Labor Lawyer Basics

THE
LABOR
LAWYER
Volume 16 Number 3
Winter/Spring 2001
CONTENTS
EDITORIAL POLICY AND INFORMATION FOR AUTHORS ........................
ii
THE EDITORS PAGE .....................................................................

Dana F. Proyect
NAFTA AND WORKER RIGHTS: AN ANALYSIS OF THE LABOR SIDE

ACCORD AFTER FIVE YEARS OF OPERATION AND SUGGESTED
IMPROVEMENTS ........................................................................... 319
Barry LaSala
VOLUNTARY CORPORATE CODES OF CONDUCT: WHATS MISSING? ...... 349
Owen E. Herrnstadt
BUILDING AN INTERNAL DEFENSE AGAINST CLASS ACTION LAWSUITS
AND DISPARATE IMPACT CLAIMS .................................................... 371
G. Roger King and Jeffrey D. Winchester
ITS COMMON, BUT IS IT RIGHT? THE COMMON LAW OF TRUSTS IN
ERISA FIDUCIARY LITIGATION ...................................................... 391
Michael J. Collins
JOHN ROCKER AND EMPLOYEE DISCIPLINE FOR SPEECH ................... 439
Lewis Kurlantzick
APPLYING THE SUPREME COURTS AFFIRMATIVE DEFENSE TO
SUPERVISOR HARASSMENT ............................................................ 449
Cara Yates Crotty
2000 STUDENT WRITING COMPETITION WINNER: RETALIATORY
HARASSMENT AGAINST EMPLOYEES BY EMPLOYEES: SHOULD THE
EMPLOYER BE LIABLE? ................................................................. 465
Kari Jahnke
INDEX TO VOLUME 16 ................................................................... 503
Section of
Labor and Employment Law
American Bar Association
Copyright 2001 American Bar Association
http://www.bna.com/bnabooks/ababna/laborlawyer/16.3.pdf
EDITORIAL STATEMENT: The Labor Lawyer is a journal of ideas and developments in

the field of labor and employment law. Its objectives are to provide practitioners, judges,
administrators, and the interested public with balanced discussions of developments in
all areas of labor and employment law. The Labor Lawyer is geared to the practical needs
of those who work in this area and seek to share their insights and viewpoints. The Editor
encourages discussion of the broader policy issues that underlie these developments. The
Labor Lawyer may be cited as follows, by volume and page: 16 LAB. LAW.
(2001).
EDITORIAL GUIDELINES FOR AUTHORS: The Labor Lawyer welcomes contributions
from all interested persons. Articles should be submitted to Professor Robert J. Rabin,
Editor, The Labor Lawyer, Syracuse University College of Law, E.I. White Hall,
Syracuse, NY 13244-1030; phone: 315/443-3681; fax: 315/443-4141. In general, articles
should be informal and direct. Endnotes should be confined to useful documentation.
Only one copy, double-spaced, should be submitted. Endnotes must be double-spaced and
placed at the end of the article. In preparing both text and endnotes, authors should refer
to the following works for style: The Bluebook: A Uniform System of Citation (16th ed.)
(Harvard Law Review Association, Cambridge, Mass.), and for matters of literary style
not covered by this manual, The Chicago Manual of Style (14th ed.) (The University of
Chicago Press, Chicago, Ill.), or The Elements of Style by William Strunk, Jr., and E.B.
White (3rd ed.). Absent appropriate disclosure in connection with the article submission,
The Labor Lawyer will rely on the authors belief that the articles subject matter has not
been preempted.
PERMISSIONS: Request to reproduce portions of this publication should be addressed
to Director, Copyrights and Contracts, American Bar Association, 750 N. Lake
Shore Drive, Chicago, IL 60611; phone: 312/988-6101; fax: 312/988-6030; e-mail:
rvittenson@staff.abanet.org.
DISCLAIMER: The material contained herein represents the opinions of the authors
and does not express the views or the positions of the American Bar Association or the
Section of Labor and Employment Law, unless adopted pursuant to the bylaws of the
Association and the Section are so indicated.
2001 American Bar Association. All rights reserved. Printed in the United States
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on acid-free paper.
The Labor Lawyer

A Journal of Ideas and Developments in
Labor and Employment Law
EDITOR
Professor Robert J. Rabin

Syracuse University College of Law
Syracuse, New York 13244-1030
EDITORIAL BOARD
William L. Keller, Chair

Laurence E. Baccini
Michael H. Beck
Allan L. Bioff
Robert M. Dohrmann
Howard Lesnick
David M. Silberman
Evan J. Spelfogel
Marley S. Weiss
STUDENT EDITORIAL BOARD
20002001
Syracuse University College of Law
EDITOR-IN-CHIEF
Dana F. Proyect
ARTICLES EDITORS
Shelly Mui
Kathleen M. OBrien
SENIOR ASSOCIATE EDITORS
Luke T. Cooper
James C. De Francisco
Courtland D. Rae
James A. Tacci
ASSOCIATE EDITORS
Nicolle M. Allen
Elizabeth Kazarinoff
Mirlen A. Martinez
Marissa Ross
Benjamin A. Scales
Ruchi Thaker
Kevin Whittaker
The Editors Page

As the outgoing Student Editor-in-Chief, it is my pleasure to write
the editors page for this issue. The time I have spent working on The
Labor Lawyer has been tremendously rewarding. First, there are several people I would like to thank for their help and support throughout
this year. I thank Professor Rabin for giving me the opportunity to work
with him on this journal. His passion for labor and employment legal
issues has inspired me to continue in this field. I thank my staff, especially the Co-Articles Editors, Kathleen OBrien and Shelly Mui, for
their relentless editing and for enabling me to meet the publication
deadlines. I also thank my family for answering all of my grammatical
questions.
This 2001 Winter/Spring issue has a variety of articles ranging
from international labor relations to the background of ERISA, as well
as the winning article of the 2000 Student Writing Competition. I hope
you enjoy reading these articles as much as I have.
The issue begins with an article by Barry LaSala discussing
NAFTAs side accord known as the North American Agreement on Labor Cooperation (NAALC). This timely article criticizes the lack of enforcement of Mexicos labor laws by the NAALC. The author suggests
an arbitration system to resolve these labor disputes.
Owen E. Herrnstadt, Director of International Affairs at the International Association of Machinists and Aerospace Workers, focuses
on the problems of voluntary corporate codes of conduct. Although codes
exist in many industries, critics believe that many codes are not in the
workers best interests because of fatal flaws within the codes. Mr.
Herrnstadt illustrates such flaws and encourages corporations to adopt
stronger codes to increase protection of their workers.
G. Roger King and Jeffrey D. Winchesters article is an informative
tool for employers on how to avoid class action lawsuits and disparate
impact claims. The article also discusses specific federal statutory
claims that often give rise to class actions against employers.
The article by Michael J. Collins is an all you need to know piece
about ERISA. The author provides a background on ERISA, its origin
from the common law of trusts, and how the common law of trusts
continues to impact the interpretation of ERISA.
Lewis Kurlantzicks article focuses on Atlanta Braves pitcher John
Rockers inflammatory comments about New Yorkers in SPORTS ILLUSTRATED. Professor Kurlantzick discusses whether Rocker was disciplined for just cause. In addition, the article addresses the relevancy
of federal civil rights laws as well as state statutes to such a situation.
Cara Yates Crotty writes about the effects of two Supreme Court
cases, Burlington Industries, Inc. v. Ellerth and Faragher v. City of Boca
Raton, which hold that employers may be liable for a hostile environment created by an employees supervisor. The author discusses the
employers affirmative defense that it exercised reasonable care to prevent and correct the harassment and that the employee failed to avail
herself of any preventive or corrective opportunities provided by the
employer.
Finally, I am happy to announce Kari Jahnke as the 2000 Student
Writing Competition winner. Ms. Jahnke explores the unsettled law
regarding employer liability for retaliatory harassment against employees. She draws the conclusion that Title VII should protect victims
of discrimination as well as the subsequent retaliation that the victims
may face as a result of filing a complaint.
I hope you enjoy this edition.
Dana F. Proyect,
Editor-in-Chief
Editors Note: In our previous issue, Fall 2000, Vol. 16, Number 2,
Merritt J. Greens name was incorrectly stated on the cover and in the
Table of Contents. We apologize for this error.
319
NAFTA and Worker Rights: An

Analysis of the Labor Side Accord
after Five Years of Operation and
Suggested Improvements
Barry LaSala*
I. Introduction
In a campaign speech discussing his position on the North American Free Trade Agreement (NAFTA)1 and his general philosophy on
trade, then-Arkansas governor and presidential candidate Bill Clinton
committed the nation to the improvement of labor rights in Mexico.2
Mr. Clinton envisioned a trade policy for the twenty-first century that
would maintain U.S. competitiveness3 and preserve the interests of
workers, who inevitably and often times are adversely affected by free
trade.4
Following his election in 1992, President Clinton pursued his vision by negotiating a side accord to NAFTA called the North American
Agreement on Labor Cooperation (NAALC).5 The NAALC is designed
to address a myriad of worker rights issues among the NAFTA signatory nations. Two stated objectives of the NAALC are to improve working conditions and living standards in each Partys territory6 and to
promote compliance with, and effective enforcement by each Party of,
its labor law.7 To facilitate these objectives, the NAALC broadly defines
* J.D. Candidate, 2001, Georgetown University Law Center; M.A., International
Affairs, 1999, American University, School of International Service; B.S., Cum Laude,
1994, Frostburg State University. This article is dedicated in loving memory of Dorothy
LaSala.
1. North American Free Trade Agreement Implementation Act, 19 U.S.C. 3301
et seq. (1999).
2. William J. Clinton, Expanding Trade and Creating American Jobs: Remarks
by Governor Bill Clinton at the North Carolina State University, Raleigh, NC, at 14 (Oct.
4, 1992) (transcript available from the Democratic National Campaign Headquarters)
(noting that a side accord to NAFTA should provide extensive powers to improve worker
rights and offer dispute resolution).
3. Id. at 9 (noting that developing new markets for U.S. products will be critical
to the nations overall economic performance).
4. Id. at 15 (stating his concern about NAFTAs impact on U.S. and Mexican
workers).
5. Canada-Mexico-United States: North American Agreement on Labor Cooperation, Pub. L. No. 103-182, 107 Stat. 2057, 32 Intl Legal Materials 1499 (1993) [hereinafter NAALC].
6. 32 Intl Legal Materials 1499, at art. 1(a).
7. Id. at art. 1(f).
320
16 THE LABOR LAWYER 319 (2001)
labor law issues that fall within its scope8 and has instituted a complex
administrative structure to resolve disputes.9 This discussion is timely
in light of President Bushs announced desire to expand NAFTA and
the ideological shift that his administration brings with regard to labor
issues being negotiated in the context of a trade accord.
Many commentators argue that the side accord has been successful
in addressing labor rights violations in Mexico, albeit to varying degrees.10 This article argues that although Mexico has adequate labor
standards in place, it lacks appropriate mechanisms to enforce its laws,
and the NAALC has failed to facilitate such enforcement. Consequently, substantive improvements in Mexican working conditions
have proven elusive. Since its commencement, the procedural operation
of the NAALC has continually denied adequate recourse for demonstrated labor abuses in Mexico. As a result, a new direction is needed.
Section II of the article discusses the general structure and technical procedures established in the NAALC, which are designed to resolve alleged labor law violations. Section III assesses the NAALCs
response to various complaints alleging labor law violations in Mexico.11 For selected submissions,12 the article will describe the parties
8. Id. at art. 49(1). Labor law is defined as:
laws and regulations, or provisions thereof, that are directly related to: (a) freedom of association and protection of the right to organize; (b) the right to bargain
collectively; (c) the right to strike; (d) prohibition of forced labor; (e) labor protections for children and young persons; (f) minimum employment standards,
such as minimum wages and overtime pay, covering wage earners, including
those not covered by collective agreements; (g) elimination of employment discrimination on the basis of grounds such as race, religion, age, sex, or other
grounds as determined by each Partys domestic laws; (h) equal pay for men
and women; (i) prevention of occupational injuries and illnesses; (j) compensation in cases of occupational injuries and illnesses; (k) protection of migrant
workers.
9. Id. at art. 21-42 (detailing dispute resolution procedures established in the
NAALC including complaint filing, information gathering, consultation, and arbitration).
10. See generally Leonard Bierman & Rafael Gely, The North American Agreement
on Labor Cooperation: A New Frontier in North American Labor Relations, 10 CONN. J.
INTL L. 533, 561-62 (1995) (citing Ian Robinson, The NAFTA Labour Accord in Canada:
Experience, Prospects and Alternatives, 10 CONN. J. INTL L. 475, 489 (1995) (noting the
NAALCs significance as a trade-related document and its benefit of providing labor groups
with a mechanism to chastise their own governments for failure to reverse the erosion of
the living standards of our trading partners)); Ronald W. Kleinman & Joel M. Shapiro,
NAFTAs Proposed Tri-Lateral Commission on the Environment and Labor, 2 U.S.-MEX.
L.J. 25, 34 (1994) (noting that the NAALC marks several departures from U.S. trade practices in the past and that alone is a success); Juli Stensland, Note, Internationalizing the
North American Agreement on Labor Cooperation, 4 MINN. J. GLOBAL TRADE 141, 163
(1995) (stating that the NAALCs primary advantage is that it concentrates on the enforcement of existing labor standards rather than a unilateral imposition of standards).
11. At time of publication, eleven U.S. submissions alleging labor law violations
have been filed. One was withdrawn and three are still pending. (Information on file at
the Bureau of International Labor Affairs, U.S. Dept of Labor.)
12. U.S. Natl Admin. Office, U.S. Dept. of Labor, Pub. Report of Review of NAO
Submissions selected for analysis include: Submission No. 940001 (Oct. 12, 1994), Sub-
NAFTA and Worker Rights
321
involved, the allegations made, the findings of the NAALC, its recommendations in response, and final resolution. Particular emphasis is
placed on determining if the allegations of the complainants were heard
in a timely and efficient manner and whether the final resolution resulted in the advancement of worker rights, which the NAALC purports
to address.
Section IV analyzes the overall effectiveness of the NAALC. It
highlights Mexicos inability to enforce its labor laws and illustrates
the NAALCs inability to address this concern. In this regard, the article specifically and categorically critiques each stage of the NAALC
process. Section V proposes an arbitration system based on a commercial approach as an alternative to the dispute resolution system prescribed by the NAALC. Arbitration will encourage fair, efficient, and
timely resolution of labor disputes in this and future trade pacts. Furthermore, arbitration is an appropriate way to account for cultural,
legal, and historical differences between nations when dealing in the
sensitive area of labor relations.13
II. Structure and Procedures of the NAALC
The NAALC consists of a Commission for Labor Cooperation,14
which is comprised of a Ministerial Council,15 Secretariat,16 and a National Administrative Office (NAO) in each country.17 The Ministerial
Council, composed of cabinet level officials from the United States,
mission No. 940002 (Oct. 12, 1994), Submission No. 940003 (April 11, 1995), Submission
No. 9601 (Jan. 12, 1997), Submission No. 9701 (Jan. 12, 1998), and Submission No. 9702
(Apr. 28, 1998). Submission No. 940004 was removed from consideration before final
resolution and will not be included in the analysis. Submission No. 9602, involving allegations of violations of U.S. labor laws by a subsidiary of the Sprint Corporation operating in San Francisco, is beyond the scope of this article, which is focusing on the lack
of enforcement of labor rights in Mexico. Submission No. 9703 resulted in an Agreement
signed by Secretary Herman of the United States and Secretary Palacios of Mexico regarding issues on freedom of association and occupational safety and health. Submission
No. 9901 involves issues concerning freedom of association, minimum employment standards, and occupational safety and health at Executive Air Transport, Inc. and is pending
in the Public Report stage. Submission No. 2000-01 is the latest submission involving
Custom Trim/Auto Trim and is pending in the preliminary stages of the NAALC process.
(Available for review in the Public Reading Room, Bureau of International Labor Affairs,
U.S. Dept of Labor.)
13. BARRY E. CARTER & PHILLIP R. TRIMBLE, INTERNATIONAL LAW 849 (Aspen, 2d
ed. 1995) (noting the longstanding principle of international law that a nation-state has
exclusive authority over its nationals).
14. NAALC, supra note 5, at art. 8(1). The Commission for Labor Cooperation is
the official title of the formal structure created under the NAALC.
15. Id. at art. 8(2). The Ministerial council consists of the highest ranking labor
official, or their designee, in each participating country and meets once a year in regular
session. Id. at art. 9(1), 3(a).
16. Id. at art. 8(2). The Secretariat is headed by an Executive Director selected for
a 3-year term and is comprised of a staff of 15 professionals. Id. at art. 12(1), (3).
17. Id. at art. 8(2) (describing the National Administrative Office structure);
NAALC, supra note 5, at art. 15.
322
Mexico, and Canada, oversees and directs all activities under the
NAALC.18 The primary function of the Secretariat is to assist the Ministerial Council in the execution of its functions and provide support
not specifically delineated that the Council might require.19
The NAO is the entity with which outside parties20 file complaints
alleging labor law abuses, thereby commencing the first stage of the
dispute resolution process.21 After a complaint is filed, the NAO has
discretion to determine, within sixty days of receipt, if review is warranted.22 Generally, the NAO Secretary is directed to accept submissions for review when it appears the side accord has been violated.23
However, the Secretary may decline acceptance of submissions under
several specific circumstances.24 If a submission is accepted for review,
the NAO may conduct additional examinations or investigations to de-
18. Id. at art. 10. One of the many functions of the Council is to:
(b) direct the work and activities of the Secretariat and of any committees or
working groups convened by the Council; . . . (d) approve the annual plan of
activities and budget of the Commission; (e) approve for publication, subject
to such terms or conditions as it may impose, reports and studies prepared by
the Secretariat, independent experts or working groups; (f) facilitate Partyto-Party consultations, including through the exchange of information; (g) address questions and differences that may arise between the Parties regarding
the interpretation or application of this Agreement; and (h) promote the collection and publication of comparable data on enforcement, labor standards
and labor market indicators.
19. Id. at art. 13(1) (stating that the Secretariat has various other responsibilities
including the submission of a budget for the Commissions activities, art. 13(2); and the
preparation of reports on various matters, art. 14(1)(a)-(d)).
20. See infra notes 56-104 and accompanying text (commonly, complaints are filed
by U.S. based and international human rights organizations, labor organizations, and
lawyer associations).
21. NAALC, supra note 5, at art. 16(3) (stating that [e]ach NAO shall provide for
the submission and receipt, and periodically publish a list, of public communications on
labor law matters arising in the territory of another Party. Each NAO shall review such
matters, as appropriate, in accordance with domestic procedures. The NAOs also serve
as a contact point for participating governments and as a disseminator of information.
Id. at art. 16(1),(2)).
22. See Bureau of International Affairs; North American Agreement on Labor Cooperation; Revised Notice of Establishment of U.S. National Administrative Office and
Procedural Guidelines, 59 Fed. Reg. 16660, 16661 (Apr. 7, 1994) [hereinafter NAO Procedural Guidelines] (explaining the standards and qualifications for the submission of a
complaint and the resolution process).
23. Id. at 16661 (stating that [i]n general, the Secretary shall accept a submission
for review if it raises issues relevant to labor law matters in the territory of another Party
and if a review would further the objectives of the Agreement).
24. Id. at 16661-62 (stating that the complaint must be signed, dated, clearly state
who is filing the submission, and sufficiently specific so that the NAO knows what relief
is being requested). Factual claims must allege a Partys failure to enforce its domestic
labor laws and other responsibilities set out in Article II of the NAALC. Additionally, the
complaint must demonstrate that relief has not been sought domestically for the particular alleged activity. Lastly, the allegations in the submission can not be substantially
similar to allegations set forth in another submission unless new and significant
information is available.
323
velop a factual record.25 Typically, the NAO will conduct a public hearing to receive sworn testimony on the matter.26
Within four months27 of acceptance of the submission, the NAO
Secretary is required to issue a public report.28 If no violation is found,
the decision stands as final. Following such a determination, further
inquiry into the matter is limited to an independently initiated request
by one of the participating nations.29 If the NAO finds a violation and
concludes that the matter has not been adequately resolved since the
commencement of the proceedings, the NAO Secretary may request
Ministerial Consultations.30
Recourse beyond the level of Ministerial Consultations depends, in
large part, on the nature of the violation and the NAO findings.31 If the
violation deals with general labor rights issues,32 no further recourse
25. Id. at 16662 H (noting that the purpose of the additional examination is to
assist the NAO in ascertaining and understanding the issues raised).
26. Id. at 16662 H(3)-H(6) (noting that in the examination process, unless inappropriate, the NAO will conduct a public hearing on the submission; H(4) directs
that notice of the hearing will be published thirty days in advance; H(5) indicates that
any hearing conducted in connection with the examination shall be conducted in public
and in English; H(6) states that the actual submission will become part of the hearing
record). The NAO conducting the investigation may also request and receive information
from another nations NAO. See also NAALC, supra note 5, at art. 21 (stating that consultations may include discussions of the other Partys labor laws, the administration of
those laws, and relevant information regarding labor market conditions in the country
that is the subject of the inquiry. Article 21(2)(a)-(c) of the NAALC indicate the types of
information that may be exchanged in this process to include descriptions of laws, regulations, procedures, proposed or pending changes to such laws or practices, and related
explanations or clarifications of the law).
27. Id. at 16662 H(8) (allowing for an additional sixty days if circumstances
require it).
28. NAO Procedural Guidelines, 59 Fed. Reg., at 16662 H(8) (determining
that the report should include a summary of the proceedings and any findings and
recommendations).
29. See Laura O. Pomeroy, Note, The Labor Side Agreement Under NAFTA: Analysis of its Failure to Include Strong Enforcement Provisions and Recommendations for
Future Labor Agreements Negotiated with Developing Countries, 29 GEO. WASH. J. INTL
& ECON. 769, 781-82 (1996) (citing Elizabeth C. Crandall, Comment, Will NAFTAs North
American Agreement on Labor Cooperation Improve Enforcement of Mexicos Labor
Laws?, 7 TRANSNATL LAW. 165, 185 n.170 (1994) (explaining that at this and subsequent
stages of the review process, only a participating government may request consultations
that would continue the inquiry)).
30. NAO Procedural Guidelines, 59 Fed. Reg., at 16662 I(1) (indicating that procedurally, the NAO Secretary recommends that the U.S. Secretary of Labor request consultations at the Ministerial level as directed under Article 22 of the side accord. Article
22(3) indicates that the ministers will exchange all public information that has been
gathered on the matter and conduct a full examination in attempting to reach resolution.
A specific time frame for these activities is not established).
31. See NAALC, supra note 5, at art. 23(2) (noting that the next phase of the process, the establishment of an Evaluation Committee of Experts, shall be initiated to
review patterns of practice by each Party in the enforcement of its occupational safety
and health or other technical labor standards).
32. Id. at art. 49 (indicating that issues involving the freedom to associate, the
right to collectively bargain, and the right to strike are not protected beyond ministerial
consultations).
324
is available beyond Ministerial Consultations.33 If the violation pertains to occupational safety and health or other technical labor standards,34 and the matter remains unresolved following Ministerial
Consultations, an Evaluation Committee of Experts (ECE) may be
established at the request of an involved party.35
Once convened, the ECE conducts its own review of the initial findings, and a draft report on the matter must be presented to the Council
within four months,36 with a final report issued within another sixty
days.37 If a nation remains unconvinced that the matter is adequately
resolved, it may request additional consultations.38 If the consulting
parties fail to resolve the dispute, a special session of the Council may
be convened.39 This phase is designed to apply pressure on the involved
parties to settle the dispute. If the dispute remains unresolved, the
Council may convene an arbitration panel to facilitate final resolution
of the dispute.40 However, several factors significantly restrict the use
of arbitration.41
33. Id.
34. Id. at art. 23(2) (defining technical labor standards as laws and regulations,
or specific provisions thereof, that are directly related to subparagraphs (d) through (k)
of the definition of labor law). Id. at art. 49. Sections (d) through (k) of the definition of
labor law are found supra, note 8.
35. Id. (noting that the Council will establish an ECE if the issues at hand deal
with those described supra note 34 and if the matter to be reviewed is indeed trade related
and is covered by a mutually recognized labor law). See also NAALC, supra note 5, at
art. 27(1) (noting that at this point, only matters that deal with enforcement of a Partys
occupational safety and health, child labor or minimum wage technical labor standards
may continue in the process).
36. Id. at art. 25 1(a)-1(c) (discussing the elements of the draft report, which
contain a comparative assessment of the matter, conclusions that are drawn, and any
recommendations to assist the parties in the final resolution of the dispute). The purpose
of the draft report is to provide the countries with an opportunity to respond to findings
before a final report is made public.
37. Id. at art. 26 1-4 (directing that within thirty days of its submission to the
Council, the final report should be published, and within another ninety days, the parties
should provide written responses to the recommendations made in the report, which will
serve as a topic of discussion at the following regular Council meeting).
38. Id. at art. 27 (1) (indicating that parties are permitted to request additional
consultations regarding persistent failure of one party to enforce its laws relating to
occupational safety and health, child labor or minimum wage technical labor standards).
39. Id. at art. 28(1)-(4)(b) (ordering, upon request, that the Council convene within
twenty days and make use of any dispute resolution procedures that may be appropriate).
40. Id. at art. 29(1)(a)-(b).
41. NAALC, supra note 5, at art. 29(1) (establishing that the arbitration procedures
may be convened after a written request by one of the parties and a two-thirds vote of
approval from the Council). As illustrated in other segments of the procedures, the arbitration panel is designed exclusively to address a persistent failure to adequately enforce labor laws related to occupational safety and health, child labor or minimum wage
technical labor standards and for issues that are trade-related and covered exclusively
by mutually recognized labor laws. Additionally, a matter may only be subject to arbitration if the violation of labor law is (a) trade related; and (b) covered by mutually recognized labor laws. Id. at art. 29(1).
325
Theoretically, the arbitration panel is comprised of five members.

Each disputing party selects two panelists, who are nationals of the
opposing party.42 The panel is required to follow model rules established by the Council which, inter alia, provide for at least one hearing
before the panel.43 Unless the disputing parties agree otherwise, the
panel will present an initial report detailing its findings44 within six
months of its creation.45 A final report is issued directly to the disputing parties within sixty days of the initial report.46 Within fifteen
days, the disputing parties are required to transmit the final report
to the Council.47 If a violation covered under the NAALC is found, the
parties may agree upon and implement an action plan to resolve the
dispute.48 If the disputing parties are unable to reach agreement on
an appropriate action plan, or there are questions as to whether the
action plan is being carried out, a party may call for the arbitration
panel to reconvene.49 Once the arbitration panel has reconvened, it
may approve the agreed upon action plan, impose a new plan, or issue
a monetary fine no greater than twenty million dollars.50 The agreement provides for additional recourse if the fine is not paid, which
includes suspension of NAFTA benefits for a monetary amount not to
42. Id. at art. 32(1)-2(d) (ordering that the disputing parties shall attempt to agree
upon a chair of the panel. If the parties are unable to agree upon a chair, a party chosen
by lot will select the chair. Additionally, if there are more than two parties involved, the
selection process is modified by allowing the complained against party to select two panelists, one from each complaining party, and the complaining parties shall select two
panelists who are citizens of the party being complained against).
43. Id. at art. 33(1)(a)-(d) (noting that the an opportunity is also provided for the
disputing parties to make initial and rebuttal written submissions); see also id. at art.
35 (stating that the panel may seek technical or expert advice from any source to assist
in the deliberations if the disputing parties agree and will be subject to any limits or
conditions with which the parties agree).
44. Id. at art. 36(5) (implying that the purpose of the initial report is to provide the
parties with time to evaluate and respond to the findings of the panel before their final
determinations are made).
45. NAALC, supra note 5, at art. 36(2)(a)-(d) (stating that the report should contain factual findings and a determination as to whether there has been a persistent
pattern of failure by the complained against party to enforce its labor laws. If a positive
determination is made, recommendations for the resolution of the dispute should also
be included).
46. See id. at art. 37.
47. Id. at art. 37(2).
48. Id. at art. 38 (noting that any agreed upon action plan should be mutually
satisfactory and shall conform with previous determinations and recommendations of
the panel).
49. Id. at art. 39 (declaring that a request for the arbitration panel to reconvene
because of failure to reach agreement may only occur sixty days after the date of the final
report. Additionally, a request for the panel to reconvene because a party is not certain
that the complained against party is fully implementing the action plan may not occur
until 180 days after the action plan was adopted).
50. Id. at art. 39(4)(b).
326
exceed the original assessment.51 At its most efficient level of operation, this dispute resolution system can take well over two years before final resolution.
III. Discussion of NAALC Submissions
It is not the concern of this article to elaborate on an entire field
of scholarship discussing the specific circumstances surrounding complaints filed before the various NAOs.52 Rather, the objective is to summarize the pertinent claims in various complaints, describe the findings, and discuss the final resolution of each matter. This article
includes analysis of a representative six submissions out of a total of
eleven that have been filed to date. These submissions have been selected as a representative group based on the diversity of issues raised
in the complaints and as a broad sampling of the various ways the
NAALC operates in practice. The purpose of this sampling53 is to determine if, after five years in practice, the NAALC has been effective
in redressing the non-enforcement of the labor standards it was designed to protect.54
51. NAALC, supra note 5, at art. 41.

52. It should be noted that not a single complaint has advanced past the level of
Ministerial Consultations to establishment of an Evaluation Committee of Experts. This
also means that not a single complaint has been subjected to arbitration.
53. To date, there have been eleven U.S. Natl Admin. Office, U.S. Dept of Labor,
submissions accepted for review alleging labor law violations in Mexico and one submission accepted for review alleging labor law violations arising in the United States. The
submissions include: Submission No. 940001 (dealing with allegations related to freedom
of association and the right to organize a union against the Mexican subsidiary of U.S.
based Honeywell Corporation); Submission No. 940002 (alleging misconduct in the areas
of freedom of association and the right to organize a union against the Mexican subsidiary
of U.S. based General Electric Corporation); Submission No. 940003 (dealing with alleged
violations of freedom of association rights, the right to organize an independent union,
and violation of minimum employment standards by the Mexican subsidiary of Sony
Corporation); Submission No. 9501 (dealing with alleged violations of freedom of association and wrongful discharge by a subsidiary of Sprint Corporation); Submission No.
9601 (dealing with issues of freedom of association and guarantees in the NAALC regarding the maintenance of impartial labor tribunals against the actions of various agencies within the Mexican government); Submission No. 9602 (dealing with allegations that
Mexico failed to protect workers from brutal anti-union tactics by Maxi-Switch Inc.);
Submission No. 9701 (addressing allegations of illegal gender discrimination by various
employers in Mexicos Maquiladora exporting industry); Submission No. 9702 (addressing allegations of violation of guarantees in Mexican law permitting freedom of association and violation of health and safety laws by Han Young de Mexico, S.A. de C.V. factory,
which assembles truck parts for Hyundai Precision America, a subsidiary of the Hyundai
Corporation of Korea); Submission No. 9703 (dealing with issues of freedom of association
and health and safety at ITAPSA, a subsidiary of Echlin Inc., a Connecticut based corporation which produces and distributes automobile replacement parts).
54. Because the focus of this article centers on Mexicos inability to enforce its labor
laws and the NAALCs inability to extricate the situation, the NAO complaint filed
against a subsidiary of the Sprint Corporation operating near San Francisco, California,
is beyond the scope of this article and will thus not be considered.
327
On February 14, 1994, Submission No. 940001 was filed against

Honeywell Manufacturas de Chihuahua,55 and Submission No.
94000256 was filed against a subsidiary of General Electric Corporation.57 The submission against the Honeywell subsidiary alleged that
workers wages were significantly depressed, company representatives
made illegal threats of dismissal against workers involved in union
organizing, and the company dismissed approximately twenty workers
for union activities.58 Submission No. 940002 alleged that the General
Electric subsidiary curtailed union organizing by thwarting information dissemination,59 unlawfully dismissing twenty workers for union
organizing activities,60 and violating several health and safety regulations at the plant.61 The U.S. NAO accepted the submissions for review on April 15, 1994, roughly sixty days after the initial filing.62
On October 12, 1994, a full eight months after the filing, the NAO
issued a public report and made no findings regarding the substantive
allegations in either complaint.63 The NAO did suggest, with regard to
the Honeywell subsidiary case (No. 940001), that the timing of worker
dismissals at the plant coincided with union organizing efforts.64 As a
result of this coincidence and the suspicion that the workers com55. See Submission No. 940001 & No. 940002 (noting that Honeywell Manufacturas operated an electronics manufacturing plant in the State of Chihuahua, Mexico)
[Honeywell].
56. See id. at 2 (stating that the submission was filed by the United Electrical,
Radio and Machine Workers of America) [UE].
57. Id. at 5. Specifically, the complaint was filed against Compania Armadora, S.A.
operating in Ciudad Juarez, State of Chihuahua, Mexico.
58. Id. at 3. The complaint further alleged that the institutions in Mexico designed
to provide adjudication of these matters, known as Conciliation and Arbitration Boards
(CABs), have a reputation for not adequately protecting the interest of workers, and
specifically, for failing to reinstate workers who have been incorrectly terminated for
supporting independent unions.
59. Id. at 5. The complaint specifically alleges that the companys activities included, altering the established practice of plant entry to prevent employee organizers
from distributing campaign literature, [and] taking campaign literature from employees.
60. Id. at 5-6. The complaint also alleges that the company pressured dismissed
workers into accepting severance benefits so that the workers could not challenge the
dismissal in the future.
61. Submission No. 940001 & No. 940002 (stating that these allegations include
failure to give light work to pregnant women and failing to provide adequate ventilation in work areas and suitable protective equipment, and failing to test properly employees for exposure to chemicals).
62. See id. at 7.
63. See id. at 32 (concluding that the information available to the NAO did not
establish that the Government of Mexico had shown a failure to promote compliance with
its labor laws).
64. Id. at 30-31. Additionally, [t]he NAO acknowledges and understands that
workers perceived or actual lack of access to legal remedies, accompanied by economic
circumstances which forced them into accepting severance pay-offs instead of challenging
the actions of their supervisors, are impediments to the Mexican workers right to legal
recourse when their rights have been violated.
328
plaints might be substantiated, the NAO recommended public information exchange and other cooperative programs between the signatory nations to discuss the matters raised in the report and to foster a
better understanding of each nations labor laws.65 However, the NAO
did not recommend additional recourse for the dismissed and threatened workers.66
On August 16, 1994, Submission No. 940003 was filed against
Magneticos de Mexico (MDM), a subsidiary of Sony Corporation.67 The
complaint alleged violations of Mexican labor laws regarding work
hours and freedom of association, including an allegation that the company fired workers due to their union activities.68 The U.S. NAO accepted the submission for review on October 13, 1994, and issued a
public report of its findings on April 11, 1995, a full six months after
submission.69 The NAO, employing the same analysis as in its first two
submissions, focused its inquiry on whether Mexico adequately enforced its labor laws, rather than evaluating whether a particular company violated those laws.70 However, the NAO made strong statements
65. See id. at 31.
66. Id. The decision not to recommend Ministerial Consultations was based in part
on the fact that the submissions did not establish that the Government of Mexico was
failing to adequately enforce its labor laws. Submission No. 940001 & No. 940002, at 30.
See also Jason S. Bazar, Comment, Is the North American Agreement on Labor Cooperation Working for Workers Rights?, 25 CAL. W. INTL L.J. 425, 444 (1995) (citing Submission No. 940001 & No. 940002) (noting that the focus of the investigation of the NAO was
centered on whether Mexico was enforcing its labor laws, not the potential unlawful
conduct of the companies, and that the NAO was by no means a substitute for Mexicos
domestic system for resolution of these disputes)).
67. Submission No. 940003, at 3 (noting that the Sony subsidiary was operating in
Nuevo Laredo, Tamaulipas, Mexico); see id. at 2-3 (indicating that the submitters included the International Labor Rights Education and Research Fund (ILRERF), the Associacion Nacional de Abogados Democraticos (National Association of Democratic Lawyers), the Coalition for Justice in the Maquiladoras, and the American Friends Service
Committee (AFSC)).
68. See id. at 3-6 (stating that in the area of freedom of association and the right to
organize, submitters alleged that Magneticos and the government supported union at the
plant interfered with the general affairs of the independent union and with the unions
delegate election. It also alleged that: a worker critical of the current union was suspended;
intimidation of the workers attempting to create the independent union including demotions, threats of firing for union activities, and firing workers without cause was common;
and, the delegate election of the independent union was conducted unfairly and under
conditions of harassment. In this regard, it is alleged that workers were misled, intimidated, threatened, fired, forced into resignation, and coerced prior to, during, and after the
election. It is also alleged that Magneticos was directly involved with the police in a violent
suppression of a demonstration following the vote. Finally, the complaint alleged that the
Mexican government intentionally attempted to thwart the organizing effort through its
administrative agencies that have jurisdiction over labor-management issues).
69. Id. at 7.
70. See id. at 25. The NAO stated:
[T]he NAO review has not been aimed at determining whether or not the
company named in the submission may have acted in violation of Mexican
labor law. Rather, the purpose of the NAO review process, including the public
329
regarding several of the allegations.71 With regard to allegations that

workers were improperly dismissed, the NAO found,
Considering the duration of employment of the dismissed workers
with MDM (ranging from four to fifteen years), their documented association with the opposition union movement, and the circumstances
of their separation, it appears plausible that the workers discharges
occurred for the causes alleged, namely for participation in union organizing activities. The timing of these dismissals coincides with . . .
an organizing drive by an independent union at the MDM plants, and
the economic realities facing these Mexican workers make it very
difficult to seek redress from the proper Mexican authorities for violations of Mexican labor law.72
In the area of union elections, the NAO found considerable testimonial evidence confirming allegations of irregularities in the union
election.73 The NAO labeled allegations of violence against workers
disturbing74 and discovered serious deficiencies in the union registration system.75 As a result of these findings, the NAO recommended
Ministerial Consultations.76 The Ministerial Consultations resulted in
an Agreement on Implementation signed by the Labor Ministers on
June 26, 1995.77 On May 10, 1996, twenty-one months after the initial
filing, the Mexican and U.S. NAOs announced that the agreement re-
hearing, was to gather as much information as possible to allow the NAO to

better understand and publicly report on the government of Mexicos fulfillment of its obligations as set out in Article 3 of the NAALC.
71. See id. at 24-32.
72. See Submission No 940003, at 27.
73. See id. at 28 (stating that allegations that the union election was called on
short notice, that many workers were not notified [of the vote], and that the election
was conducted in an open ballot format against the wishes of the workers was supported
by testimonial evidence).
74. See id. at 29.
75. See id. at 31-32 (It is not insignificant that the time consumed by the denials
[of union registration] on these grounds [minor administrative deficiencies in the applications] has arguably caused the interested workers an irreparable harm. The report
also notes that the registration process appears to have been thwarted by technicalities,
and evidence of the government supported union opposing the registration of independent
unions tends to support the allegations of the submitters that the government supported union was illegally interfering with the union registration campaign).
76. See id. at 32 (recommending Ministerial Consultations based on the fact that
serious questions are raised herein concerning the workers ability to obtain recognition
of an independent union through the registration process).
77. See Report on Ministerial Consultations on NAO Submission No. 940003 under
the North American Agreement on Labor Cooperation, at 3-4 (Jun. 4, 1996) (stating that
the implementation agreement included three types of activities to evaluate the law regarding union registration and its enforceability. It called for a joint work program to
be completed within one year; a study to be conducted by experts in Mexican labor law
to be completed within 180 days; and lastly, it called for meetings between Mexican government officials and parties involved in the submission, to be completed within 120
days).
330
quirements had been fulfilled.78 In a follow-up report,79 the NAO stated

that the consultations made progress80 but noted that the workers fired
from the Sony subsidiary remained unemployed.81
Submission No. 9601 was filed on June 13, 1996,82 against the Federal Conciliation and Arbitration Tribunal (FCAT), one of the Mexican
governmental agencies charged with arbitrating employment relations
issues.83 The allegations responded to an action by the government of
Mexico, which, in the process of consolidating some of its federal bureaucracy, eliminated the independent majority union at one of its governmental agencies.84 The complaint alleged that the FCAT violated
Mexican labor laws by failing to recognize the independent union.85 It
also alleged that Mexico failed to maintain its FCATs in an impartial
manner.86 The complaint went on to criticize a Mexican public labor
law, which prohibits more than one union from being recognized in a
public work place.87 The U.S. NAO accepted the submission for review
on July 29, 1996. Six months later, on January 27, 1997, the NAO is78. See id. at 4 (stating that the three NAOs developed and carried out a jointwork program, which consisted of three seminars and announced the completion of a
study of Mexicos labor laws dealing with union registration and its implementation).
79. See Follow-Up Report, NAO Submission No. 940003 (Dec. 4, 1996).
80. Id. at 6-9. The report viewed two Mexican Supreme Court decisions, which
found state statutes prohibiting employees from forming more than one union per workplace to be unconstitutional, as signaling a departure from past restrictions on the right
to organize. The report also indicated that the public disclosure of sensitive information,
the cooperative spirit that prevailed, and the beginning of a more open evaluation of each
countrys labor laws and systems of enforcement all showed steps in the positive direction.
Also, the report noted that [p]erhaps the greatest achievement of these ministerial consultations was that the public was afforded the opportunity to observe and participate
in this dialogue, and to question their own governments about the ways in which they
might improve enforcement of their own labor laws.
81. See id. at 4 (noting that the NAO received information indicating that all the
workers dismissed in the events associated with this case remain unemployed and that
many of the workers believed they had been blacklisted and therefore were unable to
secure employment anywhere in Nuevo Laredo).
82. Submission No. 9601, at 2 (announcing that the submission was filed by Human
Rights Watch (HRW), the International Labor Rights Fund (ILRF), and the Asociacion
Nacional de Abogados Democraticos (National Association of Democratic Lawyers)).
83. See id. at 3. Allegations raised against the Federal Conciliation and Arbitration
Tribunal (Tribunal Federal de Conciliacion y Arbitraje) [hereinafter FCAT] assert that
workers lost their union identity when the Fishing Ministry was consolidated by the
government with two other government agencies in the creation of a single agency to
create the Ministry of Environment, Natural Resources, and Fishing.
84. See id.
85. See id. at 6. Specifically, the complaint alleged that the FCAT violated Mexican
labor law by de-registering [the independent union] and in its refusal to reinstate full
recognition of [the independent union] questioning the legality of both arbitrarily deregistering the union and refusal to reinstate it under Mexican law.
86. See id. at 7 (alleging that the structure of the FCATs membership, with labor
representation emanating exclusively from the government supported union, made it
partial and inherently biased).
87. See id. at 6-7 (complaining of Mexicos failure to revise its law of federal employees (LFTSE) limiting the number of unions in the federal sector to reflect its obligations under several international treaties to which it is a signatory).
331
sued a public report finding that the governmental mechanisms in

place provided adequate recourse for workers,88 but the composition of
the FCATs create[d] the appearance of lack of impartiality.89
Ministerial Consultations were recommended and commenced to
promote an understanding of rights related to freedom of association
in Mexico and to further study Mexicos ability to enforce those rights
within its existing administrative framework.90 The Ministerial Consultations are still pending, and this nearly three-year-old complaint
has not yet been resolved.
Submission No. 9701 was filed on May 16, 1997,91 against various
private sector employers in several regions of Mexico.92 The complaint
alleged gender discrimination against pregnant women and a failure
of the government to respond.93 Specifically, the complaint alleged that
pre-employment pregnancy tests were utilized to intentionally screenout pregnant women.94 Allegedly, women who became pregnant on the
job faced dismissal or harassment in employer efforts to avoid maternity leave payments.95 The NAO accepted the submission for review on
July 14, 1997, and released its findings nearly six months later on Jan88. See Submission No. 9601, at 32 (stating that members of the independent union
were able to receive relief from appellate courts in three of four situations showing that
recourse is indeed available).
89. See id. (stating that since labor representation on the FCAT is reserved exclusively for the government-supported union, there may be a problem of impartiality in a
dispute involving the government supported union and an independent union).
90. See id. at 32-33 (noting that while the composition of a FCAT is explicit in the
law, the labor member on the panel is regularly reserved for the company dominated
union representative).
91. Submission No. 9701, at i (indicating that the submission was filed by Human
Rights Watch, the International Labor Rights Fund, and the National Association of
Democratic Lawyers of Mexico).
92. See id. (noting that the discrimination complaint focused on the actions of export processing employers in the Maquiladora industrial sector). The report indicates
that by July, 1997, over 908,000 workers were employed in the Maquiladora sector in
various exporting capacities. See id. at 13 (citing Instituto Nacional de Estadstica, Geografa de Informatica (INEGI), Industria Maquiladora de Exportacion, at 2 (Sept. 1997)).
93. See id. at 6.
94. See id. at 2 (stating that the submitters allege that the Maquiladora employers
regularly require female job applicants to verify their pregnancy status as a condition of
employment).
95. See id. at 5 (declaring that submitter Human Rights Watch found that when
some workers became pregnant, the companies encouraged them to resign by reassignment to more difficult tasks; alteration of work shifts on a weekly basis; being forced to
stand instead of being offered a seat; and being obliged to work overtime hours without
compensation as a condition for keeping their employment as well as other forms of
intimidation and harassment). It is also alleged that women were denied adequate recourse in the law. See Submission No. 9701, at 7 (stating that the established institutions
designed to address these matters are poorly funded and lack the requisite jurisdiction
or direction to address gender discrimination. The Report specifically noted the ineffectiveness of the Conciliation and Arbitration Boards, which are the primary administrative bodies for the adjudication of labor/management disputes, but are limited in this
area because of a lack of jurisdiction over pre-employment matters, including preemployment pregnancy testing).
332
uary 12, 1998. The NAO acknowledged that pre-employment pregnancy screening, which may be a violation of international law96 and
is questionable under Mexican law,97 is prevalent in the Maquiladoras.98 The NAO also discovered that post-hire pregnancy discrimination is prevalent, and many Mexican women are unaware of their
available options to combat this form of illegal sex discrimination.99
Because of these findings, the NAO recommended Ministerial Consultations to clarify the law and practice in Mexico on pre-employment
pregnancy screening and post-hire discrimination on the basis of pregnancy.100 Action on this matter is still pending at the Ministerial level
twenty-one months after the original filing.
Submission No. 9702 was filed on October 30, 1997,101 against a
Mexican subsidiary of Han Young Corporation.102 The complaint alleged that the company attempted to thwart employee efforts to form
an independent union through intimidation, coercion, and harass96. Arguably, Mexico may be in violation of several international agreements to
which it is a signatory. See International Labor Organization (ILO) Convention 111, Discrimination in Respect of Employment and Occupation, adopted June 4, 1958, ratified by
Mexico in 1961. See also The U.N. Convention on the Elimination of All Forms of Discrimination Against Women (CEDAW), adopted by the United Nations General Assembly
in Resolution 34/180 of December 18, 1979 and opened for signature, ratification and
accession in March 1980, ratified by Mexico in 1981. See also International Covenant on
Civil and Political Rights (ICCPR) and the American Convention on Human Rights.
97. See id. at 14 (referring to various provisions of the Mexican Constitution and
Mexican Federal Law to demonstrate that pregnancy discrimination is prohibited. Article
123(A) of the Mexican Constitution governs labor standards and paragraph V establishes
protections for pregnant women. Title V of the Federal Labor Law deals with the employment of women and prevents discrimination in Articles 133 and 164; and Article 170
provides protection against gender discrimination).
98. See Submission No. 9701, at 34 (noting that the Government of Mexico claims
that pre-employment pregnancy testing is not widely practiced and where it is practiced
it is not inconsistent with Mexican law).
99. Id. at 44. The findings are adequately summarized by this passage in the report:
The review of Submission No. 9701 raises serious matters regarding the treatment of women workers who are pregnant in Mexicos Maquiladora sector and
the protection they are afforded by the Mexican authorities. Women are subjected to pregnancy screening and intrusive questioning. They are denied employment if they are pregnant. There are instances where they are dismissed
from employment after becoming pregnant or are pressured into resigning for
the same reason. The level of awareness amongst women of their rights is in
question and they may lack confidence in the procedures and mechanisms by
which those rights can be protected.
100. See id. at iii.
101. Submission No. 9702, at i (stating that the submission was filed by the Support
Committee for Maquiladora Workers, the International Labor Rights Fund, the Asociacion Nacional de Abogados Democraticos de Mexico (National Association of Democratic
Lawyers of Mexico), and Sindicato de Trabajadores de la Industria Metalica, Aerco,
Hierro, Conexos y Similares de Mexico (the Union of Metal, Steel, Iron, and Allied Workers of Mexico).
102. See id. at 3 (noting that Han Young de Mexico, S.A. de C.V. assembles car parts
for Hyundai Precision America, a subsidiary of Hyundai Corporation of Korea).
333
ment.103 A supplemental complaint was added to the Han Young case104

on February 9, 1998, to address alleged health and safety violations at
the same plant.105 The complaint alleged violations of health and safety
laws and regulations106 resulting in various injuries and ailments107
and further alleged that the Mexican government failed to enforce
health and safety laws at the plant.108
The NAO accepted the Han Young subsidiary case for review on
November 17, 1997 and issued a report of findings on April 28, 1998.
In its report, the NAO substantiated many of the allegations, stating,
[t]he workers in question have expressed their union preference
through two representation elections, strikes, and fasts, and in the face
of determined opposition from the company, including intimidation,
threats, and dismissals.109 Serious questions were also raised about
the ability or willingness of Mexicos Conciliation and Arbitration
103. Id. at ii. The report notes that many of the workers claimed to have never seen
or have any knowledge that they were operating under a collective bargaining agreement
or were represented by a union. When an election to create an independent union was held,
the complaint alleges that it transpired with many irregularities such as threats of dismissal and intimidation. Additionally, the company allegedly interfered with the actual
election when it brought in thirty-five workers sympathetic to the company who were otherwise ineligible to vote and prevented the submitters from checking the credentials of
these individuals; see also, id. at ii (noting that despite the use of these illegal activities by
the company, the complainants voted for the independent union anyway, only to have it
overturned and nullified by a Mexican Conciliation and Arbitration Board); see id. (stating
the CAB based its ruling to overturn the election on the fact that the union was not properly
registered and failed to prove that it had support from a majority of the workers).
104. See Submission No. 9702-Part II: Safety and Health Addendum (stating the
second submission was offered by the Maquiladora Health and Safety Support Network,
Worksafe! Southern California, the United Steelworkers of America, the United
AutoWorkers, and the Canadian AutoWorkers).
105. See id. at 2 (stating that workers at the Tijuana plant were interested in forming a union to address issues of safety and health . . . and the lack of a company doctor
in the plant).
106. See id. at 2 (noting that the alleged violations claimed that Han Young failed
in installing local exhaust ventilation, conducting periodic hazard identification and control, exposure monitoring, medical surveillance, health and safety training and other
hazard control measures. The submission also claimed that Han Young failed to provide
adequate protective gear consistent with safety rules that would have avoided injury
including safety glasses, face masks, gloves, and shoes).
107. Id. at ii. The complaint states that various violations of health and safety laws
have led to frequent injuries and illnesses such as respiratory problems, loss of vision,
broken bones, burns, and hearing loss.
108. See id. at 41 (At least four inspections took place since June 16, 1997. . . . [F]our
inspections in the space of one year is substantial. Notwithstanding repeat inspections,
however, serious unabated violations were allowed to continue over this entire period.).
109. See Submission No. 9702, at 45-46 (finding:
[t]hat a group of 120 workers at Han Young obtained union representation
only after extensive litigation, intervention by the Mexican Federal labor authorities, two representation elections which they won, international public
attention, and extensive media coverage. It is worth noting that until the instant case, from the information available to the NAO, not one independent
union had been registered or had obtained collective bargaining representa-
334
Boards (CAB) to enforce freedom of association rights to form an independent union.110

On August 11, 1998, the U.S. NAO issued a public report of its
findings regarding the supplemental complaint and again substantiated many of the claims identifying details of a hazard filled workplace.111 Specifically, the report found,
The information from expert witnesses, workers and inspection reports is consistent and credible in describing a workplace polluted
with toxic airborne contaminants, strewn with electrical cables running through puddles of water, operating with poorly maintained and
unsafe machinery, and with numerous other violations and omissions
of minimum safety and health standards.112
The NAO also found that the health and safety inspections conducted
by the Mexican government were ineffective, and despite frequent inspections, violations continued unabated.113 As a result of these findings, the U.S. NAO recommended Ministerial Consultations, which are
pending.114
IV. Analysis
A. Mexicos Inability to Enforce Its Labor Laws
Although substantive Mexican laws contain sufficient protections
of worker rights,115 it is apparent that Mexico does not adequately enforce its labor laws. Sources of worker protections in Mexico include the
Political Constitution of the United States of Mexico,116 the Mexican
tion rights in Tijuana and only one other exists in the entire maquiladora
sector).
110. See id. at 47 (finding that:
[t]he placement, by the Tijuana CAB, of obstacles to the ability of workers to
exercise their right to freedom of association, through the application of inconsistent and imprecise criteria and standards for union registration and for
determining union representation, is not consistent with Mexicos obligation
to effectively enforce its labor laws on freedom of association in accordance
with Article 3 of the NAALC).
111. See Submission No. 9702-Part II: Safety and Health Addendum, at 40.
112. See id. (noting also that [t]his workplace was severely lacking in adequate
sanitation facilities for workers to relieve themselves and bath[e] in minimally acceptable
hygienic conditions or even get a drink of water).
113. Id. at 42. The findings note that nearly $10,000 in fines were assessed against
Han Young although it has not been shown that the fines were actually collected, or what,
if any, additional actions were contemplated by Mexican authorities to seek compliance,
thereby throwing into question the deterrent value of the inspections generally.
114. See id. at 43.
115. See supra notes 55-114. All of the submissions legally ground their complaints,
not only on the mandates set out in the NAALC, but in the violation of international
treaties to which the United States and Mexico are signatories and specific provisions of
Mexican constitutional and statutory law which preserve worker rights.
116. 2 AMOS J. PEASLEE, Political Constitution of the United States of Mexico, in
CONSTITUTIONS OF NATIONS: FRANCE TO POLAND 415, 453-56 (1950). Title VI, Article 123
of the Mexican Constitution provides the pertinent constitutional basis for worker pro-
335
Federal Labor Law,117 and many international agreements to which

Mexico is a party.118 Although these laws provide a sufficient legal basis
for enforcement of basic worker rights, the U.S. NAO has found frequent and continual violations of these rights by subsidiaries of U.S.
and other multinational corporations operating in Mexico, in addition
to a lack of enforcement by the government of Mexico.119
The U.S. NAO has also found that most Mexican workers are unaware of their rights and that the administrative and legal institutions
in place have thwarted, rather than assisted, workers attempting to
utilize such mechanisms.120 This raises the concern that Mexicos adtections stating, Congress, with due regard for the following principles, shall enact laws
on labor, which shall govern in the case of skilled and unskilled workmen, employees,
domestic help, and artisans, and in general every labor contract. Id. at 453. Specific
provisions following lay out the basic protections that workers are to enjoy. The minimum wage to be received by a workman shall be that considered sufficient, according to
the conditions prevailing in the respective region of the country, to satisfy his normal
needs, his education, and his lawful pleasures, considering him as the head of a family.
Id. at 454 (quoting CONST. at Title VI, Art. 123 (VI)). In every agricultural, industrial,
mining or other class of work, employers are bound to furnish their workmen comfortable
and sanitary dwelling places. Id. (quoting CONST. at Title VI, Art. 123 (XII)). Employers
shall be liable for labor accidents and occupational diseases contracted by reason of or in
fulfillment of work. Id. (quoting CONST. at Title VI, Art. 123 (XIV)).
Employers shall be bound to observe in the installation of their establishments
all the provisions of law governing hygiene and sanitation, and to adopt adequate measures to prevent accidents due to the use of machinery, tools, and
working materials, as well as to organize the work in such a manner as to
assure the greatest guarantees possible for the health and lives of workmen
compatible with the nature of the work, under penalties which the law shall
determine.
Id. at 455 (quoting CONST. at Title VI, Art. 123 (XV)). Both workmen and employers
shall have the right to unite for the defense of their respective interests, by forming
syndicates, unions, professional associations, etc. Id. at 455 (quoting CONST. at Title VI,
Art. 123 ((XVI)). The law shall recognize the right of workmen and of employers to strike
and to lock-out. Id. (quoting CONST. at Title VI, Art. 123 ((XVII)).
117. See Ann Torriente, Study of Mexican Supreme Court Decisions Concerning the
Rights of State Employees to Organize in the States of Jalisco and Oaxaca, National Law
Center for Inter-American Free Trade (1997), available at http://www.natlaw.com/pubs/
spmx1b3.htm (describing the Mexican Federal Labor Law, most recently amended in 1988,
as the statutory basis for implementation of the general worker rights provisions described in the text of the Mexican Constitution). [On file at the U.S. Dept of Labor, U.S.
Bureau of International Labor Affairs, U.S. National Administrative Office, under Submission No. 940003].
118. See id. (noting that Mexico is a member of the International Labor Organization
and ratified ILO Convention 87, which addresses freedom of association, on April 10,
1950). Mexico also ratified International Labor Organization conventions 155, 161, and
170, which address occupational safety and health. See also supra note 96 (noting that
Mexico has ratified International Labor Organization Convention 111 which addresses
discrimination in the workplace); see also supra note 104, at 22 (noting that the prevailing
legal view in Mexico is that international treaties are superior to federal law) (citing
Torriente, supra note 117 (describing other worker protections present in Mexico including federal laws for public sector workers, various state laws for workers employed at
the local level, decision law through administrative bodies, and doctrinal opinions)).
119. See supra notes 53-114.
120. See supra notes 90 & 100.
336
ministrative mechanisms lack the will or ability to address worker rights

violations.121 Specifically, several of the submissions substantiate testimony and evidence indicating that the CABs, the three-member government panels empowered to prevent employer misconduct, lack impartiality122 and discriminate against workers by overturning union certification votes based on administrative minutia.123
In the Han Young subsidiary case (No. 9702), the U.S. NAO found
significant and unimpeded health and safety violations.124 In other
cases, the use of threats, fear, and intimidation by employers to quell
union organizing drives is common.125 The charges indicate that despite government inspections, workers continued to be employed in a
hazard filled workplace and that although fines were assessed against
the company, the NAO was never able to ascertain if Mexican authorities collected the fines.126 In the Sony subsidiary case (No. 940003),
the NAO determined that Mexican workers, who may have been
wrongly dismissed and had their union election tampered with, enjoyed
little reasonable legal recourse.127
These and other examples illustrate that even with the specter of
public attention and mounting pressure, Mexico continues to have a
poor record of enforcing its labor laws. The research demonstrates that
when Mexico makes an effort to enforce its laws, the institutions
charged with enforcement suffer from administrative indifference and
bias. Furthermore, the cases demonstrate that the legal goal of the
NAALC in ensuring Mexicos enforcement of its labor laws has failed.
This article will now specifically discuss the NAALCs inability to assist
Mexico in the enforcement of its labor laws.
121. See Submission No. 9702-Part II, at 69 (stating that the review of this submission raises questions about the impartiality of the CAB No. 15 and the fairness, equitableness, and transparency of its proceedings and decisions); but see supra note 82, at
32 (indicating that the composition of arbitration panels creates the appearance of a lack
of impartiality yet the union wishing to gain certification in this case had three out of
four appeals cases decided in its favor by an appellate panel).
122. See Submission No. 9702, at 47.
123. See id. (finding that the Tijuana Conciliation and Arbitration Board placed
obstacles in the way of workers attempting to exercise their right to associate and
organize a union through the application of inconsistent and imprecise criteria and
standards for union registration and for determining union representation and found
these activities inconsistent with Mexicos obligation to effectively enforce its labor
laws).
124. See Submission No. 9702-Part II: Safety and Health Addendum, at 26 (describing a workplace posing dangers to the health and safety of workers . . . where they were
exposed to toxic airborne contaminants that threatened their long term health. These
conditions remained unabated over a period of time, and continue largely unabated, despite repeated inspections by the Mexican government.).
125. See, e.g., Submission No. 940001 & No. 940002.
126. See Submission No. 9702-Part II: Safety and Health Addendum, at i-ii.
127. See Submission No. 940003, at 26-27.
337
B. NAALCs Failure to Promote Mexican Worker Rights

Architects of the NAALC, recognizing the potential value of Mexicos pre-existing legal basis for progressive advancement of worker
rights, designed the regime to assist Mexico in enforcing those laws
already on the books. Yet the NAALC proved itself incapable of ensuring that Mexicos labor laws are enforced and as a result, while it has
generated greater disclosure, it has had little or no effect in correcting
specific violations of individual worker rights.128
The significant shortcomings of the NAALC fall into three subfields. First, the NAALC is structurally flawed in that it exempts many
alleged abuses from condemnation under the NAALC system. Second,
the Ministerial Consultation process has not provided for adequate resolution of disputes. This is evidenced by the discovery that the workers
bringing complaints rarely see any improvement in their specific situations. Third, administration of the NAALC process utilizes an unreasonable amount of time and resources without providing any real opportunity for arbitration, which is a more cost-effective approach to
dispute resolution.
1. A Hierarchy of Rights
The side accords primary deficiency is that matters of great significance, including those related to freedom of association, the right to
strike, the right to organize, and other industrial labor issues, are given
lower priority.129 Thus, if raised in a complaint, these issues are not
permitted to move beyond the Ministerial Consultation phase of the
NAALC process.130 In regard to disputes covering these issues, the
NAALC solely sets forth a system fostering cooperation and consultation as opposed to punitive disciplinary action or alternative dispute
resolution.131 In the areas of child labor, occupational health and safety,
128. It should be noted that the initial steps of the NAALC process, including NAO
fact gathering, have allowed for the significant disclosure of sensitive information of the
labor practices of NAFTA countries and happens to be one of the more useful provisions
of the side accord. See Juli Stensland, Note, Internationalizing the North American Agreement on Labor Cooperation, 4 MINN. J. GLOBAL TRADE 141, 162 (1994) (stating that the
NAALC provides access to greater amounts of information making it easier for interested
parties to identify labor abuses).
129. See supra note 9 (defining the wide scope of issues to be included within the
purview of the NAALC generally); see NAALC, supra note 5, at art. 23 (stating that the
Evaluation Committee of Experts phase of the NAALC, which follows unsuccessful Ministerial Consultations, is reserved for issues involving the enforcement of . . . occupational safety and health or other technical labor standards).
130. See The Failed Experiment: NAFTA at Three Years: NAFTA and Labor Rights
(Intl Lab. Rights Fund), at 17-18 (Jun. 26, 1997) (noting that issues related to technical
labor standards can never lead to trade sanctions).
131. See also Crandall, supra note 29, at 192 (stating that the protracted submission process and inability to sanction industrial labor violations make the side accord
appear toothless).
338
and other concerns, the NAALC expands the alternatives by permitting

the creation of a panel of experts, followed by an additional series of
consultations and eventually an arbitration system that may administer sanctions.132 The consequence is that many significant worker
rights issues go un-addressed by some of the more powerful mechanisms of the NAALC. Many of the issues excluded from protection, such
as freedom of association and the right to strike, are foundational
rights, which permit workers to advance their cause collectively.
It can be argued that these fundamental rights deserve a heightened level of protection because they create a platform of democracy
and equal treatment under the laws that are of integral importance to
the advancement of worker rights in so many other areas. Stronger
protection of the right to organize and bargain collectively would go a
long way in addressing health and safety violations that continue to
permeate much of Mexicos industrial culture. The NAALC fails to attach the appropriate level of significance to these considerations by
discharging these fundamental matters to a secondary status.
2. Ministerial Consultations Do Not Facilitate Justice
The meetings of Labor Ministers, when they have been conducted,
have not resulted in meaningful resolution of the identified worker
rights violations. For example, in the Sony subsidiary case (No.
940003), the Ministerial Consultations called for an examination of the
laws applicable to union registration and certification. They also called
for a review of the efficacy of each government in implementing and
enforcing those laws.133 While information exchange can be a valuable
attribute134 by leading to a broader understanding of each nations labor laws, it does not directly address the injustices experienced by the
workers who filed the submission twenty-one months prior, nor does it
result in their re-employment. The particular workers harmed did not
witness any positive change as a result of the consultations, but instead
experienced reprisals for filing a complaint in the first place.135
Similarly, in the submission alleging pregnancy discrimination
against several employers in the Maquiladora region of Mexico (No.
9701), the NAO discovered that this form of discrimination is prevalent
in Mexican society and that the Mexican government is aware of the
132. See NAALC, supra note 5, at art. 23.
133. See id. at 3.
134. Study on the Operation and Effects of the North American Free Trade Agreement, Office of the United States Trade Representative, at 104 (July 1997) (stating that
Ministerial Consultations have been an effective forum for providing transparency and
focusing international attention on important labor law enforcement issues).
135. See Submission No. 940003, at 4 (acknowledging that the workers who filed
the original submission have not been reinstated after their dismissal and believe they
have been blacklisted and as a result are precluded from obtaining gainful employment elsewhere).
339
problem.136 In response to the findings, NAO recommended that Ministerial Consultations clarify the law and practice in Mexico on preemployment pregnancy screening and post-hire discrimination on the
basis of pregnancy.137 Nearly two years have passed since the complaint was filed and nearly eighteen months have passed since Ministerial Consultations have been recommended, and no substantive action has alleviated the discrimination. If nothing else, the international
attention produced by the proceedings may have caused Mexican employers to discriminate more discreetly in order to avoid liability or
further international scrutiny. In this instance, the Ministers were unable to develop a timely strategy to reverse the discrimination allowing
the abuses to continue unscathed.
The Han Young subsidiary case (No. 9702) illustrates a related
problem. In that submission, the NAO discovered severe health and
safety violations and employer abuses.138 Indeed, the case stands as an
illustration of some of the impudent abuses that the NAO has publicly
reported. Yet, when the NAO recommended Ministerial Consultations,
it suggested that the meetings focus on the implementation of proposals
the Government of Mexico had itself developed and on discussions of
strategies Mexico might employ in the future.139 While these efforts
could produce positive results in the future, they provide no material
recourse for the workers whose rights were abused and who were subjected to nineteenth-century working conditions. These examples demonstrate that when Ministerial Consultations are fully employed their
performance is ineffective at best.
The evidence clearly demonstrates that consultations, though designed to facilitate substantive results, amount to little more than
high level meetings that gloss over the issues in dispute by ordering
reports, studies, and other forms of information exchange.140 Additionally, the scope of the recommended mandate the Ministers receive
from the NAO often times, as illustrated explicitly in the Han Young
136. See Submission No. 9701, at 44 (noting that there are different opinions as to
the legality of pre-employment pregnancy screening in Mexico).
137. Id. at iii.
138. See Submission No. 9702.
139. See id. 47 (reporting that:
[c]onsultations should discuss any strategies being considered by the Government of Mexico to address these issues and in particular those strategies designed to address problems such as those with the Tijuana CAB in Baja California, as well as other measures to ensure that workers freedom of
association and right to bargain collectively are protected).
140. This analysis is not designed to minimize the significance high level consultations can play in the long term advancement of worker interests. However, the
NAALC mandate that engaged parties make every attempt to resolve [the] dispute
disregards the potentially greater effectiveness of a more adjudicative and legally based
model.
340
case, falls far short of what is required to obtain substantive results.

If Ministers were called upon to resolve specific disputes as opposed
to reviewing problems in the abstract, more substantive results would
be obtained.
The great irony of the Ministerial Consultations and the NAALC
is that the system was designed to improve workers rights, in part,
through public disclosure and information gathering. While the
NAALC does an adequate job of gathering information and discovering labor violations, it is incapable of instituting appropriate corrective measures. The discovery of specific labor violations is critical,
but discovery alone does not resolve disputes, and the Ministers are
not provided with the proper authority to successfully resolve such
disputes.
3. NAALC Consumes Time and Resources
The procedures established in the NAALC result in an unjustly
protracted process and allow an unreasonable amount of time to pass
before disputes are resolved.141 Structurally, once a complaint is filed,
the NAO is given two months to decide whether to accept the submission and then has an additional four months to issue a preliminary
report.142 For most disputes, six months may pass before Ministerial
level meetings commence. If the issue in dispute moves forward, the
ECE is granted an additional six months before its final report is transmitted.143 The inefficiency of this skeletal structure is clearly illustrated through a review of the various submissions.
In the first two submissions regarding the Honeywell and General
Electric subsidiaries (No. 940001 and No. 940002, respectively), the
NAO took approximately eight months from the date of filing to issue
its Public Report thereby concluding the action.144 The Sony subsidiary
case (No. 940003) took a full twenty-one months before final resolution
was achieved.145
Other submissions, which have been ongoing for months, and some
for years, remain unresolved. The FCAT case (No. 9601), filed on June
13, 1996, is still pending final resolution, nearly three years after the
filing date.146 The Han Young subsidiary case (No. 9702), originally filed
on October, 30 1997, has yet to be resolved.147 The NAO issued two
reports with regard to this submission on April 28, 1998 and August
11, 1998, respectively. In both instances, the NAO recommended Min-
141.
142.
143.
144.
145.
146.
147.
See NAALC, supra note 5.

See NAO Procedural Guidelines, 59 Fed. Reg. at 16661.
Id. at 16662.
See Submission No. 940001 & 940001.
See Submission No. 940003.
341
isterial Consultations, using strong language to express concern over

the labor abuses taking place.148 Yet, as of April 1999, no additional
findings have been made and no strategy has been employed to resolve
the matter.
The time frames established in the NAALC and the resulting prolonged advancement of submissions through the process indicate a system that is neither efficient nor result-oriented.
4. Arbitration Is Not a Reality
Article 29 of the NAALC,149 which describes the procedures initiating the ad hoc arbitration process, places far too many restrictions
on even the preliminary commencement of arbitration proceedings under the continued assumption that violations ought to be handled diplomatically. Specifically, arbitration (1) requires a persistent pattern
of non-enforcement of a labor law,150 (2) may only commence at the
written request of a disputing party,151 and (3) requires a two-thirds
vote to commence.152 In addition, the panel may only be convened to
adjudicate a limited number of infractions.153 These restrictions basically preclude arbitration in all but the most blatantly and continuously
abusive instances.
V. Recommendations for Responsive Labor Dispute
Resolution
Many commentators suggest that the NAALC is an accomplishment because it takes the unprecedented step of establishing a permanent structure to adjudicate extra-territorial labor disputes within
the confines of a trade pact.154 It has also been noted that simply exposing labor abuses can go a long way in achieving progress in ad148. See id. at 46-47 (noting that the company employed intimidation, threats, and
dismissals to oppose employee union preference and that governmental interference
with the ability of workers to select union representation is not consistent with Mexicos
obligation to effectively enforce its labor laws).
149. See NAALC, supra note 5, at art. 29.
150. Id.
151. Id.
152. Id.
153. Id. (indicating that the party complained against must have failed to effectively enforce its occupational safety and health, child labor or minimum wage technical
standards that are (a) trade-related; and (b) covered by mutually recognized labor
laws).
154. See Jason S. Bazar, Comment, Is The North American Agreement on Labor
Cooperation Working for Workers Rights? 25 CAL. W. INTL L.J. 425, 457 (1995) (noting
that the NAALC shows progress considering its limited powers); see also Ronald W. Kleinman & Joel M. Shapiro, NAFTAs Proposed Trilateral Commissions on the Environment
and Labor, 2 U.S.-MEX. L.J. 25, 34 (1994) (arguing that merely including labor and environmental side accords represents a departure from set US trade practice); see also
Crandall, supra note 29, at 193 (arguing that although the core NAALC provisions do
not have enforcement power, they do provide a means of exposing labor abuses and provide a forum for parties to address their differences).
342
vancing worker and human rights.155 While there is merit in exposing

abusive labor practices, it is not clear that exposure has ameliorated
the particular abuses that have been aired under the NAALC or has
resulted in general improvement of the lives of Mexican workers. In
fact, there are instances where workers have found their situations
worsened from employer reprisals.156
Because the goals set forth in the NAALC have not been achieved,
a new approach, which centers on effective and efficient arbitration is
warranted. Eliminating or shortening the ineffective portions of the
NAALC and revamping the arbitration system will ensure dispute resolution is more responsive, fair, and timely.
A. Shorten/Eliminate Ineffective NAALC Provisions
The general ineffectiveness of the NAALC procedures requires
their significant curtailment or total elimination. The initial complaint
and fact gathering phases of the process require more stringent time
restrictions. Six months is an unreasonable amount of time to gather
information and issue a preliminary report. Although the Ministerial
Consultations have proven ineffective under the NAALC, high-level diplomacy is recognized as a valuable and prudent step in dispute resolution. Therefore, the Ministerial Consultations should remain an element of the process to allow a final opportunity for a negotiated or
mediated settlement. However, a strict time limitation (such as ten
business days) must be placed on the consultations process to avoid
unnecessary delay in the resolution of the dispute.
Next, the Evaluation Committee of Experts phase should be eliminated. It serves no substantive purpose in the process other than to
gather information, which has already been gathered, and determine
possible violations of the side accord, which have already been determined. While expert based fact-gathering is an essential element to
dispute resolution, it is a process better served at the commencement
of arbitration. For example, the arbitration system may include a National Administrative Office or Evaluation Committee of Experts who
assist in the gathering of general information in the early stages of
arbitration. Elimination of the ECE as an independent step in the process, however, is critical in significantly reducing the time frame for
dispute resolution.
As described in Section II, the NAALC provides for arbitration of
disputes, which remain unresolved following the initial phases of
NAALC dispute resolution. However, after five years of operation, not
a single dispute has been submitted to arbitration. By shortening and
155. See generally id.
156. See Submission No. 9601.
343
eliminating the early phases of this process, the use of arbitration becomes a viable possibility.
B. Revamping the NAALC Arbitration Approach
The underlying NAALC arbitration model, as outlined in Articles
29 through 41 of the NAALC, can be used as a starting point upon which
necessary alterations may be implemented. For suggested alterations to
the underlying model, the United Nations Commission on International
Trade Law (UNCITRAL) model of commercial arbitration is valuable.157
The UNCITRAL approach is attractive because Mexico has adopted it
for use in commercial transactions158 and because its approach is considered mainstream, providing much desired credibility.159
1. Revisions of NAALC Model
A preliminary problem with the NAALC as described in Section IV
above is that different types of labor issues are subjected to varying
levels of review. The revamped NAALC arbitration model should eliminate these restrictions and arbitrary divisions and instead employ
broad definitional jurisdiction for workers rights issues that may be
brought before the arbitration panel. The UNCITRAL rules suggest
that an arbitration system ought to define its terms broadly and encourages states not to impose onerous or local requirements,160 and in
this instance, its advice should be heeded.
A second area of the NAALC model requiring revision is Article
36.161 Under the current article, the arbitration panel is provided with
six months to draft an initial report, which is then transmitted to the
disputing parties for review.162 The disputing parties then have thirty
days to respond to the report.163 After review of the comments, the
arbitration panel is required to deliver its final report within another
thirty days.164 This time frame permits a staggering eight months to
pass before corrective action is instated. It is unnecessary to provide
the parties with a draft report of the panels findings before the report
157. See Howard M. Holtzman & Joseph E. Neuhaus, A Guide To The UNCITRAL
Model Law on International Commercial Arbitration (1989) (reprinting a copy of the text
of the UNCITRAL rules in Appendix A as adopted by the United Nations Commission
on International Trade Law (UNCITRAL) (Jun 21, 1985)).
158. See DENNIS CAMBELL, DISPUTE RESOLUTION METHODS 410 (1994).
159. See supra note 157, at 1240. See ALAN REDFERN & MARTIN HUNTER, LAW AND
PRACTICE OF INTERNATIONAL COMMERCIAL ARBITRATION (1986) for additional guidance
in the creation of an international arbitration regime.
160. PROVISIONAL REMEDIES IN INTERNATIONAL COMMERCIAL ARBITRATION: A PRACTITIONER HANDBOOK 258 (Axel Bosch ed., 1994). Article 7 (1) defines the term arbitration
agreement broadly to encourage ease in the use of the system.
161. See NAALC, supra note 5, at art. 36 (describing the time frame each stage
within which the arbitration process must be conducted).
162. Id. at art. 36(2).
163. Id. at art. 36(4).
164. Id. at art. 37(1).
344
is released since all parties have consented to the jurisdiction of the

arbitration panel well in advance and because there is no required mediation. However, a preliminary review by the parties is acceptable if
the time frame is shortened and the process stimulates settlement discussions. Further, while an expedient appeals process may be desirable
to ensure fairness and objectivity, providing parties with the ability to
review the initial findings after a full opportunity to present its case
unnecessarily prolongs the process. A revised arbitration model should
provide for a permanent institutional structure rather than the current
ad hoc system. An institutionalized structure allows for more predictability in addressing future complaints.165
Third, Articles 38 and 39 of the NAALC arbitration process provide
for the development of an action plan when a violation has indeed
been found.166 If the action plan goes unfulfilled, the panel may convene
once again at the request of a party167 and only then may monetary
sanctions be considered.168 Again, consideration should be given to
eliminating these provisions and replacing them with the provisions
favored by UNCITRAL.169 To remedy a lack of enforcement, the panel
should be provided with the authority to implement monetary sanctions upon an appropriate finding or some other remedy as agreed to
in advance by the parties.
Finally, the scope of the arbitral agreement must be widened and
made clear at the outset.170 In dealing with matters as sensitive as a
nations internal labor relations, it is essential that consent to be bound
by the arbitration process is clear and unequivocal.171 This carries a
165. REDFERN & HUNTER, supra note 159, at 9 (stating that ad hoc arbitration systems react to a current crisis while future actions can be better addressed through a more
permanent structure).
166. See NAALC, supra note 5, at art. 38 (noting that an action plan may not be
implemented unless the arbitration panel finds a persistent pattern of failure by a
participating nation to enforce its occupational safety and health, child labor or minimum wage technical labor standards).
167. Id. at art. 39(1).
168. Id. at art. 39(4)(b).
169. See supra note 157, at 1245 (stating that Article 19 suggests that the parties
are free to determine in advance the procedures that shall govern the arbitration proceedings, including the judgment and awards process); see also id. at 1248 (indicating
that the parties may also consider provisions that provide recourse against an arbitral
award that one country felt was unjust).
170. See id. at 1242 (implying that the scope of an arbitration agreement can be
affected by the definitional significance given to common terms; for example an arbitration agreement can be defined as an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in
respect of a defined legal relationship, whether contractual or not. An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a
separate agreement).
171. See supra note 165, at 4 (noting that arbitration will not be valid unless the
parties have consented to its authority); see id. at 5 (stating that arbitration panels may
only exercise those powers that have been explicitly or implicitly provided to it); see id.
345
tremendous substantive and symbolic benefit by virtually eliminating

the argument that national sovereignty is harmed, since each nation
involved explicitly agrees to submit itself to the jurisdiction of the
panel. To this end, extensive efforts must be made to exchange information and evaluate each participating nations labor laws.172 Various
other significant issues will be the subject of negotiation.173
2. Attributes of Arbitration
Many of the benefits of arbitration in the commercial context
are relevant or desirable for the resolution of worker-related issues. One benefit is that parties avoid the awkward position of
standing in direct judgment of one anothers actions since wide jurisdiction is not established.174 Instead, an arbitration panel is restricted to implementing substantive and procedural rules, which
have been agreed to by the participating countries in advance.175
This consideration preserves the national sovereignty interest176
(stating that parties to an arbitration tribunal have more control at the beginning of the
process that in the courts).
172. A complete discussion of each nations labor laws and enforcement practices
conducted by the labor Ministers in each nation will serve several purposes. It will define
common areas to serve as a basis for a new dispute resolution process and will facilitate
the actual establishment of the system by creating common legal grounds on which the
arbitration panel may derive its authority. A preliminary determination should be made
as to the effectiveness of those laws and enforcement mechanisms within each nation.
173. See Holtzman & Neuhaus, supra note 157, at 1243 (discussing the number of
and appointment of arbitrators, defaulting to a number of three unless otherwise specifically determined by the parties); see id. at 1244 (discussing Article 13, which addresses
the rules for challenging an arbitrator; Article 14, which discusses the possibilities of
terminating an arbitrator because he is unwilling or incapable of carrying out his duties);
see also id. at 1245 (noting that Chapter V of the UNCITRAL rules outline standards for
the general conduct of the proceedings: including Article 18, which ensures equal treatment of all parties involved; Article 19, which ensures the parties are free to determine
procedures that shall govern the arbitration panel proceedings; Article 20, which notes
that the parties are free to agree upon a place of arbitration; Article 23, which describes
the duty of the claimant to state the facts supporting his claim factually, the relevant
issues, and the relief or remedy sought; Article 24, which notes that a hearing on the
matter will be presumed but that the panel may have the power to select others methods
of information gathering; Article 26, which allows the tribunal to appoint experts and
conduct hearings to foster accurate fact-finding and fair dispute resolution). Issues of
liability jurisdiction and choice of law will be worked out as well.
174. Id. at 3 (noting that a more fair and impartial resolution of disputes can be
fostered by avoiding legal differences and constraints) (quoting Hunter Paulson, A Code
of Ethics for Arbitrators in International Commercial Arbitration, INT. BUS. LAWYER 153
(1985)).
175. One advantage of arbitration is that the parties are able to select the procedural
rules and substantive law that shall govern the resolution of disputes. This latitude helps
ensure that the parties are comfortable with the scope and parameters of the arbitration.
See REDFERN & HUNTER, supra note 165, at 450 (noting that procedures set in place to
protect U.S. investors violate the national sovereignty of Canada and Mexico and that
U.S. sovereignty is violated by placing restrictions on the U.S. governments ability to
aid U.S. corporations in global economic competition).
176. Id. (affirming the notion that an advantage of arbitration is that parties are
able to select the procedural rules and substantive law that shall govern the resolution
346
and recognizes the cultural,177 political,178 and legal differences among

nation-states.
The next advantage, which may be particularly appreciated by
many of Mexicos employers, is the private and discreet nature of arbitration.179 While arbitral proceedings would normally be held in public, the violations of law discovered would draw far less attention if the
elongated NAALC process were shortened and quickened. An expedient
resolution would naturally be preferred over a more public and drawnout alternative.
Another benefit is the speed and efficiency with which disputes
may be resolved.180 A final attribute worthy of mention is the enhanced
enforceability of arbitral decisions.181 As noted in the Han Young case
(No. 9702), the Government of Mexico ordered fines for health and
safety violations on one of its employers, but the NAO was unable to
determine if those fines had been collected and expressed skepticism
about the effectiveness of fines that went un-enforced.182
A final attribute worth noting is the wide use of arbitration generally. Mexico adopted strong arbitration rules in its 1989 Commercial
Code used by Mexican businesses. A working usage of arbitration helps
ensure that the administrative and regulatory structure needed to implement such a system exists in Mexico.
VI. Conclusion
It is clear that after five years in practice, the NAALC has not
achieved its intended results. The NAALC should not be completely
of disputes). Also, arbitration allows the parties to craft the entire system to their
liking, thereby ensuring each participant may exercise autonomy and independence in
establishment of the system. See also supra note 160, at 450 (noting that Mexicos
concerns over infringement of its national sovereignty might have influenced resolution
of the first two submissions before the NAALC) (citing Richard Alm, Union Leaders
Upset After Labor Complaints on Mexico Shunned, DALLAS MORNING NEWS, Oct. 14,
1994, at 1-D).
177. See Stephen Zamora, The Americanization of Mexican Law: Non-Trade Issues
in the North American Free Trade Agreement, 24 LAW & POLY INTL BUS. 391, 445-46
(1993) (asserting that the American view of justice, which is focused on the individuals
rights and obligations and pursued through an adversarial process, may not be compatible with the practices of Mexican society, which focuses on cooperation and authoritarianism and carries out its laws through flexible administrative procedures rather than
litigation).
178. See id. at 444 (supporting the idea that the differing political systems of Mexico
and the United States make it difficult for the American adversarial system of justice to
be easily applied in Mexico).
179. See id. at 3 (noting that parties concerned about their reputations or desire to
avoid public attention with regard to details of specific disputes appreciate the private
legal nature of arbitration).
180. See id. (stating that these proceedings, which usually consist of a single hearing, can be significantly more timely than submitting a claim before a traditional courts,
which can take several years).
347
discredited because it represents a viable approach given the political

realities under which it was created. However, the adoption of a more
definitive and high-powered arbitration process would result in more
timely and responsible dispute resolution and will foster general improvements in worker rights as signatory countries recognize the true
effectiveness of achieving the NAALCs goals.
If a system of arbitration is not legal, viable or politically feasible
under the NAFTA system, it is possible that a streamlining of the current NAALC could improve substantive results. If nothing else, the
failures of the system serve as an illustration of how these matters
might be addressed differently in the future. For example, a bilateral
trade agreement between the United States and Jordan will contain
provisions on the environment and labor rights within the actual text
of the accord for the first time ever. This and other proposals merit
additional research and academic attention. Creating international
personality for the transnational corporations in operation under
NAFTA rules should also be explored. This article has focused on Mexicos failure to enforce its labor laws and on the failure of the NAALC
to adequately compel such compliance. The article has not addressed
the notion of holding corporate actors directly liable under an arbitration system, but rather compelling Mexico to respond to an adverse
ruling of labor violations being conducted by a transnational corporation in her territory. The notion of creating a commercial arbitration
model, in which private parties adjudicate matters against private parties, would represent a natural extension of this research.
A critical, although obvious, point remains to be made. Above any
legal scheme that can be implemented to advance worker rights in
trade relations, it is the discipline and resolve of the United States that
is critical to advancement in an era in which our trade relations continue to be dominated by state to state power relationships. The stark
reality is that most nations will only grudgingly enter an arbitration
system that addresses worker rights issues within their sovereign territory and would likely not do so at all if access to the American marketplace were not so lucrative.
Cognizant of economic realities, the United States must utilize its
tremendous economic muscle to provide progressive leadership in this
area. Indeed, it is a moral imperative and economic necessity for the
United States to utilize its democratic political system, sophisticated
and stable populous, and dominating economy to assist our trading
partners in the development of healthy and prosperous societies. In
light of the many valid arguments levied against the adverse effects of
globalism in the last two years, the proposals contained herein permit
one small step in the advancement of the interests that so many feel
have been discarded.
348
The United States negotiates trade deals from a position of

strength and must use that leverage to ensure progress in these vital
areas. Without the resolve of the greatest democracy and economic
power in the world, little can be achieved in the overall advancement
of worker rights.
349
Voluntary Corporate Codes of

Conduct: Whats Missing?
Owen E. Herrnstadt*
I. Introduction
Voluntary corporate codes of conduct are in vogue. It seems as if
nearly every company has one. If you dont believe it, surf the web and
you will come up with hundreds of bold statements by major transnational corporations that refer to their guiding principles, code of worldwide business conduct, and code of ethics and business conduct.1
Codes now exist in almost every industry: apparel, oil, electronics,
and general manufacturing. Although individual codes are directed at
differing groups (for example, shareholders, corporate boards, and suppliers), they are increasingly aimed towards workers. Indeed, a significant number of corporations have implemented codes of conduct that
refer either explicitly or implicitly to the conditions of workers lives.
For many of these corporations, references to bettering the lives of
workers is prompted by the market demand of conscience-laden consumers.2 As competition becomes more fierce, these corporations calculate that they must pacify perceived public demands regarding the
treatment of workers. Codes of conduct serve as a tool for achieving
that objective.
Trade associations, individual corporations, and some non-government organizations (NGOs) have signed on to the corporate code of
conduct bandwagon. Together with representatives from the highest
level of government, they have embraced codes as a mechanism for
steering corporate behavior. Indicating his full support for the Apparel
Industries Partnership Program (AIP) and its creation of the Fair Labor Association (FLA), President Clinton said: The announcement we
make today will improve the lives of millions of garment workers
* J.D., M.S.I.R., University of Wisconsin, Director of International Affairs, International Association of Machinists and Aerospace Workers. The views expressed in this
article are those of the author and do not necessarily represent the views of the IAM.
1. E.I. Du Pont de Nemours and Company (visited Jan. 31, 2000) http://www.
dupont.com/careers/about/principals.html, Caterpillar (visited Dec. 21, 2000) http://
caterpillar.com/about cat/doing business with cat/01 code of conduct.html,
and Honeywell (visited Jan. 24, 2000) http://www.honeywell.com:80/about/page1 3.
html, respectively.
2. See, e.g., Robert J. Liubicic, Corporate Codes of Conduct and Product Labeling
Schemes: The Limits and Possibilities of Promoting International Labor Rights Through
Private Initiatives, 30 L. POLY & INTL BUS. 111, 114-19 (1998).
350
around the world.3 Indeed, prior to the AIP code, President Clinton
announced the Model Business Principles. These guidelines encourage all businesses to adopt and implement voluntary codes of conduct
for doing business around the world.4
Despite a positive reception by some people, not everyone has been
so generous with praise for corporate codes of conduct. For some critics,
codes are rarely in the interests of workers. They view codes as a vehicle
for corporations to (1) distract and confuse conscience-laden consumers,
who have demanded that the goods they buy not be made or handled
by exploited workers, (2) distract and confuse workers regarding their
fundamental rights, and (3) distract and confuse national policy makers. These critics believe that many codes are nothing more than corporate public relations shams and subterfuges for avoiding real efforts
to improve workers lives.5
For example, in referring to the AIP code of conduct, Alan Howard,
who represented the Union of Needletrades, Industrial, and Textile
Employees (UNITE) in the AIP, writes, It is difficult to escape the
conclusion that the implementation of this agreement will tend to contain, dilute, and divert the very pressures for empowering workers and
raising standards that created the AIP in the first place.6 Others have
also been outspoken in their criticism of voluntary corporate codes of
conduct.
Critics refute the notion that voluntary corporate codes of conduct
can somehow provide a steering mechanism for corporate behavior towards its workforce. They contend that only strong and effectively enforced international and national regulations for corporate behavior in
the workplace can form adequate steering mechanisms.7
3. Office of the Press Secretary, Remarks by the President at Apparel Industry
Partnership Event, Apr. 14, 1997 (visited Oct. 18, 2000) http://www.pub.whitehouse.gov/
WH/Publications/html/Publications.html.
4. The code itself contains references to prohibitions on discrimination, respect
for the right of association and the right to organize and bargain collectively, as well as
references to [r]esponsible environmental protection and environmental practices.
Among other things, the guidelines emphasize that they are to be voluntary. U.S. DEPT
OF COMMERCE MODEL BUSINESS PRINCIPLES (visited Oct. 18, 2000) http://www.depaul.
edu/ethics/principles.html.
5. These criticisms are similar to many of the arguments that have been raised
by opponents of modifying section 8(a)(2) of the National Labor Relations Act, (codified
in 29 U.S.C. 158 (1998)). That provision of labor law prohibits companies from dominating, supporting, or otherwise interfering with trade unions. Proponents state that,
among other things, the modification is needed to give employers more flexibility in the
workplace. They also argue that modification of section 8(a)(2) is needed to provide workers with an alternative to unions. Opponents, however, dismiss this argument asserting
that it serves to distract and confuse lawmakers, would forestall strengthening labor
laws, and is intended to confuse workers regarding their own rights to form free and
independent trade unions.
6. Alan Howard, Why Unions Cant Support the Apparel Industry Sweatshop
Code, WORKINGUSA, July/Aug. 1999, at 49.
7. Of course, critics also argue that strong regulations will create the environment
for free trade unions which will empower workers.
Voluntary Corporate Codes of Conduct
351
Why have voluntary corporate codes of conduct received such vehement opposition from worker advocates? What is the basis of their
criticism? One reason is that almost all voluntary corporate codes of
conduct contain basic flaws, many of which are fatal. The first section
of this article reviews some of these flaws. Specifically, it examines some
of the internationally recognized labor standards that are left out of
most corporate codes, as well as the failure of most codes to include
other important features concerning implementation and enforcement.
The second section of the article examines guidelines that have been
issued by worker federations and agreements that have been reached
by worker federations with specific industries and corporations. It also
evaluates screens such as the Investment Product Review Process
as developed by the American Federation of LaborCongress of Industrial Organizations (AFL-CIO).
The significance in analyzing these guidelines, agreements, and
screens is two-fold: while not perfect, such analysis (1) illuminates
serious deficiencies that exist in many unilaterally implemented codes
of conduct, and (2) supports the notion that agreements, under certain
conditions, can exist between workers and corporations that generally
reflect many of the elements that are described in the first section of
this article. This point, in itself, highlights fundamental differences
between codes that are unilaterally and voluntarily implemented by
corporations and codes that are established between worker organizations and corporations.
With respect to codes that are established in cooperation with
worker representatives, this article acknowledges that the number of
examples in this category is so exceedingly smalloccurring in only a
handful of trade union instancesthat it is difficult to reach any conclusion about their merits. Further difficulties exist given that these
codes are, by and large, in their infancy and in most cases not fully
developed. Consequently, it is the conclusion of this article that while
they represent a positive step forward in eliminating some of the more
serious flaws of unilaterally implemented codes, given their novelty, it
is difficult to form any significant conclusion about their merits.
II. Flaws in Unilaterally Implemented Codes
Much discussion has already occurred regarding what elements
must be in a code in order for it to be credible and effective.8 This section
8. See, e.g., Jorge F. Perez-Lopez, Promoting International Respect for Workers
Rights Through Business Codes of Conduct, 17 FORDHAM INTL L.J. 1 (1993); Lance
Compa & Tashia Hinchliffe-Darricarrere, Enforcing International Labor Rights Through
Corporate Codes of Conduct, 33 COLUM. J. OF TRANSNATL L. 663 (1995); Liubicic, supra
note 2; Janelle Diller, A social conscience in the global marketplace? Labour dimensions
of codes of conduct, social labelling and investor initiatives, 138 INTL LAB. REV. 99 (1999);
Jill Murray, Corporate Codes of Conduct and Labour Standards (International Labour
Organization, Working Paper, 1998) (visited Oct. 21, 2000) http://www.ilo.org/public/
english/230actra/publ/codes.htm; Howard, supra note 6, at 48.
352
of the article is only intended to highlight some of the major elements

that must go into a labor code. It is not intended in any way to be exhaustive. For example, under content, key elements would also include
standards for livable, decent wages, and safety and health conditions, to
name just two. These components can basically be categorized into three
general areas: (1) content, (2) implementation, and (3) enforcement.
While most discussions note which labor standards must be contained
in a code, few give further elaboration on them. Given the importance in
understanding what these labor standards encompass, attention in this
article is weighted heavily on the first category content.
A. Content
Participants at the second United States/European Union (US/EU)
Symposium on Codes of Conduct and International Labor Standards
consisted of representatives from government, business, labor, academia, and non-government organizations from the United States and
the European Union.9 Over the course of two days, intense discussions
were held regarding the scope and standardization of codes of conduct
and implementation of codes of conduct. Participants disagreed with
each other on a number of the issues discussed. However, consensus
was reached on one point: the applicability of core labor standards to
be a starting point and a bare minimum.10 Indeed, the report notes,
[p]articipants from across the spectrum of interests unequivocally
gave their support to the universal applicability of the ILOs [International Labour Organization] core labor standards as set out in the June
18, 1998, Declaration on Fundamental Principles and Rights at
Work. 11 These principles include the right to freedom of association
and collective bargaining, as well as the prohibition of discrimination,
compulsory or forced labor, and child labor.12 These rights are generally
referred to as the ILO core labor standards.
For voluntary codes of conduct, it is inadequate to merely refer to
these labor standards because each one of these standards is subject to
a variety of interpretations. Often these interpretations, when made
on a voluntary basis through corporate codes, do not accurately reflect
the principles as announced by the ILO.13 Consequently, in stating
9. The author served as a participant in the first Symposium on this topic held in
Brussels in February 1998. He also served as a participant in the second Symposium
that was held in Washington, D.C., December 10-11, 1998.
10. U.S. DEPT OF LABOR, Joint Report on the Main Issues Emerging from the
US-EU II Symposium on Codes of Conduct and International Labor Standards 5 (Sept.
1999).
11. Id.
12. See ILO Declaration on Fundamental Principles and Rights at Work (June
1998) http://www.ilo.org/public/english/standards/decl/index.html.
13. See Diller, supra note 8; THE SWEATSHOP QUANDARY: CORPORATE RESPONSIBILITY ON THE GLOBAL FRONTIER (Pamela Varley ed., Investor Responsibility Research
Center) (1998).
353
these principles, codes must not be limited to explicit reference to the

appropriate ILO standard. The ILO standards themselves can serve as
guidance on what the standard actually means. In many cases, the
background discussion of the specific ILO standard in question is extremely helpful.14
1. ILO Conventions 87 and 98Freedom of Association, Right to
Organize, and Engage in Collective Bargaining
ILO Conventions 87 and 98 refer to the freedom of association, the
right to organize, and the right to engage in collective bargaining.
These concepts referred to in isolation of the ILO standard are relatively unhelpful. After all, what does it mean to respect workers freedom of association, to respect their right to organize, or to respect workers rights to engage in collective bargaining? These are complicated
concepts which must be interpreted with deep knowledge and understanding of the appropriate ILO Conventions.
ILO Conventions 87 and 98 establish a number of fundamental
rights. These Conventions outline basic workers rights to establish
their own organizations, elect their own representatives, organize their
own activities, formulate their own programs, and draft their own constitutions and rules.15 In addition, they describe union rights to join
other federations and confederations as well as affiliate with international organizations.16 They further address the rights of trade unions
to be free and independent from company interference, including prohibitions on employer organization attempts to dominate them.17 Other
Conventions address such matters as the rights of worker representatives to carry out their functions promptly and efficiently.18
The ILO Committee of Experts is responsible for the supervision
of the observance by member States of their standards-related obligations.19 In discussing these Conventions, the ILO Committee of Experts noted that in order for workers to fully exercise their rights to
engage in collective bargaining, information must also be exchanged
14. As mentioned supra note 8, this is not to say that other issues are not essential
for codes. Indeed, fundamental rights to livable wages, safe and healthy workplaces, nonexcessive work hours, and so forth, should also be included. The ILO standards given
specific focus in this article are the ones for which there now appears to be a certain
degree of consensus for their inclusion in codes.
15. ILO Convention 87, Freedom of Association and Protection of the Right to Organise, July 5, 1948, art. 2, 3.
16. Id. at art. 5.
17. ILO Convention 98, Right to Organise and Collective Bargaining, July 1, 1949,
art. 2.
18. ILO Convention 135, Workers Representatives, June 23, 1971, art. 2.
19. ILS Handbook or Procedures Relating to International Labor Conventions and
Recommendations, Section VI, Regular Machinery for Supervising the Observance of Obligations Arising Under or Relating to Conventions and Recommendations, at 52 (visited
Oct. 22, 2000) http://www.ilo.org/public/english/standards/norm.
354
with workers.20 This information should include a variety of matters

for ascertaining the economic situation of the enterprise.21
The ILO Committee on Freedom of Association, which is tripartite
in nature, considers cases which allege the infringement of the freedom
of association.22 The ILO Committee on Freedom of Association has
stated, [l]egislation preventing bargaining on such subjects as wages,
working hours, leave and conditions of work, is contrary to Convention
No. 98.23 In addition, the Committee on Freedom of Association has
stated that in order for these Conventions to be effective, there is a
need to provide expeditious, inexpensive and wholly impartial means
of redressing grievances caused by acts of anti-union discrimination, as
well as of national machinery which, in addition to being speedy, should
not only be impartial but should also be seen to be such by the parties
concerned.24
The ILO Committee of Experts considered this topic of remedies
to include adequate compensation as well as penalties for violators:
Penalties may include fines or imprisonment or both, and have the
dual functions of punishment and acting as a deterrent to anti-union
discrimination. In order to provide adequate protection, they should be
included in national legislation.25
2. ILO Conventions 29 and 105Forced or Compulsory Labor
Taken in isolation of reference to the applicable ILO standards, the
use of forced labor could be interpreted as strictly limited to the use of
prison labor and the use of workers who have violated criminal laws
regarding assault, vandalism, larceny, murder, etc. The ILO Conventions, however, cover a variety of cases of compulsory or forced labor,
including the following:
(a) as a means of political coercion or education or as punishment for
holding or expressing political views. . . ; (b) as a method of mobilising
labour for . . . economic development; (c) as a means of labour discipline; (d) as a punishment for having participated in strikes; (e) as a
means of racial, social, national, or religious discrimination.26
20. HECTOR BARTOLOMEI DE LA CRUZ ET AL., THE INTERNATIONAL LABOR ORGATHE INTERNATIONAL STANDARDS SYSTEM & BASIC HUMAN RIGHTS, at 221
(1996) (citing CE, General Survey, 1994, para. 246).
21. Id.
22. See Harold Dunning, The origins of Convention No. 87 on freedom of association
and the right to organize, 137 INTL LAB. REV. 149 (1998); see also, Geraldo von Potobsky,
Freedom of Association: The Impact of Convention No. 87 and ILO Action, 137 INTL LAB.
REV. 195 (1998). The Committees mission is to note the extent to which the position
in each state appears to conform to the terms of the Conventions and the obligations
accepted under the ILO Convention. The Committee is characterized by its independence, impartiality and objectivity.
23. DE LA CRUZ ET AL., supra note 20, at 221.
24. Id. at 216-17.
25. Id. at 218 (citing CE, General Survey, paras. 219 and 222).
26. ILO Convention 105, Abolition of Forced Labour, June 25, 1957, art. 1.
NIZATION:
355
Codes of conduct that refer to forced or compulsory labor, which do not

adequately incorporate these ILO standards, also fail to adequately
reflect the Declaration on Fundamental Principles and Rights at Work.
3. ILO Conventions 138 and 182Child Labor
Conventions 138 and 182 require nations to pursue overall policies,
which effectively abolish child labor and set a minimum age for employment at fifteen years of age.27 Developing countries may choose the
age of fourteen.28 Minimum age for employment in hazardous occupations is eighteen years of age or sixteen years of age where special
protections are in place.29
Convention 182 is the most recent ILO Convention.30 Convention
182 applies to all people under the age of eighteen years.31 It specifically
addresses the worst forms of child labor as slavery and similar practices, child prostitution or use in pornography, use of children in other
illicit activities and other work harmful to their health, safety or morals.32 Codes must address these fundamental rights as well. The language of the appropriate standards must also be explicitly incorporated
in codes since a mere statement of prohibition on child labor can be
subject to many different interpretations.
4. ILO Conventions 100 and 111DiscriminationEqual Pay
These Conventions are aimed at national policies, which would
eliminate discrimination in employment. Under Convention 111, discrimination is broadly defined as including any distinction, exclusion
or preference made on the basis of race, colour, sex, religion, political
opinion, national extraction or social origin.33
Convention 100 is directed at promoting the principle of equal
remuneration for men and women workers for equal work.34 The principle applies to all forms of payment. The Convention also states that
rates of pay must be set on the basis of objective job criteria and not on
sex discrimination.35
Codes must also incorporate the language of these Conventions as
well. The foregoing ILO Conventions represent fundamental principles
as reflected by the U.N.s Declaration of Human Rights.36 They are also
codified and expanded in the ILO Conventions and were recently re27. ILO Convention 138, Minimum Age, June 26, 1973, art. 2.
28. Id. at art. 2.
29. Id. at art. 3.
30. ILO Convention No. 182, Worst Forms of Child Labour, June 17, 1999.
31. Id. at art. 2.
32. Id. at art. 3.
33. ILO Convention 111, Discrimination (Employment and Occupation), June 25,
1958, art. 1.
34. ILO Convention 100, Equal Renumeration, June 29, 1951, art. 1.
35. Id. at art. 3.
36. Universal Declaration of Human Rights, G.A. res. 217A (III), U.N. Doc. A/810,
at 71 (1948).
356
affirmed by the ILOs Declaration on Fundamental Principles.37 These

standards were also, as mentioned, one of the few substantive issues
in which there was consensus at the US/EU Symposium on Codes of
Conduct.
Despite the apparent agreement that freedom of association, right
to organize and engage in collective bargaining, prohibitions against
forced labor, child labor, or discrimination are fundamental human
rights and represent a minimum in any corporate code, few corporate
codes address them. Even when these rights are addressed, it is inadequate. For example, under the much touted Apparel Industry Partnership program, although prohibitions of forced labor, employment discrimination, and child labor are referenced, as is the right of freedom
of association and collective bargaining, the appropriate ILO standards
are not explicitly referenced.38
Other codes of conduct that mention fundamental rights, such as
the prohibitions against forced labor, also neglected to explicitly reference the ILO standards that more comprehensively cover these rights.
In addition, companies such as the Dayton Hudson Corporation have
codes of conduct that do not even explicitly reference freedom of association and collective bargaining within the ILO context.39 Although
Honeywell states that it will not knowingly engage a business partner
who employs forced or child labor, no reference to the appropriate ILO
standard is included.40 The Honeywell code of conduct apparently recognizes the right to freedom of association and the right to collective
bargaining, but again, no explicit reference to ILO standards is included, and the code qualifies the right to establish or join organizations of their own choosing, as long as these organizations are legally
authorized in their own country.41
Dayton Hudson and Honeywell are two of the many unilaterally
implemented corporate codes of conduct that were examined in the
preparation of this article.42 While only a handful of codes were reviewed for this article, the flaws contained in these codes appear to be
reflected by dozens of codes that have been reviewed in at least three
separate studies. Indeed, these studies conducted in each of the past
37. See ILO Declaration on Fundamental Principles and Rights at Work, supra
note 12.
38. Apparel Industry Partnership, Preliminary Agreement, Charter Document,
Fair Labor Association, (Apr. 2000) available at http://lchr.org/sweatshop/aipfull.htm.
See also, U.S. Text, Public Affairs OfficeUnited States Mission to the European Union,
April 14, 1997; Howard, supra note 6.
39. THE SWEATSHOP QUANDRY, supra note 13, at 509-10; about DHC: Vendor Engagement (visited Dec. 17, 1999) http://www.dhc.com/about/engagement.asp.
40. THE SWEATSHOP QUANDRY, supra note 13, at 530-31.
41. Id. (emphasis added).
42. Some of the other corporate codes reviewed include those of Caterpillar, Levi
Strauss & Co., Mattel, Inc., Reebok, and U.S. Apparel Industry Partnership Workplace
Code of Conduct.
357
three years indicate that the corporate codes reviewed in this article
are typical of other corporate codes. These studies conclude that only a
few codes contained any mention of human rights, and even fewer contain explicit references to ILO standards. Even when fundamental human rights are mentioned and explicit references are given to appropriate ILO standards, these codes offer virtually no details or explanations
as to the precise nature of these fundamental rights.
For example, a study conducted by the Investor Responsibility Research Center (IRRC) three years ago involved a survey of S&P 500
companies and 80 major retailers.43 Over 200 companies responded to
the IRRC survey and 170 completed the questionnaire.44 Using the
survey, IRRC collected 121 codes.45 The IRRC then identified a group
of forty-six companies and their codes or policies.46 The IRRC identified this subset because they had codes and policies that were specifically tailored to labor conditions in emerging markets.47 Of this
group, only one code defined child labor according to United Nations
standards or local laws, whichever are higher.48 With reference to freedom of association and the right to organize and the right to collectively
bargain, only six of the 46 companies reviewed specifically affirm the
right of workers making their goods to organize a union and bargain
collectively.49 Slightly more than half of the companies reviewed included wage policies of some kind.50
The IRRC study has strikingly similar results to another study
that was completed two years ago. In that study, Janelle Diller reviewed codes of conduct, social labelling programs, and investor initiatives, involving 215 codes and 12 social labelling programs.51 In
her survey, the elimination of child labor appeared in 45 percent of the
codes reviewed.52 The issue of wage levels appeared in about 40
percent of the codes, prohibition of forced labor was found in only 25
percent of the codes, and freedom of association and collective bargaining were found in varying ways, in only 15 percent of the codes
reviewed.53
When references in the codes were made to these fundamental human rights, Diller found the language was often vague and missing
important references. In all, no more than one-third of the codes and
43.
44.
45.
46.
47.
48.
49.
50.
51.
52.
53.
THE SWEATSHOP QUANDRY, supra note 13, at v.

Id.
Id.
Id. at 401.
Id.
Id. at 406.
THE SWEATSHOP QUANDRY, supra note 13, at 410.
Id. at 414.
Diller, supra note 8, at 99-100.
Id. at 112.
Id.
358
labels reviewed referred to international standards . . .54 Many of the

definitions supplied by the codes, she noted, even contradict, international labour principles.55 Specific examples include lack of specificity as to what a child is; lack of specificity regarding categories of
discrimination; inadequate definition regarding forced labor; and inadequate language regarding freedom of association, the right to organize, and collective bargaining.56
In a recent study, Andrew Wilson and Chris Gribben surveyed the
worlds largest 500 corporations.57 Of those corporations responding
to their survey, ninety-eight percent had a code of ethics . . . or similar
policy guidelines.58 However, less than half of the companies responding to the survey that have a code make explicit references to
human rights.59 This survey also found that, of the companies responding to the survey, not one American headquartered companys code
refers to any specific international standard.60
B. Implementation
Even if a code explicitly and unambiguously incorporates internationally recognized labor standards, the code is fatally flawed if it is
not effectively implemented. Although numerous elements enter into
the implementation of a code, three factors influence the effectiveness
of implementation: (1) knowledge, (2) adequate resources, and (3) acceptance and cooperation by workers and their representatives.
1. Knowledge
If a code is to be effective, it must be understood by the workers it
targets. This means that it must be widely and freely distributed to
everyone concerned in an understandable language. It also means that
complicated concepts such as freedom of association and collective bargaining must be explained so that they can be easily understood by
workers. Freedom of association grows from consciousness, confidence
and activism amongst the workforce . . .61
In addition, knowledge must also be extended to all levels of
management and all departments within the enterprise.62 It does lit-
54. Id. at 115.

55. Id. at 116.
56. Id. at 116-17.
57. Andrew Wilson & Chris Gribben, Business Responses to Human Rights, ASHRIDGE CENTRE FOR BUSINESS AND SOCIETY, Apr. 2000. The survey itself does not elaborate precisely what these international standards are other than a reference to the UNs
Universal Declaration.
58. Id. at 1 (noting that the response rate was poor, with only 52 companies
responding).
59. Id. at 2.
60. Id. at 3.
61. Murray, supra note 8, at 20.
62. Id.
359
tle to advance a corporate code of conduct if only the human resources

or personnel departments are aware of these international standards
and have the requisite knowledge to apply them to the workplace.
For example, if marketing is basing its costs on non-unionized workforces and/or situations in which fundamental rights are not recognized nor honored, the transaction they engage in may have an impact
on what human resources or personnel would have accomplished had
everyone in the enterprise been familiar with these fundamental human rights.
Furthermore, knowledge of codes must be extended beyond the corporation to enterprises with which the corporation has a relationship.
Corporations that have complex supply chains could easily avoid a corporate code simply by outsourcing. In addition to being covered by the
corporate code, subcontractors and suppliers must also have full knowledge of the code itself.
Perhaps most important, workers must be informed about all aspects of the code. Workers who dont understand the corporate code and
who dont understand the basic concepts that fundamental rights encompass, such as the right to organize and the right to engage in collective bargaining, can hardly enjoy the rights conveyed to them by
such codes.
Trainers should not be limited to company representatives, but
should also come from others who have intimate knowledge of fundamental rights. For example, training could also come from trade unions
representatives, NGOs, and international bodies such as the ILO. In
order for their expertise to be shared, however, each of these trainers
must, of course, be experts not only in fundamental human rights but
in each corporations code. Indeed, as fledgling union organizations
may require the assistance, resources and solidarity of other unionists,
knowledge of the code should be extended beyond the workplace to, for
example, other free trade unions already operating in related industries or the free trade union peak body for the region.63
Unfortunately, for many codes this is not the case. Knowledge of
the code and an understanding of the concepts behind such ideas as
collective bargaining and rights to organize are wholly absent. Far too
often neither management nor workers at the enterprise are even
vaguely familiar with these fundamental human rights. Further, those
who have intimate knowledge of these fundamental rights, such as
trade union representatives or representatives from NGOs, are not
even made aware of a corporations code. Even if they are given the
opportunity to review the corporations code, they are either not given
access or given only limited access to the workers who are, theoretically,
supposed to be covered by the code.
63. Id.
360
2. Adequate Resources
Implementation costs money and corporations must commit to
spending adequate resources to make sure that the code is fully implemented. Unfortunately, past experience has shown that unless a code
is adequately funded, it will not work effectively.64 Indeed, use of unpaid or nominally paid non-governmental organizations to ensure compliance are likely to encounter similar difficulties.65 In his article on
corporate codes of conduct, Robert J. Liubicic analogizes inadequate
funding of corporate codes of conduct to the Reagan Administrations
decision to cut the staffs of the Equal Employment Opportunity Commission, the Occupational Safety and Health Administration, and the
National Labor Relations Board.66 As Liubicic notes, by reducing the
number of inspectors in the field, these cuts have lead to lax oversight,
allowing sweatshops to proliferate, for example, and leaving the lawabiding companies vulnerable to corner-cutting rivals. 67
Indeed, the lack of adequate funding is one of the most serious
criticisms lodged at corporate codes of conduct. For example, critics of
the AIP point out that it is insufficiently funded by participating companies: Employers contributions barely will cover the office rent of the
new Association, let alone support a staff capable of knowing what is
going on in thousands of factories around the world.68
3. Worker Approval
For implementation to be effective, codes of conduct must be administered through cooperative efforts with workers and their representatives. Corporate codes of conduct cannot be unilaterally established and implemented in isolation from the workers who are affected
by them. Unfortunately, this aspect of implementation appears to be
seriously deficient in most voluntary corporate codes of conduct: Reports from practice suggest that code implementation systems often
lack . . . adequate participation by workers.69
Corporate codes of conduct that have been developed without
worker input are doomed. Without worker participation, the necessary
trust for a successful corporate code of conduct is missing. Indeed, a
corporate code that is unilaterally implemented without worker participation, let alone consent, is laughable. After all, without their input,
codes will not have the credibility that they need with the workers that
the code covers. Why would any workers trust a code that is being levied
64. Liubicic, supra note 2, at 144.
65. Id. at 145.
66. Id. (citing Aaron Bernstein, The Workplace Cops Could Use Some BackUp, BUS.
WK., Feb. 23, 1998, at 42-43).
67. Id.
68. Howard, supra note 6, at 45; see also Murray, supra note 8, at 20.
69. Diller, supra note 8, at 119.
361
on them by some corporate office thousands of miles away? This lack

of trust will ultimately result in workers refusal to cooperate with the
code for many reasons, including their skepticism regarding the companys sincerity. It may even result in workers refusing to assert their
rights under a code because they fear company retaliation.70
C. Enforcement
Even if a code is adequately implemented, if it is not enforced it
will be ineffective. One method for increasing the effectiveness of enforcement is through the monitoring of all workers who are covered by
the code.71 Corporations that have monitoring programs either conduct
monitoring internally or externally. Internal monitoring is most common and, by its very nature, raises serious questions regarding its legitimacy. After all, internal monitors often have very strong ties to the
company itself, thus raising immediate questions regarding their objectiveness.72 In addition, questions remain regarding internal monitors expertise in terms of understanding and applying internationally
recognized labor standards.73
A limited number of corporations use external monitoring. For external monitoring to be at all credible, however, monitors must: be truly
independent from the enterprise; understand internationally recognized labor standards; have practical experience; a real understanding
of labor relations; and special knowledge of how labor standards are
applied in the workplace.74 Corporations who do external monitoring
sometimes use monitors who have little or no experience with labor
standards. For example, auditing firms are often used for monitoring
purposes. Although auditors may be able to apply a set of pre-developed
questions as a way of monitoring, monitoring requires more skills than
simply filling in blanks on a questionnaire. It requires a working knowledge of labor standards and labor experience, which is not something
that many auditors are familiar with. In addition to lacking significant
experience in applying fundamental rights in the workplace, many auditing firms will also have a previous relationship with the corporation
that they are monitoring. This, in itself, detracts from the necessary
70. See Liubicic, supra note 2, at 148.
71. This includes workers who are employed by the corporation directly as well as
workers who are employed by enterprises such as suppliers, subcontractors, franchisees,
and others who have a relationship with the corporation. If corporations are able to escape
enforcement mechanisms merely by outsourcing work or by relying on suppliers to avoid
adherence to their own corporate code of conduct, then legitimate concerns regarding the
effectiveness of the code will be raised.
72. See Howard, supra note 6, at 42-3.
73. See Liubicic, supra note 2; Diller, supra note 8.
74. See Howard, supra note 6; see Diller, supra note 8. See also numerous quotes
from United Students Against Sweatshops (visited October 5, 2000) http://www.
usasnet.org; as well as various university statements with respect to the Fair Labor
Association.
362
credibility that is required in order for any monitoring program to be

a success.
One way a corporation could bring some degree of credibility to a
monitoring program would be to call upon the expertise of trade unionists. In locations where workers have formed free and independent unions, codes of conduct enforcement would be relatively simple because
the union would be able to represent the workers by using its expertise
and by calling upon the expertise of outsiders. However, where unions
do not represent workers, the question of who may be best able to monitor is raised.
Given this situation, it is clear that free and independent trade
unions that are located in the country where the affected facilities are
located can be of great assistance. If these trade unions do not exist,
free and independent trade unions in the host country of the transnational corporation and trade unions, which represent the transnational corporation in other countries may also be able to participate
in monitoring.
The reason why free and independent trade union representatives
can be the most effective when it comes to monitoring should be obvious
to anyone. Their job is to apply fundamental human rights concerning
labor standards. They organize workers into independent trade unions,
practice collective bargaining, and enforce collective bargaining agreements on a daily basis. They are also familiar with the subtle nuances
regarding each of these activities.
Some people have criticized the use of trade unionists for monitoring purposes. They mistrust unions and believe that unions would use
this opportunity to gain access to a facility in order to carry on organizing activities. In theory, a company which is sincere in implementing
a code of conduct that reflects internationally recognized labor standards should have no reservations about trade unionists monitoring its
facilities and the facilities of its suppliers and contractors. In reality,
however, this corporate mistrust may prove to be the most significant
stumbling block in the use of trade unionists to monitor unilaterally
implemented corporate codes of conduct. Despite this reality, fears of
organizing and other union activity contradict the fundamental human
rights principles encompassed by the core labor standards. Other fears
regarding the need for confidentiality and proprietariness of information that will be gained by such visits are unfounded. Union representatives should be able to maintain this confidentiality as well as any
other professionals involved in the monitoring effort.
Other questions remain regarding organized labors role in monitoring. Should organized labor undertake responsibility for monitoring
a code of conduct? And if so, will there be enough trade union representatives to adequately monitor corporate facilities? Clearly organized
labor should in no way accept sole responsibility for implementing or
monitoring a code. These issues are appropriately left to the corporaCopyright 2001 American Bar Association
363
tion. However, leaving responsibility for implementation and monitoring with the corporation should in no way preclude organized labors
involvement in implementation and monitoring. After all, the assistance that a union can lend to a program is invaluable. Unquestionably,
unions have a unique and comprehensive understanding of workers
rights, particularly those covered by internationally recognized labor
standards, and unions may serve as the best resources for implementation and monitoring programs. After all, as mentioned, this is what
unions do. They engage in organizing, collective bargaining, and upholding the collective bargaining agreement. Union representatives,
through experience and training, may be more knowledgeable about all
aspects of these fundamental human rights than anyone else.
Concerns that unions are not capable of engaging in this activity
from a personnel standpoint is also unfounded. There are literally millions of trade unionists throughout the world. They belong to thousands
of free and independent labor unions that span the globe. It is difficult
to believe that these trade unionists could not serve in monitoring
programs. In reality, given the incredibly small number of monitoring
programs that permit trade unionists to participate in monitoring programs, it is hard to believe that lack of available trade unionists would
present a significant problem.
Still, monitoring represents a significant concern even if trade
unionists participate in the actual monitoring program. A key issue, of
course, is the ability to monitor the entire enterprise complete with
supplier chains and subsidiaries. Obviously, the ability to engage in
such monitoring is a complicated task involving, among many other
things, the companys full cooperation in providing monitors with access to adequate information regarding their entire enterprise.
Other issues regarding effective enforcement are also important.
For example, meaningful remedies must also be available when corporations violate their own codes. Among other things, code violations
must be rectified swiftly and with enough force to act as deterrents of
future violations. Discontinuation of subcontracts and termination of
other business relationships must also be viewed as the price for violating a code. In addition, issues of public disclosure and transparency
are also essential. Further, neutral parties must be secured to arbitrate
disputes over the application and interpretation of the code.
III. International Worker Federation Guidelines,
Agreements, and Screens
At least two international worker federations have issued their
own model guidelines on codes of conduct for their affiliates.75 Other
international worker federations have actually reached agreements
75. At the time of writing, it appears that the International Federation of Building
and Wood Workers was preparing to announce its model guidelines.
364
with specific industries or corporations, which address fundamental

worker rights. Still other worker federations have developed sophisticated screening mechanisms, which reflect core labor standards. The
screens serve to guide investors into worker friendly products.
These model guidelines, agreements, and screens help eliminate
serious deficiencies that exist in many unilaterally implemented corporate codes, because they attempt to encompass internationally recognized labor standards. Further, many of them attempt to, at a minimum, create a framework for monitoring and enforcing corporate codes
of conduct. In addition, they are built on a premise that a corporate
code of conduct must be implemented with cooperation between workers and the corporation involved.
As previously stated, these model guidelines, agreements, and
screens are exceedingly few in numberoccurring only in a handful of
trade union instances. As a result, it is difficult to reach any conclusion
about their merits. In addition, further difficulties exist because these
codes are, by in large, in their infancy and in most cases not fully developed. Nevertheless, they do illuminate serious flaws that exist in
many unilaterally implemented corporate codes of conduct, because
they are based on a sincere attempt to encompass and to enforce internationally recognized labor standards, and as such are a positive step
in terms of the development of codes.
A. Model Guidelines
1. The International Confederation of Free Trade Unions
(ICFTU) Basic Code of Labour Practice
The ICFTU code was adopted in December, 1997.76 One of the specific objectives of the code is to encourage the use of consistent language in codes of conduct as part of a strategy to promote an international framework for worker rights.77 The intention of the document
is also to serve as a model guideline for trade unions negotiating with
companies and in working with NGOs in campaigns involving codes of
conduct.78 In addition, it is also to serve as a benchmark for evaluating any unilaterally-adopted codes of labour practice.79 The scope of
the code is also extended to cover the labor practices of a companys
contractors, subcontractors and principal suppliers.80
The code reflects internationally recognized core labor standards.81
It also expands to include additional elements, among them living
76. ICFTU, Basic Code of Labour Practice, available at http://www.icftu.org/
english/tncs/tncscode.html.
77. Id.
78. Id.
79. Id.
80. Id.
81. Id. at para. 2 and 5.
365
wages, working conditions, and excessive hours of work.82 While these

standards are not described in detail, there is a specific reference to all
applicable ILO Conventions.
The guidelines state, Contractors, subcontractors, principal suppliers, and licensees (franchise-holders) shall support and cooperate
with implementation and monitoring by
providing (name of company) with relevant information concerning their operations;
permitting inspection at any time of their workplaces and operations by approved inspectors;
maintaining records of the name, age, hours worked and wages
paid for each worker and making these available to approved
inspectors on request;
informing, verbally and in writing, the workers concerned of the
provisions of this Code; and,
refraining from disciplinary action, dismissal or otherwise discriminating against any worker for providing information concerning observance of this code.83
The ICFTU guidelines recognize that knowledge of the code is
essential for implementation.84 However, the code does not elaborate
on what type of training will take place for workers regarding the guidelines. There is also no mention of educating management as well as
others involved with the enterprise (suppliers, sub-contractors, etc.) regarding the guidelines. The very nature of the guidelines presumes that
they would be implemented through an agreement between a company
and a trade union.85 As such, one would assume that it is based on
worker participation, although, it is not specifically stated.
2. The International Metalworkers Federation (IMF)
The IMF guidelines explicitly state that its objective is to advance the welfare of the societies in which the business implants itself, which at a minimum includes safeguarding the environment,
observing the core labour standards of the International Labour Organization, and providing decent wages and working conditions for
[company] employees.86
Coverage under the IMF Code is extremely broad. In addition to
covering contractors, sub-contractors, principal suppliers, and licensees
(franchise-holders), the code also seeks coverage of all workers pro82. See ICFTU, supra note 76.
83. Id. at para. 6.
84. Id.
85. According to the ICFTU, [t]his basic code is meant to assist any trade union
organisation in negotiations with companies.; Article 8 of the ICFTU code regarding
implementation and monitoring also refers to the company and trade union.
86. IMF Model Code of Conduct, paras. 1-2. It should also be noted that the author
was a member of the IMF Working Group that drafted this code of conduct.
366
ducing products or services for the company whether or not they are
employees of the company.87
The standards that are referenced in the IMF code reflect all appropriate ILO standards and are virtually identical to the standards
that are reflected in the ICFTU code with one exception. In the IMF
Code, the word decent is used instead of livable when describing
wages. The word decent is used to connote a clearer requirement that
wages be adequate under any reasonable standard.
In terms of implementation, the IMF Code is more explicit than
the ICFTU Code. For example, under the IMFs Code, the company will
require its contractor(s) to support and co-operate in the implementation and monitoring of this code by giving the monitoring group . . .
unlimited access to its facilities and by making all relevant information
available to the group in a timely fashion.88
Further, the IMF Model Code contains a provision that specifically
addresses monitoring. Under the IMF Code,
a monitoring group . . . consisting of an equal number of [company]
management and union representatives must be created; in case of a
deadlock, arbitration will be handled by the ILO or a neutral party
agreed upon by [company] management and the union side; [Company] shall bear the cost of all monitoring activities.89
This provision specifically involves unions in implementation and

monitoring. It also provides for third party arbitration where the disputes involve the monitoring and implementation program. Lastly, it
addresses the issue of resources for monitoring and implementation by
directing the responsibility for adequate funding to the company.
B. Agreements
Some agreements that have been reached between industries and
international worker federations elaborate on specific characteristics of
freedom of association, rights to organize, and collective bargaining.
One such agreement is reflected by the Global Chlorine Chemistry Forum Joint Labor-Management Statement as negotiated between the
World Chlorine Council and the International Federation of Chemical,
Energy, Mine and General Workers Union (ICEM).90 The Chlorine
Joint Labor Management Statement encompasses an agreement that
includes the following:
a. Labor and management jointly recognize the role and legitimacy of trade unions in the workplace, and pledge to act in good
faith to create a positive and enduring labor-management relationship which recognizes and respects the rights of employees to organize and to bargain collectively.
87.
88.
89.
90.
Id. at paras. 3-4.

Id. at para. 8.
Id. at para. 12.
The Agreement was executed on Oct. 20, 1998.
367
b. The parties participating in the Forum, including their consultants, will not engage in derisive, anti-union actions including
(but not limited to) the following examples: the use of unfair or
illegal tactics during organizing campaigns; attacks on honesty
and integrity of union members, supporters or staff; attack the
economic effectiveness of unions; spreading false information;
firing or taking other reprisals against workers because they
support unions; and, citing an old problem with the union as if
it happened yesterday.
c. In the course of organizing campaigns, labor and management
and their respective consultants will not engage in derisive attacks on each other; campaigns shall be conducted with fairness
and integrity, consistent with employees right to choose a representative for collective bargaining.
The ICEM also reached an agreement with Statoil. The agreement
affirms the companys support for fundamental human rights in the
community and in the place of work.91 Numerous provisions in the
agreement explicitly refer to ILO Conventions. The ILO standards that
were referenced in the ICFTU guidelines are also, for the most part,
reflected by the ICEM Statoil agreement.92
Other agreements have also been reached between international
worker federations and specific companies. For example, an agreement
between IKEA and the International Federation of Building and Wood
Workers (IFBWW) reflects basic ILO standards.93 The agreement goes
further, however. It contains precise language regarding monitoring
and organized labors direct participation in monitoring.94 Basically,
the agreement establishes a monitoring group to be appointed with
two members from IKEA and two members from the IFBWW.95 It establishes that the monitoring group will meet at least twice a year,
and the parties shall provide relevant information in order to carry out
its mandate.96 Furthermore, the monitoring group will hold its meetings at suppliers premises. The IKEA/IFBWW Monitoring Program
has already had delegation visits to factories in Slovakia, Hungary,
Malaysia, and Romania.97
91. ICEM Info., Vol. 3, No. 3, 1998.

92. The agreement was executed on July 7, 1998 by the ICEM, its Norwegian affiliate NOPEF, and Statoil.
93. IFBWW-IKEA Agreement on Rights of Workers, executed in May 25, 1998
(visited Jan. 31, 2000) http://www.ifbww.org/fitbb/trade union rights/ikea/ifbww
ikea eng.html.
94. Id.
95. Id.
96. Id.
97. Monitoring Group Communication, Feb. 26, 1999 and Sept. 10, 1999 (visited
Jan. 31, 2000) http://www.if bww.org/fitbb/trade union rights/ikea/ifbww ikea
eng.html.
368
The IFBWW also obtained agreements with two additional companies. In its recent agreement with Faber-Castell, the IFBWW
reached an agreement covering appropriate ILO standards as well as
instituting a monitoring program for implementation of the agreement.98 Monitoring will be accomplished by equal representatives from
organized labor and the company.99 It will meet at least every two
years and will aim to hold its meetings at production and sales companies premises. The members of the committee shall receive all relevant information in order to carry out their mandate.
Most recently, the IFBWW reached an agreement with the international construction company Hochtief.100 A representative of the
company explained during the signing ceremony that the purpose of
the company in entering into such an agreement was to do more than
just set the standards for our own behaviour. As one of the worlds
leading construction companies, we want to play a part in the longterm process of improving the rules that govern conduct in our industry.101 The General Secretary of the IFBWW, Ulf Asp, stated, The
agreement with Hochtief is a major contribution to improving working
and living conditions for many building workers and thus a contribution to sustained development.102
Other agreements between international worker federations and
specific companies have also been reached. Often, these agreements
specifically refer to ILO standards.103
C. Investment Screens
While not a code, the AFL-CIO has recently adopted a report by
its Investment Product Review Working Group, which establishes
guidelines for international investments.104 The guidelines are comprehensive and are used to evaluate international investment vehicles for screened products and direct targeted investments.105 Basically, the review, as issued by the working group, has two prongs.
The first involves country selection, and the second involves companyspecific screening. Both categories refer explicitly to ILO core stan98. The agreement was executed on March 3, 2000. Signatories to the agreement
include Faber-Castell, the IFBWW, and IG Metall.
99. Id.
100. The agreement was executed on March 15, 2000. Signatories include the
IFBWW, Hochtief, and IG Bau.
101. IFBWW Press Release, IFBWW, IGBAU, and Hochtief Agree Globally Valid
Social Standards (March 15, 2000) (quoting Friedel Abel, Member of the Executive Board
and Human Resources Director of Hochtief ) (on file with author).
102. Id.
103. See, e.g., the International Union of Food and Allied Workers (IUF) and its
agreements with Accor Group and Danone.
104. AFL-CIO Investment Product Review (1999). The author of this article was a
member of the Working Group Evaluation Committee which reviewed this screen.
105. Id. at 72.
369
dards. References are also made to organized labors participation in

monitoring.
With respect to the first prong of the screen, the guidelines state
that investment in particular countries should be made in consultation
with international organizations and trade unions that are involved
in monitoring fundamental worker and human rights and global economic conditions to determine whether the country complies with (or
violates) internationally recognized standards for workers rights.106
The first prong also includes a statement that at a minimum the screen
must include ILO Core Conventions.107 These Conventions are specifically referenced in the document.
The screens second prong involves company selection. ILO standards are also specifically referenced in this aspect of the screen. In
addition, this prong notes the importance of companies working with
the AFL-CIO to advance the passage of a resolution on ILO conventions
on workplace rights at annual shareholder meetings.108 The screen
also states that investment vehicles should consult with free and independent trade unions in the country at issue and in the U.S. to determine whether and how to invest in particular countries and ensure
that organized labor can actively participate in effectively monitoring
and enforcing conditions and criteria associated with the investment
in such country.109
How are these model guidelines, agreements, and screens different
from unilaterally implemented voluntary corporate codes of conduct?
Well, for one thing, they incorporate core internationally recognized
labor standards. Although they still fall short of elaborating on what
these standards actually mean, they go much further than any voluntary corporate code of conduct. Some model codes like the IMF Code
even address enforcement issues like monitoring, and agreements like
the IFBWW/Faber Castell and the IFBWW/IKEA agreements actually
contain language implementing monitoring programs.
Whether or not these worker-oriented models and agreements will
be successful remains to be seen. Questions concerning the status of
agreements may be raised whenever there is a change in management
and whenever mergers, acquisitions, bankruptcies, and plant closings
occur. Further, questions may arise if and when outsourcing and supplier chains become even more convoluted as the global economy expands. Despite the uncertainty, these model guidelines, agreements
and screens are a positive stepa positive step that can only occur in
situations where workers are empowered to form their own free and
106.
107.
108.
109.
Id. at 73.
Id.
Id.
Id. at 74.
370
independent unions and to engage corporations in discussions over topics included in codes of conduct.
Unfortunately, empowerment of workers is sadly missing from
many voluntary corporate codes of conduct that have been unilaterally
implemented. Without empowering workers through the adoption and
effective enforcement of internationally recognized labor standards,
corporate codes of conduct will continue to lack the essential elements
of any code that hopes to be successful.
IV. Conclusion
What is missing from voluntary corporate codes of conduct? This
article addresses some of the essential elements that must be contained
in any voluntary code. Among other things, voluntary codes that do not
adequately include language regarding internationally recognized labor standards and programs for effective implementation and enforcement are doomed to fail.
The failure to adopt meaningful codes of conduct has resulted in
angering conscience-laden consumers who seek products that are not
made by workers whose fundamental rights have been violated. Failure
to adopt adequate codes has also angered others, such as the emerging
coalition of college students, which has successfully convinced some to
withdraw their membership from the Fair Labor Association.110 The
concern for adequate codes are also giving rise to various shareholder
actions.111
Despite the growing number of voluntary corporate codes of conduct, few, if any, of them adequately incorporate the essential elements
discussed in this article. Accordingly, it should not be surprising that
serious questions are being asked regarding the commitment of some
corporations to adopt meaningful codes. In view of the aforementioned,
corporations must seriously ask themselves whether they are truly interested in empowering their workers through the introduction of corporate codes of conduct. If they are not, then they should admit it and
not try to fool themselves, the public and their workers into believing
otherwise. If, on the other hand, corporations are truly interested in
empowering workers, then they should develop codes that do not contain the flaws that have been highlighted to in this article.
110. See, e.g., Steven Greenhouse, Students Urge Colleges to Join a New AntiSweatshop Group, N.Y. TIMES, Oct. 20, 1999 (visited February 18, 2000) http://
www.nlcnet.org/press/newsclip/NYTimes10-20-99.html.
111. Recently, shareholder resolutions, centered around internationally recognized
labor standards and human rights, have been introduced at companies like General Electric and Lucent Technologies.
371
Building an Internal Defense

against Class Action Lawsuits and
Disparate Impact Claims
G. Roger King*
Jeffrey D. Winchester**
I. The Nature and Mechanisms of Federal Class Actions
Employers today face an increasing threat of lawsuits brought by
applicants, employees, or former employees, under a myriad of federal
statutes. To make matters worse, these statutes allow individuals
bringing suit against a defendant company to engage in the litigation
strategy of alleging a collective or class action, thereby expanding
the employers possible exposure to damages and placing a great degree
of pressure on the employer to settle, at a high cost, even meritless
suits. For this reason, it is crucial that employers understand what
class action employment suits are, how they function, and, perhaps
most importantly, how to avoid them.
A class action lawsuit against an employer permits a representative employee with a claim that is typical of other individual employees
to sue the employer on behalf of a class of similarly situated employees.1 Although touted as a mechanism for achieving economies of
time, effort, and expense, 2 a class action can be a powerful tool in
the hands of plaintiff employees, who can turn questionable statistical
evidence and attenuated claims of similarity among employees holding different positions at different facilities in various locations across
the country into a leverage tool for substantial settlements against
employers.
Federal class action lawsuits are governed by Rule 23 of the Federal Rules of Civil Procedure. Under Rule 23(a), a federal district court
may certify a class action when the following prerequisites are fulfilled:
* G. Roger King, J.D., graduated from Cornell Law School and is a partner in the
Labor and Employment Section of Jones, Day, Reavis & Pogues Columbus, Ohio, office.
Mr. King is an editor of Developing Labor Law and is a contributing editor to HR ADVISOR.
Mr. King is a frequent lecturer on employment relations matters.
** Jeffrey D. Winchester, J.D., graduated from Cornell Law School and served as a
Clerk for Judge David M. Ebel of the United States Court of Appeals for the Tenth Circuit.
Mr. Wincester is an associate in the Labor and Employment Section of Jones, Day, Reavis
& Pogues Columbus, Ohio, office.
1. NEWBERG ON CLASS ACTIONS 1.01 (3d ed. 1992).
2. Andrews v. Am. Tel. & Tel. Co., 95 F.3d 1014, 1025 (11th Cir. 1996) (quoting FED.
R. CIV. P. 23(b)(3) advisory committees notes, 1966 Amendment).
372
1. the class is so numerous as to make disposition of individual

claims on a case-by-case basis impracticable (numerosity);
2. there are questions of law or fact common to the class (commonality);
3. the claims or defenses of the representative parties are typical
of those of the other members of the class (typicality); and
4. the representative parties will fairly and adequately protect
the interests of the class (adequacy of representation).3
The requirements of Rule 23(a) share a common theme: [t]hey all
involve an analysis of the relationship or nexus between the named
plaintiff(s) and the alleged class to ensure that maintenance of a class
action is economical and that . . . the claimed class have substantially
the same interests.4 Because the representative plaintiff must, as a
prerequisite to class certification, demonstrate a nexus between
his/her claims and those of the identified class, the employers first line
of defense in employee class action suits is to convince the court that
the members of the employee group identified by the plaintiff are too
differently situated from the plaintiff and from each other to qualify as
a Rule 23(a) class.
The United States Court of Appeals for the Fourth Circuit has
noted that when deciding whether a plaintiff has demonstrated a nexus
among potential class members in employment discrimination lawsuits, the court must ask the following questions:
(i) What is the nature of the unlawful employment practice
charged [] is it one that peculiarly affects only one or a few employees or is it genuinely one having a class-wide impact[?]
(ii) How uniform or diverse are the relevant employment practices of the employer, considering matters such as: size of the work
force; number of plants and installations involved; extent of diversity
of employment conditions, occupations and work activities; degree of
geographic dispersion of the employees and of intra-company employee
transfers and interchanges; degree of decentralization of administration and supervision, as opposed to the degree of local autonomy [?]
(iii) How uniform or diverse is the membership of the class, in
terms of the likelihood that the members treatment will involve common questions [?]
(iv) What is the nature of the employers management organization as it relates to the degree of centralization and uniformity of
relevant employment and personnel policies and practices [?]
(v) What is the length of the time span covered by the allegations,
as it relates to the degree of probability that similar conditions prevailed throughout the period [?]5
3. FED. R. CIV. P. 23(a).
4. See BARBARA LINDEMANN & PAUL GROSSMAN, EMPLOYMENT DISCRIMINATION
LAW 1587 (Paul W. Cane, Jr. ed., ABA Section of Labor and Employment Law 3d ed. 1996)
(quotations omitted).
5. Stastny v. S. Bell Tel. & Tel. Co., 628 F.2d 267, 277 (4th Cir. 1980) (quotation
omitted).
Internal Defense against Class Action Lawsuits
373
In sum, the more differences the employer can demonstrate between the would-be class representative and among the alleged members of the identified class, the greater the likelihood that the court
will refuse to certify the lawsuit as a class action, thereby forcing the
plaintiff or plaintiffs to proceed on an individualized basis.6
Once a nexus has been demonstrated, the named class representative must then meet Rule 23(a)s numerosity requirement. This requires a showing that proceeding on an individual plaintiff basis would
be impracticable.7 The courts have held that when the question is a
close one, the balance tips in favor of finding numerosity, because the
courts retain the power to decertify the class under Rule 23(c).8 While
the party seeking class certification need not state the exact number of
members in the proposed class or identify each class member, a bare
allegation of numerosity is insufficient, and the plaintiff bears the burden of showing the impracticability of pursuing the lawsuit as a joint
action involving individual plaintiffs.9 There are as of yet no rigid numerical guidelines for determining impracticability of joinder, but the
courts have generally ruled that less than twenty-one [members] is
inadequate, more than forty [is] adequate, with numbers between varying [treatment] according to other factors.10 The key inquiry is
whether the plaintiff alleges discriminatory treatment of only a limited
number of employees, or whether the plaintiffs allegations of discrimination involve a company-wide policy that could potentially affect a
large number of persons.11 In addition, the amount of damages at issue
is a factor in determining numerosity. If the individual damages likely
to be at stake are small, the courts are more likely to find numerosity,
because smaller potential recoveries make it that much more unlikely
that potential plaintiffs would file individual suits.12
Because the nexus showing is so crucial to the pursuit of a class
action lawsuit, the court has considerable discretion in permitting the
parties discovery with respect to class certification issues.13 And because the merits of the case are often intertwined with the issue of
6. The procedural mechanism whereby members of a dismissed putative class may
bring their own actions as individual plaintiffs is discussed infra Section III.
7. 5 JAMES WM. MOORE, ET AL., MOORES FEDERAL PRACTICE 23.22 (3d ed. 2000).
8. Groover v. Michelin N. Am., Inc., 187 F.R.D. 662, 666 (M.D. Ala. 1999) (citing
Evans v. U.S. Pipe & Foundry Co., 696 F.2d 925, 930 (11th Cir. 1983)).
9. Robidoux v. Celani, 987 F.2d 931, 935 (2d Cir. 1993).
10. Thomas County Branch of N.A.A.C.P. v. City of Thomasville Sch. Dist., 187
F.R.D. 690, 696 (M.D. Ga. 1999) (quoting Cox v. Am. Cast Iron Pipe Co., 784 F.2d 1546,
1553 (11th Cir. 1986)); see also Duprey v. Conn. Dept of Motor Vehicles, 191 F.R.D. 329,
333 (D. Conn. 2000) ([B]ased on prevailing precedent, . . . the difficulty in joining as few
as 40 class members should raise a presumption that joinder is impracticable.) (quoting
Robidoux, 987 F.2d at 936).
11. See Hewlett v. Premier Salons Intl, Inc., 185 F.R.D. 211, 216 (D. Md. 1997).
12. Id.
13. MOORE, ET AL., supra note 7, at 23.61[6][a].
374
certification, the plaintiff often has the courts permission to discover

information related to both class certification and the underlying merits of the case. Thus, even if the court eventually refuses to certify the
class, the employer has nonetheless been subjected to the time, effort
and expense of additional discovery aimed at the underlying substantive issues of the case, and oftentimes that discovery can relate to hundreds and sometimes even thousands of employees.14
Once the court grants class certification, the court has wide discretion in determining whether notice is given to some or all of the members of the class.15 However, where the class action is predominantly
to recover money damages, notice to all members is mandatory.16 The
notice is intended to protect the rights of all class members who, under
Rule 23, will be bound by any judgment ultimately handed down in the
action. The notice is supposed to apprise potential participants of the
existence of the lawsuit and is not to encourage or discourage potential
class members from asserting their claims.17 Moreover, notice must apprise class members of their right to opt out of the action, or else find
themselves legally bound by the outcome.18 However, despite the Rules
requirement that notice be neutral vis a vis the decision to join the
class, the usual effect of class notice is to encourage participation, and
thereby notice generally increases the class size.
II. Class Actions and Specific Federal Statutory Claims
As mentioned above, there are a number of federal statutes that
plaintiffs may rely on in an attempt to pursue collective action claims
against employers. Outlined below are brief descriptions of the most
common federal employment statutes that give rise to collective actions.
A. The Civil Rights Act of 1964, Title VII
Title VII19 prohibits discrimination in the workplace on the basis
of race, color, national origin, religion, and/or sex. Title VIIas also been
interpreted by the courts to prohibit sexual harassment and discrimination because of pregnancy. As Title VII does not contain its own
14. Id.
15. FED. R. CIV. P. 23(d)(2).
16. See Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 811 (1985).
17. See Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 173 (1974).
18. Phillips Petroleum Co., 472 U.S. at 812; see also Becherer v. Merrill Lynch,
Pierce, Fenner, and Smith, Inc., 193 F.3d 415, 424 (6th Cir. 1999). It should be noted,
however, that under some federal statutes, most notably the Fair Labor Standards Act
(FLSA) and the Age Discrimination in Employment Act (ADEA), notice has the opposite
effect of that under Rule 23: putative class members are given notice of their right to
affirmatively opt in to a class and are not bound by the action unless they elect to join
in the class. See FLSA, 29 U.S.C. 216(b) (1998); ADEA, 29 U.S.C. 626(b) (1999) (incorporating 29 U.S.C. 216(b)). See also Tice v. Am. Airlines, Inc., 162 F.3d 966, 973 (7th
Cir. 1998).
19. 42 U.S.C. 2000e, et seq. (1994).
375
collective action provisions, any potential class lawsuits against an employer under Title VII are governed by Rule 23 and the case law that
has developed as the courts have applied Rule 23 to the various federal
statutes.
B. The Americans with Disabilities Act (ADA) and the
Rehabilitation Act
Both the ADA20 and the Rehabilitation Act21 prohibit workplace
discrimination against persons with physical or mental disabilities,
and, like cases brought under Title VII, class actions under these statutes are governed by Rule 23. However, certification of class suits under
these statutes can be considerably more difficult than certification under other statutes. This is because discrimination claims under these
statutes tend to be highly individualized, requiring a case-by-case analysis of the claimants alleged disability and the reasonable accommodation sought. As a result, it is often difficult for plaintiffs to find a class
representative who can adequately represent a class of individuals
with the same type of disability which affects their ability to perform
the duties of a similar position, in a similar manner.22
C. The Fair Labor Standards Act (FLSA)
The FLSA23 requires payment of minimum wage and overtime to
employees covered by the Act. The FLSA permits class actions on behalf
of similarly situated employees, but such actions are not controlled
by the opt out notice requirements of Rule 23. Instead, section 16(b)
of the FLSA requires that notice be provided to putative class members,
informing them that they will not be bound by a judgment unless they
opt in to the suit.24 Generally, courts are guided by the elements of
Rule 23 in deciding class formation under the FLSA. However, it is well
established that plaintiffs need not completely satisfy Rule 23 when
section 16(b) applies.
D. The Age Discrimination in Employment Act of 1967 (ADEA)
The ADEA protects persons forty years of age and older from workplace discrimination.25 Unlike its sister federal antidiscrimination statutes, namely Title VII, the ADA, and the Rehabilitation Act, the enforcement provision of the ADEA explicitly incorporates the collective
action opt in approach of section 16(b) of the FLSA. As mentioned
20. Id.
21. 29 U.S.C. 701, et seq. (1999).
22. LINDEMANN & GROSSMAN supra note 4, at 1596 (quoting Lintemuth v. Saturn
Corp., 1994 WL 760811, at *5 (M.D. Tenn. 1994).
23. 29 U.S.C. 201, et seq. (1998).
24. 29 U.S.C. 216(b); see Does I thru XXIII v. Advanced Textile Corp., 214 F.3d
1058, 1064 (9th Cir. 2000) (citing Hoffmann-La Roche Inc. v. Sperling, 493 U.S. 165, 169
(1989)).
25. 29 U.S.C. 621-634 (1999).
376
above, under this approach, only those who affirmatively opt in to the
collective action are bound by the ultimate outcome. Those who do not
join the collective action remain free to pursue individual actions
against the employer, so long as they satisfy the ADEAs procedural
prerequisites.
E. The Equal Pay Act
The Equal Pay Act prohibits differentials in employee pay based
upon gender.26 Even though the Equal Pay Act and Title VII both prohibit gender-based discrimination, plaintiffs often pursue class actions
under the Equal Pay Act because it provides for recovery of double
damages in the event of a willful violation. Because the Equal Pay Act
is part of the FLSA, class actions under the Equal Pay Act must be
brought in accordance with the opt in requirements of section 16(b)
of the FLSA, rather than Rule 23.
F. The Employee Retirement Income Security Act (ERISA)
ERISA, a very complex and intricate statute, governs employee
benefit and retirement plans.27 Generally, ERISA class action claims
involve nondisclosure, breach of duty, or nonforfeiture with respect to
an employee benefit or retirement plan.28 Because an employers benefit and retirement plans tend to cover a large number of employees,
class actions brought pursuant to ERISA can involve extremely large
potential class sizes.
III. The Effect of the Filing of a Class Action Lawsuit on
Individual Employees Federal Discrimination Claims
The main federal anti-discrimination statutes, namely Title VII,
the ADA, and the ADEA all require that, as a prerequisite to filing suit
against an employer, the plaintiff must first file a charge of discrimination with the Equal Employment Opportunity Commission (EEOC)
and must do so within a fixed period of time after the alleged discriminatory action (usually 300 days). In most cases, failure to file a charge
with the EEOC within the prescribed time period bars an employee
from later pursuing a lawsuit against the employer for discrimination.29 However, the courts have held that the filing of a class action
lawsuit by a co-worker that implicates an employees potential cause
of action effectively tolls the running of the charge-filing period for that
employee, even if the class is never certified or is later decertified. 30
26. 29 U.S.C. 206(d) (1998).
27. 29 U.S.C. 1145, et seq. (1999).
28. MOORE, ET AL., supra note 7, at 23.23[5][i].
29. See Bullington v. United Air Lines, Inc., 186 F.3d 1301, 1310 (10th Cir. 1999).
30. See Armstrong v. Martin Marietta Corp., 138 F.3d 1374, 1391 (11th Cir. 1998)
(citing Crown, Cork & Seal Co. v. Parker, 462 U.S. 345 (1983); Am. Pipe & Constr. Co. v.
Utah, 414 U.S. 538 (1974)).
377
Once class certification is denied, or an initially certified class is

decertified, the putative class members individual charge-filing clocks
begin ticking again, and so long as the decertified employees file individual charges with the EEOC in the time remaining to them, they are
free to pursue their individual discrimination claims against the employer.31 Therefore, the filing of a class-action suit effectively freezes
the statutory charge-filing periods of all potential class members, allows extensive discovery and strategy planning, and then, once the
court eventually rules that there is no class, allows the plaintiffs to
continue to pursue their discrimination claims against the employer,
some of which may be, by that time, a number of years old. For this
reason, the mere filing of a suit that contains class allegations poses a
serious threat of exposure to discrimination suits to employers of all
sizes.
The landscape alters significantly when the EEOC itself brings
suit on behalf of a group or class of employees. Under Title VII and the
ADEA, the EEOC is unfettered by the class action procedural requirements of numerosity, typicality, commonality, and adequacy of representation that govern private-plaintiff discrimination class action lawsuits.32 This statutory scheme makes it more difficult to obtain
dismissal of an EEOC collective action, and most EEOC collective actions are therefore argued and won on the merits, not procedure. However, there is a silver lining to the EEOC class action cloud: the courts
have consistently held that EEOC class actions take precedence over
and extinguish individual causes of action.33 Therefore, if the EEOC
files an action on behalf of a class of employees and a covered individual
fails to join that class, his or her cause of action is permanently barred.
IV. Avoiding Disparate Impact Class Action Lawsuits
A. The Nature and Danger of Disparate Impact Suits
Unlike claims of intentional discrimination or disparate treatment,
which allege overt and/or intentional discrimination, claims of disparate impact discrimination stem from allegations that employment
practices that are facially neutral nonetheless have an unintentional
disparate impact, that is, significant adverse affect, on a protected
31. Armstrong, 138 F.3d at 1391.
32. See, e.g., E.E.O.C. v. Franks Nursery & Crafts, Inc., 177 F.3d 448, 467 (6th Cir.
1999); E.E.O.C. v. Pan Am. World Airways, Inc., 897 F.2d 1499, 1505-06 (9th Cir. 1990).
33. See Franks Nursery, 177 F.3d at 456. [Title VII] bars an aggrieved individual
from ever bringing . . . suit should the EEOC choose to sue on its own. In such cases, the
only right Title VII reserves to an aggrieved individual is the right to intervene in the
EEOCs action. (citing 42 U.S.C. 2000e-5(f)(1); Pan Am., 897 F.2d at 1506 ([A]n individual employees right to bring a private ADEA action terminates upon the EEOCs
commencement of an enforcement action on his behalf.); see also Bureerong v. Uvawas,
922 F. Supp. 1450, 1464 (C.D. Cal. 1996) (suit by Secretary of Labor for unpaid overtime
wages on behalf of employee group terminates individual employees right to sue for same
relief under FLSA).
378
group.34 As with intentional discrimination claims, the structure of a

disparate impact claim relies upon shifting burdens between the plaintiff and the defendant employer:
The Prima Facie Case: A plaintiff class may establish a prima
facie case of disparate impact by showing that the challenged
practice or selection device resulted in a pattern of hiring, promotion, selection, etc., that had a significant exclusive effect on
a protected group.35 This showing is made through statistical
evidence revealing a disparity so great that it cannot reasonably
be attributed to chance.36
Business Necessity: If impact is established, the burden shifts to
the employer to produce evidence that the practice or selection
device is job-related [for the position in question] and consistent
with business necessity.37
Alternatives with Lesser Impact: Even if the employer has established business necessity, the class has the opportunity to rebut the employers proof by showing that the employer failed to
implement an effective alternative practice or selection device
that would have had a lesser adverse impact.38
For employers, disparate impact claims are dangerous because of
their heavy reliance on statistical evidence and lack of a requirement
of a showing of intent on the part of the employer to discriminate. Failure to have certain under-represented groups working in a position or
positions can leave the employer vulnerable to statistical analyses potentially enabling class representatives to establish a prima facie
case.39 As one court has noted, plaintiffs may establish a prima facie
case of disparate impact discrimination by proffering statistical evidence which reveals a disparity substantial enough to raise an inference of causation40 and that this statistical inference need not have
a scientific degree of certainty.41 Once the class has cleared this hurdle, the employer usually faces the difficult choice between settlement
and facing a jury.
34. See, e.g., Intl Bhd. of Teamsters v. United States, 431 U.S. 324, 335-36 n.15
(1977); Smith v. Xerox Corp., 196 F.3d 358, 366-69 (2d Cir. 1999).
35. See, e.g., Albemarle Paper Co. v. Moody, 422 U.S. 405, 425 (1975); E.E.O.C. v.
Joes Stone Crab, Inc., 220 F.3d 1263, 1274 (11th Cir. 2000); United States v. City of
Warren, 138 F.3d 1083, 1091-92 (6th Cir. 1998).
36. See, e.g., Hazelwood Sch. Dist. v. United States, 433 U.S. 299, 307-08 (1977);
E.E.O.C. v. Joint Apprenticeship Committee of Joint Indus. Bd. of Elec. Indus., 164 F.3d
89, 95 (2d Cir. 1998).
37. Albemarle, 422 U.S. at 425-28; see Bullington, 186 F.3d at 1312.
38. Albemarle, 422 U.S. at 425-28; Brunet v. City of Columbus, 1 F.3d 390, 409 (6th
Cir. 1993); Harper v. Bd. of Regents, Ill. State Univ., 35 F. Supp. 2d 1118, 1123 (C.D. Ill.
1999).
39. Joint Apprenticeship Committee, 164 F.3d at 95.
40. Id.
41. Id.
379
Two statistical analyses, in particular, can cause headaches for employers faced with disparate impact claims. These are
(1) The Under-Utilization Analysis: This test involves an analysis
of the major job positions of an employer and a statistical analysis to
calculate if the protected groups at issue is being under-utilized, that
is, whether the numbers of minorities or women in a particular job
classification is smaller than would be reasonably expected.42 In making this statistical argument, the plaintiff may rely upon either labor
market statistics or, where data related to the racial makeup of the relevant labor market is difficult to obtain, the plaintiff may rely upon demographic figures for the local population.43 Then a comparison is done
between the expected utilization of the group in that occupation and
the employers actual utilization of group members in that occupation.44
(2) The Eighty Percent Benchmark Rule: An often used approach
for assessing disparate impact is the four-fifths rule or eighty percent
benchmark rule. The rule was created by the EEOC and has been
widely used by the courts as a rule of thumb.45 Briefly summarized,
the eighty percent rule states that an employers selection criterion has
an adverse impact, for purposes of plaintiffs prima facie case, where
members of a protected group are selected at a rate less than four-fifths
(eighty percent) of that group with the highest rate of selection. For
example, if fifty percent of white employees are promoted to a certain
level, but only thirty percent of African-American employees are promoted to the same level, then the relevant ratio would be 30/50, or sixty
percent, and an adverse impact would thus be demonstrated under the
eighty percent rule.
Both rules can cause considerable problems for employers. The assumptions made and data used in the under-utilization analysis are
particularly vulnerable to potential manipulation or misunderstanding. While the employer has the right to challenge any submitted data
and offer evidence showing that the calculations are misleading, the
employer is still stigmatized by the appearance of impropriety. In a
legalistic sense, the burden of proving disparate impact is on the plaintiff, but, in reality, the employer is the one that will have to prove the
statistics offered are inaccurate or misleading.
It may be difficult, particularly for smaller employers, to avoid violating the eighty percent rule. This rule has been widely criticized, yet
42. Williams v. Vukovich, 720 F.2d 909, 922 (6th Cir. 1983); EEOC Compliance Manual, (CCH) 2081 (1998); see also Smith, 196 F.3d at 368 (applying same statistical
analysis disparate impact claim based upon reduction in force).
43. City of Warren, 138 F.3d at 1093.
44. Joint Apprenticeship Committee, 164 F.3d at 95-96.
45. See Uniform Guidelines on Employee Selection Procedures, 29 C.F.R. pt. 1607.40
(1978); Boston Police Superior Officers Fedn v. City of Boston, 147 F.3d 13, 21 (1st Cir.
1998); Bew v. City of Chicago, 979 F. Supp. 693, 696-97 (N.D. Ill. 1997); Fickling v. N.Y.
State Dept of Civil Serv., 909 F. Supp. 185, 188 (S.D.N.Y. 1995).
380
it is still used by a number of courts as a starting point of analysis. One

of the major problems with this rule was noted by the Sixth Circuit
recognizing the need for caution in its application:
[I]f an employer selects 60% of the blacks and 80% of the whites, this
very likely indicates a real difference in selection procedures if he is
choosing 600 blacks out of 1,000 and 800 whites out of 1,000. On the
other hand, if he chooses 3 blacks out of 5 applicants and 4 whites
out of 5 applicants, [the percentages are the same, and the 80% rule
is violated] both common sense and rigorous statistical analysis tell
us that it is much more likely that mere chance is the controlling
factor.46
Unfortunately, a number of courts are reticent to discard the eighty

percent rule, thus it is a reality with which employers must deal.47
Despite the fact that courts may consider the possibility of chance
accounting for the observed disparity, employers can ill afford to leave
their fate to chance. Employers should routinely evaluate their hiring,
promotion, and termination practices for substantial compliance with
these rules. Efforts should be made to hire and promote individuals
from protected groups. Because class actions are so costly to litigate
and devastating to settle or lose, employers need to focus on reasonable,
practical opportunities to eliminate the opportunity for one of these
lawsuits to develop by working to improve their statistics.
B. Preventing Disparate Impact Suits: How to Uncover Unseen
Potential Disparate Impact Liability in an Organization
Because disparate impact claims target facially-neutral hiring
practices and requirements, such claims can pose a substantial practical problem in even identifying such practices. Outlined below are
examples of hiring and promotion practices that the courts have recently found to establish a prima facie case of discriminatory disparate
impact.
1. Restriction of Job Advertising to Local Newspapers
In United States v. City of Warren, the municipal government of a
predominantly white city in predominantly white Macomb County,
Michigan, had for years followed a policy of advertising City employment opportunities only in local county newspapers and not in newspapers distributed in the neighboring city of Detroit, which had a substantial black work force.48 The Sixth Circuit Court of Appeals found
46. Black v. City of Akron, 831 F.2d 131, 134 (6th Cir. 1987).
47. See, e.g., Langlois v. Abington Hous. Auth., 207 F.3d 43, 50 (1st Cir. 2000) ([W]e
have approved use of the four-fifths rule as a pertinent benchmark in the employment
context.) (citing Boston Police, 147 F.3d at 21); Pietras v. Bd. of Fire Commrs, 180 F.3d
468, 474 (2d Cir. 1999) (refusing to abandon the four-fifths rule for disparate impact
claims).
48. City of Warren, 138 F.3d at 1088.
381
that the Citys refusal to publicize jobs outside the racially homogenous county, [created] a de facto barrier between employment opportunities and members of a protected class, especially in light of the fact
that the City had employed no black individuals while its advertising
policy was in effect, compared to a statistical projection of at least 99
black employees if the City had advertised its job openings to a wider
population base.49
2. Requirement that applicants meet certain minimum
educational requirements
In EEOC v. Joint Apprenticeship Committee of Joint Industry
Board of Electrical Industry, the EEOC successfully argued that an
industrial boards requirement of a high school diploma or General
Equivalency Diploma (GED) as a prerequisite to admission to its apprenticeship program could support a prima facie claim of disparate
impact racial discrimination.50 The EEOC satisfied its burden of proof
by providing the Court with statistical data showing, (1) For counties
from which [the Board] received five or more applications, 89.2% of
Whites and 68.3% of Blacks between the ages of 18 and 22 possessed a
high school diploma or GED, [and] (2) Blacks comprised 18.3 % of the
potential [local labor force] for [the Boards] apprentice training program but made up [only] 12.2% of actual applicants to the program.51
Because both of these discrepancies were statistically significant, the
Second Circuit Court of Appeals held that the EEOC had shown that
the Boards educational requirement had a racially disparate impact
and remanded the case to the district court to determine whether the
Board could state a valid business justification for its educational
requirement.52
3. Reliance upon subjective personal/family ties as hiring
criteria
In Banks v. City of Albany, an unsuccessful black candidate for the
position of firefighter brought a claim of disparate impact racial discrimination against the City of Albany Fire Department, where only
3.1% of the firefighters in the Albany Fire Department were black, compared to a black population in the City of Albany of 21.5%.53 Key to the
courts decision was the fact that the Chief of the Fire Department, who
had the sole power of determining which candidates would be hired,
admitted that he based his hiring decisions on his personal knowledge
of candidates and their families. Because this selection process had no
demonstrable business necessity and such a selection criteria would
49.
50.
51.
52.
53.
Id. at 1094.
Joint Apprenticeship Committee, 164 F.3d at 95, 98.
Id. at 95-96.
Id. at 98.
City of Albany, 953 F. Supp. at 35.
382
tend to perpetuate underrepresentation of minorities in the fire department, the court held that the plaintiff had made his prima facie
case and denied the Citys motion for summary judgment.54
4. Some Tips on Avoiding Disparate Impact Discrimination
Claims
In light of recent case law, in order to help prevent exposure to
liability for disparate impact claims, employers should
Carefully consider the likely impact of employment and recruiting policies and procedures on protected groups in the geographical area;
Establish clear, nondiscriminatory standardized hiring and promotion criteria, and take affirmative steps to ensure the standard application of those criteria by those employees given the
power to conduct interviews and make hiring decisions;
Conduct regular training and reviews of interview and applicant
evaluation practices and procedures;
Apply the statistical analyses used by the courts to their own
workplaces, in an effort to identify and eliminate any hiring barriers or glass ceilings that may exist.
V. Common Class Action Dangers: Avoiding Wage and
Hour, Sexual Harassment, and ERISA Class Action
Liability
A. Wage and Hour Claims under the FLSA
One of the greatest threats posed by wage and hour class actions
under the FLSA is that an employers small error can lead to massive
liability. For example, an employer might, for a short period of time,
fail to pay the proper rate of overtime wages to its non-salaried personnel.55 Each employees claim may only total a few hundred dollars in
back pay. However, if the company employs a large number of nonsalaried personnel, and plaintiffs counsel is successful in certifying a
large class, then the employer may face hundreds of thousands of dollars in liability, in addition to attorneys fees and costs.56
Wage and hour class actions commonly arise because an employer
failed to pay minimum wage, overtime for more than forty hours of
54. Id. at 35-36.
55. See generally, Klem v. County of Santa Clara, 208 F.3d 1085 (9th Cir. 2000).
56. See Nguyen v. Excel Corp., 197 F.3d 200, 202 & n.1 (5th Cir. 1999) (case in which
2,300 hourly employees sought compensation for alleged unpaid time under FLSA against
employer); Brzychnalski v. Unesco, Inc., 35 F. Supp. 2d 351, 353 (S.D.N.Y. 1999) (certifying a class of hundreds of asbestos workers bringing FLSA overtime claims even though
there may be some differences in the calculation of damages for the individual class
members, should they prevail); Hoffman v. Sbarro, Inc., 982 F. Supp. 249, 252 (S.D.N.Y.
1997) (seeking overtime pay for all managers employed by nationwide restaurant chain
over a four year period).
383
work per week, and/or for miscalculating the proper rate of overtime,
as specified in the FLSA.57 Such claims also arise when an employer
has misclassified employees as salaried or exempt under the FLSA
but nonetheless treated them as hourly employees.58 In addition, an
employer who suspects that it has misclassified employees as exempt
from the FLSA but does not take immediate action to rectify the situation can be hit with liquidated damages and an order to pay the plaintiffs attorneys fees.59
Employers can minimize their exposure to these types of class actions by taking the following steps:
At the time of hiring, inform employees of their employment
status (i.e., salaried exempt or non-salaried non-exempt), and
detail the terms of their payment, for straight time and overtime, in writing. For example, an employer could require that
an employee read and sign such a document and keep the document in the employees personnel file.
Where appropriate, install a time clock or other appropriate time
keeping procedure and issue a written policy regarding its use.
The policy should require non-exempt employees to properly
punch in immediately upon arrival and punch out upon departure from work and during all lunch or personal breaks. Discipline for failure to properly use the employers time keeping
mechanism should be administered because, ultimately, an employees failure to follow proper timekeeping procedures could
leave the employer vulnerable to a class action lawsuit.
Institute clear and firm policies regarding lunch and break times
of non-exempt employees. An employer can be held responsible
for unpaid wages or overtime when it utilizes staff during unpaid
periods of time. While the occasional few minutes of unpaid work
may seem little for the employer to ask, when added up over the
span of several years and over a large class of employees, the
potential liability can be significant.
Require employees to review and sign their time cards or time
records every week and initial any changes made to their cards
or records.
Do not institute policies docking salaried or exempt employees
pay for disciplinary reasons or for being absent from work in
increments of less than a full work day. Such action could create
a class of workers, who will argue that those actions show they
are in practice non-exempt employees and therefore are entitled
to hourly wages and overtime.
57. See Brzychnalski, 35 F. Supp. 2d at 352.
58. See Heidtman v. County of El Paso, 171 F.3d 1038, 1042 (5th Cir. 1999).
59. See id.
384

Reimburse employees as soon as possible for inadvertent mistaken wage deductions. The law gives the employer a window of
opportunity to remedy the situation without encountering liability under the FLSA.60 The quicker the employer remedies the
situation, the less likely it is to find itself facing a class action
FLSA suit.
B. Sexual and Other Workplace Harassment Claims

In light of recent United States Supreme Court rulings, it is imperative that employers follow the Supreme Courts edicts in order to
reduce the risk of facing a class action premised upon sexual harassment. Although the Supreme Court ruled that an employer may in
some cases be held strictly liable for supervisor sexual harassment, the
Supreme Court has noted that in certain cases an employer can affirmatively defend itself against a claim of sexual harassment if the employer used reasonable care to prevent harassment and took prompt
action to correct the problem.61 Moreover, the employer can defend itself by showing that the employee(s) initiating any claim unreasonably
failed to take advantage of programs designed to prevent, report, or
avoid sexual harassment, or other available options.62 Although the
majority of sexual harassment suits involve one or at most a few plaintiffs alleging individualized harassment, class suits can arise from a
pervasive course of sexually harassing conduct affecting a number of
people in the workplace.63
Thus, in order to prevent a class from forming, employers must
take an active role in communicating a zero-tolerance anti-harassment
policy, and expeditiously address and resolve each claim of sexual harassment, thereby making it difficult, if not impossible, for plaintiffs to
allege the existence of a wide pattern of harassment based upon sex.
Employers can minimize their exposure to class actions premised on
sexual harassment by taking the following steps:
Publish a clear anti-discrimination policy forbidding all forms of
discrimination and illegal harassment. It is helpful to include in
such policies examples of prohibited conduct.
Institute a comprehensive discrimination/harassment reporting
procedure. Be sure that the reporting procedure includes the following features:
60. 29 C.F.R. 541.118(a)(6).
61. See generally Faragher v. City of Boca Raton, 524 U.S. 775 (1998); Burlington
Indus., Inc. v. Ellerth, 524 U.S. 742 (1998).
62. See Faragher, 524 U.S. at 807-08.
63. See, e.g., Donnelly v. Glickman, 159 F.3d 405, 408 (9th Cir. 1998). It is also worth
noting that the EEOC may bring sexual harassment actions on behalf of a class, without
having to satisfy Rule 23s requirement of qualifying as a class representative. See
E.E.O.C. v. Dinuba Med. Clinic, 222 F.3d 580, 587 (9th Cir. 2000). Moreover, each member
of the class may be entitled to the individual damages maximum. See id.
385
(1) The names and direct-dial phone numbers of persons in the

employers Human Resources or similar department with authority to investigate reports of discrimination. Consider setting up an 800 number and a mechanism whereby employees
can report, anonymously if they choose, discriminatory harassment 24 hours a day.
(2) Clear identification of other management personnel who may
be contacted to report harassment. It is important to allow the
employee to report to the company harassment by direct supervisors who have the power to alter the terms and conditions
of the job.
(3) A clear statement that reports of discrimination will not result
in punishment to the person reporting.
Take measures to ensure that the policy and procedure is distributed to, and read by, each and every employee. As an added
precaution, require employees to sign a form certifying that they
have read and understand the policy and that they will abide by
it. Keep a signed copy in the employees personnel file.
Post copies of the policy and procedure prominently in the workplace, and distribute updates and reminders of the policy periodically to all personnel.
Investigate reports of harassment immediately. During the pendency of an investigation, take precautionary measures to separate the employee claiming harassment from the alleged harasser and protect the complaining employee from possible
retaliation by the alleged harasser or other employees.
Train supervisory personnel thoroughly on their reporting and
investigation duties. Be sure that supervisors know that they
must not attempt to minimize the seriousness of the complaint
by telling the complaining employee that the harasser is just
that way or otherwise trivialize the seriousness of sexual
harassment.
Where harassment is found to have occurred:
(1) Discipline the harasser (including, if appropriate, termination).
(2) Transfer the harasser to another workplace or shift, where the
harasser is unlikely to come into contact with the victim, or
(3) Offer the victim a transfer to another workplace or shift (do
not force the victim to transfer).
(4) Attempt to obtain the victims signed agreement that the measures taken were an adequate and satisfactory response to the
problem, and keep a signed copy of the agreement in the employees personnel file.
In order to avoid sexual harassment class claims, it is important
to understand that the more an employer can do to show a court that
it took affirmative steps to prevent harassment, to encourage reports
386
of harassment, and to respond quickly and effectively to harassment,

the more likely the court will find that the employer acted in a reasonable manner and is thus not liable for any errant sexual harassment
that may have occurred in the workplace.
C. ERISA Claims
ERISA class actions must be taken seriously, not only because of
the threat of substantial damage awards, but because of the complexity
and potentially enormous cost of litigating ERISA class claims. Plaintiffs may bring ERISA class actions based upon allegations that an
employers conduct constitutes a pattern and practice of interference
with existing or future rights under a benefit plan.64 Plaintiffs seeking
to pursue such claims must show that a pattern or practice of interference exists and this pattern or practice is part of the employers regular
and standard operating procedure.65 There are a wide variety of claims
that plaintiffs can bring under the expansive umbrella of ERISA.66 A
few examples of possible class action claims include
Unlawful termination of vested health care benefits;67
Fraudulent inducement of employees to retire prior to benefit
vesting;68
Unlawful forfeiture of pension credits;69 and
Breach of fiduciary duty for failure to adequately advise employees concerning the terms of an employee benefit plan, alteration thereof, or termination of a plan.70
While there is no way of ensuring that an employer will never have
to face an ERISA class action, there are some preventive measures that
employers can take to reduce the risk. The following checklist can help
employers minimize ERISA class-action exposure:
State all language pertaining to vesting rights in benefits plans
clearly and unambiguously. Courts generally agree that if the
vesting language in a plan is clear, those provisions should be
64. EMPLOYEE BENEFITS LAW, 540 (Steven J. Sacher et al. eds., ABA Section of Labor
and Employment Law 1991).
65. Id.
66. See generally, e.g., Intl Union, United Auto., Aerospace & Agric. Implement
Workers of Am. v. Skinner Engine Co., 188 F.3d 130 (3d Cir. 1999) (affirming summary
judgment dismissal of class of retirees claims that former employer illegally terminated
post-retirement health benefits).
67. See id.
68. See generally, McAuley v. Intl Bus. Mach. Corp., Inc., 165 F.3d 1038 (6th Cir.
1999).
69. See generally, Phillips v. Ala. Hotel & Rest. Employees Pension Fund, 944 F.2d
509 (9th Cir. 1991).
70. See generally, Intl Union, United Auto., Aerospace & Agric. Implement Workers
of Am. v. Skinner Engine Co., 15 F. Supp.2d 773 (W.D. Pa. 1998). Moreover, the employer
is under a duty to truthfully respond to employee questions regarding potential changes
to an ERISA plan when the employer is giving serious consideration to such changes.
See Bins v. Exxon Co. U.S.A., 220 F.3d 1042, 1048 (9th Cir. 2000) (listing cases).
387
enforced.71 However, if an argument can be made that the language of a plan is ambiguous, such ambiguities are construed
against the employer (or its agent) as the plan drafter. Accordingly, a greater likelihood exists that the employer could face a
class action on issues arising over interpreting the plan, if language or phrases utilized are not clear.
Plan well in advance for multiple terminations, layoffs, and
changes in benefit plans. Employers should determine whether
the proposed employment action would have a discriminatory
effect on certain employees under the plan. If it can be shown
that an employer laid off or terminated a disproportionate percentage of employees that were close to being vested under a
benefit plan, the employer may face a class action. Impacted
employees may claim that the layoff or termination interfered
with their vesting rights under ERISA.72 Thus, employers
should plan any actions affecting employees, taking into account ERISA, as it would under the ADEA and Title VII, and
should take steps to ensure that it treats all employees (i.e.,
vested, nearly vested, far from vesting) equally.
Be aware of the vesting status of employees that are subject to
recall after a layoff. Even if the employers conduct is not intentionally discriminatory, disproportionately recalling employees
less likely to vest could create a class of employees closer to vesting that appear to have been discriminated against.
Be aware of the pension liability of each work site. Shifting work
from a site with high pension liability to one with a low proportion of vested employees, in conjunction with eventual layoffs,
may lead to a potential class action.
Fully disclose all interpretations and material terms of any benefit plan, including summary plan descriptions (and copies of
plan documents, if requested), to employees. Failure to adequately do so could lead to class charges of misrepresentation
and concealment.
Ensure that all notices, advisories, or directions given to employees concerning enrollment in, alteration of, or termination
of a benefit plan are accurate and timely.
VI. The Potential Impact of Federal Rule 23(f)

On December 1, 1998 Rule 23(f) officially became part of the Federal
Rules of Civil Procedure. This new subdivision of Rule 23 provides for
immediate permissive interlocutory appeals from district court orders
either granting or denying class action certification. Subsection (f) states,
71. See Am. Fedn of Grain Millers v. Intl Multifoods Corp., 116 F.3d 976, 980 (2d
Cir. 1997).
72. See generally Amatuzio v. Gandalf Sys. Corp., 994 F. Supp. 253 (D.N.J. 1998).
388

A court of appeals may in its discretion permit an appeal from an
order of a district court granting or denying class action certification
under this rule if application is made to it within ten days after entry
of the order. An appeal does not stay proceedings in the district court
unless the district judge or the court of appeals so orders.73
This rule gives the court of appeals unfettered discretion to determine

whether to permit an interlocutory appeal from a class certification
order.
Rule 23(f) requires an aggrieved party to apply for an appeal from
a district court certification within ten days of the ruling. This extremely short ten day appeal window is designed to minimize any delay
in the appeals process and to ensure that the courts of appeals timely
address applications for appeal. If a party fails to apply for appellate
review of a class certification decision within the prescribed ten days,
then the party must wait until a final judgment is entered in the matter
before the lower courts decision regarding class certification status is
subject to appeal.74 Because of this, the Advisory Committee sponsoring
Rule 23(f) noted that the courts of appeals will need to develop appropriate standards for expeditiously granting or denying review.75
The addition of Rule 23(f) is of great significance to class actions
and would-be class actions arising in the employment context. Perhaps
most important is Rule 23(f)s potential for saving employers from having to choose between settling a groundless class lawsuit or taking their
chances by going forward and hoping for the best on the merits or on
appeal. Prior to the enactment of Rule 23(f), an employer faced with an
order granting class certification was only assured of appellate review
of that order by proceeding to final judgment in the case. Such a ruling
can present a death-knell to employers who find themselves forced to
settle groundless lawsuits in the face of the immense costs associated
with going forward with a huge class action. As the Seventh Circuit
pointed out,
[A] grant of class status can put considerable pressure on the defendant to settle, even when the plaintiffs probability of success on the
merits is slight. Many corporate executives are unwilling to bet their
company that they are in the right in big-stakes litigation, and a grant
of class status can propel the stakes of a case into the stratosphere.76
Now, under Rule 23(f), employers can request immediate appellate review of the class certification order, and, in some cases, may have the
underlying litigation stayed while the order is under review.77
73. FED. R. CIV. P. 23(f).

74. See Gary v. Sheahan, 188 F.3d 891, 892 (7th Cir. 1999).
75. FED. R. CIV. P. 23, advisory committee note, 1998 Amendment.
76. Blair v. Equifax Check Serv., Inc., 181 F.3d 832, 834 (7th Cir. 1999).
77. Id. at 835 (Filing a request for permission to appeal [under Rule 23(f)] does not
stop the litigation unless the district court or the court of appeals issues a stay and a
389
Few would disagree that the goals behind new Rule 23(f) are commendable. It remains to be seen whether the rule in operation will
foster or hinder the Rules intended ends. In all events, employers faced
with class action lawsuits should keep in mind that a Rule 23(f) appeal
of an adverse class certification ruling can and should be sought (within
ten days of the ruling) before succumbing to unreasonable class settlement demands.
VII. Conclusion
An unavoidable part of the modern business world is the everpresent threat of being subjected to a class action suit for alleged discrimination or for alleged violation of any of a number of federal employment laws. While no amount of preventive medicine can completely
immunize employers from exposure to suit, businesses must do all they
can to ensure that they are in full compliance with all federal laws and
regulations; by doing so, employers reduce the risk that opportunistic
plaintiffs will find some basis for an individual claim that they can then
attempt to ratchet into a costly class action. The class action lawsuit is
a powerful tool in the hands of attorneys seeking to force quick settlement of groundless claims, and the extent to which employers both
understand the mechanisms of these claims and take steps to eliminate
the grounds for these claims is determinative of the extent to which
employers will avoid being subjected to these burdensome and expensive causes of action.
stay would depend on a demonstration that the probability of error in the class certification decision is high enough that the costs of pressing ahead in the district court exceed
the costs of waiting. (This is the same kind of question that a court asks when deciding
whether to issue a preliminary injunction or a stay of an administrative decision.)).
391
Its Common, but Is It Right? The

Common Law of Trusts in ERISA
Fiduciary Litigation
Michael J. Collins*
On Labor Day in 1974, President Ford signed into law the Employee Retirement Income Security Act (ERISA).1 The primary goal of
ERISA is to provide safeguards to ensure that employees receive promised pension benefits.2 One of the primary ways that ERISA attempts
to protect employees rights is by the imposition of strict duties on plan
fiduciaries. The common law of trusts served as the basis for ERISAs
fiduciary duty provisions, and courts have often applied the common
law of trusts in interpreting ERISAs fiduciary rules. This article describes and evaluates how courts have used the common law of trusts
in fiduciary breach actions under ERISA.
I. ERISA Background
A. Reasons ERISA Was Adopted
After more than ten years of hearings and debate, Congress enacted ERISA in 1974 in response to perceived failures in the private
pension system.3 Prior to ERISA, pension plans were often designed
with such stringent vesting standards that few employees ever qualified for benefits, and many plans were inadequately funded. In addition, some plans were administered dishonestly or incompetently.4
* The author is an attorney with Gibson, Dunn & Crutcher LLP, Washington, D.C.
He received his J.D. in 1995 from Notre Dame Law School.
1. Pub. L. No. 93-406, 88 Stat. 829 (1974) (codified in various sections of the United
States Code, primarily in 26 U.S.C. and 29 U.S.C.).
2. ERISA 2, 29 U.S.C. 1001 (1999).
3. In March 1962, President Kennedy appointed a Committee on Corporate Pension Funds. The Committee submitted its Report to President Johnson in early 1964.
The Report concluded that there is a strong public interest in private pension plans and
made a number of recommendations, including minimum vesting and funding standards,
a benefit insurance program, and improved pension portability. Legislation was introduced in both houses of Congress in 1968 but did not move beyond committee hearings.
The Labor and Tax Committees of the House and Senate finally reported out bills in
1972. A turf war between the various committees delayed the bills until ERISAs eventual
passage in 1974.
4. Senator Williams, while introducing the Conference Report to ERISA, stated:
Despite the value of full reporting and disclosure [imposed under the Welfare
and Pension Plan Disclosure Act of 1958], it has become clear that such provisions are not in themselves sufficient to safeguard employee benefit plan
392
The most prominent example given for the need for greater regulation of private pensions was the situation involving Studebaker Corporations employees.5 In December 1963, following years of losses, Studebaker decided to close its manufacturing plant in South Bend,
Indiana.6 The plant closing resulted in the dismissal of more than 5,000
workers, and the termination of a pension plan covering 11,000 members of the United Automobile Workers (UAW). The assets of the plan
were far less than needed to provide the benefits that had vested under
the plan.7 Ultimately, Studebaker and the UAW agreed to allocate the
plans assets in accordance with default priorities specified in the plan.8
Approximately 3,600 retirees and active workers who had reached age
sixty received the full pension promised under the plan, and roughly
4,000 other vested employees received lump-sum distributions of
roughly 15% of the value of their accrued benefits.9 The remaining employees, whose interest had not yet vested in any benefits under the
plan, received nothing.10
Although the driving force behind ERISA was the desire to more
closely regulate private pension plans,11 ERISA also applies to welfare
assets from such abuses as self-dealing, imprudent investing, and misappropriation of plan funds. Neither existing State nor Federal law has been effective in preventing or correcting many of these abuses. Accordingly, the legislation imposes strict fiduciary obligations on those who have discretion or
responsibility respecting the management, handling, or disposition of pension
or welfare plan assets.
120 CONG. REC. 29932 (1974), reprinted in 1974 U.S.C.C.A.N. 5177, 5186 (statement of
Sen. Williams) [hereinafter ERISA Legislative History].
5. STEVEN J. SACHER, ET AL., EMPLOYEE BENEFITS LAW 5 (2d ed. 1998).
6. JOHN H. LANGBEIN & BRUCE A. WOLK, PENSION & EMPLOYEE BENEFIT LAW 54
(2d ed. 1990).
7. Steven D. Spencer & John P. Urban, Piecing Together the ERISA Puzzle: An
Introduction to Employee Benefits Law, ERISA BASICS: A PRIMER ON ERISA ISSUES, A-1
(ALI-ABA 1998).
8. Id.
9. Id.
10. Id.
11. An employee pension benefit plan or pension plan includes any plan, fund,
or program that is:
maintained by an employer or by [a labor union], or by both, to the extent that
by its express terms or as a result of surrounding circumstances such plan,
fund, or program: (i) provides retirement income to employees, or (ii) results
in a deferral of income by employees for periods extending to the termination
of covered employment or beyond.
ERISA 3(2)(A), 29 U.S.C. 1002(2)(A) (1999).
In addition, the Department of Labor is given authority to issue regulations providing one or more exempt categories under which (i) severance pay arrangements,
and (ii) supplemental retirement income payments shall be treated as employee welfare benefit plans rather than employee pension benefit plans. ERISA 3(2)(B), 29
U.S.C. 1002(2)(B). The Department of Labor has exercised its authority to issue regulations addressing these and other issues. 29 C.F.R. 2510.3-2 (1999).
The Common Law of Trusts in ERISA Fiduciary Litigation
393
benefit plans, such as health and disability plans.12 For example,

ERISAs reporting and disclosure and fiduciary responsibility rules
apply to both pension and welfare plans.13 However, while ERISA imposes various substantive requirements on pension plans,14 it generally does not impose such requirements on welfare plans.15
B. Structure of ERISA
ERISA is divided into four titles. Title I provides substantive protections for employees rights.16 Title II sets forth the rules that allow
favorable tax treatment of plans providing retirement income for employees.17 Title III sets forth the jurisdiction of the regulatory agencies
12. An employee welfare benefit plan or welfare plan is any plan, fund or program:
established or maintained by an employer or by [a labor union], or by both, to
the extent that such plan, fund, or program was established or is maintained
for the purpose of providing for its participants or their beneficiaries, through
the purchase of insurance or otherwise, (A) medical, surgical, or hospital care
or benefits, or benefits in the event of sickness, accident, disability, death or
unemployment, or vacation benefits, apprenticeship or other training programs, or day care centers, scholarship funds, or prepaid legal services, or
(B) any benefit described in [section 302(c) of the Labor-Management Relations Act of 1947] (other than pensions on retirement or death, and insurance
to provide such pensions).
ERISA 3(1), 29 U.S.C. 1002(1).
13. ERISA 101-111, 29 U.S.C. 1021-1031 (1999); ERISA 401-414, 29
U.S.C. 1101-1114 (1999). The reporting and disclosure provisions generally require
the provision of certain information to participants and the Department of Labor. See
infra notes 80-90 and accompanying text for a discussion of the reporting and disclosure
rules. For a discussion of the fiduciary responsibility rules, see the discussion infra
notes 26-47.
14. For example, ERISA imposes on pension plans detailed rules regarding minimum participation, vesting, and funding. ERISA 202, 203, 302, 29 U.S.C. 1052,
1053, 1082 (1999).
15. However, since ERISA was enacted in 1974, Congress has imposed several substantive requirements on ERISA-covered group health plans. See, e.g., Consolidated Omnibus Budget Reconciliation Act of 1985 (codified at ERISA 601-609, 29 U.S.C. 11611169) (1999) (group health plans required to offer COBRA continuation coverage
following termination of employment and other qualifying events).
16. ERISA 2-713, 29 U.S.C. 1001-1191c (1999).
17. Title II of ERISA is primarily set forth in sections 401-418E of the Internal
Revenue Code, 26 U.S.C. 401-418E (1999). Plans that satisfy these requirements are
tax-qualified. Plans that cover a broad group of employees generally are designed to be
tax-qualified for three primary reasons. First, employer contributions to the plan generally are deductible when made, rather than when employees become vested or upon
distribution of benefits. 26 U.S.C. 404(a)(1), (3). Second, employees generally are not
taxed until they receive distributions from the plan. 26 U.S.C. 402(a). Third, earnings
on contributions to the trust that holds plan assets are exempt from federal income tax.
26 U.S.C. 401(a), 501(a). In addition, favorable tax treatment may be available for
distributions received from the plan. See, e.g., 26 U.S.C. 402(c)(1) (amounts rolled over
to another tax-qualified plan or an individual retirement arrangement (IRA) generally
are not taxed until distributed from the second plan or the IRA), 26 U.S.C. 402(e)(4)
(net unrealized appreciation on certain distributions of employer stock is not subject to
tax until the stock is sold).
394
that enforce ERISA and provides standards and qualifications for actuaries.18 Currently, three federal agenciesthe Department of Labor, the
Internal Revenue Service, and the Pension Benefit Guaranty Corporationhave regulatory authority over various provisions of ERISA. Title
IV creates a structure for providing plan termination insurance for certain defined benefit pension plans.19
Title I of ERISA generally applies to any pension or welfare plan
established or maintained by (i) an employer engaged in commerce or
in any industry or activity affecting commerce; or (ii) a labor union; or
(iii) both an employer and a labor union.20 However, certain types of
plans were exempted because Congress felt that ERISAs protections
were not required. The exceptions from ERISA coverage include governmental plans,21 church plans,22 plans maintained solely for purposes of complying with workers compensation, unemployment compensation or disability insurance laws,23 plans maintained outside of
the United States primarily for the benefit of nonresident aliens,24 and
excess benefit plans.25 Thus, with these and certain other limited exceptions, Title I of ERISA has a very broad reach.
C. The Common Law Trust Background of ERISAs Fiduciary
Duty Provisions
In order to encourage the provision of retirement benefits, the
Internal Revenue Code (Code) has, since 1921, provided favorable
tax treatment for benefits provided under tax-qualified retirement
The Internal Revenue Code also imposes various requirements that welfare benefits
must satisfy in order for favorable tax treatment to apply. See, e.g., 26 U.S.C. 105(h) (if
a self-insured health plan does not satisfy specified nondiscrimination rules, highly compensated individuals are subject to tax on benefits they receive under the plan). See
Michael J. Collins, A Primer on the Self-Insured Health Plan Nondiscrimination Rules,
J. PENSION PLANNING & COMPLIANCE 1 (Summer 1999). Like the rules applicable to taxqualified plans, these rules are intended to encourage the provision of welfare benefits
to employees in all compensation ranges.
18. ERISA 3001-3042, 29 U.S.C. 1201-1242 (1994 & Supp. 1998).
19. ERISA 4001-4402, 29 U.S.C. 1301-1461 (1994 & Supp. 1998).
Plan termination insurance does not apply to a wide variety of defined benefit plans,
including, inter alia, plans maintained by governmental entities, certain plans maintained
by churches, and unfunded plans maintained to provide benefits to a select group of management or highly compensated employees. ERISA 4021(b)(2), (3), (6), 29 U.S.C. 1321.
20. ERISA 4(a), 29 U.S.C. 1003(a) (1999).
21. ERISA 4(b)(1), 29 U.S.C. 1003(b)(1). Governmental plan is defined to generally include plans established or maintained by the United States government, the
government of any State or political subdivision thereof, or . . . instrumentality of any of
the foregoing. ERISA 3(32), 29 U.S.C. 1002(32).
22. ERISA 4(b)(2), 29 U.S.C. 1003(b)(2). Church plan is defined in ERISA
3(33), 29 U.S.C. 1002(33).
23. ERISA 4(b)(3), 29 U.S.C. 1003(b)(3).
24. ERISA 4(b)(4), 29 U.S.C. 1003(b)(4).
25. ERISA 4(b)(5), 29 U.S.C. 1003(b)(5). An excess benefit plan is a plan maintained by an employer solely for the purpose of providing benefits for certain employees
in excess of the limitations under section 415 of the Internal Revenue Code on benefits
that may be provided under tax-qualified plans. ERISA 3(36), 29 U.S.C. 1002(36).
395
plans.26 Since 1938, the Code has required assets of qualified plans to
be held in trust. A trust that is part of a qualified pension, stock bonus,
or profit-sharing plan must be managed for the exclusive benefit of
employees, and trust funds may not be diverted for purposes other than
the exclusive benefit of employees before satisfaction of all liabilities to
participants and beneficiaries.27 Similarly, the Labor-Management Relations Act of 1947 (LMRA), which governs multiemployer28 and other
Taft-Hartley funds, provides that trust funds must be held for the
sole and exclusive benefit of the employees . . . and their families and
dependents.29
ERISAs legislative history makes clear that Title I is intended to
apply rules and remedies similar to those under traditional trust law
to govern the conduct of fiduciaries.30 As such, ERISA imposes three
basic fiduciary duties traceable to the common law of trusts. First, a
fiduciary31 must act solely in the interest of and for the exclusive pur26. Revenue Act of 1921, ch. 136, 219(f), Pub. L. No. 42-98, 42 Stat. 227, 247
(1921). See supra note 17 for a description of the favorable tax rules applicable to taxqualified retirement plans.
27. Revenue Act of 1938, ch. 289, Pub. L. No. 74-554, 165, 52 Stat. 447, 518 (1938).
The rule currently is reflected at 26 U.S.C. 401(a)(2) (1999). See also 26 C.F.R. 1.4011(b)(2)-(5), 1.401-2 (1999). In 1954, Congress applied prohibited transaction rules to
tax-qualified plans to discourage certain transactions involving conflicts of interest between the plan and the employer sponsoring the plan. 26 U.S.C. 503 (1999). Engaging
in a prohibited transaction could result in loss of favorable tax treatment for the plan.
This provision continues to apply to plans maintained by governmental organizations
and churches. 26 U.S.C. 503(a)(1)(B). It no longer applies to tax-qualified plans maintained by other employers; rather, those plans are subject to the more detailed restrictions set forth in 26 U.S.C. 4975 (1994 & Supp. IV 1998).
28. Special tax qualification rules apply to multiemployer pension plans, which are
plans maintained pursuant to a collective-bargaining agreement between employee representatives and one or more employers. 26 U.S.C. 413(a)(1) (1994). In addition, multiemployer plans are subject to different plan termination insurance rules than single
employer plans. See ERISA 4201-4303, 29 U.S.C. 1321-1453.
29. 29 U.S.C. 186(c)(5) (1998). See Blankenship v. Boyle, 329 F. Supp. 1089 (D.D.C.
1971) (discussing trustees duty of undivided loyalty to beneficiaries and finding breach
where corpus of trust was kept in bank owned by trustees).
30. H.R. REP. NO. 93-1280, at 295 (1974), reprinted in 1974 U.S.C.C.A.N. 5038,
5076. See also ERISA Legislative History, supra note 4, at 4743 (The objectives of
[ERISAs fiduciary responsibility] provisions are to make applicable the law of trusts; to
prohibit exculpatory clauses that have often been used in this field; to establish uniform
fiduciary standards which dissipate or endanger plan assets; and to provide effective
remedies for breaches of trust.).
31. ERISAs definition of fiduciary is expansive. It generally includes any person
with respect to a plan to the extent:
(i) [s]he exercises any discretionary authority or discretionary control respecting management or disposition of its assets, (ii) [s]he renders investment advice for a fee or other compensation, direct or indirect, with respect to any
moneys or other property of such plan, or has any authority or responsibility
to do so, or (iii) [s]he has any discretionary authority or discretionary responsibility in the administration of such plan.
ERISA 3(21)(A), 29 U.S.C. 1002(21)(A). Fiduciary status is determined under a functional analysis, rather than based on official titles. Mertens v. Hewitt Assocs., 508 U.S.
248, 262 (1993); Blatt v. Marshall & Lassman, 812 F.2d 810, 812 (2d Cir. 1987).
396
pose of [] providing benefits to participants and their beneficiaries.32

Second, the fiduciary must act with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man
acting in a like capacity and familiar with such matters would use in
the conduct of an enterprise of a like character and with like aims.33
In this regard, courts measure prudence according to the prudent person standard developed under the common law of trusts.34 Third, the
fiduciary must diversify [] the investments of the plan so as to minimize the risk of large losses, unless under the circumstances it is clearly
prudent not to do so.35 In addition to these three basic fiduciary duties
derived from the common law of trusts, a fiduciary also is required to
operate the plan in accordance with the documents and instruments
governing the plan, [but only] insofar as such documents and instruments are consistent with ERISAs requirements.36
In addition to the general fiduciary duties set forth in section 404
of ERISA,37 section 406 of ERISA delineates specific categories of
transactions that are deemed to per se violate the fiduciary responsibility rules (prohibited transactions).38 The Code includes substantially similar rules that impose an annual 15% excise tax if specified disqualified persons engage in a prohibited transaction with a
tax-qualified retirement plan, and a 100% excise tax if the prohibited
transaction is not corrected after notice is given by the Internal Revenue Service.39 Prohibited transactions generally involve conflicts of
interest that could result in a party taking advantage of its position
with the plan in order to obtain a sweetheart deal 40 and fall within
three broad categories: (i) transactions between the plan and a party
A broad definition of fiduciary was necessary because of the potentially large number
of parties with the ability to dissipate plan assets or engage in other actions that could
harm participants interests. For example, a defined benefit pension plan typically will
have at least three plan fiduciaries. First, a trustee will be responsible for holding plan
assets. Second, an investment manager will have authority to invest plan assets. Third,
a plan administrator will have the authority to decide claims for benefits. More fiduciaries
are possible; for example, several investment managers may be appointed, and there may
be more than one fiduciary in charge of plan administration.
32. ERISA 404(a)(1)(A), 29 U.S.C. 1104(a)(1)(A) (1999). This exclusive benefit
requirement imports the common law duty of loyalty into ERISA.
33. ERISA 404(a)(1)(B), 29 U.S.C. 1104(a)(1)(B).
34. See, e.g., Katsaros v. Cody, 744 F.2d 270, 279 (2d Cir. 1984).
35. ERISA 404(a)(1)(C), 29 U.S.C. 1104(a)(1)(C). The diversification requirement is not applicable to an eligible individual account plan that invests in qualifying
employer real property or qualifying employer securities if certain requirements are
met. ERISA 404(a)(2), 29 U.S.C. 1104(a)(2).
36. ERISA 404(a)(1)(D), 29 U.S.C. 1104(a)(1)(D).
37. 29 U.S.C. 1104.
38. 29 U.S.C. 1106 (1999).
39. 26 U.S.C. 4975(a), (b).
40. See, e.g., Lowen v. Tower Asset Mgmt., Inc., 829 F.2d 1209, 1213 (2d Cir. 1987);
Freund v. Marshall & Ilsley Bank, 485 F. Supp. 629, 637-38 (W.D. Wis. 1979).
397
in interest,41 (ii) fiduciary self-dealing,42 and (iii) a plans acquisition

and holding of employer securities or real property.43 ERISA contains
a number of exemptions to these prohibited transaction rules.44 In addition, both ERISA and the Code permit issuance of class and individual exemptions by the agencies that enforce ERISA.45
Thus, ERISAs fiduciary duty provisions are closely related to the
common law of trusts, although section 406 prohibits some transactions
that would be permissible under the common law. However, the Supreme Court has recognized that trust law does not tell the entire
story. After all, ERISAs standards and procedural protections partly
reflect a congressional determination that the common law of trusts did
not offer completely satisfactory protection.46 Rather, with respect to
the trust-like fiduciary standards, Congress expect[ed] that the courts
will interpret this prudent man rule (and the other fiduciary standards)
bearing in mind the special nature and purpose of employee benefit
plans. 47
D. Lawsuits against Breaching Fiduciaries
Section 502(a) of ERISA authorizes various causes of action.48 The
procedural, as well as substantive, aspects of ERISA litigation vary
according to the specific causes of action alleged in the plaintiffs complaint. For example, subject matter jurisdiction, standing, statute of
limitations, the courts standard of review, the relief available, the
plaintiffs obligation to exhaust the plans administrative procedures
before filing suit, who can be liable, and the availability of a jury trial
turn on which provision of section 502(a) is applicable.
41. ERISA 406(a), 29 U.S.C. 1106(a). Parties in interest include fiduciaries

and other parties with a close relationship with the plan, including, inter alia, a person
providing services to [the] plan[,] an employer any of whose employees are covered by
the plan, a labor union any of whose members are covered by the plan, and employees
of the employer maintaining the plan. ERISA 3(14)(A), (B), (C), (D), (H), 29 U.S.C.
1002(14)(A), (B), (C), (D), (H).
42. ERISA 406(b), 29 U.S.C. 1106(b). Self-dealing includes when a fiduciary:
(1) deal[s] with assets of the plan in his own interest or for his own account,
(2) in his individual or in any other capacity act[s] in any transaction involving
the plan on behalf of a party (or represent[s] a party) whose interests are
adverse to the interests of the plan or the interests of its participants or beneficiaries, or (3) receive[s] any consideration for his own personal account from
any party dealing with the plan in connection with a transaction involving
assets of the plan.
43. ERISA 406(c), 29 U.S.C. 1106(c).
44. ERISA 407, 408, 29 U.S.C. 1107, 1108 (1999).
45. ERISA 408(a), 29 U.S.C. 1108(a). See also 26 U.S.C. 4975(c)(2).
46. Varity Corp. v. Howe, 516 U.S. 489, 496-97 (1996).
47. Id. (quoting H.R. REP. NO. 93-1280, at 302, reprinted in 1974 U.S.C.C.A.N.
5038, 5083).
48. 29 U.S.C. 1132(a) (1999).
398
Several provisions of section 502(a) address potential relief against

breaching plan fiduciaries. Section 502(a)(2)49 allows a plan participant, a plan beneficiary,50 a plan fiduciary, or the Secretary of Labor to
bring an action for relief under section 409 of ERISA51 to redress violations of ERISAs fiduciary responsibility provisions. For actions
brought under section 502(a)(2), any relief generally is in favor of the
plan, rather than in favor of individual participants or beneficiaries.52
Section 502(a)(3) of ERISA allows a participant, beneficiary, or fiduciary to bring suit to enjoin any act or practice that violates Title I of
ERISA or the terms of the plan, or to obtain other appropriate equitable relief to redress such violations or enforce any provision of Title
I of ERISA or the terms of the plan.53
II. The Sirens Call: ERISA Preemption and Federal
Common Law
ERISA broadly preempts all state laws that relate to an ERISAcovered plan.54 The term relate to has been read very broadly by the
courts.55 As a result, claims involving common law contract issues,56
49. 29 U.S.C. 1132(a)(2).
50. A plan beneficiary is a person designated by a participant, or by the terms of
an employee benefit plan, who is or may become entitled to a benefit thereunder. ERISA
3(8), 29 U.S.C. 1002(8).
51. 29 U.S.C. 1109 (1999). Section 409 of ERISA generally provides that: (1)
breaching fiduciaries are personally liable for losses resulting from a breach, must restore
any profits resulting from the breach, and are subject to such other equitable or remediable relief that a court may deem appropriate, and (2) a fiduciary generally is not liable
for a breach occurring before she became a fiduciary or after she ceased to be a fiduciary.
52. Mass. Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 144 (1985).
53. 29 U.S.C. 1132(a)(3).
54. ERISAs preemption provision provides that: [e]xcept as provided in subsection
(b) of this section, the provisions of this subchapter . . . shall supersede any and all State
laws insofar as they may now or hereafter relate to any employee benefit plan described
in [section 4(a)] and not exempt under [section 4(b)]. ERISA 514(a), 29 U.S.C. 1144(a)
(1999). The savings clause in ERISA provides that state laws that regulate insurance,
banking, and securities are not preempted by ERISA. ERISA 514(b), 29 U.S.C.
1144(b). In addition, state insurance laws continue to apply to multiple employer welfare arrangement[s]. ERISA 514(b)(6), 29 U.S.C. 1144(b)(6).
55. The term relates to is to be given its broad common sense meaning, such that
a state law relates to an employee benefit plan, in the normal sense of the phrase, if it
has a connection with or reference to such a plan. Shaw v. Delta Air Lines, Inc., 463 U.S.
85, 96-97 (1983). Since Shaw, the Court has expansively interpreted ERISA preemption
to cover state laws having even a tenuous connection to ERISA plans. See, e.g., District
of Columbia v. Greater Washington Bd. of Trade, 506 U.S. 125 (1992); Ingersoll-Rand Co.
v. McClendon, 498 U.S. 133 (1990); Metro. Life Ins. Co. v. Mass., 471 U.S. 724 (1985). But
see N.Y. State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514
U.S. 645, 646 (1995) (describing preemption in limited terms and declining to preempt a
New York law imposing surcharges on ERISA health plans).
56. See, e.g., Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 62 (1987); Dranchak v. Akzo
Nobel Inc., 88 F.3d 457, 459 (7th Cir. 1996) (preempting breach of contract claim seeking
continuation of benefits); Pitman v. Blue Cross & Blue Shield, 24 F.3d 118, 121-22 (10th
Cir. 1994) (plaintiffs state law claims for breach of contract, breach of the implied covenant of good faith and fair dealing, and infliction of emotional distress preempted where
plan rejected claim for high dose chemotherapy and autologous bone marrow transplant
399
fraudulent and negligent misrepresentation,57 oral misrepresentation,58 fraud,59 and improper processing and handling of benefit
claims60 have generally been held to be preempted.
Because ERISA preempts state laws and both the claims and remedies available under ERISA are quite limited, courts are often tempted
to address what they believe must be oversights in the statutory
scheme by invoking the federal common law of ERISA. Although the
legislative history on the appropriateness of courts invoking federal
common law is somewhat unclear, it is now accepted by the courts as
a matter of course.61 The Supreme Court first noted the ability of federal courts to develop a federal common law of ERISA in 1983.62 The
basis for the development of the federal common law of ERISA is that
Congress intentionally delegated to the federal courts broad power to
create rights and obligations that are consistent with ERISAs underlying purposes, even if the rights and obligations are not actually set
forth in ERISA.63 In developing this federal common law of ERISA,
courts have often looked to the common law of trusts for guidance. This
treatment); Gordon v. Barnes Pumps, Inc., 999 F.2d 133, 137 (6th Cir. 1993) (dismissing
state law claim for breach of contract based upon amendment of a severance plan because
claim relates to an employee benefit plan).
57. See, e.g., Maez v. Mountain States Tel. & Tel., Inc., 54 F.3d 1488, 1496 (10th
Cir. 1995) (promissory estoppel claims predicated on allegations plaintiffs were wrongfully induced to participate in an early retirement program); Carlo v. Reed Rolled Thread
Die Co., 49 F.3d 790, 794-95 (1st Cir. 1995) (negligent misrepresentation claim relating
to defendant allegedly misinforming plaintiff of amount of benefits available under early
retirement program); Aliff v. BP Am., Inc., 26 F.3d 486, 488-89 (4th Cir. 1994); Sanson v.
Gen. Motors Corp., 966 F.2d 618, 618-21 (11th Cir. 1992).
58. See, e.g., Elmore v. Cone Mills Corp., 23 F.3d 855, 863 (4th Cir. 1994) (en banc);
Lister v. Stark, 890 F.2d 941, 944-46 (7th Cir. 1989).
59. See, e.g., Perdue v. Burger King Corp., 7 F.3d 1251, 1255-56 (5th Cir. 1993);
Randol v. Mid-West Nat. Life Ins. Co., 987 F.2d 1547, 1552 (11th Cir. 1993); Lea v. Republic Airlines, Inc., 903 F.2d 624, 631-33 (9th Cir. 1990). But see Farr v. U.S. West, Inc.,
58 F.3d 1361, 1365-66 (9th Cir. 1995); Forbus v. Sears Roebuck & Co., 30 F.3d 1402, 140507 (11th Cir. 1994).
60. Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 48 (1987).
61. Senator Javits, the primary sponsor of ERISA, stated that Congress intended
that a body of Federal substantive law will be developed by the courts to deal with issues
involving rights and obligations under private welfare and pension plans. 120 CONG.
REC. 29942 (1974) (statement of Sen. Javits). In addition, Senator Williams compared
ERISA to the Labor-Management Relations Act of 1947, which had a well-developed
federal common law at the time of ERISAs passage. 120 CONG. REC. S29933 (1974),
reprinted in 1974 U.S.C.C.A.N. 5177, 5188 (statement of Sen. Williams).
62. Franchise Tax Bd. v. Constr. Laborers Vacation Trust for S. Cal., 463 U.S. 1, 24
n.26 (1983). In 1985, Justice Brennan noted that ERISAs legislative history demonstrates that Congress intended federal courts to develop federal common law in fashioning the additional appropriate equitable relief under section 502(a)(3) of ERISA. Mass.
Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 156 (1985) (Brennan, J., concurring).
63. For a strong criticism of courts development of the federal common law of
ERISA, see Jeffery A. Brauch, The Federal Common Law of ERISA, 21 HARV. J.L. &
PUB. POLY 541, 591 (1998). For a contrasting view, see Jayne Elizabeth Zanglein, Closing the Gap: Safeguarding Participants Rights By Expanding The Federal Common
Law of ERISA, 72 WASH. U. L.Q. 671 (1994).
400
approach has allowed courts to often achieve the desired result while,
at the same time, insulating themselves against criticism that the result is inconsistent with ERISAs text and structure.
III. Analysis of the Use of the Common Law of Trusts in
ERISA Fiduciary Breach Cases
Described and analyzed below are four situations in which courts
have utilized the common law of trusts in developing a federal common
law of ERISA: (i) a fiduciary duty to disclose early retirement windows
that are under serious consideration by management; (ii) a right to
contribution from a breaching co-fiduciary; (iii) nonfiduciary liability;
and (iv) a requirement that an employee stock ownership plan diversify
its investments beyond employer stock. The analysis will show that
courts that have adopted common law rules have often reached results
in these areas that are contrary to the text and purposes of ERISA.
A. Duty to Disclose Early Retirement Windows
Employers that maintain defined benefit pension plans often adopt
early retirement windows in order to encourage voluntary reductionsin-force. An employee who elects to retire during the specified period (the
window period) receives larger benefits than she otherwise would receive
under the plan. Common approaches are to credit employees with additional years of service credit64 and to subsidize the early commencement of benefits.65 Early retirement windows are a way for an employer
to reduce its workforce without resorting to layoffs. Often, an employer
will discover that the window benefits are insufficient to induce the desired number of employees to retire and will implement a more generous
early retirement package for employees retiring during a second window
period. A controversy that arises with respect to these more generous
packages is when the employer has a fiduciary duty to disclose to employees that it is considering such a package.
1. Common Law Duty to Disclose
Under the common law, a trustee ordinarily has no duty to the
beneficiary to furnish information in the absence of a request for such
64. Defined benefit plans often provide retirement benefits based on a fixed formula
that includes the employees years of service. For example, a typical formula would provide an annual annuity benefit commencing at age sixty-five equal to 1.5% times the
participants years of service times the participants average salary in the five years in
which the average is highest. Under this formula, an employee with thirty years of service
and an average salary of $20,000 would receive an annual benefit of $9,000 (1.5% times
thirty times $20,000) commencing at age sixty-five.
65. Benefits usually are actuarially reduced for commencement prior to normal
retirement age (typically age sixty-five). For example, benefits may be reduced by 6%
for each year that benefit commencement precedes age sixty-five. If the employee described in supra note 64 retired at age fifty-nine, her annual benefit would be reduced by
30% (5% times six years), so she would receive an annual benefit of $6,300. Under an
early retirement window, the 30% reduction may be eliminated, so that she could receive
her full $9,000 annual benefit commencing at age fifty-nine.
401
information.66 However, the trustee has a duty to communicate to the

beneficiary material facts affecting the interest of the beneficiary which
he knows the beneficiary does not know and which the beneficiary
needs to know for his protection in dealing with a third person with
respect to his interest.67
A number of pre-ERISA cases dealt with the duty to disclose information under employee benefit plans. For example, in Branch v.
White, a labor union and a contractors association established a pension plan under which both union and nonunion employees were eligible to participate.68 The trustees informed union members, but not
nonunion employees, of the plans eligibility requirements.69 The court
held that the plans trustees had a fiduciary duty to inform the nonunion employees of the conditions for plan participation, even though
the plans trust agreement did not require the trustees to notify employees of the eligibility requirements.70 The court noted that the trustees had a duty to fully inform the beneficiaries of the trust of all facts
relating to the subject matter of the trust which were essential for the
protection of the beneficiaries interests.71
In Moch v. Durkin, a plan participant applied for retirement benefits under a Teamsters pension fund.72 The plan provided that a participant was entitled to benefits only if one or more employers contributed on . . . behalf [of the participant] $75 or more in at least two years
prior to 1961.73 The trustees determined that such contributions had
been made on the plaintiffs behalf for only one year and denied his
benefits claim.74 The plaintiff later discovered that in 1957 he had been
credited with only $68.47 but that another employer had mistakenly
failed to contribute an additional $23.76 on his behalf for that year.75
If the $23.76 had been contributed, the plaintiff would have been eligible for a pension.76 The employer promptly tendered a check for the
delinquent contribution when it was made aware of the error, but the
fund refused to cash the check or to award the plaintiff his pension
because of its undisclosed policy that an application for benefits barred
acceptance of retroactive contributions on the claimants behalf.77
The pension fund claimed that the plaintiff should have inquired
in writing whether any contribution delinquency existed before he sub-
66.
67.
68.
69.
70.
71.
72.
73.
74.
75.
76.
77.
RESTATEMENT (SECOND) OF TRUSTS 173 cmt. d (1959).

Id.
239 A.2d 665 (N.J. Super. Ct. App. Div. 1968).
Id. at 669.
Id. at 671.
Id.
297 N.Y.S.2d 865, 866 (N.Y. App. Div. 1969).
Id. at 866.
Id.
Id.
Id.
Id.
402
mitted his claim for benefits.78 Citing Branch v. White, the court held
that the pension fund had an affirmative duty to notify prospective
[pensioners of this] procedure and that the failure to do so estopped
the fund from denying the plaintiffs benefits.79
2. ERISAs Statutory Disclosure Obligations
ERISA imposes a number of specific disclosure obligations. Part 1
of Title I of ERISA is devoted to reporting and disclosure.80 The most
important obligation is to distribute to participants and beneficiaries a
summary plan description (SPD) that requires certain information to
be accurate and comprehensive and written in a manner understandable to the average plan participant.81 The purpose of the SPD is to
inform participants and beneficiaries of their rights and obligations
under the plan. If there are any material modifications to the terms of
the plan or any change in the information required to be furnished in
the SPD, a summary of material modifications must be furnished to
participants and beneficiaries.82
Other ERISA disclosure obligations include providing an annual
summary of the plans financial condition,83 participant benefit statements,84 notice of a failure to make required minimum required plan
contributions,85 and various other items.86 In addition to information
that is required to be disclosed, participants and beneficiaries may also
78. 297 N.Y.S.2d at 866.

79. Id. at 867.
80. ERISA 101-111; 29 U.S.C. 1021-1031 (1999). Disclosure generally refers
to information that must be furnished to plan participants, while reporting refers to
information that must be provided to federal regulatory agencies.
81. ERISA 102(a); 29 U.S.C. 1022(a) (1999). See also 29 C.F.R. 2520.102-2
(1999). The SPD must be provided within ninety days after a person becomes a participant (or, as to a beneficiary, ninety days after she first receives benefits), or, if later, within
120 days after the plan becomes subject to ERISAs SPD requirement. ERISA 104(b)(1),
29 U.S.C. 1024(b)(1) (1999).
82. ERISA 104(b), 29 U.S.C. 1024(b). Alternatively, a plan administrator may
furnish a new SPD that incorporates the modifications. If so, no separate summary of
material modifications is required. 29 C.F.R. 2520.104b-3(b) (1999).
83. ERISA 103(a), 29 U.S.C. 1023(a) (1999).
84. Participants who have separated from service with the employer must be provided a statement of their benefits under any plan subject to ERISAs vesting requirements (i.e., pension benefit plans subject to Title I). ERISA 105(c), 29 U.S.C. 1025(c)
(1999). A plan administrator must provide such a statement to other participants upon
request. ERISA 105(a), 29 U.S.C. 1025(a).
85. ERISA 101(d)(1), 29 U.S.C. 1021(d)(1).
86. See, e.g., ERISA 205(c)(3)(A), 29 U.S.C. 1055(c)(3)(A) (1999) (terms and conditions of qualified joint and survivor annuity form of benefit); ERISA 206(d)(3)(G)(i),
29 U.S.C. 1056(d)(3)(G)(i) (1999) (requirement to notify participant and alternate payee
of determination whether a domestic relations order is qualified); ERISA 606(a)(1),
29 U.S.C. 1166(a)(1) (1999) (requirement to provide notice of COBRA health coverage
continuation rights following loss of coverage); ERISA 701(e), 29 U.S.C. 1181(e) (1999)
(certificate of health coverage under the Health Insurance Portability and Accountability
Act of 1996).
403
obtain other plan-related material upon request. In particular, a plan

administrator must respond to a written request of any participant or
beneficiary seeking a copy of the latest updated summary plan description and the latest annual report and the bargaining agreement,
trust agreement, contract, or other instruments under which the plan
is established or operated.87 ERISA provides statutory penalties for
failure to satisfy many of these requirements.88
In addition, with respect to certain pension plans, section 204(h)
of ERISA requires at least fifteen days written notice of any plan
amendment that significantly reduces the rate of future benefit accruals under the plan.89 The penalty for failing to provide the notice to a
participant or beneficiary is severethe amendment is not effective
with respect to that person.90
3. Court-Developed Disclosure Obligations for Early Retirement
Windows
In addition to ERISAs express disclosure obligations, courts have
struggled with the circumstances and the extent to which a fiduciary
has a duty to disclose in accordance with the general fiduciary duties
set forth in section 404(a) of ERISA.91 Some courts have recognized a
fiduciary duty not to mislead plan participants about changes to an
employee benefit plan and to answer questions about future benefit
options forthrightly.92 Other courts have further broadened this duty
by imposing an affirmative fiduciary obligation to provide complete and
accurate information regarding current or proposed changes to the
plan, even if the participant does not specifically inquire with regard
to such matters.
Many of these cases have involved adoption of early retirement
windows. Several circuits have applied a serious consideration standard to determine a fiduciarys duty to answer questions about early
retirement windows, the first being Fischer v. Philadelphia Electric Co.
87. ERISA 104(b)(4), 29 U.S.C. 1024(b)(4). In the past few years, several courts
have interpreted the meaning of instruments under which the plan is established or
operated. See, e.g., Bd. of Trs. of the CWA/ITU Negotiated Pension Plan v. Weinstein,
107 F.3d 139 (2d Cir. 1997) (no requirement to provide copy of plans actuarial report);
Hughes Salaried Retirees Action Comm. v. Admr of Hughes Non-Bargaining Ret. Plan,
72 F.3d 686, 691 (9th Cir. 1995) (en banc) (participants not entitled to list of other retired
participants names and addresses); Bartling v. Fruehauf Corp., 29 F.3d 1062, 1070 (6th
Cir. 1994) (disclosure of plans actuarial report is required).
88. See, e.g., ERISA 502(c)(1), 29 U.S.C. 1132(c)(1) (1999) (fine of up to $100
(adjusted for inflation) per day for failure to timely provide documents required to be
disclosed under ERISA section 104(b)(4)).
89. ERISA 204(h), 29 U.S.C. 1054(h) (1999). The regulations interpreting this
requirement appear at 26 C.F.R. 1.411(d)-6 (1999).
90. 26 C.F.R. 1.411(d)-6, Q&A-13. See also DiCioccio v. Duquesne Light Co., 911
F. Supp. 880, 899 (W.D. Pa. 1995).
91. ERISA 404(a), 29 U.S.C. 1104(a) (1999).
92. See infra notes 91-114 and accompanying text.
404
(Fischer I).93 In Fischer I, the employer seriously considered offering an

early retirement incentive program but did not inform certain employees, those contemplating retirement and inquiring whether an early
retirement incentive benefit would be provided.94 The employer ultimately announced an early retirement program after the plaintiffs
elected to retire, and the plaintiffs alleged that the employer had
breached its fiduciary duties by misrepresenting that it was not considering an early retirement program.95
A duty to disclose in this context raises a difficult conflict between
employers and employees. On the one hand, employers constantly consider changes in their benefit structures. In addition to imposing a substantial burden on employers, a duty to disclose all such considerations
could seriously mislead employees.96 For example, management may
deliberate whether a workforce reduction is required and discuss the
adoption of an early retirement incentive program to bring about such
a reduction. However, management may ultimately decide not to pursue such a strategy. If employers were required to disclose such deliberations, employees might delay retirement, turn down attractive job
offers, or take other steps in anticipation of early retirement incentives
that never materialize.
The Third Circuit attempted to resolve this conflict by holding that
the duty to disclose information in response to employee inquiries
arises when the early retirement incentive program has received serious consideration.97 The touchstone of the decision is that when a
93. 994 F.2d 130 (3d Cir. 1993). See also Hockett v. Sun Co., 109 F.3d 1515 (10th
Cir. 1997); Muse v. Intl Bus. Machs. Corp., 103 F.3d 490 (6th Cir. 1996) (no duty to disclose
because serious consideration stage not reached); Kurz v. Pa. Elec. Co., 96 F.3d 1544
(3d Cir. 1996). But see Sprague v. Gen. Motors Corp., 133 F.3d 388 (6th Cir. 1998) (no
duty to disclose possibility of future changes in health care benefits); Ballone v. Eastman
Kodak Co., 109 F.3d 117 (2d Cir. 1997) (serious consideration is only one element to be
used in determining whether disclosure required; materiality of misrepresentation determines whether fiduciary breached disclosure duties); Pocchia v. NYNEX Corp., 81 F.3d
275 (2d Cir. 1996) (no duty to disclose in absence of participant inquiry; duty limited to
not making affirmative misrepresentations or omissions); Payonk v. HMW Indus., Inc.,
883 F.2d 221 (3d Cir. 1989) (no duty to notify plan participants of preliminary plan termination discussion prior to participants decision to transfer assets to other pension fund
when employer complied with ERISAs disclosure rules; effect of Fischer I on case is
unclear); Stanton v. Gulf Oil Corp., 792 F.2d 432 (4th Cir. 1986) (no duty to disclose until
terms at issue are actually incorporated into plan).
94. 994 F.2d at 132.
95. Id.
96. See Hockett, 109 F.3d at 1523 ([M]ost of such information actually would be
useless, if not misleading, to employees, considering that many corporate ideas and strategies never reach maturity, or else metamorphose so dramatically along the way, that
early disclosure would be of little value.).
97. In 1996, the Third Circuit addressed what actually constitutes serious consideration. In Fischer v. Pa. Elec. Co., 96 F.3d 1533 (3d Cir. 1996), cert. denied, 520 U.S.
1116 (1997) (Fischer II), the court focused on the materiality of the misrepresentations
and whether the misrepresentations were substantially likely to mislead an employee.
405
plan administrator speaks, it must speak truthfully.98 The court noted

that, although an employer is not under an obligation to offer precise
predictions about possible retirement plan changes, it may not misrepresent future plan changes to participants.99 Other circuits have
followed the same basic approach.100
A Ninth Circuit panel recently attempted to expand the duty to
disclose benefit improvements under serious consideration by holding
that the employer must disclose the possible change not only to employees who actively inquire about the potential for enhanced benefits,
but also to any employee who might be materially affected by the
change.101 However, the Ninth Circuit reheard the case en banc, and
discarded the panels holding in favor of the rule adopted by most of
the other circuit courts of appeal. Bins v. Exxon Co. U.S.A. involved a
lump-sum early retirement incentive benefit under a severance plan.102
Announcement of the benefit came as an unpleasant surprise to the
plaintiff, who had retired two weeks earlier after receiving negative
responses to several inquiries about the possibility of enhanced benefits.103 He filed suit arguing that once benefit improvements are under
serious consideration, a fiduciary must disclose the possible improvements to participants, regardless of whether the employee inquires
about such improvements.104 However, the district court found that the
plaintiffs inquiries were made before serious consideration of the
The court found that serious consideration occurs when (1) a specific proposal (2) is being
discussed for purposes of implementation (3) by senior management with the authority
to implement the change. Id. at 1539. The first element refers to a specific proposal that
is sufficiently concrete to support consideration by senior management for the purpose
of implementation. Id. at 1540. The second element is intended to protect managements
ability to take a role in the early phases of a project without necessarily triggering a
disclosure duty. Id. The third element ensures that the disclosure determination focuses
on the proper individual within the corporate structure, recognizing that middle management and consultants will likely discuss implementation before something is seriously considered. Id.
Other courts have applied the standard elucidated in Fischer II for purposes of determining when serious consideration occurs. See, e.g., McAuley v. Intl Bus. Machs.
Corp., 165 F.3d 1038, 1043 (6th Cir. 1999); Hockett v. Sun Co., 109 F.3d 1515, 1523 (10th
Cir. 1997).
98. 994 F.2d at 135. See also Varity Corp. v. Howe, 516 U.S. 489 (1996) (duty not
to affirmatively mislead participants); In re Unisys Corp., 57 F.3d 1255 (3d Cir. 1995),
cert. denied sub nom. Unisys Corp. v. Pickering, 517 U.S. 1103 (1996); Maez v. Mountain
States Tel. & Tel., Inc., 54 F.3d 1488 (10th Cir. 1995); Mullins v. Pfizer, Inc., 23 F.3d 663
(2d Cir. 1994); Berlin v. Mich. Bell Tel. Co., 858 F.2d 1154 (6th Cir. 1988).
99. 994 F.2d at 135.
100. See, e.g., Mullins, 23 F.3d 663; Drennan v. Gen. Motors Corp., 977 F.2d 246 (6th
Cir. 1992). But see Pocchia, 81 F.3d 275 (no duty to disclose changes until actually
adopted).
101. 189 F.3d at 939.
102. 189 F.3d 929 (9th Cir. 1999), modified by 220 F.3d 1042 (9th Cir. 2000).
103. Id. at 931.
104. Id. at 933.
406
benefit improvement and that the employer had no duty thereafter to

update the responses.105
The Ninth Circuit panel reversed, holding that once an employerfiduciary seriously considers a proposal to implement a change in
ERISA benefits, it has an affirmative duty to disclose information about
the proposal to all plan participants and beneficiaries to whom the employer knows, or has reason to know, that the information is material.106 While acknowledging the adverse financial effect of requiring
blanket disclosure to all employees near retirement, the court saw
no principled reason to require the employer to respond to questions
asked by well-informed, favorably-situated, or lucky employees, but to
permit the employer to remain silent as to others.107 The court went
on to apply the Fischer II standard to determine what constitutes serious consideration.108
The en banc Ninth Circuit reversed the panel on the affirmative
disclosure issue, declining however,
to impose on employers a duty to follow up an employees inquiry in
the absence of an assurance from the employer that it will provide an
update. . . . [A]n employers arrival at the serious consideration stage
does not independently give rise to a fiduciary obligation to volunteer
information in the absence of an inquiry.109
In Wayne v. Pacific Bell,110 the same Ninth Circuit panel that decided Bins addressed another aspect of the serious consideration
standard. In Pacific Bell, the plaintiffs elected enhanced benefits in a
window period shortly before expiration of a collective bargaining
agreement.111 At the same time, in negotiations over a successor agreement, the employer proposed more generous benefit enhancements.112
The court held that this proposal constituted serious consideration,
triggering the employers disclosure obligation. The court followed a
1992 Sixth Circuit decision on this point,113 while applying its Bins
rationale to determine the extent of the disclosure obligation.114
105. 220 F.3d at 1047.
106. 189 F.3d at 939.
107. Id. at 939.
108. Id. at 940.
109. 220 F.3d at 1054. However, the Ninth Circuit placed an additional gloss on the
serious consideration standard, focusing on the American Law Institutes Principles of
Corporate Governance. Id. at 1051-52.
110. 189 F.3d 982 (9th Cir. 1999).
111. Id. at 985-86.
112. Id.
113. Id. at 987-88, (citing Drennan, 977 F.2d at 251-52).
114. The Pacific Bell court stated that no interference with the collective bargaining process would result (so long as the employer does not use its disclosure obligation
to undermine the unions bargaining position), and it saw no conflict between the
ERISA disclosure obligation and the employers labor law obligation not to bargain with
individual employees. 189 F.3d at 988. This portion of the courts holding is questionable at best, because an employer has no right to implement a benefit improvement
407
4. Analysis
Courts reliance on the common law of trusts in developing a fiduciary duty to disclose serious consideration of benefit changes is improper. Most importantly, this approach is inconsistent with the statutory text of ERISA. It also has the effect of turning non-fiduciary
settlor functions into fiduciary functions and is inconsistent with
ERISAs written plan document requirement. In addition, as a public
policy matter, increased disclosure obligations may have the effect of
deterring employers from offering early retirement windows, which
may result in more layoffs.
A.
SPECIFIC DISCLOSURE REQUIREMENTS
As described above, ERISA includes a comprehensive reporting

and disclosure scheme.115 In particular, with respect to pension plan
amendments, ERISA specifically requires advance notice only of
amendments that significantly reduce the rate of future benefit accruals.116 Changes made by other plan amendments are required to be
disclosed in a summary of material of modifications, or, alternatively,
a new summary plan description within 210 days of the plan year in
which the amendment is effective.117
In enacting specific disclosure requirements, Congress tried to
strike a balance between the interests of employees in receiving relevant plan information and employers and plan fiduciaries in avoiding
unnecessarily burdensome obligations. Congress specifically considered when advance notice of plan amendments is required and determined that only reductions in the rate of future benefit accruals must
be disclosed prior to the effective date of the amendment. Perhaps Congress would have required advance disclosure of early retirement window programs if it had specifically considered the issue. Nevertheless,
it either did not consider the issue or determined that advance notice
was not required. Because ERISA includes very specific disclosure requirements, there is no place under the statute for additional courtrequired disclosure events.
This is not to say, of course, that the employer or another plan
fiduciary may respond untruthfully to a specific question regarding fuwith respect to union employees unless agreed to in the collective bargaining process.
There is no guarantee that the union will agree to enhanced early retirement benefits
in fact, the union may fight against the proposal because it wishes to avoid further
workforce reductions. Thus, employers who follow the holding in Pacific Bell may disclose benefit improvements that are never implemented. It is quite likely that, in some
cases, a prior early retirement window will close before the bargaining process ends
and will not be replaced, but some employees nevertheless will have delayed retirement
in reliance on the employers disclosure.
115. See supra notes 68-79 and accompanying text.
116. ERISA 204(h), 29 U.S.C. 1054(h) (1999).
117. 29 U.S.C. 1024(b)(1) (1999); 29 C.F.R. 2520.104b-2(b)(1), 2520.104b-3(a)
(1999).
408
ture benefit enhancements. The Supreme Court correctly held in Varity

Corp. v. Howe that when a fiduciary speaks, it must speak truthfully.118
Although ERISAs disclosure rules should be deemed to occupy the
field with respect to the affirmative duty to disclose information to
participants and beneficiaries, they do not permit a fiduciary to provide
inaccurate information in response to a specific request.119
B.
SPONSOR VS. FIDUCIARY
Under ERISA, plan assets must be held for the exclusive benefit
of plan participants and beneficiaries.120 However, the exclusive benefit
rule has been characterized by Dean Fischel and Professor Langbein
as ERISAs fundamental contradiction.121 For example, the employer
can be characterized as a beneficiary of the planamong other benefits to employers, contributions receive tax-favored treatment and
ERISA plans are an important tool for attracting and retaining employees.122 The Supreme Court has addressed this issue as follows:
[A]mong the incidental and thus legitimate benefits that a plan sponsor may receive from the operation of a pension plan are attracting
and retaining employees, paying deferred compensation, settling or
avoiding strikes, providing increased compensation without increas118. In Varity, an employer, which was also the administrator of its employees welfare benefit plan, combined several of the unprofitable divisions of a subsidiary corporation into a new corporate entity and persuaded many of the employees of those divisions
to transfer their benefits to the plan offered by the new entity, assuring the employees
that their benefits would remain secure. 516 U.S. at 492-94. The employer, however, was
aware that the new entity was insolvent from its inception. Id. at 494. At the end of its
second year, the new entity went into receivership, resulting in the employees loss of
their welfare benefits. Id. Although the fundamental holding of Varity is correct, it is less
clear that the employer was acting in a fiduciary, rather than a settlor, capacity when it
made misrepresentations to employees. However, holding in favor of Varity would have
been a clear injustice to the employees. Varity is a perfect example of the truism that
bad facts make bad law.
119. However, the disclosure rules should be deemed to cover the timing of disclosures; thus, an employer should not be required to disclose any change before the ERISA
disclosure period ends for summaries of material modifications and summary plan descriptions, which generally is 210 days after the close of the plan year in which the plan
amendment at issue becomes effective. ERISA 104(b)(1), 29 U.S.C. 1024(b)(1); 29
C.F.R. 2520.104b-2(b)(1), 2520.104b-3(a). Until that time, an employer/fiduciary should
be permitted to provide incomplete, although not inaccurate, information. For example,
in response to an inquiry regarding future benefit enhancements, a response along the
lines of although no plan amendment has been formally adopted, it is always possible
that the company may make future changes should be deemed to satisfy a fiduciarys
disclosure obligations.
120. ERISA 404(a)(1)(A)(i), 29 U.S.C. 1104(a)(1)(A)(i) (1999).
121. Daniel Fischel & John H. Langbein, ERISAs Fundamental Contradiction: The
Exclusive Benefit Rule, 55 U. CHI. L. REV. 1105 (1988).
122. For example, ERISAs vesting rules, ERISA 203, 29 U.S.C. 1053 (1999),
provide a strong incentive for employees to remain with the employer until their benefits
fully vest. In addition, under many defined benefit pension plans, a large portion of the
benefits accrue in the employees final few years before retirement, and benefits taken
before attaining normal retirement age (typically age sixty-five) are often significantly
reduced on an actuarial basis.
409
ing wages, increasing employee turnover, and reducing the likelihood

of lawsuits by encouraging employees who would otherwise have been
laid off to depart voluntarily.123
Thus, with respect to ERISA-covered plans, an employer wears

two hatsit serves both as settlor and plan fiduciary. For example,
plan design is considered a settlor, rather than a fiduciary, function,
and as such, there is no fiduciary responsibility attached to the adoption
or amendment of a plan.124 The serious consideration cases obliterate
this distinction by, in essence, imposing a fiduciary duty to disclose
settlor functions. As described below, requiring disclosure of early retirement windows at the serious consideration stage may effectively
preclude employers from adopting successively more generous retirement incentives in downsizing situations, even though employers are
normally free from fiduciary restrictions in adopting plan amendments.125 Thus, the cases requiring disclosure at the serious consideration stage are inconsistent with the settlor-fiduciary distinction recognized by the Supreme Court.
C.
WRITTEN PLAN REQUIREMENT
Every ERISA-covered plan must be maintained pursuant to a

written instrument.126 A written plan is required so that every employee may, on examining the plan documents, determine exactly what
his rights and obligations are under the plan.127 A plan generally may
not be orally modified; only written modifications are enforceable
against the plan.128 However, some courts have adopted the principles
of equitable estoppel under federal common law to require the payment
of benefits not provided for under the terms of the plan.129 In addition,
some courts have held that an unwritten plan may be enforceable under
certain circumstances.130
123. Lockheed Corp. v. Spink, 517 U.S. 882, 893-94 (1996).
124. Curtiss-Wright Corp. v. Schoonejongen, 514 U.S. 73, 78 (1995) (even though an
employer may act as a fiduciary when it is administering a welfare benefit plan, it is not
engaged in plan administration and is not acting in its fiduciary capacity when it decides
to create, amend, or terminate such a plan); Lockheed Corp., 517 U.S. at 894 (same rule
for pension plans). See also Akers v. Palmer, 71 F.3d 226 (6th Cir. 1995), cert. denied, 518
U.S. 1004 (1996).
125. See infra notes 126-133 and accompanying text.
126. ERISA 402, 29 U.S.C. 1102 (1999).
127. H.R. NO. 93-1280, at 297 (1974), reprinted in 1974 U.S.C.C.A.N. 5038, 5077-78.
128. See, e.g., Degan v. Ford Motor Co., 869 F.2d 889 (5th Cir. 1989) (employers
assurance of early retirement benefits to pension plan participant not enforceable);
Cleary v. Graphic Communications Intl Union Supplemental Ret. & Disability Fund, 841
F.2d 444 (1st Cir. 1988) (trustees not estopped from denying supplemental benefits, even
though plan administrator made informal representations to employees).
129. See, e.g., Smith v. Hartford Ins. Group, 6 F.3d 131 (3d Cir. 1993); Dockray v.
Phelps Dodge Corp., 801 F.2d 1149 (9th Cir. 1986); Coonce v. Aetna Life Ins. Co., 777 F.
Supp. 759 (W.D. Mo. 1991).
130. See, e.g., James v. Natl Business Sys., Inc., 924 F.2d 718 (7th Cir. 1991); Moeller
v. Bertrang, 801 F. Supp. 291 (D.S.D. 1992).
410
A requirement that employers disclose plan amendments that are

under serious consideration but have not been adopted is inconsistent
with ERISAs written plan requirement. First, under ERISAs statutory
disclosure requirementsfor example, the summary of material modifications and the required notice under section 204(h) of ERISAthe
timing of the required disclosure runs off the actual adoption of a plan
amendment. A plan amendment is not effective until it is actually
adopted in accordance with the plans amendment procedures.131
Therefore, a disclosure requirement with respect to proposed amendments that have been seriously considered, but have not been adopted
in accordance with plan procedures, is inconsistent with ERISAs written plan requirement.
Second, the only reasonable remedy for failure to disclose is eligibility for the enhanced early retirement benefits for employees who
actually retired before the effective date of the amendment. In effect,
the court forces the plan to pay an additional benefit not provided under
the plan terms by treating the plan as if it had been amended. This
clearly contravenes both the literal language and the purpose of the
written plan requirement.132
Third, if an employer discloses that it is seriously considering a
plan amendment to increase early retirement benefits at some future
date, it effectively has committed itself to adopting that amendment.
For example, an employer may determine that the hoped-for number
of employees is not retiring pursuant to an early retirement incentive
program. As a result, it may decide to offer enhanced incentives, effective when the current window closes. Because early retirement windows generally are open for one year or less, most, if not all, employees
who otherwise would have retired during the initial window period may
delay retirement until the new window is effective.133 If the employer
decides not to adopt the proposed enhancement after disclosing that
the enhancement is under serious consideration, severe employee relations problems will result. More importantly, the employer may be
sued by the employees who delayed retirement, and, as a result, are no
longer eligible for early retirement incentives. The theory of liability
would be that the employer breached its fiduciary duties by misleading
131. See, e.g., Elmore v. Cone Mills Corp., 23 F.3d 855 (4th Cir. 1994) (en banc)
(CEOs written communications to employees were not binding since they did not comply
with plans amendment procedures); Biggers v. Wittek Indus., Inc., 4 F.3d 291 (4th Cir.
1993) (employers failure to sign severance pay plan amendment reducing benefits prevented lower schedule of benefits from applying).
132. It is worth noting that the courts have not yet decided what the remedy should
be in cases where early retirement windows have not been timely disclosed.
133. Early retirement incentives typically are offered under tax-qualified retirement
plans, which are subject to detailed nondiscrimination requirements. Early retirement
windows that last for more than one year significantly complicate nondiscrimination
testing. See 26 C.F.R. 1.401(a)(4)-4(f)(4) (1999).
411
employees that a more generous incentive package would be forthcoming. Thus, a serious consideration disclosure requirement places the
employer and employees in exactly the position the written plan requirement was intended to eliminatethe benefits under the plan cannot be determined solely by reference to the written plan document.
D.
ERISAS GOAL OF ENCOURAGING VOLUNTARY PLANS
The primary goal of ERISA is clearly to protect the interests of

plan participants and beneficiaries. However, this was not Congresss
only goal. Retirement income for Americans comes from three primary
sources: Social Security, personal savings, and employer-sponsored retirement plans. Thus, another goal of ERISA is to encourage employers
to voluntarily adopt generous retirement plans.
Defined benefit plans are an especially important part of the employer retirement plan prong. Unlike defined contribution plans, defined benefit plans typically provide participants a stable source of retirement income for their lives.134 Unfortunately, private sector defined
benefit plans have experienced a marked decline, from 175,143 in 1983
to only 63,657 by 1996.135 This decline can be attributed to a number
of factors, including the desire of employees to switch to defined contribution plans so that they can invest their retirement savings in the
stock market. However, a large factor in any analysis of the decline of
defined benefit plans is the ever-increasing regulatory burdens imposed
on such plans, especially under the Internal Revenue Code.136
Tax-qualified defined benefit plans are the only practical way to
offer increased early retirement benefits in the form of annuity payments to employees who voluntarily accept early retirement. This is
because the limits on tax-qualified defined contribution plans make the
use of such plans impractical,137 and ERISA effectively prohibits the
134. Lump sum distribution options are becoming more common under defined
benefit plans, especially with the trend toward cash balance plans. If an employee
chooses a lump sum, the benefit under the plan does not provide retirement income for
life unless the lump sum is invested in an annuity contract or other vehicle providing for
periodic payments over the employees life. However, a large number of plans, especially
multiemployer (i.e., plans jointly sponsored by a labor union and a group of employers)
and governmental defined benefit plans, continue to restrict participants to annuity forms
of distribution.
135. Pension and Welfare Benefits Administration, Private Pension Plan Bulletin:
Abstract of 1996 Form 5500 Annual Reports, at Table E1 (1999), available at http://
www.dol.gov/dol/pwba/public/programs/opr/bullet1996/table-e1.htm.
136. See, e.g., 26 U.S.C. 401(a)(17) (1994 & Supp. IV 1998) (limit on amount of
compensation that may be taken into account in determining benefits), 410(b) (1994)
(plan coverage requirements), 415(b) (1994 & Supp. IV 1998) (limits on annual retirement
benefits). See also 26 C.F.R. 1.401(a)(4)-1 (1999) (nondiscrimination testing under 26
U.S.C. 401(a)(4)).
137. 26 U.S.C. 415(c) (annual contributions to a tax-qualified defined contribution
plan are limited to the lesser of $30,000 or 25% of compensation). Because the employee
will have no compensation income from the employer in years following the year of retirement, the limit on annual contributions in those years is $0.
412
use of non-tax qualified plans.138 It must be kept in mind that an employer has an option to lay off employees; early retirement windows are
a way to provide increased retirement benefits to employees who may
otherwise be terminated involuntarily.139 A mistake that advocates of
employees interests often make is to assume that additional courtdeveloped ERISA rights will benefit employees in the aggregate. However, with respect to early retirement windows, it is incorrect to assume
that the only two possible alternatives are (1) no disclosure requirement, in which case some employees do not receive the increased benefits (because they retire too early), and (2) a full disclosure requirement,
in which case all employees do receive the increased benefits. This line
of reasoning fails to take into account the possibility that the disclosure
requirement will deter employers from offering early retirement windows in the first instance and instead will reduce their workforces by
layoffs.
It is unclear whether the additional court-imposed disclosure requirements will deter employers from adopting early retirement windows. However, as discussed above, a requirement to disclose benefits
that are under serious consideration places employers in a difficult
position, under which they may be sued regardless of their decision.140
The precipitous decline in defined benefit plans in recent years counsels
against imposing additional obligations, except when strong policy reasons require such obligations. Given the fact that early retirement windows likely prevent layoffs in many cases, courts should be reluctant
to impose a blanket disclosure rule.
B. Contribution and Indemnity
ERISA allows plaintiffs to choose their defendants in cases involving multiple breaching fiduciaries. Given ERISAs joint and several liability for fiduciary breaches, this can result in one fiduciary assuming
the entire financial liability for a breach for which it was only partly
responsible.141 This has led some courts to apply, in the name of fairness, the rule from the common law of trustsa breaching fiduciary
may recover from another fiduciary damages that were attributable to
the second fiduciarys breach.
138. For example, ERISAs funding rules would require the employer to pre-fund
benefits under such a plan. ERISA 301-308, 29 U.S.C. 1081-1086 (1999). However,
such pre-funding of a non-tax qualified plan would subject the employees to current tax
on the full value of their benefits, even though they would not receive such benefits until
later years. See 26 U.S.C. 402(b)(1) (1999).
139. Of course, if the lay-offs are age-based, the employer may be sued under the
Age Discrimination in Employment Act as well as under state antidiscrimination laws.
140. See supra note 133 and accompanying text.
141. See, e.g., In re Masters Mates & Pilots Pension Plan & IRAP Litig., 957 F.2d
1020 (2d Cir. 1992); Lowen v. Tower Asset Mgmt., Inc., 829 F.2d 1209 (2d Cir. 1987).
413
1. The Common Law

Under the common law of trusts, co-trustees are jointly and severally liable for breaches of fiduciary duty unless they (i) were not involved with, (ii) could not have prevented by the exercise of reasonable
care, and (iii) took proper steps to compel the co-trustee to redress the
breach.142 When two trustees are jointly and severally liable to the
beneficiary for a breach of fiduciary duty and one of the trustees pays
more than her proportionate share of the liability, she is entitled to
contribution.143 There are three exceptions to the above general rule.
First, if one of the trustees is substantially more at fault than the other,
she is not entitled to contribution, but, rather, the trustee less at fault
is entitled to indemnity.144 Second, if one of the trustees receives a benefit from the breach, the other trustee is entitled to indemnity to the
extent of the benefit, and, with respect to any further liability, if neither
is more at fault than the other, each is entitled to contribution.145 Third,
a trustee who commits a breach of her fiduciary duties in bad faith is
not entitled to contribution or indemnity from her co-trustee.146
2. Structure of ERISA
ERISA imposes personal liability on plan fiduciaries who breach
their duties.147 Such fiduciaries are required to make good to the plan
any losses resulting from the breach and to restore to the plan any profits
made through use of assets of the plan.148 In addition, a breaching fiduciary shall be subject to such other equitable or remedial relief as the
court may deem appropriate, including removal of such fiduciary.149
Section 405 of ERISA provides that co-fiduciaries are liable for
breaches or violations committed by other fiduciaries under three circumstances.150 First, such liability will apply if the co-fiduciary knowingly participates in or undertakes to conceal an act or omission by
another fiduciary knowing such act or omission is a breach.151 Second,
it will apply if by her failure to comply with the general fiduciary duties
under section 404(a) of ERISA in the administration of her specific responsibilities she has enabled the other fiduciary to commit a breach.152
Third, co-fiduciary liability will apply if she has knowledge of the
142.
143.
144.
145.
146.
147.
148.
149.
150.
151.
152.
RESTATEMENT (SECOND) OF TRUSTS 224 (1959).

Id. at 258(1)(a).
Id.
Id. at 258(1)(b).
Id. at 258(2).
ERISA 409(a), 29 U.S.C. 1109(a) (1994).
Id.
Id.
ERISA 405(a), 29 U.S.C. 1105(a) (1999).
ERISA 405(a)(1), 29 U.S.C. 1105(a)(1).
ERISA 405(a)(2), 29 U.S.C. 1105(a)(2).
414
breach, unless [s]he makes reasonable efforts under the circumstances

to remedy the breach.153 Liability for a violation of section 405 is joint
and several.154
3. Court Decisions
The seminal case holding that contribution is available from another breaching fiduciary is Chemung Canal Trust Co. v. Sovran
Bank/Maryland.155 In this case, Fairway Spring Company appointed
Glen Dawson as trustee of its pension plan, and Dawson made imprudent investments and engaged in transactions prohibited by section
406 of ERISA.156 Fairway later appointed Sovran Bank/Maryland as
successor trustee to Dawson.157 Following Sovrans appointment as
trustee, some of Dawsons imprudent investments performed adequately, but payments owed to the plan under some of these investments eventually stopped.158 In 1989, Fairway appointed Chemung Canal Trust Company to replace Sovran as trustee.159
Chemung brought an action against Sovran for breach of its fiduciary duties to the plan and sought to recover the losses caused by
Sovrans lack of prudence in continuing to have the plan hold some of
the investments previously made by Dawson.160 Chemung also claimed
that two plan investments chosen directly by Sovran were imprudent.
Sovran filed a third-party complaint against Fairway alleging that
Fairway had failed to monitor Dawson, correct Dawsons fiduciary
breaches, or disclose those breaches to Sovran.161 Sovran also counterclaimed against Chemung, its successor trustee, alleging Chemung had
not adequately evaluated and pursued claims that the plan could have
maintained as a result of the improper investments and that the losses
of the plan would have been reduced if Chemung had taken those measures. Sovran requested relief directly on behalf of the plan, as well as
contribution or indemnity should it be found liable to the plan.162
Fairway claimed that Sovrans third party complaint was impermissible, because the standing to sue rules in section 502 do not provide
for contribution or indemnity between breaching fiduciaries.163 The district court granted Fairways motions and dismissed the counterclaim
153. ERISA 405(a)(3), 29 U.S.C. 1105(a)(3).
154. See, e.g., In re Masters, 957 F.2d at 1027-28.
155. 939 F.2d 12 (2d Cir. 1991). Other courts also holding that a right of contribution
or indemnity exists include: Free v. Briody, 732 F.2d 1331 (7th Cir. 1984); Duncan v.
Santaniello, 900 F. Supp. 547 (D. Mass. 1995); Cohen v. Baker, 845 F. Supp. 289 (E.D. Pa.
1994); and Freund v. Marshall & Ilsley Bank, 485 F. Supp. 629 (W.D. Wis. 1979).
156. 939 F.2d at 13.
157. Id.
158. Id.
159. Id.
160. Id.
161. Id.
162. 939 F.2d at 13.
163. Id. at 14.
415
and third-party complaint holding that there was no cause of action for
contribution or indemnity under ERISA.164
The Second Circuit began its discussion by noting that ERISA does
not deal expressly with contribution. Therefore, the question is
whether such a right can be recognized either by implication from the
statute, or as a part of federal common law.165 The court noted that
[a] plaintiff who brings an action does not care whether the defendant
has a right of contribution against others, as long as the plaintiff obtains a full recovery.166 Rather, contribution simply involves allocating
liability among co-defendants and other third parties. The right of
action for contribution is no more than a procedural device for equitably distributing responsibility for plaintiffs losses proportionally
among those responsible for the losses, and without regard to which
particular persons plaintiff chose to sue in the first instance.167
The court then noted that the Supreme Court has made it clear
that courts are to develop a federal common law of ERISA and held
that the principles of traditional trust law are to guide the development
of federal common law.168 It then determined that the common law of
trusts indisputably provides for a right of contribution among defaulting fiduciaries.169 The court stated that it was not creating a right
from whole cloth.170 Rather, it simply follow[ed] the legislative directive to fashion, where [C]ongress has not spoken, a federal common law
for ERISA by incorporating the common law of trusts.171 The court
argued that Congresss silence on the issue of contribution among
breaching fiduciaries is likely because Congress simply did not focus
its attention beyond the welfare of plan participants and beneficiaries.
Thus, the court concluded that incorporating the doctrines of contribution and indemnity into the law of ERISA is appropriate.172
Other courts have held, in reliance upon the Supreme Courts reasoning in Massachusetts Mutual Life Insurance Co. v. Russell, that contribution and indemnity are not available under ERISA, because federal courts should not imply remedies that are not set forth in
ERISA.173 The Ninth Circuit was the first federal court of appeals to
164.
165.
166.
167.
168.
169.
Id. at 14.
Id. at 15.
Id.
Id. at 15-16.
939 F.2d at 16.
Id. (citing RESTATEMENT (SECOND) OF TRUSTS 258); GEORGE G. BOGERT &
GEORGE T. BOGERT, THE LAW OF TRUSTS AND TRUSTEES 701 (2d ed. 1982) (citing Perry
v. Knott, 4 Beav. 179 (1842) and Sherman v. Parish, 53 N.Y. 483 (1873)).
170. 939 F.2d at 16.
171. Id.
172. Id. at 18.
173. 473 U.S. 134 (1985). See Concha v. London, 62 F.3d 1493, 1500 n.3 (9th Cir.
1995); Kim v. Fujikawa, 871 F.2d 1427, 1432-33 (9th Cir. 1989); Daniels v. Natl Employee
Benefit Servs., Inc., 877 F. Supp. 1067, 1074 (N.D. Ohio 1995); Physicians Healthchoice,
416
rule that contribution and indemnity are not available under ERISA.
In Kim v. Fujikawa, a collectively bargained ERISA plan was managed
by a two-person committee, consisting of one employer and one employee representative.174 Kim, the employer representative, alleged
that the plan may have been paying money to union employees to support them while they were acting as union representatives during a
strike.175 If true, such allegation would involve a prohibited transaction under ERISA.176 The defendants filed a counterclaim against
Kim, as well as a third party complaint against the management
trustees of the plan, each seeking contribution on the ground that the
plaintiff and the third party defendants had participated in the prohibited transactions.177
Citing Massachusetts Mutual, the court held that section 409 of
ERISA, only establishes remedies for the benefit of the plan, and does
not provide for contribution among breaching fiduciaries.178 The court
noted that, in light of ERISAs interlocking, interrelated, and interdependent remedial scheme, which is in turn part of a comprehensive
and reticulated statute, it is clear that Congress did not intend to
authorize other remedies [under ERISA] that it simply forgot to incorporate expressly.179 Thus, the court dismissed Fujikawas contention
that Congress implicitly intended to allow a cause of action for contribution under ERISA, noting,
Indeed, implying a right of contribution is particularly inappropriate
where, as in this case, the party seeking contribution is a member
of the class [e.g., fiduciaries] whose activities Congress intended to
regulate for the protection and benefit of an entirely distinct class
[e.g., ERISA plans], and where there is no indication in the legislative history that Congress was concerned with softening the blow on
joint wrongdoers.180
4. Analysis
A right of contribution or indemnity is inconsistent with ERISAs
detailed liability rules, as well as Supreme Court precedent addressing
when a right of contribution may be implied under a federal statute.
In addition, contribution and indemnity may be an inefficient legal
Inc. v. Trustees of Automotive Employee Benefit Trust, 764 F. Supp. 1360, 1364-65 (D.
Minn. 1991); NARDA, Inc. v. R.I. Hosp. Trust Natl Bank, 744 F. Supp. 685, 698 (D. Md.
1990); McLaughlin v. Biasucci, 688 F. Supp. 965, 966 (S.D.N.Y. 1988).
174. 871 F.2d at 1429.
175. Id.
176. ERISA 406(a)(1)(D), 29 U.S.C. 1106(a)(1)(D).
177. 871 F.2d at 1429-30.
178. Id. at 1432 (citing Russell, 473 U.S. at 141-42); 29 U.S.C. 1109.
179. Kim, 871 F.2d at 1432 (quoting Russell, 473 U.S. at 146 (quoting Nachman Corp.
v. Pension Ben. Guaranty Corp., 446 U.S. 359, 361 (1980))).
180. Id. at 1433 (quoting Texas Indus., Inc. v. Radcliff Materials, Inc., 451 U.S. 630,
639 (1981)).
417
rule. Therefore, courts should not allow a right of contribution or indemnity to breaching fiduciaries.
A.
ERISAS DETAILED LIABILITY RULES
The fiduciary provisions of ERISA are quite detailed. The statute

sets forth specific rules regarding what constitute fiduciary duties,181
liability for breaches by co-fiduciaries,182 prohibited transactions that
are per se impermissible,183 limitations on the amount of employer
stock and real property that may be held by a plan,184 specific exemptions from the prohibited transaction rules,185 the liability of persons
who commit fiduciary breaches,186 a prohibition on exculpatory provisions purporting to relieve a fiduciary from liability for a breach,187 and
prohibitions on certain persons (e.g., certain convicted felons) from
serving in fiduciary positions.188 Given the broad sweep of these provisions, it is generally inappropriate to assume that Congress intended
for courts to develop additional rights and remedies, especially when
the interests of participants are unaffected by the proposed rights and
remedies.
In particular, section 405 of ERISA specifically addresses the potential liability of co-fiduciaries and provides for neither contribution
nor indemnity.189 A few references to the common law of trusts in
ERISAs legislative history should not be read to give federal courts
authority to allow a remedy not contemplated by Congress, and which
may even have been rejected, when the recovery of the plan is unaffected. If courts have the power to create remedies, there would have
been no need for Congress to lay out a detailed remedial scheme in
ERISA. The statute could have either provided no specific remedies, or
181. ERISA 404, 29 U.S.C. 1104 (1994 & Supp. 1998).

182. ERISA 405, 29 U.S.C. 1105.
183. ERISA 406, 29 U.S.C. 1106.
184. ERISA 407, 29 U.S.C. 1107 (1999).
185. ERISA 408, 29 U.S.C. 1108 (1999).
186. ERISA 409, 29 U.S.C. 1109 (1999).
187. ERISA 410, 29 U.S.C. 1110 (1999).
188. ERISA 411, 29 U.S.C. 1111 (1999).
189. 29 U.S.C. 1105(a). It should be noted that ERISA 409(a), 29 U.S.C. 1109(a),
provides that a breaching fiduciary is responsible for, inter alia, making good any losses
and restoring any profits made as a result of the breach, and shall be subject to such
other equitable relief as the court may deem appropriate, including removal of such fiduciary. The quoted sentence is most reasonably read to give a court the discretion to
fashion additional remedies for fiduciary breaches. For example, in Brock v. Robbins, 830
F.2d 640, 647 (7th Cir. 1987), the court noted that injunctive relief might be appropriate
when a trustee acted imprudently, but no losses resulted from the fiduciary breach. See
also Brink v. DaLesio, 667 F.2d 420, 429 (4th Cir. 1981) (prejudgment interest available
on amounts wrongly appropriated by fiduciaries); Russo v. Unger, 845 F. Supp. 124, 12627 (S.D. N.Y. 1994) (prejudgment interest on judgment for fiduciary breach). However,
ERISA section 409(a) cannot be reasonably read to give federal courts discretion to provide for liability against parties not named by the plaintiff in the original lawsuit.
418
it could have stated that any remedies previously available at common

law continue to be available under ERISA.190
B.
ERISAS PURPOSE
The availability of contribution and indemnity has no bearing on

ERISAs primary goal of protecting plan participants. Because fiduciary
liability is joint and several, plans can collect from any breaching fiduciary. Contribution and indemnity simply allocate this liability
among several responsible parties. Even assuming that Congress intended for courts to develop a broad federal common law of ERISA,
there is no reason to believe that such a power was intended to include
areas that do not relate to any of ERISAs stated purposes.
C.
SUPREME COURT NON-ERISA CASES
In Cort v. Ash, the Supreme Court set out a four-part test to be

used in deciding whether a remedy not specifically provided by a federal
statute should, nevertheless, be read into the statute.191 First, is the
party seeking the remedy a member of the class for whose special benefit the statute was enacted? Second, is there any indication of either
explicit or implicit legislative intent to create or deny such a remedy?
Third, would implying such a remedy be consistent with the underlying
purposes of the legislative scheme? Fourth, is the cause of action one
traditionally relegated to state law, in an area so basically the concern
of the States, so that it would be inappropriate to infer a cause of action
based solely on federal law?192
The application of these factors strongly counsels against implying
a right to contribution or indemnity under ERISA. First, the party seeking the remedy (a breaching fiduciary) is not part of the class for whose
benefit ERISA was enacted; the primary intended beneficiaries of
ERISA were, of course, employees. Second, the structure of ERISA
strongly indicates that Congress did not intend to create a right to
contribution or indemnity. ERISA sets forth very specific rules regarding the liability of co-fiduciaries and parties in interest; nowhere is a
right to contribution or indemnity mentioned. In addition, ERISAs legislative history is silent on the subject; general references to the common law of trusts are not enough to conclude that such a remedy should
be available, especially when those references relate exclusively to protection of employees rights. Third, it is debatable whether allowing a
right to contribution or indemnity is consistent with the purposes of
190. For a good discussion, see Jeffrey A. Brauch, The Federal Common Law of
ERISA, 21 HARV. J.L. & PUB. POLY 541, 591 (1998).
191. 422 U.S. 66 (1975). For non-ERISA cases applying the Cort test, see Texas Indus., 451 U.S. at 639 (rejecting defendants attempt to imply right of contribution from
a co-conspirator into the antitrust laws) and Northwest Airlines, Inc. v. Transp. Workers
Union of Am., 451 U.S. 77 (1981) (rejecting claim for contribution under the Equal Pay
Act and Title VII of the Civil Rights Act of 1964).
192. 422 U.S. at 78.
419
ERISA. ERISA evidences no concern whatsoever with protecting a single breaching fiduciary from having to foot the bill for all losses resulting from its breach, even if other fiduciaries are jointly responsible. The
primary intended beneficiaries, employees, end up in the same position,
regardless of the rule chosen.193 The fourth factor in Cort, on the other
hand, may indicate that contribution should be permitted under
ERISA, because ERISAs broad preemption clause makes it clear that
there is no state interest in the issue.
In Chemung, the court held that the Cort analysis is inapplicable
to the right of contribution under ERISA, because such a right does not
involve the usual right of action, and it would be misleading to so
characterize a defendants right of contribution.194 The court instead
concluded that contribution simply is a method to equitably distribute
financial responsibility among the parties responsible for losses suffered by the plan as a result of fiduciary breaches, without regard to
which parties the plaintiff chose to sue.195
The Second Circuits stated reasons for disregarding the Cort factors in Chemung are unpersuasive. As with any other right of private
action that Congress may intend without specifically stating, a court is
required to determine whether the implied right to contribution is
consistent with ERISAs statutory scheme.196 Also, the Supreme Court
has applied Cort in deciding whether a right of contribution is available
under other federal statutes.197 The Cort factors represent the Supreme
Courts attempt to provide workable standards for determining when
an implied right to sue exists under a federal statute.198 Those factors
should be taken into account by a court in analyzing whether a right
to contribution or indemnity exists among breaching fiduciaries, and,
as outlined above, the factors strongly indicate that no such right
should be implied under ERISA.
D.
ECONOMIC ANALYSIS
The primary objection to a no-contribution rule is fairness. The

court in Chemung noted that [t]here is no reason why a single fiduciary
who is only partially responsible for a loss should bear its full brunt.
Full responsibility should not depend on the fortuity of which fiduciary
193. Of course, some fiduciaries may have deeper pockets than others. However,
since liability is joint and several, the employee/plaintiff can easily protect herself in this
regard by suing all fiduciaries who are potentially responsible.
194. 939 F.2d at 15.
195. Id.
196. Id. at 18.
197. Northwest Airlines, 451 U.S. at 77 (rejecting claim for contribution under the
Equal Pay Act and Title VII of the Civil Rights Act of 1964).
198. For a critique of using Congressional intent for determining whether an implied
cause of action should be available, see Susan I. Stabile, The Role of Congressional Intent
in Determining the Existence of Implied Private Rights of Action, 71 NOTRE DAME L. REV.
861 (1996).
420
a plaintiff elects to sue.199 In perhaps the best-known statement on

the issue, Prosser and Keeton noted,
There is obvious lack of sense and justice in a rule which permits the
entire burden of a loss, for which two defendants were equally, unintentionally responsible, to be shouldered onto one alone, according
to the accident of a successful levy of execution, the existence of liability insurance, the plaintiffs whim or spite, or the plaintiffs collusion with the other wrongdoer, while the latter goes scot free.200
Despite the superficial appeal of a contribution/indemnity rule, a

significant downside of the rule is that, at least in certain circumstances, it may be an inefficient legal rule. Professor Landes and Judge
Posner concluded in their seminal work on contribution among joint
tortfeasors that a contribution rule is inefficient because the deterrent
effects of no-contribution and contribution rules are the same, but a
contribution rule increases administrative costs (e.g., due to additional
court proceedings to allocate the liability).201
In addition, a contribution rule may reduce the likelihood of settlement.202 The economic theory is that, under a contribution rule, settlement does not bar a court from determining further liability in a
subsequent lawsuit, and, therefore, each defendants incentive to settle
decreases.203 Thus, a contribution rule encourages every defendant to
pursue litigation. Under a no-contribution rule, on the other hand, defendants will compete to settle rather than litigate, because the expected liability of the non-settling defendants increases as each defendant settles.204
199. Chemung, 939 F.2d at 16.
200. W. PAGE KEETON ET AL., PROSSER AND KEETON ON THE LAW OF TORTS 50, at
337-38 (W. Page Keeton, ed., 5th ed. 1984) (footnote omitted).
201. WILLIAM M. LANDES & RICHARD A. POSNER, THE ECONOMIC STRUCTURE OF
TORT LAW 201-02 (1987). See also RICHARD A. POSNER, ECONOMIC ANALYSIS OF LAW 18889 (4th ed. 1992).
The economic theory behind the conclusion that contribution does not affect deterrence can be summarized as follows. Without contribution, all potentially liable tortfeasors have an incentive to select the socially optimal level of care. Each party has an
incentive to act with the level of care that minimizes the sum of her expected loss from
liability (the full loss under a no-contribution rule) and her cost of accident avoidance.
Once one potential tortfeasor exercises care, the others have an incentive to do so because
the tortfeasor who is negligent bears the total loss if the others are not negligent.
A contribution rule does not change the potential tortfeasors level of care. As long
as the sum of all tortfeasors expected shares of the total loss resulting from the tort is
100%, the incentives for efficient accident avoidance are the same under either rule. Each
potential tortfeasor will still exercise the level of care that minimizes his or her expected
cost. LANDES & POSNSER, at 196. Thus, the rules produce the same deterrence result.
For an argument that the assumptions underlying this analysis undermine the case
against a no-contribution rule in the ERISA context, see Elizabeth A. Di Cola, Note,
Fairness and Efficiency: Allowing Contribution Under ERISA, 80 CALIF L. REV. 1543
(1992).
202. POSNER, supra note 201, at 202-03.
203. Id. at 202.
204. Frank H. Easterbrook et. al., Contribution Among Antitrust Defendants: A Legal and Economic Analysis, 23 J.L. & ECON. 331, 362 (1980). The economic theory is that
421
Thus, there are strong arguments that a contribution rule is inefficient. Courts should be reluctant to read into statutes vague notions
of fairness when the result may be a net waste of resources. If ERISA
provided for contribution, economic theory would provide no basis for
disallowing contribution claims. However, because the statute is silent
on the subject, economic theory provides another reason why courts
should not create a right to contribution in ERISA fiduciary breach
actions.
C. Nonfiduciary Liability
In some cases, a nonfiduciary may participate in a fiduciarys
breach of her duties under ERISA. Because the text of ERISA does not
specifically address nonfiduciary liability, courts have struggled to determine whether such liability is appropriate.
1. Common Law
Under the common law of trusts, a nonfiduciary who knowingly
participates in a trustees breach of trust is liable to the beneficiaries
of the trust. For example, in Smith v. Ayer, a trustee, in breach of his
fiduciary duties, pledged trust assets as collateral for loans made by a
third party to a company he owned.205 The Supreme Court held that
the lender, who was charged with knowledge of the breach, was required to return the collateral to the trust.206 The Court stated that
property acquired from the trustee by third parties with knowledge of
his trust and his disregard of its obligations, can be followed and recovered. The law exacts the most perfect good faith from all parties
dealing with a trustee respecting trust property.207
The common law doctrine has been stated as follows by Bogert:
The beneficiary, as equitable owner of the trust res has the right that
third persons shall not knowingly join with the trustee in a breach of
trust.208 Bogert states that the elements necessary to prove participation by a nonfiduciary in a trustees breach of trust are (1) an act or
omission which furthers or completes the breach of trust by the trustee;
and (2) knowledge at the time that the transaction amounted to a
breach of trust, or the legal equivalent of such knowledge.209
a plaintiff will be willing to settle with a particular defendant for less than that defendants proportionate share of the damages only if the plaintiffs expectation of winning
against that defendant is less than 100%. This conclusion assumes that the plaintiff will
not incur any unrecoverable costs; if there are such costs that will not be recovered, the
amount for which the plaintiff is willing to settle is correspondingly reduced. Under a
no-contribution rule, a defendant cannot be forced to share in any additional damages.
Thus, a no-contribution rule provides better incentives to settle.
205. 101 U.S. 320 (1879).
206. Id. at 332.
207. Id. at 327.
208. BOGERT & BOGERT, supra note 169, at 901.
209. Id. (footnotes omitted)
422
Blankenship v. Boyle, a pre-ERISA case, applied the common law

principles to an employee benefit plan.210 In that case, the trustees of
a Taft-Hartley welfare benefit plan breached their fiduciary duties by
permitting large amounts of cash to remain in non-interest bearing
accounts in a bank controlled by the sponsoring union, while the sums
grew to more than 30% of the banks demand deposits.211 The court
held that the bank had actual knowledge of the trustees breach, and,
therefore, was liable for its participation in the trustees breach of
trust.212
2. ERISA
ERISA imposes personal liability on plan fiduciaries who breach
their statutory duties.213 Such fiduciaries are required to make good to
the plan any losses resulting from the breach and to restore to the plan
any profits made through use of assets of the plan.214 In addition, a
breaching fiduciary shall be subject to such other equitable or remediable relief as the court may deem appropriate, including removal of
such fiduciary,215 and co-fiduciaries may be liable for breaches or violations committed by other fiduciaries.216
Until the Supreme Court decided Mertens v. Hewitt Associates217
in 1993, the majority of courts found an ERISA cause of action against
a nonfiduciary who knowingly participated in a fiduciary breach.218 The
first ERISA case to impose liability for a nonfiduciarys knowing participation in a fiduciary breach was Freund v. Marshall & Ilsley
Bank.219 In Freund, the trustees of an ERISA plan had loaned virtually
all of the plans assets back to the sponsoring company in exchange for
unsecured promissory notes in violation of the trustees fiduciary duty
to diversify investments.220 The court held that liability under ERISA
could be extended not only to the fiduciary trustees, but also to the
210. 329 F. Supp. 1089 (D.D.C. 1971).

211. Id. at 1102, 1113.
212. Id. at 1103-04.
213. ERISA 409(a), 29 U.S.C. 1109(a).
214. Id.
215. Id.
216. ERISA 405(a), 29 U.S.C. 1105(a).
217. 508 U.S. 248 (1993).
218. Diduck v. Kaszycki & Sons Contractors, Inc., 974 F.2d 270 (2d Cir. 1992); Whitfield v. Lindemann, 853 F.2d 1298 (5th Cir. 1988); Brock v. Hendershott, 840 F.2d 339
(6th Cir. 1988); Lowen v. Tower Asset Mgmt., Inc., 829 F.2d 1209, 1220 (2d Cir. 1987)
(Authority for recovery against non-fiduciaries is derived from trust law principles, upon
which ERISA is based.); Fink v. Natl Sav. & Trust Co., 772 F.2d 951 (D.C. Cir. 1985);
Thornton v. Evans, 692 F.2d 1064 (7th Cir. 1982); Bouton v. Thompson, 764 F. Supp. 20
(D. Conn. 1991); Pension Benefit Guar. Corp. v. Ross, 733 F. Supp. 1005 (M.D.N.C. 1990);
Pension Fund-Mid Jersey Trucking Indus.-Local 701 v. Omni Funding Group, 731 F.
Supp. 161 (D.N.J. 1990); Benvenuto v. Schneider, 678 F. Supp. 51 (E.D.N.Y. 1988).
219. 485 F. Supp. 629 (W.D. Wis. 1979).
220. Id. at 636-37.
423
nonfiduciary company officials who participated in the scheme.221 The

court stated,
Sections 502(a)(3) and (a)(5) of ERISA, pursuant to which these actions are brought, expressly preserve the authority of the Court to
award such equitable relief as is appropriate to redress any fiduciary
violations proven in a given case. . . . In view of the expressed Congressional intent in enacting ERISA to make applicable the law of
trusts, the Court is fully empowered to award the relief available in
traditional trust law against non-fiduciaries who knowingly participate, either directly or through an agent, in a breach of trust.222
Citing Bogert and Bogerts THE LAW OF TRUSTS AND TRUSTEES, the
court required proof of (1) an act or omission which furthers or completes the breach of trust by the trustee; and (2) knowledge at the time
[of the transaction] that the transaction amounted to a breach of
trust.223
The Supreme Courts decision in Mertens seriously called into
question the viability of knowing participation claims against nonfiduciaries.224 In Mertens, the Court considered a claim by plan beneficiaries against an actuary for knowingly participating in a fiduciarys
breach of duty.225 The actuary did not fall under the broad definition of
fiduciary under ERISA.226 When Kaiser Steel Corporation began
phasing out its steel operations, a large number of employees took early
retirement under the Kaiser Steel Retirement Plan, but the actuary
failed to change the plans actuarial assumptions to reflect the costs of
the unusually large number of retirees.227 As a result, Kaiser failed to
adequately fund the plan.
The plaintiffs brought an action under section 502(a)(3) of ERISA,
which provides that a court may award other appropriate equitable
relief in an action brought by a plan participant, beneficiary, or fiduciary.228 The Court did not directly address whether a nonfiduciary may
be sued under ERISA, but rather, only considered whether money damages could constitute other appropriate equitable relief.229 After extensive discussions of the nature of equitable relief at common law, the
Court held in a 5 to 4 decision that money damages could not be considered equitable relief for the purposes of section 502(a)(3).230
The case assumed, without deciding, that a nonfiduciary can be
sued under ERISA for participating in a fiduciary breach. However,
221.
222.
223.
224.
225.
226.
227.
228.
229.
230.
Id. at 631.
Id. at 641-42.
Id. at 642.
508 U.S. 248.
Id.
ERISA 3(21), 29 U.S.C. 1002(21).
508 U.S. at 248.
29 U.S.C. 1132(a)(3) (1999).
Mertens, 508 U.S. at 248, 253.
Id. at 256, 267-68.
424
Justice Scalia made clear in his opinion that the Court doubted that
ERISA section 502(a)(3) provides such a cause of action, because no
provision explicitly requires them to avoid participation (knowing or
unknowing) in a fiduciarys breach of fiduciary duty.231 The Court
acknowledged that such a cause of action was available under the
common law of trusts.232 However, Justice Scalia reasoned that because Congress undoubtedly knew about the common law cause of
action, it is all the more unlikely that the omission of an explicit cause
of action in ERISA was inadvertent.233 Rather, ERISAs detailed enforcement scheme provides strong evidence that Congress did not intend to authorize other remedies that it simply forgot to incorporate
expressly. 234
Since Mertens, most lower courts have rejected a federal common
law cause of action against nonfiduciaries who knowingly participate
in a fiduciary breach.235 For example, in Reich v. Rowe, the Secretary
of Labor brought suit against several defendants involved in the failed
OMNI Medical Health and Welfare Trust (OMNI).236 The Secretary alleged, inter alia, that H. James Gorman, Jr., a financial consultant,
knowingly participated in the fiduciary breaches [by] OMNIs administrators.237 After the district court dismissed the action against Gorman for failure to state a claim under ERISA, the Secretary appealed
to the First Circuit.238
OMNI, an employee welfare benefit plan within the meaning of
section 3(1) of ERISA, was established to provide [] medical, dental,
and life insurance and other benefits to the employees of a number of
small, unrelated employers.239 In its status as administrator of the
plan, OMNI collected premiums from employers, held the plan assets
in trust on behalf of participants, and paid benefits to participants and
their beneficiaries.240
The Secretary of Labor claimed that OMNIs administrator
breached its fiduciary duties because it falsely claimed that the plan
was a tax-exempt ERISA covered benefit plan in an attempt to avoid
state regulation of the plan.241 The Secretary alleged that the plan was
a multiple employer welfare arrangement (MEWA) within the meaning
231.
232.
233.
234.
235.
236.
237.
238.
239.
240.
241.
Id. at 254.
Id.
Id.
Id. (quoting Russell, 473 U.S. at 146-47).
But see Gruby v. Brady, 838 F. Supp. 820 (S.D.N.Y. 1993).
20 F.3d 25 (1st Cir. 1994).
Id. at 26.
Id. at 27.
Id.
Id.
Id.
425
of section 3(40)(a) of ERISA and, as such, was not exempt from state
insurance regulation.242
Gorman and his employer, Coopers & Lybrand, were named as defendants in Rowe.243 Gorman served as a general legal advisor to OMNI
and informed OMNI on several occasions that the plan was a MEWA
that was operating in violation of Massachusetts insurance laws.244
Nevertheless, Gorman advised OMNI, in response to a letter from the
New Hampshire Insurance Department regarding the status of the
plan, that it had the option to try the red herring across the trail of
the Insurance Department just to keep them off balance by telling
them OMNI was an ERISA-covered plan.245
Gorman effectively advised OMNI that it may avoid state regulation by misleading the Insurance Department with regard to the plans
status under ERISA. He also drafted a letter for OMNI to use in which
OMNI falsely claimed that it was not a MEWA and, as such, was exempt from New Hampshire insurance regulations.246
The Labor Department did not allege that Gorman was a plan fiduciary, but nevertheless held Gorman liable for his improper actions
under ERISA to the same extent as fiduciaries.247 The Secretary sought
on behalf of the plan recovery of losses it suffered and the unwinding
of various prohibited transactions.248 It also sought a permanent injunction barring Gorman and the other defendants from serving as
ERISA fiduciaries or providing services to any ERISA-covered plan.249
The district court concluded that Gorman could not be held liable
as a nonfiduciary, and the Labor Department argued on appeal that
where ERISA is silent or ambiguous, courts should look to ERISAs
. . . purposes [and infer] a remedy where necessary to further those
purposes.250 However, the Second Circuit rejected the district courts
conclusion, holding that judicial remedies for nonfiduciary participation in a fiduciary breach fall within the line of cases where Congress
deliberately omitted a potential cause of action rather than the cases
242. 20 F.3d at 27. MEWAs are defined in ERISA 3(40)(A), 29 U.S.C. 1002(40)(a)
(1999), and are arrangements established to offer or provide certain welfare benefits to
the employees of two or more unrelated employers. They may allow employees of participating employers to obtain insurance coverage at rates more favorable than those
available directly. If a MEWA is self-insured, it is subject to state insurance laws to the
extent not inconsistent with Title I of ERISA. Only state insolvency laws apply to insured
MEWAs. ERISA 515(b)(6), 29 U.S.C. 1144(b)(6) (1998).
243. 20 F.3d at 27.
244. Id.
245. Id.
246. Id.
247. Id.
248. Id. at 27-28.
249. 20 F.3d at 27-28.
250. Id. at 31.
426
where Congress has invited the courts to engage in interstitial lawmaking.251 The court based its holding on three grounds. First,
ERISAs substantive provisions proscribe various acts or practices
that involve nonfiduciaries, but knowing participation in a fiduciary
breach is not among those acts and practices.252 Second, the court noted
that nonfiduciary service providers provide critical advice to ERISA
plans and was concerned that extending the threat of liability over the
heads of those who only lend professional services to a plan without
exercising any control over, or transacting with, plan assets will deter
such individuals from helping fiduciaries navigate the intricate financial and legal thicket of ERISA.253 Third, while recognizing that
limit[ing] liability for nonfiduciaries may provide less protection than
existed before ERISA was enacted, the court noted that Congress engaged in a cost-benefit analysis in fashioning ERISAs comprehensive
regulatory scheme, and liability for nonfiduciaries apparently was rejected in this process.254
A closely related question to nonfiduciary liability for participating
in a fiduciarys breach of her duties under section 404 of ERISA is
whether a nonfiduciary party-in-interest can be held liable for participating in a transaction prohibited by section 406 of ERISA. In June 2000,
the Supreme Court held in Harris Trust and Savings Bank v. Salomon
Smith Barney, Inc. that a nonfiduciary party in interest may be held
liable under ERISA for participating in a prohibited transaction.255
In Harris Trust, Salomon arranged financing for two motel chains
to acquire motel properties in various locations throughout the United
States.256 The motel chains sold mortgage notes secured by the acquired properties to Salomon, who in turn sold the notes to institutional investors.257 In exchange for its services, Salomon received
participation interests in the net cash flow generated by the properties, plus a specified percentage of any appreciation of the properties value.258 At the same time, Salomon provided broker-dealer services to the Ameritech Pension Trust, which held assets for various
tax-qualified pension plans sponsored by Ameritech Corporation.259
Salomon received several hundred thousand dollars per year in commissions and other compensation for providing brokerage and other
services to the trust.260
251.
252.
253.
254.
255.
256.
257.
258.
259.
260.
Id.
Id.
Id. at 32.
Id.
120 S. Ct. 2180 (2000).
Id. at 2185.
Id.
Id.
Id.
Id.
427
After extensive negotiations involving an investment manager to

the trust, Ameritech and Salomon, the trust agreed in 1987 to purchase
Salomons participation interests in the motel properties for approximately $21 million. During the recession in the early 1990s, the nationwide market for hotel properties experienced a significant decline,
and the participation interests the trust purchased from the defendant
became almost worthless. In 1992, Harris Trust, the new trustee, sued
Salomon seeking to hold it liable for the loss on the participation interests. Among other theories of liability, Harris Trust alleged that
Salomon could be forced to reimburse the trust because Salomon had
participated in a transaction prohibited by section 406 of ERISA.261
It also claimed that Salomon failed to timely disclose information relating to the riskiness, poor performance, and low value of the participation interests.262
The Court held that section 502(a)(3) of ERISA provides a cause of
action against nonfiduciary parties in interest who participate in a prohibited transaction.263 The Court rejected Salomons contention that
section 502(a)(3) authorizes a suit only against a party that can violate
ERISAs substantive provisions.264 Rather, the Court concluded that
section 502(l) of ERISA compelled the conclusion that a partys status
as a defendant under section 502(a)(3) of ERISA can arise from duties
imposed by section 502(a)(3) itself and does not depend on whether that
party is expressly subject to a duty under one of ERISAs substantive
provisions.265 Section 502(l) of ERISA authorizes the Department of
Labor to bring civil penalty actions against defendants and other
persons where there is a fiduciary breach.266 The civil penalty, in turn,
is defined by reference to the applicable recovery amount, which is
the amount that a court orders an other person to pay to a plan or to
its participants and beneficiaries in a court proceeding brought by the
Department of Labor under section 502(a)(2) or 502(a)(5) of ERISA. The
Court found that the plain implication of section 502(l) is that the
Department of Labor may bring a civil action under section 502(a)(5)
of ERISA against any person, including a nonfiduciary, who is a knowing participant in a fiduciarys violation and that a section 502(a)(5)
action can be brought even if there is no ERISA provision that explicitly
imposes a duty on that other person to not knowingly participate in
such a transaction.267 The Court then reasoned that if the Department
of Labor can bring a civil action against a nonfiduciary under ERISA
261.
262.
263.
264.
265.
266.
267.
120 S. Ct. at 2186.

Id. at 2185.
29 U.S.C. 1132(a)(3) (1999).
120 S. Ct. at 2187-90.
Id. at 2190-91.
Id. at 2180-81.
Id. at 2188.
428
section 502(a)(5), then it follows that participants, beneficiaries, or fiduciaries can also bring suits against a nonfiduciary under the similarly worded section 502(a)(3) of ERISA.268
Salomon does not address the liability of nonfiduciaries who participate in a breach of a fiduciarys duties under section 404(a) of
ERISA. Nevertheless, the reasoning in the case seems to dictate that
such nonfiduciaries may be liable under ERISA for such participation,
because the Courts reasoning is equally applicable to non-parties in
interest who participate in fiduciary breaches.
3. Analysis
The courts that have not allowed a claim against a nonfiduciary for
participating in a breach of section 404 of ERISA have been correct. Such
a cause of action is inconsistent with the text of ERISA. In addition, a
rule allowing nonfiduciary liability usually does not implicate ERISAs
purposes and may result in a reduced level of care by plan fiduciaries.
A.
STATUTORY PROVISIONS
As described above with respect to the right of contribution, ERISA

provides a highly detailed scheme for the available remedies and the
parties who can be subject to liability.269 No provision is made for liability of nonfiduciaries who participate in fiduciary breaches. As noted
by the Court in Mertens,
[N]o provision explicitly requires [nonfiduciaries] to avoid participation (knowing or unknowing) in a fiduciarys breach of fiduciary duty.
It is unlikely, moreover, that this was an oversight, since ERISA does
explicitly impose knowing participation liability on cofiduciaries.
That limitation appears all the more deliberate in light of the fact
that knowing participation liability on the part of both cotrustees
and third persons was well established under the common law of
trusts. In Russell we emphasized our unwillingness to infer causes of
action in the ERISA context, since that statutes carefully crafted and
detailed enforcement scheme provides strong evidence that Congress
did not intend to authorize other remedies that it simply forgot to
incorporate expressly.270
In addition, the prohibited transaction provisions of ERISA and

the Code provide for penalties against certain nonfiduciaries who participate in a prohibited transaction. Section 502(i) of ERISA allows the
Department of Labor to impose a civil penalty against a party in interest that participates in a transaction prohibited by section 406 of
ERISA.271 In most cases, a nonfiduciary that participates in a prohibited transaction will be a service provider or other party that qualifies
268. Id.
270. Mertens, 508 U.S. at 254 (quoting Russell, 473 U.S. at 146-47 (internal citations
omitted)).
271. 29 U.S.C. 1132(i) (1999).
429
as a party in interest.272 Similarly, section 4975(c) of the Internal Revenue Code provides that the IRS may impose an excise tax on nonfiduciary disqualified persons who participate in a prohibited transaction
with respect to a tax-qualified retirement plan.273 Thus, Titles I and II
of ERISA explicitly provide for liability of certain nonfiduciaries, and
this liability pointedly does not include liability to any party other than
the Department of Labor or the Internal Revenue Service.
B.
ERISAS PURPOSE
In most cases, ERISAs purpose of protecting the interests of plan

participants and beneficiaries is not implicated by a nonfiduciary liability rule. By definition, in order for a nonfiduciary to have participated
in a fiduciary breach, a fiduciary must have breached its duties. Thus,
the fiduciary can be held fully liable for any damages that result from
the breach.
In most cases, this will result in the plan being made whole.
Few fiduciaries are judgment-proof and fiduciary liability insurance,
which plan fiduciaries often have, will provide additional protection
in many cases. However, in some cases, the breaching fiduciary will
be judgment-proof and will not have sufficient liability insurance. In
that event, the plan may not be made whole for the damages resulting
from the breach. This result is unfortunate. However, this fairly rare
outcome does not justify ignoring the statutory language of ERISA. If
Congress is concerned with this result, it should amend the statute.
C.
ENCOURAGING CARE BY FIDUCIARIES
In any case in which knowing participation liability is imposed,

a plan fiduciary will have either actively engaged in a fiduciary breach
or, at a minimum, failed to sufficiently monitor the activities of the
nonfiduciary. A rule placing all liability on fiduciaries will encourage
fiduciaries to fulfill the responsibilities imposed on them by section 404
of ERISA.274 Letting fiduciaries off the hook for the entire liability that
results from their breach may be a disincentive for fiduciaries to fulfill
their statutory obligations.
D.
DUTY TO DIVERSIFY ESOP INVESTMENTS
ERISA established employee stock ownership plans (ESOPs). An

ESOP is a defined contribution plan that is designed to primarily invest
in stock of the sponsoring employer corporation. Because of the employer stock requirement, ESOPs are exempt from ERISAs diversification rules. Unfortunately, the employer stock held by an ESOP may
drop significantly in value, reducing participants retirement savings.
This has led to numerous lawsuits by participants alleging that the
272. See ERISA 3(14), 29 U.S.C. 1002(14) (1999).
273. 26 U.S.C. 4975(c).
274. 29 U.S.C. 1104.
430
ESOP fiduciaries should have sold the employer stock and purchased
other investments before the stocks price dropped.
1. Common Law
Section 228 of the RESTATEMENT (THIRD) OF TRUSTS provides that
the trustee owes a duty to beneficiaries to conform to the terms of the
trust directing investments by the trustee.275 As a general rule a
trustee can properly make investments in such properties and in such
manner as expressly or impliedly authorized by the terms of the
trust.276 However, the law of trusts distinguishes between two types
of directions: the trustee may either be mandated or permitted to make
a particular investment. If the trust requires the fiduciary to invest in
a particular investment, the trustee must comply unless compliance
would be impossible or illegal or a deviation is otherwise approved by
the court.277 When the instrument only allows or permits a particular
investment, [t]he fiduciary must still exercise care, skill, and caution
in making decisions to acquire or retain the investment.278
In addition, the common law requires a trustee to diversify the
trusts investments, unless, under the circumstances, it is prudent not
to do so.279 The purpose of the diversification requirement is to minimize the risk of large losses to the trust.
2. ERISA
One of the primary concerns of Congress in enacting ERISA was
the excessive investment of pension funds in stock of the employer
maintaining the plan. As a result, ERISA places strict limits on the
ability of plans to acquire and hold stock of the employer that sponsors
the plan. Section 406(a)(1)(D) of ERISA prohibits a plan fiduciary from
causing a plan to acquire on behalf of the plan any employer security
or real property in violation of section 407(a).280 In turn, section 407(a)
provides that a plan may acquire qualifying employer securities, but
generally limits the amount of qualifying employer securities that a
plan may hold to 10% of the value of the plans assets.281 However,
section 407(b) allows eligible individual account plans to exceed the
10% limit.282
An ESOP is a tax-qualified individual account pension plan designed to invest primarily in the employers securities and thus pro275. RESTATEMENT (THIRD) OF TRUSTS 228(b) (1992).
276. Id. at cmt. d.
277. Id. at cmt. e (citation omitted).
278. Id. at cmt. f.
279. Id. at 227(b); BOGERT & BOGERT, supra note 169, at 612.
280. 29 U.S.C. 1106(a)(1)(D) (1999).
281. Qualifying employer securities include stock, a marketable obligation, or an
interest in a publicly traded partnership issued by the employer that sponsors the plan
(or an affiliate thereof). ERISA 407(d)(5), 29 U.S.C. 1107(d)(5) (1999).
282. 29 U.S.C. 1107(b)(2)(A).
431
vide the participants with an ownership interest in their employer.

In addition, an ESOP may also borrow money and enter into transactions with related parties to acquire the employers securities in
what would otherwise be prohibited transactions under section 406 of
ERISA and section 4975 of the Internal Revenue Code. As a result,
an ESOP may serve the dual purposes of providing retirement benefits
to employees and as a financing vehicle for the employer. An ESOP
that obtains a loan to acquire employer stock is referred to as a leveraged ESOP.283
Although an ESOP, like other employee pension benefit plans covered by ERISA, is subject to the exclusive purpose fiduciary rule under ERISA, ESOPs and other eligible individual account plans are not
subject to the diversification requirement or the prudence requirement,
but only to the extent that prudence requires diversification.284 These
rules make sense; it would be impossible to have a plan invested primarily in employer stock if ERISAs diversification rules applied.
3. Case Law
Unfortunately, investment solely in employer stock under an ESOP
can turn out to be a poor investment. Like any non-diversified investment, it is subject to the risk of a large decline in value. For example,
corporate officers who are also fiduciaries of the ESOP may become
aware of information that likely will cause the value of the employers
stock to drop. Several courts have examined whether a cause of action
lies against an ESOP fiduciary that fails to diversify the ESOPs assets
in such circumstances. For example, in Moench v. Robertson, the Third
Circuit considered a case involving an ESOP sponsored by Statewide
Bancorp.285 Statewide permitted employees to make contributions on
a salary reduction basis to the ESOP and matched a portion of those
contributions.286 All contributions were invested in stock of Statewide.287 In 1989, Statewide began experiencing financial difficulties,
and the market value of its stock fell from $18.25 per share in July
1989 to less than 25 cents per share in May 1991.288 On May 22, 1991,
283. Under a leveraged ESOP, the ESOP acquires stock with the proceeds of a loan
(which may be from the employer that sponsors the plan). The stock acquired with the
loan proceeds is held in a suspense account, and stock is released from the suspense
account and allocated to employees accounts as the loan is repaid.
284. ERISA 404(a)(2), 29 U.S.C. 1104(a)(2).
285. 62 F.3d 553 (3d Cir. 1995).
286. Id. at 558.
287. Id. It is no longer permissible for employers to require employees to invest
their own contributions in employee stock. Section 407(b)(2)(iv) of ERISA, 29 U.S.C.
1107(b)(2)(iv), which was added to ERISA by the Taxpayer Relief Act of 1997, Pub. L.
No. 105-34 1524(a), 111 Stat. 788 (1997), provides that the qualifying employer securities exception does not apply to an individual account plan that requires employees to
invest contributions in excess of 1% of their compensation in employer stock.
288. 62 F.3d at 557.
432
the FDIC took control of the bank and Statewide filed for voluntary
bankruptcy.289
Throughout this period, the ESOP committee, which consisted of
Statewide employees, regularly caused the ESOP contributions to continue to be invested in Statewide stock, despite the committees knowledge of Statewides precarious financial condition.290 The ESOP provided that the committee had full authority with respect to the
administration of the plan and the direction of investment of the plan
assets.291
The court first concluded that the failure to diversify an ESOPs
investments may result in a fiduciary breach. Quoting the Court of
Appeals for the District of Columbia Circuit, the Third Circuit noted
that, with respect to ESOPs,
[T]he requirement of prudence in investment decisions and the requirement that all acquisitions be solely in the interest of plan participants continue to apply [to ESOPs]. The investment decisions of
a profit sharing plans fiduciary are subject to the closest scrutiny
under the prudent person rule, in spite of the strong policy and preference in favor of investment in employer stock.292
The court further noted that a number of other courts have similarly concluded that ESOP fiduciaries are, at least in certain circumstances, required to diversify the ESOPs investments.293 The court
then used the common law of trusts to develop a standard for determining whether the failure to diversify an ESOPs investments is a
breach of fiduciary duty.
While the fiduciary in Moench presumptively was required to invest in employer securities, the court stated that there may come a
time when such investments no longer serve the purpose of the trust,
or the settlors intent.294 The court concluded that the fiduciarys decision to remain invested in employer stock would be subject to judicial
review under an abuse of discretion standard.295
4. Analysis
Requiring diversification of ESOP assets is another area where
courts have utilized the common law of trusts to create a duty that is
inconsistent with ERISAs statutory language and purpose. Unlike traditional defined benefit or defined contribution plans, which are de289. Id.
290. Id.
291. 62 F.3d at 558.
292. Id. at 570 (quoting Fink v. Natl Sav. and Trust Co., 772 F.2d 951, 955-56 (D.C.
Cir. 1985)).
293. See, e.g., Martin v. Feilen, 965 F.2d 660 (8th Cir. 1992); Fink, 772 F.2d 951;
Eaves v. Penn, 587 F.2d 453 (10th Cir. 1978).
294. 62 F.3d at 571.
295. Id.
433
signed primarily to provide retirement income to employees, ESOPs

have multiple purposes. Providing retirement income obviously is one
of those purposes. However, equally important is worker capitalism,
a policy of encouraging employee ownership of their employers and the
corporate financing vehicle of leveraged ESOPs.296
A.
PLAIN LANGUAGE OF ERISA
As noted, ESOPs are exempt from ERISAs diversification requirement and exempt from the prudence requirement to the extent it would
require diversification.297 Despite the efforts of the Moench court and
other courts to characterize their reasoning otherwise, a requirement
that an ESOP must invest in non-employer securities is, at base, a
requirement that it diversify its investments beyond employer stock.
Efforts to characterize required investments in non-employer stock as
other than a diversification requirement are unavailing. Thus, the results in Moench and the other ESOP diversification cases are directly
contrary to the plain language of the statute.
B.
CONGRESSIONAL INTENT TO ENCOURAGE EMPLOYEE OWNERSHIP
Many have argued that ESOPs have not delivered on their promise
of worker capitalism and that they are an unjustifiable tax expenditure.298 Nevertheless, Congresss clear intent was to encourage employers to adopt ESOPs in order to increase employee ownership. For
example, the Tax Reform Act of 1976 states,
The Congress is deeply concerned that the objectives sought by [the
series of laws encouraging ESOPs] will be made unattainable by regulations and rulings which treat employee stock ownership plans as
conventional retirement plans, which reduce the freedom of the employee trusts and employers to take the necessary steps to implement
the plans, and which otherwise block the establishment and success
of these plans.299
Obviously, an ESOP does not advance worker capitalism if its assets are invested in mutual funds or other similar assets, rather than
employer stock. Therefore, requiring ESOP fiduciaries to transfer investments from employer stock to securities of unrelated entities is
inconsistent with a fundamental purpose of ESOPs, which are not designed solely to provide retirement benefits to employees and should
not be treated as such under ERISA. Rather, with respect to ESOPs,
296. In this regard, it should be noted that, even when an employees stock is held
by the ESOP (i.e., prior to distribution to the employee), the employee has the right to
direct the voting of her shares. 26 U.S.C. 409(e) (1999).
297. ERISA 404(a)(2), 29 U.S.C. 1104(a)(2). See supra notes 280-284 and accompanying text.
298. See, e.g., Michael W. Melton, Demythologizing ESOPs, 45 TAX L. REV. 363
(1990).
299. Tax Reform Act of 1976, Pub. L. No. 94-455, 803(h), 90 Stat. 1520 (1976).
434
ERISAs fiduciary duties should be applied only to those areas that do

not involve the choice of ESOP investments.
C.
PROHIBITED TRANSACTIONS
Section 406(a)(1)(B) of ERISA300 and section 4975(c)(1)(B) of the

Code301 provide that any lending of money or other extension of credit
between a plan and a party in interest is a prohibited transaction. Section 408(b)(3) of ERISA302 and section 4975(d)(3) of the Code303 provide
an exception for a loan to an ESOP if the loan is primarily for the benefit
of participants and beneficiaries of the plan, the interest rate on the
loan is reasonable, and any collateral given for the loan is limited to
qualifying employer securities. This special exception for plan loans
does not apply to any other type of ERISA-covered plan.
If, by virtue of investing in assets other than employer securities,
a plan is no longer invested primarily in employer securities, then the
plan no longer qualifies as an ESOP. In that event, if a loan was made
based on the assumption that the plan was an ESOP, the fiduciaries of
the plan will automatically be deemed to be engaging in a prohibited
transaction and will be vulnerable to a lawsuit from a participant or
the Department of Labor,304 as well as a 15% annual excise tax under
Code section 4975(a),305until the prohibited transaction is corrected
(i.e., the loan is repaid).
ESOPs may be poor public policy and an unwise use of scarce tax
resources. Nevertheless, such arrangements have been specifically approved by Congress. A requirement to diversify plan investments beyond primarily investments in employer securities would cause the
fiduciaries of a leveraged ESOP to immediately engage in a prohibited
transaction. This is a strong indication that Congress did not intend
for ESOPs to ever be required to invest in assets other than employer
stock.
D.
CONFLICT WITH PLAN TERMS
As previously noted, ESOPs are required to invest primarily in

employer securities, and this requirement generally is reflected in the
ESOPs terms.306 Section 404(a)(1)(D) of ERISA requires that a plan
must be operated in accordance with its terms to the extent consistent
with Titles I and IV of ERISA. Thus, if an ESOP trustee decides to
change investments so that the ESOP is no longer invested in accordance with plan terms, she may have committed a fiduciary breach.
300.
301.
302.
303.
304.
305.
306.
29 U.S.C. 1106(a)(1)(B).
26 U.S.C. 4975(c)(1)(B).
29 U.S.C. 1108(b)(3) (1994).
26 U.S.C. 4975(d)(3).
ERISA 502(a)(2), 29 U.S.C. 1132(a)(2).
26 U.S.C. 4975(a).
26 U.S.C. 4975(e)(7)(A).
435
It can, of course, be argued that consistent with the provisions of

this title and Title IV, the language of section 404(a)(1)(D) trumps the
requirements of the plan language of section 404(a)(2).307 For example,
section 404(a)(1)(D) of ERISA would not allow a trustee of IBMs pension plan to follow a plan provision requiring investment of 100% of the
plans assets in General Motors stock because that provision clearly
violates the diversification requirement of section 404(a)(1)(C). However, most cases in which the plan language conflicts with the requirements of ERISA are fairly clear-cut. ESOPs, on the other hand, are not
only permitted, but are required, to provide for investment primarily
in employer stock. Given the unique purposes of ESOPs, requiring a
trustee to roll the dice by choosing to either ignore the plan terms
(and risk violating section 404(a)(1)(D)) or continuing to remain invested exclusively in employer stock (and risk violating section
404(a)(1)(B)) is inappropriate.
E.
SETTLORS INTENT
In formulating its standard for review of ESOP investment decisions, the Third Circuit in Moench noted that while the fiduciary presumptively is required to invest in employer securities, there may come
a time when such investments no longer serve the purpose of the trust,
or the settlors intent.308 This statement is simply incorrect with respect to ESOPs. An employers intent in adopting an ESOP is to provide
retirement benefits to its employees funded through employer stock.309
If the employer wished to establish a plan to invest in employer stock
until the plan fiduciary decided that another investment would be better, it could have established another type of tax-qualified retirement
plan, such as a profit sharing plan or a stock bonus plan.310 Thus, one
of the Moench courts justifications for employing the common law of
trusts to support an ESOP diversification requirement is without merit.
F.
ESOPS ARE SUBJECT TO A SPECIFIC DIVERSIFICATION REQUIREMENT
Section 401(a)(28)(B) of the Code imposes a specific diversification

requirement on ESOPs. Any participant who has attained age fifty-five
and completed at least ten years of service must be permitted to make
307. 29 U.S.C. 1104(a)(2).
308. 62 F.3d at 571.
309. Of course, the employer may have been motivated by additional factors, including improving employer productivity by giving employees a stake in the business,
obtaining tax deductions, and, if a leveraged ESOP is employed, using a tax-favorable
financing vehicle.
310. A stock bonus plan is required to allow employees the option of receiving their
benefits in employer stock. 26 U.S.C. 401(a)(23) (2000). However, the plans assets may
be invested in any manner chosen by the plan fiduciary. As a practical matter, stock bonus
plans typically invest at least part of their assets in employer stock. Otherwise, whenever
an employee requested a distribution in the form of stock, the plan would have to purchase the stock.
436
a diversification election at certain prescribed times.311 Generally, a

participant may elect to diversify up to 25% of her ESOP account balance into non-employer securities in the first five years during which
the diversification election is available and up to 50% of her account in
the sixth year.312
The legislative history to section 401(a)(28) provides as follows:
Congress was concerned that the prior-law rules encouraging ESOPs
provided tax benefits to employers and others engaged in ESOP
transactions without ensuring increased rights of ownership for participating employees. In addition, Congress was concerned that employees for whom an ESOP provided a major source of retirement
savings could be disadvantaged due to the fact that those savings
could be invested exclusively in employer securities. To minimize that
concern, Congress found it appropriate to require ESOPs to allow
certain plan participants approaching retirement age to elect partial
diversification of their ESOP account balance.313
Thus, Congress has provided a specific rule regarding when ESOPs are
required to diversify their assets. Because Congress has generally exempted ESOPs from ERISAs diversification requirements and provided a specific exception to that rule, additional exceptions should not
be read into ERISA.314
IV. Recommendations
This article has demonstrated that, in developing the federal common law of ERISA, courts have often invoked the common law of trusts.
Unfortunately, ERISAs fiduciary rules differ in many important respects from the common law of trusts, and the use of common law rules
has frequently led courts to arrive at results that are clearly contrary
to both the intent and, in many cases, the plain language of ERISA.
When applying the common law of trusts in ERISA fiduciary breach
cases, courts should be careful to follow the Supreme Courts admonition that
the law of trusts often will inform, but will not necessarily determine
the outcome of, an effort to interpret ERISAs fiduciary duties. In
some instances, trust law will only offer a starting point, after which
courts must go on to ask whether, or to what extent, the language of
the statute, its structure, or its purposes require departing from
common-law trust requirements. And, in doing so, courts may have
311. 26 U.S.C. 401(a)(28)(B).
312. Id.
313. JOINT COMM. ON TAX, 99th CONG., GENERAL EXPLANATION OF THE TAX REFORM
ACT OF 1986, at 833 (1987).
314. Of course, the ESOP diversification rule is in the Code, rather than in Title I
of ERISA with the fiduciary rules. However, the plan qualification rules of the Code
constitute Title II of ERISA, and different parts of ERISA should be read to produce a
consistent result.
437
to take account of competing congressional purposes, such as Congress desire to offer employees enhanced protection, on the one hand,
and, on the other, its desire not to create a system that is so complex
that administrative costs, or litigation expenses, unduly discourage
employers from offering . . . plans in the first place.315
Unfortunately, courts have frequently applied rules developed under the common law of trusts when ERISAs language and structure
clearly mandate a different result. Nevertheless, ERISAs fiduciary duties are derived from the common law, and the structure of section
404(a)316 and the legislative history make clear that the common law
of trusts should assist in ERISA interpretation. What, then, is the
proper role for the common law of trusts in lawsuits alleging a breach
of the fiduciary duties set forth in section 404 of ERISA?
The relevance of the common law can be divided into three types
of cases. First, if the area at issue is addressed in detail by ERISA, the
common law has no relevance. Second, if ERISA does not provide specific rules for an area, then the common law should be consulted. If the
result under the common law is consistent with the overall policy of
ERISA as expressed by Congress, then the case should be decided in
conformity with the common law. Third, if the relevant provision of
ERISA specifically anticipates the application of common law principles, then the common law should control.
A courts first step in any fiduciary breach case should be to determine whether another section of ERISA directly addresses the potential fiduciary duty. For example, ERISA provides very detailed disclosure rules. Thus, a claim that a fiduciary breached a duty to disclose
an early retirement window benefit that is under serious consideration should be dismissed.317 If Congress intended for courts to impose
disclosure requirements beyond those specifically set forth in ERISA,
it should have said so.
If ERISA does not provide specific rules, and the area is not directly
addressed by ERISA, then the result obtained under the common law
of trusts should be accorded significant weight by a court. For example,
in Donovan v. Cunningham, the ESOPs fiduciaries did not conduct an
independent investigation of the fair market value of the employer
stock the ESOP purchased.318 Rather, the fiduciaries relied upon an
independent appraisal that was more than a year old, even though they
knew that certain fundamental assumptions of the appraisal were no
longer valid. Citing the common law of trusts, the Fifth Circuit agreed
315. Varity Corp., 516 U.S. at 497.
316. 29 U.S.C. 1104(a).
318. 716 F.2d 1455 (5th Cir. 1983). In order to avoid a prohibited transaction, an
ESOP may not pay more than adequate consideration for employer stock it purchases.
ERISA 408(e)(1), 29 U.S.C. 1108(e)(1).
438
with the Secretary of Labor that the fiduciaries violated their duties of
loyalty and prudence.319
Cunningham is a perfect example of a case where courts should
look to the common law of trusts. No provision of ERISA specifically
addresses how a fiduciary must fulfill its duties of prudence and loyalty
in determining the price an ESOP pays for employer stock. Therefore,
the court should look to the common law of trusts for guidance on what
prudence and loyalty require. In Cunningham, those duties clearly
were not satisfied under the common law test, so the court was correct
to conclude that they were also not satisfied under ERISA.
Finally, ERISAs express language may require resort to the common law of trusts. For example, section 502(a)(3) of ERISA320 provides
that a participant, beneficiary, or fiduciary may sue to enjoin any act
or practice which violates any provision of Title I of ERISA or the terms
of the plan or to obtain other appropriate equitable relief. The term
other appropriate equitable relief should be interpreted in light of the
common law of trusts. For example, in Eaves v. Penn, the Second Circuit
upheld a district court order requiring rescission of a transaction.321
Citing the RESTATEMENT (SECOND) OF TRUSTS, the court noted,
Traditional trust law provides for broad and flexible equitable remedies in cases involving breaches of fiduciary duty. In addition to specific remedies for recovery of profits obtained by fiduciaries by use of
plan assets, trust law provides the alternative remedy of restoring
plan participants to the position in which they would have occupied
but for the breach of trust.322
V. Conclusion
The common law of trusts should play an important role in developing the federal common law of ERISA in fiduciary breach cases. However, courts have been too willing to apply common law rules to reach
desired results, even when those rules are inconsistent with the language and structure of ERISA. The common law should be used as a
guide in determining the meaning of ERISAs fiduciary duty provisions,
but not as a way to achieve outcomes that infringe on the decisions and
compromises Congress made in the decade-long development of ERISA.
319.
320.
321.
322.
716 F.2d at 1464, 1473-74.

29 U.S.C. 1132(a)(3).
587 F.2d 453.
Id. at 463 (citing RESTATEMENT (SECOND) OF TRUSTS 205, cmt. a (1959)).
439
John Rocker and Employee

Discipline for Speech
Lewis Kurlantzick*
I. The Commissioner of Baseballs Disciplinary
Authority: Rocker and Just Cause
John Rockers statements in a Sports Illustrated interview, Commissioner of Baseball Bud Seligs suspension and fine of the Atlanta
Braves pitcher for those comments, and the arbitral disposition of
Rockers grievance in the wake of that discipline raise vexing issues
about the reach of the Commissioners disciplinary authority. More generally, the case also points to the little-noticed but significant question
of how Rocker would have fared under various state statutes designed
to limit private employer interference with employee speech interests.
In a December 27, 1999, Sports Illustrated article, Rocker offered
opinions belittling New York City, welfare mothers, homosexuals, foreigners, and other minority groups. He also called an overweight black
teammate a fat monkey.1 After speaking with Rocker, Commissioner
Selig, citing the best interests of baseball, condemned the pitchers
behaviornoting that Rocker had dishonored the Braves and Major
League Baseballand imposed the sanction of a seventy-three day suspension, including all of spring training, and a $20,000 fine. Selig also
ordered the player to undergo sensitivity training. Rocker, through his
union representatives, objected to the imposition and severity of this
punishment, and the Major League Baseball Players Association
(MLBPA) immediately filed a grievance claiming that the discipline
was without just cause.
The Commissioners authority is significantly circumscribed by the
just cause provision of the collective bargaining agreement with the
players union.2 Accordingly, an aggrieved player, such as Rocker, can
* Lewis Kurlantzick is a Professor of Law at the University of Connecticut School
of Law where he regularly teaches a seminar on Sports and the Law.
1. See Jeff Pearlman, At Full Blast, SPORTS ILLUSTRATED, Dec. 27, 1999, at 60.
2. Basic Agreement Between The American League of Professional Baseball Clubs
and The National League of Professional Baseball Clubs and Major League Baseball
Players Association, Art. XII(A) (1997) (Discipline: Just Cause):
The Parties recognize that a Player may be subjected to disciplinary action
for just cause by his Club, League or the Commissioner. Therefore, in Grievances regarding discipline, the issue to be resolved shall be whether there has
been just cause for the penalty imposed.
If discipline imposed upon a Player is determined to be improper by reason of a final decision under this Grievance Procedure, the Player shall
promptly be made whole.
440
have an independent arbitrator ultimately determine whether there

has been just cause for the penalty imposed.3 And, indeed, the arbitrator who reviewed Seligs discipline found that it was excessive and
consequently reduced the suspension to the first fourteen days of the
regular season. The arbitrator further concluded that under the Major
League Agreement the Commissioner is not empowered to levy a fine
of more than $250 in this type of disciplinary setting. (The arbitrator
let stand the sensitivity training requirement.)
The protection afforded by the just cause limitation, which is designed to curb arbitrary employer action, is particularly consequential
in the setting of professional sports where the employment effect of a
Commissioners ruling, due to its industry-wide character, is more
sweeping than an act of management discipline in a more conventional
industry. For example, imagine an experienced Travelers Insurance
Company employee who is well-paid but has limited competence outside insurance. Fortunately for him, market forces tend to limit the
potential for abusive treatment by his employer and provide him with
options if he is maltreated. Employment opportunities at other insurance companies affect Travelers handling of the employee, and they
offer comparable job possibilities if Travelers dismisses him. This market constraint, though, does not operate in professional sports because
a Commissioner suspension amounts to a ban on hiring by all employers in the industry.4
The just cause assessment involves two related, central questions.
First, what sort of behavior warrants discipline; i.e., is the conduct legitimately a concern of the employer? Second, what form and level of
sanction are apt; i.e., is the discipline excessive? Rockers case presented both issues.
In his comments, Rocker did not denigrate his employer. He did
not criticize the operations of the Braves or the League. He did not
disparage his employers product. Nor did he question the competence
of supervisory employees (e.g., umpires). Indeed, the only mention by
Rocker of a member of the baseball universe was a reference to a black
3. Id.
4. Indeed, in the case of managerial employees, for example, a team manager, the
industry-wide employment effect of Commissioner disciplinein effect, a concerted refusal to dealis similarly severe. But, in treating this class of employees, his authority
is significantly less constrained as the employee has neither the protection of a union nor
recourse to antitrust law to challenge the legitimacy of managements collective interest
in his conduct due to baseballs limited exemption from antitrust scrutiny.
The case of an owner, such as former Cincinnati Reds executive Marge Schott, presents a markedly different situation. First, since she is in a position to hire people, there
is a legitimate collective concern that these hires might reflect her bigoted views. More
important, in essence, the owners are the source of the rules applied by the Commissioner. Thus, an owner has input in the formulation of these rules, and, in the end, the
Commissioner is accountable to the owners, who employ him. Thus, an owners vulnerability to unjust treatment is decidedly less than that of a player.
John Rocker and Employee Discipline for Speech
441
teammate as a fat monkey, without specific identification of the individual. In short, his conduct squarely presents the question of the
limit of the Commissioners authority to regulate players off-field behavior. That regulation is problematic as it affects the personal liberty
and privacy of players, and therefore, the answer to the question plainly
demands great caution.
The response that arbitrators have given to this difficult question is
to insist on a demonstrable connection between the conduct and harm
to the employers business interests. And it is in the identification of
exactly what behavior counts and the level of proof of harm required that
arbitral law implicitly and critically defines and values an employees
liberty interest and weighs it against management prerogatives.
The discipline situation probably easiest to justify is when the
misconduct away from the workplace bears on the employees competence or trustworthiness, casting doubt on his ability to continue to
perform his job adequately and thereby interfering with the employers
ability to operate the business successfully. An example would be the
discharge of a plant guard who has been convicted of armed robbery or
an employee who regularly ingests drugs shortly before coming on duty.
Another, more precarious grounding of disciplineand the one
Rockers case highlightsdisapproves of off-duty employee behavior
which tarnishes the reputation of the company or its products. This
reputational defense is more plausible when an entertainment product
with high public visibility is involved;5 and this image justification was
at the center of the Commissioners brief for his action. Indeed, that
line of argument has elicited sympathy from arbitrators passing on
challenges to Commissioner discipline for off-field drug activity.6 And
if the Braves had been able to offer objective proof of serious economic
harm such as cancellation of season ticketsno easy taskthe Commissioners case would have been strengthened. Moreover, in recent
years the National Hockey League (NHL) has disciplined players for
voicing racial slurs, with suspensions ranging from one to three games;
though these instances of verbal abuse occurred on the ice so that justification for league action, e.g., the threat of game disruption, is easier
to accept.
The arbitrators validation of Seligs authority to act, but reduction
of the penalty imposed, was not surprising in light of both the general
5. In this respect compare the case of off-duty bigoted remarks by an assembly line
worker in a widget factory. The Uniform Players Contract, section 7(b)(1), provides that
a baseball club may terminate a player if he shall . . . fail, refuse or neglect to conform
his personal conduct to the standards of good citizenship and good sportsmanship.
6. See, e.g., Kuhn v. Major League Baseball Players Assn (Willie Wilson, Jerry
Martin), Gr. Nos. 84-1 & 84-2 (Apr. 3, 1984) (Bloch, Arb.). In a number of these cases,
though, while the arbitrator accepted the premise that player use of drugs is a matter of
legitimate concern regarding the best interests of baseball, he found the sanction imposed disproportionate to the offense and, accordingly, reduced it.
442
state of just cause jurisprudence on off-site employee speech and particular prior arbitral treatment of Commissioner discipline of off-field
drug offenders. The importance of spring training for a pitchers career
and the fact that the suspension ordered was greater than that prescribed for some drug users undoubtedly contributed to the judgment
of excessiveness. In addition, the severity of the penalty for comments
in a magazine might have appeared particularly out of line in an industry in which employees are expected to speak regularly with the
press. While the substantial decrease in the sanction was a major
accomplishment for the union, it had grounds for disappointment as
well, as it had argued that just cause for any discipline was lacking.
Indeed, the decision can be viewed as precedent for the proposition
that Commissioner disciplinary authority extends beyond drugs and
on-field incidents.
Of course, recognition of the existence of Commissioner authority
does not necessarily mean its invocation in these circumstances was
wise. Indeed, Selig might have been better served by a decision to condemn Rockers venomous remarks; to emphasize that Rocker spoke for
himself alone and not as a representative of Major League Baseball; to
acknowledge the value of personal liberty though it may, on occasion,
be abused; and to avoid the likely future of considerable difficulties in
fashioning consistent disciplinary responses in other speech cases.7
II. The Relevance (or Irrelevance) of Federal Civil Rights
Laws: Discrimination in Employment and Public
Accommodations
Attorney Lewis Steel has suggested that Rockers behavior implicates federal civil rights legislation and that the discipline he received
was a legitimate response to the dictates of these laws.8 More particularly, he contends that the Braves were obliged to discipline Rocker in
order to preclude team liability for (1) employment discrimination on
the basis of race, i.e., the creation of a hostile working environment
under Title VII of the 1964 Civil Rights Act;9 and (2) discrimination in
the enjoyment of the services and facilities of a place of public accommodation, i.e., discrimination against potential customers on the basis
of race or color under Title II of the 1964 Civil Rights Act.10 While
Steels suggestions are distinctive, their validity is dubious at best.
7. Important extra-legal sanctions in the clubhouse would still have operated.
Following the SPORTS ILLUSTRATED interview, Rocker was shunned by his teammates.
In spring training and early in the season, his teammates largely wanted nothing to do
with him. It took almost an entire season for him to shed his status as a pariah in the
Braves clubhouse.
8. Lewis M. Steel, Where Rockers Rights End, N.Y. TIMES, Feb. 12, 2000, at A15.
If Steel is correct, then state civil rights laws may also have bearing.
9. 42 U.S.C. 2000e-2(a)(1) (1994).
10. 42 U.S.C. 2000a (1994).
443
It is true that federal law imposes liability on employers for the

boorish conduct of employees in the workplace that has made life miserable for other employees. More precisely, an employer is responsible
for workplace harassment by co-workers if the employer knew or
should have known of the harassment and failed to take corrective
action.11 In light of this threat of liability, employers are sensibly alert
to move aggressively to restrain and monitor employee conduct that
might provide the foundation for hostile environment claims by other
employees.
However, even accepting that comments not fairly attributable to
the employer and uttered far from the workplace are material, under
accepted judicial standards, a failure to impose stiff discipline on
Rocker would not have created a significant risk of liability for the
Braves. The bulk of Rockers offensive comments in the Sports Illustrated interview expressed severe distaste for non-English speaking
foreigners. He made only one remark about a fellow employee, referring
to a black teammate as a fat monkey.
Yet to constitute a Title VII violation based on race, an employee
must face a workplace permeated with discriminatory intimidation,
ridicule, and insult that is sufficiently severe or pervasive so as to alter
the conditions of the victims employment and create an abusive working environment as judged by a reasonable person.12 Rockers conduct,
however distasteful it may have been to his teammates, hardly produced such a harassing condition. In determining whether conduct is
actionable, courts have generally looked to four factors: (1) the frequency of the discriminatory conduct; (2) its severity; (3) whether it is
physically threatening or humiliating, or a mere offensive utterance;
and (4) whether it unreasonably interferes with an employees work
performance.13 Rockers behavior was neither pervasive, nor severe, nor
physically threatening. It cannot even be characterized as an episodic
pattern of antipathy based on race. A conclusion that Rockers conduct,
assessed objectively, intimidated his teammates and interfered with
their play is untenable. Rockers comments to a magazine writer simply
do not approach the extreme, persistent, and unwelcome forms of speech
that federal judges have treated as subject to regulation.
Moreover, the Braves could have taken prompt and effective actionand thereby legally protected itselfwithout imposing on Rocker
the kind of severe sanctions that Commissioner Selig did. Thus, for
example, they might have counseled Rocker about the sensitivity of
11. E.g., Reed v. A.W. Lawrence & Co., 95 F.3d 1170, 1180 (2d Cir. 1996); Equal
Employment Opportunity Commission, Guidelines on Discrimination Because of Sex, 29
C.F.R. 1604.11(d) (2000); HAROLD S. LEWIS, JR., CIVIL RIGHTS AND EMPLOYMENT DISCRIMINATION LAW 190 (1997).
12. E.g., Harris v. Forklift Systems, Inc., 510 U.S. 17 (1993).
13. See id. at 23.
444
the matter, admonished him that such conduct would not be tolerated,
and warned him of the disciplinary consequences of another such
incident.
Admittedly, hostile workplace law is somewhat mushy. The relevant factors are nonexhaustive and unweighted; severe, pervasive,
and abusive are imprecise terms. The contours of the violation are
vague. Also, it is the totality of circumstances that determines whether
incidents collectively amount to a harassing environment. Accordingly,
since the focus of the law is on the cumulative behavior of all employees,
the employer will be inclined to restrain any comment that might advance a hostile environment even when the comment by itself does not
generate the environment. The resulting uncertainty and concern for
the aggregate picture might well lead a prudent employer, anxious to
avoid litigation, to act preventively and to over-suppress employee
speech by restricting any statement that might contribute to a hostile
environment. Employers, after all, have no general interest in preserving employee speech interests unrelated to efficiency.
Yet, even if we assume that rational, cautious employers will engage in some degree of overregulation of employee speech, there was
no need for the Braves to severely discipline Rocker. The aggregation
problem was not present in the Rocker case, and his behavior was not
sufficiently egregious to be either actionable or worrisome. I am not
suggesting that the Braves should not have responded in some fashion,
but a failure to seriously discipline Rocker would not have grounded a
credible claim of racial employment discrimination due to the creation
of an objectively hostile work environment.
Mr. Steels Title II contention is similarly unpersuasive. First, it is
quite a stretch to read Rockers comments as designed to drive black
(and other minority) customers from the Braves stadium. Also, it is
clear that Rocker was speaking personally in the interview and not on
behalf of the Braves or Major League Baseball. So it can hardly be said
that the Braves denied or intend to deny the full and equal enjoyment
of its facilities because of racial discrimination. Moreover, and in any
case, the Braves, again, can respond effectively and protect the team
from liability without imposing severe discipline on Rocker. To counter
any potential perception of discrimination, the team could disavow
Rockers insensitive remarks; make it clear that he is not speaking for
the team; declare its own contrary values; and publicize that all patrons, no matter what their color, are sought and welcome at Turner
Field and will be admitted and served without differentiation.
Under the Civil Rights Act, an employer is not obliged to change
the beliefs of employees. The focus is on behavior. Thus, the Braves,
like any other employer, need not dismiss all Klu Klux Klan members.
Indeed, any other reading of the statute would swallow up the interest
in freedom of association.
445
III. State Statutes

A weighty and unexamined issue is the treatment of Rockers behavior under state legislation enacted to limit employer interference
with employee speech interests. A few states, such as Massachusetts,
afford a degree of such protection under their Civil Rights Acts.14 But
the most explicit provision, one specifically addressed to the employeremployee relationship, exists in Connecticut. That lawrare in the
United Statesshields employees from retaliatory action grounded in
the employees exercise of enumerated constitutionally protected
rights, including freedom of speech. It states,
Any employer . . . who subjects any employee to discipline or discharge on account of the exercise by such employee of rights guaranteed by the first amendment to the United States Constitution or
section 3, 4 or 14 of article first of the Constitution of the state, provided such activity does not substantially or materially interfere with
the employees bona fide job performance or the working relationship
between the employee and the employer, shall be liable to such employee for damages caused by such discipline or discharge, including
punitive damages, and for reasonable attorneys fees as part of the
costs of any such action for damages.15
Could the Braves discipline Rocker without liability if this provision

applied? A proper reading of the statute yields a negative answer.
Since any discipline would be on account of Rockers exercise of his
free speech right,16 the central interpretive issue is the meaning to
be given to the qualifications of the proviso. Did Rockers activity substantially or materially interfere with his job performance or his working relationship with the team? Does Rockers colloquy interfere with
his job performance? Clearly the answer to these questions is no if
his job is defined as being a relief pitcher. His ability to retire opposing
batters is not adversely affected by the views he expressed. However,
baseball players do commit themselves contractually to conform their
14. See MASS. GEN. LAWS ch. 12, 11I (1999).
15. CONN. GEN. STAT. 31-51q (1999).
16. While there has been some judicial disagreement about whether the law reaches
workplace expression, there is no doubt that off site speech such as Rockers is within its
parameters. Moreover, while in some cases the factual issue of causation has proved
troublesome for complaining employees, the causal link between Rockers comments and
his discipline is patent. The Connecticut Supreme Court has interpreted the statute to
protect only an employee speaking as a citizen on matters of public concern. See Daley
v. Aetna Life & Cas. Co., 249 Conn. 766 (1999). Thus, it does not protect one who speaks
on a matter only of personal interest, such as the terms and conditions of his employment,
and an employer is therefore free to discipline an employee for making comments critical
of the employers practices or expressing grievances about the circumstances of his employment. Rocker, in his interview, quite clearly was not speaking in his capacity as an
employee to express grievances about his employment situation; but rather, he spoke as
a citizen, addressing a matter of public concerni.e., his belief and the belief held by
others that New York City is home to large numbers of unsavory and repugnant groups
of people.
446
personal conduct to standards of good citizenship and good sportsmanship. And Rockers job performance might be seen to include a measure
of respect for teammates in a small group, cooperative endeavor. But
these constructions run into serious empirical and conceptual difficulties in Rockers case. In his interview, Rocker barely mentions and does
not criticize the Braves. Indeed, his only mention of a member of the
organization was a reference to a teammate as a fat monkey. As previously noted, his comments hardly qualify as fighting words, much
less the creation of a hostile work environment. And there have been
no disruptive responses by teammates to the article. In addition, to
recognize the vague references to good citizenship in the Uniform
Players Contract as effective limits on employee protection would be
to gut the thrust of the statute, which is designed to prevent the crude
use of economic power to quash speech distasteful to the owner but not
deleterious to the company.
Similarly, it is difficult to see how Rockers comments could substantially interfere with his working relationship with his employer.
Rocker did not, after all, publicly criticize or demean the Braves or Major
League Baseball. Nor, quite clearly, are his remarks part of a private
personnel dispute with the employer. While he may have lost the respect
of his employer as a person, his working relationship with the Braves as
an athlete is unlikely to be affected by his comments. Finally, while the
rooting of discipline in reputational harm to the employer is plausible,
to accept hostility to views publicly expressed by an employee as warrant
for discipline is to subvert the basic purpose of the statute.
The Connecticut statute undoubtedly imposes a cost on the Braves,
who are placed in a difficult position. Indeed, most employers, including
Connecticut employers, would likely be surprised to learn of this restriction on their disciplinary authority, as the state has generally offered little protection for speech by private employees in the United
States. But the decision to limit employer control over its workforce so
that it is not exercised in a way so as to inhibit speech on controversial
issues is understandable. The workplace, where people spend much of
their day, is an important locus of public discourse. Much employee
speech is not work-related, but rather is devoted to conversation about
public matters, sports, politics, and the issues of the day. (In fact, the
use of political speech by employees as evidence to support an employment discrimination claim under federal or state law raises serious
constitutional questions under the First Amendment.) Indeed, if recognition of the value of free speech rests implicitly on an agreement
that we live in a society with people whose views we dislike, why should
working with them be a major problem? The Connecticut statute expresses disagreement with existing employment law, which gives employers too much authority to control employees speech on every subject, not just on matters of race and sex.
447
Yet the statute might be better constructed if it took account of

values strongly held and expressed by the employer, central values that
conflict with an employees stated views. A businesss interest in expressive association may be undercut by the forced acceptance of an
employee who advocates or epitomizes a position inconsistent with that
adopted and advocated by the organization. For example, a law firm
strongly and outspokenly committed to equal opportunity encounters
an employee who speaks publicly in favor of discrimination. However,
recognition of such an exception should require a specific, announced
position by the employer, and one which goes beyond its interest in
maximizing profits.17 The Braves contractual call for good citizenship
would be inadequate as a foundation for exclusion of an employee.
Rather, vindication of an interest in expressive association should require the identification of a clear position to be advocated over time in
an unequivocal way.
IV. Preemption of State Legislation?
Though the Connecticut statute, if applicable, would protect Rocker,
its application to an employee covered by a collective bargaining agreement with a just cause provision raises a difficult preemption question.
Is the state legislation preempted by federal labor law, in particular by
section 301 of the Labor-Relations Management Act (LRMA)?18
A confident answer is not possible, as much is in doubt in the preemption area. The preemption claim argues, in essence, that union and
employer have negotiated a collective bargaining agreement under the
aegis of the federal labor law regime. That agreement includes a just
cause provision which addresses the limits of employer authority to
discipline on account of employee speech, and arbitration decisions interpreting that phrase constitute the law of the shop. Accordingly, the
Connecticut statute must yield in service to the goal of a unified federal
body of labor-contract law. This argument surely is tenable. Yet, the
Supreme Courts most recent pronouncements about section 301 preemption19 indicate that even though the state court action and the arbitration grievance would adjudicate the same facts, federal law does
not preempt if the state action, implementing the provision of minimum
substantive guarantees to individual workers, does not require interpretation of the collective bargaining agreement. Under that test, the
Connecticut statute would seem to survive.
Of course, the answer to the preemption question is unlikely to be
a very consequential one in the Rocker setting. That is, the relevant
17. This exception bears some resemblance to the exemptions, rooted in part in a
concern for intimate association, in fair housing and fair employment laws for businesses
with a small number of employees and for small owner-occupied housing units.
18. 29 U.S.C. 185 (1994).
19. See Lingle v. Norge Div. of Magic Chef, Inc., 486 U.S. 399 (1988).
448
evidence and standards of decision would be similar under both the

just cause clause and the Connecticut statute.
V. Conclusion
John Rockers jeremiad and managements response to his invective raise vital issues about the norms governing the employment relationship. More narrowly, the case highlights the limits on the disciplinary authority of the Commissioner of Baseball. More generally, the
dispute forces attention to the question of the definition and desirability
of the law, arbitral and legislative, about the circumstances in which
speech by an employee, particularly expression occurring away from
the workplace, can be grounds for disciplinary action by an employer.
Unique and little-noticed state legislation affords protection for employee speech interests. However, the interaction between these state
directives and federal labor law is problematic; and, though it is unlikely that the state law is preempted, that conclusion is uncertain.
449
Applying the Supreme Courts

Affirmative Defense to Supervisor
Harassment
Cara Yates Crotty*
In 1998, the U.S. Supreme Court clarified the standards for holding
an employer liable for its supervisors creation of a hostile work environment. In Burlington Industries, Inc. v. Ellerth1 and Faragher v. City
of Boca Raton,2 the Court held that employers are vicariously liable for
an actionable hostile environment created by a supervisor.3 However,
when no tangible employment action is taken against the victimized
employee, the employer may raise an affirmative defense.4 This defense
has two prongs which the employer must show by a preponderance of
the evidence: (1) the employer exercised reasonable care to prevent
and correct promptly any sexually harassing behavior, and (2) the victimized employee unreasonably failed to take advantage of any preventive or corrective opportunities provided by the employer or to avoid
harm otherwise.5 Expanding on this, the Court stated,
While proof that an employer had promulgated an anti-harassment
policy with complaint procedure is not necessary in every instance as
a matter of law, the need for a stated policy suitable to the employment circumstances may appropriately be addressed in any case
when litigating the first element of the defense. And while proof that
an employee failed to fulfill the corresponding obligation of reasonable care to avoid harm is not limited to showing any unreasonable
failure to use any complaint procedure provided by the employer, a
demonstration of such failure will normally suffice to satisfy the employers burden under the second element of the defense.6
It is with these guidelines in mind that the courts have examined

plaintiffs claims of supervisor harassment that have not resulted in a
tangible employment action. Although the Supreme Courts statement
* Cara Yates Crotty is an Associate in the Columbia, South Carolina, office of Constangy, Brooks & Smith, L.L.C., a law firm representing exclusively management in all
aspects of labor and employment law. She received her J.D. from the University of South
Carolina School of Law, where she was a member of the South Carolina Law Review and
a legal writing teaching assistant.
1. 524 U.S. 742 (1998).
2. 524 U.S. 775 (1998).
3. Burlington, 524 U.S. at 765; Faragher, 524 U.S. at 807.
4. Id.
5. Id.
6. Burlington, 524 U.S. at 765; Faragher, 524 U.S. at 807-08.
450
of the affirmative defense appears quite straightforward, its application

by the appellate courts has resulted in several conflicts. The purpose
and scope of this article is to set forth and discuss published opinions
from the U.S. Courts of Appeals that have examined and analyzed the
evidence offered to satisfy this affirmative defense.
I. Whether the Employer Exercised Reasonable Care to
Prevent and Promptly Correct Any Harassing
Behavior
A. Affirmative Defense Satisfied
In Caridad v. Metro-North Commuter Railroad,7 the Second Circuit found that the employer satisfied the first prong of the affirmative
defense where it had an anti-harassment policy with a procedure for
filing complaints and where the company endeavor[ed] to investigate
and remedy problems reported by its employees.8 The plaintiff knew
about the sexual harassment policy, but failed to report her supervisors
harassment until she was confronted about her absenteeism.9 The company attempted to investigate her complaint, despite the plaintiffs refusal to provide specific details about the harassment or to otherwise
cooperate in the investigation and offered to transfer her to another
shift.10 The court held this was sufficient evidence to satisfy the first
prong of the affirmative defense.11
The Fourth Circuit in Brown v. Perry found that the employers
anti-harassment policy was sufficient to satisfy the first element of
the affirmative defense.12 The court noted that the first element could
be met with such a policy, but that mere promulgation of such a policy would not be adequate in all situations.13 To satisfy this element,
an employers policy must be both reasonably designed and reasonably effectual.14 The court concluded that the policy in this case,
which included a complaint procedure, was designed to deter harassment.15 The court held that where there is no evidence that an employer adopted or administered an anti-harassment policy in bad faith
or that the policy was otherwise defective or dysfunctional, the existence of such a policy militates strongly in favor of a conclusion that
the employer exercised reasonable care to prevent and promptly correct sexual harassment.16
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
191 F.3d 283 (2d Cir. 1999), cert. denied, 120 S. Ct. 1959 (2000).
Id. at 295.
Id. at 290.
Id.
Id. at 295.
184 F.3d 388 (4th Cir. 1999).
Id. at 396.
Id.
Id.
Id. (quoting Faragher, 524 U.S. at 807).
Applying Affirmative Defense to Supervisor Harassment
451
The court in Brown further noted that the employer took reasonable care to prevent further harassment by supporting the victim and
suggesting that she contact an Equal Employment Opportunity (EEO)
counselor.17 Her supervisors, to whom the plaintiff originally complained, acceded to her requests that the matter not be reported further
despite a policy requiring that all matters of harassment be reported
to appropriate officials.18 Because the victim had no difficulties working
effectively, did not want to pursue the complaint, and reported only a
single incident of harassment by a supervisor with whom she had only
limited contact, the court stated,
In these circumstances[,] offering immediate unconditional support
to the victim and suggesting that she pursue her EEO remedies constitutes an entirely reasonable effort to prevent further incidents.
That this effort proved unsuccessful is unfortunate, but it does not
mean that the effort was unreasonable. . . . The law requires an employer to be reasonable, not clairvoyant or omnipotent.19
The court also found that the employers corrective action, taken
after the plaintiff later filed a formal complaint, was reasonable.20 The
employer issued a restraining order prohibiting the alleged harasser
from having any contact with the victim and suspended the alleged
harasser for thirty days after an investigation.21 The court held that
no reasonable factfinder could conclude that the employer in this case
did not take reasonable corrective measures where the employers response ended the harassment and punished the alleged harasser for
his behavior.22
The Fifth Circuit in Scrivner v. Socorro Independent School District23 held that the employer satisfied the first element of the affirmative defense where its anti-harassment policy and its response to
the plaintiffs complaints were reasonable and vigorous.24 The court
noted that the school district investigated an anonymous complaint
that the school principal was sexually harassing the staff.25 The plaintiff did not make this complaint, and during a thorough investigation,
she denied that she had ever experienced harassment by the principal.26 Based on the investigation, the employer found no evidence to
support the allegations of harassment, but warned the principal that
he was to refrain from unprofessional behavior.27 Shortly thereafter,
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
Id. at 396.
184 F.3d at 396.
Id.
Id.
Id. at 397.
Id.
169 F.3d 969 (5th Cir. 1999).
Id. at 971.
Id. at 970.
Id.
Id.
452
the principal called the plaintiff a lesbian, and the plaintiff filed a complaint with the school district.28 After another investigation, the school
district found that the principals conduct could create a hostile environment, and it reassigned him to another job, after which the principal
resigned.29 The court noted that the school district responded with swift
investigations after each complaint, warned the principal about his behavior after the first complaint, and removed him after the second complaint.30 These actions were sufficient to satisfy the first element of the
affirmative defense.
In Shaw v. AutoZone, Inc.,31 the Court of Appeals for the Seventh
Circuit held that the first element of the affirmative defense was met
because the plaintiff had constructive notice of the employers antiharassment policy and the plaintiff did not complain about the alleged
harassment.32 Although the plaintiff testified that she had never seen
the employers sexual harassment policy, the evidence showed that she
received a copy of the policy, she was required to read and comply with
the policy, and she signed an acknowledgment form stating that she
would read and learn the policy.33 The court held that the plaintiff had
constructive knowledge of the policy and that actual knowledge, in
these circumstances, was not necessary.34 The policy was effective and
provided for several methods of lodging complaints.35 In addition, the
employer regularly conducted training sessions on sexual harassment.36 This all lead to the conclusion that the employer took reasonable care to prevent harassment.37 Noting that the first prong of the
affirmative defense also requires the employer to show that it reasonably responded to the complaint of harassment, the court found that,
because the plaintiff never complained, the employer had nothing to
which it could respond.38 Under these circumstances, the employers
efforts to prevent harassment were sufficient to satisfy the first element
of the affirmative defense.
In Savino v. C.P. Hall Co.,39 the employer availed itself of the
affirmative defense where it (1) posted its sexual harassment policy;
(2) provided procedures for reporting harassment; (3) promptly investigated the plaintiffs complaint and sought to remedy the situation by
reprimanding and suspending the supervisor; and (4) relocated the
28.
29.
30.
31.
32.
33.
34.
35.
36.
37.
38.
39.
Id.
169 F.3d at 970.
Id. at 971.
180 F.3d 806 (7th Cir. 1999).
Id. at 811-13.
Id. at 811.
Id.
Id. at 811-12.
Id. at 812.
180 F.3d at 812-13.
Id.
199 F.3d 925 (7th Cir. 1999).
453
plaintiff to an area away from the harasser.40 The Seventh Circuit held
that this evidence was sufficient to establish entitlement to the first
element of the affirmative defense.41
The Savino court rejected the plaintiffs argument that the employer was not entitled to the affirmative defense because additional
harassment occurred after the plaintiff made her first complaint.42 The
court noted that, Title VII does not require that the employers responses to a plaintiffs complaints of supervisory sexual harassment
successfully prevent[] subsequent harassment, only that the employers
actions were reasonably likely to check future harassment.43
The employer in Montero v. AGCO Corp.44 satisfied the first element of the affirmative defense where it had an anti-harassment policy
that defined sexual harassment, identified the individuals whom employees should contact if they were sexually harassed, described disciplinary measures the company could use in response to harassment,
and stated that retaliation would not be tolerated.45 The plaintiff admitted that she had received an employee handbook containing the
policy, a memorandum describing the policy, and two additional pamphlets explaining the policy.46 The Ninth Circuit held that this evidence
was sufficient to show that the employer took reasonable care to prevent
harassment.47 The employer also took reasonable care to promptly correct harassment where the company responded to the plaintiffs complaint, investigated her allegations within eleven days of receiving the
complaint, and terminated and disciplined the offending employees.48
In Madray v. Publix Supermarkets, Inc.,49 the plaintiffs contended
that the employer did not satisfy the first element of the affirmative
defense because the complaint procedures in the employers antiharassment policy identified only one person in each store, the store
manager, to whom employees could make complaints of harassment.50
Because the alleged harasser in this case was the store manager, the
plaintiffs claimed that the policy was inadequate.51 The Eleventh Circuit looked to a 1990 policy statement from the Equal Employment
Opportunity Commission which stated that complaint procedures
should be designed to allow employees to complain of harassment with-
40.
41.
42.
43.
44.
45.
46.
47.
48.
49.
50.
51.
Id. at 932-33.
Id.
Id. at 933.
Id.
192 F.3d 856 (9th Cir. 1999).
Id. at 862.
Id.
Id.
Id at 862-63.
208 F.3d 1290 (11th Cir. 2000).
Id. at 1298.
Id.
454
out first having to complain to the offending supervisor.52 Because the

employer in this case had designated company representatives outside
of the store to whom employees could first complain and had even established a toll-free telephone number for making complaints, the court
held that the policy was adequate and met the requirements of the first
prong.53
The plaintiffs in Madray also asserted that the employer did not
take reasonable care to correct sexual harassment because its middlelevel managers did nothing to stop the harassment when the plaintiffs
complained to them.54 The court, however, found that the company was
not legally on notice of the alleged harassment until the plaintiffs notified one of the individuals identified in its harassment policy.55 [O]nce
an employer has promulgated an effective anti-harassment policy and
disseminated that policy and associated procedures to its employees,
then it is incumbent upon the employees to utilize the procedural
mechanisms established by the company specifically to address problems and grievances. 56 Thus, the court held that the employer was
not placed on notice of [the] harassing behavior by the plaintiffs informal complaints to individuals not designated by Publix to receive or
process sexual harassment complaints.57 The court further stated that
the manner in which the plaintiffs related their complaints to the middle managers, in social contexts and informally without requests that
action be taken, was also not sufficient to place the company on notice
that the plaintiffs expected the employer to address their complaints.58
Thus, because the employer promptly responded when the proper officials were notified of the harassment, it satisfied the first prong of the
affirmative defense.
B. Affirmative Defense Not Satisfied
The Court of Appeals for the Second Circuit in Richardson v. New
York State Department of Correctional Service59 held that reasonable
jurors could disagree about whether the employer exercised reasonable
care to prevent and correct harassment.60 The plaintiff alleged twelve
incidents of racial harassment, ten by co-workers and two by supervisors.61 All but one incident was reported to management.62 Because the
employer responded to some, but not all, of the alleged co-worker in52.
53.
54.
55.
56.
57.
58.
59.
60.
61.
62.
Id.
Id. at 1298-99.
Id. at 1299-1300.
208 F.3d at 1300.
Id. (quoting Farley v. Am. Cast Iron Pipe, 115 F.3d 1548, 1554 (11th Cir. 1997)).
Id. at 1300.
Id. at 1300-01.
180 F.3d 426 (2d Cir. 1999).
Id. at 439.
Id. at 441.
Id.
455
stances of harassment, the court found that reasonable minds could

disagree as to the effectiveness of the employers response.63 There was
a question of fact regarding the employers response to the co-worker
harassment, and the court held that the employer could not assert that
as a matter of law it exercised reasonable care under Faragher.64
Thus, the employer was not entitled to summary judgment on the affirmative defense.65
In Hurley v. Atlantic City Police Department, the Third Circuit
ruled that the employers policies prohibiting harassment were not sufficient to establish the first element of the affirmative defense.66 The
evidence showed that, although the employer issued written antiharassment policies, (1) it failed to enforce them, (2) it painted over
offensive graffiti that continued to appear every few months, and (3) it
did not investigate and punish harassment as it did other forms of
misconduct.67 Moreover, the plaintiffs supervisor was aware of much
of the harassment, but failed to take any action to stop it.68 The court
rejected the employers argument that the plaintiff should have progressed through five levels of management before filing suit because
there was extensive testimony regarding the ineffectiveness of these
mechanisms.69 The court further ruled that the plaintiff had no obligation to try all these mechanisms, because her immediate supervisor,
who was responsible for preventing and redressing harassment pursuant to the ACPDs own policy, was on notice of the harassment.70
The Fourth Circuit rejected summary judgment on an employers
use of the affirmative defense in Smith v. First Union National Bank.71
Noting the standard it pronounced in Brown, the court found that the
employer could not satisfy the first element of the defense as a matter
of law because its anti-harassment policy was otherwise defective or
dysfunctional.72 The companys policy provided, in part, It is First
Unions policy to prohibit sexual harassment of our employees. Sexual
harassment includes any unwelcome offensive sexual advances, requests for sexual favors, and other verbal or physical conduct of a sexual nature.73
The plaintiffs allegations, however, involved gender-based harassment that was not sexual in nature, such as comments demeaning to
63.
64.
65.
66.
67.
68.
69.
70.
71.
72.
73.
Id. at 442.
Id.
180 F.3d at 443.
174 F.3d 95 (3d Cir. 1999), cert. denied, 528 U.S. 1074 (2000).
Id. at 118.
Id.
Id.
Id.
202 F.3d 234 (4th Cir. 2000).
Id. at 245 (quoting Brown, 184 F.3d at 396).
Id.
456
women.74 The plaintiff alleged that she did not interpret the policy to
encompass the harassers conduct, and the court found that her interpretation was reasonable because the policy did not identify discrimination on the basis of gender as prohibited conduct.75 Thus, the policy
was not as a matter of law sufficient to prevent the harassment of which
the plaintiff complained.76
Continuing with its analysis, however, the court stated that [a]
deficient policy does not necessarily negate an employers affirmative
defense in all cases if there is other evidence that it took steps to prevent harassment.77 Here, the plaintiff alleged that the companys management discouraged her from complaining about a supervisors harassment when she was told by the harassers boss that if she ever
wanted to get anywhere . . . [Id] never complain to human resources. 78 The court stated that, [e]mployers cannot satisfy the first
element of the Faragher-Ellerth affirmative defense if its managementlevel employees are discouraging the use of the complaint process.79
The court in Smith further found that the employer did not take reasonable care in correcting the harassment of which the plaintiff complained.80 The investigation of the harassment complaint focused on
the offending supervisors management style rather than the specific
allegations of harassment.81 Thus, a jury could find that the employer
failed to satisfy the affirmative defense, and summary judgment on that
basis was not appropriate.
Similar to one of the findings in Smith, the Fifth Circuit in Walker
v. Thompson82 found that the employers policy was inadequate because, although it addressed sexual harassment, there were no written
complaint procedures for reporting racial harassment.83 The lack of
such a written policy procedure at [the company] certainly weighs in
the [plaintiffs] favor in determining whether there is a genuine issue
of material fact with regard to whether [the company] exercised reasonable care to prevent any racially harassing behavior.84 The court
also found that the employer did not establish as a matter of law that
it took reasonable care to correct the harassment where the president
of the company put one of the alleged harassers in charge of the inves74.
75.
76.
77.
78.
79.
80.
81.
82.
83.
84.
Id.
Id.
Id.
202 F.3d at 245.
Id.
Id.
Id.
Id.
214 F.3d 615 (5th Cir. 2000).
Id. at 627.
Id.
457
tigation, which was not done thoroughly and which purportedly revealed no harassment.85
The Sixth Circuit, in Hafford v. Seidner,86 found that the employer
did not satisfy the first element of the affirmative defense as a matter
of law, where it knew of racial threats and harassment, but failed to
act appropriately.87 The employers policy against discrimination was
not sufficient in light of this evidence.88 After the plaintiff received
threatening telephone calls that he believed were based on his race, he
reported them to his employer.89 The court found that the employers
general announcement regarding improper use of the internal telephones was not sufficient where no employees were personally interviewed.90 When the plaintiff identified the specific individuals making
the telephone calls, the employer still failed to investigate those individuals.91 The court thus determined that a factfinder could conclude
that the employer did not take prompt and effective corrective action.92
In Jackson v. Quanex Corp., the companys inadequate response to
reports of racial harassment precluded summary judgment.93 While the
offending supervisor was reprimanded, the Sixth Circuit noted his extensive history of using racial epithets and demeaning language, with
no apparent management response.94 The Court held that [r]easonable
minds could surely have differed as to whether Quanex exercised reasonable care to correct racial harassment when it merely reprimanded
a supervisor whose offensive conduct was known to management.95
The court noted that the employers pattern of unresponsiveness . . .
reminds us that if a remedy is ineffectual, liability will attach . . . [and]
an employers actions will not necessarily shield it from liability if harassment continues. 96
The Eighth Circuit, in Sims v. Health Midwest Physician Services
Corp.,97 found that the employer could not establish that its response
to the sexual harassment was reasonably prompt as a matter of law.98
85.
86.
87.
88.
89.
90.
91.
92.
93.
94.
95.
96.
97.
98.
Id.
183 F.3d 506 (6th Cir. 1999).
Id. at 513-14.
Id.
Id. at 514.
Id.
Id.
183 F.3d at 514.
191 F.3d 647 (6th Cir. 1999).
Id. at 664.
Id.
Id. at 665 (quoting Fuller v. City of Oakland, 47 F.3d 1522, 1529 (9th Cir. 1995)).
196 F.3d 915 (8th Cir. 1999).
Id. at 921.
458
Employees had reported allegations of sexual harassment to the Front

Office Coordinator, who had been designated by the clinic manager as
the individual who could address employee problems in her absence.99
The court held that reports to the Front Office Coordinator by the plaintiffs co-workers that a physician was harassing the plaintiff were sufficient to impute notice to the employer.100 Because the employer did
not take prompt steps after it received such notice, it was not able to
avail itself of the affirmative defense.101
Similarly, in Dees v. Johnson Controls World Services, Inc.,102 the
Eleventh Circuit found there was evidence that the employer had notice
of the alleged sexual harassment but did not take appropriate action.103
The plaintiff alleged that, after she filed a complaint with human resources, one of the human resources employees called her and stated
that the plaintiffs harassers were up to their old tricks again and
that the same complaints had been investigated years before.104 Another co-employee told the plaintiff that he had reported the harassment that the plaintiff was experiencing to human resources personnel
on multiple occasions, but nothing had been done in response.105 The
court held that a jury could infer that the employer knew about the
allegations before the plaintiff filed her complaint, but failed to take
any corrective action.106 Thus, the employer was not entitled to summary judgment on the affirmative defense.
II. Whether the Employee Unreasonably Failed to Take
Advantage of Any Preventive or Corrective
Opportunities Provided by the Employer or to Avoid
Harm Otherwise
A. Affirmative Defense Satisfied
In Caridad v. Metro-North Commuter Railroad, the plaintiff failed
to report her supervisors sexual harassment despite the companys procedures for lodging complaints.107 The Second Circuit rejected the
plaintiffs contention that her reluctance to report the harassment was
reasonable and that the employer was therefore not entitled to the affirmative defense.108 For such reluctance to be reasonable, it must be
based on apprehension of what the employer might do, not merely on
99.
100.
101.
102.
103.
104.
105.
106.
107.
108.
Id. at 917.
Id. at 919-20.
Id. at 921.
168 F.3d 417 (11th Cir. 1999).
Id. at 422-23.
Id.
Id. at 423.
Id.
191 F.3d at 290.
Id. at 295.
459
concern about the reaction of co-workers.109 Faced only with evidence

that one of the plaintiffs male co-workers told her that nobody cares
what happens to you and that she had walked into a lions den, the
court found that the plaintiff did not have a credible fear that her employer would not take her complaint seriously or that she would suffer
retaliation.110 Thus, the employer was entitled to the protection of the
affirmative defense.111
The court in Brown v. Perry held that to satisfy the second element
of the affirmative defense, an employer need not demonstrate that an
employee unreasonably failed to follow a complaint procedure or to
take advantage of any preventive or corrective opportunities provided
by an employer. 112 Rather, an employer can prove the second element
of the affirmative defense by demonstrating that the plaintiff employee
unreasonably failed . . . to avoid harm otherwise. 113 The court determined that the plaintiff in this case unreasonably failed to avoid harm
otherwise where, six months after the offending supervisor made sexual advances to her in a hotel room, she voluntarily remained alone
with him in his hotel room at another conference after a night of barhopping.114
In Scrivner v. Socorro Independent School District, the Fifth Circuit found that the plaintiff unreasonably failed to take advantage of
the employers sexual harassment policies where she did not complain
about the school principals behavior even when presented with an
express opportunity to do so.115 The employer had received an anonymous complaint about the principal and interviewed the plaintiff during its investigation.116 However, the plaintiff chose to lie, reporting
that she had not witnessed any sexually harassing conduct by [the principal] and that he treated her professionally. 117 The court stated,
[w]hen an employer initiates a good-faith investigation of charges of
discrimination, it must be able to rely on the evidence it collects. By
misleading investigators, [the plaintiff] thwarted the purposes of Title
VII and frustrated [the school districts] efforts to remedy past misconduct and prevent future harassment.118 Thus, the second element of
the affirmative defense was satisfied.
109.
110.
111.
112.
765).
113.
114.
115.
116.
117.
118.
Id.
Id. at 290, 295.
Id. at 295.
184 F.3d at 397 (quoting Faragher, 524 U.S. at 807; Burlington, 524 U.S. at
Id.
Id. at 397.
169 F.3d at 971.
Id. at 970.
Id. at 971.
Id. at 971-72.
460
In Shaw v. AutoZone, Inc., the Seventh Circuit held that the plaintiffs failure to complain about the sexual harassment was unreasonable.119 The plaintiff failed to follow the companys harassment policies
by reporting the harassment, by asking the offending supervisor to stop
his conduct, and by ignoring the companys three attempts to find out
why she quit her job.120 Although the plaintiff argued her failure to
report the harassment was reasonable because she did not feel comfortable enough with anyone in management to discuss the offensive
conduct, the court stated, [w]hile a victim of sexual harassment may
legitimately feel uncomfortable discussing the harassment with an employer, that inevitable unpleasantness cannot excuse the employee
from using the companys complaint mechanisms.121 The employees
subjective fears were not sufficient to alleviate her duty, and the employer met the affirmative defense.122
In Savino v. C.P. Hall Co., the employer satisfied the second element of the affirmative defense where the plaintiff did not complain
about the harassment for four months, where she failed to report all of
the alleged harassing conduct when she did complain, and where she
did not immediately report subsequent acts of harassment despite instructions to do so.123
The Ninth Circuit in Montero v. AGCO Corp. held that the second
prong of the affirmative defense was satisfied where the plaintiff waited
two years to complain about the sexual harassment despite her familiarity with the anti-harassment policy and the complaint procedures
and where she knew and had occasionally spoken to the individual to
whom she should have addressed her complaint.124 Although she had
knowledge of the policy and the opportunity to make a complaint, she
failed to do so.
The Eleventh Circuit in Madray v. Publix Supermarkets, Inc. found
that the plaintiffs unreasonably failed to use preventive and corrective
opportunities where they knew the appropriate complaint procedures
and understood whom they should contact according to Publixs sexual
harassment policy . . . [y]et . . . chose to complain informally to managers that were not authorized to receive such complaints under the
Publix sexual harassment policy.125 The court also rejected the plaintiffs argument that their complaints to middle managers were appropriate and sufficient because of the companys Open Door Policy.126
Because the Open Door Policy required employees to report their com119.
120.
121.
122.
123.
124.
125.
126.
180 F.3d at 813.

Id.
Id.
Id.
199 F.3d at 933.
192 F.3d at 863.
208 F.3d at 1301.
Id. at 1301-02.
461
plaints to higher level managers when the problems were not resolved,
and because the plaintiffs failed to do so with regard to their sexual
harassment complaints, the court found that they also unreasonably
failed to use the companys Open Door Policy.127 The court noted that
[a]n employer cannot use its own policies to insulate itself from liability
by placing an increased burden on a complainant to provide notice beyond that required by law, but decided, in this case, the plaintiffs
failure to utilize the complaint procedures provided to them was unreasonable.128 Thus, the employer established the second element of
the affirmative defense.
2. Affirmative Defense Not Satisfied
The employer in Watts v. Kroger Co. failed to establish the second
element of the affirmative defense as a matter of law.129 The employer
contended that the plaintiff unreasonably failed to avoid the harassment because she waited too long to complain about it.130 The plaintiff
alleged that her supervisor began harassing her upon his arrival at the
store in 1993 and that the harassment intensified in the spring of
1994.131 The court ruled that [a] jury could find that waiting until July
of [1994] before complaining is not unreasonable.132 The court also
rejected the employers argument that the plaintiff acted unreasonably
by filing a union grievance instead of complying with the reporting
procedures in the companys harassment policies.133
In Walker v. Thompson, the employer alleged that it satisfied the
second prong of the defense where the plaintiffs refused to agree to a
settlement agreement negotiated between the employer and the Equal
Employment Opportunity Commission after the plaintiffs had filed
charges of race discrimination.134 The court held that in light of the
[plaintiffs] testimony that the racial remarks and hostile actions continued after the internal investigation . . . we are not persuaded that
the [plaintiffs] refusal to sign the proposed settlement demonstrates
the second element of this defense as a matter of law.135
III. Discussion
As one would expect, the appellate courts are not in agreement on
all the issues. There is a conflict regarding whether an employers response must end the harassment in order to satisfy its burden under
127.
128.
1998)).
129.
130.
131.
132.
133.
134.
135.
Id.
Id. at 1302 (quoting Williamson v. City of Houston, 148 F.3d 462, 467 (5th Cir.
170 F.3d 505, 510 (5th Cir. 1999).
Id. at 510.
Id. at 507.
Id. at 510.
Id. at 511.
214 F.3d at 628.
Id.
462
the first element of the affirmative defense. In Brown v. Perry, the

Fourth Circuit held that, as long as the employers response is a reasonable effort to prevent additional harassment, it has met its burden.136 That a plaintiff experiences further harassment is not necessarily enough to show the employers actions were not reasonable. The
Seventh Circuit reached the same conclusion in Savino v. C.P. Hall
Co.137 The Sixth Circuit, however, in Jackson v. Quanex Corp., held
differently.138 Citing a Ninth Circuit case, the Sixth Circuit stated that
ineffectual actions by an employer will result in liability where the
harassment does not stop.139 Considering the Supreme Courts requirement that an employer must take reasonable care,140 the Sixth Circuit has set a standard that is unreasonably and unjustifiably high.
The circuit courts of appeals also disagree on whether a plaintiff
may report the harassment to anyone in management or whether the
report must be made to an individual identified in the anti-harassment
policy. This is obviously an important issue because an employers response to the complaint is judged from the time that it acquired legal
notice of the harassment. If a plaintiffs complaint to a managerial employee is not sufficient to place the company on notice, then it should
not be held liable for not responding to the complaint. The Eleventh
Circuit in Madray v. Publix Supermarkets, Inc., recognized this and
held that the plaintiffs complaints to middle managers were not sufficient to place the employer on notice where its anti-harassment policy
specifically identified several individuals to whom complaints should be
reported and provided a toll-free hotline.141 The evidence showed that
the plaintiffs knew about the policy and failed to use it.142 The company
was not legally obligated to respond to the complaints until they were
made to the appropriate officials.143 The Fifth Circuit, however, in Watts
v. Kroger Co. held that the plaintiff acted reasonably by filing a grievance
with the union and that she was not required to comply with the reporting procedures in the employers harassment policies.144
When an employer effectively promulgates an anti-harassment
policy so that employees have actual or constructive knowledge of the
reporting procedures, it is reasonable for the company to rely on the
reporting mechanisms for discovering complaints. As long as the reporting procedures provided are not unduly burdensome on the employee, the courts will most likely determine that it is unreasonable for
136.
137.
138.
139.
140.
141.
142.
143.
144.
184 F.3d at 396.

199 F.3d at 933.
191 F.3d at 665.
Id. (citing Fuller, 47 F.3d at 1529).
Burlington, 524 U.S. at 765; Faragher, 524 U.S. at 807.
208 F.3d 1290.
Id. at 1301.
Id. at 1300.
170 F.3d 505.
463
an employee with actual or constructive knowledge of the policy to fail

to utilize the procedures. Thus, to take advantage of this protection,
employers should disseminate a policy identifying specific individuals
to be contacted in the event an employee believes he or she is being
harassed and providing those individuals contact information.
Also worth noting is the Supreme Courts decision in Kolstad v.
American Dental Assn, regarding the standard for an employers liability for punitive damages.145 The Court held that an employer may
incur liability for punitive damages for acts of its managers that are
taken in the face of a perceived risk that its actions will violate federal
law.146 However, as a defense to its managers action, an employer can
demonstrate that it never acted in reckless disregard of federally protected rights147 when it has undertaken . . . good faith efforts at Title
VII compliance.148 Thus, the same inquiry for determining whether an
employer satisfies the first prong of the Ellerth/Faragher affirmative
defense is relevant for assessing an employers liability for punitive
damages. One court has held that to avoid punitive damages, adoption
of anti-discrimination policies is important, but education of supervisory personnel on those policies is essential to show an employer endeavored to prevent discrimination.149
Practitioners will undoubtedly receive more guidance in this area
of the law as the courts continue to wrestle with these issues. Although
the Supreme Court has clarified the standard for assessing employer
liability for supervisor harassment, many of the old rules of the game
still apply to employers: prepare and disseminate an effective antiharassment policy, provide numerous avenues for reporting complaints,
and respond swiftly and adequately to any complaints of harassment.
145. 527 U.S. 526 (1998).

146. Id. at 536.
147. Id. at 544 (quoting Kolstad v. Am. Dental Assn, 139 F.3d 958, 974 (D.C. Cir.
1998), vacated by 527 U.S. 526).
148. Id. at 544.
149. See Equal Employment Opportunity Commn v. Wal-Mart Stores, Inc., 187 F.3d
1241 (10th Cir. 1999).
465
Retaliatory Harassment against

Employees by Employees: Should
the Employer Be Liable?
Kari Jahnke*
I. Introduction
Anna used to enjoy her responsibilities and challenges as a customer
service representative and excelled at her job. However, she now dreads
work every day. Her work environment is full of hostility and anger toward her. Her co-workers make degrading and derogatory comments
regarding her African-American heritage, calling her names and berating her. Some have even threatened her. She is fearful and distraught
because the animosity and prejudice she endures stem from characteristics and stereotypes out of her control. She must work to support herself, but she cannot live up to expectations under such conditions.
After her work environment becomes intolerable, Anna finally
musters the courage to file a complaint of racial discrimination with
the Equal Employment Opportunity Commission (EEOC). She has to
relive all of the indecent and painful experiences to sustain her complaint. She believes, however, that it is worth it, since the law will
protect her. She is hopeful, because she believes she will be able to enjoy
and thrive in her job again. Unfortunately, after her co-workers learn
of her complaint, they further ostracize and chastise her. She is frustrated and experiences a sense of hopelessness. She feels she has no
other source of support or guidance and no legal protection from her
co-workers desire to punish her for resorting to anti-discrimination
laws. Does Anna have further legal recourse? Unfortunately, it depends
upon where she works.
Congress enacted Title VII of the Civil Rights Act of 19641 to protect employees from such discrimination previously described by affording them the right to work in an environment free from discriminatory intimidation, ridicule, and insult.2 The two primary purposes
* Kari Jahnke received two degrees from the University of North Dakota in 1996:
a B.S. in Aeronautical Studies and a B.B.A. in Airport Administration. She expects to
receive a J.D. from the University of Minnesota in May of 2001. She wishes to thank her
family for their continuous support and encouragement throughout her educational and
professional experiences.
1. Civil Rights Act of 1964 (codified as amended at 42 U.S.C. 2000e2000e-17
(1999)).
2. Meritor Sav. Bank, FSB v. Vinson, 477 U.S. 57, 65 (1986).
466
of Title VII are to ensure equal opportunities in employment by preventing discrimination and to provide a remedy for individuals subjected to unlawful employment discrimination.3 To achieve these
aims, Congress identified specific types of employment practices that
are unlawful under the anti-discrimination provision, section 703(a)
of Title VII.4
In addition to providing protection against specific discriminatory
employment practices, Congress also enacted an anti-retaliation provision, section 704(a) of Title VII, which provides further protection to
employees who attempt to oppose discrimination.5 Unfortunately, although the federal circuit courts uniformly recognize that a hostile
work environment claim is actionable under the anti-discrimination
provision,6 they disagree as to whether a hostile work environment
claim falls within the realm of the anti-retaliation provision.7
This article discusses whether retaliatory harassment by coworkers may constitute an adverse employment action under section
704(a) of Title VII. Part II provides background information regarding
the interpretations of the adverse employment action requirement. It
discusses the relationship between sections 703(a) and 704(a). It also
explains how the courts construe the adverse employment action requirement under section 703(a). Finally, it describes the differing interpretations of the adverse employment action requirement under
section 704(a). Part III addresses whether broadening the scope of
section 704(a) to proscribe retaliatory co-worker harassment comports
with the text, interpretation, and purpose of the statute. Part IV concludes that courts should uniformly recognize that co-worker retaliatory harassment violates section 704(a) if (1) the abusive conduct was
severe or pervasive enough to alter the conditions of employment, and
(2) the employer knew of the discrimination, but (3) failed to take reasonable remedial steps.8
3. See 42 U.S.C. 2000e; see also Joanna L. Grossman, The First Bite is Free:
Employer Liability for Sexual Harassment, 61 U. PITT. L. REV. 671, 720-21 (2000) (criticizing the Supreme Courts decision in Faragher v. City of Boca Raton, 524 U.S. 775
(1998), for elevating deterrence as a primary goal and placing the remedial goal as
secondary).
4. See 42 U.S.C. 2000e-2(a)(1)(a)(2).
5. See id. at 2000e-3(a).
6. See discussion infra Part II.B.1-2 and accompanying text (explicating the judicial interpretation of section 703(a)(1)); see also Faragher, 524 U.S. at 785-86 (noting
that the courts of appeals have followed the substantive contours of section 703(a)).
7. See discussion infra Part II.C.1-3 and accompanying text (describing the varying judicial interpretations of the adverse employment action requirement under section
704(a), the anti-retaliation provision of Title VII).
8. See discussion infra Parts III-IV and accompanying text (arguing that courts
should uniformly apply the hostile work environment doctrine to claims under section
704(a) of Title VII).
Retaliatory Harassment against Employees by Employees
467
II. Interpretation of the Anti-Retaliation Provision

A. The Relationship between the Anti-Discrimination and AntiRetaliation Provisions of Title VII and the Prima Facie Case
The substantive anti-discrimination provision of Title VII contains
two sub-provisions, section 703(a)(1) and section 703(a)(2).9 Section
703(a)(1) makes it unlawful for an employer to discriminate against any
individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individuals race, color, religion,
sex, or national origin.10 Section 703(a)(2) states that it is unlawful for
an employer to limit, segregate, or classify his employees . . . in any way
which would deprive or tend to deprive any individual of employment
opportunities or otherwise adversely affect his status as an employee,
because of such individuals race, color, religion, sex, or national origin.11
The anti-retaliation provision, section 704(a), makes it illegal for an employer to discriminate against any of his employees or applicants . . .
because [the employee or applicant] has opposed any practice made an
unlawful employment practice by [Title VII], or because he has made a
charge, testified, assisted, or participated in any manner in an investigation, proceeding, or hearing under [Title VII].12
Despite the markedly different language in the provisions,13 courts
apply the discrimination concepts developed under each provision to
the other provisions.14 For example, courts apply the burden-shifting
approach developed under McDonnell Douglas Corp. v. Green15 and its
9. See 42 U.S.C. 2000e-22000e-17.
10. Id. at 2000e-2(a)(1).
11. Id. at 2000e-2(a)(2).
12. Id. at 2000e-3(a).
13. Compare 42 U.S.C. 2000e-2(a)(1), and 42 U.S.C. 2000e-2(a)(2), with 42
U.S.C. 2000e-3(a).
14. See discussion infra Part II.C.1-2 (describing liberal and conservative judicial
interpretations of the anti-retaliation provision); see also Rebecca Hanner White, De Minimis Discrimination, 47 EMORY L.J. 1121, 1148 (1998) (Title VII is a statute containing
broadly worded prohibitions that necessarily have required extensive interpretation by
the courts and the Equal Employment Opportunity Commission.).
15. 411 U.S. 792 (1973). Under the McDonnell Douglas model for disparate treatment discrimination cases, a plaintiff must first establish a prima facie case of discrimination by a preponderance of the evidence. See id. at 802. If a prima facie case is established, a presumption of discrimination arises in favor of the plaintiff. See id. The burden
of production then shifts to the defendant to produce a legitimate, nondiscriminatory
reason for the adverse action. See id. at 802-03. If the defendant rebuts the presumption
of discrimination, the plaintiff may still prevail if he or she demonstrates that the reason
articulated by the defendant was a mere pretext for discrimination. Id. at 804. The overall
burden of persuasion always remains on the plaintiff to prove that he or she was a victim
of intentional discrimination. Id. at 805. See also Texas Dept of Community Affairs v.
Burdine, 450 U.S. 248, 252-53 (1981); St. Marys Honor Ctr. v. Hicks, 509 U.S. 502, 50711 (1993); Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 120 S.Ct. 2097, 210512 (2000) (applying the McDonnell Douglas paradigm to a claim brought under the Age
Discrimination in Employment Act and holding that a plaintiffs prima facie case of age
bias, together with evidence that the employers asserted reason for taking the allegedly
468
progeny for disparate treatment discrimination cases under section

703(a) to retaliation discrimination cases under section 704(a).16 Following the McDonnell Douglas paradigm, the plaintiff must first establish a prima facie case of retaliation by a preponderance of the
evidence.17 The retaliation prima facie case requires the plaintiff demonstrate (1) that he or she engaged in statutorily protected activity
under Title VII,18 (2) that he or she suffered an adverse employment
action,19 and (3) that a causal link between the protected activity and
the adverse employment action exists.20 If the plaintiff can establish
discriminatory action was false, can sustain a jurys finding for the plaintiff even without
direct proof of a discriminatory motive).
16. See, e.g., Richardson v. N.Y. State Dept of Corr. Serv., 180 F.3d 426, 443 (2d Cir.
1999) (We evaluate retaliation claims under the burden shifting rules established by the
Supreme Court in McDonnell Douglas v. Green.); see also Melissa A. Essary & Terence
D. Friedman, Retaliation Claims under Title VII, the ADEA, and the ADA: Untouchable
Employees, Uncertain Employers, Unresolved Courts, 63 MO. L. REV. 115, 120 (1998)
(discussing the application of the McDonnell Douglas burden-shifting paradigm in retaliation cases).
17. See, e.g., Gunnell v. Utah Valley State Coll., 152 F.3d 1253, 1263 (10th Cir.
1998); Munday v. Waste Mgmt. of N. Am., Inc., 126 F.3d 239, 242 (4th Cir. 1997); Manning
v. Metro. Life Ins. Co., Inc., 127 F.3d 686, 692 (8th Cir. 1997); Smart v. Ball State Univ.,
89 F.3d 437, 439 (7th Cir. 1996); Knox v. Ind., 93 F.3d 1327, 1333 (7th Cir. 1996).
18. This element is met if the plaintiff shows that he or she participated in a protected activity or opposed an employment practice made unlawful by Title VII. See 42
U.S.C. 2000e-3(a). The protected activity through opposition must be motivated by a
reasonable, good-faith belief that unlawful discriminatory conduct occurred and that the
action is attributable to the employer. See, e.g., Clover v. Total Sys. Servs., Inc., 176 F.3d
1346, 1351 (11th Cir. 1999); Collins v. Ill., 830 F.2d 692, 702 (7th Cir. 1987) (noting that
it is not necessary that the employer is actually committing an unlawful employment
practice under Title VII; rather, it is sufficient for a plaintiff to reasonably believe that
the employer is violating the statute); Rucker v. Higher Educ. Aids Bd., 669 F.2d 1179,
1182 (7th Cir. 1982) (holding that a reasonable belief that an employer action constituted
a violation of Title VII, even if that belief is incorrect, is enough to satisfy the first prong
of the prima facie case of retaliation); Payne v. McLemores Wholesale & Retail Stores,
654 F.2d 1130, 1137 (5th Cir. 1981) (noting a plaintiff can satisfy the first prong of the
prima facie case by showing a reasonable belief that an unlawful employment practice
was occurring); see also Glover v. S.C. Law Enforcement Div., 170 F.3d 411, 412 (4th Cir.
1999) (holding that the participation clause [of the anti-retaliation provision] shields
even allegedly unreasonable testimony from employer retaliation).
19. See, e.g., Gunnell, 152 F.3d at 1262; Munday, 126 F.3d at 242; Manning, 127
F.3d at 692; Smart, 89 F.3d at 439; Knox, 93 F.3d at 1333. The Sixth Circuit Court of
Appeals recently modified the standard for a prima facie case of retaliation, stating that
the plaintiff must prove that the defendant either took adverse employment action
against the plaintiff or the plaintiff was subjected to severe or pervasive retaliatory harassment by a supervisor. See Morris v. Oldham County Fiscal Court, 201 F.3d 784, 792
(6th Cir. 2000) (emphasis added).
20. See, e.g., Gunnell, 152 F.3d at 1263; Munday, 126 F.3d at 242; Manning, 127
F.3d at 692; Smart, 89 F.3d at 439; Knox, 93 F.3d at 1333. To establish a causal connection
between the plaintiffs protected activity and the adverse employment action, the plaintiff
must demonstrate that the employer was motivated by the protected activity. See, e.g.,
Grizzle v. Travelers Health Network, Inc. 14 F.3d 261, 267-68 (5th Cir. 1994) (holding
that a retaliation claim fails where a plaintiff is unable to produce evidence that her
employer knew about her complaint); Williams v. Cerberonics, Inc., 871 F.2d 452, 457
(4th Cir. 1989) (establishing causality by showing that the retaliatory action followed the
protected activity); Manoharan v. Columbia Univ. Coll. of Physicians & Surgeons, 842
469
these three elements, a presumption of retaliation arises in favor of

the plaintiff.21 The burden of production then shifts to the defendant
to produce a legitimate, nondiscriminatory reason for the adverse action.22 If the defendant meets its burden, the presumption of retaliation is rebutted.23 However, a plaintiff may still prevail if he or she is
able to establish that the reason articulated by the defendant was a
mere pretext for retaliation.24 The overall burden of persuasion that
the plaintiff was a victim of intentional retaliation remains on the
plaintiff.25
Each prong of the prima facie case has generated a significant body
of law defining what will suffice in establishing a retaliation claim.26
However, the second prong of the test, which requires that the plaintiff
suffer an adverse employment action, is the most controversial.27 Although the federal courts agree that a plaintiff must demonstrate the
second element of the prima facie case of retaliation,28 there is a lack
of consensus in the courts as to what conduct constitutes an adverse
employment action.29
As with the procedural requirements, courts look to section 703(a)
for guidance in interpreting the substantive requirements of section
704(a), including the determination of what actions constitute an adverse employment action. Although the provisions are not identical in
the prohibited activities, both section 703(a)(1) and section 704(a) make
it an unlawful employment action for an employer to discriminate.30
Moreover, like the prima facie case of retaliation, the prima facie case
of discrimination requires the plaintiff to show that he or she suffered
an adverse employment action. Therefore, despite section 704(a)s failure to specifically mention compensation, terms, conditions, or priviF.2d 590, 593-94 (2d Cir. 1988) (requiring the plaintiff to demonstrate the defendants
knowledge of the protected activity and that that knowledge motivated the employer to
retaliate).
21. See McDonnell Douglas, 411 U.S. at 802-03; see also, e.g., Richardson, 180 F.3d
at 443; Gunnell, 152 F.3d at 1263; Munday, 126 F.3d at 242; Manning, 127 F.3d at 692;
Smart, 89 F.3d at 439; Knox, 93 F.3d at 1333; see also Essary & Friedman, supra note
16, at 120.
22. See sources cited supra note 21.
23. Id.
24. Id.
25. Id.
26. See Marisa Williams & Rhonda Rhodes, Recent Developments in Retaliation
Law and Resulting Implications for the Federal Sector, COLO. LAW., Jan. 28, 1999, at
59, 60.
27. Id.
28. See sources cited supra note 19 and accompanying text.
29. See discussion infra Part II.C.1-3 (examining how the circuit courts of appeals
have developed different interpretations of the anti-retaliation provision).
30. Compare 42 U.S.C. 2000e-2(a)(1), with 42 U.S.C. 2000e-3(a). A common rule
of statutory construction is that [a] term appearing in several places in a statutory text
is generally read the same way each time it appears. Ratzlaf v. United States, 510 U.S.
135, 143 (1994). Title VII, however, does not define the term discriminate.
470
leges of employment,31 courts generally equate discrimination actionable under section 704(a) with discrimination actionable under section
703(a)(1).
B. Adverse Employment Actions under Section 703(a)(1)
Section 703(a)(1) of Title VII makes it an unlawful employment
practice for an employer to fail or refuse to hire or to discharge any
individual, or otherwise to discriminate against any individual with
respect to his compensation, terms, conditions, or privileges of employment, because of such individuals race, color, sex, or national origin.32
Consistent with the liberal interpretation of Title VII, the Supreme
Court has broadly construed the provision to include any aspect of the
employment relationship.33 In addition, it has recognized that an adverse employment action may occur through either explicit or constructive alterations in the terms or conditions of employment.34
1. Explicit Alterations in the Terms and Conditions of
Employment through Tangible Employment Actions
A tangible employment action is a materially adverse change in
employment status, such as a termination of employment, a demotion
evidenced by a decrease in wage or salary, a less distinguished title, a
material loss of benefits, [or] significantly diminished material responsibilities.35 In most cases, the tangible employment action will inflict
direct economic harm.36 Since only a supervisor is empowered to make
economic decisions affecting other employees under his or her control,
only a supervisor can cause this type of injury.37 Thus, a tangible em31. Compare 42 U.S.C. 2000e-2(a)(1), which proscribes discrimination with respect to compensation, terms, conditions or privileges of employment, with 42 U.S.C.
2000e-3(a), which simply proscribes discrimination.
32. 42 U.S.C. 2000e-2(a)(1).
33. See Hishon v. King & Spalding, 467 U.S. 69, 75-77 (1984) (construing the provision to guarantee equal employment opportunity by eradicating discrimination in all
aspects of the employment relationship); see also White, supra note 14, at 1151 (recognizing that courts now understand that harm need not be economic in nature to be considered materially significant).
34. Burlington Indus., Inc. v. Ellerth, 524 U.S. 742, 752 (1998); see also Louis P.
DiLorenzo & Laura H. Harshbarger, Employer Liability for Supervisor Harassment After
Ellerth and Faragher, 6 DUKE J. GENDER L. & POLY 3, 14 (1999) (noting that courts have
changed the central focus of sexual harassment analysis from the type of harassment to
the ultimate impact of the harassment, i.e., the presence or absence of a tangible job
detriment).
35. Burlington Indus., 524 U.S. at 761 (quoting Crady v. Liberty Nat. Bank & Trust
Co. of. Ind., 993 F.2d 132, 136 (7th Cir. 1993). Tangible employment action claims are
also identified as quid pro quo claims. See id. Not all adverse changes in employment
status, however, are severe or pervasive enough to be tangible employment actions. See,
e.g., Kocsis v. Multi-Care Mgmt., Inc., 97 F.3d 876, 887 (6th Cir. 1996) (finding that a
demotion without a change in pay, benefits, duties, or prestige was also insufficient to
support a claim); Harlston v. McDonnell Douglas Corp., 37 F.3d 379, 382 (8th Cir. 1994)
(holding that reassignment to a more inconvenient job did not create liability).
36. Burlington Indus., 524 U.S. at 762.
37. Id.
471
ployment action cannot result from co-worker actions. Since the supervisor is acting as an agent for the employer, the employer is vicariously
liable when supervisory discrimination results in a tangible employment action.38
2. Constructive Alterations in the Terms and Conditions of
Employment through a Hostile Work Environment
Section 703(a) also forbids constructive alterations in the terms
and conditions of employment due to a hostile work environment.39 In
Meritor Savings Bank, FSB v. Vinson,40 the Supreme Court expressly
rejected an interpretation of Title VII that limited its protection to tangible economic matters and explained that the phrase terms, conditions or privileges of employment in section 703(a)(1) is an expansive
concept which includes protection against a hostile work environment
based on discrimination.41
Title VII, however, does not regulate all adverse conduct in the
workplace.42 For a hostile work environment to exist as proscribed by
Title VII, the workplace must be permeated with discriminatory intimidation, ridicule and insult, that is sufficiently severe or pervasive
to alter the conditions of the victims employment and create an abusive
working environment. 43 This standard is a compromise between making actionable any conduct that is merely offensive and requiring the
conduct to cause a tangible physical injury.44 It requires that the discriminatory conduct be so severe or pervasive that it creates an objectively and subjectively hostile work environment.45 The conduct must
be more severe than simple teasing or crude comments.46 Moreover, the
38. Id. at 754-65 (discussing the applicability of agency law to impose liability upon
the employer). The employer is liable independent of whether the employer knew, should
have known, or approved of the supervisory action. Id. at 761 (citing Meritor Sav. Bank,
477 U.S. at 70-71); see also DiLorenzo & Harshbarger, supra note 34, at 14 (Where the
plaintiff demonstrates a tangible job detriment, the employers liability is automatic.).
39. See Faragher, 524 U.S. at 786 (We have repeatedly made clear that although
the statute mentions specific employment decisions with immediate consequences, the
scope of the prohibition is not limited to the economic or tangible discrimination
and it covers more than terms and conditions in the narrow contractual sense.) (citations omitted); Harris v. Forklift Sys., Inc., 510 U.S. 17, 21 (1993); Meritor Sav. Bank,
477 U.S. at 64-66.
40. 477 U.S. at 57.
41. Id. at 64-66.
42. Id. at 67 ([N]ot all workplace conduct that may be described as harassment
affects a term, condition, or privilege of employment within the meaning of Title VII.).
43. Harris, 510 U.S. at 21 (quoting Meritor Sav. Bank, 477 U.S. at 65-67) (citations
omitted).
44. See Harris, 510 U.S. at 21.
45. See Faragher, 524 U.S. at 788; Harris, 510 U.S. at 21-23 (holding that a Title
VII hostile environment claim will succeed only where the discriminatory conduct is so
severe or pervasive as to create an objectively hostile or abusive work environment and
where the victim subjectively perceives the environment to be abusive).
46. Faragher, 524 U.S. at 788 (citing Oncale v. Sundowner Offshore Serv., Inc., 523
U.S. 75 (1998)).
472
abusive conduct must be sufficiently continuous and concerted in order

to be deemed pervasive.47 However, the standard does not require the
conduct to be so abusive as to seriously affect an employees emotional
or psychological health.48 Nor does it require that the employee suffer
tangible adverse effects such as an inability to perform the job or obstruction of career advancement.49 In determining whether the work
environment is sufficiently hostile or abusive, courts must consider the
totality of the circumstances,50 including (1) how often the discriminatory conduct occurred; (2) how severe the conduct was; (3) whether
the conduct included physical threats or humiliation; (4) whether the
conduct unreasonably interfered with the employees work; and (5) what,
if any, psychological harm resulted from the conduct.51
Under the hostile work environment doctrine, the imposition of
liability on the employer is dependent upon who is harassing the victim.
In cases where a supervisor creates a hostile work environment, the
employer is vicariously liable.52 In such cases, however, the employer
may offer an affirmative defense to liability and damages by showing
that (1) the employer exercised reasonable care to avoid and/or eliminate harassment when it might occur, and (2) the employee failed to
act with reasonable care to take advantage of the employers safeguards
or to otherwise prevent harm that could have been avoided.53
When the employee is a victim of co-worker harassment, the employer will be liable only if the employers own negligence caused the
hostile work environment. The employer is negligent if it knew or
should have known about the conduct and failed to stop it.54 Thus, for
the employer to be liable for a hostile work environment created by coworker harassment, it must have known of the harassment and acqui47. Faragher, 524 U.S. at 787 n.1. Episodic harassment, unless extremely serious,
is insufficient to meet the pervasive requirement. See id. See also Allan H. Weitzman,
Employer Defenses to Sexual Harassment Claims, 6 DUKE J. GENDER L. & POLY 27, 4950 (1999) (Fleeting hostility or abusiveness does not affect the workplace environment
enough to alter the conditions of the victim[]s employment and merit Title VII liability.).
48. Harris, 510 U.S. at 22.
49. Id.
50. See id. at 23.
51. See Faragher, 524 U.S. at 786-88; Harris, 510 U.S. at 23; see also Grossman,
supra note 3, at 685-87 (noting that severity and pervasiveness tend to be inversely
related and that [e]ither severe or pervasive harassment can be actionable); Weitzman,
supra note 47, at 48-51 (explaining that the severe and pervasive elements are coupled
so that the more severe the incidents become, the less pervasive they need to be to create
a hostile environment).
52. See Harris, 510 U.S. at 23.
53. Burlington Indus., 524 U.S. at 765; Faragher, 524 U.S. at 805-07; see also
DiLorenzo & Harshbarger, supra note 34, at 16-17 (summarizing the impact of the affirmative defense to Title VII claims).
54. See Burlington Indus., 524 U.S. at 758-59 (citing RESTATEMENT (SECOND) OF
AGENCY 219(2)(b)); see also Grossman, supra note 3, at 689-90; Joseph M. Kelly & Adele
Sinclair, Sexual Harassment of Employees by Customers and Other Third Parties: American and British Views, 31 TEX. TECH. L. REV. 807, 811-12 (2000).
473
esced in such a manner as to condone and encourage the co-workers

actions.55
C. Adverse Employment Actions under the Anti-Retaliation
Provision
The Supreme Court has never limited its application of hostile
work environment discrimination to section 703(a). However, because
there is disarray in the circuit courts of appeals as to what may constitute an adverse employment action, the circuits widely disagree as
to whether a hostile work environment caused by retaliatory co-worker
harassment is actionable under section 704(a).56 Three general views
prevail as to what may constitute an adverse employment action.57 The
Fifth and Eighth Circuits adopt the most conservative approach and
restrict the definition of an adverse employment action to only those
actions that may be deemed ultimate employment decisions.58 The
Fourth and Sixth Circuits approach resemble that of the Fifth and
Eighth Circuits; however, the approach is less stringent, as it recognizes that employer conduct that impairs an employees current or future employment opportunities may constitute an adverse employment
action.59 The remaining circuits and the Equal Employment Opportunity Commission adopt a liberal interpretation of the adverse employment action requirement. They are willing to hold actionable a broad
55. Burlington Indus., 524 U.S. at 760 (citing 29 C.F.R. 1604.11(d) (1997)) (providing the knows or should have known standard for liability in cases of harassment
between fellow employees ); Faragher, 524 U.S. at 788-89 (citing cases in which employers were liable for harassment by co-workers because the employer knew of the harassment but failed to act).
56. Compare Fielder v. UAL Corp., 218 F.3d 973, 984-85 (9th Cir. 2000) (Title VIIs
protection against retaliatory discrimination extends to employer liability for co-worker
retaliation that rises to the level of an adverse employment action.); Richardson, 180
F.3d at 446 ([U]nchecked retaliatory co-worker harassment, if sufficiently severe, may
constitute adverse employment action so as to satisfy the second prong of the retaliation
prima facie case.); Gunnell, 152 F.3d at 1264 (Under our circuit precedent we believe
that co-worker hostility or retaliatory harassment, if sufficiently severe, may constitute
adverse employment action for purposes of a retaliation claim.); Knox, 93 F.3d at 1334
(No one would question the retaliatory effect of many actions that put the complainant
in a more unfriendly working environment. . . . Nothing indicates why a different form
of retaliationnamely, retaliating against a complainant by permitting her fellow employees to punish her for invoking her rights under Title VIIdoes not fall within the
statute.); Wyatt v. City of Boston, 35 F.3d 13, 15-16 (1st Cir. 1994) (providing examples
of actions other than discharge that fall within the scope of section 704(a) such as employer actions such as demotions, disadvantageous transfers or assignments, refusals to
promote, unwarranted negative job evaluations and toleration of harassment by other
employees), with Manning, 127 F.3d at 686 (requiring tangible changes in job duties
resulting from an ultimate employment decision) and Mattern v. Eastman Kodak Co.,
104 F.3d 702, 707 (5th Cir. 1997) (requiring employer action in the nature of an ultimate
employment decision).
57. See Essary & Friedman, supra note 16, at 133-34.
58. See discussion infra Part II.C.1 and accompanying text.
474
range of employer conduct that adversely affects the employee, including the condonation of retaliatory co-worker harassment.60
1. Conservative Courts Limit Adverse Employment Actions to
Ultimate Employment Decisions
The Fifth and Eighth Circuits refuse to recognize that section
704(a) prohibits any action less than an ultimate employment decision.61 These courts define ultimate employment decisions as acts such
as hiring, granting leave, discharging, promoting, and compensating.62 Thus, the term can be considered synonymous with a tangible
employment action as described in Burlington Industries, Inc. v. Ellerth.63 By so limiting the definition of adverse employment, these
courts only recognize retaliation in the form of a tangible employment
action and completely disregard the hostile work environment doctrine
developed under section 703(a)(1).64
A leading example of this approach is Mattern v. Eastman Kodak
Co.65 Mattern was a former employee who alleged that management
personnel and co-workers retaliated against her after she filed a sexual
harassment claim with the EEOC.66 To support her claim of retaliation,
Mattern alleged several incidents of retaliatory harassment, including
her co-workers uttering accidents happen as she passed by them, her
locker being broken into, and her work equipment being stolen.67 She
also alleged that management failed to act after it acquired knowledge
of her co-worker harassment.68 The jury found in her favor.69 The Fifth
Circuit Court of Appeals reversed, however, reasoning that none of the
actions she complained of were ultimate employment actions.70
Part of the courts analysis follows that of other circuitsit looked
to the anti-discrimination provision for guidance in its interpretation
61. See Manning, 127 F.3d at 692; Mattern, 104 F.3d at 707.
62. Mattern, 104 F.3d at 707.
63. See discussion supra Part II.B.1 (describing how a tangible employment action
may constitute an adverse employment action under Title VII).
64. See Manning, 127 F.3d at 692; Mattern, 104 F.3d at 707; see also Ledergerber v.
Stangler, 122 F.3d 1142, 1144 (8th Cir. 1997) (finding no adverse employment action when
employee suffered no material change in the terms or conditions of her employment).
65. 104 F.3d at 702.
66. Id. at 703-04.
67. Id. at 705. Other alleged actions were: (1) a home visit from supervisors to
instruct her to report to a company doctor; (2) a reprimand for not being at her work
station when she was in the Human Resources Department protesting her abuse; (3) a
supervisor threatening to fire her; (4) a negative performance evaluation that caused her
to miss a pay increase and be placed on final warning; and (5) requiring her to climb
scaffolding in a uniform that was too large for her. See id. at 705-06.
68. Id. at 704.
69. Id.
70. Mattern, 104 F.3d at 707-08. (Hostility from fellow employees, having tools
stolen, and resulting anxiety, without more, do not constitute ultimate employment decisions, and therefore are not the required adverse employment actions.)
475
of the anti-retaliation provision.71 However, rather than interpreting

Title VII liberally, as is consistent with the purpose and precedential
interpretation of the Act, the court construed both sections 703(a)(1)
and 704(a) narrowly. In doing so, the court first compared the text of
section 703(a)(1) and 703(a)(2), the two sub-provisions of the substantive anti-discrimination provision.72 It determined that the scope of section 703(a)(2) is much greater than that of section 703(a)(1).73 Thus,
the court concluded, section 703(a)(1) must exclude the vague harms
contemplated in section 703(a)(2) and include only ultimate employment decisions.74 Since sections 703(a)(1) and 704(a) both make it unlawful for an employer to discriminate, the court reasoned that the
anti-retaliation provision also must exclude such harms and must only
protect against ultimate employment actions.75
To define an ultimate employment action, the Mattern court relied
on the judicial interpretation formerly applied exclusively to claims
against the federal government under section 717 of Title VII76 and
71. Id. at 708-09.
72. Mattern, 104 F.3d at 708-09; see also 42 U.S.C 2000e-2(a)(1); 42 U.S.C.
2000e-2(a)(2).
73. 104 F.3d at 709.
74. Id.
75. Id.
76. Title VII was amended in 1972 to include within its scope federal employees as
stated in section 717. See 42 U.S.C. 2000e-16 (All personnel actions affecting employees
or applicants for employment [in federal government positions] shall be made free from
any discrimination based on race, color, religion, sex, or national origin.). Some lower
courts have construed the prohibition of discrimination in personnel actions in section
717 to reach only discrimination in ultimate employment decisions. See, e.g., Page v.
Bolger, 645 F.2d 227, 233-34 (4th Cir. 1981). In Page, an African American postal worker
alleged he had been denied a promotion because of his race and brought suit against his
employer under section 717 of Title VII. Id. at 228-29. The Fourth Circuit rejected his
claim. In its analysis, the court analogized section 717 to section 703 of Title VII, stating:
The proper object of inquiry in a claim of disparate treatment under 717 is
whether there has been discrimination in respect of personnel actions affecting (covered) employees or applicants for employment. . . . Disparate
treatment theory as it has emerged in application of this and comparable provisions of Title VII, most notably 703(a)(1), . . . has consistently focused on
the question whether there has been discrimination in what could be characterized as ultimate employment decisions such as hiring, granting leave,
discharging, promoting, and compensating. This is the general level of decision
we think contemplated by the term personnel actions in 717. It is the level
focused upon in the major Supreme Court decisions establishing and refining
the substantive and procedural elements of individual disparate treatment
theory.
Id. at 233 (citations omitted). The court added, it is obvious to us that there are many
interlocutory or mediate decisions having no immediate effect upon employment conditions which were not intended to fall within the proscriptions of 717 and comparable
provisions of Title VII. Id. However, as a caveat to its holding, the Page court explicitly
stated, [b]y this, we suggest no general test for defining those ultimate employment
decisions which alone should be held directly covered by 717 and comparable antidiscrimination provisions of Title VII. Id. See also Dollis v. Rubin, 77 F.3d 777, 781-82 (5th
476
extended it to sections 703(a)(1) and 704(a).77 In adopting this interpretation and applying it to section 704(a), the court expressly rejected
co-worker hostility as actionable under the anti-retaliation provision.78
Although the Mattern court recognized that hostility from co-workers
might have an effect on the conditions of a persons employment, the
court refused to recognize that such behavior is enough to constitute
an adverse employment action, because it does not rise to the level of
an ultimate employment decision.79 The court reasoned the conduct, of
which Mattern complained, was not an ultimate employment decision
but merely tangential to future employment decisions that could be
considered ultimate.80
The Mattern court also emphasized that its interpretation supports
the important policy of balancing the rights of the employer and the
employee. Concerned over how deeply into the employment relationship Title VII should intrude, the court stated that a more expansive
construction of the adverse employment action element would hinder
the ability of the employer to manage its employees.81 Moreover, the
court was troubled that employers may have difficulty distinguishing
between conduct that is retaliatory from conduct that is caused simply
by negative interpersonal relations.82 It therefore held that the use
of the ultimate employment decision bright-line rule properly shields
the employer from fear that an employee may brandish his protected
status against any and all adverse events affecting him or her at the
workplace.83
The Eighth Circuit also narrowly construed the definition of adverse employment action to include only ultimate employment deci-
Cir. 1985) (adopting the Page court limitation on personnel action under section 717 to
ultimate employment decisions in a retaliation claim).
77. See Mattern, 104 F.3d at 707 (citing Dollis, 77 F.3d at 782).
78. Id.
79. Id. (Hostility from fellow employees, having tools stolen, and resulting anxiety,
without more, do not constitute ultimate employment decisions, and therefore are not
the required adverse employment actions.).
80. Id. at 707-08.
81. Id. at 708 (To hold otherwise would be to expand the definition of adverse
employment action to include events such as disciplinary filings, supervisors reprimands, and even poor performance by the employeeanything which might jeopardize
employment in the future. Such expansion is unwarranted.).
82. Id.; see also Holland & Hart, Retaliation by Co-Workers Can Lead to Liability
in Discrimination Case, WYO. EMP. L. LETTER, Oct. 1998 (explaining that employers
need to be careful to separate actions based on personality conflicts from those based
on retaliation).
83. See Mattern, 104 F.3d at 709 (A transfer involving no reduction in pay and no
more than a minor change in working conditions will not do, either. Otherwise every
trivial personnel action that an irritable, chip-on-the-shoulder employee did not like
would form the basis of a discrimination suit. (quoting Williams v. Bristol-Meyers Squibb
Co., 85 F.3d 270, 274 (7th Cir. 1996) (citations omitted))).
477
sions.84 Specifically, in Manning v. Metropolitan Life Insurance Co.,85

the court held that co-worker retaliatory harassment in the form of
hostility and personal animus and ostracization is insufficiently
severe to support a claim for retaliation.86 The court further stated,
[a]bsent evidence of some more tangible change in duties or working
conditions that constituted a material employment disadvantage . . .
[the plaintiffs] did not present evidence sufficient to demonstrate any
adverse employment action that constitutes the sort of ultimate employment decision intended to be actionable under Title VII.87 Thus,
the Eighth Circuit also requires the retaliation to be in the form of a
tangible employment action and rejects application of the hostile work
environment doctrine to the anti-retaliation provision.
2. Liberal Courts Broaden the Scope and Recognize that CoWorker Harassment May Be an Adverse Employment Action
In contrast, other circuits adopt a more liberal construction of an
adverse employment action, finding decisions with substantially less
significant consequences to be sufficient.88 In fact, the First, Second,
Seventh, Ninth, and Tenth Circuits have held explicitly that co-worker
retaliatory harassment, if sufficiently severe, can constitute an adverse
employment action for purposes of a Title VII retaliation claim.89 These
84. See, e.g., Manning, 127 F.3d at 686; Ledergerber, 122 F.3d at 1142; Harlston,
37 F.3d at 379.
85. 127 F.3d at 686.
86. Id. at 692.
87. Id. (citing Ledergerber, 122 F.3d at 1144).
88. See, e.g., Wideman v. Wal-Mart Stores, Inc., 141 F.3d 1453, 1456 (11th Cir. 1998)
(We join the majority of circuits which have addressed the issue and hold that Title VIIs
protection against retaliatory discrimination extends to adverse actions which fall short
of ultimate employment decisions.); Berry v. Stevinson Chevrolet, 74 F.3d 980, 984-86
(10th Cir. 1996) (construing section 704(a) to reach beyond ultimate employment decisions and protect an employee from a malicious prosecution action brought by a former
employer); Welsh v. Derwinski, 14 F.3d 85, 86 (1st Cir. 1994) (rejecting the argument that
an adverse employment action only involves discharge, demotion, or failure to promote;
rather, adverse employment action includes many things such as constant rudeness and
conspicuous discriminatory acts).
89. See, e.g., Fielder, 218 F.3d at 985 (Title VIIs protection against retaliatory
discrimination extends to employer liability for co-worker retaliation that rises to the
level of an adverse employment action.); Richardson, 180 F.3d at 446 (finding that
[j]ust as an employer will be liable . . . for a racially or sexually hostile work
environment created by a victims co-workers if the employer knows about (or
reasonably should know about) that harassment but fails to take appropriately remedial action, so too will an employer be held accountable for allowing
retaliatory co-worker harassment to occur if it knows about that harassment
but fails to act to stop it).
Gunnell, 152 F.3d at 1264 ([C]o-worker hostility or retaliatory harassment, if sufficiently
severe, may constitute adverse employment action for purposes of a retaliation claim.);
Knox, 93 F.3d at 1334 ([T]here is nothing to indicate that the principle of employer
responsibility [involved in direct claims of harassment by co-workers] does not extend
478
courts reason that, just as an employer may be liable under section

703(a)(1) for co-worker harassment based on a protected characteristic,
so too may an employer be liable for harassment motivated by retaliation under section 704(a) if it is severe or pervasive enough to materially alter the work environment. Although section 704(a) does not
itself contain language requiring a materially adverse employment action in order to state a claim,90 the courts infer the requirement from
the basic prohibition of employment discrimination set forth in section
703(a)(1). Consistent with the Supreme Courts analysis of a hostile
work environment claim,91 these courts take a case-by-case approach
to determine (a) whether the retaliatory harassment is sufficiently severe or pervasive to support a claim of discrimination and (b) whether
the employer negligently failed to remedy the situation.
Knox v. Indiana92 is an example where co-worker retaliatory harassment was found to be sufficiently severe, and the employer was
found to have negligently ignored the harassment. Knox was a correctional officer at a state correctional facility. During her employment,
she was subjected to blatant sexual harassment on the job by her
supervisor and reported the action to the facilitys affirmative action
officer.93 After being informed that Knox had filed harassment charges
against him, her supervisor told his friends whom also worked at the
correctional facility.94 Thereafter, these fellow employees began to
make insulting and demeaning statements about Knox, both to staff
and in front of inmates.95 In addition, they openly remarked, [t]hey
intended to make Knoxs life hell, and they were going to get her. 96
Knox reported the relentless campaign of co-worker retaliatory harassment to the correctional facilitys affirmative action officer.97 However,
the officer failed to make a reasonable effort to stop the conduct.98 Knox
subsequently filed a claim against the State of Indiana alleging, inter
alia, retaliation in violation of section 704(a) of Title VII.99 A jury re-
equally to other Title VII claims, such as a claim of unlawful retaliation.); Wyatt, 35 F.3d
at 15-16 (stating that employer actions such as demotions, disadvantageous transfers
or assignments, refusals to promote, unwarranted negative job evaluations and toleration
of harassment by other employees would constitute adverse employment action under
Title VII).
90. See 42 U.S.C.A. 2000e-3(a).
91. See Faragher, 524 U.S. at 786-88; Harris, 510 U.S. at 23.
92. 93 F.3d at 1327.
93. Id. at 1329.
94. Id. at 1331.
95. Id.
96. Id.
97. See id.
98. See Knox, 93 F.3d at 1331.
99. Id. at 1332.
479
turned a verdict in favor of Knox on the retaliation claim.100 The State

then appealed the jurys decision, claiming the evidence did not support
the jurys verdict.101
In upholding the jurys verdict and finding the employer liable for
retaliatory harassment by its employees,102 the Seventh Circuit Court
of Appeals noted it is well established that Title VII imputes liability
on an employer for co-worker harassment motivated by race or sex discrimination if the employer had actual or constructive knowledge of the
harassment, but inadequately addressed it.103 The court further found,
[t]here is nothing to indicate that the principle of employer responsibility [involved in direct claims of harassment by co-workers] does not
extend equally to other Title VII claims, such as a claim of unlawful
retaliation.104
The Tenth Circuit Court of Appeals applied the same hostile work
environment analysis to a retaliation claim in Gunnell v. Utah Valley
State College.105 Gunnell was a former employee who brought action
against her employer for sexual harassment and retaliation.106 While
still employed, she complained to the employers personnel director that
her supervisor and another employee had subjected her to verbal and
physical sexual harassment, including gestures, comments, and unwelcome physical contact.107 Gunnell took a leave of absence while her
employer investigated her complaint.108 She then filed a written grievance and request for a transfer to a different department.109 Her employers grievance committee ultimately decided that Gunnells allegations had merit but refused her request for transfer and directed her
to return to her position.110 Thereafter, Gunnell alleged that her coworkers shunned her, made false statements about her, and excluded
100. See id. Knox was awarded $40,000 in compensatory damages and was granted
a permanent injunction that prohibited the State from engaging in retaliatory conduct
toward [Knox] and/or permitting its employees to continue to engage in retaliatory conduct toward [Knox] after becoming aware that the retaliation is occurring. Id. The correctional facility was also ordered to explain its anti-retaliation policy to its employees.
See id.
101. Id. at 1329.
102. The district court defined the adverse employment element of the retaliation
prima facie case as an adverse action affecting the terms of her employment . . . taken
by her employer or by co-workers with the knowledge and acquiescence of her employer.
Knox, 93 F.3d at 1332. The Seventh Circuit upheld this definition by stating that it accurately indicated that fellow employee action can sometimes form the basis of Title VII
liability. Id. at 1333.
103. See id. at 1334.
104. Id.
105. 152 F.3d at 1253.
106. See id. at 1257.
107. Id.
108. Id.
109. Id.
110. Id.
480
her from office communications in response to her complaint.111 However, she never reported the retaliatory conduct to her employer.112
Instead, she filed a notice of discrimination with the state antidiscrimination agency, alleging sexual harassment and retaliation.113
The relationship between Gunnell and her employer and co-workers
quickly deteriorated further; she was terminated soon thereafter.114
Gunnell subsequently filed suit in federal district court alleging, inter
alia, retaliation under Title VII.115 The retaliation claim went to a jury
trial.116 After the jury returned a verdict for her employer, Gunnell
appealed on the ground that the district court had erroneously instructed the jury by limiting employer liability to retaliatory acts of
management and supervisory-level employees but excluding the retaliatory acts of co-workers.117
In reviewing the retaliation claim, the Tenth Circuit addressed two
issues: (1) whether co-worker retaliatory conduct may constitute an
adverse employment action and (2) whether an employer may be liable
for such conduct.118 Addressing the first issue, the court noted that the
remedial nature of Title VII dictated a liberal definition of adverse employment action119 and held that, co-worker hostility or retaliatory harassment, if sufficiently severe, may constitute adverse employment
action for the purposes of a retaliation claim.120 As to the issue of
employer liability, the court held, an employer can only be liable for
co-workers retaliatory harassment where its supervisory or management personnel either (1) orchestrate[d] the harassment or (2) [knew]
about the harassment and acquiesce[d] in it in such a manner as to
condone and encourage the co-workers actions.121 Ultimately, since
111. See Gunnell, 152 F.3d at 1257. Gunnell also alleged that she was given inferior
office equipment, assigned menial office tasks and that her job was restructured to minimize duties and complexity. Id.
112. Id. at 1257-59.
113. Id. at 1257-58.
114. Id. at 1258.
115. Id. at 1258-59.
116. See Gunnell, 152 F.3d at 1259.
117. Id. Gunnell argued that the jury instruction should provide that her employer
be liable for retaliation if management-level employees knew or should have known about
the retaliatory acts of her co-workers and failed to stop them. See id. Instead, the district
court instructed the jury that her employer may be liable for retaliation by reason of the
actions of supervisory employees who had significant control over [Gunnells] hiring,
firing, or conditions of employment or who had ultimate authority to hire, fire, and to
control conditions of employment. Id. at n.1. Thus, it limited employer liability to only
those acts by employees who were management-level or who were in a supervisory position over Gunnell. See id.
118. Id. at 1264.
119. Gunnell, 152 F.3d at 1264 (citing Jeffries v. Kansas, 147 F.3d 1220, 1231-32
(10th Cir. 1998)).
120. Id. at 1264.
121. Id. at 1265.
481
none of the supervisory or management-level personnel knew of the coworkers retaliation, the employer was not liable.122
Richardson v. New York State Department of Correctional Service123 is a third example of a circuit court applying the hostile work
environment theory to retaliatory co-worker harassment. Richardson
worked at two separate facilities while employed by the New York State
Department of Correctional Service (DOCS) from 1988 until 1994.124
While at the first facility, Richardsons co-workers made numerous racially insensitive comments that combined, created a racially hostile
work environment.125 She reported the comments to her employer and
the DOCS Affirmative Action Office eventually investigated her complaint.126 The affirmative action officer concluded that although the
intent of the comments appeared to be for humorous, rather than malicious purposes, [Richardsons co-workers] appear to lack cultural/
racial sensitivity. 127 The officer recommended that DOCS institute a
cultural awareness training. The first program, however, was not held
until three years after the recommendation. Meanwhile, Richardson
was subjected to additional incidents of racial slurs and harassment,
which ultimately compelled her take medical leave of absence in
1992.128
While on medical leave, Richardson filed discrimination charges
with the state division of human rights and the Equal Employment
Opportunity Commission.129 When she returned to work from her medical leave in 1993, she was assigned to a different correctional facility.130
Unfortunately, the discrimination continued.131 Moreover, Richardson
became the target of retaliation for having complained about the discrimination she endured at the first correctional facility.132 Richardson
then filed a claim in the United States District Court for the Northern
District of New York, alleging racial discrimination.133 Thereafter, her
122. See id.
123. 180 F.3d at 426.
124. See id. at 433.
125. See id. at 433-34.
126. Id. at 433.
127. Id. The affirmative action officer noted further that she was verbally attacked
simply because she was an African-American female. See id. In addition, the investigative
report to her supervisor included the comment: I had just been through a meeting that
reminded me of what it must have been like for blacks in the south who might have been
lynched. I felt it was like a lynching meeting that I had just been through. Richardson,
180 F.3d at 433.
128. Id. at 434.
129. Id.
130. Id. at 435.
131. Id.
132. Id. For example, a supervisor disclosed Richardsons home address to inmates
and advised one inmate to be careful around Richardson because she instigated problems.
See Richardson, 180 F.3d at 435.
133. See id. at 432, 436.
482
co-workers retaliated further against her through several acts of harassment including shooting rubber bands at her, making numerous
degrading comments to her, shunning and ignoring her, and failing to
give her messages.134 In addition, Richardson once found horse manure
in her parking space and hair in her food on several occasions.135 When
Richardson met with her employer to discuss her concerns, he failed to
improve the situation and instead merely stated, it might be difficult
to change their attitudes.136 After enduring two years of the harassment, Richardson was again forced to take a medical leave of absence
in order to avoid suffering further emotional distress and mental anguish.137 However, since she failed to update the documents to justify
her absence, she was terminated.138 Richardson then filed a supplemental complaint to her earlier lawsuit and alleged, inter alia, retaliation in violation of section 704(a).139 The district court granted her
employers summary judgment motion, finding, Richardson failed to
present evidence sufficient to establish that [her employer] took adverse employment action against her.140 Richardson appealed to the
Second Circuit Court of Appeals.141
In evaluating Richardsons retaliation claim, the Second Circuit
acknowledged the disagreement among the federal circuits regarding
the issue of employer liability for acquiescence in co-worker retaliatory
harassment.142 It then recognized that unchecked retaliatory coworker harassment, if sufficiently severe, may constitute adverse employment action so as to satisfy the second prong of the retaliation
prima facie case and was consistent with the circuits interpretation
of Title VII and Supreme Courts interpretation of the hostile work
environment theory of discrimination.143 Holding that Richardson indeed had stated a prima facie case of retaliation, it reversed the district
courts dismissal of the claim.144
The Ninth Circuit, in Fielder v. UAL Corp.,145 also addressed the
issue of whether co-worker retaliatory harassment may be actionable
134. Id. at 435.
135. Id.
136. Id.
137. Id.
138. See Richardson, 180 F.3d at 435-36.
139. See id.
140. Id. at 432.
141. See id. at 436.
142. See id. at 445.
143. Id. at 446.
144. See Richardson, 180 F.3d at 447.
145. 218 F.3d at 973. Prior to the Fielder decision, the law in the Ninth Circuit was
unclear as to whether action less than an ultimate employment decision may constitute
an adverse employment action. See Aielleo v. Reno, No. C 97-3686, 2000 U.S. Dist. LEXIS
6797, at *17 (N.D. Cal. May 17, 2000). For example, in Yartzoff v. Thomas, 809 F.2d 1371
(9th Cir. 1987), the court stated that employment actions less than those typically characterized as ultimate employment actions may amount to an adverse employment action
483
under section 704(a). A co-worker harassed Fielder on several occasions

through sexual advances, requests for sexual favors, and other verbal
and physical conduct.146 After Fielder reported the sexual harassment
to her supervisor, the supervisor instructed her to not discuss the matter with her co-workers.147 However, the offender was allowed to relate
to other co-workers that he had done nothing wrong.148 Some fellow
employees then ostracized and yelled at Fielder, accusing her of fabricating the harassment.149 Others ignored her and refused to assist her
in duties so that she was unable to adequately perform her job.150 In
reversing the trial courts summary judgment in favor of the employer,
the Ninth Circuit Court of Appeals held that section 704(a) provides for
employer liability for co-worker retaliation when it rises to the level of
an adverse employment action.151 It also recognized that a strict interpretation of section 704(a) would allow employers to retaliate at will
so long as the retaliation does not rise to the level of a constructive
discharge.152 The case was then remanded to determine if the coworker conduct was motivated by retaliation to her complaints of sexual harassment.153
The common denominator in the analyses of these courts is the
following: (1) the harassment must be sufficiently severe or pervasive
to constitute a hostile work environment; (2) the employer must know
for purposes of proving retaliation. See id. at 1376 (Transfers of job duties and undeserved performance ratings, if proven, would constitute adverse employment decisions. ); see also Hashimoto v. Dalton, 118 F.3d 671, 675 (9th Cir. 1997) (Title VII does
not limit its reach only to acts of retaliation that take the form of cognizable employment
actions such as discharge, transfer, or demotion. ). Subsequently, however, without expressly overruling Yartzoff, the court adopted a more restrictive definition of adverse
employment action. See, e.g., Nidds v. Schindler Elevator Corp., 113 F.3d 912, 919 (9th
Cir. 1996) (holding that a transfer is not an adverse employment action, absent a showing
of additional, material detriment, such as a decrease in pay or grade); Steiner v. Showboat
Operating Co., 25 F.3d 1459, 1465 (9th Cir. 1994) (finding that an employees transfer to
a different work shift did not constitute an adverse employment action because there
was no showing of additional, material detriment). Most district courts in the Ninth
Circuit followed the latter construction and interpreted adverse employment action narrowly, requiring some tangible impact upon the terms, privileges, conditions or duration
of the employees job. See, e.g., Aielleo, 2000 U.S. Dist. LEXIS 6797, at *21 (citing Helgeson v. Am. Intl Group, Inc., 44 F. Supp. 2d 1091, 1098 (S.D. Cal. 1999)).
146. See Fielder, 218 F.3d at 977. The harassment consisted of: the co-worker frequently touching Fielders shoulder, back, arms, or hips while on the job; pinning her to
a wall with his back and rubbing himself against her; leaning over to her in front of
numerous customers and asking her to sleep with him; and making obscene phone calls
to her at home. See id. Fielder testified that she feared that the harasser would harm
her and requested that their work schedules not coincide. Id. at 980. However, her supervisor refused to accommodate her request. Id.
147. Id. at 978.
148. Id.
149. Fielder, 218 F.3d at 978-79.
150. Id. at 979.
151. Id. at 984.
152. Id.
153. Id. at 989.
484
about the harassment; and (3) the employer must be negligent in failing
to stop the retaliation.154 This follows what the Supreme Court has
dictated as the proper analysis under Title VII.155
3. The Moderate Courts Require a Tangible Employment Action
or Constructive Discharge
Like the Fifth and Eight Circuits, the Fourth and Sixth Circuits
generally take a conservative approach to determine what constitutes
an adverse employment action under Title VII.156 However, the circuits
do not limit the definition of an adverse employment action to only
ultimate employment decisions.157 Rather, the Fourth and Sixth Circuits acknowledge that action such as a constructive discharge may also
constitute an adverse employment action, because it has an ultimate
employment effect.158 Furthermore, both circuits acknowledge that an
employers acquiescence in co-worker harassment may make an employees work conditions intolerable so as to constitute a constructive
discharge.159 Thus, it appears that the Fourth and Sixth Circuits place
the bar of an adverse employment action higher than the liberal interpretation of most courts, but lower than the narrow construction developed by the Fifth and Eighth Circuits.
The Fourth Circuit addressed the issue of co-worker retaliatory
harassment in Munday v. Waste Management of North America,
154. See, e.g., Knox, 93 F.3d at 1332-33; Gunnell, 152 F.3d at 1265 (An employer
may not be held liable for the retaliatory acts of co-workers if none of its supervisory or
management-level personnel orchestrated, condoned, or encouraged the co-workers actions, and no such management participation could occur if the supervisory or management-level personnel did not actually know of the co-workers retaliation.).
155. See discussion supra Part II.B.2 (describing the hostile work environment doctrine in employment discrimination cases).
156. See Patton v. Sears, Roebuck & Co., Nos. 97-2310/98-1621/98-1004, 2000 U.S.
App. LEXIS 27997, at *2 (6th Cir. Nov. 1, 2000) (upholding a jurys finding that the
plaintiff was constructively discharged when he suffered supervisory and co-worker harassment that forced him to resign); Rachel M. Wolf, Recent Decisions: The United States
Court of Appeals for the Fourth Circuit, 58 MD. L. REV. 1280, 1287 (1999).
157. See e.g., Harrison v. Metro. Govt of Nashville, 80 F.3d 1107, 1119 (6th Cir. 1996)
(holding that a claim of retaliation may be supported by allegations that the plaintiffs
activities were more carefully scrutinized than other employees); DiMeglio v. Haines, 45
F.3d 790, 804 & n.6 (4th Cir. 1995) (holding that a reprimand and reassignment may
constitute an adverse employment action); see also Wolf, supra note 156, at 1289.
158. See Patton, 2000 U.S. App. LEXIS 27997, at *12 (noting that a constructive
discharge certainly qualifies as an adverse employment action to sustain a retaliation
claim); Wolf, supra note 156, at 1289. A constructive discharge occurs when an employer
deliberately makes an employees working conditions intolerable, thereby forcing the
employee to quit involuntarily. See, e.g., Patton, 2000 U.S. App. LEXIS 27997, at *13
(quoting Yates v. Avco Corp., 819 F.2d 630, 636-37 (6th Cir. 1987)); Munday, 126 F.3d at
244. A constructive discharge must be based on objective criteria, i.e., a reasonable person
could not bear the intolerable conditions. Patton, 2000 U.S. App. LEXIS 27997, at *13
(citing Wilson v. Firestone Tire & Rubber Co., 932 F.2d 510, 515 (6th Cir. 1991); Munday,
126 F.3d at 244 (citing Bristow v. Daily Press, Inc., 770 F.2d 1251, 1255 (4th Cir. 1985)).
159. Patton, 2000 U.S. App. LEXIS 27997, at *13; Munday, 125 F.3d at 244.
485
Inc.160 In Munday, the court found that the co-worker harassment was
insufficiently severe or pervasive to constitute a constructive discharge,
and therefore did not constitute an adverse employment action under
section 704(a).161 It further found that the employer had no knowledge
of the harassment and therefore could not be liable under section
704(a).
After enduring several incidents of sexual harassment throughout
her tenure of employment, Munday ultimately walked off the job because she disapproved of the vehicle with which she was provided.162
She was subsequently fired for insubordination.163 Thereafter, Munday
filed a discrimination suit against her employer.164 As part of a subsequent settlement agreement between the parties, the employer promised to reinstate Munday and not to retaliate against her for filing the
discrimination complaint.165 Prior to her return to work, the employer
held a meeting at which employees were told not to sexually harass
Munday. However, the general manager of the facility also instructed
employees to ignore her and to report anything she said to other employees.166 Thereafter, the general manager refused to address Mundays subsequent complaints about her tenuous work environment and
yelled at her when he heard she planned to sue her employer again.167
Munday denied the rumor and attempted to address the matter, but
the manager responded colorfully, stating he did not care about her
problems.168 Following that confrontation, Mundays co-workers continued to ignore her, eventually compelling Munday to resign.169
Munday brought suit against her employer in the United States
District Court of Maryland alleging retaliation because she filed the
discrimination charge and because of the resulting settlement agreement.170 The district court held that the managers conduct after Mundays reinstatement satisfied the requirement of an adverse employment action necessary to establish a prima facie retaliation claim.171
The employer appealed to the Fourth Circuit Court of Appeals arguing
the district court erred as a matter of law.172
160.
161.
162.
163.
164.
165.
166.
167.
168.
169.
170.
171.
172.
126 F.3d at 239.

Id. at 244.
Id. at 241.
Id.
Id.
Id.
See Munday, 126 F.3d at 241.
Id.
Id.
Id. at 242.
Id.
Id.
Munday, 126 F.3d at 242.
486
The Fourth Circuit recognized that co-worker harassment may be

actionable if it adversely affects the work environment and creates intolerable working conditions.173 It also conceded that Mundays work
environment was unpleasant.174 However, the court ultimately held
that the manager and co-worker alienation was insufficiently severe to
constitute an adverse employment action.175 The court further emphasized that Munday had not complained to her employer about being
ignored, nor was there evidence that any co-worker had actually spied
on her or reported her statements to management.176 Thus, one may
infer that the court found the employer did not have actual or constructive knowledge of the harassment. Further, of the actions that Munday
initially complained, the employer addressed and corrected them appropriately.177 Therefore, the employer reasonably remedied the employee actions of which it was aware.178
The Munday decision fluctuates between the conservative and liberal views of the adverse employment action. It appears consistent with
the liberal approach followed by the majority of the circuits by noting
that an employers acquiescence of severe or pervasive co-worker retaliatory harassment may constitute an adverse employment action.179
This follows the hostile work environment approach mandated by the
Supreme Court as the proper analysis under Title VII.180 However, by
requiring a constructive discharge, the Fourth Circuit enunciates a
harsher standard: that the work conditions be intolerable. This stringent criterion requires that the plaintiff show that the co-worker harassment not only altered the conditions of his or her employment, but
also substantially impaired employment opportunities so as to constitute a tangible employment.181 This suggests that employer conduct
that promotes harassment or ostracizing of an employee will not render
working conditions intolerable unless overtly manifested.182 In doing
so, the Fourth Circuit appears to only recognize tangible employment
173. Id at 244. To determine whether Mundays working conditions were intolerable,
the court applied the objective standard of whether a reasonable person in [Mundays]
position would have felt compelled to resign. Id. (citations omitted).
174. Id.
175. Id. at 243 (In no case in this circuit have we found an adverse employment
action to encompass a situation where the employer has instructed employees to ignore
and spy on an employee who engaged in protected activity, without evidence that the
terms, conditions, or benefits of her employment were adversely effected.).
176. Id.
177. See Munday, 126 F.3d at 243.
178. Id.
179. See discussion supra Part II.C.2 (discussing the liberal interpretation of section
704(a), which recognizes that an employers acquiescence of severe or pervasive co-worker
harassment may constitute an adverse employment action).
180. See discussion supra Part II.B.2 (describing the hostile work environment doctrine in employment discrimination cases).
181. See Wolf, supra note 156, at 1297.
182. Id. at 1301.
487
decisions and rejects the application of the hostile work environment

doctrine to the anti-retaliation provision.
The Sixth Circuit Court of Appeals, in Patton v. Sears, Roebuck &
Co.,183 recently addressed the issue of whether evidence of co-worker
harassment was sufficient to support the jurys finding that Patton was
constructively discharged.184 In doing so, it also recognized in dicta that
an employer may be liable for co-worker retaliatory harassment.
After working at Sears for over twenty-eight years, Patton was
offered an early retirement package.185 After refusing the package and
continuing to work for Sears, he alleged that his supervisors and coworkers began to discriminate and retaliate against him.186 The most
serious incident of harassment occurred when the General Manager of
the store where he worked violently attacked Patton by clubb[ing]
him on the head with a thick training manual and subsequently attack[ing] him while he was using the restroom.187
The Sixth Circuit Court of Appeals upheld the jurys finding that
the harassment was severe enough to create a hostile environment to
force Patton to resign, thereby constituting a constructive discharge.188
The court went on further to cite as persuasive the liberal courts interpretation of the anti-retaliation provision and stated, [t]he jury in
this case could have reasonably held [the employer] liable for failing to
follow up on Pattons complaints and condoning his co-workers harassment.189 Thus, the Sixth Circuit has arguably adopted the liberal interpretation of the issue.190 However, it adopted the approach in dicta in a
case where the direct issue was whether a jurys finding of a constructive
discharge was reasonable.191 Thus, the Sixth Circuit has yet to expressly
183. 2000 U.S. App. LEXIS 27997, at *1.
184. Id. at *13-14.
185. Id. at *3-5. Patton worked his way from a stock person to a department manager. Id. at *3. He had a favorable relationship with his supervisors and co-workers until
he refused to accept the early retirement offer. Id. at *4 (Patton did not experience any
employment or disciplinary problem for the vast majority of his tenure at Sears. Indeed,
he received a number of favorable employment reviews, interacted well with his coworkers, had no attendance or tardiness problems, and was consistently rated by [his
supervisors] as meeting or exceeding expectations.).
186. Id. at *5-9.
187. Patton, 2000 U.S. App. LEXIS 27887, at *6. Other incidents included: (1) a coworker making statements that Patton interpreted as a reference to a lynching party;
(2) an employee put[ing] a shirt and tie on a black ceramic dog Patton kept in his office,
and attached a balloon with the word help written on it; (3) a co-worker asking if Patton
had any brains left after being hit on the head with the training manual; and (4) an
unknown person putting pins on Pattons chair. Id. at *7.
188. Id. at *13.
189. Id. at *14 n.1. The dissent in Patton recognized that [e]mployer liability for
co-worker retaliation presents an unsettled issue and criticized the majoritys approach
of adopting the liberal interpretation of the anti-retaliation provision in a footnote as
dicta. Id. at 35-36 (Batchelder, J., dissenting).
190. Id. at *14 n.1.
191. See Patton, 2000 U.S. App. LEXIS 27887, at *11-13.
488
decide whether co-worker harassment that is insufficient to constitute

a constructive discharge may still be sufficient to constitute an adverse
employment action under the anti-retaliation provision.192
4. The EEOCs Interpretation
The Equal Employment Opportunity Commission acknowledges the
split among the courts regarding the scope of the adverse employment
action requirement.193 It concludes that section 704(a) should be construed broadly.194 Moreover, among the actions specifically identified as
forbidden retaliation, the EEOC Compliance Manual recognizes coworker harassment or intimidation as a violation of section 704(a).195
Consistent with the Supreme Courts interpretation of a hostile work
environment claim,196 the EEOC requires that the retaliation subjectively and objectively create severe or pervasive hostility in the employees working environment.197 In addition, the Manual indicates that
an employer is liable under section 704(a) for failing to take reasonable
steps to remedy or prevent co-worker retaliation.198 While the EEOC
guidelines are not binding, they are given deference by the courts and
have contributed to the development of Title VII interpretation.199
III. Broadening the Scope of Section 704(a) to Proscribe
Retaliatory Co-Worker Harassment
An extension of section 704(a) to recognize retaliatory harassment by co-workers as within the scope of the provision is consistent
192. Prior to Patton, the Sixth Circuit expressly recognized that retaliatory harassment by a supervisor can be actionable in a Title VII claim. See Morris, 201 F.3d at
791. However, the Morris court explicitly reserved to rule on whether an employer can
be liable for co-workers retaliatory harassment. Id. at 791 n.8.
193. See EQUAL EMPLOYMENT OPPORTUNITY COMMISSION COMPLIANCE MANUAL
614.7 (2000) [hereinafter EEOC]; see also Williams & Rhodes, supra note 26, at 62
(alteration in original) (quoting the EEOC Directive 915.003 at 8-13) ([s]ome courts have
held that the retaliation provisions apply only to retaliation that takes the form of ultimate employment actions . . . [o]thers have construed the provisions more broadly, but
have required that the action materially affect the terms, conditions, or privileges of
employment) (citations omitted).
194. See EEOC, supra note 193, at 614.7; see also Williams & Rhodes, supra note
26 and accompanying text.
195. See EEOC, supra note 193, at 614.7 (If others, such as coworkers . . . retaliate
against [an employee] for having opposed employment discrimination, the [employer]
will, under certain circumstances, have a duty to take steps reasonably calculated to end
the retaliation.).
196. See discussion supra Part II.B.2.
197. See EEOC, supra note 193, at 614.7 (recognizing that retaliation against people who protest unlawful employment discrimination can take many forms).
198. Id.
199. See, e.g., Kelly & Sinclair, supra note 54, at 812 (noting that the First, Eighth,
Ninth, and Tenth Circuits have cited favorably the EEOC guidelines on the issue of
employer liability for harassment of employees by non-employees, and many state courts
have followed EEOC guidelines in cases of first impression).
489
with the text, liberal interpretation, and broad purpose of the

provision.
A. Recognizing Co-Worker Retaliatory Harassment as an
Adverse Employment Action Is Consistent with the Text of
Title VII, Section 704(a)
Section 704(a), the anti-retaliation provision of Title VII, states,
It shall be an unlawful employment practice for an employer to discriminate against any of his employees or applicants for employment
. . . because [the employee or applicant] has opposed any practice
made an unlawful employment practice by [Title VII], or because he
has made a charge, testified, assisted, or participated in any manner
in an investigation, proceeding, or hearing under [Title VII].200
The anti-retaliation provision is, on its face, broader than the substantive anti-discrimination provision.201 The anti-discrimination provision
contains detailed and specific text, with numerous and precise verbs
and explicit restrictions with respect to the terms, conditions, or privileges of employment and employment opportunities.202 In contrast, the
anti-retaliation provision does not.203 It simply and broadly prohibits
an employer from discriminating against an employee because he vindicated himself and fought for his Title VII rights.204 Thus, the antiretaliation provision, which does not limit the scope of unlawful employment action to specific actions or conditions, should be construed
more broadly than the substantive anti-discrimination provision.
B. Recognizing Co-Worker Retaliatory Harassment as an
Adverse Employment Action Is Consistent with the
Legislative Intent, Broad Purpose, and Liberal Interpretation
of Title VII and Section 704(a)
The purpose of section 704(a) is to prevent employers from chilling
employees assertion of Title VII rights.205 To achieve the specific pur-
200. 42 U.S.C. 2000e-3(a).

201. See id. at 2000e-2(a)(1)(a)(2); Id. at 2000e-3(a).
202. See id. 2000e-2(a)(1)(a)(2).
203. See id. 2000e-3(a); see also Knox, 93 F.3d at 1334 (There is nothing in the
law of retaliation that restricts the type of retaliatory act that might be visited upon an
employee. . . . It need only be an adverse employment action, . . . [as] adverse actions can
come in many shapes and sizes.) (citations omitted); Passer v. Am. Chem. Socy, 935 F.2d
322, 331 (D.C. Cir. 1991) (The statute itself proscribes discriminat[ion] against those
who invoke the Acts protections; the statute does not limit its reach only to acts of retaliation that take the form of cognizable employment actions such as discharge, transfer,
or demotion.).
204. See 42 U.S.C. 2000e-3(a).
205. See Civil Rights Act of 1964, at 704; see also EEOC, supra note 193, at 614.7;
Brian J. Kreiswirth, Justifiable Limitations on Title VII Anti-Retaliation Provisions, 107
YALE L.J. 2339 (1998) (noting that without the protection of the anti-retaliation provisions, employees would be dissuaded from invoking the protection of Title VII altogether).
490
pose of the provision and the overall purposes of Title VII,206 section
704(a) affords broad protection against retaliation for those who seek
protection of employment-related civil rights.207 Recognizing an employer may be liable for severe or pervasive co-worker retaliatory harassment is consistent with the congressional intent of the original
Civil Rights Act of 1964, as well as the amended Civil Rights Act of
1991. In order to more aggressively deter and protect against unlawful
harassment and intentional discrimination in the workplace, Congress
amended the Civil Rights Act in 1991.208 The amendment extended a
plaintiffs remedies for a Title VII violation, which were originally limited to restitution, to include compensatory and punitive damages.209
By doing so, Congress intended to expand the scope of actionable employer conduct under Title VII.210 Thus, the more expansive approach
as to what constitutes an adverse employment action is consistent with
the legislative intent of Title VII.
In recognizing that claims may not come within the scope of the
anti-retaliation provision if interpreted literally, courts have also extended the scope to comport with both the overall purpose of Title VII
and the specific purpose of section 704(a).211 For example, although the
text of neither provision provides the distinction, courts have interpreted section 704(a) to allow a retaliation claim even when no actual
discrimination has occurred or if a discrimination claim under section
703(a) fails.212 An employee need not prove a discrimination claim to
206. See supra note 3 and accompanying text.
207. See, e.g., Wideman, 141 F.3d at 1456 (Permitting employers to discriminate
against an employee who files a charge of discrimination so long as the retaliatory discrimination does not constitute an ultimate employment action, could stifle employees
willingness to file charges of discrimination.); Pettway v. Am. Cast Iron Pipe Co., 411
F.2d 998, 1006 n.18 (5th Cir. 1969) (The protection of assistance and participation in any
manner would be illusory if [an] employer could retaliate against [an] employee for having
assisted or participated in a [Title VII] proceeding.); see also EEOC, supra note 193, at
614.7.
208. See 42 U.S.C. 1981a note (1994) (Congressional Findings); see also Wolf, supra
note 156, at 1299.
209. See Wolf, supra note 156, at 1299.
210. See id.
211. See, e.g., McDonnell v. Cisneros, 84 F.3d 256, 262 (7th Cir. 1996) (identifying
situations, apparently not foreseen by Congress, in which a literal interpretation of the
provision would leave a gaping hole in the protection of complainants and witnesses).
The court stated in dicta that it would extend the protection of the anti-retaliation provision to situations where: (1) an employer retaliates against an employee for . . . failing
to prevent the filing of a [Title VII] complaint [by a co-worker]; and (2) the employer
either does not know who the complainant is and decides therefore to retaliate against
a group of workers that he knows includes the complainant, or makes a mistake and
retaliates against the wrong person. Id. Both are cases of genuine retaliation, and we
cannot think of any reason . . . other than pure oversight, why Congress should have
excluded them from the protection of [section 704(a)]. Id.
212. See, e.g., Glover, 170 F.3d at 412 (holding that the participation clause [of the
anti-retaliation provision] shields even allegedly unreasonable testimony from employer
retaliation); Collins v. Ill., 830 F.2d 692, 702 (7th Cir. 1987) (noting that it is not necessary
that the employer is actually committing an unlawful employment practice under Title
491
sustain a retaliation claim. Rather, he or she must only reasonably

believe that an unlawful employment practice has occurred.213 Further,
recognition of retaliation claims under section 704(a) in situations
where a discrimination claim under section 703(a) is not viable, implies
that a retaliation claim has a broader objective than a discrimination
claim.214
The Supreme Courts decision in Robinson v. Shell Oil Co.215 also
supports the broad interpretation of section 704(a). Although the text
of the provision only prohibits discrimination against employees or
applicants for employment,216 the Court held that section 704(a) also
extends to former employees as long as the alleged discrimination is
related to, or arises out of, the employment relationship.217 The antiretaliation provision thus protects a former employee from postemployment actions allegedly taken in retaliation for the employees
protected activity.218 Further evidence of willingness to extend the application of the anti-retaliation provision is found where courts have
extended the scope of section 704(a) of Title VII to encompass suits
brought to remedy retaliatory action resulting from the prosecution of
a claim under the Equal Pay Act and other anti-discrimination statutes.219 Therefore, the further broadening of section 704(a) to include
co-worker retaliatory harassment is consistent with the liberal interpretation of the provision.
VII; rather, it is sufficient for a plaintiff to reasonably believe that the employer is violating the statute).
213. See, e.g., Wu v. Thomas, 863 F.2d 1543, 1549 (11th Cir. 1989) (noting that a
retaliation claim does not require that the employer actually have been engaged in an
unlawful employment practice; instead, the plaintiff need only have a reasonable belief
that an unlawful employment practice was occurring); Rucker v. Higher Educ. Aids Bd.,
669 F.2d 1179, 1182 (7th Cir. 1982) (holding that a reasonable belief that an employer
action constituted a violation of Title VII, even if that belief is incorrect, is enough to
satisfy the first prong of the prima facie case of retaliation); Payne v. McLemores Wholesale & Retail Stores, 654 F.2d 1130, 1137 (5th Cir. 1981) (noting a plaintiff can satisfy
the first prong of the prima facie case by showing a reasonable belief that an unlawful
employment practice was occurring).
214. See White, supra note 14, at 1165-66 and accompanying text.
215. 519 U.S. 337 (1997).
216. See 42 U.S.C. 2000e-3(a).
217. Robinson, 519 U.S. at 346; see also Passer, 935 F.2d at 331 (holding that a
cancellation of a major symposium in former employees honor after the employer learned
that the employee filed charges of age discrimination could be an adverse employment
action under the anti-retaliation provision).
218. See Robinson, 519 U.S. at 346 (recognizing that a former employee is protected
under section 704(a), thereby allowing him or her to bring a claim against a former
employer for giving negative job references to other potential employers in retaliation for
the employee filing a Title VII claim).
219. See Passer, 935 F.2d at 322; see also Wu, 863 F.2d at 1547-48 (recognizing claim
of retaliation based on a suit alleging gender discrimination under the Equal Pay Act,
Title VII of the Civil Rights Act of 1964, and 42 U.S.C. 1983).
492
C. Limiting Adverse Employment Actions to Ultimate

Employment Decisions Is Inconsistent with the Language,
Interpretation, and Purpose of Title VII and Section 704(a)
Confining an adverse employment action to an ultimate employment decision conflicts with the clear statutory language, purpose, and
judicial interpretation of section 704(a) of Title VII. The Fifth and Eighth
Circuits interpretation of section 704(a), limiting an adverse employment action to an ultimate employment decision, is inconsistent with the
text of the provision.220 The ordinary understanding of the verb discriminate is not limited to the actions defined as ultimate employment decisions.221 Rather, the plain meaning of the verb is interpreted broadly
to encompass all manners of differentiation and discernment.222
The narrow definition of the adverse employment action, which
necessarily links it to ultimate employment decisions, also frustrates
the broad, remedial purpose of Title VII. Courts that limit the definition
of adverse employment actions to ultimate employment decisions rely
on the notion that Title VII was designed to address only ultimate employment decisions.223 This contradicts Title VIIs broad proscription
against discrimination by focusing only on the effect of the employers
conduct and by ignoring the employers intent to treat an employee
disparately because he or she participated in a protected activity.224 It
precludes redress even though certain intangible factors, such as employee empowerment and an ability to concentrate, may interfere with
job performance.225 The ultimate employment decision that courts also
allow employers to engage in is a calculated plan of retaliation as long
as they are carefulor clever enoughnot to impose a serious or tangible employment-related detriment upon their victims.226
The Supreme Court has expressly declined to limit Title VIIs prohibition against discrimination to employment actions with tangible
220. See Wideman, 141 F.3d at 1456 (directly criticizing the Mattern courts limitation of adverse employment action to ultimate employment decisions).
221. See id.; see also Passer, 935 F.2d at 331 (The statute itself proscribes discriminat[ion] against those who invoke the Acts protections; the statute does not limit its
reach only to acts of retaliation that take the form of cognizable employment actions such
as discharge, transfer or demotion.).
222. See WEBSTERS NEW WORLD DICTIONARY 423 (David B. Guralink et al. eds., 2d
ed. 1986); see also BLACKS LAW DICTIONARY 467 (6th ed. 1990) (defining discrimination
as failure to treat all persons equally where no reasonable distinction can be found
between those favored and those not favored).
223. See Mattern, 104 F.3d at 707 (relying on Dollis, 77 F.3d at 781-82 (Title VII
was designed to address ultimate employment decisions, not to address every decision
made by employers that arguably might have some tangential effect upon those ultimate
decisions.)).
224. See Wolf, supra note 156, at 1289 (noting that the dissents opinion in Munday,
126 F.3d at 239, remarks that the relevant inquiry should be the employers intent).
225. See Wolf, supra note 156, at 1300; see also infra notes 256-261 and accompanying text.
226. Wolf, supra note 156, at 1300.
493
economic effects.227 Rather, the Supreme Court has that held Title VII
is violated when an employer discriminates on the basis of a protected
characteristic by creating a hostile or abusive work environment, which
can be determined only by looking at all the circumstances.228 Such
interpretations clearly indicate that Title VII extends protection
against employment actions beyond ultimate employment decisions.
Courts that adopt the ultimate employment decision standard essentially adopt mutually contradictory positions in treating retaliation
claims. The confinement of the adverse employment action to only ultimate employment actions renders a retaliation claim far more limited
than an underlying discrimination claim.229 Paradoxically, all courts,
including the ultimate employment decision courts, recognize that a
retaliation claim may exist even when no actual discrimination has
occurred,230 implying that a retaliation claim has a broader objective
than a discrimination claim.
Finally, the Mattern courts reliance on section 717 of Title VII, to
define the adverse employment action, is misplaced.231 Although sections 703(a), 704(a), and 717 were all enacted to effectuate the general
goals of Title VII, the provisions are substantially distinct in several
ways.232 First, section 717 specifically requires there be a personnel
actionnot merely discriminationthereby narrowing significantly
the scope of the provision.233 The language of section 704(a) is broader
regarding its prohibition on employer conduct in that it prohibits any
discrimination as opposed to merely personnel actions.234 Furthermore,
personnel actions may incorporate more than ultimate employment actions.235 Second, section 717 exclusively addresses discrimination in
227. See discussion supra Part II.B (describing the liberal interpretation of Title
VIIs anti-discrimination provision).
228. Faragher, 524 U.S. at 787.
229. See discussion supra Part II.C.1 (describing the restriction of adverse employment actions to ultimate employment decisions).
230. See, e.g., Wu, 863 F.2d at 1549 (noting that a retaliation claim does not require
that the employer actually have been engaged in an unlawful employment practice; instead, the plaintiff need only have a reasonable belief that an unlawful employment
practice was occurring); Payne, 654 F.2d at 1137 (stating that a plaintiff can satisfy the
first prong of the prima facie case by showing a reasonable belief that an unlawful employment practice was occurring).
231. See Mattern, 104 F.3d at 717 (Dennis, J., dissenting) (stating that Page v. Bolger, the decision on which the majority opinion relied, did not add the restriction that in
order for an employee to recover under section 717, he must prove that he was discriminated against by the employer in an ultimate employment decision such as hiring,
granting leave, discharging, promoting, and compensation).
232. Compare 42 U.S.C. 2000e-3(a), with 42 U.S.C. 2000e-17.
233. See id. 2000e-17.
234. Compare 42 U.S.C. 2000e-3(a), with 42 U.S.C. 2000e-17.
235. While the Page court explicitly qualified its definition of a personnel action, it
nonetheless stated that its list of described actions was not exhaustive:
[W]e suggest no general test for defining those ultimate employment decisions which alone should be held directly covered by 717 and comparable
494
federal employment.236 Its purpose is to extend the protection of Title

VII to employees of the federal government.237 By doing so, Congress
did not intend to restrict the protection of employees in the private
sector accorded by sections 703(a) and 704(a).238 If Congress intended
to restrict the protection under sections 703(a) and 704(a) to that of
section 717, it would have amended the language to reflect this narrow
application.239 Thus, by erroneously relying on section 717 to interpret
sections 703(a) and 704(a), the Mattern court squarely contradicted
both the text and purpose of the provisions and impeded the achievement and protection of employee civil rights.
IV. Courts Should Uniformly Recognize that Co-Worker
Retaliatory Harassment May Violate Section 704(a)
A. Courts Should Extend the Hostile Work Environment
Discrimination Doctrine Developed under Section 703(a) to
Section 704(a)
To ensure the achievement of the purposes of Title VII, courts frequently turn to section 703(a), the substantive anti-discrimination
provision, for guidance in interpretation of section 704(a), the antiretaliation provision.240 Under section 703(a)(1), an employer may be
liable for discriminatory harassment when (1) the conduct is sufficiently severe or pervasive as to alter the conditions of employment and
create a hostile or abusive work environment, and (2) the employer
knew or should have known of the harassment, but (3) failed to take
reasonably calculated steps to end the abuse.241 Consistent with this
approach, and noting that the scope of section 704(a) is broader than
that of section 703(a),242 courts should extend the hostile work environment doctrine of discrimination recognized under section 703(a) to
section 704(a). By recognizing that retaliatory co-worker harassment
is within the scope of section 704(a), courts comply with the text and
antidiscrimination provisions [under] Title VII. Among the myriad of decisions
constantly being taken at all levels and with all degrees of significance in the
general employment contexts covered by Title VII there are certainly others
than those we have so far specifically identified that may be so considered.
Page, 645 F.2d at 233.
236. See id.; see also Mattern, 104 F.3d. at 717-18 n.1 (Dennis, J., dissenting) (noting
that there is no indication that the Page court intended the personnel actions definition
to apply to the anti-retaliation provision of section 704(a)).
237. See Equal Employment Opportunity Act of 1972, Pub. L. No. 92-261, 86 Stat.
103 (codified as amended at 42 U.S.C. 2000e-17).
238. See id.
239. Congress did not change the text of sections 703(a) and 704(a) when it amended
Title VII to add section 717. See id.
240. See discussion supra Part II.A (discussing judicial interpretation of antidiscrimination and anti-retaliation provisions).
241. See discussion supra Part II.B.2 (describing employer liability for hostile work
environment).
242. See discussion supra Part III.B (comparing scope of sections 703(a) and 704(a)).
495
liberal interpretation of the provision and carry out the purposes of both
the anti-retaliation provision and Title VII.243
There is simply no rationale supporting an interpretation of Title
VII that affords less protection against retaliatory discrimination
than against discrimination protected under the substantive antidiscrimination provision. The individual and collective effects of discrimination are similar, independent of whether they are motivated
by discrimination against a protected characteristic or protected activity.244 An employer has a duty to take effective measures to stop coworker harassment when the employer knows or has reason to know
that such harassment is taking place in the work environment. An
employer must also ensure that further harassment is not tolerated
merely because an employee is exercising his or her rights protected
under Title VII.
The policy reasons given by courts that limit an adverse employment action to ultimate employment decisions are unwarranted. For
example, the Mattern court warned that a broadening of the definition
would unjustifiably expose the employer to liability in such a way that
it would interfere with the employers managerial and enforcement
powers.245 Three arguments repudiate this apprehension. First, noting
the lack of legislative history that supports a restriction of section
704(a) to a narrower interpretation than section 703(a), the Seventh
Circuit Court of Appeals in Knox v. Indiana stated,
[t]here is nothing in the law of retaliation that restricts the type of
retaliatory act that might be visited upon an employee who seeks to
invoke her rights by filing a complaint. It need only be an adverse
employment action . . . [as] adverse actions can come in many shapes
and sizes. . . . The law deliberately does not take a laundry list approach to retaliation, because unfortunately its forms are as varied
as the human imagination will permit.246
Thus, the provision itself justifies the liberal interpretation and extension to proscribe co-worker retaliatory harassment.
Second, the courts that have extended the definition of adverse
employment action to employer actions beyond ultimate employment
243. See discussion supra Part III.A-B (arguing that an extension of 704(a) to recognize co-worker retaliation as discrimination is consistent with the text, intent, and
purpose of the provision).
244. See generally David C. Yamada, The Phenomenon of Workplace Bullying and
the Need for Status-Blind Hostile Work Environment Protection, 88 GEO. L.J. 475, 483
(2000). Yamada notes that the psychological effects include stress, depression, mood
swings, loss of sleep (and resulting fatigue), and feelings of shame, guilt, embarrassment,
and low self-esteem. Id. He also identifies that [m]ore severe effects can include PostTraumatic Stress Disorder, which, left untreated, may cause an individual to react violently. Id. Finally, Yamada describes the physical effects [to] include reduced immunity
to infection, stress headaches, high blood pressure, and digestive problems. Id.
245. See Mattern, 104 F.3d at 708.
246. Knox, 93 F.3d at 1334 (citations omitted).
496
decisions have created safeguards to protect against the slippery slope

effect. The courts recognize that not all adverse behavior constitutes
an adverse employment action247 and realize that reserving employment discrimination statutes for workplace decisions of material consequence conserves judicial resources and avoids trivializing discrimination complaints.248 As the Supreme Court explained in Faragher v.
City of Boca Raton,249 [t]hese standards for judging hostility are sufficiently demanding to ensure that Title VII does not become a general
civility code. 250 Restricting actionable harassment to severe or pervasive situations will filter out complaints attacking the ordinary tribulations of the workplace, such as the sporadic use of abusive language,
gender-related jokes and occasional teasing.251 Employers retain the
right to take adverse employment actions against an employee for any
legitimate, nondiscriminatory reason.252 Title VII merely prohibits employers from allowing discriminatory or retaliatory harassment to pervade the workplace. Thus, the judicially created limitations imposed
on hostile work environment claims under section 703(a) maintain the
balance of rights between employer and employee.253 Similarly, by limiting the scope of 704(a) to retaliatory discrimination that is so severe
or pervasive as to materially alter the terms or conditions of employment, courts have balanced carefully the rights of the employer with
those of the employee.254
247. See, e.g., Drake v. Minn. Mining & Mfg. Co., 134 F.3d 878, 885 (7th Cir. 1998)
(noting that Title VII is not directed [at] unpleasantness per se but only . . . against
discrimination in the conditions of employment); Manning, 127 F.3d at 692 (Although
actions short of termination may constitute an adverse employment action within the
meaning of the statute, not everything that makes an employee unhappy is an actionable
adverse employment action. ) (quoting Montandon v. Farmland Indus., Inc., 116 F.3d
355, 359 (8th Cir. 1997)); Wanamaker v. Columbian Rope Co., 108 F.3d 462, 466 (2d Cir.
1997) ([N]ot every unpleasant matter short of [discharge or demotion] creates a cause
of action [for retaliation].); see also Weitzman, supra note 47, at 48 (Harassing behavior,
although offensive, is often held not severe or pervasive enough to be actionable under
Title VII.).
248. See, e.g., Williams, 85 F.3d at 274 (noting that courts are expressing fear that
trivial personnel actions that a disgruntled employee did not like would support a discrimination suit); see also White, supra note 14, at 1128 n.30 (noting that the Seventh
Circuit, in defending the need for a materially adverse employment action stated that,
[t]he Equal Employment Opportunity Commission, already staggering under an avalanche of filings too heavy for it to cope with, would be crushed, and serious complaints
would be lost among the trivial) (quoting Williams, 85 F.3d at 274).
249. 524 U.S. at 775.
250. Id. at 788 (quoting Oncale, 523 U.S. at 81).
251. Id. (quoting BARBARA LINDERMAN & DAVID D. KADUE, SEXUAL HARASSMENT IN
EMPLOYMENT LAW 175 (1992)).
252. See McDonnell Douglas, 411 U.S. at 804-05; Burdine, 450 U.S. at 252-53; Hicks,
509 U.S. at 507-11; Reeves, 120 S.Ct. at 2105-12; see also Glover, 170 F.3d at 414.
253. See infra discussion Part II.B. (discussing the development of the adverse employment element under section 704(a)).
254. See Glover, 170 F.3d at 413 (explicating the courts balance between the aim of
the anti-retaliation provision to protect persons engaged reasonably in activities opposing
discrimination against Congress equally manifest desire not to tie the hands of em-
497
Third, the employers acquiescence of co-worker harassment can

lead to devastating effects on both the individual employee and the
organization. Comprehensively, the employer suffers much more financial loss when it allows retaliatory harassment to pervade the work
environment.255 For example, an employer may suffer direct costs
through an increase in medical and workers compensation claims due
to work-related stress.256 It may also bear indirect costs by undermining employee empowerment and cultivating an environment of fear,
mistrust, resentment, hostility, and humiliation. These psychological
effects may interfere with the employees ability to concentrate, which
may lead to increases in accidents at work and/or frequent mistakes,
resulting in inferior work product.257 It may also result in stress, which
can stifle creativity.258 A deteriorated relationship with an employer
may, in addition, produce lower productivity and decreased quality of
employee performance, which results in a diminution in profits for an
employer.259 Less loyalty or pride in the employees work may lead to
poor customer relations, which will cost the employer time to rebuild
successful business relationships.260 It can also lead to increased job
turnover, forcing the employer to recruit and train new employees.261
Thus, the employer must consider all the costs incurred by failing to
remedy a hostile work environment.
B. Courts Need Uniform Interpretation
The lack of uniformity in jurisdictions as to what constitutes adverse employment action has spurred demands for uniform interpretation to clarify the scope of section 704(a).262 The wide variations in
interpretation have lead to an increase in litigation and unpredictable
results in the federal courts.263 Moreover, since many states have enployers in the objective selection and control of personnel) (quoting Laughlin v. Metro.
Wash. Airports Auth., 149 F.3d 253, 259 (4th Cir. 1998)).
255. See Yamada, supra note 244, at 478 (identifying costs incurred by an employer
in addition to litigation costs emerging from abusive work situations).
256. See id. at 483; see also Weitzman, supra note 47, at 27 (Workers suffering
trauma from harassment take more time off from work than the average employee, subjecting employers to increased business costs from medical insurance.).
257. See Weitzman, supra note 47, at 27-28.
258. See Yamada, supra note 244, at 484.
259. See Weitzman, supra note 47, at 28.
260. See id.
261. See id.
262. See Eric J. Wallach & Mark E. Greenfield, The EEOC Has Delineated the Risk
of Liability for Retaliation When an Employer Takes Action Against a Worker Who Complains of Discrimination or Harassment, 20 NATL L.J. 47 (1998) (noting that retaliation
complaints received each year by the EEOC more than doubled in number between . . .
1991 and 1997, from 7,900 to 18,100); see also White, supra note 14, at 1124 n.14 (noting
a 300% increase in all employment cases filed in federal district courts for the same time
period).
263. See Wallach & Greenfield, supra note 262; see also discussion supra Part II.C.12 (noting the broad interpretation of various anti-discrimination provisions).
498
acted civil rights legislation that provide protection similar to that afforded in Title VII,264 their courts look to the federal courts interpretation of Title VII to interpret the state civil rights legislation.265 Thus,
a uniform interpretation of the anti-retaliation provision would in264. See, e.g., MINN. STAT. 363.01-363.30 (2000); see also Kelly & Sinclair, supra
note 54, at 810. Several state civil rights acts provide more protection and remedy to an
employee than the federal Civil Rights Act. For example, several states prohibit discrimination based on marital status, juvenile record, or sexual orientation. See Kalley R.
Aman, No Remedy for Hostile Environment Sexual Harassment: Balancing a Plaintiffs
Right to Relief Against Protection of Small Business Employers, 4 J. SMALL & EMERGING
BUS. LAW 319, 340 (2000) (citing Andrea Catania, State Employment Discrimination
Remedies & Pendent Jurisdiction Under Title VII: Access to Federal Courts, 32 AM. U. L.
REV. 777, 783-84 (1983)). In addition, some states provide for individual liability in employment discrimination cases and other remedial measures. See Aman, supra note 264,
at 810; see also, e.g., MINN. STAT. 549.20, subd. 1(a) (awarding punitive damages in civil
actions upon clear and convincing evidence that the acts of the defendant show deliberate disregard for the rights or safety of others); MINN. STAT. 363.071, subd. 2 (requiring any party found to engage in unfair discriminatory practices to pay a civil penalty
to the state). Moreover, an employee alleging retaliatory harassment may also obtain
relief at the state level under tort theories such as intentional infliction of emotional
distress, negligent infliction of emotional distress, outrage, negligent retention, negligent
supervision, false imprisonment, or defamation. See, e.g., Blakely v. Continental Airlines,
Inc., 751 A.2d 528, 164 N.J. 38, 57-69 (N.J. 2000) (holding that an employer may be liable
for allowing co-workers to transmit allegedly defamatory comments on an electronic bulletin board in retaliation of an employees sexual discrimination complaint); Manikhi v.
Mass Transit Admin., 758 A.2d 95, 360 Md. 333, 364-70 (Md. 2000) (analyzing claims of
false imprisonment and intentional infliction of emotional distress caused by co-worker
harassment); Robel v. Roundup Corp., 10 P.3d 1104, 1112-14 (Wash. Ct. App. 2000) (analyzing claim that co-worker harassment supported claims of outrage, negligent infliction
of emotional distress, and defamation); Huffman v. Pepsi-Cola Bottling Co., 1995 WL
434467, at *3 (Minn. App. 1995) (describing the claims of reprisal, negligent retention,
and negligent supervision for an employers acquiesce of retaliatory co-worker harassment). See generally Aman, supra note 264, at 335-44 (noting that claims of negligent or
intentional infliction of emotional distress are problematic because of the stringent standard placed on the plaintiff to prove the prima facie case and lack of uniformity in the
states recognition and interpretation of the claims); Yamada, supra note 244, at 478, 493505 (describing the tort of intentional infliction of emotional distress and noting that such
claims arising out of the workplace are seldom successful). However, these claims may
be preempted by state civil rights legislation or workers compensation statutes. See, e.g.,
MINN. STAT. 176.011, subd. 16; MINN. STAT. 363.11 (providing that as to acts declared
under the Minnesota Human Rights Act, the procedure herein provided shall, while
pending, be exclusive); see also Yamada, supra note 244, at 478.
265. See, e.g., Morris, 201 F.3d at 793 (stating that the Kentucky Civil Rights Act
should be interpreted consonant with [Title VII]); Beckman v. Edson Hill Manor, Inc.,
2000 WL 1759913, at *1 (Vt. 2000) (noting that the analyses, standards, and burdens of
proof applied under Vermonts Fair Employment Practices Act are the same as those
under Title VII and adopting the Fourth Circuits holding in Richardson, 180 F.3d at 446,
that unfettered retaliatory co-worker harassment, if sufficiently severe, may constitute
an adverse employment action); Green v. Indus. Specialty Contractors, 1 S.W.3d 126, 131
(Tex. Ct. App. 1999) (The Texas Human Rights Act is modeled after federal law with the
purpose of excuting the policies set forth in Title VII of the federal Civil Rights Act of
1964.); Massey v. Conn. Mental Health Ctr., 1998 WL 470590, at *2 (Conn. Super. 1998)
(The Connecticut Supreme Court has examined federal case law interpreting Title VII
provisions for guidance in enforcing Connecticuts anti-discrimination statute.) (citations omitted); Janken v. GM Hughes Elecs., 46 Cal. App. 4th 55, 66 (Cal. Ct. App. 1996)
(explicating that [b]ecause the antidiscrimination objectives and relevant wording of
[T]itle VII of the Civil Rights Act of 1964 . . . are similar to those of the [Fair Employment
499
crease judicial economy and ensure consistency in both the state and
federal levels. Consistent interpretation is needed so both employees
and employers know which actions are protected under the statute,
thereby leading to a reduction in litigation with a closer adherence to
the purposes of Title VII and similar state civil rights legislation.266
Until a uniform interpretation of an adverse employment action
under section 704(a) is achieved, employers should take necessary
proactive steps to protect themselves against retaliation claims.267 For
example, an employer must develop and widely publish a well-drafted
anti-discrimination and anti-retaliation policy.268 The policy must provide a clear explanation of both prohibited conduct and protected activities to avoid inadvertent violations of Title VII.269 It must also explicitly discourage harassment and encourage the employee subjected
to harassment to notify the employer immediately.270 Moreover, the policy should provide several avenues of complaint and encourage the employee to report the harassment to the level of management appropriate
for the individual situation.271 The policy should also train all employees in the use of the complaint procedures and its prohibition against
and Housing Act (FEHA)], California courts often look to federal decisions interpreting
[Title] VII for assistance in interpreting the FEHA); Lynch v. City of Des Moines, 454
N.W.2d 827, 833 n.5 (Iowa 1990) ([D]ecisions under Title VII of the federal Civil Rights
Act of 1964 may be persuasive in construing the Iowa Civil Rights Act, although, of
course, federal decisions under the federal statute are not binding on us when construing the Iowa statute.); College-Town, Division of Interco, Inc. v. Mass. Comm. Against
Discrimination, 508 N.E.2d 587, 591 (1987) ([W]e may look to the interpretations of
Title VII of the analogous [f]ederal statute; we are not, however, bound by interpretations of the [f]ederal statute in construing [the Massachusetts] statute.); see also
Aman, supra note 264, at 321 (recognizing that most states have antidiscrimination
laws that mirror the purpose and language of Title VII and therefore, state courts
often adopt federal decisional law for the purposes of interpreting state employment
discrimination statutes).
266. See Wallach & Greenfield, supra note 262 (stating that unwary employers,
confident that they have engaged in no unlawful discrimination, are unwittingly subjecting themselves to liability by retaliating, either intentionally or inadvertently, against
an employee or former employee who believes otherwise).
267. See id.; see also Elinor P. Schroeder, Regulating the Workplace Through Mandated Personnel Policies, 48 KAN. L. REV. 593, 601 (2000) (explicating that although Title
VII contains no provision requiring employers to have anti-harassment policies with complaint procedures, Faragher and Ellerth hold an employer may avoid liability through
properly structured, promulgated, maintained, and enforced anti-harassment policies).
268. See Wallach & Greenfield, supra note 262; see also Schroeder, supra note 267,
at 601 (describing the anti-harassment policy and complaint procedures promulgated by
the EEOC).
269. See Wallach & Greenfield, supra note 262; Schroeder, supra note 267, at 601.
The policy should also assure an employee that if he or she engages in a protected activity,
he or she will be protected against retaliation. See Schroeder, supra note 267, at 601.
270. See DiLorenzo & Harshbarger, supra note 34, at 18.
271. See id. (explaining that one of the most critical features of a sexual harassment
policy is . . . the person to whom employees are to report complaints of harassment [and
that] a policy which directs an employee to report harassment to her immediate supervisor may be inadequate since the harasser may be the supervisor or an individual at a
500
retaliation.272 Such procedures should outline how the employer is to

conduct a prompt, thorough, and impartial investigation.273 In addition, the employer must ensure the complaint remains confidential to
reduce the chance that a complaining employee will be subjected to
reprisal by co-workers.274 The employer should assure the employee
that it will take immediate and appropriate corrective action when it
determines harassment has occurred.275 Finally, the employer should
direct the employee to immediately report any acts of retaliation.276
The training allows the employers to (1) create a culture which discourages harassment and retaliation; (2) encourage employees to use
the reporting procedure, allowing management to promptly remedy the
situation; and (3) give prior notice to all employees of the probable consequences of engaging in harassment.277
Honest, regular evaluations play an important role as well. It is
much easier for an employer to defend a retaliation claim against a
former employee who has a long and well-documented history of performance problems than against an employee who was terminated for
no established reason shortly after complaining of discriminatory conduct.278 In taking such precautions, the employer will fulfill the purpose
of section 704(a) by minimizing retaliatory harassment.
V. Conclusion
To better achieve the purposes of the provision and balance the
rights of employers and employees, courts should uniformly recognize
that an employer violates section 704(a) when (1) the abusive conduct
was sufficiently severe or pervasive so as to alter the conditions of employment, and (2) the employer knew of the discrimination, but (3) failed
to take reasonable remedial steps.
The Supreme Court has recognized that discriminatory harassment that is severe or pervasive enough to create a hostile work environment violates the substantive anti-discrimination provisions of Title
VII. Since the scope of section 704(a) is broader than that of section
703(a), it necessarily follows that an employer not only violates section
level above the employees immediate supervisor); see also Knox, 93 F.3d at 1333 (supervisor of plaintiff told his friends, who were co-workers of plaintiff, to harass her).
272. See DiLorenzo & Harshbarger, supra note 34, at 19 (emphasizing the importance of training both supervisory and rank-and-file employees).
273. See Schroeder, supra note 267, at 602.
274. See Wallach & Greenfield, supra note 262; Schroeder, supra note 267, at 601.
275. See Schroeder, supra note 267, at 602.
276. See Wallach & Greenfield, supra note 262.
277. See DiLorenzo & Harshbarger, supra note 34, at 20; see also Weitzman, supra
note 47, at 28 (Training programs serve the dual purpose of fostering a workplace environment that is free of harassment and providing a legal basis to defend a . . . harassment claim.).
278. See Wallach & Greenfield, supra note 262.
501
703(a) when it condones severe or pervasive harassment, but also violates section 704(a) when it discriminates against an employee for participating in the enforcement of Title VII by creating a hostile or abusive work environment.
There is simply no justification for interpreting Title VII to afford
less protection against retaliatory discrimination than against discrimination based on a protected characteristic. The negative and degrading
psychological effects on the victim are the same and exist independently of whether the discriminatory motive is based on a protected
characteristic or a protected activity. Both forms of harassment, if sufficiently severe, may alter the terms and conditions of employment for
the victim. Thus, since an employer may be liable under section 703(a)
for a hostile work environment resulting from discrimination, it should
also be liable under section 704(a) for a hostile work environment
caused by co-worker retaliatory harassment. Interpreting Title VII to
prohibit co-worker retaliatory harassment is the most effective means
to both balance the rights of employers and employees and purposively
enact the broader anti-discrimination objectives of Title VII.
503
Index to Volume 16
Author Index
Arsenault, Steven J., Marsha E. Hass, Jane H. Philbrick, and Barbara
D. Bart, An Employee by Any Other Name Does Not Smell as Sweet:
A Continuing Drama, vol. 16, no. 2, page 285.
Brudney, James J., The Changing Complexion of Workplace Law: Labor
and Employment Decisions of the Supreme Courts 1999-2000 Term,
vol. 16, no. 2, page 151.
Cohen, Charles I., Neutrality Agreements: Will the NLRB Sanction Its
Own Obsolescence? vol. 16, no. 2, page 201.
Collins, Michael J., Its Common, but Is It Right? The Common Law of
Trusts in ERISA Fiduciary Litigation, vol. 16, no. 3, page 391.
Cowen, William B., Merritt J. Green, Gregory J. Ossi, and Jan W. Sturner, An Argument That the WARN Act Does Not Allow Plaintiffs to
Recover Non-ERISA Benefits, vol. 16, no. 2, page 269.
Craver, Charles B., The Clinton Labor Board: Continuing a Tradition
of Moderation and Excellence, vol. 16, no. 1, page 123.
Crotty, Cara Yates, Applying the Supreme Courts Affirmative Defense
to Supervisor Harassment, vol. 16, no. 3, page 449.
Davies, George N., Neutrality Agreements: Basic Principles of Enforcement and Available Remedies, vol. 16, no. 2, page 215.
Feinstein, Fred, The Challenge of Being General Counsel, vol. 16, no.
1, page 19.
Feldman-Summers, Shirley, Analyzing Anti-harassment Policies and
Complaint Procedures: Do They Encourage Victims to Come Forward? vol. 16, no. 2, page 307.
Herrnstadt, Owen E., Voluntary Corporate Codes of Conduct: Whats
Missing, vol. 16, no. 3, page 349.
Hiatt, Jonathan P. and Craig Becker, Drift and Division on the Clinton
NLRB, vol. 16, no. 1, page 103.
Jahnke, Kari, 2000 Student Writing Competition Winner: Retaliatory
Harassment against Employees by Employees: Should the Employer Be Liable? vol. 16, no. 3, page 465.
King, G. Roger and Jeffrey D. Winchester, Building an Internal Defense
against Class Action Lawsuits and Disparate Impact Claims, vol.
16, no. 3, page 371.
Kramer, Andrew M., The Clinton Labor Board: Difficult Times for a
Management Representative, vol. 16, no. 1, page 75.
Kurlantzick, Lewis, John Rocker and Employee Discipline for Speech,
vol. 16, no. 3, page 439.
LaSala, Barry, NAFTA and Worker Rights: An Analysis of the Labor
Side Accord after Five Years of Operation and Suggested Improvements, vol. 16, no. 3, page 319.
504
Liebman, Wilma B. and Peter J. Hurtgen, The Clinton Board(s)A

Partial Look from Within, vol. 16, no. 1, page 43.
Robfogel, Susan S., Electronic Communication and the NLRA: Union
Access and Employer Rights, vol. 16, no. 2, page 231.
Truesdale, John C., Battling Case Backlogs at the NLRB: The Continuing Problem of Delays in Decision Making and the Clinton Boards
Response, vol. 16, no. 1, page 1.
Wilcox, Gwynne A., Section 7 Rights and Union Access to Employees:
Cyber Organizing, vol. 16, no. 2, page 253.
Title Index
Analyzing Anti-harassment Policies and Complaint Procedures: Do They
Encourage Victims to Come Forward? Shirley Feldman-Summers,
vol. 16, no. 2, page 307.
Applying the Supreme Courts Affirmative Defense to Supervisor Harassment, Cara Yates Crotty, vol. 16, no. 3, page 449.
An Argument That the WARN Act Does Not Allow Plaintiffs to Recover
Non-ERISA Benefits, William B. Cowen, Merritt J. Green, Gregory
J. Ossi, and Jan W. Sturner, vol. 16, no. 2, page 269.
Battling Case Backlogs at the NLRB: The Continuing Problem of Delays
in Decision Making and the Clinton Boards Response, John C.
Truesdale. vol. 16, no. 1, page 1.
Building an Internal Defense against Class Action Lawsuits and Disparate Impact Claims, G. Roger King and Jeffrey D. Winchester,
vol. 16, no. 3, page 371.
The Challenge of Being General Counsel, Fred Feinstein, vol. 16, no. 1,
page 19.
The Changing Complexion of Workplace Law: Labor and Employment
Decisions of the Supreme Courts 1999-2000 Term, James J. Brudney, vol. 16, no. 2, page 151.
The Clinton Board(s)A Partial Look from Within, Wilma B. Liebman
and Peter J. Hurtgen, vol. 16, no. 1, page 43.
The Clinton Labor Board: Continuing a Tradition of Moderation and
Excellence, Charles B. Craver, vol. 16, no. 1, page 123.
The Clinton Labor Board: Difficult Times for a Management Representative, Andrew M. Kramer, vol. 16, no. 1, page 75.
Drift and Division on the Clinton NLRB, Jonathan P. Hiatt and Craig
Becker, vol. 16, no. 1, page 103.
Electronic Communication and the NLRA: Union Access and Employer
Rights, Susan S. Robfogel, vol. 16, no. 2, page 231.
An Employee by Any Other Name Does Not Smell as Sweet: A Continuing Drama, Steven J. Arsenault, Marsha E. Hass, Jane H. Philbrick, and Barbara D. Bart, vol. 16, no. 2, page 285.
Its Common, but Is It Right? The Common Law of Trusts in ERISA
Fiduciary Litigation, Michael J. Collins, vol. 16, no. 3, page 391.
Index to Volume 16
505
John Rocker and Employee Discipline for Speech, Lewis Kurlantzick,

vol. 16, no. 3, page 439.
Neutrality Agreements: Basic Principles of Enforcement and Available
Remedies, George N. Davies, vol. 16, no. 2, page 215.
Neutrality Agreements: Will the NLRB Sanction Its Own Obsolescence?
Charles I. Cohen, vol. 16, no. 2, page 201.
NAFTA and Worker Rights: An Analysis of the Labor Side Accord after
Five Years of Operation and Suggested Improvements, Barry LaSala, vol. 16, no. 3, page 319.
Section 7 Rights and Union Access to Employees: Cyber Organizing,
Gwynne A. Wilcox, vol. 16, no. 2, page 253.
2000 Student Writing Competition Winner: Retaliatory Harassment
Against Employees by Employees: Should the Employer Be Liable?
Kari Jahnke, vol. 16, no. 3, page 465.
Voluntary Corporate Codes of Conduct: Whats Missing? Owen E. Herrnstadt, vol. 16, no. 3, page 349.
General Subject Index
Employee Speech
John Rocker and Employee Discipline for Speech, Lewis Kurlantzick,
vol. 16, no. 3, page 439.
ERISA
Its Common, but Is It Right? The Common Law of Trusts in ERISA
Fiduciary Litigation, Michael J. Collins, vol. 16, no. 3, page 391.
Class Actions
Building an Internal Defense Against Class Action Lawsuits and Disparate Impact Claims, G. Roger King and Jeffrey D. Winchester,
vol. 16, no. 3, page 371.
Clinton Board Symposium
Battling Case Backlogs at the NLRB: The Continuing Problem of Delays
in Decision Making and the Clinton Boards Response, John C.
Truesdale. vol. 16, no. 1, page 1.
The Challenge of Being General Counsel, Fred Feinstein, vol. 16, no. 1,
page 19.
The Clinton Board(s)A Partial Look from Within, Wilma B. Liebman
and Peter J. Hurtgen, vol. 16, no. 1, page 43.
The Clinton Labor Board: Continuing a Tradition of Moderation and
Excellence, Charles B. Craver, vol. 16, no. 1, page 123.
The Clinton Labor Board: Difficult Times for a Management Representative, Andrew M. Kramer, vol. 16, no. 1, page 75.
Drift and Division on the Clinton NLRB, Jonathan P. Hiatt and Craig
Becker, vol. 16, no. 1, page 103.
506
Global Law
NAFTA and Worker Rights: An Analysis of the Labor Side Accord after
Five Years of Operation and Suggested Improvements, Barry LaSala, vol. 16, no. 3, page 319.
Voluntary Corporate Codes of Conduct: Whats Missing? Owen E. Herrnstadt, vol. 16, no. 3, page 349.
Harassment
Analyzing Anti-harassment Policies and Complaint Procedures: Do They
Encourage Victims to Come Forward? Shirley Feldman-Summers,
vol. 16, no. 2, page 307.
Applying the Supreme Courts Affirmative Defense to Supervisor Harassment, Cara Yates Crotty, vol. 16, no. 3, page 449.
2000 Student Writing Competition Winner: Retaliatory Harassment
Against Employees by Employees: Should the Employer Be Liable?
Kari Jahnke, vol. 16, no. 3, page 465.
Organizing Under the NLRA
Electronic Communication and the NLRA: Union Access and Employer
Rights, Susan S. Robfogel, vol. 16, no. 2, page 231.
Neutrality Agreements: Basic Principles of Enforcement and Available
Remedies, George N. Davies, vol. 16, no. 2, page 215.
Neutrality Agreements: Will the NLRB Sanction Its Own Obsolescence?
Charles I. Cohen, vol. 16, no. 2, page 201.
Section 7 Rights and Union Access to Employees: Cyber Organizing,
Gwynne A. Wilcox, vol. 16, no. 2, page 253.
Statutory Coverage
An Employee by Any Other Name Does Not Smell as Sweet: A Continuing Drama, Steven J. Arsenault, Marsha E. Hass, Jane H. Philbrick, and Barbara D. Bart, vol. 16, no. 2, page 285.
The Supreme Courts Labor and Employment Decisions
The Changing Complexion of Workplace Law: Labor and Employment
Decisions of the Supreme Courts 1999-2000 Term, James J. Brudney, vol. 16, no. 2, page 151.
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THE EDITORS PAGE .....................................................................

NAFTA AND WORKER RIGHTS: AN ANALYSIS OF THE LABOR SIDE

EDITORIAL STATEMENT: The Labor Lawyer is a journal of ideas and developments in

Copyright 2001 American Bar Association

The Labor Lawyer

Professor Robert J. Rabin

William L. Keller, Chair

STUDENT EDITORIAL BOARD

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The Editors Page

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NAFTA and Worker Rights: An

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16 THE LABOR LAWYER 319 (2001)

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NAFTA and Worker Rights

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16 THE LABOR LAWYER 319 (2001)

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NAFTA and Worker Rights

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16 THE LABOR LAWYER 319 (2001)

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NAFTA and Worker Rights

Theoretically, the arbitration panel is comprised of five members.

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16 THE LABOR LAWYER 319 (2001)

51. NAALC, supra note 5, at art. 41.

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NAFTA and Worker Rights

On February 14, 1994, Submission No. 940001 was filed against

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16 THE LABOR LAWYER 319 (2001)

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NAFTA and Worker Rights

regarding several of the allegations.71 With regard to allegations that

hearing, was to gather as much information as possible to allow the NAO to

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16 THE LABOR LAWYER 319 (2001)

quirements had been fulfilled.78 In a follow-up report,79 the NAO stated

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NAFTA and Worker Rights

sued a public report finding that the governmental mechanisms in

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NAFTA and Worker Rights

ment.103 A supplemental complaint was added to the Han Young case104

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Boards (CAB) to enforce freedom of association rights to form an independent union.110

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NAFTA and Worker Rights

Federal Labor Law,117 and many international agreements to which

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16 THE LABOR LAWYER 319 (2001)

ministrative mechanisms lack the will or ability to address worker rights

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NAFTA and Worker Rights

B. NAALCs Failure to Promote Mexican Worker Rights

Copyright 2001 American Bar Association