Hot Topics in Business Law

Dec 5, 2019 |

Article 1: “Transgender Ex-Cashier Sues Dunkin' Donuts, Saying Managers Let Coworkers and Patrons Harass Her, Then Fired Her”

According to the article, a transgender woman is suing Dunkin’ Donuts and one of its Pennsylvania franchisees after, the woman alleges, managers at a Bethlehem store allowed customers to harass and attack her, then fired her when she complained and left work to protect herself.

The federal civil rights lawsuit, filed recently in Pennsylvania’s eastern district, requests a jury trial and unspecified damages of more than $150,000. It outlines claims of harassment, a hostile work environment, wrongful termination, retaliatory discharge and a failure to accommodate her HIV status, among its 18 counts.

Referred to as Jane Doe in the lawsuit, the plaintiff is described as an HIVpositive woman of color.

Doe worked at the Dunkin’ Donuts in the spring of 2018. Before she was fired, she alleges in the lawsuit, she endured epithets such as “tranny,” “n***a” and “f*ggot,” while her requests that customers, superiors and coworkers use her preferred name and pronouns were ignored. A shift leader also instructed her to stop using the women’s bathroom, the lawsuit says.

The alleged harassment reached its peak when three customers, including a former coworker, berated her with slurs and threatened to kill her, the lawsuit says. The former colleague also shoved her, it says.

Doe called her manager, who told her to go home if she didn’t feel safe, which she did, according to the lawsuit. Days later, it says, she was fired.

The company that owns the franchise, Triangle Doughnuts LLC, said she was fired for violating the company’s time-off policy, the lawsuit says.

Two numbers linked to Triangle Doughnuts were both disconnected. Another number for Triangle’s owner, listed in a Dunkin’ Donuts franchise disclosure document, was also disconnected.

Dunkin’ Donuts spokeswoman Michelle King declined to comment on the litigation, but said Dunkin’ Donuts locations are independently owned and that neither the plaintiff nor defendants are employed by the company. King declined to provide contact information for Triangle Doughnuts’ offices.

“We and our franchisees pride ourselves in our diverse workforces, and we strive to create inclusive work cultures. Our franchisees are required by their franchise agreement to comply with all applicable laws,” a corporate statement said.

Bethlehem attorney Victor Scomillio, who court documents say represents the defendants, did not return a phone message.

Shortly after Doe took a cashier position at Bethlehem’s Dunkin’ Donuts on Fourth Street in or around March 2018, a shift leader called her by her birth name and used male pronouns to describe her, even after Doe asked her to stop, the lawsuit says. The shift leader also referred to Doe as “dude,” it says.

The assistant manager and manager also misgendered her, despite her repeated requests to stop, Doe alleges.

Customers did the same, and when Doe corrected them, one customer complained to management that patrons shouldn’t have to use Doe’s preferred pronouns because Doe was “not a girl,” which managers did not contest, the lawsuit says.

In another incident, patrons also said they didn’t want “him” serving them, according to the lawsuit. Rather than defend their employee, the shift leader and assistant manager moved her to the back of the shop, out of view of the customers, the lawsuit says.

After the shift leader told Doe to stop using the women’s bathroom — saying, “They don’t feel comfortable with you going in there” — the harassment intensified, the lawsuit alleges.

A coworker “tried to get in Doe’s face aggressively,” called her “ni**a” and threatened to beat her up, according to the lawsuit. Customers, including a former coworker, subjected Doe to homophobic slurs and said, “I’ll kill your b*tch a**,” it says.

After the former coworker pushed her, Doe reported the incident to police and called her manager, who told her, “If you don’t feel safe, go home,” the lawsuit says. Doe did just that, it says.

Capt. Benjamin Hackett of the Bethlehem Police Department said he could not find an incident report from April or May 2018 matching Doe’s complaint, but he noted that this particular Dunkin’ Donuts is situated in a bar district and is the subject of numerous calls to police. Without Doe’s actual name, it would be difficult to find a report, he said.

In the days after Doe called police and left work, the lawsuit says, the manager informed Doe she no longer worked at Dunkin’.

After Doe filed a complaint with the Equal Employment Opportunity Commission, the manager told the commission that employees shouldn’t correct customers because the customer is always right, the lawsuit says.

“I did not and will not correct my customers,” the manager told the commission, according to the lawsuit.

Triangle Doughnuts told the commission that Doe was fired for violating the company policy that employees must request time off two weeks in advance, the lawsuit says.

Doe does not believe this is the actual cause for her firing, according to the lawsuit. Rather, she feels her discharge was motivated by her sex, her gender identity and/or gender stereotyping, and her attempts to rebuff customers and fellow employees, the lawsuit says.

Triangle Doughnuts’ time-off policy is problematic, however, according to the lawsuit, because HIV-positive people may face complications they can’t foresee two weeks in advance. Triangle also has no anti-retaliation policy, the lawsuit says.

The EEOC sent Doe a notice of her right to sue her former employer last month, saying it was “terminating the processing of this charge.”

Asked to elaborate, spokesman James Ryan said EEOC complaints are confidential and the commission is prohibited from commenting on them. He did not provide an answer to a follow-up email requesting information on how the commission decides to terminate a charge and what a termination entails.

Discussion Questions

1. Is the type of discrimination described in the article specifically prohibited by the Civil Rights Act of 1964? Explain your response.

Discrimination based on gender identity or sexual orientation is not currently prohibited by the Civil Rights Act of 1964, although the United States Supreme Court has taken up the issue in its current term. The U.S. Supreme Court cases concerning gay rights are Bostock v. Clayton County, Ga. and Altitude Express Inc. v. Zarda. The case on transgender rights is R.G. & G.R. Harris Funeral Homes Inc. v. Equal Employment Opportunity Commission.

For further information regarding the Supreme Court’s consideration of the issue, please refer to the following internet address: 

2. If the type of discrimination described in the article is not specifically prohibited by the Civil Rights Act of 1964, is it proscribed by any other law(s)? Explain your response.

The subject case arose in the state of Pennsylvania. The Pennsylvania Human Relations Commission (PHRC) has issued new guidance announcing that it takes the position that employment discrimination based on LGBT status is prohibited by the Pennsylvania Human Relations Act (PHRA). For further information regarding the PHRC’s stance on discrimination based on LGBT status, please refer to Teaching Tip 2 article (“New Pa. Guidance Interprets Anti-Discrimination Law to Cover LGBT Individuals”).

3. If the type of discrimination described in the article is not specifically prohibited by the Civil Rights Act of 1964, should it be? Explain your response.

This is an opinion question, so student responses may vary.

Article 2: “McDonald’s Workers File Class Action Suit Alleging Culture of Sexual Harassment”

According to the article, Michigan McDonald’s workers filed a class action lawsuit recently, alleging that the company has a systemic sexual harassment problem. The class action suit was filed with support from the TIME’S UP Legal Defense Fund and backed by the American Civil Liberties Union and the labor group Fight for $15.

Jenna Ries, the former McDonald’s worker who is the named plaintiff in the suit, also filed charges with the U.S. Equal Employment Opportunity Commission, a precursor to filing civil rights charges in federal court.

In one alleged incident, a manager cornered Ries, 32, in a walk-in freezer, pinning her against a wall. “I lived in constant fear of losing my job,” she said on a Tuesday press call.

The lawsuit comes a little more than a week after the fast-food restaurant ousted CEO Steve Easterbrook for having a relationship with a subordinate employee, which violates the company’s non-fraternization policy.

McDonald’s board concluded that the relationship between Easterbrook and the unidentified staffer was consensual, the Wall Street Journal reported, but that it raised questions about the CEO’s judgment regarding his personal affairs and corporate conduct. As part of his exit package, Easterbrook could pocket as much as $85 million worth of stock and options.

The class action lawsuit is the latest in a string of sexual harassment complaints against the burger chain. At least 50 workers have filed sexual harassment charges against McDonald’s in state courts or with the U.S. Equal Employment Opportunity Commission during the past three years.

In May, the American Civil Liberties Union and Fight for $15 announced 23 new complaints against McDonald’s—20 of them filed with the U.S. Equal Employment Opportunity Commission. Three of the complaints were filed as civil rights lawsuits, and two stemmed from previous allegations.

Workers at the fast-food restaurant went on strike in September 2018 and protested again in May 2019 to draw attention to harassment, calling on the company to do more to prevent it.

“McDonald’s is committed to ensuring a harassment and bias-free workplace,” Easterbrook wrote in a May 2019 letter addressed to author and actress Padma Lakshmi, who attended a Chicago rally in front of the company’s headquarters.

The company, which has more than 14,000 locations in North America, has long held that it is not responsible for the labor practices and treatment of employees at its franchisees’ stores.

The company’s position regarding its franchisees is “ridiculous,” says Eve Cervantez, an attorney with the Altshuler Berzon law firm, which represents many of the McDonald’s workers who have filed complaints in recent years.

Workers apply for jobs at McDonald’s either through its website or in stores that are plastered with McDonald’s logos, she says, and they are led to believe that they will work at a big corporation with a human resources department ready to help them if something illegal happens.

A McDonald’s spokesperson told Forbes that all franchisees must fully comply with laws on sexual harassment and that, under their franchise agreements, failure to do so results in serious consequences, up to and including revocation of the franchise.

The National Labor Relations Board is currently reviewing a case that could decide whether McDonald’s is a joint employer of its franchisee staff. If it is found to be a joint employer, that would mean that the company bears some responsibility for working conditions.

Lawmakers have also weighed in on McDonald’s handling of sexual harassment. Since June, more than 56 members of Congress and 115 local elected officials have signed letters demanding that McDonald’s meet with workers to craft tougher policies aimed at stamping out harassment.

The restaurant industry has historically been a hotbed of harassment. A 2016 survey of female fastfood workers in non-managerial positions found that 40% of them had experienced unwanted sexual behaviors on the job, and women of color were especially likely to be subjected to retribution for speaking up about unwanted sexual attention. Thirty-four percent of African-American women and 26% of Latinas reported at least one negative action, compared with 17% of white women, according to the survey.

McDonald’s has taken some measures to tackle the problem. During the past year, it has introduced harassment training for its U.S. franchisees; released a more detailed policy regarding discrimination, harassment and retaliation; and launched a free help hotline for employees. In August, McDonald’s announced that it would expand its nationwide staff training program, starting in October.

“There is a deeply important conversation around safe and respectful workplaces in communities throughout the U.S. and around the world, and McDonald’s is demonstrating its continued commitment to this issue through the implementation of Safe and Respectful Workplace Training in 100% of our corporate-owned restaurants,” a company spokesperson told Forbes.

Despite the company’s assurances, employees and critics maintain that McDonald’s anti-harassment efforts still fall short.

The concept of consequences for those who violate discrimination and harassment policies is “one of the most glaring flaws in the supposed remedies that McDonald’s has put forward because these new measures are mandatory only for corporate-owned stores,” says Gillian Thomas, a senior staff attorney with the ACLU’s Women’s Rights Project. “For the 95% of the 14,000 McDonalds locations that are franchise stores, these highly touted reforms are merely ‘encouraged.’”

Discussion Questions

1. As the article indicates, filing charges with the United States Equal Employment Opportunity Commission (EEOC) is a precursor to filing civil rights charges in federal court. Explain what this means.

This simply means that before the plaintiff can file a civil rights-related case in federal court, he or she must first file a complaint with the United States Equal Employment Opportunity Commission (EEOC). In response to the filing, the EEOC will investigate the complaint to determine if it has merit, and if the EEOC determines that the case indeed has merit, it will issue a “right-to-sue” letter to the plaintiff, giving the plaintiff the procedural right to file the case in federal court.

2. What is a class action lawsuit?

In a class action lawsuit, a group of plaintiffs combine forces to pursue a complaint against the defendant(s). This is based on the notion that there is “power in numbers,” i.e., that in pursuing the case, the plaintiffs are stronger together than they would be individually. For a class action lawsuit to proceed, the court must first determine that the plaintiffs have sufficient “commonality of interest,” i.e., that their claims are similar enough to combine together in one case. 

3. As the article indicates, McDonald’s (the franchisor), which has more than 14,000 locations in North America, has long held that it is not responsible for the labor practices and treatment of employees at its franchisees’ stores. Is that a correct assessment of its potential liability in this case? Why or why not?

Not necessarily. As the article indicates, workers apply for jobs at McDonald’s either through its website or in stores that are plastered with McDonald’s logos, and they are led to believe that they will work at a big corporation with a human resources department ready to help them if something illegal happens. As the article further indicates, the National Labor Relations Board is currently reviewing a case that could decide whether McDonald’s is a joint employer of its franchisee staff. If it is found to be a joint employer, that would mean that the company bears some responsibility for working conditions.

Article 3: “America's Largest Milk Producer, Dean Foods, Files for Bankruptcy”

According to the article, Dean Foods, America’s largest milk producer and home to multiple well-known brands, recently filed for bankruptcy protection.

The Dallas-based company announced it initiated Chapter 11 proceedings “to enable us to continue serving our customers and operating as normal as we work toward the sale of our business,” Eric Beringause, who recently joined the Dean Foods as president and CEO, said in a statement.

Dean Foods products include Dairy Pure, TruMoo, Land O’Lakes, Lehigh Valley Dairy Farms and Oak Farms.

Its bankruptcy filing comes amid a sour year for the milk industry.

Last year, total sales dropped $1.1 billion, according to the Dairy Farmers of America. The net sales for 2018 were $13.6 billion, compared to $14.7 billion in 2017.

However, sales of dairy alternative products have been soaring.

Over a 52-week period that ended in June 2018, oat milk and non-dairy milk blends saw the highest growth, with dollar sales up 23% and 51%, respectively.

Dean Foods announced that it had received around $850 million in debtor-in-possession financing, a type of financing for companies that are financially distressed and in bankruptcy, from some existing lenders.

A potential sale of “substantially all assets” to Dairy Farmers of America, Inc. has been discussed, according to Dean Foods. If both parties reach an agreement, the sale would allow for higher or otherwise better offers in the bankruptcy. Dean Foods will operate normally amid the reorganization efforts. The company has approximately 15,000 employees across the country.

Discussion Questions

1. What is Chapter 11 bankruptcy?

Chapter 11 bankruptcy is reorganization bankruptcy for a business. Through the Chapter 11 reorganization process, business debts are not typically forgiven; instead, the debt obligation is restructured through a repayment plan that is more palatable to the debtor in terms of periodic payments.

2. How does Chapter 11 bankruptcy compare to Chapter 7 bankruptcy?

Chapter 7 bankruptcy is liquidation bankruptcy for a business (or an individual). Through the liquidation process, upon distribution of the bankruptcy estate to eligible creditors, any remaining debts are discharged, and the business ceases to exist as an ongoing concern.

3. What is “debtor-in-possession” financing?

Debtor-in-possession (DIP) financing is a special form of financing provided for companies in financial distress, typically during restructuring under Chapter 11 corporate bankruptcy law. Usually, this debt is considered senior to all other debt, equity, and any other securities issued by a company, placing the new financing ahead of a company’s existing debts in terms of priority for repayment.

DIP financing may be used to keep a business operating until it can be sold as an ongoing concern if this is likely to provide a greater return to creditors than the firm’s closure and corresponding liquidation of assets. It may also give a troubled company a “fresh start.”