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United States v. City of New York
Citations: 359 F.3d 83; 2004 U.S. App. LEXIS 2439; 85 Empl. Prac. Dec. (CCH) 41,763; 93 Fair Empl. Prac. Cas. (BNA) 359Docket: Docket Nos. 02-6102(L), 02-6112(L), 02-6122, 02-6124, 02-6126, 02-7405(CON)
Court: Court of Appeals for the Second Circuit; February 12, 2004; Federal Appellate Court
Welfare recipients participating in New York City’s Work Experience Program (WEP) may qualify as employees under Title VII of the Civil Rights Act of 1964, and thus are entitled to protections against sexual and racial harassment. The circuit court concluded that the district court mistakenly ruled that these individuals were not employees based on a Rule 12(b)(6) motion. Additionally, the court determined that the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA), which mandates participation in work activities as a condition for welfare benefits, does not intend to strip these participants of Title VII protections. This interpretation aligns with the perspectives of federal agencies enforcing both Title VII and PRWORA. The court vacated the district court's judgment and remanded the case for further proceedings. PRWORA, enacted in 1996, replaced the Aid to Families With Dependent Children (AFDC) program with Temporary Assistance to Needy Families (TANF), aiming to promote job preparation and reduce reliance on government benefits. States must ensure a certain percentage of families engage in work activities to receive TANF grants. Work activities encompass a range of employment and training options, and non-compliance can result in reduced assistance or termination of benefits. Notably, any reduction in assistance due to non-participation is not classified as a wage reduction. PRWORA specifies that various nondiscrimination laws, including Title VI of the Civil Rights Act, apply to programs receiving its funds. Furthermore, federal enforcement of PRWORA provisions is limited, giving states considerable autonomy. New York has enacted its version of PRWORA, extending work requirements to households without dependent children that receive state funding. A reduction in a household's grant occurs when a recipient refuses to participate in required work activities, as per N.Y. Soc. Serv. L. 342(2). New York allows social services districts to mandate participation in work experience within public or non-profit sectors as an alternative to other work activities under PRWORA and state law (N.Y. Soc. Serv. L. 336(1)(d)). The number of hours required for work experience is calculated by dividing the assistance amount by the higher of the federal or state minimum wage (N.Y. Soc. Serv. L. 336-c(2)(b)). Agencies must ensure that participants receive appropriate workers' compensation and that the assigned projects serve a public purpose (N.Y. Soc. Serv. L. 336-e(2)(c), (d)). Participants are also entitled to childcare and transportation expenses. The document details allegations from two plaintiffs in a legal complaint. Tammy Auer was assigned to the Sanitation Department in January 1997, where she faced sexual harassment from her supervisor James Soto, who made inappropriate comments, touched her inappropriately, and threatened her job. Auer reported the harassment, but no action was taken, leading her to quit and file a complaint with the EEOC, which found reasonable cause to support her claims. Tonja McGhee was assigned to the New York City Housing Authority in April 1998, where she initially entered a consensual relationship with her supervisor, Choice Bennett. After ending the relationship in August 1998, Bennett began threatening her and falsely reported her work performance to his supervisor. In October 1998, Bennett instructed McGhee to enter his office, turned off the lights, and demanded she lower her pants, prompting her to flee. She reported his behavior to supervisors and a WEP coordinator, but no action was taken. Bennett continued to harass her after she was transferred to a different location. In May 1999, McGhee left her position and filed an EEOC charge; the EEOC later found reasonable cause and referred her case to the DOJ. Maria Gonzalez began clerical work in spring 1997, where her supervisor, Gregory Payne, initiated unwanted physical contact and verbal harassment. Despite her complaints to Payne's supervisor, Robert Estelle, no effective resolution occurred. After a series of escalating threats from Payne, Gonzalez reported the situation to another supervisor, Robert Fox, who merely transferred her to a location with no work available. Gonzalez subsequently filed an EEOC charge, which also found reasonable cause and referred her case to the DOJ. Theresa Caldwell-Benjamin was assigned to the Parks Department in July 1996, where she encountered a noose and a racist caricature during an assignment in March 1998. Her complaint to her WEP supervisor was dismissed, and the offensive imagery remained throughout her time there. The EEOC later found reasonable cause regarding her complaint and referred it to the DOJ. Norma Colon, assigned as a computer operator in May 1997, experienced inappropriate advances from her supervisor, George Santiago. He made suggestive comments and retaliated against her when she did not respond favorably, leading to her departure. Colon filed an EEOC complaint, which found reasonable cause and issued a right to sue letter in June 2001. In May 2001, the United States initiated a lawsuit against the city and NYCHA under 42 U.S.C. 2000e-5(f)(1) for discrimination on behalf of four women: Gonzalez, Auer, Caldwell-Benjamin, and McGhee. The women sought to intervene in the lawsuit, with Auer aiming to add claims under state and local anti-discrimination laws. Separately, in September 2001, Colon filed her own discrimination lawsuit based on both federal and state claims. The defendants moved to dismiss both actions, asserting that the individual plaintiffs did not qualify as employees under Title VII and that 42 U.S.C. 608(d) and 617 indicated an intent to exclude Work Experience Program (WEP) participants from Title VII protections. The district court consolidated the cases for consideration of the motions, ultimately assuming jurisdiction but deciding under Federal Rule of Civil Procedure 12(b)(6). On March 8, 2002, Judge Richard Conway Casey issued an unpublished opinion granting the defendants’ motions to dismiss, concluding that the plaintiffs were not employees as defined by Title VII. The court identified that the plaintiffs failed to demonstrate they were hired or received employment-related benefits, emphasizing that their benefits stemmed solely from their status as welfare recipients. Key factors included the nature of TANF benefits, the absence of traditional employment benefits like pensions or health insurance, and the differing potential for workers' compensation claims. Judge Casey found the EEOC's prior guideline suggesting that PRWORA participants could be considered employees unpersuasive, given conflicting Second Circuit precedents. He deemed Auer's motion to intervene moot and declined to assert supplemental jurisdiction over Colon's state law claims. The plaintiffs appealed, contending their complaints sufficiently established their status as Title VII employees and that PRWORA did not preempt Title VII. Colon further argued against the dismissal of her state law claims. Two groups of amici, comprising civil rights and workers’ rights organizations, submitted briefs supporting the plaintiffs’ position. A Rule 12(b)(6) dismissal is reviewed de novo, accepting all allegations by the plaintiff as true, particularly in civil rights cases where the complaints are interpreted liberally. To assess if Title VII applies to Work Experience Program (WEP) participants, the definition of an employee under Title VII is crucial. Title VII defines an employee as anyone employed by an employer, requiring a two-part test to establish an employment relationship. The plaintiff must demonstrate they were hired by the employer, which includes receiving remuneration that must consist of substantial benefits, not merely incidental perks. To determine the existence of an employment relationship, the court applies thirteen factors outlined by the Supreme Court, focusing on the hiring party's control over the work performed. Although defendants argue that plaintiffs did not meet the hiring criterion because they received no remuneration, the court disagrees. Plaintiffs claimed they received cash payments and food stamps equivalent to minimum wage for their work, and failing to work would result in a loss of benefits. The assessment concludes that the plaintiffs were effectively employees due to the substantial benefits received, including transportation, childcare expenses, and eligibility for workers’ compensation, thus meeting the criteria established in related case law. Plaintiffs assert that welfare recipients engaged in work-related activities for benefits are likely considered employees under Title VII, as per the EEOC's amended compliance manual. The EEOC clarifies that the lack of salary does not negate an employer-employee relationship, emphasizing the importance of specific factors (the Reid factors) in determining employment status. Most welfare-related work activities, including various forms of employment and training, likely classify participants as employees, while activities like vocational education and job search assistance do not. The EEOC's interpretations, while not formally adjudicated or rule-made, are deemed persuasive. The district court found the EEOC's opinion unconvincing, as it did not consider the court's substantial economic benefit test. However, the EEOC's categorization of workers receiving remuneration versus those not engaged in work activities aligns with the Second Circuit’s employee test, warranting respect. Defendants argue against the plaintiffs' employee classification, citing a Tenth Circuit case and a New York Court of Appeals decision that frame benefits received as public assistance rather than remuneration. The dissent also contends that prior rulings and 42 U.S.C. § 608(c) negate the plaintiffs' employee status. In Johns v. Stewart, the Tenth Circuit ruled that participants in a public assistance program were not FLSA employees, as the work aspect was one component of a larger assistance program, noting the absence of typical employee benefits. The court found that the reasoning in Johns does not convince them that participants in work experience programs cannot be classified as Title VII employees. Johns is not governed by Title VII or PRWORA, so the court did not apply the O’Connor analysis or relevant administrative interpretations. The Department of Labor has rejected the approach taken in Johns concerning the Fair Labor Standards Act (FLSA). Additionally, there is no evidence from Johns that participants received the same benefits as Work Experience Program (WEP) participants or that they were required to perform useful work. The analysis in Johns creates a false dichotomy between being a welfare recipient and an employee, suggesting one cannot be both. Defendants argue that the Human Resources Administration had various reasons to terminate or reduce grants, not solely due to refusal to accept WEP assignments, emphasizing that public assistance benefits are based on family need rather than work performed. In response, it is clarified that employee status is not strictly either/or; individuals can hold different statuses for different duties. Relevant cases illustrate that individuals may be considered employees in certain capacities while excluded in others. The Brukhmam case found WEP participants are not employees under New York's prevailing wage requirement, as they do not work for contractors or engage in public works. The distinction between the economic rights conferred by New York’s constitutional provision and the civil rights protected by Title VII highlights why Brukhmam does not apply to this case, as Title VII ensures freedom from discrimination for all employees, unlike the specific economic protections under the New York Constitution. Brukhmam fails to apply the established criteria for determining an employer-employee relationship and disregards the perspectives of relevant enforcement agencies regarding Title VII and PRWORA. The dissent references O’Connor, asserting that while compensation from an employer is not a sole requirement, it is essential for an employer-employee relationship. In O’Connor’s case, the psychiatric hospital had no financial connection to her college, which funded her work. Consequently, O’Connor could not sue the hospital under Title VII or Title IX because there was no employer-employee relationship established through payment. In contrast, in the current case, the City acts as both the payor and recipient of the services provided by the plaintiffs. The defendants argue that the benefits received by the plaintiffs—such as cash grants and reimbursements for transportation and childcare—are not typical employment benefits. However, workers’ compensation is generally linked to employment, and the payment of money itself is a standard characteristic of employment. The work hours required from recipients correlate directly with their grant size and the minimum wage, reflecting conventional compensation calculations. Additionally, the defendants cite 42 U.S.C. 608(c), which states that penalties for non-compliance with state program requirements should not be construed as wage reductions. The dissent interprets this as a clear directive that the benefits for WEP participants should not be classified as wages. However, this interpretation conflicts with the statute's language, which does not explicitly deny that these benefits could be considered wages. Instead, it addresses penalties regarding the withholding of benefits, suggesting that non-compliance impacts payments but does not negate the existence of wages. Plaintiffs earn payments equivalent to minimum wage based on hours worked, and failure to attend work results in a proportional reduction of these payments, emphasizing that the loss of payments is a sanction rather than a wage reduction. An employee's wage reduction due to absence does not imply a loss of wages under Section 608(c), which supports the interpretation that benefits received by plaintiffs are indeed wages. Section 608(c) clarifies the relationship between penalties for non-compliance and the minimum wage requirement for welfare recipients in work programs. For instance, a participant's second unexcused absence results in a three-month payment loss, which can lead to wage calculations falling below the minimum wage, potentially violating New York Social Services Law Section 336-c(2)(b). However, Section 608(c) permits the imposition of penalties without breaching this minimum wage law. Even if Section 608(c) were incorrectly interpreted as excluding payments from being considered wages, plaintiffs would still qualify as employees under Title VII, as established in Pietras v. Board of Fire Commissioners. Title VII's applicability is based on the nature of the relationship between plaintiffs and defendants rather than statutory labels. The alleged relationship, which includes cash payments and the requirement for productive work, supports plaintiffs' classification as employees for Title VII purposes. Regarding preemption, the inquiry focuses on whether Congress intended to remove Title VII protections from participants in Work Experience Programs (WEP) when enacting the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA). For one federal statute to preempt another, there must be clear congressional intent. The courts must uphold both statutes unless explicitly stated otherwise. Defendants assert that such intent is evident in PRWORA's Sections 608(d) and 617, which list specific discrimination laws applicable to programs receiving PRWORA funds. They argue the omission of employment discrimination laws signifies a removal of Title VII protections. However, this interpretation is contested, as silence on certain statutes does not inherently indicate an intention to exclude them. The legal maxim pertinent here applies when a statute outlines two or more terms or entities, implying that any omitted term was intentionally excluded. In the case of Section 608(d), which encompasses non-discrimination laws for programs receiving PRWORA funds, it includes activities such as education and vocational training that do not qualify as employment under Title VII. Title VII governs employment relationships regardless of funding source. Therefore, the absence of Title VII in the discrimination provisions of Section 608(d) does not demonstrate Congressional intent to exclude PRWORA participants, who may be considered employees under Title VII. Defendants argue that Section 617 restricts federal enforcement of anti-discrimination laws, asserting it limits the government’s power to regulate state conduct under PRWORA. However, individual participants in work experience programs (WEP) can still pursue claims under Title VII or other relevant statutes. Section 617 pertains solely to PRWORA and does not limit the Department of Justice's enforcement of Title VII for WEP participants. Defendants also reference the former AFDC/JOBS program, which mandated non-discrimination in participant assignments, suggesting that the lack of similar language in PRWORA indicates a removal of protections. However, since the AFDC/JOBS program was fully repealed, this revocation does not necessarily signify a loss of protections. The repeal of provisions indicating AFDC participants were not employees under Title VII could imply the opposite. Furthermore, a 1997 amendment to PRWORA that allowed for Welfare-to-Work grants, including non-discrimination language, suggests some level of protection remains for TANF recipients and others eligible for these services. An individual cannot face gender discrimination in work activities funded under the Welfare-to-Work (WtW) program, as stipulated by 42 U.S.C. 603(a)(5)(D)(iii). The WtW program establishes a state grievance procedure as the sole remedy for gender discrimination complaints (42 U.S.C. 603(a)(5)(I)(iv)). WtW encompasses both traditional employment activities and those not typically classified as employment (42 U.S.C. 603(a)(5)(C)). This non-discrimination provision remains relevant even with Title VII protections available. WtW, aligned with Section 608(d), prohibits discrimination based on age, disability, race, national origin, and now gender, reflecting congressional intent to enhance protections rather than indicate preemption of existing laws. Legislative history reveals that Congress did not intend to exempt welfare recipients from anti-discrimination laws, as indicated by Department of Labor guidance and discussions surrounding the omnibus budget bill. Efforts to define workfare participants as non-employees for compensation purposes were rejected, supporting their status under the Fair Labor Standards Act (FLSA). The lack of congressional action on the Department of Labor's interpretations further affirms their validity, alongside regulations from the DOL and the Department of Health and Human Services that reinforce protections against discrimination. Complaints of discrimination under various federal, state, or local laws, including Title VII of the Civil Rights Act of 1964, Title IX of the Education Amendments of 1972, and the Pregnancy Discrimination Act, must be handled according to those laws and their implementing regulations. The Department of Health and Human Services (HHS) has clarified that Section 617 of the Act does not preempt Title VII, ensuring that federal employment laws apply equally to Temporary Assistance for Needy Families (TANF) beneficiaries as to other workers. The district court dismissed the relevance of HHS and Department of Labor (DOL) regulations, asserting that neither agency had the authority to define Title VII coverage. However, these regulations do not attempt to define Title VII but clarify the process for handling discrimination claims and affirm the non-preemptive nature of Section 617. The court's stance was challenged by the argument that agencies should receive deference unless acting outside their authority, which is not the case here. Defendants contended that the agencies changed their positions on Title VII's applicability, but the preamble to DOL's interim regulation indicated ongoing protections against gender discrimination for PRWORA participants. The relevant case cited by defendants concerning EEOC guidelines does not apply to regulatory matters. Certain recipients of Temporary Assistance for Needy Families (TANF) may not qualify as employees or students, aligning with the Department of Labor's (DOL) prior stance that anti-discrimination laws, like Title VII, apply to workfare participants. The Department of Health and Human Services (HHS) acknowledged it initially omitted Title VII from its regulations, prompting criticism. HHS recognized the need to emphasize civil rights and labor law enforcement in its final rule, clarifying that section 417 of the Act does not limit the applicability of other federal laws, including workplace and anti-discrimination protections for TANF beneficiaries. Concerns arose that some states interpreted section 417 too broadly, believing it exempted them from federal laws outside of new Title IV-A. HHS clarified that its prior omission of Title VII was not a reversal of position but rather a lack of enforcement responsibility. Following feedback, HHS updated regulations to confirm that PRWORA does not preempt Title VII protections for employees receiving TANF funds. The legislative history and the regulations from both involved agencies indicate no intent to preempt Title VII. Consequently, as the plaintiffs' allegations indicate their employee status under Title VII, the district court's dismissal of their claims is reversed. Colon contends that if the dismissal of her federal claims is vacated, her related state and local claims should also be reinstated. The district court had previously declined to exercise supplemental jurisdiction over these claims, citing the dismissal of all claims under its original jurisdiction. With the federal claims reinstated, the court also vacates the dismissal of the state and local claims, leaving the merits of those claims unaddressed and allowing for potential reconsideration of dismissal on other grounds. The court finds that the plaintiffs adequately alleged their status as employees protected by Title VII and determined that the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) does not preempt Title VII for Work Experience Program (WEP) participants. As the district court dismissed the state and local claims solely due to lack of supplemental jurisdiction, those dismissals are also vacated, and the case is remanded for further proceedings. On appeal, McGhee settled her claims against NYCHA, and as a result, both are removed from the appeal. Defendants argue that PRWORA’s language indicates Congress did not intend to extend Title VII coverage to TANF beneficiaries, a position interpreted as a preemption argument. If Title VII inherently covers WEP participants, the silence of PRWORA on the matter does not negate this coverage. The dissent minimizes the significance of workers' compensation for WEP participants, suggesting it primarily benefits employers. This perspective overlooks the historical intent of workers' compensation laws, which aim to provide financial support to injured workers without requiring proof of employer fault. Such statutes are designed to relieve workers from the burdens of litigation and to provide timely compensation, representing a significant reform in labor law. The dissent's focus on medical coverage neglects the full range of benefits, including cash compensation and scheduled awards for disabilities, which are crucial for workers unable to establish negligence. The Supreme Court's recent emphasis on the EEOC Compliance Manual in interpreting employment definitions highlights the ongoing relevance of these issues in employment law. The dissent asserts that Title VII provides no additional protection against sex discrimination for Welfare to Work (WEP) participants, claiming that they are no better off with Title VII than without it. This raises questions about how the decision would negatively affect the flexibility of WEP assignments. Furthermore, the argument that removing Title VII protections would enhance flexibility in welfare reform is questioned, as it appears counterproductive. Title VII does, in fact, offer incremental protection against sex discrimination, contrary to the dissent's claims. Specifically, Section 603(a)(5)(I)(iv) of Title 42 only protects those in the WtW program, leaving TANF recipients who are WEP participants without such protections. Additionally, the grievance procedure outlined in this section lacks provisions for judicial review, a critical feature of Title VII protections. New York Social Services Law 331(3) merely prohibits discrimination without providing any remedies for affected WEP participants.