The Minnesota Court of Appeals published a decision on May 20, 2013 reversing a trial court’s dismissal of a marital-status discrimination claim on a motion for summary judgment.  Aase vs. Wapiti Meadows Community Technologies & Services, Inc., et al., No. A12-1671 (Minn. Ct. App., May 20, 2013).  The plaintiff was employed by a private mental-health and employment counseling firm.  The employer’s main competition in the area was a non-profit organization, whose board consisted of county commissioners.  Both the employer and the non-profit competed for federal funds through the federal Workforce Investment Act.  And, as the Court noted, the relationship between the two was “strained.”

When the plaintiff’s husband was asked to serve on the local workforce-investment board, the employer suspected a conflict-of-interest in violation of its employment policies.  The Court noted that the workforce-investment board was made up of the members of its competitor’s board of directors as well as members of the local community and representatives of local employers.  Not surprisingly, the employer began an investigation and, after the plaintiff refused to discuss certain information concerning her husband, the employer ultimately terminated the plaintiff because of the conflict-of-interest and insubordination.

The plaintiff sued claiming the employer discriminated against her based on her marital status. The Minnesota Human Rights Act prohibits an employer from taking an adverse employment action against an employee because his or her marital status.  Minn. Stat. § 363A.08.  Two years ago, the Minnesota Supreme Court addressed this prohibition and stated that: “it is not necessary that the termination be ‘directed at the institution of marriage’ because the law protects against discrimination ‘on the basis of the identity, situation, actions, or beliefs of a spouse or former spouse.’”  Taylor v. LSI Corp. of Am., 796 N.W.2d 153, 156 (Minn. 2011) (emphasis added).  Against this backdrop, the Court of Appeals in this case addressed whether the employer had a “legitimate, non-discriminatory reason” for terminating the plaintiff.  And, if so, whether the plaintiff introduced sufficient evidence that the employers reason was “pretext” for unlawful discrimination.

The Court of Appeals held that applying the conflict-of-interest policy to the plaintiff’s spouse would not constitute a “legitimate, non-discriminatory” reason for termination because the termination would be based upon the actions of the plaintiff’s spouse.  But, the Court of Appeals agreed that terminating the plaintiff for failing to cooperate in the employer’s investigation would constitute a “legitimate, non-discriminatory” reason for termination.

Although the Court of Appeals agreed that a legitimate reason existed for termination, it was required to examine whether the plaintiff could produce evidence that the employer’s stated reason was not its actual reason for termination.  In doing so, the Court of Appeals noted that the plaintiff had claimed that certain decision-makers favored termination based solely on the conflict-of-interest and that her termination letter stated the reason for termination as “a conflict of interest or potential conflict of interest because of [her] husband serving on the board of [the employers] primary competitor.”  Based upon these allegations, the Court of Appeals reversed the trial court’s decision, holding that the plaintiff presented a genuine issue for trial.

Takeaway: Even appropriate and well-intentioned conflict-of-interest policies can create problems for employers if not properly drafted and applied.  Under Minnesota law, an employer might be held liable for discrimination if it takes an action against an employee based upon the actions of the employee’s spouse, even if those actions possibly create a conflict-of-interest for the employee.  And although the Minnesota Court of Appeals did not find the conflict-of-interest policy to be discriminatory on its own, it called into question how such policies could be applied when it comes to conflicts created by spouses.  Consequently, it will be important for Minnesota employers to have well-drafted conflict-of-interest policies.  More importantly, Minnesota employers should consult counsel before taking action based on a conflict-of-interest policy when the conflict relates to the employee’s spouse.