United States: 2023 Iowa Labor & Employment Year End Review

Kansas City, Mo. (December 28, 2023) – This update highlights key developments in Iowa labor and employment law in 2023, and how these developments will impact employers in 2024.

Iowa Supreme Court Applies Modified McDonnell Douglas Test Into Summary Judgment Standard on Indirect Discrimination Claims Under Iowa Civil Rights Act

The Iowa Civil Rights Act ("ICRA") does not contain language similar to Title VII that allows an employer the opportunity to raise the "same decision" defense (i.e., the employer would have reached the same decision regarding an employee absent discrimination or protected activity).

To address this, in 2019, the Iowa Supreme Court abandoned the use of the McDonnell Douglas burden-shifting framework at trial on discrimination and retaliation claims, which relied on indirect evidence under the ICRA, and directed Iowa courts to apply the Price Waterhouse motivating factor causation test when instructing the jury. Hawkins v. Grinnell Regional Medical Center, 9929 N.W.2d 261 (Iowa 2019). In Hawkins, the Iowa Supreme Court did not address the appropriate standard for summary judgment, which left an open-ended question under Iowa law. As articulated by this author in the 2022 Iowa Labor & Employment Year End Review, courts applying Iowa law during this time continued to use the McDonnell Douglas burden-shifting standard at summary judgment and the Price Waterhouse motivating-factor standard at trial.

On March 31, 2023, the Iowa Supreme Court in Feeback v. Swift Pork Co., 988 N.W.2d 340 (Iowa 2023), modified the burden-shifting framework for summary judgment "to align the summary judgment test with the mixed-motive causation standard and same-decision defense at trial." Under this "modified McDonnell Douglas test," employees "must carry the initial burden of establishing a prima facie case of age discrimination" and can do so by showing that they are members of a protected class, were qualified for their positions, and the circumstances of their discharge raised an inference of discrimination. Once this initial burden is met, employers must "'articulate some legitimate, nondiscriminatory reason' for its employment action." At that point, the burden shifts back to the employee to demonstrate that the employer's proffered reason is pretextual or, while true, was not the only reason for the employee's termination and that the employee's protected class was another motivating factor.

In Feeback, a former employee at a pork processing plant was fired after swearing at his direct supervisor via text message shortly after he was harshly criticized for his job performance. The former employee sued his employer, direct supervisor, and plant manager for wrongful termination, workplace harassment, and age discrimination, and the defendants moved for summary judgment on the grounds that the former employee was an at-will employee who was fired for insubordination. The former employee resisted summary judgment by arguing that he intended to text someone else, the defendants retaliated against him for making safety complaints, profanity was widespread at this workplace, and the employer had a practice of discriminating against older employees.

With respect to the age discrimination claim, the district court concluded that the former employee's claims relied on indirect evidence of a discriminatory motive and applied the McDonnell Douglas burden-shifting analysis on summary judgment. The employer's motion for summary judgment was supported by affidavits and deposition testimony that supported the notion that the former employee was terminated for insubordination: a legitimate non-discriminatory reason. The Iowa Supreme Court concluded that, in order to survive summary judgment under the modified McDonnell Douglas test, the former employee had to show he had admissible evidence to establish that the employer's proffered reason was pretext for age discrimination and that his age was a motivating factor for his termination. The court ultimately concluded that the former employee could not establish pretext or that his age was a motivating factor under this standard and granted summary judgment for the employer.

The Feeback decision provide much needed clarity on the standard applicable to summary judgment on indirect discrimination claims under the ICRA. The modified McDonnell Douglas test provides a potentially lower burden of proof for employees to survive summary judgment and provides essentially two paths to trial: (1) demonstrate the employer's proffered reason is pretextual or (2) if true, that the employee's protected status was an additional motivating factor in the termination.

Iowa Supreme Court Adopts "Honest Belief Rule," Which Further Aligns Iowa Civil Rights Act to Title VII

Feeback does not necessarily mean the employee gets an easier path to trial. In addressing pretext, the Iowa Supreme Court formally adopted the "honest belief rule." In Feeback, the appellate court reversed the trial court's decision on summary judgment, in part, because it concluded that there was a fact question about who the employee meant to text and that the evidence could support the employee's theory that a faulty internal investigation supported pretext of age discrimination. The Iowa Supreme Court rejected this "mistake theory" and stated "[t]he question is not whether Feeback sent the texts accidentally; the question is whether [the HR director] had a good faith belief that Feeback was insubordinate. He did." Feeback, 988 N.W.2d at 349.

In adopting the honest belief rule, the Iowa Supreme Court relied on precedent from the U.S. Court of Appeals for the Eighth Circuit stating that the "critical inquiry in discrimination cases like this one is not whether the employee actually engaged in the conduct for which he was terminated, but whether the employer in good faith believed that the employee was guilty of the conduct justifying discharge." Feeback, 988 N.W.2d at 349 (quoting McCullough v. Univ. of Ark. for Med. Scis., 559 F.3d 855, 861-62 (8th Cir. 2009)) (emphasis added). The Feeback court concluded that in order to rely on a faulty investigation, the former employee "must show that [his] employer did not honestly believe the legitimate reason that it proffered in support of the adverse action." Ultimately, the Iowa Supreme Court found that the appellate court erred in holding that the employee's mistake theory or the sufficiency of the employer's investigation raised a jury question on whether insubordination was pretext for age discrimination.

The Feeback decision reiterates the notion that courts are not super-personnel departments that review the wisdom or fairness of business decision unless those business decisions themselves involve intentional discrimination. To overcome summary judgment on an indirect discrimination case under the ICRA, an employee now has to present sufficient evidence that the employer acted with an intent to discriminate and not merely that the employer's proffered reason was incorrect.

Statutory Changes to Non-Competes in Mental Health Professions

Against the backdrop of an urgent, nationwide shortage of mental health professionals, the Iowa legislature unanimously passed legislation barring non-competes in employment contracts involving mental health professionals. The new law, which was signed by Governor Reynolds and became effective immediately on June 1, 2023, prohibits employers from entering into agreements with mental health professionals that (1) limits the location in which the provider may practice, (2) prohibits the mental health professional from contacting previous patients, or (3) imposes temporal restrictions on the practice of the mental health professional.

The new law incorporates the previously codified definition of "mental health professional" under Iowa Code 228.1 to include any "individual that holds at least a master's degree in a mental health field, including but not limited to, psychology, counseling and guidance, nursing, and social work, or the individual is a physician and surgeon or an osteopathic physician and surgeon." The mental health professional must also hold a current Iowa license in the field and have "at least two years of post-degree clinical experience, supervised by another mental health professional, in assessing mental health needs..." The scope of the new law also includes "individuals who are completing their supervisory requirement under a temporary license" and "licensed master social workers with a current and active supervision plan on file with the board of social work."

This statutory change also nullifies previous non-competes with mental health professionals as void and unenforceable. The Iowa legislature's stance on non-competes follows a 2022 district court's ruling that a licensed mental health counselor's noncompete violated public policy. In that opinion, the district court judge cited "a crisis due to a shortage of mental health providers" in Iowa and the disruption of close relationships mental health providers develop with their patients that is unique to mental health providers when compared to other medical professions.

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