Blog Rss Feed

Executive Termination, Quirky Question # 1

Mon, 15 Oct 2007 00:00:00 GMT

Here are my thoughts on our first Quirky Question, relating to Executive Termination.

The courts have recognized a legal theory called the “after-acquired evidence doctrine.” The basic notion of this theory is that information learned after the employee has separated from his/her employer may bear upon the employee’s claims in litigation and the employer’s post-employment obligations to the former employee. This is true even if the employer did not know this information at the time of the discharge. For example, assume that a company fired a 56-year-old employee as part of a reduction-in-force and the employee sued for age discrimination. Assume further that the employer then discovered that the employee had been embezzling from the company. In this context, the courts have held that the “after-acquired” evidence (i.e., the facts discovered about the embezzlement) can cut off the employee’s damages in the age discrimination lawsuit even if the employer was ignorant about these facts at the time of the employee’s discharge.

This legal theory developed in the context of discrimination claims under Title VII and the Age Discrimination in Employment Act. The United States Supreme Court recognized the legitimacy of the after-acquired evidence doctrine in the case of McKennon vs. Nashville Banner Publishing Co., 513 U.S. 352 (1995). In McKennon, the high court found that while after-acquired evidence could not bar a liability determination, it could be used to cut off the employee’s damages claim. The Court stated, “Where an employer seeks to rely upon after-acquired evidence of wrongdoing, it must first establish that the wrongdoing was of such severity that the employee in fact would have been terminated on those grounds alone if the employer had known of it at the time of the discharge.” The Supreme Court also held that because of the important public policies underlying the country’s anti-discrimination statutes, the employer had to prove that it would have discharged the employee by “clear and convincing” evidence, an unusually high legal standard in a civil lawsuit.

In recent years, the after-acquired evidence doctrine has been applied in breach of contract cases – the type of case you would be confronting if you elected not to pay your former employee his severance compensation. For example, in a case directly relevant to your situation, the Supreme Court of Tennessee held that the after-acquired evidence applied in breach of contract cases. The court noted that a “majority of jurisdictions” allowed the use of after-acquired evidence as a complete bar to an employee’s recovery or to mitigate damages. The court stated that “those jurisdictions that have concluded that a complete bar to recovery is appropriate, generally reason that under well-established principles of contract law, the prior misconduct of the employee excuses the employer’s subsequent breach.” Teter vs. Republic Parking System, Inc., 181 S.W.3d 330 (Tenn. 2005). In the Teter case, like your situation, the company had discovered pornography on the former employee’s work computer. Importantly, the Supreme Court of Tennessee also found that because a breach of contract case did not implicate any particular public policies, the employer need only prove its contention that it would have fired the employee by the more typical civil liability “preponderance of the evidence” standard.

The situation you described adds another issue as well – the introduction of a different employer’s confidential and proprietary information into your workplace. This fact potentially provides you a separate justification for applying the “for cause” discharge standard.

The key question you will need to answer, both with respect to the pornography and the other employer’s confidential data, is whether your company would have fired the executive had it been aware that he had downloaded pornography, or brought confidential data belonging to another employer into your work environment, or both. If your firm can demonstrate that in the past, it has fired employees for downloading pornography, or for disregarding your policies regarding introducing another company’s proprietary or trade secret data into your workplace, your position will be enhanced significantly. Conversely, if your company has tolerated these kinds of actions by other employees in the past (especially if it has done so without imposing any discipline), your efforts to withhold the severance compensation based on your former employee’s wrongful conduct will be more difficult to justify.

Of course, as reflected in the Readers’ Responses below, there are a variety of practical considerations that also are likely to influence your decision regarding how to proceed. How much money is involved in the one year severance payment? How much will it cost to defend the litigation, assuming the employee sues? Has the company terminated other employees for introducing pornography or competitors’ proprietary data into the workplace and is it committed to doing so in the future? Weighing these and other factors, and considering the governing legal principles, should enable your company to make a thoughtful decision regarding how to proceed in this situation

******************************************************************************************

Thanks to the many individuals who have sent in a response to the first Quirky Question. As you will see, the consensus from the readers seems to be that the company should pay the executive his severance compensation and move on.

Response # 1: No, I don't believe they are able to now use the issues that they have recently uncovered in order not to pay severance. That due diligence should have been done before the employee's dismisal.

Response # 2: It seems to me that the executive has already been terminated, therefore you cannot go back to terminate for "cause" for something found AFTER his termination.

Response # 3: Really interesting question. The obvious place to start is the contract itself. (How's that for a shocker?!) Does the contract define cause? Usually, the definition of cause includes "misconduct". So far, so good. But some contracts also require the employer to give written notice of any misdonduct and/or an opportunity for the Executive to cure the problem. In that situation, the Executive would have the better argument. The employer would have to rely on the argument that the misconduct was of a nature that could not be cured. That's a little dicey. The more interesting scenario is where the definition does not give the Executive a right to cure the misconduct. Then, let the games begin! The Executive may argue that this "after-acquired evidence" does not alter the employer's reason for the discharge. The employer has already gone on record as describing the separation as a termination without cause and, therefore, should be estopped from changing its tune. But the employer can use the "after-acquired" evidence principle to its advantage. By analogy, in discrimination cases, where after-acquired evidence of misconduct is found, courts allow damages to be cut off from the date the evidence is discovered, if it was of a nature that would have caused the termination. The employer bears the burden of proof that it would have terminated the Executive. To show this, the employer should marshal evidence that it in fact terminated others who violated this policy. But if other violators were only reprimanded or suspended, the argument is considerably weakened. That is a good reminder of why every termination decision is a precedent of sorts.

Response # 4: Had he sued for wrongful discharge, your liability would have been limited to the time you discovered the terminable event. However, this is not a wrongful discharge case. He was terminated, admittedly, without cause at the time of termination. As such, the contract prevails unless it has a provision providing for later discovered cause. There is little question but that if you terminate the severance payments the executive will bring an employment claim. Even if it were defensible, the cost of defense (and probable settlement) probably meets or exceeds the cost of severance. My recommendation is to put this behind you and learn valuable lessons including the need to better supervise executives. One thing you could do is notify the former employer about the confidential info. discovered by sending them a copy of everything you found with a cover letter explaining how you found it and assuring them that you have now destroyed all copies in your possession. They DO have a claim against him and perhaps they will pursue it. Lastly, subject to contractual commitments to the contrary, you are free to provide this information to prospective future employers under the limited privilege available to employers.

Response # 5: When the Company separated the executive they were not aware of the violation of their sexual harassment policy and their confidential information policy. Even though the Company probably has a policy that the computer is their property and they can view what is contained in it at anytime, the point is they hadn't done so at the time the decision was made to ask him to leave without cause. It is problematic to change your mind later on based on after acquired evidence, especially when you could have found the information if you had looked. I say pay him his one year of severance and be glad you're rid of him before you had a sexual harrassment or Confidential Information lawsuit filed against him and the Company.

Response # 6: Response #3 (as well as some of the other responses) encompassed a lot of my thoughts. In counseling the remaining execs on this issue, I would sure raise the after-acquired evidence rationale/doctrine as a possible way to deny the severance, but I would also remind the executives that this could sure look like a bad faith, post-termination attempt to wiggle out of paying the $ (not to mention quite possibly constitute a breach of contract for which the company could be liable for not only the damages but also the exec's attorney's fees, costs, etc...) Of course, denying the severance $ based on the "porno" and "confidential" information of the prior e'er also raises the question of why the company didn't do a search for these things while exec was employed -- it looks (and would be portrayed by a plaintiff's attorney) like the company was a-okay with him looking at the porno and using the confidential/proprietary info as long as he was with the company, but, now that he's gone, the company is looking for any reason to deny the $. No doubt also that if the company wants to deny the $, it had better do some thorough due diligence before denying the $, in order to check the computers of its other higher-ups to see if similar materials are on their computers. It may be that the remaining execs become far less interested in denying the severance $ if they know that what is on their computers could be subject to discovery/scrutiny. As always, uniformity/consistency of enforcement of company policies and practices would also come into play. In the end, I bet most companies would pay the $ and be done with it, but may also revise future exec employment agreements to cover post-separation "bad acts" like this. A potential middle ground would be to confront the exiting exec with the "bad info" (possibly complete with actual images taken from his computer) and negotiate something less than 100% $; that way, if successful, some action has been taken, and a positive precedent set, but hopefully litigation and the associated dirty laundry airing would be avoided. Fun stuff.

Employee Injury, Quirky Question # 3

Tue, 16 Oct 2007 09:02:00 GMT

Roy's Analysis of QQ # 3

October 22, 2007 | Posted by Ginsburg, Roy | Topics: Employee Injury, Workplace Violence

This fact pattern raises a number of questions.

One of the first inquiries you need to consider is whether the injury is going to be compensable as a workers' compensation claim? We doubt that it would be. In Minnesota, for example, the workers' compensation statute applies to injuries that are suffered “arising out of and in the course of employment.” It seems extremely unlikely that your employee’s actions in building a “shooting device” at home, bringing it to work, and then demonstrating it (however ineptly) to his co-workers during a break and outside of your facility could possibly be considered to be in the “course of his employment.” Nevertheless, you should investigate and document your investigation to ensure that you are well prepared to address any workers' compensation issues in the event they are raised.

A second inquiry is whether you should take any action against the genius employee who invented the “shooting device?” You should. This is clearly a situation involving unauthorized activity that created a serious risk of injury not only to the employee himself, but to his co-workers and possibly (depending on where your parking lot is located) members of the public. A disciplinary response would be especially warranted if your company has a formal policy that generally prohibits employees from engaging in activities that jeopardize the safety of the employees themselves or their co-workers. Even in the absence of this type of prohibition, presumably your policies proscribe “horseplay,” and the type of conduct involved here arguably falls into that category.

The severity of the discipline you elect to impose depends on a variety of factors: whether you have had other disciplinary problems with this employee; whether he previously has engaged in any conduct that put his co-workers’ safety in jeopardy; whether you have a progressive discipline system; whether your firm has encountered other types of problems in which employees have been injured, how you responded to them, and what discipline was imposed was imposed in those circumstances; other similar inquiries focusing on the dual issues of whether the punishment was proportional to the offense involved and your company’s past experience and past response.

A third inquiry is whether your firm should take any disciplinary action against any other employees? The answer to that question depends on whether other employees knew that the injured employee was involved in these activities and failed to report his intentions. Of course, you will need more information to evaluate this issue, including, at a minimum, whether the knowledgeable employees were supervisors or managers, whether they had specific information about the injured employee’s plans to demonstrate his "shooting device," when they learned this information, whether they had attempted to intervene beforehand, whether they had directed the employee not to engage in this conduct in the company’s parking lot, etc.

As should be evident, the answers to these inquiries also may bear upon the nature of the discipline imposed on the injured employee. For example, if a manager had specifically instructed him not to give the demonstration (at least not on company property) and he did so anyway, a more severe disciplinary response may be appropriate. The underlying issue about which you need to be attuned with respect to the knowledge of the supervisors is a claim for negligent supervision.

Fourth and finally, you may consider whether there is anything else the company should do. At a minimum, you may wish to search the employee’s locker and/or work space to ensure that he has not brought any other “shooting devices” or explosive materials to the worksite. You also may want to use this incident as a “teaching moment,” reminding all of your other employees, either through a written communication or a series of meetings, that guns of any type (home-made or not) are not permitted on company premises, including the company parking lot, and that all employees need to avoid conduct that puts themselves, their fellow employees or members of the public at risk of injury.

Readers' Responses to QQ # 3

October 18, 2007 | Posted by Ginsburg, Roy | Topics: Employee Injury, Workplace Violence

Response # 1: The employer's first and foremost responsibility is to provide all workers with a safe work environment (including any and all of the employer's premises, not just the work building). The employee in question has risked the safety of both himself and his co-workers. In this case, the risk was significant as it involved what under the law would be considered a deadly weapon. The employee must be terminated.

Hopefully, the employer has a written policy against weapons and violence in the workplace and can stand on that to support the termination. But, even if they do not have such a written policy, the employee must be terminated for gross misconduct -- jeopardizing the workplace safety.

There are separate issues involved in whether a claim for workers' compensation can be successfully challenged.

Response # 2: Can you fire an employee for stupidity?

Comments/Questions

Sexual Harassment (Round 2), Quirky Question # 5

Mon, 29 Oct 2007 09:10:00 GMT

Roy's Analysis of Quirky Question # 5

November 5, 2007 | Posted by Ginsburg, Roy | Topics: Sexual Harassment, Avoid Harm Otherwise

In my view, you need to figure out what's going on between the two employees. For that reason, I would advocate more direct and proactive steps than described in the reader's response displayed below. Especially since the interaction between the complaining employee and the executive has been sufficiently open for you to "notice," an interview with the employee who brought the initial complaint is warranted.

I would want to know whether there has been any further harassing conduct. I would want to know whether their "relationship" has changed and whether the interaction between them is "welcome" to her. (Remember: the standard is not whether the conduct is "consensual" but instead, whether it is "welcomed." In the very first harassment case that reached the US Supreme Court back in 1986, the nation's high court made clear that sometimes "consensual" behavior is "unwelcome.")

If the employee who brought the initial complaint advised you (or your designee) that she was not appreciative of the increased interaction with the Executive, I would make an effort to try to understand why it is occurring. Is she being pressured? Does she fear retaliatory conduct? To the extent she expresses either of those sentiments, I would seek to understand the factual basis for her beliefs.

If, however, she does not report those problems, your company may be insulated from potential liability, even if later problems occur between the two employees. Recall that in the companion Faragher/Ellerth cases the US Supreme Court decided in 1998, the Court created an affirmative defense for employers to certain types of sexual harassment claims. Among other facets of that decision, the Supreme Court stated that to prevail on a sexual harassment claim where the complaining employee has not suffered "tangible economic harm," the employee must demonstrate that she availed herself of the company's sexual harassment policy and took steps to "avoid harm otherwise." That phrase has not seen a great deal of decisionmaking by the lower courts but there is at least one case that may be analogous.

In Brown vs. Perry, 184 F.3d 388 (4^th Cir. 1999), the federal appellate court held that a female employee who went out drinking and dancing until the early morning hours with a supervisor, after which she had accompanied him to his hotel room, had failed to "avoid harm otherwise." Her lawsuit was dismissed, in part because this was a person whom, she claimed, had sexually harassed her previously under very similar circumstances. In affirming the grant of summary judgment by the trial court, the Fourth Circuit concluded that it was inexcusable for her to accompany a person who previously had physically accosted her back to his hotel room at midnight after a night of drinking and dancing. Both the district and appellate courts had little sympathy for the victim when a similar incident occurred a second time under circumstances that mirrored the first situation leading to the initial complaint.

If your employee continues to interact with the Executive about whom she previously complained, especially in an affectionate or sexual way, your company may well have an argument that she failed to "avoid harm otherwise" in the event she initiates a lawsuit based on any harassing conduct following your investigation and resolution of her first complaint.

Readers' Responses to QQ # 5

October 30, 2007 | Posted by Ginsburg, Roy | Topic: Sexual Harassment

Response # 1: Regarding QQ#5, I think one could simply draw the conclusion that the Company's prompt remedial measures in response to the initial complaint seemed to have worked. Whether it was a matter of misunderstanding, miscommunication, or just the need for some education, it could be that the executive has come to understand the boundaries of permissible conduct and both parties are putting this incident behind them and simply getting on with their professional relationship. In other words, sometimes these remedial measures actually do work.

Now, that said, I think it might be appropriate for someone in HR to check back in with the complaining employee. In fact, it is probably a "best practice" to check back in with a complaining employee after some period of time, to make sure that the initial situation has been taken care of and/or there are not new problems.

In the course of checking back in, I would propose that the HR person allude to the fact that the complainant and the executive appear to be working and spending time together -- not in an accusatory way, just as a matter of observation. The HR person could say something positive like, we hope that means the previous issue between the two of you has been satisfactorily resolved and maybe also remind the employee about her right to be free from retaliation, etc. -- something to open the door to the employee, in case she had something more she wanted to report.

If the employee says everything is fine, I would make a note to the file about this conversation.

Performance Evaluation, Quirky Question # 6

Wed, 31 Oct 2007 18:23:00 GMT

Roy's Analysis of QQ # 6

November 7, 2007 | Posted by Ginsburg, Roy | Topics: Performance Evaluation, Company Records

Your inquiry raises several issues in addition to the specific question you posed about whether your company is obligated to provide the employee the original performance review document.

First, as your question reflects, performance evaluations are difficult. While most would agree that the purpose of a performance evaluation is to provide candid, objective feedback regarding the employee’s performance in the time period encompassed by the review, this goal is more easily stated than achieved. Managers preparing performance evaluations struggle to find the appropriate balance between candor and criticism. Performance reviews often are either overwhelmingly enthusiastic or harshly condemnatory. Neither approach helps the employee being reviewed.

Second, a problem implicit in your question is the close personal relationship between the manager and the employee. Given this close friendship, I wonder whether the goal of an objective evaluation is realistic. Both as a general proposition and in this specific situation, your company may want to consider disqualifying an evaluator with a close personal relationship with the employee being evaluated. These types of relationships have the potential for distorting the evaluation, as appears to have happened here.

Third, situations where a close friend is evaluating a subordinate employee create an appearance (legitimate or not) of favoritism to other employees. If your firm does not have the flexibility to substitute another evaluator (I don’t have any sense of the size of your business), you might at least consider having a second person participate in the evaluation when close personal relationships are involved.

Fourth, as you noted, the review does not cover the entire performance period. Typically, I see the opposite problem. Individuals include in their assessments criticisms from a period long preceding the “review period.” Thus, an employee who believes that he or she has adequately addressed and resolved a prior performance problem continues to see criticisms based on that problem, perhaps from years earlier. Here, of course, you have a review based on just one-sixth of the year. This abbreviated period did not accurately reflect the employee’s year-long performance, which clearly was deficient for most of the year. An objective and fair review could have pointed out that the employee had exhibited serious problems throughout the year, but that since the demotion and with the additional supervision, his performance had improved significantly.

Fifth, the specific question you pose is preceded by your observation: “there are no copies.” Although I recognize that there may not be any identical, signed copies of the review, I am skeptical that there truly are no copies. The document probably was created on a computer and likely has been saved on a hard drive or network server. Drafts may have been retained. Photocopies may have been made. In our world of electronic data, it is hard to have confidence that all other copies have been destroyed.

Even if you had the only copy, however, my advice to you would not change. Give the employee a copy of the earlier review. I make that recommendation not because you necessarily have a legal obligation to do so, but because withholding the document is more problematic than producing it. Your company has a very straightforward and legitimate explanation for why the review was revised: it was prepared by a biased reviewer, who admitted that he based the assessment on just two months out of twelve, and who acknowledged that he ignored the other prior serious problems that had been identified (all of which had been documented and which led to the employee’s prior demotion).

Don’t run from these facts; they are helpful. If the employee in question later initiated litigation against the company, you will be able to explain easily why the evaluation was modified. It would be much harder for the company to explain why it refused to provide the employee a copy of the original review, or even worse, why the document had been destroyed. (Don’t destroy it!) In my opinion, refusing to provide the ill-conceived review elevates its significance. You might want to write “Withdrawn” or “Void” on the document before providing a copy to the employee, but even this step may be unnecessary.

Finally, like so much of employment law, there are two statutory schemes that affect the rights and responsibilities of employers and employees alike -- federal and state. While I am not familiar with any federal requirement that you produce the document to the employee, you need to evaluate whether there are any statutes or regulations in your jurisdiction that require you to produce the signed document to the employee. As the reader who responded to this question pointed out, in California there apparently is such a requirement. You should check to determine whether there is a parallel provision in your state's employment law statutes.

Readers' Responses to QQ # 6

Response # 1

At least in California, an employee has a right to copy any document she signed relating to employment. In this case, even if the company is no longer going to view the original review as "official", because it was presented to and signed by employee X, under California law I would think X does have a right to a copy.

FMLA Leave, Quirky Question # 7

Mon, 05 Nov 2007 09:07:00 GMT

Not so fast!

Believe it or don’t, your discharged employee’s prior employment with your company, even though it was several years ago, enables him to meet the requirements of the federal Family Medical Leave Act (FMLA). As you noted correctly, that statute comes into play when the employee has worked at least 1250 hours and has been employed for at least a 12-month period.

At the end of 2006, the federal Court of Appeals for the First Circuit explored what the 12-month requirement means. (Take a look at the case of Rucker v. Lee Holding Co., d/b/a Lee Auto Malls, No. 06-1633 (1st Cir. December 18, 2006).) In that decision, the First Circuit held that the FMLA was “ambiguous as to whether previous periods of employment count toward the 12-month requirement . . .” (Emphasis added.)

In the case of first impression (i.e., the court had not previously analyzed and decided this issue), the appellate court held that a five-year gap in an employee’s employment with the same employer did NOT prevent him from satisfying the FMLA’s 12-month requirement. The court found that both the statutory language and the language of the Department of Labor regulations were susceptible of differing interpretations. In the Rucker decision, the court decided to give that language an expansive reading that benefited the discharged employee.

While I recognzie the statutory and regulatory language are less than perfectly clear, I thought the Rucker decision was a stretch. The analysis simply did not seem like a common sense interpretation of the statute. Silly me! In 2007, there have been two decisions that make Rucker seem eminently reasonable. In O'Connor v. Busch's Inc., 492 F. Supp.2d 736 (E.D. Mich. 2007), the federal district court adopted the Rucker analysis, applying it to a fact pattern where there was a 20-year gap between the employee's initial employment for the company and her rehiring. After working for the company in the 1980s, the employee left her employment. She was rehired in 2005 as the VP of Finance. Later the same year, she was injured in an automobile accident. Suffering from headaches and depression as a result of her accident-related injuries, she requested time off. Although the company advised her that it would provide her time off after the end of the year reconciliation of the company's books, this proposal was not satisfactory to the employee, leading to her resignation. The employee then sued under the FMLA.

In the words of the modern day philosopher, Ferris Bueller, the court "bought it," even while paying lip service to the notion that it was "troubled by the potential consequences of permitting Plaintiff . . . to combine periods of employment separated by nearly twenty years."

Similarly, in the case of Thomas vs. Mercy Memorial Health Center, Inc., 2007 WL 2493095 (Aug. 29, 2007, E.D. Okla.), the employee had worked for the defendant-employer's predecessor company in 1991, 1992 and 1994. She also worked for defendant in 2002 and early 2003. She returned to work in April 2004 but only worked for about eight months before she was fired for absenteeism relating to her own and her husband's health problems. The district court combined the prior periods of employment, concluding that the employee had worked for more than 12 months and therefore was FMLA eligible.

In light of these cases, telling your employee to "pound sand" would likely be imprudent. Although it is counter-intuitive, your former employee seemingly has a legitimate claim. So, while I generally endorse the idea of “lawyering-up,” in this instance your resources may be better spent trying to resolve your differences with your ex-employee on an amicable basis.

As for “sanctions,” not this time.

Employee Cooperation in Investigations, Quirky Question # 9

Mon, 19 Nov 2007 09:21:00 GMT

Your questions implicate difficult issues that highlight the tension between the competing interests of employers to provide a safe, violence-free work environment, and employees’ legitimate privacy interests. Here, the interests of the employer predominate.

Every employer has a duty to attempt to provide a safe work environment. While all risks cannot be anticipated, known risks cannot be ignored.

Consider, for example, the potential consequences of a “do-nothing” approach. If the male employee escalated the violence towards his significant other, and committed a violent crime against her in the workplace (or anyone else who intervened, or who just happened to be an innocent bystander), it would be extremely difficult to justify the company’s lackadaisical response, particularly if the injuries suffered by your female employee or your other workers were serious. Defending a lawsuit by your other injured employees (or their families in the event of a death), would be difficult, at best.

Given this potential, it is imperative that you attempt to gather additional information from the employee involved to enable the company to assess the risk and, if necessary, take appropriate precautions. Even in the absence of a company policy requiring cooperation in company investigations, your firm would be justified in exploring these issues thoroughly with the female employee. Since your company has a specific policy requiring cooperation, your firm’s position is even stronger.

If your employee refuses to cooperate in the investigation, you could impose any discipline you deem appropriate, including discharge. I would not advocate jumping to that ultimate sanction. Rather, I would explain to her that a failure to cooperate jeopardizes her continued employment. I also would explain why the company needs to explore these issues, both from a practical and legal perspective. If she nevertheless refuses to reveal any of the information that you consider necessary to evaluate the situation accurately, you could impose a progressive disciplinary approach, starting with suspension with pay, then suspension without pay, and finally termination. But, again, you need not pursue a progressive disciplinary approach if you have concluded that discharge is the appropriate response to this situation.

The fact pattern you describe is very similar to a case decided by the United States District Court for the Northern District of Ohio in late 2005, Rowe v. Guardian Automotive Products, Inc., 2005 WL 3299766 (N.D. Ohio). In Rowe, like the situation you describe, two employees were living together. The male employee assaulted the female employee, breaking three of her ribs. The male employee was charged with assault and convicted. This information came to the company’s attention when the male employee later received a 30-day jail sentence for driving without a license. When the company explored the situation, it discovered the male employee had a lengthy criminal history involving alcohol abuse, threats to kill his ex-wife, physical acts of violence against his ex-wife, and the assault on Rowe. Based on this history of violence, the company terminated the male employee. The company also tried to obtain additional information directly from Rowe to ascertain whether the now-ex-employee posed a risk of harm to her, her co-workers, or her supervisor.

On three separate occasions, the company tried to elicit this information from Rowe and each time she refused to cooperate, arguing that the inquiries invaded her privacy. She pointed out that she was on leave when the assault occurred and that it had not occurred at work. Despite those facts, the company terminated her employment based on her refusal to cooperate with the company’s legitimate investigation. The federal District Court upheld this decision, dismissing the plaintiff’s invasion of privacy case on summary judgment.

The bottom line is that employers have an obligation to attempt to create a safe, violence-free working environment. If an employee refuses to support that effort by refusing to participate in an investigation bearing upon this issue, the employer is justified in discharging that employee.

Readers' Responses:

I think it's worth highlighting that in both the question and the cited case, the Company had a policy in place that required employees to participate in the investigatory process. Therefore, the employee should understand she is being approached consistent with the normal practices of the Company. I also believe it behooves the Company to articulate to the female employee one or more reasons to pursue the investigation that may make her feel uncomfortable. For example, if there is enough evidence (as appears to be the case in both instances) to terminate the male employee without the female's input, she might naturally feel the investigation (and her part in it) is unnecessary. Therefore, having someone from the Company articulate the Company's concerns about retaliatory acts by the male or other potential targets at the Company might enable the female employee to understand the Company is not merely voyeuristically interested in what she may perceive as a personal matter. Finally, in the cited case, the female was given numerous opportunities to comply with the Company's investigation. This appears to be a prudent course of action where the female employee may be initially reluctant to speak -- whether it be to "protect" the male or because she does not want to "relive" a traumatic experience.

Title II of the Genetic Information Act of 2008

Fri, 11 Dec 2009 10:11:51 GMT

Donating Sick Leave, Quirky Question #2

Mon, 15 Oct 2007 13:17:00 GMT

Roy's Analysis of QQ # 2

Proposed donations of sick time constitute a magnanimous gesture and are to be commended. But they raise a number of potential problems for the employer that should be considered before the sick-leave donations are approved. Set forth below are five questions an employer should consider when evaluating these types of requests. Like many employment issues, it is far better to think these issues through in advance, rather than addressing them only after a specific situation (and corresponding potential problems) have arisen.

First, what will the employer do if one of the employees who has donated all of his/her sick time also becomes ill or is in an accident? Will the employer simply insist that the sick time has been used up and force the employee to take a leave without compensation? How long might this unpaid leave last before the absences would affect the employee’s continued employment?

Second, as one of the Reader Responses reflected, you need to examine whether any employees are being pressured into “donating” their sick time by friends of the employee who is ill? What if the employee who “encouraged” others to donate their sick leave is a manager? Someone with hiring/firing responsibility? If an employee did not agree to "donate" his/her sick time, would their be any adverse consequences for that employee?

Third, what if the employee who is sick is herself a manager with disciplinary authority, or hiring and firing authority? Would employees being requested to "donate" sick-leave time to this individual feel comfortable rejecting this request?

Fourth, what precedent is the company establishing with regard to the Americans With Disabilities Act? That federal statute requires, in certain circumstances, that employers make "reasonable accommodations" to individuals with disabilities, assuming that the employers can do so without suffering an "undue hardship." Would the additional leave provided to the sick employee be compelling evidence by a disabled employee in a similar job that allowing someone in this position additional compensated time off was a "reasonable accommodation" that did not cause the employer an “undue hardship?”

Fifth, is the employer creating risks for discrimination litigation if another employee also becomes ill, uses all her sick time, and then turns to the company to obtain additional sick leave from her co-workers? What if the company approved the extended leave for the first employee (based on the donated time from other employees) but, for valid reasons, rejected the extended leave opportunity for the second employee, who happened to fall into a protected class?

The motivations underlying the sick time donation idea are admirable. Perhaps the company will conclude that regardless of the potential for some of the types of problems identified above, those risks are outweighed by the generous and compassionate attitudes and behaviors being fostered by the sick-leave donations. But, an employer should be aware that this approach may lead to potential problems. These problems should be considered in advance, before they actually arise, so that the employer and the employees alike know how alternative situations will be handled. When these issues are considered carefully, the company may find that an alternative approach is preferable, perhaps by assisting the employee through the already existing short-term or long-term disability programs available at the company.

Readers' Responses to QQ # 2

Response # 1: Why wouldn't you want to encourage employees to help each other?

Response # 2: On the surface, leave donation appears to be a great idea and they appeal to a great many.  However, such programs breed ill feelings over the long haul. When you allow employees to donate leave, many develop the expectation that sometime in the future, it will be returned when needed. This is rarely the case and hence, the ill feelings start to develop.

Without intention, employees often experience undue pressure to donate, even when they don't want to. It is similar to the feelings of a United Way campaign. The intentions are good; however, some employees believe in donating in other ways and can feel pressure from peers and supervisors to donate.

There are also the situations where employees abuse their leave, then find themselves in a position of needing more leave, so again employees may feel pressure to donate leave even though the employee could have avoided the situation by being more responsible.

Finally, there is the fairness issue. Who will be in charge of requesting donations and will the vigor in solicitation be the same for everyone?

As you can tell from my reasons listed, I have always been against leave donation programs. However, to ensure an individual is not left out in the cold, short-term and long-term disability plans should be considered and added to the benefits plan. These programs are one of the tools that can be used to keep ill feelings out of the workplace.

Response # 3: My experience with sick leave donations is that they create a nightmare issue for the tax folks in the payroll deparment. There are tax issues relating to passing along sick days and other paid vacation days from one employee to another. This illustrates another reason why our company will not allow these types of leave donations.

Sexual Harassment, Quirky Question # 4

Mon, 22 Oct 2007 09:44:00 GMT

Your fact pattern raises several issues that cause me concern.

First, you work in Human Resources. This gives you a license to “intrude.” Indeed, you have an obligation to investigate when necessary. Here, it’s necessary.

Second, you cannot honor the employee’s request that you do nothing. Once you have notice of a potential problem, you need to take action. At a minimum, you need to investigate the situation by speaking directly with the complaining party. Your characterization that her complaint was "somewhat vague" is not good enough. You need to understand the behaviors that have led her to conclude she is being harassed. You may or may not agree with her that the conduct is offensive or problematic, but you need to find out what the conduct is. It’s possible that she will be perturbed that you have initiated an investigation. That’s her problem, not yours. You need to explain to her that the Company is obligated to investigate when alerted to a problem.

Third, you should make an effort to understand whether her reticence to have you take action is linked in any way to a fear of retaliation. Although you pointed out that the alleged harasser is not her supervisor, you also suggested that he could have some impact on the evaluation of her performance. One of your responsibilities will be to ensure that this does not occur.

Fourth, following your interview with the complainant, you need to interview the alleged harasser. He may corroborate the allegations, deny them, or provide you additional information that assists you to evaluate the legitimacy of the complaint. If he reacts adversely, you should remind him that your company does not tolerate retaliation of any kind, and that the company will monitor his conduct carefully to ensure that no retaliation occurs. There are various other components of an effective investigation that are beyond the scope of this response.

In general, when considering the “please don’t investigate” requests, consider the following scenario. Imagine that you receive a complaint accompanied by the request that you do nothing. Assume that you honor that request. Assume further that you hear nothing further about this situation, but that six months later, another employee complains to you about sexual harassment by the same individual.

Let’s complicate the matter further by assuming that the second complaint (by a second employee) involves egregious, assaultive behavior that ultimately leads to a lawsuit. You will be deposed (i.e., you will be compelled to answer questions, under oath, and your testimony will be transcribed). You will be asked when you first learned of any problems regarding the employee accused of the sexual assault. You will have to state that you learned of potential problems in connection with the first employee’s complaint. You then will be asked what action you took in the ensuing six months to ascertain what had happened and to ensure that no other employees were victimized. Under the fact pattern you described, your response to that question will be “Nothing.” That response is not adequate. You may as well visit your CFO following your deposition and inform him that he will need to get out the company’s checkbook. There is also a risk that you will be added as a defendant to the litigation under a negligence theory. In short, you need to investigate once you have been apprised of a potential sexual harassment problem.

Readers' Responses

Response # 1: As an HR practitioner, I have been here before. So often an employee confides in you like a friend and it's important to draw the line and maintain your business role. In this instance you have to remember that your first obligation is to your company, and as such, you have to find out more information on her concerns.

You must look into this further, as the employee has really officially put you, as the company representative, on notice. What I suggest is that you let her know you must, as part of your job, find out more from her on this situation, as much detail as you can. You are not intruding. You can reassure her that your role is to strive for a harassment-free working environment. While you can tell her you will try to maintain her confidence as much as possible you simply cannot promise complete confidentiality as you never know which way these situations will go.

And, keep an open mind, as you may be surprised in what you learn. Once you have her full information, I recommend working with your legal counsel and your superior in the next steps in investigating this situation further. Best of luck to you in this process!

Response # 2: What do you do if the employee reports that she is being "harassed," but then walks out and refuses to speak to you? Are you still obligated to conduct the investigation, when the employee is not cooperating?

How about an incident when they quit? Are you still on notice and must you do something? In my view, you should at least attempt to investigate and you should document your efforts.

However, what do you do about the practical challenge of conducting an investigation when the complainant is refusing to cooperate? In California, where I practice, there was a case against CBS, in which the complainant refused to cooperate with the investigation. The court allowed the company to use the complainant's lack of cooperation as a defense to her later claim of harassment.

As an HR practice, however, there are risks associated with accepting an employee's refusal to participate in a sexual harassment investigation. You should at least make an effort to obtain more facts from the complaining employee.

Comments/Questions

Drug Testing Drivers, Quirky Question # 8

Mon, 12 Nov 2007 09:25:00 GMT

You pose a good question. Like so much of employment law, your question illustrates the tension between competing societal interests. Here, the tension exists between employees’ rights to privacy and public safety.

States have different drug testing statutes, so the answer to your question is state-dependent. Since I practice out of Minneapolis, I’ll answer your question with reference to the applicable laws in Minnesota. The relevant Minnesota statute is the Minnesota Drug and Alcohol Testing in the Workplace Act. Under the statute, an employer is allowed to conduct random drug tests for employees who occupy “safety sensitive” positions. “Safety sensitive” positions are defined as those jobs in which “impairment caused by drug or alcohol use would threaten the health and safety of any person.” See Minn. Stat. § 181.950, subd. 13. Another way to frame your question, therefore, is to inquire: “Does a job that involves driving a company automobile fall within the definition of a “safety sensitive” position, such that your firm would be justified in engaging in random drug testing?”

There is not a great deal of case law in Minnesota defining precisely which positions are, or are not, “safety sensitive” positions. The courts have found that jail personnel, patrol officers, investigators, and court security deputies all occupied “safety sensitive” positions. Similarly, workers involved in the maintenance of railway lines have been held to occupy “safety sensitive” positions. In contrast, workers involved in loading, unloading and cleaning commercial aircraft have been held not to occupy “safety sensitive” positions, a fact that may cause some unease among airline passengers.

I am not aware of any Minnesota cases addressing the issue of whether driving a company vehicle involves a “safety sensitive” position. Some insights, however, can be obtained from parallel federal law. In the federal context, and the public employer arena, drug testing is considered a “search” within the meaning of the Fourth Amendment. Random drug testing has been deemed permissible only where it serves “special governmental needs . . ..” National Treasury Employees Union v. Von Raab, 489 U.S. 656, 665 (1989). The nation’s highest court has held that “special needs” exist where an employee works in a “safety sensitive” position. In deciding whether an employee occupies a “safety sensitive” position, courts have been directed to consider whether the employee’s duties are “fraught with such risks to others that even a momentary lapse of attention [could] have disastrous consequences.” Skinner v. Railway Labor Exec. Ass’n, 489 U.S. 602, 628 (1989).

Applying these standards, federal courts have found that the following positions are “safety sensitive” such that random drug testing should be permitted: a) air traffic controllers; b) aircraft maintenance personnel; c) railroad safety inspectors; d) highway and motor carrier safety specialists; e) lock and dam operators; f) heavy equipment operators (e.g., forklift, tractor and crane operators). However, federal courts have held that Department of Energy employees whose jobs included driving cars and vans containing documents and Department of Agriculture employees whose jobs included driving shuttle buses, mail vans, and cars, did not occupy “safety sensitive” positions.

Based on this analogous federal case law, it would appear that someone whose job responsibilities involve driving a company vehicle does not occupy a “safety sensitive” position that would subject that person to random drug testing. In my view, that analysis may be misguided. Certainly, someone behind the wheel of a 6000 pound SUV going 70 mph is engaged in an activity where “even a momentary lapse of attention [could] have disastrous consequences.” Moreover, I’d wager that someone driving an SUV traveling at 70 mph is a bit more dangerous to the general public than a forklift operator driving around a warehouse at 3 mph.

According to the U.S. Secretary of Transportation, there were approximately 43,000 automobile deaths on American highways, both in 2005 and 2006. Here in Minnesota, just two days after I posted QQ # 8, the Star Tribune reported on a tragic situation involving a van driver for the Forest Lake Area School District who caused a crash that killed his passenger, a 14-year-old student, and himself. Exacerbating the tragedy, as reported by the Star Tribune, the driver had marijuana in his system, and additional marijuana was found in the van. See, Student's Driver Had Drugs In, With Him, Star Tribune, November 14, 2007, p. A-1. Both the national statistics and this recent, profoundly sad story here in Minnesota, suggest that it is time for state legislatures to re-examine the balance between employee privacy and public safety.

In my view, companies providing employees with company vehicles should be permitted to randomly drug test these individuals. (Keep in mind that it will be the companies that are sued if there is an accident involving a serious injury or fatality.) But, that is not the current state of the law, and therefore, random drug testing would seem ill-advised.

Employer Notice of Mental Disability, Quirky Question # 10

Mon, 26 Nov 2007 09:27:00 GMT

Okay, I admit it. As some of you undoubtedly realized, I did not receive this question from a client or a reader. The fact pattern is derived from a case that was decided very recently, Stevenson vs. Hyre Electric Co., No. 06-3401 (7th Cir. October 16, 2007).

[Occasionally, I will address a very recent decision in my questions. To make it easy for you to access this material, I will organize it under the topic addressed (here, FMLA), as well as a new category we've initiated with this question called "Recent Decisions."]

Turning then to the question presented, the facts described above are drawn from the Stevenson case. As the Seventh Circuit described, the employee had “no documented history of misconduct or health problems” at her employer, but “[a]ll that changed . . . when a stray dog climbed through the window the warehouse where [she] worked and approached her.” Stevenson had an immediate adverse reaction to this situation which combined spraying air freshener around her work area and “yelling, cursing and screaming” at her co-workers for several minutes. She left work later that day because she was feeling ill and did not attend work the following day.

Two days after the incident, Stevenson had a very agitated 10-minute interaction with the Company’s President, again yelling profanities about the dog. The President was unable to calm her down. The same day, Stevenson filed an OSHA complaint about the dog. She later left work to visit the Emergency Room. Over the next week or so, Stevenson continued to miss work and continued to behave oddly. The Company sent Stevenson a letter describing her rights under the FMLA but Stevenson failed to notify her employer that she desired FMLA leave.

Anxious about Stevenson’s continuing aberrant behavior, the Company changed the locks on the warehouse. On March 9, approximately one month after the dog incident, the employer terminated Stevenson’s employment.

In granting the employer's motion for summary judgment, the Illinois district court concluded that the employee had failed to satisfy the requirements of the FMLA that she provide her employer notice of her need for FMLA leave. The federal appellate court reversed this decision.

As the Seventh Circuit pointed out, under the statutory scheme of the FMLA and the accompanying federal regulations, an employee is obligated to notify her employer that she will need FMLA leave “30 days in advance.” When the need for leave is not known in advance, however, the employee should give notice “as soon as practicable under the facts and circumstances of the particular case.” The regulations anticipate that notice will be provided within one or two days of the date the employee learns of the need for the leave, except in “extraordinary circumstances where such notice is not feasible.” In this case, the appellate court found that Stevenson was obligated to provide notice to her employer of her need for FMLA leave after her visit to the ER and the diagnosis by the ER physicians. She failed to do so.

The appellate court went on, however, to point out that notice is not always necessary. In particular, the court stated, notice is not necessary where the employer has “constructive notice” of the employee’s need for the leave. Relying on an earlier 7^th Circuit decision, the appellate court observed that constructive notice may occur when the employee is unable to communicate her illness or when “clear abnormalities” in the employee’s behavior provide the employer constructive notice of the serious health condition. In the Stevenson case, the circuit court concluded that Stevenson’s clear behavioral abnormalities could have put the employer on notice of her need for FMLA leave. Further, the court found that her condition could have constituted a “serious health condition” under the FMLA that would have qualified her for leave. The court therefore reversed, sending the case back to the trial court to reach factual determinations on both the constructive notice and serious health condition issues.

The Stevenson case is intriguing on multiple levels. My concern is that it imposes on employers and their management employees, very few of whom have any psychological or medical expertise, an unrealistic obligation to discern when employees are suffering from a serious mental health problem warranting FMLA leave. If the employer fails to pick up on the cues that should provide it “constructive notice,” a discharged employee may later be able to assert an FMLA claim that she was deprived of a leave opportunity that would have enabled her to remedy the problem.

For example, when an employee begins engaging in severe sexual harassment of another employee, is this a reflection of a mental health problem that would be improved by an FMLA leave? If an employee is not performing his job duties adequately, does this reflect depression or some other mental illness? If an employee is belligerent and bellicose toward his co-workers, does this mirror a mental health issue that warrants leave? In these and hundreds of other contexts, behaviors by employees may reflect mental health problems, or they may not.

Yet the standard for determining whether an employee has provided the employer “constructive notice” of a “serious health condition” will be difficult to determine and, in my view, somewhat malleable. Employers may discover, long after the fact, that the problem they thought they had solved by terminating the problem employee actually should have been addressed through leave and corresponding medical treatment. That possibility will inject a level of uncertainty into discharge decisions that employers previously thought were unassailable.

Restrictive Covenants; Interference with Contract: Quirky Question # 11

Tue, 04 Dec 2007 13:54:00 GMT

Your fact pattern raises a number of issues. Let me touch on a few basics before addressing the specific question you posed.

As a preliminary matter, you should understand that non-competition agreements, which constitute one type of "post-employment restrictive covenant," are governed by state law. There is no federal statute dictating whether non-competes are enforceable. Rather, state law determines the enforceability of non-competes. Some states enforce them; some states enforce them but only in limited circumstances; some states largely repudiate them. In short, the first issue you need to resolve is whether the state where this dispute has arisen is one that will enforce a properly crafted non-compete.

Moreover, as the last sentence implied, even jurisdictions that recognize the validity of non-competes will evaluate whether they are crafted properly. Typically, courts will assess the substantive, geographic, and temporal scope of the non-competes when evaluating their legitimacy. There are other issues regarding non-competes upon which courts will focus but they are beyond the scope of my observations here. Essentially, however, courts attempt to balance the employer's legitimate business interests with the employee's needs for job mobility and income.

For the purposes of your question, I will assume that your company is based in a state that recognizes the efficacy of non-competes and that the employee in question lives and works in that state. (Even if your company was based in a state that generally accepted non-competes, if your employee lived and worked in a state that rejects them – e.g., California or North Dakota – you may have difficulty enforcing the agreement.) Further, I will assume that your attorney's assessment is accurate, i.e., that the non-compete is properly drafted and enforceable.

Although there is a legal theory for "tortious interference with contractual relations," and although the action you are proposing could result in your former employee losing her new job, I do not believe those facts should deter you from taking the action you outline. Even if your actions resulted in a change in the new employer's perception of your former manager, your actions would not be "tortious."

Like non-compete law, the law of tortious interference with contractual relations is dependent upon the common law of the relevant state. Though there are differences in the various states’ approaches to this legal theory, in most jurisdictions, an element of the tort involves some type of “wrongful” conduct. Some times that conduct is described as “malicious,” other times the element is described as “acting improperly,” and in some instances the element is described somewhat circularly as “wrongful” or “tortious.” All of these formulations of the legal theory, however, encompass the notion that there has been some type of inappropriate or improper conduct or motive that caused the interference.

In the context you describe (enforceable non-compete, designed to protect your company's legitimate interests), it is perfectly appropriate for you to notify both your ex-employee and her new employer that she would be in violation of her contractual agreements with your company were she to take a job with your competitor. Your company has the right to do so, and can take this action without undue anxiety of potential litigation. Indeed, if your company failed to take this step, your manager later might argue your company knowingly waived its right to enforce its contract with her. Such inaction could have implications not just for the specific employee who recently left your employment but for your other employees who signed identical restrictive covenants.

If you wish to insulate your company further against the risk of litigation, you may want to have the communication to your former manager and her new employer drafted and sent by counsel. Communications by counsel in anticipation of or in connection with litigation are, at a minimum, qualifiedly privileged. Many of these communications are deemed absolutely privileged. Therefore, by relying on counsel to convey this message, you reduce the already slim likelihood that your manager will ever be able to assert legitimate claims against your firm.

In addition, your manager's new employer may well appreciate being apprised of her contractual breach. Who knows what your former manager stated to the new employer. Perhaps she represented that she had no restrictions on her employment. If so, the new employer may be quite pleased to learn, early in the employment relationship, that it had been deceived.

Moreover, if the company retains her with knowledge of her pre-existing, post-employment restrictive covenants, it may be confronting increased risks of liability it would prefer to avoid. On the other hand, the new employer may be fully cognizant of the non-compete and may have made the determination that it is willing to litigate the issue (or at least attempt to resolve the problem through negotiation) because of its interest in hiring your former manager.

As to the issue of whether your ex-employee ‘could’ sue you, my observation is simple. There is always a risk of litigation when actions taken by a company have an adverse impact upon individuals, whether current or former employees, or members of the public. It is critically important to distinguish, however, between a risk of “litigation” and a risk of “liability.” Here, although your former employee may threaten suit, or possibly even initiate litigation, based on the limited facts you described, your risks of “liability” are not significant.

That does not mean a lawsuit will be cost free. If the matter is litigated, you will incur attorneys' fees and your management team will be distracted by the litigation. But, both the fees and the distraction may well be justified by the important principle at issue in the lawsuit – enforcing your company's legitimate non-competition agreements. This principle may have ramifications far beyond the specific situation of your recently departed manager. For that reason, you may wish to modify your analysis from your defensive posture (do we risk litigation by our former employee?) to a more aggressive stance. Assuming you have a legitimate, enforceable non-compete, and that your employee has joined a competitor where she will be fulfilling the same job responsibilities she performed for your company, you may want to be the plaintiff and bring an action to enforce your contractual rights. Again, such litigation may have benefits that extend well beyond your dispute with your recently departed employee.

Sexual Harassment -- Employment of Minors, Quirky Question # 12

Mon, 10 Dec 2007 09:19:00 GMT

Although I generally believe there are risks associated with relying too heavily on legal advice from friends, here you have been provided useful guidance. Your company policies (whether sexual harassment or any other policies) should be tailored to your company’s workforce. If that workforce is predominantly teenagers, you need to consider that fact when crafting your policies. If your workforce comprises a significant number of individuals for whom English is a second language, you need to tailor your policies to that component of your workforce.

In a very recent federal appellate court decision, EEOC vs. V & J Foods, Inc., No. 07-1009 (7^th Cir. November 7, 2007), the court addressed a number of issues relevant to your inquiry. In the V & J case, a 16-year-old girl was employed by Burger King. She was sexually harassed in a variety of ways by the 35-year-old male manager of the restaurant (propositions, offers to pay her for sex, unwelcome touching, etc.). She made efforts to complain about his conduct, which resulted in her being fired by the store manager on pretextual reasons. She was rehired soon afterwards but the problems persisted. Her mother then attempted to intercede on her behalf by registering complaints with the Assistant Manager of the restaurant. This was promptly reported to the Manager, who fired the employee a second time in response.

The EEOC sued on the employee’s behalf, claiming both hostile work environment sexual harassment and retaliation. Somewhat surprisingly, the District Court granted the employer summary judgment, dismissing the EEOC’s case. The lower court found that the young employee had failed to avail herself of the reporting mechanism provided by the employer and that she could not bring a retaliation claim based on the actions of her mother. The appellate court reversed.

There are at least four important principles addressed in the 7^th Circuit opinion, each relevant to the questions you’ve posed. First, the appellate court stated emphatically that the trial court’s analysis misconstrued the Faragher/Ellerth affirmative defense requirement. That affirmative defense only is available to employers when the employee has not suffered “tangible economic harm.” In this case, the employee was fired (twice). In a context involving actions by a supervisor, resulting in tangible economic harm, there is strict liability.

Second, to the extent the employee was seeking damages corresponding to the time period when she was still employed, the appellate court found that the affirmative defense could apply. The court, however, rejected its application because the sexual harassment policy and its reporting mechanism were not reasonable. While recognizing that an employer “is not required to tailor its complaint procedures to the competence of each individual employee,” the court emphasized that “[k]nowing it has many teenage employees, the company was obligated to suit its procedures to the understanding of the average teenager.” The court found that the “known vulnerability of a protected class has legal significance.” Applying this analysis to the facts of the V & J case, the court found numerous deficiencies with the mechanism set forth in the company’s Employee Handbook with regard to reporting sexual harassment problems.

Third, the court reiterated the well-recognized principle that “[a] policy against harassment that includes no assurance that a harassing supervisor can be bypassed in the complaint process is unreasonable as a matter of law.” V & J’s policy did not create a mechanism that would allow its employees to circumvent the harasser, when that harasser was the store manager.

Fourth, the appellate court rejected the district court’s analysis of the retaliation issue. The appeals court found that the employee’s mother was acting as her agent. The court noted that minors “must act through agents in any legal matter, and their agents are their parents or guardians.” Comparing the mother’s action to that of an attorney acting on a client’s behalf, the court found that the employee’s mother was “opposing a practice” prohibited by law. The manager’s decision to terminate the employee as a result of the mother’s complaints were, therefore, retaliatory.

As you can see, this analysis applies directly to your situation. Given that your company employs “a lot of minors,” you need to be sure that your policies, including your sexual harassment policy, are written in a way they can understand. Ensure that you avoid the problems encountered by V & J. The policy must be clear. It must be easily understood. It must identify the individuals to whom a complaint can be brought if a problem arises. The policy must not compel the employee to report the problem to the harasser himself. If you are sensitive to these common sense steps, you should not encounter problems.

As for complaints by a parent, take them seriously. Recognize that in this context, the parent is acting as an agent for his/her child. You certainly need to avoid any punitive action toward the minor employee based on the parent’s behavior, especially when the parent is trying to alert you to conduct that he/she considers unlawful. If you take punitive action against the employee, you risk a legitimate retaliation lawsuit.

Drug & Alcohol Testing, Employment of Minors, Quirky Question # 13

Mon, 17 Dec 2007 09:23:00 GMT

Good questions. Unfortunately, the answer under Minnesota law is not clear. (Laws of other states may differ.) Your company will need a consent for this testing, but the law is vague as to whether minors can effectively consent to medical procedures.

We recommend a conservative approach. Companies want their drug testing process to be fair and reasonable, to non-minors and minors alike. In addition, companies want to eliminate the prospect that parents will object to such tests after the fact, or insist that they should have been informed in advance. Therefore, we recommend that both the minor and the parent sign the consent form. (This conservative approach is consistent with the 7th Circuit's analysis described in QQ # 12, where the appellate court pointed out that in certain circumstances minors must act through their parents or other legal guardians.)

Of course, this can lead to another, equally important issue. Let’s assume that the parents and the minor both sign the consent form, and the test is conducted. Let’s assume further that the test results demonstrate that the minor has been ingesting drugs. Who gets the test results? The drug testing statute says that the "applicant" gets the results, and it includes a lot of privacy provisions. HIPAA issues may be implicated as well. Consequently, we recommend only providing the results of the test to the minor, unless the minor provides permission in writing to the employer to release the test results to the parents.

An even safer and more proactive approach, that would provide for complete transparency, would be to advise the minor applicant and the co-signing parent, at the time the consent form is executed, that the results only will be shared with the minor, absent a specific, written directive from the minor and parent. Without that written instruction, a parent would be hard pressed to argue that he/she should have been provided with a copy of the test results.

Finally, there is a question in Minnesota regarding whether a consent signed at the outset of employment is effective on an ongoing basis. Minnesota’s drug testing statute has a provision requiring employers to give written notice of the testing policy upon hire or adoption of the policy. See Minn. Stat. § 181.952, Subd. 2. There is a separate provision requiring the employer to give the employee/applicant a form on which to acknowledge that they have seen the policy before requesting a test. Minn. Stat. § 181.953 subd. 6(a). We are not aware of any case law discussing whether one notice can satisfy both of these requirements. Adhering, then, to the generally conservative approach described above, our recommendation is to have minors and their parents sign a separate acknowledgment at the time the minors are asked to take a drug or alcohol test not linked to the hiring process.

Lastly, as the 7^th Circuit’s analysis illustrates (see QQ # 12), your company’s drug and alcohol testing policy will need to be written in a way that minors can understand. (We also recommend that you include a provision in your company’s drug and alcohol testing policy specifically stating that your company reserves the right to impose discipline, up to and including termination, upon someone who refuses to take an appropriate drug or alcohol test.)

Disparaging Comments on Web, Quirky Question # 14

Mon, 24 Dec 2007 14:47:00 GMT

Your questions illustrate how changing technology, and the introduction of that technology into the workplace, generate new and unusual questions for the human resources professional.

First, I recommend that every employer, including your firm, have in place a written policy governing your employees’ use of your computer network and use of the Internet. Three essential provisions of such a policy are: a) your company owns the computer equipment to which your employees are provided access and/or which they are furnished to perform their job responsibilities; b) your employees should have no expectation of privacy in anything they send or receive via the company’s computer systems, and that your company reserves the right and sole discretion to monitor, with or without notice to the employees, everything they send and receive; and c) certain uses are prohibited – e.g. sending anything that is sexually explicit, offensive, or defamatory, or that reveals confidential, proprietary or trade secret information belonging to your company or its customers. Especially with such a policy in place, there should be little risk associated with terminating the employee who disregards these proscriptions.

Second, even if your company does not (yet) have such a policy governing computer use, you have legitimate bases for discharging the employee. Although you have not disclosed the precise comments that were included in the Web-blog, I’ll assume that it was both sexually explicit and offensive. As such, I have little doubt that the statements violate your sexual harassment policy. In my view, the fact that the statements were made on the Web, rather than in the office itself, makes little difference. Indeed, one could make the argument that publicizing the statements on the Web is far worse than making the statements to a few colleagues in the office.

Third, even without the sexual harassment angle, your firm has a sound basis for terminating the employee. Consider how your company would have reacted had the comments been expressed in a company meeting, posted on a company bulletin board, or communicated to a small group of co-workers. The fact that the offending employee chose to use a modern telecommunications medium should not alter the analysis. The comments not only are guaranteed to create an awkward (if not unworkable) situation between the two employees, they also may poison the offending employee’s ability to work with others. Who, for example, will want to work with the employee who posted the comments if they are fearful that he might treat them in the same way? Even if they were not concerned that he will make comparable comments about them, you have the “creep” factor to consider. Will anyone want to work with a co-worker who has posted graphic sexual information about another one of your employees?

Fourth, as for the unwilling subject of the Blog, I would express sympathy for his plight. I also would apprise him of the company’s decision to terminate the offending employee (following an appropriate investigation). You might even take advantage of these circumstances to remind all of your employees of your company’s policy regarding use of your company’s computer systems, explaining that disregard of the policies may result in termination. You also might offer to provide any assistance to the employee in efforts he makes to have the information removed from the Web-blog.

Beyond those steps, however, I would be circumspect about taking other actions, at least not without the input and express approval of the adversely affected employee. For example, if the specific circumstances were addressed publicly within your company, this might simply draw more attention to the information set forth on the Blog and cause your remaining employee further discomfort or embarrassment.

Finally, you have inquired about whether the person about whom the Blog was written might have legal recourse against his co-worker. He may. Many states, including Minnesota, have recognized causes of action for invasion of privacy, which includes the concept of “publication of private facts.” This legal theory is grounded on the notion that certain private information about an individual deserves to remain private. Your employee also may have a claim for defamation, depending on the nature, content and falsity of the statements made. Lastly, your employee may have rights under state telecommunications laws.

I would not recommend that the company become involved in providing advice to this employee on his legal options against his co-worker. If he wishes to pursue that avenue, he can do so with the help and guidance of private counsel.

Disability Discrimination, Quirky Question # 15

Mon, 07 Jan 2008 10:19:00 GMT

Your question implicates both legal and practical issues. From a legal perspective, the answer to your inquiry is “No.” Although the Americans With Disabilities Act (ADA) does include a provision that prohibits an employer from discriminating against someone because of that person’s “association” with a person with a disability, that provision does not extend to the fact pattern you presented.

For example, your company could not refuse to hire the parent of a disabled child because you were concerned the employee was likely to have attendance problems. Such a decision would violate the ADA. Similarly, your company could not refuse to hire the spouse or partner of someone who is HIV-positive because of an irrational fear that the virus could be transmitted to another employee. Again, such a decision would violate the ADA.

Even if we assume for the sake of discussion that “Sleep Apnea” is a disability (perhaps a close question in itself), this means that you could not refuse to hire this person out of a fear that his wife’s condition might interfere with his ability to work. But, under the guidelines promulgated by the Equal Employment Opportunity Commission (EEOC), a reasonable accommodation is something that an employer must provide only when an employee him/herself is “disabled.” There is no obligation to provide an employee an accommodation because that employee is associated with someone else who is disabled. Given that fact, your company has no legal obligation to give this employee any preference in scheduling, allowing him to forego working your “midnight shift.”

Perhaps, however, the analysis should not end there. Even if your company had the right to insist your employee works the final shift, should it? Let’s assume that your company rotates its employees among the three shifts on an equal basis, with each employee working four months annually on the latest shift. How important is it to your company that this particular employee work that shift each year? I recognize that this issue implicates questions which the company is best positioned to assess – how many employees work the late shift; would other employees resent it if this particular employee was not required to work this shift, especially if they understood the circumstances; how difficult would it be to find another employee to work the shift instead; have other employees requested relief from working the night shift; etc. You might discover, however, that you have another employee who prefers working the latest shift and who would gladly exchange shifts with the employee who has requested the accommodation.

Even if that solution did not present itself, there are a few other inquiries you might wish to consider – how would other employees feel if you did not accommodate this employee under these circumstances (e.g., would the decision be perceived as another indication of the company's inflexibility towards its employees); or, is the employee likely to quit if no accommodation is made and, if so, would the company regret its decision (e.g., if the employee was a committed, high performing, loyal employee). Alternatively, what if your employee did not have the financial flexibility to quit and explore alternative employment and, resentfully, worked the third shift. How would you feel (and how would your other employees feel) if there was a tragedy during this period due to the employee's wife’s Sleep Apnea?

If your analysis of these issues would cause the company to feel differently about this issue, there should be some creative solutions to the problem you are confronting. For example, you might want to work with the employee to explore whether there are technological solutions to the problem he is confronting (equipment that awakens someone who is having difficulty breathing). (Coincidentally, in yesterday’s Star Tribune, there is a reprint from the Wall Street Journal, Sunday, entitled “Testing for Sleep Apnea,” January 13, 2008, p. D-6, addressing some of the developments with regard to testing for this medical problem.)

The bottom line is that understanding your company’s legal rights is a critical first step. At times, however, this understanding simply helps you frame other equally important inquiries.

Comments/Questions

Racist Ideas, Quirky Question # 16

Mon, 14 Jan 2008 09:23:00 GMT

Your company has several options when addressing this extremely difficult situation. At one end of the spectrum is the “Do Nothing” option. At the other end of the spectrum is the “Fire the Dimwit” option.

I would strongly recommend against the “Do Nothing” approach. Although the risks of physical violence to members of your workforce may be extremely low, the potential consequences of violent behavior by this individual are extremely serious, especially since the company is on notice of his racist beliefs. On the other hand, I certainly understand that your company may be reluctant to discharge an employee solely because of the organization to which he belongs, no matter how unpalatable the belief system advanced by the organization.

At a minimum, however, the situation should be monitored very carefully. If the employee articulates his hateful beliefs in the workplace, discharge him. If he brings literature into the workplace advocating violence toward minorities, discharge him. If his conduct toward minorities is antagonistic or belligerent, discharge him. In all of these contexts, the company’s discharge position will be easily defended, inasmuch as the employee undoubtedly would be violating your company’s proscriptions against discriminatory conduct and would be creating a hostile and offensive working environment for your employees.

The tougher call is whether you should fire the employee in the absence of any violent conduct (and you stated that he has not exhibited any to date) and in the absence of specific conduct at the worksite that would warrant a discharge (as described above). [I wonder, however, how you know the employee is a member of the White Supremacist organization? Did he share his beliefs with his co-workers? Did he attempt to interest others in the organization? Did he exhibit behaviors in the workplace that led others to question him? If those questions are answered affirmatively, go back to the preceding paragraph for the solution.]

Another factor that may play into your analysis relates to the position your employee holds. Is he a manager? Does he supervise any other employees? Does he have the power to hire and/or fire? If those questions are answered affirmatively, you have a problem that needs to be addressed. At a minimum, your employee would have to be removed from any managerial or supervisory role.

Even if he is not a manager and has no supervisory or hiring/firing authority, does he have to work with other employees? To the extent that the employee must interact regularly with others, if his perspectives and attitudes are well known to his co-workers, allowing him to continue working may be very disruptive. It would be difficult to establish a collegial, professional and productive working environment for a diverse workforce when one member of the group holds views deeply offensive to others. Given that fact, it may be appropriate to terminate the employee even in the absence of specific threatening conduct or workplace proselytizing.

Another reason to consider discharge is that if the company allows the employee to continue working and a tragedy ensues, the company may be at risk. This is the situation in which Lockheed Martin found itself several years ago. In the case of Tanks v. Lockheed Martin, a former Lockheed Martin employee who belonged to a racist organization that advocated violence toward minorities came to work and murdered and wounded several African American and Caucasian co-workers before killing himself. According to the Complaint, there had been numerous incidents over many years that put the company on notice of the employee’s violent proclivities and his racist beliefs, including specific threats of violence toward minority co-workers. The question presented was whether the company could be held liable for this tragic event under various common law theories. The federal District Court rejected the Lockheed Martin’s summary judgment motion, seeking dismissal of the case based on the exclusivity provisions of the Mississippi Workers’ Compensation Act. Although the District Court rejected the company’s arguments, it did certify an interlocutory appeal to the Fifth Circuit Court of Appeals. Somewhat surprisingly, the appellate court reversed, finding that the actions of the murderer fell within the exclusivity provisions of the Workers’ Compensation statute. See, Tanks v. Lockheed Martin Corp., 417 F.3d 456 (5^th Cir. 2005). The resolution of the Tanks case (and other related cases) from that point forward is unclear.

Putting aside the question of whether the applicable workers’ compensation statute may provide the exclusive remedy for violent workplace conduct, the cases involving violence by one employee toward another often turn on the issue of whether the company knew or should have known of the violent propensities of the employee who caused the injuries to a co-worker, or at times, a member of the public. These types of cases implicate issues of negligent hiring, supervision and retention. These issues, however, will be addressed in future Quirky Question analyses.

Supplement to Analysis of QQ # 16

In the last line of the penultimate paragraph in the analysis of Quirky Question # 16 above, I commented that the developments in the Tanks vs. Lockheed Martin Corp. litigation, as well as the related lawsuits, following the Fifth Circuit's 2005 decision (reported at 417 F.3d 456) were "unclear." Not any more.

In a brief, unpublished, per curiam, decision, announced just last week, the Fifth Circuit affirmed the summary judgment dismissal of the claims of all of the other plaintiffs injured by the "deranged employee who went on a violent rampage at work." The appellate court found that the Tanks case was "factually and legally indistinguishable from the case here." Therefore, the court held that the claims of all of the other plaintiffs were "exclusively compensable by state workers' compensation laws." See, Bailey, et al. vs. Lockheed Martin Corp., et al., No. 07-60399 (5th Cir. January 17, 2008). Barring further appeal, this ruling seemingly has brought the litigation to an end.

Protecting the Company's Public Image, Quirky Question # 17

Mon, 21 Jan 2008 12:15:00 GMT

Companies have a legitimate interest in, and right to control, their public image. Companies, therefore, can regulate employees’ attire and appearance. Few would question whether companies have the right to regulate the type of clothing employees wear, so long as the regulation is reasonable and applied uniformly (no pun intended). For example, employers may legitimately require employees to wear shoes, or otherwise regulate footwear (whether for safety or other reasons). Employers may regulate the types of clothing worn by employees (e.g., no shorts, no bathing suits, no tank tops, etc). Employers may require certain uniforms.

Similarly, employers may regulate the types of “facial jewelry” worn by the employees while they are at work, particularly where the piercings are inconsistent with the image the company seeks to project. In my view, your company is within its rights to prohibit facial jewelry and could force an employee to choose between continued employment and this particular form of self-expression.

On the other hand, a thoughtful client of mine once remarked in regard to a male employee with particularly long hair: “It’s not what's on his head, it’s what's in it that matters to me.” Do you want to fire an otherwise high-performing employee simply because he/she has a piercing in her nose or eye-brow? Your call.

A middle ground your company may wish to consider could be the adoption of a more flexible policy, differentiating between the types and number of facial piercings. Of course, the problem with any "flexible" policy is that it requires more thoughtful and even-handed enforcement, with correspondingly more careful training of those who enforce the policy. You do not want to create a situation where differential enforcement leads to claims of discrimination, with the facial piercings policy identified as merely a "pretext" for discriminatory discharge decisions. Similarly, you do not want to create a policy where the exceptions have swallowed the rule.

Interestingly, your fact pattern is similar to a case that arose several years ago (Cloutier vs. CostCo). In that case, the employee claimed that her facial piercings were related to her religious beliefs, albeit with a non-mainstream religion. She claimed that she was member of the “Church of Body Modification.” The federal Court of Appeals for the First Circuit did not buy it, affirming the trial court’s dismissal of the case on summary judgment. The appellate court concluded that CostCo had the right to control its image, which extended to determining the type (and quantity) of permissible facial jewelry.

Would the same result would have ensued if the employee’s appearance or attire were connected with a religious institution somewhat more widely recognized than the “Church of Body Modification?” Another question for another day.

Email Communications with Lawyer, Quirky Question # 18

Mon, 28 Jan 2008 09:08:00 GMT

Like several other Quirky Questions already addressed, your inquiries illustrate further how technological changes are changing the types of questions companies are routinely confronting in the workplace. The fundamental question you pose is whether the communications between your former executive and her private counsel are encompassed by the attorney-client privilege and whether that privilege has been waived by the executive's method of communication. A subset of that question is whether the messages sent from your former executive should be treated any differently from the messages sent by the attorneys to your former executive.

There is surprisingly little case law on this issue. Clearly, the substance of communications between an individual and his or her lawyer are typically encompassed by the attorney-client privilege. Had your former employee sent a letter to her lawyers seeking guidance on issues relating to her discharge, your company would not have been able to obtain that letter in discovery. If your company had inadvertently received that correspondence because it was misaddressed, you would have been obligated to return it unread. Had your former employee orally communicated the content of the emails to her lawyers, again these communications would be privileged.

The attorney-client privilege, however, requires those claiming its benefits to make reasonable efforts to ensure the confidentiality of the communications. Thus, a letter that had multiple "cc" recipients other than the lawyers to whom it was addressed would not be protected by the attorney-client privilege. Similarly, an oral communication made in the presence of others with whom no privilege existed would be undeserving of protection.

Arguably, given that your former employee used your company's email system to communicate with her lawyers, the attorney-client privilege has been waived. This is especially true in light of your company's well-defined (and, I will assume, well publicized) policy, stating that your company reserved the right to monitor all email communications.

There is not much case law on this subject, but there is a relatively recent decision out of New York implicating these same issues. In Scott vs. Beth Israel Medical Center, Inc., No. 602736/04 (New York Supreme Court, New York County; Oct. 17, 2007), the court found that a fired employee who communicated with his private employment law counsel via the company's email system did not have an "expectation of confidentiality," and had waived the attorney-client privilege. As in the fact situation you describe, the employer in the Scott case had an email policy that provided for the possibility of employer monitoring, a fact on which the court relied in reaching its decision. Beth Israel's policy also prohibited the use of the company's email system for personal reasons. According to the court, Beth Israel's e-mail policy states that its e-mail system “should be used for business purposes only,” that documents sent over the system are the property of the medical center, that employees have no personal privacy rights in such material, and that the medical center “reserves the right to access and disclose such material at any time without prior notice.”

The court also rejected the notion that the standard disclaimer language at the end of the emails from the law firm to the executive created an expectation of confidentiality. “When client confidences are at risk, [the law firm’s] pro forma notice at the end of the email is insufficient and not a reasonable precaution to protect its clients.” Thus, the attorney-client privilege was not available for the emails either to or from the law firm.

Interestingly, unlike your situation, in the Scott case, the medical center did not review the emails. In that case, the employer notified the former executive's attorneys that it was in possession of the unread emails and that it believed the attorney-client privilege had been waived. The employee's law firm then raised this issue with the court, which rejected its claims of privilege.

Although the New York case is useful guidance, I urge you to move cautiously. If a court in your jurisdiction did not follow the approach of the Scott court, you would risk disqualifying your law firm if you shared the emails with your lawyers and they read these communications. Depending on the content of the communications, you might expose yourself to other sanctions as well.

I suggest you take the following steps. First, preserve the emails carefully. Second, do not allow anyone else, including your outside counsel, to read (or even, skim) the emails until you obtain judicial guidance. Third, notify your former employee's attorneys that you are in possession of the emails and that you will be seeking a judicial determination on whether the attorney-client privilege was waived by your former employee's use of the company's email system to communicate with his private counsel. Fourth, file a motion seeking guidance from the court on whether the attorney-client privilege has been waived. In that motion, you will be able to point out all of your company's policies demonstrating that there was no expectation of privacy or confidentiality with regard to personal emails sent out over your company's email system. (To the extent that your former executive ever previously articulated a position on the lack of confidentiality associated with your email system, you should be able to exploit that fact.)

By taking these conservative steps, you will maximize your chances of being able to share the email communications with your counsel and use them effectively in the litigation. You also will minimize the risk that a court will find that any improper conduct associated with your review of the communications between your former executive and her counsel.

Starting the Work Day, Quirky Question # 19

Mon, 04 Feb 2008 10:21:00 GMT

Your question cuts across various industries. For example, it’s quite common in the photocopy industry to provide service employees with company-owned vehicles. Similarly, in the construction industry, it is common for certain employees to be issued company-owned vehicles that they may use to travel to a construction site without first stopping at a home office.

Your question raises the issue of what constitutes compensable time prior to the commencement of the work day. Similarly, by extension, the facts you describe also raise a question about whether your employees are compensated for the time they spend driving home from their final customer’s location.

An employer’s approach to this issue (whether it involves the vehicle question you posed or other types of pre- or post-work activities) can have ramifications under the Fair Labor Standards Act (FLSA) and/or parallel state wage and hour laws. Historically, there was relatively little interest in these types of issues by the plaintiffs’ employment bar. That was then, this is now. FLSA and state wage and hour claims now are receiving incredible amounts of attention and are yielding some of the largest settlements and verdicts (many involving eight- and nine-figure sums).

I can certainly understand why your firm has approached this issue as you describe. It seems wasteful to have an employee commute 30 miles to a central office before starting his/her day, only to send that person 25 miles back in the same direction after he/she has “clocked in” at the home office. I don’t doubt that the employee would prefer to drive the 5 miles directly to the customers’ location, rather than spending an hour-plus in the car. Similarly, I am sympathetic to the concerns you articulate regarding the employee’s desire to stop for food or a beverage on the way to the job site, without feeling that he/she is exploiting your company.

Nevertheless, in a recent decision by the Washington Supreme Court, that state’s high court rejected the approach your company has been following. In the case of Stevens vs. Brink’s Home Security Inc., No. 79815-0 (Wash. October 18, 2007), the court ruled that the alarm installation employees who drove directly from their homes in company-provided vehicles were entitled to compensation for their commuting time (both before and after the time spent with customers) pursuant to Washington’s Minimum Wage Act (MWA).

Interestingly, the defendant in the Stevens case offered its employees two options: a) they could drive to the central office and pick up a company vehicle at the start of the day, returning it at the end of the day; or b) they could retain the company vehicle and go directly to the job site from their homes. With respect to the second option, the employees were compensated for drive time in excess of 45 minutes. A class of employees, all of whom had selected the second option, brought the lawsuit, seeking overtime compensation for the time spent driving to the worksite and driving home from the worksite, regardless of the length of the commute.

The Washington Supreme Court affirmed the trial court’s award of summary judgment to the plaintiff class, awarding them damages, pre- and post-judgment interest and attorneys’ fees. Concluding that the time the Brinks’ employees spent driving to and from the first and last job site was compensable, Washington’s high court noted that Brinks “controlled” the use of the company’s vehicles. The court pointed out that the employees were precluded from having passengers in the vehicles and had to obey other company rules regarding vehicle use. The court’s analysis is a bit thin with respect to this aspect of the opinion since the company “rules” were largely routine (wear seat belts, obey traffic laws, park legally, don’t carry alcohol, and lock vehicle). More meaningfully, the court also noted that the employees received directions regarding where to go for their first job via phone and computer messages, and had to plan their route before departing. Moreover, while on route, they might receive instructions from the home office redirecting them to a different location. Based on these facts, the court found that this level of control demonstrated that the time spent by the employees driving to and from work constituted “hours worked” under the Washington minimum wage statute.

For Washington employers, barring distinguishing factors, drive time in a company vehicle (whether going to the first job of the day, or returning home at the end of the day), is compensable and should be included in employers’ calculations when determining employees’ overtime eligibility. For your company, and employers in other states, the Stevens analysis provides some useful insights and guidance. To what extent are your firm and other employers “controlling” the use of the company vehicles? Do the employers prohibit all passengers, or would it be permissible for an employee driving the vehicle to drop a child off at school or a spouse off at work, on the way to a jobsite? Are employees permitted to run errands with the company vehicles, either at the beginning or the end of the day? How do employees learn where they will be assigned to work on a particular day and do they have to engage in any preparatory activities before arriving at the job site? Do employees have contact with the home office on the way to the job site and, are they sometimes told to report elsewhere for work? Depending on how these and similar questions are answered and depending on the similarities between other states’ statutes and the language of Washington’s MWA, your company and other firms may be confronting unanticipated overtime liability.

I recommend that you evaluate your policies and practices carefully in this area and consider whether it would be prudent to alter your approach. Note, too, as referenced above, that there are a number of other contexts where the commencement and end of the official work day has been litigated. Often, these situations implicate the donning and doffing of protective or other types of specialty clothing or equipment. As I’ve stated in other blog analyses, however, these are questions that I’ll reserve for another day.

Reasonable Suspicion of Drug Use, Quirky Question # 20

Mon, 11 Feb 2008 09:40:00 GMT

I am not aware of specific judicial decisions that clearly would support your company's decision. In my view, however, with just one caveat, I believe your company has acted reasonably and should be able to persuade a court of that fact in the event your employee challenges your company's actions.

As you described in your question, based on the newspaper article, you learned that your employee was "arrested for DUI and marijuana possession." Ideally, when your company was made aware of this situation, it should have conducted an independent investigation. Your investigation could have consisted of obtaining the police arrest record or other public information regarding this incident through the City or County Attorney’s Office.

Alternatively, your investigation could have simply involved interviewing the employee to ascertain the relevant factual information directly from him. You could have confirmed the accuracy of the newspaper report, ensuring that your employee actually was arrested for DUI and that drugs were found in the vehicle. If the employee admitted the accuracy of the report and offered no explanation for the situation, you would have received independent confirmation in support of your suspicion.

It is possible, though unlikely, that your employee could have presented additional information to you that both cast doubt on the information in the article and assuaged your concerns. For example, he might have informed you that he is a diabetic and the erratic driving leading to his "DUI" arrest was caused by low blood sugar. (These facts would have been easily verifiable.) Similarly, he might have informed you that although there were drugs in the vehicle, they belonged to his passenger, who admitted they were his. (Again, these facts would have been verifiable.) If these facts had been uncovered and confirmed, you may not have elected to require the employee to engage in the random drug test. In short, it usually is advisable to conduct a prompt investigation of your own into the issues that caused your firm concerns, or aroused your suspicions, whatever the underlying issues might have been.

Let's assume for this discussion, however, that no investigation was conducted. Even without an investigation, your employee's destruction of the urine sample is corroborative of the fact that there was prior wrongful conduct. Indeed, your employee's behavior following the company's request that he take the drug test (which the testing company advised you is equivalent to a positive test) provides ample justification for treating his conduct as a "first positive" under your policy.

You also have asked whether your firm is justified in relying on a newspaper article. Although as noted above, I would recommend that your firm conduct its own investigation regardless of the source of your concerns (e.g., a newspaper, an employee's report, an anonymous tip on your company's hotline, your own observations, etc.), a newspaper report may provide you a legitimate basis for having “reasonable suspicion” of wrongful conduct, with resulting disciplinary action. This issue is particularly timely here in the Twin Cities, where a group of students at a local high school recently included pictures of their underage drinking escapades on their Facebook pages. The school disciplined the students based on the pictures they had displayed on Facebook. While the school's actions have precipitated some protests from the students themselves, their parents, and a few of their fellow students, the school's disciplinary decision seems to have been well grounded.

Another way of evaluating the appropriateness of your company's conduct is to consider how an alternative hypothetical scenario might have played out. For example, if your company took no action in response to the newspaper report and did not require a drug test, presumably the employee would have continued working without interruption. Imagine that the employee caused an accident at your facility due to impairment relating to alcohol or drug use. If another employee or a member of the public were injured in this accident and sued the company for negligence, it would be difficult to explain the company's complete inaction after seeing the newspaper story.

In short, as with many aspects of employment law, once the company is on notice of problematic behavior (e.g., drug use, sexual harassment, potential workplace violence, etc.), it needs to act. The fact that the source of this knowledge might be a newspaper – here, the report of an arrest – does not alter this equation. (Keep in mind, however, that regardless of the source, all allegations are not true. That observation is easily illustrated by reference to just two words, even in the context of an “arrest” – “Duke Lacrosse.” Hence the need for your own, objective investigation.)

Medical Marijuana Use In the Workplace, Quirky Question # 21 (California Issue)

Wed, 13 Feb 2008 09:49:00 GMT

[As promised, today marks the introduction of our West Coast Quirky Question analyses. On the first Wednesday of each month, we will post a question pertaining to issues arising in California, Washington or Alaska. Our firm's attorneys in our two California offices, located in Irvine and Palo Alto, or our Seattle or Anchorage offices will share their insights in response to the questions.

Today's analysis is provided by Karen Wentzel. Karen, who practices in our Palo Alto office, is a Stanford Law School grad, who has been practicing employment law for more than 20 years. Karen's biography can be found at www.dorsey.com. Her email address is: wentzel.karen@dorsey.com. If you have any particularly unusual questions pertaining to California law, you can send them either to me or to Karen.

We hope you enjoy this new, monthly feature of our Blog. Regards, Roy]

Karen's Analysis is set forth below:

I suspect that those of you whose companies are located in, or do business in, California, recognize that these facts are drawn not from a client inquiry but instead from a very recent case from the California Supreme Court. In that case, Ross v. Ragingwire Telecommunications, Inc. (Cal. No. S138130, January 24, 2008), the state's high court affirmed a bright line test that employers need not accommodate the use of illegal drugs.

The employee in the Ross case argued that his employer had to accommodate a person using marijuana under a doctor’s care based on a 1996 initiative passed by California voters called the Compassionate Use Act. Federal law prohibits the possession of marijuana, even by medical users. But the Compassionate Use Act gives a person in California who uses marijuana for medical purposes on a physician’s recommendation a defense to certain state criminal charges involving the drug. Mr. Ross argued that this meant his potential employer could not refuse to hire him based on the results of his pre-employment drug test.

The California Supreme Court disagreed. The Compassionate Use Act, the court said, does not address the rights and duties of employers and employees. And, the California Fair Employment and Housing Act (which prohibits discrimination on the basis of a disability as well as other protected categories) permits an employer to condition an offer of employment on the results of a medical examination, and to deny employment to applicants who test positive for illegal drugs. Therefore, there was no basis for Mr. Ross’ claim of disability discrimination.

The ruling is important to employers for several reasons. The opinion affirms that an employer may condition an offer of employment on the results of a medical exam. Medical exams may be required by an employer after an offer of employment is made but before the employee begins work to ensure that the applicant can perform the essential functions of the job. This means that the medical exam must be job related. But the court said that the employer had a legitimate interest in avoiding well-documented problems associated with the abuse of drugs and alcohol by employees – increased absenteeism, diminished productivity, greater health costs, increased safety problems and potential liability to third parties, and more frequent turnover. This was true even though Mr. Ross would not have had responsibilities for driving a company vehicle or operating potentially dangerous machinery.

Notwithstanding this decision, as is always the case, if an employer is going to require conditional medical exams and reject applicants who test positive for illegal drug use, it is important to apply the rule fairly and across the board. Treating applicants differently without a legitimate and well-articulated business reason for doing so can lead to claims of differential treatment and discrimination. In addition, the tests should be administered to preserve the applicant’s right to privacy under the California Constitution. Finally, remember that the Ross case involved the current use of an illegal drug. A past addiction or alcoholism may be a covered disability that cannot be the basis for an adverse employment action and may require a reasonable accommodation (e.g., a modified schedule to allow the employee to attend Alcoholic Anonymous meetings).

Unfortunately, even though Ross was an opinion of the California Supreme Court, the issue of accommodating medical marijuana use in the workplace is not necessarily settled. The dissent argued that the result was anything but compassionate and will unfairly force employees to choose between medical treatment for serious illnesses and unemployment, or continuing employment and chronic pain. At least one state legislator has said he plans to introduce legislation to protect medical marijuana users’ right to employment. Stay tuned.

Age Discrimination and the OWBPA, Quirky Question # 22

Mon, 18 Feb 2008 17:13:00 GMT

Your question is one of the more technical employment law questions that have been posted thus far in our Quirky Questions Blog. (For the non-technicians among you, you'll have to bear with us this week.) Your question also illustrates how tricky it can be to determine the appropriate "decisional unit" under the OWBPA.

The EEOC's interpretive regulations define the decisional unit as "that portion of the employer's organization from which the employer chose the persons who would be offered consideration for the signing of a waiver and those who would not be offered consideration for the signing of a waiver." 29 C.F.R. § 1625.22(f)(3) (B). The EEOC uses the term "decisional unit" to "reflect the process by which an employer chose certain employees for a [termination or exit incentive] program and ruled out others from that program." Id.

Determining the appropriate "decisional unit" is highly fact intensive and there is no "safe harbor" under the regulations. If an employer defines the decisional unit too narrowly or too broadly, it might be accused of trying to hide its discriminatory motives. In Kruchowski v. Weyerhaeuser Co., 446 F.3d 1090 (10th Cir. 2006), for example, the federal appellate court invalidated a release because the employer misidentified the affected decisional unit. In its OWBPA disclosures, the employer defined the decisional unit as "all salaried employees" employed at a specific mill. In discovery, the employer clarified that the decisional unit actually consisted of "those salaried employees reporting to the Mill manager." The court found that 15 employees were included in the disclosures but were never considered for termination. Although the employer tried to characterize its discovery response as a "slight clarification" of its OWBPA disclosures, the court invalidated the release.

Where an employer closes an entire plant or facility, as your company has done, it is possible that the proper decisional unit is broader than just the affected plant or facility. Unfortunately, there is no “one size fits all” answer in these situations; rather, determining the appropriate decisional unit depends on how you arrived at the decision to close the affected facility.

In Griffin v. Kraft General Foods, Inc., 62 F.3d 368 (11th Cir. 1995), a class of plaintiffs challenged the release used in connection with a plant closing, arguing that the employer should have provided information – i.e., ages and job titles – of individuals employed at other plants if the company "considered for closure several plants producing similar products" and if "employees at other plants may assume some of the functions of the closed plant." The court remanded the case to the trial court for additional fact finding regarding the company's plant closure decision. Under Griffin, it appears that employers may have to provide information beyond a closed facility if, for example, a certain production line or function will be transferred to another facility, or if the employer evaluated several facilities before deciding which one to close. If, however, a plant was closed because, for example, it produced a product line which the company decided to discontinue, and no serious consideration was given to closing another plant, the proper decisional unit would be the affected facility only.

Despite the reasoning of Griffin, a recent case from the District of Minnesota, Pagliolo v. Guidant Corp., 483 F. Supp. 2d 847 (D. Minn. 2007), suggests that Minnesota employers should proceed cautiously before identifying a decisional unit that is broader than a single facility. In Pagliolo, the company implemented a reduction in force affecting employees at six separate Guidant-owned corporations, who worked in nine of the company’s 84 facilities in the United States. The company identified the decisional unit as all United States-based employees, arguing that every department in each one of its United States-based businesses was required to examine whether staff reductions could be made. In this case, the District of Minnesota found the decisional unit of all United States-based employees to be too broad. The court particularly took issue with the fact that terminations were made in six separate corporations and multiple facilities, and found that a terminated employee would not be able to draw meaningful information from disclosures that lumped together employees from different facilities and corporations. The decision goes on to express doubt that a decisional unit could ever be larger than a single facility.

In light of Guidant, we recommend that Minnesota employers carefully scrutinize their decision-making process before identifying a decisional unit broader than a single facility. That said, the EEOC’s regulations make clear that decisional units must be defined “on a case-by-case basis,” and that, to do so, an employer must examine “its organizational structure and decision-making process.” 29 C.F.R. § 1625.22(f)(3)(B). Further, the regulations expressly recognize that a decisional unit may comprise more than one facility. Id. § 1625.22(f)(3)(E). In light of this regulatory guidance, we do not recommend that employers adopt a bright-line rule that decisional units could never be broader than a single facility. If your company seriously considered making reductions in more than one facility, and/or evaluated the operations of several facilities before deciding which one to close, the decisional unit may be broader than a single facility.

When drafting OWBPA disclosures, be sure to examine your termination decisions carefully. Ensure that you do not define the "decisional unit" either too broadly or too narrowly. Given the high stakes involved (the invalidation of releases of ADEA claims, often for significant numbers of potential plaintiffs), plaintiffs' counsel may scrutinize OWBPA disclosures in the hopes of finding some deficiency in how the company defined the decisional unit. They will have an incentive to do so as long as courts continue to invalidate releases on (sometimes) very technical grounds.

Age Discrimination, Volunteering for RIFS, Quirky Question # 23

Mon, 25 Feb 2008 14:23:00 GMT

Yep. I have at least seven concerns with the approach you have outlined. First, I question whether your approach makes economic sense. In your question, you stated that at least some of your RIFs have been motivated by "economic downturns." Given that fact, how can you justify paying substantial severance compensation to individuals who "volunteer" to resign? I presume you have done the economic calculations, but you should examine carefully whether your company really is saving money if it allows individuals to receive substantial compensation “for which they would not be eligible if they simply retired.”

Second, as a corollary to the point above, keep in mind that if one or more of your employees challenged their terminations on the ground that they were discriminatory, you would need to demonstrate that in fact, the RIFs were justified by the financial savings and were not simply a "pretext" for getting rid of certain protected class employees. If your firm cannot demonstrate that there were true economic benefits flowing from the RIFs, you may have difficulty justifying the “economically-driven” layoffs.

Third, in your question, you stated that the employees who volunteered for the RIFs became eligible for benefits that they would not otherwise receive if they simply retired. I wonder whether your company's approach will affect normal retirement patterns. If your employees know that your company is likely to engage in RIFs "periodically" and that they can "volunteer" to participate, with the potential for receiving substantial additional financial benefits, they may postpone retirements that otherwise would benefit your company.

Fourth, deferred retirements can have several negative effects. Employees who otherwise are psychologically ready for retirement may continue to work longer than they otherwise would have, perhaps coasting along until the next RIF announcement. Such an approach can result in diminished quantity and quality of the work performed. Further, opportunities for less senior employees to move up in your organization and assume the positions these individuals normally would be vacating may be diminished. These employees may wait until opportunities become available, or they may simply elect to pursue alternative opportunities elsewhere.

Fifth, allowing employees to "volunteer" for layoff may undermine your carefully constructed RIF selection process. As you point out, your company utilizes a 10-criteria system designed to ensure your firm retains its most talented and capable employees. By allowing certain employees to volunteer for layoffs (in exchange for substantial financial benefits), you may be saying "Goodbye" to employees you would most want to retain. Some of your senior, long-term, employees may be your most knowledgeable, most dependable workers. Do you really want to create an incentive for them to leave? Similarly, some of your most talented, severance-eligible, employees may feel that they can easily obtain suitable alternative employment with your competition. Do you want to create a financial incentive for those individuals to depart and work for your competitors?

Sixth, just as you are creating a financial incentive that may result in talented individuals volunteering for lay off, you also are creating a system that may result in the retention of less talented employees who would otherwise have been selected through your RIF evaluation process. Assume, for example, you were eliminating twenty percent of your workforce in the RIF. Assume further that the two top performers in a group of ten were individuals who were eligible for the severance package. In other circumstances, they may continue working for another five to ten years and the two employees who would laid off were be the employees who ranked ninth and tenth on your RIF criteria. Because the top two “volunteered” for layoff, however, the two poorest performers would retain their positions. Although this might spare the managers of this group some short-term discomfort, in the long run they likely will regret the fact that the two weakest performers are still employed, and continue to generate an average (or poor) work product. At some point, your company will have to address these performance deficiencies. Even worse, the fact that these two employees were not selected in the RIF process may be used as evidence by their counsel that they were performing satisfactorily in any discharge claims they later asserted.

Finally, unless you document very carefully who "volunteered" to be included in the RIF, you may be skewing significantly the statistics of those "selected" for layoff as well as the application of your RIF selection criteria. Particularly with respect to age discrimination claims, this can create standard deviations dramatically higher than would exist in the absence of the “voluntary” layoffs. You need to ensure that your company's well-intentioned and generous approach does not create potential liability in connection with the claims of those who did not want to be included in the RIFs.

Superficial Responses to Charges of Discrimination, Quirky Question # 24

Mon, 03 Mar 2008 09:29:00 GMT

I do have concerns that the "superficial response" approach you've outlined will exacerbate the problems you identified. Even worse, your approach is likely to cost your company more money in the long run. In my experience, the failure to invest appropriate time and energy into an investigation of a discrimination claim and to present persuasively the information you collect is a major mistake.

First, there are different perspectives on claims of discrimination. Some view them as baseless whining by disgruntled employees. Others (more enlightened in my view) see the claims as analogous to the canaries in the mines, alerting your company to potentially serious problems that need to be addressed thoughtfully. At a minimum (as I've suggested in other Blog responses), you need to conduct an investigation to find out whether your company has a problem. Your investigation may reveal a hypersensitive, idiosyncratic reaction by an employee that is largely meritless. Or, you may discover that your company has a manager who is unnecessarily exposing your firm to potentially significant liability because of attitudes and actions wholly inconsistent with your company's well-articulated philosophies.

Second, regardless of which outcome is revealed by your investigation, a thoughtful response to a state or federal agency will benefit your company. For example, if the investigation demonstrates a complete lack of merit to the complaint, you want to tell that story to the agency involved. You not only should be able to persuade the agency to dispense with this claim, you may generally enhance the reputation of your company with the agency involved, a benefit that may assist your company on a closer claim in the future. Alternatively, if your investigation reveals that wrongful conduct occurred and that there is merit to the Charge, you can invest your energy on working cooperatively with the EEOC or the state agency to resolve the issue promptly. This approach has three primary potential benefits. Your firm's reputation with the agency will be improved, again something that may redound to your benefit in a closer case in the future. Further, and perhaps more importantly, you will be able to take proactive steps to prevent similar problems from arising in the future. Perhaps the offending manager needs more training; perhaps he should be discharged. Either way, the complaint will have alerted you to the problem and enabled your company to address it. The third benefit is that your investigation should equip with you with the information you need to resolve the specific complaint involved, before it escalates into full-fledged litigation, with its attendant adverse publicity and risks of a substantial adverse judgment.

Third, my concern with the "superficial" approach you mentioned is that you will not know which of the two situations described in the preceding paragraph you are confronting. Is the Charge utter BS? Or, is it legitimate? If you treat both situations uniformly, neither your company nor the investigating agency will know. By the time your company determines which situation you are dealing with, you will have expended significant sums. Indeed, it is likely that your "superficial" response will have led to far more inquisitive questions in the "Request for Information" submitted by the agency in response to your submission.

Fourth, in the paragraphs above, I've posited the weak plaintiff's case/strong plaintiff's case alternative. As we all know, however, there are many cases that fall between these extremes. If you fail to examine these claims carefully and submit a superficial response to the investigating agency, you may well commit your company to a position that you would not have elected to take had a more comprehensive investigation been conducted. In other words, you will have handed the plaintiff a compelling argument that the reason you have advanced for the adverse action (whether a discharge or some other behavior) is a "pretext" or cover-up for the real reason for your action – discrimination.

Fifth, as a corollary to the preceding point, you do not want your response to the EEOC or state agency to constitute a document from which your company will be running for the duration of the dispute, whether at the agency level or in court. You do not want to put your managers in the position of having to explain at their depositions that the reasons set forth in the company's submission to the federal or state agency were not the "real" reasons the company took the actions for which it is being criticized. These credibility-killing explanations may end up costing your company far more than it ever would have expended conducting a careful, deliberate investigation of the Charge of Discrimination and communicating the evidence you adduced during your investigation to the EEOC.

Finally, I recommend taking the long-term view, rather than focusing specifically on a given charge of discrimination. Demonstrate to the investigating agency that your company takes these issues seriously and is trying diligently to address problems of discrimination in an effective manner. Don't give the agency reason to doubt the sincerity of your response you submit or, more seriously, your company's commitment to principles of equal employment opportunity. This will only pique the agency's interest in scrutinizing your company's conduct, possibly leading to far more serious problems in the future.

As the above analysis illustrates, I believe strongly in conducting a careful, thoughtful investigation into a Charge of Discrimination. Interview the individuals with knowledge. Examine the relevant documentary evidence. Pin down the facts. Then, spend the time to organize and present this information to the investigating agency as persuasively as you can. Put the evidence in the broader context of the consistent efforts made by your company to support tenets of equal employment opportunity.

In short, the Charge-Response is not the place where your firm should be trying to save a few bucks. As described above, the money "saved" by your company by this approach likely will be consumed (and then some) by the potential problems this approach creates. At the same time, you risk damaging the reputation of your firm within important federal and state agencies.

Coincidentally, just this past week, the EEOC announced its 2007 statistics regarding the number of Charges filed. The EEOC reported that there were 82,792 Charges of Discrimination, approximately a ten percent increase over 2006. The most common claims were race discrimination (37% of the Charges), retaliation (32%) and sex discrimination (30%). These numbers illustrate that positive interaction with the EEOC, or parallel state agencies (whose statistics are not reflected in the EEOC data) regarding Charges of Discrimination, remains critically important for corporate America. [Note that a link to the EEOC's Website is included under "Resources" on the left side of this page.]

Responsibility for Employee Injury, Quirky Question # 25 (West Coast Questions)

Wed, 05 Mar 2008 09:10:00 GMT

[Today marks our second QQ contribution from our West Coast colleagues. The analysis below is provided by Sarah Jung Evans, an Associate in our Seattle office. Sarah, who is licensed to practice both in California and Washington, is a 2000 graduate of Northwestern University and a 2003 graduate of UCLA Law School. After spending several years in government, handling EEOC charges, NLRB work, investigations, and other employment issues for the Department of Veterans Affairs, Sarah joined Dorsey in 2005. We're very happy she did. Sarah's analysis is set forth below.]

Quirky Question # 25

Not so fast.

Federal law and comparable statutes in 43 of the states share the language first used in the “British Compensation Act formula for determining what is a compensable workers’ compensation injury: an injury ‘arising out of and in the course of employment.’” Washington, however, has no requirement that an injury “arise out of” employment, only that the worker was within “the course of employment” when injured.

As the Washington Supreme Court in Ball-Foster Glass Container Company v. Giovanelli ruled on February 21, 2008, the case from which these facts arise, “[t]he language of the statute shows the intent of the Washington Legislature to adopt a broader and more comprehensive statute than other states.”

In line with that philosophy, the Giovanelli court held that the employee’s injury was covered by workers’ compensation pursuant to the “traveling employee doctrine.” This doctrine is also known as the “commercial traveler rule,” or the “continuous coverage rule” in other jurisdictions.

First, the Court determined that Mr. Giovanelli was in fact a ‘traveling employee’ because he was “one whose job requires travel from place to place or to a place from a permanent residence or the employee’s place of business.” As the court observed, Mr. Giovanelli’s “job assignment to Seattle required him to travel to a place away from his permanent residence.” The Court noted that the employer recognized this fact by reimbursing Mr. Giovanelli not only for his travel expenses, but for the journey to and from Seattle, and provided him a per diem during his entire stay in Seattle, including his days off.

It is well established in Washington and other jurisdictions (e.g., Utah, New Mexico, Oregon, Georgia and Texas) that traveling employees are generally considered to be in the course of employment continuously during the entire trip, except during a distinct departure on a personal errand. “The rationale for this extended coverage is that when travel is an essential part of employment, the risks associated with the necessity of eating, sleeping, and ministering to personal needs away from home are an incident of the employment even though the employee is not actually working at the time of injury.” Citing to another Washington case, the Court articulated the general rule as: “When employees are required by their employers to travel to distant jobsites, courts generally hold that they are within the course of their employment throughout the trip, unless they are pursuing a distinctly personal activity.” The Giovanelli court went further, holding that “…traveling employees are entitled to expanded coverage for travel-related injuries.”

The second issue was whether Mr. Giovanelli’s walk across the street in front of his hotel to a nearby park was a distinctly personal activity. The Court said the test of whether a worker has “left the course of employment” was “whether the employee was pursuing normal creature comforts and reasonably comprehended necessities or strictly personal amusement ventures.” Under the “‘personal comfort doctrine,’ a worker who engages in acts that minister to personal comfort does not thereby leave the course of employment unless the extent of the deviation is so substantial that an intent to abandon the job temporarily may be inferred or the method chosen is so unusual and unreasonable that the act cannot be considered incidental to the course of employment.” The doctrine applies to such acts as eating, resting, drinking, going to the bathroom, smoking and seeking fresh air, coolness or warmth.

Under Washington's broader statute, the Court held that “[a] traveling employee is entitled to broader coverage [under the personal comfort doctrine] than a nontraveling employee … The nontraveling employee may satisfy his personal needs without leaving the comfort of home.” Accordingly, the Court held that “[i]n taking a Sunday stroll to the park on his single day off, Giovanelli did not ‘distinctly depart’ from the course of employment on a ‘personal errand.’ Neither the nature of his activity nor the manner in which he engaged in it was unreasonable or unusual. The risk of getting injured while crossing the street in front of his hotel during a walk to the park was a risk of his employment. Accordingly, he is entitled to compensation.” As the Supreme Court succinctly stated, “But for [Mr. Giovanelli's] need to lodge away from home during his job assignment, he would not have been there [crossing the street].”

This expansion of workers’ compensation insurance coverage for traveling employees may increase insurance premiums for companies like Ball-Foster Glass, but the Washington Supreme Court left that issue to the Legislature. It will be interesting to see if other jurisdictions follow Washington’s lead.

Background Checks, Quirky Question # 26

Mon, 10 Mar 2008 09:35:00 GMT

I'd answer your question with one of my own: What's your tolerance for risk?

A few other questions flow from my first inquiry. Would you be putting any members of the public at risk if you hired this applicant and he did not turn out to be the person you expected? For example, will he be operating dangerous machinery? Or, alternatively, will he, in his role as your employee, have unsupervised contact with the public? Yet a third example – will he have access to your customers' financial data or manage any customer funds? As these questions are intended to demonstrate, there are many different types of jobs that potentially expose the public, and correspondingly, your company, to risk.

Putting aside for a moment the public interest, a corollary inquiry is whether you would be putting the company at risk if he engaged in any wrongful conduct? For example, will the employee have access to corporate funds? Will he be a spokesperson for the company? Will he have independent authority to enter into contractual agreements that legally bind the company? Will he be entrusted with serving any of the company's critical accounts? Again, I ask these questions to illustrate that there are a variety of different types of positions where non-performance (or worse, misfeasance) could jeopardize important corporate interests.

Lastly, thinking solely of your selfish interests, what would be the ramifications for you personally of a problematic hiring decision? Would your job be at risk if it turned out that he was not the person he represented on his resume? Would your job be at risk if he injured a member of the public, or a co-worker? Would your job be on the line if he damaged an important customer relationship?

If your answers to any of these questions increase your anxiety, I'd suggest you rely on your intuition, hold off on this hiring decision, and wait until you are able to get additional information. Worst case scenario – you lose a talented applicant whose resume checks out and a position that has been open for some time (admittedly longer than you would like) remains unfilled. Best case scenario – your company avoids a disaster.

The legal theory that you need to be attuned to is a claim for negligent hiring. The basic notion behind this theory is that companies are obligated to exercise an appropriate standard of care when making hiring decisions. The appropriate standard will depend on the nature of the position and the risks the individual poses to members of the public or co-employees. To use a fanciful example, if you were hiring a person with the responsibility for guarding weapons-grade uranium, your due diligence better be damn thorough. Conversely, if you are hiring someone to cut the lawn in front of your company headquarters, perhaps your background checks could be a bit less rigorous.

The seminal Minnesota case on this subject, Ponticas vs. K.M.S. Investments, 331 N.W.2d 907 (Minn. 1983), was decided 25 years ago. The fact pattern of Ponticas was troubling. A company was hiring someone for the job of resident manager for an apartment complex. The person hired for that job would receive a master key for approximately 200 apartments. The company hired someone without making any effort to check the references he listed on his resume. As it turned out, the references he listed were family members (mother and sister). In addition, the company making the hiring decision failed to explore the multi-year "gaps" in the applicant's employment. As it turned out, the gaps reflected time the applicant spent in prison.

Without any of this information, the company hired Dennis Grafice, a 25-year old with a troubled past, including sporadic employment, criminal convictions for multiple offenses, and incarceration. Not long after he had been hired, Grafice used the master key he had been given to access a tenant's apartment and sexually assaulted a woman whose husband was out of town on business. She sued the company on the ground that it had been negligent in hiring this individual. The Minnesota Supreme Court accepted the plaintiff's legal theory, stating “an employer has a duty to exercise reasonable care in view of all the circumstances in hiring individuals who, because of their employment, may pose a threat of injury to members of the public.” The court emphasized that companies needed to perform “reasonable investigations” into an applicant's background, a concept that took into consideration the nature of the position and the risk to the public.

Although negligent hiring cases decided since Ponticas, whether in Minnesota or other jurisdictions, often have involved hiring decisions that have placed dangerous individuals in contact with the public, these are not the only contexts where this legal theory has been accepted. For example, one case involved a hospital’s retention of an individual to coordinate a kidney transplant unit. This individual, who could not read medical charts, was unaware that one of the kidneys implanted in a patient was cancerous, ultimately leading to the death of the recipient. Another case involved an individual who kept loaded weapons at a Boy Scout camp, one of which was fired and accidentally struck a child. Other cases involve situations involving ex-felons who were entrusted with customer funds, only to later embezzle those monies. Moreover, we now live in a time when technological advancements can exacerbate risks, as the $7 Billion loss at the French Bank, Societe Generale, in January 2008, all attributable to the deception of one rogue trader, dramatically illustrates.

So, trust your intuition. Speak with the references the applicant has listed on his resume. Find out their relationship to the applicant. Determine what the applicant was doing during the "gaps" on his resume. Maybe there is an innocent explanation for these breaks in his employment history – perhaps he was a very happy and successful stay-at-home dad. You need to find out whether the explanation is innocent or something else. Until then, don't make the offer. There will always be another qualified candidate for the position you are trying to fill.

Comments/Questions

Unauthorized Job References, Quirky Question # 27

Mon, 24 Mar 2008 09:40:00 GMT

I hate to add to your anxieties, but unfortunately, your concerns are justified. There is a reason that many companies provide only “name, rank and serial number” when asked about former employees. Typically, this limited disclosure is designed to avoid the risks associated with providing negative or damaging information about a former employee. Here, your question poses the unusual (dare I say, “Quirky”) opposite situation – the risks associated with providing positive information about a former employee, who, at least from your account, does not deserve the enthusiastic endorsement.

I am aware of two cases that are analogous to the situation you described, both of which involved rather grim facts. In one case, a teacher was dismissed by a school board for inappropriate sexual contact with a student. Notwithstanding the reason for the dismissal, the teacher sought and obtained a positive letter of recommendation from one of his former colleagues. The recommendation omitted any explanation of why the teacher was fired. He then obtained another teaching position in a different school district where he again engaged in inappropriate sexual conduct with a student. The student and her family sued the first employer, pointing out that but for the erroneous information contained in the letter of recommendation, the teacher never would have been hired by the second school district and the sexual assault would not have occurred. The court refused to dismiss this “negligent reference” theory.

In a similar case, an employer fired an employee for various unpredictable behavioral problems, including bringing a firearm to work. Following his discharge, the employee sought and obtained a glowing reference letter from the employer who had fired him. He obtained a new job, and not long thereafter, not only brought a firearm to his new place of employment but shot and killed a co-worker. The decedent’s estate sued the first employer in connection with the “negligent” reference letter. Again, the court refused to dismiss the case in response to defendant’s motion, meaning that barring settlement, the case would proceed to trial.

These cases stand for a simple proposition which understandably appears to be at the root of your anxieties regarding this situation – employers cannot disseminate inaccurate, positive information about a former employee. While there is no affirmative obligation to disclose any information about a former employee, once an employer undertakes to disclose some information in a reference letter, that information should be accurate. As in any negligence context, it is “foreseeable” that when making a hiring decision, a prospective employer will rely, at least in part, on the information the former employer provides.

Your situation does not involve the physical violence associated with the two cases described above, but the absence of that factor does not provide me much solace. For example, let’s assume that your intuition regarding your ex-employee’s dishonesty is accurate. Let’s assume further that he embezzles substantial sums from his new employer or customers or vendors of his new employer. While I have not seen the “quite enthusiastic” reference letter you describe in your question, it would not be a stretch for the financially injured party to argue that but for the reference letter, your former employee would not have been hired and would not have caused the financial harm attributable to his conduct.

Clearly, there are other factors that bear upon this hypothetical situation. For example, what other reference checking did the subsequent employer engage in? What information did the second employer obtain about your former employee? What conduct did he engage in? What financial controls existed at the second company that should have detected the embezzlement? Were others complicit in this activity?

These, and numerous other inquiries, would affect any ultimate liability determination. As your question recognizes, however, these are issues about which you and your company should not have to worry. Your firm needs to establish clear policies regarding how reference letters are handled: who has the authority to draft them; who will review the letters that have been drafted; what will the consequences be if these directives are ignored. I recommend that you adopt and publicize such policies promptly.

In the meantime, keep your fingers crossed that your former employee was just incompetent rather than dishonest, and that his performance improves at his new employer. The longer he works at his subsequent employer without incident or problem, the lower the likelihood of any risk to your firm resulting from the reference letter. (Incidentally, I doubt that a subsequent employer would have a legitimate complaint about a subjective, overly enthusiastic reference letter regarding an honest former employee who was just not very skilled.)

Donning and Doffing, Quirky Question # 28

Mon, 31 Mar 2008 10:17:00 GMT

[When I get a question like yours, I walk down the hall to see my partner, Jim Kremer. Jim, a 1987 graduate of Moorhead State University and a 1990 graduate of Georgetown University Law Center, is an expert on these issues. Jim's resume can be viewed at www.dorsey.com and he can be reached by email at kremer.james@dorsey.com. Since Jim is far more knowledgeable than I regarding these kinds of issues, I asked Jim to address your question. Jim's analysis is set forth below.]

Jim's Analysis of QQ # 28:

As you undoubtedly know, “wage and hour” claims are all the rage (or, from the employer’s perspective, the scourge) these days. Their appeal to plaintiffs’ counsel is understandable. Seemingly innocent or innocuous pay practices, if found to run afoul of the Fair Labor Standards Act (FLSA) or state wage laws, can lead to enormous liability in collective or class actions. Among the issues receiving increased attention is whether employees must be paid for time spent donning and doffing clothing and other gear they are required to wear.

Decades have passed since Congress enacted the Portal-to-Portal Act (excluding certain walking/travel time and activities that are “preliminary or postliminary” to an employee’s “principal [work] activity” from the scope of compensable time). The Supreme Court first addressed a donning/doffing question in its 1956 decision of Steiner v. Mitchell, 350 U.S. 247 (holding that changing clothes and showering were “an integral and indispensable part of the principal activities” of employees of a battery plant, and thus not excluded from compensable time under the Portal-to-Portal Act).

Following Steiner, many courts have wrestled with the question of whether donning and doffing activities must be compensated. The disposition generally turned on:

a) the nature of the gear worn by the employees – whether it was non-unique and relatively simple (such as hardhats, safety glasses, earplugs, smocks and hairnets) or more cumbersome and elaborate safety gear (such as chain mail or other protective equipment worn by employees performing knife work in meat and poultry processing plants);

b) the amount of time and effort required of employees to don and doff the gear in question; and

c) whether use of the gear was optional or mandated by the employer.

Courts generally concluded that the typically nominal time it took an employee to don and doff non-unique gear was either not “work” or did not have to be paid because of the de minimis amount of time involved. Although the courts have not reached accord as to what constitutes a de minimis amount of time, usually less than 10 minutes per day has been characterized as de minimis. In contrast, the more extended time and effort required to don and doff more unique and cumbersome protective gear has generally led to the conclusion that the time expended is compensable.

The donning and doffing landscape changed with a November 2005 Supreme Court decision in the consolidated cases of IBP v. Alvarez and Tum v. Barber Foods, 546 U.S. 21 (2005). Both cases involved claims by employees of meat processing plants for compensation for the time they spent obtaining and donning protective and sanitary gear, walking to their work stations after putting on the gear, and walking to the changing area at the end of a shift to remove the gear.

As to pre-donning waiting time, the unanimous court’s ruling is clear. Time spent waiting to obtain protective gear constitutes “preliminary” activity excluded from compensable time under the Portal-to-Portal Act. Therefore, you do not need to pay your employees for the time they spend waiting in line to get their gear pre-shift. One caveat, however – if you require your employees to report to the changing area at a specific time and the employees then must wait to obtain their gear, the waiting time may have to be paid under Department of Labor regulations (specifically 29 CFR § 790.7(h)). Although a requirement that workers be present at a pre-determined time prior to shift-start time may not alone be sufficient to transform any waiting time into compensable “work” time, prudent employers avoid such mandates. A policy merely requiring employees to be at their work station and ready to work at shift-start time arguably does not implicate the DOL regulation, affording the employer the benefit of the Alvarez holding as to pre-donning waiting time.

With respect to post-donning/pre-doffing walking or waiting time, the Supreme Court held that employees must be paid under the DOL’s “continuous workday rule” (29 C.F.R. § 790.6). The “continuous workday rule” limits the application of the Portal-to-Portal Act to activities occurring before an employee’s first “principal activity” and following his last “principal activity” during the day. In Alvarez, because the donning and doffing of gear was conceded to be a “principal activity” before the Supreme Court, the post-donning/pre-doffing walking time did not implicate the statute's exclusions and the time was held compensable.

Notably, the issue of whether the donning and doffing of required gear constitutes “principal activity” that must compensated was not directly addressed by the Supreme Court in Alvarez. In one of the underlying cases (IBP v. Alvarez), the Ninth Circuit had held that the time spent donning and doffing unique protective gear was compensable, but that the donning and doffing time relating to non-unique gear (e.g., hardhats, smocks and the like) was “de minimis as a matter of law” and thus not compensable. Neither side challenged these findings before the Supreme Court. Nevertheless, the opinion arguably supports the conclusion that donning and doffing required gear constitutes “work” that is not excluded from compensable time under the Portal-to-Portal Act. Several courts – and the Department of Labor – have so held.

Not all courts agree that Alvarez ends this debate, however. The Second Circuit, for example, affirmed the dismissal of an FLSA collective action, holding that “[t]he donning and doffing of a helmet, safety glasses and boots are ‘relatively effortless,’ non-compensable, preliminary tasks. See Gorman v. Consolidated Edison Corp., 488 F.3d 586 (2^nd Cir. 2007).

Another open question following Alvarez is the continued vitality of the de minimis doctrine. While some courts have continued to adhere to historic precedent relieving employers of the obligation to pay employees for donning and doffing activity that is otherwise compensable “work” but takes only a few minutes per day, others have suggested that the doctrine should not operate to deprive employees of compensation – at least where the employees’ aggregate amount of uncompensated time (including walking and waiting time) is measurable, the donning/doffing activity is regular rather than sporadic, and such time can be quantified and captured by the employer.

So your seemingly simple question does not lend itself to a simple answer. The law on the compensability of donning and doffing activities remains in a state of flux. As a practical matter, you need to assess carefully the amount of time your employees spend putting on their required gear, walking to/from their work stations, and waiting in line to turn in their gear at the end of each shift. In my view, the de minimis doctrine remains the employer’s best defense (and in some jurisdictions the only viable defense) against donning and doffing claims, at least where the workforce is non-union. Prospectively, you may want to give consideration to plant layout and procedural changes that could cut down on the amount of time employees expend on these activities. For example, it may be possible to relocate changing areas nearer production areas, minimizing post-donning/pre-doffing walking time. Similarly, placing bins at the doors to production areas in which employees can place their protective/sanitary gear at the end of a shift may substantially reduce doffing time at shift-end. Implementing a few such changes may prove to be much more economical than adding time to each employee’s compensated time.

If you have a union workforce, keep in mind that the FLSA provides that unionized employers are not required to pay employees for the time spent “washing” or donning and doffing “clothes” (which the DOL has said includes donning and doffing protective safety equipment) if the employer has a “custom or practice” of nonpayment or if such activity is expressly excluded from compensable time under a collective bargaining agreement. See 29 U.S.C. § 203(o). This exception in the union setting has its own complexities and inconsistent rulings among the courts, and is the topic for another day.

Finally, the issue of whether all donning and doffing of required protective and sanitary gear on the employer’s premises constitutes compensable “work” – the issue not directly presented in Alvarez – may be squarely before the Supreme Court in the near future. Tysons has petitioned the Supreme Court to resolve the question of whether some degree of exertion is required for donning/doffing activities to be compensable “work.” So stay tuned.

Comments/Questions

Quirky Question # 29, Maintaining Electronic Records

Wed, 02 Apr 2008 08:48:00 GMT

[Readers: Today we post another one of our California-specific analyses. The analysis below was prepared by Mandana Massoumi and Gabrielle Wirth of our firm's Irvine, California office. Gabrielle is a 1982 graduate of the University of California, Davis, School of Law, and Mandana is a 1987 graduate of the University of San Francisco School of Law. Their resumes are available on our firm's website at www.dorsey.com.]

Analysis of QQ # 29

The California Labor Code, § 1198.5, specifically addresses the subject of your question. Under the Labor Code, a California employer is permitted to retain personnel files electronically. That right, however, is circumscribed somewhat, to ensure that employees are permitted access to their personnel files.

In short, you can switch to an electronic database. But, you have to make sure the records can be downloaded, stored on a disk, and maintained at your California location. California Labor Code Section § 1198.5 requires employers to permit an employee to inspect his or her personnel records. Inspection pursuant to this section must be allowed at "reasonable intervals and reasonable times." (L.C. § 1198.5(b).)

Section 1198.5( c) requires the employer do one of the following:

(1) Keep a copy of each employee’s personnel records at the place where the employee reports to work.

(2) Make the employee’s personnel records, available at the place where the employee reports to work within a reasonable period of time following an employee’s request.

(3) Permit the employee to inspect the personnel records at the location where the employer stores the personnel records, with no loss of compensation to the employee.

L.C. § 1198.5(c) (emphasis added). Therefore, § 1198.5 permits the employer to keep the original personnel records at a location other than that were the employee reports to work, so long as a copy is available at the location where the employee works and can be made available for inspection upon request.

Subject to the provision in section (2) above, the employer is not required to make personnel records available immediately upon request. The California Department of Labor Relations, Division of Labor Standards Enforcement ("DLSE") offered some guidance in its August 27, 1998 opinion letter on how soon such personnel records should be provided to an employee for inspection. (See Wage-Hour Opinion Letter No. 1998.08.27 (1998).) That letter reiterated the employers’ obligation to make records available to an employee within a "reasonable" time. The August 27, 1998 opinion explained that while reasonable attempts at a timely response must be made, there was no per se rule and would be subject to a "case by case" evaluation. The DLSE stated as follows:

"The Division has historically taken the position that the flexibility demanded by the clear language of this statute means that reasonableness can only be determined on a case by case basis. …

Other difficulties in setting any hard and fast rule on access to an employee’s personnel file would allow, for example, an out of state employee who maintains their personnel files in an out of state location, or one who has statewide operation and employee, but maintain their personnel files at a central location, to provide access to these files within a “reasonable period of time” after a request is made to inspect them by the employee. On the other hand, it would not be unreasonable to expect fairly immediate access to an employee’s personnel file maintained at the place where the employee works as required by statute, absent compelling reasons or unusual circumstances that the employer would have the burden of establishing.

In the event your constituent is denied access to their personnel files outside of these time parameters, or altogether, he or she may file a complaint with the nearest office of the Division of Labor Standards Enforcement." (Emphasis added.)

In sum, the regulations permit employers to keep electronic copies of the personnel files. However, employers must ensure a copy (electronic or hard copy) is maintained and retrievable (to be printed in hard copy format upon request), at the location where the employee works in California.

A separate issue is what materials you wish to include in the electronic personnel records. When maintaining electronic copies of personnel files, we recommend that you consider segregating certain types of materials to ensure that they are not inadvertently produced when the personnel file materials are made available to the employee. For example, business records, confidential data, and privileged communications should be scrutinized carefully to assess whether any of this data belongs in the personnel file. Consideration also should be given to the retention periods that govern different types of documents. While certain types of documents have mandated retention periods, other materials (e.g., emails and other routine communications) do not and may be destroyed after a reasonable period of time. One potential problem with maintaining materials electronically is that you may find yourself retaining documents that could be (and should be) disposed of. Therefore, if you elect to maintain electronic personnel files, you may want to conduct periodic file reviews to cull information that no longer needs to be retained.

Non-Fraternization Policies, Quirky Question # 30

Mon, 07 Apr 2008 09:16:00 GMT

As a preliminary observation, it is important to recognize that non-fraternization policies are legitimate and enforceable. Many companies use them because they advance significant corporate interests.

A) The policies minimize favoritism, especially in the context where one employee may have supervisory responsibilities over another person with whom he/she is involved.

B) Non-fraternization policies minimize the perception of favoritism. Even if a member of a relationship is attempting scrupulously to be fair and objective, other employees may perceive favoritism toward the individual with whom he/she is involved.

C) The policies reduce the likelihood that the company will confront sexual harassment litigation if the relationship between two emotionally involved employees ends, especially when both members of the couple are not equally enthused about the termination of the relationship.

D) Non-fraternization policies enhance the company’s flexibility with respect to employment decisions that may result in the transfer of the employees; it is much harder to find suitable employment opportunities for two members of a couple, than just one person.

E) Non-fraternization policies reduce the likelihood that there will be undesired consequences for the company if adverse actions are taken toward an employee involved with a co-worker. Negative job actions are difficult enough without the added complication of evaluating how the other employee member of the couple will react to a layoff or demotion of a spouse or significant other.

For these and other reasons, many companies ban the hiring of spouses or significant others. Some companies do not adopt an absolute ban but do preclude individuals who are married or otherwise involved from working in the same department or exercising supervisory responsibility over each other.

Unfortunately, too often companies adopt non-fraternization policies without giving adequate consideration to how they are going to address a situation where two employees already are involved. Or, they fail to consider how they will address situations where two employees become involved after the policy is established. As I've expressed in other Blog analyses, I recommend that companies thoughtfully consider these (and other) issues before the situations arise and the assessments become influenced by the specific individuals involved.

As you referenced in your question, there are difficult "enforcement" issues that your company likely will confront. Some of them may be definitional. For example, although a policy may be easily applied to a married couple, what about two employees who are just dating? Is one date enough? Two? How many? At what point will the company insist on policy enforcement? Moreover, how will your company collect the relevant data and/or monitor the situation?

Not only are there difficult practical issues to consider, implementation of such a policy also raises difficult legal issues. Absent a carefully evaluated and consistently enforced approach, there is a risk of both disparate treatment and disparate impact claims. Disparate treatment claims could arise if your company concluded that to enforce its policy, the female employee must leave your organization. Disparate impact claims could arise even if your company had a facially neutral basis for selecting which member of the couple would be terminated, but your approach had an adverse impact on members of a protected class. For example, the policy may be that the employee with less seniority must leave the company. But, if your company’s past hiring practices have resulted in a workforce where your male employees generally have greater seniority, a women forced out by this policy arguably may have a disparate impact claim. Similar analyses may apply if the decision is made on the basis of management/non-management, salary, or other criteria that would favor men in light of your historical hiring practices. Even determinations based solely on performance evaluations may be problematic, since the two members of the couple may not be evaluated by the same person and there may be little consistency or fairness with the ratings.

Some companies request the employees to decide who will remain and who must leave the company. Although this approach eliminates any potential claim that the company’s selection criteria were unfair or biased, requiring the employees to choose may not yield the result the company most desires. For example, the most talented member of the couple (and the person the company would most like to retain) may have more opportunities elsewhere. Given that fact, the couple may elect to have that person leave. Although this eliminates risks associated with the selection process, it also may eliminate a talented employee from your workforce. Another option is the highly scientific coin flip. This approach certainly is a neutral process, but again, it may result in the loss of the employee the company would most like to retain.

Perhaps the best approach is to prepare, in advance of any necessary decision, a matrix reflecting the values the company would like to utilize in determining which employee should be retained. Commonly used in the context of reductions in force, the criteria on the matrix are more likely to ensure that the company will be left with the employee it most wishes to retain. The criteria would depend on the nature of the position and the skill sets deemed important by the company.

Finally, when making this determination, thought should be given to evaluating other potential legal risks to the company that may be associated with the discharge of one member of the couple. For example, are there contracts that limit in any way the company’s termination rights? Was one member of the couple recently recruited to the company to take the position, thereby increasing the possibility of a promissory estoppel claim? Does either member of the couple have a charge of discrimination or any other legal action pending against the company, increasing the risk that a discharge will result in a retaliation claim? If the company is desirous of managing carefully the risks associated with this difficult decision, these variables also should be factored into the company’s decision regarding which employee to retain and which employee to discharge.

The bottom line is that non-fraternization policies have a number of potential benefits. But, they raise practical and legal concerns that can be difficult to manage. They also can generate resentment among employees whose attitudes with respect to employer inquiries into this topic can be summarized by the observation, "None of your business." Actually, it is your business, but you have to decide whether the benefits of adopting such a policy outweigh the detriments.

Use of Email for Union Organizing, Quirky Question # 31

Mon, 14 Apr 2008 16:39:00 GMT

[When I receive questions about union organizing, the NLRA, collective bargaining agreements and related topics, I promptly walk down the hall to the offices of two of my partners, Bob Hobbins and Doug Christensen. Both Bob and Doug have deep expertise and extensive experience regarding these issues and are positioned far better than I to address these topics. Both also have an uncommon amount of common sense, which you will quickly discover if you have a chance to work with them. Doug kindly agreed to my request to provide an analysis of this question. By way of background, Doug is a 1984 graduate of Notre Dame and a 1988 graduate of Duke University School of Law. Doug’s resume is available at www.dorsey.com; his email is christensen.doug@dorsey.com. Doug’s analysis is set forth below.]

Analysis of QQ # 31:

It is likely that you will be able to discipline the two employees for violating your Communications Policy without violating the National Labor Relations Act (NLRA), so long as you have consistently enforced the Policy (and continue to do so) in a non-discriminatory manner. The NLRB recently decided a long-awaited and highly anticipated case that provides important guidance (and significantly greater flexibility) to employers regarding the establishment, implementation, and enforcement of e-mail use policies. To better understand that decision and place it in proper context, a brief discussion of some basic rules about union-related communications in the workplace will be helpful.

The NLRA provides employees of covered employers certain rights, including the Section 7 right “to self-organization to form, join or assist labor organizations . . . and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection . . ..” Section 8 of the NLRA provides that it is an unfair labor practice for an employer to “interfere with, restrain, or coerce employees in the exercise of the rights guaranteed. . . .” It is also an unfair labor practice for an employer “by discrimination . . . to encourage or discourage membership in any labor organization . . ..”

Over the years, the National Labor Relations Board, the federal agency charged with administering the NLRA, has developed an intricate set of rules about union-related communications in the workplace, attempting to balance the statutory rights of employees under the NLRA with employers’ rights to maintain control of their premises and to operate their businesses. An employer generally may not bar union-related communications among employees on employer property, such as a break room or lunchroom, during employees’ non-working time, and it generally may prohibit union-related conversations during working time only if it also prohibits other non-business conversations during working time. Next, the rule had been that an employer generally may prohibit union-related communications by employees using company property, such as bulletin boards, telephones, and copying machines, if it does not discriminate by permitting other non-business use of company property. Additionally, an employer generally may ban non-employee union organizers from its premises, but may not bar access by union agents if it allows other outside solicitors on its premises (except for limited charitable solicitations).

Until late last year, the NLRB had not addressed the rules for regulating electronic workplace conduct in compliance with the NLRA. On December 16, 2007, the NLRB issued its decision in the case of The Guard Publishing Company, 351 NLRB No. 27. In that 3-2 decision, decided along party lines, the NLRB addressed for the first time the question of how employees’ use of their employers’ e-mail systems relates to employee rights under the NLRA. The NLRB reviewed the employer’s communication policy, which prohibited the use of e-mail for “non-job-related solicitations” to determine whether the policy violated employees’ Section 7 rights and was an unfair labor practice.

The relevant portion of the policy at issue in Guard Publishing stated: "Company communications systems and the equipment used to operate the communications systems are owned and provided by the company to assist in conducting the business of The Register-Guard. Communications systems are not to be used to solicit or proselytize for commercial ventures, religious or political causes, outside organizations, or other non-job-related solicitations."

The evidence before the NLRB showed that employees had – with the employer’s knowledge – used company e-mail for personal announcements, offers of personal items for sale, and other non-business purposes, without any disciplinary actions being taken against the employees who had used e-mail for those purposes. There was no evidence before the NLRB, however, that employees had ever used company e-mail for solicitations on behalf of any outside organization or cause of any kind (other than the United Way, for which the employer conducted a periodic annual compaign).

The employer, a newspaper publisher, twice disciplined a union employee for violating the communication policy after she sent e-mails regarding, among other things, a union rally and upcoming collective bargaining negotiations. The employee and her union challenged the disciplinary actions, and the e-mail policy itself, as violating employees’ rights to engage in collective activity with respect to their working conditions, under Section 7 of the NLRA. They argued that, because e-mail has become the most common method for employees to communicate about work and non-work issues, employers do not have an unfettered right to ban personal e-mail just because the employer owns the e-mail system. They also argued that, because e-mail is similar to face-to-face solicitations that occur in a break room or lunchroom, such communications cannot be banned during non-work time. Conversely, the employer argued that the union had many ways to communicate with the employees it represented other than through the use of the employer’s e-mail system, and that Section 7 does not provide employees with a statutory right to use employer-provided e-mail systems for any purpose. The key issue before the NLRB, then, was whether e-mail should be treated like employee communications on non-working time (which generally cannot be prohibited) or whether it should be treated the same as other situations involving company property, such as bulletin boards, telephones, and copying machines (where employers generally may ban union-related use if they do not discriminate).

The NLRB rejected the argument that employee use of employer-provided e-mail systems are like face-to-face solicitations in a break room or lunchroom which cannot be restricted during non-work time. Instead, the NLRB found an employer’s e-mail system to be like other company property, such as bulletin boards, telephones, and copiers, to which employers have always been permitted to restrict employee access. The NLRB held that no special rule is needed for e-mail, and that an employer may restrict non-business use of its e-mail system in that same way it can restrict the use of its other property.

The NLRB next considered the employee’s and the union’s claim that, having permitted employees’ use of the e-mail system for personal purposes unrelated to work, the employer could not lawfully prevent employees from using e-mail for union-related purposes. Recognizing that prior NLRB precedent supported this challenge to the employer’s implementation of its e-mail policy, the NLRB departed from and modified its prior precedent in the discriminatory application area and held that an employer does not discriminate against union-related use of its property merely because it permits some personal use of that property by employees. The NLRB held that an employer is allowed to choose what categories of communications to allow and prohibit so long as the distinction is not drawn along Section 7 lines.

This revised discrimination standard is beneficial to employers. It means that an employer does not need to permit union solicitation or distribution even if it permits solicitation or distribution for personal purposes, so long as the distinction made by the employer is not simply to prohibit union activity. Significantly, this portion of the Guard Publishing decision applies to all types of company property, and not just e-mail systems. In applying its new test to the case before it, the NLRB held that the employer could legally prohibit its employees from using its e-mail system to solicit support for the union and did not violate the NLRA when it disciplined the employee for sending e-mails urging support for the union during contract negotiations because, although the employer permitted employee e-mails of a personal nature, there was no evidence that it permitted e-mails intended to solicit support for a group or organization (with the sole permitted exception of the United Way).

Under Guard Publishing, you should be able to discipline your employees for their violations of your Communications Policy, so long as you have (and will continue to) strictly and consistently enforce the Policy. In other words, the two employees at issue can be disciplined for their union solicitation efforts only if employees who have solicited (or will solicit) participation in other membership organizations were also (or also will be) disciplined. If your Policy is not enforced as to non-union-related e-mail, but is enforced to ban union-related e-mail of a similar type, your enforcement of the Policy will give rise to a discrimination charge that will have a high chance of success. It would not be surprising if your union tests your enforcement of the Policy by encouraging its members to send prohibited, non-work-related e-mails that do not pertain to union issues to see if you will enforce the Policy in those situations. Monitoring e-mail is a tough task, but proper, consistent monitoring and enforcement is essential to prevent and defend against discriminatory enforcement unfair labor charges.

A few words of caution, however, in closing. Guard Publishing was one of several significant 2007 NLRB decisions decided by 3-2 votes, along party lines. The ultimate fate of the Guard Publishing decision is far from certain, and a number of factors, alone or together, could make it relatively short-lived. The majority’s decision, which has already been appealed to the Court of Appeals for the District of Columbia, provoked a vigorous dissent and may be modified or reversed by the Court of Appeals. There is also talk that union interests may seek to have legislation introduced in Congress that would have the effect of overturning the decision. Moreover, close party line decisions like Guard Publishing are vulnerable to change because, by long-standing tradition, the composition of the NLRB splits in favor of the party occupying the White House. The result of this November’s presidential election may affect the NLRB’s ideological balance and might result in the modification or reversal of the holdings in Guard Publishing. It is also likely that further litigation testing the exact parameters of Guard Publishing will occur.

Sexual Harassment -- Activities Outside the Workplace, Quirky Question # 32

Mon, 21 Apr 2008 09:51:00 GMT

As you undoubtedly realize, if you are not able to bring the offending conduct to an end, your company may be confronting a sexual harassment claim. As you pointed out, your employees are engaging in various types of offensive conduct: a) asking questions of your “motorcycle enthusiast” that are inappropriate; b) “teasing” your female employee, sometimes in a crude manner; c) downloading pictures of your female employee from the Sturgis website and circulating them to others within your workforce; and d) using one of the pictures as “wallpaper,” (the background image) on a computer. In short, all the behaviors you are describing sound like fairly standard “hostile work environment” sexual harassment.

Exacerbating the situation from a potential liability standpoint is that your employee already has complained to you. Given your position as an attorney in Law Department, your knowledge will be imputed to the corporation. Moreover, you have described the fact that you have attempted to take action to address some of the concerns expressed by the offended employee (“I’ve informally asked some of the guys to tone it down . . ..”), but that you are not getting the hoped-for response.

In sum, you have a harassment complaint, the company is on notice, and the problem has not been rectified. In my view, you need to respond more aggressively to the problems that have been brought to your attention. This includes the four distinct issues of which you have been made aware: a) teasing; b) crude comments; c) circulation of pornographic materials via your company’s computer system; and d) display of a photo of a (partially ?) naked woman on a computer screen. If an investigation is necessary (you already may have all the facts you need), you should conduct one promptly. To the extent that you confirm the allegations that have been brought to your attention, you should discipline the employees who have engaged in the problematic conduct. I recommend that you ignore the fact that some of the offending conduct arguably was precipitated, in part, by the non-work-related behaviors of the complaining employee.

In sexual harassment cases, you must distinguish between the work-related behaviors of your employees and the non-work-related behaviors. The non-work-related behaviors are largely irrelevant to the sexual harassment analysis. The fact that one of your employees is a motorcycle enthusiast, who enjoys the Sturgis rally, and who engages in behavior while in Sturgis that is radically different from her workplace conduct, does not mean that she is fair game for inappropriate, harassing workplace conduct.

The most directly analogous case of which I am aware is a decision out of the Eighth Circuit Court of Appeals, Burns v. McGregor Electronic Industries, Inc., 995 F.2d 559 (1992). The plaintiff, Lisa Burns, was a victim of substantial (often outrageous) sexual harassment by a number of employees, including the company’s owner/President who was more than 40 years her senior. Compounding the problem of her treatment in the workplace, she had posed nude for a couple of motorcycle magazines. This resulted in significant additional abusive conduct directed toward her. Despite these facts, the District Court granted the employer summary judgment. In an opinion deferential to the District Court, the Eighth Circuit reversed and remanded, but noted, “Our disposition of this case should not be read as constituting a de facto entry of judgment for Burns.”

That was the first Burns opinion. The following year, after the District Court again dismissed Burns’ lawsuit, the case was back in the appellate court (989 F.2d 959 (1993)). The second time around, the appellate court was not quite so deferential. The Eighth Circuit was understandably troubled by the fact that the District Court was unable to distinguish between Burns’ conduct outside of work and her treatment at the workplace. The trial judge seemingly could not get over the fact that Burns had posed nude for a magazine, concluding that, given her behavior, she could not have been offended by her treatment in the workplace. The appellate court stated:

“The plaintiff’s choice to pose for a nude magazine outside work hours is not material to the issue of whether plaintiff found her employer’s work-related conduct offensive. This is not a case where Burns posed in a provocative and suggestive way at work. Her private life, regardless of how reprehensible the trier of fact might find it to be, did not provide lawful acquiescence to unwanted sexual advances at her work place by her employer.”

In the second opinion, the Eighth Circuit gave up on the trial judge, and reversed and remanded with a directive that judgment be entered for the plaintiff, Lisa Burns.

As the Burns decision illustrates, for the most part, an employee’s activities outside the workplace are irrelevant to the issue of whether he/she is a sexual harassment victim in the workplace. The one part of the analysis where this conduct may be considered is when evaluating whether the employee found the behaviors “subjectively offensive.” As was addressed by the U.S. Supreme Court in a post-Burns decision, in a typical harassment case, an employee must establish that the behaviors were both “subjectively” AND “objectively” offensive. For example, with regard to the subjective standard, an employee who initiated a lot of sexual banter in the workplace may have difficulty establishing that she was personally offended by sexual banter. With respect to the objective standard, an employee needs to demonstrate that she is not having a hypersensitive, idiosyncratic reaction, but rather that the behavior would have offended a “reasonable” person.

In the fact pattern presented by your question, you can argue that a person who allowed herself to be photographed nude, in provocative positions, at the Sturgis rally, with the knowledge that her pictures were likely to be displayed on the world wide Web, is not likely to have been “subjectively” offended by the conduct of her co-workers. Absent a direct linkage, however, to her conduct in the workplace, that argument is likely to be unpersuasive. The fact that your employee elected to behave in one way at a motorcycle rally in another state hardly suggests that she was inviting offensive conduct in the workplace, where she has had a very different persona. Given that fact, I suggest that you take her complaints of offensive conduct seriously, take steps to ensure the offensive conduct stops, and discipline the employees who engaged in the conduct described in your question.

Disclosing Private Health Information, Quirky Question # 33

Mon, 28 Apr 2008 09:52:00 GMT

Like many of questions I have posted, this question highlights the conflict between two important, but competing, public policies. One policy is the critical need for maintaining the privacy of patient information. The other policy is the crucial importance of maintaining public health. In this question, those policies collide.

This fact pattern was drawn, not from a client question, but from the recent case of Serrano v. Christ Hospital, No. A-448-06T3 (New Jersey Sup. Ct. App. Div.; Dec. 21, 2007). In Serrano, the hospital concluded that the patient’s privacy rights were paramount and discharged the employee who had shared the patient’s confidential information with the school, notwithstanding her 16-year employment history. In the case (unlike the question we devised), the employee who revealed this information was a secretary in the hospital’s intensive care unit. Because she was bilingual (English and Spanish), she had been asked to translate for an elderly Spanish-speaking woman who was being tested for meningitis. While assisting with the translation, she learned that the elderly patient had a daughter and that the daughter’s son attended the same nursery as her own daughter. The patient’s daughter and grandchildren were advised that they should be tested for exposure to meningitis but they declined to participate in the testing.

The next day, when the secretary took her own daughter to the nursery school, she saw the patient’s grandchild at the nursery, coughing. As set forth in our hypothetical problem, she left with her son and when later questioned by the school regarding why she had done so, she explained the situation, including revealing the patient’s condition. The nursery school then contacted the potentially contagious family and insisted that they take their son to a physician for an examination.

Following the family’s complaint to the hospital regarding the disclosure of their medical information, the hospital fired Serrano, the secretary who had disclosed the information. The secretary then sued, contending that her discharge constituted a violation of the public policy designed to protect public health. Despite these policies, the District Court dismissed the discharged employee’s claim on summary judgment. The appellate court, however, reversed.

Oddly, in my view, the appellate court sent the case back to the lower court to resolve the conflict between the two competing public policies, noting that these questions are “best left for the factfinder to decide.” This part of the court’s analysis perplexes me somewhat. The key facts are essentially undisputed. The secretary admitted that she had disclosed the patient information to the school and the school acknowledged that it had removed the student pending an examination by a physician and medical clearance. The hospital acknowledged that it fired the secretary because of her disclosure of the patient’s data. I’m not sure what additional “facts” the “factfinder” needs to resolve. Essentially, the courts of New Jersey need to resolve the legal question regarding which of the two important state public policies is paramount. Further, the courts need to resolve the issue of whether, even assuming that the public health policy is more important than the patient's privacy rights, the nature of the disclosure here was appropriate.

When discussing this question with some insightful friends this past weekend, a few consensus themes emerged. First, a hospital cannot allow each individual employee to become the interpreter of hospital policy. If every employee is empowered to assess hospital policies (here, the federally mandated patient privacy policy) and act on his/her own interpretation, the hospital no longer has a policy. Second, the method of disclosure here was inappropriate. The secretary did not contact the hospital administration or the hospital's General Counsel. The secretary did not call the New Jersey Department of Health to report the situation. Rather, she simply acted independently and reported the information to the school. Although it is easy to understand how these events could have unfolded given the facts that her own child attended the nursery and that the school called her and requested her to explain why she did not drop off her child, that does not excuse her actions. As the observations above suggest, there were alternative responses she could have provided the school, pending a more thoughtful examination of these issues. Third, one could legitimately question whether Serrano truly was trying to advance an important public policy. She did not march into the hospital administration when the family left the hospital against medical advice. She did not make the case for reporting the situation to governmental authorities, despite the fact that she knew the patient's grandchild was in nursery school. She did not contact the New Jersey Health Department to report the situation herself. Indeed, she only acted in the "public interest" when her family was potentially directly affected. This type of conduct is not necessarily consistent with advancing an important public policy.

Nevertheless, if I were reading tea leaves, I’d predict the jury will side with the discharged secretary. Any parent will be able to empathize with her predicament and her concern for her own child’s safety. The jury will be balancing the risks of exposing a group of children to a potentially fatal disease with the privacy interests of a single person who imprudently rejected standard medical treatment. The jury also may wonder why the hospital did not step up to protect the public health when the family refused appropriate medical treatment. Finally, the jurors may be uneasy about the seemingly harsh sanction (termination) imposed on a 16-year employee who was inadvertently thrust into a very difficult situation.

Barring settlement, there is more to come on this case, so stay tuned. I'll try to follow up when the case progresses further through the legal system.

Bogus Lawsuits, Quirky Question # 34

Mon, 05 May 2008 09:34:00 GMT

Let me begin by stating, "I feel your pain." As a defense attorney, there are times when, like you, I have marveled at the fact that the plaintiff has had the temerity to bring a lawsuit based on the facts alleged. More discouragingly, I have been disappointed that he or she has been able to find a lawyer to draft, serve and file the Complaint, rather than simply advising the client that the claims lack any merit whatsoever, or that they are fatally flawed (e.g., time-barred).

Now, lest I invoke the wrath of the plaintiffs' employment bar, let me add that at times I certainly understand why claims have been brought. Many plaintiffs' cases have merit, and many others involve facts that certainly support the plaintiffs' position, even if they are insufficient to persuade a fact-finder.

But, your question does not involve the legitimate, or even the close, plaintiffs' cases. Your question referenced the "utterly frivolous" case. When confronted with those kinds of claims, you have three options.

First, the most typical corporate response is simply to defend the case and prevail. This can be costly but many companies simply attribute these expenses to the “cost of doing business.” Moreover, a convincing win, well publicized by the company, can communicate to other employees that the company will not capitulate and settle when confronted with dubious lawsuits. This outcome has value and suggests that in the long-term, settling insubstantial cases for even modest amounts can be counter-productive. For example, a number of years ago, contrary to my advice, one of my clients opted to resolve all employment claims brought against it, justifying the decisions on the ground that defending the lawsuits would cost more than the settlement amounts. When the number of separate lawsuits climbed into the 50s, and certain plaintiffs acknowledged the widespread employee perception was, “Sue the company, get a car,” the company’s willingness to settle evaporated. We obtained a series of summary judgment wins and quickly saw both the amount of the settlement demands and the frequency of claims plummet. The “free car” days were over and the remaining employees knew it.

A more aggressive defense response is the one about which you’ve inquired – filing a responsive lawsuit. This could take two forms, which represent the second and third options referenced above.

The second option available to you is to assert a counterclaim for abuse of process in the original lawsuit. The third option is to wait for the lawsuit to conclude, either at the motion stage (motions to dismiss or for summary judgment), or by verdict, and then consider how you want to proceed.

Personally, I am not a fan of the second option for several reasons. First, until the plaintiff's lawsuit is concluded, your abuse of process claim is not really ripe. Second, I don't like the atmospherics of a counter-claim in the original lawsuit. I'd rather have the fact-finder focusing exclusively on the issue of whether the underlying claims are legitimate. Third, I think there is a greater risk of a compromise dismissal by the trial court if the counterclaim is part of the initial lawsuit. This is true both at the motion stage and when the parties are working through any settlement, even if the resolution does not require the defendant to provide any compensation to the plaintiff. In that context, it simply is too easy for the judge to pressure the defendant to give up the counterclaim – indeed, that offer can become the judge-advocated rationale to the plaintiff for why he/she should drop the claim without compensation. Fourth, overworked courts want to see litigation end; this means the entire case, not just the plaintiff's claims.

The alternative, a post-victory abuse of process lawsuit, is a rarely pursued, but very intriguing idea. Although you may subsequently encounter an argument that this is a form of "retaliation," in my opinion this contention lacks merit. Your company has a right to seek redress in the courts in response to improperly asserted litigation. The countervailing consideration, that undoubtedly will be argued by the plaintiff, is that allowing a post-dismissal or post-trial abuse of process claim will "chill" the exercise of statutorily protected rights under federal or state anti-discrimination statutes and adversely affect the important public policies those statutes were designed to advance. This argument may initially appear reasonable but I don't believe it withstands scrutiny. How does allowing an entirely bogus lawsuit, which often will consume significant administrative agency time (whether at the EEOC or state counterpart agencies) and significant judicial resources advance the interests of the anti-discrimination statutes? One could make an equally plausible argument that this litigation not only wastes scarce resources but also diminishes the goals of the anti-discrimination statutes, because frivolous lawsuits generally undermine public perceptions of legitimate claims and the statutory schemes on which they are based.

I am aware of one recent case, Greer-Burger v. Temesi, No. 2006-1616 (Dec. 12, 2007), that implicated the issues raised by your inquiry. In the Temesi case, the Ohio Supreme Court held that it was not necessarily retaliatory for a defendant to pursue an abuse of process lawsuit against an employee who had unsuccessfully prosecuted a discrimination lawsuit. In the case decided by the Ohio Supreme Court, the original plaintiff (Tammy Greer-Burger) had sued Laszio Temesi and her employer for sexual harassment. The case went to trial and she lost. Temesi then sued her for abuse of process, malicious prosecution and intentional infliction of emotional distress.

In response to Temesi's lawsuit, Greer-Burger filed a new Charge of Discrimination, alleging retaliation, with the Ohio Civil Rights Commission (OCRC). An Administrative Law Judge (ALJ) concluded that Temesi's lawsuit was retaliatory, and recommended that the OCRC block the litigation and award Greer-Burger $16,000 in attorneys' fees. The OCRC followed the ALJ's recommendation. Temesi then appealed to the trial court; he lost again, with the trial court affirming the OCRC's conclusion. Temesi did not give up, appealing the case to the Ohio Court of Appeals. There, he lost for the fourth time. Temesi pursued the case to the Ohio Supreme Court, where he finally was vindicated.

The Ohio high court repudiated the notion that any claim brought against a person who previously had pursued a discrimination claim was retaliatory. The court stated, "we hold that an employer is not barred from filing a well-grounded, objectively based action against an employee who has engaged in a protected activity." The court further rejected the notion that Temesi's claim for punitive damages somehow proved retaliation. "Although some may argue that allowing an employer to seek punitive damages will have a chilling effect on employee lawsuits, a blanket prohibition on employer punitive damages would open the door to truly frivolous cases."

The Ohio Supreme Court went on to observe that unless the abuse of process lawsuit proves to be a "sham," there is a Constitutional right to seek redress from the government. Thus, unless Temesi's lawsuit was "objectively baseless," it should not be barred. The procedure adopted by the Ohio court was to have the ALJ evaluate the legitimacy of Temesi's lawsuit under the standards it had articulated.

The divided Ohio court recognized that it was balancing competing interests of employees and employers. While not wanting to chill discrimination claims, the court was unwilling to preclude employers in all instances from seeking judicial redress in response to a frivolous lawsuit. This analysis applied even to a case that went to verdict, as it should. As you may know, the summary judgment standard is often an easy standard for plaintiffs to satisfy, even when their claims are razor thin. As the Ohio court implicitly recognized, surviving summary judgment should not be the measure by which the abuse of process theory is assessed.

Bottom line: assert your retaliation claims but make judicious decisions regarding when you elect to do so. Be prepared for the the types of arguments advanced by Greer-Burger, as described above. From my perspective, it would be very interesting to see the law develop further in this arena.

Voluntary Leave Policy, Quirky Question # 35

Wed, 07 May 2008 09:17:00 GMT

[Set forth below is our analysis of Quirky Question # 35. As this was a question submitted to the employment attorneys in our Anchorage, Alaska office, our colleagues there provided the analysis. The response below was furnished by Wendy E. Leukuma. Wendy is a 1999 graduate of Northern Michigan University and a 2002 graduate of William Mitchell College of Law. If you would like to communicate with her about the question and analysis below, or any other employment law issue, her direct line is 907.257.7826 and her email address is leukuma.wendy@dorsey.com. Wendy's resume is displayed at www.dorsey.com.]

Wendy's Analysis of QQ # 35

Arguably, your fact pattern illustrates the maxim, “No good deed goes unpunished.” Your company appears to have a generous policy, designed to assist employees to obtain necessary treatment for drug or alcohol abuse. As you recognize, however, at times your policies may collide with your need to have a reliable workforce.

Since your employee does not yet qualify for Family and Medical Act (FMLA) leave, his entitlement to leave depends on your company’s policies and on whether he is entitled to a reasonable accommodation under the Americans With Disabilities Act (ADA) or Alaska’s non-discrimination laws.

With respect to your companies’ policies and procedures, at a minimum, the employee’s request for leave should be treated like any other non-FMLA request for leave. If you routinely permit employees to take several weeks’ vacation in a row without penalty, you should permit this employee to do the same for purposes of seeking treatment. In addition, the employee should be permitted to exhaust any available paid leave such as vacation, PTO, or sick leave while in treatment. Of course, you do not have to take his word for it. You should (for liability reasons alone) require him to provide proof that he is obtaining treatment and that he is making satisfactory progress.

Because your policy specifies that employees who voluntarily seek treatment will not be penalized, it is important that you not terminate this employee simply because he needs to take leave. Rather, any decision to terminate should be based on the hardship caused by granting such leave. Since your company is already short-staffed, you may be in a situation where you have several vacant mechanical engineer positions. If that is the case, you should certainly fill these positions before terminating this employee. Otherwise, you may have a hard time justifying his termination under your company’s drug and alcohol policy.

You also may wish to consider your past practices with respect to allowing other non-FMLA-qualifying employees time off for drug and alcohol treatment. What have you done in the past? How often? How much time have you allowed the other employees to take off? Were your company’s economic circumstances different in the past (e.g., not so short-staffed)? Exploring these inquiries should help you evaluate two different issues. First, as described below, gathering data in response to these questions will enable you to better assess the issue of whether your firm will be able to establish an undue hardship if the employee’s leave becomes prolonged. Second, it will be important for you to understand whether this employee will be able to make any argument, legitimate or otherwise, that he is experiencing differential treatment with respect to your company’s enforcement of this policy. For example, if you have had several Caucasian employees take leave under your drug and alcohol and this employee is a minority, he may be able to make an argument that he is experiencing race or ethnicity based differential treatment. Assuming that your examination of these issues does not flag any concerns for you, you still have to assess whether your employee has any rights under the ADA.

Regardless of your specific company policies, under the ADA, most employers with 15 or more employees are required to provide reasonable accommodation, including unpaid leave, to disabled employees who are able to perform the essential functions of their job with or without accommodation. Under Alaska law, Alaska employers with one or more employees are required to provide such accommodations. Accordingly, if this employee is a recovering alcoholic, he may be entitled to additional leave, so long as it does not create a hardship for your company. In the context of a drug or alcohol addiction, 28 days of leave for treatment is traditionally considered the normal amount of time required. Absent significant operational concerns, courts are sometimes reluctant to find a hardship where the employee is absent from work for a month or less. (In fact, as will be addressed in other Blog postings, courts increasingly have been granting protracted leaves as an accommodation to provide employees an opportunity to address physical or mental health issues that are precluding them from continued gainful employment.)

Here, given your employee’s rotating shift, it appears as though he will be absent from the workforce for a minimum of six weeks before his next rotation. In most cases, this amount of time should be sufficient for the employee to seek and obtain any treatment necessary. Additional requests for leave from this employee should be evaluated on a case by case basis to determine whether the individual is truly disabled within the meaning of the ADA and if so, whether your company can accommodate his request for leave without undue hardship. Under the ADA, you may interact with his medical provider to determine the answers to these questions. The information you obtain from your employee’s medical provider also may shed light on whether your company is likely to be able to work out a solution to this situation that fulfills the needs of your company and your employee alike.

Need for Search Warrant, Quirky Question # 36

Mon, 12 May 2008 09:41:00 GMT

Yes to your first question; no to your second inquiry.

For the purposes of your inquiry, I will assume that you learned your employee had illegal pornography on his work computer when the police requested a copy of his hard drive and not before. My assumption is that if you had learned previously and independently that your employee was engaging in illegal conduct (here, possessing illegal pornography), your company would have taken responsive actions to remedy that situation, including, possibly, notifying appropriate law enforcement officials.

Courts continue to grapple with the issue of whether employees have expectations of privacy in their offices, including their computers, that generally would require investigative authorities to obtain a search warrant. This analysis can be affected by a company’s past practices (has the company allowed employees to use their company computers for personal use; has the company allowed employees to download their own music, photos, and programs onto the company computer; do the employees have responsibility for servicing their own computer programs themselves; does the company periodically review the data on the employees’ computers; are employees given their computers upon resignation or termination; are the employees allowed to purchase their computers upon resignation or termination; etc.). The answers to these and other inquiries may influence the calculus of whether an employee has a reasonable expectation of privacy in his or her company-issued computer equipment.

Another critical factor that bears on this analysis is what company policies have been promulgated regarding the employees’ computer use and access. If a company has clearly delineated policies stating that it owns all of the computer equipment provided for its employees’ use, and that it retains the right to take possession of and/or review employees’ computers and other electronic equipment, as well as the emails communicated via this equipment, or other data generated or stored on the equipment, these policies affect the employees’ expectations of privacy. Of course, there should not be a corporate disconnect between the policies on the company books and the company’s actual practices.

In early 2007, the question of police access to an employee’s computer, without the authorities first obtaining a search warrant, was addressed by the Ninth Circuit Court of Appeals. See, United States v. Ziegler, 474 F.3d 1184 (9^th Cir.) (superceding opinion filed on 1/30/07).

In the first Ziegler decision, the Ninth Circuit held that the employee could have no expectation of privacy given the company's well defined policies regarding company computers. Soon thereafter, however, the Ninth Circuit withdrew and revised its opinion, concluding that even in the context of company-owned computers and company policies specifying that the company had the right to access those computers at any time, employees nevertheless had a protectable 4^th Amendment right against unreasonable search and seizure that required the police authorities to obtain a search warrant to access the materials on the computer.

Despite this analysis, the Ninth Circuit also found that the employer, which owned the computer gear, and which determined who had permissible access to its premises, was authorized to give “consent” to the search, obviating the need for the search warrant. Once the employer had authorized the police to have access to the company-owned computer, the police no longer needed to obtain a search warrant. (This analysis is akin to other contexts where a joint property owner consents to a police search even in the absence of a warrant.) Deservedly, the employee in Zeigler who had stored child pornography on his work computer, was toast.

As to your second inquiry (whether a company is obligated to inform an employee of the police request for access to the computer being used by the employee), your company has no obligation to apprise your employee of the decision to provide the police access to the computer. In general, employers are not obligated to inform employees of ongoing investigations, whether instituted by governmental investigative authorities or by the company itself. Indeed, there are times when providing such notice to the employee would undermine completely the purpose of the investigation and could alter its results. In the context of your questions, for example, if the employee had been apprised of the investigation, the evidence could have been deleted from the computer.

The bottom line is that generally employers do not have to require law enforcement authorities to obtain a search warrant to have access to a company-owned computer used by an employee. Whether there may be strategic reasons for requesting the investigative authorities to return with a warrant is another question for another day.

Company Liability for Employees' Cell Phone Use While Driving, Quirky Question # 37

Mon, 19 May 2008 09:34:00 GMT

You inquired whether it's advisable for your company's sales manager to contact your field sales employees via cell phone when they are driving between customer appointments. It's not. The practice is risky to your employees and to members of the public, inasmuch as it forces your employees to speak with your office on a cell phone while they are driving. Although the risks to your employees and the public should be sufficient for your company to alter its practices, if you need more convincing, you should understand that this practice exposes your company to potential legal liability and correspondingly significant financial risk.

There is increasing evidence as to how unsafe it is for individuals to drive while talking on cell phones. And there are increasing instances of employers being held liable when their employees get into accidents while talking on cell phones.

Studies show that using a cell phone while driving dramatically increases the risk of a traffic accident. For example, in a study by the Insurance Institute for Highway Safety in Perth, Australia (2005), the conclusion was that drivers who use cell phones are four times more likely to get into injury-causing traffic accidents than drivers who do not use cell phones while driving.

Similarly, a 2006 study by the University of Utah found that the impairments associated with using a cell phone while driving can be as profound as those associated with driving under the influence (.08). Even drivers using "hands-free" devices showed similar levels of "impairment" (Perth Study and University of Utah Study).

Not surprisingly, state legislatures are beginning to take action to address the problems associated with the pervasive use of cell phones by individuals driving vehicles. As of today, six states (California, Connecticut, New Jersey, New York, Utah and Washington) and the District of Columbia, and at least 10 cities (e.g., Chicago, Detroit, Dallas) have enacted bans or restrictions on cell phone use while driving. The Washington and New Jersey statutes also specifically ban text messaging while driving.

Because of the significant risks associated with the combination of driving and cell phone use, a number of companies are proactively seeking to eliminate this all-too-common practice. For example, UPS does not provide drivers with cell phones and forbids them from talking on their own cell phones while driving. Shell Oil Company not only directed its employees not to use cell phones while driving, but, in 2007, its General Counsel asked law firms working as outside counsel to Shell to not drive and talk on their cell phones while doing Shell business. Exxon Mobil (which has had some experience with an impaired driver, albeit of an oil tanker) prohibits employees from using cell phones while driving. Exxon Mobil's policy dictates that phones contain a call-forward feature – a voicemail message advising callers that the Exxon worker is busy at the wheel.

These and other company policies may seemingly have been stimulated by prudence and responsibility. Or, they may have been influenced by a number of recent cases in which employers were held liable for accidents caused by their employees who were talking on cell phones while driving. Earlier this year, International Paper Company agreed to settle for $5.2 million a personal injury suit brought by a widowed mother of four who had her arm amputated after she was rear-ended by one of its employees who was allegedly talking on her company-provided cell phone while speeding on the interstate (77 in a 70 mph zone). Dyke Industries, a lumber wholesaler, suffered a jury verdict of $21 million after one of its salesmen hit and severely disabled an elderly woman while the salesman was talking on his cell phone when driving to a sales appointment. A lawyer hit and killed a 15-year-old girl when the lawyer was talking on her cell phone while driving home from a meeting one night. The lawyer, who initially thought she hit a deer, served a one-year jail term and paid $2 million. Her law firm settled for an undisclosed amount after initially being sued for $30 million.

As these sad (and costly) situations illustrate, it’s a terrible idea for your supervisor to call employees when he knows they are driving, especially since multiple alternative options are available. Your employees could call into the office to speak with the sales manager after completing one job but before departing for the second. Or, your employees could call into the office upon arrival at the second job but before commencing work. Yet another option would be to instruct your employees that they may not answer the phone while driving. Within a short period of time following receipt of the call, your employee could pull off the road into a parking lot and return the call from there. Whichever option is considered most desirable, your firm needs to enforce it. To the extent that employees violate your company's policy regarding the use of cell phones while driving, they should be disciplined.

Promulgating an effective policy regarding cell phone use while driving should be relatively easy. Ideas to consider including in your policy are:

a) Banning all cell phone use by your employees while they are driving any company vehicle, driving their own vehicles on company business, or driving to or from customer appointments at the beginning of, during, or at the end of the workday;

b) Prohibiting the use of cell phones while driving for all business-related calls, whether before, during, or after business hours. (Of course, a well-crafted policy also should apply to personal calls made during the work-day while your employees are driving.);

c) Prohibiting the use of hands-free devices as well as hand-held devices;

d) Prohibiting your office personnel from contacting any of your employees via cell phone when they are known to be traveling from appointment to appointment, or from one customer location to another; and

e) Instructing your sales representatives that they are not to answer their cell phones at any time when they are driving.

There may other simple rules that would be appropriate for your company to incorporate into its policies, depending on the nature of your firm's business. Basically, you want to ensure that neither your employees nor members of the public are put at risk because of your company's practices with regard to either company-issued cell phones or PDAs, or your employees' personal cell phones or PDAs. Taking these simple precautions not only will benefit your employees and the public alike, these prudent actions also will reduce the risk of potential legal liability and substantial damages for any injuries caused by your employees' using cell phones while driving.

Comments/Questions

Disclosing Information Regarding Past Felony, Quirky Question # 38

Tue, 27 May 2008 09:28:00 GMT

Several weeks ago, I addressed the fundamental issues involved in the legal theory of "negligent hiring." (See Quirky Question # 26, or access it by using the “View by Topic” tab to the left). As I explained previously, in the seminal Minnesota case on that topic, Ponticas v. K.M.S. Investments, the Minnesota Supreme Court emphasized that “an employer has a duty to exercise reasonable care in view of all the circumstances in hiring individuals who, because of their employment, may pose a threat of injury to members of the public.” As your question demonstrates, you already have given some thought to this issue. You are fully aware of the employee's past conviction and as you note, given the employee's limited interaction with the public, you do not feel that you are exposing the public (and, ultimately, your company) to risk on that front.

A decade after the Ponticas decision, another grim case made its way through the Minnesota judicial system that implicated analogous issues. That case, Yunker v. Honeywell, Inc., 496 N.W.2d 419 (Minn. Ct. App. 1993), involved a bizarre fact pattern. A Honeywell employee, Randy Landin, became infatuated with a co-worker. The infatuation was not reciprocated, however, and Landin responded by murdering his co-worker. Landin was convicted of the lesser offense of manslaughter and sent to prison. After serving five years in prison, he was released. (An entirely separate question, beyond the scope of this analysis, is whether five years in prison is a sufficient penalty for taking another person's life.)

After he was released from prison, he reapplied for a custodial position at Honeywell. Like your company, Honeywell concluded that he had discharged his debt to society, and rehired him. Like your firm, Honeywell took into consideration the fact that the employee, by virtue of the position he would occupy, would have relatively little contact with the public. Honeywell apparently concluded that his past conduct would not pose a risk to other Honeywell employees or members of the public.

Unfortunately, Honeywell was wrong. Not long after he was hired, Landin became interested in another Honeywell employee, a female employee who also worked on Honeywell's custodial staff. As had happened previously, his amorous sentiments were not reciprocated. Tragically, his response to this second "rejection" was the same as his response to the first – he murdered the co-worker who had rejected him. The co-worker's estate sued Honeywell on multiple theories, including negligent hiring, negligent retention and negligent supervision.

The Minnesota Court of Appeals rejected the decedent's estate's negligent hiring theory, a decision driven largely by a public policy analysis. As the appellate court pointed out, imposing liability on Honeywell under a negligent hiring theory would “essentially hold that ex-felons are inherently dangerous and that any harmful acts they commit against persons encountered through employment will automatically be foreseeable.” The court found that such a result would “offend our civilized concept that society must make a reasonable effort to rehabilitate those who have erred . . ..” Based on this reasoning, the appellate court concluded that “public policy” supports a “limitation on this [negligent hiring] cause of action.” (For reasons not directly relevant to your situation, the Court of Appeals did find that Honeywell had "negligently retained" the employee – he had engaged in other problematic behaviors since he had been rehired – and the case was sent back to the District Court on that theory.)

Applying that precedent to your situation suggests two points, neither of which (I admit) is directly responsive to your specific questions (which I will address below). First, it would appear that your company's decision to hire this individual should not expose your company to a negligent hiring claim. As the Yunker court emphasized, if employers are precluded from ever hiring anyone with a felonious past, those individuals will be doomed to permanent unemployment. Second, however, you will need to monitor the situation closely. If the employee you hired engaged in any conduct that you found troubling, you will need to address that situation promptly. You do not want to allow a situation to remain unremedied, especially if the context implicated any of the issues relating to his prior conviction. Disregarding this potential problem could expose your company to considerable liability.

The fact pattern you presented, however, is more subtle. You did not suggest that the employee has engaged in any problematic conduct in the workplace. Rather, you simply have learned that the employee occasionally has been asked to baby-sit for a co-worker's pre-teen daughter. The first question you asked is whether you have a "legal duty" to intervene. In my view, you do not. A company is not obligated to apprise its entire workforce of all of the dark secrets and past problems of which it is aware regarding all of its employees. Indeed, it would be an imprudent precedent to begin doing so for multiple reasons.

The next two inter-related questions you ask (what are the risks of intervention versus non-intervention) are tougher inquiries. As to the former, the risk of intervention would seemingly revolve around a potential defamation claim by the employee who had served time in prison. I will address defamation more thoroughly in other Blog postings, but the key point you need to understand here is that truth is a complete defense to a defamation claim. In short, to the extent you share any information with the employee who has asked the former felon to babysit, you need to be accurate. Do not embellish. Do not exaggerate. Stick to the facts and then stop. Taking this approach should eliminate any potential exposure on a defamation claim.

As to the latter (the risk of non-intervention), from a legal perspective, I see little risk to your firm. Even if your employee engaged in horrific conduct and sexually assaulted your other employee's daughter, I do not believe that your company would risk legal exposure. (This assumes, of course, that you have not made affirmative representations to your employees regarding what a terrific babysitter this employee would make.)

I have suggested in a few of my other Blog postings, however, that the legal analysis often does not end the inquiry. I suggest that you consider this issue as a parent might consider it. In this context, the greatest risk of "non-intervention" is the risk that the pre-teen daughter might be assaulted. Although the likelihood of this possibility may be miniscule, the consequences if it did occur would be traumatic. Further, if you were asking someone to babysit for your daughter, I have little doubt that you would want to know whether the individual had previously served time in prison for a sex-related offense. When considering the issue in this context, I believe the desired course of conduct is clear – pertinent information should be shared with the employee who is having the ex-felon babysit for her daughter.

You may discover that the employee himself already has shared this information and has provided sufficient reassurance to his co-worker that she has no reticence about hiring him. You may discover that she was unaware of the pertinent facts but that she is willing to use him to provide this assistance despite his prior conduct. But, you also may discover that she was unaware of the employee's background, is troubled by it, and wants to terminate the baby-sitting activities. At the present time, you do not know which of these scenarios might apply. Once you have shared the data (and done so with the request that it remain confidential), your employee will be able to make an informed decision regarding how she wishes to proceed. And I suspect you will sleep easier at nights if a subsequent problem ever does occur.

Bad-Mouthing the Company, Quirky Question # 39

Mon, 02 Jun 2008 10:49:00 GMT

As some of you may have recognized, the basic fact pattern described in Quirky Question # 39 was derived from a recent lawsuit from the Sixth Circuit, James Fox vs. Eagle Distributing Company, No. 07-5203 (December 14, 2007). In the Eagle Distributing lawsuit, the plaintiff filed a charge of age discrimination with the EEOC and a parallel state agency in Tennessee as a result of a demotion. Following his demotion, the employee had frequent contact with customers in his role as a beer distributor. The company received a number of complaints from these customers regarding the employee's poor job performance. As a consequence, the employer gave the employee a written notice that he would be discharged if the company received any more customer complaints.

Not long thereafter, the employer received a complaint of a different nature. Whereas the earlier complaints related to Fox's job performance, the later complaint related to Fox's negative comments about his employer. Fox had stated to at least one customer that he was pursuing a $10 Million lawsuit against the company, that his lawsuit should "get [the company's] attention," and that the company was "out to get him." The employer perceived this as another “complaint” by a customer and terminated Fox's employment. Fox then filed another Charge with the EEOC, now complaining of retaliation under the federal Age Discrimination in Employment Act (ADEA).

The District Court dismissed on summary judgment the plaintiff's underlying age claims relating to his demotion, as well as his retaliation claims. The employee did not appeal the dismissal of his federal age discrimination claims but did appeal the dismissal of his retaliation claim. The central issue on appeal was whether the employee's negative comments to the company's customers constituted "protected activity" under the ADEA's anti-retaliation provision, 29 U.S.C. § 623(d). The appellate court concluded that the employee's comments did not constitute "protected activity" and affirmed the summary judgment dismissal of the lawsuit.

As you likely know, the ADEA, as well as the other principal federal and state anti-discrimination statutes, contain broad anti-retaliation provisions. The ADEA's provision, for example, prohibits an employer from taking adverse actions against an employee who has "opposed any practice made unlawful by this section," or because an employee has "made a charge, testified, assisted, or participated in . . . an investigation, proceeding or litigation under this [Act]." The narrow question, therefore, was whether describing to customers the "$10 Million lawsuit" the employee was pursuing, or stating that his lawsuit would get the company's attention, or complaining the company was "out to get him," represented the type of conduct the statutory scheme was designed to protect. As noted above, the appellate court found that it was not.

The Sixth Circuit decision highlights several practical and legal points. First, and most importantly, the decision imposes some reasonable limits on the types of conduct the anti-retaliation provisions of the ADEA are designed to protect. The court did not believe that making disparaging comments about one’s employer fell into the category of protectable conduct. The court noted that the employee did not specifically reference “age discrimination” in his comments to the customer, or otherwise explain the basis of his lawsuit. Whether providing that additional detail would have cloaked the comments with additional protections is unclear from the opinion. In my view, however, making derogatory comments about one’s employer to customers (particularly, conclusory comments that do not set forth factual data) should not be deemed “protected activity” under the statutory scheme. These types of comments can alienate customers, damage business relationships, and make customers feel uneasy about being “drawn into” litigation. Moreover, there is no corresponding statutory goal that is advanced by denigrating one’s employer to a customer.

Second, the opinion illustrates the difficulties associated with managing an employee who has filed a Charge of Discrimination. Once a Charge has been filed with a federal or state agency, employers need to carefully assess how their actions will be perceived by the employee with the pending Charge. Equally important, employers need to consider how their actions can be “characterized,” even if the employers’ intent is entirely benign. This observation is not intended to suggest that no disciplinary action (up to and including termination) can be taken against someone who has a pending Charge. It can, and when appropriate, it should. But, be cognizant of the fact that disciplinary measures instituted against someone with a pending Charge will likely lead to an additional claim -- one of retaliation. The employer, therefore, needs to be prepared to defend the inevitable additional retaliation claim.

Third, although not discussed in the opinion, the decision illustrates the value of using "last chance" letters. If there are recurring performance problems that, when repeated, warrant termination, using a "last chance" letter benefits the employee and employer alike. The employee is informed that the company views the problem very seriously and that even one more incident will jeopardize the employee's continued employment. The employer benefits by clearly communicating its expectations to the employee and creating a written record of those expectations.

The bottom line is that employers can terminate employees who have decided to make derogatory comments about their employers to customers, even if those comments touch in some way on litigation relating to discrimination claims. The employers actions may lead to a separate retaliation claim, but that claim should be defensible.

Working Another Job While Taking "Leave," Quirky Question # 40

Wed, 04 Jun 2008 18:13:00 GMT

[Quirky Question # 40 is another one of our California Questions. As such, I have requested one of my California colleagues to provide the analysis. The analysis below was written by Karen Wentzel of our Palo Alto office. As I've described previously, Karen is a Stanford Law School grad, who has been practicing employment law for more than 20 years. Karen's biography can be found at www.dorsey.com. Her email address is: wentzel.karen@dorsey.com. If you have any particularly unusual questions pertaining to California law, you can send them either to Karen or me.]

Karen's Analysis of QQ # 40

This scenario arises out of a recent California Supreme Court decision, Lonicki v. Sutter Health Central, 124 Cal. App.4^th 1139 (2008). Employers may be surprised to learn that working at one job while on medical leave and receiving benefits from another may be acceptable in some circumstances. What those circumstances are, however, may not be known until a jury decides.

Under the California Family Rights Act (CFRA), the California equivalent of the federal Family and Medical Leave Act (FMLA), an employer with 50 or more employees may be required to provide eligible employees with up to 12 weeks of unpaid “family care and medical leave” on the birth or adoption of a child, serious illness of a family member, or when an employee’s own serious health condition “makes the employee unable to perform the functions of the position of that employee.” A serious health condition may include depression and work-related stress where the employee is under continuing treatment by a health care provider.

In Lonicki the California Supreme Court ruled that an employee's ability to work a second job while on medical leave from another can be evidence that he or she is not suffering from a serious health condition, but it is not conclusive.

Plaintiff Antonina Lonicki was a certified technician at Defendant Sutter's hospital sterile processing department in Roseville. After the hospital became a level II trauma center in 1997, Plaintiff's workload increased significantly, and shortly thereafter, a new supervisor allegedly increased her stress and caused her to consult a doctor. In January 1999, Plaintiff began working weekends at another hospital, in addition to her job at Sutter.

On July 26, 1999, the new supervisor changed Plaintiff's shift and denied her request for vacation. Plaintiff went home in tears and told her supervisor she was too upset to return to work. The supervisor requested that Plaintiff obtain medical authorization for her absence. Plaintiff received a note for a one-month leave of absence for "medical reasons" from a nurse practitioner and was referred to a therapist for work-related stress.

Approximately one week later, Sutter sought a second opinion of Plaintiff's medical condition through its own doctor. After speaking to Plaintiff for a only a few minutes, the doctor concluded that she was able to return to work with no restrictions. A Sutter director telephoned Plaintiff and told her to return to work or face dismissal. Plaintiff informed Sutter that, on the advice of her doctors, she could return no sooner than the end of her one-month leave. Plaintiff did not return to work at Sutter and continued her weekly visits with a psychologist until the end of August. During those visits Plaintiff was diagnosed with "major depression" related to work, and received a doctor's note recommending an additional month of "sick leave." When Plaintiff delivered the note to Sutter, she learned that she had been discharged for failing to return to work during her original leave of absence. Plaintiff had continued working part-time at the other hospital during this period.

The trial court granted summary judgment to Sutter on Plaintiff's CFRA claim, finding that she was capable of performing her job at Sutter because she continued to work a substantially similar part-time job at the second hospital while on leave from Sutter. In 2004, the California Court of Appeal affirmed the lower court's decision, finding that the question was whether Plaintiff could perform her job functions generally, not whether she could perform the specific job at Sutter.

In a 4-3 ruling, the California Supreme Court reversed, holding that an employee's ability to work a second job while on medical leave from another might constitute evidence that he or she is not suffering from a serious health condition, but it is not conclusive. "When a serious health condition prevents an employee from doing the tasks of an assigned position, this does not necessarily indicate that the employee is incapable of doing a similar job for another employer," Justice Kennard wrote for the majority. Reversing the Appellate Court, the majority held that the test under the CFRA is whether an employee is unable to perform her job for the specific employer, not her ability to perform her essential job functions "generally."

The three justices who dissented asserted that the legislation did not contemplate that an employee would take medical leave from one job in order to work at a second job while still receiving benefits from the first job.

The bottom line: Even if an employee is on medical leave due to inability to perform the essential functions of his or her job, yet continues performance at a similar second job, this is not conclusive evidence that he or she does not suffer from a serious health condition and is capable of performing the duties specific to his or her job under the first employer. Terminating the employee without more information may lead to costly and time-consuming disputes involving factual questions that may ultimately have be decided by a jury.

Unethical Conduct By Employee, Quirky Question # 41

Mon, 09 Jun 2008 15:49:00 GMT

[This Quirky Question was presented to my partner, David Lauth, by one of his clients. Therefore, I've asked David to share the analysis in which he and his client engaged.

David is a 1977 graduate of the University of Michigan and a 1982 graduate of the University of Michigan Law School. If you would like to provide David any feedback or reaction to this fact pattern, you can reach him at Lauth.David@dorsey.com. David's resume is available at www.dorsey.com, and his direct line is 612.343.7940.]

David's Analysis of QQ # 41

Needless to state, the behavior described in this Quirky Question demonstrates a discouraging lack of honesty and integrity. Moreover, it raises concerns about what sort of side deals this employee might be cutting or trying to cut with his customers and others. In our view, this conduct is sufficiently serious that you may wish to consider termination of employment, or at a minimum, a written warning that any similar behavior in the future will result in termination.

Even though this situation does not present any cutting-edge legal issues, it does illustrate the typical potential concerns worth exploring before making any termination decision.

1. Investigation. The first step in this situation, like others, is simply to confirm that the alleged behavior did in fact occur. Here, the report of the motel manager certainly appears credible, since she has no apparent motive to fabricate these allegations. Even so, it is essential to confront the employee with the allegations and give him an opportunity to deny or explain them. This is the kind of “due process” that most judges and juries will expect to have occurred before an employee is terminated, out of a basic and simple sense of fairness. If the employee concedes these incidents occurred as alleged, that will eliminate ambiguity regarding the underlying facts. If the employee flatly denies the allegations, you should consider casting a broader net to look for other witnesses to these events who might be able to confirm or deny the allegations. Of course, if other witnesses corroborate the allegations notwithstanding the employee's denials, you will have further evidence of the employee's lack of honesty.

2. Contract issues. The next step is to evaluate whether this employee has any kind of written employment agreement. Some employees do have such agreements, and they often prevent an employer from terminating an employee unless there is “cause” – or unless the employer is willing to provide the severance pay required by the agreement. If, however, there is no employment agreement, the salesperson is an “at will” employee, meaning that you are at liberty to terminate his employment for any reason not prohibited under the law. (If the employee had an employment agreement that required “cause” for termination, you would have to determine whether the "cause" threshold had been met in this case, or whether you needed to consider another alternative short of discharge.)

3. Comparable situations. Perhaps the most frequent legal challenges to employment-related decisions arise from the state and federal laws that prohibit discrimination on the basis of race, age, gender, disability, or other protected classifications. Before making a termination decision, you should explore whether any other employees of the company have ever been caught engaging in similarly dishonest behavior. If you find that there have been comparable situations involving employee dishonesty (even if they did not involve a similar fact pattern, which presumably has never previously arisen), you would want to ensure that this employee was being treated no more harshly than any other employee of a different race, gender, age or the like who had engaged in similar misconduct.

Assuming this review leads to the conclusion that a termination of employment is both appropriate and legally defensible, there are at least two other issues you may wish to consider. Other important subjects of discussion include the following.

4. Communications. It is often necessary to communicate something about an employment termination both inside and outside the company. In most situations, however, “less is more.” Disparaging statements that are made about a former employee, either inside or outside the company, can lead to potential defamation claims. For that reason, you may elect not to communicate inside the company about the reasons for this employee’s termination. Similarly, you may decide that you do not wish to have further communications with the motel manager regarding this subject, other than thanking her for bringing the issue to your attention, informing her that the company has responded appropriately, and requesting her to let you know if any further problems occurred.

5. Additional investigation and training. You also may wish to review all of this salesperson’s customer accounts to confirm that there have not been other improprieties. Finally, you may want to take this opportunity to review and revise the company’s Employee Handbook or Code of Conduct, and/or use this as an opportunity to conduct employee training meetings on the issue of business ethics.

Quirky Question # 42, Investigation Inquiries

Mon, 16 Jun 2008 10:39:00 GMT

[Because Quirky Question # 42 contained a variety of different inquiries regarding workplace investigations, I have restated each of the questions below, as well as providing my response. I hope you find the information helpful.]

1) Is there a time frame you recommend for employers to commence an investigation into workplace misconduct? Is there a time period by which the investigation should be completed?

Investigations into suspected workplace misconduct should be initiated promptly. Beyond that general guideline, however, the speed with which a company should initiate an investigation largely depends on the circumstances and the type of misconduct being investigated. For example, if the company believes there is a risk of workplace violence, the investigation must be commenced immediately and appropriate precautionary steps must be instituted immediately, even if they are only temporary and await a more complete investigation. Similarly, if the company believes that employees are trading securities on the basis of inside information, again there are critical reasons to begin your investigation as soon as possible. There are many other contexts in which a careful and prudent company, which is desirous of minimizing the risk of injury to other employees, the public, or the company, and desirous of reducing the risk of litigation, will take prompt action to investigate allegations of employee wrongdoing.

In a typical investigation into allegations of workplace discrimination and/or sexual or other types of harassment, the company needs to move aggressively, though perhaps not quite as aggressively as it would in the contexts described above. Even this observation, however, is contextual. For example, if the sexual harassment investigation involves allegations of inappropriate jokes in the workplace, those allegations would warrant one type of response. If, alternatively, the sexual harassment allegations related to sexual assault, the investigation must be initiated immediately. In general, courts have made clear that they expect companies to respond to allegations of harassment and/or discrimination promptly (i.e., within days, not weeks or months). The longer a company allows serious allegations to remain unexplored, the less receptive the courts will be to the company's defense and the easier it will be for the plaintiff to argue (perhaps justifiably) that the company was indifferent to the serious problems brought to its attention.

As these examples illustrate, one size does not fit all. Tailor the nature of the investigation to the types of allegations made. The timing, scope and the speed of the completion of the investigation will likewise depend on the claims made and the facts uncovered during the investigation itself.

2) If a lawsuit is filed on the morning the investigation is commenced, must that fact be disclosed to the interviewees? Would this assessment change if the interviewee is named as a defendant?

This is an interesting inquiry and one I have not personally encountered. In general, I do not believe the fact that litigation was just instituted needs to be disclosed to the interviewees, subject to the caveat discussed below. I am not sure, however, what downside would be associated with disclosing that information in most instances. Indeed, apprising employees that a lawsuit had just been filed that morning might help them better appreciate and understand the stakes involved for the company and make them more cooperative.

As the second observation above reflects, my attitude would change if the company were interviewing the defendant. In this instance, I believe that the fact of the lawsuit and the employee's identification in the lawsuit as a defendant should be disclosed to him or her. (For the purposes of the question, I will assume that the lawsuit was filed by a third-party, not the company itself. If the company is the plaintiff, a broader set of ethical rules would come into play.) I am not aware of any legal requirement to disclose the litigation to an interviewee, even one named as a defendant, but I consider that approach fairer and more prudent. The accused may wish to obtain counsel, the accused may wish to consider more carefully what information he or she discloses voluntarily, and/or the accused may wish to thoughtfully consider all options, including resignation, before participating in an investigation. All of these potential desires are legitimate and should be respected. Moreover, if the company were to push ahead with its investigation, without disclosing the fact that the lawsuit had been filed that day, the employee's lawyer later may be able to exploit that fact. In my experience, jurors like to see not just a compelling substantive justification for a company's action, but procedural fairness as well. Interviewing someone who has been named as a defendant in a lawsuit, without disclosing that fact, does not have the appearance of procedural due process.

Finally, there may be compelling reasons not to proceed with the investigation and the interview of the accused once the lawsuit has commenced. For example, assume that the named defendant is a member of management who has been accused of sexual harassment. Assume further, that you interview him without revealing the filing of the lawsuit and that he largely admits wrongful conduct. Although these admissions may provide the company a basis to discharge him (especially if the allegations are sufficiently serious or he is a repeat offender), you also confront the risk that his status as a member of management will result in his actions being imputed to the company, with attendant corporate liability. If your investigative report later must be disclosed during discovery, the company may have provided an assist to the plaintiff. In short, once litigation has begun, I believe that a company should consider carefully just how it wishes to proceed with an investigation into the alleged wrongdoing. This assessment should include an evaluation of whether an independent investigation is even warranted or whether the "investigation" simply should be performed in the context of the lawsuit itself.

3) How do you prevent an interviewee from sharing with other employees the discussion that takes place in an investigative interview? Would you recommend disciplining a witness who does not maintain the confidentiality of the interview discussion? Should that person be terminated?

Individuals being interviewed in connection with a company investigation should be advised at the outset of the interview that the company is engaged in a confidential investigation and the company's expectation is that the contents of the interview, both questions and answers, will remain confidential. It also is appropriate to inform employees that if they reveal information disclosed in an interview (either questions or answers) to other employees or anyone outside the company, including family members, the employee will be subject to discipline, up to and including discharge.

In my view, it would be appropriate to discipline someone who disregarded that directive. The level of the discipline, and the difficult question of whether the employee should be terminated for revealing the contents of the interview, again (like Question # 1 above) is highly dependent on the nature of the investigation. For example, if the company is investigating insider trading and the interviewee tips off the employee accused of this illegal conduct, the interviewee should be terminated. If, however, the alleged offense is far less severe, discharge may be a completely disproportional response to the revelation (intentional or inadvertent) of some aspect of the investigative interview.

Before terminating an individual who has participated in an investigation, you also should consult with in-house or outside counsel. The key issue you will want to consider in this context is whether the termination could be characterized as retaliatory. This issue currently is before the U.S. Supreme Court and will be the subject of a future Blog.

4) What if an employee surreptitiously records an interview session? What can be done to retrieve the tape recording? What consequences can be imposed for this conduct? If the tape is recovered, can it be destroyed?

The question presumes that at some point after the interview, the company learns that someone has secretly recorded the interview session. Clearly, you want to obtain all copies of the tape. It could be passed along to other interviewees or individuals outside the company. Moreover, in our digital age, you could discover the audio tape had made its way to the Internet or a website. Given these risks, I recommend that the company immediately try to retrieve all copies of the audio tape. Further, you could advise an employee who refused to return it that he/she will be subject to discipline, up to and including termination. (Again, however, this admonition should be considered carefully with counsel to ensure that the company is not increasing the likelihood of future litigation.)

You also ask whether the company can destroy the tape. This is a more difficult question, and implicates some facts that are not addressed in your inquiry. For example, has a lawsuit been instituted? Is it likely that a lawsuit will be instituted? In either of these contexts, the prudent course of conduct is to preserve this evidence carefully. You do not want to expose the company to a risk that it will be accused of spoliation of evidence (essentially, a claim that the company destroyed inculpatory evidence). Even in the absence of a lawsuit, or the likelihood of a lawsuit, the more conservative approach is to retain the tape. By doing so, you will avoid the risk that you are later accused of destroying evidence that either was damaging to the company or in some way beneficial to the interviewee.

5) How can you evaluate witness credibility if the interviews are being conducted telephonically?

As recognized by your question, it is difficult to assess witness credibility in a telephonic interview. Therefore, I recommend that, for interviews where you have a reasonable basis to believe that witness credibility will be an important factor in your assessment, you not conduct the interviews over the telephone. If you have to conduct telephonic interviews, you will have to base your credibility assessments on issues such as consistency with other testimonial and documentary evidence.

6) What right does the employee accused of wrongful conduct have to obtain the investigative report? How about the witnesses who are interviewed? How about the person making the accusations?

The employee accused of wrongful conduct has no right to obtain or even review the investigative report. The same holds true for the witnesses you interview. A similar observation applies to the person who made the accusations. You do not have to provide the investigative report to any of these individuals. I strongly recommend that you not do so.

Of course, if litigation is commenced, either by the person making the accusations, or (in that unusual context) the accused, the calculus above changes. Depending on who prepared the report, it may or may not be protected by the attorney-client privilege or the work-product doctrine. If a lawyer did not prepare the report, or the report was not prepared at the direction of counsel, in all likelihood you are going to have to produce the report during the discovery phase of the lawsuit. That does not mean, however, that it must be provided to the accused or to the witnesses – just the person who has filed the lawsuit. Moreover, you should make an effort to protect further dissemination of the report through the use of an appropriate Protective Order.

Even if a lawyer prepared your report, or directed the preparation of the report, if you intend to rely on the report and the analysis set forth therein to justify your decisions or to demonstrate that the company provided procedural due process to the accused, you may find that the report must be disclosed in response to discovery requests. That potential illustrates the importance of considering a number of related issues in advance: a) who should prepare the report; b) what should the scope of the report be; c) to whom will the report be provided within the company; d) will the company rely on the report for the decision regarding the accused; and e) will the company look at external factors, beyond the scope of the report, as well. These and other factors will be addressed in future Blog questions.

[I hope you find the analysis above to be of use. If you are interested in obtaining more information on workplace investigations, I recently wrote an article on this topic for Business Law Today (April 2008). To obtain a copy of that article, you can simply access our firm’s website, www.Dorsey.com, and click on Dorsey Publications. Under that tab, you will see a listing for “Attorney Articles.” Scroll down to the article on Workplace Investigations and you will be able to download the article. Alternatively, just send me an email requesting the article and I will forward it to you. Regards, Roy]

Observations About Workplace Violence, Quirky Question # 43

Mon, 23 Jun 2008 09:58:00 GMT

Like prior Blog questions, this inquiry illustrates the difficult balancing of two important, and sometimes conflicting, societal interests. On one hand, you have employers' critical interests in maintaining a violence-free workplace. On the other, for public employers, there is a legitimate First Amendment right. The challenge confronted by governmental employers (and, ultimately, the courts) is how to ensure a safe workplace without chilling individuals’ free speech rights.

In a case from just over one year ago, the Second Circuit Court of Appeals determined that the public employer's interest in maintaining a violence-free workplace was paramount. In Blackman vs. New York City Authority, (Civ. File No. 06-4714, June 21, 2007), the Court upheld the employer's right to terminate an employee who stated that two supervisors who were killed in a workplace shooting "deserved what they got." Assuming that the fired employee had engaged in protected speech (itself a close question), the court found that the employer’s need to protect its workers "plainly outweighed" the employee's right to make the offending remark.

In the New York case, there was some history involving the same employee (Blackman) that presumably made the decision somewhat easier. On a prior occasion, Blackman had had a heated altercation with his supervisor, which ended when Blackman stated, "I am not leaving; I have a Transit Authority pass, a Union Card, and a .38 . . .." Blackman was involved in the disciplinary process relating to these initial comments when the additional inflammatory remarks were made. Exacerbating the situation, the two supervisory employees who had been murdered, and about whom Blackman made his "deserved what they got" comment, worked for Blackman's employer, the NY Transit Authority. Further, Blackman's comment expressed the view that the two supervisory employees deserved to be shot because of their role in terminating the employment of the ex-employee who had murdered them. With these facts as the backdrop, the Court observed, "Even assuming that Blackman's [deserved what they got comment] may have addressed matters of public concern, the opinions expressed by Blackman, when viewed in light of his earlier threat against [his supervisor], reveal him to be a person of violent disposition, who was potentially deeply disruptive of the workplace." With this history, the court found the government's interests in discharging Blackman to be "especially weighty."

The facts presented in this Blog question are a bit closer than the Second Circuit case from which the question was drawn. In a context where the employee had not demonstrated any prior violent propensity (no previous threatening conduct or comments) and where the shooting to which the employee referred did not occur at his own place of employment, a public employer may have had a somewhat more difficult task persuading a court that the employee truly represented a risk of workplace violence warranting his dismissal.

In close cases, employers are in the unenviable position of trying to evaluate risks of workplace violence, assessing whether an idle or heated observation by an employee realistically reflects the employee's propensity to act violently in the workplace. Of course, if the employer treats the comments dismissively, concluding that they truly were just idle observations or comments made in anger on which the employee will never act, and subsequent developments later prove the employer wrong, it is very easy to second-guess the employer's judgment. In this context, there always is a risk of litigation from the decedent’s estate on the theory that the employer negligently supervised or negligently retained the employee who made the threat and later acted on it. Conversely, however, if the employer takes the precautionary step of discharging the employee who made the comment, despite the absence of any history of threatening comments or violent conduct, the employer risks litigation from the discharged employee who will contend that his termination constituted a disproportionate response and that the public employer was attempting to chill his freedom of expression.

The bottom line, however, is that workplace violence is an all-too-common component of the 21st century workplace. Incidents of workplace violence are reported far too frequently, such as the June 25, 2008, shooting at a Henderson, Kentucky plastics plant that left five workers dead. The Department of Labor has estimated that approximately ten percent of workplace deaths are attributable to workplace violence.

Given these grim statistics, every employer needs to give thought to how it will handle situations involving the risk of workplace violence. The good news is that courts have recognized that this is a serious problem and, for the most part, validate employers' steps to minimize the risk of harm to employees, including the discharge of employees perceived to present a risk of harm to their co-workers and managers. This is true even when the discharge may result in some infringement of a public employee's right to express him/herself in the workplace.

Buttons Worn by Union Employees, Quirky Question # 44

Mon, 30 Jun 2008 15:44:00 GMT

[As I have expressed previously, when I receive a question implicating traditional labor law issues involving the NLRA, NLRB, union organizing or collective bargaining agreements, I promptly walk down the hall to the office of my partner, Robert Hobbins. Bob, a 1970 graduate of Creighton University, and a 1973 graduate of New York University School of Law, has been practicing labor law with Dorsey since his graduation from law school. He is the Chairman of Dorsey's Labor & Employment Law Department. His insights into Quirky Question # 44 are shared below.]

Bob's Analysis of QQ # 44

As counterintuitive as this may seem, your Human Resource Director is appropriately concerned. In Washington State Nurses Ass’n v. NLRB, 526 F.3d 577 (9^th Cir. 2008), the U.S. Court of Appeals for the 9^th Circuit recently reversed a decision of the National Labor Relations Board (the Board) which had concluded that a hospital lawfully could prohibit nurses from wearing similar buttons. The Court of Appeals held instead that the hospital’s rule violated the rights of the nurses under the National Labor Relations Act (NLRA) because the hospital failed to establish that there were “special circumstances” permitting the hospital to ban such buttons under its rule.

The NLRA provides employees of covered employers certain rights, including the Section 7 right “to self-organization, to form, join or assist labor organizations . . . and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection . . . .” Section 8 of the NLRA provides that it is an unfair labor practice for an employer to “interfere with, restrain, or coerce employees in the exercise of the rights guaranteed . . . .” Over the years, the Board, the federal agency charged with administering the NLRA, has developed an intricate set of rules about union-related communications in the workplace, attempting to balance the statutory rights of employees under the NLRA with employers’ rights to maintain control of their premises and to operate their businesses.

The rules adopted by the Board and the courts over the years for application in hospital workplaces have traditionally distinguished between patient care areas within an acute care hospital and all other areas. In those non-patient care areas, attempts to ban the wearing or display of union insignia are presumptively invalid, but the presumption may be overcome by demonstrating that the ban is necessary to avoid disruption of health care operations or the disturbance of patients – i.e., “special circumstances.” Beth Israel Hospital v. NLRB, 437 U.S. 483 (1978). Traditionally, the employer proposing such a ban in areas outside direct patient care areas has the burden to prove that such special circumstances are present.

In the Washington State Nurses case, the hospital contended that buttons worn by nurses reading, “RNs Demand Safe Staffing” involved a clear suggestion that the hospital’s staffing levels were unsafe and that such a message was “inherently disturbing” to patients, thus establishing, without more, the requisite special circumstances. The record in the case contained no evidence of any actual disturbance of patients, nor of complaints by patients or members of their families, and no evidence that either patients or family members had even raised questions concerning the buttons. The hospital did offer proof that various nurse managers had expressed their own concerns about the potential effect of the union button on patients and their families.

In the Washington State Nurses case, an administrative law judge had issued a decision that the hospital’s action unlawfully interfered with employee rights under the NLRA and therefore violated Section 8. However, in reviewing the judge’s decision, the Board itself ruled 2-1 that the hospital’s ban of the “Safe Staffing” button was justified, finding that the message on the button at issue would “inherently disturb” hospital patients, thus satisfying the requirement of “special circumstances” to justify the enforcement of a ban outside of direct patient care areas.

The Board’s decision was appealed by the union to the U.S. Court of Appeals. In reviewing decisions of the Board, the Courts of Appeals are obliged by Sections 10(e) and (f) of the NLRA to affirm the Board’s findings of fact if they are “supported by substantial evidence on the record considered as a whole.” In reviewing the Board’s determination that the hospital had established “special circumstances” justifying its rule banning these buttons throughout the premises (even in non-patient care areas), the Court of Appeals concluded that there was no substantial evidence in the record to support the Board’s finding that these buttons had a disruptive effect on the hospital’s health care operations or its patients. Rather, the Court characterized the Board’s finding as inherently speculative, citing the absence of any record evidence of patient complaints, expressions of concern or even questions concerning the button. The Court also noted that this was true even though nurses had worn the very button at issue for several months before it was banned and had displayed a different – but arguably even more controversial – button prior to that for a number of months. Accordingly, after examining the record as a whole, the Court of Appeals concluded that the Board’s finding that the hospital had met its burden to establish “special circumstances” was not supported by substantial evidence, requiring its reversal.

In your question, there is no indication that the button worn by your nurses has prompted any expressions of concern or other indications of disturbance of patients or their family members to date. In the absence of any evidence that the button is actually having such an effect, it will be difficult to establish the special circumstances required to ban the wearing of such buttons throughout the hospital. Note that different considerations may apply in the event you wish to ban the wearing of these buttons only in direct patient care areas.

Unemployment Compensation Challenge, Quirky Question # 45

Wed, 02 Jul 2008 18:31:00 GMT

[Set forth below is another QQ contribution from our West Coast colleagues. The analysis below is provided by Sarah Jung Evans, an Associate in our Seattle office. Sarah, who is licensed to practice both in California and Washington, is a 2000 graduate of Northwestern University and a 2003 graduate of UCLA Law School. Sarah's direct line is: 206.903.2396; her email is evans.sarah@dorsey.com. Don't hesitate to contact her if you have any questions about the issue below.]

Sarah's Analysis of QQ # 45

Washington law does not disqualify from unemployment benefits all workers who voluntarily leave their jobs, only workers who leave “voluntarily without good cause.” The State Legislature, however, has never defined “good cause,” although it has listed eleven specific reasons why a worker could leave voluntarily and still receive benefits. Those reasons include relocation of a military spouse, protection of a claimant or immediate family member from domestic violence or stalking, a 25 percent or more reduction in pay, a 25 percent or more reduction in hours, a change in the worksite resulting in increased distance or difficulty in travel, an unsafe workplace, illegal activities on the worksite, a change in work that violates a claimant’s religious or moral beliefs, or taking an apprenticeship approved by the Washington state apprenticeship training counsel.

In Spain v. Employment Sec. Dep’t (consolidated with Batey v. Employment Sec. Dep’t), decided by the Washington Supreme Court on June 19, 2008, two claimants sought unemployment benefits. Spain stated that she left because she suffered “daily verbal abuse” on the job. Batey said she left her job with a battered women’s shelter after “sharply disagreeing with management on how their clients should be treated, among other things.”

On its first pass, the Department concluded in both cases that it did not have the statutory authority to grant unemployment benefits if the reasons the claimant voluntarily left his or her job was not among the eleven reasons listed above. The claimants appealed and the Washington Supreme Court granted review to decide whether the eleven reasons for which a claimant could quit and still receive benefits were the only reasons, or whether they were simply a non-exhaustive list. The Court held that the list was non-exhaustive, and remanded to the Employment Security Department to “determine, based upon the individual facts of the case . . . whether these employees had good cause to leave their jobs.”

In sum, if you do decide to challenge a former employee’s claim for unemployment benefits, the fact that they quit may not be enough to defeat the claim by itself. Until either the Legislature or case law provides more guidance, the likely outcome of employer objections under these circumstances is unclear.

The other question you should consider is whether it is wise to challenge the former employee’s request for benefits. Some things to think about:

(1) What risk do you run that the former employee will file some type of wrongful termination suit against your business in the future? If the former employee feels that they were fired for a discriminatory reason, but you have evidence that they were fired for misconduct, you may want to defend against the unemployment insurance claim. If you win, it shows that you have support for your position and may discourage the former employee from pursuing any other claims, and provide additional evidence to bolster your defense if they do file a lawsuit. Of course, an opposite result at the unemployment compensation stage, especially if it turns on collateral conduct (e.g., an employee claiming sexual harassment) may embolden the employee.

(2) How much is contesting the claim going to cost in lost productivity and out-of-pocket costs? The process of contesting an employee's unemployment compensation claim can be distracting and a drain on the employer's human resources, as many times lawyers do not represent employers at such proceedings.

(3) How likely is it that contesting the unemployment benefits will make the employee more likely to sue? An employee who receives his/her benefits may have a more favorable feeling about the employer and more quickly move on with his/her life. Your analysis of this factor will depend largely on how well you know the former employee.

Firing An Employee for Having an Abortion, Quirky Question # 46

Mon, 07 Jul 2008 09:58:00 GMT

As I have stated in other Blog analyses, trust your instincts. Based on the facts you report, you would be exposing the company to risk. Terminating an employee because she had an abortion violates Title VII, and the Pregnancy Discrimination Act (PDA) contained therein.

Although this particular issue has not been litigated frequently, the federal courts that have examined this issue have held that is impermissible for an employer to terminate an employee because she elected to have an abortion. This analysis is supported by the legislative history of the PDA and the Equal Employment Opportunity Commission (EEOC), to which the courts often defer when adjudicating issues relating to employment law.

The PDA states, “the terms ‘because of sex’ or ‘on the basis of sex’ include but are not limited to, because of or on the basis of pregnancy, childbirth, or related medical conditions; and women affected by pregnancy, childbirth, or related medical conditions shall be treated the same for all employment-related purposes, including receipt of benefits under fringe benefit programs, as other persons not so affected but similar in their ability or inability to work.” 42 U.S.C. § 200e(k). The question, therefore, is whether an abortion is a “related medical condition” under the statute.

As referenced above, the EEOC has weighed in on this issue. The EEOC has stated that,

“The basic principle of the [PDA] is that women affected by pregnancy and related medical conditions must be treated the same as other applicants and employees on the basis of their ability or inability to work. A woman is therefore protected against such practices as being fired . . . merely because she is pregnant or has had an abortion.” 29 C.F.R. pt. 1604 App. (1986).

The EEOC’s interpretation of the PDA also is consistent with the legislative history of the statute. “Because the [PDA] applies to all situations in which women are ‘affected by pregnancy, childbirth, and related medical conditions,’ its basic language covers women who chose to terminate their pregnancies. Thus, no employer may, for example, fire or refuse to hire a woman simply because she has exercised her right to have an abortion.” H.R. Conf. Rep. No. 95-1786 at 4 (1978), reprinted in 95^th Cong. 2d Sess. 4,1978 U.S.C.C.A.N.4749, 4766.

In a very recent case from the Third Circuit Court of Appeals, Doe v. C.A.R.S Protection Plus, Inc., et al., Nos. 06-3625, 06-4508 (May 30, 2008), the appellate court analyzed these issues in light of the language of the PDA, its legislative history and the EEOC’s position, and stated, “We now hold that the term “related medical conditions” includes an abortion.”

The C.A.R.S case went up to the Third Circuit after the District Court granted the employer summary judgment on the plaintiff’s Title VII claim. The appellate court reversed.

The facts in C.A.R.S were straightforward. One of the company’s employees discovered that there were serious medical problems associated with her pregnancy. The employee learned her unborn child had severe deformities leading her physician to recommend the pregnancy be terminated. She and her husband evaluated the recommendation and elected to follow their physician’s advice. Because C.A.R.S had a miserly leave policy for its employees (the appellate court charitably described the leave policies as “less than compassionate”), which did not provide for any personal or sick leave and five days of vacation only after an employee had been employed for at least one year, the employee’s husband had kept the company apprised of his wife’s medical visits. He also requested leave time for his wife for the funeral and asked whether she could use her vacation week to grieve following the funeral. There was conflicting testimony about whether this request had been granted by the employer. But, there was no dispute that on the day of the funeral, the company packed up the employee’s personal belongings and terminated her employment.

The company attempted to demonstrate that its discharge decision was not discriminatory. Rather, the company argued, it was based on its policies prohibiting any personal or sick leave. The appellate court, however, found that those policies were not uniformly applied and that several male employees had been given time off for medical-related conditions (mental illness, heart attack, back problems, etc.). The evidence also demonstrated that there was no uniform policy regarding whether an employee was required to call in to the company to request time off for an illness.

Based on these facts, the appellate court found that Doe (the District Court agreed to allow the plaintiff to be identified anonymously) had made out a prima facie case of pregnancy discrimination. The Third Circuit also found that Doe had raised a fact issue as to whether the reasons articulated by C.A.R.S for its decision were pretextual. Here, the court pointed to some of the same evidence that had been used to establish the prima facie case, as well as a comment by Doe’s supervisor that the lower court had inappropriately treated as a “stray comment.” The appellate court also found that the temporal proximity between the employee’s decision to terminate her pregnancy and the company’s decision to discharge her was “unusually suggestive,” noting that temporal proximity alone may be sufficient to create an “inference of causality” sufficient to defeat summary judgment.

The Third Circuit sent the case back to the trial court for further proceedings. Assuming it is not resolved through settlement, the jury will have to decide whether the evidence supports the argument that Doe was fired because she elected to terminate her pregnancy or whether she was fired for “abandoning” her job, as alleged by the company. The underlying legal issue on which Doe’s case is grounded, however, has been resolved – it is a violation of Title VII and the PDA to terminate an employee because she elected to have an abortion. The task for the jury will be to make a factual determination regarding the employer’s true motivation for discharging the employee.

In the fact pattern presented in your question, you posit that you have been directed to terminate the employee who recently had an abortion. I suggest that you explore with your company’s management the underlying reasons for why they wish to terminate the employee. If they acknowledge that their motivation to discharge her is driven by her decision to have an abortion, you should explain that such a decision would constitute a violation of Title VII and the PDA. If they direct you to terminate her employment anyway, you have an ethical decision to make. Consider it in the broader context of whether you would engage in other illegal conduct simply because you supervisors directed you to do so. For example, if your boss told you to fire someone based on his race, age or other protected classification, would you do so?

Faking Illness to Avoid Shift, Quirky Question # 47

Mon, 14 Jul 2008 10:15:00 GMT

Your question raises an issue similar to the inquiry addressed in our Quirky Question # 41. As you may have read, that QQ involved the unusual situation of an employee routinely stopping at a hotel near his place of employment to help himself to the “free” breakfast and "free" newspaper the hotel provided to its guests. In short, the prior question involved the issue of how an employer should deal with a dishonest employee.

The same basic question is presented here, though in a very different context – how should the employer respond to a dishonest employee who is availing herself of the FMLA leave options by periodically claiming, falsely, that she is ill and needs leave. Compounding the problem, she is boasting to her fellow employees that she is going to continue gaming the system on a regular basis in the future.

Before addressing the specific response warranted by this scenario, let’s review some of the basics. The Family and Medical Leave Act (FMLA) provides for up to 12 weeks of unpaid leave for qualifying employees. A qualifying employee is one who has worked for the employer for at least 12 months and who has worked at least 1250 hours in the preceding 12-month period. (In previous questions, I have addressed the unusual circumstances associated with the fact that the eligible employee did not have to work for 12 consecutive months to be FMLA eligible; see QQ # 7.)

One of the more difficult aspects of administering the FMLA for employers is that the leave taken by employees does not have to be taken continuously. Rather, the leave can be utilized “intermittently.” Given that employees are eligible for 60 days of leave (12 weeks times 5 business days per week) annually, the employee described in the question above would be able to skip the shift she wants to avoid during each of the 26 weeks that she otherwise would be obligated to work that shift (once every other week), and still have 34 days of potential FMLA leave remaining.

Two other fundamental points are worth addressing. First, the employer does not simply have to accept the employee’s request for FMLA leave without obtaining medical corroboration of the underlying need for the leave request. Under the statutory scheme of the FMLA, the employer may insist that the employee provide a certification from a health care provider that she has a qualifying medical condition. Moreover, if the employer is not satisfied with the explanation provided by the employee, the employer may insist that the employee visit another medical provider (at the employer’s expense) for a second opinion. If the two medical assessments are in conflict, the employer may insist upon a third opinion (again at its expense) to be provided by a medical provider agreed upon by the first two medical practitioners who provided opinions.

Second, in general, “migraine headaches” may (or may not) qualify as a “serious health condition” under the statute, sufficient to provide employees a right to take FMLA leave. Again, this determination will likely depend on various medical considerations – e.g., how frequently does the employee get the headaches, how severe are the headaches, how incapacitated is the employee because of the headaches, how long has the employee experienced the headaches, is the employee utilizing prescription or non-prescription medications that adequately address the physical problems associated with the headaches. Presumably, these and similar inquiries are the types of questions that will be explored in the medical examinations.

Turning then to the specific factual scenario described above, you have several options. One option is to simply allow the employee to take the leave she requests once every other week. In my view, however, this is a bad idea. First, presumably, you will need to get some other employee to work the shift that the employee is skipping. If that employee already has worked 40 hours that week, you will have to pay the replacement employee overtime compensation for the skipped shift. Simply put, even though you don’t have to pay the employee taking the leave for the shift she misses, her decision to skip one shift every other week could cost your firm money.

Second, the other employees (many of whom also may be unenthused about working this late-night shift) may resent the fact that their co-worker is skipping the shift and that the company is tolerating her regular absences. Other employees may perceive this situation as unfair and they would be correct.

Third, given that the employee is boasting to her co-workers that she is going to miss the shift every other week, for what she concedes is a pretextual reason, accepting this conduct by her has two adverse consequences. It could exacerbate the resentment other employees feel toward the employee and the company. And, it sends the wrong message to the workforce. Allowing the employee to take the leave basically communicates to this employee and the rest of the workforce that she can abuse the company’s leave rules (as well as misuse the legitimate benefits of the FMLA), without consequence. If this approach were utilized by the company, you should not be surprised if other employees also decide that they would like to take some time off, either intermittently or on a more protracted, consecutive-day or consecutive-week basis.

Another option then would be to confront the employee about her request for leave and her statements that she is going to get a well-timed migraine headache every time she is asked to work the late shift. Assuming you corroborate the fact that the statement was made (either by speaking with a sufficient number of other employees or by obtaining an admission from the employee that she made this statement), you simply could deny her request for FMLA leave. The corollary question you should assess is whether you also want to discipline the employee for making a fraudulent request for leave. If you conclude that the employee is dishonest, and you have a legitimate aversion to employing dishonest employees, discharge her. If you conclude that this penalty is unduly harsh, you could consider utilizing a “last chance” warning or explaining to the employee that any further acts of dishonesty will result in her termination.

A third option you may wish to consider would be to rely on the mechanisms provided in the FMLA to address this situation. For example, if other employees did not provide clear corroboration of the employee’s statements and the employee herself denied making them, you could sit tight until she requested leave. Once the request was made, you could avail yourself of your right to seek a medical opinion regarding the employee’s condition. Taking advantage of the FMLA procedures could have a couple of benefits. First, you will get some independent insights into whether a health care practitioner will rubber-stamp the employee’s leave request. Second, if the employee’s health care professional validates the employee’s “need” for the leave, you will have gained an insight into that individual’s objectivity and veracity. Third, I would expect that your own physician will point out that migraine headaches do not arrive on schedule at 6:00 p.m. (an hour before a 7:00 p.m. shift, every other week). Presumably, this health care professional will support the company’s rejection of the leave request. As described above, if there is a conflict in the opinions of the two health care practitioners, you could demand a third opinion. Of course, the biggest downside to this approach is the attendant cost.

The bottom line is that your company should not honor your employee’s request for intermittent leave every other week for “migraine headaches.” If your employee makes the imprudent decision to litigate this issue, you should prevail.

Supplement to Analysis of QQ # 47

On July 14, I posted QQ # 47, a situation presented to us by one of our clients involving an employee who advised her co-workers that she “planned” to get migraine headaches every time she was asked to work a particular late-night shift. On July 21, I posted my analysis of that question.

On July 23, 2008, I saw a report of a decision from the Seventh Circuit, Vail v. Raybestos Prods. Co., No. 07-3621 (7^th Cir. July 21, 2008), involving an employee who was terminated by her employer for abusing the intermittent leave provisions of the Family and Medical Leave Act (FMLA). Coincidentally, the employee had been fired for periodically claiming that she needed leave because of her unexpected “migraine headaches.”

Although the employer previously had agreed to allow the employee to take FMLA leave as a result of her migraine headaches, it became suspicious of the employee because of the timing of the requests for leave. The employer retained a private investigator to learn what activities she engaged in during the time she was too ill to work and discovered that during these periods of ‘incapacity,’ she was cutting lawns for her husband’s lawn service business. Based on this information, the employer terminated her employment.

The employee sued her employer for interfering with her rights under the FMLA. The District Court granted summary judgment to the employer and the 7^th Circuit affirmed. The appellate court pointed out that the employee must demonstrate that she took the leave “for the intended purpose of the leave,” 29 U.S.C. § 2614(a)(1), and that the employer can defeat a FMLA claim by showing that the employee did not take leave for the “intended purpose.”

The Court noted that an employer is under no obligation to reinstate an employee returning from FMLA leave if the refusal is based on the “honest suspicion” that the employee was abusing the leave. Persuaded that the employer had an “honest suspicion” that the employee was abusing the leave (as reflected by the timing of the leave requests and the lawn cutting work in which she then engaged), the Court found that the Raybestos had not violated its employee’s FMLA rights by ending her employment.

Blackberry Use and Overtime Pay, Quirky Question # 48

Mon, 21 Jul 2008 10:30:00 GMT

[My colleague, Nicole Haaning, recently has been involved in a number of FLSA and off-the-clock cases, so I asked her to respond to this Quirky Question. Nicole's analysis is set forth below. By way of background, Nicole is a 1998 of Indiana University, a 2000 graduate of Illinois (with an M.A. in English) and a 2003 graduate of the University of Michigan Law School. Nicole joined Dorsey upon her law school graduation and has worked in the firm's Labor & Employment Law Department throughout her Dorsey tenure. Nicole can be reached at haaning.nicole@dorsey.com. Her direct line is 612.492.6635. If you have any questions regarding the analysis below, do not hesitate to contact her.]

Nicole's Analysis of QQ # 48

New technologies like BlackBerries, cell phones, and remote-access Internet connections can create wage and hour headaches for employers because they enable employees to work outside the workplace and outside of or beyond regular work hours. One thing is clear: non-exempt employees must be compensated for any time they spend working, even if they are only checking and responding to e-mails between commercial breaks.

Where (like here) business needs require that non-exempt employees respond to e-mail or take calls after hours, the biggest risks employers face are claims that non-exempt employees were not paid for all hours they worked and/or that they were owed overtime for hours worked outside of regular business hours. An employer’s best protection is a clear and consistently-enforced policy that employees are required to record their time and that they will be paid for all time worked, including overtime where necessary.

It sounds like you have implemented such a policy already. To ensure that it is consistently enforced, we recommend taking periodic steps to ensure your IT employees are in compliance. For example, you could periodically check their time sheets or other time records – if you know they are responding to e-mails outside of regular work hours, that time should be reflected on their time sheets.

Of course, it will be difficult for you to monitor or verify the hours your IT employees actually work outside of regular business hours. In this case, where non-exempt employees are responding to e-mails in the middle of the night or on holidays, you may want to set some grounds rules to limit your liability – both for off-the-clock work and unfettered overtime. For example, you could try to manage employees’ expectations regarding 24-7 IT support. IT employees could be officially “off duty” and not required to check or respond to e-mails after 10 p.m. or another reasonable time, or projects requiring support overnight or on weekends or holidays could require advance notice and approval.

For employers who are considering whether to issue BlackBerries or cell phones to non-exempt employees, we recommend they take a step back and assess whether they want or need their non-exempt employees to be checking and returning e-mails and phone calls outside of their regular work hours. In addition to ensuring that employees are paid for all time they work, preventing non-exempt employees from working outside of regular work hours gives employer more control over the amount of overtime they work.

One option is for employers to implement a clear policy that non-exempt employees are not expected to, or permitted to, check e-mail or return phone calls outside of regular business hours, without prior approval from their manager. Employees who do so without their manager’s approval should be paid for their time, but disciplined for violating the policy, up to termination if necessary, to get the message across to repeat offenders. To remove temptation, and make it easier to enforce their policies, employers should think twice before handing out BlackBerries to non-exempt employees or giving them remote access to the company’s computer system. Employees cannot work outside of regular business hours if they do not have access to the company’s systems. On the other hand, if an employer goes to the trouble and expense of issuing BlackBerries to non-exempt employees, it arguably has created an expectation that the employees will be available outside of regular work hours.

Cell phones pose an especially tricky issue, since most employees have their own cell phones and may give their phone number out to customers or coworkers unbeknownst to management. Again, an employer’s best defense is to implement and post a policy prohibiting non-exempt employees from working outside of regular work hours and to discipline offenders.

Before deciding on a course of action, employers should take an honest look at their corporate culture to make sure their policies and culture are aligned. For example, employees may feel there is an unspoken expectation that they will be available and responsive to e-mails or phone calls in the evening or on weekends (whether or not the company provides BlackBerries or other technology). Those employees may feel pressured to break rules prohibiting working outside of work. If they are working but not recording their hours, employers could be liable for unpaid overtime or off-the-clock work since an employer must compensate employees for any work it is found to “suffer or permit.” 29 U.S.C. § 203(g).

Whatever policy is implemented, companies must make sure their policies are consistently enforced across the company. That means supervisors cannot look the other way if they are getting e-mails after hours and their reports’ time sheets do not reflect that extra work.

Even with the safeguard of a clear policy in place, there are unresolved legal implications that an employer cannot perfectly plan for:

1) For example, could an employee claim she is so tied to her BlackBerry that she is essentially working from the time she gets up and first checks her e-mail until she checks it one last time, right before bed? Even if the employee is not actively responding to e-mails, she is constantly checking her BlackBerry to make sure she has not received an e-mail. In cases dealing with “on call” time, courts have generally found that employees do not have to be compensated for such time as long as they are otherwise free to go about their personal business. See, e.g., Reimer v. Champion Healthcare Corp., 258 F.3d 720, 725 (8th Cir. 2001); 29 C.F.R. § 758.17. BlackBerries, however, require more attention than a pager that is clipped to an employee’s belt and ignored until it goes off. Courts have not yet considered how employees should be compensated for time spent monitoring their BlackBerries.

2) Along the same lines, it may be difficult, if not impossible, for employees to record every single e-mail exchange. Is it okay if some very brief and infrequent exchanges slip through the cracks? The Department of Labor’s regulations permit employers to “disregard” “insubstantial or insignificant periods of time … which cannot as a practical administrative matter be precisely recorded.” 29 C.F.R. § 785.47. This exception applies, however, only where there are “uncertain and indefinite periods of time involved of a few seconds or minutes duration.” Id. Also, “an employer may not arbitrarily fail to count as hours worked any part, however small, of the employee’s fixed or regular working time.” Id. Thus, even if non-exempt employees spend miniscule amounts of time responding to e-mails outside of regular work hours, if they do so on a regular basis, and/or are expected to do so, an employer may not be able to invoke the de minimis exception.

In sum, employers should think hard about whether their business requires non-exempt employees to be responsive to e-mails or phone calls outside of regular work hours. If they do, an employer’s best defense is to implement, and strictly enforce, a policy requiring employees to record all of their time and making clear that they will be paid for all their time.

Secret Use of Video Cameras to Monitor Employees, Quirky Question # 49

Mon, 28 Jul 2008 10:39:00 GMT

Your question is a good one, but you have not given me quite enough information to respond specifically. What types of “situations” have you had where you concluded that the secret installation of a video camera would benefit the company? What types of conduct has occurred that you believe is “inconsistent with your company’s workplace rules?” Are you referring to the theft of company property? Illegal drug use? Something else entirely? Depending on the nature of the problem your company is confronting, you may or may not want to consider secret video surveillance of your employees.

In addition, there are a few other questions I would pose to you. First, where do you intend to install the cameras? Second, are the cameras going to be on 24-7, or will they be confined to the hours following the conclusion of the workday? Third, is your workforce unionized? Fourth, if the existence of the cameras became known to your employees, how do you think they would react? Finally, are there less intrusive methods of gathering the information you deem important? Each of these questions should be assessed by you when considering whether to install video cameras without your employees’ knowledge.

In general, with respect to non-union employees (union employees are discussed further below), the use of secret video cameras is permissible. But I wonder whether use of the cameras is worth the ill-will that likely would be generated (“the company was spying on us” reaction) if the existence of the cameras is revealed at some point. (And, you should assume that, at some point, your company’s use of the cameras will be revealed.) Another concern I have is that the use of video cameras creates the opportunity for mischief. This could apply both to how the cameras are used and what is done with the videotapes generated by the surveillance.

For example, let me start with an extreme (and I hope, atypical) scenario, which concededly is beyond the scope of your question. In a case out of Georgia in 2005, a male supervisory employee at a company set up a video surveillance camera in the ceiling of a women’s worksite restroom. The outcome of the ensuing litigation was predictable – the company lost the “invasion of privacy” litigation even though it claimed ignorance of the supervisor’s conduct. See, Johnson vs. Allen (Ga. Ct. App. March 17, 2005). Oh yeah, another consequence of the behavior was that the supervisory employee was fired.

Even if the supervisor was not just a voyeur and had a legitimate purpose in mind, the secret installation of video cameras in a bathroom, locker room, or similar location is going to lead to litigation the company will not be able to win. For example, even if a company had credible evidence that narcotics sales were taking place in the women’s restroom, the solution is not to install video cameras in the women’s restroom. Call your County Attorney and let the prosecutors and police determine the best way to address your suspicions regarding the sale of narcotics.

Another case, this one from California, illustrates the potential problems with regard to the use of secret video cameras, even if the employer is trying to address a legitimate workplace problem. In the case of Hernandez v. Hillsides, Inc., B-183713 (Ct. App. September 14, 2006), the employer set up a motion-activated camera in an office to determine who was accessing a company computer at night to view pornography. A manager disconnected the camera each day before the workday began and reconnected the camera each night after the workday was over. One day, the manager forgot to disconnect the camera in the morning. Of course, this was the day that two employees discovered the still-recording camera. They sued for invasion of privacy. Although the trial court found that the employer’s interest in installing the video camera was legitimate, and outweighed the two employees’ expectation of privacy in their shared office, the appellate court disagreed. The California Court of Appeals found that an employee “need not establish that he was actually viewed or recorded to succeed on a cause of action for invasion of privacy.” The court noted that the employer could have used the camera if it provided notice to the employees that the camera was in use. But, obviously, this typically would defeat the purpose of the monitoring. [Note that the California Supreme Court accepted review of the Hernandez decision in 2007. I have not seen, however, any subsequent activity relating to this case.]

The Hernandez case was decided on the protections afforded by the California Constitution. This highlights another point applicable to this question, and much of employment law. Although there are critically important federal statutes regulating many facets of employment law (Title VII, the Americans with Disabilities Act, the Age Discrimination in Employment Act, the National Labor Relations Act, to name just a few), much of employment law is state law dependent. What may be acceptable in Minnesota may not be acceptable in California or other jurisdictions. Therefore, when determining the appropriate course of conduct for your employer, you must consider where your policies or procedures will be applied.

As referenced above, another key consideration when evaluating the use of secret video surveillance is whether the employees being monitored are parties to a collective bargaining agreement. The National Labor Relations Board has held that it is an unfair labor practice to install hidden surveillance cameras without bargaining with the workers on this subject. See, Anheuser-Busch, Inc., 342 NLRB No. 49, 7/22/04. But, in a split decision, the NLRB did NOT revoke the discipline imposed on the workers (including discharge) based on the activities revealed by the surveillance cameras.

As these examples illustrate, the decision to utilize secret video surveillance is not an easy one. You should ensure that the individuals involved in setting up and monitoring the cameras, as well as handling the tapes, are completely responsible. You should consider carefully whether there is a less intrusive method of obtaining the information provided by the video cameras, recognizing that some courts (especially in some states) may be particularly sensitive to the privacy interests of the affected employees. And, you should ensure that the interests you are seeking to protect could be legitimately juxtaposed to the privacy intrusion represented by the use of this surveillance technique. If you are confident about your analysis of these issues, when applied to the law of the jurisdiction where you seek to install the cameras, and if you are cognizant of the fact that such use would not be appropriate for a unionized workforce, you may elect to utilize surveillance cameras. Finally, however, be attuned to the impact such use, if disclosed, would have on management-employee relations. When you factor that variable into your calculus, you may decide that the benefits of surreptitious surveillance just aren’t worth it.

Litigation by In-House Counsel, Quirky Question # 50

Mon, 04 Aug 2008 09:56:00 GMT

The issues presented in this Quirky Question recently have received attention from the courts in Minnesota. In the case of Kidwell v. Sybaritic, Inc., No. A07-0584 (Minn. Ct. App. June 3, 2008), the intermediate appellate court in Minnesota addressed several issues paralleling those presented in this inquiry.

Kidwell was the General Counsel of the corporate defendant for a relatively abbreviated time period (about10 months). Sybaritic terminated Kidwell’s employment a few weeks after he sent an email to the company’s top management expressing his concern that the company was engaging in various types of unlawful conduct. Following his termination, Kidwell sued his former employer under Minnesota’s Whistleblower statute. Following the jury trial, which Kidwell won, the case went up to the Court of Appeals.

The appellate court explored two related issues. First, the court examined the question of whether an in-house attorney may ever sue his or her employer under the state’s Whistleblower statute. Second, the court explored the question of whether communications made by in-house counsel relating directly to his or her job responsibilities fall within the scope of the Whistleblower statute. Kidwell persuaded the court as to the former issue but not the latter.

With respect to the first question examined by the court, the Court of Appeals noted that some jurisdictions had adopted the “attorney-client defense,” i.e., the notion that because in-house counsel would have to reveal information encompassed by the attorney-client privilege to pursue a whistleblower or retaliation claim against the company, such claims are absolutely barred. The court observed, however, that “the majority view . . . appears to reject the attorney-client defense and to permit such claims, though sometimes with the proviso that in-house attorneys may pursue such claims so long as they do not run afoul of the duty of confidentiality . . ..” The Minnesota Court of Appeals elected to follow that “majority” view, holding that a claim under the Whistleblower statute is not “per se barred by the so-called attorney-client defense.”

Having concluded that even in-house counsel may avail themselves of the Whistleblower statute’s protections, the court then evaluated whether Kidwell had presented evidence sufficient to prove that he made a good faith report of a violation (or suspected violation) of law. Although the appellate court considered several alternative arguments on this issue, the argument that carried the day for the corporate employer was well-established precedent standing for the proposition that “a former employee may not maintain an action under the Whistleblower Act if the alleged report is a communication that was made to fulfill the employee’s job responsibilities.” The court observed that if an employee makes a report as part of his or her job duties, rather than to “expose an illegality,” the requirements of the Whistleblower statute have not been satisfied. As the court stressed, “an employee does not engage in protected conduct under the Whistleblower Act if the employee makes a report in fulfillment of the duties of his or her job.”

Applying the Sybaritic holding to the‘Quirky Question’ presented below, it is clear that, in Minnesota at least, your General Counsel would be allowed to pursue a claim under the Whistleblower statute. Your “assumption that everything he has been told in the course of his job is protected by the attorney-client privilege and could not be revealed in any lawsuit against the company” is erroneous. It is possible that your about-to-be former General Counsel could file a retaliation claim based on the statute. In advance of such litigation, you may want to remind your in-house attorney of his duty of confidentiality. Of course, if such a lawsuit were initiated, you may want to consider immediately requesting the court to impose a Protective Order to preserve the confidentiality of your otherwise privileged information.

Although your in-house lawyer may not be barred from suing, the other facts you reveal should provide you greater solace. As you noted, the concerns being raised by your in-house attorney fall “squarely within” his areas of expertise and job responsibilities. Given that fact, it would not appear that he would be able to persuade a court that the purpose of his (supposedly good faith) report to you was to “expose an illegality,” rather than simply fulfilling the duties of his job. If your in-house counsel later elected to institute a lawsuit, I would quickly highlight the Sybaritic holding and inquire how he could file a lawsuit on these issues consistent with his Rule 11 obligations.

Finally, the holding of Sybaritic (assuming that, if appealed further, is not reversed) should increase companies’ general comfort level regarding essential (but potentially damaging) information entrusted to other types of employees. For example, a Human Resources Director provided with statistical data about the composition of a company’s workforce should be precluded from bringing a Whistleblower claim based on recommendations regarding hiring or firing decisions. Likewise, a member of the Audit Committee who is informed about areas of concern and who conveys those facts to management should be precluded from basing a Whistleblower claim on the information revealed in the course of his/her job duties. There undoubtedly are numerous situations where key employees are provided damaging information about a company, but as these examples illustrate, the Sybaritic holding should provide companies some protection against Whistleblower claims by individuals who are merely fulfilling their job responsibilities when reporting on wrongful or illegal conduct.

Supplement to Quirky Question # 50, Litigation Initiated by In-House Counsel:

In QQ # 50, I addressed the situation of whether an in-house attorney who claimed that he was fired for whistle-blowing activities could bring a claim against his employer, even if by doing so he would need to reveal information encompassed by the attorney-client privilege. Since posting that analysis, I came across an analogous case, Nesselrotte v. Allegheny Energy, Inc., No. 06-01390 (W.D. Pa. July 22, 2008).

In Nesselrotte, an in-house counsel, fired by her employer, sued for sex discrimination, age discrimination and retaliation. In the twenty-day period between the notice of her termination and her last day of employment, Nesselrotte copied and removed numerous documents from her employer, including many which were designated as “confidential” or “privileged.” Nesselrotte attempted to justify her removal of these privileged materials on the basis of Rule 1.6(c)(4) of the Pennsylvania Rules of Professional Conduct. Among other grounds for disclosing privileged communications, that rule provides a lawyer the right to reveal information relating to the representation of a client if necessary “to establish a claim or defense on behalf of the lawyer in a controversy between the lawyer and the client . . . or to respond to allegations in any proceeding concerning the lawyer’s representation of the client.”

The court didn’t buy Nesselrotte’s argument. The court rejected the notion that a lawyer may rely on Rule 1.6 to justify the removal and/or copying privileged or confidential documents. As the court emphasized, “[T]he proper avenue for a former employee (even an attorney) to obtain privileged and/or confidential documents in support of his or her claims is through the discovery process, . . . not by self-help.” The Judge observed, “the Court declines to hold that Rule 1.6(c)(4) of the Pennsylvania Rules of Professional Conduct trumps the attorney client privilege in the context of this case, where an attorney employed self-help by removing without authorization privileged and confidential documents seemingly in breach of her former employer’s Ethics Code and Confidentiality Agreement.”

The Nesselrotte case is interesting but seemingly turned largely on the imprudent decision of the in-house attorney to steal the documents that she felt would be beneficial to her case. Had she instead elected to obtain access to the privileged documents she felt were pertinent to her claims through appropriate discovery mechanisms, the court would have had to resolve the more challenging issue of whether an attorney suing for sex and age discrimination could obtain access to materials that were otherwise covered by the attorney-client privilege and/or work product doctrine. Assuming that the court permitted access to these materials through discovery, the court then would have to make the more difficult determination regarding how these materials could be used in hearings or at trial.

The judiciary in different states have reached different conclusions on the rights of in-house counsel to sue their employers and their ability to support their litigation with otherwise privileged and confidential information. To the extent that you confront a claim of this kind, it is critical for you to understand the position of your state courts on these issues.

Firing a Registered Sex Offender, Quirky Question # 51

Wed, 06 Aug 2008 11:55:00 GMT

[Set forth is another one of our California Quirky Questions. The analysis below was supplied by Jessica Linehan. Jessica, a 1999 graduate of the University of Southern California and a 2002 graduate of University of Southern California Law School, can be reached at 949.932.3675 or by email at linehan.jessica@dorsey.com.]

Jessica's Analysis of Quirky Question #51

Your question implicates specific California law on this issue. By way of background, the federal statute enacted in 1996 known as "Megan's Law" requires every state to create a registry for convicted sex offenders and make certain information about those offenders available to the public. This information is available online at sites such as http://www.meganslaw.ca.gov and www.Megans-law.net, and can be accessed by anyone at any time. Certain sites allow you to search by name or location, so it is inevitable that curious coworkers may sometimes unearth a hidden sex offender. When this happens, the employer is faced with numerous challenges that need to be addressed.

California's version of Megan's Law specifically prohibits use of information obtained on websites as to sex offenders in employment decisions, except in limited circumstances. Cal. Penal Code § 290.4(d)(2)(E). The statute provides that use is authorized only to "protect a person at risk." See Id. at § (d)(1). The limited circumstances where use of such information is allowed is generally for particular lines of business involving minors, such as community care facilities or day care facilities. See id. at § (d)(3). If your line of business does not involve direct involvement with children that would qualify as "person at risk," think twice about using information obtained from these websites in employment decisions.

Improper use of information disclosed on the sexual offender registries could subject employers to liability. California's Megan's Law expressly subjects misusers of such information to liability for actual, and trebled, damages, or a civil penalty not exceeding $25,000. Id. at § (d)(4)(A). In light of the Penal Code’s prohibition of use of the sex offender information found on the database, employers should be very careful to distance themselves from any perception that such information is being relied upon for purposes of an employment decision. An employer who terminates an employee based on its findings on the sexual offender registries also risks a claim of wrongful termination in violation of public policy. While there are currently no reported California cases advancing this theory, there is existing case law and authority that would provide the foundation for a wrongful termination claim on this basis. California case law has addressed the "compelling and necessary" public purposes for such registries, and have made clear that the legislative intent is not for the information to "be used to inflict . . . additional punishment on any such person convicted of a sexual offense." See People v. Jones, 101 Cal. App. 4th 220 (2002); 89 Ops. Cal. Atty Gen 85 (April 27, 2006). Thus, your company would be restricted from terminating the employee your employee found listed on the sexual offender registry.

You also will need to be cognizant of the effect of the knowledge about this employee in the office environment. The employee who first discovered this information may not be inclined to keep it quiet, despite the statute's restrictions on disclosure. To avoid the potential backlash against this employee, where other employees’ actions or reactions to this information could create problems (and potential liability for your firm), it is important to speak with both the employee who discovered the information and the employee sex offender.

With respect to the employee who discovered the information, you should counsel that employee as to the need for individual privacy and the laws that generally prohibit use of this information in the workplace. That way, you will be able to explain why action cannot necessarily be taken on the sole grounds of this discovery, while assuring your employee that her concerns are valid. You should also follow up periodically with the employee who voiced her discomfort to ensure that no worrisome behavior on the part of the sex offender employee has surfaced. Document each instance you follow up with the concerned employee and document her feedback as well. For the sex offender employee, you should be up front about the discovery. You should request that the reporting employee inform you of any inappropriate behavior he perceives from other employees and follow up periodically. Document your conversations.

Of course, it is always better to prevent this type of unfortunate situation in the first place by using effective pre-employment screening. An effective and thorough employment application can be the best starting place. While generalized inquiries as to arrests should be avoided, inquiries as to convictions, guilty pleas or pleas of no contest are generally valid. In addition, thorough background screening through reputable agencies is another tool to identify high risk individuals before hiring. Despite the many safeguards against use of information discovered on California's Megan Law website, there are no such restrictions if the information were disclosed in the course of a properly-conducted background search. A person's status as a sexual offender is not a protected class within the meaning of the California Fair Employment and Housing Act. See also 89 Ops. Cal. Atty. Gen. 85 (April 27, 2006). Note that such background checks must be conducted within the parameters of state and federal laws and have specific notice and disclosure requirements that must be followed. In addition, keep in mind that not all information unearthed in a background check may be used in employment decisions.

Supplement to QQ # 51, Terminating a Registered Sex Offender: In QQ # 51, my California colleague, Jessica Linehan, addressed the issue of a company’s right to terminate a registered sex offender. Shortly after we addressed this issue, a federal court in Texas decided a case involving the same legal questions. See Vlasek v. Wal-Mart Stores, Inc., No. H-07-0386 (S.D. Texas July 22, 2008).

In the Vlasek case, Wal-Mart received an anonymous letter and phone call informing the company that its employee, Vlasek, was a registered sex offender. Vlasek had not disclosed her criminal conviction or her status as a registered sex offender on her job application. Upon receiving the information regarding Vlasek’s status as a registered sex offender, Wal-Mart representatives met with her. Vlasek contended that various representations were made to her during this meeting, assuring her that her job with Wal-Mart was secure notwithstanding her prior, undisclosed criminal conduct. Not long after this meeting, however, Wal-Mart terminated her employment.

Vlasek brought several claims, including: a) promissory estoppel; b) disability discrimination; c) sex discrimination; and d) violations of the Fair Credit Reporting Act. The court rejected all of her claims. As to Vlasek’s promissory estoppel claim, the court noted that Vlasek was an at-will employee and nothing said to her in the meeting could alter that status. The court also found that Vlasek had not relied to her detriment on any statements made to her during the meeting with the store supervisors. With regard to the ADA claim, the court simply found that Vlasek did not have any mental or physical impairment covered by the ADA. As to the sex discrimination claim, the court held that Vlasek had failed to exhaust her administrative remedies. Finally, although the court recognized that there was non-compliance with FCRA, the court found that Vlasek would have been fired even if she had been given a copy of background report that contained information regarding her past conviction and her registration as a sex offender.

Usurpation of Corporate Opportunity, Quirky Question # 52

Mon, 11 Aug 2008 16:28:00 GMT

Like many of the other questions I’ve addressed in this Blog, your inquiry is dependent on the laws of the state where you work. There is no federal prohibition against “usurping” a corporate opportunity, but nearly all states prohibit “usurpation of corporate opportunity.” In essence, the “usurpation” theory is a subset of the claim for breach of fiduciary duty. The fact that this legal theory exists, however, does not suggest to me that you need be concerned.

The basic idea of “usurpation of corporate opportunity” is that directors, officers, and executives of companies may not exploit for their personal gain an idea presented to them or developed by them in their corporate capacities. These individuals have a fiduciary obligation to share the opportunities with the companies they work for, rather than taking advantage of these opportunities to enrich themselves.

This does not mean, of course, that any idea they conceived while employed must be shared with their employer. The new ideas or opportunities must have a close relationship to the activities of the company for which the employees work before any obligations are imposed upon them. Moreover, as discussed below, additional criteria must be met as well.

Perhaps an example would help explain this concept. If an individual were the VP of Business Development for a commercial real estate company and, in that capacity, learned that a terrific commercial property had become available for purchase, he could not resign his employment, form a new company, and purchase that property, without risking a lawsuit for usurping this corporate opportunity. Conversely, however, if the same VP of Business Development learned of an investment opportunity in an emerging computer company, his decision to resign and join the new company would not constitute an opportunity he had “usurped” from his employer.

Turning then to your situation, there are several facts set forth in your question that should you provide you comfort. Analyzing your fact situation under Minnesota law, there are at least four significant reasons why the legal theory should not encompass your situation.

First, as you stated, you are a “non-managerial” employee. The legal theory was designed to reach wrongful conduct by directors and officers of companies. This is based on the common sense notion that lower level employees typically are not presented with ideas involving opportunities for the company or requiring corporate decision-making. As a non-managerial employee, it seems unlikely that “corporate opportunities” would be presented to you, rather than someone senior to you in the company. In short, it would appear that the legal theory simply may not apply to you. (It’s hypothetically possible that a non-management employee could be presented with a corporate opportunity, or conceive something based on his work for the company, but nothing in your abbreviated fact pattern suggests that this is true for you.)

Second, from your description, there does not appear to be any logical nexus between the activities your prior company engaged in and the activities of your new company. Minnesota courts require this link. As the Minnesota Supreme Court described in the seminal Minnesota usurpation case, Miller vs. Miller, 301 Minn. 207 (1974), “The threshold question to be answered is whether a business opportunity presented is also a “corporate” opportunity, i.e., whether the business opportunity is of sufficient importance and is so closely related to the existing or prospective activity of the corporation as to warrant judicial sanctions against its personal acquisition by a managing officer or director of the corporation.” A few questions that would enlighten the analysis include: a) what was the product your prior employer was trying (unsuccessfully) to produce; b) what product is your new company producing; c) are the two products competitive; d) do the two products perform the same function; e) did you incorporate any of the technology of the failed product into your new ideas; f) if so, what and how important were these ideas; g) if so, were these ideas already commonly known in the marketplace; h) what was your role in the development of the new product for your new company; and, i) how did your role compare to that of the colleagues with whom you started the company. The answers to these questions will shed light on the issue of whether the opportunity even constituted a “corporate” opportunity.

Third, as you described in your question, the company you previously worked for failed to complete its product, struggled to obtain financing, laid off its workforce and went out of business. Your description is of a company in severe financial distress. Minnesota courts have made clear that a company struggling to survive economically cannot establish a “usurpation of corporate opportunity” claim. Again, as the Miller court observed, “If the facts are undisputed that the business opportunity presented bears no logical or reasonable relation to the existing or prospective business activities of the corporation, or that it lacks either the financial or fundamental practical or technical ability to pursue it, then such opportunity would have to be found to be noncorporate as a matter of law.” Again, this analysis is well grounded in common sense. It belabors the obvious to state that a company barely surviving economically is not in a position to pursue an entirely different product concept, with all of the costs necessary to develop this new venture. Moreover, courts have been understandably reluctant to analyze this situation with the benefit of hindsight. They have rejected the idea that the success of the subsequent company would have solved the financial woes of the economically distressed company. They also have recognized that this analysis is entirely too speculative to be credible. Who knows whether the original company would have made the same decisions that contributed to the success of the other company. Would it have hired the same people? Would the employees have been as committed to the old company? Would the employees have been able to produce the same product? With the firm’s track record of financial trouble, would it have gotten the financial backing that the second company received? These are but a few of the many questions illustrating why it would be ill-advised to accept the argument of the company claiming usurpation when it did not even have the financial wherewithal to remain in existence.

Finally, in Minnesota at least, as the quote above reveals, the courts require the company claiming the usurpation to demonstrate that it had both the practical and technical capability to pursue the opportunity it claims was usurped. Although I would need more facts to assess whether your former employer would be able to satisfy these requirements, I’m skeptical based even on the data you shared. You stated that your new business has “nothing to do with that of the failed company where [you] used to work.” As a preliminary matter, I would question whether a “failed company” has the practical ability to reinvent itself and succeed. Even if that were possible, however, I would need to know more about the technical abilities of the personnel at your former employer and the skill sets of the employees at the business you started. To the extent that they are different, however, you likely have another argument for countering the contention that you “usurped” an opportunity belonging to your former employer.

As I’ve mentioned in past observations on this Blog, the fact that you have a completely meritorious defense does not mean that you are immune from suit. Unfortunately, frivolous litigation is filed too frequently. But, assuming you can afford to defend the litigation, be resolute and don’t capitulate.

Termination for Infertility Treatments, Quirky Question # 53

Mon, 18 Aug 2008 17:34:00 GMT

My thoughts are that you had better have an alternative explanation for terminating your employee if you hope to avoid both litigation and liability under Title VII. Although I recognize the validity of your observation that infertility may affect men and women alike, certain types of infertility treatments are unique to women and, therefore, are encompassed by the Title VII’s Pregnancy Discrimination Act (PDA).

Your reference to Quirky Question # 46 is on target. As I discussed in that analysis, the key to the question of whether an employer could terminate an employee for having an abortion was the PDA provision that explained the term “because of sex” included discrimination “because of or on the basis of pregnancy, childbirth, or related medical conditions.” Just as the decision to terminate a pregnancy implicated the ‘related medical conditions’ language, so too does the decision to use modern medical techniques to enhance the likelihood of pregnancy.

In the very recent (last month) decision of Hall v. Nalco Company, No. 06-3684 (7^th Cir. 2008), the federal appellate court addressed, in a case of first impression, the question presented in this Blog posting. In the Hall case, the defendant company terminated an employee who was going through the in-vitro fertilization (IVF) process to address her infertility. As the 7^th Circuit explained (quoting from medical journals), the IVF process “is an assisted reproductive technology that involves administration of fertility drugs to the woman, surgical extraction of her eggs, fertilization in a laboratory, and surgical implantation of the resulting embryos into the woman’s womb.” Each IVF treatment takes weeks to complete and multiple treatments are sometimes needed to achieve a successful pregnancy.

As the court stressed, “the PDA made clear that, for all Title VII purposes, discrimination based on a woman’s pregnancy is, on its face, discrimination because of her sex.” The court noted that “the same is true for disparate treatment based on childbirth and medical conditions related to pregnancy or childbirth.” This lead to the SeventhCircuit's observation, “Employees terminated for taking time off to undergo IVF – just like those terminated for taking time off to give birth or receive other pregnancy-related care – will always be women.” The court found that Hall had not been terminated because of her gender-neutral condition of infertility, but for the “gender-specific quality of childbearing capacity.”

The 7^th Circuit then concluded, “Because adverse employment action based on child-bearing capacity will always result in 'treatment of a person in a manner which but for that person’s sex would be different,' . . . Hall’s allegations present a cognizable claim of sex discrimination under Title VII.”

Having recognized the validity of Hall’s claims, the court then turned to the specific facts to evaluate whether the District Court had improvidently granted summary judgment. Because Nalco’s management employees had made careless comments and writings regarding Hall’s health, fertility treatments and related absences from work, the appellate court felt that the case was not appropriate for summary judgment disposition. The case, therefore, was sent back to the lower court for resolution by a jury.

In short, you would be ill-advised to base your termination decision on your concerns about the amount of time your employee has missed or may miss for infertility treatments. If you find it necessary to consolidate your workforce, make your retention and discharge decisions on neutral, performance-based factors that do not implicate your employees’ protected class status. To do otherwise invites litigation and increases your company’s potential legal exposure.

Rights Provided by Employee Handbook, Quirky Question # 54

Mon, 25 Aug 2008 09:05:00 GMT

As you may have perceived, QQ # 54 was derived from a 7th Circuit case, decided just last month, Peters v. Gilead Sciences, Inc., No. 06-4290 (July 14, 2008). In Peters, a case based on Indiana law, the employer had provided its employees with an employee handbook which paraphrased the language of the Family and Medical Leave Act (FMLA). The handbook described the FMLA eligibility requirements of 1250 hours of work in the preceding 12 months, combined with one year's employment. The employer's handbook, however, did not address the other nuances of the FMLA or its other applicability criteria. For example, the handbook did not address the FMLA requirement that there must be 50 employees at the worksite of the employee seeking FMLA leave, or within 75 miles of that worksite (sometimes referenced as the 50/75 rule).

Peters experienced a work-related neck and shoulder injury in late 2001. He re-injured his shoulder about one year later, leading to corrective surgery that required a brief (11-day) leave. Compounding the imprecision of its handbook, Gilead Sciences then sent Peters a letter explaining the FMLA and restating, in part, the FMLA's eligibility requirements. Again, however, the letter omitted any reference to the 50/75 rule. The letter specified when Peters would need to return to work, and promised him reinstatement in the same or an equivalent position.

As noted above, Peters quickly returned to work and was reinstated into his job. Several months later, however, he took a second leave, caused by an adverse reaction to a prescription medication he had been using. The company sent Peters another letter, largely mirroring its first FMLA communication and specifying the date by which he needed to return to work. Somewhat carelessly, the company miscalculated the mandatory return date, miscounting the amount of leave Peters actually had taken and consequently, underestimating the amount of leave he had left.

When the incorrectly calculated leave "expired," the company hired a new employee to fill Peters' job. The company explained its decision to Peters by referencing another FMLA provision, the company's right to replace an employee occupying a "key" position. Gilead Sciences offered Peters another position but he rejected it, at which point he was terminated. Peters then sued the company on a number of different legal theories, including FMLA violations, breach of contract and promissory estoppel.

Once it examined the FMLA more closely, the company discovered that Peters was not FMLA-eligible because he did not work at a site that had at least 50 employees and the company did not have 50 employees in the aggregate working within 75 miles of Peters' work location. Peters, however, argued that his employer was "equitably estopped" from denying him coverage under the FMLA due to the company's representations in its employee handbook and the two letters the company sent to him. Despite Peters' equitable estoppel argument (the notion that given its representations to him in the handbook and the letters, the company was prevented, or "estopped," from making an argument based on the eligibility requirements) the District Court granted summary judgment, dismissing Peters' case.

The 7th Circuit reversed, though on slightly different grounds. The appellate found that it did not have to decide the "equitable estoppel" issue, since there were two other potential bases on which Peters could prevail. First, the 7th Circuit found that Peters might be able to prevail on his claim for "promissory estoppel." Promissory estoppel is a quasi-contract theory in which the court finds that certain promises may rise to the level of a binding agreement if the person to whom the promises were made takes action in reliance and is injured as a result. For example, if a company made a job offer to an individual (the promise) and encouraged him to move across the country to accept the position, and the employee moved across the country to take the job (the reliance), and was damaged thereby (e.g., quitting his other job, selling his house, etc.) (the injury), the employer is prevented (or estopped) from denying the employee the benefits of the promises previously made.

In the Peters case, the court found that the employer's handbook and the statements set forth in the letter could constitute promises under Indiana law upon which Peters had relied to his detriment.

Second, the court observed that the statements made in the employee handbook could simply be a unilateral contract offer, which Peters accepted by working for Gilead Sciences. The 7th Circuit noted, however, that the Indiana Supreme Court had not decided the issue of whether employee handbooks could rise to the level of binding contracts. Even if a handbook in Indiana did not constitute a contract, the appellate court concluded that Peters had set forth enough facts to pursue a claim under the legal theory of promissory estoppel.

As the 7th Circuit noted, "There is no reason employers cannot offer FMLA-like benefits using eligibility requirements less restrictive than those in the FMLA, and that is what Gilead did. Peters statutory ineligibility is irrelevant to the contract-based theories of liability."

The Peters lawsuit is illustrative of several critical points. First, as I have observed in this Blog before, much of employment law is state law dependent. In Indiana, the courts apparently have yet to resolve the issue of whether the promises in an employee handbook can rise to the level of contract. Other states, however, have resolved that issue. In Minnesota, for example, our state Supreme Court decided about 25 years ago that handbooks could constitute unilateral contracts. Of course, that led to the use of disclaimers, boldly set forth in handbooks, to disabuse employees of the notion that it would be reasonable to view handbooks as contractually binding.

Second, there are times when state law provisions do interact with federal law. Here, the handbook analysis had direct bearing on the FMLA, a federal statute. Indeed, in some ways the federal statute complicated the situation because the FMLA requires that information about employee FMLA leave rights be included in employee handbooks (if the employer uses such a document). Moreover, the appellate court considered, but did not decide, whether Peters' "equitable estoppel" argument would have required the employer to provide the otherwise ineligible Peters with rights provided by the FMLA. In the absence of Peters' state law contract and quasi-contract claims, presumably the court would have reached this issue.

Third, the case illustrates the importance of crafting your employee handbook carefully. If you reference eligibility for statutory benefits, you'd better get it right. If you omit key statutory provisions, you may be obligating your company to provide benefits that exceed those of the statute or that apply to individuals who otherwise would not be eligible for the statutory benefits. There are at least two ways to address this potential problem. You could analyze each statute carefully and ensure that your summary descriptions are correct. Or, you could include a provision in your handbooks, specifying that the handbook only provides a short synopsis of the statute and, to the extent that the statute contains provisions governing eligibility or benefits not summarized in the handbook, the statute (not the handbook) will govern. This may not completely exculpate an employer that mischaracterizes a statute but it is better than the alternatives -- either omitting key statutory provisions or attempting to incorporate the entire statute into the handbook.

Fourth, the Peters case also illustrates the importance of conveying information clearly, and accurately, in other employee communications. Don’t send out letters that paraphrase statutory provisions inaccurately. Don’t advise employees that they are entitled to benefits for which they would not be eligible. Do your homework before sending out the letters. Get legal advice to ensure that you are not making promises you do not intend to make. Otherwise, you may find yourself in the position of Gilead Sciences, having promised benefits that are quite likely to be enforced, regardless of the limitatons of the statute.

Finally, purely from an advocacy perspective, limit your arguments to those which are credible. As referenced above, one of the explanations that Gilead Sciences offered to Peters for why he had been replaced was that he was a "key" employee under the statute. The FMLA definition of a "key" employee is very circumscribed and there is no way Peters would have fit that definition. By including an argument that has virtually no chance of success, the company merely diminished its own credibility with the court.

California Non-Competes, Quirky Question # 55

Wed, 03 Sep 2008 16:46:00 GMT

[Quirky Question # 55 is another one of our California Questions. As such, I have requested one of my California colleagues to provide the analysis. The analysis below was written by Karen Wentzel of our Palo Alto office. As I've described previously, Karen is a Stanford Law School grad, who has been practicing employment law for more than 20 years. Karen's biography can be found at www.dorsey.com. Her email address is: wentzel.karen@dorsey.com. If you would like to see other analyses provided by Karen, click on the "View by Topic" box to the left of this posting, and scroll down to "California Questions." Click on that category and other California questions will be displayed.

If you have any particularly unusual questions pertaining to California law, you can send them either to Karen or me.]

This is a question that attorneys in California are asked all the time, especially from companies with multi-state operations. And, as is the case in many arenas, California marches to the beat of its own drummer. The short answer is that non-compete provisions in employment agreements are very rarely enforceable in California.

The California Supreme Court recently affirmed this conclusion and in doing so, underscored California’s strong public policy in favor of open competition and employee mobility. In a long-awaited ruling, the Court in Edwards v. Arthur Andersen LLP, S147190 (Cal. August 7, 2008) held that California Business & Professions Code 16600 unambiguously prohibits post-employment restrictions unless the agreement falls within statutorily enumerated exceptions, and it is not up to the courts to adopt additional “narrow-restraint” exceptions.

The employment agreement at issue in Edwards included fairly typical non-compete clauses. The plaintiff, Raymond Edwards (“Edwards”), worked as an accountant for Arthur Andersen LLP (“Andersen”). As a condition of his employment, he signed a non-competition agreement which prohibited him from performing certain professional services for his former Andersen clients for 18 months and from soliciting any former clients for 12 months following his termination. It also prohibited him from soliciting professional personnel for 18 months after his departure. In the wake of Andersen’s indictment in the Enron scandal, Edwards’ practice group was sold to HSBC USA (“HSBC”). Before hiring any of Andersen’s employees, HSBC required them to sign a “Termination of Non-Compete Agreement” (“TONC”) pursuant to which the employees would be released from the non-competition agreement with Andersen in exchange for a full release of “any and all claims” against Andersen. Andersen refused to release any employees from the non-competition agreement unless the employee signed the TONC. Edwards, worried that he could be sued as part of the Enron debacle, refused to sign the TONC, believing that he could be giving up his right to indemnification by Andersen if he did so. In response, Andersen terminated Edwards’ employment and withheld severance benefits, and HSBC withdrew its offer of employment.

Edwards sued Andersen for intentional interference with prospective economic advantage, arguing that it was a violation of public policy to require him to sign the TONC to be released from an agreement that was unenforceable under Business and Professions Code 16600. The trial court, following caselaw from the federal Ninth Circuit in California, decided that the non-competition agreement did not violate Section 16600 because it was narrowly tailored and did not completely deprive Edwards of his right to pursue his profession.

The Court of Appeal and the Supreme Court both disagreed. Citing the express language of Section 16600, the Supreme Court rejected any “rule of reasonableness” or “narrow-restraint” exception that would uphold a non-competition agreement so long as it did not completely preclude the employee from engaging in a lawful profession, trade or business. The court concluded, “Section 16600 is unambiguous, and if the Legislature intended the statute to apply only to restraints that were unreasonable or overbroad, it could have included language to that effect.” The only exceptions are those set forth in the statute itself that allow non-competes in the context of a sale or dissolution of a corporation, partnership, or limited liability corporation where the individual granting the non-compete has an equity interest in the business being sold (e.g., a shareholder or a partner).

In short, the Court’s ruling affirms a strict interpretation of Section 16600. Any agreements that purport to per se limit an employee’s ability to work for a competitor or solicit former clients or customers will not be enforced in California.

It is important to note, however, that the Court expressly declined to address the so-called “trade secret exception” to Section 16600, which allows an employer to prohibit an employee from using trade secrets to solicit former customers. California does not follow the “inevitable disclosure” doctrine, which in some states may be relied upon to create a presumption that an employee going to work for a competitor will necessarily use his or her former employer’s trade secrets while working for the competitor. But, to the extent an agreement prohibits a former employee from using trade secrets to compete unfairly, it will still be enforceable.

What this means is that it is ever-more important for employers to take precautionary steps to ensure that their confidential business information will be protected as trade secrets. These steps might include identifying information the employer considers trade secret; having a policy that all confidential information is in some way marked "Confidential;" asking employees (and where appropriate third parties) to sign a Confidentiality and Non-Disclosure Agreement that sets out their duties not to use or disclose proprietary information; and implementing workplace security procedures, including policies and procedure to protect computerized information.

In addition, the Court also declined to specifically decide whether the provision in the agreement prohibiting Edwards from recruiting employees violated Section 16600. In general, one employee may solicit another to leave current employment to work for a competitor if the solicited employee is not under a contract of employment. However, knowledge of which employees are the top performers is arguably confidential information. And, existing caselaw in California has upheld “anti-raiding” clauses so long as they are reasonable in scope and limited to “non-solicitation” of employees, i.e., the provision cannot purport to be a “no-hire” clause. For the time being, this continues to be the case, but it is not likely to be long before this concept is also tested head-on in the courts in light of the Edwards case.

The bottom line is that California courts will not enforce provisions in agreements that attempt to limit outright an employee’s ability to work for a competitor or go after former customers even if in another state they might be considered reasonable restrictions. Only if an employee is using trade secrets to compete unfairly will a non-compete provision be upheld. What becomes even more important, therefore, is that all employers take steps to protect their confidential business information from improper use or disclosure.

Punitive Damages for Sexual Harassment, Quirky Question # 56

Mon, 08 Sep 2008 09:55:00 GMT

My reaction to the fact scenario you present is that it contains positives and negatives. The positives, of course, are that your company is “committed to eliminating sexual harassment,” and that you not only have a well defined sexual harassment policy but conduct periodic training sessions. The negatives are that your employee’s sexual harassment complaint “fell through the cracks,” and that the explanations you offer for that fact are not especially compelling.

Courts are not particular sympathetic to a company’s failure to investigate employees’ sexual harassment complaints and typically do not find that a company’s “hectic schedule” justifies delaying the initiation of an investigation. Further, in my experience, courts would be completely unimpressed by a company’s attempt to shift responsibility to the harassment victim by suggesting that she was not sufficiently persistent in pursuing her claim. Once an employee reports the harassment to you, it is incumbent upon your company to act. I doubt that there is anything in the handbook you referenced or in the training you conduct suggesting that if your company is unresponsive to the employee’s first complaint, she needs to follow up by complaining again.

The bottom line is that sexual harassment complaints must be investigated promptly. I am periodically asked just what “promptly” means. Like much of sexual harassment litigation, this issue depends on the “totality of the circumstances.” Moreover, there s a direct linkage between the seriousness of the allegations and the speed with which the company begins its investigation. If, for example, the allegation involves a sexual assault, it is imperative that the company start its investigation immediately. If, however, the harassment allegations were only a few off-color jokes, especially if they were not directed at the person complaining, a court might be a bit more tolerant of a slight delay in commencing the investigation. But for any type of harassment allegation, the commencement of the investigation should be measured in days, not weeks, and certainly not months. Even for allegations that involve less egregious conduct, failing to begin your investigation within days of receiving the complaint is a mistake.

Here, you state that your employee has filed a complaint and has included a claim for punitive damages. This suggests to me that the actions about which your employee complained could be serious. You inquire whether the mere fact that you have a sexual harassment policy, coupled with your bi-annual training, will suffice to defeat any claim for punitive damages. Sorry to disappoint, but if there is disconnect between your policies and your enforcement of those policies, your company may be at risk for punitive damages. In short, if your company ignores its well-established policies prohibiting sexual harassment, you may have exposure for punitive damages.

For example, a number of years ago, the 8th Circuit addressed this situation in the case of MacGregor v. Mallinckrodt, 373 F.3rd 923, 931 (2004). As the court found in MacGregor, if a company discriminates in violation of its own anti-discrimination policies, the existence of the policies will not allow the employer to escape punitive damages. In the MacGregor case, the HR Department did not formally reprimand a harassing manager for his conduct and did not communicate the results of its internal investigation to the complaining employee. The 8th Circuit held that these "lax anti-discrimination policies were insufficient to keep the issue of punitive damages from the jury" and that the employer's behavior was "sufficiently indifferent" toward the employee's rights to support the maximum punitive damages award [under Title VII] of $300,000.

In a similar, more recent case, Bjornson v. Dave Smith Motors, No. 04-285 (D. Idaho July 31, 2008), the District Court denied the defendant's post-trial motions and affirmed the jury verdict of $100,000 in punitive damages. The court rejected the auto dealer's argument that its well-established harassment policy insulated it from a punitive damages award. The court found that the company had disregarded its policy by ignoring the plaintiff's complaints, failing to investigate fully, and only providing the harasser a "meager warning" for his conduct. The court observed further, "The employer must show that it implemented its policy in good faith. As with the affirmative defense to the hostile work environment claim, there is substantial evidence from which a jury could conclude that the policy, although it existed, was not implemented in good faith. It must be shown that defendant made efforts to implement its policy, through education of its employees and active enforcement of its mandate." (Emphasis added.)

The highlighted admonition of the Idaho District Court appears to apply to your fact situation. You will need to demonstrate the "active enforcement" of your policy's mandate if you hope to rely on the existence of your policy to avoid potential exposure for punitive damages. Based on the facts you describe, I'm not convinced that you will be able to do so.

Finally, keep in mind that Title VII has capped exemplary damages at $300,000 (or less, depending on the employer's size). Typically, however, sexual harassment claims are brought under both federal and state statutes, with a few common law claims thrown in as well. The state statutes may (or may not) cap available punitive damages. Be sure to check the state statute that may be implicated. The common law claims (assault, battery, intentional or negligent infliction of emotional distress) usually will not have any limits on the potential punitive damages. Given these facts, it is critical for you to treat sexual harassment seriously and effectively if you hope to avoid potential exposure for punitive damages.

Religious Discrimination and Accomodations, Quirky Question # 57

Mon, 15 Sep 2008 09:16:00 GMT

You are correct that there are a lot more religious discrimination cases in the news these days. This undoubtedly reflects the fact that the U.S. workforce is increasingly diverse, and includes employees of varied religious faiths and perspectives. Moreover, the EEOC has made religious discrimination cases a higher priority than it has in the past, with a resulting increase in litigation where the EEOC is the plaintiff, either pursuing claims on behalf of an individual or pursuing some type of systemic relief.

One of the battlegrounds in the religious discrimination cases is employees’ work schedules. This may relate to employees’ desire to take time during the workday to pray or participate in other religious practices, to take time off (sometimes quite a bit) to observe various religious holidays, or, as in the fact pattern you describe, not to work during the Sabbath. Of course, depending on the religion, these days of worship may be different.

Under Title VII, employers with 15 or more employees may not discriminate against employees on the basis of religion (as well as various other protected categories). One of the obligations imposed upon employers under Title VII is to make an effort to accommodate employees’ religious beliefs when there is a conflict between an employee’s religious beliefs and some work rule or requirement. Here, you point out that there is a conflict between your firm’s need to staff your Sunday shifts and a few of your employees’ desire to avoid working on Sunday. This is the type of issue that requires an employer to explore whether an accommodation of the employee is possible.

There are several key points, however, to keep in mind with respect to religious accommodation issues. First, not all requests for an accommodation must be honored. The employer only need accommodate those beliefs that are religious and “sincerely held.” If an employer has a bona fide (or legitimate) concern about whether the religious beliefs are sincerely held, it may engage in limited inquiries to gain a better understanding of this issue. Here, for example, you point out that the employees first raised an issue with you about working your Sunday shifts because of the impact these shifts would have upon their “family time.” The fact that your employees' initial objection had nothing to do with a religious-based concern may cast doubt on the legitimacy of the subsequent request for a religious accommodation. Note, however, that there appears to be a relatively low bar for determining whether an employee’s religious beliefs are “sincerely held,” so it's difficult for an employer to prevail upon this issue.

Second, the standard for religious accommodation is quite different than the standard for an accommodation of a disabled employee. Although both statutory schemes refer to the concept of “undue hardship,” the burden on the employer to show undue hardship is far less significant for religious accommodation issues than it is for disability accommodation.

Third, as the courts have explained, an accommodation would pose an undue hardship if it would cause more than a de minimis cost on the operation of the employer’s business. As the EEOC has pointed out, factors to consider when making this assessment include: the type of workplace, the nature of the employee’s duties, the cost of the accommodation in relation to the size and operating costs of the employer, and the number of employees who will need an accommodation (a variable that affects several of the other factors just listed). Moreover, like other aspects of discrimination law, these cases are highly individualized and assessed on a “totality of the circumstances” analysis.

Fourth, monetary costs are not the only measure of assessing an undue hardship. Other factors to consider include the impact of the accommodation on other aspects of the employer’s business. Would the accommodation decrease efficiency? Would the accommodation affect workplace safety? Would the accommodation increase the burden on other employees, especially with respect to potentially hazardous or difficult work? These are but a few illustrations of the ways in which an employer could legitimately demonstrate that the accommodation would constitute an undue hardship. If an undue hardship is established, an employer is justified in rejecting the requested accommodation.

Fifth, an employer does not have to grant an accommodation if it would adversely affect another employee’s rights pursuant to a collective bargaining agreement, or a bona fide seniority system. For example, if your company allowed employees to select their shifts based on the length of their tenure with your firm, and the employees who were seeking to avoid working on Sunday were junior employees who would not have the requisite seniority to select non-Sunday shifts, your company would not be obligated to accommodate them if that meant bumping a more senior employee into the undesirable Sunday shift. Of course, another employee could elect to swap shifts with the employee hoping to avoid Sunday work due to his or her religious beliefs.

In sum, there are a number of issues you should explore when trying to assess whether your company must accommodate an employee’s request for a religious accommodation. Is the religious belief sincerely held? Will accommodating the employee’s request result in more than a de minimis hardship for your company, whether measured by costs or other legitimate considerations? Would granting the accommodation conflict in some way with other rights guaranteed to your other employees?

Once these questions are considered, you will be better positioned to evaluate whether you can grant your employees’ requests to avoid the Sunday shift assignments. Keep in mind that even if you do determine that you can accommodate the requests by your employees, you should think creatively about how you approach this issue. It may be that other employees are willing to swap shifts on a voluntary basis. Hypothetically, you might even find that you could accommodate individuals of different religions by flexible scheduling. For example, some employees may ask not to work from sundown on Friday to sundown on Saturday. Other employees may have no reservations about working shifts that conflict with this timeframe but are desirous of avoiding Sunday work.

If, however, you conclude that you cannot accommodate your employees’ requests, you may have a defensible position. Engage in an interactive process with the affected employees, consider any ideas or solutions they may propose, and document your communications with your employees. Treat these kinds of situations individually, carefully examining the particular needs and beliefs of each employee. Finally, consider thoughtfully the types of issues described above and document your analysis. By engaging in a thoughtful and deliberative assessment of these issues, you will reduce your potential exposure if you are subsequently sued for religious discrimination.

Conflicts Between Religion and Other Discriminatory Prohibitions, Quirky Question # 58

Mon, 22 Sep 2008 09:08:00 GMT

As addressed in last week’s Quirky Question, Title VII, as well as the parallel state anti-discrimination statutes, prohibit discrimination on the basis of religion. The proscription against religious discrimination involves two separate obligations: a) companies may not discriminate against employees on the basis of their religion (disparate treatment claims); and b) companies have an obligation to accommodate their employees’ sincerely held religious beliefs (accommodation claims). Last week, I discussed the religious accommodation concept. Here, however, as you point out, the potential religious accommodations conflict with other obligations imposed upon your company.

Many states, including Minnesota, have statutes that prohibit discrimination on the basis of sexual orientation. Further, independent of state laws, most of the largest and mid-size corporations in this country have policies prohibiting discrimination on the basis of sexual orientation. In short, the type of quotation displayed by your employee conflicts with state law and sound corporate policies. In my view, in this context, corporations are fully justified in terminating employees who are unwilling to remove these types of anti-Gay statements from their work spaces.

Out of an abundance of caution, however, companies should follow the prescriptions of the courts and the EEOC guidelines before making the discharge decision. First, explore with the employee displaying the bigoted statement why it is being displayed. If he advises you that his actions reflect a “sincerely held” religious belief, you need to move to the next step of the analysis. (Of course, if he tells you that he simply hates homosexuals and does not tie his antipathy to “sincerely held” religious beliefs, your rights to discipline or discharge him are even more unfettered.) Second, assuming your employee’s beliefs are religiously linked, you need to explore whether you can accommodate these beliefs. As I discussed last week, however, your accommodation obligations are not substantial. If the accommodation would cause your company even a minimal “undue hardship,” the accommodation does not have to be made.

There are many ways in which you can demonstrate that allowing this hateful message to be displayed (whether based on a Biblical passage or not) would be harmful to your company. The message violates state law, at least in Minnesota and a number of other states. The message violates your company’s policies. The message is contrary to your company’s diversity initiative. The message is hurtful to employees, both heterosexual and homosexual. The message is divisive and counter-productive to a harmonious and effective workforce. If displayed in an area where your customers and/or vendors have access, your message also may offend representatives of those groups and may adversely affect your company’s relationships with these third parties. The bottom line is that allowing hateful, hurtful messages to be displayed in your workplace (regardless of which group is targeted) adversely affects your company’s profitability. For these reasons (and undoubtedly others as well) your company should be able to demonstrate easily that allowing the Biblical quote to be displayed would constitute an “undue hardship” for your company.

I recommend, therefore, that you discuss with your employee whether he is willing to remove the quotation from his work area. If he is not willing to remove the offensive material, impose discipline. If you want to help the employee understand the seriousness of your concerns, you could consider progressive discipline. For example, you could suspend him without pay for a defined period of time. If that action does not convince your employee that you view his actions seriously, and he still insists on displaying this Bible quote, you would be justified in terminating him. If he later sued on the basis of religious discrimination, your company should prevail.

Several years ago, a similar case was presented to the Ninth Circuit, Peterson v. Hewlett Packard, 358 F.3d 599 (9^th Cir. 2005). In Peterson, a case arising out of the District of Idaho, a Hewlett-Packard employee displayed a number of virulently anti-Gay Biblical quotes in his cubicle, all within the view of other company employees. Peterson, who characterized himself as a “devout Christian” acknowledged that he the quotations were “intended to be hurtful.” (Apparently, there were other sections of the Bible that he somehow overlooked.) Peterson claimed that he hoped his Gay and Lesbian colleagues would see his message, “repent and be saved.” Hewlett Packard met with Peterson, explored whether it could accommodate his religious beliefs, discovered that Peterson would not agree to the removal of the quotations, and terminated his employment, both for violating the company’s policies and for insubordination. The District Court granted the company’s summary judgment motion in Peterson’s disparate treatment and failure to accommodate religious discrimination claims. The Ninth Circuit affirmed.

With respect to the failure to accommodate claim, the Ninth Circuit pointed out that an accommodation need not be made where the accommodation “would result in discrimination against [ ] co-workers or deprive them of contractual or statutory rights.” Further, the court emphasized that Title VII’s prohibition against religious discrimination “does not require an employer to accommodate an employee’s desires to impose his religious beliefs upon his co-workers.” This observation holds true regardless of which religious zealot is desirous of imposing his set of beliefs upon his co-workers.

Note that the EEOC has recently published an informative “Fact Sheet” relating to religion and Title VII, in which the EEOC addresses a number of questions and answers about religious discrimination. See, http://www.eeoc.gov/policy/docs/religion.html .

Finally, another way to consider this question is to substitute another issue in the message that was displayed and evaluate whether there would be any serious debate about the outcome. For example, if an employee posted a message in his or her cubicle that anyone who married someone of another race should be put to death, claiming that this sentiment was based on his or her religious beliefs, there would be little tolerance for the expression of this idea. Or, if an employee communicated the sentiment that a young woman should be killed if she marries someone other than the marriage partner selected for her by her parents, again there would be immediate rejection of this message as completely unacceptable. The same immediate rejection should apply when an employee is asserting that individuals with a different sexual orientation should be “put to death,” regardless of whether he links this sentiment to his religion.

My last observation is that the train has left the station with respect to protecting individuals on the basis of sexual orientation. State laws prohibit discrimination against these individuals. It is likely that federal legislation will pass in the next Congress prohibiting sexual orientation discrimination. Most responsible companies have established policies regarding sexual orientation discrimination, and are working hard to ensure their workforces are both diverse and tolerant. Employers are well within their rights in insisting that their employees get on board, regardless of those employees’ religious beliefs

Mandatory Arbitration, Quirky Question # 59

Mon, 29 Sep 2008 09:33:00 GMT

The fundamental questions your company is evaluating – should your firm adopt a mandatory arbitration policy, and how should it be written – are important inquiries. Before you completely commit to the arbitration path, let me offer a few observations for your consideration. Then, if your company still wishes to implement a mandatory arbitration policy, I'll offer a few suggestions on the contours of such a policy.

As you know, there are pros and cons to requiring your employees to arbitrate their employment claims with your company. The principal justification I hear expressed for the adoption of an arbitration policy is that mandatory arbitrations save companies money. Frankly, I’m not convinced that’s true.

I don’t dispute the notion that a case filed and resolved by an arbitrator following a hearing is likely to be less expensive than a case filed and resolved by a federal or state court judge following a trial. But the broad question of whether requiring your firm's employees to arbitrate their claims would be less expensive for your firm should not be assessed on this type of single case comparison alone. I suggest that you consider whether your company, when assessing all of the potential claims and/or litigation, would spend less on employment lawsuits if you adopted a mandatory arbitration policy. There are a number of variables that cause me to question whether these policies truly result in a cost savings.

First, as you likely know, most civil cases that get filed in state or federal court, are resolved before trial. (I’ve seen different statistics on this question but nearly all of them are that fewer than five percent of filed cases actually are tried to verdict.) Many of them are resolved through a motion for summary judgment. Occasionally, they are resolved at an even earlier stage in the proceeding, through a motion to dismiss. The expenses associated with these dismissed cases are substantially less than cases that are tried to verdict.

In arbitrations, however, you rarely can persuade an arbitrator to dismiss a case early on. Even obtaining summary judgment is an unusual event in an arbitral forum. Some arbitrators won’t even allow parties to file such a motion. Other arbitrators permit such motions to be filed but grant them only infrequently. Given these facts, the more meaningful comparison is what will it cost your company to participate in an arbitration hearing 95 percent of the time. Juxtapose that figure to what it would cost your company to try in court fewer than 5 percent of the cases.

Second, a potentially significant part of litigation expenses are the fees associated with discovery. But, the federal and state courts have taken steps to rein in discovery expenses. For example, in the federal courts, as well as many state courts, lawyers need agreement from opposing counsel or judicial permission to take a deposition for more than seven hours. Moreover, if there are discovery abuses, these issues can be brought to a court’s attention. In contrast, arbitration is a far more undefined environment. Some arbitrators allow substantial discovery; others do not. Some arbitrators will simply use the federal or state rules of civil procedure when defining the appropriate scope of discovery, which means that there will be only a minimal cost savings in this area. (One practical recommendation for you, as a consequence, is to consider how your firm would like to define the scope of appropriate discovery in your arbitration policy. A corollary cautionary recommendation is that, although discovery can be expensive, you should not be too limiting in defining the scope of permissible discovery. Don't write your policy in a way that precludes all depositions or so circumscribes your ability to obtain information from the plaintiff before the hearing that you are clueless as to what your employee, or former employee, will say when testifying.)

Third, keep in mind that you have to pay arbitrators. You don't have to pay state or federal judges. Moreover, an arbitrator has a financial incentive to allow a broad inquiry. That is not true for judges, whose dockets typically are so congested that they work diligently to assist the parties to resolve the matters before trial, and sometimes (if those efforts fail) impose tight time limits on the actual trial itself.

A second common justification advanced by those advocating arbitration is that arbitration is a more expeditious dispute resolution procedure than civil litigation in state or federal courts. This is probably true. But, when viewed from a defense perspective, I’m not sure this is necessarily an advantage. Moreover, if defendants are eager to move a case along more quickly, there are many ways to expedite the process (short discovery periods, early motions, early deposition of plaintiff, etc.). Typically, however, defendants recognize that delay is not disadvantageous.

A third issue you may want to consider when evaluating the desirability of requiring arbitrations is the question of finality. There are pros and cons to assess on this point. If you mandate arbitration of employment claims and the claims are pursued through a hearing result, the case is over. (This is true except in the rarest of cases, beyond the scope of this Blog analysis, where arbitrators make errors that cause courts to step in post-arbitration.) In short, there is finality with the arbitrator’s determination. There likely will be times, however, when an arbitrator renders a decision you simply cannot believe. In this context, you will wondering how quickly you can file your appeal. Simply put, you can’t. As just stated, except in extraordinary situations, the arbitrator's decision ends the case.

In a judicial forum, of course, if the jury gets it wrong, you have the right to file post-trial motions, in which you ask the court to rectify a jury’s "mistaken" analysis. If the judge doesn’t share your perception that the jury erred, you have the right to file an appeal. If the intermediate appellate court also is unconvinced by your arguments, you can petition for review by a higher court. In other words, you often will have three layers of appeal from an adverse decision. Before you decide that you are going to adopt a mandatory arbitration policy, consider what you are giving up.

A fourth general observation regarding arbitration is that the Rules of Civil Procedure (all 300-plus pages), whether for federal or state courts, have been thoughtfully developed over decades. They address a multitude of issues that can arise in civil litigation. Arbitration rules, in contrast, if defined at all, usually are set forth in a few brief pages. This leaves a great deal of room for interpretation, rather than providing the clarity and certainty associated with the well-defined rules of civil procedure. Further, the Rules of Evidence also provide parties with guidance on what evidence is (and is not) admissible. In the arbitration context, the evidentiary standards usually are far more lax. So, for example, an arbitrator may be far more inclined to admit evidence that is only marginally relevant, or is based on otherwise inadmissible hearsay, than his or her judicial counterparts. This can prolong a hearing, introduce extraneous issues, and, at times, be outcome determinative.

My last general observation is that arbitrations sometimes involve "compromise" resolutions. More than a few arbitrators adopt a "split-the-baby" approach. This may reflect the fact that the arbitrators are hoping that at some future point, they will be retained by the parties and their lawyers in connection with another dispute. Judges, in contrast, do not feel that financial pressure and generally are indifferent to the prospect of involvement in future disputes involving the same parties. Therefore, they may be a bit less inclined to reach a compromise resolution.

I hope I’ve raised a few general issues for you to evaluate regarding the adoption of a mandatory arbitration policy. Assuming, however, that your firm still wants to implement an arbitration policy, let me now address the specific question you posed regarding the prohibition of class actions in the policy.

Many courts recognize that employees do not truly "bargain" with respect to policies and procedures that employers adopt and impose upon them. Therefore, courts scrutinize these “contractual” obligations carefully. Although the courts have found that employer-imposed arbitration policies are enforceable, courts often evaluate whether the policies implemented by employers either impose obligations on employees that would not exist in the court system, or deprive employees of the rights they otherwise would have if the claims were being pursued in court. For example, when employees are required to pay a portion of the arbitration costs, courts often have rejected those arbitration policies since the employees would not be obligated to pay these costs to pursue a claim in federal or state court. Conversely, if the arbitration policies take away rights available in a judicial forum, such as the right to pursue claims on a class action basis, again courts are skeptical. Judicial skepticism, especially when applied to arbitration policies, often results in a repudiation of the arbitration agreement as "unfair," or "unconscionable," or an "adhesion" contract. In other words, courts hold these types of agreements unenforceable.

Here, you are contemplating prohibiting employees from pursuing class claims through your arbitration policy. Yet, if employees can meet the standards for class claims in a judicial forum, they would be able to pursue a classwide claim. Therefore, a court may well conclude that your arbitration policy deprives employees of rights to which they otherwise would be entitled and reject your policy on that basis. Given that risk, I recommend that you not include such a prohibition in your company's arbitration policy. Inclusion of this type of provision risks invalidating the entire arbitration policy.

Abusing PTO Policies, Quirky Question # 60

Thu, 02 Oct 2008 09:38:00 GMT

[Quirky Question No. 60 is another one of our West Coast questions, this one posed to the lawyers in our firm's Anchorage, Alaska office. Wendy Leukema, who has addressed other Quirky Questions posed to her and her colleagues in Anchorage provides her analysis below. Note that Wendy's analysis is not dependent on statutory or common law unique to Alaska; rather, she analyzes this inquiry from the perspective of the federal statute now causing such anguish to employers and such joy to the plaintiffs' employment bar, the FLSA.]

Quirky Question # 60

Once again, as the saying goes, “no good deed goes unpunished.” Your existing PTO policy is very generous – perhaps too generous – and certain employees are taking advantage of the fact that, under federal wage and hour law, their salaries may only be reduced for full-day absences due to personal reasons. The good news for you is that under the Fair Labor Standards Act (FLSA), employers with bona fide benefits plans may reduce an employee’s PTO for partial day absences due to personal reasons, including illness and injury, so long as the employee’s actual pay is not affected. This is true even if the employee is able to cash-out his or her earned but unused PTO at the end of the year. Webster v. Public School Employers of Washington, Inc., 247 F.3d 910, 917 (9^th Cir. 2001) (explaining that a reduction in paid leave does not affect an employee’s exempt status under federal law, even if the employee is able to convert unused leave time to cash). Thus, an employer may reduce an exempt employee’s PTO for tardiness or absences due to personal reasons without jeopardizing the employee's exempt status. Barner v. City of Novato, 17 F.3d 1256, 1261 (9^th Cir. 1994).

Where an exempt employee has exhausted his or her PTO or has not yet earned enough PTO to cover the absence, employers with bona fide benefit plans have several options. With respect to full-day absences covered by the policy (e.g., vacation, illness, or injury), employers may reduce an employee’s pay or require the employee to carry a negative leave balance. 29 C.F.R. 541.602(b)(2); DOL Opinion Letter dated September 14, 2006. With respect to partial day absences, employers may only require the employee to carry a negative leave balance. Under no circumstance, may an exempt employee’s actual pay be reduced for partial-day absences. See DOL Opinion Letter dated January 7, 2005. As explained by the DOL, “payment of the employee’s guaranteed salary must be made, even if an employee has no accrued benefits in the leave plan and the account has a negative balance, where the employee’s absence is for less than a full day.” Id.

To qualify as a bona fide benefit plan, the plan or policy must provide a reasonable amount of paid sick leave for exempt employees, be communicated to eligible employees, and operate as described in the plan or policy. DOL Opinion Letter dated September 14, 2006. In addition, the plan must be administered impartially and its design should not reflect an effort to evade the requirements that exempt employees be paid on a salary basis. Id.

Based on the information you provided, it appears as though your plan would more than meet these criteria. The DOL has approved as “bona fide” leave plans providing for at least five days of sick leave per year. These days do not have to be designated solely as sick days; the DOL has approved as “bona fide” leave plans which provide for one day of sick leave and five days vacation, where the employees were (1) able to use their vacation days as additional sick days, (2) able to take leave in half-day increments, and (3) not required to use leave if out for only an hour or two due to illness or a doctor’s appointment. The DOL has also approved as “bona fide” leave plans that require one year of service prior to eligibility for paid sick leave. Accordingly, under such a plan, the employer could reduce an exempt employee’s pay for full- day absences taken for illness or injury prior to the employee’s one year anniversary date.

Before you begin making partial day deductions from exempt employee’s PTO, however, we recommend that you revise your policy to permit such deductions and that you communicate these changes to your exempt employees. It is far preferable to communicate these types of policy changes in advance, rather than simply making retroactive deductions from a benefit to which your employees believed they were entitled.

Comments/Questions

Timing of Retaliation Claims, Quirky Question # 61

Mon, 06 Oct 2008 12:45:00 GMT

Retaliation claims are becoming increasingly common. Numerous federal and state statutes prohibit retaliation against employees availing themselves of various types of statutory protections. Retaliation claims can arise in connection with the federal and state anti-discrimination prohibitions (Title VII, the ADEA, the ADA, and parallel state statutes providing protection against discriminatory conduct). Indeed, the EEOC reports that retaliation claims are one of the fastest growing categories of discrimination charges. Retaliation claims, however, can arise in many other contexts as well (e.g., OSHA, workers’ compensation, FLSA, FMLA, etc.). Virtually every statutory scheme that affords some type of protection to employees also prohibits retaliation against employees who exercise their rights under those statutes.

The “temporal proximity” you reference is merely the length of time between the protected conduct and the subsequent adverse job action. The closer in time between the protected conduct (e.g., filing a complaint of sexual harassment) and the adverse consequence (e.g., transfer or discharge), the more likely courts are to infer a causal relationship between the protected conduct and the employer’s subsequent action. The more remote in time, the more likely that courts will conclude that there were other, unrelated or intervening factors that motivated the subsequent decision.

There is no hard and fast guideline I can provide you regarding the appropriate time lag between protected conduct and later adverse action. My intuitive sense (based on reading a lot of retaliation cases) is that courts are somewhat skeptical about adverse job actions that occur within six months of an employee exercising some statutorily protected right. Between six months and twelve months, courts are more receptive to the employers' arguments that there were other factors that caused the adverse decision. When a year or more has passed, courts are somewhat skeptical about the employees' arguments that the subsequent adverse job action was retaliatory.

Although, in general, the closer the temporal link, the more likely courts will infer a retaliatory motive, every case must be evaluated on its individual circumstances. For example, imagine a situation where an employee complained of age discrimination on October 15 and an employer terminated his employment on October 20. It would surprise no one if that employee then accused the company of retaliatory conduct based on his protected conduct of filing a charge of discrimination. But, if the company had discovered on October 16 that the employee had been embezzling corporate funds for the preceding year, it certainly would be justified in terminating the employee. Such a decision would not be “retaliatory” notwithstanding the temporal proximity between the charge-filing and the employee’s termination.

A recent case from the federal court in the Eastern District of Tennessee illustrates the flip side of this situation. In Taylor v. Gatlinburg, No. 3-06-00273 (E.D. Tenn. August 26, 2008), a District Judge denied the City’s motion for summary judgment on the plaintiff’s retaliation claim. The plaintiff, Mike Taylor, a Captain in the Fire Department, contended that the City of Gatlinburg refused to let him take a test to become Fire Chief in retaliation for his involvement in a Fair Labor Standards Act lawsuit (FLSA). The surprising fact of the case was that Taylor and nine others had participated in the FLSA lawsuit 15 years before he was denied the opportunity to seek the Fire Chief position. Really! I’m not making this up.

The court downplayed the significance of the 15-year gap between the protected conduct and the adverse job action, perhaps justifiably. One reason the court did so was that the City seemingly advanced pretextual reasons for why Taylor was not selected as the Fire Chief. The City pointed to his lack of a college degree, but three of the four candidates who were allowed to proceed through the application process beyond the point at which Taylor was eliminated did not have a college degree. Further, the individual selected to be the Chief did not have a college degree. The court also examined other evidence suggesting a possible nexus between Taylor’s participation in the FLSA suit and his rejection for the Chief position. This evidence included statements by individuals that the City Manager, Cindy Ogle, who made the decision regarding who would be the Chief had been the City Manager 15 years earlier when the FLSA suit was brought and had periodically made critical comments about those who brought the suit, including Taylor. Taylor offered additional evidence that the Ms. Ogle also had stated that Taylor would never be the Chief because he had “sued the City.”

When evaluating this outcome, keep in mind the procedural posture of the Taylor lawsuit. The case reached the court on a motion for summary judgment by the City, a context in which all factual disputes are resolved in favor of the non-moving party (here, Taylor). Whether Taylor will be able to persuade the fact-finder at trial that the City Manager still harbored resentments about the FLSA litigation some 15 years after it had concluded remains to be seen. If he succeeds on his retaliation claim, it will be the longest time “gap” of which I am aware in a retaliation case.

Two final points regarding retaliation claims. First, as I tell my clients, do not convert an infirm underlying claim into a compelling retaliation claim. For example, an individual may file a charge of age, race or sex discrimination. The company may know that this claim is wholly without merit. But, if the company’s response to this “frivolous” claim is to terminate the employee or take some other adverse job action, the company may have created a very strong retaliation claim for the employee. In other words, a retaliation claim does not have to be connected to a valid underlying claim; it will succeed or fail on its own fact pattern.

Second, when confronted with a claim of discrimination, or a claim alleging some other type of statutory violation, it is preferable to bring in an objective observer when trying to determine how to address some other aspect of the employee’s conduct. For example, if an individual accuses a supervisor of sex discrimination and later seeks a promotion, it would be advisable to involve someone other than the accused in the determination of whether the employee should be promoted. If the accused supervisor is the decision-maker and decides that the employee should not receive the promotion, you can be confident that the retaliation claim will soon follow. Even if the negative decision on the promotion was entirely legitimate, your firm still will have to explain why it let the accused make the promotion decision and articulate how that person was able to divorce him- or herself from the underlying accusations of discriminatory conduct.

Scope of Retaliation Claims, Family Members ?, Quirky Question # 62

Mon, 13 Oct 2008 10:47:00 GMT

You ask an excellent question, which frankly has no clear answer. The courts that have examined this issue have reached inconsistent results, some finding that taking punitive action toward a family member constitutes impermissible retaliatory conduct and others reaching the opposite conclusion. So, for now, the answer to your inquiry is that it depends on the jurisdiction in which the claim is brought. Given that federal circuit courts are among those that have reached inconsistent conclusions on the scope of the retaliation provisions set forth in the anti-discrimination statutes, at some point either Congress or the U.S. Supreme Court will have to reconcile the inconsistent statutory interpretations.

For example, in the recent case of EEOC v. Wal-Mart Stores, Inc., No. 07-CV-0300 (D.N.M. July 28, 2008), the federal District Court addressed a situation where a Wal-Mart employee, Ramona Bradford, filed a charge of discrimination against the company. During the next five months, Bradford's two adult children applied for positions with Wal-Mart. Despite being more qualified than those hired, Wal-Mart rejected each of their applications. Wal-Mart also offered pretextual reasons for why at least one of these applicants was not hired, telling him that Wal-Mart had a "hiring freeze" notwithstanding the fact that the company hired others at the same time. Bradford and each of her adult children then alleged retaliation by Wal-Mart.

The question examined by the District Court was whether either of Bradford's adult children (Robin and John) had engaged in any protected conduct encompassed by the retaliation provision of Title VII. The statute's retaliation provision 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/applicant] has opposed any practice made an unlawful employment practice by this Title, or because [the employee/applicant] has made a charge, testified, assisted, or participated in any manner in an investigation, proceeding, or hearing under this Title." Section 2000e-3(a). Because the court concluded that neither of the Bradford children had "opposed any practice made unlawful" or had otherwise engaged in conduct described in the statutory anti-retaliation provision, the court found that their retaliation claims should be dismissed.

In reaching this conclusion, the District Court observed that it was not obligated to defer to the EEOC's own interpretation of the statute, as set forth in the EEOC Compliance Manual. The Manual provides that the retaliation provisions of the federal anti-discrimination extend to individuals "so closely related to or associated with the person exercising his or her statutory rights that [retaliatory conduct] would discourage that person from exercising those rights." Nevertheless, the District Court found that given the plain and unambiguous language of the statute, the EEOC's interpretation was "unpersuasive."

The District Court opinion (which, whether you agree with it or not, is thoughtful and well-reasoned) noted that there was a split of authority on the scope of the anti-retaliation provisions. At least one federal circuit (6th) has found that the anti-retaliation provisions extend to family members or others closely associated with the person who filed the Charge of Discrimination, whereas other federal circuits (3rd, 5th and 8th) have concluded that the statutory anti-retaliation provisions do not reach these individuals.

The District Court in the Wal-Mart decision also considered the question of whether the party who filed the Charge (Ramona Bradford) had a legitimate retaliation claim against the company. The court concluded she did since she clearly had engaged in protected conduct (filing a Charge) and penalizing one's family members for this action could deter the Charging Party (or others similarly situated) from engaging in this type of protected activity.

So, returning to your situation, you could fire the husband of your employee. In at least some jurisdictions (perhaps most), the retaliation provisions of the federal statutes would not provide him any rights. If, however, if you were in the Sixth Circuit, or if another court found the Sixth Circuit's reasoning more persuasive than its opposite counterparts, the husband of your employee would have a legitimate retaliation claim. The husband also may have claims based on state law anti-retaliation provisions, a subject beyond the scope of this analysis. Moreover, if the husband of your employee had assisted his wife in some way with regard to her claim of discrimination, and if your company was aware of that fact, he may have directly engaged in protected conduct.

As the Wal-Mart case also illustrates, even if the husband did not have a legitimate claim, your action in terminating him likely will provide his spouse (who already has filed a Charge of Discrimination) with another basis on which to proceed against your company. As I suggested in my analysis of last week's retaliation issue, I strongly encourage clients not to convert an infirm underlying discrimination claim into a compelling retaliation claim. Whereas your company may be well positioned to defeat the wife's claim of discrimination, your question essentially concedes that you are retaliating against the claimant by firing her husband. In my view, that would not be the most ethical approach.

Finally, even if the ethical issue does not trouble you, I'm not convinced that your plan makes practical sense. If you have a capable, qualified employee, who is meeting your legitimate performance expectations, why would you want to fire him even if his spouse was suing you? I suppose that if you had an extremely small firm, there could be some awkwardness associated with employing the spouse of someone suing you, but for me that would be an insufficient basis on which to discharge someone. Moreover, you may discover that continuing to employ the husband provides your firm some very compelling evidence that your workplace is not discriminatory. For example, if the spouses were of approximately the same age, and the wife was suing you for age discrimination, your firm may be able to obtain some persuasive testimony from her comparably-aged husband stating that he has never experienced age discrimination. Similarly, for example, if the wife claimed gender discrimination, it would be interesting to pose questions to her husband about whether he has ever discriminated against women at your company, or whether he has ever observed discrimination against women. If he stated that he had not observed such conduct, to some extent, that undermines his wife's legal theory. If, in contrast, he states that he has observed such conduct, there could be an interesting series of questions about why he failed to report these problems. You could inquire, "You knew our company was discriminating against women, you knew your wife was working here, and you said nothing to us to assist our firm to improve our policies and practices?" Silence, in this context, simply does not make sense.

In short, although your visceral reaction is that it would be "weird" to employ the husband, there well could be strategic advantages to doing so.

"Me Too" Evidence, Quirky Question # 63

Mon, 20 Oct 2008 09:18:00 GMT

Your question takes me on a trip down memory lane. More than 20 years ago, I tried my first case in federal court – an age discrimination case in which I represented the Goodyear Tire & Rubber Company. Due to difficult economic circumstances, Goodyear had been forced to reduce the number of wholesale tire salesmen in Minnesota. Although we won most of the cases emanating from this situation on summary judgment, one of these cases was tried to jury verdict.

During the trial, plaintiff’s counsel called a number of other witnesses, also former Goodyear employees in the protected age group, who wanted to testify about the end of their employment relationships with Goodyear under various circumstances. We sought to exclude this testimony, without success. We then sought to limit the testimony to issues pertinent to the case being tried. The judge who tried the case agreed that this limitation was reasonable and instructed the other former employees not to discuss the circumstances relating to their own separations from the Company. Witnesses, however, don’t always follow judges’ instructions, especially when they have something they want to say. One witness, therefore, began his response to an otherwise innocuous question, by stating, “When I was fired at age 57, blah, blah, blah.” We immediately objected, and the court instructed the jurors to ignore the witness’s comments.

Interestingly, however, the judge allowed the jurors to ask questions of the witnesses at the conclusion of the questioning by plaintiff’s and defendant’s counsel. As soon as my opponent and I had concluded our questioning of this particular witness, the judge invited the jurors to ask questions. Despite being instructed to disregard the witness’s testimony about his personal situation, the first question posed by a juror to him was, “Why were you fired at age 57?” Proof positive that you cannot un-ring the bell.

The jury came back with a plaintiff’s verdict, finding that the plaintiff had been fired in violation of the Age Discrimination in Employment Act. The extent to which the jurors were influenced by the testimony described above is difficult to ascertain. Happily, I’m pleased to report that the Eighth Circuit viewed the facts somewhat differently than the jury. The Eighth Circuit reversed, but rather than send the case back for retrial, the appellate court directed that judgment be entered for Goodyear. Case over, defense victory.

Some 20 years later, the issue of which other "Me-Too" witnesses can testify and what they can say, reached the U.S. Supreme Court. In the case of Sprint/United Management Co. v. Mendelsohn, No. 06-1221 (Sup. Ct. February 26, 2008), the nation’s high court evaluated the same issue described in your question and that I confronted in the Goodyear case. Ellen Mendelsohn sued Sprint for age discrimination. At trial she sought to present evidence from five other former Sprint employees whom she claimed also had been discharged because of their age. Sprint moved to exclude this evidence, pointing out that none of the other employees worked in the same Department in which the plaintiff had worked and none were supervised by the same person who made the decision to terminate Mendelsohn. The District Court excluded the evidence and the issue was presented to the Tenth Circuit. The intermediate appellate court apparently concluded that the lower court had applied a “per se” rule, mandating that the evidence be excluded, and instead offered its own analysis of the Rules of Evidence 401 and 403 (relevancy and prejudice), and how they should be applied to this type of evidence. The Supreme Court accepted cert to resolve the seemingly conflicting circuit court opinions on this issue.

The Supreme Court decision can be summed up in two words – “it depends.” The high court found that there should not be either a per se rule excluding such “me too” evidence, or a per se rule including such evidence. As the Supreme Court concluded, “The question whether evidence of discrimination by other supervisors is relevant in an individual ADEA case is fact based and depends on many factors, including how closely related the evidence is to the plaintiff's circumstances and theory of the case. Applying Rule 403 to determine if evidence is prejudicial also requires a fact-intensive, context-specific inquiry.”

Here are a few thoughts for you to consider when evaluating whether the evidence presented by these other individuals is likely to be admissible in your case:

· did the manager who decided to terminate the plaintiff also make adverse employment decisions with regard to the other potential witnesses;

· were the adverse employment decisions the same (i.e., discharge, discipline, other);

· did the manager make any ageist comments toward your plaintiff or the other potential witnesses, and if so, were the comments the same or similar;

· did the manager engage in any biased conduct toward your plaintiff or the other potential witnesses, and if so, was the conduct the same or similar;

· if the decision-makers were not the same, did the plaintiff and the other former employees work in the same department;

· if the decision-makers were not the same, did the managers for the plaintiff and the other employees report to the same individual;

· were there any general corporate directives that affected the decisions to terminate the plaintiff or the other employees;

· were the employees basically the same age;

· were the employees similarly situated in other respects (type of job, length of tenure, education level, experience level, etc.); and,

· what role did your Human Resources group play with respect to the various decisions.

The answers to these and other questions will guide the court in assessing whether the “me too” evidence presented by your other former employees will be admissible. As the Mendelsohn court pointed out, this determination is "fact based" and depends on "many factors."

"Penalizing" Employee for Using Leave, Quirky Question # 64

Mon, 27 Oct 2008 09:49:00 GMT

This is a tough question, on which courts are rendering inconsistent opinions. So, while I've offered a few thoughts below, I encourage you to monitor these kinds of situations carefully to see how this area of the law develops.

That said, upon first glance, your position seems eminently reasonable – how can a person who has been absent for some period of time qualify for a perfect attendance bonus? Similarly, how can an employee who has missed time (perhaps substantial amounts of time) be deemed to have made the same contribution to your firm's performance as those who have been there every day?

The problem with this initial reaction, however, is that it fails to take into account the statutory protections afforded by the Family and Medical Leave Act (FMLA). Under the FMLA, an employee may sue her employer for "interfering" with the exercise of her statutory rights. An interference claim typically involves a five-factor prima facie case (i.e., the basic elements required to pursue a FMLA claim). The prima facie elements are: 1) she is an employee eligible for FMLA leave; 2) the defendant is a covered employer; 3) she is entitled to FMLA leave; 4) she provided notice of her intent to take leave; and 5) the defendant employer denied her the FMLA benefits to which she was entitled.

With regard to an "interference" claim, the fifth element can be that the employer somehow used the leave against the employee in an unlawful manner, as "unlawful" is defined by the statute or the relevant regulations. Therefore, it is important to review the regulations. Under 29 C.F.R. §825.220(c), an employer cannot use the taking of FMLA leave as a "negative factor" in employment actions. As some courts have pointed out, if an employer takes an employment action based, in whole or in part, on the fact that the employee took FMLA-protected leave, the employer has denied the employee a benefit to which he or she was entitled.

For example, in the very recent case of Wojan v. Alcon Laboratories, Inc., Case No. 07-11544 (E.D. Mich. September 15, 2008), the court analyzed a situation where an FMLA-eligible, drug sales employee took FMLA leave. In the years before she took FMLA leave, the employee had been a very high performer, receiving high rankings on her performance evaluations based on both subjective and objective ranking methods. She had annual sales rankings that rose from number 53 to as high as number 12 in the nation, which qualified her for the company's highest sales award, the President's Club.

In late 2004, however, the employee took FMLA leave in connection with the birth of her child. The Company did not adjust her sales quota to account for the time she was away from work. Consequently, with 12 weeks away from her job, her comparative sales rankings dropped to number 89 nationwide. Given her low rating, she was placed on a Performance Improvement Plan, and ultimately, discharged for poor performance. The plaintiff-employee argued that the company's refusal to adjust her sales quota based on her leave "set in motion an unbroken chain of events resulting in her termination."

The federal district court agreed, denying the employer's summary judgment motion on the employee's FMLA interference claim. The court concluded that by failing to re-set the employee's sales quota, adjusting it for the time she was away from work, the employer had allowed the leave to negatively affect a term of her employment. (I note, in passing, that the plaintiff brought a number of other claims as well, including FMLA retaliation, sex discrimination, pregnancy discrimination, marital status discrimination -- she was a single mother -- and retaliation under the state discrimination statutes. There also were a number of other facts that substantially strengthened the employee's case and portrayed the employer in a negative light. For example, the plaintiff presented evidence that her supervisor had told her upon her return from leave that she had better not be showing baby pictures to her colleagues and that she had better be out selling. How these collateral facts affected the determination of the court is difficult to pin down with precision. Let's just say, however, that they could not have helped the employer.)

Another very recent case (decided just last week), from the federal district court in Minnesota, assessed many of the same issues. In Dickinson v. St. Cloud Hospital, No. 07-3346 (D. Minn. October 20, 2008), the court considered whether the hospital's method of calculating "absenteeism" interfered with the plaintiff-employee's exercise of her FMLA rights. The hospital compared the amount of time an employee worked against the amount of time the employee was scheduled to work. If an employee's absenteeism, calculated in this fashion, reached a certain percentage, the employee began a progressive disciplinary cycle. Dickinson, an LPN who had missed time off due to various physical problems that qualified her for FMLA leave, was disciplined for excessive absenteeism (first with written warnings, then with a suspension, and eventually, with discharge). She sued, claiming that the hospital's method of determining the absenteeism percentage should have included the qualified FMLA leave time as part of the time in which she was scheduled to work. She argued that had her FMLA absence time been included in the denominator of the calculation, it would have resulted in a lower absenteeism percentage and she would not have been subject to discipline.

The Minnesota district court agreed, although it pointed out that different courts were reaching opposite conclusions on this issue. Nevertheless, the court found that the hospital's method of calculating absenteeism had resulted in her FMLA leave constituting a "negative" factor, in violation of the regulations discussed above. Again, the employer's summary judgment motion on the interference claim was denied.

Applying the principles of these cases to your situation suggests that you should not consider the qualified FMLA leave when assessing your employee's "perfect attendance." I recognize that this seems incongruous but if you disqualified the employee from receiving your "perfect attendance" bonus, you would be using the FMLA leave as a negative factor. Arguably, this would trigger your employee's right to assert an FMLA interference claim.

The same analysis would appear to apply to the more subjective "contribution" bonus paid out by your company. If you disqualified your employee from receiving this compensation simply because she had exercised her statutory rights to take FMLA leave, you again are using your employee's leave as a "negative" factor, potentially exposing your company to an interference claim.

In sum, I'd simply urge your firm to move cautiously in this arena. The cases described above are very recent, having been decided within the last two months. As noted, other cases have reached the opposite conclusion. But, this is an area where you should at least evaluate the relevant issues when deciding how to proceed. Finally, of course, if there are other performance problems on which your decision-making is grounded, the mere fact that an employee has taken FMLA leave will not preclude you from taking disciplinary action, up to and including termination. Just make sure that you carefully document these other reasons because in all likelihood, you will be defending your discipline or discharge decision and will need to explain why these other variables, and not the FMLA leave, led to the company's disciplinary action.

Retaliation for Participating in an Investigation, Quirky Question # 65

Tue, 04 Nov 2008 15:11:00 GMT

[Readers: I've recently addressed two retaliation questions from our readers (see QQ #s 61 and 62, so I thought you would benefit from a different perspective on the current inquiry. This week's analysis is provided by my partner, Jim Kremer. Jim, a 1990 graduate of Georgetown University Law Center, can be reached at 612.340.7859 or by email at kremer.james@dorsey.com. If you have any questions, please do not hesitate to contact Jim. Regards, Roy]

Jim's Analysis of QQ # 65

The circumstances you find yourself in are increasingly common for employers these days. Internal efforts to investigate and address discrimination complaints are often rewarded with retaliation claims by the complaining employee or persons who provide information that is not helpful to the company’s position in the course of the investigation. Often times, an employer’s most significant potential liability lies not with the underlying complaint that spurred the investigation, but rather with retaliation claims brought by the complainant resulting from his or her treatment following the complaint. Occasionally, retaliation claims are brought by someone who participated in the investigative process. The ever-present prospect of such claims presents the employer with difficult challenges requiring thoughtful and careful management.

As an initial matter, the proliferation of retaliation claims might lead an employer to conclude that it would be better off if it did not thoroughly investigate discrimination or harassment claims. That would be a big mistake. Having in place an effective mechanism for identifying, investigating and addressing instances of potential harassment and/or discrimination is a critical step in both limiting an employer’s exposure to litigation – as your company’s experience reflects – and defending against claims if litigation ensues. The “Faragher and Ellerth” affirmative defense, delineated by the Supreme Court in 1998 through two companion cases (Burlington Indus., Inc. v. Ellerth and Faragher v. Boca Raton), allows an employer to avoid hostile work environment liability where (1) the employer exercised reasonable care to prevent and correct promptly any sexually harassing behavior, and (2) the plaintiff employee unreasonably failed to take advantage of any protective or corrective opportunities provided by the employer or to avoid harm otherwise. The availability and application of this affirmative defense present a myriad of fact-based and legal issues beyond the scope of this analysis. For present purposes, it suffices to say that all employers would be wise to implement and effectively communicate discrimination and harassment policies; train employees on the policies; establish effective internal complaint procedures; promptly and thoroughly investigate complaints of sexual and other harassment; and take appropriate remedial action when warranted.

Turning to the situation you have described, your HR folks are right to be concerned about a potential retaliation claim if you proceed with termination. That is not to say that the employee’s participation in the discrimination investigation should serve to insulate her from disciplinary action, including termination, based on her poor performance. But extra care must be taken to ensure that you can defend the termination decision, particularly in light of the relationship between the manager pushing for the termination and the individual about whom the employee provided damaging information. There are several, additional pieces of information I would like to know before providing any definitive advice as to this employee’s potential termination.

First, what does the manager know about the internal investigation? Does he know that the employee was interviewed? Does he know what the employee said, or that she provided damaging information regarding his friend? Has the manager spoken with his friend, the target of the investigation, regarding the results of the investigation? Who within the company is privy to the results of the investigation? If you proceed with the termination, your ability to defend against a retaliation claim will be enhanced if you can demonstrate that the manager was isolated from the investigation and that he had no knowledge of the information provided by the employee.

Second, have other employees reporting to this manager participated in the investigation and, if so, have any of them provided damaging information? Assuming that other employees under this manager have been involved, are they the subject of any active or potential disciplinary action based on their performance? The fact that others who participated in the investigation, including some who conveyed damaging information, have not faced disciplinary action should help demonstrate that the termination decision was prompted by the employee’s poor performance and not her participation in the investigation.

Third, has this manager and the company as a whole been consistent in dealing with the kinds of performance problems underlying the current termination recommendation? Will the employee be able to point to others with similar performance issues who have not been terminated or subjected to disciplinary action? If there are such similarly situated employees, what work-related factors distinguish their situations from that of this employee? If it appears that the company has accorded others more favorable treatment, such as a greater opportunity to correct their poor performance, terminating this individual’s employment on the heels of her participation in the discrimination investigation may well be construed as retaliatory.

Fourth, are the performance shortcomings underlying the termination recommendation objectively verifiable? Here, as in other situations, disciplinary decisions premised on objective performance criteria – e.g., sales goals, productivity measures, etc. – are easier to defend than actions based on purely subjective performance assessments.

Fifth, do other management personnel support the termination recommendation? This gets to who owns the termination decision within the organization. The broader the support for termination, the more difficult it will be for the employee to establish the necessary causal relationship between the termination decision and her sharing damaging information about her manager’s friend. In a situation such as yours, where the manager recommending termination is a good friend of the person about whom the employee provided damaging information, it would be prudent to have another manager with knowledge of the functional area review the employee’s situation and make an independent disciplinary recommendation.

Sixth, are there any facts that tend to suggest that the timing of the termination decision is suspicious? For example, if the employee’s performance should have resulted in her termination one or two months ago, prior to her participation in the discrimination investigation, why didn’t the manager go forward with the termination at that time? What has occurred in the interim that demonstrates that this is a performance-based decision and not retaliatory?

All of these questions are geared toward identifying potential weaknesses that might be exploited at a later date by the terminated employee’s lawyer. If the information you have gathered after considering these issues warrants immediate termination, then the fact that the employee recently participated in a discrimination investigation should not dissuade you from that course of action. Treating the underperformer with “kid gloves” merely because she participated in an internal investigation is not a good idea. It sends the wrong message to your workforce and sets a poor precedent that will only serve to make it more difficult to effectively manage your business and employees. If, on the other hand, potential problems surface in response to these inquiries, it may be more prudent to continue or impose disciplinary action short of termination.

Given the nature of your questions, you will be interested in the outcome of a case now before the Supreme Court. In Crawford v. Metropolitan Government of Nashville and Davidson County, Tennessee, the Supreme Court has been asked to assess whether the anti-retaliation provisions under Title VII extend protection to employees who participate in an employer’s internal investigation. Crawford was fired shortly after she was interviewed as part of an investigation of another employee’s sexual harassment complaint. In the interview, Crawford told the company investigator that she, too, had been sexually harassed by the school district’s employee relations director. The Sixth Circuit affirmed the dismissal of Crawford’s retaliation claim, concluding that participation in a purely internal, in-house investigation, in the absence of any pending EEOC charge, is not a protected activity under Title VII. The Sixth Circuit also concluded that merely cooperating with the employer’s investigation by appearing for questioning, and relaying unfavorable information in response to the questions posed, does not constitute the type of over opposition to prohibited conduct required to trigger Title VII’s protections against retaliation. The court reasoned that the fear of potential retaliation claims by every person interviewed as part of an internal investigation would dissuade employers from conducting thorough, internal investigations.

The Supreme Court heard oral argument in the Crawford case on October 9. A decision is anticipated in the near future so stay tuned.

Comments/Questions

Domestic Abuse and Wrongful Discharge, Quirky Question # 66

Wed, 05 Nov 2008 17:43:00 GMT

[Readers: Set forth below is our slightly belated analysis of Quirky Question # 66. This is one of our West Coast questions, and the analysis was provided by Sarah Jung Evans, an
Associate in our Seattle office. Sarah, who is licensed to practice both in California and Washington, is a 2000 graduate of Northwestern University and a 2003 graduate of UCLA Law School. Sarah's direct line is: 206.903.2396; her email is evans.sarah@dorsey.com. Don't hesitate to contact her if you have any questions about the issue below.]

Sarah's Analysis of QQ # 66

Although employment in Washington is generally terminable “at will” (meaning that an employee may quit or be fired for any reason not prohibited by law), the doctrine of wrongful termination in violation of public policy provides narrow exceptions to that general rule. Washington has typically applied the tort of wrongful discharge to situations where an employer terminates an employee for reasons that contravene a clearly mandated public policy as articulated in “a constitutional, statutory, or regulatory scheme.” In the past, such policies have included those where an employee was terminated as a result of his or her (1) refusal to commit an illegal act; (2) performance of a public duty or obligation; (3) exercise of a legal right or privilege; or (4) in retaliation for reporting employer misconduct.

As you may have recognized, the situation described in this question parallels a case decided by the Washington Supreme Court on October 3, 2008. In Danny v. Laidlaw Services, the Court ruled that Washington has “a clear public policy to prevent domestic violence.” In Danny, the plaintiff and her five children had experienced ongoing domestic violence at the hands of her husband, resulting in her son being hospitalized. She requested time off from work twice and was at first refused. Following the hospitalization her son, however, the company granted her request for time off. About a month after she returned to work, she was demoted, and in December, she was terminated. She then brought a lawsuit, alleging that she was wrongfully terminated in violation of public policy.

Washington's Supreme Court stated that although the wrongful discharge tort should be “applied cautiously,” there were many executive, judicial and legislative enactments which pronounced a public policy to prevent domestic violence. In fact, as early as 1979, the Washington legislature recognized in a statute that domestic violence was a community problem that accounts for a “significant percentage” of violent crimes in the nation and is disruptive to “personal and community life.” RCW 70.123.010. Also in 1979, the legislature enacted the Domestic Violence Act (DVA), requiring law enforcement to respond to domestic violence. The DVA was later expanded to require the mandatory arrest of domestic violence perpetrators. In 1984, the legislature enacted a separate Domestic Violence Protection Act (DVPA) to provide domestic violence victims with the ability to obtain civil protection orders against their abusers.

Domestic violence protection has even expanded to the employment context. In 2002, recognizing that a fear of losing one’s employment may hinder escape from domestic violence, the legislature enacted laws allowing domestic violence victims to receive unemployment compensation through the state if they must leave employment to protect themselves or their immediate family from violence.

Washington has been equally active in protecting child victims of family violence. It has established a council for prevention of child abuse and neglect, and created procedures for obtaining a protective order against the abuser of a child.

Against this backdrop, the Washington Supreme Court held that the state’s policy of domestic violence prevention is “truly public” in nature, and that this, coupled with Washington’s Executive Order 96-05 which directs each state agency to create workplace environments that provide “assistance for domestic violence victims without fear of reproach” and notes that domestic violence causes “loss of productivity, increased health care costs, increased absenteeism, and increased employee turnover,” was sufficient to support a finding of public policy to prevent domestic violence.

The Court did not leave this public policy unlimited, however. In other words, an employee’s notification to his or her employer of domestic violence is not carte blanche to take unlimited time off from work. The Court specifically stated that in order for Danny to prevail on her claim of wrongful discharge in violation of public policy, she still must meet the remaining three essential elements of the claim: a) jeopardy; b) causation; and c) absence of justification. In this case, Danny would have to show that the time off she took was the only available adequate means to prevent the domestic violence against herself or her children or to hold her abuser accountable. Some examples of situations which would likely meet this threshold are:

· Obtaining a protective order where court is only open during her working hours;

· Testifying against her abuser if the hearing is during her working hours;

· Moving into a shelter if the shelter’s move-in rules required doing so during her working hours;

· Moving into a shelter if the abuser’s schedule made it impractical or dangerous to move during non-working hours.

Situations where the time off would probably not meet the threshold could include:

· Obtaining a protective order or testifying against the abuser where the employee only works the night shift;

· Time off in excess of that necessary given the distance from the court that would be traveled to participate in either of the above;

Based upon the above factual questions, the Court remanded the case to the District Court for further consideration as to the other three elements of the wrongful discharge in violation of public policy claim.

In question posed here, the risks for the Company lie in the specific factual circumstances underlying the employee’s request for time off. If she is able to demonstrate that the time off she sought was the only adequate means to protect herself and/or her children against domestic violence given the time constraints and travel distances related to the necessary actions, then a court could find that she meets the jeopardy element of the wrongful discharge in violation of public policy cause of action. However, she still must demonstrate that her taking the time off actually caused her termination, and that the Company did not have any overriding justification for its decision to terminate. If the Company can provide evidence that the reasons for the employee’s termination were completely unrelated to her request for time off, or that there was some other overriding justification for the termination, then it may yet avoid liability.

Scope of Relief in Sexual Harassment Cases, Quirky Question # 67

Mon, 10 Nov 2008 09:27:00 GMT

I have addressed the subject of sexual harassment in response to a number of other questions. (To access those analyses, use the “View by Topic” tab on the upper left-hand side of this screen and scroll down to “Sexual Harassment.” That will enable you to pull up all of the previous sexual harassment questions and analyses.)

Although most corporations have made substantial strides in eradicating sexual harassment from the workplace, sexual harassment problems have not disappeared. Therefore, as reflected by your inquiry, it is important to understand the scope of potential liability when considering the issue of sexual harassment and how you wish to respond when confronted by an egregious situation.

Let me start with the basics. As you undoubtedly know, sexual harassment is prohibited by Title VII. But, a Title VII claim is not the only cause of action that will be asserted and is not the only claim about which you need be concerned when trying to evaluate the risks your company is confronting.

States have statutes that parallel the anti-discrimination prohibitions of Title VII, and each of these different statutory schemes is somewhat unique. Further, plaintiff employees often will assert claims in addition to the statutory claims. These common law claims can be quite different, depending on the nature of the conduct that has occurred. If, for example, there has been physically assaultive behavior or the threat of such conduct, in all likelihood your company will confront claims for assault and battery. If the perpetrator of the harassment has engaged in behavior that “shocks the conscience of the community,” your firm likely will be defending a claim for intentional infliction of emotional distress. If the person who engaged in the harassing conduct had a history of this kind of behavior at other companies before your firm hired him, you may have exposure to a claim for negligent hiring. If the perpetrator of the harassment has engaged in similar conduct at your company, and your company failed to address the problem or discipline the perpetrator, you may have to contend with a claim for negligent supervision. In certain circumstances, if your employee had rights guaranteed by contract, you may have to defend a breach of contract claim.

As these examples demonstrate, the scope of liability you confront will depend on the nature of the underlying conduct and the resultant claims that are asserted. Without knowing a bit more about your factual pattern, it is difficult for me to provide you too much specific information about the nature of the damages and/or other relief you confront. But, with that caveat, here are a few thoughts for you to consider.

First, under the statutory schemes (whether federal or state), defendants typically confront the possibility of back pay. In contexts where an employee alleging harassment has been terminated (either actually or “constructively”) back pay simply represents the salary and other benefits that the discharged employee would have received from the date of the discharge through the date of trial. Of course, plaintiffs typically will seek the monetary equivalent of all the benefits an employee would have received but for her discharge (e.g., health, dental, and life insurance; 401k contribution or other equivalent retirement plan contribution; automobile and/or auto allowance; vacation and/or PTO days; payments for educational programs for which the employee was eligible; and various other perquisites unique to the company involved). The amount of back pay is offset by the sums earned by the employee in other employment following her discharge.

Second, under the statutory schemes, the company also may confront the possibilty of front pay. Front pay implicates many of the same issues as back pay. Rather than compensating the discharged employee for the period from the date of discharge through trial, the front pay component compensates the employee for all of the salary and other benefits she would have received from the date of the trial until a point in the future in which the employee reasonably could have been expected to find comparable employment. (In situations where the employee already has found suitable alternative employment, the front pay component may drop out of the equation.)

Third, depending on the nature of her injuries (including psychological or emotional injuries), a sexual harassment plaintiff may be entitled to pain and suffering or emotional distress damages. These damages, which are capped under the federal statutory scheme, may be largely unlimited under state statutes or under common law legal theories.

Fourth, a plaintiff-employee may be entitled to recover exemplary (or punitive) damages. Again, these damages are capped under the federal statutory scheme (depending on company size, they can be as much as $300,000), but they may be unlimited under parallel state statutes or the common law claims asserted by the harassment victim. Some states, however, also limit the punitive damages under their anti-discrimination statutes, so this issue needs to be examined on a state-by-state basis. Keep in mind too that the statutory caps are per plaintiff. Therefore, if you had five plaintiffs who were affected by the conduct you alluded to, and your company had 500 or more employees, you would be exposed to potential punitive damages of $1.5 Million. (If you would like to see additional analysis of punitive damages in sexual harassment cases, see Quirky Question # 56.)

Fifth, although the federal statutory scheme of Title VII does not allow for doubling or trebling of compensatory damages, some state statutes do provide for this type of recovery. Again, it is critical to examine the statutory scheme under which the claim is asserted to fully appreciate the potential exposure associated with a particular claim.

Sixth, along the lines of the last observation, some of the state statutory provisions may have unusual features, such as statutory penalties. It is critical to understand these statutory damages provisions to comprehensively evaluate the potential risks.

Seventh, the statutory schemes are “fee shifting” statutes. A prevailing plaintiff typically is entitled to recover her attorneys’ fees. (Alas, the same is not true for the prevailing defendant.) At times, the attorneys’ fees incurred in the pursuit of a plaintiff’s claim may exceed the compensatory damages to which the plaintiff is entitled.

As you can see, the seven categories discussed above relate to the potential financial risk your company may confront when faced with a sexual harassment case involving egregious conduct. Courts, however, also may impose other types of non-monetary penalties on companies that disregard their obligations under Title VII. These kinds of penalties may be quite diverse, depending on the imagination of the federal judge. They include, by way of example, ensuring that the federally mandated posters are displayed prominently in a company’s lunchroom, conducting periodic training sessions on sexual harassment, monitoring future claims with corresponding reporting requirements to a special master or other court-appointed official, etc. In some circumstances, a court may order “reinstatement” of a discharged employee.

Two relatively recent cases illustrate the creative resolutions certain courts have ordered when confronted by egregious hostile environment harassment. In EEOC v. Custom Cos., No. 02-C-3768 (N.D. Ill. 2007), the agency sought relief on behalf of three female employees. The employees alleged that they had been subjected to inappropriate physical contact, sexual advances and sexually explicit comments. Moreover, in a fact pattern that at least partially parallels your situation, the plaintiffs also alleged that the company had required them to entertain customers at a strip joint partially owned by the company’s President, and had been forced to participate in a company-sponsored golf tournament where strippers from the same club performed.

After the jury awarded substantial damages ($2.3 Million), the court imposed far-reaching injunctive relief. Characterizing the company’s conduct as “reprehensible,” the court ordered a four-year injunction. Reacting negatively to the “hyper-sexualized” work environment, the court ordered the employer to comply with Title VII, post notices apprising the company’s employees of the jury verdict and require employees to participate in harassment training programs. Perhaps most troubling from the company’s perspective (though certainly not unjustified), the court also ordered the company to notify its customers of the jury verdict.

Another case brought by the administrative agency, EEOC v. JOBEC Inc., d/b/a McDonald’s, No. 06-cv-01871 (D. Colo. April 3, 2008), involved claims by four young female employees (ages 15-19). The alleged harassment included grossly inappropriate physical contact, requests for sexual favors, and offensive remarks. In addition to substantial financial damages, the court-ordered consent decree required the company to refrain from future sex discrimination and harassment. The court also directed the employer to send a letter of apology to the four plaintiffs, as well as all other female employees who had worked at the company-owned restaurants during the relevant time period. The order required JOBEC to update its anti-discrimination policies and disseminate the revised policy annually for the next three years to all of its employees and new hires. The court also directed the company to conspicuously post a notice in each of its restaurants informing the employees of the settlement, describing examples of prohibited conduct, and providing contact information for relevant federal and state investigative agencies.

As you can see from the discussion above, when egregious sexual conduct occurs, a company confronts serious financial damages and potentially onerous injunctive relief. You have a sobering message to deliver to your management.

Withdrawal of Job Offer to Transsexual, Quirky Question # 68

Mon, 17 Nov 2008 09:44:00 GMT

My first reaction to the fact pattern you described is that regardless of whether there are any legal impediments to your decision or whether you have exposed your company to the risk of litigation and/or liability, I don’t understand why you would pass on an individual you describe as a “highly qualified applicant.” Your decision is more perplexing in light of your acknowledgement that you have offered the job to another “admittedly less qualified” individual.

Purely from a business standpoint, don't you want to populate your company with the most talented employees you can find? Whether that talent derives from prior academic excellence, directly relevant work experience, outstanding interpersonal skills, or some other characteristic or qualification pertinent to the job requirements, these are the individuals who are going to make your company successful. Ideally, they will contribute to your firm’s bottom line and increase the collective wealth of your other employees and shareholders alike.

Since you have not identified the nature of the job for which this individual was hired, let me offer a few hypothetical examples. If the position you were filling was that of engineer, and the person you first hired and then rejected was a brilliant engineer, consider what could she have done for your company. If she had designed a new product, or improved an existing product, and your company’s revenues were substantially increased as a consequence, would it really have mattered that she had had a sex change operation? If the position you were filling was that of a salesperson, and the accepted/rejected applicant was an outstanding salesperson, with a proven track record who would have replicated her past successes at your company, would your sales manager have been concerned that she had had a sex change operation? If you were hiring an employee in the Human Resources function, and the rejected applicant could have assisted you both to improve your policies and to persuade disgruntled employees that they should not pursue litigation against your company, would your VP of HR have cared that she had had a sex change operation? As these and countless other examples illustrate, your decision to reject this applicant upon learning of her plans could have deprived your company of an outstanding contributor.

Moreover, simply because your company elected to withdraw the offer to her does not mean that one of your competitors will have the same attitude. Consequently, you not only have eliminated a potentially valuable contributor from your workforce, you have increased the likelihood that this talented individual will be competing against you. How will you feel if this employee designs a profitable product for your competition, or outperforms your “less qualified” hire in competitive sales opportunities?

I also wonder what “complications” you expected this “situation” to create. Were you concerned that your other employees would not accept this individual if they learned of her sex change operation? Was your concern based on empirical data or assumptions about how other employees would respond? As my questions imply, I don’t think you should necessarily expect a negative reaction by your other employees. Generally, it is preferable to give the situation a chance to unfold. If your company did encounter problems, you could evaluate them, assess their legitimacy, and with input both from your new hire and your other employees, explore thoughtfully whether they could be resolved.

But enough of my pontificating about the business aspects of this situation. Let’s examine the potential legal ramifications. First, as you undoubtedly know, Title VII, the principal federal anti-discrimination statute says nothing about transsexuals. Simply put, transsexuals are not a protected classification under the statute. Moreover, Title VII does not provide protection for individuals based on sexual orientation. The question, then, is whether Title VII’s prohibition against sex discrimination somehow reaches individuals who have elected to have a sex change operation. More on that issue below.

Second, although Title VII may not prohibit sexual orientation discrimination, many states (now more than 20) have statutes prohibiting discrimination on the basis of sexual orientation.

Third, as I’ve touched on in other Blog analyses, typically, when plaintiffs allege discrimination under federal or state statutes (or both), they also plead common law claims. Though more facts would be needed to assess this fact pattern, it is possible that the employee who was offered the job may have a claim for promissory estoppel. As you describe in your inquiry, the employee was offered a job, before you later withdrew the offer. If the employee quit another job, or took other actions in reliance on your offer (e.g., moved from another state, sold a home, etc.), she may have a legitimate promissory estoppel claim.

Let me now return to the potential statutory discrimination claims.

As referenced above, Title VII does not specifically protect transsexuals. But there have been a number of recent decisions that have relied on the United States Supreme Court holding in Price Waterhouse v. Hopkins, 490 U.S. 228 (1989), a decision that held sexual stereotyping was barred by Title VII’s prohibition against sex discrimination, to extend Title VII protection to transsexuals. For example, in Lopez v. River Oaks Imaging & Diagnostic Group, Inc., No. 4:06-cv-03999 (S.D. Texas, April 3, 2008), the federal district court denied the defendant’s summary judgment motion in a case involving a similar fact pattern. Izza Lopez had applied for a position with a medical clinic that involved scheduling patient appointments over the telephone. The defendant clinic offered Lopez a job, which she accepted, after which she resigned from her existing job. In connection with the clinic’s background check, however, the clinic “discovered” that Lopez was “male” and allegedly had “misrepresented” himself as a woman during the interview. Lopez sued under Title VII.

Lopez did not argue that Title VII protected transsexual employees, instead arguing that that she was entitled to pursue a claim based on Price Waterhouse’s prohibition of sex stereotyping. The court agreed, observing “There is nothing in existing case law setting a point at which a man becomes too effeminate, or a woman becomes too masculine, to warrant protection under Title VII and Price Waterhouse.” The court also observed that the explanations offered by the clinic in support of its “misrepresentation” argument were questionable, but pointed out that these factual issues were not appropriate for resolution on summary judgment. The bottom line -- the plaintiff’s Title VII lawsuit survived the defendant’s motion to dismiss.

Even more recently, the case of Schroer v. Billington, No. 05-1090 (D.D.C., Sept. 19, 2008), presented similar issues. Schroer applied for a position with the Library of Congress’s Congressional Research Service as a terrorism research analyst. Schroer was eminently qualified for the position: he had served in the Army for 25 years, during which time he had been in Special Forces units. At the time of Schoer’s retirement in 2004, he was the Director of a 120-person classified organization that tracked and targeted high-threat international terrorists. Among other responsibilities, Schroer regularly briefed the Vice President, the Secretary of Defense, and the Chairman of the Joint Chiefs of Staff. Schroer held a Top Secret, Sensitive Compartmented Information security clearance. Schroer also held Masters Degrees in History and International Relations and had graduated from both the National War College and the Army Command and General Staff College.

At the time Schroer interviewed for the job, he presented as a male. He was deemed to be the most qualified applicant and was offered the job. At a luncheon following the communication of the job offer, Schroer advised his new employer that he was about to begin the phase of his gender transition in which he would be dressing in traditionally feminine clothing and presenting as a woman on a full-time basis. Based on this information, the defendant withdrew the job offer.

The case was tried to the federal court. The defendant articulated five reasons why it had withdrawn the job offer to Schroer; the court found all five were pretextual. The court also held that whether analyzed under Price Waterhouse’s sexual stereotyping analysis or a strict reading of Title VII’s prohibition of sex discrimination, Schroer had proven a claim. As the court observed, “What makes Schroer’s sex stereotyping theory difficult is that, when the plaintiff is transsexual, direct evidence of discrimination based on sex stereotypes may look a great deal like discrimination based on transsexuality itself, a characteristic that, in and of itself, nearly all federal courts have said is unprotected by Title VII.” Despite the difficulty of this issue, the court found that it did not matter for purposes of determining liability whether the Library of Congress withdrew its offer of employment because it “perceived Schroer to be an insufficiently masculine man, an insufficiently feminine woman, or an inherently gender-nonconforming transsexual.”

Not only did the court find the defendant had engaged in sex stereotyping in violation of Title VII, it also found that Schroer had established a direct violation of Title VII. The court heard competing expert testimony of experts, one of whom testified that the scientific community recognizes “nine factors that constitute a person’s sex.” (Who knew? I always thought it was a much simpler calculus.) Pointing out the statutory prohibition of sex discrimination has been given a more expansive interpretation by the courts (e.g., includes sexual stereotyping and same-sex sexual discrimination), and drawing an interesting analogy to religious discrimination and the prohibition against discriminating against someone who "converted" from one religion to another, the court found that Schroer had established sex discrimination under Title VII.

As these cases illustrate (and there are other cases reaching opposite conclusions), withdrawing a job offer to someone who advises you that she is a transsexual is not without legal risks. Thus, even if you are unpersuaded by the business justifications addressed above, there are some legal risks to which your decision exposes your company.

Although beyond the scope of this analysis, I also have concerns that your decision would present potential risks based on state anti-discrimination statutes prohibiting sexual orientation discrimination. There is a risk that your withdrawal of the job offer could be viewed as sexual orientation discrimination. More facts would be needed to develop this issue further, including the reasons articulated for why the offer was withdrawn and other relevant information regarding the composition of your workforce and past hiring patterns, to name just a few. Whether you ultimately won or lost a claim for sexual orientation discrimination, however, you certainly risk the possibility that such a claim would be asserted.

"Memorized" Trade Secrets, Quirky Question # 69

Mon, 24 Nov 2008 09:32:00 GMT

In nearly all states, the governing law regarding misappropriation of trade secrets is determined by the Uniform Trade Secrets Act (“UTSA”). (There remain a few hold-out states that have not adopted the UTSA, but for the purposes of this question, I will assume you are in a UTSA state.)

The direct response to your inquiry is that you would have a basis to seek injunctive relief against your former employee, even if he only “memorized” your trade secrets and did not remove hard or electronic copies of your confidential data. To explain why I’ve reached that conclusion, let me address a few of the fundamental principles.

Since I practice out of Minneapolis, I’ll use the Minnesota Uniform Trade Secrets Act (“MUTSA”) as the pertinent statutory scheme. (The states that have adopted some version of the UTSA have slight variations on the uniform statute. Further, courts in these jurisdictions have interpreted the statutes somewhat differently. Thus, as I’ve stressed before, particularly in the area of employment law, you have to examine carefully the subtleties and nuances of the jurisdiction in which your dispute has arisen.)

The MUTSA sets forth a relatively straightforward statutory framework. The statute defines a trade secret as: “information, including a formula, pattern, compilation, program, device, method, technique, or process, that:

(i) derives independent economic value, actual or potential, from not being generally
known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and

(ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.”

In short, information may constitute a trade secret if: a) it is not generally known, or readily ascertainable; b) it has economic value to the company; and c) the company made reasonable efforts under the circumstances to maintain its secrecy.

The specific question you pose is whether the definition of trade secret somehow is inapplicable to information that someone memorizes rather than misappropriates by stealing in hard copy or electronic form. First, as a number of courts that have examined this issue have noted, there is nothing in the UTSA suggesting that “memorized” information somehow fails to qualify as a trade secret or is exempt from the reach of the statute. Second, courts have noted that there is near unanimity among commentators that memorized information should not be excluded from the definition of trade secrets. Third, many courts have pointed out that including memorized information within the definition of trade secrets advances the important public policies at the heart of the UTSA. Fourth, some courts have noted that the majority of jurisdictions now recognize that trade secrets encompass memorized data and that, especially where courts are interpreting a uniform statute, it is important for them to reach uniform conclusions.

In your question, you do not identify the type of information you suspect your former employee of misappropriating. It should be understood that the type of information involved may affect the issue of whether trade secret protection will be available. For example, imagine that a employee working for Coca Cola memorized the secret formula for Coke. Assume further that this individual tried to sell the secret formula to a Coke competitor. Most courts would hold that it mattered little whether the employee had written the formula on a piece of paper or memorized it. In either case, he would have misappropriated Coke’s trade secrets.

A closer question may be involved if an employee memorized customer information and shared that type of data with a competitor. Courts have reached differing opinions on whether customer information constitutes trade secrets. This analysis typically turns on the specific facts involved. Did the employee only take customer names? Is that information available through public sources (e.g., phone books, the Internet, trade association publications, etc.)? Did the employee take information other than customer names (e.g., past purchasing information, contract expiration dates, names/phone numbers/email addresses of key customer personnel)? Depending on how these and similar questions were resolved, a court may conclude that the customer data either did, or did not, constitute trade secrets.

Assuming that the customer information would meet the standards to qualify as a trade secret, courts then would evaluate whether this information would be protected regardless of whether it was memorized or recorded in some other fashion. The Supreme Court of Ohio examined that issue earlier this year in the case of Al Minor & Associates, Inc. v. Martin, No. 2008 (February 6, 2008, Ohio). Martin was a former employee of Al Minor & Associates, an actuarial firm that designed and administered retirement plans. Martin, an at-will employee who was employed without a contract and who had no post-employment restrictive covenants, started his own competing firm. He successfully solicited 15 customers of his former employer, who then sued him for misappropriating trade secrets. The company alleged that Martin had memorized the trade secrets that he misappropriated.

As with so many other issues in employment law, competing principles are often at stake. In the Al Minor case, the court pointed to the conflicting principles involved – the protection of the employer’s rights in their trade secrets and the employee’s right to exploit his own talents. In Al Minor, however, the court resolved this conflict in favor of the employer. The Ohio Supreme Court stated, “we conclude that the determination of whether a client list constitutes a trade secret . . . does not depend on whether it has been memorized by a former employee. Information that constitutes a trade secret . . . does not lose its character as a trade secret if it has been memorized. It is the information that is protected by the UTSA, regardless of the manner, mode, or form in which it is stored – whether on paper, in a computer, in one’s memory, or in any other medium.” (Emphasis added.)

In sum, as the Ohio Supreme Court summarized well, information does not “lose its character” as a trade secret simply because it was memorized rather than recorded in some other fashion. Therefore, if the information your employee may be sharing with your competition would otherwise qualify as a trade secret, the mere fact that he memorized the data should not prevent you from seeking injunctive relief. In another Blog analysis, I’ll spend some time addressing the other issues relating to the basis for granting injunctive relief in misappropriation cases.

Announcement: Chambers and BTI Rankings

Mon, 01 Dec 2008 09:06:00 GMT

Joint Employer Liability, Quirky Question # 70

Wed, 03 Dec 2008 14:22:00 GMT

[Readers: Today's first "Wednesday" West Coast question -- delayed slightly due to my travel schedule -- is analyzed by Karen Wentzel of our Palo Alto office. Karen, a Stanford Law School graduate who has been practicing employment law for more than 20 years, can be reached at wentzel.karen@dorsey.com, or by phone at 650.843.2708. If you would like to explore with her issues relating to joint employer liability, do not hesitate to send her an email or give her a call. Regards, Roy]

Karen's Analysis of QQ # 70

Your question highlights an issue that is receiving considerable judicial attention in a variety of contexts -- joint employer liability. The bottom line is that you have reason to be concerned. Under California law, your company may be found to be a “joint employer” with the employment agency and therefore could be on the hook for claims of harassment, discrimination or retaliation notwithstanding what your contract may say about the person’s status.

First, the basics: California law, like the federal Title VII, prohibits discrimination on the basis of sex. Under California law, sex is defined to include pregnancy, childbirth, or medical conditions related to pregnancy or childbirth. What this means is that, as with other protected categories under state and federal law, it is important that an employer not take any adverse employment actions against a worker “because of” her pregnancy. California law also requires an employer to provide up to four months leave for a woman disabled by pregnancy and to transfer a woman to a less strenuous or hazardous position for the duration of her pregnancy if she so requests, with the advice of her physician, if the transfer can be reasonably accommodated. Therefore, the decision to take any action adverse to a pregnant employee should always be carefully scrutinized.

Some businesses believe that using an employment agency to supply temporary or even long-term workers will insulate them from discrimination claims so that they need not scrutinize their employment decisions as carefully. This is not true. As with federal law, California courts may find both entities to be joint employers depending on the amount of control the contracting business exerts or has the right to exert. In evaluating whether the contracting business is a joint employer the courts will look at the totality of the circumstances, with specific focus on factors such as the nature and degree of control over employees; the day to day supervision of employees, including discipline; the authority to hire and fire employees and set conditions of employment; and control of employee records and payroll.

While all of these factors should be taken into consideration, both policy and practical considerations lead to the conclusion that a business cannot afford to parse them too finely. Courts facing claims of discrimination and harassment have had little difficulty finding that each “employer” bears responsibility for the offending actions. For example, in Mathieu v. Norrell Corp. (2004) 115 Cal. App. 4^th 1174, the court found the temporary agency and its client to be joint employers in a case involving sexual harassment. In explaining its decision, the court easily found that the purpose of the California Fair Employment and Housing Act (FEHA) is to safeguard an employee’s right to hold employment without discrimination. That purpose, the court said, is best served by a finding of dual employment. The employment agency was found to be a joint employer based on the facts that it paid the employee and she was required to report to the agency if she were to miss a day of work. “To hold otherwise would allow . . . temporary agencies to send their employees into hostile and discriminatory workplaces and to ignore complaints of harassment without fear of liability.”

The same policy arguments that led the courts to safeguard the employee’s right to work without discrimination also apply when courts determine whether the contracting business should be subject to liability. Even if the temporary agency is issuing the paycheck, where the business has the right to control the work environment, and especially where the business has the right to terminate the worker at any time, the contracting business will likely be found to be a joint employer. As with the analysis of whether any worker is an employee or independent contractor, the contractual terms by which he or she is employed will not be conclusive. The key is the right to control.

As with many legal issues, the legal standard to be applied is a little fuzzy. There is no bright line test or magic formula as to when both entities have sufficient control to be found liable. The cases do require that the amount of control exercised be “significant” and that the contracting business have the ability to affect the terms and conditions of the worker’s employment. If it is undisputed that only the temporary agency has the ability to hire and fire, set compensation, or train the person, there may not be a basis for also suing the contracting business.

However, as a practical matter, if you are the contracting business, the lack of a bright line standard will work against you. First, as we have seen, as a matter of policy the courts will protect the individual who is being discriminated against and will not let finger pointing between the two entities result in the employee being left without a remedy. Second, because the determination of whether or not an entity is a joint employer often involves a detailed factual analysis, it is difficult to have the question decided as a matter of law on a summary judgment motion. Finally, a plaintiff will always look to the bigger and more well-funded entity (usually but not always the contracting entity) as the deep pocket from whom to seek redress. What this means is that the employee will sue both entities and attempt to leverage a settlement whatever the two entities’ respective involvement.

Two additional points bear noting:

First, although your question doesn’t directly involve the harassment of a worker, it’s important to note that under FEHA an “employer” can be liable for the harassment of “a person providing services pursuant to a contract.” Government Code § 12940(j). This means that the employer may be liable for acts of harassment against a worker even if the person claiming harassment meets all the tests for a classic “independent contractor” (i.e., she has the right to control the performance of the contract and discretion as to the manner of performance; is customarily engaged in an independent business; and, has control over the time and place the work is performed, supplies the tools and instruments used in the work, and performs works that requires a particular skill not ordinarily used in the course of the employer’s work.)

Second, the concept of “joint employment” is applied beyond just the arena of discrimination and harassment laws. Although it is beyond the scope of this analysis, contracting businesses should know that courts have considered both temporary agencies and their clients to be “joint employers” in the context of wage and hour laws, the Family Medical Leave Act (FMLA), workers’ compensation liability, and tax liability. Special rules also apply under California law for determining liability for unemployment insurance and disability contributions.

The bottom line: Employer beware. Make sure that whether an individual is clearly your employee, or falls into the sometimes gray area between employee, independent contractor, and leased employee, you make your decisions as to the terms and conditions of that person’s employment based on legitimate business needs that you can clearly articulate and have documented.

Downsizing Alternatives ?, Quirky Question # 71

Sun, 07 Dec 2008 22:16:00 GMT

Your question is not particularly quirky, but it certainly is timely. There are a number of pragmatic ideas every company should consider as alternatives to substantial layoffs. Set forth below are ten approaches your firm could consider. They are organized from the least to the most disruptive, for both the company and the employees alike. Of course, some of these options may not be appropriate in your particular situation. Moreover, regardless of the economic impact of these alternatives, there may other factors, unique to your firm’s circumstances, that make the option inapplicable to your situation.

Stop Hiring. One of the first steps that a company should consider is a hiring freeze. This has several potential benefits. It demonstrates to the existing employees that you are committed to them and making an effort to preserve their jobs. In the event that layoffs are later necessary, and these layoffs result in litigation, this simple step also will enhance your arguments that your workforce reduction was driven by economic necessity. At times, employers engage in layoffs while simultaneously hiring other employees. This not only is damaging to employee morale, it raises the question of whether the layoff truly was an economic necessity, or merely a pretext for the company to rid itself of certain employees.

Notwithstanding the legitimacy and uniform applicability of a hiring freeze, there may be circumstances where you make an exception. For example, assume that you have been trying to recruit a key employee from your competition for some time without success. If that individual lost her job and approached you about potential employment, you may want to make an exception to your general hiring freeze. Similarly, if you had a chance to hire an individual whom you felt would significantly expand your business (a great engineer, a terrific salesman, a physician with a unique specialty), disregarding the opportunity to hire this individual may be foolish and short-sighted. But, if you elect to make an exception to the “freeze,” document your reasons for doing so. At a later date, you may need to explain your actions to a judge or jury and you will want to have an accurate record of the reasons for your decision.

Don’t Replace Departing Employees. Another step that can be implemented, closely correlated to the hiring freeze, is simply to refrain from replacing employees who are departing from your organization. Employees voluntarily leave companies for various reasons, including retirement, changed interests, better offers from other companies, personal circumstances (such as a spouse’s relocation), etc. If possible, don’t replace those individuals. Instead, simply redistribute the work they are performing to other employees.. Again, this approach is likely to have a positive impact on employee morale.

There will be times, of course, where you have no choice but to replace the employee who has departed. There may be individuals within your organization who can step into the shoes of the departing employee. But if not, you will need to fill the vacant position (especially one critical to your company’s long-term success) with a qualified individual from outside your organization. Again, document the reasons for your decision.

Reduced Workweek. One concept that could be considered as an alternative to laying off significant numbers of your employees is to reduce the time commitment expected from each of your employees. Switch, for example, from a five-day to a four-day workweek.

There are pros and cons to this approach and, to some extent, it is difficult to predict the likely outcome of this business/social experiment. In a smaller organization, the employees may find this approach far preferable to seeing co-workers and friends lose their jobs. The risk, however, is that your employees will not be able to afford a reduction in their workweek, with the corresponding reduction in their compensation (a five- to four-day change also represents a 20 percent salary reduction). Therefore, you may find yourself losing talented employees. In the current economic climate, that may not be all bad, although as discussed further below, you don’t want to lose the wrong employees (your high performing, highly productive contributors).

As with each of the other ideas addressed, one of the important themes to keep in mind is to communicate clearly to your employees. If employees understand that your best estimate of the duration of the reduced workweek is three months, that might be a far more palatable scenario than a reduced workweek lasting twelve months. But, don’t over-promise. Make a realistic appraisal of how long you anticipate this situation will last and share that estimate with your employees. If circumstances change and the economic downturn proves more severe and more consequential for your business than you first expected, keep your employees in the loop.

Salary Freeze. Another way to weather a tough economic climate is to impose an across-the-board salary freeze. Calculate how much this approach will save your firm on an annual basis and evaluate whether those savings will be sufficient to prevent your company from the alternative of laying off some of your employees. Of course, you also will have to make your best prediction of how such a freeze might affect your company. This highly individualized calculus is likely to have different impacts on different companies. For example, let’s assume that you operate a high-tech firm that is dependent on a highly educated engineering workforce. Let’s assume further that your engineers are regularly receiving calls from engineering headhunters, who routinely try to lure them away to your competitors. If an across-the-board salary freeze would likely result in the loss of a significant number of these employees, you will have to evaluate carefully whether such an approach presents a practical solution to your current financial woes. You may conclude that while an across-the-board freeze is impractical, a targeted or select freeze focusing on certain categories of your employees would benefit your company. Conversely, however, you may conclude that your company is not dependent on any particular group of employees and if a freeze incentivized certain employees to depart, that outcome would have the beneficial effect of saving your company additional funds.

Salary Reductions. If a salary freeze would not provide your company the savings it is seeking and you still hope to avoid layoffs, another option to consider would be a uniform salary reduction. Perhaps the easiest way to calculate the potential benefits of this approach would be to consider a uniform percentage decrease for all employees. You could easily determine whether a five percent (or a ten percent, or some other figure) would enable your firm to achieve the savings necessary to retain your workforce. At some figure (different, depending on the health of the industry), however, you would risk losing employees. They might simply conclude that they could not afford to remain employed with your firm, even if they wanted to continue working with you. Of course, it belabors the obvious to point out that if some or all of your workforce is unionized, salary freezes or reductions could not be unilaterally imposed by your company on these collective bargaining employees.

Benefits Reductions. A slight variation of the salary freeze and/or reduction ideas addressed above is a modification of the benefits provided to your employees. This could be done as a stand alone approach (if it would yield the needed cost savings) or in conjunction with a salary freeze or reduction. Here, too, special attention would have to paid to union employees, or employees whose benefits had fully or partially vested. Decisions regarding these issues should be carefully assessed by in-house or outside benefits counsel.

Temporary Layoffs, with Defined Return Date. Yet another option that might be worth consideration is a temporary layoff. This could be done for a plant, a division, or some other non-essential segment of your business. In all likelihood, the only way this option will be viable is if you can provide your employees some clarity regarding the duration of the “temporary” layoff. In short, if you are hoping your employees will return to work at your company, the layoff cannot be indefinite. Note, however, that if you in fact promise to re-employ these individuals at a specified time, you will need to carry through on your promise. If you later extended the layoff, you may be confronting claims for promissory estoppel (i.e., lawsuits brought by individuals who stated that they relied, to their detriment, on your promise to resume operations at a specific date, only to see you later breach your promise to them).

Temporary Shutdowns. A corollary concept to the preceding point is to consider the cost savings associated with a complete, though temporary, shutdown of your business. There are a variety of difficult business considerations associated with this option, each of which becomes more complicated if the shutdown is protracted. Will your employees stick with the company through the shutdown, or will they seek alternative employment? What will your customers conclude about the long-term viability of your business? What are the costs directly related to the shutdown and subsequent reopening of the business? Does the shutdown trigger any financial obligations to your employees imposed either by state law or by contract (e.g., providing compensation for accrued, unused vacation)? But, if these issues are thought through carefully and communicated clearly to your employees, this may prove to be a viable alternative for your company.

Employee Retraining and Reassignment. Depending on the urgency of your company’s economic needs, you also may want to consider the possibility of retraining or reassigning some of your employees. As noted in the preceding sentence, this option may not be viable if your company already is confronting an economic crisis. But, if you merely are anticipating a downturn and have the flexibility to take proactive steps, retraining may be an attractive alternative. There are a number of benefits associated with this approach. First, taking this step in lieu of layoffs likely will engender a great deal of appreciation and good will among your employees. Second, although this is not a cost-free option in the short-run, the long-term impact could be beneficial. You will end up with a more diversified and talented workforce, employees who can perform in a variety of different capacities, depending on your company’s current and future needs. Third, the increased knowledge associated with this cross-pollination could enhance the exchange of information within your business and improve efficiencies. Fourth, if your efforts to retrain your employees are successful, you may find that your recruiting and hiring costs diminish.

Voluntary Layoffs. If the ideas above are either unappealing to your company or simply impractical given the economic pressures your company is confronting, another option that may provide more immediate relief to your economic woes is a voluntary layoff. I have written on the subject of voluntary layoffs in the past, expressing considerable criticism. [ Download Article PDF] I won’t repeat the points I made in that article. Suffice it to state that my principal concerns about voluntary layoffs is that the wrong employees volunteer and the remaining workforce is diminished, not only in numbers but in skill, insight and knowledge.

If the ideas described above simply won’t work for your company, you always have the option of involuntary layoffs. As the recent disappointing labor statistics illustrate, this is the option many companies are implementing in the current economic climate.

Using Internet for Background Check, Quirky Question # 72

Mon, 15 Dec 2008 09:15:00 GMT

[Readers: Last week's Quirky Question was submitted to and has been analyzed by my partner, Mike Iwan. Mike is a 1992 graduate of Stanford University and a 1998 graduate from the University of Minnesota Law School. Mike can be reached at 612.340.5613 or by email at Iwan.Michael@dorsey.com. If you have any questions or comments about Mike's analysis, don't hesitate to contact him. Regards, Roy]

Mike's Analysis of Question # 72

The good news is that you have not implicated the employment background checking provisions of the federal Fair Credit Reporting Act by conducting your own Internet search. The bad news is that you have implicated a number of other practical and legal issues by deviating from your normal procedure for handling employment inquiries. Many of these, in and of themselves, do not automatically create legal liability, but they do highlight a set of facts that could be difficult to explain if this candidate felt he was unlawfully passed over for employment and sought to take further action.

One perhaps less obvious issue has to do with your company's federal contractor status. While typically you would be entitled to disregard an unsolicited e-mail inquiry that goes outside of your normal job posting process, if you undertake any qualitative assessment of the unsolicited candidate, you most likely have converted Mr. Hunter into an applicant for employment under the OFCCP's traditional definition of an applicant or more recent definition of an "Internet applicant." If so, you must record this individual in your applicant flow data and include him in any statistical analysis you might be required to do in support of an affirmative action program.

Several other issues relate to the inherent unreliability of information, with the possible exception of public records, accessible via the Internet. While it is true that (depending on the survey) as many as 60 percent of companies utilize Internet searching at some point in the hiring process and with respect to at least some positions, your situation demonstrates precisely why such information must be viewed with caution, particularly as it relates to social networking sites, personal blogs, and the like. First of all, there is no way to verify whether the “Joe Hunter” whose blog you stumbled upon happens to be the same “Joe Hunter” who e-mailed you the employment inquiry, or, if he is, whether any of the information he reported about himself is true. In short, while running an Internet search may yield some possible additional information about a candidate for employment, I would only engage in such a search pursuant to an established policy that applies equally to all candidates who reach a certain stage of the hiring process and/or with respect to certain positions. Moreover, you are much better off spending your time contacting employment references and, when the time is right and according to your established process, conducting formal background checks. Internet searches should never be a substitute for these procedures.

As suggested above, the most significant legal concern I would have about your situation, is that by deviating from your established procedure, you have, almost by definition, engaged in differential treatment with respect to this applicant for employment. And to further complicate matters, you have discovered (or at least think you have discovered) attributes about this individual that you typically would not have in your possession at this stage of your process with respect to other candidates. For example, you believe that Hunter is "younger" (which could be a protected class under Minn. Stat. § 181.81) and African-American (which is a protected class under Title VII and virtually every state's human rights statute). While it is not per se unlawful to possess or (with the exception of pre-employment medical inquiries) even ask for such information in your hiring process, you run the risk of later having to demonstrate that such information did not factor into your decision-making process (i.e., proving the negative), or that, even if it did, the individual still was not the most qualified applicant (potentially leading to a mixed-motives analysis).

Your question suggests that at least some of the additional information you discovered did, in fact, influence your decision to pass over this individual as a candidate for employment – most notably, your suspicion that Hunter has an arrest record. Even if true, the EEOC and most courts view consideration of arrest records as leading to disparate impact in the hiring process, due to the disproportionately higher rates at which certain racial or ethnic groups are arrested. Conviction records are viewed less skeptically (although the EEOC continues to maintain that the conviction must be recent, serious, and job related for it to be a valid criteria in the hiring process), and while certain conviction records are available through public records sites, many of these sites ask you to agree to certain limitations on use that you should review carefully before running any queries.

Separate from the arrest record issue, if you were able to confirm through your normal interviewing and hiring process that Hunter was an outspoken anti-war protestor, you could consider that factor when evaluating whether he was the most-qualified candidate for a position with your company. As a private employer, you are not precluded from factoring in Mr. Hunter's self-avowed public policy views under some sort of "free speech" argument. Nor is there any argument that information posted by Hunter on a personal blog is protected by any right to privacy. In fact, even if Hunter only expected the blog to be viewed by family and friends, the information could not be any more public than by posting it on a site accessible through a general Internet search engine. Accordingly, should you have questions about information you discovered via a legitimately conducted Internet search, you should feel free to present such information to the candidate, even if just to confirm whether the person referenced is the same.

In sum, decide first whether an Internet search would be a useful addition to your company's hiring process. If you conclude that it would be a valuable addition to your hiring process, develop a policy to insure that such searches are run for all candidates at a specified point in the hiring process and/or for certain positions. This would suggest reserving Internet searching for a later stage of the hiring process, after you have winnowed down the candidates through traditional criteria. Your policy should include a standard set of searches to be run for each candidate and a requirement to document the results of such searches. Finally, you should approach such results with a healthy dose of skepticism, at the very least giving candidates a chance to respond to Internet search results if they are likely to influence the hiring decision. Do not use Internet search results as a substitute for verifying employment references and running a formal background check. Employers have been found liable for a "bad hire" when they failed to check references or run a traditional background check. No employer has (yet) been found liable for failing to run an Internet search prior to hiring.

Offensive Music Lyrics as Title VII Violation, Quirky Question # 73

Mon, 22 Dec 2008 10:05:00 GMT

You do have something to worry about, but it is not whether your company risks assuming the role of the “thought police.” Your company has a legitimate right to regulate the content of the information your employees bring into the workplace, regardless of the method by which this information is introduced. For example, you undoubtedly prohibit your employees from bringing pornographic magazines into your company’s work environment. Similarly, I assume that your company prohibits your employees from introducing pornographic or otherwise offensive material into the work environment via your computer system. Most businesses also regulate the information brought into the workplace and disseminated further via the company’s email system. Likewise, companies legitimately prohibit the type of DVDs that employees may bring into the work environment, either for their own use or to be shown to others.

The analysis that applies to these other media should not be markedly different when the offensive material is brought into the workplace via the radio. Several days ago, for example, I was driving with my 16-year old son, listening to a music CD he had made from various I-Tunes songs he had downloaded. As a particular song came on, he demonstrated his sensitivity to our differing musical and language sensibilities by observing, “Dad, you might want to skip this next one.” The reason for his observation was the language used in the next song and his concern that I might be offended by the lyrics.

The fact is that music lyrics today, particularly in certain musical genres, are very explicit. Many songs include profanity. Many others involve words that are sexist, racist, or ethnically offensive. Other songs include graphic references to certain parts of human anatomy and/or descriptions of various types of sexual conduct. Given these facts, it is not surprising that one or more of your employees might be offended by the music being played in a co-workers’ cubicle. It is important for your company to be attuned to these issues and make clear that certain types of lyrics are inconsistent with your company’s policies regarding discrimination and/or harassment and will not be allowed in the workplace.

In my view, this should not be an overly difficult calculus. Songs that involve pejorative, slang terms for members of certain genders or races or religions are problematic. Songs that make graphic sexual references are problematic.

I recognize, however, that most songs are far from explicit and may involve questions of nuance, inference, double-entendre, or subtlety. I have no doubt that many readers could send me examples of lyrics that would be difficult for companies to evaluate in terms of potential offensiveness. As for songs involving these kinds of lyrics, I’d simply reference the standard observation articulated by the U.S. Supreme Court with regard to harassment cases – each case must be evaluated on a “totality of the circumstances” analysis. Moreover, companies do not have to base their policies or practices on the hypersensitivities of the idiosyncratic employee.

I am aware of one relatively recent case that implicated many of these issues. In EEOC v. Novellus Systems, Inc., No. 07-4787 (N.D. Cal. June 23, 2008), the EEOC sued the defendant corporation in relation to the experience of an African American employee who was offended by a co-worker who repeated offensive rap lyrics. The Vietnamese co-worker allegedly played rap songs and repeatedly sang the songs' derogatory lyrics, including the “N-word” in the presence of his co-worker. The EEOC contended that the company both failed to respond to the African American employee's complaints and retaliated against him for complaining.

Although Novellus did not admit liability, the company entered into a two-year consent decree that required the company to modify its anti-discrimination policy to include a zero-tolerance statement for music that included “racially derogatory terms and names.”

One last note – it is not just music lyrics that you should monitor. Some radio talk shows are careless in terms of how they refer to different racial and ethnic groups. Some are blatantly sexist. If your workers listen to these types of programs and their co-workers can easily overhear these broadcasts, the same issues addressed above may be implicated.

Finally, as noted above, I don’t think you need be overly concerned about your company’s role as the “thought police.” You are not attempting to regulate how your employees think; you are merely regulating their conduct in the workplace. Your employees, of course, can listen to any music they enjoy regardless of its content, or any talk-show radio programs they find informative or amusing, outside of the workplace. You are merely establishing a minimum set of standards regulating how your employees behave in the workplace. Your company has the right to do so.

Sarbanes-Oxley, Quirky Question # 74

Mon, 05 Jan 2009 00:47:00 GMT

[Quirky Question # 74 was directed to my partner, Holly Eng, so her analysis is set forth below. Holly is a 1989 graduate of St. Cloud State University and a 1993 graduate of the Georgetown University Law Center. Holly has been practicing in the firm’s Labor & Employment Law Department since joining the firm following her graduation from Georgetown. More information on Holly is available at http://www.dorsey.com/eng_holly/. If you have any questions about QQ # 74, don’t hesitate to contact Holly at eng.holly@dorsey.com or 612.343.2164. Regards, Roy]

Holly’s Analysis of Quirky Question # 74

The short answer, particularly if yours is a publicly-traded company, is “yes”; you should take this complaint seriously and conduct an appropriate investigation (although what’s appropriate under these circumstances may be quite abbreviated).

While investigative processes vary among organizations, you should follow whatever corporate controls are in place within your organization and ensure that the Audit Committee of your Board of Directors receives any and all necessary information.

Moreover, you should ensure that no adverse employment action is taken against this employee because he asserted this complaint. Of course, this does not mean that you should discontinue your performance-management activities. You should continue to manage his performance, as necessary. However, do not allow anything about this complaint to alter or enhance your performance-management activities in any way.

By way of background, let me offer a few words about the Sarbanes-Oxley Act (“SOX”). In response to highly-public whistleblower complaints, Section 806 of the SOX prohibits publicly-traded companies (and any officer, employee, contractor, subcontractor, or agent of such companies) from discharging, demoting, suspending, threatening, harassing, or otherwise discriminating against an employee because (1) the employee provides information or assistance to a Federal regulatory law enforcement agency, a Member of Congress or Congressional committee or the employee’s supervisor or other such person in the company who has the authority to investigate or terminate misconduct; and, (2) the employee reasonably believes the conduct at issue constitutes a violation of mail, wire, bank, or securities fraud laws, any rule or regulation of the SEC, or any provision of Federal law relating to fraud against shareholders.

There are a few things to keep in mind under the circumstances you’ve presented.

First, the employee does not have to identify fraud correctly to be protected. So long as the employee has provided information (to one or more the individuals listed in the Act) regarding conduct the employee “reasonably believes” constitutes a violation of various laws, the employee arguably falls within the gamut of the Act. We may quibble about whether or not this employee has a “reasonable belief” that a violation exists. However, it is difficult to know what someone is actually thinking, and any inquiry that an administrative body may do on this point is likely to be very fact intensive and to give the benefit of the doubt to the employee.

Second, the individual’s simple statement that he is a “whistleblower” does not make it so. If he does file a charge with the Occupational Safety and Health Administration (“OSHA”), (the division of the Department of Labor responsible for investigating and making final determinations with respect to whistleblower complaints under SOX), a “whistleblower” must be able to establish the following things to set forth a viable claim:

1. He engaged in a protected activity (as defined by the Act);

2. The employer knew about (or reasonably suspected) the protected activity;

3. He suffered an unfavorable personnel action (in other words, something “bad”
happened to his employment, such as a termination or demotion); and

4. There was a nexus between the unfavorable personnel action and the protected activity sufficient to raise an inference that the whistle-blowing activity was a "contributing factor."

Third, notwithstanding a finding that these elements have been met, the Department of Labor will not proceed with an investigation if the employer demonstrates “by clear and convincing evidence” that it would have taken the same unfavorable personnel action in the absence of the complainant’s whistleblower activity.

Finally, although it’s small consolation, if this individual does file a charge in bad faith, the SOX provides that the company may seek some attorneys’ fees and costs as a result.

California Oddities, Quirky Question # 75

Wed, 07 Jan 2009 09:04:00 GMT

[Readers: The inquiries set forth in Quirky Question # 75 were posed to my colleague, Ed Raskin, in our Southern California office, which is located in Irvine. Ed is a 2002 graduate of the University of California, Irvine, and a 2006 graduate of the University of California, Berkley, School of Law. Ed's resume is available at: http://www.dorsey.com/raskin_edward/. If you have any questions about the issues addressed in Quirky Question # 75, don't hesitate to contact Ed by email at raskin.edward@dorsey.com, or by phone at 949.932.3602. Regards, Roy]

Ed's Analysis of QQ # 75

This is a complex scenario, so I think it would make the most sense if we treated each of your three questions separately:

Question 1

First, the broad question is asked: can a Caucasian can file a race discrimination claim even though he is not Asian, or part of any other ethnic minority for that matter? The answer is yes. Both federal law (Title VII) and California law (the Fair Employment and Housing Act (“FEHA”)) prohibit discrimination on the basis of race, color or national origin (among other bases). Simply put, Caucasians are part of a specific race and their color happens to be white. Therefore, an employer taking any adverse action against a person because of the employee’s status as a Caucasian, or any other race, does so in violation of the law. Additionally, an employer may not take adverse action against any employee based on the color of the employee’s skin be it white, black or tan. However, it is unlikely that your former employee will succeed in bringing such a claim because he supervised and works in an otherwise all Caucasian department. He will have a difficult time proving that his Caucasian supervisor discriminated against him because he was Caucasian.

Question 2

Second, the next question presented is whether this lawsuit is time-barred? The answer is no, for two separate reasons. The first reason is the continuing violations doctrine and the second is the rule of equitable tolling that applies to the FEHA.

The continuing violations doctrine permits an employee to bring a lawsuit for an employer’s unlawful conduct that begins before the limitations period and “continues” into the limitations period. The California case on point is Richards v. CH2M Hill, Inc., 26 Cal. 4th 798 (2001). In Richards the court explained that discrimination may occur as either an isolated one-time occurrence or as a continuous course of conduct taking place over a period of time. In either case, the statute of limitations begins to run when the unlawful course of conduct ceases or when the employee is on notice that further efforts to end the unlawful conduct will be in vain.

In 2005, the California Supreme Court affirmed and applied Richards in Yanowitz v. L’Oreal USA Inc., 36 Cal. 4th 1038 (2005), to a set of facts similar to the question submitted. In Yanowitz, plaintiff sued her employer for failing to fire a female sales associate and replace her with someone more attractive. Plaintiff refused to do so and thereafter alleged that plaintiff’s supervisor began criticizing her performance in written performance evaluations. Notably, plaintiff never suffered a decrease in salary or benefits, nor was she ever fired or demoted. More than one year after her supervisor began criticizing plaintiff’s work performance, she filed a complaint with the DFEH claiming that she was retaliated against for refusing to terminate an employee for an impermissible reason. Applying Richards, the Court held that the supervisor’s criticisms and negative performance evaluations amounted to a continuing violation because the supervisor’s actions took place over time and amounted to a pattern of conduct. Therefore, plaintiff’s lawsuit was not time-barred.

As applied to the question submitted, the actions taking place from January 2006 through January 2008 may amount to a continuing violation, effectively tolling the statue of limitations during that time. Specifically, if your former employer can show that the poor performance evaluations he received over time were the result of his refusal to terminate the Asian-Americans because he thought that doing so was unlawful, then the continuing violations doctrine may apply. In other words, every time your former employee received a poor performance evaluation based on his refusal to terminate in 2006, a new violation occurred connected to the 2006 event (i.e., the alleged refusal to terminate the three Asian-Americans). This effectively makes the discriminatory conduct a pattern rather than one swift blow occurring from January 2006 to January 2008.

Of course, the fact that the former employee never complained to Human Resources or anyone in the management team about his belief that he was receiving unfair and discriminatory performance evaluations cuts against such an argument. Moreover, the company can argue that because these alleged discriminatory performance evaluations occurred over a two-year period, the unlawful conduct had reached a degree of permanency which put this former employee on notice that the unlawful conduct would not end. If successful, this argument would stop the tolling of the statute of limitations on the date that the discriminatory conduct reached a level of permanency. If the actions reached a level of permanency more than a year before your former employee filed his DFEH complaint (i.e., before February 2007), then the lawsuit would be time-barred. Nonetheless, the Yanowitz case is a difficult hurdle to overcome.

As for the time period the DFEH was investigating your former employee’s complaint (February 2008 to December 2008), that time period is subject to equitable tolling. Broadly speaking, equitable tolling is a judicially created principle designed to prevent a case from being disposed of on statute of limitations grounds when the defendant was provided timely notice of plaintiff’s claims. As applied here, plaintiff is required to file a complaint with the DFEH prior to bringing suit in a civil action as provided by statute in the FEHA. Therefore, California Courts have long held that the one year period for an employee to file a civil lawsuit is tolled until the DFEH completes its investigation.

Question 3

The final question presented is whether the former employee must avail himself of the company’s internal complaint procedure prior to bringing suit? Two recent California cases instruct that: (1) an employee is not required to utilize an employer’s internal complaint procedure before obtaining a right to sue letter from the DFEH if that process does not protect the employee’s due process rights to present evidence, and (2) the statute of limitations will be tolled while an employee utilizes an employer’s internal complaint procedure.

In Ahmadi-Kashani v. Regents, 149 Cal. App. 4th 449 (2008), the defendant employer argued that plaintiff’s lawsuit was barred because she initiated, but did not complete, a mandatory internal grievance process set forth in a collective bargaining agreement applicable to her. The Court of Appeal found for plaintiff because the informal grievance procedure did not provide for a “quasi-judicial” hearing with sufficient due process and therefore the plaintiff was not required to see that process to completion before pursuing a claim with the DFEH.

Next, in McDonald v. Antelope Valley Community College Dist., 45 Cal. 4th 88 (2005), defendant employer argued that plaintiff’s case was time-barred because she failed to file a DFEH complaint during the time period that she was participating in a voluntary internal complaint process. The employer made the specific point that plaintiff was advised she could file her DFEH complaint while the internal complaint process was moving forward and that the internal complaint procedure was entirely voluntary. The California Supreme Court disagreed with the employer and held that the statute of limitations was tolled during the time period that the voluntary internal complaint procedure transpired because the employer had adequate notice of the claim and refusing to toll the statute of limitations in such a situation would be fundamentally unfair.

Thus, these two cases taken together instruct that an employer must likely pursue an internal complaint procedure through completion before filing a DFEH complaint when required by a collective bargaining agreement, so long as the internal procedure provides a “quasi-judicial” process for presenting evidence. However, if the internal complaint process is voluntary, an employee need not see the process through to completion before filing a DFEH complaint. In either case, the statute of limitations will be tolled because the employer is on notice of the former employees claims.

In sum, the questions posed illustrate that it is entirely possible for events that occurred more than one year ago to give rise to a legal claim that is within the statute of limitations because of both the continuing violation and equitable tolling doctrines. This situation should serve as a reminder to employers to keep good records beyond the one year statute of limitations when it comes to matters the employer believes may be subject of a lawsuit – even if it that lawsuit is filed several years down the line.

Downsizing and Foreign Nationals, Quirky Question # 76

Mon, 12 Jan 2009 09:42:00 GMT

[Readers: Although I have been practicing employment law for many years, the sub-specialty of immigration law is outside my area of expertise. Fortunately, two terrific Minneapolis colleagues of mine, Saiko McIvor and Craig Peterson, have practices devoted exclusively to immigration issues. Saiko is 1976 graduate of the University of Washington and a 1984 graduate of the Golden Gate University School of Law. For more information on Saiko, go to http://www.dorsey.com/mcivor_saiko/. Craig is 1987 graduate of Moorhead State University, a 1992 graduate of William Mitchell College of Law, and a 2001 graduate of the University of Minnesota (M.A.). For more information on Craig, go to http://www.dorsey.com/peterson_craig/ Quirky Question # 76 was posed to Craig; his analysis is set forth below. If you have any questions about the analysis below, don’t hesitate to contact Craig at peterson.craig@dorsey.com, or 612.492.6766. Regards, Roy]

Craig’s Analysis of QQ # 76

Changes in employment, such as layoffs, changes in duties or salaries can expose employer and employee alike to variety of risks, or no risk at all, depending on the type of immigration legal status involved. The question posed listed a variety of immigration variants. Let's look at each status in turn.

Lawful Permanent Residents.

Also known as "green card" holders, these individuals are able to live and work indefinitely in the United States. Generally, employers may treat US permanent residents as they would a US citizen worker. A layoff, reduction in salary or hours, re-assignment or other change in employment does not typically affect a permanent resident differently than it would a US citizen, or raise any special considerations for the employer. This is true even if the foreign national has acquired permanent residence based upon an offer of permanent employment, and it is the sponsoring employer which is later terminating employment. In employment-based permanent residence processes, both employer and employee must intend permanent employment when the application is filed, and when approved. Subsequent events, such as downsizing by the employer or discovery of a more attractive job offer by the employee can result in termination of employment without risk to the employer or to the employee's immigration status.

H-1B's.

The H-1B is a temporary immigration status for "specialty occupations" which commonly means employment for which a Bachelor's degree or equivalent is a minimum requirement for entry into the occupation. There are employer and employee risks which arise with significant changes in H-1B employment. Every H-1B petition rests in part on a Labor Condition Application (LCA), a US Department of Labor tool intended to protect wages and working conditions for US workers competing with foreign nationals for positions suitable for H-1B classification. The LCA is a collection of attestations, or promises, made by the employer regarding the employment circumstances. The Department of Labor has enforcement authority to ensure compliance with employer attestations made on the LCA. Chief among the attestations is the employer's promise to pay the prevailing wage for the occupation or the employer's own wage, whichever is higher. This obligation continues throughout the time period for which the LCA was certified and the related H-1B was granted. An employer may not simply reduce the earnings of an H-1B employee without risking sanction by Department of Labor, typically in the forms of fines and back pay. It is possible to change the level of employment from full time to part time, by filing of an amended H-1B petition with the US Citizenship & Immigration Services (US CIS) accompanied by a new LCA reflecting part-time employment. In fact, this is the best approach to making a key H-1B employee less expensive to retain, despite the transactional costs incurred in filing an amended H-1B.

What about termination? H-1B regulations do not prohibit terminations, but termination prior to the end date of the approved H-1B petition raises two employer obligations. The first is notice to US CIS that the employment has terminated. While US CIS regulations do not provide for a penalty for failure to notify the agency of a termination, the Department of Labor has hinted it would take the extraordinary position that the employer's obligation under the LCA to pay the H-1B wage continues even after termination, unless the employer makes the notification to US CIS. The second employer obligation is to pay the cost of returning the H-1B employee to his or her home country. If the employee goes home as the result of termination, the employer has the obligation of paying the travel expense. The obligation does not extend to transportation of household goods or dependent travel however. Also, the obligation does not arise if the employee does not go home, but instead chooses to look for another H-1B employer in the United States, or chooses to apply for a different type of visa, or chooses to remain in the US without legal status.

An H-1B employee who is terminated loses his/her immigration legal status immediately upon termination, and consequently loses the right to remain in the US. From the employee's perspective, it is helpful if an employer provides as much notice as possible, allowing the employee to search for another H-1B sponsoring employer, or to change to a different immigration legal status.

L-1A and L-1B.

These are intra-company transferees, for companies which have parent, subsidiary, branch or other affiliated offices outside the United States. The L-1A is for executives and managers, while the L-1B is for workers who have specialized knowledge of the company's products or processes. Unlike the H-1B, there is no Labor Condition Application for L-1's, hence no wage or working condition attestations enforced by the Department of Labor. The hours or earnings of an L-1 employee may be reduced without violating immigration laws or regulations applicable to the L-1 category. A termination of employment would result in the loss of immigration status for the employee, but the L-1 regulations impose no specific requirement on the employer's part to notify US CIS of the termination or to pay the cost of returning the employee home, as is the case with H-1B's. Other changes, such as changes in employment duties or relationships between the US and foreign affiliated entity may require an amended petition, however.

TN.

This is a temporary employment visa available to Canadian and Mexican citizens as part of the North American Free Trade Agreement (NAFTA.) The treaty contains a list of approved occupations for which TN classification may be granted. The regulations governing TN classification do not require any notice to US immigration agencies of termination or reduction in pay, nor do the regulations impose any requirement upon employers to pay the cost of returning the terminated employee home. Termination of employment results in the employee's loss of immigration status however.

F-1.

This is the most common type of foreign student visa. There are several types of work authorization available to students with F-1 visas, and recent graduates typically are authorized to engage in post-completion "optional practical training" (OPT) with off-campus employers. The usual duration of post-completion OPT is 12 months. There are no employer wage or other attestations associated with F-1 work authorizations, nor is there a general requirement to report terminations or other changes in employment in most cases. A new variant of OPT, for graduates in science, technology, engineering or mathematics programs (so-called STEM graduates) permits these graduates to apply for an extension of 17 months of post-completion OPT, for a total of 29 months. In order to qualify for the additional 17-month extension however, the employee must show his/her employer is enrolled in the Department of Homeland Security's E-Verify system. If an employer is enrolled in E-Verify, and employs a STEM graduate on OPT during this 17-month period, the employer is obligated to report termination of the student's employment to the school's designated school officer. The reporting and E-Verify requirements are conditions of the additional 17-month extension available to STEM graduates, and do not apply to the initial 12-month grant of OPT. Termination of OPT employment does not trigger any requirement for the employer to notify US CIS or to pay the cost of returning the student home.

An F-1 student whose employment is terminated or whose compensation is reduced does not necessarily lose his/her immigration status. The regulations governing OPT permit up to 90 days of unemployment during the initial 12-month grant of OPT, and a total of 120 days' unemployment during the 29-month period available to a STEM graduate.

Discrimination Based on Inter-Racial Marriage, Quirky Question # 77

Mon, 19 Jan 2009 23:12:00 GMT

The specific question you posed was, “Does Title VII . . . encompass discrimination on the basis of inter-racial marriage?” Your lead-in to that question, however, (“Putting aside the issue of whether the manager actually is treating him unfairly . . ..”) is somewhat troubling.

As I have suggested in other Blog analyses, employment issues often implicate at least two fundamental issues – what is legally permissible and what is right in a broader, ethical sense. Frequently, the legal and ethical analyses align but that is not always true. Sometimes, the law lags behind.

The starting point for my analysis, therefore, would be to ask you a question – if you assumed that Title VII did not prohibit discrimination based on inter-racial relationships, how would your company address this situation? I would hope that your response would be that your company would promptly and carefully investigate this situation, and if it determined that your managerial employee was treating your other employee unfairly or discriminatorily based on his inter-racial marriage, institute appropriate disciplinary action. Depending on the facts elicited in your company’s investigation, the appropriate discipline may well be discharge.

If your company’s reaction was the opposite, i.e., ‘if it’s not illegal, we’re not going to act,’ I’d simply ask, “Why not?”. Do you really want to employ a managerial employee who is so bigoted that he would treat one of your other employee’s unfairly simply because he is married to a woman of another race? Do you believe that denying equal opportunities to an employee based on the race of his marriage partner, rather than his intellect, diligence, integrity, work ethic, or any other performance-related factors, would likely contribute to a more competent and effective workforce?

Another factor for your consideration is how a biased decision-maker (and the biased decisions he makes) is likely to affect the morale of your company’s workforce? How would your minority employees react to this type of decision-making? Or, as a corollary issue, would you have confidence that someone who discriminates against one of your employees based on the race of his spouse would be likely to treat your minority employees equitably?

Finally, situations that implicate fundamental questions relating to racial equality or that smack of unfairness are likely to lead to litigation. Play out this scenario from a pessimistic perspective. Imagine airing the issues relating to your company’s treatment of minorities and/or majorities married to minorities in court. Or in the newspaper or other public media. Would you be comfortable with how your company would be portrayed?

Well, enough of my posing questions back to you; let me turn to the legal question you asked. The issue of whether Title VII reaches individuals involved in inter-racial marriages is a question that the courts have addressed periodically since Title VII was passed in 1964. As you may have guessed, the judicial analyses in the late-60s and '70s found that Title VII did not reach this type of discrimination. In the earlier decisions, the courts noted that Title VII’s prohibition (“unlawful . . . for an employer . . . to discharge any individual . . . because of such individual’s race” 42 U.S.C. § 2000e-2(a)(1)), simply did not extend to discrimination based on those with whom the adversely affected employees (typically, Caucasian) associated, whether by marriage or otherwise.

More recently, however, the judicial analysis has shifted. Courts in a number of jurisdictions have held that Title VII reaches discrimination based on an employee's marriage to a member of another race. A good example of such a decision is the case of Holcomb v. Iona College, No. 06-3815-cv (2dCir. April 1, 2008).

In Holcomb, the Second Circuit stated, “We hold, for the first time, than an employer may violate Title VII if it takes action against an employee because of the employee’s association with a person of another race.” As the appellate court pointed out, the Fifth, Seventh and Eleventh Circuits agree. Similarly, the Second Circuit observed that the District Courts within the circuit that had addressed this issue had determined that Title VII reached this type of discriminatory conduct.

Interestingly, a number of courts that have explored this type of associational discrimination have concluded that the discriminatory conduct falls squarely within Title VII’s proscription of discrimination based on the “individual’s race.” For example, as one court held, “Plaintiff has alleged discrimination as a result of his marriage to a black woman. Had he been black, his marriage would not have been interracial. Therefore, inherent in the complaint is the assertion that he has suffered racial discrimination because of his own race.” Rosenblatt v. Bivona & Cohen, P.C., 946 F. Supp. 298, 300 (S.D.N.Y. 1996). The Second Circuit adopted this same analysis: “We reject this restrictive reading [i.e., statute does not reach this conduct] of Title VII. The reason is simple: where an employee is subjected to adverse action because an employer disapproves of interracial association, the employee suffers discrimination because of the employee’s own race.” (Emphasis in original.)

The Holcomb facts are interesting and highlight a few of the points I referenced above. In that case, Iona College terminated the employment of two of its three assistant basketball coaches. One of these coaches (Holcomb) was married to an African American woman. The other coach who was fired was African American. The one assistant coach who was retained, the most junior of the three, was Caucasian. As part of Holcomb’s allegations, he cited to a variety of crude racist comments made by one of the individuals involved in the decision to terminate him, the school’s former Athletic Director (since promoted to one of three Vice President positions at the college). Typical of many discrimination cases, several other individuals who had heard this individual make racially insensitive remarks also came forward with this evidence. Needless to point out, these well-publicized facts cannot be beneficial to Iona College.

Despite the evidence adduced by Holcomb, the District Court granted the College’s summary judgment motion. Though the District Court found that Holcomb had established a prima facie case of discrimination, the lower court also found that the College had advanced non-discriminatory reasons for its discharge decision (the poor performance of the basketball team, the off-court problems of the players, etc.).

In reversing the summary judgment grant, however, the Second Circuit emphasized that in a mixed motive case, the plaintiff is not required to prove that the employer’s stated reason was a pretext for discrimination. “A plaintiff alleging that an employment decision was motivated both by legitimate and illegitimate reasons may establish that the ‘impermissible factor was a motivating factor, without proving that employer’s proffered explanation was not some part of the employer’s motivation.’” (Citations omitted.) The appellate court concluded that Holcomb had come forward with sufficient evidence to present his case to the jury and that the jury could find that the College’s proffered reasons for its actions were not credible.

In sum, if your investigation reveals that your manager truly is discriminating against your employee because he is married to an African American woman, I think your company would be justified in terminating this individual. And, if your company elects not to take this action, as the Holcomb decision and other cases demonstrate, you soon could be defending a Title VII lawsuit. Many courts have held that Title VII reaches this type of discriminatory conduct.

Stealing Confidential Information, Quirky Question # 78

Mon, 26 Jan 2009 09:20:00 GMT

[Readers: The question below was posed to my partner, Nick Akerman, who works in Dorsey's New York office. Nick, an expert on the Computer Fraud and Abuse Act, provides the following analysis. If you would like to communicate with Nick, don't hesitate to contact him at 212.415.9217 or akerman.nick@dorsey.com. More information about Nick is available on our firm's Website; see http://www.dorsey.com/akerman_nick/. Regards, Roy]

Nick's Analysis of Quirky Question # 78

As you recognize, your company’s position would be enhanced either if: a) your employee had executed an agreement containing post-employment restrictive covenants such as a non-compete or non-disclosure obligation, or b) your company had taken appropriate steps to protect the confidentiality of the data so that you could seek protection pursuant to the Uniform Trade Secrets Act. Despite the unavailability of potential contract or statutory claims based on these legal theories, however, you are not out of luck.

When data has been stolen, a company also has the option under the Computer Fraud and Abuse Act (“CFAA”) to file a lawsuit in federal court for injunctive relief and damages. Title 18, U.S.C.§ 1030. The injunction can direct the employee and his new employer to return the stolen data and prevent the employee and his new employer from contacting the customers who are the subject of the stolen data. In other words, you may be able to obtain the same relief as if your employee had a valid restrictive covenant requiring him not to conduct business with your customers.

Primarily a criminal statute, the CFAA provides that “[a]ny person who suffers damage or loss by reason of a violation of this section may maintain a civil action against the violator to obtain compensatory damages and injunctive relief or other equitable relief.” § 1030(g). Because it is a federal statute, you can file in federal court. (State causes of action for theft of trade secrets and breach of a restrictive covenant cannot be filed in federal court unless there is diversity of citizenship or there are other federal claims.)

The CFAA was enacted in 1984 as a criminal statute to criminalize the theft of national security and banking data. In 1992 it was amended to include the ability for an individual injured by a violation of the statute to bring a civil action, much like the Racketeer Influenced and Corrupt Organizations (“RICO”) statute, Title 18, U.S.C. § 1961, et seq. The CFAA has since been amended a number of times to keep up with new technologies and the ubiquity of computers in society. The CFAA was last amended in 2001 in the U. S. Patriot Act to include computers located outside the United States if they communicate with the United States or are involved in commerce with the United States.

The CFAA outlaws the entire panoply of computer crime including stealing computer data. There is no need to show that the data is trade secret protected, copyrighted, confidential or proprietary. Rather, one of the key elements necessary to prove a CFAA civil action, as explained in more detail below, is to show that the employee accessed the company computer without authorization or exceeded the authorization he had been granted.

As a jurisdictional prerequisite to filing a civil CFAA action, the plaintiff company must allege and ultimately prove $5,000 in loss. “Loss” is defined by the CFAA as

“any reasonable cost to any victim, including the cost of responding to an offense, conducting a damage assessment, and restoring the data, program, system, or information to its condition prior to the offense, and any revenue lost, cost incurred, or other consequential damages incurred because of interruption of service.”

The “federal courts have sustained actions based on allegations of costs to investigate and take remedial steps in response to a defendant’s misappropriation of data.” Modis, Inc. v. Bardelli, 531 F. Supp. 2d 314, 320 (D. Conn. Jan. 22, 2008). Such costs must of course relate to the computer. In Nexans Wires, SA 319 F.Supp. 2d 468, (S.D.N.Y 2004), aff'd, 166 Fed. Appx. 559, 562-63 (2d Cir. 2006), for example, the court held that $8,000 spent by two corporate executives to fly to Manhattan from Germany to examine the computer intrusion and discuss the breach at the French restaurant Le Cirque did not qualify for the $5,000 loss because the expense was not sufficiently related to the company computer.

The CFAA encompasses what it defines as a “protected computer.” The CFAA’s definition of protected computer, however, covers every conceivable type of computer. § 1030(e)(1). As the defendant rightly claimed in United States v. Mitra, 405 F. 3d 492, 495 (8th Cir. 2005), “[e]very cell phone and cell tower is a ‘computer’ under this statute’s definition; so is every iPod, every wireless base station in the corner coffee shop, and many another gadget.”

Four of the seven causes of action under this statute require proof that the person who accessed the computer did so “without authorization or exceeding authorization.” Title 18, U.S.C., §§ 1030(a)(2), (a)(4), 5(A)(ii), and 5(A)(iii). The courts have acknowledged that the difference between unauthorized access and exceeding authorized access is “paper thin.” Inter’al Airport Centers, LLC v. Citrin, 440 F.3d 418, 420 (2006). For example, in the employee/employer context an employee is authorized to access the company computers to perform work for the company but exceeds that authorization when the computer is accessed to steal data for a competitor. Lack of authorization, as interpreted by the courts, can be established in four separate ways.

First, lack of authorization can be shown when an employee violates his agency relationship with his employer by accessing the employer’s computer for a purpose that is contrary to the interests of the employer. It is the breach of the “duty of loyalty” that terminates “the agency relationship “and with it” the “authority to access” the computer. Citrin, 440 F.3d at 420-21. In Citrin, the defendant employee Citrin used an erasure program to destroy data on his employer’s computer immediately prior to his resignation from the company to join a competitor. Thus, the court found that Citrin’s authorization to access the computer terminated when he “resolved to destroy files that incriminated himself and other files that were also the property of his employer.” Citrin, 440 F.3d at 420.

The agency theory upon which authorization is based is not universally accepted by the lower courts. There are at least five reported federal district court decisions that have refused to adopt the agency standard as a predicate to an employee’s authorization to use an employer’s computers. These district courts take the simplistic view that if the employee was authorized to use the employer’s computer, he was authorized to use if for all purposes. Thus, even if the employee accessed the computer to steal the employer’s data, the employee did not violate the CFAA because the employee, as part of his duties, was authorized to access the computer.

For that reason, these courts ruled that the intent of the employee in accessing the computer was irrelevant to the question of authorization and that “the phrase ‘without authorization’ generally only reaches conduct by outsiders who do not have permission to access the plaintiff’s computer in the first place.” Shamrock Foods Co. v. Gast, 535 F.Supp.2d 962, 964-65 (D. Ariz. 2008); Diamond Power Intern., Inc. v. Davidson, Nos. 1:04-CV-0091-RWS-CCH and 1:04-CV-1708-RWS-CCH, 2007 WL 2904119, at *13 (N.D. Ga. Oct. 1, 2007); Brett Senior & Assocs., P.C. v. Fitzgerald, No. 06-1412, 2007 WL 2043377, at *2-4 (E.D. Pa. July 13, 2007); Lockheed Martin Corp. v. Speed, No 6:05-CV-1580-ORL-31, 2006 WL 2683058, at *5 (M.D. Fl. Aug. 1, 2006); Int’l Ass’n of Machinists and Aerospace Workers v. Werner-Masuda, 390 F.Supp.2d 479, 495 (D.Md. 2005).

None of the Circuit courts, however, have adopted this view of authorization, and this issue has not yet reached the Supreme Court. For example, the 11th Circuit in United States v. Salum, 257 Fed. Appx 225, 230 (11th Cir. 2007) upheld a criminal conviction for a violation of the CFAA, where the defendant employee was authorized to access the computer but did so for an improper purpose. In that case the court affirmed the criminal CFAA conviction of a police officer with the Montgomery Police Department, who had provided information from the FBI's National Crime Information Center database to a private investigator. Although the defendant police officer "had authority to access the NCIC database" [just like any employee has the authority to access his company's computers] the Court held that there was sufficient evidence to convict on the element of lack of authorization because the defendant knew the information he accessed was to be used "for an improper purpose." The court did not cite either the Diamond Power case or Lockheed Martin the two district court cases from the 11th Circuit which dismissed CFAA civil cases finding that the defendants’ motive in accessing the computers had no bearing on whether the access was authorized. Nonetheless, Salum effectively overruled these two lower court cases.

Second, the limits of authorization to access a computer can be set by agreement. In EF Cultural Travel BV v. Explorica, Inc., 274 F.3d 577, 583-84 (1st Cir. 2001) the court upheld a preliminary injunction entered by the district court based on a violation of the CFAA because the defendants, all former employees of the plaintiff, had accessed and downloaded pricing data on EF Cultural’s website by violating their confidentiality agreements with EF Cultural. In that case the former employees used EF Cultural’s confidential information concerning its public website to create an automatic robot to download from the website all 154,293 prices for high school tours in a two-day period.

Third, lack of authorization can be established by a violation of company rules and policies. The CFAA is a unique statute in the sense that it allows companies to set the rules that form the predicate for a violation of the statute. In EF Cultural Travel BV v. Zefer Corp., 318 F.3d 58, 63 (1st Cir. 2003), the court recognized that the “CFAA . . . is primarily a statute imposing limits on access and enhancing control by information providers.” Thus, a company “can easily spell out explicitly what is forbidden.” Id. at 63. Doe v. Dartmouth-Hitchcock Medical Center, 2001 WL 873063 *2 (D.N.H. 2001) provides a clear example of the critical nature of promulgating workplace rules for accessing data. In that case, the court interpreted “unauthorized access” based on the hospital’s Graduate Medical Training Manual which contained “policies governing the confidentiality of patient records, which generally prohibit interns and Fellows, like . . . [the Defendant] from accessing patient records absent a ‘professional ‘need to know.’” Based on these policies, the court found that the defendant, who was a resident in psychiatry at the Dartmouth hospital, “was granted only limited access to Dartmouth’s computerized patient records” and this limitation was imposed “for the very purpose of protecting patient confidentiality.” Id. at *5.

A patient whose records had been allegedly viewed by a hospital intern for reasons unrelated to treatment sued the hospital and the intern for violations of the CFAA. The court dismissed the CFAA claim against the hospital finding that it had been victimized by its “own policies.” Id. at * 5. For that reason it would be inconsistent with the purpose of the CFAA “to protect computer systems . . . from unauthorized access and concomitant damage – to find the hospital was vicariously liable for the actions of the resident.” Id.

Fourth, the courts have found that access is without authorization when it exceeds the expected norms of intended use of the computer. In United States v. Phillips, 477 F.3d 215 (5th Cir. 2007) a student at the University of Texas was provided access to a school secured network through a password consisting of his Social Security number. The student, however, used what is known as “’brute-force attack program’ which automatically transmitted to the website as many as six Social Security numbers per second, at least some of which would correspond to those of authorized . . . users.” Id. at 218. This program allowed Phillips “[o]ver a fourteen-month period” to gain “access to a mother lode of data about more than 45,000 current and prospective students, donors, and alumni.” Id. The court upheld the student’s criminal conviction under the CFAA, finding that his access to the computer was not authorized because the “brute force attack” exceeded the expected norms of intended use of the computer.

In sum, the CFAA provides your company a legitimate basis on which to seek redress for the wrongful conduct of your former employee, given that he used your company’s computers to copy critical customer and rate information, and forwarded that data to both himself and his new employer. Other claims may be available to your company as well, such as a claim for breach of fiduciary duty, or a claim based on your state’s unfair competition laws. In the future, however, you can further enhance the protections for your company by ensuring that all appropriate employees execute the agreement containing your post-employment restrictive covenants. Similarly, as you recognize, it would be prudent for your company to take appropriate measures to ensure that your company’s confidential information is treated in a manner that ensures protection under the Uniform Trade Secrets Act.

Employee Relationships and Protective Orders, Quirky Question # 79

Mon, 02 Feb 2009 10:29:00 GMT

I do see potential problems with the alternative approaches you are advocating. First, if you were to fire just one of the two employees, you will need to determine the appropriate criteria for making this selection. Will you base your decision on seniority? Performance rankings? Importance to your organization? Other criteria? Understand that firing either of these employees increases the risk of discrimination claims, especially if you discharge your female employee. (I addressed some of these issues in a Blog analysis almost a year ago, which you can access by using the “View By Topic” tab on the upper-lefthand corner of this page. Simply scroll down to “Non-Fraternization Policies;” that will enable you to access Quirky Question # 30. I will not repeat the observations set forth in that prior analysis here.)

Terminating both of the employees involved is certainly a gender-neutral decision but even this approach is not with risks. The primary concern I have is that even if both of your employees were fired, your female employee could initiate a claim for wrongful discharge in violation of public policy.

In April 2008, the federal District Court for the Northern District of Iowa confronted a similar situation. In Rayburn v. Wady Industries, Inc., et al., No. C07-1008 (April 10, 2008), the court addressed a situation where two employees of Wady Industries, who had been involved in an on-again/off-again relationship and who had lived together on two occasions, had what you have charitably described as an “ugly” break-up. Rayburn obtained a “No Contact Order” against her former boyfriend, Miller, whom she accused of domestic abuse, tied to alcohol abuse. Recognizing that the two employees worked for the same employer, however, the court issuing the Order specifically provided that Miller was allowed to continue working at Wady Industries and could have contact with Rayburn, “as necessitated by employment.” Rayburn provided the No Contact Order to Wady Industries, and the Company took some steps to minimize the contact between the two employees, including erecting a tarp between their two work stations (which were approximately 60 feet apart).

Despite the steps taken by the Company, Rayburn complained to the police that Miller was violating the No Contact Order, for work-related and non-work-related behaviors. This resulted in the police being called out to the Company on several occasions. Ultimately, the Company made the decision to terminate Rayburn for “disrupting the workplace.”

Defendants brought a Motion for Summary Judgment on Rayburn’s claim for wrongful discharge in violation of public policy. In this procedural context, all facts alleged by Rayburn were assumed to be true.

The federal court began its analysis by pointing out that the Iowa Supreme Court recognized two exceptions to the doctrine of at will employment: a) discharge in violation of public policy, and b) discharge in violation of an employee handbook which constitutes a unilateral contract. Based on Iowa precedent, the court enumerated four factors that had to be established to prove a claim for wrongful discharge on the basis of public policy: 1) the existence of a clearly defined public policy; 2) the clearly defined public policy would be undermined by the employee’s discharge; 3) the discharge resulted from the employee’s participation in the protected activity; and 4) other justifications for the discharge were lacking.

With this framework, the court then evaluated each element of the claim. The federal court first addressed whether there was a clearly defined public policy. Recognizing the clear guidance from the Iowa Supreme Court that public policy exceptions typically derive from the state Constitution and statutes, and that courts should be “careful to limit the tort action for wrongful discharge to cases involving only a well-recognized and clear public policy,” the federal court nevertheless found that a No Contact Order and the statute on which it is grounded set forth a clearly defined public policy to protect victims of domestic abuse. The Court stated, “the Court finds that although Chapter 664A does not specifically mandate protection for an employee who reports a violation of a no-contact order, the forceful language of the statute articulates a clearly defined public policy of Iowa from which such protections can be implied.” (The Court also relied on Iowa precedent providing similar protections to someone who reports suspected child abuse.)

Turning to the second element of the claim, the Court quickly found that allowing the employer to discharge an employee reporting violation of a No-Contact Order would undermine the public policy. The Court emphasized that this was true, “especially when the violation occurred at the workplace.”

The District Court then concluded that Rayburn’s discharge appeared to have resulted from her engaging in protected activity, i.e., the reporting of the violation of the No-Contact Order. This conclusion was based on the deposition testimony elicited by plaintiff’s counsel from those involved in the discharge decision, as well as other evidenced regarding Rayburn’s productivity, performance evaluations, and compensation. Given the evidence Rayburn adduced, this issue could not be resolved in the Company's favor on summary judgment.

Finally, with respect to the issue of whether there were other justifications for Rayburn’s discharge, the Court found that Rayburn had presented sufficient evidence to survive summary judgment on this issue.

The Rayburn case illustrates the risks your Company confronts if it terminates your female employee because she asked for your assistance in enforcing the Protective Order and advised you that she intends to call the police if your response is ineffective. I recommend, therefore, that you continue employing your employee who obtained a Protective Order. If you want to continue employing the male employee as well, you should consider options that would minimize his contact with his former paramour at work. For example, could he be transferred to another facility? If you don’t have another facility, could he be moved to another part of the facility where they both work to reduce the likelihood of contact between them? If they are line or shift employees, could they be assigned to different lines or shifts?

In crafting the most workable solution, consider seeking input from your female employee. When you do so, however, do not promise that you will follow her recommendation. Rather, simply explain that you are seeking her input into finding a workable solution. If you do find a workable “solution,” monitor the situation carefully. Check in with your female employee frequently to ascertain whether the problem has been resolved. Document her responses carefully if she advises you that the matter has been resolved. If her opinion is the opposite, objectively evaluate whether the problem persists and, if so, try an alternative approach to solving it.

Of course, you may conclude (either with or without your employee’s input) that there is not an adequate solution involving the retention of these two employees. It simply may be too disruptive to continue employing both of them. In this context, the path least likely to lead to litigation is terminating the male employee.

If you elect to do so, you should be vigilant to ensure that this individual does not pose a risk of harm to your female employee at your worksite or others who work at your Company. That topic, however, involves another analysis for another day.

Background Checks, Quirky Question # 80

Wed, 04 Feb 2009 16:14:00 GMT

[Readers: The question below was posed to my Seattle colleague, Sarah Jung Evans. Sarah has written several of our analyses of the West Coast Quirky Questions. Sarah, who is licensed to practice both in California and Washington, is a 2000 graduate of Northwestern University and a 2003 graduate of UCLA Law School. Sarah's direct line is: 206.903.2396; her email is evans.sarah@dorsey.com. Don't hesitate to contact her if you have any questions about the issue below. Regards, Roy]

Sarah's Analysis of Quirky Question # 80

You ask whether your Washington bank can adopt an across-the-board policy requiring background checks for all of your applicants. Such an approach would expose your bank to potential liability under the state and federal statutory schemes. Let's start with Washington.

In 2007, Washington Governor Christine Gregoire signed into law S.B. 5827. That bill states that "a person may not procure a consumer report for employment purposes where any information contained in the report bears on the consumer's credit worthiness, credit standing, or credit capacity, unless the infromation is either: (i) substantially job related and the employer's reasons for the use of such information are disclosed to the consumer in writing; or (ii) required by law.

With the passage of this statute, Washington joined four other states with similar restrictions on the use of credit reports - Hawaii, Pennsylvania, New York and Wisconsin.

The question for your evaluation is whether your across-the-board policy would violate the Washington statute. Assuming you also comply with your notification obligations under the Fair Credit Reporting Act (FRCA), you should assess how the Washington law impacts your liability with regard to obtaining the information you seek.

First, you must consider whether the credit worthiness, credit standing or credit capacity is information which is required to be gathered by law. This would not generally be the case for most positions. Given that, the next question to consider is whether the applicant's credit information is "substantially job related." The exact meaning of this phrase has not yet been interpreted by Washington courts. However, in a bank setting, it is generally agreed that employees such as tellers who directly handle monetary funds, are in the type of position where credit information is substantially job related. A person whose job entails purely adminstrative functions (with little or no discretion or handling of monetary funds) is, on the other hand, less likely to qualify.

Until the Washington courts interpret the meaning of "substantially job related," we recommend you act conservatively and only obtain consumer reports containing credit information for those applicants whose job functions directly involve money or finances or have significant discretion with such sensitive information. Note too that the Washington law maintains an exception, making such limitations inapplicable to situations where the employer "has reasonable cause to believe" the employee has "engaged in specific activity that constitutes a violation of law." This mimics the FCRA's exception where employees suspected of misconduct are not entitled to the same notification procedures.

This law obviously applies to employers whose principal place of business is Washington, but may also apply to Washington residents who apply to out-of-state corporations.

Second, with respect to federal law, another area of concern relating to background checks has been noted by the EEOC. The EEOC has concluded that an employer's requirement of a good credit record for job applicants has a forseeably disproportionate adverse impact upon minorities . However, an employer may avoid Title VII liability if the requirement is justified by business necessity. And, the EEOC has found that a bank's practice of performing a credit check on successful job applicants did not unlawfully discriminate against minority applicants where the checks were done in a facially neutral manner and served a legitimate, job-related purpose, particularly in the employment of tellers. EEOC v. American Nat'l Bank, 21 Fair Empl. Prac. Cas. (BNA) 1595 (E.D. Va. 1979), aff'd in part and rev'd in part on other grounds, 652 F.2d 1176 (4th Cir. 1981). Thus, under either Washington or federal law, any background check for which credit is pulled should be justified by business necessity.

Finally, another important consideration is what you do with the information you receive from the background check agency? Make sure you dispose of it properly! As of June 1, 2005, it became critical for employers to properly dispose of consumer information or face liability for statutory fines and civil penalties as well as actual damages if an employee's identity is stolen as a result of the employer's failure to protect the information. The disposal obligations, found at 16 C.F.R. 682, were a part of the Fair and Accurate Credit Transaction Act of 2003 (FACTA) which amended the Fair Credit Reporting Act.

Employers are subject to the FTC's jurisdiction under the FRCA when they obtain a consumer report as a part of background check. Every such employer is required to take "reasonable measures" to protect against unauthorized access to or use of the consumer information in connection with its disposal.

The standard for disposal is a flexible one, allowing entities to determine what is a "reasonable" measure. Factors to determine what is "reasonable" include: the sensitivity of the consumer information; the nature and size of the entity's operations; the costs and benefits of different disposal methods; and relevant technological changes. The disposal rule provides several non-exclusive examples of methods of compliance, including : (a) implementing and monitoring policies and procedures that require the burning or shredding of papers containing consumer information so that the information cannot practicably be read or reconstructed; (b) implementing and monitoring compliance with policies and procedures that require the destruction or erasure of electronic media containing consumer information so that the information cannot practicably be read or reconstructed.

Failure to comply with the disposal rule can expose employers to the following liability:

Civil fines - Fines up to $2,500 per violation can be assessed from the federal government.

Civil liability - Employers are potentially liable up to $1,000 per employee in statutory damages.

Actual damages - Employers are also liable for actual damages if employees' identities are stolen as a result of the company's failure to protect the information.

Class action lawsuit - Employers could be subject to a class action lawsuit if multiple employees are affected.

In addition to the federal penalties associated with the disposal rule, employers can also face liability under state statutes and/or negligence claims.

Note that in December 2007, the FTC announced a settlement in its 15th case (and its first in 13 months) addressing the data security practices of companies handling sensitive consumer information. American United Mortgage Company agreed to pay a $50,000 penalty for failing to implement reasonable safeguards to protect customer information and failing to provide customers with privacy notices.

American United was the first FTC action taken pursuant to the Disposal Rule of the FACTA of 2003. The complaint filed in the Northern District of Illinois asserted that the Northbrook, Illinois-based mortgage company disposed of several dozen consumers’ personally identifying information by leaving intact hundreds of documents in a nearby unsecured dumpster, in some cases in open trash bags. Indeed, even after the FTC provided written notice to American United that disposal of documents containing consumers’ personal information in this manner created a risk of unauthorized access, "on at least two occasions, additional intact American United documents containing consumers’ personal information were found in and around the same dumpster adjacent to American United’s office."

In addition to the fine, the stipulated judgment and order required American United to obtain an immediate third-party audit of its privacy safeguards and ongoing audits every two years for a decade. American United was also permanently enjoined from further violations of the FACTA Safeguards, Disposal, and Privacy rules. This case illustrates the potential consequences of disregarding a company's obligations under FACTA.

Accommodating Two Employees With Similar Disabilities, Quirky Question # 81

Mon, 09 Feb 2009 01:19:00 GMT

[Readers: This question was posed to my colleague, Mike Iwan, so I have provided his analysis below. Mike is a 1992 graduate of Stanford University and a 1998 graduate from the University of Minnesota Law School. Mike can be reached at 612.340.5613 or by email at Iwan.Michael@dorsey.com. If you have any questions or comments about Mike's analysis, don't hesitate to contact him. Regards, Roy]

Mike's Analysis of QQ # 81

That is certainly an unenviable position. The choice between losing two valued employees, or retaining just one of them and defending your favoritism in court is extremely difficult. This situation also raises countless issues about ADA coverage, the definition of a disability, and what it means for an accommodation to be reasonable. The matter is further complicated by the recently enacted amendments to the ADA, which promote a much broader definition of “covered disability.” I believe, however, that there is a way to resolve this situation that meets your business needs while still giving you a defensible position in any subsequent litigation.

I note in passing that, at least with the second employee, you need to be aware of possible FMLA issues. It doesn’t sound as if the employee is asking for any sort of leave or reduced schedule in connection with his injury, and it is also unclear whether this shoulder injury would qualify as a serious health condition under the FMLA. But any time you are confronted with an employee illness or injury affecting job performance, it is wise to first rule out any FMLA obligations.

The next question to ask in such situation is whether the ADA (or a similar state law) is implicated. Usually this means first asking whether the employee has a “disability.” Not all physical impairments, of course, qualify for protection under the ADA. To be a “disability,” an impairment must substantially limit one or more major life activities. A temporary impairment does not count as a disability. If the injury to this employee’s shoulder heals or is likely to heal, he is due no protection under the ADA. Even if his lifting restriction is permanent, he still faces a long line of unfriendly precedent. While the ADA specifically includes “lifting” as an example of a major life activity, courts have been reluctant to equate lifting restrictions with disability status. Brunko v. Mercy Hospital, 260 F.3d 939, 941 (8th Cir. 2001) (40-pound lifting restriction was not a disability); Gutridge v. Clure, 153 F.3d 898, 901(8th Cir. 1998) (45-pound restriction was not a disability); Snow v. Ridgeview Med. Ctr., 128 F.3d 1201, 1207 (8th Cir. 1997) (25-pound restriction was not a disability). In all of those cases, an employee was restricted from performing some jobs, but able to perform a wide variety of other ones.

The situation here is potentially different; however, given the severity of the lifting restriction. While most daily activities do not require the lifting of 40 or 45 pounds, 10 pounds is so low that the employee has a better argument that, if thought to be a long-term condition, he is disabled. Still, one could think of any number of office, retail, or other customer service positions in which the employee could work even with his lifting restriction, even if he can no longer work for a company that provides emergency day care to children of all ages. An impairment that renders a person unable to perform one specific job is not a disability. Aucutt v. Six Flags Over Mid-America, 85 F.3d 1311, 1319 (8th Cir. 1996). Without proof of more serious limitations to his daily life or ability to find employment, he will likely have a hard time proving that he is disabled.

Admittedly, however, there is some uncertainty here. Last September, Congress amended the ADA to loosen the definition of disability. The amendment specifically repudiated the cases imposing a strict standard on the definition of disability. According to Congress, the new focus of ADA cases is supposed to be on whether employers have complied with their accommodation obligations. The definition of disability, however, remains unchanged. Even in light of this new directive, it is not clear that a court would find a 10-pound lifting restriction on one arm to be a substantial limitation of any major life activity.

Even if a court decided that this employee is disabled, it is unlikely that he would be able to demonstrate that his requested accommodation would be effective. If each employee could care for only a segment of the children, your business model would not work. On days when the mix of ages was distributed evenly, there would be no problems. But on those days when the range in ages skews old or young, some of the employees would be responsible for every child, and some employees would do no work at all. This would be neither safe nor efficient.

The fact that you have a written job description emphasizing the need to be able to care for children of all ages and to lift 30 pounds makes your case even stronger. When a function is this important, and when removing the function would fundamentally alter the nature of the position, the function is essential to the job. 29 C.F.R. §1630.2(n)(3).

Unfortunately, this employee can no longer lift more than ten pounds. The only suggested way to accommodate his lifting restriction in his current child care position is to allow him to abstain from working with some portion of the children. But by only being available to care for some of the children, he is no longer performing the central, essential function of the job. Employers are not required to alter an existing position by removing or changing the job’s essential functions.

But what about the fact that you have offered such an “accommodation” to the first employee? Have you conceded that the accommodation is reasonable? (Again using the term “accommodation” assumes that the first employee has a disability – it very well may be that neither have a covered disability under the ADA). The answer is no, for two overlapping reasons. First, the ADA requires that courts consider every disability claim on a case-by-case basis. Albertson's, Inc. v. Kirkingburg, 527 U.S. 555, 566 (1999). Even if one accommodation is reasonable, a new set of circumstances (including, presumably, the existence of the first accommodation) could still make another, similar accommodation unreasonable.

Second, the fact that an employer offered a particular accommodation once is not conclusive proof of the accommodation’s reasonableness. See Myers v. Hose, 50 F.3d 278, 285 (4th Cir. 1995) (holding that an employer did not violate ADA by refusing to extend accommodations to the plaintiff even though those accommodations were offered to other employees). To adopt such a rigid standard, in fact, would create a disincentive for employers to offer the fullest possible accommodation to an employee, for fear that its efforts may actually be “used against it” with regard to a later employee. Id.

In Smith v. Ameritech, for example, the Sixth Circuit rejected a claim by a plaintiff that his employer failed to accommodate his chronic back pain by reassigning him to a different position and allowing him to work from home. The court concluded that although the employer had made similar arrangements for another employee with multiple sclerosis, it would be inappropriate to “ratchet up liability” on employers who offer accommodations “as a matter of good faith” even though no particular set of accommodations is required by the ADA.. 129 F.3d 857, 866-68 (6th Cir. 1997).

In light of the foregoing, the most important step for you to take at this point is to make sure you have engaged in a dialogue with this second employee. The EEOC calls this the “interactive process.” When an employee tells an employer about a disability, the employer must undertake reasonable efforts to find an accommodation that is appropriate with regard to both the essential functions of the position and the individual limitations of the employee. Fjellestad v. Pizza Hut of Am., Inc., 188 F.3d 944, 951-54 (8th Cir. 1999). One final option to consider is whether there are any open positions in your organization that do not require lifting of more than 10 pounds, for which your second employee would be otherwise qualified. If there really are no accommodations available that do not result in the elimination of an essential job function, the creation of an entirely new position, or significant pressure being placed on either the company’s financial health or the responsibilities of other employees, then you have no reasonable accommodation to offer and you have fulfilled your obligations under the ADA.

Sexual Harassment, Ancient Info, Quirky Question # 82

Mon, 16 Feb 2009 00:47:00 GMT

Your question implicates a number of different issues. You are correct that the statutes of limitation for statutory discrimination claims are relatively short. The federal statute of limitation under Title VII, for example, is 300 days (approximately 10 months). In the few states without a parallel state agency, the statute of limitations is even shorter (180 days, or approximately 6 months). In Minnesota, where my practice is based, the statute of limitations under the Minnesota Human Rights Act is one year. So, your initial instinct that employees should not be able to bring lawsuits based on conduct that occurred long ago has some legitimacy.

In the legal arena, however, as you undoubtedly know, you have to dig a bit deeper to test your first impressions. Although you would have a strong statute of limitations defense if the conduct complained of had occurred five years ago and there had been no problems since, when wrongful conduct (assuming there was some) has occurred within the statutorily protected time period, the statute of limitations defense may not be available to you. In this context, the question of whether the complaining employee may introduce evidence of the prior problems (even those that occurred five years ago) implicates both statute of limitations issues and evidentiary issues. Each are addressed below.

Statute of Limitations:

In an interesting, and some respects unusual, case from the Washington Court of Appeals, Jane Doe III v. State of Washington, et al., No. 35130-7-II, (Wash. Ct. App., April 8, 2008) (unpublished), the court examined some of the issues you have raised. The plaintiff in that lawsuit, Jackie Delgado, brought a 7-count complaint based on statutory and common law claims, including hostile work environment sexual harassment and sex discrimination. The trial court dismissed the plaintiff’s lawsuit on statute of limitations grounds, noting that plaintiff’s lawsuit, filed in 2005, was based on conduct occurring 8 years earlier. The court reached this conclusion despite the fact that some of the interaction between Delgado and Green (the alleged harasser) had occurred in 2003. The Washington Court of Appeals reversed the grant of summary judgment on several of Delgado’s claims, including her statutory claims for sexual harassment and sex discrimination.

The appellate court began its analysis by noting that the Washington Law Against Discrimination (WLAD) did not have a statute of limitations. Therefore, under Washington’s general statute of limitations for personal injury claims, a plaintiff must assert discrimination claims within three years. (This highlights a practice pointer I have emphasized in prior Blog analyses – since so much of employment law is state-dependent, it is critical for you to evaluate the laws of the states where the dispute arises. Washington’s 3-year statute of limitations for discrimination claims is atypical.)

The intermediate appellate court then noted that for discrete acts of discrimination (termination, failure to promote, denial of transfer, refusal to hire, etc.), the statute of limitations begins to run “from the date of the alleged wrongful act.” The court noted that “if the statute of limitations period has run, a lawsuit for that discrete act is barred, even if that act relates to others timely alleged in the charges filed.”

Critically, however, the court stressed that hostile work environment claims are “different in kind from discrete acts.” The court observed that a hostile environment claim is composed of a series of separate acts that collectively constitute one unlawful employment practice. Therefore, the court found it did not matter that some of the alleged acts fell outside the statute of limitations period, because hostile environment claims are based on “the cumulative effect of individual acts.”

Defendants, however, argued that the 8-year gap between 1994 (when some of the most outrageous conduct ended) and 2002 (when other conduct occurred), demonstrated that the sexual harassment was not part of the same hostile work environment. The appellate court rejected this argument. The court noted that Delgado had been harassed by Green from 1989 through 1994, that Green had threatened to kill her on two occasions between 1989 and 2002, and that she had been harassed in 2002. Interestingly, the court also focused on the impact the sexual harassment had had on Delgado – she had cut her hair, intentionally gained a great deal of weight, dressed poorly, all with intention of making herself unattractive to Green, and avoided large portions of the hospital grounds where she might encounter Green. During the period where she made herself physically unattractive, she was not subjected to sexual harassment.

Finding that Delgado’s claims were not time time-barred, the court noted that the harassment involved the same victim, the same relationship, and the same type of harassment. Moreover, even though the harassment ceased for a lengthy period, the court found that Green continued to “control” Delgado, affecting her physical appearance and her movement at her place of employment. The court observed, “In other words, there is a genuine issue of material fact as to whether Delgado continued to bear the burden of Green’s harassment between 1994 and 1999. There is a genuine issue of material fact as to whether Green’s acts from 1989 to 2002 are part of the same actionable hostile work environment practice.”

What makes this case unusual in my opinion is that the court looked at the impact or effect on the victim in evaluating whether her claims were time-barred. Because she clearly was affected in the period following the cessation of the harassment (cessation attributable to the actions she took to make herself less attractive), the court considered the interim period in determining the ongoing nature of the hostile environment claim. As noted, the court observed, whether Delgado continued to bear the burden affected the limitations calculus. The principle articulated by the court in the Washington case has the potential for significantly altering the way in which limitations periods are determined in hostile environment cases, at least in Washington. If limitations periods are extended to encompass the period in which an employee continues to “bear the burden” of prior harassment, the limitations period could be open-ended. The unanswered question from the case is whether the same decision would have been reached if there had been no subsequent similar acts in 2002. Conceivably, an employee could continue to “bear the burden” of prior harassment look after the harassment ended, regardless of whether the harassment resumed at some point in the future.

A cynical view of the appellate court’s decision is simply the old axiom – bad facts make bad law. There certainly were some terrible facts in the case and it could be that the court was unwilling to leave this particular plaintiff without a remedy. Whether the same analysis will be applied to less egregious contexts remains to be seen.

Evidentiary Issues:

Even if a court did not reach the conclusion that the statute of limitations should reach back eight years, the harasser’s earlier conduct still could become part of any subsequent litigation your employee may institute, based simply on evidentiary considerations.

There are two related questions you should consider when evaluating the evidentiary issue. First, will the evidence be “discoverable” – in other words, will the plaintiff’s lawyer be permitted to explore these past events in interrogatories (written questions the company will have to respond to under oath), document requests, or depositions (under oath question and answer inquiries). The standard for the “discovery” of information in these mechanisms is very broad: is the information directly relevant or “reasonably calculated to lead to the discovery of admissible evidence.” Courts generally are unreceptive to objections to inquiries during the discovery phase of litigation based on an argument of relevancy. Thus, unless you could establish that the plaintiff was seeking the information simply to harass or embarrass your executive (a tough legal hurdle to clear), most of the information pertaining to the past events will be fair game during discovery.

Second, courts have to assess whether information legitimately explored and elicited during the discovery phase of a lawsuit is “admissible” during the judicial proceeding. Here, courts examine whether the information elicited is relevant and whether, even if so, the information’s relevancy is outweighed by the risk of unfair prejudice. This balance is set forth in Rule 403 of the Federal Rules of Evidence, which states: “Although relevant, evidence may be excluded if its probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues, or misleading the jury, or by considerations of undue delay, waste of time, or needless presentation of cumulative evidence.”

Applying this construct to your situation would lead to the following types of inquiries. What conduct occurred five years ago and is it the same as, similar to, or different from the conduct that recently occurred? What were the executive’s motivations then, and what were his motivations now? Did the executive deny engaging in the conduct which the complaining employee brought to the company’s attention? Did the executive deny engaging in the conduct revealed by your investigation that implicated his interaction with other employees? Has he denied the conduct the employee complained of recently? Did the executive’s response (then and now) implicate issues regarding his veracity?

Depending on how these and other questions are resolved, the information pertaining to his conduct many years ago may or may not be admissible. If the behavior was the same, if his motivations appeared to be the same, if he lied about his conduct then and/or now, a court may find that this evidence should be admitted. If, in contrast, the conduct complained of five years ago was radically different and the executive fully acknowledged the conduct (thereby removing issues regarding his truthfulness from the equation), a court might reach the opposite result.

Another way in which these issues could play out in your lawsuit relates to the adequacy of your company’s response. In your question, you note that “other employees had been mistreated by the executive” but that your company did not fire him. You do not identify the ramifications (if any) for the executive. Did the company discipline him? Suspend him? Demote him? Freeze or reduce his compensation? Your company’s response to the prior problem also could influence the court’s decision on the admissibility of the evidence of these earlier problems, depending in part on the non-statutory claims asserted by the complaining employee. For example, if she alleged that the company was negligent in retaining this executive, or negligent in supervising his conduct since these earlier problems arose (common law claims recognized in many states), the relevancy of the prior conduct becomes more direct.

Common Law Claims:

You also asked about the types of common law claims your employee may assert. As you may know, many common law claims have longer statutes of limitations than do the statutory claims. Depending on the state and the nature of the claim involved, the statutes of limitations may range from two years (for intentional torts) to six years for negligence theories. In a harassment case, the common law claims could include assault, battery, negligent hiring, retention or supervision, and intentional or negligent infliction of emotional distress. Depending on the nature of the conduct in which your executive employee may have engaged, some or all of these claims, and possibly others, may be asserted. Plaintiffs assert these kinds of claims for different reasons, including, among others, the differences in the damages schemes. That is the subject for another day.

FMLA Preemptive Strike, Quirky Question # 83

Mon, 23 Feb 2009 14:49:00 GMT

Your question is very timely, as this issue has recently received attention from a number of courts. Moreover, these decisions demonstrate that your plan to terminate your employee just before he qualifies for the benefits of the Family and Medical Leave Act (FMLA) is ill advised.

As you know, the FMLA provides eligible employees with the right to take 12 weeks of unpaid leave under certain circumstances. The principal eligibility requirements are that the employee has worked 1250 hours during the preceding 12-month period and has been employed with your firm for at least 12 months. (I previously have written about the fact that the 12 months of employment do not have to be consecutive, and, indeed, can be separated by multi-year gaps. For those earlier analyses, go to the “View By Topic” bar to the left and click on 'Family and Medical Leave Act.' That will enable you to access the earlier analyses.)

With respect to your inquiry, I will assume that the employee in question has worked more than 1250 hours during the 11 months he has been employed with your company. (Forty hours per week times 48 weeks would put him well above the 1250 minimum.) I also will assume that this employee had never worked with your company previously, so he had no prior period of employment to combine with the 11 months he has just worked. Consequently, as you have concluded, it would appear that your employee is one month shy of FMLA eligibility.

This leads me to a question not revealed by your inquiry. Is the employee seeking FMLA leave immediately? Your question states, “He recently requested FMLA leave.” If you are suggesting that he sought FMLA leave, to start right away, your conclusion would be correct – the employee would not eligible for FMLA leave. Moreover, in this context, it would be difficult for the employee to make an argument that he was retaliated against for asserting a right for which he was otherwise not eligible.

If, however, your employee was complying with the notification requirements imposed on employees (“the employee shall provide the employer with not less than 30 days’ notice, before the date of the leave is to begin, of the employee’s intention to take leave . . .”, 29 U.S.C. § 2612(e)(1)), a different outcome is likely. In this context, the employee is fulfilling his statutory obligation to his employer by providing the notice required by the statute. Moreover, at the time the leave would commence, he will have worked for your firm for more than 12 months, making him FMLA eligible. When this factual context has been examined by the courts, the employee has been found to qualify for FMLA leave.

For example, in the recent case of Reynolds vs. Inter-Industry Conference on Auto Collision Repair (a/k/a I-CAR), No. 08-CV 2115 (N.D. Ill. January 22, 2009), the employee, Reynolds, had worked for his employer just nine days shy of one full year. Due to serious health problems of Reynolds’ finance and their unborn child, Reynolds requested and was given eight days off. Reynolds’ son was born prematurely and the doctors advised Reynolds and his finance that the child would need to remain in neonatal intensive care for three months. Consequently, Reynolds requested FMLA leave to take care of his son after he came out of intensive care, at which he would have been employed with I-CAR for approximately 15 months.

I-CAR responded by terminating Reynolds’ employment in the nine-day window before he reached his first anniversary date. Reynolds sued I-CAR for violating the FMLA and other claims. In response, I-CAR moved to dismiss Reynolds’ FMLA claim in a Rule 12(b)(6) Motion, arguing that because he had not worked for the company one full year, his FMLA claim should be dismissed.

The federal court rejected the employer’s effort to dismiss Reynolds’ FMLA claim. The court's analysis started with the FMLA's statutory purpose – to provide eligible employees with 12 weeks of leave in connection with the birth or adoption of a child; to care for a child, spouse, or parent with a serious health condition; or because of a serious health condition that makes the employee unable to perform the functions of the employee’s position. Clearly, Reynolds’ request for time off to care for his newborn fell squarely within the defined purposes of the statute.

Next, the court looked at the notification obligations that are imposed on the employee. Since employees are, in most circumstances, expected to notify their employers 30 days in advance of the desired leave, the court found that “it would be illogical to interpret the notice requirement in a way that requires employees to disclose requests for leave which would, in turn, expose them to retaliation, or interference, for which they have no remedy.”

The federal court also found support for its analysis in the Department of Labor regulations. As provided in the pertinent regulations, “[t]he determination of whether an employee has worked for the employer for at least 1250 hours in the past 12 months and has been employed by the employer for a total of at least 12 months must be made as of the date the FMLA leave is to start.” 29 C.F.R. § 825.110(d) (emphasis in original).

Lastly, the court looked at the public policies underlying the FMLA, the balancing of the demands of the workplace with the needs of the families and the effort to provide employees the opportunity to take reasonable leave for medical reasons. As the court stressed, “An employer has no legitimate interest in being able to terminate an eleventh month employee for simply requesting foreseeable leave for which he is eligible, when that employer would be clearly prohibited from making that same decision a month later – or, in Plaintiff’s case, a mere nine days later. If the protections of the FMLA are to serve the Act’s purpose, they must be read to cover scenarios such as Plaintiff’s.”

Apparently sensitive to potential criticisms of its analysis, the court concluded, “[t]he Court’s decision today simply means that under the FMLA, an employer may not terminate an employee who has worked less than twelve months for requesting foreseeable future leave that the employee will be eligible for and entitled to at the time the leave is to begin.” The court also cited to a number of decisions from other federal courts that had reached the same conclusion.

In sum, your tentative plan to make a preemptive decision to terminate your employee of 11 months because he has requested FMLA leave could lead to litigation that will be difficult for your company to win. If your employee would otherwise be eligible for the FMLA leave at the time such leave would begin, your employee likely would be covered by the FMLA.

The Reynolds decision does not address the more problematic scenarios that seemingly would be encompassed by the logic of the court’s analysis. For example, what if, instead of 9 days before Reynolds reached his first year employment anniversary, he announced his need for FMLA leave 9 months before the end of his first year of employment. Would that advance “notification” preclude adverse action by the employer based on the employee’s desire for FMLA leave? Would the same analysis apply to the 1250 hours requirement (i.e., an employee requests FMLA leave at a point when he only has had 1000 hours)? It will take some time before these other issues reach, and are resolved by, the courts.

Finally, as I’ve expressed in other Blog analyses, there are legal issues for you to consider and there are other, practical, employee relations issues for you to consider. I’m not sure I buy two of the premises of your question. First, you state that the employee who has requested the leave is someone liked by your Company who does quality work. Nevertheless, you suggest that you are willing to jetison him because you believe he could be replaced relatively easily. I’m not convinced. If you have an employee who is exceeding your performance expectations, are you really ready to end the employment relationship with him? Keep in mind that this is an employee who presumably understands your company, understands his job responsibilities and gets along well with his co-workers. Any new employee will have to be trained (at some cost to your firm), plus you have no guarantee that this individual will perform as satisfactorily as the employee you are planning to fire.

Second, you suggest that employees who request FMLA leave are not as “dependable” as other employees. Again, I’m not convinced. Moreover, I think you are underestimating the loyalty you can inspire by supporting your employees’ requests for leave. This is true not only for the specific recipient of the accommodated schedule but for other employees who will observe how this employee is being treated. Consider the converse as well – how would your other employees feel if you terminated a well liked colleague simply because he requested FMLA leave for which he was not quite eligible? I doubt this approach will endear your Company to your workforce. In my view, both for legal and practical reasons, you should provide your employee the leave he is seeking.

Witnesses at Investigative Interviews, Quirky Question # 84

Mon, 02 Mar 2009 10:16:00 GMT

Like your company, many employers conducting investigations receive requests from their employees to have another person present at investigative interviews. Sometimes that person is a co-worker, sometimes that person is a friend or family member, and sometimes the employee asks to have a lawyer accompany him/her to the interview. As I’ve touched on in other Blog analyses, subject to the qualifications described below, all of these requests should be rejected. You do not want other employees sitting in on the investigative interview. You don’t want non-employees sitting in. And, you certainly don’t want attorneys participating in the interview. I’ll return to each of those contexts below.

You specifically inquired, however, about “Weingarten” rights and what that means. The fact that you are unfamiliar with the term suggests to me that your work force in not unionized. (I draw that inference only because the concept of Weingarten rights emanates from a National Labor Relations Board (NLRB) case and likely would have come up before if your workforce comprised union employees.)

In a setting involving unionized employees, employees possess contractual rights that the employer must respect during the course of the investigation. Unlike private employees in a non-unionized environment, a union member may be entitled to have a union representative present during an interview where the interview may lead to disciplinary action. This right to have a union representative present in interview contexts where the interviewee is potentially subject to disciplinary action is referred to as a “Weingarten” right and is derived from the case of NLRB v. Weingarten, Inc., 420 U.S. 251 (1975).

So, the first question to explore is whether the employee being interviewed is subject to a collective bargaining agreement. If the employee is a union employee, the next question to explore is whether the person being interviewed may be disciplined as a consequence of the interview. If the answer to each inquiry is affirmative, the interviewee has the right to have a union representative present during the interview.

From a practical perspective, of course, it is often difficult to predict whether an investigative interview will reveal facts that could lead to the employee’s discipline. Before the interview commences, you may not know what information is likely to be disclosed and what the interviewee’s role may have been in the problematic conduct. For that reason, some employers ensure that a union representative is invited to participate in any investigative interview of a union employee.

Further, union employees are entitled to meet with a union representative prior to being questioned about their alleged workplace misconduct. In U.S. Postal Service v. NLRB, the employer was investigating an employee for alleged misconduct and, pursuant to Weingarten, the employer permitted the employee to have a union representative present during questioning. The employer refused, however, to allow the employee to consult with his representative prior to the meeting. The NLRB held that such a refusal constituted an unfair labor practice in violation of the NLRA.

As this analysis reveals, a union employee may have a right to have a union representative present at an investigative interview. Further, the employee may have a right to meet with the union representative prior to the investigative interview. Despite those rights, however, the interviewer need not cede control of the interview to the union representative, letting him/her take over the interview, begin questioning the interviewee, or otherwise engaging in any behaviors that interrupt or, worse, disrupt, the interview process. If this situation occurs, seek cooperation from the interviewee and the representative. If problems persist, terminate the interview and resume it at a later date under more controlled circumstances.

If you are not dealing with union employees, Weingarten rights do not apply. Although there was some confusion about this issue for a period of time, at least for now this debate appears to be over. See, e.g., NLRB vs. IBM Corporation, 341 NLRB No. 148 (June 9, 2004) (NLRB decided private employees in a non-union setting do not have the right to have a co-worker present at an investigatory interview, even if the interview in question might lead to disciplinary action). In short, for non-union employees, you do not have to allow others to accompany your employee to an investigative interview. Moreover, if you were to allow someone else to attend, you are exposing yourself and your company to unnecessary potential grief.

Presumably, the reason you are conducting the investigation is that you believe some wrongful conduct has occurred. You do not want to reveal that information to a third-party witness, even if he/she is also an employee. Your standard admonitions about confidentiality and privacy will lose considerable impact if another person is allowed to sit in on the interview. Further, there are a variety of circumstances where the purpose of your investigation could be thwarted, or partially undermined, if you allowed another employee to sit in. For example, what if the employee asked to sit in on the interview was the target of the investigation, the very individual you suspected of wrongdoing? The questions you posed will be quite revealing to that individual. Even if the third-party participant is not the target of the investigation, what if he/she was a friend of the target? Would that person’s presence, even if he/she were ostensibly brought in to support the interviewee, affect the content of the answers provided?

Your ability to control the interview itself, and the information revealed during the course of the interview, would diminish further if a non-employee were allowed to sit in on the investigative interview. Whereas you can discipline a co-employee who breaches the confidentiality of the interview process, you have relatively little recourse against a non-employee observer to the interview. If that person disclosed the interview contents to others, what recourse would you really have? If he/she wrote an interesting article about the nature and content of the interview and posted it on the Internet, what would you be able to do? If that person shared critical data (perhaps just recounting questions you posed) to the target of the interview, what would your options be?

Similarly, the presence of an attorney at an investigative interview will complicate your life. What role will that individual play? Who is the attorney representing? Will he/she have an attorney-client relationship with the interviewee? If the two of them step out into the hall to discuss a question you posed, will you be able to ascertain what they discussed? If he/she instructs the person you are interviewing not to answer, what will you do? If objections are asserted to your inquiries on the basis of relevance, hearsay, foundation or other standard objections that might be asserted in a judicial proceeding, how will you respond? Will the presence of an attorney on behalf of the witness lead you to conclude that you need a lawyer present on behalf of the company? What requests, if any, will you make of the attorney with respect to the confidentiality of the interview process? Even if the attorney-witness pledged to maintain the confidentiality of the interview, how would you ever enforce that promise? If the lawyer later established an attorney-client relationship with the target of your investigation, how could you restrict the information shared with that individual? How would you ever discover what was disclosed? As these, and many other potential questions reveal, allowing an attorney to participate in an investigative interview as a witness for the interviewee potentially raises a variety of difficult problems.

In sum, with respect to the issue of witnesses at investigative interviews, different standards apply to union and non-union employees. Although a union employee may have the right to have a witness present at the investigative interview, that is not true for non-unionized employees. Moreover, there are a variety of compelling reasons why you should not allow interviewees to bring third-party witnesses with them to the investigative interview.

If you advise an interviewee that he/she may not be accompanied by another person during the investigative interview and the interviewee therefore refuses to participate, a different set of questions is raised. Since I've addressed some of these issues in a prior Blog analysis, I won't repeat them here. (If you're interested, simply scroll down on the "View By Topic" bar to the left and click on "Investigations.")

Recording Phone Calls, Quirky Question # 85

Wed, 04 Mar 2009 15:04:00 GMT

[Readers: Quirky Question # 85 was submitted to my colleagues in our Palo Alto office. The analysis was provided by Jennifer Prieb. If you have questions or comments, don't hesitate to contact Jennifer directly at prieb.jennifer@dorsey.com, or 650.843.2745. Jennifer, a 2004 graduate of Azusa Pacific University and a 2007 graduate of Santa Clara University School of Law, would be happy to address your inquiries. Regards, Roy]

Jennifer's Analysis of QQ # 85

While you may have good reason to worry about whether this employee is using your confidential information or improperly soliciting your employees, eavesdropping on telephone conversations to find out is very risky in all states, especially California. Although federal law provides limited exceptions that allow employers to monitor private telephone conversations, California law subjects employers to criminal and civil penalties for the same, even when the employer owns the communication system.

As information technology has expanded in the workplace, so too have legal and ethical privacy issues for employers. Monitoring the use of electronic equipment in the workplace can be tricky, and employers need to understand the strict federal and state laws that limit those actions. Generally, both federal and California laws prohibit eavesdropping through the monitoring or recording of confidential telephone conversations.

The Federal Electronic Communications Privacy Act

An employer who "provides" a telephone and/or voice-mail system may access those systems only under certain conditions. As a general rule, the Electronic Communications Privacy Act ("ECPA") prohibits intentional interception or disclosure of electronic communications. 18 U.S.C. § 2501, et seq.; 18 U.S.C. § 2701, et seq. Courts have found that eavesdropping or recording a conversation at the time of transmission constitutes "interception." United States v. Meriwether, 917 F.2d 955 (6th Cir. 1990); Fraser v. Nationwide Mutual Insurance Co., 135 F. Supp. 2d 623 at 634. On the other hand, mere retrieval of stored information, such as voice-mail, probably would not be considered a violation of the Act because the transmission has already ceased.

There are two key exceptions to the ECPA that allow employers to monitor their employees. First, an employee may either expressly or impliedly consent to an employer's monitoring. Federal courts are split on what constitutes implied consent, and they often examine the way a company sets out and enforces its policies. Although courts are usually reluctant to find implied consent, it has been found where the employee is informed of the well-known monitoring program and the policy is consistently enforced. If the policy is not clear that personal calls as well as business calls will be monitored, then consent may not be found.

The second ECPA exception to electronic monitoring allows employers to monitor an employee's telephone calls or voice-mail messages in the ordinary course of business. For example, if the communications are intercepted by employer telephones or related equipment for the purposes of customer service or training, the business use exception would likely apply. Even so, courts look to whether there is a reasonable business justification for the monitoring in each case, and have created somewhat varying standards when applying this exception.

The ECPA was designed for those employers who "provide" phone and/or voice-mail systems, and, thus, it does not apply to employers whose electronic systems are provided by an outside entity. Because you own your company's telephone system, your company may fall within the federal exceptions to telephone monitoring, so long as you set forth and consistently enforce clear policies, obtain the consent of your employees, and conduct the monitoring in the ordinary course of business. California law, however, is a very different matter.

California Privacy Act

In California, persons who eavesdrop or surreptitiously record workplace conversations are vulnerable to civil or criminal liability under the Privacy Act. Cal. Penal Code § 630, et seq. Unlike federal law, California does not provide a business use exception, but it does permit electronic monitoring of "confidential communications" with the consent of all parties.

The Privacy Act defines "confidential communication" as "any communication carried on in circumstances as may reasonably indicate that any party to the communication desires it to be confined to the parties thereto." Excluded from this definition is "a communication made in a public gathering . . . or in any other circumstance in which the parties to the communication may reasonably expect that the communication may be overheard or recorded."

In 2002, the California Supreme Court adopted a broad reading of the Privacy Act to resolve a split in the Courts of Appeal concerning the definition of "confidential communications." Flanagan v. Flanagan, 27 Cal.4th 766 (2002). The court held that the Privacy Act applies to "the actual conversation, not its contents," and distinguished between "simultaneous dissemination" of a conversation and the "secondhand repetition" of its contents. This means that eavesdropping is prohibited in California only if done while the message is in transit. As a result, the mere retrieval of stored voice-mail messages that have already been transmitted may limit an employer's exposure to criminal or civil liability.

Many employers choose to notify employees in advance, through a written policy within their employee handbook, that their activities may be monitored. Under any circumstances, an employer should warn all employees using its electronic communication systems that they should not expect their communications to be private. Some may even go so far as to indicate on outgoing voice messages that the caller's message may be monitored by the company. However, because California law requires the consent of both parties to a "confidential communication," eavesdropping or recording is prohibited if any party to the conversation expects it to be private. For this reason, while there are certainly steps you can take to protect your confidential information, especially if you have a written technology usage policy in place, recording or listening in on the employee's calls may be a perilous option.

"Long Term" Independent Contractors, Quirky Question # 86

Mon, 09 Mar 2009 10:36:00 GMT

Many years ago, I was at lunch with a client. We were generally discussing the client’s business and various challenges the client was confronting. Near the end of the lunch, the client observed, “We don’t pay our employees overtime. Is that a problem?” Not fully comprehending the comment that just had been made, I stated that the client did not need to pay its “exempt” employees overtime compensation, so it should not worry about that issue. The client corrected me and noted, “We don’t pay anyone overtime. We don’t believe that overtime is consistent with our company’s culture. We do, however, pay employees substantial bonuses based, in part, on how hard they work during the year.” I did my best not to choke on my food, to maintain my composure, and to calmly explain to the client that it did not have the right to opt out of a federal statute – the Fair Labor Standards Act (FLSA) – that had been in existence since the 1930s. Likewise, I advised the client that it was facing substantial exposure for unpaid overtime (OT) compensation, with the added risk that the base pay on which the OT compensation would be calculated likely would include the “bonuses” paid at year-end to compensate its “hard-working” employees.

As the phrase goes, “That was then, this is now.” The FLSA currently is the source of more employment litigation, and more potential exposure, than almost any other employment statute. Whereas a decade ago we were able to change the client’s policies, adopt a new compensation plan based on exempt and non-exempt employee status, and avoid litigation altogether, such an outcome would be extremely unlikely today. Plaintiffs’ counsel have figured out that the FLSA can work for them like a bank (without any toxic assets). Seven-, eight- and even nine-figure judgments and settlements are reported regularly based on a variety of claims ranging from misclassifying employees (exempt vs. non-exempt), failing to pay OT comp, failing to provide appropriate meal and rest breaks, failing to compensate employees for donning and doffing required safety gear, failing to compensate employees for travel time, etc.

So, in response to your question about whether you are confronting any risks, the answer is, “Most assuredly.” The key question implicit in the facts you describe is whether your “independent contractors” are truly “independent contractors” or whether they more realistically could (or should) be characterized as “employees.” This is the central issue on which your company’s potential liability is likely to turn. Unfortunately, there are no facts in your question that would enable me to offer many meaningful insights into your situation, other than your observation that many of your independent contractors have held that status for a protracted time period. Therefore, let me analyze your situation somewhat more generally.

The FLSA applies to employees. (Note, too, that many states have wage and hour statutes that also may present risks to your company; addressing those parallel state statutes is beyond the scope of my comments here.) The FLSA does not apply to independent contractors. Consequently, the determination of whether an individual working for your insurance company is an employee or an independent contract is the initial, fundamental inquiry.

The relatively recent case of Hopkins vs. Cornerstone America, et al., No. 07-10952 (5^th Cir. October 13, 2008), is an illustrative example of how courts may evaluate this issue. In Hopkins, 14 former “sales leaders” sued their employer for unpaid overtime compensation under the FLSA. The defendant insurance companies (a group of inter-related entities) argued that these individuals all were independent contractors not entitled to the protections and benefits of the FLSA. The trial court perceived the situation rather differently, granting the plaintiff group summary judgment on the issue of whether they were employees. In other words, even assuming all of the facts (and inferences from those facts) were as the defendants alleged, defendants still lost on this issue. The Fifth Circuit granted the defendants’ request for interlocutory appeal. Because the appellate court was reviewing a summary judgment motion, it evaluated the issue de novo, that is, without giving any deference to the decision of the court below.

The Fifth Circuit reached the same conclusion as the trial court. Despite the company’s characterization of the 14 sales leaders as “independent contractors,” the court found that for FLSA purposes they were “employees.”

The appellate court began its analysis by citing to a 1992 Supreme Court decision, Nationwide Mutual Ins. v. Darden, which emphasized the FLSA “stretches the meaning of ‘employee’ to cover some parties who would not qualify as such under a strict application of traditional agency law principles.” The Fifth Circuit then applied the “economic realities test” – whether the worker is economically dependent on the alleged employer or is instead in business for himself -- to determine whether these workers were independent contractors or employees.

Under the Fifth Circuit’s formulation of this test [other jurisdictions have somewhat different standards], the court is to evaluate five non-exhaustive factors: a) the degree of control exercised by the alleged employer; b) the extent of the relative investments of the worker and the alleged employer; c) the degree to which the worker’s opportunity for profit or loss is determined by the alleged employer; d) the skill and initiative required in performing the job; and e) the permanency of the relationship. As the court pointed out, no single factor is determinative.

Analyzing the relationship between the company and its 14 sales leaders on the basis of these criteria, the appellate court found that every factor supported the conclusion that these individuals were, in fact, employees, regardless of the label given them by defendants. For example, with respect to the issue of “control,” the court noted that the defendants had responsibility for hiring and firing all of the subordinate sales agents upon whom the sales leaders’ income was entirely dependent. The companies also handled the advertising and determined the prices of the insurance products. Perhaps even more significantly, the defendants prohibited the sales leaders from selling any other companies’ insurance products, controlled the number and sources of the sales leads, and determined the geographic territories in which the sales leaders could work.

With respect to the second criterion – investment – the court compared the resources invested by the companies with those invested by the sales leaders. The court of appeals found that the defendants’ investment vastly exceeded the individuals' investment, a factor that supported the determination of “employee” status.

The appellate court then looked at the third factor – who determined the worker’s opportunity for profit and loss. Given that the companies dictated the geographic territories, assigned the sales leads, prevented the workers from selling any other companies' insurance products, and hired and fired the subordinate agents upon whose production the sales leaders’ incomes depended, the court found this factor also supported the conclusion that these individuals were “employees.”

As to the skill sets possessed by the workers – the fourth factor – the Fifth Circuit found that the sales leaders did not have any particularly “unique” skills, instead possessing the skills common to any effective managers. Moreover, given the control exercised by the defendants, the sales leaders were precluded from exercising “true initiative” in their supposedly independent businesses. This variable also supported the determination that the sales leaders were employees.

Finally, the court looked at the “permanency” of the working relationships. Given that the sales leaders had been associated with the defendants for many years, the Court of Appeals also found that this factor supported the determination that the sales leaders were employees. The court was not persuaded by the defendants’ argument that the sales leaders were “at will” workers, free to terminate their association with defendants at any time for any reason. (Of course, although not referenced by the court, nearly all ‘employees’ are ‘at will’ as well.)

Based on its analysis of these five factors, as well as a few collateral considerations advanced by defendants, the Fifth Circuit found that the sales leaders were employees and were entitled to the protections of the FLSA. The case then was sent back to the District Court for further proceedings.

The Hopkins decision should provide you some insights into whether your company could convince a court that your independent contractors are, in fact, truly independent and not really employees. As suggested above, this determination could well have significant financial implications for your firm. Good luck.

Associational Discrimination, Quirky Question # 87

Tue, 17 Mar 2009 12:30:00 GMT

You have asked whether Title VII reaches claims brought by Caucasians who complain about the treatment of minorities at your company. Without more information, it would be difficult for me to provide you a definitive answer to your inquiry. Theoretically, however, it is possible for your Caucasian employees to assert a legitimate Title VII claim based on how the minority employees in your company are treated. As discussed below, however, this type of claim is unusual and not without significant limitations.

In the recent case of Barrett v. Whirlpool Corporation, No. 08-5307 (6^th Cir. February 23, 2009), the appellate court examined a number of these issues. The case was before the appellate court following the grant of summary judgment to defendant Whirlpool. The three plaintiffs (Barrett, Melton and Nickens) claimed that their employer discriminated and retaliated against them in violation of Title VII on the basis of their friendships with and advocacy for certain African American co-workers.

The claims brought by plaintiffs involved some very ugly conduct by the plaintiffs’ co-workers, including grossly racist conduct. Some of this conduct was reported by the plaintiffs to their supervisors, but the company’s response was inadequate.

As the Sixth Circuit pointed out, “Title VII forbids discrimination on the basis of association with or advocacy for a protected party.” The court emphasized that Title VII protects individuals who, though not members of the protected class, are “victims of discriminatory animus toward [protected] third persons with whom the individuals associate.” For example, the appellate court previously had held that a Caucasian parent discriminated against because he had a bi-racial daughter stated a legitimate claim under Title VII. Similarly, as I’ve addressed in a prior Blog analysis, discrimination based on an individual’s inter-racial marriage also is prohibited by Title VII.

In Barrett, the District Court had found that the plaintiffs’ associations with their African American co-workers fell short of providing Title VII protection because the plaintiffs provided no evidence that their friendships “constituted anything other than the casual, friendly relationships that commonly develop among co-workers but that tend to be limited to the workplace.” The appellate court, however, repudiated that formulation by the trial court. Instead, the Sixth Circuit adopted the analysis articulated by the Seventh Circuit that the degree of association is irrelevant – “the key inquiries should be whether the employee has been discriminated against and whether that discrimination was ‘because of’ the employee’s race.” (Relying on Drake v. 3M, 134 F.3d 878 (7^th Cir. 1998) (white employee may sue under Title VII based on discrimination resulting from his friendship with black co-workers). The appellate court also cited to other decisions involving parallel factual patterns, including inter-racial dating, inter-racial parent-child relationship, inter-racial marriage, friendship with protected class employees, association with Hispanic community, and casual social relationships with African-American non-employees. In all of these contexts, the relevant courts found that Title VII reached the conduct in question.

The Sixth Circuit adopted the reasoning of the Drake court: “If a plaintiff shows that 1) she was discriminated against at work, 2) because she associated with members of a protected class, then the degree of association is irrelevant.” The court noted that the absence of a relationship outside of work should not “immunize the conduct of harassers who target an employee because she associates with African-American co-workers.” While reaching this conclusion, the court observed that the closer the relationship (e.g., marriage or paramour) between the individual outside the protected group and the member of the protected class, the greater the likelihood the Caucasian employee will be able to demonstrate discriminatory treatment based on the relationship. But, as the appellate court emphasized, this issue “goes to the question of whether the plaintiff has established a hostile work environment, not whether he is eligible for the protections of Title VII in the first place.”

Just as the Sixth Circuit found that discrimination based on association is a viable Title VII claim, the appellate court also examined the issue of whether the plaintiffs had advanced a viable claim based on their advocacy on behalf of protected class members. “As with the question of association, the key questions are whether Plaintiffs were discriminated against, and whether the reason for the discrimination was their advocacy for protected employees.”

The appellate court also examined the issue of whether the plaintiffs were victims of retaliation. This legal theory also potentially applied to the claims of the plaintiffs.

In short, as the Barrett case illustrates, there are at least three potential claims that your employees could bring: a) associational discrimination claims; b) advocacy discrimination claims; and c) retaliation claims. The viability of those claims will depend on the nature of underlying conduct engaged in by your company’s employees and the nexus, if any, between the associations or advocacy of your Caucasian employees and the adverse treatment they experienced. Here, the typical issues arising in any harassment or discrimination case will predominate: the nature of the conduct; its severity and frequency; whether your company had knowledge of the discriminatory behaviors; the positions (managerial or non-managerial) of those who engaged in the wrongful conduct; the effectiveness of your company’s response when confronted with the behavior; whether the employees availed themselves of the mechanisms your company provides to address discriminatory conduct; etc.

Interestingly, when evaluating these types of issues in the Bennett case, the Sixth Circuit found that although the claims asserted by the plaintiffs were cognizable, only one of the three plaintiffs had presented sufficient evidence to overcome the summary judgment determination of the lower court. Whether you can achieve the same success will depend on the unique facts of your case.

Religious Discrimination -- Beards; Quirky Question # 88

Mon, 23 Mar 2009 11:45:00 GMT

You inquired whether you have to accommodate the requests of your employees who object your company’s policy that your male employees must be clean shaven. Although I would need a few additional facts to provide you a definitive answer, the simple response is that your company most likely does have to accommodate your employees’ desires to have beards. This is true even if allowing these employees to have beards conflicts with your policies regarding the appearance of your employees.

As you suggest in your question, your employees contend that your policies constitute religious discrimination. The first issue, therefore, is whether these employees have a “sincere religious belief that conflicts with a job requirement.” Occasionally, the “religious belief” issue is an analytical stretch for the employee. For example, one of the first Blog analyses I posted involved a female employee with various facial piercings that conflicted with her employer’s appearance policies. She attempted to justify her facial piercings on religious grounds, claiming she belonged to the "Church of Body Modification." The court did not buy it.

In most instances, however, employees raising claims of religious discrimination do have a sincere belief that conflicts with a specific job requirement. Since you have not described the religious beliefs of the employees involved, I will assume that their desires to have beards is actually linked to their religion.

The next question you will need to explore is whether your company can accommodate the employees’ religious beliefs without causing an “undue hardship” with regard to the conduct of your business. See 42 U.S.C. § 2000e(j). As you likely know, the concept of “reasonable accommodation” developed in the area of disability discrimination. Typically, with regard to disability discrimination, companies examine the economic impact of the requested accommodation on the business and other corollary issues. These cases are highly individualized, and like other areas of discrimination, depend on an analysis of the totality of the circumstances. How expensive is the accommodation? How many employees work at the facility where the accommodation is sought? What are the company’s revenues? What are the revenues of the facility where the employee is seeking the accommodation? Are there non-monetary considerations that bear upon the accommodation (e.g., would the requested accommodation require the company to modify its work schedule; how would other employees be affected; could the employee perform the essential functions of the job with the accommodation; are any safety issues implicated; etc.)?

These kinds of inquiries also come into play when a religious accommodation is sought. Would the accommodation cause an undue hardship for your company? For example, are there any safety issues that would be implicated by allowing employees to have beards? A recent case from the United States Court of Appeals for the D.C. Circuit, Potter v. District of Columbia, No. 07-7164 (March 6, 2009), involved just this context. In Potter, a group of D.C. firemen and emergency medical services (EMS) workers challenged on religious grounds the D.C. fire department’s proscriptions against beards. The principal factual issue of the case was whether beards impeded or interfered with the use of various different types of breathing apparatus the firemen needed to perform their jobs. A central question was whether a leak in the face mask, caused by a beard, could endanger the bearded fireman, his fellow firemen, and/or the citizens the firemen are trying to assist.

After both the City and the firemen filed cross-motions for summary judgment, the District Court granted summary judgment for the firemen and EMS workers. The trial court concluded that the City’s “clean-shaven policy” was not sufficiently narrowly tailored to satisfy the requirements of the statute on which the firefighters had grounded their claim, the Religious Freedom Restoration Act. That statute mandates that the government demonstrate that a policy that burdens religious freedom do so in the least restrictive manner to advance a compelling interest.

The U.S. Court of appeals affirmed the summary judgment decision in favor of the firemen. It appeared, however, that this decision was based, at least in part, on the flawed approach to the litigation taken by the City. Indeed, in a concurring opinion, one of the federal appellate judges commented that the City’s “muddled litigation strategy rendered summary judgment for the plaintiffs a legitimate outcome.” The concurring judge went on to characterize the situation as a “semi-natural experiment, in which the District of Columbia will fight calamities with some of its firefighters bearded, while other firefighting entities adhere to OSHA’s rule or its equivalent.”

Nevertheless, as the Potter case illustrates, it is important for employers, whether governmental or private employers, to evaluate whether the policies adopted that infringe on religious freedoms are the least restrictive policies that could be adopted in light of the compelling interest the employer seeks to advance.

Moreover, as some cases illustrate, there are times when the issues of disability discrimination and religious discrimination may intersect. If, for example, the employer has accommodated an employee for disability reasons, that accommodation may also affect whether the same accommodation must be offered to accommodate religious beliefs. By way of illustration, in Fraternal Order of Police Newark Lodge No. 12 v. City of Newark, 170 F.3d 359 (3d Cir. 1999), the appellate court held that the government cannot discriminate between conduct that is secularly motivated and religiously motivated. The Newark police department prohibited police officers from growing beards but granted medical exceptions for beards as required by the ADA. Two Muslim police officers filed suit, contending that their First Amendment rights were infringed by the no-beards policy. The Third Circuit agreed, holding that the police department must create a religious exemption to its no beards policy to parallel its secular exemption, unless the department could make a substantial showing as to the hypothetical negative effects of a religious exemption.

A final observation with respect to the “undue hardship” concept. As some courts have observed, establishing an “undue hardship” in the context of a religious accommodation request is “not a difficult threshold to pass.” When assessing claims of whether an undue hardship is likely to be caused by a religious accommodation, courts seem more willing than in the parallel disability accommodation context to look beyond mere economic considerations.

In sum, the first issue is whether the accommodation sought relates to a sincerely held religious belief. The next issue is what important interest the policy is designed to advance. Assuming that there are both legitimate religious beliefs and legitimate corporate interests at stake (e.g., safety considerations), the courts have to evaluate whether the policies are the least restrictive policies designed to advance the corporate interest. Lastly, the courts evaluate whether the requested accommodation would cause the employer an undue hardship. Even if sincere religious beliefs are at issue, an accommodation that causes the employer an undue hardship is likely to be rejected. But, absent some serious safety issues (e.g., your employees work with air-borne pathogens and need tight fitting masks), it may be difficult to advance a persuasive argument that accommodating someone who wants to have a beard for religious reasons would cause your company an undue hardship.

Guest Article & Analysis

Sat, 28 Mar 2009 11:14:00 GMT

It Ain’t Over Til It’s Over, or How to Convert a Successful Mediation to a Done Deal

By: Joan S. Morrow, Attorney and Mediator

You and your client settle a case at mediation. Great! But, alas, the end of the mediation marks the beginning of weeks or sometimes even months of protracted negotiations over the language of the settlement agreement or, worse yet, over issues that were never discussed or were inadequately clarified at the mediation. Generally, these negotiations will be with the other side; worse is when the negotiations are between you and your client. As the days and weeks pass without a final settlement document, your client is increasingly unhappy with you. This unhappiness sometimes stems from the fact your “meter” is still running; at the very least, it’s a consequence of the fact that the client has not attained the closure and finality that they thought they’d achieved at mediation.

Some Solutions:

1. Well in advance of the mediation, get a clear understanding from your client of what non-monetary terms should be part of a resolution. This especially applies to cases involving issues beyond dollars. Don’t assume that your client will have all these items in mind; in some cases, you will need to really quiz your client to make them think through what a final settlement should look like. If there is to be an ongoing business relationship post-settlement or settlement terms requiring future action, your complete fluency with what will be required is imperative.

2. As soon as you have an understanding with your client, you need to communicate it to the other side. Unless there are strategic reasons not to do so this should be done before mediation. There are several ways this can be done:

a) Prepare a draft settlement agreement incorporating all desired terms. If you’re worried that this gesture may be misinterpreted as an excessive desire to settle, state it’s being done to alert your opponent to issues of concern and to save time at the mediation session.

b) Make a settlement demand, specifying all desired terms. If you’re on the defense side, such that a “demand” may not seem in order, send a letter identifying the terms that will be important to your client if a resolution is reached.

c) If a pre-mediation demand or draft settlement agreement is impractical because the structure of the deal will need to evolve at the mediation, prepare draft language for important terms on separate sheets of paper so they can be shared at
the mediation, as appropriate.

3. At the mediation session, don’t just focus on dollars; negotiate all terms as you make your way through the negotiation. Quite frequently, parties and counsel who are pessimistic about the prospects for settlement will say, “Let’s see if we have any chance of getting close on the money…THEN we’ll worry about the other terms. This strategy often leads to several unintended and certainly undesirable consequences:

a) The parties miss the opportunity to achieve positive momentum from the small successes that come from agreement on some non-monetary terms or those of secondary importance. More important, some of those non-monetary terms have more value to the other side than you may appreciate; your early agreement to them may make it easier to get closer on dollars.

b) The 11^th hour revelation of important, non-monetary terms makes their negotiation more difficult because parties may be more tired, more frustrated and less clear in their thinking due to the tug and pull of the negotiations. Sometimes, a party may feel “sandbagged” by having made substantial monetary movement, only to discover that the parties remain very far apart on non-monetary terms and that significant leverage has been lost by the status of the monetary negotiations.

4. Recognize that almost every term needs to be negotiated, not merely assumed. This seems obvious, but I have often seen that the following terms are not articulated at mediation; when they show up for the first time in a draft Settlement Agreement, they invariably produce consternation and sometimes non-agreement:

a) Mutuality of terms, like releases, confidentiality and non-disparagement agreements.

b) Scope of releases.

c) Liquidated damages or shifting attorneys’ fees provisions and the circumstances for their operation in the event of a breach of the Settlement Agreement.

d) Characterization of the settlement proceeds or the allocation between fees and proceeds that should appear in the Settlement Agreement, as well as any indemnification terms.

e) In employment cases, plaintiff’s agreement not to reapply.

f) Mandatory ADR (mediation or arbitration) to deal with post-settlement issues or alleged breaches of the Settlement Agreement.

g) Specific scope and terms of non-disparagement agreements or non-competition agreements.

h) Specific language of negotiated statements or scripts, joint press releases or letters of recommendation.

i) Confidentiality, specifically what is to be kept confidential (e.g., terms of settlement, allegations or facts of claim, fact of settlement, etc.), who is covered and who is excepted.

j) In summary, in some negotiations, almost everything needs to be specified and not assumed, other than severability, non-admission of liability and, generally but not always, choice of law terms.

5. Learn to identify cases with complicated issues or parties with significant emotion which may benefit from two mediation sessions rather than a one-day marathon. Identifying the proper mediation structure for a particular case is an important skill for both professional mediators and advocates in mediation; ‘Rome wasn’t built in a day’, and some settlements aren’t either. In many cases, the process and the parties will benefit from a 1-1/2 or 2-day mediation with sessions of reasonable length. This format gives parties time to express and get past their feelings about the case and move on to the settlement issues. In some other cases, it gives the parties time to reflect on the deal crafted thus far and to refine their thinking, so as to arrive at a better, more comprehensive settlement.

Multiple sessions of sensible length do not add to the expense of mediation. For example, a mediation that lasts from 8:30 a.m. to 6:30 p.m. on Day I and then from 8:30 a.m. to 2:00 p.m. on Day II is not much different in cost from a mediation starting at 8:30 a.m. and running to midnight; in fact, the former structure is likely to be more cost-effective and successful because the parties will be less fatigued and likely to make better and quicker decisions. What is important in multiple session mediations is shaping the parties’ expectations for reasonable stopping times and identifying good points in the negotiation for breaks.

6. If you have not come to the mediation armed with a draft Settlement Agreement, use the ‘dead’ time during mediation, when you’re waiting for a response from the opposing party or when the mediator is otherwise occupied, to begin to draft detailed settlement terms that can be shared with the opposing side during the mediation itself. Rather than crafting an agreement in its entirety, look at those terms that are complicated and which will need precise articulation. Involve your client in the drafting and make an exchange of language part of your negotiation at the mediation.

a) If you arrive at a settlement and, again, if you have no draft Settlement Agreement or collection of term sheets as I have suggested above, then prepare a detailed, handwritten outline of terms, which sets forth the key points of agreement and which is signed by the parties. If it’s already late in the day, if both fatigue and frustration are setting in and if the deal struck is complex, it’s sometimes wise to do a very short list of terms and then to schedule a several hour session either for the next day or the very near future, either for the parties to meet in person or to have all necessary persons accessible by conference call to conclude these matters. Again, this may sound to some like additional or unnecessary expense, but as anyone who has been involved in protracted post-settlement negotiations can attest, a more streamlined process is cost efficient.

Conclusion

What all this advice adds up to is more of the First Commandment for Lawyers at Mediation: Thou Shalt Be Prepared. Far too often, even counsel who are prepared for the mediation process and who are armed with a negotiation strategy have not found the time or taken the trouble to develop a closure strategy. Practice some of the steps outlined above and you are guaranteed to get better settlements, faster closure and to have happier clients.

Overtime Compensation and "Exempt" Employees, Quirky Question # 89

Wed, 08 Apr 2009 10:43:00 GMT

[Readers: Set forth below is my California colleague's analysis of Quirky Question # 89, which addresses the issue of how out-of-state employees who occasionally work in California for a California-based employer should be treated with respect to overtime compensation and employee classification (exempt or non-exempt). As you read the analysis, you may reach the exasperating conclusion, "Only in California!"

The analysis below was prepared by Edward Raskin. Ed is a 2002 graduate of the University of California, Irvine, and a 2006 graduate of the University of California, Berkley, School of Law. Ed practices in Dorsey's Irvine, CA office. If you have any questions or comments about the analysis below, Ed can be reached at 949.932.3602 or via email at raskin.edward@dorsey.com. Additional information regarding Ed and his practice is available at: http://www.dorsey.com/raskin_edward/. Regards, Roy]

Ed's Analysis of QQ # 89

It has become commonplace for employees who work in one state to occasionally perform work in another state. While this practice is commonplace, unfortunately the law surrounding this practice is very much up in the air, especially for workers who work occasionally in California.

You inquired about how Arizona employees, working periodically in CA, should be treated, both with respect to overtime compensation. As you recognize in your question, this issue also may be affected by how these employees are classified, i.e., whether they are exempt or non-exempt employees. Of course, the situation is complicated further if an employee classified as "exempt" under one state's statutory scheme would be classified as "non-exempt" under CA law.

This factual context was recently explored by the Ninth Circuit in Sullivan vs. Oracle. In Sullivan, the Ninth Circuit Court of Appeals applied California’s Labor Code to out-of-state employees temporarily working in California for an in-state based company. On February 17, 2009, about three months after first deciding the case and after Oracle filed petitions for rehearing and en banc rehearing, the Ninth Circuit withdrew its opinion. At that point, the three-judge panel asked the California Supreme Court to ultimately decide the following issues raised in Sullivan:

1. Does the California Labor Code apply to overtime work performed in California for a California-based employer by out-of-state plaintiffs in the circumstances of this case, such that overtime pay is required for work in excess of eight hours per day or in excess of forty hours per week?

2. Does Business & Professions Code § 17200 apply to the overtime work described in question one?

3. Does § 17200 apply to overtime work performed outside California for a California-based employer by out-of-state employees in the circumstances of this case if the employer failed to comply with the overtime provisions of the Fair Labor Standards Act?

It is unclear whether the Ninth Circuit opinion will be reinstated if the Supreme Court declines to accept these certified questions. Of course, it is equally unclear whether, if it accepts the certified questions, the California Supreme Court will analyze these issues in a manner consistent with the Ninth Circuit's now-withdrawn interpretation.

While Sullivan has been withdrawn, the circumstances involved in that case, which are similar to the facts you present, may provide us some guidance in how future courts may approach this situation. In Sullivan three putative class representatives were out of state residents (2 from Colorado and 1 from Arizona) who occasionally — anywhere from 5 to 30 days a year — traveled to Oracle’s home state of California to train Oracle customers on its software. Oracle classified these employees as exempt until 2003, when it changed their status to non-exempt and began paying them overtime.

Plaintiffs filed suit, alleging three distinct claims. The first claim sought to recover unpaid overtime pursuant to California’s Labor Code for work performed in California by non-residents who worked complete days in California from 2001 to 2004. Plaintiffs’ second claim under the California’s Unfair Competition Law (“UCL”) asserted that the violations of the Labor Code also violated the UCL. Finally, in their third claim Plaintiffs argued that Oracle’s overtime pay violations for work performed in the United States, but not in California, also breached the UCL.

Oracle moved for summary judgment on all three claims. It argued that California law should not apply to out-of-state employees. Rather, Oracle contended that Colorado overtime law should apply to the two Colorado residents and that the overtime provisions of the Fair Labor Standards Act (“FLSA”) should apply to the Arizona resident, since Arizona lacks its own state-specific overtime law.

The District Court granted Oracle’s motion for summary judgment on all three claims. Specifically, the court granted summary judgment on the first claim on grounds that the relevant provisions of California law did not apply to non-residents who work primarily in states other than California. Since the second claim under the UCL was based on an underlying Labor Code violation, the court also granted summary judgment in favor of Oracle. Finally, the district court granted summary judgment on the third claim on the grounds that the UCL does not apply to work performed outside of California in violation of the FLSA.

On appeal, the Ninth Circuit affirmed the district court’s decision as to the UCL claim for work performed outside of California, but reversed as to the claims under the California Labor Code and related claim under the UCL. Had the Ninth Circuit not withdrawn its opinion, the question you posed would have rather a straightforward response: yes, you must apply California law to both your Arizona employees for all work they perform for your company in California. Since, Sullivan's future is currently unclear, however, employers in your position are left in a lurch.

Until the California Supreme Court decides this issue, cautious employers may wish to follow the Ninth Circuit’s guidance as set forth in Sullivan, absent other controlling authority. Therefore, it would be prudent to apply California law to your Company’s two Arizona-based employees to provide maximum risk protection.

However, this can become complicated. Your Company apparently has classified both employees as exempt under the computer professional exemption. Since Arizona does not have state-based labor laws, I will assume the exemption analysis was previously done under the applicable Federal law found at Section 13(a)(1) of the FLSA. California, however, has its own slightly different version of the computer professional exemption, including a much higher minimum pay requirement. Specifically, the California computer professional exemption is found at Labor Code 515.5 with sets forth the duties and minimum pay requirements for an employee to meet the exemption.

Because I do not know exactly what duties the two Arizona-based employees engage in on a day-to-day basis, I will assume that they meet the duties test of both Labor Code 515.5 and Section 13(a)(1) of the FLSA. Therefore, the next question is whether the two employees meet the minimum pay requirements under California law. Each year the Department of Labor Standards Enforcement sets the level of minimum pay based on the consumer price index. In 2008 the minimum salary was $75,000 per year. However, effective January 1, 2009, the minimum salary was raised to $79,050 per year.

As a result, the first Arizona employee making $60,000 per year would be ineligible for the California exemption regardless of whether or not the employee performs duties that are classified as exempt and overtime pay would be due under Sullivan. The second employee, making $77,000 per year, would be eligible for the California exemption for work performed in 2008 (provided he was performing exempt duties) because his salary exceeded the $75,000 minimum. For work performed in 2009, however, this employee would not meet the California exemption regardless of the nature of the duties he was performing, because he does not meet the salary threshold.

The underlying caveat to all of this is that Sullivan is no longer good law, so there is a reasonable argument that Arizona employees should not be treated the same as California employees for the few days they happen to work in California. Nevertheless, until the California Supreme Court decides this issue, employers wanting to be exceedingly cautious can apply the Sullivan framework discussed above.

Enforcing Arbitration Agreements, Quirky Question # 90

Mon, 13 Apr 2009 14:04:00 GMT

As the very recent U.S. Supreme Court decision in the 14 Penn Plaza case illustrates, courts will enforce employment arbitration agreements. (See Doug Christensen’s analysis of this decision, posted Monday, April 20, 2009.) In 14 Penn Plaza, the nation’s high court enforced an arbitration agreement set forth in a collective bargaining agreement, requiring employees to arbitrate employment discrimination claims. Many other courts have enforced arbitration agreements in a variety of different types of employment agreements.

The question you pose is whether an arbitration agreement contained in your Employee Handbook is enforceable. Complicating the matter somewhat is that your Handbook is available electronically on-line rather than in hard copy. Moreover, as you noted, your company does not have the capability to track who accesses your Handbook on-line and who does not. As a consequence, you don’t really know which of your employees has reviewed your Handbook. For that matter, you don’t even know which of your employees knows your company’s Handbook contains an arbitration provision.

Given that arbitration agreements are contracts, and subject to standard contract analysis (offer, acceptance, consideration), the factual context you describe may be problematic. A fundamental question is whether, in the context you described, there has been a meeting of the minds with respect to the agreement to arbitrate. As I’m sure you can appreciate, an employee who did not ever review your Employee Handbook on line, or who may even have reviewed the document but not indicated his/her assent to its provisions, may be able to advance a persuasive argument that he/she did not agree to arbitrate any of his/her employment claims.

Similar issues arose in the recent case of Kirleis v. Dickie, McCamey & Chilcote, P.C., No. 07-3504 (3^rd Cir. March 24, 2009). In Kirleis, a partner in a law firm challenged her firm’s mandatory arbitration policy. When Kirleis filed complaints against her firm for sex discrimination, retaliation and hostile work environment under federal and state law, the law firm moved to compel arbitration pursuant to the firm’s By-Laws. The firm’s By-Laws were set forth on-line. Kirleis, however, challenged the legitimacy of the By-Laws’ arbitration provision, arguing that she: a) had never been provided with a copy of the firm’s By-Laws; b) was never informed the By-Laws contained an arbitration provision; c) never signed any agreement or other document referring to or incorporating the arbitration provision; and d) never agreed to arbitrate her claims.

The appellate court emphasized that the determination of whether the parties agreed to arbitrate turns on “ordinary state-law principles that govern the formation of contracts.” Thus, before compelling arbitration pursuant to the Federal Arbitration Act, the court had to determine whether a “valid agreement to arbitrate exists,” and whether the “particular dispute falls within the scope of that agreement.” The Third Circuit then assessed the state-law principles governing the formation of contracts – “(1) a mutual manifestation of an intention to be bound; (2) terms sufficiently definite to be enforced; and (3) consideration.” The Court noted that under Pennsylvania law, arbitration agreements must be sufficiently specific to cover the employee’s claims and the employee must have “expressly agreed” to abide by the arbitration agreement.

Relying on earlier Pennsylvania decisions, one involving an arbitration agreement contained in an employee handbook that an employee had not received, the federal Court of Appeals concluded that Kirleis’s claims were not subject to arbitration. First, the Court found that because Kirleis had not received a copy of the law firm’s By-Laws, she could not have agreed to arbitrate her claims. Second, the Court observed that even had the By-Laws been provided to her, “a mere offer is insufficient to create a triable issue as to the existence of a contract to arbitrate.” Because Kirleis had presented evidence that she did not agree to arbitrate her claims, the court was unwilling to compel arbitration.

The defendant law firm argued that Kirleis, as a shareholder/director of the firm, was on “constructive notice of the arbitration provision set forth in the By-Laws” and her “implied intent” to be bound thereby. The appellate court recognized the “tension” between the law of contract and corporate law principles, but concluded that the contract law requirements predominated. Finding that under Pennsylvania law, “explicit agreement is essential to the formation of an enforceable arbitration contract,” the notion that Kirleis “impliedly agreed to arbitrate “must fail.”

The principles of the Kirleis decision and other arbitration cases illustrate the problems your company may confront in trying to enforce the arbitration agreement set forth in your on-line Employee Handbook. It would appear from the facts you presented that your company has not distributed the Handbook in hard-copy form. Moreover, it is unclear whether all employees have access to your Handbook on-line. (Does every employee have a company-issued computer? For those employees not issued a computer, are they provided access to computer terminals on a regular basis? During orientation or other training programs, are your employees advised that they should review your company’s handbook on-line? When your company adopts handbook changes, are employees notified that they should review the changes that have been made?) Given the fact that it’s unclear which of your employees have been provided access to your company’s handbook, and that you cannot monitor which of your employees accesses your on-line information, you also would be unable to rebut any contention that the particular employee who has filed suit might make regarding the absence of knowledge.

As the Kirleis case illustrates, even if you could establish that the employee had seen your Employee Handbook on-line, your company still would confront some additional issues. First, you also would need to establish that the employee knew of the arbitration provision. Second, you would need to establish that the employee assented to arbitrate his claims. And, third, you would need to establish that there was consideration to support the agreement to arbitrate. If the arbitration agreement was in place when the employee joined your Company, and the other elements of contract formation are satisfied, the consideration question should not present a problem. But, if the arbitration requirement was put in place after the employee already had commenced employment with your company, the question of whether there was consideration sufficient to support the agreement may be more difficult to establish.

Bottom line, you may have some problems trying to enforce the arbitration provision in this situation. Rather than risk an adverse judicial determination holding that the arbitration agreement is not enforceable, it may be more prudent for your Company to take appropriate steps to ensure that the arbitration provision is enforceable in the future.

14 Penn Plaza: US Supreme Court Decision

Mon, 20 Apr 2009 09:39:00 GMT

U.S. Supreme Court Enforces Agreement Compelling Unionized Employees to Arbitrate Discrimination Claims

By Douglas R. Christensen

On April 1, 2009, an ideologically divided United States Supreme Court resolved a long-standing controversy regarding the arbitration of discrimination claims of union-represented employees. The Court’s decision in 14 Penn Plaza v. Byett resolved a split and an issue of confusion among lower courts, and the Court clarified and synchronized two of its earlier decisions concerning arbitration in the employment arena. The question presented by 14 Penn Plaza was whether a provision in a collective bargaining agreement that clearly and unmistakably required union members to arbitrate claims arising under the Age Discrimination in Employment Act was enforceable. The Supreme Court, in a 5-4 opinion written by Justice Thomas, held that “a collective bargaining agreement that clearly and unmistakably requires a union member to arbitrate ADEA claims is enforceable as a matter of federal law.” The decision may have a number of important practical implications for employers with unionized workforces.

1. Factual Background

The employees in 14 Penn Plaza were employed as night lobby watchmen and were members of the Service Employees International Union which, pursuant to the National Labor Relations Act, had the exclusive authority to bargain for their “rates of pay, wages, hours of employment, and other conditions of employment.” The employees were subject to a collective bargaining agreement which cited a number of federal, state, and local anti-discrimination laws, including the ADEA, and which provided that “[a]ll such claims” were subject to arbitration under the collective bargaining agreement “as the sole and exclusive remedy for violations,” and further provided that “[a]rbitrators shall apply appropriate law in rendering decisions based upon claims of discrimination.”

Several of the night watchmen were reassigned to less remunerative night porter and cleaner positions. The union filed grievances over the reassignment, contending, among other things, that the reassignments violated the labor agreement’s ban on age discrimination. The union requested that all of the claims raised in the grievances be arbitrated, but later withdrew the age discrimination claims from arbitration, while continuing to arbitrate the remaining claims. The night watchmen then filed a charge of discrimination with the Equal Employment Opportunity Commission, and, after the EEOC issued a right to sue notice, commenced litigation against 14 Penn Plaza. 14 Penn Plaza brought a motion to compel arbitration which was denied by the district court and the Second Circuit Court of Appeals.

2. The Supreme Court’s Decision and Reasoning

The Supreme Court majority based its decision in 14 Penn Plaza on an examination of the ADEA and the NLRA. The Court held that the provision of the collective bargaining agreement requiring arbitration of discrimination claims was a “condition of employment” that was subject to mandatory bargaining under the NLRA. From there the Court found that the NLRA requires that courts respect contractual bargains between employers and unions, “unless the ADEA removes this particular class of grievances from the NLRA’s broad sweep.” Finding no such language in the ADEA, the Supreme Court concluded that the collective bargaining agreement’s arbitration clause required arbitration of the unionized employees’ ADEA claims.

The Supreme Court acknowledged tension between two of its earlier arbitration-related decisions. In Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991), the Court held that an individual employee could be compelled to arbitrate age discrimination claims, but it appeared as if a union was prohibited under Alexander v. Gardner-Denver Co., 415 U.S. 36 (1974), from agreeing in a collective bargaining agreement to arbitrate the age discrimination claims of its members. Justice Thomas stressed that Gardner-Denver and its progeny “have narrow holdings” and are of “narrow scope,” and stated that broad dicta in those cases “rested on a misconceived view of arbitration that this Court has since abandoned.” The Court’s decision in 14 Penn Plaza greatly narrowed (and may have effectively overruled) its decision in Gardner-Denver.

The 14 Penn Plaza majority praised the benefits of arbitration and stated that “[n]othing in the law suggests a distinction between the status of arbitration agreements signed by an individual employee and those agreed to by a union representative.” The Court stated that, “[a]s in any contractual negotiation, a union may agree to the inclusion of an arbitration provision in a collective bargaining agreement in return for other concessions from the employers. Courts generally may not interfere with this bargained-for exchange.” The Court held that it had no legal basis to strike down the collective bargaining agreement’s arbitration clause because it was “freely negotiated” and “clearly and unmistakably” required the employees to arbitrate the age discrimination claims at issue. The Court also held that an agreement to arbitrate ADEA claims is not a waiver of a substantive right, as that term is used in the ADEA, but merely shifts the forum for the resolution of ADEA claims from a court to an arbitrator. Thus, the night watchmen were required to arbitrate their ADEA claims and could not pursue those claims in court.

As Justice Souter’s dissent noted, the 14 Penn Plaza decision “explicitly reserves the question of whether a collective bargaining agreement’s waiver of a judicial forum is enforceable when a union controls access to and presentation of employee claims in arbitration,” as is often the case. The majority stated that a union’s duty of fair representation to its members and the judicial review available under the Federal Arbitration Act are effective protection against unfair or discriminatory actions by a union in pursuing grievances for alleged discrimination by an employer.

3. Observations, Ramifications, and Considerations

While the majority opinion focuses on ADEA claims, it strongly suggests that its holding will apply to other statutory claims of discrimination, including Title VII claims. It should also apply to state law discrimination claims, and there is a strong argument that any state law attempts to preclude such collective bargaining agreements are preempted by federal labor law.

The Court’s decision leaves to the lower courts the job of determining whether or not a collective bargaining agreement’s arbitration agreement clearly and unmistakably covers statutory claims.Since most state and federal courts have held that various state and federal anti-discrimination statutes do not expressly prevent employees from arbitrating discrimination claims, those employers who already have a collective bargaining agreement provision that clearly and unmistakably provides for the arbitration of discrimination claims should be able to insist that those claims be arbitrated, unless the statute at issue expressly prohibits arbitration.

However, it is likely that only a few existing collective bargaining agreements will meet the 14 Penn Plaza standard. Employers with broader, more generalized arbitration provisions in collective bargaining agreements will have a hard time convincing federal or state courts that unionized employees are required to arbitrate their discrimination claims. But, when collective bargaining agreements containing arbitration provisions are up for renewal, they can be renegotiated to provide for the arbitration of discrimination claims by union members.

A union may or may not decide that it is beneficial to it to arbitrate its members’ discrimination claims. Employers should consider whether it will benefit them to require unionized employees to arbitrate their discrimination claims rather than pursue them in court: for some employers, this may be the right result, but others might correctly decide that it is not. Compulsory arbitration is, for a variety of complicated reasons, not always the best way to resolve discrimination claims. Employers should consult with labor counsel to discuss the pros and cons of compulsory arbitration versus litigation, and, if they choose to go the arbitration route, to assist them in crafting clear and unmistakable language that will pass muster under 14 Penn Plaza.

Finally, a caveat – it is unclear how broad an impact the 14 Penn Plaza decision may ultimately have because of a bill recently introduced in Congress. The Court in 14 Penn Plaza acknowledged that Congress has the power to identify claims that may not be subject to mandatory arbitration. A bill introduced in February 2009, the Arbitration Fairness Act of 2009, would, if passed, make compulsory arbitration provisions in employment agreements unenforceable. The bill does not currently apply to arbitration provisions in collective bargaining agreements, but the 14 Penn Plaza decision might inspire attempts to modify the bill to legislatively overrule the decision. For the time being, clear and unmistakable collective bargaining agreement provisions between an employer and a union to arbitrate employees’ discrimination claims are enforceable, but employers are advised to monitor legislative developments.

Changes to Nation's Employment Laws

Fri, 24 Apr 2009 10:52:00 GMT

Holly's, Zeb's and Ambrea's Analysis of Changes to the Nation's Employment Laws

The advent of the Obama Administration is likely to result (and already has resulted) in sweeping changes to federal labor and employment laws and, accordingly, the relationship between employers and their employees. As we approach the 100th day of the new Administration, we have compiled a user-friendly summary guide to several key pieces of labor and employment legislation that are either pending before or likely to be revisited by the 111th Congress. Among other things, these laws underscore the Obama Administration's stated commitments to strengthening anti-discrimination protections, repositioning the work/family balance, and reinvigorating unions. We will continue to monitor these and other legislative developments and will issue updates to ensure our clients stay ahead of the curve on impending changes.

A. Strengthening Anti-Discrimination Protections

Lilly Ledbetter Fair Pay Act of 2009

• Essentially strips the statute of limitations with respect to compensation discrimination cases under Title VII, the Rehabilitation Act, the ADA, and the ADEA.

• Restarts the clock for an employee to file a claim with the EEOC every time an employee receives a paycheck “affected” by a discriminatory compensation decision, regardless of when it occurred.

• Employee must still file an administrative charge within 180/300 day window.

• Limits back-pay to two years prior to charge.

Signed into law in January 2009; retroactive to May 28, 2007.

Paycheck Fairness Act

• Would amend the FLSA “to provide more effective remedies to victims of discrimination in the payment of wages on the basis of sex.”

• In effect, would require employers trying to rebut presumption of pay discrimination to establish that the factor responsible for the pay differential: “(i) is not based upon or derived from a sex-based differential in compensation; (ii) is job-related with respect to the position in question; and (iii) is consistent with business necessity.”

• The employee would still prevail if they show that there is an “alternative employment practice” that would serve the same purpose without producing the pay differential.

• Would change class certification scheme for pay-discrimination claims from opt-in (FLSA) to opt-out (Rule 23).

Passed the House in January 2009; was received in the Senate in January 2009, but has not gone to a vote.

Employment Non-Discrimination Act

• Would provide federal protection (akin to protection afforded persons based on gender, race, religion, age, etc.) to persons because of their sexual orientation, gender identity, or both.

Inactive; reintroduction in the 111th Congress is anticipated.

Equal Remedies Act

• Would remove the current caps on punitive damages under Title VII and the ADA.

Inactive; reintroduction in the 111th Congress is anticipated.

B. Repositioning Work/Family Balance

Working Families Flexibility Act

• Would give employees the right to request flexible work options, including the number of hours the employee is required to work; the time the employee is required to work; and the location of the work.

• Within 14 days after employee requests change, employer would be required to meet with employee and then produce/deliver a written decision within 14 days after meeting.

• Employer’s decision must identify cost of change, overall financial resources involved, effect of change on employer’s business, etc.

• Upon denial, employee could request reconsideration, and employer would have to meet again and issue a final decision in writing, stating the grounds for denial. An employee could then file a complaint with the DOL.

• Penalties and damages would be available for infractions.

Reintroduced March 3, 2009; pending.

FMLA (possible expansions)

• Would allow employees to take leave to address effects of domestic violence; would provide employees up to 24 hours of unpaid leave per year to attend school activities or to take family members to doctor for regular medical or dental appointments.

• Another bill would require a Family Leave Insurance Program, into which employees and employers would pay shared premiums in order to fund paid FMLA leave for workers.

Introduced in 2007 and again in 2008; reintroduction in the 111th Congress is anticipated.

Healthy Families Act

• In its current form, would require that employers provide 7 paid sick days to any employee who works more than 30 hours a week, with a prorated annual amount for employees working less than 30 hours; accrued sick leave could carry over from year to year.

Introduced in 2005 and again in 2007 with then-Senator Obama as a co-sponsor; reintroduction in the 111^thCongress is anticipated.

Family-Friendly Workplace Act

• Would amend the FLSA to allow private-sector employers to offer employees the option of receiving “comp time” PTO, rather than overtime premium payments, at a rate of 1.5 hours of PTO per “overtime” hour worked. Employees would have to consent to the swap in writing.

• To be eligible, employees must have worked at least 1,000 hours in the prior 12 months; the maximum accrual is 160 hours of “comp time”; employers would have to pay out by January 31 of a given year all “comp time” not used in the prior year; and all “comp time” would have to be paid out at termination.

Introduced February 10, 2009; pending.

C. Reinvigorating Unions

Employee Free Choice Act (EFCA)

• In its current form, would be the most sweeping revision to national labor law in over 50 years.

• Would allow unionization of a group of employees upon the union gathering signed cards from more than 50% of the members of that group, without the benefit of a secret ballot election; would require employers to submit to binding arbitration if they could not reach a first contract with the new union after 90 days of bargaining and 30 days of mediation (and such contract would be binding for 2 years); and would impose new, increased penalties for unfair labor practices.

Introduced in 2003 and again in 2007 with then-Senator Obama as a co-sponsor; reintroduced in both the House and Senate on March 10, 2009.

Secret Ballot Protection Act

• This is the antithesis to EFCA and was, in fact, introduced before EFCA. It would require a secret ballot election and would preclude voluntary recognition of a union by an employer (something that is allowed currently).

Introduced February 25, 2009; pending.

Re-Empowerment of Skilled and Professional Employees and Construction Tradeworkers (RESPECT) Act

• Would narrow the 60-year-old definition of “supervisor” under the NLRA to eliminate “assign” and “responsibility to direct” from that definition. Doing so would move thousands of front line and low-level supervisors within the protection of the NLRA and allow them to be forcibly included in unionized bargaining units.

Introduced in 2007; reintroduction in the 111th Congress is anticipated.

D. Executive Orders

Economy in Government Contracting

• Denies federal contractors reimbursement for funds spent on activities designed to persuade employees not to join a union.

Effective January 30, 2009.

Notification of Employee Rights Under Federal Labor Laws

• Requires federal contracts (except purchases under $100,000) to require contractors to post a notice informing employees that they have a right to decide whether to join a union.

Effective January 30, 2009.

Non-Displacement of Qualified Workers Under Service Contracts

• Requires all federal contracts (in excess of $100,000) to include a provision requiring any contractor who assumes the contract from a previous contractor to retain that previous contractor’s qualified employees.

Effective January 30, 2009.

Use of Project Labor Agreements (PLAs) for Federal Construction Projects

• Allows the Government to require PLAs on large-scale federal construction projects (exceeding $25 million). A PLA is defined as “a pre-hire collective bargaining agreement with one or more labor organizations that establishes the terms and conditions of employment for a specific construction project.”

Effective February 6, 2009.

E. Other Putative Changes

Federal Oversight, Reform, and Enforcement of the WARN Act of 2007 (FOREWARN)

• Would amend the WARN Act by expanding scope of “employer” to businesses employing 50 or more full-time employees (rather than 100); expanding scope of “plant closing” from 50 employees down to 25; expanding “mass layoff” to 100 employees (rather than 500); and requiring 90 days advance notice (up from 60). It also would expand the scope of notice (employers would have to inform more people / entities of intended layoffs), and it would increase fines.

Introduced in September 2007; reintroduction in the 111th Congress is anticipated.

Employee Misclassification Prevention Act

• Would step up enforcement regarding misclassification of independent contractors; increase penalties; and impose civil fines of $10,000 per violation for employers who “repeatedly or willfully” misclassify workers. Would also require employers to notify “non-employees” in writing of: (a) their classification; (b) the significance of the classification (that their rights to “wage, hour, and other labor protections” depend on proper classification); and (c) their right to contact the DOL if they need further information.

Introduced in House in May 2008 and in Senate in September 2008 with then-Senator Obama as a co‑sponsor; reintroduction in the 111th Congress is anticipated.

Unionization of Home Based Employees, Quirky Question # 91

Mon, 27 Apr 2009 01:24:00 GMT

[Readers: The question relating to the unionization of home-based employees was posed to my colleage, Joel O'Malley. Joel's analysis is set forth below. If you would like additional information regarding this issue, don't hesitate to contact Joel directly at 612.492.6727 or via email at omalley.joel@dorsey.com. Additional information regarding Joel is available at http://www.dorsey.com/o'malley_joel/. Regards, Roy]

Joel's Analysis of Quirky Question # 91

Unions aren’t just in factories anymore. Actually, they haven’t been for decades. Employees in virtually all sectors of the economy have organized to form unions, as is their right under the National Labor Relations Act. Amazingly, this can include employees scattered over a wide geographical area, as long as those employees constitute an appropriate bargaining unit (generally, employees with substantially mutual interests in wages, hours, and conditions of employment).

Thus, when an appropriate unit of scattered employees collectively exercise their desire to organize by submitting signed authorization cards, the National Labor Relations Board will hold a mailbox election, much like many states’ electoral contests recently have been conducted. [Note this all might change should the Employee Free Choice Act become law, a topic for another day.] Ballots are mailed and must be returned by employees within a certain period, typically a couple weeks.

As for your desire to convince your employees not to unionize, many of the normal rules around keeping an election free from pressure and coercion are quite different in the mailbox ballot setting. For example, in normal live elections, neither the union nor the employer may make election speeches to massed assemblies of employees within 24 hours before the scheduled vote. This rule, enunciated by the National Labor Relations Board over fifty years ago in its Peerless Plywood decision, was meant to protect employees from being forced to listed to speeches on the eve of an election – much like those negative 30-second television spots in public office elections – that might “destroy freedom of choice.” Either party may still distribute literature during that period, though. The rule is most applicable to employers forcing employees to meet and listen to speeches on company time, but has been applied to creative unions that, for example, drive around factories with mounted speakers blaring pro-union messages.

In the mailbox ballot context, the Peerless Plywood rule is quite different. Instead of barring mass communications within 24 hours of the vote, the rule bars such communications beginning at the time the ballots are mailed until ballots must be returned. Thus, rather than a 24-hour rule, it could amount to a two or more weeks of relative silence. Yet, with employees scattered all over the country, it’s hard to contemplate a massed assembly where employees are forced to listed to speeches.

You state that virtually all communication with your employees is done electronically. The Board and courts in more recent years have addressed similar situations – although not in the mailbox election setting – and have applied the Peerless Plywood rule rather leniently. In one case, an employer was permitted to send individual employees electronic “Vote No” messages on their mobile devices. Virginia Concrete Corp., 338 NLRB 1182, at *9 (2003). Although the employees could not avoid seeing the message, it was analogous to campaign literature in that it was not audible and could be deleted or scrolled past if the employee desired. In another case, a union agent allegedly programmed a screen-saver on a widely visible computer in the employer’s workplace to transmit an anti-union (and, in this case, pro-religious) message to employees. See Mail Contractors of America, Inc., 122 Fed. App’x 635 (4th Cir. 2005) (“VOTE YES LOCAL 470 AND JESUS WILL FORGIVE YOUR SINS.”). Again, the court held the message amounted to the distribution of campaign literature.

In addition to the Peerless Plywood rule, the Board also prohibits electioneering in polling places. See Milchem, Inc., 170 NLRB 362 (1968). Under the Milchem rule, it must be shown a party engaged in the equivalent of “prolonged conversations” with employees. See NLRB v. WFMT, 997 F.2d 269, 274-75 (7th Cir. 1993). The application of this rule is rather obvious in the live election setting; in the mailbox setting, it’s less than clear.

While no Board or court decision has overturned a mailbox election based on the Milchem rule; one case did analyze communications to employees during the mailbox balloting period under the test. In Mail Contractors of America, the employer claimed the union sent a pamphlet to the homes of individual eligible voters. The court assumed without deciding that the Milchem electioneering prohibition could apply in the mailbox balloting situation, but held the evidence was insufficient to support the employer’s assertion that pamphlets were sent to all eligible voters.

In this new fluid and electronic landscape where the old rules don’t seem to apply, it’s hard to tell what the Board would do in any given case of alleged improper electronic communication or electioneering. It appears that electronic communications with employees during the Peerless Plywood period are generally permissible, since employees are not required to read particular e-mails, and those inaudible messages can quickly and easily be deleted and largely ignored. What if the employer includes a link in an e-mail message to a speech from the company president posted on Youtube or the company’s intranet? Again, probably permissible, since watching the video is voluntary. But programming computers so that the video automatically appears when the computer is booted up probably would cross the line. And what if the employer sends e-mails every day over the entire balloting period? There certainly is an argument to be made that this would amount to a “prolonged conversation” with employees.

The safe recommendation is probably that, during the Peerless Plywood period, the employer should send text-only e-mails on an infrequent basis, and do so using a bcc format so it appears to individual employees that the e-mail is directed at them and not at a “massed audience.” Depending on the employer’s appetite for risk and technical sophistication, however, many more means of fully harnessing electronic communication can be imagined, whether in the mailbox ballot or a live election context. One can be sure unions are brainstorming these same ideas themselves.

Nose Rings, Facial Jewelry and Religion, Quirky Question # 92

Mon, 04 May 2009 10:05:00 GMT

One of the early questions I addressed in this Blog involved a similar issue (see Question # 17, accessible through the “View by Topic” tab under “Appearance at Work”.) That Blog analysis touched on a decision from the First Circuit (Cloutier vs. Costco Wholesale Corp., 390 F.3d 126 (1^st Cir.2004)), in which Costco prevailed on summary judgment when confronting an employee’s request to display facial jewelry (an eyebrow piercing). The employee, who claimed that she had the eyebrow piercing for religious reasons, lost her claim. Whether this reflected some underlying skepticism of the plaintiff’s religious beliefs – she asserted that she was a member of the “Church of Body Modification” – or whether the district and appellate courts were concerned about Costco’s ability to control its public image, or some mixture of the two inter-related issues is unclear. That was then, . . ..

A recent decision out of the Middle District of Florida, EEOC vs. Papin Enterprises, Inc. et al., No 6:07-cv-1548-Orl-28GJK (April 7, 2009), reached the opposite conclusion, on facts similar to those presented in your question. In Papin, an employee of a Subway franchisee sued because of the defendants’ unwillingness to allow her to wear her nose-ring. Like the plaintiff in the Costco case, the Subway employee claimed religious reasons for wearing her facial jewelry. Nowhere in the 19-page judicial opinion, however, does the Court identify the religion with which plaintiff identified. This omission perhaps reflects the fact that, after initially questioning the sincerity of the employee’s beliefs, both the defendants conceded, at least for summary judgment purposes, that the plaintiff’s desire to wear the nose-ring was based upon a “sincerely held” or “bona-fide” religious belief. Once that legal concession was made, the focus of the case became whether the Subway franchisee could accommodate the employee’s religious beliefs without experiencing an “undue hardship.” Here, the defendant’s analytical approach was perplexing.

Rather than focusing on the company’s need to control its public image, the defendant franchisee instead attempted to ground its unwillingness to accommodate the employee, and its ultimate termination of her employment when she refused to remove the nose-ring, on food safety standards. Unfortunately for the defendants, this rationale could not be reconciled with the accommodations offered. Although there was some factual dispute between the plaintiff and defendants, the defendant franchisee (the franchisor also was a named defendant) contended that it offered the plaintiff the option of covering up her nose-ring with a band-aid. She refused. More fundamentally, it is unclear (at best) how covering a nose-ring with a band-aid would satisfactorily resolve food safety issues. The second accommodation proposed by the franchisee was even sillier.

Apparently concerned that it was out of compliance with the requirements of the franchisor regarding employee appearance and attire, and recognizing that the franchisor made regular, scheduled, once-monthly visits to the franchisee’s location, the franchisee proposed that the employee simply not show up for work on the one day each month when the franchisor’s visit was scheduled. As the Court noted, “the Papin entities cannot sincerely argue that they had a strict food safety requirement barring nose rings while at the same time claiming that one of the proposed reasonable accommodations was to allow [the employee] to wear the nose ring at all times while she was working at the restaurant but to permit her to leave when the compliance auditor came by.” Clearly, the proposed accommodation was completely inconsistent with the underlying rationale (food safety concerns) for why the facial jewelry was impermissible.

Interestingly, the franchisor’s efforts to evaluate the sincerity of the employee’s religious beliefs also proved problematic. The court observed that the franchisor was willing to waive the prohibition on the nose-ring if the employee could demonstrate that her wearing of this facial jewelry was legitimately linked to a sincerely held religious belief. As the Court observed, if the company was willing to waive the facial jewelry prohibition, it could not have been based on a “food safety requirement.” Thus, the company’s willingness even to engage on the first issue in a religious discrimination context (whether the belief was bona fide) proved its undoing when trying to advance its undue hardship justification (food safety requirements).

Applying the lessons of the Papin case to your question suggests some practical points. First, consider carefully the reasons for why your company prohibits certain facial jewelry. Your company does have the right to protect its public image. Especially since your employee interacts regularly with the public, your company’s desire to proactively regulate your employee’s appearance takes on added significance. Second, as you consider whether you can offer your employee any reasonable accommodation of her supposed religious beliefs, ensure that the accommodation considered does not undermine the rationale you have advanced for the undue hardship argument. Third, don’t be too quick to dispose of the first line of defense – your assessment of whether the employee’s religious beliefs are sincerely held. But, when you explore this issue with your employee, make clear that even if she articulates a sincerely held religious belief, you may not be able to accommodate her. Fourth, give some thought to developing the “slippery slope” argument. If one nose-ring is acceptable, how about two or three? Would your attitude be different about tongue piercings? What about multiple facial piercings of various kinds? How would your company react if applicants with facial tattoos sought employment?

With respect to all of these issues, I encourage you to develop reasonable policies that are legitimately linked to your business interests. It is also important for your company to then enforce these policies fairly and uniformly. Taking this approach will increase the likelihood that you will prevail in litigation challenging your company’s prohibition of facial jewelry on religious grounds.

Terminating Bankrupt Employee, Quirky Question # 93

Mon, 11 May 2009 11:38:00 GMT

[Readers: Quirky Question # 93 was posed to my partner, David Lauth. David's analysis is set forth below. If you would like more information about this issue, do not hesitate to contact David directly at 612.343.7940, or via email at lauth.david@dorsey.com. For more information on David, check out http://www.dorsey.com/lauth_david/. Regards, Roy]

David's Analysis of QQ # 93

You ask whether there is any reason why your company could not terminate your Company's Controller, given the fact that she has declared personal bankruptcy. There is.

It is a completely understandable and appropriate impulse to have the concerns you expressed. There are very good reasons to worry that someone in this situation may be more tempted than usual to cross the line into dishonest or unethical behavior, and good reasons to worry that other people in the company are going to lose faith in her abilities and her judgment.

The obstacle to terminating her employment is the United States Bankruptcy Code. Part of the goal of a bankruptcy filing, of course, is to help a debtor get a fresh start. To that end, a provision in the Bankruptcy Code directly addresses this situation and protects the employee.

11 U.S.C. 525 (b) provides as follows:

"No private employer may terminate the employment of, or discriminate with respect to employment against, an individual who is or has been a debtor under this title, a debtor or bankrupt under the Bankruptcy Act, or an individual associated with such debtor or bankrupt, solely because such debtor or bankrupt—

(1) is or has been a debtor under this title or a debtor or bankrupt under the Bankruptcy
Act . . ."

This prohibition is not quite as sweeping as it might appear. First, note that the statute prohibits a termination of employment only if it is “solely” because of the bankruptcy filing. If there is evidence of misconduct or poor performance by an employee – even if that employee has filed for bankruptcy, and even if the employer is upset about the bankruptcy filing – then a termination based at least in part on that misconduct or poor performance is not “solely” because of the bankruptcy filing and is not unlawful. Laracuente v. Chase Manhattan Bank, 891 F.2d 17 (1^st Cir. 1989); Stockhouse v. Hines Motor Supply Inc., 75 B.R. 83 (D. Wyo. 1987).

Second, even though the statute purports to prohibit any “discriminat(ion) with respect to employment,” it has not in fact been applied that broadly. A number of courts have held, for example, that the statute does not create a cause of action for a failure to hire a job applicant because of the applicant’s prior bankruptcy filing. See Stinson v. BB&T Investor Services, 285 B.R. 239 (W.D. Va. 2002); Pastore v. Medford Savings Bank, 186 B.R. 553 (D. Mass. 1995).

It is clear under the statute, however, that an employer cannot terminate an employee simply because the employee has filed for bankruptcy, even if the employer has a reasonable fear that others will react negatively to news of the filing. In re Hopkins, 66 B.R. 828 (W.D. Ark. 1986). In your situation, a termination of this employee will likely lead to a claim that the statute has been violated.

Update to Quirky Question # 68, Discrimination Against Transsexuals

Tue, 12 May 2009 09:22:00 GMT

Guest Article, Forensic Psychiatric Evaluations of Emotional Distress Claims

Thu, 14 May 2009 11:04:00 GMT

CONTRASTS IN CLAIMS:

EVALUATING EMOTIONAL DISTRESS—Part I—the “Eggshell Plaintiff”

Barbara Long, M.D., Ph.D., A.B.P.N.

Employment law Title VII claims often include allegations of significant emotional distress allegedly caused by reportedly inappropriate remarks, touches, and other behaviors in the workplace. When a supervisor, as opposed to a coworker, has been the alleged instigator of the reportedly offensive behavior, emotional distress claims are frequently enhanced because of the “power differential” between the supervisor and supervisee. Evaluating the validity of such emotional distress claims can be challenging. This paper will describe how expert psychiatric forensic consultation can assist in determining which claims may have merit and which may be false, the ultimate determination to be made by the trier-of-fact.

Case # 1—VALID CLAIM (The case study below was fabricated for teaching purposes, although the psychiatric issues illustrated are drawn from a variety of actual cases and archival data.)

Janice was a 31 year old minority woman, who had worked as a secretary for a construction company for 10 years. Prior to that, she had held a series of short-term positions as office assistant but had left for a better job or personal reasons. In her current job, her supervisor, Jack, was a “rough-and-ready” guy, who had an excellent reputation for his ability to get the job done. A loud, boisterous man, he commanded the respect of the all-male sub-contractors by balancing a stern iron will with a seemingly endless supply of rough jokes that often had off-color, sexual, or racial overtones. He often socialized with his sub-contractors after hours, and his alcohol problem was well-known, since he kept a stash in his office and sometimes was seen to imbibe at work. Management tolerated his personality and habits because of his extraordinary ability to complete construction projects within the time and budgetary limits mandated by contracts.

His overbearing personality style created tension among office staff, who tried to avoid provoking Jack’s anger and never complained to higher management about him. However, Janice was the subordinate that most frequently received his ire, especially when contracts contained spelling, grammatical or other errors, or materials were misfiled. Despite these frequent verbal reprimands, Janice received “meets expectations” on her performance reviews, although her frequent requests for time off for medical reasons was mentioned in most of her reviews. She was always given the same raises as other employees. She tended to isolate herself at work and was considered by others to be quiet and aloof but cooperative when her help was needed.

Jack’s loud verbal confrontations of Janice could be heard throughout the office complex. Others saw her in tears following these incidents, after which Janice often either went home immediately or took the next day off. She usually went to her primary care physician complaining of intense insomnia, anxiety, and depression related to her job or other stressful life problems of various kinds. The physicians usually prescribed anxiolytic, hypnotic, or antidepressant medications, which Janice usually took briefly before discontinuing them on her own. The pattern of verbal abuse by Jack had intensified over the years and grew to include demeaning remarks about Janice’s “stupidity.”

At her performance review on the 10^th anniversary of her employment, Jack again began to berate her for ongoing spelling and grammatical errors that had changed the meaning of terms of the contract and caused the client to move the business elsewhere—problems that had occurred from time to time over the course of Janice’s employment. Irate, Jack confronted Janice, called her a name involving a racial epithet, rated her performance as “below expectations,” and denied her a merit raise. She left in tears, went home, and overdosed on her anxiety and hypertension medications. Her brother, who usually visited her apartment daily, found her unconscious and took her to the ER. Coworkers complained to management about Jack’s treatment of Janice. Management investigated and terminated Jack immediately.

In the ER, Janice complained of voices that sounded like Jack’s yelling at her and repeatedly calling her names with racist and sexist content. She disclosed that for several months, the voices had awakened her at night, leaving her anxious and unable to return to sleep. She had complained to her doctors of insomnia, anxiety, depression, and, recently, paranoid ideas, but she had never mentioned the voices until this ER visit. After the current meeting with Jack, the voices had started again, leaving her highly agitated, suspicious of others, and suicidal. She overdosed in order to stop the voices. The ER doctor admitted her to the hospital and started anti-psychotic and antidepressant medication, which decreased her symptoms. However, as before, she discontinued the medications after discharge. She received a medical leave of absence and short-term disability, following which she applied for and received Social Security Disability. After being absent for a year, the company terminated her.

She retained an attorney and filed a complaint with the EEOC, alleging sex and racial harassment/discrimination, hostile work environment, and other torts. After obtaining a “right to sue” letter, she filed her legal complaint, which included a claim of severe emotional distress, exacerbation of a medical condition (hypertension), and permanent disability caused by Jack’s actions, which had created a “hostile work environment.” Her counsel alleged that management was aware of and tolerated Jack’s alcohol problem and propensity to be verbally abusive and intimidating. Defense counsel’s response was that employees, including Janice, had never before complained about Jack’s behavior, and when management was made aware of the problem, it investigated and took appropriate action.

During the litigation process, which was very stressful for Janice, she filed bankruptcy due to inability to make ends meet on a reduced income. She continued to go the ER for situational stresses including those caused by the litigation. She remained unemployed on SSDI. The Independent Psychological Evaluation by the plaintiff’s expert concluded that Janice had PTSD caused by Jack’s verbal abuse, the hostile work environment, and management’s retention and lack of supervision of Jack. Despite a lack of training in HR or management, the expert further opined that Janice had been too intimidated by her supervisor’s “position of authority,” and that the “power differential,” along with inadequate reporting procedures within the company fostered a climate of abuse of which employees, including Janice, were reluctant to complain.

Defendant’s Forensic Psychiatric Analysis of Plaintiff

Counsel for the company requested an Independent Psychiatric Evaluation of her emotional distress claim. Legal, medical, and employment records were reviewed and psychological testing completed. There were coworker affidavits supporting Janice’s perception of Jack’s behavior as chronically verbally abusive. Janice’s past history included being raised in poverty by an alcoholic father who was physically and verbally abusive to all of the 10 children. Once he had called Janice racist names, after she had brought home a report card consisting of mostly Ds and Fs. She graduated from a public high school with a class rank in the lowest 10^th percentile. She was a loner all of her life, had been married once, and had no children. Legal history was negative except for two prior bankruptcies during her prior marriage to an alcoholic man who, like her father, was verbally and emotionally abusive. Since her divorce, she had been able to support herself on her income from the defendant company. She had a limited social support system that consisted mainly of her Church and her original family members. Family history included a great uncle who had been institutionalized for schizophrenia. Medical history included longstanding hypertension, a problem that had worsened with age and weight, becoming increasingly difficult to control with medications. Her physician had discontinued a beta blocker due to concerns about depression. Records included over 50 ER visits over the years due to complaints of anxiety, stress, depression, or vague physical complaints that could not be explained medically. These ER visits were related to situational stresses, including work, quarrels with her ex-husband, or thoughts that others, even strangers, were against her.

The psychological testing included the MMPI-2, MCMI-III, Rorschach, SIRS, and Sentence Completion. The first four instruments are standardized tests, while the fifth is a critical items test that can alert the examiner to potential acute psychiatric disturbance possibly requiring intervention. The MMPI-2, the “gold standard” of personality testing, provides information about both Axis I (treatable psychiatric disorders) and Axis II (personality disorders that are developmental in nature, having a significant genetic component as well as potential inputs, such as sexual or physical abuse/neglect). Her MMPI-2 revealed an F scale (exaggeration of symptoms) that was at a level commonly seen in psychiatric inpatients. There was a borderline clinically significant scale on L indicating a view of herself that was more righteous and moral than the general population. Clinical scale elevations included Scales 1 (Somatization), 2 (Depression), 6 (Paranoia), 7 (Anxiety), 8 (Schizophrenia), and Scale 9 (Social Introversion). The computerized interpretive Personal Injury Report was based upon the two-point elevations of Scales 8, 6, and 2 and suggested a breakdown in thinking with significant depression and paranoia. Significant elevations on Scales 7, 9, and 1 suggested accompanying high anxiety, panic, social isolation, and somatic reactivity under stress. MMPI-2 research indicated that this was a generalized distress pattern.

The MCMI-III, a test for personality disorders, showed elevations on Schizoid, Paranoia, and Obsessive Compulsive scales. The Structured Interview of Reported Symptoms, a test for feigning or malingering of psychological symptoms, revealed no primary scales that deviated from “Honest Reporting” of symptoms. One supplementary scale that measured endorsement of everyday problems was elevated. The Sentence Completion contained responses that suggested chronic feelings of emptiness, despair, and self-worthlessness. The Rorschach, which was administered, scored, and interpreted according to the Comprehensive System of John Exner, Ph.D., revealed an individual with a Coping Deficit and thought disorder. Strong pessimistic thinking directed inward was indicated along with problems with emotional control secondary to an elevated number of situational stresses in a woman with a limited supply of emotional resources to cope. Individuals with this result are expected to have frequent “breakdowns,” in which they seek medical or psychological intervention.

The psychiatric Mental Status Examination revealed a depressed and anxious woman who was guarded. There was psychomotor retardation. Thinking revealed paranoid and somatic delusions that involved concerns that Jack or other members of management were out to get her and had been poisoning her food, resulting in physical problems and ER visits. Their voices were arguing day and night, interfering with sleep. Her style of communication revealed looseness of associations consistent with a thought disorder. She had stopped her medications, because she had thought the doctors were part of the company’s conspiracy against her. Diagnoses were Axis I: Paranoid Schizophrenia and Axis II: Personality Disorder, Not Otherwise Specified, with Schizoid and Paranoid features. The evaluation was inconsistent with PTSD.

The expert concluded that although the history suggested a latent schizophrenic process caused by a genetically determined (rather than work-related) Coping Deficit, low-normal IQ, and a predisposition to schizophrenia, a history of physical and emotional abuse by her father and ex-husband, and poor social and overall life adjustment, she had been able to cope by restricting her life to work, Church, family, and medical interventions. This strategy succeeded until the final incident with Jack. Despite the emotional parallels between Jack and her father and ex-husband, parallels that had intensified her emotional responses to Jack’s behavior, the final confrontation had “tipped the scales,” breached her psychological defensive structure, and resulted in a florid psychotic breakdown. Her current ongoing psychotic state and Schizophrenia diagnosis was judged to carry some degree of permanency, although part of the permanency had resulted from her non-compliance with medications and follow up. The expert opined that although there were no guarantees, if she complied with medications and received ongoing psychiatric care, it was more likely than not that her emotional condition would improve. However, it was unlikely that she could ever return to a secretarial position. No opinions were rendered about policies, as this was outside the realm of the expert’s training. The case was settled out of Court.

Case Lessons

This case illustrates the psychiatric equivalent of the legal term, “Eggshell Plaintiff.” It illustrates the importance of a comprehensive psychiatric evaluation in order to determine diagnosis and causality in work-related legal claims of emotional distress. Only through a review of records, psychological testing, and a comprehensive psychiatric evaluation could the complicated and interrelated biological, social, and psychological forces be understood sufficiently, so that the question of psychological injury could be fairly assessed.

In this case, the litigant’s claim had merit, even though she had not mitigated her damages. Defense counsel had feared the plaintiff’s expert’s PTSD diagnosis, since this diagnosis permits explicit causality to be assigned to a known causal factor. Although relieved that the evaluation did not support such a diagnosis, since the workplace conduct did not, in the opinion of the expert, rise to the level needed for such a diagnosis, defense counsel had a far worse problem. The defense expert explained that emergence of a florid Schizophrenic process was potentially far more serious from a legal perspective because of the issue of permanency of harm to the individual’s personality functioning.

Also discussed with counsel was the other evidence bolstering the validity of her claim. This included overwhelming coworker support through affidavits, lack of evidence of feigning on the psychological test instruments and in the interview, absence of personal complicating factors (e.g., substance abuse, a prior history of similar claims against prior employers, antisocial behavior, etc.), and evidence that coworkers and management alike knew of her supervisor's alcoholism and poor control of anger but did not confront him. These factors had to be weighed against her limited IQ, which raised the question of why her poor performance had been consistently rated as “meets expectations,” when it had clearly been poor, increasing Jack’s frustration over time and jeopardizing the company’s relationships with customers.

WARN Act Issues, Quirky Question # 94

Mon, 18 May 2009 10:13:00 GMT

[Readers: Quirky Question # 94 was submitted to my partner, Ryan Mick. His analysis is set forth below. If you have any questions about Ryan's analysis, please do not hesitate to contact him. Ryan can be reached at 612.492.6613, or via email at mick.ryan@dorsey.com. Additional information regarding Ryan and his practice is available at: http://www.dorsey.com/mick_ryan/. Regards, Roy]

Ryan's Analysis of QQ # 94

You are right to be thinking about the WARN Act. WARN requires an employer to give 60 days notice of termination in certain circumstances. But whether the WARN Act would actually affect you in this instance is uncertain. There are a number of threshold elements that must be satisfied before the WARN Act imposes any obligation on an employer. It is unclear whether those elements would be satisfied in this situation.

As a preliminary matter, note that even if the WARN Act applies, the only obligation it imposes on an employer is to provide proper notice of the terminations to affected employees. That can be a somewhat complicated task in itself, but employers do not have any obligation to extend employment for any amount of time or to provide placement assistance, etc. to affected employees.

To determine whether the WARN Act imposes any notice obligations requires a multi-step analysis. First, you need to evaluate whether you are a “covered” employer? Covered employers include those who (1) employ 100 or more employees, excluding part time employees; or (2) employ 100 or more employees (including part time employees) who aggregate at least 4,000 hours per week. If you meet either of these tests, looking at your workforce as a whole, the WARN Act may be applicable.

Second, if you are a “covered” employer, you must next analyze the circumstances of the planned terminations. Generally speaking, there are two types of notice triggering events under the WARN Act: “plant closings” and “mass layoffs.” It does not appear that you are closing a facility (or any distinct department or part of a facility), so the question is whether the facts described could be considered a “mass layoff.”

Generally speaking, a mass layoff means a reduction in force (such as the mass terminations contemplated here) that results in loss of employment at a single site of employment during any 30-day period, for 500 or more employees or at least 50 employees, if that number is at least 33 percent of the workforce. In this case, it appears that two factors will determine whether the potential terminations involve a “notice triggering event.” The first factor is the number of employees actually terminated. If you only terminate 50 employees, that number satisfies only part of the test for a “mass layoff” because 50 employees is only 25 percent of your workforce. You would need to terminate at least 66 employees to meet that threshold.

Even if the you terminate 66 or more employees, however, those terminations must occur at a “single site of employment” for a “mass layoff” to occur. There is no simple analysis to determine what constitutes a “single site of employment.” Making that determination requires a detailed factual assessment of the nature of the operations at separate facilities, the extent of personnel and management overlap, etc. Federal regulations define a “single site of employment” as “either a single location or a group of contiguous locations.” Here, the question is whether the two facilities are “contiguous.” It appears they are not for purposes of the WARN Act. The federal regulations specifically note that:

"Non-contiguous sites in the same geographic area which do not share the same staff or operational purpose should not be considered a single site. For example, assembly plants which are located on opposite sides of a town and which are managed by a single employer are separate sites if they employ different workers."

As the two facilities have been described – one for fiberglass fabrication and one for installation of interior components – they would likely have different “operational purposes” under the WARN Act. If so, and particularly if the facilities do not share employees on a regular basis, it appears that the two facilities should be analyzed separately.

As such, it matters from which facility the employees may be terminated. If 50 or more employees are terminated from one facility, the WARN Act would impose notice obligations as to the employees in that facility. If fewer than 50 employees are terminated per facility, then WARN may not be triggered. Again, a thorough assessment of several factors not spelled out in your note should be undertaken before drawing conclusions based on the number of terminations at separate facilities alone.

Third, from your note it appears that the need to downsize is the product of a customer’s unanticipated cancellation of a large order. Although this circumstance will not relieve you of the obligation to provide WARN notice, where the law applies, it may shorten the required notice period. The WARN "unforeseeable business circumstances” exception allows for less than 60 days notice if the business circumstances requiring a mass layoff or plant closure were not reasonably foreseeable at the time 60 days notice would have been required. In your case, if you had no reason to expect that the customer in question was going to cancel the order, you may be able to go ahead with the terminations without giving the full 60 days notice. This analysis itself raises numerous questions of fact – for example, why did the customer cancel the order and what insight, if any, did you have into that issue – and it will be your burden to prove that the exception applies.

Fourth, even if you can demonstrate unforeseeable business circumstances, however, you have an obligation to provide whatever notice is reasonable under the circumstances. Here, for example, it appears that you have known about the cancelled order for several weeks, and the potential implications of that cancellation, but have not provided notice under the WARN Act. While an employer does not have to give employees notice immediately upon learning of business difficulties – for example, if the employer needs time to determine whether a loss of business will actually require layoffs – the fact that you have known of the cancellation for several weeks could create significant questions as to whether you provided reasonable notice if you attempt to proceed with terminations on less than 60 days notice.

Needless to say, the seemingly simple WARN Act can be very complicated in practice.

Finally, it is not just the federal WARN Act you need to consider. Many states have enacted their own, stricter versions of the WARN Act. By way of example only, “mass layoffs” are defined under Illinois and New York law to include layoffs affecting 25 or more employees (rather than 50 or more), if that number is at least 33 percent of an employer’s workforce. Any employer considering whether to terminate multiple employees should always pay attention to state law as well as federal law. In addition, there are efforts underway to strengthen WARN Act protections for employees. Most recently, a bill was introduced in Congress in April that would redefine “mass layoffs” to include employment losses from a single employer of 50 or more employees (if that number is at least 33 percent of the workforce) at more than one site of employment and double penalties for noncompliant employers. You should monitor theses developments.

Long Hair and Religion, Quirky Question # 95

Tue, 26 May 2009 12:02:00 GMT

[Readers: Sorry that I missed the Monday morning posting. Got too busy. So, with my apologies for the slight delay, the analysis of QQ # 95 is set forth below. Regards, Roy]

I would need more facts to assess whether your company needs to allow this employee to have long hair as an accommodation of his purported religious beliefs. As you referenced in your question, I’ve looked at the issue of religious accommodations in the context of various facial piercings, beards and nose rings. Now, you inquire about long hair.

As I’ve addressed in prior Quirky Questions, there are a variety of related inquiries that need to be considered when an employee presents a request for a religious accommodation of his or her appearance. But, before you reach this issues, it’s worthwhile to explore some practical questions, some of which may bear on whether you could or should accommodate your employee’s request based on his religious beliefs.

First, how long has this employee worked for you? Has he always had long hair or is his desire to wear his hair long a new request? If the latter, has he adopted new religious beliefs? Is there some reason why past compliance with your company’s grooming policy did not offend his religious sensibilities while current compliance is religiously problematic?

Second, do you enforce your grooming policy uniformly? If your employee will be able to point to other individuals working at your company who have long hair and perform similar jobs, it may be difficult for your company to advance a compelling argument that allowing this employee’s long hair would constitute an undue hardship. (Note that both with respect to religious and disability discrimination, if you have allowed other employees to behave in a way sought by the individual seeking the accommodation, your undue hardship argument will be an uphill climb.)

Third, what job does your employee perform? What is the reason your company prohibits long hair? Is your policy linked solely to your company’s desire to control its public image or are there other issues in play? For example, are there safety considerations, linked perhaps to the machinery or equipment the employee must use? Are there food safety considerations that are driving your policy? In these illustrative contexts and many others, what does your company do with respect to the hair styles of your female employees? Do these employees wear hats, hair nets, or other equipment to keep their long hair out of their way as they work?

Fourth, what are your employee’s religious beliefs? How do his religious beliefs relate to his long hair? How did your employee broach this topic with you? Did he explain his religious beliefs? Was he willing to discuss them?

Fifth, is anything else of relevance going on with this employee? For example, was he recently disciplined for performance problems? Is he on a Performance Improvement Plan? In short, are his new found religious beliefs (assuming that they are newly discovered) a set up to insulate him from a potential adverse job action? (Forgive me cynicism. Given the nature of some of the claims I’ve seen, I’ve grown somewhat skeptical.)

Exploring each of these areas should position you to analyze the fundamental issues pertinent to a request for a religious accommodation. There are three basic issues that must be explored. Are the employee’s religious beliefs sincerely held? In other words, are they bona fide religious beliefs? Next, can these religious beliefs be accommodated? Lastly, would accommodating your employee’s requests for the religious accommodation cause your firm any undue hardship?

As I’ve suggested in past analyses, the standard for establishing an “undue hardship” in the context of a request for a religious accommodation appears to be a somewhat easier test for an employer than in the parallel context of proving undue hardship in disability discrimination cases. Indeed, controlling your company’s image may well be a legitimate consideration for your company, the deviation from which would constitute an undue hardship. Of course, if this is the underlying justification, you may have to elaborate a bit on why maintaining a certain corporate image is important. Further, this rationale should be linked to the job responsibilities performed by this employee. If, for example, the employee had no interaction whatsoever with the public or your customer base, the “public image” argument may be more difficult to justify persuasively.

In short, you need to better understand the facts before you will know whether your company must accommodate your employee’s request and whether your company faces exposure if it fails to do so.

One recent case involving an applicant who claimed his long hair was linked to his religious beliefs highlights a few of the issues implicated in this kind of fact pattern. In Lord Osunfarian Xodus v. The Wackenhut Corporation, No. 07 C 1431 (N.D. Ill. April 24, 2009), an applicant for a security guard position claimed that he was denied a job because he refused to cut his dreadlocks. The plaintiff asserted that his religious beliefs – Rastafarian/Hebrew Israelite – prohibited him from cutting his hair. The Defendant corporation moved for summary judgment, arguing that the plaintiff never even mentioned his religious beliefs during his job interview. The federal district court didn’t buy it.

The Court’s opinion revealed a bit of frustration with both parties. The court began its analysis of defendant’s summary judgment motion by observing, “The facts in this case are clearly in dispute.” The plaintiff claimed that he mentioned his religious “beliefs” in the interview and the defendant denied it. The judge may as well have said, “Why are you wasting judicial resources with this motion?”

Interestingly, the court noted that while the parties could not agree on precisely what was said about the plaintiff’s religion during the interview, he did state that he could not cut his hair because of his “beliefs.” The court found that this assertion was sufficient to raise an issue of religious discrimination. The judge stated, “The parties do agree that plaintiff did not specifically identify his religion at the interview, but that type of declaration is not required to prove religious discrimination.” In short, once an applicant or employee introduces a concern that he cannot engage in certain conduct because of his belief system, it will be incumbent upon the employer to explore this issue and find out why.

Finally, the court did rule for the defendant on the argument that plaintiff had failed to mitigate his damages. Plaintiff argued that he was unable to accept any subsequent employment because his rejection from the security guard position, in an abbreviated interview, exacerbated a previous mental health condition. (See why I get skeptical at times.) Fortunately, the court rejected this contention, which, incidentally, was unsupported by any medical testimony.

Restrictive Covenants Tied to Compensation, Quirky Question # 96

Wed, 03 Jun 2009 01:18:00 GMT

Your question implicates a number of different issues. As a prefatory matter, I’ll start with one of my primary mantras – employment law is often state-dependent. Therefore, the first issue you need to evaluate is where your employees are employed and the law of these states regarding post-employment restrictive covenants. (A related issue, not addressed here, is how the courts in the jurisdictions where your employees work analyze contractual choice of law provisions, i.e., the contract terms defining which state's law will govern if a dispute arises between the employer and employee.)

If, for example, your employees work in California or North Dakota, your non-competition agreements will be unenforceable, except in extremely limited circumstances. Both the legislatures and courts in these jurisdictions have repudiated non-competition agreements. In short, when crafting your company’s non-competition agreements, you need to be acutely aware of the relevant state law.

My second observation is a question – Why do you feel your company needs to offer your employees a year’s compensation in connection with the non-compete you are asking your employees to execute? Assuming your employees are not located in a state like California, North Dakota or other jurisdictions that reject non-competes, you do not need to link your non-competition agreements to post-termination compensation. If you have supported your restrictive covenants with adequate consideration, and the agreements can otherwise withstand judicial scrutiny, you don’t need to offer continued compensation to make the restrictive covenants enforceable. Non-competition agreements can withstand scrutiny if they are based on a legitimate corporate interest and are substantively, temporally and geographically reasonable.

The third issue you need to assess is one I alluded to above – Are your post-employment restrictive covenants are supported by adequate consideration? You mentioned that you plan to require your “existing” and “future” employees to execute the new non-competes. While a job offer generally will constitute sufficient consideration for your new employees, continued employment may or may not constitute sufficient consideration for your existing employees. Again, this issue is dependent on the law of the state in which your employees work.

A separate question is whether your company’s offer of up to one year’s compensation in the event your former employee cannot find non-competitive employment would constitute adequate consideration. I can’t offer a definitive opinion on that issue but I’m skeptical. First, you state that as to some employees, your company may simply waive the non-compete to avoid making any payments. If that practice is commonplace, your employees may well be able to argue that this contingent consideration is not adequate to support the non-compete. Second, as you also noted, you intend to reserve the discretion to withhold the payments if, in your company’s opinion, your former employee has not made sufficient efforts to obtain alternative employment. In a context where the employer has the sole discretion to determine whether payments must be made to the employee, a court may well conclude that no real consideration has been offered.

Lastly, I am somewhat uneasy by the undercurrent of your question. You observe that if the employees do not submit reports on a monthly basis, or submit reports that the company, in its discretion, does not deem adequate, you will have “sufficient flexibility to withhold payment.” I don’t want to read too much into your observation but it sounds as though your company may be considering offering this benefit without really planning to provide your ex-employees with the compensation promised to make the restrictive covenants “more palatable.” If so, that would be a mistake.

If you are going to enter a contract with your employees that includes restrictive covenants, and if you are going to offer substantial compensation to your employees to induce their agreement, your expectation should be that your company will fulfill its contractual obligations. My admonition can be illustrated by a recent case from the Eighth Circuit Court of Appeals, Bannister v. Bemis Company, No.08-1634 (February 25, 2009). The District Court (Judge Kyle from the District of Minnesota, applying Arkansas law due to a choice of law provision), granted summary judgment to the employee, awarding him $81,051 based on the defendant company’s breach of its monthly payment obligations, as set forth in the non-competition agreement. Despite the de novo standard of review (that is, the appellate court did not defer to the lower court’s determination), the appellate court affirmed.

In Bannister, the non-compete prevented the employee from working for a competitor for 18 months following the termination of employment. If the employee was “unable to obtain employment consistent with his abilities and education solely because of the [non-compete] . . . [the non-compete would continue to bind the employee] only as long as Bemis, in its sole discretion made payments to him equal to his monthly base salary at the time of his termination.” Bannister requested his employer to release him from the non-compete so he could obtain employment with a Bemis competitor, but Bemis rejected this request. Approximately nine months later, Bemis terminated Bannister’s employment, offering a severance package and a release from the non-compete, except as to the competitor Bannister previously sought to join. Bannister declined the company’s offer.

Not long thereafter, Bannister requested Bemis to start paying his monthly salary pursuant to the company’s payment obligations set forth in the non-compete. Bemis declined, pointing out that Bannister had been released to work for any company except for the one competitor Bannister previously had sought to join. Bannister ultimately found employment with another company but there was a nine-month gap between the end of his job with Bemis and the commencement of his new employment. Bannister then sought compensation under the non-competition agreement for the nine months in which he was not employed. As the appellate court noted, “Because the [non-competition agreement] does not provide for a partial release, once Bannister provided the required documentation and sought payment from Bemis under the [agreement] . . . Bemis was obligated to pay Bannister his monthly salary.”

The court also examined the issue of whether Bannister’s failure to submit monthly statements regarding his efforts to find alternative employment (like the obligation your company is considering) justified the company’s refusal to pay the compensation required in the contract. Because Bannister had provided documentation regarding the job offer he had received from Bemis’s competitor, and because Bemis breached its obligations by refusing to pay the required funds, the court found that Bannister did not need to submit the monthly statements that otherwise would have been required. As the court stated, “the failure of one party to perform its contractual obligations releases the other party from its obligations. The party who first breaches a contract is no position to take advantage of a later breach by the other party.” (Citations omitted.) In sum, both the federal District Court and the Court of Appeals found that the employer was obligated to fulfill its obligation to pay its former employer his base salary as set forth in the non-compete agreement drafted by the company.

If your company elects to include a payment obligation in your restrictive covenants (which, as discussed above, your firm does not need to do), be prepared to fulfill your obligations to your former employees. Failure to do so would expose your company to risks of of litigation and liability.

SSI Disability and the ADA, Quirky Question # 97

Mon, 08 Jun 2009 10:01:00 GMT

I agree with you that the fact pattern you described does not make sense. If your former employee persuaded the Social Security Administration that he is “permanently disabled” and consequently is unable to work at all, it is difficult to understand how he can argue simultaneously that he could continue working with your company if your company provided him a reasonable accommodation.. On their face, these two positions are fundamentally inconsistent.

The problem with this context, however, is that, at least theoretically, your former employee is not the one “argu[ing] simultaneously that he could continue working with your company . . ..” Your employee is not contending that he is a victim of discrimination; the EEOC is advancing that contention on his behalf. And, many courts, including the U.S. Supreme Court, have drawn clear distinctions between the individual employee and the EEOC. For example, as early as 1970, the United States Supreme Court held in General Telephone Co. of the Northwest v. EEOC, 446 U.S. 318 (1970), that “the EEOC is not merely a proxy for the victims of discrimination.” Likewise, in EEOC v. Waffle House, Inc., 534 U.S. 279 (2002), the nation’s high court stated, “The EEOC does not stand in the employee’s shoes.”

Given the fact that the EEOC is the plaintiff, rather than your former employee, the defense of judicial estoppel is not available to you. The “judicial estoppel” defense is essentially the concept that a party who prevails on one ground in a lawsuit may not repudiate that ground in another lawsuit. As courts have noted, the concept of judicial estoppel is designed to prevent manipulation of the judicial system by litigants who seek to prevail twice, on opposite legal theories. See, e.g., Levinson v. U.S., 969 F.2d 260, 265-66 (7^th Cir. 1992). But, the judicial estoppel theory is an equitable theory, requiring consideration of multiple variables, including, for example, whether the plaintiff is the same party, or as here, different.

A recent instructive case that explored these issues is EEOC v. Autozone, Inc., No. 07-1154 (C.D. Ill. February 23, 2009). In Autozone, the EEOC sued the defendant, alleging that it had violated the ADA in connection with its treatment of John Sheperd, a former Autozone employee. Sheperd has ceased working for Autozone due to depression, myofascial pain, degenerative discs of the spine, and other problems. The Social Security Administration (SSA) awarded Shepherd disability defendants, finding that his “sub-optimally controlled depression” impaired his “overall functioning . . . and effectively render[ed] him disabled.”

When the EEOC sued in connection with Autozone’s treatment of Shepherd, the defendant company asserted the judicial estoppel defense, pointing to the inconsistency in the position advanced by Shepherd before the SSA and the position advanced by the EEOC in its lawsuit. As you might have guessed from the analysis above, the federal District Court rejected the defendant’s arguments with respect to the judicial estoppel defense.

As the District Court found, “the EEOC is not merely an alter-ego of the individual employee, and it is not barred by prior acgtions or statements of those individuals in any other context.” Further, picking up on the analyses of he Supreme Court and other lower federal appellate courts, the court found that “the EEOC’s interest in pursuing perpetrators of discrimination is much broader than simply obtaining relief for the victim of that discrimination. Narrowing that interest by placing on it the same boundaries that limit individual litigants would be ill advised.” Finally, the District Court concluded that the concern for manipulation of the judicial system did not apply given that the EEOC was not a litigant in the administrative proceedings before the SSA. In sum, the court held that the EEOC was not a proxy for Shepherd and that its interest in pursuing relief on Shepherd’s behalf “is a public interest in eliminating discrimination, and that interest is not as narrow as is Shepherd’s interest.”

As you can see, the fact that your former employee successfully persuaded the SSA that he was entitled to receive full SSI disability benefits will not preclude the EEOC from pursuing a disability discrimination against your company. Having made that observation, your company still should be able to exploit the statements made by your former employee in connection with his efforts to to persuade the SSA that he was completely disabled. You still will have a compelling argument to make to the factfinder, whether judge or jury, that the position advanced by the EEOC is hopelessly inconsistent with the position advanced by your ex-employee before the SSA. When your former employee is called to testify regarding the nature, scope and effect of his disability, your counsel should be able to conduct an effective cross-examination.

Lastly, one issue that merits careful examination for your company is the standard for determining a disability under the ADA (especially in light of recent legislative changes to the statute) as compared to the SSI standard for determining disability. To the extent that these standards differ, you should be prepared to explain why the same result is warranted under both statutory schemes, regardless of who is pursuing the claims on behalf of your former employee. Good luck!

Background Checks for Contract Employees, Quirky Question # 98

Wed, 10 Jun 2009 17:29:00 GMT

[Readers: Quirky Question # 98 was posed to my colleagues in our Seattle office. Sarah Jung Evans was kind enough to provide the analysis below. If you would like to follow up with Sarah, don't hesitate to contact her at 206.903.2396, or via email at evans.sarah@dorsey.com. More information on Sarah's background is available at: http://www.dorsey.com/evans_sarah/. Regards, Roy]

Sarah's Analysis of Quirky Question # 98

This scenario is more common than you might think, often arising when a company like yours uses an agency to find temporary or permanent employees and the subsequent hires prove problematic, or even worse, criminally dishonest. In this situation, your company (and other similarly situated employers) need to ensure that it does not experience this business loss again. The question is how this goal can be accomplished without terminating your firm’s relationship with the hiring agency, which you have described as “Company ABC.”

You have two options. First, you can ensure that the contract with Company ABC contains terms requiring it to utilize a reputable third-party vendor to conduct appropriate background checks. The likely reason Company ABC is not doing so already is to avoid the costs associated with complying with the notification and other requirements of the Fair Credit Reporting Act (FRCA), which are triggered when one does not perform the background check internally.

Second, and the preferred option in my view, is for your company to take the reins on obtaining the records and screen the recommended employees yourself. Especially when you are hiring employees (whether temporary or permanent) who will have job responsibilities that you consider sensitive, conducting an appropriate background check can be crucial. For example, if the employees were going to be given access to customers’ credit card information, you will want to have complete confidence in the personal integrity of the employees you retain. Similarly, if you were hiring an engineer whom you planned to assign to a highly confidential software or hardware project, the disclosure of which would have great value to your competition, your company will want to ensure you are retaining honest and loyal individuals.

If your firm elects to screen the recommended employees (or use your standard vendor to do so), you will need to ensure that Company ABC, which is providing you the potential candidates, furnishes those prospective employees with the proper notices and authorizations for your company, or your vendor, to conduct the background check you deem necessary. After proper notice and authorization is provided to the potential hires, your company would be free to conduct systematic checks.

The main drawback to this second approach is the cost your firm will incur. The main benefit is that you will exercise substantially greater control of the screening process.

A standard credit check, often an important part of evaluating a candidate’s fitness for a position, implicates significant legal requirements to which you need to be attuned.

First, the Washington Fair Credit Reporting Act (WFCRA) prohibits an employer from obtaining a consumer report bearing on an employee's creditworthiness unless the information is substantially job-related, or required by law. RCW § 19.182.020. If such information is substantially job-related, an employer may obtain it only after the reasons for the use of such information are disclosed to the employee in writing. Id.

Second, the FCRA imposes certain requirements related to "consumer reports," a term that includes credit reports. Before obtaining a credit report, an employer must: (a) inform an applicant or employee in a written disclosure statement that a report may be obtained for employment purposes; and (b) obtain the individual's written authorization to obtain the report. 15 U.S.C. 11681b(b)(2). The employer also is obligated to certify to the consumer reporting agency that it has complied with all disclosure requirements. 15 U.S.C. § 1681d(a)(2). It is not entirely clear whether a vendor relationship would be considered to meet the "for employment purposes" prong of this requirement. However, to be safe, we recommend that your company comply with both the FCRA and WFRCA.

Third, the WFCRA imposes additional requirements. For current employees, the disclosure must notify the employee that the consumer report may be used for employment purposes. RCW § 19.182.020(2)(b). A statement to this effect contained in an employee manual will suffice. Id.

Fourth, both the FCRA and the WFCRA require certain disclosures before taking an adverse employment action, if such action is based in whole or in part on the information contained in the consumer report. The FCRA requires that after the report is completed, but before taking any adverse action, an employer must provide the individual with: (a) an unedited copy of the report; and (b) a copy of "A Summary of Your Rights Under the Fair Credit Reporting Act." 15 U.S.C. § 1691d(a)(1).

After taking adverse action based, even partially, on information in the report, the employer must orally or in writing: (1) give notice of the adverse action to the person; (2) provide the name, address and telephone number of the consumer reporting agency making the report; (3) state that the consumer reporting agency did not take the adverse action and is unable to give specific reasons for the action; and (4) provide notice of the person's right to obtain a free copy of the consumer report from the consumer reporting agency within sixty days and the right to dispute the accuracy of any information in the report. 15 U.S.C. § 1681m(a).

The WFCRA requires the employer to provide to the employee written notice of the adverse action, plus: (1) the name, address and telephone number of the consumer reporting agency; (2) a description of the consumer's rights under the Washington Act; and (3) a reasonable opportunity to respond to any information in the report that is disputed by the employee. RCW § 19.182.020(2)(c); RCW 19.182.110(2).

With regard to a criminal background check, you should keep in mind that such checks can be found to violate Title VII due to the disparate impact they have on minorities. To minimize the risk of such a claim, you must be able to show a business necessity to justify the exclusion of an applicant on the basis of prior criminal convictions.

Generally, an employer cannot use a prior felony as an absolute bar to employment in all situations, and a blanket policy of excluding all applicants with conviction records is likely to constitute unlawful discrimination. Such pre-employment inquiries should be accompanied by a statement that convictions will not disqualify the applicant automatically, and that you will consider the particular circumstances of each case when deciding whether employment of that particular person for the particular job is manifestly inconsistent with the safe and efficient operations of the employer.

Despite the seemingly onerous requirements associated with both the FCRA and the WFCRA, by conducting careful background checks either directly or using your own vendor, your company will gain greater control over the hiring process for your independent contractors/temporary employees. This should enable your firm to avoid the repetition of the problems you recently experienced when relying on another company to evaluate the backgrounds of these individuals. Finally, as your company becomes more familiar with the FCRA and the WFCRA, and your company works with these statutory schemes more routinely, you likely will find that compliance with these statutes is less burdensome than you might anticipate.

Guest Article, Forensic Psychiatric Evaluations of Emotional Distress Claims, Part 2

Fri, 12 Jun 2009 13:25:00 GMT

CONTRASTS IN CLAIMS: EVALUATING EMOTIONAL DISTRESS—Part II— A “False Claim”

Barbara Long, M.D., Ph.D., A.B.P.N.

Employment law Title VII claims often include claims of significant emotional distress allegedly caused by inappropriate remarks, touches, and other behaviors in the workplace. When a supervisor, as opposed to a coworker, has been the alleged instigator of the reportedly offensive behavior, emotional distress claims are frequently enhanced because of the “power differential” between the supervisor and supervisee. Evaluating the validity of such emotional distress claims can be challenging. This paper, which is Part 2 of a series on Evaluating Emotional Distress Claims, will describe how expert psychiatric forensic consultation can assist in determining which claims may have merit and which may be false, the ultimate determination to be made by the trier-of-fact.

Case # 2 – False Claim

Background Facts

Bitsy was a 23 year-old single Texas woman who worked in sales for two years for the Southwest division of an advertising agency. She held this job since graduating from a local college, where she had earned a degree in business. She reported to the regional manager, Tom, and worked hard at her job. She was an attractive, outgoing, flirtatious woman, who joked around and socialized outside of work with the largely male sales force and her boss. At her first annual retreat of the national sales force, alcohol flowed freely as a “Number One in Sales Award” was presented for the best national performer. Although her sales numbers were high, she did not win the award, much to her disappointment. On her performance review, she was rated “meets expectations” in most categories and “above expectations” in some. In the section entitled, “Your Personal Goals in the Company,” she usually wrote, “To win the “Number One Award” and be National VP of Sales, and I think I am good enough to do it!”

At her second annual retreat, Bitsy’s boss invited the division team for lunch and early cocktails in the hotel bar. Bitsy and six others (five men, one woman) attended. They talked about work and their families. Other than Bitsy, everyone, including Tom, showed pictures of their spouses and children. Bitsy talked about her current boyfriend, who was “rich and cute.” After several rounds of Margaritas, the level of banter, including sexual innuendo, increased. The other woman excused herself, stating that she wanted to go shopping and inviting Bitsy along. Bitsy declined, preferring to remain “with the boys.” They continued to drink and banter until about 6 PM, when all of the men except for the manager, departed for the convention meeting, which was starting. Alone, Bitsy and Tom discussed her goals with the Company and her frustration that she had not won the achievement Award either year. She also said that in addition to a higher raise, she felt that she was entitled to a promotion to Sales Manager for Texas. Tom suggested they discuss her thoughts later in the evening after the meeting was over. They sat together at dinner, in which more alcohol flowed.

After the meeting, Tom suggested that they talk in his suite. Both were highly intoxicated by that time, Bitsy having consumed five Margaritas and four glasses of wine. She again discussed her expectations, while Tom listened but said nothing. She became angry by his lack of response and began to cry. He put his arm around her, and she cried into his chest. Tom told her not to worry, that he would “take care of her,” and that “all would work out just fine, although she was “not yet ready” for the promotion she desired. However, he said that he was confident that she would someday be given the job. All she had to do was to “keep doing what she was doing,” i.e., working hard. Reassured, Bitsy told him how relieved she was to work for “such a big, strong, handsome man who will always protect me.” She asked if he would “always take care of me,” to which he “promised he would.” They acknowledged a mutual attraction, and Tom brushed her breast, as he dried her tears with a tissue. After considerable “petting,” they disrobed and began to have sex. Bitsy later testified that over the course of the night, they engaged intercourse four times and mutual sex twice, and that during the proceedings, Tom had “promised” to approve her promotion when they returned, if she would “keep doing what she was doing,” i.e., performing sex.

The next day, they returned to work. Bitsy went to Tom’s office and asked when he would finalize her promotion. A shocked Tom asked to what she was referring. Bitsy described the previous evening’s events and his “promise” of a promotion in return for sex. Tom said that there was no such promise and that, in fact, he had told her that she was not yet ready for the promotion. The sex, which “both of us enjoyed, had nothing to do with anything.”

Enraged, Bitsy went to the V.P. of Sales, broke down in tears, and told him about what had happened and the reported promises made. He called in HR, who launched an investigation after interviewing Bitsy. As per their usual protocol, HR immediately referred her to an Employee Assistance Program (EAP) counselor, who recommended a medical leave of absence.

Tom denied issuing promises but acknowledged that there had been consensual sex at the meeting. He was issued a written warning and given mandatory sexual harassment training. Bitsy was informed about HR’s determination that although there was a difference of opinion about the sexual activity being consensual and no determination could be made about that, Tom had been given a written warning, additional training, and reminder about the policy against retaliation. Bitsy asked HR when she would be getting her promotion, but the V.P. of Sales affirmed Tom’s judgment that she was not qualified for such a promotion. Bitsy sought legal counsel and issued a Complaint of sexual assault, discrimination, quid pro quo sexual harassment, and retaliation. Her Complaint stated that she had suffered “extreme emotional distress and psychological injury” from the reported events and retaliation. Her EAP counselor diagnosed PTSD and recommended disability. They continued counseling on a weekly basis.

After two years out of the workplace, Bitsy’s attorney stated that because of her ongoing psychological distress from the “sexual assault, harassment, and discrimination,” she was still too “traumatized” to return to any form of work, and her ability to trust men was damaged. She could not work with men, because such would result in “reminders of the sexual assault and discrimination.” An additional legal claim of permanent disability due to psychological injury was added. Her EAP supported her legal claim, noting that in sessions, any discussions of what had happened or the prospect of work resulted in her client’s collapsing into tears and shaking with anxiety and panic. She said that her client had reported “freaking out” when she saw “big men who looked like Tom and was very frightened that any big man might assault her.” She described problems sleeping, diminished appetite and weight, low energy, and loss of motivation and self esteem. The EAP said that she was working hard to keep her client “stable and functional” but was having a hard time because of the stress of litigation. Bitsy saw her General Practitioner (GP) and complained of headaches, nausea, stomach and throat spasms, chest pain, and back pain whenever she thought of what had happened with Tom. The GP prescribed Prozac, which Bitsy took briefly but discontinued because of weight gain.

The Plaintiff’s Medical Expert

Her attorney retained an expert, whose assistant reviewed only the legal Complaint, interviewed Bitsy for two hours, and administered psychological inventories and tests, including the MMPI-2 and other tests designed for individuals who had experienced a PTSD Criterion A stressor (Criterion A of the DSM-IV diagnostic criteria for PTSD is defined as witnessing, experiencing, or confronting an “event or events that involved actual or threatened death or serious injury, or a threat to the physical integrity of self or others.”) The expert also administered other inventories designed to measure a claimant’s “emotional reactions to the harasser.” These non-standardized inventories, which were described in the social science literature, were found to yield highly significant results consistent with PTSD, extreme distress, and sexual trauma. The expert testified Bitsy had PTSD and was functionally disabled, and that her disability was 100% caused by the “sexual assault, harassment, and discrimination.” No Axis II diagnosis was made. The expert further opined that Bitsy exhibited all of the clinical signs seen in women who suffered psychological damage because of sexual harassment by a male superior who had used the power of his position to “get her alone, intimidate, and sexually assault her.” The expert further stated that it was common for women, who were “trapped in such a situation,” to be “unable to say no” because of their fear of consequences, including loss of their jobs if they declined the sexual advances.

The Defendant’s Medical Expert

The expert retained by the defense conducted psychological testing, which included four general standardized tests: MMPI-2, MCMI-III (a test for Axis II), Rorschach (administered and scored according to the scientifically-validated Comprehensive System of John Exner), and the Structured Interview of Reported Symptoms (a test for feigning or malingering of psychological symptoms).

A comprehensive psychiatric interview obtained the following history. She had been a cheerleader and Prom Queen in high school. In the college, she had joined a sorority and began a pattern of heavy alcohol usage at parties and football games. Occasionally she enjoyed marijuana and had used cocaine while in college. She described a pattern of engaging in many sexual relationships but discontinuing them after a brief time when they failed to pay sufficient attention to her “needs.” She added that she was looking for the right man “to take care of me.”

During the two years leave of absence, Bitsy had become involved romantically with several men, moved in with them, and traveled with them to different foreign countries. She worked out every day and pursued a number of hobbies and interests, including gardening, boating, and roller blading. She socialized with her social network of female and male friends and continued her former pattern of heavy daily alcohol usage. She had made no efforts to get another job, instead hoping to marry her current boyfriend, who was a successful investment banker, who “took care of” her and gave her “whatever [she] wanted.” When discussing the reported events leading to her legal complaint, she exhibited rage, cried, and said that she had deserved the promotion and wanted Tom to “pay” for denying it to her, particularly after he had “had his fun.” She expressed further rage toward the company for “protecting him not me” and vowed to “make a difference in how big companies treat women.” She added that her goal was “justice” and that “no amount of money in the world could make up for what they did to me.” She was proud of the extensive media coverage and added that “CNN wants to do a segment on my case.” She said that thinking about the situation had ruined her career, disrupted her life, and left her with severe physical symptoms. She felt “too violated” to “think about work.”

Bitsy’s MMPI-2 showed elevations on the L and F scales, suggesting an unrealistic view of herself as highly virtuous and clinical scale elevations more exaggerated than those seen in psychiatric inpatients. She produced clinical scale elevations on Scales 1 and 3 (Conversion V pattern) and 4 (Psychopathic Deviate), a pattern often seen in histrionic or Cluster B personalities, who translate psychological conflict into physical symptoms. A substance abuse problem was suggested by her responses. The clinical scales measuring depression and anxiety were not elevated. The result was consistent with somatization in a histrionic/Cluster B individual with limited insight and tendencies to act out, especially involving alcohol. The MCMI-III was consistent with a Narcissistic/ Histrionic personality disorder.

The Rorschach, owing to the work of John Exner, Ph.D., is now a scientific test widely accepted by the Courts and psychological community. Unlike other instruments, it is difficult to malinger and is important, as it is arguably the best psychological test for reality testing and perceptual distortion – both problems of a developmental, rather than situational, basis. Along with variables measuring enduring personality characteristics, it also contains variables related to situational stress and affects that are temporary, rather than enduring. The results of the Rorschach should be examined for consistency with behavior as described in the history.

Bitsy’s Rorschach revealed the following well-entrenched, enduring personality problems, which are of a developmental basis: This is an unconventional, character-disordered woman with considerable hostility and difficulties maintaining emotional control, particularly when stressed. She has an unusually high Aspirational Ratio, suggesting that her ambitions exceed her emotional resources to cope. Repeated disappointments are likely when her aspirations fail. She tends to scan situations hastily and to make decisions based on limited information. She indicated some additional situational stress that is exceeding her capacities for control, resulting in possible lapses and acting out especially when she is angry. Problems with distortion of reality are evident, notably over issues evoking her anger. Such distortion is usually associated with impulsive decisions based on poor judgment. Her understanding of others is likely to be poor, and her relationships are more fantasy than reality based. She does not anticipate cooperative relations with others.

Examining the Rorschach variables related to emotions often seen in individuals with PTSD, she is currently constraining negative affect (anger) but is not exhibiting evidence of painful introspection, guilt, depression, hypervigilance, or self-recrimination. There is no evidence of stress from intrusive ideation often seen in individuals with PTSD. The Rorschach results were found to be consistent with Bitsy’s behavior as described in her history.

The Mental Status Examination was negative with the exception of complaints of litigation-related insomnia and somatic symptoms (nausea, stomach upset, headaches, etc). Her symptoms did not interfere with her ability to travel, do hobbies, and engage in social activities.

The defense expert diagnosed an Adjustment Disorder, Unspecified, with Somatoform symptoms, Episodic Alcohol Abuse, and an Axis II Narcissistic and Histrionic Personality Disorder. The Adjustment Disorder was caused by the stress of litigation. The alcohol and personality problems represented pre-existing problems that were unchanged by the disputed events and were ongoing. Her complaints of reported disability due to severe psychological injury were inconsistent with her own report of good functioning in all areas of life and absence of symptoms except as evoked by the stress of litigation. The case settled out of court.

Lessons Learned

Among the many issues raised by his case, the following will be highlighted:

1. Alcohol usually results in significant impairment in judgment, both by employees and their managers. When alcohol is involved, it is difficult later to determine the truth of what occurred when workers are together under the influence in ambiguous social settings.

2. Those in positions of authority risk their jobs as well as legal action when they engage in sexual activity with subordinates. This case illustrates such a high risk situation, but risk is present, even if consenting adults advise HR and keep their relationship professional at work. The repercussions on the workplace, which is a highly interpersonally connected and emotionally sensitive place, are usually significant, since traditional roles and the expectations surrounding those roles change when a superior is involved with a subordinate.

3. Companies are well-advised to have training about boundaries between superiors and subordinates and the potential hazards involved in socializing with coworkers and using alcohol in settings that blend work and social objectives.

4. When significant problems are discovered, a psychiatric workplace consultation may help to defuse the situation and make referrals if further mental health treatment is indicated. Involvement with such a neutral third party professional may be a useful step for HR to take prior to referral to EAP counselors. Such counselors can be useful in treating employees but usually lack the necessary training, education, and experience, to diagnose significant clinical and personality disorders. Further, if asked to testify as expert for their client/ plaintiff, they may find themselves in an ethical bind, not only because they may be called upon to testify against the company that made the referral, but also because of the risk of conflict of interest posed by assuming dual roles.

5. If there is a significant claim for mental distress and/or disability, it is useful for attorneys for both plaintiff and defense to obtain an Independent Medical (Psychiatric) Examination (IME). Such an examination is most effective when it involves three parts: (A) Review of legal, medical, mental health, work, and other pertinent records that permit a longitudinal view of the claimant’s functioning in a variety of settings; (B) Psychological testing using standardized instruments that measure general psychological symptoms, personality, and possibly malingering. This is preferable to tests designed to validate restricted diagnoses that may produce false positives and subjective instruments that feature close-ended questions that risk evoking “yea-saying,” i.e. affirmative responses. (C) Comprehensive psychiatric clinical interview and Mental Status Examination. Following this procedure, opinions obtained to a reasonable degree of medical certainty, about diagnosis and causality can be offered and properly defended in deposition or trial. Consideration of issues of secondary gain and malingering are part of the IME.

6. The expert should not simultaneously function as the claimant’s treater due to the high risk of conflict of interest.