Monday, April 14, 2014

Know Your Evidence, Part 10

I really can't explain the results in this particular case from the Northern District of Illinois, except to say that somehow the company just didn't bother to look at its own internal timekeeping system, with the result that it failed to realize when it terminated an employee for tardiness that, in fact, the record showed that she had been at work on time. The result was a reversal by the Seventh Circuit Court of Appeals of summary judgment, followed by this Title VII retaliation case making its way back to the trial court where it will be heard by a jury, unless it settled. Which is what I recommend for the employer.

The company kept saying that it terminated the plaintiff for a single reason-tardiness, sometime after she filed an EEOC complaint alleging she'd been discriminated against on the basis of race when she was denied a promotion. True to form, she then sued for retaliation, and also true to form, the original race discrimination claim was dismissed on summary judgment. But because the alleged basis for the company's decision--i.e. the fact that the plaintiff was late to work--was inconsistent with the company's own time punch records, the Court of Appeals found that there was a factual dispute, and sent the case back for trial.

This type of error should be picked up in the initial factual investigation when a company decides an employee should be terminated. As you read the court's opinion, the company (and to a certain extent its counsel) simply looks like it did not understand its own rationale for the termination.  The end result is predictable.

Thursday, March 27, 2014

Federal Statute Creates New Burdens for Employers Filing Unemployment Claims

A little noticed federal statute – the Unemployment Insurance Integrity Act – has the potential to create some big problems for employers who deal with unemployment insurance claims.  The statue was passed in 2011 to little fanfare.  It was focused on trying to deal with unemployment insurance fraud, but seems to have focused on relatively minor employer fraud issues, rather than the much larger and pervasive employee fraud problem, and basic government mismanagement of the unemployment insurance programs at the state level.

The statute provides that states' unemployment compensation schemes must require employers and their agents to timely and adequately respond to a state unemployment agency's request for information.  This is true regardless of the state of the employee's claim, and includes the initial unemployment claim, something that is frequently ignored by employers who do not wish to contest unemployment claims by their terminated employees.  The statute requires that if an employer engages in a pattern of non-existent or inadequate responses, the state is to charge the employer's unemployment insurance account for all benefits claimed, even when the claimant is determined to be ineligible.  In other words, an employer can lose the right to challenge frivolous unemployment claims if it supplies bad information, or no information, in response to an initial unemployment charge.  States are also required to put civil and criminal penalties in place for these failures to respond.

So employers should pay attention to these new requirements, particularly since state unemployment insurance agencies only allow a limited period for filing responses.  The required state laws penalize an employer for willfully making a false statement or willfully failing to disclose a material fact related to termination of an employee with penalties that are imposed based on repeated instances this conduct.  Traditionally, states have not required an employer to respond to an unemployment notice under circumstances where eligibility for the unemployment insurance is not in dispute, such as in a layoff situation.  Under the new statute, a response is likely required, regardless of the circumstances.  For employers that have traditionally elected to simply not contest a claim for benefits (for whatever reason) the statute works a major change.  Simply put, employers should now never ignore a request for information from an unemployment insurance agency, even in situations where the employer is electing not to challenge the claim for benefits.  Depending on the state, the company could find that two failures to respond (or a failure to respond that is late by more than a day) could constitute a pattern of failure under the state statute, and subject the employer to the loss of its ability to challenge bogus claims in the future.

So, some quick advice: do not provide written separation agreements to terminating employers providing that an employer will not contest an unemployment insurance claim.  Regardless of whether the employer wants to, a response is now required, with accurate information.  Employers must consider that their payroll service or unemployment insurance contractor will be faced with accelerated requests for information and may lean heavily on the employer to provide this information quickly.  Accordingly, employers should review their state laws and train their staffs to recognize these claims and notices for unemployment insurance so that they can be flagged for quick follow-up action.  To facilitate processing, the employer should consider using a system similar to that for managing workplace absences (and if you don’t have such a system in place for workplace absences, you should get one) involving a single or limited point of contact for all unemployment insurance inquiries and responses.  Finally, employers should consider eliminating the offer of not contesting unemployment compensation from their severance plans.  This will require some thought with respect to severance terms and offers, given that unemployment compensation is frequently a significant economic benefit to a departing employee.

Some Thoughts on the Unionization of College Athletes

The recent decision by a Regional Director of the NLRB to find that Division I college football players at a private university are, in fact, employees for purposes of union organizing is potentially a watershed event for college athletics. If this decision is not reversed during the appeal process, then it will mean the end of college athletics, at least as we know them here in the United States.

Some of the early commentary on the decision reflects a view that the analysis is a tightly crafted piece of legal wordsmithing that is likely to stand up on review by the NLRB as a whole and the federal appellate courts.

I have no idea what those early commentators were reading, but I don't think it was the NLRB decision. The document itself contains what I consider gigantic holes in terms of its reasoning and legal support. It flat-out ignores certain key aspects of the college-student relationship that I think will prove fatal to the analysis on appeal. But mainly, it simply proves too much with respect to the employee status of the college athletes.

The NLRB decision uses a lot of ink detailing the amount of control the coaching staff has over Northwestern's scholarship football players. In fact, that's one of the key weaknesses of the decision-what is described throughout these paragraphs is not an employer-employee relationship, but a relationship between students and the people responsible for their education and welfare, who stand in an in loco parentis status rather than a boss status. No employer in the United States maintains the kind of control the Northwestern coaches have over their charges. To me, that argues more heavily in favor of their student status than anything else in the decision.

The Regional Director simply glosses over the key question of whether students at a university on scholarship are performing work subject to a contract of hire, for remuneration by their employer. There's no discussion about whether the scholarships and associated room and board payments even resemble wages. For example, scholarships are a fixed value, independent of the quality or amount of work performed by the recipient. Second or third string scholarship players at Northwestern get just as much money as the guys on first team. That doesn't resemble any wage scale that I'm aware of.

The Regional Director discounts the key aspects of a college’s academic emphasis with respect to eligibility, postseason activities, and the like. He notes that during certain times of the year participation in the football program involves a lot of hours, in some cases perhaps more hours than the players spend hitting the books. I have no idea whether that's true-there was no objective evidence cited for that proposition, just anecdotal testimony-but I do know that if you're not hitting the books to a certain degree, you can't play. So whatever the emphasis on scholarship, it is in a very real sense at least as important as athletics given that your athletic performance does not determine your scholastic eligibility, but rather, the other way around. Graduation rates also dictate postseason play, a concept totally foreign in any employment relationship.

Even something as fundamental as the burden of proof in the case is contorted in the Regional Director's analysis. I'm unconvinced that a group of people who walk into an NLRB office claiming to be employees can somehow shift the burden of proof instantly to the target employer, which then must put on evidence to show that, whatever the claims, these people are not employees.

It will be very interesting to see what happens to this case on appeal. But for a minute, imagine the impact if college players are found to be employees rather than students. The value of their "wages", i.e. their tuition, books, living expenses, etc., becomes instantly taxable. Moreover, the fact that colleges would be free to pay additional "wages" would, in a real sense, very quickly spell the end of college athletic programs at a number of universities that simply would not be able to compete with the economic prowess of the major college football and basketball schools. It might also mean the end of most nonrevenue sports, because the dollars flowing into those sports from the football/basketball programs would have to be diverted to maintain the football or basketball edge.

Unlike some other commentators, I don't think this decision has a very good chance on appeal. And if nothing else, I would expect a legislative fix to be engineered if it appears likely that colleges are going to lose a big chunk of that $11 billion of annual revenue they receive from their athletic programs. But if it does survive, I think we can say goodbye to most if not all of the practices that we recognize as integral to college athletics today.

Tuesday, March 25, 2014

Saving Non-Competes with Forum Selection Clauses

I have been counseling a lot of clients on the use of non-compete agreements lately, and given our firm-centric focus in California, the issue often arises as to whether non-competes can ever be enforced for California employees.

Typically, the answer is “no”; California law categorically rejects any type of post-employment restriction on an employee's ability to seek work, even with a directly competing company. In addition, California courts historically reject employer efforts to get around the California non-compete rule by using a choice of law provision designating a non-compete friendly jurisdiction to hear any disputes. But a recent Supreme Court decision might be giving some life to the ability of out of state employers to enforce their non-compete provisions on their California work force.

The Supreme Court case held that contractual forum selection clauses should be enforced unless particularly unfair or exceptional circumstances exist. The ruling follows the trend already established in some California federal court cases. In one case, a Washington-based employer was permitted to enforce its Washington forum selection clause and choice of law provisions against California sales employees who left for a competitor. When the employer filed suit in Washington, pursuant to the selection clause, the employees tried to block the action by suing in California federal court. But the California federal court determined that the forum selection clause was valid. Other California federal courts have found forum selection clauses valid, for example in the case of a Pennsylvania company seeking to transfer non-compete cases from California to Pennsylvania. In both cases those courts ruled that the possibility that Pennsylvania law might be applied to the non-compete clauses was not a sufficient basis to void the forum selection clause in the employment agreements.  And a recent state court decision applying Pennsylvania law to a California resident employee is here.

So for non-California based employers, don’t give up hope with respect to your non-compete agreements. But you should start now, drafting provisions, in your employment agreements that contain forum selections clauses as well as choice of law provisions. The tide may be turning in a way that allows you to protect your business.

Sunday, March 23, 2014

Silicon Valley Job Searching Advice

Some potentially useful information for both employers and job seekers in the tech world is here.

Thursday, March 20, 2014

A Bad Attitude Policy and the NLRB

Most companies will terminate an employee for a lousy attitude that has tangible effects with co-workers and customers.  Sometimes that prohibition is expressed in an employment policy, most times it is not.  A recent NLRB decision dealing with the former situation should provide some solace to employers who seek to discipline employees that would rather be working somewhere else and don’t care who knows it.

The case concerned a restaurant that had a rule in its employee manual that prohibited insubordination or lack of respect and cooperation with fellow employees or guests, including “displaying a negative attitude that is disruptive” to staff and customers.  For some reason, the general counsel of the NLRB took the position that the rule clearly encompassed an area of protected concerted activity, in that employees would assume that the rule would prohibit them from being critical of the employer, which would inhibit the employees from raising controversial topics, including terms and conditions of employment.  Fortunately, the majority of the Board (in this case, the two Republican appointees) determined in fact that the relevant policy language limits the policy to unprotected conduct that would interfere with the legitimate business concerns of the restaurant.  In this case, "unprotected conduct" meaning being a butthead, specifically using an obscenity in front of the restaurant patrons, a "fit of pique [that] wasn’t part of the service that guests reasonably would expect".

The NLRB has been on the warpath against employment policies lately, taking a position that I can best express as, “if there is any possible way that a provision could be interpreted in a way that violates federal labor law, then the policy is illegal and must be voided.”  Fortunately, there are some more rational heads on the Board, and they prevailed in this case.

Wednesday, March 12, 2014

New EEOC Guidance on Accommodating Religious Dress in the Workplace

The EEOC recently issued its interpretation of Title VII's requirements that employers accommodate religious practices of their employees.  The guidance is here. The only thing that I would note in this publication, which is merely a restatement of current law, is that the EEOC is using the words "undue hardship" into this guidance. However, the term "undue hardship" does not mean the same thing as the phrase does in the context of other employment statutes requiring accommodation, such as the Americans with Disabilities Act.

In fact, the law regarding religious accommodation has remained relatively stable for several decades-an employer is not required to accommodate a religious practice of an employee if doing so would create more than a "de minimis" effect in the workplace. This is a significantly lower standard of harm that an employer has to demonstrate than is found in the ADA. I'm not sure why the EEOC is using the same term, except perhaps in an attempt to get people to believe that the burden is somehow higher than it actually is.