Important Safety Tip: Transcribed Voicemails and Protecting Internal Information

An employment discrimination case involving a major law firm in Boston highlights the importance of protecting internal investigations and assessments from searches by people in the general company workforce. In this case, I think it’s going to be an expensive lesson for the law firm, and it has important lessons for any employer that uses digital storage of wordprocessing documents. .

It also highlights a stunning lack of technological sophistication on the part of firm management with respect to its own confidential information.

NOTE:  The case is reported in the Massachusetts Lawyers' Weekly, here, but you'll need a subscription.

A female associate of the firm raised an internal complaint that she was being sexually harassed by her supervising partner. The firm assigned another partner to investigate her claim. Unfortunately, the investigating partner had some issues that apparently raised concerns about his objectivity with respect to the female associate’s complaint. The law firm’s diversity chair, a lawyer herself, spoke with the investigating partner, and then at 5:30 AM one day left a detailed message on the voicemail of the firm's managing partner. Her message indicated that the investigating partner was overly defensive and automatically discounted complaints from firm employees about their working conditions.  She also strongly criticized the firm for its knee-jerk reaction in ignoring or not taking seriously sexual harassment complaints.

For whatever reason, the managing partner felt that it was appropriate to transcribe this oral message into a document that was then preserved in the firm's digital wordprocessing files. It was not password protected, or otherwise segregated from other documents in the system, and, incredibly, was open to search by anyone with access to the system. Of course, the female associate found it, copied it, and is using it as evidence in the discrimination case she ultimately filed against the law firm.

The law firm has tried to prevent the use of this document, with its highly damaging admissions, by claiming it was a confidential attorney-client privileged document, or, at the very least, that the female associate violated her ethical obligations as a lawyer by removing firm property for her own personal use.

The state court official overseeing discovery disagreed. The transcription did not contain legal advice to the firm (which would have made it attorney-client privileged, at least) nor did it discuss specific aspects of defending or prosecuting the discrimination charge, which might have made it protectable as work product. Instead, the official found that the transcription simply discussed the law firm's environment with respect to diversity and gender at the time when the female associate worked there.  The matter goes before the trial judge next week for another review.

The managing partner who ordered the transcription opined recently that the female associate "was in for a very important lesson in the law" if she thought that just because his doors were open and his files were in his office that she was authorized to go get those files.  But that seems to me to be a completely wrong analogy. The female associate wasn't in his office going through his files, she was working in a common access area open to lawyers, secretaries, paralegals, and God knows who else at the firm. Moreover, even though it would have been relatively simple to protect the transcription with a password, the managing partner didn't think to do that. And finally, fundamentally, who transcribes and makes a permanent record of a message like this? This is precisely the kind of internal assessment information that should be transmitted orally and kept that way, or done with clear attorney client privilege attributes.

Further complicating things is the fact that the Massachusetts Board of Bar Overseers has recommended that the female associate receive a reprimand for taking a document that she should have realized was confidential and not intended for this use.

Well, duh.  Smoking gun documents admitting that your company is ignoring sexual harassment complaints are never intended to be used in a lawsuit.  At this point, the document is admissible evidence. Also, at this point, it's quite clear that the law firm would never have released this as part of its normal discovery responses, or even revealed its existence.  Given that the firm did not take even the basic steps necessary to protect the alleged confidential nature of the information, it's hard for me to see this as an ethical violation, even a minor one.

The lesson here is obvious: some information is best transmitted without a permanent record being established, but if you establish such a permanent record, at least be smart enough to protect it so that a litigant in your employ can’t wander across it in your generic document files.

Disability Hiring Quotas on the Way for Federal Contractors

Along with what has to be one of the more disingenuous press releases I've read recently (and in Chicago, that's saying something), the OFCCP issued proposed rules for federal contractors that effectively mandate that 7% of their workforces will be people with disabilities, or else.

The rules require particular efforts by contractors to recruit and hire disabled workers, along with the associated burdensome record-keeping, similar to what is already in place under the OFCCP's affirmative action requirements for women and minorities.  The proposed rules also include requirements for written disability accommodation procedures and annual job description reviews.

What's particularly interesting is the OFCCP setting a "goal" of having 7% of a workforce classified as "disabled" under federal law.  The OFCCP leadership is saying that this figure is only "aspirational".  But it's very clear that the "goal" is actually a hard floor for companies that want to avoid the expense of a full OFCCP audit.  Apparently frustrated at the fact that the relatively higher unemployment rate for disabled workers has resisted the four decade-long combined efforts of the EEOC, the courts and state law, the OFCCP has now decided that it's not enough to oversee and tune the process of hiring and promotions--it wants the outcome to resemble some federal best guess of what the workforce should look like.

In a particularly ironic statement, the OFCCP Director says that what gets "measured" gets done. But of course, there is no "measure" for disabled employees.  The OFCCP has no idea how many people who qualify as disabled are actually working in federal contractor jobs.  No one does.  Unlike gender or racial differences, many disabilities (especially  mental or psychiatric conditions) do not manifest themselves to employers, and employees rarely go out of their way to identify themselves as disabled.  What is clear is that whatever the official number is now, it is certainly lower than the actual value.  This fact not only means that the OFCCP's program appears to be a solution in search of a problem, it means that it will be impossible to verify compliance, absent some type of highly intrusive inquiry of employee health conditions.  Exactly the type of inquiry that is currently illegal under federal law.

Another reason to avoid contracting with the federal government.

Ticket Scalpers and Gold Diggers Everywhere Breathe a Sigh of Relief

Trading World Series tickets for sex isn't prostitution, as a matter of law.  Although the article makes the proposed swap sound pretty innocuous, the actual transaction, as alleged, was a good deal more salacious than a simple generic offer.  The court's decision is here.

The article is from the WSJ, where they worry about this stuff (not too surprising, given the frequency with which NYC baseball teams make it to the Series; this type of transaction is more of a theoretical issue here in Chicago).

The Dumbest Employees of 2011

Hmmm.  This is from AOL, and these folks are all fairly dim, but the guy who did a Lorena Bobbit on himself is the clear winner in my view.

And of course the year is not over by a long shot, especially if you consider all the misconduct, foolishness and substance abuse likely to take place at office parties and workplaces between now and the New Year.  So even though I think it will be hard to top the English patient, I am not counting anything over until 1/1/12.

No Harm, No Foul (Lawsuit)

Say you're a large employer using an electronic payroll system that is hacked by nefarious persons unknown. Suddenly, your employees' Social Security numbers, birth dates, earnings history, withholdings, and home and business addresses are now presumed to be open to exploitation. What's worse, the hack occurred as a result of a heretofore unknown but readily discoverable flaw in your corporate IT firewall that, once it was exploited, opened all of the employees' personal data to review by third-party.

Eschewing the traditional pitchforks and torches, a group of your employees file suit alleging potential identity theft, increased costs to monitor credit activity and significant emotional distress as result of the threat of having their financial futures ruined. Big trouble for you, right?

Probably not. A recent decision of the Third Circuit discusses a very similar situation involving a contract payroll processing firm that also suffered a significant breach of security, resulting in tens of thousands of employment records being opened to unauthorized review. But, as the District Court found and the appellate court affirmed, the plaintiffs in this case did not have standing to sue because their allegations of hypothetical future injury were not sufficient to satisfy the requirement that there be an actual injury in fact for a lawsuit to proceed. Or, as the court noted with respect to the plaintiffs' still speculative claim that a hacker took their personal information with the intent to commit a future criminal act involving their identity, "unless and until these conjectures come true, appellants have not suffered an injury; there has been no misuse of the information, and thus, no harm." 

This is probably music to the ears of many companies that maintain large amounts of sensitive personal data that is always under the threat of revelation. The short answer is that simply suffering a data breach like this does not open the door to liability; there has to be some manifestation of harm before court will agree to review the case or award a remedy.

Diplomas and Job Selection Standards

One of the things that has always puzzled me is why the various federal discrimination agencies (not to mention plaintiffs' attorneys) have not attacked employers on the high school/college diploma requirement for hiring or promotion. It isn't like there hasn't been some hint that this might be a lucrative area for a disparate impact type claim-the Griggs case from the early 1970s was a clear warning by the Supreme Court that generic education standards for employment might not hold up under any kind of systematic analysis.

Just think for a moment about the difficulty of justifying the need for a bachelor's degree with respect to many jobs. Especially in the liberal arts area. What exactly does a bachelor of arts degree mean with respect to a job such as marketing, insurance underwriting, medical technology, food service or financial management? In truth, aren't many of the skills people need for these positions learned on the job, as they move up through the ranks of blue and white collar America?

There may be some change on the horizon here. The EEOC recently issued what it refers to as an "informal discussion letter" in response to a query about the application of the ADA in situations where learning disabled students have difficulties on state required tests, that result in their being denied a high school diploma. Expanding on the question before it, the Commission opined that a qualification standard, test or other selection criteria such as a high school diploma requirement that effectively screen out an individual or class of individuals with a disability must be "job-related for the position in question and consistent with business necessity."

Those are ominous words inside the quotation marks, ladies and gentlemen. Because if you can't articulate why, exactly, a person needs a high school diploma to perform a specific job, or if your workforce contains examples of people without high school diplomas performing the work in question, or if it's possible to train people up to the necessary level of performance without them having a high school diploma, then you may be in trouble under the ADA with respect to people with learning disabilities. Moreover, it's a simple step from challenging high school diploma requirements to challenging college graduation requirements along the same lines. And there's no disputing the fact that a college graduation requirement has a significant disparate impact among certain populations, including minorities, and the disabled.

And now to make this issue really convoluted, a recent law review article from William and Mary Law school cites studies that convincingly demonstrate that the best predictors for job performance across the board are so-called "g" loaded standards that are heavily indicative of cognitive ability. Graduation from high school and from college are classic g loaded standards, and an employer applying these types of tests will, according to the research, end up with a significantly less diverse and more effective workforce.

Whether this type of broad-spectrum social science analysis would have any effect on a judge or jury in an actual disparate impact case, where the assumptions are that an impartial job selection process will result in workers from each protected class being hired or promoted in rough proportion to their numbers in the population (which the article categorically states is an incorrect assumption) remains to be seen. What is clear is that most employers would be hard-pressed to point to specific elements of any job in the workplace that are grounded in a high school or college diploma, even though these cognitive standards work well.

For now the floodgates for this particular type of litigation are still secure. But for how long?

Absolutely Inexcusable

The Browns admit that they didn't check their quarterback for a concussion after a helmet to helmet shot that obviously staggered him.

Idiotic and dangerous.

It goes to show that even in organizations with relatively small numbers of employees and plenty of resources to devote to a problem, getting a policy properly enforced takes focus, and accountability.  I hope there are both in Cleveland.

Downward Dogs for Everyone!

In what I'm sure will prove to be a key ruling for the leotard and Lycra set, it turns out that yoga poses cannot be copyrighted.

Personal Example As a Source of Athletic Success

I must say that although I'm a slight fan of the Denver Broncos, I'm not a member of the Tebow cult. Denver wins because of its terrific defense, its excellent kicker, a solid running game, and, yes, because of the efforts of its quarterback.

But after reading this Wall Street Journal article, I can certainly see how this single player inspires his teammates, along with an incredibly loyal fan base.  And I will continue to hope that the type of personal integrity detailed here is contagious.

UPDATE:  And it appears that what Mr. Tebow did in college he is continuing to do as a pro.  As Rick Reilly notes, it's Tebow's off the field conduct that merits admiration and emulation. Very impressive

The Best Laid Plans, Etc.

Being prepared and thinking ahead are critical in dealing with problematic, long-service employees. Most employers are not willing to terminate long-term employees, even ones who have a history of performance problems, except as a last resort. So it's not uncommon to find cases of companies setting up mechanisms to try to provide an incentive to these employees to behave. In extreme cases, these incentives take the form of so-called "last chance agreements", where employees are put on formal notice that one more episode of misconduct or incompetence will result in termination.

Which is where our story picks up in this case, and provides along the way a highly teachable moment. The last chance agreement offered to plaintiff by the employer contained a clause that probably meant well, but ultimately led to all kinds of unintended consequences. Specifically, as part of being allowed to continue employment, the employee had to agree not only to release the employer from any past claims against it (this is not uncommon and makes perfect sense), he had to agree not to commence any action against the employer under any employment law before any state or federal court or administrative agency, civil rights commission, etc. Failure to agree to these terms meant instant termination. Shortly after signing the agreement, the employee decided he could not agree to these terms; termination followed, QED.

Important safety tip.  It's illegal for an employer to prohibit an employee from filing a charge with the EEOC or from filing a lawsuit as a condition of continued employment, and especially with regard to future events. An employer may be able to, in certain circumstances, restrict an employee's ability to receive any benefit from an EEOC charge (and thus remove the incentive for filing same), but the Commission retains an absolute right to investigate on its own any and all claims within its jurisdiction.

The trial court evaluated two important issues-whether revoking the last chance agreement, with its illegal clause, was in fact protected activity (making the discharge illegal retaliation), and whether simply offering the agreement, with its threat of termination for engaging in protected activity, was a retaliatory practice.

Again, important safety tip-the company in this case knew that it could not legally prohibit its employees from filing charges of discrimination with the EEOC, or suing it for discriminatory conduct that occurred after the signing of the agreement. Notwithstanding this knowledge, management allowed this term to remain in the last chance agreement, apparently in the hope that the threat would dissuade employees from filing charges and lawsuits, even though the company had no ability to actually enforce the provision. Don't do this. If you have a provision in an agreement that is legally unenforceable, or that you do not intend to enforce, take it out.

With respect to the first issue, the court found a question of fact as to whether the employee was fired because he wanted to protect his civil rights or because he revoked the last chance agreement. That means the issue goes to a jury, which I expect would not be particularly receptive to the employer's semantics here. In other words, the difference between being fired for saying "I revoke my agreement to this document which takes away my civil rights" (the employer's position) and being fired for saying "I want to protect my civil rights" (the EEOC's and employee's position) is a subtle and risky enough distinction that it should not be allowed to occur.

The second issue was a little easier for the court. Threatening to fire people for engaging in protected activity is sufficiently discouraging for most employees that the threat itself is a retaliatory act prohibited by federal (and most state) law.  Accordingly, it's a bad idea to have such threats actually written into your employment documents. 

Making the Other Side Pay

One of the maddening inequalities in employment litigation is the fact that attorneys fees are routinely awarded as part of damages to a successful plaintiff; a successful defendant must bear its own attorney expenses and normally is only entitled to recover so-called "costs", typically things like filing fees, or document copying expenses. Only in the rare case are recoverable costs significant enough to offset in any meaningful way the attorney expenses borne by a successful defendant. The unfortunate truth is that a plaintiff's attorneys fees are often a significantly greater financial threat than the award of back wages, or other compensatory damages, and can be a major factor for defendants in determining whether to move forward with the case, or simply settle to avoid the risk of a large award.

Electronic discovery, however, offers opportunity for defendants to level this playing field a little. Several recent cases, admittedly in more commercial settings, have held that a prevailing defendant is entitled to recover its electronic discovery costs, including the costs associated with converting electronic data into mutually usable file formats, and costs associated with electronic discovery project management.

Now the typical employment case does not involve the production of thousands of pages of information, or require significant e-discovery efforts. But in situations where a defendant is opposing a class-action with several hundred or even several thousand potential plaintiffs and their associated personnel files or wage payment records, recoverable e-discovery costs could easily top $30-$40,000. Confronting an employment plaintiff with a threat of having to pay that amount in the event of a loss would be a powerful tool for settlement purposes.

Several examples are here and here. And this case actually involved an employment claim; the defendants sought the award of discovery costs to potentially offset any award of attorneys fees as a result of the plaintiff's successful ERISA claim.

So keep track of e-discovery efforts and costs in litigation--they might be as useful a lever for resolution as a piece of important evidence.

And This Is Why It Is a Mistake to Date Coworkers

Especially married coworkers with a penchant for obsessive-compulsive behavior.  As a Duke grad, the young woman in this story should have had more sense.  Specifically, she should've picked up with somebody from Chapel Hill.

Tired Lips--All-Time Favorite Judges' Quotes, Part 10

"Our profession is rife with cynicism, awash in incivility. Lawyers and judges of our generation spend a great deal of time lamenting the loss of a golden age when lawyers treated each other with respect and courtesy. It's time to stop talking about the problem and act on it. For decades, our profession has given lip service to civility. All we've gotten from it is tired lips. We have reluctantly concluded lips cannot do the job; teeth are required. In this case, those teeth will take the form of sanctions."

Kim v. Westmore Partners, Inc., et al. (Calif. App., 4th Dist. 2011)

Retaliation Under Sarbanes-Oxley Can be Anything, Really

At one time, Sarbanes Oxley whistleblower claims were  projected to be the next "big thing" in employment litigation. Because of the fast track the claims were supposed to be on and the prospect for near immediate relief, it was envisioned that public companies everywhere would be inundated with serious claims about real or imagined SEC violations (or a host of other potential claims) that would open the gate to thousands of retaliation lawsuits. It hasn't worked out that way. But that doesn't mean that Sarbanes-Oxley cases don't still pose real difficulty for employers.

 

As with this case.   An employee raised concerns about Haliburton revenue recognition practices to the company's chief accounting officer. The CAO dismissed the concerns, as did the company and the company's outside auditors. Not satisfied, the employee then filed a confidential complaint with the SEC and Haliburton audit committee. In the process of notifying its management to retain documents pursuant to the investigation, the employee's name was revealed to other employee. In addition, the employee's complaint to the audit committee, which contained his identifying information, went to the company's general counsel, CFO and several others.

 

Not surprisingly, following the disclosure of the fact that the employee was reporting alleged wrongdoing by his fellow executives, many of his coworkers and the outside auditors refused to communicate with him. Ultimately, he resigned, although the SEC and the audit committee found that, again, there was no merit to his complaints.

 

The employee then filed a whistleblower complaint with the Department of Labor. The administrative law judge who heard the case determined that there was no adverse action taken against the employee because of his whistleblower status. The employee was not disciplined, demoted, or suffered any other kind of tangible company action. But on appeal to the DOL Administrative Review Board, the ALJ's decision was reversed.

 

And here is where it gets interesting - the ARB found that Sarbanes-Oxley prohibits "nontangible" retaliation activity, which is a much broader definition of retaliatory conduct than Title VII. Under this position, prohibited adverse action by an employer is not limited to economic or employment related activities--a significant expansion of whistleblower protection, and employer liability. The ARB determined that by revealing his name, the company breached the employee's confidentiality entitlement.  There is even a substantial argument to be made that unintentional and purely accidental actions by the company that have an unforseen but negative impact on an employee could be considered retaliation even if they have no tangible affect whatsoever. The ultimate effect of the ARB's ruling might be to totally insulate an employee from any type of action once he files a whistleblower complaint, something that is outside of normal employee retaliation law experience.  If so, then public companies will face a significant limitation on their ability to manage their workforces.

And Now, Some Helpful Words on Office Politics

They're going to be with you, always, and you need to know how to work them to get ahead.

From the Wall Street Journal.

Two Important Noncompete Cases

Two recent cases, one out of the federal court here in Chicago and one of out Illinois Supreme Court, highlight some important considerations for drafting and enforcing noncompete agreements. The federal decision is important because it highlights the necessity of careful planning in the sale or purchase of a business, while the Illinois Supreme Court case rewrites some fundamental rules for consideration of noncompete agreements in Illinois.

In the federal case the former employee, Harris, originally formed a company that distributed prelit Christmas trees and other seasonal material. He ultimately sold his business to New England Pottery, a holiday decor distributor and agreed to stay on as an employee subject to a 5-year employment agreement. In his capacity as an employee, Harris continued to interact with the suppliers and customers he developed for his own company.

NEP was ultimately sold to Central Garden and Pet company some 5 years later. Harris did not participate in the negotiations between Central and NEP and was not a signatory or party to their asset purchase agreement. Harris signed an employment agreement with Central on the date of the sale and on the date the sale closed he signed a noncompete agreement that prohibited him from working in the holiday decor industry or in any other industry in which Central operated for 5 years following the end of his employment with Central. During the course of Harris' employment with Central, there were no exclusive relationships between Central and its overseas suppliers--Central's suppliers were not prohibited from sharing information about orders placed by Central or other customers, and only Harris, of all the employees privy to Central's cost and pricing information, was required to sign a confidential information agreement relating to this information.

Harris ultimately left Central, and filed a lawsuit seeking to void his noncompete with Central. He also immediately started working in competition with his former employer.

The federal court first had to determine what standard to use in determining the viability of the noncompete. Harris claimed he was simply an employee when he signed his noncompete, but Central claimed that Harris' noncompete was part of its acquisition of NEP. Unfortunately for Central, its asset purchase agreement did not incorporate or even mention Harris' noncompete agreement or identify the noncompete as essential to the closing of the deal. As the court noted, once Central executed the asset purchase agreement, it became obligated to complete the purchase of any of these assets, regardless of whether Harris agreed to a noncompete. Accordingly, the court measured the noncompete under the far more restrictive (and less favorable for Central) "employee" standard, meaning that the agreement had to protect a legitimate business interest and be reasonable as to time, place, and scope of restricted activity.

Central claimed that it was seeking to protect a legitimate business interest--confidential information--in prohibiting Harris' employment with competitors (note that the standard used by the federal court changed about three months later, see below). Again , the court quickly disposed of this argument, noting that neither Central's customers nor any other Central employee, save Harris, was prohibited from discussing customer or pricing information. Under these facts, there was no confidential information because the company had not taken the adequate steps to safeguard it. The court found that the noncompete was therefore not protecting a valid business interest, and found for Harris.

Interesting aside - the company tried to rely on the confidentiality provision included in its employee handbook as evidence of its efforts to prevent disclosure of business information by its work force as a whole. The handbook provided no description of what information the company considered confidential with respect to this specific lighting business at issue, and the company admitted that it provided no guidance to the employees about the business information it considered confidential. Instead, Central hoped that its employees would use common "business etiquette" to keep its business information confidential. This argument barely passes the straight face test for me, but just so that there is no doubt, I give you the words of the court: "Relying on good manners to prevent disclosure of information will not do in creating a protectable interest in confidentiality". Good manners notwithstanding, get it in writing.

And, when you are in the process of negotiating a business transaction and you want the noncompete of a potential competitor to be a factor, put it in the agreement.

The Illinois Supreme Court case is more significant. The facts of the case are not as important as the court's analysis, which basically brings Illinois into conformance with a number of other states with respect to what can be used to justify the imposition of a noncompete on a former employee.
Under previous Illinois precedent, an employer can establish a legitimate business interest to preclude an employee from competing with it only when there was either a permanent customer relationship at issue or confidential business information. That was the analysis used by the federal court in the case above.

In this new case, the Illinois Supreme court considerably broadened the considerations an employer case use to justify preventing a former employee from competing with it. Now courts and employers must make their analysis using a legitimate business interest test that is far more flexible. A legitimate business interest is now judged on the totality of the facts and circumstances of each case. Factors to be considered in this analysis include (but are not limited to) the near permanence of customer relationships, the employee's acquisition of confidential information through employment, and time and place restrictions. The court specifically noted that none of these factors carry any more weight than any other, but that their importance will depend on specific facts and circumstances of the individual case.

As someone who has litigated noncompete cases in several states, I think that the court's decision is absolutely correct, and far closer to what is being used in states that have allowed their noncompete jurisdiction to evolve over the last few years. In fact, geographic restrictions have become less important, while the nature of what comprises protectable confidential business information has become far more flexible and time sensitive.

So, for employers in Illinois, the drafting of a noncompete should be undertaken with significant care and forethought. The restrictions cannot be too broad, especially in regard to the activities the company is trying to prohibit post employment. The best course of action is to carefully assess the role of the employee and what elements of that role the company can legitimately claim as proprietary. Then the company should determine how long and to what degree it can protect those business interests by always keeping in mind that for noncompete cases, less is more.

What Could Go Wrong?

The US Post Office has a well justified sensitivity to guns at its facilities. There have been enough shootings by postal workers in the workplace that the term "going postal" has a clear, if colloquial, definition.

So it's no surprise that the Post Office seeks to ban everyone from carrying a gun in its premises. That may be about to change. A federal judge in Denver is allowing a lawsuit challenging the gun ban to go forward. Two rural Colorado residents, who carry hand guns for self defense and with valid state concealed weapon permits, want to be able to carry their guns into the Post Office, on their person, when they pick up their mail. They don't get home delivery, and are arguing that having to leave their guns in their vehicles parked on a side street is not a reasonable restriction on their Second Amendment rights.

Well, I guess you can make an argument that you are just as likely or even more likely to encounter an armed shooter in a post office as you are wandering around generally, but this seems to be asking for trouble. Maybe the Post Office can put in a drive-by, er, drive-through window.

FMLA Standards are "Standards" in the 7th Circuit

A case last week out of the District Court in Illinois highlights something I have long maintained with respect to the Family Medical Leave Act, namely, that the best way employers can prevent misuse of FMLA leave is to require employees to play by the rules. With the recent revision in FMLA regulations, the rules can be as onerous for people trying to misuse leave as they can for employers trying to abide by the FMLA requirements.

Plaintiff here is a Polish interpreter at a county hospital (the Chicago area has almost as many Polish speaking people as Warsaw, so this was someone who had plenty to do). On August 4, 2008, he asked for a month's vacation leave from August 11 to September 11. The employer denied this request based on timing and staffing. The employee then promptly turned in an FMLA leave of absence request three days later, claiming he needed time off for chronic depression and lower back pain, and asking for a three month leave of absence, beginning at the same time as his denied vacation.

What a coincidence.

After some back and forth over his medical certification, but before any FMLA leave was approved, the employee left town. But not before he told a couple of his friends that he was in fact headed for Mexico, a well known destination for therapy to relieve chronic depression and low back pain, although probably not at the same time.  The employer ended up firing him for job abandonment.

The federal court disposed of plaintiff's FMLA interference and retaliation claims easily. The judge noted that plaintiff failed to provide the required 30 days of notice, and because his medical conditions were chronic and there was no indication of an emergency, the failure to do so was ample basis for the employer to deny leave. Moreover, the court determined that plaintiff did in fact go to Mexico, recreated with friends, and spent time in several other vacation destinations, which justified the employer canceling the leave even if had been properly noticed. And once the judge ruled that plaintiff was not entitled to FMLA leave because of no notice and misuse of the leave, she then dumped plaintiff's retaliation claim on the ground that where is no entitlement to FMLA leave, there can be no retaliation for taking it.

Many FMLA situations arrive on short notice, so 30 days of notice is not always practical. But where an employee is simply using FMLA to augment a vacation entitlement, the notice requirement and other procedural mandates can be a powerful tool to close off abuse.

"Too Feminine Looking" Discrimination?

Discrimination claims based on appearance usually involve an allegation that a plaintiff is not dressing or acting appropriately for his or her gender role. Classic Supreme Court Law in this area notes at least one case in which a plaintiff was not selected for promotion to accounting firm partner because she did not comport herself in a feminine enough manner. Cases on the flip side of the equation typically contain allegations that the plaintiff is harassed because his appearance wasn't "manly" enough.

So it was a surprise when I came across this case recently coming out of New York. A female junior high school custodian (now there is a job fraught with challenges) was not selected for a promotion. She alleged the novel argument that she was not selected because she appeared to be too feminine, i.e. she wore makeup, and dressed in clothes that, to use the words of the opinion, "accentuated her femininity." The factual basis of the claim was that one of her managers said at one point that the woman did not appear as an authoritative figure, which the plaintiff claimed was an allusion to her highly feminine appearance (totally irrelevant aside--somehow I missed out on highly feminine janitors working at my junior high school).

These so-called "gender plus" cases frequently turn on phrases that are found to be code words for some type of gender bias. The New York federal judge, however, found that "unauthoritative" does not equal "feminine" and noted that there was no other evidence to support the plaintiff's claim that the more "matronly" (is this a polite word for "manish"?) woman that was selected for the promotion was chosen based on her less polished appearance.

The employer's basis for the promotion choice? The allegedly more feminine applicant appeared hesitant and lacked confidence during her interview. The Court found that this was a proper and legitimate explanation for the employer's choice.

Gender plus cases don't apply only to appearance situations, of course. As male and female work and domestic rules continue to evolve, I expect we will see variations of this case continue. At some point, however, the so-called traditional male or female stereotypes may just disappear. Perhaps that day is not too far off.

An Odd Use of Title VII's National Security Exemption

While we are on the subject of odd and unusual discrimination claims, the Mandarin Oriental Hotel in Washington, DC has been accused of discriminating against a Muslim employee by barring him from serving a visiting Israeli delegation.

 

My immediate reaction to this was so what?  From a purely legal perspective (and hey, that's what the blog is really about) unless it affected a promotion or wage circumstance, there would be virtually no damage from such a work assignment and thus no violation of the law. A discriminatory assignment could be used as evidence in a case filed down the road for other conduct, but claiming discrimination for not being given a particular service assignment in a hotel sounds like a loser to me.

 

The case gets more interesting after the hotel filed its response, which claimed a so-called "National Security Exemption" for the hotel's actions. The hotel claimed that it was required by the State Department to provide a list of potential servers for the Israeli group. The State Department uncovered "irregularities" with several hotel employees, including the plaintiff in this case. The State Department then instructed the hotel to prohibit these employees from having any access to the Israeli group during its stay at the hotel.

 

Title VII expressly provides that an employer can fail or refuse to hire an employee for a position if the employment position is subject to any requirement imposed in the interest of national security, under any security program in effect or administered under any law or executive order. So it looks like the hotel, if they really were told by the State Department not to put these employees in contact with the Israeli delegation, is off the hook.

 

The broader question is whether it's right for foreign delegations to impose their prejudices here in the United States via the simple expedient of having their embassy raise the issue with US State Department. There are very few procedural or due process protections in such a situation. Stay tuned for further details.

Employee Expiration Dates

This is a fun read that hides a real truth-as companies change, their workforces need to change with them. When the employees in those workforces stay static, it becomes a drag on performance for everyone around.

The idea of expiration dates for employees is simply another way of saying that employers need to keep assessing their workforces, provide solid feedback and a path for improvement, and weed out people who either can't take the hint, or act in such a way that shows that they aren't willing to be part of the team. Identifying these people (putting an expiration date on them, to use the article's metaphor) is important, but putting together a strategy to keep refreshing and improving your workforce is even more important.

Why It's Often a Mistake to Rely on Representations from Government Officials

File this one under "you can't believe your lying eyes." A major law firm, O'Melveny & Myers, signed a contract with the Department of Energy to provide it with legal services in connection with the sale of a petroleum reserve. As with virtually all federal contracts, this one contained clauses indicating that the parties were subject to particular paragraphs of the Federal Acquisition Regulation requiring them to comply with federal executive orders relating to employment discrimination against minorities and women, the disabled, and Vietnam era veterans. In other words, the contract required the law firm to submit to the jurisdiction of the OFCCP and its compliance process.

For whatever reason, the firm elected to disregard these provisions, and instead relied on the oral pronouncements of the chief of the OFCCP's Defense Contracts Administration in Los Angeles that the provision of legal services under these circumstances was not within OFCCP's jurisdiction.

(As an aside, I typically counsel my clients to never, ever, rely on anything they are told over a telephone, or even in person, by a federal or state employee with respect to an interpretation of the regulations or laws the employee routinely enforces).

Law firms traditionally shy away from doing anything that will make them subject to the OFCCP's oversight. The large firms with which I've worked assiduously assessed whether they might be obligated to respond to an OFCCP request for information, and carefully avoided doing things that would bring them under OFCCP supervision. That's because virtually no law firm that I'm aware of could withstand an OFCCP audit of its employment practices. The numerical disparities involving women, minorities, and veterans in big law leadership would raise red flags under the most benign employment audits, nevermind what would happen under the tilted OFCCP process.

In any event, when the OFCCP compliance officers appeared on the law firm's doorstep, asking for the law firm's pay and compensation data, the firm blew them off, and cited the above-mentioned opinion of the OFCCP official. At the resulting hearing before an administrative law judge, the firm tried to argue that, notwithstanding the presence of its signature on the contract with DOE, it was not a party to a "federal contract" (I think even the administrative law judge had difficulty swallowing that one), and, even if it was, it was not providing "nonpersonal services", as required for OFCCP jurisdiction. The ALJ brushed aside the firm's interpretation of the requirement, noting that similar arguments in the healthcare industry had been rejected last year.

The end result, then, is that the law firm was ordered to comply with OFCCP procedures. I suspect there will be an appeal on this case, but regardless, this is a warning shot across the bows of law firms that are not only providing services directly to federal agencies, but that are providing services in support of federal contractors. OFCCP jurisdiction is quite expansive, and has been known to reach out and ensnare not only federal contractors, but companies working with federal contractors, sometimes even the companies that are not involved in the performance or support of the federal contract in any way. This case is a powerful warning that firms need to assess whether their work for federal contractor clients might entangle them in OFCCP jurisdiction, with all the accompanying affirmative action headaches and disclosures.

Federal Contractor Blues

'When I use a word,' Humpty Dumpty said, in rather a scornful tone, 'it means just what I choose it to mean — neither more nor less.'
                                                         ---Through the Looking Glass, by Lewis Carroll

There are many advantages to being a federal contractor, the biggest, of course, being that your main customer won't go bankrupt, and tolerates a level of inefficiency that would be certain death in the private sector. This is especially true if you are providing a unique product, such as building tanks, or nuclear submarines. The flipside of working for a client that simply prints more money for its vendors is that you are subject to the vagaries of the federal executive's social engineering programs.

One example of this is the OFCCP, an antiquated federal employment practices watchdog that engages regularly in highly intrusive reviews of workforces using standards that mutate based on, well I don't know.

A recent federal case out of the District of Columbia illustrates perfectly why nobody wants to be involved with the agency. A company receives notice that it is in the crosshairs of the OFCCP for something referred to as a "desk audit". This is a relatively benign process by which the agency requests annualized compensation data broken down by race, gender, and employee salaries, grade, and/or workforce level within the organization.

The initial analysis yields a threshold ratio determined by measuring the extent of pay differential between minorities, women, and white male employees within discrete job classifications. Above the threshold, and the employer is subject to the next phase of the OFCCP review. Or at least that's the way it's supposed to work in theory.

In actuality, if a company workforce meets the threshold test, i.e., there's no indication of discrimination in pay, and the compliance officer either decides or is directed to find discrimination somewhere, the OFCCP can run the compensation data through a variety of other statistical tests of dubious validity in an effort to try to find some test that will deliver a result indicating that there is a pay disparity. This pernicious determination opens the door to a far more intrusive, expensive, and likely rigged investigatory process. I use the word "rigged" advisedly-the OFCCP has every incentive to find some discrimination in order to justify its existence. Enough findings of no problems, and some congressional budget hawk might decide to allow the EEOC, which also has jurisdiction over federal contractors, to simply manage the discrimination issues by itself. This, of course, would be a disaster for all those career bureaucrats at the OFCCP.

And so this luckless federal contractor found itself meeting the threshold test, but then discovered that the OFCCP compliance officer decided to run a few more tests that-surprise!-showed some type of discrimination. The company objected to this post hoc  determination by the agency, and the case moved on to federal court. Unfortunately, federal administrative law being what it is, federal agencies have wide discretion as to how they conducts their tests, even to the extent of changing the rules in midstream. To its credit, the OFCCP doesn't try to obfuscate this, but says in its public documents that its measurement thresholds are not static, but "subject to changes as OFCCP continues to evaluate its targeting methodology". The end result, though, is a moving target for employers that are trying to run a business without opening the door to an investigation that can cost thousands of dollars, and hundreds of hours in employer time and effort.

Overreaching Dooms Noncompetes

A recent case out of the Virginia Supreme Court shows how important it is for employers to pay attention to the post-employment conduct they are trying to limit when drafting a noncompete agreement. In fact, I frequently tell clients when they are putting these agreements together to be as specific as possible with respect to the position the employee is working now, and use that description as the basis for limiting any future employment with a competitor. Otherwise, the former employer runs the distinct risk of having the noncompete voided by a reviewing court.

In almost every state where they are enforceable (they are not in California) noncompetes are viewed with disfavor. That's because they limit the ability of former employees to find jobs, and are viewed as a type of restraint of trade by the judges who are usually charged with enforcing the agreements. Courts will typically look for reasons to void noncompete agreements rather than enforce them. As a result, the smart employer drafts a noncompete that does not overreach, and does not create any more of an obstacle to future employment than is necessary to protect specific employer interests. Noncompete clauses that seek to restrict a former employee's ability to work anywhere, at any time, for any current or potential competitor or customer, are almost always struck down as being overbroad. The smarter course, as is clearly demonstrated in the Virginia case, is to draft the noncompete clause to limit a former employee from performing the same types of services for a competitor or customer that she performed for the former employer.

Regardless of the actual description of the limitation, the company must also be able to articulate the legitimate business interest justifying any type of noncompetition clause.

For purposes of enforceability, it's frequently best to provide a brief job description, or a limiting paragraph relating to job duties, so that a reviewing court has a clear picture of just how far the employer seeks to extend its reach with a former employee. The old adage that "less is more" is nowhere more true than in the drafting of these types of agreements.

Evidentiary Issues

Courts tend to look at employment discrimination cases as being proved by either "indirect" or "direct" evidence. The distinction between the two kinds of evidence is relatively simple-with indirect evidence, a jury or judge has to make an inference that illegal discrimination is the motivation for the employment decision.

An example of indirect evidence would be something like a supervisor who regularly makes fun of older employees by referring to them as "dinosaurs", "mossbacks", or other derogatory terms. The inference that arises is that someone who doesn't care for older workers would allow that feeling to infect the employment decision-making process. Direct evidence, on the other hand, requires no such inference. A supervisor who says, "We have too many older workers here, we need to get rid of some so that we project a better corporate image," leaves no doubt about the motivation for subsequent employment decisions.

This becomes important because many employment discrimination cases are disposed of before trial, typically by showing that there is not enough evidence to make it worth putting a case before a jury. The process of short-circuiting a case like this is called "summary judgment." And cases where direct evidence is present can't be disposed of through summary judgment, ensuring that the employer will have to go through the time, expense, trauma, and significant risk of facing a jury with its version of events.

Direct evidence of discrimination is rare, however. You just don't have employers, or their agents, telling employees that the reason they're being let go, or that their job was eliminated, is because they're old, female, Catholic, black, white, etc.

Which leads me to this case. A law firm marketing director, with good performance evaluations, went out on pregnancy leave under the FMLA. While she was out on leave, the firm's executive committee determined to restructure the marketing department, and dominate the marketing director's job. As part of the termination process, the firm engaged its human resources director to consult with outside counsel to orchestrate determination. But after the now ex-marketing director was notified that she was fired, the human resource director told her that she had been let go because she was pregnant and took medical leave. The human resources director also allegedly said that there were a group of people that were discriminated against because they were pregnant or took medical leave, and named several names.

The human resources director's statements, which she repudiated under oath at her deposition, nevertheless counted as statements made by the firm or its authorized agent with respect to the marketing director's termination. As a result, the law firm was confronted with direct evidence that pregnancy and medical leave were the causes of her firing. The Seventh Circuit Court of Appeals reversed the lower court's grant of summary judgment in favor of the law firm, with result that the case is now headed for trial.

The lesson here is that direct evidence of discrimination is an incredibly powerful factor in employment discrimination litigation. Employers should do everything they can to refrain from any kind of communication indicating a protected factor motivated or caused an adverse employment action.

An Employment Lawyer's View of the Paterno Situation

I've counseled corporate clients many times on removing senior-level executives, and the odd Paterno termination process, with its hand-delivered letter and curt telephone call 10 minutes before the Board of Directors announced the firing, makes perfect sense to me.

It's clear that there has been an acknowledgment at the senior levels of Penn State leadership that Paterno needed to go for some time. Several years ago, representatives of the University management team went to Paterno's house to ask him to step down from his head coach position. Paterno threw them out. Either before or after that particular event, the realization must have come to the Penn State board that by wallowing in the financial success of the football program, and allowing Paterno's successful record in football (unblemished by NCAA violations) to become the focus of the University, they had created a monster that perceived itself to be totally outside their control.

Now, it's great to be a monster, as long as you're only facing people with figurative pitchforks and torches. But as a monster, you have to be careful not to do something so, well, monstrous, that ultimately allows the pitchfork crowd to get a monster of its own.

That's what Paterno ended up doing here. And because he's a monster, or because he's 80+ years old, or for some other reason, Paterno didn't realize that the monster he created was about to gobble him up. By acting like a monster himself, Paterno set up a situation in which the university owed him literally nothing in terms of process, hearing, or explanation.

In short, Paterno become dangerous to the brand he mistakenly thought was his. The economic value of continuing with him to the end of the season, or even giving him the opportunity to defend himself (I'm not sure he can, anyway), was less than the economic damage his presence directing the team would inflict.  The monster of terrible, continuing publicity, was bigger than the monster of Joe Paterno.

An easy choice, in the end.

Jay Cutler is the Worst Interview in Football

Seriously.  I think highly of him as a player, and well of him as a person.  But his interview demeanor is simply awful.

Apple Corps?

This is interesting.
A unionized Apple Store would pit the traditionally change resistant and anti-innovation (with respect to employment practices, in particular) unions against a company that was constantly reworking its retail environment, and that has high standards of product knowledge and flexibility for its employees.  It would make for an entertaining union voting campaign, at the least.

Dealing With A Ghastly Scandal

"Appalled" would be far too mild a word to describe my reaction to the Penn State sexual assault allegations.

For those of you looking for a lesson as to how something awful can totally spin out of control for your organization, review that first sentence. "… the Penn State sexual assault allegations." Not the Jerry Sandusky sexual assault allegations-this awful episode is now totally within the Penn State brand. It doesn't matter that Sandusky, a former longtime defensive coordinator for the PSU football team, was no longer working for the University when these terrible events started coming to light. The incomplete and apparently uncoordinated response of the PSU leadership to what was witnessed and reported by a graduate student places a significant amount of blame at the very top of the Penn State athletic department.

We know from reading the initial reports that there may be a valid legal defense for the two Penn State administrators, who have been arraigned on charges of failing to report criminal sexual activity involving children, and perjury. We know that iconic coach Joe Paterno is not accused of any legal wrongdoing. But surely somebody at least contemplated whether there could be a valid moral, public relations or business justification for failing to do more on the information the athletic department received in 2002.

Irrespective of the fact that what was being reported was a criminal sexual assault on a child by an individual with almost total access to the Penn State athletic facilities, and who enjoyed the trust of everyone at the University, I have to believe that some adult in this miserable process thought about what this would be like if the administration's attempt to sweep it under the rug was unsuccessful, or if the benign assumption about Sandusky was wrong. How someone could possibly believe that there was any type of upside - moral, business, personal - in not making this a formal investigation and complaint is simply staggering.

Under the circumstances, it's probably wise to revisit a few of my basic truisms about corporate conduct. No. 1 -- whitewashing something like this and being found out almost always creates a situation far worse than does reporting the misconduct when it first surfaces. No. 2 -- a cover-up will almost always be found out; and the worse the conduct, the more likely the cover-up will be unsuccessful. No.3 -- there is no proper explanation, at least not one that you can make and continue to look at yourself in the mirror each day, for not intervening to stop a sexual assault on a child, and/or not immediately reporting what you observed to the police. No.4 -- there are certain circumstances in which there is no such thing as the "benefit of the doubt."  And last -- the more difficult the choice confronting the organization (i.e., confronting the individuals in the organization making the choice), the more likely that the easy choice is the wrong one.

All of us know how we would like to think we would act in circumstances similar to those confronting Joe Paterno, his graduate assistant, and the Penn State athletic director and Penn State's senior vice president for business and finance. Reminding ourselves of the truisms above might help our decision-making process become closer to our ideal.

UPDATE:  I agree with the assessments expressed here.

UPDATE #2:  The inevitable conclusion (note that there has been sentiment to ask Paterno to step down for some time; this provides the obvious mechanism since he seemed impervious to hints).  The PSU Board and its alumni supporters simply could not stand the thought of showing up at the remaining games this season and being confronted by protests and signs saying "Welcome molesters", and the like.  As the article says, someone finally decided to act like an adult at State College.  The decision comes at least 13 years too late.

Boston, Florida

There are any number of reasons not to have a business located in Massachusetts-the lousy weather, the Boston driving experience, the high taxes, the overregulated and pro-union employment law regime-you know, the whole blue state thing. So while companies are willing to have some element of their operations there, it makes sense for the the prudent employer to keep as many people on the outside of the Massachusetts state line as possible.

Imagine, then, the surprise and frustration of the employer in a recent Bay State court case that found itself defending claims under the Massachusetts Wage Act brought by an employee who lived in Florida, and based his sales operations for the company from his home there. He sued in Massachusetts Superior Court, alleging that his former employer owed him more than $100,000 in unpaid commissions and accrued vacation pay.

Although the company tried to dismiss the case for lack of jurisdiction, sensibly arguing that the employee was not covered by Massachusetts law, a state judge found differently. Noting that the sales director had business cards that listed the corporate offices in Massachusetts for contact purposes, that the sales paperwork was sent to and from Massachusetts, and that the employee frequently traveled to Massachusetts to confer with the company representatives, the court determined that there were sufficient, contacts with the Commonwealth to allow application of Massachusetts law. The fact that the employee also frequently traveled to 30 other states where he had customers, and did not physically live or work in the state, was of no import.

This is a troubling result, for several reasons. Not the least among them--the Wage Act mandates treble damages and attorneys fees for successful plaintiffs.

Anyone with employees who consistently conduct business in Massachusetts should assess whether they may unintentionally subject themselves to the jurisdiction of Massachusetts state courts as a result. At the very least, it would be smart to take steps to minimize regular activity that involves contact with, or travel to Massachusetts, to avoid a similar claim.

Disclosing Cyber Security Risk Assessments

In what I would characterize as a hat tip to the obvious, the SEC Corporate Finance division issued Disclosure Guidance requiring public companies to do a better job of advising investors about so-called "cyber security risks". In a classic example of closing the door of a horseless barn, the Commission is finally getting around to telling companies that they really should be paying attention to information technology problems that might affect the value of their stock.

From my perspective, the cyber security issue often begins with the employees of a company. The easiest access into a company's information technology system is through an employee, either deliberately or as a result of day-to-day IT security sloppiness. In fact, hackers now are much more likely to simply target specific employees, or groups of employees, to insert their malware into a company system. For example, at EMC Corporation's RSA security unit, which manufactures computer log-in devices used throughout the industry, two small groups of employees received e-mails containing an innocuous, corporate type message, and attached spreadsheet labeled "2011 Recruitment plan." One employee retrieved the file from the spam folder and when she opened the attachment, she introduced a virus inside the company network that eventually gave a hacker access to proprietary company data, allowing it to conduct later attacks against RSA's customers.

It's getting easier than ever to conduct this type of spear phishing attack because of the wealth of private and corporate data contained in sites such as Facebook, or LinkedIn. Companies should be vigilant about training their staffs with respect to unsolicited e-mails from unknown addresses, and particularly the attachments contained in those e-mails. This is in addition to the training that should be going on with respect to things like flash drives, iPods, and other potentially affected hardware that gets plugged into the company server.

The SEC guidance is not particularly helpful, but it does provide a map of at least minimal diligence for disclosure to investors. Public companies are expected to evaluate cyber security risks within their operations and then figure out some way to disclose these risks to investors, without at the same time opening the door to an attack from a hacker who reads the SEC filings. I'm glad I don't have to draft that particular notice.

The Commission also notes that disclosure should occur in the event of an actual data breach. In particular, a company should factor in whether a potential or actual breach exposed it to lengthy government investigation or costly third-party claims, caused significant business interruption, or undermined the value of the company's services or reputation, or led to substantial remediation costs.

Finally, (and this sounds like a semantic nightmare), companies are required to disclose conclusions on the effectiveness of their required SEC disclosures.  So if a cyber attack could affect the company's ability to disclose the required information to the SEC, the company has to disclose that its ability to disclose its ability to disclose its ability to disclose… could be affected as a result of an IT intrusion. 

Fun stuff, huh? The short answer is that every organization, but especially those that sell public stock, should be policing their IT programs at the highest level.  That means senior executive involvement, and perhaps more nerdiness in the so-called C-suite. 

If at First You Don't Succeed…

Sue, sue, again. At least that's the approach of the plaintiffs' litigation team in the late and unlamented Dukes v. Walmart litigation that was unceremoniously bounced from the ranks of class-action cases by the Supreme Court last year. You may recall that the Court determined that the Ninth Circuit's approval of the class of approximately 1.5 million women who worked at Walmart during the relevant period was inappropriate and improvident. The majority on the Court focused on the allegation in the class certification that the plaintiffs were all similarly affected by Walmart's centralized policy of decentralization that allowed individual store managers to make employment decisions based on a scheme affected by centralized and pervasive anti-woman bias.
If that sounds like unmitigated lawyer doubletalk, then you agree with Justice Scalia and the rest of the majority.
The plaintiffs' law firm has now refiled the case, this time on behalf of only 90,000 current and former female employees who work for Walmart in California. But this doesn't seem to solve the problem mentioned above-that if these decisions were decentralized, it's almost per se impossible to certify a class based on the resulting treatment. In fact, this will be Walmart's defense in this case--namely that each individual employment decision, or at least each individual store manager's employment decisions, will stand on their own and cannot provide the basis for such a wide-ranging class.
The plaintiffs are alleging that they have new statistical evidence that was not put before the Supreme Court in the original litigation. Short of some kind of clear link between these thousands of employment decisions at issue, plaintiffs may find it's "class dismissed", even in the relatively employee-hospitable environs of the Ninth Circuit.

Bootstrapping Time?

I am an infrequent reader of the press releases put out by the Department of Labor, EEOC, and other federal executive agencies because they are frequently agency propaganda about how well they're doing, and fairly transparent attempts to justify why they should receive more tax dollars. But a recent release by DOL relating to an overtime and back wages settlement involving Hilton Reservations caused my eyebrows to jump a little. It wasn't the size of the settlement that caused me some consternation, although $715,000 is nothing to sneeze at. Rather it was the fact that DOL found that Hilton had not complied with the Fair Labor Standards Act by not paying for pre-working shift activity such as booting up the computer, and opening programs required to assist customers, such as e-mail programs.
This is noteworthy, because many employers do not start recording compensable work time until an employee's computer terminal is functional. In fact, in many businesses, employees actually login using their computer terminals, which cannot be done until the computer is booted up and running. That the Department considers this working time to be compensated and calculated into overtime is striking.
For employers that are not counting computer start up time as time worked, it would be a good idea to assess how much time is involved in this process, and keep an eye out for other enforcement reports by the DOL on the subject. There may be a significant alteration in how time is tracked in your future.

Miracles Still Occur

In our memories especially.  Today is the fourth anniversary of one of the strangest plays in college football history, the Trinity-Millsap Lateral-fest.

Feast your eyes here.

Why You Should Actually Read Your Employment Practices Liability Insurance Policy

Important safety tip: all of you with EPLI insurance should run, do not walk, to where your policy is stored, and read the policy carefully. Pay particular attention to the scope of coverage, because if it says you are covered for charges or lawsuits brought against you by an employee, you are not going to be covered in a suit brought by a federal agency, such as the EEOC. At least, that's what Cracker Barrel discovered recently, to the tune of $2 million plus.

What happened in the case was that 10 current or former employees brought employment discrimination charges against the company over a period of several years. The EEOC consolidated the charges into one lawsuit, and transformed it into a wide-ranging class-action. Years later, the case settled for some $2 million in damages and more than $700,000 in attorneys fees.The company's EPLI insurer refused to pay the settlement, citing language in the policy that defined a covered claim as "a civil, administrative, or arbitration proceeding commenced by the service of a complaint or charge, which is brought by any past, present or prospective employee(s)."

The court backed the insurer, noting that the plain language of the policy does not apply to litigation brought by a federal agency, which is clearly not a "past, present or prospective employee" of the company.

So, a quick suggestion-make sure your EPLI policy covers not just actions brought by current or former members of your workforce, but also addresses those situations where your company is the luckless target of federal, state, or local agency legal attention.

The Wage Implications of Obamacare

I am always nervous about citations to studies prepared by outfits with political agendas (although what organization doesn't have an agenda these days?).  But the numbers cited in this assessment by the Heritage Foundation are consistent with numbers that I saw from the CBO and other relatively unbiased sources when the debate over the PPACA was raging a year and a half ago.

The short answer is that for a minimum-wage worker, Obamacare will impose an almost 80% wage surcharge per family in the form of mandatory health insurance payments that will be absorbed primarily by the employer.

In hard numbers, average employees that cannot contribute at least $20,000 (single plan) or $27,500 (family plan) of value to their employer will not receive full-time employment positions. For states like Illinois, which has a higher minimum wage than the federal requirement, the overhead cost assigned to an employee with family plan medical insurance rises to almost $30,000 a year (based on a 2000 hour work year).

These values will be very hard for many unskilled laborers to meet. Employers will have no economic alternative but to hire unskilled workers to part-time positions, or hold their workforces below the 50 person threshold, in order to meet the new Obamacare requirements.  This is in addition to dumping the low value producers into the government run health insurance exchanges, which appears to be the main goal of the statute in the long run.

Well, This Makes Me Feel Better about Photographic Evidentiary Standards

Based on this demonstration, it seems that you can insert just about anything into a photograph, a video, or any other computer-generated image. And you can do it very inexpensively, and very quickly, unlike the old photo retouching process.  In other words, soon you won't be able to believe your eyes.  This has some troubling implications for trial evidence. Presumably, any time you can get a witness to testify that the picture offered in evidence resembles his recollection of the way things were at the time the picture was taken, then the picture comes in as evidence and goes to the factfinder, typically a jury. The only way a jury or a judge could evaluate the picture's accuracy is by trying to assess whether the witness was telling the truth.
I'm certainly not comfortable with that standard.

What Does a US Worker Really Cost?

An enlightening discussion here.
Some thoughts--

Compensation remains slightly more than half of the GDP, but more and more of it is in the form on non-wage type payments for taxes, benefits, etc.  So workers are taking home less, even as they make about the same in total compensation relative to the size of the economy.

The non-wage expenses are making our workers more and more expensive vis-a-vis their foreign counterparts, with the resulting incentives that cause employers to move jobs out of the US.

These non-wage costs (and their government-regulated nature, think payroll taxes, Obamacare health insurance) also act as a brake on domestic hiring.  As long as employers face economic uncertainty (in the form of the possibility of increased or changed regulation) every time they hire an employee, they will hesitate.  If enough of them hesitate, you get stagnant employment numbers.  Sound familiar?

Why Pro Athletes are Different from the Rest of Us

Other than the money, the partying, the bling, the off-duty issues, the attention, etc.

I'm referring, of course, to the fact that some of them get to drink while performing their duties as baseball players.  Maybe it's the attire--Sox teams seem to have gotten the attention here.  It sounds worse than Mad Men.

I don't think an open bar is a prudent workplace policy.  But I especially don't think it's smart for people to imbibe at work when their job description includes hitting 95 mph fastballs being thrown within inches of their heads, or tracking down 3 inch spheres being hit hundreds of feet from their location.

And now MLB wants to take action:  "I'm shocked, shocked, to find drinking going on in this establishment..."

The Employment Relationship Matters

A recent FMLA case here in Illinois shows why it's important for companies to carefully manage, or in this case, to at least understand, their own workforce relationships, or else find themselves wrapped up in lawsuits that they cannot defend.

Plaintiff worked as a manager for a regional air service that conducted flight operations in conjunction with United and United Express in Chicago. His paycheck and W-2 listed his employer as Trans-State Holdings, Inc ("TSH"). But his business card bore the logo of Trans-State Airlines ("TSA"), the improbably named (at least in affiliation with United) GoJet Airlines, and TSH. Company internal directories identified plaintiff as the O'Hare Airport contact for all three entities. He participated in employee meetings with both TSA and GoJet, drafted policies and procedures for both airlines, and represented both airlines in meetings with United Airlines and United Express operations. Company management determined that the plaintiff was only employed by Trans State Airlines, which had 33 employees within 75 miles of O'Hare. Note that the payroll employer, Trans-State Holdings had no employees at O'Hare at the time.

This becomes important because plaintiff tried to exercise FMLA leave rights as a result of a psychiatric disorder. The company denied plaintiff's request for FMLA leave, and terminated him when he failed to return from a 2 week personal leave.

The company's initial argument was that the FMLA was not applicable because it did not have the required number of employees  - 50 - within 75 miles from the work site. The court rejected the company's defense, finding that while TSA and GoJet had different labor representations and different seniority lists, the company shared the same upper level management - the president, the vice president, and chief financial officer were the same for all three. The company with no employees in the area, TSH, maintained the personnel files for TSA and GoJet and TSH's recruitment department performed services for all three companies. Apparently, employees moved seamlessly between the three companies on occasion.

Looking at this confusing and irregular factual background, the court tried to impose some type of order.  It noted that the US Department of Labor allows employees from one company to be considered employees of another for purposes of an FMLA headcount either under a "joint employment" or "integrated employer" test. Each test looks to see whether there are significant links between the employee and the various companies at issue such that each company can be considered an employer.  If the employment circumstances meet the test, the workforces are merged for purposes of counting towards the FMLA threshold of 50 employees.

In this case, the court had little difficulty in finding that the three companies, individually and jointly, had control over plaintiff's employment. He was named as their representative at O'Hare, he represented them in dealings with the airlines and the Department of Homeland Security, they were listed on his business card as his employer, and all three benefited from his services.  The court did not bother to check the application of the integrated employer test.

Once it determined that TSH, TSA and GoJet met the joint employment test, the Court found that plaintiff's medical condition qualified him for FMLA. The employer tried to defeat the FMLA entitlement with a novel argument--that plaintiff made his medical condition worse (i.e. he turned it into an FMLA qualifying condition), by not following his doctor's advice. The Court rejected this "plaintiff should have been a better patient" defense, determining that there was no case law for that proposition, and no authority for it in the regulations. The Court granted summary judgment for the ex-employee, ruling that the companies were liable for terminating him without granting him the FMLA leave he requested.

This case is noteworthy because of the confusion evidenced on part of the companies as to exactly who was employing plaintiff. Prior to the irrevocable decision to deny plaintiff his FMLA leave and terminate him, it would have been prudent for someone in charge to sit down and look at the nature of the employment relationship between the three entities. A situation where an employee is being used as a representative of multiple entities should raise a red flag as to how court will look at the employment relationship for headcount and ultimate legal liability purposes.

A Cheek Swab Would Have Sufficed

The British military is famous for absorbing and accommodating into its ranks soldiers from many of its former colonies. Particularly noteworthy among these groups are the Ghurkas, a fierce fighting tribe from Nepal.

Unsurprisingly, things occasionally get lost in the translation between British Army requirements, and Gurkha culture. I guess that explains how this particular individual came up on a court-martial charge for zealously collecting a DNA sample from a Taliban fighter that he engaged.

Quite reasonably, it seems that the charges have been dismissed on the soldier returned to his unit. I hope they were careful to inspect his carry-on bag before he got on the airplane home, however.

A Fair FMLA Result

A recent Family and Medical Leave Act ("FMLA") case out of Illinois shows the importance of not rushing to a decision when the FMLA is involved, and reinforces the ability of an employer to require compliance with its attendance procedures, even where the FMLA applies.

The employee worked as a mushroom picker for company in central Illinois (insert inappropriate jokes here about being kept in the dark, etc. with regard to your current working conditions). She advised her supervisor that she needed to take leave one summer to help her sick mother in Mexico. The manager directed her to coordinate her trip with HR to ensure that the leave was properly recorded. The company's FMLA policy required employees to submit requests for foreseeable FMLA absences at least 30 days in advance, and as soon as possible for unforeseeable events. The company typically did not enforce the 30 day notice requirement, but did ask for some type of advance documentation when possible. The company provided the employee with the necessary documentation (in Spanish, even) so that she could take it to Mexico and get it completed by her mother's physician there.

The employee planned to cover the first two weeks of her absence with vacation time, and then use FMLA time for the rest. At the end of the vacation portion of her absence, she unsuccessfully tried to fax the completed FMLA paperwork to her employer. Back in the US, when the employee did not return to work the employer unsuccessfully attempted to contact the employee by phone and via mail at her house. In the meantime, the employee's brother called her in Mexico and told her that she needed to contact the employer. She ultimately talked to her supervisor who told her that the company did not have her FMLA medical certification  The employee sent another copy. This fax did not make it, either, nor did the employee call to confirm that the employer received her second fax. The employer terminated her shortly thereafter.

In finding for the employer, the court noted that the company was entitled to impose reasonable procedural requirements for requesting FMLA leave, including preliminary authorization where possible. The court determined that the company exercised reasonable discretion in the application of its procedures in this case, and that the company did not receive any FMLA certification before it terminated the employee Although there was some confusion about who said exactly what to the employee, it was clear that the company had not rushed to terminate the employee under its formal deadline, but rather extended it to try to accommodate the employee's situation. Because the employee knew that she had to get the information to the company and failed to do so, the court determined that she was out of luck with respect to her request, even though she made a good faith attempt to send the information

This case has two important messages. The first is that in an absence case, an employer should avoid making summary decisions and carefully assess its obligations before making a decision. The courts are not looking for a perfect process in these cases, but only one that provides the statutory requirements for notice and reasonable opportunity to respond. The second is that even when the employer does not follow its own attendance policies, the employer can still enforce reasonable requirements as long as those requirements are effectively communicated to the workforce.

As Many of Us Predicted

The NBA will start cancelling regular season games today if no agreement is reached.  Once both sides cross this particular Rubicon, it might be a while before something else looms large enough to get the parties back to the table in any meaningful way.
The NFLPA and owners were smart enough to avoid this milestone, but the season is longer in the NBA, and the cost per cancelled game is arguably less.  Perhaps there is still some financial calculus at work notwithstanding the jangled pace and tenor of the negotiations.

UPDATE:  Looks like the NBA will lose the month of November, completely. 

Are Pets "Family Members"?

Apparently for some people in Florida.  I would love to know the circumstances that triggered some constituent to get a state senator to include "threats against pets" as a basis for guaranteed leave under Florida law.
The Florida statute in question provides up to three days of unpaid leave for victims of domestic violence, as defined by the statute. If this amendment goes forward, a threat of violence against a pet would be considered a protected reason to leave a job, and one more reason that employers will have to learn more than they wish to know about the private lives of their employees.

Does the Army Have a Discipline Problem?

You'd think so from this article and the comments below. A huge chunk of of military jurisprudence consists of what is essentially employment law, albeit in a criminal law setting. Outside of the traditional torts-assault, battery, murder, etc.-military law focuses on getting people to do their jobs, and do them properly in a coherent team.

This leads to some interesting angles on what are traditionally employment matters. For example, sexual harassment is a criminal offense under military law (Uniform Code of Military Justice Article 93, Maltreatment of subordinates). Under certain circumstances, so is adultery, along with unduly familiar relations between superiors and subordinates (UCMJ Article 134). Refusing to dress properly might get you a warning letter, or fired; in the military, it can get you tossed in the slammer.

Thus the article, and the comments following it, reflect legitimate concerns about how people do their jobs, and whether they are following the proper customs and courtesies required of all military members. I suspect that a lot of what is perceived as a breakdown in this type of discipline is a result of the heavy combat operations tempo our Armed Forces have been subjected to, particularly in the Army and the Marine Corps. Things like having your boots shined, uniforms pressed, and being properly attired are usually given less emphasis in units actively engaged in combat, for obvious reasons. That slackness tends to carry over into the garrisons, unless properly addressed by NCOs and officers. 

It will be interesting to see if this perception continues as we wind down our active operations in Central Asia. 

Why the NFL Players Association Agreement Makes Sense

 I attended the first meeting for football agents convened by the reconstituted NFLPA last week. After listening to the union version of events, and looking at the compensation numbers that came out of the first draft and free agent signings, it's reasonably clear that the extremely vocal critics of the deal signed between the NFLPA and the National Football League don't know what they are talking about.

I've always assumed that the union people knew exactly what they were doing when they settled the Brady litigation and the NFL agreed to end the owner lockout. Whether it was the decertification, or the realization that some real money was about to go away, the end result reflects a fairly thoughtful assessment of revenue sources, incentives for desirable behavior, economic trade offs for "quality of life" work conditions and appreciation of just how important (and lucrative) football has become in the American cultural landscape.

I won't try to recreate the full presentation here, but want to focus on a couple of major points that demonstrate pretty clearly the kind of detailed thought process that took place on both sides of the contract football.

For example, the players relinquished a claim to approximately 60% of "Total Revenue" reported by the NFL--a number subject to heavy discounting for expenses--in exchange for a lower percentage of the more all-inclusive "All Revenue". What's noteworthy about this All Revenue figure is that it is not discounted so heavily for expenses, and has a sliding scale of player entitlement, based on the level of effort expended by the clubs in earning the dollars. So, for example, players share in 55% of the media revenue, which represents very little effort by the clubs and their organizations. On the other hand, the local club revenue stream, arising from ticket sales and club specific activities, provides only 40% of its revenue to the players. This rewards clubs willing to make the extra effort to market locally, and generate more revenue off things like naming rights.  Overall, the players are effectively guaranteed an average of 47% of the All Revenue number generated by league activities.  If that seems like a low percentage, consider the projection that TV revenue alone should make up any total dollar shortfall--a prediction that is already being borne out in the latest ESPN contract.

In addition, the union gets out of the revenue sharing business with the league in exchange for locked-in cash spending requirements. The minimum each team can spend in cash expenditures on player compensation is 89% of the total salary cap number set by the league and union each year. This has the affect of significantly increasing the spending by certain cheapskate clubs. Teams that don't spend that money on their own players will be forced to contribute it directly to the union, which will then have the discretion to distribute these shortfalls in spending. If there's a better incentive for owners to put the dollars out, I can't think of it.

But most notable for the players, and probably most important in the long term, are the limitations on practice time and intensity that were negotiated as part of this economic package. Players had serious and legitimate concerns about overtraining throughout the football year. Off-season workouts are now limited not only in duration, but in type of activity,  with only 10 authorized OTAs (organized training activities) which involve full speed work (and only limited hitting) on the both offensive and defensive sides of the ball. The collective bargaining agreement also limits the number of so-called padded practices, where players engage in full-speed or near full-speed hitting, to a total of 14 over the course of the regular season. Preseason practices are limited to 1 padded practice per day, and a total of 4 hours of practice time, only 3 of which can be in full pads.

There are a number of other concessions made by clubs on training in exchange for compensation issues by the union. But both sides realized how much money the game was capable of making and how totally damaging a strike/lockout that cost regular season games would be. In fact, both sides appear to be absolutely correct in their perceptions - NFL games were on top of the ratings for television programs in the first several weeks of the season. And remember, these are not even playoff games. It's a testament to the quality of the product, and the intelligence of the people handling the negotiations, that led to an agreement that seems rational and maintains the momentum of one of the greatest spectator sports in the country.