Thursday, December 27, 2012

Cut Rate Football Playoffs

NFL players do not make that much money as a result of their team's successes after the regular season. In fact, playoff games represent a pay cut for most NFL players, unless they have certain types of incentive clauses built into their contracts.

The distribution of cash is described here.  As the League ponders adding additional playoff teams in lieu of additional regular-season games, the economics would seem to favor more playoffs-the players are paid less and the stadium and advertising revenue for these games is significantly more than for regular-season contests.

Monday, December 24, 2012

A First Amendment Right to Fire Complaining Workers?

From a purely legal perspective, it's hard to beat the combination of federal labor law, employment law, and First Amendment rights under the U.S. Constitution, all arising in one case. But that's what happened in California when a group of newspaper employees, dissatisfied with the editorial policies of their boss, begin the process of union organizing to better negotiate with their management over the paper's editorial content. Part of their organizing efforts included encouraging newspaper subscribers to cancel their subscriptions, as well as making complaints about management's actions restricting the content of some of the reporters' and editors' story selections. Most of the active union supporters who did not resign were eventually fired, leading to the the predictable charge before the NLRB. As is typical under this administration, the Board sided with the employees, finding that the employer committed unfair labor practices.

But the Court of Appeals for the District of Columbia, probably the country's premier appellate court for these types of issues, sided with the company. Why it did is a fascinating look at what happens when constitutional rights collide with collective-bargaining rights.

As an initial matter, the Court noted that a newspaper publisher has "absolute discretion to determine the contents of its newspaper" under the First Amendment of the Constitution. Reporters and editors who are not publishers do not have a legitimate employee concern over the subject matter, at least under the National Labor Relations Act.

Given this straightforward preference for First Amendment rights over mere statutory rights, the Court had little trouble striking down the Board's order reinstating the fired employees.  Nor was the Court enamored of the Board's order that the newspaper publish a particular reporter's column (the column had been eliminated at least in part for the reporters prounion activities)  every week for the foreseeable future.  I have difficulty believing that somebody at the Board thought this was appropriate-such an order requires  the Board to become directly involved with the newspaper publisher's exercise of freedom of the press rights. The Court also chided the Board for ignoring the clear coercive effect of its order to reinstate the terminated prounion reporters and editors:  "It sanctions [the publisher] for trying to discipline employees who sought to remain on its payroll and at the same time called on newspaper readers of Santa Barbara to cancel their subscriptions because [the publisher] would not knuckle under to the employee's demands for editorial control."

The case is noteworthy for non-media publishers mainly because it presents a striking example of the Board's overreach under this administration. Given that the Board will have at least four more years of executive protection, we can expect to see this kind of regulatory stretch continue.

Sunday, December 23, 2012

Gas-Fired (or at least reprimanded)

I am a little speculative about this report from The Smoking Gun, but the letter of reprimand appears real.  In any event, you wonder if there's a disability here, and whether it's possible to accommodate someone with such room clearing talent.

Irresistible Attraction Force Meets Immovable Spousal Object

A case out of the Iowa Supreme Court has generated an unwarranted amount of attention this weekend.  The opinion is noteworthy mainly because it highlights the lines drawn between legitimate at-will and illegal employment decisions that discriminate against a protected group because of that group's status.

The facts--an attractive dental assistant was fired after more than 10 years of good work performance because she was considered by her boss, and more importantly the boss's wife, as a threat to his marriage   Specifically, he terminated the assistant's employment after his wife, who was suspicious of the employee already, discovered they were texting suggestively, and the dentist himself believed that he might eventually have an affair with the woman.  The assistant sued, claiming gender discrimination.

The Iowa Supreme Court got the case after the lower court granted summary judgement for the employer dentist  and affirmed the lower court's decision   The Court noted that the basis for the termination was not the plaintiff's gender, but her threat to the relationship between the dentist and his wife.  The fact that there would not have been a threat if the assistant had been male misses the point, said the Court.  The issue is whether gender was the basis for the decision--it was not.  The employer wins, 7-0.

There have been a number of commentators saying how unfair it is that someone could get fired because they were "too attractive."  But that is exactly the lesson of at-will employment.  An employee can be fired for any reason that is not protected by a federal or state statute.  Fairness really isn't the issue--the Court here took a silly and purely gratuitous shot at the employer for not giving the employee more severance pay, but that didn't affect its opinion.You can be fired because you are an impediment to a boss having an affair with another person, and you can be fired because people think you are having an affair with the boss  Those decisions don't have a gender-based motivation.  Of course, you can't be fired legally for personally refusing to have an affair with the boss--that would be quid pro quo sexual harassment, a particular form of gender discrimination 

It's obviously better not to find yourself in a situation like this, but it's a better result if you recognize that there could be a harassment problem coming down the track, and preempt it, rather than letting things get to the full, hostile work environment stage.

Important safety tip--this case arose in the context of a single termination--I suspect the result would have been different if the wife demanded and got the termination of every woman working in the office.  A mass female firing would have raised at least an inference of gender-based decision making, and would have been actionable.

Tuesday, December 18, 2012

Arbitrating the Noncompete Case: The Supreme Court Speaks

The Supreme Court recently ruled that arbitration agreements in non-compete clauses are matters of federal law under the Federal Arbitration Act, notwithstanding the relatively transparent efforts by a state supreme court to deprive federal courts of jurisdiction.

The case arose out of the typical non-compete situation. Two former employees of Nitrolift, having previously signed an agreement with provisions containing confidentiality, noncompetition, and arbitration requirements, went to work for a competitor of Nitrolift. The former employer demanded arbitration in consonance with the terms of the non-compete provision, and the former employees filed suit in state court, asking the court to declare the non-competition agreements invalid. When the state trial court found the contracts arbitration clauses were valid and that an arbitrator was the proper fact finder to resolve the dispute, the former employees appealed to the Oklahoma Supreme Court. That court determined first that it had jurisdiction over the Federal Arbitration Act issue because there was a state statute in effect regarding covenants not to compete. The Oklahoma justices then found adequate and independent state grounds to justify assertion of jurisdiction.

Of course, these two initial findings by the Oklahoma court were simply an attempt to dodge the fact that it has no jurisdiction over these claims because it is a state court. And the U.S. Supreme Court stepped directly into that discussion by noting that the state court could only get jurisdiction by rejecting the federal act requirement that arbitrators should decide a contract's validity. In other words, there was a federal law basis present in the initial court decision, and the Oklahoma Supreme Court could not get around that federal basis.

So the U.S. Supreme Court gets the case, voids the Oklahoma determination, and then finds that the Federal Arbitration Act specifically holds that attacks on the validity of a contract, which are distinct from attacks on the validity of the arbitration clause, are to be resolved by the arbitrator and not a court.

While this was ultimately a win for the employer, and for proponents of arbitration, the lesson here is that non-compete, arbitration and non-confidentiality agreements should not be included in one  employment contract. State law varies dramatically on the enforceability of all three of these types of agreements and the confusion that was generated here (and the basis for state court mistakenly asserting jurisdiction) could have been avoided with better drafting. In other words, at a minimum, consider writing out separate employment contracts for confidentiality, non-compete provisions, and arbitration, especially if you are engaged in multistate operations.

The NLRB’s Attack on At-Will Employment

Recent cases coming out of Region 28 of the NLRB (which is located in Arizona) indicate that the Board is beginning to undermine one of the most basic elements of the American workforce relationship – at-will employment. These Region 28 cases revolved around a relatively uncontroversial clause found in most employee handbooks and union contracts indicating that the employees of the company were at-will and that this employment arrangement could not be changed without the signature of a senior company manager. The NLRB found in both cases that the innocuous provisions were discriminatory because they might cause employees to think they could not change their at-will employment status through collective bargaining or some other qualified protected activity. Note that there was no actual claim that anyone believed that a union contract could not alter at-will employment status, or that anyone was harmed by believing that they couldn't engage in collective bargaining. The Board simply whacked these provisions on some fanciful harm that might occur in the future.

As with its opinion on off-duty employee access to the workplace, the Board seems to be making up its jurisprudence on the fly. For whatever reason, it has decided to interpret at-will employment provisions that state that the relationship can only be modified with the consent of senior management as affecting Section VII concerted activity rights. Of course, most of these at-will employment provisions were adopted in response to state court holdings that a company's failure to explicitly state that the at will employment relationship could only be modified in a particular way could lead to the inadvertent formation of employment contracts as a result of publishing employment policies in things like employee handbooks. Is the Board trying to set employers up for breach of contract claims, or is it simply trying to undermine the at-will relationships established over a century of employment jurisprudence? Who knows, but the uncertainty reflected in these Board decisions is simply going to make it more difficult for employers and strengthen the hand of unions in their interactions. Given the administration's reliance on unions for campaign financing and muscle, that may be the best explanation of all.

UPDATE:  Shortly after these decisions were issued, the NLRB General Counsel issued an updated guidance that distinguished the Arizona cases and actually moved the needle back in favor of the employer.  The GC noted that context was an important factor in assessing employer policies, and specifically noted, among other things, that the use of the personal pronoun "I" in the Arizona policy language indicated a waiver by employees of their rights to modify the at-will relationship.  These are very fine distinctions, in my opinion, that really don't give us much guidance on anything but the hairsplitting nature of the NLRB opinions.

Homelessness Discrimination?

Under the category of “is this really a problem?”, comes news that Rhode Island enacted a “Homeless Bill of Rights” that included a provision that makes it illegal to discriminate against an employee or a job applicant because they don’t have a fixed home address or permanent mailing address. Nor can an applicant be rejected for employment because she lists a homeless shelter or a social services provider as a mailing address. There is apparently a push for similar legislation in other states.

I would be very interested to see if this is really a problem, or to know how many people are turned down for a job because they list a post office box as their home address.

Controlling Access to Your Place of Business

Terrible events in Connecticut recently highlight the absolutely crucial ability of employers to be able to control access to their  places of business. How ironic is it that the NLRB has significantly eroded the ability of an employer to control off-duty employee access to the workplace?

For over a generation the NLRB interpreted the National Labor and Relations Act to allow an employer to deny access to its property by off-duty employees. Typically, an employer’s policy that limited access had to do so solely with respect to the inside of the plant and/or working areas, be clearly explained to all employees, and apply universally to prohibit access to the plant by any off-duty employee for any purpose. These rules were consistent with other Board requirements relating to uniform and consistent application of employer policies, regardless of union presence.

But in several recent decisions, the Board found that any employer policy allowing off-duty employees back onto the facility for work related purposes (for example to pick up a paycheck or attend an employer sponsored evening event) were too sweeping in scope to be enforced. I usually don’t quote Board opinion language, but the facts here are important to understanding the bizarre way the Board reasoned to strike down these policies. In J.W. Marriot, the Board determined that a requirement that employees who were returning to their work area post-shift “obtain prior approval from your manager” was unenforceable because it gave managers “absolute discretion to grant or deny access for any reason, including to discriminate against or discourage" protected, concerted activity.  

        Now, there was no actual circumstance where any manager had refused to allow an employee access to a work area after hours for the purpose of preventing a protected meeting or discussion; the Board based its holding on the mere possibility of discrimination at some undefined future time. In other words, an employer cannot retain discretion in its management team to allow limited purpose access to its facility for off-duty employees, it must either reject all off-duty returns under all circumstances, or none. Of course, this holding represents a significant departure from previous Board opinions. And since most employers are not going to be put in a situation where they refuse to allow access to off-duty employees who, for example, might forget their medicine at work, the Board's ruling effectively opens the door to access by all off-duty employees. The Board did indicate that there might be special circumstances where an employer could allow reentry, but gave virtually no guidance on this, and the language of the Board’s opinion indicates that these would be unique circumstances, indeed.

Employers that limit access by off-duty employees to their work place but allow exceptions in very limited circumstances risk having that policy struck down. Moreover, a policy that requires manager permission for reentry is similarly likely to violate the Board's new interpretation of Section 8(a)(1) because of potential, but undefined harm to union organizers. redesign your workplace security plans accordingly.

Friday, December 7, 2012

Hugs and Kisses and Correspondence

This story in The Atlantic details a practice with which I am totally unfamiliar-the appending of "xoxox" to digital correspondence, almost exclusively by women.  Apparently this is a trend that's been developing for some time, although it's used more in certain industries then in others.

Well. Since the meaning of this term is "hug and kisses" (and please note, it's apparently common enough that my Dragon voice recognition software automatically puts the letters in rather than the words), I would not recommend that you close business correspondence this way. Moreover, I would not recommend that you close any correspondence in the workplace this way, especially if you're a guy writing to a female coworker or subordinate, or vice versa. It goes without saying that you should not address your boss this way, but I would have thought it goes without saying that this is generally inappropriate in any professional communication, and I would've been wrong.

I'll leave it to the readership to figure out whether this is a passing fad or representative of some deep-seated genetic thing. My personal view is that I am not thrilled about any trend that introduces even more ambiguity into communications that are already misinterpreted enough.

When Your Employees Might Be Guilty

There are certain cases under various state and federal laws when both the corporate entity of the company and its individual employees face separate liability for their joint conduct. A typical example is a sexual harassment case that involves allegations of physical contact. The company is potentially liable because its employees have allegedly created a hostile work environment; the individual supervisor involved in the alleged conduct is potentially liable because of the assault on the person of the plaintiff. Another example might involve allegations of securities fraud-both the company and individual executives can face criminal liability stemming from securities transactions in which the employees were involved.

As a result, lawyers like me who defend these cases have to tread very carefully at the very beginning of our investigation. While I am representing a company in the case, I'm also representing the individual employees in their management capacity as representatives of the company.  Of necessity, I am frequently representing the employees in their individual capacity, too, because their interests (i.e. their version of events) and the company's coincide. But what happens if, during the course of the investigation, I discover that the individual employee has, in fact, committed securities fraud? Or has committed an assault? At that point, the interests of the employee and the interests of the company diverge-the company might well want to be able to say that the employee acted outside the scope of her employment, and therefore the company has no liability.

Obviously, this puts the lawyer in an untenable situation where he is representing two clients with diametrically opposed interests: the company wants to throw the employee under the bus, and the employee wants to shift as much claim to the company as possible. In that case, the lawyer must withdraw from representing both clients and turn the case over to someone else.

Just about the only way to avoid this situation is with what is called a joint defense agreement. Basically the lawyer advises the employee that she is representing both the company and the employee, but that if their interests diverge, the lawyer is staying with the company, and the employee must get her own counsel. The agreement also specifies that both sides can share whatever information is uncovered up to the point that their interests begin to diverge and that each side waves its right to disqualify the lawyer because of a conflict of interest.

But if the lawyer doesn't get a joint defense agreement, and continues the representation, he's in real trouble. As we see in this case.

I'll follow up when I see the decision here, but the lesson for corporate clients is clear-make sure you understand up front the exposure that you are facing and the exposure that your employee is facing, if any. Where both sides have exposure, make sure your counsel is not in the process of disqualifying himself when he starts the investigation.

Wednesday, December 5, 2012

Not Your Typical Supervisor-Employee Counseling Session

I have absolutely no idea whether any of this is true, but as a general rule, poorly performing store managers should not be physically assaulted, choked, or have their faces rubbed in the dirt by senior company managers.

Wednesday, November 21, 2012

Giving Thanks

Every manager should read this article about the value of showing people that their efforts are appreciated.  It costs the company nothing, reinforces the team dynamic, and generally helps humanize the workplace.  None of this is a bad thing.

Happy Thanksgiving.

When Disabilities Attack: Accommodating Bad Conduct

The biggest problem that I encounter with Americans with Disabilities Act cases is that they are so fact specific that it’s often difficult to craft hard and fast rules for employers to follow that can prevent or limit exposure under the law. Many of these cases revolve around the specific essential elements of an individual’s job, and how the disability effects the performance of those essential elements. ADA cases become even more problematic when the essential job element is something that is not specified in a job description, but rather more of a generally accepted requirement for any position, such as civil conduct, and an ability to work with others.

So this recent Second Circuit decision is instructive on several levels, because it deals with a case in which the disabling condition created a conduct problem for the covered entity. It’s not an employment case per se, but the Second Circuit makes it very clear that the principles here apply to employment cases as well.

The plaintiff worked as a volunteer janitor and housekeeper in a nursing home. He had a neuro- developmental disorder that the Court characterized as “autism spectrum disorder”. After a series of complaints from female staff members that the plaintiff was acting inappropriately with them, and following the plaintiff’s somewhat bizarre statements during the nursing home’s investigation, the facility eliminated him from the volunteer program and barred him from entering its premises.

The plaintiff then filed a lawsuit under Title II of the ADA which requires a public entity to accommodate disabled individuals to allow participation in services, programs or activities provided by the entity. For our purposes, however, the analysis used by the Second Circuit applies equally to accommodations required of employers.

The Court first noted that workplace misconduct is a legitimate and nondiscriminatory reason for terminating an employee, and that a requested accommodation that “simply excuses past misconduct” is unreasonable as a matter of law. Moreover, even when an employer doesn't engage in the ADA’s required interactive process to determine possible accommodations, as happened here, an employee may not recover if the employee can’t show that a reasonable accommodation existed at the time of the termination of employment.

That’s an important point for employers - in certain circumstances, it will be immediately apparent that no reasonable accommodation of a disability is possible. In those limited situations, an employer is not required to engage in the interactive process, which typically involves discussing and identifying the disabling condition and matching it against the essential elements of a job to determine how the job might be modified.

The Court also noted that an employee who engages in inappropriate conduct with coworkers, customers, and management is not a qualified individual because he cannot meet an essential element of the job. This is also an important holding--the Court determined that a request to excuse past misconduct can never be a reasonable accommodation, and the inappropriate conduct, even if it resulted from his disability, was a legitimate nondiscriminatory reason for termination in this case.

The plaintiff had proposed two accommodations.  The first was that the nursing home management should have spoken with his therapist to encourage and help the plaintiff interact better with his colleagues. Unfortunately, there was nothing in the record that indicated that any further discussions with plaintiff's physician would have helped to modify his behavior. The second accommodation proposed an education program for plaintiff's colleagues to increase their tolerance for his aberrant behavior. The Court flatly rejected this proposal, noting that it did not even attempt to address the inappropriate activities of the plaintiff but merely lowered the standard for acceptable conduct in the workplace. Again, this was an unreasonable accomodation as a matter of law.

The case is noteworthy because it clearly states the standards for dealing with misconduct that arises out of a disabling condition. Frequently these types of cases are some of the more troubling ones that an employer will face – it’s nice to have solid guidance from the Second Circuit on these issues.

An Intelligent Assessment of US Manufacturing Jobs

Here's a very interesting assessment of the future of manufacturing operations in the US.  My experience with clients that deal with this type of business mirrors the conclusions of the article--we are a manufacturing nation, but we will not employ as many people to do those jobs in the future.

Automation is the main reason, of course, along with the application of new ways of measuring output and effectively structuring work teams.  And as the jobs move from simple assembly operations to overseeing the machines that perform those operations, manufacturing jobs require more than a high school degree.  Especially given that modern public high schools are more like warehouses for the delivery of social welfare services than they are educational institutions.  But that's a matter for another blog.

The brief point is that you can't walk out of high school now and into a job where an employer will train you to be productive over the course of a multi-decade career.  Instead, you have to have some specific skills in math, science, management, and maybe more to even qualify for entry level positions.  

Welcome to the Brave New World.

UPDATE:  Here's another good read from James Fallows at The Atlantic on US manufacturing in the future.

Monday, November 19, 2012

The WSJ's View of Important Job Skills in the Near Future

My personal opinion is that these skills are always important, but maybe they really are more significant in this economy.
One thing for sure--the need to keep your public persona free of problematic associations has never been greater.  References to smoking dope on your Facebook page are just plain idiotic.

Friday, November 16, 2012

Can You Hear Me Now?

The facts of this particular case are so entertaining that I’ll let the record speak for itself and then get to the lesson. Merrill Lynch had two coworkers-- Mary Carroll and Jim Kelliher-- working in the same department. Carroll, who had something of a prickly personality, previously lodged a complaint with human resources that resulted in the termination of two other Merill Lynch employees. Following her complaint, she was further irritated by the fact that she was not considered for a supervisory position that opened up, although she told people she was not interested in the position and did not apply for it.

At some point Carroll felt that Kelliher, who apparently was some type of innocent bystander to the previous events, was performing some of her job duties. Rather than handle the situation within the corporate structure, or like a normal person, Carroll instead called Kelliher’s home on Thanksgiving evening in 2005 and began yelling at Kelliher over the telephone.

 Kelliher’s wife, hearing a very angry woman on the phone on which her husband was having a conversation, picked up a receiver in another room. As she listened in and became increasingly concerned at Carroll’s rants, she used the answering machine on the phone to record the conversation. She later testified that she was scared because it was Thanksgiving night at 9:00 p.m., and there was a screaming, profane, woman on the other end of the line who sounded unhinged. Accordingly, Kelliher’s wife believed that she needed to record the phone conversation in the event something violent happened. The Kellihers called the police the next day and Kelliher called his supervisor at Merrill Lynch and reported Carroll’s bizarre call.

Not being one to play defense, Carroll subsequently filed her own police report, accusing the Kelliher’s of violating the Illinois eavesdropping statute. After Carroll filed her complaint, Merrill Lynch fired her for her conduct on the call, and she escalated the situation by filing suit against the Kelliher’s and Merrill Lynch.

Ms. Carroll is the kind of employee who makes practicing employment law so gratifying. Specifically, I’m guessing that her bosses were quite happy to call her up and tell her that she was fired following these events. Moreover, her situation provides a good opportunity to analyze Illinois’ eavesdropping statute, which is one of the strictest in the country.

Illinois law prohibits recording a telephone conversation without the consent of everyone on the call, however, there is an exception which allows a party to record a conversation without the consent of the other party where there is a reasonable suspicion that the other person on the end of the call is about to commit a criminal offense against the person doing the recording. After the district court dismissed Carroll’s complaint with summary judgment based on this exception, the Seventh Circuit affirmed the decision, finding that Kelliher’s wife reasonably feared that a crime could be committed as a result of hearing a screaming woman on the other end of the phone threatening to kill her husband. So the lesson for employers is that when you have the very limited circumstance of an employee on the phone threatening to or about to commit a crime, you can record the call without their consent in Illinois, but the real lesson, I think, is that employees like plaintiff in this case usually find a way to blow themselves up without further help from the company.

Who Is a Title VII Supervisor: Supreme Court Review

The Supreme Court is set to review a Seventh Circuit decision that involves a key concept under Title VII discrimination law – who is a supervisor of the employee/discrimination victim? Illegally discriminating supervisors automatically subject an employer to vicarious liability for harassing conduct, so the question is a significant one for any type of harassment case.

The Seventh Circuit takes a fairly restrictive view of who is a supervisor. Employees properly considered supervisors who have the authority to hire, fire, demote, promote, transfer, or discipline an employee. The Seventh Circuit, quite sensibly, bases its definition on whether an employee has the ability to take tangible employment action against a subordinate--such ability means the employee is considered a supervisor. The EEOC and several other circuits take a far more expansive view, considering an employee to be a supervisor when she has the authority to control daily work activities in a way that materially enables harassment. The EEOC’s definition has a significant disadvantage for employers in that there are no bright line factors involved. In fact, theoretically, in a modern workplace with shifting work responsibilities and work teams, an employee could be a supervisor one day, and a coworker the next.

The arguments for this case are set in late November. I’ll be following up from there.

File this Under Chutzpah

Or sheer arrogance.  Or cluelessness.  Take your pick--after sinking your cruise ship, causing multiple deaths, AND abandoning ship to leave the passengers and crew to fend for themselves, you should expect to be fired.  And you should accept your pink slip quietly.
Things are just different in Italy.

Employee Ownership of Intellectual Property

Absent a formal agreement between a company and an employee, patent rights typically default to the inventor. Many employers require that employees sign a specific invention or intellectual property agreement that transfers the rights to anything created as part of the employee's job to the employer.

But what does it take to validate such a contract? Specifically, does an employer have to provide something other than continuing employment in exchange for the waiver of employee rights to make a valid contract?

A recent case out of the Federal Circuit (in the District of Columbia) answers this question in the negative. Specifically, where there is an agreement assigning all of an employee's job-related intellectual property rights to the company for inventions or other IP created on the employer's time, continued employment is sufficient consideration to validate the contract. The opinion is important in a couple of aspects: it establishes a valid precedent (at least under the state law in question, in this case Wyoming) that continued employment can serve as adequate consideration to support an employment agreement entered into at the start of employment; more importantly, even when the employee had conceived of an invention prior to joining an employer, failure to reduce to practice the invention (that is, manufacture or assemble it in any tangible way) kept the employee from acquiring rights to the concept. This was so because the agreement specifically required all previously existing IP to be reduced to practice in order to be excluded from coverage.

The lesson for an employer with respect to intellectual property rights? Get an agreement and make it a condition of an employment that requires the employee to assign all non-reduced IP rights to the employer. While this case does not close all the doors available to an employee to assert IP rights, its analysis is persuasive and should carry some weight for any federal court that considers it.

More Penn State Fallout--Former Coach McQueary Files Whistleblower Suit

And so the PSU/Jerry Sandusky/Joe Paterno saga continues.  At some point it will become clear to the people at PSU that they can't win for losing.  Specifically, there are no good choices for the University at this point, only increasingly bad ones.
I suppose this latest lawsuit could be assessed in terms of people and institutions getting what's coming to them--Penn State allowed itself to become a karmic black hole, and so therefore it should expect noxious consequences for some time.  But this is also a very good example of how a bad management culture can create effects that reverberate long after the principal miscreants have left the scene.  
The failure of the University to deal with the former coach's reporting Sandusky abusing a child ten years ago continues to create fallout for the school.  That initial failure led to the school removing the coach when he ultimately was identified as the key witness against Sandusky (and Joe Paterno).  It was clear that McQueary couldn't continue at PSU under the circumstances.  But it was also clear that his termination was fraught with legal difficulties for the school.  
Damned if you do and if you don't--the only way for PSU to avoid a lawsuit was to reach some kind of severance agreement.  Agreement has been in limited supply in State College lately.

Empire Building: EEOC Pushes Discrimination Law Into New Territory.

The Equal Employment Opportunity Commission recently issued a fact sheet describing how the anti-discrimination provisions of Title VII and the ADA can be contorted to apply to domestic violence or stalking situations. The guidance can be found here.

After reading it, my take is that the Commission is trying really hard to make a political statement here, rather than one that involves true legal analysis and application of the law to a new environment. Some of the situations are simply circumstances where an employer maintains a gender based preconception of domestic violence circumstances and acts accordingly. But the really expansive analysis that the Commission conducts simply doesn’t make a lot of sense, except in very, very narrow circumstances where an employer is either improperly linking gender to a particular, stereotypical personality trait, or in situations where no sane or competent employer would engage in such a nitpicky or extended analysis.

For example, the EEOC suggests that an employer might violate Title VII by not hiring a woman subject to domestic violence for fear that she would bring “drama” to the workplace. This scenario automatically presupposes that such an employer would not reject a man for the same reason, something that in my experience is more common. In an equally unlikely scenario, the Commission argues that an employer might violate the ADA by failing to take action to stop employees from harassing a co-worker who has been facially scarred in an attack by a former domestic partner. Seriously? This is not a domestic violence situation; in fact it has nothing to do with domestic violence, and everything to do with the company's harassment policy.

Given the amount of stretching and contorting that is present in this document, I’m pretty sure that it was really a political statement, designed to allow the president and his supporters to argue that they are really, really, really seriously focused on the needs of women. Most employers will not recognize themselves in these scenarios, and have already undertaken appropriate steps to protect their employees and their business.

Monday, September 17, 2012

Disparate Impact Need Not Apply – Merit Based Compensation Systems Can be Exempt Under Title VII

A recent decision by the Seventh Circuit Court of Appeals affirmed a District Court’s judgment in favor of Merrill Lynch on a race discrimination claim involving a performance-based compensation system for Merrill Lynch brokers. This has important ramifications for the financial industry, and perhaps for a number of other employers with similar compensation arrangements.

This is a class action matter and has a number of the usual legal twists and turns. But the most interesting aspect of the case is its reference to a relatively little used section of Title VII of the 1964 Civil Rights Act found at 42 USC 2000e-2(h). That section, usually referenced as Section 703(h) because of the goofy way the law was written, states that it is not unlawful for an employer to apply different standards of compensation or different terms, conditions, or privileges of employment, as part of a “bona fide seniority or merit system, or a system that measures its earnings by quantity or quality of production”, provided that the system is not set up to intentionally discriminate because of race, color, religion, or national origin.

Merrill Lynch was sued by a group of African American brokers, who claimed that its bonus compensation system, based on production credits which reflected commissions earned on client assets managed by the broker, discriminated against them because of their race. As the Court noted, “the production – credit system is about as direct a measure of production as one could have imagined in the financial services industry.”

Under these circumstances, the Court determined that the bonus program at issue compensated brokers on the basis of production and that it did so in a race neutral way. Once that determination was made, the Plaintiffs lose because the statute expressly exempts these types of systems from its scrutiny.

The Plaintiffs tried to avoid this result by arguing the bonus system was biased because it didn’t accurately measure the parties’ true efforts in getting a commission. The Court made quick work of this, noting that the bonus calculations were made directly on their managed assets performance, and nothing else. The Court stated that it would have been different if a broker’s compensation depended on some type of subjective analysis that might be infected with racial animus. But given that the numbers were applied equally to everyone, the Court had no basis to allow the complaint to go forward.

The Plaintiffs next tried to argue that the 703 (h) provision applied only to manufacturing production systems, such as piecework rates, and not the sort of financial  asset production credit system at issue. Again, the Court said that there was no basis for this assertion, that the statute did not make the distinction, and there was no basis for the Court to look at any type of legislative history to make that call.

The decision is important for employers that have the capability to structure a compensation or a promotion decision based on some type of directly measurable qualitative or quantitative product, whether it it’s the number of widgets turned out per hour or the performance of client assets in a stock portfolio. To the extent that employers can characterize their performance systems as qualitative or quantitative measurement-based, they can effectively insulate themselves from discrimination claims under Title VII.

Unemployment Compensation Audits In Illinois

Here's a good article from the Illinois Chamber of Commerce about handling an Illinois Department of Employment Security ("IDES") audit with respect to independent contractor status.

Having been through this process with a number of clients, I wholeheartedly endorse the approach of taking as many opportunities as possible to convince the Department that your independent contractor classification system is sound.

Thursday, September 13, 2012

NHL Labour Woes--It's Different in Canada

So you're a big-time hockey team owner and you decide that you simply aren't making enough money.  You look across the street to where your NFL friends run their business, and enviously think about their restructuring their collective bargaining agreement with hard salary caps, reduced revenue percentages for the players, and a relatively streamlined discipline system. You also note that virtually every NFL team is in the black, while a number of your hockey team owning colleagues are either just barely breaking even or actually losing money.

You know the collective bargaining agreement is about to expire with your hockey union, and, taking a page out of the NFL and NBA owners manual, you decide to hardball the players union by threatening to lock out the players and force them to live on their savings for a while.

So far so good right? But there's a small fly in your union busting ointment-namely, that unlike the NFL and NBA, the NHL has a number of teams in Canada. Specifically, the NHL has teams in Qu├ębec, Ontario and Alberta, provinces that have their own labour laws that limit unilateral actions by ownership in these cases. In the United States, state laws cannot override or affect federal labor law; so local ordinances like this are not an issue. But not only do our Canadian neighbours spell "labour law" differently, their provincial legal codes are enforceable, even in situations where there is a nationwide, multi-province employer in question.

It looks like several of the clubs will not be able to lock out their players without either approval by provincial labour boards, or by taking steps to secure what's called a "lockout vote", as well as mediation, in Alberta  (the statute is here, the lockout provisions are in Division 13).  For teams in those provinces, at least, the players will be allowed to show up, and collect compensation. Whether the rest of the owners will collectively fund that arrangement remains to be seen. But it raises an interesting question for multinational sports leagues trying to adopt a consistent position with respect to their clubs and their employees.  Stay tuned.

Wednesday, September 12, 2012

Why It's Good to Be an Employment Lawyer or HR Manger

Business is trending up for us employment lawyers.

It's one of the few legal areas that is seeing growth.  And that translates into a need for competent Human Resources managers, too.

And, for better or worse, here is why it might be good to be a lawyer.

Monday, September 10, 2012

Seventh Circuit Rewrites the ADA

Two very troubling ADA decisions from the normally solid Seventh Circuit Court of Appeals here in Chicago:

Earlier this summer, the Court reversed a lower court's grant of summary judgment to an employer in a case involving an employee with sleep apnea. The employee's medical problems, which included chronic sleeplessness, resulted in him getting a doctor's recommendation for day shift only work.

The employer had a few dayshift only positions and assigned the employee to one of them, but eventually the position was eliminated and the employee entered the normal shift rotation of day, evening, and overtime shifts. The employee attempted to work these new hours, but ultimately found that fatigue and pain (he also suffered from fibromyalgia) made it impossible to continue. Again, his physician placed him on a medical restriction to work only day shifts. Because it had no positions available that did not require either overtime or flex time (i.e. working outside the shift timeframe), the company laid the employee off. It refused to put him back into other vacant positions, asserting that overtime and flex time were essential job functions of any available position. When a position came open some seven months later that had straight day shifts, the employee bid on the position and the company brought him back to work.

Proving that no good deed goes unpunished, the employee then promptly sued the employer for disability discrimination because it did not reasonably accommodate him by giving him a dayshift only position. The lower court found for the employer.  The Seventh Circuit reversed, and in doing so engaged in some disturbing analysis with respect to the employer's definition of the essential elements of the positions. Although the employer identified working overtime as a requirement for all of its positions, the court found that this was not necessarily so, based, apparently, on the fact that some job descriptions explicitly listed overtime as a requirement, while others did not. The court also questioned whether overtime was an essential qualification if it was rarely required for a few positions.

I find this result problematic-employers have the right to set their own job requirements, and as long as those requirements are applied consistently, the court should not be challenging them. There was no evidence that overtime was not an essential element of all the positions at the facility-the fact that it was only rarely required for some positions does not make it any less essential when the employer needs people to stay at work passed their normal shift time.  The Court noted that employers have the authority to determine which job functions are essential, and that courts should not second-guess those decisions, and then went on to second-guess this employer's decision.  Moreover, the employer's failure to include overtime as an essential element for every single job description should not preclude the employer from proving that, in fact, all positions were required to be overtime capable as the need arose.  The decision effectively means that employers need to break down and fine tune their job descriptions to include every single possible element, something that is typically difficult and impractical. Alternatively, employers could completely eliminate job descriptions, and rely on practice to establish essential elements. I assume that would solve at least part of the problem that surfaced here.

Employers should also be aware of a new decision effectively mandating reassignment of  disabled employees into a vacant position in lieu of more qualified (but not necessarily more senior) applicants.

In a case involving United Airlines, the Court reversed an earlier line of precedents at the urging of the EEOC. United Airlines had a policy that looked to place disabled employees into vacant positions when they were the best qualified applicant, but the Court’s language leaves no doubt that such a competitive type policy will not stand. “…[A]ccommodation through appointment to a vacant position is reasonable. Absent a showing of undue hardship, an employer must implement such a reassignment policy.”

In setting this requirement, the Seventh Circuit directs lower courts (and, therefore, employers) to first determine whether mandatorily reassigning a disabled employee to a vacant position for which they are minimally qualified is ordinarily, “in the run of cases”, a reasonable accommodation. In other words, given the job requirements and qualifications of the employee, does it appear logical that the disabled employee could claim assignment to the vacant position as a reasonable accommodation? If so, then the employer can defend against the mandatory reassignment requirement only by showing that there are fact specific considerations particular to its employment circumstances that make a mandatory reassignment an undue hardship.

Courts have long claimed that employment discrimination statutes are not designed to give a preference for employees that are in the protected class, but merely “level the playing field” for those employees so that their protected status is no longer a factor. But this decision, as the Court clearly notes, establishes a definitive preference for disabled employees over their coworkers. Employers are on notice that they must consider vacant positions for reassignment, even in circumstances where the disabled employee is not the most qualified for the position.

One of the reactions to the decision that I would expect to see is that employers will start defining the requirements of their positions as definitely as possible, so that they are not required to put disabled employees with minimal qualifications into key positions that happen to vacant at the time the request for accommodation is made. Short of that, it will become imperative for human resources departments that manage accommodation requests to become acutely aware of every single job vacancy within their organization. Good luck with that.

My thanks to my associate, Liz Winiarski, for her assistance in writing this post.

Not So Fast, Commissioner

The NFL bounty scandal continues to provide worthwhile lessons for unionized employers. The latest development occurred on September 7, when the NFL Collective Bargaining Agreement Appeals Panel reversed an arbitration decision from early last summer, upholding NFL Commissioner Roger Goodell’s ability to discipline players involved in the alleged bounty system used by the New Orleans Saints over several seasons.

Goodell imposed discipline, including fines and suspensions, on four New Orleans Saints players for their “conduct detrimental to the integrity of, or public confidence in, the game of professional football.” Specifically, the players were alleged to have participated in a compensation for injury program by either paying into or accepting money from a pool designed to reward players for injuring opposing team members during a game.

The players' union challenged the Commissioner’s discipline on the ground that he did not have jurisdiction to make such a determination. Instead, the union argued that the conduct alleged was a violation of the collective bargaining agreement clause that prohibits players and clubs from entering into undisclosed agreements involving off-the-books payments. In essence, the issue is whether the conduct involved in the bounty system amounted to conduct detrimental under Article 46 of the collective bargaining agreement, or whether it was an undisclosed compensation agreement under Article 14 or 15 of the CBA. The former can only be addressed by the Commissioner (with limited right to appeal), the latter, only by a grievance before the system arbitrator.

After the initial ruling by the system arbitrator in favor the Commissioner, the matter went to the NFL’s appellate Panel for review. The Panel determined that the bounty system, in fact, violated both the “conduct detrimental” provision and the undisclosed compensation provision. As a result, the Commissioner and the system arbitrator each had jurisdiction to impose penalties; the Commissioner for players' participation in a plan to injure, and the system arbitrator for the agreement to receive payments from the bounty pool.

The Panel was not convinced, however, that the Commissioner was disciplining the players just for their engaging in conduct detrimental to the League. Accordingly, the Panel reversed the initial discipline against the four Saints players and returned the matter to Goodell for reevaluation.

Note that this does not preclude the Commissioner from disciplining the players, even to the extent that they were previously punished. In fact, it opens up a new avenue of discipline for the League, based on the violation of the compensation provision. The players, who were immediately reinstated, may wish that they were subject only to the Commissioner’s discipline by the time this is all over. In any event, it provides an interesting window into the various and fine demarcations drawn when assessing the language of a collective bargaining agreement and its application to employees in a disciplinary environment.

UPDATE:  And, no surprise, the Commissioner kept almost all of the restrictions in place, especially for the people the League views as the principals in the scandal.  it will be interesting to see what happens if this ever gets to a court  although I believe that the union will have serious issues trying to get a judge to intervene in a collectively bargained discipline process.

Wednesday, August 15, 2012

How Much Are Gold Medals Worth to the Olympic Athletes?

More than you might think, especially given the relatively stingy payouts to US athletes.

I assume that part of the differential results from the increased marketing opportunities available to US athletes, but that only works for major sports and certain people.  I think USOC should start working on upping the compensation--there is a lot of financial hardship in getting to the elite athlete stage.

Monday, August 13, 2012

Some Useful Insights

The best organizations and their managers do not confuse loyalty with agreement. Instead, they recognize that thoughtful disagreement with one's superiors frequently masks a strong desire to see the company do well, and a strong commitment to the company's goals and values.

This article from the Wall Street Journal online gives some valuable thoughts on disagreeing with the boss and how to do it effectively.  The key point? That disagreeing with your superiors will usually be taken well as long as the disagreement is perceived as trying to protect the boss, or make the company more effective. Disagreeing to promote a particular individual agenda, or for pure self-aggrandizement, does not play well anywhere.

Although I am not a fan of business casual dress, I occasionally participate in it, especially during hot and humid Chicago summers. But the trend itself has been problematic for employers almost everywhere it gets put into place. Especially in white collar, office, environments, where there is always a percentage of the workforce that doesn't seem to understand that business casual does not equal beach attire, clubbing togs, or mowing the yard wear.  Apparently, the pendulum is swinging back from a much more relaxed office clothing standard toward a more formal one, and it's about time.  If you have ever had to tell a coworker to go home and change their clothes (unfortunately, I have), this article will give you cause for celebration.

And here's some guidance on what to wear to work, at least if you're a guy.

Saturday, August 11, 2012

Is the End of Football Now Visible on the Horizon?

That would certainly seem to be the position for the author of this article and the links contained in it. While the American public is willing to put up with any number of sports-related scandals with respect to gambling, and athlete conduct, the idea that football players are permanently injuring themselves in horrible and mystifying ways might be too much to take.

The physical dangers of a football career have been known for some time. Sports Illustrated ran a series several years ago about the toll that maintaining an unusually high bodyweight, and repeatedly slamming that body into other people maintaining unusually high body weights, took on a NFL players. The shortened longevity of an NFL career relative to other major sports is well-known.  As with long-distance running, it is virtually impossible to play football for any length of time without getting hurt seriously enough to stop you from playing.

But the prospect of significant brain injury raises awareness of the game's dangers to new heights.  We now know that cumulative head trauma can manifest itself as dementia or other forms of mental degeneration. The problem is insidious-it doesn't manifest itself until well after a player's career is over.  The fact that it affects a relatively low number of players does not lessen the frightening and horrifying aspect of the condition.

The NFL should rightly concern itself with the situation. For one thing, it has a direct effect on how many people are going to allow their children to participate in football, thus affecting the supply of future players.  Similarly, the knowledge that players are literally destroying themselves will have a direct effect on the willingness of people to watch the sport grind its players up like combat. In addition, the business side of the game was bad enough; football teams were notorious for simply discharging injured players with virtually no recognition in all but the most unusual circumstances. Now, if the allegations in the NFL concussion lawsuits are true-claims that the NFL was well aware of the brain injury issue, but systematically denied that there was a problem and hid key medical data-the league could be looking at a monstrous financial liability.  Not to mention a  public relations disaster which could result in state or federal authorities simply banning football contests for anyone under the age of 18.

Don't laugh, Teddy Roosevelt almost did exactly this more than 100 years ago.

Football is an exciting game that has supplanted baseball as America's sport of choice. But unless the NFL figures out a way to deal with the injury issue, and especially the brain injury issue, I suspect its days might be numbered.

UPDATE:  And the litigation engine is running at full throttle, per this report that the insurance companies are starting to devour each other and their NFL-related clients.

UPDATE II:  PBS and ESPN are out with some information indicating that the NFL was at least acknowledging the relationship between an NFL career and head injuries / brain damage in 1999.  I'm not convinced this is a smoking gun, because this injury seems to be extremely idiosyncratic, but it further opens the door to inquiry regarding what the NFL knew and when it knew it.

Sunday, August 5, 2012

Hiring Qualifications Don't Justify Wage Discrepancies (After a Time, Anyway)

(This entry courtesy of my associate here in Chicago, Susan Baker).

Gender-based pay discrimination is under a political and legal spotlight and has been since the Ledbetter case several years ago.  Accordingly, it’s crucial for employers to understand if and how their employment policies result in compensation disparities and when these disparities have to be remedied.  It’s also important for a company to understand that potential plaintiffs have more than one option to sue their employers--Title VII or the Equal Pay Act (“EPA”) or both--and those options vary significantly in terms of their process and requirements.

Under Title VII, a gender discrimination plaintiff has to prove that her employer intended to discriminate against women by paying them less.  In its defense, an employer need only provide a legitimate, nondiscriminatory reason for its actions.  But in an EPA case, once a pay disparity is established, the employer has to prove that the difference in pay is the result of a factor other than sex.  In other words, the employer must prove that its legitimate business policies (which can't be based on gender in any manner) accounted for the difference in pay.

In many cases, we see such gender-neutral policies at work in hiring.  An employer may favor hiring people with advanced degrees, or particular work experience, or some type of specialized education, that results in women starting at lower salaries than their male counterparts.  The key point to remember is that these types of criteria should only have an effect on the initial compensation decision--once the employees have been working under an employer's performance standards for a while, the hiring criteria should diminish in importance, and the company's performance requirements should dictate compensation levels. 

These were the tough lessons learned for an employer in a recent Seventh Circuit opinion. The plaintiff brought a gender-based pay discrimination claim under Title VII and the EPA and succeeded on both after the Court engaged in a detailed audit of the employer’s pay practices.

As we've noted before, one of the pleasures of working in Chicago is reading the oft entertaining opinions of the Seventh Circuit.  In demonstrating the diminishing utility of hiring criteria over time, Judge Easterbrook here used an analogy that resonates with all dejected law school applicants  who fared poorly on the admissions test, the LSAT.  He explains that although the notorious exam affects the probability of admission to law school, it has no effect on a student’s grades once enrolled, nor does it affect future job opportunities.  This, Easterbrook declares, is just like a sex discrimination claim arising under the EPA:  nondiscriminatory reasons for pay disparities such as education and experience, for example, can properly affect the differences in starting salaries between men and women, but such factors do not, and should not, affect increases in pay once the person is steadily employed.  At that point, performance on the job is what counts, and any original gap in starting salaries should begin to close so that employees doing the same job under the same standards receive the same compensation.

This case emphasizes that employers must be keenly aware of pay disparities and the reasons behind them.  Any factors affecting employees’ starting salaries should gradually disappear, and, eventually, there should be no difference in compensation between employees who work in the same position and contribute to the company on the same level.  This remains true even if it means that women receive greater compensation increases as compared to men in order to close that gap.

Wednesday, August 1, 2012

The End of Workplace Investigations As We Know Them?

Quite possibly, if a federal court upholds the latest NLRB opinion.

It is generally a caveat of an internal workplace investigation that participants in the investigation, whether they be victims, witnesses, or targets of the investigation, are not to discuss the matter under investigation or the investigation itself with their coworkers until the investigation is completed. The reasons for such a requirement are obvious: knowing that an investigation is in progress, and its focus, creates a very real prospect of witness accounts being altered, fabricated, or coerced, evidence being destroyed, or other steps taken to frustrate the employer's ability to get an accurate picture of what actually occurred.

But the NLRB finds that this routine instruction, which is often key in sensitive investigations such as those surrounding sexual harassment complaints, is a violation of the National Labor Relations Act. Specifically, a majority of the Board determined that prohibiting employees from discussing an ongoing investigation with their coworkers interfered with the employees' rights to engage in "protected, concerted activity".

As I have noted previously, federal employment agencies such as the EEOC and NLRB are working to eliminate general workplace rules by which management has functioned for decades. Instead, the agencies are forcing employers into specific, fact-finding exercises that must occur before any workplace policy is put into actual effect. Here, the Board required the employer to make a specific determination as to whether any given witness in the investigation needed protection, whether testimony was in danger of being fabricated, or whether there was a need to prevent a cover-up. Absent specific determinations by the employer (presumably reviewable by the Board with the benefit of perfect hindsight) that such danger was present, the "no discussion" rule was a violation.

Of course, it is frequently impossible to determine at the outset of an  investigation (when such instructions are typically given) whether there is a danger of a cover-up, witness fabrication, or other risks. Often by the time such a determination can be supported with actual evidence, it's too late because employees have modified their stories in response to the questions they know are coming, e-mails have disappeared, and employees have colluded on their version of events.

If this interpretation is upheld, it means that employers will have to make some type of record as to the various bases they have for keeping an investigation confidential, and the facts to support those bases.  The decision represents yet another highly intrusive move by the Board into the workplace of most US businesses.

The EU Will Continue in Economic Crisis

Just a prediction after reading these stories:

Swedish prostitutes are entitled to sick pay (although Sweden isn't in the EU, the thought process is similar between the two governments, see the next paragraph); and,

EU employees who get sick on vacation are entitled to get more vacation to make up for the vacation time they lost being ill.

Res ipsa loquitur.

And Here's Another Reason Federal Judges Don't Trust Department of Labor Opinions

It's bad enough when executive branch agencies change their positions on interpretations of law based on whoever is in the White House. As I've commented previously, the DOL has been getting hammered by federal judges recently because of its dramatic inconsistency in interpreting the meaning of wage and hour regulations under the Fair Labor Standards Act.  Because there is now a Democratic administration in power, the DOL has reversed itself on several long-standing precedents that were relied on by employers.  Federall judges, in response, are simply ignoring DOL's interpretations of its own regulations.

But this latest move is unprecedented, at least in its obviousness. With the threat of budget sequestration looming at the start of 2013, a number of defense contractors are looking ahead to the effect of the loss of hundreds of millions of dollars as result of budget cuts for DOD. Unsurprisingly, the loss of these contracts will mean significant job losses for those companies, and they are now making preparations to provide their workforces with the required 60 day advance notice of pending terminations. This notice is required under the federal Worker Adjustment and Retraining Notification Act, frequently known as "WARN".  Typically, such notice would be required if sequestration is still scheduled at the time the notices are due.

It didn't take Obama administration officials long to figure out that 60 days before January 1, 2013 is somewhere in the vicinity of November 2, 2012, or right before the presidential elections. Realizing that it wouldn't look particularly good for the president and his minions if hundreds of thousands of workers were to receive pending layoff notices just before they went to the polls, the president's people immediately leveraged the Department of Labor into issuing an advisory opinion that such layoff notices, particularly the ones given right before an election in which their benefactor might lose his job, were just inappropriate.

So we have the picture of a federal executive branch agency, charged with upholding laws designed to protect employees, undercutting those laws in an effort to sway the electorate in favor of the current White House occupant.   The move itself is not surprising. The president and his people are from Chicago, after all.  What is surprising is that it was done so openly, and apparently in a state of almost panic.  Regardless, this will provide more fodder for federal judges who are none too happy with how unreliable DOL's advice has become.

Tuesday, July 31, 2012

The Computer Fraud and Abuse Act and Employee Data Theft

When Congress enacted the Computer Fraud and Abuse Act in 1986, a number of us believed that employers had a powerful tool to deal with employees improperly removing key company information from electronic data storage systems for the employee's benefit. The statute, which has both civil and criminal components, makes a person liable for damages if they intentionally access a computer without authorization, or exceed authorized access to a computer, to obtain information from any protected computer; accesses a protected computer without authorization or exceed authorized access to commit fraud; or intentionally access a protected computer without authorization and recklessly cause damage or loss to the computer's owner.

CFAA cases typically arise in one of two circumstances: someone outside the company hacks into the company's servers or databases and either maliciously damages the system, or removes confidential information for use elsewhere, or an employee who has routine access to the system takes information from it to use for the benefit of a competitor, or for the employee's own use, to the detriment of his employer. While the courts have had no trouble finding that the CFAA applies to the first scenario, the courts are split on whether the statute applies to the second.

A recent decision by the Fourth Circuit provides useful guidance on the application of the CFAA to situation where an employee, who is authorized access to employer's computer system, removes proprietary information from it, shortly before he leaves the company to join a competing business. In this case, a project director for a company providing specialized welding and related services to the power generation industry was accused of systematically removing confidential and trade secret information from his employer's network by sending it via his work computer to his personal e-mail address.

Note to potential data thieves everywhere-in my experience, it is virtually impossible for the average employee to remove information from a company server in electronic form without detection. And every one of my clients performs an immediate review of all the activity on a manager's information technology account, following an abrupt and unanticipated departure.

There are two schools of thought with respect to CFAA application to this kind of situation. The first school, which is in session here in the Seventh Circuit, is that an employee who removes information from an employer's computer system, in breach of his fiduciary duty to the employer (as in our example case), cannot say that she is authorized to do so, and is therefore in violation of the statute. I like this approach, because it's logical and makes common sense. After all, no employer would say that an employee who steals its trade secrets is doing so in an authorized manner. The second school of thought takes a more literal reading of the statute, noting that an employee who can access the computer system as part of his job is "authorized", regardless of the purpose for which he does so. This more limited reading of the statute, which was articulated by the Ninth Circuit, is the one that was ultimately adopted by the Fourth Circuit in this case.

A key part of the Fourth Circuit's ruling is that the CFAA is a criminal statute, as well as a civil one. Criminal statutes are usually read very narrowly, in order to provide as much notice to the public as to what conduct is actually prohibited. The court noted that a broad reading of what is "authorized" access would theoretically criminalize conduct by any employee that was not specifically okayed by an employer. Visits to Facebook, shopping sites, personal banking sites, etc., would become criminal violations because they were not specifically authorized by an employer's policy. The court also noted that it was not necessary to find an expansive scope for the CFAA because there were numerous other state law causes of action, e.g., theft of trade secrets, breach of fiduciary duty, etc., that would encompass and protect the employer's data in this type of situation.

In short, the CFAA is not a cure-all for employee data theft. My personal opinion is that the Fourth Circuit's read on this is likely to be more persuasive with the federal district courts that confront the situation. Accordingly, companies should look to more traditional means of protecting their data under trade secret, fiduciary duty, confidentiality, and other doctrines.

Sunday, July 15, 2012

New Joint Employer Test for FLSA Cases

An interesting case from the Third Circuit raises a seldom litigated feature of the FLSA, albeit a critical one.

Unlike some other employment laws, notably Title VII, the ADEA, and the ADA, the FLSA (and its cousin, the FMLA) has a very broad definition of the term "employer." Individual supervisors can be employers under the FLSA, as can corporate entities up or down the line of the corporate entity actually employing the plaintiff.

That was the situation in this case. The Court was confronted with a type of joint employer claim in the form of a rental car company (a holding company) that used some 38 separate leasing organizations, all under the umbrella of the corporate parent. The parent provided services in the form of business guidelines, benefits plans, car rental reservation tools, insurance, technology and legal support. The business guidelines were communicated directly to the subsidiaries' employees in the form of a corporate manual. The holding company also offered HR services, including recommended pay scales and wage rates, to the subsidiaries. But the use of the services was optional to each of the subsidiaries, and the subsidiaries paid for each of the services that they used or subscribed to.

Assistant branch managers for the 38 subsidiaries sued collectively under the FLSA for overtime wages, claiming they were improperly categorized as "exempt" employees who are not entitled to overtime, and instead work on a fixed salary basis. Noteworthy is the fact that the holding company had previously recommended that the subsidiaries consider the assistant managers "exempt" and not pay them overtime. The assistant managers sued their subsidiaries and the holding company, claiming that the holding company was an employer under the FLSA. The holding company denied liability, saying that it was not an FLSA employer because it did not involve itself sufficiently in the day-to-day operations of the individual leasing companies.

The Court determined that the holding company was not an employer, based on its review of the facts, as measured against the standard the Court fashioned for this case. The factors in measuring the employer status in a joint employment circumstance are whether the alleged employer has:

Authority to hire and fire employees;
Authority to determine work rules and assignments, and set conditions of employment (e.g., compensation, benefits, hours and work schedules, including the rate and method of payment);
Day-to-day supervision of the workforce, including employee discipline; and
Control of employee records, including payroll, insurance, taxes, and the like.

While this list looks relatively straightforward, the Court said that each situation will be different, and there may be factors militating strongly one way or the other that are not contained in the formal list. One of the keys here was that the holding company sold its services, and that the policies that it did put forth were not binding on the subsidiaries. Companies should note that less entanglement in actual supervision of employees, and the use of recommended rather than mandatory policies, is a good way to maintain enough legal distance from subsidiary employees to avoid wage and hour liability. This is one of those legal areas where it would be smart to consult your employment counsel before making any final determinations.

The NFL Litigation Bonanza

The dust has settled a little following the NFLPA filing its lawsuit relating to discipline imposed on Saints players for participating in the alleged bounty system designed to knock other teams' players out of football games. So far, a couple of things are pretty clear:

--The NFLPA has a lousy case. The main thrust of the union's complaint is that it wants relief from a federal judge in the form of invalidating a process that the union itself authorized. This is a loser from the get-go in all but the most egregious situations. Basically, the union is asking to be saved from its own bad judgement in allowing the NFL to negotiate and win a provision that gives the league commissioner the power to not only impose discipline, but then rule on whether he himself was reasonable in making his decision. I don't know why anyone would think that's a good idea--most union contracts have SOME type of check and balance provision on the discretion of management. But the NFLPA allowed that process to stand, and federal courts are notoriously reluctant to mess with union agreements and disputes.

--The only way the union prevails is to show that the process was so awful and unfair that the league was not following the CBA terms when it approved the discipline handed down. That's going to be tough, because the players didn't participate in their own defense at the arbitration, and because it appears that NFL Commissioner Roger Goodell didn't do anything other than rule on what he believed was the evidence. Procedurally, there has to be more than that to sustain an arbitration challenge (Grantland has a nice analysis here).

--Notwithstanding the comment above, the union had to file its lawsuit in order to save some kind of face with its membership, and to preserve the jobs of the union leadership. After all, that $5K a year per player in dues has to go for something, right?

--The NFL isn't exactly covered in sugar here, though. The league has pretty much demonstrated that its "airtight" case against the players has a few leaks. Audio tapes that aren't clear, a failure to produce the infamous ledger of bounty payments, and a number of other shortcomings all show that there was a lot of slippage between those press releases of a fully operational payoff scheme to injure other players and reality. Maybe the players should have showed up for the hearings, after all.

--Linebacker Jonathan Vilma's defamation lawsuit, which is a separate filing from the bounty gate union suit, but is seeking much of the same relief, should probably be kicked out of court because the subject of the dispute falls under the conflict resolution provisions of the union contract. In fact, the NFL filed a grievance against Vilma basically asking that an arbitrator require Vilma to use the CBA grievance procedure instead of court. The interesting question is whether a personal claim of defamation against Goodell can be preempted by the union contract, which nominally only applies to disputes between the union and the league in the course of football business. For example, if Goodell punched Vilma, Goodell , in addition to getting a severe beatdown, would be sued directly as an individual for battery.

One thing for sure--those of us who thought there would be relative labor peace following the CBA signing last fall could not have been more wrong. And isn't it interesting to see a union defending members that were allegedly willing participants in a system that set out to deliberately injure other union members?

Thursday, July 12, 2012

Sexual Harassment and the CIA

The CIA is apparently dealing with some problematic issues involving sexual harassment, and a few of the details are leaking out of the Agency.

With respect to sexual harassment cases, at least, the Agency is probably no different from any other long hour, high stress organization. Romantic liaisons between bosses, subordinates and coworkers are also common in places like hospitals, law firms, and financial investment companies. Moreover, paramilitary organizations are usually highly male-dominated, so it's not surprising at all that the women working there might be exposed to the occasional dirty joke, explicit remark or come on. Although the article doesn't mention it, managing these cases is a real challenge in this environment because of the security clearances of the people involved and the nature of their work. In addition, internal CIA personnel matters are typically classified, meaning that much of the investigation of a complaint has to take place behind closed doors.

And whatever stresses there are at the headquarters, the situation is only exacerbated once the agents are placed into the field.

Which raises the issue of whether typical Title VII jurisprudence should even apply to this kind of employment situation.

Tuesday, July 10, 2012

New Online Guidance on the FMLA From the US Department of Labor

For those of you looking for a relatively comprehensive and updated review of FMLA entitlements (albeit from an employee perspective, of course), the DOL has put out two new online resources.

DOL's "The Employee's Guide to the Family and Medical Leave Act" is a nice, straightforward review of FMLA procedures and rights. It might be handy to have in an HR manager's toolkit for situations where something needs to be explained, or reviewed with an employee.

DOL also put on a webinar outlining these provisions, and addressing some frequently asked questions. If you have time, you can view the webinar here.

Again, note that both products are geared toward employees. But they provide a useful overview of the statute and the basic rules of engagement for FMLA situations.

Monday, July 2, 2012

Assault and Batter

This has nothing to do with employment law, but some cases are simply too good to pass up.

From Lowering the Bar comes the story of a man who was arrested for "battering" his sister in a dispute over how much maple syrup should be put on pancakes.

You can't make this stuff up.

Wednesday, June 27, 2012

Miniature Horses, Golf Courses, and Allotments of Common Sense

A recent news story highlights another aspect of the Americans with Disabilities Act that occasionally touches on employment law- ADA public accommodation rules, which are found in the regulations entitled "Nondiscrimination on the Basis of Disability in Public Accommodations and Commercial Facilities" , a guide published by the Department of Justice.

These are the regulations that have plenty of good intention, but in practice frequently create what I would characterize as absurd results. Case in point-a requirement for business establishments, including restaurants, to accommodate so-called "guide or companion miniature horses" for people who, out of choice, allergy, or religious belief (Muslims, for example, frequently do not want to use guide dogs) can't use a guide or companion dog. In an apparent effort to "normalize" the presence of novelty animals, the regulations note that people have traveled, including air travel, with miniature horses, as if this were an everyday and relatively inconsequential event.

Personal note-I have yet to get on an airplane with a horse, miniature or otherwise. I would bet that no one in the DOJ has, either.  And I can't imagine the accommodation that would be necessary for other passengers who found a horse in the seat next to them.

There are some similarly problematic requirements for miniature golf courses (you can't have too much slope on the putting areas), shooting ranges (accommodations have to be made so that the disabled can shoot in all positions.  Really? Even the prone position?), and health clubs. Unfortunately, what seems to be missing from the analysis is some type of cost-benefit assessment. I'd like to know whether someone at the DOJ had to account for whether it makes economic sense for these establishments to make thousands of dollars in retrofit adjustments for the benefit of relatively few users. Or whether it makes sense for airlines to put a "horse friendly" seating area on every airplane. At some point there will be some type of public backlash. But I think we'll have to see how this initiative plays out in terms of enforcement actions before we get a real feel for the true cost of compliance.

Saturday, June 23, 2012

It Hasn't Been a Good Month for Public Employee Unions

The Supreme Court yesterday delivered another blow to public employee unions by limiting their use of mandatory member dues for political purposes. Following on the heels of the Wisconsin recall campaign, which featured copious amounts of mandatory union dues used in to support various unions' political ends, and resulted in a significant hit to public employee unions' bottom lines, it's been a rough first part of June for public-sector, collective-bargaining.

This case comes out of California, the land of powerful and well-heeled public employee unions. California law permits public-sector employees to create so-called "agency shops" in which all employees are represented by a union, and nonmember employees are required to pay an annual fee for "chargeable expenses". Chargeable expenses in this setting are fees required to support non-political union activities related to collective-bargaining. In order to properly collect chargeable expenses, public unions are required to provide employees with so-called Hudson notices, that advise the nonmembers of how much of their dues payments go to political activities, and allowing the nonmembers to opt out of paying for non-chargeable costs.

Of course, the unions do not want people to opt out of paying non-chargeable political costs. Much of the public employees' political influence comes from the ability of their unions to amass significant war chests to fund campaign contributions and political advertising on behalf of candidates who will then support public-sector pay increases.

In the circumstances here, the SEIU sent out the requisite Hudson notice to the members of a bargaining unit, estimating that approximately 56% of its total dues requirements would be chargeable. Nonmembers had 30 days to object to the full payment of dues, but were on the hook for the chargeable costs, nonetheless. A month after sending out the Hudson notices (after the time to object had expired), the union announced a temporary 25% increase in dues and the elimination of a dues contribution cap, in order to increase political funding for the November 2006 election. Nonunion employees were not given a choice as to whether they would pay in to the fund, and in fact the union indicated that all of the 25% increase would go to pay for political operations.

The plaintiffs in this case were a group of employees who did not like having their dues co-opted for political purposes to which they did not subscribe. They prevailed and got their money back at the trial court level, but the Ninth Circuit ruled for the union, setting up the appeal.

The Supreme Court, as is its normal practice, reversed the Ninth Circuit, finding that what the union did with respect to public employees constituted a violation of their First Amendment rights of free association and free speech. Specifically, the Court determined that the union should have provided a fresh Hudson notice advising employees of their right to opt out of the increase, and allowing them to do so. The Court said that a public entity effectively compelling the funding of the speech of individual speakers or groups is virtually the same as a public entity compelling speech and association. Mandatory subsidies from a public employee group for private speech are subject to exacting First Amendment scrutiny and those subsidies cannot be sustained unless there is a comprehensive regulatory scheme involving a mandated association among those who are required to pay the subsidy.

What this means is that public employee unions will have to be more careful about how they spend their money, how they account for the money, and how they give notice to their workforce. Public sector unions may not use nonmember dues for political purposes, without those employees' consent. This case sends a relatively clear message that the Court is looking carefully at the coercive practices of unions, especially in the public sector.