Here's an interesting article from the Atlantic, which raises a topic that seems to be getting some traction within employment discrimination litigation-the idea of unconscious, unintentional, discrimination, especially against women, as a result of culture, upbringing, etc. In this article, the thesis is that husbands embedded in traditional and neo-traditional marriages, compared to husbands in so-called modern marriages, exhibit attitudes, beliefs and behaviors that undermine the role of women in the workplace. Modern marriages are considered those where the wives are employed full-time and traditional / neo-traditional marriages are those in which the wives are unemployed.
Essentially, the authors of a study on which the article is based argue that men in traditional marriages unconsciously treat the women working around them as if they were their wives, seeking to protect them from risks and stress, and at the same time devaluing their ambition and ability to contribute to an organization.
There are couple of problems with this assertion, which, for all I know, is true. The first is that the same can be said equally of married women, I presume--that they view men in the workplace through the prism of their marital experience with their husbands. I don't know whether this has a positive or a negative effect, except to say that most married men would pity the poor buggers who were treated at work the same way their wives treated them at home.
Okay, I'm just kidding on that last sentence. Really, just kidding.
The second point is more significant-I'm not sure we should care about what people think in their hearts or their heads, as long as it doesn't translate into measurable discriminatory conduct. Presumably, it is impossible to eradicate every single preconceived notion from our minds about our fellow human beings. I'm not sure we want to anyway, and in many cases it can be a useful survival mechanism. The best we can do is to try to deal with any manifested, improper behavior resulting from this preconception. In other words, as a boss I don't care if your view of women in the workplace derives from The Clan of the Cave Bear; if you're treating them evenhandedly and as individuals (the same way you should treat your male coworkers), then what does it matter? Thought crimes went out with 1984, at least in my opinion.
In any event, this is worth a read just to get us thinking about workplace attitudes, and their sources, and how or whether we ought to deal with them.
Thursday, June 7, 2012
Tuesday, June 5, 2012
Feline Appendages and Individual Liability--A Lesson for HR Directors?
Readers will know that I have frequently commented on the "cats paw" model of employment discrimination in the last few months. This is not because I am a fan of cats (to prove this, take a look at what constitutes a cat fan in my universe; although this is technically a cat rotor), but because there have been a number of these cases littering the legal landscape.
Get it? Cats-paw--littering? You have to be quick on this blog.
A recent 7th Circuit Court of Appeals case here in Chicago demonstrates yet another way that well-meaning human resources personnel can find themselves defendants in an employment discrimination lawsuit. The HR director of a company was accused of facilitating the termination of an employee after he complained about race discrimination and went to see a lawyer. Following the termination, the now ex-employee sued the company, his direct supervisor, and the HR director.
Note to potential plaintiff readers--while seeing a lawyer is frequently a good idea when you think your bosses are racist, telling your racist bosses that you are seeing a layer--while perfectly legal-usually gets a less than enthusiastic response.
The plaintiff brought his case not under Title VII, but under the so-called Civil War Civil Rights Act of 1866. This type of case is often referred to as a "Section 1981" action, and the law applies only to claims of race discrimination and has several key differences from Title VII. The big difference for our purposes is that individual supervisors are liable under Section 1981 claims, while they are generally not liable under Title VII. The plaintiff here sued the HR director personally, claiming retaliation under the cat’s paw theory, alleging that she had been at least partially responsible for manipulating the plant supervisor into firing him, although she did not have the authority to do so herself.
The unfortunate HR director, who had, of course, been involved in the plaintiff's termination because that's what HR people usually do, found herself in the litigation crosshairs after the company went bankrupt, cutting off any remedy, and the allegedly racist supervisor settled out his claim.
The Court issued two important holdings--the first is that cat’s paw liability can exist in Section 1981 cases. That's big--if individual employees can be liable for race discrimination claims, then the cat’s paw application allows a plaintiff to reach far into a corporate structure to touch multiple defendants. This makes HR personnel especially vulnerable since they can be accused of facilitation for almost any adverse employment action.
The second holding is also important, because it resulted in the HR director being let off the hook. The court determined that there was insufficient evidence of retaliatory animus to allow the case to go forward against her. In short, although you can be sued as a cat’s paw (or more properly, as a monkey, see here), the plaintiff still has to come up with evidence that your actions were motivated by race or retaliation.
And it has to be more evidence than just involvement in the employment decision. In this case, that fact of involvement was a given-indeed, for an HR director, it would've been unusual for her not to have been involved. What saved the HR is that there was no admissible evidence that she was retaliating when she processed the termination. And in making this determination, the Court made what I consider to be a major evidentiary ruling: comments by managers with respect to an employment termination could properly be considered to be made in furtherance of a "conspiracy”, and therefore each manager's comment could be admissible against the other manager as evidence of illegal discrimination; but to establish the underlying conspiracy, there needs to be a showing of more than just normal corporate coordination in the process.
That's a mouthful, but here's what it boils down to-it's perfectly normal for an HR director to have multiple conversations with supervisors about a problem employee, and that employee's termination. But HR directors and their staff must understand that if the employment decision is challenged as discriminatory, not only everything that they say, but everything the other supervisors say is potentially admissible against them to establish their individual liability to the plaintiff. The only saving element here is that normal, day-to-day interaction on employment situations is not sufficient to show a conspiracy; there has to be some type of showing that the HR staff and the supervisors were taking unusual or extreme measures, or focusing on the individual more than they normally would under the circumstances, or knew they were doing something improper.
So, this case is worth a read. The decision identifies a number of potential avenues for personal liability in race discrimination claims, particularly for human resources personnel. My advice is to constantly monitor internal communications with respect to problem employees, and keep those communications on a professional level at all times—the people here got into trouble because there was a fair amount of personal dislike between the supervisor and the plaintiff that spilled over into their communications. Moreover, employers should be aware that in race discrimination claims, more than just company assets are on the line.
Get it? Cats-paw--littering? You have to be quick on this blog.
A recent 7th Circuit Court of Appeals case here in Chicago demonstrates yet another way that well-meaning human resources personnel can find themselves defendants in an employment discrimination lawsuit. The HR director of a company was accused of facilitating the termination of an employee after he complained about race discrimination and went to see a lawyer. Following the termination, the now ex-employee sued the company, his direct supervisor, and the HR director.
Note to potential plaintiff readers--while seeing a lawyer is frequently a good idea when you think your bosses are racist, telling your racist bosses that you are seeing a layer--while perfectly legal-usually gets a less than enthusiastic response.
The plaintiff brought his case not under Title VII, but under the so-called Civil War Civil Rights Act of 1866. This type of case is often referred to as a "Section 1981" action, and the law applies only to claims of race discrimination and has several key differences from Title VII. The big difference for our purposes is that individual supervisors are liable under Section 1981 claims, while they are generally not liable under Title VII. The plaintiff here sued the HR director personally, claiming retaliation under the cat’s paw theory, alleging that she had been at least partially responsible for manipulating the plant supervisor into firing him, although she did not have the authority to do so herself.
The unfortunate HR director, who had, of course, been involved in the plaintiff's termination because that's what HR people usually do, found herself in the litigation crosshairs after the company went bankrupt, cutting off any remedy, and the allegedly racist supervisor settled out his claim.
The Court issued two important holdings--the first is that cat’s paw liability can exist in Section 1981 cases. That's big--if individual employees can be liable for race discrimination claims, then the cat’s paw application allows a plaintiff to reach far into a corporate structure to touch multiple defendants. This makes HR personnel especially vulnerable since they can be accused of facilitation for almost any adverse employment action.
The second holding is also important, because it resulted in the HR director being let off the hook. The court determined that there was insufficient evidence of retaliatory animus to allow the case to go forward against her. In short, although you can be sued as a cat’s paw (or more properly, as a monkey, see here), the plaintiff still has to come up with evidence that your actions were motivated by race or retaliation.
And it has to be more evidence than just involvement in the employment decision. In this case, that fact of involvement was a given-indeed, for an HR director, it would've been unusual for her not to have been involved. What saved the HR is that there was no admissible evidence that she was retaliating when she processed the termination. And in making this determination, the Court made what I consider to be a major evidentiary ruling: comments by managers with respect to an employment termination could properly be considered to be made in furtherance of a "conspiracy”, and therefore each manager's comment could be admissible against the other manager as evidence of illegal discrimination; but to establish the underlying conspiracy, there needs to be a showing of more than just normal corporate coordination in the process.
That's a mouthful, but here's what it boils down to-it's perfectly normal for an HR director to have multiple conversations with supervisors about a problem employee, and that employee's termination. But HR directors and their staff must understand that if the employment decision is challenged as discriminatory, not only everything that they say, but everything the other supervisors say is potentially admissible against them to establish their individual liability to the plaintiff. The only saving element here is that normal, day-to-day interaction on employment situations is not sufficient to show a conspiracy; there has to be some type of showing that the HR staff and the supervisors were taking unusual or extreme measures, or focusing on the individual more than they normally would under the circumstances, or knew they were doing something improper.
So, this case is worth a read. The decision identifies a number of potential avenues for personal liability in race discrimination claims, particularly for human resources personnel. My advice is to constantly monitor internal communications with respect to problem employees, and keep those communications on a professional level at all times—the people here got into trouble because there was a fair amount of personal dislike between the supervisor and the plaintiff that spilled over into their communications. Moreover, employers should be aware that in race discrimination claims, more than just company assets are on the line.
Saturday, June 2, 2012
Breast Feeding Rights--Is There a Problem?
A recent Time Magazine cover photo stimulated, among other things, increased discussion about breast feeding rights for nursing mothers. Specifically, the right to breast feed in public or at work, whether there should be mandatory accommodations for nursing mothers at work, and whether women should have a right to breast feed anywhere and with little or no requirement to cover themselves while nursing.
This is a touchy issue, of course. I am aware of restaurants being besieged by angry, lactating women after the removal of a nursing mother because it (the nursing) made the patrons uncomfortable. Retail sales establishments are no better--Target stores have been subjected to "nurse-ins" after one store asked a shopper to move to a more discreet location to nurse.
For employers, the breast feeding issue is a mixed bag. State breast feeding statutes vary dramatically. In addition, the PPACA ("Obamacare") has a little known and seldom discussed provision amending the Fair Labor Standards Act that requires employers with more than 50 employees to provide nursing women unpaid work breaks and a suitable location (i.e., not a bathroom) to pump breast milk. The regulations on this provision are still in flux, but employers should be aware of this requirement, as well as requirements of their localities, which are likely more onerous anyway. A reasonably current listing of states where such laws are in place is here.
In Illinois, for example, women may breast feed, uncovered, anywhere except in churches or places of worship, where they are required to comply with normal dress requirements. Since I practice in Illinois, I've often wondered how such an "uncovered" situation interplays with a company's obligations and policies on say, sexual harassment, or religious tolerance. Does a woman who openly exposes her breast to her co-workers to feed her baby have a cause of action for hostile work environment if people stare at her? Can she claim that comments about her breasts are "unwelcome" under these circumstances? What about complaints by her co-workers whose religious beliefs or sensitivities are violated by the sight? I don't know the answers here--there are analogies to be made for either side of the argument. At least one federal court has ruled that breast feeding as a status is not a protected category (although you can certainly argue that nursing is so closely tied to pregnancy that it should be) and an employer could terminate someone for breast feeding at work.
The issue has also arisen in the relatively rigid environment of the US military. I suspect that this photo is going to cause the people involved some problems, not so much because of the breast feeding, but because they are in uniform (or in this case, partially out of uniform). While the military has made some accommodations to women with children, I'm guessing that DoD will draw the line at any public display like this. But I could certainly see allowing soldiers to express milk in private while on duty, although not in forward areas, or while deployed.
Employer responsibilities here will continue to develop as state and federal courts take these cases. Advice now--look to your state law for guidance, be aware of the federal requirements, and, as always, don't rush to make a decision.
UPDATE: Apparently the powers that be took an appropriately dim view of the military moms. Again, the issue isn't breast feeding as much as it is publicly doing it in uniform.
UPDATE II: And now the woman who organized the inappropriate photo shoot has been fired from her regular job for misconduct. This will get interesting.
UPDATE III: More from the breastfeeding at work front. Even pro-lactation types are opining against this professor's decision to breastfeed in class in front of her students.
This is a touchy issue, of course. I am aware of restaurants being besieged by angry, lactating women after the removal of a nursing mother because it (the nursing) made the patrons uncomfortable. Retail sales establishments are no better--Target stores have been subjected to "nurse-ins" after one store asked a shopper to move to a more discreet location to nurse.
For employers, the breast feeding issue is a mixed bag. State breast feeding statutes vary dramatically. In addition, the PPACA ("Obamacare") has a little known and seldom discussed provision amending the Fair Labor Standards Act that requires employers with more than 50 employees to provide nursing women unpaid work breaks and a suitable location (i.e., not a bathroom) to pump breast milk. The regulations on this provision are still in flux, but employers should be aware of this requirement, as well as requirements of their localities, which are likely more onerous anyway. A reasonably current listing of states where such laws are in place is here.
In Illinois, for example, women may breast feed, uncovered, anywhere except in churches or places of worship, where they are required to comply with normal dress requirements. Since I practice in Illinois, I've often wondered how such an "uncovered" situation interplays with a company's obligations and policies on say, sexual harassment, or religious tolerance. Does a woman who openly exposes her breast to her co-workers to feed her baby have a cause of action for hostile work environment if people stare at her? Can she claim that comments about her breasts are "unwelcome" under these circumstances? What about complaints by her co-workers whose religious beliefs or sensitivities are violated by the sight? I don't know the answers here--there are analogies to be made for either side of the argument. At least one federal court has ruled that breast feeding as a status is not a protected category (although you can certainly argue that nursing is so closely tied to pregnancy that it should be) and an employer could terminate someone for breast feeding at work.
The issue has also arisen in the relatively rigid environment of the US military. I suspect that this photo is going to cause the people involved some problems, not so much because of the breast feeding, but because they are in uniform (or in this case, partially out of uniform). While the military has made some accommodations to women with children, I'm guessing that DoD will draw the line at any public display like this. But I could certainly see allowing soldiers to express milk in private while on duty, although not in forward areas, or while deployed.
Employer responsibilities here will continue to develop as state and federal courts take these cases. Advice now--look to your state law for guidance, be aware of the federal requirements, and, as always, don't rush to make a decision.
UPDATE: Apparently the powers that be took an appropriately dim view of the military moms. Again, the issue isn't breast feeding as much as it is publicly doing it in uniform.
UPDATE II: And now the woman who organized the inappropriate photo shoot has been fired from her regular job for misconduct. This will get interesting.
UPDATE III: More from the breastfeeding at work front. Even pro-lactation types are opining against this professor's decision to breastfeed in class in front of her students.
Friday, June 1, 2012
More Unhelpful Social Media Guidance From the NLRB
If there's one thing the federal bureaucracy has demonstrated, it's a total inability to match legal concepts with a changing reality. Nowhere is this more true than the labor and employment law field, where large agencies like the EEOC or NLRB are full of people who presumably sit around and do little else but think about the laws they enforce, and yet consistently issue guidance to the private sector about these laws that is, shall we say, less than helpful.
Case in point: the recent NLRB Report that supposedly provides useful guidance on the interaction between the National Labor Relations Act, and social media. Never mind that electronic social media issues have been around for more than a decade, and that Facebook, MySpace, LinkedIn, YouTube, and the rest have had a stranglehold on the popular imagination for the last eight years or so, the NLRB is still treating these electronic gathering places like the office water cooler or coffee pot. As a result, the Board continues to regulate 21st century communications technology under 1940s and 50s standards relating to so-called "protected, concerted activity". The end result doesn't work very well because, at least in my humble opinion, the Board fails to account for the fact that posting something on Facebook is quantitatively and qualitatively different than talking to two or three people around the Keurig. An employer might have relatively little interest in restricting water cooler chat between two or three people; an employer could have a huge interest in preventing slanderous misinformation from being posted where it instantly becomes viewable by millions within an hour or so.
Important safety tip-while most of the NLRA relates to union activity, the provisions under discussion here cover any employer, unionized or not, with employees engaged in commerce, and that meets the statutory minimums in terms of gross business volume ($50,000 for non-retail establishments, $100,000 for shopping centers and office buildings, and $500,000 for retailers).
Employers are encouraged to have a policy on social media use because it puts people on notice with respect to the kind of conduct that the employer expects, and provides guidance on the use of a relatively novel software. Most companies by now are well aware of the dangers of unregulated social media access and use by their employees-harassment lawsuits, intentional and inadvertent disclosure of trade secrets, violation of Federal Trade Commission regulations, etc. Judging by the nature of the problems that arise in employment cases, however, companies' workforces are not so savvy. Thus the need for the policy. But in trying to guide employers on how to draft a policy that does not restrict protected, concerted activity, the NLRB does nothing but describe arbitrary, inconsistent, and hairsplitting standards that are so context-specific as to be almost useless.
Seriously, it appears as if this document was written by different people, at different times, and that no one bothered to read the assembled Report until after it was published, if then. There are lots of nuanced examples that seem at odds with each other, if not outright contradictory. For example, a policy that prohibits release of confidential "guest, team member, or company information" is illegal, but a policy cautioning employees to be suspicious when asked to disclose confidential information is okay. A policy that directs employees to check with the company external communications or legal department if they are unsure about the information they are about to post , is illegal. So is a policy that precludes offensive, demeaning, abusive or inappropriate remarks. But a policy that prohibits employees from "harming the image and integrity of the company and any harassment, bullying, discrimination, or retaliation that would not be permissible in the workplace is not permissible between coworkers online…" is okay.
There's more. Relatively conventional guidance like this in a social media policy is improper: "think carefully about' friending' coworkers"; "report any unusual or inappropriate internal social media activity"; "you are encouraged to resolve concerns about work by speaking with coworkers, supervisors, or managers"; and "don't comment on any legal matters, including pending litigation or disputes."
If I had to pick an overall theme of the Report, it would be that context is everything. The Report specifically encourages employers to provide as many examples as possible of prohibited activity so that their employees understand that the social media prohibitions are not to be construed to prevent them from unionizing, talking about a union, bad mouthing their bosses, or complaining about their compensation. And so the Report blesses a policy forbidding "statements which are slanderous or detrimental to the company" because it appeared on a list of prohibited conduct that included sex or race harassment and sabotage (now there's a word I don't hear very often in employment policies). The Report noted that such a list communicated an intent by the employer not to restrict the employees from engaging in protected, concerted activity.
When the NLRB began this campaign against social media policies, most lawyers advised their clients to put language in their policies indicating that the policies were expressly not applicable to NLRA protected rights. But without the contextual references mentioned above, it appears from the Report that a generic savings clause will not be sufficient.
There is a sample social media policy attached to the Report that is fairly bland and generic, and probably will not be of much use to the average employer. But for right now this represents the only guidance that we have from the Board with respect to what it will tolerate in this area. Until the courts figure out exactly how social media actually interplay with the NLRA, the smart employer will look to this guidance, and its lawyers, in drafting guidance and dealing with social media issues.
Thursday, May 31, 2012
Taking On Some Lawyers From a Bankrupt Firm? Better Go Slow
Here's a recent decision by a federal judge in New York that could potentially shake the very foundations of law practice here in the United States.
The ruling relates to the movement of lawyers from firms that declare bankruptcy, to other ongoing practices, and whether the bankrupt firm has any claim on the ongoing client work that the departing attorneys take with them. Usually, billable hour rate work like this travels freely with the departing lawyer, and the old firm has no right to any of the proceeds.
That changes with this ruling. Relying on New York partnership law, the partnership agreement of the bankrupt firm, and the authorization for declaration of bankruptcy by the remaining partners, the court determined that ongoing but unfinished work, even unbilled work, was the property of the bankrupt law firm. In other words, the lawyers who took that work with them to other firms and subsequently billed for it have to account for the value of that work, and repay it to the bankruptcy estate of their former firm.
This return of billable proceeds potentially represents tens of millions of dollars of losses to the firms that hired these lawyers following the bankruptcy. The ruling should greatly restrict the movement of lawyers from a bankrupt firm, especially those who leave with active client engagements involving litigation or transactions. Moreover, the sweeping nature of the court's opinion and analysis indicates that firms might be able to assert ownership over ongoing work taken by a departing partner even without the bankruptcy proceeding.
If that's the case, then I would expect the loyalty factor at major law firms to go up substantially, because it would mean the end of the so-called "portable book of business" that most firms hiring laterals seek to acquire. Such a ruling would dramatically reduce the movement of lateral partners by making them far less attractive to acquiring firms. And it might do a lot to reinvigorate the collegial model of law firm practice, where partners remain in one place for virtually their entire careers.
UPDATE: An expert on law firm breakups provides more details and background here.
The ruling relates to the movement of lawyers from firms that declare bankruptcy, to other ongoing practices, and whether the bankrupt firm has any claim on the ongoing client work that the departing attorneys take with them. Usually, billable hour rate work like this travels freely with the departing lawyer, and the old firm has no right to any of the proceeds.
That changes with this ruling. Relying on New York partnership law, the partnership agreement of the bankrupt firm, and the authorization for declaration of bankruptcy by the remaining partners, the court determined that ongoing but unfinished work, even unbilled work, was the property of the bankrupt law firm. In other words, the lawyers who took that work with them to other firms and subsequently billed for it have to account for the value of that work, and repay it to the bankruptcy estate of their former firm.
This return of billable proceeds potentially represents tens of millions of dollars of losses to the firms that hired these lawyers following the bankruptcy. The ruling should greatly restrict the movement of lawyers from a bankrupt firm, especially those who leave with active client engagements involving litigation or transactions. Moreover, the sweeping nature of the court's opinion and analysis indicates that firms might be able to assert ownership over ongoing work taken by a departing partner even without the bankruptcy proceeding.
If that's the case, then I would expect the loyalty factor at major law firms to go up substantially, because it would mean the end of the so-called "portable book of business" that most firms hiring laterals seek to acquire. Such a ruling would dramatically reduce the movement of lateral partners by making them far less attractive to acquiring firms. And it might do a lot to reinvigorate the collegial model of law firm practice, where partners remain in one place for virtually their entire careers.
UPDATE: An expert on law firm breakups provides more details and background here.
Friday, May 25, 2012
CEOs Behaving Badly
There's been a run of silliness at the top of the management food chain recently and I thought that several of these cases deserve comment.
Yahoo's CEO was recently forced out after it was discovered that he had falsely claimed to have an accounting and computer science undergraduate degree, and he only had an accounting degree. The genesis of the false degree claim is odd-the gentleman was also the CEO at eBay prior to taking the Yahoo position, and his official SEC filing resume showed the correct undergraduate degree. However, his bio listed on PayPal at the same time references the nonexistent comp sci degree. As serious as the Yahoo resume fraud is-the misstatements appeared in a formal SEC filing, which the CEO had to swear under oath was correct-the real problem here is that Yahoo was not making enough money in the opinion of a group of renegade shareholders. The CEO's departure also resulted in the departure of a number of board members and senior management officials, including the woman who chaired the search committee that failed to detect the resume embellishment.
That would be consistent with my experience in this area-while resume fraud for relatively low level job applicants is an instant killer, at the rarefied levels of management, especially where there has been a demonstrated level of performance over the years, padding the old bio is not viewed nearly so seriously when the company is making money. It's not uncommon to see dollars trump personal integrity issues, especially when the board has personal attachments to the malfeasor. But when things aren't going so well, look out.
Over at Best Buy, the story is a little more convoluted but with similar results. This time the misconduct involved self-aggrandizement of a somewhat different type-the CEO got himself into an overly familiar relationship with a female subordinate. Apparently there was nothing particularly romantic about the relationship, at least not yet, but the woman in question was amazingly indiscreet about the many favors that the CEO was showering on her in the form of tickets, travel, dinners, etc.
When one of the woman's coworkers wrote a personal letter to the chairman of the board expressing her concerns about favoritism resulting from the relationship, the chairman did a remarkable thing. No, I don't mean he acted to investigate the allegations and determine whether there was a threat to the company; he did a remarkably dumb thing-he showed the personal letter, which identified the reporting female coworker by name, to the CEO, and told the CEO to knock it off. He did not advise the rest of the board about the problem, and, when the CEO didn't take the hint, was effectively forced out as board chairman several months after the CEO was forced to resign.
In this day and age, anyone in senior management forging a close personal relationship with a business subordinate needs to be careful. Anyone in senior management forging a close personal relationship with an attractive business subordinate of the opposite gender needs to have his/her head examined.You don't require a PhD in organizational psychology to understand the effects of this kind of situation. And for goodness sake, when you get a formal complaint about a relationship like this, don't sweep it under the rug, or think you can deal with it "personally".
Finally, a recent revelation concerning the Stryker Corporation demonstrates that even when you follow the rules, you may not be safe. Stryker's CEO was forced out of the job earlier this year, officially for "family reasons". Unfortunately, it wasn't the CEO's family that drove the force-out, it was the Stryker family, which has the most shares in the privately held company.
The CEO, who had been very successful for the company and its business management, became the subject of discussion after his wife filed for divorce, and the CEO went to the chairman of the board and the board's compliance officer and asked for permission to date a woman employed by the company as a flight attendant on the corporate jet. The board advised the CEO that the relationship would be permissible if the woman left the company, which she did. Months after this episode, the board launched an independent investigation of the relationship, based on an anonymous phone call to the company hotline that there was a double standard in place because of the woman's departure.
Apparently the now separated spouse of the CEO had some friends, or at least one Stryker family friend, on the board. The end result-- the board separated the CEO, although it characterized the termination as "without cause." I would say so, given the fact that there was an explicit authorization of the relationship, and the independent investigation found no misconduct whatsoever by the CEO. So the message here is that running a business successfully, and making tons of money for your shareholders, and getting public approval for your relationships, and following the rules, isn't enough if you really irritate a powerful board member.
It's a little reminiscent of what I refer to as the Pirates of the Caribbean defense: when convenient, the rules are more like guidelines.
Yahoo's CEO was recently forced out after it was discovered that he had falsely claimed to have an accounting and computer science undergraduate degree, and he only had an accounting degree. The genesis of the false degree claim is odd-the gentleman was also the CEO at eBay prior to taking the Yahoo position, and his official SEC filing resume showed the correct undergraduate degree. However, his bio listed on PayPal at the same time references the nonexistent comp sci degree. As serious as the Yahoo resume fraud is-the misstatements appeared in a formal SEC filing, which the CEO had to swear under oath was correct-the real problem here is that Yahoo was not making enough money in the opinion of a group of renegade shareholders. The CEO's departure also resulted in the departure of a number of board members and senior management officials, including the woman who chaired the search committee that failed to detect the resume embellishment.
That would be consistent with my experience in this area-while resume fraud for relatively low level job applicants is an instant killer, at the rarefied levels of management, especially where there has been a demonstrated level of performance over the years, padding the old bio is not viewed nearly so seriously when the company is making money. It's not uncommon to see dollars trump personal integrity issues, especially when the board has personal attachments to the malfeasor. But when things aren't going so well, look out.
Over at Best Buy, the story is a little more convoluted but with similar results. This time the misconduct involved self-aggrandizement of a somewhat different type-the CEO got himself into an overly familiar relationship with a female subordinate. Apparently there was nothing particularly romantic about the relationship, at least not yet, but the woman in question was amazingly indiscreet about the many favors that the CEO was showering on her in the form of tickets, travel, dinners, etc.
When one of the woman's coworkers wrote a personal letter to the chairman of the board expressing her concerns about favoritism resulting from the relationship, the chairman did a remarkable thing. No, I don't mean he acted to investigate the allegations and determine whether there was a threat to the company; he did a remarkably dumb thing-he showed the personal letter, which identified the reporting female coworker by name, to the CEO, and told the CEO to knock it off. He did not advise the rest of the board about the problem, and, when the CEO didn't take the hint, was effectively forced out as board chairman several months after the CEO was forced to resign.
In this day and age, anyone in senior management forging a close personal relationship with a business subordinate needs to be careful. Anyone in senior management forging a close personal relationship with an attractive business subordinate of the opposite gender needs to have his/her head examined.You don't require a PhD in organizational psychology to understand the effects of this kind of situation. And for goodness sake, when you get a formal complaint about a relationship like this, don't sweep it under the rug, or think you can deal with it "personally".
Finally, a recent revelation concerning the Stryker Corporation demonstrates that even when you follow the rules, you may not be safe. Stryker's CEO was forced out of the job earlier this year, officially for "family reasons". Unfortunately, it wasn't the CEO's family that drove the force-out, it was the Stryker family, which has the most shares in the privately held company.
The CEO, who had been very successful for the company and its business management, became the subject of discussion after his wife filed for divorce, and the CEO went to the chairman of the board and the board's compliance officer and asked for permission to date a woman employed by the company as a flight attendant on the corporate jet. The board advised the CEO that the relationship would be permissible if the woman left the company, which she did. Months after this episode, the board launched an independent investigation of the relationship, based on an anonymous phone call to the company hotline that there was a double standard in place because of the woman's departure.
Apparently the now separated spouse of the CEO had some friends, or at least one Stryker family friend, on the board. The end result-- the board separated the CEO, although it characterized the termination as "without cause." I would say so, given the fact that there was an explicit authorization of the relationship, and the independent investigation found no misconduct whatsoever by the CEO. So the message here is that running a business successfully, and making tons of money for your shareholders, and getting public approval for your relationships, and following the rules, isn't enough if you really irritate a powerful board member.
It's a little reminiscent of what I refer to as the Pirates of the Caribbean defense: when convenient, the rules are more like guidelines.
Tuesday, May 22, 2012
When Does a Work Day Actually Start?
The Fair Labor Standards Act continues to be a source of significant litigation and risk for employers. My take on why this statute is the law most likely to be violated by my clients is that the FLSA simply does not fit very well in a modern work place. After all, the statute reflects a Depression–era view of the United States, a place where jobs typically involved manufacturing or agriculture rather than services and information technology. There are still a lot of “typical” jobs, of course, but a number of employers are finding themselves whipsawed between the demands and opportunities of the modern job, and an antiquated statute that still draws clear lines between work time and non-work time and the work place and non-work place.
FLSA language continues to be parsed more and more by plaintiffs’ lawyers, who focus on undefined terms that allow them to squeeze out what are effectively de minimus violations that apply to large work forces. As I have mentioned before in this blog, the threat of a large class action or FLSA collective action, with associated litigation costs in the millions of dollars, moves many an employer to a quick settlement.
A recent Seventh Circuit case shows how closely these lines are being drawn. The FLSA does not define when an employee begins “work”; it only requires that all working time be paid. This vagueness becomes a problem when employers require their employees to undertake preliminary activities that are not productive work, e.g. putting on uniforms or protective work clothes. These so called “donning and doffing” situations are perfect examples of the collective action problem facing employers – the time involved is relatively small for compensation purposes, but is typically spread across a huge work force, with significant potential liability.
In this case, the issue involved a requirement by US Steel that its employees put on flame retardant uniforms, gloves, boots, a hard hat, and other protective equipment before going to the job. The protected employees must then walk from their locker rooms to their work stations. In a non–union setting, the time spent changing into a uniform would be compensable and mark the start of the work day. In other words, the employees would be compensated from the time they enter the locker room to put on their uniforms through the time they travel to their work station, work their shift, and then return and remove their protective equipment.
But the FLSA contains a provision that allows union contracts to exclude from compensation all the time spent changing clothes or washing up at the beginning or end of each work day . Such an exclusion was negotiated between the Steelworkers and US Steel.
Notwithstanding this express provision, the plaintiffs in this case alleged that what they were putting on was not exactly clothing, but rather safety equipment. Since the collective bargaining agreement did not address the issue of pay for time spent putting on and taking off “safety equipment”, the Plaintiffs tried to argue that they should be compensated for this time, along with the travel time to and from the work area.
The Seventh Circuit panel was having none of this semantic dancing around. It quickly noted that clothing is almost always protective to some degree, and it made no sense for the collectively bargained provision to be circumvented in this manner. The Court stated that the union and the employer had negotiated a trade-off: the time spent changing clothes would not be compensable, in exchange for a higher hourly rate for time spent actually engaged in productive work. The Court also found that if the clothes changing time was not compensable, then the travel time between locker room and work station was not compensable either.
The final part of this opinion is worth reading for what the Court says about the Department of Labor and its brief filed on behalf of the Plaintiffs. Judge Posner, writing for the Court, noted that the Department of Labor’s position on this issue had shifted from the time of the 2008 election; specifically, the DOL favored the company’s position under the Bush Administration, and favored the employee’s position under the Obama Administration.
Judge Posner voiced his displeasure with this shifting of agency positions based on the nature of the administration in power:
“All that the Department has contributed to our deliberations, therefore, though it is not quite nothing, is letting us know that it disagrees with the position taken by the Bush Department of Labor...it would be a considerable paradox if before 2001, the Plaintiffs would win because the president was a Democrat, between 2001 and 2009 the defendant would win because the President was a Republican, and in 2012, the Plaintiffs would win because the President was again a Democrat. That would make a travesty of the principle of deference to interpretations of statutes of the agencies responsible for enforcing them... since that principle is based on a belief either that agencies have useful knowledge that can aid a court or that they are delegates of Congress charged with interpreting and applying their organic statutes consistently with legislative purpose.
In other words, the DOL opinions on these types of issues are virtually worthless. You would think someone in the agency would take this not so subtle hint in the future.
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