File this one under "you can't believe your lying eyes." A major law firm, O'Melveny & Myers, signed a contract with the Department of Energy to provide it with legal services in connection with the sale of a petroleum reserve. As with virtually all federal contracts, this one contained clauses indicating that the parties were subject to particular paragraphs of the Federal Acquisition Regulation requiring them to comply with federal executive orders relating to employment discrimination against minorities and women, the disabled, and Vietnam era veterans. In other words, the contract required the law firm to submit to the jurisdiction of the OFCCP and its compliance process.
For whatever reason, the firm elected to disregard these provisions, and instead relied on the oral pronouncements of the chief of the OFCCP's Defense Contracts Administration in Los Angeles that the provision of legal services under these circumstances was not within OFCCP's jurisdiction.
(As an aside, I typically counsel my clients to never, ever, rely on anything they are told over a telephone, or even in person, by a federal or state employee with respect to an interpretation of the regulations or laws the employee routinely enforces).
Law firms traditionally shy away from doing anything that will make them subject to the OFCCP's oversight. The large firms with which I've worked assiduously assessed whether they might be obligated to respond to an OFCCP request for information, and carefully avoided doing things that would bring them under OFCCP supervision. That's because virtually no law firm that I'm aware of could withstand an OFCCP audit of its employment practices. The numerical disparities involving women, minorities, and veterans in big law leadership would raise red flags under the most benign employment audits, nevermind what would happen under the tilted OFCCP process.
In any event, when the OFCCP compliance officers appeared on the law firm's doorstep, asking for the law firm's pay and compensation data, the firm blew them off, and cited the above-mentioned opinion of the OFCCP official. At the resulting hearing before an administrative law judge, the firm tried to argue that, notwithstanding the presence of its signature on the contract with DOE, it was not a party to a "federal contract" (I think even the administrative law judge had difficulty swallowing that one), and, even if it was, it was not providing "nonpersonal services", as required for OFCCP jurisdiction. The ALJ brushed aside the firm's interpretation of the requirement, noting that similar arguments in the healthcare industry had been rejected last year.
The end result, then, is that the law firm was ordered to comply with OFCCP procedures. I suspect there will be an appeal on this case, but regardless, this is a warning shot across the bows of law firms that are not only providing services directly to federal agencies, but that are providing services in support of federal contractors. OFCCP jurisdiction is quite expansive, and has been known to reach out and ensnare not only federal contractors, but companies working with federal contractors, sometimes even the companies that are not involved in the performance or support of the federal contract in any way. This case is a powerful warning that firms need to assess whether their work for federal contractor clients might entangle them in OFCCP jurisdiction, with all the accompanying affirmative action headaches and disclosures.
Thursday, November 17, 2011
Wednesday, November 16, 2011
Federal Contractor Blues
'When I use a word,' Humpty Dumpty said, in rather a scornful tone, 'it means just what I choose it to mean — neither more nor less.'
---Through the Looking Glass, by Lewis Carroll
There are many advantages to being a federal contractor, the biggest, of course, being that your main customer won't go bankrupt, and tolerates a level of inefficiency that would be certain death in the private sector. This is especially true if you are providing a unique product, such as building tanks, or nuclear submarines. The flipside of working for a client that simply prints more money for its vendors is that you are subject to the vagaries of the federal executive's social engineering programs.
One example of this is the OFCCP, an antiquated federal employment practices watchdog that engages regularly in highly intrusive reviews of workforces using standards that mutate based on, well I don't know.
A recent federal case out of the District of Columbia illustrates perfectly why nobody wants to be involved with the agency. A company receives notice that it is in the crosshairs of the OFCCP for something referred to as a "desk audit". This is a relatively benign process by which the agency requests annualized compensation data broken down by race, gender, and employee salaries, grade, and/or workforce level within the organization.
The initial analysis yields a threshold ratio determined by measuring the extent of pay differential between minorities, women, and white male employees within discrete job classifications. Above the threshold, and the employer is subject to the next phase of the OFCCP review. Or at least that's the way it's supposed to work in theory.
In actuality, if a company workforce meets the threshold test, i.e., there's no indication of discrimination in pay, and the compliance officer either decides or is directed to find discrimination somewhere, the OFCCP can run the compensation data through a variety of other statistical tests of dubious validity in an effort to try to find some test that will deliver a result indicating that there is a pay disparity. This pernicious determination opens the door to a far more intrusive, expensive, and likely rigged investigatory process. I use the word "rigged" advisedly-the OFCCP has every incentive to find some discrimination in order to justify its existence. Enough findings of no problems, and some congressional budget hawk might decide to allow the EEOC, which also has jurisdiction over federal contractors, to simply manage the discrimination issues by itself. This, of course, would be a disaster for all those career bureaucrats at the OFCCP.
And so this luckless federal contractor found itself meeting the threshold test, but then discovered that the OFCCP compliance officer decided to run a few more tests that-surprise!-showed some type of discrimination. The company objected to this post hoc determination by the agency, and the case moved on to federal court. Unfortunately, federal administrative law being what it is, federal agencies have wide discretion as to how they conducts their tests, even to the extent of changing the rules in midstream. To its credit, the OFCCP doesn't try to obfuscate this, but says in its public documents that its measurement thresholds are not static, but "subject to changes as OFCCP continues to evaluate its targeting methodology". The end result, though, is a moving target for employers that are trying to run a business without opening the door to an investigation that can cost thousands of dollars, and hundreds of hours in employer time and effort.
---Through the Looking Glass, by Lewis Carroll
There are many advantages to being a federal contractor, the biggest, of course, being that your main customer won't go bankrupt, and tolerates a level of inefficiency that would be certain death in the private sector. This is especially true if you are providing a unique product, such as building tanks, or nuclear submarines. The flipside of working for a client that simply prints more money for its vendors is that you are subject to the vagaries of the federal executive's social engineering programs.
One example of this is the OFCCP, an antiquated federal employment practices watchdog that engages regularly in highly intrusive reviews of workforces using standards that mutate based on, well I don't know.
A recent federal case out of the District of Columbia illustrates perfectly why nobody wants to be involved with the agency. A company receives notice that it is in the crosshairs of the OFCCP for something referred to as a "desk audit". This is a relatively benign process by which the agency requests annualized compensation data broken down by race, gender, and employee salaries, grade, and/or workforce level within the organization.
The initial analysis yields a threshold ratio determined by measuring the extent of pay differential between minorities, women, and white male employees within discrete job classifications. Above the threshold, and the employer is subject to the next phase of the OFCCP review. Or at least that's the way it's supposed to work in theory.
In actuality, if a company workforce meets the threshold test, i.e., there's no indication of discrimination in pay, and the compliance officer either decides or is directed to find discrimination somewhere, the OFCCP can run the compensation data through a variety of other statistical tests of dubious validity in an effort to try to find some test that will deliver a result indicating that there is a pay disparity. This pernicious determination opens the door to a far more intrusive, expensive, and likely rigged investigatory process. I use the word "rigged" advisedly-the OFCCP has every incentive to find some discrimination in order to justify its existence. Enough findings of no problems, and some congressional budget hawk might decide to allow the EEOC, which also has jurisdiction over federal contractors, to simply manage the discrimination issues by itself. This, of course, would be a disaster for all those career bureaucrats at the OFCCP.
And so this luckless federal contractor found itself meeting the threshold test, but then discovered that the OFCCP compliance officer decided to run a few more tests that-surprise!-showed some type of discrimination. The company objected to this post hoc determination by the agency, and the case moved on to federal court. Unfortunately, federal administrative law being what it is, federal agencies have wide discretion as to how they conducts their tests, even to the extent of changing the rules in midstream. To its credit, the OFCCP doesn't try to obfuscate this, but says in its public documents that its measurement thresholds are not static, but "subject to changes as OFCCP continues to evaluate its targeting methodology". The end result, though, is a moving target for employers that are trying to run a business without opening the door to an investigation that can cost thousands of dollars, and hundreds of hours in employer time and effort.
Monday, November 14, 2011
Overreaching Dooms Noncompetes
A recent case out of the Virginia Supreme Court shows how important it is for employers to pay attention to the post-employment conduct they are trying to limit when drafting a noncompete agreement. In fact, I frequently tell clients when they are putting these agreements together to be as specific as possible with respect to the position the employee is working now, and use that description as the basis for limiting any future employment with a competitor. Otherwise, the former employer runs the distinct risk of having the noncompete voided by a reviewing court.
In almost every state where they are enforceable (they are not in California) noncompetes are viewed with disfavor. That's because they limit the ability of former employees to find jobs, and are viewed as a type of restraint of trade by the judges who are usually charged with enforcing the agreements. Courts will typically look for reasons to void noncompete agreements rather than enforce them. As a result, the smart employer drafts a noncompete that does not overreach, and does not create any more of an obstacle to future employment than is necessary to protect specific employer interests. Noncompete clauses that seek to restrict a former employee's ability to work anywhere, at any time, for any current or potential competitor or customer, are almost always struck down as being overbroad. The smarter course, as is clearly demonstrated in the Virginia case, is to draft the noncompete clause to limit a former employee from performing the same types of services for a competitor or customer that she performed for the former employer.
Regardless of the actual description of the limitation, the company must also be able to articulate the legitimate business interest justifying any type of noncompetition clause.
For purposes of enforceability, it's frequently best to provide a brief job description, or a limiting paragraph relating to job duties, so that a reviewing court has a clear picture of just how far the employer seeks to extend its reach with a former employee. The old adage that "less is more" is nowhere more true than in the drafting of these types of agreements.
In almost every state where they are enforceable (they are not in California) noncompetes are viewed with disfavor. That's because they limit the ability of former employees to find jobs, and are viewed as a type of restraint of trade by the judges who are usually charged with enforcing the agreements. Courts will typically look for reasons to void noncompete agreements rather than enforce them. As a result, the smart employer drafts a noncompete that does not overreach, and does not create any more of an obstacle to future employment than is necessary to protect specific employer interests. Noncompete clauses that seek to restrict a former employee's ability to work anywhere, at any time, for any current or potential competitor or customer, are almost always struck down as being overbroad. The smarter course, as is clearly demonstrated in the Virginia case, is to draft the noncompete clause to limit a former employee from performing the same types of services for a competitor or customer that she performed for the former employer.
Regardless of the actual description of the limitation, the company must also be able to articulate the legitimate business interest justifying any type of noncompetition clause.
For purposes of enforceability, it's frequently best to provide a brief job description, or a limiting paragraph relating to job duties, so that a reviewing court has a clear picture of just how far the employer seeks to extend its reach with a former employee. The old adage that "less is more" is nowhere more true than in the drafting of these types of agreements.
Friday, November 11, 2011
Evidentiary Issues
Courts tend to look at employment discrimination cases as being proved by either "indirect" or "direct" evidence. The distinction between the two kinds of evidence is relatively simple-with indirect evidence, a jury or judge has to make an inference that illegal discrimination is the motivation for the employment decision.
An example of indirect evidence would be something like a supervisor who regularly makes fun of older employees by referring to them as "dinosaurs", "mossbacks", or other derogatory terms. The inference that arises is that someone who doesn't care for older workers would allow that feeling to infect the employment decision-making process. Direct evidence, on the other hand, requires no such inference. A supervisor who says, "We have too many older workers here, we need to get rid of some so that we project a better corporate image," leaves no doubt about the motivation for subsequent employment decisions.
This becomes important because many employment discrimination cases are disposed of before trial, typically by showing that there is not enough evidence to make it worth putting a case before a jury. The process of short-circuiting a case like this is called "summary judgment." And cases where direct evidence is present can't be disposed of through summary judgment, ensuring that the employer will have to go through the time, expense, trauma, and significant risk of facing a jury with its version of events.
Direct evidence of discrimination is rare, however. You just don't have employers, or their agents, telling employees that the reason they're being let go, or that their job was eliminated, is because they're old, female, Catholic, black, white, etc.
Which leads me to this case. A law firm marketing director, with good performance evaluations, went out on pregnancy leave under the FMLA. While she was out on leave, the firm's executive committee determined to restructure the marketing department, and dominate the marketing director's job. As part of the termination process, the firm engaged its human resources director to consult with outside counsel to orchestrate determination. But after the now ex-marketing director was notified that she was fired, the human resource director told her that she had been let go because she was pregnant and took medical leave. The human resources director also allegedly said that there were a group of people that were discriminated against because they were pregnant or took medical leave, and named several names.
The human resources director's statements, which she repudiated under oath at her deposition, nevertheless counted as statements made by the firm or its authorized agent with respect to the marketing director's termination. As a result, the law firm was confronted with direct evidence that pregnancy and medical leave were the causes of her firing. The Seventh Circuit Court of Appeals reversed the lower court's grant of summary judgment in favor of the law firm, with result that the case is now headed for trial.
The lesson here is that direct evidence of discrimination is an incredibly powerful factor in employment discrimination litigation. Employers should do everything they can to refrain from any kind of communication indicating a protected factor motivated or caused an adverse employment action.
An example of indirect evidence would be something like a supervisor who regularly makes fun of older employees by referring to them as "dinosaurs", "mossbacks", or other derogatory terms. The inference that arises is that someone who doesn't care for older workers would allow that feeling to infect the employment decision-making process. Direct evidence, on the other hand, requires no such inference. A supervisor who says, "We have too many older workers here, we need to get rid of some so that we project a better corporate image," leaves no doubt about the motivation for subsequent employment decisions.
This becomes important because many employment discrimination cases are disposed of before trial, typically by showing that there is not enough evidence to make it worth putting a case before a jury. The process of short-circuiting a case like this is called "summary judgment." And cases where direct evidence is present can't be disposed of through summary judgment, ensuring that the employer will have to go through the time, expense, trauma, and significant risk of facing a jury with its version of events.
Direct evidence of discrimination is rare, however. You just don't have employers, or their agents, telling employees that the reason they're being let go, or that their job was eliminated, is because they're old, female, Catholic, black, white, etc.
Which leads me to this case. A law firm marketing director, with good performance evaluations, went out on pregnancy leave under the FMLA. While she was out on leave, the firm's executive committee determined to restructure the marketing department, and dominate the marketing director's job. As part of the termination process, the firm engaged its human resources director to consult with outside counsel to orchestrate determination. But after the now ex-marketing director was notified that she was fired, the human resource director told her that she had been let go because she was pregnant and took medical leave. The human resources director also allegedly said that there were a group of people that were discriminated against because they were pregnant or took medical leave, and named several names.
The human resources director's statements, which she repudiated under oath at her deposition, nevertheless counted as statements made by the firm or its authorized agent with respect to the marketing director's termination. As a result, the law firm was confronted with direct evidence that pregnancy and medical leave were the causes of her firing. The Seventh Circuit Court of Appeals reversed the lower court's grant of summary judgment in favor of the law firm, with result that the case is now headed for trial.
The lesson here is that direct evidence of discrimination is an incredibly powerful factor in employment discrimination litigation. Employers should do everything they can to refrain from any kind of communication indicating a protected factor motivated or caused an adverse employment action.
An Employment Lawyer's View of the Paterno Situation
I've counseled corporate clients many times on removing senior-level executives, and the odd Paterno termination process, with its hand-delivered letter and curt telephone call 10 minutes before the Board of Directors announced the firing, makes perfect sense to me.
It's clear that there has been an acknowledgment at the senior levels of Penn State leadership that Paterno needed to go for some time. Several years ago, representatives of the University management team went to Paterno's house to ask him to step down from his head coach position. Paterno threw them out. Either before or after that particular event, the realization must have come to the Penn State board that by wallowing in the financial success of the football program, and allowing Paterno's successful record in football (unblemished by NCAA violations) to become the focus of the University, they had created a monster that perceived itself to be totally outside their control.
Now, it's great to be a monster, as long as you're only facing people with figurative pitchforks and torches. But as a monster, you have to be careful not to do something so, well, monstrous, that ultimately allows the pitchfork crowd to get a monster of its own.
That's what Paterno ended up doing here. And because he's a monster, or because he's 80+ years old, or for some other reason, Paterno didn't realize that the monster he created was about to gobble him up. By acting like a monster himself, Paterno set up a situation in which the university owed him literally nothing in terms of process, hearing, or explanation.
In short, Paterno become dangerous to the brand he mistakenly thought was his. The economic value of continuing with him to the end of the season, or even giving him the opportunity to defend himself (I'm not sure he can, anyway), was less than the economic damage his presence directing the team would inflict. The monster of terrible, continuing publicity, was bigger than the monster of Joe Paterno.
An easy choice, in the end.
It's clear that there has been an acknowledgment at the senior levels of Penn State leadership that Paterno needed to go for some time. Several years ago, representatives of the University management team went to Paterno's house to ask him to step down from his head coach position. Paterno threw them out. Either before or after that particular event, the realization must have come to the Penn State board that by wallowing in the financial success of the football program, and allowing Paterno's successful record in football (unblemished by NCAA violations) to become the focus of the University, they had created a monster that perceived itself to be totally outside their control.
Now, it's great to be a monster, as long as you're only facing people with figurative pitchforks and torches. But as a monster, you have to be careful not to do something so, well, monstrous, that ultimately allows the pitchfork crowd to get a monster of its own.
That's what Paterno ended up doing here. And because he's a monster, or because he's 80+ years old, or for some other reason, Paterno didn't realize that the monster he created was about to gobble him up. By acting like a monster himself, Paterno set up a situation in which the university owed him literally nothing in terms of process, hearing, or explanation.
In short, Paterno become dangerous to the brand he mistakenly thought was his. The economic value of continuing with him to the end of the season, or even giving him the opportunity to defend himself (I'm not sure he can, anyway), was less than the economic damage his presence directing the team would inflict. The monster of terrible, continuing publicity, was bigger than the monster of Joe Paterno.
An easy choice, in the end.
Tuesday, November 8, 2011
Jay Cutler is the Worst Interview in Football
Seriously. I think highly of him as a player, and well of him as a person. But his interview demeanor is simply awful.
Apple Corps?
This is interesting.
A unionized Apple Store would pit the traditionally change resistant and anti-innovation (with respect to employment practices, in particular) unions against a company that was constantly reworking its retail environment, and that has high standards of product knowledge and flexibility for its employees. It would make for an entertaining union voting campaign, at the least.
A unionized Apple Store would pit the traditionally change resistant and anti-innovation (with respect to employment practices, in particular) unions against a company that was constantly reworking its retail environment, and that has high standards of product knowledge and flexibility for its employees. It would make for an entertaining union voting campaign, at the least.
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