Showing posts with label Trade Secrets. Show all posts
Showing posts with label Trade Secrets. Show all posts

Thursday, October 17, 2019

EMPLOYMENT LAW QUARTERLY | Volume XXI, Issue iii

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City of Toledo Joins Cincinnati, Passes Salary History Ban

By Scott H. DeHart*

The City of Toledo passed Ordinance No. 173-19, which generally prohibits Toledo employers with at least fifteen employees from seeking an applicant’s prior salary information. Toledo joins a growing number of states and municipalities that have enacted similar bans, including the City of Cincinnati in March of 2019. Accordingly, Toledo employers should determine whether they are subject to the law and, if so, implement necessary changes to existing practices to ensure compliance with the ordinance when it becomes effective on June 26, 2020.

“Prohibition on Inquiring About or Use of Salary History”
Beginning on June 26, 2020, covered employers in Toledo cannot seek, use, or otherwise rely upon an applicant’s salary history during the hiring process. Notable exceptions include discussions of salary and benefit expectations, internal transfer or promotion, “voluntary and unprompted disclosure” of salary history, and applicants governed by a collective bargaining agreement. The ordinance also requires an employer to provide an applicant the applicable pay scale for the position following an offer of employment, but only upon “reasonable request.”

Remedies and Statute of Limitations
In the event the ordinance is violated, the applicant can seek “compensatory damages, reasonable attorney’s fees, the costs of the action, and such legal and equitable relief as the court deems just and proper.” The applicant must initiate any such action within two years.

Toledo has joined a growing number of jurisdictions outlawing inquiry into an applicant’s salary history, passing an ordinance similar to that passed by the City of Cincinnati just months earlier. Given this trend, employers should expect other cities to pass similar laws. Toledo employers should begin preparations and implement necessary changes to existing practices to ensure compliance with the ordinance when it becomes effective in June 2020.

*Scott H. DeHart, who works in the Columbus office, practices in all areas of labor and employment law. If you have questions about this ordinance or about inquiry into an applicant’s salary history, please contact Scott at shd@zrlaw.com or (614) 224-4411.



Use it or Lose it: U.S. Supreme Court Holds That Title VII Defendants Must Raise Charge-Filing Defense in a Timely Manner

By Tiffany Henderson*

Before an employee can file a lawsuit under Title VII of the Civil Rights Act of 1964 (“Title VII”), which prohibits discrimination based on an employee’s race, color, religion, sex, or national origin, the employee must file a Charge of Discrimination with the Equal Employment Opportunity Commission (“EEOC”) or the employee’s state’s equivalent of the EEOC. In Ohio, the state equivalent to the federal EEOC is the Ohio Civil Rights Commission. Generally, employees must file their Charge of Discrimination within 180 calendar days of the day the discrimination occurred or, if in a state like Ohio that has its own state agency, within 300 calendar days of the date that the discrimination occurred.

On June 3, 2019, the U.S. Supreme Court unanimously held that Title VII’s “charge-filing requirement” is not “jurisdictional,” i.e., grounds for dismissal at any point during litigation. Fort Bend County, Texas v. Davis, 139 S. Ct. 1843 (June 3, 2019). Instead, employers must raise the objection in a timely manner or they forfeit the defense. So, if an employee sues its current or former employer under Title VII, and the employee incorrectly or insufficiently filed a Charge of Discrimination with the EEOC or equivalent state agency, then the employer cannot wait until the later stages of the litigation to object on these grounds.

In Davis, an employee filed an EEOC Charge of Discrimination against her employer alleging sexual harassment and retaliation. While the EEOC processed her charge, the employer fired the employee after she did not show up to work due to a conflict with a church commitment. The employee then attempted to amend her EEOC Charge to include an allegation for religious discrimination by making a handwritten notation on her EEOC intake questionnaire. However, she did not amend her formal EEOC Charge.

After the EEOC notified the employee of her right to sue, she filed a lawsuit in federal court and asserted claims including sexual harassment, retaliation, and religious discrimination under Title VII. After litigating the case for years, the employer moved – for the first time – to dismiss the religious-discrimination claim. The employer argued that the court lacked jurisdiction over the claim because the employee failed to properly assert it in her EEOC Charge. The district court agreed and dismissed the claim. On appeal, the Fifth Circuit reversed and reinstated the claim. The U.S. Supreme Court agreed to hear the case and decide whether Title VII’s charge-filing requirement was a jurisdictional precondition that can be raised at any stage of a lawsuit or a “procedural prescription” that the employer must raise in a timely manner or risk forfeiting. The U.S. Supreme Court picked the latter.

In Davis, the U.S. Supreme Court noted that Title VII’s language regarding the charge-filing requirement focuses on a party’s procedural obligations, not a court’s jurisdiction. Accordingly, the Court held that the charge-filing requirement is not “jurisdictional,” and thus an employer forfeits the objection if it does not raise it in a timely manner. The Court contrasted the “harsh consequences” of jurisdictional objections, which can dissolve a claim at any point in the litigation (even in front of the U.S. Supreme Court), against a party’s argument that the other party failed to comply with a claim-processing rule, which the objecting party forfeits if it “waits too long to raise the point.” The U.S. Supreme Court never specified what amounts to waiting “too long to raise the point.”

The U.S. Supreme Court also confirmed that the EEOC charge-filing requirement is mandatory. Accordingly, upon an employer’s timely objection, a Title VII plaintiff’s failure to abide by the requirement will prove fatal to their lawsuit. Employers who are facing a Title VII lawsuit should consult with counsel to determine whether this procedural defense may exist.

*Tiffany Henderson practices in all areas of labor and employment law. If you have questions regarding the U.S. Supreme Court’s Davis decision or any other employment law issues, please contact Tiffany at tsh@zrlaw.com or (216) 696-4441.



Companies Must Make Reasonable Efforts to Maintain the Confidentiality of their Trade Secrets if They Want Courts to Protect Them

By Ami J. Patel*

For information to be considered a trade secret, it must be sufficiently secret to impart economic value because of (1) its relative secrecy and (2) the owner of the information must take reasonable efforts to maintain the secrecy of the information. Recent case law serves as a reminder that to obtain trade secret protection from the courts, the second, often overlooked component of the “trade secret” rule is pivotal. In litigating trade secret misappropriation under the federal Defend Trade Secrets Act (“DTSA”) and applicable state law, it is not enough for companies to simply show the existence of a trade secret. Companies must show they took appropriate measures and had proper policies and procedures in place to protect their trade secret information.

A federal court recently reiterated this principle in Abrasic 90 Inc. v. Weldcote Metals, Inc., 364 F. Supp. 3d 888 (N.D. Ill. 2019). In Abrasic, defendant Joseph O’Mera was president and a director of the plaintiff Camel Grinding Wheels, U.S.A. (“CGW”), which produced abrasive products. In his capacity as president, O’Mera developed and oversaw various aspects of CGW’s operations, played the primary role in negotiating costs with CGW’s suppliers, and set CGW’s prices for its entire product line and approved all pricing discounts. In 2018, O’Mera left CGW to start a competing abrasives business for Weldcote Metals, Inc. (“Weldcote”). When he left, O’Mera took files containing information about CGW’s pricing, customers, and suppliers. Additional employees who also took files containing information about CGW’s pricing, customers, and suppliers, followed O’Mera to Weldcote. Further, O’Mera convinced one such employee to bring customer pricing documents from CGW’s shared drive.

CGW filed suit against its former employees and Weldcote and moved to enjoin the defendants from entering the abrasives business, from doing business with CGW’s suppliers or distributors, and from using the information at issue. The information at issue included compilations of CGW’s pricing and sales data. Notably, the court held that this type of information could be a trade secret under the law. However, the court denied CGW’s motion for a preliminary injunction under DTSA and the Illinois Trade Secrets Act, because CGW had taken “almost no measures to safeguard the information that it now maintains was invaluable to its competitors.”

According to the court, CGW could have taken the following data security measures, but did not:
  1. Requiring its employees to enter into non-disclosure and confidentiality agreements. CGW failed to require those with access to its supposed trade secrets to enter into non-disclosure and confidentiality agreements. The court described this as “among the most fundamental omissions by the company.”
  2. Establishing and implementing policies concerning the confidentiality of the company’s business information. CGW’s employee handbook did not have a policy regarding confidentiality beyond a “vague, generalized admonition about not discussing CGW business outside of work,” which “did not define, delineate, or specify which information was considered confidential.” The court determined this was “too broad and vague to confer meaningful protection over the information at issue.”
  3. Training company employees about their obligation to keep certain categories of information confidential. In the absence of a confidentiality policy, CGW further “did nothing to train or instruct employees about their obligation to keep certain categories of information confidential.”
  4. Ensuring all confidential information is returned to the company upon the cessation of employment of any employee with access to such information. Although CGW instructed departing employees to return CGW “property,” these employees “were not asked whether they possessed any of the information at issue or instructed to return or delete such information.” The court noted that merely requiring that departing employees return company property is not enough, and that company precautions “must go beyond normal business practices for the information to qualify for trade secret protection.”
  5. Ensuring that employees with responsibility for maintaining the security of sensitive company data and information are trained in data security and IT management. CGW’s IT management person had “no training in data security (or virtually any other area of IT management) and was ill-equipped to identify, much less champion, sound data security practices.”
  6. Ensuring that the company maintains and implements comprehensive data security policies and practices. CGW’s IT management practices were “grossly inadequate to prevent unauthorized access and use of the company’s purportedly valuable proprietary information.” Further, CGW’s IT person recommended to the company internally that it “take some basic steps to improve the security of the information at issue,” such as segregating access to documents on a need-to-know basis and adopting an “acceptable device use policy.” CGW, however, failed to implement “even these modest suggestions, further undermining its trade secret claim.”
  7. Restricting access to sensitive company information to employees on a need-to-know basis, such as assigning employees passwords to access the information. The entire contents of CGW’s shared drive were accessible to employees who did not need access to this information. Further, the IT management person always granted any request for access that was made of her and she “did not make any meaningful inquiry into whether the person needed access to the information.”
  8. Differentiating access and protective measures with respect to sensitive company information from those imposed with respect to non-sensitive company information. The court disfavored the manner in which the information was stored on CGW’s shared drive. CGW provided all employees with the same password to obtain access to the shared drive. Files were not encrypted, and there were no restrictions on employees’ ability to access, save, copy, print, or email the information. Further, there was no evidence that employees needed the authorization of the IT management person to obtain access to the shared drive. Rather, any employee could have enabled their own workstation to access the shared drive with minimal knowledge or assistance. Moreover, the documents on the shared drive were not segregated from other files that were not trade secrets and the documents were not labeled in any manner as “confidential” or “proprietary.” The court noted that it “takes virtually no effort and little sophistication to include a heading on an Excel spreadsheet identifying a document as ‘proprietary’ or ‘confidential,’ yet CGW failed even to do that much with respect to the information at issue.”

The lesson from Abrasic is clear: to claim information is a statutory trade secret, companies need to employ reasonable security measures to protect that information. While companies need not implement each and every measure discussed above, it is imperative that they take heed of these measures.

*Ami J. Patel practices in all areas of labor and employment law. If you have questions regarding protecting your company’s trade secret information or any other employment law issues, please contact Ami at ajp@zrlaw.com or (216) 696-4441.



Letter of the Law: U.S. Department of Labor’s Wage and Hour Division Continues Issuing Opinion Letters

By Michele L. Jakubs*

In 2018, the U.S. Department of Labor's Wage and Hour Division (“DOL”) reinitiated its practice of issuing opinion letters. The DOL’s opinion letters offer official guidance addressing how a particular law, such as the Family and Medical Leave Act (“FMLA”) and Fair Labor Standards Act (“FLSA”), applies in specific circumstances. These letters also serve as important guidance for other employers faced with similar circumstances and compliance concerns. Although the letters are not binding precedent, they can help bolster arguments made by employers.

Since 2018, the DOL has released a steady stream of opinion letters (available through this link). Just this year, the DOL already has issued over a dozen opinion letters offering guidance on specific issues under the FMLA and the FLSA. A summary of some important opinion letters is provided below.

Opinion Letter FMLA 2019-1-A (available here)

This opinion letter addresses whether an employer may permit employees to exhaust some or all available paid sick (or other) leave prior to designating leave as FMLA qualifying, even when the leave clearly is FMLA qualifying. The DOL’s answer is a resounding no.

The individual submitting this request for an opinion stated that employers often justify this practice pursuant to language in the FMLA regulations, 29 C.F.R. §825.700, which in relevant part states that “[a]n employer must observe any employment benefit or program that provides greater family and medical leave rights to employees than the rights provided by the FMLA.” However, the DOL’s response is clear that an employer may not delay the designation of FMLA-qualifying leave as FMLA leave. “Once an employee communicates a need to take leave for a FMLA-qualifying reason, neither the employee nor the employer may decline FMLA protection for that leave. Accordingly, when an employer determines that leave is for an FMLA-qualifying reason, the qualifying leave is FMLA-protected and counts toward the employee’s FMLA leave entitlement.” Further, pursuant to the FMLA regulations, “once the employer has enough information to make this determination, the employer must, absent extenuating circumstances, provide notice of the designation within five business days, and may not delay designating leave as FMLA-qualifying, even if the employee would prefer the delay.” 29 C.F.R. §825.300(d)(1).

The DOL reconciles the language in 29 C.F.R. §825.700, i.e., the regulation cited in the underlying request for an opinion, with the opinion set forth in its letter, stating “[o]f course an employer must observe any employment benefit or plan that provides greater family or medical leave rights to employees than the rights established by the FMLA, [b]ut providing such additional leave outside of the FMLA cannot expand the employee’s 12-week (or 26 week) entitlement. [If] an employee substitutes paid leave for unpaid FMLA leave, the employee’s paid leave counts toward his or her 12-week (or 26-week) FMLA entitlement and does not expand that entitlement.”

This opinion may create additional confusion for employers in the Ninth Circuit, which covers Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington. In 2014, the Ninth Circuit Court of Appeals concluded that an employee can decline FMLA leave and use paid leave instead, even though the underlying reason for leave would have been FMLA-qualifying. Escriba v. Foster Poultry Farms, 743 F.3d 123, 1244 (9th Cir. 2014). In issuing this opinion letter, the DOL noted its disagreement with the Escriba decision in a footnote.

Opinion Letter FLSA 2019-2 (available here)

This opinion letter addresses whether time spent participating in an employer’s optional volunteer program constitutes “hours worked” requiring compensation under the FLSA. The answer is no, unless such time is forced.

The program at issue in the opinion letter is an employer-sponsored optional community service program for employees, where employees can choose to engage in certain volunteer activities. Under the program, the employer compensates employees for time they spend on volunteer activities during normal working hours or while they are required to be on the employer’s premises, but activities which take place outside of normal working hours are not compensated. At the end of the year, the employer awards a monetary bonus to certain participating employees based on the total overall hours each employee volunteered.

Relying on a previous opinion letter concerning volunteer activities, the DOL notes that “[a]n employer may use an employee’s time spent volunteering as a factor in calculating whether to pay the employee a bonus, without incurring an obligation to treat that time as hours worked, so long as (1) volunteering is optional, (2) not volunteering will have no adverse effect on the employee, and (3) the employee is not guaranteed a bonus for volunteering.” FLSA 2006-4.

The DOL concluded that participation in the program at issue does not count as hours worked under the FLSA because: (1) the employer does not require participation in the program nor control or direct volunteer work; (2) employees do not appear to suffer adverse employment consequences if they do not participate in the program; and (3) the employer does not guarantee participating employees a bonus for volunteering.

The DOL also confirmed that an employer can use a mobile device application to track a participating employee’s time spent volunteering, provided that this application is not used to direct or control the volunteering activities.

Opinion Letter FLSA 2019-9 (available here)

This opinion letter addresses whether an organization used permissible rounding practices when calculating its employees’ hours worked. The organization at issue used payroll software to calculate its employees’ hours worked and wages. Based on clock in and clock out times, the software would convert an employee’s hours worked each day into a numerical figure that would be rounded based upon whether the third decimal fell below .005. For example, if the software initially calculated an employee’s hours worked in a single day to be 6.865, that figure would be rounded up to 6.87 for purposes of calculating the employee’s pay for that day. However, if the initial figure was 6.864, then the software would use 6.86 for purposes of calculating the employee’s pay for the day.

The DOL found that this rounding practice was consistent with the FLSA’s regulations. The DOL explained it has been its “policy to accept rounding to the nearest five minutes, one-tenth of an hour, one-quarter of an hour, or one-half hour as long as the rounding averages out so that the employees are compensated for all the time they actually work.” The specific rounding practice at issue was neutral on its face and appeared to average out. Therefore, the DOL opined that, consistent with the FLSA’s regulations, the rounding practice “will not result, over a period of time, in failure to compensate the employees properly for all the time they have actually worked.” 29 C.F.R. § 785.48(b)

Conclusion

The key takeaways from the opinion letters summarized above are the following:
  • Employers may not permit employees to exhaust some or all available paid sick (or other) leave prior to designating leave as FMLA-qualifying. When an employer determines that leave is for a FMLA-qualifying reason, the qualifying leave is FMLA-protected and counts toward the employee’s FMLA leave entitlement.
  • Employers will not incur an obligation to treat an employee’s time spent volunteering as “hours worked” under the FLSA, so long as such time is not forced, i.e., (1) volunteering is optional, (2) not volunteering will have no adverse effect on the employee, and (3) the employee is not guaranteed a bonus for volunteering.
  • In determining employees’ hours worked, employers may use rounding practices, so long as those practices are neutral and average out so that the employer compensates its employees for all the time its employees actually worked.
The DOL’s opinion letters provide valuable insight regarding the intricacies of the FMLA and the FLSA and how these laws apply under specific circumstances. The attorneys at Zashin & Rich regularly provide guidance to employers regarding the nuances of the FMLA and the FLSA and counsel employers on such policies and procedures. Employers should consult with counsel to assess whether their FMLA and FLSA policies and procedures remain compliant with these ever-evolving laws.

*Michele L. Jakubs, an OSBA Certified Specialist in Labor and Employment Law, practices in all areas of labor and employment law. If you have questions regarding the DOL’s opinion letters, or the FMLA or the FLSA, please contact Michele at mlj@zrlaw.com or (216) 696-4441.



Z&R SHORTS


Please join Z&R in welcoming Tiffany Henderson and Ryan Spitzer to its Employment and Labor Groups


Tiffany Henderson practices out of Z&R’s Cleveland office. Her practice encompasses all areas of private and public sector labor and employment law. Tiffany graduated from Bowling Green State University and received her Master of Public Administration and her Juris Doctor (cum laude) from Cleveland State University and Cleveland-Marshall College of Law, respectively. As a law student, Tiffany served as Student Bar Association President, Director of Pre-Law and Recording Secretary for the Black Law Students Association, and was a member of the mock trial advocacy team. Tiffany also received the Norman S. Minor Scholarship and Cleveland-Marshall Law Alumni Association Life Member Scholarship. Prior to joining Z&R, Tiffany served as an Assistant Attorney General at the Ohio Attorney General’s Office. Before practicing law, Tiffany worked with PPG in Cleveland, Ohio as an Information Technology Systems Analyst.

Ryan Spitzer practices out of Z&R’s Columbus office and represents public and private sector employers in all aspects of labor and employment law. Ryan graduated from the Ohio State University and earned his law degree cum laude from Capital University with a concentration in civil litigation. As a law student, Ryan participated in the Fall National Moot Court Team and was an extern for Chief Justice Maureen O’Connor at the Ohio Supreme Court. Prior to joining Z&R, Ryan worked for the Miami County Prosecuting Attorney’s Office where he handled both civil and criminal matters and was appointed as a Special Assistant Prosecuting Attorney in multiple counties.


Congratulations to Stephen Zashin, Helena Oroz, and Jeffrey Wedel on their Recent Win before the Ohio Supreme Court


Z&R congratulates Stephen Zashin, Helena Oroz, and Jeff Wedel on their recent success before the Ohio Supreme Court in Gembarski v. PartsSource, Inc., 2019-Ohio-3231 (Aug. 14, 2019). The case is a significant win for employers. The Ohio Supreme Court held that when a single named plaintiff files an action on behalf of a class of employees, but is not bound by an arbitration agreement to which other members of the putative class action may be bound, the employer need not raise an arbitration defense at the pleading stage. Instead, the employer may wait and raise such a defense at the class-certification stage of the proceedings.

Upcoming Speaking Engagements


November 4, 2019
Jonathan J. Downes presents “Keys to Successful Negotiations” and “Negotiation Practice on Specific Issues” at the State Employment Relation Board (SERB) Advanced Negotiations Seminar. The seminar will take place at the State Library in Columbus, Ohio.

December 4, 2019
George S. Crisci will be part of a panel presentation entitled “Labor Law Hot Topics” at the Ohio State Bar Association’s National Labor Relation Board (NLRB) Updates seminar. The panel presentation will take place at the Ohio State Bar Association in Columbus, Ohio.

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Thursday, May 12, 2016

What’s a Trade Secret? Soon, Federal Courts Will Decide That Question

By: Brad E. Bennett* and Ami J. Patel**


Yesterday, President Obama signed into law the Defend Trade Secrets Act of 2016 (“DTSA”). As the law’s name suggests, the DTSA will have a major impact upon any business that seeks to protect its confidential information from inappropriate use, disclosure, and theft.

DTSA now provides access into the federal court system for anyone desiring to bring suit on most trade secrets violations. Since trade secret violation claims are commonly paired with claims for breach of non-competition and non-solicitation agreements, those latter claims now also will land in federal court far more often. DTSA will also require all employers to rewrite their non-disclosure agreements and employee handbooks, or else they will forfeit some of the DTSA’s key protections, such as the ability to recover exemplary damages and attorneys’ fees in certain situations.

Among the DTSA’s more interesting provisions:

Whistleblower / Anti-Retaliation Immunity: DTSA provides immunity to individuals who disclose trade secrets to government officials in the course of reporting suspected violations of the law. Furthermore, individuals who file a lawsuit against their employer for retaliation (which could include discrimination/harassment) may disclose trade secrets to their attorney and the court. This right might be construed broadly enough to encompass more than mere whistleblowing, but also to include ordinary retaliation claims under the discrimination laws to the extent that they are premised upon “opposition.”

Immunity Disclosure Requirements: Employers must disclose DTSA’s immunity provision to employees in any contract or agreement that governs the use of trade secrets or other confidential information (e.g., non-solicitation, confidentiality agreements). DTSA prevents employers who fail to comply with this notice requirement from obtaining exemplary damages or attorneys’ fees. This compliance item will require employers to revise any handbook provisions on confidentiality, as well as all employee non-disclosure agreements.

Inevitable Disclosure: DTSA specifically prohibits an employer from obtaining an injunction to prevent someone from entering into an employment relationship on the basis of the information that person knows. This provision effectively nullifies the “inevitable disclosure” doctrine that some courts had developed, under which an employer could seek to enjoin a former employee from working in a job that would inevitably result in the use of trade secrets, even if no evidence of actual disclosure existed.

Definitions: DTSA specifically excludes “reverse engineering” and “independent derivation” from the definition of what it means to acquire a trade secret by improper means.

Federal Seizure Remedy: In “extraordinary circumstances,” a federal court may authorize the ex-parte seizure (without notice to the other party) of property to prevent dissemination of trade secrets. This remedy is available in extremely limited circumstances, and the employer must meet a high burden to obtain this remedy. For example, the employer must demonstrate, via a verified complaint, that a temporary restraining order would be insufficient and that the wrongful holder of the trade secrets may destroy the trade secrets if given advance notice. DTSA also creates a cause of action for damages resulting from wrongful seizures. The employer also cannot have any involvement in the seizure itself—i.e., the service of papers on the person subject to the seizure, as well as everything associated with the seizure itself, must be done by federal marshals, who “may” be assisted by local law enforcement. There are also restrictions on publicizing anything associated with the seizure, a bond mandate, and provisions for requesting encryption of anything seized.

Statute of Limitations: DTSA provides for a three-year statute of limitations, which begins to run when the party discovers, or should have discovered based on reasonable diligence, the misappropriation.

Remedies: Available remedies include injunctions, damages (potentially even “reasonable royalties”), and attorneys’ fees. Exemplary damages equaling twice actual damages may be awarded “if the trade secret is willfully and maliciously misappropriated.” Attorneys’ fees may be awarded if a claim is made in bad faith, a motion to terminate an injunction is made or opposed in bad faith, or if a trade secret is willfully and maliciously misappropriated. A reasonable royalty can be recovered “in exceptional circumstances” if a mere injunction would be “inequitable.” A reasonable royalty can also be recovered “in lieu of” damages.

Relation to State Law: DTSA specifically does not preempt state law dealing with trade secrets, and injunctions issued under DTSA cannot “conflict with an applicable State law prohibiting restraints on the practice of a lawful profession, trade, or business.” Therefore, a plaintiff could potentially avoid federal court by pleading a case solely under state law.

In light of DTSA’s requirements, updating the language of existing contracts and policy documents is necessary for businesses that wish to derive all of DTSA’s benefits.
The lawyers of Zashin & Rich have decades of combined experience in drafting non-disclosure agreements, workplace confidentiality policies, and similar documents. If you have questions about DTSA, trade secrets, or other employment policy concerns, please contact either Ami J. Patel (ajp@zrlaw.com) in Z&R’s Cleveland office (216.696.4441), or Brad E. Bennett (beb@zrlaw.com) in Z&R’s Columbus office (614-224-4411).

*Brad E. Bennett, an OSBA Certified Specialist in Labor and Employment Law, practices at the firm’s Columbus office. He is well versed in all areas of labor and employment law including trade secrets misappropriation and enforcement of post-employment restrictive covenants.

**Ami J. Patel practices in all areas of labor and employment law. She has extensive experience counseling employers on trade secrets misappropriation and enforcement of post-employment restrictive covenants.
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Friday, December 17, 2010

EMPLOYMENT LAW QUARTERLY | Fall 2010, Volume XII, Issue iii

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Lock It Up: Safeguard company property against trade secret theft

By Lois A. Gruhin

In today's difficult economic times, trade secret theft is becoming more frequent, particularly in the areas of corporate information technology, finance, accounting, sales, marketing, human resources, and communications. Employers have found that former employees steal data by transferring it to a CD or DVD and copy e-mail lists, employee records, and customer information. Often, former employees then use this information to find a new job or with their new employer.

There are a number of different methods and safeguarding techniques employers should consider to protect their confidential business information. Some of these include:
  • Ensuring that documents and electronic data are adequately protected with locks, passwords, or other restrictions on access;
  • Requiring employees to sign non-compete/non-disclosure agreements;
  • Conducting exit interviews and obtaining assurance form the exiting employee that he/she has returned all company property and reminding the employee of any agreements he/she may have signed;
  • Terminating computer access immediately after the employee leaves the company; and
  • Conducting trade secret/non-compete audits regulary.

It is critical for companies to safeguard their trade secrets and technical information. Companies must be able to maintain customer relationships without worrying that former employees might use stolen information to the company's detriment. Implementing proper procedures and safeguards to protect confidential business information can help alleviate these concerns and assure your company's viability.

Special Delivery: Workers' compensation awards must account for all jobs

By Scott Coghlan*

Recently, the Ohio Supreme Court held in State ex rel. FedEx Ground Package Sys., Inc. v. Indus. Comm. that a Workers' Compensation claimant is entitled to both an average weekly wage (AWW) and full weekly wage (FWW) which includes income from a second job, even when that second job is unrelated to the first and when the second job pays more than the first.

In that case, Christopher Roper, injured himself while working for FedEx. In addition to his job at FedEx, Roper worked a second job with a pest control company and also operated another business on the side. After his injury at FedEx, FedEx set Roper's AWW at $160.45 and set his FWW at $250.80. FedEx derived these figures from his earnings at FedEx without taking into account his earnings from his second job at the pest control company.

Roper then moved the Industrial Commission of Ohio to increase his AWW and FWW to reflect his combined earnings from FedEx and the pest control company. The district hearing officer did so based on the "special circumstances" provision of R.C. 4123.61, increasing his AWW award to $417.05 and his FWW award to $457.36. The Franklin County Court of Appeals eventually affirmed the order.

The Ohio Supreme Court similarly affirmed, holding that the AWW, as the basis for benefit computation, "should approximate the average amount that the claimant would have received had he continued working after the injury as he had before the injury." The Court further stated that, while R.C. 4123.61 refers to the "average weekly wage for the year preceding the injury," the formula may be discarded if the AWW cannot justly be determined by applying the formula. When this occurs, the statute provides that the administrator for the Bureau of Workers' Compensation "shall use such method as will enable the administrator to do substantial justice to the claimants." Id.

To no avail, FedEx argued that the inclusion of wages from other, concurrent jobs would create a disincentive for claimants to return to work. FedEx also argued that secondary wages should be excluded entirely, or in the alternative that they be limited to situations where the two jobs are similar in character. In response to FedEx's first argument, the Court noted that R.C. 4123.56(A) expressly prohibits temporary total disability payments when the employer makes work available to the employee in a manner that is within his or her physical capabilities, or when another employer does so. The court, in dispensing with the second argument, noted that R.C. 4123.61 "refers to wages earned in the year prior to injury without qualification or exclusion." The court also noted that similar jobs can also have disparate earnings. Thus, limiting AWW awards to jobs which are similar in nature would not necessarily eliminate the wage differential which could potentially exist.

FedEx also challenged the amount of the FWW the Commission awarded to Roper. The Court also upheld this amount, giving broad deference to the Commission's calculation relying on Joint Resolution No. R80-7-48, issued by the Industrial Commission and Bureau of Workers' Compensation. The resolution states that the full weekly wage equals "the gross wages (including overtime pay) earned over the aforementioned six week period divided by six" or "the employee's gross wages earned for the seven days prior to the date of injury, excluding overtime pay," whichever is higher. The Court found that the Commission did not abuse its discretion in using the first formula to calculate Roper's FWW amount.

As a result of this case, employers need to understand that AWW and FWW awards must include all of an injured worker's income from the year prior to the injury from all employers. In addition, employers need to offer employment within the physical capabilities of the injured worker as soon as possible so as to minimize temporary total compensation payments.

*Scott Coghlan, the chair of the firms' Workers' Compensation Group, has extensive experience in all aspects of workers' compensation law. For more information about workers' compensation compliance, please contact Scott at 216.696.4441 or sc@zrlaw.com.

Unions Winning a Higher Percentage of Representation Elections, but the Numbers Don't Tell the Full Story

By Jon M. Dileno*

According to National Labor Relations Board ("NLRB") data, unions won 68.5 percent of representation elections conducted by the NLRB in 2009. This is up from the prior year's 66.9 percent and represents the highest win rate since 1955 when unions won 67.6 percent of the elections in which they participated. The 2009 union election win-rate represents more than a ten percent increase since 2004, although unions have won more representation elections than they have lost in each of the past 13 years.

While the union win-rate increased in 2009, the number of voters eligible to participate in the elections decreased from 2008.  Additionally, the NLRB conducted 1,293 elections in 2009 as compared to 1,612 in 2008, with the number of elections in 2009 (1,293) being nearly half the number of elections conducted in 1996 (3,300). Thus, while unions are winning at a greater percentage, the dramatic decrease in elections has resulted in a corresponding decrease in the actual number of elections they are winning.

Notably, these NLRB statistics do not reflect the full extent of organizing by labor unions.  Many unions organize through check-card recognition, neutrality agreements, and methods other than NLRB-run, secret ballot elections.  These statistics should encourage all non-union employers to review and revise workplace policies related to union organizing and monitor their workplaces for potential union organizing efforts.

*Jon M. Dileno practices in all areas of labor and employment law, with a focus on private and public sector labor law. For more information on NLRB statistics or any other labor or employment issue, contact Jon at 216.696.4441 or jmd@zrlaw.com.

Taking It All Off: Are employers required to pay employees for changing clothes?

By Patrick M. Watts

Recently, the Department of Labor ("DOL") issued yet another opinion letter regarding whether changing clothes at the beginning or end of the workday is compensable time under the Fair Labor Standards Act ("FLSA"). The DOL also addressed whether changing clothes could be considered a "principal activity" under the Portal to Portal Act making compensable all employee activities that occur after the changing of clothes at the beginning of the workday.

What are clothes?
The FLSA provides that when determining hours worked by an employee, the employer shall exclude "time spent in changing clothes or washing at the beginning or end of each workday which was excluded from measured working time during the week involved by the express terms of or by custom or practice under a bona fide collective-bargaining agreement…" 29 U.S.C. §203(o). The DOL has issued five (5) opinion letters over the past fifteen (15) years regarding the meaning of this provision and the meaning of "clothes." In one opinion letter, the DOL concluded that "clothes" did not include protective equipment such as: mesh aprons, plastic belly guards, mesh sleeves, plastic arm guards, wrist wraps, mesh gloves, runner gloves, polar sleeves, rubber boots, shin guards and weight belts. See Wage and Hour Opinion Letter, December 3, 1997. Later, the DOL revised its view of "clothes" and determined that "clothes" included protective gear. See Wage and Hour Opinion Letter, FLSA 2002-2.

In its most recent opinion letter, the DOL retreated to its previous position and now advises that "clothes" do not include protective gear. In support, the DOL cited to the legislative history of the law and also to current court cases which conclude that protective gear are not clothes. In citing the legislative history, the DOL noted that during Congressional debate on this provision an example of bakery employees was utilized to explain the purpose of this provision. The DOL concluded that the example of bakery employees changing "clothes" was incompatible with meatpackers or employees changing protective gear. Moreover, the DOL cited to three cases which concluded that, among other things, helmets, smocks, plastic aprons, arm guards, gloves, hooks, knife holders, sanitary and safety equipment, and protective equipment did not constitute "clothes." As a result, the DOL advises that time spent changing protective gear or equipment is not exempt from compensable time based on the express terms of or by custom or practice of a collective bargaining agreement as provided by 29 U.S.C. §203(o). The DOL disavowed any previous opinion letter which is inconsistent with this most recent opinion.

Can the workday start when the employee is changing clothes?

In the second part of its recent opinion letter, the DOL addressed whether changing clothes could still constitute a "principal activity," even if the act of changing clothes itself was not compensable. If changing clothes is a principal activity, then walking time and waiting time after changing clothes at the beginning of the day (and walking and waiting time before changing clothes at the end of the day) would constitute compensable time.

The DOL determined that changing clothes may be a principal activity. The DOL first noted that the language of §203 assumes that changing clothes can be a principal activity because that section states that "time spent in changing clothes or washing at the beginning or end of each workday…" The DOL concluded that the language itself assumes that the changing of clothes, while exempt from compensability in some cases, remains part of the workday. The DOL also cited to several court cases which addressed this issue. Many of these courts concluded that simply because the activity was not compensable did not also mean that the activity could not be considered the start of the workday. One court noted that although changing clothes may not be compensable under the FLSA, "it does not affect the fact that these activities could be the first 'integral and indispensable' act that triggers the start of the continuous workday…" As a result, the DOL concluded that changing clothes, even when not compensable, may still be a principal activity which effectively starts the workday.

Notably, the DOL did not opine that changing clothes will always be non-compensable or that changing clothes will always be a principal activity. Employers must consider a variety of factors to answer these questions, including whether there is a custom or practice or express language within a collective bargaining agreement and also whether changing clothes is an integral and indispensable act to an employees job. If you need assistance analyzing these or any FLSA compliance issues, please contact us.

Child's Play: U.S. Department of Labor issues final child labor regulations

By Michele L. Jakubs*

The United States Department of Labor (DOL) final regulations concerning child labor took effect on July 19, 2010. The regulations govern the employment of children for non-agricultural jobs. The final regulations incorporate statutory amendments to the Fair Labor Standards Act (FLSA) and specific recommendations made by the National Institute for Occupational Safety and Health and give employers clear notice of jobs that children may not perform.

The FLSA requires workers be at least 16 years old to work in non-agricultural occupations. However, the DOL deems certain occupations suitable for workers between 14 and 15 years old. For example, prior to the regulations, 14- and 15-year olds could work in retail, food service, and gasoline service establishments. With the new regulations, permissible occupations for workers ages 14-15 now include: office and clerical work, computer programming, writing software, tutoring, serving as a peer counselor or teacher's assistant, singing, playing a musical instrument, cashiering, modeling, price marking, assembling orders, packing and shelving, bagging and carrying out customer orders, kitchen work, and other food, beverage prep and service work. Fifteen year olds can also work as lifeguards.

The new regulations make clear that any job not specifically permitted for 14- and 15-year olds is prohibited. The regulations also include a non-exhaustive list of prohibited occupations including: manufacturing, mining, processing, working with a hoisting apparatus, working with power-driven machinery such as lawn mowers and golf carts, all work requiring the use of ladders or scaffolds, and occupations in warehousing, storage, communications, public utilities or public messenger services. Fourteen and 15-year olds also are prohibited from door-to-door "street" sales. However, charitable or fundraising efforts, such as selling cookies for the Girl Scouts or school fundraisers, are exempt from this provision.

The new regulations also clarify times and maximum number of hours 14- and 15-year olds may work. From June 1st through Labor Day, 14- and 15-year olds may work between the hours of 7 a.m. and 9 p.m. They may work a maximum of 8 hours per day and no more than 40 hours in one week. When school is in session, 14- and 15-year olds may work between 7 a.m. and 7 p.m. Additionally, during the school year they may not work more than 3 hours per day or 18 hours per week.

The new regulations also expand prohibitions for workers between the ages of 16 and 18. The prohibited occupations for workers between ages 16 and 18 now include: working with, tending, riding upon, repairing, servicing or disassembling an elevator, crane, manlift, hoist or high-lift truck; and working with chain saws, reciprocating saws, wood chippers and abrasive cutting discs.
The regulations also increase the penalties for child labor violations. Violators can be subject to a civil penalty between $11,000 and $50,000 for each violation and $100,000 for repeated or willful violations. The regulations also add a new penalty for causing death or serious injury to an employee under the age of 18. "Serious injury" is defined as:
  • Permanent loss or substantial impartment of one of the senses (sight, hearing, taste, smell, tactile sensation);
  • Permanent paralysis or substantial impairment of the function of a bodily member, organ, or mental faculty, including the loss of all or part of an arm, leg, foot, hand, or other body party; or
  • Permanent paralysis of substantial impairment that causes loss of movement or mobility of an arm, leg, foot, hand or other body part.

In addition to the above, the regulations also include new work-study programs for workers aged 14-15. As a result of these new regulations, this may be a good time for employers to revisit their child labor policies and make any necessary changes.

*Michele L. Jakubs, an OSBA Certified Specialist in Labor and Employment Law, practices in all areas of employment litigation and FLSA compliance. For more information about complying with child labor laws, please contact Michele at 216.696.4441 or mlj@zrlaw.com.

Z&R Shorts


Welcome Stefanie L. Baker
Zashin & Rich Co., L.P.A. is pleased to announce the addition of Stefanie L. Baker to its Employment and Labor Group.

Stefanie's practice encompasses all areas of public and private labor and employment issues.
Stefanie earned a B.A. with honors from Miami University.  She earned her law degree (J.D.) with honors from Cleveland-Marshall College of Law.  During law school, Stefanie served as Editor-in-Chief of the Journal of Law and Health.  She was also a member of Moot Court and completed an externship with the Honorable Christopher A. Boyko of the Northern District of Ohio.  Stefanie is admitted to practice law in the State of Ohio.  She is a member of the Ohio State Bar Association, the Cleveland Metropolitan Bar Association, and the Cleveland-Marshall Law Alumni Association.

Please join us in welcoming Stefanie to Z&R!

Congratulations to Patrick J. Hoban
Zashin & Rich Co., L.P.A. would like to congratulate Patrick J. Hoban on his recent certification by the Ohio State Bar Association as a Specialist in Labor and Employment law. Pat fulfilled several requirements to earn this specialty certification, including demonstrating a substantial and continuing involvement in Labor and Employment law. Congratulations Pat!
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Saturday, May 1, 2010

EMPLOYMENT LAW QUARTERLY | Summer 2010, Volume XII, Issue ii

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Unpaid Break Time for Nursing Mothers is Now Mandatory

By Michele L. Jakubs*
 
On March 23, 2010, President Obama signed into law the Patient Protection and Affordable Care Act (“PPACA”). PPACA Section 4207 (“Section 4207”), “Reasonable Break Time for Nursing Mothers,” amends Section 7 of the Fair Labor Standards Act by requiring employers to grant employees who are also nursing mothers a reasonable amount of break time to express milk. The break time is unpaid and must be granted each time the employee has the need to express milk for up to one year following the birth of a child.

Employers must also designate a lactation area, other than a bathroom, that is out of sight, sufficiently private and free from intrusion.

Section 4207 does not apply to employers with less than fifty employees if compliance would impose an undue hardship on the employer. Factors for determining an undue hardship include the employer’s size, financial resources, nature of the work performed, or structure of the place of business.

Importantly, Section 4207 also does not preempt state laws that provide greater protections to nursing mothers. Several states have already implemented laws regarding the rights of nursing employees in the workplace. For example, the state of Indiana has enacted a law which protects nursing mothers in the workplace. This law has many similar provisions to those set forth in Section 4207, but it exceeds the scope of Section 4207 in that it applies to businesses with twenty-five employees or more, and it requires employers to provide a cold storage space or allow employees to bring their own portable cold storage device to store expressed milk. Ohio presently does not have a law protecting nursing employees in the workplace, but it does have a law protecting individuals nursing in public.

Section 4207 took effect immediately. However, the Department of Labor is currently establishing complimentary rules to clarify the law including enforcement procedures. Consequently, employers employing fifty or more employees should implement policies that comply with Section 4207 immediately if they have not done so already. Further, employers of all sizes should review state and local laws to ensure compliance with laws related to nursing employees.

*Michele L. Jakubs, an OSBA Certified Specialist in Labor and Employment Law, practices in all areas of employment litigation and wage and hour compliance and administration. For more information concerning changes to the Fair Labor Standards Act or any other employment issue, please contact Michele at 216.696.4441 or mlj@zrlaw.com.

Employee or Non-Employee That is the Question…

By Stephen S. Zashin*

Congress recently introduced the Employee Misclassification Prevention Act (“EMPA”) known as H.R. 5107 with its counterpart S. 3648. EMPA, if passed, would require employers to keep certain records concerning non-employees or independent contractors who perform labor or service for remuneration.

EMPA would amend the Fair Labor Standards Act (“FLSA”) by creating a special penalty for employers who misclassify employees as non-employees or independent contractors. The Department of Labor could impose fines as high as $5,000 per violation and “willful” violations would be subject to triple damages.

Presently, there are a multitude of different tests applied by various government agencies to determine whether a particular individual is an independent contractor or an employee; employers should apply the most stringent of these tests to avoid liability under the various laws for which this is an issue (including the FLSA as well as Title VII and other antidiscrimination statutes).

In Community for Creative Non-Violence v. Reid, 490 U.S. 730 (1989) the U.S. Supreme Court examined twelve factors to determine whether the hired individual is an employee or independent contractor under common law agency principles. The Court considered most important the hiring party's ability to control the manner and means by which the work was accomplished, but stated that there were other relevant factors to look at and that no single factor outweighed another.

Employers should carefully review the following factors when determining whether a particular person should be deemed an independent contractor or an employee:
  1. The skill required;
  2. The source of the instrumentalities and tools;
  3. The location of the work;
  4. The duration of the relationship between the parties;
  5. Whether the hiring party has the right to assign additional projects
    to the hired party;
  6. The extent of the hired party's discretion over when and how long to work;
  7. The method of payment;
  8. The hired party's role in hiring and paying assistants;
  9. Whether the work is part of the regular business of the hiring party;
  10. Whether the hiring party is in business;
  11. The provision of employee benefits; and,
  12. The tax treatment of the hired party.
The consequences for making the wrong decision and misclassifying the person can be severe: liability for failure to withhold and pay the employer’s share of employment and social security taxes; liability for failure to make contributions to employee benefits plans; disqualification from retirement benefits plans; liability for wage-hour violations (such as failure to pay overtime); liability for health insurance claims under COBRA; and, liability for violations of employee’s rights under laws protecting employees from discrimination.

Employers may avoid misclassification problems by increasing the frequency of communication between workers and their employees. Employers should schedule recurring meetings with their workers to assess job duties and responsibilities; this can be done during annual performance reviews.

The passing of EMPA would heighten the importance of avoiding worker misclassification. Employers should clarify the terms of their relationship with workers and anticipate future changes. Employers who take a proactive approach to classification issues will help to minimize their risk of costly consequences and future litigation.

*Stephen S. Zashin, an OSBA Certified Specialist in Labor and Employment Law, has extensive experience with employee classification issues. If you have classification questions or any other questions regarding employment or labor issues please contact Stephen S. Zashin at 216.696.4441 or ssz@zrlaw.com.

Handbook Disclaimer: Include One or Suffer the Consequences

By Lois A. Gruhin

Employers frequently rely on employee policy manuals and handbooks to disseminate important policies and practices. These manuals and handbooks may subject unsuspecting employers to contractual liabilities, especially when a properly crafted disclaimer is not included.

A recent Ohio Court of Appeals decision offers significant insight regarding the importance of including disclaimers in handbooks and policy manuals. According to the holding of Dunlap v. Edison Credit Union, Inc., an employer may avoid contractual liability for the contents of a handbook by including in the handbook an express disclaimer of contractual intent and a reservation of rights to change the contents of the handbook.

In Dunlap, a retiring employee sought compensation for 38.5 unused vacation days. She argued that a provision in the policy manual – “‘Employees will receive vacation pay for all unused vacation at the time of termination’” – entitled her to all of her accrued and unused vacation time dating back to 2000. In response, the employer argued that the manual was not a contract, but instead was merely a “set of guidelines.” The employer also argued that the purpose of the manual was only “to establish a framework around which the efforts of all employees can be coordinated.”

The employee manual in question contained the following additional language: “The Board of Directors and Credit Union Management may modify, suspend or delete any of the policies stated in the [policy manual] without notice. To be effective, such changes must be in writing and signed by the Manager.” Importantly, the manual also included a multi-part disclaimer:

The manual is a management guide to general human resource methods at the Credit Union. It does not promise that the policies mentioned will be applicable in any given instance. The manual does not change the employment-at-will relationship in any way.

The [manual] is not an employment contract and does not provide any enforceable contractual rights to the employee with respect to his/her terms or conditions of employment. Neither these guidelines, nor any written or oral polices, practices or procedures which may develop from these guidelines create either an express or implied employment contract.

The Court of Appeals held that these disclaimers prevented the employee from recovering her vacation time. The Court held that while, in other circumstances, handbooks and policies might form the basis of an express or implied contractual obligation, that could not be the case here in light of the disclaimers, which specifically negated the possibility of contractual intent. Because of the disclaimers, therefore, the handbook became ”merely a unilateral statement of rules and policy which creates no obligations and rights.”

This decision clarifies that employers can avoid untended contractual obligations arising out of a handbook by including a well crafted disclaimer to make it clear that there is no intent to contract, and that the employer reserves the right to change the policies in the handbook at any time.

Up in Smoke: Employers Need Not Reasonably Accommodate Medicinal Marijuana Use

By David R. Vance*

The Supreme Court of Oregon recently ruled that an employer has no duty to reasonably accommodate medical marijuana use by employees.

The Oregon Medicinal Marijuana Act (“OMMA”) authorizes persons holding a registry identification card to use marijuana for medicinal purposes and exempts those persons from criminal prosecution. The Federal Controlled Substances Act (“CSA”) does not authorize medicinal marijuana use and classifies marijuana as an illegal drug for which criminal charges may be imposed.

In Emerald Steel Fabricators, Inc. v. Bureau of Labor and Industries, the employer, Emerald Steel Fabricators (“Emerald Steel”), hired a temporary employee as a drill press operator. Unbeknownst to Emerald Steel the employee used medicinal marijuana off the clock one to three times per day. Emerald Steel considered the employee for a permanent position but fired the employee when the employee disclosed his use of medicinal marijuana. Emerald Steel fired the employee despite the fact that he provided his registry card and documentation from his treating physician attesting that medical marijuana was the most successful form of treatment for his medical condition.

Two months later, the employee filed a complaint with the Oregon Bureau of Labor and Industries (“BOLI”). The employee claimed that Emerald Steel discriminated against him in violation of Oregon Revised Statute § 659A.112, which prohibits discrimination against an otherwise qualified individual because of a disability and requires an employer to make a reasonable accommodation to those with disabilities. BOLI found that the employee was not fired based on his disability, but ruled that Emerald Steel violated Ore. Rev. Stat. § 695A.112 by failing to reasonably accommodate the employee’s disability and denying employment opportunities to an otherwise qualified person.

On appeal, Emerald Steel argued that Ore. Rev. Stat. § 659A.112 must be interpreted consistent with its federal counterpart – the Americans with Disabilities Act (ADA). Further, Emerald Steel argued that because the ADA prohibits protection to those engaged in illegal drug use and CSA classifies marijuana as an illegal drug the employee’s use of medical marijuana is not protected by Ore. Rev. Stat. § 695A.112. The Court of Appeals upheld BOLI’s reasoning that Emerald Steel did not properly preserve its argument at the administrative level. However, the Oregon Supreme Court disagreed and proceeded with review on the merits of Emerald Steel’s argument.

The Oregon Supreme Court ruled in favor of Emerald Steeling finding that employers are not required to reasonably accommodate the use of medicinal marijuana by employees, and employers do not engage in discrimination when terminating employees for use of medicinal marijuana. The Oregon Supreme Court recognized the United States Supreme Court’s ruling in Gonzalez v. Raich, 545 U.S. 1 (2005), that under the Commerce Clause Congress may prohibit the possession, manufacturing and distribution of marijuana even when state law permits it for medical use. The Oregon Supreme Court furthered reasoned that as a result of Gonzalez, CSA partially preempted OMMA to the extent that OMMA explicitly authorized use of a drug CSA classified as illegal. Therefore, the Oregon Supreme Court ruled that Ore. Rev. Stat. § 695A.112, similar to the ADA, does not protect those engaged in illegal drug use. Therefore, Emerald Steel was relieved of its obligation to reasonably accommodate the employee pursuant to Ore. Rev. Stat. § 695A.112.

Strictly speaking, this decision allows Oregon employers to use discretion without being subject to discrimination claims when hiring, retaining or discharging employees who use medicinal marijuana. However, this issue remains unsettled in other jurisdictions such as California with laws similar to OMMA. Therefore, employers operating in these jurisdictions should proceed with caution when making employment related decisions related to an employee’s use of medicinal marijuana.

*David R. Vance, a member of the firm’s Cleveland office, has extensive experience with drug and alcohol issues. For more information about reasonably accommodating employees or any other employment or labor issues, please contact David at 216.696.4441 or drv@zrlaw.com.

Alcoholics Who Violate a No Call / No Show Policy Are Not Protected by the ADA

By Patrick M. Watts
 
Recently, the Second Circuit Court of Appeals held in VandenBroek v. PSEG Power CT LLC, that where regular attendance is an essential job function, the Americans with Disabilities Act (“ADA”) and the Family and Medical Leave Act (“FMLA”) did not protect an alcoholic employee who nonetheless repeatedly violated his employer’s attendance policy.

The plaintiff in the case, Bruce VandenBroek, worked as a boiler utility operator at Power Connecticut LLC (“PSEG”). PSEG maintained a no-call/no-show rule requiring employees to call their shift supervisor before the start of a missed shift so that PSEG could arrange coverage. In 2005, VandenBroek took FMLA leave to treat back pain and recover from back surgery. In February 2006, VandenBroek violated the no-call/no-show policy on two occasions. The day after VandenBroek violated the no-call/no-show policy for a second time, he informed PSEG he was entering a program for treatment of alcoholism and drug abuse.

On March 1, 2006, VandenBroek’s physician released him for work beginning March 6, 2006. On March 2, 2006, PSEG terminated VandenBroek for violating its no-call/no-show policy. VandenBroek filed suit against PSEG alleging violations of the ADA and FMLA. Specifically, he alleged PSEG discriminated against him by terminating his employment for conduct causally related to his disability and retaliated against him for taking leave afforded to him by the FMLA.

The Second Circuit upheld the District Court’s finding that VandenBroek failed to establish a prima facie case to support his discrimination claim. Essentially, the Second Circuit agreed with the lower court that VandenBroek was not “otherwise qualified” to perform his job because PSEG could not rely on his regular attendance. The Court reasoned that while attendance is essential to most jobs, it was particularly important in this case where attendance is necessary to prevent a power outage or explosion.

Further, VandenBroek improperly relied on Teahan v. Metro-North Commuter Railroad Co., 951 F.2d 511 (2d Cir. 1991), which held that when an employer terminates an employee based on conduct caused by a disability, the employer terminates the employee because of the employee’s disability. The District Court distinguished Teahan, a case decided under the Rehabilitation Act of 1974, because the ADA, 42 U.S.C. § 12114(c)(4), permits employers to “hold an employee…who is an alcoholic to the same qualification standards for employment or job performance and behavior that such entity holds other employees, even if any unsatisfactory performance or behavior is related to the…alcoholism of such employee.”

The Second Circuit also upheld the District Court’s decision that the employer did not retaliate against VandenBroek because he had taken FMLA leave, but rather terminated the employee for a legitimate business reason: violating the employer’s “no call/no show” policy. The Court found the employer’s decision to terminate VandenBroek was unrelated to his prior FMLA absences for back pain and nasal surgery. 

VandenBroek provides only limited guidance for employers making employment related decisions when dealing with employees suffering from alcoholism. Employers making decisions to terminate employees suffering from alcoholism because of poor attendance must be prepared to show specific reasons why attendance is an essential job function. Additionally, this issue has not been decided by the United States Supreme Court. As a result, employers operating outside the Second Circuit may not be afforded similar discretion.

The Enemy From Within: The Dangers of Unrestricted Technology

By Jason Rossiter*

In a time when most employees have unlimited access to the Internet, employers must establish a clear and concise electronic information policy to avoid disclosure of sensitive and confidential information by its employees. Without a clear and concise electronic information policy, employers risk infinite abuses of employee work time, exposure to viruses, loss of trade secrets, and misuse of employer owned property.

An effective electronic information policy includes an unambiguous statement regarding the employer’s expectations of computer use, data storage, and distribution of employer owned documents. Additionally, the policy must establish simple rules regarding use of employer issued e-mail accounts, cellular and smart phones, and personal digital assistants (“PDAs”), as well as a requirement to maintain the confidentiality of employer owned documents and proprietary information. Employers must also establish ownership of networks, computers, servers, files, e-mails, and phones to reduce an employee’s expectation of privacy when using employer owned property.

Any policy should clearly define the scope of permitted internet usage. Leaving internet use entirely within the discretion of an employee may lead to the very abuses that the policy is designed to eliminate. Employers should also describe what kinds of language, material, and images employees are permitted to transmit when using employer-provided networks and computing equipment, including mobile phones. The policy should make employees aware that the employer intends to utilize technology to monitor all activity and that employees have no expectation of privacy when using company-owned systems and networks.

The policy should also prohibit employees from syncing confidential business information, including customer lists, into “cloud” based Internet services without the employer’s permission. The policy should also prohibit employees from using their own personal smartphones, mobile broadband cards, online services such as Google Voice, or other such technologies as a means of circumventing the employer’s policies or of stealing confidential data.

Most importantly, employers should enforce all of these policies by implementing monitoring mechanisms.

Employers should distribute their policy to all employees and designate a contact person who can answer questions about it. Finally, since technology changes rapidly, employers should revisit their electronic information policies at least annually.

*Jason Rossiter has extensive experience drafting and editing electronic information policies. For more information about the ever changing technology issues facing employers or any other employment or labor issue, please contact Zashin & Rich  at 216.696.4441.

On the Edge: Government Employers Walk a Thin Line When Contemplating Searches of Technology Utilized by Their Employees

By George S. Crisci*

On June 17, 2010, the United States Supreme Court ruled that a government employer may search employee text messages sent from a government-issued pager, despite an employee’s reasonable expectation of privacy when the search is motivated by a legitimate work-related purpose and it is not excessively intrusive in light of the purpose.

In City of Ontario, California v. Quon, No. 08-1332 (June 17, 2010), the employee, Jeff Quon, alleged that his employer, the City of Ontario, (“Ontario”) and Arch Wireless (“Arch”), the pager provider, violated his Fourth Amendment rights and the federal Stored Communications Act (SCA) by searching the text messages he made on his government issued pager.

Ontario issued its police officers pagers with text messaging capabilities. The police officers, including Quon, signed Ontario’s computer policy, which stated that Ontario “reserves the right to monitor and log all network activity including e-mail and Internet use, with or without notice. Users should have no expectation of privacy or confidentiality when using these resources.” The policy did not apply explicitly to the pager text messages, although Ontario informally informed its employees that it would treat the text messages in a similar manner.

Almost immediately after the pagers were issued, Quon exceeded the number of allowed text messages for the month. Quon reimbursed Ontario for the overages. Ontario told Quon that an audit of his text messages would not occur so long as he paid for the overages. This pattern continued for the next few months, which prompted the police chief to investigate whether Ontario’s text message contract with Arch met the department’s text messaging needs. Subsequently, the police chief and Quon’s supervisor requested and obtained two months worth of text message transcripts. Upon review, they discovered Quon used his pager mostly for personal use. As a result, Ontario allegedly disciplined Quon for violating its employment policies.

Quon filed suit alleging that Ontario and Arch violated his Fourth Amendment rights and the SCA by obtaining and reviewing his text messaging transcripts, and that Arch violated the SCA by turning over the transcripts. The District Court granted Arch’s motion for summary judgment on the SCA claim, but denied the motion of Ontario and Arch as it applied to the Fourth Amendment claim. The District Court applied a two part test – whether Quon had a reasonable expectation of privacy in the text messages, and whether the text message audit was reasonable – to determine whether Ontario and Arch violated Quon’s Fourth Amendment rights. The District Court determined that Quon had a reasonable expectation to privacy, but Ontario had not violated his Fourth Amendment rights because the search was reasonably conducted to determine the efficacy of Ontario’s text messaging plan. The Ninth Circuit reversed the District Court, and instead found that Ontario’s search, while conducted for a legitimate work-related reason, was unreasonable in its scope. Quon appealed to the Supreme Court.

The Supreme Court ruled that Ontario did not violate Quon’s Fourth Amendment rights. In reaching its conclusion, the Supreme Court did not rule on whether Quon had a reasonable expectation of privacy with regards to his text messages, but instead assumed he had such an expectation of privacy, and then determined that the review of the text messages was a reasonable search.

The Supreme Court held that a search conducted by a government employer is Constitutional if it is “justified at its inception and if the measures adopted are reasonably related to the objectives of the search and not excessively intrusive in light of the circumstances giving rise to the search.” The Court found that Ontario’s search was justified because it was reasonable for Ontario to conduct the audit to determine the adequacy of its contract with Arch. Additionally, the scope of the search was reasonable because it was an efficient and expedient way to determine whether Quon’s text messages were work-related.

Government employers should remain cautious when searching employee information stored in government issued/owned property. Additionally, government employers should keep searches involving personal employee information limited in its scope so as to avoid violating its employees’ Fourth Amendment rights. Government employers contemplating such a search may wish to consult counsel to address issues raised in Quon prior to conducting a search involving private employee information.

*George S. Crisci, an OSBA Certified Specialist in Labor and Employment Law, represents employers in all facets of labor and employment law, in both the public and private sector. For more information concerning any labor or employment issue, please contact George at 216.696.4441 or gsc@zrlaw.com.

Z&R Shorts


George Crisci’s article entitled “Recent Developments in Public Sector Collective Bargaining” has been selected for inclusion in the 2010 edition of the OSBA CLE Institute’s The Best of Labor & Employment Law.

Stephen Zashin will be part of a panel presenting “Trial: Direct and Cross of an Expert Witness on Damages” at the 47th Annual Midwest Labor & Employment Law Seminar on October 14, 2010 at the Hilton at Easton Town Center in Columbus, Ohio.  For more information go to www.ohiobar.org.
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Tuesday, December 22, 2009

EMPLOYMENT LAW QUARTERLY | Fall 2009, Volume XI, Issue IV

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ACCESS DENIED: Court Upholds Jury Verdict Against Employer That Improperly Accessed Employees’ MySpace Pages

By: David R. Vance*

The District of New Jersey upheld a jury verdict against an employer who terminated two former employees after viewing their MySpace pages (www.myspace.com). See Pietrylo v. Hillstone Restaurant Group, No. 06-5754, 2009 U.S. Dist. LEXIS 88702, at *1 (D.N.J. Sept. 25, 2009). The employer, Houston’s Restaurant, alleged that the employees damaged employee morale and violated the restaurant’s “core values” by posting comments and holding chats about the restaurant’s management through their MySpace accounts. However, the former employees successfully argued that Houston’s Restaurant violated a federal Wiretap Act, a parallel act under New Jersey law, and the federal Stored Communications Act by logging into their MySpace accounts.

Upon learning that the employees held chats and posted comments through MySpace’s Spect-Tator (a chat group on myspace.com which is only accessible by invitation and then by password) about Houston’s management, the managers requested the employees’ password and log-in information. However, the managers failed to receive written or verbal authorization from the employees to access their MySpace accounts.

The jury determined that the managers accessed the employees’ password-protected websites five times without authorization. Because no direct evidence of authorization existed, the jury relied on testimony from employees in reaching its decision. One of the employees testified that while she provided her managers with her password and log-in information, she did not authorize them to access her account. The only reason she gave them her account information was because she felt she would get in trouble if she failed to do so.

The jury concluded the managers had the requisite state of mind and that the repeated visits to the website showed their actions were purposeful or intentional. The jury awarded nominal compensatory damages for back pay. The District Court upheld the jury’s award of punitive damages because the managers acted maliciously in repeatedly accessing the website.

This case puts employers on notice that they should not access employee websites or personal pages without authorization and even then should be cautious in doing so. In situations where access to an employee’s personal website is necessary, the authorization should be explicit.

*David R. Vance practices in all areas of labor and employment law. For more information about employee privacy or any other labor or employment issue, contact David at 216.696.4441 or drv@zrlaw.com.

The Role Of Economists In Reductions-In-Force Analysis

By: Audrius Girnius, PhD Huron Consulting Group*

The economic downturn has hit the U.S. labor market nearly as hard as the stock market over the last two years. The national unemployment rate has reached its highest point since the early 1980s and, according to the Department of Labor’s figures, it jumped to 10.2% in October, 2009. See, http://www.bls.gov/news.release/empsit.nr0.htm. A significant factor in the increased unemployment rate is large-scale layoffs – Reductions-in-Force (RIFs). Many large and prominent companies have had to make the tough decision to reduce their workforce, and more reductions are likely to come. This environment is rife with potential for litigation on various discrimination claims, with age discrimination (ADEA) claims particularly common.

An organization considering a RIF can take several simple proactive steps to help reduce its potential litigation risks. An organization should allow for sufficient time in the process for consideration of potential adverse impact, document their decision-making, and work with a statistical expert to determine whether the resulting change in the composition of employees may be evidence of adverse impact or explained by business-related factors.

The main task for a statistical expert is to conduct an analysis to determine whether the terminations will affect disproportionately a protected group. The statistical analysis of potential adverse impact from a RIF might, for example, compare (a) the proportion of older employees among the affected employees with (b) the proportion of older employees in the “at risk” population. The “at risk” population consists only of those employees who were considered for the RIF. For instance, if the RIF were to affect only employees in the IT department, the “at risk” population would be all employees in the IT department. The reason for comparison of the affected employees to the “at risk” population is straightforward. If the selection process is random with regard to age, then the affected employees should be representative of the “at risk” employees. In our example, if 50 percent of IT employees were over the age of 40, one would expect that about 50 percent of the affected employees would be over the age of 40. If a disproportionately high number of the affected employees are over the age of 40, one must perform a statistical test to determine whether this difference is statistically significant. Such statistical evidence may be used to support a claim of age discrimination. The example above focuses on age but there are other categories, such as race or gender, that may be critical to a statistical analysis. There are two important steps in an adverse impact analysis in a RIF, creating an “at-risk” group and conducting a statistical analysis.

Creating an “At-Risk” Group
The first step in a RIF is to identify the correct pool of employees at risk. Without a proper identification, any statistical analysis can yield spurious results. A statistical analysis on a faulty “at risk” grouping can result in a faulty finding of statistically significant adverse impact.

Conducting Statistical Tests
The second important step is to conduct a statistical analysis of the outcome of the RIF. Two alternative tests are frequently used to determine the level of statistical significance. The first is called a chi-squared test and the other is called the Fisher’s exact test. The chi-squared test compares the actual number of older employees in the “at risk” group to the expected number and calculates a test statistic. If the corresponding probability value test is less than five percent, the overrepresentation of older employees is considered statistically significant. Statistical tests that show that a particular outcome has less than a five percent chance of resulting from random chance is considered statistically significant.

The Fisher’s exact test calculates the probability of each possible outcome which would show a greater overrepresentation of older employees than the proposed RIF. Once all of the probabilities have been calculated, they are summed and if the resulting sum is less than five percent, the outcome is considered statistically significant. In essence, this test calculates how many more extreme and over-representative distributions exist. If the particular distribution of older affected workers is extreme enough, this test finds the distribution to be statistically significant. One advantage of the Fisher’s exact test is it is appropriate even for small sample sizes. Thus, even if the correct “at risk” groups are small, a valid test of adverse effects is still available.

Notably, both the chi-squared and a Fisher’s exact test have only two dimensions: the protected class and whether affected. Other explanatory factors, such as experience, performance, and education that could impact a decision to terminate an employee, are not accounted for in these tests. In instances where such factors can be explanatory, an economist may use a logistic regression. A logistic regression models the decision-making process by including all factors that were used by the decision-makers to determine who was to be chosen for the RIF. As with the two tests described earlier, a logistic regression also calculates the statistical significance of age in the decision-making process so it can be used as empirical evidence in a case of age discrimination.

While conducting a RIF is a difficult and unpleasant process, an economist can assist decision-makers in ensuring that the process is statistically sound and help mitigate potential liability. An economist can assist with creating the correct “at risk” groupings and can conduct a statistical analysis to determine whether an adverse impact has occurred in a particular RIF. The economists at Huron Consulting Group have assisted Zashin & Rich Co., L.P.A with statistical analyses related to employment decisions/lay-offs for numerous clients.

*Audrius Girnius, PhD, a Director with Huron Consulting Group, specializes in the application of microeconomics, statistics, and econometrics to complex problems in employment and labor litigation. Audrius has developed innovative economic models to analyze a variety of complex issues involving employment and labor and economic damages. If Huron can be of assistance to you, please contact Audrius at 646.520.0068 or agirnius@huronconsultinggroup.com.

GINA Took Effect On November 21, 2009 – New EEOC Poster Required

By: Jessica T. Tucci

Title II of the Genetic Information Nondiscrimination Act (“GINA” or the “Act”) grants the Equal Employment Opportunity Commission (“EEOC”) the authority to police workplace discrimination based on genetic information. GINA prohibits the use of genetic information when making decisions related to any term, condition or privilege of employment. Further, the Act prohibits employers from requiring, requesting or purchasing genetic information. The Act applies to private employers and state and local government employers with fifteen or more employees. Genetic information includes information resulting from employee or family member genetic testing. Such tests include the analysis of DNA, RNA or chromosomes. Genetic information also includes information regarding a disease or disorder of an employee’s family member.

While the Act strictly prohibits the use of genetic information in making employment related decisions, some exceptions exist that allow employers to request or acquire genetic information. For example, an employer does not violate GINA when it inadvertently acquires an employee’s medical history or offers health or genetic services as part of a wellness program. Additionally, an employer does not violate GINA if the employee gives prior voluntary informed written consent. However, GINA does not exempt well intentioned genetic information collections such as collecting DNA to perform a criminal background check. Absent some enumerated exceptions, employers likely violate the Act by using DNA to conduct a background check.

GINA does not directly prohibit harassment, although its prohibiting language is similar to the prohibiting language of Title VII and other equal employment statutes. Therefore, the EEOC predicts an inferred harassment cause of action exists under GINA. At this time, GINA expressly rejects a disparate impact cause of action.

GINA’s remedies include reinstatement, hiring, promotion, back pay, injunctive relief, pecuniary and non-pecuniary damages and attorneys’ fees. Similar to Title VII, GINA caps compensatory and punitive damages. Finally, punitive damages are not available against federal, state or local government employers.

Immediate compliance with GINA requires employers to post the most recent version of the “Equal Employment Opportunity is the Law” poster or post its supplement. The revised poster and its supplement can be found at http://www.dol.gov/ofccp/regs/compliance/posters/ofccpost.htm. Employers should also revise all stated anti-discrimination policies to include GINA.

THE ENEMY WITHIN: Dealing With Disloyal Employees

By: Jason Rossiter*

Congress enacted the Computer Fraud and Abuse Act (“CFAA”) to reduce the cracking of computer systems and to address computer related crimes. Since its enactment in 1984, employers have attempted to use the CFAA as a mechanism to bring actions against former employees that took or misused the employers’ data or confidential information. However, courts are continuing to limit employer’s ability to do so by narrowly construing whether an employee’s use of a company computer is “unauthorized”.

The Ninth Circuit in LVRC Holdings LLC v. Brekka, 581 F.3d 1127 (9th Cir. 2009) recently ruled that whether an employee’s use of a work computer is “without authorization” under the CFAA turns on the employer’s policies and definitions of acceptable use and not the employee’s state of mind. The employee in Brekka emailed corporate documents containing the company’s proprietary information to his personal email account. Since the company did not maintain a policy against emailing proprietary information, the Court could not find that the employee engaged in “unauthorized” use of his work computer as defined by the CFAA. Rather, the Court held that the CFAA permits employers to pursue claims against ex-employees that have stolen proprietary information only when the theft violates a clearly defined limit to access of company networks.

The case marks a continuing trend away from allowing employers to use CFAA in trade secret cases against former employees. It basically prohibits those employers without a policy explaining acceptable computer use from pursuing a CFAA claim. Employers, however, can still pursue alternative claims (e.g., breach of a nondisclosure agreement or misappropriation of trade secrets).

In light of the Court’s ruling, employers should revisit their data confidentiality and technology use policies. Company data and use and confidentiality agreements should include all potential causes of action – breach of contract, intellectual property infringement, trade secret, computer crime, etc. – so as to best protect the company from disloyal former employees. In order to maintain an action under the CFAA, companies also must clearly define authorized use within their technology policies.

*Jason Rossiter has extensive experience representing employers in litigating and arbitrating workplace disputes in Ohio, California, and throughout the country. For more information about the CFAA or any other labor or employment issue, please contact Zashin & Rich at 216.696.4441.

EMPLOYEE RESTRICTED, EMPLOYER CONFLICTED: When Disabled Employees Want To Return To Work

By: Lois A. Gruhin

In July 2009, the U.S. Equal Employment Opportunity Commission (“EEOC”) settled a class action disability lawsuit with an Ohio based company. In that case, the company agreed to pay more than $90,000 and offer jobs to employees it allegedly subjected to discrimination.  The EEOC alleged that the company violated the Americans with Disabilities Act (“ADA”) by failing to permit disabled employees to return to work without a full-duty, no-restriction doctor’s release.

In the U.S. District Court for the Southern District of Ohio, the EEOC argued that disabled employees out on leave should be permitted to return to work regardless of whether they still have some physical restrictions, so long as they are able to perform their jobs.  The company, however, maintained a policy requiring these same employees to obtain a full-duty, no-restriction doctor’s release prior to returning.  The company’s policy adversely affected over 80 employees in Ohio and several surrounding states.  Laurie Young, an EEOC attorney from the office in which the case was brought said, “Employers should be aware that the most recent amendments to the ADA became effective on January 1 of this year, and those amendments made substantial changes to the ADA as interpreted by the court.”

This case reminds employers to check their policies to assure compliance with the Americans with Disabilities Act Amendments Act (“ADAAA”).  Additionally, employers must revise those policies that fail to meet the ADAAA’s requirements.  Lastly, employers must be particularly careful when workers’ compensation laws, the Family and Medical Leave Act and the ADA intersect.

Z&R SHORTS


Speaking Engagements January 29, 2010
George Crisci will be presenting Mandatory Bargaining Subjects in Public Sector Collective Bargaining for the ABA Labor & Employment Sections' Committee on State and Local Government Collective Bargaining and Employment Law.
For more information go to www.abanet.org.

February 16, 2010
Steve Dlott will be presenting “How to Defend a Workers’ Compensation Claim” for the Medina Safety Council. For more information go to www.medinasafetycouncil.com.

June 8, 2010
Patrick Watts will be one of the presenters of “Employment Law Alphabet Soup” for the National Business Institute. For more information go to www.nbi-sems.com.
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