Is a Blanket Savings Clause Sufficient To Protect an Employer’s Policies Under the NLRA?

Probably not – in a recent case, an administrative law judge (ALJ) for the National Labor Relations Board (NLRB) rejected an employer’s argument that a savings clause added to the beginning of its employee handbook shielded the employer from liability.

The focus of the dispute in Macy’s, Inc. was whether the employer’s policies were unlawfully overbroad under Section 7 of the National Labor Relations Act (NLRA). No. 1-CA-123640 (May 12, 2015). The Union and the NLRB General Counsel argued that a number of the employer’s policies chilled the exercise of employees’ Section 7 rights. The ALJ agreed that many of the policies violated the NLRA for reasons similar to those discussed in the recent advice memorandum from the NLRB Office of General Counsel regarding employment policies. For example, the confidentiality provision was overbroad because it prohibited disclosure of “the personal information of the Company’s employees and customers.” In addition, the intellectual property policy prohibited the use of the Company’s logo or trademark, which the ALJ concluded may discourage employees from using the Company’s logo or trademark in Union materials.

After finding the employer’s policies violated the NLRA, the ALJ analyzed whether the employer’s savings clause neutralized the employer’s policies. Specifically, the employer sent its employees a message in April of 2014, notifying them that it added the following disclaimer as an introductory page to its handbook:

Nothing in the Code or the policies it incorporates, is intended or will be applied, to prohibit employees from exercising their rights protected under federal labor law, including concerted discussion of wages, hours or other terms and conditions of employment. This Code is intended to comply with all federal, state, and local laws, including but not limited to the Federal Trade Commission, Endorsement Guidelines and the National Labor Relations Act, and will not be applied or enforced in a manner that violates such laws.

The ALJ explained that in order to repudiate unlawful policies effectively, a savings clause must be “timely, unambiguous, specific in nature to the coercive conduct, and untainted by other unlawful conduct.” The ALJ determined that the employer’s savings clause was too generic in contrast to the specificity of the unlawful policies, and it did not specifically reference those policies. In addition, the savings clause was not added until 17 months after the promulgation of the rules at issue. Therefore, the ALJ concluded that the savings clause was ineffective.

Takeaway: A blanket savings clause at the introduction of an employee handbook may not be sufficient to bring overbroad employment policies into compliance with the NLRA.

If an Employee Reports Harassment to Her Supervisor, But No One Else, Is The Faragher/Ellerth Defense Still Available?

Potentially – a recent case shows that the Faragher/Ellerth defense may still be viable if the employee reports alleged harassment to her supervisor, but does not report the matter to higher-level management officials as directed by the employer’s anti-harassment policy.

The Faragher/Ellerth defense is one of the strongest tools available to employers to defeat hostile work environment harassment claims. It protects an employer from liability when the employer can show: (i) that the employer exercised reasonable care to prevent and correct promptly any sexually harassing behavior; and (ii) that the plaintiff employee unreasonably failed to take advantage of any preventive or corrective opportunities provided by the employer or to avoid harm otherwise.

In Daniel v. Autozone, Inc., an employee sued her employer alleging claims for discrimination, retaliation, and hostile work environment harassment under Title VII. No. 1:13-cv-118 (N.D.N.Y. May 6, 2015). The employee alleged that soon after she started the job, other employees harassed her on a regular basis by making racially offensive statements and calling her derogatory names. The employee alleged that she reported the harassment to her direct supervisor, who did nothing about it, but no one else.

In response to the employee’s harassment claim, the employer raised the Faragher/Ellerth affirmative defense. The employer had a detailed harassment policy, which directed employees to first report alleged harassment to their supervisors. The policy also stated that if employees were not satisfied with their immediate supervisor’s response, they could direct their complaints to higher levels of management, including a 1-800 reporting number. Because it was undisputed that the plaintiff was aware of the policy and never followed its procedures, the court held that the employer was protected by the Faragher/Ellerth defense and dismissed the plaintiff’s harassment claim against the employer.

On the other hand, the individual defendants in the lawsuit – including the supervisor who allegedly did not respond to the employee’s complaints of harassment – were not so lucky. The court allowed claims to proceed against the individual defendants under 42 U.S.C. § 1981 and New York state law.

Takeaway: Anti-harassment policies should include multiple avenues for employees to report harassment, including the option for an employee to report to higher levels of management if a direct supervisor’s response is insufficient. The Daniel v. Autozone, Inc. case shows that this kind of policy will enable an employer to use the Faragher/Ellerth affirmative defense even if the employee reported alleged harassment to her direct supervisor, but did not otherwise follow the policy.

Is Continued Employment Sufficient Consideration For a Noncompete Agreement in Wisconsin?

Yes, the Wisconsin Supreme Court recently held that continued at-will employment is sufficient consideration for a noncompete agreement.

In Runzheimer International, Ltd., v. David Friedlen and Corporate Reimbursement Services, Inc., the Wisconsin Supreme Court resolved an issue that was previously unclear under Wisconsin law.  2015 WI 45 (Wis. Apr. 30, 2015).  The key holding of the case is that:

[A]n employer’s forbearance in exercising its right to terminate an at-will employee constitutes lawful consideration for signing a restrictive covenant.

The court based this holding on the doctrine of at-will employment, reasoning that the employer was giving up its right to terminate the employee immediately in exchange for the noncompete.  The court noted that, theoretically, an employer could terminate the employee moments after the employee signs the noncompete.  However, the court explained that the employee would be protected in that circumstance by other legal doctrines, including fraudulent inducement or good faith and fair dealing, which could be used to invalidate the noncompete.

The Runzheimer decision presents a contrast with Minnesota law.  In Minnesota, a noncompete must be signed at the inception of the employment relationship.  If the employment has already started, independent consideration, such as a bonus or a promotion, is required.  See Sanborn Manufacturing Co. v. Currie, 500 N.W.2d 161 (Minn. Ct. App. 1993).

Takeaway:  Continued at-will employment is sufficient consideration to support a noncompete agreement for an existing employee in Wisconsin.

5 Things Employers Should Know About the Labor Market in Minnesota

Here are 5 things employers should know about the current labor market in Minnesota:

  1. The unemployment rate in the State of Minnesota as of March 2015 was 3.7%, which was below the nationwide average of 5.5%.
  2. The unemployment rate in the Twin Cities Metropolitan Area as of March 2015 was 4.0%.
  3. It is estimated that Minnesota has 51,000 more jobs today than it did a year ago.
  4. Since 2010, the job growth in the Twin Cities has been predominantly in the suburbs. The number of jobs in Minneapolis remained essentially flat while St. Paul lost jobs during that time period.  Dakota County gained the most jobs.
  5. According to a recent report, the unemployment rate in Minnesota is currently 0.33% below its historical average.

Takeaway:  The historically low unemployment rate in Minnesota likely means that it will be harder for employers to find qualified applicants for the foreseeable future.

When Are Reasonable Accommodations NOT Required For a Disabled Employee?

Sometimes, the Americans With Disabilities Act (ADA) does not require an employer to provide a reasonable accommodation to an employee. The most notable exception to the rule is when the accommodation would pose an undue hardship on the employer. But there are other circumstances when accommodations are not required, too.

For example, in Morse v. Midwest Independent Transmission System Operator, Inc., the court addressed the issue of whether an employer failed to accommodate an employee who had Asperger’s Syndrome. 2013 WL 6502173 (D. Minn. 2013). Initially, the court questioned whether the employee qualified as “disabled” for purpose of the ADA because there was no evidence that the plaintiff “was substantially or materially limited in performing any major life activity on account of his Asperger’s syndrome, and [the plaintiff] himself testified that he did not regard his condition as severe.”

Even assuming the plaintiff’s Asperger’s Syndrome qualified as a disability, however, the court held that the employer was not required to provide any reasonable accommodation to the employee. The court explained that an employer “need not accommodate a disability that is irrelevant to an employee’s ability to perform the essential functions of [his] job — not because such an accommodation might be unreasonable, but because the employee is fully qualified for the job without accommodation and therefore is not entitled to an accommodation in the first place.” Because the evidence showed that the plaintiff’s job performance was “excellent,” and because there was no other evidence that the employee’s disability interfered with his essential job functions, the court held that the ADA did not require the employer to provide a reasonable accommodation.

The Morse case is a good reminder that reasonable accommodations under the ADA are only required when they serve certain purposes. In general, the four primary reasons that an accommodation may be required under the ADA are:

  1. To “enable a qualified applicant with a disability to be considered for the position such qualified applicant desires;”
  2. To “enable an individual with a disability who is qualified to perform the essential functions of that position;”
  3. To enable an “employee with a disability to enjoy equal benefits and privileges of employment as are enjoyed by its other similarly situated employees without disabilities;” and
  4. To make “existing facilities used by employees readily accessible to and usable by individuals with disabilities.”

See 29 C.F.R. § 1630.2(o). If a requested accommodation does not serve any of these purposes, the accommodation may not be required by the ADA.

Takeaway: When responding to a request for accommodation under the ADA, employers should consider not only whether the accommodation imposes an undue hardship, but also whether the accommodation serves one of the purposes identified by the ADA.

Supreme Court Holds That The EEOC’s Conciliation Efforts Are Subject To Judicial Review

In Mach Mining, LLC v. EEOC, the U.S. Supreme Court resolved the issue of whether courts may review conciliation efforts made by the Equal Employment Opportunity Commission (EEOC) prior to filing suit and what standard courts should apply when reviewing this issue. No. 13–1019 (Apr. 29, 2015).

Before the EEOC may file a lawsuit against an employer, federal law requires that the EEOC must first “endeavor to eliminate [the] alleged unlawful employment practice by informal methods of conference, conciliation, and persuasion.” 42 U. S. C. §2000e–5(b). Nothing said or done during these conciliation efforts may be used as evidence in a subsequent proceeding “without written consent of the persons concerned.” Id.

In Mach Mining, LLC, the Court reversed the Seventh Circuit’s holding that courts lacked the authority to review whether the EEOC has satisfied its conciliation obligations. As a result, whenever an employer is sued by the EEOC, courts have authority to review whether the EEOC satisfied the statutory prerequisite of endeavoring to resolve the matter through conciliation.

The Court also addressed the scope of judicial review that a Court should apply when reviewing whether the EEOC has met its conciliation obligations. The Court described the level of review as “relatively barebones” and limited to the following three issues:

  1. The EEOC must inform the employer about the specific allegation, as the Commission typically does in a letter announcing its determination of “reasonable cause;”
  2. The notice must properly describe both what the employer has done and which employees (or what class of employees) have suffered as a result; and
  3. The EEOC must try to engage the employer in some form of discussion (whether written or oral), so as to give the employer an opportunity to remedy the allegedly discriminatory practice.

If the EEOC meets these conditions, it will have satisfied its conciliation obligations and may proceed with the lawsuit. The Court explained that a sworn affidavit from the EEOC will typically suffice to establish that the conditions were met. When a court determines that the requirements were not met, however, the proper remedy is for the court “to order the EEOC to undertake the mandated efforts to obtain voluntary compliance.”

The Court also explained that this kind of judicial review is consistent with the statute’s non-disclosure provisions concerning what is said or done during conciliation because “a court looks only to whether the EEOC attempted to confer about a charge, and not to what happened (i.e., statements made or positions taken) during those discussions.”

Takeaway: When the EEOC sues an employer, the employer should review the EEOC’s conciliation efforts to determine whether the EEOC satisfied the statutory prerequisites for the lawsuit. If not, the court may order the EEOC to attempt to conciliate before allowing the lawsuit to proceed.

Why You Wanna Treat Me So Bad? – Prince Gets Sued For Tortious Interference With Contract

A new lawsuit in New York challenges Prince’s classic lyric in Purple Rain that “Baby I could never steal you from another.”

According to the lawsuit, Prince recently recorded, produced, and released a new album for free from his protégé, former Voice contestant Judith Hill.  But controversy arrived faster than a little red corvette.  A few days after the album’s release, a producer who previously signed Hill to Sony’s label sued Prince for tortious interference.  The lawsuit alleges that Hill was warned not to record with Prince multiple times, but did it anyway.  Notably, Hill has filed her own lawsuit and is asking the court to declare that she has no contractual obligations to the producer.

At this point it’s unclear whether Prince sought legal advice before recording and releasing Hill’s album.  If he did, he would arguably be able to raise advice-of-counsel as a defense.

Takeaway:  The Prince litigation is a sign o’ the times.  Hiring an employee – or a protégé in Prince’s case – who is subject to contractual restrictions, such as a non-compete agreement, always carries some risk.  If u don’t want 2 get sued, it’s best to do your due diligence and consult with legal counsel prior to making the hire.

3 Ways That Employers In Minnesota Can Cut Costs and Save Money

Here are three easy things that employers can do to cut costs and save money in Minnesota:

(1) Don’t Pay Out Unused PTO To Terminated Employees:  Under Minnesota law, whether a terminated employee is entitled to payment for unused PTO or vacation depends on the terms of the agreement between the employer and the employee.  As a result, an employer who adopts a policy stating that unused PTO or vacation will not be paid out at the time of termination is not required to pay those benefits to a terminated employee.

(2) Pay Pro Rata Salaries In the Initial and Terminal Weeks of Employment:  Many of the exemptions from minimum wage and overtime requirements require that an employee must be paid on a “salary basis,” which means that the employee must receive a predetermined salary that is “not subject to reduction because of variations in the quality or quantity of the work performed.”  However, this requirement does not apply to the initial or terminal weeks of employment.  See 29 C.F.R. § 541.602(b)(6).  As a result, employers may pro-rate an exempt, salaried employee’s wages during the first and last weeks of employment.

(3) Deduct Credit Card Processing Fees From Gratuities:  Currently, the law allows an employer to deduct a service charge from a gratuity paid by a customer using a credit or charge card so long as the “percentage deducted from the tip [is] in the same ratio as the percentage deducted from the total bill by the service company.”  Recently, legislation has been introduced to ban this practice in Minnesota, but it has not yet passed into law.  For the time being, it remains lawful in Minnesota.

Takeaway:  These strategies will not yield large savings right away, but over time, the savings can add up, particularly for employers with a large number of employees or a high turnover rate.

EEOC Issues Proposed Rules For Employer Wellness Programs

On April 20, 2015, the EEOC issued a notice of proposed revisions to its regulations under the Americans with Disabilities Act concerning employer wellness programs. The new regulations will not become effective until after the notice period ends on June 19, 2015, and a final rule is published. In the meantime, here’s what employers should know about the EEOC’s proposed rules for wellness programs:

  1. Wellness programs must be reasonably designed to promote health and prevent disease. The proposed regulations explained that a program satisfies this standard “if it has a reasonable chance of improving the health of, or preventing disease in, participating employees, and it is not overly burdensome, is not a subterfuge for violating the ADA or other laws prohibiting employment discrimination, and is not highly suspect in the method chosen to promote health or prevent disease.”
  2. Wellness programs must be voluntary. An employer may not require employees to participate in a wellness program, nor may an employer deny health insurance coverage or other benefits to employees for refusing to participate, except as part of an authorized, limited incentive that complies with the proposed regulations.
  3. Wellness incentives must be limited. The proposed regulations state that an incentive, whether in the form of a reward or a penalty, so long as the “maximum allowable incentive available under the program . . . does not exceed 30 percent of the total cost of employee-only coverage.” For example, if the total cost of coverage paid by both the employer and employee for self-only coverage is $5,000, the maximum incentive for an employee under that plan must be $1,500.
  4. Medical information must be kept confidential. Medical information obtained through a wellness program must be maintained as confidential, except as authorized by the ADA or as may be necessary to administer the health plan.
  5. Employers must offer reasonable accommodations for wellness programs. Absent undue hardship, employers are required to provide reasonable accommodations to enable disabled employees to enjoy equal benefits and privileges of employment, including participation in wellness programs. This includes reasonable accommodations that may be necessary to enable employees with disabilities to earn whatever financial incentive an employer wellness program offers.

Takeaway: Employers who offer wellness programs should review the EEOC’s notice of proposed rulemaking and provide comments on it before June 19, 2015, if they wish to do so. Because the proposed rules will likely be similar, if not identical, to the final rule that eventually will take effect, employers should also review their wellness programs to determine whether any changes may be necessary.

Is LinkedIn’s Reference Search Function Subject To The Fair Credit Reporting Act?

No – the U.S. District Court for the Northern District of California recently dismissed a complaint alleging Fair Credit Reporting Act (FCRA) violations based on LinkedIn’s Reference Search function. LinkedIn’s “Reference Search” function is available to premium account holders. It is designed to generate a list of individuals who previously worked with a job applicant and who may be able to provide feedback about the applicant’s previous job performance.

In Sweet et al. v. LinkedIn Corporation, a group of rejected job applicants sued LinkedIn and argued that the Reference Search function did not comply with the requirements of the FCRA. No. 5:14-cv-04531-PSG (N.D. Cal., Apr. 14, 2015). The FCRA is a federal statute that regulates “consumer reporting agencies,” which provide “consumer reports,” such as background checks, for employment purposes. See 15 U.S.C. § 1681 et seq. Among other things, the FCRA requires consumer reporting agencies to “adopt reasonable procedures for meeting the needs of commerce for consumer credit, personnel, insurance, and other information in a manner which is fair and equitable to the consumer, with regard to the confidentiality, accuracy, relevancy and proper utilization of such information.” 15 U.S.C. § 1681(b). The FCRA also imposes requirements for employers who utilize consumer reports provided by consumer reporting agencies to assess job applicants, including obtaining written authorization from the applicant and notifying the applicant if an adverse decision is based in part on information contained in the consumer report.

In Sweet, the court granted LinkedIn’s motion to dismiss based on its conclusion that the Reference Search function on LinkedIn was not a “consumer report” for purposes of the FCRA. The court explained that “Reference Searches are not consumer reports because the information contained in these histories came solely from LinkedIn’s transactions or experiences with these same consumers.” The FCRA defines “consumer report” to exclude a “report containing information solely as to transactions or experiences between the consumer and the person making the report.” 15 U.S.C. § 1681a(d)(2)(A)(i).

The court also held that LinkedIn was a not a “consumer reporting agency” under the FCRA. The FCRA defines “consumer reporting agency” as “any person which, for monetary fees, dues, or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information on consumers for the purpose of furnishing consumer reports to third parties . . . .” 15 U.S.C. § 1681a(f). The court reasoned that because the complaint alleged that the plaintiffs voluntarily provided their names and employment histories to LinkedIn, the complaint supports the conclusion that LinkedIn gathered the information for the purpose of carrying out the plaintiff’s information-sharing objectives – not for the purpose of creating consumer reports.

Takeaway: Because the Reference Search function is not a consumer report subject to the FCRA, employers who utilize the function are not required to comply with the FCRA requirements unless they conduct a separate background check that qualifies as a “consumer report.”

Notification Requirements For Unauthorized Disclosure of Employee Data

Most employers maintain records with sensitive information relating to their employees, such as social security numbers or similar information.  When a data breach occurs and this information is disclosed without authorization, employers may have legal obligations to notify employees affected by the breach.

For example, Minnesota law has a data breach notification requirement that would require an employer to notify employees “in the most expedient time possible and without unreasonable delay” of a suspected data breach.  The law provides that:

Any person or business that conducts business in this state, and that owns or licenses data that includes personal information, shall disclose any breach of the security of the system following discovery or notification of the breach in the security of the data to any resident of this state whose unencrypted personal information was, or is reasonably believed to have been, acquired by an unauthorized person. The disclosure must be made in the most expedient time possible and without unreasonable delay, consistent with the legitimate needs of law enforcement, . . . or with any measures necessary to determine the scope of the breach, identify the individuals affected, and restore the reasonable integrity of the data system.

See Minn. Stat. § 325E.61.  For purposes of the statute, “personal information” is defined to include unencrypted data including an individual’s first name or first initial and last name in combination with any of the following: (i) a social security number; (ii) a driver’s license number or Minnesota identification card number; or (iii) account number or credit or debit card number, in combination with any required security code, access code, or password that would permit access to an individual’s financial account.

For a mass data breach affecting 500 or more individuals at a time, the employer would also need to provide notification within 48 hours to “all consumer reporting agencies that compile and maintain files on consumers on a nationwide basis . . . of the timing, distribution, and content of the notices.”

Takeaway:  When a data breach affecting employee data occurs, an employer may need to comply quickly with notification obligations under applicable state law.  In the event of a data breach, it is important for employers to check the notification requirements for each state where affected employees are located.

Sixth Circuit Holds That Telecommuting Is Not A Reasonable Accommodation After All

After previously holding last year that telecommuting may be required as a reasonable accommodation, the Sixth Circuit Court of Appeals issued an en banc order vacating that decision. This time, the court held that because regular and predictable on-site attendance was essential to the employee’s job, her request to telecommute as an accommodation was not required by the Americans with Disabilities Act (ADA).

In EEOC v. Ford Motor Co., the employee suffered from irritable bowel syndrome and fecal incontinence that was so bad that she said it could “start pouring out of her at work.” No. 12-2484 (6th Cir., Apr. 10, 2015). Ford allowed her to try telecommuting on a trial basis on three occasions, but determined that she was still unable to maintain consistent job hours and complete her core job functions. Later, the employee requested to work from home up to four days per week. Human Resources met with her to discuss how she would be able to complete her job duties with that arrangement. After determining that the request was unreasonable, Ford proposed alternative accommodations, including moving her closer to the restroom or helping her to look for jobs better suited for telecommuting. The employee turned down both accommodation proposals and filed a charge of discrimination with the EEOC.

The first time that the Sixth Circuit addressed the case it held that there was a genuine issue of fact regarding whether the employee’s request to telecommute was reasonable. The court explained that the employer failed to show that the employee’s constant physical presence at work was essential for her to perform her job duties, particularly in light of recent technological advancements that make telecommuting more feasible.

Reviewing the decision again en banc, the Sixth Circuit vacated its previous order. This time, the court held that the employee’s request to telecommute was not reasonable. The court explained that although the ADA requires reasonable accommodation of disabled employees, “it does not endow all disabled persons with a job—or job schedule—of their choosing.” The court concluded that the employee had a “highly interactive” job and that “regular and predictable on-site attendance” was an essential job requirement. Relying on the well established rule that providing a reasonable accommodation does not require an employer to remove an employee’s essential job functions, the court held that the employee’s request to telecommute was unreasonable and not required by the ADA.

In reaching its decision, the Sixth Circuit suggested that regular attendance is an essential function for “most jobs.” The court wrote that:

That general rule—that regularly attending work on-site is essential to most jobs, especially the interactive ones—aligns with the text of the ADA. Essential functions generally are those that the employer’s “judgment” and “written [job] description” prior to litigation deem essential. See 42 U.S.C. § 12111(8). And in most jobs, especially those involving teamwork and a high level of interaction, the employer will require regular and predictable on-site attendance from all employees (as evidenced by its words, policies, and practices).

The court explained that the “sometimes-forgotten guide” of common sense also supports this conclusion.

Takeaway: The Sixth Circuit’s en banc decision in EEOC v. Ford Motor Co. is good for employers because it reinforces the common sense rule that regular and consistent attendance is an essential function of “most jobs.” This rule will not apply to all jobs, however, so employers should continue to engage in the interactive process when accommodations are requested. In addition, it is possible that the EEOC may seek to appeal the decision to the U.S. Supreme Court, so this may not be the final word in the case.