Labor & Employment Archives - Page 79 of 145

OSHA Issues New Illness and Injury Recordkeeping Rule That Casts Doubt upon Commonplace Employer Drug Testing and Safety Incentive Policies

Announcing a series of requirements that will begin to take effect August 10, 2016, OSHA released, on May 11th, its final rule to “modernize injury data collection to better inform workers, employers, the public and OSHA about workplace hazards.” Tellingly, OSHA acknowledges in its accompanying press release that the rule is intended to “nudge” employers to enhance methods to prevent workplace injuries and illnesses. Apparently, OSHA is proceeding under the assumption that all employers, regardless of past safety history, require an external push to enhance workplace safety efforts. Included within the rule are a number of alarming pronouncements—discussed more fully below—regarding routine employer safety practices such as drug testing and incentive policies that may necessitate changing long-established routines.

Overview of the New Injury and Illness Recording and Reporting Requirements

Signaling a stark departure from traditional injury recording and reporting practices whereby employers track and maintain such information internally, the new rule will require thousands of employers to electronically submit these records to OSHA each year. OSHA will then publish this data online in a format that anyone with access to the internet—including competitors, prospective employees, shareholders, union organizers and disgruntled former employees—can presumably search, filter and copy for their own use, including further public dissemination. The data submission obligations will be phased in over two years, as employers with 250 or more employees must submit the required 300A Annual Summary by July 1, 2017, and employers with 20 to 249 employees in “high-hazard” industries must submit their 2016 and 2017 300A Summaries by July 1, 2017 and 2018, respectively.

Employers operating in State Plan states are covered, too, as the OSHA-approved state programs must adopt “substantially identical” requirements within six months. Accordingly, employers in California, Connecticut, Indiana, Maryland, Michigan and Virginia—among others—should begin preparations to comply with the new rule.

Although a portion of the rule does not go into effect until next year, employers must comply beginning August 10, 2016 with requirements relating to employee involvement in employer recordkeeping systems and discrimination/retaliation prevention. Although much of the attention paid to the new rule has focused on the electronic submission requirements, OSHA’s commentary surrounding the discrimination prohibition suggests that this section may ultimately force employers to make changes to long-standing practices surrounding post-accident drug testing and safety incentive efforts.

The employee involvement portion of the rule, set forth at 29 C.F.R. § 1910.35, explicitly requires employers to “inform each employee how he or she is to report a work-related injury or illness” and “establish a reasonable procedure for employees to report work-related injuries and illnesses promptly and accurately.” A procedure is not reasonable, according to the new rule, if it would “deter or discourage a reasonable employee from accurately reporting a workplace injury or illness.” Further, employers must inform employees that they have the right to report injuries and illnesses, in addition to advising them that their employer is “prohibited from discharging or in any manner discriminating against [them] for reporting work-related injuries or illnesses.”

OSHA Takes Aim at Post-Injury Drug Testing and Safety Incentive Policies

Taking a position in the final rule that is sure to alarm a wide range of employers, OSHA announced that “blanket post-injury drug testing policies deter proper reporting” of injuries. Although the rule does not make across-the-board drug testing a per se violation, OSHA instructs employers to utilize post-injury drug testing only where “there is a reasonable possibility that drug use by the reporting employee was a contributing factor to the reported injury or illness,” and only where “the drug test can accurately identify impairment caused by drug use.” OSHA suggests that employees who report bee stings, repetitive strain injuries or other injuries where drug use could not reasonably have contributed to the occurrence, should not be tested. Creating greater uncertainty, OSHA warns employers that even when the decision to conduct a post-injury drug test is reasonable, the agency may nevertheless conclude that the testing unlawfully deterred injury reporting and constituted retaliation if the drug testing procedure itself is punitive or embarrassing to the employee, whatever that means.

OSHA recognizes, however, that employers that conduct post-accident testing mandated by federal regulations (e.g., interstate transportation) or pursuant to state workers’ compensation laws, many of which include “drug-free workplace” incentive programs, are not affected by the new rule. As such, an employer’s efforts to comply with applicable federal regulations or state laws will not be viewed as retaliatory.

The new rule similarly takes aim at another behavior the agency has long sought to discourage—employer safety incentive and disincentive policies and practices. While this will not come as a surprise to most employers (particularly those who recall the “Fairfax Memo” issued in March, 2012, see https://www.osha.gov/as/opa/whistleblowermemo.html), the language found in the rule will likely force many employers back to the drawing board in an effort to develop new policies intended to enhance workplace safety without incurring the wrath of OSHA. In the meantime, employers would be well advised to avoid using an incentive program to “take adverse action, including denying a benefit, because an employee reports a work-related injury or illness, such as disqualifying the employee for a monetary bonus or any other action that would discourage or deter a reasonable employee from reporting the work related injury or illness.” One would assume that this could encompass the month-end pizza party promised to employees if there are no recordable injuries and then abruptly canceled because an employee reports an injury.

In contrast, OSHA instructs that if “an incentive program makes a reward contingent upon, for example, whether employees correctly follow legitimate safety rules rather than whether they reported any injuries or illnesses, the program would not violate this provision.” The rule thus favors positive reinforcement, such as paying a bonus for serving on a safety committee or submitting a safety suggestion adopted by the company, at the same time that it prohibits the imposition of consequences for engaging in protected activities such as reporting an illness or injury.

What Should You Do Now?

Consider modifying your drug and alcohol testing policies to allow for discretion on obvious cases in which drug use or testing are clearly unrelated to an employee’s injuries and revisit the reasonableness of your drug testing procedures with your employment attorney. Be mindful, however, that with discretion comes the potential for inconsistent application of the policies and follow-on disparate treatment claims.
Examine your safety incentive and disincentive policies and practices with a critical eye, asking whether the policies and/or practices could be perceived as deterring or discouraging employees from reporting an injury or illness. Certain management bonus plans may similarly be viewed as incentivizing managers to discriminate against employees who report illnesses and injuries if the effect of doing so negatively impacts the manager’s bonus eligibility (i.e., where the bonus is tied to the OSHA recordable rates). If the potential for either conclusion exists, consider discontinuing or revising those policies and/or practices.
Begin preparations to switch from paper-based recordkeeping methods to an electronic system compatible with OSHA’s data submission portal.
Train the individuals responsible for injury and illness recordkeeping and reporting so they fully understand the new rule.

Article By Aaron R. Gelb, J. Kevin Hennessy, Caralyn M. Olie & Thomas H. Petrides of Vedder Price

DOL Announces Final Rule on Salary Threshold for Exempt White-Collar Employees

Today, the U.S. Department of Labor (DOL) announced its final rule on the minimum salary that white-collar employees must be paid to qualify as exempt from the overtime requirements under the Fair Labor Standards Act (FLSA). The new rule raises the current salary level that such employees must receive in order to qualify as “exempt” from $23,660 annually, to $47,476 annually. The new rule takes effect December 1, 2016.

Under current DOL regulations, most white collar employees – executives (supervisors), administrative employees, and professionals – are exempt from the FLSA overtime rules and need not be paid overtime for hours worked over 40 in a workweek if they satisfy two conditions. First, they must perform “exempt” duties as defined by the DOL regulations. Second, they must be paid a guaranteed salary of at least $455 per week, or about $23,660 annually.

The new rule, first proposed in a slightly different form back in 2015, raises the salary level significantly to $913 per week, or about $47,476 annually. This new salary level is set at the 40th percentile of weekly earnings for full-time salaried workers in the lowest income Census region (currently the South). This number is less than the $970 per week, or about $50,440 annually, that the DOL had originally proposed. In addition, the DOL will now permit up to 10 percent of the salary level to come from non-discretionary bonuses and incentive payments (including commissions).

This new threshold of $913 per week/$47,476 annually will be tied to the 40th percentile for full-time salaried workers in the lowest income Census region going forward, and will be updated every three years. It is currently expected to rise to more than $51,000 annually when the first update takes effect on January 1, 2020.

In addition, under the new rule the salary level for employees who qualify for the “highly compensated employee” exemption will rise from $100,000 per year to $134,004 per year. This level is the annual equivalent of the 90th percentile of full-time salaried workers nationally.

One change contemplated by the DOL when the agency first proposed this new rule back in 2015 will not take effect: changes to the “duties” test. The DOL has announced that the final rule will leave the existing duties tests for the executive, administrative, and professional exemptions in place.

The DOL estimates that 4.2 million additional workers will become eligible for overtime as a result of this rule change, including approximately 101,000 workers in the State of Michigan. This is estimated to raise total wages for American workers by approximately $12 billion over the next 10 years.

Many employers will be impacted by this new rule, as many employers have at least one “exempt” employee who is paid less than $47,476 annually. Thus, employers should scrutinize their workforces carefully to determine if changes in exempt status are necessary. Options include:

increase the salary of an employee who meets the duties test to at least $47,476 annually to retain his or her exempt status;
convert the employee to non-exempt status and pay an overtime premium of one-and-one-half times the employee’s regular rate of pay for any overtime hours worked;
convert the employee to non-exempt status and reduce or eliminate overtime hours;
convert the employee to non-exempt status and reduce the amount of pay allocated to base salary (provided that the employee still earns at least the applicable hourly minimum wage) and add pay to account for overtime for hours worked over 40 in the workweek, to hold total weekly pay constant; or
use some combination of these responses.

Given the significance of these changes, and the expected impact on the American workforce, employers are encouraged to consult with legal counsel to discuss their options and strategies for implementing changes, if necessary.

The Latest in the NLRB Handbook Saga? Another Unlawful Recording Policy Fails to Pass Muster

Last month, the National Labor Relations Board (NLRB) yet again shed further light on its analysis – and increased scrutiny – of employers’ handbook policies. The NLRB’s decision in T-Mobile USA, Inc., 363 NLRB No. 171 (Apr. 29, 2016), serves as a follow-up to an earlier decision with respect to rules restricting employees’ use of recording devices. We talked about the T-Mobile decision in our post last week and thought we would continue the discussion by elaborating on another of the board’s decisions on recording rules.

In one of many recent decisions scrutinizing employer handbook policies, the board in Whole Foods evaluated an employer rule prohibiting the use of recording devices on company premises. Whole Foods, 363 NLRB No. 87 (Dec 24, 2015). The NLRB specifically explained that it was not holding that all rules regulating recordings are invalid. Rather, the board found “only that recording may, under certain circumstances, constitute protected concerted activity under Sec. 7 and that rules that would reasonably be read by employees to prohibit protected concerted recording violate the Act.” Id. at *3, n.9. The NLRB further explained that employers are not prohibited from maintaining rules restricting or prohibiting employee use of recording devices, but they must be narrowly drawn so that employees understand that Sec. 7 activity is not restricted. This was the board’s issue with respect to the Whole Foods policy, as it found the rules to be overly broad. The board relied on the fact that the rules applied regardless of the type of activity engaged in and that it covered all recordings.

The T-Mobile decision, which we wrote about last week, provides additional insight on how to interpret Whole Foods. In T-Mobile USA, Inc., 363 NLRB No. 171 (Apr. 29, 2016), the board found the following policy to be unlawful:

To prevent harassment, maintain individual privacy, encourage open communication, and protect confidential information, employees are prohibited from recording people or confidential information using cameras, camera phones/devices, or recording devices (audio or video) in the workplace. Apart from customer calls that are recorded for quality purposes, employees may not tape or otherwise make sound recordings of work-related or workplace discussions. Exceptions may be granted when participating in an authorized [] activity or with permission from an employee’s Manager, HR Business Partner, or the Legal Department. If an exception is granted, employees may not take a picture, audiotape, or videotape others in the workplace without the prior notification of all participants.

Id. at *4. The administrative law judge found that T-Mobile had set forth valid, nondiscriminatory rationales for the rule, including maintaining a harassment-free work environment and protecting trade secrets, and that the rule was narrowly tailored to these interests. However, the NLRB reversed, noting that “[t]he rule does not differentiate between recordings that are protected by Section 7 and those that are not, and includes in its prohibition recordings made during nonwork time and in nonwork areas.” Id. at *5. Notably, though, the policy did state that the restriction is limited to recordings “in the workplace.”

With respect to the policy justifications alleged, the board conducted the following analysis:

Harassment: T-Mobile asserted that its recording prohibition was in place to prevent harassment and noted that, under federal and state laws, employers have an affirmative obligation to prevent harassing conduct. However, the NLRB found that the recording prohibition was not narrowly tailored to this interest. The board noted that it neither cited laws regarding workplace harassment nor specified that the restriction is limited to recordings that could constitute unlawful harassment.

Confidential information: T-Mobile asserted as an additional justification its interest in protected confidential information in the workplace. The NLRB noted that the employer’s other policies defined “confidential information” as inclusive of employee information such as employee contact information and wage and salary information. The board also cited Whole Foods and said that the employer’s interest in protecting confidential information was too insufficient to justify the broad prohibition on recording.

While Whole Foods indicated that such policies are not per se unlawful, the T-Mobile decision makes clear that simply inserting business justifications into the policy will not distinguish the lawful from the unlawful. The board seems to be closely scrutinizing the justifications and requiring detailed explanations thereof. The decisions in T-Mobile and Whole Foods indicate that the NLRB will also require that a rule carve out recordings that would be considered protected activity under the Act, and it appears – at least for now – that rules which fail to do so will be struck down. T-Mobile teaches us that, while recording rules are still lawful in some circumstances, the rules must be especially specific with regard to their application and justifications. Employers should continue to closely monitor NLRB decisions to stay up-to-date on all decisions analyzing employer handbook policies.

Article By Jackie S. Gessner of Barnes & Thornburg LLP

Whistleblower Wins Big in Case that Tests Limits of Confidentiality Agreements

Confidentiality agreements are common in corporate America. Many companies require new employees to sign them as part of the hiring process. In some industries like healthcare, privacy policies are elevated to a legal requirement. Can these agreements be used to stop an employee from reporting his or her employer for fraud or turning documents over to an attorney? The answer is “no” but there are some limits on what an employee can take and do with the information. The most recent case to examine the issue comes from the Northern District of Illinois.

On May 9th, U.S. Magistrate Judge Sidney Schenkier dismissed a counterclaim brought by LifeWatch Services against a whistleblower in a federal False Claims Act case.

Matthew Cieszynski was a certified technician working for LifeWatch. His job was to conduct heart monitoring tests. LifeWatch conducts remote heart monitoring testing throughout the United States. Patients can wear heart monitor devices anywhere in the world and have those devices monitored through telemetry. Cieszynski’s job was to look for unusual or dangerous heart arrhythmias. The testing results would be passed to the patients’ cardiologists who use the data to diagnose and treat various heart ailments.

When first hired by the company in 2003, Cieszynski signed a confidentiality agreement that said in part, “you agree that both during your employment and thereafter you will not use for yourself or disclose to any person not employed by [LifeWatch] any Confidential Information of the company…” The agreement also restricted Cieszynski’s ability to access computer systems and records or remove information from the company’s premises.

In 2006, Cieszynski signed a HIPAA confidentiality statement.

Years later, Cieszynski became concerned that LifeWatch was sending some of the heart monitoring work offshore to India in violation of Medicare regulations. He became especially concerned that some of the Indian workers were not properly certified to review and interpret the heart monitoring data.

In 2012, Cieszynski believed that a patient died because of an improper diagnosis made by an unlicensed offshore technician. That is when he became a whistleblower and filed a False Claims Act lawsuit in federal court. In order to file his lawsuit, he provided what he believed were important company documents to his lawyer. Those were later turned over to the government.

Under the Act, complaints are filed under seal and served on the government instead of the defendant. This allows regulators and prosecutors to investigate the merits of the case in secret. Usually the case is unsealed when the government decides to intervene or allow the whistleblower’s counsel to pursue the case. Until unsealed, the whistleblowers identity is not disclosed.

When the complaint was unsealed, LifeWatch Services discovered that Matt Cieszynski was the person who brought the suit. Their response was to file a counterclaim against Cieszynski for violating his employment agreement and the separate HIPAA nondisclosure agreement.

On May 9th, Magistrate Judge Schenkier dismissed LifeWatch’s counterclaim in a case widely watched by both members of the plaintiffs and defense whistleblower bar.

In dismissing the counterclaims, Judge Schenkier discussed the “strong policy of protecting whistleblowers who report fraud against the government.”

The court recognized the legitimate need for companies to protect confidential information. Those needs must be carefully balanced against the need to prevent “chilling” whistleblowers from coming forward, however.

In deciding that the counterclaim against Cieszynski should be dismissed, the court examined a number of factors. Those include:

What was the intent of the whistleblower when taking the documents? Here Cieszynski took them for the sole purpose of reporting what he believed to be fraud. There was no evidence that he sought to embarrass the company.
How broad was the disclosure? In this case there was no disclosure to the public or competitors. Cieszynski only provided documents to his lawyer and the the government.
The scope of the documents taken from the employer. Although LifeWatch claimed Cieszynski took more documents than were necessary to prosecute his case, the court said it wouldn’t apply hindsight and require a whistleblower to know exactly what documents the government might need. Since the documents were reasonably related to what the government could need, Judge Schenkier elected not to second guess Cieszynski.

There are limits to what a person can take and what he or she can do with those documents. For example, disclosing trade secrets to competitors or releasing sensitive healthcare information to the public will not likely elicit sympathy from the court.

In a case like this, however, courts will give the benefit of doubt to the whistleblower. Especially when there has been no public disclosure and no real harm to the defendant. Although LifeWatch claimed harm, the court found the only harm was the “fees and costs associated with pursuing the counterclaim – which is a self-inflicted wound.”

Corporate counsel should think long and hard before bringing counterclaims against whistleblowers. Not only are courts generally unsympathetic to these challenges, the fee shifting provisions of the False Claims Act can make these cases expensive for the defendants. Under the False Claims Act, defendants must pay the relator’s (whistleblower) lodestar legal fees if the relator prevails.

Article By Brian Mahany of Mahany Law

No Going Back – Rejection of Promotion Offer Not a Failure to Mitigate

Gibbs -v- Leeds United Football Club concerned the former Assistant Manager of the Club who took his £330,000 constructive dismissal claim to the High Court so as to sidestep the compensation ceiling in the Employment Tribunal.

Having fairly easily established the fundamental breach of contract necessary to win his claim against Leeds, Mr Gibbs then faced two more difficult questions about his compensation. First, how do you provide for mitigation where you know the dismissed employee is going to get a bonus from his new employer, and when, but don’t know how much it will be? Second, is it a failure to mitigate that the employee declines to accept an offer of improved employment terms from the old employer?

On the first point, the Judge reviewed the options of (i) estimating the bonus figure (but thereby certainly being wrong in one party’s favour of the other) or (ii) delaying the compensation award until the bonus amount were known, but thereby racking up interest charges for Leeds and denying Mr Gibbs receipt of his money. Note that part of the relevant bonus was due to be paid by Mr Gibbs’ new employer, Tottenham Hotspur FC, little more than four months after the High Court’s decision, at a time of low prevailing interest rates and when Mr Gibbs was safely in receipt of a salary from Spurs and so had no immediate need for the money. Nonetheless, this was still felt to be hardship enough all round to leave that option on the bench.

The Judge chose instead to order that:

the full amount of the £330,000 award should be paid to Mr Gibbs’ solicitors to be held in an interest-bearing account;
the parties should then agree how much of that could be released to Mr Gibbs (i.e. leaving at least enough in the account to cover any likely bonus award from Spurs); and
the rest would be offset against that bonus, with the bonus amount going back to Leeds and the balance to Mr Gibbs, plus interest in each case.

All very sensible and the fact that this was a High Court case in no way prevents a similar Order (or agreement between the parties) being made by the Employment Tribunal where there is a need to reflect an uncertain future receipt in the amount of a settlement or compensation award.

On the second point, was it a failure by Mr Gibbs to take reasonable steps to mitigate his losses when he rejected Leeds’ post-resignation offer to stay at Elland Road as Head Coach/Manager? The Judge gave this allegation a fairly short shrift – having found the Club guilty of a repudiatory breach of Mr Gibbs’ contract, it could not fix things so easily. Though the new role would have been more senior and presumably better paid, the damage caused to Mr Gibbs’ credibility among players and staff by the Club’s earlier treatment of him made it reasonable for him to refuse. He could have taken the chance that Leeds would change its behaviour towards him, but he was not obliged to do so. Bear in mind also the recent Employment Appeal Tribunal decision in Cooper Contracting -v- Lindsey which stressed just how high is the hurdle of showing a failure to mitigate, and also Buckland –v- Bournemouth University in 2010. There the Court of Appeal decided much against its own better judgment that once the employer was guilty of a repudiatory breach of contract, it could not “mend” that breach by profuse apologies and other appropriate steps afterwards, even if those measures would have undone all or most of the harm caused in the first place.

See more at: http://www.natlawreview.com/article/no-going-back-rejection-promotion-offer-not-failure-to-mitigate#sthash.ueEsoJnq.dpuf

Tokyo District Court Rules that “US-Style” Dismissal is Invalid

badge_button_japan_flag_800_2185 Article 16 of the Japanese Labour Contracts Act provides that “If a termination lacks objectively reasonable grounds and is not considered to be appropriate in general social terms, it is treated as an abuse of rights and is invalid”. Obviously the terms “objectively reasonable grounds” and “appropriate in general social terms” are ambiguous but here is a case which sheds a little light on those two phrases.

On March 29, 2016 the Tokyo District Court ruled that the termination of the five plaintiff employees by Japan IBM was invalid. Chief Judge Toru Yoshida ordered Japan IBM to reinstate them and to pay their salary retroactive to the date of termination. The plaintiffs were all dismissed without notice based on what IBM said was their poor performance. The employees alleged that the real reason was a desired reduction of the workforce and that IBM picked on them because they were members of a labour union which was against any restructuring, and not because their performance actually justified their dismissals.

The Court did indeed find that the plaintiffs’ performance was lower than average. However, it ruled that continuous lower evaluation based on a relative evaluation system is not enough to justify the termination. Merely because their performance was poorer than their colleagues’ did not mean that they were objectively unable to perform the duties of the role to an adequate standard. As a result, said the Court, Japan IBM had abused the right to terminate.

The plaintiffs’ lawyer said proudly during media interview at the Court, “This judgement is a landmark case because the judgement proved that the Japanese legal theory of “abuse of right” can serve as a brake on US-style terminations”. In fact it was already very clear that Japanese law would block dismissals without very good reason (i.e. not including performance unless supported by very strong evidence of very serious shortcomings), but we can probably forgive him in his moment of triumph. Even if it is not strictly a landmark, the decision does make it clear that relatively (as opposed to absolutely) poor performance will not count as “objectively reasonable grounds” for a dismissal, and that a termination without prior warning (or which is stated to be for an untrue reason) will not be found to be “appropriate in general social terms”.

Therefore, unilateral terminations in Japan are often litigated. Since the sanction of default is usually reinstatement rather than a cash payment, getting it wrong for the sake of expediency is often not a sensible option. This IBM case is a good lesson for employers in Japan accustomed to US or similar employment systems that poor performance is not always a justifiable reason to dismiss. Establishing objectively reasonable grounds is a very high hurdle in Japan and may strain the patience of employers not used to that burden. It is therefore much preferable to try to agree a severance with the employee. While this may be expensive it will at least be effective to terminate his employment and draw a conclusive line under the matter. The employee in turn gains a cash cushion and an opportunity to leave his employment with little loss of face and a clear record and reference.

Article By Kenichiro Kawada of Squire Patton Boggs (US) LLP

Defend Trade Secrets Act. It’s Coming: What You Need to Know

The Defend Trade Secrets Act (DTSA) is headed to President Barack Obama for his signature, and there is little doubt that President Obama will sign it into law. Below is a summary of what you need to know about this soon-to-be law, including what you should be talking to your employment law counsel about in terms of modifying employment contracts and agreements.

What is the DTSA?

The DTSA will effectively “federalize” trade secrets law and allow companies or individuals with trade secrets to file private civil lawsuits under the Federal Economic Espionage Act (the Espionage Act).

What does “federalizing” trade secrets law mean?

The federalization of trade secrets law is a game changer. Pre-DTSA, trade secrets law was a state law issue. While most states dealt with trade secrets by adopting some versions of the Uniform Trade Secrets Act, the laws (and court’s interpretation of them) varied significantly from state to state. The variations led to many hotly contested procedural issues for example forum, venue and choice-of-law.

What is the purpose of the DTSA?

The DTSA’s specified purpose is to create a nationwide law that tightens trade secrets protections to align them with those given to patents, copyrights, and trademarks. It makes the issue a federal one so that federal law and courts can control the subject area, which will provide more certainty for litigants in trade secrets cases.

What will the DTSA protect?

Federal law regarding intellectual property has been fought on three fronts: copyrights, patents, and trademarks. Now, trade secrets will enter the federal protection arena.

The DTSA will allow “[a]n owner of a trade secret that is misappropriated [to] bring a civil action…if the trade secret is related to a product or service used in, or intended for use in, interstate or foreign commerce.” Oddly enough, however, the DTSA itself does not define “trade secret.” The Espionage Act, however, does.

How will the DTSA protect trade secrets? (Hint: Seizure provision)

As set forth above, the DTSA will allow trade secret owners whose trade secrets have been misappropriated to file civil actions in federal court. It also provides for theft protections abroad, but much of this part of the law is yet to be determined.

In addition to allowing victims to be awarded damages for wrongful takings, the DTSA contains a seizure provision that allows for the seizure of stolen trade secrets in “extraordinary circumstances” upon an “ex parte application,” and “affidavit or verified complaint.” This seizure provision is something completely new in the trade secrets context, as no state law has ever provided a plaintiff with this remedy.

Although it is unclear what situations courts will eventually qualify as “extraordinary circumstances,” the threshold appears to be slightly higher than that required to obtain a temporary restraining order under the Federal Rules of Civil Procedure. In fact, the first requirement for a court issuing a seizure order is the determination that “an order issued pursuant to Rule 65 of the Federal Rules of Civil Procedure or other form of equitable relief…[would] be inadequate…because the party to which the order would be issued would evade, avoid, or otherwise not comply with such an order.” These additional requirements must also be met before the court will grant a seizure:

an immediate and irreparable injury;
the harm to the applicant outweighs the harm to the legitimate interest;
a showing that the person misappropriated the trade secrets by improper means or conspired to misappropriate through improper means;
a description (with reasonable particularity) of the matter to be seized and the location of the matter to be seized (if reasonable under the circumstance); and
the person(s) against whom seizure would be ordered would destroy, move, hide or make the trade secrets inaccessible if they were provided notice of the application.

A seizure order is enforceable by federal law enforcement officials and the materials seized are to be deposited to the custody of the court.

While such seizures may be difficult when dealing with small bits of data or data that can be easily copied or disseminated, the DTSA provides something else no other trade secrets law offers: it allows the moving party to request that the seized information is encrypted in the custody of the court.

Is there anything else interesting about the DTSA? (Hint: Whistleblower protection)

Yes. It has an immunity protection for whistleblowers. That provision essentially provides that an individual, who reveals the disclosure of a trade secret in confidence to a federal, state, or local government official, or to an attorney, may not be held criminally or civilly liable under any federal or state trade secrets law.

Also, an individual who files a lawsuit for retaliation by an employee for reporting a suspected violation of law may disclose the trade secret to his or her attorney and use the trade secret information in the court proceeding.

What are the pros?

The advantage of the DTSA is that, for companies that operate across state and national borders and that have their trade secrets threatened by competitors across the world, state laws were previously insufficient to properly protect those companies. The DTSA will help shore up the protection of trade secrets, likely reduce jurisdictional court battles that are typical at the outset of trade secret litigation in state court, and provide litigants with federal jurisdiction.

What are the cons?

The DTSA does not preempt state trade secret laws. As such, while a litigant may bring a federal trade secrets lawsuit, that same litigant may also be able to bring a claim under state law as well. While it adds uniformity of trade secrets law at the federal level, it does nothing for the myriad of trade secrets laws at the state level. In reality, this means that a litigant is more likely to face a federal trade secrets misappropriations claim and similar state law claims. While this provides uniformity at the federal level, it does not to clarify the patchwork of state laws, and makes trade secret litigation more complex by providing more litigation options to trade secret holders. While some may see this as a good thing, because it provides multiple avenues for recovery, others prefer uniformity.

While it is not necessarily true that companies should expect to see more litigation, they should be prepared to litigate these cases on the federal stage, as well as remain up-to-date on all relevant state laws.

What should my company’s next steps be to ensure compliance and corporate readiness?

Internal Controls

Companies should check their internal controls to ensure they are properly protecting their trade secrets. Some beginning action items should include the following:

Audit and Identify: Perform an audit of corporate assets to identify and designate trade secrets and determine where trade secrets are maintained and who has access to them.
Protect: Take steps to properly and adequately protect trade secrets. For electronically available or accessible information, ensure trade secrets are username and password protected and only made available or accessible to those who need access. Encrypting electronic information will also reduce the chance that it can be taken, opened, read, and disseminated outside the company’s information systems. For tangible trade secrets, ensure trade secrets are physically locked or that physical access to them is password, keycard or otherwise protected and that only those who need access have it.
Revise Agreements: Many companies allow third-parties access to the property, premises, data, networks, etc. Companies should review their vendor agreements, non-disclosure agreements, and other confidentiality and other non-disclosure-type agreements to ensure they are sufficient to identify and protect corporate trade secrets.
Revise Policies: Companies should review their privacy policies, including corporate security and electronic use policies to ensure they are sufficient to identify and protect their corporate trade secrets. This includes reviewing non-compete, non-disclosure, and other privacy-related agreements and policies the company may have with its employees.

Dealing with Employees

The DTSA requires that employers provide notice of the DTSA’s immunity “in any contract or agreement with an employee that governs the use of trade secret or other confidential information.” Companies can comply with this requirement by cross-referencing a policy document provided to the employee that sets forth the employer’s internal mechanism for reporting a suspected violation of law. If the employer fails to do this, the employer cannot be awarded exemplary damages or attorneys’ fees in an action against an employee to whom notice was not provided. This is required for all contracts and agreements that are entered into or updated after the DTSA’s enactment date.

The takeaway for this requirement is that companies with employees should sharpen their pencils because they have contracts and agreements to modify.

Dealing with Competitors

Companies can now act swiftly against a competitor attempting to misappropriate trade secrets. Under the appropriate “extraordinary circumstances,” the ability to file an ex parte motion in federal court for the seizure of any misappropriated property provides companies with a way to actually keep these trade secrets, well, secret. In addition, the automatic access to federal courts provides companies with a forum that is often better suited to handle complex interstate and international litigation, not to mention complicated technical issues, and decreases initial costs related to procedural battles.

Article By Sara H. Jodka & Emma R. Wolfe

Trade Secrets, Banker Bonuses, Worker Misclassification – Employment Law This Week – Episode 25 [VIDEO]

We invite you to view Employment Law This Week – a weekly rundown of the latest news in the field. We look at the latest trends, important court decisions, and new developments that could impact your work.

This week’s episode includes:

Former Workers Violated Ex-Employer’s Trade Secret Rights
Financial Regulators Propose Banker Bonus Restrictions
D.C. Circuit: Musicians Are Employees
NLRB Alleges Misclassification Violates NLRA
In-House Tip of the Week

Article By George Carroll Whipple, III of Epstein Becker & Green, P.C.

Supreme Court Rules Public Employee Demoted For Perceived Political Activity Can Bring First Amendment Challenge

In a 6-to-2 decision, the Supreme Court ruled that when a public employer demotes an employee in order to prevent the employee from exercising his free-speech rights, the employee may challenge that action as a violation of the First Amendment and §1983, even if the employer was mistaken about the employee’s behavior. The Court found that the government’s motive is what matters and that the constitutional violation of discouraging employees from engaging in protected political activity and speech is the same regardless of whether or not the employer was mistaken about the employee’s political involvement. Heffernan v. City of Paterson, 578 U.S. ___ (2016).

Supervisor Assumed Employee Supported Opposing Candidate

Jeffrey Heffernan was a police officer in Paterson, N.J., a twenty-year veteran of the force. After being promoted to detective in 2005, he was assigned to the office of the chief of police. In April 2006, the city was in the middle of a mayoral election where the incumbent had the support of Heffernan’s supervisors, but the challenger was a former Paterson police chief and friend of Heffernan. Heffernan could not even vote in the election as he did not live in the city but his mother did.

One afternoon, while off duty, Heffernan went, at his mother’s request, to the challenger’s campaign office to get a new yard sign for his mother’s yard. Other members of the police force saw him with the sign. The following day, Heffernan’s supervisors demoted him to patrol officer and assigned him to a walking patrol post. They demoted him as punishment for what they thought was his “overt involvement” in the challenger’s campaign, even though that belief was mistaken. Heffernan was not involved in the campaign but merely picked up the sign to help his bedridden mother.

Heffernan sued, alleging his demotion violated the First Amendment. He asserted that his supervisors demoted him because they thought he engaged in constitutionally protected speech, even though they were mistaken about his actions. The district court and Third Circuit Court of Appeals rejected his claim, holding that a free-speech retaliation claim under §1983 lies only when the government retaliated against an employee who actually exercised his First Amendment rights, not on the mistaken perception that he exercised protected rights.

High Court Rules In Favor Of First Amendment Protection

Generally, the First Amendment prohibits government officials from dismissing or demoting an employee because that employee engaged in constitutionally protected political activity or speech. Heffernan argued that the government’s motive in taking an adverse employment action is the key to a public employee’s retaliation claim. He alleged that as long as a government employer believed that the employee was engaged in protected activity and took adverse action because of that belief, the employer violated the First Amendment.

The Supreme Court agreed. Writing for the majority, Justice Breyer stated that “the government’s reason for demoting Heffernan is what counts here.” The Court ruled that when a government employer demotes an employee because it wants to prevent the employee from engaging in political activity protected by the First Amendment, the employee is entitled to challenge that unlawful action under the First Amendment and §1983, even if the employer is acting upon a factual mistake regarding the employee’s behavior. The Court stated that the employer’s mistake does not diminish the risk of harm to the demoted employee or to others who fear similar adverse consequences of engaging in protected activity.

The Court left the door open, however, for government employers to adopt a neutral policy that prohibits police officers from overt involvement in any political campaign. Whether a specific neutral policy meets constitutional muster is a question the Court left for another day.

It’s the Employer’s Ill Motive that Matters, Not the Employee’s Exercise of Rights

The Court’s ruling means that a public employer can be held liable for violating an employee’s constitutional rights even where the employee admits he wasn’t exercising those rights. The public employer’s desire or motive to keep the employee from engaging in protected political activity is enough to give the employee a viable claim for damages under §1983 regardless of whether the employee engaged in any activity protected by the Constitution.

Article By Joanna R. Vilos of Holland & Hart LLP

Uber Aims to Settle Two Class Actions; Approximately 385,000 Uber Drivers in California and Massachusetts to Remain Independent Contractors – At Least for Now

Last Thursday, Uber settled two closely-watched class actions contesting Uber’s classification of approximately 385,000 drivers in California and Massachusetts as independent contractors as opposed to employees. While the plaintiffs viewed the settlement as a victory, so likely did Uber, as it allows Uber to continue to pursue an on-demand independent contractor service business model. The court, however, still needs to approve the settlement and whether it will do so is not clear.

As part of the proposed settlement, Uber agreed to pay $84 million to the drivers. If Uber holds an initial public offering and its valuation goes above $93.75 billion within one year, Uber will pay an additional $16 million to the drivers bringing the total settlement to $100 million. After reducing the pot to account for attorneys’ fees and other costs, the individual payments, based on the number of miles driven by each driver, range from nominal amounts up to $8,000, although the majority of class members may just walk away with less than $100. Uber further agreed to revise its termination practices so that drivers must generally be given warnings and explanations before Uber can deactivate them from its software application. Drivers will also be able to appeal terminations and will enjoy a more driver-friendly tipping policy.

Many consider $84 million, or even $100 million, a well-spent business expense for Uber, who potentially had to spend hundreds of millions, if not billions, of dollars to reclassify its drivers and comply with the requirements of minimum wage, overtime, workers compensation, anti-discrimination, benefits, sick leave, and other federal, state and local laws that apply to employees.

But Uber is not out of the woods yet. First, as mentioned earlier, the court must approve the settlement and there is no guarantee that it will. Just a few weeks earlier, a California judge rejected a proposed settlement of similar litigation between Uber’s competitor, Lyft, and its drivers in part because it “short-changed” those drivers. Under that settlement, Lyft drivers would have received an average of $56. Second, Uber is settling lawsuits with its former and existing drivers in California and Massachusetts, but lawsuits in other states remain outstanding and new ones could be on the way. Stay tuned for further developments.

Article By Michael S. Arnold & Gauri P. Punjabi of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

Category: Labor & Employment

OSHA Issues New Illness and Injury Recordkeeping Rule That Casts Doubt upon Commonplace Employer Drug Testing and Safety Incentive Policies

Overview of the New Injury and Illness Recording and Reporting Requirements