Category: Labor & Employment

Section 409A Transition Relief Deadline Quickly Approaching

The National Law Review recently published an article by Daniel B. Lange and Christopher K. Buch of Katten Muchin Rosenman LLP regarding Section 409A Transistion Relief Deadlines:

As the end of the year approaches, important transition relief from penalties and excise taxes imposed by Section 409A of the Internal Revenue Code (the Code) is about to expire. If an employer has an employment agreement or other nonqualified deferred compensation plan that provides for severance payments to an employee only if such employee executes a release, there may be a technical violation of Code Section 409A. The Internal Revenue Service allows for correction of such technical violations without penalty, but the correction must occur before December 31, 2012.

In 2010, the IRS issued two notices (IRS Notice 2010-6 and 2010-80) addressing how to fix an employment agreement that was not in compliance with Code Section 409A. In these notices, the IRS stated that by allowing an employee to receive his or her severance payment following the execution of a release, the employee would be able to control the year of such payment by timing when he or she delivered such release to his or her employer. The IRS stated that, to the extent the severance payment is subject to Code Section 409A, the ability to control payment timing is a violation regardless of whether the execution and delivery of the release actually crosses two taxable years.

The IRS provided transitional relief from this technical violation by allowing employers to amend any noncompliant employment agreement or other nonqualified deferred compensation plan in effect as of December 31, 2010. Under the transitional relief, such agreement or plan must comply with the Code Section 409A release requirements by December 31, 2012.

In order to take advantage of the transitional relief, an employer must correct the noncompliant agreement or plan in one of two approved manners and include the names of the employees affected and the correction method used by the employer.

Briefly, if the agreement or plan provides for a defined payment period, the correction must be made to provide for either: (a) payment only on the last day of such defined period or (b) if the defined payment period begins in one taxable year and ends in another taxable year, payment must be made in the later taxable year. If the agreement or plan does not provide for a defined payment period, the correction must be made to provide for either: (x) payment only on a specified date either 60 or 90 days following the employee’s separation from service, or (y) payment during a defined period not longer than 90 days following the employee’s separation from service, except that the payment must be made in the later taxable year if that period could span two taxable years.

If the agreement or plan is not corrected by the December 31, 2012 deadline, payments made pursuant to such agreement or plan may be immediately included in an affected employee’s income, a 20 percent penalty tax will be imposed, and additional interest taxes may apply. Please note that in the case of a bilateral agreement or plan, the affected employee’s consent is required to make any change, so employers should allow plenty of time to make these corrections.

A copy of IRS Notice 2010-6 can be found here and a copy of IRS Notice 2010-80 can be found here.

©2012 Katten Muchin Rosenman LLP

Posting By Employer Regarding Pending Legal Action Can Violate CEPA

The National Law Review recently published an article by Ari G. Burd of Giordano, Halleran & Ciesla, P.C., Posting By Employer Regarding Pending Legal Action Can Violate CEPA:

 

In Flecker v Statue Cruises, LLC, the plaintiff filed an action against his employer alleging violations of the New Jersey Wage and Hour Law.  In response, the employer posted a memorandum directed to all employees informing them of the suit.  The memo specifically identified plaintiff as the party responsible for filing the suit and advised employees that as a result, no employees would be scheduled for overtime.  Immediately thereafter, plaintiff was confronted, threatened and harassed by coworkers.  Eventually the harassment became so great that plaintiff resigned.  Plaintiff then filed a claim of retaliation under the Conscientious Employee Protection Act (CEPA), New Jersey’s whistle-blower statute.

The trial court entered summary judgment in favor of the employer and the case was dismissed.  However, on November 14, 2012, the Appellate Division reversed this ruling and reinstated the case, noting there was sufficient evidence for a reasonable jury to conclude that the employer knew or should have known its memorandum would incite the plaintiff’s co-workers and that such action could ultimately force the plaintiff to resign.  This is yet another example to show that CEPA is far-reaching, and protects workers from a wide assortment of retaliatory conduct far greater than mere discharge, suspension or demotion.

© 2012 Giordano, Halleran & Ciesla, P.C.

Inclement Weather and Time Off Issues: To Pay or Not to Pay

With winter closing in, the possibility of bad weather brings potential attendance issues to the forefront of our minds. Icy roads and snow storms in Kentucky often cause delays and closings of not only schools but also businesses. Of course safety is the primary concern for everyone in extreme weather conditions, but employers must think beyond the logistics of employees getting to work or staying home. Absences due to bad weather impact the productivity of a business, and raise questions regarding the calculation of pay and how an employee’s time should be tracked. These issues are further complicated when dealing with a mix of exempt and non-exempt employees; however the U.S. Department of Labor (DOL) does offer some guidelines to assist an employer in determining their rights and responsibilities when bad weather impacts employee attendance.

Let’s consider several scenarios:

The business decides to close due to bad weather and sends non-exempt employees home: Employers are required to pay hourly employees only for the hours worked. Under the Fair Labor Standards Act (FLSA), an employer is not obligated to pay for hours not worked. Therefore, non-exempt employees when unable to attend work, or sent home due to weather do not have to be compensated for the time off. This is a fairly straightforward and uncomplicated practice, unlike dealing with the complex nature of exempt employees.

The business is open, but an exempt employee chooses not to come in:  An exempt employee almost always has to be paid, in any circumstance. Under the FLSA an employer is prohibited from docking the pay of an exempt employee who chooses not to come into work for inclement weather. In this position as well, any business that decides to close due to weather is required to pay exempt employees their regular salaries. The only instance in which an employer can deduct pay from a salaried exempt employee is if the facility is closed for more than a week. Another point to note is that the FLSA does not require that an employer provide vacation or leave time. Therefore there is nothing to prevent the employer from deducting the inclement weather days off from the employees’ paid time off or vacation to cover the missed work. This sounds on its surface like a positive solution to the problem. However, complications arise when an employee has not accrued enough time off or when they have already scheduled and been approved to take their remaining time off at a later date. In both cases, an employer is still restricted from deducting the difference from the employees’ salary. The days off can be deducted from future earned leave. However, serious consideration should be given to instituting this practice as it complicates the employee/employer relationship and cause morale issues which can lead to a decline in productivity or a loss of good employees.

Employer’s Plan: An inclement weather policy should be a standard document in all employee handbooks. Now is the time to review that policy and consider whether it covers all of the issues that need to be addressed to protect both the employees and the employer. Several points to consider when reviewing the policy both for its applicability and validity are as follows:

  1. How are closures communicated and who is the decision-maker?
  2. Can employees who are faced with daycare or school closings bring their children to the workplace?
  3. Are employees permitted to work from home? What conditions apply in this instance?
  4. Outline eligibility for pay, how it is determined, and if paid time off will be applied for the absence(s).
  5. Will non-exempt employees be given an opportunity to make up some or all of the time missed? Will this occur within the same pay period?

Whatever the forecast this winter, with proper planning, understanding the legal obligations and a clear and concise policy an employer can reduce the likelihood of confusion created by weather-related absences. So plan now for Jack Frost, and you’ll be able to enjoy the winter wonderland without the stress of the question “to pay or not to pay.”

© 2012 by McBrayer, McGinnis, Leslie & Kirkland, PLLC

IRS Guidance Encourages Leave Donation Programs for Hurricane Sandy Victims

The National Law Review recently featured an article, IRS Guidance Encourages Leave Donation Programs for Hurricane Sandy Victims, written by Alexander L. Reid, Celia Roady, Mary B. “Handy” Hevener, and Matthew R. Elkin of Morgan, Lewis & Bockius LLP:

 

Employers wishing to provide disaster relief assistance have several tax-relief provisions available to them.

In the wake of Hurricane Sandy and the resulting destruction and devastation to the East Coast, many employers have expressed an interest in providing disaster relief assistance to their affected employees. The following describes the different tax-relief provisions that may be applicable should employers provide such assistance.

Employee Donations of Vacation and Sick Pay

One way that employers can assist affected employees is by enabling employees to donate vacation, sick, or personal leave in exchange for employer contributions to charitable organizations for the relief of disaster victims. Without guidance from the Internal Revenue Service (IRS), these leave-sharing programs would have required the employees receiving any donated leave days to pay income andFederal Insurance Contributions Act (FICA) taxes on the leave-day income. Morgan Lewis, however, assisted the American Payroll Association (APA) in obtaining payroll reduction donation relief from the IRS for Hurricane Sandy, which the IRS released on November 6, 2012, in Notice 2012-69.[1] The APA has been successful in obtaining such guidance twice previously, after both the September 11 attacks and Hurricane Katrina. When the IRS adopted these special relief provisions for 15-month periods after 9/11 and after Hurricane Katrina, some companies estimated that the provisions facilitated millions of dollars of additional donations.

The new IRS guidance permits employers to adopt leave-based donation programs under which the donating employee is not subject to income or FICA taxes on the donated leave, and the payments from charitable organizations to the recipients are also exempt from income and FICA taxes.

The APA’s request also asked the IRS to eliminate the requirement that employees designate recipient charitable organizations and allow employees to assign their leave days to disaster relief programs that employers can set up on their own (using the rules in the Internal Revenue Code discussed below, which permit employers to provide certain tax-exempt disaster relief payments to employees affected by major disasters.) The APA also proposed that the IRS might allow employees simply to assign designated amounts of their wages, rather than leave days, for Hurricane Sandy relief. We understand that the IRS may rule on these additional requests in subsequent guidance.

Qualified Disaster Relief Payments to Employees

In addition to encouraging employee donations of vacation and sick pay, employers wishing to provide assistance may utilize Section 139 of the Internal Revenue Code, which establishes a federal income and payroll tax exclusion for payments received by an individual as a qualified disaster relief payment. A “qualified disaster” includes any federally declared disaster, as well as any disaster that is determined by the Secretary of the U.S. Department of the Treasury to be catastrophic in nature. The Federal Emergency Management Agency (FEMA)has declared counties in the states of New York, New Jersey, Rhode Island, and Connecticut to be qualified disaster areas. In addition, the IRS has issued guidance confirming that Hurricane Sandy is designated as a qualified disaster for federal tax purposes, regardless of whether those affected are located in a federally declared disaster area.[2]

Employers who wish to provide payments to their affected employees should take steps to ensure that such payments meet the limitations of Section 139 and therefore will be treated as qualified disaster relief payments. Those steps include the following:

  • Make payments to employees only for reasonable and necessary personal, family, living, or funeral expenses or reasonable and necessary expenses incurred for the repair or rehabilitation of a personal residence or repair or replacement of its contents.
  • Do not make payments for any expenses compensated for by insurance or otherwise.
  • Confirm that any expenses are attributable to the qualified disaster.
  • While the employer does not have to require employees to account for actual expenses, the employer must reasonably expect the payments to be commensurate with expenses incurred. Consider having a written policy explaining how payments are intended to approximate actual losses.

Employers should also do the following:

  • Review 401(k) and retirement plan terms to determine if the payments must be treated as compensation under the plan documents.
  • Consider any state law implications.

Payments under Section 139 are an immediate and direct way employers can provide assistance to employees affected by Hurricane Sandy with little administrative cost. There are advantages, however, to providing such assistance through an employer-sponsored public charity.

Helping Through a Charitable Organization

Employer-sponsored public charities can provide a broader range of assistance to employees because payments from these organizations are not subject to the limits of Section 139 discussed above. Further, a charitable organization can respond to any type of disaster or employee hardship situation, not just “qualified disasters,” as long as the related employer does not exercise excessive control over the charitable organization.

There are three principal requirements for providing employee assistance through an employer-sponsored public charity:

  1. The class of beneficiaries must be indefinite. The relief program generally must be available to employees affected by current and future disasters and hardships.
  2. The recipients must be selected based on an objective determination of need or distress. The program must have some guidelines for determining when to provide assistance and must undertake some due diligence to ensure that the recipients are “needy or distressed.” Financial assistance cannot be provided to employees simply because they are victims of a disaster. Typically, public charities providing employee disaster or hardship relief adopt guidelines for awarding assistance and require an application form to be completed by the individual seeking assistance. The application form can then be used to make a determination that the applicant meets the “needy or distressed” requirement.
  3. The recipients must be selected by an independent selection committee. This is a critical requirement and will be met if a majority of the selection committee consists of members who are “not in a position to exercise substantial influence over the affairs of the employer.” As a practical matter, this means that the majority of the selection committee cannot consist of members of the employer’s senior management. Many organizations have retired employees or persons from the human resources department serve on the selection committee.

These employer-sponsored public charities also provide a concrete way for company employees to assist other company employees by donating to the organization. Donations from both the employer and other employees are generally tax-deductible charitable contributions, and assistance payments received by employees are excludable from gross income. Providing assistance through these charitable organizations can therefore offer increased flexibility and tax benefits.

Unlike employer-sponsored public charities, which can provide assistance under any type of disaster or employee hardship situation, employer-sponsored private foundations may only provide assistance to employees or family members affected by a qualified disaster as defined in Section 139. Employer-sponsored private foundations also must be sure to meet the safeguards listed above to ensure that such assistance is serving charitable purposes rather than the business purposes of the employer.

[1]. Read the IRS notice here.

[2]. Read the IRS announcement here.

Copyright © 2012 by Morgan, Lewis & Bockius LLP

Hurricane Sandy: Board of Education Discretion in Issuing Alternative Work Schedules on Snow Days

With the Hurricane Sandy knocking at our front doors, now seems like a good time to update Boards of Education on alternative work schedules for professional and service personnel. As we all know, in West Virginia a school system is always faced with a number of school cancellations and delays as a result of inclement weather. A common question from school administrators is: What discretion does a Board of Education have in issuing alternative work schedules on snow days?

West Virginia Code 18A-5-2 provides that “any school or schools may be closed by proper authorities on account of . . . conditions of weather or any other calamitous cause over which the board has no control. . . [and] the time lost by the closing of schools is counted as days of employment and as meeting a part of the requirements of the minimum term of one hundred eighty days of instruction. On such day or days, county boards of education may provide appropriate alternate work schedules for professional and service personnel affected by the closing of any school or schools under any or all of the above provisions. Professional and service personnel shall receive pay the same as if school were in session.”

Of course when a Board of Education provides alternative work schedules, it must do so without discrimination and/or favoritism. West Virginia Code 6C-2-2 defines discrimination as “any differences in the treatment of similarly situated employees, unless the differences are related to the actual job responsibilities of the employees or are agreed to in writing by the employees”. And, favoritism is defined as “unfair treatment of an employee as demonstrated by preferential, exceptional or advantageous treatment of a similarly situated employee unless the treatment is related to the actual job responsibilities of the employee or is agreed to in writing by the employee.” In sum, a Board of Education should be uniform among similarly situated employees.

For example, in Denny Sullivan v. Jackson County Bd. of Educ., Docket No. 96-18-087 (Aug. 30, 1996), the board of education on a state of emergency day called only maintenance and custodial employees to work, as they were considered essential to maintain the premises and remove snow. If any employee in either of these classifications was unable to report to work they were required to take some form of leave time. The Grievants, all in the classifications required to report, initiated a grievance alleging favoritism and discrimination because other employees did not have to report to work. However, the Grievance Board ruled that the Grievants failed to show any violation, and ruled that “a county board of education may establish ‘alternative work schedules’ for employees during a time of emergency.”

Also, it is important to note that “differences in work sites can justify differences in the treatment of employees assigned to those sites despite that the employees are in the same classification.” Bryan Rogers v. Jackson County Bd. of Educ., Docket No. 96-18-104 (Aug. 30, 1996).

Another example is found in Sandra Shetler and Deborah Weatherholtz v. Berkeley County Bd. of Educ., Docket No. 00-02-119 (June 9, 2000) in which the Board of Education directed all central office personnel to report to work on a one hour delay on a day in which school was closed for snow. School based staff was not to report to work. The Grievants were both Special Education Coordinators. The Grievance Board ruled that the “Grievants were not similarly situated to the employees who were not required to report to work. The other 210-day employees that did not have to work were school-based employees, were not in Grievants’ classification, and their schools, or places where they worked, were not open for business.” Again, the most important factor is to treat similarly situated employees equally, but, differences in work sites can justify differences in the treatment of employees assigned to those sites despite that fact that the employees are in the same classification.

© 2012 Dinsmore & Shohl LLP

EEOC Releases Q&A Fact Sheet On Application of Title VII and ADA to Victims of Domestic Violence, Sexual Assault, and Stalking

Recently, The National Law Review published an article by R. Holtzman Hedrick of Barnes & Thornburg LLP regarding Domestic Violence Victims:

 

The Equal Employment Opportunity Commission’s (EEOC) most recent official guidance involves the application of federal anti-discrimination laws to employees and applicants who have experienced domestic or dating violence, sexual assault, or stalking. The Q&A Sheet can be found here. 

Because victims of these offenses are not explicitly protected under federal law, employers may not realize certain employment decisions can run afoul of Title VII (prohibits discrimination on the basis of sex and sex stereotyping, among other categories) or the Americans with Disabilities Act (ADA).  Examples that might lead to charges of discrimination under Title VII include:

  • Terminating an employee after learning she has been the subject of domestic violence because the employer fears the possible “drama battered women bring to the workplace.”
  • Failing to select a male applicant after learning applicant obtained a restraining order against his male domestic partner because hiring manager believes men can’t be victims of domestic violence and should be able to protect themselves.
  • Allowing males a leave of absence to appear in court for the prosecution of an assault, but denying females leave to testify in domestic violence case.  Employer believes the former to be a “real crime” while the latter is “just a marital problem.”

The ADA prohibits discrimination based on actual or perceived impairments, and one can easily foresee situations when domestic/dating violence or sexual assault can result in such impairments.  Examples where employers may be found liable for unlawful disability discrimination under such circumstances include:

  • Deciding not to hire applicant employer discovers is the complaining witness in a rape prosecution and has seen a therapist for depression because employer believes applicant may need time off in the future to deal with symptoms or for counseling sessions.
  • Failing to address and stop harassment by co-workers regarding employee with facial scars/skin grafts resulting from attack by former domestic partner.
  • Failing to accommodate an employee not eligible for FMLA leave by refusing to give her time off to seek treatment for depression and anxiety following a sexual assault.  The employer tries to justify the refusal by stating that leave and attendance are uniformly applied to all employees.
  • Failing to honor an employee’s request for reassignment to available vacant position at different location for which she is qualified when ex-boyfriend who currently works in the same building is stalking her, causing her major depression.  Employer cites “no transfer” policy as reason for refusal.
  • (Supervisor) disclosing to other co-workers an employee’s post-traumatic stress disorder resulting from incest.

Although these are the examples given by the EEOC, indirect discrimination allegations under Title VII and the ADA can arise in numerous situations that would not necessarily be readily apparent to even well-trained and sophisticated employers. Of course, it is always a good idea to seek guidance from experienced employment counsel when employers are given pause about an employment decision, even when the employer is not entirely sure why they might be hesitating.

© 2012 BARNES & THORNBURG LLP

Is Continued Employment Enough to Uphold Invention Assignment Agreements?

It is a common misconception that employers automatically own the rights to intellectual property created by their employees. Specifically for patents, the default is that an invention and any patents covering it belong to the inventor, unless an agreement is established to the contrary. Nonetheless, the absence of an agreement does not necessarily preclude an employer from claiming a right to an employee’s invention. In such situations, an employer may be entitled to a “shop right”1 to use an invention while the employee retains ownership. As a result of this counterintuitive and complicated framework, without a specific written agreement to partition rights, it can be challenging to ascertain employer-employee rights. This is particularly true when multiple inventors are involved, as is often the case in the corporate context.

As a remedy, employers have often required, as a condition of employment, that employees enter into written agreements requiring that any inventions (and other intellectual property) created as part of their job will be assigned to the employer. However, for any contract to be enforceable – including an intellectual property assignment – there generally needs to be a mutuality of consideration. That is, each party needs to get something out of the deal.

Because of this mutuality requirement, companies often struggle with whether simply providing the employee with continued employment is sufficient to support an intellectual property assignment contract.

Case Background

The United States Court of Appeals for the Federal Circuit recently confronted this issue in Preston v. Marathon Oil Company, 684 F.3d 1276 (Fed. Cir. 2012). The court held that no additional consideration beyond the continuation of at-will employment is required to support an employee’s assignment of inventions (and other intellectual property) to the employer.

In the case, Pennaco Energy, a subsidiary of Marathon Oil Company (collectively “Marathon”), hired Yale Preston as a relief pumper in Marathon’s coal bed methane well operation. Preston was hired as an employee at-will, and, consequently, either he or Marathon could terminate the employment relationship at any time for any reason without cause or liability.

After he was hired, Preston signed an agreement that, among other things, assigned all intellectual property rights to Marathon for anything he created related to Marathon’s business or that used Marathon’s confidential information or equipment during his employment. There was no separate or additional consideration for this contract beyond Preston’s continued employment.

During his employment, Preston worked on a baffle plate system used for methane gas extraction. Preston drafted conceptual drawings, met with Marathon’s engineers, engaged a third party on Marathon’s behalf to manufacture the baffle plates, and managed the installation of the baffle plates in Marathon’s gas wells.

While Marathon still employed Preston, the company began preparing a patent application for the baffle plate system. After Preston’s employment ended, Preston filed his own patent application for the baffle plate system. Both patent applications ultimately matured into issued patents, but Preston refused to assign his patent to Marathon.

Marathon brought suit against Preston in Wyoming state court, alleging that Preston had breached his employee agreement by refusing to assign the patent.

Preston, in turn, filed a complaint in the U.S. District Court for the District of Wyoming2, seeking a declaration that he was the sole inventor of the patent in his name, and alleging other related (and later rejected) claims. Marathon counterclaimed in the federal suit, seeking its own declaration that Preston had agreed to assign his rights in the patent to Marathon.

The federal district court found that Preston was the sole inventor of his potential invention, but that Preston was required to assign his interest to Marathon pursuant to his employment agreement. The district court also found that Preston, in failing to assign the patent to Marathon, was in breach of that contract.

Preston appealed to the United States Court of Appeals for the Federal Circuit, with the key issue being whether, under Wyoming law, continuing the employment of an existing at-will employee constitutes adequate consideration to support an agreement containing an invention assignment provision. The Federal Circuit certified this question to the Wyoming Supreme Court, which answered in the affirmative – that continuation of at-will employment is sufficient consideration under Wyoming law3. Preston v. Marathon Oil Co., 277 P.3d 81, 88 (Wyo. 2012). As a result, the Federal Circuit found that the employment agreement at issue was enforceable.

In addition, under the language of Preston’s employment agreement, the Federal Circuit held that even assuming Preston had “conceived” of the invention prior to joining Marathon, he could not establish that he had made the invention in any tangible way – known as “reducing to practice” – before the employment, which the agreement required for an invention to be excluded from the ambit of the assignment. The appeals court, therefore, rejected Preston’s claim that his individual patent should be exempt from the assignment clause, and affirmed the lower court’s finding that Preston had “little more than a vague idea” for the ultimate patented invention prior to his employment.

Lesson for Employers

At first blush, the implication of the Preston holding is to provide a federal-level, unified resolution to the question of whether continued employment constitutes sufficient consideration for an assignment contract. However, because this decision was rendered under Wyoming state law, it may not be capable of being universally applied. Nonetheless, the Federal Circuit’s opinion certainly provides guidance to employers concerning how best to structure intellectual property assignment agreements to ensure that their rights are protected.

1 The “shop right doctrine” holds that when an employee, during hours of employment, uses the employer’s materials and equipment to conceive and perfect an invention for which the employee obtains a patent, the employee must provide the employer with a non-exclusive right to practice the invention. See United States v. Dubilier Condenser Corp., 289 U.S. 178, 188, amended sub nom. United States v. Dubilier Condenser Corp., 289 U.S. 706 (1933).

2 The Wyoming state court action was then stayed pending the outcome of the federal case.

3 The Wyoming Supreme Court distinguished its previous ruling in Hopper v. All Pet Animal Clinic, Inc., 861 P.2d 531 (Wyo. 1993), which required separate consideration, other than continued at-will employment, for a non-compete agreement, noting “there is a fundamental difference between non-competition agreements and intellectual property assignment agreements,” and that the stability of the business community is served by not requiring additional consideration for intellectual property assignments. Preston, 277 P.3d at 87.

© 2012 Neal, Gerber & Eisenberg LLP

EEOC Continues Focus on Religious and National Origin Discrimination Involving Muslim and Arab Communities

The National Law Review recently published an article by Robert B. Meyer and David L. Woodard of Poyner Spruill LLP, regarding Discrimination:

 

The U.S. Equal Employment Opportunity Commission has announced on its website that it continues to focus on what it considers to be ongoing religious and national origin discrimination in the workplace, especially against Muslim, Sikh, Arab, Middle Eastern, and South Asian Communities.  The EEOC reports that in the initial months after the September 11, 2001 terrorist attacks, the Commission saw a 250% increase in the number of religion-based charges involving Muslims.  Since that time, the EEOC states that it has continued to track an increase in such charges, as well as those alleging national origin discrimination against those with Middle Eastern background.  While the Commission does not specify how many of those charges were found to have merit, it does report that it has filed nearly 90 lawsuits against employers, many of which involve alleged harassment on the basis of religion and national origin.  Thus, it is apparent that the EEOC is aggressively pursuing investigation and enforcement activities in this area.

Title VII of the Civil Rights Act of 1964 prohibits employers from discriminating against employees or job applicants on the basis of religion or national origin.  The harassment of individuals because of their religion or national origin is also prohibited.  Through its interpretations of Title VII, The EEOC has recognized a wide range of actions and conduct that may be potentially unlawful, including: disparate treatment, teasing or insults because of a person’s appearance, customs, language, or accent; requiring employees to speak English in the workplace; disparate treatment, jokes, or insults toward an employee because of the national origin or religion of that person’s spouse; and adverse actions based on perceptions of an employee or applicant’s national origin or religion.

It is important to note that in addition to these prohibitions against discrimination and harassment, Title VII also requires employers to reasonably accommodate the religious practices of an employee or applicant, unless doing so would cause an “undue hardship” for the employer.  The EEOC has suggested that reasonable accommodation may include, for example, providing employees with leave to attend religious observances, providing time and/or a place to pray, and permitting employees to wear religious attire in the workplace.  However, the issue of accommodation requires the employer to consider each request for accommodation on a case-by-case basis in order to determine whether accommodation is possible and reasonable under the circumstances.

The EEOC also states that it has “intensified its outreach” to educate employees in this area of the law by issuing fact sheets on immigrant employee rights, employment discrimination based on religion and national origin, and employer responsibilities under Title VII with respect to the employment of Muslims, Arabs, South Asians, and Sikhs.  These fact sheets provide specific examples of prohibited conduct in the workplace, and also offer instructions on how employees may file charges with the EEOC.  Therefore, and in view of the EEOC’s emphasis on this particular form of discrimination, employers should review carefully these fact sheets as a part of their proactive compliance and training measures.  Employers should also remember that retaliation against anyone who files a charge or otherwise opposes unlawful discrimination is expressly prohibited under Title VII.

© 2012 Poyner Spruill LLP

Sixth Circuit Upholds Wal-Mart’s Termination of Employee for Using Medical Marihuana

The National Law Review recently featured an article regarding Medical Marijuana and Employee Terminations written by Christina K. McDonald of Dickinson Wright PLLC:

 

In a case of significant importance, on September 19, 2012, the United States Court of Appeals for the Sixth Circuit held that a private employer may fire an employee for testing positive for medical marihuana in violation of the employer’s drug use policy under the Michigan Medical Marihuana Act (“MMMA”). The court’s holding in Casias v. Wal-Mart Stores, Inc., sets the precedent that users of medical marihuana are not a protected class in the private sector and that the MMMA only protects users of medical marihuana from state action, such as arrest and prosecution, for legal use of the drug.

Joseph Casias worked as a Wal-Mart employee in Battle Creek, Michigan for a little over five years when he was terminated for violating the company’s drug use policy. Mr. Casias suffers from sinus cancer and an inoperable brain tumor and endured ongoing pain as a result of his condition. Mr. Casias’ oncologist recommended that he try medical marijuana to treat the pain associated with his medical condition, so Mr. Casias obtained a medical marihuana registry card form the Michigan Department of Community Health under the MMMA, which was enacted in 2008.

Mr. Casias complied with the state laws governing the use of medical marihuana and never used marihuana at work nor did he come to work while under the influence of the drug. During his employment, Mr. Casias took a drug test in accordance with Wal-Mart’s drug use policy, and he tested positive for the use of marihuana. Wal-Mart did not honor Mr. Casias’ medical marihuana registry card and terminated his employment because the use of marihuana violated the company’s drug use policy. Mr. Casias sued Wal-Mart for wrongful termination.

The federal District Court for the Western District of Michigan held that Wal-Mart’s decision to fire Mr. Casias was lawful because the MMMA only provides medical marihuana users with protection from state action, and not from private action.

In affirming the district court’s decision, the Sixth Circuit specifically held that the MMMA “does not impose restrictions on private employers, such as Wal-Mart.” The court noted that similar medical marihuana laws in other states do not regulate private employment actions either. Finally, the court held that Wal-Mart’s decision to terminate Mr. Casias’ employment was not against public policy.

To read the full text of the court’s opinion, click here. Employers should consult with an attorney before taking any action against an employee for use or suspected use of medical marihuana.

© Copyright 2012 Dickinson Wright PLLC

NLRB Strikes Down Employee Handbook Language and Issues First Social Media Decision

The National Law Review recently published an article by Doreen S. Davis, Jonathan C. Fritts, Ross H. Friedman, and David R. Broderdorf of Morgan, Lewis & Bockius LLP regarding the NLRB and Social Media:

 

Continuing its aggressive foray into nonunion workplaces, the NLRB has weighed in on social media and employee handbook issues, finding certain language to be unlawful under Section 8(a)(1) of the National Labor Relations Act.

In September, the National Labor Relations Board (NLRB or Board) issued two decisions confirming that it will now use Section 8(a)(1) of the National Labor Relations Act (NLRA or Act) to find basic (and widespread) handbook and policy language to be unlawful even when it does not involve protected activity under Section 7 of the NLRA. In Costco Wholesale Corp., 358 N.L.R.B. No. 106 (Sept. 7, 2012),[1] the Board reviewed a variety of handbook provisions protecting certain confidential information and found them unlawful under the Act. The Board’s more recent decision in Knauz BMW, 358 N.L.R.B. No. 164 (Sept. 28, 2012),[2] built on the Costco decision and deemed that a rule requiring workplace courtesy violated Section 8(a)(1). The Knauz case is the Board’s first decision in a case involving posts to the social media website Facebook. Given the Board’s expansive interpretation of Section 8(a)(1), it is likely that one or both of these decisions could face appellate court scrutiny in the near future.

Costco Wholesale Case

In its Costco decision, issued on September 7, the Board found that the following policy language was unlawful under Section 8(a)(1) of the NLRA:

  • Prohibiting “unauthorized posting, distribution, removal or alteration of any material on Company property.”
  • Discussing “private matters of members and other employees . . . includ[ing] topics such as, but not limited to, sick calls, leaves of absence, FMLA call-outs, ADA accommodations, workers’ compensation injuries, personal health information, etc.”
  • Disseminating “[s]ensitive information such as membership, payroll, confidential financial, credit card numbers, social security numbers, or employee personal health information.” The policy stated that such information “may not be shared, transmitted, or stored for personal or public use without prior management approval.”
  • Sharing “confidential” information, such as employees’ names, addresses, telephone numbers, and email addresses.
  • Electronically posting statements that “damage the Company, defame any individual or damage any person’s reputation.”

The Board’s decision confirms that even basic policy language common in nonunion workplaces will be struck down if there is a reference to one “inappropriate” item. In this case, a reference to “payroll” information (as in the third bullet above) rendered an entire section unlawful. As a result, employers should carefully review their employee handbooks to avoid an adverse finding by the NLRB.

Knauz Case

Knauz—issued on September 28, three weeks after Costco—involved a nonunion car dealership with a handbook provision stating that

[c]ourtesy is the responsibility of every employee. Everyone is expected to be courteous, polite and friendly to our customers, vendors and suppliers, as well as to their fellow employees. No one should be disrespectful or use profanity or any other language which injures the image or reputation of the Dealership.

The Board majority found this rule unlawful under Section 8(a)(1) of the NLRA because employees would reasonably view the prohibition against “disrespectful” conduct and the “language which injures the image or reputation of the Dealership” to encompass Section 7 activity. Employees who wished to avoid discipline, according to the majority, would mind this rule in the context of disputes related to wages, hours, or terms and conditions of employment and therefore would be inhibited in exercising NLRA rights. It also is noteworthy that the Board upheld, in a footnote, the administrative law judge’s (ALJ’s) dismissal of the allegation that the dealership fired an employee based on his Facebook postings about an automobile accident at one dealership. These Facebook postings were deemed unprotected under Section 7. The judge had reasoned that the employee posted the information apparently “as a lark, without any discussion with any other employee of the [dealership], and had no connection to any of the employees’ terms and conditions of employment.”

The one Republican NLRB member, Brian Hayes—who was not on the panel for theCostco case—issued a dissenting opinion on Knauz. Member Hayes discussed the Board’s overreach in applying Section 8(a)(1) and cited a great deal of precedent in support. He also signaled that the appellate courts likely would pare back the Board’s recent expansion into the world of employee handbooks and social media policies. Specifically, Member Hayes cited case law holding that the Board must not review policy language in isolation or come up with a theory whereby employees “conceivably could construe [language] to prohibit protected activity,” as opposed to whether they “reasonably would do so.” Member Hayes pointedly argued that the majority’s “analysis instead represents the views of the Acting General Counsel and Board members whose post hoc deconstruction of such rules turns on their own labor relations ‘expertise.'”

Conclusion

While the Acting General Counsel’s view and the views of some ALJs on these issues have been widely publicized, the decisions in Costco and Knauz provide the first look at the Board’s majority view. The law is changing, and handbook language should be reviewed to determine if the language “could be” read to restrict Section 7 activity, even with a strained interpretation. The Acting General Counsel will continue to prosecute these types of cases against nonunion employers, which constitute 93% of all private sector workplaces. While many employers have already reviewed their policy language based on the legal developments in this area over the past several years, as developed by the Acting General Counsel’s three guidance memoranda, the Costco and Knauz decisions provide another opportunity to review policy language in order to minimize the risk of a violation. Notably, unions have and will continue to use handbook policies to threaten and file unfair labor practice charges against an employer at strategic times—including organizing campaigns and collective bargaining negotiations.

[1]. Read the Costco decision at here.

[2]. Read the Knauz decision here.

Copyright © 2012 by Morgan, Lewis & Bockius LLP