Category: Labor & Employment

The NLRB at it Again: Blanket Rules Prohibiting Employees from Discussing Ongoing Investigations Violates NLRA Absent “Legitimate and Substantial Justification”

An article by Eric E. Hobbs of Michael Best & Friedrich LLP regarding The NLRB recently appeared in The National Law Review:

 

The National Labor Relations Board (NLRB or Board) on July 30, 2012, held that a blanket rule prohibiting employees from discussing ongoing internal investigations – for example, of employee misconduct, harassment, or criminal conduct – violates the employees’ rights under the National Labor Relations Act (NLRA) absent “legitimate and substantial justification”.

In Banner Health System, the employer’s human resources consultant, as a matter of course, had asked employees involved in internal investigations not to discuss the investigation’s details, the employees’ roles or what had been said during the consultant’s interviews while the investigation continued. In particular, she had asked employee James Navarro, whom she had interviewed as a part of an insubordination investigation, to maintain his silence. Navarro then filed an unfair labor practice charge against the employer, alleging that the consultant’s request had violated his rights under Section 7 of the NLRA, which protects, among other things, communications between employees regarding terms and conditions of employment.

The NLRB found merit to the charge and issued a complaint, which went to hearing before one of the NLRB’s administrative law judges. The judge found the employer’s conduct not to have violated Navarro’s Section 7 rights because the consultant’s request had been justified by the employer’s concern with protecting the integrity of its insubordination investigation.

The NLRB reversed its judge’s decision on that point. It held that, in order for an employer to justify a prohibition against employee communications regarding ongoing investigation, the employer must demonstrate the existence of a “substantial business justification” that outweighs the employees’ Section 7 rights. And a general concern with protecting the integrity of an investigation, according to the Board, was not substantial enough to meet the bar.

The Board gave examples of justifications that might qualify as sufficiently substantial to outweigh employees’ Section 7 rights: If a witness needed protection; if the employer reasonably believed that evidence might be destroyed or fabricated; or if maintenance of silence was necessary to prevent a “cover-up.” Notably, the Board did not say that those three circumstances were examples only, rather than an exclusive list of potentially adequate justifications. Our best educated guess is that they are examples only.

We do not have to guess, however, that the NLRB would find a blanket prohibition against communication by employees among themselves during the course of an ongoing employer investigation to be unlawful. In fact, a requirement of such silence in any case the employer cannot show substantial business justification for it will be found by the Board to violate the employer’s workers’ Section 7 rights.

The Board’s decision is not without support by its own precedent. In the late 1980s, the NLRB had held that it was unlawful under Section 7 of the Act for an employer to direct an employee who complained of sexual harassment not to talk to anyone other than her supervisors about the matter. The Board found that “anyone” could include the employee’s union representatives and that such a prohibition ran afoul of the NLRA.

The Banner Health System decision, however, greatly expands that principle. Employers now must be careful whenever directing employees not to communicate among themselves about, or to maintain as “confidential” all matters related to, an internal investigation. Protection of the integrity of the investigation is not going to be a sufficiently substantial reason for imposing such a prohibition, and the burden will be on the employer to establish that it had a “substantial business justification” for the prohibition that outweighed its employees’ rights under Section 7 of the NLRA.

In the event you believe it necessary to maintain the confidentiality of an internal investigation, we suggest that you take several steps:

  • First, make sure you are able to articulate a significant concern particular to the investigation that a failure by any witness to maintain confidentiality will result in serious, negative consequences. For instance, where employer, employee or third-party safety might be jeopardized, where a target of or participant in the investigation might become violent, where the target of or participant in the investigation might threaten or manipulate other witnesses, or where evidence might be destroyed or lost.
  • Second, be clear to limit your request for confidentiality. Limit it explicitly to confidentiality of the interview conducted, the facts known to the individual, his or her impressions and opinions, the existence of the investigation, and other of its elements. Make clear that the confidentiality is to be maintained only during the pendency of the investigation, but not afterwards. And, if possible, articulate that the confidentiality is to be maintained not just among employees but also among friends and family members.
  • Finally, do not threaten to discipline employees for breaches of confidentiality regarding the investigation at the time you communicate your confidentiality request, unless the investigation is one that clearly and “substantially” justifies such a threat.

© MICHAEL BEST & FRIEDRICH LLP

The Myth of the Ideal Worker: Does Doing All the Right Things Really Get Women Ahead?

The National Law Review recently published an article, The Myth of the Ideal Worker: Does Doing All the Right Things Really Get Women Ahead?, by Brande Stellings of Catalyst Inc.:

 

Women, what if much of the career advice you’ve been given for getting ahead in the workplace is simply wrong?  What if, despite doing “all the right things,” you still find yourself not earning as much or advancing at the same pace as your male colleagues?

Catalyst’s report, The Myth of the Ideal Worker, the latest in its series on high-potential employees, examined the career advancement strategies of women and men to find out what strategies each used and which strategies seemed to make a difference in terms of compensation and promotion. The findings may surprise you. Some of the conventional wisdom about women in the workplace has got it all wrong.

Knowing what will and will not work is vitally important, particularly in the legal profession where women’s advancement within law firms has flatlined. The National Association of Women Lawyers (“NAWL”) annual survey of women in AmLaw 200 law firms shows that women’s representation in the equity partner ranks is 15% – the same percentage since NAWL began the survey six years ago. These numbers are not dissimilar to women in US business generally. The annual Catalyst census of women’s representation of Fortune 500 Board directors and executive officers has also stalled out in the 14-16% range.

So, which career advancement strategies are most effective? Which ones have no impact?

We’ve all heard the maxim that women don’t ask – with its implicit assumption that if women do ask, they will receive. The Catalyst report found, however, that women were more likely than men to ask for career-building experiences and training, andjust as likely as men to negotiate for higher compensation or job placement during the hiring process for their current job.  Nevertheless, the men in the study (which follows the career paths of over 4000 MBA graduates from around the world) made more money and advanced farther and faster than their women counterparts. The $4600 pay gap that separated men from women in their first jobs out of the gate from business school? It grew to over $31,000 several years down the road – even when women were more likely than men to ask for more.

A lot of explanations are proffered about why these compensation and advancement gaps exist. The Catalyst reports have tested for a lot of those common assumptions and in the process busted some myths. Contrary to conventional wisdom, our high-potential pipeline study found these gaps are not due to lower aspirations, motherhood, part-time status, or industry. The problem isn’t with the women, it’s with organizational and social structures and the gender stereotypes that pervade them.

The Catalyst report found two tactics that made a measurable difference for women’s advancement in the study. The first is making one’s achievements visible. Women who were more proactive self-promoters were more likely to have risen faster and increased their salaries, and were more professionally satisfied.  In other words, it pays to toot your own horn.

Of course, we know that advice is not as simple to follow as it sounds. Self-promotion can be tricky, especially for women who run the risk of triggering the gender tripwire of stereotypes. A couple years ago at the NAWL General Counsel Institute, a law firm partner panelist told the audience about her experience writing up her accomplishments in her partner compensation memo. She was asked, “Don’t you think you should be more modest?”

Nevertheless, it’s important for women to find a style that works for them, and to make their achievements known to their bosses and their colleagues, to seek feedback, and to ask for credit and for promotions when due. It’s not enough to do good work. People have to see you and your accomplishments. Importantly, doing so will help attract a sponsor, which is critical to advancement.

The second tactic that predicted women’s advancement was gaining access to powerful others.  Identifying and networking with influential people within a firm, building a network of contacts with important people and working on high-profile assignments impacted women’s advancement in a way that other strategies – such as blurring work-life boundaries, getting training, and career planning – did not.

This tactic also made a difference for the men in our study. For the most part, however, the study found that similar approaches to career management yielded different outcomes for women and men. Even when women do “all the right things,” they still won’t advance as far or get paid as much as their male peers.  Maybe the issue isn’t that women don’t ask, but that men don’t have to.

To learn more about the latest research on career advancement strategies and hear from women leaders in the business and legal world about what strategies worked for them, join me at the NAWL General Counsel Institute on November 8, 2012 for a panel discussion, The Myth of the Ideal Worker: Does Doing the Right Thing Really Help  Women Get Ahead? For more information – Please Click Here.

© 2012 Catalyst Inc.

Retirement and Pensions Law Update

The National Law Review published an article about Retirement and Pensions Laws Changes written by David J. Leiter and Abby Matousek of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.:

 

PBGC Offers Guidance on MAP-21 Rate Changes

On August 29th, the Pension Benefit Guaranty Council (PBGC)released guidance on how the recently enacted MAP-21 legislation, which gives defined benefit plan sponsors flexibility in near-term plan contributions, will affect PBGC premiums. The guidance clarifies that calculation of variable-rate premiums will be unaffected regardless of whether plan sponsors avail themselves of interest rate stabilization provisions. The guidance also says that MAP-21 increases the flat and variable premium rates and caps variable rate premium. This guidance supersedes any “inconsistent guidance” in the PBGC’s 2012 premium instructions—which will be reflected in the 2013 instructions.

PBGC Requests OMB Extend Info Collection on QDRO Booklet Revisions

On August 23rd, the PBGC issued a notice requesting an extension of an information collection request for a booklet on qualified domestic relations orders (QDROs). The booklet contains information on benefit options that the PBGC offers on QDROs, modeled orders and child support. The booklet also clarifies rules on when payments to an alternate payee may begin. PBGC is planning several revisions to the booklet, including changing the description of agency procedures for informal review of a draft domestic relations order.

Industry Speaks Out on Brokerage Window Pros and Cons

Amidst concerns over DOL’s brokerage window Field Assistance Bulletins, plan fiduciaries are speaking out on the pros and cons of brokerage windows. In an August 16th interview SIFMA managing director Lisa Bleier said brokerage windows allow plan fiduciaries to give participants maximum flexibility in choosing investment options and are often the only way for employers to attain the fullest possible participation in its 401(k) plan. However, the downside to brokerage windows is that employees sometimes make investment choices fiduciaries would avoid. While a relatively small percentage of defined contribution plans have brokerage windows and the decision to offer them is generally based on participant demand.

Brokerage Window-Only Plans Will Likely be Heavily Influenced by Election Results

In an interview, Bradford Campbell, a benefits attorney and former DOL assistant secretary, said DOL officials will address concerns associated with brokerage windows if President Obama wins a second term; however, the issue will likely go away if Mitt Romney wins in November.

Witnesses Urge ERISA Advisory Council to Not Require Affirmative Beneficiary Designations

At an August 29th ERISA Advisory Council hearing, participants urged DOL to avoid one-size-fits-all regulation that would burden administrators with an affirmative duty to contact participants who undergo significant life events regarding changes to beneficiary designations. Practitioners present at the hearing told DOL that a rule requiring a plan administrator to actively reach out is unnecessary as most plans already encourage employees to update beneficiary choice and burdensome to plan administrators. Witnesses agreed on the importance of up-to-date beneficiary designations and outlined the standards already in place to ensure these designations are updated as necessary.

ERISA Advisory Council Hears from Industry on Lifetime Income and Income Replacement

At the August 30th meeting of the ERISA Advisory Council, flexibility of 401(k) plan distributions was underscored as a valuable tool to meet plan participants’ unique needs. Jason Scott, managing director of Financial Engines Retiree Research Center, told the Council that the common defined benefit model is not necessarily the right way to approach the issue of lifetime income, saying the “real power of the 401(k) plan is its flexibility.” Participants at the meeting agreed that plan sponsors tend to look for lifetime income solutions that are “fully vetted and approved and very easy,” which are not always the best for retirees. Some suggestions to the Council in the area of lifetime income included: encouraging plan sponsors to offer in-plan lifetime income assistance; providing clear guidance that “prudent retirement help includes consideration of the broader picture” (including Social Security); and considering solutions that lower the plan sponsor’s fiduciary risk.

Insurance Experts Should be the Judges of Annuity Providers

Witnesses told the ERISA Advisory Council on August 30th that the DOL should allow plan sponsors to defer to state insurance regulators’ determinations of an annuity provider’s long-term financial viability and ability to satisfy fiduciary duty. Cynthia Mallett, Vice President of Corporate Benefit Funding at MetLife told the Council that the requirement to assess annuity providers’ financial viability leaves the “entire retirement community at a loss” as it should not be expected that plan sponsors have stronger reviews than state insurance regulators. Participants said that the fiduciary responsibility involved in selecting an annuity provider “is one, if not the biggest, issue for plan sponsors” offering lifetime income options.

American Benefits Council Speaks Out Against 401(k) Credit Insurance Legislation

At an August 28th meeting of the ERISA Advisory Council, Diann Howland, Vice President of Legislative Affairs at the American Benefits Council, spoke in opposition to the Retirement Savings Security Act of 2011 (H.R. 3656), introduced by Representative Pete Sessions (R-TX). The legislation would promote an insurance product that repays some 401(k) plan loans in the event a participant defaults due to death or disability and would require plan sponsors to automatically enroll plan participants. The American Benefits Council is concerned that the automatic enrollment aspect in terms of costs of the product and the fact that the legislation waives the ERISA fiduciary responsibility. Howland cited concern that the bill continues to garner cosponsors—current cosponsors include Representatives Bruce Braley (D-IA), Ruben Hinjosa (D-TX), Tom Latham (R-IA), Charles Rangel (D-NY) and Pat Tiberi (R-OH).

IRS Examining Regulatory Progress on Lifetime Income Guidance

On August 28th, the IRS held a phone forum to discuss a package of guidance and proposed rules on lifetime income options. The guidance, issued in February, is intended to encourage the use of lifetime income options such as fixed and longevity annuities. The package includes:

  • REG-110980-10,  addressing partial annuity distribution options under defined benefit pension plans;
  • REG-115809-11, on qualified longevity annuity contracts (QLACs);
  • Rev. Rul. 2012-3, on how qualified joint and survivor annuity and the qualified pre-retirement survivor annuity rules apply when an annuity is purchased under a profit-sharing plan; and
  • Rev. Rul. 2012-4, on rolling over amounts from a defined contribution plan to a defined benefit plan to obtain an additional annuity.

IRS Cancels hearing on Anti-Cutback Exemption

The IRS has announced that a hearing scheduled for August 24th has been cancelled. The hearing would have considered proposed regulations that would provide a limited exemption to anti-cutback rules for pension plans, allowing single-employer plan sponsors that are in a bankruptcy proceeding to amend its pension plan to eliminate a lump-sum distribution option if it met certain conditions.

American’s Nearing Retirement Face Challenges

Americans approaching retirement age are faced with new challenges as a result of the financial crisis. The almost-retired “suffered disproportionally” according to a recent New York Timesarticle, experiencing falling home process in addition to lower incomes. The article cites a report from Sentier Research which found that household income for Americans age 55 to 64 fell by almost 10 percent in today’s dollars from three years ago.

Workers Show Confidence in Ability to Retire Despite Inadequate Savings

A recent study, Baby Boomers and Generation Xers: Are They on Track to Reach Their Retirement Goals?, conducted by the Insured Retirement Institute found that, although the majority of Baby Boomers and Gen Xers are confident they will have enough money to retire comfortably, many have not calculated what their needs will be and have not saved appropriately. While the report found that “there are large groups of people who just do not have realistic expectations,” the results show that those taking important steps—such as consulting financial advisors, calculating savings or buying annuities—are the most confident in their ability to retire.

©1994-2012 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

OFCCP Audits Focus on Veteran Hiring

Tina A. Syring-Petrocchi of Barnes & Thornburg LLP recently had an article regarding OFCCP Audits published in The National Law Review:

Although the new veterans hiring rules have been delayed, the Office of Federal Contract Compliance Programs (OFCCP) will focus its audits in aggressively interpreting the current regulations to support the affirmative action policies. The OFCCP has proposed new rules for veterans that would require contractors to track those who apply for jobs and write reports explaining decisions not to hire protected veterans. However, these proposed regulations have been delayed for at least nine months.

Despite the regulatory delay, the OFCCP will use the audits as a jump-start to the new hiring rules. It is anticipated that the OFCCP will scrutinize federal contractors’ good-faith efforts at hiring or attempting to hire veterans.  Employers should be prepared to review and evaluate hiring efforts, including how many military veteran applicants were referred by an agency, how many were interviewed and how many were hired.  Federal contractors also should begin tracking the number and quality of veteran applicants referred by recruitment sources and, if ineffective, cease using those sources. Failure to take these affirmative steps may give an appearance that the employer is just “going through the motions,” which will result in technical violations for being deficient in either outreach programs or recordkeeping.

While it is wise for employers to begin the tracking process and reviewing recruitment sources, federal contractors should avoid asking applicants if they are veterans. This particular question could result in further scrutiny by the OFCCP if the employer fails to hire the applicant as it would give the appearance of discrimination. Under the current regulations, employers are not required to make such an inquiry.

In addition to external recruitment efforts, employers should be prepared to demonstrate “known veteran” employees have been considered for promotions and retraining opportunities. The OFCCP’s position is that employers should look internally at known veteran employees (even if none apply for a position) to determine if that employee is qualified and interested for the position. Many companies and their advocates have argued that this runs contrary to equal employment opportunity since it results in preferential treatment of veterans as well as imposes a significant burden on employers.  Nonetheless, employers should be prepared for this inquiry during an OFCCP audit.

© 2012 BARNES & THORNBURG LLP

Smartphones – 24/7 Access: When are employees off the clock?

The National Law Review recently published an article by Cynthia L. Effinger of McBrayer, McGinnis, Leslie and Kirkland, PLLC regarding Smartphones and Employees:

With instant access to all things via smartphones and the internet, it has become increasingly easy for employees and employers to stay connected to work all the time. Smartphone access and being constantly connected is part of our professional make-up, and necessary to keep pace with the speed of the information highway. Right? Connectivity is firmly woven into everyday business practices but at what price?

If your company issues smartphones or similar devices to all or some of its employees so they can stay in touch, checking emails or responding to phone calls after-hours or on the weekends; your company could be at risk for ‘off-the-clock’ lawsuits.  The Fair Labor Standards Act (“FLSA”) requires employers to compensate non-exempt employees overtime pay for any time worked beyond a 40-hour workweek. Exempt employees (so long as they are classified correctly), are the exception. Under FLSA failure to pay an employee wages and overtime due will result in serious fines, and is a growing area of class action law suits.

Being smart about smartphones usage by employees is crucial. It is essential to have a clear electronic-use policy that outlines specific guidelines explaining work hours and use of any such device (laptops, tablets and phones). As an employer you are financially responsible for work hours that are requested and voluntary. Which means if a non-exempt employee is using a smartphone (company issued or personal) outside of work hours, for work purposes – even when not required or requested – the company is responsible for overtime pay to that employee for the hours worked. So, an electronic use policy needs to be very specific about what is permitted and what is prohibited.

Of course it is not enough to have a policy in place, it must be enforced. To enforce such a policy that applies to work performed after-hours and off-premises, the employer must institute a strong system of reporting and monitoring the activity. This could include a specific time-recording tool, as well as an essential versus non-essential activity list, which could temper an employee’s overtime.

There is a “de minimus” rule, which has been adopted in several federal court proceedings that classifies minimal time spent checking or replying to emails or texts as not compensable.  However, if the employee tracks and presents the aggregate of these de minimus actions, the time often becomes comprehensive enough for an overtime claim.

Having the correct system and policy in place to control smartphone usage is no longer an afterthought; it is an essential element of employment and a critical policy. Smartphones have changed the way we work, and as in many areas of business, technology surpasses our ability to keep up with the changes it creates. If you don’t have an electronic-use policy in place, we recommend you make it priority number one for the HR Department. Have it reviewed by an attorney, educate your staff and enforce its rights and restrictions.

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

Mandatory Paid Sick Leave: Employers Bracing for November Ballot Initiative in Orange County

The National Law Review recently published an article regarding Mandatory Paid Sick Leave, by Rachel D. Gebaide and Melody B. Lynch of Lowndes, Drosdick, Doster, Kantor & Reed, P.A.:

Citizens for Greater Orange County (CGOC), a Florida political committee, last week presented the requisite number of signatures needed to garner a spot on the November 6, 2012 ballot in Orange County for a proposed earned paid sick leave ordinance. Bill Cowles, Orange County Supervisor of Elections, verified the final petitions needed for the measure on Friday, August 17, 2012, after determining that the CGOC collected over 50,000 signatures from Orange County registered voters.

If approved by voters, the paid sick leave ordinance would require all employers in Orange County with 15 or more employees to provide each employee with one hour of paid job-protected sick leave for every 37 hours worked, up to a maximum of 56 hours of paid sick leave annually. Smaller employers in Orange County are not required to provide paid sick leave but may not retaliate against any employee who uses up to 56 hours of sick time per year. As a result, the ordinance essentially requires Orange County employers with fewer than 15 employees to provide up to 56 hours of unpaid sick leave annually to each employee.

Under the proposed ordinance, which applies to full and part-time employees, employees could use their paid sick leave for their own illness, diagnosis or preventative medical care, for the care of an ill family member, or to care for their child in the event that a child’s school or day care facility is closed due to a public health emergency. The definition of a family member under the ordinance is quite broad, and includes an employee’s spouse, child, parent, grandparent, grandchild, domestic partner, sibling or other individual related by blood or affinity.

In formal opposition to the sick leave ordinance and in an attempt to block the ballot initiative, a coalition of local chamber of commerce organizations and business associations filed a Complaint for Injunctive and Declaratory Relief in Orange County Circuit Court against the Citizens for Greater Orange County and Bill Cowles, in his official capacity as the Orange County Supervisor of Elections. The crux of the chambers’ and business associations’ argument is that the language of the ballot initiative is misleading to voters and is cost-prohibitive to employers, including the non-profit organizations, charities and religious institutions that also would be covered by the ordinance. According to the Orlando Sentinel, Orange County Mayor Teresa Jacobs and each of the Orange County Commissioners oppose the sick leave ordinance, suggesting that Board of County Commissioners is unlikely to adopt the ordinance which it could do instead of sending the issue to the voters.

Barring a successful legal challenge, Orange County voters will cast their vote for or against the sick leave ordinance in November. In addition to the legal challenge, Orange County voters can expect to see well-organized campaigns on both sides of the issue.

If the sick leave ordinance passes, employers in Orange County will need to analyze their current sick leave and other paid time off policies and implement new or revised policies no later than January 1, 2013, to comply with the ordinance.Lowndes, Drosdick, Doster, Kantor, & Reed, P.A. has a team of employment lawyers who can assist you with that analysis, including the interplay between the sick leave ordinance, related federal and state laws, and your paid time off policies.

© Lowndes, Drosdick, Doster, Kantor & Reed, PA

How to be Prepared: When an Employee’s Misconduct Leads to Termination

The National Law Review recently published an article regarding Employee Misconduct written by Preston Clark Worley of McBrayer, McGinnis, Leslie and Kirkland, PLLC:

Terminating an employee can be one of the most difficult tasks for a business owner or human resource manager. It is however the responsibility of both positions and a necessary part of doing business. Termination is difficult under most circumstances because of the personal information an employer may know about an employee. After an employee becomes part of the workforce supervisors often discover personal information, such as an employee’s financial hardships or family difficulties, which makes difficult decisions uncomfortable.

Besides the emotional stress of terminating an employee, there are also legal concerns. Every employer should have steps in place that protect the company against wrongful termination or discrimination lawsuits.

The most important factor when terminating an employee is documentation. You cannot document enough. Employee documentation should describe in detail, all actions and behaviors that lead to all disciplinary actions and ultimately the termination of the employee. Every incident report and reprimand should be documented, clearly outlining the actions taken. (To read more about documentation of misconduct visit http://mcbrayeremploymentlaw.com/2012/08/03/how-to-be-prepared-when-an-employees-misconduct-leads-to-termination/)

Of course, we more easily think to document the incidents and reprimands of an employee, but it is also important for a company to document all trainings, meetings and attempts to assist or improve the employee’s behaviors.  It is best to review with the employee all performance expectations and conduct policies, before the employee starts to work and again after any incident of misconduct.  Each time and employee is reminded of the expectations and conduct policies; the communications should be documented by the employer and signed by the employee.

If this practice is followed, prior to termination, an employee will have received several reprimands and incident reports that relate to poor performance or policy violations.  Even though you have documented this all in the employee’s file, and they have read and signed each document, one more step should solidify the documentation necessary to ensure a proper termination of a difficult employee.  Draft a final warning letter, outlining each time the employee has had a problem, and the steps the company has taken to resolve the issue.  This letter is similar to a termination letter, in that it spells out exactly what repercussions the employee will suffer (i.e.; termination) if the behavior is not corrected.

If the company has a well-documented employee file, the likelihood of encountering trouble from terminating an employee are greatly minimized.

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

Vacation Pay at Termination: What’s your Policy?

Recently W. Chapman Hopkins of McBrayer, McGinnis, Leslie and Kirkland, PLLC had an article, Vacation Pay at Termination: What’s your Policy?, featured in The National Law Review:

For many employers, the summer season brings with it an increase in employee vacations. With that in mind, now may be a good time to re-visit vacation pay policies as they pertain to employee separation. In particular, how does your company handle accrued, but unused, vacation pay at the time of separation?

Kentucky’s wage statutes expressly require employers to pay, in full, all “wages or salary earned” at the time of separation.  KRS 337.055.  The term “wages” includes “any compensation due to an employee by reason of his or her employment, including…vested vacation pay.”  KRS 337.010.  In order to know how much vacation pay must be paid at separation, it is therefore necessary to determine how much of an employee’s vacation pay has “vested.”

Based on the interplay of those two statutes, failing to include language in your employment policy addressing vesting could force you to have to litigate the issue should the employee sue to recover unpaid vacation benefits.  The best approach, therefore, is to specifically define when and how vacation pay vests.  An employment policy should articulate that annual paid vacation is earned as labor is performed throughout the year, and therefore “vests” as it is earned.  This ensures that an employee who has only worked for part of the year at separation will receive only the proportionate share of his or her vacation pay.  Considering that Kentucky courts have consistently held vacation pay to be a matter of contract between employers and employees, it may be a good idea to have employees sign an acknowledgment of the vacation pay policy.

As always, consulting your attorney and HR professional before making any changes is advisable.

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

Theft of Employee Data from Third-Party Vendor Exposes Employer and Vendor to Privacy Class Action

The National Law Review recently published an article by Kevin M. McGinty of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. regarding Employee Data Theft:

A recently-filed class action lawsuit asserts claims against the Winn-Dixie supermarket chain and a third-party vendor, Purchasing Power, LLC, in connection with the alleged theft of employee data provided to Purchasing Power in order to administer a discount purchasing program offered to Winn-Dixie employees.  The claims advanced against Winn-Dixie and Purchasing Power highlight the potential risks associated with sharing employee or customer data with third party vendors, and underscore the need for companies to ensure that the data security practices of third-party vendors are consistent with those of the companies themselves.  The complaint also demonstrates how failure to make prompt disclosure of data breaches to affected individuals can increase the risk of class action litigation.

According to the complaint in Burrows v. Purchasing Power, LLC, Case No. 1:12-cv-22800 (S.D. Fla.), Winn-Dixie either transferred or permitted Purchasing Power to access personally identifiable information (“PII”) of Winn-Dixie employees for the purpose of making a discount purchasing program available to Winn-Dixie’s employees.  The complaint alleges that Winn-Dixie notified employees on January 27, 2012 that Winn-Dixie employee data had been inappropriately accessed by an employee of Purchasing Power.  The notice further stated that Winn-Dixie first learned of the data theft in October 2011.  According to the complaint, Winn-Dixie did not explain the reason for its delay in providing notice, and Purchasing Power has never, at any time, provided notice of the breach to Winn-Dixie employees.

One unique aspect of Burrows that distinguishes it from the typical privacy class action is an allegation that the named plaintiff suffered actual injury by reason of a data breach.  Specifically, plaintiff alleges that the Internal Revenue Service refused to accept his 2011 federal income tax return, stating that a return had already been filed in his name.  Plaintiff claims that someone who had access to the PII stolen from Purchasing Power filed the return, thereby depriving plaintiff of an anticipated refund.  He seeks damages associated with the lost refund, in addition to other damages associated with the risk of further misuse of his PII.

The complaint asserts claims for negligence, violation of the federal Stored Communications Act, 18 U.S.C. § 2702, violation of the Florida Unfair and Deceptive Trade Practices Act, and breach of the common law right to privacy.  Plaintiff asserts these claims on behalf of a putative class of all Florida employees of Winn-Dixie whose PII was provided to or accessed by Purchasing Power.

The complaint in Burrows has some evident flaws.  The Stored Communications Act only applies to conduct by entities such as Internet service providers that are engaged in the “provision to the public of computer storage or processing services by means of an electronic communications system.”  18 U.S.C. § 2711(2).  Neither the defendants nor the conduct alleged facially meet this requirement.  Further, the particularized harm allegedly suffered by the named plaintiff allows defendants to argue that determining whether class members suffered actual injury would raise highly individualized questions of fact that preclude certification of a plaintiff class to seek money damages under Fed. R. Civ. P. 23(b)(3).

Nonetheless, certain aspects of Burrows pose challenges for the defendants.  Where, as here, the data breach allegedly resulted from a targeted effort to steal PII – unlike cases involving thefts of laptops, in which any data theft is incidental – courts have been more receptive to claims that class members’ costs to mitigate risk of identity theft constitute cognizable injury.  The actual injury allegedly suffered by the named plaintiff supports the argument that the threat of misuse of the stolen data is not speculative and, therefore, warrants monetary and injunctive relief.

Burrows provides a timely reminder that it is critical that any company that shares customer or employee PII with a vendor must ensure that the vendor can adequately protect such data.  Executing a written agreement specifying the company’s and the vendor’s respective data security obligations is a necessary, but not sufficient step.  The contract will not be worth the paper on which it is written if the vendor lacks the capability to comply with its obligations.  Individuals responsible for the company’s data security practices must engage in sufficient due diligence to assure the company that the vendor’s data security practices are at least commensurate with the company’s practices and otherwise comply with the legal requirements of all applicable states and jurisdictions.  In addition, to provide proper incentives to adhere to contract requirements, the agreement should indemnify the company for any losses caused by the vendor’s failure to satisfy its data security obligations.

Finally, Burrows illustrates the critical importance of prompt notification whenever a data breach occurs.  If plaintiff was indeed victimized by someone who filed a bogus return using the plaintiff’s stolen PII, notice to employees in October 2011, perhaps combined with proactive steps to protect affected employees from misuse of data, might have forestalled such an injury.  Absent such an occurrence, it is unlikely that a lawsuit would ever have been filed.  Ultimately, providing prompt notice whenever a data breach occurs avoids violating state law notice requirements and discourages the filing of class action lawsuits.

©1994-2012 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

NLRB Political “Tit for Tat” Continues

The National Law Review recently published an article, NLRB Political “Tit for Tat” Continues, by Keith J. Brodie of Barnes & Thornburg LLP:

 

 

Another Obama recess appointment to the NLRB is drawing Congressional scrutiny in recent days, in a continuation of the behind-the-scenes politicking between the Administration and certain Congressional members.  As we have reported previously, Republican Board Member Terrance Flynn resigned in May in the wake of allegations of inappropriate communications during his time as Chief Counsel for Board Member Brian Hayes.   Now Senator Orin Hatch, a prominent Utah Republican, has set his sights on Democratic Board Member Richard Griffin.  Prior to being appointed to the Board by President Obama in January, Mr. Griffin was General Counsel of the International Union of Operating Engineers.

In a letter sent to Mr. Griffin on July 18, Senator Hatch raises questions about Mr. Griffin’s actions during his time as General Counsel for the union, specifically requesting information about his role in defending IUOE union officials accused of fraud and extortion, an area that he claims would have been investigated in detail at Mr. Griffin’s confirmation hearing in front of the Senate, if not for President Obama’s actions in appointing Mr. Griffin as a recess appointment.  It remains to be seen whether Member Griffin will actually respond to Senator Hatch’s questions.  But Senator Hatch’s letter illustrates that the Board is likely to continue to be closely scrutinized by Congress, especially as the election season progresses, and that the political “tit for tat” is likely to continue.

Senator Hatch’s letter to Mr. Griffin is available here (PDF).

© 2012 BARNES & THORNBURG LLP