Category: Labor & Employment

Turning the Unemployment Program into a Reemployment Program

Recently the U.S. Department of Labor had an article about the Unemployment Program published in The National Law Review:

Two months ago, the President signed the Middle Class Tax Relief and Job Creation Act of 2012.  That legislation extended the vital payroll tax cut and federal unemployment insurance programs that have been so crucial for American families and to the continued and sustained economic recovery.   But it also included several important reforms to the Unemployment Insurance system that didn’t grab the headlines the day it passed.

The Obama Administration is committed to finding new and innovative ways to turn the unemployment system into a reemployment system.  States, as laboratories of democracy, can play a crucial role in developing creative strategies that help us accomplish this goal in ways that may inform the policies of other states and the federal government in the future.

Today, I had the privilege to announce guidance to states interested in developing demonstration projects to help their unemployed obtain jobs faster and more efficiently.   These demonstrations are a key component in the first major overhaul of the Unemployment Insurance system in decades.

Through this initiative, 10 states will have the opportunity to develop new and creative ways to help recipients of UI funds get back to work faster.  These states will design programs that help the unemployed get back to work, while lowering costs and ensuring that all participants receive the same worker protections.  This will create a level playing field for employers who follow the rules and have their employees’ welfare in mind.

The Labor Department is preparing to announce more guidance in the coming months that further improve the functionality of the UI system.  These reforms will provide states with more flexibility to respond to changes in the economy, provide employers tools to avoid layoffs, help the unemployed get back into the workforce faster and even expand opportunities for the unemployed to start their own businesses.

Authored by Secretary Hilda Solis

© Copyright 2012 U.S. Department of Labor

Organized Labor’s Big Day: Are You Ready?

The National Law Review recently published an article by R. Scott Summers of Dinsmore & Shohl LLP regarding Changes that Affect Private Sector Employers:

On April 30, 2012, just a few short weeks away, two critical changes that will affect just about every private sector employer are slated to go into effect. Whether your organization has a union, or is union-free, these changes could have important implications for your workplace policies and will affect the way you handle issues during union organizing campaigns.

As of April 30, 2012, most private sector employers1 – union and non-union – will be required to post a notice entitled “Employee Rights Under the National Labor Relations Act (NLRA).” The original effective date for posting this notice was January 31, 2012, but that date was pushed back until this spring. Among other things, the notice informs employees that they have the right to:

  • organize a union
  • discuss wages, benefits and other terms and conditions of employment with co-workers
  • strike and picket
  • choose not to participate in such activities.

The notice also lists examples of unlawful employer conduct and provides information about how to file unfair labor charges against an employer.

None of the various legal challenges to this controversial National Labor Relations Board (NLRB) posting rule have yet been effective. Earlier this month a U.S. District Court Judge upheld the NLRB’s rule requiring the posting. The Judge noted among other things, that the employers had not established that they would suffer irreparable harm if the posting requirement were allowed to take effect. This was particularly the case, according to the judge, in light of her prior order invalidating the portion of the NLRB’s rule that made the mere failure to post the notice an unfair labor practice. The Judge also noted that the public interest also favored denying the employers’ requested injunction because the notice was intended to increase employees’ awareness of their rights, which the judge observed was “undoubtedly in the public interest.”There is another legal challenge to the posting rule pending in a federal District Court in South Carolina, but no decision has been issued in that case and there is no reason to expect one will be issued before April 30.

The poster is available on the NLRB’s web site at www.nlrb.gov. Also, various businesses which offer reproductions of government-required employment postings have already developed products that incorporate the new NLRB posting.

In addition to the requirement of posting a notice of employee rights under the NLRA, the NLRB has recently confirmed its plan to launch a website designed to inform nonunion employees of their rights under the NLRA. The NLRB’s focus in launching the website is to reach and educate nonunion employees about their right to engage in protected, concerted activity under the NLRA. As a supplement to the website, the NLRB plans to distribute educational brochures containing examples of issues that have arisen in past and current cases before the NLRB. The brochures, which will be offered in English and Spanish, will be distributed through advocacy groups and other federal agencies, such as the Department of Labor.

Obviously these two initiatives taken in tandem may serve to push non-union workforces to consider unionization. Additionally, the increased awareness of the right to bring a complaint against an employer regardless of one’s union membership will certainly result is an increase in the number of complaints filed with the NLRB.

The other big change, also taking effect on April 30, 2012, is a new rule that will revamp aspects of the union election process. What will this mean for your business?

  1. elections will proceed quicker than ever before
  2. you will have fewer opportunities to raise challenges throughout the election process

These rules illustrate the importance of engaging in union prevention efforts long before organizing begins.

The rule, popularly referred to as the “quickie elections” rule, will change the process for contesting union petitions and limit employers’ opportunities to challenge certain aspects of the election process before a union election. The NLRB’s goal is to speed up the election process by mandating that certain election issues be dealt with after the union election. (See our Jan. 4, 2012 insightNLRB’s New “Ambush Elections” Rule).

Eliminating pre-election appeals, limiting decisions on critical issues until after the election, and speeding up the election process, could substantially reduce the amount of time an employer has to communicate with its employees before an election. In fact, the election “campaign period” could be reduced to just a few weeks. Under the current rules, elections are usually scheduled at least a month after a union petition is filed.

A recent study conducted by the Heritage Group’s labor policy expert James Sherk estimated that the new election rules will dramatically increase the rate of unionization. Sherk cites a Bloomberg Government analysis to observe that a majority of workplace union elections are decided by five or fewer votes. What’s more, “cutting the time between a request for an election and the ballot increases the chances union supporters will prevail,” according to the study. Unions win 87 percent of elections held 11 to 15 days after a request, a rate that falls to 58 percent when the vote takes place after 36 to 40 days, according to the researchers.

The 11 to 15 day timeframe is very close to what the new NLRB rule is expected to achieve. The ambush election rule will trim the time between an election request and the election itself to 10 days or so, a significant drop from the current average of 31 days.

“If a broader set of elections were to occur more quickly,” wrote Bloomberg analysts Jason Arvelo and Ian Hathaway, “the likely outcome would be more organizing drives, a higher success rate for unions and ultimately more union membership.”

Practical Impact for Employers
In the meantime, what is the practical impact of these new rules on employers? To be sure, the new rules will result in employees being more aware of the NLRB and how to file unfair labor practice charges. They will also result in quicker elections in cases with contested unit and eligibility issues. Quicker elections certainly mean less time to communicate with employees during the election period.

Unions often plan organizing drives before they actually request a workplace election, while employers, who may not be aware of the effort, are forced to make their case only during the period between an election request and the actual election. Hence, shortening that period of time is more prohibitive to an employer’s ability to make the case against unionization than a union’s ability to lobby for it. Employees will hear the other side of the story only from management. Employers, not union organizers, will explain that unions often do not achieve their promised wage increases, but they always take up to 2 percent of workers’ wages in dues. Employers will also point out patterns of union corruption and clauses in union constitutions that levy stiff fines against workers who stray from union rules. Employers are free to tell workers what the union organizers do not.

Savvy employers should have strong employee relations policies and programs in place long before a petition. Such programs should establish open communication channels, provide for employee recognition, and implement competitive wages and benefits among other things. Implementing this type of program will not only help avoid a unionization drive in the first instance, but also will help build employee trust and establish efficient lines of communication that could be vital during a shortened pre-election period.

Employers should also consider training managers about permissible and prohibited conduct under the NLRA and conducting their own education programs, advising employees of their rights under the NLRA, and reminding employees of internal complaint procedures available to them.

Conclusion
2012 is already shaping up to be another eventful year at the NLRB. In coming insights we will further comment on the areas discussed here, as well as several other noteworthy trends. These include, among other things, the Board’s continual focus on social media cases and changes to their General Counsel’s willingness to defer to the grievance and arbitration process in some cases. Finally, Chairman Pearce’s stated desire for the Board to become known as “the resource for people with workplace concerns that may have nothing to do with union activities” promises a continuation of the Board’s focus on protected concerted activity cases in the non-union context. As always, we will continue to monitor and analyze these changes and their implications for employers.
_______________

(1) Excluded from coverage under the National Labor Relations Act are public-sector employees, agricultural and domestic workers, independent contractors, workers employed by a parent or spouse, employees of air and rail carriers covered by the Railway Labor Act, and supervisors.

© 2012 Dinsmore & Shohl LLP.

Employer Social Media Policies: Another One Bites the Dust

An article by Gerald F. Lutkus of Barnes & Thornburg LLP regarding Employer Social Media Policies was recently published in The National Law Review:

The NLRB has continued its assault on employer social media policies and a recent Administrative Law Judge ruling from the Board further complicates the issue. The Acting General Counsel, in his various reports on the Board’s social media cases, has made it clear that employers need to include disclaimers in their policies that nothing in the policy is meant to interfere with employee Section 7 rights. However, a San Francisco-based ALJ, in a lengthy opinion dealing with the social media policy of G4S Secure Solutions (USA) Inc., struck down that company’s social media policy even though it included such a disclaimer.

Specifically, the ALJ found that G4S’s policy was overbroad and would chill the exercise of Section 7 rights by employees of the company. G4S’s policy stated, “This policy will not be construed or applied in a way that interferes with employees’ rights under federal law.” The ALJ expressly determined that “it cannot be assumed that lay employees have the knowledge to discern what is federal law, and thus permitted under the disclaimer, as opposed to what is prohibited ‘legal matter’.” Though the ALJ did not go beyond that, the clear suggestion from the opinion is that a disclaimer of noninterference with Section 7 rights must be far more particular in explaining what types of rights are, in fact, protected under Section 7 and, thus, not prohibited under an employer’s social media policy. Of course, most employers are reluctant to spell out in detail in their own policy manuals exactly what types of activity employees may engage in as protected activity under Section 7 of the NLRA.

The judge’s ruling also struck down that portion of the company’s policy forbidding employees from commenting on work-related legal matters, but allowed a provision that prohibited the posting on social media sites of pictures of employees in their security uniforms.

A full text of the ALJ’s ruling in G4S Secure Solutions can be reviewed here.

© 2012 BARNES & THORNBURG LLP

Workplace Homicides on the Decline

An article by Jared Wade of Risk and Insurance Management Society, Inc. (RIMS) regarding Workplace Homicides recently appeared in The National Law Review:

The number of workplace homicides is less than half of what it was 20 years ago.

Omar Thornton was fired on August 3, 2010. He arrived for a 7 a.m disciplinary meeting at the Connecticut beer distributor where he worked, and after being shown a video his employer had recorded of him stealing a case of beer, was given an ultimatum: resign or be fired. Thornton signed a resignation agreement before reportedly excusing himself to get a drink of water. That was when the horror began.

Thornton used two Ruger pistols he had concealed in his lunchbox to kill nine coworkers during a 45-minute shooting rampage throughout the facility before taking his own life. It was the deadliest workplace shooting in Connecticut history.

Fortunately, tragedies like this are becoming less common. The likelihood of a workplace homicide is now half what it was in the mid-1990s, according to a recent report by the National Council on Compensation Insurance (NCCI). This trend mirrors a declining national homicide rate, but workplace killings have fallen off even more rapidly. There were 950 in 1993 compared to just 462 in 2009, according to the Bureau of Labor Statistics. This represents a 59% drop-off in workplace homicides over 16 years compared to an overall U.S. homicide rate that fell 49%. The number of homicides has also fallen as a percentage of overall workplace deaths. In 1992, 17% were due to homicide compared to just 11% in 2009. (Auto accidents remain the top killer, holding steady at around 40% of all workplace deaths throughout at least the past two decades.)

The massacre in Connecticut was unusual in another way: the homicides were committed by a coworker. “Contrary to popular belief,” states the Spring 2000 issue of Compensation and Working Conditions, “the majority of [workplace homicides] are not crimes of passion committed by disgruntled coworkers and spouses, but rather result from robberies.”

In a disturbing trend, however, this is less the case today than it was a decade ago. Increasingly, coworkers are killing coworkers. “The highest share of workplace homicides is still due to the category of robbers and other perpetrators, but that share has fallen from 85% to 69% from 1997 to 2009,” states the NCCI report. “Over that same time period, the share due to work associates has grown from 9% to 21%.”

This represents a key area of concern for all companies. There is little a company can do about the national homicide rate. And while there is more it can do to protect itself from being targeted by thieves (adding surveillance, physical barriers or security guards, for example), robberies can still happen. There are, however, proven steps a company can take to reduce the likelihood of coworker-on-coworker violence.

Conducting better background screening during the hiring process is one. Other companies have found success by adopting zero-tolerance policies towards aggressive behavior of any kind in the workplace. That may be effective when combined with clear disciplinary actions for offenders. But the federal U.S. Office of Personnel Management recommends one method above all others: vigilance.

“No one can predict human behavior, and there is no specific profile of a potentially dangerous individual,” states the agency. But, it notes, there are clear indicators based on FBI research of increased risk of violent behavior.

Any direct threats of harm lead the list followed by intimidation, harassment, bullying or other aggressive behavior. Employees who have “numerous conflicts” with coworkers or display extreme changes in behavior also fit the profile of those more prone to commit violence. If any of these issues are observed by, or reported to, management, they should never be ignored.

Risk Management Magazine and Risk Management Monitor. Copyright 2012 Risk and Insurance Management Society, Inc.

Slogans versus substance in the battle over ObamaCare's future: ANALYSIS

An article regarding ObamaCare written by Wendell Potter of the Center for Public Integrity recently appeared in The National Law Review:

Cries of ‘Hands off my health care’ mask the benefits of the Affordable Care Act

Hands off my health care!

Remember those words from the health care reform debate of two years ago? I’m confident we’ll be seeing them on protest signs in Washington again this week as the Supreme Court hears arguments on the constitutionality of the Affordable Care Act. And we’ll see them again when the protest campaigns shift into high gear this summer.

One of the rules of effective communications is to keep it simple. In attacking something you don’t like, use as few words as possible, and make sure those words pack an emotional wallop. That’s why lies about “death panels” and a “government takeover” of health care have been so potent. Unfortunately for those advocating reform, it’s far more challenging to explain and defend a law as complicated as the Affordable Care Act.

Maybe, then, supporters of the law should co-opt the “hands off” slogan and make it their own. That would require adding just a few more words here and there to make clear what would be lost if the law is repealed, gutted or declared unconstitutional.

Here’s are some suggestions:

“Hands off my health care! Granny doesn’t need her meds all year anyway!”

The Affordable Care Act is closing the despised and even deadly “doughnut hole” in the Medicare prescription drug program, which was designed in 2003 largely by lobbyists for insurance and pharmaceutical companies who were more interested in protecting their companies’ profits than helping seniors stay alive. The way the law was cobbled together, Medicare beneficiaries get prescription drug coverage only up to a certain amount. When they reach that limit, they fall into the “doughnut hole” and have to pay about $4,000 out of their own pockets for their prescriptions before coverage resumes. As a consequence, many people stop taking their medications because they don’t have the money to pay for them. And many of them die. The Affordable Care Act has already shrunk that gap and will close it completely in 2020.

“Hands off my health care! Who cares if insurers refuse to cover sick kids?”

Before the Affordable Care Act, insurance companies routinely refused to insure children who were born with disabilities or who developed life-threatening illnesses like diabetes or cancer. It was perfectly legal for them to refuse to sell coverage to anyone — even children— who had what insurers call a “pre-existing condition.” The reform law already requires insurers to cover all kids, regardless of health status. It will apply to the rest of us in 2014.

“Hands off my health care! My 24-year-old daughter can just stay uninsured!”

Insurers have long had a policy of kicking young adults off their parents’ policies when they turn 23. Many of these young folks don’t have the money to buy coverage on their own—and a lot of them can’t buy it at all because of, you guessed it, pre-existing conditions. That’s why young people comprise the biggest segment of the uninsured population. Because the Affordable Care Act allows parents to keep dependents on their policies until they turn 26, an estimated 2.5 million young people had become insured again as of the end of last year.

“Hands off my health care! If I lose my coverage because I lose my job, so be it!”

Millions of Americans fall into the ranks of the uninsured every year when they get laid off. That’s one reason the number of people without coverage swelled to 50 million during the recession. Many of them can’t afford to buy insurance on their own and many of them have—you guessed right again—pre-existing conditions and can’t buy it at any price. Starting in 2014, not only will the Affordable Care Act prohibit insurers from refusing to sell coverage to people of any age because of their medical history, it will also provide subsidies to low-income individuals and families to help them buy insurance.

“Hands off my health care! It’s not my problem if your insurance company dumps you when you get sick!”

To avoid paying claims, insurers for years have cancelled the coverage of policyholders when they got sick. A former nurse in Texas testified before Congress in 2009 about getting a cancellation notice from her insurer the day before she was to have a mastectomy because she had failed to note on her application for coverage that she had been treated for acne. The Affordable Care Act makes it illegal for insurers to cancel policies for any reason other than fraud or failure to pay premiums.

“Hands off my health care!” Maybe we ought to think that through a little bit more before we take to the streets with those words on our placards. Insurers who profited from the way things used to be will laugh all the way to the bank if you start waving those signs, but you and people you love might live to regret it. On the plus side, at least for the special interests, you probably won’t live as long.

Slogans versus substance in the battle over ObamaCare's future

Signs from a Tea Party protest in St. Paul, Minn.Flickr Creative Commons/Fibonacci Blue

Reprinted by Permission © 2012, The Center for Public Integrity®

Will Auditors Influence How Executives Are Paid?

Recently The National Law Review published an article by Andrew C. Liazos of McDermott Will & Emery regarding Executive Pay:

PCAOB proposals would have auditors reading the employment and compensation contracts of corporate leaders and, possibly, forcing changes to comp programs due to unacceptable risks of material restatement.

Unfortunately, the PCAOB is suggesting that auditors also evaluate whether the design of an executive-compensation program could itself lead to excessive risk taking. Here’s what one of the board members, Steven Harris, had to say about this matter:

“Equity-based compensation arrangements may also provide strong incentives for excessive risk-taking by executives. Studies have shown that these arrangements can position executive officers to benefit from the upside of high-risk investments, while largely insulating them from the downside risks. In addition, excessive risk taking generally is viewed as one of the contributing factors to the recent financial crisis. For example, ‘The Financial Crisis Inquiry Report’ concluded that ‘Executive and employee compensation systems at these institutions disproportionately rewarded short-term risk taking.’ The Board’s proposals would require auditors to focus on the potential opportunities and motivations for executive officers to exaggerate gains, or minimize losses, and to consider any effect compensation incentives might have on the reliability of the financial statements.” (Emphasis added)

That type of statement raises the possibility that an auditor might view the structure of an executive-compensation program to be so problematic that, when coupled with other factors, the auditor may be unable to issue an unqualified opinion. This risk (i.e., not receiving an unqualified opinion on financial statements) could give the auditor significant influence over executive-compensation decisions.

What’s particularly interesting about the timing of the PCAOB release is that its focus on executive compensation is happening when shareholders now have a “say on pay” under Dodd-Frank and there is an increasing focus on “pay for performance.” As discussed in my January column, ISS, the leading shareholder advisory service, recently revamped its guidelines for making recommendations on executive compensation by focusing on total shareholder return (TSR) as compared with peer companies, and it’s reasonable to expect that issuers will start to use TSR performance goals. One can only imagine the reaction of compensation committees if their decisions to restructure executive pay in response to shareholders were to be second-guessed by auditors, particularly in light of the current lawsuits regarding failed say-on-pay votes.

The PCAOB is moving quickly on this change. While the proposed amendments require SEC approval, the PCAOB anticipates that these changes would be effective for audits of financial statements for companies with fiscal years beginning on or after December 15, 2012.

© 2012 McDermott Will & Emery

JOBS Act – Jumpstart Our Business Startups: U.S. House of Representatives Legislation

Recently published in The National Law Review was an article by Jeffrey M. Barrett and Gregory J. Lynch of Michael Best & Friedrich LLP regarding the JOBS Act:

On Thursday, March 8, 2012, the U.S. House of Representatives easily passed a package of bills called the Jumpstart Our Business Startups, or JOBS Act aimed at making it easier for small businesses to go public, attract investors, and hire workers by reducing U.S. Securities and Exchange Commission (SEC) registration requirements and other restrictions.  If it becomes law, the JOBS Act has the potential to significantly reduce the securities compliance costs of raising capital for emerging companies.

The Senate is expected to soon introduce its own version of the legislation and President Obama has indicated his support of the measure.Business Startups, or JOBS Act aimed at making it easier for small businesses to go public, attract investors, and hire workers by reducing U.S. Securities and Exchange Commission (SEC) registration requirements and other restrictions.  If it becomes law, the JOBS Act has the potential to significantly reduce the securities compliance costs of raising capital for emerging companies.

Increase of 500 Investor Threshold to be a Reporting Company

The JOBS Act increases the offering threshold for companies exempted from SEC registration from $5 million – the threshold set in the early 1990s – to $50 million.  The measure also raises the threshold for mandatory registration under the Securities Exchange Act of 1934, as amended, from 500 shareholders to 1,000 shareholders for all companies (and 2,000 shareholders for all banks and bank holding companies) and excludes securities held by shareholders who received such securities under employee compensation plans from the calculation.  Raising the offering and shareholder thresholds is intended to help small companies gain access to capital markets without the costs and delays associated with the full-scale securities registration process.

Crowdfunding

Also included in the legislation is a new registration exemption from the Securities Act of 1933, as amended, for securities issued through internet platforms also known as “crowdfunding.”  To use this new exemption, the issuer’s offering cannot exceed $1 million, unless the issuer provides investors with audited financial statements, in which case the offering amount may not exceed $2 million.  An individual’s investment must be equal to or less than the lesser of $10,000 or 10 percent of the investor’s annual income.  By exempting such offerings from registration with the SEC and preempting state registration laws, the legislation seeks to enable entrepreneurs to more easily access capital from potential investors across the United States to grow their business and create jobs.

Removal of Ban on Small Company Advertisements to Solicit Capital

Lastly, the legislation would remove the prohibition against general solicitation or advertising on sales of non-publicly traded securities, provided that all purchasers of the securities are accredited investors.  The Securities Act of 1933, as amended, currently requires that any offer to sell securities either be registered with the SEC or meet an exemption.  Rule 506 of Regulation D is an exemption that allows companies to raise capital as long as they do not market their securities through general solicitations or advertising.  The legislation would allow small companies offering securities under Regulation D to utilize advertisements or solicitation to reach investors and obtain capital, provided that all purchasers of the securities are accredited investors.  The goal is to allow companies greater access to accredited investors and to new sources of capital to grow and create jobs, without putting less sophisticated investors at risk.

Emerging Growth Companies

The legislation establishes a new category of security issuers, identified as “Emerging Growth Companies” (EGCs), which will be exempt from certain regulatory requirements until the earliest of three conditions: (1) five years from the date of the initial public offering; (2) the date an EGC has $1 billion in annual gross revenue; or (3) the date an EGC becomes what is defined by the SEC as a “large accelerated filer,” which is a company with a  worldwide market value of outstanding voting and non-voting common equity held by non-affiliates (also known as “public float”) of $700 million or more.  The regulatory relief provided by the legislation is designed to be temporary and transitional, encouraging small companies to go public but ensuring they transition to full conformity with regulations over time or as they grow large enough to have the resources to sustain the type of compliance infrastructure associated with more mature enterprises.

© MICHAEL BEST & FRIEDRICH LLP

Search Warrant Basics

Recently The National Law Review published an article from Risk Management Magazine a publication of the Risk and Insurance Management Society, Inc. (RIMS) regarding Search Warrants in the Office:

When armed government agents enter your office, seize your computers and talk to your employees, the business day has gotten off to a rough start. It only gets worse when the news shows video of agents in raid jackets carrying your eye-catching, focus group-tested logo. As the days go on, you are busy reassuring customers, vendors and employees that despite early reports and comments made by the government and your competitors, it is all going to be fine and you are going to get back to business as usual.

Presented with this hypothetical situation, many adopt a similar response: it won’t happen to me. But any business that operates in a heavily regulated area or partners with any federal agency needs to appreciate that government inquiries are simply part of operating in that space. The FBI is not the only investigative agency; it is just as likely that the Environmental Protection Agency or the Health and Human Services Office of the Inspector General will be at the front desk with a warrant in hand and a team ready to cart away the infrastructure and knowledge of your business. Will you be ready?

Good planning as part of a regular annual review can help settle nerves, avoid costly mistakes, and put you in the best defensive position should that fateful day come when the feds show up at your door. Follow this five-part plan and you will be much better off.

Summon the Team

Just as the agents did the morning before the search, you need to assemble your response team. The government has specialized people with individual roles and you need to have the same type of team. Some people on your team are there because you want them there. Others make the team because they sit at the reception desk or close to the front door. Either way, they are now on the same team.

The point person on the team has to be the in-house counsel. The agent may not let the receptionist place a series of calls, but the receptionist should be permitted to call the in-house counsel to notify her of the situation. From that point on, the command center shifts from the front desk to counsel’s desk.

The next call should be made from the company’s general counsel to outside criminal counsel. A general litigation or M&A background may be well suited for the company’s general needs, but on this day, the needs are quite different. Outside criminal counsel needs to begin the dialogue with the agent and the prosecutor, and should send someone to the scene if possible.

The response team should also include the heads of IT, security and communications. The IT officer must make sure that, as the search is conducted, intrusion into the system can be minimized so that the business may continue operation. If the IT officer is not permitted to assist with the search, it is critical that he observes all actions taken by the government related to any IT matters. This observation may be valuable at some point in the future if computer records are compromised or lost. This is just as important for information that may tend to show some violation of the law as it is for information that may support defense or a claim of actual innocence. The Computer Crime and Intellectual Property Section of the Criminal Division has produced a manual for the search and seizure of computer records and an expert can help evaluate law enforcement’s compliance with its own approved procedures.

If your company is a manufacturer or scientific production company where the question at issue may be the quality, characteristics or integrity of a product, it is important that you demand an equal sample from the same source and under the same conditions as those taken by the seizing agents. This is important so that your own experts can review a similar sample for your own testing in defense. If this is not possible given the type of product seized, your outside counsel will work with prosecutors and agents to assert your rights to preserve evidence for future testing. Just as the IT expert can be a helpful observer, a technical expert who observes the government sampling can also provide valuable insight into issues related to the sampling that may make a world of difference at some time in the future.

The communications expert is the final member of the team, but no less significant. She can be an important point of contact for media inquiries that will inevitably follow. It is vital to be able to communicate to your customers that you are still performing your daily support and that, as you address this matter, you will never take your eye off the customer’s needs and deadlines. With a disciplined response, many companies will survive a search warrant and government investigation. This process will help ensure that your customers are there for you when you get through this difficult time.

Depending on the size of your company, all of the response team roles may be performed by one or two people. Think of the function of the tasks that need to be accomplished instead of job titles alone. The other factor that you must consider at the outset is what role will these people have in the case going forward. Try and identify people who can perform these tasks but will be outside the case itself. If you know that the company lab has been under investigation, the lab director may be a target of the investigation. If that is the case, you do not want to have that employee serving as your only witness observing the search. Instead, an ideal observer might be the outside counsel’s investigator.

Execute a Pre-Established Plan

An important part of this response is that you have a pre-established plan that can be taught and disseminated instantaneously. The first rule of any plan is to not make matters worse. In this case that means, “Let’s not have anyone arrested for obstruction.” If the search team has a signed search warrant for your address, they have a lawful right to make entry.

Challenging the search warrant is for another day and both state and federal laws prohibit interfering with the execution of a search warrant. This is the time to politely object to the search and document what is happening. With a copy of the search warrant in hand, outside legal counsel may be able to challenge the scope of the search, but that is not an area where the novice should dabble.

While your specialized team members perform their tasks, the company is generally at a standstill while the search continues. Let your team members work and have the rest of your employees go home. You are shut down for the time being just as you would be any other time your business is closed. You do not want to allow employees to wander the halls and interact with agents. Off-hand comments that make it into a law enforcement report may distort the facts and be difficult to explain later.

Make sure that company employees understand what is happening and what their rights are in this situation. It is important to avoid interfering with the actual lawful execution of a search warrant; it is also unlawful to tell your employees to not speak to the agents. If they know they have a right to meet with a company-retained counsel of their own and have a right to remain silent at this point, it may go a long way in calming nerves.

Assert Privilege

This is not a difficult matter to explain, but it is critical: if there are documents that are covered by the attorney/client privilege or any other similar privilege, it is critical that you assert that privilege. One reason for the receptionist to be allowed to call company counsel is that there are materials that are covered by the privilege.

It is critical to make privilege claims at this juncture so that the agents are aware of the assertion and that they formally recognize it. This may simply mean that they put those documents in a different box for review by a team subject to judicial review at a time in the near future or it may mean that the team will review the materials for immediate decisions to be made on scene. Whatever procedure the agents have established can be reviewed later, but if you do not assert privilege now, it changes the options available to you as the proceedings go forward

Record the Search

Given the concerns of civil liability, it is not uncommon for agents to make a video recording of their entry and departure from the scene. Their goal is to document any damage that may have been caused by the lawful execution of the warrant. The agents also want to be able to document their professional execution of the warrant in the event that claims are raised at a later point. But that tape is going to stay in their custody and not be available for your team to review as you prepare the defense.

A video record of the search may provide a key piece of support to the defense that could not possibly be understood on the day of the search. However, this process must be handled in a very unassuming manner and with a clear understanding by the agents that you are doing it, and that, in the event there are undercover officers who are masked, that you will make no effort to record them. In some states, recording voice without consent of all parties is a felony, so this is a matter that you must review with outside counsel when you are developing your procedures for search warrant response. Again, you do not want to do anything to make your situation worse.

Collect Your Own Intelligence

Just as the agents are trying to learn about your operations, they will be giving you valuable information about their own operations and the focus of their investigation. Your first tasks are to determine who is in charge, document the names of the agents in attendance and note all the agencies involved in the search. This is information that you can gather directly by politely asking for the names of the agents and observing the insignia of the agents’ uniforms or badges around their necks.

The other opportunity available to you in this unique situation is the opportunity to listen to the language the agents use, the apparent hierarchy of the agents, and the small bits of casual conversation that may give you valuable insight into the goals of the search. As the day wears on, the agents will feel more comfortable around your response team and they will talk more freely. This is not to suggest that your team should attempt to interrogate the agents, however, because that will open a two-way dialogue that may lead to statements that are difficult to explain or put in context. The suggestion is simply that you serve as an active listener.

Help Establish Rapport

Throughout the day, the agents are going to be forming opinions about your company and your employees. Use this time to make a good impression about your company. A professional, disciplined response in a time of crisis sends a very different message than the one sent by yelling obstructionists. Even though the agents have quite a bit of information about you as their target, it may have all been gathered from third parties. This may be your opportunity to impress them and to help them question the veracity of your accusers. Remember that there will be meetings about your company, your executives and their futures, and the only people in those meetings will be the agents and the prosecutors. You want their memories of this day to weigh in your favor.

Risk Management Magazine and Risk Management Monitor. Copyright 2012 Risk and Insurance Management Society, Inc.

Illinois Federal Court Sides With Circuits Allowing Non-Disabled Individuals to Bring ADA Claims

The National Law Review published an article by the Labor & Employment Group of Schiff Hardin LLP regarding ADA Claims:

An Illinois federal court recently decided that it could be unreasonable for an employer to require an employee take a mental health exam as a condition of keeping his job, and allowed a former employee’s claim to proceed to trial. Sanders v. Illinois Dept. of Central Management Services, 2012 WL549325 (C.D.Ill. Feb. 21, 2012).

The Illinois Department of Central Management Services (the “Department”) employed Michael Sanders as a data processing technician. In 2005, Mr. Sanders was disciplined with suspension for various infractions including not following procedures, leaving his work station and sending an email to his supervisor, Victor Puckett, accusing him of being racist and needing mental health treatment. Thereafter, on August 26, 2005, Mr. Sanders accused Mr. Puckett of screaming, cursing and threatening to throw him out the window during a work dispute, which Mr. Puckett disputed. Mr. Sanders was disciplined for the August 26 incident. On September 9, 2005, the union representative at the pre-disciplinary hearing relating to the August 26 incident notified the Department that Mr. Sanders had threatened to harm Mr. Puckett (which Mr. Sanders disputed).

A.    The Discharge Decision

Thereafter, the Department placed Mr. Sanders on administrative leave and directed him to undergo an independent psychological evaluation, but Mr. Sanders did not attend any of the three appointments made for him. The Department initially terminated Mr. Sanders on November 23, 2005 for not undergoing the psychological exam, but voluntarily reinstated him and placed him on administrative leave effective February 1, 2006. During his leave, the Department made additional appointments for him to undergo an independent psychological evaluation, but Mr. Sanders did not attend any of them.

In January, 2007, the Office of Executive Inspector General (“OEIG”) determined that there was no evidence that Mr. Sanders violated Department rules during the August 26, 2005 incident. The Department scheduled another appointment for an independent psychological evaluation on September 5, 2007. Mr. Sanders sent two memos to the doctor who was to examine him, threatening to take legal action, disciplinary action and contact the media if the doctor did not cancel the appointment.

Mr. Sanders was discharged for refusing to undergo the independent psychological examination. He appealed his termination to the Illinois Civil Service Commission. The Commission found that it was not reasonable for the Department to require Mr. Sanders to submit to an independent psychological examination, and the Department’s decision to discharge Mr. Sanders was unsupported, based on a number of factors including that the Department had not interviewed Mr. Sanders to obtain his version of events relating to the alleged incidents, and also that, according to the Commission, there was no “credible evidence” that Mr. Sanders had threatened Mr. Puckett. The Department’s appeals of that decision to the Commission and the circuit court were denied.

B.     The ADA Suit

Thereafter, Mr. Sanders filed suit against the Department in Illinois federal court alleging violation of the Americans with Disabilities Act (“ADA”). The court allowed Mr. Sanders’ suit to proceed to trial on the question of whether Mr. Sanders’ discharge for refusal to undergo a psychological examination violated the ADA. The court noted that an employer’s demand that an employee submit to a medical exam may be permissible if the employer has a reasonable belief that the employee’s ability to perform essential job functions is impaired by, or the employee poses a direct threat due to, a medical condition. Here, however, the court focused on the OEIG’s finding that there was no evidence that Mr. Sanders violated the Department’s rules during the August 26, 2005 incident, and held that a jury should decide if it was reasonable for the Department to continue to schedule the psychological exams for Mr. Sanders after the OEIG’s determination. The court also noted that what may be reasonable in some employment settings, such as law enforcement or school personnel, may not be reasonable in others.

The case is significant because the district court in this case joined a number of federal circuit courts that allow a non-disabled individual to bring suit under the ADA, including the U.S. Courts of Appeal for the Ninth and Tenth Circuits. The Seventh Circuit has not ruled on the issue. Here, the court did not even consider the question of whether the plaintiff was a qualified individual with a disability under the ADA.

The case reinforces that any request for a physical or mental examination must be carefully examined for necessity and job-relatedness. It also highlights the importance of conducting thorough investigations into alleged instances of misconduct before taking any employment actions.

© 2012 Schiff Hardin LLP

Florida Bill Would Preempt Local “Wage-Theft” Ordinances

The National Law Review recently published an article by Jay P. Lechner of Greenberg Traurig, LLP regarding Wage-Theft Ordinances:

GT Law

The term “wage theft” has become popular among commentators and labor groups to describe a variety of employer violations of federal and state laws relating to overtime, minimum wage or lost income to an employee. In 2010,Miami-Dade County enacted a “wage-theft” ordinance, providing for triple damages against employers and establishing a claims filing process for employees alleging that they were underpaid. Other Florida municipalities are contemplating similar regulations. These ordinances are problematic in that they create a statewide patchwork of various additional regulations that businesses are forced to learn and comply with, are largely unnecessary given the adequacy of existing remedies for employees and do not discourage frivolous or unfounded claims.

The Florida House last week passed a bill that would address these concerns by expressly preempting local regulation of “wage theft” and preventing local governments from enacting their own “wage theft” ordinances. The bill also would encourage early resolution of employee complaints by requiring an employee to, as a condition precedent to bringing an unpaid wage claim, notify the employer in writing, identifying the amount owed and the work dates and hours for which payment is sought and allowing the employer 15 days to pay the total amount of unpaid wages. The bill has been sent to the Senate, which has a similar bill pending. If passed, the bill would become effective July 1, 2012.

©2012 Greenberg Traurig, LLP.