The National Law Forum

The Top Ten Things You Should Know About The Innovation Act of 2013 (For Now)

Companies that find themselves either defending against patent infringement lawsuits or enforcing their own patent infringement claims should pay close attention to the Innovation Act of 2013 (H.R. 2639). The Innovation Act (“the Act”), which was introduced by Representative Bob Goodlatte (R-VA), made it out of committee and has now been passed by the House, is aimed squarely at non-practicing entities (“NPEs”), i.e., companies that own patents but that do not sell any products or provide any services themselves. While NPEs may be the primary target, the Innovation Act, if passed, will impact all patent litigation, not just NPE efforts. Likewise, while primarily having a potentially negative impact on plaintiffs, the Act will also have potentially negative impacts on defendants. With bipartisan support and the backing of the White House, the Innovation Act may be the first such legislation to pass.

The Innovation Act makes numerous amendments to Title 35, the section of U.S. Code embodying U.S. patent law. These changes include introducing a discovery delay and other discovery changes, fee shifting, customer suit staying and party-of-interest transparency, heightening pleading requirements and expanding post-grant review. If nothing else, NPEs and their targets should know the following about these changes and the Innovation Act:

Discovery: Perhaps the most expensive and intrusive aspect of any U.S. patent litigation is the discovery process. Indeed, the expense and process of discovery is often the most effective tool used by plaintiffs to bring defendants to settlement, as the process can begin early in the case before any substantial determinations regarding the merits are decided. As a result, defendants are often forced to spend up to hundreds of thousands of dollars going through the discovery process before having any idea whether infringement is a substantial risk or not. The Innovation Act significantly neuters this tool and makes other significant changes to discovery in patent cases:

1. The Act limits discovery to only matters relevant to interpreting the claims until such time as the claims are actually interpreted. Claim interpretation is often dispositive of the merits of the case. Consequently, defendants would be able to dispose of frivolous cases before the expensive discovery process or make settlement decisions more fully informed of the risks; and

2. The Act seeks to better balance discovery costs between the parties, ordering the Judiciary Conference to address the presumably unfair burden placed on defendants and place a higher burden of costs on plaintiffs.

Fee Shifting: Another area in which U.S. patent litigation, indeed U.S. litigation as a whole, differs from foreign litigation is that, except in extreme cases, each party bears its own litigation costs. Currently, NPEs often file suit against multiple defendants. Each defendant is often offered a settlement for an amount much less than that defendant’s anticipated litigation costs. As defendants settle, the settlement price typically is increased for other defendants, further encouraging early settlement. Consequently, many defendants that otherwise believe they have a strong non-infringement case will settle because the cost of achieving victory is substantially higher than settling. This strategy would not work in most foreign countries since, in those countries, the losing party pays the winning party’s fees and costs. The Innovation Act would align U.S. patent litigation with this practice and eliminate the strategy of leveraging high litigation costs for early settlement.

3. In other words, under the Act the Court can force the losing party to pay the winning party’s attorney fees and costs. If passed, this would have a dramatic effect on patent litigation defendants’ decision making process and the typical enforcement strategy of many NPEs. By allowing Courts to shift the litigation costs to the losing side, defendants may be significantly motivated to litigate when they have a strong case even if the price of settlement is relatively low. Combined with the discovery delay described above, defendants will have considerable incentive to remain in the case at least through claim interpretation and to fight infringement claims if the claim interpretation is favorable…

4. …but, by allowing Courts to shift litigation costs to the losing side, defendants’ potential exposure may also be much higher. If the defendant ultimately loses a case, the Court presumably could order them to pay the plaintiff’s litigation costs, particularly if it was apparent that they should have settled. Consequently, the Act’s changes will necessitate defendants making smart decisions about their risk exposure. Fortunately, the discovery delay will enable defendants to economically make more effective decisions by delaying significant discovery costs until after claim interpretation.

5. The Act’s fee-shifting provisions also allows for the limited joinder of parties (such as those covered by transparency provisions described below) to satisfy the award of litigation costs. In principle, this provision could be used against defendants as well as plaintiffs.

The other changes mentioned above may also cast a chill on the NPE business and other patent plaintiffs.

Customer Suit Staying

6. The Innovation Act requires the staying of patent lawsuits against a defendant’s customer. Plaintiffs often sue a defendant’s customers in order to pressure the defendant into settling, often on terms less favorable than the defendant’s actual liability would dictate. Under the Act, an action against a customer may be stayed if the customer agrees to be bound by the results of a suit against the manufacturer. Consequently, customer suit staying takes away another pressure point for plaintiffs.

Post-Grant Review Expansion

7. The Innovation Act expands the post-grant review available against covered business methods (“CBMs”), making CBM review a more effective tool to fight back against patent lawsuits. Specifically, the Act makes the CBM review program permanent and codifies the broad interpretation of what is a CBM.

Heightened Pleading Requirements

8. Currently, many plaintiffs merely name the patents infringed and, in some cases, the products or services infringing. Heightened pleading requirements require more detailed initial pleading by plaintiffs, including greater details describing how a defendant’s products or services infringe the asserted patent claims.

Party-of-Interest Transparency

9. The actual parties of interest are often not discernible from patent complaints. Many NPEs are shell companies that serve the purpose of hiding the actual party asserting the patent. The Innovation Act requires detailed descriptions of the plaintiff’s business and identification of the real party or parties-of-interest behind the asserting plaintiff. Such transparency makes next to impossible for plaintiff’s to hide their true identity and may impact litigation strategies currently used by NPEs and other plaintiffs.

10. Additionally, the party-of-interest transparency provisions of the Act also permit possible joinder of the real party or parties-of-interest behind the asserting plaintiff. This provision gives real teeth to the Fee Shifting provisions of the Act as it may prevent a real party-of-interest from hiding behind a shell company with limited or no resources and avoiding the consequences of the Fee Shifting provisions.

Keep in mind that the Innovation Act will not just affect the Act’s main target, NPEs. Indeed, the Innovation Act has the potential to affect others. Defendants that choose to fight a patent lawsuit rather than settle could find themselves on the losing end of the fee-shifting provisions. Also, the Act may encourage a delay in sharing sales numbers until after claim interpretation, with the result that defendants that may have previously settled for reasonable amounts may find themselves paying much higher amounts if the claim interpretation goes poorly. On a different front, the amounts NPEs and others are willing to pay for patents may be reduced because of the greater risks and costs involved in enforcement. This could reduce the market for patents that provide additional sources of revenue for many patent owners. This in turn could reduce the overall value of patents, the amount companies are willing to spend on patenting and result in an overall chilling effect on research and development and ultimately innovation. As the Innovation Act evolves through the legislative process, some or all of the points above may vary, but the clear direction of the Act, the limitation of patent litigation by NPEs, will remain.

Article by:

Sean S. Wooden

Of:

Andrews Kurth LLP

Dental and Vision Coverage Under the Affordable Care Act

Many employers are unaware of how dental and vision insurance coverage fit within the Affordable Care Act (ACA). This article unravels these rules.

ACA does not mandate dental and vision insurance for adults. For children under age 19, the rules are different. In the exchanges and the individual and small-employer markets, dental and vision insurance are generally required for children under age 19. This requirement does not apply to large employers with 50 or more employees.

Individuals and Small Employers

Effective January 1, 2014, for the small employer and individual market, ACA requires non-grandfathered health plans to cover a specific group of health benefits known as“essential health benefits.” There are ten benefit categories, of which one is pediatric services. Pediatric services include dental and vision care for children under age 19.

Children in this age group are entitled to teeth cleaning twice a year, x-rays, fillings and orthodontia if medically necessary. (It should be noted that there is not a single definition of “medically necessary.”) In addition, children under age 19 can annually get an eye exam and one pair of glasses or contact lenses. There is no requirement under ACA that health plans provide dental and/or vision coverage to individuals age 19 and over.

The Exchanges

Except as provided below, health insurance plans offered within an exchange must include pediatric dental and vision benefits. If the exchange has a stand-alone dental plan providing pediatric dental benefits, the health insurance plan does not need to offer this benefit. The exchanges do not have stand-alone plans for pediatric vision benefits.

Under the federal exchanges, when the dental insurance is a stand-alone plan, employers and individuals are not required to purchase it. State exchanges may provide otherwise. There are no subsidies for stand-alone pediatric dental plans.

Planning tips:

It may be more cost effective to purchase a stand-alone dental policy. When the health plan includes dental coverage, certain dental expenses may not be covered until the medical deductible is satisfied.
If dental and vision coverage is desired for adults, the health plan should be carefully examined because the law only requires pediatric dental and vision coverage. If dental and vision insurance for adults are not covered in the health plan, the adults must purchase a stand-alone policy.

Employers With 50 or More Employees

Currently, health plans for large employers with 50 or more employees are not required to provide essential health benefits. Instead, health plans for large employers must offer “minimum essential coverage.” If this coverage is not affordable and meaningful, beginning in 2015, the employer may be subject to a monetary penalty.

The term minimum essential coverage is defined very broadly under ACA. Virtually any health plan offered within a state that is offered to at least 95% of the employer’s full-time employees and dependents constitutes minimum essential coverage. There is no requirement under ACA that dental or vision benefits must be offered in these health plans. Unlike the exchanges and the individual and small employer markets, dental and vision care for children under age 19 are not required. Although not required, most large employers offer dental and vision coverage to their employees.

Article By:

William N. Anspach, Jr.

Of:

Much Shelist, P.C.

Inside Counsel 14th Annual Super Conference – May 12-14, 2013 Early bird special

The National Law Review is pleased to bring you information about the upcoming Inside Counsel Super Conference.

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When

Monday, May 12 – Wednesday, May 14, 2014

Where

Chicago, IL

Now celebrating its 14th year, InsideCounsel’s SuperConference is an exclusive corporate legal
conference attracting more than 500 senior level in-house counsels from Fortune-1000 and multi-national companies. The three-day event offers opportunities to showcase your firm’s industry knowledge and thought leadership while interacting with GC’s and other senior corporate counsel during exclusive networking and educational opportunities. The conference agenda offers the perfect blend of experts and national figure heads from some of the nation’s largest corporations, top law firms, government and regulatory leaders, and industry trailblazers. The conference agenda and educational program receives consistent high marks.

No longer just providing legal counsel, in-house attorneys have become strategic business partners within their companies. They not only need to be influential in the boardroom, but must demonstrate the ability to make strategic decisions on both commercial and legal analysis. At the annual InsideCounsel SuperConference, you will:

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USDA (U.S. Department of Agriculture) Finalizes Import Regulations for “Mad Cow Disease”

In November, the USDA announced a final rule that will align the Agency’s import regulations for bovine spongiform encephalopathy (BSE or “mad cow disease”)with international standards. According to a USDA November news release, the final regulation will allow for the safe trade of bovines and bovine product, while still protecting the U.S. from the introduction of BSE.

Michigan Senator Debbie Stabenow praised the new rule by stating, “I applaud USDA’s actions to make sure that American’s beef producers have access to new export markets…This effort is crucial to breaking down other countries’ unfounded trade barriers, and re-opening trade markets that are closed to U.S. beef. American agriculture has long set the gold standard food production. [These] actions will ensure U.S. beef producers can operate on a more level playing field and help grow our agriculture economy.”

Article by:

Aaron M. Phelps

Of:

Varnum LLP

FINRA (Financial Industry Regulatory Authority) Issues New Rules on Securities Borrowing, Customer Protection and Callable Securities

On December 4, 2013 the Securities and Exchange Commission approved rules proposed by the Financial Industry Regulatory Authority regarding securities loans and borrowings, permissible use of customers’ securities, and callable securities. For securities loans and borrowings, Financial Industry Regulatory Authority proposed new Rule 4314, which requires a member firm acting as an agent in a securities lending or borrowing transaction to disclose its capacity as agent. The rule aims to clarify whether parties are acting as principals or agents when entering into security lending or borrowing agreements. When member firms loan securities to or borrow securities from a counterparty acting in an agency capacity, the rule requires the member firm to maintain books and records to reflect the details of the transaction with the agent and each principal on whose behalf the agent is acting as well as the details of the transaction. The rule allows a member firm that is a party to a loan or borrowing agreement with another member firm to liquidate the transaction whenever the other party becomes subject to one of the specified liquidation conditions. Additionally, no member firm can lend or borrow any security to or from any person that is not a member of FINRA, including any customer, except pursuant to a written agreement. Each member firm subject to Securities Exchange Act Rule 15c3-3 that borrows fully paid or excess margin securities from a customer must comply with the Securities Exchange Act Rule 15c3-3 requirements for a written agreement between the borrowing member firm and lending customer.

FINRA also adopted new Rule 4330 regarding the permissible use of customers’ securities. The rule prohibits a member firm from lending securities held on margin for a customer that are eligible to be pledged or loaned unless the member firm first obtains written authorization from the customer permitting the lending arrangement. The rule also requires a member firm that borrows fully paid or excess margin securities carried for a customer account to comply with Securities Exchange Act Rule 15c3-3, provide notices to customers in compliance with Securities Exchange Act Section 15(e), and notify FINRA at least 30 days prior to the borrowing. Before any member firm engages in a securities borrowing transaction with a customer, the rule requires the member firm to have reasonable grounds for believing that the customer’s loan of securities is appropriate for its financial situation and needs and that the member firm provide certain disclosures to the customer in writing. A FINRA member firm is also required to keep books and records evidencing compliance with these rules.

Finally, FINRA adopted new Rule 4340 to clarify requirements applicable to callable securities. The rule requires each member firm with possession or control of a callable security, in the event of a partial redemption or call, to identify such securities and establish an impartial lottery system to allocate the securities among its customers. The member firm must also provide written notice, which may be electronic, to new customers opening an account and to all customers once a year that describes how customers may access the allocation procedures on the member firm’s website or obtain hard copies upon request. The rule prohibits a member firm from allocating securities to its own or an associated person’s account during a redemption until all other customers’ positions have been satisfied. This prohibition applies only when the redemption is offered on terms favorable to the called parties. When on unfavorable terms, a member firm cannot exclude its positions or those of its associated persons from the redemption.

The proposed rules with links to amendments, comments, and the approval order may be accessed here.

Article by:

James D. Van De Graaff

Adam J. Joines

Of:

Katten Muchin Rosenman LLP

Labor and Employment Law: Tri-State Round-Up

New York

“Pregnant Workers Fairness Act” Becomes Law in New York City

On October 2, 2013, New York City Mayor Michael Bloomberg signed into law the “Pregnant Workers Fairness Act” (PWFA) in an attempt to plug a perceived gap in the Pregnancy Discrimination Act, which does not require accommodation for pregnant employees. Once the new law takes effect in early February 2014, it will require employers in New York City to offer reasonable accommodation for pregnancy, childbirth and related medical conditions.

The PWFA will apply to all businesses in New York City with four or more employees, including independent contractors. It requires that written notice of its provisions be presented to all new employees at the time of hire, and that a poster advising employees of their rights under the PWFA—to be produced by the City’s Commission on Human Rights—be posted within the employer’s facility. Employers that are able to demonstrate that compliance would pose an undue hardship are excluded from compliance. Employees who believe they have been the victims of discrimination in violation of the PWFA have the option of either filing a complaint with the New York City Commission on Human Rights or bringing a court action against their employer.

NYS Department of Labor Proposes New Wage Deduction Regulations

Employers in New York have been waiting since June 2012 for guidance regarding amendments made that month to Section 193 of the New York Labor Law restoring employers’ ability to make deductions from employee wages for overpayments and advances, but only in specific, as-yet-undefined circumstances. The wait, however, appears to be nearing an end.

In May 2013, the NYSDOL issued proposed wage deduction regulations that address not only deductions for overpayments and advances, but also deductions deemed permissible because they are “for the benefit of the employee.” The complete proposed regulations are available on the NYSDOL website (www.labor.ny.gov./legal/wage-deduction-regulation.shtm), but the following is a brief summary:

Deductions for Overpayments
Written authorization from the employee is not required for the employer to make deductions for unintended overpayments. The proposed regulations specify in detail, however, the timing, frequency, amount permitted and advance notice required for such deductions, along with dispute resolution procedures and the method by which improper deductions are to be repaid.
Deductions in Repayment of an Advance
The new regulations state that any provision of money to an employee by an employer that is accompanied by the accrual of interest, fees or a repayment amount of anything other than the specific amount provided to the employee is not an advance, and it may not be recouped via wage deduction. Furthermore, the parties must agree in writing to the terms of repayment before the advance is given; and once agreement is reached, no further permission or notice is required until the entire amount of the advance has been recouped.
Deductions for the Benefit of the Employee
Such deductions are expressly limited to those listed in Section 193 of New York’s Labor Law, along with benefits for health and welfare, pension and savings, charity, representation, transportation, food and lodging.

Employers are encouraged to proceed with caution if they wish to implement a program for recoupment of overpayments and wage advances, as the wage deduction regulations proposed by the NYSDOL are not yet final and are thus subject to change.

New Jersey

New State Law Limits Employer Access to Employees’ Social Media Accounts

A new law set to take effect on December 1, 2013 will make New Jersey the latest of a growing number of states—including Arkansas, California, Colorado, Illinois, Maryland, Michigan, Nevada, New Mexico, Oregon, Utah and Washington—that prohibit employers from requesting access to the social media accounts of current or prospective employees. The law also prohibits employers from retaliating or discriminating against any such individual who either refuses to provide such access or who complains about what he or she believes to be a violation of the law.

The law applies only to those social media accounts that are the exclusive personal property of the employee or prospective employee. Employers are, however, permitted to obtain access to private accounts for the purposes of ensuring legal or regulatory compliance, investigating employment-related misconduct or investigating a potential disclosure of the employer’s proprietary or confidential information. The law does not prohibit employers from accessing accounts its employees use for business-related purposes, and employer review of material that employees or prospective employees post publicly on an otherwise private social media account remains lawful.

Enforcement of New Jersey’s social media law is left solely to the state’s Department of Labor; the law does not provide individuals with a private right of action. Companies may be fined up to $1,000 for their first violation and $2,500 for violations thereafter.

Amendment to NJLAD Prohibits Retaliation Against Employees Who Seek Information About Their Coworkers

An amendment to New Jersey’s Law Against Discrimination (NJLAD), signed into law on August 28, 2013 and given immediate effect, adds a nonretaliation pay equity measure to NJLAD. Intended to protect employees who request information about other employees’ or former employees’ compensation or potential membership in a protected class, the amendment prohibits employer retaliation for such a request, provided the request is made either as part of an investigation into potential discriminatory treatment or to take legal action for such discriminatory treatment with regard to compensation.

It is important to note that the amendment does not require employers to take action in response to such a request from an employee or to provide him or her with the information sought while employers are free to deny such requests; they are, however, prohibited from retaliating against the employee making the request.

Employers in New Jersey should consider examining and, if necessary, revising their policies pertaining to requests for and disclosure of protected information, and they should take steps to make sure that supervisory and managerial employees are aware of NJLAD’s new provisions.

“NJ Safe Act” Requires Unpaid Leave for Employees Affected by Domestic or Sexual Violence

A new law that took effect on October 1, 2013 enables eligible employees within New Jersey to take 20 days of unpaid leave within a 12-month period in the event that the employee, his or her child, parent, spouse or domestic or civil union partner is the victim of domestic or sexual violence.

Dubbed the New Jersey Security and Financial Empowerment Act, but better known as the “NJ Safe Act,” the law applies to employers within the state with 25 or more employees. Its intended purpose is to allow victims of assault, or those who are giving care to such victims of assault, to engage in a series of activities related to such victims’ recovery without fear of losing their jobs.

The NJ Safe Act covers those employees who have worked for a covered employer for at least 12 months and who have worked at least 1,000 hours during the previous 12 months. Leave may be taken within one year of an occurrence of domestic violence or sexual assault, and it may be taken intermittently. If the need for leave is foreseeable, employees seeking such leave are required to provide written notice to their employer as far in advance as possible. Employers are permitted to request documentation from the employee supporting the employee’s need for leave. The act also requires employers to post a notice made available by the New Jersey Commissioner of Labor and Workforce Development to inform employees of their rights.

Employees are provided with a private right of action under the NJ Safe Act and are able to seek relief in the New Jersey Superior Court up to one year after an alleged violation. Prevailing plaintiffs may be entitled to recovery of economic and noneconomic damages, as well as attorneys’ fees, a civil fine and an order of reinstatement. The law, like most of New Jersey’s employment laws, contains a provision that prohibits retaliation against an employee who exercises his or her rights under it.

New Jersey employers with more than 25 employees should take steps to ensure that their leave policies comply with the new law. Such employers should also make sure that any employee training on the subject of retaliation includes information on the NJ Safe Act and that they have posted the required materials within their workplaces.

Connecticut

Significant Changes Made to Connecticut’s Personnel Files Act

As a result of an amendment to Connecticut’s Personnel Files Act that took effect on October 1, 2013, employers within the state now have a dramatically shorter period of time within which to respond to requests from current or former employees to inspect the contents of their personnel files. Whereas the law previously required employers to permit such inspection “within a reasonable period of time,” the law now mandates that current employees be allowed to inspect their files within seven days of a written request; former employees must receive the same opportunity within ten days. Such inspections are to take place during regular business hours and at a location at, or reasonably near, the employee’s place of employment.

The amendment also places a number of other new requirements on Connecticut employers. Among them are the following:

Employees must now be provided with a copy of any documented disciplinary action not more than one business day after the action is imposed;
Employees must “immediately” be given copies of any documented notice of the termination of their employment;
Employers must now include a “clear and conspicuous” statement in any written termination or disciplinary notice that, should an employee disagree with any information contained in such a document, the employee may submit a written explanation of his or her position. If an employee chooses to submit such a statement, employers are required to include it within the employee’s personnel file; employers must also include the employee’s statement with any transmission of or disclosure from the file to any third party.

As before, Connecticut’s Personnel Files Act does not contain a private right of action. The state’s Department of Labor may impose a fine of up to $500 for a first violation and up to $1,000 for subsequent violations involving the same employee.

Article by:

Jonathan S. Hershberg

Laura Sack

Of:

Vedder Price

Supreme Court To Consider Employers’ Arguments Regarding Contraceptive Mandate

The United States Supreme Court will revisit the Affordable Care Act (“ACA”)requirement that most employers provide contraceptive coverage in employee health insurance plans. On November 26, 2013, the Court accepted two cases which center on the issue, each of which resulted in a different outcome. The ACA currently provides an exemption to certain non-profit religious organizations, but there is no such exemption for private employers.

The Supreme Court will now consider whether private companies should be able to refuse to provide employees with contraception coverage under their health plans on the basis of religion. Further, the Supreme Court may consider whether for-profit corporations may validly claim protection under freedom of religion.

In Sebelius v. Hobby Lobby Stores, Inc.^[1], the U.S. Court of Appeals for the 10th Circuit ruled that a requirement which forced Hobby Lobby to comply with the contraception coverage mandate violated the Religious Freedom Restoration Act, which protects religious freedom. Hobby Lobby is owned by David and Barbara Green, who have stated that they strive to run their company in accordance with their Christian beliefs. The Greens have no objection to preventive contraception, but only medication which may prevent human embryos from being implanted in the womb (i.e., “the morning-after pill”).

The 10th Circuit Appeals Court ruled in favor of Hobby Lobby based upon its decision in a previous case, Citizens United v. Federal Election Commission^[2]^, which held that corporations hold political speech rights akin to individuals. Taking this reasoning further, if a corporation can have political speech rights, then it should also have protection for its religious expression, according to the Court.

In Conestoga Wood Specialties v. Sebelius^[3], the U.S. Court of Appeals for the 3rd Circuit viewed the issue differently. The Court upheld the contraception coverage mandate based upon what it perceived as a “total absence of case law” to support any argument that corporations are guaranteed religious protection.

According to the ACA, contraceptive coverage provided by employers’ group health insurance plans is “lawful and essential” to women’s health; however, certain businesses assert that their religious liberty is more important. Ultimately, the United States Supreme Court will cast the deciding vote.

_{[1] Sebelius v. Hobby Lobby Stores, Inc., 723 F.3d 1114 (10th Cir. 2013).}

_{[2] Citizens United v. Federal Election Commission, 558 U.S. 310 (2010).}

_{[3] Conestoga Woods Specialties v. Sebelius, 724 F.3d 377 (3d Cir. 2013).}

Article by:

Brittany Blackburn Koch

Of:

McBrayer, McGinnis, Leslie and Kirkland, PLLC

Holiday Warning Update: Cut Sexual Harassment From Your Holiday Party Invitation List (seriously)

OK, we admit it is somewhat cliché for employment lawyers to circulate client alerts every December warning about the dangers lurking at company holiday parties. But when real-life examples show just how expensive claims arising from these events can be, we would be remiss not to issue yet another such alert.

Last December, we issued an alert concerning a federal district court’s refusal to dismiss a holiday party related sexual harassment lawsuit filed against an employer,Shiner v. State University of New York at Buffalo (Case No. 11-CV-01024).

The case finally settled in August 2013, with the employer paying the plaintiff a whopping $255,000.

The plaintiff, Leslie Shiner, was a clerk at the University at Buffalo Dental School. She alleged that she had not wanted to attend the school’s annual holiday party because the conduct at previous events made her uncomfortable. However, a supervisor encouraged her to attend the party, which was held at a local bar. During the party, an associate dean, with supervisory authority over the plaintiff, allegedly made sexual advances toward her that included fondling her, putting his tongue in her ear and pulling her onto his lap. Another department official with supervisory authority allegedly cheered him on.

In early 2012, the plaintiff filed claims of sexual harassment under state and federal anti-discrimination laws, as well common law claims of assault and battery. In November 2012, as we wrote last year, the judge denied the defendant-employer’s motion to dismiss and allowed the case to proceed. After months of discovery and over a year and a half after the plaintiff filed her lawsuit, her employer ultimately agreed to pay her $255,000 to settle her claims. That amount obviously does not include the attorneys’ fees expended by the employer during a protracted time period of motion practice and discovery. Not including the inconveniences to the employer, the total out-of-pocket cost of the case to the employer likely exceeded $350,000 or $400,000.

The lesson for all employers is that the lighthearted, and sometimes drunken, atmosphere at office holiday parties does not equate to a free pass for unwanted touching, lewd comments and other types of inappropriate behavior that otherwise would not be tolerated. As the University of Buffalo Dental School eventually had to recognize when it agreed to settlement, employers who fail to protect themselves can be held liable for workers’ conduct that might easily get out of hand at festive events particularly when there is drinking.

The following are examples of ways employers can reduce the threat of dangerous misbehavior:

Remind employees prior to the event that the company’s code of conduct remains in effect during the event
Establish procedures in advance to handle any inappropriate behavior that might occur
Limit the amount of drinking and provide taxis or other safe transportation home to employees who may be intoxicated

If an employee does come to you with a sexual harassment complaint, please consider it seriously and take prompt action as necessary to investigate and stop the harassment.

Article by:

Michael B. Kass

Of:

Armstrong Teasdale

Supreme Court Declines Review of Intern Compensability Issue

While the compensability of time spent in internship programs continues to be an hotly contested litigation issue, the United States Supreme Court has declined an opportunity to provide clarity in this area, denying certiorari to a Florida medical billing intern whose claim was rejected last year by the Eleventh Circuit. Kaplan v. Code Blue Billing & Coding, Inc., 2013 U.S. LEXIS 8046 (U.S. 2013).

Perhaps multiple requests for high court review of an appellate decision will be necessary before the Supreme Court addresses the status of interns under the FLSA, as was required before the Court accepted review of the exempt status of pharmaceutical sales representatives.

Article by:

Noel P. Tripp

Of:

Jackson Lewis P.C.

The Christmas Conundrum, continued

Last week we discussed the basic framework for providing employees with days off during recognized religious holidays. A related issue commonly presented during the holiday season is whether employees must be paid for their time off.

While an employer may have to give an employee time off in order to observe a religious holiday in accordance with Title VII of the Civil Rights Act, the “reasonable accommodation” does not have to be accompanied by pay. Although it may not be a popular decision, denying paid time off is perfectly acceptable when it comes to non-exempt (hourly) employees. Generally speaking, an employer is only required to pay hourly employees for time actually worked. For exempt employees (generally, salaried) who are given time off, the full weekly salary must be paid if they worked hours during the week in which the holiday falls. As always, a contract or collective bargaining agreement can create an affirmative obligation to provide paid time off.

Notwithstanding the foregoing, private employers or employees engaging in work with the federal government should be conscious of two possible exceptions to their paid time off rules. The federal government provides its employees with paid time off on several recognized holidays and, in addition, often provides overtime pay to those employees who must work during the holidays. Although this is not legally mandated for private employers, persons who work under a government service contract subject to the McNamara O’Hara Service Contract Act and persons who work under a government labor contract subject to the Davis-Bacon and Related Acts must receive holiday and vacation benefits. The exact terms of these benefits depend on worker classification and contract.

Always remember, offering paid time off around the holidays is a gesture of good will. Regardless of an employer’s legal obligations, offering paid time off can go a long way in making the holidays a happier time for employees.

Article by:

W. Chapman Hopkins

Of:

McBrayer, McGinnis, Leslie and Kirkland, PLLC

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