Tag: Labor Law

Starting an Online Business: Licensing Requirements

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Individuals interested in starting an online business are often confused or uninformed as to the licensing requirements for such businesses.  In many ways, an online business is like any “brick and mortar” store and the owner will probably be required to obtain certain licenses or permits to operate.

Federal Requirements

Business Licenses.  Most businesses do not require a federal business license or permit.  However, a business engaged in one of the following activities should contact the responsible federal agency to determine the requirements for doing business:  Investment Advising, Drug Manufacturing, Preparation of Meat Products, Broadcasting, Ground Transportation, Selling Alcohol, Tobacco, or Firearms.

Tax Identification Number.  A federal tax identification number, also known as an Employer Identification Number (EIN), is a federal identification number issued by the Internal Revenue Service to identify a business entity.  Nearly all businesses are required to have a tax identification number.

If a business is operated as a sole proprietorship, the owner may use his or her social security number in place of an EIN on all governmental forms and other official documents.  However, most small business advisors recommend using a federal tax identification number instead.

To obtain a federal tax identification number, a business owner should contact the nearest Local IRS Field Office or call the IRS Business and Specialty Tax Hotline at 800-829-4933.  The necessary form, IRS Form SS-4, can be downloaded directly from the Small Business Administration website.

State Requirements

Many states and local jurisdictions require a person to obtain a business license or permit before beginning business operations.  A business that operates without the required license or permit may be subjected to fines or may be barred from further business activity.  In some localities, a business operating out of a residence may require an additional permit.

While business licensing requirements vary from state-to-state, the most common types include:

·    Basic Business Operation License – a legal document issued by a local governmental authority that authorizes a person to conduct business within the boundaries of the municipality.  Many states have established small business assistance agencies to help small businesses comply with state requirements;

  • Fictitious Name Certificate – a document, usually filed with a state agency, which is required to operate a business using an assumed name or trade name (essentially, any name other than the full, formal name of the individual or company);
  • Home Occupation Permit – a permit which may be required to conduct business from a residence;
  • Tax Registration – if the state has a state income tax, a business owner must usually register and obtain an employer identification number from the state Department of Revenue or Treasury Department.  If the business engages in retail sales, the owner must usually obtain a sales tax license;
  • Special State-Issued Business Licenses or Permits – these permits may be required for a business that sell highly-regulated products like firearms, gasoline, liquor, or lottery tickets;
  • Zoning and Land Use Permits – may be required to develop a site or property for specific purposes
  • Employer Registrations – if the business has employees, the owner must usually make unemployment insurance contributions;

Additional state licenses may be required for regulated occupations such as building contractors, physicians, appraisers, accountants, barbers, real estate agents, auctioneers, private investigators, private security guards, funeral directors, bill collectors, and cosmetologists.

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New Requirements for Illinois Businesses under Concealed Carry Act

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Illinois employers may be surprised to learn what action items may be necessary for their businesses following enactment of Illinois’ new Concealed Carry Act.

Facing a deadline imposed by the Seventh Circuit’s 2012 ruling that the state’s concealed carry ban was unconstitutional, on July 9 the Illinois state legislature overrode Governor Quinn’s amendatory veto to enact Public Act 98-0063, which includes the new Firearm Concealed Carry Act (“Act”) and related laws and amendatory legislation. The Act makes Illinois the 50th state to enact legislation allowing concealed carry, and permits Illinois residents and non-residents who meet specified qualifications to apply for a license to carry a “concealed firearm” — defined as a concealed loaded or unloaded handgun carried on or about a person or within a vehicle — in the state. Among other provisions, the Act specifies qualifications, procedures and content of applications for licenses and areas where those holding licenses will be prohibited from carrying firearms. Individuals cannot apply for a concealed carry license in Illinois until the Department of State Police issues the applications (the Department has up to 180 days to do so).

Required Postings for “Prohibited Areas”

The Act prohibits authorized licensees from carrying a firearm into “prohibited areas” and further mandates clear notices at entrances of such venues that firearms are prohibited. (Required signage and accompanying rules will be issued by the Department of State Police and are not yet available.) Among others, the following are types of establishments subject to these requirements that must post clear notices prohibiting the carrying of firearms:

  • Areas controlled by public or private hospitals or their affiliates, mental health facilities, nursing homes, public or private elementary or secondary schools, pre-schools, and child care facilities.
  • Areas under the control of an establishment serving alcohol on its premises, if more than 50% of the establishment’s gross receipts within the prior 3 months is from the sale of alcohol. (The Act further provides that owners of such establishments who fail to prohibit concealed firearms are subject to penalties up to $5000.)
  • Buildings, classrooms, laboratories, clinics, hospitals, artistic, athletic or entertainment venues and other areas under the control of a public or private community college, college, or university.
  • Events authorized by Special Event Retailer’s license during the time alcohol will be sold.
  • Areas under the control of a gaming facility licensed under the Riverboat Gambling Act or the Illinois Horse Racing Act of 1975.
  • Public gatherings or special events conducted on property open to the public that requires the issuance of a government permit.
  • Any stadium, arena, or the property or areas under the control of a stadium, arena, or any collegiate or professional sporting event.
  • Areas under the control of a museum, amusement park, zoo, or airport.
  • Any areas owned, leased, controlled or used by a nuclear energy storage, weapons, or development site.
  • Buses, trains, or other forms of transportation paid in whole or in part with public funds, and any areas controlled by a public transportation facility.
  • Areas where firearms are prohibited under federal law.

Prohibition by Other Owners Desiring to Maintain Gun-Free Facilities

Employers and other property owners can still prohibit the carrying of concealed firearms on property under their control that is not among the enumerated “prohibited areas” provided they post the state-approved sign indicating that firearms are prohibited. (Owners of private residences desiring to prohibit firearms need not post the sign.) Because this provision of the Act applies to owners of “private real property” however, it raises questions for businesses operating on leased premises who desire to ban firearms. At a minimum, such businesses should ensure that their landlord’s concealed carry policy is consistent with their own.

Special Provisions for Parking Areas

Note that while the carrying of concealed firearms may be prohibited in buildings, facilities and properties — including parking areas — authorized licensees can still drive with concealed firearms into the parking areas, and can store the firearms and ammunition in a case in their locked vehicle or in a locked container out of plain view. Thus while licensed employees and visitors may be prohibited from bringing a firearm into a business or venue, they cannot be prohibited from keeping the firearm in their car. Employers must be sure that any policies or procedures governing handguns in the workplace do not infringe on the rights of employees to keep authorized handguns locked in their cars, even if in employer-owned parking lots.

An Evolving Area of Law

This area of the law continues to evolve. On July 16, Chicago’s City Council unanimously voted to strengthen the City’s assault weapons ban with measures that prohibit more weapons, add stricter penalties for violations, and outline student safety zones in order to meet a 10-day deadline imposed by companion amendments within Public Act 98-0063.

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White House Highlights the Need For Educated Immigrant Entrepreneurs and Employees

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The Office of Science and Technology Policy (“OSTP”) highlighted the need for immigration reform in a recently published blog post. Over 40 percent of Fortune 500 companies, including GE, Ford, Yahoo and Google, were founded by immigrants or children of immigrants. According to the OSTP, the recently passed bipartisan Senate bill would enact some of the President’s key priorities for retaining the skilled workers.

Specifically, the bill would remove visa caps for immigrants with a PhD or Master’s degree in Science, Technology, Engineering and Math (“STEM”). A recent article from Forbes.com highlighted the continuing need for STEM graduates. The median pay for STEM graduates with less than three years of work experience was $88,700. However, STEM jobs remain unfilled because of the lack of qualified candidates.

The Senate bill would also create a new startup visa for Immigrant Entrepreneurs. Qualified Entrepreneurs would have to invest no less than $100,000 in a U.S. business, create no fewer than three jobs and generate at least $250,000 in annual revenue from business conducted in the United States. A “Qualified Entrepreneur” would be an individual who has a significant ownership interest in a U.S. business entity, is employed in a senior executive position of that U.S. business entity, submits a business plan to USCIS and has a substantial role in the founding or early stage development of such entity.

Additionally, the bill would eliminate the existing backlogs for employment-based visas. This change would permanently expand the availability of visa numbers for high-skilled workers by exempting relatives of these skilled workers from the annual cap. These are important, necessary and critical changes to our broken immigration system. All eyes are now focused on the House to see if these important immigration reform steps will be passed into law and how the new bill would impact the EB-5 program.

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A Checklist for Employee Reference Checks

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Thorough research during an employer’s hiring phase can prevent undesirable employees from becoming part of a workforce. There is no better way to get an accurate assessment of job applicants than by speaking with people who have actually worked with them. Before picking up the phone, however, potential employers should keep a few things in mind:

Who should inquire?

Someone in HR may typically perform reference checks, but the supervisor or manager who will be interacting with and interviewing the applicant should consider making the calls.  A supervisor or manager will not only benefit from getting the information directly, but they may also have an easier time getting high-level references to speak candidly about the applicant.

Consider obtaining consent

Getting the applicant’s consent before obtaining potentially sensitive information can help insulate you from liability. Further, former employers may be more at ease discussing the applicant if they know the applicant has approved of the contact.

What should be discussed?

Keep it at a professional level; not personal. Anything you ask should be relevant to the position with the goal being to find out about the applicant’s ability and how they will interact with others. Obviously, avoid any questions that could inadvertently lead to a discrimination or unfair hiring practices claim, such as inquiring about the person’s age or religion.

Know what you want to find out beforehand. People provide references whom they believe will say positive things, but this is not always the case. In the event a reference thinks poorly of the applicant, try to find out if their negative opinion is based on articulable, business-related reasons. While comments like, “she just was not a good fit at our company” can be appreciated, it is better to hear comments such as, “she was not a good fit at our company because she was repeatedly absent and needed constant oversight.”

Take notes

Information obtained during a reference check can be valuable evidence if a negligent hiring claim is later made by a third-party. For example, if the applicant is hired and subsequently is violent towards a customer, having records to show that none of the employee’s references offered any indication of violent behavior will support your defense that the hiring was not negligent.

Get necessary releases before going further

An applicant’s express permission is necessary before accessing some records, such as a credit report or criminal background check. Some records may be completely inaccessible, such as workers’ compensation information or medical records. If you have conducted the reference checks and are ready to take your interview process to the next level, make sure that you know what kind of releases are required.

 Maegan Pirtle and Shawn Beloin, Law Clerks for McBrayer, contributed to this article.

Employment as Consideration in Employee Non-Competes: Less than Two Years is Not Enough

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The Illinois Appellate court very recently clarified a budding dispute among practitioners regarding what type of consideration is necessary to enforce a non-compete or non-solicitation agreement. In Fifield v. Premier Dealer Services, Inc., in which our firm represented the employee and his new employer, the First District Illinois Appellate Court set forth this bright line rule — if the only consideration for a restrictive covenant is employment, then an employee has to work at least two years after signing the agreement before the non-compete or non-solicitation agreement can be enforced. This is true even if the restriction meets all other requirements (e.g., legitimate interest, reasonable scope).

This rule applies whether or not the agreement is signed at the beginning of employment or during, whether the employee quits or is fired. It simply doesn’t matter. Unless the employee has worked two years, the company will not be able to enforce that agreement unless some other adequate consideration is given for the restrictive covenant.

What does this mean to you? It means that if you hire a new employee and require her to sign a non-compete and that employee leaves a year after being hired, you will not be able to enforce that non-compete agreement no matter what. Indeed, based on the Fifield case, if the employee works one year and eleven months and then leaves, the agreement would still not be enforceable.

The same rule would apply if you ask an employee to sign a non-compete during his or her employment. After that agreement is signed, the employee has to work an additional two years for the agreement to be enforceable, provided that the only consideration for the agreement is employment.

And that is the loophole that the court has left employers: providing some other consideration besides employment. For example, if a company gives a real (not an illusory or nominal) signing bonus, the employer would have a fairly good argument that it has provided adequate consideration to enforce the agreement. Perhaps a promotion would work as well, although that is more problematic since a promotion is still basically employment. After promoting its employee, nothing prevents the company from then firing the employee, if employment is at will. If, on the other hand, the employee was hired for a particular amount of time (at least two years) during which he or she could not be fired without cause, that could itself be sufficient consideration since it would arguably constitute two years of employment even if the employee quit early.

Another, albeit untested possibility would be to draft the restrictive covenant in such a way that the post-employment restriction would be equal to the length of time that the employee actually works. So if the employee leaves after one year, then she or he is restricted for one year. To be enforceable, the restriction would likely have to have some maximum period of time. Probably two to three years at the most.

As you can see, this new ruling has significant implications. At the very least, every company should carefully review its non-compete and non-solicitation agreements to see if they are supported by adequate consideration. If they don’t, then you should discuss with your attorneys how best to rectify the situation. You certainly do not want your former employees going to competitors singing, “I can’t get no consideration.”

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Virtual Communications with Real Consequences: Terminations for Social Media Posts Continue to Draw the Attention of the National Labor Relations Board (NLRB)

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In the late autumn of 2012, an otherwise innocuous private Facebook discussion amongst employees of Skinsmart Dermatology (Skinsmart) suddenly devolved into an expletive-laced tirade. At one point during the conversation an employee boasted that she told her supervisor to “back the freak off,” called her employer “full of sh**,” and dared Skinsmart to “fire” her and “[m]ake [her] day.”

Notably, none of the other participants in the Facebook chat directly responded to the employee’s comments. One of those participants, however, reported the employee’s remarks to Skinsmart, who promptly fired her after concluding that it was “obvious” she did not want to continue working there.

Following her termination, the employee filed an Unfair Labor Practice Charge (ULP) with the National Labor Relations Board (NLRB) claiming that Skinsmart fired her in violation of the National Labor Relations Act (NLRA). The NLRA prohibits an employer from interfering with or restraining an employee’s right to engage in “protected concerted activities.”

As background, “protected” activities include discussing wages, hours and other terms and conditions of employment with coworkers. “Concerted” activities include: (1) when an individual employee seeks to “initiate or to induce or to prepare for group action”; (2) where an individual employee brings “truly group complaints” to management’s attention; and (3) where employees discuss “shared concerns” among themselves prior to any specific plan to engage in group action.

After analyzing the evidence, the NLRB’s Division of Advice recommended dismissal of the employee’s ULP Charge. First, it found the terminated employee’s Facebook comments were “an individual’s gripe” rather than an expression of “shared concerns” over working conditions among employees. Second, it found there was no evidence that the terminated employee’s coworkers viewed her remarks as an assertion of shared concerns regarding employment conditions. Consequently, the Division of Advice concluded that the employee did not participate in concerted activity, and therefore Skinsmart did not illegally fire her in response to her Facebook comments.

Significantly, before recommending dismissal of the ULP Charge, the Division of Advice also considered whether the terminated employee’s comments constituted “inherently concerted” activity that deserved protection under the NLRA.[1] While the Division of Advice ultimately ruled that they were not, its consideration of “inherently concerted” activity suggests that it will continue to interpret “protected concerted activity” as broadly as it can.

Under the “inherently concerted” analysis, an employee’s expressions may be considered protected concerted activity if those expressions involve “subjects of such mutual workplace concern” like wages, schedules, and job security, even if there was no contemplation of group action. Because the employee’s posts did not relate to any of those mutual workplace concerns, the Division of Advice concluded, the employee did not engage in “inherently concerted” activity.

In light of Skinsmart, before taking any adverse action against an employee for inappropriate social media communications, an employer should scrutinize the employee’s comments to determine whether they constitute an individual gripe or protected concerted activity. Because the NLRB has targeted “Facebook firings” as infringing on employees’ right to engage in protected concerted activity, we recommend that employers undertake this analysis with the benefit of counsel to minimize their exposure to a ULP Charge or other legal action.

[1] The term, “inherently concerted,” arose out of an earlier NLRB decision in 2012. See Hoodview Vending Co., 359 N.L.R.B. No. 36 (2012).

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Avoiding the Funk…Overcoming Job Search Fatigue-Syndrome

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As part of my role as a member of the Lawyers in Transition Committee for the NYSBA, I was one of four panelists asked to speak on the topic of “Avoiding the Funk During the Job Search.” It is a program we have run for the last several years since 2008 and for those of you that want to watch the full webinar you can download it for free on the NYSBA website.

So while the tips in this blog can be useful anytime the career funk sets in, this blog is for those persistent, noble, red-eyed, weary warriors of the legal job search who have had to weather weeks, months and, in some instances, at least a year of job searching in a weird legal climate.

First things first. You Are Not Unique. Career Funk  is everywhere…regardless of your work or job circumstances, whether you are employed, self-employed, unemployed or looking for a job, rest assured, that a sense of ennui, frustration, and good old-fashioned depression can creep into your workday and mindset and derail even the most gung-ho, caffeine-driven career.  It happens to me at least once a day like clockwork around 3pm and it hits hard, just like it does for everyone. I guess that’s my first point: You are not unique and neither am I. Career funk will come. Funk will set in for all of us and we all need tips and tools and rituals to help De-Funk.

So it has me thinking? What does Job Funk & Job Search Fatigue Syndrome for attorneys look like, what are the causes and what can you do to combat it? So here are some of my initial lay observations about lawyers and why the job search funk hits attorneys particularly hard.

Here’s the crux of it.  We are a community of professionals who like to be prepared for the worst and we are trained to throw ourselves into a difficult situation, issue spot, quickly problem solve, fix and move on to the next issue. On a day to day basis, we are accustomed to immediate gratification

So here’s the root of the job funk: many of my clients approach the legal job search with the same, immediate tackle, throw-down and conquer approach that they approached their legal practice. But soon enough within 3 -5 months, attorneys confront a harsh reality that job search in this climate can be a long, protracted and uncertain process. Attorneys come to learn that while they can control the effort they put into their job search, they cannot control the outcome, the timing and the results

Lack of control, lack of immediate gratification, and a lack of certainty define the new job search reality for many attorneys and can lead to job search funk.

 So what can you do to avoid the Funk? Here are some basic suggestions:

  1. Go Inward: Some of you know that in addition to being a former attorney, I am also a shrink. And so, in my experience, spending quiet time identifying and processing difficult emotions is the starting point for overcoming any funk. Many times when we are in a funk we do not even know what emotions and feelings are brewing beneath the surface; all we know is that we are not ourselves and in a rut. Denial of difficult emotions, such as—rejection, bereavement, fear, grief, loss, hurt, embarrassment, disappointment– breeds such career obstacles as procrastination, paralysis, indifference, fatigue and just guarantees us more funk.  So no more denial! If you are sensing that your job search is running on fumes, it might be time to go inward a little and figure out what is going on internally and emotionally with you.  Spending some time identifying what you feel, and allowing yourself to express and process the tough emotions associated with job loss or protracted job transition can actually be a starting point for re-energizing your job search. The only way through the grief and loss is through it… there is no way around it. And when we are in a funk…it’s a sign to start going inward, articulate and process the rough feelings with a friend, mentor, counselor or professional.
  2. Connect With Non-Lawyers: Reducing isolation and finding ways to connect interpersonally is key to reducing the funk.  But here’s the deal: while you are in the job funk, stay away from other attorneys and the networking events that draw other attorneys looking for employment. Why? Because misery likes company and the last thing you need right now is to surround yourself with other well-meaning, highly articulate, equally frustrated and defeated attorneys who can creatively add to your own list of reasons to be miserable.  Part of getting out of the funk means protecting yourself.Find ways to connect with other professionals from other industries through alumni associations, civic organizations, local charities or through hobbies you may have left to atrophy over the last several years. Mix it up and you are more likely to find people that are like-minded and maybe more positive and energetic than you are right now.
  3. Eliminate Well-Meaning, Loveable Energy Drainers: I am about to give you a De-Funk mantra: Protect yourself. Protect yourself and then protect yourself some more. The reality is that while in the job funk, you are emotionally vulnerable. This means that for the immediate future you need to ruthlessly eliminate and/or reduce contact with those loving, caring and well-meaning people in your world—friends, colleagues, family members—who want the best for you, are worried about your “situation” but who, like clockwork, invariably give unsolicited advice that makes you feel worse about yourself, your job search efforts and your career. These are the well-intentioned people who always say and ask the wrong thing about the most sensitive area in your life. Do you have any people like that in your world? Yep. Thought so. Me too. To them and you, I say: BOUNDARIES. This is a time for you to create and maintain boundaries.Reducing contact with these people is imperative to protecting you from sinking deeper into the funk. You can always reconnect with them when you are stronger, more confident and less vulnerable.
  4. Structure Your Day & Get Moving: Some experts say that finding a job is a 40-hour a week “job.” I do not agree. I don’t know about you, but I can’t do the same project, task or activity for more than 3 hours much less for 40 hours a week. I need variety. But I do believe that your work week should be scheduled and that the job search game plan, i.e. your resume revisions, networking, and connecting with contacts etc. should be structured and scheduled at the same time every day.I also believe that exercise of some sort that gets you out of your home and into the world also needs to be structured into your “job search” day. It will help improve your mood, get you seeing other people and feeling that you accomplished something at the end of the day.
  5. Be Selfish by Giving to Others: My final tip sounds counterintuitive but it actually makes sense. Start paying it forward. I’m not being preachy…I am being practical. When you give you feel better. Full stop. Your situation may be difficult, hard and frustrating but there are people in more dire and difficult circumstances than you or me. Find a way to volunteer your time to a cause you believe in, or to a hospital, children’s cause, food pantry, soup kitchen or home for the aged and watch your funk lift! The most selfish thing you can do to get out of your funk is to give to others.Giving activates our feelings of gratitude for what we have and reminds us that everything in life changes. Giving to others will make your spirits soar, it is good for the soul and you will gain perspective about your current situation. All good things.

Most importantly, there is a difference between job funk and full blown clinical anxiety and depression. If you believe your circumstances may be more serious than a “funk” then there is professional help for attorneys through the NYSBA and City Bar of NY to help address issues related to job loss that are more serious. And I would encourage you to capitalize on these resources to help move you forward.

And finally….I leave you with this quote about facing the challenges of uncertainty in the face of unwanted change, which I often find comforting. Peace.

“Life is a series of natural and spontaneous changes. Don’t resist them; that only creates sorrow. Let reality be reality. Let things flow naturally forward in whatever way they like.” – Lao Tzu

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Crying Over Spilled Milk: What Companies Can Learn from the Paula Deen Disaster

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Paula Deen may be the most recent celebrity to ruin the brand she built, but she is certainly not the first. Consider Martha Stewart, Tiger Woods, and Lance Armstrong. At one point, all had an empire built around their name and reputation. And, just like that, all were vehemently vilified by the press and public when an aspect of their personal lives became front-page news, resulting in the swift destruction of their businesses.

PR disasters can happen faster than a boiling pot can run over, and as Paula Deen is learning, it is hard to contain the mess once it has been unleashed. Even if companies do not have a national celebrity as the face of their business, there is a lot they can learn from the Calorie Queen’s downfall.

Separate the brand from the CEO (or other high-powered figure)

We are all human. What happened to Paula Deen can happen to any business owner.  People make inappropriate comments, go to prison, sleep around, and take steroids (see above-named individuals). When your face is more than just who you are, though, you have to tread lightly in the public eye.  When your face is your brand, negative publicity affects business.

Food Network, Smithfield Foods, Wal-Mart, Novo Nordisk, and Home Depot did not drop Paula Deen because her products were not up-to-par. They dropped Paula Deen because her public image tarnished her brand.

A company should not rest on one person’s reputation, but should be built around principles, a mission, or a niche. That way, when the higher-ups make a mistake, the company can continue. With that being said, management and boards should be concerned with how the highly visible, well-known figures in their companies are behaving, whether they are on national TV or at a local charity gala. Employment agreements should always include expectations regarding behavior and how one represents the company. Extensive background checks should occur for any employee who could potentially taint the brand.

Act fast, but fully assess the situation

In the age of social media, an incident can lead to pandemonium in no time. Allegations can spread quickly and extensively. Whether, when, and why Deen may have uttered an offensive racial slur is of no matter because Facebook and Twitter reported that she did; that was enough for public conviction. If gossip is spreading about your business, do not be afraid to address it head-on through social media or a press release. But do not fall victim to knee-jerk reactions. Take time to investigate, come up with a game plan, and take necessary action before addressing the publicity. If the incident is so bad that your company’s future is on the line, then hire a PR team to step in.

Thank employees, customers and clients for loyalty

There are a lot of angry fans out there who think Paula Deen was thrown under the milk truck. In the midst of almost every PR crisis, there will be supporters. These people will stand by the company when others are jumping ship. Make your gratitude to them known, whether it is in the form of a bonus, sincere message on your company Facebook page, or a customer appreciation day. Find some way to turn the situation into a positive one.

We have likely not heard the last of Paula Deen. Her brand, though in the trenches now, may pull through. And there is always a scorned celebrity book deal to be made. Smaller companies may not recover so easily from PR blows. Business owners should always be monitoring their image and employees to minimize risks. HR departments should be pro-active. Expectations should be communicated. Professionals should be consulted if needed.

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A Bad Smoke Break: Stringent Documentation of Work Rules Defends Against Unemployment Claims

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A recent Missouri case demonstrates the importance of documentation when defending against unwarranted unemployment claims. The case also underlines the need for the reforms passed by the Missouri General Assembly and pending signature by Gov. Jay Nixon.

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Facts

James Sullivan worked as a part-time cook for nearly a year and a half at Landry’s Seafood House. One day, he disappeared during dinner service and was found 20 minutes later smoking and talking on his cell phone in the parking lot. He was fired and filed a claim for unemployment benefits. In Missouri, when employees are terminated for work-related misconduct, they can be disqualified from receiving unemployment benefits. However, a deputy at the Missouri Division of Employment Security initially determined that Sullivan was eligible for benefits. The restaurant appealed that determination to the Division Appeals Tribunal.

Appeals Tribunal Finds Willful Misconduct

During the hearing, which Sullivan failed to attend, Landry’s Seafood House offered the testimony of a senior kitchen manager. The manager said the restaurant had policies prohibiting employees from smoking at work or leaving their work area without a supervisor’s permission. Landry’s posted signs on its doors to remind employees of the rule and had discussed the policy with employees at shift meetings. Further, Landry’s provided employees with a copy of its policies. Sullivan had signed an acknowledgment of receipt when hired. Sullivan had been counseled for violating the rules in the past and had complied with the policies on several occasions by asking for permission to leave his workstation and clocking out before going outside to smoke a cigarette.

After the hearing, the Appeals Tribunal reversed the determination and found in favor of Landry’s. Sullivan was to be disqualified from receiving unemployment benefits because he was discharged for work-related misconduct. Sullivan appealed.

Court of Appeals Sides with the Employer

The Missouri Court of Appeals upheld the decision in Landry’s favor, finding there was substantial evidence to support it. The court noted that Sullivan was aware of the rules, had signed a written statement acknowledging receipt of the policies, and had been counseled on the rules. The supervisor’s testimony at the hearing established these facts and constituted substantial evidence that Landry’s terminated Sullivan for work-related misconduct. The court explained that Landry’s rule on breaks was also reasonable because a restaurant’s business depends on employees preparing food for its customers in a timely manner. Landry’s rule against smoking on the clock was reasonable because an employer has a right to expect employees to be engaged in meaningful work while being paid.

Bottom Line

At the time of this case, Missouri law defined misconduct as a “wanton and willful” act in order to disqualify a terminated employee from receiving unemployment benefits in Missouri. But as the first decision made by the deputy at the Missouri Division of Employment Security shows, that definition can lead to inconsistent rulings. Although the Missouri Court of Appeals ruled in favor of the employer, it was a time-consuming and expensive undertaking to work through the appeals process to secure a decision that would seem obvious to most people.

During the 2013 Legislative Session, the Missouri Chamber championed legislation to change the definition of misconduct to provide more consistency in unemployment compensation cases. Sponsored by Rep. Will Kraus, a Republican from Lee’s Summit, SB 28 is currently pending signature by Gov. Jay Nixon. House Bill 611 contains similar language and also awaits signature. Proof that you properly communicated your work rules to employees and required them to acknowledge receipt of the rules is key when seeking to establish that an employee’s violation of the rules was intentional. Landry’s actions in this case protected the restaurant from having to pay unemployment benefits to a former employee who violated its well-publicized policies.

Published in the July 2013 issue of Missouri Business, the Magazine of the Missouri Chamber of Commerce and Industry

2013 Family and Medical Leave Act (FMLA) Amendments: Have you Complied?

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In February 2013, the U.S. DOL published the Final Rule implementing statutory changes to the Family and Medical Leave Act of 1993 (FMLA).  The final rule expanded the military family leave provisions, among other changes.  The following chart was adapted from the DOL’s Wage and Hour Division website and shows a side-by-side comparison of the salient provisions of the current regulations:

Qualifying Exigency Leave (§ 825.126)
2008 Regulations 2013 Regulations
An eligible employee may take FMLA leave for qualifying exigencies arising out of the fact that the employee’s spouse, son, daughter or parent (the covered military member) is on active duty or has been notified of an impending call or order to   active duty in support of a contingency operation.

Eligible employees may take qualifying exigency leave for any of the
following reasons:

(1) short notice deployment; (2) military events and related activities; (3) childcare and school activities; (4) financial and legal arrangements; (5) counseling; (6) rest and recuperation; (7) post-deployment activities; and (8) additional activities.

Employees who request qualifying exigency leave to spend time with a military member on Rest and Recuperation leave may take up to five days of leave.

 “Covered military   member” is now “military member” and includes both members of the National Guard and Reserves and the Regular Armed Forces.

“Active duty” is now “covered active duty” and requires deployment to a foreign country.

A new qualifying exigency leave category for parental care leave is added.  Eligible employees may take leave to care for a military member’s parent who   is incapable of self-care when the care is necessitated by the member’s covered active duty. Such care may include arranging for alternative care, providing care on an immediate need basis, admitting or transferring the parent to a care facility, or attending meetings with staff at a care facility.

The amount of time an eligible employee may take for Rest and Recuperation qualifying exigency leave is expanded to a maximum of 15 calendar days.
 

Military Caregiver Leave (§ 825.127)
2008 Regulations 2013 Regulations
An eligible employee who is the spouse, son, daughter, parent, or next of kin of a covered servicemember (a current servicemember) of the Armed Forces, including National Guard and Reserve members, with a serious injury or illness incurred in the line of duty on active duty for which the servicemember is undergoing medical treatment, recuperation, or therapy, is otherwise in outpatient   status, or is otherwise on the temporary disability retired list, may take up to 26 work weeks of FMLA leave to care for the servicemember in a single 12-month period. The definition of covered servicemember is expanded to include covered veterans who are undergoing medical treatment, recuperation, or therapy for a serious injury or illness.

A covered veteran is an individual who was discharged or released under conditions other than dishonorable at any time during the five-year period prior to the first date the eligible employee takes FMLA leave to care for the covered veteran.

The period between enactment of the FY 2010 NDAA on October 28, 2009 and the effective date of the 2013 Final Rule is excluded in the determination of the five-year period for covered veteran status.
 

Serious Injury or Illness for a Current Servicemember (§ 825.127)
2008 Regulations 2013 Regulations
A serious injury or illness means an injury or illness incurred by a covered servicemember in the line of duty on active duty that may render the servicemember medically unfit to perform the duties of his or her office, grade, rank, or rating. The definition of a serious injury or illness for a current servicemember is expanded to included injuries or illnesses that existed before the beginning of the member’s active duty and were aggravated by service in the line of duty on active duty in the Armed Forces.
 

Serious Injury or Illness for a Covered Veteran (§ 825.127)
2008 Regulations 2013 Regulations
Not applicable. A serious injury or illness for a covered veteran means an injury or illness that was incurred or aggravated by the member in the line of duty on active duty in the Armed   Forces and manifested itself before or after the member became a veteran, and is:

(1) A continuation of a serious injury or illness that was incurred or aggravated when the covered veteran was a member of the Armed Forces and rendered the servicemember unable to perform the duties of the   servicemember’s office, grade, rank, or rating; OR

(2) A physical or mental condition for which the covered veteran has received a VA Service Related Disability Rating (VASRD) of 50 percent or greater and such VASRD rating is based, in whole or in part, on the condition precipitating the need for caregiver leave; OR

(3) A physical or mental condition that substantially impairs the veteran’s ability to secure or follow a substantially painful occupation by reason of a disability or disabilities related to military service or would do so absent treatment; OR

(4) An injury, including a psychological injury, on the basis of which the covered veteran has been enrolled in the Department of Veterans Affairs Program of Comprehensive Assistance for Family Caregivers.
 

Appendices
2008 Regulations 2013 Regulations
The FMLA optional-use forms and Notice to Employees of Rights Under the FMLA (poster) are provided in the appendices to the regulations. The FMLA optional-use forms and poster are removed from the regulations and no longer available in the appendices. They are now available on the Wage and Hour Division website, www.dol.gov/whd, as well as at local Wage and Hour district offices.

 

If you are a covered employer under FMLA, have you done the following?

Displayed the new DOL FMLA Notice Poster, electronically or in hard copy?

  • Updated your FMLA policy, which must be in your
    employee handbook or distributed to each employee?
  • Started using the new FMLA forms, such as the
    Notice of Eligibility, Designation Notice, and various Certification forms?
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