Trade Secret Misappropriation Defendant Dodges Sanctions after Wiping Computer

Trade Secret MisappropriationA former employee accused of stealing company trade secrets and confidential information dodged a bullet in the form of sanctions. Specifically, on January 30, 2017, a Georgia District Court held that mass deletion of company documents and multiple uses of computer wipe programs on a former employee’s personal devices AFTER a preservation notice was sent to the employee did not rise to the level of sanctionable conduct (HCC Ins. Holdings, Inc. v. Flowers 1/30/17 ).

HCC Insurance Holdings Inc. sued its former employees for misappropriation of trade secrets. HCC presented evidence that before one of those individuals resigned, Valda Flowers, she moved over 8,000 e-mails from her company e-mail account to various drives. She also deleted hundreds of documents from her work computer.

Before filing the suit, HCC sent Flowers a preservation notice. The notice directed her to retain all electronic evidence, including storage devices. After receiving the preservation notice, Flowers ran a computer wiping program on her personal laptop. HCC moved for an adverse inference sanction, arguing Flowers destroyed data on her personal laptop by using computer applications that made it impossible to determine exactly what HCC information Flowers misappropriated. On this point, a neutral forensic examiner was unable to locate any HCC confidential information or trade secrets on Flowers’ devices. HCC further contended that Flowers’ husband, an IT professional with 35 years of experience, helped her misappropriate HCC’s trade secrets and that he “could have utilized several methods to transfer HCC’s trade secrets to [Flowers’] personal devices without leaving any evidence on her HCC computer.”

Duty to Preserve Triggered

The court found that Flowers was under a duty to preserve evidence on her laptop when she received the preservation notice. As such, the court concluded that her conduct was “troubling” and in breach of that duty. Inexplicably, however, the court found sanctions weren’t warranted. It reasoned:

HCC does not provide any evidence to show that Flowers or her husband actually transferred any data from HCC Life to her personal devices or cloud storage media she controlled. HCC argues that Mr. Flowers ‘could have utilized several methods to transfer HCC’s trade secrets to [Flowers’] personal devices … But HCC does not present any evidence that Mr. Flowers in fact did so. HCC thus fails to show that any of its data was resident on any of Flowers’ or Mr. Flowers’ personal devices or was otherwise in their control.

In reaching this decision, the Court cited Federal Rule of 37(e). This rule governs how and when sanctions may be issued for the loss or destruction of electronically-stored information. But the court did not go through a step-by-step analysis under the Rule.

Take-Aways for Employers and Employees

Having been involved with numerous trade secret misappropriation lawsuits and spoliation issues involving computer evidence, this decision left me scratching my head. Simply, put, it the facts and circumstances involved in this case will more often than not give rise to sanctions. With that in mind, here are a few points for employers and individuals to consider to maximize the chance of obtaining sanctions in trade secret violations or to avoid or minimize sanctions being awarded:

For employers, consider:

  1. First, if there is any indication or concern that a former employee has misappropriated trade secrets or is otherwise in breach of a non-compete restriction, it is critical to investigate and it is equally important to preserve information investigated and maintain the chain-of-custody of any computers or similar devices investigated. 
  2. Second, sending a preservation notice is a great way to trigger a party’s obligation to preserve information that may relate to a lawsuit. This was a key point I made at a recent presentation about digital evidence.
  3. Third, sending a preservation notice also means your preservation obligations have been triggered. Therefore, make sure you’ve taken steps to preserve information and evidence that may relate to the claims.

Here are important considerations for employees:

  1. First, assume that access to or transfer of any email, file, database, or other company information will leave a “digital fingerprint.” And that fingerprint will persuade the court to award injunctive relief, establish liability, or to later award sanctions.     
  2. Second, one explanation Flower offered for the computer transfer activity and wiping was her husband simply transferred and wiped her personal files, e.g., iTunes and photographs. While this may be true, having personal items on a company provided laptop or device will often violate an employer’s policies. Also, early in a lawsuit, a judge may only be presented evidence of mass file transfer/deletion activity. This means the judge may not have the benefit of knowing whether the files at issue are business or personal. Even so, the transfer activity may often be enough to persuade a judge to issue injunctive relief until the content or file types are analyzed. 

For more information about investigating trade secret misappropriation issues or defending against such accusations, contact attorney Jason Shinn. He has been practicing law since 2001. Mr. Shinn has litigated trade secret misappropriation matters, Computer Fraud and Abuse Act, and noncompete disputes in federal and Michigan courts. 

Jackson Enacts Ordinance Prohibiting Sexual Orientation Discrimination In Employment

LGBTQ DiscriminationOn February 8, 2017, the City Council for Jackson, Michigan approved a non-discrimination ordinance that prohibits discrimination based on sexual orientation and gender identity in employment, housing and public accommodations. The ordinance passed 5-2 and after extensive and heated public debate.

A full copy of the ordinance is available here. Except for exempted employers, e.g., religious organizations, the ordinance covers any employer that employs one or more persons.

Under the ordinance, the City may only investigate allegations of sexual orientation or gender identity discrimination. If an individual’s complaint would be covered by the Michigan Department of Civil Rights, or the Equal Employment Opportunity Commission, then the complaint must be filed with that agency and Jackson will not accept the complaint. Complaints involving discrimination based on religion, race, color, national origin, age, sex, height, weight, familial status, or marital status must be filed with the Michigan Department of Civil Rights or EEOC.

Here are additional points that employers and individuals should be aware of:

  • Except for exempted companies, e.g., religious organizations, the ordinance covers any employer that employs one or more persons. It also extends to employment agencies.
  • Also, there is no private right of action. This means individuals cannot sue for violating the ordinance. If there is a violation, however, a civil infraction will be issued with a fine of up to $500 per each day of the violation.
  • All complaints must be filed within 30 days of an incident to the city’s Human Relations Commission.

Unfortunately, the State of Michigan has failed to amend its main civil rights statute, the Elliot-Larsen Civil Rights Act, to provide LGBTQ individuals the same protections afforded to other individuals. But Jackson, like many Michigan communities, have taken the initiative to enact to prohibit discrimination based on sexual orientation and gender identity.

In this regard, Mr. Jim Murray, the president of AT&T of Michigan, and Patti Poppe, the president and CEO of Consumers Energy, explained why such anti-discrimination protections are important for businesses to remain competitive in attracting talented and qualified employees. Here is an excerpt:

To stay competitive in today’s economy and attract quality talent, we need to be zealous in our efforts to make our communities more welcoming to all. In the absence of action at the state level, 41 Michigan communities have passed similar measures. Lesbian, gay, bisexual and transgender individuals deserve to know their company stands with them; no person should live in fear of losing their job simply because of who they are … discrimination is discrimination and people are people. We don’t need them seeking opportunities elsewhere because we couldn’t make room for them in our Michigan communities.

Contact attorney Jason Shinn for more information about federal and Michigan employment laws, including anti-discrimination protections for sexual orientation and gender identity.

Hiring the No. 2 Guy on al-Qaeda’s Hit List: An Uber-Example of Limitations in Employee Background Checks

Prescreening job applicantsIf you recently used Uber in Florida, did you check to see if your driver was Terry Jones? If Mr. Jones’ name or his significance is not immediately apparent to you, don’t worry, Uber apparently had no clue either.

The Washington Post reported (by Faiz Siddiqui) that Uber hired Terry Jones. He is the (in)famous preacher who made worldwide headlines in 2010 when he organized “International Burn a Koran Day.” The Washington Post noted that Mr. Jones’ grandstanding “sparked death threats and global protests and earned him a No. 2 spot on an al-Qaeda hit list.” Mr. Jones’ popularity with al-Qaeda probably makes for an interesting discussion for Uber passengers. And the subject likely comes up because Mr. Jones admits he strikes up conversations about his anti-Muslim message with passengers (which must be infinitely less interesting than conversations with black-haired flamenco dancers).

One other fun fact about riding with Mr. Jones, he carries a gun, which violates Uber’s  firearms prohibition policy. Uber also has a nondiscrimination policy, among other things, prohibit discrimination against riders or drivers based on religion and national origin. Uber suspended Jones on February 4, 2017, to investigate his account and activity on the platform. It also emphasized that it conducts background checks on its driver applicants, which Mr. Jones passed. The background screenings reportedly include local, state and federal databases and motor vehicle records and go back seven years. Jones, however, was not flagged by Uber because his background check showed only two arrests that were dismissed.

Uber also emphasized that it conducts background checks on its drivers, which Mr. Jones passed. Jones, however, was not flagged in Uber’s background check because his background showed only two arrests that were dismissed.

Even so, the Washington Post noted that Mr. Jones was admittedly surprised to be approved by Uber to be a driver:

Even the Koran-burning preacher himself was surprised when he was approved to drive for Uber last month. ‘I don’t know how much research they do’ … But Uber, he said, didn’t follow up about his past …

Uber’s hiring of Terry Jones present a buffet of employment and HR discussion points, but here are two for consideration:

Guns, Rights, and Employment Restrictions

Many states, including Michigan, expressly allow employers to restrict employees from carrying a concealed pistol in the course of his or her employment.  And these restrictions – at least in Michigan – will not infringe upon an employee’s Second Amendment Rights. That was an issue decided where a drugstore employee carried a concealed weapon while at work. He later fired his gun in response to an armed robbery. See Hoven v. Walgreen Co. (2014).  The drugstore then fired the employee for violating its workplace policy. The former employee later sued, claiming Walgreen fired him in violation of public policy for exercising his right to self-defense. The district court decided against the employee, and that decision was upheld on appeal. The Court reasoned:

… though the Second Amendment of the United States Constitution and Article I, § 6 of the Michigan Constitution limit some state interference with individuals’ right to engage in self-defense and bear arms, they do not prevent interference with these rights by private actors. Therefore, the United States Constitution and the Michigan Constitution are not valid bases for Hoven’s claim.

Background Checks – A Start, but Only a Start

This is not the first time Uber’s screening policies for its drivers came under scrutiny. On February 20, 2016, in Kalamazoo, Michigan, an Uber driver shot six passengers while driving for Uber. Similar to the Jones situation, Uber argued there was nothing more it could have done to keep the shooter from working as an Uber driver because he had no criminal record.

And largely, Uber is correct; Criminal background checks are a single snapshot in time. And such snapshots are often further limited. For example, in Michigan employers generally can’t request information about employees’ and applicants’ misdemeanor arrests, detentions or dispositions that didn’t result in convictions. That appears to be what would have happened with Mr. Jones and his arrests that were dismissed.

All too often, companies rely only on “a one-and-done” background check. That is a start, but often only a start. Accordingly, we routinely discuss with our business clients the importance of having a robust and comprehensive employment law compliance program. Such a program must adequately screen job applicants in a way that complies with the patchwork of state and federal law while meeting your company’s particular needs. Does that add costs; certainly. But how much of a hit to reputation and revenue do you think Uber took and will take because of the above circumstances? Can your business afford the same?

For more information about complying with federal or Michigan employment laws or your rights under those laws, contact attorney Jason Shinn. Since 2001, he has worked with companies and individuals to address employment law issues, in addition to focusing on noncompete law and litigation.

What President Trump’s Supreme Court Nominee Means for Employment Law Cases

Trump Supreme Court pickOn January 31, President Trump announced that his U.S. Supreme Court nominee is Neil Gorsuch. Judge Gorsuch sits on the U.S. Court of Appeals for the Tenth Circuit. If confirmed, he would fill Justice Antonin Scalia’s seat.

Judge Gorsuch authored a dissenting opinion that exemplifies how he will likely affect employment law decisions if he is confirmed to the U.S. Supreme Court. The dissent is from the case Transam Trucking, Inc. v. Admin. Review Bd. (10th Cir., 2016).

The plaintiff, Alphonse Maddin, was employed as a truck driver by TransAm Trucking (“TransAm”). In January 2009, Maddin was transporting cargo when the brakes on his trailer froze because of subzero temperatures. Judge Gorsuch explained that Maddin called TransAm for help and “someone there gave him two options. He could drag the trailer carrying the company’s goods to its destination (an illegal and maybe sarcastically offered option). Or he could sit and wait for help to arrive (a legal if unpleasant option).” Madden, however, chose to unhook the trailer and drive his truck to a gas station. In response, TransAm fired him for disobeying orders and abandoning its trailer and goods.

Both an administrative law judge (“ALJ”) and Department of Labor (“DOL”) Administrative Review Board concluded Maddin was terminated in violation of the whistleblower provisions of the Surface Transportation Assistance Act (“STAA”). He was ordered reinstated with backpay. TransAm filed a Petition for Review of the Review Board’s Final Decision and Order, which Judge Gorsuch’s colleagues denied.

In dissenting, Judge Gorsuch clarifies that he would have reversed and found for the employer, TransAm. His dissent also offers these insights into what a Justice Gorsuch will bring to the Supreme Court.

Judge Gorsuch is a textual literalist 

First, much like Justice Scalia, Judge Gorsuch is likely to be a textual literalist with statutory enforcement. Consider for example this dissent:

The Department of Labor says that TransAm violated federal law … But that statute only forbids employers from firing employees who “refuse[] to operate a vehicle” out of safety concerns … The trucker in this case wasn’t fired for refusing to operate his vehicle. Indeed, his employer gave him the very option the statute says it must: once he voiced safety concerns, TransAm expressly — and by everyone’s admission — permitted him to sit and remain where he was and wait for help. The trucker was fired only after he declined the statutorily protected option (refuse to operate) and chose instead to operate his vehicle in a manner he thought wise but his employer did not. And there’s simply no law anyone has pointed us to giving employees the right to operate their vehicles in ways their employers forbid. Maybe the Department would like such a law, maybe someday Congress will adorn our federal statute books with such a law. But it isn’t there yet. And it isn’t our job to write one — or to allow the Department to write one in Congress’s place.

Judge Gorsuch’s colleagues believed the subject statute, if not expressly, was intended to and afforded the protections received by the trucker, even if not expressly so noted in the statute.

Not Inclined to Second-Guess an Employer’s Business Judgment.

Second, Judge Gorsuch is likely to give substantial deference to an employer’s business judgment. Here is what he had to say on this issue in the TransAm case:

It might be fair to ask whether TransAm’s decision was a wise or kind one. But it’s not our job to answer questions like that. Our only task is to decide whether the decision was an illegal one.

Judge Gorsuch reached a similar conclusion in a 2012 case involving a religious discrimination claim brought by a former employee who believed his employer discriminated against him because he was a Muslim. In the case, Kaiser v. Colorado Dept. of Corrections (504 Fed. App’x 739), Judge Gorsuch upheld the dismissal. In doing so, he wrote, “it is not our function under the federal discrimination laws to tell employers how best to go about their jobs … maybe others would have gone about the job differently than [the terminating supervisor] did,” but that was not for the court to decide.”

Not a Fan of Giving Judicial Deference to Administrative Agencies

Third and perhaps the area where a Justice Gorsuch will have the most impact on employment law decisions relates to how much deference will be afforded to agencies responsible for enforcing such laws.

This is because Judge Gorsuch is a vocal critic of giving undue judicial deference to administrative agencies. This deference is often called Chevron deference from the case Chevron Inc v. Natural Resources Defense Council, Inc. (1984). Under the Chevron principle, courts defer to an agency’s interpretations if a law’s language is ambiguous, the agency has Congressional authority to issue regulations interpreting the law and the interpretation is reasonable. Chevron deference is the highest level of deference a court can give.

However, Judge Gorsuch considers the Chevron doctrine as putting too much judicial and legislative authority in executive agencies. He succinctly explained his criticism in an August 2016 concurring opinion in Gutierrez-Brizuela v. Lynch (10th Cir., 2016), a non-employment immigration case against the federal government. According to Judge Gorsuch, the Chevron standard,

permits executive bureaucracies to swallow huge amounts of core judicial and legislative power and concentrate federal power in a way that seems more than a little difficult to square with the Constitution of the framers’ design. Maybe the time has come to face the behemoth.

This animosity towards giving agencies like the Equal Employment Opportunity Commission (EEOC), the Department of Labor, or the National Labor Relations Board too much deference will likely benefit employers who must navigate an increasingly complex web of regulations and interpretations.

Gorsuch’s views on deference could be critical to the outcome of cases involving the EEOC interpretations, NLRB, and Labor Department rulemaking that are presently making their way through the circuit courts right now. Of particular concern, Of particular concern, however, is what deference would a Justice Gorsuch give to the EEOC’s interpretation that Title VII’s sex bias prohibition includes sexual orientation discrimination. The EEOC has claimed that it does and this issue is pending before multiple federal appeals courts.

The Senate is expected to hold confirmation hearings for Judge Gorsuch in late March or early April. Thereafter and barring no filibuster or other procedural delays, the full Senate would likely immediately vote on whether to confirm Judge Gorsuch.

What Repealing Obama Care Means for Employees Who are also Nursing Mothers

Maternity leave for working mothersA signature campaign promise for Donald Trump was to repeal the Affordable Care Act (ACA), commonly called Obama Care, and replace it with … well, something to be determined. With President Trump now in office, the ACA is officially on life support with Republicans ready to pull the plug.

However, the ACA is a highly complex and voluminous statute. It also touched upon many aspects of the employment relationship outside of health insurance.

Nursing Mothers and the ACA

One such area has to do with working mothers who are nursing. The ACA sought to promote the Surgeon General’s Call to Breastfeeding, which detailed numerous health benefits for both babies and their mothers. These benefits included:

  • Breastfed babies have a decreased incidence of SIDS;
  • They are less likely to develop asthma and obesity;
  • Mothers who breastfeed are less likely to develop breast and ovarian cancers; and
  • Breastfeeding also saves an average family between $1200-$1500 in the first year, in addition to significant savings in healthcare.

One impediment to breastfeeding found by the Surgeon General was a lack of accommodation for breastfeeding or accommodation for expressing milk at the workplace. As Forbes notes (See An Obamacare Repeal Could Strip Women of Workplace Breastfeeding Protections, by Claire Zillman this is a “uniquely” American problem:

The problem that the breastfeeding provision sought to solve is uniquely American. Since the United States is the only industrialized nation in the world without paid maternity leave, many new mothers are forced to return to work shortly after giving birth. In fact, 59% of first-time mothers return to paid work in the first three months postpartum. At the same time, the American Academy of Pediatrics urges them to exclusively breastfeed their newborns for six months, since breastfeeding is shown to benefit the health of both babies and new moms. That leaves many women with an agonizing choice: Stop breastfeeding, take unpaid time off work, or figure out a way to nurse or pump milk on-the-job.

With this in mind, the ACA amended the Fair Labor Standards Act to require guarantees to working mothers to have a private area for to pump. This private area could not be a bathroom and had to have access to a sink any refrigerator. Small businesses are exempted if the requirements would “impose an undue hardship by causing the employer significant difficulty or expense.”

Repealing the ACA and What it Means for Nursing Mothers

If the ACA’s breastfeeding provision does not survive, then it falls to states to protect the rights of breastfeeding women in the workplace. Presently 28 states plus Washington, D.C., and Puerto Rico had laws similar to the Obamacare provision according to the National Conference of State Legislatures.

However, Trump and his fellow Republicans’ motivation to repeal the ACA have routinely focused on other aspects of the ACA (e.g., insurance mandates, subsidies, and Medicaid expansion). But that doesn’t mean under President Trump the breastfeeding provision would likely be enforced less aggressively.

For example, President Trump signed an executive order (Minimizing the Economic Burden of the Patient Protection and Affordable Care Act Pending Repeal) directing federal agencies to “exercise all authority and discretion available to them to waive, defer, grant exemptions from, or delay the implementation of any provision or requirement” in the ACA that places a cost or burden on businesses and individuals. This could give the agency that enforces the provision, the DOL Wage and Hour Division, discretion to grant more hardship waivers.

In contrast, businesses may find that with or without the ACA provision it makes sense to continue to maintain a workplace friendly to nursing mothers regarding public relations, recruiting, and reduction in overall lost employee productivity due to the health benefits cited by the Surgeon General’s report  referenced above.

EEOC Has a New Sheriff – Trump Appoints Victoria Lipnic as Acting EEOC Chair

Change in leadershipPresident Trump appointed Commissioner Victoria A. Lipnic as acting Chair of the EEOC. Ms. Lipnic began serving as an EEOC Commissioner in 2010 after being nominated to serve by President Barack Obama. Mr. Obama again nominated her to serve a second term ending on July 1, 2020. As explained below, this is good news for employers. But it is probably a “best case scenario” for employees too in light of Trump’s other appointments.

Trump has been criticized for the lack of relevant experience in his cabinet appointments (did you catch the testimony from his nominee for Secretary of Education, Betsy DeVos – brutal). But the same cannot be said about Ms. Lipnic.

Ms. Lipnic’s Prior Employment Law Experience

Ms. Lipnic brings a wealth of relevant employment law experience. She has worked at the Department of Labor, serving as the Workforce Policy Counsel to the Republican Majority members of the Committee on Education and the Workforce in the U.S. House of Representatives, and she was an attorney for labor and employment matters for the U.S. Postal Service.

Highlights of Ms. Lipnic’s Prior EEOC Work 

While Ms. Lipnic’s appointment generally bodes well for employers, her prior work suggests she will not be dogmatic when it comes to Republican/employer-friendly policies. Here are a few notable highlights involving Ms. Lipnic:The

  • The EEOC’ held in Baldwin v. Foxx decision that discrimination based on sexual orientation is necessarily a form of sex discrimination and, therefore, violates Title VII. This EEOC decision was significant on two fronts: It marked the first time that the EEOC issued a ruling stating that claims for sexual orientation discrimination are covered by Title VII as a form of sex discrimination and Ms. Lipnic dissented in the decision. Since the time of the EEOC’s decision, the scope of Title VII’s sex discrimination provision, including its application to gay, lesbian, and transgender employees, continues to be litigated in federal courts. And such courts have shown a willingness to not follow the EEOC’s lead. See Hively v. Ivy Tech Cmty. Coll. (7th Cir., 2016) 830 F.3d 698 (The U.S. Court of Appeals for the Seventh Circuit decided against the EEOC’s Foxx decision and held Title VII did not protect against discrimination based on sexual orientation).
  • Ms. Lipnic departed from her other Republican member in support the EEOC’s 2012 guidance on criminal background checks. This guidance recommended against blanket exclusions of convicted individuals in favor of individualized assessments of whether an employer’s criminal conduct exclusion is job-related and consistent with business necessity.
  • In 2014, Ms. Lipnic also dissented in the EEOC’s pregnancy guidance. Notably, this guidance was ultimately rejected by the Supreme Court in Young v. UPS.

Ms. Lipnic replaces Jenny R. Yang, who was named Chair of the U.S. Equal Employment Opportunity Commission by President Barack Obama in September 2014. Ms. Lipnic will also be taking over an agency that saw its longest-serving general counsel, P. David Lopez, step down this past December. Under both Ms. Yang and Mr. Lopez, the EEOC aggressively moved towards protecting gay rights and the agency secured the largest damages award in the EEOC’s history. Such damages arose out of large-scale discrimination against individuals with intellectual disabilities, religious discrimination claims.

Commissioner Lipnic will most certainly steer the EEOC away from the aggressive, employee-friendly initiatives taken by her predecessors. However, unlike other Trump appointees, she is not someone who can be considered “hostile” towards the purpose of the agency she will be responsible for managing or lacking expertise.

For more information about federal and Michigan employment laws, including EEOC claims, continue to read our Employment Law Blog. You can also follow on Twitter its contributing writer employment attorney Jason Shinn.

What the Trump Transition Teaches About Social Media Legal Issues Facing Companies

Social Media and Employment LawCompanies focus on maximizing social media strategies to promote the business. This week’s transition between the Obama and Trump administration highlighted numerous social media issues that employers need to pay close attention to concerning business and employee social media issues.

Social Media Use – Two Presidential Approaches

President Barack Obama was the first President to use the @POTUS Twitter account. He also set aside using his personal Twitter account in favor of using the @POTUS account. In other words, President Obama made a clear distinction for promoting the administration’s message as compared to his personal messages.

In contrast, Mr. Trump stated he would continue to use his personal Twitter account and delegate the responsibility of the @POTUS account to his White House staff (for more information on this transition, click here) (here is a great resource for reviewing Mr. Trump’s statements, including his Twitter posts).

Social Media Recommendations for Employers

Similar to the issues playing out on the Presidential transition stage, businesses must consider how their business and employee social media accounts and promotion should be handled. Here are just a few points to consider:

  • Social Media Ownership: If the responsibility for managing a social media account is delegated to an employee other than the business owner, document this responsibility. The social media policy should specifically identify the names of the responsible employees as the only employees authorized to post on behalf of the company-owned social media platform.
  • Social Media Guidelines: Since company-owned social media accounts are a direct reflection of the company, it is pertinent that each business provides its delegated employees with a list of employer expectations to guide their use of the platform. Topics for consideration include addressing the role the social media site will play for the business, how frequently posts should be made, areas or topics that are “off limits” or require approval, desired content of the posts, and acceptability of sharing/retweeting posts. Also, a separate focus should be on non-company social media guidance. Employee use of social media may interfere with your company’s mission or business interests or the interest of your customers.
  • Employee Social Media Use: Just as posts made by an employee on the company-owned social media account reflect the company, some people may believe that business posts made by employees on their personal accounts reflect the company as well. Consider for example a recent Tweet from (then) President-Elect Trump advertising for L.L. Bean. Trump Ethics TweetThe Washington Post (by Danielle Paquette) reported this Tweet broke long-standing policies against the President from endorsing products and was largely frowned upon by ethics experts. The concern being using the power of the Nation’s highest office to advertise. Similarly, you may not want your company to be associated with a cause or group based on an employee’s social media post. So be specific when addressing your company’s social media expectations on posting business related content on a personal page.
  • Social Media and Noncompete Agreements. Parties may enter into noncompete agreements, which designate certain information is defined to be confidential or trade secret. But such agreements are not dispositive, especially with the proliferation of information available through social media tools such as LinkedIn and Twitter, which have further complicated the status of information as confidential or constituting an employer’s trade secrets.
  • Transitions and Exit Interviews: A business should have a social media transition. Whether an employee leaves the company or takes another position within your company, a game-plan should be in place for transferring social media responsibility. Minimally speaking, this should include addressing the turnover of all access credentials to any company owned/sponsored social media accounts. You’ll also want to update the social media passwords each time responsibility is transferred to a new employee.

Social media has become an inextricable component of the HR and employment law landscape. And as the presidential transition makes evident, having clear social media standards and regulations is critical for efficient use and transition.

For additional information on how best to manage your company’s social media accounts, contact attorney Jason Shinn. Mr. Shinn routinely works with companies and HR professionals to address employment law issues at the intersection of technology and the workplace, including social media law best practices.

Overtime Rules Halted Before December 1 Deadline

TRO, preliminary injunction, temporary restraining orderA Texas federal judge has stopped the U.S. Department of Labor’s new overtime rules from taking effect as scheduled for December 1, 2016. Significantly, the court issued a nationwide injunction. The decision to enjoin the Department’s overtime rules was issued earlier today, and a copy of the Order is available here (Nevada v U.S. Department of Labor – Injunction Order).

The district court judge concluded that the applicable statute (29 U.S.C. § 213(a)(1)) does not grant the Department the authority to use a salary-level test or an automatic updating mechanism under its revised overtime rule.

The Revised Overtime Regulations

The revised rules were scheduled to become effective December 1, 2016. It would have increased the minimum salary level for exempt employees from $455 per week ($23,660 annually) to $921 per week ($47,892 annually). This means that workers who earn an annual salary of less than $47,476.00 would automatically be eligible for overtime pay. The Department’s revised overtime rule also establishes an automatic updating mechanism that adjusts the minimum salary level every three years. The first automatic increase will occur on January 1, 2020.

Background of the Federal Litigation

As we previously noted, in September 2016 two lawsuits were filed in the Texas court challenging the Department’s authority to revise the overtime rules. The revisions would have more than doubled the exempt salary threshold to $47,476 and other changes. Twenty-one states filed one lawsuit, including Michigan. The other was filed by the U.S. Chamber of Commerce and similar business groups.

The cases were later consolidated in October, and the combined plaintiffs moved to issue a preliminary injunction that would halt the new regulations on an expedited basis, which was heard on November 16.

The Order Enjoining the Overtime Regulations

The plaintiffs sought a preliminary injunction to enjoin the Department from implementing its revised rule on December 1, 2016. In granting the injunction, the district court judge issued a lengthy opinion. But the key determinations for employers and employees are:

  1. The Department’s revised rule exceeded its delegated authority to interpret the type of employees exempt from overtime and the considerations to evaluate such employees.
  2. The Department lacked the authority to implement the automatic updating mechanism.
  3. The district court issued a nationwide injunction – not just for the states that sued.

In reaching these conclusions, the court reasoned:

Directly in conflict with Congress’s intent, the Final Rule states that ‘[w]hite collar employees subject to the salary level test earning less than $913 per week will not qualify for the [] exemption, and therefore will be eligible for overtime, irrespective of their job duties and responsibilities.’ With the Final Rule, the Department exceeds its delegated authority and ignores Congress’s intent by raising the minimum salary level such that it supplants the duties test.

In other words, Congress defined the exemption regarding duties, which includes no minimum salary level.

What Does This Mean

The Department estimated 4.2 million workers are ineligible for overtime but would have automatically become eligible under its revised overtime rule with no change to their duties. The Department estimated that the new rule would have boosted wages by $12 billion over the next 10 years.

But this is now all in jeopardy. This is because the injunction gives time for the Trump administration to direct the Department to withdraw the rule altogether. While withdrawing the rule would require time for notice and comment, which takes many months, the injunction may set the stage for this to now happen. And even if the Trump administration did nothing, the court’s opinion would not bode well for the Department in regard to ultimately prevailing in the suit.

Another interesting question is what businesses will do who already revamped their payroll and workforce in anticipation of the rule going into effect on December 1, 2016. Even with the unexpected Trump victory, many businesses continued to prepare for the revised rule. Such preparation included raising workers’ salaries above the new threshold to avoid overtime requirements. Do those companies now go back to their old compensation plans?  That would do wonders for employee retention.

Contact employment attorney Jason Shinn for more information about federal overtime laws and this significant overtime ruling. We will continue to monitor this decision and assess what it means for businesses and employees.

Pitfalls in Contracting with Employee Staffing Companies

Business PitfallsBusiness owners are increasingly considering the use of outside vendors to meet workforce needs. This is especially true for temporary employees or flexible staffing solutions. But companies must carefully review any contractual terms apply to such workforce situations.

Employee Leasing Companies

We recently represented a company involved in a lawsuit against a staffing company called True Blue Inc. True Blue, through its subsidiary Labor Ready, solicited our client’s business to supply temporary employees. A benefit stressed by True Blue/Labor Ready’s local office was their expertise in screening and background investigation of individuals.

After a contract was entered reflecting these negotiations, True Blue provided leased several individuals for temporary staffing. That contract included a provision for criminal background and drug testing checks and something True Blue/Labor Ready described as a 20-point pre-employment screening.

Despite these screening programs, two employees leased to our client were involved in two separate criminal thefts. In one instance video surveillance recorded the True Blue/Labor Ready employee stealing a laptop. During the police investigation, it was discovered that the individuals’ backgrounds had been misrepresented with respect to criminal history and identity; one applicant presented false employment documentation for employment verification purposes, i.e., identity theft that True Blue failed to discover.

True Blue was immediately advised of these issues initially by my client’s president and general manager and then through legal counsel. But True Blue’s response included ignoring the situation, denying it had any obligation to conduct pre-employment screening or background checks, or blaming its client for improperly supervising the employees. True Blue/Labor Ready, however, did find time to continue to bill the client for the subject employees.

After no resolution could be reached, True Blue and its Labor Ready subsidiaries were sued in Oakland County Circuit Court. Incredibly, True Blue/Labor Ready counterclaimed for contractual indemnification. The story that True Blue/Labor Ready manufactured for their counterclaim was that after the parties entered the contract, a document captioned “work ticket” was provided contemporaneously or after the leased employees worked for the plaintiff. This, work ticket, the story goes, included an indemnification provision that insulated True Blue from its negligence, wrongdoing, or other liability arising out of leasing its employees.

This lawsuit was eventually submitted to mediation, where it eventually settled with the plaintiff receiving a cash payment.

Considerations for Using Temporary Staffing Companies

Temporary staffing agencies and more permanent employee leasing firms are increasingly being considered to augment existing staff. But the above example illustrates a few pitfalls that may arise in such relationships. Here are a few takeaways if your business is considering using a temporary staffing company:

  1. Carefully review the contract to make certain it reflects the parties’ agreement. Importantly, the contract should expressly address what is important for your business to be successful. Also, carefully consider how any subsequent terms or conditions buried in a “work ticket” or any other documentation may affect or alter the initial contract. On this point, be especially critical of any indemnification provision that may be found in the “fine print.” If the terms are inconsistent with a prior contract or are unacceptable, immediately document the problem and rejection of those terms.
  2. Employers must comply with a patchwork of laws and regulations concerning prescreening and background checks (See Addressing Legal Issues in the Hiring Process and Your Job Search). And any background investigation of job applicants will have limitations. In that regard, Defendants in the above-referenced lawsuit produced (just days before the mediation) documents showing that some measure of prescreening did take place. Defendants did not discover the identity theft situation and none of the prescreening results were shared with our client.
  3. Consider conducting due diligence about the business and litigation history of a staffing company or other vendor. At the mediation, True Blue’s assistant in-house counsel in addressing the enforceability of the indemnification provision referenced his company’s success at enforcing it in various courts throughout the country. That piece of information sheds potential light on the business practices and how issues are resolved.

For more information about using outside employee staffing companies, and complying with federal and Michigan employment laws, contact attorney Jason Shinn. Mr. Shinn frequently works with companies to address employment law issues involving leased employees and temporary staffing with an eye towards eliminating or minimizing legal risks.

Labor Department Seeks Information From Employers and Employees About FMLA

Survey and opinionOn October 28, 2016, the Department of Labor (DOL) gave notice that it is seeking comments from employers and employees about the Family and Medical Leave Act (FMLA). The notice is available here Federal Register.

The comments will be used to develop and administer two surveys in 2017 and 2018. According to the DOL, these survey results will be used as follows:

… to collect information about the need for and the experience with family and medical leave from employees’ and employers’ respective perspectives. This effort will build on previous information collection efforts, as the new surveys will update and expand on the evidence about FMLA use and leave.

In this regard, the employer survey will focus on employees’ use of leave and employers’ experience managing the FMLA. And the employee survey will address their use of and need for leave and their experiences with FMLA-eligible leave. Comments must be provided to the DOL by Dec. 27, either by email or mail:

Email: ChiefEvaluationOffice@dol.gov; Mail or Courier: Christina Yancey, Chief Evaluation Office, OASP, U.S. Department of Labor, Room S–2312, 200 Constitution Avenue NW., Washington, DC 20210.

For more information about the FMLA or other federal and Michigan employment law, contact attorney Jason Shinn.

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