Company Sued for Rescinding Job Offer Because Prospective Employee Signed Online Petition

Online petition legal issuesEmployers have a new concern with job offers and social media; In what appears to be a first, a federal court of appeals held an employer could be liable for rescinding a job offer because the prospective employee signed an online petition supporting issues under the federal Fair Housing Act (FHA).

Specifically, in Linkletter v. Western & Southern Fin. (3/23/17), the plaintiff, Gayle Linkletter, was offered a position with Western & Southern Financial Group. At the time the offer was made, Western & Southern was engaged in a lengthy real estate dispute with a women’s shelter over its location in the neighborhood. Residents of the Anna Louise Inn women’s shelter had sued Western & Southern in federal court under the FHA.

While the dispute between the shelter and Western & Southern was ongoing, Linkletter signed a petition expressing support for the shelter. The petition was titled, “The Anna Louise Inn has my Support!” It also stated, “I support the mission of the Anna Louise Inn, which has provided safe and affordable housing for women for 102 years in its current location.” As a signor, Linkletter also stated that “[the] Anna Louise Inn should remain where it is and continue its mission of providing safe and affordable housing for single women.” The Inn posted the petition online with the names of the signors, including Linkletter.

Before Linkletter began working, Western & Southern’s Senior Vice President of Human Resources called Linkletter to notify her that Western & Southern had rescinded the employment offer. Linkletter said she was told the rescission due to Linkletter having taken “a position that was contrary to Western & Southern” and Senior VP mentioned Linkletter’s support for the Anna Louise Inn.

Linkletter sued Western & Southern. Her suit argued that Western & Southern violated the FHA as it related to her. On this point, the FHA makes it “unlawful to coerce, intimidate, threaten or interfere with any person” for having “aided or encouraged any other person in the exercise” of the rights granted by the act. Linkletter argued that she was protected by this provision because her would-be employer interfered with her employment because she aided or encouraged women in the exercise of their housing rights under FHA.

The lower court dismissed the case because the petition didn’t “aid or encourage” the women of the inn as contemplated by the law. That decision was reversed on appeal.

Linkletter’s action, signing a petition, is seemingly innocuous. However, the language and timing of the petition demonstrate that it existed to encourage the women to remain in their residence in opposition to the alleged discrimination by Western & Southern … Linkletter signed the petition to “encourage” the women in their dispute with Western & Southern

* * *

the defendants fail to explain why a petition-signing is not encouragement beyond vague assertions that the action lacks “concreteness” or “directness.” The allegations in the complaint show that the action was concrete and important enough to alert Linkletter’s future employer to her public support, and result in her termination. If the encouragement is sufficiently concrete to lead to an individual’s firing, it is sufficiently concrete to state a plausible claim.

Employment Protections Extended to Online Petitions and Activity

The Linkletter decision was issued by the Sixth Circuit Court of Appeals, which covers Michigan. This decision also means that an employee signing a petition, at least under certain circumstances, may be protected activity. While this case involved the FHA, its reasoning would extend to other situations where an employee or job applicant signs an online petition or voices support through Facebook to support co-workers or people attempting to uphold their statutory rights.

For example, Title VII prohibits discrimination on the basis of the employee’s friendship with or advocacy on behalf of a member of a protected class. See Barrett v. Whirlpool Corp., 556 F.3d 502 (6th Cir., 2009) (Title VII extended to Plaintiffs who were not members of the protected class but claimed they were discriminated against because they were friends with and spoke out on behalf of their African-American co-workers).

Also, readers of this blog know that employers have repeatedly faced liability for disciplining employees for Facebook postings that implicate rights under the National Labor Relations Act. See NLRB Once Again Wades Into the Lawfulness of Employer’s Workplace Policies or NLRB Finds Employer’s Workplace Rules Violated Federal Labor Law.

Considering the political environment and how technologically allows anyone to publicly communicate their support or opposition on any issue, employers must carefully evaluate the reasons behind any termination to avoid unintended liability.

For more information about employment and social media law, contact attorney Jason Shinn. He routinely works with clients to address issues at the intersection of technology and the workplace.

State Marijuana Laws can Leave Employees Dazed and Confused about their Rights

Workplace drug testingMany states have decriminalized marijuana, whether generally or when used for medical reasons. But such changes present challenges for companies and their employees when it comes to balancing workplace concerns and employee rights. The latest marijuana issue employers may need to consider is called “microdosing.”

Rebecca Greenfield in her article, “The Case for Eating Weed at Work, ” explains the recent microdosing trend :

With recreational marijuana now legal in eight states and the District of Columbia, users have gravitated to low-dose edibles, such as brownies and mints with THC content of fewer than 5 milligrams—low enough for a manageable high for first-time users …

Microdosing refers to regularly taking small amounts of drugs—generally, hard-to-get and illegal psychoactive ones, such as LSD or psychedelic mushrooms—throughout the day to boost creativity. Taken in such small quantities, the drugs don’t make users trip. Rather, people claim the drugs improve their concentration, problem-solving abilities, creativity, and productivity and reduce their anxiety.

Marijuana Use in the Michigan Workplace

Michigan is one state that has decriminalized marijuana for medical reasons. Specifically, under Michigan’s Michigan Medical Marijuana Act (MCL 333.26421) “a certified user may not be subjected to any “penalty of any manner, or denied any right or privilege, including but not limited to civil penalty or disciplinary action by a business.”

However, employees have not fared well under the statute. Consider for example in Casias v. Wal-Mart Stores, Inc. (2012) the employee was a certified medical marijuana user. He had sinus cancer and an inoperable brain tumor. He later failed a drug test and was fired.

The plaintiff then sued for wrongful discharge. He claimed that his marijuana use was not illegal under Michigan’s Medical Marijuana Act. The Sixth Circuit disagreed. It concluded that Michigan’s medical marijuana statute provided only a “defense to criminal charges or other adverse state action,” and that applying it to claims against private employers would be unduly broad.

Disciplining Employees for Marijuana Use

Legally, employers will continue to have significant leeway for punishing marijuana use in the workplace. Even if its use is permitted under state law, marijuana remains an illegal Schedule I drug under the federal Controlled Substances Act.  And employees using the drug are not currently afforded protections under the Americans with Disabilities Act.

This means whether your state law permits recreational or medicinal marijuana use, you still generally have the right to test your employees for drug use and discipline them if their marijuana use violates your drug-free workplace policy. However, consult with your company’s employment attorney because there are nuances to employment-related drug testing. For instance, recent changes to OSHA’s drug testing and its enactment of an anti-retaliation rule alters the circumstances when drug testing can be conducted. This rule is intended to reemphasize the protections for employees to report injury and illnesses without fear of retaliation.

For instance, recent changes to OSHA’s drug testing and its enactment of an anti-retaliation rule alters the circumstances when drug testing can be conducted. This rule is intended to reemphasize the protections for employees to report injury and illnesses without fear of retaliation.

For more information about complying with federal and Michigan employment laws and your rights under those laws, contact employment attorney Jason Shinn. Since 2001, he’s worked with clients to address employment law matters, and litigating those issues in federal and Michigan courts.

Trade Secret Misappropriation Lawsuit Dismissed – What Your Business Can Learn

Misappropriation company informationTrade secret misappropriation lawsuits continue to be a potent offense for businesses against departing employees seeking to compete wrongfully. But as with any offense, it is critical to pay attention to fundamentals to be successful.

A recent federal district court opinion illustrates this point (link to memorandum and opinion provided below). Specifically, Raben Tire Co., LLC sued two of its former employees, Dennis McFarland and Christopher Bates, and their new employer, CBA Tire Inc. and Antioch Tire, Inc., d/b/a Tredroc Tire. Raben Tire sued for misappropriation of trade secrets under the Defend Trade Secrets Act of 2016 (DTSA), 18 U.S.C. § 1831 et seq., and other state law claims.

In response, Defendants moved to dismiss the complaint. Defendants argued that Raben Tire Co. did not “plausibly” allege how the information in question qualifies as a ‘trade secret’ under federal law” and, therefore, the claim should be dismissed. Defendants also argued the Court should decline to exercise supplemental jurisdiction on the remaining state-law claims if the federal claim was dismissed.

The Court agreed with Defendants. In concluding this, the judge reasoned (Memorandum and Order),

Other than labeling that information as ‘confidential’ in its complaint … Raben Tire Co. has not alleged any steps that it took to protect the information from disclosure.

* * *

In this case, Raben Tire Co.’s complaint is entirely devoid of any allegations of how it protected the information in question from dissemination. There is no suggestion, for example, that either McFarland or Bates were restricted from sharing that information due to a nondisclosure agreement.

Trade Secret Litigation Considerations

Two points jump out. First, before filing a trade secret lawsuit, it is important for a company to make sure it has information that qualifies as “trade secret.” This is done by working closely with the company and its managers to understand the type of information involved in the litigation and whether reasonable steps were taken to protect the subject information.

Second and similar to the Raben case, I’ve had significant success over the years defending trade secret misappropriation claims by attacking the alleged trade secrets. For example, our client and his new company were sued in a federal lawsuit for trade secret misappropriation and other federal and Michigan claims. We aggressively focused on attacking the claimed trade secrets. By the time the case went to trial in December 2016, we had eliminated numerous categories of information from trade secret consideration. This also resulted in eliminating over 80% of the damages Plaintiff had identified during the litigation.

The bottom line is that a plaintiff alleging misappropriation of trade secrets under the federal DTSA or Michigan trade secret law must be able to substantiate that the stolen information meets the statutory definition of what is a trade secret. This standard is typically not demanding at the pleading stage, but Raben shows if you aren’t careful problems may arise. But during the litigation trade secrets may be whittled away substantially, even if not entirely.

For more information about federal or Michigan trade secret law, contact attorney Jason Shinn. He has represented clients in federal and state courts in such matters. He also collaborates with businesses and their management to investigate suspected misappropriation of confidential business information and other wrongful conduct.

Employment Discrimination in the Application Process – You Never Know Who is Watching

Employment DiscriminationHere’s a good reason for why employers need to have and stick to a standard job application procedure: A woman in Ypsilanti,
Michigan posted on Facebook a textbook example of employment discrimination.

You can read the post in its entirety. But the short story is that she was at Big Boy when a black man asked if the restaurant was hiring. He was told no. However, when the white woman later asked if the restaurant was hiring she was told the exact opposite and given an application.

It doesn’t take an HR genius to know that, if true, this is the kind of event that gives rise to unlawful discrimination claims and a lot of bad press. And if this is news to your business, you need to get a hold of an employment attorney ASAP.

Federal and Michigan Anti-Discrimination Laws

This is because, under Title VII of the Civil Rights Act of 1964, employers are prohibited from discriminating against applicants based on race, sex, color, religion or national origin. See 42 U.S.C. § 2000e-2(a)-(b). And as amended by the Pregnancy Discrimination Act, Title VII’s prohibition on sex discrimination extends to pregnancy or childbirth (42 U.S.C. § 2000e(k).

Similarly, under Michigan law, an employer cannot “[f]ail or refuse to hire or recruit … an individual … because of religion, race, color, national origin, age, sex, height, weight, or marital status. MCL 37.2202.

Consistency is Needed to Limit Discrimination Charges 

Employers are permitted to reject unsolicited or walk-in applicants, provided this policy is uniformly applied and not used for discriminatory purposes. But the key phrase is “uniformly applied.”

Accepting this Facebook post at face-value, this is anything but uniform and under the circumstances would likely be the type of discrimination that can get an employer sued – and rightfully so. The bottom line is that employers must ensure that they comply with federal, state and local nondiscrimination laws and do not use discriminatory criteria during recruitment.

It is, therefore, important for a business to have in place and follow non-discriminatory employment selection strategies. These strategies, if applied consistently to any applicant provide a line of defense against negligent hiring, discrimination and other claims.

For more information about complying with federal and Michigan employment laws, including improving your current policies and procedures, contact employment attorney Jason Shinn. Since 2001, Jason has collaborated with employers to implement best practices in all phases of the employment cycle.

An Employer’s First and Best Line of Defense to Discrimination Claims

Defending Discrimination LawsuitsA recent Michigan Court of Appeals decision highlights the important role employment agreements can play in defending against employment discrimination lawsuits.

Specifically, in Sams v Common Ground, when William Sams was hired by Common Ground he signed an employment contract. In that contract, Sams agreed that he would not sue the company one year after his employment ended and that waived any statute of limitations to the contrary.

Federal and Michigan employment laws are subject to statutes of limitations. For example, the statute of limitations for Michigan’s Persons with Disabilities Civil Rights Act (MCL 37.1101 et seq.) is three years. A statute of limitations refers to the time frame an individual has from the date the alleged action occurred to the date that a lawsuit must be filed. If a lawsuit is not filed within the statute of limitations, it will be barred.

Despite this agreement, Sams later sued Common Ground 2½ years after his employment ended. Sams seemed to argue that because his position and job duties had changed after signing the contract, it no longer applied. The court rejected this argument noting that while his job conditions were altered, his employment with the company never ended. Thus, his original contract applied to the new position.

The Court also reaffirmed well-established Michigan law that an employer and employee may alter the statute of limitations that would normally apply to a discrimination claim. This includes shortening the time a plaintiff has to file a discrimination lawsuit. Only in limited circumstances will a court not enforce such an agreement. Examples include where the shortened limitation violates the law, public policy, or where traditional contract defense, such as unconscionability, may exist.

Employer Considerations – First and Best Line of Defense

From a company perspective, shortening the statute of limitations should be a no-brainer. The longer an employee’s statute of limitations is, the larger the window your company is exposed to liability. Obviously, it is smart business to decrease risks wherever possible. And it is an inexpensive line of defense to later attack an untimely discrimination lawsuit. It is important, however, to have your employment agreements reviewed by experienced legal counsel to avoid having it later be invalidated.

For example, agreements to shorten the statute of limitations may raise different issues under federal anti-discrimination laws. The Equal Employment Opportunity Commission, for instance, has challenged shortening of the limitations period for federal claims as unlawful.

Employees – Know when the clock runs out

For individuals who may have been discriminated against, consider whether you are “on the clock,” regarding when you must sue or pursue a discrimination charge. On this point, we’ve seen instances where our clients – employers and employees – agreed to shorten a statute of limitations down to as little as six months. And sometimes, this agreement was buried in the fine print of an application that was likely overlooked or forgotten by the employee.

For more information about reviewing your company’s employment agreements and policies, contact employment attorney Jason Shinn. Since 2001, he regularly assists employers and management in complying with federal and Michigan employment laws, as well as investigating employment discrimination claims or defending against them in federal or Michigan courts.

Uber’s Autonomous Vehicle Development Collides with Federal Trade Secret Lawsuit

Autonomous vehicle trade secretsOn Feb. 23, 2017, Waymo, the Alphabet Inc. company formed from Google’s self-driving project, sued Uber Technologies, Inc. and its related entities, Ottomotto LLC, and Otto Trucking LLC. The suit is for violations under the federal Defense of Trade Secrets Act and other related claims. 

Waymo alleges its former engineer, Anthony Levandowski, took valuable intellectual property relating to LiDAR that is essential to its autonomous driving vehicle program and then resigned without notice. Levandowski then passed the technology off to Uber.

While Uber and the other defendants have yet to respond with their version of the story, the lawsuit sets forth a detailed and damning account of unfair competition and theft by a former employee. According to Waymo’s suit (Waymo LLC v. Uber Technologies Complaint), Levandowski:

Waymo has uncovered evidence that Anthony Levandowski, a former manager in Waymo’s self-driving car project – now leading the same effort for Uber … searched for and then installed specialized software onto his company-issued laptop in order to access the server that stores these particular files. Once Mr. Levandowski accessed this server, he downloaded the 14,000 files, representing approximately 9.7 GB of highly confidential data. Then he attached an external drive to the laptop for a period of eight hours. He installed a new operating system that would have the effect of reformatting his laptop, attempting to erase any forensic fingerprints that would show what he did with Waymo’s valuable LiDAR designs once they had been downloaded to his computer.

* * *

While Waymo developed its custom LiDAR systems with sustained effort over many years, Defendants leveraged stolen information to shortcut the process and purportedly build a comparable LiDAR system in only nine months.

A few observations about this suit.

  • First, the Defend Trade Secrets Act (DTSA), 18 U.S.C. 1832, et. seq., was signed into law 0n May 11, 2016, by President Obama. It creates a federal civil cause of action for trade secret misappropriation. Since its enactment, there have been an increasing number of DTSA suits filed. This trend will continue in light of the remedies and other enforcement procedures under the DTSA.
  • Second, Alphabet and Google were on the receiving end of a DTSA lawsuit. Both were sued in June 2016, in California federal court for allegedly violating the DTSA. However, that claim was recently dismissed (See order from Space Data Corp. v. Alphabet, Inc. lawsuit).
  • Third, Waymo’s suit against Uber caps a horrendous month for the ride-sharing company. Specifically, Uber made headlines for hiring a notorious gun-toting “preacher” who was No. 2 on Al-Qaeda’s hit list and damning revelations about it handled charges of sexual harassment (See Hiring the No. 2 Guy on Al-Qaeda’s Hit List: An Uber-Example of Limitations in Employee Background Checks and An Uber Example For How Not to Respond to Sexual Harassment, respectively). Headlines like these above are not good for business. But the DTSA lawsuit is especially troubling if the allegations are proven true. Besides significant damages, it could set back Uber’s autonomous vehicle plans indefinitely.
  • Fourth, let’s assume Uber had no involvement with the initial misappropriation. However, it still faces legal liability and risks to its business operations even if it was not initially involved in the wrongful conduct. For example, a few years ago, I represented several engineers sued for allegedly taking source code and confidential information that was later used in their new employer’s competing software. That software was marketed as a “game-changer” prior to its release and intended to replace the new employer’s flagship product. The new employer hired the engineers for their experience – not because they had or were expected to bring with them any wrongfully acquired trade secrets or other confidential information. Even so, the release was delayed indefinitely and the competitor was facing substantial damages under various legal theories for the actions of the engineers. Mission accomplished if you were the former employer.

For this reason, your business should have in its hiring procedure checkpoints and procedures to warn and protect against new hires from using confidential business assets of a former employer. Such measures go along way towards avoiding litigation or limiting liability.

For more information about trade secret protection, contact attorney Jason Shinn. Since 2001, he has worked with businesses to protect trade secret and confidential business information. This collaboration includes drafting enforceable non-compete, non-solicitation, and confidentiality agreements and suing for trade secret misappropriation claims in state and Michigan courts Also, Mr. Shinn works with engineers and programmers involved with autonomous vehicle technology with respect to negotiating and assessing employment, confidentiality, and licensing agreements.   

Revisiting Your Whistleblower Protection Compliance Game Plan

Whistleblower Compliance On February 3, 2017, the Michigan Supreme Court issued a ruling involving Michigan’s Whistleblowers’ Protection Act (WPA). The ruling requires employers to carefully evaluate any changes made to an employee’s position, job duties, and working conditions after that employee raises concerns that may be protected activity under the WPA. Otherwise, an employer may be setting themselves up to be later sued for violating the WPA.

Specifically, in Smith v. City of Flint (2017), Smith sued for a WPA violation. He continued to be employed by the Flint City Police Department and he was also president of the Flint City Police Officers Union when he filed suit. Before suing, Smith publicly complained that the revenue from a recent millage was not being used for hiring as many new police officers as possible.” A few months later, Smith was assigned the night shift—making it difficult for him to conduct his duties as union president during the day—and was relocated to the north end of Flint where crime is more prominent.

Michigan Supreme Court reverses finding of no WPA violation

The trial court decided for Flint and concluded that Smith suffered no adverse employment action because his assignment to patrol duty in a particular area of the city constituted no adverse employment action. The Court of Appeals agreed with the trial court and affirmed the decision.

The Michigan Supreme Court, however, reversed the decisions for the City. In doing so, the Court reasoned that Smith’s complaint sufficiently alleged discrimination under the WPA based on a job reassignment unique to the plaintiff during undesirable hours at an undesirable location.

Michigan’s Whistleblower Protection

Michigan’s WPA (MCL 15.361 et seq.) is intended to protect employees from wrongful termination or retaliation for participating in a protected activity. Under Michigan’s WPA, protected activities comprise:

  1. Employees who have reported to a public body a violation of law, regulation or rule;
  2. Employees about to report a violation; or
  3. Employees who have participated in hearings, investigations, or legislative inquiries.

The Smith case clarifies that individuals are not only protected from wrongful termination but retaliation. And employers must understand that retaliation may consist of, among other things, discrimination or threats of discrimination against an employee regarding “compensation, terms, conditions, location, or privileges of employment.”

Considerations for Avoiding a Whistleblower Violation

In light of Smith, it is important for employers to carefully evaluate any employment decision, not just those regarding termination, where protected activity is concerned to avoid liability. If an employee’s hours, schedule, or benefits change unfavorably at or after the time the employee partakes in what may be a protected activity, the employee may build a case against you and your business under WPA.  If you will reduce an employee’s hours or benefits, or if you will change their schedule in a way that could be viewed as a demotion, be sure that you have a trail of documentation to justify the employment decision.

For more information about Whistleblower Protection or legal advice on how to respond to an employment situation where an employee engaging in protected activity, contact employment attorney Jason Shinn. Since 2001, Jason has represented employers and employees in Whistleblower Protection cases, as well as collaborating with employers to implement best HR practices and preventive measures.

An Uber Example For How Not to Respond to Sexual Harassment

Hostile Work EnvironmentUber is back in the headlines again (See our prior post about Uber’s background check misstep, “Hiring the No. 2 Guy on al-Qaeda’s Hit List: An Uber-Example of Limitations in Employee Background Checks“). This time for recently announcing that it is investigating a former engineer’s sexual harassment claim. But the real news is how this investigation came about and why it is only now being investigated.

Specifically, Uber’s former engineer, Susan Fowler, worked at Uber for approximately three years. She left, however, in December 2016. On February 19, 2017, she published a blog post, “Reflecting on One Very, very Strange Year at Uber.” The damning allegation from this post is that Uber’s human resource department spectacularly ignored her complaints because her alleged harasser was a “high performer.”

What not to do when responding to sexual harassment claims.

According to the Washington Post, Uber’s CEO responded on Twitter that, “What’s described here is abhorrent & against everything we believe in. Anyone who behaves this way or thinks this is okay will be fired.” Here is an excerpt from Ms. Fowler’s post:

On my first official day rotating on the team, my new manager sent me a string of messages over company chat. He was in an open relationship, he said, and his girlfriend was having an easy time finding new partners but he wasn’t. He was trying to stay out of trouble at work, he said, but he couldn’t help getting in trouble, because he was looking for women to have sex with. It was clear that he was trying to get me to have sex with him, and it was so clearly out of line that I immediately took screenshots of these chat messages and reported him to HR.

* * *

When I reported the situation, I was told by both HR and upper management that even though this was clearly sexual harassment and he was propositioning me, it was this man’s first offense, and that they wouldn’t feel comfortable giving him anything other than a warning and a stern talking-to. Upper management told me that he “was a high performer” (i.e. had stellar performance reviews from his superiors) and they wouldn’t feel comfortable punishing him for what was probably just an innocent mistake on his part.

Ms. Fowler was given the option to either find another team so she would not have to interact with the harasser. Or she could stay where she was understanding that her manager would likely give her poor performance reviews and there would be nothing Uber could do about it. Ms. Fowler even notes that one Uber HR representative explicitly said “it wouldn’t be retaliation if I received a negative review later because I had been ‘given an option.’”

Investigate All Discrimination Claims – Even Claims Involving “High Performers”

Forgive the tangent, but it will make sense in a moment. One of the best attorney movies of all time is “My Cousin Vinny.” There is a court scene where the prosecutor is giving a very lawyerly and professional opening statement to the jury. Vinny, played by Joe Pesci, responds with his opening statement, however, by simply saying, “Everything that guy just said is bullshit. Thank you.

With that segue, if true, Uber’s response to its engineer’s sexual harassment complaint should be considered “BS.” Simply put, both federal and Michigan employment laws prohibit employers from discriminating based on sex and protect employees from sexual harassment in the workplace. Employers are also prohibited from retaliating or otherwise discriminating against applicants or employees for opposing unlawful discrimination in the workplace or making charges, testifying, assisting, or participating in anti-discrimination proceedings.

To hit home this point, our law firm resolved earlier this month a federal lawsuit for reverse race discrimination and sexual harassment. Similar to Ms. Fowler, our client promptly reported the incident giving rise to the claims. Instead, of taking appropriate action, our client was transferred to a less desirable location, received negative performance reviews, and eventually received less income. The harasser ended up keeping his position at the same location.

After successfully defending against two motions to dismiss the case, the matter quickly settled on terms our client was happy to accept. That confidential settlement, however, was made possible, largely, by the employer’s inaction decisions in responding to the harassment claims.

So what these examples should make clear is that a company must have meaningful procedures for investigating employee discrimination complaints. And, unlike the allegations against Uber, employers must thoroughly investigate all discrimination complaints, regardless of who – even high performers – is involved.

For more information about complying with federal or Michigan employment law or investigating employment discrimination claims, contact attorney Jason Shinn. Since 2001, he has represented employers and employees in federal and Michigan courts with claims involving employment discrimination.

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.