Telecommuting under ADAMichigan employers dodged a bullet (sort of) on when it comes to whether telecommuting must be considered as a reasonable accommodation under the Americans with Disabilities Act (ADA).

Specifically, in a “judicial do-over,” the full Sixth Circuit Court of Appeals in EEOC v. Ford revisited a prior decision (previously discussed here) that had concluded that employers may be required to consider telecommuting (i.e., working remotely) under the ADA. This time, the Court determined that Ford Motor Co. did not violate the ADA by refusing to allow an employee with irritable bowel syndrome to telecommute up to four days a week because “regular and predictable attendance” at the workplace was an essential function of her job. The employee, was a Ford steel resale buyer who had sought to work from home as an accommodation for her bowel condition. Ford rejected this request and resulted in the Equal Employment Opportunity Commission (EEOC) suing on behalf of the employee.

Originally, back in September 2012, the Michigan Eastern District found in favor of Ford and concluding that working from home, up to four days per week, was not a reasonable accommodation under the ADA. But, the EEOC appealed that decision and in April 2014 a partial panel of Sixth Circuit judges reversed the trial court’s 2012 decision concluding that there was an issue of fact as to whether the employee’s telecommuting proposal was reasonable. However, fast forward to April 2015 and the full Sixth Circuit vacated the 2014 decision and said the trial court got it right in its 2012 decision in favor of Ford.

In doing so, the Sixth Circuit’s 2015 decision gave significant ammunition to employers for refusing telecommuting as a reasonable accommodation:

… a general rule that, with few exceptions, ‘an employee who does not come to work cannot perform any of his job functions, essential or otherwise’ … That general rule—that regularly attending work on-site is essential to most jobs, especially the interactive ones—aligns with the text of the ADA. Essential functions generally are those that the employer’s ‘judgment’ and ‘written [job] description’ prior to litigation deem essential … And in most jobs, especially those involving teamwork and a high level of interaction, the employer will require regular and predictable on-site attendance from all employees (as evidenced by its words, policies, and practices).

Five judges of the Sixth Circuit dissented, essentially arguing that a jury should have been allowed to decide whether Harris’s telecommuting proposal was reasonable. In this regard, the dissent made a compelling argument that under the ADA and its associated goals, an employee’s request for accommodation should be a starting point for discussions and that employers should not be able to shut down that starting point in the interactive process and thereby shift the burden entirely to the employee to propose other accommodations. But again, that was not the winning argument after the judicial dust settled.

Key ADA Accommodation Points for Employers

While this was a long and winding judicial road-trip, after the dust settled, a number of key points should be carefully assessed when it comes to engaging in a reasonable accommodation interactive process required under the ADA.

  1. First and perhaps most significantly, the Sixth Circuit’s panel went beyond the above “general rule” that “regular and predictable on-site attendance” was an essential function and a prerequisite to perform other essential functions of the employee’s job. In this regard, the Court broadly concluded “in most jobs, especially those involving teamwork and a high level of interaction, the employer will require regular and predictable on-site attendance from all employees,” and “most jobs would be fundamentally altered if regular and predictable on-site attendance is removed.”
  2. Second and despite the preceding point, the majority opinion did not rule out telecommuting as a reasonable accommodation in all cases (that would be too easy). Instead, it concluded that, under the facts of the Ford case, the employee’s telecommuting proposal was not a reasonable accommodation because it would not allow her to perform the essential functions of her particular job.
  3. Third, the Sixth Circuit’s 2015 decision also emphasized the significance of the employer’s judgment as to which functions of a job are essential. But employers need to understand that it isn’t simply a matter of taking a position without backing it up. Instead, it is critical to be able to demonstrate the essential job functions, often through well-written and accurate job descriptions, which may also provide a legitimate basis where some employees are allowed to telecommute (as was the case at Ford), to distinguish those other telecommuting arrangements.

For more information about this decision or complying with the Americans with Disabilities Act, including responding to request for accommodations under the ADA, contact employment attorney Jason Shinn. Since 20o1, Mr. Shinn has represented employers and employees when it comes to complying with federal and Michigan employment laws.

Employee Medical MarijuanaToday is April 20, 2015. However, for certain individuals who partake in smoking a plant in the cannabis genus, it is also “420.” The use of “420” has historically been a shorthand reference to recreational marijuana smoking. However, as more states enact laws legalizing marijuana use for medical conditions, employers may need to reassess their workplace policies on drug testing and reasonable accommodation of medical conditions. Traditionally, employers have been told that because marijuana is still illegal under federal law and federal law trumps state, it didn’t matter how your state treated medical marijuana use, there was no requirement to accommodate such use. But that answer may not be so short or needs an “asterisk.”

The Current National Landscape for Medical Marijuana

According to CNN, 27 states and the District of Columbia have either legalized medical marijuana or decriminalized marijuana possession — or both. In 2008, Michigan voters overwhelmingly voted to approve a medical marijuana ballot measure, the Michigan Medical Marihuana Act (Michigan – being the counter-culture state it is – Michigan opted to spell marijuana using an “h” (marihuana), which is also the same spelling in the Michigan Public Health Code).

Michigan’s Act permits an individual with a qualifying debilitating medical condition to register as a medical marihuana patient with the state and avoid criminal penalties under state law for certain medical uses of marijuana. More information about Michigan’s registration program and Act is available here.

However, despite efforts at the state level, marijuana or, more specifically, cannabis continues to be listed as a Schedule I of the Controlled Substances Act under Federal law. This is the most tightly restricted category reserved for drugs which have “no currently accepted medical use.”  The Schedule I listing of marijuana creates an irreconcilable conflict between state and federal law in terms of marijuana being legal. In other words, one could lawfully be using marijuana in Michigan or any other state where the substance has been legalized, but still be guilty under federal law for using an unlawful substance.

Employer Obligations When it comes to Medical Marijuana Use and Employees and Downstream Issues

Because marijuana use is still illegal under federal law, and such law preempts state law, the short answer to employer questions about whether they need to accommodate an employee’s medical marijuana use in the workplace has usually been “no.” See Medical Marijuana & Employment Law: Unanswered Questions For Employers and Employees. This general rule remains true, but there may be downstream issues that employers may need to consider when making employment terminations based on medical marijuana use.

Specifically, I was having a lunch with a friend who works in insurance last week. She explained a recent situation where one of her customers had fired an employee for failing a drug test when it came back positive for marijuana use. However, at the time of the registration, that employee was also properly registered under Michigan’s medical marijuana act to use it. But again, the employer relied upon the distinction that under federal law, marijuana is still illegal.

Instead of that being the end of it, the terminated employee filed for unemployment. Normally, an employee is disqualified from receiving unemployment benefits if he or she was fired for misconduct in connection with the work. And illegal drug use has historically been used as such a disqualifier. But in this particular instance, apparently there was an administrative determination that the terminated individual was not disqualified for failing the drug test because at that time he was (under Michigan law) lawfully using marijuana for medicinal purposes.

Employer Take-Aways. 

 

A review of the Michigan Unemployment Insurance Agency’s employee/employer resources and related administrative materials did not produce any insight as to whether this result is the product of an agency-wide position. More likely, it may simply be one case decided on its own set of facts by one person at the agency.

Even so, employers should still enjoy (for now) the general rule that there is no legal obligation to accommodate an employee’s medical marijuana use because it remains illegal under federal law. But, like most things when it comes to employment law, employee use of medical marijuana may require a closer look in order to make an informed decision and/or to evaluate downstream issues.

For more information about Michigan employment law issues, including investigating workplace misconduct or addressing employee accommodations, contact Jason Shinn.

 

Understanding Noncompete RestrictionsNot many people would jump out of a plane and then worry about figuring out what to do about a parachute on the way down. But often times individuals take that approach when it comes to starting a new business or taking a job after having signed a non-compete agreement. And that lack of planning can prove costly and catastrophic.

A former employee learned this lesson the hard way after a Michigan Circuit Court judge issued an injunction preventing him from operating his new business. See Arko Exchange v. Mehmedovic, (PDF). Specifically, the judge ruled that the former employee violated his noncompete agreement when he started up a freight-hauling business that competed against his former employer. The employee also recruited truck drivers from his former employer for his new company.

Aladin Mehmedovic, the defendant, had formed his freight hauling company (Rocket Transport, LLC) on October 14, 2013. But on January 2, 2014, Mr. Mehmedovic signed a noncompete agreement with Arko Exchange LLC, also a freight-hauling company.

The agreement provided that during Mehmedovic’s  employment and for a period of two years from the date of termination, he would not compete with Arko within Michigan, Indiana, Illinois, and Ohio. The agreement also provided that Mehmedovic could not (1) “own, manage, operate, join, control, or be employed” with any other business like Arko; (2) induce Arko’s employees to end their employment; and (3) “engage or otherwise participate in business activity directly or indirectly competitive with Arko’s business.”

On January 23, 2015, Mr. Mehmedovic left Arko and hit the ground running with Rocket, including recruiting drivers from Arko. Arko responded with its lawsuit asserting, among other claims, a breach of the noncompete agreement Mr. Mehmedovic had previously entered into, seeking money damages and an injunction to keep Rocket from operating. The Court granted the injunction finding that there was a “substantial likelihood of irreparable harm” (the magic legal words necessary for issuing an injunction) if an injunction was not granted to stop Rocket’s recruiting practices.

The Take-Away for Employers and Employees.

From the employer’s perspective, this case illustrates two critical points when it comes to protecting the company against departing employees: Vigilance and Decisiveness. More specifically, the defendant former employee left Arko’s employment on January 23, 2015 and on February 16, 2015, Arko filed suit. That is a decent turn around time in the litigation world. It also indicates that someone at Arko was closely monitoring Mr. Mehmedovic’s departure and the company was ready to take action when it had evidence of Mr. Mehmedovic’s violation of the noncompete agreement and to otherwise support its claims.

In contrast, it is not uncommon for months to go by before an employer even realizes such issues have occurred and then more time is spent deciding what to do about it. That delay harms the company’s competitive interests and erodes arguments in favor of convincing a judge to issue an injunction in the first place. For these reasons, we’ve developed for our business clients a checklist of steps to take when an employee ends his or her employment, including steps to take if there is a noncompete restriction involved.

From the employee’s perspective, signing a noncompete restriction has consequences. And if you don’t understand what you can or cannot do under your noncompete agreement that is a problem that can turn into an expensive lawsuit. And in addition to litigation costs, consider the loss of the time and money invested in starting up the business in the first place. On this point, Mr. Mehmedovic was given three options to choose from by the judge:

  1. Divest himself of any ownership interest in the company;
  2. Move the business outside the geographic restriction area provided for under the agreement (Michigan Indiana and Ohio); or
  3. Shutdown the company.

Even if Mr. Mehmedovic’s noncompete restriction was “bullet-proof” in terms of restricting his post-employment obligations, how much better off would he have been knowing that before spending the time and money to start a new business only to be told you have three options – get rid of your interests, shut it down, or move it.

For more information about Michigan noncompete agreements, contact Michigan attorney Jason Shinn. Mr. Shinn works with both companies and individuals when it comes to drafting, negotiating, and enforcing noncompete agreements. He has litigated noncompete disputes in Michigan and federal courts on behalf of employers and individuals.

LGBT Brick WallWe previously discussed the Department of Labor’s final rule that extended Family and Medical Leave Act protections to same-sex married couples. That rule was to apply regardless of the couple’s state of residence. But same-sex couples in Texas, Arkansas, Louisiana, and Nebraska will have to wait to enjoy the same benefits provided to heterosexual couples.

The DOL’s rule would enable employees in legal same-sex marriages to take job-protected leave under the Family and Medical Leave Act (FMLA) to care for a seriously ill spouse even if the state where they live doesn’t recognize same-sex marriages.

Challenge to Extending FMLA to Same-Sex Couples

On March 26, 2015 Judge Reed O’Connor of the U.S. District Court for the Northern District of Texas granted a request for a preliminary injunction brought by the Texas attorney general’s office and joined by state attorneys general in Arkansas, Louisiana and Nebraska ordering those final rules to be put on hold. See order in Texas v. United States (3/26/15) (PDF). The Texas judge framed the issue as whether the Department of Labor (DOL) exceeded its jurisdiction by promulgating a rule that required states to violate the federal full faith and credit statute and state laws that prohibit recognition of same-sex marriages.

The states argued that the DOL final rule (scheduled to take effect March 27, 2015) unlawfully interferes with state laws that prohibit same-sex marriage and bar recognition of out-of-state same-sex marriages. These states further argued that the DOL’s rule is contrary to the full faith and credit statute under the U.S. Constitution, impermissibly abrogates state sovereign immunity, and wrongfully preempt state laws that limit recognition of out-of-state marriages to opposite-sex unions.

In response to the lawsuit, the DOL responded to the claims that “[t]he Final Rule impacts States only in their capacity as employers and merely requires them to provide unpaid FMLA leave to eligible employees based on a federal definition of spouse.”

The Texas court in granting the injunctive relief sided against the DOL. In doing so, the Court reasoned the FMLA defines “spouse” as “a husband or wife” and currently, married same-sex couples can only be considered spouses under FMLA regulations if they reside in a state that recognizes same-sex marriage. But the DOL’s final rule changes the definition of spouse from a “state of residence” rule to a “place of celebration” rule that looks to the law of the place where the marriage was performed. Accordingly, the court reasoned, it would extend FMLA rights to same-sex married couples even if they reside in a state that doesn’t recognize same-sex marriages.

The Texas court further concluded that the full faith and credit law expressly reserves to the states the right to refuse to recognize same-sex marriages performed under the laws of other states and federal agencies cannot promulgate rules that conflict with federal law. Accordingly, the court ruled that the states are substantially likely to succeed on the merits of their claims and, therefore, granted the injunctive relief.

Temporary Victory?

In all likelihood (hopefully), this decision will be a temporary and small victory for the states opposing the extension of FMLA rights to same-sex couples. This is because the U.S. Supreme Court is scheduled to decide the case Obergefell v. Hodges, U.S., No. 14-556, (scheduled for oral arguments on April 28, 2015), which has the potential to decide the issue of nationwide marriage equality or – minimally speaking – whether the Fourteenth Amendment require a state to recognize a marriage between two people of the same sex when their marriage was lawfully licensed and performed out-of-state?

For more information about complying with the Family Medical Leave Act or other federal and Michigan employment laws, contact attorney Jason Shinn. Mr. Shinn has been practicing in the areas of employment law since 2001, including same-sex issues first arising under civil union laws. Since that time, Mr. Shinn frequently consults with companies and employees about employment legal issues unique to employees in same-sex relationships.

Shooting-Self-in-Foot.jpgTwo annoyances in life often involve cliches and living out a cliche. This is especially true when the cliche is “shooting yourself in the foot.” But T-Mobile got to experience both last week when the National Labor Relations Board (NLRB) ruled that it engaged in unfair labor policies.

The ruling arose out of T-Mobile’s employee handbook, code of conduct, and a confidentiality form that all employees are required to sign. However, because of the manner in which T-Mobile drafted these documents, the NLRB found they obligated T-Mobile employees to comply with unlawful labor rules. The full NLRB opinion is available here (NLRB_T_Mobile_Opinion_2015_3_18).

We previously explained that employers need to be mindful that the NLRB would be focusing on employee manuals, sometimes called employee handbooks, and other employee agreements that violate employee rights under the National Labor Relations Act (NLRA) (an act that applies to union and non-union employees). See Employee Manuals Need Spring Cleaning Thanks to the NLRB. We also expressed our concern that many provisions in employee manuals and agreements could violate the NLRA and, therefore, subject companies to an unfair labor practice charge similar to what T-Mobile got hit with.

A review of the T-Mobile opinion substantiates these concerns in that the offending provisions were construed or otherwise interpreted to prevent workers from communicating with one another about wages, from speaking to the news media about workplace conditions and from speaking with co-workers to marshal evidence against disciplinary charges. Over all, administrative law judge found that 11 of the 13 policies subject to the litigation were illegal.

Employer Take-Aways

Employee manuals appear to be the “it thing” when it comes to employer liability. And such liability isn’t just coming from the NLRB and decisions like the T-Mobile opinion. Consider for example that we discussed earlier in the year the case where an employer had won an employment-related discrimination claim at the trial level only to have that victory reversed on appeal. The reason for the reversal was a poorly drafted and inaccurate employee manual, which the court held agains the employer in terms of allowing the litigation to continue. See Flag on the Play: Court Takes Away Employer’s Victory Because of Mistake in the Employee Manual).

The NLRB has made it clear that it will be focusing on employee manuals and employment agreements that violate employee rights under the NLRA. And if your company’s employee manual or other employment related policies, procedures, and agreements have not been updated in the recent past, now is the time to do so in order to avoid liability or other mistakes that could cost your company.

For more information about implementing HR best practices and drafting employee manuals, contact employment attorney Jason Shinn. His law firm offers complete employment and HR services for companies and their employees.

Shark_AboveAt a time when companies are increasingly using “independent contractors” rather than W-2 employees, the risks and liabilities for misclassification have never been higher. And it just got harder for Michigan and other Midwest employers who are accused of improperly classifying their workforce after a 3/26/2015 ruling from the Sixth Circuit Court of Appeals.

Specifically, Keller v. Miri Microsystems LLC, involved cable and satellite installers and whether they were properly classified as “independent contractors” or should have been classified as “employees.” The correct classification means the difference between being entitled to overtime pay under the Fair Labor Standards Act (FLSA) or not. This is because under the FLSA, only “employees” are entitled to overtime and minimum-wage compensation; Independent contractors do not enjoy FLSA’s protections. Businesses are liable to workers for overtime wages even if the company classifies an individual as an “independent contractor” who should be classified as in “employee.”

Determining Whether an Individual is an “Employee” or “Independent Contractor.”

In deciding whether an individual is truly an independent contractor or an employee subject to the FLSA, employers in the Sixth Circuit are subject to a judicial test referred to as the “economic realities test.” Under this test, the following six factors are applied to the employment relationship:

  1. The permanency of the relationship between the parties;
  2. The degree of skill required for the rendering of the services;
  3. The worker’s investment in equipment or materials for the task;
  4. The worker’s opportunity for profit or loss, depending upon his skill;
  5. The degree of the alleged employer’s right to control the manner in which the work is performed; and
  6. Whether the service rendered is an integral part of the alleged employer’s business.

Returning to the Keller v Miri Microsystems, the Court departed from a general rule that the application of these six factors to determine the employment status is a “question of law” to be decided by the judge, and not a “fact question” that must be decided by a jury. More often than not, employers and their attorneys believe they will be better off in terms of cost savings (because there is no trial) and the outcome (a favorable ruling) if a judge is deciding these issues and not a jury.

In doing so, the appeals court reversed the trial court’s dismissal and sent it back for trial for the jury to decided the issue. The Keller decision cited extensively to another cable and satellite installer case from the Eleventh Circuit Court Of Appeals (Scantland v. Jeffry Knight Inc.), which also closely scrutinized contested facts involving the “economic realities test” and reversed a dismissal in favor of the employer to allow the fact questions to be decided by a jury.

The Financial Impact of Misclassifying Employees as Independent Contractors.

The distinction between independent contractors and employees translates into enormous financial differences between the individuals involved and society as a whole, as well as significant financial liability to employers who get the classification wrong. See Employers Cannot Ignore Costly Risks of Mis-classifying Independent Contractors.

Consider for example that a 2000 study commissioned by the U.S. Department of Labor (DOL), found that between 10 to 30 percent of audited employers misclassified workers. Researchers found that misclassifying just one percent of workers as independent contractors would cost unemployment insurance trust funds $198 million annually. Also, a 2009 report by the Government Accountability Office (GAO) estimated that independent contractor misclassification cost the federal government $2.72 billion in revenues in 2006.

So even if the Keller and Scantland decisions do not signal a trend, there are significant financial incentives and pressures for employee/independent contractor misclassification issues to be closely scrutinized.

Is it that Difficult to Correctly Classify an Employee versus an Independent Contractor?

One of the frustrating issues facing employers and individuals when it comes to employee classification is why is it so difficult to make the correct classification? On this point, the dissenting judge in the appeal noted that the trial judge who originally decided the Keller decision in favor of the employer had previously denied summary judgment to an employer in a similar 2014 Michigan case involving individuals who installed cable television services. (Swinney v. AMcomm Telecomm., Inc.).

In other words, two similar cases, two conflicting results. This illustrates that every FLSA classification case evaluated under the six factors – an imprecise test to begin with – may end up with differing results when applying the law to the particular facts of the case. And for this reason, it is important for employers to carefully evaluate their employee/independent contractor classifications.

Employer Take-Aways.

Decisions like Keller will allow more scrutiny over an employer’s decision to classify an individual as an employee or independent contractor. And for Michigan and other other Midwest employers subject to the Sixth Circuit Court of Appeals jurisdiction, the Keller decision and similar cases should cause employers to carefully evaluate their use of classifying individuals as “independent contractor” rather than employees. Whether this is done intentionally to deny workers overtime pay, or due to a mistaken belief as to the appropriate classification, the end result is the same; costly litigation and financial liability for misclassification mistakes.

For more information about employee/independent contractor classification issues and other overtime issues under the Fair Labor Standards Act, contact Michigan employment attorney Jason Shinn. Since 2001, Mr. Shinn has worked with companies to address and document independent contractor and employee classifications, as well as litigating these and other employment related disputes, including overtime pay cases. in federal and Michigan courts.

Pregnancy DiscriminationYesterday the U.S. Supreme Court issued the much anticipated opinion in a pregnancy discrimination claim, Young v . United Parcel Service.

For context, the claim in Young v UPS arose under the Pregnancy Discrimination Act (PDA). The PDA was added to Title VII (the gold-standard in terms of civil rights law prohibiting workplace discrimination) to overcome a prior Supreme Court ruling that allowed employers to treat pregnant female workers less favorably based on being pregnant.

There are two anti-discrimination provisions under the PDA: the first prohibits pregnancy bias as a form of discrimination based on sex; the second prohibits employers from treating female employees who become pregnant different than other employees who perform the same sort of work. And this second prohibition was at issue in the Young v UPS case.

The New Framework for Analyzing Pregnancy Discrimination Claims

In this regard, the specific issue in the case was relatively straight-forward and was framed as follows:

Whether, and in what circumstances, the Pregnancy Discrimination Act, 42 U.S.C. § 2000e(k), requires an employer that provides work accommodations to non-pregnant employees with work limitations to provide work accommodations to pregnant employees who are “similar in their ability or inability to work.

The U.S. Supreme Court’s answer to this question, however, was anything but straightforward. Specifically, in a 6-3 opinion, the Court came up with essentially a variation of the McDonnell Douglas analysis – a bedrock employment law shifting burdens test – that is to be applied to pregnancy accommodation claims. Under this test, a female employee who claims her employer discriminated against her because of her pregnancy and her employer must go through a sort of back-and-forth legal match with her employer as follows:

  1. The female employee must initially show that she is in the protected group, i.e., (i) she was pregnant; (ii) that she asked to be accommodated because she could not fulfill her normal job duties; (iii) the employer refused to accommodate her; and (iv) the employer did actually provide an accommodation for others who are just as unable, or unable, to do their work temporarily. In sum, this initial showing is focused on showing that the employer’s refusal to accommodate a pregnant employee was the likely result of intentional bias.
  2. If the employee successfully makes the preceding showing, the employer must respond by showing that its workplace policy was not biased against pregnant workers, but was a legitimate, non-discriminatory neutral policy. However, the Court specifically noted that the employer’s reason “cannot consist simply of a claim that it is more expensive or less convenient to add pregnant women to the category of those (“similar in their
    ability or inability to work”) whom the employer accommodates. If this showing is made by the employer, the legal burden shifts back to the employee.
  3. The employee must now show that the employer’s articulated neutral reason was not genuine, but only a pretext for bias. The employee can refute the employer’s reason by showing that the workplace policy puts a “significant burden” on female workers, and the policy is “not sufficiently strong” to justify that burden.

Practical Applications of the Pregnancy Discrimination Analysis

Our reading of the Court’s opinion is that at the end of the day, this last step in analyzing pregnancy discrimination claims essentially comes down to determining the negative impact an employer’s policy has on female workers, which is far different than requiring a plaintiff to show an intentionally biased policy. In support of this assessment, the Court reasoned:

The plaintiff can create a genuine issue of material fact as to whether a significant burden exists by providing evidence that the employer accommodates a large percentage of nonpregnant workers while failing to accommodate a large percentage of pregnant workers. Here, for example, if the facts are as Young says they are, she can show that UPS accommodates most nonpregnant employees with lifting limitations while categorically failing to accommodate pregnant employees with lifting limitations. Young might also add that the fact that UPS has multiple policies that accommodate nonpregnant employees with lifting restrictions suggests that its reasons for failing to accommodate pregnant employees with lifting restrictions are not sufficiently strong—to the point that a jury could find that its reasons for failing to accommodate pregnant employees give rise to an inference of intentional discrimination.

Justice Antonin Scalia and Justice Clarence Thomas joined in a dissenting opinion and Anthony M. Kennedy wrote a separate dissent. Both dissents argued that the majority simply made up an analytical framework that had no basis in the law. However, for anyone familiar with a Scalia dissent, a summary can never do the real thing justice; Here is an excerpt:

Faced with two conceivable readings of the Pregnancy Discrimination Act, the Court chooses neither. It crafts instead a new law that is splendidly unconnected with the text and even the legislative history of the Act. To ‘treat’ pregnant workers ‘the same . . . as other persons,’ we are told, means refraining from adopting policies that impose ‘significant burden[s]’ upon pregnant women without ‘sufficiently strong’ justifications … Where do the ‘significant burden’ and ‘sufficiently strong justification’ requirements come from? Inventiveness posing as scholarship—which gives us an interpretation that is as dubious in principle as it is senseless in practice.

Employer and Employee Take-Aways

The Court rejected the position pushed by advocates for the employer and the employee side of the equation. The end result was that female employees received less legal protections than argued for and employers fell short of avoiding claims of pregnancy bias they were pushing for. How this plays out remains to be seen as the U.S. Supreme Court sent the case back to the trial court to apply this newly minted framework so it will be interesting to see what result the trial court reaches.

In the meantime, the best piece of advice for employers I’ve seen on this issue comes from employment attorney Jon Hyman: “My practical take for handling pregnant workers remains unchanged. Unless you can unequivocally demonstrate that you’ve never provided an accommodation to a disabled worker, you should be prepared to offer the same to your pregnant workers.”

On a separate note, Justice Kennedy’s dissent is worth reading for its practical and brutal honesty about the issues pregnant women face in the workplace. Having represented parties on both sides of the issue, one cannot help but agree with what the Justice says, even if you disagree with what should or can be legally done. In his view:

… there is no showing here of animus or hostility to pregnant women. But as a matter of societal concern, indifference is quite another matter. There must be little doubt that women who are in the work force—by choice, by financial necessity, or both—confront a serious disadvantage after becoming pregnant. They may find it difficult to continue to work, at least in their regular assignment, while still taking necessary steps to avoid risks to their health and the health of their future children. This is why the difficulties pregnant women face in the workplace are and do remain an issue of national importance.

For more information about pregnancy discrimination and other workplace issues, contact Michigan employment attorney Jason Shinn. Mr. Shinn has been practicing in the are of federal and Michigan employment law for over 14 years, representing companies and individuals. His most meaningful work, however, is working with employers to meet their obligations under federal and Michigan employment laws in order to cultivate a culture where employees can succeed in the workplace.

Thanks to the National Labor Relations Board (the NLRB), companies need to add employee manuals to the list of things that need spring cleaning. Specifically, the NLRB’s Office of the General Counsel issued a 3/18/2015 report full of examples of how your company’s employee manual likely violates the National Labor Relations Act (NLRA).

Updating Employee Personnel ManualsFor background, any employee – whether in a union or non-union workforce – has rights under Section 7 of the NLRA. These rights generally protect an employee’s right to discuss wages, hours, and other terms and conditions of employment with fellow employees.

With this in mind, the NLRB’s General Counsel’s report can be considered the wind-up for the NLRB’s next round of enforcement directives – going after employers whose employee manuals or handbooks violate the NLRA. And if the NLRB is kicking the tires of your business, it is likely only a matter of time before it gets under the hood.

The full report is available here (NLRB Report of the General Counsel Concerning Employ Policies) and should be thoroughly assessed in relation to your company’s current employee policy manual. I can almost guarantee at least a few provisions in your employee manual likely violate the NLRB’s current understanding of Section 7 rights under the NLRA. However, a two areas of focus that jumped out as troubling are as follows:

Treatment and Handling of Confidential Business Information as a Violation of the NLRA

First, the treatment of the NLRB’s General Counsel towards confidential business information and how it is to be handled by employees will be problematic for most employers. In this regard, the General Counsel explained that

[A]n employer’s confidentiality policy that either specifically prohibits employee discussions of terms and conditions of employment— such as wages, hours, or workplace complaints—or that employees would reasonably understand to prohibit such discussions, violates the Act. Similarly, a confidentiality rule that broadly encompasses “employee” or “personnel” information, without further clarification, will reasonably be construed by employees to restrict Section 7-protected communications … In contrast, broad prohibitions on disclosing “confidential” information are lawful so long as they do not reference information regarding employees or anything that would reasonably be considered a term or condition of employment, because employers have a substantial and legitimate interest in maintaining the privacy of certain business information.

Clear as mud, right? Essentially it appears that the NLRB’s general counsel is trying to carve out two categories of “confidential information: “Business confidential information” that is unrelated to employee and personnel information may be appropriately regulated by employers’ policies and procedures; But policies that proscribe the treatment of “confidential information” involving or touching upon employee or personnel issues that an employer may wish to treat as confidential will likely violate the NLRA.

But this is where employers really need to be concerned: The distinction between what is permissible and what is not is somewhat anemic to begin with, and if your company’s policies are too broad or poorly worded, then whatever distinction existed may be obliterated. Consider the following examples the NLRB’s general counsel offered of employee manual provisions that would violate the NLRA:

  • Do not discuss “customer or employee information” outside of work, including “phone numbers [and] addresses.”
  • “Never publish or disclose [the Employer’s] or another’s confidential or other proprietary information. Never publish or report on conversations that are meant to be private or internal to [the Employer].”
  • “Discuss work matters only with other [Employer] employees who have a specific business reason to know or have access to such information.. .. Do not discuss work matters in public places.”
  •  “[I]f something is not public information, you must not share it.”

Again, the general theme for why the NLRB’s General Counsel believes these employee policy provisions violate the NLRA is the belief that they restrict disclosure of employee information and therefore are unlawfully overbroad.

Social Media Policies and Violations of the NLRA.

Second, the other area of concern employers should have is concerning their employee social media policies. Now if your company doesn’t have any social media policies, you’ve got another set of issues to deal with.

But here are a few examples that the NLRB’s general counsel found to violate the NLRA:

  • “[I]t is important that employees practice caution and discretion when posting content [on social media] that could affect [the Employer’s] business operation or reputation.”
  • “Never engage in behavior that would undermine the reputation of
    [the Employer], your peers or yourself.”
  • Do “not use any Company logos, trademarks, graphics, or advertising materials” in social media.
  • “Company logos and trademarks may not be used without written consent ….”
  • [You may not c]reate a blog or online group related to your job without the advance approval of the Legal and Communications.

According to the NLRB’s report, these rule examples were unlawful because “they contain broad restrictions that employees would reasonably read to ban fair use of the employer’s intellectual property in the course of protected concerted activity.”

Next Actions for Employers – Update the Company’s Employee Manual

We recently wrote about an employer whose improperly drafted employee personnel manual ended up costing the employer a trial win. See Flag on the Play: Court Takes Away Employer’s Victory Because of Mistake in the Employee Manual. But in case your HR department needs more, the NLRB’s most recent pronouncement on the subject of employee manuals should give employers reason to review their current employee personnel policies, procedures, and agreements. Otherwise, your company could be looking at expending costs and resources in responding to an unfair labor charge.

Minimally speaking, if an employers’ policies or procedures come within an area code of restricting employees’ use or disclosure of company information, then your company should expressly note that such restrictions are not intended to restrict Section 7 communications or other protected concerted activities protected by applicable law. Such language should not be considered a “silver bullet” that will save an otherwise overbroad employee restriction. But if coupled with a smartly drafted policy or restriction, it could be enough to avoid the NLRB’s scrutiny.

For more information about complying with federal or Michigan employment law, including implementing HR best practices and drafting employee manuals, contact employment attorney Jason Shinn. His law firm offers complete employment and HR packages that provide a solid game plan for start-up and growing businesses.

Foundation BlocksCrain’s Detroit, by Dustin Walsh, reported last week that this year marks the 30 year anniversary of arguably the most significant Michigan court opinion concerning non-compete agreements. See “30 Years Later, A Noncompete Ruling has Been Forged into Law.” The case referenced in this article comes from a January 17, 1985 Michigan Supreme Court decision in favor of employers who sought to restrict former employees from using client and business information after ending their employment.

The case actually involved two separate cases that were consolidated on appeal: Follmer Rudzewicz & Co. v. Kosco and Nolta-Quail-Sauer and Associates v Roche (1985). Kosco, the defendant former employee, was an accountant and in the other case, Roche was an insurance agent. Kosco’s employment agreement involved a three year limitation and Roche’s had a five year limitation period. Essentially both contracts required the former employees to pay a certain amount if they serviced their employer’s former customers within a three year time period following termination for Koche and five years for Kosco. The presumption underlying these provisions was that the former employees had access to their former employers’ confidential client information and presumably used such information to acquire the employers’ former customers.

At the time the Follmer case was decided, Michigan law considered all agreements where a person, co-partnership or corporation agreed not to engage in any employment or business, whether reasonable or unreasonable as against public policy and illegal and void. MCL 445.761. The defendant former employees claimed that this statute voided their post-employment restrictions. The Michigan Supreme Court disagreed and reasoned:

[T]he contractual provisions are not violative of the statute relied on by the defendants … The challenged contractual provisions seek to protect the employers from the use by their employees of information acquired in the course of their employment. While an employee is entitled to the unrestricted use of general information acquired during the course of his employment or information generally known in the trade or readily ascertainable, confidential information, including information regarding customers, constitutes property of the employer  and may be protected by contract  … An agreement requiring an employee to pay for using confidential information in obtaining the patronage of his employer’s customers does not violate the statute.

In essence, the Follmer/Nolta-Quail decision held the restrictions did not literally prohibit competition by a former employee but instead extracted some type of compensation or imposed some type of forfeiture on a former employee engaging in such competition based on the assumption that the former employee is paying for the value of the employer’s confidential information.

A few years later on December 28, 1987 the legislature enacted Michigan’s current non-compete law (MCL 445.774a) to clarify the legality of non-competition agreements in Michigan. The statute provides as follows:

An employer may obtain from an employee an agreement or covenant which protects an employer’s reasonable competitive business interests and expressly prohibits an employee from engaging in employment or a line of business after termination of employment if the agreement or covenant is reasonable as to its duration, geographical area, and the type of employment or line of business. To the extent any such agreement or covenant is found to be unreasonable in any respect, a court may limit the agreement to render it reasonable in light of the circumstances in which it was made and specifically enforce the agreement as limited.

Since Michigan enacted its non-compete statute, such restrictions have become commonplace in almost every employment relationship. And certain such restrictions are understandable where a manager or employee could exploit a company’s confidential, trade secret, or proprietary information by jumping to a competitor. However, the use of non-compete restrictions can deteriorate into the absurd. Consider for example that the Jimmy John’s sandwich franchise routinely requires its low-wage sandwich makers and delivery drivers sign non-compete restrictions. See Jimmy John’s Makes Low-Wage Workers Sign ‘Oppressive’ Noncompete Agreements. Or consider Miller, Canfield, Paddock & Stone’s Christopher Trebilcock who believes the Jimmy John’s noncompete is a legitimate way for large companies to protect against competitors using “proprietary information.” In fact, Mr. Trebilcock believes that non-compete agreements can be legitimate for a company’s janitor: “A janitor, for example, can cause just as much trouble as a CEO because they have access to information — there could be documents with sensitive material on desks or in the trash.” Noncompetes Aren’t Just for High-level Executives Anymore (subscription required).

Closing Thoughts

It’s easy to question the wisdom of companies like Jimmy John’s or attorneys advocating the use of non-compete agreements for every employee in the organization regardless of where they are in the corporate hierarchy. Research suggest that such use has a negative impact on innovation (See Noncompete Agreements – A Hurdle to Employment and Innovation?). In fact, one Michigan legislature has recently proposed a bill that would significantly scale back the enforceability of non-compete agreements. The proposed legislation is an extreme response. But based on our experience representing non-compete lawsuits filed against former administrative assistants, back-office phone schedulers, and other entry level positions far removed from the sort of executive, management, or sales positions where non-compete agreements often make strategic and business sense, it is no wonder why politicians feel compelled to limit the adverse effect non-compete agreements have on innovation.

This doesn’t mean, however, that employers should not have non-compete agreements with their employees. Instead we encourage our business clients to use non-compete agreements but in a smart and strategic manner rather than indiscriminately. There are many reasons for taking a smart non-compete approach, including avoiding the expense of enforcing prospective violations against former employees who are not likely to pose a meaningful threat to the business and concerns about selective enforcement. See for example, Enforcing Noncompete Agreements: How to Avoid Wasting A+ Resources on the C- Employee.

In sum, non-competes are critical to business, but it is equally important to have a smart non-compete strategy tailored to your business instead of an across the board non-compete policy; The difference between the two is analogous to checkers and chess.

For more information about Michigan non-compete law, contact attorney Jason Shinn. Mr. Shinn routinely consults with employers about drafting and enforcing non-compete agreements. He also often collaborates with individuals to evaluate their obligations and rights under a non-compete agreements, including in relation to starting a business or taking a position with a competitor.

Fog-&-Uncertainty.jpgA recent Delaware court case invalidating an employer’s non-compete agreement provides a cautionary reminder for companies with operations and employees in multiple states.

Specifically, in Ascension Ins. Holdings, LLC v. Underwood (Delaware, Jan. 28, 2015) the company, Ascension was incorporated in Delaware, but headquartered in California. California was also where the employee, Roberts Underwood worked.

Their employment agreement contained a provision referred to as a “choice of law” provision. A choice of law provision specifies which state’s law will apply if (when) there is a dispute arising under the agreement. (For more information on how choice of law provisions affect non-compete disputes see Enforcing Non-compete Agreements – What Law Will Apply?).  In the Ascension case, the choice of law called for Delaware law to apply.

Similar to Michigan, Delaware law generally enforces employee non-competition agreements if certain conditions are met (i.e., reasonable in scope and duration and if the restrictions advance a legitimate business interest of the employer). However, California law generally does not enforce non-compete restrictions, unless the restrictions are made in connection with the sale of the business.

The Delaware court in resolving which state’s law would decide the issue noted that the parties’ relationship was based in California and the applicable contracts were negotiated and entered into in California. Further, the territory in which the defendant employee was to be restricted was in California. In light of those facts, the court rejected the plaintiff employer’s argument that Delaware’s preference for enforcing contractual obligations in the form of non-compete restrictions should trump California’s interest in not enforcing such restrictions.

Accordingly, the Delaware court concluded that “allowing parties to circumvent state policy-based contractual prohibitions through the promiscuous use of [choice-of-law] provisions would eliminate the right of the default state to have control over the enforcability of contracts concerning its citizens.” For these reasons, the court denied the employer’s request to enjoin the defendant former employee from working.

Employer Considerations

Companies are often organized in one state, with their headquarters or base of operations in another state with operations in other states. Such situations can set up a scenario like that above where the question of whether a non-compete agreement entered into by an employee will be enforceable in the state where the employee is working.

For this reason, it is important to understand the various state laws that may come into play when it comes to non-compete restrictions. With this knowledge, employers will be better able to compare whether one state or the other is more favorable with respect to enforcing restrictive non-compete restrictions and take appropriate steps to establish connections with the state chosen to govern the non-compete restriction.

For more information about non-compete restrictions, including whether your non-compete is enforceable, contact attorney Jason Shinn. Mr. Shinn routinely works with employers or sales representatives, executives, and other individuals in non-compete disputes.