same-sex coupleOver 370 companies, including small businesses and Fortune 100 companies, and business groups showed their support for same-sex couples seeking the right to marry by filing a brief in the same-sex marriage case Obergefell v Hodges pending before the U.S. Supreme Court.

Thirty-seven states and Washington, D.C. permit same-sex marriages under local laws or court decisions. However, a rogue opinion from the Sixth Circuit U.S. Court of Appeals (the federal circuit covering Michigan, Kentucky, Ohio and Tennessee) strayed from this trend and upheld same-sex marriage bans last year, thus opening the door for the U.S. Supreme Court to resolve the same-sex marriage issue once and for all (unless you are Alabama).

The full friend of the court, or amicus, brief filed by the companies and business groups (collectively the “Business Coalition”) is available here. The Business Coalition’s brief reads in part:

[Businesses] already operate against a complicated, uncertain, and frequently changing backdrop of laws and employment-related regulations that increase our administrative costs. Inconsistent state marriage laws impose an added economic burden on American businesses at an estimated cost of over one billion dollars per year. Discriminatory state laws force [Businesses] to implement inconsistent policies across the various jurisdictions in which we operate, our stated corporate principles of diversity and inclusion notwithstanding. Our ability to grow and maintain our businesses by attracting and retaining the best employee talent is hindered. The patchwork of state laws applicable to same-sex marriage thus impairs our business interests and employer/employee relations.

In 2013, our law firm argued in favor of Michigan recognizing same-sex marriage (“Sexual Orientation Discrimination and Michigan Law – Is it a Time for a Change?”). Similar to the reasons set forth in that article, the brief filed by the Business Coalition focused on economic reasons for why same-sex couples should be allowed to marry, rather than the social or civil rights implications raised by the same-sex couples. And the economic reasons in favor of recognizing same-sex couples is compelling.

But in addition to economic reasons, we also noted that providing same-sex couples equal access to marriage licenses was consistent with Michigan’s considerable history at being in front of protecting the rights of individuals. In this regard, we noted:

[T]here are enough economical and pro-business reasons to provide compelling reasons for why Michigan’s economy would likely benefit from restricting discrimination based on sexual orientation. And such a restriction would certainly be consistent with Michigan’s long-standing tradition of taking the lead in protecting individuals’ civil rights. In fact, going back to 1955 – almost a decade before the federal government passed the federal civil rights act – the Michigan legislature passed the Fair Employment Practices Act, which guaranteed the opportunity of Michiganders to gain employment regardless of race, color, religion, or national origin. Also, as early as 1983 the Michigan Department Rights Commission issued a statement that the state’s Civil Rights Act should be amended to prohibit discrimination based on sexual orientation.

Unfortunately, one of the prominent names listed as urging the U.S. Supreme Court to deny same-sex couples the right to marry, is Michigan’s Governor Rick Snyder. Truth be told, this is not likely a cause Governor Rick Snyder supports or cared to get behind in the first place given his pragmatic political approach and dogmatic focus on creating a thriving business climate in Michigan. In fact, this focus was embodied in Gov. Snyder’s 2014 campaign tagline, “Michigan is the Nation’s Comeback State” following significant job gains and other business development.

Even so, before the Business Coalition brief was filed, Michigan was at odds with the legal reasoning guiding the majority of the state and federal courts and legislatures addressing same-sex couples right to marry. Now, however, Michigan is clearly at odds with the sort of companies that it should be trying to attract. Hopefully Michigan can “comeback” from being on the wrong side of this issue.

OnSame-sex_couple February 25, 2015, the U.S. Department of Labor issued its final rule revising the regulatory definition of spouse under the Family and Medical Leave Act (FMLA) so that eligible employees in legal same-sex marriages will be able to take FMLA leave to care for their spouse or family member, regardless of where they live. This change will go into effect on March 27, 2015.

The FMLA entitles eligible employees of covered employers to take unpaid, job-protected leave for specified family and medical reasons.

The major changes under the DOL’s to the FMLA’s definition of a spouse include the following:

  • The U.S. Department of Labor (DOL) has changed its focus from a “state of residence” rule to a “place of celebration” rule for the definition of spouse under the FMLA regulations. Now, the DOL will look to the law of the place in which the marriage was entered into, instead of the law of the state in which the employee resides. According to the DOL, this “place of celebration rule” allows all legally married couples, whether opposite-sex or same-sex or married under common law, to have consistent federal family leave rights regardless of where they live.
  • Also, the DOL’s definition of spouse expressly includes individuals in lawfully recognized same-sex and common-law marriages and marriages that were validly entered into outside of the United States if they could have been entered into in at least one state.

Here is a link to the full text of the final rule.

The DOL’s revision was in response to the Supreme Court’s decision in 2013 striking down section 3 of the Defense of Marriage Act (DOMA) as unconstitutional (United States v. Windsor). Specifically, this update to the FMLA now provides FMLA rights to all legally married same-sex couples consistent with the Windsor decision.

What the FMLA Update Means for Employers and Employees

For both employers and employees, it will be important to understand that leave and job protection rights available under the  FMLA now extend to all eligible employees in same-sex and common-law marriages, regardless of whether the employee’s state of residence permits same-sex or common-law marriage.

Employers should also review their FMLA policies and procedures and update them prior to the 3/27/2015 effective date to comply with the FMLA revision.

For more information about the FMLA, including complying with the new revisions pertaining to same-sex couples, contact employment attorney Jason Shinn. Mr. Shinn is a Michigan licensed employment attorney.

A proposed Michigan House Bill was recently introduced that would significantly limit the use of noncompete agreements (sometimes called covenants not to compete) in Michigan. Such agreements often restrict individuals from working for a competitor or other post-employment activities. Noncompete Restrictions

Specifically, State Represntative Peter Lucido (R) introduced HB 4198 on February 12, 2015, which has since been referred to the Committee on Commerce and Trade.
Under current Michigan law, noncompete restrictions between an employer and employee may be enforceable if certain conditions are met. Current Michigan law (MCL 445.774a) 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.

However, proposed HB 4198 would outright void a noncompete restriction between an employer and employee. Specifically, the proposed bill reads:

… any term in an agreement an employer obtains from an employee, contract laborer, or other individual that prohibits or limits the individual from engaging in employment is void.

HB 4198 would allow for noncompete restrictions in certain limited circumstances involving the sale of a business. More specifically, a purchaser of a business may obtain noncompete restrictions from the seller, principles, or officers of the business if it is in writing, entered into as a result of the sale, and at the time the sale takes place. Similar to current Michigan noncompete law, the noncompete restriction would still need to be reasonable as to its duration, geographical area, and the type of employment or line of business.

It is important to remember that this is only a proposed bill and one that has been referred to the Committee on Commerce and Trade (committees can often be legislative black holes). It is also likely to be a controversial bill given the impact it would have on businesses and employees. And let’s face it, anyone who has driven any distance on a Michigan road knows Michigan politicians have a difficult time passing legislation on issues with broad support, let alone contentious issues.

We will, however, continue to monitor this legislation. In the meantime, if you have any questions about Michigan noncompete law, contact attorney Jason Shinn. He represents both employers and employees in drafting and reviewing noncompete agreements, as well as litigating noncompete disputes.

EEOC discrimination According to records released in February by the U.S. Equal Employment Opportunity Commission, the agency had its lowest year in terms of monetary recovery since 1997 and other key numbers were also significantly lower. While there are a number of explanations offered for this reduction, including from the EEOC and employment attorneys, one explanation that is not getting mentioned is the role that employers and HR professionals have in this reduction. In this regard, HR professionals are increasingly aware of compliance issues and often proactively intervene when employment law compliance strays off the tracks.

EEOC 2014 Numbers

Going back to the EEOC’s numbers for fiscal year 2014:

  • The EEOC won the lowest monetary penalty since 1997;
  • Went 0-2 in jury trials; and
  • Filed half as many new lawsuits as it did a decade before.

To add further context to these numbers, EEOC lawyers filed 167 suits during fiscal year 2014. In contrast between 1997 and 2011, the EEOC filed an average of 370 lawsuits a year. Further, during the eight years of President George W. Bush’s administration, the EEOC obtained an average payout of $91 million per year as compared to just $22.5 million for 2014.

The EEOC notes that the drop in numbers was due in part to the government shutdown during the reporting period. Also, the National Law Journal, “Steep Drop in EEOC Lawsuits, by Jenna Greene, offers a number of other explanations for the 2014 drops as explained EEOC representatives and other employment attorneys.

Drop in Numbers Encouraging But Not a Reason to Get Lazy

The drop in 2014 numbers is encouraging, but employers shouldn’t get lazy in guarding against employment discrimination and other EEOC charges. For starters, there were still 88,778 charges of workplace discrimination filed with the EEOC.

Second, 2015 is shaping up to be a better year for the EEOC, at least according to the EEOC General Counsel, P. David Lopez. He notes that the agency is on track to post stronger results in 2015. Bolstering this conclusion, it is important to note that the EEOC has already won four of five jury trials to date.

Decline in HR Claims and the Role of HR

Going back to the National Law Journal’s article, a number of employment attorneys and EEOC representatives offer explanations for the 2014 drop in EEOC numbers. And certainly those explanations make sense and are likely to be a part of the lager narrative. But an equally important chapter in that narrative that is often overlooked is the increased sophistication and vigilance by HR professionals in with state and federal employment laws.

Our experience is that HR professionals are often on top of compliance matters and quick to identify issues in their infancy. In fact and without going into specifics of client matters, in the last quarter, we’ve had a number of opportunities to work closely with our business clients’ HR point person and in those instances the level of competency and attention to detail likely saved the company from becoming the wrong kind of EEOC statistic.  And (obviously) by being on top of the compliance side of employment laws, it means a company is going to increase the chance of successfully defending against an EEOC charge.

For more information about complying with federal or Michigan employment laws, as well as responding to an EEOC charge of investigation, contact employment attorney Jason Shinn.

 

 

 

CoExistAs an employment law nerd, I often get giddy when there is a meaty employment law issue being addressed by the U.S. Supreme Court (hopefully Justice Ginsburg took it easy on the sauce prior to oral arguments). But today I’m especially giddy because the Supremes are hearing arguments in the case captioned EEOC v. Abercrombie & Fitch Stores, Inc. The reason for the extra excitement is that I have a pending case that shares a central issue with the Abercrombie & Fitch.

Specifically at issue in the Abercrombie & Fitch case is whether an employer can be liable under Title VII of the Civil Rights Act of 1964 for refusing to hire an applicant or discharging an employee based on a “religious observance and practice” only if the employer has actual knowledge that a religious accommodation was required and the employer’s actual knowledge resulted from direct, explicit notice from the applicant or employee.

In a nutshell, a Muslim teen wore a black headscarf to her job interview with Abercrombie & Fitch. The headscarf would have violated Abercrombie & Fitch’s dress code (called the “Look Policy”). Among other things, the policy prohibits caps and black clothing. The Muslim teen, had worn a headscarf since she was thirteen because she believes it is required by her faith. An assistant manager later told a friend of the teen that she was not hired because of her headscarf.

Abercrombie & Fitch has taken the position that it didn’t violate federal anti-discrimination laws when it decided not to hire he headscarf would because it is up to the applicant or employee to make a company aware of a policy that conflicts with their religious beliefs.

The EEOC alleged that Abercrombie & Fitch had violated Title VII of the Civil Rights Act of 1964. That statute, in part, prohibits employers from refusing to hire someone because of her religious practices unless the employer can show that it would be an “undue hardship” to make allowances for the practice. The EEOC further contended that Abercrombie & Fitch should have made an exception to its “Look Policy” to accommodate the Muslim applicant’s religious beliefs. The trial court agreed with the EEOC, but that decision was appealed where Abercrombie & Fitch won with the Court ruling:

We reverse the district court’s grant of summary judgment to the EEOC. Abercrombie is entitled to summary judgment as a matter of law … Ms. Elauf never informed Abercrombie prior to its hiring decision that her practice of wearing a hijab was based on her religious beliefs and (because she felt religiously obliged to wear it) that she would need an accommodation for the practice, because of a conflict between it and Abercrombie’s clothing policy.

Bolstering the Court of Appeals decision is that fact that the EEOC’s policy materials encourage employers to actively engage in a dialogue with applicants or employees concerning their conflicting religious practice and possible accommodations that the employer might provide for it only after an employer is put on notice of the need for a religious accommodation.

The question to be answered, however, is what notice is sufficient and whether that notice must come from the applicant/employee. A decision in this case is not expected until later this year.

What will not change, however, is that once the need for a religious accommodation to the employer’s work rule or policy is made known to the employer, the burden rests on the employer to show that it could not accommodate the employee’s religious practice without undue hardship. Typically, religious accommodation suits involve religious conduct, such as observing the Sabbath, wearing religious garb, etc., that result in indirect and minimal burdens, if any, on employers or other employees. And while not always, more often than not, an employer can often accommodate such needs without too much inconvenience or unduly burdening other employees.

For more information about religious discrimination and accommodation, contact employment attorney Jason Shinn.

 

Employee religious beliefs and social media can create a firestorm for employers.Employers are often on the verge of becoming caught up in a firestorm when it comes to the religious and moral beliefs of employees. On the one hand there is the legal risks. But on the other, no business owner wants his or her business to be “trending” as the subject of a divisive public relations firestorm. Two examples illustrate these concerns:

Moral Objections to Giving Flu Vaccines.

On February 19, 2015, a federal district court judge ruled that Walgreens was within its rights to fire a pharmacist who had moral objections to administering flu vaccines. Specifically, the plaintiff, 66-year old Rodney Prewitt, was a pharmacist who had worked at the company for about five years prior to suing Walgreens. The lawsuit was filed after the pharmacy started a flu vaccine program that required pharmacists to complete a training program in order to administer the vaccines and immunize customers who asked for the service.

Prewitt, however, had moral objections to giving the vaccine and voiced these concerns at the outset and even before a lawsuit was filed. These concerns were confirmed in correspondence sent by Prewitt’s attorney to Walgreens, which documented his objection to providing immunizations “on the grounds of his moral/ethical and/or religious beliefs,” (citing to a state “Conscience Policy” law). He also referenced age discrimination in this pre-suit correspondence, which eventually formed the basis of his lawsuit.

The judge noted that Prewitt “testified that he was not allowed to work because of his conscience objection. The plaintiff proceeded under the theory that his suspension/termination were ‘wrongful’ based on his moral objection up until he realized that this claim was legally deficient.” The judge further found that Prewitt had made a minimal showing for an age discrimination claim (e.g., he was over 40, was qualified for his job, suffered an adverse employment action, and the circumstances of that action could indicate age discrimination.”

At that point, the burden shifted to Walgreens to show that it had a legitimate and nondiscriminatory reason to fire Prewitt. In this regard, the company argued that after the pharmacy started its vaccine program, administering those vaccines became a required part of Prewitt’s job. Accordingly, Walgreens demoted Prewitt and later terminated him because he refused to immunize customers. Accordingly, the Court made the following ruling dismissing the case:

The facts are clear. Walgreens made a business decision to market vaccinations, specifically the flu vaccine. Mr. Prewitt did not agree with this decision and voiced a moral objection. He refused to perform an essential part of his job. Though Mr. Prewitt’s objection may have been genuine and sincere, he has not established any unlawful discrimination by his employer.

(See Prewitt v Walgreens Order).

Doctor refuses to treat Lesbian Couple’s Infant after “much prayer.”

Last week a Metro Detroit pediatrician refused to treat an infant because the parents were lesbians. The Detroit Free Press reported that Dr. Vesna Roi, after agreeing to treat the lesbian couple’s child, later changed her mind. For reasons not reported, Dr. Roi waited until the lesbian couple showed up for their infant’s appointment and were in the waiting room to make them aware of her decision. Adding injury to insult, Dr. Roi refused to personally inform the couple and had another staff member tell the lesbian couple of the change. According to the doctor’s apology note, “after much prayer following your prenatal (visit), I felt that I would not be able to develop the personal patient doctor relationship that I normally do with my patients.”

It is important to note that Dr. Roi did nothing illegal under the circumstances — in Michigan there are few legal protections that protect the LGBT community from discrimination. But consider this story from Dr. Roi’s practice, Eastlake Pediatrics, and her fellow doctors – they are now at the center of a divisive public relations firestorm that has nothing to do with the business. Further, as of publication of this blog article, there were almost 600 comments and the story had been retweeted over 300 times. Those comments run the spectrum – from insightful t0 dergatory – and represent views at both ends of the spectrum. But none of them speak to the quality of the core services being offered at the medical practice.

In addition to responding to the public relations side of the equation, there are the legal concerns: If the doctor is an employee of the clinic, it would have to address the likely religious discrimination and/or accommodation claim the doctor would no doubt make if any adverse employment action were to be taken by the employer. And, as the above pharmacist’s lawsuits illustrates, even a weak case can be dressed up to include other claims (religious belief/accommodation) that takes time and money to defend against.

Conclusion

So what’s an employer to do when an employee has a moral or religious objection that implicates an employer’s business? Unfortunately, there is no single right answer or set of recommendations that can be offered because the appropriate response will depend upon the actual circumstances. But even so, it is likely that the employer will need to make difficult decisions to balance protecting the brand and its business in the eyes of its customers while respecting the religious and other rights of employees. Have fun with that.

For more information about this article or complying with federal and Michigan employment laws, contact attorney Jason Shinn.

Building a BusinessMichigan, like many states, seeks to create a vibrant start-up environment. And as a further sign of that commitment, February 18 through February 25, 2015 marks Entrepreneurship Week in Michigan under a recent proclamation from Gov. Snyder.

The preamble for the Governor’s proclamation notes that:

More than 70 percent of young Americans envision starting a business or doing something entrepreneurial as adults…Entrepreneurship is critical to success in the workplace and in communities as it brings ideas, creativity and innovation to life and drives economic growth on local, state and national levels … Entrepreneurship encourages job creation and is a vital part of Michigan’s reinvention and continued growth.

While the pomp and circumstance surrounding a whole week dedicated to entrepreneurship is nice, it is critical to also focus on an issue that every boot-strapping entrepreneur needs to address as they grow their business – employees.

Certainly business startups will face any number of hurdles in starting their business. But employee issues often top the list. In this regard, most start-ups encounter problems if they fail to have the right employment documents ready to be signed by newly hired employees. The following employment documents should be in every new company’s HR toolbox:

  • Employee Offer Letters and Employment Agreements – Every start-up should have a standard offer letter to be signed by new employees. Among the topics to include in the offer letter will be the terms and conditions of the position; noting whether it is “at-will,” meaning the employee or employer may terminate the employment relationship for any reason or no no reason at all (assuming the reason is not for unlawful discriminatory reasons or other reasons that violate applicable law), and the start-date. Another provision employers should consider including is asking the employee to sign and return an acknowledgment that the employee is able to accept the position without violating any obligations to prior employers, e.g., noncompete restrictions.
  • Intellectual Property or Inventions Assignment Agreement – Such agreements provide that any inventions, ideas, products, or services developed by the employee during the term of employment and related to the business belong to the company and not the employee.
  • Employee Manuals – Employers should consider employee manuals as roadmaps for how your company operates. A few common examples of items that should be covered in an employee manual include anti-harrasment and discrimination policies, how to report such issues and other employee misconduct, company policies on vacation, employee social media policies, and computer and internet usage policies.

A word of caution; It may be tempting to try and save a few dollars by “borrowing” the above HR documents from a former employer or scouring the Internet for free forms. But such penny pinching can also leave your business unprotected. Consider for example a recent post about a company that had won at the trial level in a Family Medical Leave Act lawsuit, but that decision was reversed on appeal because of a mistaken representation made in the company’s employee manual. Such mistakes also frequently happen when it comes to improperly or incomplete noncompete agreements.

Noncompete and confidentiality agreements are also an area where entrepreneurs often get their companies into trouble by not having such documents drafted specific to their needs. See DIY Employment and Noncompete Agreements: Are You Getting What you Pay For? In sum, if you are investing your time, money, and other resources into starting a business, then you should also plan on protecting that investment with appropriate employment documents and other legal protections.

For more information about employee manuals, employee contracts, noncompete agreements and other employment related documents, contact attorney Jason Shinn.

Throwing the Flag Employee MisconductThis past week saw the Seattle Seahawks skillfully avoid winning back-to-back Super Bowls because of (arguably) bad decision-making (all the Seahawks had to do was move the ball 36 inches into the end-zone – the only other decision worse than passing in that situation was having Katy Perry perform at half-time, but I digress).

An employer found itself in a similar situation and after further review its victory in an employment-related discrimination claim was reversed because of poor decision-making in relation to its employee manual.

Specifically, the Sixth Circuit Court of Appeals (the federal circuit that covers Michigan employers) reversed a trial decision in favor of an employer in Tilley v. Kalamazoo Cnty. Rd.Comm’n (1/26/2015). The employer was sued for claims under the Family Medical Leave Act (FMLA) (29 USC § 2601 et seq.) and under Michigan’s Elliott-Larsen Civil Rights Act.

The FMLA and Eligibility

For background purposes, the FMLA provides employees “a total of 12 workweeks of leave during any 12-month period for . . . a serious health condition that makes the employee unable to perform the functions of the position of such employee.” 29 U.S.C. § 2612(a)(1)(D). Importantly, these FMLA benefits are not available to all employees. Only an “eligible employee” who works for an “employer” – as both terms are defined under Act – may obtain such benefits.

The Court of Appeals agreed with the district court that the plaintiff employee was not FMLA eligible pursuant to what is called the FMLA’s 50/75 Employee Threshold (to be FMLA eligible, an employer must employ at least 50 employees at, or within 75 miles of, the employee’s worksite at the time the FMLA leave was requested). Again, it was undisputed that the Road Commission did not employ at least 50 employees at, or within 75 miles of, his worksite at the time the plaintiff sought FMLA leave.

At this point, the employer should have been well into its touchdown dance. But there was a flag on the play – an incorrectly drafted employee manual. The Court, while acknowledging the plaintiff employee was no FMLA eligible, noted that the employer’s manual said otherwise:

[Plaintiff] showed that the Road Commission’s Personnel Manual (the “Manual”) contained a clear misrepresentation as to his eligibility to apply for FMLA benefits … This is an unambiguous and unqualified statement that Road Commission employees, like [Plaintiff], who have logged 1,250 hours in the year before seeking FMLA leave are covered by the FMLA and are eligible to apply for FMLA benefits …. The Road Commission could have qualified its statement concerning employee eligibility … the Road Commission’s unqualified statement that employees in [Plaintiff’s] position are covered under the FMLA satisfies the misrepresentation element of the equitable estoppel test.

The equitable estoppel reference refers to a doctrine that courts may apply to employer policy statements regarding an employee’s FMLA eligibility. If applied, the doctrine prevents the employer from raising non-FMLA eligibility as a defense.

Take-Away for Employers

The employee manual is one of the most basic and recognized tool in an employer’s toolbox. It really should be the fundamental cornerstone for any employer’s HR best practices.

And one of the most popular questions our law firm gets from start-up companies and growing companies is “Why should my company pay your law firm for an employee manual when I can just [insert any number of sources where employee manuals are magically produced]?” This case perfectly answers that question – when an employee manual is not properly drafted or is not regularly updated, it is as bad as not having one in the first place and can cost your company significant multiples of what it would have cost to properly draft it in the first place.

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.

Michigan Employment LawIs an intern an employee? This question is expected to be answered in the coming weeks – at least for employers in the Second Circuit.

Specifically, the Federal Court of Appeals for the Second Circuit Court is expected to answer this question after it reviews two earlier conflicting opinions in two separate cases filed that were filed by unpaid interns. The opposite outcomes in the unpaid intern cases essentially left employers and their unpaid internship programs in legal limbo.

The Fox Searchlight Black Swan Intern Case – In June 2013, a New York district court judge agreed with former Fox Searchlight Pictures interns that they deserved minimum wages for their work at the company. The two interns in that case worked on the 2010 film Black Swan and claimed in a lawsuit that during their time at Fox, they received no compensation even though they completed work assignments that were typically the responsibility of paid employees. Those tasks included taking lunch orders, answering phones, and making travel arrangement.

The Hearst Corporation Intern Case – In May 2013, a conflicting decision was reached when a New York District Court judge agreed with Hearst Corporation and ruled that it did not violate labor laws by not paying its unpaid interns while they interned at Harper’s Bazaar, Cosmopolitan, Marie Claire, and other magazines.

Despite the similarity of the cases, the District Court judges reached opposite results because they relied on different approaches to determine if interns should be covered by employee protections. Specifically, the District Court judges relied upon a 1947 Supreme Court ruling in a case about railroad trainees, which eventually served as the basis for an internship fact sheet the Department of Labor compiled in 2010. That fact sheet identifies six criteria that the federal Labor Department says must be met in order for an unpaid internship to be legal, which are as follows:

  1. The internship, even though it includes actual operation of the facilities of the employer, is similar training which would be given in an educational environment;
  2. The internship experience is for the benefit of the intern;
  3. The intern does not displace regular employees, but works under close supervision of existing staff;
  4. The employer that provides the training derives no immediate advantage from the activities of the intern and on occasion its operations may actually be impeded;
  5. The intern is not necessarily entitled to a job at the conclusion of the internship; and
  6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

So two judges, looking at substantially identical facts, using the same test, but reaching opposite conclusions? Essentially what happened is that the judge in the Fox case used the Department of Labor criteria as a rigid checklist. As such, the judge found that the movie studio failed to meet every requirement. In contrast, the judge in the Hearst case, used the rules as more of a “framework” (referred to as a “balancing of the benefits test”) for assessing the employee-employer relationship, which looks to the “totality of circumstances” to evaluate the “economic reality” of the relationship. Under the “framework” test, the judge in the Hearst Case decided the employer met enough of the Department of Labor’s requirements to make its unpaid internships legal.

The Second Circuit is expected to rule in the coming weeks which interpretation is correct.

Closing Thoughts

Obviously Federal and Michigan labor and employment laws apply to employment relationships. But the two cases above illustrate that the question of what counts as an employment relationship for legal purposes is not so simple. And because of the uncertainty, some employers have simply ended their internship programs. Others have began to pay interns (See Claire Zillman’s article in Fortune, “Unpaid interns have their day in court—again“).

For me personally, I’m pulling for the “framework” argument to win, but for purely personal and selfish reasons that have nothing to do with representing employers and a belief that internships provide valuable experience. Instead, I grew up believing rules were more of a guide or a framework rather than a rigid mandate to follow. This view, however, was often at odds with my parents and teachers. So I’m looking for validation from the Second Circuit Court of Appeals that I had the correct view. An opinion is expected to be issued in the coming weeks and I have my “I told you so” letter ready to go out.

For more information about your company internship programs or other Federal and Michigan employment law compliance issues, contact employment attorney Jason Shinn. Mr. Shinn has been practicing law since 2001 in the areas of federal and Michigan employment law and litigation, as well as investigating workplace misconduct. He prefers to work with companies on the front end in order to avoid employment lawsuits.

 

Business Jiu JitsuOutside of being an employment law attorney, I practice Brazilian Jiu Jitsu. It is a grappling based martial art that owes its modern development to the Gracie family, especially Helio Gracie. But it also offers a broader perspective for approaching conflict outside of physical matches. And – since business is rife with conflict – it frequently offers applications to businesses and start-up companies, especially in the area of employment law.

This point was driven home at a recent class. One of my instructors, Josh Bagely, (on the left in the link) was teaching a particular technique but expanded on three core principles that need to form the basis of every jiu jitsu technique:

  1. Preservation – First, regardless of what is happening in a jiu jitsu match or a self-defense situation, before you can take any other action, you must first make sure you are in a position where you can protect yourself;
  2. Control – Second after you’ve taken steps to protect yourself now is the time to work to gain control of the situation and your opponent. Here you are taking steps to put yourself in a position for going on the attack;
  3. Attack – Once you have the first two principles taken care of, you are now going to be in a strong position to go on the offensive in terms of looking for submissions or other scoring opportunities.

Instructor Bagaly is a jiu jitsu black belt and a very successful competitor. He further explained that his success on the mat goes back to continually assessing whether he is following these principles. In other words, there are times he has taken care of the first two concepts and began to work towards a submission, i.e., an attack. But his opponent counters, which may require going back to regaining control. Or, if you take a big gamble (or are less experienced like me), you may find yourself having lost significant ground and forced to expend a lot of energy and effort focusing on preservation or regaining control. In sum, failing to abide by these principles in a jiu jitsu match often results in being on the wrong end of a submission (trust me on this).

Business and Jiu Jitsu – Protecting the Business, Controlling its Growth, and Competing in the Marketplace

Professionally speaking, in working with start-up companies and even established businesses, we often see where these principles have not been looked at in a while or even overlooked from the outset. For example, entrepreneurs will often take appropriate steps to form a business but then everyone involved in the venture jump right into bringing the product/service development to market. So they have gone from minimal preservation (forming a business entity) to attacking, i.e., getting the product or service to market. It is not uncommon to find that in that rush one founder has the company’s domain name registered in his or her own personal name. Another founder may be contributing the initial intellectual capital to be expended upon by another employee, founder, or both.

But in these circumstances the control aspect was ignored in terms of not having having or having inadequate non-compete, non-disclosure, or employee invention/intellectual property assignment agreements in place to cover these and other situations. Such agreements allow for a significant measure of control for building the company and putting it in a place to successfully compete in the market place, and an eventual exit strategy for the founders. Without that control, however, it is not uncommon for founders battling over ownership interest in designs, software, or other intellectual property with employees in addition to employment law compliance issues that can arise along the way.

Another very common fact pattern where businesses get into trouble is ignoring the need for ongoing assessment. After moving beyond start-up, your company is now expanding. But it has been a few years since your company first drafted its employee manual/employment contracts. And since that time, there may have been significant changes to workplace laws or “novel” theories by employment-based regulatory agencies as to what is or is not permissible in company employee manuals. If these issues aren’t updated, you may have a ticking time bomb hiding in your company’s employment documents.

Or maybe a significant court opinion has come down limiting the effectiveness of certain restrictions in a non-compete agreement. Going back to the concepts of preservation, control, and attack, your company should assess whether it is still on solid ground to maintain appropriate control of employment risks and opportunities before expanding its human resource assets. Otherwise, the next round of competition may not be against competitors, but rather against a former employee who is challenging his or her non-compete restrictions from the offices of your competitor forcing your company to expend time and resources on legal fees dealing with ancillary issues that, if properly controlled in the first place, would not have been an issue or an issue easily dispensed with early on in the dispute.

Closing Thoughts on Business and Jiu Jitsu Strategy

One of the appealing aspects of jiu jitsu training is certainly its effectiveness in terms of self-defense. But what keeps me going back is that at my particular gym instructors like Harvey Berman, Angelo Popofski, Brandon Fracassi-McDaniel, and  Josh Bagaly go beyond teaching just a bunch of techniques. Instead, they provide rich context for the jiu jitsu principles behind the techniques. And that context frequently extends outside of the gym into law, business, and life in general. This isn’t surprising when you consider how its founder, Helio Gracie, viewed the art: “Jiu Jitsu is personal efficiency … which anyone can do. It is the force of leverage against brute force.”

As an employment and business law attorney, this quote drives home the point of how companies and start-ups should approach business – continually taking the steps to monitor and investing the time to allow their business to efficiently compete without having to resort to brute force in the form of substantial legal fees that escalate pursuing or defending against drawn-out litigation. For more information about federal or Michigan employment legal issues or otherwise discussing employment best practices for your start-up company, contact attorney Jason Shinn. Since 2001, he has represented entrepreneurs, start-up companies, and established businesses in responding to employment and business law challenges. This experience includes pursuing or defending such matters in state and federal courts.