Knockout.jpegIn what has been perhaps the most telegraphed wind-up punch to hit employers in some time, the National Labor Relations Board (NLRB) has finally weighed in on the issue of employer social media policies. 

Specifically, on September 7, the NLRB issued its Order striking down Costco Wholesale Corporation’s social media policy and related electronic posting employee policy. The Costco decision has been a long time in the making with the actual time line as follows: 

  • On August 2011, the NLRB’s acting General Counsel Lafe Solomon first signaled that the NLRB would be entering the fray of employment and social media fray back when the NLRB’s first social media report was issued. The NLRB’s August Social Media report is available here.  

If there was any doubt as to what direction the actual NLRB would take when it came to employer social media policies, the Costco decision put that doubt down for the count when it invalidated Costco’s social media employee policy found in its handbook that prohibited employees from making statements that “damage the Company, defame any individual or damage any person’s reputation.” 

What Does the NLRB’s Striking a Company’s Social Media Policy Mean for Employers

For employers and HR professionals, the NLRB’s full body of work pertaining to employer social media policies is worth analyzing. But employers should definitely take away the following from the NLRB’s decision to invalidate Costco’s social media policy:

First, Section 7 of the National Labor Relations Act applies to all employees—unionized and non-unionized—the right to engage in protected “concerted activities for the purpose of collective bargaining or other mutual aid or protection.”  A broad employer social media policy that comes within an area code of infringing or discouraging employee rights under Section 7 of the NLRA exposes the employer to coming under fire from the NLRB. 

In this regard, the NLRB was specifically critical of Costco’s social media policy because it “does not present accompanying language that would tend to restrict its application.”

This brings up the second take-away; Employers should include a “savings clause” or express disclaimer that protected Section 7 communications are excluded from the employer’s social media policy – no matter how broadly the policy may be read.

While not a silver-bullet, a “savings clause” or exclusionary clause carving out Section 7 rights from an employer’s social media policy was specifically lacking in Costco’s policy. 

Indeed, there is nothing in the rule that even arguably suggests that protected communications are excluded from the broad parameters of the rule … [Costco] does not present accompanying language that would tend to restrict [the social media policy rule’s] application. 

Accordingly, a provision carving out Section 7 rights from an employer’s social media policy would tend to put employees on notice that the policy’s application is not intended to inhibit protected employee activity under Section 7, which include rights to unionize, collectively bargain, and strike.

Next Actions for Employers When it Comes to Social Media Policies

Both union and non-unionized employers need to be prepared to avoid round two now that the NLRB’s stance on social media policies is firmly established as set forth in the Costco decision. Accordingly, employers should carefully review their social media policies and employee policies to ensure that they do not contain “broad” prohibitions that are unlikely to survive NLRB scrutiny.

Scalpel.jpgAfter an individual’s employment is terminated and that individual begins working for a competitor or starts his or her own business, a common question asked by both the individual and the former employer is whether a noncompete agreement can be used to restrict one’s post employment opportunities.    

The short answer is … well, there really is not a short answer because the enforceability of a noncompete agreement will depend upon any number of facts and circumstances.

Having said this (isn’t it just like a lawyer to talk out of both sides of his mouth?) under Michigan law, noncompete agreements are enforceable as a matter of course, but such enforcement is subject to numerous requirements, some of which are discussed below. 

Employers and Employees May Enter into Noncompete Agreements under Michigan Law. 

Under the Michigan Antitrust Reform Act (MARA), MCL 445.771 et seq., an employer and employee are free to enter into an agreement to protect the employer’s “reasonable competitive business interests” and to prevent post employment competition by the employee, as long as the agreement is reasonable in duration, geographical scope, and the type of activity restrained. MCL 445.774a. The employer has the burden of showing the reasonableness of the noncompete agreement.

Dissecting What Makes a Noncompete Agreement Enforceable or Unenforceable

So let’s dissect exactly what an employer or employee should consider in determining what impact a noncompete agreement will have on future employment opportunities and competitive interests.   

  • What is Protectable as a “competitive business interests? 

Noncompetition agreements may be used to protect interests such as “trade secrets, confidential information, close contact with the employer’s customers or customer lists, or cost factors and pricing.” In essence, if something provides your business with an advantage over your competition, it should be a “competitive business interest” that is worth protecting.  

  • What is not Protectable as a “competitive business interest? 

Noncompete agreements cannot, however, prohibit future use of an employee’s “general knowledge or skill.”  

  • The Scope of the Restriction Must be Reasonable. 

The noncompete restrictions that must be “reasonable” generally involve geography and time, i.e., how long is the restriction in place? In this regard, the Devil is certainly in the details and it is those details that will drive the analysis to determine if a noncompete agreement will be upheld as reasonable or struck as unreasonable.

In dissecting those details, the following considerations will be critical to the analysis of the enforceability of a noncompete agreement:  

  1. Broad Geographic Limitations May be Reasonable.  The reasonableness of a geographic restriction will depend on the nature and scope of the employer’s business and the nature of the employee’s duties and responsibilities. Under some circumstances, an employer may be entitled to a global restriction to protect the employer’s reasonable competitive business interests. For instance, applying Michigan law, a worldwide noncompetition agreement has been considered “reasonable if the employer actually has legitimate business interests throughout the world.” In that case (Superior Consulting) the employer conducted business in 43 states and several foreign countries, which supported the court’s conclusion that the noncompetition agreement’s unlimited geographical scope to be reasonable.
  2. Broad Geographic Limitations May be Unreasonable. The geographic scope of In other cases, the courts have used their discretion to limit the geographical scope of an agreement to a rather small area. For example, in Robert Half Int’l, Inc v Van Steenis, 784 F Supp 1263 (ED Mich 1991), where the defendant provided the same services as his former employer, the court limited the geographical scope to a 50-mile radius of the former employer’s offices.
  3. The Duration of a Noncompete Agreement Must Be Reasonable. Similar to geography, the reasonableness of a time restriction in a noncompete agreement will depend upon the facts and circumstances involved. While each situation should be independently assessed, as a general rule of thumb, six months to a year will often be upheld as reasonable. But again, there is no science to this determination and there will often be circumstances that permit this time to be expanded.  

Closing Thoughts

Noncompete agreements involve an area of law that both employers and employees should not leave to chance because there are significant ramifications to both. Further, noncompete law is very specialized and often very fact intensive when it comes to the enforceability of a noncompete agreement and knowledge of how the law may apply to your particular situation or industry is critical for drafting an enforceable noncompete agreement.

In addition to the legal issues discussed above, drafting a noncompete agreement that is likely to be upheld requires careful attention to its practical application. For example, a noncompete agreement drafted too broadly that effectively eliminates an individual from being able to work in any capacity has little chance of being enforced. 

For more information about drafting enforceable noncompete agreements, please contact Jason Shinn. Also, see What Happens When a Noncompete Agreement is Violated? A Blueprint for Noncompete Litigation, for more information about enforcing or defending against a noncompete lawsuit. 

Business Professionals.jpgOn September 11, 2012, Michigan took one step closer to implementing a court system specializing in handling business and commercial cases.

Specifically, the Michigan Senate Judiciary Committee unanimously approved legislation that would create a business court system that would exclusively determine disputes if all or part of the claim included a business or commercial dispute where the amount in controversy exceeded $25,000.

Business disputes would further include: 

  • An action in which all of the parties are business enterprises.
  • An action in which at least one of the parties is a business enterprise and the other parties are its or their present or former owners, managers, shareholders, members, directors, officers, agents, employees, suppliers, or competitors, and the claims arise out of those relationships.

According to a well-respected business lawyer, Doug Toering, who has been closely following the legislation, there are likely to be minor amendments added to the bill to address procedural issues (i.e., the mechanics for moving cases in or out of the business court if a claim is added or dismissed in a multiple claim lawsuit), which will need to be approved by the full Michigan Senate and then signed into law by Gov. Snyder before it will go into affect. 

Michigan Business Courts and Employment Related Lawsuits. 

With respect to employment claims, the proposed legislation specifically excludes from its coverage the following:

  • Employment discrimination claims;
  • Civil rights claims, including actions brought under Michigan’s  Elliott-Larsen Civil Rights Act and the Persons with Disabilities Civil Rights Act; and 
  • Wrongful discharge claims, except for actions involving corporate officers or directors.

But not everything arising in the employee/employer relationship would be excluded from the coverage of Michigan’s proposed business court. Claims arising out of noncompete or trade secret misappropriation claims would likely fall under the business court’s jurisdiction, even though such claims commonly arise in the context of the employment relationship.  

Benefits of a Michigan Business Court System. 

In theory, business courts make a lot of sense for Michigan businesses. Consider these three benefits: 

  • First, it is anticipated that the creation of a business court will have only a minor fiscal impact because the court would be run by current judges who would be assigned to the business court.
  • Second, the proposed Michigan business court system would assign business and commercial cases to specific judges who are experienced in business and commercial law issues and statutes specific to such claims, e.g., the Uniform Commercial Code, noncompete agreements, compliance with corporate or limited liability company statutes, as well as issues unique to such business entities, e.g., governance, powers, duties, and management. 
  • Third, by having judges specifically assigned to deal exclusively with business and commercial claims, business court judges would presumably continue to develop that judge’s expertise and insight into such issues, leading to more consistent and well-reasoned business decisions. 

Judicial Campaign Donations, Business Courts and Public Perception.

One concern, however, is the perceived influence money may have in determining business disputes. By limiting the number of judges who hear business disputes, an unintended consequence is that it is easier for donors to funnel money in the form of campaign contributions who are likely to regularly appear before these judges.

For both the public and those businesses that lack the financial resources to make matching contributions there is the risk of eroding the public trust and diminishing the value of the judicial process when it comes to business disputes. 

Take for example billionaire Matty Moroun and his very public and very expensive efforts to win the legal and public opinion battle to prevent the building of a second bridge from Metro Detroit to Canada in order to protect his current monopoly. In this regard, the Detroit Free Press recently reported that Matty Moroun, his wife, his son, and his son’s wife, gave the maximum amount of money allowed under Michigan law in June to the re-election campaigns of Republican-nominated justices. Additionally, several employees of one of Mr. Moroun’s company gave over half of the maximum amount allowed under Michigan law.

For those not familar with what is at stake for Mr. Moroun’s bridge empire, it is worth your time to read a great write up from Businessweek: Matty Moroun: Detroit’s Border Baron, which estimated that tolls from the bridge owned by Mr. Moroun’s company takes in approximately $156,000 per day. 

The issue of money and judicial integrity made major headlines in 2009, when the U.S. Supreme Court heard Caperton v. Massey. That case specifically addressed the issue of the role money played in a judicial election. This case arose out of a West Virginia trial where Hugh Caperton won a $50 million jury verdict against Massey Coal.

Massey appealed that verdict to the West Virginia Supreme Court. While the case was pending to be heard by this court Massey, through its CEO Don Blankenship, gave a $3 million campaign contribution in support of Brent Benjamin in his race for state Supreme Court Justice. Benjamin won the race, and refused to recuse himself from the Caperton case where he ended up casting the deciding vote in a 3-2 ruling to overturn the $50 million verdict against Massey. 

The US Supreme Court agreed 5-4, sending the case back to the West Virginia Supreme Court,and forcing Justice Benjamin to recuse himself from the case.

In both instances, there is the danger that the erosion of public trust – whether by individuals or companies – in the judiciary is significant. And those concerns may be magnified where you are whittling down the number of potential judges who are likely to hear your business case. 

Closing Thoughts on Michigan Business Courts

Does money actually influence a judicial decision? Without answering the question, the U.S. Supreme Court in the Capperton v. Massey decision reasoned that where a judge received $3 million in campaign contributions, “the probability of actual bias on the part of the judge or decision maker is too high to be constitutionally tolerable” and, as such due process required that judge to recuse himself.  

Going back to the question about money and influence, my personal belief – based on experience and a genuine belief in the principles of the rule of law, is mostly no. But the answer, however, matters less than what the public and those who are affected by such decisions believe to have taken place in any particular case. And that belief can be easily persuaded where headlines report high-powered billionaires or corporations flood a smaller field of business court judges with campaign contributions. 

For more information about this post, including how noncompete lawsuits and trade secret misappropriation claims will likely be affected by the creation of business courts, contact Jason Shinn.  

QWERTY Keyboard.jpgA recent court appearance provides an example of what any company concerned about reducing unnecessary costs should be aware of when it comes to managing outside legal counsel.  

Specifically, I was in court last month in relation to a hearing on a motion in a sexual harassment / wrongful termination claim I’m defending. A fairly prominent attorney from a major Metro Detroit law firm was also sitting in the bleacher seats waiting for his case to be called.

When his case was called, he approached the podium with another attorney who he introduced as his partner. The attorney proceeded to explain that his motion was unopposed and that opposing counsel had actually agreed to the relief requested. 

Bluntly speaking, it made no sense for two attorneys – partners no less – to attend a hearing on a motion that a judge routinely grants. In fact, these types of motions are what newbie attorneys cut their teeth on when first practicing law, which makes sense: It gives a new lawyer the opportunity to get court room experience, at a lower cost to the client. 

This incident reminded me that being an attorney often has more in common with the QWERTY keyboard than creating meaningful value for clients.

The QWERTY Keyboard and Intended Inefficiency 

The modern keyboard, called QWERTY because of the placement of first six letters on the top row of the keyboard, was developed in the 1870s by Chistopher Sholes. An explanation for the nonsensical placement of the keys was to reduce the efficiency of typists who would otherwise cause the keys of early typewriters to jam.

In other words, the QWERTY keyboard was designed with the intention to be inefficient. One blogger,Darryl Rehr, has bluntly described the design as making “no sense. It is awkward, inefficient and confusing …” It also makes no sense in light of the advancement in computers and word processors that are intended to improve efficiency not reduce it. 

The Inefficiency that is the Attorney’s Billable Hour

Similar to the QWERTY keyboard, the “billable hour” is the dominant fixture for delivering legal services. Time, generally measured in increments of tenths of an hour, is often the measuring stick used to deliver legal services. So however long a particular task takes – researching a legal issue, a phone call, traveling to court, etc. – that is how much time a client will be charged for legal services.  

Going back to the above example, what value did the client receive in having two experienced lawyers, both partners at a major metro Detroit law firm, attend an unopposed motion that the opposing lawyer actually agreed to the relief requested? Like the QWERTY keyboard, this decision made no sense and was an inefficient use of the client’s resources. 

Steps Companies can take to avoid QWERTY Keyboard Legal Services

The purpose of this post is not to embarrass or call out any of the attorneys referenced above. In fact, I’ve gotten to know the prominent attorney referenced above having had several cases on opposite sides of him and his law firm; He is a nice guy, sharp and professional.

But similar to early word processing that depended upon built in inefficiencies for success, this attorney’s law firm, like many law firms, depend upon generating billable hours for their financial success. But that metric essentially defines a lawyer and the law firm by quantity of the work, not quality, which is no strategy for a law firm’s long-term financial success. See John Grimley over at the International Business Development Blog who recently reported about law firms looking to survive need to recalibrate their focus on becoming lean and efficient providers of legal solutions.   

So for companies defending any lawsuit – not just an employment related lawsuit – it is important to carefully scrutinize your law firm’s billing practices and specifically address the misalignment created by hourly billing in order to reduce excessive lawyer fees. In this regard, here are a few points of consideration: 

  • How will a case be staffed? 

There are a number of legitimate reasons for staffing the defense of a lawsuit with more than one person. For instance, paralegals and associate attorneys will have a lower billable rate than a more senior-experienced attorney. And it is not necessary for a senior attorney to perform tasks requiring less or no analysis. So ask this question and make sure the staffing is reasonable in relation to the issues presented – not your company’s bank account. 

And as invoices are provided, be sure to review them to confirm staffing makes sense. If it is not immediately apparent if this is true, follow up with the law firm. There may be a good explanation for it. Or, like the example above, you may be reminded of the saying that pigs get fat, hogs get slaughtered.  

  • What are your available billing options?

Billable hours are not inherently evil, but it does create an incentive that is contrary to the client’s best interests. It is, therefore, important to have a certain level of trust in your attorney that work performed is necessary or has a likelihood of returning a measurable return on investment. My own measuring stick for this requirement is to make legal decisions as if I was spending my own money.

Also, billing on an hourly basis should not be the only option, so consider discussing other billing alternatives that align your interest with the attorney. 

  • What is the billable hour requirement at the law firm and how are bonuses determined?

The answers to these questions will probably give you the best insight as to what you can expect from a law firm and its attorneys. By way of reference, a common yearly billable hour requirement for Metro Detroit law firms is 2000, but I’ve had friends at law firms where that number shot up to 2,300 or dropped to 1800 with bonus incentives built around the minimal requirement.

In this regard, the billable hour is both the “carrot” and “stick” for the attorneys working on your matter: The carrot in that bonuses are doled out based on time billed in excess of a certain number and the stick that if a certain number of billable hours is not reached, then the attorney has not met the law firm’s minimal billing requirements (never a good thing for job security and financial success).

In either event, you have attorneys – partners and associates alike – motivated to “survive” by hitting their hourly marks and to thrive by exceeding those marks. The hours needed to hit those marks must come from somewhere and the question is, how many hours will come from your matter? But lost in this equation, however, is an assessment of how many of those hours provide meaningful value to the client – as opposed to “garbage hours. Sending two attorneys for an unopposed motion is a prime example of garbage.  

For more information about billing arrangements that are more in line with business objectives and corresponding values, please see our commitments we promise to deliver to clients.  

Women are Teachable.jpg

Labor Day is generally considered a time to recognize the social and economic achievements of U.S. workers. And a significant amount of this achievement is due to opportunities presented by removing overt discriminatory barriers to employment.  

But it is also important to realize that many employment-related statutes were passed – in part – to combat less overt barriers such as stereotypes that blocked women and others from obtaining equality in the work place. 

Anti-Employment Discrimination Statutes Generally Prohibit Making Employment Decisions Based on Stereotypes 

Consider for example, Michigan’s Elliot-Larsen’s Civil Rights Act’s ultimate purpose is not merely to eliminate the discrimination but also the effects of discrimination, particularly “the effects of offensive or demeaning stereotypes, prejudices, and biases.” Miller v CA Muer Corp, 420 Mich 355, 363, 362 NW2d 650 (1984).

It is easier to understand why prohibiting discrimination based on stereotypes is just as important as prohibiting overt discrimination when you look back on what stereotypes, existed. 

Take for example the images included in this post, which come from the RCA Company manual, circa 1940s that was posted by Retronaut. 

At the time the intended audience for this manual probably appreciated some guidance in how to work along side women who began to transition from kitchen and reproductive duties to simply production duties. But now (hopefully) it is at best humorous to think that companies held views like “women are teachable” (above). 

Stereotypes still persist, but the discussion now more often than not takes place outside of the workplace. 

Fast forward to the present and it is clear that stereotypes still persist, just not in company policies and the workplace. Instead, Marissa Mayer’s recent ascension to the ranks of CEO of a major U.S. Corporation, Yahoo, illustrates that the headlines garnered by Ms. Mayer focused as much or more on her pregnancy and whether it was realistic or appropriate for her to balance motherhood with the demands of a major CEO position.

Women are Patient.jpgYet, it is even more significant that her pregnancy or how she would balance the demands of the job with motherhood did not deter Yahoo from considering Ms. Mayer for the position, let alone hiring her for it. Score one for progress.

But Yahoo like other employers recognize that the employment landscape has changed. Consider that according to the Pew Research Center, women made up almost half of the labor force (46.7%) in 2010. And in terms of education, women surpass men in both college enrollment and completion.

In light of these facts, perhaps Yahoo should be providing Ms. Mayer and her sisterhood with manuals assuring them that men are “teachable” (although my wife may argue it takes more time and effort) and do not be afraid to call a “trained male counselor” in dealing with male workers.  

In all seriousness, since the time of the manual depicted in this post, women have and continue to make significant gains in their labor force participation and educational attainment. And the majority of U.S. society tends to view this as a positive change. Specifically, a September 2011 Pew Research poll found that 73% of Americans feel that the trend toward more women in the workforce has been a change for the better in society.

Women are Cooperative.jpg

Women in the Workplace – Conflicting Societal Views, but Employers Don’t Have the Option to be Conflicted.    

The public may be conflicted about what it means for a woman to properly balance career and family obligations.

But an employer should not have any such conflict for good reason: An employer cannot generally comply with state or federal law by making employment decisions based on suspicion, assumption, or subjective information that a person cannot perform a job because of a protected characteristic, such as gender, pregnancy, or age.

In 2010, women made up almost half of the labor force (46.7%). In 1997, women made up 46.2% of the labor force, and back in 1970 women made up only 38.1% of the labor force.

 

 

Balancing Stones.jpgA previous post on this blog discussed ways for employers to increase the effectiveness of a company’s social media policy (See The Sweet-spot for Increasing the Effectiveness of a Social Media Policy: Employee Self-Interest).

One of the real-world examples discussed in that post was a lawsuit against a former Michigan Assistant Attorney General Andrew Shirvell that arose out of Mr. Shirvell’s use of social media. As explained below, on August 16, 2012, a jury returned a verdict in this case (it did not turn out well for Mr. Shirvell).  

Specifically, Andrew Shirvell was fired as a Michigan assistant attorney general, mocked (quite brilliantly) on the Daily Show, and eventually sued in federal court for using social media (blogging) to chronicle his obsession over a former student body president at the University of Michigan, Chris Armstrong.

Mr. Armstrong is openly gay and Mr. Shirvell, a self-described “right-wing guy,” started the “Chris Armstrong Watch” blog. On his blog, Mr. Shirvell repeatedly blogged about Mr. Armstrong, including post that he was promoting a “radical homosexual agenda” and referring to Mr. Armstrong as a “gay Nazi.”

While almost no one (thankfully) would sympathize with a Nazi – gay or otherwise – a jury felt equally unsympathetic toward Mr. Shirvell and his actions; On August 16, 2012, a jury returned a verdict against Mr. Shirvell in the amount of $4.5 million in the lawsuit filed by Mr. Armstrong.

Employer and Employee Liability for Social Media Misconduct

For both employers and individual employees, this jury’s $4.5 million verdict is a stark reminder that social media continues to expand the liability for both and there are real-life consequences if it is misused. 

While the lawsuit against Mr. Shirvell did not involve his former employer (he was, however, fired in response to his social media escapades), employers should still take notice that they need to be prepared to take appropriate action if they learn that an employee may be inappropriately using social media, including against a co-worker.   

On this point, case law is not always consistent when it comes to when and under what circumstances an employer may be liable for an employee’s social media misconduct, but such liability increasingly happens.

For example, Jon Hyman provides an excellent discussion of a lawsuit arising out of employees who started an anonymous blog that focused in a very offensive and derogatory manner on a co-worker, Ralph Espinoza. See 820,000 Reasons to Have a Social Media Policy. After Mr. Espinoza learned of the blog, he complained to management, who did little other than asking employees to put the blog to rest, but it continued for approximately eight weeks. A jury awarded Espinoza $820,000 for the harassment.

Take-Aways – Employee Social Media Misconduct is Still Misconduct 

From a practical perspective, it is unrealistic for employers to monitor all possible social media to detect potential derogatory or defamatory postings by employees.

But if the employer does become aware (i.e. the offended employee complains to management a co-employee posted something discriminatory or offensive or a competitor, client, or customer makes a similar complaint about a potentially offensive post), the employer must treat potential social media related misconduct like any other investigation into employee misconduct. 

It is important, however, that such social media related investigations are conducted in collaboration with experienced legal counsel because of the conflicting obligations and policy considerations that employers must balance.

For more information about the challenges employers face when it comes to balancing social media employment related risks, see The Intersection of Social Media & Employment Law: The Good, the Bad, and the Confusing (which includes a link to presentation materials).  And for additional information about conducting employment investigations or other employment law issues, contact Jason M. Shinn. 

Baseball Bat.jpgA recent employment lawsuit, Ondricko v MGM Grand Detroit, LLC (PDF), for gender and race discrimination, illustrates how an employer can strike out in employment litigation by it’s own inconsistencies in disciplining employees and poor documentation for such discipline.  

Factual Background

Kimberly Ondricko is a white female. At the time she was terminated, she was employed as a supervisor with the MGM Grand Detroit casino (“MGM”). As supervisor, Ms. Ondricko was responsible for supervising the card dealers at the casino. 

The employer claimed she was terminated for violating the employer’s conduct rule in connection with a “bad shuffle.” This bad shuffle involved a blackjack dealer and an automatic card shuffler that malfunctioned, which resulted in the dealer dealing cards previously dealt.

And this is where the problem that inconsistent discipline and poor record-keeping comes into play. Specifically:

  • Since 2004, at least six other supervisors had engaged in misconduct related to card shuffle procedures. Only two were terminated – one before Ms. Ondricko’s termination, one after her termination.  
  • The employer’s human resource department had referenced the same policy as the basis for both the suspensions and terminations arising out of the “bad shuffle” incidents that Ms. Ondricko was fired for violating. No details explained why suspensions were given out rather than terminations.   
  • Ms. Ondricko had a clean discipline record. In contrast one of the two other employees terminated for “bad shuffle” incidents did not. In fact, this employee, a black female employee, actually had a significant history of disciplinary infractions. 
  • The other supervisor, a black male, was also terminated in relation to a “bad shuffle” violation, but this occurred eight months after Ms. Ondricko’s termination, which was around the time that Ms. Ondricko filed her claim with the Equal Employment Opportunity Commission. 
  • Also around the time Ms. Ondricko was fired, the terminated black female employee had retained legal counsel to investigate pursuing claims against the employer. In response to this investigation, an assistant manager – for some inexplicable reason – commented to a vice-president that “do you think I want to fire Kim, I didn’t want to fire Kim, how could I keep a white girl.”      

Following her termination, Ms. Ondricko sued for gender and race discrimination and the trial court threw both claims out on summary judgment. But that decision was reversed on appeal for the following reasons.  

Turning to Instant Reply, the Call at the Trial Court Level is Reversed

  • Direct Evidence of Discrimination – Strike One

There was no dispute that the employer had a written policy in place relating to “bad shuffles” and, therefore, the employer (at least facially) had a legitimate basis for terminating Ms. Ondricko. Accordingly, she argued that her race, i.e., being a “white girl”, was also a motivating factor in her termination. Such a claim is referred to as a mixed-motive case, which happens when a plaintiff claims the adverse employment action is the result of a mixture of legitimate and illegitimate motives. 

The Court easily concluded that the assistant manager’s “white girl” statement was direct evidence of race discrimination as it would be reasonable for a jury to conclude that MGM was motivated by a desire to be racially balanced in its terminations for misconduct related to card shuffle violations.

  • Inconsistent Disciplinary Actions – Strike Two 

At this point, the employer could have salvaged its defense and victory at the trial level if it met its burden of showing that the employer would have terminated Ms. Ondricko even if it had not been motivated by impermissible discrimination. But that was not to be.

Specifically, at the time of Ms. Ondricko’s termination, MGM had only terminated one manager (the black female) for the same violation. That manager had a history of discipline issues and Ms. Ondricko did not. The other manager was terminated for the same violation, but eight months after Ms. Ondricko. The other supervisors were only suspended for apparently violating the same rule Ms. Ondricko was fired for violating.  

  • Deficient Documentation for Disciplinary Actions – Strike Three

As to the other supervisors who had only been suspended, the employer claimed that not all shuffle-related offenses warranted the same level of discipline, thus the “legitimate reason” for the different levels of discipline. 

The Court rejected this argument for several reasons. First, nothing in the rule described any such distinctions and corresponding levels of discipline; It provided only: “What in the business judgment of MGM jeopardizes the efficiency or integrity of the gaming operation is prohibited.” 

Second, MGM could not point to no other policy, written or verbal, that delineated the circumstances under which distinctions in the levels of discipline were appropriate.

Third, in most if not all instances, the employer’s own company discipline documents only cited the rule the manager violated, but did not reference any details underlying the offense or to otherwise explain why different discipline was warranted.

Accordingly, the Court concluded there were disputed material facts pertaining to the actual motivation involved in MGM’s decision and reversed the trial court’s decision and allowed Ms. Ondricko’s Title VII race discrimination claim proceed to trial, as well as the gender discrimination claim. Play ball! 

Successfully Defending Discrimination Suits – What Should Employers Work on in the Off-Season?

First, Title VII’s anti-discrimination provision makes it “an unlawful employment practice for an employer . . . to discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s race, color, religion, sex, or national origin.” 42 U.S.C. § 2000e-2(a)(1). In other words and using the words of the assistant manager, Title VII even applies to “white girls.” 

Second, consistency is critical for defending any sort of employment discrimination claim. And the lack of consistency is what doomed the employer’s defense. In essence, the employer made the decision to punish Ms. Ondricko, a white female with no record of discipline issues, more harshly to show its recent termination of a black female with a history of discipline issues was not discriminatory.  

Third, it is essential to properly document the reasons an employee is disciplined. If there were extenuating circumstances why one disciplinary action was taken and not another, such circumstances should be recorded. Otherwise, as was the case here, an employer is left with all the glory of hindsight to explain its actions but without any facts to support why seemingly inconsistent levels of discipline was handed out for seemingly similar infractions. 

Fourth, legal counsel should be consulted immediately when it comes to properly disciplining and investigating employee misconduct. Even the best trained managers may not appreciate the nuances or impact a disciplinary decision may have on the company. And if your managers are not properly trained, an employer may get stuck with having to explain why managers used questions like how we keep a “white girl” after firing a black girl as the reference point for disciplinary actions. Have fun with that. 

For more information about investigating employee misconduct or employee disciplines, contact Jason Shinn. Also, for more information about differences between state and federal law when it comes to reverse race discrimination claims see Changing Gears in Reverse Discrimination Claims: Differences under Michigan and Federal Law.   

Security_Computer_Laptop in Chain.jpegA well written article by Connie Bertram, asks the question “Is Self-Help Discovery by Employees Protected Activity?”

The title of the article refers to situations where an employee attempts to gather factual support or to otherwise pursue an employment discrimination claim or a related employment-based lawsuit against the employer by accessing employer files and databases to build the case.

The answer to the question is critical for employers who are faced with the dilemma of (i) not enforcing a company’s technology use policy that restricts who may access certain categories of company information and/or restricts access to information for only business related matters; or (ii) enforcing the policy but run the risk of inadvertently creating a retaliation claim against the employer.

Ms. Bertram explains: 

This type of misconduct appears to be fueled by the belief of claimants and their counsel that employees have an unfettered protected right to engage in self-help discovery to develop their claims. Indeed, many plaintiffs counsel encourage this behavior, advising clients to gather the goods while they are able to so that counsel can later use the fruits of their efforts in demand letters, Equal Employment Opportunity Commission investigations, and litigation. It is clear that an employee engages in protected activity when she, in good faith, makes or takes certain steps legally and legitimately to investigate an internal or EEOC complaint. But does protected activity include so-called self-help discovery, such as taking and downloading documents or recording conversations?

The article goes on to highlight employment-related lawsuits that have answered this question in favor of employees as well as employers.

The Take-Away for Employers

Unfortunately, Ms. Bertram’s major recommendation is where most employers fail: Employers either (i) do not have a meaningful confidential and proprietary information policy that employees must acknowledge in writing having reviewed; or (ii) Employers either fail to enforce and monitor such policies or fail to do so on a consistent basis. 

One additional point I would add, concerns how data is stored and accessed in the first place. In my experience investigating employee computer misconduct, it is not at all uncommon to discover that all or significant portions of an employer’s entire business operation is easily accessible by anyone with computer access within the company.

In this regard, there is no reason to have highly confidential company information, e.g., pricing, marketing, formulas, customer lists, HR investigation files, etc., that is accessible by anyone employed by the company. Instead, the default rule for any employer should be company information is available to employees “as needed” to perform the applicable job function of that employee. 

Such a default rule benefits employers because it provides an added measure of access control to sensitive data. It may also require an employee to take additional steps – potentially criminal steps under the Computer Fraud and Abuse Act or state law equivalent statutes – to access information outside the employee’s normal authorization. This may also provide the employer with additional non-discriminatory ammunition to discipline or discharge the employee it would not otherwise have available.  

For additional information about investigating employee misconduct, including misconduct involving computers, email, or other technology specific investigations, feel free to contact Jason M. Shinn.  

Building BlockThe cornerstone of merger and acquisitions – the buying and selling of all or part of a business – is the non-disclosure agreement. And similar to the critical role a cornerstone has in building a foundation, the nondisclosure agreement also serves as the reference point for completing a business transaction. 

However, a recent lawsuit filed in federal district court illustrates the importance companies and their employees need to place on complying with nondisclosure obligations throughout the purchase transaction.   

Due Diligence and Nondisclosure Agreements in M&A

Nondisclosure agreements are often signed at the beginning of the merger or acquisition under consideration. It generally is intended to facilitate the exchange of often highly confidential information between a buyer and a seller usually as part of the purchasing company’s due diligence process.  

Nondisclosure agreements also provide a measure of protection for companies who rightly worry that word of a potential sale will hurt business, jeopardize customer or supplier relationships, and undermine employee morale if the sale does not take place.  

Liability for Breaching a Nondisclosure Agreement

In 2011, Catalent Pharma Solutions was in talks to sell its U.S. commercial pharmaceutical packaging business to Sharp Corp., reportedly for $80 million. At the time of these talks, Sharp was a U.S. division of United Drug, PLC. 

The parties entered into a nondiscolsure agreement and pursuant to that agreement, Catalent considered these talks to be confidential as well as the information exchanged between Sharp and Catalent.

But United Drug’s CEO took a different view: In two separate public conference calls United CEO discussed the potential sale, valuations of Catalent, and how  the sale would affect the U.S. market in favor of United Drug. Discussions between Catalent and Sharp ended without a deal being consummated between them. 

Catalent Pharma eventually sued Sharp and United Drug for damages arising from a breach of the non-disclosure agreement based on the allegedly unauthorized and improper disclosure of Catalent’s confidential and sensitive business information by its parent company’s CEO.  

A key issue in Catalent’s lawsuit will be whether Sharp’s parent company (United Drug) was bound by the nondisclosure agreement. In this regard, Catalent claims in the lawsuit that United Drug executives were involved in the deal discussions and, therefore, were “representatives” under the nondisclosure agreement.  

Take-aways for Employers

When it comes to mergers and acquisitions, the Catalent lawsuit makes clear that a nondisclosure agreement is only a piece of paper, which can be easily violated. And even if a violation is discovered, they can be expensive to litigate. Therefore, it is important to manage the flow of confidential information. To properly manage this flow, here are a few points companies should consider: 

  • Digital Deal Rooms. I have become a big fan of using digital deal rooms for sharing information, including in conducting due diligence matters. These are secure online virtiual deal rooms where documents are stored and shared. Two great features are establishing permission-based roles and creation of audit trails. In this regard, the Catalent complaint noted the number of times confidential documents were reviewed.   
  • Sequence the Disclosures. The purpose of a buyer’s due diligence is to obtain enough information for the buyer to make an offer. But this doesn’t mean that a buyer needs every data point all at once. Instead, information could be provided in a phased approach so that “crown jewel” type confidential information would be disclosed at the end of the due diligence period or only after a definitive binding acquisition agreement is ready to be signed. 
  • Educate Employees. It is important for the company and its employees that is receiving information pursuant to a confidential agreement to not lose sight of the obligations created by the nondisclosure agreement. In this regard, a best practice is to limit access to such information to those employees and consultants with a need-to-know basis. For those employees that do have access, make sure they understand – if not the specifics of the nondisclosure agreement – the ultimate goal to protect the confidentiality of the information and even the existence of the deal under discussion. 

These are only a few of many issues to consider if your company is part of a merger or acquisition transaction. But for more information about buying or selling a business, including conducting an efficient and meaningful due diligence of that sale, contact Jason Shinn. 

Pregnant Executive.jpgMarissa Mayer was recently named the new CEO of Yahoo. She is a former vice-president of Google who has amassed plenty of professional accolades and otherwise seems to be really smart (I love this interview she gave to Fast Co., especially point No. 7). 

But I found it more interesting that news outlets mostly bypassed leading with her professional achievements and focused on Ms. Mayer’s pending pregnancy. Consider for example this sampling: 

The coverage that Ms. Mayer’s pregnancy received highlight two points relative to employment and pregnancy. 

The Media Can Make a Big Deal about a Pregnant Employee; Employers Shouldn’t. 

First, any employer that announced hiring decisions or made employment decisions based on pregnancy would make headlines for all the wrong reasons. 

This is because under Michigan law, pregnancy discrimination is prohibited. To prove pregnancy discrimination, a plaintiff must show that the employer discriminated against the employee on the basis of a pregnancy. MCL 37.2202(1)(a) (Technically, the Michigan statute prohibits employment discrimination because of sex and MCL 37.2201(d) defines “sex” to include pregnancy). 

In addition to the headlines, is the cost of discrimination. The Equal Employment Opportunity Commission reported at the beginning of 2012 that “53,865 charges alleging pregnancy discrimination” had been made over the past 10 fiscal years. These charges resulted in $150.5 million in monetary benefits for charging parties.

One reason for the number of filings may relate to the consistently high percentage of mothers in the U.S. workforce with children under 18 years of age. The chart from the Catalyst, a nonprofit organization focused on expanding opportunities for women and businesses, illustrates this point: 

LABOR FORCE PARTICIPATION RATE OF MOTHERS (WITH CHILDREN UNDER 18)

chart

On the one had, these numbers are encouraging in that women with children have the opportunity to remain in or return to the workforce. But on the other hand, it is worth noting that the U.S. is one of only a few countries on the planet where employers are not required to offer mandatory maternity leave. In contrast, countries like Canada and Norway provide 40 weeks or more of paid maternity leave.

Women – Young and Old – Still Underrepresented in the Ranks of CEOs. 

Second, it was also reported that Ms. Mayer is one of the youngest female CEOs. But you could drop “young” from that headline and it is still newsworthy.

This is because women significantly remain underrepresented when it comes to the rank of CEO.

Consider for example these numbers from a 2009 article from Harvard Business Review:  

When we studied the leadership of 2,000 of the world’s top performing companies, we found only 29 (1.5%) of those CEOs were women, an even smaller percentage than on the Fortune 500 Global list (2.6%).

Closing Thoughts

While the workplace has certainly evolved to be gender-blind (most of the time) it is interesting that outside of the workplace women still face greater scrutiny in the media and public discussions when they decide to have a career and have children.

And it is a scrutiny that simply does not exist for men. Take Google co-founder Larry Page; He was expecting his second child two months after he took the CEO title at Google. That is probably news to most because there were no headlines, social media discussions, or debates about whether he could lead a technology giant and still be a father. 

Unfortunately, Mr. Page had it much easier than Ms. Mayer’s circumstances: Google vs. Yahoo (do you need to say anything more?) and no one questioned his decision to be a father and CEO. Aside from dealing with the occasional guilt experienced because you make more for no other reason than gender, being a guy is a really good gig.   

For more information regarding avoiding pregnancy discrimination and other employment law claims, contact Jason Shinn.