Privacy Lock.jpgThe Food and Drug Administration (FDA) was sued by six on-staff doctors and scientists after discovering the FDA accessed their personal email accounts (Gmail). 

The Washington Post reported that government documents showed that the secret surveillance took place over a two-year period after the staffers complained to lawmakers in Congress that the FDA was approving risky medical devices.

According to the complaint filed against the FDA (PDF), the plaintiff-employees claim the FDA targeted its employees with a covert spying campaign that used spyware to monitor and access the employees’ workplace computers and other technology to monitor the employees’ password-protected Gmail. Additionally, the Complaint alleges that the FDA intercepted email communications, including attorney-client communications by a staffer preparing to file an Equal Employment Opportunity Commission (EEOC) retaliation case against FDA managers. 

Employer Monitoring of Employee Email  

The Complaint against the FDA, a governmental agency, for monitoring employee email brings into play unique issues that private employers do not necessarily have to consider, such as Fourth Amendment protections. But employer monitoring of employees’ emails in the private sector has met with mixed results: 

Stengart v Loving Care (PDF) (2009) involved an employer who provided its employee with a laptop computer and a work email address. Prior to plaintiff’s resignation, she communicated with her attorneys about her anticipated suit against her employer. These email communications were sent from plaintiff’s work-issued laptop but through her personal, web-based, password-protected Yahoo email account. After plaintiff filed suit, the company created a forensic image of the hard drive from plaintiff’s computer and was able to numerous communications between plaintiff and her attorney.

The trial judge found in favor of the employer noting that the company’s policy put employees on sufficient notice that electronic communications, “whether made from her company E-mail address or an Internet based E-mail address would be subject to review as company property.” 

The Court of Appeals disagreed, however, and noted that the policy was not clear as to what email use would or would not become company property. The policy also failed to put an employee on notice that he or she should have no expectation of privacy in private emails sent over the employer’s network. The Court further based its decision on the “important societal considerations that undergird the attorney-client privilege.” 

Scott v. Beth Israel Med. Center Inc., (N.Y. Sup. Ct. 2007) is a case in stark contrast to Stengart. In Scott, the court sided in favor of the employer and decided that email communications between the plaintiff doctor and his attorney exchanged over the employer’s email system was not protected by the attorney-client privilege or work product doctrine.

The emails in question were were all sent over the employer’s email server. And the employer’s email policy stated, among other things, that the electronic mail systems were the property of the employer and should be used for business purposes only, that employees “have no personal privacy right in any material created, received, saved or sent using [employer’s] communication or computer systems,” and that the employer reserved the right to access and disclose such material at any time without prior notice.

The important distinction between Scott and Stengart is that Scott used his employer provided email account. Stengart, however used her personal email account, but accessed it through her employer provided computer.  

The Take-Away 

The decision-making process for monitoring employee emails is as much about managing legal risks as it is about managing your company’s culture. In that regard, there is not necessarily a right or wrong answers just responses along the spectrum of bad to better.

In any event, among other points that employers should consider in monitoring employee email are the following:

  • Have a well-written e-mail policy that clearly advises employees of how company computers, Internet resources, and email will be treated. The lack of such a policy was one of the critical facts the Stengart used to decide in favor of the employee. 
  • The policy should expreslly note that the employer reserves the right to monitor all e-mail and that employees should have no expectation of privacy in email transmitted through the company system.
  • An employer should obtain the employee’s signed acknowledgement that the policy was received and understood. A better check would be to require an employee to click an acknowledgment screen before the employee could log onto the network.  

For individual employees:

  • You should assume anything you email or otherwise access through your employer’s technology infrastructure will be reviewed. 
  • Also, it is important to realize that there is the potential that webmail, e.g., Gmail or Yahoo based email, could be retrieved after you have logged out and long after you have left your employer.  
  • Do not, under any circumstances use your employer’s email system to communicate with your attorney, especially if you are planning on suing that employer. 

In regard to this last point, I have on various occassions directed individuals emailing me about legal representation to create a private email account rather than use their employer provided account. While I’ve been called “paranoid,” it is better than later finding out you were correct to believe your email discussions were being monitored.  

Social Media on ChalkboardOn January 25, 2012, the National Labor Relations Board’s General Counsel issued a press release that a second report describing social media cases reviewed by the NLRB has been made available. The first NLRB social media report (PDF) was released in August 2011.

According to the NLRB’s press release, this second NLRB report (PDF) was needed to address emerging social media issues. The NLBR further explained: 

Cases concerning the protected and/or concerted nature of employees’ social media postings and the lawfulness of employers’ social media policies and rules continue to be presented to the Regional Offices … In addition, these issues and their treatment by the NLRB continue to be a “hot topic” among practitioners, human resource professionals, the media, and the public. 

The NLRB’s second report covers 14 cases. Half of those cases involve questions about employer social media policies. It is noteworthy from the employer perspective that five of those policies were found to be unlawfully broad and one was found to be lawful after it was revised.

Broad “Savings Clauses” Excluding Section 7 Rights and Activities Not Good Enough

Employers and HR professionals should definitely read both reports. But one case jumped out at me as particularly important. This is because I’m seeing a number of employers follow a similar approach that the NLRB found to be a violation of Section 7 Rights under the National Labor Relations Act (NLRA) when it comes to drafting social media policies. 

Specifically, page six of the report discusses a case where the NLRB found that an employee’s discharge for Facebook comments about the employer was lawful, but the employer’s social media policy was not. 

In that case, the employee was reprimanded by a manager and later on the employee’s lunch break she updated her Facebook status with a comment consisting of an expletive and her employer’s store. She was later terminated for this and similar Facebook comments. Again, the termination was lawful. 

In regard to the employer’s social media policy, it provided that when it comes to social networking, employees should generally avoid identifying themselves as employees of the employer unless there was a legitimate business need to do so or when discussing terms and conditions of employment in an appropriate manner. 

This social media policy was found to violate the NLRA generally for two reasons:

  1. First, the social media policy’s use of “appropriate” was not defined and it implicitly means that the social media policy prohibited “inappropriate” discussions of terms and conditions of employment.  
  2. Second, and here is where employers should pay particular attention: The NLRB specifically found that a “savings clause” provision in the employer’s social media policy did not bring the policy back into compliance with the NLRA.

That savings provision informed employees that the employer’s social media policy would not be interpreted or applied so as to interfere with employee rights to self-organize; form, join, or assist labor organizations; to bargain collectively; or to engage in other concerted activities for purposes of collective bargaining or other mutual aid or protection. 

Personally, I found the explanation for why this provision did not save the social media policy from violating the NLRA to be unsatisfactory. But the fact remains that drafting a broadly worded social media policy that may prohibit conduct protected by the NLRA only to note that the social media policy will not be applied to violate the NLRA is not going to pass muster under the current NLRB regime.

Employer Take-Aways

Shakespeare is credited with the observation that “the devil can cite Scripture for his purpose.” And it may appear that the NLRB will find a social media policy violates an employee’s NLRA rights and then selectively look to the employer’s policy to support the violation. 

None-the-less, the above case should motivate employers to rethink, rather than double down on drafting broad social media policies that contain ambiguous or poorly defined meanings and expect such policies to pass muster with the NLRB simply because an equally broad savings clause provision carves out Section 7 rights and activities.

If there is a bright spot, the NLRB’s increased attention on social media issues is also providing a road map (even if the terrain is not entirely charted out) in the form of cases for employers to follow when it comes to drafting and implementing social media policies.

In that regard, it is important to have a competent “social media legal sherpa” familiar with this dynamic intersection of social media, employment, and labor law. Otherwise employers may find themselves in a nasty collision with the NLRB at this intersection.      

Yellow NotepadThe Sixth Circuit recently resolved an issue of uncertainty for Michigan employees and employers when it comes to analyzing Family and Medical Leave Act (FMLA) interference claims. Going forward, employees must satisfy the burden-shifting framework common to employment discrimination claims when evaluating FMLA interference claims. 

FMLA Background

The FMLA, 29 USC 2601 et seq., was originally enacted to balance the demands of the workplace while providing employees the ability to take reasonable leave for personal or family medical reasons.

Among the FMLA’s statutory requirements, it imposes on employers two prohibitions to ensure that employees will not suffer an adverse employment action for taking FMLA protected leave. Specifically, under the interference provision, “[i]t shall be unlawful for an employer to interfere with, restrain, or deny the exercise of or the attempt to exercise, any right provided under this subchapter.”

Under the discrimination provision, it is unlawful for an employer to discharge or in any other manner discriminate against any individual for opposing any practice made unlawful by the FMLA. Congress modeled this provision after Title VII of the Civil Rights Act, as under the Civil Rights Act an employee is protected from employer retaliation for opposing a practice protected under that act.

How FMLA Interference Claims against Michigan Employers are Decided   

In the Sixth Circuit (the Federal Jurisdiction that includes Michigan), there was no dispute that what is known as the McDonnell Douglas burden-shifting framework applied to FMLA retaliation suits (as opposed to interference claims) when the plaintiff produced indirect evidence of a causal connection between the protected activity and the adverse employment action.

Under the McDonnell Douglas burden-shifting framework a plaintiff must make out a prima facie case of discrimination by showing that (1) The employee availed herself of a protected right under the FMLA by notifying the employer of the employee’s intent to take leave; (2) The employee suffered an adverse employment action; and (3) That there was a causal connection between the exercise of the employee’s FMLA rights and the adverse employment action. If the employee satisfies these three requirements, the burden then shifts to the employer to proffer a legitimate, nondiscriminatory rationale for discharging the employee.

Prior to the Donald v Sybra court opinion it was unsettled (sort of) if the preceding burden-shifting framework applied to FMLA interference claims. The Donald Court resolved this issue in favor of applying the McDonnell Douglas burden-shifting framework.

Interestingly, the Court concluded that this issue had actually been decided by a prior court opinion (Grace v. USCAR, 521 F.3d 655, 670 (6th Cir. 2008)) because that court opinion effectively adopted the McDonnell Douglas test without saying as much (under federal procedural rules, a reported panel opinion like the Grace opinion are binding on subsequent courts. See 6 Cir. R. 206(c)). 

use “[r]eported panel opinions are binding on subsequent
panels,” 6 Cir. R. 206(c),

The Take Away

From a practical standpoint, the Donald opinion is not a game changer in that employers, employees, and their attorneys are intimately familiar with the McDonnell Douglas framework, which had long been applied to FMLA retaliation suits. 

A more interesting question, however, was asked by Jon Hyman of the Ohio Employer’s Law Blog of whether the McDonnell Douglas test should be scrapped entirely.

For employers, a more practical take-away from this case is that an employee may be lawfully terminated for legitimate business reasons even when FMLA leave is in play. 

Consider for example that in Donald the employee had worked for the employer for over two years. And during this time she had experienced a number of health problems that forced her to miss a substantial periods of work. But Donald was fired only after the employer suspected that she entered customer orders improperly to steal cash from her register. Thus the Court of Appeals agreed with the trial court that the employee failed to produce sufficient evidence to prove that her employer’s stated reasons, cash register and order irregularities, were pretextual. Therefore, the employer did not violate the FMLA because its termination decision was based on legitimate, non-discriminatory reasons. 

Terminating an employee who has excercised FMLA rights, however, is not without risks. But by collaborating with an experienced employment lawyer, these risks can be managed in order to put the employer in the best position for successfully defending against a prospective FMLA discrimination claim.  

Security_Computer_Laptop in Chain.jpegMichigan Companies were recently given a new tool for fighting back against trade secret misappropriation and unfair competition.

Specifically, in Actuator Specialties, Inc. v. Chinavare the Michigan Court of Appeals agreed with the trial court’s determination that Actuator Specialties established a threat of misappropriation against its former employee and his new employer. This threat entitled it to an injunction prohibiting the former employee from working for any competitor of Actuator Specialties for three years.

As explained below, this decision is significant because the three year restriction on working for competitors was based on the Michigan Trade Secret Act rather than a noncompete agreement.

In this regard, Michael Khoury, a fellow business lawyer, noted that “This may be one of the first cases of this kind in Michigan relying solely on the [Michigan Trade Secret Act] … most [court opinions] have relied on written employment or nondisclosure agreements.”

Background

At the time Chinavare ended his employment with Actuator Specialties he was employed as a general manager. While employed, Chinavare had copied Actuator’s files onto a personal USB drive.

He later testified that he copied these files to be able to work after hours away from the Actuator’s offices. Chinavare further explained that after copying these files to his USB drive that he realized his personal computer did not have a USB port so he kept the USB drive containing the files of Actuator Specialties at his house in a closet. 

In 2008, Chinavare and two other Actuator employees quit and they begin working for a competing business called Renew Valve and Cleveland Valve & Gauge (Renew Valve). Shortly after this departure, Actuator Specialities discovered that only three days before their departure someone had accessed confidential files belonging to Actuator Specialties.  

This discovery prompted the former employer to file its lawsuit and seek a Temporary Restraining Order (TRO) on 2/12/08. The TRO was issued on 2/15/08, which did not prohibit Chinavare from working for Renew Valve. But on 2/13/08, Chinavare uploaded the data on his USB drive onto his Renew Valve computer. He also altered certain Actuator file documents to reflect Renew Valve in the letterhead.

Computer Forensic Inspection Revealed Wide Spread Theft & Use

The theft of computer files was later discovered and resulted in Actuator Specialities hiring a computer forensics company to conduct an analysis of digital evidence. Notably, this forensic inspection extended to Chinavare’s computers and Renew Valve’s computers. 

The inspection revealed hundreds of files in the possession of both Chinavare and Renew Valve that belonged to Actuator Specialties. It also revealed a missing or unidentified USB drive that had not been previously disclosed. This USB drive had been inserted into Chinavare’s computer and later into four computers at Renew Valve.

After seven days of evidentiary hearings, the trial court issued a preliminary injunction enjoining Chinavare from working at RV or any similar competitor of Actuator Specialties for a three-year period, which was later converted to a preliminary injunction. The entry of this preliminary injunction was appealed by Chenevare only.

Trade Secret Theft Warranted a Three Year Injunction

In analyzing Chinavare’s claim, the Court examined Michigan’s Uniform Trade Secrets Act (MUTSA), MCL 445.1901 et seq. Under this statute, Michigan courts are authorized to award injunctive relief for “actual or threatened misappropriation” of trade secrets.

In affirming the trial court’s order for injunctive relief, the Court of Appeals noted that Actuator had showed that Chinavare (i) possessed its confidential information; (ii) had downloaded that information onto Renew Valve’s computer system; and (iii) used that information for the benefit of Renew Valve.

The Court further concluded that the evidence showed Renew Valve engaged in questionable behavior that showed a lack of trustworthiness (hiring three former employees away from Actuator at the same time and Renew Valve had used portions of a PowerPoint presentation created by Actuator as its own). 

Take-Away for Michigan Employees and Employers

It is important to note that this opinion is unpublished, which means it does not have any precedential effect under Michigan law. Accordingly, another court is not required to follow the ruling.

Even so, this opinion may provide persuasive authority for another court and, therefore, there a number of significant issues that individuals and companies on both sides of the employment fence (e.g., companies whose employees are departing and companies making new hires) should consider in relation to trade secrets and protecting competitive business interests:  

  1. First, for departing employees don’t misappropriate company information. For employers of newly hired employees, don’t encourage and don’t allow misappropriated information to be used in your company. Such misappropriation may open the door for asserting computer fraud claims like those under the Computer Fraud and Abuse Act. And if you violate this rule, don’t try and cover it up. Computer forensics – 11 times out of 10 (intentional hyperbole) – will uncover some type of “digital fingerprint” that will often point to unauthorized access of digital information. Covering up, i.e., deleting such evidence will often result in spoliation and sanctions, which is never a good thing. 
  2. Second, the Court of Appeals opinion in Actuator Specialties assumes without discussion that information taken met the statutory definition of “trade secret.” Presumably, however, trade secret status was established at the trial level and it was not challenged on appeal. But “trade secret” designation should not be assumed by either side. In defending companies and employees against trade secret misappropriation claims, I’ve had success in showing that information does not rise to the statutory definition of trade secret or that the party claiming trade secret protections failed to take the appropriate steps to maintain trade secret protections.    
  3. Third, when it comes to new hires, a recommended practice for employers is to have the new employee confirm, in writing, that he or she is not subject to any noncompete agreements that would restrict the employee from accepting a position. But the Actuator Specialities case illustrates that more effort may be required of employers when it comes to new hires. Such efforts may include confirming a new hire has not improperly taken any information belonging to a former employer and make it clear that it is against company policy to use any such information. Upon learning that these efforts have failed, the new employer must promptly respond in order to limit its liability for trade secret misappropriation.
  4. Fourth, employers should follow the example set by Actuator Specialties. Specifically, shortly after the individual defendants terminated their employment on, an owner of Actuator Specialties – either by design or out of caution – made the stategic decision to investigate what, if any, company data may have been accessed or taken prior to its former employees departing. The results of this investigation provided the ammunition for Actuator Specailties to pursue its claims of trade secret misappropriation. 
  5. Fifth, William Hazlitt wrote: “Wit is the salt of conversation, not the food.” Similarly, Michigan employers should consider using the Michigan Trade Secret Act to prohibit former employees from working for competitors as the salt of a company’s intellectual property protection plan, not the food. In other words, employers must bolster its chance of successfully protecting its competitive advantages and intellectual property by strategically using noncompete agreements (sometimes referred to as covenants not to compete) to protect against unfair competition by former employees. One reason for this point is that properly drafted noncompete agreements will provide broader protections than available only under Michigan’s Trade Uniform Secrets Act.  

Here is a link for additional recommendations and best practices for protecting company information from misappropriation or feel free to contact me about implementing a trade secret protection program, pursuing a trade secret/unfair competition claim, or defending against such claims.

Pepsi.jpgOn January 11, 2012, the Equal Employment Opportunity Commission (EEOC) reported that Pepsi Beverages agreed to pay $3.13 million and provide job offers and training to resolve a charge of race discrimination. This EEOC charge is a reminder that employers considering or presently using criminal background checks in hiring must tailor the program to meet 

The EEOC Investigation

The EEOC’s investigation determined that there was reasonable cause to believe that the criminal background check policy formerly used by Pepsi discriminated against African Americans in violation of Title VII of the Civil Rights Act of 1964. 

Specifically, that investigation revealed that more than 300 African Americans were adversely affected when Pepsi applied a criminal background check policy that disproportionately excluded black applicants from permanent employment. 

Two aspects of Pepsi’s criminal background check policy were particularly damning:

  • Job applicants who had been arrested pending prosecution were not hired for a permanent job even if they had never been convicted of any offense; and 
  • Pepsi’s former policy denied employment to applicants from employment who had been arrested or convicted of certain minor offenses.

The EEOC’s Policy on Using Arrest and Conviction Records in Hiring Decisions

The EEOC has long standing guidance and policy statements on the use of arrest and conviction records in employment. In fact, the EEOC issued its first written policy guidance regarding the use of arrest and conviction records in employment in the 1980s. There are also additional restrictions and requirements that employers using criminal background checks must comply with. See What Employers and Employees Should Understand About Conducting Background Checks.  

The Take Away for Employers

The use of arrest and conviction records to deny employment can be illegal under Title VII of the Civil Rights Act of 1964 if it is not relevant for the job. This is because the EEOC has determined that these arrest and conviction records can limit the employment opportunities of applicants or workers based on their race or ethnicity.

It is, therefore, important for employers to examine or re-examine their criminal background check policy to confirm the policy does not create an adverse impact based on race in violation of Title VII and the EEOC’s prohibitions against unwarranted roadblocks to employment.

Specific points under a criminal background check policy that employers should evaluate include the following:   

  • The nature and severity of the offense;
  • The time that has passed since the conviction or completion of the sentence; and
  • The nature of the job sought in order to be sure that the exclusion is important for the particular position.  

For more information about the use of criminal background checks in pre-employment inquiries see the EEOC’s Pre-Employment Inquiries and Arrest & Conviction guidelines or contact Jason Shinn.    

Young and Old Hands.jpgMichigan home health care companies and the home health care industry are facing significant changes under the U.S. Department of Labor’s (DOL) proposed rule change to the Fair Labor Standards Act’s (FLSA) 1975 “companionship exemption.”   

Proposed FLSA Revision 

On December 27, 2011 the DOL published a notice of proposed rulemaking to revise the companionship and live-in worker regulations applicable to home health care workers employed by third-party companies. This proposed revision would extend the FLSA’s overtime and minimum wage coverage to these employees, which have previously been exempt from the FLSA since 1975.  

Obviously if this revision is enacted it will significantly change the home health care industry. Consider for example that the DOL’s proposed rule would potentially mean higher paychecks for an estimated 1.7 million home care workers. This is because employers covered by the FLSA must generally pay the federal minimum wage and one and a half times an employee’s regular hourly wage for each hour or part of an hour that the employee works in excess of 40 hours in one week. 29 USC 207(a)(1).

But an increase in wages also means higher labor costs for a number of home-care companies. Such increase would likely be passed along to customers, many of which are likely to be on fixed incomes and rely on Medicare and Medicaid reimbursements.

To some extent, however, the impact of the proposed change to the FLSA companionship exemption would be muted because a number of states already provide coverage of home care workers under state minimum wage and overtime laws. Additionally, the DOL’s proposed rule would also benefit those home care employers that are already paying overtime despite the federal exemption.

Reason for the Revision to the FLSA Home Health Care Exemption

According to the FAQ page maintained by the DOL, the FLSA changes are needed: 

Due to significant changes in the home health care industry over the last 35 years, workers who today provide in-home care to individuals are performing duties and working in circumstances that are markedly different than when the companionship services regulations were first promulgated. The nature of the employment relationship and the scope of duties being performed by workers in the home are different than originally contemplated when the exemption was first enacted.

The impetus for the DOL’s proposed rule can actually be traced back to 2001 when the outgoing Clinton Administration proposed a revision to the labor rules to allow federal protections to apply to personal home care aides. The Bush administration, however, reversed those revisions and returned to the 1975 exemption.

In 2007, the U.S. Supreme Court affirmed the 1975 companionship exemption in ruling against a home care aide who sued her employer over unpaid overtime. See Long Island Care at Home, Ltd. v. Coke, 551 U.S. 158 (2007). In this decision, the U.S. Court noted that any change to the exemption rule must come from Congress or the Labor Department, which brings us full circle with the DOL’s December 2011 proposed rule change. 

Submitting Comments Concerning the Proposed Revision to the FLSA Home Health Care Exemption

The DOL’s proposed rule will be subject to comments, which may be submitted by following this link. Alternatively, comments may be sent in hard copy to Mary Ziegler, Director, Division of Regulations, Legislation, and Interpretation, Wage and Hour Division, U.S. Department of Labor, Room S-3502, 200 Constitution Avenue, N.W., Washington, D.C. 20210. All Comments regarding the DOL’s proposed rule must be identified by RIN 1235-AA05 and be received on or before February 27, 2012. 

For Michigan home health care providers looking for more information about what this proposed revision will mean to your business, contact Jason Shinn or see the DOL’s fact sheet on the proposed rule change, the DOL’s FAQ, or the DOL’s comparison chart showing the differences between the current and proposed rule.

Changes Ahead.jpgYesterday the National Labor Relations Board (NLRB) through Chairman Mark Gaston Pearce and Acting General Counsel Lafe E. Solomon announced the appointment of Terry A. Morgan as Regional Director in the Detroit Regional Office (Region 7) with a satellite office in Grand Rapids, MI. 

While the appointment of Ms. Morgan’s appointment is important for Michigan employers, it has and will be overshadowed by the attention given to President Obama’s recent recess appointments to the NLRB (Why Obama’s Recess Appointments to NLRB May Still Be “Good” For Employers; Obama’s NLRB Appointments: Why the Rush?; LXBN TV: Ballard Spahr’s Christopher Willis on Richard Cordray’s Recess Appointment As CFPB Director). 

The appointees are Democratic union lawyer Richard Griffin, Democratic Labor Department official Sharon Block and Republican NLRB lawyer Terence Flynn.

President Obama’s appointments returns the NLRB to its full slate of five members for the first time since August 2010. The NLRB previously lost its quorum when the term of Democrat Craig Becker—an earlier recess appointee—expired. Without a quorum, the board cannot rule on cases or create new regulations and this resulted in a backlog of undecided cases.  

Returning to Ms. Morgan, the NLRB press announcement describes her as follows:

Ms. Morgan received her undergraduate and JD degrees from University of Wisconsin in 1981 and 1988 respectively. She began her career in 1988 in the Agency’s Cleveland office (Region 8). She served as a field attorney in both Cleveland and Manhattan (Region 2). In 1997, she was promoted to a supervisory field attorney position in Manhattan where she served until 2004 when she was promoted to a Deputy Assistant General Counsel position in the Division of Operations-Management in 2004. In this position she has had oversight responsibility over a number of regional offices, most recently Baltimore (Region 5) and Cleveland. She will replace Regional Director Stephen Glasser who retired last year.

The NLRB is the federal agency that oversees employees’ rights to organize, supervises union elections, and decides disputes between U.S. private-sector employers and employees.

Hopefully, Ms. Morgan will continue Region 7’s practice of releasing, without charge, its publication called “Outreach,” which has been a good source of news and events within the Agency, as well as highlights in labor law and practice.  

Under both federal and Michigan law, employers may generally conduct comprehensive background checks on job applicants as long as the employer has obtained the appropriate waivers and does not discriminate in the equal enforcement of the policy. Going beyond this generality, employers and employees should also consider the following:

Employers should view the application process as their earliest opportunity to obtain these waivers and as an opportunity to look for anything in the application or resume that might raise a red flag. In this regard, recommended provisions include:
Acknowledgment that false or misleading answers on application or during interview will result in rejection of the application or dismissal in the event the applicant is hired;
Authorization to receive employment records;
Authorization to release employment records; and
Authorization for drug screening.
WHen it comes to conducting a background check, including a criminal history background check, employers must be aware of the limitigations. These include:
A Need to obtain a waiver for background check and future references;
Employers may not request or maintain information on arrests or detentions;
Employers May request or maintain information on convictions;
May refuse to hire on the basis of information obtained only if there is a job related reason for doing so; and
Additionally, the EEOC has taken the position that a conviction alone cannot be the basis for refusal to hire under Title VII.

Employee Screening.jpg

Employment Applications

Employers should view the application process as the earliest opportunity to obtain these waivers and as an opportunity to look for anything in the application or resume that might raise a red flag.

In this regard, recommended employment application provisions include:

  • Acknowledgment that false or misleading answers on an application or during the interview process will result in a rejection of the application or dismissal if the applicant is hired;
  • Authorization to receive employment records;
  • Authorization to release employment records; and
  • Authorization for drug screening.

Background Checks

When it comes to conducting a background check, including a criminal history background check, employers must be aware of the following limitations:

  • Employers need to obtain a waiver for background check and future references;
  • Employers may not request or maintain information on arrests or detentions;
  • Employers may request or maintain information on convictions;
  • Employers may refuse to hire on the basis of information obtained only if there is a job related reason for doing so; and
  • The EEOC has taken the position that a conviction alone cannot be the basis for refusal to hire under Title VII.

Using Social Media to Conduct Background Checks 

A hot topic for HR professionals is whether a social media investigation should be performed. This usually involves searching the usual suspects, e.g., Facebook, LinkedIn, Twitter, and the like, for information about an applicant. Certainly there are legal risks if a company uses social media to screen a job applicant. But equally true is that reviewing an applicant’s publicly available social media profile provides an additional treasure trove of information in which to assess a candidate’s professional qualifications.

For example, John Pagel, Marketing Manager at Kings Dominion, explained that he has “asked a few prospective employees for their social media information, based on the specific job title, which was for a social media coordinator.” Thus, Mr. Pagel’s interest in the applicant’s pages was to solely evaluate their knowledge and experience in using social media.

Personally, I think Mr. Pagel’s approach is certainly reasonable. I also like the fact that Mr. Pagel was not simply on a fishing expedition in terms of perusing through an applicant’s social media outlets and, instead, had a legitimate and clearly stated business reason for doing so.     

For more information and best practices for using social media as a hiring tool see Using Social Media to Screen Job Applicants – A Few Recommendations for Employers. 

Closing Thoughts

The preceding points are by no means exhaustive. But they are important points employers and HR professionals should discuss with their legal counsel. These points, however, are certainly no substitute for competent legal counsel retained to address the particular facts and circumstances of your hiring procedures. 

Jason Shinn is an employment lawyer who has worked with companies and individuals since 2001 to address employment law issues under state and federal employment laws. His experience includes counseling these clients on day-to-day employment matters, including emerging issues at the intersection of employment and social media law.  

Business Headlock.jpgFestivus – as introduced by Seinfeld – is a holiday celebration that included the “Airing of Grievances,” i.e., public criticism and pronouncements as to how a particular person has been a disappointment in the past year. 

The timing of holiday and year-end bonuses also often mark the beginning of a similar airing of grievances in the form of unfair competition lawsuits against departing employees.

This is because historically, employees plan their exits around receiving their bonuses. And these exits are often for a competitor or to start a competing business.

For example, this blog previously discussed a lawsuit alleging that a group of attorneys stole computer records consisting of client information from their former law firm prior to departing to start a competing venture. This theft came after the former law firm had handed out year-end bonuses. 

Certainly not all competition by a former employee is unlawful. But if a departing employee violates a noncompete agreement, misappropriates company assets, or engages in other wrongful conduct, then the former employer may have a number of claims available for protecting its business interests. 

Such claims may include a variety of business torts, including tortious interference with a contract or a business expectancy, misappropriation of trade secrets, and business defamation, and claims under the Computer Fraud and Abuse act. Speaking from experience, however, it is far better (and cheaper) to prevent such post-employment litigation. 

Preventing or Limiting the Damage done by a Departing Employee

A common sentiment clients express is that the damage done by a departing employee unfairly competing is like a slow wind up punch. In other words, the signs and evidence of such wrongful conduct were clearly evident from the outset.

In this regard, the following are leading indicators that employers should review and otherwise monitor in order to guard against an employee unfairly competing: 

  • Any access logs available to the employer should be carefully reviewed for the month leading up to year-end bonuses. Examples include computer sign-ins, server access logs, copier usage, and building access. Often times, these logs will identify unusual or heavy access or usage of resources that could be indicative of copying, transfer or retrieval of information. Going back to the lawyers that were accused of stealing computer records, it was explained to me that they actually had support staff scan physical files so it was “easier” to find, which also made them easier to download. One attorney reportedly even asked the office manager for moving boxes in order to box up personal items she intended to donate to charity.     
  • E-mail, use of portable hard drives or other memory storage, and downloading of data should be carefully monitored. 
  • After an employee departs, it is prudent to monitor press releases that involve the former employee or that employee’s new employer to determine whether any trade secret information has been misappropriated. 
  • Review back-up email archives to assess whether any information was transferred by the employee in the weeks preceding the employee’s departure.

Responding to a Departing Employee’s Unfair Competition 

The ultimate response an employer should have to a departing employee preparing to or actually engaging in some form of unfair competition will depend upon numerous facts and circumstances that should be evaluated with experienced counsel. But these considerations will often include:

  • Whether the former employee is violating a noncompete agreement;
  • Whether a demand letter asking the employee for voluntary and mandatory compliance by a date certain is appropriate before pursuing litigation; 
  • Whether to also send a demand letter to the new employer. In this regard, hiring an employee in violation of a noncompete agreement may constitute tortious interference with a contract and providing notice may provide a route to pursue the new employer; and
  • Whether you should  contact any vulnerable or targeted clients in order to cement business relationships and how much, if anything, should be disclosed to the client. 

Regardless how these and other issues are resolved, it is absolutely critical that the company act swiftly in order to protect its business interests. Additionally, three areas critical to litigation success will also require swift action:

First, one of the most effective remedies a company may have against a former employee who has misappropriated trade secrets or otherwise is engaging in unfair competition is a preliminary injunction. But unreasonable delay in pursuing a preliminary injunction can jeopardize this remedy.

Second, swift action in responding to a departing employee engaged in unfair competition is also important in terms of setting precedent for current employees and for judges. This is because inconsistent enforcement of a company’s rights or pursuing remedies against some employees while attempting to enforce rights or pursuing the same remedies against other employees sends mixed messages and may undercut any claim a company is protecting legitimate business interests.

Third, evidence of misappropriation and unfair competition will need to be preserved. And this evidence will often take the form of digital evidence that is easily lost through deletion or routine computer operations. Additionally, companies pursuing claims against their former employees should anticipate judges will hold them to a high standard when it comes to preserving digital evidence. 

The Take Away

Some may consider it to be Grinch-like (or attorney-like) to turn holiday or year-end bonuses into a negative. And while the unscrupulous individual willing to steal is the exception, it is important to consider that such former employees who have gone into business for themselves or have jumped over to a competitor pose a far greater threat than everyday cut-throat competition. This is because these former employees have intimate familiarity with the company’s business operations, services or products, pricing and marketing information, and its customers. 

But the damage done by a departing employee who is unfairly competing or has otherwise misappropriated company assets can often be avoided by taking appropriate preventive measures. And a business taking reasonable precautions, such as including noncompetition provisions in its employment agreements, protecting its trade secrets and confidential information from disclosure, and establishing and following appropriate exit interviews should greatly reduce its chances of becoming involved in subsequent business litigation or, if necessary, significantly increase its chances of prevailing.

iPad gift wrappedNothing captures the meaning of the Holidays (it is surprising how many winter festivals/holidays one could choose from or – cynically speaking – could use to develop a religious discrimination claim) than the giving and receiving of gifts, especially tech gadgets. And this invariably means employers will ring in the new year with an influx of new technology devices, e.g., iPads, tablets, smart phones, etc., coming into the workplace. 

For companies, it is important for their IT managers, CIOs and other company leaders to make informed decisions when it comes to determining the best way to manage the influx of these tech gadgets into their organizations.

Workplace Technology Use Policies

Employee owned devices should be addressed in a Workplace Technology Use Policy. Such a policy will cover the full range of issues at the intersection of technology and employee issues, such as email use, social media policies, and Internet use. 

But before an employer chooses to address employee-owned technology devices, it is important for employers to understand and evaluate the benefits and risks in order to ultimately determine what makes the most sense for the business.

In regard to risks, a few areas that come to mind that employers should consider include the following: 

  • Illegal Software & Violation of Software Licenses: Regardless of what the hottest device happens to be this season, it is always a good time for employers to remind their employees that non-company software cannot be introduced (uploaded or downloaded) onto company property without the express written approval of an appropriate manager and that all such software must be properly licensed and registered for the company’s use within the terms of any applicable licenses. 
  • Handling Company & Customer Information: Employers must determine and enforce how company or customer information will be treated. If employers allow such information to be transmitted between the company and employee owned devices, it is imperative that employers and employees exercise a great degree of caution in securing and handling all company and customer information. It is also a good practice to have some sort of audit trail so that the company will know who has what and when. This type of access information will also come in handy if an employer needs to later prove an employee misappropriated company assets on his or her way to working for a competitor. At the very least, employers should require employees to secure their technology devices with strong passwords and encrypting all company data stored on employee owned devices.  
  • Not all Data is Created Equal: It is also important for employers to educate employees as to what company data will not be permitted to be transferred to employee-owned devices. Consider for example that regulations governing certain types of data, such as health information protected under the Health Insurance Portability and Accountability Act (HIPAA) and HIPAA’s Security Rule requires that electronic protected health information (EPHI) be treated in certain ways. Additionally, many industries have regulatory obligations that require certain data, such as personally identifiable information, to be encrypted. 
  • If Nothing Else, Encrypt the Data Before it Leaves the Company: Even if there are no legal or regulatory requirements for data to be encrypted, employers should insist that any company data transferred to an employee owned device must be encrypted. One reason for this requirement is because many data breach laws, including Michigan’s data breach law, contain specific exemptions and protections for businesses if there is a data breach of encrypted data. In other words, if there an employee owned device is lost or stolen, a company limit or outright avoid the need for costly breach notifications if the customer information was encrypted. 

Conclusion

Implementing a company technology use policy comes down to balancing business, legal, and practical considerations. Specifically, IT-management policies with rigid parameters regarding what devices are acceptable for corporate use will often provide the most protection to the business. But the broad appeal and adoption of tech gadgets by officers, managers, and employees make such a rigid approach unfeasible. But these two competing interests must be resolved with an understanding of the applicable risks and legal requirements.