1912 saw some other landmarks. The Republic of China was formed. The first NHL game was played (a key development for those of us here in Minnesota). Robert Scott arrived at the South Pole, only to discover that Roald Amundsen had gotten there one month before. Arizona was admitted to the Union as the 48th state. The Titanic had its first (and last) voyage. The first Japanese cherry blossom trees were planted in Washington, D.C.

And, not to be overlooked, early in 1912, Hennepin County District Court Judge William Lancaster and Minnesota Supreme Court Justice David Simpson started a law firm at the request of First National Bank of Minneapolis (now known as US Bank). James E. Dorsey, fresh out of Harvard Law School, became the firm’s first associate in 1913. By 1919, “Dorsey” was part of the law firm’s name. When both Lancaster and Simpson died prematurely in 1924 and 1925, one from illness and one in a car accident, the law firm’s name was changed to “Junell, Dorsey, Oakley and Driscoll.” The firm has had 14 name changes since that time, becoming “Dorsey & Whitney” in 1982.

Thus, as Asmaa Butt, a researcher with Lexology in the United Kingdom, correctly noted in response to the last Trivia Game question, like Fenway, Paramount, LL Bean, and other companies, Dorsey & Whitney celebrated its 100th anniversary this year. Congratulations to Asmaa, our third international Trivia Game Winner. She wins one of our fabulous prizes.

The next Trivia Game question will go up later this afternoon. Good luck.  Regards, Roy

Many of my colleagues and I will be presenting at the Institute next week. For those who might be interested in attending our sessions, they are listed below:

May 21

Salespeople – Can’t Live With Them, Can’t Live Without Them: Managing, Disciplining and Firing the Salesperson (Melissa Raphan) (10:20 a.m. – 11:15 a.m.)

The Contingent Workforce and Alternate Staffing Models – In-House Counsel Perspectives (panel discussion, moderated by Ryan Mick) (1:30 p.m. – 2:30 p.m.)

FLSA “Off the Clock” Litigation – The Hottest Issues in the Hottest Cases (panel discussion, moderated by our now-retired partner, Robert Reinhart, Jr.) (1:30 p.m. – 2:30 p.m.)

How to Discipline and Discharge (Melissa Raphan, and others) (2:45 p.m. – 3:45 p.m.)

Are They Really Independent Contractors? Enforcement Trends and Best Practices to Avoid Misclassification (Courtney DaCosta and Ryan Mick) (4:00 p.m. – 5:00 p.m.)

May 22

Out of the Frying Pan and Into the Fire: Managing the Leave Process After FMLA Leave is Granted (Marilyn Clark) (10:20 a.m. – 11:15 a.m.)

Employees Gone Wild! Managing the Crises They Create (panel discussion, moderated by me) (11:25 a.m. – 12:20 p.m.)

The 15 Most Important Non-Compete Cases—What Every Employment Lawyer Should Know (Joe Hammell) (11:25 a.m. – 12:20 p.m.)

Improving Your Mediation Advocacy Skills in Employment Law Cases (panel discussion, moderated by our now-retired partner, Robert Reinhart, Jr.) (1:30 p.m. – 2:30 p.m.)

Employees Gone Wild! (repeat session) (2:45 p.m. – 3:45 p.m.)

As this conference illustrates, my colleagues and I will be speaking on a wide variety of employment topics next week. If you plan to attend the conference, please be sure to track us down and say hello.

More generally, I want to remind you that our Labor & Employment Group offers a number of training opportunities, which we tailor to our clients’ (or non-clients’) needs and desires. This includes basic training on fundamental topics such as discrimination law, sexual harassment, post-employment restrictive covenants, discipline and discharge, etc. The programs also include my “HR and Management Mistakes” seminar and the crisis management seminar “Employees Gone Wild!”, which I will be presenting next week.  With all of our seminars, we strive to make them interactive (using quizzes, discussion groups, etc.), and entertaining (using television and movie clips, “Jeopardy” games, etc.), as well as informative.

If you would be interested in a single seminar or a series of training seminars at your company, please do not hesitate to contact me. Best regards, Roy

By way of background, Matt spent many years working in our Fargo office.  He recently made the move to Minneapolis and we are very pleased he did.  If you have any questions about the analysis below, don't hesitate to contact Matt directly.  His email is:  kipp.matthew@dorsey.com; his phone number is: 612.492.6162.  Additional information about Matt is available at: http://www.dorsey.com/kipp_matthew/.

I hope you find Matt's analysis helpful.  Regards, Roy]  

Quirky Question # 193: 

An employee experienced complications with her pregnancy toward the end of her second trimester.  As a result of these complications, her physician placed her on bed rest for the remainder of the pregnancy.  If she carries the baby to term, this employee will exhaust her Family and Medical Leave Act leave by the time of the birth.  Are we required to give the employee additional leave after the baby is born?

Matt’s Analysis:

The answer to this question is complex because there are two different leave considerations at issue – (1) the leave while the employee is on bed rest and (2) any leave the employee may be entitled to after the baby is born – and it implicates the Family and Medical Leave Act (FMLA), the Pregnancy Discrimination Act (PDA), and, potentially, the Americans with Disabilities Act (ADA), in addition to whatever state laws may apply in your jurisdiction. Furthermore, employers are advised to tread very carefully in this situation, and those like it, because the Equal Employment Opportunity Commission (EEOC) recently brought renewed focus on the issues of discrimination against pregnant women and caregivers. See Press Release, EEOC, Unlawful Discrimination Based on Pregnancy and Caregiving Responsibilities Widespread Problem, Panelists Tell EEOC (Feb. 15, 2012) (http://www.eeoc.gov/eeoc/newsroom/release/2-15-12.cfm).

As you likely know, the FMLA provides the employee with certain leave rights. Unlike the PDA or the ADA, the FMLA applies in this situation to both the pre- and post-birth leave. The FMLA requires covered employers to grant leave to employees for reasons including: (1) “a serious health condition that makes the employee unable to perform the functions of the position of such employee” and (2) “the birth of a son or daughter of the employee and in order to care for the son or daughter.” 29 U.S.C. § 2612(a).

The PDA prohibits discrimination against pregnant women. This Act applies only to the determination of the leave issue while the employee is on bed rest. The PDA requires an employer to treat the pregnant employee the same as if she were not pregnant. In the case of a request for additional leave beyond that permitted under the FMLA, an employer must treat the pregnant employee the same as it would any other employee with a medical condition that prevented the employee from working for a set period of time. If your company has a policy providing for additional leave, that leave must be offered to the pregnant employee under the same circumstances as it would be offered to any other employee with a health condition requiring leave.

Depending on the types of complications caused by the pregnancy and the extent of the bed rest restriction, an employee may also be disabled under the ADA. She will qualify as disabled if the unusual physical impairments caused by her pregnancy affect a major life activity and that major life activity is substantially limited by the impairment. Prior to the passage of the ADA Amendments Act of 2008 (ADAAA), there were court decisions ruling both ways on the issue of whether pregnancy complications constituted a disability. Some of these cases relied on the specific nature of the limitation caused by the pregnancy complications, but other cases relied on regulations that indicated short-term impairments were not “substantially limiting.” Because pregnancy is inherently short-term, some courts found that the pregnant employee was not disabled.

Following the passage of the ADAAA, the U.S. Department of Labor (DOL) revised its regulations to be in harmony with and implement the new law. As part of these revisions, the DOL eliminated the regulations that included duration of the impairment as part of the “substantially limits” consideration. The regulations also now specifically state: “The effects of an impairment lasting or expected to last fewer than six months can be substantially limiting within the meaning of this section.” 29 C.F.R. § 1630.2(j)(1)(ix). In conformity with the ADAAA, the regulations also lower the standard required to meet the “substantially limits” definition. Thus it is much more likely that a pregnant employee who experiences unusual complications from her pregnancy, which limit her activities, will be “disabled” under the ADA.

In this situation, the employee’s physician has restricted her to bed rest with only short periods away from the bed to use the bathroom or to prepare a meal. This sedentary life style for, potentially, three months is sufficient to establish that she is limited in at least one major life activity “as compared to most people in the general population.” 29 C.F.R. § 1630.2(j)(1)(ii). Therefore, this employee would be considered disabled under the ADA for the duration of her bed rest.

Once it is determined that this employee is disabled, and she has asked for an accommodation, then it is the employer’s obligation to engage in the interactive process with the employee to determine whether there is a reasonable accommodation available. The EEOC has issued guidance finding that a reasonable accommodation includes permitting an employee to take unpaid leave. In this situation, given the extent of the employee’s restriction and the nature of her work, the only accommodation that is being requested is additional leave beyond that permitted by the FMLA. (For other employers, depending on the nature of the employee’s work, it may be possible to make arrangements that would permit the employee to work while she is lying in bed at home.)

When an employee may be entitled to leave under both the FMLA and the ADA, an employer should determine the employee’s leave rights under each law separately and then consider where the two laws may overlap. The first step in this situation would be to ask the employee how much leave she intended to use after the birth of her child. The typical leave is six to eight weeks. Assume for the sake of this discussion that the employee tells you that she already knows the birth will be by Caesarean section, so she will take eight weeks of leave following the birth. Thus, the total amount of leave she will take is approximately twenty weeks.

Twelve of those weeks are guaranteed under the FMLA. Part of the FMLA leave will cover the time after the birth and part of the FMLA leave will cover the time she is on bed rest. The remaining eight weeks of leave, which would be applied to the time she is restricted to bed rest, would be governed by the ADA. As the employer, you must determine whether this eight weeks of leave is a reasonable accommodation. If providing her with eight weeks of leave to accommodate her disability is going to place an undue hardship on you, then it is not a reasonable accommodation. There are a number of considerations that factor into whether an accommodation constitutes an undue hardship, so it is advisable to consult with an attorney before rejecting a requested accommodation on the basis of undue hardship.

As the foregoing illustrates, whenever the FMLA and ADA interact, there are a number of potential pitfalls for the employer. To avoid them, make sure you engage in proper communication with your employee, provide the employee with his or her full rights under the applicable laws, and, of course, consult with your attorney whenever you are uncertain about how to proceed at any particular stage in the process.

I hope you find the analysis below helpful.  Regards, Roy]

When Is a Proscription on Convictions an Impermissible Predilection?  EEOC Issues New Guidance on the Use of Criminal History in Employment

By:  Douglas R. Christensen and Courtney J. DaCosta 

Earlier this week, the United States Equal Employment Opportunity Commission (“EEOC”) issued updated Enforcement Guidance (“Guidance”) regarding the circumstances under which employers permissibly may, under Title VII of the Civil Rights Act of 1964 (“Title VII”), rely on arrest and conviction records in employment decisionmaking. See EEOC, Consideration of Arrest and Conviction Records in Employment Decisions under Title VII of the Civil Rights Act of 1964 (April 25, 2012), http://www.eeoc.gov/laws/guidance/arrest_conviction.cfm. The Guidance, while clarifying the agency’s position on this issue, also portends additional burdens for employers who need or want to consider applicants’ and employees’ criminal records.

The EEOC issued its Guidance in the midst of its ongoing Eradicating Racism and Colorism from Employment (“E-RACE”) initiative and on the heels of prominent enforcement actions involving allegations of race discrimination relating to the use of criminal history information. The most recent of those actions was venued in Minnesota and resulted in a $3.13 million settlement between the EEOC and Pepsi Beverages. See EEOC, Pepsi to Pay $3.13 Million and Made Major Policy Changes to Resolve EEOC Finding of Nationwide Hiring Discrimination Against African Americans (Jan. 11, 2012), http://www.eeoc.gov/eeoc/newsroom/release/1-11-12a.cfm. The Guidance is the EEOC’s first on this issue in more than 20 years.

Use of Criminal History Information in Employment Carries Pros and Cons

According to one recent survey, more than nine out of ten employers require at least certain applicants to submit to a criminal background check. See Soc’y of Human Res. Mgmt., Background Checking: Conducting Criminal Background Checks (Jan. 22, 2010), http://www.shrm.org/research/surveyfindings/articles/pages/backgroundcheckcriminalchecks.aspx.

This practice may be advisable for a number of reasons, including promotion of workplace safety; prevention of meritorious negligent hiring claims; and compliance with requirements imposed by federal, state, or local law. However, the use of criminal history information in employment can be frought with legal risks, chief among them potential liability for discrimination under Title VII, the federal statute that prohibits workplace discrimination on the basis of race (as well as color, national origin, sex, and religion).

Disparate Impact Concerns Dominate EEOC’s Guidance

The EEOC’s Guidance focuses principally on circumstances under which an employer’s consideration of criminal history information will have a prohibited disparate impact on applicants and employees on the basis of race. African American and Hispanic men, the EEOC observes, are arrested and convicted at rates disproportionate to their prevalence in the U.S. population. For this reason, an employer’s facially neutral practice of disqualifying for employment all or certain applicants who have a criminal record, or a certain type of criminal record, may have the effect of discriminating against African American and Hispanic individuals.

EEOC Frowns on Reliance on Arrest Information

As a preliminary matter, the EEOC’s Guidance strongly cautions against the use of arrest records in employment decisions under almost all circumstances. According to the EEOC, the fact that an applicant has been arrested in the past is insufficient evidence to support a conclusion that he in fact engaged in the conduct for which he was arrested. However, according to the EEOC, an employer may make an employment decision based on the conduct that led to the arrest “if the conduct makes the individual unfit for the position in question.” For example, a pharmaceutical company theoretically could deny employment in a sales representative position to an applicant whose criminal background check revealed that she had been arrested for dealing in prescription drugs.

Unfortunately, the EEOC’s Guidance does not indicate what steps, if any, the employer must take to determine whether the individual in question actually engaged in the conduct underlying his or her arrest. Particularly in the case of new job applicants, employers generally will have very limited ability to assess the validity of the arrest and the applicant’s culpability for the alleged conduct. For this reason, and given the EEOC’s obvious skepticism of the use of arrest records in hiring and employment, most employers would be wise to forgo this practice altogether.

Reliance on Conviction Records Can Be Permissible if Circumscribed

Employers have much greater leeway under the EEOC’s Guidance to consider conviction records in hiring and employment decisions. According to the EEOC, “a record of a conviction will usually serve as sufficient evidence that a person engaged in particular conduct, given the procedural safeguards associated with trials and guilty pleas.” The EEOC’s Guidance recommends that employers not, however, ask about criminal conviction history on job applications; instead, that inquiry should be reserved for a later stage of the hiring process. (It is worth noting that some states—but not Minnesota, in the case of private employers—separately prohibit inquiries regarding criminal history early on in the selection process).

If an employer’s selection criterion relating to conviction history has a statistically significant disparate impact on individuals of a certain race, the criterion will be deemed to violate Title VII unless it is “job related and consistent with business necessity.” In its recent Guidance, the EEOC opines that an employer may be able to justify a criminal-history-based selection criterion that has a disparate impact in one of two ways:

• First, the employer may validate the criterion in accordance with the Uniform Guidelines on Employee Selection Procedures, guidelines jointly promulgated in 1978 by the EEOC, the Civil Service Commission, the Department of Labor, and the Department of Justice. See 29 C.F.R. § 1607.1, et seq.
• Second, the employer may develop a “targeted screen” based on three factors articulated in a 1975 Eighth Circuit decision, Green v. Missouri Pacific Railroad, 523 F.2d 1290 (8th Cir. 1975): (1) the nature of the crime, (2) the time elapsed since the crime, and (3) the nature of the position sought. In most cases, according to the EEOC, the employer also should engage in an “individualized assessment” with respect to any individual disqualified by the targeted screen.

Unfortunately, both options have the potential to entail substantial burden and expense for employers. The process of having a selection criterion validated pursuant to the Uniform Guidelines on Employee Selection Procedures can be cumbersome and time-consuming, and it can have the inertial effect of locking employers into validated procedures that may not accommodate changing business needs.

Use of the Green factors in employment decisionmaking is unlikely to be problematic in and of itself and, in fact, many employers already do consider factors such as these, whether purposefully or simply as a matter of common sense. Potentially more troublesome is the EEOC’s suggestion that employers undertake an “individualized assessment” for any candidate whom the Green factors exclude. According to the EEOC, such an assessment could include, but need not necessarily include all of, the following evidence:

• The facts or circumstances surrounding the offense or conduct;
• The number of offenses for which the individual was convicted;
• Older age at the time of conviction, or release from prison;
• Evidence that the individual performed the same type of work, post conviction, with the same or a different employer, with no known incidents of criminal conduct;
• The length and consistency of employment history before and after the offense or conduct;
• Rehabilitation efforts such as education and training;
• Employment or character references and any other information regarding fitness for the particular position; and
• Whether the individual is bonded under a federal, state, or local bonding program.

Obviously, compilation and review of all of these data points is likely to be time-consuming, if not impossible, in the run of cases. The EEOC does note in its Guidance that “an employer may be able to justify a targeted criminal records screen solely under the Green factors” and that “Title VII thus does not necessarily require individualized assessment in all circumstances.” Given this Guidance, employers who elect not to engage in individualized assessments of candidates who are excluded by a selection criterion relating to conviction history, or who engage in only limited individualized assessments, should ensure that the selection criterion is narrowly tailored to the specific requirements of the position at issue.

Compliance with State or Local Law Is Not an Absolute Defense

As we noted above, federal, state, or local law may require the use of criminal history screening or make a clean criminal record a minimum requirement for certain positions, typically those that implicate safety or public health interests. Minnesota law, for one, includes many provisions of this nature. See Minn. House Research Dep’t, Criminal Background Check Statues: An Overview (Jan. 2010), http://www.house.leg.state.mn.us/hrd/pubs/bkgdchck.pdf.

The EEOC’s Guidance clarifies that, while adherence to a federal requirement of this nature will not violate Title VII, adherence to a similar state or local law may lead to Title VII liability due to the supremacy of federal law over state or local law. Employers who find themselves stuck between the rock of a state or local law prohibiting employment of individuals with certain criminal records and the hard place of potential disparate-impact liability should be sure to document thoroughly the reasons for their hiring and employment decisions based on criminal history and, if necessary, raise the conflict with appropriate state or local authorities.

EEOC and Dorsey Offer Suggested Best Practices

The EEOC’s Guidance sets forth a list of best practices for employers regarding the use of criminal arrest and conviction information:

• Eliminate policies or practices that exclude people from employment based on any criminal record;
• Train managers, hiring officials, and decisionmakers about Title VII and its prohibition on employment discrimination;
• Develop a narrowly tailored written policy and procedure for screening applicants and employees for criminal conduct;
• Identify essential job requirements and the actual circumstances under which the jobs are performed;
• Determine the specific offenses that may demonstrate unfitness for performing such jobs;
• Determine the duration of exclusions for criminal conduct based on all available evidence;
• Record the justification for the policy and procedures;
• Note and keep a record of consultations and research considered in crafting the policy and procedures;
• Train managers, hiring officials, and decisionmakers on how to implement the policy and procedures consistent with Title VII;
• When asking questions about criminal records, limit inquiries to records for which exclusion would be job related for the position in question and consistent with business necessity; and
• Keep information about applicants’ and employees’ criminal records confidential. Only use it for the purpose for which it was intended.

We offer the following additional best practices to supplement the EEOC’s list:
• Consider, on a position-by-position basis, whether the benefits of criminal history screening are likely to outweigh the legal risks;
• Work with any third-party providers of criminal background reports to ensure that criminal history information not relevant to the position at issue is not communicated to decisionmakers in the first instance;
• Conduct individualized assessments of excluded candidates to the fullest extent possible under the circumstances;
• Document thoroughly the reasons for not selecting certain candidates based on screening factors or individualized assessments;
• Track applicant flow and selection data to assess on an ongoing basis whether a criminal history screen is having a disparate impact; and
• Remember that, while the issue of criminal history screening may come up most often in the hiring context, the EEOC’s Guidance is equally applicable to current employees.

Finally, it is worth noting that the EEOC’s Guidance does not carry the force of law and, therefore, will not automatically control in civil litigation under Title VII or similar state or local laws that prohibit employment discrimination. That said, the EEOC’s opinion on these matters is likely to be highly influential in the courts, and it will be the final word with respect to charges of discrimination filed under Title VII. While only time will tell the degree of influence the EEOC’s Guidance will have in the courts and at the state level, the prudent employer will take it to heart at this time.

The EEOC’s Q&A document regarding the Guidance is available here:

ttp://www.eeoc.gov/laws/guidance/qa_arrest_conviction.cfm

The EEOC’s press release relating to the Guidance is available here:

http://www.eeoc.gov/eeoc/newsroom/release/4-25-12.cfm.

“Making your living in this way is bruising. Paul Simon sung about it. Bob Dylan sung about it. Name the Paul Simon song that referenced this profession. Name the two Dylan songs that focused on this activity. Who were the individuals about whom Dylan wrote?”

As Mark Tobin of Grand Forks, North Dakota, correctly observed, the questions related to boxing. Paul Simon’s song, “The Boxer,” is one of my personal favorites. For those of you unfamiliar with it, I’ve included a You Tube link: http://www.youtube.com/watch?v=y-YgA4WSWUA.

Bob Dylan has written two songs about boxing: “Who Killed Davey Moore?” and “Hurricane.” Davey Moore was a professional boxer who died in 1963 as a result of head injuries sustained during a nationally-televised boxing match. Rubin “Hurricane” Carter was a boxer who was convicted of murder on the basis of extremely thin (and dubious) evidence. His two convictions were both overturned and Carter is now a free man.

For providing the correct answers to these questions, Mark is (again) the latest winner of our Employment Trivia contest. He continues to acquire nearly every prize available in my prize box. Kudos to Mark!

The next question goes up now. Good luck. Roy

The first of the accumulated articles is the material set forth below.  The analysis was written by my colleague, Jen Cornell.  Jen's email is: cornell.jen@dorsey.com; her direct line is: 612.492.6438.  Additional information regarding Jen is available at: http://www.dorsey.com/Jen-Cornell/.  Don't hesitate to contact Jen if you have any questions about the content below.  Regards, Roy]

Quirky Question # 192:

A long-time employee has informed us of his decision to undergo a sex change.  We are concerned about the reactions of co-workers and aren’t clear if we should be doing anything in response.  As an employer, are we required to take any actions?

Jen’s Analysis of Quirky Question # 192:

The question of whether this worker is protected against discrimination under federal and many state laws is a relatively settled matter of law.  To start, I want to clarify some terminology: Individuals undergoing a sex-change may refer to themselves in a number of ways including transsexual, transvestite, transgender, or intersex, among others.  All of these labels are descriptive of individuals who live, at least in part, as a gender that may differ from that expected of them.  The term “transitioning” refers the process by which an individual undergoes physical changes to their sex.  I am going to use the term transgender to respond to this question but the answer would be the same regardless of how the employee identifies.

Title VII does not expressly protect transgendered employees; rather Title VII expressly prohibits discrimination on the basis of race, color, religion, sex, or national origin.  See 42 U.S.C. § 2000e.  Many courts, including the Eighth Circuit, initially interpreted the law as conferring no protections to transgendered individuals.  See Sommers v. Budget Mktg., Inc., 667 F.2d 748, 750 (8th Cir. 1982).  In Price Waterhouse v. Hopkins, 490 U.S. 228 (1989), however, the Supreme Court held that a female employee who was not stereotypically feminine was protected by the law since “we are beyond the day when an employer could evaluate employees by assuming or insisting that they matched the stereotype associated with their group . . . .”  Id. at 251.

After Price Waterhouse, courts have almost uniformly held that Title VII protects transgendered individuals, since the basis of the discrimination could be characterized as a reaction to the individual’s failure to conform to the stereotypes of his/her sex.  See, e.g., Smith v. City of Salem, 378 F.3d 566, 572 (6th Cir. 2004); Schwenk v. Hartford, 204 F.3d 1187, 1198-1203 (9th Cir. 2000); Rosa v. Park West Bank & Trust Co., 214 F.3d 213, 215-16 (1st Cir. 2000). 

The most recent decision by the Eleventh Circuit, Glenn v. Brumby, No. 1:08-cv-02360 (11th Cir. Dec. 6, 2011), soundly affirmed this judicial trend of extending anti-discrimination protections to transgendered employees since the Glenn Court held that discrimination against a transgendered employee must meet heightened scrutiny in the public employment context – a more exacting standard then that required in Title VII cases.  Important for employers, the Eleventh Circuit noted that employers’ fears of co-workers’ reactions to an employee transitioning would not justify discrimination – would not constitute an important governmental purpose – indicating that employers cannot use other employees’ potential prejudices and reactions as defenses to discrimination.  Additionally, the panoply of state laws that expressly protect transgendered individuals, including Minnesota’s, see Minn. Stat. § 363A.03 subdiv. 44, indicate that employers would be best served to anticipate and proactively address the issue rather than wait for any problems to arise.

Moreover, even more recently, on April 20, 2012, the EEOC, in deciding a case involving the Bureau of Alcohol, Tobacco & Firearms, held in Macy v. Holder that a “complaint of discrimination based on gender identity, change of sex, and/or transgender status is cognizable under Title VII.”  The EEOC’s ruling was grounded on Hopkins, a 2008 case from the D.C. Circuit, Schroer v. Billington, the Glenn decision discussed above, and other federal court decisions. (For a discussion of the Schroer decision, see Quirky Question # 68.)  The EEOC’s decision, binding on federal agencies, may have broad implications for private employers as well, particularly when considered in light of the pre-existing trend among federal courts.

So practically speaking, what do Glenn and Macy mean for employers?  Essentially, providing workplace training and policies that incorporate transgendered employees in a proactive manner may protect employers from discrimination lawsuits.  Further, such training and policies will provide an employer the same types of defenses if litigation arises that anti-harassment policies and training currently provide in other contexts.  Not to mention, it’s the right thing to do.

There is no need to reinvent the wheel; after all, most employers have solid sexual harassment policies and procedures already in place.  Since the same laws are at issue, employers need only incorporate the issue of transgender employees into existing trainings and policies.

In particular, employers should:
• Update anti-discrimination and harassment policies to include terms such as transgender as a protected status;
• Disseminate updated policies, either by auditing an employee handbook if applicable, posting, or otherwise distributing the updated policies;
• Train human resources personnel on the issue so that they are attuned to any potential issues;
• Incorporate discussion of transgender anti-discrimination and anti-harassment expectations into ongoing training – there is no need to offer separate training on this issue, simply add the issue to existing programs;
• Monitor the workplace.

Courts currently require no more regarding transgendered employees than the protections required under Title VII; so as long as employers have sound up-to-date sexual harassment policies and procedures, incorporation of transgendered individuals into those policies should be organic and simple to implement.  And as with all other workplace discrimination issues, the more proactive you are with these simple steps, the better chance you have to inoculate yourself against claims of discrimination.  While these suggestions may seem simple, in the constantly changing world of workplace discrimination law, an ounce of prevention is worth a pound of cure.

I hope you find their analysis of value.  Regards, Roy]

Quirky Question # 191:

I read with interest your analysis of pre-employment background checks in Quirky Question # 189. I’ve got a slightly different inquiry touching on the same issue.

I’m a Human Resources Executive at a national retail company. During several parts of the year, we need to hire additional cashiers. For many years, we have successfully used a temporary staffing agency to fill these seasonal positions. The temporary workers are employed by the staffing agency, but work at our company.

We offer a store credit card, and instruct all cashiers (whether regular or temporary) to encourage customers to complete applications for the card while checking out their purchases. The credit card application requires detailed personal and confidential information. We have several practices, procedures and policies in place to protect our customers from identity theft. For example, we conduct pre-employment credit and criminal background checks on all of our regular employees, and assume that the temporary agency conducts similar background checks on their workers whom they place at our company.

Since the seasonal workers are technically employed by the staffing agency, does that eliminate (or reduce) our liability should it turn out that the worker steals a customer’s identity? Moreover, should we play any role in what background checks the staffing agency runs on the seasonal workers to reduce any liability we may have for negligent hiring of those workers?

Ed’s and Jillian’s Analysis:

Great questions.  Here are a few general principles that we hope you will find helpful.

In your contract with your staffing agency, you should require the staffing agency to conduct background checks for any employee placed at your company. Those background checks should be very similar (and preferably identical) to the background checks performed on your own employees for the temporary workers the agency provides. Your contract should also clearly provide: (1) how and under what conditions negative information revealed by the background checks must be communicated to the company before any employee is placed by the staffing agency at the company; and (2) the type of approval the company must provide before any such placement if the background check uncovers negative information in the employee’s background.

It may be possible for an employer to avoid vicariously liability for the tortious or criminal acts of individuals working on their premises through a temporary staffing agency. See, e.g., Sandra M. v. St. Luke’s Roosevelt Hosp. Center, 33 A.D.3d 875, 880 (N.Y. App. Div. 2006) (stating that an employer may delegate the task of conducting pre-employment background checks, and the liability for performing them negligently, to an independent contractor); Escoto v. Estate of Ambriz, 200 S.W.3d 716 (Tex. App. 2006); Gaeke v. Primus Automotive Fin. Svcs., Inc., 2002 WL 32133028 (W.D. Tex. 2002) (finding no liability for negligent hiring or supervision where defendant contracted with staffing agency for clerical help).

The delegation is not without limits, however. Even in situations where the employer did not have a duty to hire or supervise the temporary worker, an employer still may be found liable to an injured party if it acted negligently in choosing the staffing agency that provided the worker and conducted his/her background check. For example, if a temporary worker engages in inappropriate conduct that results in liability, whether the employer or the staffing agency that conducted the background check will be held liable may depend on the reasonableness of and diligence used in the employer’s choice of the staffing agency. See Sandra, 33 A.D. 3d at 881 (stating that an employer’s reliance on another entity to supply temporary workers was reasonable for certain positions, so long as the temporary agency supplied workers with “no inappropriate behavior or propensities”) (quoting Maristany v. Patient Support Servs., 264 A.D. 2d 302, 303 (N.Y. App. Div. 1999) (“an employer has the right to rely on the supposed qualifications and good character of the contractor”)). Therefore, an injured party could potentially bring a successful negligence action against the employer based on the employer’s negligence in choosing and relying on a particular staffing agency to conduct background checks and inform it of any negative information uncovered regarding the workers to be placed on its premises.

The employer also can be found negligent under a failure to supervise theory. See e.g., Verinakis v. Medical Profiles, Inc., 987 S.W. 2d 90, 98 (Tex. Ct. App. 1998) (pet. denied Tex. 1999); Cook v. Greyhound Lines, Inc., 847 F. Supp. 725, 732 (D. Minn. 1994). For example, if the employer failed to provide proper oversight or training, or failed to employ reasonable safeguards to guard against employee theft of customer information, an individual injured by the actions of the temporary employee might be able to assert a claim successfully.

Moreover, once negative background information is conveyed to the employer by the staffing agency, the employer may be subject to liability for the improper use of that information to the same extent it would be had the employer conducted the check. Therefore, all employers should be aware of laws affecting the use of information learned through pre-employment background checks when establishing the policies and procedures for handling such information.

Practical Guidance

There are several approaches employers can use in contracting and working with a staffing agency that may reduce the potential of liability for the conduct of a temporary worker for whom the staffing agency failed to conduct an adequate credit or criminal background check or to convey relevant negative information.

1) Make a Well-Considered Choice of A Temporary Staffing Agency

If you choose to have a staffing agency conduct background checks for your own employees or for temporary workers who will work at your company, take care to that you use due diligence in choosing the agency that your organization uses. Make sure you know the vendor by gathering adequate information on the background of the agency and its clients, practices, awards, and any prior problems to make an informed decision on which agency to use. Your goal is to hire an agency that no one could argue you were negligent in choosing. In short, check the background of the background checkers.

2) Make Clear Through a Binding Contract That The Staffing Agency Has The Obligation To Conduct The Background Checks

Once you have carefully selected the entity you will use for candidate selection and associated background checks (and documented your decision-making process) the structure of the contract under which these tasks will be done is a critical factor to how any potential liability based on the worker’s conduct may be determined. Without a contractual obligation to conduct background checks, a temporary agency may be found to have had no duty to do so. See Fox Associates, Inc. v. Robert Half Intern., Inc., 334 Ill. App. 3d 90, 97 (Ill. App. Ct. 2002) (affirming dismissal of plaintiff employer’s negligent misrepresentation claim based on the staffing agency’s failure to provide information of a temporary worker’s prior conviction for embezzlement after the worker embezzled from the plaintiff, because plaintiff failed to allege that the staffing agency was under a duty to conduct a criminal background check on the temporary worker).

3) Set Forth Specific Procedures for Conducting Checks and Communicating Their Results

The contract with the staffing agency should specifically set forth the agency’s obligations in conducting the background checks and the checks should be no less than the scope of the checks performed on your own employees. The contract should also cover when and how negative information uncovered should be communicated to you. The required procedures for doing so should be in writing, and should, at a minimum, include what information will be conveyed (e.g., all negative information) and how this will be done (e.g., a written report, signed by the recipient before the candidate is placed). A clear and detailed procedure for what and how potentially damaging information will be communicated to the employer is essential.

4) The Contract Should Govern What Happens if Negative Information Is Uncovered

The contract with the staffing agency should provide detailed procedures for how any negative information revealed in the checks will be communicated to you and what must occur before a worker whose background check reveals negative information is placed on your premises. The contract should require that no temporary worker whose background check reveals negative information, as defined in the contract, will be placed on your premises without your written consent. Once any negative information is communicated to you, the decision regarding the effect of the that information should be based on the duties and industry of the position, as well as the context of the negative information, as we discussed in Quirky Question # 189 regarding the potential for claims of disparate impact discrimination based on pre-employment background checks.

5) Do Not Allow For Discretion in Whether to Share Information

The contract should not allow for discretion in these matters. To avoid a potential argument by the staffing agency that its failure to convey information was reasonable, the contract should provide detailed directives for what background check information will be shared with you.

6) Include an Indemnify and Hold Harmless Provision for Liability Resulting From Improperly Conducted Checks and Improperly Conveyed Information

Because unforeseen scenarios may arise, you should require that the contract contain an indemnify and hold-harmless provision for any employer liability resulting from the inadequacy of the staffing agency’s background check or the failure of the agency to convey relevant (and contractually required) information uncovered by the background check. That provision should also cover your attorneys’ fees and costs in defending against any such claims.

7) Ensure That Contract Procedures are Consistently Followed

Once your detailed contract is implemented, make sure its required procedures are consistently followed. We recommend conducting random audits of worker referrals and how their background checks were conducted and any resulting information was shared with you. The timing and frequency of the random audits should be specified in the contract.

8 )  Act On Negative Information Revealed in a Candidate’s Background Check

Once the staffing agency has met its contractual obligations in conducting the check and conveying its results, you must act on that information in the same manner as if you conducted the background check yourself.

9) Review training and safeguards to make sure they are reasonable and sufficient to guard against theft of customer information

Although not directly related to the background checks, an employer should review its processes and procedures to make sure that its training and safeguards are reasonably designed to prevent identity theft.

One caveat: This approach is not a one-step solution to your dilemma. By way of example only, while it might diminish a company’s risk of a successful suit alleging negligent hiring, it would not necessarily diminish a claim based upon the company’s allegedly insufficient oversight of or training of the temporary worker if the worker were to steal confidential information after the worker is placed at the company. Plaintiffs might also attack the company’s technology, claiming that safeguards should have been, but were not employed by the company, to prevent the theft. As we discussed previously, there remains a risk of disparate impact discrimination claims stemming from the way in which background checks are conducted or the way in which information revealed by them is used by the company.

That said, while there is no guaranteed method of eliminating all potential liability, consistent application of these nine steps should reduce the likelihood of liability based on a temporary worker’s past conduct.

Quirky Question # 190:

My company is a firm believer in rewarding good behavior as opposed to punishing bad behavior. Along those lines, we give bonuses to employees who maintain perfect attendance over the course of a year. For employees who do have absences, we apply a “no-fault” system that grants employees a set number of days that can be missed each year for whatever reason, so that our supervisors and HR staff do not waste time checking in on the reasons for every absence.

Of course, our employees periodically take different types of leave from work, including leave under the Family and Medical Leave Act and the Americans With Disabilities Act. An employee who recently took FMLA leave advised us that she does not think she should be disqualified from the perfect attendance bonus because she did have “perfect” attendance when she wasn’t forced to be out because of her health issue. Another employee who took some leave for a disability issue claims her missed days should not apply to her annual 15-day threshold, again because the leave was not by choice.

Neither employee’s request seems valid to me. How can an employee who misses work have perfect attendance? And what’s the point of a no-fault attendance policy if certain missed days count, while other do not?

Joel’s Analysis:

Attendance policies tend to be the toughest to administer on a day-to-day basis. Perfect attendance bonuses and no-fault attendance policies are no exception. Based on some relatively recent guidance contained in Family and Medical Leave Act (FMLA) regulations, and considering a recent case pursued by the Equal Employment Opportunity Commission (EEOC), however, there do appear to be some clear answers to your questions.

Attendance bonuses and policies can be powerful tools. Employers frequently put in place policies to incentivize positive employee behavior, including providing benefits for employees to attend work punctually and regularly. And like you, employers also have sought to simplify attendance policies to avoid paternalistically requiring an explanation for every missed workday. These “no-fault” attendance policies generally allow a certain number of unexcused absences without requiring the employee to provide any documentation, and then penalize employees who take leave beyond allowable limits.

Both perfect attendance and no-fault policies make encouraging employee dedication and managing absenteeism easy. For perfect attendance bonuses, a simple check of the year’s attendance provides a quick computation of commitment and a clear measure for presenting a reward. For no-fault attendance policies, employees need not fret about getting a doctor’s note, and employers save on the time and energy devoted to these administrative burdens.

Though perfect attendance bonuses and no-fault attendance policies are easy and beneficial to employers and employees alike, both policies implicate employee leave laws, with contrary results. For perfect attendance bonuses, employers should feel comfortable, based on recent FMLA regulation changes, that FMLA and ADA leave may be counted against an employee’s perfect attendance, as long as employees on other leaves are similarly disqualified. But for no-fault attendance policies, while it seems counterintuitive to ignore an employee’s absences when determining whether an employee has reached her threshold of allowable absences, employers should do exactly that when the absences are the result of FMLA or ADA leave.

To understand this difference, it’s useful to be reminded of the FMLA and ADA statutory and regulatory frameworks. The FMLA prohibits an employer from “interfering” with the exercise of an FMLA right, including the entitlement to absences from work. The ADA prohibits employment discrimination or retaliation “against a qualified individual on the basis of disability.” Discrimination includes the failure to provide to a qualified individual with a known disability a reasonable accommodation, including absences from work, unless the accommodation causes the employer an undue hardship. Retaliation includes taking an adverse employment action against an employee because of a disability. Relevant here, the ADA may require an employer to suspend or modify its attendance policies to accommodate a disabled worker.

Turning first, then, to your company’s perfect attendance bonus, FMLA regulations state that an employer may not use the taking of FMLA leave as a “negative factor” in employment actions. See, 29 C.F.R. § 825.220(c). For perfect attendance bonuses, recent regulations allow an employer to exclude an employee taking FMLA leave from a perfect attendance bonus as long as employees having taken other leaves (e.g., vacations) are similarly disqualified. See id. § 825.215(c). One might ask how the FMLA rule prohibiting the FMLA from being used as a negative factor against employees squares with the more recent regulation permitting FMLA leave to disqualify perfect attendance bonuses. The justification appears to be that policies that penalize employees for taking FMLA leave itself are impermissible, but perfect attendance bonus disqualification for FMLA leave simply denies an extra reward that has been conditioned on the employee achieving a job-related performance goal.

As for your company’s no-fault attendance policy, the same FMLA regulation described above specifically prohibits an employer from counting FMLA leave against an employee. See id. § 825.220(c). (“nor can FMLA leave be counted under ‘no fault’ attendance policies”). The Americans with Disabilities Act (ADA), as interpreted by the EEOC, similarly finds fault in no-fault attendance policies. Last year, the EEOC reached a $20 million settlement with Verizon in a nationwide class action where the EEOC alleged Verizon’s no-fault attendance policy violated the ADA. The policy provided for progressive discipline upon accumulation of chargeable absences, but neither included an exception for qualified individuals with disabilities whose absences were caused by disabilities, nor a provision for reasonable accommodation of qualified individuals with disabilities.

In light of the FMLA’s regulations against no-fault attendance policies and the EEOC’s ADA interpretation, it appears employers should be very careful in applying such policies. For some employers, the burdens of accounting for FMLA or ADA leave might outweigh the administrative benefits of such a no-fault policy in the first place. Careful application of a no-fault attendance policy is all the more advisable given the recent amendments to the ADA, which generally permit many more conditions to be considered disabling, and, therefore, require employers to treat many more absences as caused by a disability (and protected against retaliation). For these reasons, some employers may consider returning to a more paternalistic fault-based attendance policy, with absences treated as either “excused” or “unexcused,” and with penalties imposed for excessive unexcused absences.

Another option employers have used to avoid a paternalistic fault system but gain some benefits of a no-fault system is to assign points to unexcused absences (but not excused leaves), then expunge points after a designated period (typically 12 months). Points typically drop off after the designated period even if the employee was on leave for a long period and actually worked very little during the prior 12 months. The question arises, then, whether FMLA or ADA leave may be considered when determining the expungement period in such a point system. Thankfully, in applying these types of attendance points policies, employers may rely on periods actually worked, and need not count periods of FMLA or ADA leave. A relatively recent case from the Seventh Circuit Court of Appeals confirms this. In Bailey v. Pregis Innovative Packaging, 600 F.3d 748 (7th Cir. 2010), the court held such a system was permissible because employees on leave do not necessarily accrue additional benefits while on the leave. Thus, employees on leave would not accrue a benefit (expungement of accumulated points) which would flow from being at work without taking unexcused absences.

One of the reasons employers prefer no-fault attendance policies is that absences need not be verified as excused versus unexcused. Unfortunately, if a paternalistic policy replaces a no-fault policy, the verification process itself includes legal risk. In particular, employers should avoid requiring a doctor’s note to verify every absence occurring during intermittent FMLA leave, and instead rely only on the FMLA-directed certification and recertification process. In the recent case of Jackson v. Jernberg Industries, Inc., 677 F. Supp. 2d 1042 (N.D. Ill. 2010), the employer required employees to produce a doctor’s note for each absence occurring during intermittent FMLA leave. The policy was designed to prevent employee abuse. The plaintiff employee was terminated for failing to and refusing to comply with policy; after the employee was twice tardy for reasons unrelated to the FMLA condition, the employee refused to supply a doctor’s note to support 13 unscheduled absences purportedly due to the FMLA condition, and the employee missed 10 consecutive days for reasons unrelated to the FMLA condition. The court held the employer’s verification policy interfered with employee’s exercise of FMLA rights because a doctor had already provided certification supporting the employee’s intermittent FMLA leave. The court instructed that the FMLA recertification process was enough to protect employers against abuse, and that at recertification, the employer may ask the doctor to analyze the employee’s pattern of absences to determine whether the medical condition supports that pattern. Thus, employers cannot go overboard with verifying the reasons for absences under fault-based absence policies.

Of course, attendance policies are not the only ones potentially affected by the FMLA or ADA. A close cousin is a punctuality policy, which rewards employees for showing up to work on time. Just like no-fault attendance policies, no fault tardiness policies also should be avoided, at least for non-manufacturing jobs where punctuality is not necessary to keep assembly lines running. One of the rare cases analyzing such a policy clearly suggests this result. In Holly v. Clairson Industries, 492 F.3d 1247 (11th Cir. 2007), the employer instituted a no-fault tardiness policy and defined punctuality as an essential function of every employee’s job. A paraplegic employee was terminated for excessive tardiness and sued. The court sided with the employee, holding that strict punctuality was not an essential function for all positions, which the company’s uniform policy failed to recognize. In that case, the employee did not work on an assembly line, and performance was deemed sufficient as long as the work got done. In light of the Holly case, employers should make sure to tie any punctuality policy to the specific essential requirements of the jobs affected.

So, where does that leave your company in trying to design legally compliant and administratively efficient attendance policies? It appears under the current FMLA and ADA legal framework that perfect attendance bonuses are permissible, as long as all types of leaves disqualify an employee from the perfect attendance award. The key is consistency.

No-fault attendance policies should be carefully applied, and some employers might consider replacing them with some sort of fault-based system. Under such a fault-based system, at least for intermittent FMLA leave, an employer should not demand proof to excuse every absence. To guard against the behavior of the employee in the Jackson case (missing 10 straight workdays for reason unrelated to the FMLA condition), employers should consider a no-call/no-show policy permitting termination of employment, and should act on that policy when appropriate. But if the fault-based attendance policy involves the expungement of unexcused absence points after a period of time, the employer may exclude FMLA and ADA leave time from that period.

My company is a firm believer in rewarding good behavior as opposed to punishing bad behavior. Along those lines, we give bonuses to employees who maintain perfect attendance over the course of a year. For employees who do have absences, we apply a “no-fault” system that grants employees a set number of days that can be missed each year for whatever reason, so that our supervisors and HR staff do not waste time checking in on the reasons for every absence.

Of course, our employees periodically take different types of leave from work, including leave under the Family and Medical Leave Act and the Americans With Disabilities Act. An employee who recently took FMLA leave advised us that she does not think she should be disqualified from the perfect attendance bonus because she did have “perfect” attendance when she wasn’t forced to be out because of her health issue. Another employee who took some leave for a disability issue claims her missed days should not apply to her annual 15-day threshold, again because the leave was not by choice.

Neither employee’s request seems valid to me. How can an employee who misses work have perfect attendance? And what’s the point of a no-fault attendance policy if certain missed days count, while other do not?

Additional information regarding Ed is available at: http://www.dorsey.com/magarian_edward/.  Ed can be reached via email at magarian.ed@dorsey.com, or by phone at 612.340.7873.  Additional information regarding Jillian is available at: http://www.dorsey.com/Kornblatt_Jillian/.  Jillian can be reached via email at kornblatt.jillian@dorsey.com, or by phone at 612.492.6156.  Please don't hesitate to contact Ed or Jillian if you have any questions regarding their analysis below.  Regards, Roy]

Quirky Question # 189:

I am the Human Resources Director at a mid-size company, with employees in eight states.  We’ve recently read about the U.S. Equal Employment Opportunity Commission (“EEOC”) bringing suit against employers based on pre-employment background checks, as well as some states prohibiting pre-employment credit checks.  We certainly don’t want to create potential liability for ourselves based on our pre-employment screening, but feel that criminal and credit checks are a valuable part of our recruiting process.  We are beginning to feel that no matter how we proceed, we face potential liability in one way or another.  Do you have any advice?

Ed’s and Jillian’s Analysis:

You are not alone in your sentiment that choosing whether, when, and how to conduct pre-employment background checks can feel like being asked whether you would prefer to stay in the frying pan or jump into the fire.  While pre-employment background checks offer strong benefits in potential avoidance and defense of employees’ improper conduct, the way such checks are conducted and how information revealed by them is used can lead to unintended consequences.  These consequences may include, among other issues, potential liability based on a background check policy or practice that causes a disparate impact on job applicants in protected classes.  This was demonstrated by the recent announcement that Pepsi Beverages Co. will pay a $3.13 million settlement to resolve a race discrimination charge filed with the Minneapolis office of the EEOC based on Pepsi’s use of applicant arrest records.

Discrimination Issues

In addition to federal and state laws restricting the use of or procedure for conducting pre-employment background checks, federal and state non-discrimination laws may limit an employer’s ability to use credit or criminal background checks in pre-employment decision making.  Practices that may be neutral on their face (such as conducting credit checks on all job applicants) could have a disparate impact on certain protected groups and therefore potentially could lead to disparate impact discrimination claims.  Cf. Albemarle Paper Co. v. Moody, 422 U.S. 405, 431 (1975) (adopting the EEOC’s determination that test results must predict or correlate with “important elements of work behavior which comprise or are relevant to the job or jobs for which candidates are being evaluated.”) (quoting 29 C.F.R. § 1607.4(c)); El v. Southeastern Pennsylvania Transp. Auth., 479 F.3d 232, 242 (3d Cir. 2007) (holding that “employers must show that a discriminatory hiring policy accurately – but not perfectly – ascertains an applicant’s ability to perform successfully the job in question”).  In fact, as part of its E-RACE Initiative, the EEOC recently has focused on cases involving alleged disparate impact on minority groups through employers’ use of credit checks in employment decisions.

The EEOC has taken the position that employers should not conduct applicant credit checks unless doing so is needed for the employer “to operate safely or efficiently.”  See Letter from Dianna B. Johnston, Assistant Legal Counsel, EEOC, “Title VII: Employer Use of Credit Checks” (March 9, 2010).  For example, courts have held that credit checks are appropriate for positions with responsibility for handling large amounts of cash.  Courts, however, frown upon employers’ use of credit checks when the information revealed by the credit check is not linked to job requirements or job performance.  See, e.g., Terry v. Elec. Data Sys. Corp., 940 F. Supp. 378, 386 (D. Mass. 1996) (stating that credit history did not correlate with job performance when an applicant for a computer operator position worked at the organization as a computer operator for five months in a temporary role before he was recommended for the position on a regular basis and required to undergo a credit check); see also EEOC v. American Nat’l Bank, 1979 WL 25, at *33 (E.D. Va. June 25, 1979), rev’d in part on other grounds.

Criminal Arrests and Convictions

At issue in the Pepsi settlement referenced above was the company’s policy prohibiting the hiring of job applicants for permanent jobs at its bottling plants anyone who had been arrested for any offense, even if the arrest did not result in a conviction.  Pepsi also routinely denied employment to applicants who had been arrested or convicted of minor offenses.  According to the EEOC, its investigation revealed reasonable cause to believe that these facially-neutral policies disproportionately excluded African-American applicants from permanent employment in violation of Title VII of the Civil Rights Act of 1964.

Further, perhaps counter-intuitively, employers may not even exclude all applicants with criminal convictions from consideration for employment.  When recruiting for positions in which there is a direct relationship between the prior criminal offense(s) and the specific position sought or for positions in which hiring an applicant with convictions for particular crimes would pose an unreasonable risk to property or the safety or welfare of specific individuals or the general public, however, employers may exclude applicants on that basis.  See Bolden v. City of New York, 2005 WL 2759843, at *2 (2d Cir. Oct. 26, 2005) (upholding summary judgment for employer in police officer’s claim that his automatic termination as a result of his conviction for federal tax fraud was impermissible discrimination).  For example, the exclusion of applicants with convictions for violent crime has been held valid for positions in close contact with populations that are vulnerable to violent crime, such as children or elderly or disabled individuals.  See El, 479 F. 3d at 245-46.

In all other situations, employers are required to make individual determinations of whether a criminal conviction is a permissible basis on which to exclude an applicant from further consideration.  Employers must be able to demonstrate consideration of three factors in assessing whether such an exclusion was justified by business necessity: (1) the nature and gravity of the offense(s); (2) the time that has passed since the conviction or completion of the sentence; and (3) the nature of the job held or sought.  EEOC, “Policy Statement on the Issue of Conviction Records under Title VII of the Civil Rights Act of 1964” (Feb. 4, 1987, last modified on Sept. 11, 2006) (citing Green v. Missouri Pacific R.R. Co., 523 F.2d 1290 (8th Cir. 1975)).  State laws may place additional requirements on employers’ consideration of applicants with criminal convictions, such as the age of the applicant at the time of the conviction or whether the applicant has produced information regarding his or her rehabilitation and good conduct. See, e.g., N.Y. Correct. Law § 753.

State Laws Regarding Credit Reports As A Pre-Employment Screening Tool

Because of increasing concern over the potentially disparate impact of employers’ use of credit checks as a pre-employment screening tool, a number of states restrict employers’ use of credit checks.  Many states have recently adopted laws prohibiting employers (subject to certain exceptions) from failing to recruit or hire a person based on a credit report, or inquiring into an applicant’s credit history, or even ordering a credit report on an applicant unless a satisfactory credit history is a bona fide occupational requirement.  Several states (including California, Connecticut, Hawaii, Illinois, Maryland, Oregon, and Washington) currently place significant restrictions on employer use of credit information, such as requirements that the credit check be “substantially related” to the job duties of the position being considered or providing limited categories of positions for which applicant or employee credit checks are permissible. Additional states are considering or in the process of passing such legislation.

Pending Federal Legislation Regarding Applicant Credit Checks

Due to the increasing numbers of employers conducting applicant and employee credit checks and the difficult economic conditions many individuals are experiencing, the EEOC and others have stated concerns that, in addition to other issues, individuals with poor credit history may be rendered permanently unemployable through employer use of credit checks as part of their applicant screening processes.   In response, a bill to amend the federal Fair Credit Reporting Act (“FCRA”) has been introduced in the U.S. House of Representatives.  The Equal Employment for All Act would amend the FCRA to prohibit employer use of credit checks outside of specific circumstances.   These circumstances would include employment that requires national security or FDIC clearance, employment with a state or local government agency, and management positions with financial institutions.  See H.R. 321, Equal Employment for All Act (introduced Jan. 19, 2011).  Given the fact that 2012 is an election year, coupled with the divisive environment of Capitol Hill, it seems unlikely that there will be much legislative progress this year on this issue.

Practical Guidelines

There are several steps employers can take to minimize the risk of potential liability when using credit or criminal background checks as a pre-employment screening tool.

1) Conduct Pre-Employment Background Checks Only When There is a Sound Business Reason to Do So:

We recommend that employers first determine the positions for which a credit or background check is warranted and appropriate, documenting the business purpose for the credit or background check.  In determining which positions should be subject to a credit check, consider the responsibilities of the position and the potential negative implications of placing a person in the position who has a problematic credit history (or other negative information in his or her background).  For example, background checks for employees with access to large amounts of cash and/or confidential information will likely not only be supported by a sound business reason, but may be important to avoid liability for claims of employee theft of customer money or identity.

2) Develop – And Adhere To – Procedures for the Use of Credit or Criminal Background Check Results:

Employers should consider the nature of the negative credit information, such as whether debt was from one large event or was incurred over time from multiple sources; the time since the negative credit event occurred; and whether the applicant attempted to consolidate or repay the debt.  See Terry, 940 F. Supp. at 386 (holding that an applicant’s “failure to explain why he had not repaid the loan, coupled with his lack of concern and remorse about the delinquent loan,” was a legitimate reason for the employer’s decision to revoke its job offer).  A particular credit score should not be used as an automatic “cut-off” point for applicant consideration. In each case there should be an individualized consideration of whether the negative information is relevant to a hiring decision based on the position involved and the specifics of the information revealed by the credit or background check. These considerations will differ depending on the employer’s industry, as well as the role within the organization.

3) Conduct Credit and Criminal Background Checks Only After a Preliminary Hiring Decision Has Been Made Based on Other Considerations (experience, education, etc.):

A “best practice” in this area is to conduct applicant credit and criminal background checks only after making a conditional offer of employment to the candidate.  Then, if a problem is identified in the credit or background check, the offer can be withdrawn if it ultimately is determined the negative information should preclude hiring the person.

4) Ensure That Background Checks are Conducted for All Similarly Situated Applicants in the Recruiting Process:

If you make conditional offers to multiple candidates for a position, whether at the same time or over time while filling multiple positions with the same title and responsibilities, make sure that you make the same background inquiries for all candidates at that stage in the hiring process. Race-based, gender-based, ethnicity-based, age-based, or religiously-based differentiation for conducting background checks will not withstand scrutiny.

5) Share Background Check Results on A Limited Basis:

To protect candidates’ privacy, the internal sharing of information revealed by background checks should be as limited as practiable.  When a credit or criminal background report contains no negative information, the details of the report should not be shared with the hiring manager for there is no need to do so.

If negative information is uncovered by a credit or criminal background check, a preliminary determination should be made whether the information is relevant and needs to be shared with the hiring manager.

6) Consider The Context For Information Revealed By the Background Check:

As part of this preliminary determination, the timing of the events described in the report should be considered. The more remote in time the negative credit event or criminal conviction occurred, the less weight it should be given in the hiring decision. Likewise, minor negative credit events and criminal convictions should be given less weight than long-standing patterns or unexplained credit issues or convictions for major crimes. A general guideline is that minor, negative credit events and low-level criminal convictions should not be considered if more than five years in the past. However, more serious issues or those that closely relate to the position’s duties may warrant consideration for a longer period of time. The weight given to negative information may also vary, based on the relevance of the negative information to the employer’s industry. It is important that consistent standards are applied to such determinations and that all candidates are treated equally. Once a determination is made that the negative information may be a relevant consideration in the hiring decision, it can and should be shared with the hiring manager

7) Give Candidates An Opportunity to Respond to Negative Information Revealed By the Check:

The FCRA requires that employers provide certain information regarding credit check results and the candidate’s rights under the FCRA before any adverse action is taken based on a credit report.  We recommend allowing applicants the opportunity to provide employers with additional information, explanation, and/or context for negative information obtained in credit or background reports before finalizing hiring decisions.  This could be done in an interview or separately by written communication.  Providing the opportunity for explanation will ensure compliance with the statute and may lead you to hire the applicant.  Conversely, however, if the explanation proffered by the applicant lacks credibility or is otherwise inadequate, you may decide not to hire the applicant.

8)  Re-visit the Business Purpose for Excluding A Candidate Based on Negative Information:

Before a candidate is excluded from further consideration because of negative information in his or her credit or criminal background check, employers should confirm that that there is a sound business reason justifying the use of such information for the particular position.

9) Document Your Decision-Making Process:

We advise employers to maintain records of employment decisions based on the results of information in credit or criminal background reports, including the timing and reasoning for the decisions. See Dalton v. Capital Associated Indus., 257 F. 3d 409, 418 (4th Cir. 2001) (considering the role of false information in a criminal background report used in a hiring decision that the employer argued was ultimately based on the applicant’s misrepresentation of dates of prior employment).

While balancing these multiple considerations may be difficult, doing so should decrease the likelihood of future liability based upon your pre-employment background checks.

I consider myself very fortunate to have received this award a second time.  The first award was in 2006, and was based upon our defense of Cisco Systems, Inc. and two individuals who led a company acquired by Cisco.  In that case, the plaintiff company sought $1.3 Billion.  After an 8-week trial, it recovered slightly less — ZERO!  This year, the award was based on our representation of Revis Stephenson, the wrongfully discharged Chairman of the Board and CEO of an ethanol company he had started.  We were able to recover $4 Million for our client as a result of his wrongful removal from the CEO position and the defamatory statements the company made about him.

Although I was the recipient of the award in both 2006 and 2011, in each instance, the award reflected the incredibly hard work of a team of attorneys.  In 2006, the team was composed of me, Joe Hammell and David Trevor, among others.  This year, the team was composed of me, David Trevor and Marilyn Clark.  David has pointed out to me a certain commonality in the teams; deservedly so! 

If I can be of any assistance to you or your company, I hope you will contact me.  (I might even be able to persuade David to work on the case as well.)  Regards,  Roy

As Bill Wheelock, of the defense employment law boutique, Fine, Boggs & Perkins LLP, in San Marcos, CA, correctly stated, the answer is the Washington Generals, the team that played against the Harlem Globetrotters. The Generals (who also have used the names, Boston Shamrocks, New Jersey Reds, Baltimore Rockets, and Atlantic City Seagulls) amassed a disheartening losing streak of 2495 games. Given that their job was to lose, the Generals last failed to meet their employer’s expectations on January 5, 1971, when, under the name, the New Jersey Reds, they defeated the Harlem Globetrotters 100-99. According to the Globetrotters Website, between 1962 and 2000, they lost only 2 games, against 12,594 wins. Even Phil Jackson would be envious.

For providing the answers to my Employment Trivia Game, Bill is the latest winner of one of our astonishing prizes. The next question goes up now. Good luck!  Roy

It is difficult to predict the long-term ramifications of the Supreme Court's decision, particularly since, as addressed below, the Supreme Court qualified its opinion somewhat and declined to make broad pronouncements.  Notwithstanding these facts, and despite the somewhat limited application of the opinion, we thought you might be interested in reading about the Supreme Court's analysis of the way in which the nation's employment discrimination laws interact with the Constitution.  Regards, Roy]

Introduction

On January 11, 2012, the United States Supreme Court issued what commentators have hailed as a “sweeping” decision in Hosanna-Tabor Evangelical Lutheran Church & School v. EEOC, unanimously holding that a ministerial exception shields religious groups from employment discrimination and retaliation claims under federal law. See 565 U.S.__, No. 10-533 (Jan. 11, 2012).

In reaching its decision, the Court concurred with the Courts of Appeals that the Free Exercise and Establishment Clauses preclude the application of federal discrimination laws to a religious organization’s employment decisions about its ministers. The Court subsequently concluded that this so-called ministerial exception applied to Cheryl Perich, a former elementary school teacher, who alleged that Hosanna-Tabor discharged her in violation of the Americans with Disabilities Act (“ADA”). The Court found that Perich qualified as a minister “based on all the circumstances of her employment” with Hosanna-Tabor — including the facts that her employer held her out as a minister, that her title reflected significant religious training and formal commissioning, that she had accepted a formal call to religious service, and that her job duties involved carrying out the church’s mission. Id. at 15-17.

The Court rejected the EEOC’s position that this decision would result in a “parade of horribles,” such as allowing religious organizations “unfettered discretion” to interfere with criminal proceedings (by, for example, retaliating against witnesses) or to broadly violate general employment laws. See id. at 20-21. In so doing, the Court emphasized that its holding is limited to “unemployment discrimination suit[s] brought on behalf of a minister, challenging her church’s decision to fire her.” Id.

The Court expressly left for another day the question of whether the ministerial exception bars other types of suits by employees against their religious employers. Accordingly, it remains to be seen whether the Hosanna-Tabor decision will indeed afford religious organizations sweeping protections, as some anticipate, or whether such organizations will remain liable in employee claims brought under contract, tort, wage-and-hour, and harassment theories, as well as under certain state anti-discrimination laws.

The Court additionally refused to adopt a “rigid formula” for determining when an employee qualifies as a minister for purposes of the ministerial exception. Id. at 15. Religious organizations should therefore stay tuned for subsequent decisions fleshing out the applicable test. In the interim, employers should remain cautious of relying upon this exception, especially where employment circumstances markedly differ from those in Hosanna-Tabor.

Background

Hosanna-Tabor, a member congregation of the Lutheran Church-Missouri Synod, offers a “Christ-centered education” to students in a small Redford, Michigan school. See Hosanna-Tabor, 565 U.S.__, No. 10-533, at 1 (Jan. 11, 2012). The school primarily employs “called” teachers, who the Synod regards as “having been called to their vocation by God through a congregation.” Id. A teacher may become eligible for a call by completing a “colloquy” program, which involves taking courses at a Lutheran college or university, obtaining an endorsement from the local Synod, and passing an oral examination. See id. Once called, a teacher becomes a commissioned minister, serving an open-ended term. See id. The call may be rescinded only for cause via a supermajority vote of the congregation. See id. When no called teachers are available, the school employs “lay” teachers, who the school board appoints for one-year renewable terms. See id.

Perich began her employment with Hosanna-Tabor in 1999 as a lay teacher, but she subsequently completed the colloquy program and, later the same school year, the congregation called her to become a “Minister of Religion, Commissioned.” Id. at 2. Perich accepted the call. See id. In her role, Perich taught both secular and religious subjects, led daily devotional exercises, attended weekly chapel service, and occasionally led chapel service herself. See id. at 2-3. These duties were substantially the same as those performed by lay teachers.

At the start of the 2004-05 school year, Perich — who had been diagnosed with narcolepsy over the summer — took a disability leave. See id. at 3. When she advised the school that she planned to return, the principal informed her that the school had retained a lay teacher for the remainder of the school year. See id. After discussing concerns regarding Perich’s physical ability to return, the congregation voted to offer her a “peaceful release,” under which the congregation would pay a portion of her health-care premiums in exchange for her resignation as a called teacher. See id. Perich refused this offer. See id. Although the school board had advised that it did not have a position for her, Perich returned to Hosanna-Tabor on the first day her doctor released her to do so and refused to leave until the school documented in writing that she had reported for work. See id. The principal later called Perich and told her she would likely be fired, and Perich threatened to sue. See id.

At its next meeting, the congregation voted to rescind Perich’s call, and Hosanna-Tabor terminated her employment on April 11, 2005. See id. at 4. A letter from the school board chairman stated that the grounds for her discharge included Perich’s “insubordination and disruptive behavior,” as well as “the damage she had done to her ‘working relationship’ with the school by ‘threatening to take legal action.’” Id.

Following her discharge, Perich filed a charge with the EEOC, and the agency sued Hosanna-Tabor for allegedly terminating Perich in retaliation for asserting her rights under the ADA. See id. The EEOC sought Perich’s reinstatement, as well as back pay, compensatory and punitive damages, and other monetary and injunctive relief. See id. at 5.

The United States District Court for the Eastern District of Michigan agreed with Hosanna-Tabor that the ministerial exception barred the EEOC’s suit because the claims asserted concerned the employment relationship between a church and its minister. See id. The Sixth Circuit vacated and remanded. See id. at 5-6. Although the Court of Appeals recognized the existence of a ministerial exception rooted in the First Amendment, it found that Perich did not qualify as a “minister,” pointing to the fact that her duties as a called teacher were substantially the same as the duties of a lay teacher. See id.

Court’s Decision

Writing for the Court, Justice Roberts first acknowledged that the Free Exercise and Establishment Clauses of the First Amendment preclude the application of federal employment discrimination laws to claims arising from employment relationships between religious organizations and their ministers. Id. at 13-15. Roberts noted that the Courts of Appeals have “uniformly recognized” this ministerial exception grounded in the First Amendment. In adopting this view, Roberts emphasized: “Requiring a church to accept or retain an unwanted minister, or punishing a church for failing to do so, intrudes upon more than a mere employment decision. Such action interferes with the internal governance of the church, depriving the church of control over the selection of those who will personify its beliefs.” Id. at 13.

The Court rejected the EEOC’s argument that religious organizations should not be afforded a “special rule” regarding ministers grounded in the Religion Clauses, but instead should rely upon the right to freedom of association to defend against certain discrimination claims. See id. at 14. Characterizing the EEOC’s position as “untenable,” the Court noted that “freedom of association is a right enjoyed by religious and secular groups alike.” Id. The First Amendment, the Court went on to state, “gives special solicitude to the rights of religious organizations,” and thus the Court refused to accept “the remarkable view that the Religion Clauses have nothing to say about a religious organization’s freedom to select its own ministers.” Id.

In adopting the ministerial exception, the Court distinguished its prior holding in Employment Division, Department of Human Resources of Oregon v. Smith, 494 U.S. 872 (1990). In Smith, the Court held that the Religion Clauses did not preclude the state from denying unemployment benefits to two members of the Native American Church who were fired for using peyote, even though this use was for religious purposes. Hosanna-Tabor, 565 U.S.__, No. 10-533, at 14-15. The Hosanna-Tabor Court noted that while Smith related to the government’s regulation of “outward physical acts,” Perich’s case concerned “government interference with an internal church decision that affects the faith and mission of the church itself.” Id. at 15.

After concluding that the First Amendment affords a ministerial exception, the Court went on to hold that this exception applied to Perich. The Court first stated that the exception “is not limited to the head of a religious congregation.” Id. It did not, however, offer much additional guidance regarding when an employee qualifies as a minister, refusing to adopt a “rigid formula.” Id. Rather, the Court simply stated that “it is enough for us to conclude” that Perich was a minister “given all the circumstances of her employment.” Id. at 15-16. In reaching this conclusion, the Court pointed to the fact that Hosanna-Tabor held Perich out as a minister and tasked her with performing her office in accordance with church standards. See id. at 16. The Court further noted that Perich’s title of minister reflected that she undertook significant religious training as well as a formal commissioning process, and it emphasized that Perich held herself out as a minister by accepting the congregation’s formal call. See id. Finally, the Court stated that Perich’s job duties “reflected a role in conveying the church’s message and carrying out its mission.” Id. at 17.

In reversing the Sixth Circuit, the Court noted that the lower court had committed three errors. First, the Sixth Circuit failed to afford any weight to the fact that Perich was a commissioned minister. See id. at 18. The Court noted that while a title alone is not dispositive, the fact that an employee is ordained or commissioned is relevant to her status as a minister. See id. Second, the Sixth Circuit placed undue weight on the fact that lay and called teachers performed similar duties. See id. While the Court noted the foregoing error, it “express[ed] no view” on whether Perich’s duties alone, absent the other factors described above, would suffice to render her a minister. Finally, the Court stated that the Sixth Circuit wrongfully focused on the relative amount of time Perich spent on religious as opposed to secular teaching duties. See id. at 18-19. The Court noted that the amount of time spent on various activities may be relevant, but emphasized that the issue “is not one that can be resolved by a stopwatch.” Id. at 19. Rather, this factor must be considered together with a range of other considerations, such as those the Court relied upon in determining Perich’s status. See id.

The Court ultimately emphasized that its decision in Hosanna-Tabor is narrowly tailored, addressing only the issue of whether an employment discrimination suit may be brought by or on behalf of a minister “challenging her church’s decision to fire her.” Id. at 21. The Court expressly stated, “We express no view on whether the [ministerial] exception bars other types of suits, including actions by employees alleging breach of contract or tortious conduct by their religious employers. There will be time enough to address the applicability of the exception to other circumstances if and when they arise.” Id.

Practical Implications

Hosanna-Tabor recognizes the substantial import of allowing religious institutions the freedom to choose those who minister to their faith, prohibiting undue government interference in internal employment decisions that strike at the heart of the institution’s beliefs and mission. This decision further signals that employees of such institutions may not both have and eat their proverbial cake, gaining job security through ordainment or other formal commissioning while simultaneously retaining lay protections from the church’s internal decisions about its own leaders.

While religious employers may take some comfort in the protections Hosanna-Tabor affords, they should remain cautious of over-reliance on the ministerial exception. Whether, and to what extent, this exception will apply to employment decisions beyond those involving the hiring and firing of a church’s ministers remains unclear. The Court’s narrowly tailored ruling further suggests that — even where ultimate employment decisions regarding ministers are concerned — employees may still have viable claims against their religious employers under a range of laws. Adding to these uncertainties, the Court offers slim guidance regarding how to determine who qualifies as a “minister” for purposes of the exception.

In light of the nebulous landscape in the wake of Hosanna-Tabor, religious institutions — as with other employers — are well advised to make hiring and firing decisions with due caution and care. Before implementing any such decision, the institution should take a step back and review the decision from the perspective of a skeptical third party to determine whether the action will likely survive a challenge should the employee decide to bring one. In so doing, the institution should assess the risk that the employee may claim the institution’s actions are unlawful. If the answer is “yes,” the institution should carefully evaluate whether the ministerial exception will likely apply based on the limited guidance offered in Hosanna-Tabor and any subsequent decisions fleshing out the applicable standards. By carefully evaluating all relevant facts and circumstances prior to acting (as opposed to scrambling to defend its actions after the fact), the institution is able to make a well-reasoned decision and, in turn, to greatly reduce the risks inherent in taking any adverse action against its employees.

Like many companies, we are in a highly competitive industry.  We spend a lot of time training our sales employees to perform their jobs, at a considerable expense to our company.  Consequently, we have all of our sales personnel execute a non-compete/non-solicitation agreement at the commencement of their employment.

Several of our employees have joined a company that we recognize is not competitive with ours.  But, it sure seems like they are recruiting our other sales people to join them.  A number of employees who have been friends for some time have jointly moved to this other company.

Do we have a legitimate claim based on the restrictions contained in the non-solicitation agreement?  We have to stop the bleeding.  This is especially true right now because our own company has been struggling (layoffs, declining stock price, etc.), so it probably isn’t too difficult to convince our employees that they might have a better future elsewhere. Anything we can do?

Roy’s Analysis:

Maybe.  Maybe not.  Sorry for the equivocal response but I’d need more facts to provide you clear guidance.  Let’s review a few basics of restrictive covenant law, which I hope will provide you some insights to assist you in analyzing this issue.  

First, as you likely know, the law of post-employment restrictive covenants, such as a non-compete or a non-solicit, is dependent on state law.  The enforceability of your employment agreements will be heavily influenced by the governing state law.  Some states (e.g., California and North Dakota) repudiate restrictive covenants except in extremely limited circumstances.  Other states enforce the agreements made by the employer and employee, despite the employees’ lack of bargaining power when the agreement is executed.  Some states (approximately 17) have statutes that regulate this area.  So, the first task is to determine what state’s law applies.

Second, as a corollary to the preceding point, the governing state law may be determined by the contract, assuming there is a choice-of-law provision in the agreement.  But, even when there is a choice-of-law provision, some courts may not elect to enforce it.  For example, if the employee lives and works in a state different from the “governing law” state specified in the contract, and if the court concludes that the public policies of the state where the employee works are inconsistent with the state identified in the choice-of-law provision, the court may choose not to enforce the contract provision.  Of course, in the absence of any choice-of-law contractual provision, and in a context where the competing states have divergent legal standards, the determination of which state’s law will govern the contract’s interpretation will turn on a number of variables, including, for example: predictability of results; maintenance of interstate order; simplification of the judicial task, advancement of the forum state’s governmental interest; and application of the better rule of law.

Third, equally, if not more important than the determination of which state’s law governs the contract interpretation, is the language of the contract itself.  You have pointed out your company requires your sales employees to execute a “non-solicitation agreement.”  But, you have not described the language of that agreement.  Whether your company has any chance of enforcing the agreement will depend heavily on its language.  This can be broken down further into a few Goldilocks-like subparts.

Language Too Narrow:  Some “non-solicitation” agreements are limited only to what the name of the restriction implies – soliciting.  At times, companies will use a few synonyms for soliciting, such as prohibitions on “inducing,” “convincing,” or “persuading” the ex-employees’ former colleagues to resign their employment, or to join the ex-employees’ new employer.  When this type of language is used, courts may elect to enforce the language literally, concluding that the employer chose to use language prohibiting only specific affirmative actions by the outgoing employee.  Thus, if the former employee did not initiate the contact (i.e., did not affirmatively reach out to his/her former colleagues), the ensuing interaction between the parties was not proscribed by the employment agreement.

Language Too Broad: In contrast to the prior example, some “non-solicitation” agreements use language that is overbroad, sometimes ridiculously so.  For example, some non-solicits list every imaginable type of interaction between the ex-employee and his/her former colleagues, regardless of whether proscription is linked to a legitimate interest of the employer.  In these situations, the employer seemingly is prohibiting any interaction, even social interaction between two individuals who may have been friends for a protracted period.  This type of language will provide the former employee with some persuasive arguments to challenge the validity of the agreement.

Another example of overbroad non-solicit language is when the employer includes broad prohibitions on activities “related” to soliciting, often prefaced by a “directly or indirectly” descriptor.  Here, an employer might use language stating that a departed employee may not “assist in hiring” anyone who is a current employee.  What does that mean?  If the departed employee advised a former colleague to check out his new employer’s website, has he/she “assisted”?  If the former employee advised a former colleague to get a resume in quickly, has he/she assisted?  If the ex-employee provided a former colleague with some background insights into the new company, has he/she assisted?  If the former employee provided the former colleague with insights into the individuals likely to conduct the interview of the applicant, has he/she assisted?  In each of these hypothetical contexts, the so-called non-solicit seemingly encompasses conduct that is utterly innocuous and that an employer would have difficulty linking to a legitimate corporate interest.

Moreover, the problem is complicated when the ex-employee is in a managerial role in the new company, especially a senior role.  Is that individual precluded from interviewing a former colleague?  From offering an opinion on the applicant’s skill sets?  From expressing enthusiasm about the applicant’s personal integrity or other characteristics? What if the applicant considers it important to meet with the individual who is likely to be his/her boss; in other words, interview the interviewer to determine whether this is a company he/she would like to join?  Is this type of interaction prohibited?

When the language of the non-solicit is overbroad, for the reasons above or other reasons, another state-law- dependent issue comes into play.  Some states do not permit equitable modification of the restrictive covenant.  Other states allow courts limited flexibility to modify the contract language (the blue-pencil doctrine), but only if the modification can be achieved by striking offending verbiage without adding or creating other contract language.  Still other states simply prohibit any judicial modification of inartfully crafted restrictive covenants, whether non-solicits or non-competes.

Language Just Right:  It is possible to draft a non-solicit that passes legal muster (in states where restrictive covenants are not proscribed).  In my view, however, there is not a one-size-fits-all approach.  The language used must be linked to a legitimate corporate interest that can be easily articulated.  This will depend on a host of factors, including the nature of the business, the position occupied by the restricted employee, the time and expense associated with training the employee (and/or his/her replacement), the employee’s access to confidential and proprietary data, and other considerations.  Moreover, once appropriate language is drafted, the non-solicit still has to withstand the scrutiny to which any other restrictive covenant is subjected (adequacy of consideration, reasonable in terms of substantive restriction, geographic restriction and temporal restriction).

To summarize some of the key issues for you to explore:

• What state’s law governs?
• Does your contract contain a choice of law provision?
• Is there a conflict between the law of the state where the employee lives and works and the law specified in the contract?
• What is the specific contract language — what conduct is prohibited?
• Is the prohibited language linked to a legitimate interest of your company?
• If the language suffers from being overbroad, what flexibility do the courts in your state have to modify employment agreements?

In addition to these backdrop considerations, there are a few other issues worthy of consideration.  One important factor you’ve identified is that your company has been struggling; you referenced the fact that your firm has experienced layoffs, and that the company’s stock price has declined.  This raises the question of whether your ex-employees whom you suspect of soliciting your current employees resigned voluntarily or were laid off.  While this may not be a dispositive factor in terms of how a court might interpret the non-solicit, it does bear upon the general equities and provide the atmospherics for the court’s analysis.  Moreover, this issue highlights another aspect of the contract language.  Some restrictive covenants specify that they apply regardless of the reason for the employee’s separation. Other restrictive covenants only apply when the employee resigns voluntarily.

Similarly, are the employees being solicited in jeopardy of losing their positions?  Are they on a lay-off list?  Might their departments be eliminated?  Are any of them on performance improvement plans?  Here, too, these background inquiries create atmospherics that could affect a court’s analysis.

Regardless of whether the employees you suspect of soliciting your employees left voluntarily or involuntarily, as you realize, it makes it much easier to persuade someone to leave your employ when a company is struggling.  When employees are insecure about their future, when their friends are being laid off, when the opportunities for promotion appear bleak, when wages are flat or declining, the likelihood that employees might depart increases dramatically. When the alternative appears attractive, either by itself, or in comparison to the problems at your own company, the incentives for departure are increased.

Another observation you made in your question is that the employees who first left your company are friends with those who were recruited away.  In some ways, this variable has the potential to complicate the argument that some inappropriate or wrongful conduct has occurred, simply because the individuals may have been interacting regularly.  Courts recognize that co-workers, especially those with personal friendships, talk to each other.  Invariably, topics of conversation include job satisfaction, future employment opportunities, compensation levels, and a host of other job-related subjects.  Defining what is a permissible or impermissible subject of discussion in this context is difficult.

Finally, you note that your company and the organization your ex-employees have joined are not competitive. As a result, your non-compete restriction does not come into play.  Many courts are loath to convert a “non-solicit” into a de facto “non-compete,” another problem you will have to overcome.

The bottom line is that non-solicitation agreements can be useful post-employment restrictive covenants that help protect a corporation against losing quality employees. Unfortunately, without more data, I cannot provide much insight into the validity or enforceability of the agreements your company is utilizing.

In general, non-solicitation agreements have to be carefully crafted and tailored to protecting the legitimate interests of the company.  Far more effective than creating contractual obligations binding employees to a company, however, is creating a corporate environment that employees do not want to leave.  As Jim Goodnight, the CEO of SAS, one of the country’s most successful software companies observed in a 2003 “60-Minutes” piece, “You know, I guess that 95 percent of my assets drive out the front gate every evening. It’s my job to bring them back.”

SAS has been extraordinarily successful in achieving its CEO’s vision (the company is often selected as the best company to work for in the U.S.). The ties that bind its employees to the company are not contractual in nature; they are grounded on more meaningful connections between employer and employee.  Solve the problems that are confronting your company and I suspect the “bleeding” you referenced will diminish dramatically, if not stop altogether.  Your goal should be to make your non-solicitation agreement irrelevant.

Think You Own Your LinkedIn, Twitter and Facebook Account?  Think Again!

By:  Nick Akerman

You may not, as reflected in the recently reported decision of Eagle v. Morgan, 2011 WL 6739448 (E.D. Pa. December 22, 2011) where both the employee and her former employer claim ownership in the employee’s LinkedIn account, the popular social networking site for business professionals.  The dispute is starkly drawn in the litigation’s opposing pleadings and provides a strong warning to the hundred million plus LinkedIn users and other users of social media who operate under the assumption that their social media accounts belong solely to them to transfer as they please when they change jobs.

The facts in the Eagle case will sound familiar to all social media mavens who use sites like LinkedIn to promote their businesses and professional careers.  The plaintiff Linda Eagle, a Ph.D. in communications and psychology, established her LinkedIn account in 2008 after she and others founded Edcomm, Inc. (“Edcomm”) to train individuals to work in the financial services industry.  Like others who sign up for a free account with LinkedIn, Dr. Eagle’s complaint alleges she had to assent to a user agreement “which constitutes “a legally binding agreement with LinkedIn Corporation” and, as such, “information provided to LinkedIn is owned by the LinkedIn user, subject to the other terms of the User Agreement.” Id. at *1.

According to LinkedIn’s terms of use, “[u]sers can maintain only one LinkedIn account at a time” and “Dr. Eagle [as alleged in her complaint] used her account to promote Edcomm’s banking education services; foster her reputation as a businesswoman; reconnect with family, friends, and colleagues; and build social and professional relationships.” Id.

In October 2010 Sawabeh Information Services Company (“SISCOM”) purchased Edcomm. Dr. Eagle initially remained employed by SISCOM as its CEO, but approximately six months later Edcomm involuntarily terminated her employment.  According to Dr. Eagle’s complaint, Edcomm then hijacked her LinkedIn account using her LinkedIn password.  Her complaint alleges that Edcomm used her password “to gain unauthorized access” to her account, “changed the password,” and “then changed Dr. Eagle’s account profile to display” Edcomm’s new CEO’s “name and photograph” “but Dr. Eagle’s honors and awards, recommendations and connections.” Id. at *2.  The complaint alleges that Edcomm “used Dr. Eagle’s account both to prevent her connections from reaching her, and to acquire business connections for the benefit of . . . [the new CEO] and Edcomm. Id.

In response Edcomm filed a counterclaim alleging facts that Dr. Eagle’s LinkedIn account had been established and used for the benefit of Edcomm at Edcomm’s expense.  Thus, the counterclaim alleges “that Edcomm, while under Dr. Eagle’s management, implemented a policy requiring Edcomm’s employees to create and maintain LinkedIn accounts.” Id at 3. All Edomm executive employees, as a matter of company policy, were required “to: (a) utilize their Edcomm email address for LinkedIn accounts; (b) utilize a specific form template, created and approved by Edcomm, for their description of Edcomm, work history, and professional activities, as well as photographs taken by a professional photographer hired by Edcomm; (c) contain links to Edcomm’s website on LinkedIn accounts and the Banker’s Academy webpage, as well as Edcomm’s telephone number; and (d) utilize Edcomm’s template for replying to individuals through LinkedIn.” Id.  The counterclaim further alleges that “[c]ertain Edcomm employees monitored these LinkedIn accounts, corrected any violations of Edcomm policy, and maintained accounts for several employees for the benefit of Edcomm” and that “all discussions, connections, and content were added by” Edcomm employees.” Id.

In short, Edcomm alleges that “Dr. Eagle’s LinkedIn account was used for Edcomm business and Edcomm personnel developed and maintained all connections and much of the content on her account” and that Dr. Eagle, who regained control of her LinkedIn account after initiating her lawsuit, had “wrongfully misappropriated both Edcomm’s connections on the LinkedIn account and Edcomm’s telephone number constituting Edcomm’s proprietary information on the account.” Id.

Based on these dueling allegations both sides filed numerous claims against each other.  Dr. Eagle alleges violations of the Computer Fraud and Abuse Act (“CFAA”), Title 18, U.S.C. §1030, violation of Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a)(1)(A), unauthorized use of name in violation of 42 Pa.C.S. § 8316, invasion of privacy by misappropriation of identity, misappropriation of publicity, identity theft under 42 Pa.S.C. § 8315, conversion, tortious interference with contract, civil conspiracy and civil aiding and abetting. Id. at. *2.  Edcomm also alleges violations of the CFAA, misappropriation, conversion, tortious interference with contract but added claims for unfair competition and a violation of the Pennsylvania trade secret law.

Dr. Eagle moved to dismiss all of Edcomm’s claims on the ground that they do not, as a matter of law, allege facts constituting proper claims for relief.  The court granted Dr. Eagle’s motion to dismiss all of Edcomm’s claims except for two Pennsylvania law causes of action, 1) misappropriation of an idea and 2) unfair competition that is essentially based on the same elements of the misappropriation claim.  Under Pennsylvania law misappropriation of an idea requires the plaintiff to prove that 1) the plaintiff had an idea that was novel and concrete and 2) the idea was misappropriated by the defendant. Id. at *13. As the court explained,

“[t]o determine whether an idea has been misappropriated, Pennsylvania courts look to the three elements of common law misappropriation:

(1) the plaintiff “has made substantial investment of time, effort, and money into creating the thing misappropriated such that the court can characterize the ‘thing’ as a kind of property right,” (2) the defendant “has appropriated the ‘thing’ at little or no cost such that the court can characterize the defendant’s actions as ‘reaping where it has not sown,’ “ and (3) the defendant “has injured the plaintiff by the misappropriation.”  Id.

In refusing to dismiss the misappropriation and unfair competition counts the court relied on the allegations in Edcomm’s counterclaim that “Edcomm personnel, not Dr. Eagle, developed and maintained all connections and much of the content on the LinkedIn Account, actions that were taken solely at Edcomm’s expense and exclusively for its own benefit.” Id.  The court stated, ‘[w]hile Plaintiff argues that Edcomm fails to allege facts that would show that it made a substantial investment of time, effort, and money into creating the cell phone number or LinkedIn account, Edcomm counters that its employees developed the accounts and maintained the connections, which are the route through which Edcomm contacts instructors and specific personnel within its clients.”  Thus, the court held that “these conflicting allegations create an issue of fact requiring further discovery.” Id.

With businesses like Edcomm actively encouraging their employees to use social media as a marketing tool, there can be little doubt that litigation over the ownership of social media accounts is likely to increase.  Just last July PhoneDog.com, a popular mobile phone site, sued in federal district court in California a former employee who had amassed approximately 17,000 followers on Twitter claiming that the followers constituted a company-owned customer list entitling it to $2.50 per month per follower or $350,000 in total damages.  The only way to avoid the inevitable lawsuits over the ownership of these accounts is for both employers and employees to be proactive in establishing ownership rights prior to using individual social media accounts as a marketing tool.

From the employer’s standpoint this ownership issue is a prime reason why employers should adopt social media policies clarifying who owns the social media accounts and ownership rights when the employment relationship is terminated.  For example, it may make sense to allow employees using LinkedIn to keep their accounts but cleanse them of information that belongs to the employer because of the employer’s financial investment in the site and to ensure the employee is no longer associated as a spokesperson for his former employer.  As a strategy to minimize, and perhaps avoid litigation altogether, an agreement between the employer and employee delineating the post employment rights of both the employee and employer to the account would seem the most efficient way to deal with this issue.

As Todd correctly stated, if you met the description above, your job would be a “Hitman.” The movie in which this scene was portrayed was Quentin Tarintino’s 1994 film, “Pulp Fiction,” starring Samuel L. Jackson and John Travolta. Before killing his victims, Samuel Jackson’s character, Jules, would make the following observation: “There’s a passage I got memorized. Ezekiel 25:17.  “The path of the righteous man is beset on all sides by the inequities of the selfish and the tyranny of evil men.  Blessed is he who, in the name of charity and good will, shepherds the weak through the valley of the darkness, for he is truly his brother’s keeper and the finder of lost children.  And I will strike down upon thee with great vengeance and furious anger those who attempt to poison and destroy My brothers.  And you will know I am the Lord when I lay My vengeance upon you.””

The second time Jules gave this speech came at the end of the movie, after Jules had experienced a “miracle.” Reflecting on his life of crime, Jules elected not to kill the person to whom he was speaking.

For providing all of these answers, Todd wins one of our amazing prizes.  The next question goes up now.  Good luck! Roy

One of our employees has been out of work on a disability. We’ve accommodated her by letting her take a prolonged leave of absence. During this time, she also has been availing herself of both our Short-Term Disability (STD) and Long-Term Disability (LTD) policies. She’s been out of work for a full year.

We’ve periodically conducted internal reviews to see whether we might have any jobs that would be appropriate for the employee on leave, but we just haven’t had any positions that fit both her qualifications and her limitations. Moreover, she has not contacted our company at all during her extended leave. She has not accessed our on-line position listings (we’d know because our system records all site visits), she has not come into the office where she could check bulletin boards with internal job listings, and she has not contacted either her former supervisor or our HR Department.

Given these facts, we terminated her employment at the end of the anniversary of her separation. She now claims that we have discriminated against her on the basis of her disability. She further contends that it was our company’s responsibility to determine whether there were any positions she could have performed during her leave of absence. Frankly, we think that was her responsibility. Who’s right?

Roy’s Analysis:

In my view, you and your company have the stronger, more compelling position. But, the case law on this topic is somewhat mixed. Moreover, my analysis would be affected by factors not revealed in your question. Let me explain.

As a prefatory observation, I commend your company for allowing your employee to take leave as one way of accommodating her disability. Many courts have recognized that a leave of absence, during which time your employee can recuperate from a disability (often involving the process of regaining mental health), is a reasonable accommodation for someone who is unable to perform the essential functions of a job because of a physical or mental impairment. (As you likely know, if your company is covered by the Family and Medical Leave Act (FMLA), there are separate obligations to provide your employee either continuous or intermittent unpaid leave of up to 12 weeks annually. This analysis does not address the FMLA issues.)

Another approach your company has adopted is to assist your disabled employee to utilize both short- and long-term disability insurance. This approach undoubtedly reduced the financial hardship associated with the leave your employee found necessary by providing some level of compensation (often quite substantial) during the period she has been absent from work.

As you described, however, your employee has been off work for one year. Moreover, as you pointed out, your organization has checked periodically to determine whether there might be any positions available that your employee could perform, either with or without a reasonable accommodation. As you noted, you have not identified any such positions during your employee’s leave, given her limitations. (A separate observation I would make is that I hope you have documented your periodic reviews of the available positions. To the extent that jobs became available which you concluded your employee was not qualified to perform, again, documentation is beneficial. This will be particularly true if your employee initiates litigation.)

You also observed that your employee has done nothing on her own to explore employment opportunities. She did not check your on-line job postings. She did not come into the company to review any job postings on your bulletin boards. And, she did not initiate any contact with you or others (HR or her former supervisors) to ascertain whether there might be any positions for which she is qualified and which she could perform. This fact pattern certainly suggests that you have a former employee who simply was not interested in working. Your company cannot be expected to read your employee’s mind and somehow divine that despite her complete lack of effort to explore positions for which she was qualified, she actually was interested in returning to work.

Given her apparent indifference about returning to work, I understand why your organization concluded that, after a year-long absence, it was time to terminate her employment. I do not believe that it is reasonable to impose upon the employer the obligation to initiate regular contact with the employee on leave to explore whether she wishes to return to work. My conclusion is informed by the following factors.

First, as you described, your employee made no efforts to stay in touch with your company during her leave. I think you are entitled to draw a reasonable inference from that lack of contact; specifically, I think it’s reasonable to conclude that she does not want to work.

Second, especially in a company with a substantial workforce, the task of regularly checking whether an employee who is on leave has had a change in her disability could be daunting (particularly so if you have multiple employees on disability leave). Moreover, imposing an obligation on the employer to explore disabled employees’ status is a slippery slope. How often should the employer check? Once a year? Once every six months? Once a month? More frequently? As you know, both physical and mental health conditions can change or they can remain constant. It is far easier for a disabled employee to apprise her employer of meaningful changes in her condition than it would be for an employer to undertake this responsibility.

Third, not only would the employer have a potentially difficult time checking on the employee’s health status, this would only represent a portion of the calculus. The employer also would need to assess whether the employee was qualified for the position, not in terms of her health condition, but in terms of the requisite skill sets and educational background. It could potentially be onerous for an employer to have to compare the qualifications of the employee on leave every time a new position was created or every time a position became vacant due to another employee’s transfer, resignation, or retirement. Further, it would be equally (or even more) burdensome to attempt a comparison of the employee on leave with every other candidate, whether internal or external, every time a position became available. Again, it would be far easier for an employee on leave to monitor the employer’s job postings and make an independent decision regarding whether to explore that opportunity. In a fluid, dynamic workplace, where new positions are being created regularly, or where positions routinely become vacant due to the movement of employees from one job to another or one location to another, the burden on the employer to monitor and apprise the employee on leave of every available job opportunity could be quite substantial.

Fourth, employers need to have the flexibility to move quickly, particularly when a qualified applicant is seeking a position. Requiring employers to review all open positions against all employees on leave would be problematic. This is particularly true for a large employer, which may be employing thousands or tens of thousands employees in a particular location.

As I stated above, however, the case law this subject appears to be somewhat mixed. In Minnesota, where my practice is based, courts have observed that an employee “can’t expect the employer to read his mind and know he secretly wanted a particular accommodation and sue the employer for not providing it.” Braziel v. Loram Maintenance of the Way, Inc., 943 F. Supp. 1083 (D. Minn. 1996)(summary judgment granted for employer when employee could not identify at his deposition how his position could be modified to enable employer to accommodate his disability).

The same principle applies here. Just as an employer cannot read the employee’s mind to determine what accommodation the employee seeks, an employer is likewise unable to discern that an employee on leave who has made no effort to stay in touch with the employer or explore alternative job opportunities that might become available, is actually interested in returning to work in some capacity. As the Eighth Circuit has observed, the ADA “is not an affirmative action statute.” Huber v. Wal-Mart Stores, Inc., 486 F.3d 480 (8th Cir. 2007).

Despite the observations above, the ADA does impose obligations that an employer ignores at its peril. I suggest the following practical suggestions, which are designed both to increase the likelihood that an employee will be able to return to work, and decrease the risks of litigation if such a return is not possible.

• Consider leave as an appropriate “reasonable accommodation.” Particularly when you are addressing mental health disabilities, time away from work may be a workable solution.

• If you have an employee who is about to take leave as a “reasonable accommodation,” provide that employee some guidance, both orally and in writing, that you expect the employee to check in periodically (monthly, bi-monthly, quarterly, or some other appropriate time period). Document the fact that the employee has checked in, or if not, that the employee failed to abide by your request.

• Advise the employee that the purpose of the periodic contact is two-fold: a) to ascertain whether the employee’s condition has improved or changed in any way; and b) to ascertain whether the employee is ready to return to work in any capacity.

• In the same oral and written guidance in which you request the employee to make periodic contact with the you, inform the employee that the burden will be on the employee, not you (the employer), to stay informed of the potential job opportunities that may become available. Let the employee know the ways she can stay current and informed on this issue (on-line postings, internal company websites, contact with her supervisor, contact with HR, etc.).

• Engage in the interactive process, both at the time the employee initially goes out on leave, and before any termination decision is made. The EEOC has high expectations regarding the obligation the ADA imposes on employers to engage in the interactive process with a qualified disabled employee.

• To the extent the employer does periodically check regarding whether certain jobs may have become available for which an employee on leave may be qualified, document your efforts. You will need this documentation to reconstruct this information if accusations are later made that your company somehow failed to consider your employee-on-leave for positions for which she was qualified.

By taking these practical steps, you will enhance the chances of helping your employee return to work and you will reduce the likelihood of litigation if the employee is unable to do so.

I hope you find this information to be helpful.  Regards, Roy]

Quirky Question # 186:

For many years, our company has required all employees to sign a contract agreeing to arbitrate any employment claims, including discrimination claims.  Last year we changed our form contract to make it clear that any arbitration only would cover the individual employee making the claim.  There would be no “class action” arbitrations or anything like that.  (We were told by another law firm that the Supreme Court had just ruled that this approach was legal.)

Now, we’ve got a terminated employee threatening to bring a class action against us.  His lawyer says our new arbitration contract violates the National Labor Relations Act and something called the Norris-Laguardia Act.  But, we aren’t even a union shop!  What’s going on here?  I thought the Supreme Court just said that we could ban class actions in our arbitration agreements.

David’s Analysis:

Unfortunately, your ex-employee’s lawyer may have a point.  A very recent decision of the National Labor Relations Board (NLRB), D.R. Horton, Inc. and Michael Cuda, Case 12-CA-25764, held that it was a violation of the National Labor Relations Act to require employees to sign an arbitration agreement preventing them from filing class, joint or collective claims.  While that decision has not yet been reviewed by the courts, the NLRB’s analysis of the legal issues was thorough and addressed the relevant statutes and cases in some detail.  In particular, the NLRB considered the recent Supreme Court case you reference (AT&T Mobility v. Concepcion, 131 S. Ct. 1740 (2011)), but found that it did not apply in this context.

The NLRB’s ruling in the D.R. Horton matter was based on a provision in the National Labor Relations Act that not only protects classic union activity, such as organizing and collective bargaining, but also guarantees employees the right “to engage in … concerted activities for the purpose of … other mutual aid or protection …” 29 U.S.C. § 157.  In other words, employees have the right to work together (or “collectively”) even outside of the traditional union context, for their “mutual aid or protection.”

The NLRB determined that collective litigation, such as class actions, constitutes the type of collective activity protected by the National Labor Relations Act.  Therefore, the NLRB determined that the right to pursue employment claims collectively was protected activity.  According to the NLRB, forcing employees, as a condition of employment, to sign a contract waiving that right was a violation of the Norris-LaGuardia Act, 29 U.S.C. § 101 et seq., which prohibits contracts that force employees to surrender certain protected rights.  The NLRB distinguished this from cases allowing such contracts where the employee had the choice to sign (and receive additional benefits) or not sign but still remain employed.

The NLRB also analyzed the 2011 Supreme Court opinion in Concepcion, which upheld the validity of consumer contracts waiving rights to collective action.  Concepcion involved cell phone customers claiming that certain fees had been fraudulently imposed.  In that context, the NLRB ruled, class action rights were merely “procedural” and could be waived.  In the employment context, by contrast, the right to act collectively for mutual aid and protection is “substantive,” and the employer cannot force employees to waive that right prospectively as a condition of employment.  The NLRB also noted that if the National Labor Relations Act’s protection of collective action is in conflict with the Federal Arbitration Act’s (FAA) provision making arbitration agreements enforceable, the National Labor Relations Act, as the later statute, would control over the earlier FAA.

As noted above, this issue has not been litigated in court yet, so it may be that the NLRB’s ruling in D.R. Horton will be overruled, but it is a thorough and thoughtful opinion and represents the most recent statement on this issue.

As a practical matter, there are a number of issues your company should address going forward:

• Consider dropping the requirement that the waiver of class or collective action rights be a condition of employment.  Instead, you could offer your employees additional consideration if they choose to sign a contract waiving those rights;

• If you can’t absolutely bar class or collective actions by employees, make a decision as to whether you would rather have any such actions brought in court or in arbitration.  Note that some of the procedural protections in class action litigation are quite favorable to employers.  You might decide that those offer better defensive prospects than the more informal rules which often prevail in arbitration;

• Once you have made the decision as to whether class litigation or class arbitration is the lesser of two evils, make sure any agreement you require employees to sign clearly specifies whether the employee is required to litigate or to arbitrate any class claims; and

• More broadly, don’t forget to consider the implications of the National Labor Relations Act and other labor statutes, even if you are not a unionized employer.  As this situation illustrates, those laws can impact even non-union employers in some situations.

We run a manufacturing company.  We are fortunate in that, despite the difficult economy, our products remain in high demand.  One of our employees has a couple of related disabilities, the consequence of which is that he only can work a maximum of 8 hours each day.  In the past, we have been able to accommodate this limitation.  But, given the ever-increasing demand for our products, we have had to convert from 8-hour shifts to 12-hour shifts on all of our production lines.

Our employee has asked us to accommodate him further by allowing him to work just 8 hours each day.  We don’t think that would be fair to our other employees, all of whom have to work 12-hour shifts.  We also think it would be unfair to force us to incur the additional expense associated with this requested accommodation.  What’s your reaction?  Do we have to accommodate this employee by allowing him to work just 8 hours per day?

Roy’s Analysis: 

My first thought is that your company deserves congratulations.  It’s wonderful that your firm has been able to increase sales of your products in the difficult economic conditions of the last several years. 

Although I cannot provide you complete assurance regarding your treatment of your employee, there are reasons for your company to be quite optimistic about your position.  Initially, I like the backdrop facts that you have shared in part.  As you describe, your employee has had a disability for some time.  Even more important, your company has been accommodating your employee’s disability by agreeing not to ask him to work more than 8 hours each day.  This demonstrates that your firm did not discriminate against your employee when you discovered his physical limitations. 

These facts would be enhanced even further if your company hired this individual knowing of his disability.  Similarly, the longer the period you employed him while accommodating his disability, the more persuasive your arguments that your company does not discriminate against employees with disabilities and that your organization attempts to accommodate persons who need an accommodation to perform the essential functions of the job.

Due to your company’s success and the resulting demand for your products, however, it is apparent that the accommodations you have offered in the past (basically, limiting the employee’s workday to just 8 hours) no longer will suffice.  With your new requirement of 12-hour shifts, your employee seemingly will not be able to perform the essential functions of the job.  The job requires 12 hours of work; with an 8-hour limitation, your employee will come up four hours short each day.

As you may know, the basic analytical structure of a failure to accommodate disability discrimination case has four elements.  A plaintiff must show that: a) he has a disability; b) he is a “qualified disabled person;” c) the employer knew of the disability; and d) the employer failed to make a reasonable accommodation of the disability.  Here, you acknowledge that your employee is disabled.  Moreover, your company knew of the disability (and, in fact, have been accommodating it for some time).  Consequently, the potential battleground, if this dispute evolves into litigation, will be the second and fourth elements referenced above.

To determine whether an individual is a “qualified disabled person,” courts examine whether the employee can perform the essential functions of the job.  The EEOC has promulgated regulations to assist employers and employees alike to evaluate whether a job requirement constitutes an “essential function” of the job.  These variables include: 1) the employer’s judgment as to which job functions are essential; 2) the content of the written job descriptions relating to the job; 3) the amount of time spent on the specific function in question; 4) the consequences associated with not compelling the employee to perform the function; 5) the terms of the collective bargaining agreement (if any); 6) the past work experience of other employees in the same job; and 7) the current experience of other employees in the same or similar jobs.  See 29 CFR § 1630.2(n)(3).

Here, an analysis of these factors would appear to support your company’s position that working a 12-hour shift is an essential function of the job you would like this employee to perform.  Many courts have reached this same conclusion, finding that an employer’s standard shift schedule is an essential job function. See, e.g., Rehrs v. Iams Co., 486 F.3d 353, 357 (8th Cir.2007 (rotating shift schedule is an essential function); Kallail v. Alliant Energy Corp. Servs., Inc., 2011 WL 1833347, at * 12-13 (N.D. Iowa 2011) (rotating, 12-hour shift, was an essential function of job); Tompson v.Dep’t of Mental Health, 924 N.E.2d 747 (Mass. Ct. App. 2010) (8-hour shift was essential function). As the Eighth Circuit pointed out in Rehrs, “[i]t is not the province of the court to question the legitimate operation of a production facility or determine what is the most productive or efficient shift schedule for a facility.” Rehrs, 486 F.3d at 357-58.

Further, the fourth element (did the employer failure to make a “reasonable accommodation”) of the failure to accommodate analysis also supports your position that the employee needs to work the full 12-hour shift.  When evaluating whether an employer can make a reasonable accommodation of an employee’s disability, courts examine whether the proposed accommodation would cause an “undue hardship” to the employer.  Here, you should be able to present persuasive evidence that an accommodation that would result in your employee working only two-thirds of the standard shift (8 of the 12 hours) would constitute an undue hardship for your company.

As you point out, were your firm to continue to employ this individual and continue to allow him to work just eight hours daily, you would  have to determine how to cover the four-hour gap.  You undoubtedly have considered a few possible alternatives.  First, you could ask your other employees to work extra to cover the four-hour gap.  But, that might require another employee to work 16 hours (the original 12 hour shift, plus the four additional hours), a schedule that will require your company to expend additional resources for overtime compensation.  Moreover, when employees are working 16 consecutive hours, work quality is likely to deteriorate. 

Second, your company could hire a new employee to cover the extra four hours per day, employing that individual 20 hours per week. Even assuming your firm could find an employee willing to work only 20 hours per week, here too there clearly will be additional expense for your company (recruiting, hiring, training, and potentially, significant benefits). 

Third, another accommodation your company might consider would be to provide your employee an indefinite leave of absence.  Any number of courts have accepted short-term leaves (sometimes as long as a year) as a reasonable accommodation for an individual with a physical or mental impairment.  But, here too, the accommodation is not without costs.  Your firm would have to hire a “temporary” replacement, perhaps for a prolonged period.  Again, hiring and training employees is expensive, especially if the expectation is that this person will not be employed for a lengthy period.  Moreover, this type of accommodation presumes your employee’s disability will improve as a result of the time away from work and as a result of the leave, he later will be able to work the 12-hour shifts.  Here, it sounds as though your employee already has had the 8-hour workday limit for a lengthy period of time.  If there is little prospect of improvement in your employee’s condition and time away from work is unlikely to increase the chances that he will be able to work a longer day, this accommodation may be pointless.

Further, when considering each of the three alternatives above, it is not just the financial consequences that should be assessed when considering “undue hardship.”  The impact on employee morale, the effect on other employees (some of whom may not be too thrilled with having to work 12-hour shifts), and other intangibles also are part of the undue hardship calculus.

The bottom line is that the various hypothetical solutions to this problem would likely cause your company an undue hardship.  Couple that fact with the judicial analyses that schedules or shifts constitute an essential function of the job, and your firm should not have much to worry about.  In sum, your company should be able to require your employee to work the full 12-hour shift.  If you have to terminate your employee because he is unable to do so, your company should not be exposed to liability on a failure to accommodate theory.  Whether you will be able to persuade your employee of that fact before he proceeds with a lawsuit is a question, however, about which I can offer few insights.

As Mark correctly described, the movie I was looking for was “Nine to Five,” starring Lily Tomlin, Dolly Parton, and Jane Fonda.  The abusive boss, played by Dabney Coleman, is tied up and held captive by the women.  For providing these answers, Mark is the latest winner of one of amazing prizes. 

The next question goes up now.  Good luck!  Roy