April 2014
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Employment Law

EEOC Equal Pay Directed Investigation

Recently I attended a presentation given by Shirley Richardson, the Deputy Director for the EEOC – Memphis District. Ms. Richardson focused on the EEOC’s current Strategic Initiatives. I previously wrote about those initiatives here.

One of the EEOC’s Strategic Initiatives is enforcing equal pay laws. One method the EEOC can use to enforce equal pay laws is an Equal Pay Directed Investigation. A Directed Investigation can be conducted without an EEOC Charge being filed.

Basically, the EEOC will send a letter to the employer stating that it is conducting an investigation and will ask to review the pay records for male and female employees. The Directed Investigation is similar to an audit by the Department of Labor, but the focus is on whether discrimination has occurred on the basis of gender.

Employers should conduct an internal audit of their payroll records to ensure that men and women are paid equally for equal work. Discrepancies in pay between men and women must be tied to legitimate, non- discriminatory reasons which are applicable to the job. These reasons could include differences in education, experience and seniority.

The failure to conduct an internal equal pay audit may result in problems for the employer if it faces an EEOC Charge or Directed Investigation. Be proactive and conduct the audit now to avoid problems in the future.

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March 2014
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Employment Law

What To Do When A Key Employee Walks Out The Door

You have just been told that one of your key employees is resigning to go to work for a competitor.  You will be facing competition from him or her in the near future.  In order to protect your company’s interests and prepare yourself for that competition employers should take the following steps:

  • If an employment contract exists which contains a non-compete provision, a non-solicitation of customers provision and/or other restrictive covenants get with legal counsel as soon as possible (You should have key employees sign contracts which have enforceable restrictive covenants).  The first step may be to send a cease and desist letter or to file a lawsuit seeking injunctive relief, depending on all the facts and circumstances.  But that determination needs to be made as quickly as possible so that damage to the company can be minimized and certain legal rights of the company are not waived or prejudiced by failing to act quickly.
  • Conduct an exhaustive search to determine if the employee took anything that belongs to the company.  This would include a forensic search of the computer and smart phone and a search of relevant paper files.  Remember, even if the employee does not have a non-compete agreement if he or she takes certain company information the employer may have a claim for breach of a confidentiality agreement, breach of fiduciary duty, a violation of the state’s trade secret law and conversion of property.  If information was taken from a computer there also may be claims under certain federal laws.
  • Contact customers to notify them of the employee’s departure and tell them who will be the new point of contact.  This contact serves two purposes.  First, it will show the customer you care and hopefully allow you to maintain the relationship.  Second, in the course of this call you might learn whether the former employee has contacted the customer.  If you have a non-solicit in place the employee’s contact with the customer might violate that agreement and give rise to other claims, depending on the information that was shared and discussed.
  • Meet with your management team to discuss the employee’s departure and set out a plan of action.  In addition to setting a plan this meeting may also provide you with valuable information regarding the former employee’s plans and whether he or she has contacted any of your other employees.  Contact with other employees could violate an anti-raiding provision in the employee’s contract and, in some circumstances, could give rise to a claim for tortious interference with contract or business relations.
  • Obtain a resignation letter.  The resignation letter will generally defeat any unemployment claim that the employee may pursue if things don’t go well in his or her new job.  Furthermore, if the employee is dishonest in the letter about the reason for his or her departure (e.g. the letter states the resignation is to spend more time with the family when the reality is the person is going to work for a competitor) the letter can be very damaging to the employee in future litigation.

In today’s society you will likely lose a key employee to a competitor.  Taking these steps and potentially others, will help you protect your company’s interests and minimize the harm to the business.

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February 2014
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Employment Law

6TH CIRCUIT HOLDS GENERAL CONTRACTOR IS JOINT EMPLOYER OF SUBCONTRACTOR’S EMPLOYEES

A few months ago I wrote a blog post which discussed how companies that use temporary services or subcontractors can, in certain circumstances be held to be the joint employer of the employees of the temporary service or subcontractor.  You can read that blog post here.  Earlier this month the United States Court of Appeals for the 6th Circuit applied the factors I discussed in that blog post to hold that a general contractor for a construction site in Memphis, Tennessee was the joint employer of one of its subcontractors’ employees.

In EEOC and Maurice Knox v. Skanska U.S.A. Building, Inc. the EEOC and Knox sued Skanska alleging racial discrimination and retaliation in violation of Title VII.  Knox was employed by a subcontractor on the construction site named C-1 Inc. (“C-1”).   Despite this fact the EEOC and Knox argued that Skanska was Knox’s joint employer.  The District Court disagreed with the Plaintiffs and granted summary judgment to Skanska.  On appeal the 6th Circuit reversed.

The 6th Circuit held that Skanska was a joint employer because it could “share or co-determine those matters governing essential terms and conditions of employment.”  In making this finding the Court focused on the following facts:

  • Skanska could remove Knox and other C-1 employees from the jobsite if the employee was “incompetent, disorderly or otherwise unsatisfactory”
  • Skanska routinely exercised its ability to direct and supervise Knox’s performance.
  • Skanska set Knox’s hours and daily assignments.
  • Skanska assigned Knox’s supervisors.
  • Skanska responded to any complaints asserted by Knox.
  • Skanska was responsible for responding to any complaints asserted by Knox and did not consult with C-1 about those complaints.
  • Skanska had Knox sign a document on Skanska letterhead setting forth his job responsibilities.
  • Skanska repeatedly removed C-1’s personnel from the jobsite without any challenge from C-1.

The Skanska decision reinforces that when a company exercises the right to control subcontractor and temporary employees the company will most likely be considered a joint employer of those employees.  Employers should keep this in mind when making staffing decisions and, if controlling the temporary employee or subcontractor’s employee is not important, take the appropriate sets to eliminate or minimize the right to control in an effort to avoid a successful joint employer argument.

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January 2014
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Employment Law

BYOD? Legal Risks of Bring Your Own Device Policies

In our 24/7 society it seems everyone carries a smartphone.  We feel the need to be able to access email, surf the internet, text message and make and receive calls anytime, anywhere.  And many employers want their employees to be reachable anytime, anywhere.  As a result, many employers are going “BYOD” and adopting Bring Your Own Device Policies.  But going BYOD creates certain legal risks.  Employers need to know those risks and how to minimize their exposure to them.

The primary legal risks associated with going BYOD include:

  • Loss of confidential information due to the loss or unauthorized access of the employee’s device.
  • Wage and hour issues, such as a non-exempt employee using the device to work overtime or a minimum wage violation because the fees and expenses for the device reduce the employee below minimum wage for each hour worked.
  • Discrimination and harassment.
  • Employee negligence – the employee has an accident while using the device which results in a worker’s compensation claim, a claim by an injured third party, or both.
  • An overbroad BYOD policy which inhibits “concerted activity” in violation of the National Labor Relations Act (“NLRA”)

To minimize these risks employers should adopt a BYOD policy.  An effective BYOD policy should:

  • State that mobile device management software will be installed on the employee’s device which allows the employer to remotely “wipe” the device if necessary.
  • State that the employer is not responsible for personal data loss.
  • State that the employee has no expectation of privacy in the information stored on the device.
  • State that the employer can monitor and preserve all data on the device.
  • Require employees to sign the policy consenting to the terms.
  • Prohibit the use of the device outside of the employee’s normal work hours unless expressly authorized to do so.
  • Prohibit the use of the device for work while on unpaid leave unless expressly authorized to do so.
  • Ensure that the fees and expenses for the device do not reduce the employee below minimum wage.
  • State that time worked using the device will be counted as compensable time.
  • Prohibit the use of the device for discrimination or harassment.
  • Prohibit the use of the device when driving or operating equipment.
  • Prohibit the storing of information from prior employers.
  • State the protocols that will be followed in the case of an employee’s resignation or termination.
  • Specify any other prohibited uses.
  • State that the employee must notify management immediately in the event their device is lost, damaged or stolen.
  • Contain an NLRA disclaimer.
  • State that the BYOD Policy may be revoked at any time.

Adopting an affective BYOD Policy which contains these elements will help those employers who choose to go BYOD minimize the risks from doing so.

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November 2013
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Employment Law

US Supreme Court Agrees To Hear ACA Contraception Cases

The ACA’s contraceptive mandate has been challenged in several lawsuits across the country since the ACA became law. I have written about a few of them in this blog.  Today, the U.S. Supreme Court announced it would hear two cases challenging that mandate—Sebelius v. Hobby Lobby Stores and Conestoga Wood Specialties v. Sebelius.  The issue in both cases is whether companies may decline to provide contraceptive coverage to employees based on the religious beliefs of the companies’ owners.  The principal argument in those cases is that the contraceptive mandate violates the Religious Freedom Restoration Act.

Stay tuned to see how the Supreme Court decides this controversial issue.

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November 2013
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Employment Law

6th Circuit Rejects Religious Challenge To ACA

Recently the 6th Circuit denied an appeal by Eden Foods, Inc. (“Eden Foods”) that claimed the Affordable Care Act’s (“ACA”) contraception mandate violated the Religious Freedom Restoration Act.  Michael Potter, a Roman Catholic, and the sole owner and shareholder of Eden Foods, filed suit against the federal government claiming that the contraception mandate would interfere with his and his company’s exercise of religion.

The Court held that a secular, for profit company is not entitled to protection under the Religious Freedom Restoration Act.  The three judge panel followed the lead of another 6th Circuit Panel’s September 17th ruling upholding the denial of an injunction against the contraception mandate.  That case was filed by auto parts manufacturer Autocam Corp.  The Autocam opinion concluded that the right of free exercise of religion never extends to secular, for profit companies.

In contrast to these decisions by the 6th Circuit the Seventh Circuit Court of Appeals recently held that the Religious Freedom Restoration Act applies to individuals and secular organizations.

The U.S. Supreme Court may have to resolve this issue.  Stay tuned!

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November 2013
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Employment Law

What Makes A Non-Compete Enforceable in Tennessee?

Covenants not to compete are a common part of the employment relationship.  The recent decision by the Tennessee Court of Appeals in Combs v. Brick Acquisition Company is instructive on when a covenant not to compete will be enforced.

In Tennessee a covenant not to compete is enforceable if there is a legitimate business interest to be protected and the time and territorial limitations of the non-compete are reasonable.  In determining whether a non-compete is reasonable a court will consider the following:

  • The consideration supporting the non-compete;
  • The threatened danger to the employer in the absence of the non-compete;
  • The economic hardship imposed on the employee by the non-compete and;
  • Whether the non-compete is inimical to the public interest.

In Combs the decision turned on whether the employer could show a legitimate business interest to be protected.  In determining whether a legitimate protectable business interest exists Tennessee Courts consider the following:

  • Whether the employer provided the employee with specialized training;
  • Whether the employee is given access to trade or business secrets or other confidential information; and
  • Whether the employer’s customers tend to associate the employer’s business with the employee due to the employee’s repeated contacts with the customers on behalf of the employer.  This third element is often referred to as the employee being the “face of the business”.

These considerations may operate individually or in combination to create a legitimate protectable business interest.

In Combs the Court held that because Mr. Combs had access to confidential pricing and profit margin information and was the sole commercial brick salesperson for the company in the Chattanooga area the employer had a legitimate protectable business interest.  Therefore, the non-compete was enforced.

If you have questions about the enforceability of a non-compete consult your lawyer.

October 2013
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Employment Law

Who Is The Employer of a Temporary Employee?

Do you use temporary employees in your business?  If you answered that question “yes” then you need to know that your company may be considered a “joint employer” of those employees.

If your company exercises the right to control the temporary employees your company  and the company providing the temporary employees (“temp service”) are joint employers of the temporary employees.

Factors to consider in determining who has  the right to control include:

1.who controls when the employees arrive and leave;

2. who controls what the employees do and how they do it;

3. whose policies and procedures govern the employees;

4. who provides the tools and equipment; and

5.  who pays the employees and provides their benefits.

The most significant legal implication of being a joint employer is that temporary employees can pursue a claim against you and the “temp service” for any  discrimination, harassment or retaliation they claim to experience while performing an assignment for your company.  Furthermore, under the Affordable Care Act (ACA) if you have the right to control the temporary employees you use you will have to count them in determining whether you meet the ACA 50 employee threshold.

Temporary employees can provide a valuable service to your business.  But if you use them know that the legal ramifications of doing so may be far more permanent.

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September 2013
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Employment Law

ACA Marketplace Notice Must Be Sent By October 1

The Affordable Care Act (ACA) requires all employers that are subject to the Fair Labor Standards Act (“FLSA”) to provide written notice of the health insurance  “Marketplace” to all employees on or before October 1, 2013.  The notice must be provided  even if the employer will not have to provide coverage under the ACA.

Employers are generally subject to the FLSA if they are engaged in interstate commerce or have an annual business volume of at least $500,000.   If your business is covered by the FLSA and you have not yet sent the Marketplace Notice, make sure you do so no later than October 1st.   A model notice can be obtained from the Department of Labor’s website.

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September 2013
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Employment Law

What To Do When The EEOC Comes Knocking

Recently the EEOC listed the 10 states which produced the most charges of discrimination in 2012.  To my suprise Tennessee was 10th on the list.

If your business receives an EEOC Charge (or a charge from a state human rights agency such as the Tennessee Human Rights Commission) you should take the following steps:

1. Litigation Hold- Immediately take steps to preserve all documents which might be relevant to the allegations in the charge.  This process, commonly referred to as a litigation hold, requires you to preserve hard copies as well as electronically stored information, and to suspend normal document retention/destruction practices and policies.

2. Notify your insurer- If you have Employment Practices Liability Insurance send the carrier written notice of the charge.  The failure to do so could result in the insurer denying coverage based on your failure to promptly notify it of the allegations.

3. Notify your attorney- Because statements made in the position statement and the response to the request for information are admissions which can be used against you, and the failure to assert certain defenses might result in  a waiver,  it is important that you get your attorney involved at the outset. If you have EPLI insurance the insurer will likely provide an attorney for you.

4. Investigate- If the charge presents allegations which are new or that have not previously been investigated a prompt, thorough investigation should be conducted.

5. Need to Know- In order to reduce “water cooler gossip” and to avoid retaliation claims,  you should only provide information about the charge to those who have a legitimate need to know the information.

The EEOC charge is often the first stage of what becomes lengthy, costly litigation.  Make sure you are taking the proper steps at the outset to give your business the best possible chance of prevailing.

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