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CORPORATE COUNSEL SYMPOSIUM XXIII OCTOBER 30, 2012

Five by Five: Top Strategies for

Reducing Employment Litigation in a Difficult Economy

Dionne Blake Target Corporation Group Manager and Senior Counsel, Employee Relations Minneapolis, Minnesota

Andrew P. Coffey NCS Pearson, Inc. Vice President and Assistant General Counsel Bloomington, Minnesota

Christine L. Meuers Wells Fargo & Company Deputy General Counsel Minneapolis, Minnesota

Mandana Massoumi Dorsey & Whitney LLP (714) 800-1432, (949) 932-3600 [email protected] Costa Mesa, California

Melissa Raphan Dorsey & Whitney LLP (612) 343-7907 [email protected] Minneapolis, Minnesota

Program Materials

are available on www.dorsey.com

1. Panel PowerPoint

2. Mandana Massoumi, Enforceability of Class Action Waivers Post-Concepcion, Dorsey & Whitney LLP (October 30, 2012)

3. Melissa Raphan and Jennifer Cornell, Department of Labor and Equal Employment Opportunity Commission Enforcement Update: Strategy in Responding to Government Audits and EEOC Activity, Dorsey & Whitney LLP (October 30, 2012)

4. Melissa Raphan and Jennifer Cornell, Staying Ahead of the Whistle: Preventive Practices to Reducing Whistleblower and Retaliation Claims, Dorsey & Whitney LLP (October 30, 2012)

5. Mandana Massoumi and Cherise S. Latortue, Life After Brinker: The California Supreme Court’s Decision in Brinker and Recent Decisions That Have Followed, Dorsey & Whitney LLP (October 30, 2012)

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6. Melissa Raphan and Jennifer Cornell, Dealing with the e-Workplace: Internet Security, Privacy and Social Media Policies, and the Hot Button National Labor Relations Act Issues (for Union and Non-Union Employers), Dorsey & Whitney LLP (October 30, 2012)

(a) House of Representatives H.R. 5050: The Social Networking Online Protection Act http://www.gpo.gov/fdsys/pkg/BILLS-112hr5050ih/pdf/BILLS-112hr5050ih.pdf

(b) California Assembly Bill No. 1844: Employer Use of Social Media (September 27, 2012) http://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201120120AB1844&search_keywords=#content_anchor

(c) Illinois Compiled Statutes: 820 Ill. 55/1 (2012): Right to Privacy in the Workplace Act http://www.ilga.gov/legislation/ilcs/ilcs3.asp?ActID=2398&ChapterID=68&Print=True

(d) Maryland SB 433: User Name and Password Privacy Protection and Exclusions (signed into law May 12, 2012) http://mlis.state.md.us/2012rs/bills/sb/sb0433t.pdf

(e) Employer Access to Social Media Usernames and Passwords, National Conference of State Legislatures (last visited September 23, 2012) http://www.ncsl.org/issues-research/telecom/employer-access-to-social-media-passwords.aspx

(f) Memorandum of the Office of the General Counsel, NLRB (Aug. 18, 2011) http://mynlrb.nlrb.gov/link/document.aspx/09031d458056e743

(g) Memorandum of the Office of the General Counsel, NLRB (May 30, 2012) http://mynlrb.nlrb.gov/link/document.aspx/09031d4580a375cd

Five by Five: Top Strategies for Reducing Employment Litigation in a

Difficult EconomyDionne Blake

Group Manager and Senior Counsel, Employee Relations Target Corporation

Andrew P. CoffeyVice President and Assistant General Counsel

NCS Pearson, Inc.

Christine L. MeuersDeputy General Counsel Wells Fargo & Company

Mandana Massoumi and Melissa RaphanDorsey & Whitney LLP

What Concepción v. AT&T Does for the Enforceability of Class Action Waivers:

Should your company consider the implementation?

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When the Federal Agencies Come Knocking…

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Fair Labor Standards Act (FLSA) Cases Still Keep Employers Up At

Night – So What is New on This Front?

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Retaliation Claims: Still #1 at the Equal Employment Opportunity Commission

and in Your Workplace?

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As if the Actual Workplace Was Not Dicey Enough, Employers Must Now

Contend With the e-Workplace

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Questions?

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October 30, 2012

Enforceability of Class Action Waivers Post-Concepcion Mandana Massoumi

The Supreme Court in AT&T Mobility, LLC v. Concepcion, 131 S. Ct. 1740 (2011) held that the Federal Arbitration Act preempts any contrary state law, and allows enforcement of an express class action waiver provision. The Court overturned an earlier California Supreme Court decision, in which the state court held class action waivers in arbitration agreements were unenforceable. Since the United State Supreme Court’s decision in Concepcion, different courts have challenged enforceability of arbitration agreements with express class action waiver provisions. In some instances, this has resulted in inconsistent application of the principles articulated by Concepcion. Thus, issues related to enforceability of such agreements are by no means settled. Understanding some of these challenges is critical, particularly in attempting to draft an enforceable arbitration agreement, including one with a valid class action waiver clause. A sample of the relevant cases and challenges to such agreements have been highlighted below.

The Principles of Concepcion

On April 10, 2010, the United States Supreme Court decided Stolt-Nielsen v. Animal Feeds Int’l. Corp., 130 S.Ct. 1758 (2010) where the court refused to impose classwide arbitration where the agreement was silent on the issue. The Court found that where arbitration agreements were “silent” on the class arbitration issues, the arbitrators’ decision to permit class arbitration “exceeded their power” under the Federal Arbitration Act (“FAA”) section 10(a)(4) and should be vacated.

Exactly one year later, on April 10, 2011, the United States Supreme Court in AT&T Mobility v. Concepcion, supra, considered whether Section 2 of the FAA preempts a California rule articulated in a prior decision by the California Supreme Court. In that case, the state law rule was articulated in the California Supreme Court’s decision in Discover Bank, which held that class action waivers in consumer contracts are not enforceable, where: (1) the agreement is a contract of adhesion; (2) there is an allegation to cheat consumers; and (3) the consumer’s individual damages are smaller. The AT&T arbitration clause at issue read as follows:

“[The customer and AT&T] agree to arbitrate all disputes and claims…[and] agree that each may bring claims against the other only in … its individual capacity, and not as a plaintiff or class member in any purported class or representative proceeding.”

At issue was the conflict between the language of the FAA and that of California’s Discover Bank rule. The FAA notes that an agreement to arbitrate “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” However, California’s Discover Bank rule noted: “[W]hen the [class-action] waiver is found in a consumer contract of adhesion in a setting in which disputes between the contracting parties predictably

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involve small amounts of damages, and when it is alleged that the party with the superior bargaining power has carried out a scheme to deliberately cheat large numbers of consumers out of individually small sums of money….such waivers are unconscionable.”

The United States Supreme Court found that the AT&T’s arbitration agreement was enforceable and that Section 2 of the FAA preempts the Discover Bank rule. The Court found the California rule “stands as an obstacle to the accomplishments and execution of the full purposes and objections of Congress’…California’s Discover Bank rule is preempted by the [Federal Arbitration Act].”…When states law prohibits outright the arbitration of a particular type of claim, the analysis is straight forward: the conflicting rule is displaced by the FAA.” Id at 1747.

Challenges Under State Law to Agreements Found to be Unconscionable

Following Concepcion many courts followed its holding, finding the FAA preempts any contradictory state law claims, when considering enforcement of an arbitration agreement. Notably in Marmet Health Care Ctr. v. Brown, 2012 U.S. LEXIS 1076 (U.S. Feb. 21, 2012) the Supreme Court vacated and remanded the decision of the West Virginia Supreme Court, which had refused to enforce an arbitration agreement for personal injury and wrongful death claims brought under the state statute. The United States Supreme Court found that “[w]hen this Court has fulfilled its duty to interpret federal law, a state court may not contradict or fail to implement the rule so established.” Id at *1. Similarly, in Kilgore v. KeyBank, N.A., 673 F.3d 947 (9th Cir. 2012), the Ninth Circuit Court of Appeals vacated and remanded the lower court’s decision which had denied defendant’s motion to compel arbitration of state law Unfair Competition Claims. The Court found the arbitration agreement enforceable and the motivation of the state legislators irrelevant “to determining whether federal law preempts” state legislation. Id. at 31; see also, Rosendahl. v. Bridgepoint Educ., Inc., 2012 U.S. Dist. LEXIS 26139 (S.D. Cal. Feb. 28, 2012) (Motion to compel arbitration granted and Plaintiff’s state law claims under the PAGA could be arbitrated as individuals); Blau v. AT&T Mobility, 2012 U.S. Dist. LEXIS 217 (N.D. Cal. Jan. 3, 2012) (Motion to compel arbitration granted as the FAA preempts California’s UCl and CLRA injunctive claims); James v. Conceptus, Inc., 2012 U.S. Dist. LEXIS 32434 (S.D. Tex. Mar. 12, 2012). Unconscionable fee splitting provisions were severed to enforcement of the arbitration agreement.

Nonetheless, a number of courts have continued to find that certain state law claims are not preempted under the FAA and thus not subject to arbitration. In most cases, these courts have considered state law principles in concluding the arbitration agreement and its class action waiver provisions are procedurally or substantially unconscionable. In these instances, courts have taken issue with arbitration agreements that attempt to curtail or eliminate rights provided under state law. This has also included reliance on the argument that public policy supporting the underlying state statute mandates availing litigants to the full relief afforded by the state regulations, thus precluding arbitration. For example, in O’Brien v. Am. Express Co., 2012 U.S. Dist. LEXIS 64553 (S.D. Cal. May 8, 2012), the Court found enforcement of the arbitration agreement can be challenged because state law arguments of unconscionability could serve as a defense, despite the ruling in Concepcion. In Samaniego v. Empire Today, LLC, 2012 Cal.App. LEXIS 540 (Apr. 5, 2012), the Court also affirmed denial of the motion to compel arbitration of an agreement with an express class action waiver. The Court found the state law requirements survived Concepcion, and on that basis, determined the agreement at issue was unconscionable as it violated some of

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the requirements set forth under state law. Similarly in Hernandez v. Kimpton Hotel & Rest. Group LLC, 2012 U.S. Dist. LEXIS 56743 (N.D. Cal. Apr. 23, 2012), the Court denied the motion to compel arbitration because the agreement was unconscionable with provisions that violated the state law requirements. See also, Coiro v. Wachovia Bank, N.A., 2012 U.S. Dist. LEXIS 24508 (D.N.J. Feb 27, 2012) (Agreement was found enforceable after review of New Jersey’s unconscionability law); Mayers v. Volt Management Corp., 2012 Cal.App. LEXIS 227 (Feb. 2, 2012) (Agreement not enforced as it was substantively and procedurally unconscionable as Plaintiff was not provided with the AAA rules); Antonelli v. Finish Line, Inc., 2012 U.S. Dist. LEXIS 19787 (N.D. Cal. Feb. 16, 2012) (Agreement not enforceable as it was unconscionable for requiring Plaintiff to share expenses, out of state forum selection clause, and gave company the power to unilaterally cancel); Ajamian v. CantorCO2e, L.P., 2012 Cal.App. LEXIS 148 (Feb.16, 2012) (Agreement not enforceable as it was unconscionable for having an out-of-state choice of law provision, and authorized non-statutory attorney fees for the company).

Enforceability of Silent Agreements

Given the challenge to express class action waiver provisions, some have questioned whether class action waivers are the safer alternative to those silent on the issue. Nonetheless, a number of courts have found that even when the agreement was silent on the issue of class arbitration, class action arbitration could be compelled. In Sutter v. Oxford Health Plans LLC, 675 F.3d 215 (3d Cir. 2012) the court affirmed the District Court’s decision to permit class arbitration even when the agreement was silent on the issue. The Court found, “Stolt-Nielsen did not establish a bright line rule that class arbitration is allowed only under an arbitration agreement that incants ‘class arbitration’ or otherwise expressly provides for aggregate procedures.” Id. at 222. Similarly in Mork v. Loram Maint. Of Way, Inc., 2012 U.S. Dist. LEXIS 2205 (D. Minn. Jan. 8, 2012), a motion to compel arbitration of a FLSA collective action was granted, even where the agreement was silent on the issue. See also, Yahoo! Inc. v. Iversen, 2011 U.S. Dist. LEXIS 117149 (N.D. Cal. Oct.11, 2011) (Petition to compel Plaintiff’s individual claims to arbitration was denied; court found Stolt-Nielsen does not foreclose a finding of an ‘implied’ agreement to arbitrate class claims).

Federal Statutes Not Preempted by the FAA

Another key challenge to enforcement of class action waivers and arbitration agreements has been reliance on an argument that federal claims are not preempted by the FAA and survive the arbitration challenge. In other words, some courts have determined these agreements should not apply to claims raised under federal law as plaintiffs should not be prevented from vindicating federal statutory rights. A collection of these recent cases have come from the Second Circuit and the Southern District of New York. For example, in Nat’l Supermarkets Ass’n v. Am. Express Travel Related Servs. Co. (In re Am. Express Merchs. Litig.), 667 F.3d 204 (2d Cir. 2012), the Second Circuit found that Concepcion did not alter its earlier decision, which had found class action waivers were unenforceable when they prevented litigation of other federal statutory rights. The U.S. Supreme Court had vacated the earlier decision and remanded with instructions to reconsider in light of Concepcion. Nonetheless, the Second Circuit upheld its earlier decision, finding Concepcion did not apply as the FAA did not preempt other federal statutory rights. Similarly in Sutherland v. Ernst & Young LLP, 2012 U.S. Dist. LEXIS 5024 (S.D.N.Y. Jan. 13, 2012), the Southern District Court of New York denied a motion for reconsideration of an order

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denying motion to compel of an arbitration agreement with a class action waiver. The Court found the agreement was not enforceable as it prevented Plaintiffs from seeking relief available to them under the FLSA. There have been a few notable exceptions to this trend. One was LaVoice v. UBS Fin. Servs., 2012 U.S. Dist. LEXIS 5277 (S.D.N.Y. Jan 13, 2012). In that case the Court relied on Concepcion in finding the class action waiver was, in fact, enforceable. See also, Khanna v. Am. Express Co., 2011 U.S. Dist. LEXIS 146542 (S.D.N.Y. Dec. 14, 2011) (Motion to compel arbitration with express class-action waiver was granted, despite RICO claims).

Challenges by the NLRB

Class action waivers have also been challenged by the National Labor Relations Board (“NLRB”). In D.R. Horton, two members of a three-member NLRB considered whether an employer’s arbitration agreement and its class action waiver provision violate Section 8(a)(1) of the NLRA. At issue was an arbitration agreement with an express class action waiver provision implemented corporate-wide by D.R. Horton, as a condition of employment for all employees. The Board held – in agreement with its administrative law judge – that the arbitration agreement unlawfully precluded an employee from filing a charge with the NLRB. Notably, the Board found that requiring an employee to arbitrate all claims and waive the right to proceed as a class action, violates NLRA’s Section 7 guarantee of the right to engage in “concerted activity.” “The [agreement] thus clearly and expressly bars employees from exercising substantive rights that have long been held protected by Section 7 of the NLRA.”

Since issuance of this opinion by the NLRB, a number of courts have considered it, but most have refused to follow the rationale. For example, most recently in Morvant v. P.F. Chang’s China Bistro, Inc., 2012 U.S. Dist. LEXIS 63985 (N.D. Cal. May 7, 2012), the court granted the motion to compel arbitration under an agreement with express class action waiver clause. The Court specified that the “NLRA is not a bar to enforcement of agreements to arbitrate non-NLRA claims on an individual basis.” Id. at *25. In Brown v. Trueblue, Inc., 2012 U.S. Dist. LEXIS 52811 (M.D. Pa. Apr. 16, 2012) the Court considered a motion for reconsideration of an order granting a motion to compel arbitration with an agreement that contained a class action waiver, in light of D.R. Horton. The Court found that D.R. Horton did not constitute a change in the law and denied the motion for reconsideration.

Nonetheless, a few courts have considered the decision in refusing to enforce class action waiver provisions. For example, in Herrington v. Waterstone Mortg. Corp., 2012 U.S. Dist. LEXIS 36220 (W.D. Wis. Mar. 16, 2012), the Court granted the motion to compel arbitration, severing the class action waiver provision under D.R. Horton. In Owen v. Bristol Care, Inc., 2012 U.S. Dist. LEXIS 33671 (W.D. Mo. Feb. 28, 2012), the Court denied the motion to compel arbitration of FLSA claims under an agreement with class action waiver provisions. The Court found that the agreement precluded Plaintiff’s from vindicating their rights under the federal statute – the FLSA. It also found that under D.R. Horton the class waiver was unenforceable. Id. at *13.

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Factors to Consider When Updating Your Arbitration Agreement

In light of the unsettled issues and challenges, employers should carefully review existing language of their arbitration agreements to determine if there is need to update the same. The following are some factors to consider when drafting or updating arbitration agreements in light of the aforementioned challenges to express class action waivers and arbitration agreements:

(1) Avoid one-sided provisions or provisions that can render the agreement unconscionable for favoring one side.

(2) Avoid provisions that have potential of limiting or precluding statutory rights such as those limiting statute of limitations for claims otherwise specified by state or federal law.

(3) Draft clear statements of what is included and excluded from the arbitration agreement. Also clearly draft the procedures for the arbitration, such as discovery, and or the arbitration panel you intend to use (e.g. JAMS, AAA, etc.).

(4) Depending on the jurisdiction, consider whether you need to offer some consideration in exchange for the arbitration agreement. In some jurisdictions, continued employment alone is not sufficient.

(5) Consider opt-out provisions. In most cases few employees (if any) actually opt-out; yet, courts look preferably on such provisions in refuting claims of unconscionability.

(6) Set clear limits on the arbitrator’s authority to avoid unwanted decisions, such as class wide arbitration.

(7) Spell out the requirement for a written award to preserve opportunity for judicial review.

(8) Exclude claims under Section 7 of the NLRA and those otherwise not permitted by statute (e.g. for workers compensation).

(9) Exclude the right to file a claim with government agencies or those specified by whistleblower statutes (e.g. Dodd Frank, etc.).

(10) Consider drafting provisions providing a separate track for injunctive relief, to provide option of seeking relief of court when needed.

© 2012 Dorsey & Whitney LLP. This article is intended for general information purposes only and should not be construed as legal advice or legal opinions on any specific facts or circumstances. An attorney-client relationship is not created or continued by reading this article. Members of the Dorsey & Whitney LLP group issuing this communication will be pleased to provide further information regarding the matters discussed therein.

October 30, 2012

Department of Labor and Equal Employment Opportunity Commission Enforcement Update: Strategy in Responding to Government Audits and EEOC Activity Melissa Raphan and Jennifer Cornell

Introduction

The last few years have brought a spike in government audits and federal agency enforcement activity on the employment front. The Department of Labor (“DOL”) fiscal year 2013 budget sends a signal to employers about where the Office of Federal Contract Compliance Programs (“OFCCP”) will be focusing its attention in the upcoming year. While certain programs will be discontinued, heightened enforcement activity is on the horizon. At the same time, several Equal Employment Opportunity Commission (“EEOC”) guidelines involving the use of background checks in hiring, telecommuting requirements and renewed focus on reasonable factors other than age to defeat disparate impact age claims are attracting attention as well.

DOL Budget Changes Signal New Direction of OFCCP Efforts

Secretary of Labor Hilda L. Solis announced with the release of the DOL’s 2013 budget requests that the budget reflected a focus on “programs that will keep America’s workforce strong and innovative, while providing needed worker protections.” Press Release, U.S. Dep’t of Labor (Feb. 13, 2012), available at http://www.dol.gov/opa/media/press/opa/OPA20120285.html. Indeed, the changes in the DOL budget indicate an increased focus on retaliation protections: $5 million to bolster the Occupational Health and Safety Administration’s enforcement on non-retaliation measures. To read more about the 2013 budget, visit FY 2013 Budget in Brief, available at http://www.dol.gov/dol/budget/2013/PDF/FY2013BIB.pdf.

Additionally, the proposed enforcement initiative of the OFCCP, responsible for ensuring the compliance of federal contractors, focuses on increased employer responsibilities under Section 503 of the Rehabilitation Act which addresses federal contractors’ responsibilities around recruitment and hiring of individuals with disabilities. As a result, federal contractors will be required to annually survey their employees, and establish and maintain quantitative data on the number of individuals with disabilities they learn about through job referrals, the number who apply, and the number they hire. Among other requirements, federal contractors will be required to establish utilization goals for individuals with disabilities.

Finally, the OFCCP proposed changes to the Veteran’s Readjustment Assistance Act of 1974 (“VEVRAA”) in April 2011 that strengthen and clarify the requirement that federal contractors engage in directed, specific outreach and recruiting to veterans. While the comment period on the proposed rules has closed and final regulations should be announced any day, the proposed rules require the same qualitative data keeping as that proposed for Section 503, such as annually

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surveying their employees, establishing and maintaining quantitative data on the number of individuals with disabilities they learn about through job referrals, the number who apply, and the number they hire.

The OFCCP is an Agency of Enormous Scope and Power

The OFCCP is one of the most aggressive enforcement agencies and courts have provided the agency with great latitude in its enforcement activities. For example, the D.C. Circuit ruled that there were no Fourth Amendment protections in an OFCCP audit. See United Space Alliance v. Solis, 824 F. Supp. 2d 68 (D.C. Cir. 2011). The OFCCP has investigatory powers under Executive Order 11246 which allows it to conduct audits to ensure that federal contractors comply with the non-discriminatory terms that are contained in each and every federal contract. The first step in this process is a “desk audit” whereby the OFCCP may issue a notice to show cause why enforcement proceedings should not be initiated if it finds “probable cause.” The first desk audit is voluntary. If the contractor refuses to comply, however, an administrative law judge can expedite the enforcement proceedings. United Space consented to a desk audit and the OFCCP requested additional information. United Space refused to supply additional information arguing, in part, that the request amounted to an administrative subpoena and was in violation of its Fourth Amendment rights. The D.C. Circuit held that by consenting to the desk audit, United Space had waived any Fourth Amendment argument because participation in the first audit constituted a consent to the “search.” As a result, federal contractors are caught between a rock and a hard place – refuse a desk audit and face expedited enforcement proceedings, or consent to the search and waive the right to object to requests for further information. As the United Space Court held “[s]ubmissions to such lawful investigations is the price of working as a federal contractor.”

While not new, it is worth noting that there is no statute of limitations on an OFCCP audit. See Lawrence Aviation Indus., Inc. v. Reich, 28 F. Supp. 2d 728 (E.D.N.Y. 1998), aff’d in part, 1999 WL 494870 (2d Cir. 1999), cert. denied, 528 U.S. 1153 (2000). While an individual who is aggrieved by a federal contractor has 180 days to file a complaint, the “filing requirements are not applicable to the OFCCP when seeking compliance with government regulations.”

Practice Pointer: Each request from the OFCCP must be carefully considered because it may have implications beyond the immediate issue. Because the playing field is not a level one, employers should turn to experienced counsel when faced with any government audit (even one considered routine).

In 2012 the EEOC Issued a Number of Guidances

For the first time in over 20 years, the EEOC has updated its guidelines on how employers should use criminal conviction and arrest records in employment decisions. What is clear from the Guidance is that a one-size-fits-all policy regarding the use of conviction and/or arrest records may not withstand scrutiny and potential challenge. See U.S. Equal Employment Opportunity Commission, Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII, available at http://www.eeoc.gov/laws/guidance/arrest_ conviction.cfm.

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The use of arrest records in employment decisions has long been potentially problematic when an employer faces a claim of disparate impact under Title VII. See, e.g., Caston v. Methodist Med. Ctr. of Ill., 215 F. Supp. 2d 1002, 1008 (C.D. Ill. 2002) (finding use of arrest records in hiring stated a claim under disparate impact theory of race discrimination). The Guidance notes that an arrest is not evidence of criminal behavior. However, employers may consider evidence bearing on the “conduct underlying the arrest,” in making employment decisions such as an employee who gives evasive answers during an employer’s investigation of the conduct for which the employee was arrested. The EEOC Guidance gives the specific example of an assistant principal who is accused of inappropriately touching several students, gives incredible and inconsistent answers during the school’s investigation, and is fired for his conduct in the investigation. While the employee may have only been arrested and not convicted, a termination based on his conduct during the investigation would not violate Title VII.

A blanket denial of employment based on arrest and/or conviction records could be problematic for an employer in two ways. First, if an employer faced with two applicants or employees with similar conviction records treats each differently, it would potentially face a claim for disparate treatment based on protected class status. Second, a facially neutral policy, given the increased rate of conviction for certain protected classes, may leave an employer open to a disparate impact claim.

Employers should consider certain steps to minimize the risk of a disparate impact claim. The EEOC advises that, to comply with the new Guidance, a policy regarding convictions must consider three factors: (1) the nature of the conviction, (2) the time passed since the conviction, and (3) the nature of the job. If all three factors would presumptively disqualify an applicant, for example, from employment, the employer should engage in an individualized assessment. The individualized assessment would offer the applicant an opportunity to show there is some inaccuracy in the records (if an inaccuracy exists), but also should include some consideration of the demonstrated rehabilitation of the individual through metrics such as references, other employment since the conviction, and the specific circumstance surrounding the offense, to name a few. Employees or applicants who lie about their conviction history, however, cannot state a claim for disparate impact. See, e.g., Ganzy v. Sun Chem. Corp., 2008 WL 3286262, 10 (E.D.N.Y. Aug. 8, 2008) (discussing cases).

It is unclear how much deference courts will give the new Guidance. It is likely, however, that the new Guidance was intended to rebut those legal decisions which found the EEOC’s previous Guidance to lack a “substantive analysis” worthy of deference. See El v. Se. Penn. Transp. Auth., 479 F.3d 232, 244 (3d Cir. 2007). Employers are taking the new regulations seriously due to heightened enforcement activity. In January 2012, Pepsi Beverages reached a settlement with the EEOC regarding its background check policy in the amount of $3.13 million. See Pepsi Settlement Press Release, U.S. Equal Employment Opportunity Commission, (Jan 11, 2012), available at http://www.eeoc.gov/eeoc/newsroom/release/1-11-12a.cfm.

Practice Pointer: Employers should take a fresh look at their hiring and employment policies regarding background checks. While the individualized assessment may be time-consuming to create and institute, it will be essential to any defense in litigation if an adverse impact (or disparate impact) claim ever arises.

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There continues to be significant interest around telecommuting and it is worth considering the EEOC Guidance on this issue when considering such a request under the Americans with Disabilities Act Amendments of 2008. For more information see Work At Home/Telework as a Reasonable Accommodation, http://www.eeoc.gov/facts/telework.html (last accessed Oct. 23, 2012).

On March 30, 2012, following the Supreme Court decisions in Smith v. City of Jackson, 544 U.S. 228 (2005) and Meacham v. Knolls Atomic Power Lab., 554 U.S. 84, 97 (2008), the EEOC amended its rule, 29 C.F.R. § 1625.7, concerning Disparate Impact and the Reasonable Factor Other Than Age Defense (“RFOA”) under the Age Discrimination In Employment Act (“ADEA”). Any employment practice that adversely affects individuals within the protected age group on the basis of older age is discriminatory unless the practice is justified by a “reasonable factor other than age.” 29 C.F.R. § 1625.7 (c).

An RFOA is defined as “a non-age factor that is objectively reasonable when viewed from the position of a prudent employer mindful of its responsibilities under the ADEA under like circumstances” and is “decided on the basis of all the particular facts and circumstances surrounding each individual situation.” 29 C.F.R. §1625.7(e)(1).

An employer will be required to “show that the employment practice was both reasonably designed to further or achieve a legitimate purpose and administered in a way that reasonably achieves that purpose in light of the particular facts and circumstances that were known, or should have been known, to the employer. Id. Given how recently this Guidance was issued there has been limited opportunity to see how the Courts will apply this Guidance but it is worth considering, particularly when engaged in hiring, performance reviews, and reductions in force.

Conclusion

The stepped-up activity of the federal regulatory agencies in the employment arena confirms what employers already know – each action taken must be carefully considered and explainable. Thoughtful analysis of each step taken is prudent. Recognizing that the practical realities of the workplace are such that everyone must do more with less and decisions are made in complex environments with multiple moving parts, time expended on the front end will be well rewarded on the back end.


October 30, 2012

Staying Ahead of the Whistle: Preventive Practices to Reducing Whistleblower and Retaliation Claims Melissa Raphan and Jennifer Cornell

Introduction

Employees have multiple avenues, and statutes, under which to raise retaliation claims. The activity at the Equal Employment Opportunity Commission, Department of Labor and federal and state courts reflects that employees are aware of their expanded opportunities to pursue these claims. As the agency statistics and recent cases demonstrate, the scope of retaliation claims is increasing; however, employees still must prove up their claims.

Retaliation Charges are Number One With the EEOC

In 2010, retaliation charges filed with the Equal Employment Opportunity Commission (“EEOC”) surpassed race-based charges as the most frequently filed charge for the first time ever. This increase in retaliation charges continued in 2011 with retaliation constituting more than 37% of the EEOC charges. See U.S. Equal Opportunity Commission, Charge Statistics, http://www.eeoc.gov/eeoc/statistics/enforcement/charges.cfm (last visited October 1, 2012). This represents an uptick in retaliation claims, see U.S. Equal Opportunity Commission, Charge Statistics, http://www.eeoc.gov/eeoc/statistics/enforcement/charges.cfm (last visited October 1, 2012) (noting that over 35% of charges received in 2011 included a retaliation claim).

In addition to the increase in the number of retaliation charges filed, the United States Supreme Court has greatly expanded the scope of coverage under Title VII retaliation claims. For example, in Kasten v. Saint-Gobain Performance Plastics Corp., 131 S. Ct. 1325 (2011), the Supreme Court held that an oral complaint fulfilled the “filed any complaint” requirement for a retaliation claim under the Fair Labor Standards Act (“FLSA”). This case involved a public employer, and the Court declined to address whether an oral complaint to a private employer would also be considered sufficient. Circuit courts are already interpreting Kasten to decide that it does extend to private employers. See, e.g., Shrable v. Eaton Corp., 2012 WL 4511621, at *3 (8th Cir. Oct. 3, 2012) (finding an oral report to a private employer a protected report under the FLSA); Minor v. Bostwick Labs., Inc., 669 F.3d 428 (4th Cir. 2012) (same).

The Supreme Court has also broadened the class of people protected under anti-retaliation statutes. In Thompson v. North American Stainless, L.P., 131 S. Ct. 863 (2011), the Court held that adverse action against a complaining employee’s fiancée was sufficient to state a claim since Title VII did not categorically exclude third party reprisals. At least one court has interpreted this decision to include adverse action against an employee’s sibling. See Lopez v. Four Dee, Inc., 2012 WL 2339289 (E.D.N.Y. June 19, 2012) (holding that the termination of the sister of the employee making a protected report was sufficient evidence of an adverse action to survive

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summary judgment). As a result, when an employee makes a complaint, even an oral one, employers would be advised to determine not only what actions need to happen to protect them from a retaliation complaint by that employee, but also from other employees that have some relationship to the complaining employee.

Practice Pointer: Before terminating an employee (or taking any “adverse action” short of termination), an employer should inventory all recent “complaints” by the employee (even oral ones) to evaluate the potential for a retaliation claim. The employer should also consider whether any individual (in addition to the employee) linked to, or related in any way, to the employee has filed a “complaint” because that may also satisfy the “protected activity” requirement.

Dodd-Frank Has Enhanced Whistleblower Protections

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank”) has greatly enhanced the whistleblower protection provisions of the Sarbanes-Oxley Act of 2002 (“SOX”) and created new protections for employees reporting potential violations to the Securities and Exchange Commission (“SEC”), and other financial oversight agencies. These new laws, and “employee-friendly” court rulings, mean that employers need to be extra vigilant in addressing an employee who has made such a complaint.

While the Ninth Circuit has held that reports to the media do not constitute protected reports, see Tides v. Boeing Co., 644 F.3d 809 (9th Cir. 2011), and the First Circuit has held that the whistleblower protections of SOX do not apply to the employees of contractors, see Lawson v. FMR LLC, 670 F.3d 61 (1st Cir. 2012), the Southern District of New York has held that internal complaints, not just those to the SEC, can trigger protections. See Egan v. TradingScreen, Inc., 2011 WL 1672066 (S.D.N.Y. May 4, 2011). In addition, the Seventh Circuit has held that an employee who makes a protected report is able to state a claim under the Racketeer Influenced and Corrupt Organizations Act (“RICO”) for being terminated after making the report. See DeGuelle v. Camilli, 644 F.3d 192 (7th Cir. 2011).

The landscape with regard to Dodd-Frank is still evolving, but courts appear to be holding that the legislation not only alters what conduct constitutes a protected report, but what claims are available to an employee who faces adverse action after a report.

Practice Pointer: Dodd-Frank made sweeping changes to the law around financial fraud reporting and courts are still shaping the contours of what constitutes protected activity. Employers should have a robust complaint process to use when faced with an employee complaint, and should thoughtfully consider an annual certification that the employee is not aware of any wrongdoing to minimize the risk of a Dodd-Frank claim. In addition, employers should consider the following as they evaluate their complaint processes and procedures:

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• Employers should create a culture that encourages internal reporting

• Employers should be mindful of potential “complaints”

Incentivizing Internal Reporting – HR’s Role:

• Maintain an open environment in which employees feel complaints will be heard and addressed

• Know when to direct employees to the Compliance Department

• After directing an employee to the Compliance Department, follow up with Compliance to ensure it is aware of a potential whistleblower complaint and take steps to ensure that the employee and Compliance connect

• Following an investigation, follow up with employees to ensure there is nothing further they wish to report

• Remind employees that the Company prohibits retaliation

Recognizing Protected Complaints – HR’s Role:

• Remind all employees who raise potential whistleblower complaints that the Company strictly prohibits retaliation

• As with all potentially protected complaints, proceed cautiously before taking any adverse employment action that follows on the heels of the “protected activity”

• Note that anti-retaliation provisions protect employees of both public and private companies from adverse actions based on external complaints made to the SEC

o Employees of private companies are not protected under the new regulations from retaliation based on internal reports (e.g., complaints to a supervisor or HR)

o Nonetheless, in an effort to promote an environment that strongly encourages internal reporting, the Company strictly prohibits retaliation based on any internal report of a potential securities violation

Recent Minnesota Cases Create Some Limits on Retaliation Claims

In 2012, Minnesota courts and the Eighth Circuit demonstrated some willingness to rein in retaliation claims. In cases of retaliation under the Family Medical Leave Act (“FMLA”), some courts have held that when the leave at issue did not qualify as FMLA leave, the retaliation protections of FMLA did not apply. For example, the Minnesota Court of Appeals held that an employee plaintiff could not survive summary judgment on her FMLA retaliation claim when she was fired after taking time off for medical appointments that did not, in turn, lead to a diagnosis of a “serious health condition” under the meaning of the Act. Weidema v. State Dep’t of Transp., 2012 WL 2873942 (Minn. Ct. App. Jul. 16, 2012). The court noted that while FMLA leave can include visits to the doctor for “symptoms that are eventually diagnosed as constituting a serious health condition, even if, at the time of the initial medical appointments, the illness has not yet been

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diagnosed nor its degree of seriousness determined” the converse is not true. Since the employee was not diagnosed with a serious medical condition that was protected by the FMLA, her dismissal could not be characterized as retaliation under the FMLA, and summary judgment was appropriate.

The Eighth Circuit applied similar reasoning in Miller v. State of Nebraska Department of Economic Development, 467 Fed. App’x, 536, 540 (8th Cir. 2012), when it held that an employee could not survive summary judgment on his FMLA retaliation claim related to caring for his ailing father. While the plaintiff’s father was in and out of the hospital, depositions and letters from doctors indicated that his father only periodically needed some assistance with his health condition. The court held that Miller failed to show his absences from work were to provide “necessary assistance” as required under the FMLA. Both of these cases indicate that an employer facing an FMLA retaliation claim should not take at face value an employee’s assertion that leave was protected, even if facially it would appear so.

The Eighth Circuit affirmed summary judgment for the employer in Schrable v. Eaton Corp., No. 12-1404 (8th Cir. Oct. 3, 2012), finding that the employee had not made a protected report under the FLSA. At a company meeting, the plaintiff had complained that the company had stopped offering gift cards and extended meal breaks during the holiday season. He was fired for performance issues six months later. The court held that the loss of extended meal breaks could not have an impact on overtime compensation, as argued by the plaintiff, and thus could not constitute a protected report. Consistent with federal regulations, since meal breaks are not work time they have no bearing on overtime. Notably, the Schrable Court did find that an informal oral complaint was covered by FLSA’s anti-retaliation provision, as discussed above.

In a recent case, the Minnesota Court of Appeals noted that to constitute a discharge in violation of public policy, a complaint must reference a statute that specifically applies to the employer’s actions or inactions. In Denoto v. Sears Imported Autos, Inc., 2012 WL 1149350 (Minn. Ct. App. April 9, 2012), a BMW salesperson began complaining about the functioning of the heating and defrosting element on the BMW 5 Series vehicles. After his termination, he alleged retaliation under the violation of public policy exception to at-will employment recognized in Phipps v. Clark Oil & Refining Corp., 408 N.W.2d 569, 570 (Minn. 1987). Denoto pointed to Minnesota Statute § 169.71, subdiv. 3, which states “[n]o person shall drive any motor vehicle with the windshield or front side windows covered with steam or frost to such an extent as to prevent proper vision” as public policy entitling his report to protection. The court found, however, that the statute did not “embody a clear public policy that supports a cause of action for an employee of a car dealership who is discharged for refusing to conceal from vehicle owners or prospective vehicle owners that a few vehicles of the same model had heating problems.” Since the statute was directed at drivers of vehicles, not manufacturers, Denoto’s complaints failed to fall under the public policy exception. As a result, summary judgment was affirmed. Again, by taking a more nuanced view of the alleged report and whether it deserved protection under this common law doctrine, the court found the report was simply not “protected conduct.”

Finally, the Eighth Circuit affirmed summary judgment in a case where the plaintiff in the first instance argued his failure to get a promotion was in retaliation for statements he made at a City Council hearing that (he argued) were protected speech. Buehrle v. City of O’Fallon, Mo., 2012 WL 4009616 (8th Cir. Sep. 13, 2012). In the alternative, he stated that his failure to promote was

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based on his filing of a workers’ compensation claim. The Court found that while framed as an argument in the alternative, the plaintiff could not make both arguments simultaneously. The plaintiff’s argument that he was not promoted because of the City Council statements (held to be within the course of his official duties and thus not protected speech) amounted to a concession that was fatal to his retaliation claim as to the reason for his failure to promote. Here, the plaintiff attempted to argue factually in the alternative, and the Court rejected such a claim.

Practice Pointer: It is prudent for an employer to take all employee “complaints” (oral as well as written) seriously and to train managers to recognize and escalate “complaints” so that they can be addressed as appropriate.

OSHA Initiates Test Program for Settlement of Whistleblower Claims

The Occupational Safety and Health Administration (“OSHA”) has announced a pilot program for a new alternative dispute resolution program for whistleblower claims. The program is to be piloted for the next year in Region 5 (Illinois, Indiana, Michigan, Minnesota, Ohio, and Wisconsin) and in Region 9 (Arizona, California, Hawaii, Nevada, American Samoa, and Guam).

The new program provides two alternatives for settlement of a whistleblower claim. The first alternative, “early resolution,” allows the parties to pursue a settlement before OSHA has investigated. Once a valid complaint is received by the agency, it will send a letter to both parties explaining the “early resolution” program. The parties must respond within 10 business days of receipt of the letter to the regional coordinator and both agree to attempt an early resolution. The regional coordinator may also contact the parties directly to discuss the program. If both parties agree to participate in the “early resolution” program, the regional coordinator with try to determine if there is common ground such that a resolution is possible. If so, the regional coordinator will propose a settlement and work with the parties on an agreement. The regional coordinator will not comment on the merits of the claim, rather his or her role is to try to achieve a settlement prior to an OSHA investigation of the merits. If the parties do not agree to a settlement within 20 days of receipt of the opening letter, the regional coordinator prepares a “statement of position” and OSHA commences its investigation.

The second alternative, the “mediation option,” can be instigated after “early resolution” has failed and while an investigation is ongoing. Again, both parties must agree to mediate. If both parties agree, and the regional coordinator determines the dispute is suitable for mediation, OSHA will pay for an outside mediator, from the Federal Mediation and Conciliation Service. During mediation the OSHA investigation will be stayed. After mediation has been agreed to by the parties and the coordinator, the mediation will occur on one day, within 30 to 60 days. If no agreement is reached by the end of the one-day session, or if an agreement is reached but a final settlement is not signed within five days of the mediation, the regional coordinator will declare that there was no settlement and the OSHA investigation will continue.

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All information in either alternative is confidential and will not be used in OSHA’s investigation. Furthermore, nothing in this process prevents the parties from settling a dispute on their own, without the assistance of the OSHA alternative dispute resolution process. More information about the pilot alternative dispute resolution program can be found at U.S. Dep’t of Labor, OSHA Direction (Oct. 1, 2012), available at https://www.osha.gov/OshDoc/Directive_pdf/DIR_12-01_CPL_02.pdf.

Practice Pointer: When a whistleblower complaint is filed with OSHA, you will have a short window (10 days) to respond to the “early resolution” option so an early evaluation of the claim would be prudent. Furthermore, as the OSHA investigation proceeds, an OSHA-sponsored mediation may be worth considering.


October 30, 2012

Life After Brinker: The California Supreme Court’s Decision in Brinker and Recent Decisions That Have Followed Mandana Massoumi and Cherise S. Latortue

Earlier this year, California employers received some long awaited guidance from the California Supreme Court on the issue of meal and rest break periods. On April 12, 2012, the California Supreme Court decided Brinker Restaurant Group v. Superior Court of San Diego, 53 Cal.4th 1004 (2012), providing guidance on how California employers can attempt to demonstrate compliance with the state’s meal and rest break regulations. In short, Brinker confirmed employers only have a duty to “provide opportunity” for employees to timely take their meal and rest breaks; they need not “ensure” those breaks are taken. Now, months later, other courts have followed Brinker, further clarifying the applicable standard for ensuring compliance with these break regulations. This article reviews some of the key holdings of Brinker and a few of the recent decisions that have followed, providing some recommended best practices going forward.

The Regulations

The law governing rest breaks is articulated in the California Wage Order, which notes the following critical requirements:

• “Every employer shall authorize and permit all employees to take rest periods, which insofar as practicable shall be in the middle of each work period.”

• “The authorized rest period time shall be based on the total hours worked daily at the rate of ten (10) minutes net rest time per four (4) hours or major fraction thereof.”

• “However, a rest period need not be authorized for employees whose total daily work time is less than three and one-half hours.”

The State’s Division of Labor Standards Enforcement (“DLSE”), headed by the California Labor Commissioner, interprets this as requiring not less than ten minutes in a rest area away from the work area if the employee so desires. (See DLSE Manual § 45.3.3.)

The requirements for meal breaks are codified in Section 11 of the Wage Orders and California Labor Code Section 512. Labor Code Section 512 specifies that employers are required to provide their non-exempt employees with a meal break of at least 30 minutes for every period of no more than five hours. However, if the work period is no more than six hours for the day, the meal period may be waived by mutual consent (and, if employee works more than 10 hours per day, a second 30 minute meal period must be provided, except if the total work period is not more than 12 hours, the second meal period may be waived by mutual consent if the first meal period was not waived). The Wage Orders have similar language but include a requirement that employee be “relieved of

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all duty” during the 30-minute meal period. If not relieved of all duty, the meal period shall be considered an “on duty” meal period and counted as time worked. On duty meal periods are permitted “only when the nature of the work prevents an employee from being relieved of all duty” and there is a written agreement between the employer and employee agreeing to the on-duty meal period.

California Supreme Court’s Decision in Brinker

The California Supreme Court initially granted review of Brinker in 2008. Nearly four years later, the Court issued its long awaited decision on April 12, 2012. The opinion addressed the following four critical issues: class certification issues; rest breaks; meal breaks; and off-the-clock work.

On the Class Certification issue, the court had to consider if the trial court was required to resolve legal and factual disputes in order to determine whether individual or common issues predominated the case, and thus whether a class action was proper. The Court held trial courts must only resolve “any legal or factual issues that are necessary to a determination of whether class certification is proper. . . .” (Id. at 1023.) The Court noted: “If the defendant’s liability can be determined by facts common to all member of the class, a class will be certified even if the members must individually prove their damages.” (Id. at 1022.)

On the issue of off-the-clock work, the Court had to determine whether common issues predominate for class of members “who worked off the clock or without pay?” The Court held that no evidence supported the trial court’s decision that there was a common policy or common method of proof. In contrast to the rest period claim, the Court expounded, the only formal policy “discusses such work, consistent with state laws.” (Id. at 1051.) The Court found off-the-clock claims were not appropriate for class treatment, as Plaintiff has the burden of demonstrating the employer “knew or should have known” of the off-the-clock work.” Specifically, the Court noted “[t]hat employees are clocked out creates a presumption they are doing no work, a presumption … putative class members have the burden to rebut.” (Id. at 1051.)

Next, the Court considered the issue of rest breaks and determining the rate at which rest time must be authorized and permitted for the purpose of rest breaks. In one of the few cases decided by the California Supreme Court with a mathematical formula, the Court provided the following formula for purposes of calculating rest breaks: “Employees are entitled to 10 minutes’ rest for shifts from three and one-half to six hours in length, 20 minutes for shifts from three and one-half to six hours in length, 20 minutes for shifts of more than six hours up to 10 hours, 30 minutes for shifts of more than 10 hours and up to 14 hours, and so on.” (Id. at 1029.) The Court also noted that rest breaks must be authorized and permitted. It held:

Employers are. . . subject to a duty to make a good faith effort to authorize and permit rest breaks in the middle of each work period, but may deviate from that preferred course where practical considerations render it infeasible. At the certification stage, we have no occasion to decide, and express no opinion on, what considerations might be legally sufficient to justify such a departure. (Id. at 1031.)

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The Court further explained as follows:

Hohnbaum asserts employers have a legal duty to permit their employees a rest period before any meal period. Construing the plain language of the operative wage order, we find no such requirement and agree with the Court of Appeal, which likewise rejected this contention. (Id. at 1031.)

…

Employers [must] make a good faith effort to authorize and permit rest breaks in the middle of each work period, but may deviate from that preferred course where practical considerations render it infeasible. (Ibid.)

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In the context of an eight hour shift, as a general matter, one rest break should fall on either side of the meal break. Shorter or longer shifts and other factors that render such scheduling impracticable may alter this general rule. (Ibid.)

Based on this, the Court found the certification of the rest period subclass was not proper. The Court explained that “[c]lasswide liability could be established through common proof if [Plaintiffs] were able to demonstrate that, for example, Brinker under [its] uniform policy refused to authorize and permit a second rest break for employees working shifts longer than six, but shorter than eight, hours.” (Id. at 1033.)

Next, the Court considered the issue of meal breaks and the nature of an employer’s duty to provide employees with meal periods. On this the Court specified that a key requirement of the law is for the employee to be relieved of all work; “[A]n employer must relieve the employee of all duty for the designated period, but need not ensure that the employee does not work.” That said, the Court explained that employers have no obligation to “ensure” meal breaks are taken. Rather, have to provide opportunity for the break:

Hohnbaum contends that an employer has one additional obligation: to ensure that employees do no work during meal periods. . . . We are not persuaded. The difficulty with the view that an employer must ensure no work is done—i.e., prohibit work—is that it lacks any textual basis in the wage order or statute. (Id. at 1038.)

…

If work does continue, the employer will not be liable for premium pay. At most, it will be liable for straight pay, and then only when it ‘knew or reasonably should have known that the worker was working through the authorized meal period.’ (Id. at 1040, fn.19.)

…

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Proof an employer had knowledge of employees working through meal periods will not alone subject the employer to liability for premium pay; employees cannot manipulate the flexibility granted them by employers to use their breaks as they see fit to generate such liability. On the other hand, an employer may not undermine a formal policy of providing meal breaks by pressuring employees to perform their duties in ways that omit breaks. (Id. at 1040.)

…

To summarize: An employer’s duty with respect to meal breaks under both section 512, subdivision (a) and Wage Order No. 5 is an obligation to provide a meal period to its employees. The employer satisfies this obligation if it relieves its employees of all duty, relinquishes control over their activities and permits them a reasonable opportunity to take an uninterrupted 30-minute break, and does not impede or discourage them from doing so. What will suffice may vary from industry to industry, and we cannot in the context of this class certification proceeding delineate the full range of approaches that in each instance might be sufficient to satisfy the law. (Ibid.)

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On the other hand, the employer is not obligated to police meal breaks and ensure no work thereafter is performed. Bona fide relief from duty and the relinquishing of control satisfies the employer’s obligations, and work by a relieved employee during a meal break does not thereby place the employer in violation of its obligations and create liability for premium pay under Wage Order No. 5, subdivision 11(B) and Labor Code section 226.7, subdivision (b). (Id. at 1040-1041.)

As for the timing of the meal breaks, the Court offered the following guidance:

We conclude, that absent waiver, section 512 requires a first meal period no later than the end of an employee’s fifth hour of work, and a second meal period no later than the end of an employee’s 10th hour of work. We conclude further that, contrary to Hohnbaum’s argument, Wage Order No. 5 does not impose additional timing requirements. (Id. at 1041.)

Based on this, the Court found that the defined class in Brinker was overbroad and the trial court’s decision to certify the class was based on an erroneous legal assumption that Section 512 required a meal period every five hours. The Supreme Court remanded the question of meal subclass certification to the trial court for reconsideration in light of the clarification it provided.

Life After Brinker: Decisions Since Brinker

When the Supreme Court granted review of Brinker in 2008, seven similar wage and hour cases were given “grant and hold” status: Brinkley v. Public Storage, Inc., Flores v. Lamps Plus, Hernandez v. Chipotle Mexican Grill, Inc., Tien v. Tenet Healthcare, Bradley v. Networkers Int’l,

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LLC, Faulkinbury v. Boyd & Associates, and Brookler v. Radio Shack Corp. Following the Brinker decision, all seven cases were remanded to their respective Courts of Appeal, with instructions to vacate their prior decisions and analyze the cases in light of Brinker. Of these seven cases, four have been recently decided, three of which have been published. All reaffirm Brinker.

The first is the unpublished opinion of Brinkley v. Public Storage, Inc., 2012 WL 3126606 (Cal. App. 2d Dist. Aug. 2, 2012), wherein plaintiffs sought a class action suit against defendant for failing to ensure that plaintiff and other class members took all meal and rest periods they were entitled to take. The trial court granted defendant’s motion for summary adjudication on the meal and rest break violations, which was upheld by the Court of Appeal’s post-Brinker decision. (Id. at *1.) In support of its motion for summary judgment, defendant introduced its policy, which stated: “all employees must take a 30-minute meal period whenever he or she worked at least five hours in a shift; employees may take two 10-minute rest periods each day which should be scheduled midway through the morning and midway through the afternoon, if possible; and employees had to sign in and out during their meal break.” (Id. at *2.) Further, defendant’s senior vice president testified employees were reprimanded for working during lunch. (Ibid.) Additionally, defendant introduced evidence that it advised plaintiff and other employees at a meeting that they were required to take rest and lunch breaks, and employees were reprimanded for working during lunch. (Ibid.) Plaintiff’s evidence, however, consisted of testimony by two of the class plaintiffs that they regularly worked shifts longer than six hours and rarely took an uninterrupted lunch within the first five hours of their shift, and plaintiff’s timecards which indicated he did not take a meal break until more than five or six hours after his shift commenced. (Ibid.)

The trial court granted Plaintiff’s motion for class certification on his meal period claims. (Id. at *2.) The meal period class included all nonexempt property managers who: (1) worked a period of more than 6 hours (a) without a meal period of not less than 30 minutes; or (b) without a meal period within the first five (5) hours of work or (2) worked a period of more than 10 hours per day (i) without being provided a second meal period of not less than 30 minutes, (ii) without a meal period within the second five hours of work except if (A) the total hours worked were not more than 12 hours per day, (B) the second meal period was waived by mutual consent, and (C) if the first meal period was not waived. (Ibid.) Defendant moved for summary judgment. The trial court granted the summary adjudication of the rest and meal break claims, and plaintiff appealed. (Ibid.)

Upon remand after the Brinker decision, the Court of Appeal upheld the trial court’s grant of summary adjudication, rejecting plaintiff’s claims that defendant was required to provide breaks, and ensure employees took their breaks, in light of Brinker. The Court specifically provided: “an employer's obligation is to relieve its employee of all duty, with the employee thereafter at liberty to use the meal period for whatever purpose he or she desires, but the employer need not ensure that no work is done.” (Id. at *5, quoting Brinker, supra, 53 Cal. 4th at p. 1017.) In support of its decision, the Brinker court reasoned defendant had produced substantial evidence that it provided meal periods. This included: (1) a written break policy of which plaintiff was aware; (2) disciplining employees for not taking breaks; and (3) advising Plaintiff and others of the requirement. They also submitted declarations from 21 managers stating they were allowed to take breaks at their own discretion. (Id. at *5.) Plaintiff’s evidence on the other hand, only indicated plaintiff and others missed breaks, but were not denied them. (Ibid.)

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The second case, Flores v. Lamps Plus, 209 Cal. App. 4th 35 (2012), which was decided on August 20, 2012, upheld a trial court’s denial of class certification because plaintiff failed to establish defendant had a common practice or policy of denying meal and rest breaks. In support of class certification on the meal and rest break claims, plaintiff submitted timekeeping records from a random sampling of putative class members analyzed by a mathematics and statistics expert who opined the records demonstrated that 91.9 percent of the sample employees experienced meal period violations. (Id. at 43.) Collectively, the plaintiffs testified they were either denied their lunch breaks, and/or were interrupted during their lunch breaks. (Id. at 44.) Five employees including plaintiffs submitted declarations that they missed meal and rest periods. (Ibid.) Finally, questionnaires completed by a sampling of the putative class noted employees often missed meal and rest breaks, or they always received either their meal break or their rest break, but not both. (Ibid.) The questionnaire did not ask why a break was missed. (Ibid.)

In opposition to class certification, Lamps Plus introduced its policy which required: non-exempt employees “must” take an uninterrupted meal period of at least 45 minutes after not more than five hours of work; employees are “entitled” to take a second meal period if they work more than 10 hours; employees must take meal periods and should not eat at their desks or work stations; employees are authorized to take a 15-minute paid rest period for every four hours, or major fraction of four hours worked; employees must sign an acknowledgment they had received a copy of Lamp Plus’ meal and rest break policy, they will comply with company policy, and if they are not provided meal and rest breaks, they would contact human resources. (Id. at 44-45.) Meal breaks were logged into the timekeeping systems. (Id. at 45.) Lamps Plus also provided evidence of disciplining employees for violations of its break policy. (Ibid.)

The trial court denied class certification on the grounds that individual issues predominated over common issues as to the meal and rest period claims, reasoning that employers need only “authorize and permit” them, “which means make them available, but not ensure they are taken.” (Id. at 45.) Upon remand following the Brinker decision, the Court of Appeal upheld the trial court’s decision, rejecting plaintiff’s argument that employers must ensure meal and rest breaks are actually taken, and noting plaintiff’s misplaced reliance on Cicairos v. Summit Logistics, Inc., 133 Cal. App. 4th 949, (2005). Lamps Plus, supra, at 51. Briefly, Cicairos involved an appeal from summary judgment in favor of an employer regarding employees’ meal and rest period claims, which was reversed by the Court of Appeal on the grounds triable issues of facts existed as to whether the employer’s policy on meal and rest breaks violated California law where the employer pressured its truck-drivers to make a certain number of trips per day, tracked their progress with a tracking system which did not include a code for rest stops, and did not schedule meal breaks; the employer’s policy essentially deprived its employees of meal and rest periods. Cicairos, 133 Cal. App. 4th at 955-956. In distinguishing Lamps Plus from Cicairos, the Court noted, “the mandate that an employer may not frustrate the exercise of employee’s meal breaks is not equivalent to an obligation to ensure that an employee actually takes the break. Unlike the employer in Cicairos, in this case, there is over-whelming evidence that Lamps Plus's policies allowed and encouraged meal periods.” Lamps Plus, supra, at 50-51. The Court further provided:

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The evidence establishes that Lamps Plus had a meal and rest period policy conforming to the applicable laws and wage orders, and that Lamps Plus disciplined its employees for failing to comply with the policy. Further, the breadth of supposed “violations” is widely variable. Some employees declared they often missed meal and rest breaks; others declared they always received their meal and rest breaks; and still others declared that they always received either their meal break or their rest breaks, but not both. Some employees declared their meal breaks were uninterrupted, and others claimed interruptions of varying degrees. Even the named plaintiffs have divergent experiences, despite all having worked at the same store and reported to the same manager. They each report a different number of alleged violations and differing reasons for the claimed violation. (Id. at 54.)

. . .

[O]f the 40 questionnaires turned in by Lamps Plus employees, over half of the responding employees said Lamps Plus required them to work off the clock. On the other hand, almost half of the responding employees reported no off-the-clock work. Even the named plaintiffs did not uniformly report working off the clock. With almost as many employees reporting they were not required to work off the clock as those who claimed they were, the evidence does not lead to an inference there was a companywide policy requiring such work. Also, the evidence does not demonstrate Lamps Plus knew of any widespread off-the-clock work. The employee questionnaires were nonspecific and asked general questions, such as “Did you ever perform work after hours?” without inquiring whether any Lamps Plus manager had knowledge of this work. Lamps Plus had a policy requiring employees to record the hours worked. Determining whether Lamps Plus managers knew or should have known about off-the-clock work will be a fact-intensive inquiry, necessarily involving investigation of the individual circumstances of each employee's off-the-clock work.

(Id. at 56.) (emphasis added.) In sum, the Court of Appeal noted, “[g]iven the variances in the declarations, questionnaires, and deposition testimony, plaintiffs failed to demonstrate a common practice or policy.” (Ibid.)

The third, Hernandez v. Chipotle Mexican Grill, Inc., 208 Cal. App. 4th 1487 (2012), was brought by a former employee on behalf of himself and potential class members, for alleged violations of meal and rest breaks. Chipotle moved to deny class certification, contending it had met its responsibility to provide breaks. In support, Chipotle submitted its written break policy, declarations of several employees and managers, and the declaration of its human resource director. First, Chipotle’s break policy mandated managers to provide employees with one uninterrupted 30–minute meal break if they worked over five hours, and two 30–minute meal breaks if they worked more than 10 hours. (Id. at 1491.) Employees received a 10–minute rest break if they worked three and one-half hours or more; they received two rest breaks of at least 10 minutes each if they worked more than six hours a day. (Ibid.) All breaks were paid and employees were provided free food and beverages to encourage employees to take their breaks. (Ibid.) Second, declarations from 57 employees attested they had all received meal and rest breaks, and some employees occasionally forgot to record their times, or recorded them

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inaccurately. (Ibid.) Third, declarations from 16 managers provided employees received meal and rest breaks, they were not permitted to return early from breaks, and employees had no financial incentive to accurately record their break times because the breaks were paid. (Id. at 1491-1492.) Finally, the lack of financial incentive was supported by a declaration from Chipotle’s human resource director. (Id. at 1492.)

On the other hand, Hernandez submitted the following in support of his class certification motion: a compilation of his time records; excerpts from his deposition in which he testified that his managers interrupted his meal breaks two to three times a week; and declarations from a total of 23 non-management, (hourly) employees who claimed they were not provided breaks or were interrupted by managers during their breaks. (Id. at 1492-1493.)

The trial court denied class certification on the grounds that although plaintiff had established numerosity, ascertainability, typicality, and adequacy, he failed to show individual issues did not predominate over common issues, and class treatment were superior to an individual action. (Id. at 1493-1494.) With respect to the rest break claims, the trial court held, as conceded by Hernandez, employers need only authorize and permit such breaks; that is, employers were only obligated to make the breaks available. (Id. at 1494.)

On August 21, 2012, the Court of Appeal in Hernandez agreed with the trial court, reasoning that while Plaintiff’s evidence only showed that some employees had missed their breaks, Chipotle’s evidence showed it had met its duty to provide employees breaks. (Id. at 1501-1502.) In so finding, the Hernandez decision noted that Brinker had resolved the very issue contrary to Hernandez’s position: “bona fide relief from duty and the relinquishing of control satisfies the employer's obligations, and work by a relieved employee during a meal break does not thereby place the employer in violation of its obligations and create liability for premium pay.” (Id. at 1499.) In so finding, the Court of Appeal, as in Brinkley, noted plaintiff’s reliance on Cicairos was misplaced for two reasons: (1) the Cicairos court relied on an opinion letter from the Department of Labor, DLSE, which stated in pertinent part that “[u]nder the facts presented ... the [employer's] obligation to provide the plaintiffs with an adequate meal period [was] not satisfied by assuming that the meal periods were taken, because employers have ‘an affirmative obligation to ensure that workers are actually relieved of all duty,” which the DLSE later withdrew; and (2) Cicairos's conclusion did not depend upon an “ensure” standard; rather, the facts “were such that the employer's business practices effectively deprived employees of the ability to take meal breaks.” (Id. 1499.) The Court further held that “the only evidence of a company-wide policy and practice was Chipotle's evidence that it provided employees with meal and rest breaks as required by law,” and whether there was employer liability required an individualized inquiry as to why any particular employee missed a particular break. (Id. at 1502.)

The fourth case, Tien v. Tenet Healthcare, Corp., __ Cal. Rptr. 3d __ (Oct. 4, 2012), is the most recent post-Brinker decision. Plaintiffs filed for themselves and on behalf of others similarly situated, an amended complaint against defendant alleging failure to pay additional wages for missed periods and rest breaks. Certification was sought on four classes: missed meal periods; missed meal breaks; waiting time penalties; and pay stub violations. Following the Second District’s decision in Brinkley, the trial court denied class certification. When the Supreme Court granted hold-and-review of Brinkley, plaintiffs-appellants asked the court to vacate its denial of

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certification, on the grounds Brinkley was no longer citable and Cicairos, supra, was the only published authority on the matter. The trial court declined to change its denial of class certification, reasoning that Cicairos appeared to be a minority view which was adopted by one court, when several other courts have taken the Brinkley/Brinker view which seemed stronger. Appellants filed a petition for review. The Court of Appeal in Tien, upon remand following Brinker, upheld the trial court’s denial of class certification, noting substantial evidence supported denial of certification.

With regards to plaintiff’s meal and rest break claims, defendant’s evidence consisted of a written meal and rest break policy, which included an electronic time-keeping record system (Kronos)—employees were required to record their meal and rest period on Kronos. Tenet’s evidence indicated employees did not always comply with Kronos thus certain employees received meal periods although their time records showed otherwise, some employees signed lawful waivers for meals they missed, which was not accounted for in the definition of the class, some employees signed missed meal logs while others did not, some employees did not use Kronos but rather, signed correction slips documenting they took their meals; and some employees shorted the clock by starting their meal breaks before clocking out. Based on the evidence present, the Court of Appeal found the trial court’s finding that individual questions of proof predominated, coincided with Brinker, that is: the reasons why any particular employee might not take a meal period are more likely to predominate if the employer need only offer meal periods, but need not ensure employees take their meals.

As for the rest break claims, the Tien court upheld the trial court’s denial of class certification on the grounds that Tenet’s written policy made 10-minute rest breaks available after every four hours of work, and given Tenet was obligated only to offer, not ensure, rest breaks, employer liability only arose if its policy was in name only and unobserved in practice. Given the trial court found employees did not record their 10-minute breaks on Kronos, any reasons employees might not take their breaks were predominantly individualized questions of fact.

The remaining remanded cases, Bradley v. Networkers Int’l LLC, 2009 WL 265531 (Cal. App. 4th Dist. May 13, 2009), rev. granted May 13, 2009; Faulkinbury v. Boyd & Assoc., 112 Cal. Rptr. 3d 72 (2010), rev. granted Oct. 13, 2010; and Brookler v. Radio Shack Corp., 2010 Cal. App. LEXIS 1674 (Cal. App. 2d. Dist. Sept. 13, 2010), rev. granted Nov. 17, 2010, are still pending in the lower courts.

Best Practices and Key Considerations

In light of the on-going litigation related to the meal and rest break compliance and guidance provided by Brinker, the following are some key considerations to keep in mind as you attempt to ensure compliance with California’s meal and rest break regulations:

1. Rest Break Policies: Some recommended practices that would assist in meeting the obligations set by the Court include:

• Review existing policies to ensure they are properly drafted and updated. Take note of the clarification Brinker provides on rest breaks.

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• Make sure the rest break policy addresses circumstances when employees work “major fractions” of four-hour periods. If employees work more than six hours, they will need a meal and two rest periods.

• Train managers to properly enforce the policy and provide opportunity for and not interfere with the breaks.

2. Meal Breaks: Similarly review the policy and properly document and train managers to ensure compliance.

• If an employee works through lunch, ensure they are paid.

• Consider scheduling alternatives if employees have to work shifts that are longer than eight hours.

• Require employees to record meal breaks unless all operations cease.

• Ensure the meal break is timely scheduled – “before the end of the fifth hour of work.”

• Ensure all breaks are “duty free” – be clear that employees should not work and are free to leave the premises.

3. Shift the Burden: Consider a timecard certification program.

4. Investigate Violations: If appropriate, pay the penalty for violations.

5. Consider discipline of non-compliant employees and look for patterns in departments which may indicate supervisor interference.


October 30, 2012

Dealing with the e-Workplace: Internet Security, Privacy and Social Media Policies, and the Hot Button National Labor Relations Act Issues (for Union and Non-Union Employers) Melissa Raphan and Jennifer Cornell

Introduction

Not since the Industrial Revolution has the American workplace undergone such a dramatic transformation as that prompted by the advent of the internet. While the internet has greatly improved the productivity of American businesses and their employees, the change has been so rapid that courts and legislatures are playing catch up to determine the rules of the game. As a result, employers are often caught in cyber-space to try to determine what is permissible based on laws and court decisions, developed before the internet, in a post-internet world. This article addresses three particular aspects of the employer’s dilemma: (1) what is permissible for employers to tell employees regarding posting on social media sites; (2) whether employers may ask for employee passwords to social media and email accounts; and (3) what rights and access employers have to an employee’s email accessed on the employer’s computer.

Social Media Facts and Figures

• About 43% of U.S. companies block employee access to social media sites from work computers

• About 40% of U.S. companies have a formal social media policy

• About 33% of U.S. companies reported taking disciplinary action against workers who violated their social media policy

See Greg Dawson, On Social Media at Work?, Orlando Sentinel (Feb. 2, 2012) (citing a study by the Society for Human Resource Management).

Employee Posting on Social Media Sites

Employers certainly have expectations about what an employee might say about the employer/management at work, is there a difference between such comments made at work or on the employee’s Facebook site? Absolutely. Much to the surprise of employers, there are limits to an employer’s ability to control what employees say on social media sites about the employer/management. To begin, the limits stem primarily from decisions by the National Labor Relations Board (“NLRB”). The NLRB governs the conduct of all employers, regardless of whether the employer has unionized employees. As articulated by the NLRB, the issue is whether an employee’s posting constitutes “protected activity” under Section 7 meaning that the

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employee is engaging in “concerted activity” for the “mutual aid or protection” by discussing “the terms and conditions of employment.” If an employer restricts an employee’s Section 7 rights, whether the workplace is unionized or not, the employer may be found liable for having committed an unfair labor practice. Such a finding can bring remedies ranging from a cease-and-desist order to reinstatement of an employee wrongfully terminated. While federal courts have jurisdiction to hear cases that allege violations of the National Labor Relations Act (“NLRA”), most cases are heard by an administrative law judge (“ALJ”) and are appealed to the NLRB since that administrative body is specifically designed to hear such cases.

Recent decisions by the NLRB indicate that the rights to “engage in concerted activity for mutual benefit,” protected by Section 7 of the NLRA, could be implicated by employer policies regarding posting on social media sites like Facebook. In Hispanics United of Buffalo, Inc., No. 3-CA-27872, 2011 WL 3894520 (NLRB Sept. 2, 2011), an NLRB ALJ found that the termination of five employees who posted comments on Facebook regarding a co-worker’s complaint about them was “protected activity” under Section 7 such that they could not be fired for it. Called a “textbook example of concerted activity” by the NLRB, the original post was from one employee describing a co-worker’s complaint with the question, “My fellow co-workers how do u feel?” Five different co-workers, on Facebook on their day off, responded in a manner that arguably portrayed the complaining co-worker in a negative light and the employer terminated them for “bullying and harassing.” The ALJ found that the posting constituted a conversation about the “terms and conditions” of employment making their firing unlawful under the NLRA.

In another NLRB case, an ALJ considered two separate Facebook postings by a BMW salesperson. Karl Knauz Motors, Inc., No. 13-CA-46452, 2011 WL 4499439 (NLRB Sept. 28, 2011). The salesperson posted two photographs; one of a hotdog stand at a launch event at the BMW dealership and the other of a crashed Landrover at an adjacent dealership owned by the same people who owned the defendant employer. The employee accompanied the hotdog photo with derogatory comments about the choice of a hotdog stand for a BMW dealership event. The salesperson was fired for both postings. Even though no other employees commented on the hotdog photograph, as in Hispanics United, the ALJ deemed it “protected activity” since the launch event had an impact on the salesperson’s earnings, and there existed evidence that the posting grew out of previous discussions with co-workers about the same issue. The photo of the crashed Landrover, however, since it was not connected to the sales person’s employment or discussions with other employees, was not protected activity and the salesperson’s termination for posting it was not unlawful.

As a result of the increase in NLRB cases involving social media, the OGC published a report in August 2011 detailing the outcome of over a dozen cases that provide useful guidance for employers, both unionized and non-unionized, for dealing with social media issues. Memorandum of the Office of the General Counsel, NLRB (Aug. 18, 2011), available at https://www.nlrb.gov/publications/general-counsel-memos (search for OM 11-74). For example, policies restricting negative remarks about one’s supervisor or an employer’s tax-withholding policies on a social media site are unlawful, as are policies prohibiting posting of photos that depict the company in any manner. However, general complaints about one’s work that are not directed at one’s co-workers or that did not arise from a conversation with co-workers are not protected, as was made clear in Knauz.

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The first NLRB decision (appealed from an ALJ determination) on the issue of social media postings, Costco Wholesale Corp., 358 N.L.R.B. No. 106 (Sept. 7, 2012), upheld the ALJ’s determination that the maintenance of a handbook prohibiting certain activities, such as (a) “unauthorized posting, distribution, removal or alteration of any material on company property”; (b) discussing private employee matters including various terms and conditions of employment; (c) sharing sensitive information such as payroll data; and (d) sharing “confidential” information such as employees’ names, addresses, telephone numbers, and email addresses was unlawful. However, the NLRB reversed the ALJ insofar as he had found prohibitions on postings that damage the company or any person’s reputation to be unlawful since a blanket prohibition could be construed as one that prohibits employees from exercising their rights under Section 7. Therefore, even if an employer never disciplines an employee for social media activity, the mere existence of company policies regarding the same can be deemed a violation of employee rights under the NLRA.

Practice Pointer: Employers should carefully consider the wording of any social media policy that prohibits employees from posting or discussing their work in any way. The determination of whether any such policy is unlawful will center on whether the policy “chills” employees from exercising their rights to “concerted activity.” Blanket policies prohibiting all employment-related speech are likely to be found unlawful, while policies more tailored to the specific business needs, are more likely to be upheld. To minimize the risk that any prohibition will be found to violate Section 7 of the NLRA, many employers specifically include a statement in their social media policy to say, “This policy is not intended to prevent you from discussing terms and conditions of employment at [company name].”

Access to Employee Passwords and Employee Internet Privacy

Given the available privacy settings on many social media sites, employers may not even know what employees are posting. While employers want to ensure that their social media policy does not run afoul of employees’ rights under the NLRA, other concerns (e.g., client confidentiality or threats of workplace violence) may prompt an employer to seek access to an employee’s social media account.

Until recently, there were no restrictions prohibiting an employer from seeking access to an employee’s (or applicant’s) social media sites via the individual. As employer requests for password information has increased, there has been an increase in legislative and judicial activity on this point. State legislatures are creating laws to make such requests unlawful. Currently, legislation banning the practice (with limited exceptions) has been adopted in California, Maryland, and Illinois. See Employer Use of Social Media, California Assembly Bill No. 1844 (Sept. 27, 2012); User Name and Password Privacy Protection and Exclusions, Maryland SB 433 (signed into law May 12, 2012); 820 Ill. Comp. Stat. 55/1 (2012). In addition, at least ten other states have similar legislation pending, including California, Delaware, Massachusetts, Michigan, New Jersey, New York, Ohio, Pennsylvania, South Carolina, and Washington. (For an up-to-date list of states considering such legislation see Employer Access to Social Media Usernames and Passwords, National Conference of State Legislatures,

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http://www.ncsl.org/issues-research/telecom/employer-access-to-social-media-passwords.aspx (last visited Sept. 23, 2012)). Similar legislation has been proposed at the federal level as well. See The Social Networking Online Protection Act, H.R. 5050, 112 Cong. (2012).

While the tide is turning on employers being able to seek access to all employees’ social media sites in the workplace, once litigation ensues, in the context of particular litigation, courts have not found employees enjoy privacy rights to those accounts. For example, in McMillen v. Hummingbird Speedway, Inc., No. 113-2010 CD (Ct. of Common Pleas Penn. Sept. 9, 2010), McMillen instigated a lawsuit for personal injuries he sustained in a car crash. The defendant sought discovery of McMillen’s social media accounts because, based on his public profile, it believed he had posted about trips and events that would speak to his claimed damages. McMillen sought protection from the court claiming a privacy interest and confidentiality privilege in the sites. The court denied protection, noting that the user agreements on the sites made it clear that users had no expectation of privacy and the very nature of the sites was to connect with others, not to maintain any privilege. McMillen demonstrates that when engaged in litigation with an employee where postings on social media sites may have a bearing on the claims and defenses, employers should seek (and may well be allowed) such discovery.

Unauthorized access to an employee’s social media sites has been deemed a violation of the Federal Stored Communications Act, a version of which exists in many states as well. See Pietrylo v. Hillstone Restaurant Grp., No. 06-5754 (D. N.J. June 16, 2009) (jury verdict for the plaintiff after his employer accessed his social media accounts without authorization). Furthermore, some state bar associations have rendered opinions that attorneys using social media sites in the course of a case, such as hiring an investigator to “friend” a witness or sending “friend” requests to an unrepresented witness, can run afoul of professional ethics guidelines. See Phila. Bar Assoc. Prof. Guidance Comm., Op. 2009-02 (Mar. 2009); San Diego Cnty. Bar Assoc., Legal Ethics Opinion No. 2011-2 (May 24, 2011).

Practice Pointer: Litigation aside, employers may be denied access to an employee’s social media sites. Given that employee passwords may be “off limits,” employers may want to talk about what information may be kept by an employee in a password-protected account during employment to avoid having to seek access to such account when the individual leaves. Blanket access to employee sites may well be unlawful in any given state, now or in the near future. Attorneys engaged in litigation with an employee should consider seeking discovery of the employee’s social media sites.

Attorney-Client Privilege and Ownership of the Electronic Data of Employees

The ease and access of electronic communication also creates issues in determining who owns data generated on social media sites and how the attorney-client privilege is impacted. When an employer is providing an employee with the hardware, it may think it has unfettered access to an employee’s work. However, this may not always be the case, even if an employer has an internet policy that states as much.

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In Stengart v. Loving Care Agency, Inc., 990 A.2d 650 (N.J. 2010), the defendant employer gave Stengart a laptop and had a policy that read, in part “[e]-mail and voice mail messages, internet use and communication and computer files are considered part of the company’s business and client records. Such communications are not to be considered private or personal to any individual employee.” Id. at 657. Stengart accessed her personal email on a Yahoo! account which was password protected and, unbeknownst to Stengart, the defendant had installed software on the computer that made images of all websites accessed. From her Yahoo! account, Stengart had exchanged emails with her lawyer discussing her employment. During discovery, the employer argued that the emails exchanged between the employee and her attorney were company property under the language of the policy. The trial court agreed, however, on appeal the New Jersey Court of Appeals reversed, holding that “there must be a nexus between company policies and the employer’s legitimate business interests” for the emails to be company property. Id. at 658-59. The New Jersey Supreme Court affirmed the New Jersey Court of Appeals, holding that by accessing her Yahoo! email through a password- protected account, Stengart had an expectation of privacy in the emails, thus maintaining the privilege. In addition, the New Jersey Supreme Court noted that the defendant had not warned Stengart of the presence of the imaging software, and that the policy did not reference personal email.

In Ardis Health, LLC v. Nankivell, No. 11 Civ. 5013 (S.D.N.Y. Oct. 11, 2011), the court held that an account and login information for a social media site belonged to the employer after the employee’s departure since they had signed an employment agreement that expressly stated all Nankivell’s work as a video and social media producer was the sole and exclusive property of the employer. In a recent California case, PhoneDog v. Kravitz, No. C-11-03474 (N.D. Cal. Jan. 30, 2012), PhoneDog, a company engaged in reviewing mobile productivity and services, hired Kravitz to maintain a Twitter account and post product reviews and generate a video blog about different products. When Kravitz left PhoneDog, he kept the Twitter account, under a different account name, as he had amassed over 17,000 followers. PhoneDog sued for, among other things, misappropriation of trade secrets and conversion and has survived a motion to dismiss these claims. Similarly, in Christou v. Beatport, Case No. 10-cv-02912 (D. Colo. Mar. 14, 2012), the court denied a motion to dismiss a claim that the contacts on a MySpace page constituted a trade secret. Beatport and Christou started a nightclub together; when Beatport left to start a competing nightclub; and accessed Christou’s MySpace page to access his list of contacts, Christou sued, for among other things, misappropriation of trade secrets. The court found that, under the multi-factor test for determining whether something constitutes a trade secret the “ancillary information connected to those names cannot be obtained from public directories and is not readily ascertainable from outside sources, and thus this militates in favor of trade secret classification.” Id. at *26.

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Practice Pointer: An employer’s internet, email, and social media policy should clearly state what safety and privacy features are installed on any hardware. Further, the policy should spell out the expectations regarding personal use, keeping in mind that an employee may well maintain some expectation of privacy to password-protected sites. Finally, when hiring employees to generate online content, maintain a social media presence or collect contacts (as in the case of a recruiting professional), a well-worded policy and/or agreement which addresses who owns what at the outset of the relationship is more likely to lead to a better outcome for the employer to protect any work product or contact information if and when that employee leaves.

Conclusion

This arena is changing at lightning speed on multiple fronts, from the actual technology (and functionality) to the ways in which it is used (and abused) by employees. The law in this area is being made real time. When analyzing issues involving social media, it is critical to consider legislation (and pending legislation), caselaw (including NLRB decisions) and current media to stay within the lines. As with everything employment law, clearly articulating and communicating an employer’s expectations is critical and will form the starting point of any analysis regarding what steps an employer may lawfully take.


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