Wednesday, January 30th, 2013
Let’s look at the question of whether Virginia courts enforce notice provisions for change work in construction contracts.
How’s this for a typical lawyer answer? “It depends.”
For starters, a public contract is treated differently from a private contract. For public contracts, general contractors should be very careful to provide notice in strict compliance with both the contract and Virginia Code § 33.1 – 386. This was the subject of Commonwealth v. AMEC Civil, LLC. The Code requires written notice of the contractor’s intention to file a claim, which must be given at the time of occurrence or at the beginning of the work on which the claim is based. In the AMEC case, the Supreme Court of Virginia held:
Code § 33.1-386(A) is to be strictly construed, and is clear and unambiguous, stating that contractors “shall” provide “written notice” to VDOT. We hold that actual notice cannot satisfy the written notice requirement in Code § 33.1-386(A), and that written notice is required.
For private contracts, Virginia law is a bit more conflicted (but it is still a good idea to give written notice).
In Virginia, contracting parties can change a written contract’s notice requirements through their conduct (as opposed to a written amendment, etc.) when there is clear and convincing evidence of their mutual intent to do so. Check out: Cardinal Development Co. v. Stanley Constr. Co., Inc. So, a notice requirement in a contract will not be strictly enforced when the conduct of the parties indicates that the parties were not requiring written notice for agreed upon changes, but they must be proven by clear and convincing evidence.
But in a case (recently discussed by our friend Chris Hill over at the Construction Musings blog – he has a link to the opinion), the U.S. District Court for Eastern District of Virginia held that when a contract requires written change orders, the parties must get written change orders to get paid for the extra work.
Given the landscape, it’s always a good idea to get your change orders in writing. Contractors should always provide Notice for changes in compliance with the contract’s requirements. It is just too easy to do – especially when considering to the risks of failing to do so.
Please note: This page is provided for general informational purposes only and is a marketing publication of Gentry Locke Rakes & Moore, LLP. It is intended to alert visitors to developments in the law and is does not constitute legal advice or a legal opinion on any specific facts or circumstances. You are urged to consult your own lawyer concerning your situation and specific legal questions you may have.
Friday, January 18th, 2013
This article originally by Gentry Locke attorneys David Paxton and Michael Finney appeared in Vol. 24, No. 4 of the Journal of Civil Litigation,a publication of the Virginia Association of Defense Attorneys. It appears here with permission. Read the full article as a PDF attached to this article.
I. INTRODUCTION
Most civil cases resolve by settlement, rather than trial. Accordingly, significant time and effort are often devoted to strategy underlying the familiar back-and-forth negotiation process. When is the best time to engage in settlement discussions? Does it show weakness to be the first to raise the subject? How should offers be framed? Would use of a mediator be helpful?
When a case is pending in federal court, a sometimes overlooked consideration is whether a defendant should make an “offer of judgment,” pursuant to Rule 68 of the Federal Rules of Civil Procedure. A Rule 68 offer is somewhat of a hybrid between a settlement and a decision on the merits. Although if the offer is accepted, judgment is entered against the defendant, a Rule 68 offer is best understood as a way to bring settlement pressure to bear on a plaintiff.
Defendants must of course understand the mechanics and potential pitfalls of a Rule 68 offer. Once conveyed, however, a well-calculated Rule 68 offer places litigation risks on a plaintiff. For example, an unaccepted Rule 68 offer can shift subsequent litigation costs and cut-off a plaintiff’s right to attorneys’ fees. It can even moot a plaintiff’s entire claim. These significant consequences mean that a plaintiff must carefully consider a Rule 68 offer. As such, the offer is a powerful tool for defendants.
This article first explores the basics of a Rule 68 offer: what it is, what it must include, how it will be construed, and what it will be compared to if not accepted. It then discusses some strategic considerations in deploying and structuring the terms of a Rule 68 offer, using a hypothetical to illustrate pros and cons.
As a general rule, whenever a prevailing plaintiff’s recovery of attorneys’ fees can be a driving litigation factor, defendants should evaluate making a Rule 68 offer as early in the process as practical.
Tuesday, January 8th, 2013
The National Labor Relations Board (“NLRB”) is accelerating its assault upon common employment policies typically found in company employee handbooks. Moreover, as of this writing, there are only three current NLRB members (out of five), all of whom are strong Union or worker advocates. Thus, employers should expect increased scrutiny, regulations, rules, and adverse decisions from the NLRB in 2013.
Quick Overview of Legal Framework (Protected Concerted Activity under Section 7).
To understand the rationale for the Board’s actions, the starting point is Section 7 of the National Labor Relations Act (“Act”), a law that has been in effect since 1935. Section 7 provides, in pertinent part, that employees have the right to engage in protected, concerted activity for their mutual aid or protection concerning their terms and conditions of employment. In determining whether an employer policy violates an employee’s Section 7 rights, the NLRB applies the following test:
A violation is generally dependent upon a showing of one of the following: 1) employees would reasonably construe the language to prohibit Section 7 activity; 2) the rule is promulgated in response to union activity; or 3) the rule has been applied to restrict the exercise of Section 7 rights. Martin Luther Memorial Home, Inc., 343 NLRB 646, 647 (2004).
The NLRB further concludes that “ambiguous employer rules–rules that reasonably could be read to have a coercive meaning–are construed against the employer.” Flex Frac Logistics, 358 NLRB No. 127 (Feb. 11, 2012). In addition, on June 18, 2012, the NLRB issued a press release and launched a webpage on its website (nlrb.gov/concerted-activity) to inform employees of their rights to engage in “protected concerted activity” and included examples of more than a dozen recent cases to help employees understand one of the “best kept secrets” of the Act.
Let’s look at a few of the NLRB’s recent decisions.
Inflexible At-Will Policy Found Unlawful.
Most employers have policies confirming that employees are employed at-will. In two recent cases, NLRB officials concluded that if the policy included language that the at-will employment relationship cannot be modified or altered in any way, it would violate Section 7 because employees have the right to seek to change their at-will status. Recognizing that these decisions caused considerable controversy, on October 31, 2012, the NLRB Acting General Counsel (AGC) released two Advice Memoranda that analyzed at-will employment clauses in two employee handbooks finding that both were lawful under the Act. Once such policy included a statement that “only the President of the Company has the authority to make any such agreement [modifying the at-will relationship] and then only in writing.” The NLRB AGC found this at-will policy lawful because the at-will relationship could possibly be changed. Thus, employees would not reasonably assume that their Section 7 rights were infringed.
PRACTICE POINT: We recommend that companies continue to inform employees that they are employed at-will. If your company’s at-will policy expressly states that it cannot be altered in any way, however, the NLRB will likely conclude that it violates the Act.
Overbroad Confidentiality Policies Are Likely Unlawful.
Employers have a legitimate interest in seeking to restrict the improper use or disclosure of their confidential or propriety information. An employer’s “confidentiality” or non-disclosure policy may violate Section 7, however, if the company defines “confidential information” too broadly such that it could interfere with an employee’s proper exercise of his Section 7 right to discuss his terms and conditions of employment.
In the recent case of Flex Frac Logistics, for example, the employer had a lengthy definition of information it deemed “confidential” that included a prohibition of any disclosure of “personnel information” to any person “outside the organization.” Violations could lead to “termination” or “legal action.” The NLRB concluded that this language was overbroad and unlawful because it prohibited employees from “discussing wages or other terms and conditions of employment with non-employees, such as Union representatives – an activity protected by Section 7 of the Act.” 358 NLRB No. 127 (Sept. 11, 2012). The Board found that even though the majority of the items were properly designated as confidential, the context of the overall confidentiality rule did nothing to “remove employees’ reasonable impression that they would face termination if they were to discuss their wages with anyone outside the company.”
PRACTICE POINT: Confidentiality or non-disclosure policies must be drafted with precision. Employees cannot be prohibited from discussing or disclosing their own personal employment terms (including their wages or benefits) to coworkers or even outsiders.
Policies that Prohibit Negative or Adverse Comments Also under Scrutiny.
In Costco Wholesale Corp., 358 NLRB No. 106 (Sept. 7, 2012), the employer had a social media policy that prohibited employees from, among other things, making statements that “damage the Company, defame any individual or damage any person’s reputation.” The NLRB found this policy overbroad and unlawful because employees could reasonably conclude that the rule required them to refrain from engaging in certain protected communications–those that may be critical of the employer or its agents. In contrast, the NLRB noted that it has upheld rules that proscribe conduct that is malicious, abusive or unlawful.
PRACTICE POINT: On May 30, 2012, the NLRB AGC issued its third report concerning social media guidance relating to employer policies. This memo is referred to as OM 12-59 and can be found on the NLRB website. Near the end of the memo, the AGC analyzed Wal-Mart’s recently revised social media policy and concluded that it was lawful in its entirety. It also attached the policy to its guidance. It is important that an employer carefully draft a social media policy tailored to its company so that employees know the rules regarding their use of social media. As the NLRB has recently issued 3 separate advice memos and decided cases such as Costco, it is clear that this is a topic of keen interest to the agency. It is best to have your policy approved by your labor counsel.
Firing for Employee Comments on Facebook Found Unlawful.
Consider the following facts: An employee, Lydia, has been openly critical of the job performance of several of her coworkers including Marianna. One Saturday morning, Marianna posted the following message on her personal Facebook page:
Lydia, a coworker, feels that we don’t help our clients enough. . . I about had it! My fellow coworkers how do u feel?
Four other coworkers added comments to the Facebook posting in which they “generally objected to the assertion that their work performance was substandard.” Lydia also saw the Facebook postings and posted her own reply: “stop with ur lies about me.” She then complained to the Executive Director and showed her the Facebook postings. The Company fired Marianna and the other four coworkers for “bullying and harassment” of Lydia in alleged violation of the Company’s “zero tolerance” policy.
Based on these facts, the NLRB decided that the terminations were unlawful. Hispanics United of Buffalo, Inc., 359 NLRB No. 37 (Dec. 14, 2012). The Board majority found that there was “no question” the employees were engaged in concerted activity that was for the “purpose of mutual aid or protection.” The Board found that the postings were “concerted” because the workers were “taking a first step towards group action to defend themselves” in anticipation that Lydia would eventually take her criticism to management.
PRACTICE POINT: This decision arising in the Facebook/social media context confirms that the Board analyses comments posted on Facebook in the same manner as it analyzes verbal comments made by employees on the shop floor, at work or in the community. There will likely be much more litigation in this area.
Conclusion
As these recent decisions show, the Labor Board has shown unprecedented interest in challenging employment policies that have been in effect for decades. It is expected that this trend will continue for the foreseeable future. Enlightened employers are best advised to seek legal guidance from their labor counsel to ensure that their policies comply with Section 7, and also before taking disciplinary action against an employee for a violation of such a policy.
Thursday, December 13th, 2012
On December 11, 2012, HSBC, the “world’s local bank” announced that it had entered into a Deferred Prosecution Agreement (“the Agreement”) with the Department of Justice (found here– link opens in a new window) that required HSBC to pay $1.9 billion in criminal fines for decades of improper banking practices, notably in the world of money laundering, drug cartels, and arms dealings. At first blush, many might think that a $1.9 billion fine is a harsh penalty, even for a global bank such as HSBC. Though the $1.9 billion fine is the largest in the history of the banking industry, closer examination of the negotiated resolution reveals that HSBC is not the loser in this game, and the corporate world, banking or otherwise, will greatly benefit from the guidance provided in the Agreement. This article aims to extract the lessons embedded within the Agreement in an attempt to assist corporate clients navigate the world of internal investigations and government investigations.
To most (if not all) companies, $1.9 billion is not an insignificant amount of money. There is no doubt about the message sent by the Department of Justice to the corporate world that it takes financial crime seriously, but the untold story of the HSBC Deferred Prosecution Agreement is that no executives, officers, directors, or employees face the prospect of spending any time in a federal prison. Specifically, HSBC was charged with:
- willfully failing to maintain an effective anti-money laundering program;
- willfully failing to conduct and maintain due diligence on correspondent bank accounts held on behalf of foreign parties;
- willfully violating and attempting to violate the Trading with the Enemy Act; and
- willfully violating and attempting to violate the International Emergency Economic Powers Act.
In the Agreement, HSBC admitted responsibility for the acts of its officers, directors, and employees and agents, and conceded that the facts underlying the charges were true and accurate. Despite these startling admissions and a severe financial penalty, HSBC, for all intents and purposes, walked away intact and a better-functioning company. And the great lesson to be learned from the HSBC case is that engagement of experienced counsel early in the process (e.g., from the first sign of government interest in internal dealings) will position a company, its officers and directors, and employees and agents in manner that may not only guarantee corporate survival, but also a get out of jail free card.
How did HSBC get through such a potentially ruinous situation? First, HSBC took swift action and accepted responsibility at an early stage in the process by engaging counsel to conduct a prompt, and serious, internal investigation. Second, HSBC made strenuous efforts to critically analyze the results of its internal investigation, flushed out the problems, sought guidance from experienced counsel as to how to fix the problems, re-examined how it conducted business, and implemented sweeping internal reforms.
In effect, HSBC prosecuted itself and communicated its findings to the Department of Justice. This process may seem strange to companies that have never encountered such issues, but undoubtedly, a key factor in the Department of Justice’s decision to take prison time off the table was based on HSBC’s cooperating with the Department of Justice, “including conducting multiple extensive internal investigations, voluntarily making U.S. and foreign employees available for interviews, and collecting, analyzing and organizing voluminous evidence and information for the Department.1
This successful internal investigation positioned HSBC to present a laundry list of tangible remedial measures it had undertaken to remedy the past wrongs, and ensure a compliant future. Such remedial measures included instituting a new CEO, General Counsel, Chief Compliance Officer, retrieving bonuses for a number of the most senior compliance and anti-money laundering officers, focusing its efforts on bolstering its anti-money laundering staff from 92 employees to 880 employees, severing relationships with risky clients, and footing the bill for over $290 million in internal costs for instituting the changes.
These are, of course, significant changes at global bank such as HSBC, but the theme that emerges is that HSBC made real change as a result of a carefully orchestrated internal investigation and overhaul of internal operations.
Should your company find itself in the midst of a civil/regulatory or criminal investigation, early recognition of the need for experienced counsel is of the utmost importance. Engaging counsel early to effectively sweep in to conduct an internal investigation and establish a relationship of cooperation with the governmental/regulatory authority is absolutely essential to protecting a company, its officers and directors, its employees and agents, and its stakeholders from criminal prosecution.
If you or your company needs advice on any related issues, contact an attorney in our Criminal & Government Investigations group.
1 Deferred Prosecution Agreement, at p.5.
Tuesday, November 13th, 2012
This article appeared in the Winter/Spring 2013 issue of “Virginia Human Resources Today” magazine.
Your CEO tells you that she wants a strong “confidentiality” policy in the Employee Handbook. You update your Company’s policy intending to safeguard the Company’s “confidential” information. But, here’s the catch — if your policy as written would lead an employee to believe that he is not free to discuss his wages or working conditions with coworkers or outsiders, the NLRB will likely conclude it is unlawful! In Flex Frac Logistics, LLC, 358 NLRB No.127 (Sept. 11, 2012), a non-union company had all employees sign an agreement that included the following language:
Employees . . . have access to information that must stay within the organization. Confidential information includes, but is not limited to, information that is related to: our customers, suppliers, distributors; [our] organization management and marketing processes, plans and ideas, processes and plans; our financial information including costs, prices; current and future business plans, our computer and software systems and processes; personnel information and documents. . . No employee is permitted to share this Confidential Information outside the organization. . . . Disclosure of Confidential Information could lead to termination. (emphasis added).
Employees have the right under Section 7 of the National Labor Relations Act (the “Act”) to engage in “protected, concerted activity” concerning their terms and conditions of employment. An employer violates the Act when it “maintains a work rule that reasonably can chill employees in the exercise of their Section 7 rights.” In Flex Frac, the Board majority opined as follows:
The Board has repeatedly held that nondisclosure rules with very similar language are unlawfully overbroad because employees would reasonably believe that they are prohibited from discussing wages or other terms and conditions of employment with non-employees, such as union representatives – an activity protected by Section 7 of the Act.” 358 NLRB No. 127 (Sept. 11, 2012). The Board found that even though the majority of the items were properly designated as confidential, the context of the overall confidentiality rule did nothing to “remove employees’ reasonable impression that they would face termination if they were to discuss their wages with anyone outside the company.”
PRACTICE POINT: Confidentiality or non-disclosure policies must be drafted with precision. Employees cannot be prohibited from discussing or disclosing their own personal employment terms (including their wages or benefits) to coworkers or even outsiders.
Policies that Prohibit Negative or Adverse Comments Also under Scrutiny.
In Costco Wholesale Corp., 358 NLRB No. 106 (Sept. 7, 2012), the employer had a social media policy that prohibited employees from, among other things, making statements that “damage the Company, defame any individual or damage any person’s reputation.” The NLRB found this policy overbroad and unlawful because employees could reasonably conclude that the rule required them to refrain from engaging in certain protected communications–those that may be critical of the employer or its agents. In contrast, the NLRB noted that it has upheld rules that proscribe conduct that is malicious, abusive or unlawful.
PRACTICE POINT: On May 30, 2012, the NLRB AGC issued its third report concerning social media guidance relating to employer policies. This memo is referred to as OM 12-59 and can be found on the NLRB website. Near the end of the memo, the AGC analyzed Wal-Mart’s recently revised social media policy and concluded that it was lawful in its entirety. It also attached the policy to its guidance. It is important that an employer carefully draft a social media policy tailored to its company so that employees know the rules regarding their use of social media. As the NLRB has recently issued 3 separate advice memos and decided cases such as Costco, it is clear that this is a topic of keen interest to the agency. It is best to have your policy approved by your labor counsel.
Firing for Employee Comments on Facebook Found Unlawful.
Consider the following facts: An employee, Lydia, has been openly critical of the job performance of several of her coworkers including Marianna. One Saturday morning, Marianna posted the following message on her personal Facebook page:
Lydia, a coworker, feels that we don’t help our clients enough. . . I about had it! My fellow coworkers how do u feel?
Four other coworkers added comments to the Facebook posting in which they “generally objected to the assertion that their work performance was substandard.” Lydia also saw the Facebook postings and posted her own reply: “stop with ur lies about me.” She then complained to the Executive Director and showed her the Facebook postings. The Company fired Marianna and the other four coworkers for “bullying and harassment” of Lydia in alleged violation of the Company’s “zero tolerance” policy.
Based on these facts, the NLRB decided that the terminations were unlawful. Hispanics United of Buffalo, Inc., 359 NLRB No. 37 (Dec. 14, 2012). The Board majority found that there was “no question” the employees were engaged in concerted activity that was for the “purpose of mutual aid or protection.” The Board found that the postings were “concerted” because the workers were “taking a first step towards group action to defend themselves” in anticipation that Lydia would eventually take her criticism to management.
PRACTICE POINT: This decision arising in the Facebook/social media context confirms that the Board analyses comments posted on Facebook in the same manner as it analyzes verbal comments made by employees on the shop floor, at work or in the community. There will likely be much more litigation in this area.
Conclusion
As these recent decisions show, the Labor Board has shown unprecedented interest in challenging employment policies that have been in effect for decades. It is expected that this trend will continue for the foreseeable future. Enlightened employers are best advised to seek legal guidance from their labor counsel to ensure that their policies comply with Section 7, and also before taking disciplinary action against an employee for a violation of such a policy.
Tuesday, October 30th, 2012
Before January 1, 2013, employers must provide the new Fair Credit Reporting Act (FCRA) Summary of Rights to individuals before taking any adverse employment action based on the contents of a background report obtained from a third party. The good news is that the procedural requirements under the FCRA are the same – the only change is the updated Summary of Rights, which can be found here. The most significant revision is that the Summary of Rights now directs contacts to the new Consumer Financial Protection Bureau (CFPB), which is the federal agency now responsible for interpreting the FCRA. Employers should consider using the new Summary of Rights now, and removing all old forms from their HR systems prior to year end to avoid any problems.
As a reminder, the FCRA applies whenever an employer causes a “consumer report” (e.g., a criminal background check, credit check, etc.) to be prepared by a third party and the employer uses that consumer report for employment purposes, such as to evaluate a job applicant. Before procuring such report, the FCRA requires the employer to give a written disclosure to the individual and obtain his or her written consent. The courts have made it clear that the FCRA requires that this disclosure and consent must be in a stand-alone document and cannot be combined with other consents.
Many employers are either unaware or forget that this FCRA consent must be a stand-alone document and not simply contained in a sentence added at the bottom of an employment application. While this requirement may seem overly technical, many employers have found out the hard way that not following this rule can lead to class-action claims by applicants who were denied employment. Be sure your company is using the correct format for securing consents for these background checks.
Once the background report is received, if the employer plans to take any adverse action against an applicant or employee based, in whole or in part, on information contained in the report, then the employer must follow a two-step notification process. First, before any adverse action is taken, the employer must provide a “pre-adverse action” notice to the individual, which must include a copy of the new Summary of Rights. The purpose of this notice is to allow the individual to contest and/or correct inaccurate information contained in the report. If, after waiting the required time period, the employer decides to move forward with the adverse action, the employer must then provide the second adverse action notice to the individual.
Background screens used in the hiring process have now become a major point of emphasis with the EEOC. In April 2012, the EEOC issued updated enforcement guidance concerning how (in its view) Title VII of the Civil Rights Act of 1964 restricts an employer’s discretion to consider criminal records relative to employment decisions. This guidance can be found here. The bottom line is that background check policies and practices should provide an opportunity for an individualized assessment to determine if the policies, as applied, are job-related and consistent with business necessity. In case employers were not paying attention, on September 4, 2012, the EEOC issued its Draft Strategic Enforcement Plan, and once again made it clear that pre-employment background screenings will be a major focus.
These “announcements” are consistent with the EEOC’s recent enforcement efforts. For example, earlier this year the EEOC found that Pepsi’s background check policy denied employment opportunities to applicants who had been arrested or convicted of certain minor offenses or who were awaiting prosecution without prior convictions. According to the EEOC, more than 300 African Americans were adversely impacted by Pepsi’s background check policy. Pepsi agreed to pay $3.13 million and to provide job offers to these individuals. Additionally, the EEOC filed lawsuits against Kaplan Higher Education Corporation and Freeman Companies alleging that they engaged in unlawful discrimination by refusing to hire African Americans because of their credit histories. Both of these lawsuits are still ongoing.
In light of the FCRA changes and the EEOC’s focus on hiring practices, coupled with recent Fourth Circuit opinions confirming the EEOC’s broad investigative powers, employers should review their overall policies and practices relating to hiring and background checks to ensure compliance in this critical area.
Thursday, September 6th, 2012
Businesses routinely conduct investigations into workplace misconduct and other incidents. In most investigations, the individuals interviewed and the person who brought the complaint are directed not to discuss the investigation with others. Plenty of good reasons exist for this practice, which many HR professionals believe is a “best practice.” In two very recent actions, this practice has been attacked by the government and found to be unlawful. While no court has upheld this challenge to the standard confidentiality approach to workplace investigations, these recent actions suggest that employers should evaluate their current practices going forward.
On July 30, 2012, the National Labor Relations Board (“NLRB”) ruled that it was unlawful for an employer to have a policy that prohibits an employee who makes a workplace complaint from discussing the matter with co-workers while the employer investigates the matter. In a 2-1 decision, the NLRB held that a “blanket” rule requiring confidentiality in connection with internal investigations violates the right of employees to “engage in protected concerted activity” under Section 7 of the National Labor Relations Act (“NLRA”). The NLRB noted that a “generalized concern with protecting the integrity of its investigation” was too flimsy a basis to outweigh the employees’ rights under the NLRA. The argument that the policy was a “mere suggestion” did not hold up and was rejected because this policy had a reasonable tendency to coerce employees even though the policy contained no specific threat of discipline if the confidentiality was breached.
The NLRB ruling came in a case where an employee challenged a workplace directive received after the equipment he was using malfunctioned. When he refused his supervisor’s directive on the basis of health and safety concerns, the employee received “coaching” for insubordination. During the coaching by HR, the employee complained that he was being retaliated against for questioning unsafe work procedures. The HR manager reminded the employee of the company’s policy not to discuss the complaint with co-workers while it was being investigated.
Less than a week later, the Buffalo office of the Equal Employment Opportunity Commission (“EEOC”) issued a warning letter to an employer that its policy of prohibiting workers from discussing an ongoing internal investigation was unlawful. In this letter, which came from a field office, the EEOC said:
An employer who tries to stop an employee from talking with others about alleged discrimination is violating Title VII rights, and the violation is “flagrant,” not trivial…In this case, telling women who complained of harassment that they were not to tell others about the alleged harassment is enough to constitute harm until Title VII. There does not have to be a separate adverse action. In addition, your written policy is so broad that a reasonable employee could conclude from reading it that she could face discipline for making inquiries to the EEOC about harassment if that harassment is being or has been investigated internally.
While this notice from an EEOC office is not binding precedent, it does raise a serious concern. Assuming the Buffalo office was not acting unilaterally, it appears that the EEOC may be modifying its earlier Enforcement Guidance which addressed the Vicarious Employer Liability for Unlawful Harassment (EEOC No. 915.002, June 18, 1999) which specifically requires confidentiality to the maximum extent possible when conducting investigations into claims of harassment. However, nothing in either of these recent Administrative actions changes an employer’s duty to protect employees who make complaints from suffering retaliatory acts, and without applying a confidentiality rule the employer could face a nearly impossible task.
In both actions, the federal government is requiring employers to take a more nuanced and case-specific approach to confidentiality during internal investigations. The NLRB has suggested that an employer must first determine in each investigation what are the actual concerns: Are there witnesses who need to be protected? Is there evidence in danger of being destroyed? Is there a legitimate danger of testimony being fabricated? Is there a need to prevent a cover-up? As previously noted, a generalized concern for protecting the integrity of an investigation may no longer be a sufficient basis for this type of rule.
So, what’s an employer to do the next time workplace misconduct is reported and an investigation will be conducted? There are a few suggestions:
- When receiving a complaint from the complainant, continue to advise the complaining person that the investigation will be conducted quickly and with as much confidentiality as possible to ensure its integrity. These assurances are essential to help minimize the risk and fear of retaliation. Be sure to explore any concerns the complaining witness has about confidentiality and document them clearly. Encourage the employee to come back to the investigator with any additional information relating to the complaint. Be sure to get a complete list of names of all employees that the employee believes have information relevant to the complaint. Assure the complainant that all identified persons will be questioned.
- Continue to advise witnesses who are supervisors and executives that they must treat the investigation and the matter being investigated as confidential as they are not covered by the NLRA, and these are the persons whose positions give them the ability to create real problems in terms of potential acts of retaliation.
- Review all forms and policies currently being used to ensure that the language does not contain a blanket prohibition against any and all discussions with co-workers during an investigation, and to ensure that any discipline associated with the policy is properly nuanced. If problematic language exists, consider modification to ameliorate these concerns.
- Consider documenting the specific concerns and reasons for a confidentiality directive to be used during an investigation as part of the investigative file.
- If this new approach becomes implemented more fully, then it will become even more critical for employers to have on staff, or to retain, trained professionals who can conduct internal investigations in order to complete the required document review and witness interviews as quickly as possible to minimize the risk of witness collusion or the application of improper pressure on employees. Otherwise, employers will have little ability to protect the objectivity and integrity of their investigations.
Wednesday, August 29th, 2012
This article first appeared in Staffing Industry Analysts’ online publication, “The Staffing Stream.” This and other articles are available at the link below.
It seems like every week there is some decision, guidance or policy change that alters companies’ ability to transact business. Whether it’s the courts, the Equal Employment Opportunity Commission or the National Labor Relations Board, the employment law landscape is constantly changing.
In July, Randstad suffered a blow as did all of staffing companies that have multiple offices and place a significant number of temporary employees. These staffing firms are the unfortunate recipients of an EEOC Charge.
Randstad’s woes started with a Charge and an amended Charge — and then a broad EEOC request to see documents or a data compilation setting forth all position assignments made by Randstad over a 5-year period, among other documents. The EEOC subsequently agreed to limit the information request to 13 branch offices. Randstad in response only provided information regarding the four positions for which the employee at the center of the EEOC’s investigation had been assigned and otherwise refused to comply with the requests.
A U.S. District Court had ruled against the EEOC. On appeal, though, the Federal Court in the 4th Circuit (which covers Maryland, North Carolina, South Carolina, Virginia, and West Virginia) acknowledged the broad subpoena power of the EEOC and was not sympathetic to Randstad’s argument that the request was burdensome alone. The court made clear that cost of production alone would not be enough.
This decision clearly evidences the breadth and reach of an EEOC subpoena. Companies need to be prepared to deal with this level of production if the other Circuits follow suit — and I would guess they will. The argument to support a ‘burdensome’ claim will have to be well supported and clear and may require a showing of being onerous to allow a company to avoid any attempt by the EEOC to demand extensive discovery production.
Tuesday, August 21st, 2012
There was recently an employment discrimination case in Roanoke that provides a valuable lesson to HR professionals. Here are the key facts:
- Manager supervises an employee whose job performance is deemed to be deficient. He drafts proposed written warning, and emails it to HR for review.
- Employee belongs to protected class (e.g., race, age, gender, disability) and/or there is a reason for the company to exercise caution before implementing any disciplinary action against employee (e.g., lengthy service; employee has exercised rights–complained, taken FMLA leave; good performance reviews).
- HR edits the proposed warning, and sends e-mail to manager with comments.
- Company ultimately terminates employee citing poor performance as reason.
Sound familiar? This fact pattern could arise in any workplace. The manager sought input from HR as to a personnel matter, and HR performed one of its key roles. In this case, however, the terminated employee subsequently filed a lawsuit alleging that his termination was the product of unlawful discrimination and retaliation.
Here’s the critical lesson: With rare exception, all of the internal e-mails between HR and the manager are discoverable and must be turned over (produced) to the plaintiff in the normal course of the litigation. Thus, every word or phrase used by the manager or HR professional will be carefully scrutinized.
So why was this a concern? When the HR professional responded to the manager (step 3 above), she wrote, among other things, as follows:
I have reviewed the documentation that you have provided . . . There is a lot of substance here and I am fine with you proceeding. There is a lot of room for him to ‘trip up’ after this warning considering all the areas where he is below expectation.
According to the company, the employee’s performance problems continued. HR sent an e-mail to an executive to provide him with an update. The HR professional stated, among other things, that she was waiting to receive a follow-up performance review from the manager so that she could “scrub it to ensure it is appropriate since this will be highly sensitive and this document could end up being used in a file defending our actions.”
(As an aside, the employee/plaintiff was not aware of these emails when he filed his lawsuit. It was only in the course of formal discovery that he requested pertinent documents in the company’s possession, and the company was obligated to locate and produce them.)
The company filed hundreds of pages of documents and evidence with the Court to justify its termination decision, and asked the Judge to dismiss the case. The Judge refused to do so. In so doing, the Judge relied heavily upon the two internal e-mails from the HR professional.
[The Company] has sought to undermine [Plaintiff’s] case by marshalling evidence of Plaintiff’s failure to meet [its] legitimate job expectations. Plaintiff, however, has countered by arguing that the Company saddled him with impossible, illegitimate expectations that no employee could meet. In support of his argument, Plaintiff spotlights two e-mails from the Company’s head of human resources. One e-mail refers to performance expectations that could ‘trip up’ Plaintiff, and the other mentions Plaintiff’s latest performance review document and the need to ‘scrub it to ensure it is appropriate.’ Clearly, both e-mails are subject to more than one interpretation. These e-mails, standing alone, are sufficient to raise a triable question of fact regarding the legitimacy of the Company’s expectations . . . The fact-finder is free to use the evidence as a basis for rejecting the Company’s proffered explanation . . . The Court will therefore deny the Company’s motion for summary judgment. Phillips v. StellarOne, C.A. 7:11cv440 (W.D.Va. July 2012)
What can we learn from this decision? Electronic communications are here to stay. They can be efficient and effective. As shown herein, however, they can also be dangerous. Company managers need to know that everything they say and do, especially in their electronic communications, could be “fair game” and subject to production in an employment claim. Companies must ensure that management and HR receive training and education to avoid situations such as the one summarized herein.
Thursday, July 19th, 2012
This article was published on “The Staffing Stream,” an online blog sponsored by Staffing Industry Analysts. To read this article and more on their site, click the link offered below the article.
Who’s the boss? And who is liable in the event there is an issue? Employers and courts have been mulling through this problem. However it all comes down to the control that the employer has over its workers.
Last month, the need for some type of written agreement between customers and their staffing vendors defining their relationship may have just become clearer when the U.S. Court of Appeals for the 3rd Circuit issued its decision on joint employer liability on June 28, in the case of In Re: Enterprise Rent-A-Car Wage and Hour Employment Practices Litigation.
While the case looks at the liability of a parent company for the Fair Labor Standards Act violations of its subsidiaries, the Court, which covers Delaware, New Jersey and the Eastern, Western and Middle Districts of Pennsylvania, enunciated criteria, the “Enterprise” test, melding standards established by other Circuits into a clear four-criteria inquiry. The Court suggested that when faced with the question of potential joint employer liability, lower courts consider the following four points:
- Authority to hire and fire the relevant employees;
- Authority to promulgate work rules and assignments, and to set the employee’s conditions of employment: compensation, benefits, and work schedules including the rate and method of payment;
- Involvement in the day to day employee supervision including employee discipline; and
- Actual control of employee records, such as payroll, insurance or taxes.
The Court cautioned that lower courts should not blindly apply these standards and are to consider economic concerns of the real world.
However, the bottom line is that users of contingent labor should dust off those contracts, terms and conditions and timesheets and set and maintain the employer indicia of discipline, setting pay rates, setting and paying wages and limiting clients’ access to records of temporary employees.
