Human Rights Commission Looking for Early Information From Claimants

Representing defendants in claims before the Maine Human Rights Commission can be frustrating because the allegedly detailed statement of charge is often not very detailed. It can be difficult to respond to a claim when the defendant doesn’t fully understand the nature of the charges. Recently, I received a sexual harassment claim which, while detailed in many respects, was vague as to the specific acts of sexual harassment. Apparently, the Human Rights Commission felt the same way. They established a procedure which simultaneously sent the document request to the plaintiff and the respondent. In this case, the request to the complainant asked for very detailed information regarding the sexual harassment, including who committed it, what occurred, when it occurred, where it occurred, who was present, how complainant reacted to it, and how the complainant’s job was affected. Further, it asked whether complainant complained to anyone and to whom, whether an investigation was conducted, whether corrective action was taken, and the identity of any witnesses. This information can be very helpful to the Commission who investigates the claim, as well as the respondents, and can also facilitate the speed of the case.

Do You Know What Your Restrictive Covenant Restricts?

When preparing employment agreements, businesses often want to include provisions that restrict employees in their use of company information, contact with customers, or choice of next employer.  These restrictions, called restrictive covenants, serve very distinct purposes and it is important to keep the purpose of each in mind when preparing employment agreements.  For example, although a non-disclosure agreement might prevent an employee from disclosing confidential business information to a competitor, it would not necessarily preclude the employee from jumping ship to work for that same competitor.

As a case in point, the federal district court in Massachusetts recently granted a preliminary injunction to a large medical device manufacturer enforcing the terms of a non-disclosure agreement with a former employee, but denied the manufacturer’s request for an injunction barring the employee from working at a competing business.  Boston Scientific Corp. v. Lee (D. Ma. May 14, 2014).  The employee, Dr. Lee, had signed an employment agreement with Boston Scientific Corporation that prohibited Dr. Lee from disclosing Boston Scientific’s proprietary information.  The agreement also required Dr. Lee to return all documents containing Boston Scientific’s proprietary information upon the termination of his employment.  The parties, however, did not sign a non-competition agreement.  After Dr. Lee left Boston Scientific to join one of the company’s alleged competitors, Boston Scientific filed for a preliminary injunction enjoining Dr. Lee from (1) disclosing its proprietary information and (2) working at the competitor.

Although the court found Boston Scientific was entitled to an injunction enjoining Dr. Lee from disclosing any of its proprietary information, it held the non-disclosure and confidential information provisions of his employment agreement could not be transformed into covenants not to compete.  So, in the absence of a non-competition agreement, the court declined to grant an injunction restraining Dr. Lee’s employment.

Interestingly, this decision coincides with bills pending in the Massachusetts legislature that propose significant limitations on the use of non-competition agreements in the state.  Whether this legislation will become law, and what form it will take if it does, is still unclear.  A blog post on this topic will therefore have to wait for another day – so stay tuned.

Employer's Electronic Communication Policy Negates Expectation of Privacy in Employee's Work Computer

Adding its voice to the growing body of cases illustrating the importance of electronic communications policies, a federal court in Virginia ruled earlier this year that an employee had no reasonable expectation of privacy in personal files stored on his work computer where his employer maintained a policy that clearly informed him that he should have no such expectation.  Walsh v. Logothetis  (E.D. Va. Jan. 21, 2014).

The plaintiff in the case, Thomas Walsh, began working at Virginia Commonwealth University (VCU) in 2008 as a Chief Administrative Officer in the School of Medicine.  In the spring of 2011, Walsh’s supervisor, who was an Associate Dean in the School of Medicine, raised concerns about the financial management of Walsh’s department.  VCU conducted an audit as a result of the supervisor’s concerns.  In connection with the audit, VCU searched Walsh’s work computer and found copies of his personal 2007 and 2008 tax returns, which Walsh had stored on the computer.  The tax returns showed that Walsh had falsified his employment application to VCU by overstating the salary he had earned at his previous job.  The audit also showed that Walsh had failed to follow other financial procedures implemented by VCU.  Based on the results of the audit, VCU terminated Walsh’s employment.

Walsh later sued in federal court alleging a variety of constitutional and statutory violations.  Among his many claims, Walsh alleged that the search of his work computer was unlawful under the Fourth Amendment.  Specifically, Walsh alleged that several VCU policies permitted employees to store personal files on their work computers and that he therefore had a reasonable expectation of privacy with respect to the personal tax returns he had stored on his work computer.

The court acknowledged that public employees, such as Walsh, generally have a reasonable expectation of privacy in their workplace.  However, the court concluded that employees cannot have a legitimate expectation of privacy in electronic communications where a policy puts them on notice that their communications may be monitored.  VCU had such a policy, which provided:

No user shall have any expectation of privacy in any message, file, image or data created, sent, retrieved, received, or posted in the use of the Commonwealth’s equipment and/or access.  Agencies have a right to monitor any and all aspects of electronic communications and social media usage.  Such monitoring may occur at any time, without notice, and without the user’s permission.

Consequently, even though Walsh may have been permitted by VCU to store personal information on his work computer, he did not have any reasonable expectation that this information would remain private.

The result in Walsh v. Logothetis is relevant for private employers, even though the case involved a public employee and a claim under the Fourth Amendment.  This is because common law claims for invasion of privacy, like privacy claims under the Fourth Amendment, generally require a plaintiff to show that he or she had a reasonable expectation of privacy.  A clear policy stating that such an expectation does not exist in electronic communications stored or accessed on a work computer is therefore equally important for employers in both the public and private sectors.

Avoiding a Severance Agreement Trap

This is a true and cautionary tale and one that can be readily avoided.  You have finally completed negotiations with a problem employee you have wanted to get rid of and a severance agreement has been signed.  The terms are generous, with full salary for a number of months, plus health insurance benefits, but it was worth it to get that release signed.  No need to worry about unemployment, because surely the employee will find a new job sometime before a month’s of severance payments run out.

One small problem with the plan.  To get things over, you decided to pay the severance payment in one lump sum.  Much to your surprise, after receiving the severance payment, the employee files for unemployment.  Lo and behold it is granted for all but the week that the severance payment was made.  You say to yourself, “How can that be?”  The severance agreement explicitly states that he’s receiving x months of pay and benefits.  No matter, the Unemployment Insurance Division of the Department of Labor has a rule which states that severance payments are credited to the week that they are paid, only, no matter the amount or the period covered.  The law says that an employee should not receive unemployment for the period of time when he/she is receiving severance payments.  The State says that means only when that payment is paid, not the period of time that it covers, even if there is an explicit written agreement.

The solution is to pay the severance payments over time on the regular pay dates.  Unemployment will then be deferred until all payments have been made.  A difference that is hard to understand?  You bet.

NLRB Seeking Comments on Employee Email Use

In 2007, the National Labor Relations Board (NLRB) decided in a split decision that employees do not have a statutory right to use an employer’s email system to engage in activities protected under federal labor law.  Relying on this decision, known as Register Guard, many employers have since adopted policies limiting the extent to which employees may use employer-provided email and communications systems for protected concerted activities.

Now, in a case currently pending before the NLRB, the Board has signaled it is considering whether to revisit its holding in Register Guard.  At issue in the case is a decision by an administrative law judge to dismiss an allegation that the employer, Purple Communications, Inc., committed an unfair labor practice by maintaining a rule prohibiting employees from using company email for non-work-related purposes. Disappointed with the judge’s ruling, the NLRB General Counsel filed an exception and requested that the Board overrule the Register Guard decision.
 
The Board appears to have taken the General Counsel’s request to heart and has invited the parties in Purple Communications, Inc., as well as other interested parties, to submit briefs on the issue.  Specifically, the Board has requested parties to address the following questions:

1. Should the Board reconsider its conclusion in Register Guard that employees do not have a statutory right to use their employer’s email system (or other electronic communications systems) for Section 7 purposes?
2. If the Board overrules Register Guard, what standard(s) of employee access to the employer’s electronic communications systems should be established?  What restrictions, if any, may an employer place on such access, and what factors are relevant to such restrictions?
3. In deciding the above questions, to what extent and how should the impact on the employer of employees’ use of an employer’s electronic communications technology affect the issue?
4. Do employee personal electronic devices (e.g., phones, tablets), social media accounts, and/or personal email accounts affect the proper balance to be struck between employers’ rights and employees’ Section 7 rights to communicate about work-related matters? If so, how?
5. Identify any other technological issues concerning email or other electronic communications systems that the Board should consider in answering the foregoing questions, including any relevant changes that may have occurred in electronic communications technology since Register Guard was decided. How should these affect the Board’s decision?

While the invitation for comments on the continuing viability of Register Guard is itself notable, it is also noteworthy that the NLRB has asked parties to comment on the decision in light of how technology, and the uses of that technology, has changed in the last seven years.

The deadline for submitting briefs is June 16, 2014.

Can HRAs Survive Healthcare Reform?

Health Reimbursement Arrangements (HRAs) are used to help employees pay for medical expenses incurred by the employee, his or her spouse, dependents, and any children who, at the end of the taxable year, have not attained age 27.  An HRA must be funded solely by the employer; employees cannot contribute to an HRA account.  HRA reimbursements are not included in the employee’s taxable income. Unused amounts can be rolled over for use in other plan years if the plan so provides. HRAs can also be offered only to those employees who enroll in group medical coverage sponsored by another employer.

HRAs are group health plans that are subject to Health Care Reform under the Affordable Care Act (ACA). Under the ACA, group health plans are barred from establishing an annual limit on the dollar amount of benefits for any individual (the Annual Dollar Limit Prohibition). In order to comply with this requirement, an HRA must be integrated with other group health coverage that itself complies with the Annual Dollar Limit Prohibition.  In other words, an HRA can be offered only if employer offers compliant primary group health coverage and the employee is actually covered under a group health plan that does not have an annual limit on the dollar amount of benefits.  Two important points to keep in mind:

• the employer-sponsored HRA cannot be integrated with individual market coverage or with individual policies, even if the employer pays the premium; and
  
• the primary group coverage in which the employee is actually enrolled does not have to be provided by the same employer that offers the HRA; for example, the linked coverage could be sponsored by the employer of the employee’s spouse. 

The ACA also requires that non-grandfathered group health plans must provide certain preventative services without imposing any cost sharing requirements for the service (the Preventive Services Requirements).  An HRA can satisfy this part of the ACA if the group health plan coverage with which it is integrated complies with the Preventive Service Requirements.

If the primary group health coverage that is linked to the HRA does not provide minimum value to the employee (that is, if the plan’s share of the total allowed costs of benefits provided under the plan is less than 60% of the costs), the HRA can only be used to reimburse co-payments, co-insurance, deductibles, and premiums under the non-HRA group coverage, as well as for medical care expenses that do not constitute essential health benefits.

Finally, the ACA requires that at least annually, an HRA must permit participating employees (or former employees if they are allowed to participate in the HRA) to permanently opt out of and waive future reimbursements from the HRA. Upon termination of employment, either the remaining amounts in the HRA must be forfeited or the employee must be permitted to permanently opt out of and waive future reimbursements from the HRA.

These new HRA rules take effect for plan years that begin on or after January 1, 2014.  However, they do not apply to funds credited to the HRA before January 1, 2013, or to amounts credited in 2013 under the terms of an HRA in effect on January 1, 2013. These funds can be used after December 31, 2013, to reimburse medical expenses pursuant to the terms of that HRA.

At-Will Employment Clauses and the NLRB

The National Labor Relations Board (“NLRB”) has made headlines in the last few years with its close scrutiny of workplace social media policies.  However, making something of a quieter splash, the NLRB has also been scrutinizing another practice that, in its view, has the potential to “chill” employee rights in violation of the National Labor Relations Act (“NLRA”):  at-will employment clauses in employee handbooks.

The issue of at-will employment clauses came to the fore in 2012, when an administrative law judge found that the following language in an at-will provision in an employee handbook violated the NLRA:  “I further agree that the at-will employment relationship cannot be amended, modified or altered in any way.”  In the judge’s opinion, this acknowledgement, which followed a standard description of the at-will employment relationship, violated the NLRA because it required the employee to agree that the relationship could not be changed and amounted to a waiver of the employee’s right to advocate for a change in status.

More recently, however, in a case called Windsor Care Centers, the NLRB’s Office of General Counsel (“Office”) found that an at-will clause was not unlawful where it provided the following language at the end of the clause:

Only the Company President is authorized to modify the Company’s at-will employment policy or enter into any agreement contrary to this policy.  Any such modification must be in writing and signed by the employee and the President.

In Windsor, the Office explained that the NLRB applies a two-step inquiry to determine whether a work rule would reasonably tend to chill employees in exercising their rights.  First, a rule is unlawful if it explicitly prohibits employees from exercising their rights under the NLRA.  Second, a rule is unlawful even if it does not explicitly restrict protected activities if: (1) employees would reasonably construe the rule to prohibit protected activity; (2) the rule was created in response to union activity; or (3) the rule has been applied so as to restrict protected activity.

Applying this two-step inquiry, the Office found that the at-will clause in Windsor did not explicitly restrict protected activities and that the company had neither created the rule in response to union activity nor applied it in a discriminatory manner.  The Office therefore concluded that the clause would be unlawful only if employees would reasonably construe it to prohibit protected activity.  According to the Office, the clause could not reasonably be construed as restrictive, because the language “simply describes the method by which employees can, at present, create an enforceable employment contract with the employer modifying their at-will status.”  Because the language did not require employees to agree that their status could not be changed, the Office concluded the at-will clause was lawful and distinguishable from the clause at issue in the 2012 case, American Red Cross Arizona Blood Services.

In light of the NLRB’s recent activity, businesses should revisit the language in their employee handbooks and consider revising at-will provisions that do not allow for any modification of an employee’s at-will status.