EMPLOYER MAY HAVE ACTED UNLAWFULLY IN REVOKING JOB OFFER

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By: Carol G. Schley, Clark Hill PLC

            A recent decision by a federal appeals court is a reminder to employers that there are limitations on taking adverse action against applicants and employees who act against the employer’s interests in their non-work activities.

            In Linkletter v. Western & Southern Financial Group, 2017 U.S. App. LEXIS 5130 (6th Cir. 2017), plaintiff Gayle Linkletter was offered a job with defendant Western & Southern, an insurance company located in Cincinnati, which she accepted.  However, before her employment commenced, the job offer was rescinded.  Linkletter alleged that she was told by the vice-president of HR that the offer was rescinded because Linkletter had “taken a position that was contrary to Western & Southern,” namely, Linkletter’s signing of an on-line petition supporting a local women’s shelter, Anna Louise Inn.

            Western & Southern and the Inn had a contentious history.  Prior to Linkletter’s job offer, the Inn had sued Western & Southern under the federal Fair Housing Act (FHA), alleging that Western & Southern had illegally attempted to force the Inn to move out of Western & Southern’s neighborhood.  Among other things, Western & Southern had been accused of informing Cincinnati’s mayor that the Inn was “not appropriate” for the neighborhood, due to its “low-income permanent housing” and housing for “recovering prostitutes,” photographing the Inn’s residents without permission, and falsely accusing the residents of criminal activity. 

            The litigation between Western & Southern and the Inn was ultimately settled.  However, while it was still pending, Linkletter signed an online petition supporting the Inn as “safe and affordable housing for single women.”  The Inn posted the petition online, and when Western & Southern discovered Linkletter had signed it, it revoked her job offer.

            Linkletter thereafter sued, claiming Western & Southern’s revocation of her job offer violated the FHA.  By signing the petition, Linkletter claimed she was aiding and encouraging the women of the Inn to exercise their rights under the FHA, which, among other things, prohibits housing discrimination on the basis of sex, and Western & Southern unlawfully retaliated against her when she did so.

            At the trial court level, Linkletter’s claim was dismissed for failure to state a viable claim.  However, the Sixth Circuit Court of Appeals (which is the federal appeals court for Michigan, Ohio, Kentucky and Tennessee), held that Linkletter’s claim was valid, and therefore could proceed to trial.  The appeals court held that the anti-interference provision of the FHA should be construed broadly and that “the scope of the statute extends to employers who cancel contracts in retaliation for Fair Housing Act advocacy.”  The court further held that Linkletter’s signing of the petition “aided and encouraged” the women of the Inn, as the petition “existed to encourage the women to remain in their residence in opposition to the alleged discrimination by Western & Southern.”  Finally, the court rejected Western & Southern’s claim that its opposition to the Inn, and its rescission of Linkletter’s job offer, were due to economic reasons, not sex discrimination.  “The existence of economic (or religious or moral) motivations does not protect the defendants from housing discrimination claims when their actions had a clear discriminatory effect.  Economic motivation does not cleanse discrimination.” 

            The Linkletter case is a reminder to employers that there are limitations on their ability to take adverse employment actions against applicants and employees based upon their non-work activities.  While Linkletter specifically dealt with a person supporting others’ rights under the FHA, there are other statutes that also contain similar provisions, including Michigan’s Elliott-Larsen Civil Rights Act and Title VII.  To avoid potential liability in this area, it is recommended that any adverse employment action that has a possibility of raising similar issues to be reviewed by legal counsel before a decision is made.

Carol G. Schley is a member of the Detroit SHRM Legal Affairs Committee and an attorney at the law firm Clark Hill PLC.  She can be reached at cschley@clarkhill.com or (248)530-6338.

Detroit SHRM encourages members to share these articles with others, inside and outside their organization, as long as its name and logo, and the author’s information is included in the re-post of the article. April 2017.

LESSONS LEARNED FROM THE MISSING $10 MILLION COMMA

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By: Carol G. Schley, Clark Hill PLC

Recently, a federal appellate court determined that the lack of a comma in an overtime statute rendered the statute ambiguous, resulting in an employer being potentially required to pay $10,000,000 in overtime pay to its employees.  While this case involved a Maine overtime statute, it provides important practical lessons for all employers.

The case, O’Connor v. Oakhurst Dairy, 2017 U.S. App. Lexis 4392 (1st Cir., Mar. 13, 2017), concerned a statute that exempted from overtime compensation any employees who worked on the following tasks:

            … canning, processing, preserving, freezing, drying, marketing, storing, packing for shipment or distribution of: (1) Agricultural produce; (2) Meat and fish products; and (3) Perishable foods.

              The language in dispute in O’Connor was “packing for shipment or distribution.”  The employer argued that “packing for shipment” and “distribution” were two separate tasks identified in the statute and, therefore, because its delivery drivers were involved in the “distribution” of products, the drivers were exempt and not entitled to overtime.  The delivery drivers argued that because there was no comma after “shipment” in the statute, the last category of exempt workers in the statute were required to be involved in packing (i.e., either packing for “shipment” or packing for “distribution”).  The delivery drivers argued that because they did not perform any “packing” in connection with their jobs, they were not encompassed by the statute and therefore were entitled to overtime.

              The O’Connor court analyzed in detail the lack of a comma after “shipment” in the statute, finding various arguments asserted by both sides to be credible, but also rejecting various other arguments by both sides as unpersuasive.  In the end, the Court found that the lack of the comma rendered the statute ambiguous and, therefore, the court construed the ambiguity in favor of the delivery drivers, “as that reading furthers the broad remedial purpose of the overtime law, which is to provide overtime pay protections to employees.”  The case was then remanded to the lower court for further deliberations, and the overtime pay owed by the employer to the delivery drivers under the statute may reach $10,000,000.

Despite concerning a Maine statute, there are good lessons for all employers to glean from the O’Connor decision:

  1. Take care in preparing employment-related documents. While this lesson should go without saying, it is surprising how often employment documents, such as employment agreements and employee handbooks, are unclear, contain typographical errors, or otherwise don’t correctly express what the employer intends.  As the O’Connor case demonstrates, something as small as a missing comma can cause big trouble for employers.  The extra time it takes to carefully draft a document and have it reviewed by knowledgeable individuals is well worth it, as doing so may avoid confusion, employee disputes, and potential litigation down the line.
  1. Don’t rely on forms or boilerplate. Too often, employers try to save time and money by using old forms for new issues, or by using “off the shelf” forms from books, office supply stores or the internet.  Doing this can create a host of issues, as such forms may not be compliant with current employment laws, which are always evolving.  Further, such forms may fail to be compliant with the law of an employer’s particular state and lack necessary and required provisions.
  1. Periodically review your agreements, forms, and manuals. Not only does the law change over time, but the needs of an employer may change as well.  Even if an employer is not aware of any issues or problems, it should periodically review its employment-related documents to ensure they continue to meet the needs of the employer and to make revisions as necessary to avoid potential future problems.
  1. Consult Counsel. When in doubt, or when a document is important (which, in the author’s opinion, all employment-related documents are), it is worth having legal counsel assist with reviewing and drafting.  Beyond just being a second set of eyes on a document to catch ambiguities and errors, legal counsel can also ensure that necessary provisions are included, unlawful provisions are deleted, and that a document clearly expresses the wishes and intent of the employer. 

Carol G. Schley is a member of the Detroit SHRM Legal Affairs Committee and an attorney at the law firm Clark Hill PLC.  She can be reached at cschley@clarkhill.com or (248)530-6338.

Detroit SHRM encourages members to share these articles with others, inside and outside their organization, as long as its name and logo, and the author’s information is included in the re-post of the article. April 2017.

7th CIRCUIT’S LGBT RULING SETS STAGE FOR SUPREME COURT REVIEW OF ISSUE

By:  Claudia D. Orr

For those of you who participated in my webinar on March 21 (still available at – http://www.plunkettcooney.com/news-events-86.html ) or attended the Detroit SHRM Dinner on March 22, you are aware that federal appellate courts have been virtually uniform in their holding that a sexual orientation discrimination claim cannot be brought under Title VII, the federal civil rights law. For those who were unable to participate, let’s take a quick look at a recent case to bring you up to speed on the current state of the law.

In December 2016, the U.S. Court of Appeals for the 11th Circuit heard oral arguments in the appeal by Evans, a lesbian security guard who claimed she had been forced to resign from her employment because of her sexual orientation. Evans v Georgia Regional Hosp. The 11th Circuit hears appeals from federal district courts in Alabama, Florida and Georgia.

Chai Feldblum (the first openly gay EEOC Commissioner) was present during the hearing and commented that “it should have been clear in 1964 when Title VII passed that it protected gay and transgender employees.”  However, on March 10, the 11th Circuit disagreed and ruled that Title VII does not permit a claim for discrimination based on sexual orientation.

The dissenting judge in Evans strongly disagreed with the majority, stating:

Plain and simple, when a woman alleges … that she has been discriminated against because she is a lesbian, she necessarily alleges that she has been discriminated against because she failed to conform to the employer’s image of what women should be – specifically, that women should be sexually attracted to men only. And it is utter fiction to suggest that she was not discriminated against for failing to comport with her employer’s stereotyped view of women.

The 11th Circuit joined virtually every other federal circuit (including the U.S. Court of Appeals for the 6th Circuit, which hears appeals of cases from federal district courts in Michigan, Ohio, Tennessee and Kentucky) in holding that Title VII does not prohibit discrimination based on sexual orientation, until now…

Hively v Ivy Tech Community College of Indiana was brought by Kimberly Hively, who is openly lesbian, after she had been denied several adjunct professor positions by the college over the course of five years.  In its April 4 historical, but highly divided, en blanc ruling (meaning it was heard by all the judges in the circuit court), the U.S. Court of Appeals for the 7th Circuit held that “a person who alleges that she experienced employment discrimination on the basis of her sexual orientation has put forth a case of sex discrimination for Title VII purposes.”  In so ruling, the majority opinion expressly denied “amending” Title VII to add a new protected category. 

In a concurring opinion, Judge Posner agreed with the majority that the district court’s decision dismissing the case should be reversed but provided “an alternative approach that may be more straightforward,” stating:
I would prefer to see us acknowledge openly that today we, who are judges rather than members of Congress, are imposing on a half-century-old statute a meaning of ‘sex discrimination’ that the Congress that enacted it would not have accepted.  This is something courts do fairly frequently to avoid statutory obsolescence and concomitantly to avoid placing the entire burden of updating old statutes on the legislative branch.  We should not leave the impression that we are merely the obedient servants of the 88th Congress (1963-1965), carrying out their wishes.  We are not.  We are taking advantage of what the last half century has taught.

The three dissenting judges criticized the majority for legislating from the bench.  This is often seen as one of the differences between “liberal” and “conservative” judges/justices.  Those who are liberal tend to believe that it is their role to interpret a law based on the meaning it would have today (therefore interpretations of the law can change over time), whereas conservative judges tend to interpret the law based on the meaning of the legislature at the time the law was passed.

When there is a split in the opinions of the federal appellate courts on an important legal issue, as now exists, the U.S. Supreme Court may be asked to decide the issue.  Currently, the Supreme Court is equally divided with four justices who tend to be liberal and four who tend to be conservative.

A 4:4 Supreme Court opinion would mean that the Circuit Court opinion it is reviewing would stay in place. But this is complicated by the fact that if it agrees to hear one of the Circuit Court’s opinions on this issue, it may also hear a case ruling opposite at the same time.  This may result in a lack of clarity on the issue from any ruling by a divided court. 

However, by the time this issue is brought before the Supreme Court it is likely that a conservative justice will be confirmed by the Senate and on the bench.  Of course, that would place the balance of the court in the same position as it was when the court heard arguments on the constitutionality of state law bans on same-sex marriages and that resulted in the ruling that allowed for same-sex couples to be married nationwide.

What is odd is that, currently, a same-sex couple could be legally married on Saturday and both spouses could be fired by their employers on Monday when they place a picture from their wedding on their desk. This makes little sense. It will be interesting to watch this issue play out. 

If you need advice concerning LGBTQ issues in the workplace (including updating your policies and practices, or assistance when an employee discloses their transgender status), consult with an experienced employment attorney, such as the author. 

This article was written by Claudia D. Orr, who is Chair of the Legal Affairs Committee of Detroit SHRM, and an experienced labor/employment attorney at the Detroit office of Plunkett Cooney (a full-service law firm and resource partner of Detroit SHRM).  She can be reached at corr@plunkettcooney.com or at (313) 983-4863. For further information go to: http://www.plunkettcooney.com/people-105.html.

Detroit SHRM encourages members to share these articles with others, inside and outside their organization, as long as its name and logo, and the author’s information, is included in the re-post of the article. April 2017.

SUPREME COURT LIMITS APPEALS COURT REVIEW OF DISTRICT COURT DECISION REGARDING ENFORCEMENT OF EEOC SUBPOENA

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By Karen L. Piper

The United States Supreme Court has ruled that a federal Court of Appeals should have reviewed a district court’s decision not to enforce an EEOC subpoena for whether the district court abused its discretion, not whether the appeals court would have made the same decision.

The EEOC (Equal Employment Opportunity Commission) is authorized by Title VII to investigate charges of discrimination filed by an employee or by the EEOC, itself.  When investigating, the EEOC is entitled to access “’any evidence of any person being investigated or proceeded against that relates to unlawful employment practices covered’ by Title VII and is ‘relevant to the charge under investigation.’”  If the employer does not provide the information requested, the EEOC can issue a subpoena.  If the employer does not comply with the subpoena, the EEOC can ask a federal district court to enforce the subpoena and order the employer to provide the requested information.

In this case, an employee, who was discharged after failing a return-to-work physical evaluation three times following a maternity leave, filed a charge of sex (pregnancy) discrimination against her employer, McLane Co.  The EEOC expanded its investigation to include all McLane locations nationwide and to include employees who might have an age discrimination claim.  The EEOC asked McLane for information about other employees who were required to pass a physical evaluation.  McLane provided the information without identifying the employees.  The EEOC issued a subpoena for the employees’ names, addresses, telephone numbers and social security numbers.  McLane did not provide the information.  The EEOC filed suit to enforce its subpoena.  The district court declined to enforce the subpoena.  It ruled that the identifying information was not relevant because: “an individual’s name, or even an interview he or she could provide if contacted, simply could not shed light on whether the [evaluation] represents a tool of … discrimination.” (Brackets and deletions in original.)

The EEOC appealed.  The Circuit Court of Appeals for the Ninth Circuit reversed.  It ruled the identifying information was relevant.  McLane appealed. 

The Supreme Court ruled that the Court of Appeals should not have made an independent decision regarding relevance; it should only have reviewed the district court’s decision for an abuse of discretion.  The Supreme Court noted that district courts are well suited to determine both aspects involved in reviewing whether to enforce a subpoena: whether the information requested is relevant and whether it is unduly burdensome to provide in light of the circumstances.  Whether the information is relevant requires a court to evaluate the relationship between the information sought and the matter under investigation.  Whether producing the information is burdensome turns on the nature of the information sought and the difficulty the employer will face in providing it.  The district courts have discretion to make these decisions on a case-by-case basis.  The Supreme Court ruled that appeals courts should limit their review of these decisions to whether the district court abused its discretion, not whether the appeals court would have made the same decision.

Because the Ninth Circuit Court used the wrong standard in reviewing the district court’s decision, the U.S. Supreme Court vacated the appeals court’s decision and sent the case back to the Ninth Circuit to review the case again using the correct, abuse-of-discretion standard.

This ruling is good news for employers.  It is not uncommon for the EEOC to request information which exceeds the scope of an individual charge of discrimination.  Employers should have a better chance of convincing a trial court judge than an appeals court that the EEOC’s request for information is irrelevant, overbroad and/or burdensome.  Trial courts are called upon regularly to make these types of decisions.  The EEOC will be less likely to appeal an adverse decision knowing the appeals court review will be limited to determining whether the trial court abused its discretion.  When faced with a broad EEOC request for information or a subpoena that would be burdensome to answer, consult with experienced employment counsel, such as the author, on how to resolve the matter and/or whether to resist the request. 

This article was written by Karen L. Piper, who is Secretary of the Board of Detroit SHRM, a member of the Legal Affairs Committee, and a Member of Bodman PLC, which represents employers, only, in Workplace Law. Ms. Piper can be reached at Bodman’s Troy office at (248) 743-6025 or kpiper@bodmanlaw.com. For further information, go to: http://www.bodmanlaw.com/attorneys/karen-l-piper.

Detroit SHRM encourages members to share these articles with others, inside and outside their organization, as long as its name and logo, and the author’s information are included in the re-post of the article. April 2017.

AGE DISCRIMINATION MAY BE INFERRED FROM POORLY DOCUMENTED REASONS FOR SEPARATION AND THE REDISTRIBUTION OF WORK DUTIES

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By:
JAMES M. REID

If you read my last article earlier this month (“A Well Drafted Job Description/Attendance Policy Proved to be Critical In Defending A Disability Discrimination Claim”), you understand how crucial advanced planning can be to defending a discrimination lawsuit.  Likewise, you can guess what happens when an employer poorly documents or makes inconsistent statements regarding the reason(s) for separation.  In Hrapkiewicz v Wayne State University Board of Governors (“WSU”) (Unpublished March 9, 2017), the Michigan Court of Appeals affirmed the trial court’s denial of WSU’s motions to overrule a jury verdict finding age discrimination.  It also found that the jury’s verdict of $300,000 in damages plus costs of $4,403.84 and attorney fees of $261,180 was supported by the evidence.

In this case, WSU terminated the employment of a 62-year-old employee despite “excellent” reviews and 37 years of service.  Although the employee acted disrespectfully toward others at times and had “interpersonal conflicts” with staff, the employee was never disciplined or given written warnings.  WSU ultimately terminated the employee primarily for a “snowy day incident” (the employee permitted students to “show up” for an exam despite the school being closed for inclement weather).  WSU also identified “classroom concerns” (throwing an eraser at a student) and “financial irregularities” regarding the employee’s sale of syllabi (although WSU never confronted the employee about this concern, never conducted an independent investigation, and did not interview any witnesses to verify the alleged irregularities prior to termination).

The employer defended the age discrimination allegations by arguing that there was no evidence that age was a factor and/or that the employee was not replaced by a younger employee.  The court determined that a jury could find circumstantial evidence of pretext for unlawful age discrimination as a result of the employee’s favorable record over many years of employment and the inconsistent reasons for separation.  The court also determined that a jury could find that the employee was replaced (even though a younger worked was not hired to fill the position) because a younger employee was reassigned to assume a majority of the employee’s duties.

This case is a helpful reminder for employers to (1) independently investigate incidents leading to disciplinary action, and (2) timely document performance concerns well in advance of terminating an employee’s employment, especially if the employee has a long-standing stellar performance record.  Failing to plan in advance or seek the advice of experienced employment counsel exposes employers to a high risk of liability. 

This article was written by JAMES M. REID, a member of the Legal Affairs Committee of Detroit SHRM, a Resource Partner and Director of MISHRM, and a shareholder of the law firm of Maddin Hauser Roth & Heller PC located in Southfield, Michigan. He can be reached at (248) 351-7060 or jreid@maddinhauser.com. Detroit SHRM encourages members to share these articles within their organizations; however, members should refrain from forwarding them outside their organizations or printing for mass distribution without written permission of the Detroit SHRM Executive Committee. March 22, 2017

Eleventh Circuit Rules Title VII Does Not Prohibit Discrimination Based on Sexual Orientation

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By Karen L. Piper

Title VII of the Civil Rights Act of 1964 prohibits employers from discriminating against employees on the basis of race, color, religion, sex and national origin. On March 10, 2017, the U. S. Court of Appeals for the Eleventh Circuit (which covers Alabama, Florida and Georgia) issued an opinion ruling that Title VII does not prohibit employers from discriminating against employees on the basis of the employee’s sexual orientation. Evans v. Georgia Regional Hospital.

This case involved Jameka Evans, a gay woman, who worked for the hospital as a security officer. While Evans did not openly broadcast her sexual orientation, she asserted that it was “evident” that she identified with the male gender because she presented herself wearing a male uniform, having a male haircut, and wearing men’s shoes. She left the hospital voluntarily after 14 months.

Evans claimed that during her employment at the hospital, she was denied equal pay or work, harassed, and physically assaulted or battered. She further claimed that a less qualified individual was appointed to be her direct supervisor. When Evans complained about these violations to Human Resources, she was asked about her sexuality. This caused Evans to infer that her sexuality was the basis for the harassment. Evans also claimed sex discrimination because she did not comport with her manager’s gender stereotypes.

Evans filed a complaint with the EEOC (Equal Employment Opportunity Commission) and a subsequent lawsuit claiming that the hospital violated Title VII by discriminating against her on the basis of sex because of both her sexual orientation and her gender non-conformity. Evans represented herself, after the court denied her request for appointment of counsel.

The district court denied both claims. The court observed that every federal appeals court faced with the issue had decided that Title VII does not prohibit discrimination based on sexual orientation. The court also posited that Evans’ claim of discrimination based on gender non-conformity was “just another way to claim discrimination based on a sexual orientation” and dismissed this claim. Evans appealed.

The Eleventh Circuit Court of Appeals affirmed dismissal of Evans’ claim of discrimination on the basis of her sexual orientation.  Based on case law from all circuits that had addressed the issue, Title VII was “not intended to cover discrimination against homosexuals.” Several of these cases were written before the U.S. Supreme Court recognized same-sex marriage in Obergefell v. Hodges (2015).

The Eleventh Circuit recognized that discrimination based on failure to conform to a gender stereotype is prohibited sex-based discrimination as the U.S. Supreme Court had ruled in 1989 in Price Waterhouse v. Hopkins. In Price Waterhouse, a female accountant was denied partnership because she did not match the stereotypes of how a woman should look and act. Price was described as abrasive, brusque, and macho, and the employer complained that she should have walked, talked, and dressed more femininely. The Supreme Court ruled that Price Waterhouse had violated Title VII because an employer is prohibited from evaluating employees by assuming or insisting that they match the gender stereotype associated with their gender. While recognizing that gender non-conformity is a valid legal theory, the Eleventh Circuit agreed that Evans had not provided sufficient facts to show that gender non-conformity led to adverse employment action. The court granted Evans the opportunity to amend her complaint to support this claim.

Some of the U. S. appeals courts, most notably the Seventh Circuit (covering Illinois, Indiana, and Wisconsin) appear to be open to reconsidering local precedents ruling that sexual orientation is not protected. A three-judge panel of the Seventh Circuit affirmed dismissal of a sexual orientation claim based on local precedent in Hively v. Ivy Tech Community College, South Bend (July 28, 2016). In its opinion, the district court noted that the U. S. Supreme Court decisions recognizing same-sex marriage “create a paradoxical legal landscape in which a person can be married on Saturday and then fired on Monday for just that act.” The employee asked the full court to review the decision. The full court agreed and vacated its July 28, 2016 decision. (October 11, 2016). Oral argument was held before the full court on November 30, 2016. The parties are waiting for a decision.

The EEOC still holds the position that Title VII prohibits discrimination on the basis of sexual orientation. The EEOC also posits that a homosexual individual necessarily fails to conform to gender stereotypes because the stereotype is that individuals should be attracted to persons of the opposite sex. The EEOC’s position could change after President Trump fills an existing vacancy among the EEOC Commissioners and a vacancy that will occur on July 1, 2017 when Commissioner Jenny Yang’s term expires. For now, it is best to check with experienced employment counsel, such as the author, when dealing with a situation in which such a claim could become an issue.

This article was written by Karen L. Piper, who is Secretary of the Board of Detroit SHRM, a member of the Legal Affairs Committee, and a Member of Bodman PLC, which represents employers, only, in Workplace Law. Ms. Piper can be reached at Bodman’s Troy office at (248) 743-6025 or kpiper@bodmanlaw.com. For further information, go to: http://www.bodmanlaw.com/attorneys/karen-l-piper.

Detroit SHRM encourages members to share these articles with others, inside and outside their organization, as long as its name and logo, and the author’s information are included in the re-post of the article. March 2017.

COURT DECLINES TO ENFORCE NON-COMPETE AGREEMENT AGAINST AN ENTRY-LEVEL EMPLOYEE

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By Karen L. Piper

Many courts are reluctant to enforce non-compete agreements against entry-level employees, as was the result in the recent Goldfish Swim School v Aqua Tots decision. Steven Ogg worked part-time for Goldfish Swim School as a swim instructor earning $10 per hour and later as a deck supervisor earning $12.50. When hired, he signed an Employee Confidentiality, Non-Disclosure and Non-Compete Agreement. The agreement precluded Ogg from working for a competitor within a 20-mile radius of any Goldfish location for one year after ending his employment and from soliciting any Goldfish employees or customers for an 18-month period after separation. After Goldfish terminated his employment, Ogg began working for Aqua Tots, a direct competitor of Goldfish, in breach of his non-compete agreement.

Upon learning of his employment with Aqua Tots, Goldfish sued Ogg for breach of contract and sued Ogg and Aqua Tots for tortious interference with a contract and unjust enrichment. After some initial discovery and a hearing, the circuit court denied Goldfish’s motion for a preliminary injunction and dismissed the lawsuit. The Michigan Court of Appeals affirmed the circuit court’s decision. 

With respect to the denial of the injunction, the Court of Appeals agreed that Goldfish had failed to prove it would suffer irreparable harm if a preliminary injunction did not enter. The court relied on the fact that Goldfish had no evidence that Ogg had shared Goldfish’s curriculum with Aqua Tots, or taken any client contact information, or solicited any Goldfish clients, or caused Goldfish any financial harm.

With respect to dismissal of the lawsuit, the Court of Appeals determined that Goldfish’s agreement with Ogg did not protect a “reasonable competitive business interest.’” Under Michigan law, in order to be enforceable, a restrictive covenant must: protect an employer’s “reasonable competitive business interests;” and be reasonable as to its duration, geographical area, and type of employment or line of business. The court rejected Goldfish’s argument that the non-compete agreement was necessary to maintain the confidentiality of its swim instruction method, which it characterized as a trade secret. As the court noted, a trade secret is subject to efforts to maintain its secrecy. In this case, Goldfish taught its instructional method to children in front of hundreds of people every day.

Unlike its conclusion that the non-compete provision was unreasonable, the Court of Appeals concluded that the provision barring solicitation of Goldfish clients was reasonable. The court nevertheless affirmed the dismissal of Goldfish’s breach of contract claim because Goldfish had no evidence that Ogg had solicited any Goldfish clients in breach of the non-solicitation provision.

The court also affirmed dismissal of Goldfish’s claims against Aqua Tots for tortious interference and unjust enrichment. Goldfish did not present facts to show that Aqua Tots was even aware of Ogg’s non-compete agreement or that Aqua Tots, in any way, benefitted from Ogg’s prior employment with Goldfish. Aqua Tots had its own method of teaching children how to swim that was quite different than Goldfish’s method. 

This case is a timely reminder that courts look closely at non-compete agreements. Employers should review with counsel whether the non-compete provision protects a reasonable competitive interest and whether, in some cases, a non-solicitation of customers agreement may suffice. Also, to prevent employees from using or disclosing their trade secrets, employers should require all employees to sign a confidentiality and assignment of inventions agreement. BHB Investment Holdings, LLC v Ogg (unpublished, Michigan Court of Appeals No. 330045, Feb. 21, 2017).

This article was written by Karen L. Piper, who is Secretary of the Board of Detroit SHRM, a member of the Legal Affairs Committee, and a Member of Bodman PLC, which represents employers, only, in Workplace Law. Ms. Piper can be reached at Bodman’s Troy office at (248) 743-6025 or kpiper@bodmanlaw.com. For further information, go to: http://www.bodmanlaw.com/attorneys/karen-l-piper.

Detroit SHRM encourages members to share these articles with others, inside and outside their organization, as long as its name and logo, and the author’s information are included in the re-post of the article. March 2017.

DOL’S FIDUCIARY DUTY RULE MAY TAKE EFFECT APRIL 10 … OR NOT

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By: Claudia D. Orr

The US Department of Labor (“DOL”) not only manages the federal wage and hour law (Fair Labor Standards Act), it has administrative oversight of, and enforcement responsibility for, a host of other laws including the Employee Retirement Income Security Act. Commonly referred to as “ERISA”, the act regulates the pension and welfare (group health insurance) benefit plans sponsored by employers.  The DOL has published a final rule requiring anyone who provides investment advice to retirement plans (such as a 401(k) or an IRA) to comply with the fiduciary standard. Let’s look at why this matters to your plan and employees.

Financial advisors are compensated primarily in two ways: by an hourly fee or by commissions.  Those financial advisors who are paid by the hour are typically registered through the Financial Industry Regulatory Authority (“FINRA”) and, if so, are already bound by fiduciary standards. That means the advisor is required to provide advice and make recommendations that are in their clients’ best interests and not their own.

It is often mistakenly assumed that all financial advisors make investment recommendations that are in their clients’ best interests, but that is not necessarily true.  An advisor who is paid by commissions has an inherent conflict of interest because some of the financial “products” s/he offers to sell a client (such as annuities, etc.) yield higher commission payments to the advisor than others.  This incentivizes the advisor to recommend those products that will provide the advisor with higher commissions. 

Because of the inherent conflict of interest resulting from commission payments, some unethical advisors engage in “churning” client accounts. Churning is excessive trading largely to generate the commissions made with each purchase. Thus, the unethical advisor may suggest selling one annuity product and the purchase of another annuity product, repeatedly, when there is little or no financial advantage to the client and, in fact, may result in penalties for the early surrender.

To protect plans subject to ERISA (which are the only investment accounts that the DOL has jurisdiction over) and the savings of the plans’ participants, the new DOL rule requires all investment advisors providing recommendations concerning investment policies or strategies, portfolio composition, rollovers, transfers, etc. (with some limited exceptions) to abide by the fiduciary duty standard.

Some of the nation’s brokerage, advisory and insurance firms that sell financial products for commissions have lobbied hard to defeat the new rule, claiming it will be harmful to their industry. Some have predicted that certain financial products may all but disappear since an advisor may not be able to recommend the purchase of certain products that are seldom in the clients’ best interests. 

The rule was to take effect April 10, 2017. However, on February 3, 2017, President Trump issued a memorandum to the Secretary of Labor requiring the DOL to take a second look at the proposed rule.  In it, President Trump states, in relevant part:

           Department of Labor Review of Fiduciary Duty Rule.

(a) You are directed to examine the Fiduciary Duty Rule to determine whether it may adversely affect the ability of Americans to gain access to retirement information and financial advice. As part of this examination, you shall prepare an updated economic and legal analysis concerning the likely impact of the Fiduciary Duty Rule, which shall consider, among other things, the following:

            (i) Whether the anticipated applicability of the Fiduciary Duty Rule has harmed or is likely to harm investors due to a reduction of Americans’ access to certain retirement savings offerings, retirement product structures, retirement savings information, or related financial advice;

            (ii) Whether the anticipated applicability of the Fiduciary Duty Rule has resulted in dislocations or disruptions within the retirement services industry that may adversely affect investors or retirees; and

            (iii) Whether the Fiduciary Duty Rule is likely to cause an increase in litigation, and an increase in the prices that investors and retirees must pay to gain access to retirement services.

(b) If you make an affirmative determination as to any of the considerations identified in subsection (a)-or if you conclude for any other reason after appropriate review that the Fiduciary Duty Rule is inconsistent with the priority identified earlier in this memorandum-then you shall publish for notice and comment a proposed rule rescinding or revising the Rule, as appropriate and as consistent with law.

While the President’s memorandum to the Secretary of Labor does not provide for a delay in the rule’s implementation, it may have that effect or it could result in the revising or rescinding of the rule.  The DOL has issued a proposed rule that would delay the effective date of the fiduciary rule for 60 days (or until mid April) and requested public comment on the proposed delay and on the February 3rd directive by the Whitehouse.

At the time President Trump issued his memorandum, his nominee was Andrew Puzder who, according to the New York Times, came from the business sector (former CEO of the company that franchises Hardee’s and Carl’s Jr. restaurants) and has been an outspoken critic of many worker protections enacted under the Obama administration including an increase to the federal minimum wage.  However, amid growing resistance, Puzder withdrew from consideration.  President Trump has since nominated Alexander Acosta for Secretary of Labor, who is viewed as more friendly to labor than the original nominee.  While this rule has been years in the making, there is now a cliff hanger.  Stay tuned!

Incidentally, plan sponsors (employers) have been coming under attack for not providing appropriate investment options for employees. Often the issue is the high fees attributable to the mutual funds being offered.  In January, for example, Schwab was sued in a California federal district court by its own employees who complained that their employer (Schwab) breached its fiduciary duties by providing them with expensive and poorly performing investment choices. You guessed it…the funds offered were Schwab funds. 

The lesson today is that employers need to be careful who they receive advice from and carefully evaluate the mix of funds being offered to their employees.  For example, many employers now include among the investment choices some exchange traded funds (ETFs) which on average have significantly lower administrative fees than mutual funds.  Obtaining sound advice from an advisor having a fiduciary responsibility is the key.

This article was written by Claudia D. Orr, who is Chair of the Legal Affairs Committee of Detroit SHRM, and an experienced labor/employment attorney at the Detroit office of Plunkett Cooney (a full service law firm and resource partner of Detroit SHRM).  She can be reached at corr@plunkettcooney.com or at (313) 983-4863. For further information go to: http://www.plunkettcooney.com/people-105.html.

Detroit SHRM encourages members to share these articles with others, inside and outside their organization, as long as its name and logo, and the author’s information, is included in the re-post of the article. March 2017.

A Well Drafted Job Description/Attendance Policy proved to be Critical in Defending a Disability Discrimination Claim

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By:
JAMES M. REID

In Williams v. AT&T Mobility (6th Cir 2017), the United States Court of Appeals for the Sixth Circuit ruled that the employer’s termination of the employee was not a violation of the Americans With Disabilities Act because regular attendance was an essential function of the job and the employee could not perform that function.  The court relied in part on EEOC v Ford Motor Co. (6th Cir 2015), which reasoned that “[r]egular, in person attendance is an essential function . . . of most jobs, especially the interactive ones.” In addition, this employer listed regular attendance as an essential job function and prepared a strict attendance policy in advance of any attendance issues with this employee.

In this case, the employee suffered from depression and anxiety that caused her to miss work.  During her approximately 8 years of employment with the employer, her job duties included answering incoming calls and assisting customers while being logged in to her work computer. Although the employee had attendance issues throughout her employment, she missed approximately 7 months straight due to depression and anxiety attacks.  Thereafter, she had sporadic attendance and remained on short term disability leave for several additional months.  When the employee returned, she was warned that she would be terminated if she continued to have unexcused absences pursuant to the employer’s attendance policy.  While the employer was evaluating whether her additional absences were excused, medical evidence revealed that “she could not function at work in a call center environment” and “could not focus mentally due to mental illness.”  As a result of being incapable of having regular attendance, her employment was terminated. 

The employee sued the employer for: (1) failing to accommodate her disability; (2) failing to engage in the interactive process; (3) disparate treatment; and (4) retaliation.  As to the first claim, the employee “failed to propose any reasonable accommodation that would have allowed her to perform the essential functions of the job” since she “could not work at all for significant periods of time”.  Since the employee could not prove she was qualified to perform the job with or without a reasonable accommodation, the court did not have to address her interactive process and disparate treatment claims.  Regarding her retaliation claim, the employee was unable to show any “causal connection” between her accommodation requests and employment termination.  The court acknowledged that “there are some jobs that a person with disabilities is simply unable to perform.”

 This case gives helpful guidelines to allow employers to plan in advance and proceed with termination if the employee is unable to perform the essential job functions with or without a reasonable accommodation.  However, these accommodation cases are very fact specific.  By way of example, this case may have been decided differently if the employee was: (1) able to have regular attendance with flexible scheduling, modified break times, and/or additional leave; or (2) in a position that did not require regular attendance at the worksite as an essential function of the job.  Employers are encouraged to plan in advance by seeking the advice of counsel when creating job descriptions, drafting handbook policies, or responding to employee requests for accommodations.

This article was written by JAMES M. REID, a member of the Legal Affairs Committee of Detroit SHRM, a Resource Partner and Director of MISHRM, and a shareholder of the law firm of Maddin Hauser Roth & Heller PC located in Southfield, Michigan. He can be reached at (248) 351-7060 or jreid@maddinhauser.com. Detroit SHRM encourages members to share these articles within their organizations; however, members should refrain from forwarding them outside their organizations or printing for mass distribution without written permission of the Detroit SHRM Executive Committee March 1, 2017.

Further Evidence Concerning Importance Of Well Drafted Employment Applications

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By:  Claudia D. Orr

One of my recent articles entitled “One Fibber and Two Dismissals” emphasized just how important it is to have your employment application reviewed by a competent, experienced employment attorney. That article showed how an employer obtained dismissal of a sexual harassment claim because of a “resume fraud” defense built into its employment application. Now, in Sams v Common Ground, the Michigan Court of Appeals affirms dismissal of a disability discrimination case because of another defense built into the employment application. 

We know very little about the facts of the case because, other than timing of events, they simply aren’t relevant to a dismissal based on a limitations period. On August 15, 2011, the plaintiff applied for work at Common Ground.  The application required the applicant to agree to a one year contractual limitations period, meaning any lawsuit against the employer had to be brought within one year of the accrual of the claim, or it was time barred.  Plaintiff was hired as a crisis interventionist, but was reassigned to the position of a recovery coach within a year. That position lowered plaintiff’s wage rate and affected his fringe benefits.  A few weeks later, plaintiff tendered his resignation, resigning effective September 30, 2012. 

Two and a half years later, plaintiff filed a lawsuit claiming Common Ground violated Michigan’s Persons with Disabilities Civil Rights Act and that he had been constructively discharged (meaning his employer’s actions left him with no choice but to resign).  Normally, claims brought under Michigan’s civil rights statutes are subject to a three year statutory limitations period.

However, based on the contractual limitations period found in the employment application, the circuit court dismissed plaintiff’s lawsuit and the appellate court affirmed. Plaintiff challenged the contractual limitations period on numerous grounds (including unconscionability) all of which were rejected because the clause had been properly drafted.

As I often say, a well drafted employment application is an employer’s first line of defense.  The contractual limitations period that I draft requires claims to be brought within 180 days. However, for this to be enforceable as to federal discrimination claims it must be drafted in a manner that considers the filing of charges filed with the Equal Employment Opportunity Commission.  While the Commission takes the position that any shortened limitations period is unlawful as to federal discrimination claims, there is ample case law to suggest otherwise.  If you have not had your company’s employment application reviewed recently by experienced employment attorney, such as the author, it is advisable to do so sooner rather than later since the next employment claim could be right around the corner.

This article was written by Claudia D. Orr, who is Chair of the Legal Affairs Committee of Detroit SHRM, and an experienced labor/employment attorney at the Detroit office of Plunkett Cooney (a full service law firm and resource partner of Detroit SHRM).  She can be reached at corr@plunkettcooney.com or at (313) 983-4863. For further information go to: http://www.plunkettcooney.com/people-105.html.

Detroit SHRM encourages members to share these articles with others, inside and outside their organization, as long as its name and logo, and the author’s information, is included in the re-post of the article. February 2017.