Lou Michels and Rod Satterwhite are partners in the Labor & Employment group at McGuireWoods LLP. Both handle employment litigation on behalf of employers, and advise companies on employment issues regularly.

December 2007 - Posts

FMLA Amendment Likely for Military Families

I don't usually quote myself (at least not publicly), but we just sent out a client alert regarding a likely amendment to the FMLA that would expand benefits to include certain types of leave relating to military service, and family care for wounded soldiers.  The amendment contains no effective date, and is expected to be signed by President Bush, so you may want to become familiar with it.  Read the client alert here.  Happy Holidays.

UPDATE 1/2/08:  As Lou pointed out in his comment, this bill was pocked vetoed by the President last week.  The reasons, however, were unrelated to the FMLA provisions, so a revised version is possible once Congress returns.  - RAS

Update 1/30/08:  The president has now signed the DoD Authorization Act with this provision, and it is effective immediately.

Advice on How Not to Non-Compete

Although the enforceability of non-compete agreements varies widely across the country (in California they are effectively unenforceable, while in other states employers use them with impunity), there are some basic rules for drafting non-competition agreements that apply in most places.  A recent court of appeals case out of Illinois has a very useful discussion on the elements of what makes up a solid non-compete agreement.  Here are some basic principles:
 
1.    "Pigs get fed, hogs get slaughtered."  Most non-competition agreements falter because of over-reaching by the former employer.  While it may seem like a good idea to prohibit a former employee not only from working in your neighborhood, but in this dimension as well, most courts simply will not enforce such a provision.  Remember, courts view non-compete agreements as restraints on trade, and, accordingly, with suspicion and hostility.  Add to this the relative imbalance in bargaining power between an employer and someone seeking to hold a job, and you have a recipe for unenforceability.  Instead of trying to stop your sales manager from going to work for anyone within a thousand miles of an operating location, restrict her from working with former customers.  In other words, there should be a logical and articulable connection between the damage you want to prevent and the steps you are taking to prevent it. 
 
2.    Don't start with geographic or time restrictions; focus on the nature of the job.  In the Illinois case, the court invalidated the agreement in large part because it prohibited the former employee from working for a competitor in any capacity whatsoever.  The court's interpretation of the non-compete was buttressed heavily by the testimony of the employer's president, who cluelessly testified on cross-examination that the purpose of the clause in question was to prevent his former salesman from doing any work for a competitor in any role.  Someone did not spend enough time at the woodshed with the witness, obviously.
 
3.    Link your geographic limitations directly to the territory of the business operation, and no more.   The Illinois non-compete operated to restrict the former employee's ability to conduct business on behalf of a competitor throughout Canada, among other places.  Unfortunately, the employer had only conducted business in Toronto, and then only on one occasion.  The appellate court promptly seized on this (remember, courts are looking for excuses to invalidate these agreements) as a basis for voiding the agreement.  In other words, don't try to prevent business from taking place in a place where you are not taking business.
 
4.    Make the timeframe for the restriction logical in light of the business activity being restricted.  In one of my non-compete cases involving the high-tech sector, a judge in Virginia asked my client during the injunction hearing how long he thought his products would be on the market before being rendered technologically obsolete by industry improvements.  "Somewhere in the 9-12 month timeframe," said the Chief Technology Officer witness, which happened to coincide nicely with the 12-month timeframe on the restrictive covenant.  The judge granted the injunction, noting that he could not have supported a request for a longer limitation, given that there would be no protectable interest more than 12 months after the employee quit.
 
5.    When you are hiring someone with a restrictive covenant that might be enforced against her (and against you), try to treat the former employer as you would like to be treated.  What I mean by this is that I usually find business people are willing to try to reach a business solution on enforcing non-competes if they believe they are being confronted by business people on the other side.  Quietly hiring people with non-compete agreements under circumstances that are clearly a violation is almost always going to result in litigation and an implication that the company doing the hiring knew it was doing something wrong.  In my experience, you are far better off confronting the fact that the person you want to hire has a restrictive covenant in place and offering to strike some kind of business arrangement with the former employer. 
 
At the end of the day, you do not want to be in litigation because you guessed wrong either on how much you could restrict your former employees or how enforceable the terms of that non-compete actually are.  Unlike a lot of things in employment law, with non-competes, less actually is more.
 
 

How Not to Fire a Coach

Frequently, I read the report of a case, and after reviewing the facts, ask myself, "I wonder what really was going on here?"  Such a case is Peirick v. Indiana University-Purdue University (I always thought they were two different schools)  Indianapolis, a recent gender and age discrimination claim. 
 
The school fired Peirick, the women's tennis coach, after 13 years of work, and immediately after the tennis team went undefeated during regular season play (a first), won the conference championship, became the first women's team at the school to advance to the NCAA post-season tournament, and after she was named a College Coach of the Year by the U.S. Professional Tennis Association.
 
Okay, folks.  Big red flag here -- if you're going to fire a coach after she's led your athletic team to its best year in school history, and recognition at a national level, you'd better have solid evidence of some pretty significant misconduct or other failing.  What you absoutely can't do is summarily terminate her with no warning, on the basis of:  equivocal complaints by a couple of players about coaching style, a complaint about driving habits, and allegedly blaming school administrators for failure to properly schedule a tennis tournament in a selected venue.  You especially can't terminate someone for this conduct if you wait months after the last incident before making the termination decision and don't bother to raise any of these complaints with the coach yourself.  Finally, you absolutely, positively should not terminate a female coach for this conduct after you've tolerated similar conduct on the part of male coaches and given them the chance to improve, and you replace the 13-year veteran coach with a 23-year-old novice and start by paying her more than the 13-year veteran. 
 
Of course, this is exactly what the University did and the 7th Circuit called the administration on it.
 
Like I said earlier, I wonder what really was going on.  My guess is that somebody badly wanted the tennis coach gone for a reason that no one wanted to articulate and so the administration cobbled together whatever bad things it could find in order to justify the decision.  Or perhaps the 23-year old replacement was perceived to be a dramatic upgrade in quality of coaching and the administration wanted to bring her in right away.  But the entire decision smells fishy -- which is exactly why there's going to be a trial to sort this all out.  But I'm guessing we still won't know the real reason at the end of the process.
 
 

Old School Flying

The saying goes that, "There are old pilots and there are bold pilots, but there are no old, bold pilots."  It's also true that in the United States, there are no old commercial pilots at all, at least over the age of 60, because the FAA has consistently enforced a rule first put into effect back in the 50s that requires commercial pilots to retire at age 60.  The basis of the rule is the belief that flying requires keen sensory acuity and rapid-fire reflexes that are incompatible with the condition of average pilot once he reaches age 60.  These kinds of attributes were especially critical in emergency situations. 
 
Of course, this type of blatant age stereotyping has been undercut by the fact that we now have astronauts fly at or above age 60.  And the requirement that pilots need to be at the absolute peak of physical capability has been reduced substantially by the numerous automated systems in modern commercial jets that greatly limit the need for instantaneous, "white-knuckle" responses to in-flight emergencies.  So it was not too surprising when Congress passed a bill recently lifting the mandatory retirement age to 65 for commercial pilots.
 
Most modern aviation accidents are the result of some type of error in judgment on the part of the crew, either in misinterpreting or misreading instrument settings, or misjudging the weather or physical state of the aircraft.  And there is no doubt that more "experienced" pilots generally have better judgment than younger pilots in these types of situations.
 
The President signed the legislation almost immediately.  Strike another blow against age-related stereotyping, although international treaty requirements will mandate that airlines cannot put two pilots over the age of 60 in the same cockpit at the same time.  I suspect that restriction will eventually fall by the wayside as well as the air-traffic control corridors become more regulated and flying safety becomes even less dependent on physical capability.

Sad Milestone for Santa

Workplace training has reached a new low.  In this article from an Austrailian newspaper, it appears that a temporary staffing agency has told its department store Santa workforce this season that they may no longer use the phrase "Ho! Ho! Ho!".  The reason:  (and I kid you not) "[t]he term 'ho' is . . . American slang for a prostitute" and, according to one would-be Santa, "[w]e were told it (ho) was a derogatory term for females and can upset people."  Instead, according to the training program, the Aussie St. Nicks were told to spread the holiday sprit with a rousing "Ha! Ha! Ha!".

Now despite our bitter and somewhat jaded approach to workplace harassment issues, I think I can speak for both Lou and myself when I say this goes a little too far.  Silly as this story is, it is also somewhat indicative of a growing trend in the workplace to over-regulate worker behavior out of a fear, however remote, of offending someone.  Such sterilization, however, is not what the law requires.

This trend, in fact, warrants a quick reminder of the real standard for illegal workplace behavior.  To be actionable, offensive behavior must be sufficiently severe and pervasive to affect a person's ability to perform the functions of their job.  Courts weigh these two factors on a sliding scale to determine whether the behavior would be objectively offensive to a reasonable person, so the more severe the behavior (such as physical touching or assault), the less often it has to occur in order to constitute harassment.  Likewise, relatively minor behavior (jokes, comments, etc.) must happen more frequently to reach an actionable level.  The standard is not, and never has been, that employers must eliminate any potential source of offense from the workplace.  Indeed, if it did, law firms might not exist.

In my experience, most employers genuinely want to create an environment for their employees that is comfortable and free of harassment.  However, the current litigious environment, exacerbated by the ever-thinner American psyche, has caused many employers to become gun shy about what they permit their employees to do and say.  There is still a place for balance and common sense in managing workplace behavior, and it's possible for employers to legally strike that balance without slapping a gag order on jolly old St. Nick.  Oops.  Did I say "old"?  I meant "experienced."

Supremes to Rule on Major ADA Issue

This term the Supreme Court continues to take on some vexing employment law issues . On December 7, 2007, the Court decided to review an Americans with Disabilities Act case that addressess a fundamental ADA issue--whether an employer has to reassign an employee with a disability to a vacant job instead of other, more qualified, applicants.

The case is Huber v. Wal-Mart Stores Inc., No. 07-480. Huber worked as a grocery order filler for Wal-Mart and sustained a work-related, permanent injury to her right hand and arm. The injury left her unable to perform the essential functions of her normal job, and she requested a reassignment to another vacant position, that of "router", for which she was qualified and that had equivalent pay.  After considering Huber's application along with several others, Wal-Mart applied its policy of hiring the most qualified applicant and elected not to transfer Huber into the router job. Instead, she was offered another vacant job that paid approximately half what she'd earned in her previous position.

Huber did not dispute the fact that the person hired for the router position was more qualified than she was and that Wal-Mart consistently applied its policy of hiring the best qualified person for the job. Instead, she argued that "reassignment to a vacant position" is cited by the ADA as an example of a reasonable accommodation that an employer has to provide to a disabled employee. The Eighth Circuit ruled for the employer, noting that the ADA was not an affirmative action statute and did not require an employer to treat a disabled employee better than it would treat a nondisabled employee by making an exception to its normal employment policies.

The Eighth Circuit's decision is at odds with the EEOC's interpretation of the ADA. But federal courts routinely reject the EEOC's guidance on employment law. And there is plenty of other federal case law out there that says that employers are not required to treat disabled employees differently than they would nondisabled employees in the same situation.

I would hope the Court affirms the Eighth Circuit's decision and puts this issue to bed once and for all. But there are plenty of pressures, legal and political, pushing the court the other way. The ADA has been a spectacularly unsuccessful statute in terms of its professed goal of getting more disabled Americans back to work. A legal requirement that an employer must reassign a disabled employee to a specific vacant position- in essence treating the disabled employee as "super qualified"-is one remedy that has been pushed by the plaintiffs' bar for some time.

Stay tuned.

Party Time

It's the period between Thanksgiving and New Year's, otherwise known as "The Danger Zone" in the employment law world because of--wait for it--the dreaded office party.

I've counted at least five separate articles published on various employment law websites, on CNN, and in the local paper on how one should conduct oneself at the office Christmas / holiday party. If those who do not know the past are condemned to repeat it, then nobody is paying attention to what happens after hours between Turkey Day and the Rose Parade. So, in the interests of public service and brevity (because I have two exceedingly long posts already this month), let me give you a quick guide to avoiding problems during this most treacherous time of the year.

First, and most important, Rule: Don't drink. By this I mean you don't drink alcohol; water, Coke, green tea are all just fine. But alcohol, mixed with office politics, some low-cut blouses, and the occasional ill-placed sprig of mistletoe, appears to be the root of all evil. In fact, one article that listed ways to prevent company party lawsuits dealt with nothing but alcohol consumption.

Second Rule: Don't dance. This is especially true if you are now shopping for your suits in the "portly" aisle of the men's department, are buying dresses in two digit sizes where the numbers add up to more than 10, or have the sense of rhythm and body awareness of a rhinoceros.

Third Rule: Avoid any combo-violations of Rules One and Two at the same party.

Last Rule: Avoid all deep and meaningful conversations with anyone, including your spouse/significant other. By "deep and meaningful", I mean all topics except for: a) the weather; b) the local sports franchises; c) how the weather affects the local sports franchises; d) where people bought their shoes.

Some of you are reading this now and saying to yourselves, "But this will prevent anyone from having any fun!" To those of you to whom this applies, you should stay home drinking under the mistletoe, discussing the 2008 Democratic primaries with your dance partner, because you obviously do not understand the purpose of the office party. It's not to have fun, it's to socialize in a restrictive, high threat environment. And hope that somebody dances.

Happy holidays.

Supreme Court Reviews Anecdotal Evidence

One of the sure things about employment litigation is that people who claim they are being mistreated at work because they are male, female, black, white, Jewish, Catholic, old, etc. have a posse of enablers or other types who are happy to support the cause with their own "stories" of discriminatory treatment. Frequently, a sizable part of pretrial efforts is filtering out these unrelated claims of discrimination, which range from specific horror stories of mistreatment (which are almost never reported) to more general "everybody knows that Bob doesn't like women" types of statements.

Not only is this type of evidence a part of most discrimination claims, the stories are extremely dangerous if they get admitted at trial. Instead of having to defend against one claim of employment discrimination, an employer suddenly finds itself having to defend against half a dozen, but without the ability to deal with them as effectively because they were not part of the original charge. Often a jury will be overwhelmed with this type of evidence, assuming that if five or six other people come forward now to claim discrimination, there must have been something improper going on, notwithstanding a failure to raise the issue when the conduct actually occurred.

Usually this evidence gets excluded either prior to or at trial. However, the issue has now made it to the top of the legal food chain--the Supreme Court heard oral arguments at the end of November on whether so-called "me too" evidence should be admitted in an age discrimination case.

The case is Sprint/United Management Company v. Mendelsohn, a case out of the 10th Circuit. The plaintiff was a 16-year, mid-level manager who was laid off as part of a reduction in force that extended over three years. She sued in 2003 alleging age discrimination in the layoff, and the District Court granted Sprint's motion to exclude evidence of allegations of discrimination against five other Sprint employees outside the plaintiff's supervisory chain. A jury found for Sprint.

On appeal the 10th Circuit reversed, saying that these other claims of discrimination, even though they were not within the plaintiff's chain of command, were relevant because of the companywide nature of the reduction in force.

At the Supreme Court oral argument, Sprint claimed that the plaintiff's real reason in offering the five witnesses was to bolster her claim, which was weak, with additional unrelated evidence. As the enforcer of federal antidiscrimination laws, the government argued that in some cases anecdotal statements might be appropriate, such as where evidence concretely suggests that a companywide campaign of discrimination is going on, but absent that it should be excluded.

Plaintiff's counsel responded by saying that even where the evidence was overly prejudicial to the employer (and that will be in just about every case), the prejudice could be easily remedied by the proper jury instructions. Yeah, right, jurors routinely follow judges' instructions to ignore inflammatory evidence. Not in my experience, buckaroo. The other major danger here, of course, is that if this evidence is found to be relevant for trial, that means it's relevant to the summary judgment claim as well. Not only could you be litigating each of the anecdotal claims at trial, these claims could preclude you from getting summary judgment in the first place.

Based on the comments from the justices at oral argument, I'll hope the court ends up at the place where it's headed right now--namely to have the trial judge make this call, and allowing the evidence in only where there is other evidence of a companywide or division wide plan of discrimination. Otherwise these cases will become more complicated by an exponential factor.

Age Discrimination Releases and Remedies

Two recent decisions here are of particular note for employers seeking to prevent age discrimination claims.

A case out of the Northern District of California limits some of the more creative ways that the plaintiff's bar is trying to contort federal employment discrimination law. In Syverson et al. v. IBM Corp., (No. C-03-04529), IBM released several thousand employees pursuant to a four-year ongoing reduction in force. As is normal in these cases, it offered severance packages to employees selected for termination in exchange for signing releases and covenants not to sue.

Unfortunately, the Ninth Circuit ultimately determined that the releases were not compliant with the Older Workers Benefits Protection Act, and invalidated them. The plaintiffs in this case then sued IBM for violation of the OWBPA, seeking injunctive relief to prevent IBM from reinstating the voided releases, an injunction requiring IBM to inform all of the employees terminated as part of the four-year program that the releases were invalid, and an injunction requiring IBM to not engage in further acts of discrimination. For good measure, the plaintiffs also sought an order from the court that stopped the statute of limitations from running for all employees terminated during the same time on federal employment discrimination claims.

Note that the basis for these claims was not a violation of the Age Discrimination in Employment Act, but rather a portion of that statute, the OWBPA, which, on its face, deals only with the subject of valid waivers of age discrimination claims.

After reviewing cases from a variety of jurisdictions, the court ruled that there was no basis for it to enforce anything under the OWBPA because that portion of the age discrimination statute did not contain any rights-creating language. As the Court noted, there was nothing to suggest that the OWBPA gave any rights other than voiding releases that were not in compliance with it. As a result, the court properly dismissed this portion of the lawsuit, no doubt prompting a sigh of relief from IBM's legal team which did not have to confront the reopening of an even larger can of worms that it already faced.

And a decision out of Minnesota, which is almost as good a place to sue as California, again reinforces the need to properly draft the OWBPA waiver and carefully manage the process once you distribute the releases to the workforce.  In Peterson et al. v. Seagate US LLC, (No. 07-2502), the Court invalidated age discrimination releases, allowing an age discrimination class-action to proceed.  The court also allowed all of the potential class members, even those who had not filed charges of discrimination, to "piggyback" on the timely filed charges of only two individuals. 

In assessing the OWBPA compliance of Seagate, Court noted that the OWBPA provisions require strict, unqualified adherence and that substantial compliance with the OWBPA provisions is not sufficient to secure a release of claims.  The court found that the allegations contained in the complaint-that Seagate failed to properly identify all of the employees subject to the reduction in force decision; that Seagate human resources asked the employees to sign the releases immediately without allowing the opportunity to consult with an attorney (and that human resources personnel stood at the doorway of the facility collecting signed releases as the terminated employees were leaving); that Seagate failed to include the selection criteria and eligibility factors used to select individuals chosen for termination; and that Seagate failed to properly identify the decisional unit affected by the reduction in force-were more than adequate to void the releases. 

Just as an aside, if you're going to hand out release documents that tell people they have 45 days to consider their options and that they should consult with an attorney, as required by the OWBPA, it's generally a bad idea to encourage or even suggest that people should immediately sign the waivers.

We are going to see more and more large-scale age discrimination claims in litigation, if for no other reason than the aging workforce will not "go gently into that good night". As a result, you can expect to see more creative interpretations of the ADEA, which simply reinforces the requirement to get these releases correct the first time.

ERISA Floodgates?

Again, my apologies for the paucity of posts--I've been away at trial for several weeks and cleaning up after that.

The Supreme Court heard oral arguments recently on an ERISA case that has wide-ranging implications. Larue v. DeWolff Boberg & Associates came before the court on November 26. The case involves a claim by an individual 401(k) pension plan holder against the pension plan administrators for a breach of fiduciary duty. This is a potentially landmark case, because it will be the first real test before the Supreme Court on the rights of an individual employee to seek liability against pension plan administrators directly where the individual's 401(k) investment turns out badly.

Most commentators are predicting a win for the employee. From my viewpoint, while such a win might be correct from a purely legal perspective, holding plan administrators individually liable for investment decisions in employer managed pension plans will probably open a flood gate of litigation both at the class-action and individual level. Without some type of statutory fix by Congress, it could mean that employers will simply get out of the pension business, forcing their employees to take the initiative to save on their own.

From a public policy perspective, this could be a disaster. Much like health insurance, most people have virtually no experience setting up a pension fund other than the one offered through their employer. With Social Security slated to go bankrupt within two generations, cutting the available options for private sector saving should be avoided at all costs.