What to do When an Employee Sues Your Company

No matter how compliant and good intentioned a company may be with its legal obligations, it does not eliminate the possibility that a disgruntled employee will file a discrimination claim against the company.  It is important to rationally approach the situation and the following steps are recommended to minimize the company’s exposure.

  1. First and foremost, the company should create an organized response with a single person in charge of overseeing the response.
  1. It is critical to immediately identify all relative documents whether those are paper or digital. Once these documents have been identified, the company should make sure they are secured and preserved for future use.
  1. Under no circumstances should the company take any action against the employee if that employee is still currently with the company. The law prohibits retaliating against employees who have engaged in protected activity.  The worst thing the company can do is to take what might have been a meritless claim and turn it into a real problem by retaliating against the employee.
  1. The company should also check to see if it has employment practices liability insurance. If so, a timely claim should be filed.  If the policy allows the company to select its own attorneys, it should do so as soon as possible.

If the company does not have insurance, it should immediately obtain experienced counsel to help it through the process.  There are many nuances in defending employment claims that an unexperienced attorney or lay person will not have the necessary expertise to handle appropriately.

  1. Finally, it is important to insulate the claim as much as possible from the workforce. Steps should be taken to make sure that communications regarding the claim be privileged and confidential.  The matter should not be openly discussed in front of other coworkers unless they are witnesses and have a meaningful need to participate in the defense.

If you have any questions about this article, please contact its author, Mark Sauer, at 715-845-8234 or msauer@mzattys.com.

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The Rules of Attraction: Do Employers Need Workplace Dating Policies?

In light of the recent spotlight on sexual harassment in the workplace, it is important for employers to think about the somewhat squeamish topic of workplace romance.  As long as employees interact with each other during the workday, there is always a chance that romantic relationships may develop.  This issue presents an interesting balancing act between respecting the privacy of employees and protecting an employer from legal liability.  Read More… “The Rules of Attraction: Do Employers Need Workplace Dating Policies?”

Using Arbitration Agreements With Employees To Control Costs and Exposure

A useful tool that I do not see enough employers using is arbitration agreements with their employees.  There is no doubt that using arbitration agreements has positives and negatives, but it is one of the very few, limited ways in which an employer can force an employee to forego the rather ridiculously lengthy and expensive processes involved with defending claims for discrimination, retaliation, or the like.  As such, more employers should be using arbitration agreements to proactively address such situations. Read More… “Using Arbitration Agreements With Employees To Control Costs and Exposure”

Client Alert: U.S. Supreme Court Upholds Mandatory Arbitration Clauses in Employment Contracts

On Monday, May 21, 2018, the United States Supreme Court in Epic Systems Corp. v. Lewis, ruled in a 5 to 4 decision that employers can utilize mandatory arbitration provisions to bar employees from bringing class-action lawsuits over employment disputes.  In reconciling conflicting federal laws, the Supreme Court held that mandatory arbitration agreements providing for individualized proceedings must be enforced.

As a practical matter, the Court’s decision is a big win for employers.  Companies may include provisions in employment contracts that require employees to bring any dispute through individualized arbitration and bar the filing or joining of a class-action lawsuit.  As compared to arbitrating a single employee dispute, a class-action lawsuit, even a frivolous one, can consume substantial time and resources.  Employers would be wise to consult with an attorney about whether using mandatory arbitration agreements could be beneficial to help limit potential claims and damages over employment related disputes.

The Supreme Court’s decision can be accessed here.

For more information on the history of this case, please see a prior Mallery & Zimmerman blog post.

U.S. Supreme Court Changes Course on 70 Years of Federal Overtime Law

A recent United States Supreme Court decision has changed the game in interpreting whether employees are exempt from overtime requirements.  For more than 70 years, the Court has interpreted exemptions to the Fair Labor Standards Act (“FLSA”) narrowly.  The FLSA is a 1938 law that requires employers to pay overtime to certain employees who work more than 40 hours in a week.  There are many categories of employees who are exempt from this requirement.  The Court, however, has long-held that such exemptions should be construed narrowly with an eye towards the payment of overtime.  On April 2, 2018, the Court departed from this principal.  Read More… “U.S. Supreme Court Changes Course on 70 Years of Federal Overtime Law”

Telecommuting and the Americans with Disabilities Act

A recent decision from the United States 6th Circuit Court of Appeals found that working remotely can be a reasonable accommodation under the Americans with Disabilities Act. Employers should always remain cautious about applying rigid and inflexible rules to requests for reasonable accommodations.

In Meachem v. Memphis Light, Gas & Water Division, the Plaintiff was an in-house employment attorney for Memphis Light. After a history of miscarriages, her physician placed her on bed rest for the last 10 weeks of her pregnancy. The Plaintiff requested that she be allowed to work from home as an accommodation. Her employer denied the request. The 6th circuit found that she could perform the essential functions of her job remotely for the applicable time period. It also found that other employees had been allowed to work from home without objection. Therefore, the Court upheld the jury verdict in favor of the Plaintiff finding that her employer had violated the Americans with Disabilities Act.

The real lesson from cases such as this is inflexible policies simply do not work with the Americans with Disabilities Act. Employers need to engage in an interactive process to prove and determine whether or not an accommodation is reasonable and does not create an undue hardship. Time and time again employers apply a policy without thought and are found liable. More specifically to this case, working from home with the technologies of the time, could certainly be found to be reasonable in certain circumstances.  Therefore, carefully consider all aspects of any request before deciding whether or not to deny it. If in doubt, discuss the issue with your attorney.

If you have any questions regarding this article, please contact its author, Mark Sauer, at 715-8456-8234 or msauer@mzattys.com.

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Non-Solicitation Agreements Invalidated by Wisconsin Supreme Court as Overbroad

Employers beware. Many employers utilize non-solicitation of employee agreements as standard practice when hiring new employees. Such agreements typically prevent a former employee (in usually a high level or management position) from encouraging current employees to leave the employer to join him or her at their new company. Despite the practicality of these agreements, the Wisconsin Supreme Court has called into question the enforceability of non-solicitation of employee agreements, and employers who utilize these agreements would be wise to reevaluate them in light of the Court’s decision in Manitowoc Company, Inc. v. Lanning, 2018 WI 6 (Jan. 19, 2018). Read More… “Non-Solicitation Agreements Invalidated by Wisconsin Supreme Court as Overbroad”

Rounding Time: The Do’s and Don’ts of an Effective Rounding Policy for Wisconsin Employers

A common question that often arises for employment attorneys relates to proper rounding policies for employee time.  A legal policy can be an effective, efficient method of dealing with the issue, while a misstep can lead to significant potential liability, costing an employer thousands of dollars in legal fees, and considerable time and headaches. The best way to avoid this wasted money, time, and frustration is to preemptively review your policies and procedures to ensure they are compliant with the law. Below are things to consider to achieve a compliant rounding policy. Read More… “Rounding Time: The Do’s and Don’ts of an Effective Rounding Policy for Wisconsin Employers”

Bitcoin in Bankruptcy: Commodity or Currency?

It is hard to peruse media outlets without hearing about bitcoin and other types of cryptocurrency. But what is Bitcoin?  Is it just another form of currency, or is it a commodity? It depends on who you ask, and bankruptcy courts are beginning to weigh in on the subject. Read More… “Bitcoin in Bankruptcy: Commodity or Currency?”

How Long Is Too Long For An Unpaid Leave of Absence As A Reasonable Accommodation?

Employers, for far too long, have been left to guess how long of an unpaid leave they must grant their employees as a reasonable accommodation for a disability under the Americans with Disabilities Act (ADA).  While there had been prior decisions that provided some guidance, it seemed every time there appeared to be some basis to figure out ‘how long was too long,’ a contrary decision would come down due to the vague and speculative nature of these circumstances.  In Severson v. Heartland Woodcraft, Inc., 2017 WL 4160849 (7th Cir. Sept. 20, 2017), the Seventh Circuit provided some finality to the issue (hopefully). Read More… “How Long Is Too Long For An Unpaid Leave of Absence As A Reasonable Accommodation?”

Balancing Humanity and Liability in the Workplace

A friend, who is a supervisor in a company, shared with me that she was “afraid to care” when it came to the employees she encounters on a daily basis.  She felt that knowing any personal information about her subordinates – whether it be how and ill family member was doing or what he or she did the past weekend – would only lead to knowledge that could invite or support a future claim against the company.  This struggle between wanting to develop professional, interpersonal relationships with subordinates and the fear of providing ammunition for a future discrimination claim is not an uncommon one amongst supervisors.  It struck me as a sad commentary on what the exponential growth of lawsuits in the employment sector has done to the important interpersonal and professional relationships in the workplace. Read More… “Balancing Humanity and Liability in the Workplace”

A Cautionary Tale: Hesitate Before Accessing Employees’ Personal Email Accounts

A recent Federal District Court decision highlights the pitfalls of accessing a former employee’s personal Gmail account. Employers should be aware of the risks of accessing such information even when they have a legitimate business reason for accessing it. Read More… “A Cautionary Tale: Hesitate Before Accessing Employees’ Personal Email Accounts”

Voluntary Receivership: An Overlooked Option for Obtaining a Going Concern Premium in a Business Sale

Many Wisconsin business advisors fail to consider using a receivership under Wisconsin’s Chapter 128 as a tool for selling a going concern business. Yet, in many instances, it is the optimal method for such a sale.

For the past 15 to 20 years, Wisconsin lenders have used Chapter 128 receiverships to sell going concern businesses. A Lender, however, may only compel such a receivership when it can demonstrate that the borrower is insolvent on a modified balance sheet basis.

In contrast, any business may, at any time, voluntarily subject itself to a Chapter 128 receivership. There is no insolvency requirement. Read More… “Voluntary Receivership: An Overlooked Option for Obtaining a Going Concern Premium in a Business Sale”

Obama Administration Issues “Call of Action” to States to Curtail Non-Compete Agreements

On October 25, 2016, the Obama Administration released a “call to action” urging state policymakers to adopt best practices and enact reforms that aim to reduce the prevalence of non-compete agreements (i.e. restrictive covenants) in the employment context.  While not legally binding or controlling in any way, the “call to action” may signal a continuing shift towards disfavoring non-competes or additional states banning them altogether.

Non-compete agreements are contracts under which an employee generally agrees not to enter into or start a similar profession or trade in competition against the employer.  One of the principal reasons for enforcing a non-compete agreement is to prevent dissemination of trade secrets or other sensitive information and unfair competition.  Because of these legitimate concerns, many employers require their employees to sign such contracts as a condition of employment to protect themselves. Read More… “Obama Administration Issues “Call of Action” to States to Curtail Non-Compete Agreements”

Court of Appeals Determines The Fate Of Overbroad Non-Solicitation Agreements

Last week, the District II Wisconsin Court of Appeals held that an agreement that restricts a former employee from encouraging other employees to leave their jobs, generally referred to as a “non-solicitation” agreement, was unenforceable.  The Manitowoc Company Inc. v. Lanning, 2015AP1530 (Aug. 17, 2016).  The decision calls into question what is a rather typical provision in such employer-employee agreements. Read More… “Court of Appeals Determines The Fate Of Overbroad Non-Solicitation Agreements”

Remembering the Public Policy Exception to the Employment at Will Doctrine

It is often said by employers who operate in at-will employment states that they can terminate an employee for any reason, or no reason at all, so long as they do not do so because of a protected characteristic (race, sex, disability, etc.).  While generally true in most circumstances, a recent decision from the Fifth Circuit provides an excellent reminder that there are limited exceptions to this rule that are lurking on the periphery.  Read More… “Remembering the Public Policy Exception to the Employment at Will Doctrine”

For Wisconsin Businesses In Need of Capital “Crowdfunding” Is An Option

“Crowdfunding:” The practice of raising capital from a large number of individuals by accepting funding in small dollar amounts from each contributor.  Certainly the idea of crowdfunding has been around for ages, but with advances in technology crowdfunding has become a popular alternative way to fund a project or business venture, which can be especially helpful for small businesses.  Websites like Kickstarter and Indiegogo are online crowdfunding platforms for creative projects where investors can pledge money to make projects happen.  The drawback of such websites, however, is that the project creators keep 100% ownership of their work and the websites cannot be used to offer financial returns or equity in a company.  In order to actually offer financial returns or equity in a company, an offering by the company must comply with over 585 pages of applicable SEC rules, which can be cost prohibitive for many small businesses. Read More… “For Wisconsin Businesses In Need of Capital “Crowdfunding” Is An Option”

Wearables in the Workplace

With every significant advancement in technology, companies need to think and plan ahead about how new technology can both be used to the company’s advantage and the risks and liabilities the new technology poses.  One of the newest advancements that will pose a challenge to employers over the next several years is that of wearables in the workplace.  Such devices hold a good deal of promise but also raise numerous legal concerns.

Wearables can take many shapes and forms from fitness trackers to smart watches to GPS tracking devices to implanted microchips.  And these are just the forms of wearables readily available today.  Some experts predict that within the next decade smart phones will be a tool of the past as society transitions more into smaller, wearable devices for consumers that are constantly receiving, generating and disseminating data to the wearer (and to others about the wearer).  And one can rest assured that within the next decade new wearable devices that have not yet been conceptualized will be in the marketplace.

The benefits these wearables present for employers are potentially numerous.  Fitness trackers can be used by employers to incentivize better healthy habits, reduce the costs of ever-rising healthcare and increase productivity.  GPS tracking devices can greatly assist transportation companies, retailers and other companies that rely heavily on logistics in improving efficiency.  Implanted microchips can replace less secure methods of building access, computer logins and the like and provide even more detailed health information of the wearer.  Of course, each industry can likely come up with numerous nuanced ways in which these wearables could benefit them specifically, especially with the constantly dropping prices of such devices.

But what about the vast array of legal issues that wearables bring to the workplace and what should companies do to control such risks?  After all, for every benefit that a new piece of technology brings, it almost always brings as many, if not more, potential abuses or risks.  Read More… “Wearables in the Workplace”

New DOL Guidance Suggests Increased Enforcement Efforts Based on Joint Employer Liability

On January 20, 2016, the United States Department of Labor (“DOL”) issued a new Administrative Interpretation (“AI”) that suggests they will use their enforcement efforts to pursue wage and hour claims against more entities through the joint employer doctrine.  The text of the AI can be found here.  While this does not represent a change in the actual law, the AI suggests that when the DOL brings enforcement actions for wage and hour issues that it will seek to cast as wide of a net as possible and bring in as many entities as possible under the joint employer doctrine.

 

Generally speaking, an employer may have two or more employers for purposes of wage and hour liability where the employee is suffered or permitted to perform work for multiple related entities.  Whether joint employer liability exists is important because, in such scenarios, the employee’s hours of work for both employers are aggregated together for purposes of determining overtime pay and there is joint and several liability for all employers for any violations.  The AI provides additional detail regarding such issues along with examples proffered by the DOL where they contend joint employer liability would exist.

If you have questions about this article, please contact its author, Aaron Graf, at agraf@mzmilw.com.

Changes To “White Collar” Salaried Employee And “Independent Contractor” Exemptions

Be Aware of Changes To “White Collar” Salaried Employee And “Independent Contractor” Exemptions Or Risk FLSA Liability.

The United States Department of Labor (“DOL”) has recently taken several significant actions that impact or will soon impact employers’ obligations under the Fair Labor Standards Act (“FLSA”).  First, the DOL has issued proposed rules altering the salary threshold requirement for exempt white collar employees.  In addition, the DOL has issued an Administrative Interpretation clarifying the DOL’s position on “independent contractor” classifications.  These issues have the potential to significantly alter obligations for employers.

The “Salary Test” For White Collar Exemptions Will Substantially Change.

On March 13, 2014, President Obama issued a presidential memorandum directing the DOL to update certain regulations pertaining to overtime regulations under the FLSA.  Since that time, there has been much discussion about what those changes would encompass.  On July 6, 2015, the DOL issued its proposed new regulations and the public comment period has since come to an end.  It is anticipated that the final rule will be issued as soon as the fall of 2016, or possibly later.

In sum, the proposed changes are designed to update the white collar salary requirements. The proposal would move the present $23,660 annual salary threshold to $50,440.  In addition, the DOL intends to include a provision which would automatically update the salary threshold over the course of future years.

The move to more than double the salary threshold is likely to remove approximately 5 million workers from meeting this exemption according to the federal government.  This means employers would either need to restrict such workers from working overtime or pay them overtime rates.  In either event, it stands to have a substantial financial impact on employers even without taking into consideration the possibility of increased liability and litigation. As the final rule is issued and employers begin analyzing whether any of its employees are affected by this new requirement, it would also be an excellent opportunity to revisit and evaluate whether your company is in compliance with all other aspects of the FLSA and its nuanced exemptions.

The DOL Changed How “Independent Contractor” Status Will Be Analyzed.

The DOL also issued an Administrative Interpretation of already existing regulations concerning the definitions and classifications for independent contractors.  The DOL, operating under the assumption that employers have abused the independent contractor classification to avoid associated costs, seeks to shift the focus of the analysis away from the “control” aspect and instead focus on the “economic realities” aspects.

The Administrative Interpretation emphasizes that very few workers should qualify as independent contractors.  It discusses each of six factors and provides a useful example of applying these principles to each factor.  As a refresher, the six factors analyzed by most courts are as follows:  (1) the extent to which the work performed is integral to the employer’s business, (2) whether the worker’s managerial skills affect his or her opportunity for profit or loss, (3) the relative investments in facilities/equipment between the employer and the worker, (4) the worker’s skills and initiative, (5) the permanency of the worker’s relationship with the employer, and (6) the nature and degree of control exercised by the employer.

The Administrative Interpretation discusses the application of the six recognized factors but highly discourages relying significantly on the “degree of control” factor.  Rather, it encourages focusing on the “economic realities” of the situation.  In other words, a greater focus should be placed on whether the worker is economically dependent on the employer instead of focusing on whether the worker works offsite or is subject to supervision.   Further, the Administrative Interpretation states that an agreement between an employer and a worker concerning the independent contractor status essentially has no bearing on the determination and “is not relevant to the analysis of the worker’s status.”

Conclusion: The Changes Are Significant, The Liability Exposure is Large, And Personal Liability Could Ruin A Business, Its Owners And Its Managers.

It is abundantly clear–both from the proposed rule altering the salary threshold for the white collar exemptions and from the Administrative Interpretation of the independent contractor test–that the DOL is attempting to restrict the white collar exemption and afford overtime to as many workers as possible. Employers must keep abreast of these changes, analyze them carefully and closely, and make any warranted modifications to their policies and practices.  Even after taking these steps, litigation is likely to ensue as plaintiffs’ attorneys seize on these changes as an opportunity to file additional claims, especially as class actions.

Those employers that have analyzed the impact of these changes will be well-suited to defending such claims.  Those that bury their heads in the sand will be learning the hard way that non-compliance under the FLSA is costly.  Also, do not forget that company owners and higher level managers may have personal liability under the FLSA.  If owners/managers have the power to hire and fire employees, the power to determine salaries, the responsibility to maintain employment records and other signs of operational control over significant aspects of the company’s day-to-day functions they could have personal liability for FLSA violations.  The FLSA is truly one of those areas where an ounce of prevention is worth a pound of cure.

If you have questions about this article, please contact its author, Aaron Graf, at agraf@mzmilw.com.

Employer Cannot Evade WFMLA Obligations to Undocumented Workers

In an interesting decision from the Wisconsin Court of Appeals, the court was faced with an issue of first impression involving the Wisconsin Fair Employment Act (“WFEA”) and what legal obligations an employer has towards an undocumented worker.  The court held that the fact that the employee is an undocumented worker is not an absolute defense to a violation of the WFMLA and that an employer must abide by the law regardless of the employee’s immigration status.

In Burlington Graphic Systems, Inc. v. Wisconsin Department of Workforce Development, 2015 WI App 11, 359 Wis. 2d 647, 859 N.W.2d 446, the employee had worked for the employer for nearly ten years as a printing press operator.  The employee required surgery to remove a glass fragment embedded in her face and to alleviate the swelling, discomfort, headaches and blurry vision caused by the embedded glass fragment.  The surgery and recovery time took approximately one week.  Upon her return to work, the employer fired her for being absent too many times and counted at least one of her WFMLA protected recovery days as an unexcused absence.

The employee filed a WFMLA complaint and the Department of Workforce Development found probable cause based on the circumstances present.  The employer then rehired the employee and required her to provide documentation of her legal status.  When the employee was unable to provide such documentation, the employer fired her again.  The employee’s WFMLA complaint then proceeded to a hearing on the merits before an ALJ to determine whether the employer had violated the WFMLA.  The ALJ found that the employee was an employee within the statutory meaning under the WFEA, that the employee had a serious health condition and that the employer had violated the WFMLA when it held a WFMLA protected absence against her when it discharged her.  After a series of appeals, the issues ended up before the Wisconsin Court of Appeals.

Most of the issues involved in the case were relatively routine and unremarkable.  However, the employer seized upon the language of the WMLFA that an employee returning from family or medical leave is not “entitle[d]…to a right, employment benefit or employment position to which the employee would not have been entitled had he or she not taken family or medical leave.”  Wis. Stat. §103.10(9)(a).  The employer argued that, because the employee was an undocumented worker, she had no right to employment in the first place and that her discharge was mandated by federal law.  Thus, when returning from medical leave, she was not “entitled” to her position.

Despite the facial appeal of such an argument, the court quickly disposed of it finding that just because an employee may be discharged, an employer is not relieved of its obligation to abide by the WFMLA.  The court further found that accepting the employer’s argument would undermine the purpose of the WFEA and the Immigration Reform and Control act and create an incentive for employers to hire undocumented workers whose rights they could then violate without consequence.  The court upheld the decision of the ALJ that the employer violated the WFEA.  The only saving grace for the employer was that, as an undocumented worker, there was no remedy available for backpay or other wages.  Thus, the employer was only obligated to pay the requisite attorney’s fees and to implement policies to train employees regarding its WFMLA obligations.

One wonders whether the result may have been different had the employee not been employed at the company for ten years – seemingly for much of the time as an undocumented worker.  One gets the sense that the Court was not pleased with the company readily accepting the employee’s services for ten years only to use the employee’s undocumented status as an attempt to evade its WFMLA obligations.  This may be a case of bad facts making bad law.

If you have questions about this article, please contact its author, Aaron Graf, at agraf@mzmilw.com.

Wisconsin’s Social Media Protection Act

Wisconsin recently enacted a new law intended to restrict employer’s ability to require employees to disclose certain social media information.

Wisconsin Governor Scott Walker signed the Wisconsin Social Media Protection Act (2013 Wisconsin Act 208) into law recently, giving employees in Wisconsin more privacy in the workplace.

Read More… “Wisconsin’s Social Media Protection Act”