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.


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”

Important Changes to Litigation in Wisconsin on the Horizon

On April 3, 2018, the Wisconsin legislature enacted 2017 Wisconsin Act 235, which includes several reforms to litigation taking place in Wisconsin state courts.  The changes include a new definition of what is “discoverable” in litigation, limitations and alterations to certain aspects of discovery and changes to several statutes of limitation.  Below is a short summary of a few of the more important changes.  Attorneys practicing law in Wisconsin should be aware of these changes, which will take effect July 1, 2018. Read More… “Important Changes to Litigation in Wisconsin on the Horizon”

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.


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”

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?”

Five Dollars for a Not-Quite Foot Long: 7th Circuit Tosses Subway Class Action Settlement

On August 25, 2017, the Seventh Circuit Court of Appeals held that a settlement agreement entered into between a putative class of consumers and Subway was “utterly worthless” and reversed and remanded the District Court’s Order approving that settlement.  The class had alleged that Subway’s famous Footlong sandwiches often came up short. Read More… “Five Dollars for a Not-Quite Foot Long: 7th Circuit Tosses Subway Class Action Settlement”

Wisconsin Supreme Court Prepares to Weigh Private Rights, Riparian Rights, and the Public Trust Doctrine

On September 20th, the Wisconsin Supreme Court will hear oral arguments in Movrich v. Lobermeier, 372 Wis. 2d 724, 889, N.W.2d 454, 2016 WI App 90 (2016). This case puts at odds two revered values: the public trust doctrine and the right of alienation by private property owners. The Wisconsin Court of Appeals found that the public trust doctrine prevailed over the private property owner’s rights. Read More… “Wisconsin Supreme Court Prepares to Weigh Private Rights, Riparian Rights, and the Public Trust Doctrine”

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”

Wisconsin Federal District Court holds Village Cannot “Banish” Sex Offenders from Community

On April 17, 2017, the United States District Court for the Eastern District of Wisconsin struck down an ordinance restricting the residency of convicted sex offenders in the Village of Pleasant Prairie (the “Village”).  In Hoffman v. Village of Pleasant Prairie, No. 16-CV-697-JPS, 2017 WL 1380560 (E.D. Wis. Apr. 17, 2017), a group of convicted child sex offenders (“Plaintiffs”) challenged a Village ordinance (passed on April 18, 2016) regulating residency for sex offenders within its borders (the “Ordinance”).  The federal Court granted summary judgment in favor of the Plaintiffs holding that the ordinance violated the Ex Post Facto Clause of the United States Constitution and violated Plaintiffs’ constitutional right to equal protection. Read More… “Wisconsin Federal District Court holds Village Cannot “Banish” Sex Offenders from Community”

Epic Systems Case on Class Action Waivers in Employment Arbitration Agreements Headed to U.S. Supreme Court

See update regarding the U.S. Supreme Court’s decision in Epic Systems Corp. v. Lewis.

On January 13, 2017, the United States Supreme Court granted certiorari in N.L.R.B. v. Murphy Oil USA, No. 16-308, Epic Systems Corp. v. Lewis, No. 16-285, and Ernst & Young LLP v. Morris, No. 16-300, consolidating those cases and agreeing to review the validity of class or collective action waivers in arbitration agreements under the National Labor Relations Act (NLRA) and the Federal Arbitration Act (FAA).  The Supreme Court will ultimately resolve a federal circuit split over whether class action waivers in employment arbitration agreements are: (1) prohibited by the NLRA because such waivers violate employees’ right to engage in concerted activities; and (2) protected under the FAA.  Recent Supreme Court nominee Judge Neil Gorsuch may play a determinative role in the Court’s decision, and the decision certainly will affect employers’ ability to minimize liability exposure. Read More… “Epic Systems Case on Class Action Waivers in Employment Arbitration Agreements Headed to U.S. Supreme Court”

Failure to Respond to State Agency Mandates Dismissal

Defense counsel in employment actions before the Wisconsin Equal Rights Division (“ERD”) routinely encounter situations where a complainant is difficult to communicate with in terms of discovery, setting depositions, or the like.  Often, counsel has no choice but to make numerous, repeated attempts before seeking dismissal as the ERD tends to bend over backwards for complainants before dismissing the case.  Even after seeking dismissal, the ERD often will grant a complainant several additional opportunities to make things right.  However, there may be an alternative dismissal tool that defense counsel can utilize to more effectively seek dismissal of a non-cooperative or non-responsive complainant. Read More… “Failure to Respond to State Agency Mandates Dismissal”

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”

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 an attorney at Mallery & Zimmerman.

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 an attorney at Mallery & Zimmerman.