Employer Law Report

New Jersey Case Further Muddies Water On Personal Email Access and Privilege Issues

bhall@porterwright.com (Brian Hall) — Fri, 10 Jul 2009 13:54:46 -0500

May an employer access an employee's emails sent using a company-issued laptop via a personal, password-protected, web-based email account? And, if those emails were sent to the employee's attorney for the purpose of obtaining legal advice, does the employee's use of the company laptop waive the attorney-client privilege? Those questions recently were addressed by a New Jersey appellate court in Stengart v. Loving Care Agency, Inc.

The plaintiff in Stengart sent the emails to her attorney regarding her intent to sue her employer for discrimination . After the lawsuit was filed, the company created a forensic image of the laptop's hard drive and discovered the emails. When plaintiff's counsel first learned that these emails were in the possession of the company's counsel, plaintiff's counsel requested that the original emails and all copies be turned over based on the attorney-client privilege, but the company's counsel refused.

The trial court concluded that the emails were not protected by the attorney-client privilege because the company's electronic communications policy put the plaintiff on sufficient notice that her emails would be viewed as company property. On appeal, however, the New Jersey Superior Court, Appellate Division, disagreed, stating that the policies underlying the attorney-client privilege substantially outweigh "the employer's interest in enforcement of its unilaterally imposed regulation," and rejecting "the employer's claimed right to rummage through and retain the employee's emails to her attorney."

First question: Assuming the employer discovered the emails before the plaintiff's resignation, did it have a right in the first instance to review personal emails sent by the plaintiff using company computer equipment, but a private, password-protected email account? The New Jersey appellate court said no.

According to the company, its electronic communications policy notified employees that it reserved the right and “will” exercise the right to "review, audit, intercept, access, and disclose all matters on the company's media systems and services at any time, with or without notice." In addition, the policy said that email and voice mail messages, Internet use and communication and computer files are considered part of the company's business and client records. "Such communications are not to be considered private or personal to any employee." The policy then went on to identify certain uses of the email system that were specifically prohibited but also accepted that "occasional personal use" would be permitted.

According to the appellate court, the employer was unable to demonstrate that this policy, as opposed to multiple other drafts of the policy, actually was ever put into effect or that, in any event, it applied to an executive-level employee such as plaintiff. Furthermore, in the face of plaintiff's denial that she was aware of the policy, the employer could not produce a signed acknowledgment from her.

The court next considered whether the company’s policy should apply to emails sent on the employee's personal account. Here, the court again bent over backwards to find ambiguities in the policy that "cast doubt over the legitimacy of the company's attempt to seize and retain personal emails sent through the company's computer via the employee's personal email account."

Finally, the court looked at whether the employer's policy was reasonable in claiming "ownership" of personal emails sent using company computers. Here, the court held that the employer's ownership of its computer systems did not justify its right to retain personal emails, particularly when the policy expressly acknowledged the right to occasional personal use of the email system. In analogizing the computer to a "file cabinet" for personal communications, the Court noted that a policy imposed by an employer, purporting to transform all private communications into company property -- merely because the company owned the computer system -- furthered no legitimate business interest. The court conceded, however, that "an employer may monitor whether an employee is distracted from the employer's business and may take disciplinary action if an employee engages in personal matters during work hours. That right to discipline or terminate, however, does not extend to the confiscation of the employee's personal communications.”

In light of the court's views, it is not surprising to learn that it held that the policies underlying the attorney-client privilege outweighed the employer's claimed interest in ownership of or access to otherwise privileged communications because they were sent on the company computer. Therefore, the court reversed the trial court's conclusion that plaintiff waived the attorney-client privilege when she risked disclosure of her communications by using a work-issued computer.

So what do we learn from this decision? With respect to the attorney-client privilege issue, the Stengart decision is contrary to many others that have held that employees who communicate with their attorneys using the company computer waive the privilege when they are told that personal email communications used on company computers will not be private. Those courts finding a waiver of the privilege typically have relied on the employer's policy to find that the employee knew that personal communications of any nature would not remain private. The difference here seems to be plaintiff’s use of her password-protected personal email account instead of her company's email account.

But, what about the employer’s right to access the personal email account? We have seen previously from the Van Alstyne case that courts may be hostile to employers accessing their employees' personal email accounts. The Van Alstyne decision, however, never really makes clear how the employer accessed its employee's account. For instance, it is not clear whether the employer improperly obtained or circumvented the employee's password. By contrast, the Stengart court, though hostile to the privacy implications, does not completely foreclose the employer's right to view emails sent using a personal account if the employer disseminates a policy giving it the right to monitor all personal emails sent on its computer systems regardless of the account used. Clearly, this is a situation where the moral high ground is going to shift depending on the steps the employer has taken to notify its employees of the limitations on their expectation of privacy, the means used by the employer to access personal communications, and the nature of the employee's personal communication (e.g. communications with an attorney vs. viewing child pornography). The wise employer will contact counsel before proceeding.

My Summer Camp Adventure

bhall@porterwright.com (Brian Hall) — Thu, 09 Jul 2009 14:34:32 -0500

It's hard to believe that fewer than 10 years ago, there was widespread concern that our computers were all going to blow up and there would be anarchy in the streets. Since the clock struck midnight on January 1, 2000, we have seen an unprecedented technology boom that has had a widespread impact on the workplace. Remember the anxiety caused by cameras on our cell phones due to their impact on protecting trade secrets and our privacy in the locker rooms? Since then, we have grown comfortable with workers using laptops offsite though we still need to concentrate better on keeping track of them and what is on them!

Now, the social media craze -- Facebook, Linked-In, Twitter, etc. -- seems to be causing employers the most recent concern. As editor of employerlawreport.com, I have come to achieve a certain comfort level with social media, but I think that what primarily is keeping many employers up at night is fear of the unknown. That is why I'm going to summer camp! Starting this past Tuesday and running through the second Tuesday in August, I will be attending Social Media Summer Camp, a Columbus Business First initiative. The first session, "Social Media 101," provided a nice overview of everything that is out there and how businesses have been and could be using social media to market their services and products. The attractiveness of social media from a marketing perspective is often easy to see and hopefully we will be able to use some of what we learn at camp to improve our blog and to otherwise better communicate with our clients and friends.

In addition, I'm keeping my employment lawyer hat on to identify potential issues for employers that are encouraging their employees to "friend" others or to "tweet" or are attempting to regulate how and when they do it. This past Tuesday's session left me with one particular impression: Whether or not companies choose to use social media to foster their business, they would be wise to monitor the various social media outlets to make sure that others, including disgruntled and former employees, are not messing with their messages or creating unwanted ones.

So that's why I'm going to summer camp. I'm taking my laptop with me, but fortunately for all involved, I'm leaving my bathing suit at home.

ICE Issues I-9 Audit Notices to More than 650 Employers

rcohen@porterwright.com (Robert Cohen) — Thu, 02 Jul 2009 10:24:31 -0500

The Immigration and Customs Enforcement (ICE) announced on July 1, 2009 that I-9 audit notices have been presented to 652 employers across the country. (To read the press release, click here.)

Notwithstanding the Obama Administration’s announcement that it will change the focus of immigration enforcement to concentrate on abusive employers, this announcement reflects a new initiative to step up I-9 enforcement actions.

By contrast, only 503 similar notices were issued during the entire FY2008. The ICE announcement included the point that these employers were not randomly selected but have been identified from leads and other investigative information.

If past experience is a guide, we can expect that at least some of these notices will result in further enforcement actions against the identified employers.

Supreme Court Rules for White Firefighters

bsiegel@porterwright.com (Bradd Siegel) — Wed, 01 Jul 2009 16:58:46 -0500

On June 29, 2009, the Supreme Court addressed a provocative question about the current state of workplace diversity in the United States. In the controversial Ricci v. DeStefano decision, the Court determined by a vote of 5-4 that only in very narrow circumstances can public employers engage in disparate-treatment discrimination to avoid violating the disparate impact provision of Title VII of the Civil Rights Act. In order to make a race-conscious preventative decision, an employer must have a strong basis in evidence that a given selection method was deficient and that discarding that method’s results is necessary to avoid creating a disparate racial impact.

Title VII protects employees from two types of discrimination based upon race, color, religion, sex, and national origin: intentional acts of discrimination (disparate treatment), and facially neutral policies and practices that have a disproportionate adverse effect on minorities (disparate impact). If an employee makes a prima facie showing of disparate impact discrimination, the burden then shifts to the employer to prove that the practice in question is job related and consistent with business necessity. Even if the employer meets this burden, a plaintiff may still succeed by showing that the employer refuses to adopt an available alternative employment practice that has a lesser disparate impact and serves the employer’s legitimate needs. Ricci posed the question of under what circumstances an employer may take race-conscious action to avoid disparate-impact liability given this statutory scheme.

The dispute in Ricci emerged from a 2003 examination administered by the City of New Haven, Connecticut, to qualify firefighters for promotion. The City’s charter required that New Haven fill vacancies in the classified civil service ranks with the most qualified individuals as determined by job-related examinations. To accomplish this objective, the City hired a third party consultant to develop an examination based upon analyses of the positions available for promotion. The test results qualified 17 white candidates, two Hispanic candidates, and no black candidates for promotion. Although it was unclear whether the City could develop an effective alternative test, the City determined that certification of the test results could subject the City to liability because of the test’s disparate racial impact. As a result, the City promoted no one.

A group of white and Hispanic firefighters who would have been promoted based upon the original test results claimed that the City had discriminated against them because of their race. The District Court granted summary judgment in favor of the City. The Court of Appeals affirmed the judgment, and the Supreme Court reversed, entering summary judgment in favor of the petitioner firefighters.

At least rhetorically, Justice Kennedy’s majority opinion rejected the petitioner’s position that an employer can never take race-based promotional action to avoid disparate impact liability. The Court also expressed concerns that, conversely, a focus on racial statistics could allow an employer to discard test results simply to obtain a preferred racial balance. The Court consequently determined that an employer could take race-conscious action only when there existed a “strong basis in evidence” that it would be exposed to a disparate impact claim if it failed to take that action. In other words, an employer must uphold racially disproportionate test results unless there exists strong evidence that the selection method itself was either 1) not job related and consistent with business necessity or 2) that the employer had refused to adopt an equally effective, non-discriminatory alternative practice. The majority did not define what constitutes a “strong basis in evidence.” It concluded, however, that while the significant statistical disparity exhibited by the New Haven test results amounted to a prima facie showing of disparate impact, those statistics did not meet the “strong basis in evidence” standard.

In her dissent, Justice Ginsburg, who spent a significant part of her early career advocating for gender equality, objected both to the majority’s newly established standard and to the application of that standard to the facts of the case. Ginsburg noted that the “strong basis in evidence” standard created a barrier for public employers seeking to comply with Title VII’s disparate impact provision. The dissent suggested instead that an employer may lawfully discard racially disproportionate results so long as it has good cause to believe that its selection method would not withstand an examination for business necessity. The dissenters further objected to the majority’s conclusion that the facts of the case warranted an entry of summary judgment under the new standard. Ginsburg pointed out that not only had the qualification examinations yielded racially disproportionate results, but those results were underscored by a long history of discrimination both in New Haven and in firefighting generally that had significantly disadvantaged black firefighters. The majority’s conclusion thus raised the question that if the facts of Ricci did not meet the new standard, what facts would amount to a “strong basis in evidence”?

The dissent’s criticism of the majority’s “strong basis in evidence” standard highlights the dilemma now faced by employers confronted with the possibility of disparate impact liability. While the majority ostensibly rejected a prohibition on employer race-based action to counteract or remedy racial disparities, its determination that the facts of the Ricci case did not meet the new standard sets a high bar for a public employer to meet before engaging in race-conscious action.

Bill to Protect Sexual Orientation and Gender Identity Introduced in Congress

jlaplante@porterwright.com (Jamie LaPlante) — Fri, 26 Jun 2009 09:44:06 -0500

One month ago, we discussed a bill introduced in the Ohio General Assembly to prohibit discrimination on the basis of sexual orientation and gender identity and expression. Representative Barney Frank (D-Mass.) recently introduced a similar bill in Congress to prohibit employment discrimination on the basis of sexual orientation and gender identity, The Employment Non-Discrimination Act of 2009, H.R. 2981. This bill, which has been referred to committee, defines “gender identity” as “the gender-related identity, appearance, or mannerisms or other gender-related characteristics of an individual, with or without regard to the individual’s designated sex at birth.” This language is similar to the proposed definition of “gender identity and expression” under the Ohio bill. This proposed bill, like the Ohio proposal, also includes broad protection of “actual or perceived” sexual orientation. The language in the proposed federal statute limits potential claims under the Act to disparate treatment and retaliation actions only, expressly excluding disparate impact claims. The procedures and remedies for violations of the Act are the same as those provided under Title VII. The proposed federal statute, like the proposed Ohio statute, expressly excludes religious organizations that are exempt from Title VII’s religious discrimination provisions.

The proposed federal statute, in contrast to the Ohio proposal, directly addresses grooming standards and restroom, shower, and changing facility usage. Under the federal proposal, employers may deny, on the basis of gender identity, employees access to changing areas or showers where being seen unclothed is “unavoidable”—if the employer provides “reasonable access” to adequate facilities “not inconsistent with the employee’s gender identity” determined at the time of employment or when the employee notifies the employer that he/she is undergoing/has undergone gender transition. The federal proposal also allows for reasonable dress and grooming standards—provided the employer allows employees who are undergoing, or who have undergone, gender transition to adhere to the standards for the gender to which the employee transitioned or is transitioning.

We’ll provide updates as additional information becomes available.

U.S. Supreme Court Holds That Plaintiffs Retain Burden of Proof in Mixed-Motive ADEA Cases

jweber@porterwright.com (Jeff Weber) — Fri, 26 Jun 2009 09:32:23 -0500

So-called “mixed motive” cases, where there is evidence of unlawful bias but also evidence of a legitimate, nondiscriminatory reason for an employment action, have generated a great deal of debate over the applicable burden of proof. In 1989, a divided U.S. Supreme Court held in Price Waterhouse v. Hopkins that, once a plaintiff has proven that unlawful animus was “a motivating factor” in an employment decision, the burden of proof shifts to the defendant to prove that it would have taken the same action even absent the unlawful animus. This approach was essentially ratified by Congress when it approved certain amendments to Title VII in enacting the Civil Rights Act of 1991. But, because Price Waterhouse applied to a claim under Title VII, and federal age discrimination claims fall under the Age Discrimination in Employment Act (ADEA), which was not similarly amended by the Civil Rights Act of 1991, the burden of proof applicable to mixed-motive ADEA cases has remained in dispute.

On June 18, 2009, the U.S. Supreme Court resolved this dispute in Gross v. FBL Financial Services, holding that the burden of proof for an ADEA claim remains with the plaintiff at all times, even in a mixed-motive case. The Court’s 5-4 decision relied heavily on the differences in statutory framework between the ADEA and Title VII in distinguishing the result in Price Waterhouse. The majority opinion, written by Justice Thomas, pointed out that the ADEA required the plaintiff to prove that he was demoted “because of” his age and that there is no statutory basis to shift the burden of proof to the defendant simply because the plaintiff produced some evidence that age was one motivating factor in the decision. The plaintiff still retained the burden of proof to demonstrate that he would not have been demoted “but for” his age.

With Congress all too willing these days to enact legislation overturning employment law decisions of the Supreme Court that displease it, it will interesting to see how long the holding in Gross stands.

Second Circuit Agrees with First and Seventh Circuits that the Two-Member NLRB Had Authority to Issue Opinions

jlaplante@porterwright.com (Jamie LaPlante) — Thu, 25 Jun 2009 16:18:50 -0500

As we reported earlier, there is a split in the federal courts of appeals regarding whether the National Labor Relations Board (NLRB) has authority to issue binding opinions while it is operating with only two members. Since that post, another federal circuit has weighed in on the issue.

The NLRB is the federal agency charged with governing relations between private employers and unions and administering the National Labor Relations Act (NLRA). Ordinarily, the NLRB has five members and frequently delegates power to issue rulings and opinions to three-member panels. In order for the NLRB itself to act, it must have a three-member quorum. In late December 2007, the NLRB had one vacancy and two members whose terms were nearing expiration. Congress and the President clashed on the nomination of replacement NLRB members, and filling the vacancies became unlikely (and still has not occurred). Just before the expiration of the two members’ terms, the four-member NLRB delegated all of its power to a three-member panel, which included the two members whose terms were not set to expire. After the two departing members’ terms expired, the two remaining members of the three-member panel continued to issue opinions, relying on statutory language in the NLRA allowing a three-member panel to proceed as a quorum in the absence of one of its members.

During this period of time and to the date of this post, the two-member quorum of the panel has issued more than 400 opinions. Those opinions were challenged in several federal court actions arguing that, in order for two members of a three-member panel to proceed as a quorum, the NLRB itself must have a quorum of three members; otherwise, the NLRB and the panel lack authority to act. The First and Seventh Circuits held that the two-member panel had authority to issue opinions. The D.C. Circuit, however, held that it did not.

In Snell Island SNF LLC v. NLRB, No. 08-3822 (2d Cir. June 17, 2009), the U.S. Court of Appeals for the Second Circuit joined the First and Seventh Circuits on this issue holding that the two remaining members of the panel did have authority to issue binding opinions. It reached this result by relying on slightly different reasoning from that of the First and Seventh Circuits. Those courts relied primarily on the unambiguous plain text of the statute. The Second Circuit, instead, held that the plain text was ambiguous and deferred to the NLRB’s interpretation of the NLRA. The Court deferred to the NLRB’s interpretation under the United States Supreme Court’s decision in Chevron USA, Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837 (1984), which requires deference to agency statutory interpretation,because the NLRB is the agency charged with administering the NLRA, and the court found the NLRB’s interpretation reasonable.

On May 27, 2009, the NLRB filed a petition with the D.C. Circuit for re-hearing by the entire D.C. Circuit (en banc) of the decision holding that the NLRB lacked authority.

Given the split in authority and the potential impact on the more than 400 NLRB decisions issued in 2008 and 2009, it is likely that the United States Supreme Court will weigh in on this issue. Unless and until that happens, employers should proceed with caution when relying on NLRB decisions issued after December 31, 2007 by this two-member quorum.

Ohio Supreme Court Reaffirms Narrow Exception to Broad BWC Successor Rules

bhall@porterwright.com (Brian Hall) — Wed, 17 Jun 2009 15:36:37 -0500

The Ohio workers' compensation successor-in-interest rules frequently catch even the most seasoned corporate M&A attorney off guard. Most M&A attorneys reasonably expect that a straight asset purchase will not result in the assumption of any workers' compensation liability in Ohio. As it relates to companies that pay premiums directly into the Ohio state workers' compensation fund, that expectation more often than not will turn out to be wrong. In short, Ohio's courts have long held that the workers' compensation statute authorizes the BWC to find successorship whenever "any employer transfers a business in whole or in part or otherwise reorganizes the business."

Frequently deferring to BWC determinations that successorship justifies a transfer of the seller's experience to the purchaser, the courts simply have defined a successor in interest as a "transferee of a business in whole or in part." This broad definition generally has resulted in the asset purchaser being held to have succeeded to the experience rating of the selling company even when the asset purchase agreement expressly states that the purchaser assumes none of the liabilities of the selling company. (Indeed, it has even resulted in a finding of successorship when a company retained another company's employees as it took over a lease of that company.)

When the selling company's workers' compensation experience in Ohio is negative, the purchaser often is very surprised when they are left holding the bag and responsible for continuing to pay premiums attributable to some very bad claims. As a result, any company that is purchasing the assets of (or is otherwise taking over the business of) a company that is experience rated for workers' compensation in Ohio would be wise to evaluate whether the selling company is merit or penalty-rated and, if the latter, to either take that into consideration in arriving at a purchase price or to create a mechanism to recoup payments made for the workers' compensation claims it inherits.

With these successor principles as a backdrop, we now consider the Ohio Supreme Court's decision yesterday in State ex rel. Valley Roofing LLC v. Ohio Bureau of Workers' Compensation, which upholds a tiny, but significant, gap in the BWC's broad authority to find successorship. In that case, Valley Roofing purchased the assets of Tech Valley Contracting, Inc. from PNC Bank after the bank had foreclosed on Tech. When Valley Roofing applied for workers' compensation coverage, the BWC transferred Tech's experience rating to Valley Roofing. Valley Roofing objected on the ground that it was not a successor to Tech; instead, it had acquired Tech's assets from an intermediary bank. The Ohio Supreme Court, relying on its prior decision in State ex rel. Crosset v. Conrad, found that Valley was not a successor to Tech because Tech did not transfer its business to Valley Roofing, but instead transferred its assets to the bank, which foreclosed on them and then the bank transferred those assets to Valley Roofing. Valley Roofing undoubtedly saved a substantial amount of money as a result of the structure of this transaction.

In this economic climate and perhaps more so as the economy hopefully enters a recovery, we suspect that there may be businesses that are looking to purchase the assets of other more struggling businesses. In structuring these deals, many purchasers do not consider the workers' compensation history of the selling company. But shrewd purchasers can structure the deal in order to avoid a nasty surprise once the transaction has closed and it is time to obtain workers' compensation coverage for the new entity.

En Banc Sixth Circuit Holds that there is no Cause of Action for Third-Party Retaliation, Reversing Earlier Decision

jlaplante@porterwright.com (Jamie LaPlante) — Wed, 10 Jun 2009 16:01:40 -0500

In April 2008, I reported that a divided three-judge panel of the Sixth Circuit in Thompson v. North American Stainless LP held that an employee may sue for retaliatory acts against him by his employer in response to protected activity by a related employee—a close friend or family member. This decision was in contrast to the decisions of the Third, Fifth, and Eighth Circuits rejecting associational retaliation claims. After rehearing en banc by the Sixth Circuit (by the entire court), the Court joined its sister circuits in rejecting a cause of action for associational retaliation in a narrowly-divided opinion.

In Thompson, a woman filed a sex discrimination charge with the EEOC. Three weeks later, the employer terminated the woman’s fiancé, who it also employed. The fiancé filed his own EEOC charge and, eventually, a lawsuit, and alleged that his termination amounted to retaliation for his fiancé’s EEOC charge. In response, the employer argued, among other things, that there is no cause of action under Title VII for retaliation against associated third-parties. The trial court agreed and dismissed the case. The plaintiff appealed, and a divided three-judge panel of the Sixth Circuit reversed and held that Title VII provides a cause of action for retaliation in response to a related employee’s protected activity. The court defined this new cause of action stating, “Title VII prohibit[s] employers from taking retaliatory action against employees not directly involved in protected activity but who are so closely related to or associated with those who are directly involved, that it is clear that the protected activity motivated the employer’s action.” (Emphasis added.) In so holding, the panel closely examined the Supreme Court’s definition of “retaliation”—that which would “dissuade[] a reasonable worker from making or supporting a charge of discrimination.” (Quoting the U.S. Supreme Court’s decision in Burlington Northern and Santa Fe Railway Co. v. White, 126 S.Ct. 2405 (2006).)

The Sixth Circuit in rehearing en banc reversed. As in the earlier decision before the Sixth Circuit panel, the EEOC filed an amicus (“friend of the court”) brief in support of associational retaliation claims. The en banc Sixth Circuit declined to adopt the EEOC’s position. In reversing the panel’s decision, the Court relied on the plain language of the statute limiting the class of persons authorized to sue for retaliation to those who opposed an unlawful employment practice; made a charge; or testified, assisted, or participated in any manner in an investigation, proceeding, or hearing (so-called “protected activity”). The Court rejected the plaintiff’s argument that close friends and family members who did not engage in protected activity themselves are nonetheless included within the class of persons authorized to sue for retaliation under Title VII. The Court held that an associated employee will only have a cause of action for retaliation resulting from a friend or family member’s complaint of discrimination or harassment when the associated employee himself has engaged in protected activity by opposing the practice or participating in the complaint or investigation—i.e. engaged in some protected activity of his own. The Court did note that the plaintiff’s fiancé, the employee who made the original sex discrimination charge, could have filed a retaliation complaint herself alleging that the termination of her fiancé in response to her protected activity, filing a charge, was an adverse employment action against her. It is unclear in this case why she did not do so. But it is interesting to note that it is unclear what type of remedy she would have been able to seek in such an action: Reinstatement of her fiancé? Or back pay or front pay on her fiancé’s behalf? The Court does not answer this question in Thompson.

Judge White dissented arguing that Title VII’s use of the term “aggrieved person” in the retaliation provision of the statute broadens the scope of retaliation actions to include those “aggrieved,” including associated family and friends of the complaining party. The majority rejected this view, holding that the use of aggrieved person in the statute defines the scope of standing for Title VII actions, not necessarily the class of persons authorized to sue. Judge Martin separately dissented arguing that “opposition” of a discriminatory practice necessarily included unexpressed opposition, such as the type of opposition held by close friends and family members of an employee faced with a discriminatory practice by their shared employer. The majority, however, interpreted Title VII as requiring actual action to qualify as protected activity under the statute, not mere unexpressed opposition or disagreement with an employment decision or practice.

Despite the views of the Third, Fifth, Eighth, and now Sixth Circuits rejecting associational discrimination, the EEOC takes the view that Title VII prohibits associational retaliation. Even though the Sixth Circuit rejected associational retaliation claims, such claims could be actionable if an associated employee shows that he did something to “oppose” the discrimination against or “participate” in the complaint or charge by the other related employee. It is likely that the Supreme Court will weigh in on this issue in the near future. As I stated in my prior post, until then, employers should be aware of the potential for third-party retaliation claims and take steps to protect themselves from liability. In particular, when faced with an EEOC charge or discrimination complaint from an employee who is associated with or related to other employees in the employer’s workforce, the employer should proceed cautiously in making any hiring, promotion, discipline, or termination decisions.

Recent Court Decision Analyzes Reach of Lilly Ledbetter Fair Pay Act

nquathamer@porterwright.com (Nicole J. Quathamer) — Fri, 05 Jun 2009 14:24:05 -0500

Last week, a United States District Court Judge for the Eastern District of Pennsylvania issued one of the few decisions thus far to analyze the reach of the Lilly Ledbetter Fair Pay Act. In Rowland v. CertainTeed Corp., 2009 U.S. Dist. LEXIS 43706, Judge Schiller held that the Ledbetter Act’s extension of the statutory time period for claiming pay discrimination does not apply to a failure-to-promote case. In so holding, Judge Schiller reasoned that Congress limited the Ledbetter Act to claims of “discrimination in compensation.”

Under the Ledbetter Act, an unlawful employment practice occurs “when a discriminatory compensation decision or other practice is adopted, when a person becomes subject to a discriminatory compensation decision or other practice, or when a person is affected by application of a discriminatory compensation decision or other practice, including each time wages, benefits, or other compensation is paid, resulting in whole or in part from such a decision or other practice.” 29 U.S.C. § 626(d)(3) (2009). This legislation followed the Supreme Court’s decision in Ledbetter v. Goodyear, which limited Ledbetter’s claim to adverse actions taken within 300 days of filing the EEOC Charge.

In Rowland, the plaintiff claimed that her employer denied her a series of promotions because of her sex. She further argued that the Ledbetter Act should be applied to enlarge the actionable period to extend to all of those adverse decisions, not just those that preceded her EEOC Charge by less than 300 days. As support, she analogized her continuing failure to be promoted to the continuing compensation practice complained of in Ledbetter v. Goodyear. She argued that the Ledbetter Act’s expansion of "unlawful employment practice" broadens the scope of the Act to failure-to-promote claims because promotions directly impact compensation.

Judge Schiller declined the invitation to apply the Ledbetter Act to these facts. He ruled that a "continuing violation" theory is inapplicable in the context of a failure to promote and explained that a “failure-to-promote claim divorced from a discriminatory compensation claim, as is the case here, does not fall within the purview of that newly enacted law…." Rather, each adverse action, namely the decision to deny her a promotion, is "a discrete act" that must be analyzed and complained of within 300 days of each discrete action as required by Title VII. Otherwise, the Ledbetter Act “would eliminate any statute of limitations with respect to reporting discrimination to the appropriate agency, a change in law not found in the Ledbetter Act."

In the coming months, we will see whether other courts follow Judge Schiller’s lead and limit the scope of the Ledbetter Act to only claims exclusively related to “discrimination in compensation.” But the analysis set forth in Rowland may, at least for now, be useful to support an employer’s argument favoring such a restriction when confronted with a Ledbetter Act argument outside the context of a compensation claim.

State Age Discrimination Claims Under O.R.C. § 4112.99 Barred By Arbitration

cpate@porterwright.com (Christy Pate) — Wed, 03 Jun 2009 15:27:07 -0500

The Ohio Supreme Court held yesterday that a discharged employee is barred from pursuing an action for age discrimination under R.C. § 4112.99 when the discharge has been arbitrated and was found to be for just cause. More specifically, the Court concluded that R.C. § 4112.14(C), which prohibits age discrimination lawsuits if an arbitrator upheld a discharge for just cause, applies to age discrimination claims brought under § 4112.99. So if a Plaintiff files a lawsuit under § 4112.99, even though this provision does not mention arbitration proceedings, the state age discrimination claim may still be prohibited by § 4112.14(C). Meyer v. UPS, Inc., 2009-Ohio-2463.

In Meyer, the plaintiff, Robert Meyer, was fired from his employment with UPS. The grievance filed by Mr. Meyer over his discharge was denied, and his discharge was upheld by a panel of union members and company management. Mr. Meyer filed a complaint in state court alleging workers compensation retaliation and amended the complaint to add state claims for age discrimination. Under Ohio law, a plaintiff may choose between several age discrimination statutes, including § 4112.02(N), § 4112.14, or § 4112.99. These statutes provide different damages to a plaintiff and arguably are covered by different statutes of limitations. Section 4112.14 is the only one that refers to arbitration. In this case, Mr. Meyer chose to file his claim under § 4112.99.

First, the Ohio Supreme Court accepted the Court of Appeal’s conclusion that the grievance panel was the functional equivalent of arbitration for purposes of § 4112.14(C). For employers, this presumably broadens the number of cases that will be barred since the Supreme Court held that a single arbitrator is not required.

Next, the Supreme Court found that § 4112.99 is a gap-filler and does not govern the specifics of an age discrimination claim. Accordingly, “an age discrimination claim brought pursuant to R.C. 4112.99 is subject to the substantive provisions of R.C. 4112.02 and 4112.14.” Accordingly, the ban related to filing a lawsuit after a matter has been arbitrated applies to cases filed under § 4112.99.

In addition to this explicit holding related to arbitration, the Meyer case also suggests that plaintiffs cannot avoid the specific provisions of § 4112.14 by couching an age discrimination claim as a § 4112.99 claim. In other words, § 4112.99 cannot be used by plaintiffs to get a jury trial or compensatory or punitive damages if the claim is based on § 4112.14. The Court’s opinion, as mentioned above, states that § 4112.99 is a gap-filler. Because § 4112.14 specifically governs age discrimination claims, no gap-filler is necessary. According to the Court, “[t]o allow the general provisions of R.C. 4112.99 to prevail over the specific provisions of . . . 4112.14 would ignore the relevant statutes and would turn the framework of R.C. Chapter 4112 relating to age discrimination on its head.” This language strongly suggests that § 4112.99 cannot be used by plaintiffs to, for example, get a jury trial or compensatory or punitive damages if the claim is based on a violation § 4112.14 – which does not permit any of these things.

Finally, the issue of what statute of limitations applies to § 4112.14 age claims remains an open issue. The Court did, however, expressly reject the plaintiff’s argument that all age claims brought under § 4112.99 are subject to a six-year statute of limitations.

Overall, the case is good for employers, particularly those who routinely use a grievance or arbitration procedure. While employees whose discharge was upheld through arbitration – or an equivalent process – can still pursue a federal claim, they are significantly restricted – if not altogether prohibited – in their ability to bring a state law claim.

Role of E-Verify Still Subject of Much Debate

rcohen@porterwright.com (Robert Cohen) — Wed, 03 Jun 2009 10:01:10 -0500

The Courts and the Obama Administration continue to struggle over the proper role of E-Verify, particularly the proposed rule mandating E-Verify for Federal contractors. The Government has agreed with the litigants challenging the rule to delay implementation of the proposed rule until September 8, 2009, with strong hints that it will be delayed further as that date approaches. The proposed rule will not apply to any government contracts before the effective date.

For a more comprehensive review of the proposed rule and E-Verify generally, please review our article: E-Verify: Coming Soon to a Theater Near You.

Jon & Kate Plus 8.....Equals Child Labor Law Violations?

jlandrum@porterwright.com (Jaime Powell) — Tue, 02 Jun 2009 09:08:08 -0500

In wage and hour news, the TLC show “Jon & Kate Plus 8” may be in some hot water for violations of state child labor laws. Troy Thompson, Spokesman for the Pennsylvania Department of Labor and Industry, has been widely quoted as confirming that the agency received a complaint and is conducting an investigation.

Many people don’t realize that the child actors on their favorite television show are protected by state child labor laws. While state requirements vary, many have restrictions on the number of hours a child actor can work in a day or week, require special permits, or even require a teacher to be present on the set. At this point, it’s unclear what alleged violations may (or may not) have occurred on the set of Jon & Kate Plus 8. Regardless, this seems to be yet another hurdle in the controversial show’s path this season.

The Sixth Circuit Holds that a Waiver Request Option Saves an Otherwise Questionable $500 Arbitration Fee for Employees

jedwards@porterwright.com (Jenni Edwards) — Fri, 22 May 2009 09:32:06 -0500

Ever wonder if you can require an employee to split the costs of mandatory arbitration? The Sixth Circuit reinforced its 2003 en banc decision that allows for cost-splitting provisions in arbitration awards in the decision it issued Tuesday in the case of Mazera v. Varsity Ford Services, LLC et al. Of course, the court’s decision is not simply an affirmation that cost-splitting provisions are okay—rather, it is an affirmation that the validity of these provisions must be assessed on a case-by-case basis.

In this case, Omari Mazera was fired from his job as a car porter at Varsity Ford Services, LLC (“Varsity”). Mazera filed a lawsuit alleging that Varsity had discriminated against him on the basis of his race and disability; he also moved the district court to declare that the arbitration provision in Varsity’s employee handbook was unenforceable.

The arbitration provision required employee complaints, including complaints of discrimination, to be resolved through a four-step process that ended with an arbitration proceeding. It also stated that, within ten days from the date of an unfavorable decision by the president of the dealership regarding an employee’s complaint, the employee “must deposit with the General Manager $500.00 or five (5) days pay, whichever is less. If you request a waiver of the deposit fee, you must state the reasons for your request and submit the request to the General Manager.” Mazera signed a document acknowledging receipt of the “Mandatory Complaint Procedure” and stating that he understood that compliance with the procedure “is a term and condition of employment.”

Both the district court and the Sixth Circuit outright rejected Mazera’s arguments that the arbitration agreement was unenforceable because he had not received consideration for his agreement and because the arbitration agreement was not a condition of his employment. After all, the courts noted that the arbitration agreement contained reciprocal obligations for both parties, which is sufficient consideration to create a valid contract. The courts also agreed that Mazera had specifically agreed that compliance with the arbitration procedure was a term and condition of his employment, thus his argument it was not lacked merit.

Where the Sixth Circuit disagreed with the district court’s decision, however, involved the district court’s conclusion that the cost-splitting provision was unenforceable. The Sixth Circuit reiterated that, in this circuit, the analysis of the enforceability of a cost-splitting provision must be completed on a case-by-case basis. The court must consider whether the potential costs of arbitration are so great that they would deter individuals from seeking to vindicate their federal statutory rights through arbitration. In other words, in each case, the court must consider whether the individual arguing that the cost-splitting provision is too expensive would also be considered too expensive by other people with the same job description, the same wages, and the same socioeconomic background. If the answer is yes—that the cost-splitting provision is so expensive that others in the same situation would choose to forgo pursuit of their claims—then the provision is unenforceable.

For example, in this case, the provision required a deposit of $500 or five (5) days pay, whichever is less. For an employee like Mazera, who earned approximately $20,000.00 per year, both the Sixth Circuit and the district court agreed that some potential plaintiffs may manage to come up with $500 and be determined to pursue their claims regardless of the costs, a substantial number of other would find the cost prohibitively expensive. The result would be that many potential plaintiffs who would otherwise pursue their federal statutory rights in court through a contingency-fee arrangement with an attorney, who would likely pay the $350 filing fee, may choose not to pursue those same rights through Varsity’s arbitration procedure because they alone would be responsible for the $500 arbitration deposit. The Sixth Circuit also emphasized that the time line for payment—a mere 10 days—may present an additional hardship to employees who are interested in pursing their claims.

But—and here’s where the Sixth Circuit disagreed with the district court—Varsity’s arbitration procedure allows for employees like Mazera to request a waiver of the deposit. While the district court questioned whether Varsity would genuinely consider and grant a waiver, the Sixth Circuit found that the opportunity for waiver saved the arbitration provision. According to the Sixth Circuit, the fact that arbitration is often significantly less expensive than litigation would suggest that an employer like Varsity would be willing to waive the cost-splitting requirement for employees who are unable to pay the required deposit. Moreover, if Varsity were to waive or sufficiently reduce the deposit amount for those employees who are likely to be deterred from pursuing their rights because they are unable to pay it, the provision is enforceable because it should not deter employees from pursuing their federal statutory rights.

The net result for employers? Cost-splitting arbitration provisions are acceptable and enforceable so long as they allow all employees a true opportunity to pursue their rights. Employers may also want to consider including a waiver provision, such as the one included in Varsity’s arbitration procedure, that would protect the employer from arguments that the cost-splitting provision prohibited employees from pursuing their rights. Lastly, a waiver provision will only provide protection if employers fairly administer the granting or denial of waivers. So, if you choose to include such a provision, be sure that management is aware of your generous approach to the granting of waivers—only then will you be able to count on the cost-saving benefits that arbitration offers.

D.C. Circuit Upholds "Direct Observation" Requirements for USDOT Return to Duty and Follow Up Testing

bhall@porterwright.com (Brian Hall) — Fri, 22 May 2009 09:19:39 -0500

In a decision released May 15, 2009, the U.S. Court of Appeals for the District of Columbia upheld a Department of Transportation (DOT) regulation that requires employees who are returning to safety-sensitive duties after having completed a drug treatment program due to failing or refusing to take a drug test, to submit to return to duty and follow up testing under "direct observation" conditions. This decision and the regulation it upholds applies to employers in the aviation, rail, motor carrier, mass transit, maritime and pipeline industries that are subject to the DOT drug-testing regime. Under the regulation’s "direct observation" procedures, the employer must require a same-gender observer to “watch the urine go from the employee’s body into the collection container.” To comply, employees must raise their shirts above the waist and lower their clothing so as to expose their genitals and allow the observers to verify the absence of any devices that would permit the employee to cheat the test.

Previously, the employer had the option to require direct observation, but this was not mandatory under the former regulation. Concerned that employers were reticent to require direct observation and in light of the rise in commercially available devices, such as the "Whizzinator," that enable people to cheat on their drug tests, the DOT promulgated this new regulation requiring direct observation for all return to work and follow up tests conducted under the DOT's auspices as of November 1, 2008.

Several transportation industry unions and the BNSF Railway Company challenged the new regulation, and the D.C. Circuit issued a stay of the direct observation requirement back on November 12, 2008. Impressed with evidence that demonstrated the growth of an entire industry focused on circumventing drug tests, coupled with evidence that employees that previously had tested positive or refused drug testing presented an elevated risk of cheating, the court in its May 15th decision found that the DOT had justified the direct observation requirement. From a constitutional standpoint, the court also found that "given the combination of the vital importance of transportation safety, the employees’ participation in a pervasively regulated industry, their prior violations of the drug regulations, and the ease of obtaining cheating devices capable of defeating standard testing procedures, ... the challenged regulations [are]facially valid under the Fourth Amendment."

At the conclusion of its decision, the court emphasized that, because this case presented only a facial challenge to the direct observation requirement, the court considered only “whether the tests contemplated by the regulations can ever be conducted.” The court expressed no view on either the merits of "any as-applied challenge to this rule" or the constitutionality of any other rule. As such, employers that will be governed by the direct observation requirement would be wise to ensure that, given the intrusion into privacy necessarily associated with the requirement, all persons or entities that conduct such tests on their behalf are properly trained in the DOT regulations and procedures and that they conduct such tests consistent with those regulations and procedures in a professional manner that preserves as best as possible the dignity of the testing subject.

E-Verify Bill Introduced in Ohio House

rcohen@porterwright.com (Robert Cohen) — Wed, 20 May 2009 17:30:21 -0500

Representative Courtney Combs, a Republican from District 54 in Butler County, has introduced H.B. 184 to the Ohio House of Representatives. The bill would require all employers in Ohio, both public and private, to register and participate in E-Verify, a voluntary, federal program designed to supplement the I-9 employment verification process for all new employees. We have written a more extensive article on E-Verify for interested employers.

As introduced, H.B. 184 would require all employers to certify their participation in the E-Verify program on state income tax forms. As a result, although the bill does not provide direction to the Department of Taxation on the enforcement mechanisms for this provision, it would appear that some additional burden of enforcement would also be imposed upon the Department of Taxation. Presumably, failure to register for the E-Verify program would not excuse a non-compliant employer from its income tax obligations. Additional responsibilities for the administration of federal immigration laws are also assigned to local law enforcement agencies and the Department of Corrections in other parts of this bill. Congress is expected to address immigration reform over the next several months, so the future of State initiatives such as H.B. No. 184 is not clear.

Healthy Families Act of 2009 Introduced in Congress

bhall@porterwright.com (Brian Hall) — Wed, 20 May 2009 10:06:50 -0500

On May 18, 2009, Representative Rosa L. DeLauro, a Democrat from Connecticut, introduced the Healthy Families Act of 2009 (H.R. 2460) in the U.S. House of Representatives. The bill, which is largely the same as bills issued in prior sessions of Congress, would require employers with more than 15 employees to provide workers with up to 56 hours of paid sick leave each year. Under the bill, workers would accrue paid sick leave at the rate of one hour for every 30 hours worked, could begin using the paid sick leave after 60 days of employment, and could roll over unused sick leave into the next calendar year. Similar to the proposed Ohio legislation that was withdrawn before the 2008 November elections, employers would not be permitted to ask for written documentation of the need for leave until after the employee has missed three consecutive days.

Most of you will recall that last year's Ohio legislative proposal was withdrawn following political negotiations with Governor Strickland's office due to concern that the bill would devastate Ohio's business climate. While H.R. 2460 would not appear to disproportionately impact Ohio, it would impact more Ohio employers than the proposed Ohio legislation would have impacted since the Ohio law would not have required employers with 25 or fewer employees to provide paid sick leave. At a time when American businesses, particularly small businesses, are still reeling from the economic downturn, federally mandated paid sick leave -- while perhaps laudable in its intent -- looks like it will create more problems than it cures. The change in Presidential administrations and the make up of Congress, together with the concerns over the H1N1 flu virus, suggest that this might be the year that mandated paid sick leave passes.

Supreme Court Issues Decision in AT&T v. Hulteen

jlandrum@porterwright.com (Jaime Powell) — Wed, 20 May 2009 10:00:31 -0500

On May 18, 2009, the Supreme Court of the United States issued its opinion in AT&T v. Hulteen. Reversing the Ninth Circuit’s decision, the Court held that AT&T did not violate the Pregnancy Discrimination Act of 1978 (PDA) by calculating the accrual of pension benefits in a way that gives less retirement credit to employees who took pregnancy leave before enactment of the PDA than to employees who took other kinds of medical leave.

AT&T offered pension benefits based on Net Credited Service, which was calculated based on an employee’s date of hire and adjusted for any time the employee was not working, i.e. not earning service credits. Before 1978 (and the enactment of the PDA), employees were credited a maximum of 30 days for pregnancy leave. In contrast, employees on regular temporary disability had no limit on the days they could remain off work while continuing to accrue service credits. This method of accrual was changed after the PDA went into effect, but not retroactively. As a result, the plaintiffs in Hulteen received smaller pensions than they otherwise would have received had they received full credit for pregnancy leave taken before enactment of the PDA.

In upholding AT&T’s pension benefits calculation, the Supreme Court relied on Section 703(h) of Title VII, which provides that “it shall not be an unlawful employment practice for an employer to apply different standards of compensation … pursuant to a bona fide seniority … system … provided that such differences are not the result of an intention to discriminate because of … sex.” Before enactment of the PDA, “an exclusion of pregnancy from a disability-benefits plan providing general coverage [was] not a gender-based discrimination at all.” Thus, the Court reasoned, “the only way to conclude that Title VII does not protect AT&T’s system would be to read the PDA as applying retroactively to recharacterize AT&T’s acts as having been illegal when done. This is not a serious possibility.”

The Court also rejected the plaintiffs’ argument based on the Lily Ledbetter amendments to Title VII. The Court held that the Lily Ledbetter Fair Pay Act, which made it “an unlawful employment practice … when an individual is affected by application of a discriminatory compensation decision or other practice, including each time … benefits [are] paid, resulting … from such a decision”…. [did] not help Hulteen. AT&T’s pre-PDA decision not to award Hulteen service credit for pregnancy leave was not discriminatory, with the consequence that Hulteen has not been ‘affected by application of a discriminatory compensation decision or other practice.’”

Bill Introduced to Add Sexual Orientation and Gender Identity and Expression to Protected Classes Under Ohio Law

jlaplante@porterwright.com (Jamie LaPlante) — Wed, 20 May 2009 09:54:00 -0500

On May 12, Representatives Stewart and McGregor introduced into the Ohio House of Representatives H.B. 176 to add “sexual orientation or gender identity and expression” to the list of protected classes under Chapter 4112, Ohio’s anti-discrimination statute, and R.C. 4111.17, which prohibits wage discrimination. Interestingly, the bill limits the statutes’ coverage for the two new classes only —sexual orientation and gender identity and expression—to government employers and employers employing 15 or more persons (as opposed to the four or more persons required for other protected classes). [R.C. 4112.01(2).]

The bill defines sexual orientation as “actual or perceived, heterosexuality, homosexuality, or bisexuality” and gender identity and expression as “the gender-related identity, appearance, or expression of an individual regardless of the individual’s assigned sex at birth.” [R.C. 4112.01 (23), (24).] The bill provides an exception for “religious association[s], corporation[s], or societ[ies] . . . not organized for private profit, or any institution[s] organized for educational purposes . . . operated, supervised, or controlled by such [religious organizations]” to discriminate on the basis of sexual orientation or gender identity and expression except where the organization is engaged in a secular business activity unrelated to the religious or educational purpose for which the organization is organized. [R.C. 4112.02(R).] Otherwise, the bill simply extends the prohibition on employment discrimination already applicable to the protected classes of race, color, religion, sex, military status, national origin, disability, age, and ancestry to the two new classes.

Currently, 20 states and the District of Columbia—and many more cities and municipalities, including Columbus—prohibit employment discrimination based on sexual orientation. Only a subset of those states—California, Colorado, Iowa, Illinois, Maine, Minnesota, New Jersey, New Mexico, Oregon, Rhode Island, Vermont, Washington, and the District of Columbia—protect gender identity or expression or transgender status as a protected class. Some states additionally protect “gender dysphoria” as a disability under state disability law protections. H.B. 176, as written, would seem to broadly protect employees who are undergoing (or plan to undergo) sex assignment surgery and those who do not plan to undergo surgery but choose to identify as the opposite sex. This category presents a host of workplace issues—including dress code, grooming standards, and restroom-use issues related to transgender employees who identify with a gender other than their biological gender. Many state and municipal laws addressing gender identity make explicit exceptions for dress code and grooming standards, but the proposed Ohio statute does not.

As this bill progresses in the Ohio legislature, we will post updates.

Employers Court Danger When Using Technology to Investigate Employee Misconduct or Gather Evidence Without Prior Legal Advice

bhall@porterwright.com (Brian Hall) — Mon, 18 May 2009 09:57:41 -0500

Perhaps it's the economy. Perhaps it's the lure of trying to catch someone in the act. Perhaps it's something else entirely, but we’re starting to see more instances of employers getting themselves in trouble because they’re monitoring employee use of employer technological resources to investigate possible employee misconduct without first seeking legal advice. Two fairly recent examples: Hay v. Burns Cascade Co., Inc. out of the Northern District of New York and Van Alstyne v. Electronic Scriptorium, Ltd. out of the Fourth Circuit.

In Hay, the employer, concerned that the plaintiff, one its customer service employees, was bad-mouthing it to customers, began monitoring her telephone calls. While listening to one telephone call, the president of the company determined that the conversation was between plaintiff and a male customer and overheard her saying that she "can't believe these guys are managers" and that she had "lost all respect" for the company's CEO. The president testified that he knew it was a customer because it was during work hours, and “there was nothing to indicate that it was anything other than a business call.” The president did not ascertain, however, which company the customer was affiliated with or whether the company was an existing or prospective customer. According to the court's decision, the president listened to the conversation for 30-40 seconds before he stopped monitoring. Based apparently on this one telephone call, the company decided to terminate the plaintiff's employment due to "poor performance."

Problem: According to the plaintiff, the conversation the president monitored was with her husband. As a result, the plaintiff filed suit, alleging that her employer had illegally intercepted, disclosed and used her private and personal telephone communications and that she was wrongfully terminated from her employment due to the unlawful use of information derived from illegal wiretapping and eavesdropping. The employer filed a summary judgment motion, which the court denied in all significant respects. Specifically, the court held that the plaintiff had produced sufficient evidence to obtain a jury trial on the issue of whether the employer's conduct violated Title III of the Omnibus Crime Control and Safe Streets Act of 1968, also known as the Federal Wiretapping Act, which prohibits the intentional interception of wire communications, including telephone conversations, in the absence of a court order.

There are two exceptions to that statute, which unfortunately the employer could not make fit to avoid a jury trial. First, there is an exception if the subject of the telephone monitoring consents either explicitly or impliedly. Here, however, the court found that the employer had not sufficiently established the plaintiff's consent to monitoring. Although the plaintiff may have been aware through conversations with co-workers that the employer may be or was capable of monitoring phone calls, there was no evidence that plaintiff was actually informed that her conversations were being monitored. In addition, there were no tones or other signals that would indicate to the plaintiff that her calls were being monitored. Finally, the company's code of conduct did not clearly state that telephone calls were being monitored.

The second possible exception to the Wiretapping Act is the business exception, which applies to monitoring conducted in the ordinary course of business. The court skirted the question of whether the interception of plaintiff's telephone calls to determine if she was making derogatory statements about the company to customers was in the ordinary course of business because there was an issue of fact as to whether the call that got her fired was with a customer or her husband. Finally, because the evidence used to terminate the plaintiff's employment was potentially obtained in violation of the Wiretapping Act, the court permitted her wrongful termination case to go to the jury.

In Van Alstyne, the plaintiff pursued a sexual harassment case against her employer after being terminated from her employment at Electronic Scriptorium, Ltd., which filed a counterclaim against her alleging several business torts. During the course of the litigation, ESL's president admitted that he had accessed emails from the plaintiff’s personal AOL account. The plaintiff then filed suit alleging that the president's access of her personal emails violated the federal Stored Communications Act as well as Virginia law. The Court's statement that the president admitted accessing the plaintiff's AOL account at all hours of the day, from home and Internet cafes, and from locales as diverse as London, Paris and Hong Kong suggests that the employer accessed the plaintiff's AOL account directly from a third-party service provider, making a finding that the SCA was violated a near certainty . At the conclusion of trial, the jury awarded the plaintiff a total of $200,000 in damages and approximately $136,000 in attorney fees. On appeal, the Fourth Circuit overturned $100,000 of the damages, which were allocated to damages under the statute, because the plaintiff had not shown that she sustained actual damage as a result of access to her email account. The court upheld the award of $100,000 in punitive damages and the attorney fees.

Hay and Van Alstyne demonstrate the kinds of trouble employers can cause themselves when they use their technology resources to either monitor or obtain evidence from their employees without their knowledge or consent and without first seeking legal advice. The employer in Hay has little to demonstrate that it obtained the plaintiff's consent to monitoring, particularly because its code of conduct was quite vague on the issue. (As an aside, many state laws – but not Ohio's – require that both parties to a telephone conversation be advised that their call is being monitored). Also, if the plaintiff can establish that the intercepted call indeed was with her husband, there will be slim chance for the employer to claim the business exception to the wiretapping act. As far as Van Alstyne is concerned, the employer was courting danger once it started tapping into the employee's private email account.

Another case to watch: Pietrylo v. Hillstone Restaurant Group, a New Jersey federal court case that is scheduled for trial in June. In Pietrylo, the employer terminated two employees for disparaging comments made about the company and supervisors on a private password-protected MySpace site after obtaining the password from a third employee. The primary issue likely will be whether the employee voluntarily gave the employer the password or whether she was coerced into doing so. If the case in fact goes to trial, we will let you know the outcome.

In the meantime, it is critical that employers seek legal advice before undertaking employee monitoring programs. Although employers certainly may reserve the right to monitor their employees’ use of company technology resources, there are limits to what employers can do without risking liability. Legal counsel can help employers avoid a world of headaches.