Employment Law Alert

'Required' Union Poster Unlawful According to D.C. Circuit

James J. La Rocca — Mon, 13 May 2013 13:34:16 -0500

On May 7, 2013, in Nat’l Ass’n of Mfrs. v. NLRB, the United States Court of Appeals for the District of Columbia decided that a rule implemented by the National Labor Relations Board (“Board” or “NLRB”) requiring most private sector employers to post a notice about workers’ rights to unionize was invalid. As previously reported, the Board issued the rule almost two years ago, and has repeatedly postponed its effective date pending the outcome of legal challenges to the rule by business groups.

Practical Implications of the Decision

The big takeaway from the D.C. Circuit’s decision is that employers (still) have no legal obligation to post a notice about unionizing in the workplace – at least not anytime in the near future. Notably, there is a similar case pending before the Fourth Circuit (covering Maryland, North Carolina, South Carolina, and Virginia), which has the authority to uphold the rule for those states within its jurisdiction. Additionally, the NLRB may ask the United States Supreme Court to decide the issue. For now, employers may want to review their workplace postings to confirm the notice is not on display. This is particularly true for employers that purchase and utilize “universal” workplace posters, which may include the notice.

Notably, the decision has no impact upon federal contractors, who still are required to post a similar notice.

Summary of the Decision

The D.C. Circuit’s decision to invalidate the Board’s rule was premised on the penalties associated with an employer’s failure to post the notice, some of which ran afoul of employer rights. Under the rule, a failure to post could subject an employer to: (1) an unfair labor practice; (2) a finding of anti-union motivation where other alleged violations of the Act are asserted against an employer; and/or (3) a tolling of the NLRA’s 6-month statute of limitations. The D.C. Circuit reasoned that the first two potential penalties were inconsistent with an employer’s explicit right to express and disseminate “any views, argument, or opinion” on unions to its workers as long as those messages are not coercive. The Court reasoned that just as an employer has this broad right to share information about unions with its workforce, an employer has the reciprocal right not to express or disseminate such information, and penalizing them for exercising this right defies the express language of the Act. The D.C. Circuit added that the tolling penalty ran afoul of the NLRA because the drafters of the Act could not have possibly contemplated an expansion of the limitations period based upon an employer’s failure to post a notice about unionization, as no such equitable tolling had ever been recognized as of the time Congress enacted the 6-month statute of limitations.

Notably, the D.C. Circuit’s decision comes only a few months after Canning v. NLRB, 705 F.3d 490 (D.C. Cir. 2013) where the same court decided that the Board has lacked the power to act since at least January 4, 2012 due to invalid “recess” appointments by President Obama. (We previously reported on the Canning decision in detail. And, as anticipated, the Board petitioned the Supreme Court to review the D.C. Circuit’s decision in Canning about 2 weeks ago.) In its more recent decision about the workplace posting, the D.C. Circuit noted that the NLRB actually has lacked the power to act since August 27, 2011, but clarified it was not this lack of power that rendered the posting rule invalid.

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For answers to any questions concerning the workplace posting or other issues involving the NLRB, please feel free to contact an attorney in the Gibbons Employment & Labor Law Department.

James J. La Rocca is an Associate in the Gibbons Employment & Labor Law Department.

Gov. Christie Issues Conditional Veto of Social Networking Privacy Bill

Lindsay J. Jarusiewicz — Thu, 09 May 2013 12:28:49 -0500

On Monday, May 5, 2013, New Jersey Governor Chris Christie issued a conditional veto of Assembly Bill No. 2878, the controversial piece of proposed legislation that sought to bar most employers from requiring current or prospective employees to provide user names or passwords to social networking accounts and from inquiring as to whether current or prospective employees even had social networking accounts.

In his veto message, Governor Christie recognized the importance of protecting the privacy of job candidates and employees at the heart of the “well-intentioned” bill, but noted that such privacy concerns “must be balanced against an employer’s need to hire appropriate personnel, manage its operations, and safeguard its business assets and proprietary information.”

Accordingly, Governor Christie recommended several amendments to the bill. First, the conditional veto deleted the entire section of the bill prohibiting employers from requiring or requesting that an employee or prospective employee disclose whether he or she has a social networking account. The conditional veto also struck the section of the bill providing a private right of action to aggrieved employees and prospective candidates against employers. In an apparent effort to offer more protections to employers, the conditional veto added language granting employers the right to conduct investigations to ensure compliance with applicable laws, regulations or “prohibitions against work-related misconduct” based on specific information on an employee’s personal account and also the right to investigate employee’s actions regarding the transfer of certain proprietary information to an employee’s personal account. Finally, the conditional veto granted employers the right to view, access or utilize information about current or prospective employees that can be obtained in the public domain.

Notably, the conditional veto did not alter the section of the bill prohibiting an employer from requiring or requesting current or prospective employees to provide user names or passwords to their social networking accounts.

Now the Assembly must vote on the bill incorporating Gov. Christie’s recommended amendments. With the high level of bipartisan support the bill has garnered, as evidenced by its passage in the Senate (38-0) and in the Assembly (75-2), it is likely the vote will happen sooner rather than later.

Lindsay J. Jarusiewicz is an Associate in the Gibbons Employment & Labor Law Department.

Mitchell Boyarsky to Speak at Upcoming NJBIA Employment Seminar

Gibbons P.C. — Thu, 09 May 2013 10:01:29 -0500

Mitchell Boyarsky, a Director in the Gibbons Employment & Labor Law Department, will speak at the upcoming NJBIA Employment Seminar, "Workplace Harassment & Discrimination: Creating a Culture of Zero Tolerance," on Friday, May 10, 2013 at the Wilshire Grand. Mr. Boyarsky's panel, "Making Training Work," will discuss how to implement internal training programs to prevent harassement. Mr. Boyarsky will also provide insight into how to handle cases that occur when training fails or is neglected.

For additional information on the other panel discussions at this seminar or to register for this event, please click here.

Supreme Court Reviews Employer Reimbursement Provisions in Employee Benefits Plans

Richard S. Zackin — Thu, 02 May 2013 09:26:44 -0500

In US Airways, Inc. v .McCutchen, decided on April 16, 2013, the U.S. Supreme Court once again emphasized that in disputes involving employee benefits plans governed by the Employee Retirement Income Security Act, 29 U.S.C. § 1001, et seq. (“ERISA"), it is the unambiguous language of the plan in question that controls the rights of the parties and that general equitable principles cannot be used to supersede the terms of the plan. In areas where the plan is silent, however, courts may employ appropriate equitable principles to construe the plan. At issue in US Airways was the reimbursement provision of an employer’s health benefits plan that purported to give the employer the right to recoup medical benefits paid to an employee injured in an automobile accident who thereafter recovered funds from third parties as a result of the accident, although the amount the employee actually recovered after paying his attorney was less than the amount he owed his employer. The Supreme Court rejected the employee’s attempt to apply equitable principles of unjust enrichment to limit the application of the reimbursement provision. Holding, however, that the plan was silent as to the allocation of the costs, including attorneys fees, incurred by the employee in his efforts to recover from third parties, the Court further held the equitable principle known as “the common fund rule” should apply, entitling the employee to reasonable attorneys fees from the funds recovered. The decision makes clear the importance to employers of accomplishing the objectives of their benefits plans with clear-cut language.

Background

After McCutcheon was seriously injured in an automobile accident, his medical bills, amounting to almost $67,000, were paid by the health plan of his employer, US Airways (“the Plan”). McCutchen sued the driver of the other car involved, claiming $1 million in damages. Unfortunately, the driver of the other car had insufficient insurance. Through the efforts of McCutchen’s attorney, working under a 40 percent contingency fee arrangement, McCutcheon was able to recover only a total of $10,000 from the driver of the other car and $100,000 from his own insurance company. This left him with a net recovery of $66,000 after paying his attorney, since US Airways did not contribute anything towards his attorneys fees.

US Airways, as Plan administrator, then brought suit in federal district court, seeking equitable relief under § 502(a)(3) of ERISA to recover from McCutchen the $67,000 in medical bills it had paid on his behalf, relying on the following Plan provision:

If [US Airways] pays benefits for any claim you incur as the result of negligence, willful misconduct, or other actions of a third party, . . . [y]ou will be required to reimburse [US Airways] for amounts paid for claims out of any monies recovered from [the] third party, including, but not limited to, your own insurance company as the result of judgment, settlement, or otherwise.

The District Court found for US Airways. On appeal, however, the United States Court of Appeals for the Third Circuit ruled that because US Airways’ suit was one for equitable relief under § 502(a)(3), the equitable principle of unjust enrichment should limit the Plan’s reimbursement provision. As full reimbursement would “leav[e] [McCutchen] with less than full payment” for his medical bills and, at the same time, would provide a “windfall” to US Airways, given its failure to “contribute to the cost of obtaining the third-party recovery,” the Third Circuit directed the District Court to determine what amount, shy of the entire amount sought by the Plan, would qualify as appropriate equitable relief.

The Supreme Court’s Opinion

Writing for the majority, Justice Kagen rejected the Third Circuit’s premise that courts are free to apply equitable principles merely because an employer’s recovery under a reimbursement provision constitutes equitable relief under § 502(a)(3). Justice Kagen noted, as the Court had held earlier in Sereboff v. Mid Atlantic Medical Services, that the Plan’s reimbursement provision created an “equitable lien by agreement.” Such a lien serves to carry out the terms of the Plan, which “means declining to apply rules – even if they would be ‘equitable’ in a contract’s absence – at odds with the parties’ expressed commitments.” Thus McCutchen could not rely on theories of unjust enrichment to defeat the Plan’s clear terms.

The Court, however, did not leave McCutchen without any relief. The Court concluded that the Plan’s reimbursement provision was silent as to “how to pay for the costs of obtaining” monies from third parties. The Court ruled that it was appropriate to fill this gap in the Plan’s provisions with the equitable “common-fund doctrine [as] the best indication of the parties’ intent, since it was unlikely that McCutchen would have pursued a recovery against third parties for the benefit of himself and US Airways had he known he would be unable to retain any of his recovery. The common-fund doctrine recognizes that someone “who recovers a common fund for the benefit of persons other than himself” is due “a reasonable attorney’s fee from the fund as whole.” Thus, in the absence of any Plan provision to the contrary, McCutchen was entitled to have US Airways contribute to the attorneys' fees he incurred in securing a recovery that inured to the benefit of the Plan.

Conclusion

Overall, US Airways, Inc. v. McCutchen is favorable to employers because it allows them, through precise draftsmanship, to maximize the reimbursement of medical benefits paid on behalf of employees who subsequently recover against third parties. Employers should be mindful, however, that although their health plans’ reimbursement provisions can be drafted to preclude application of the common fund doctrine in all circumstances, reimbursement provisions that are so onerous as to dissuade plan participants from pursuing third parties will be counterproductive. When drafting new plans or reviewing their current plans, employers should keep these precepts in mind. For answers to any questions concerning ERISA or other employee benefits issues, please feel free to contact an attorney in the Gibbons Employment & Labor Law Department.

Richard S. Zackin is a Director in the Gibbons Employment & Labor Law Department.

Employee Complaints Are Unavoidable - Here's What You Need to Know!

Gibbons P.C. — Wed, 01 May 2013 14:54:02 -0500

Even companies that have developed comprehensive workplace policies and have trained their employees on compliance are faced with employee complaints. A prompt and effective workplace investigation has a number of key components. In a recent article published by the New Jersey Law Journal, entitled Addressing Employee Complaints, Susan Nardone outlines the guidelines an employer should follow for conducting an effective investigation, including:

act quickly;
select the right investigator;
establish an investigation plan; and
maintain proper documentation of the investigation.

To read the full article and learn more about these guidelines and several others, click here.

Or, to register to hear Ms. Nardone speak on this topic in greater detail at DRI’s 36th Annual Employment and Labor Law Seminar on May 3, click here.

The Supreme Court Addresses Offers of Judgment in the Context of Collective Actions

Richard S. Zackin — Mon, 29 Apr 2013 11:31:29 -0500

In Genesis Healthcare Corp. v. Symcyk, the U.S. Supreme Court, by a vote of 5 to 4, rejected an employee’s contention that her employer should not have been permitted to thwart her attempt to bring a collective action under the Fair Labor Standards Act (“FLSA”) by making an offer of judgment to her under Rule 68 of the Federal Rules of Civil Procedure that included all of the relief to which she would have been entitled in connection with her individual FLSA claim. The Court’s April 16, 2013, ruling provides encouragement to employers who may seek to block an FLSA collective action with an offer of judgment—although, as detailed below, the Court’s opinion did leave one issue unresolved. The Court’s opinion also applies to cases brought under the Age Discrimination in Employment Act (“ADEA”) and the Equal Pay Act (“EPA”), as both of those statutes are governed by the collective action procedures of the FLSA rather than by the class action procedures of Rule 23 of the Federal Rules of Civil Procedure.

Background

Plaintiff brought suit under the FLSA alleging that her former employer improperly automatically deducted 30 minutes of time per shift for meal breaks even though plaintiff and certain other employees performed work during those breaks. Plaintiff purported to bring the action on behalf of herself and all similarly situated persons. The FLSA expressly permits such a “collective action” provided each similarly situated person affirmatively elects to “opt in” to the action.

When the employer answered the complaint, it simultaneously served on plaintiff an offer of judgment under Rule 68. That offer included all of plaintiff’s purported lost wages and “such reasonable attorneys fees, costs and expenses . . . as the Court may determine.” The offer was conditioned on it being accepted within 10 days. Plaintiff never responded to the offer. The employer then moved to dismiss the complaint for lack of subject matter jurisdiction, arguing that the offer of judgment deprived plaintiff of a personal stake in the litigation and thus rendered the entire action moot.

The District Court granted the employer’s motion to dismiss, but the United States Court of Appeals for the Third Circuit reversed. The Third Circuit agreed that no other potential plaintiff had yet opted into the suit, that the offer of judgment fully satisfied plaintiff’s individual claim, and that, under its precedents, such an offer generally moots a plaintiff's claim, whether or not it is accepted. Nevertheless, the Third Circuit held that plaintiff's collective action was not moot because allowing defendants to "pick off" named plaintiffs with an offer of judgment before a District Court certified a collective action “could short circuit the process, and, thereby, frustrate the goals of collective actions.” The Third Circuit remanded the case to the District Court to allow plaintiff to seek "conditional certification.

The Supreme Court’s Opinion

Writing for the majority, Justice Thomas held that the issue before the Court was simply whether the employer’s offer of judgment terminated the “actual controversy” between the parties over which a federal court could constitutionally assert jurisdiction, in that it offered plaintiff complete relief on her individual FLSA claim. To resolve that issue the Court had to determine whether the offer of judgment rendered the controversy moot even though plaintiff had never accepted it. The Court noted that the Circuit Courts of Appeals were split on the issue, but concluded it did not have to resolve the split, as plaintiff had conceded the issue in the District Court and in the Third Circuit and thus could not raise it in the Supreme Court.

The Court then rejected plaintiff’s contention that her attempt to bring a collective action gave her a personal stake in the action that survived the offer of judgment. The Court distinguished collective actions from class actions certified under Rule 23. Once a court certifies a Rule 23 class action, the class members attain a legal status before the Court separate from that of the named plaintiff, so that a live controversy continues to exist even should the named plaintiff’s individual claim become moot. In collective actions, however, the class certification procedures of Rule 23 do not apply and thus, until some other person opts into the action, there is no claim before the Court over which it can assert jurisdiction once the plaintiff’s claim becomes moot. Accordingly, the Court held that the District Court had properly dismissed the action.

In dissent, Justice Kagan took the view that plaintiff, in the courts below, had not waived the issue of whether the offer of judgment had rendered her claim moot. Reaching that issue, the dissent maintained that only an accepted offer of judgment moots the action, that a District Court has no authority under Rule 68 to enter a judgment based on the offer of judgment over the plaintiff’s objection, and thus that the District Court in the present case should have considered plaintiff’s request for a collective action in order to provide her with all of the relief requested in her complaint.

Conclusion

The Genesis Healthcare decision clearly provides employers faced with collective actions in FLSA, ADEA or EPA cases with the option of making offers of judgment that would give the named plaintiffs complete relief and thereby nip in the bud a request that the Court allow a collective action to proceed. However, the issue of whether such offers, if not accepted, will moot the plaintiff’s claim and thus bar the collective action has not been finally decided by the Court. Whether any members of the majority will side with the dissent on that issue remains to be seen, and plaintiffs’ lawyers in jurisdictions that have not ruled on the issue will certainly press the point.

For answers to any FLSA questions or questions regarding collective actions or class actions, please feel free to contact an attorney in the Gibbons Employment & Labor Law Department.

Richard S. Zackin is a Director in the Gibbons Employment & Labor Law Department.

New Form I-9 To Go Into Effect On May 7, 2013

Michael J. Riccobono — Wed, 24 Apr 2013 08:14:51 -0500

The U.S. Citizenship and Immigration Services (USCIS) recently released an updated Employment Eligibility Verification Form I-9. Beginning May 7, 2013, the new Form I-9 must be used for all new hires, including reverification or rehires. The new Form I-9 denotes a revision date of March 8, 2013 in the lower left hand corner of the form and is available on the USCIS’s website. Employers are not required to complete the new Form I-9 for current employees if they have maintained properly-completed unexpired forms on file for those employees.

Key Changes

While the new Form I-9 does not change an employer’s obligation to verify employee identity and employment authorization, it does alter the list of acceptable documentation and adds several data fields.

Acceptable Documents

The list of acceptable documents which may be used by employees to confirm their identity and employment authorization under “List A” is the most significant change to the new Form I-9. The documents which are no longer acceptable under “List A” include:

Alien Registration Receipt Card with photograph - Form I-151
Unexpired Reentry Permit - Form I-327
Unexpired Refugee Travel Document - Form I-571
Unexpired Temporary Resident Card - Form I-688
Unexpired Employment Authorization Card - Form I-688A
Unexpired Employment Authorization Card with photograph - Form I-688B
Certificate of Naturalization - Form N-550/570
Certificate of U.S. Citizenship - Form N-560/561

Other documents, which have been added as acceptable documents under “List A” include:

Foreign passport with Arrival/Departure Record with endorsement - Form I-94-94A
Employment Authorization Document with photograph - Form I-766
Passport from the Federates States of Micronesia with Form I-94/94A

As of May 7, 2013, only the list of acceptable “List A” documents appearing at the end of the new Form I-9 may be used. The “List B” and “List C” documents have not changed with the new Form I-9.

New Data Fields

The new Form I-9 also includes new data fields which require an employee’s foreign passport information (if applicable), and the employee’s telephone number and email address. The new Form I-9 also provides extended instructions that the employee is required to complete the form no sooner than the date of acceptance of the job offer and no later than the date of commencement of work, a requirement which has created some confusion for employers and employees alike in the past.

Employer Resources

The USCIS has also recently released a revised “Handbook for Employers,” which serves as a useful resource for employers on the completion and retention of the new Form I-9.

Penalties

Failure to comply with these new I-9 requirements may result in significant penalties, including civil fines ranging from $110 to $1,100 per Form I-9, or criminal charges.

For answers to questions regarding the new Form I-9 requirements, please feel free to contact an attorney in the Gibbons Employment & Labor Law Department.

Michael J. Riccobono is an Associate in the Gibbons Employment & Labor Law Department.

Third Circuit Finds Private Healthcare Facility and Its Operator to be Single Employer for Liability Under the NLRA

Lindsay J. Jarusiewicz — Tue, 23 Apr 2013 10:14:50 -0500

In a recent decision, Grane Health Care v. NLRB, the Third Circuit ruled that a private healthcare facility and its operator - in which it has a 99.5% ownership stake and a near complete overlap of company officers - are a single employer subject to the National Labor Relations Act (the “Act” or “NLRA”). Accordingly, the two entities were found to be jointly and severally liable for remedying unfair labor practices committed by either of them.

Background

Grane Health Care (“Grane”) purchased the Laurel Crest Nursing and Rehabilitation Center from Cambria County, Pennsylvania. Then Grane transferred the property to a newly-established entity it formed to operate the property, Cambria Care Center. Prior to the sale, Laurel Crest was subject to Pennsylvania’s Public Employees Relations Act (“PERA”) and had two unions - Local Union No. 1035 (“Local 1035”), which represented the nonprofessional employees, and the Service Employees International Union (“SEIU”), which represented the nursing employees. After the sale, employees had to reapply for their positions with the new operating company, Cambria Care. Though a majority of the previous employees were hired by Cambria Care, five represented employees were not. Further, both Grane and Cambria Care refused to bargain with the two incumbent unions. The unions then filed unfair labor practice charges against Grane and Cambria Care.

An Administrative Law Judge held that Grane and Cambria Care were a single employer (the “Company”) subject to the NLRA, that the Company violated Local 1035’s bargaining rights and that the Company violated the Act by not hiring the five employees based on their union affiliations. The National Labor Relations Board (the “Board”) affirmed the ALJ's findings, adopted its decision, and ordered the Company to recognize and bargain with Local 1035 and to hire the five employees to the positions for which they applied. The Company then appealed to the Third Circuit.

The Third Circuit’s Decision

In affirming the Board’s determination that Grane and Cambria are a single employer subject to liability under the Act, the three-judge panel noted that the Board appropriately made detailed factual findings related to each of the four factors normally implemented to determine single employer status: (1) functional integration of operations; (2) centralized control of labor relations; (3) common management; and (4) common ownership. The Court also noted that the Board’s findings “describe two deeply integrated companies with centralized control emanating from Grane.”

The Court also affirmed the Board’s decision that the Company had a duty to bargain with Local 1035 and explained that the successorship doctrine requires a new employer to bargain with an incumbent union that represented the predecessor’s employees when there is substantial continuity between the predecessor and successor enterprises. The Court rejected the Company’s argument that the successorship doctrine cannot be applied as a matter of law where the predecessor employer is a state entity not subject to the Act. The Court held that the successorship doctrine applied because the doctrine's purpose is to encourage stability at a time of transition, and there is nothing in the Act precluding the Board from finding that union certification under the Pennsylvania law is sufficient to establish a presumption of majority support under federal law consistent with the Act. Accordingly, the Company had a duty to bargain with Local 1035. Finally, the Court affirmed the Board’s decision that the Company had engaged in unfair labor practices by refusing to hire the five employees based on antiunion animus. The panel found the Board’s credibility determinations as to the testimony of two Grane representatives was not patently unreasonable and supported the view that the justifications for not hiring the five employees were pretextual, and therefore, the Court declined to disturb the Board’s decision.

Conclusion

The Third Circuit’s opinion in Crane Health Care should remind employers (1) when acquiring businesses subject to collective bargaining agreements, they have a duty to bargain in good faith with the pertinent unions, and (2) there are circumstances in which they will be liable under the NLRA for the actions of their affiliated companies which are otherwise distinct corporate entities.

For questions regarding the National Labor Relations Act, please feel free to contact an attorney in the Gibbons Employment & Labor Law Department.

Lindsay J. Jarusiewicz is an Associate in the Gibbons Employment & Labor Law Department.

Legislation to Invalidate Certain Non-Compete Agreements Introduced in New Jersey

Christine A. Amalfe — Fri, 12 Apr 2013 09:01:24 -0500

Earlier this month, a new bill, A3970, was introduced in the New Jersey State Assembly by Assemblymen Peter J. Barnes, III, Joseph V. Egan, and Wayne P. Deangelo limiting the enforcement of certain provisions in employment contracts if the individual is eligible for unemployment compensation. It is unclear if the bill will ultimately pass, and be signed into law by the Governor, but there appears to be support within the state Assembly and Senate. The bill provides that if an unemployed individual is found to be eligible to receive unemployment compensation benefits, that individual shall not be bound by any covenant, contract, or agreement not to compete, not to disclose, or not to solicit. The bill only applies to agreements entered into AFTER the date of enactment.

Given the uncertainty raised by this very broad bill, employers are urged to enter into these types of agreements for all important employees with access to confidential information as soon as possible. In addition, assuming the bill passes, it will be important to provide for some type of garden leave or attempt to structure severance payment over time, so that the former employee may not be deemed eligible for unemployment during the term of the non-compete/non solicitation.

We will continue to monitor the bill and provide any updates as they become available.

Christine A. Amalfe chairs the Gibbons Employment & Labor Law Department.

Federal Computer Fraud and Abuse Act Claim Asserted in Complaint Tethers Lawsuit to Federal Court

Lindsay J. Jarusiewicz — Tue, 09 Apr 2013 08:09:55 -0500

A Federal District Court recently refused to dismiss a complaint for lack of subject matter jurisdiction because, among several state law claims, the plaintiff – the individual defendant’s former employer – also asserted a claim under the Federal Computer Fraud and Abuse Act (CFAA).

In NouvEON Tech. Partners, Inc. v. McClure, No. 3:12-CV-633-FDW-DCK, 2013 U.S. Dist. LEXIS 29208 (March 5, 2013), a North Carolina Federal District Court denied defendants’ Rule 12(b)(1) motion to dismiss, for lack of subject matter jurisdiction, a myriad of state law claims filed by NouvEON against its former employee (McClure) and her new employer (Smarter Systems). Defendants argued that the state law claims did not belong in Federal Court because the complaint only contained a single federal claim – alleging violation of the CFAA – and pled it only against McClure. The Court was persuaded, however, that because NouvEON alleged Smarter Systems was vicariously liable for McClure’s conduct in violating the CFAA, and because the complaint specifically incorporated by reference into the state law claims all of the factual allegations supporting the federal claim, all the claims should be resolved in one federal judicial proceeding.

Factual Background

One week after resigning from NouvEON, McClure began working for Smarter Systems. NouvEON alleged that McClure’s duties at Smarter Systems violated a non-compete agreement she entered into with NouvEON prior to leaving the company, and that McClure misappropriated confidential information by accessing NouvEON’s database after she left NouvEON. NouvEON further alleged that McClure accessed the confidential information at the direction of Smarter Systems, in order for her new employer to gain a competitive advantage over NouvEON.

NouvEON’s complaint alleged McClure and Smarter Systems committed computer trespass under North Carolina statute and violated North Carolina’s Unfair and Deceptive Trade Practices Act, and accused both defendants with civil conspiracy and unjust enrichment. The complaint also alleged that McClure violated the CFAA and committed conversion, and that Smarter Systems tortiously interfered with McClure’s contract and was vicariously liable.

The Court’s Decision

The North Carolina Federal District Court ruled that although the state claims substantially predominated over the federal claim, all allegations in the complaint concerned the “same core of operative facts.” Therefore, the Court, guided by the “principles of judicial economy, convenience, and fairness to litigants,” exercised its discretion to retain supplemental jurisdiction under 28 U.S.C. § 1367 over NouvEON’s state law claims.

The Takeaway

The Court’s decision presents employers who prefer to litigate trade secret, restrictive covenant and related state law claims against their former employees (and perhaps their new employers) in federal court a potential means of doing so (when diversity jurisdiction does not exist). By pleading a valid CFAA claim, employers can satisfy the federal question jurisdiction requirement for litigating in Federal Court.

For answers to questions regarding non-competition, trade secrets, and other related matters, as well as litigation and the protection of business information please feel free to contact an attorney in the Gibbons Employment & Labor Law Department.

Lindsay J. Jarusiewicz is an Associate in the Gibbons Employment & Labor Law Department.

Susan L. Nardone to Speak at Upcoming NJBIA Employment Seminar

Gibbons P.C. — Mon, 08 Apr 2013 09:20:14 -0500

Susan L. Nardone, a Director in the Gibbons Employment & Labor Law Department, will speak at the upcoming NJBIA Employment Seminar on Friday, April 12, 2013, at Forsgate Country Club. Ms. Nardone's panel, "The EEOC: the New Sheriff in Town?," will discuss how the EEOC's actions and enforcement priorities can impact New Jersey businesses.

For additional information on the other panel discussions at this seminar or to register for this event, please click here.

What to Expect from the EEOC in 2013

Susan L. Nardone — Mon, 01 Apr 2013 13:31:29 -0500

At the Gibbons Second Annual Employment & Labor Law Conference in February, one panel discussion focused on the Equal Employment Opportunity Commission’s ("EEOC") recent activity and enforcement priorities. Among the panelists were Corrado Gigante, Director of the Newark Area Office of the EEOC, and Gibbons Directors, Christine Amalfe, Kelly Ann Bird and Susan Nardone.

The panel discussed the EEOC’s late 2012 release of its Strategic Enforcement Plan for the period 2012-2016. The large number of individual, private-sector charges has forced the EEOC to develop a strategic approach to eradicating unlawful employment discrimination. The Plan calls for an "integrated, holistic approach to enforcement from beginning to end, without separating the investigation and conciliation stage of the EEOC’s work from its litigation stage." According to the Plan, the EEOC will focus on a number of areas, including the protection of lesbian, gay, bisexual and transgender (LGBT) employees, pregnancy discrimination, disability discrimination and reasonable accommodation, equal pay, and recruitment and hiring practices.

Director Gigante noted that while the EEOC continues to address individual claims and charges, going forward it will focus on those matters likely to achieve a broader remedial impact, such as cases involving systemic discrimination. The EEOC will use individual complaints as a basis for conducting a more widespread investigation of the company involved to root out other potential problems. Additionally, Director Gigante indicated that the EEOC is teaming up with other federal agencies, including the Department of Labor, the Department of Justice, and the Office of Federal Contract Compliance Programs, to share information.

The EEOC’s focus on the protection of LGBT employees follows its April 2012 decision in Macy v. Holder, Appeal No. 0120120821 (April 20, 2012), about which we previously blogged, in which the EEOC determined that Title VII affords protection to these employees. The EEOC also takes the position that discrimination based on sex includes discrimination based on a failure "to conform to socially-constructed gender expectations."

Director Gigante cited the rise in pregnancy-related charges filed by older women and discussed the interplay between the Americans with Disabilities Act, the Americans with Disabilities Act Amendments Act, the Pregnancy Discrimination Act, and the Family Medical Leave Act in pregnancy-related discrimination claims. The EEOC is particularly interested in cases alleging failure to accommodate pregnant employees.

The panel also discussed disability discrimination and failure to accommodate claims, with a particular focus on no-fault attendance and fixed leave policies, both of which have been the subject of litigation by the EEOC. Employers should carefully review their attendance and leave policies to ensure that they do not run afoul of the anti-discrimination laws. Director Gigante emphasized that employers should determine the individual needs of the disabled employee in order to identify reasonable accommodation. While it is important to initiate the accommodation process to ensure compliance, Director Gigante noted that the employer need not accept the specific accommodation requested by the employee and that undue hardship to the employer remains a valid consideration.

With respect to recruitment and hiring, Director Gigante reiterated the EEOC’s continuing concern with facially-neutral pre-employment tests and requirements that have a disparate impact on employees belonging to a protected class. Moreover, employers can expect close scrutiny if they elect to use background checks and criminal history reports to screen applicants. It is critical that employers be familiar with the EEOC’s April 2012 guidance on the use of criminal background checks, including the need to perform individualized assessments, and with any state or local laws that may impose further limitations. In addition, the EEOC’s Plan specifies that it will specifically target a number of additional discriminatory recruitment and hiring practices, including exclusionary practices and policies, channeling/steering individuals into jobs due to their status in a particular group, and restrictive application processes.

For information on how employers can protect their businesses and comply with the law, or for an audit of workplace policies and practices, please feel free to contact an attorney in the Gibbons Employment & Labor Law Department.

Susan L. Nardone is a Director in the Gibbons Employment & Labor Law Department. Daniel A. Schleifstein, an Associate in the Gibbons Employment & Labor Law Department, co-authored this post.

New York City Prohibits Discrimination Against the Unemployed

Peter J. Dugan — Mon, 25 Mar 2013 09:35:51 -0500

New York City has expanded the scope of its Human Rights Law (“NYCHRL”) to prohibit job discrimination based upon a job applicant’s status as unemployed. The amendments to the NYCHRL define the term “unemployed” to mean someone “not having a job, being available for work, and seeking employment.” The amendments, which will become effective on June 11, 2013, are groundbreaking in that they make New York City the first jurisdiction in the United States to provide a private right of action for discrimination based on an applicant’s “unemployed” status. If successful in pursuing such claims, denied job applicants may recover compensatory and punitive damages, as well as their attorneys’ fees and costs. In light of this, New York City employers should immediately begin preparing for these coming changes by reviewing their hiring practices, as well as their job advertisements and postings.

Overview of the Amendments to the NYCHRL

The new amendments prohibit employers covered by the NYCHRL (i.e., those employers operating in New York City with 4 or more employees) from considering an applicant’s “unemployment status” with respect to “hiring, compensation or terms of employment.” Furthermore, the amendments prohibit job advertisements or postings, which indicate “being currently employed is a requirement or qualification for the job” or that unemployed individuals need not apply because they will not be considered.

Unlike New Jersey, Oregon, or Washington, D.C., which have passed similar laws prohibiting discrimination against the unemployed, the New York City statute goes one step further in providing persons aggrieved by a violation of the law with a private right of action. Such individuals can file a complaint with the New York City Commission on Human Rights, or commence an action in court against the employer. Like any other plaintiffs alleging discrimination under the NYCHRL, they will be entitled to collect compensatory and punitive damages, as well as their attorneys’ fees should they succeed in establishing their claims. The statute of limitations for such claims is three years and it runs from the date of the alleged discrimination.

While the amendments to the NYCHRL are expansive, they are not limitless. There is nothing in the amendments which prohibit an employer from:

considering an applicant’s status as unemployed “where there is a substantially job-related reason for doing so” or “inquiring into the circumstances surrounding an applicant’s separation from prior employment;”
considering or advertising any substantially job-related qualifications such as holding a valid professional or occupational license; a certificate, registration, permit, or other credential; a minimum level of education or training; or a minimum level of professional, occupational, or field experience;
determining that only its current employees will be considered for employment or given priority for employment; or
determining compensation or terms and conditions of employment based on the applicant’s actual amount of experience.

Employer Takeaways

As of June 11, 2013, persons who are “unemployed” – currently 9.1% of the New York City population – will represent a new class of potential plaintiffs who may file discrimination lawsuits. Any employers with a workforce in New York City should immediately suspend any practices of barring applicants merely because they are unemployed. In addition, employers should train managers, as well personnel in their Human Resources Departments, on the changes to the law to ensure that the hiring process complies with the new law. Finally, New York City employers should immediately review their job postings (both in print and online) to ensure they comply with the new amendments to the law.

For assistance with matters involving compliance with the New York City Human Rights Law, please contact an attorney in the Gibbons Employment & Labor Law Department.

Peter J. Dugan is an Associate in the Gibbons Employment & Labor Law Department. Christopher Fox, a paralegal at Gibbons, assisted in the preparation of this article.

NLRB to Ask Supreme Court if Board Members Were Lawfully Appointed

James J. La Rocca — Thu, 14 Mar 2013 13:26:21 -0500

Earlier this week, the National Labor Relations Board (the “Board” or the “NLRB”) announced it will petition the United States Supreme Court to review Canning v. NLRB, No. 12-1115 (D.C. Cir. Jan. 25, 2013). As previously reported, in Canning the Federal Court of Appeals for the District of Columbia held that three appointments of officers to the NLRB by President Obama were unconstitutional because they lacked the “Advice and Consent” of the Senate and were not authorized by the Constitution’s so-called Recess Appointments Clause. As a result, the Court concluded that the NLRB does not have the quorum necessary to issue decisions or otherwise act. The Canning decision arguably invalidates hundreds of opinions rendered by the Board this past year. Employers should stay tuned for updates on the NLRB’s petition, and feel free to contact an attorney in the Gibbons Employment & Labor Law Department regarding any questions about the decision in Canning or prior NLRB rulings.

James J. La Rocca is an Associate in the Gibbons Employment & Labor Law Department.

Employee's Facebook Posting Sinks Her FMLA Discrimination and Retaliation Claims

Mitchell Boyarsky — Mon, 04 Mar 2013 13:29:00 -0500

A Family and Medical Leave Act (“FMLA”) plaintiff’s leave was proven fraudulent through her Facebook postings, resulting in summary judgment for her employer, dismissing her complaint. The Federal District Court for the Eastern District of Michigan concluded that the employer’s reason for her termination was legitimate and unrelated to her exercise of FMLA rights.

In Lineberry v. Richards, Plaintiff took a leave of absence based on excruciating pain she experienced in her lower back as certified by her physician. She applied for, and received approval from her employer to take, leave under the FMLA. During her leave, she went on vacation to Mexico. Plaintiff later posted on Facebook pictures of her vacation, including photographs showing her riding in a motorboat, lying on her side on a bed holding two bottles of beer in one hand, and holding her infant grandchildren, one in each arm, as she stood. She also posted details regarding certain activities she engaged in during her leave, including trips to Home Depot, watching her grandchildren and taking online classes. After Plaintiff’s co-workers revealed the Facebook postings to their employer, the employer questioned her in an investigation. The employer concluded that Plaintiff lied during the investigation about her use of a wheelchair while on leave.

Plaintiff sued her employer claiming its decision to terminate her employment interfered with her FMLA rights and retaliated against her for taking leave. On summary judgment, the Court reasoned that an employer’s interference with an employee’s FMLA rights does not violate the FMLA if it was motivated by a legitimate reason unrelated to the exercise of FMLA rights. In addition, the FMLA does not provide greater rights to an FMLA-eligible employee than to a non-FMLA-eligible employee. Here, Plaintiff was dishonest, and the employer terminated her employment after it uncovered the dishonesty. Accordingly, Plaintiff was not insulated from termination simply because she was on an FMLA-approved leave at the time.

This case is just another example of social media pervading the workplace and its utility in presenting the facts. It is noteworthy that the Court did not question the appropriateness of the disclosure of plaintiff’s Facebook postings to the employer by plaintiff’s co-workers, which led to plaintiff’s discharge. In a case where an employer is provided with social media postings – rather than surreptitiously obtaining them without authorized access – they may be used for employment decision-making.

For answers to questions regarding employer use of employee social media or the FMLA, please feel free to contact an attorney in the Gibbons Employment & Labor Law Department.

Mitchell Boyarsky is a Director in the Gibbons Employment & Labor Law Department.

Gibbons Director, Susan Nardone, to Speak at Upcoming NAWL Labor & Employment Webinar

Gibbons P.C. — Fri, 22 Feb 2013 12:24:09 -0500

Employee complaints concerning discrimination and harassment occur in nearly every workplace.

Susan L. Nardone, a Director in the Gibbons Employment & Labor Law Department, will serve as a panelist for the upcoming NAWL webinar, "Avoiding the Pitfalls that Cost: Highlighting Best Practices in Labor and Employment Internal Investigations," taking place on Wednesday, February 27, at 11:00 am. This webinar will focus on how to handle common, yet complex, issues likely to arise during the internal investigation of an employee complaint.

Ms. Nardone, along with other female professionals, will play out a virtual fact scenario after which they will offer their professional guidance and advice. Participants will be able to interact with the panelists and offer their own input on best practices. This webinar is free of charge and CLE credits are available. For more information or to register, please click here.

Amendments to FMLA Mean Changes to Military Leave Provisions, Forms and Postings

Carla N. Dorsi — Thu, 21 Feb 2013 09:21:31 -0500

On February 6, 2013, the United States Department of Labor (DOL) published final regulations that amend the Family and Medical Leave Act’s (“FMLA”) military leave provisions and eligibility requirements for pilots and flight crews. Other changes impacting the minimum increments of time allowable for measuring FMLA leave and recordkeeping requirements are also part of the final regulations. The new regulations take effect on March 8, 2013, giving employers only a few weeks to ensure that their policies and forms are updated.

Key Changes

Among the critical changes found in the new FMLA regulations are:

Qualifying Exigency Leave

Extending qualifying exigency leave to eligible employees who are family members or next of kin to those serving in the Regular Armed Forces – not just the Reserves or National Guard – but, requiring foreign deployment of that military member.
Permitting an eligible employee to take leave to care for a covered military member’s parent who is incapable of self-care when that care is necessitated by the servicemember’s covered active duty.
Increasing, from five to fifteen days, the amount of time an eligible employee may take qualifying exigency leave related to a military member’s rest and recuperation.

Military Caregiver Leave

Expanding the definition of “covered servicemember” to include covered veterans who are undergoing medical treatment, recuperation, or therapy for a serious injury or illness.
Providing alternative definitions for “serious injury or illness” of a covered veteran, only one of which must be met.
Expanding the definition of “serious injury or illness” for a current servicemember to include preexisting conditions that are aggravated during active duty.
Permitting Military Caregiver Leave Certifications to be completed by any health care provider, as defined in §825.125 of the FMLA regulations, and authorizing employers to require a second or third opinion in these circumstances (which is not permitted when the certification is provided by the DOD, VA, or TRICARE networks).

Airline Flight Crews

Establishing special rules for calculating the hours of service required for FMLA eligibility for airline flight crew employees.
Creating a special rule for calculating leave time for airline flight crew employees and requiring that intermittent and reduced schedule leave be accounted for in increments of no greater than one day.

The DOL has released a helpful side-by-side comparison of the pre-existing regulations and the amended regulations.

New Forms and Postings

In light of the amendments, the DOL has updated the required posting that employers must display in the workplace. In addition, several of the FMLA forms made available on the DOL’s website have been revised, including the Notice of Eligibility and Rights and Responsibilities (Form WH-381), the Certification of Qualifying Exigency for Military Family Leave (Form WH-384), the Certification of Serious Injury or Illness of a Current Servicemember - for Military Family Leave (Form WH-385) and Certification of Serious Injury or Illness of a Veteran for Military Caregiver Leave (Form WH-385V). However, the revised forms published by the DOL still do not include the Genetic Information Nondiscrimination Act (GINA) safe harbor language. Employers are encouraged to include this language in those FMLA forms that solicit medical information.

Conclusion

Employers should update their workplace postings and forms in order to be in compliance on March 8, 2013. In addition, employers should review their handbooks and policies to ensure that their FMLA policies are updated to comply with the latest changes. For answers to questions regarding the new FMLA regulations or for assistance with compliance, please feel free to contact an attorney in the Gibbons Employment & Labor Law Department.

Carla N. Dorsi is a Director in the Gibbons Employment & Labor Law Department.

Are You an "Applicable Large Employer" Required to "Play or Pay" Under the ACA's Employer Mandate and the IRS' Proposed Shared Responsibility Regulations?

David N. Crapo — Wed, 20 Feb 2013 17:16:53 -0500

In addition to the controversial and much-litigated Individual Mandate, the Patient Protection and Affordable Care Act of 2010 (“ACA”) includes an equally controversial (though not quite as heavily litigated) “Employer Mandate.” The Employer Mandate can be found in new section 4980H of the Internal Revenue Code. Effective for plan years beginning in 2014, “applicable large employers” will face a choice. They must either (i) offer substantially all (at least 95%) of their full-time employees (employees working on average 30 or more hours per week) and their non-spousal dependants “affordable” health insurance providing “minimum essential coverage” and “minimum [actuarial] value” or face potential penalties. If such coverage is not offered penalties apply if any of their full-time employees qualify under the ACA for a premium tax credit or cost-sharing reduction in connection with the purchase of health insurance.

To implement the Employer Mandate, on January 2, 2013, the IRS published its proposed regulations concerning Shared Responsibility for Employers Regarding Health Coverage (“Large Employer Regulations”) in the Federal Register. Those regulations affect only those “employers constituting applicable large employers.” For 2014, an “applicable large employer” will be one who employed an average of at least 50 full-time equivalent employees on business days during calendar year 2013. This means that employers must now start keeping the records necessary to determine whether they will be considered “applicable large employers” in 2014 for purposes of the Employer Mandate.

A determination of the number of employees is crucial to determining whether an employer is an “applicable large employer,” and, therefore, subject to the Employer Mandate. That determination is not simple. The regulations are complex. This article will address (i) how to determine the number of full-time equivalent employees an employer has for purposes of the Employer Mandate; and (ii) what an employer might do to prepare for the 2014 effective date of the Employer Mandate.

Determining the Number of Employees. In calculating the number of its employees for purposes of the Employer Mandate, the employer must use the common law definition of an employee. IRS expressly rejected the use of any other definition, such as the definition of employee under the Fair Labor Standards Act. Expressly excluded from the calculation of the number of employees, however, are those whose roles vis-à-vis the employer are limited to that of (i) sole proprietor, (ii) partner in a partnership; and (iii) 2-percent (or more) S-corporation shareholder. However, to the extent that a sole proprietor, partner or shareholder provides services as an employee to the employer, he or she is an employee with respect to his or her hours of service as an employee.

To determine whether it constitutes an “applicable large employer” in 2014, the employer must calculate the actual hours worked by all (both full- and part-time) employees during 2013. More information on determining the number of employees can be found in the complete article here.

Controlled Groups and Aggregation Issues. All entities treated as a controlled group under IRC § 414 will be treated as a single employer for purposes of the “applicable large employer” determination. In other words, the full-time equivalent employees of all members of the controlled group are aggregated to determine whether the group constitutes a single “applicable large employer.” IRS has reserved on the applicability of the controlled group aggregation rules to government entities, churches or convention associations of churches. Pending the issuance of regulations, those employers may rely on reasonable good faith interpretations of IRC § 414 in determining whether a person or a related group of persons is an “applicable large employer” for purposes of the Employer Mandate.

For the complete article, including special rules for certain groups of employees, click here.

David N. Crapo is Counsel to the Gibbons Financial Restructuring & Creditors Rights Department.

A Friendly Reminder that the NLRB Workplace Posting Requirement Has Been Postponed Indefinitely

James J. La Rocca — Tue, 19 Feb 2013 11:30:58 -0500

Now well over a year ago, the National Labor Relations Board (the “Board” or “NLRB”) issued a rule requiring most private sector employers to post a notice of employee rights to unionize in their workplaces. The posting requirement was initially to take effect on November 14, 2011. The requirement was postponed, first, until January 31, 2012, and, then again, until April 30, 2012 in light of legal challenges to the rule. Prior to the April 2012 “effective date,” the NLRB announced that it would once again postpone the rule—this time indefinitely “until the legal issues are resolved.” As recently reported, the Board’s great laid plans may go further awry in light of a federal appellate court decision challenging the NLRB’s ability to take any further action until at least one more Board Member is lawfully appointed. For answers to questions regarding the posting, or the Boards's current state of affairs, please feel free to contact an attorney in the Gibbons Employment & Labor Law Department.

James J. La Rocca is an Associate in the Gibbons Employment & Labor Law Department.

Trade Secrets -- What You Don't Safeguard Might Hurt You!

Gibbons P.C. — Fri, 15 Feb 2013 09:48:10 -0500

Is your company’s hard-earned, valuable, confidential data at risk? Are you taking all the steps you should to safeguard this information?

In a recent global report by Symantec, 50% of employees who lost or left their jobs in the past 12 months indicated they kept confidential company data. Of these, 40% indicated they planned to use the proprietary information in their new jobs. Exacerbating the situation is the perception on the part of employees that it is acceptable to take confidential corporate information, and that their companies do not care.

Obviously, companies should care. Trade secrets, which broadly comprise valuable information that is kept secret to afford an economic advantage, take on many forms: a formula, a recipe, a customer list, patterns, projections, etc. Companies need to strictly enforce policies relating to these data and proactively secure them -- they cannot rely upon government enforcement actions to protect them, as we recently reported.

Rather, employers should develop, implement and police a trade secrets protection plan. At minimum, this should involve: 1) auditing their policies, non-disclosure and restrictive covenant agreements (particularly in light of recent legislative changes at the federal and state levels); 2) analyzing their physical security of files, information, computer equipment and assets, as well as security access for employees, particularly off-site or remote access; and 3) scrutinizing departing employees. We have previously reported on recent federal developments, a District Court case in New Jersey, and a New Jersey State Court decision in this critical area of any business.

Attorneys in the Gibbons Intellectual Property and Employment & Labor Law Departments have extensive experience in trade secrets counseling and best practices.

This post originally appeared on the Gibbons IP Law Alert on February 15, 2013