From new laws to the aggressive enforce- ment agendas of state and federal agencies to unprecedented government rulemaking activism, employers face a more challeng- ing and demanding employment and labor other states evaluate the enforceability of restrictive covenants based on whether the agreements are reasonable in geographic scope and duration. But the standard lan- guage used in most employee agreements provides no protection at all with today’s evolving technology. An agreement that a former employee will “return all property” to her former employer may have made sense when most information had a tangible law environment in 2014 than ever before. Included below are some key develop- ments, red flags, pitfalls and opportuni- ties for employers to watch in the coming months. These developments underscore that risk management is not just a matter of being aware of new laws, but also of recent trends in the way existing laws are being leveraged against employers.
The NLRB Wants You, Union Or Not
The National Labor Relations Board has pursued an infamously activist agenda during the Obama administration, issuing hundreds of new rulings that regulate – and penalize – both unionized and non-union employers. With recent legal challenges to the NLRB’s authority to do so resolved in 2014, the pace of that agenda will quicken, affecting both unionized and non-union employers alike.
In Noel Canning v. NLRB, an employer successfully challenged President Obama’s 2012 recess appointments (that is, appoint- ments made between Congressional ses- sions and without Congressional approval) to the NLRB, since without those appoint- ments the NLRB lacked the quorum it
Barbara E. Hoey and Mark A. Konkel are Partners in Kelley Drye’s New York office and members of the firm’s Labor and Employment practice group, of which Ms. Hoey is the Chair. They represent the interests of employ- ers across a range of industries – manufactur- ing, healthcare, retail, aviation, education, financial services, and hospitality.
needed to act. (Noel Canning is now on
appeal to the U.S. Supreme Court.) Since that time, however, the President has duly appointed – without resort to the “recess appointment” process – a duly constituted NLRB. The new NLRB can be expected to re-issue decisions that might be invalidated on Noel Canning grounds, as well as to con- tinue to pursue an activist agenda, including requiring employers to allow employees to use company e-mail to discuss unionizing, implementing “quickie election” rules that deny employers a chance to communicate effectively with employees during union campaigns, and finding that the arbitra- tion agreements and employment policies even of non-union employers violate the National Labor Relations Act.
Protection Of Intellectual Property
The pace of change to mobile technol- ogy will continue to increase in 2014 – but has your protection of intellectual property evolved with it?
Employers need to take a close look at the restrictive covenants that protect their customer relationships and intellectual property – noncompetition, nondisclosure, and nonsolicitation agreements – to ensure that the agreements protect against the threats of a bring-your-own-device, cloud- computing workplace in which information is more than mobile: it is everywhere.
The enforceability of restrictive cov- enants is a matter of state law. Some states like California and Colorado reject true noncompetition agreements entirely. Most
form, but what does it mean to “return” an
electronic file that may have been down- loaded and viewed on an iPhone?
Better-drafted agreements will permit an employer to require an employee to affirmatively identify all electronic devices on which an employee views or stores the employer’s information, will give a former employer the right to inspect those devices, and will allow an employer to get relief from a court when a former employee refuses to cooperate.
Beware Use Of Background Checks
Employers’ use of criminal history, credit, and other background checks in the hiring process is under vigorous attack from EEOC lawsuits and legislative initia- tives.
Some legislative efforts may result in an outright ban on the use of many or most background checks for employment-related purposes. For example, the New Jersey leg- islature is eyeing the so-called Opportunity to Compete Act, which bars employers with
15 or more employees from conducting criminal background checks on applicants prior to a conditional job offer and from asking candidates about criminal histories on job applications. Similar legislation has been proposed in New York State and New York City. Democratic leaders in the U.S. Senate are pursuing legislation that would altogether prohibit employers from using credit checks in the hiring process.
The U.S. Equal Employment Oppor- tunity Commission has been increasingly
March 2014 The Metropolitan Corporate Counsel Volume 22 No. 3
active in filing lawsuits against employers that use background checks. Following April 2012 updated EEOC guidance on the use of arrest and conviction histories in employment decision making, the EEOC has pursued high-profile suits against employers like Dallas-based corporate event planner Freeman, Dollar General Corp., automaker BMW Manufacturing Co., and clothing company Saavedra alleging that their use of criminal background checks in the hiring process had a disparate impact on blacks.
The law on employers’ use of back- ground checks is rapidly evolving. Employ- ers must not assume that the continued use of such checks is lawful and should consult counsel for the latest developments.
Largest Unpaid Intern Settlement Approved
In what is purportedly the largest settle- ment in an intern class action to date, a New York federal judge granted preliminary approval to a $450,000 settlement between Elite Model Management and former unpaid interns who spent short periods of time at the self-described “world’s most prestigious modeling agency.”
The FLSA permits unpaid internships, but only if the internships meet strict crite- ria that the intern does not displace regular employees. The complaint in Davenport
- Elite Model Management Corp. sought at least $50,000,000 in unpaid wages, overtime pay, liquidated damages, interest and attorneys’ fees for unpaid interns who worked for the modeling agency between February 2007 and the date of a final judg- ment. The plaintiff alleged that Elite used its internship program to source free labor that it otherwise would have had to use paid employees to perform.
With the rise of “unpaid intern” actions, this settlement should caution employers to take a hard look with counsel at their intern- ship programs. The Department of Labor only considers an internship proper under the FLSA if all of the following require- ments are met:
- The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environ- ment;
- The internship experience is for the benefit of the intern;
- The intern does not displace regular employees, but works under close supervi- sion of existing staff;
- The employer that provides the train- ing derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;
- The intern is not necessarily entitled to a job at the conclusion of the internship; and
- The employer and the intern under- stand that the intern is not entitled to wages for the time spent in the internship.
Employers should carefully review their unpaid internship programs to ensure their legality under the FLSA and to prevent an otherwise beneficial program from becom- ing an exposure to substantial liability.
Discrimination Against The Unemployed?
With unemployment remaining a per- vasive problem nationally, New Jersey has joined New York in a growing legislative movement across the country to extend pro- tections to unemployed job applicants.
A New Jersey state appeals court recently held that a New Jersey law that attempts to limit discrimination against the unemployed by prohibiting employers from stating in a job listing that applicants must be employed did not violate the free speech rights of employers. Rejecting First Amendment and New Jersey constitutional challenges to the law, the New Jersey Appellate Division, in New Jersey Dep’t of Labor and Workforce Dev. v. Crest Ultrasonics et al., found that challenges to the law as violations of the First Amendment and the New Jersey con- stitution failed. The court also found that the New Jersey law was narrowly tailored with the significant goal of helping unem- ployed workers present their qualifications to potential employers.
New York City has passed similar legis- lation directed toward protecting the unem- ployed in the hiring process as an amend- ment to the New York City Human Rights Law. The New York City law prohibits both job listings from listing current employment as a necessary qualification and discrimina- tion against the unemployed in hiring, com- pensation or terms of employment.
In New Jersey, employers must ensure that all job listings, postings, or ads in any source, even if listed through a separate agency, make no mention that an applicant must be employed or that unemployed will not be considered. In New York City, employers must not only follow these steps with their ads, but must evaluate applicants based on their qualifications and not allow an applicant’s unemployed status affect their hiring and compensation decisions. Beware similar legislative initiatives in other juris- dictions around the country.
“Bridgegate” In New Jersey Highlights The Danger Of E-Mail And The Need For Restrictive Device-Use Policy
In the aftermath of the continuously evolving “Bridgegate” scandal involving
members of Governor Christie’s staff, we see that texts and emails have been the strongest evidence of potential wrong- doing. Employers should take a hard look at their device-use policies.
Amidst the thousands of e-mails and text messages that implicated several of Governor Christie’s associates in the scandal, there is a broader lesson. Wide- spread use of personal devices, with an attendant lack of control of an employee’s or agent’s business-related communica- tions, can plague any employer, not just a public figure. Choosing whether to provide employees with accounts and devices to use to communicate during work hours or outside of the office can be a difficult ques- tion that involves significant expenditure by the employer. These concerns, however, do not inevitably necessitate costly changes to employers’ existing bring-your-own-device or “BYOD” policies.
The ACLU, in an open letter to Governor Christie, suggested that he mandate all his personnel to use their government-issued accounts and to provide copies of any other communication made outside of these accounts (a move some private corporations are also implementing). Aside from the pre- vention of inappropriate or damaging com- munications employees may be ashamed to send over a corporate device, personal devices prevent security risks for employ- ers, with confidential business information being passed over non-secure networks.
While it may be wise for employers to require employees to use a company- issued device, this may not always be economically feasible. Moreover, where such restrictions are in place, it is difficult to truly prevent all communication across personal devices. In these cases, employers should review their device-use policies and ensure that their policies are clear, includ- ing a broad definition of what constitutes a business communication, and providing for broad authority for the employer to audit such communication over personal devices.
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The rapid evolution of labor and employ- ment law requires employers to remain more alert than ever before to new risks that have been underestimated by many. Old instincts are no longer sufficient to man- age exposure. The task of staying alert is complicated by the fact that liability stems not just from the new laws themselves, but from the new and aggressive ways multiple laws have been leveraged against employers by enforcement agencies and the plaintiffs’ bar. In this environment, finding the right internal or external business partner to watch and manage these new risks becomes mission-critical.