Wednesday, October 22, 2014

The Major Threat Presented by a Tiny Thumb Drive

In our modern, ever-electronic, workplace, it continues to become ever-easier for dishonest employees to help themselves to their employer’s most sensitive and valuable assets through wholesale electronic copying of confidential, proprietary, and trade secret information. A recent example is a case of a former employee of a large medical device company who was recently indicted for criminal charges for stealing, via a thumb drive, the company’s trade secrets regarding the design of a balloon-catheter system. According to the indictment, the employee then left his employment and began trying to launch a new business selling the medical device (for which he supposedly owned the underlying technology). These days, few things present as big of a threat to companies as a tiny thumb drive.
Although the Boston Scientific story represents a relatively rare situation where criminal charges are being pursued for the alleged theft of trade secrets, instances of employees misappropriating an employer’s trade secrets, and other confidential and proprietary information, are far too common these days. Those unlawful acts can cause tremendous harm to a company and can also expose new employers of pilfering employees to very severe legal and economic consequences, including multi-million dollar jury awards (such as the $22 million verdict that we obtained for our client) and injunctions shutting down significant portions of their business.

Although the matter of misappropriation/theft of trade secrets has been addressed for quite some time by laws enacted at the state level, with 47 different states adopting versions of the Uniform Trade Secrets Act, including Minnesota, that topic is also now receiving serious attention at the federal level. There is no currently existing federal law that directly addresses the issue of misappropriation of trade secrets, although some federal laws do touch on the issue peripherally. Although Congress has kicked around the possibility of a federal statute over the last few years, the current developments regarding the possible Trade Secrets Protection Act of 2014 represent the farthest advancement to date of a possible federal trade secrets law. 
In the meantime, careful employers would be well served to give some thought as to how much harm they might suffer at the hands of an unscrupulous employee. Employers should then think about confidentiality policies, practices, and agreements to be put in place – and followed. That should include consideration of efforts to monitor compliance by employees with those policies and practices. Notwithstanding the criminal proceedings in the Boston Scientific matter, wronged employers are typically left to fight for their own justice through the commencement of a civil lawsuit. We still operate mostly in a legal environment where a person can get incarcerated for five years for stealing a $1,000 laptop computer, but only face a civil lawsuit for stealing thousands of computer files, worth hundreds of thousands of dollars (or more). So, it is much better for companies to be vigilant on the front-end.

Tuesday, October 14, 2014

The Unhealthy Side Effects of Employer Wellness Programs

I love wellness programs. I am a sucker for discounts of any sort, and I especially like the idea of rewarding healthy behavior. My bicycle has a tag that logs my work commute when I pass the electronic stations throughout the Twin Cities, and I smile every time I hear its gratifying “beep.”

So, I understand why employers like wellness programs. What’s not to like about incentivizing healthy lifestyle changes while also lowering health insurance costs, decreasing absenteeism, and increasing productivity? As is so often the case, however, the devil is in the details.  If wellness programs are implemented poorly, they can sour a workplace’s culture and lead to legal headaches and costs.

Just this month, the U.S. Equal Employment Opportunity Commission (EEOC) filed a disability discrimination lawsuit in Wisconsin against an employer that it alleges illegally required an employee to undergo a health risk assessment and biometric test or suffer adverse consequences. Specifically, the suit alleges that the employer cancelled an employee’s medical insurance after he failed to participate in a supposedly “voluntary” health assessment and biometric testing program. The EEOC maintains that the wellness program constituted disability-related inquiries that were not sufficiently job-related and consistent with business necessity as defined by the federal Americans with Disabilities Act (ADA).

This Wisconsin lawsuit is part of increased enforcement activity by the EEOC targeting employer wellness programs. In August, the EEOC filed another lawsuit against another Wisconsin employer, alleging that an employee was unlawfully fired after objecting to medical examinations and questions related to disabilities as part of a wellness program.

While the outcome of these lawsuits will not be known for some time, they serve as a reminder to employers not to let their zeal for wellness programs cause them to skip legal steps. Here are just a few legal issues that employers should consider when implementing a wellness program:
  • Wellness Programs Must Be Truly Voluntary – A wellness program must truly be voluntary to stay on the right side of the law. A program is not voluntary if it involves cancelling coverage for failure to participate, shifting an insurance premium to employees who choose not to participate, or other adverse consequences for non-participation.
  • Employee Health Information Must Be Kept Private – Health information must be kept confidential under the federal HIPAA law and under disability discrimination laws. Health information should be stored securely and separately from other hard copy or electronic personnel documents and kept private and separate from decision-makers.
  • Wellness Programs Should Not Regulate or Prohibit Lawful Behavior Outside of Work – Minnesota has a lawful consumables product law which protects employees’ use of lawful substances like tobacco and alcohol outside of the workplace. Other states have similar laws or even broader laws that protect any lawful activity outside of work.  To avoid running afoul of these laws, wellness programs should not involve an employer making any employment decisions based on legally protected behavior.
  • Don’t Forget About Disability Accommodations – It can violate disability discrimination laws to deny a disabled employee participation in a wellness program. So, when implementing a program, be mindful of the need to consider and comply with any reasonable accommodation obligations to disabled employees.
  • Check with Legal Counsel for Other Considerations – You may also have other legal requirements to consider, including, for example, potential legal limits on the monetary value of incentives you might offer for participation in a wellness program. In addition, unique state laws may apply. So, before finalizing and implementing any plan, it is wise to consult with counsel.
In the spirit of promoting “wellness,” now is a good time to check the legal health of your employer wellness programs and to make sure that you’re in tip-top shape.

Wednesday, October 8, 2014

New Regulations Simplify Reporting Requirements for Federal Contractors . . . Really, They Do!

If you do business with the federal government, chances are that you're feeling weighed down by the various new requirements placed on you over the past year. We’ve discussed these requirements in past posts here and here. That's why you may be surprised to hear that the US Department of Labor's Veteran Employment and Training Service (VETS) published a final rule last week that actually makes something easier for federal contractors. The rule modifies and simplifies the reporting requirements under the Vietnam Era Veterans' adjustment Assistance Act (VEVRAA) for federal contractors with contracts of $100,000 or more.  Previously, contractors had to file a VETS-100 Report and/or VETS-100A Report, on which they reported data on "covered veterans" in their workforce. The VETS' new rule eliminates the VETS-100 Report and renames the VETS-100A Report as the VETS-4212 Report.

In keeping with the updated VEVRAA regulations that became effective earlier this year, the new VETS rule replaces the term "covered veteran" with "protected veteran," which is defined to include the four categories of: (1) "disabled veteran"; (2) "recently separated veteran;" (3) "activity duty wartime or campaign badge veteran;" or (4) "Armed Forces service medal veteran." The bigger change, though, is that while the old VETS-100A Report required contractors to specify the categories of covered veterans they hired or employed, the new VETS-4212 Report only requires that contractors report protected veterans in the aggregate, without specifying whether an individual belongs to one or more of the four categories of protected veterans.
The change to reporting protected veterans in the aggregate has three main benefits. First, it provides added privacy to disabled veterans. Previously, contractors had to specify on their publicly available report that a disabled veteran worked in a certain job group. Now that the new report only requires the employer to report a "protected veteran" in that job group, it is more difficult to figure out who might be a disabled veteran just by looking at the report. Second, this change will eliminate double counting of a single veteran who may meet the definition of two or more of the four categories. Finally, the VETS is predicting that the new approach will save federal contractors money, and who doesn’t like that?

The new rule also completely eliminates the VETS-100 report, which applied to contracts entered into prior to Dec. 1, 2003, because these  contracts no longer exist. In addition, the rule sets forth electronic filing requirements and amends mandatory contract clauses relating to the report. While the rule officially becomes effective Oct. 27, 2014, the practical effective date of the new rule will be the 2015 reporting period, which runs from Aug. 1st to Sept. 30th. In the meantime, contractors should be sure their self-identification forms include the new definitions and are otherwise up-to-date with the VEVRAA regulations that became effective earlier in the year.

Wednesday, October 1, 2014

EEOC Files Historic Transgender Discrimination Lawsuits As Societal Focus on Transgender Rights Grows

If you’re an Amazon Prime member or you’ve shopped online at Amazon lately, you’ve probably heard that Amazon launched a new TV series last week, "Transparent," about a 70 year old divorced father who announces to his children that he intends to transition from a man to a woman. The "Transparent" series is getting rave reviews and comes at a time of increased societal and legal focus on the rights of transgender individuals.

Indeed, just before the launch of the "Transparent" series, the U.S. Equal Employment Opportunity Commission (EEOC) filed its first ever lawsuits alleging sex discrimination against transgender individuals. On Sept. 25, the EEOC filed two separate discrimination actions - one against a Michigan-based funeral home and the other against a Florida-based eye clinic. Both lawsuits allege that the defendant employer fired a transgender employee for transitioning from male to female and not conforming to the employer’s gender-based expectations.

For some time now, discrimination based on gender identity and sexual orientation has been unlawful under Minnesota employment discrimination law and in a number of other states. Federal discrimination law, however, does not expressly prohibit such discrimination. Nevertheless, the EEOC has taken the position that the prohibition on sex discrimination under Title VII of the Civil Rights Act of 1964 encompasses discrimination based on impermissible sex stereotyping and an individual’s failure to meet gender expectations. 

The EEOC has also made it clear that protecting GLBT individuals under Title VII is a top enforcement priority. The EEOC’s recent lawsuits further this enforcement agenda and are the first time in history that the EEOC has sought to apply Title VII to transgender discrimination in court. While the merits of the cases at issue remain to be seen, other challenges to transgender discrimination have been successful in court. In 2011, the U.S. Court of Appeals for the Eleventh Circuit upheld a victory for a former employee who claimed she was fired based on her intended transition from male to female, in violation of the Equal Protection Clause of the U.S. Constitution. In addition, in 2004, the U.S. Court of Appeals for the Sixth Circuit held that a transgender employee had an actionable discrimination claim under Title VII.

The EEOC’s lawsuits are the latest in a growing movement to protect transgender people at work. On other fronts, President Barack Obama recently signed an executive order making it illegal for federal contractors to discriminate on the basis of sexual orientation or gender identity.

Employers should take note of this trend and review their policies and practices, being mindful of the unique challenges that transgender individuals may face in the workplace. With the growing societal awareness of transgender issues, employers should expect to see more transgender discrimination claims filed by both individuals and the federal government.

Wednesday, September 24, 2014

Lessons From the NFL: Thoughtful Planning To Avoid the Limelight

Another Sunday has come and gone and with it, somewhat predictably, another Vikings loss. What’s remarkable about this week, however, is that the team was without its star player, Adrian Peterson. Mr. Peterson has been barred from team activities pending the resolution of his criminal indictment for child abuse. Mr. Peterson has admitted to disciplining his 4-year-old son with a wooden switch and injuring the child in the process. The Vikings organization has been widely criticized for its initial response to Adrian Peterson’s indictment. The Vikings initially planned to let Mr. Peterson continue playing, but reversed its position after widespread public outrage to this initial plan.

If you follow football news at all, you know that the Peterson situation mirrors, in many respects, other football news. The NFL is currently under siege for mishandling its initial response to a domestic violence incident involving Ray Rice, a marquee player for the Baltimore Ravens. There are reports that the NFL knew of Mr. Rice’s conduct for quite some time before it took responsive action. In both situations, the football organizations have been accused of turning a blind eye to egregious conduct to keep their star players in the game. The public backlash and negative reaction from sponsors have prompted the NFL and its teams to take more serious action in their later responses to the Rice and Peterson incidents. 

Events like this are good times to reflect on how the rules work for employers and how to handle matters well to try to avoid the public limelight. As a general starting point, the rule in most states, including Minnesota, is “at-will employment.” An employer can take action against an employee for any reason, unless the reason is unlawful (i.e. because of an employee’s legally protected class status or in retaliation for protected activity, like union organizing or taking protected leave). But what about criminal activity?  On that front, employers need to exercise caution. It is generally unlawful to act based solely on an arrest rather than the conduct at issue. In addition, some states, such as Wisconsin, prohibit discrimination because of an employee’s conviction record as well, unless the conduct is sufficiently job-related. Likewise, it can violate federal law to take negative action against an employee for criminal conduct unless there is a tight nexus between the conduct at issue and the individual’s job duties that creates a genuine risk for an employer.

Losing fans and sponsors would likely meet these standards for the NFL. But, other employers should make sure they carefully consider the conduct at issue when determining what action should be taken in response to off-work conduct. And when it comes to matters of domestic violence, it is often the victim who is punished by employers. That’s a problem too. Minnesota law flat out prohibits discrimination based on marital status, including discrimination on the basis of the identity, situation, actions or beliefs of a spouse or former spouse. In addition, Minnesota law has recently been expanded to allow victims of domestic violence, sexual assault, and stalking to use paid leave to pursue protective measures and services. 

One key takeaway for all employers from the recent NFL drama: Think things through carefully, consider your business and legal risks, and try to get it right the first time around. 

Thursday, September 18, 2014

Worth The Work? Why it is Risky To Not Pay Your Interns

Unless you were unplugged, you probably saw all the high profile names that made legal headlines last week. Included in that list was David Letterman. In a quick whirlwind of activity, a CBS intern filed a wage and hour lawsuit against CBS News and Letterman’s production company, Worldwide Pants, only to drop the suit a short time later with a public apology. In the lawsuit, the CBS intern claimed that unpaid “Late Show” student interns were employees and that the failure to pay them wages violated wage and hour laws. The suit, had it proceeded, would have sought to recover back wages, interest, and attorneys’ fees for six years’ worth of unpaid CBS interns. Ultimately, though, the intern dropped the suit. Several media outlets reported that the intern issued a public apology for the suit, claiming her attorneys coerced her into the filing.

Many employers who use unpaid interns have not been as lucky as CBS News and Letterman. As predicted in one of our blog posts two years ago, unpaid internships have created a wave of wage and hour class action lawsuits, many of them against well-known companies. The entertainment and media industries have been heavily targeted in particular, with lawsuits against Fox Searchlight, NBCUniversal, Warner Music Group, Conde Nast, and Clear Channel.

However, all variety of for-profit businesses that use unpaid student interns are vulnerable to wage and hour suits if they don’t tread carefully. Internship programs are a great way for students to get real-life work experience and get a foot in the door of a company. Because of these benefits to interns, companies sometimes lose track of their potential wage and hour obligations to interns. The U.S. Department of Labor’s Wage and Hour Division has issued guidance on strict requirements that must be met for an internship to be unpaid. Under this guidance, for-profit companies always have to pay interns – even those getting academic credit for the internship – to remain legally compliant  because the company almost always derives an "immediate advantage" from an intern's work. For an internship to be unpaid, the work done must be for the benefit of the student, not free labor for the company.

Admittedly, the Wage and Hour Division itself has not initiated as many investigations against companies with unpaid intern programs as some had expected. Still, that doesn’t mean that you can breathe a sigh of relief. The Division focuses its investigation resources on a number of competing priorities, but remains watchful for violations, as noted in an online post last spring. In addition, as noted above, the wave of lawsuit continues.

If you are a for-profit employer using unpaid interns, it’s a good time to review your risks and compliance requirements. Review your company’s internship policies and practices, along with the Department of Labor guidance noted above. When in doubt, paying interns the applicable minimum wage is usually far more cost-effective than fighting a subsequent legal claim.

Monday, September 8, 2014

Falling Back (or Springing Ahead): The Correct Method to Pay Employees

I was sitting by a campfire last night and, although it was a beautiful night, I could not help but notice that there are signs of fall everywhere. The leaves are beginning to change, the evening air had a slight nip, and darkness arrived much earlier in the evening. These reminders of fall mean that, because of Minnesota’s participation in Daylight Savings Time, we need to think about the semi-annual ritual of the changing of the clocks. Each spring we “Spring Ahead” by moving the clocks forward one hour at 2:00 a.m. on a designated date. Each fall, when Daylight Savings Time ends, we “Fall Backward” by changing the clocks back one hour. This year Daylight Savings Time will end on November 2, 2014.

This semi-annual ritual of changing the clocks is often a concern for those employers who have non-exempt (hourly) employees working the late shift (at 2:00 a.m. when the clocks change). When the clocks are moved back those employees usually work an additional hour for the shift. When the clocks are moved ahead those employees usually work one less hour for the shift. 

Under the Fair Labor Standards Act (“FLSA”) employers must pay employees for all hours worked and overtime for any hours worked in excess of 40 hours per week. So how do these basic rules apply during the changes related to Daylight Savings Time? Here is a summary:

Fall Backward:  Employees usually work one more hour per shift. Employers must pay the employee for the total number of hours actually worked. So, if the shift is normally eight hours, the employee must be paid for nine hours. The extra hour of pay must also be included in the employee’s regular rate of pay for calculating overtime.

Spring Forward:  Employees usually work one less hour per shift. Employers may choose to pay the employee for the normal number of hours worked for the shift; however, employers are not required to pay employees for the hour that was not worked. If the employer does choose to pay the employee for this hour, the employer does not have to include the extra hour in the employee’s regular rate of pay for calculating overtime. The employer may not, however, use the extra hour of pay as a credit to overtime compensation that is owed the employee.

As you enjoy these final waning days of summer you may want to add a review of your pay policies during the changes in Daylight Savings Time to your fall to-do list.