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Legal Briefs for HR

Posted on November 15, 2013

Welcome to Legal Briefs for HR, an update on employment issues sent to over 5000 individual HR professionals, in-house counsel and business owners plus HR and legal professional organizations (who have been given permission to republish content via their newsletters and websites), to help them stay in the know about employment issues.  Anyone is welcome to join the email group . . . just let me know you’d like to be added to the list and you’re in!  Back issues are posted at www.munckwilson.com under Media Center/Legal Briefs and you can also join the group by clicking on “Subscribe.”  

Congrats to the many, many LB4HR subscribers who are honored in the Dallas Morning News’ Top 100 Places to Work! The 82-page supplement is in today’s newspaper and contains lots of creative ideas to make your workplace GREAT!

Here’s new info for you to gobble up before Turkey Day:

1. Benefits Bonanza– Employees who shun health flexible spending accounts (FSAs) for fear they will fall victim to the “use it or lose it” provision will cheer this news.  On October 31, the U.S. Treasury Department and IRS issued a notice and fact sheet, to announce changes in the rules governing FSAs.  Effective now, employers that offer FSAs that do not include the optional grace period (which gives workers an extra 2.5 months to used up available FSA funds, at the end of the plan year) now have the option to allow workers to roll over up to $500 in unused FSA funds at the end of the 2013 plan year.  And all employers with FSA programs will now have the option to allow plan participants to roll over up to $500 of unused FSA funds at the end of the year, starting with the 2014 plan year. For more info, go to http://www.treasury.gov/press-center/press-releases/Documents/103113FSA%20Fact%20Sheet.pdf. There is a link in this announcement that takes you to the nine-page Notice 2013-71.

2. Could the ENDA be Near?– Legislation designed to ban employment discrimination based on an employee’s actual or perceived sexual orientation and/or gender identity (the Employment Nondiscrimination Act or ENDA) has been bounced around in Congress since 1994 but just cleared a significant hurdle, by being passed in the Senate on November 7.  While the House presents a significant challenge for passage and eventual enactment into law, employers should double-check both state and local law where they do business to see if similar prohibitions are already in place.  According to the Human Rights Campaign website (www.hrc.org), bans on sexual orientation and gender identity are on the books in 17 states (CA, CO, CT, DE, HI, IL, IA, MA, ME, MN, NJ, NM, NV, OR, RI, VT, WA) and the District of Columbia and four additional states (MD, NH, NY and WI) ban sexual orientation discrimination only. And local laws, governing cities and counties, reach another 189 jurisdictions.

3. Are You Secure?– One company learned that it’s penny-wise approach to lax data security was pound foolish, as it pays a $3 million settlement to end class action data breach litigation that all began with the theft of two laptops.  The company is a health insurer and the laptops contained the unencrypted personal info of more than 1.2 million customers.  So how to you get to a $3 million settlement? By being forced to disgorge the “unjust enrichment” of insufficient spending on data security and paying each customer $10 per year for premium overpayments (with a $30 cap for each class member), without the customer being made to prove actual harm.  The company will also have to seriously upgrade its systems/processes and pay any actual, proven losses due to identity theft suffered by a customer. This is one of those issues that spans several corporate departments (e.g., IT, Operations, Sales, HR, Legal) and each department may assume the other(s) have it covered.  Ask the question and make sure you do.

4. Noncompete Nuked– The required elements of an enforceable noncompete covenant can vary from state to state, but certain truisms are universal.  Noncompetes are generally disfavored by courts as a restraint on trade.  If you want yours to stand up to scrutiny, do a good job of identifying your protectable interests and then draft restrictions to be no broader than those interests.  While some states’ statutes and common law allow for judicial reformation of an overbroad agreement (referred to as the “blue pencil”), this exercise is usually discretionary, not mandatory.  In a recent case in AZ, the court refused to blue pencil an overbroad agreement and dismissed the claim that the noncompete had been violated.  Unisource Worldwide Inc. v. Swope (D. Ariz. 8-8-13).  The court opined that the company had already protected “all of [its] conceivably legitimate interests” via its nondisclosure of confidential info, nonsolicitation of customers and nonsolicitation of co-workers covenants.  The court went on to explain that “Ambiguity and excessive breadth in such covenants are especially disfavored because of their [terroristic] effect on employees, who have little sense of which provisions of a particular covenant will be enforceable and who therefore cannot determine what conduct is precluded.”   The DE Court of Chancery proclaimed that it will no longer blue line overbroad noncompetes, since that option tends to encourage employer overreaching.  Now may be a good time to revisit yours and enhance the likelihood of them being upheld by dialing back the conduct, time and/or geographic limits.

5. Does Not Compute– A battle is brewing among the circuit courts over what level of employee misconduct is sufficient to state a claim under the federal Computer Fraud and Abuse Act (CFAA).  The law provides for both civil and criminal penalties for one who knowingly and with intent to defraud, exceeds authorized access to a protected computer.  The debate arises where an employee was authorized to access the employers computers, at some point in time, but uses that access in a way no employers would OK.  On one side, the 1st, 5th, 7th and 11th Circuits view unauthorized access as encompassing situations when the access was authorized but the access is used to obtain or alter info in the computer that the person is not entitled to access or alter.  In these jurisdictions, employers win where they had a robust computer use policy and the person’s conduct violates that policy.  On the other side, the 4th and 9th Circuits say the law does not apply where the access was authorized but the use of the info was inappropriate.  In order for the employer to prevail in these jurisdictions, they will need to show something more, akin to hacking into a database or using a stolen password.  This battle is probably headed to the Supreme Court, in order to determine a uniform standard.  In the meantime, employers should employ good offense (by limiting access via passwords and similar measures) and defense (by having computer use policies which prohibit certain access and/or use of the computer systems and their contents).

6. Board Biz– Richard Griffin has been confirmed for a four-year term as the General Counsel of the National Labor Relations Board, replacing the interim GC, Lafe Solomon.  Griffin is former GC of a labor union and became a Board member in 2012, via one of those controversial recess appointments that did not occur during an actual recess of Congress.  Many of the cases he decided as a Board member may be invalidated, depending the U.S. Supreme Court’s review of the NLRB v. Noel Canning case.

7. Not Playing Your Cards Right– The Consumer Financial Protection Bureau (CFPB) issued a bulletin on September 12, 2013, warning employers that they cannot require employees to receive their pay on a payroll card of the employer’s choosing .  This issue comes within the CFPB’s jurisdiction under the Electronic Fund Transfer Act  and Regulation E.  The press release, which contains a link to the full bulletin, can be found at http://www.consumerfinance.gov/newsroom/cfpb-bulletin-warns-employers-against-exclusive-use-of-payroll-cards/. The CFPB has its eyes on the retail and food service industries, where most of the employee complaints are originating.  In addition to these federal rules, be aware that states also restrict how (and how often) employees must be paid.

8. DOL Taking a Swing at MLB– The baseball season may be over but the U.S. Department of Labor is just getting started with San Francisco Giants and the Miami Marlins.  It’s not unusual to find unpaid interns in the sports and entertainment industries, where entry-level talent are willing to work for free just to get their foot in the door. Increasingly, it’s also not unusual to find that these interns are now asking for back pay and both government agencies and plaintiffs’ lawyers are willing to go to bat for them.  The Giants paid $544,715 in back pay for whiffing on minimum wage, overtime and record-keeping requirements about two months ago and the feds are back for a second round. Conde Nast announced it is shutting down its internship program following lawsuits filed against  Hearst Magazine and Fox Searchlight Pictures.  Before you bring a rookie into your clubhouse for free, be sure to refresh on the DOL’s requirements for a “true” internship on Fact Sheet 71, found at http://www.dol.gov/whd/regs/compliance/whdfs71.pdf.

9.Testing, Testing– A NY Court of Appeals created a new cause of action, negligent testing, and used it to award damages against a drug-testing laboratory.  Landon v. Kroll Laboratory Specialists (NY Ct App 10-10-13).  The plaintiff alleged that the lab produced a false positive test for marijuana, which did not go down well as plaintiff was on probation and had to defend the test result before a criminal probation board.  Plaintiff claimed the lab used a standard that was below professionally accepted standards for determining a positive result, which was a breach of its duty of care to the plaintiff. The lower court dismissed plaintiff’s claim but the circuit court reversed, finding such a duty existed even absent a contractual relationship between the parties.  You may want to check with the labs you use for employee testing and ask about the standards they apply in finding a positive result for various substances.

10. Calendar This – Break out that fresh 2014 calendar and pencil in May 15 and 16 for the University of Texas School of Law’s 21st Annual Labor and Employment Law Conference in Austin, TX.  The faculty for this program met last week and we’ve put together a great program for HR pros and attorneys alike.  See you there!

11. Thankful – With Thanksgiving fast approaching, I’d like to take a minute to thank you, great readers, for what you do every day.  As HR pros, counsel, business owners and managers, you make your workplaces functional, safe, productive, fun and a source of personal pride (not to mention income) for so many people.   You’ve been tasked with the complex job of shepherding the most important resource any organization has . . . its people.  And you do it so well.  In case you have not been told so lately, THANK YOU for all that you do!

12. Stated Differently– Here are some hot topics for you multi-state employers:

1. Arizona – Minimum wage will rise to $7.90/hour, effective January 1, 2014 and employees who receive part of their pay in tips must be paid at least $4.90/hour.  Don’t forget to change your state minimum wage law poster, too.

2. California – Here are just a few of the changes in CA law employers should be aware of:

1. Definition of hostile environment based on sex expanded to make clear that the conduct need not be motivated by sexual desire.

2. Military and veteran status are added to the list of protected  categories under the FEHA.

3. Current law which prohibits employer discrimination against employees who take time off for issues arising from domestic violence and sexual assault is expanded to include victims of stalking.

4. Employees who are victims of certain offenses are protected from discharge, discrimination or retaliation for taking time off to appear in a court proceeding in which a substantive right of the employee is at issue.  Listed offenses include vehicular manslaughter while intoxicated, felony child abuse, assault resulting in death of a child under age 8, felony domestic violence, felony physical abuse of an elder or dependent adult, felony stalking, solicitation for murder, hit and run causing death or injury, felony DUI and sexual assault.

5. Paid Family Leave law is expanded, effective July 1, to include paid time off to care for employee’s seriously ill grandparents, siblings or parents-in-law (in addition to existing law which applies to the employee’s seriously ill spouse, parent, child, domestic partner or time to bond with employee’s child that was recently born, adopted or taken in via foster care).

6. Employer penalties which apply for failure to provide relief from work for meal or rest periods now also apply to state law mandated “recovery periods” which are cool down periods for outdoor workers, to prevent heat illness.

7. Employers may not ask for or use info about any applicant’s convictions that have been judicially dismissed or sealed (in addition to existing law which prohibits employers from asking applicants if they have been arrested or detained, unless it resulted in a conviction or referral to a pretrial or post-trial diversion program).

3. California (San Francisco)– Effective January 1, 2014, employers of 20 or more employees in San Francisco must address employee requests for a flexible schedule arising from parenting and caretaking duties.  Within 21 days of the request for  a changed start time, part-time, part-year or telecommuting schedule, the employer must discuss the request with the employee, provide a written response and if the request is denied, provide a bona fide business reason for the denial.  The San Fran Office of Labor Standards will accept employee complaints of violation of this ordinance, called the Family Friendly Workplace Ordinance.

4. Florida– Minimum wage will rise to $7.93/hour effective January 1, 2014 and employees who receive part of their pay in tips must be paid at least $4.91/hour.

5. New York– NY law was amended in November 2012, expanding scenarios under which an employer could lawfully deduct from an employee’s pay (including erroneous overpayments), however, the deductions would not be allowed until regulations were issued. At long last, they are here and became effective on October 9, 2013.  The regulations are posted at http://www.labor.ny.gov/legal/laws/pdf/wage-deduction/12-NYCRR195-Wage-Deductions-Text.pdf.

6. Oregon (Portland)– Effective January 1, 2014, employers with six or more employees must provide employees with at least one hour of paid sick time for every 30 hours worked. Smaller employers will be required to provide an equal amount of time off, without pay. Affected employees are those who work at least 240 hours in a calendar year and they are not eligible to use the time off until the 90th calendar day after employment began, assuming they have worked at least 240 hours at that point in time.  Copies of the new law (9 pages) and regulations (16 pages) are posted at http://www.portlandonline.com/fritz/index.cfm?c=55242.

7. Washington (Seattle)– Effective November 1, 2013, employers are limited in their ability to obtain and use information about criminal convictions in the hiring process. The protection applies to any employee who spends at least 50% of their time in Seattle, regardless of where the employer is based.  Employers may not inquire about or use criminal history info until after conducting an “initial screen” to determine if the applicant meets all of the job’s requirements.  No advertisement, publication or policy can even appear to categorically exclude from employment based on criminal history.  Before rejecting an applicant based on criminal history, the employer must consider mitigating factors, like the type of offense and time elapsed since the offense.  Before rejecting an applicant, he or she must be notified of the decision and given at least two days in which to respond, correct or explain the criminal info.

13. For the Birds – If you like being tweeted and want breaking news on employment law changes (and the occasional random cheer for K-State . . . Go Cats!), follow me on Twitter.  I’m at @amross.

 

Until next time,

Audrey E. Mross
Labor & Employment Attorney
Munck Wilson Mandala LLP
600 Banner Place
12770 Coit Road
Dallas, TX  75251

972.628.3661 (direct)
972.628.3616 (fax)
214.868.3033 (iPhone)
amross@munckwilson.com
www.munckwilson.com

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