Employers often don’t stand alone in lawsuits – let’s talk about manager and supervisor liability

Ohio’s discrimination law is quirky when compared to its federal counterparts. For one thing, an Ohio employee does not need to exhaust his or her remedies with the Civil Rights Commission before filing a discrimination lawsuit in court. Also, under Ohio law, supervisors and managers can be held personally liable for their own acts of discrimination.

Discrimination laws, however, are not the only laws that provide for this individual liability. Other federal statutes – namely the FLSA, the FMLA, and the Equal Pay Act – also provide for manager and supervisor liability. The FMLA’s regulations [section 825.104(d)] explain why managers and supervisors can be personally liable under these statutes:

An “employer” includes any person who acts directly or indirectly in the interest of an employer to any of the employer's employees. The definition of “employer” in section 3(d) of the Fair Labor Standards Act (FLSA), 29 U.S.C. 203(d), similarly includes any person acting directly or indirectly in the interest of an employer in relation to an employee. As under the FLSA, individuals such as corporate officers “acting in the interest of an employer” are individually liable for any violations of the requirements of FMLA.

This week, a Pennsylvania federal court explained the scope of this individual liability. In Narodetsky v. Cardone Industries (as discussed on law.com), the federal court permitted FMLA claims to proceed against the defendant’s HR manager, benefits manager, and plant manager, as well as its president and CEO. The court concluded that anyone who exercises control over plaintiff in the termination or medical leave decisions can be liable under the FMLA. At least one Ohio federal court – in Mueller v. J.P. Morgan – reached this same conclusion. Extrapolating this rule to the FLSA, individual liability would extend to anyone who exercises control over a pay decision.

Individual liability has significant implications for how employers litigate FMLA and FLSA cases. If a supervisor, manager, or executive is named in a lawsuit, you and your counsel need to determine quickly whether the individual(s) can be represented by the same lawyer as the company, or if there is a conflict. This issue is complicated when an individual has left your organization, and exponentially complicated when the departure was on bad terms.

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Presented by Kohrman Jackson & Krantz, with offices in Cleveland and Columbus. For more information, contact Jon Hyman, a partner in our Labor & Employment group, at (216) 736-7226 or jth@kjk.com.

Do you know? The duty of loyalty: illegal competition vs. legal preparation

There are right ways and wrong ways for an employee to leave your company. Just because an employee is not subject to a noncompetition agreement does not mean that he or she cannot be liable for mistakes made on the way out the door. In fact, each and every employee owes his or employer a duty of loyalty up to the moment he or she ceases employment.

Your employee may prepare to compete against you while still in your employ without violating this duty of loyalty. There are many reasons why an employee may choose to prepare to compete while still employed. Some need the income provided by ongoing employment. Some want a degree of certainty that their new competitive venture will be ready to operate. Some may derive an eventual competitive advantage from continued association with their present employer (such as knowledge of pricing or business plans, or ongoing associations with key employees, customers, and vendors).

There are certain steps that an employee can legally take to prepare to compete without violating this duty of loyalty, even while still employed and even if done stealthily:

• Incorporating the new firm.

• Arranging for space and equipment.

• Securing financing.

• Making future business plans.

But, those preparation are subject to certain legal limits while still employed. The duty of loyalty prohibits employees from doing any of the following while still your employee:

• Using your property (computers, for instance) to prepare to compete.

• Using confidential information or trade secrets to prepare to compete.

• Starting the competing operation.

• Soliciting employees or customers for the new enterprise.

• Holding back business opportunities or diverting them to the new enterprise.

What can you do to prevent employees from engaging in these illegal activities? Consider these 6 ideas.

1. Require that key employees sign noncompetition agreements.

2. Consider requiring a wider subset of employees sign non-solicitation agreements.

3. Have all employees sign confidential information and trade secret policies, or, at a minimum, incorporate these policies into your employee handbook.

4. Incorporate statements about employee loyalty into the handbook.

5. Do not accept notice periods upon resignation for any employee who you think is a risk to compete.

6. Consider forensic examinations of computers and email accounts for any employee you reasonably believe was engaging in unlawful conduct during his or her employment.

These tips will not magically transform a disloyal employee into your lap dog. They will, however, place you in a position to hold the disloyal employee accountable for his or her actions.

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Presented by Kohrman Jackson & Krantz, with offices in Cleveland and Columbus. For more information, contact Jon Hyman, a partner in our Labor & Employment group, at (216) 736-7226 or jth@kjk.com.

Is it wrong to “friend” your boss on Facebook?

Mashable reports on a recent survey conducted by Liberty Mutual’s Responsibility Project, in which 56% of Americans reported that “it’s ‘irresponsible’ to friend your boss on Facebook, while 62% of bosses agree it’s wrong to friend an employee.” These numbers simply beg the question – what does your social media policy say about this issue? Here’s 5 suggestions (with attribution for the first three to Molly DiBianca at the Delaware Employment Law Blog):

1. Anything goes. Any employee can friend any other employee regarding of rank or position.

2. Supervisors are prohibited from friending direct reports, but employees can friend their supervisors (who can choose whether to accept the request).

3. Supervisors and their reports cannot be Facebook friends, regardless of who initiates the request.

4. Employees are only permitted to be Facebook friends with their peers. No one can friend anyone higher or lower on the org chart.

5. Employees are expressly prohibited from being Facebook friends with any co-workers, regardless of position.

The option you choose has a lot more to do with your corporate culture than what is legal or illegal. Your choice, however, will impact certain legal issues, such as harassment liability.

Regardless of which option you choose, you should choose one to incorporate into your social media policy. You don’t have a social media policy? To get started, I suggest Drafting a social networking policy: 7 considerations.

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Presented by Kohrman Jackson & Krantz, with offices in Cleveland and Columbus. For more information, contact Jon Hyman, a partner in our Labor & Employment group, at (216) 736-7226 or jth@kjk.com.

WIRTW #116

This morning on The Proactive Employer I had an engaging chat with Stephanie Thomas on the topic of statistics and reduction in force. To listen to or download Stephanie’s podcast, you can visit The Proactive Employer’s website. I also understand that Stephanie’s podcasts are available on iTunes. I also recommend reading Stephanie’s thoughts on Planning and Executing a Reduction in Force: A 10-Point inspection.

Here’s the rest of the best I read this week:

Discrimination & Harassment

• Ricci redux? Supreme Court hears another fire department race case – from Sindy Warren at the Warren & Hays Employment Law Blog

• Family Responsibilities Discrimination Litigation Update 2010 – from WorkLife Law Blog

• Sexual Harassment Investigation: Preserve the Evidence – from Debra Reilly’s Workplace Investigations Blog

• Second Circuit Addresses Effectiveness of Sexual Harassment Policy – from Employer Law Report

Competition & Trade Secrets

• Preparing to Compete with a Former Employer – from Trade Secrets and Noncompete Blog

• Steps to Minimize Chances of a Noncompete Fight – from Employment Law Blog

• Eight ways to guarantee yourself a noncompete lawsuit – from Jay Shepherd’s Gruntled Employees

• Average Trade Secrets Data Theft Costs $2 Million – from Trade Secrets Blog

Wage & Hour

• 5 Tips For Avoiding Wage & Hour Lawsuits – from Becky Regan at Compensation Cafe

• You Can’t Avoid Paying Overtime Wages By Splitting Up An Employee’s Tasks – from Overtime Advisor

• Unclassy Action Lawsuit? – from Abovethelaw.com

• Business Under Assault: Increased Regulations and Enforcement Proposed – from Michael Haberman’s HR Observations

Social Media

• GINA and Social Media – from Adria Martinelli at Delaware Employment Law

• More Jury Instructions to Deal With Social Media in the Courtroom – from Molly DiBianca’s Going Paperless

• Social Media Guidelines and Policies: Do Your Employees Know the Ground Rules Too? – from Dan Schwartz’s Connecticut Employment Law

• Americans time spent on social media sites up 210% in 2009 – from Real Lawyers Have Blogs

Background Checks

• Oregon Legislature Bans Workplace Credit Checks – from Dennis Westlind’s World of Work

• Cleveland Heights Women Forges Background Checks – from Jason Morris at employeescreenIQ Blog

Human Resources

• Two Predictors of a Good Hire: Passion, and How They Treat the Receptionist – from The Business of Management

• The Giving Tree: Treating Talent You've Outgrown with Respect – from Kris Dunn, The HR Capitalist

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Presented by Kohrman Jackson & Krantz, with offices in Cleveland and Columbus. For more information, contact Jon Hyman, a partner in our Labor & Employment group, at (216) 736-7226 or jth@kjk.com.

Access to federal court just got a little bit easier for corporations

Employers like to be in federal court. According to a recent study by the American Constitution Society, plaintiffs only win 15% of the time on employment discrimination suits in federal court. Thus, it is often critical for employers to have their cases heard in federal court.

Federal courts, however, are courts of limited jurisdiction. There are two main avenues to get a case into federal court—lawsuits premised on a federal statute (known as federal question jurisdiction), and lawsuits with more than $75,000 in controversy where no defendants hail from the same state as any plaintiff (known as diversity jurisdiction). Whenever a party is sued in state court, that party may remove the suit to federal court, provided the federal court would otherwise have jurisdiction.

For purposes of diversity jurisdiction, a corporation is a citizen of its state of incorporation and the state where it has its principal place of business. When a large corporation does business in a number of states, however, determining its “principal place of business” often presents courts with a challenge. On Tuesday, in Hertz Corp. v. Friend, the United States Supreme Court decided what “principal place of business” means:

We conclude that “principal place of business” is best read as referring to the place where a corporation’s officers direct, control, and coordinate the corporation’s activities. It is the place that Courts of Appeals have called the corporation’s “nerve center.” And in practice it should normally be the place where the corporation maintains its head-quarters—provided that the headquarters is the actual center of direction, control, and coordination, i.e., the “nerve center,” and not simply an office where the corporation holds its board meetings (for example, attended by directors and officers who have traveled there for the occasion).

Why is this case important to employers?

1. As noted above, employers like to be in federal court. This case expands employer’s access to federal court by limiting the number of states in which it can be found to be a citizen for diversity purposes. By limiting a corporation’s principal place of business to the corporate nerve center, corporations will be able to remove a greater number of lawsuits.

2. Employers only have 30 days after receipt of a state court lawsuit to remove the case to federal court. The determination of whether to remove a case has to be made quickly. Therefore, it is important to get counsel involved in the litigation as early as possible so that the removal date—which cannot be extended under any circumstances—is not missed.

For additional analysis of this opinion, I suggest the following:

• Identifying corporate “nerve centers” – via SCOTUSBlog

• U.S. Supreme Court Breathes Life Into Removal Statute – via What’s New in Employment Law?

• Today, all 9 Justices embrace a clear rule over a more nuanced and litigation-breeding interpretation – via Althouse

• Nine-Zip for Common Sense – via The California Civil Justice Blog

• Supreme Court Applies "Nerve Center" Approach to Diversity Jurisdiction – via Washington DC Employment Law Update

• The Supreme Court and Federal Jurisdiction Law – via ChamberPost

• High Court Makes it Harder for Plaintiffs to Avoid Federal Court in Contract Cases – via Point of Law

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Presented by Kohrman Jackson & Krantz, with offices in Cleveland and Columbus. For more information, contact Jon Hyman, a partner in our Labor & Employment group, at (216) 736-7226 or jth@kjk.com.

Calculating the rolling 12-month FMLA leave entitlement

As I’ve previously discussed, the FMLA allows for 4 different ways for employers to calculate its employees’ 12-week leave entitlement:

1. Based on a calendar year.
2. Based on some other defined and fixed 12 month period.
3. Based on the 1st day an employee uses FMLA leave.
4. A rolling 12-month period, measured backward from the date an employee uses any FMLA leave.

There is no doubt that for employers the last option – the rolling 12-month period – is both the administratively burdensome and the most advantageous.

Under this “rolling” 12-month period, each time the employee takes FMLA leave, the remaining leave entitlement is the balance of the 12 weeks that has not been used during the immediately preceding 12 months. The FMLA’s regulations provide some insight into how this works in practice:

For example, if an employee has taken eight weeks of leave during the past 12 months, an additional four weeks of leave could be taken. If an employee used four weeks beginning February 1, 2008, four weeks beginning June 1, 2008, and four weeks beginning December 1, 2008, the employee would not be entitled to any additional leave until February 1, 2009. However, beginning on February 1, 2009, the employee would again be eligible to take FMLA leave, recouping the right to take the leave in the same manner and amounts in which it was used in the previous year. Thus, the employee would recoup (and be entitled to use) one additional day of FMLA leave each day for four weeks, commencing February 1, 2009. The employee would also begin to recoup additional days beginning on June 1, 2009, and additional days beginning on December 1, 2009. Accordingly, employers using the rolling 12-month period may need to calculate whether the employee is entitled to take FMLA leave each time that leave is requested, and employees taking FMLA leave on such a basis may fall in and out of FMLA protection based on their FMLA usage in the prior 12 months. For example, in the example above, if the employee needs six weeks of leave for a serious health condition commencing February 1, 2009, only the first four weeks of the leave would be FMLA-protected.

Choosing the rolling 12-month period will add some administrative burden to your FMLA management, but you will be repaid by the fact that employees cannot double-dip by taking more than 12 weeks of contiguous leave because there should not be an overlap of leave years.

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Presented by Kohrman Jackson & Krantz, with offices in Cleveland and Columbus. For more information, contact Jon Hyman, a partner in our Labor & Employment group, at (216) 736-7226 or jth@kjk.com.

Do you know? Administrative employees vs. the administrative exemption

Nothing in employment law has a more misleading name than the administrative exemption in the Fair Labor Standards Act. Employers routinely mis-believe that if an employee performs administrative tasks, that employee is exempt from being paid overtime under the FLSA. In fact, the administrative exemption only applies to a narrow group of employees – those whose primary duty is the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers, and which includes the exercise of discretion and independent judgment with respect to matters of significance.

The following story from the National Law Journal illustrates the risks of confusing employees who perform administrative functions and employees who are exempt under the FLSA:

When legal secretary Karla Osolin used to work at Jones Day, she was paid a salary and overtime.

That's what caused red flags to go up when she took a job in September 2008 with Ohio intellectual property boutique Turocy & Watson. Now the firm faces a suit alleging wage-and-hour violations and stands accused of misclassifying Osolin and many others to avoid paying overtime.

Examples of some professions that the Department of Labor has found could qualify for the administrative exemption include mortgage loan officers, insurance agents, sales managers, marketing analysts, purchasing agents, financial services registered representatives, and loss prevention managers.

These categories are merely guidelines to observe, and not dogma to follow. Whether an administrative employee is administratively exempt is determined on an employee-by-employee basis, even within the same job category within the same organization. The analysis is fact-specific, and should be done by a professional well-versed in these issues.

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Presented by Kohrman Jackson & Krantz, with offices in Cleveland and Columbus. For more information, contact Jon Hyman, a partner in our Labor & Employment group, at (216) 736-7226 or jth@kjk.com.