When Coyote Posts Get Ugly (My latest column in Workforce magazine)

Each month I write a featured column in Workforce magazine. This month, my column focuses on the risks businesses take when then take to social media to comment on pending litigation and the employees who’ve filed. The article—”When Coyote Posts Get Ugly”—is available here.

A hypnotic tale about choice of law and non-compete agreements

Choice of law is one of the most important, and, often, most ignored decisions you can making in drafting a non-competition agreement. Lifestyle Improvement Centers, LLC v. East Bay Health, LLC (S.D. Ohio 10/7/13), illustrates how the choice of which state’s law will govern the contact can govern the enforceability of the restrictive covenant.

Patrick Porter owned Positive Changes Hypnosis Centers, a successful hypnosis-therapy center, which included a network of franchises. In 2003, Porter sold the business to an Ohio-based company, Lifestyle Improvement Centers. Years later, while running a competing California-based self-improvement company called East Bay Health, Lifestyle reached out to the Porters for help with a struggling Positive Changes franchise in California. Ultimately, the Porters acquired the struggling Positive Changes franchise from Lifestyle. The Porters’ company, East Bay, entered both a franchise agreement and a non-compete agreement with Lifestyle.

The Porters spent a year trying to turn around the Positive Changes franchise location, ultimately concluding it was a lost cause. The Porters shut down the franchise and converted it into The Smart Body Institute, operated through their East Bay Health company. When the Smart Body Institute entered the hypnotherapy business, Lifestyle sued under the non-compete agreement, which stated that Ohio law governed the parties’ relationship.

The Porters and East Bay argued that because California law forbids non-compete agreements, it violates the law and public policy of the state in which their business is located to enforce a non-compete agreement under a competing state’s law. The Ohio federal court hearing the dispute agreed, concluding that despite the Ohio choice of law provision, California law applied. Thus, an Ohio company, with an Ohio choice of law contract, in an Ohio court, could not enforce its non-compete agreement.

In this case, the court ignored the parties’ choice of law because of the strength of the public policy of the state in which the competing business was located. Yet, this case illustrates a larger point. Choice of law can be outcome determinative in non-compete cases. Because state law governs the enforceability of non-compete agreements, there are 50 different possible sets of rules for your contract. The set that you choose could determine your case. For example, Ohio enforces non-compete agreements based on their overall reasonableness. California, on the other hand, has decided that its public policy renders most non-compete agreements per se unenforceable. Do not ignore the selection of the controlling law in your non-competition agreements. Otherwise, you could be missing a golden opportunity to dictate the terms of the agreement’s interpretation, and, ultimately, its enforceability.

Riffing on the right way to do workforce reductions

Anthony Rachells was a top performer at Cingular Wireless. As a National Retail Account Executive in Cingular’s Cleveland region, he received numerous sales awards, consistently exceeded company sales goals by the greatest margin of any of his co-workers, and, in 2003 earned the top performance review among his peers. Yet, when AT&T acquired Cingular in 2004, and eliminated five of the nine employees in Rachells’s position. Rachells received the lowest 2004 performance review score of any candidate, ranked seventh in the overall selection process, and was terminated.

Rachells—who was the only African-American National Retail Account Executive—sued, claiming that his manager (who other testified had a history of discriminating against minorities) included him in the workforce reduction because of his race.

Last week, in Rachells v. Cingular Wireless Employee Services [pdf], the 6th Circuit concluded that it should be up to a jury to determine whether the decision-making manager singled out Rachells because of his race.

Here, among the Cingular candidates, Rachells was the only person of color and the only individual discharged in the RIF. Given this small sample size of the Cingular candidates, however, this is not sufficient to conclude that Cingular’s actions were racially motivated…. The district court erred in dismissing two other crucial categories of evidence tending to show race-based discrimination: evidence of Rachells’ superior qualifications and evidence of a discriminatory atmosphere at Cingular….

Here are three factors to think about when using subjective criteria (such as rankings) when deciding on who to include in a RIF:

1. Comparability. What do your workforce demographics look like before and after the RIF, company wide, department by department, and job function by job function? If it looks like your RIF affected women, minorities, or older workers more than their comparators, it will become harder to justify the legitimacy of the subjective criteria. In this case, Cingular’s RIF failed the smell test by including the only African-American account executive.

2. Consistency. Do you always use subjective criteria as part of your decision-making? If not, it will look like you added a subjective component to this RIF for a reason (to single out someone or some group). If nothing else, you will have to explain why you deviated from the norm. In this case, it was not a stretch for the court to conclude that the manager rigged the ranking to single out Rachells.

3. Honesty. Was everyone honest in their subjective evaluations? The quickest way to buy yourself a jury trial is for the plaintiff to uncover dishonesty or other shenanigans in the decision-making process. If you are going to have a subjective component to any RIF, make sure the evaluations pass muster. How do they compare to past performance reviews? Have the employees ever been counseled, disciplined, or put on a performance plan? Do the objective criteria (sales numbers, for example) contradict the subjective evaluation? In this case, Cingular’s RIF failed because the objective criteria (sales figures, awards, and prior performance reviews) did not match the subjective ranking prepared solely for purposes of the RIF.

RIFs, done correctly, provide employers wide protections from allegations of discrimination. Done poorly, however, RIFs open employer to widespread claims of discrimination that can prove more difficult to defend than the savings the employer hoped to realize from the layoffs.

WIRTW #293 (the “interview from hell” edition)

Is this the worst (fake) job interview ever?

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

Discrimination

• Fortune on the EEOC’s legal war against employers — from Walter Olson’s Overlawyered
• Is Being Dead a Disability? — from California Employment Law
• An employer is not required to change supervisors as an ADA accommodation — from Eric Meyer’s The Employer Handbook Blog
• SCOTUS Dismisses Constitutional Age Discrimination Case — from Phil Miles’s Lawffice Space
• Where’s the Beef? Employer Defeats EEOC’s Religious Discrimination Pattern Or Practice Case By Establishing Undue Hardship Defense — from Workplace Class Action Litigation
• United States Supreme Court Asks Government to Weigh in on Accommodations for Pregnant Employees — from Trade Secret / Noncompete Blog
• Unpaid interns and sexual harassment -- how much do you know? — from Robin Shea’s Employment & Labor Insider

Social Media & Workplace Technology

• Court Finds Duty to Preserve Personal Emails of Employees — from Molly DiBianca’s Delaware Employment Law Blog
• Blurred Lines: Social Media and Confidentiality in Workplace Investigations — from Employment Law Lookout
• Tweet Ye, Tweet Ye: It’s OK to Promote Your Workers on Social Media — from Whatever Works

HR & Employee Relations

• Are You An Employee Friendly Company? — from The Tim Sackett Project
• Fat Jokes Can Turn Out to Be a Costly Workplace Problem — from TLNT
• Employment Law Differences for Non-Profit Employers — from Minnesota Employer
• Counting to Seven: The 7 Year Rule for Reporting Adverse Information on a Background Check — from employeescreenIQ Blog

Wage & Hour

• Pro-employee 5th Circuit? Four keys to recent FMLA retaliation decision — from Work Matters
• Holy Smokes! Employee's Minister Uncovers Her FMLA Abuse, Leads to Her Termination — from FMLA Insights
• Federal Court Denies Class Certification, Preemptively Denies FLSA Collective Action – Class Members’ Experiences Too Varied — from Currents: Hot Topics in Employment Law
• Did Amazon Violate Overtime Pay Requirements By Not Paying Warehouse Employees For Required Screenings? — from Overtime Lawyer Blog

Smoking out the law on e-cigarettes in the workplace

29 states, plus the District of Columbia, have laws prohibiting anyone from smoking in the workplace. Like similar bans in other states, Ohio’s statewide workplace ban applies to “smoking,” which means “inhaling, exhaling, burning, or carrying any lighted cigar, cigarette, pipe, or other lighted smoking device for burning tobacco or any other plant.”

Electronic cigarettes do not burn tobacco. Instead, they use a heating element to vaporize a liquid solution that includes a concentration of nicotine. Because these vaporizing devices do not contain tobacco, they are not prohibited by workplace smoking laws.

According to the Zanesville Times Recorder, e-cigarettes will be coming to your workplace, and will test the limit of your anti-smoking policy:

As vaporing becomes more prevalent, it’s quickly evolving into a controversial workplace issue. Employers will be faced with the challenge of contemplating the pros and cons of e-cigarettes for their workplaces and will need to consider adapting a policy that reflects their position

Proponents of e-cigarettes in the workplace argue that there exists no proof of any associated health risks, and that they improve employee productivity by eliminating the need of smoke breaks during the workday.

Opponents argue that these devices contain nicotine and detectable levels of known carcinogens and toxic chemicals, and that prohibiting their use in the workplace eliminates the risk of any complaints from nonsmoking co-workers, customers or others annoyed by the vapors.

There are no laws requiring that you allow e-cigarettes in your workplace. Laws that prohibit smoking in the workplace are a floor, not a ceiling. You are free to ban these devices in your workplace, and should consider doing so.

Companies should review their smoke-free workplace policies specifically to prohibit e-cigarettes, and consider including employees that use e-cigarettes as “smokers” for purposes of any wellness or smoking-cessation initiatives.

This post originally appeared on The Legal Workplace Blog.

The devil went down to the EEOC… A story on religious accommodation

Halloween is almost upon us, which mean that it’s only appropriate to discuss one of the EEOC’s last actions before the government shutdown—the filing of a lawsuit against two Pennsylvania energy companies for failing to accommodate an employee’s religiously based fear of using the newly installed time and attendance biometric hand scanners. From the EEOC’s press release:

Butcher repeatedly told mining officials that submitting to a biometric hand scanner violated his sincerely held religious beliefs as an Evangelical Christian. He also wrote the mining superintendent and human resources manager a letter explaining the relationship between hand-scanning technology and the Mark of the Beast and antichrist discussed in the Book of Revelation of the New Testament and requesting an exemption from the hand scanning based on his religious beliefs.

The mining companies refused to consider alternate means of tracking Butcher’s time and attendance, such as allowing him to submit manual time records as he had done previously or reporting to his supervisor, even though the mining company had made similar exceptions to the hand scanning for two employees with missing fingers. The EEOC charges that Butcher was forced to retire because the companies refused to provide an accommodation to his religious beliefs.  

According to the EEOC lawyer litigating this case, “In religious accommodation cases, the standard is not whether company officials agree with or share the employee’s religious beliefs. Instead, the focus is on whether the employer can provide an accommodation without incurring an undue hardship.”

Before you dismiss an employee’s request for a religious accommodation as silly or outrageous, stop, think, and decide whether the expense or difficultly in making the accommodating exceeds the cost and aggravation of defending a possible discrimination lawsuit. The answer to that equation, should, more often than not, guide your decision.

For more on this issue, I recommend pages 229 – 230 of my latest book, The Employer Bill of Rights, where I discuss a former co-worker of mine who believed that Lee Iacocca saved Chrysler by making a pact with the devil, and how the company for which we worked accommodated his beliefs (true story).

Can George Costanza sue for sexual harassment or retaliation?

In an episode of Seinfeld, George Costanza lost his job after the cleaning woman, with whom he had sex on his desk in his office after hours, ratted him out to management.

Could he have sued for sexual harassment? According to Stevens v. Saint Elizabeth Med. Ctr. (6th Cir. 8/29/13), the answer is no.

Caroline Stevens, worked as the personal assistant to defendant Dr. Donald Saelinger, the Chief Executive Officer of Patient First, which was later acquired by Saint Elizabeth Medical Center. After the hospital discovered a recently ended a consensual relationship between the two (which included after-hours sex in the office ), it offered both the option of resignation or termination. Stevens refused to resign, yada yada yada, and was fired.

The 6th Circuit affirmed the dismissal of both her sexual harassment claim (premised on some post-break-up love notes and other protestations of continued affection at the office) and her retaliation claim (premised on her termination after she had written a letter to Saelinger stating a desire to do her job in a non-threatening environment).

There is nothing wrong with employees dating. Nothing good, however, comes from a boss having relations with a subordinate employee, especially one who is a direct report. No matter your corporate position on employee romance, it’s probably best to prohibit managers and supervisors from dating (etc.) their direct reports. Untangling relationships is complicated enough. You do not need to complicate it more by engaging the possibility (and the resulting legal risk) of an employee reporting to an ex.

As for George’s possible legal claims, it’s no soup for you.