Thursday, December 8, 2016

Demand Letters in Perspective

When employees think they’ve been mistreated and seek the advice of a lawyer, the result is often a demand letter sent by the employee’s lawyer to the employer. The employee (or ex-employee) may claim to have been discriminated against, paid incorrectly, wrongfully terminated, or otherwise subjected to unlawful employment practices. The demand letter usually describes the alleged mistreatment, says why the employee believes it’s against the law, threatens to pursue legal action, and demands payment in exchange for an agreement not to bring a claim or lawsuit.
It’s never fun to receive a demand letter, of course, and the threat of legal action should always be taken seriously. Ultimately, the facts and circumstances of the particular situation—and how the law applies to those facts and circumstances—will determine how the employer should respond. In every situation, however, it is worth knowing some basic guidelines for handling demand letters.
Have a protocol. Demand letters can be addressed to an owner, the CEO, the HR Manager, or others. All managers and supervisors should be trained to recognize a demand letter and should know what to do with one when it arrives. The letter needs to find its way to the employer’s in-house or outside lawyer quickly.
Don’t overreact. A demand letter is not a lawsuit and may never lead to one. It may be a very serious threat or it may be posturing. If the letter includes a deadline for response, be mindful of it but remember that it’s not a court-imposed deadline. Recognize that a demand letter may represent an opportunity to defuse and avoid a lawsuit in the making. Remember that any response could be admissible evidence in a lawsuit.
Don’t retaliate.  In many cases, employees and ex-employees have a protected right to claim that they have been victims of unlawful employment practices. Discrimination claims, claims of retaliation for whistleblowing, and wage and hour claims, among others, are protected by statute. Retaliation can create a whole new set of legal problems. The opportunity for retaliation to occur is most likely when the demand letter comes from a current employee, but even ex-employees can experience retaliation if the employer reacts to a demand letter by cutting off benefits, refusing to pay earned wages or severance, or giving a bad reference.
Don’t destroy evidence. Parties to a lawsuit have a legal duty to preserve evidence, and destroying evidence can result in serious penalties. A demand letter, even though it only threatens a lawsuit and doesn’t actually start one, may trigger this duty. All information that could possibly relate to the claims made in the demand letter must be kept confidential and protected.
Check insurance coverage and notice requirements. If insurance coverage exists for the claims described in a demand letter, the carrier may require notice of a potential claim. Check policy language to determine when and how to provide notice and protect coverage.
Don’t gossip. It’s tempting to talk about a demand letter. The circumstances leading up to it may make for juicy gossip, and it can be interesting to speculate about what will happen as a result of the demand. Such talk is seldom productive and may make things worse. Discussion should be limited to those who need to be involved, and instructions about confidentiality and privilege from the employer’s lawyer should be carefully followed.
Posted by Judy Langevin

Monday, December 5, 2016

That is SO last week

Last week was a big one for wage and hour law. The Department of Labor filed a notice of its intent to appeal the injunction stopping enforcement of its new FLSA overtime rule and asked the Fifth Circuit to expedite the appeal proceedings. Meanwhile, SHRM offered advice to employers in the wake of the overtime rule injunction.
Two significant wage and hour settlements were also announced last week. Zillow Inc. reached a $6 million settlement with the Department of Labor to resolve issues arising from class action overtime claims by sales representatives. Lifetime Fitness agreed to pay nearly $1 million in back wages and damages to almost 16,000 employees nationwide after a Department of Labor investigation found the company violated minimum wage requirements at its locations in 26 states.
  • Walmart agreed to pay $7.5 million to settle a discrimination suit that accused the company of denying health insurance benefits to same-sex spouses.
  • The Guardian covered why minority working-class women are disproportionately affected by economic austerity.
  • A full panel of the Seventh Circuit considered whether Title VII protects workers from discrimination on the basis of sexual orientation, revisiting a case decided in July by a three-judge panel.
  • A former financial advisor sued Citigroup for being a “boys club” where she was subjected to gender-based discrimination.
  • A study by online magazine Quartz revealed that slightly overweight, healthy female candidates are less likely to be hired than overweight men.
  • The National Law Review explained the EEOC’s new Guidance on National Origin Discrimination.
In Other News
  • HR Dive announced the 2016 winners of its annual awards for the companies and trends defining HR and employee management.
  • The Atlantic released a collection of engrossing interviews with American workers.
  • A federal judge denied a request for an injunction to halt the December 1 implementation of anti-retaliation provisions in OSHA’s new recordkeeping rule.
  • Former Penn State University coach Mike McQueary was awarded an additional $5 million in his whistleblower lawsuit against Penn State. McQueary claimed that his employment ended because he testified against officials implicated in the Jerry Sandusky sex abuse case.
  • The Los Angeles City Council approved a “ban the box” ordinance, prohibiting LA employers from asking about a job candidate’s criminal history until after a conditional job offer is made.

Thursday, December 1, 2016

Data Security for Employers: An Update

Employers store, manage, and share sensitive data about employees. The Navigator and other commentators have written a lot about issues related to personally identifiable informationhealth-related data, and employee privacy, as well as data security in general. Compiling and maintaining sensitive information is a necessary part of the employer-employee relationship, but it creates risks of liability. It’s essential that employers stay aware of the issues and risks created when new technologies emerge and new web-based HR services are offered. As we come to the end of a year that has seen many technological advances, we think it’s a good time to review old and new risks.

Employee data and mobile devices. It is now common practice for employers to allow employees access to company data and systems from a mobile device. Mobile devices include both company-provided or personally owned home computers, laptops, and smartphones. It is critical that employers have and enforce security policies that protect company and employee data that can be accessed from mobile devices.

Employee data and wearables. Wearables of all kinds – from fitness trackers to access badges to location monitoring devices – are being adopted by employers large and small, and can provide valuable information and management tools. Each wearable device comes with its own security risks, however, and employers need to understand how the data collected is transmitted, stored, and analyzed. Employers should make certain that wearables do not function as access points to company data or put company systems at risks. It’s also important to be sure that devices do not collect information that the employer should not have. Location monitoring devices should function only when employees are working, and fitness trackers should not provide employers with employee-specific health information. How wearables work and their business purpose should be clearly explained to employees.

Employee data and third-party vendors.  Employers who use third party administrators and vendors for benefit plans, payroll, performance management, wellness programs, or employee monitoring transmit and share confidential information about their employees. It’s the employer’s responsibility to make sure that administrators and vendors handle that information with care. Contracts for such services seldom include protection from liability for the employer if sensitive information is mishandled, so it’s important to carefully research and fully understand the product, processes, data security policies, and history of any provider.

Employee data compromised by data breaches. Employers can be vulnerable to lawsuits brought as a result of data breaches. Although some jurisdictions recognize only a limited statutory right to privacy in such situations, the Sixth Circuit recently held that plaintiffs whose personal data was stolen by hackers have standing to sue based on the risk of future fraud or identity theft. The Seventh Circuit has also recognized that plaintiffs have standing when hackers obtain their private information, but the Third Circuit has held that an increased risk of identity theft resulting from a data breach is too speculative to establish standing to sue either an employer or a third party responsible for the breach.  

Here are some suggestions for managing the risks associated with gathering, storing, and using sensitive data about employees:
  • Keep policies related to employee data up to date, and make sure they cover newly-acquired technology. 
  • As new mobile devices are acquired, make sure they meet data security requirements.
  • Never adopt new technology – wearable or otherwise – without inquiring about data security and making sure your security needs will be met.
  • Require third party administrators and vendors who handle employee information to provide you with their updated data security policies. Ask if your organization will be indemnified in the event that the vendor or administrator suffers a data breach.
  • Keep asking who needs access to what information in your internal information systems, and limit access to those with a legitimate need to know.  
  • Review access protocols at least once a year and remind employees – particularly those who handle sensitive employee data – of their responsibility to keep information secure.
  • Insist that managers and supervisors model best practices related to both hi-tech data security and low-tech management of confidential information.
  • Remember that just because you can access and store data, it’s not necessarily wise to do so.
Posted by Judy Langevin

Monday, November 28, 2016

That is SO last week

Last week, a federal judge in Texas issued a preliminary injunction blocking implementation of the Department of Labor’s new rules on overtime, which would have extended overtime eligibility to approximately 4 million Americans. The injunction prevents the regulations from taking effect on December 1, preserving the existing rules while the court considers the merits of the challenge to the new regulations brought by 21 states and several employer groups earlier this fall. The Department of Labor released a statement disagreeing with the court’s decision, which it said “has the effect of delaying a fair day's pay for a long day's work for millions of hardworking Americans.” The DOL says it is considering its legal options.

The injunction means that employers may continue to follow the existing overtime regulations until a final decision is reached. As some commentators have observed, it may be prudent for employers who have already implemented salary or employee classification adjustments in anticipation of the new regulations to leave those changes in place and refrain from making any additional changes until a final decision is reached in the federal suit.

  • HR Dive shared some advice on cultivating a culture of thanks in today’s workplace using principles drawn from social media platforms.
  • In a new study, McKinsey estimates that artificial intelligence will allow a high percentage of jobs to be automated within decades.
  • A new app called Goal Guru is designed to help improve employee wellness through wellness tracking, digital coaching, and social engagement.
In Other News 

Wednesday, November 23, 2016

Employment-Related Election Results

On Election Day, November 8, employment-related initiatives were voted on and passed by voters in a number of states.

Minimum Wage

Voters in Arizona, Colorado, Maine, and Washington approved ballot measures to increase their state’s respective minimum wages. Washington will incrementally increase its minimum wage from $9.47 to $13.50 by 2020. Arizona, Colorado, and Maine will incrementally increase their minimum wages to $12 by 2020. The largest increase is in Maine, where the minimum wage is currently $7.50.

The federal minimum wage remains at $7.25 an hour, as it has since 2009. Twenty-nine states and Washington D.C. have minimum wages above the federal minimum wage.

Paid Sick Leave

Voters in Arizona and Washington became the sixth and seventh states in the U.S. to pass statewide paid sick leave. Arizona’s law takes effect July 1, 2017, and requires employees to earn at least one hour of paid leave for every 30 hours worked, or up to five paid sick days annually. Washington’s law will take effect on January 1, 2018, and will require workers covered by Washington’s Minimum Wage Act to earn, and have the right to use, one hour of paid leave for every 40 hours worked.


Legalization of marijuana for various uses was a big winner on November 8. Voters approved measures to legalize medical marijuana use in Arkansas, Florida, and North Dakota. Montana voted to loosen restrictions in an existing medical marijuana law. California, Maine, Massachusetts, and Nevada voted to legalize the use of recreational marijuana. An effort to legalize marijuana for recreational use in Arizona failed to pass.

The new Arkansas and Maine laws expressly prohibit employment discrimination against medical marijuana users, although the laws do not require an employer to permit or accommodate the use, consumption, or possession of marijuana in the workplace. The California law expressly preserves an employer’s right to enforce a drug-free workplace policy.

Employers in these states should ensure their policies on drugs in the workplace comply with these new laws and reflect the organization's current priorities. Consider providing guidance to employees to ensure compliance with company policy. Employees may not understand that their employer can legally set limits and maintain a drug-free workplace, notwithstanding the legalization of marijuana for some purposes.

Happy Thanksgiving from everyone here at the Employment Law Navigator!

Posted by Laura Bartlow

Monday, November 21, 2016

That is SO last week

Last week, the EEOC released its 2016 Annual Performance and Accountability Report. In fiscal year 2016, which ended September 30, the agency won $482.1 million for workers and resolved 97,443 charges—6.5 % more than it received. This is $43 million less than the agency recovered in the 2015 fiscal year. This year’s recovery includes $347.9 million for victims of employment discrimination in private and public sector workplaces through mediation, conciliation, and settlements; $52.2 million for workers harmed by discriminatory practices through agency litigation; and $82 million for federal employees and applicants. EEOC Chair Jenny Yang said the agency is “proud of our efforts to foster constructive solutions that promote prosperity for all our workers, employers and communities.”
  • One of the largest trucking and transportation companies in North America agreed to pay $260,000 and provide other relief to settle EEOC charges that it discriminated against East Indian Sikh job applicants.
  • Georgia Power Company will pay more than $1.5 million to settle a class disability discrimination lawsuit brought by the EEOC on behalf of 24 workers.
  • A former dean at the University of California Berkeley School of Law withdrew his federal discrimination lawsuit against the school after a federal judge declined to stop sexual harassment disciplinary proceedings against the former dean.
In Other News

Thursday, November 17, 2016

What GCs Need to Know About EPLI

This is the fifth in our series of posts for general counsel and the HR professionals who support them. As we have noted previously, GCs are responsible for a lot but may not have time to become an expert on everything. These posts provide a brief take on employment law issues GCs are likely to encounter, such as HR technology, settling employment claims, employment enforcement agencies, and reductions in force.

Today's topic is Employment Practices Liability Insurance, or EPLI. EPLI provides coverage for employment-related claims and lawsuits brought by current, former, or prospective employees. Although EPLI can be expensive and does not completely eliminate the risk of liability for employment-related claims, it is well worth considering when an organization reviews its insurance coverage. Because of EPLI's connection to liability issues and litigation, GCs need to be involved in the decision to purchase EPLI and the choice of coverage and carrier. Here are some questions to ask:

Does EPLI coverage make sense for this organization?  Consider the number of employees, staff turnover, the training level of managers and supervisors, the history and frequency of employee charges and complaints, the ability of the organization to fund defense costs and pay a large judgment, and the general risk tolerance of upper management. Weigh the expense of EPLI against the likelihood of an expensive employment action. The EEOC received nearly 90,000 charges of employment-related discrimination in fiscal year 2015. A single-plaintiff employment lawsuit can easily cost more than $100,000 to defend—regardless of outcome—and a loss can result in a judgment of several hundred thousand or more. Consider that more than half of all employment-related lawsuits are filed against small businesses, but less than two percent of businesses with fewer than 50 employees purchase EPLI.

What type and level of coverage fits the organization's needs?  Like all forms of liability insurance, EPLI premiums and coverage vary, and are related. One way to obtain lower premiums can be to opt for a higher deductible or self-insured retention. A retention transfers some of the risk of loss back to the policyholder. A deductible reduces the amount of insurance available, usually for any damages the policyholder pays.

What claims are covered?  Not all EPLI policies cover all employment claims. The insurance generally covers claims such as sexual harassment, discrimination, retaliation, wrongful termination, and violation of leave laws. Many EPLI policies contain exclusions for breach of contract, OSHA, FLSA, workers’ compensation, COBRA, WARN, and ERISA violations, among other exclusions. Generally, an EPLI policy offers reimbursement for the legal expenses of defending against claims or lawsuits, including payment of judgments or settlements, regardless of whether the company prevails. Although some EPLI policies cover punitive damages, several states prohibit insurance for punitive damages. Be sure you understand which claims and expenses your policy covers and what coverage your jurisdiction allows.

Who has the right to select counsel?  Many insurance carriers reserve the right to designate or approve defense counsel and direct the defense. If a policyholder wants the right to select counsel or weigh in on strategy, this needs to be negotiated at policy inception or renewal. 

Another term to pay attention to is the consent, or “hammer” clause. It is common for EPLI policies to require the insurer to obtain the consent of the policyholder for costs of defense or settlement, but many policies also provide that, if the policyholder does not consent to a settlement the insurer supports, coverage is limited to the amount of the rejected settlement plus defense costs to the date of the withheld consent. 

What are the notice requirements?  GCs need to be familiar with what constitutes a claim under the EPLI policy, so they can identify when the insurance carrier must be notified of claims. Many EPLI policies are “claims-made” policies, meaning that claims must be reported to the insurance carrier within the policy period in which the claim or report is initially made. The policy may be triggered by a formal lawsuit or charges by a state or federal agency, or it may merely require a written demand, an agency investigation, or a formal internal complaint.

A failure to report an internal complaint that later turns into a charge or suit can constitute failure of notice in some policies—which may forfeit all coverage for the claim. GCs need to make sure that somebody understands what may trigger a policy claim and what the notice requirements are and is watching for incoming complaints that may trigger notice obligations.

Does your EPLI policy cover cybersecurity breaches?  Some EPLI policies provide some coverage for cybersecurity breaches. Carefully examine the terms and conditions of the EPLI policy to see if there are any exclusions or provisions relating to cybersecurity, and to assess whether provisions regarding claims of invasions of privacy, negligence, and misrepresentation may encompass liability resulting from cybersecurity breaches. Consider obtaining a cyber-specific policy.

Posted by Laura Bartlow