Tuesday, September 22, 2015

September Edition of the Employment Law Blog Carnival

Attorney Andrea W. S. Paris hosted this month's edition of the employment law blog carnival titled, "Post-Labor Day: Employment Law Blog" and is available here

Wednesday, September 16, 2015

11th Circuit Holds Florida Statute Disallowing Consideration of Hardship in Considering Enforceability of Noncompete Agreement Conflcts with Rule 65

Daniel MacLachlan was serving as the CFO of Trans Union Risk and Alternative Data Solutions, Inc. (TRADS).  MacLachlan signed a 1-year "Noncompetition and Nonsolicitation Agreement" with TRADS during his employment with TRADS, which, if he was terminated from TRADS, prohibited MacLachlan from "directly or indirectly":

(a) engag[ing] in a business...that is the same as or is similar to any Business conducted by [TRADS] during [MacLachlan's] employment ...[or];

(b) enter(ing) into any employment or business relationship with any person or entity that engages in a Business that is the same as or similar to any Business conducted by [TRADS] during [MacLachlan's] employment by [TRADS], including, without limitation,...Interactive Data LLC....

MacLachlan, several months after signing this noncompete agreement, resigned from TRADS and signed an employment agreement to become the CFO of TBO, a company that acquired Interactive.  MacLachlan did not inform TRADS of his new relationship with TBO.  

TRADS believed MacLachlan had gone to work for a competitor in violation of the noncompete agreement he signed with them and initiated an action to enforce that agreement and moved for a preliminary injunction.   MacLachlan contested the preliminary injunction arguing, inter alia, that TRADS had not demonstrated a substantial likelihood of success on the merits; that TRADS failed to establish irreparable harm; that the harm of the preliminary injunction to MacLachlan would outweigh any damage to TRADS; and that sections 542.335(1)(g)1, (j) of the Florida statutes did not govern the case.  After an evidentiary hearing on TRADS' motion, the district court granted the preliminary injunction, prohibiting MacLachlan for one year or until the final resolution of the cause, whichever is sooner, from "[c]ontinuing employment or association with [Interactive] or any affiliate or investor thereof" and from "[e]ngaging in a business or activity that is the same as or similar to any business conducted by TRADS."

Did the District Court Properly Grant TRADS' Preliminary Injunction?

In case anyone was wondering what this contract dispute was doing in federal court, it was a diversity action, with state substantive law and federal procedural law applied.  Thus, federal procedure was applied to determine whether the preliminary injunction was properly issued.  Therefore, under Rule 65, a moving party (TRADS) must establish four (4) elements to obtain a preliminary injunction:

"(1) it has a substantial likelihood of success on the merits;  (2) irreparable injury will be suffered unless the injunction issues; (3) the threatened injury to the movant outweighs whatever damage the proposed injunction may cause the opposing party; and (4) if issued, the injunction would not be adverse to the public interest."  

The 11th Circuit noted that preliminary injunctions are "extraordinary" and "drastic" remedies that should not be issued unless the moving party clearly establishes each of the four (4) prerequisites.  

In 1996, Florida adopted Fla. Stat. section 542.335, which contains the substantive law to which courts look in "analyzing, evaluating and enforcing restrictive covenants contained in employment contracts."  The statute prescribes the elements necessary to state a prima facie claim to enforce a restrictive covenant and issues instructions to the courts when ruling on such claims.  Section 542.335(1)(g)1 governs the enforceability of a restrictive covenant and mandates:

(g) In determining the enforceability of a restrictive covenant, a court:  

1.  Shall not consider any individualized economic or other hardship that might be caused to the person against whom enforcement is sought.

Fla . Stat. sec. 542.335(1)(g)1.  Once a restrictive covenant is deemed enforceable, the statute prescribes certain rules for enforcement:

(j) A court shall enforce a restrictive covenant by any appropriate and effective remedy, including, but not limited to, temporary and permanent injunctions.  The violation of an enforceable restrictive covenant creates a presumption of irreparable injury to the person seeking enforcement of a restrictive covenant.

Fla. Stat. sec. 542.335(1)(j).

The 11th Circuit noted that Rule 65 is applied to the exclusion of any contrary state procedure.  See Ferrrero v. Associated Materials, Inc., 923 F.2d 1441, 1448 (11th Cir. 1991).  MacLachlan argued that Rule 65 should have been applied to the exclusion of Fla. Stat. sections 542.335(1)(g)1 and (j) while TRADS argued that the district court appropriately applied those subsections in determining whether Rule 65 had been satisfied.  

Under the Erie doctrine, the Court noted, "[t]he first step of the analysis is to determine whether [Rule 65 and section 542.335(1)(j) are in] conflict .... If no conflict exists, then the analysis need proceed no further, for the court can apply state and federal law harmoniously to the issue at hand."  The 11th Circuit ultimately concluded that, because Rule 65 and section 542.335(1)(j) apply harmoniously to TRADS' motion for preliminary injunction, the district court did not err in their application.

Florida's Excluded Use of Potential Hardship in Preliminary Injunction Analysis

MacLachlan also appealed the district court's application of section 542.335(1)(g)1 to the preliminary injunction analysis, which precluded any consideration of the potential hardship to MacLachlan when the court balanced the harms under Rule 65.
Section 542.335(1)(g) governs the enforceability of restrictive covenants, not the enforcement of an already enforceable restrictive covenant.  After all, the statute begins:  "In determining the enforceability of a restrictive covenant, a court ...."  It then goes on to list four (4) considerations that a court "shall" or "shall not" contemplate when determining whether a restrictive covenant is enforceable.  One of these considerations a court "shall not" consider is "any individualized economic or other hardship that might be caused to the person against whom enforcement is sought."  section 542.335(1)(g)1.

The 11th Circuit held that, "[h]ere, the district court erred when it applied section 542.335(1)(g) in determining whether a preliminary injunction was an appropriate and effective remedy for the enforceable restrictive covenant.  "Having erroneously applied section 542.335(1)(g), the district court failed to consider any harm that MacLachlan would suffer if the injunction issued.  Therefore, we must vacate the district court's order granting the injunction and remand this matter for the district court to balance the harms in accordance with Rule 65.

The case is Transunion Risk and Alternative Data Solutions, Inc., vs. Daniel MacLachlan, No. 15-10985.

EEOC Obtains $17 Million Jury Verdict in Sexual Harassment and Retaliation for Female Employees at Moreno Farms

The Equal Employment Opportunity Commission (EEOC) announced last week that it had obtained a jury verdict award of $17,425,000 to five former female employees of Moreno Farms, Inc., a produce growing and packing operation in Felda, Fla., who suffered sexual harassment and retaliation in violation of Title VII.   The summarized facts of the case are quite disturbing:
According to EEOC's suit, two sons of the owner of Moreno Farms and a third male supervisor engaged in graphic acts of sexual harassment against female workers in Moreno Farms' packaging house, including regular groping and propositioning, threatening female employees with termination if they refused the supervisors' sexual advances, and attempting to rape, and raping, multiple female employees.  All five women were ultimately fired for opposing the three men's sexual harass­ment.
EEOC filed suit in U.S. District Court for the Southern District of Florida after first attempting to reach a pre-litigation settlement through its conciliation process.  On Sept. 10, the jury returned a unanimous verdict in the Moreno Farms case, awarding $2,425,000 in compensatory damages and $15 million in punitive damages to the five female farmworkers. 

Tuesday, September 15, 2015

Federal Lawmakers Push for The Fair Chance Act

In an effort to help avert the stigmatism associated with having a criminal record when applying for jobs, a bipartisan group of federal lawmakers late last week introduced legislation, The Fair Chance Act, that prohibits federal agencies and contractors from asking about the criminal history of a job applicant until after a conditional offer is made.

People who may have checked Twitter the last several days may have seen #banthebox, which refers to the Fair Chance Act and refers to applications where applicants must check on an application whether they have a criminal record.  According to statistics, at least 70 million Americans have to check such a box.  Furthermore, men who report convictions are 50 percent less likely to receive a callback or job offer, with the rate being even higher for African-American men, cited Elijah Cummings (D-Md), one of the sponsors of the legislation. 

From The Huffington Post article on the bill:
The bill bars federal agencies from asking about a person's criminal history before a conditional job offer is made, with some exceptions, such as for law enforcement. Agencies would be prohibited from asking people bidding for government contracts to disclose their criminal records in advance of an award decision. Government contractors would, in turn, be subject to similar requirements. 
It is important to note that this bill only covers federal agencies and contractors and would not apply to private sector employers.  Thus, unless the specific state you reside in already "bans the box," then your criminal history is fair game before a conditional offer of employment is made.

Wednesday, September 9, 2015

Muslim Flight Attendant Suspended When Religious Accommodation Revoked

With Kim Davis and her refusal to issue marriage licenses to same-sex couples, the issue of religion and religious accommodations in the workplace have been at the fore.  Late last week came the story of Charee Stanley, a flight attendant for a small airline, ExpressJet, who was suspended, without pay, after her religious accommodation(s) were revoked.

Stanley began working for ExpressJet about three (3) years ago and converted to Islam and the Muslim faith about two (2) years ago.  Only recently did Stanley learn that her religion prohibits her from consuming and serving alcohol.  Thus, Stanley sought a religious accommodation with ExpressJet, which was granted.  Her supervisor at ExpressJet then told her to work out an arrangement for someone to fulfill passenger requests for alcohol, which she did.  This arrangement worked out quite well for several months until one of her coworkers filed a complaint against Stanley claiming she was not fulfilling her duties by refusing to serve alcohol. The employee complaint also said Stanley had a book with "foreign writings" and wore a headdress.  ExpressJet then revoked Stanley's religious accommodation and placed her on unpaid administrative leave, for some reason.

Title VII and Religious Accommodations

As taken from the Equal Employment Opportunity Commission's website on religious discrimination, the law requires an employer or other covered entity to reasonably accommodate an employee's religious beliefs or practices, unless doing so would cause more than a minimal burden on the operations of the employer's business. This means an employer may be required to make reasonable adjustments to the work environment that will allow an employee to practice his or her religion.
Examples of some common religious accommodations include flexible scheduling, voluntary shift substitutions or swaps, job reassignments, and modifications to workplace policies or practices.

An employer does not have to accommodate an employee's religious beliefs or practices if doing so would cause undue hardship to the employer. An accommodation may cause undue hardship if it is costly, compromises workplace safety, decreases workplace efficiency, infringes on the rights of other employees, or requires other employees to do more than their share of potentially hazardous or burdensome work.

What all of this means, essentially, is that employer's are required to accommodate an employee's religion, unless doing so creates an undue hardship and it cannot cause more than a minimal burden on the operations of the employer's business.  What works against ExpressJet in this case is the fact they had granted Stanley's accommodation and it appears to have not created any undue hardship and to have been de minimis and was only revoked in response to a coworker's complaint.  What ExpressJet will have to argue is that the accommodation was serving as an undue hardship, which may or may not be easy to do--it will depend on the unique and particular facts.

Many have and will argue that Stanley ought to take another job or that she is being unfair in suddenly requiring an accommodation in the middle of employment.  However, the law does not require an employee to have to choose between their religion and their job IF the employer can reasonably accommodate the position and that is precisely the focus of the charge Stanley has filed and which her attorney is fighting.  Should Stanley lose this charge or subsequent lawsuit, then she will probably have to choose between serving alcohol or taking another position.  But, for now, she is making a valid argument that ExpressJet can accommodate her religion so that she may continue to serve as a flight attendant.  (I have a hunch the case will settle).

Wednesday, September 2, 2015

Wisconsin Unemployment and "Misconduct" vs "Substantial Fault"

For decades, in Wisconsin, whenever an employee was discharge (i.e., "fired," "terminated") from their job and applied for unemployment benefits, the inquiry was whether the employee (the "claimant") engaged in "misconduct."  The term "misconduct" is a legal term that was addressed in the seminal case of Boyton Cab Co. v. Neubeck, 237 Wis. 249, 259-60, 296 N.W. 636 (1941).  I discussed that case in an old post that can be found here.

Over the years, many employers and legislators believed that it became more and more difficult for employers to meet their burden and show misconduct and beginning on January 5, 2014, the State began considering a two-tier standard for disqualifying claimants who are discharged. A claimant is now disqualified if they are discharged for misconduct or for "substantial fault" connected with the employment.  As is true with any new language or change in the law, how this is to be interpreted in unemployment cases is still developing.

As amended by 2013 Wis Act 20, Wis. Stat. § 108.04(5g)(a) defines substantial fault as:
those acts or omissions of an employee over which the employee exercised reasonable control and which violate reasonable requirements of the job but shall not include:
1. Minor infractions of rules unless such infractions are repeated after a warning was received by the employee,
2. inadvertent mistakes made by the employee, nor
3. Failures to perform work because of insufficient skill, ability, or equipment.

As explained on the Department of Workforce Development's website:
An employee’s behavior may be substantial fault when the employee violates a requirement of the employer but the violation does not rise to the level of misconduct. Substantial fault does not include: minor violations of rules unless the employee repeats the violation after warning, unintentional mistakes made by the employee or not performing work because the employee lacks skill, ability, or was not supplied the equipment.
More than a year has passed since the Act 20 provisions were applied and there are ZERO cases on the Labor and Industry Review Commission's (LIRC) website discussing this standard.  Thus, at best, claimants ought to do their best to show the three (3) exceptions listed under Wis. Stat. sec. 108.04(5g)(a), though the burden remains with the employer to show misconduct or substantial fault.

As I always advise potential clients, if you are denied unemployment, or are receiving unemployment benefits and the employer has appealed, it is ALWAYS best to retain an attorney to represent you in these appeal hearings as, even though they are relatively relaxed, they can cost you a lot of money in overpayment and penalties.