When Fantasy Football Impacts the Reality of the Workplace

Many players are deep into fantasy football season, so the question is – are you having fun yet?  Obviously not if you relied upon Antonio Brown or Ben Rothlisberger to carry you to glory, but many supervisors are beginning to feel the effects fantasy football can have on the workplace.  Let’s talk about some of those here:

Goodbye Monday Morning!

Needless to say, productivity is not as high for employees on most Monday mornings, but this is only further exacerbated as team “owners” spend the morning recounting the weekend results with other league members.  Or people are just spending the first hour of their day looking at the week’s results, praying for some result on Monday night, and setting their team up for the next week.

While most employment policies don’t reference fantasy sports, policies on the use of Company resources for personal matters apply, and you can continue to hold people accountable for their deliverables regardless of how their team is performing.  Just make sure you’re not the one creating the problem yourself.

The Problem Boss

Because sometimes, it is the boss that creates the issues.  When supervisors pressure people to play (especially when a buy-in is involved), talk trash constantly about team performance, and let fantasy invade reality, it can be a concern.  Issues may also be exacerbated when a former peer is now a supervisor due to a recent promotion.

This can be a good time to remind supervisors that they are in that role at all times – they don’t get a pass when they put their fantasy team hat on.  A lack of judgment in this setting can have ramifications for the Company, so keep that in mind.  Training, mentoring, and coaching for newly appointed supervisors can be critical to ensuring professional conduct and positive performance.  And if you are the boss who wins, just remember to use those winnings for an end of the season party for everyone.

The Boys Club

Most fantasy football office leagues get set up by dudes asking other dudes to participate.  This can be an issue where certain team members are left out, so remember that office leagues should be open to everyone in the office.  If the league is gathering for a watching party, consider inviting everyone even if they will spend the evening rolling their eyes over the latest debate about which team got an unfair outcome that week.  This is especially true when any supervisors are involved, as there is some potential for Company ratification of the league.  When in doubt, just think about my old colleague Michelle – she’s not only a mother, but also a vegan – and despite the obvious disability of being a UCLA and New York Giants fan, she was able to have a dominant run in quite a few leagues.

Personnel Fouls

Needless to say, some people take fantasy football much too seriously.  They never let up on talking trash; they threaten bodily harm when the commissioner voids a trade; they have that inappropriate team name that they have way too much fun with all year.   Any of these things can cause problematic issues in the workplace, and you once again need to look to your other policies and make sure to enforce them.  Anti-violence, anti-harassment, and anti-discrimination policies can all be implicated during the fantasy football season, and employers should not consider misconduct in this forum to be out of sight, and out of mind.

Dollars and Cents

What happens when the loser doesn’t pay up?  Everyone has good intentions, but by the end of the season Johnny’s team falls flat; he’s stopped paying attention; and he may not want to pay the $20 so Jill can celebrate her victory.  In a work league, the commissioner will often reach out to the Company for help in collecting – which always creates a slippery slope of employer involvement.  Companies should steer clear of these disputes, and should not provide contact information for departed employees regardless of whether they win or lose.

The bottom line is that fantasy football can be a great employee bonding event, but employers should tread carefully.  Just keep a few things in mind for a successful fantasy season:

  • Follow your policies;
  • Consider prohibiting employees from using Company equipment and property, such as computers, email, televisions, copiers and printers, for fantasy football leagues if the workplace disruption appears to be getting out of hand;
  • Supervisors should always act like supervisors; and
  • Don’t draft any Dolphins.

Dozens of employment class actions have been filed against employers with operations in Illinois for alleged violations of the Illinois Biometric Information Privacy Act (BIPA).  Those suits relate primarily to the failure to provide required notice to employees and obtain their consent in connection with the collection and use of employee fingerprints for timekeeping systems.  Other states, such as New York, also prohibit the fingerprinting of individuals as a condition of securing employment or continuing employment, but the Illinois BIPA is far broader in regulating employers’ collection and storage of biometric information.

In Rosenbach v. Six Flags Entertainment Corp., a widely anticipated decision addressing the circumstances under which an employee has standing to bring a BIPA claim, the Illinois Supreme Court held that an individual does not need to allege actual injury, beyond a violation of his or her rights under BIPA, to be entitled to seek statutory damages. Simply failing to comply with BIPA’s requirements could result in litigation by affected employees and customers.  Thus, a “no harm” defense is now a non-starter for violations under the BIPA.

In an opinion staunchly portraying individuals’ right to privacy in and control over their biometric data under BIPA, the Illinois Supreme Court decided that this “no harm needed” result is intended by the law to give companies the strongest possible incentive to conform to their biometric privacy obligations and prevent problems before they occur.

While BIPA isn’t new law, given the increasing use of biometric data, BIPA’s private right of action, and the Rosenbach finding that plaintiffs don’t have to demonstrate actual harm, employers’ exposure to lawsuits and damages under the law will increase. Moreover, as local and global legislators continue to focus on individual privacy rights, including biometric privacy rights, employers will have to pay attention to developments in the law that  regulate their handling of biometric data.

Workplace Privacy Landscape

In the United States, no one law provides an overall framework for the privacy of personal information in the workplace. There is a patchwork of federal laws that protects certain employee information, such as health-related information and credit histories. For example, the Health Insurance Portability and Accountability Act (HIPAA) and the Genetic Information Nondiscrimination Act (GINA) impose confidentiality obligations on most employers when it comes to employees’ health-related information. Employers using consumer reporting agencies to gather the credit history of an employee must follow the notice, disclosure, and consent requirements established by the Fair Credit Reporting Act (FCRA).

Otherwise, in the US an employee’s right to privacy in the employment context is largely based on state law. For example, states have enacted laws regulating drug and other pre-employment testing, e-mail and phone call monitoring, personnel files access, the use and disclosure of social security numbers, and security breach notifications.

California recently passed a comprehensive consumer privacy law (the California Consumer Privacy Act (CCPA), effective January 1, 2020), granting consumers rights over their personal information (including biometric information) and imposing data protection duties on companies conducting business in California. While the CCPA does not directly address employee or job applicant personal information, its broad definition of consumers suggests that it could have an impact in the workplace.

The privacy landscape is a bit different outside of the US, but also is transforming. For example, last year, European Union data protection legislation faced huge change. Effective May 28, 2018, the General Data Protection Regulation (GDPR) provides a harmonized framework for the protection of personal data in the EU. The GDPR can apply to businesses located outside the EU also. The GDPR strengthened individuals’ rights to control their personal data, and requires those processing personal data to, among other things, have a lawful basis for processing personal data, notify and inform data subjects about their processing activities, and comply with obligations around accuracy, retention, disclosure and disposal of personal data. Personal data protected by the law encompasses a wide range of information including, personal details, family details, education and training, employment details and medical details. Biometric data is among the GDPR’s “special categories” of personal data which may be processed only if a separate, specified lawful justification is established.

You can read more about the CCPA and the GDPR on our Privacy Matters blog.

Illinois Biometric Information Privacy Act (BIPA)

BIPA was passed in 2008, but as the use of biometric information increases, it has received more attention. BIPA regulates the “collection, use, safeguarding, handling, storage, retention, and destruction of biometric identifiers and information.” Biometric identifiers include things such as retina or iris scans, fingerprints, voiceprints, or scans of hand or face geometry. Biometric information is information based on an individual’s biometric identifier used to identify an individual.

In addition to complying with rules on disseminating, safeguarding, retaining and destroying biometric data, under BIPA, Illinois companies have to take the following steps before collecting anyone’s biometric data or information:

(1)    provide written information that biometric information is being collected or stored;

(2)    provide written information of specific purpose and length of term for which biometric information is being collected, stored, and used; and

(3)    receive a written release.

In recent years, the plaintiff’s class action bar has focused increasingly on bringing class actions under statutes such as BIPA, i.e., statutes that allow for an award of statutory damages. BIPA allows a person “aggrieved” by a violation of the law to recover, for each violation, liquidated damages or actual damages, reasonable attorneys’ fees and costs, and obtain other relief, including an injunction.

Rosenbach v. Six Flags Entertainment Corp.

In Rosenbach, the Illinois Supreme Court answered what it means to be “aggrieved” under BIPA, stating that a failure to comply with one of the requirements of BIPA “constitutes an invasion, impairment, or denial of the statutory rights of any person or customer whose biometric identifier or biometric information is subject to the breach. . . . The violation, in itself, is sufficient to support the individual’s or customer’s statutory cause of action.”

The defendant in Rosenbach sold season passes to its amusement park using a fingerprinting process. To complete the sign-up process for a season pass, when the plaintiff visited the park, he was asked to scan his thumb into the defendant’s biometric data capture system. However, when collecting the thumbprint, the defendant did not provide the requisite information or obtain a release. The court found that alleging this non-compliance was enough for the plaintiff to seek relief under BIPA.

The court weighed the cost of compliance for a business against the harm to individuals, and found strongly in favor of protecting individuals’ privacy rights, stating:

“Compliance should not be difficult; whatever expenses a business might incur to meet the law’s requirements are likely to be insignificant compared to the substantial and irreversible harm that could result if biometric identifiers and information are not properly safeguarded; and the public welfare, security, and safety will be advanced. That is the point of the law. To require individuals to wait until they have sustained some compensable injury beyond violation of their statutory rights before they may seek recourse, as defendants urge, would be completely antithetical to [BIPA’s] preventative and deterrent purposes.”

Biometric Information is Special

Companies are using biometric data, such as retina scans, fingerprints, and face or voice recognition, more often due to technological advances.  For example, this data is being used to track employee time and for building and device security (e.g., biometric authentication to enter a building or access work tablets, laptops, and smart phones). At the same time, laws regulating the handling of biometric information are gaining steam among US state legislators.

In 2008, with BIPA, Illinois was the first state to enact a biometric privacy statute. BIPA explains that “[b]iometrics are unlike other unique identifiers that are used to access finances or other sensitive information”, that “[b]iometrics are biologically unique to the individual; therefore, once compromised, the individual has no recourse [and] is at heightened risk for identity theft,” and the “full ramifications of biometric technology are not fully known.”

After BIPA, two other states (Texas and Washington) passed laws specifically governing the handling of biometric information.

The Texas law, the Capture or Use of Biometric Identifier Act (CUBI), went into effect in 2009. CUBI restricts companies from capturing biometric information for a commercial purpose unless the individual was informed and consented to the information’s capture. Uncooperatively, CUBI does not define “commercial purpose,” but, for example, capturing biometric data to pay employees may be a commercial purpose. CUBI specifically recognizes, however, that biometric identifiers may be collected “for security purposes by an employer.” The law also requires a companies use reasonable care to “store, transmit, and protect from disclosure” biometric information, and it restricts the sale or disclosure of biometric information.

The Washington law went into effect in 2017. Like CUBI, it only applies to biometric information used for a commercial purpose. The Washington law, however, does define “commercial purpose” to mean the sale or disclosure to a third party for the purpose of marketing goods or services, and excludes a security or law enforcement purpose. In Washington, a person cannot enroll a biometric identifier in a database for a commercial purpose, without first providing notice, obtaining consent, and providing ways to prevent the successive use for a commercial purpose.

Unique aspects of the Illinois law, compared to the Texas and Washington laws, include that it is not limited to commercial activities, and it allows a private right of action, which give an individual the right to sue in a civil litigation. There is no private right of action under the Texas or Washington biometric privacy laws.

Other states have also considered biometric data laws, which require notice and information on collection and use, require consent, restrict disclosure, and regulate confidentiality, retention, and disposal standards. Laws like this have been considered in Alaska, Connecticut, Massachusetts, Montana, and New Hampshire. Further, in the last several months, legislators in Florida and New York City have also proposed laws on the collection and use of biometric data similar to BIPA, including its feature of a private right of action.

Going Forward

Laws like BIPA will become more relevant to businesses and employers that increasingly use biometric data, for example, when using fingerprint scans for timekeeping. While employers may be familiar with their obligations under HIPAA and the FCRA, and new laws like GDPR and the CCPA have garnered much attention and discussion, employers must watch out for other laws regulating employee privacy in the jurisdictions in which they operate, and monitor developments in this area. More regulation of biometric data is likely due to an increasing use of biometrics and the potential harm if this data is compromised.

In particular, companies operating in Illinois and using biometric data will have to ensure they understand and comply with their obligations under BIPA, since simply failing to comply with any of the law’s requirements could result in litigation. Following the Rosenbach decision, there should be an increase in litigation under BIPA because plaintiffs will not have to demonstrate actual harm to survive a motion to dismiss. Failing to explain how biometric data will be stored and collected, to notify in advance of collecting biometric data, or to obtain consent in writing to the collection, use or storage of biometric data exposes companies to these lawsuits.

#TimesUp For Your Representations and Warranties

In late 2017 and throughout 2018, the world watched the careers of several top executives topple.  Once considered titans of their industry, these individuals were ensnared by allegations of sexual harassment.  In their wake, the #MeToo movement arose and has permanently shifted public sentiment and empowered alleged victims to come forward in droves.  For fiscal year 2018, the EEOC reported a 13.6 percent increase in sexual harassment charges and a 50% increase in lawsuits that the EEOC filed for sexual harassment as compared to 2017.[1]  We expect the number of claims being filed to continue to rise.

Victims are not the only ones speaking out.  There has been a recent rise in shareholder derivative actions alleging breach of fiduciary duties by companies by condoning the actions of executives in perpetrating sexual harassment (and sometimes paying these executives generous

exit packages on their way out).  In their latest campaign for improved corporate governance, shareholders argue that these actions are costly to companies and expose them to future litigation.  While the outcome of these cases is far from clear given the relatively high standard of deference given to the businesses under the business judgement rule, what is clear is that these suits bring unwanted attention and reputational damage to companies by shining a light on how they handle allegations of sexual harassment.

Meanwhile, our lawmakers also have been busy at work and have enacted a flurry of #MeToo legislation aimed at protecting victims of sexual harassment.  These laws have popped up across the country and include: mandatory sexual harassment training for employees, restrictions or prohibitions on the enforceability of confidentiality provisions, and banning the use of mandatory arbitration agreements for claims of sexual harassment.

With the changing landscape, employers must also adapt the way that they think about and deal with allegations of sexual harassment. Savvy employers are not being complacent.  We recently have seen employers:

  • review their internal policies and practices when dealing with allegations of sexual harassment – including their non-disclosure agreements, employment agreements and settlement agreements;
  • institute sexual harassment training for employees – even where there is no legal requirement to do so; and
  • update the language of their executive employment agreements – in particular, provisions relating to terminations for cause to explicitly include sexual harassment and sexual misconduct as a basis for such termination and thereby rendering the executive ineligible for severance and other benefits.

Going beyond this, there are two additional tools for companies to add to their arsenal – this time within the context of corporate transactions:

  1. increased focus on social due diligence; and
  2. adding #MeToo representation to deal agreements.

Social Due Diligence

Employment related diligence traditionally has focused on “big-ticket” items such as potential wage and hour violations (whether it be classifying contractors correctly, getting employee overtime exemptions right or failing to provide meal or rest periods), issues related to unions and collective bargaining, and benefits compliance (in particular when it comes to things like pensions).

In conducting diligence, companies typically ask for the target’s policies and pay practices, offer letter and other employment-related agreements, information relating to employee complaints, terminations and litigation, and so on.

In addition to the above, buyers are advised to take a closer look at potential social and reputational risks associated with sexual harassment claims.  In particular, companies should ask the target for:

  • details on specific HR processes that are undertaken when an employee raises a complaint;
  • any complaints of sexual harassment, specifically in relation to executives;
  • steps the target has taken to combat sexual harassment;
  • internal investigation reports and outcomes;
  • feedback from employees who have exited the company;
  • data on employee attrition – if the target has a high attrition rate as compared to the industry or among certain types of employees this could signal a potential problem.

#MeToo Reps

The representation and warranties section of a deal agreement contains statements from one party to the other asserted to be factually correct and intended to induce the other party to enter into the agreement.  Warranties are a promise of an indemnity if the representations are not true.

Within the context of employment, share-sale and merger agreements typically represent that a company has been in material compliance with the law, that employment related claims have not been instituted against the company, and so forth.  Now it is becoming more common for buyers to seek representations from the seller about sexual harassment claims.

Here are a few variations of what we have seen these look like in practice:

(1) The addition of “sexual harassment” to the laundry list of employment laws that the seller represents that they are in compliance with as of a certain date.

(a) Except as has not had and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, the Company and its Subsidiaries are, and since January 1, 2017 have been, in compliance with all Applicable Laws relating to labor and employment, including those relating to labor management relations, wages, hours, overtime, employee classification, discrimination, sexual harassment, civil rights, affirmative action, work authorization, immigration, safety and health, information privacy and security, workers compensation, continuation coverage under group health plans, wage payment and the payment and withholding of taxes.

– Bristol-Myers Squibb Company and Celgene Corporation merger; January 02, 2019.

(2) Requiring the seller to represent that a specific set of individuals (in the example below, officers and members of the board and employees at the Vice-President level or above) have not been subject to allegations of sexual harassment or sexual misconduct or the seller has not entered into a settlement agreement relating to such allegations by those individuals.

(e) From January 1, 2015 through the date hereof, except as would not individually or in the aggregate be expected to have a Material Adverse Effect, (i) no officer of the Company, member of the Company Board, or employee of the Company or any of its Subsidiaries at a level of Vice President or above (each, a “Covered Person”), has been the subject of any sexual harassment or other sexual misconduct allegations during and related to his or her tenure at the Company, and (ii) the Company has not entered into any settlement agreement related to allegations of sexual harassment or sexual misconduct by any Covered Person.

– GlaxoSmithKline plc tender offer for TESARO, Inc.; December 3, 2018

(3) Requiring the seller to represent that it has investigated all allegations of sexual harassment that it was made aware and taken appropriate action.

(f) The Company and each of its Subsidiaries has promptly, thoroughly and impartially investigated all sexual harassment allegations of which it is or was made aware. With respect to each such allegation with potential merit, the Company or its Subsidiary has taken prompt corrective action that is reasonably calculated to prevent further harassment. The Company does not reasonably expect any material liability with respect to any such allegations.

– Virtu Financial, Inc. and Investment Technology Group, Inc. merger; November 6, 2018

Thinking about Next Steps for Buyers

Before deploying these tactics, buyers are wise to think about potential implications and next steps.

If diligence reveals that the target has an issue with sexual harassment and the deal goes through, the buyer must be prepared to take steps to remediate since it now is aware that it has acquired a potential problem.

Careful consideration should be given to what remedy to seek and how damages will be calculated in the event that the seller made a misrepresentation.  This is especially tricky as it is difficult to quantify potential legal liability within the context of sexual harassment claims, which in this day and age come with potential reputational damages.

Sellers Should take Action, Too

Sellers should not wait idly until confronted with this issue.  The proactive seller can and should  take steps to protect their interests as well.  One thing sellers can do as a matter of good housekeeping is conduct pre-diligence before a sale negotiation even starts.  This  not only will allow sellers to take mitigating steps if they uncover any potential issues related to sexual harassment but also put sellers in the best position to respond to prospective buyers if and when asked about these issues.

[1] https://www.eeoc.gov/eeoc/newsroom/wysk/preventing-workplace-harassment.cfm

            The title may be what every little kid learns (and an underappreciated classic by the Jackson 5), but per usual California is different.  Many California workers may find their employment status shift as a result of a recent decision by the California Supreme Court which significantly expanded the universe of workers likely classified as employees instead of independent contractors.  This change may leave some workers toe-tapping and singing “do, re, mi;” however, others may not share a similar glee over the potential change.  True, the shift in status would mean that these workers would be entitled to additional protections and benefits, such as paid vacation, sick leave, health insurance and unemployment benefits, but like most things in life, it comes with a price… their freedom.  The autonomy and freedom that independent contractors enjoy is highly valued and is one of the reasons these types of jobs (particularly in the gig economy) have become quite popular.  This freedom could vanish soon due to the new “ABC test” in California which makes it harder for employers to show that workers qualify as independent contractors for purposes of California wage orders.

            The landmark decision, Dynamex Operations West, Inc. v. Superior Court of Los Angeles, came down on April 30.  Much like Max Richter’s Sleep, the decision is not brief.  In 82 pages, the Court reinterpreted and bid adieu to the multifactor Borello test it had been using for nearly three decades to determine employee status.

D is for Dynamex

            Instead of throwing their hands up in the air, saying “Ayo! Gotta let go,” two individual Dynamex delivery drivers sued on their own behalf and on behalf of a class of alleged similarly situated drivers.  The drivers claimed that Dynamex allegedly misclassified drivers as independent contractors, and as a result, that Dynamex had allegedly engaged in unfair and unlawful business practices under Business and Professions Code section 17200.

S is for Supremes

            Rather than “keep [us] hanging on,” the California Supreme Court granted review to clarify the standard for determining employee or contractor status in the wage order context.  The Court began the opinion with a broad characterization of the misclassification of independent contractors as harmful and unfair to workers, to honest competitors, and to the public as a whole.  The Court provided a long and detailed analysis of the relevant case lineage – carefully analyzing previous case law, and then applied the “ABC test.”

California’s ABC’s

            Using the ABC test for worker classification is not new.  Approximately half of all states use variations of this test to evaluate employment relationships.  Under the ABC test, a worker will be deemed to have been “suffered or permitted to work,” and therefore, an employee for wage order purposes, unless the putative employer proves:

(A)       that the worker is free from the control or direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact;

(B)       that the worker performs work that is outside the usual course of the hiring entity’s business; and

(C)       that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

            Each of these requirements must be met in order for the presumption that a worker is an employee to be rebutted.

I is for Impact

            Worker classification is of considerable significance to workers, businesses, and the public generally.  Employers bear the responsibility of paying Social Security and payroll taxes, unemployment insurance taxes and state employment taxes, providing workers’ compensation insurance, and complying with the seemingly endless state and federal statutes governing the wages, hours, and working conditions of employees.  Many businesses, particularly those operating in the gig economy, are premised on the use of independent contractors due to the benefits associated with using such workers, such as lower labor costs and increased staffing flexibility, including the ability to more quickly react to changing business needs.

W is for Wipeout

            The Dynamex decision could seriously disrupt the gig economy and has the potential of “wipin’ out” many benefits companies rely upon in utilizing independent contractors.  It could also impact the benefits workers enjoy as a result of their independent contractor status.  As previously noted, gig workers have a tremendous amount of flexibility in hours and pay.  Earning capacity is directly tied to the amount of work an individual decides to take on and can vary from day to day.  Time truly is money in the gig economy.  Additionally, gig work is constantly varied – both in the type of work one can do and in the type of people one will meet.  Gig workers are free to take vacations whenever they want because there is no expectation of their availability.   This freedom and flexibility allows gig workers to focus on their families and friends as well as hobbies and pastimes – something that the traditional workplace may not afford.  Gig workers are also able to see what it is like to run their own business but have somewhat of a safety net.  This fosters entrepreneurship and creativity.  Whether Dynamex will wipe this all out remains to be seen.

E is for Epic

            There is not just doom and gloom here for employers though.  On May 21, 2018 in Epic Systems v. Lewis, the Supreme Court of the United States ruled that courts must enforce individual arbitration clauses in employment contracts and upheld the enforceability of arbitration agreements containing class and collective action waivers of wage and hour disputes.  While not a complete solution to the problems the “ABC test” may cause California employers, it does provide companies with a significant tool to prevent class or collective litigation over classification disputes.  In fact, Epic was recently relied upon in a consolidated misclassification case before the Ninth Circuit (arguing that the drivers should honor the arbitration clauses and submit their individual disputes to arbitration), and in upholding the arbitration clauses, the Ninth Circuit appears to be marching to that same Epic drum.

The Labor Dish recently addressed the rapid rise of remote working arrangements amongst U.S. employees.  Although “OUT OF SIGHT, BUT NOT OUT OF MIND” touched on the many benefits that come from such arrangements, it also detailed various wage and hour concerns unique to employees working from home, and how employers should begin to navigate these issues.  Just getting payroll in order, however, will not solve all the problems facing employers with telecommuting employees.  Things are a bit hairier, so to speak, and from house pets to home invaders, there are various health and safety issues employers must consider.  The following addresses some of these issues, and also the ways in which remote working arrangements can help employers better “weather the storm,” when it comes to health and safety.

Workers’ Compensation

It is common knowledge that employers have a duty to create a safe working environment and may be liable for employee injuries or illnesses that occur “on the clock.”  Employers may not be aware, however, that they also must create safe working environments for employees working remotely, and that such employees may be eligible for workers’ compensation benefits for injuries or illnesses that occur while working away from the office, such as in their own homes.

In order to limit safety issues, and potential liability, employers should consider requiring all employees that work remotely to sign an agreement that:

  • Describes the employee’s specific job duties;
  • Details the employee’s work hours and break periods;
  • Requires the employee to designate an area, such as a home office, as his or her specific working environment;
  • Explains activities prohibited during work hours, including the supervision of any children under 12 years old, or other children or adults needing assistance;
  • Explains that at no time will workers compensation benefits be available to any other third parties that may get injured or become ill in the specified working environment; and
  • Outlines the reporting procedures for any job-related injuries or illnesses, which emphasizes that all reports should be made as soon as possible.

These terms of remote working arrangements, some of which may also be useful in avoiding wage and hour pitfalls, help draw clearer lines between when an injury or illness simply occurs in an employee’s home, and when they arise out of and in the course of employment.

Taking these measures, employers may avoid liability in some unusual circumstances.  For example, in 2011 an Oregon appeals court found an employer liable for the injuries of an employee who tripped over her dog walking to her own garage, where she regularly worked.  The court explained that she was walking to the garage solely to perform a work task, and therefore the injuries arose out of and in the course of her employment.  Sandberg v. JC Penney Co., 260 P.3d 495 (Or. App. Ct.  2011).  Conversely, a Tennessee court did not find an employer liable for the injuries a remote employee sustained during a third party assault, while she was preparing lunch in her home, where she had an employer-approved office.  There, although the injuries occurred during the course of her employment – she was engaged in a permissible break, in a place where her employer reasonably expected her to be, and she was not engaging in prohibited conduct, among other reasons – the court found that the injuries did not arise out of her employment due to the lack of causal connection between her employment and the third party assault.  Wait v. Travelers Indem. Co., 240 S.W.3d 220 (Tenn. 2007).

OSHA

The Occupational Safety and Health Act (“OSHA”), and its corresponding safety and health regulations, also provides that working environments must be safe for employees.  Beyond this, OSHA requires that most employers with more than 10 employees properly record certain work-related injuries and illnesses.  The regulations make clear that this requirement extends to employees who work from home, “if the injury or illness occurs while the employee is performing work for pay or compensation in the home, and the injury or illness is directly related to the performance of work rather than to the general home environment or setting.”  29. C.F.R. § 1904.5(b)(7).  For reference, 29. C.F.R. § 1904.5(b)(7) provides the following examples:

  • Work related injuries:

o    An employee drops a box of work documents and injures his or her foot.
o    An employee’s fingernail is punctured by a needle from a sewing machine used to perform garment work at home, becomes infected and requires medical treatment.

  • Non-work related injuries:

o    An employee working at home is electrocuted because of faulty home wiring.
o    An employee is injured because he or she trips on the family dog while rushing to answer a work phone call.  But see, JC Penney Co., 260 P.3d 495 (finding a remote employee eligible for workers compensation benefits, after she tripped on her dog while performing work-related tasks at her home).

As stated above, to ensure OSHA compliance, and to reduce the risk of potential liability, employers should provide telecommuting employees with clear guidelines regarding workplace injuries and illnesses, and also all applicable reporting procedures.

Benefits: Weathering the Storm

Despite the apparent minefield of health and safety risks employers need to navigate when allowing employees to telecommute, these arrangements can also provide benefits in this arena.  For example, natural disasters – such as Hurricane Sandy in 2012, which, according to official New York City reports, flooded approximately 23,400 businesses in the city –  can be devastating on employers, if an entire workforce is grinded to a halt during recovery efforts.  If employees can telecommute, however, then an employer may be better equipped to “weather the storm,” and keep at least some operations afloat.  Further, something as simple as a contagious stomach bug can be better contained and not threaten to take out entire collaborative teams, if at least some employees work remotely.

Introduction

             The #MeToo movement is a worldwide phenomenon.  Since October 2017, the hashtag has trended in at least 85 countries, and in dozens of languages—for example, #YoTambien in Spanish, #MoiAussi or #BalanceTonPorc in French, #QuellaVoltaChe in Italian, #Ятоже in Russian, גםאנחנו# in Hebrew, and أنا_كمان# in Arabic. 

             As the #MeToo movement gains momentum, global employers must recognize that the likely increase in complaints won’t be limited to the US,[1] given that about two-thirds of countries around the world have laws that prohibit workplace sexual harassment.[2]  This article highlights some of the many anti-sexual harassment laws around the globe, offers “best practice” tips for creating a harassment-free workplace culture outside the US, and examines how to conduct a thorough investigation if a global employer finds itself facing a sexual harassment claim, especially in light of onerous data privacy laws and limited attorney-client privilege outside the US.

  1. First Thing’s First: Make Best Efforts to Avoid a #MeToo Moment

             No employer wants to be the next #MeToo cover story, and so, as the old adage goes, an ounce of prevention is worth a pound of cure.  In this case, preventive medicine includes implementing and following anti-sexual harassment policies and making sure all employees are aware of them — and providing sexual harassment training to all employees.  While these are good practices generally, such practices may be legally required in some countries.  For example, Belgium, France, India, Japan, the Netherlands, and some provinces in Canada (including Ontario, Saskatchewan, and Manitoba) require employers to implement anti-sexual harassment policies.  And employers must provide broader anti-harassment training to employees in India, South Korea, Taiwan, and some provinces in Canada (including Ontario and British Columbia).

             Employers who fail to comply with these requirements can face serious consequences.  In many countries, victims can sue employers and hold them liable for their employees’ unlawful actions.  The good news is that employers can protect themselves by making sure all employees are aware of prohibitions on sexual harassment — thus reducing the chances of harassment occurring in the first place.  What is more, in the event that an employee does engage in harassment, employers should be able to identify the steps they have taken to educate and protect their workforce, including through the use of anti-harassment policies and training.

  1. In the Event of Harassment Allegations, Investigate All Complaints

             Whether located in the US or abroad, most companies have good intentions when it comes to creating a harassment-free workplace.  But what specifically should companies do when faced with a sexual harassment complaint outside the US?  As in the US, the first step will generally be to promptly investigate the allegations.  In fact, some countries — including Austria, Chile, Costa Rica, India, Japan, and South Africa — expressly require employers to investigate sexual harassment complaints.  Countries such as Chile and India have laws that enumerate specific  minimum requirements for investigations, including the maximum number of days employers can take to complete investigations and make decisions based on their findings.

             Along the way, investigators must navigate numerous pitfalls to uncover the truth behind any harassment allegations while best protecting the company.  These pitfalls are both more numerous and more involved in the context of global investigations, where the relevant employees, allegations, and documents might span several countries and various different laws.  For instance, some countries (e.g., India and France) require companies to consult with certain employee representative groups.  In India, companies must have internal complaints committees to investigate sexual harassment complaints, and in France, companies must consult with a health and safety committee with respect to harassment investigations.  In practice, this means investigations can drag on for weeks before the employer can finally resolve the claims.

A.             Determine the Scope of Attorney-Client Privilege

             Attorney-client privilege is a critical component of many US-based investigations. However, when conducting a global investigation, companies should determine whether and how the attorney-client privilege applies to communications made during the investigation.  Generally, common law countries such as the UK, Australia, Canada, New Zealand, Hong Kong, India, and Singapore recognize the privilege, though they may interpret it and apply it differently than US courts do.  In India, for instance, the privilege exists for outside counsel but not for in-house counsel.

             On the other hand, most civil law countries across the EU, Middle East, and Asia Pacific do not have an attorney-client privilege equivalent, although they do generally require attorneys to maintain the confidentiality of client communications.  For more information on attorney-client privilege around the globe, visit the DLA Piper Privilege Handbook, available here.

             Often in global investigations, documents or information are sent from one country to another, whether because the actors are spread across various countries (e.g., where a regional manager is accused of harassing employees in various countries in his/her territory) or simply for ease of review.  However, companies must take into account that documents protected in one country may be subject to production in another country if they are sent there.  Let’s say counsel is conducting an investigation abroad, in a country that does not recognize attorney-client privilege.  Should he or she still give an Upjohn-like warning to employees being interviewed?  If there’s any chance that the matter may be litigated in the US, then the answer is yes, in order to preserve the privilege here.    

B.             Consider the Impact of Data Privacy Laws outside the US

             When conducting internal investigations, companies and their counsel must also consider data privacy issues.  More than 100 countries around the world have data protection laws that give employees certain rights with respect to their personal data, including the right to notice regarding the types of personal information that a company might obtain, how it will use that data, and to whom the data will be disclosed; the right to consent or refuse consent to the collection, use, and sharing of that data; and the right to correct erroneous data.  Data protection laws also set out requirements for and limits to collecting personal information and sharing with third parties and outside of the country.  These rules apply when conducting investigations and sharing the results of the investigations.

             The most talked about data protection law right now is the EU’s General Data Protection Regulation (GDPR), which took effect on May 25, 2018.  GDPR requires employers to have a legal basis or good reason to collect, use, or share personal information.  Potential legal bases include:

  • the processing is necessary for the company to comply with a EU legal obligation (a US statute or regulation would generally not be sufficient);
  • the processing is necessary for the purposes of legitimate interests of the company or of a third party to whom the data are disclosed, except where the individual’s interest in his or her fundamental rights and freedoms override those interests;
  • the processing is necessary to perform a contract to which the individual is party (e.g., the employment contract); or
  • the individual has unambiguously consented to the processing (though beware that express consent can be freely revoked at any time under GDPR).

             Further, the GDPR imposes restrictions on sharing personal information outside the European Economic Area (EEA).  Importantly, the European Commission has determined that the US does not provide adequate protection for personal information, so companies will be limited in their ability to transfer personal data into the US, which can present logistical nightmares for global companies headquartered in the US.  As such, companies with workforces in the EU should take the following steps as soon as possible and in any event before obtaining, using, or transferring personal information:

  • update privacy notices, which must include, among other things: a description of the categories of personal data that the company will process, the purposes for which the personal data will be processed, information about third-party transfers, legal grounds for the transfer, whether there will be a transfer to countries outside the EEA that do not provide adequate protection (e.g., US), and that the employee has the right to withdraw consent and to file a complaint with the supervisory authority;
  • update privacy policies and procedures;
  • create or update intra-group data transfer agreements;
  • provide employees with data privacy training; and
  • if non-EEA countries are in scope, implement additional safeguards (e.g., model contract clauses).

             Of course data privacy considerations are not limited to GDPR and the EU, and companies should be aware of data privacy rules in any jurisdiction where they have employees.

C.             Consider Public Relations Strategy

             Finally, while not a strict legal requirement, companies also should have a plan of action for when information about investigations abroad is disclosed so they are able to respond quickly and minimize the effects of the negative press.  We are living in a world where information travels rapidly across the world via social media and other online platforms.  For employers, this means that stories about sexual misconduct abroad can easily make it into the morning newsfeed of consumers at home and create a public backlash.  A recent Harvard Business School study found that when people learn about sexual harassment claims being made in an organization, they view the organization as having a cultural problem and being less equitable than organizations engaged in other unlawful acts, including financial misconduct.  The same study found that addressing the allegations in a timely, informative manner that shows consideration for the victim can minimize public backlash.  As such, companies should not neglect their public response to harassment allegations.

Conclusion

             As the #MeToo movement continues to make waves worldwide, the number of workplace sexual harassment complaints is likely to increase in the short term — not just in the US, but globally.  But as companies take steps to  prevent sexual harassment and react appropriately when it does occur, there is real hope that workplace attitudes and cultures will ultimately shift — and the number of complaints may eventually decrease.  Until that time, here are some steps companies can take to limit their liability or legal exposure with respect to harassment claims:

  • understand and comply with local laws governing sexual harassment;
  • update sexual harassment policy to ensure that it clearly prohibits sexual harassment, provides examples of sexual harassment, establishes the scope of the policy and to whom it applies, and contains a clear procedure for reporting incidents that mitigates retaliation against victims of or witnesses to unlawful harassment;
  • provide periodic training to all employees on the company’s sexual harassment policy and create an environment where employees feel comfortable raising concerns;
  • have a protocol in place for investigations so concerns can be addressed in a timely manner. If needed, take remedial actions, including moving the affected employee’s workspace or changing his/her work schedule (if required or if the employee requests such accommodations) to prevent further inappropriate actions by the accused. Also, provide training to professionals conducting the investigation to ensure that investigations are fair and comply with relevant legal standards; and
  • keep victims informed about the timeline of investigations and any remedial measures the company has taken, and advise them to report any ongoing inappropriate conduct. When the investigations end and remedial measures are no longer in place, the company should follow up with all complainants to ensure they are no longer experiencing ongoing harassment and feel safe in the workplace.

             Employers and outside counsel can face many pitfalls when conducting any internal investigation, especially in the case of a global investigation.  However, with preparation, good judgment, and knowledge of local laws, global investigations can be a useful and (relatively) safe tool to make lawful and effective employment decisions following a sexual harassment complaint.

[1] The 50% increase in sexual harassment lawsuits filed by the Equal Employment Opportunity Commission in the United States, along with $23 million in increased recovery since October 2017, provides a cautionary tale for anyone who believes the #metoo movement is slowing down.  https://www.eeoc.gov/eeoc/newsroom/release/10-4-18.cfm

[2] https://ph.ucla.edu/sexual-harassment-explicitly-prohibited-workplace

Wage and Hour Issues Involving Remote Employees

A 2017 Gallup survey found that nearly half of U.S. employees (43%) spend at least a portion of their working time away from their employer’s offices.  This represents a 4% increase since 2012 and a whopping 34% increase from 1995 and the trend appears to only be gaining momentum.  Work-from-home opportunities and flexible scheduling options not only influence a position’s attractiveness to applicants and employees, but also may benefit companies by, among other things, improving employee retention and morale and widening the pool of available employee talent.  There are, however, important potential wage and hour pitfalls that employers should consider when permitting employees to telecommute or work remotely on a full-time, part-time, or occasional basis.

Policies

As an initial matter, any arrangement which permits some or all employees to work remotely should be addressed in the company’s employee handbook or personnel policies.  At a minimum, the handbook should include clear timekeeping policies for non-exempt employees and address guidelines for tracking hours worked, prohibitions on off-the-clock work, and requiring permission before working overtime.

Employers that plan to offer more extensive telecommuting programs should consider implementing policies to address:

  • Who is eligible to telecommute, including, for example, procedures for requesting approval to telecommute and the conditions for telecommuting;
  • Employee responsibilities while telecommuting, such as accessibility during business hours, communication expectations with colleagues and supervisors, secure access requirements and proper protection of company proprietary information while working remotely, and conditions for using company-owned equipment; and
  • Employer responsibilities, such as the availability and extent of technical support for remote employees and reimbursement of any telecommuting expenses.

Payroll

Employers that have remote workers across multiple states must be sure to comply with the payroll laws in each such jurisdiction–not just the laws in which the company’s home office is located.  This requires, at a minimum, knowing the following:

  • The applicable minimum wage;
  • Whether the state exemption overtime calculation laws differ from the federal Fair Labor Standards Act (FLSA);
  • Payday frequency requirements;
  • Requirements as to what information must appear on paystubs, such as paid sick leave accruals; and
  • Laws addressing payment of final wages and payout of accrued, unused vacation.

Note that there can be payroll tax implications when an employee works in a state other than the state in which the company maintains a physical presence.  Generally, under the “physical presence rule,” employees pay taxes in the state in which they render services; however, a minority of states do not follow this rule so employers are advised to contact a tax expert to ensure its compliance with each jurisdiction’s tax laws.

Employee Classification

Employers are sometimes tempted to classify individuals who work remotely as independent contractors or consultants because they assume that they don’t have the requisite physical control for the offsite individual to be an employee; however, that is only one factor in the analysis of whether an individual should be classified as an employee or independent contractor.  Employers need to look beyond the physical location of the individual and analyze how much overall control the employer has over the individual.  This includes, for example, looking at the level of instruction and direction over the work; the degree of integration into the company’s business; the continuity of the relationship; payment of expenses; provision of materials and tools; realization for profit or loss; and exclusivity.  See e.g. IRS 20-Factor Test.  Employers can be subject to significant fines and penalties for misclassifying employees as independent contractors.

Overtime Laws

Employers with telecommuting employees should be sure to avoid potential pitfalls related to compliance with state and local wage and hour laws.  For example, certain states, including California, Pennsylvania, and Oregon, have different criteria for determining whether a position classifies as overtime exempt.  Where applicable state law differs from the FLSA, the stricter state exemption standard must be followed.

Once it is determined that a remote or telecommuting employee is non-exempt under applicable law, the employer must then ensure that it is complying with laws addressing meal and rest breaks and payment of overtime.  For example, a number of states, including Nevada, Alaska, Colorado, and California, require that non-exempt employees be paid overtime on a daily, not just weekly, basis.  Additionally, California has also recently rejected the FLSA’s de minimis doctrine, meaning that employers of California employees cannot generally disregard “insubstantial or insignificant periods of time beyond the scheduled working hours” when recording time worked.  Troester v. Starbucks Corp., 5 Cal.5th 829, 421 P.3d 1114 (Cal. S. Ct. 2018).

The FLSA is clear that non-exempt employees must be compensated for all hours worked, including all work performed at a remote location (see 29 C.F.R. § 785.12); however, time tracking for remote, non-exempt employees can be a more difficult task given that the employee cannot be physically observed in the workplace.  Employers with a sizeable number of non-exempt, remote employees may wish to consider implementing electronic systems for properly tracking hours worked.  Not only does the law require proper tracking, but such systems can be invaluable should the company ever find itself defending against an employee wage claim.  Such a system could include requiring remote workers to log in and out of the company’s computer system when working remotely; engaging task-monitoring devices to monitor URLs and apps accessed; using software that tracks keystrokes, takes randomized screenshots of the remote employee’s computer screen, or otherwise monitors productivity.  Of course, any such monitoring should be appropriately described in the company’s computer and electronic communications policies.  Regardless of whether a company uses a time tracking and/or productivity monitoring system, if it knows or has reason to know that a non-exempt employee is working beyond his or her shift, notwithstanding a policy prohibition from doing so, it must count the additional hours towards time worked and compensate the employee accordingly.  29 C.F.R. 785.12.

In recent years, a number of highly visible companies in jurisdictions that prohibit “use or lose” vacation policies have adopted unlimited paid time off (“PTO”) programs, garnering ample media buzz.  Under such policies, employees can take off as much time as they choose (within reason) as long as they get their job done.  The focus is on producing results, not just logging hours.

Buzz aside, only about 1-2% of employers currently offer such policies – primarily in California due to its generous laws regarding vacation accrual and payout—and, because they are so new, courts and legislatures have not yet opined on them.  The following lays out the legal and practical issues for employers to consider when deciding whether to transition to an unlimited policy.

Benefits of an Unlimited PTO Policy 

  • Cost Savings:
    • There is an argument under current wage and hour laws that employers can avoid payout of accrued vacation upon termination, where applicable, because PTO is “unlimited” and does not “accrue” or “vest.” See e.g., Cal. Lab. Code § 227.3 (where “an employee is terminated without having taken off his vested vacation time, all vested vacation shall be paid to him as wages”) (emphasis added). That being said, there is currently a dearth of case law on this issue and we don’t know whether courts will agree or if legislatures will eliminate this perceived legislative loophole.   While there has not been case law regarding payout of “unlimited” vacation at termination, California has acknowledged the existence of “unlimited” plans as it relates to paid sick leave which indicates an understanding of this concept as something distinct from a traditional accrued vacation plan.
    • Unused, accrued PTO that rolls over each year and is paid out upon separation can be a significant expense on a company’s balance sheet. Indeed, one report estimates that American companies have $224 billion in liabilities on their balance sheets from unused vacation time. That liability can be decreased or eliminated with an unlimited PTO policy.
    • Some studies have shown that unlimited PTO policies may indirectly reduce the cost for other benefits (think health insurance, disability insurance and employee assistance programs) because employees can more easily take time for routine and preventative care.
  • Talent Acquisition Tool: The flexibility that these policies offer may make a company more attractive to top talent, especially to millennials.
  • Reduces Administrative Headaches: In many cases, human resources and payroll staff are relieved of monitoring time off and, in jurisdictions and companies with a “use or lose” policy, the end of the year rush to take unused PTO goes away too.
  • Employee Loyalty: If managed correctly, unlimited PTO may build higher morale and a culture of employee ownership because the policy conveys that the company trusts its employees to manage their time in a way that serves their personal needs while also meeting their obligations at work.

Drawbacks of an Unlimited PTO Policy

  • Not a Good Fit for Every Company Culture: These policies are better suited for results-driven companies that already provide employees with a certain amount of autonomy and flexibility. They are unlikely to be effective at companies where employees must be physically present at the worksite, like retail establishments, restaurants or manufacturing plants. Also, these policies may cause morale problems for more senior employees who may be upset that a junior employee now gets the same vacation time as someone who has been a loyal employee for many years.
  • Too Cumbersome for Non-Exempt Employees: These policies likely won’t make sense if the workforce is heavily comprised of employees paid on an hourly basis who are not exempt from overtime and minimum wage requirements because employers must still track non-exempt employees’ hours worked to ensure compliance with overtime, minimum wage, and meal and rest break laws. Additionally, non-exempt workers are paid based on time worked, not their completion of their work assignments, so the likelihood of abuse is much greater. Companies that otherwise wish to implement an unlimited PTO policy may do so for their exempt employees, while keeping a traditional vacation policy for non-exempt employees.
  • Requires Active Management of Employee Performance: Supervisors must proactively manage employee performance and create and communicate metrics to assess contribution and productivity without simply relying on hours logged at the office. Managers won’t be able to discipline someone for not being in the office, but rather for failing to complete their work, which requires more oversight. And remember, there will be some employees who will abuse this privilege by, for example, creating consistent long weekends through the summer.
  • May Dissuade Employees from Taking Time Off: If employees do not have clear expectations of how much time off is acceptable or if job security is low or employee competition is high, employees may fear taking time off absent a fixed entitlement to do so. This can defeat one of the reasons for providing unlimited paid time off in the first place.
  • Uncharted Territory: As these policies gain popularity, legal issues will arise. Not all companies will have the appetite to adopt a policy that has not yet been vetted by courts and legislatures.

Transitioning to an Unlimited PTO Policy

When making the transition to an unlimited PTO policies, employers should remember:

  • “Unlimited” Should Not Mean “Unmanaged”: It’s imperative to have a clear, written policy addressing: (i) eligibility; (ii) how to request time off; (iii) the rules and guidelines around the benefit (including that sufficient advanced notice is required for planned time off); (iv) that because vacation does not accrue, there will be no payout of PTO upon separation; and (v) that employees must meet their goals and maintain satisfactory job performance to remain eligible for the benefit. Supervisors should discuss with their teams how PTO will be managed so that there is no interruption of service for clients and to minimize headaches for other team members. Discipline under the new policy will be challenging initially and Human Resources should be very involved in these discussions to ensure consistency throughout the organization.
  • Must Comply with Other Legal Obligations: Companies must still comply with their FMLA, ADA, USERRA, paid sick leave, and similar obligations, if applicable. To minimize complications related to leave administration, employers should make clear how these policies interact with an unlimited PTO plan, in compliance with applicable local law. The PTO policy should establish clear limits on how PTO is used, and how long an employee can use it for in a single block of time (i.e., absences of more than 15 consecutive days are not covered by this policy). Remember that leave statutes and ordinances have anti-retaliation policies, so companies must be consistent in how the PTO use limits are applied.
  • Plan for the Transition: Companies transitioning away from a traditional PTO plan should give staff ample time to use their accrued days or cash them out in advance of the unlimited policy going into effect and have a clear communication plan in place. There should be clear talking points about why the change has been made and how the company will administer it. Supervisors should be armed with information and know when to pass questions onto Human Resources. This is key, as employees will always come to supervisors first, and without a communication plan in place before the transition, there is likely to be inconsistent (and otherwise problematic) responses without valuable input from Human Resources. And remember that everything is local here, and companies must balance the desire for uniformity with local rules regarding use and payout of accrued paid time off, medical leaves of absence, reasonable accommodations and paid sick leave.

For years, Washington’s employment laws were to California’s like Macklemore was to Dr. Dre – yes, they had a west coast flavor, but they weren’t as scary as California[1].  Washington laws provided for meal and rest breaks, but there wasn’t much class action litigation.  They allowed non-competes, and averaging of wages to determine if someone was paid minimum wage.  But Washington is now coming out as Snoop Dogg and fully embracing its West-Side street cred, just like the original on Dre’s The Chronic.

First, in 2015, the Washington Supreme Court in Demetrio v. Sakuma Bros., 183 Wash.2d 649 (2015),held that agricultural piece-rate workers must be separately paid for rest breaks, even if they are paid completely for their time worked.  This certainly had the flavor of California’s own decision in Gonzalez v. Downtown LA Motors, 215 Cal.App.4th 36 (2013), but was a good example of Washington paying homage to the godfathers like Cube and Jerry Brown down south that led the way, without overshadowing its mentor.

Then in 2017, Washington decided to make its own mark, announcing itself as a full member of the West-Side’s Death Row of employment laws by deciding in Brady v. AutoZone Stores, Inc., 188 Wash.2d 576,  that Washington employers have a “mandatory obligation” to provide meal breaks, and ensure those meal breaks complied with the law. This went beyond what California’s Supreme Court had held in Brinker Restaurant Corp. v. Superior Court, 53 Cal. 4th 1004 (2012),  where the employer’s obligation is to “provide a reasonable opportunity to take an uninterrupted 30-minute break.”  Needless to say, there was rejoicing among the Plaintiffs’ bar at this decision, and class action litigation exponentially increased in Washington as a result.

Now fast forward to 2018, when Washington has followed up its cameo appearance with its own Doggystyle moment, holding that piece-rate agricultural workers must be compensated separately for “non-picking” tasks in Carranza v. Dovex Fruit Company, 416 P.3d 1205 (2018).  This decision is limited to agricultural workers, but aggressive plaintiffs lawyers have filed multiple class actions within days of this ruling and further litigation regarding piece-rate compensation will surely occur.

To understand Dovex, you have to look at the lyrics of the parties in this case.  On one side of the wage-and-hour battle, the Plaintiffs argued that work that did not fall within the piece rate must be paid out at a separate hourly rate.  The employer argued that what mattered is the total compensation paid to the employee for the total hours worked.

The Supreme Court broke this down to hold that, essentially, when a picker was not picking, he or she was not being paid . This varies from the federal interpretation of the FLSA, endorsed by (among others) the FLSA, which holds that minimum wage compliance is determined over the entire work week. Dovex does follow California law, however, which requires that employees be paid at least the minimum wage for “each and every separate hour worked,” and if an employee was paid via piece rate, he or she was not being paid for all the tasks they performed over the course of the day .  For now, Washington has regulations, WAC 296-126-021, that specifically allow for (non-agricultural) piece-rate workers’ weekly wages to be averaged across all hours worked in a workweek to determine minimum wage compliance.  California just seems to be too old-school to have a regulation that makes this much sense.

So what does this mean for Washington employers, and others who are operating on the West Coast? It is fair to say that there will likely be more class action litigation, and the cost of doing business may increase, just as it has in California.  Employers can proactively assess their policies in light of this trend, looking at the cases currently pending before the Washington Supreme Court to identify possible concerns, and address those before the rules are retroactively changed.  And employers can look to California to better understand where Washington is going, though knowing that the young ones are always trying to outdo the OGs.

_____________________________________
1. I’ll let you determine where Oregon falls within this analysis. My vote is for the Black Eyed Peas.

Do you remember the “Friends” episode where Monica, a chef, brings home dinner for all of her friends – five steaks and an eggplant for Phoebe – which she received from a new meat supplier at work? Her boss calls her the next day to say that the food was a kickback and terminates her immediately for violating corporate policy. (Don’t worry, I’d forgotten about the episode too until I started writing this).

Would it have taken the scriptwriters a long time to rewrite the scenario and figure out how to terminate Monica in countries outside the US? Sadly, the answer is yes. Employers face many potential pitfalls when terminating non-US employees for cause. Here are some of the top issues that employers encounter that are surprising from a US law, at-will employment perspective.

As Monica once said: “Welcome to the real world. … You’re gonna love it!

1.            Ground of Terminations

a)            In many countries having grounds for an immediate termination for cause is a very hard standard to meet.

If Monica had received some borscht as a kickback in a Moscow restaurant, for instance, the restaurant might not be able to use the for-cause termination route. In Russia termination for cause for a single act of gross misconduct is restricted to an exhaustive list of grounds including the employee coming to work intoxicated, embezzlement, or willful destruction or damage to property as determined by a court ruling (meaning that the company would have to sue the employee in court and obtain a judgment against the employee). Unless one of the enumerated causes is given, the employer can dismiss an employee only if there is repeated failure by the employee to perform his or her employment duties without good cause, but this requires prior discipline against the employee for the violation. Thus, under this prong, even after Monica got caught taking the kickback in violation of the corporate policy, her boss could not terminate her if it was her first misconduct.

In practice, employers in Russia often prefer to mutually terminate an employment relationship to avoid contentious proceedings and to minimize disruption, even where there are serious concerns with respect to an employee’s behavior (though in fairness, this does sound like California).

I know!” [with Monica’s excited tone]

b)            The termination grounds often need to be set forth in company policies properly rolled out.

If Monica was working in China and violated a global company policy that was not rolled out through a “democratic process” (basically, a process of obtaining the opinion of the employees’ and/or their representatives) the restaurant would not be able to use the “for cause” route for a termination based on violation of the company policy.

Instead, the restaurant would probably need to convince Monica to resign or accept mutual separation.

2.            Speed

In some countries there is a very strict timeline for the termination process.

What if Monica worked in a beer garden in Germany?  The German beer garden would need to serve Monica with a termination letter within two weeks after learning the relevant facts constituting the severe breach of contract. The two week period is triggered once the employer has collected sufficient facts to come to an educated decision on whether or not the relationship with the employee is irrevocably disrupted and a dismissal is the only option available. If the employer misses this deadline, the dismissal without notice for cause is void but may be construed as a regular termination with notice from 4 weeks up to 7 months (after 20 years of employment), which, though, in turn can be challenged.

3.            Investigation

We do not have enough background to know how Monica’s boss found out about her alleged misconduct (clearly they did not have an employment lawyer in the writing room). But we know for sure that Monica did not have a chance to explain herself during the investigation.

In many non-US countries employers must investigate the allegations of misconduct in accordance with specific procedures or at least follow such procedures as they want to impose discipline.

In a Bollywood script Monica should have received a charge sheet that should clearly set out the alleged misconduct, specific sections of the company policy violated by the particular misconduct, and the time within which the employee is required to provide a response to the charge sheet. In India, Monica would have three to four working days from the date of receipt of the charge sheet to assess and respond to the charges. The next step is usually to appoint an enquiry officer or constitute an enquiry committee and send a notice to the employee setting out the date and time of the enquiry/disciplinary hearing. During the hearing all evidence should be produced and the employee should be given an opportunity to provide explanations and to cross-examine the witnesses. After the hearing, the enquiry officer should submit a report with the findings to the disciplinary authority in the company (normally management). The whole process would probably not fit into one 25-minute episode (although the usual workaround in India is to shame Monica sufficiently for her to resign).

4.            Formalities

In many non-US countries employers must comply with specific formalities and jump through many hoops in order to terminate an employee for cause.

a)            In South Korea termination notice in an e-mail is not sufficient. The termination notice must be in writing wet-ink signed by duly authorized officer of the employing entity and should specify the reasons for termination. Unfortunately, receiving a letter several days later is not nearly dramatic enough for the US attention span, but that still pales in comparison to what is required in Belgium, where the termination notice would have to be delivered by registered mail, issued by the Belgium post, and of course in the “right” language based on Belgium language legislation (though sadly a bad British accent is not a requirement).

b)            In some countries companies need to comply with several follow up steps after the termination:

  • In Japan the employer should, inter alia, notify local authorities that the employee lost a qualification as insured person.
  • In Hong Kong the employer should, inter alia, notify Mandatory Provident Fund trustee and the Inland Revenue Department of Hong Kong of the employee’s termination.

And as we all know, nothing spells comedy gold like notifying the government’s revenue department, so all things considered it’s probably a good thing Friends was based in New York.