When your water cooler is actually a set of water coolers in 40+ countries like at DLA Piper, water cooler talk must be digital. News reports of changes in France’s labor laws — Code du Travail – prompted speculation (and debate) among DLA’s attorneys on which countries now provide the best climate for business expansion after looking at both economic and legal factors in combination.  Bets were made and a template was agreed upon for each competitor to research from.

Here is how the US looks on that template on a scale from 1 (best business climate) to 10 (least promising climate).

Economic/Political Stability:  USA has been #1 on the A.T. Kearney Foreign Direct Investment Confidence Index for 5 years running

Labor Costs:  Productivity is key: USA is #5 in OECD – more “bang per buck” than any other country on this competition

Corporate Tax Rates:  USA’s effective tax rate is 18.6% but more than 2/3 of US corporations pay no tax

Ease / Cost of Set Up:  World Bank ranks USA first among larger countries and in top ten overall in this category

Talent Pool:  40+% college educated + more patents filed per year than any other country + availability @ OECD and G-7 averages

Labor Market Regulation: 

Collective Engagement:  USA has no works councils; few unions (less than 8% of private sector covered by union contracts)      

Key HR Legal Considerations:  Employment at will = maximum business flexibility (e.g., no equivalent to “Transfer of Undertakings: Protection of Employment” regulations (TUPE) that are commonplace in the UK and the EU       

Evaluative scores for the other participating countries (ranked from lowest/best score to highest/worst score) on that business pain cycle entailed individualized judgment. Each participant attempted to pinpoint how difficult the employment laws in his or her country were.  Those scores initially ran as follows:

  • USA – 1.5
  • UK – 3
  • Romania – 3
  • UAE – 4                                  
  • Spain – 4
  • France – 4
  • Netherlands – 4
  • German – 5
  • Australia – 5
  • China — 7

Circulation of those scores (which were submitted by each participant simultaneously to the London office for tabulation) triggered further debates, which may continue until Christmas. Comments from the wagerers/debaters illustrate the difficulty of such transnational comparisons as well as their depth of knowledge of the laws in each other’s countries:

    • “Are you saying France is only a 3? If so, Australia must be a zero then!”
    • “UAE should come down to 2 – limited unfair dismissal regulations and discrimination regulations plus no unions.”
    • “I thought that in Spain we suffer more pain than in the UK but less than in France; I need to recalibrate Spain.”
    • “The world has gone mad! Given these ratings, Germany must be a 2.”

Passion runs high in the best professionals. Here, however, there is not only passion but the willingness to do the research to confirm each point. That is why I love working with (and debating with) my international colleagues, who are wicked smart and who track not only what happens in their own country but globally.   This crew is a truly talented team regardless of how you score each country.

But, you can see that for yourself. These debaters are among the contributors to DLA’s new Guide to Going Global, which contains additional information about employment and labor law basics in 56 jurisdictions throughout the Americas, Asia Pacific, Europe, the Middle East and Africa.

Over 500 years after his death, Shakespeare’s works continue to be a touchstone for legal analysis and critique. A fool’s errand it would be to attempt to catalog the legal issues in each of his 37 plays.  Indeed, so popular is the Bard’s legal acumen that he is the most-quoted literary author in Supreme Court decisions.

Once again, a single line from one of Shakespeare’s plays explains a critical legal development:

And you that do abet him in this kind
Cherish rebellion, and are rebels all.

Richard II, Act II, Scene 3.

Like the non-discrimination laws in a number of other states, including California, New Jersey, and Illinois, New York State’s Human Rights Law (“NYSHRL”) contains a provision extending liability to those who aid and abet discrimination or retaliation. A recent federal appellate decision, Griffin v. Sirva, Inc., 858 F.3d 69 (2d Cir. 2017), reveals that such aiding and abetting provisions may apply even outside those states.

The facts of that case are simple, and not uncommon. Sirva is the parent of Allied Van Lines, which had a contractual relationship with Astro, a New York warehouse and transportation company.  Allied’s standard contract requires its contractors (like Astro) to run criminal background checks and eliminate any individuals convicted of certain crimes from working on Allied jobs.  Astro, accordingly, terminated the employment of two New York drivers – Messrs. Godwin and Griffin (perfect Shakespearean names), who then sued Astro, Allied and Sirva because the NYSHRL limits the use of criminal convictions in employment decisions.

Let’s leave aside the issue of whether this might be a permissible decision by Astro (in fact, a jury cleared Astro of discrimination prior to our curtain call) and go where the Duke of York did in Richard II: is Allied (which is not the employer and not based in New York) potentially culpable? The District Court said no; the Second Circuit initially certified questions to the New York Court of Appeals and now – based on the Court of Appeals answers to those questions in Griffin v. Sirva, Inc., 29 N.Y.3d 174 (2017) –  has vacated and remanded.

No one contended that Allied was the direct employer, and the Court of Appeals confirmed that liability under the criminal conviction discrimination provisions of the NYSHRL (Section 296(15)), is limited to an aggrieved party’s “employer.” The Court of Appeals did acknowledge that a joint employer could be liable under the law but set a test for that which effectively excludes Allied: “common-law principles … determine who may be liable as an employer under [S]ection 296(15) of the Human Rights Law, with greatest emphasis placed on the alleged employer’s power to order and control the employee in his or her performance of work.”

Allied’s true peril (and that of other businesses) lies in the extra-territorial application of the Human Rights Law’s aiding and abetting provision. As the Second Circuit held, “Section 296(6) extends liability to persons and entities beyond joint employers [and] … applies to out-of-state defendants.”

The final curtain has not yet dropped on this play, but the performance so far raises an important reminder. It does not matter if it is in New York or “[i]n fair Verona, where we lay our scene.” Romeo and Juliet, Prologue.  Out-of-state companies must be mindful that imposing obligations, by contract or otherwise, on their business counterparties which impact the employees of those counterparties may trigger scrutiny under an aiding and abetting theory.

To reduce this risk, businesses should consider utilizing as many of the following best practices as practicable:

  1. Eliminate contractual provisions that dictate how a counterparty must act with respect to its own employees;
  2. Disclaim any control over employment decisions impacting the counterparty’s personnel;
  3. Require the counterparty to covenant to comply with applicable federal, state and local employment laws;
  4. Demand indemnification from any suits by employees, agents, or contractors of the counterparty; and
  5. Demand to be named on the counterparty’s EPLI insurance as “a separate named insured.”

Every expansion of potential employer liability admittedly also leads to the temptation to follow the advice of Dick the Butcher: “The first thing we do, let’s kill all the lawyers.” Henry VI, Part 2, Act IV, Scene 2. If so, please note that a catalog of the types of deaths in the Bard’s plays is readily available with suggestions for how best to do this.

Today’s authors are summer college interns from DLA Piper’s Chicago office.


Being good at anything is no easy feat. Becoming great is even harder. But, as we submit applications to law schools, we wanted to know what it would take to become truly great lawyers and thus interviewed a cross-section of DLA Piper’s employment law partners to prepare a psycho-biography of stardom for ourselves.

We have compiled our field research and analysis into a short quiz:

1.    You’re on your way to a meeting with a client. Right before the meeting, do you:

A.     Brush up on some publications that are relevant to that client’s business and write down new questions you have for them?
B.     Reread your file on this matter?
C.     Relax because you went to a top ten law school and have years of experience?

Good lawyers do B; great lawyers do A as well. Washington, DC partner Joseph Turzi admonished us to “read your clients’ trade publications and know their issues better than they know their own issues. This is your investment into the future.”

2.     You’re writing an email to a client, answering their questions, do you:

A.     Send your first draft knowing that clients often fail to immediately understand legal complexities so there will be a follow-up conference call?
B.     Summarize your advice in plain English and in a clear format directly answering the questions?
C.     Forward the research done by your associates with an FYI cover email?

Great lawyers are great explainers and teachers. Ian Kopelman, a partner in the Chicago office, states, “I don’t know if it’s a legal skill but you have to be able to speak and write in English rather than in legalese, so that a non-lawyer client is able to understand what you’re trying to express. Whether if it’s a legal analysis or a practical analysis based on the law, they have to be understand what you’re telling them.”

3.     You are seeking additional work from a current client. Do you:

A.     Schedule a lunch date with them for next week and try to get some quality time in?
B.     Shoot them a quick email with some subtle hints?
C.     Make a mental note to passive aggressively bring it up next time they call?

The best lawyers are “good people” and understand how to connect with people. San Diego partner Mary Dollarhide admonished us “ you must have face time and talk time with people.” Her view is straightforward: “Forget the notion that you can recede into your text messages and into your emails; that doesn’t do it.” Mary emphasized “It’s really important to make the investment in the people at each client because law is very much a people business.”

4.     It’s your most exciting case of the year! To prepare, you should:

A.     Don’t sleep for five days because this is a must-win scenario?
B.     Relax now so your mind is fresh to improvise during trial?
C.     Prepare your case thoroughly including familiarizing yourself with the opposition’s side?

Here, as elsewhere, the Aristotlean “golden mean” is what the best lawyers do. Chicago partner Marilyn Pearson puts it aptly when she says, “in my practice, what I try to do when I’m going to do an arbitration is I try to prepare my case and I try to prepare their case. I want to know what  they are going to argue. I want to be able to argue their case as well or better than they can.”

5.     You receive an assignment at work but are confused about how to go about it, do you:

A.     Desperately research everything you can and work from there?
B.     Make a list of the things you are confused about, find the person who gave you the assignment, and ask questions?
C.     Start working on the assignment in hopes that you figure it out somewhere along the way?

 In a career as demanding as the legal profession, it’s easy to feel that you have to know it all. Maria Rodriguez, a partner in the Los Angeles office, sagely counseled us that the best lawyers “ask questions. There are so many questions to always ask. I was the kid that asked too many questions; I am still that way. Always. So I think you come to each task with humility, you come to listen and you come to learn. And you learn by listening and asking questions.”

If any law school wants to utilize this quiz on its application, we are now ready. But, before we finish our collective assessment of greatness, indulge us each in a closing thought on our field research:

Alix:  Throughout these interviews, what I found compelling was the overlap of responses. The most common response when asked about important character traits was how critical it is to be good to the people around you. Being good to coworkers and to clients was something almost everyone emphasized. It reminded me that — no matter how successful you are — at the end of the day you’re a person like everyone else. Along with this, some advice I also treasured was that at any point in life it is okay to ask questions and there is no shame in that. I will make sure to remember this advice and act on it throughout the remainder of undergrad, law school, and my legal career.

Amanda: Although many of the partners we interviewed espoused the importance of hard work and being analytical, almost all repeatedly advised us to be good listeners, build relationships and be humble. We will keep these skills in mind during our journey to the law profession as they are often overlooked or regarded as less important. For some, soft skills may not come easily. Yet, through these interviews, we saw that partners are still continuously reevaluating, developing and improving their soft skills by being conscientious and self-aware. We will do the same!

Lucas: It might seem counter-intuitive but, to be successful, one needs to be much more than just a great lawyer. In a world that is increasingly competitive, excellence with the legal aspects of the profession are expected rather than commended. To be truly successful, one needs to develop a wide range of skills. The difference maker today is just as much what you do outside of the office, as what you do within it. Something that spoke to me was this idea that success is proportional to the investment you make in yourself with your free time. In a world where there are so many competing priorities, going above and beyond is the new normal. Alix, Amanda, and I must adapt as such by investing in ourselves.

Details matter. The Titanic sank because its center propeller didn’t work in reverse. A Japanese company lost between $225 and $350 million because a typing error caused it to offer thousands of shares for 1 yen apiece instead of single shares for thousands of yen apiece.

For employment, the most dangerous illustration of this “minor mistakes, major consequences” syndrome is the Fair Credit Reporting Act (“FCRA”). Recent FCRA settlements make this point perfectly clear:

  • A major transportation company settled an FCRA class action case for $7.5 million.
  • A major bank settled an FCRA class action case for $12 million.
  • A major home improvement store settled an FCRA class action case for $2.2 million.

Let’s review the FCRA details. This federal law regulates the use of consumer reports, which includes the typical background check that employers often use for job applicants.  The law sets specific, detailed, and unforgiving standards for each step of the process:

  • Prior to obtaining a report, the employer must advise in a stand-alone written disclosure that a consumer report may be obtained for employment purposes; get written authorization from the individual; and certify to the consumer reporting agency that it will comply with various legal requirements.
  • Prior to taking an adverse action based on the report, the employer must provide the individual a copy of the report and a description in writing of the individual’s rights under the FCRA. This is typically done in a pre-adverse action letter.
  • Next the employer must wait 5 business days before taking any adverse action. While not explicitly required in the text of the FCRA, a federal advisory opinion and related case law support this 5-day waiting period. See, e.g., Kelchner v. Sycamore Manor Health Ctr., 305 F.Supp.2d 429 (M.D. Pa. 2004) (acknowledging in dicta that a reasonable period for the employee to respond to disputed information is not required to exceed five business days following the consumer’s receipt of the consumer report from the employer).
  • After taking an adverse action based on the report, the employer must: 1) give post-adverse action notice to the individual of the adverse action; 2) provide the name, address, and telephone number of the consumer reporting agency as well as a statement that the agency did not make the decision to take the adverse action and cannot provide reasons for the adverse action; and 3) provide notice of the individual’s right to dispute the accuracy or completeness of the agency’s report and to obtain a free copy of the consumer report within 60 days. This is typically done in a post-adverse action letter.

These requirements are technical details that—like the Titanic’s propeller specifications—have significant consequences if not met.  The FCRA creates mandatory damages of $100 to $1000 for violations with respect to each individual, which have enticed class action attorneys to bird-dog employers’ compliance with the law.

Common employer mistakes—many of which led to the multi-million dollar settlements—include providing extraneous information in the stand-alone disclosure document, failing to provide a copy of the consumer report, failing to wait the full 5 business days before denying employment, and failing to provide the necessary pre- or post-adverse action letters.  Oops!

Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016) suggested respite in upholding dismissal of the case due to the lack of any concrete harm and noted that bare violations of the law’s “procedural requirements may result in no harm,” and thus no standing to bring suit.  But, that is hardly immunity.

Post-Spokeo, the common employer mistakes itemized above have been sufficient to bring suit. Thomas v. FTS USA, LLC, 193 F.Supp.3d 623 (E.D. Va. 2016) (failure to provide disclosure, written consent, and notice of adverse action before applicant received a copy of the report constitutes injury in fact); Rodriguez v. El Toro Med. Investors LP, 2016 WL 6804394 (C.D. Cal. Nov. 15, 2016) (inclusion of liability release in disclosure was an injury in fact).

Employers who utilize background checks (and wish to avoid shipwreck or other FCRA disasters) should remember that checking the small things is essential.  Your checklist for success should begin with this one-two:

  1. Make sure the stand-alone disclosure stands alone. The FCRA requires a clear and conspicuous disclosure, in a document that “consists solely of the disclosure” that states a consumer report may be obtained for employment purposes. Feist v. Petco Animal Supplies Inc., 218 F. Supp. 3d 1112 (S.D. Cal. 2016) (disclosure with 35 extra paragraphs created injury in fact because applicant could be “confused or distracted by the length of the consent form”). The best practice here is to limit any extraneous information in the disclosure and to not include any waiver of claims, FCRA or otherwise. Put simply, the disclosure must stand alone.
  2. If you’re going to take an adverse action, double-check. If you’re going to turn down an applicant or fire a current employee based on a background check, make sure to follow the necessary steps, most notably: A) get proper disclosure and authorization; B) send a pre-adverse action letter including a copy of the report and a description of the individual’s rights; C) wait at least 5 business days before taking an adverse action; and D) send a post-adverse action letter with the necessary information.

Given this, there is also a need to ask when, where, and how employers should utilize background checks. There is no science to link credit history to greater employee integrity.  Further, using criminal history to screen potential candidates invites EEOC scrutiny.  Worrying about FCRA details is important but only after worrying about why using consumer reports is important.

Watching baseball in Fenway Park is different than watching baseball in Wrigley Field. My sons noted that distinction within an inning, commenting that Fenway fans cheered players hitting the cutoff man whereas, back home at Wrigley, the party is more important than such finer points of the game.

This is a case for those who cheer players who hit the cutoff man and run out every grounder. It is also perhaps a reminder of why those small details add significant value regardless of the outcome of any single game in the season. I love to cheer for those consummate professionals so forgive me that here he is one of our own: Dave Durham.

The case is American Baptist Homes v. NLRB (DC Cir. 2017).  The issue is a familiar one in managing a unionized workforce: the duty to share information with the union. Here, a nursing assistant was fired for sleeping on the job.  The union filed a grievance and asked for the statements of witnesses collected during the company’s investigation.

Historically, the NLRB had immunized witness statements from the broader duty to share relevant information with unions. In this case, the NLRB shifted its views too late for the nursing home to conform its practices to those new views:

  1. the NLRB concluded that only two of the three witnesses had been given sufficient assurances of confidentiality (a novel twist on its prior rule) and thus the third statement must be produced (but not the others),
  2. the NLRB decided that it would apply a new balancing test but only in future cases: a technique called “sunbursting” ever since Great Northern Ry. Co. v. Sunburst Oil & Refining Co., 287 U.S. 358 (1932).

Disappointing results, despite that getting a favorable ruling on 2 out of 3 of those witness statements (which is outstanding work for any baseball pitcher or hitter). But, the NLRB is not final and is subject to judicial review so the case proceeded onward to the appellate court.

The first issue reveals an inherent problem in current review of administrative agencies: deference. Thus, the Court of Appeals did not judge whether confidentiality is a proper test but merely copped out: “…this Court defers to the Board’s reasonable interpretation of its own precedent.”  That is a problem that will need Supreme Court review.

Justice Gorsuch (before his 2017 appointment to the Supreme Court) framed it this way:

There’s an elephant in the room with us today. We have studiously attempted to work our way around it and even left it unremarked. But the fact is [deference doctrines] permit executive bureaucracies to swallow huge amounts of core judicial and legislative power and concentrate federal power in a way that seems more than a little difficult to square with the Constitution of the framers’ design. Maybe the time has come to face the behemoth.

Gutierrez-Bruzella v. Lynch, 834 F.3d 1142 (2016).

The second issue, however, is the reason for applause. Although the appellate court ducked (saying that any review of this new and as-yet unapplied rule was premature), raising this issue generated another win: a limitation on the NLRB’s ability to seek contempt sanctions for enforcement against American Baptist.

Here, as always, the NLRB’s order directed the employer to “cease and desist from …refusing to provide information that is relevant and necessary to the processing of a grievance.” This created the risk that the NLRB would/could backdoor American Baptist with its new test in contempt proceedings. Raising the issue on appeal, however, forced the NRLB to concede that it couldn’t and forced the court to limit the NLRB: “we could not uphold a cease-and-desist order that did so.”

For those fans who prefer to party at the ballpark and cheer only home runs, I apologize for this dissertation between innings on the inner game of incremental steps that determine over the course of 162 games who does and does not make the playoffs; I will buy y’all the next round of beers.

But, for fans who go to sleep wondering whether the NLRB and other administrative agencies should be required to use “sunbursting” as a rule and who appreciate the finesse that Mr. Durham pulled in using an appeal on an issue without standing in order to secure a bill of particulars limiting the NLRB’s adverse ruling, please join me in toasting Dave Durham for his fine work.

College legends shape minds forever. Having attended the University of California, Berkeley, “The Play”—an unscripted play to win over arch-rival Stanford with only four seconds on the clock – was the subject of a mandatory course.  It is also a cautionary tale on what can happen when attention lapses.

Reading up on commentary regarding joint employment claims that have been made against franchisors reminds me of that game. Portions of the business press (perhaps Stanford grads?) have announced that with the Republican party controlling the Executive Branch, joint employment claims will disappear.  However, there are several reasons to remain cautious:

First, changes in federal enforcement will not happen overnight.  For example, there are appointments to be made and confirmed by the Senate; there are pending cases that will need to be ruled on (e.g., pending unfair labor practice complaints at the NLRB); and, elsewhere, formal opinions issued under the FLSA (Administrator’s Opinion No. 2016-1) to be reconsidered by a yet to be confirmed successor.

Second, changes in federal enforcement offer limited solace when issues of state law continue to create potential exposure.  This includes both common law theories and interpretations of state statutes governing employment.  For example, Ochoa v. McDonald’s, No. 3:14-cv-02098-JD (N.D. Cal.), held that while McDonald’s was not a joint employer, issues of fact existed as to whether it could be held liable under an ostensible agency theory.

Third, Washington D.C. is not the sole problem for franchisors.  Rather, the plaintiffs’ bar (bringing cases like Ochoa) is an equal if not greater risk.  Despite established law holding that franchise controls are insufficient to establish joint employment, this has not deterred private litigants from seeking to hold franchisors jointly liable in individual and class-action suits throughout the country.

Given all this, what should franchisors do?

There are options.  One is better patrolling the border on joint employer issues; the other is to find innovative means to get franchisees into compliance (especially with wage-hour laws).  The former is the conventional wisdom; the latter is – for now – unconventional and untested (and is illustrated by what Subway did in its pact with the Department of Labor). 

For today, let’s look at how best to patrol the border to avoid joint employment findings.

Emerging case law developments inform that effort.

  • In Gesselle v. Jack in the Box, Inc., 2016 WL7223324 (D. Ore. Dec. 13, 2016), a federal district court held that mere “power to terminate a franchise … is not sufficient to create a joint employment relationship”; that franchise controls do not establish an employer-employee relationship because “[s]uch policies are merely reflective of an inherent interrelationship of operations …and [the franchisor’s] goal of attaining conformity to certain operational standards and details”; that a franchisor who provides payroll services or other “ministerial functions” to franchise employees is not thereby a joint employer; and that the “provision of nonmandatory advisory materials relating to Human Resources and the training of franchise employees” does not establish a franchisor’s control over franchise employees.
  • In Pope v. Espeseth, Inc., 2017 U.S. Dist. LEXIS 4928 (W.D. Wis. Jan. 11, 2017), another federal district court granted summary judgment in favor of the franchisor based on its operations manual, which expressly stated that “all personnel-related documents and recommendations” were “optional and should be modified and customized as the franchisee deems appropriate […] to suit their own business needs.” This express disclaimer, along with the franchisee’s actual practice of modifications (e.g., paying a different commission rate than recommended) precluded a finding that the franchisor was a joint employer under the FLSA or Wisconsin state law.
  • In Nutritionality, Inc. d/b/a Freshii, Case Nos. 13-CA-134294, 13-CA-138293, and 13-CA-142297 (Apr. 28, 2015), the NLRB’s general counsel provided guidance under both its traditional rule on joint employment and its more recent Browning-Ferris standard. There, the General Counsel declined to prosecute Freshii because it had no direct role in hiring, firing, disciplining or supervising, setting wages, benefits, or work hours. Although it accepted online employment applications, those were forwarded to franchisees without screening or analysis. Franchisees had access to manuals and handbooks, but the franchise agreement did not require their use and expressly disclaimed control over labor and employment matters. The extent of Freshii’s control dealt with standardizing the product and customer experience and, as a result, was not sufficient indicia of joint employment.

These developments provide valuable guidance on improving franchise agreements:

  • Franchisors should minimize controls or requirements that are not needed to protect the franchise system or the brand.
  • Franchise agreements should state the parties’ mutual intent to be independent contractors (even though that alone is not dispositive).
  • Franchise agreements should affirm that the franchisee will make all decisions on hiring, firing, promotion, and disciplining its employees.
  • Franchise agreements should provide that any personnel policies made available are optional and that the franchisee alone will chose whether and how to use these policies.

Concomitantly, these developments suggest best practices on revisiting franchise controls.

  • These cases highlight the value of self-imposed limits on the franchisor’s control, especially with respect to employment-related topics. Now, more than ever, it is critical to balance the desire for control against the risk of exposure on joint employment.
  • While there will inevitably be circumstances where franchisor personnel interact with franchisees’ hourly employees, franchisor employees should be programmed to interact primarily with franchisee ownership and management.
  • Franchisees should make their own personnel decisions (hiring, firing, promotion, and discipline) and set their own employee compensation policies. This franchisee autonomy should be documented at every opportunity.
  • To the extent practicable, training programs should be limited to franchisee’s supervisorial and managerial employees, who in turn can independently train the franchisee’s hourly staff.
  • Employment applications should specify that the applicant is applying to the franchisee, not the franchisor, for employment. This can also be reinforced with disclaimers acknowledging employment with the franchisee, not the franchisor.
  • Franchisees should create their own employment manuals and policies. Where franchisees are given sample personnel policies or manuals, it should be clearly documented that this is merely a resource and that its use is optional.

There is also assistance (but only with respect to state law claims) coming from legislative efforts at the state level. In the past two years, Texas, Tennessee, Louisiana, Utah, Wisconsin, Georgia, Michigan, Oklahoma, Indiana, South Dakota, North Dakota, Arizona, Wyoming, Kentucky, and Arkansas have enacted laws expressly stating that a franchisor is not an employer of a franchise and its employees.

This is a huge boost in those states but no basis to rest on the laurels of those successes given the risks under federal laws and in other states. Watch “The Play” just once and you too will understand what all of us who attended Cal cherish as sacred text: never coast, never quit, and never slow down if you intend to win.

P.S.  On June 7, 2017, U.S. Secretary of Labor Alexander Acosta announced the withdrawal of the DOL’s 2016 Administrator’s Interpretation on joint employment.  This adds incrementally to the shift evidenced in cases such as Geselle  and Pope


Malcolm Gladwell in his essay “How David Beats Goliath” extolled the use of the full-court press in basketball: “In the world of basketball, there is one story after another … about legendary games where David used the full-court press to beat Goliath.”

Is there an equivalent in litigation with ex-employees?

Under the Computer Fraud and Abuse Act (“CFAA”), there is one possible equivalent. Broadly, the CFAA allows employers (as owners of computers and computer systems) to bring a civil claim against anyone who accesses its computers without authorization and, as a result, causes the owner loss of $5,000 or more.

First, there must be at least $5,000 in loss. But, look closely:  CFAA defines loss as any “reasonable cost to any victim, including the cost of responding to an offense, conducting a damage assessment, and restoring the data, program, system, or information to its condition prior to the offense, and any revenue lost, cost incurred, or other consequential damages incurred because of interruption of service.” 18 U.S.C. § 1030.  This, in short, can include the cost of determining that there has been a misuse. Brown Jordan International, Inc. v. Carmicle, 846 F.3d 1167 (11th Cir. 2017) (holding that this dollar threshold is satisfied by the cost of retaining forensic specialists to determine the extent of the damage caused the company’s systems and to sweep the workplace for surveillance devices).

Second, the loss must result from the bad actor’s use “without authorization” or by “exceeding [his/her] authorized use.” 18 U.S.C. § 1030.  Brown Jordan held that “without authorization” means that there was an absence of authority or permission conferred by the employer to the employee for the “use” in question, a construction shared by the 9th Circuit in U.S. v. Nosal, 828 F.3d 865 (9th Cir. 2016). Other courts have taken a broader approach. For example, the 7th Circuit has held that when an employee breaches his common law duty of loyalty to his employer, he is acting “without authorization.”  Int’l Airport Centers v. Citrin, 440 F.3d. 418, 420 (7th Cir. 2006). The 5th Circuit has defined “without authorization” by virtue of  the employer’s policies—such as those set forth in an employee handbook. See United States v. John, 597 F.3d 263, 272 (5th Cir. 2010).

Gladwell points out that a full court press hinges “on a willingness to try harder than anyone else.” CFAA claims are likewise not effortless.  Such claims require proof not only of the dollar threshold but also of the fact of the misuse being unauthorized.   A press is indeed hard work.

Under the Defend Trade Secrets Act (“DTSA”), there is another potential equivalent.

The DTSA permits — in addition to actual damages — awarding the amount of any unjust enrichment the misappropriator experienced if such an amount is not covered by the actual damages. Plus, in the case of a willful or malicious breach , courts may award either double the actual loss and/or reasonable attorneys’ fees.  This arsenal of remedies creates the equivalent impact of the full court press:  “the ‘rush state’ in their opponents—that moment when the player with the ball is shaken out of his tempo.”

The $5,000,000 jury verdict in Dalmatia Import Group, Inc. v. FoodMatch Inc. et al, Case No. 16-cv-0276 (E.D. Pa 2017) illustrates this perfectly. There, Dalmatia brought claims for stealing the secret recipe for a proprietary fig spread. Though this dispute was among business partners, it is no different legally from situations in which the defendant is an ex-employee. The only difference, perhaps, would be that the in terrorem impact of a full court press of DTSA remedies may be higher there.

There is, however, a counterpoint. No strategy is automatic.  Gladwell ends his essay on a sad note: the National Journal Basketball girls’ team from Redwood City that illustrated his essay lost in the third round after committing too many fouls–a classic hazard of an aggressive press.  Is there an equivalent caveat for employers?

Sure.   Employers are often tempted to raise CFAA or DTSA issues as counterclaims against ex-employees who have sued.  Before doing so, there is an additional step of analysis to undertake: is this retaliatory?  Even if an employer’s affirmative claim and/or counterclaim is colorable, it still may be retaliatory. See Spencer v. International Shoppes Inc., 902 F. Supp. 2d 287 (E.D.N.Y. 2012) (denying defendant’s motion for summary judgment as to plaintiff’s retaliation claim and finding that there was a material issue of fact as to whether claims brought against a former employee was motivated by retaliatory animus notwithstanding the validity of the suit).

Veteran basketball fans and coaches appreciate the fundamental rule of pressure defense: it can make diamonds but can also burst pipes. Choose carefully when, where, and how to apply pressure.

Under Title VII, it is unlawful for employers to discriminate on the basis of sex. Historically, sex discrimination has been understood to be biological and, thus, to exclude discrimination based on sexual orientation. But sometimes, like Queen Elsa in Frozen, judges are tempted to sing “Let it go, let it go, can’t hold it back anymore.”

Cutting loose with that history, an en banc decision from the Seventh Circuit broke new ground in Hively v. Ivy Tech Community College.  There, the appellate court held that discrimination on the basis of sexual orientation is a form of sex discrimination covered by Title VII.

In its ruling, the majority took the stance that it would be impossible to fathom discrimination based on sexual orientation without sex discrimination: i.e., if Hively had been male, she would not have been discriminated against  for having a female partner.  That is true but it is also a departure from history and from textual language.

Judge Posner, concurring with the majority opinion, attempts to explain those departures, stating that the court’s interpretation merely gives “fresh meaning” to the statutory language. He adds that “we are merely the obedient servants of the 88th Congress [from 1964], carrying out their wishes.”  Title VII is not frozen as per the day of enactment, but open to “judicial interpretative updating.”

In the words of the Frozen title tune, Judge Posner asserts authority to “let it go” and “to test the limits and break through.”  This prompted Mike Sheehan, co-chair of DLA’s Employment Group to ask his team to consider how to answer in oral argument if Judge Posner throw out that very question – “isn’t it true, counsel, that courts are not merely the obedient servants of former legislatures and have authority to take advantage of what the last half century has taught?”

Just as aspiring chess masters test themselves by replaying games played before their time, lawyers aspiring to master their craft practice by asking such questions with each morning’s advance sheets of new decisions. Let me share some samples of answers to the question posed:

  • “Your honor, no statute is frozen in time but every statute commands respect to the Constitutional division of authority between courts and legislatures. There is a key difference between the permissible — applying a 19th century antitrust statute to an e-commerce economy – and the impermissible – interpreting a 1964 discrimination statute to protect Cubs fans from discrimination.   The former is faithful to that Constitutional division; the latter dishonors it.”
  • “Your honor – I believe your question was best answered by this court 23 years ago in the matter of Fuja v. Benefit Trust Life Ins. Co., 18 F.3d 1405, 1407 (7th Cir. 1994). Ms. Fuja asked this court to order her insurance carrier to cover lifesaving chemotherapy which the carrier had deemed experimental.  This court denied Ms. Fuja’s request knowing that it would most surely lead to her death.  As Judge Coffey explained there:

Despite rumors to the contrary, those who wear judicial robes are human beings, and as persons, are inspired and motivated by compassion as anyone would be. Consequently, we often must remind ourselves that in our official capacities, we have authority only to issue rulings within the narrow parameters of the law and the facts before us. The temptation to go about, doing good where we see fit, and to make things less difficult for those who come before us, regardless of the law, is strong. But the law, without which judges are nothing, abjures such unlicensed formulation of unauthorized social policy by the judiciary.

The answer to your question is that every American is injured when judges go beyond their Article III powers and make law without having been elected by the people.”

  • “Your honor, this is – in the immortal words of Mona Lisa Vito – a bullshit question.”[1]

Worthy answers all for lawyers who practice on imaginary cases over breakfast to be best prepared for their daily work (and part of the mystique and adventure of being seconded to the US practice from my home base in Germany). Future cases in other circuits and, potentially, a Supreme Court review will tell whether we will have to let go of the traditional meaning of the Title VII’s ban on sex discrimination countrywide or only in the Seventh Circuit (Illinois, Indiana, and Wisconsin).

[1]   Mona Lisa Vito, as legal scholars well remember, was the expert witness in My Cousin Vinnie who made that line famous when the District Attorney attempted to challenge her qualifications as an expert witness:

D.A. Jim Trotter: Now, uh, Ms. Vito, being an expert on general automotive knowledge, can you tell me…what would the correct ignition timing be on a 1955 Bel Air Chevrolet, with a 327 cubic-inch engine and a four-barrel carburetor?
Mona Lisa Vito: It’s a bullshit question.
D.A. Jim Trotter: Does that mean that you can’t answer it?
Mona Lisa Vito: It’s a bullshit question, it’s impossible to answer.
D.A. Jim Trotter: Impossible because you don’t know the answer!
Mona Lisa Vito: Nobody could answer that question!
D.A. Jim Trotter: Your Honor, I move to disqualify Ms. Vito as a “expert”.
Judge Chamberlain Haller: Can you answer the question?
Mona Lisa Vito: No, it is a trick question!
Judge Chamberlain Haller: Why is it a trick question?
Vinny Gambini: [to Bill] Watch this.
Mona Lisa Vito: ‘Cause Chevy didn’t make a 327 in ’55, the 327 didn’t come out til ’62. And it wasn’t offered in the Bel Air with a four-barrel carb till ’64. However, in 1964, the correct ignition timing would be four degrees before top-dead-center.


Base jumping, street luging, and transporting loose glass bottles of nitroglycerine in the back of a Jeep off-road have been equally adventurous activities in the modern world. Now, courtesy of New York City, utilizing independent contractors should perhaps be added to that list.

New York City has passed first-of-its-kind legislation to protect independent contractors against alleged wage theft — the Freelance Isn’t Free Act (“FIFA”).  That law will go into effect on May 15, 2017.  Like other state and local laws (e.g., “ban the box”), proliferation of such laws elsewhere is inevitable.

For the safety of adrenaline junkies, let’s examine (1) the reasons why using independent contractors has become a high-risk activity; (2) what the New York City law adds to make this sport even more fraught; and (3) what steps might facilitate your ability to compete and survive.


It’s no secret that independent contractors can provide a number of attractive benefits to employers, among them an estimated 20-40% savings in labor costs, a flexible workforce that can be adjusted more easily to business needs, and a lower administrative burden. But the rush of these thrills comes at a price.

The Department of Labor, National Labor Relations Board and state agencies have been regularly challenging the misclassification of contract workers. That is also now a commonplace in private litigation.  This is further complicated by the absence of a single uniform test for proper classification.

The “ABC test” – most often used for unemployment insurance coverage but now expanding elsewhere – is the most rigorous: (A) the worker is free from your company’s control and direction in performing her service; (B) the work being done is outside of your usual course of business; and (C) the worker is customarily engaged in an independent trade, occupation, profession or business.


Who’s covered? FIFA defines a freelance worker as a person or organization composed of no more than one person that is hired or retained as an independent contractor to perform work in NYC.  Lawyers, medical professionals and salespeople who solicit orders are not covered under the definition of freelancer.

What’s required? FIFA requires a written contract between the hiring party and freelancer whenever the services provided have a value of $800 or more, either for that single service, or when combined with all services for the hiring party in the past 120 days.  The contract must include: (1) an itemization of the work to be done; (2) the value of the work to be provided and the rate and method of payment; and (3) the date payment will be due or the mechanism by which the date will be determined.  If the contract doesn’t specify the payment due date, payment must be made within 30 days of completion of the work.

What’s the exposure for noncompliance? Complaints may be filed with the director of the city’s Office of Labor Standards, though there’s no requirement to do so as a condition precedent to a civil action.  There are three causes of action: (1) failure to enter into a written contract; (2) breach of contract for failure to timely render full payment for completed work; and (3) retaliation for exercising or attempting to exercise rights guaranteed under FIFA.  Plaintiffs can be awarded damages, injunctive relief, attorney’s fees and costs.  Also, the city’s corporation counsel has authority to bring actions for pattern or practice violations of the Act and to seek penalties of up to $25,000 in such instances.


Even though New York City’s is the only such law today, others could soon follow. Thus, this is the right time to review usage of  independent contractors.  Take a close look at when, where and how you are employing freelancers:

  • Do you have them working on your premises for extended periods of time?
  • Are they performing any core functions of your business?
  • Are they doing the same work and in the same positions as your employees?
  • Do they lack the ability to subcontract the work in order to increase their profit?

If the answer to any of these questions is yes, you should feel the same adrenaline rush as with any other ultrahazardous sport. There is risk in every sport and every business; there are also alternatives to reducing risk (from wearing a helmet to reducing reliance on such adventurous arrangements).  The choice (and taste for the adrenaline rush) are necessarily personal.

PS: Relying on a contract clause saying “the parties agree that this is an arms-length relationship and that X is an independent contractor” is  more akin to a flashy scarf than a safety helmet in the current conditions of this sport.

Spring means a few things for me but especially spring training for professional baseball and geeking out over how to get the most out of the talent on my favorite team (both on the baseball diamond, and in my office).  Baseball performance metrics have changed over my lifetime.  I watch expectantly at the promise of equivalent change in non-baseball employers as I read articles like “The Performance Management Revolution” in the Harvard Business Review.

Let me expedite that change by sharing how businesses might copy the Pittsburgh Pirates.

1.  Reward Wins Above Replacement

A metric now used in baseball is Wins Above Replacement (WAR).  WAR is the value that would be lost if that individual employee was unable to do the job and you had to replace that person with an average employee.  This is illustrated in a recent book explaining how the Pittsburgh Pirates ended 20 years of futility and got to the playoffs in 2013.  Big Data Baseball, puts the value of one WAR in the 2012-2013 at $5 million.  That year, Andrew McCutchen won the MVP award for the Pirates with a WAR of 8.1 and a salary of $4,500,000 – meaning that his true value was $40.5 million, or a value of $36 million over what the club was paying him.

Thinking this way can be useful for employers as well. The true value of a given employee is the value of that person relative to his or her replacement.  Obviously, turnover is expensive so there is a value in retaining the talent you have.  But an employee with a negative WAR (with your own WAR being an assessment of the full value of the employees you have) by its very nature cannot be better than a replacement.  And an employee with a minimal WAR can be more easily replaced by an all-star with a lot of potential.  So then the question becomes, how do you calculate your own WAR?

2.  Think Outside the Box

Going into the 2013 season, the Pirates had one of the lowest payrolls in baseball. And management was given only a budget of $15 million to bring in additional talent to improve that off-season. To provide a sense of the challenge that was presented here, 28 free agents received an annual contract value of over $10 million prior to the 2013 season, with the top pitcher receiving a 6 year, $147 million contract, and the top hitter receiving 5 years and $125 million. But the Pirates still had to find a way to win, so they went looking for undervalued players, and found one in catcher Russell Martin who had a skill that had not previously been measured – pitch framing.

Pitch framing is essentially how a catcher catches the pitch so either a potential ball is called a strike, or a potential strike is called a ball. For years this was talked about, but never measured – but with additional data came additional ways to quantify the effect of this undervalued skill. What this data showed was that Russell Martin brought a huge amount of value just by getting the umpire to call more strikes – 70 runs from 2007 to 2011. Over the same period, the Pirates primary catcher at the time cost the club 65 runs. So this one position, and one skill had the difference of 135 runs over a 4 year period. Runs, simply put, translate into wins – in this case, 13 wins that the Pirates had left on the table over those years based on this one skill alone.

Yet, Russell Martin, based on the usual baseball metrics, was coming off a horrible year. In 2012, he only hit .211, with a .311 on base percentage. His RBIs had dropped to 53 – quite simply, he was not sexy, and he was not who a team would traditionally spend money on when they needed to win. Nonetheless, the Pirates gave him a 2 year, $17 million contract. Finding untapped skillsets – like Russell Martin — in your current or prospective workforce that you can then use for your company is the real world equivalent of gaining those 13 wins. The difficulty is abandoning the traditional and thinking outside the box: what is your equivalent of pitch framing? Is it worth taking time to consider what it might or could be?

3.  Democratize the Process

Moneyball, the Michael Lewis book and Brad Pitt movie about how my beloved Oakland Athletics found their own way to win with a limited payroll, is justifiably famous.  While Moneyball was notable for showing how new statistics could be used to find value, it was actually more revealing if you stop and consider the decision-making process that Brad Pitt faced:  while the “smart guys” in the room were all Ivy League grads with laptops, the baseball people made all the decisions.

And before 2012, this is how the Pirates operated too.  The manager, Clint Hurdle, was an old-school baseball-lifer.  The general manager, Neal Huntington, was a Dartmouth grad who was crazy smart, but did not interfere with the clubhouse.  Unsurprisingly, this was not working until Dan Fox stepped up. Dan Fox was the Pirates main analytics expert.  He was an Iowa State grad with a true skill in explaining complex processes.  Fox found a way to take all this data, and present it in a format that was compelling to ball players.

Starting from spring training, he convinced the coaching staff to value shifts of their infield defenders to minimize the opponents ability to get on base with ground balls and simultaneously convinced veteran pitchers to start throwing a sinking fastball with less velocity, but a higher likelihood of a ground-ball.  Then, Fox convinced hitters who were paid on home runs for years to stop pulling the ball and instead use the whole field.  He did this by becoming ingrained in the clubhouse, and an indispensable part of the club.

What does Dan Fox’s success teach all the rest of us?

  • Hire – and empower – passion and expertise, not credentials.
  • Sell the metrics (not announce or order or anything else traditional)
  • Prove the metrics with constant feedback (because annual reviews won’t work)

4.  If You Aren’t Failing, You Aren’t Trying

The Pirates were extraordinarily successful in 2013: making the playoffs for the first time in 20 years, winning the Wild Card game at home, taking the Cardinals to the edge in their series, having a player win the MVP, and having 5 players, including 3 pitchers, as All-Stars. They got extraordinary value, with a motley crew like Francisco Liriano (3.0 WAR and $1 million salary) and Starling Marte (5.0 WAR and $500,000 salary) providing value.  The Pirates went to the playoffs again in 2014 and 2015, losing in the Wild Card game both times, and then in 2016, flop city.  Trying to stay ahead of the curve by playing their outfielders closer to the infield to cut off hits, the Pirates regressed to a losing record, showing that innovative organizations always looking for the edge will sometimes fail.

The safest thing any organization can do is to continue to be average by following what has been successful in the past. But looking ahead is key to learn the lessons of spring – to take advantage of the talent you have, and recruit the talent you need.  Seeking glory means doing things that are considered odd.  So, go home tonight and ask (1) what is the right means to measure WAR in your organization; (2) what is the hidden talent like “pitch framing” that is currently unrecognized/unrewarded; (3) what would Dan Fox do to improve your organization with his ability to explain, cajole, and provide reliable feedback; and (4) is it better to play it safe or to risk in order to dare for success?

Just like the Pirates, you can succeed, regardless of your history and limitations.