Labor and Employment Update - Fall 2013

EMPLOYEE THEFT:  WHY YOU SHOULD THINK TWICE BEFORE THREATENING TO CALL THE COPS

If your employees are at-will, you may terminate their employment with or without cause, for any reason, as long as it is not an illegal reason (for example, you may not terminate them based on race, religion, national origin, sex, disability, age, whistleblower status, or in retaliation for making a workers’ compensation claim or taking FMLA leave).  So, if an at-will employee is stealing from the company, you can most certainly terminate the employment relationship on that basis.  However, employers should take caution to refrain from making the following common mistakes during the termination process in order to avoid potential liability:

FAILING TO CONDUCT A PROPER, THOROUGH INVESTIGATION:  It is crucial that you thoroughly investigate a suspicion of employee theft prior to taking action as an allegation of theft is serious and should not be made lightly.  In addition, it is important to avoid possible violations of privacy rights during the investigation.  For example, digging through an employee’s personal bag (i.e. purse, briefcase) in an attempt to search for stolen goods or money without that employee’s consent can lead to an invasion of privacy claim.  Also, forcing an employee to remain in an investigatory meeting may lead to a false imprisonment claim.  As such, if  an employee is being questioned about suspected theft and expresses a desire to leave the meeting, you must let him or her do so.  

THREATENING CRIMINAL ACTION:  The most typical response to learning that an employee has been stealing from you is the desire to confront them and threaten to call the police unless the money is paid back in full.  Employers should NEVER make this move.  Threatening to file criminal charges in an attempt to coerce re-payment or to obtain a voluntary resignation from an employee may in fact result in criminal charges against you for extortion.  Furthermore, if you make the decision to file such charges and the charges are subsequently dismissed for lack of evidence, you may find yourself as the defendant in a malicious prosecution action.  However, if you simply provide information to law enforcement authorities about a theft and the authorities’ investigation results in a finding that an employee is responsible, you cannot be liable for malicious prosecution of that employee.  So, rather than filing charges against an employee, it is best to simply report to law enforcement authorities that a theft has taken place and allow them to make their own conclusions about the charges to be filed.  

LABELING THE EMPLOYEE AS A “THIEF”:  If all the evidence points to theft, but is not conclusive, an employee should not be told he is being terminated for “theft” or “dishonesty,” or even “suspicion of theft.”  Accusing an employee of a crime is per se defamatory (language that is deemed defamatory in and of itself without the need for proof of special damages) in many jurisdictions.  So, if you accuse an employee of theft and you cannot prove it, you are exposing your company to liability for defamation.  Managers should be trained to never say or write anything about an employee that cannot be proven with reliable documentation or eyewitness testimony.  As Kmart learned in a very costly lawsuit in 1994, telling co-workers that an employee was fired for theft is defamation.  In the Rue v. Kmart case, the plaintiff employee’s supervisor told approximately 50-55 of her co-workers that she was fired for stealing a bag of potato chips.  The evidence revealed that while the plaintiff employee denied the theft allegation, Kmart had never investigated her side of the story and rather made the decision to fire her based on the sole account of her supervisor.  The jury found that Kmart had defamed her and awarded her $90,000 in compensatory damages and $1.4 million in punitive damages.  

THE WORKPLACE BULLY:  A PERVASIVE PROBLEM FOR EMPLOYERS

With the abrupt departure of Jonathan Martin, a 6 foot 5, 312-pound offensive lineman from the Miami Dolphins, the issue of bullying has again captured the nation’s attention  Martin, who was drafted by the Dolphins in 2012, was allegedly harassed by veteran players based on his rookie status.  This behavior continued into Martin’s second season with the team and allegedly included harassing messages from fellow offensive lineman Richie Incognito.

Martin’s departure from the Dolphins is yet another indication that bullying is a universal problem with a diverse range of victims.  According to a 2010 survey by Zogby International, 35% of American workers have experienced workplace bullying.  Although bullying in the workplace appears extensive, there are currently no states with legislation specifically prohibiting it.  Legislation has been introduced in many states, however, including Pennsylvania and New Jersey, which would create a cause of action against both a workplace bully and the employer.

Even without statutes prohibiting bullying in the workplace, bullied employees may pursue legal action under theories of harassment, retaliation, intentional inflection of emotional distress, and even assault.

As to harassment and retaliation, bullied employees may allege claims based on federal laws such as:

Title VII of the Civil Rights Act, which prohibits discrimination based on race, color, religion, sex, and national origin;

The Americans with Disabilities Act, which prohibits discrimination based on disabilities;

The Age Discrimination in Employment Act, which protects individuals over the age of 40; and

The Uniformed Services Employment and Reemployment Rights Act, which prohibits discrimination based on military service.

Significantly, with these types of claims, the employee must demonstrate a connection between the harassment and their status in a protected class.

An employee may also bring a claim for hostile work environment, which requires allegations that the harassment was: 1) unwelcome; 2) based on the employee’s status as a member of a protected class; 3) attributable to the employer; and 4) severe and pervasive.  Notably, a claim for a hostile work environment pertains only to unwelcome, severe and pervasive behavior that is based on a protected class and, thus, does not require a general code of civility in the workplace.

Workplace bullying can subject an employer to costly litigation, hamper productivity, and negatively impact employee morale.  Accordingly, to protect both employees’ and the business, employers should have a complaint procedure in place for employees to report allegations of bullying and a process for investigating and taking action if necessary.

EMPLOYERS MAY BE ABLE TO PREVENT CLASS ACTIONS WITH ARBITRATION POLICIES

As has been written about many times before, in April 2011, the United States Supreme Court held in AT&T Mobility v. Concepcion  that class action waivers in arbitration agreements can be enforceable because the Federal Arbitration Act trumps any state law that declares otherwise.  Nevertheless, employers still needed to worry about violating the National Labor Relations Act by implementing these policies/programs.  

The National Labor Relations Board subsequently held [in D.R. Horton] that arbitration agreements preventing employees from filing collective action claims to address wages, hours, and working conditions violate employees’ rights to engage in concerted activity under the NLRA.  Even though D.R. Horton is on appeal to the Fifth Circuit and has been rejected by an overwhelming majority of courts, the NLRB continued to invalidate arbitration agreements that prohibited class or collective actions.

Recently, however, the Supreme Court rendered another decision – American Express Co. v. Italian Colors Restaurant – which may begin to change that.  In that case, the Court made it clear that Concepcion’s holding applies to claims based on federal law (like the NLRA) as well.   American Express involved claims under federal anti-trust laws.  First, the Court noted that the FAA requires arbitration agreements to be rigorously enforced unless Congress has commanded to the contrary – and that the federal antitrust laws do not even mention class actions.  Further, the Court explained that, while Federal Rule of Civil Procedure 23 establishes the procedures for litigating class actions in federal court, it does not create an entitlement to class proceedings, especially in cases involving claims under federal statutes enacted well before Rule 23.  Finally, the Court held, “The fact that it is not worth the expense involved in proving a statutory remedy does not constitute the elimination of the right to pursue that remedy.”

On November 8, 2013, an ALJ in Chesapeake Energy Corp. v. Bruce Escovedo  held that American Express implicitly rejected the rationale behind the Board’s decision in D.R. Horton.  The NLRA, [like the antitrust laws in American Express], does not even mention class actions and was enacted well before Rule 23.  Therefore, the Judge found that the employer’s arbitration agreement did not violate the Act simply because it prohibited employees from filing and participating in class and collective action claims.  The Judge did find, though, that the company’s arbitration policy could not prohibit employees from exercising their statutory right to file unfair labor practice charges with the Board.  
Even so, the Chesapeake Energy decision is encouraging for employers and possibly the first of many ALJ decisions refusing to invalidate similar arbitration agreements.

By:  Lee D. Moylan
lmoylan@klehr.com

FEDERAL DISTRICT COURT IN ILLINOIS INVALIDATES MANDATORY ARBITRATION AGREEMENT THAT WOULD HAVE PRECLUDED EMPLOYEES FROM OPTING INTO AN ALREADY FILED FLSA LAWSUIT

November 12, 2013 was not a lucky one for Amedisys Illinois, LLC.  On that date, the Federal District Court for the Northern District of Illinois in an FLSA Collective Action – Piekarski v. Amedisys Illinois, LLC – refused to enforce Amedisys’ arbitration agreement to preclude potential class members from opting into the action.  By way of background, Amedisys, during a precertification stay of the litigation it had requested, attempted to implement an arbitration policy mandating the arbitration of all employment disputes – and precluding class actions — unless employees opted out of the program within 30 days.  

To communicate the program to its employees, Amedisys sent an email to them that provided little to no detail about the program.  Instead, the email included electronic links to the new policy and to a cover letter explaining the program, referencing the Piekarski action, and including (by way of yet another link) the Piekarski complaint.  Only if the employees opened these linked documents would they read that, to opt out of the program (and thereby preserve their rights to be part of the Piekarski case), they were required to print the opt out form, sign it, and mail it to the company within 30 days.  Given these facts, the plaintiff argued that the arbitration agreement should not be enforced against those who did not return an opt out form because the agreement was implemented after the lawsuit had been filed.  

Indeed, various courts for various reasons have found that arbitration agreements cannot be applied retroactively to claims that accrued or were filed by the time the agreements were implemented.  The plaintiff also argued that the arbitration agreement was invalid because, by the way the company notified employees, employees likely did not understand how to opt out.  

The court sided with the plaintiff.  Because the arbitration agreement was communicated after a lawsuit had been filed, the court explained that it had the authority to limit and rectify the communication if the court found that it had been coercive, misleading, or abusive to discourage class members from participating in the action.  Here, not only did the court find that the communication had been misleading (and coercive), but it also found that it was “obvious” that the company intended that it be so.  It was notable that: (1) the company did not attach the pertinent documents directly to the email, but, instead, required each employee to click on several different links to see them; (2) the documents were not easily understandable and consisted of over 50 pages; and (3) to opt out, each employee was required to print the form, sign it, and mail it back within 30 days.  Also, the court cited several decisions from different circuits in support of its finding that this communication was more likely to have been coercive given the unequal bargaining power between the employer and the employees.  Further, the court considered Amedisys’ attempt to implement the agreement during a stay that the court had granted at the company’s request as “highly improper.”

Undoubtedly, there have been many decisions over the last few years enforcing arbitration agreements in the employment context precluding employees from participating in class and collective actions.  Indeed, implementing an arbitration program remains a viable option for employers to minimize the possibility that they will have to defend themselves in such actions.  However, because decisions are being rendered in this area on a regular basis, it is apparent that employers must keep abreast of the developing case law in deciding whether and how to implement an arbitration policy.  Because of all this, employers should consult counsel before drafting or implementing an arbitration policy.

By:  Lee D. Moylan
lmoylan@klehr.com