On the morning of August 12, 2008, Lawrence Daniels, a pharmaceutical representative employed by Astellas Pharma US Inc., was driving a car owned by Astellas.  That same morning, James Caskey, was riding his bicycle around his North Naples neighborhood.  He was biking home when he was struck and killed by the car driven by Daniels.   A criminal proceeding found Daniels guilty of failing to yield at a stop sign.  Now, a civil case will determine whether Daniels was texting while driving.  If so, Collier County Circuit Judge Hugh Hayes has permitted Caskey’s widow to seek punitive damages against the driver and his employer according to a story in the Naples Daily News.  Punitive damages have no relation to the actual damages incurred but, rather, are intended to punish the defendants and deter others from engaging in similar conduct.

Although Daniels denies he was using his cellphone while driving, cell phone records suggest otherwise.  Importantly for Daniels’ employer, its employee handbook did not require its drivers to pull to the side of the road to text. Daniels’ handbook simply said: “Use of a cellular phone in a company vehicle is permissible; however, cellular phone usage should be restricted as much as possible while driving.”  While Michigan laws prohibit texting while driving, Florida has not yet enacted such laws.  If Daniels was indeed texting while driving, his company’s failure to issue a policy prohibiting texting while operating its vehicles could be costly, as it eliminates at least one possible defense to company liability.  In Florida DUI cases, punitive damages of up to $500,000.00 are permitted.

While there are many employee handbooks available for download on various websites, including one found on the Small Business Administration’s website, consult your attorney to ensure particular issues which may be important to your business are addressed.

Once your policies are implemented, it’s also important to take measures to enforce them.   Last year, the Walt Disney Company updated their employee policies to prohibit the use of any electronic device to send or read text messages, e-mails or any other written communication while operating a vehicle.   Employees who fail to comply are subject to disciplinary action up to and including termination.

In Hall v. Stark Reagan, former shareholders of the law firm alleged that their shareholder status in the firm was terminated by the remaining attorneys based on their age. The attorneys filed suit in Oakland County Circuit Court based on age discrimination.

The law firm claimed that the parties’ shareholder agreement required the parties to arbitrate any age discrimination claims. The Circuit Court agreed and dismissed the complaint.

The Court of Appeals reversed that decision. It found that the arbitration clause in the shareholder agreement was limited in its scope to disputes relating to the “interpretation or enforcement” of the “rights or obligations” described in the agreement. Since those “rights or obligations” only involved various forms of entitlement to stock ownership, a dispute involving age discrimination was not contemplated by the shareholder agreement.

Because the complaint did not contain any allegation that defendants violated the shareholder agreement, the court concluded that including an age discrimination case “within the scope of an arbitration provision expressly limited to the ‘interpretation or enforcement’ of ‘rights or obligations’ concerning corporate stock would expand the clause’s reach beyond that intended by the parties.”

In many cases, arbitration is preferable to litigation. If you currently have arbitration clauses in your agreements with your employees, make sure they cover all of the potential disputes that can arise.

However, under a new IRS settlement program, business owners have the opportunity to “come clean” regarding workers who have been previously misclassified as independent contractors.  The Voluntary Classification Settlement Program allows eligible business owners to voluntarily agree to reclassify independent contractors as employees (one of the eligibility requirements is that the taxpayer is not currently being audited).  The business owners would then pay only 10% of the payroll tax liability which would have been due on the employee’s compensation for the past year, without interest or penalties.  Participating taxpayers agree to treat applicable workers as employees for future tax periods and extend the period of limitations on assessment of employment taxes for three years to allow the IRS to monitor future compliance.  In exchange, the IRS agrees to:

• Accept 10 percent of the employment tax liability that may have been due on amounts paid to the workers for the most recent tax year;
• Waive all interest and penalties on unpaid amounts; and
• Not conduct an employment tax audit with respect to worker classification of those workers being reclassified for prior years.

To determine whether to consider participating in this program, a business owner should consult with counsel to analyze whether the workers are independent contractors or employees.  The factors used by the IRS center around degrees of control and independence:

1. Does the owner control or have the right to control what the worker does and how the worker does the job?
2. Are the business aspects of the worker’s job, including how the worker is paid and who provides tools for the job, controlled by the owner?
3. How continuous is the relationship?
4. Is the work performed a key aspect of the owner’s business?

The IRS says that “there is no ‘magic’ or set number of factors that ‘makes’ the worker an employee or an independent contractor, and no one factor stands alone in making this determination.”  The entire relationship must be considered.

For business owners who want a free analysis, the IRS is more than willing to conduct one through the filing of Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding.   Although it may take at least six months, the IRS will review the facts and circumstances and officially determine the status of any workers.  However, in light of the publicized vigilance in the pursuit of unpaid taxes by the IRS for misclassified workers, this particular option may fall into the category of “be careful what you ask for.”

The employee worked for Countrywide Financial Corp., which merged with Bank of America in July 2008.   According to the Department of Labor, the employee revealed “widespread and pervasive wire, mail and bank fraud involving Countrywide employees”  and was fired shortly after the merger.

In a Bank of America statement reported by the Los Angeles Times the bank said it fired the employee “solely based on issues with the employee’s management style and in no way related to the employee’s complaints and the allegations made in the complaint.”  The bank said it will appeal the ruling to the Labor Department’s Office of Administrative Law Judges within 30 days.

In the case of Deer v. Saltzman, Tanis, Pittell, Levin & Jacobson, Lavern Deer, who is black, was employed by a pediatric medical practice. While her performance reviews were generally excellent for her first several years of employment, they included constructive comments on areas of improvement. When Ms. Deer was passed over for a promotion, she filed an EEOC complaint for discrimination while she was still employed by the medical practice.

Around that same time, her supervisor gave Ms. Deer low scores for “Individual Initiative,” “Personal Job Efficiency,”and “Planning” in her written performance evaluation. The supervisor noted that Ms. Deer “should spend more time with her staff,” and that she “needs to organize her work in order to spend more time on the floor managing her staff.” The supervisor provided a written performance warning to Ms. Deer which she signed. A subsequent investigation also found that she was spending work time using the office computer which was prohibited by office policy.

Ms. Deer was fired after admitting she sent private e-mails on company time. Ms. Deer then sued, alleging that her termination was in retaliation for her EEOC complaint.

In order for an employee to prevail on a retaliation claim, she must show (1) that she engaged in statutorily protected activity (for Ms. Deer, it was the filing of the EEOC complaint); (2) that she suffered a materially adverse employment action (termination, in Ms. Deer’s case); and (3) that there was some causal relationship between the two events.

As to the last issue, the Southern District of Florida federal court found that the earlier performance evaluations showed that her termination was caused by her performance deficiencies and not because of the filing of the EEOC complaint. The court found that the medical practice demonstrated “legitimate, nondiscriminatory reasons for its employment decisions,” and dismissed Ms. Deer’s complaint.

Lesson for employers? Document everything relating to your employees’ job performance especially any performance deficiencies. Even in an at-will employment situation, an employer can still be liable for wrongful termination if discrimination or retaliation can be proven. With proper documentation, these types of claims are easier to defend.

The District Court for the Northern District of California had previously certified the class action and the Ninth Circuit Court of Appeals affirmed that ruling. The Supreme Court reversed the ruling of the Ninth Circuit and found that a class action, which would have been one of the largest in United States history, was inappropriate. The Court found that that the alleged class of workers would not have enough common “questions of law or fact” to result in a class action.

The plaintiffs wanted “to sue for millions of employment decisions at once,” but the Court held that “without some glue holding together the alleged reasons for those decisions, it will be impossible to say that examination of all the class members’ claims will produce a common answer to the crucial discrimination question.”

The Court determined that there was no significant proof that Wal-Mart operated under a “general policy of discrimination.” In fact, Wal-Mart’s announced policy forbids sex discrimination, and the company has penalties for denials of equal opportunity. The plaintiffs’ only “evidence of a general discrimination policy was a sociologist’s analysis asserting that Wal-Mart’s corporate culture made it vulnerable to gender bias.” Because the sociologist was unable to estimate what percentage of Wal-Mart’s employment decisions might be determined by stereotypical thinking, his testimony was worlds away from “significant proof” that Wal-Mart “operated under a general policy of discrimination.”

Justice Scalia wrote the the opinion of the Court, in which Justices Roberts Kennedy, Thomas and Alito joined. Justice Ginsburg wrote a dissent as to the issue of whether there were enough facts uniting the claims and believed that “Wal-Mart’s delegation of discretion over pay and promotions is a policy uniform throughout all stores.” Justice Ginsburg was joined by Justices Breyer, Sotomayor and Kagan in finding that the plaintiffs should have been permitted to “show that common class questions ‘predominate’ over issues affecting individuals.”

While Wal-Mart will still have to defend the original claims of the handful of women who brought the lawsuit and may end up facing new claims around the country, the ruling will prevent the possibility of billions of dollars in damages in a single case. Although this ruling will protect businesses from class action lawsuits based on a lack of common facts, the ruling should also highlight the importance of a written anti-discrimination policy in defending these types of actions.

Dr. Eric Eskioglu filed a complaint which alleges that the non-compete clause in his 2006 employment contract with Lee Memorial Hospital is not enforceable. The clause prohibits the doctor from engaging in a neurosurgical practice within a 50-mile radius of Lee Memorial Hospital. Specifically, the clause in his employment contract states:

“Physician shall not engage in the practice of neurosurgery or any related field of medical or surgical practice, within a radius of fifty (50) miles from the LMHS facility located on Cleveland Avenue, Fort Myers, Florida for a period of three (3) years following the date of termination of employment. Physician expressly agrees that this paragraph 10.c. is reasonable.”

Dr. Eskioglu voluntarily resigned from Lee Memorial and his last day of employment was March 18, 2011. Unfortunately, for him, he wants to continue his practice at Physicians Regional Medical Center in Naples, which is a little over 40 miles from Lee Memorial. Among other arguments, the doctor alleges that enforcement of the non-compete clause would harm the public because it would limit the public’s access to services in his neurosurgical specialty.

Unless Lee Memorial Hospital breached the employment contract with Dr. Eskioglu, he will have an uphill battle in attempting to invalidate the non-compete provision. Florida law enforces restrictive covenants if they are reasonable in time, area and line of business and set forth in a writing signed by the party against whom enforcement is sought, and the contractually specified restraint is supported by at least one legitimate business interest justifying the restraint, and reasonably necessary to protect that interest. Envtl. Servs. v. Carter, 9 So. 3d 1258, 1263 (Fla. Dist. Ct. App. 5th Dist. 2009); § 542.335, Fla. Stat.

I will be watching for any resolution of this case.

The NLRB issued a press release advising that “a settlement has been reached in a case involving the discharge of a Connecticut ambulance service employee for posting negative comments about a supervisor on her Facebook page.” The NLRB alleged, among other things, that the company maintained overly broad rules in its employee handbook regarding blogging, Internet posting, and communications between employees. Under the settlement, “the company agreed to revise its overly-broad rules to ensure that they do not improperly restrict employees from discussing their wages, hours and working conditions with co-workers and others while not at work, and that they would not discipline or discharge employees for engaging in such discussions.”

Although the precise language of the original rules and the revised rules was not published, it would be surprising if the employer was not allowed to maintain a policy prohibitting its employees from referring to supervisors as “scumbags” and other vulgar names as this employee posted on Facebook. Another undisclosed aspect of this case is why the National Labor Relations Board is wasting its resources and those of a private employer in attempting to protect this type of employee behavior.

The NLRB’s position, taken directly from its own Office of the General Counsel News Release is as follows:

“An NLRB investigation found that the employee’s Facebook postings constituted protected concerted activity, and that the company’s blogging and internet posting policy contained unlawful provisions, including one that prohibited employees from making disparaging remarks when discussing the company or supervisors and another that prohibited employees from depicting the company in any way over the internet without company permission.”

The NLRB is an independent federal agency which has the authority to safeguard employees’ rights to organize and to remedy unfair labor practices committed by private sector employers. One reporter notes that this case appears to be the first time “the board has argued that workers’ criticisms of their companies or bosses on a social media site is considered a protected activity.”

The purported basis of the complaint rests in Section 7 of the National Labor Relations Act which permits employees “the right to self-organization, to form, join or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.”

While a hearing was scheduled for January 25, 2011, a postponement of that hearing until February 8th to allow for additional settlement discussions may show that the NLRB is reluctant to have a written opinion issued in favor of the company.

A television news account of the case can be found on YouTube.