Legal Trickery – Eric A. Parzianello

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Is Your Business At Risk? Take a Short Risk Test to Find Out

Posted by Eric Parzianello on January 17, 2016

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How does a business owner minimize its risk of litigation or other costly disputes?  The first thing an owner must do is identify areas which are most likely to lead to conflict with either other owners, employees or customers.  While any of the following areas can lead to trouble, if a business owner’s answer is “no” to more than than a handful of these critical areas, unwanted issues could be lurking on the horizon.

1.  Does the Company have signed By-laws or an Operating Agreement?

Setting the “rules of the game” between owners is critical.  Even single member limited liability companies should have operating agreements to ensure it’s not considered a sole proprietorship in the event of litigation.

2.  Does the Company comply with corporate formalities such as documenting annual meetings?

Many companies’ governing documents provide for mandatory annual meetings or periodic valuations for buy-out purposes.  Failing to follow those provisions can lead to owner disputes.

3.  Does the Company have a succession plan in place?

Small business owners in particular often fail to have a plan in place in the event of their death or disability.  This can leave owners’ family members and the company itself in jeopardy. A Company’s succession plan should be part of the owners’ estate planning.

4.  Does the Company have an employee handbook?

A comprehensive employee handbook which covers all issues of the employees’ relationship with the Company is essential.  The lack of such a document with at-will provisions, social media policies and anti-discrimination and harassment policies can lead to litigation from a terminated employee.

 

5.  Are the Company’s key employees subject to non-compete agreements?

Both Michigan and Florida enforce well-drafted non-compete and non-solicit agreements.  Employees without such an agreement can turn your customers into theirs after they leave.

6.  Does the Company have confidentiality agreements to protect its sensitive information?

A Company must take measures to protect its confidential information.  Confidentiality agreements with those who have access to proprietary data are critical.

7.  Are the company’s customer relationships properly documented with contracts? 

Customer and client relationships are the lifeblood of any company.  Without proper contracts which include provisions for termination, default and dispute resolution, a Company can be at risk for litigation.

8.  Is any real estate owned by Company titled in the name of a separate entity?

If the business is operated from real estate which the Company owns, having a separate entity to hold that real estate can limit the risk to the business operations in the event of certain claims such as personal injury.

If the Company has multiple owners: 

9.  Does it have restrictions on an owner’s ability to sell ownership interests?

Although many small business interests are not marketable, an owner may wish to sell his interest to a spouse or key employee.  Without restrictions on such a sale, the other owner may end up with a business partner he doesn’t want.

10.  Does it have buy-sell agreements in the event of retirement or death of an owner?

Without proper buy-sell procedures, the retirement or death of an owner in a multi-owner business can lead to disputes between the owners or their beneficiaries.

Does your Company have some areas of risk?  Contact me to discuss how to reduce them.

Eric A. Parzianello
313-672-7300
eparzianello@hspplc.com

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Think Your Arbitration Clause is Sending Your Dispute to Arbitration? It May Not

Posted by Eric Parzianello on March 4, 2015

Depending on the nature of the dispute and which side you’re on, arbitration can be a good mechanism to provide a resolution.  Parties often insert some type of arbitration clause in their agreements believing that all disputes under that agreement must be arbitrated.  If, however, the arbitration clause is not sufficiently broad to cover any type of dispute and a complaint is drafted with the intent of avoiding arbitration, court litigation will proceed as one Florida appeals court recently held.

In Sherwood v. Slazinski, Dr. Leonard Slazinski and other members of a limited liability company (LLC) filed an action against two other members of the LLC, the Sherwoods, seeking declaratory and injunctive relief.  Like most Operating Agreements, the one at issue addressed company formation, capital contributions, profits/losses, distributions, management, compensation, bookkeeping and transfers.  The Operating Agreement also contained the following clause:

    • “[i]n the event of any impasse in decision-making, not otherwise capable of being decided according to the terms of the Operating Agreement, the matter shall first be referred to voluntary nonbinding mediation. In the event there is no satisfactory resolution after such mediation, it shall be referred to arbitration….”

The Sherwoods filed a motion to compel arbitration on the basis of this clause.  The Court of Appeals found that “to compel arbitration, the Sherwoods had to demonstrate: (1) that a valid written agreement to arbitrate existed, (2) that an arbitrable issue existed, and (3) that the right to arbitrate had not been waived.”In a February 20, 2015, decision, the Florida Court of Appeals concluded that the dispute as framed by Dr. Slazinski in his complaint did not fall within the scope of the arbitration clause since the clause related only to member duties and decision-making impasses. Because the arbitration clause was narrowly drafted, it didn’t extend “to any and all claims that may arise or relate to the agreements governing the business.” The Court therefore denied the requested arbitration.

If you desire arbitration for any type of dispute, make sure your clause says that.  If you’re trying to avoid arbitration, make sure your complaint is drafted to ensure that result.

Eric Parzianello

eparzianello@hspplc.com
313-672-7300

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Do Your Employment Agreements Require Arbitration and Preclude Class Actions?

Posted by Eric Parzianello on March 1, 2015

A February 17, 2015, decision of the district court in the Southern District of Florida confirms the ability of an employer to require an incoming employee to execute and be bound by an arbitration agreement.

In Curbelo v. Autonation Benefits, Inc., the plaintiff electronically signed a confidentiality, no-solicit, non-compete, and arbitration agreement on her first day on the job. The agreement required arbitration of any claim she could bring against her employer “i ncluding participation as a class representative or class member on any claim.” The plaintiff sued the employer in federal court under the Fair Labor Standards Act for wage violations and sought to act as a class representative on behalf of other employees. The federal court found that both the arbitration clause and the class action waiver were valid and enforceable. The court ordered the case to arbitration.

Arbitration clauses in your employment agreements can be another way to limit your litigation risk. Make sure your employment agreements protect your company.

Eric Parzianello
eparzianello@hspplc.com
313-672-7300

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Sixth Circuit Bails Out Employer’s Questionable Drafting: Arbitration Clause Enforced Despite Lack of Mention of Survival

Posted by Eric Parzianello on April 13, 2014

The Sixth Circuit Court of Appeals recently bailed out an employer from some questionable drafting in its professional services contracts.  As a result, multiple former workers were required to arbitrate their claims individually as opposed to a class.

In Huffman v. Hilltop Companies LLC, the plaintiffs were hired by Hilltop to review the files of mortgage loans originated by PNC Bank. For over a year, they regularly worked in excess of forty hours per week but were not paid at overtime rates because they were classified as independent contractors – a classification the plaintiffs believed was erroneous.

One paragraph of their 24 paragraph Professional Services Contract contained the following arbitration clause:21.  ARBITRATION. Any Claim arising out of or relating to this Agreement, or the breach thereof, shall be settled by binding arbitration administered by the American Arbitration Association (“AAA”) in accordance with its Commercial Arbitration Rules and its Optional Procedures for Large, Complex Commercial Disputes. The … arbitration and all related proceedings and discovery shall take place pursuant to a protective order entered by the arbitrators that adequately protects the confidential nature of the parties’ proprietary and confidential information.

A separate paragraph containing the survival clause read as follows:

22. SURVIVAL. Paragraphs 4, 5, 6, 7, 8, 9, 10. 11, 12, 14, 17, and 22 shall survive the expiration or earlier termination of this Agreement.

The plaintiffs’ contracts were terminated and they later filed suit in federal court alleging a violation of the Fair Labor Standards Act.  The employer argued that the plaintiffs were required to arbitrate their claims; the plaintiffs argued that the arbitration clause expired when the contracts were terminated since it wasn’t one of the twelve paragraphs listed in the survival clause.

The federal district court agreed with the plaintiffs.  It ruled that there was a “clear implication” that the parties intended the arbitration clause to expire with the agreement since 12 of the 24 paragraphs in the contracts were identified in the survival clause – and the “Arbitration” paragraph was not one of them. 

However, the Court of Appeals reversed.  It held that there is a strong presumption in favor of arbitration.  It found that the plaintiffs’ interpretation that the arbitration clause terminated upon the contract’s termination depends on a “strained reading” of the contract.  The listing of half of the contract’s paragraphs in the survival clause was apparently not enough for the Court:  it stated that “if the survival clause listed twenty-three of the agreement’s twenty-four clauses—all but the arbitration clause—that might constitute a clear implication, and yield a different result.”

The Court then not only held that the multiple plaintiffs were required to arbitrate but that they could not proceed as a class in arbitration.  Though the contract and the arbitration clause did not address classwide arbitration, the court held that the plaintiffs must proceed individually in the absence of a specific authorization to do so.  Despite this ruling, an employer would best be served by an explicit reference that an arbitration provision survives termination and a specific prohibition against classwide arbitration.  

Eric A. Parzianello
eparzianello@hspplc.com
313-672-7300

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Revitalizing Detroit Requires a Leap of Faith and Solid Preparation

Posted by Eric Parzianello on January 30, 2014

It was a cold, February day in 2012 when my partner Mark Snitchler and I drove downtown on Woodward Avenue from Oakland County to view possible Detroit office space for our new law firm Hubbard Snitchler & Parzianello PLC. Despite the passing of more than a decade since moving from Detroit to Franklin, as I traversed the city streets, it initially appeared not much had changed in the city. My immediate thought was “maybe this isn’t such a good idea.” Over the next couple hours, however, my confidence would be restored.

Our “idea” to move downtown was inspired by Detroit’s recent rejuvenation. As companies and organizations moved back to the city, we believed a boutique business law firm, like the one we planned to open, would thrive in Detroit. We met with Bruce Schwartz, Quicken’s Detroit Relocation Ambassador, for what we thought would be a building tour. As Snitchler recalled, “Although we visited a number of buildings, what stood out more was the vision Bruce laid out for us.”

Schwartz shared Dan Gilbert’s plan for downtown, which centers on redeveloping Woodward Avenue and surrounding districts like Capitol Park and Grand Circus Park into a thriving urban environment made of new and renovated residences, offices, stores, restaurants and cultural attractions.  After we examined projection drawings of the Woodward corridor and reviewed artists’ renderings of renovated buildings, we were captivated by the matter-of-fact confidence in what was planned. Still, we were making a huge bet on the city making a comeback. While every new venture has risk, Snitchler, John Hubbard and I knew advance research and planning was a necessity to minimize our risk.

Taking our own advice, we focused on the following items, key to starting any new business:

Develop a business plan. A discussion between owners of the “how,” “why” and “where” of the business is important. For us, our individual expertise had been established, but we still needed to address the markets and clientele we would target. The industry outlook, analysis of competition and financial projections are additional elements of a good business plan. And for us, incorporating Detroit into our future marketing would be important. 

Decide on a business structure. The decision to form a business as a limited liability company, corporation or other entity depends on various factors. Regardless of the type, a company needs a legal entity to limit the owners’ personal liability and maximize tax benefits.  We worked with CPAs to determine the most appropriate structure for our business.

Obtain start-up capital. All ventures need to establish banking relationships. Loans for equipment and lines of credit should be explored. We’re starting to see banks that are more willing to extend loans to start-ups. That has positively affected the downtown area. At the same time, there are grants, tax abatements and other funding programs that should be explored.

Draft an operating agreement. One of our busiest practice areas is business breakup litigation. When partners don’t plan an exit strategy, it can lead to court battles. Discussion of the terms on which one partner can leave or be asked to leave the business may take the “romance” out of the initial stages of a professional relationship, but it is essential. Non-solicitation agreements also should be considered with a new venture so departing partners or employees can’t attempt to take customers on their way out.

Negotiate a lease.  A lease agreement may a new venture’s largest obligation.  Seeking counsel to help understand all lease obligations – such as taxes, insurance, and common area maintenance charges – is important.  Negotiating terms such as length, tenant improvements, and options for additional years is also essential. 

Recruitment.  There’s no question a vast majority of graduates, entrepreneurs and professionals are looking to work and live in a cool, urban setting.  Detroit has that.  As a case in point, when the David Broderick Tower at Woodward and Witherell was redeveloped into 125 apartments last September, every residence was leased.  As more residences, offices and merchants are added, we believe it will attract the best and brightest professionals in the world.  Instead of brain drain, Detroit is experiencing a brain gain. 

As for our firm, there have only been a couple unanticipated growing pains in moving downtown.  As Hubbard jokes, “We’re still working on patience – waiting for elevators or driving to the top level of the parking garage to find a space. But that means more people are coming back to Detroit, so it’s a good thing.”

Our bet on the city’s comeback is already paying off.  Mark noted, “We’ve attracted new clients who either have businesses located in the city or are looking to move here. Our downtown move to the Chrysler House is a big reason for that, and it uniquely positions us to assist those clients.”

Each day we are reminded of Detroit’s potential by the wall-size Fathead photos of a bustling downtown, taken in 1917, adorning our office. The photos are as much a nod to the city’s rich history as to our belief that the city is coming back. At our firm, we think it’s actually already back.

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This article was originally published in dBusiness Magazine in its July/August 2013 Edition.

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Top 7 Safeguards To Protect Confidential Information

Posted by Eric Parzianello on January 12, 2014

How do I protect my confidential information ?  It’s a common question asked by corporate executives and business owners who are increasingly concerned about how to protect their company’s sensitive material. The disclosure of customer lists, pricing information and business techniques could negatively impact a company’s revenues.  What are the top safeguards a business owner can put in place to protect critical information?

  1. Store critical information with controlled physical access
  2. Limit access to sensitive information in electronic format
  3. Clearly mark any confidential information
  4. Ensure departing employees return confidential information in their possession
  5. Restrict copying and transmission of confidential information
  6. Require employees and others who will view sensitive material to sign confidentiality agreements
  7. Enforce any violations of confidentiality agreements or company policy

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Employee’s Facebook Vacation Pictures Lead to Termination

Posted by Eric Parzianello on March 20, 2013

A winter trip to Cancun is the perfect backdrop for Facebook picture posting – unless you happen to be on FMLA leave for “excruciating” back and leg pain.

Lineberry v. DMC

That is the message from a recent federal case out of the Eastern District of Michigan, Lineberry v. Detroit Medical Center.

Carol Lineberry was performing satisfactorily as a registered nurse at the  Detroit Medical Center (“DMC”).   On January 27, 2011, she was moving stretchers at work and woke up the next day with “excruciating pain in her lower back and leg pain.”  The DMC approved leave for Lineberry under the Family and Medical Leave Act (“FMLA”) from January 27, 2011, through April 27, 2011. While on FMLA leave, she took a trip to Mexico.   Her co-workers saw Facebook photos of Lineberry on vacation, including photos of her riding in a motorboat (above) and lying on a bed holding up two bottles of beer in one hand.  Lineberry also posted Facebook pictures of herself holding her grandchildren.  Based on these Facebook postings, Lineberry’s co-workers (and Facebook friends) complained to her supervisors about what they thought was a misuse of FMLA leave.

On her return, she was questioned about her trip during an investigative meeting attended by the DMC’s human resources personnel.  Lineberry claimed that she was wheeled around the airport in a wheelchair.  When reminded that airports have security cameras, she recanted and admitted that the use of a wheelchair was a lie.  The DMC terminated her for violating the DMC’s Progressive Discipline Policy concerning  “Dishonesty, falsifying or omitting information, either verbally, [or] in written format (including electronically) on DMC records including, but not limited to payroll records, human resources records etc.”  Lineberry naturally sued for violation of her FMLA rights.

In February of 2013, the court dismissed her complaint.  It held that employees may be dismissed so long as the dismissal would have occurred regardless of the employee’s taking of FMLA leave.  The court found that she was terminated for dishonesty and not as a retaliation for taking FMLA leave.  The court also found that if an employer, like the DMC’, honestly believes that an employee lied and misused FMLA leave time, it may terminate the employee based on that belief.

Lesson for employers:  have a good employee handbook policy regarding dishonesty.  Lesson for employees:  use better judgment in Facebook posts — and Facebook “friends.”

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IRS To Crack Down on Improper Use of Independent Contractors But Offers Early Settlement

Posted by Eric Parzianello on September 27, 2011

A prior blog post examined some of the dangers of classifying workers as independent contractors when the Department of Labor may consider them to be employees.  If the DOL concludes that employees have been erroneously classified as independent contractors, then  minimum wage, overtime, penalties and interest may be only a part of a business owner’s problems.   Another looming risk as a result of an erroneous classification is the IRS seeking to recover unpaid federal employment taxes.  The IRS has publicized its intent to be more vigilant about worker misclassification in the future.

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.”

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Bank of America Fires Poor Manager; U.S. Says She Was a Whistleblower and Awards Her $930,000

Posted by Eric Parzianello on September 15, 2011

As a timely follow-up to a recent blog regarding documentation of employee deficiencies, whether a former Bank of America employee’s personnel file was sufficiently “papered” with negative performance reviews will almost certainly be at issue on appeal.  The bank was ordered to reinstate and pay a former employee approximately $930,000 in back wages, interest, compensatory damages and attorney fees after the United States Department of Labor found that she was fired for being a whistleblower.

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.

Posted in General Employment Law, Uncategorized | Leave a Comment »

Documentation of Your Employees’ Job Deficiencies Could Be Important After They Sue

Posted by Eric Parzianello on September 6, 2011

Are you sufficiently documenting your employees’ performance deficiencies? A recent Florida federal decision shows the importance of maintaining records which evidence any performance issues should that employee file a lawsuit for discrimination or retaliation.

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.

Posted in General Employment Law, Uncategorized | Leave a Comment »

We’re Hiring: Litigation Paralegal Needed

Posted by Eric Parzianello on June 21, 2011

My firm is looking for an experienced legal assistant to support our business litigation and transactional practices. Candidates must: have excellent organization and writing skills; be attentive to detail; be proficient in transcription; and have the ability to work in a fast-paced environment. Please send resumes to mosborn@bealshubbard.com.

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Supreme Court Gives Wal-Mart Huge Legal Victory in Sex Bias Case

Posted by Eric Parzianello on June 20, 2011

A divided United States Supreme Court this morning handed Wal-Mart Stores a huge legal victory in a sex bias case. The plaintiffs, who were current or former employees of Wal-Mart, sought damages on behalf of themselves and a nationwide class of some 1.5 million female employees, because of Wal-Mart’s alleged discrimination against women. The plaintiffs claimed that “local managers exercise their discretion over pay and promotions disproportionately in favor of men, which has an unlawful disparate impact on female employees.” A link to the complete decision can be found here.

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.

Posted in General Employment Law, Uncategorized | Leave a Comment »

Florida Physician’s Non-Compete Agreement With Hospital Was About 10 Miles Too Long

Posted by Eric Parzianello on May 5, 2011

How important are 10 extra miles in a non-compete clause? A recently filed case in Lee County, Florida, shows that they can be critically important.

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.

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Facebook Case Update: Case Settled; Employer’s “Overly Broad” Internet Policies To Be Revised

Posted by Eric Parzianello on March 2, 2011

In an update to last month’s NLRB Facebook case story, that case has been settled. The details of the NLRB’s complaint are found in a prior post below.

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.

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“My Supervisor Is A Psychopathic Scumbag”: Protected Facebook Post? NLRB Incredibly Says “Yes”

Posted by Eric Parzianello on February 2, 2011

From an employer’s perspective, the National Labor Relations Board complaint against a company for firing an employee after she posted derogatory comments about her supervisor on Facebook is beyond absurd. The complaint was filed after an ambulance company fired an employee for venting on her Facebook account that she “love[s] how the company allows a 17 [the company’s term for a psychiatric patient] to be a supervisor,” before calling the supervisor a “scumbag” among other things.

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.

Posted in Social Media in the Workplace, Uncategorized | Leave a Comment »

Hiring Your Competitor’s Employee? Undertake a Cost-Benefit Analysis

Posted by Eric Parzianello on November 3, 2010

Are you contemplating stealing away a competitor’s employee for your own company? While you may ultimately not have to pay damages for interfering with your competitor’s business, your defense costs may be significant.

On October 25, 2010, the Florida First District Court of Appeal reversed a trial court’s decision, prior to trial, to dismiss a lawsuit brought by a physician group against a former employee and her new employer. In Southeastern Integrated Med., P. L. (“SIMED”) v. North Florida Women’s Physicians, P. A. (North Florida) , SIMED and Dr. Carroccio entered into a Employment Agreement. Dr. Carroccio agreed to provide professional services to SIMED’s patients as a full-time medical doctor. The parties’ Employment Agreement contained a covenant not to compete which provided that upon termination of employment, “Dr. Carroccio was restricted for two years from providing medical services within a twenty-five mile radius of any SIMED medical office.”

Eleven months into the Employment Agreement, SIMED learned that North Florida solicited Dr. Carroccio to leave SIMED and to work at North Florida despite having knowledge of the Employment Agreement. Dr. Carroccio accepted the offer to work for North Florida and informed SIMED that she was quitting. SIMED sued Dr. Carroccio and North Florida alleging that it suffered damages in the loss of legitimate business interests, including substantial relationships with specific patients.

The trial court found that North Florida’s conduct was not actionable because it had a legitimate, competitive business purpose, “i.e., North Florida was free to compete with SIMED in recruiting physicians to its practice.” The trial court therefore dismissed the complaint. However, the appellate court found that it was improper for the trial court to consider North Florida’s motives in recruiting Dr. Carroccio without hearing evidence on the issue. It therefore sent the case back to the trial court for further proceedings.

While North Florida may ultimately prevail in the trial court, it will have already paid considerable attorney defense costs for the original proceedings in the trial court, then in the appellate court, then back in the trial court and then, perhaps, in the appellate court again. If you’re planning to hire an employee with a non-compete agreement away from a competitor, consult your counsel and develop a cost-benefit analysis. That employee may provide a considerable amount of profit for you. On the other hand, the analysis may conclude that the potential upside does not outweigh the cost of litigation.

Posted in Non-Compete Law, Uncategorized | Leave a Comment »

Looking Through Your Employees’ Personal E-mails or Texts? Supreme Court Highlights Need For Written Policy

Posted by Eric Parzianello on September 16, 2010

Can employers delve into their employees’ personal lives by looking through their e-mails and texts? The answer could be yes, if the information is on company equipment and your written policy permits it.

In a case which was the subject of two prior blog articles below, this summer’s decision by the United States Supreme Court in the case of City of Ontario v. Quon highlights the need for employers to have written policies addressing employee use of work-issued electronic devices. In Quon, a police officer’s sexually charged text messages to his estranged wife and office girlfriend were reviewed by the officer’s police chief. Although he was only issued a reprimand for sending the personal text messages in violation of a written policy, Quon and the people he was messaging sued, claiming that the department had no right to look at the communications.

The Supreme Court held that the officer did not have a right to privacy under these circumstances since the police department had a legitimate interest in its review and the search was reasonable in scope. Importantly, the court noted that the city’s policy that allowed it to monitor and log text messages resulted in the employees having no expectation of privacy or confidentiality when using those devices. Although the decision dealt with the constitutional issues surrounding a public employer’s search of an employee’s text messages, private employers should note that the Court’s decision was based on the employee violation of an explicit policy governing the use of company-owned devices.

The importance of a written policy governing the use of employer-owned devices for electronic communications and notifying the employees of the employer’s right to monitor such use cannot be overstated. The necessity for clarity in such a policy became evident in a New Jersey case regarding employee e-mails.

In Stengart v. Loving Care Agency Inc., the New Jersey Supreme Court ruled that an employee who exchanged personal e-mail messages with her attorney on an employer-issued laptop computer had a reasonable expectation of privacy in those communications. While the employer had a policy that allowed the company to review any messages sent on its equipment, the policy also permitted personal use of e-mail. The court noted that it was “not clear” from the policy “whether the use of personal, password-protected, web-based e-mail accounts via company equipment” was covered by the policy; therefore, the policy did not destroy an expectation of privacy by the employee in her personal e-mails.

As noted in a recent Law.com article, “employers should have clearly worded policies related to the use of employer-issued electronic devices and computers. At a minimum, the policy should contain:

• specific definitions of the work devices and messages that are covered by the policy — for example, work-issued computers, BlackBerrys, and cell phones;

• a provision addressing whether an employee is permitted to use work devices for personal use; and the extent to which that use is allowed;

• a provision informing employees that the employer may monitor and log all work devices and accounts;

• a provision informing employees that the employer may access and search work devices and accounts, and that employees have no expectation of confidentiality or privacy in messages sent over those devices;

• a provision allowing for disciplinary action if the policy is violated;

• a form for employees to sign acknowledging receipt of the policy.

If there is any question about the purpose and scope of the search, the employer should consult with legal counsel prior to any action. Having clearly defined policies and procedures will define the line between personal and private use of work-issued devices and minimize the employer’s exposure to litigation.”

Posted in Social Media in the Workplace, Uncategorized | Leave a Comment »

Employee or Independent Contractor? The Answer May Be Costly . . . and Your Agreement May Be Irrelevant

Posted by Eric Parzianello on July 20, 2010

Recent court rulings continue to make clear that regardless of what your independent contractor agreement says, minimum and overtime wages may be required to be paid to workers under the Fair Labor Standards Act (“FLSA”). An Indiana federal court recently found exotic dancers to be employees of a topless nightclub and a Tennessee federal court found nurses who signed Independent Contractor Agreements to nevertheless be employees of a business which provides nurses for long-term nursing care. Once a company is found liable, corporate officers who have operational control and are involved in the day-to-day business operation or have some supervision responsibility for the employees are personally liable for back wages and overtime. Additionally, joint employers may be liable where the alleged employer had the power to hire and fire the employee, supervised and controlled the employee’s schedule and conditions of employment, determined the rate and method of payment, and maintained employment records.

The FLSA requires employers to pay minimum wage to “employees” and wages at a rate of one and one-half times their regular rate of pay to “employees” who work more than 40 hours in one workweek. While the Act provides little guidance in its definition of “employee” as “any individual employed by an employer,” courts have interpreted “employees” to be “those who as a matter of economic reality are dependent upon the business to which they render service.”

The “economic realities” test considers these factors: (1) the permanency of the relationship between the parties; (2) the degree of skill required for rendering the services; (3) the extent of the worker’s investment in equipment or materials for the task; (4) the worker’s opportunity for profit or loss; (5) the degree of the employer’s right to control the manner in which work is performed; and (6) whether the service rendered is an integral part of the employer’s business. Importantly, the parties’ written agreements do not control whether a worker is considered an employee for FLSA purposes. Although a contract may provide some evidence of the economic relationship between parties, the FLSA is designed to defeat contractual arrangements.

On June 21, 2010, applying the factors to nurses in the case of Lemaster v. Alternative Healthcare Solutions, Inc., a federal court in Tennessee found: (1) the most transient nurse worked for over six months and the permanence factor therefore leaned slightly in favor of an employment relationship; (2) while nurses are skilled workers, nothing suggested that they were capable of finding their own clients, a factor clearly supporting a finding of employee status; (3) the nurses supplied their own stethoscopes and blood pressure cuffs, but otherwise did not provide any medical equipment used at the patients’ homes, a factor weighing in favor of finding that the nurses were employees; (4) all of the nurses were compensated at an hourly rate and they had no opportunity for profit or loss beyond their hourly wage, a factor falling squarely on the side of employee status; (5) the company exercised control over the nurses’ work schedules which weighed slightly on the side of employee status; and (6) because nurses are integral to a company in the business of recruiting nurses, this factor also weighed in favor of finding employee status.

The court concluded that the nurses were employees regardless of their Independent Contractor Agreements (“ICAs”). As to the agreements, the court went out of its way to signal a possible attorney malpractice action by stating: “The attorney drafted the ICAs and advised [the employer] on the use of independent contractors, although she never mentioned the application of the Fair Labor Standards Act to the nurses.”

On June 4, 2010, an Indiana federal court found that topless dancers were employees of the Dancers Showclub in Indianapolis. The court in Morse v. Mer Corp. found that the club’s exercise of control over the dancers, the lack of the dancers’ control over their profit and the fact that “a dancer’s investment is limited to her costumes and a padlock,” all weighed in favor of employee status. As to the issue of whether the dancers required highly developed skills, the court rejected the club’s argument that a dancer “must be a peculiar combination of a customer service representative and counselor: she must have excellent listening skills, the ability to read another person’s affect and discern from that demeanor his particular conversational or emotional needs, and the ability and willingness to fulfill those needs in a purely non-sexual way.” The court found that argument to be “unconvincing, especially because nothing in the record indicates that the [club’s] hiring process included an assessment of a prospective dancer’s communication or counseling skills.”

These cases highlight the dangers of hiring independent contractors without a careful analysis of whether the FLSA requires compliance with minimum wage and overtime laws. Even if you have a written agreement and pay an hourly rate which is significantly higher than minimum wage, the workers or the Department of Labor may challenge your workers’ status and seek to collect back wages from your company and its officers.

Posted in Uncategorized | 2 Comments »

Reverse Weight Discrimination? Attractive Banker Says She Was Fired For Being “Too Distracting”

Posted by Eric Parzianello on June 10, 2010

A Citibank employee in New York alleges that she was fired because her male co-workers found her to be “too distracting” in a standard business suit and classic high heels. The ABA Journal reports that Debrahlee Lorenzana said that she was “being treated in a sexist and discriminatory manner.” Lorenzana said that other women at the bank dressed more provocatively than she did, but were allowed to wear what they liked because of their “general unattractiveness.” Whether her appearance could have caused such distractions will be left to the authors on the websites and blogs which have posted her pictures. Nevertheless, the case raises various interesting workplace issues including the appropriate attire for professionals in corporate America, maintenance of a dress code and discrimination (in this case, reverse discrimination) based on appearance.

Under Michigan law, an employer may generally maintain a non-discriminatory dress code but may not discriminate against an employee based on weight. If an employee proves that he or she was discharged from employment with weight being a determinative factor in the termination, then the employee has established a claim of weight discrimination. Michigan law does not limit weight discrimination to overweight individuals; if Michigan law were applied to Lorenzana’s claims, she could have a potential weight discrimination claim if she could prove she had been fired for being too thin.

Lorenzana’s allegations are in direct contrast to a recent case brought by a Michigan Hooters’ waitress who claims that she was wrongly required to lose weight in order to look more attractive. Neither Florida nor any other state has a weight discrimination law similar to Michigan, a point which Hooters laments is “one of the long list of things that make it harder for us to do business in Michigan than in our 45 other states.”

Because Lorenzana’s employment agreement contained an arbitration clause (something all employers should consider), her case will not go to a jury. Expect to read more about this, however, as Citibank plans a vigorous defense.

Posted in General Employment Law, Uncategorized | Leave a Comment »

Facebook At The Office? Make Sure It’s Covered By Your Employment Policies

Posted by Eric Parzianello on May 21, 2010

Are your employees allowed unlimited access to Facebook? Across the country, not many employers allow it and those which do are restricting usage through written policies.

A recent survey commissioned by Robert Half Technology found that 54% of American companies banned employees from logging on to Twitter, Facebook and other social networking sites from the office. Of more than 1,400 executives surveyed, only 10% gave employees unlimited access to social networks at work, while 16% allowed some personal use. Another Robert Half survey found that 38% of chief information officers interviewed have implemented stricter social networking policies — more than twice the number (17%) who say they have relaxed the rules.

A Detroit Free Press article noted that companies which allow unrestricted access to Facebook say factors such as boosting company branding and employee morale “outweigh the risks of wasted time and dips in productivity.” Ford Motor Company believes that employees on Facebook and blogs “can be powerful advocates” for the company but it also has this warning for employees: “Don’t share secret information. Don’t trade on insider information. And remember, whatever happens in Vegas, stays on Google.”

The majority of companies which prohibit access to social networking sites point to studies such as one conducted by Boston based Nucleus Research which concluded that companies allowing full access to Facebook have a 1.5% drop in total office productivity. Other concerns obviously also exist.

A waitress for Brixx Pizza in North Carolina recently lost her job over her Facebook usage. She served a couple who came in for lunch and stayed for three hours – forcing her to work an hour past her quitting time. The couple then rewarded the waitress with a $5 tip. She did what many Facebookers now do and posted a rant: “Thanks for eating at Brixx,” she wrote, “you cheap piece of – – – – camper.” She was fired for violating the company’s well-drafted policy which specifically prohibits employees from disparaging customers and “casting the restaurant in a negative light” on a social network.

As we wait to see how the Supreme Court rules on the usage of company pagers in the employee “sexting” case, at least one thing remains clear for employers: maintain a written policy on use of the company’s technology.

Posted in Social Media in the Workplace, Uncategorized | Leave a Comment »