Monthly Archives: May 2016

May 23, 2016

Limitations Period For Constructive-Discharge Claim Starts When Employee Gives Notice of Resignation

The Supreme Court made clear today that the filing period for a constructive-discharge claim begins to run when the employee gives notice of his or her resignation. In a 7-to-1 decision, the Court favored the five-circuit majority who recognized such timeline and rejected the Tenth Circuit’s reasoning that the clock begins to run on the date of the “last discriminatory act.” Green v. Brennan, 578 U.S. ___, (2016). Although the case involved a federal employee, the Court noted that the Equal Employment Opportunity Commission (EEOC) treats federal and private sector employee limitations periods the same so this ruling should affect constructive-discharge claims against private employers as well.

Discriminatory Act That Triggers Limitations Clock

In the case before the Court, Marvin Green, a postmaster in Colorado, claimed he was denied a promotion because of his race. A year after that matter was settled, Green filed an informal EEO charge with the Postal Service alleging that he was subjected to retaliation for his prior EEO activity due to his supervisor threatening, demeaning, and harassing him. After the Postal Service’s EEO Office completed its investigation of his allegations, he was informed he could file a formal charge, but he failed to do to.

A few months later, Green was investigated for multiple infractions, including improper handling of employee grievances, delaying the mail, and sexual harassment of a female employee. Green was placed on unpaid leave during the investigation. Federal agents quickly concluded that Green had not intentionally delayed mail, but neither Green nor his union representative was told. Instead, the Postal Service began negotiating with Green’s union representative to settle all the issues against Green, resulting in Green signing a settlement agreement in December 2009 that included giving up his postmaster position. On February 9, 2010, Green submitted his resignation which was to be effective March 31.

During that time, Green filed multiple charges with the Postal Service’s EEO Office. By regulation, federal employees must contact an equal employment opportunity officer in their agency within 45 days of “the date of the matter alleged to be discriminatory” before bringing suit under Title VII. Green’s allegations included that he had been constructively discharged by being forced to retire.

Green eventually sued the Postal Service in federal court in Denver. The district court dismissed Green’s constructive discharge claim, ruling that he had not contacted an EEO counselor about his constructive-discharge claim within 45 days of the date he signed the settlement agreement in December. On appeal to the Tenth Circuit Court of Appeals, Green argued that the 45-day limitations period did not begin to run until he announced his resignation, even though that was months after the last alleged discriminatory act against him. The Tenth Circuit disagreed with Green, ruling that the clock began to run on the date of the “last discriminatory act” giving rise to the constructive discharge, as two other circuits have held.

Limitations Period Begins When Employee Gives Notice of Resignation

On appeal to the Supreme Court, Green asserted that the statute of limitations began when he actually resigned due to constructive discharge, the act that gave rise to his cause of action, which was consistent with the rulings of numerous other Courts of Appeals. Interestingly, the Court agreed with the position taken by the Postal Service, which was different from the Tenth Circuit’s decision, ruling that the limitations period for a constructive-discharge claim begins to run when the employee gives notice of his resignation.

In an opinion written by Justice Sotomayor, the Court explained that “the ‘matter alleged to be discriminatory’ in a constructive-discharge claim necessarily includes the employee’s resignation.” The Court noted that to the “standard rule” governing statutes of limitations, the “limitations period commences when the plaintiff has a complete and present cause of action.” It means that period begins when the plaintiff “can file suit and obtain relief.” In effect, a constructive-discharge claim is like a wrongful-discharge claim which accrues only after the employee is fired. With nothing in Title VII or its regulations to the contrary, the Court therefore found that the limitations period should not begin to run until after the discharge itself.

So precisely when does an employee resign for purposes of triggering the limitations period for a constructive-discharge claim? The Court ruled that the limitations period begins on the day the employee tells his employer of his resignation, not the employee’s actual last day of work.

The Court did not decide the factual question of when Green actually gave notice of his resignation to the Postal Service, sending the matter back to the Tenth Circuit to determine that fact.

Significance of Decision for Employers

The practical effect of the Court’s ruling is to extend the period in which an employee may allege a constructive discharge beyond the limitations period for the underlying discriminatory acts that gave rise to the resignation. Hypothetically, employees who resign may be able to bootstrap any alleged discriminatory act during the course of their employment to their decision to abandon employment. In his dissent, Justice Thomas further opined that a discrimination victim may extend the limitations period indefinitely simply by waiting to resign. Yet the Court believed such concerns to be overblown, doubting that a victim of employment discrimination would continue to work under intolerable conditions only to extend the limitations period for a constructive-discharge claim. Nonetheless, even if the applicable Title VII limitation period (typically 180 or 300 days for private employers) for the underlying discrimination has passed, an employee may still have a timely claim for constructive discharge under the Court’s rule.

Time will tell if Justice Thomas’s concerns were more realistic that his colleagues believed.

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May 18, 2016

New Overtime Rule: $47,476 Annual Salary Required For White Collar Exemptions

By Jude Biggs

Exempt white collar workers must be paid an annual salary of at least $47,476 under the Department of Labor’s (DOL’s) just-released final overtime rule. That salary threshold is more than twice the current salary requirement for the white collar exemptions under the Fair Labor Standards Act (FLSA). Highly compensated employees must be paid at least $134,004 per year (increased from $100,000) to meet that exemption. The new rule is effective December 1, 2016, so employers have about six months to decide what to do with current exempt white collar workers who do not meet the new thresholds.

Salary Level Will Automatically Adjust Every Three Years

In a change from its proposed rule, the DOL will now automatically update the salary levels once every three years. Originally proposed as an annual update, the final rule will raise the standard threshold to the 40th percentile of full-time salaried workers in the lowest-wage Census region. The first adjustment will be posted August 1, 2019, 150 days in advance of its effective date on January 1, 2020.

Duties Tests Are Unchanged

Since 2004, the duties tests for the white collar exemptions have not included a limit on the amount of time that an employee can spend on nonexempt duties before the exemption is lost. Believing that a rise in the salary level will provide an initial bright-line test for the exemptions, the DOL refrained from changing the duties tests.

Nondiscretionary Bonuses, Incentive Payments, and Commissions

In the past, the DOL has not included nondiscretionary bonuses, incentive pay, or commissions when determining whether an employee’s salary meets the white collar exemption threshold; it looked only at actual salary or fee payments made to employees. In its final rule, the DOL will allow up to 10 percent of the salary threshold for non-highly compensated employees to be met by non-discretionary bonuses, incentive pay, or commissions. Note that these types of payments must be made on at least a quarterly basis to be included as “salary.” The DOL stated that this new policy was included in response to “robust comments” received from the business community which use these forms of pay as part of overall compensation packages for managerial and other exempt employees.

Next Steps

Over the next six months, you need to decide how to address previously exempt employees who no longer meet the salary thresholds. In order to meet the December 1 effective date, use the following checklist of steps to keep your pay practices compliant.

Examine your payroll records to determine which employees are potentially affected by the changes in the white collar exemptions.
Review the tasks performed by each white collar exempt employee to determine whether each meets the duties test under an applicable exemption.
If an employee does not meet the duties tests, you must treat them as non-exempt, regardless of salary.
Review if you are paying exempt employees on a salary basis, meaning they get paid their salary without reduction due to variations in the quantity or quality of work.
If an employee otherwise meets an exemption but is not currently paid at or above the new salary levels, decide whether to raise their salary to meet the new threshold or convert them to non-exempt and pay them time and one-half for all hours worked over 40 per week.
For any employees no longer treated as exempt, inform and train the employee, supervisors, and payroll administrators on proper timekeeping and overtime obligations. If appropriate, make sure such employees work as little overtime as possible, to hold down costs.
Consider whether the base rate of pay for such employees can be adjusted, so that with overtime pay, the employees earn about the same as before.
For employees who meet the exemption, implement procedures to update salary levels every three years to keep up with the DOL’s automatic adjustments.

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May 11, 2016

Colorado Pregnancy Accommodation Bill Passes

The Colorado legislature passed House Bill 16-1438 requiring Colorado employers to engage in an interactive process to assess potential reasonable accommodations for applicants and employees for conditions related to pregnancy and childbirth. The bill, expected to be signed into law by Governor Hickenlooper, will ensure that employers engage in the interactive process, provide reasonable accommodations to eligible individuals, prohibit retaliation against employees and applicants that request or use a pregnancy-related accommodation, and provide notice of employee rights under this law. Once signed by the Governor, the new law will go into effect on August 10, 2016.

Pregnancy-Related Workplace Accommodations

This law will add a new section, section 24-34-402.3, to the Colorado Anti-Discrimination Act, making it an unfair employment practice for you to fail to provide a reasonable accommodation for an applicant for employment, or an employee, for health conditions related to pregnancy or physical recovery from childbirth, absent an undue hardship on your business. You also may not deny employment opportunities based on the need to make a pregnancy-related reasonable accommodation.

Interactive Accommodation Process

You will need to engage in a “timely, good-faith, and interactive process” with the applicant or employee to determine effective reasonable accommodations.

Examples of reasonable accommodations include but are not limited to:

more frequent or longer breaks
more frequent restroom, food and water breaks
obtaining or modifying equipment or seating
temporary transfer to a less strenuous or hazardous position, if available (with return to the current position after pregnancy)
light duty, if available
job restructuring
limiting lifting
assistance with manual labor, or
modified work schedules.

In engaging in this process, you need to be sure to document your good-faith efforts to identify and make reasonable accommodations because doing so can negate punitive damages if an individual sues you for failure to make a pregnancy-related accommodation. You may require that the employee or applicant provide a note from her health care provider stating the need for a reasonable accommodation.

No Forced Accommodations or Leave

Under the new law, you may not force an applicant or employee affected by pregnancy-related conditions to accept an accommodation that she has not requested, or that is unnecessary to perform the essential function of her job. Similarly, you may not require a pregnant employee to take leave if there is another reasonable accommodation that may be provided. As stated in the legislative declaration for the bill, the intent is to keep pregnant women employed and generating income so forcing pregnant women to take time off during or after their pregnancy generally is not permitted.

Analyzing Undue Hardship Of Accommodations

Reasonable accommodations may be denied if they impose an undue hardship on your business. That requires an analysis of the following factors in order to decide whether the accommodation would require significant difficulty or expense:

the nature and cost of the accommodation
the overall financial resources of the employer
the overall size of the employer’s business with respect to the number of employees and the number, type, and location of the available facilities, and
the accommodation’s effect on expenses and resources or its impact on the operations of the employer.

Broad Definition of “Adverse Action” in Retaliation Prohibition

The new law prohibits you from taking adverse action against an employee who requests or uses a reasonable accommodation for a pregnancy-related condition. An adverse action is defined very broadly as “an action where a reasonable employee would have found the action materially adverse, such that it might have dissuaded a reasonable worker from making or supporting a charge of discrimination.” This approach harkens to the NLRB’s use of a “chilling effect” on employee rights as a basis for unfair labor charges. By not limiting an adverse action to concrete actions, such as a termination, demotion, pay reduction, or similar actions, the broad definition opens the door to a wide range of employer responses that could be deemed retaliation.

Notifying Employees of Their Rights

If signed into law, you will have until December 8, 2016 (120 days from the effective date) to provide current employees with written notice of their rights under this provision. Thereafter, you also must provide written notice of the right to be free from discriminatory or unfair employment practices under this law to every new hire at the start of their employment. You also have to post the written notice in a conspicuous place at your business in an area accessible to employees.

What To Do Now

With enactment almost certain, prepare now to comply with this new pregnancy accommodation requirement. A checklist of action items includes:

Review and update job descriptions to designate essential functions of each job.
Update your accommodation policies and handbook to include pregnancy-related accommodations and information on how employees may request such an accommodation.
Train your supervisors, managers, and human resources department on the new accommodation requirements and the anti-retaliation provision.
Prepare written notifications of employee rights to send to current employees no later than December 8, 2016.
Include the written notification of rights in your onboarding materials so that after December 8, 2016, all new hires receive the notice.
Post the written notification of rights in a conspicuous place accessible to employees, such as your lunch room bulletin boards, intranet, or wherever other required employment law posters are posted.

May 4, 2016

New Federal Trade Secret Act: What Employers Need to Know

By Mark Wiletsky

In a rare bipartisan effort, Congress passed the Defend Trade Secrets Act (DTSA) that will allow an owner of a trade secret to bring a misappropriation action in federal court. For the first time, companies seeking to protect their trade secrets will be able to file civil lawsuits for misappropriation under the federal Economic Espionage Act. The new law will apply to trade secrets related to a product or service used in, or intended for use in, interstate or foreign commerce. President Obama is expected to sign the bill into law very soon.

Protection of Trade Secrets

Many companies rely on a secret formula, process, or technique for their success. Consider, where would Coca-Cola or Kentucky Fried Chicken be without their secret recipes? Under current law, companies seeking to sue for misappropriation of a trade secret must rely on each state’s trade secret law and pursue their lawsuits in state court. Prosecutors may file criminal actions under the federal Economic Espionage Act for theft of trade secrets, but that statute did not provide a mechanism for filing a private federal civil suit – until now.

The DTSA amends the Economic Espionage Act to permit private parties to bring a civil lawsuit in federal court alleging trade secret misappropriation. It provides certain remedies, including injunctions, damages, and an unusual provision allowing for the civil seizure of property in extraordinary circumstances. Although the DTSA does not replace state trade secret laws, it offers an additional enforcement venue for the protection of trade secrets.

DTSA Provides Access To Federal Courts, Injunctions, Damages, and Seizure of Property

Employers need to understand the primary components of the DTSA in order to take advantage of this new avenue to protect valuable proprietary information. First, the DTSA opens the doors of federal courthouses to those alleging an actual or threatened trade secret misappropriation. As with other areas of employment law where there is an overlap of state and federal law, plaintiffs may choose whether to bring a misappropriation claim in state or federal court, depending on which law offers the most protection, more favorable discovery and motion practice, and greater damages. Federal protection for trade secrets should lead to a more consistent approach on what is protected as a “trade secret,” what constitutes a misappropriation, and what remedies are available. More predictable discovery and motion practice under federal court rules should help streamline costs while offering more uniformity in litigation across jurisdictions.

Second, the DTSA tries to balance the need to bolster protection of valuable trade secrets against the right of employee mobility by allowing for injunctions, but only in limited circumstances. Employers can seek an injunction to prevent actual or threatened misappropriation of a trade secret by an employee on terms that the court deems reasonable, as long as it does not prevent a person from entering into an employment relationship or circumvent state laws regarding restraints on employment, such as state non-compete laws. An injunction will not be granted based “merely on the information the person knows” but instead, must be based on evidence of threatened misappropriation.

Third, federal courts may award damages caused by the misappropriation of a trade secret, to include damages for actual loss, for any unjust enrichment not addressed in the damages for actual loss, or the imposition of a reasonable royalty for the misappropriator’s unauthorized disclosure or use of the trade secret. For a willful and malicious misappropriation, federal courts may award double damages and reasonable attorney’s fees. Courts also may award reasonable attorney’s fees to the prevailing party if a claim of misappropriation is made in bad faith, or a motion to terminate an injunction is made or opposed in bad faith.

In a unique provision, the DTSA allows the right to seek a civil seizure of property, but only in extraordinary circumstances. In such cases, a court may order the seizure of property when necessary to prevent the use or dissemination of the trade secret. If, however, the seizure is wrongful or excessive, the DTSA allows the individual whose property has been seized to sue for damages suffered as a result of the unlawful seizure. My colleague, Teague Donahey, provided an excellent summary of the DTSA and its seizure provisions in a recent article.

Safe Harbor For Whistleblower Disclosure of Trade Secrets

The DTSA offers safe harbor to individuals who disclose trade secrets to the government to investigate potentially illegal activity. Whistleblowers are granted civil and criminal immunity if they disclose a trade secret in confidence to a federal, state, or local government official, or to an attorney, solely for the purpose of reporting or investigating a suspected violation of law, or as part of a lawsuit or other proceeding when the disclosure is made under seal.

The new law also protects limited disclosure of trade secrets when an employee files a retaliation claim based on reporting a suspected violation of law against an employer. The employee must make such disclosures under seal and must not disclose the trade secret except pursuant to court order. Note that an “employee” is defined under the whistleblower immunity provision to include “any individual performing work as a contractor or consultant for an employer,” a broader definition than most other employment laws.

This immunity for use of trade secret information in an anti-retaliation lawsuit must be included in any contract or agreement that governs the use of trade secrets and other confidential information. Alternatively, employers may provide a cross-reference to a policy document that is provided to the employee that specifies the employer’s reporting policy for a suspected violation of law. Failure to comply with the notice requirement will result in the employer losing the ability to recover double damages and attorneys’ fees against the employee that might otherwise be available.

What You Should Do Now

If you use confidentiality or non-disclosure agreements that are designed to protect company trade secrets, review and revise future agreements to incorporate the DTSA’s whistleblower immunity notice. You’ll also want to consider expanding the venue language in your agreements to be sure you don’t exclude pursuing enforcement of the agreement in federal court.

If faced with a potential misappropriation of trade secrets, discuss with your legal counsel whether your state’s trade secret law or the new federal law (assuming it is signed into law) would provide the best enforcement mechanism. The DTSA provides an important avenue for increased protection of trade secrets but in some circumstances, state court may remain your best option.

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