Category Archives: Colorado

February 16, 2017

Court Overturns $1.3 Million Trade Secret Award Because Design Isn’t Secret

Businesses often go to great lengths to protect the secrecy of an essential product design or valuable manufacturing process. But if that design or process is commonly known in the industry, it isn’t actually secret and won’t be protected under trade secret law. One business recently had a $1.3 million jury award for trade secret misappropriation overturned when the Colorado Court of Appeals ruled that its sealed bearing pack design was not a trade secret. Hawg Tools, LLC v. Newsco Int’l Energy Servs. USA, Inc., 2016 COA 176M.

The Design of Sealed Bearing Packs For Mud Motors

Hawg Tools supplies and rents equipment used by oil and gas drilling companies. One of the tools supplied by Hawg Tools is called a mud motor, which is inserted into an oil well hole for drilling operations. One of the components in the mud motor is a bearing pack that allows a tubular shaft to turn the drill bit without friction. Bearing packs can be either wash bearing packs, which leave the bearings exposed to the surrounding drilling fluid, or sealed bearing packs, which are sealed to prevent fluid from entering the bearing assembly. Sealed bearing packs last for days whereas wash bearing packs last only a few hours. Consequently, the sealed packs permit drilling to continue longer before maintenance is required.

In 2008, Daniel Gallagher, the owner of Hawg Tools, arranged for a designer, Joe Ficken, to design the sealed bearing packs to be used in mud motors for one of Gallagher’s prior businesses. Gallagher did not request any special features or customizations for the sealed bearing packs. Ficken stated that the design was simple and took him only two days to complete. Through a series of assignments, all rights in Ficken’s design were assigned to Hawg Tools.

Hawg Tools Files Lawsuit For Misappropriation of Trade Secrets

In 2011, Ficken accepted a job at Newsco, an oil and gas drilling operation that also uses mud motors, where he was asked to design sealed bearing packs for Newsco’s use. In 2013, Gallagher discovered that Ficken had designed a sealed bearing pack for Newsco that was similar to the design he had assigned to Hawg Tools. Gallagher filed a lawsuit against Newsco and Ficken for misappropriation of a trade secret, as well as other claims, based on Newsco’s use of the similar sealed bearing pack design.

The case went to trial and a jury returned a verdict of $1.3 million in favor of Hawg Tools on its trade-secret claim, with additional damages awarded on other claims. The trial court denied defendants’ post-trial motions and the defendants appealed to the Colorado Court of Appeals.

Step One: Is It A Trade Secret?

The Court of Appeals determined that Hawg Tools had provided ample evidence at trial to establish that Newsco’s design of its sealed bearing pack was essentially the same as its own design. But the appellate court also found that Hawg Tools failed to provide sufficient evidence that its design was in fact a trade secret.

The Colorado Uniform Trade Secret Act defines a trade secret to include “the whole or any portion . . . of any . . . design . . . which is secret and of value.” The Court of Appeals thus looked at whether the design of Hawg Tools’ sealed bearing pack was in fact secret and not a matter of public knowledge or of general knowledge in the trade or business.

The Court acknowledged that a design may be a protectable trade secret if it includes a combination of elements in the public domain that is unique and the unified design or operation of those elements provides a business with a competitive advantage. However, if the design is not unique to the business, the publically known elements typically will destroy an attempt to characterize it as a trade secret.

In examining the evidence regarding the design of the sealed bearing packs, the Court found that Hawg Tools did not show that its design was different from other designs that were publically available at the same time. In fact, the Court noted that sealed bearing packs had been around since 1971. Evidence in the record showed that Hawg Tools’ design was “of public knowledge or of a general knowledge” in the mud motor manufacturing business. Therefore, the Court ruled that there was insufficient evidence that the design was secret. The Court overturned the jury’s verdict on the misappropriation claim, depriving Hawg Tools of the jury’s $1.3 million award. It is unclear whether Hawg Tools will seek review at the Colorado Supreme Court.

Lessons Learned

Trade secrets must be truly secret to be protected under trade secret laws. Businesses may utilize various legal means to protect confidential information that may not rise to the level of a trade secret, including using non-disclosure agreements and other contractual restrictions. But in order to allege a claim of misappropriation of a trade secret, the design, process, or formula at issue must not be in the public domain or known within the industry.

February 7, 2017

SEC Targets Severance Agreements That Impede Whistleblowers

By Mark Wiletsky and Brian Hoffman

The U.S. Securities and Exchange Commission (SEC) is cracking down on severance agreements that prohibit former employees from contacting regulators or accepting whistleblower awards under threat of losing their severance payments or other post-employment benefits. More and more, the SEC’s Enforcement Division has announced new cases filed against, and settlements made with, companies which restrict former employers from blowing the whistle through severance agreement clauses. Many of the scrutinized companies are not in the securities industry, and the problematic contract language is not as obvious as you may think.

Dodd-Frank Act Established Whistleblower Programs

The 2010 Dodd-Frank Act established whistleblower programs for the SEC as well as the Commodity Futures Trading Commission. Under the SEC’s whistleblower program, eligible whistleblowers who provide unique and useful information about securities-law violations to the SEC can collect significant awards of 10-to-30 percent of a penalty that exceeds $1 million.

Essential to the program, however, are the anti-retaliation provisions, which prevent whistleblowers from suffering adverse actions as a result of their whistleblowing activities. In addition, an SEC rule, Rule 21F-17, prohibits any action that impedes an individual from communicating with the SEC about possible securities violations. Rule 21F(h)(1) of the Dodd-Frank Act prohibits employers from taking retaliatory actions against whistleblowers who make protected reports.

Award Waivers, Confidentiality, and Non-Disparagement Clauses

Severance agreements often contain boilerplate language, occasionally including clauses that restrict a former employee from disclosing any confidential company information and disparaging the company or its officers and managers. Agreements also sometimes require that a former employee agree to waive any awards or monetary recovery should he or she file a complaint with a governmental agency. These severance provisions are exactly the type of restrictive language that the SEC has been targeting.

In its first whistleblower protection case involving restrictive language, in 2015 the SEC charged a global technology and engineering firm with a violation of Rule 21F-17. The company had required witnesses involved in internal investigations to sign confidentiality agreements that stated that the employee could face discipline or termination if they discussed the matter with outside parties without the prior approval of the company’s legal department. Because the investigations could involve possible securities-law violations and the clause prohibited employees from reporting possible violations directly to the SEC, the SEC found that the restrictive language in the confidentiality agreements impeded whistleblowers. The company agreed to pay a $130,000 penalty to settle the charges and voluntarily amend its confidentiality statements to add language to inform employees that they may report possible violations to the SEC and other federal agencies without company approval or fear of retaliation.

Recent SEC Cases Targeting Severance Agreements

Additional whistleblower severance agreement cases highlight other clauses targeted by the SEC. In mid-2016, the SEC charged a building products company with using severance agreements that required former employees to waive their rights to a monetary recovery if they filed a complaint with the SEC or another government agency. The clause stated that the departing employee was required to waive possible whistleblower awards or risk losing their severance payments and other post-employment benefits. The company did not admit liability, but agreed to settle with the SEC for a $265,000 penalty.

Also in mid-2016, the SEC charged a financial services company for using language in agreements that restricted employees’ ability to disclose information to government agencies. Problematic wording included restricting any disclosure of confidential information, except when disclosure is required by law, in response to a subpoena, or with the company’s permission. (See also our prior client alert on the above three cases.)

January 18, 2017

National Origin Discrimination Checklist

By Little V. West

National origin discrimination may not be as high on your radar screen as sex, race, or disability discrimination, but it accounted for almost 11% of the total number of charges filed with the Equal Employment Opportunity Commission (EEOC) in fiscal year 2015. The numbers are even higher for states with more diverse populations – 18.1% of total charges for New Mexico were for national origin discrimination, 16.6% in California, 16.2% in Colorado, and 15.3% in Texas, to name a few.

Title VII Prohibits National Origin Discrimination

As you may know, Title VII, which applies to employers with 15 or more employees, prohibits employment discrimination on the basis of race, color, religion, sex, and national origin. Its protections extend to all employees and applicants for employment in the United States.

The EEOC defines national origin discrimination as discrimination because an individual, or his or her ancestors, is from a certain country or region, or shares the physical, cultural, or language characteristics of a national origin or ethnic group. For example, national origin discrimination would result from treating an employee adversely because he or she is from another country or former country (such as Mexico, China, or Yugoslavia), a place that is closely associated with an ethnic group but is not a country (such as Kurdistan), or belongs to a group that shares a common language, ancestry, or other social characteristics (such as Arabs or Hispanics).

While outright discrimination may be more obvious, Title VII also prohibits less straightforward forms of discrimination. For example, Title VII prohibits associational discrimination, which is when an employer treats an applicant or employee less favorably because he or she associates with (e.g., dates, marries, lives with, is the parent of, etc.) someone of a particular national origin. Employment discrimination also results when an employer treats an individual less favorably because he or she does not belong to a particular ethnic group. For example, a Hispanic business owner who refuses to hire anyone other than Hispanics would be discriminating on the basis of national origin. Moreover, discrimination based on the perception or belief that an individual (or his or her ancestors) belongs to a particular national origin group can be discriminatory, regardless of whether the individual is in fact part of that group.

In addition to prohibiting discriminatory employment decisions, Title VII also prohibits unlawful harassment and retaliation based on national origin. Harassment can include the use of ethnic slurs, intimidation, threats, mocking, and other verbal, written, or physical conduct that is directed toward an individual because of his or her birthplace, ethnicity, culture, language, dress, or accent.

EEOC Issues Updated National Origin Discrimination Guidance

In late 2016, the EEOC published an updated enforcement guidance on national origin discrimination. Intending to better explain employee rights and promote employer compliance, the EEOC guidance offers many examples and HR practices in a wide variety of employment situations that could result in Title VII national origin violations. In addition, it addresses how national origin discrimination often intersects with other protected characteristics, such as race, color, or religion. The updated guidance includes several noteworthy points:

A place of national origin may be within the United States; in other words, “[n]ational origin discrimination includes discrimination against American workers in favor of foreign workers.”

Title VII applies to human trafficking. The guidance explains that, in addition to criminal liability for forcing labor and/or exploiting workers, Title VII may also impose civil liability if the conduct is directed towards person(s) in a protected class, including national origin.

The joint employer doctrine applies in the context of staffing firms and client employers. The guidance explains that, “[i]f both a staffing firm and a client employer have the right to control the worker’s employment and have the statutory minimum number of employees,” the entities can be considered joint employers. As an example, a staffing firm can be held liable under Title VII if it were to fail to take prompt corrective action for discriminatory actions based on national origin by the client employer.

Recognizing that employees have a choice as to which documents to present to establish authorization to work in the U.S., and that “newly hired employees should be allowed to work if they have applied for but not yet received a Social Security number,” the guidance states that a blanket policy not to hire candidates who lack a Social Security number can violate Title VII if it disproportionately screens out work-authorized individuals in a national origin group.

Preference for U.S. citizenship may be unlawful if it has the purpose or effect of discriminating on the basis of national origin.

We encourage you to review the EEOC’s guidance document.

Checklist For Avoiding National Origin Discrimination Liability

To put the EEOC’s guidance into practical terms, here is a handy checklist that highlights concrete HR policies and employment practices to help your organization avoid liability for national origin discrimination or harassment.

Your job application and posts should include an equal employment opportunity statement.
When recruiting applicants and posting job openings, do not:
- state a preference for (or against) a particular national origin (e.g., “looking for U.S.-born candidates” or “must not speak with a foreign accent,” etc.);
- rely only on word-of-mouth referrals from existing employees (keeps applicant pool too homogenous); or
- send job postings only to non-diverse outlets or communities.
Be careful not to reject applicants based on an ethnically sounding name; consider redacting or hiding names on your initial review of applications and resumes so you are not inadvertently influenced by an ethnic name.
During interviews, do not ask candidates about their ethnic heritage, ancestry, accent, or any other direct or indirect questions about national origin, even if you are just trying to be friendly or curious.
If you conduct background checks or pre-employment testing, conduct it on all candidates/employees in a particular job category – do not single out only those individuals with foreign-sounding names, accents, etc. for such tests.
Refrain from segregating or isolating employees based on their national origin (e.g., do not assign all Hispanic workers to lower-paying positions, or keep all Filipino employees away from the public, etc.).
Be careful imposing an English-only language rule – any restriction on language spoken at work must be job related and consistent with business necessity, and should not be imposed during employee breaks or other employee personal time while on the employer’s premises.
Make sure your harassment policy prohibits harassment based on national origin, and that you train your employees to avoid using ethnic slurs, stereotypes, name calling, mocking tones, etc.
Remember that customer and coworker preferences or prejudices do not justify discriminatory hiring, firing, promotion, or discipline decisions.

A culturally diverse workplace can present unique issues for management but can also help employers remain relevant in our increasingly diverse society. Use this checklist to help avoid potential liability for national origin discrimination in your workplace. Additional information on national origin discrimination may be found on the EEOC’s question-and-answer publication and small business fact sheet.

January 10, 2017

Tips For Accommodating Depression, PTSD, and Other Employee Mental Illnesses

By Mark Wiletsky

An estimated 16.1 million adults in the United States had at least one major depressive episode in 2015, according to the National Institute of Mental Health. This number represents 6.7% of all adults age 18 or older in the U.S. About 7 or 8 out of every 100 people will have posttraumatic stress disorder (PTSD) at some point in their lives, says the U.S. Department of Veteran Affairs, National Center for PTSD. That number goes up to about 11 to 20 out of every 100 for veterans who served in Operations Iraqi Freedom and Enduring Freedom.

As these number show, depression, PTSD, and other mental illnesses are relatively prevalent in our society. At some point, you will be faced with an employee who suffers from a mental condition and you need to know your obligations related to potential accommodations for such employees. The Equal Employment Opportunity Commission (EEOC) recently released information to help explain workplace rights for employees with mental health conditions under the Americans With Disabilities Act (ADA). Incorporating the EEOC’s guidance, here are our top practical tips for accommodating individuals with mental impairments.

Tip #1 – Don’t Get Hung Up On Disability Definition

Following the 2008 enactment of the Americans With Disabilities Amendments Act (ADAAA), it is easier for an individual seeking protection under the ADA to establish that he or she has a disability within the meaning of the statute. In fact, the ADAAA states that the definition of disability should be interpreted in favor of broad coverage of individuals.

Mental conditions, such as depression, PTSD, bipolar disorder, schizophrenia, and obsessive compulsive disorder (OCD), need not be permanent or severe to be deemed a disability. Instead, as long as the condition substantially limits a major limit activity, such as the individual’s ability to concentrate, interact with others, communicate, sleep, eat, learn, think, or regulate emotions, it will be considered a disability. Even if the employee’s symptoms are sporadic or episodic, if they limit a major life activity when active, the condition will likely qualify. This means that in most cases, you should focus on whether you can accommodate the individual, rather than whether the individual meets the legal definition of having a “disability.”

Tip #2 – Accommodate “Known” Mental Impairments

You have an obligation to reasonably accommodate “known” impairments for otherwise qualified individuals. Generally, this means that an applicant or employee must ask for a reasonable accommodation. But remember that the disabled individual need not use any special words to trigger your accommodation obligation. In other words, the person does not need to specifically say he or she needs a reasonable accommodation or mention the ADA. The individual instead may simply say that they need a change at work, such as needing to arrive late on certain days in order to attend therapy sessions, and your accommodation responsibility begins.

Generally, however, you are not obligated to provide an accommodation when one has not been requested or no work-related change has been mentioned. But, if you have knowledge of an employee’s mental condition (perhaps from prior conversations or medical documentation) and that “known” disability impairs the employee’s ability to know of, or effectively communicate a need for, an accommodation that is obvious, you should engage in a discussion with the employee about potential accommodations.

Tip #3 – Ask For Documentation

When an employee requests a reasonable accommodation due to a disabling condition, ask the employee to put the request in writing, describing the condition and how it affects his or her work. You may also request a letter from the employee’s health care provider documenting the mental condition and that the employee needs a work accommodation because of it. However, even if the employee declines to provide a request for accommodation in writing, you still have an obligation to engage in the interactive process and potentially accommodate that individual.

Be careful not to discriminate in your requests for documentation. It is best to have a uniform practice of requesting this written information for all accommodation requests, for both physical and mental disabilities, so that you cannot be charged with singling out a particular employee based on a mental illness.

Tip #4 – Keep An Open Mind About Accommodations

Don’t jump to the conclusion that an accommodation will necessarily be burdensome or costly. Some reasonable accommodations for mental disabilities may be relatively benign. Examples may include allowing the employee to wear headphones to drown out excessive noise, writing down work instructions rather than verbal instructions, changing shifts or start/end times to allow for doctor or therapy appointments, or working in a private room.

Of course, if an accommodation will result in significant expense or disruption to your business, you may be able to decline it due to undue hardship. But don’t assume that upon first request. Instead, engage in an interactive process with the employee, including input from his or her health care provider, to consider possible accommodations. A brainstorming session can often produce a variety of workable solutions, and you can choose the one that best suits your business, as long as it permits the employee to perform his or her job. Be sure to confirm those discussions in writing with the employee to avoid disputes down the road about what was discussed and/or agreed upon. Read more >>

December 21, 2016

No Such Thing As A Free Lunch!

By Brad Cave

Hundreds of hourly employees sued their former employer alleging that they were due additional overtime pay. They asserted that the company failed to include their $35 daily travel meal reimbursement in their regular rate of pay when calculating time-and-one-half, meaning they were paid less overtime than they were due. The Tenth Circuit Court of Appeals, whose decisions apply to Wyoming, Colorado, Oklahoma, Kansas, New Mexico, and Utah, recently analyzed their claim.

Calculating Regular of Pay

The Fair Labor Standards Act (FLSA) requires employers to pay employees at one and one-half times the employee’s “regular rate” of pay for all hours worked in excess of 40 per workweek. An employee’s regular rate of pay includes all remuneration paid to the employee, subject to certain exceptions. If a part of an employee’s pay is left out of the “regular rate” calculation, the employee’s overtime rate will be undervalued.

A large group of former hourly employees for a nationwide seismic-mapping services company filed a lawsuit claiming that the company violated the FLSA by failing to include an established meal allowance, which was paid to employees while traveling, in the employees’ regular rate of pay. In their collective action, the parties asserted that the company required employees to travel away from home and stay in hotels near remote job sites for four to eight weeks at a time. Employees then typically returned home for about two to four weeks before traveling to another remote location. They often worked more than 40 hours per week while at the remote location, triggering overtime pay.

Per Diem For Meals

The company provided its employees with a $35 per diem for meals for all days at the remote location as well as the days spent traveling to and from the remote job location. The company did not pay the $35 meal reimbursement on days that employees worked from their home location or when food was provided at the remote job site.

Exception To “Regular Rate” For Traveling Expenses

The regular rate of pay generally must be calculated to include all remuneration for services paid to the employee. One exception to this rule is that employers can exclude from the regular rate all reasonable payments for traveling expenses incurred by an employee in the furtherance of his employer’s interests and properly reimbursable by the employer. The regulations state that this exemption includes the “reasonably approximate amount expended by an employee, who is traveling ‘over the road’ on his employer’s business, for . . . living expenses away from home . . . .” 29 C.F.R. § 778.217(b)(3). The company argued that the $35 meal payments were exempt travel expenses and therefore, need not be included in the calculation of the employees’ regular rate.

Meal Reimbursement Was Exempt Travel Expense

The employees countered by arguing that the $35 payments were not exempt travel expenses because the employees were no longer traveling while they worked at the remote job sites for four to eight weeks at a time. They also argued that the phrase “living expenses” did not include the cost of food. The Tenth Circuit disagreed on both arguments.

The Court reasoned that the employees’ position that they were no longer “traveling over the road” when they reached their remote job site was a “hyper-literal interpretation.” The Court instead read “traveling” more broadly to include not just time in transit, but also time away from home. On the employees’ argument that the cost of food did not qualify as a “living expense,” the Court agreed with prior determinations by the U.S. Department of Labor to find that the cost of food away from home is an additional expense that the employee incurs while traveling for the employer’s benefit and therefore, is a living expense. The Court ruled that the $35 per diem meal reimbursements were exempt travel expenses and need not be included in the employees’ regular rate when determining overtime pay. The Court upheld summary judgment in favor of the company. Sharp v. CGG Land Inc., No. 15-5113 (10th Cir. Nov. 4, 2016). Read more >>

November 16, 2016

Judge Declares Persuader Rule Unlawful With Permanent Nationwide Injunction

By Brian Mumaugh

The U.S. Department of Labor’s final persuader rule was dealt yet another blow today as federal Judge Sam Cummings of the Northern District of Texas issued a permanent injunction declaring the rule unlawful. The ruling will prevent the persuader rule from being enforced anywhere in the nation.

Rule Would Have Expanded Disclosures of Union-Avoidance Activities

As we’ve reported before, the DOL’s final persuader rule, issued this past March, would have expanded the reporting requirements of both employers and their hired labor consultants who assist with union-avoidance activities. Under the Labor-Management Reporting and Disclosure Act (LMRDA), when employers hire outside consultants, including attorneys, who are directly involved in “persuading” workers whether or not to join a union or engage in collective bargaining, they must file a report disclosing the consulting relationship as well as the fees paid to the consultant. Under the now-enjoined “new rule,” the DOL expanded the scope of reportable activities to include not only those that involved the consultant making direct contact with employees, as was previously included as reportable “advice,” but also those activities where the attorney or labor consultant works with the employer behind the scenes to draft or review documents, presentations, speeches, and other materials to aid the employer in opposing union organizing and other related activities.

Legal Challenge Prevailed

The DOL’s expansion of the rule as to what constitutes reportable “advice” was highly controversial. The DOL was set to begin enforcing the final rule on July 1, 2016, but numerous business groups filed lawsuits claiming that the DOL overstepped its bounds and that the rule was unlawful. On June 22nd, a Minnesota federal judge declined to issue a preliminary injunction to block the rule, but less than a week later, Judge Cummings in Texas did just that. He issued a preliminary injunction blocking the DOL from enforcing the rule nationwide.

With today’s order, Judge Cummings turned his preliminary injunction into a permanent block on enforcement of the rule. The result is that the employers and labor consultants, including lawyers, will continue to report their persuader activities consistent with the prior rule. In other words, only those activities that meet the “advice” standard under the prior persuader rule are reportable. Such activities generally include only those that involve direct contact between the consultant and the employees.

Is This Rule Dead Forever?

It remains to be seen whether the DOL will appeal this order, but for now, the final persuader rule appears dead. With the new GOP administration taking office in late January, it is unlikely that the DOL, under GOP leadership, would try to advance this union-friendly rule in the years to follow. We’ll keep you posted on any new developments.

November 9, 2016

Colorado Minimum Wage Hike Passes

By Mark Wiletsky

Colorado voters decided to raise the minimum wage to $12 per hour over the next four years. By about a 54-to-46 margin, Colorado passed Amendment 70 which amends the Colorado constitution to gradually raise the state’s minimum wage.

Gradual Increases In Minimum Wage

Amendment 70 raises the hourly minimum wage in Colorado by 90 cents per hour each year, starting from the 2016 minimum wage of $8.31. The annual increases will be as follows:

$9.30 in 2017
$10.20 in 2018
$11.10 in 2019
$12.00 in 2020

Tipped employees will continue to be entitled to a minimum wage that is $3.02 per hour less than the regular state minimum wage. The minimum wage for tipped workers is currently $5.29 per hour, plus tips. It will then go up by 90 cents per hour each year until reaching $8.98 in 2020.

After 2020, annual adjustments will be made to reflect increases in the cost of living.

Adjustments Already in Colorado Constitution

This is not the first time that Colorado voters have approved a Constitutional amendment increasing the minimum wage. In 2006, Colorado voters approved Initiative 42 which increased the minimum wage from $5.15 to $6.85 per hour, and added a provision to the Colorado Constitution that requires an annual adjustment in the state minimum wage based on the Consumer Price Index (CPI). That measure was approved with 53 percent voting “yes” and 47 percent voting “no.” Under that amendment, the Colorado Department of Labor and Employment has set the state minimum hourly wage each year, adjusting it either up or down according to the changes in the CPI over the prior year.

Under this year’s Amendment 70, the minimum wage will only be adjusted up for increases in the CPI. It will not go down, even if the cost of living decreases. Read more >>

November 8, 2016

EEOC Questions Whether “Big Data” Analytics Help or Hinder Workplace Diversity

By Jude Biggs

As more and more employers use new analytical tools for recruiting and hiring, the potential exists for employment decisions to become more fair, objective and unbiased. But could the use of big data and technology-driven decision-making disfavor candidates who lack a robust digital footprint? These are questions that the Equal Employment Opportunity Commission (EEOC) will continue to explore after an initial “big data” public meeting in Washington, D.C. in October.

What Is “Big Data?”

The EEOC refers to “big data” as the use of algorithms, data scraping of the internet, and other technology-based methods of evaluating huge amounts of information about individuals. Big data can include computer algorithms that are based on various factors designed to correlate to successful characteristics on the job; for instance, a model may look for longevity on the job, degrees from particular institutions, membership in certain organizations, or a multitude of other factors. Computer models then use this seemingly objective criteria to scan the internet for individuals possessing the desired characteristics in “passive” candidate searches. Other types of predictive or talent analytics, based on the harvesting of a wide range of empirical data, are being incorporated into HR recruiting and decision-making platforms.

According to a recent survey of Society of Human Resource Management (SHRM) members, about one-third of respondents reported that they use big data in employment. The proportion was even higher among larger employers.

Why Does the EEOC Care About Big Data?

The EEOC is trying to get ahead of this issue by making sure that employers’ use of technology-driven HR tools does not lead to discrimination in the hiring process. EEOC Chair Jenny Lang noted that while big data has the potential to drive innovations that reduce bias in employment decisions, “it is critical that these tools are designed to promote fairness and opportunity, so that reliance on these expanding sources of data does not create new barriers to opportunity.”

What Are The Potential Advantages of Technology-Based HR Decisions?

Technology is here to stay so the question is not will it be used in the HR context but rather how should it be used to best achieve employers’ goals. Using technology and big data can result in many positive outcomes, including that it:

may help identify non-traditional candidates who would not have been considered for a particular job previously
can help overcome implicit and explicit prejudice and bias in the workplace
can improve person-job fit
may increase diversity in the workplace
may expand the pool of candidates with the qualities necessary to succeed
may reduce employee turnover.

In fact, given the global nature of online data, it is possible for certain types of employers to increase their diversity dramatically, by being able to cast a larger net to find applicants.

What Is The Potential Downside of HR’s Use of Big Data?

As with anything technology-related, the outcome is only as good as the computer program, factors selected, and data used. Many algorithms focus on correlation of successful characteristics without looking to specific job requirements. For example, a set of characteristics of high-performing employees may reflect the group’s demographics (for instance, graduation from an Ivy League school) rather than their skills or abilities to perform certain jobs (for example, leadership shown during a military deployment or creation of a successful program serving the poor). In such cases, algorithms may match people characteristics, but not job requirements.

Using big data may perpetuate past discrimination. If an algorithm is based on looking for applicants with the same characteristics as those possessed by existing managers, secretaries or high-tech programmers in a company, then the algorithm may limit diversity. Similarly, certain talent-seeking algorithms may rely too much on the make-up of the company’s current staff, meaning that minorities or other groups not currently represented in the workforce continue to be passed over.

Think about whether individuals who do not have a robust online presence will be at a disadvantage in the new, data-mining recruiting world. Individuals with lower incomes or in rural areas may not have ready access to computers, lessening their ability to engage digitally. Other individuals may choose not to engage in many online activities. Or, others who are at the start (or end) of their careers may not have established much of an online presence. Employers who focus only on technology-driven programs to identify and hire candidates may miss out on large groups of qualified individuals who simply lack significant online experience that is discoverable by algorithms.

In addition, the collection of other data points, such as attendance or leave-related data, may discriminate against disabled individuals, giving rise to ADA concerns. Moreover, such data, coupled with information about gaps in employment, could disproportionally hurt female candidates who are more likely to have taken time off of work for pregnancy or child-rearing reasons. Read more >>

November 3, 2016

$4.25M Age Discrimination and Retaliation Verdict Tough Pill For Abbott Laboratories To Swallow

By Steve Gutierrez

Four-and-a-quarter million dollars. That is what a federal jury recently awarded an ongoing employee at Abbott Laboratories for her age discrimination and retaliation claims. What caused the jury to award such a large amount in damages? Here is a look at the facts, followed by tips on how to avoid such liability when dealing with older employees.

All Seems Fine—Until Employee Hits Her Fifties

Luz Gonzalez-Bermudez (Gonzalez) has worked for Abbott since 1984, beginning her career as a pharmaceutical representative followed by promotions that ultimately made her the HCP national sales manager. In that role, Gonzalez was classified in Abbott’s compensation system as a Level 18 position, warranting a six-figure salary, an annual incentive bonus, stock options, and a company car.

But, eighteen months after her promotion to the HCP national sales manager, when Gonzalez was about 51 years old, her position was eliminated and she was demoted to a marketing manager position. Her new job was a Level 17 position, but Abbott allowed her to keep her Level 18 compensation and benefits for up to two years.

In the marketing manager position, Gonzalez reported to Kim Perez, the Director of Marketing (and later, the General Manager). Perez evaluated Gonzalez’s performance as a marketing manager negatively. Gonzalez complained internally that Perez was creating a hostile work environment, due to repeatedly asking her about outstanding work, sending a lot of emails following up on pending matters, and a lack of communication about things Gonzalez needed to know to do her job.

When Gonzalez’s two years of Level 18 compensation was up, Perez and the Human Resources Director told her that she had been assigned a Product Manager position, which was a Level 15 classification. At that level, Gonzalez took a pay cut, lowered bonus, loss of stock options, and lowered company car benefits.

Employee Lawyers Up

About six months later, Gonzalez’s attorneys sent a letter on her behalf to Perez and others at Abbott, notifying them that they had been retained to represent her in any age discrimination claims that Gonzalez may have against them. Despite the letter, Abbott did not conduct an investigation into any possible claims. Shortly thereafter, Gonzalez filed an administrative charge with the Antidiscrimination Unit of the Puerto Rico Department of Labor and Human Resources alleging age discrimination and retaliation. Read more >>

October 19, 2016

Firing Employee On FMLA Leave Is Risky, But Not Always Unlawful

By Mark Wiletsky

Terminating an employee out on Family and Medical Leave Act (FMLA) leave is risky business. After all, the major tenet behind the FMLA is to permit employees to take job-protected time off when serious health or family concerns arise.

But does that mean that an employer may never terminate an employee out on leave? No, but you better have well-supported business reasons for your termination decision, and be prepared to defend your decision in court. A recent decision by Tenth Circuit Court of Appeals offers a useful look at how a Colorado employer did it right and avoided liability for an FMLA-interference lawsuit.

Twelve-Year Employee Struggles After Promotion

Hired in 2002, Kris Olson began working for Penske Logistics, LLC as a dispatcher. Over the next ten years, he was promoted three times, including his 2013 promotion to Operations Manager of Penske’s Denver warehouse. In that role, Olson supervised over 30 employees and was responsible for hiring, financial records, moving and tracking inventory, conducting regular inventory audits, and other managerial tasks.

In his first year as Operations Manager, Olson appeared to be performing adequately, but not exceptionally, scoring mostly “2” and “3” grades on a 5-point scale on his 2013 performance review. He was told he needed to continue to train in his position. In January 2014, however, Penske issued a written warning to Olson for failing to fire an employee who had violated safety rules. Olson was told that any future failure to follow procedures would result in more severe discipline, up to and including termination. In June (about five months later), Olson’s supervisor, Rick Elliott, put Olson on a 60-day “action plan” that instructed Olson to hire more workers, process inventory more quickly, and respond promptly to phone calls and emails. The “action plan” concluded with a warning that failure to meet all requirements would result in Olson’s immediate termination. Olson appeared to follow the instructions in his “action plan.”

On July 9, 2014, Olson requested FMLA leave, which was approved. Olson’s last day at the warehouse before going out on leave was Friday, July 18, 2014.

Employer Discovers Employee’s Misconduct

July 18th proved to be a pivotal day for Olson. On that day, Elliott received a monthly grade that primary client, Whirlpool, gave the warehouse for June – a “D.” With Olson out on leave, Elliott asked a supervisor at another Penske warehouse, Nicki Brurs, to come to Denver to investigate why Whirlpool rated the Denver warehouse so low. Brurs found that there were at least 152 discrepancies between the warehouse’s inventory records and its actual inventory. In addition, Brurs learned that the warehouse was 567 audits behind schedule, having done only 37 random audits over the preceding few months.

At that same time, Elliott also discovered that over the previous few months, Olson had not billed Whirlpool for extra work performed by the warehouse. Earlier, Elliott had asked Olson why he had not billed Whirlpool for extra work and Olson answered that there had not been any extra work for which to bill. On July 28, however, Elliott learned that there had been several instances of extra work for Whirlpool, meaning Olson had lied to him.

By August 1, Elliott had made up his mind that Olson had to go. He sent a report to human resources summarizing the problems he had discovered with Olson, including his dishonesty. He detailed that Olson had hidden inventory losses by creating records for an imaginary storage location – a “ghost stow” – that allowed Olson to hide inventory losses for four years. He also reported that Olson had instructed his staff not to tell Whirlpool when inventory was missing, but instead, to report the missing units as damages. Elliott told HR that he wanted to bring in a temporary replacement as Operations Manager while Olson was out on FMLA leave and fire Olson on his first day back to work. HR agreed that Olson should be fired.

Despite its decision, Penske continued its investigation into Olson’s misconduct. Over the next couple of weeks, Penske discovered additional inventory errors and “ghost stows,” resulting in more than $120,000 of errors in the warehouse’s records. It also concluded that Olson had failed to train his employees, failed to enforce attendance policies, failed to return damaged items, and other lesser performance issues. Read more >>