| E-LEARNING UPDATE: CCG
has completed production of its Real World
E-Learning™ Sampler,
a 20 minute CD-ROM entitled “Avoiding Employee
Lawsuits.” The Sampler demonstrates and
explains some of CCG's e-learning modules and techniques,
and is provided at no cost to companies which may prefer
to meet the Supreme Court’s
training mandates through e-learning, as opposed to in-person
instruction. It includes segments on unintentional sexual
harassment, file documentation, and reasonable accommodations
under the ADA.
If you wish to receive a free copy of the Sampler,
please click here.
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BREAKING UP IS HARD TO DO--
The Real World Risks of Terminating At-Will Employees
By definition, an “at will” employee is one who
can be terminated by an employer without cause or reason.
But as experienced HR professionals, managers and executives
already know, the growing list of exceptions to this doctrine
make at-will employee terminations anything but risk-free.
As much as a confident “You’re fired!” makes
for great TV, things aren’t nearly so simple in the
real world.
There is a plethora of available employment
law articles that instructs employers on the well-known liability
hazards in this area, and how to deal with them. For instance,
at-will employees often claim that they were unlawfully terminated
based on their race, age, gender or other protected characteristic;
or that they were retaliated against for exercising certain
guaranteed rights, like promoting unionization; or that they
were terminated in violation of certain “public policy” considerations
as defined by various courts; or that their termination violated
an applicable state statute.
In these kinds of situations, documentation
is the key: an employer needs to be able to prove that its
decision to terminate was based on, for instance, incompetence
or violations of work rules, and not on some unlawful consideration.
Avoiding Lawsuits has dealt with this necessity in prior
issues – for instance, see our January
2004, June 2003,
and April 2002 issues.
But as so often happens in the real world
of employer-employee relations, just when you thought you
had your arms around the risks raised by at-will employee
terminations, there emerges an array of often ignored, but
potentially devastating issues that present even greater
dangers.
Here’s a sampling of some of the
issues you ought to be thinking about in order to stay ahead
of this curve.
Protecting Confidential Information in
a Digital World
In the “old days,” an employee
bent on furtively stealing voluminous customer files, the
results of a research project, engineering plans, and so
on would have to find a way to locate the materials (which
could be in a locked file cabinet or private office), copy
them without being noticed, and get them out of the office.
The logistics could be daunting.
In recent years, however, the theft of
trade secrets has become much easier, thanks to the prevalence
of office computer networks – an employee need only
locate the materials on the network and email the data or
burn a CD, all of which can be done, to the tune of tens
of thousands of pages of information, while casually sitting
at a desk during the normal work day. Consider: according
to a University of California at Berkley study, 92% of
all information created in 2002 was stored magnetically,
mainly
on hard drives. Some companies password protect or otherwise
secure sensitive materials, but as often as not, these systems
are easily and frequently circumvented.
Disgruntled employees who believe they
are on the ropes and subject to termination are the most
frequent and obvious risks – they collect data and
take it with them when they go (or, often, even before they
go), hoping to use it themselves or sell it to a competitor.
For instance, in recent years the following criminal prosecutions – among
many, many others -- have come to light. One can only imagine
how much additional trade secret theft remains undiscovered
or resolved confidentially:
- Two former Boeing managers were charged in a
plot to steal product development secrets from Lockheed
Martin;
- A disgruntled Cisco employee
logged in at a software engineer’s workstation, found
valuable information pertaining to released products and
ongoing product design, burned a number of CD’s,
joined a competitor, and downloaded the information on
the competitor’s computer system;
- An ex-employee of Lightwave
Microsystems collected computer back-up tapes and attempted
to sell them to a competitor;
- A ex-employee of Brookwood
Companies, a textile company, was caught with proprietary
pricing materials;
- An ex-employee of SRG, an
employee placement firm, took valuable information matching
employees with prospective employers;
- An ex-employee of Semi-Supply,
Inc. took a database of valuable and confidential customer
and order information;
- An engineer working for a Gillette contractor
downloaded 600 megabytes of plans for new production equipment
and tried to sell it.
So what do you do? The topic is, obviously, exceedingly
complex and beyond the scope of this article, but here are
some basics.
First, take advantage of the laws that exist. Congress passed
the Economic Espionage Act of 1996, and various states have
enacted their own trade secret protection laws as well. Most
of these statutes define the information that fall within
their ambits of protection as virtually anything, not already
known or readily-ascertainable by the general public, from
which an economic advantage can be gained, so long as
the owner of the information has taken reasonable measures
to
keep the information secret. In other words, you waive your
right to the law’s protections unless you take reasonable
steps to protect yourself. For instance:
- Use the technology that suits the size and infrastructure
of your company. Get beyond mere password protection – technologies
have progressed to the point where even very small companies
can implement firewalls, secure servers and other systems
that make it quite difficult for all but the most technologically
sophisticated to penetrate;
- Explore the potential to use computer monitoring
software that allows you to track individual computer usage
and network access. To create a deterrent effect, let employees
know – before, during and after their employment
(i.e., in an exit interview) -- that you are monitoring
what they are doing. Consider including the monitoring
policy as a screen saver so that as your employees log
on they will either be reminded of the policy or be required
to agree to the policy;
- Related to the above, make certain that you have
in place the appropriate policies and procedures so that
employees are aware that they should have no expectation
of privacy as it pertains to their computer usage;
- Require employees to sign the right kinds of
nondisclosure and confidentiality agreements;
- Make sure you do all that is required to limit
public dissemination of anything you may at some time seek
to protect as a “trade secret.”
Defamation Risk #1:
How Do You Explain the Termination To Co-Workers?
Employee morale can suffer when a fellow
employee is terminated, particularly if similarly-situated
employees believe there was no basis for the termination.
Especially when an at-will employee is terminated for good
reason, every employer wants to let other employees know
the real story in the effort to quell suspicion and dissent.
Here is the way that scenario often plays
out. Let’s suppose that you – an executive VP
in a manufacturing firm – are told by one of your managers,
Joe, that an employee, Harry, failed to complete a crucial
market analysis on time. Joe says he needs to send a message
to the rest of Harry’s group – deadlines must
be met, and the company won’t stand for the kind of
lackadaisical approach Harry brought to the table. He asks
for authority to fire Harry. You want to support your managers,
and you give Joe the OK. Joe terminates Harry, and sends
an email to the group:
| Some of you asked why Harry was terminated. Harry’s
termination was made for good cause – Harry failed
to complete the market analysis on time without any justification.
The company cannot afford to retain employees who do
not take the company’s needs seriously. Please
be guided accordingly. |
A month later, you are served with a defamation lawsuit.
It turns out that Joe had forgotten that he extended the
deadline, and Harry can prove it. Or far from failing to
take his job seriously, Harry has a serious illness, Joe
knew about it, but failed to accommodate Harry and violated
the ADA in the process. Thanks to the wonders of computer
technology, the distribution of Joe's email expanded exponentially,
and Harry's reputation has been decimated to the point where
he cannot get another job, and his kids
are teased in school about their lazy, incompetent father.
Harry wants punitive damages.
This is a difficult situation – it would be easiest
to say nothing, but the company could suffer if the rumor
mill were allowed to keep churning without the company putting
forth its version of the facts.
The solution is twofold. First, always, always, always make
sure that you can prove whatever you choose to say. That
means doing much more than simply asking Joe if his statements
are true. In this case, you would have been well served to,
at the very least, meet with Harry, explain the seriousness
of the offense, determine if there were an excuse, and base
a decision on the results of that inquiry. It would not hurt
to seek advice of counsel along the way.
Second, even if you conclude that termination is justified,
say as little as possible while still making your point,
and justify the lack of a detailed explanation out of a concern
for Harry’s privacy:
| This is to advise you that as of this date, Harry is
no longer employed by the Company. The Company made this
decision, after investigation, based on our belief that
it was in the best interests of the Company to terminate
Harry’s employment at this time. As a matter of
policy and in order to protect Harry’s privacy,
the Company does not believe it is appropriate to discuss
further details that pertain to this decision. |
This gets the message out, but limits the risk – so
long as your personnel are well trained in the art of dealing
with the employees who will inevitably ask questions seeking
more details. Employee defamation suits are becoming much
more common, juries are becoming more sympathetic given the
tight job market, and they need to be dealt with as a real
risk with a high damage potential.
Defamation Risk #2:
How to You Respond to a Request for a Reference?
What should you do when a prospective employer asks for
a reference on a terminated (or any other former) employee?
If avoiding lawsuits and liabilities is your priority, our
recommendation is simple: confirm dates of employment and
positions held, release compensation information only if
provided with a signed release, and say and disclose nothing
more.
From a risk management perspective, there is no upside,
and lots of downside, to the violation of this rule. If,
believing that you are being completely truthful, you disclose
that the employee was a poor performer, you again open the
door to a defamation claim. Some states have passed statutes
in an effort to protect employers against such liabilities,
but they are far from foolproof.
And the risks extend beyond the defamation sphere. For instance,
if you mention that the employee had a bad back or had been
on sick leave, you run the risk of violating the prohibition
of the ADA (and other laws) against disclosing medical information.
Although a bit far fetched, there have even been cases in
which a positive reference led to a lawsuit. Suppose you
have an employee with violent propensities and, happy to
get him out the door, you give him a positive reference.
If he harms someone at his new place of employment, you might
be on the hook -- once you start telling what you know, you
can be liable for misleading a prospective employer unless
you tell the whole story.
Caveat #1: This may be an exception to the general “say
nothing” rule. Depending on where you conduct business,
you could be liable for not disclosing the potential of an
employee to cause harm to others. Check with counsel.
Caveat #2: To avoid the argument that, by not giving a reference,
you singled someone out for special adverse treatment, as
well as the argument that your failure to provide the reference
implied to a prospective employer that the employee in question
was unfit, establish a written policy regarding references,
and train your employees to live by it.
Caveat #3: We recognize that many HR professionals seek
to encourage the free flow of employee reference information,
and will provide substantive references (and expect them
in return). That’s OK – so long as management
understands the risks, and has made an educated business
judgment that the benefits outweigh them. On a selected basis
among HR professionals who trust each other, sometimes the
risks are worth it.
Can You Withhold Wages from an Employee
Who Caused You Damage?
Suppose you terminate an employee who blows off a crucial
customer meeting and causes you to lose a lucrative sale,
or stupidly deletes computer data that takes thousands of
dollars to rebuild? Thereafter, you learn that you owe the
employee for accrued vacation time and expense reimbursements.
Do you have to pay it, or can you charge the employee for
the damage done to your company?
Check with counsel. Many states have “wage payment” laws
(with “wages” being very broadly defined) that
severely restrict the right of an employer to withhold sums
the employer claims to be due (as opposed to paying all back
wages, and suing for damages). These laws usually include
severe penalty provisions, such as counsel fee entitlements
for the employee, fines, treble or other enhanced damages,
and so on.
What About Reading Personal Mail Left On An Office Computer?
Companies have a bona fide interest in
reviewing a terminated employee’s emails. You may want
to determine if the employee was disclosing information to
competitors, or soliciting other employees, and so on. You
may also need to reconstruct what the employee had accomplished
in respect to his or her job responsibilities so that you
can determine whether any damage control is required.
Most courts – again, jurisdictions
do differ, so check with counsel – allow companies
to review employee email on an email system supplied by the
company. It helps a great deal if, through appropriate policy
and procedure materials, the company has notified its employees
that it may choose to exercise this right. This will effectively
thwart an employee’s argument that his or her privacy
was invaded; the company can argue that the employee was
told in advance to expect no privacy.
But what about personal, non-business email?
There are many cases, often labeled as “invasion of
privacy” claims, that say that an employer can be liable
for reading, copying or publicizing employee email (or other
communications, for that matter) that are obviously personal.
And there are other complications if the email relates to
medical or related issues.
Where do you draw the line? Understanding
that there is a line to be drawn is the first and most important
part of this battle. Beyond that, there is no hard and fast
rule. There has to be a bona fide business reason for an
employer to read what would appear to be purely personal
emails, and if there is not, stay away from them. Otherwise,
consult counsel to determine if the risks will outweigh the
benefits.
Caveat: Remember that you have the right
to prohibit employees from using your email system for personal
purposes. This won’t give you the right to read personal
emails sent or received in violation of this policy, but
it may limit the frequency of the instances in which you
have to deal with this issue.
What Do You Do When the Terminated Employee
Harasses and Defames You?
The internet has given terminated employees
who seek vengeance on their former employer and/or the manager
who fired them an audience, potentially in the tens of millions,
to whom they can vent their spleens.
For instance, there are cases in which
a terminated employee has given the email addresses of company
executives to porn sites and other spam providers in an effort
to embarrass them and flood their email accounts; posted
the top management positions at his former company as job
openings on internet job placement sites to cause confusion
and embarrassment; and made false, defamatory postings on
numerous websites (and to stock analysts, customers, etc.).
In a noteworthy California case, a fired
employee and his girlfriend posted derogatory messages on
internet bulletin boards, defaming their former employer,
labeling the manager who did the firing and others as chronic
liars, mentally ill, incompetent, on hallucinogenic drugs,
and so on. The company sued, alleging, among other things,
defamation and invasion of privacy, and it sought an injunction.
That further emboldened the ex-employee, resulting in 13,000
additional messages email messages, the creation of a website
dedicated to furthering the attacks, and a vow that he would
keep it up until he died.
Ultimately, the case went to trial and,
after six weeks in the courtroom, the company won substantial
compensatory and punitive damages, as well as an injunction.
But the ex-employee appealed, and the appeals court substantially
modified the injunction – there are very significant
First Amendment prohibitions on restraining free speech,
even when it is defamatory.
The upshot was that the company obtained
a money judgment it will most likely be unable to collect,
a ton of adverse trial publicity – and the defamatory
postings and harassment continued anyway.
Is there a solution to this kind of conduct?
Candidly, there are few remedies other than seeking to minimize
the emotion inherent in an employee termination at the outset.
In our experience, three factors provoke
the most vengeful responses: surprise; perceived arbitrariness
and unfairness; and employer inconsistency. You can often
limit the emotional backlash through a progressive disciplinary
system, tied to meaningful employee evaluations, which gives
employees fair warning and a chance to improve, and a structured
grievance process which provides disgruntled employees with
a controlled forum for venting… another topic for a
future issue of Avoiding Lawsuits.
As always, let
us know if we can help.
WHAT DO YOU THINK?
Employers can minimize some of the risks
of employee terminations and departures through employment
agreements with their employees. For instance, depending
on the jurisdiction, covenants not to compete can restrict
an employee’s right to work for (and take information
to) a competitor. Contract provisions precluding employees
from taking or using information – even if the information
is not deemed worthy of statutory protection – can
be immensely helpful. Agreements requiring arbitration can
be used to limit runaway jury verdicts in many cases.
Do you use these tools? If not, why not?
Click
here to give us your point of view.
Next month we will share your input (but we will never disclose
your name, e-mail address or other identifying data without
your permission).
ANALYSIS AND REVIEW: WHAT DO YOU THINK? – MAY
2004
Last month’s “What Do You Think?” focused
on whether obesity is or should be treated as a disability
under the ADA. Even if it is a disability, we asked whether
an employer has the “right” to discriminate against
obese employees and job applicants who do not fit into, and
may actually compromise, its corporate image.
Some of your comments:
“Studies demonstrate that many cases of obesity have
underlying medical causes, not just poor eating habits. To
allow employers to discriminate against individuals because
of their medical condition is completely contrary to the
purpose of the ADA.”
“No. Obesity is no different than any other medical
condition. Should candy stores be allowed to discriminate
against people with diabetes?”
“The law cannot cover every social issue, and as I
understand the law, obesity is NOT a covered disability under
the ADA. Employers, particularly providers of consumer goods,
need to balance the rights of employees and applicants with
those of its customers in order to stay in business.“
“I think the biggest problem is that the term ‘obesity’ is
overly used. If one’s weight issues are truly a result
of a medical condition, then the ADA must apply and the regular
reasonable accommodation approach kicks in. If the individual’s
weight is merely a result of bad eating and exercise habits
then it is no different than a smoking habit and should not
be protected.”
Analysis:
When it comes to employment law, there is rarely
if ever a clear answer – it’s all about the
facts. The issue of obesity as a disability in the workplace
is certainly no exception.
Both the courts and the EEOC are clear – being overweight,
in and of itself, is generally not an impairment covered
by the ADA. However, severe obesity – i.e., the individual
has a body weight more that 100% over the norm – has
been found to be an impairment.
State law is equally murky. Although several state disability
statutes have been drafted broadly enough to arguably include
obesity as a protected disability, court rulings still emphasize
that the particular facts of each case must be scrutinized.
This makes the law inherently unpredictable – there
are few concrete rules on which employers can reliably base
their actions.
As to the corporate image issue, employers, particularly
those in the consumer goods arena, have long argued that
the preferences or opinions of customers have a significant
impact on business decisions, and hiring decisions validly
based on such considerations ought to be beyond the reach
of the law. Although the argument may seem justifiable – businesses
have a right to do what’s best for business -- this
is one area where the courts have been fairly clear. Customer
preference does not override an employer’s obligations
under the law.
One of the most widely publicized federal cases addressing
the issue of “corporate image” is the class action
suit currently pending against the Abercrombie and Fitch
clothing retailer. In 2001, the EEOC issued a determination
letter stating that “. . . evidence obtained during
the course of the investigation revealed that Latinos and
Blacks, as a class, were denied permanent positions, denied
assignments and treated in an unfair manner with regard to
recruitment based on their race and national origin . . . “ The
class action suit that arose from that decision alleges that
as a matter of promoting its corporate image, Abercrombie
discriminates against Latinos, Asian Americans and African
Americans in order to create the “A&F look.” The
suit further alleges that these discriminatory hiring and
promotion practices are reflected in the company’s
TV advertisements, catalogs and store displays, which typically
feature white models. Does Abercrombie have a right to tailor
its corporate image in this way? We will continue to keep
you posted on this case as it unfolds.
If you are concerned about the legal issues that might result
from your company’s reaction to obesity or other characteristics
among applicants or employees in your workplace, seek the
advice of counsel, and as always, let
us know if we can help.
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