Employment Law Blog

Tri-Arc Food Systems, Inc. (the “Employer”) appealed a decision of the Employment Security Commission (the “Commission”) awarding unemployment benefits to a former employee of the Employer who the Employer terminated after he failed to appear at work due to his incarceration. The former employee (the “Claimant”) worked as a maintenance employee for a fast food chain. After his release from four months of incarceration, the Claimant appeared at work and was informed that he no longer had a job with the Employer. He then filed a claim for unemployment benefits. The Employer contested the claim asserting that the Claimant quit work by “moving out of town” when he became incarcerated.

The Commission’s adjudicator initially disqualified the Claimant from receiving unemployment compensation benefits on the basis that he “left work without good cause attributable to the Employer”. The Claimant appealed. Although the Employer failed to participate in the appeal, the Commission appeals referee affirmed the adjudicator’s decision, but on different grounds. The appeals referee concluded that the Claimant was discharged for “misconduct connected with his work” and thus, disqualified from receiving unemployment compensation benefits.

“‘Misconduct connected with the work’ is defined as conduct evincing such willful or wanton disregard of an employer’s interest as is found in deliberate violations or disregard of standards of behavior which the employer has the right to expect of an employee, or in carelessness or negligence of such degree or recurrence as to manifest equal culpability, wrongful intent or evil design, or to show an intentional and substantial disregard of the employer’s interests or of the employees duties and obligations to the employer.” N.C.G.S. §96-14(2).

The Claimant appealed the decision to the Employment Security Commission. The Commission reversed the appeals referee’s decision concluding that the Claimant was not discharged for misconduct or substantial fault connected with his work. The Employer appealed the Commission’s decision.

The North Carolina Court of Appeals affirmed the decision of the Commission awarding benefits to the Claimant. The court stated that “absent a specific rule violation, misconduct may consist of deliberate violations or disregard of standards of behavior which the employer has the right to expect of his employee.” Since the Employer offered no evidence of any workplace rules that the Claimant violated, the Court found that the Employer shouldered the burden of establishing that the Claimant “deliberately violate or disregarded standards of behavior to which [the Employer] justifiably expected [the Claimant] to adhere” by being incarcerated. The issue before the court was “whether a four-month absence from work at a fast food restaurant due to the employee’s incarceration for any reason is a deliberate violation of standards of behavior to which the employer justifiably expects the employee to adhere.” The Court of Appeals held that it was not.

Employers should take note that unless they have a policy that makes clear that employees face discipline and/or termination for extended absences that occur for any reason, then an employee’s claim for unemployment compensation may be awarded. Being absent from work, even if absence is caused by incarceration, is not enough to qualify an individual from receiving unemployment. The Court of Appeals held that only certain incarceration-related absences, i.e., those listed in N.C.G.S. §96-14(2) constitute misconduct in employment.

In a recent decision, the NC Court of Appeals considered an employer’s claims that two of its former employees violated their non-compete agreements when they resigned and later hired two of their former co-workers.  (Inland American Winston Hotels, Inc. v. Crocket and Winston, Slip Opinion No. COA10-593, filed June 7, 2011). The non-compete at issue required that an employee not “solicit, recruit or induce for employment…directly or indirectly” any officer or non-clerical employee during the employment and two years thereafter.  The facts of the case were that following their resignations the defendants had been approached by their former co-workers but had refused to discuss hiring the former co-workers as long as the latter remained employed.  It was only after the former co-workers had resigned and sought new employment that they were hired by the defendants.  The Court found no evidence that the defendants had engaged in any solicitation, recruitment or inducement.  Relying on dictionary definitions, the Court concluded that “solicit, recruit or induce” are similar in that they involve active persuasion, request, or petition, which the defendants had not done by merely hiring their former co-workers.  The Court noted that the employer could have included a limitation on employing or hiring former employees in its non-compete agreements, but had not done so.   Based upon the Court’s decision, a business having a non-compete drafted should make sure that the non-compete prohibits hiring as well as soliciting, recruiting or inducing for employment.

North Carolina Employers can be held liable for the activities of non-employees in a claim for sexual harassment, if the employer knew or should have known of the harassment yet failed to take appropriate actions to halt the harassment.

The Fourth Circuit Court of Appeals, reversed summary judgment previously entered in favor of the employer in the case of EEOC v. Cromer Food Services, Inc., 2011 U.S. App. LEXIS 4279 (2011). The court reasoned that the employer had a duty to investigate or take other measures to combat the harassment once it was reported to the company. The  court warned that an employer is not free to adopt a “see no evil, hear no evil strategy” by finding that “knowledge can be imputed to an employer if a reasonable person, intent on complying with Title VII, would have known about the harassment.”

Homer Ray Howard (“Howard”), an employee of Cromer Food Services, Inc. (“CFS”), reported the almost daily harassment he endured by two employees at Greenville Hospital, which was a client of CFS. Howard was a vending machine re-stocker who worked on-site at the hospital restocking vending machines. Two housekeepers at Greenville Hospital began harassing him daily following an incident with a CFS co-worker who left a note in the hospital canteen calling Howard gay. Howard could not escape the constant harassment without abandoning his duties, because the alleged harassers harassed him while he was at each vending machine.

Howard reported the harassment to his supervisors repeatedly, he attempted to report it to the president of CFS (who would not let him get in a word during the meeting) and he complained to the supervisor of the two harassers at the hospital. The CFS supervisors told Howard to let it go, that the men were joking, to stop being a crybaby, that there was nothing CFS could do since it was hospital employees harassing Howard and to quit whining. None of the supervisors at CFS asked for the names of the alleged harassers or took any other apparent affirmative steps to investigate the complaint.

After Howard filed an EEOC charge, CFS offered him a shift that would have paid him less, required him to work more hours and conflicted with Howard’s childcare responsibilities. Howard rejected the reassignment and was terminated by CFS.

 The court held that CFS did not act reasonably in the investigation process because the supervisors that Howard reported the harassment to belittled him, laughed at him or “adopted an ostrich-in-the-sand approach” by responding to complaints with comments like “Homer, it was just a joke. Let it go.” The court also found that the position CFS offered Howard was not an effective remedial measure because Howard would have been worse off if he accepted it. Finally, the court viewed the offer as too little, too late based on the fact that Howard “endured months of inaction between when he first alerted his employer of the problem (December) until he was reassigned (late March). The Court finally concluded that CFS retaliated against Howard  by reassigning him to a shift with lower pay and longer hours that conflicted with his childcare responsibilities. Howard was effectively placed in a worse position by virtue of the reassignment and therefore, CFS’s conduct might “dissuade a reasonable worker from making or supporting a charge of discrimination.”

Contact the Employment Law Team at McGuire, Wood & Bissette, P.A. today to update your current anti-harassment policy in light of the recent decision.

On March 25, 2011, the Equal Employment Opportunity Commission (“EEOC”) issued final revised regulations and accompanying interpretive guidance in order to implement the ADA Amendments Act of 2008 (“ADAAA”). The EEOC is the federal agency responsible for enforcement of title I of the Americans with Disabilities Act (“ADA”), as amended by the ADAAA, which prohibits employment discrimination on the basis of disability.

The ADAAA was enacted on September 25, 2008, and became effective on January 1, 2009. The law made a number of significant changes to the definition of “disability” under the ADA. Through the passage of the ADAAA Congress overturned several Supreme Court decisions that Congress believed had interpreted the definition of “disability” under the ADA too narrowly, resulting in a denial of protection for many individuals with impairments such as cancer, diabetes, and epilepsy. The ADAAA states that the definition of disability should be interpreted in favor of broad coverage of individuals. As a result of the ADAAA, more individuals now meet the definition of disabled.

The regulations implement Congress’s intent to set forth predictable, consistent, and workable standards by adopting “rules of construction” to use when determining if an individual is substantially limited in performing a major life activity. These rules of construction are derived directly from the statute and legislative history and include the following:

• The term “substantially limits” requires a lower degree of functional limitation than the standard previously applied by the courts . An impairment does not need to prevent or severely or significantly restrict a major life activity to be considered “substantially limiting.” Nonetheless, not every impairment will constitute a disability.
  
• The term “substantially limits” is to be construed broadly in favor of expansive coverage, to the maximum extent permitted by the terms of the ADA.
  
• The determination of whether an impairment substantially limits a major life activity requires an individualized assessment, as was true prior to the ADAAA.
  
• With one exception (“ordinary eyeglasses or contact lenses”), the determination of whether an impairment substantially limits a major life activity shall be made without regard to the ameliorative effects of mitigating measures, such as medication or hearing aids.
  
• An impairment that is episodic or in remission is a disability if it would substantially limit a major life activity when active.
  
• In keeping with Congress’s direction that the primary focus of the ADA is on whether discrimination occurred, the determination of disability should not require extensive analysis.
  

As required by the ADAAA, the regulations also make it easier for individuals to establish coverage under the “regarded as” part of the definition of “disability.” As a result of court interpretations, it had become difficult for individuals to establish coverage under the “regarded as” prong. Under the ADAAA, the focus for establishing coverage is on how a person has been treated because of a physical or mental impairment (that is not transitory and minor), rather than on what an employer may have believed about the nature of the person’s impairment.

The regulations clarify, however, that an individual must be covered under the first prong (“actual disability”) or second prong (“record of disability”) in order to qualify for a reasonable accommodation . The regulations clarify that it is generally not necessary to proceed under the first or second prong if an individual is not challenging an employer’s failure to provide a reasonable accommodation.

Source: http://www.eeoc.gov/laws/regulations/adaaa_fact_sheet.cfm

Information for small businesses and the ADAAA can be found at here.

Information on the final rule can be found at here.

Contact the Labor and Employment Team at McGuire, Wood & Bissette, P.A. today to update your employment policies.

The National Labor Relations Board (“NLRB”), on February 8, 2011, settled a complaint that it had issued against American Medical Response of Connecticut, Inc. (the “Company”), in a case that has profound implications regarding the right of employers to discipline or discharge employees because of employees’ “on line” behavior.

Last fall, the NLRB issued a complaint alleging that the Company had violated certain provisions of the National Labor Relations Act (the “NLRA”), which provides employees with the legal right to work together to improve working conditions by engaging in “protected concerted activity”. An employee of the Company had been fired after posting comments about her supervisor on her Facebook account and responding to comments made by her co-workers on that account. The complaint filed by the NLRB claimed that, in addition to having denied the employee union representation at a disciplinary meeting, the Company had enforced a policy that was overbroad and improperly restricted employees from discussing wages, hours and working conditions with co-workers and others while not at work. Many employers are not aware that certain provisions of the NLRA apply to all employers regardless of whether the workforce is represented by a union. Generally, under the NLRA, employees are permitted to act together, with or without a union, to improve working terms and conditions, including wages and benefits. These activities are known as “protected concerted activities”.

Some examples of such protected activities include:

• Two or more employees petitioning their employer about improving their working conditions and/or rates of pay;
• An employee’s speaking to his/her employer on behalf of him/herself and one or more co-workers about improving workplace conditions; and
• Two or more employees’ discussing pay or other work-related issues with each other.

The complete text of the NLRB Press Release regarding the American Medical Response case is set forth below:

“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’s Hartford regional office issued a complaint against American Medical Response of Connecticut, Inc., on October 27, 2010,  alleging that the discharge violated federal labor law because the employee was engaged in protected activity when she posted the comments about her supervisor, and responded to further comments from her co-workers. Under the National Labor Relations Act, employees may discuss the terms and conditions of their employment with co-workers and others. 

“The NLRB complaint also alleged that the company maintained overly-broad rules in its employee handbook regarding blogging, Internet posting, and communications between employees, and that it had illegally denied union representation to the employee during an investigatory interview shortly before the employee posted the negative comments on her Facebook page. 

“Under the terms of the settlement approved today by Hartford Regional Director Jonathan Kreisberg, 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. 

“The company also promised that employee requests for union representation will not be denied in the future and that employees will not be threatened with discipline for requesting union representation. The allegations involving the employee’s discharge were resolved through a separate, private agreement between the employee and the company.

“The National Labor Relations Board is an independent federal agency vested with the authority to safeguard employees’ rights to organize and to determine whether to have a union as their collective bargaining representative, and to prevent and remedy unfair labor practices committed by private sector employers and unions.”

Please contact the Employment Law Practice Group of McGuire, Wood & Bissette, P.A., at 828-254-8800 should you have any questions.

In a recent unpublished opinion (MJM Investigations, Inc. v. Sjostedt Slip Opinion# COA09-596), the NC Court of Appeals held that a non-solicitation provision in a covenant not to compete unenforceable, based upon the absence in the provision of any definition of the “current or prospect clients” whom the former consultant was prohibited from contacting.  The trial court in Wake County reviewed a consulting agreement that included non-compete and non-solicitation clauses that the plaintiff was seeking to enforce against the defendant.  The trial court struck the non-compete clause as overly broad as lacking a territorial restriction, but ruled that the remaining non-solicitation clause in the agreement was enforceable.  The Court of Appeals reversed the trial court’s enforcement of the non-solicitation clause, which prohibited the defendant from soliciting any “current or prospect client” for providing specified insurance claim investigation services. 

The appellate court found unclear whether a “current client” would be a client at the time the agreement was executed , or at the time the defendants left the plaintiff’s employ.  The court found the meaning of “prospect client” to be even more nebulous as it could mean a client prospect at the time the agreement was executed, at the time the defendants left the plaintiff’s employ, or a client unknown until later.  Further, the Court of Appeals faulted the non-solicitation clause as potentially covering “clients” and in particular “prospect clients” with which the defendants never made contact.  While the plaintiff provided a client list of over 800 businesses, the Court of Appeals ruled that the trial court’s wholesale adoption of the list constituted improper modification of the non-solicitation clause.

For future guidance, the Court of Appeals cited with approval from a prior case a non-solicitation clause that restricted the employee “for two years, from soliciting any customers having an active account with [employer] at the time of [employee's] termination or prospective customer whom [employee] himself had solicited within the six months immediately preceding his termination.”  Such a clause, which made the referenced “customer” and “prospective customer” identifiable and contained a reasonable time restriction, may be used as a model for drafting a non-solicitation clause that should be enforceable.  Interestingly, Judge Steelman wrote a concurring opinion noting that today’s economy is global in nature and encouraging the NC Supreme Court to re-evaluate the law of restrictive covenants to allow restrictions upon competing business activity for a specific period of time, limited to a specific, narrow type of business, but with fewer geographic limitations.  While the opinion of the Court of Appeals was unpublished and thus does not constitute controlling legal authority, the case is very instructive as to what non-solicitation provisions are likely to be struck down as vague and unenforceable.

Client service and outreach are a key offering of the firm’s Employment & Labor Law Team, which is dedicated to the employment and labor law needs of North Carolina employers. McGuire, Wood & Bissette, PA attorneys Grant Osborne and Hayley Roper provided a customized  “crash course” in contracts, “Fundamentals of Contract Law” to their client, Kearfott Corporation-Motion Systems Division, in Black Mountain, North Carolina.

Kearfott designs, develops, and manufactures products for land, air, sea, and space navigation and guidance for military and commercial customers worldwide. Extensive contract negotiations are at the core of its business operations. As lead attorney for the team, Grant Osborne taught numerous company employees critical contract-law basics in five concentrated half-day sessions.

The contract training sessions that were provided to Kearfott support a guiding philosophy of the legal team in assisting its clients: an ounce of prevention is worth a pound of cure. The Employment & Labor Law Team works with clients on the front end, from development of employment policies and practices to providing guidance in navigating complex contract negotiations, to avoid time-consuming and costly legal matters down the road.

For a legal consultation or custom training session from the firm’s Emplyment and Labor Law Team for your business, contact us at employmentlawteam@mwbavl.com.

Your employee posts a comment on a blog, Twitter, Facebook or LinkedIn touting your business’s excellent products and services. As an employer, you think to yourself, what could be better, that’s wonderful. However, your employee may unwittingly have violated the Federal Trade Commission Act relative to endorsements and testimonials and the employee as well as you, the employer could be liable for the violation.

The “Guides Concerning the Use of Endorsements and Testimonials in Advertising” recently issued by the Federal Trade Commission (the “Guide”) is intended to aid advertisers and endorsers in maintaining compliance with the FTC Act, including the disclosure of material connections between advertisers and endorsers. The Guide defines an endorsement as “any advertising message … that consumers are likely to believe reflects the opinions, beliefs, findings, or experiences of a party other than the sponsoring advertiser, even if the views expressed by that party are identical to those of the sponsoring advertiser.” Thus, an employee’s statements on various social media about his employer’s products or services could be considered an advertising message. The FTC requires that endorsers fully disclose any connection between the endorser and the “seller of the advertised product that might materially affect the weight or credibility of the endorsement (i.e., the connection is not reasonably expected by the audience) (emphasis added). Therefore, an employee must disclose his employment relationship each time he endorses the company’s products or services.

Employers would be wise to establish a policy regarding use of social media generally and specifically employees’ endorsements of the company and the required disclosures in conjunction with any such endorsements. For more information about the FTC Guide, see http://www.ftc.gov/opa/2009/10/endortest.shtm. Our employment attorneys may assist you with creating appropriate personnel policies.

On March 23, 2010, President Barack Obama signed into law The Patient Protection and Affordable Care Act of 2010. Section 4207 of the Act amends the Fair Labor Standards Act of 1938 (FLSA) by adding a new provision related to nursing mothers to 29 U.S.C. §207.

The amendment provides that “an employer shall provide—

(A) a reasonable break time for an employee to express breast milk for her nursing child for 1 year after the child’s birth each time such employee has a need to express the milk;

and

(B) a place, other than a bathroom, that is shielded from view and free from intrusion from coworkers and the public, which may be used by an employee to express breast milk.”

All employers with 50 or more employees are subject to the amendment. Employers with less than 50 employees may be exempt from the requirements of the amendment, if the break requirement would impose an undue hardship by causing the employer significant difficulty or expense when considered in relation to the size, financial resources, nature, or structure of the employer’s business.

The breaks required by the amendment need not be compensated by the employer. The FLSA generally requires employers to pay employees for breaks that are shorter than 20 minutes that occur during the work day, however, the amendment expressly provides that the employer may choose to not compensate women for taking breaks to express milk. Curiously the amendment could result in employers that are required to pay employees for multiple smoke breaks taken throughout the day but that are not required to pay lactating mothers to express milk. There is no prohibition against compensating lactating mothers for breaks taken to express milk so employers may compensate lactating mothers if they elect to. The Department of Labor, Wage and Hour Division will issue regulation on the new amendment in the future. The Act does not state when the amendment becomes effective, however, employers should consider it effective immediately.

States laws covering lactating mothers are not preempted by the amendment and if the state law is more expansive than the amendment, the state law applies.

Immediate steps to be taken by covered employers:

1. Update employment handbooks and policies to include breastfeeding provisions.
   
2. Inform managers and employees of the new policy.
   
3. Provide a private area (other than a bathroom) shielded from view and free from intrusion from coworkers and the public to be used by lactating mothers.
   

Relief available to employees against employers that violate the amendment are not yet known, but would include at a minimum injunctive relief. Further, the FLSA allows for potential individual liability so it is important that employers comply immediately.

On March 18, 2010, President Barack Obama signed into law the HIRE Act, which provides tax incentives in the form of tax credits to businesses that hire unemployed workers after February 2, 2010 and before January 1, 2011.

Tax Credit

An employer that hires unemployed workers during the relevant period will receive an income tax credit of 6.2% of the wages paid after March 18, 2010, to each qualifying worker. The HIRE Act effectively exempts an employer from paying its share of the eligible employees’ Social Security taxes. The reduced tax withholding will have no effect on the employee’s future Social Security benefits, and employers still must withhold the employee’s 6.2-percent share of Social Security taxes, as well as income taxes. The employer and employee’s shares of Medicare taxes also still apply to these wages.

Additionally, an employer may claim a tax credit of $1,000 on its 2011 income tax return for each eligible worker retained for at least one (1) year. The 6.2% tax credit may be claimed by an employer on its quarterly federal employment tax returns filed with the IRS. Businesses, agricultural employers, tax-exempt organizations and public colleges and universities all qualify to claim the payroll tax benefit for eligible newly-hired employees. Household employers, however, cannot claim this new tax benefit.

Eligible New Hires

Eligible new hires must have been previously unemployed. Additionally, eligible new hires cannot have worked more than 40 hours in the 60 days prior to hire by the employer claiming the credit. The new hire may not replace an existing employee, with the exception of a vacancy created when an employee leaves voluntarily or is terminated for cause. The eligible new hire cannot be related to a fiduciary of the business. For nonprofit organizations, the work performed by the new hire must be in furtherance of the organization’s tax exempt purpose.

An eligible new hire must complete an affidavit affirming that he or she has not been employed for more than 40 hours during the 60 days immediately preceding his or her date of hire. Please visit www.irs.gov to obtain the Form W-11 Affidavit.