Connecticut Employment Law Blog : Connecticut Employment Lawyer & Attorney : Daniel Schwartz : Stamford, Hartford New Haven, CT

In case you missed it, a California court recently upheld a $4.1 billion aribration award to a former executive who brought a wrongful termination suit against his former employer. (The National Law Journal has a good analysis today of what happened here, as well.)   

Although this blog covers issues applilcable to Connecticut employers, the lessons learned from this California case -- which seems to be the largest single plaintiff employment law case award ever -- are applicable to employers everywhere. 

Numerous other blogs have done a great job recapping the case so I'm not going to spend time here doing so. For a employee perspective, check out the Employee Rights Post recap.  For an employer perspective, check out the Manpower Employment Blawg.  (And for a humorous perspective, check out World of Work's "First Annual Dr. Evil Award".) 

But the lessons learned from this case are simple: If you're an employer and you make promises, you'll be bound by them. Even if they lead to really really big numbers.  Proper drafting of employment contracts and follow through on the issues that such contracts raise can help an employer avoid similar issues in the future. 

For more links about the case, check out Overlawyered.

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There's a relatively new children's book out now entitled, "The Wolf Who Cried Boy". It's a humorous take on the old fable and I read it outloud one evening this week at home.  

I can't help but be reminded of both the classic and new story, reading all of the hyperbole and hype of the last 24 hours regarding the new Ledbetter Fair Pay Act and those who are quick to predict that the floodgates of employment litigation are now open. 

Let's clarify a few issues up front: 

• Is the Ledbetter Fair Pay Act important for employers to understand? Sure, just as all changes to employment laws are important. 
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• Does it dramatically change the law? Not really.  Before this law, employers still weren't allowed to engage in pay discrimination; it's just that the time frames for bringing suit under some pay discrimination claims had been defined narrowly by the U.S. Supreme Court in 2007.   This Act extends the time frame for bringing suit by treating each new paycheck as a basis for a discrimination lawsuit, rather than just the original decision to discriminate. 
   
• Will this lead to a dramatic upturn in pay discrimination lawsuits? The jury is definitely still out on this one.  

Here's the greater perspective.  Before the U.S. Supreme Court decision in 2007, women could bring pay discrimination lawsuits under both Title VII's overall scheme, or the Equal Pay Act.  For reasons that are still not fully known (though discussed by National Journal's Stuart Taylor here (H/T Point of Law)) , Ms. Ledbetter did not pursue her Equal Pay Act claim on appeal after it was dismissed on the merits (effectively forfeiting it).  The U.S. Supreme Court ruled only that for pay discrimination claims brought under Title VII, a 180-day statute of limitations applied to pay discrimination decisions.. 

Thus, after Ledbetter, if the employer's discriminatory pay decision occurred in 2007, the employee was out of luck now to sue under Title VII.  Each new paycheck was not an "act" of discrimination. 

The new law treats each paycheck as a new "act" of discrimination, effectively re-starting the statute of limitations each time a paycheck is issued.

But here's why the fuss about the new act is overblown. The employee still could sue under the Equal Pay Act. Indeed, employers should be much more concerned about the Equal Pay Act -- which was unaffected by the Fair Pay Act --  when it comes to pay discrimination claims.  

Unlike Title VII pay discrimination claims, employees do not need to file their Equal Pay Act claims with the EEOC, and claimants have two years in which to file their claim under the Act (three years if the violation is willful).

But here's the kicker for Equal Pay Act claims: The employee does not need to prove discriminatory intent, unlike Title VII.  In fact, the Equal Pay Act focuses on disparity in pay for substantially similar work; contrast that with Title VII which focuses on a discriminatory action that causes a disparity in pay.  So, when the employee is paid less than similarly situated employees of the opposite sex, an Equal Pay Act claim can arise without showing that the employer intended to discriminate. 

Does this mean that employers have no reason to be concerned about the Ledbetter Fair Pay Act? Of course not. The act has the potential of opening of employers to older claims of discrimination against managers and supervisors who have long since gone. But remember, employees will still need to show that the employer intended to discriminate -- a burden that is not insignificant.  And former employees are not going to be able to revive a claim of pay discrimination without a recent "paycheck" to go along with it. 

It's difficult to get exact numbers of pay discrimination claims and look at the numbers of claims filed both before and after the Ledbetter decision came out, but a cursory review of the statistics published by federal agencies under the No Fear Act doesn't seem to reflect a big downturn in the numbers of pay discrimination claims after Ledbetter.  In fact, the United States Postal Service reports more pay discrimination claims being made in 2008 (after Ledbetter), than 2007.  Thus, with Ledbetter effectively being overturned, it's hard to believe that the Act will impact the numbers of claims significantly. 

There is another bill that would change the underlying law that employers should follow closely -- the Paycheck Fairness Act (H.R. 12). The Paycheck Fairness Act would limit an employer’s ability to justify paying different salaries to workers based in different locations with different costs of living. The bill would lift the caps on compensatory or punitive damages for which employers would be liable, in addition to current liability for back pay. These damage penalties would apply to even unintentional pay disparities.

The House passed that bill as part of the Ledbetter Fair Pay Act bill, but the U.S. Senate did not take that up.  Backers of that bill, including Rep. Rosa DeLauro of Connecticut, will continue to press on. 

For employers, the Ledbetter Fair Pay Act should just be another reminder to be vigilant in the monitoring of your compensation practices.  The EEOC's Compliance Manual (H/T Moore) gives some suggestions on the issues that employers can review to determine their compliance with the applicable laws.  

There's little reason for employers to cry "wolf" or "boy" over this latest Act. Stay focused and use this current annual review season to ensure that your pay practices are supported by accurate data and are fair. 

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UPDATED 2/10/09

Sometimes, by coincidence, two unrelated decision get released in close proximity to one another that they bring some greater clarity to the law.

Yesterday, I discussed a Connecticut Superior Court case that found that certain discussions did not create an employment contract and that the employee was properly classified as "at-will".

Earlier this week, a federal court in Connecticut granted an employer's motion for summary judgment after finding that a Corrective Action memorandum did not create an employment contract either (and did not create any other claims).

In Ide v. Winwholesale, Inc. (download here), Judge Squatrito was asked to address whether the employee's termination -- after allegedly being "coerced" into signing a Corrective Action memorandum -- violated an important public policy. The court found that it did not and found that there was nothing inherently wrong with the memorandum either. 

The court indicated that, in essence, the plaintiff and a co-worker were engaging in a back-and-forth tit-for-tat that ultimately led to them both being disciplined.  The employer then issued a Corrective Action memorandum to address the issues.  The memo is similar to the type that many companies use to address disciplinary and performance issues with their employees: it spells out what was unacceptable and sets forth a plan to make sure the employee follows procedures on a going-forward basis. 

The employee blamed a fellow co-worker for his problems. But the court rejected that argument calling it the "But he started it!" defense.  This court did not stop there; the Court also found that the employee's argument that there was a "genuine issue of fact" concerning the Corrective Action memorandum forced the court to ask "So what?" 

The court then delivers the knockout punch to the plaintiff's case:

[The plaintiff] further argues that the Corrective Action memorandum constituted a contract, but, because he was coerced into signing the Corrective Action memorandum, the contract was void. The merit of this argument escapes the Court. There is no indication that the parties expected or intended the Corrective Action memorandum to be a “contract,” nor has Ide established in any way that the Corrective Action memorandum satisfies the legal standard for a contract (i.e., offer, acceptance, consideration).

What's the takeaway for employers here?

Courts will still use common sense in deciding employment cases.  Here, the employer had detailed the reasons for its decision is a clear and concise fashion and used a corrective action memorandum that backed up its reasoning.  The importance of documentation and, at least the appearance of, fairness, made this a fairly easy case for the Court to dispose of.

In essence, the employer did what would be expected of it. It learned about violations of the company's policies, addressed them, and then fired the employee when he failed to correct the deficiencies noted.

One important last note for employment law practitioners: The court takes the employer to task on one procedural issue -- namely the filing of a motion to strike portions of the plaintiff's affidavit that was filed in response to the motion for summary judgment. The court suggests that the federal rules of civil procedure do not allow for such a practice and "The parties to an action 'should have faith . . . that the court knows the difference between admissible and non-admissible evidence, and
would not base a summary judgment decision simply upon the self-serving ipse dixit of a particular party.'"

The court suggests that if a party wants to object to portions of an affidavit, that the party should argue it in the summary judgment briefing itself.

UPDATE: Portions of the underlying decision, which have no impact on the outcome of the case, have been redacted by request.

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Suppose you, as a hiring manager, have a discussion with one of your current employees about a job opening within the company at another location. In the course of that discussion, you indicate that you would expect that employee to work in that position for two years before moving on to other possible opportunities. 

After that conversation, you put down the terms of the offer in writing that says nothing about a two-year position, but rather discuss an annual salary etc. In addition, you have an employee handbook states that all employees are employees-at-will, except if there is an an agreement for a specified period of time by the CEO or hiring manager to the employee.

The question that then arises is: Does that conversation create a contract for employment for a two year period?

A recent unpublished Connecticut Superior Court decision suggests no and dismissed the claim at the summary judgment stage.

In Urgo v. Bassett Furniture Direct-NE, LLC, 2008 WL 5255663 (Nov. 25, 2008) (also available at Conn. Bar Association site here), the Court (Judge Edward Domnarski, presiding) held that, in the circumstances, the conversation did not create an actual contract.

The conversation between the parties regarding the length of time that the plaintiff would be expected to manage the store did not create an actual contract commitment for a period of employment. The plaintiff had been employed by the defendant for several years and she had employed at various locations within the defendant's organization. Considering the conversation in the context of the surrounding circumstances, the plaintiff was attempting to establish how long she would be expected to stay in [the new location] before moving on to other opportunities. The defendant agreed to pay a housing allowance to the plaintiff on a monthly basis. The plaintiff had to sign a one-year lease which she claims is evidence of a one-year contract of employment. The court cannot conclude that his third-party agreement translates into a contractual commitment from the defendant. It is significant that the plaintiff's testimony indicates that she knew that there were no guarantees regarding the length of her employment. ....

...Although the plaintiff and...the CEO of the defendant, did communicate regarding the plaintiff's employment those communications do not establish an intention by the defendant to alter her "at will" status. The plaintiff has not satisfied her burden of presenting evidence that the defendant had agreed to some form of contract commitment and that there was a meeting of the minds between the parties.

For employers, this case emphasizes two important points:

• Employee handbooks (and disclaimers present in them) provide valuable and supportive evidence to courts about the scope of an employment relationship. Even better, having each individual employee sign off on receipt of the handbook or policies provides yet further evidence.
• Put offers in writing; the clearest way to avoid oral contracts from being created is to make sure that an offer in writing supersedes any prior contracts.  For more on offer letters, you can find more earlier detailed post here.

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One occasional feature of this blog is a short post on a law or regulation that is commonly overlooked.

Today's installment revolves around wage and hour claims in Connecticut.  Suppose that an employee claims that he is entitled to unpaid overtime wages for years because he has been misclassified as an exempt worker. 

How far back is the employee entitled to go for his claim for damages? Or, in other words, what is the statute of limitations on wage & hour claims in Connecticut?

A look at the wage statutes reveals nothing. How can that be? Because you have to go digging somewhere else entirely.   Conn. Gen. Stat. 52-596, entitled "Actions for payment of remuneration of employment" has the rule:

No action for the payment of remuneration for employment payable periodically shall be brought but within two years after the right of action accrues, except that this limitation shall be tolled upon the filing with the Labor Commissioner of a complaint of failure to pay wages pursuant to the provisions of chapter 558.

In plain English, what does this mean?

Two things. First, claims must be brought within two years after the paydate in which the missing wages are allegedly due. Or, put another way, an employee who claims unpaid wages can only look back over a two-year period for recovery.  Second, the time period can be extended if the employee has filed a claim with the Department of Labor for failure to pay wages.

For employers, this statute should not be overlooked. It can help limit damages in cases of unpaid wages.  And when an employer discovers an issue of unpaid wages, it can determine its potential exposure to this issue by applying this statute of limitations.

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Here's a quick update on some items and topics that have been covered by the blog over the past year:

• Earlier this week, I raised the issue of whether the rising unemployment rate would also lead to more employment lawsuits. Reuters yesterday released a very good and balanced article on the subject. I shared my thoughts with the reporter who was kind enough to add those comments to the article. You can check it out here. 
   
• The lawsuit brought by three wrestlers against the WWE is continuing..but at a snail's pace.  As you may recall, WWE filed a motion to dismiss in early October on the merits of the case. The wrestlers' response was due on November 10th. However, the wrestlers have now sought an extension of time and their response will now be due in a few weeks. In the meantime, the wrestlers did mention in their most recent filing the possibility of adding or incorporating claims that other wrestlers have. No word on any details, but we can expect some new developments by month's end.
   
• A few weeks ago, I commented on the provocative article that suggested getting rid of performance reviews.  SHRM has a good article posted today that argued that performance reviews should not be eliminated. Instead, managers must "own" the reviews (subscription required).

Whether individuals believe in performance reviews or not, organizations are increasingly looking to hold managers accountable for accurate, timely and unbiased appraisals which help manage performance and head off legal issues.

“A lot of people are asking questions, given the financial crisis, about what HR or human capital programs companies should be focused on and performance management would definitely make my short list,” said Laura Sejen, Watson Wyatt’s global practice director for strategic rewards in New York. “It’s more important than ever to make sure that employees and managers are clear about organizational goals and priorities.”

• Last year, I wrote about a case that held that the National Bank Act may preempt certain state law discrimination claims.  The Employer Law Report reports that two new cases have also followed suit, making it that much more important for national banks to learn about their available defenses in employment discrimination claims.
   
• Last, in response to my article on Veteran's Day, I received a very nice phone call from an officer of the Naval Enlisted Reserve Association (NERA). Reservists are an often-overlooked part of our military and I commend them for the work they are doing on behalf of our men and women fighting in the wars in Afghanistan and Iraq.

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Have you ever wondered about the fluctuating workweek method for calculating the regular hourly rate or the overtime premium rate for employees who are paid a weekly salary? Most have probably not. But if you are one of the few employers who do use it, have we got a Connecticut Supreme Court case for you. 

In a decision officially released next week, the Connecticut Supreme Court in Stokes v. Norwich Taxi, LLC (download the advanced release opinion here), looks to the federal laws and regulations to determine the parameters of the fluctuating workweek method as applied in Connecticut.

For background, on the fluctuating workweek, The Wage & Hour blog had this good summary:

Employees who are compensated on a salaried basis and whose hours of work fluctuate from week to week may be paid a salary such that the fixed amount covers all straight time pay for whatever hours are worked in a given week. The following conditions must be met: 1) Hours must fluctuate from week to week; and, 2) There must be a clear and mutual understanding between the employee and employer that the fixed salary is compensation for the hours worked each work week, whatever the number; 3) The amount of salary must be sufficient to provide compensation to the employee at a rate not less than the applicable minimum wage rate for every hour worked; and, 4) The agreed-upon salary must be paid even though the workweek is one in which a full schedule of hours is not worked.

This four-part test has formed the basis of several circuit court decisions.  The federal regulations on the subject are also helpful.  29 C.F.R. 778.114 can be found here.

So what did the court decide in Stokes? Well, first that the employer bears the burden of proving that the fluctuating workweek method applies under the facts of the case, not the employee.  The court then concluded that the employer failed to establish the second element of the four-part test (similar to the one above). 

The court also ruled on a number of other procedural issues, but those have minimal relevance for employers.

What's the takeaway from this case for employers? Understand the fluctuating workweek method.  It is not used all that frequently and if it is used, it is not the easiest to follow. Getting legal counsel involved at the outset to structure the position appropriately may be the easiest way to avoid problems in the future.

Final word of warning: earlier this year, new regulations were proposed that would modify the regulations on the fluctuating workweek. So this may be the first and last time the Connecticut Supreme Court looks at this issue in this fashion. Stay tuned.

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UPDATED 12/8/08 to correct cap on penalty amount to $500,000

With all the focus this year on minimum wage, 15-year-olds in the workplace, and the like, other less-publicized bills in Connecticut still haven't received much attention. In an earlier post, I noted that I would update readers on them when the dust settles. 

One of them, is Public Act 08-167 (called "An Act Concerning the Confidentiality of Social Security Numbers"), which goes into effect October 1, 2008.  You can download the text of this very broad new law here.  This new state law requires all businesses that "collect Social Security numbers in the course of business" to safeguard social security numbers, dispose of them properly and create a policy regarding such information.  It also requires all "persons" who get "personal information" on one person, to safeguard such information as well.  The legislature has summarized the new law here.

As an initial comment, the new law, as drafted, is extremely broad since the "persons" who must safeguard personal information appears to include both companies and individuals.  Thus, on its face, it could potentially cover situations in which your neighbor buys items at a tag sale from you and hands you a check with an account number on it. In such a case, the person receiving the check  may be responsible for safeguarding the account information.  Businesses that collect social security numbers will have additional obligations as well.  Because of the broad reach of this statute, employers should also consider the implications of this statute not only on their workforce, but on their customer base as well.  

How does this impact employers, in particular?
 

Because basically all private employers in Connecticut collect social security numbers "in the course of their business", either for insurance purposes or employee verification, this new law appears to apply to them.  While the legislative history and Governor Rell's press release signing the new law doesn't discuss employers specifically,  the broad language of the law covers employers.   Until and unless the scope is clarified (to limit the application, for example, to social security numbers collected from customers, rather than employees), employers should pay heed to this law.  

So what does the new law require and dictate?

 

• Create a "Privacy Protection Policy"

This policy must 1) ensure confidentiality of Social Security numbers, 2) prohibit their unlawful disclosure, and, 3)  limit access to them.

• Publish or Post the Privacy Policy

While the new law indicates that it should be published or "publicly displayed" including posting on an Internet web page, it seems that in the workplace, this will be satisfied by following the same standards that employers typically follow. Thus, the information can be included in a bulletin board posting, an company intranet, and/or an employee handbook.  Distribution to each employee via e-mail or in person may also be appropriate. 

• Protect "Personal Information"

The act requires businesses (and thus, employers) who have "personal information" about a person (including their employees) to safeguard the data and computer files and documents so that it isn't misused by third parties.  Employers must also destroy, erase, or make unreadable any document, computer file, or data before disposing of it.

What is considered "Personal Information"?  The Act defines it has "information capable of being associated with a particular individual through one or more identifiers". 
What are some examples? Social Security number, driver's license number, state identification card number, account numbers, credit or debit card number, passport number, alien registration number, or health insurance identification number.  Presumably, this could also include an employers own internal system for identifying employees.   Nothing in the new law prohibits employers from gathering and using this information, however.
What is not "Personal Information"? Any publicly available information lawfully made available from federal, state, or local government records or widely distributed media.

What are the penalties for non-compliance?
 

At the outset, it is important to note that there is no private right of action; in other words, if an employer violates the statute, they cannot be sued by the individual whose information is released at least under this statute. This does not preclude the employee from raising other contractual or tort claims (such as negligence) that may exist.

The Department of Consumer Protection (and, in some instances, other departments with limited jurisdiction) has the power to enforce the statute. But only intentional violations can result in a civil penalty of $500 per violation, with a $500,000 cap on a single event.  Notably, this penalty provision only applies to intentional violations; unintentional violations are specifically excluded.

What can employers and businesses do now?
 

While there are still several months before the law becomes effective, employers (and all businesses in the state) should start formulating comprehensive data protection policies and procedures to safeguard such information. Many businesses (such as those in the health care field) have started to implement these policies, but the reach of this Act will mean that many others will need to comply. 

Workplace Privacy Counsel blog has some additional suggestions on the policy as well.  Although the Privacy blog implies (unintentionally) that the law speaks directly about private employers, the law is written much more generally and in broader terms; it applies to all businesses that collect information from consumers as well.

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[The case] centers on an accident in Willimantic, where a big retail store was under construction. Excavator operator Richard Archambault, an employee of subcontractor Soneco, was injured in a trench cave-in. He sued general contractor Konover Construction after winning workers' comp benefits from Soneco. ...

But in a unanimous ruling penned by Justice Peter T. Zarella, the high court found [then Superior Court Judge Barbara] Quinn erred in granting those instructions. The court stated that Konover should have been permitted to assert a general denial of liability and argue that Soneco's negligence was the sole proximate cause of Archambault's injuries.

• Safety must remain a top priority.  And without the coverage of workers compensation laws, there are huge potential risks if the cases are before a jury.
  
• The laws regarding liability for contractors/subcontractors and the interplay with the state's workers compensation claims continues to develop in Connecticut.  The two cases this month still reflect the uncertain nature of the law.  Construction contracts should be thorough and should address indemnification provisions, insurance, and the like.  Should an employee get injured on the job, seeking legal advice about what may happen next may help companies avoid having their dispute end up at the Connecticut Supreme Court, like this one.

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