generalassemblyPayroll cards are finally here.

The General Assembly finished their regular session last night with several employment law bills getting passed, including some that have been kicking around for years.

One of them is Senate Bill 211, which authorizes employers to use payroll cards — instead of checks or direct deposit — to pay their employees.

But there are a number of conditions that must be met before this happens and there are a number of restrictions as well.  The bill will become effective October 1, 2016 — assuming the governor signs the measure, which is expected.

The Office of Legislative Research has done a thorough recap, which I’ll liberally borrow from here.

In order to use the card, an employee must “voluntarily and expressly authorize, in writing or electronically, that he or she wishes to be paid with a card without any intimidation, coercion, or fear of discharge or reprisal from the employer. No employer can require payment through a card as a condition of employment or for receiving any benefits or other type of remuneration.”

In addition, as noted by the OLR report:

  1. employers must give employees the option to be paid by check or through direct deposit,
  2. the card must be associated with an ATM network that ensures the availability of a substantial number of in-network ATMs in the state,
  3. employees must be able to make at least three free withdrawals per pay period, and
  4. none of the employer’s costs for using payroll cards can be passed on to employees.

Under the bill, a “payroll card” is a stored value card (similar to a bank account debit card) or other device, but not a gift certificate, that allows an employee to access wages from a payroll card account. The employee can choose to redeem it at multiple unaffiliated merchants or service providers, bank branches, or ATMs. A “payroll card account” is a bank or credit union account (1) established through an employer to transfer an employee’s wages, salary, or other compensation (pay); (2) accessed through a payroll card; and (3) subject to federal consumer protection regulations on electronic fund transfers.

Another big change, according to the OLR report: The bill also allows employers, regardless of how they pay their employees, to provide them with an electronic record of their hours worked, gross earnings, deductions, and net earnings (i.e., pay stub). To do so, the (1) employee must explicitly consent; (2) employer must provide a way for the employee to access and print the record securely, privately, and conveniently; and (3) employer must incorporate reasonable safeguards to protect the confidentiality of the employee’s personal information.

Lastly, current law allows employers to pay employees through direct deposit only on an employee’s written request. The bill allows an employee’s request for direct deposit to also be an electronic request.

An amendment, which also passed, (1) changes the timeframe in which an employer must switch an employee from a payroll card to direct deposit or check; (2) specifies that the limit on fees or interest charged for the first two declined transactions each month applies to calendar months; and (3) requires the cards to be associated with ATM networks that ensure, rather than assure, the availability of in-network ATMs in the state.

Overall, this is a big boost for both employers and employees.  The CBIA had supported the measure and it had received “cautious” support from the AFL-CIO as well.

Earlier this week, my law partner, Ross Garber, tweeted about a scandal developing in France regarding allegations that IKEA spied on its employees.

The New York Times reported:

A regional court in Versailles, near Paris, is now examining whether Ikea executives in France broke the law by ordering personal investigations — not only of Ms. Paulin but of hundreds of other people over the course of a decade.

A review of the court records by The New York Times indicates that Ikea’s investigations were conducted for various reasons, including the vetting of job applicants, efforts to build cases against employees accused of wrongdoing, and even attempts to undermine the arguments of consumers bringing complaints against the company. The going rate charged by the private investigators was 80 to 180 euros, or $110 to $247, per inquiry, court documents show. Between 2002 and 2012, the finance department of Ikea France approved more than €475,000 in invoices from investigators.

While IKEA has a store in New Haven, there’s been absolutely no allegations made against any of the United States stores.

Connecticut has a specific law that prohibits electronic monitoring of employees without notice (with some exceptions), Conn. Gen. Stat. Sec. 31-48d.  But Connecticut also has a specific state law on electronic surveillance as well even though it is not well known.

In terms of surveillance, Conn. Gen. Stat. Sec. 31-48b limits what an employer can do in two main instances:

  1. First, employers cannot operate “any electronic surveillance device or system, including but not limited to the recording of sound or voice or a closed circuit television system” for the purposes of monitoring employees in areas “designed for the health or personal comfort of the employees or for safeguarding of their possessions, such as rest rooms, locker rooms or lounges.”Obviously, the important limitation on the monitoring is that it cannot be done in places that are typically viewed as more private such as bathrooms or locker rooms. Nevertheless, it also extends to “lounges” as well.
  2. Second, employers also cannot “intentionally overhear or record a conversation or discussion pertaining to employment contract negotiations between the two parties, by means of any instrument, device or equipment, unless such party has the consent of all parties to such conversation or discussion.”In practical terms, this provision is intended to prevent employers from monitoring union representative discussions — something that the NLRB would typically take issue of anyways.

There are times when spying is allowed. And HR blogger and columnist Suzanne Lucas suggests it may be needed when fraud is suspected, such as a workers compensation case.  But it has to be done carefully and in compliance with the law.

If you are going to spy on an employee, you need to check and double check the laws in your area to see what you are allowed to do. For your spying to have any actual value to you, it will have to be upheld in a court, so do everything by the book. Consult with your attorney (or your insurance carrier’s attorney) first. Don’t make spying your default activity. And don’t go seeking information without having some outside information first. (That is, don’t monitor your employees’ Facebook pages in the hopes that they’ll slip up, but if someone else comes to you with a copy of a picture the employee posted on Facebook, start from there.)

It would be great if you could always trust your employees to be honest in everything that they do and say. Unfortunately, when you suspect fraud, you need to act or end up paying the cost yourself. And sometimes, that involves spying.

You may love your employees, but if you’re going to spy on your employees legally, you need to do it better than some of the companies that are getting negative publicity about it.

There are limits to “spying” on an employee

A recent story in a Forbes blog disclosed how one company fired 25 employees, after monitoring its employees’ computer activity.  Of course, the CEO learned that secret recordings work both way, as one employee recorded the termination meeting. 

Connecticut employers have special obligations when it comes to employee monitoring. 

In terms of surveillance, Conn. Gen. Stat. Sec. 31-48b limits what an employer can do in two main instances:

  1. First, employers cannot operate “any electronic surveillance device or system, including but not limited to the recording of sound or voice or a closed circuit television system” for the purposes of monitoring employees in areas “designed for the health or personal comfort of the employees or for safeguarding of their possessions, such as rest rooms, locker rooms or lounges.”Obviously, the important limitation on the monitoring is that it cannot be done in places that are typically viewed as more private such as bathrooms or locker rooms. Nevertheless, it also extends to “lounges” as well.
  2. Second, employers also cannot “intentionally overhear or record a conversation or discussion pertaining to employment contract negotiations between the two parties, by means of any instrument, device or equipment, unless such party has the consent of all parties to such conversation or discussion.”In practical terms, this provision is intended to prevent employers from monitoring union representative discussions — something that the NLRB would typically take issue of anyways.

Connecticut also prohibits electronic monitoring without proper notice, absent some special circumstances.  I’ve covered it more extensively here, but the most important aspect is notice.

To provide the notice, the employer must indicate the types of monitoring that may occur, such as telephonic, key strokes, general computer usage, etc. Each employer must post this in a conspicuous place (typically, where an employer has its other “bulletin board” notices, like the minimum wage rate). Putting a reference in an employee handbook is also a wise precaution in case the notice ever gets removed from the board (and it should be noted that notice in a handbook is likely sufficient under the terms of the statute.)(Conn. Gen. Stat. 31-48d.).

If an employer does not routinely monitor employees, the employer can still conduct the monitoring in situations where “(A) an employer has reasonable grounds to believe that employees are engaged in conduct which (i) violates the law, (ii) violates the legal rights of the employer or the employer’s employees, or (iii) creates a hostile workplace environment.”

So what’s the takeaway for employers? If you want to “spy” on your employees, make sure that you let them know what you’re doing.

As I mentioned Monday, I had the opportunity to attend ABA Techshow, one of the premier technology and the law conferences around. 

E-Discovery (or "Electronic Discovery") continues to be a hot topic at such conferences.

(Discovery is the process by which parties to a lawsuit exchange and receive information before a trial.  The most common forms of discovery are interrogatories — exchanging questions — and requests for production of documents.  E-discovery is the subset of just looking at electronically stored information).

Here’s why employers need to know about the developments in e-discovery:

Among all the speakers, it was universally agreed that "searches" — or the concept that you can take electronic data and run different types of inquiries into what is contained there — will only grow over the next decade. 

Why? 

Because the amount of data that is being produced by individuals each year is staggering. 107 trillion e-mails were sent worldwide in 2010.  25 billion tweets were sent during that time too.  As the speakers said at the seminar, there is too much data to review manually anymore.

Which means that understanding where all of a company’s data resides is crucial to being able to defend your company against an employment discrimination charge and being able to preserve and collect that information if need be.  Companies must be able to search their data if need be. 

A company’s IT staff (or outside experts) thus plays a starring role in that effort.  No longer can IT staff simply put on their headphones to write code. They must be willing participants in the company’s efforts to defend itself in a lawsuit.  While the IT staff may not be the most important witness, it will certainly be critical. 

Employers now may want to consider informal training to some IT staff about litigation possibilities before a lawsuit is even filed. That way, when a lawsuit is filed, it’ll be easier to find such information and know the tasks that need to be done to either preserve such information or proceed with business as usual.

For in-house attorneys, it is also important to understand that courts are not going to permit stone-walling on this.  Indeed, a recent federal case highlighted at the seminar (Seven Seas Cruises v. Ships Leisure Sam (S.D. Fl. 2011) (download here)) illustrates that courts are willing to impose sanctions if the parties do not cooperate and try to work things out themselves.

As I’ve noted before, the appellate courts in Connecticut release their decisions in advance of an "official" publication date for various reasons. I’ve now read over the Appellate Court’s upcoming decision in Paylan v. St. Mary’s Hospital Corp. a few times  trying to discern the big lesson for employers to take from this employment discrimination case in advance of its release.

And while the case won’t be "officially" released for another week, the lessons from the case really surround evidentiary issues and provide yet another cautionary tale about the need to preserve electronic data (and the need to have a court involved to protect such data if necessary as well.)

In this case, a fourth-year resident sued her employer claiming discrimination based on her gender. The hospital claimed that she was terminated for poor performance. The hospital produced a poor employee evaluation report and the employee claimed it had been altered to be back dated before she filed a complaint with management.

She sought and obtained a court order that the hard drive be preserved and sought the meta data on the creation of the document. When that did not resolve the issue she sought permission to examine the hard drive but in the interim there had been a computer glitch and the computer system was reformatted during the repairs and the data was no longer available.

After a verdict for the employer after a trial, the employee appealed the trial court’s denial of the request to introduce into evidence the court preservation order and obtain jury instruction that specifically references the destruction of evidence (termed a "spoliation" charge).

On appeal, the Appellate Court held that in order to obtain such a charge the employee must show: the information was relevant; the company was on notice that the evidence should be preserved; and the company intentionally destroyed the evidence. Here whatever errors made by the trial court were "harmless" because the employee failed to show that the reformatting of the hard drive was intentional.

In essence, the employer avoided an inference that it destroyed evidence because the employee failed to preserve this issue at trial by introducing evidence that the employer intentionally destoyed such evidence.  For employers, however, this is hardly a license to destroy electronic data.

Indeed, despite the ultimate result in the case, employers should tread extremely cautiously when getting new claims of discrimination in. The trend in federal courts is  towards requiring employers to preserve electronic evidence upon notice of a claim and, given the low cost of computer storage now, arguments that the hard drive was "reformatted" may fall on deaf ears in future cases.