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

Let the politicians and the newspapers cite a new Second Circuit decision as being important for "saving jobs" in Connecticut. It makes for good press, but for employers, the decision is more important for a different reason than highlighted in the press: The Court has weakened one of the arguments that employers use to support their decisions -- the "Business Judgment Rule".

First, the background about the case, District Local 26 v. United Technologies Corp. (download here) in general from the Hartford Courant:

A federal appeals court on Thursday upheld a decision barring Pratt & Whitney from closing its Cheshire plant and a smaller East Hartford unit, preserving hundreds of Connecticut jobs at least through early December.

The 2nd Circuit Court of Appeals in New York said U.S. District Court Judge Janet Hall properly found that Pratt violated its existing contract with the Machinists union by failing to make "every reasonable effort" to keep the two plants open.

Ok, that's all well and good but it's the second part of the decision that things get interesting. The Company argued that it was entitled to look at the EBIT (Earnings Before Interest & Taxes) savings -- and only the EBIT-savings -- and that the Court needed to defer to the company's "business judgment". 

After all, the business judgment rule "is a presumption that in making a business decision the directors of a corporation acted on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the company."

But in contracts relating to the business of a corporation -- including collective bargaining agreements -- the Court held that companies surrender part of their ability to act. 

Each party fully exercises its business judgment by voluntarily entering into an agreement, thereby surrendering, to some extent, its free exercise thereof thereafter. Pratt cannot, then, by invoking the business judgment rule, effectively insulate from review whether it engaged in a good faith pursuit of work preservation by requiring that we defer to its method of accounting for its measures.

The decision here has larger implications than just union contracts. One could see the same rationale perhaps being applied to employment contracts and other business-related contracts that a company may enter into.  

Will it be applied still further into employment discrimination claims where courts have been willing to give a "business judgment rule" jury instruction? All those types of questions remain to be seen, but after the decision here, employers should not assume that the "business judgment" rule is the panacea that some still think it is.

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It is often said that death is inevitable, but that doesn't make its occurrence less painful.  In Connecticut, we've all been touched by the senseless tragedy in Cheshire involving the Petit Family.  But on a daily basis, employees experiences losses of a family member or friend that may be less sensational, but just as noteworthy.  The question remains: How should an employer respond to a death in the employee's family? One article suggests that there are four items that an employer can focus on when an employee experiences the loss of a loved one:

• Ensuring that bereavement policies are established;
• Helping the grieving worker communicate with colleagues;
• Helping co-workers express their sympathy;
• Helping the bereaved employee and his or her supervisor deal with any lingering productivity issues

(Hat Tip: HR Magazine, September 2003.)

Thus, for employers, having a well-drafted bereavement leave is crucial to ensuring that the employer is not seen as a thorn in the employee's side during his or her time of grief.

Usually, for immediate family members, employees are allowed three days off with pay, and no pay for any additional time, unless employees arrange to use personal days or vacation time. Interestingly, a SHRM 2004 Benefits Survey showed that 90 percent of respondents offer paid bereavement leave.

Defining "immediate family member" helps in the successful implementation of this policy. Immediate family members are typically defined as "an employee’s spouse, parents, stepparents, siblings, children, stepchildren, grandparent, father-in-law, mother-in-law, brother-in-law, sister-in-law, son-in-law, daughter-in-law, or grandchild."

With the recent passage of laws regarding same-sex civil unions in Connecticut, many employers have also add "domestic partner" or "civil union spouse" as part of this definition.

Recent tragedies like the one in Cheshire demonstrate how random and unexpected some deaths can be. A well-drafted policy addressing bereavement leaves now can free up employers to assist its employees, rather than figure out how much time the employee should be allowed off.

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