There are certain expressions in the employment law world that don’t make much sense.   Call them: Employment Law Oxymorons.

At least for me, hearing an employer ask what they should do about their “1099 Employees” is one of them.

Let’s back up one step:

  • Employees are paid wages and as such, they get issued a W-2 tax form at the end of the year.
  • Independent contractors are paid fees and as such, they should be issued a 1099 tax form.

See the difference?

So when someone says a “1099 employee”, under the law, there really is no such thing.  The problem is that some employers still do not understand the differences or, worse, improperly label workers as “independent contractors” instead of employees.

The modern day example of this was a series of tweets put out last week by a website advertising for a “full-time freelance position.”

See the contradictions?  Full-time and freelance don’t really mesh together.  If you’re truly freelance, you should be able to set your time, place and manner of work.

How do you tell the difference? I previously covered the different tests that should be used but suffice to say that using the phrases “full-time freelancer” and “1099 employees” may indicate that you may not be following either.

Do you remember when the Target store data breach made news? This was not that long ago, and yet, five years later we’ve arguably become immune to the news.

Take Facebook’s latest snafu — 50 million accounts compromised.  And yet, it hardly made headlines for a 24 hour period.

Heck, even the U.S. State Department has had personal information about its employees breached in the last month — though “only” one percent may have been affected – so…yawn.

Have we become that immune to such breaches at this point?  Perhaps.

But that doesn’t mean that employers can let their guard down. Indeed, I would argue that new laws and regulations (including one in California) are making the job of employers even more challenging.

I’ll be talking about all of this at my firm’s upcoming Labor & Employment Seminar later this month with my colleague Ashley Marshall.  It’s scheduled for October 25th at the Hartford Marriott.

Here’s the formal program:

If You Collect It, You Must Protect It: Dealing with Employee Data Privacy Issues
Presenters: Daniel A. Schwartz and Ashley L. Marshall

Cyberattacks are on the rise and employers must take the necessary steps to protect employee data.  This session will address data protection worries of human resources and review state and federal laws and regulations pertaining to workplace privacy, including the Personnel Files Act, GDPR, California statutes, and HIPAA complaint releases. 

We’ve got several other topics being tackled too.  We are probably only a few days away from selling out so be sure to sign up for this complimentary seminar today.

It was the last semester of my senior year in college – right after Spring Break – when I heard the news that would forever shape my views on mental illness.

A friend and fellow editor of the college newspaper I worked for, Steven Ochs jumped to his death from one of the many bridges near his hometown in Pittsburgh, PA.

A group of us ended up driving out there across the fields of Pennsylvania to mourn his passing. It was the first time I was a pallbearer at a funeral and I knew then that was something I never wanted to be for a friend again.

Steven was a remarkable young adult.

I wish you could’ve known him.  He wrote amazing columns for our college paper and editorials nearly every weekday.  Thanks to the internet, you can still read a few here.

I can still remember sitting in his newspaper office couch and hearing him talk; he was always a few steps ahead of me.  I thought he had a promising future.

I thought about Steve a bunch last week, when the celebrity suicides of Kate Spade and Anthony Boudrain became headlines.

Those people, along with Steve, seemingly had everything that would want.

And yet.

As anyone who has had a friend or relative commit suicide, there’s a certain amount of second guessing that goes on. What signals did I miss? What could I have done differently? Was I a good enough friend? Why didn’t he ask for help?

And a lot times, it just comes down to a simple question too: Why?

Every suicide of a employee impacts the workplace as well.  And sometimes it is at the workplace itself – but regardless, suicides have been on the rise the last several years. As a Wall Street Journal article from earlier this year noted:

Nationwide, the numbers are small but striking. According to the Bureau of Labor Statistics, suicides at workplaces totaled 291 in 2016, the most recent year of data and the highest number since the government began tallying such events 25 years ago. U.S. suicides overall totaled nearly 45,000 in 2016, a 35% increase compared with 10 years earlier, according to the Centers for Disease Control and Prevention’s National Center for Health Statistics.

Who is most at risk? According to the BLS study, 45- to 54-year-old males had the highest likelihood of committing workplace suicide. And workers in the public sector had a higher propensity for workplace suicide while workers in the private sector suffered the majority of these fatalities. The private industry sectors with the highest propensities for workplace suicide were finance and insurance; professional, scientific and technical services; and health care and social
assistance.

The solutions are far more complex than a simple employment law blog post can capture.  Some of them are rooted in society.  But discussions regarding mental health — and bringing those discussions in the workplace — is often seen as one important step that can be done.  A renewed emphasis on making sure employees know about and use Employee Assistance Programs is also another important step.

HR staff can sometimes be at the front lines.  Figuring out that an employee might need help can be a part of a solution but as we all know, it might still not be enough.

We can only hope that as we raise awareness of this, that we can stop some suicides from occurring so that 25 years from now, someone else isn’t writing a blog post about one of their friends as well.

 

 

Back in 2011, I discussed a titillating case of strip club dancers (or, a decision says, “performers”, “entertainers”, “dancers” or even “exotic dancers” — although not “strippers”) who were trying to claim wages for the time they worked at a popular strip club in Connecticut.

The story at the time was that they were compelled to arbitrate their claims. 

So private arbitration should mean end of the public story, right?

Well, as it turns out, no. And the analysis of the case has some very real practical implications for employers.

I’ve been going to back through some older posts to do some followups. And in doing so, I discovered that this case had a public ending — except for the fact no one reported on it.

It seems that the dancers won big in an arbitration proceeding and then asked the court to “confirm” the award — making the whole thing public.  (You can read the arbitrator’s award here.)

And as a result, we get a revealing look at the efforts one club made to try to avoid having strippers be deemed “employees” and how it ultimately failed.

The strip club  — sorry, “adult entertainment establishment” as it called itself — had the strippers sign leases “renting” out the poles and space of the strip club. In doing so, the Club argued that these dancers were no more than tenants, and therefore, not entitled to wages, benefits or any of the normal protections that come with being an employee.

Under the “lease”, according to the decision, the dancers agreed to perform “semi-nude (topless) and/or nude dance entertainment” at the Club.”

In doing this work, dancers agreed to “perform consistent with the industry standards of a professional exotic dancer.”

(Aside: Professional exotic dancers have INDUSTRY standards?)

The Lease also provided that there will be set fees (called “entertainment fees”) for certain performances, “such  as couch and table dances,” and that dancers “may not charge more than the set fees.”

Oh, and they wouldn’t be paid any wages.

And here’s where it gets REALLY interesting.

If they ever DID claim wages, the lease provided that they would forfeit all of the entertainment fees they previously earned. And, to top it all off, should the dancers claim to be employees, they will also be liable for any attorneys’  fees, costs, or other damages incurred by the Club as a result of that claim.

But the arbitrator was having none of it.

He detailed the requirements of the strippers saying that there were four principal ways a dancer can “perform” — all of which indicated that they were tied to the Club (and therefore employees).

  • A “stage set”, in which the only income is the tips the customers choose to give her.
  • A “private dance” or “booth dance”, in which the Club sets the “mandatory entertainment fees”.  (A booth dance here cost $25, of which the dancer keeps $20 and pays $5 to the Club.)  Tips encouraged.
  • A “VIP” area in which the fee for that performance is $100 for 15 minutes, $200 for 30 minutes and $300 for an hour and in which the entire fee goes to the Club.  Tips encouraged as well.
  • A “Champagne Room” performance, in which the customer is charged $110 for one half hour and in which the entire fee goes to the Club.  Customer is free to tip the dancer.

At the end of a shift, the dancer must pay “rent” to the Club of $20 and a tip to the DJ.

The arbitrator said that the dancers were employees and therefore entitled to the protections under state and federal law.  Minimum wage was owed, for example. Moreover, the “lease” violated state law because it called for a refund of wages under Conn. Gen. Stat. Sec. 31-73.  

The arbitrator noted that while employers and employees have “wide latitude” to enter into wage agreements, that latitude does not extend to permitting parties to override or ignore the requirements of Connecticut law.

The arbitrator took particular note of the paragraphs that required the dancers to return “all” entertainment fees if they challenged their employment status.  These provisions are “clearly designed to penalize the employee for exercising her right to insist upon proper classification.  The inherent purpose of the Lease is to violate the law.”

The decision goes on to analyze the proper penalties and set-offs in such a case.  Here, the arbitrator again was not sympathetic to the employer — and for good reason.  The employer failed to prove it acted “in good faith” — and therefore the dancers were entitled to liquidated (or double) damages.

How much? Nearly $130,000 in damages for two strippers — plus attorneys’ fees.

The case is a great example of what happens on the fringes of wage and hour law. The vast majority of employers in this state play by the rules and wouldn’t even dream of cooking up a “lease” for its employees to sign.

But the law exists to protect the dancers too and here, there’s little doubt that justice has been well-served by the award here.

One of the interesting strains to come out of the new round of publicity surrounding sexual harassment is a renewed focus on mandatory arbitration provisions.

And it comes from an unexpected source: former Fox News anchor Gretchen Carlson.

Indeed, Carlson recently gave an interview with former ESPN producer and self-titled “Commander-in-She” Valerie Gordon that may have slipped under radar in which she talks about such provisions.

She notes that mandatory or “forced” arbitration provisions enable sexual harassment to exist under the radar.

I’m doing some advocacy work on Capitol Hill, working on gathering bipartisan support to take the secrecy out of arbitration.  You know the forced arbitration in employment contracts makes these things secret.  We have to stop the silence around it.

In another recent interview, Carlson suggested that these arbitration provisions are often “in the fine print” and not focused on when people start a new job.  She’s talked about it during Senate press conferences this year as well.

I’ll be interested in reading more about Carlson’s perspective in her new book being released today.

Carlson’s message should be well taken by employers; if employers are using these arbitration provisions merely as a means to allow a system of harassment to continue, then shame on them.

But here’s the issue: As with most things employment law related, it’s far more nuanced.

There are times when arbitration makes sense for BOTH the employer and employee. Litigation is expensive — very expensive, some of my clients would say — and is filled with uncertainty and time-consuming drama.  I talked more about this in a 2014 post.

Arbitration can be less expensive and can allow both sides to be heard by a neutral third party much more quickly and effectively than a court system.

And yes, it avoids some publicity but again, that can benefit employees too.

By filing in arbitration, rather than court, an employee’s claims won’t be public and won’t seen by future employers as a potential lawsuit waiting to happen.

The U.S. Supreme Court is set to review this once more in a trio of consolidated cases, including whether employers can force employees to sign away rights to pursue a class actions.

And we shall see if the Connecticut General Assembly revisits the issue in the upcoming session in January 2018.  Until then, employers should continue to monitor developments in this area and figure out if mandatory arbitration provisions are right for your business.

 

The Dialogue – an occasional discussion between myself and a prominent employee-side attorney, Nina Pirrotti returns today after a late summer hiatus. Today’s chat focuses on employee separations and severance agreements.  Share your own tips or observations in the comments below. As always, my thanks to Nina for sharing her insights here.

Dan: Hi Nina! How was your summer? Mine was fine except I can’t stop hearing news about President Trump.

It seems to drown out everything else going on and I think I have a headache from it all. But let’s give it a try, shall we?

I know I’m often confronted with having to fashion separation and settlement agreements for employers.   

What do you find are the items in agreements that you think both sides ought to be paying attention to?

Nina: Drowning in Trump-related noise.  The image is horrifying!  My husband and I were chatting the other day about an old Saturday night live weekend update skit.  As we recall it (it was decades ago), the news media was focused on other events when all of a sudden the character playing Kim Jong Un pops into the screen, holds both arms out and complains:  “What do I have to do to get attention around here?!” 

In the age of Trump that glib remark becomes bone-chilling. 

The art of crafting a fair and balanced settlement agreement isn’t the most riveting of topics in our world but it is among the most important.  

One key strategy I use in evaluating them is to put myself in the position of the employer to ensure I understand company’s (reasonable) priorities. 

Clearly the company seeks to contain the dispute itself, keep the fact that it is settling it confidential, and do everything possible to obtain closure.    If the settlement terms go beyond meeting those priorities, a red flag goes up for me and I scrutinize those terms closely.  

In light of the company’s priorities in containing the dispute and keeping it confidential, I expect to see a confidentiality provision, limiting the disclosure of the settlement agreement to those on a need to know basis (typically immediate family members, financial/tax advisor and lawyer). 

I am also not surprised by a non-disparagement provision which prevents the employee from spreading ill will about the former employer. 

Since I generally advise my client that it rarely reflects well on an employee to speak negatively about his/her former employer (no matter how justified the employee might be in doing so) I usually do not oppose such provisions. 

I will often, of course, make them mutual so that key employees at the company also commit to not disparaging my client. 

In light of the company’s priority in seeking closure, I do not have a one-size fits all response to no re-hire provision.  I understand the company’s concern that should the employee who has settled claims for discrimination apply for a position down the road and the company (for legitimate reasons) declines to hire that employee, it nonetheless remains exposed to a potential retaliation lawsuit by the employee. 

No re-rehire provisions in certain situations can be appropriate but only if they are narrowly tailored to the company itself.  Alarm bells go off for me, therefore, if the employer is large and has numerous affiliates and subsidiaries and the employer insists on including them within the scope of the no-rehire provision. 

In such cases, no-rehire provisions can be tantamount to mini-restrictive covenants and, where they hamper my client’s ability to find comparable work, I will reject them as untenable. 

Speaking of restrictive covenant  provisions, it irks me to no end when an employer tries to slip one into a settlement agreement where the employer was not bound by one during the course of his/her employment!   Such provisions are generally a non-starter for me, absent considerable additional compensation for them. 

Finally, as we discussed in an interview you conducted with me many years ago, I do not abide by liquidated damages provisions. 

If a court determines that my client has breached the agreement, even if that breach is deemed a material one, the employer should still bear the burden of proving that it has been damaged and, to a reasonable degree of certainty, the monetary amount of that damage. 

What are your thoughts, Dan?   Have I articulated the company’s main priorities well?  Are there others I am missing that I should consider the next go-round?   Do tell and I promise to listen with an open mind!

Dan: Well, one day we could talk about Trump-related employment litigation, if you’d like to really talk more about Trump.

You’ve hit on some of the highlights from an employer perspective. When crafting one for an employer, I will let you in on a “secret” – we have a template.

I know — probably not a big surprise to you since our firms have negotiated enough of them.

As a result, I find that agreements at this point are sometimes more of finessing around the edges, rather than major re-writes.

The problem I see is that there are some employers who are using a form separation agreement handed down to them years ago, without understanding what’s in them.

First off, the agreements — regardless of whether you’re trying to comply with federal law or not — should really be written in “plain English”.

Get rid of the “Whereas” clauses.

Use bold language or simply to understand provisions.

And try not to have it be 15 pages.

Second, the agreements should contain: a) a release of all state and federal claims (and local ones if you’re in places like New York City); b) confidentiality (and if it needs to be mutual, so be it); c) non-disparagement (same).  There’s more of course, but start with the basics.

Third, employers should think about provisions that may actually be helpful: a) What are you going to do about references? Is it “name, rank, serial number” or something more? b) Do you want an arbitration provision for any breach of the separation agreement?

Neither is typically a high priority but taking care of some of these details are important.

A few employers are trying to get the “best” deal and negotiate strongly but I find most employers just want to move on; the termination was probably not something that they wanted to do anyways and putting some distance between the employee and the company is probably a good thing for the business ultimately.

Since you’re not finding separation agreements all that exciting, what about how employers handle the termination or termination meeting itself? I’m sure you’ve heard some stories from clients.

Nina: Wow – you hit the jackpot with that question!   

I was once asked at an ABA conference at which I spoke what was one step management lawyers could take to maximize the chances that a departing employee won’t seek out the counsel of someone like yours truly. 

My answer?  Treat them like human beings when you terminate them.   

Don’t do what one Fortune 500 company did to one of my clients which was to call her as she lay in a hospital bed with her infant daughter who had been born earlier that day and inform her that she need not return to work because her job had been eliminated.

Time and again prospective clients had told me that they would have gone quietly into the good night had their employers treated them with a modicum of respect during the termination process. 

I recently settled a case involving a woman in her mid-60s who had worked for the same company for 20 years and proven time and again that she would do ANYTHING for that company and, indeed, had worn a number of hats over the years, shedding one and donning another as the company’s needs shifted.  In her 20th year, a new CEO was hired and you can guess what happened next.  He terminated her and replaced her with a brand new hire, decades younger, who my client had helped train.   

Doesn’t sound kosher right, but that is not the worst part! 

It was the WAY the company terminated her that prompted this lovely, meek, non-confrontational woman to summon up the courage to pick up the phone and call me. 

Her termination consisted of a three minute meeting in which the CEO informed her she was no longer needed and handed her a severance agreement that provided her with two measly weeks’ pay. 

She was literally sobbing as she signed it then and there after which she was immediately escorted out the door.   She contacted me weeks after she signed her agreement.  Too bad, so sad, right?  Wrong. 

The employer neglected to include in her severance agreement language required by the Older Worker Benefits Protection Act (OWBPA), including a 21-day period to consider the agreement and a seven-day revocation period.  She was able to keep her paltry two weeks and I got her many months more on top of that!   

There are so many morals to that story, the least of which is that severance agreements for employees over 40 should comply with the OWBPA.   Employers should be expressing their gratitude to terminated employees who have proven their devotion to the company by providing them with severance that sends the message that they valued that devotion.  

There other ways to go that extra mile to treat such employees with dignity.   Think about how you would want to be treated if you were undergoing one of the worst days of your life and act accordingly.  Thank them for their service, tell them how sorry you are, assure them that you will do everything in your power to facilitate their transition, allow them to say goodbye to their colleagues, hell, even offer to throw them a farewell gathering.  The possibilities are endless.  Sometimes we lawyers get in our own way. 

Dan, I know none of the clients who have had the benefit of your wisdom prior to terminating an employee would succumb to such pitfalls.  But what do you do when you have to clean up after the fact?

Dan: You’ve raised a good question, but I want to address something you said first. 

You said: “Employers should be expressing their gratitude to terminated employees who have proven their devotion to the company by providing them with severance that sends the message that they valued that devotion.”  

It’s that phrase that I think gets to the heart of the issues with severance in 2017. 

When I first started practicing (a few years ago, ahem), there were still many companies that offered severance without ANY release because that just seemed “the right thing to do.”

After all, there was still a bit of an unspoken contract that employers would take care of employees.

Think back to the “Mother Aetna” description of the insurance company.  But as the recessions took their toll and employee mobility took root, that social contract has definitely been frayed over the years.  In part too is the rise of employment litigation. 

Now each employer has to worry: Is THIS going to be the employment termination that leads to a lawsuit?

 I can’t even remember the last time that an employer offered severance without also demanding the employee sign a release. 

In other words, the idea of severance as “gratitude” and “thanks”, has now been replaced with much more of a quid pro quo. 

For employers, the thought ii: If we give you this severance, please don’t sue us. 

And yet for employees, some of them still remember the days when severance was just something companies did without worrying about the lawsuit. And so when the employer demands the release, some employees take offense to it, not realizing that times have changed. 

As a result, I have also seen employers trying to offer less and less; the notion of one week of severance per year of service (with caps) is still strong, but not universal. 

As to being the fixer – yes, sometimes it happens.  The lack of OWBPA provisions is really something that just shouldn’t happen anymore. 

But it’s more that employers go ahead with the termination without thinking about what comes next.  And some employers are moving so fast, that the details such as having two people in the termination meting and having COBRA information available, get lost in the shuffle.

I don’t know of a single employer that has enjoyed firing an employee.  

Even when they catch an employee red-handed, many employers are aware of the consequences that may flow for the employee from a firing. The employee may have a tough time finding a new job, for example. 

But it strikes me that a small subset of terminated employees are LOOKING to bring suit or a payday instead of looking forward to a new time in their life. 

Obviously sometimes past discrimination has to be examined, but what do you think makes employees sue their employers instead of signing severance agreements that are presented to them?

Nina: I think that employer conduct that rises to the level of actionable discrimination and/or retaliation is alive and well, unfortunately. 

The only up side of all of this is that I get to keep my day job, which I love! 

Of course there are those (“small subset” would accurately describe them) who seek to avoid accountability and are looking for a quick pay out of claims. 

Virtually all of those individuals never make it to our front door. 

I say “virtually” because we are human, after all, and one or two may sneak through the cracks in that door. 

But then we have competent lawyers like you for whom we have great respect who (very politely) convince us – – with facts – – that we are being misled. 

That is why I believe that the only situations in which early negotiations are successful are those in which both sides fight their natural inclinations to hold their cards close to their chests and actually share meaningful information from the get go.  

But how to conduct negotiations effectively is a topic worthy of its own separate dialogue, no?

Dan: I think so. Now, I have to save whatever energy I have left to stay up late to watch playoff baseball with the Yankees. Hopefully, it’s a long October filled with lots of late nights and distractions.  Until next time, Nina!  

There’s an old(?) Bonnie Raitt song that my parents used to listen to when I was in college called “Let’s Give Them Something to Talk About”.  It’s about a crush, but the intro could be just as applicable to a new court decision. The lyrics start: “People are talkin’, talkin’ ’bout people, I hear them whisper, you won’t believe it.”

The short lesson? Don’t give your employees something to talk about — namely when a lawsuit is filed, caution is strongly advised in distributing information about that lawsuit.  Interested in more? My colleague, Gary Starr, shares more:

A recent Connecticut district court decision (EEOC v. Day & Zimmerman NPS) is a cautionary tale for in-house lawyers and human resource managers who want to tell employees about an investigation into discrimination claim brought by a former employee, and that investigation may involve those employees.

Following a disability discrimination charge, the EEOC sought contact information about other employees as well as information about their employment.

Rather than simply advise the employees that the EEOC was being provided with their job title, dates of employment, home address, and phone number, the company also described the accommodation that was requested and information that the former employee’s doctor had indicated that without the accommodation, the employee could not perform the essential functions of the job.

The EEOC viewed this as retaliation against the former employee by disclosing the information and interference with the rights of the employees receiving the letter as the agency thought it would discourage others from making claims in the future out of concern that their personal information would be shared widely.

The Company’s efforts to justify the letter were rejected by the court, which decided that a jury will have to decide whether the letter was retaliation and/or interference.

In communicating with potential witnesses in an agency investigation or lawsuit, employers must be clear on why the notice is being sent.  And employers should exercise caution on deciding what information is being shared.  What the decision suggests is that employees do not need to know what the medical condition another employee may have, what accommodation has been requested by that employee, or what recommendation a doctor has made about the employee.

Letting employees know that their contact information has been given to the EEOC and that they may be contacted would likely have have been sufficient and not opened up the employer to criticism.  And the decision does suggest that offering them the choice of having a lawyer present should not interfere with their rights.

In this instance, less information is better than more.

In any case, in the unlikely event you do need to inform employees about a lawsuit, check with your counsel about the details you should (and should not) be sending.

worker3After nine-plus years of writing about employment law in Connecticut, it’s getting to be pretty rare to find a topic that I haven’t at least touched upon, but here’s one: The Duty of Loyalty.

Indeed, a new Connecticut Supreme Court case is giving me the opportunity to do so.

The case arises from an employee who, while working for one employer, was secretly working as an independent contractor for a competitor.  The employer sued under a breach of the duty of loyalty claim.

The case, Wall Systems Inc. v. Pompa, officially released last week, can be downloaded here.

Lawyers will look at the case because it sets forth what types of damages are recoverable when a breach of a duty of loyalty claim is established.  In doing so, the court makes it clear that a trial court has some discretion in fashioning the appropriate remedy:

We agree with the plaintiff that the remedies of forfeiture of compensation paid by an employer, and disgorgement of amounts received from third parties, are available when an employer proves that its employee has breached his or her duty of loyalty, regardless of whether the employer has proven damages as a result of that breach. Nevertheless, the remedies are not mandatory upon the finding of a breach of the duty of loyalty, intentional or otherwise, but rather, are discretionary ones whose imposition is dependent upon the equities of the case at hand. Moreover, while certain factors, including harm to the employer, should not preclude a finding that the employee has committed a breach of the duty of loyalty, they nevertheless may be considered in the fashioning of a remedy. Here, because the trial court properly exercised its broad discretion when it awarded damages but declined to order forfeiture or disgorgement, we will not disturb its judgment on this basis.

But I think the more interesting point for companies is to understand the scope of the duty of loyalty.

In discussing the scope of this duty, the Connecticut Supreme Court reaffirmed principles that were last set forth in detail over 50 years ago in Town & Country House & Homes Service, Inc. v. Evans.  In that case, the court found an employee breached the duty of loyalty by soliciting employer’s customers for his own competing business while still working for the employer.

The court noted that an employee’s duty of loyalty includes “the duty not to compete … and the duty not to disclose confidential information”.  The court noted that this duty not to compete is during the employment relationship — not necessarily after — and is not dependent on the use of employer’s property of confidential information.

The court went on to say that the duty of loyalty “also includes the duty to refreain from acquiring material benefits from third parties in connection with transaction undertaken on the employer’s behalf.”  What does this mean? Essentially, it bars the collection of “secret commissions and kickbacks which might cause the employee to act at the expense or detriment of his or her employer”.

An employer may seek the forfeiture of an employee’s compensation for the period of disloyalty, but the court concludes that such a remedy is an equitable one and subject to the facts of the particular case.

But it’s always important to read the footnotes and here, in footnote 9, the Court inserted the notion that the duty of loyalty may not apply all employees.  “The scope of the duty of loyalty that an employee owes to an employer may vary with the nature of their relationship. Employees occupying a position of trust and confidence, for example, owe a higher duty than those performing low-level tasks.”

Still, the case is an excellent one for employers to keep in mind — particularly if the employer does not have restrictive covenants with its employees.  If the employees are engaging in competing work while still employed, the employer can use this case — and the theories behind it — to see the appropriate remedies.

With the appropriate employee, the employer can further strengthen its arguments, but including this in an employment agreement along with restrictive covenants.  In such a case, the court reminds parties that an employer could then terminate that agreement prematurely and seek recovery of damages directly attributable to the employee’s breach.

Employers should consider consulting with their favored outside counsel to see how this decision may apply to them.

 

justiceI’m back with news of a relatively big decision today from the Connecticut Supreme Court.

In the decision, the Court clarified an important question that the Connecticut Department of Labor had been pushing hard.  It will be welcome news for businesses in the state.

The issue was this: If an independent contractor (and his or her business) works ONLY with one company, can that person still be an independent contractor?

The Court said yes, that person CAN be. But it is important to note that it does not mean that the person will ALWAYS be an independent contractor. Instead, the court will continue to apply the ABC test — balancing several factors. (I’ve discussed the test in a prior post here.)

The case, Southwest Appraisal Group v. Administrator, Unemployment Compensation Act can be downloaded here.  Note that it will not be “officially released” until March 21, 2017.

The only issue in the case was whether the putative employee was “customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service performed.”

How to make that determination? By looking at the “totality of the circumstances” which also include another series of tests.

Here, the court at least is helpful in setting up what those factors are.   According to the Court, “factors to consider in evaluating the totality of the circumstances under part
C include:

  1. the existence of state licensure or specialized skills;
  2. whether the putative employee holds himself or herself out as an independent business through the existence of business cards, printed invoices, or advertising;
  3. the existence of a place of business separate from that of the putative employer;
  4. the putative employee’s capital investment in the independent business, such as vehicles and equipment;
  5. whether the putative employee manages risk byandling his or her own liability insurance;
  6. whether services are performed under the individual’s own name as opposed to the putative employer;
  7. whether the putative employee employs or subcontracts others;
  8. whether the putative employee has a saleable business or going concern with the existence of an established clientele;
  9. whether the individual performs services for more than one entity;
  10. and whether the performance of services affects the goodwill of the putative employee rather than the employer.

The court does add some additional guidance here noting that, “We emphasize that particular caution is necessary in considering the relative size or success of the putative employee’s otherwise independent business in connection with the totality of the circumstances analysis under part C.”

This is a big decision for employers who also use independent contractors.  Businesses should again review their relationships with these independent contractors to try to satisfy as many of the factors outlined above.

robertsWith the new year upon us, cyberthieves are once again attempting to prey on unwitting HR professionals, as my colleague William Roberts explained in an article last week for SHRM on phishing.

The scam goes like this. As an HR professional, you get an e-mail from your boss (or your boss’s boss) that seems legitimate…and urgent. Something like this:

I’m in the middle of a negotiation so won’t be available by cell or e-mail but I need you to send W-2s for the management team to our new accountants. You can e-mail them to [____________]. Needs to be done today. Sorry for the rush on this and please take this as an exception to normal protocol. Thanks. – Alan

It’s happened before.  Indeed, as Bill explained in the article:

“Alan was the chief financial officer,” said William J. Roberts, a Hartford, Conn.-based data privacy attorney with the law firm Shipman & Goodwin LLP. But in this case, it wasn’t Alan who was sending the e-mail. Despite the company’s policy prohibiting employees from sending sensitive documents through e-mail, a newly hired junior HR professional fell for the phishing scam and sent the W-2s to the cyberthief’s e-mail address.

That’s more than just an “Oops” moment.

Although the IRS is taking steps to help reduce this, the best defense is for HR professionals to be aware of this scam.  I previously discussed this back in March 2016 with a quick post but it’s worth looking at some of the tips presented in the SHRM article including:

  • Train employees on cybersecurity awareness. Many companies do not.
  • Use common sense and avoid making electronic requests for sensitive data. It’s not just an e-mail threat; phishing by text is also on the rise….
  • If you receive an e-mail from upper management, verify the request….