NEWS ALERT: JUDGE STRIKES DOWN NEW OVERTIME RULE AS UNLAWFUL

Yesterday, in a shocking decision, and a stern rebuke to the Obama administration, a United States federal court judge in Texas struck down the Department of Labor’s (DOL) new overtime rule that was set to go into effect on December 1.

This brief HR Law Insider article explains all you need to know about the judge’s decision and its huge impact on businesses throughout the nation.

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OVER 20 STATES SUED THE DOL TO KILL THE NEW OVERTIME RULE

The DOL’s much ballyhooed regulation that was to raise the salary limit below which workers automatically qualified for overtime pay to $47,476 from $23,660 was set to go into full force and effect on December 1.

However, months ago over 20 states sued the DOL arguing, among other things, that the DOL exceeded its authority in enacting the new regulations.  The states contended that Congress’ law — the Fair Labor Standards Act (FLSA) — could not be changed by a fiat of the DOL.  In other words, the states contended that the Obama administration’s DOL exceeded its authority.

THE NEW OVERTIME LAW IS DEAD — FOR NOW

Judge Amos L. Mazzant III of the Eastern District of Texas ruled that the DOL has indeed exceeded its authority by raising the overtime salary limit.  The judge promptly enjoined (i.e. stopped) the DOL rule from going forward not only in Texas, but nationwide.

Understand, the court’s injunction is a temporary ruling that stops the regulation until the judge can issue a final ruling on the merits.  However, the handwriting is on the wall: the judge is highly likely to strike down the regulation when he issues his final ruling.

Until further notice, the rule increasing the minimum salary threshold of exempt workers to $47,476 from $23,660 is dead.  Businesses need not pay exempt workers more than $23,660 to comply with the FLSA.

Judge Mozzant’s ruling is clearly the first shot across the bow in a changing business landscape.  Expect more such pro-business directives from the incoming Trump administration.  These will inevitably be met with fierce resistance from pro-labor groups.

As the battle rages on, HR Law Insider will be here to provide cutting edge information and commentary to guide businesses, managers, and HR professionals.

For further information on these or other employment, business, and HR matters, contact Art Bourque at Bourque Law Firm.

 

ELECTION 2016: ARIZONA ADOPTS NEW WORKPLACE LAWS AND PRESIDENT TRUMP IS COMING TO YOUR WORKPLACE

President Elect Donald Trump won in a shocker last night.  So too did Arizona employees:  Proposition 206, known as the Fair Wages and Healthy Families Initiative, passed comfortably at 59% to 41%.

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PROPOSITION 206

Here is an overview of the new law:

Starting on January 1, 2017, Arizona’s minimum wage will increase  to $10, then $10.50 in 2018, $11 in 2019, and $12 in 2020.  In 2021, the minimum wage will be adjusted each year based on the cost of living.

In dollars and cents, a current full-time minimum wage worker makes $16,744 per year. However, by 2020, such workers will make $24,960 per year.

For restaurants and similar businesses, tipping laws in Arizona will remain the same:  employers may pay employees $3 less than minimum wage if they are earning as much, or more than, minimum wage with tips.

The new law also entitles certain employees to paid sick time. Employers with more than 15 employees must provide each worker with 24 hours of paid sick time per year. If a business has more than 15 employees, 40 hours is required.

Sick time is available to employees who have a physical or mental illness, must care for a family member, experience a public-health emergency, or take a leave of absence because of domestic or sexual violence and/or stalking.

DONALD TRUMP AND YOUR WORKPLACE

President Trump will likely have wide-ranging effects on workplace laws and, equally important, how those laws are enforced.  From Executive Orders, to selecting Supreme Court Justices that interpret workplace laws, to appointing agency heads who apply those laws (e.g. head of the Department of Labor),  a President can greatly impact employers and their workers.

In the coming weeks and months, as President-Elect Trump’s cabinet selections and other appointees come into focus, HR Law Insider  and attorney Art Bourque will be right there to help businesses understand the real world climate in which they are operating.

Today, however, is for many a day for celebration or mourning.   To assist on that joyful or seemingly perilous journey, here are two songs about change, the first for the “winners” and the second for those wondering what happened.

 

 

 

ARE YOU PROPERLY INSURED?

For two years, Lesley Wilks had car insurance from State Farm, which she obtained through the Manobianco Insurance Agency.  Her policy included liability and both uninsured motorist and underinsured motorist coverage.

Wilks later replaced the State Farm policy with a policy from another insurance company.  A year later, she decided to switch back to State Farm.  When doing so, Wilks asked Manobianco to obtain “the exact same coverage that [she] had previously, full coverage.”  Manobianco did not look up Wilks’s prior coverage and procured insurance that did not include underinsured motorist coverage.  In the course of signing several insurance forms, Wilks signed a form document which had been filled out by Manobianco to reject underinsured motorist coverage.

Several years later, Wilks was rear-ended by an underinsured driver.  State Farm denied the underinsured motorist claim she made under her policy.  Wilks then sued Manobianco for malpractice for failing to procure the insurance coverage she had requested.

HOW TO AVOID LESLEY WILKS’ FATE

Wilks v. Manobianco raises an all too common problem:  one of the first questions I ask personal injury and business clients when they have been in a crash or suffered a loss or claim is whether they have insurance.  However, oftentimes the answer is “I don’t know” or “Yes, but I don’t know how much or what my insurance really covers.”

Many individuals and businesses do not pay attention to insurance until an unforeseen event occurs.  Then, they rush through their drawers, files, and closets to search — and hope — for an insurance policy which covers their loss.

This article is a call for individuals and businesses to understand the importance of insurance and conduct an immediate self-audit to ensure that they have adequate coverage.  A small amount of effort and thought can reap large dividends.

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A LITTLE KNOWLEDGE GOES A LONG WAY

It is not uncommon for car crash victims to be hit by a driver who is either underinsured or has no insurance whatsoever.  Typically, such drivers do not have enough assets to satisfy injury claims.  It would seem that such a client is out of luck — with no means of collecting damages from the person that hit them.  Such is not the case if the person bought uninsured or underinsured motorist insurance coverage.

Uninsured motorist coverage protects you if you’re in an accident with an at-fault driver who doesn’t carry liability insurance.  Underinsured motorist coverage, on the other hand, steps in when you’re in an accident with an at-fault driver whose liability limits are too low to cover the damage or medical expenses.

Over the last several weeks alone I have encountered no less than three situations where underinsured motorist coverage, or the lack thereof, was a client’s sole means of being made whole as a result of being hit by an underinsured driver.

To understand the importance of underinsured coverage, here is an example:  assume that your case is worth $200,000, but the negligent driver only has $100,000 of coverage. In that case, you can make an underinsured driver claim against your own insurer as long as you have more than $100,000 in underinsured driver coverage. If you had $150,000 in underinsured driver coverage, you would settle with the negligent driver for $100,000, and would settle with your insurer for $50,000. You cannot take the negligent driver’s $100,000 policy and another $100,000 from your policy. You can only take from your policy that amount that exceeds the negligent driver’s coverage.

DEALING WITH YOUR INSURANCE AGENT

Arizona law requires insurers to offer uninsured motorist and underinsured motorist coverage to their insureds.  Insurers may prove compliance with the statute by having their insureds sign an Arizona Department of Insurance approved form selecting or rejecting such coverage.

It is therefore critical to carefully review all forms you are asked to sign when  obtaining new insurance or update an existing policy.

Avoid a Wilks v. Manobianco scenario:  understand the importance of every form you sign and obtain an adequate amount of uninsured and underinsured motorist coverage.

TYPES OF BUSINESS INSURANCE TO CONSIDER

Here are types of insurance that businesses should consider obtaining:

  • General Liability Insurance:  The type of policy provides both defense and damages if you, your employees or your products or services cause or are alleged to have caused bodily injury or property damage to a third party.
  • Property Insurance:  This kind of policy typically covers office equipment, computers, inventory or tools due to fire, vandalism, theft, smoke damage etc.
  • Business owner’s policy (BOP): A business owner policy packages all required coverage a business owner would need. Often, BOP’s will include business interruption insurance, property insurance, vehicle coverage, liability insurance, and crime insurance . Based on your company’s specific needs, you can alter what is included in a BOP. Typically, a business owner will save money by choosing a BOP because the bundle of services often costs less than the total cost of all the individual coverages.
  • Commercial Auto Insurance: This policy protects a company’s vehicles. You can protect vehicles that carry employees, products or equipment. With commercial auto insurance you can insure your work cars, SUVs, vans and trucks from damage and collisions.  If you do not have company vehicles, but employees drive their own cars on company business you should have non-owned auto liability to protect the company in case the employee does not have insurance or has inadequate coverage.  Many times the non-owned can be added to the BOP policy.
  • Directors and Officers Insurance: This type of insurance protects directors and officers of a company against their actions that affect the profitability or operations of the company. If a director or officer of your company, as a direct result of their actions on the job, finds him or herself in a legal situation, this type of insurance can cover costs or damages lost as a result of a lawsuit.
  • Data Breach:  If the business stores sensitive or non-public information about employees or clients on their computers, servers or in paper files they are responsible for protecting that information.  If a breach occurs either electronically or from a paper file a data breach policy will provide protection against the loss.
  • Professional Liability Insurance: This type of insurance is also known as errors and omissions insurance. The policy provides defense and damages for failing to or improperly rendering professional services.  Professional liability insurance is applicable for any professional firm including lawyers, accountants, consultants, notaries, real estate agents, insurance agents, hair salons and technology providers, among others.

CONCLUSION

The Southwest leads the nation in uninsured motorists, with New Mexico at a staggering 29% and Arizona not far down the list at 18% (see the graphic below).

Given these depressing numbers, be sure to have a plan when you walk into your agent’s office to buy insurance.  Understand what you sign.  Your financial future may depend on your preparation and diligence.

For further information on personal injury claims, obtaining insurance or making insurance claims, and general tort and commercial matters, contact Art Bourque at Bourque Law Firm.

 

“LOCKER ROOM TALK” STARTED THE SEXUAL HARASSMENT LAWSUIT REVOLUTION

Donald Trump has re-popularized the term “locker room talk.”  The euphemism, which Trump used to explain away his comments about women on a videotape that emerged last week, has different meanings to different people.

Trump downplayed his comments as harmless. Many others, however, viewed Trump’s words as harassing, threatening, and demeaning.  Whatever your belief, so-called locker room talk was the main catalyst behind the explosion of sexual harassment lawsuits some 30 years ago and clearly has not gone away.

Through the real-life story of Beth Ann Faragher, this article provides readers with a historic and revealing look at Title VII — the main law which prohibits sexual harassment and discrimination.  Equally valuable, this edition of the HR Law Insider explains how and why “locker room talk” gets companies sued, and provides businesses specific tools to prevent sexual harassment.

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TITLE VII:  HOW A YOUNG WOMAN LIFEGUARD CHANGED THE WORLD 

I had a Forrest Gump moment in 1986.  As a young  ocean lifeguard in Hollywood, Florida, I  witnessed first-hand the male-dominated culture of the Beach Patrol — in our locker room and on the beach.

Little did I know, just up the road, working with men I knew and competed against in lifeguard competitions, Beth Ann Faragher, a lifeguard with the City of Boca Raton, was on her way to making US Supreme Court history.

Sexually harassed for the better part of five years, Faragher brought claims against Boca Raton under Title VII.  After a hard-fought trial, the court found:

“From time to time over the course of Faragher’s tenure at the Marine Safety Section, between 4 and 6 of the 40 to 50 lifeguards were women.  During that 5-year period, Chief of the Marine Safety Division Terry repeatedly touched the bodies of female employees without invitation,  would put his arm around Faragher, with his hand on her buttocks, and once made contact with another female lifeguard in a motion of sexual simulation. He made crudely demeaning references to women generally, and once commented disparagingly on Faragher’s shape. During a job interview with a woman he hired as a lifeguard, Terry said that the female lifeguards had sex with their male counterparts and asked whether she would do the same.”

Marine Safety lieutenant David Silverman behaved in similar ways. He once tackled Faragher and remarked that, but for a physical characteristic he found unattractive, he would readily have had sexual relations with her.  Another time, he pantomimed an act of oral sex. Within earshot of the female lifeguards, Silverman made frequent, vulgar references to women and sexual matters, commented on the bodies of female lifeguards and beachgoers, and at least twice told female lifeguards that he would like to engage in sex with them.”

The court of appeals, however, reversed the trial court and found in favor of Boca Raton.  This led to the landmark US Supreme Court decision in favor of Faragher in 1998.

Faragher’s odyssey began in the 1980s, a decade which witnessed an explosion of sexual harassment cases under Title VII.  That’s right, it took about 20 years for a cultural shift to “allow” cases to be brought under a law that was passed the year The Beatles started the British Invasion in America.

The Faragher decision is obviously important for its legal precedent in holding employers liable for sexual harassment.   The historic ruling also provides businesses with a road map as to how to avoid sexual harassment claims.

HOW BUSINESSES CAN PREVENT SEXUAL HARRASSMENT

The facts in Faragher lawsuit are very typical of the sexual harassment allegations I have observed over 25 years of representing businesses and individuals:  uncontrolled behavior by men in positions of power and/or an overall work culture that enables, encourages, or permits bad behavior.

Regardless of one’s beliefs about the Trump situation, allowing such talk in a work environment is a sure-fire way to be on the receiving end of an EEOC charge of discrimination.  Here are specific, time-tested tools to prevent locker room talk in your workplace and avoid the fate of Boca Raton :

  • Management and employees should receive sexual harassment and discrimination training from counsel once a year.
  • Employee handbooks should be carefully drafted and specifically reviewed during the training.
  • Sexual harassment and discrimination policies should be discussed in detail; hypotheticals should be played-out to understand how the policy will work in real time/life.
  • All businesses should have a personal relationship policy, particularly regarding supervisors and managers having relationships with those that they supervise/manage.
  • Managers should read the Faragher case — it takes 20 minutes; by understanding the underpinnings of the law, managers will know why their handbook says what it says, how to identify and prevent harassment, and what to do, and what not to do, when harassment is alleged.
  • Leaders should constantly assess company culture; live by the credo:  “There are no bad teams, only bad leaders.”
  • Leaders should focus on hiring and training those people who will fit within a culture that condemns and punishes discrimination and harassment.
  • Contact counsel when there is a potential complaint about harassment or discrimination; such complaints rarely occur, and, in my experience, are often addressed and resolved quickly and inexpensively with an experienced hand and laser focus.
  • Once a complaint of harassment is reported, understand that any discipline or negative treatment towards the complainant will bring a high risk of a retaliation claim.
  • Do not overlook inappropriate, stray comments; instead, view them as red flags to monitor or act on immediately to get ahead of a larger problem.
  • Detach and observe how managers and employees treat each other at the office, in the field, and at social events.  Thinking or saying “he’s just like that” or “that’s just who he is” is unacceptable when dealing with someone conducting themselves in a way that is unaligned with your company’s culture.
  • Do not slide:  review this bullet point list once every quarter and ask:  “is our company doing these relatively simple things to prevent and/or deal with sexual harassment and discrimination”?

CONCLUSION

To understand the root problem and cure for sexual harassment one should do more than adopt wooden, form policies from attorneys or websites.  Instead, endeavor to understand the “culture” in which sexually harassment thrives.

Once one understands the roots of sexual harassment, it is far easier to avoid it in the first instance and, failing avoidance, to identify, combat and eradicate the ugly disease.

EPILOGUE

Here is a fascinating footnote about Title VII’s enactment:  Unlike today, when congressional votes are typically cast along party lines, in 1964 Title VII’s vote occurred along geographical lines — with the North for Title VII and the South against.

The House vote:

  • Southern Democrats: 7–87   (7–93%)
  • Southern Republicans: 0–10   (0–100%)
  • Northern Democrats: 145–9   (94–6%)
  • Northern Republicans: 138–24   (85–15%)

The Senate vote:

LAST NIGHT’S DEBATE: DO NOT TRY THIS AT HOME OR IN THE WORKPLACE

Any momentary triumph you think gained through argument is really a Pyrrhic victory: The resentment and ill will you stir up is stronger and lasts longer than any momentary change of opinion. It is much more powerful to get others to agree with you through your actions, without saying a word. Demonstrate, do not explicate.

Robert Greene

Many will view last night’s debate as a national embarrassment.  Most, of course, will take their candidate’s side:  if one is a Clinton fan, the debate will confirm the position that she is the only choice; and if Trump is your pick you may well have experienced a vicarious rush and excitedness when he threatened to send Clinton to jail.

But was either candidate’s argument truly effective?  Would you counsel a workplace manager, employee, or spouse to debate contentious issues this way?  Of course not.

This article explores how to persuade others not with argument, but through effectively demonstrating the merits of one’s position.  Such a skill is critical in the workplace and beyond.

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MICHELANGELO KNEW THE POWER OF DEMONSTRATION OVER ARGUMENT

Robert Greene’s The 48 Laws of Power captures the power of demonstration over argument with the true story of one of the greatest pieces of art ever created — David by Michelangelo:

In 1502, in Florence Italy, an enormous block of marble stood in the works department of the church of Santa Maria Del Fiore.  It had once been a magnificent piece of raw stone, but an unskilled sculptor had mistakenly bored a hole thru it where there should have been a figure’s legs, generally mutilating it.  Piero Soderini, Florence’s mayor, had contemplated trying to save the block by commissioning Leonardo da Vinci  to work on it, or some other master, but had given up because everyone agreed that the stone had been ruined.  So, despite the money that had been wasted on it, it gathered dust in the dark halls of the church.

This is where things stood until some Florentine friends of the great Michelangelo decided to write the artist, then living in Rome.  He alone, they said, could do something with the marble, which was still magnificent raw material.  Michelangelo travelled to Florence, examined the stone, and came to the conclusion that he could in fact carve a fine figure from it, by adapting the pose to the way the rock had been mutilated.  Soderini argued that this was a waste of time — nobody could salvage such a disaster — but he finally agreed to let the artist work on it.  Michelangelo decided that he would depict a young David, sling in hand.

Weeks later, when Michelangelo was putting the final touches on the statue, Soderini entered the studio.  Fancying himself a bit of a connoisseur, he studied the huge work, and told Michelangelo that while he thought it was magnificent, the nose, he judged, was too big.  Michelangelo realized that Soderini was standing in a place right under the giant figure and he did not have the proper perspective.  Without a word, he gestured for Soderini to follow him up the scaffolding.  Reaching the nose, he picked up his chisel, as well as a bit of marble dust that laid on the planks.  With Soderini just a few feet below him on the scaffolding, Michelangelo started to tap lightly with a chisel, letting the bits of dust he had gathered in his hand to fall little by little.  He actually did nothing to change the nose, but gave every appearance of working on it.  After a few minutes he stood aside:  “Look at it now.”   “I like it better,” replied Soderini, “you’ve made it come alive.”

Michelangelo knew that by changing the shape of the nose he might ruin the entire sculpture.  Yet Soderini was a patron who prided himself on his aesthetic judgment.  To offend such a man by arguing would not only gain Michelangelo nothing,  it would put future commissions in jeopardy.  Michelangelo was too clever to argue.  His solution was to change Soderini’s perspective (literally bringing him closer to the nose) without making him realize that this was the cause of his misperception.

Fortunately for posterity, Michelangelo found a way to keep the perfection of the statue intact while at the same time making Soderini believe he had improved it.   Such is the double power of winning through actions rather than argument.  No one is offended, and your point is proven.

PRACTICAL APPLICATION OF THE RULE

Last night’s debate once again proved that  words are a dime a dozen.  People are easily offended, often resentful, and rarely change their mindset.  As Robert Greene explains:

Everyone knows that in the heat of the argument, we will all say anything to support our cause.  We will quote the Bible, refer to unverifiable statistics.  Who can be persuaded by bags of air like that?  Action and demonstration are much more powerful and meaningful.  They are there, before our eyes, for us to see — “Yes, the statue’s nose does just look right.”   There are no offensive words, no possibility of misinterpretation.  No one can argue with a demonstrated proof.  “The truth is generally seen, rarely heard.”  Baltasar Gracian.

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CONCLUSION

Win with action and demonstration, not words.  By way of example, disciplining an employee with such invectives as they are a “poor performer” or “cannot be trusted” is wholly ineffective to turn the employee’s performance around and, at the same time, will cultivate resentfulness and dissent.  At best, you have not helped the situation.  At worst, you have created an enemy.

Similarly, do not be deceived when you are on the receiving end of “words.”  For example, as an investor, focus on facts, data, and objective metrics rather than vague promises of future success.  Otherwise, you will find yourself on the losing end of an investment and without the tools to ask the right questions and obtain real answers.

Who will win the war of words this presidential cycle?  I certainly do not know.  However, I do know that most of us are better off turning down the volume or turning off the TV and social media.  If you do, and want to be entertained by a master at the art of persuasion through demonstration, watch the movie Up in the Air [warning:  language]:

RELYING ON REPUTATION: LIVE BY THE SWORD, DIE BY THE SWORD

“A good reputation is more valuable than money.”

Publilius  Syrus

Those who cultivate a good reputation know its priceless value and almost magical quality.  Once built, a solid reputation can open the corridors of power.  Money, praise, and devotion often follow.  What’s not to like about reputation?

Blind faith in another’s reputation can, however, be very dangerous. This article peeks behind reputation’s curtain — shining the light on its sinister underbelly.  Indeed, many of us would be better served not to rely on reputation.

This edition of the HR Law Insider posits that instead of relying on reputation, one should develop his or own belief regarding potential business partners and employees.  Then, this article provides real world guidance as to how to avoid becoming entangled with those that appear to be paragons of success and virtue.

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REPUTATION’S THIN ROOTS AND SHAKY FOUNDATION

“Everyone prefers belief to the exercise of judgment.”

Seneca

Reputation is defined as “the common beliefs or opinions that are generally held about someone or something.”

Phrased in a different way, reputation is a belief one reaches not on the basis of facts, evidence, or experience, but on the beliefs of others.   Should one trust such a belief?

Bernie Madoff’s reputation was impeccable, before it wasn’t.  For decades Madoff was revered by the wealthiest, most sophisticated investors.  Before his vast Ponzi scheme was uncovered, investors clamored to give Madoff their money.  To be seen with Madoff, or to be near him,  gave many the feeling that they had entered the very corridors of power.

When one currently observes a picture of Madoff, one sees the quintiseential conman.  Now, it is “easy,” in hindsight, to see that Madoff was a fraud.

HOW TO AVOID THE REPUTATION TRAP:  DO NOT FOLLOW THE HERD

No One Would Listen is a thrilling story of how Harry Markopolos, a little-known number cruncher from a Boston equity derivatives firm, uncovered Bernie Madoff’s scam years before it made headlines, and how he desperately tried to warn the government, the industry, and the financial press.

No One Would Listen demonstrates how Madoff used his reputation as diabolical tool to woo the world’s “smartest” investors.  In the end, just before his demise, Madoff’s reputation was so good that he no longer needed to solicit investors — they came to him.

How will the next mini-Madoff you meet try and make you come to him?:

  • He will have carefully grown a social and business network of name people and companies.  How could someone so connected, with such a brilliant reputation, not be a winner and leader in his field?
  • He will make it appear as though he is doing you a favor by working with you.  Time and again a conman will tell people that his sole objective is simply to “help” people.  How fortuitous that he chose you to help!
  • Ironically, many unscrupulous types forge reputations by starting charitable organizations, making “giving back” a central theme, and/or appearing at high profile charity events.  How could a philanthropist be bad?
  • Those trading on reputation will present an appearance of wealth and success, and seem so generous as to be selfless.  Selfless people are to be trusted, right?
  • There may be a religious or spiritual component to reputation.  Religious and spiritual people are “pure” in many peoples’ eyes — their reputation is beyond reproach.
  • He will obtain the endorsement from, or membership in, seemingly well known organizations.  Here’s a little known (outside the legal community) trade secret:  did you know that lawyers pay money and have friends endorse them in order to get on those seemingly exclusive “Top 50 Lawyers” lists and magazines?
  • Reputation can be built in as little as hours or days on internet, which has made it easier than ever to cultivate reputation.

 

CRACKING THE CODE

Ignoring reputation is simple, but not easy.  Those who cultivate solid reputations are very skilled at their craft.  The siren song of a good reputation has fooled many a smart business person and investor.

Due diligence and common sense are the keys to overcoming the instinct to rely too heavily on reputation.  For example, consider a significant background check and otherwise thorough vetting when hiring a key employee or business partner.

Do not stop there, however.  Always be willing to ask challenging questions of your employees, business partners, and others with whom you trust your money or livelihood.  Defensive responses and ambiguous (non)-answers are obvious clues that something is amiss.

Asking good questions and evaluating the veracity of the answers is much easier when one is not left starry-eyed by another’s seemingly “impeccable” reputation.  In short, do not whistle past the graveyard — always be willing to be objective and proactive about your situation.

Avoid confirmation bias.  This is “the tendency to search for, interpret, favor, and recall information in a way that confirms one’s preexisting beliefs or hypotheses, while giving disproportionately less consideration to alternative possibilities.”  Time and again I have seen this bias lead successful business people to ignore hard data, stay in bad deals, or continue to believe in unscrupulous business partners or employees.

In conclusion, be your own Sherlock Holmes.  Make it your business to know who you are dealing with.  Use your cognitive tools to separate the wheat from the chaff.

As you ponder these ideas, enjoy some of my favorite — and applicable — Sherlock Holmes quotes:

  • “It is a capital mistake to theorize in advance of the facts. Insensibly one begins to twist facts to suit theories, instead of theories to suit facts.”
  • “Never trust to general impressions, my boy, but concentrate yourself upon details.”
  • “The world is full of obvious things which nobody by any chance ever observes.”
  • “How often have I said to you that when you have eliminated the impossible, whatever remains, however improbable, must be the truth?”
  • “My name is Sherlock Holmes.  It is my business to know what other people don’t know.”
  • “I shall be my own police.  When I have spun the web they may take the flies, but not before.”

For further information on hiring and managing employees, business partnerships, employment and shareholder disputes, or other general commercial matters, contact Art Bourque at Bourque Law Firm.

EEOC INTENSIFIES SCRUTINY OF WORKPLACE WELLNESS PROGRAMS

As Americans become increasingly more sedentary and less fit, workplace wellness programs offer a “win-win” solution:  companies reduce their healthcare costs and increase worker productivity; employees become more healthy and less prone to injury and disease.  What’s not to like about that?

As wellness programs proliferate, however, so too does their scrutiny by the government, principally the EEOC.  This article helps companies and wellness program administrators navigate the landmines that that may be encountered by growing government regulation and oversight.

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THE EEOC IS NOT PUMPED-UP ABOUT WELLNESS PROGRAMS

This past Thursday a federal court ruled in favor of the U.S. Equal Employment Opportunity Commission (EEOC) in a disability discrimination case involving wellness programs filed against Orion Energy Systems.

In the Orion lawsuit, the EEOC argued that Orion required Wendy Schobert to submit to medical testing as part of a wellness program or pay 100 percent of the premium for the employer-provided health insurance.  The EEOC contended that this violated the Americans with Disabilities Act’s (ADA) prohibition against involuntary medical exams.  Orion, however, contended that its wellness plan was covered by the ADA’s so-called “insurance safe harbor,” and thereby was excused from ADA compliance except if it operated as a subterfuge. Orion also argued that the plan was lawful under the ADA because it was voluntary.

The district court rejected Orion’s safe harbor argument, and held that the plan was subject to ADA review. However, the court found that the wellness plan was lawful under the ADA because it concluded that the employee’s decision whether to participate was voluntary under that statute.  Nonetheless, the court decided that there were issues of fact regarding whether Schobert was fired because of her opposition to the wellness plan, and rules that the case would be set for (an expensive) trial.

John Hendrickson, the regional attorney for EEOC’s Chicago District Office, remarked that the court’s ruling “establishes that there is no easy out for employers from ADA scrutiny.”

WHERE DO WE GO FROM HERE?

Good health is a priceless commodity.  Wellness programs will continue to offer companies and employees a wealth of benefits — both to the bottom line and the bottom that sits in a chair most of the day (i.e. most of us).

As they grow, however, Companies’ wellness programs will be subject to increasing government scrutiny.  Equally so, with the Orion decision, plaintiffs’ lawyers and government agencies will be on the hunt for companies that fail to comply with the law.

For example, many employers believe that a dispute or injury involving a wellness program is “separate” from a workplace dispute or injury and not subject to HR laws.  Most of time this is not the case.  Thus, employers should treat any employee wellness issue as a workplace issue (e.g. a wellness program injury is likely to be covered by workers compensation laws).

Is this a problem?  No, not if companies and employees stay abreast of the law and work together to develop and participate in lawful wellness programs.  How can this be done?  Easily.  By consulting professionals and reading the HR Law Insider, companies and program administrators will stay current with the law.

CONCLUSION

As we near the year end, I hope you have stuck with your health and fitness goals for 2016; if so, congratulations.  But if not, consider starting now rather than waiting for another January 1 to roll around.

Start, for example, by reading motivating and informative articles and books that will provide an impetus for change.  Dr. Phil Maffetone’s  Big Book on Health and Fitness lays out a sensible and holistic road map that makes health and fitness an ingrained part of one’s lifestyle, and an easy-to-achieve goal for both men and women at any age (I have no affiliation with Dr. Maffetone other than as a huge fan).

As you are contemplating “getting after it,” be inspired by watching a movie or two from my personal top ten list of great sports movies (below).  Hold the cheese, however, as several of these movies have enough Velveeta to fill a small cheese factory.

For wellness program questions, further information on other employment law topics, or if you want to hit some weights, go for a run, or join me on a bike ride, contact Art Bourque at Bourque Law Firm.

In any event, try and start moving now — today.  Each day presents an opportunity to start anew.  As Henry David Thoreau said:  “Only that day dawns to which we are awake. There is more day to dawn. The sun is but a morning star.”

TOP 10 SPORTS MOVIES [OK, TOP 20!]

  1. Rocky
  2. Chariots of Fire
  3. The Karate Kid
  4. Field of Dreams
  5. Pumping Iron
  6. The Longest Yard
  7. Rudy
  8. Hoop Dreams
  9. Bad News Bears
  10. Slapshot
  11. When We Were Kings
  12. Touching the Void
  13. Breaking Away
  14. American Flyers
  15. The Wrestler
  16. Hoosiers
  17. The Jericho Mile
  18. Meru
  19. Remember the Titans
  20. Perfect

 

NEW ARIZONA CASE EXPLORES COMPANY LIABILITY FOR THE ACTS OF INDEPENDENT CONTRACTORS

Control
  

def: the power to influence or direct people’s behavior or the course of events.

Because employers “control” the acts of their employees, courts hold businesses liable for employees’ conduct performed in the course and scope of their employment.  Example:  when a truck driver employed by ABC Trucking crosses a double yellow line and kills an oncoming motorist, the truck driver and ABC Trucking are both liable for negligence.

But what if that same driver is an independent contractor, not an employee of your company?  Or what if the driver is an independent contractor your family hired to move its furniture across town, or shuttle your kids between ball games?  Would you still be liable even though the driver was not your employee?

Equally important, what if you think you have an independent contractor relationship with a worker, but exercise too much control over their work and the person is deemed to be your employee?

The Arizona Court of Appeals tackled these questions last week.  Read on and gain a fingertip feel for how to hire and work with independent contractors in a way that does not make you liable for their mistakes

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A FATAL ACCIDENT AND A LAWSUIT

In Santorii v. MartinezRusso, LLC, a RE/Max Professionals real estate agent was returning from a real estate sales appointment when the car he was driving crossed the center line and struck another man’s tractor-trailer.  Both men died in the collision.  The wife of the truck driver brought a wrongful death lawsuit against RE/Max Professionals alleging that it was vicariously liable for its agent’s negligence.

The specific issue in the case was whether real estate brokers should be held liable for their salespersons’ negligent driving.  The Court answered “no.”  But, in deciding this particular issue, the Court of Appeals made broad pronouncements which are applicable to all businesses.

THE COURT CONFIRMS THE APPLICABLE TEST TO DETERMINE IF A WORKER IS AN INDEPENDENT CONTRACTOR OR AN EMPLOYEE

The Santorii Court stated that the following criteria must be evaluated in determining whether an employer-employee relationship exists:

  1. The extent of control exercised by the master over details of the work and the degree of supervision;
  2. The distinct nature of the worker’s business;
  3. Specialization or skilled occupation;
  4. Materials and place of work;
  5. Duration of employment;
  6. Method of payment;
  7. Relationship of work done to the regular business of the employer;
  8. Belief of the parties.

The degree of control exercised over a worker is the main factor courts consider in deciding whether a worker is an employee.  The right to control is present when a company can control the details of how work is performed and can give specific instructions with the expectation that they will be followed.  Thus, where a  delivery truck driver struck a motorcyclist, the Arizona Supreme Court concluded that there were fact questions regarding whether the driver was an independent contractor or an employee when the delivery company:

  • designated pick-up and delivery times
  • selected the delivery route, and the manner in which the papers were to be delivered
  • could send a supervisor on the delivery route
  • could tell the driver when to add customers and follow specific customer requests

In yet another case, the Arizona Supreme Court held that an employer was not liable for the wrongful death caused by its traveling salesman because the employer had “no control or right of control” over the manner of the salesman’s travel.   The court recognized that under the contract between the employer and the traveling salesman, the employer may have had some control over sales procedures, but found that such control “would not justify an inference of any right to control the time, method or manner of the operation of [the salesman’s] automobile.” The court noted that evidence showing that the salesman could sell anywhere in the United States, sold other companies’ products, and essentially had full discretion over his own sales trips established the employer’s lack of control.

Applying the foregoing principles, the Santorii court ruled that the real estate agent was an independent contractor and, in turn, RE/Max Professionals was not liable.  Despite working exclusively for RE/Max Professionals for over a six-year period, the agent was a licensed professional who had nearly complete discretion in the time, manner, and means in which he traveled to meet clients.

In addition, the contract between RE/Max Professionals and the agent identified the agent as an independent contractor who was “free to devote” his time, energy, effort, and skill as he saw fit.  The agent was not required to keep specific hours, attend sales meetings, or meet any sales quotas, and although RE/Max Professionals provided optional office space, administrative services, sales leads, and training, the agent was charged a monthly fee for these services.  Moreover, there was no dispute that the agent chose the territory where he worked, created his own advertisements, prospected for clients, drove his own car, worked from his home office, worked purely for commission, and set up his own appointments.

TAKEAWAY:  TO AVOID LIABILITY, CAREFULLY DRAFT INDEPENDENT CONTRACTOR AGREEMENTS AND DO NOT EXERCISE TOO MUCH CONTROL

The Santorii decision does not mean that real estate companies are home free.   First, the decision was narrowly limited to assessing liability for agents’ driving a car (versus, for example, negligent business practices).  Second, had the brokerage company exercised more control over its agent, it easily could have been found liable for the agent’s negligence. 

Santorii is a strong reminder for businesses and others to thoughtfully consider their relationships with independent contractors.  This means (1) having counsel draft independent contractor agreements that, if challenged, are defensible and supportable; (2) making sure that your business does not exercise too much control over your non-employee workers; and (3) having adequate insurance if you fail to heed Nos. 1 and 2.

Getting sued is not the only problem that can befall companies who misclassify employees as independent contractors.  The U.S. Department of Labor and IRS are always on the lookout for businesses that misclassify workers.  For more on this topic, read this article.

For help on drafting independent contractor agreements or for further information on other employment law topics, contact Art Bourque at Bourque Law Firm.

DEPARTING EMPLOYEES: WHAT INFORMATION CAN THEY TAKE TO COMPETE WITH YOUR BUSINESS?

Improvements in the job market over the last several years have increased employee mobility among businesses.  As a result, I am seeing a substantial uptick in cases where employees have elected to get a “jump start” on their new jobs by absconding with confidential and proprietary information.

This article discusses:

  • The boundaries of what employees may take from their former employers when embarking on new jobs, or starting new businesses.
  • Preventive measures to avoid the theft of company information.
  • How to stop an ex-employee in their tracks when there has been a theft of confidential or proprietary information.

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THE RULES OF THE GAME

Employees who take customer lists, marketing data or strategies, website designs, manufacturing processes, or other company information are often found to have misappropriated “trade secrets.”  A trade secret is defined as information, including a formula, pattern, compilation, program, device method, technique or process that both:

(a) Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by other persons who can obtain economic value from its disclosure or use.

(b) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

In Arizona, “misappropriation” is defined as either:

(a) Acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means.

(b) Disclosure or use of a trade secret of another without express or implied consent by a person who either:

(i) Used improper means to acquire knowledge of the trade secret.

(ii) At the time of disclosure or use, knew or had reason to know that his knowledge of the trade secret was derived from or through a person who had utilized improper means to acquire it, was acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use or was derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use.

(iii) Before a material change of his position, knew or had reason to know that it was a trade secret and that knowledge of it had been acquired by accident or mistake.

“Improper means” is defined as including “theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy or espionage through electronic or other means.”

To state a claim for misappropriation of trade secrets, one need not allege that the person/party itself stole the trade secrets; it is sufficient to allege that the party is using trade secrets that it knows or has reason to know were acquired through improper means.  In other words, misappropriation is not limited to the initial act of improperly acquiring trade secrets; the use and continuing use of the trade secrets is also misappropriation.

THE FINE LINE BETWEEN TRADE SECRETS AND PUBLIC INFORMATION

A customer list may be entitled to trade secret protection when it represents a selective accumulation of detailed, valuable information about customers — such as their particular needs, preferences, or characteristics — that naturally would not occur to persons in the trade or business.  On the other hand, matters of public knowledge are not trade secrets.  The subject matter of a true “trade secret” must be sufficiently novel, unique, or original that it is not readily ascertainable to competitors.

Whether information constitutes a trade secret is decided on a case-by-case basis.  For an understanding as to how the law is applied, observe the following case rulings:

  • specific policyholder information, including amount of outstanding loans and dividends accrued, was trade secret
  • general knowledge of business and customers acquired during employment was not trade secret
  • customer list containing detailed information about customers’ “personality traits, hobbies and likes, credit history, buying habits and pricing agreements” was trade secret
  • customer list containing “pricing information and knowledge about particular roofs and roofing needs of customers” was trade secret
  • customer list containing client names, “farm description, past insurance coverage, and loss histories” was trade secret
  • customer list was trade secret when employer winnowed potential customers down to the “elite” 6.5%
  • customer list was not trade secret when compilation process was “neither sophisticated nor difficult nor particularly time consuming,” market was highly competitive, and customers did not have exclusive business relationships
  • to be protected as a trade secret, customer list must be “more than a listing of firms or individuals which could be compiled from directories or other generally available sources”
As a general principle, the more difficult information is to obtain, and the more time and resources expended by an employer in gathering it, the more likely a court will find such information constitutes a trade secret.

STOPPING WOULD-BE MISAPPROPRIATION:  AN OUNCE OF PREVENTION IS WORTH A POUND OF CURE

The best means to protect your company’s trade secrets is not after the proverbial toothpaste is out of the tube, but rather through implementing vigorous and sustained measures to ensure the secrets are not taken in the first instance.

Contact counsel to develop a solid program to protect your trade secrets.  Among other things:

  • Have employees sign non-disclosure agreements
  • Consider non-compete and non-solicitation agreements
  • Embed in employee handbooks non-disclosure and other language regarding the confidentiality of company information
  • Protect and secure information stored in your company computers and devices
  • Monitor employees’ use of company information
  • Perform “self-audits” from time to time to ensure that management and employees have not been lax or loose with company information
  • Maintain password and information security
  • Establish procedures for on-boarding/off-boarding employees
  • Consider marking certain documents and materials as confidential

CLAIMS AGAINST EX-EMPLOYEES WHO HAVE ABSCONDED WITH TRADE SECRETS OR OTHER CONFIDENTIAL INFORMATION

In most cases it is wise to send the ex-employee, and possibly their new employer, a “cease and desist” letter.  If this proves ineffective and/or significant damage has already been done, employers can seek an injunction to stop the ex-employee from using the information and, separately,  seek damages arising from the misappropriation.

In counseling businesses as to whether it is “worth it” to file a lawsuit, I engage in an interactive process with management designed to focus on (1) the damage which has occurred to date; (2) the potential for future business losses; and (3) the risk that other employees or ex-employees will be emboldened into similar misconduct by inaction.  This cost-benefit analysis is a perfect way to understand the facts, law, and develop a solid plan going forward.

If you are interested in a methodology for dealing with any kind of contract dispute, read “How to Successfully Handle Any Type of Contract Dispute.”

For further information on contract or other employment law topics, contact Art Bourque at Bourque Law Firm.

NEW OVERTIME RULE ANNOUNCED BY US DEPARTMENT OF LABOR

Today, President Obama and Secretary Perez announced that the US Department of Labor’s final rule will automatically extend overtime pay eligibility to 4.2 million workers.

Here is all you need to know about the new rule:

TIMING:  The salary increases will not go into effect until December 1, 2016.

SALARY THRESHOLD:  On December 1, the threshold to claim an overtime exemption for salaried workers is $47,476, or $913 a week.

HIGHLY COMPENSATED EMPLOYEES(HCE):  On December 1, the threshold to claim an overtime exemption for highly compensated employees moves from $100,000 to $134,004 a year.

AUTOMATIC UPDATES:  The salary threshold will be updated every three years, beginning January 1, 2020.

BONUSES, INCENTIVE PAYMENTS, AND COMMISSIONS:  The final rule will allow up to 10 percent of the salary threshold for non-HCE employees to be met by non-discretionary bonuses, incentive pay, or commissions, provided these payments are made on at least a quarterly basis.

DUTIES TEST:  The final rule does not make any changes to the “duties test” that determines whether white collar salaried workers earning more than the salary threshold are ineligible for overtime pay.

Here is a more detailed summary of the final rule.

There you have it!

For further information on this or other employment law topics, contact Art Bourque at Bourque Law Firm.