New Law Regarding Franchise Joint Employer Liability

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The Office of the General Counsel of the National Labor Relations Board (NLRB) recently issued 13 complaints against McDonald’s franchisees as well as their franchisor, McDonald’s USA, LLC alleging various labor law violations.  The complaints follow the NLRB General Counsel’s announcement in July 2014 that McDonald’s USA may be held to be liable as a “joint employer” for unfair labor practices committed by its individual franchisees. This represents a departure from a long-standing precedent regarding franchise joint employer liability.

The 13 complaints allege that the individual franchises violated their employees’ right to engage in protect concerted activity. In other words, they took actions against them for engaging in activities aimed at improving their wages and other terms and conditions of their employment. This includes participating in nationwide fast food worker protests during the past two years. If successful, this would mean that under certain circumstances, a franchisor can be held liable for any unfair labor practices perpetrated by any of its franchisees. Such a precedent would have have a significant impact on franchise joint employer liability.

The NLRB posted on its website a “McDonald’s Fact Sheet” in which it  claims McDonald’s USA “through its franchise relationship and its use of tools, resources and technology, engages in sufficient control over its franchisees’ operations, beyond protection of the brand, to make it a putative joint employer with its franchisees” sufficient to share liability for its franchisees’ violations of the National Labor Relations Act.

The results of these complaints will not be determined for some time. Franchisors should take note, however, there are steps a franchisor can take to mitigate its risk of being declared a joint employer of its franchisees’ employees under the current law, as well as potentially under any new law.  These steps will also lessen the risk of a finding of common law vicarious liability for a franchisee’s employment practices in most states.

For more information regarding franchising and/or ways to avoid being declared a joint employer and therefore avoid liability for a franchisees’ employment issues call Gilbert Law Group today. 631-630-0100.

An Epic Heist: Nike Trade Secrets and Breach of Non-Compete

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Nike has sued three former employees who left to work for Adidas. The company is suing for breach of contract, theft of trade secrets, fraud, conspiracy and more. In the Complaint, Nike details fairly shocking allegations against the defendants who launched a plot to leave the Company, steal numerous Nike plans and products and then parlay that into lucrative new careers at Adidas.

The three employees all have a relatively long tenure at Nike. Two of the defendants have worked at Nike for 9 years. The remaining defendant has worked there for 6. Their collective experience covers soccer, football, basketball, cross-training, women’s apparel, running. All three of them climbed the corporate ladder. It is unsurprising that the defendants signed agreements that contained non-compete and non-disclosure provisions. Those provisions themselves were quite reasonable: a one-year non-compete, a one-year non-solicitation and a two-year non-disclosure.

During their years at Nike, all three of these individuals exemplified a great deal of talent and intellect—which explains them reaching such high-level positions within such a major corporation. But greed and arrogance can quickly cancel out other positive qualities like talent and intellect. In April 2014, the defendants began executing the plan for their departure from Nike.

Noteworthy is the fact that defendants launched this plan while still working for Nike. In May 2014, after one of the defendants had a visa issue, Nike paid more than $50,000 to relocate him and his family to Italy, on the understanding that one of the defendants would remain employed with the Company long-term. Upon securing Nike’s commitment to fund his relocation to Italy, the defendants allegedly discussed how the move to Italy would serve their scheme well because Italy was one of those “countries where [Nike’s] non-compete is difficult to enforce.”

While still at Nike, the defendants signed lucrative deals with Adidas. Shortly after resigning from Nike, the defendants began a sloppy attempt to steal as much Nike information as possible and then destroy any evidence.  One defendant copied all of his laptop’s contents onto an external hard drive, then damaged the laptop to a point he thought would render it inoperable and shipped it back to Nike. The defendant sent an email to his personal email address containing a zip file with design drawings for an unreleased shoe tied to a prominent, Nike-sponsored athlete. Unlike in most such instances, where the plaintiff offers vague assertions about confidential information and trade secrets, the materials at issue in this case are certainly confidential and  trade secrets. Between their collective efforts, the Defendants walked away from Nike with a treasure trove of information, including:

  • High-level strategic development plans for the next 3 to 4 years. These plans included proposed and prospective product offerings and the timing of releases.
  • Unreleased product design materials for the next 2 to 3 years. This included models, sketches and designs for soccer footwear and other soccer related products (e.g. team uniforms). These design plans included very detailed information on fabrics, cuts, colors, manufacturing and more.
  • Financial data including both a historical breakdown of all Nike footwear sales by product for the past year and a forward looking projection of growth my product for the next twelve to eighteen months.
  • Documents regarding Nike’s product marketing strategies including documents on product promotions, in-store presentations, pr campaigns, product launches, plans for specific sponsored athletes and plans for specific Nike-sponsored sports teams.

Nike is suing the defendants for every claim imaginable, and rightfully so. Turns out, Nike was, rather obviously, able to retain enough electronically stored data to present a very compelling Complaint. In many cases, especially many non-compete and trade secret cases, there is another side to the story. In many cases, the Complaint talks vaguely about wrongful conduct, confidential information and trade secrets, but never really gives specifics. Here, Nike’s complaint is filled with specific, credible and highly damaging allegations. There is unlikely to be anything the Defendants can say that would mitigate their liabilities.

WAITING TO WORK OR WAITING TO LEAVE: PAID TIME? SUPREME COURT DECIDES

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The U.S. Supreme Court has ruled that employees who wait on a security line before leaving the worksite to go home is not compensable or paid time under the Fair Labor Standards Act (FLSA). Please refer to our blog post on 10.21.14 for how this case came about. Basically, contracted employees before leaving an Amazon warehouse are required to go through security screenings. They sought overtime compensation for the time spent. The unanimous decision was in favor of the employer.

When Congress enacted the FLSA, it purposefully left vague a number of provisions. As a result, a floodgate of litigation ensued as employees wanted to be paid for walking to and from job sites. More than $6 billion in payouts in 1940s dollars were paid, almost bankrupting several industries. As a result, congress passed and emergency law, the Portal to Portal Act that exempted travel to or from work. It also exempted from overtime pay “activities which are preliminary [before work begins] to or postliminary [after work ends] to said principal activities.”

The key in deciding whether a particular activity is exempt is determining whether it is “integral and indispensable” to the main work performed.

Thus, battery-plant workers’ showers after work have been held to be integral to their work duties because the chemicals were toxic and changing clothes and showering were indispensable to the principal work done. Similarly, meat packers sharpening their knives was compensable time, as dull knives are dangerous and wastes product. The Department of Labor (DOL) has issued regulations exempting checking in and out from work and waiting in line to do so. The situation presented in this case fell into that category, and was therefore found not to be compensable time.

Justice  Sotomayor, with whom Justice Kagan joined, wrote a concurring opinion which summarized the Court’s findings:

“The Court reaches two critical conclusions. First, the Court confirms that compensable ” ‘principal’ ” activities ” ‘includ[e] . . . those closely related activities which are indispensable to [a principal activity’s] performance,’ ” ante, at 6 (quoting 29 CFR §790.8(c)(2013)), and holds that the required security screenings here were not “integral and indispensable” to another principal activity the employees were employed to perform, ante, at 7. I agree. As both Department of Labor regulations and our precedent make clear, an activity is “indispensable” to another, principal activity only when an employee could not dispense with it without impairing his ability to perform the principal activity safely and effectively. Thus, although a battery plant worker might, for example, perform his principal activities without donning proper protective gear, he could not do so safely, see Steiner v. Mitchell, 350 U. S. 247, 250-253 (1956); likewise, a butcher might be able to cut meat without having sharpened his knives, but he could not do so effectively, see Mitchell v. King Packing Co., 350 U. S. 260, 262-263 (1956); accord, 29 CFR §790.8(c). Here, by contrast, the security screenings were not “integral and indispensable” to the employees’ other principal activities in this sense. The screenings may, as the Ninth Circuit observed below, have been in some way related to the work that the employees performed in the warehouse, see 713 F. 3d 525, 531 (2013), but the employees could skip the screenings altogether without the safety or effectiveness of their principal activities being substantially impaired, see ante, at 7.

Second, the Court holds also that the screenings were not themselves ” ‘principal . . . activities’ ” the employees were ” ’employed to perform.’ ” Ibid. (quoting 29 U. S. C. §254(a)(1)). On this point, I understand the Court’s analysis to turn on its conclusion that undergoing security screenings was not itself work of consequence that the employees performed for their employer. See ante, at 7. Again, I agree. As the statute’s use of the words “preliminary” and “postliminary” suggests, §254(a)(2), and as our precedents make clear, the Portal-to-Portal Act of 1947 is primarily concerned with defining the beginning and end of the workday. See IBP, Inc. v. Alvarez, 546 U. S. 21, 34-37 (2005). It distinguishes between activities that are essentially part of the ingress and egress process, on the one hand, and activities that constitute the actual “work of consequence performed for an employer,” on the other hand. 29 CFR §790.8(a); see also ibid. (clarifying that a principal activity need not predominate over other activities, and that an employee could be employed to perform multiple principal activities). The security screenings at issue here fall on the “preliminary . . . or postliminary” side of this line. 29 U. S. C. §254(a)(2). The searches were part of the process by which the employees egressed their place of work, akin to checking in and out and waiting in line to do so–activities that Congress clearly deemed to be preliminary or postlimininary. See S. Rep. No. 48, 80th Cong., 1st Sess., 47 (1947); 29 CFR §790.7(g). Indeed, as the Court observes, the Department of Labor reached the very same conclusion regarding similar security screenings shortly after the Portal-to-Portal Act was adopted, see ante, at 7-8, and we owe deference to that determination, see Christensen v. Harris County, 529 U. S. 576, 587 (2000).”

There remain many issues still undefined in the workplace regarding whether a particular activity is exempt or not. The courts and DOL will continue to refine the parameters of exempt and non-exempt time as specific situations occur. 

Should you have wage and hour questions or other workplace issues, please contact the Gilbert Law Group at 631. 630.0100.

Pregnancy Discrimination Takes Center Stage at Supreme Court

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The Supreme Court will decide whether UPS violated the Pregnancy Discrimination Act (PDA) when it refused to provide a temporary light duty assignment to Peggy Young when she was pregnant 7 years ago before giving birth to her daughter, Triniti. The assignment would have allowed Young to work but avoid lifting heavy packages, as her physician had ordered. The issue is whether UPS violated the law by its policy of providing temporary light duty only to employees who had on-the-job injuries, were disabled under the Americans with Disabilities Act, or lost their federal driver certification.

It is well-settled that drawing a distinction between pregnant and nonpregnant employees in the workplace is generally unlawful, unless there is a legitimate business reason to justify the distinction. In 1978, Congress passed the PDA in response to the Supreme Court ruling that workplace rules that excluded pregnant workers from disability benefits and insurance coverage were not sex discrimination under Title VII of the Civil Rights Act of 1964. In this case UPS argues that unless Young can show that it intentionally discriminated against her, she has no case. Young contends that UPS “told me basically to go home and come back when I was no longer pregnant.” Young is now 42 and it has taken 7 years to get before the Court.

The Obama administration and 120 Democrats in Congress have submitted a brief supporting Young’s position. Moreover, the EEOC has updated guidance to employers to clarify that they should accommodate workers like Young. Likewise, UPS has since changed its policy so that pregnant employees are eligible for the light duty assignment.

Nonetheless, the Court’s decision is expected to have far-reaching impact in workforces across the nation as 75% of women entering the workforce today will become pregnant at least once while employed, and many will be forced to work throughout their pregnancies, or face possible termination during their pregnancies or upon their return. Stay tuned for the decision.

For workplace issues, such as pregnancy, sex discrimination, light duty or leave policies, contact the Gilbert Law Group at 631.630.0100.

Nurses Strike over Ebola

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Approximately 18,000 nurses went on strike in Northern California to voice concerns about patient-care standards and Ebola. The nurses are in the middle of collective bargaining negotiations for a new contract. Nurses often strike while in the midst of contract negotiations. This time however, the circumstances surrounding the strike are unique. While picketing Kaiser Permanente facilities, they held up signs which stated “Kaiser Open for Premiums; Closed for Safe Patient Care” and “Strike for Health and Safety.” The two-day strike impacted more than 21 Kaiser-owned hospitals and 35 clinics.

The union claimed that the nurses were striking over the lowering of patient-care standards, and that the company has failed to adopt optimal safeguards for Ebola. The union also asserted that the nurses reported many stories about the lack of safety and concern for patients. “This isn’t about money. This is about something much deeper,” the union’s executive director said.

In response, Kaiser said that it was “particularly irresponsible” to strike just when the flu season was starting, and when the nation is concerned about the risk of Ebola. Kaiser disputed the union’s claims, asserting that the reasons the union leaders are giving for walking out are not supported by the facts, wither at the medical centers “or at the bargaining table.” Kaiser used replacement workers in order to remain open.

As the nation wrestles with infectious diseases like Ebola, how the health industry deals with patients and the workforce and their interactions with the public will remain a controversial and evolving drama.

Employers, Religious Discrimination, and Accommodation

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The U.S. Supreme Court is about to clarify an employer’s obligation to provide accommodations for religious discrimination under Title VII.

In E.E.O.C. v. Abercrombie & Fitch Stores, Inc., the Court will determine whether a retail store in Woodland Hills Mall in Tulsa, Oklahoma discriminated by failing to accommodate a young woman who was refused hire as a “model” or sales associate because she wears a head scarf, or hijab, for religious reasons. The head covering violated Abercrombie’s “Look Policy,” which applies prohibits employees from wearing certain attire, such as black clothing and caps. Violation of the Look Policy subjects an employee to disciplinary action, up to and including termination.

Pursuant to Abercrombie’s policy, the assistant store manager who interviewed the applicant did not ask her questions regarding her religion. Moreover, the applicant never referenced her head scarf, and she did not ask any questions regarding the dress code, although it was discussed.

After the interview, the assistant store manager was advised that the applicant should not be hired because the head scarf was inconsistent with Abercrombie’s Look Policy.

The EEOC brought suit for religious discrimination insofar as it failed to hire her because she wore a head scarf and that it failed to accommodate the applicant’s religious beliefs.

The trial court found that the store did in fact discriminate based on religion. Of interest is the fact that the trial court reasoned that the decisive factor was not whether the applicant explicitly requested an accommodation, but whether the employer had enough information to be on notice that a religious accommodation was needed.

The truth is it would have been easy for Abercrombie to avoid this lawsuit. If they had been properly advised, they would be aware of simple steps that can be taken which would not give rise to a claim of religious discrimination and failure to accommodate. Employers facing discrimination issues should always consult a knowledgeable attorney.

If you or someone you know is facing issues relating to discrimination based on religion, race, gender, sex, ethnicity, or disability call Gilbert Law Group today at (631)630-0100.

N.Y. Mets Deny Pregnancy and Marital Status Discrimination

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N.Y. Mets chief operating officer Jeff Wilpon has denied discriminating against and eventually firing a former female senior executive based on her pregnancy and marital status, specifically, for having a baby out of wedlock. In a lawsuit filed in Federal Court in Brooklyn, New York, Wilpon is quoted as saying during a discussion of e-cigarette ads, “I am as morally opposed to putting an e-cigarette sign in my ballpark as I am to Leigh [Castergine] having this baby without being married.” Wilpon is also alleged to have made fun of Castergine by pretending to look for an engagement ring on her finger at meetings, and trashed her to colleagues by saying that “people would respect her more if she was married.” The lawsuit seeks monetary damages for discrimination on the basis of sex, pregnancy and marital status. A Major League Baseball source said the league was aware of the suit and considered it a team matter.

The suit alleged Wilpon told Castergine, who earned a six figure salary, to tell her boyfriend “that when she gets a ring she will make more money and get a bigger bonus.” Castergine gave birth in March 2014 and returned to work in June 2014, but was allegedly urged by other executives to quit.

In August 2014, she claimed that the Mets raised issues about her job performance but offered a severance package if she would agree to not sue or say negative things about the team and Wilpon. Castergine also claims that she was fired August 26, 2014, three minutes after her lawyer sent an email to the team claiming that she was subjected to work-related discrimination. In court papers, however, the Mets asserted that she was fired before they received the email and that it “was based on legitimate business reasons” unrelated to Castergine’s “gender, marital status, pregnancy, or leave.” They pointed to “business issues and conflicts” between Castergine and her supervisor and other executives which began prior to learning that she was pregnant. They also asserted that Wilpon was a longstanding supporter of her.

It remains to be seen if the case goes to trial whether a jury will believe Castergine’s discrimination claims or the Mets’ and Wilpon’s defense that there were independent business reasons unrelated to the plaintiff’s gender, pregnancy and marital status, or leave, all of which comprise categories of discrimination protected by federal and state law.

For workplace issues concerning pregnancy, marital status, leaves, work performance, and gender discrimination or harassment contact the Gilbert Law Group at 631.630.0100.

Offensive, Discriminatory Costumes At Work: From the Racist to the Racy

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Halloween is a good time for children and adults alike. But what the holiday represents to children can be far different than what adults look forward to come the end of October. Typically, adults perceive Halloween as an opportunity to get creative with their costumes while taking advantage of the fact that it is easier to get away with wearing an outfit which may not be considered appropriate at any other time of year. In one’s free time and in the company of their friends and family, surely this mindset should not be a problem, most of the time. Frequently however, employees attending Halloween parties at the office or at a work function take it too far by wearing costumes which could easily offend a co-worker. In doing so, one can open themselves or their employers up to liability for harassment and discrimination and and can be disciplined or terminated.

Costumes which should not be worn to work include those that are overly violent, gruesome, controversial, insensitive or grotesque. Some examples include bloody zombies, terrorists, police brutality victims, ebola patients, etc.

Other categories of costumes which will not be tolerated in the office or at a work event range from the racist to the racy. Obviously, if you dress as a nazi or kkk clan member, and the employer allows it, that can be considered blatant and willful discrimination based on race, color, national origin, etc. Likewise, inappropriate, sexually lewd or explicit costumes will lead to allegations of sexual harassment.

Another issue to consider is those employees who may be religious. If employees dress as the anti-christ, or a character from the Book of Mormon, it may lead to some claiming discrimination based on religion.

From an employer’s point of view, one need not be the costume police. An employer does not have to give a list of costumes which will not be tolerated. If you are going to have an event, tell employees that they are to use proper judgment and common sense; that any costumes deemed to be offensive or inappropriate, will lead to a supervisor inevitably telling the employee to change. It is always helpful to encourage employees to ask questions in advance. If there is an HR Department, it may be a good idea for them to speak to an HR rep before they show up in a hazmat suit, as not everyone will find that to be funny or appropriate. It is also important that employers have a policy as it relates to social media. Posting photos of Halloween costumes at work can lead to a negative perception of the company among other unintended legal consequences.

For questions or concerns relating to discrimination, sexual harassment, other workplace, or labor and employment issues, call Gilbert Law Group: (631)630-0100.

Waiting to Work or Waiting to Leave: Paid Time?

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The decades-long battle for pay during down time or time employees prepare to work, wait to work, or wait to leave work continues. Whether working to wait before leaving for the day or waiting to work before clocking in are instances of paid time is the issue. U.S. Supreme Court justices expressed doubts recently during arguments over whether federal law requires that workers be paid for the time they take to go through security checkpoints to prevent employee theft at Amazon. Previously, the Supreme Court held that employees must be paid for the time they take to put on protective gear, but not for the waiting time associated with taking it off. Also, the Court has ruled that butchers must be paid for the time it takes to sharpen their knives as it is an essential duty to working at a meatpacking plant.

This most recent dispute involves two former employees at a Nevada warehouse who claim that their employer, Integrity Staffing Solutions, Inc., required them to wait up to 25 minutes in security lines at the end of every shift. Integrity provides workers who fill customer orders for Amazon at warehouses. The intermediate appeals court had ruled that the work was payable as the anti-theft screenings were necessary to the workers’ primary work at the warehouse, and it was done for the employer’s benefit. However, certain Supreme Court justices disagreed with the workers’ attorney who argued that the work was compensable under the Fair Labor Standards Act (FLSA), as walking through security was a principal activity of the employees’ job duties.

Chief Justice Roberts responded, “But no one’s principal activity is going through security screenings.It may be part of that… but that doesn’t make it a principal activity.” Justice Scalia opined that the security check “is not indispensable to [the warehouse work].” In reply, the workers’ attorney argued that the screening was a “discrete act” that only occurred after the workers had clocked out and handed in their tools. He stated, “It’s work because you are told to do it.”

The Obama administration is siding with the employer. The Justice Department attorney argued that the security screenings were not “integral and indispensable to the workers’ jobs.”

It will be interesting to see how the Supreme Court decides this hot-button workplace wage issue. Stay tuned.

Should you have wage and hour questions or issues, please contact the Gilbert Law Group: 631.630.0100.

Sex Discrimination and Frozen Eggs In the Workplace

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Discrimination because of sex related to pregnancy is unlawful under both Federal and State law. See, Civil Rights Act of 1964, § 701(k), 42 U.S.C.A. § 2000e(k), McKinneys Executive Law § 296 et seq. This is a form of discrimination that can be considered both sex discrimination and/or disability discrimination.

Pregnancy in the workplace was in the news this past week as several large employers made headlines for their respective policies relating to egg freezing. Indeed, companies are offering to pay for women to freeze their ova so that they can work through their most productive and fertile years, without losing the ability to have children.

First, it was announced that Facebook and Apple will begin offering insurance coverage for female employees to freeze their eggs for later fertilization and implantation, a procedure that can cost as much as $20,000. Then Citigroup announced the same plan.

This is naturally controversial.  While some women will be grateful for the fully paid-for benefit, others, as noted in this New York Times blog post, could perceive this as putting pressure on women to stay childless as long as they want to advance their careers.

This issue has not been litigated as of yet mostly because these work policies are germinal and have just been implemented. While there is nothing facially unlawful about these policies, it could become evidence in a lawsuit brought by a woman who is turned down for a promotion, terminated, or harassed because of pregnancy, or because of actual or perceived “maternal” responsibilities.

Call Gilbert Law Group today for counsel related to pregnancy issues in the workplace, sex discrimination, or disability discrimination: (631)630-0100