Alerts and Updates
Recent Developments in Employment Law
December 2005
Supreme Court Expands FLSA Coverage Related to Donning And Doffing
IBP Inc. v. Alvarez, No. 03-1238 (U.S., Nov. 8, 2005)
On September 8, 2005, the United States Supreme Court, in a unanimous decision involving two consolidated cases, held that time employees spend walking between the location where they don and doff their work gear and the location of their first "principal work activity" is compensable under the Fair Labor Standards Act ("FLSA"). In so holding, the Court expanded the definition of "principal work activity" to include activities that are "integral and indispensable" to "principal work activities," such as the employees in these cases donning and doffing safety clothing and equipment to work on production lines. The Court stated that "during a continuous workday, any walking time that occurs after the beginning of the employee's first principal activity and before the end of the employee's last principal activity is ... covered by the FLSA."
The Court, however, declined to classify time employees spend waiting to perform their first "principal work activity" as compensable under the FLSA. Here, employees sought compensation for time spent waiting to don their safety gear at the beginning of their workday. The Court stated that "we are not persuaded that such waiting - which in this case is two steps removed from the productive activity on the assembly line - is 'integral and indispensable' to a 'principal activity' that identifies the time when the continuous workday begins."
While this decision appears to be only a refinement of current donning and doffing case law, it will result in certain employers compensating employees for unproductive time for which they were previously not paid. Accordingly, employers who have previously classified certain non-productive time prior to the first principal work activity as non-compensable should reevaluate whether such time is now compensable because it constitutes donning or occurs after donning that is "integral and indispensable" to that "principal activity." Affected employers may include those who require their employees to don or doff uniforms, equipment, safety gear, or other work-required items while at the workplace. Despite the potentially broad application of this decision to various employers, the expansion of compensable time is likely limited for individual employers. It is uncertain at this time whether this decision will apply beyond donning and doffing cases to include other workplace's significant preliminary activities.
Employers May Be Liable for the Sexually Harassing Conduct of Non-Employees
Dunn v. Washington County Hospital, No. 05-1277 (7th Cir., Nov. 27, 2005)
If a parrot flew into a workplace and then began to spew foul language and invective at only the female employees present, would the employer be liable for sexual harassment? An absurd question? Not to the United States Court of Appeals for the Seventh Circuit, which posed just this hypothetical when concluding that a hospital could be liable for the sexual harassment of a doctor who had staff privileges at, but was not an employee of, the hospital.
In this case, a nurse at a small hospital in Illinois claimed that the chief doctor for obstetrics "made life miserable for her and other women on the staff." The lower court had thrown the nurses' case out of court on the basis that because the chief doctor was not an employee of the hospital, but an outside physician who had received staff privileges, the hospital did not have the authority to control his conduct, and therefore could not be liable for it.
The Seventh Circuit disagreed. It found that although the district court's analysis was a correct statement of general negligence principles, these principles were "irrelevant" for a sexual harassment analysis under Title VII. Under Title VII, an employer's liability is "direct" and not solely "derivative" from the acts of its employees. For this reason, the "ability to 'control' the [misbehaving] actor plays no role." What is crucial and determinative is that the employer, upon receiving notice of the misbehaving actor's conduct, invoke and reasonably utilize the "arsenal of incentives and sanctions" that are available to it to end the offensive conduct.
With this as background, the Court's fowl example appears less bird-brained and more of a bland statement of law. In fact, as the Court pointed out, under the Restatement of Agency, a person can be liable if he/she allows others, whether or not his "servants or agents," upon premises under his control and then negligently permits that other to cause harm.
Applying this law to its own hypothetical, as well as the facts of the case, the Court found that: (1) in the case of the sexually harassing parrot, the employer would be required to "exclude the offending bird from its premises"; and (2) in the case of the sexually harassing non-employee doctor with staff privileges, the nurse should have an opportunity to adduce evidence that the hospital knew of his conduct and responded feebly or not at all.
The Seventh Circuit case makes clear that employers must respond promptly and appropriately when employees make a claim of harassment, whether the "source" of that harassment is another employee, an independent contractor, a guest of the employer's or even a customer invited onto the premises by the employer. In any such event, it is not a defense in the Seventh Circuit for the employer to claim that because it had no authority to control the conduct of its invitee, its employees had no recourse when subjected to the invitee's harassment.
E-Discovery Obligations Continue to Significantly Impact Employment Litigation
Broccoli v. Echostar Communications Corp., 229 FRD 506 (D. Md., Aug. 4, 2005)
In the most recent seemingly routine employment discrimination case to be impacted by a company's failure to preserve relevant information when on notice of a potential claim, the U.S District Court in Maryland determined that Echostar clearly acted in bad faith in failing to fulfill its duty to preserve relevant evidence.
Plaintiff Broccoli and defendant Andersen were employees of Echostar. Broccoli alleged that he had been subject to inappropriate sexually-charged behavior and badgering by defendant Andersen, that Andersen orchestrated his termination in retaliation for his rebuffs to her and that Andersen subsequently provided false and defamatory employment references to Broccoli's would-be employers.
During discovery, Broccoli filed a motion for sanctions against Echostar, arguing that the company had failed to preserve critical records and documents that were relevant to claims and defenses and that Echostar was guilty of spoliation of evidence. Broccoli's motion for sanctions was granted in part. The District Court imposed certain limits on Echostar's ability to present evidence that Broccoli's termination was for a legitimate, non-discriminatory/non-retaliatory reason. Broccoli's request for an adverse inference instruction to the jury based on the spoliation of evidence was granted. The Court also awarded Broccoli his attorneys fees incurred in bringing the motion.
Echostar had what the Court termed an "extraordinary e-mail/document retention policy" in which the e-mail system automatically sent all e-mails in the "sent items" folder that were over seven days old to the user's "deleted items" folder. Items in the user's "deleted items" folder that were 14 days old were then automatically purged and forever irretrievable. Similarly, electronic files of former employees were completely deleted 30 days after the employee left Echostar.
In articulating its reasons for its earlier order granting in part the motion for sanctions, the Court stated that although a data destruction policy may be a defensible business practice under ordinary circumstances, a duty to preserve arises when a party is placed on notice that evidence is relevant to litigation or when the party should have known that evidence may be relevant to future litigation.
According to the Court, Echostar was placed on notice of potential litigation when Broccoli informed two of his supervisors, orally and via e-mail, of Andersen's sexually harassing behavior in early January 2001. In July 2001, Broccoli complained to Andersen's supervisor. In November 2001, he memorialized in writing on the day of his termination his belief that his termination was related to his complaints regarding Andersen's behavior. On December 20, 2001, Broccoli's girlfriend sent an e-mail alleging that Broccoli's termination was the result of discrimination. Broccoli filed an employment discrimination claim with the EEOC in February 2002. Despite all of these actions on the part of the plaintiff, Echostar admitted that it never issued a company-wide instruction regarding the suspension of its data destruction policy. No instruction was issued even after Broccoli's termination and his girlfriend's letter was received.
The court stated that the duty to preserve covers all information relevant to claims or defenses of any party, or which is relevant to the subject matter involved in the litigation. According to the Court, Echostar was on actual notice at the time Broccoli informed his supervisors of the need to preserve all documentation relevant to Broccoli's complaints including e-mails and personnel files. Echostar had failed to preserve: (1) employment-related documents relevant to Broccoli and his termination; (2) corporate records that related to the dissolution of the "regional teams" that Echostar alleged resulted in Broccoli's termination as a result of a bona fide reduction in force; (3) correspondence by corporate decision makers that pertained to Broccoli's termination; and (4) e-mails and other electronic communications exchanged during Broccoli's employment and his termination. The District Court concluded that Echostar's bad faith prejudiced Broccoli and measurably increased the costs for him to litigate his claims. The failure to preserve this information resulted in Broccoli suffering palpable prejudice.
Lesson: When an employer learns of the potential for litigation, the duty to preserve requires the employer to suspend normal data destruction policies and to preserve any documents or e-mails that could be relevant to the claims or defenses of any party. Failing to do so can cause the Court to limit an employer's ability to present evidence of a legitimate, non-discriminatory/non-retaliatory reason for the action taken with respect to the employee. The Court may also award attorney's fees to an employee prejudiced by the failure to preserve relevant documents.
Recordkeeping Requirements Issued by OFCCP
While Office of Federal Contract Compliance Programs (OFCCP) regulations have long required that federal contractors and subcontractors collect information about the gender, race and ethnicity of each "applicant" for employment, the use of the Internet and electronic data technologies in contractors' recruiting and hiring processes has presented challenges in recordkeeping. This is due to the fact that people can send out hundreds of unsolicited submissions for positions that are not open or for which they are not reasonably qualified. If all these individuals were to be considered applicants, the burden on regulated contractors would be enormous. To address this problem, the OFCCP recently issued a final rule for recordkeeping requirements with regard to Internet-based job applications. The new rule makes clear that the recordkeeping requirements apply only to jobs for which the contractor accepts expression of interest via the Internet and related technologies, such as e-mail, commercial and internal resume databanks, and employer Web sites.
The rule will take effect on February 4, 2006.
An Internet Applicant means any individual to whom the following four criteria apply:
- The individual submits an expression of interest in employment through Internet or related technologies.
This includes all expressions of interest regardless of the means or manner in which the expression of interest is made if the contractor considers expressions of interest made through the Internet or related electronic data technologies in recruiting or selection processes for that particular position. As an example, if the contractor posts an opening on a Web site, encourages applicants to complete on-line profiles and also advises that hard copy resumes may be submitted with a cover letter, both the individuals who submit Internet applications as well as those who submit paper applications are "Internet applicants." If, however, the contractor considers only paper resumes for the position it has posted in the local newspaper, none of these applicants are considered "Internet applicants." - The contractor considers the individual for a particular position.
This means that the contractor assesses the substantive information provided in the expression of interest with respect to any qualifications involved with a particular position. - The individual's expression of interest indicates that he or she possesses the basic qualifications for the position.
Basic qualifications means those that the contractor advertises to potential applicants that they must possess in order to be considered for a position or qualifications for which the contractor has established criteria in advance. - The individual at no point in the selection process prior to receiving an offer of employment removes himself from further consideration or otherwise indicates that he is no longer interested in employment in the position.
For instance, a contractor can assume no further interest based on the individual's express statement that he or she is no longer interested in the position or on the individual's passive demonstration of disinterest shown through repeated non-responsiveness to inquiries from the contractor about interest in the position.
The new rules finally provide a written standard for Internet applicants. The OFCCP recognized that its earlier, broader proposal - which required retention of all "expressions of interest" - presented unwarranted recordkeeping burdens for contractors. The new rules appear to help contractors avoid significant burdens by limiting recordkeeping requirements to those individuals who are actually considered for a particular position.
Contractors should begin to formulate and implement policies regarding their recordkeeping practices now so they will be in compliance with the new rules when they take effect in February.
Michigan Social Security Number Privacy Act
Mich. Comp. Laws Serv. § 445.81 et al. (2005)
The Michigan Social Security Number Privacy Act (the "Act") was enacted to ensure that the Social Security numbers of employees, students and other individuals within the state of Michigan remain confidential to the extent practical. The Act prohibits individuals, businesses, associations, government agencies, universities, colleges and schools from displaying, transmitting or using all or more than four sequential digits of Social Security numbers of employees, students or other individuals under various specified circumstances. For example, the Act prohibits the use of all or more than four sequential digits of a Social Security number in the following situations, with certain limited exceptions:
- Public display - includes setting the number out for open view to the public on a computer device, network or Web site.
- Using the number as a primary account number for an individual.
- Visibly printing the number on an identification badge, membership card, permit or license.
- Requiring an individual to use or transmit the number to gain access to an Internet Web site, computer system or network, unless the connection is secure, encrypted or password-protected.
- Including the number on any document that is mailed or sent to an individual if the number is visible on the envelope or packaging.
- Including the number in a document mailed to an individual unless the number is required to appear by law, or the document is part of an application or enrollment process, is sent to change or inquire about an account or health insurance benefit, is a copy of a public record, or was mailed at the request of the individual.
- Ensures to the extent practicable the confidentiality of the Social Security numbers.
- Prohibits unlawful disclosure of the Social Security numbers.
- Limits the number of people with access to information or documents that contain the Social Security numbers.
- Describes how to properly dispose of documents that contain the Social Security numbers.
- Establishes penalties for violations of the privacy policy.
The privacy policy must be published in an employee handbook, a procedures manual or a similar document, which may be made available electronically.
A violation of the Act may result in steep penalties. A person who knowingly violates the Act is guilty of a misdemeanor punishable by imprisonment, a fine of up to $1,000.00, or both. Additionally, an individual may bring a civil action against a person who knowingly violates the Act and may recover actual damages or $1,000, whichever is greater, as well as attorney's fees.
Employers in all states should be aware that legislation of this type is likely to be passed in many jurisdictions in the near future. Moreover, even without a statute, if an employee's Social Security information is not maintained confidentially and an employee experiences identity theft as a result of the same, the employer can be liable for damages flowing from its negligence. Therefore, it is important for all employers to take steps to maintain the confidentiality of Social Security information. We can assist your company in drafting and implementing a policy that complies with this new Michigan statute.
For Further Information
For more information about this Alert, please contact one of the attorneys of our Employment & Immigration Practice Group or the attorney in the firm with whom you are regularly in contact.
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.
