Restrictive Covenant Update

E. Jason TremblayE. Jason Tremblay

Restrictive Covenant Update: Don’t Forget to Establish Your Legitimate Business Interest!

Let’s consider the following scenario. Executive is hired by an employer and signs a standard restrictive covenant agreement. Executive is later terminated and, thereafter, immediately opens up a competing business, begins to solicit and hire her former co-workers and commences soliciting her former employer’s customers. Normally, you would think this would be a straightforward restrictive covenant case and that the departing executive would be enjoined from engaging in such conduct. However, the Seventh Circuit Court of Appeals in Instant Technology LLC v. DeFazio, Case Nos. 14-2132 and 14-2243 (7th Cir. July 1, 2015) felt otherwise, holding that, while the departing executive violated her restrictive covenant agreement, the covenants failed to protect any legitimate business interests of the employer. As discussed below, this recent case should serve as a stark warning to all Illinois employers to ensure they have evidence to support all the elements of a breach of restrictive covenant claim before filing suit against departed employees.

Instant Technology is a company engaged in the business of placing information technology professionals at companies in need of such workers. DeFazio, who executed a standard restrictive covenant agreement as a condition of her employment, served as a vice president of sales and operations for Instant Technology. After she was terminated, she opened a competing business, solicited away several of her former co-workers, began soliciting candidates with whom she had contact at Instant Technology and began competing with Instant Technology by attempting to place those candidates at clients with whom Instant Technology conducted business. Interestingly, DeFazio did not dispute, and in fact admitted, she had violated her restrictive covenant agreement. However, she denied that the restrictions were enforceable, as Instant Technology did not have a legitimate business interest in need of protection.

At trial, Instant Technology argued that it had three legitimate business interests sufficient to support the restrictions: confidential information, client relationships and workforce stability. However, the trial court disagreed (and the appellate court affirmed) that those were not legitimate interests as they applied to Instant Technology. First, the Court reiterated that there was no confidential information at issue, as DeFazio appeared to have obtained information about the candidates and customers from public sources. Second, the evidence at trial revealed that protecting client relationships was not valid because Instant Technology’s clients were not necessarily loyal to it. In fact, the evidence revealed that many clients who hired Instant Technology also hired between 5-10 other staffing agencies at the same time in order to secure candidates. In short, there were no exclusive or long-term arrangements between Instant Technology and its customers sufficient to establish legally protectable client relationships. Third, Instant Technology’s argument that it had a protectable interest in the stability of its workforce was likewise rejected, since the evidence at trial revealed that over 75% of Instant Technology’s employees had left or been terminated during the course of the litigation.

In sum, this case establishes that it is crucial for employers to fully evaluate and obtain evidence to support that a legitimate business interest exists before filing a lawsuit against a departing employee, even a former employee that is brazen enough to openly poach employees and solicit clients. Otherwise, as Instant Technology learned the hard way, prematurely filing a lawsuit without a protectable interest could prove to be unsuccessful, as well as very costly.

Should you have any questions regarding this case or its impact on your company, please do not hesitate to contact E. Jason Tremblay or your designated Arnstein & Lehr LLP attorney.

Many “Independent Contractors” May Now Be “Employees”

E. Jason Tremblay and Megan P. Toth

E. Jason TremblayArnstein & Lehr Attorney Megan Toth

Many “Independent Contractors” May Now Be “Employees” According to the Department of Labor

On July 15, 2015, the U.S. Department of Labor issued an Administrator’s Interpretation regarding the application of the Fair Labor Standards Act with respect to the increasing misclassification of workers as “independent contractors.” The DOL’s recent interpretation narrows the classification of independent contractors to very limited and specific situations and thus, more workers may now be deemed “employees” and qualify for overtime under the FLSA.

Under the DOL’s new interpretation, a worker’s classification no longer depends almost exclusively on the employer’s exertion of control over the worker, but rather, on whether the worker is “economically dependent” on the employer. Also known as the “economic realities” test, which is already used by most federal courts, the DOL’s new approach for determining whether a worker is an “employee” or “independent contractor,” requires examination of the following factors:

(1) The extent to which the work performed is an integral part of the employer’s business;

(2) The worker’s opportunity for profit or loss depending on his or her managerial skill;

(3) The extent of the relative investments of the employer and the worker;

(4) Whether the work performed requires special skills and initiative;

(5) The permanency of the relationship; and

(6) The degree of control exercised or retained by the employer.

In undertaking the foregoing analysis, the DOL notes, “each factor is examined and analyzed in relation to one another, and no single factor is determinative” and “the ‘control’ factor … should not be given undue weight.”

With the subjective nature of the “economic realities” test and the DOL’s explicitly stated opinion that “most workers are employees” under the FLSA, the DOL will most likely continue its aggressive examination of worker classification throughout the country. And, while this Administrator’s Interpretation is not binding and does not carry the force of law, courts throughout the country will most certainly give deference to the DOL’s Interpretation. Thus, employers who have independent contractors should re-evaluate such designations to ensure they correspond with the factors identified above. Additional, important takeaways from the DOL’s recent interpretation of “independent contractors” include:

  • Use independent contractors sparingly, as any such designation will be highly scrutinized by the DOL; 
  • Review the type and scope of the work needed by the worker, as any worker performing duties that are an integral component of the business will likely be deemed to be an employee;
  • Evaluate the investment the worker makes to do the work needed relative to the employer’s investment in the work. The more an employer invests in the tools and equipment for the worker (relative to what the worker invests) the more likely the worker is to be deemed an employee;
  • Be careful about the longevity of the relationship between the employer and the worker. The longer the relationship exist the more likely the worker will be considered an employee;
  • If regularly classifying workers as “independent contractors” is necessary, set up and maintain procedures and policies for determining how such classifications are made and keep records of all “independent contractor” designations and the facts considered in making the designation;
  • Workers who are classified as “independent contractors” should not have a company e-mail address, be given access to the company server, attend functions specifically for employees or have the functions, responsibilities or duties normally assigned to employees; and
  • Employers should continuously monitor existing independent contractors to ensure they have not acquired additional responsibilities or otherwise changed the type and scope of work that would convert them to “employee” status.

In the end, and in light of the DOL’s Administrator’s Interpretation, employers who engage independent contractors should evaluate whether the contractors are truly in business for themselves or whether they are economically dependent on the employer’s business. Given the DOL’s broad statement that “most workers are employees,” the reality is, going forward, most independent contractors will be considered employees for purposes of the FLSA, at least according to the DOL.

Should you have any questions regarding the DOL’s recent interpretation of the FLSA in regards to “independent contractor” classification or should you want assistance reviewing your current worker classifications in light of the new Interpretation, please contact Megan P. Toth, E. Jason Tremblay or your designated Arnstein & Lehr LLP attorney.

Fair Labor Standards Act Proposed Revisions Just Released

E. Jason TremblayE. Jason Tremblay

The U.S. Department of Labor just released its highly anticipated proposed revisions to the “white collar” exemptions to the Fair Labor Standards Act, which will significantly expand the number of workers who will be eligible for overtime pay. In fact, it is estimated that approximately 5 million additional workers in the United States, who are currently exempt under the FLSA, will now be entitled to overtime.

The primary change to the FLSA is the nearly doubling of the salary threshold for exempt employees from $455 per week to $921 per week. This means is that in order for an employee to be exempt from the overtime requirements of the FLSA, they must not only meet the necessary exempt duties test (which appear to have remain unchanged), but they must also be compensated at least $47,892 per year. The DOL added that the final regulations may actually increase the proposed salary threshold to $970 a week, or $50,440 a year.

Another update relates to “highly compensated” workers and, specifically, that in order to qualify as exempt under the FLSA “highly compensated” employee exemption, a full-time salaried worker must make at least $122,148 annually, as opposed to $100,000 annually.

Significantly, the DOL is also proposing to automatically update the salary levels for exempt employees on an annual basis in order to prevent these new salary level thresholds from becoming outdated. The DOL, however, is seeking comments on methods of increasing the salary threshold before implementing the final rules. These updated FLSA regulations are set to go through a comment period before becoming final, most likely in late 2015 or early 2016. Employers should therefore be preparing now for these updated regulations and promptly evaluate whether any existing exempt employees must now be reclassified as non-exempt and entitled to overtime.

If you need assistance in this regard, please do not hesitate to contact E. Jason Tremblay or your designated Arnstein & Lehr LLP attorney.

Continued Employment Constitutes Sufficient Consideration for Restrictive Covenants

E. Jason TremblayE. Jason Tremblay

Wisconsin Supreme Court: Continued Employment Constitutes Sufficient Consideration for Restrictive Covenants in Wisconsin

Resolving previously unsettled law in Wisconsin, the Wisconsin Supreme Court recently held in Runzheimer International Ltd v. Friedlen that continued employment of an at-will employee following the execution of a restrictive covenant, such as a non-competition agreement, is sufficient consideration to enforce the restrictive covenant.

In Friedlen, a 15-year employee was asked to execute a non-competition agreement by his company. He continued to work at the company for approximately two more years and was thereafter terminated. After the terminated employee began to work for a direct competitor, the company sued, relying on the non-competition agreement that the employee had executed during his employment. The employee argued that the non-competition agreement was unenforceable based on lack of consideration, primarily because it was executed after he had already been employed for 15 years and the company did not provide him anything additional beyond continued employment.

The primary issue decided by the Wisconsin Supreme Court was whether an employer’s forbearance of its right to terminate an existing at-will employee in exchange for the employee’s agreement to comply with a post-employment restrictive covenant constitutes lawful and sufficient consideration. Holding in the affirmative, the Court followed other jurisdictions (the majority of which hold that continued employment constitutes sufficient consideration) and, further, based its decision on general contract principles. The Court also distinguished circumstances where an existing employee is terminated shortly after signing the restrictive covenant on grounds that under those circumstances, the restrictive covenant would likely be voidable under the principles of contract law or, alternatively, would constitute a breach by the employer of the doctrine of good faith and fair dealing.

Jurisdictions around the country are split on this issue. By way of example, in Illinois, continued employment must generally be for a “sufficient period of time” (which has been construed by some Illinois courts to be at least two years of continued employment). Other jurisdictions hold that continued employment, regardless of duration, is insufficient consideration to enforce a restrictive covenant. Now, that issue appears to be settled in Wisconsin.

Should you have any questions regarding this case, or should you want your existing restrictive covenants evaluated in light of this decision, please contact E. Jason Tremblay or your designated attorney at Arnstein & Lehr LLP.

U.S. Supreme Court Rules on Religious Accommodation Under Title VII

Megan Toth

Arnstein & Lehr Attorney Megan Toth

U.S. Supreme Court Rules That a Request for a Religious Accommodation Is not Required to Maintain a Title VII Claim

On June 1, 2015, the United States Supreme Court issued its opinion on the much anticipated Equal Employment Opportunity Commission (EEOC) v. Abercrombie & Fitch Stores, Inc., holding that an employee is not required to specifically request a religious accommodation in order to maintain a Title VII claim against their employer.

In Abercrombie & Fitch, an applicant (Samantha Elauf) was denied a job at one of Abercrombie & Fitch Stores, Inc.’s retail stores because she wore a hijab — a veil or head covering worn by Muslim women in public — and Abercrombie & Fitch’s “Look Policy” prohibited certain kinds of clothing, including caps. When Elauf was initially interviewed, she received a total rating high enough to be hired. However, when the district manager realized Elauf wore a hijab, he lowered her “appearance score,” bringing her below the required total rating to be recommended for hire. Elauf was later told by a friend who worked at that Abercrombie & Fitch store that she was not hired because she wore a hijab.

The EEOC sued Abercrombie & Fitch claiming it violated Title VII by not hiring Elauf because she wore a hijab. Despite the fact Elauf did not request an accommodation for her hijab, the district court ruled in favor of the EEOC and awarded Elauf $20,000. On appeal, the Tenth Circuit Court of Appeals reversed, finding Abercrombie & Fitch could not be liable under Title VII because Elauf did not request or provide any other direct notice of her need for a religious accommodation.

The U.S. Supreme Court, however, rejected the Tenth Circuit’s notice standard, holding that Title VII does not require that the employer have “actual knowledge” of the employee’s need for a religious accommodation. Specifically, the Supreme Court found that religious accommodation claims can be brought as disparate treatment claims, rather than disparate impact claims, and for such claims, “[a]n employer may not make an applicant’s religion practice, confirmed or otherwise, a factor in an employment decision.” Therefore, the test is whether the employer has sufficient information to be aware that an individual’s religious belief or practice conflicts with requirements in applying for or performing a job, not whether it had actual notice.

This holding imposes a significant burden on employers making employment decisions to determine, on their own, whether or not something is a “religious practice.” Now, even a non-obvious, unexpressed religious need for an accommodation may expose employers to unlawful discrimination claims under Title VII. And unfortunately, the Supreme Court did not provide a bright line rule for what constitutes “knowledge sufficient to require accommodation.”

In light of this decision, employers should consider implementing the following strategies to avoid religious accommodation claims:

  • Be cognizant of potential “religious practices” that may conflict with company policies. Do not just wait for a direct request for a religious accommodation. Train managers, supervisors, and anyone else making employment decisions to proactively identify “religious practices” that conflict with company policy and make sure they know where to go for additional guidance regarding religious accommodation issues.
  • Require that all accommodation decisions be made and/or reviewed by those who know the law; understand company policy; and are familiar with the company’s past decisions regarding religious accommodations.
  • While remembering that inquiries regarding an applicant or employee’s religious beliefs may be problematic, speak with employees and applicants before making assumptions about their religious beliefs. Even if someone appears to be following a religious practice, like wearing a headscarf, it does not mean they won’t conform to a workplace policy if necessary. Employers should engage with applicants/employees to discuss and attempt to resolve potential conflicts between company policy and presumed religious practices before making employment decisions.

Should you have any questions regarding this decision or any information discussed above, please contact Megan Toth or your designated Arnstein & Lehr LLP attorney.

U.S. Supreme Court Has Been Busy on the Employment Front

Megan Toth

Arnstein & Lehr Attorney Megan Toth

In the last two months, the U.S. Supreme Court has decided three different cases, all of which have significant implications for employers as discussed below.

1. Young v. UPS: Broad Pregnancy Accommodations at the Federal Level

Although many states’ laws already require broad accommodation policies for pregnancy related disabilities, the recent Supreme Court decision in Young v. UPS, indicates federal law favors and may require the same. In Young v. UPS, UPS denied a pregnant employee’s request for light duty assignment because she was “equivalent to an employee injured off the job,” and thus, did not qualify for light duty assignment under UPS’ accommodation policy. The employee, therefore, filed claims against UPS for violation of the Pregnancy Discrimination Act and for sex discrimination under Title VII. The District Court of Maryland found that UPS’ policy was not discriminatory and granted UPS’ Motion for Summary Judgment – because no similarly situated comparator was treated more favorably, and the employee could not show UPS’ non-discriminatory reason was pretext. The Fourth Circuit affirmed, and the employee appealed to the Supreme Court.

On March 25, 2015, the Supreme Court ultimately sided with the employee and remanded to give her another chance to prove that UPS violated the Pregnancy Discrimination Act. The Supreme Court found that if an employer accommodates some temporary disabilities, it must accommodate pregnancy and cannot treat pregnancy worse than it treats other temporary disabilities. Perhaps most importantly, this decision sets forth specific requirements for proving discrimination under the Pregnancy Discrimination Act. A plaintiff must show a pattern of unequal treatment by proving: (1) she sought an accommodation, (2) her company refused, and (3) the employer granted accommodations to others suffering from similar restrictions. Then, it becomes the employer’s burden to prove its reasons for excluding pregnancy disabilities from its accommodation policy were legitimate.

Takeaway: In addition to the states with laws already require broad pregnancy accommodation policies, employers in every state must now reevaluate the scope of their pregnancy disability policy to ensure pregnancy related disabilities are treated equally to other temporary disabilities.

2. EEOC v. Mach Mining: EEOC’s Conciliation Efforts Subject to Limited Judicial Review

The recent decision by the Supreme Court in Equal Employment Opportunity Commision v. Mach Mining establishes that “failure to conciliate” can be asserted as an affirmative defense by employers facing discrimination claims filed by the EEOC.

In Mach Mining, the Equal Employment Opportunity Commission filed a complaint for gender discrimination against Mach Mining. Title VII requires the EEOC to attempt to eliminate alleged unlawful employment practices “by informal methods of conference, persuasion and conciliation” before filing suit. Based on this requirement, Mach Mining asserted “failure to conciliate” as an affirmative defense, claiming the EEOC did not make a good faith attempt to conciliate as required by Title VII. The U.S. District Court’s Southern District of Illinois found that “failure-to-conciliate” was a proper affirmative defense. The Seventh Circuit, however, reversed, finding that failure to conciliate is not an affirmative defense because the statute does not provide for judicial review of EEOC’s conciliatory efforts; there is no standard to evaluate conciliation efforts; and review undermines conciliation efforts. Mach Mining then appealed to the Supreme Court.

On April 29, 2015, the Supreme Court unanimously held that “failure-to-conciliate” can be asserted as an affirmative defense, and courts may review whether the EEOC has fulfilled its statutory duty to conciliate discrimination allegations. However, the power to review is narrow. A court may only review the EEOC’s conciliatory efforts when presented with concrete evidence that the EEOC: (1) did not provide sufficient information about a charge, or (2) did not attempt to engage in a discussion about conciliating the claim. This holding resolves a multi-circuit split and clarifies the standard for reviewing the EEOC’s conciliatory efforts under Title VII.

Takeaway: This decision shows that when responding to a Title VII complaint by the EEOC, employers should pay close attention to whether the EEOC complied with the foregoing requirements to evaluate whether “failure to conciliate” is an appropriate affirmative defense.

3. Tibble v. Edison: ERISA Fiduciary Duties and Limitations Period Still Unclear

Unfortunately, the highly anticipated Supreme Court decision in Tibble v. Edison provides little insight or guidance on the broad, yet important, issues regarding the “continuing-violation” defense to the ERISA six-year limitation period and the scope of plan administrators’ fiduciary duties under ERISA.

In Tibble, the plaintiffs, on behalf of current and former 401(k) plan beneficiaries, claimed that Edison and its individual investment committee members violated their fiduciary duties of prudence by offering more expensive “retail class” shares of mutual funds, instead of relatively cheaper “institutional class” shares of the same funds. The U.S. District Court’s Central District of California granted summary judgment for the defendants, holding that, although the ERISA fiduciaries had acted imprudently by selecting more expensive retail-class shares, ERISA’s six-year statute of limitations barred plaintiffs’ claims. On appeal, the Ninth Circuit affirmed finding that the “act of the designating the investment for inclusion” triggers the six-year limitation period absent evidence that “changed circumstances.” The Supreme Court granted certiorari to decide the broad issue of whether the claim, that ERISA plan fiduciaries “breached the duty of prudence by offering higher priced retail-class mutual funds when the same investments were available as lower priced institutional-class mutual funds,” is barred by 29 U. S. C. §1113(1), when fiduciaries initially chose the higher-cost mutual funds as plan investments more than six years before the claim was filed.

On May 19, 2015, the Supreme Court vacated the Ninth Circuit’s ruling and remanded for additional consideration of the “fiduciaries’ ongoing duty to monitor” the prudence of its investments. The Supreme Court’s unusually concise opinion leaves much to be desired regarding these important issues and is restricted in the scope of its application. Specifically, the Supreme Court did not discuss whether ERISA recognizes a “continuing-violation” defense to the six-year limitation period; and its focus on the Uniform Prudent Investors Act indicates its holding may be limited to imprudent-investment claims with a clearly established, ongoing duty to monitor or where there is a recognized fiduciary duty of an ongoing nature.

Takeaway: Although continuing to reevaluate and monitor all plan investments is the best practice, it is important for plan administrators and investment committee members to keep an eye out for the forthcoming Ninth Circuit decision on remand, as it may offer guidance regarding judicial scrutiny of certain plan investments.

Should you have any questions regarding these cases, please contact Megan Toth or your designated Arnstein & Lehr LLP attorney.

More Company Handbook Provisions Are Held Invalid According to the NLRB

E. Jason TremblayE. Jason Tremblay

As previously reported, the National Labor Relations Board (NLRB) has taken a very aggressive approach against employers by requiring them to rescind employee handbook provisions that it deems to be unlawful pursuant to the National Labor Relations Act (NLRA). In the most recent example of such an approach, an NLRB Administrative Law Judge (ALJ) found in favor of the United Food and Commercial Workers Union against Macy’s Inc. and held that several Macy’s employee handbook provisions unlawfully restricted its employees’ right to communicate and complain about workplace conditions. A copy of the Macy’s Inc. decision is here.

Specifically, the ALJ held:

  • Macy’s confidential information policy that prohibited employees from disclosing information about the company or its employees could reasonably be perceived as unlawfully banning or restricting any discussion among co-workers of wages or any other terms and conditions of employment.
  • An intellectual property policy, which prohibited employees from using the Macy’s logo “or other intellectual property” was overly broad and unlawful because the use of the company’s logo could be an effective means of publicizing a labor dispute.
  • A government investigations and contacts policy, which obligated Macy’s employees to notify management prior to participating in any governmental investigation, was overly broad to the extent it hindered an employee’s unfettered right under the NLRA to freely communicate with the NLRB regarding working conditions.

The final issue the ALJ addressed was whether the savings clause in Macy’s handbook, clarifying that the policies in the handbook in no way impair its employees’ rights under the NLRA, was sufficient to remedy any of the overly broad employment policies. Holding against Macy’s, however, the ALJ found that the savings clause was ineffective because, among other reasons, it was “general” in nature and not specifically directed towards the unlawful policies at issue.

Concluding that Macy’s violated the NLRA, the ALJ required Macy’s to rescind the unlawful provisions and issue nationwide notices to all of its employees that the foregoing provisions were no longer in effect. This case is yet another example of why existing employee handbook provisions and policies (even those that are regularly included in standard employee handbooks) must be reviewed and, in certain circumstances, updated.

Should you have any questions, or should you want your employment policies reviewed, please contact E. Jason Tremblay or your designated Arnstein & Lehr LLP attorney.

NLRB General Counsel Provides Guidance on Lawful and Unlawful Employer Rules

E. Jason TremblayE. Jason Tremblay

On March 18, 2015, the National Labor Relations Board (“NLRB”) General Counsel, Richard Griffin, issued the “Report of the General Counsel Concerning Employer Rules,” a comprehensive report providing guidance to employers on what the NLRB deems to be lawful and unlawful company handbook provisions and policies. We strongly encourage all employers, union and non-union, to pay close attention to this new guidance from the NLRB.

By way of background, the NLRB is the federal agency created to enforce the National Labor Relations Act (“NLRA”). The NLRA is the federal law that grants employees the right to form or join unions and to engage in protected, concerted activity to address or improve working conditions. In this regard, the NLRB has started to closely scrutinize many commonly found work rules, policies and handbook provisions and is requiring that any policies that interfere with an employee’s rights under the NLRA be removed or revised. As you can imagine, the NLRB takes a very expansive approach on what language employees could reasonably construe as restricting their rights to engage in protected, concerted activity.

For employers who have not recently reviewed or updated their employment policies or rules, this Report is likely to be surprising. For example:

  • A provision prohibiting being “disrespectful towards management” will virtually always be found to be unlawful as it inhibits protected criticism of the employer.
  • A rule prohibiting “defamatory, libelous, slanderous or discriminatory comments about the company, its customers and/or competitors” is unlawful because it could be read to restrict employees from criticizing the employer in public. 
  • A rule stating “don’t pick fights” online is unlawful because employees could construe it to restrict “protected discussions with their coworkers.”
  • A rule prohibiting making “insulting, embarrassing, hurtful or abusive comments about other employees online” is unlawful because debating about unionization is often contentious and controversial and the rule could be viewed by employees as “limiting their ability to honestly discuss such subjects.”
  • A conflict of interest policy that “employees may not engage in ‘any action’ that is ‘not in the best interest of’ the employer” is unlawful because it does not include clarifying examples or context that would indicate that it does not apply to activities protected by the NLRA.
  • A rule “not to use any company logos, trademarks, graphics or advertising materials” on social media is unlawful because it could be reasonably read to ban the fair use of the employer’s intellectual property in the course of protecting concerted activity.
  • A rule prohibiting “walking off a job” is unlawful because it could reasonably be read to prohibit protected strikes and walkouts.

Employers should expect the NLRB to continue to closely scrutinize employment policies of both union and non-union companies, as set forth in the attached Report. Employers are therefore well-advised to carefully review their employment policies to make sure that they comply with the NLRB’s current interpretations of the NLRA.

Should you have any questions, or should you need a review of your employment policies, please do not hesitate to contact E. Jason Tremblay or your other Arnstein & Lehr LLP attorney.

NLRB Weighs in on Employers’ Right to Monitor Workplace Communications

E. Jason TremblayE. Jason Tremblay

It has traditionally been understood and recognized that employees do not have an expectation of privacy when using their employer’s computer system and that employers can monitor and control their employees’ emails. However, in light of a recent decision by the National Labor Relations Board (“NLRB”) in Purple Communications, Inc., 361 NLRB 126 (2014), employers may need to rethink this commonly held belief.

In Purple Communications, the NLRB overruled long-established precedent that employees have no statutory right to use their employer’s email system for Section 7 purposes and held instead that employee use of email for statutorily protected communications on nonworking time must be presumptively permitted by employers that give employees access to their email systems.

Section 7 of the National Labor Relations Act (“NLRA”) gives employees the right to form, join or assist unions and to engage in other concerted activities. By way of example, Section 7 protects employees that, among other things, criticize a company’s policies and procedures, its management, or other terms and conditions of their employment.

The Purple Communications’ case arose in the aftermath of a union organizing campaign. Specifically, like many companies throughout the country, the company in Purple Communications had a policy requiring that email, as well as other communication tools provided by the company, “be used for business purposes only.” The policy also prohibited employees from using company email to “engag[e] in activities on behalf of organizations or persons with no professional affiliation or business with the company.” In short, employees could not use the company email systems for any non-business related activities, which arguably included protected Section 7 activity. Certainly, in light of the prior precedent, the company in Purple Communications had good reason to believe that its policies complied with the law.

In overruling such well-established precedent, however, the NLRB effectively held that an employee’s use of email for statutorily protected communications on non-working time must presumptively be permitted by employers who have chosen to give employees access to their email systems. Put another way, once an employer gives an employee access to its email system for business purposes, it must allow that employee to use that system to communicate about Section 7 activities as well.

As you can imagine, this recent decision could have a significant impact on an employer’s ability to track, monitor and/or use employee electronic communications. For example, it has generally been accepted that employers have the right to control and/or monitor their employee’s emails sent and received through the company computer systems. But now, under Purple Communications, any such monitoring and/or control may constitute an unlawful surveillance of Section 7 protected concerted activities under the NLRA and could subject an employer to liability for unfair labor practice. Similarly, this decision may very well impact an employer’s right to discipline employees for statements they may make about their co-workers, supervisors or the company through electronic communications.

In light of this novel holding, every employer subject to the NLRA (which includes virtually all employers, union and non-union) should review their policies regarding non-business use of company electronic mail and determine whether these policies comply with the principles set forth in Purple Communications. Although this case is still likely to be challenged in court, which may result in its reversal, it is absolutely clear that, by this decision, the NLRB is attempting to establish an additional avenue through which unions may organize workplaces.

Should you have any questions, please do not hesitate to contact E. Jason Tremblay or your Arnstein & Lehr LLP labor and employment attorney.

Limitations Period For Bringing Discrimination and Retaliation Claims May Be Contractually Shortened

E. Jason TremblayE. Jason Tremblay

A recent case from the Northern District of Illinois, Lugihibl v. Fifth Third Bank (Case No. 13 CV 7193, March 16, 2015, Kennelly, M.), held that Title VII and ADEA limitations periods can be contractually shortened under certain circumstances, despite the general 300-day limitations to bring such claims in Illinois.

In Lugihibl, a bank employee brought sex and age discrimination and retaliation claims against his employer after he was discharged. While the discharged employee filed his EEOC charge within the 300-day period allowed in Illinois, he filed it after the six-month (or 180-day) period that he contractually agreed to in his incentive compensation agreement for bringing such claims. Specifically, the incentive compensation agreement stated that the employee would not commence an employment-related action “[m]ore than six months after the termination of Employee’s employment, if the action or suit is related to the termination of Employee’s employment,” or “[m]ore than six months after the event or occurrence on which Employee’s claim is based, if the action or suit is based on an event or occurrence other than the termination of Employee’s employment.” The discharged employee also contractually agreed to waive any statute of limitations periods that were contrary to this position.

The bank asserted that it had discharged the employee for a host of legitimate, non-discriminatory reasons and, further, that his EEOC charge of discrimination was untimely in any event since it was filed after the shortened six-month period for bringing such claims. After the employee filed suit in federal court, the bank filed a motion for summary judgment asserting, among other things, that the employee’s discrimination and retaliation claims were time barred by the incentive compensation agreement.

In holding for the bank, the Court expressly held that the relevant contract containing the reduced limitations period was unambiguous, supported by adequate consideration and that the provision was supported by existing law. In reaching this holding, the Court relied on several cases, including the Seventh Circuit in Doe v. Blue Cross Blue Shield United of Wisconsin, 112 F.3d 869 (7th Cir. 1997), and the dominant view in contract law that contractual limitations periods shorter than statute of limitations are permissible, provided they are reasonable. Here, the Court held that there was nothing unreasonable about the six-month time period contained in the contract because the default period for filing an EEOC charge is actually 180 days (or six months). Importantly, the Court’s holding in this case is specifically limited to contractually shortening the limitation period for filing EEOC charges and the Court recognized that an employer cannot contractually limit the time period in which an employee can file a lawsuit in federal court.

In light of the Court’s ruling in Lugihibl, employers should strongly consider whether it makes sense to incorporate a shorter limitations period for filing EEOC charges in employment agreements or other agreements, as it may later be useful in the event an existing or discharged employee decides to file an EEOC charge long after the allegedly discriminatory or retaliatory conduct occurs.

Should you have any questions regarding the Lugihibl case or if you would like to update your existing employment or other agreements, please contact E. Jason Tremblay or your Arnstein & Lehr LLP attorney.