Daniel Schwartz

With all the news about recent Supreme Court decisions, here are a few articles that you might of missed over the last few weeks:

• The Ohio Employer’s Law Blog reports on an interesting 6th Circuit decision that allows a USERRA claim (the statute that guarantees job restoration after military service) to be released in a separation agreement. 
• The Minnesota Labor & Employment Law Blog does a good job recapping the latest guidance on interns here.  
• The Compliance Building blog tries to answer the question of whether Facebook and MySpace messages are subject to discovery in lawsuits.  Its a messy topic that courts are continuing to struggle with.
• How do you calculate overtime based on commissions? This blog post by the Wage & Hour blog attempts to answer that question in plain English. 
• Kris Dunn at the HR Capitalist points out that the World Cup can be a good opportunity for companies in more ways than one. 
• The Proactive Employer has a nice little piece about how to use (or not to use) the "DeepNet" for employment purposes.  What is the DeepNet? You’ll just have to click over to find out. 
• The Wait a Second blog reports on a recent Second Circuit decision in which the court ruled that isolated "sex talk" does not save an otherwise untimely claim of sexual harassment. 
• Finally, the Hartford Business Journal reports on the signing of a Connecticut bill that expands telecommuting options for state workers. 

Daniel Schwartz

In a followup to a post of earlier this week, Windsor Locks and its Superintendent of Schools reached an agreement late yesterday in which the Superintendent agreed to resign in exchange for a six month severance payment (to be shorted if he finds work before the expiration of that severance period.)

The agreement comes after revelations in the press that the Superintendent make several updates to his Facebook page in the first few days of starting work about work. 

According to published reports in the Hartford Courant, the Facebook postings played in integral role in the agreement.

"The board felt as though the recent disclosure on a Facebook posting regarding a school district personnel matter damaged Mr. Telesca’s credibility at a critical juncture in his superintendency," board Chairwoman Patricia King said in a prepared statement.

The superintendent’s attorney commented last night on the compromise and that he felt the board was overreacting, according to reports. 

"He really doesn’t want this to be the defining moment in his career as an educator," [the attorney] said after the meeting. "It made sense for him to get this resolved in a way that will allow him to move on."

[Hartford attorney Gregg Adler] said that the board overreacted to the Facebook messages, and that there were never any grounds to move toward firing Telesca. He also said that Telesca was never given an adequate chance to explain his side of the story.

What lessons can be drawn from this? The issues regarding social media are not just related to twenty-somethings in your workforce. They are pervasive and growing.   This Superintendent isn’t the first person befelled by something he posted online. And he won’t be the last. The issue for employers to think about is — what happens when these issues come to YOUR workplace. Are you prepared?

Daniel Schwartz

Remember the buzz in 2009 about a complaint filed by a Fox 61 reporter (Shelly Sindland) that she had been discriminated against because of her age? You can find all of my stories about it here. 

It certainly had allegations that made others take notice (including a reference to "Big Boob Fridays"). 

Well, the case has reportedly ended — as most do — with a settlement. 

CTWatchdog.com is reporting this afternoon that the case has settled at the CHRO. No details on the settlement are available (nor would I expect them to be, as it is probably in the interests of both parties to keep the terms confidential). 

And what are we to make of the settlement? Nothing. These types of matters get filed and settled all the time.  It just so happens that this one involved a reporter in the public eye.

So ends another case that gets widely reported at the start, and ends with a fizzle. 

Daniel Schwartz

A common question for employers when confronted with a lawsuit is this: Should I fight or try to settle?

Unfortunately, that decision inevitably is a business one and often times depends on the facts and circumstances of the case.  

Sure, there are attorneys who profess to be "pitbulls" and who claim that it’s always best to litigate to the end … no matter what the cost is.  The logic is that employees (and their attorneys who defend them) will think twice about bringing suit if they know that the case will never settle and they’ll have to spend years of time getting there without any assurance of victory.

Great strategy, right?

But let’s live in the real world.  Defending an employment lawsuit is typically a financial loss to companies.   Executives have busy enough schedules as is; spending time in depositions adds no value to the company’s bottom line.  

Even when companies "win" and successfully defend a claim, they lose because they have had to pay an attorney tens (if not hundreds) of thousands of dollars to achieve "victory".  And EPLI insurance isn’t a sure thing anymore; get lots of claims and your premiums and deductibles go sky high.  

Then there are practical questions.  Why — when a case could settle for $5000 — is it worth spending $50,000 to achieve the same result?  To "send a message"? Might it be a better business decision sometimes to pay the $5000, guarantee an end to the case and end the payment of attorneys fees, particularly where there isn’t a likelihood of recurrence? Is that a sign of "weakness" or the sign of making a smart business decision.  

Beware of the pitbulls.  It is easy to pick fights with judges, attorneys and your former employees and increase costs of the case exponentially but it is much harder to know and understand which fights to avoid.

For employers engaged in lawsuits, always be well prepared to fight back.   And let me clear, there are times to fight, particularly when the other side is making unreasonable demands.  But never overlook an opportunity to settle when it presents itself.  

It just might be the right business decision at the right time.  

Daniel Schwartz

Need a hint on speaker? He lived here.

At a recent settlement conference in federal court, the presiding judge read both parties a quote at the start of the process and asked the parties to name the source of the quote.

Here’s the quote:

Discourage litigation. Persuade your neighbors to compromise whenever you can. Point out to them how the nominal winner is often a real loser — in fees, expenses, and waste of time. As a peacemaker the lawyer has a superior opportunity of being a good man. There will still be business enough.

Any guesses? 

It’s none other than Abraham Lincoln, as part of his Notes from a Law Lecture.

His words from 150 years ago still ring true today.  For more about how deciding to settle (or fight) can be a smart business decision, see this recent post.

Daniel Schwartz

News outlets this morning reported that the plaintiffs (a group of firefighters in New Haven) in the Ricci v. DeStefano reverse discrimination case were awarded damages of about $2 million (plus attorneys fees of $3 million).

What the reports don’t really get into, however, is exactly how that has come about. Turns out that the plaintiffs accepted offers of judgment from the city of New Haven.

You can download all of these papers in various filings here, here, here, here, here, here, here, here, here, here, here, here,  and here. You can download the omnibus paper here.

Once the court acts on these offers of judgment, the case will draw to a quick close after many years of litigation.

Daniel Schwartz

The title of this post is, of course, a bit misleading.  Any lawyer will tell you that each employment case you may have is unique and that any settlement must take into account the facts and circumstances of the particular case.

All true.  And, if your company is negotiating a settlement, you ought to have your agreement reviewed by an attorney.

But for those wondering what provisions “most” settlement agreements contain, I thought it would be helpful to outline a few from an employer perspective.

• Consideration/Payment — This paragraph describes what the employer is typically paying in the settlement and whether the paymen

  What's on YOUR checklist?

  t is to be made in a lump-sum or over time.

• Release — Probably the single most important part of the agreement. The employee is typically waiving all of his or her rights in this paragraph.
• Covenant Not to Sue – In this paragraph, the employee agrees not to sue the employer in the future.
• Stipulation of Dismissal – Of course, since there is a settlement, if the matter is pending in court, the employee agrees that the matter will be dismissed as settled (various courts term such a dismissal differently).
• No Admission of Liability – Each party agrees that the agreement is not an admission of liability but that the agreement merely represents a compromise.
• OWBPA-compliant provisions — If the employee is over the age of 40, the Older Workers Benefit Protection Act may come into play. If so, provisions relating to OWBPA (covered in this prior post) may need to be added.
• Confidentiality – Nearly all of the settlement agreements nowadays contain some type of provision that calls for the settlement to remain confidential (with some limited exceptions for attorneys, accountants and those within the company with a business need to know).
• Non-disparagement — As with the confidentiality clause, often times employers (and employees) insist that the other party cease from saying negative things about the other.
• No Rehire – If the employer is settling a dispute from a termination, typically, the employer does not want to have to rehire the employee. This provision provides that the employee agrees that he or she will not seek re-employment and waives any right to be rehired.

This list is far from comprehensive but is a starting point for employers to consider.  There are other standard provisions (governing law, severability, etc) that are also routinely added too.

Although it is a bit dated, there’s still a great checklist of all such provisions in employment settlement agreements that you may also want for your library prepared by Attorney Robert Fitzpatrick. It remains among the more comprehensive lists I’ve seen out there on the subject. It doesn’t have some of the more recent developments (such as Section 409A regarding executive compensation), but it’s a good primer on the subject.

(And another  reminder, please be sure to consult with your legal adviser regarding the drafting or reviewing of a settlement agreement that will fit with your unique legal circumstances.)

Daniel Schwartz

We had another great turnout last week  for my firm’s seminar on labor & employment law.  Many of the topics would be familiar to avid blog readers, but there were three interesting points that I haven’t talked much about that I thought were also notable.

1.  In September, the IRS announced a Voluntary Classification Settlement Program which allows employers who have misclassified employees as “independent contractors” to escape some tax consequences for re-classifying them as employees.  There are downsides to this program (including opening yourself up to a wage & hour lawsuit by the employee) but it might work for some employers in some circumstances.

Interestingly, Deputy Labor Commission Dennis Murphy indicated at the seminar that Connecticut is exploring a similar program which may (or may not) get announced in early 2012.

2.  The DOL has an active Rapid Reemployment Initiative that connects employers with unemployed workers.  In doing so, the state also is providing financial incentives to employers who hire unemployed workers.  Details can be found on the DOL’s website.

3. There are also changes to the NLRB’s election rules that got passed last week.  Labor Relations Today has all the details. Among the approved changes

• giving hearing officers the discretion to deny requests by parties to submit post-hearing briefs
• eliminating the 25 day period between the issuance of a decision and direction of election by a regional director and the holding of an election
• giving the Board the discretion to refuse to review a regional director’s resolution of post-election disputes

If you signed up for the seminar and were unable to attend (or attended) and would like a copy of the materials, please send me a note at dschwartz@pullcom.com.

My thanks to all who attended and made the program a big success.  Stay tuned for details on our next program in Spring 2012.

Daniel Schwartz

How many times do you have to win?

That’s a question that employers may ask themselves when dealing with employment cases because the fact is, a enterprising litigant can make things quite expensive on the thinnest of facts. 

Zombie Lawsuits?

Indeed, employers may be wondering if these cases are like zombies that rise up from the dead to keep going and going.  (Indeed, zombie employees is an another issue entirely…) Sure, you can eventually put an end to them, but at what cost?

Case in point? Just check out the procedural history from a new Connecticut Appellate Court case that will be released next week.  It’s the case that never dies.

• On June 13, 2003, the Plaintiff was hired.  Easy enough.
• Less than a month into her job, on July 9, 2003, she injured her back while carrying a child as part of her regular duties.  She has restrictions for a period of time and resumes working without restrictions on December 11, 2003.
• On February 13, 2004, the Plaintiff filed a complaint with the CHRO, alleging workers compensation retaliation and race and disability discrimination.  (For what adverse employment action, the opinion never says.)
• On April 28, 2004, Plaintiff reinjured her back while carrying a child. She eventually is placed on light duty for various periods as she also undergoes surgeries over the next 18 months.
• On October 6, 2005, the CHRO administratively dismissed her complaint.
• On January 9, 2006, the plaintiff’s doctor placed permanent work restrictions on her ability to work and the employer determined she could no longer return to work as a social worker. With no alternate positions available, she is terminated from state service.

With me so far? But this is where the fun for the employer really begins. Because over the next 6 years, it has had to defend itself from claims from this employee. 

• On April 26, 2006, the plaintiff filed an action in state court alleging race discrimination and workers compensation retaliation.  That action was removed to federal court. 
• The employer filed a motion for summary judgment on August 15, 2007. But two weeks later, the plaintiff filed a motion to amend her complaint to include claims of retaliation and disability discrimination. Ultimately, the court denied the leave to amend the complaint and granted the employer’s motion for summary judgment.
• The plaintiff appealled to the U.S. Court of Appeals which affirmed the decision on May 15, 2009.

Case closed? Nope, this just starts yet another chapter. Because on September 10, 2009, she filed a new state court complaint with the same underlying facts alleging disability discrimination and retaliation.  The employer sought to dismiss that suit; the superior court granted that motion. 

Then the plaintiff appealed to the Connecticut Appellate Court on December 10, 2010.  Ultimately, this court ruled that the claims are barred by a statute of limitations but not until another 18 months of litigation ensued.  (No word yet on whether plaintiff will appeal this decision to the Connecticut Supreme Court.)

What’s the lesson for employers? Employment cases — even the ones that you deem frivolous — can be (and perhaps will be) expensive.  While it is frustrating and seemingly unfair to have to offer money to settle such cases early on, it can be the wise business decision to do so. 

In the above case, the state of Connecticut obviously has the resources to defend itself against 8+ years of litigation.  But do you?

There may be 10 different ways to terminate a zombie, but for employment claims that look like they may turn into zombies, the settlement may be the easiest route.

Daniel Schwartz

In my presentations on social media this year, I’ve talked a bit about the Phonedog v. Kravitz case where an employer sued a former employee who continued to use the company Twitter account he had started.

Are Your Accounts Under Lock & Key?

When the employee left, he merely changed the Twitter account’s handle to his own name and took the 17,000 Twitter followers with him. 

The case was just settled this week for undisclosed terms; the Employment Law Daily blog does a good job recapping the lessons learned from that case here. (For another perspective, also check out the Social Media for Law Firm post on the same subject.)

One thing we DO know though is that the employee is keeping the Twitter account, which now has over 27,000 followers. 

What’s the Takeaway for Employers?

Consider requiring employees who use social media as part of their job to agree that the company owns the account.  Employers could, for example, ask for login and password information on specific accounts too.

One practical problem though is that some of these accounts sometimes blend the personal and professional, as the Trading Secrets blog has noted, so its important to have clear rules up front.  The Trade Secret Litigator blog has some more tips as well. 

Earlier this fall, another case, Eagle v. Morgan, also talked about this notion in the LinkedIn context.  The Employee Handbook blog did a nice summary as well.   Expect more suits like this in 2013.

For those of us that have been practicing for a while, it had seemed that the days of the big settlements for race discrimination cases were behind us.

After all, when the Coca-Cola and Texaco settlements were announced back in the late 1990s and 2000, many companies took notice.

But the news today is a reminder for employers that the risks still remain.

The New York Times reported this morning that Merrill Lynch has agreed to pay $160M to settle claims of race discrimination.  The monies will reportedly be available to all black brokers and trainees employed at the company since May 2001.

It is one of the largest settlements for a discrimination case ever reported.  (The Texaco and Coca-Cola suits reportedly settled for $176M and $192.5M.)

There is little doubt this case will be analyzed in the weeks and months ahead for the facts and legal theories presented.

For now, however, the case ought to serve as a reminder to employers that race discrimination claims are not yet behind us as a society and that employers need to be vigilant in ensuring that its anti-discrimination policies are followed.

Merrill Lynch has such a policy, but as the settlement shows, a policy is only as good as the enforcement behind it.

Giving claims a final resting place

A few days ago, I came across a thoughtful post from Work Matters, a longtime blog run by Michael Maslanka.

In it, Mike describes a clause in a settlement agreement to get around an issue that sometimes arises — how do you minimize the threat of an EEOC claim when the EEOC has taken the position that an employee cannot agree to a provision in which he or she agrees to not file a charge at the EEOC?

Mike solution is one that we often use too — a clause that limits the employee’s right to any recovery if he or she files a claim with the EEOC.  If you’re curious on the specific language, visit Mike’s blog post.

But Mike’s post got me thinking about other settlement provisions that pop up from time to time.   Of course, I wrote a bit about it back in 2011 so I’m not going to repeat what I said then; it’s a good place to start if you’re thinking about the subject.

Nor will I repeat the wisdom I’ve seen from one of the better articles I’ve seen about settlement provisions from attorney Robert Fitzpatrick.  I cited it (briefly) all the way back in 2008 and that I’ve cited from time to time. Robert’s article on settlement agreements was written ten years ago so it’s missing things like dealing with Section 409A, but the overwhelming majority of the article stands the test of time.  At over 90 pages, it pretty much covers the provisions you’ll need to consider including non-disparagement clauses, no-rehire provisions, and the like.

Indeed, in this age of shared information, employers need not draft an agreement from scratch. For employers, there are publicly available examples of settlement and severance agreements on the Internet.  For example, want to see the severance agreement that Marissa Mayer and Yahoo! have agreed to? It’s publicly posted.

Of course, employers shouldn’t just copy these.  It’s vitally important to get experienced employment law counsel to review your standard agreement (and specific ones, if possible).  Why should employers do this (besides a self-serving reminder to hire attorneys like myself)?

Because there are so many tricky little provisions that it’s easy to get tripped up.  Take “tender back” provisions (requiring employees to pay back settlement proceeds in the event of a lawsuit challenging the validity of the agreement).  They were generally struck down by the EEOC years ago. But your form may still have them, thereby putting your company at risk.

And if your eyes glazed over at my mention of Section 409A provisions before (and wondered what they were), that alone provides yet another reason.

Reaching an agreement with a former employee to resolve a claim of discrimination is difficult enough without worrying about whether your written agreement is valid.  Make sure you’ve covered yourself so that when you resolve the matter — it’s actually resolved.

Settlement provisions aren’t that complicated, but when reaching finality in claims, it’s better to cover your bases than cut corners.

Last year, the General Assembly considered changes to the Commission on Human Rights and Opportunities. That bill did not receive a final vote. This year, it’s back but recently died in the Judiciary Committee, according to the CBIA.  Will it get attached to another bill? Will it be tweaked further this fall in preparation for next year’s term? My colleague, Christopher Parkin, chimes in with the details and why employers need to keep an eye on any proposed changes.

The ink is still drying on the most recent round of changes at the CHRO, the massive amendments known as PA 11-237 (in fact, the CHRO website still points to old versions of the General Statutes), but the legislature has been grappling with proposed changes to the statutes that govern the CHRO in the last few months.

These amendments, Senate Bill 385, represent a considerable effort to clean up antiquated language and recodify the statutes to make them more accessible to the public.    

Among the hundreds of technical amendments built into the bill are plenty of new substantive changes that employers and their counsel will need to become familiar with.  Recently the CBIA has noted that this particular effort has seemed to die in committee; however, the bill is likely to reappear at one point or another. Here are the details and the impact on employers when this is considered again.  

Investigator and mediator will no longer be the same person

The CHRO has long been criticized for its practice of combining the mediation and investigation process by assigning a single investigator to handle both duties, a process the Commission has insisted is a function of insufficient funding.  Until recently, mediations and fact findings were very frequently held consecutively in one marathon day. 

Nobody is best served when these processes are combined.  Neither employers nor employees can fully trust the confidentiality of the mediation process when the mediator will be tasked with soliciting testimony a few hours later if the case doesn’t settle. 

It’s also not fair to the investigators to expect that they can fully partition their brain between mediation and investigation to conduct both appropriately.

SB 385 would strictly prohibit the same individual from conducting both phases of the process. Not a bad thing for employers necessarily.

The CBIA is rightfully concerned that the bill may not go far enough because it does not spell out limitations on what the investigator and mediator can discuss regarding the mediation process but the change would be an important step forward. 

Dramatic reduction in case processing time

SB 385 builds on PA 11-237’s efforts to tighten case processing time and close at least as many cases as are opened each year.  Among many smaller tweaks to deadlines is a major change to the Merit Assessment Review process. 

Currently, the MAR process must be completed within 90 days of a respondent’s answer, with any dismissals automatically sent to legal review for completion within 60 more days. 

The proposed bill would roll the two processes together and shorten the time frame.  A MAR determination and legal review would need to be completed within just 60 days of the answer.  

Time will tell whether such a timeframe is realistic and there is no penalty for failing to comply but the Commission does have a track record for taking the current 90 day MAR deadline seriously.

Goodbye MAR, hello CAR

In an effort to eliminate the perception that the CHRO’s “Merit Assessment Review” process suggests that the Commission believes that a complaint is actually meritorious if it is retained as opposed to simply being sufficient to proceed to an investigation where the merits will actually be considered, SB 385 dispatches with the phrase Merit Assessment Review, known in CHRO parlance as “the MAR.”  

The term would be replaced with the somewhat more neutral “Case Assessment Review” or CAR process.   

Expanded early legal intervention

Early legal intervention was first introduced with PA 11-237.  It allows the processing of some cases to be streamlined by permitting immediate release of jurisdiction, immediate public hearing, or full investigation. 

If SB 385 is passed, early legal intervention will become a part of the process for all complaints filed after December 31, 2014. 

If a complaint is not dismissed following the case assessment review and the mandatory mediation fails, the case will go to early legal intervention where the Commission must assign it to one of the three early legal intervention tracks within ninety days.

Discovery without rules

The most significant change proposed in SB 385 is the introduction of a discovery mechanism at CHRO.  The bill proposes that in cases where both sides are represented by counsel, the Commission may order the parties to conduct written discovery.  In effect, the bill would deputize the lawyers to do the documentary fact finding for the investigator.  

The CHRO’s testimony in support of the bill is silent as to how it expects lawyers to carry out this new obligation without any rules governing its scope. 

This part of the proposed bill has the very real risk of creating an enormous new cost to parties litigating at the CHRO as well as complicating the already burdensome discovery process in state and federal court should cases progress to that forum.  

Again, it seems unlikely at this point that these changes will get adopted. But because the agency remains committed to these efforts, employers would be wise to tell their legislators how to make changes in a way that does not significantly increase litigation costs.

Your former employee files suit against your company in federal court in Connecticut claiming that she is entitled to overtime under the Fair Labor Standards Act.   You go to a settlement conference before a magistrate judge. After a few hours of back and forth negotiation, you reach a settlement with the ex-employee.

Is judicial approval of the settlement necessary?

It’s clear that in discrimination cases, the answer is no. Parties settle such claims all the time without judicial intervention.

But, federal judges in Connecticut are noting that there is a developing split of authority on whether judicial approval is needed to settle FLSA claims.

On the one side, there are cases like Socias v. Vornado Realty L.P. (E.D.N.Y. 2014), from earlier this year, which requir a fairness hearing prior to voluntary dismissal of a FLSA action.

On the other, there are cases like Picerni v. Bilingual Seit & Preschool Inc. (E.D.N.Y. 2013) which hold that no judicial approval is required prior to settlement of FLSA lawsuit.

Who’s right? That issue will eventually have to be decided by the Second Circuit and perhaps even the U.S. Supreme Court if a circuit split develops.

In the meantime, companies and their lawyers should be prepared for courts to bring this issue up on their own (the latin phrase is sua sponte).  If so, there are a number of factors that the court may look too, as outlined in one case, Lliguichuzhca v. Cinema 60, LLC (S.D.N.Y. 2013).

As the court noted, in “scrutiniz[ing] the settlement agreement to determine [whether] the settlement is fair and reasonable[,]” the court must look at the following factors: whether there was “overreaching” by the defendant-employer, whether plaintiff was represented by “competent” counsel; whether there were “legitimate concerns about the collectability of any judgment against defendant[]“; and whether the “proposed settlement [was] . . . the product of negotiation between represented parties following extensive litigation[,]” especially because “[a]rm’s length bargaining between represented parties weighs in favor of finding a settlement reasonable.”

This “fair and reasonable” standard may not be terribly difficult to satisfy, but for parties who believe that the settlement they reached on their own should be enough, it can still be a bit nervewracking.

For employers, be mindful of your settlements of FLSA claims.  As the saying by Yogi Berra (and the song by Lenny Kravitz) goes, “It ain’t over ’til it’s over.”

Late Friday, you might have (ok, I’m sure you did) missed a press release from the United States Department of Justice announcing a settlement with a staffing agency in California.

The charge? That a staffing company “discriminated against work-authorized non-U.S. citizens in violation of the Immigration and Nationality Act (INA).”

Now, I’m sure you all know (ok, I’m sure a few of you don’t know), that after an offer of employment is made, employers must require the to-be-hired individuals to present documentation to verify their eligibility to work in the United States.

But the DOJ charged that the “company’s staff required non-U.S. citizens, but not similarly-situated U.S. citizens, to present specific documents during the employment eligibility verification process to establish their work authority. The INA’s anti-discrimination provision prohibits employers from placing additional documentary burdens on work-authorized employees during the employment eligibility verification process based on their citizenship status or national origin.”

I’ve previously discussed the I-9 form in some prior posts.  But in essence, employers need to use consistent practices at the start of employment.

The staffing agency is learning this issue the hard way:  Under the settlement agreement, the company ”will pay $230,000 in civil penalties to the United States, create a $35,000 back pay fund to compensate individuals who may have lost wages due to the company’s practices and undergo training on the anti-discrimination provision of the INA.”  Oh, and the agency will be subject to government monitoring and reporting requirements for three years.

Employers have a lot to worry about when hiring new employees.  Add consistent treatment of new hires to the list.

My colleague Peter Murphy and I have been talking a lot about background checks lately.  It’s easier than ever to run a basic Internet search on someone, but what information do you find? And are there any limts?

Today, Peter talks about two recent settlements of background check claims against employers. Both cost the employers big dollars. Here’s what you can learn from them.

Back in March, Dan noted that plaintiffs’ lawyers were brining an increasing number of lawsuits under the Fair Credit Reporting Act (“FCRA”).

This seems to be occurring for two reasons. First, the FCRA contains very specific steps an employer must follow when obtaining and then using a background check for employment related purposes, including the following:

1. Make a clear and conspicuous written disclosure to the job applicant that a consumer report may be obtained for employment purposes;
2. Have the applicant authorize in writing the procurement of the report;
3. And, before taking any adverse action based in whole or in part on the report, provide the applicant with:
   1. a copy of the report; and
   2. a description in writing of the employee’s rights under the FCRA.

If one of these steps is being systematically violated by an employer, then there is the potential for a lawsuit involving multiple plaintiffs or even a class of plaintiffs across the employer’s operations.

The second reason for the increasing number of FCRA lawsuits is that they expose employers to damages for each FCRA violation, as well as punitive damages, costs, and significant attorney’s fees.

Thus, unless employers review their hiring practices and ensure FCRA complaint, they could be exposed to costly lawsuits, as Dan and others warned back then.

Their warnings were prescient, as demonstrated by two recent settlements in FCRA cases.

In the first case, the employer accepted online job applications–just like almost all employers. The applicants alleged that the employer’s online application system did not comply with the FCRA’s procedural provisions addressing authorizations for a background check, or provide FCRA mandated disclosures to the applicants.

These procedural violations could have been enough to expose the employer to liability under the FCRA.

According to the applicants, however, the employer also was taking adverse employment actions based on information in the background checks without providing them a copy of the report or the required opportunity to correct or explain any discrepancies.

Although the employer denied any wrongdoing, it ultimately agreed to a $5.053 million settlement that recently was approved by a district court judge.

The only ones getting rich as a result of this settlement, though, were the plaintiffs’ lawyers, who received about $1.52 million in attorneys’ fees in comparison to the $50 payment to each of the eligible class members.

Plaintiffs’ attorneys were just as pleased with a district court’s preliminary approval of an FCRA settlement in a case pending in Virginia. Just like the prior case, the claims in this case stemmed from allegations that the employer violated the procedural protections of the FCRA, and then also failed to give job applications the ability to respond to adverse information in the background check.

Under the judge’s recent order, the plaintiffs’ attorneys would get 25 % of the $4,000,000 proposed settlement, and each potential class member would receive statutory damages of $53.

The numerous procedural and substantive provisions of the FCRA can be difficult to decipher, and as the above examples demonstrate small compliance mistakes can lead to costly and time consuming lawsuits.

Although we may sound like a broken record, employers should therefore consult with trusted counsel when necessary to ensure that their job application process can survive a FCRA challenge, and that their authorization forms and disclosure notices comply with FCRA’s requirements.

It’s not as easy as it first appears.

Yesterday, the U.S. Supreme Court ruled that the EEOC has a duty to conciliate that has go a bit beyond words before filing suit as a party.  In the case, EEOC v. Mach Mining (download here), the employer argued that the EEOC cannot just say that it has tried to resolve the matter through conciliation; the Supreme Court agreed, but barely, saying that in many cases, an affidavit from the EEOC attesting to its efforts is going to be sufficient. And even if it isn’t, the EEOC can get a do-over (my words, not the courts) if a court finds that its conciliation efforts did not meet the statutory minimum.

To some, this decision is a huge deal: “The implications for employers as a result of this decision cannot be overstated.”  Why? Because the EEOC will have to revisit its litigation strategy and focus on being able to show its conciliation efforts before a “third party”.

To others, the decision is disappointing “because the Court declined to authorize dismissal of the EEOC’s lawsuits if conciliation efforts were not undertaken.”

What are the implications though for Connecticut employers?

For the overwhelming majority of Connecticut employers, my take is different from both of these and is essentially the title to a Bobby McFerrin song: Don’t Worry, Be Happy. 

Sure, be happy that the Court agreed that the EEOC cannot pay lip service to conciliation efforts.  It’s a small “victory” for employers.  It could be worse.

But don’t worry about this decision because you’re very likely to never have to deal with this issue.

Why? Because in Connecticut, the state agency — the Connecticut Commission of Human Rights and Opportunities — mainly calls the shots.  Indeed, in the last ten years since April 2005, the EEOC has brought suit only five times against Connecticut employers in federal court here (though, 3 of those suits are in the last 2 years).

Quite simply, the EEOC plays a very very small role in how employment laws in this state are enforced.  Thus, any decision that affects how the EEOC handles the small numbers of cases it brings against employers is going to have just a minimal impact in Connecticut.

To be sure, in the unlikely event you end up being the subject of an EEOC investigation, you should take your efforts to conciliate with the EEOC seriously and document them. But most employers here will never have that happen. Indeed, you’re much more likely to get a lawsuit by an employee.

So, read the decision if you must. But focus on other areas of compliance instead of getting caught up in the latest and greatest from the Supreme Court.

And feel free to whistle with the earworm that is “Don’t Worry Be Happy” below.

So, in my prior two posts about the new case statistical reports from the Connecticut Commission on Human Rights and Opportunities, I’ve looked at the case statistics to see that harassment and terms & conditions claims are up, and that ancestry, race & color claims filed are also up.

But what else can we glean from these numbers?

First, according to the reports, there are a lot more cases pending at the agency than in the last couple of years resulting in a big backlog of cases.  Specifically, there are 2670 active and pending cases at the agency by the end of the fiscal year. Contrast that with just 757 in 2014, and 209 in 2013.

That means that employers are likely to have many more of these cases floating around and they are moving at the proverbial snail’s pace.  Clearly, if these numbers are right, something isn’t working at the agency.

Second, there has been a (very modest) increase the number of referee decisions at the CHRO — ostensibly being that more cases are being tried through a public hearing.  But before you draw many conclusions, the numbers are still paltry.  In 2015, just 16 cases had a referee decision. That’s up from six in 2014 and three in 2013.

Nonetheless, the calendar schedule for contested hearings looks busy for the rest of the year so it remains to be seen whether this process will continue at the same levels.

Finally, for those that think that every case is a battle that is won or lost, think again. The plurality of cases at the agency alone are still closed through settlement. In 2015, 968 out of 2334 case closures came through a withdrawal with settlement.  And that doesn’t account for the 543 cases that are “released” from jurisdiction so that employees may file in court directly (and whether those cases are settled too).

In short, for employers, the process at the CHRO is slow and you’re still likely to end up trying to settle the case more often than not.

Statistics don’t tell us everything; but to ignore the numbers here is a mistake. Employers do best when they understand and adapt to today’s trends and not simply go by how things were 10 to 15 years ago.

Because the change has been substantial.

Throw out the release?

Yesterday, I had the opportunity to talk at the Connecticut Legal Conference about employment law issues. My talk focused on free speech rights in the workplace — a topic I’ve covered well in some prior posts here and here, for example.

One of the other topics of our discussion was the Cheeks v. Freeport Pancake House case — a recent case by the Second Circuit discussing wage & hour claim settlements under the Fair Labor Standards Act.

I’ve talked about this issue in prior posts as well but the general takeaway from the discussion yesterday was a renewed emphasis on receiving approval from either a federal court or the U.S. Department of Labor on any wage/hour claim settlements.

In most employment law cases filed in federal court, when a settlement is reached, the parties typically stipulate to the dismissal of the claim under a rule of civil procedure (Rule 41).

In Cheeks, the Second Circuit said that wasn’t good enough due to the unique nature of wage/hour claims and that employees were particularly susceptible to bad settlements:

We conclude that the cases discussed above, read in light of the unique policy considerations underlying the FLSA, place the FLSA within Rule 41’s “applicable federal statute” exception. Thus, Rule 41(a)(1)(A)(ii) stipulated dismissals settling FLSA claims with prejudice require the approval of the district court or the DOL to take effect. Requiring judicial or DOL approval of such settlements is consistent with what both the Supreme Court and our Court have long recognized as the FLSA’s underlying purpose: “to extend the frontiers of social progress by insuring to all our able-bodied working men and women a fair day’s pay for a fair day’s work.”

The Court pointed out settlements in other cases which might be troubling.

In [one case], the proposed settlement agreement included (1) “a battery of highly restrictive confidentiality provisions ․ in strong tension with the remedial purposes of the FLSA;” (2) an overbroad release that would “waive practically any possible claim against the defendants, including unknown claims and claims that have no relationship whatsoever to wage-and-hour issues;” and (3) a provision that would set the fee for plaintiff’s attorney at “between 40 and 43.6 percent of the total settlement payment” without adequate documentation to support such a fee award….. In [another case], the district court rejected a proposed FLSA settlement in part because it contained a pledge by plaintiff’s attorney not to “represent any person bringing similar claims against Defendants.” … “Such a provision raises the specter of defendants settling FLSA claims with plaintiffs, perhaps at a premium, in order to avoid a collective action or individual lawsuits from other employees whose rights have been similarly violated.”

Would these apply to claims that were not filed in federal court to begin with? The speakers said the decision left that open a bit but still recommended that parties seek USDOL approval or even file the suit in federal court and seek judicial approval at the same time.

While the court noted that this might be difficult, “the burdens…must be balanced against the FLSA’s primary remedial purpose: to prevent abuses by unscrupulous employers, and remedy the disparate bargaining power between employers and employees.”

Note: These same rules do not apply to settlements under the state wage/hour laws and if you’re not covered by the FLSA, there isn’t much of a need to follow that — at least until the issue is raised in state courts.

But suffice to say that if you get a claim by a current or former employee regarding, say, past overtime wages, be wary of settling the claim without receiving outside approval.

$20,000,000.00.

That, as they say in the legal parlance, is a crooked number with a LOT of zeros behind it.

And that is also the reported amount of settlement between Gretchen Carlson and Fox News over her sexual harassment lawsuit.  Plus an unprecedented apology.  And it doesn’t take into account other cases of harassment that are allegedly being settled concurrently.

Now I’m sure the settlement had all the disclaimers that Fox News was not admitting liability as part of the settlement.

But you don’t need to be a lawyer to know that you aren’t paying a $20M settlement as “nuisance” value.  I have little doubt that the investigation that Fox News conducted turned up some pretty egregious evidence of something and the company figured that paying the settlement was STILL a lot cheaper than having the case go forward.

It’s a big deal in a lot of respects.

First, by my back of the napkin recollection, it has to be one of the largest single-plaintiff sex harassment settlements ever inked. (If there were ones much larger, it’s been kept pretty confidential.).

Second, it demonstrates — as if the allegations didn’t already — that despite pervasive training and years of awareness, that some workplaces are still riddled with sexual harassment.  I noted as much in a prior post back in July but back then it was tough to figure out what was happening.

A $20M settlement sort of avoids any doubt as to what was happening.

Third, companies need to be vigilant and if the CEO/President is condoning the behavior (or worse, is the one engaging in harassing behavior), then it’s up to the Board of Directors to take a stand.

Fourth, it’ll likely be used as a benchmark for other cases of harassment in settlement negotiations. You can just hear it now: “Well, if Gretchen Carlson got $20M, my client’s case is worth at least half as much….”

Lastly, it should put to bed the notion that we are in an environment where sex harassment just isn’t a problem any more.  Back in 2011, there was a notable column in The New York Times that suggested that was the case and I highlighted it in a discussion about this very issue.

Gretchen Carlson will now join the pantheon of people who spoke up when it would’ve been more convenient to remain quiet.  And everyone — employers and employees alike — ought to appreciate the sunlight she has brought to the issue.  Whether this case is a harbinger of more things to come or not, use this case as an opportunity to test your own practices.