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The Dialogue: About Firing Employees and Negotiating Severance Agreements

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The Dialogue – an occasional discussion between myself and a prominent employee-side attorney, Nina Pirrotti returns today after a late summer hiatus. Today’s chat focuses on employee separations and severance agreements.  Share your own tips or observations in the comments below. As always, my thanks to Nina for sharing her insights here.

Dan: Hi Nina! How was your summer? Mine was fine except I can’t stop hearing news about President Trump.

It seems to drown out everything else going on and I think I have a headache from it all. But let’s give it a try, shall we?

I know I’m often confronted with having to fashion separation and settlement agreements for employers.   

What do you find are the items in agreements that you think both sides ought to be paying attention to?

Nina: Drowning in Trump-related noise.  The image is horrifying!  My husband and I were chatting the other day about an old Saturday night live weekend update skit.  As we recall it (it was decades ago), the news media was focused on other events when all of a sudden the character playing Kim Jong Un pops into the screen, holds both arms out and complains:  “What do I have to do to get attention around here?!” 

In the age of Trump that glib remark becomes bone-chilling. 

The art of crafting a fair and balanced settlement agreement isn’t the most riveting of topics in our world but it is among the most important.  

One key strategy I use in evaluating them is to put myself in the position of the employer to ensure I understand company’s (reasonable) priorities. 

Clearly the company seeks to contain the dispute itself, keep the fact that it is settling it confidential, and do everything possible to obtain closure.    If the settlement terms go beyond meeting those priorities, a red flag goes up for me and I scrutinize those terms closely.  

In light of the company’s priorities in containing the dispute and keeping it confidential, I expect to see a confidentiality provision, limiting the disclosure of the settlement agreement to those on a need to know basis (typically immediate family members, financial/tax advisor and lawyer). 

I am also not surprised by a non-disparagement provision which prevents the employee from spreading ill will about the former employer. 

Since I generally advise my client that it rarely reflects well on an employee to speak negatively about his/her former employer (no matter how justified the employee might be in doing so) I usually do not oppose such provisions. 

I will often, of course, make them mutual so that key employees at the company also commit to not disparaging my client. 

In light of the company’s priority in seeking closure, I do not have a one-size fits all response to no re-hire provision.  I understand the company’s concern that should the employee who has settled claims for discrimination apply for a position down the road and the company (for legitimate reasons) declines to hire that employee, it nonetheless remains exposed to a potential retaliation lawsuit by the employee. 

No re-rehire provisions in certain situations can be appropriate but only if they are narrowly tailored to the company itself.  Alarm bells go off for me, therefore, if the employer is large and has numerous affiliates and subsidiaries and the employer insists on including them within the scope of the no-rehire provision. 

In such cases, no-rehire provisions can be tantamount to mini-restrictive covenants and, where they hamper my client’s ability to find comparable work, I will reject them as untenable. 

Speaking of restrictive covenant  provisions, it irks me to no end when an employer tries to slip one into a settlement agreement where the employer was not bound by one during the course of his/her employment!   Such provisions are generally a non-starter for me, absent considerable additional compensation for them. 

Finally, as we discussed in an interview you conducted with me many years ago, I do not abide by liquidated damages provisions. 

If a court determines that my client has breached the agreement, even if that breach is deemed a material one, the employer should still bear the burden of proving that it has been damaged and, to a reasonable degree of certainty, the monetary amount of that damage. 

What are your thoughts, Dan?   Have I articulated the company’s main priorities well?  Are there others I am missing that I should consider the next go-round?   Do tell and I promise to listen with an open mind!

Dan: Well, one day we could talk about Trump-related employment litigation, if you’d like to really talk more about Trump.

You’ve hit on some of the highlights from an employer perspective. When crafting one for an employer, I will let you in on a “secret” – we have a template.

I know — probably not a big surprise to you since our firms have negotiated enough of them.

As a result, I find that agreements at this point are sometimes more of finessing around the edges, rather than major re-writes.

The problem I see is that there are some employers who are using a form separation agreement handed down to them years ago, without understanding what’s in them.

First off, the agreements — regardless of whether you’re trying to comply with federal law or not — should really be written in “plain English”.

Get rid of the “Whereas” clauses.

Use bold language or simply to understand provisions.

And try not to have it be 15 pages.

Second, the agreements should contain: a) a release of all state and federal claims (and local ones if you’re in places like New York City); b) confidentiality (and if it needs to be mutual, so be it); c) non-disparagement (same).  There’s more of course, but start with the basics.

Third, employers should think about provisions that may actually be helpful: a) What are you going to do about references? Is it “name, rank, serial number” or something more? b) Do you want an arbitration provision for any breach of the separation agreement?

Neither is typically a high priority but taking care of some of these details are important.

A few employers are trying to get the “best” deal and negotiate strongly but I find most employers just want to move on; the termination was probably not something that they wanted to do anyways and putting some distance between the employee and the company is probably a good thing for the business ultimately.

Since you’re not finding separation agreements all that exciting, what about how employers handle the termination or termination meeting itself? I’m sure you’ve heard some stories from clients.

Nina: Wow – you hit the jackpot with that question!   

I was once asked at an ABA conference at which I spoke what was one step management lawyers could take to maximize the chances that a departing employee won’t seek out the counsel of someone like yours truly. 

My answer?  Treat them like human beings when you terminate them.   

Don’t do what one Fortune 500 company did to one of my clients which was to call her as she lay in a hospital bed with her infant daughter who had been born earlier that day and inform her that she need not return to work because her job had been eliminated.

Time and again prospective clients had told me that they would have gone quietly into the good night had their employers treated them with a modicum of respect during the termination process. 

I recently settled a case involving a woman in her mid-60s who had worked for the same company for 20 years and proven time and again that she would do ANYTHING for that company and, indeed, had worn a number of hats over the years, shedding one and donning another as the company’s needs shifted.  In her 20th year, a new CEO was hired and you can guess what happened next.  He terminated her and replaced her with a brand new hire, decades younger, who my client had helped train.   

Doesn’t sound kosher right, but that is not the worst part! 

It was the WAY the company terminated her that prompted this lovely, meek, non-confrontational woman to summon up the courage to pick up the phone and call me. 

Her termination consisted of a three minute meeting in which the CEO informed her she was no longer needed and handed her a severance agreement that provided her with two measly weeks’ pay. 

She was literally sobbing as she signed it then and there after which she was immediately escorted out the door.   She contacted me weeks after she signed her agreement.  Too bad, so sad, right?  Wrong. 

The employer neglected to include in her severance agreement language required by the Older Worker Benefits Protection Act (OWBPA), including a 21-day period to consider the agreement and a seven-day revocation period.  She was able to keep her paltry two weeks and I got her many months more on top of that!   

There are so many morals to that story, the least of which is that severance agreements for employees over 40 should comply with the OWBPA.   Employers should be expressing their gratitude to terminated employees who have proven their devotion to the company by providing them with severance that sends the message that they valued that devotion.  

There other ways to go that extra mile to treat such employees with dignity.   Think about how you would want to be treated if you were undergoing one of the worst days of your life and act accordingly.  Thank them for their service, tell them how sorry you are, assure them that you will do everything in your power to facilitate their transition, allow them to say goodbye to their colleagues, hell, even offer to throw them a farewell gathering.  The possibilities are endless.  Sometimes we lawyers get in our own way. 

Dan, I know none of the clients who have had the benefit of your wisdom prior to terminating an employee would succumb to such pitfalls.  But what do you do when you have to clean up after the fact?

Dan: You’ve raised a good question, but I want to address something you said first. 

You said: “Employers should be expressing their gratitude to terminated employees who have proven their devotion to the company by providing them with severance that sends the message that they valued that devotion.”  

It’s that phrase that I think gets to the heart of the issues with severance in 2017. 

When I first started practicing (a few years ago, ahem), there were still many companies that offered severance without ANY release because that just seemed “the right thing to do.”

After all, there was still a bit of an unspoken contract that employers would take care of employees.

Think back to the “Mother Aetna” description of the insurance company.  But as the recessions took their toll and employee mobility took root, that social contract has definitely been frayed over the years.  In part too is the rise of employment litigation. 

Now each employer has to worry: Is THIS going to be the employment termination that leads to a lawsuit?

 I can’t even remember the last time that an employer offered severance without also demanding the employee sign a release. 

In other words, the idea of severance as “gratitude” and “thanks”, has now been replaced with much more of a quid pro quo. 

For employers, the thought ii: If we give you this severance, please don’t sue us. 

And yet for employees, some of them still remember the days when severance was just something companies did without worrying about the lawsuit. And so when the employer demands the release, some employees take offense to it, not realizing that times have changed. 

As a result, I have also seen employers trying to offer less and less; the notion of one week of severance per year of service (with caps) is still strong, but not universal. 

As to being the fixer – yes, sometimes it happens.  The lack of OWBPA provisions is really something that just shouldn’t happen anymore. 

But it’s more that employers go ahead with the termination without thinking about what comes next.  And some employers are moving so fast, that the details such as having two people in the termination meting and having COBRA information available, get lost in the shuffle.

I don’t know of a single employer that has enjoyed firing an employee.  

Even when they catch an employee red-handed, many employers are aware of the consequences that may flow for the employee from a firing. The employee may have a tough time finding a new job, for example. 

But it strikes me that a small subset of terminated employees are LOOKING to bring suit or a payday instead of looking forward to a new time in their life. 

Obviously sometimes past discrimination has to be examined, but what do you think makes employees sue their employers instead of signing severance agreements that are presented to them?

Nina: I think that employer conduct that rises to the level of actionable discrimination and/or retaliation is alive and well, unfortunately. 

The only up side of all of this is that I get to keep my day job, which I love! 

Of course there are those (“small subset” would accurately describe them) who seek to avoid accountability and are looking for a quick pay out of claims. 

Virtually all of those individuals never make it to our front door. 

I say “virtually” because we are human, after all, and one or two may sneak through the cracks in that door. 

But then we have competent lawyers like you for whom we have great respect who (very politely) convince us – – with facts – – that we are being misled. 

That is why I believe that the only situations in which early negotiations are successful are those in which both sides fight their natural inclinations to hold their cards close to their chests and actually share meaningful information from the get go.  

But how to conduct negotiations effectively is a topic worthy of its own separate dialogue, no?

Dan: I think so. Now, I have to save whatever energy I have left to stay up late to watch playoff baseball with the Yankees. Hopefully, it’s a long October filled with lots of late nights and distractions.  Until next time, Nina!  


A New Era of Big Sexual Harassment Claims is Upon Us

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Back in the 1990s, employers still had the Anita Hill-Clarence Thomas hearings and the tawdry sexual harassment allegations relatively fresh on their minds. Employment lawyers will tell you that they started to see a bump up in claims in the early to mid 1990s as the issues of workplace harassment raised to the surface.

I raised it in one of my posts 10 years ago this very week.

But even before yesterday’s news that major movie mogul Harvey Weinstein has been accused of sexual harassment of many women over many years, I’d been thinking that we’re seeing another wave.

For employers, this new era should be even more concerning.

Why?

Because back in the 1980s and early 1990s, employers could at least say that “well, we didn’t know we needed to train” or “well, we didn’t know we needed to do an investigation.”  It may not have been plausible (or even good business), but at least it was something.

Now with laws in many states mandating sexual harassment prevention training and with U.S. Supreme Court precedent nearly mandating that employers investigate harassment claims and take prompt remedial action, there’s just no excuse.

And yet, over the last 12-24 months, we’ve seen a series of very high-profile people be brought down over sex harassment cases.

The implications for this are huge — and not for the reasons you may think.

It’ll take a while for statistics to back this up, but my educated guess is that settlements of sex harassment claims, and employee verdicts of sex harassment claims are up and going to continue going up.

As a result, employers are likely to pay more for settlements in the short term to avoid headlines of the type we are seeing. And juries are more likely to punish employers that they think should know better.

The practical implications of this for employers are several, but I’ll highlight three, some of which I’ve said before.

  1. It is absolutely imperative for employers to investigate sex harassment claims. But more than that, employers must take steps to ensure that the harassment STOPS.  Paying off one case, only to have the harasser move on to the next victim just is a recipe for disaster.
  2. When a lawsuit does arise, make sure you are fairly evaluating the case. Even if you think you have a defense, there may be more value to settling the case early on than fighting it and losing big.  Not every case is a home run, but not every case is an outright winner for the employer either.
  3. Train. Train. Train.  And when you’re done training, encourage people to bring issues to your attention.  Sweeping claims under the rug will only hurt the employer in the long run.

A new era of sex harassment claims is upon us.  Employers that allow any such harassment to go on risks headlines AND big payouts.  It’s a place employers should strive really hard to avoid.

Legislative Update: Sexual Harassment Training Bill Fails; Limits on Government NDAs Passes

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Earlier this week, it seemed that a bill requiring employers to conduct additional training on sexual harassment matters was a no-brainer to pass the General Assembly.

After all, Senate Bill 132 passed 31-5 in the state Senate and in this #metoo environment (not to mention local elections in the fall), the House looked to be a near certainty.

But a lot can happen in a few days, and some of the bill’s more controversial provisions were simply too much for the bill to overcome.

Thus, employers do not yet have to worry about the new training requirements and changes to the state’s anti-discrimination laws.

That said, employers still need to follow existing state law regarding training of supervisors (if applicable) and should still exercise caution in dealing with cases of harassment.

One bill that did receive passage late last night was Senate Bill 175, which I haven’t talked much about.

That bill makes a number of changes to government and quasi-public agencies. (In other words, these aren’t applicable to private employers).

Sections 8 and 501 are the key provisions in employment law and limit the use of non-disparagement and non-disclosure agreements.  According to the OLR report:

  • Beginning October 1, 2018, the bill generally prohibits state and quasi-public agencies from making a payment in excess of $50,000 to a departing employee in order to avoid litigation costs or as part of a non-disparagement agreement. Under the bill, “state agency” means executive branch agencies, boards, councils, commissions, and the constituent units of higher education.
  • For state agencies, the bill allows such a payment if (1) it is made under a settlement agreement that the attorney general enters into on the agency’s behalf or (2) the governor, upon the attorney general’s recommendation, authorized it in order to settle a disputed claim by or against the state.
  • It also specifies that, any settlement or non-disparagement agreement cannot prohibit a state agency employee from making a complaint or providing information in accordance with the whistleblower or false claims act.
  • Similarly, any settlement or non-disparagement agreement cannot prohibit a quasi-public agency employee from making a complaint or providing information under the whistleblower law.

For readers who work for the government, these particular provisions — namely seeking approval from the AG’s office — should be reviewed over the next few months.

It’s Not the Damages, It’s the Attorneys’ Fees

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Typically, in our court system, we operate under the “American Rule” which means that parties have to pay their own attorneys’ fees in cases, regardless of whether they win or lose.  (Contrast that with the English Rule which is a “loser pays” system.)

But there is one big exception to the American Rule — and it can be found in lots of employment law cases.   In several instances, the governing statute allows the prevailing party (or, in some instances, just the Plaintiff — read “employee”) to collect attorneys fees.

This is often seen in wage & hour claims, where an overtime claim may get dwarfed by a claim for attorneys’ fees.  One blog pointed out a few years ago in an FLSA case on “how attorney’s fees can grow to be the tail that wags the dog.”

A recent case out of the District Court of Connecticut also shows the impact in employment discrimination cases too.

The decision flows from a jury trial that awarded damages in an employment discrimination case to an individual suing a major employer.  Afterwards, both parties engaged in extensive post-trial litigation concerning attorneys’ fees, damages and more.  Ultimately, the court issued a ruling and then a final ruling after both parties asked for reconsideration.

The court awarded the Plaintiff in the discrimination claim the following:

  • Compensatory damages: $125,000
  • Punitive damages: $175,000
  • Economic damages (back pay): $ $243,711.89
  • Pre-judgment interest (on back pay): $15,665.37
  • Reinstatement

So, ultimately, the verdict is a little more than $550,000.

But the court also awarded attorneys’ fees.  And these fees far exceeded the verdict itself.

Grand total?  $973,083.50 in attorney’s fees and $30,960.24 in costs.

Such awards make employment cases unique animals in the law.  They provide extraordinary incentives to attorneys to not only take such cases, but pursue them.

For employers, the case is a difficult reminder that even when you value the case as somewhat small based on damages, the award of attorneys’ fees can add a substantial amount to what a case is worth.

 

Where Have All The Supreme Court Employment Law Cases Gone?

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In a few weeks, the Connecticut Supreme Court will begin it’s next session.  As I looked at the calendar assignment for the first term, what I began to realize is something that’s been gnawing at me for a while — there’s not an employment law case to be found on the docket.

Then I started to look back at last year’s session (2018-2019).  Term after term. Where were the employment law cases? Unless I missed something, there wasn’t an employment law case to be found anywhere on last year’s case docket.  (The only two that were even in the same neighborhood concerned a procedural requirement of the Municipal Employee Indemnification Statute, and a Labor Arbitration issue.)

In fact, I had to go back to the summer of 2017 to find the last major employment law case that the Connecticut Supreme Court considered.  That case — on the fluctuating workweek — at least gave us some guidance on a thorny wage & hour issue even if very few employers actually use that method of calculating overtime.

But the stream of cases that we used to get from the Connecticut Supreme Court seems to have dried up for now.

The big questions, then, are why have there been no cases and will this continue?

As to why, the answers are not self-evident.  If I had to guess, there are probably a variety of factors in play including: a decent economy, the increasing cost of cases that don’t have a “bet the farm” need to them, employment practices liability insurance (and the insurance companies’ reluctance to risk), settlements, the rise of mandatory arbitrations and a bit of chance.

All those factors help answer the second question as to whether this will continue? That’s a bit harder to predict but all of the above trends that have been in place for the last two years (except, perhaps, a decent economy) are all long-term plays. Arbitration agreements are, no doubt, taking away some of the cases that would otherwise see their way to courts.  Moreover, class action waivers are removing some of the big ticket cases from the court system too.

Add to that the continued legs of the #metoo movement — and companies’ aversion to adverse publicity as a result of any sexual harassment claims — and you still have a recipe for less cases at the state’s highest court.

Of course, trends like this are easily reversed — a few cases could bubble up this year and the trend will be popped. But overall, it’s been pretty quiet.

For employers, there are a few takeaways from this.

First, it’s unlikely we’ll get judicial resolution of some of the issues that remain a bit unsettled in the employment law area.  Companies will have to take calculated risks in some of those areas of confusion.  Second, if you haven’t been involved in litigation in the last ten years, you should understand that the ground has shifted; cases are more expensive than ever with items such as electronic discovery picking up steam.  That makes the incentive to settle for business reasons strong.

Lastly, if you have insurance, understand that the insurance company may ultimately want to settle for the cost of litigation and avoid an uncertain and costly appeal. That decision — however unpopular it is with employment law attorneys — may decide the fate of more cases than you realize.

 

The post Where Have All The Supreme Court Employment Law Cases Gone? appeared first on Connecticut Employment Law Blog.

Why Employment Settlement Agreements Contain Confidentiality Clauses

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This blog has tried to stay apolitical throughout its 12+ years so I’m not going to start talking politics now.

But, over the last week, the issue of confidentiality provisions and non disparagement clauses in settlement agreements of discrimination claims has moved front and center of the political debate between Senator Elizabeth Warren and Michael Bloomberg.  He agreed to have his company release details late last week. 

But it’s worth understanding the legal context to such clauses.

(ABC News has a pretty good recap of the background of the settlement agreements of Bloomberg here.)

The suggestion being made by Senator Warren and others is that there is something nefarious with such clauses and that the plaintiffs who signed settlement agreements should now be able to “talk” about being discriminated against.

In theory, that sounds unobjectionable.

But in practice, that is simply not how the overwhelming number of employment law cases get settled and ignores how such clauses are critical to getting deals done.

(I’m not the only one who feels this way. After I finished this post, I came across Robin Shea’s excellent post on the subject too.  As she explained, NDAs — or Non-Disclosure Agreements are something different than your ordinary settlement agreement.)

In many cases, the allegations of discrimination or harassment are hotly contested.  The employer might even find such allegations as unfair or frivolous.

But for various reasons — the cost of litigation, the time, perhaps even press coverage — an employer may wish to settle the claim to be done with it.

Cases settle for a whole range of amounts; the $50M settlements with Fox News are the undisputed outliers.  More often, cases settle for some “nuisance” value which can be anywhere from just a job reference to tens of thousands of dollars. (To be sure, some settle for higher than that too — that does not necessarily mean the allegations have more merit to them.)

For employees, money is typically the biggest driver to settle the case.

For employers, what’s important beyond just ending the lawsuit itself is that the employer is trying to buy peace.  They also worry about opening up the flood gates; we’ve seen instances where one lawsuit settlement begets another.  Making an agreement confidential typically increases the amount the employer is willing to offer to settle if they know word won’t get out.

In settlement agreements, each side can privately claim victory but each side typically agrees to let bygones be bygones by keeping the settlement confidential. Most times, the parties agree on a mutual non-disparagement clause. “You don’t say anything disparaging or defamatory about me and I won’t say anything bad about you.”

Confidentiality provisions in harassment cases have been subjected to increased tax liability. But they are still expressly permitted by every jurisdiction too. Why? Because courts like settlements; courts don’t have the resources to hear every case.

Now, obviously Michael Bloomberg is a special case; should a person running for office be obligated to share the details of lawsuits that have been settled? That’s up to the public to decide.

But in general, confidentiality and non-disparagement clauses in employment settlement agreements serve a valuable purpose.

 

The post Why Employment Settlement Agreements Contain Confidentiality Clauses appeared first on Connecticut Employment Law Blog.

Court: Settlement Discussions at CHRO Mediation Phase Not Admissible

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The Connecticut Appellate Court issued a new decision (officially released today) that will have important ramifications for employers proceeding with the CHRO mandatory mediation stage.  Specifically, based on this ruling, most settlement discussions during the Commission on Human Rights and Opportunities’ mediation stage will be inadmissible in a later court proceeding.   The decision also holds that changes to a deposition transcript through an errata sheet do not preclude the introduction of the original answers.

The case, Kovachich v. Department of Mental Health and Addiction Services, can be downloaded here.

The case arises from a claim that the employer denied an employee a reasonable accommodation  on the basis of a disability. According to the decision, the employee alleged that she suffered adverse incidents caused by coworkers’ violations of the scent-free working environment and that the employer made “no serious effort” to educate the workforce about the importance of doing so.  She also alleged that she was retaliated against and that such actions, in turn, led to her constructive discharge.

The matter went to a bench trial. The trial judge rendered judgment to the Plaintiff awarding emotional distress damages of $125,000 and attorney’s fees of $415,389.50.  Appeals followed.

One issue on appeal was whether documents and exchanges of e-mails that were part of the CHRO’s mandatory mediation process were admissible. The trial court said that they were. But the Appellate Court reversed finding that such statements were inadmissible offers of compromise.

Among the documents were communications with the mediator regarding requests to clarify the demands of the Plaintiff and discussions regarding issues on which the parties purportedly reached agreement.  Given the content of the communications, the Appellate Court concluded that the trial court improperly admitted such evidence.

To respond to that, the Plaintiff argued that the statements were made to show an interactive process. But the Appellate Court disagreed with that argument concluding that the present case “concerns settlement communications that occurred within the context of the commission’s mandatory mediation program.” And it noted that the “general rule that evidence of attempted settlements is not admissible against either party to the settlement negotiations is also consistent with the statutory protections afforded conciliation efforts before the commission.”

The Appellate Court also noted that it agreed with the sentiment conveyed by the CHRO in an amicus brief that “weakening the safeguards which generally preclude parties from offering settlement or compromise evidence into the record would have a chilling effect on the commission’s mediation efforts…”

For employers, the decision will be a welcome relief that a court will provide some protection to statements made in the mediation process at the CHRO. Often times, parties may concede a point during such discussions in an effort to reach an agreement; that concession cannot be used against an employer if those mediation sessions fail. To be sure, counsel should include in any e-mails with the CHRO “For Settlement Purposes Only” to avoid any possible confusion — even at the mediation process itself.  And there are some very limited exceptions so counsel should still exercise caution.

The Appellate Court also addressed a previously unanswered question that employment lawyers will find notable, namely what use a party may make at trial of deposition testimony that was amended through an errata sheet.

In this case, the lower court had found that many of the corrections made on the errata sheet were “actually changes in the deposition testimony”.  For example, “The plaintiff changed her response that she had her hair permed every six to eight weeks between 2010 and 2014, to ‘’I did not have my hair permed between 2010 and 2014.'”

The Court concluded that the original answers to the deposition can still be admissible notwithstanding amended answers on an errata sheet.  If then requested by the Plaintiff, the Plaintiff can introduce the amended answers and explain the reasons for the change.

This change may make errata changes a bit less likely in the future knowing that an individual’s original testimony can still be used and can’t just be changed outright through an errata sheet.

The post Court: Settlement Discussions at CHRO Mediation Phase Not Admissible appeared first on Connecticut Employment Law Blog.

A Final Look at CHRO Case Statistics – Part 3

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franklinSo, 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.


Settling FLSA Wage & Hour Claims? Court Approval May Be Needed

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Throw out the release?
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.

Big Settlement, Big Issues: Sexual Harassment in the Workplace Isn’t Over.

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DSC03212$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.

The Dialogue: About Firing Employees and Negotiating Severance Agreements

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The Dialogue – an occasional discussion between myself and a prominent employee-side attorney, Nina Pirrotti returns today after a late summer hiatus. Today’s chat focuses on employee separations and severance agreements.  Share your own tips or observations in the comments below. As always, my thanks to Nina for sharing her insights here.

Dan: Hi Nina! How was your summer? Mine was fine except I can’t stop hearing news about President Trump.

It seems to drown out everything else going on and I think I have a headache from it all. But let’s give it a try, shall we?

I know I’m often confronted with having to fashion separation and settlement agreements for employers.   

What do you find are the items in agreements that you think both sides ought to be paying attention to?

Nina: Drowning in Trump-related noise.  The image is horrifying!  My husband and I were chatting the other day about an old Saturday night live weekend update skit.  As we recall it (it was decades ago), the news media was focused on other events when all of a sudden the character playing Kim Jong Un pops into the screen, holds both arms out and complains:  “What do I have to do to get attention around here?!” 

In the age of Trump that glib remark becomes bone-chilling. 

The art of crafting a fair and balanced settlement agreement isn’t the most riveting of topics in our world but it is among the most important.  

One key strategy I use in evaluating them is to put myself in the position of the employer to ensure I understand company’s (reasonable) priorities. 

Clearly the company seeks to contain the dispute itself, keep the fact that it is settling it confidential, and do everything possible to obtain closure.    If the settlement terms go beyond meeting those priorities, a red flag goes up for me and I scrutinize those terms closely.  

In light of the company’s priorities in containing the dispute and keeping it confidential, I expect to see a confidentiality provision, limiting the disclosure of the settlement agreement to those on a need to know basis (typically immediate family members, financial/tax advisor and lawyer). 

I am also not surprised by a non-disparagement provision which prevents the employee from spreading ill will about the former employer. 

Since I generally advise my client that it rarely reflects well on an employee to speak negatively about his/her former employer (no matter how justified the employee might be in doing so) I usually do not oppose such provisions. 

I will often, of course, make them mutual so that key employees at the company also commit to not disparaging my client. 

In light of the company’s priority in seeking closure, I do not have a one-size fits all response to no re-hire provision.  I understand the company’s concern that should the employee who has settled claims for discrimination apply for a position down the road and the company (for legitimate reasons) declines to hire that employee, it nonetheless remains exposed to a potential retaliation lawsuit by the employee. 

No re-rehire provisions in certain situations can be appropriate but only if they are narrowly tailored to the company itself.  Alarm bells go off for me, therefore, if the employer is large and has numerous affiliates and subsidiaries and the employer insists on including them within the scope of the no-rehire provision. 

In such cases, no-rehire provisions can be tantamount to mini-restrictive covenants and, where they hamper my client’s ability to find comparable work, I will reject them as untenable. 

Speaking of restrictive covenant  provisions, it irks me to no end when an employer tries to slip one into a settlement agreement where the employer was not bound by one during the course of his/her employment!   Such provisions are generally a non-starter for me, absent considerable additional compensation for them. 

Finally, as we discussed in an interview you conducted with me many years ago, I do not abide by liquidated damages provisions. 

If a court determines that my client has breached the agreement, even if that breach is deemed a material one, the employer should still bear the burden of proving that it has been damaged and, to a reasonable degree of certainty, the monetary amount of that damage. 

What are your thoughts, Dan?   Have I articulated the company’s main priorities well?  Are there others I am missing that I should consider the next go-round?   Do tell and I promise to listen with an open mind!

Dan: Well, one day we could talk about Trump-related employment litigation, if you’d like to really talk more about Trump.

You’ve hit on some of the highlights from an employer perspective. When crafting one for an employer, I will let you in on a “secret” – we have a template.

I know — probably not a big surprise to you since our firms have negotiated enough of them.

As a result, I find that agreements at this point are sometimes more of finessing around the edges, rather than major re-writes.

The problem I see is that there are some employers who are using a form separation agreement handed down to them years ago, without understanding what’s in them.

First off, the agreements — regardless of whether you’re trying to comply with federal law or not — should really be written in “plain English”.

Get rid of the “Whereas” clauses.

Use bold language or simply to understand provisions.

And try not to have it be 15 pages.

Second, the agreements should contain: a) a release of all state and federal claims (and local ones if you’re in places like New York City); b) confidentiality (and if it needs to be mutual, so be it); c) non-disparagement (same).  There’s more of course, but start with the basics.

Third, employers should think about provisions that may actually be helpful: a) What are you going to do about references? Is it “name, rank, serial number” or something more? b) Do you want an arbitration provision for any breach of the separation agreement?

Neither is typically a high priority but taking care of some of these details are important.

A few employers are trying to get the “best” deal and negotiate strongly but I find most employers just want to move on; the termination was probably not something that they wanted to do anyways and putting some distance between the employee and the company is probably a good thing for the business ultimately.

Since you’re not finding separation agreements all that exciting, what about how employers handle the termination or termination meeting itself? I’m sure you’ve heard some stories from clients.

Nina: Wow – you hit the jackpot with that question!   

I was once asked at an ABA conference at which I spoke what was one step management lawyers could take to maximize the chances that a departing employee won’t seek out the counsel of someone like yours truly. 

My answer?  Treat them like human beings when you terminate them.   

Don’t do what one Fortune 500 company did to one of my clients which was to call her as she lay in a hospital bed with her infant daughter who had been born earlier that day and inform her that she need not return to work because her job had been eliminated.

Time and again prospective clients had told me that they would have gone quietly into the good night had their employers treated them with a modicum of respect during the termination process. 

I recently settled a case involving a woman in her mid-60s who had worked for the same company for 20 years and proven time and again that she would do ANYTHING for that company and, indeed, had worn a number of hats over the years, shedding one and donning another as the company’s needs shifted.  In her 20th year, a new CEO was hired and you can guess what happened next.  He terminated her and replaced her with a brand new hire, decades younger, who my client had helped train.   

Doesn’t sound kosher right, but that is not the worst part! 

It was the WAY the company terminated her that prompted this lovely, meek, non-confrontational woman to summon up the courage to pick up the phone and call me. 

Her termination consisted of a three minute meeting in which the CEO informed her she was no longer needed and handed her a severance agreement that provided her with two measly weeks’ pay. 

She was literally sobbing as she signed it then and there after which she was immediately escorted out the door.   She contacted me weeks after she signed her agreement.  Too bad, so sad, right?  Wrong. 

The employer neglected to include in her severance agreement language required by the Older Worker Benefits Protection Act (OWBPA), including a 21-day period to consider the agreement and a seven-day revocation period.  She was able to keep her paltry two weeks and I got her many months more on top of that!   

There are so many morals to that story, the least of which is that severance agreements for employees over 40 should comply with the OWBPA.   Employers should be expressing their gratitude to terminated employees who have proven their devotion to the company by providing them with severance that sends the message that they valued that devotion.  

There other ways to go that extra mile to treat such employees with dignity.   Think about how you would want to be treated if you were undergoing one of the worst days of your life and act accordingly.  Thank them for their service, tell them how sorry you are, assure them that you will do everything in your power to facilitate their transition, allow them to say goodbye to their colleagues, hell, even offer to throw them a farewell gathering.  The possibilities are endless.  Sometimes we lawyers get in our own way. 

Dan, I know none of the clients who have had the benefit of your wisdom prior to terminating an employee would succumb to such pitfalls.  But what do you do when you have to clean up after the fact?

Dan: You’ve raised a good question, but I want to address something you said first. 

You said: “Employers should be expressing their gratitude to terminated employees who have proven their devotion to the company by providing them with severance that sends the message that they valued that devotion.”  

It’s that phrase that I think gets to the heart of the issues with severance in 2017. 

When I first started practicing (a few years ago, ahem), there were still many companies that offered severance without ANY release because that just seemed “the right thing to do.”

After all, there was still a bit of an unspoken contract that employers would take care of employees.

Think back to the “Mother Aetna” description of the insurance company.  But as the recessions took their toll and employee mobility took root, that social contract has definitely been frayed over the years.  In part too is the rise of employment litigation. 

Now each employer has to worry: Is THIS going to be the employment termination that leads to a lawsuit?

 I can’t even remember the last time that an employer offered severance without also demanding the employee sign a release. 

In other words, the idea of severance as “gratitude” and “thanks”, has now been replaced with much more of a quid pro quo. 

For employers, the thought ii: If we give you this severance, please don’t sue us. 

And yet for employees, some of them still remember the days when severance was just something companies did without worrying about the lawsuit. And so when the employer demands the release, some employees take offense to it, not realizing that times have changed. 

As a result, I have also seen employers trying to offer less and less; the notion of one week of severance per year of service (with caps) is still strong, but not universal. 

As to being the fixer – yes, sometimes it happens.  The lack of OWBPA provisions is really something that just shouldn’t happen anymore. 

But it’s more that employers go ahead with the termination without thinking about what comes next.  And some employers are moving so fast, that the details such as having two people in the termination meting and having COBRA information available, get lost in the shuffle.

I don’t know of a single employer that has enjoyed firing an employee.  

Even when they catch an employee red-handed, many employers are aware of the consequences that may flow for the employee from a firing. The employee may have a tough time finding a new job, for example. 

But it strikes me that a small subset of terminated employees are LOOKING to bring suit or a payday instead of looking forward to a new time in their life. 

Obviously sometimes past discrimination has to be examined, but what do you think makes employees sue their employers instead of signing severance agreements that are presented to them?

Nina: I think that employer conduct that rises to the level of actionable discrimination and/or retaliation is alive and well, unfortunately. 

The only up side of all of this is that I get to keep my day job, which I love! 

Of course there are those (“small subset” would accurately describe them) who seek to avoid accountability and are looking for a quick pay out of claims. 

Virtually all of those individuals never make it to our front door. 

I say “virtually” because we are human, after all, and one or two may sneak through the cracks in that door. 

But then we have competent lawyers like you for whom we have great respect who (very politely) convince us – – with facts – – that we are being misled. 

That is why I believe that the only situations in which early negotiations are successful are those in which both sides fight their natural inclinations to hold their cards close to their chests and actually share meaningful information from the get go.  

But how to conduct negotiations effectively is a topic worthy of its own separate dialogue, no?

Dan: I think so. Now, I have to save whatever energy I have left to stay up late to watch playoff baseball with the Yankees. Hopefully, it’s a long October filled with lots of late nights and distractions.  Until next time, Nina!  

A New Era of Big Sexual Harassment Claims is Upon Us

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Back in the 1990s, employers still had the Anita Hill-Clarence Thomas hearings and the tawdry sexual harassment allegations relatively fresh on their minds. Employment lawyers will tell you that they started to see a bump up in claims in the early to mid 1990s as the issues of workplace harassment raised to the surface.

I raised it in one of my posts 10 years ago this very week.

But even before yesterday’s news that major movie mogul Harvey Weinstein has been accused of sexual harassment of many women over many years, I’d been thinking that we’re seeing another wave.

For employers, this new era should be even more concerning.

Why?

Because back in the 1980s and early 1990s, employers could at least say that “well, we didn’t know we needed to train” or “well, we didn’t know we needed to do an investigation.”  It may not have been plausible (or even good business), but at least it was something.

Now with laws in many states mandating sexual harassment prevention training and with U.S. Supreme Court precedent nearly mandating that employers investigate harassment claims and take prompt remedial action, there’s just no excuse.

And yet, over the last 12-24 months, we’ve seen a series of very high-profile people be brought down over sex harassment cases.

The implications for this are huge — and not for the reasons you may think.

It’ll take a while for statistics to back this up, but my educated guess is that settlements of sex harassment claims, and employee verdicts of sex harassment claims are up and going to continue going up.

As a result, employers are likely to pay more for settlements in the short term to avoid headlines of the type we are seeing. And juries are more likely to punish employers that they think should know better.

The practical implications of this for employers are several, but I’ll highlight three, some of which I’ve said before.

  1. It is absolutely imperative for employers to investigate sex harassment claims. But more than that, employers must take steps to ensure that the harassment STOPS.  Paying off one case, only to have the harasser move on to the next victim just is a recipe for disaster.
  2. When a lawsuit does arise, make sure you are fairly evaluating the case. Even if you think you have a defense, there may be more value to settling the case early on than fighting it and losing big.  Not every case is a home run, but not every case is an outright winner for the employer either.
  3. Train. Train. Train.  And when you’re done training, encourage people to bring issues to your attention.  Sweeping claims under the rug will only hurt the employer in the long run.

A new era of sex harassment claims is upon us.  Employers that allow any such harassment to go on risks headlines AND big payouts.  It’s a place employers should strive really hard to avoid.

Is the State of Employment Litigation Good for Employers or Bad?

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Let’s take a test.

In the last ten years or so, the number of charges of discrimination and retaliation filed at the EEOC has done WHAT?

a) Gone up by 40 percent

b) Gone up by 15 percent

c) Stayed relatively flat

d) Gone down by 15 percent

e) Gone down by 40 percent

Turns out the answer is actually (e)! Hard to believe, right?

2011 was actually the high water mark of claims filed at the EEOC with a total number of claims at just shy of 100,000 (99,947 to be exact). In the last fiscal year of 2021, the number of claims had plummeted to just 61,331, a level not seen in the last 25 years.

(As an aside,  claims of retaliation have dropped less than 10 percent the last ten years, and as a result, not make up 56 percent of all claims filed at the EEOC. That’s a story for another post.)

I’ll leave it to the data analysts to determine why claims have dropped so much.  But I’m more interested in what it means for employers.

In the abstract, it should mean less claims filed against employers.  And presumably, lower legal costs paid to attorneys.

Yet according to one study in 2017 of closed claims reported by companies with fewer than 500 employees, nearly a quarter of charges filed averaged $160,000 in defense and settlement costs taking 10 months on average to resolve.

Lawsuit and charges of discrimination continue to be an expensive proposition for employers.  Even the most frivolous of claims requires some response from an employer. And that response takes time and money to prepare.

And if anything, those costs have increased substantially over the last ten years and, it seems, the “nuisance” value of claims.

So what options are available to employers in the face of such depressing statistics? Actually a few things though admittedly none of this is all that new:

  1. Update your policies and handbooks to make sure your staff is up to date on the latest laws that have passed over the last ten years.
  2. Train staff on these new laws and update your harassment prevention training as well.
  3. Spend more time reviewing your performance-managed employees and the circumstances around discipline or firing.  In doing so, ask important questions about what type of documentation do you have? Is the termination decision “fair” (in the sense that your neighbor would agree with you that it’s fair)?
  4. Consider offering separation agreements in termination decisions along with severance.  You can reduce your exposure by ensuring employees never sue you to begin with through the use of separation agreements.
  5. Review your insurance policies and consider Employment Practices Liability Insurance or a rider to your existing policy.  (This one has pros and cons so don’t just buy it thinking that this will solve all your issues. In all likelihood, it only swaps out one set of issues for another.)

Claims of discrimination may be done but the state of employment litigation for employers is still expensive.  A little bit of prevention may not stop a claim from coming, but it will certainly reduce the risk.

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