Terminate an Employee Returning from FMLA Leave and You Could Be Sued in Your “Individual Capacity”

By Ruth Binger

To add to the woes and stress of business owners, supervisors and managers, public and private decision makers who act directly or indirectly in the interest of the employer can be sued in their individual capacity under the Family and Medical Leave Act (“FMLA”).

Most of us forget it, but the same rules that apply to actions under the Fair Labor Standards Act also apply to actions brought under the FMLA (29 C.F.R. Section 825.104(d) (2009)). A July 11, 2011 decision by the Eastern District of Virginia Court, Eastern Division, titled Weth v. O’Leary (U.S. District Court of E.D. Virginia, Alexandria Division) provides important lessons regarding this issue with respect to terminating employees returning from Family Medical and Leave Act, especially if the decision makers are public officials and have sovereign immunity. 

In Weth, the Court refused to grant summary judgment and allowed a FMLA case to proceed to trial because of a highly suspicious timeline, prior raises and highly positive reviews, and the lack of write ups or written documentation bolstering the performance reason defense. 

Plaintiff Weth initially sued O’Leary, both individually and in his official capacity as Arlington County Treasurer. The Court granted Summary Judgment in favor of O’Leary with respect to the official capacity claim because as a state constitutional officer, O’Leary was entitled to sovereign immunity. The Court refused to dismiss the individual claim because sovereign immunity does not apply to individuals sued in their purely personal and individual capacity. The Court cited favorable decisions from various Circuit Courts (Darby v. Bratch, 287 F.3d 673, 681 (8^th Cir. 2002)) where courts found that there was no reason to distinguish liability between individual corporate officers and individual public officials.

Weth was employed as a Deputy Treasurer for Litigation for the Arlington County Treasurer for six years. As late as 2009, Weth had received highly positive reviews regarding her job performance and approved salary increases. 

Weth was diagnosed with cancer in September of 2009 and advised O’Leary. In December, Weth initially sent emails to O’Leary advising him that she would need surgery in January, but then advised that the surgery would be in December. Weth worked until the 21^st of December, underwent surgery on the 22^nd of December and returned to work on the 16^th of February.

On her return date O’Leary advised her that she needed to begin looking for a new job immediately, that she was being demoted and almost all of her job duties were being removed and that her sole responsibility was to find a job. One month later, O’Leary suspended her, sent her home with the directive that she was being relieved of all of her job duties and her sole responsibility was to find other employment. 

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10/27/11 2:40 PM

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Terminate an Employee Returning from FMLA Leave and You Could Be Sued in Your “Individual Capacity”

Misclassification of Workers as Independent Contractors: How to Take Advantage of IRS’s New Voluntary Classification Settlement Program

By Marcia Swihart Orgill

Both the IRS and the Department of Labor have indicated their intent to target misclassification of workers as independent contractors rather than employees. In the proposed budget for fiscal year 2012, $240 million is allocated for initiatives specifically related to enforcing this misclassification.

Employers who have misclassified workers in the past may want to consider taking part in a new program that will allow them to voluntarily correct their misclassification of workers at a relatively low cost. As part of its “fresh start initiative”, the IRS recently announced a new Voluntarily Classification Settlement Program (VCSP).

Under this program, eligible employers will only pay an amount that equals just over one percent of the wages paid to the misclassified workers in the past year, if they prospectively treat these workers as employees. The IRS will not audit employers on payroll taxes related to these workers for past years, and employers will not be subject to interest or penalties for past misclassifications.

In order to be eligible for the program the employer must:

1. consistently have treated the workers in the past as non-employees,
2. have filed all required Forms 1099 for the workers for the previous three years, and
3. not currently be under audit by the IRS, the Department of Labor, or a state agency concerning the classification of these workers.

To apply for the program, an employer must file Form 8952, Application for Voluntary Classification Settlement Program, at least 60 days before it wants to commence treating the workers as employees.

Employers participating in the program will be subject to a six-year statute of limitations for the first three years under the program, rather than the three-year statute of limitations that generally applies to payroll taxes.

Information about the VCSP is contained in IRS Announcement 2011-64.

Posted by Attorney Marcia S. Orgill. Orgill concentrates her practice in the area of business and personal taxation—especially complex domestic and international tax strategies.

10/14/11 6:00 AM

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Misclassification of Workers as Independent Contractors: How to Take Advantage of IRS’s New Voluntary Classification Settlement Program

Federal Crackdown on Misclassifying Employees Includes Missouri and the I.R.S.

By Christopher D. Vanderbeek

The United States Department of Labor has initiated a crackdown on enforcement of federal wage laws. The Labor Department has signed agreements with twelve states, as well as the I.R.S., to share information about wage violations. Missouri is one of the states that has signed on to assist in the effort. Illinois reportedly plans to become involved in the near future.

The hope is that the shared information will help the Labor Department target businesses that improperly classify employees in order to pay employees less.

The most prevalent violations across the country involve employers classifying employees as “independent contractors.” This allows employers to avoid paying employees overtime pay and avoid complying with minimum wage requirements. Employers also do not pay for workers’ compensation and unemployment insurance for these misclassified workers. Employers also skip out on federal payroll taxes for the workers, which is why the I.R.S. is involved in the effort.

The practice of misclassifying workers is illegal, but U.S. businesses have been employing it as a cost-cutting measure for years. Misclassification for the purpose of depriving workers of overtime pay and minimum wage – known as “wage-theft” – is most prevalent and wide-spread in the hotel, restaurant, janitorial, health care, and daycare industries. The Labor Department has recently intensified efforts to curb the practice of misclassification, including getting states like Missouri involved, due in large part to the practice growing across corporate industries in recent years.

Thus far, the Labor Department’s crackdown has been an overwhelming success. From 2008 to 2010, collection of back wages for misclassified workers increased by 400 percent. The Labor Department expects even better results now that states like Missouri are involved in the effort.

Missouri businesses looking to ensure compliance with employer classification legal requirements, as well as other employment-related legal requirements, can find more information here.

Posted by Attorney Christopher D. Vanderbeek. Vanderbeek is involved in the evaluation and defense of workers’ compensation and other insurance claims, protecting the interests of employers and insurers.

10/10/11 8:56 AM

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Federal Crackdown on Misclassifying Employees Includes Missouri and the I.R.S.

Six Must-Follow Tips for Employers with Workers’ Comp Cases

By Christopher D. Vanderbeek

When a Missouri business is faced with a workers’ compensation case, what can its supervisory employees do to assist in the defense of the business?

There are six essential tips to follow that apply in all workers’ compensation cases. These apply regardless of whether (a) an employee suffered a work injury that is indisputable and the injury is of the severity that the employee alleges; or (b) there is a dispute regarding an injury, such as conflicting accounts of how, when, and/or where an injury occurred.

Following these tips will result in a stronger defense for the employer and insurer. Conversely, ignoring them could irrevocably weaken the defense.

1.   Be Proactive and Diligent.

• As soon as you find out that an injury has allegedly occurred, first write down all the facts you know.
• Next, speak to the injured employee and any witnesses. Witnesses would be any employees/vendors/visitors that were in the injured employee’s vicinity at the time of injury, even if they didn’t necessarily see the alleged incident.
• Note the conditions where the injury allegedly occurred and how it allegedly occurred.

In some cases, this is easier said than done. In cases where the injured employee does not immediately notify the employer of the alleged injury, it will not be possible to go to the scene of the alleged injury and speak to those present.

• In these cases, as soon as you become apprised of the alleged injury, write down the details as quickly as possible.
• Compile your witness list. Be sure to include any vendors and visitors who were in the vicinity at the time of the alleged injury.
• Figure out what employees were supposed to be working with the injured employee when the injury allegedly occurred. Find out if these employees were working with the injured employee at the time. Speak with the ones who were, with regard to the circumstances surrounding the alleged incident.

And part of being diligent is making sure to…

2.   Pay Attention. Don’t just let the issue rest after the initial investigation.

• Take note of conversations in the days following the incident, as other employees might discuss the incident and pertinent information could arise out of their conversations.
• When the injured employee returns to work, note his or her interactions with other employees and take stock of the body part alleged to be injured.
• If you notice that there is or are one or two specific employees with whom the injured employee seems to talk to a lot and spend a lot of time around, seek out those employees, as they may have pertinent information.
• If possible, evaluate the injured employee’s behavior when he or she believes no one is watching.

And when being diligent and paying attention…

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09/11/11 6:00 AM

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Six Must-Follow Tips for Employers with Workers’ Comp Cases

Workers’ Compensation Claims: What Comes First for the Best Defense

By Christopher D. Vanderbeek

Did you know that when a Missouri worker injures (or claims to have injured) himself during the course and scope of his employment, the worker’s employer automatically has a statutory duty to get the ball rolling to ensure that the worker receives workers’ compensation benefits? In Missouri, it starts with the employer filing a “First Report of Injury” with the state.

From this moment forward, the company will play a substantial and vital role in the defense of its interests, as well as the interests of its workers’ compensation insurance carrier. Other employees of the company, such as human resources personnel and the injured employee’s supervisors, are also in an invaluable position to assist in this defense.

For example, consider an employee who claims that a work-related injury has rendered him unable to use his dominant shoulder. If that same employee were to come into work one morning and brag to his co-workers that he caught a giant fish during the previous weekend, it would cast doubt on the severity, or even existence, of the shoulder injury. But without vigilance in reporting from other employees, it is likely that defense counsel would never come to know this information.

Missouri businesses must remember that when a worker allegedly suffers a work-related injury, defense counsel acts on behalf of the company’s workers’ compensation insurer as well as the company itself. This is because in every workers’ compensation claim filed in Missouri, both the insurer and the employer are named as defendants.

Furthermore, the more a company aids in the defense of a workers’ compensation claim, the lower the liability exposure likely will be. This in turn keeps the company’s insurance premiums lower than they would be otherwise.

Naturally, then, it is in the employer’s interest to assist in the defense of the claim.

Next up: Six must-follow tips when dealing with workers’ compensation cases.

Posted by Attorney Christopher D. Vanderbeek. Vanderbeek is involved in the evaluation and defense of workers’ compensation and other insurance claims, protecting the interests of employers and insurers.

09/6/11 10:00 AM

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Workers’ Compensation Claims: What Comes First for the Best Defense

Your Employees Are Griping About You on Facebook: Can You Fire Them?

By Ruth Binger

Have you ever caught your employees publicly griping about your company, or maybe even about you personally, on Facebook? If you have, your first instinct might have been to discipline or even fire them.

But according to several recent decisions from the National Labor Relations Board, if colleagues discuss compensation, working conditions or other issues related to their employment over Facebook, their conduct may be protected by the National Labor Relations Act (NLRA).

A conversation that either plans for group action or brings group complaints to management’s attention is considered “concerted activity” under Section 8(a)(1) of the Act.

So if you see negative posts about your company on Facebook, think carefully before you react.

For a more in-depth look at Employee Social Media Griping read my recent article on social media posts and see what may and may not be protected by the NLRA.

Posted by Attorney Ruth A. Binger. Binger serves both emerging and mature businesses concentrating in corporate law, intellectual property and technology law, and labor and employment law. Her commitment to the success of small to medium-sized businesses, and her understanding of multi-faceted issues inherent in operations, are what distinguish Binger’s practice.

09/2/11 1:12 PM

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Your Employees Are Griping About You on Facebook: Can You Fire Them?

New Change in Workers’ Compensation Premium Calculation: Missouri Businesses Now Have Financial Incentive to Report Medical-Only Claims

By Christopher D. Vanderbeek

The National Counsel on Compensation Insurance (NCCI) and the Missouri Department of Insurance, Financial Institutions and Professional Registration recently approved a change regarding the filing of work-related medical claims in Missouri. The change reportedly reduces the impact of medical-only claims on Missouri businesses’ experience ratings by 70%.

The change is effective in Missouri as of July 1, 2011.

To understand the change’s effect on Missouri businesses, one first must understand the “experience rating” (i.e. “experience modifier,” “experience modification rating”). The experience rating is a mathematical formula used by insurance companies to assess premiums. In part, the formula takes into account insurance-paid losses over the past three years.

Small losses (i.e. less than $5,000) have a greater impact on a company’s experience rating than large losses, because small losses are more frequent and more predictable than large losses. Medical-only claims (i.e. claims involving no lost work time) typically constitute small losses. Therefore, medical-only claims have a substantial impact on the experience rating computation.

It is for this reason that Missouri businesses have commonly paid medical-only claims in-house, without reporting the claims to their insurance carriers. Not reporting the claims has allowed businesses to insulate themselves from the impact that reporting the claims would have on the businesses’ experience rating and, as a result, on insurance premiums. However, this practice inevitably leads to employers failing to report proper loss data to the state Department of Labor. Accordingly, the change is intended to deter businesses from handling medical-only claims without the involvement of their insurance carriers.

The change comes just as data for the first quarter of 2011 has indicated that workers’ compensation insurance premiums increased nationally for the first time since 2005. The data was produced by a survey involving 39 insurance carriers (approximately 20% of the market). It indicated a modest 2% increase. Factors such as decreased investment income, increased medical treatment costs, and an increase in total claims filed (for the first time in 16 years) are said to account for the price hikes.

It is imperative that Missouri businesses understand the effect of this change. It is now financially beneficial for businesses to report all claims, even medical-only claims, to their workers’ compensation insurance carriers. Missouri businesses must act accordingly, ensuring optimal financial success in today’s economy.

Posted by Attorney Christopher D. Vanderbeek. Vanderbeek is involved in the evaluation and defense of workers’ compensation and other insurance claims, protecting the interests of employers and insurers.

08/14/11 11:00 AM

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New Change in Workers’ Compensation Premium Calculation: Missouri Businesses Now Have Financial Incentive to Report Medical-Only Claims

Beware the Trojan Horse that is Social Media

By Ruth Binger

While establishing and maintaining an organizational presence on popular media websites and blogs (Facebook, LinkedIn, etc.), businesses need to be aware of the legend of Troy and its supposed downfall due to a Trojan Horse. Greek mythology states that Greek warriors concocted a scheme whereby they built a wooden horse and offered it as a gift to the Trojans. The Trojans, in their greed and arrogance, accepted the gift and brought it within their gates. Then, at night as the Trojans slept, the Greek warriors emerged from the belly of the Trojan horse and defeated the Trojans changing the course of a ten-year siege.

Today, a Trojan Horse is more often thought of as a destructive software program that disguises itself as a helpful application. Similarly, although social media may be helpful for your business, be aware what could be lying in the belly of that Trojan Horse.

Line Between Private vs. Public Blurred

According to the Socialnomics web site, Generation Y will outnumber baby boomers sometime this year and 90% of them have already joined an online social network. For many young people, and even 50 year-olds, the line between private and public has disappeared as they tweet, blog, text and share the minutiae of both their personal lives and everyone around them – including their employer. Social media users are under the mistaken assumption that they own the web content they are generating and can retrieve it and delete it if needed.

They are also under the mistaken impression that what they say is protected by some cocoon and that the content they generate is private. This is not true, as evidenced by a Detroit hospital worker who was terminated after she posted a comment on Facebook about a man she treated who was accused of killing a police officer. She was fired for violating strict patient privacy rules under the federal HIPAA law. A Massachusetts 54 year old high school teacher also learned this lesson when posting negative comments about her school community, students, and parents even though she had set the privacy setting on her Facebook account. Moreover, cases are clear that locking a profile from public access does not prevent discovery in litigation either.

Disclosure of Company Information at Risk

Given the fact that technology is moving so fast and disclosure is instantaneous, worldwide and permanent, companies need to train their employees on the dangers of purposeful or inadvertent disclosure of company information. What is at stake for the employer is the loss of confidential information and trade secrets, disclosure of protectable third party information or medical information, suits from other companies for disclosure of secrets, and discrimination suits. For instance, companies recruiting and hiring managers often use social media in order to obtain more information on a candidate than they otherwise could.

However, discrimination laws prohibit employers from making direct inquiries regarding gender, race and other protected factors in their hiring process. If a candidate is not hired, the employer could be subject to discrimination claims alleging that the decision was illegal and based on a protected characteristic. Some online companies, in fact, claim that the social media profiles they will sell you comply with discrimination laws. Similarly, doing social media checks on some employees but not others could also lead to issues. Unregulated monitoring of an employee’s online presence could also lead to privacy related claims. Finally, going to the other extreme, a manager providing a favorable recommendation for a terminated employee could wreck havoc on an employer’s defense in a discrimination suit.

Scrapers & Listening Companies

The information that online users share is not just among their friends but is unknowingly shared with Web tracking companies and advertisers as well. In fact, Facebook acknowledged that its popular application, FarmVille, had improperly shared identifying information about users and, in some cases, their friends with advertisers and Web tracking companies. Social networks are becoming the new public records. Scrapers and listening companies argue they are just being entrepreneurial in that they are only gathering information that is available online anyway- in effect USER BEWARE! U.S. Court rulings are contradictory with respect to scraping, the practice of retrieving data from output from other programs.

People search websites, including Intelius, Inc., offer services that include criminal background checks. “Date Check” promises details about prospective dates for $14.95. Bringing it back to your business, some outfits such as 80Legs.com will scrape a million Web pages for $101. In fact, one Utah company, Screen-scrapers.com, offers scraping software for free. Beware:  if your competitors are not buying your business, they may be stealing it from you by scraping your company.

Bottom Line:  Companies & Users Beware

What is even more disturbing, is that the cyber-criminals who invade social networks to infiltrate your private computer are now invading your work and corporate computers as well. In short, Companies and Users Beware: Social Media can be a Trojan Horse.

11/10/10 1:00 PM

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Beware the Trojan Horse that is Social Media

Workers Can Now Sue Each Other for Negligent Acts Committed Against Each Other

By Brian S. Weinstock

There are some unfortunate unintended consequences of the August 28, 2005 Missouri Workers Compensation Reform.

I wrote Workers Can Now Sue Each Other for Negligent Acts (just published by Associated Industries of Missouri) because I believe the case (mentioned within) sets a terrible precedent from a public policy standpoint.

Do we really want employees suing each over simple negligence when there is a remedy for the injured worker via workers compensation?

Employees probably have no insurance to protect themselves over these types of issues. This could have a devastating effect on small and medium size businesses so I believe it needs to be overruled by the Missouri Supreme Court or the legislature and the Governor need to fix this issue quickly.

09/3/10 6:00 AM

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Workers Can Now Sue Each Other for Negligent Acts Committed Against Each Other

Mergers and Sales – Trade Secrets & Confidential Information

By Ruth Binger

Who Owns the Salesperson’s LinkedIn Account?

Owners/shareholders own businesses for many reasons, including selling the business at a value higher than the investment cost. However, when a business owner goes to sell his or her business and attempts to obtain the highest price available, it is important to understand where the value of that business lies and how to maximize that value to any potential buyer.

In many instances, a significant part of the business’s value is found in the intellectual property possessed by the employees.

Part of that intellectual property is found in the trade secrets and confidential information that the company develops to provide its services and products faster, cheaper, and better over time. A very critical component is the customer networks that its sales/marketing people developed over time.

Who owns those networks, especially LinkedIn, and the data associated with them?

With the complete transparency, and to some degree, anonymity of the internet, the owner’s duty to protect the intellectual property of his or her business becomes even more heightened.

Contrary to the new oracles, there is no such thing as free – everything that is created takes energy. Salespeople can be slowed down by nonsoliciations/noncompetes.

Companies can insist on owning the cell phones and smart phones. However, companies need to think about protecting the data that its employees develop on its time or downloaded from company data networks into LinkedIn, smart phones, emails, etc. This can be done by adding language protecting trade secrets and confidential information in data networks to employment manuals and employment agreements.

Today, businesses are bombarded with messages exhorting the establishment and maintenance of an organizational presence on popular Social Media sites and blogs. The members of Facebook, the largest social-networking site, with nearly 500 million members, or 22 percent of all Internet users, spend more than 700 billion minutes a month on the site. LinkedIn has over 75 million members in 200 countries and a new member joins LinkedIn approximately every seconds.

Your employees and your customers are becoming interdependent, sharing your trade secrets and confidential information at times when they are not careful. In short, your customers and employees are quickly and forcibly dictating your business operations and professional exchanges by becoming purchasing agents, spies, scouts, product reviewers and technical consultants for each other.

In every LinkedIn account that is established at the urging of the Company for the purpose of employment, there resides a goldmine of names, email addresses and other valuable contacts and professional information.

LinkedIn’s position is that the account constitutes a contract between the employee and LinkedIn. There are no cases in the United States regarding this issue.

Employees proffer free speech arguments and contend that employee owns the LinkedIn account because it is part of their knowledge base and they are entitled to take those contacts with them throughout their career. Employers, in turn, argue that they paid the employee to develop the data, or paid more to hire a person with extensive data, and therefore anything developed on its time with its money is its property. English courts have ruled that Outlook address books amount to employer proprietary databases and belong to the employer.

So, what does a prudent owner do?

Create a policy that is placed in the employment manual or noncompete agreement that makes it clear that the Company makes a significant investment in establishing or increasing the employee’s network of business contacts, that such information is protected confidential information or trade secrets and it is not to be disclosed. State affirmatively that direct dial telephone numbers, email addresses and other contact details that are generated on Company time or are provided by the Company are Company property and must be returned to the Company and deleted at the conclusion of the employment relationship.

New Hires can bargain with respect to who is exempted from the noncompete/nonsoliciation agreement and what information is exempt from the confidentiality/trade secret policy. This is in accord with Missouri and most states’ trade secrets laws. This policy would also accord with a 2001 Australian case where the Court held in a nonsocial media context that when an employee copies a significant number of client contact details into a personal address book used in the course of her job, such confidential list belongs to the employer, and must be returned at the conclusion of employment.

Today, noncompete and nonsolicitation clauses are invaluable, but they are not enough. Owners and employers must exercise more self help methods and stay ahead of the game.

Just as it is critical for the owner/employer to own the cell phone/smart phone number, and not the employee, it is also critical to own the employer’s confidential data infrastructure built on the employer’s time. If and when you, the owner, sell the business, you want something to sell that is protectable. You do not want to become another version of Wall Street giant Merrill Lynch that purchased AXA’s Advest Brokerage unit for $400 million in 2005 and by 2006 found that 417 of its 505 brokers had jumped ship with its customers and contacts.

Social media continues to rewrite the value of your business and you need to effectively manage and direct it or you will give it all away.

09/1/10 6:00 AM

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Mergers and Sales – Trade Secrets & Confidential Information