The following is a reminder about a wake-up call to employers. The California Fair Employment & Housing Commission (“FEHC”) issued a decision which held that an employer can be liable for failing to take all reasonable steps to prevent discrimination and harassment even if there is no underlying discrimination or harassment. Department of Fair Employment and Housing (DFEH) v. Lyddan Law Group, LLP.

In this case, a paralegal alleged that her supervisor sexually and racially harassed her. The FEHC found that alleged conduct did not constitute sexual or racial harassment. However, the employer was found liable in failing to take all reasonable steps to prevent discrimination and harassment from occurring. The employer: (1) did not have a written anti-harassment policy; (2) did not conduct trainings for its managers or employees in harassment or discrimination prevention; and, (3) failed to investigate after the paralegal complained of the harassment.

The FEHC is a quasi-judicial administrative agency which enforces California civil rights and other laws regarding discrimination in employment, housing, and public accommodations. The FEHC conducts hearings and issues administrative decisions in cases prosecuted before it by the California DFEH. If it finds an unlawful practice occurred, it can order a range of remedies including back pay, compensatory damages, administrative fines and civil penalties, injunctive relief, and reinstatement. The FEHC’s decision can be appealed to California Superior Court for review.

What does this mean to employers? Employers may be liable for failing to take all reasonable steps to prevent discrimination and harassment, even if there is no underlying discrimination or harassment according to the FEHC. The administrative case further reinforces the importance of employers to maintain written anti-harassment policies, conduct trainings for managers and employees in harassment and discrimination prevention, and timely investigate claims of such conduct.

By: David Wang

You’re working to fill a high-level position and have narrowed the field of job applicants to three promising candidates.?It’s time to bring them in for interviews. Your goal is to move beyond their glowing resumes and get a peek at their professional souls. But you’re unsure what types of questions will help you accomplish this. The Intuit Small Business Blog recently talked with a few hiring managers and small-business owners about the key questions they like to ask when interviewing potential employees. Here’s what they said.

When did you begin to work and why??This question can tell you a lot about your candidate’s work ethic. “The best responses are those where the candidate began doing a job such as cutting grass, shoveling snow, or working retail in high school or before,” says Bill Humbert, owner of the recruitment website?RecruiterGuy.com. Research shows that an individual’s?work ethic is typically developed during childhood, so early jobs are a good indicator that the candidate will be a dedicated worker. If the interviewee didn’t do paid work, ask what he or she did instead. If he spent 20 hours a week at football practice or caring for four younger siblings while his mother worked, he’ll likely have the drive you’re looking for. If he tells you he watched?I Love Lucymarathons every afternoon, he’s probably not the one you want.

 

What is the biggest mistake you’ve? ever made on the job??Anyone can brag about past successes, but an employee who learns from her mistakes is a valuable asset. Thus, it’s important to be able to discuss failures openly and honestly. Ask the candidate for details about what she did wrong, and encourage her to reflect on what she’d do differently next time around. If a candidate can’t come up with a response, “they are either lying or they have never taken chances — and thus are unlikely to? help grow the business,” says Guy Smith, principal and chief consultant for?Silicon Strategies Marketing.


What do you ?find most and least attractive about this position??To best fill that open position, you want a candidate who isn’t looking for?a?job — he’s looking for?this?specific job. This question will help you determine how well the candidate understands your company, what’s required in the role, and his attitude toward it. “If the ?least attractive thing is one of the job’s main functions, it probably won’t?be a good fit down the road,” says Crissy Gershey, vice president of sales and marketing for?Parties That Cook, a company that stages team-building cooking parties for Fortune 500 companies.

How many windows are there in New York City??Sara Schoonover, vice president of the legal service?TicketKick, asks this question to potential employees, knowing that they can’t answer it on the spot. However, their responses provide valuable insight into how they approach difficult questions. “It gives ?the interviewer a way to see how the candidate deals with [solving] problems,” she says. “Did they? attempt to figure it out at all, or did they immediately give up?” These types of questions are legendary in Silicon Valley for helping to measure how well candidates think on their feet.

 

by?Kathryn Hawkins

The U.S. Department of Labor’s Administrative Review Board (ARB) adopted a new standard? governing “adverse employment actions” under Section 806 of the Sarbanes-Oxley Act of 2002 (SOX).? Menendez v. Halliburton, Inc., Case No. 09-002, 2011 DOL Ad. Rev. Bd. LEXIS 83 (ARB Sept. 13, 2011).? Now, according to the ARB, an employee need not experience a “tangible” consequence as a result of his or her protected activity.? In addition, the U.S. District Court for the Western District of Washington continued the trend of granting employers summary judgment on a SOX Section 806 claim on causation grounds.? Kim v. The Boeing Co., Case No. 10-cv-1850, 2011 U.S. Dist. LEXIS 108635 (W.D. Wash. Sept. 23, 2011).? Importantly, the Kim court also noted that the “definitely and specifically” standard federal courts have applied in determining whether a complainant engaged in protected activity is alive and well (at least within the Ninth Circuit), despite Sylvester v. Parexel International LLC, Case No. 07-123, 2011 DOLSOX LEXIS 39 (ARB May 25, 2011).

Menendez v. Halliburton, Inc.

In late 2005, Anthony Menendez confidentially filed a complaint with the Securities and Exchange Commission (SEC) stating concerns about Halliburton, Inc.’s (the Company) alleged accounting practices.? In early 2006, he e-mailed a complaint to the Company’s internal audit committee raising essentially the same issues and he included his name and contact information in that message.? The Company’s Assistant General Counsel allegedly forwarded the complaint to internal audit committee members, the General Counsel and Chief Financial Officer.? The SEC subsequently informed the Company that it was opening an investigation into its accounting practices.? Shortly thereafter, the General Counsel allegedly informed several managers by e-mail that the SEC “opened an inquiry into the allegations of Mr. Menendez.”? The Chief Accounting Officer also allegedly passed on this e-mail to members of Menendez’s department.? Menendez then took a paid administrative leave, and resigned before he was scheduled to return.

Menendez filed suit under Section 806, alleging that the Company retaliated against him because of his complaints to the audit committee and the SEC, stressing that the Company violated his expectations of confidentiality by identifying him as a whistleblower.? The ALJ dismissed Menendez’s complaint, finding that he failed to demonstrate that the Company had taken adverse actions against him.? The ARB, however, found that the ALJ erred in finding that Menendez did not suffer an adverse action.

The ARB’s decision principally focused on whether Menendez suffered an adverse action.? It initially noted that Section 806 “explicitly proscrib[es] non-tangible activity … bespeaks a clear congressional intent to prohibit a very broad spectrum of adverse action against SOX whistleblowers.”? Further, although the ARB recognized that the Supreme Court’s landmark decision in Burlington Northern & Santa Fe Railway Co. v. White, 548 U.S. 53 (2006) was instructive, it stressed that Burlington Northern involved the standard under Title VII, and concluded that Section 806 affords greater protections than Title VII.? Thus, the ARB instead relied on Williams v. American Airlines, Inc., No. 09-018 (ARB Dec. 29, 2010), which held (in the context of an AIR 21 retaliation claim), that adverse action “refers to unfavorable employment actions that are more than trivial.”? The ARB went further to conclude that Section 806’s reference to the “terms and conditions of employment” does not limit SOX’s protections to “economic or employment-related actions.”

The ARB proceeded to analyze Menendez’s claim that the Company’s outing of his identity breached a right to confidentiality under Section 301 of SOX, which requires publicly-traded companies to establish procedures for confidential, anonymous submissions of employee complaints.? The ARB found that Section 301 “effectively establishes a ‘term and condition’ of employment within the meaning of Section 806’s whistleblower protection provision,” and concluded that outing Menendez as a whistleblower thus constituted an adverse action.? The ARB ultimately remanded the case for a determination of causation issues.

Kim v. The Boeing Co.

Michael Kim was as a Business Analyst tasked with consolidating cost data for The Boeing Company’s (the Company) financial statements.? From December 2006 through spring 2008, Kim complained of alleged financial irregularities to his managers and director, the Company’s ethics office, and the Senior Vice President of Internal Governance.? The Company investigated his complaints and found that his allegations were unfounded.? In November 2007, Kim told the Company’s Equal Employment Opportunity representative that he was being retaliated against and that his work environment became “incrementally more hostile and appeared designed to discourage him from pursuing his concerns about SOX non-compliance.”

In August 2008, Kim’s manager instructed him to transfer job duties with his co-worker due to concerns with his performance.? Kim refused and was suspended for insubordination.? He took a medical leave and the Company informed him that he would be terminated from his position immediately when he returned to work.? While on leave, and before he was terminated, he was selected for layoff in a reduction-in-force.? Kim filed suit under Section 806, alleging that the threatened termination and ultimate layoff were retaliatory.

The court initially noted that the ARB’s decision in Sylvester did not abrogate the Ninth Circuit ruling in Van Asdale v. International Game Tech., 577 F.3d 989 (9th Cir. 2009), that an employee’s disclosures must “definitively and specifically relate to one of the six listed categories of fraud or securities violations listed in 18 U.S.C. ?1514A(a)(1)” (emphasis added).? Driving this point home, the court stated that “[t]he Ninth Circuit Court of Appeals has joined other circuits in adopting this ‘reasonable interpretation of the statute.’” (citing Van Asdale, 577 F.3d at 997).

The court’s decision, however, ultimately focused on issues of causation rather than protected activity.? More specifically, the court granted the Company summary judgment because it established that it would have terminated Kim’s employment for insubordination regardless of whether he engaged in protected activity.? In so ruling, the court noted that Kim was warned that he would be discharged if he refused to comply with his manager’s order that he transition to the new position.? Moreover, the court emphasized that the transition would not have changed his compensation or benefits.

Implications

The ARB’s decision in Menendez is a substantial departure from the standard the ARB and federal courts have applied in determining whether an employee suffered an adverse employment action.? And the ARB’s novel ruling that an employee’s ability to file a complaint anonymously pursuant to Section 301 of SOX amounts to a term and condition of employment illustrates the risk that this new standard may be applied to yield liberal results.? It remains to be seen whether federal courts will defer to this new standard.

Moreover, the Kim court’s statement that the ARB’s Sylvester decision did not abrogate the federal appellate court decisions embracing the “definitively and specifically” test for whether conduct constitutes protected activity is noteworthy.? It reflects a lack of deference to the ARB’s recent decisions that are at odds with established lines of federal decisions, and it is possible that other federal courts will take the Kim court’s lead.? The Kim decision also is consistent with a trend of federal courts granting employers summary judgment in SOX whistleblower cases on causation grounds.

By: Steven J. Pearlman, Dawn Mertineit and Rachel S. Urquhart

Given the difficulties many businesses encounter in preventing former employees and executives from competing through enforcement of restrictive covenants, more companies should consider using “garden leave” provisions.? The garden leave concept, which arose in England, most typically takes the form of a clause in an employment contract under which a resigning employee must provide a certain period of notice of separation during which the company pays the employee to remain home, i.e., tend his/her garden, while the company transitions responsibilities and customers to other personnel.? Such clauses offer the business an opportunity to effect such a transition before the resigning employee has emerged at a competitor ready to compete. In this entry, we will explore the various ways a garden leave clause may benefit the employer. In subsequent entries, we will consider issues of timing and enforcing garden leave provisions.

Inasmuch as the resigning employee has a duty of loyalty to the enterprise by which she is still employed, a garden leave provision may compel the resigning employee to refrain from advising customers as to the identity of her prospective employer.? Even if that is not the case or the resigning employee breaches that obligation through some form of “off the record” communication, the enterprise has a better opportunity to maintain business than is the case in the ordinary restrictive covenant setting because the resigning employee remains in suspense and not immediately settled in at her new employment.? While there may be situations in which a customer chooses to redirect business to the resigning employee’s prospective employer pending the resigning employee’s arrival, more often than not a customer will be reluctant to put its business in the care of complete strangers when the familiar face upon which it has relied is absent.? Instead, customers will be more likely to stick with the company for which the resigning employee worked, which has some familiarity with the customer, and which has demonstrated a commitment toward transition of the customer to one of the resigning employee’s colleagues.

The other key instance in which a garden leave clause makes sense is when a manager or executive has familiarity with the company’s strategic plans.? Although the higher salary that managers or executives earn can be a deterrent to using garden leave clauses, it makes sense to sideline a manager or executive despite the substantial cost of doing so if that delay in her commencement of employment with a competitor can be the difference between the company’s success and failure in the marketplace.? Although former personnel are bound by a duty of loyalty to refrain from disclosing the company’s confidential, proprietary information, common sense suggests that this is one of the greatest perils of executive turnover.? Moreover, as we previously discussed here, in most jurisdictions, there are considerable obstacles to enjoining competition by way of the inevitable disclosure doctrine.? As a result, a garden leave clause may be the best tool for delaying a competitor from availing itself of a resigning employee’s knowledge and expertise.

By Jedd Mendelson

Agencies Issue Final Rule Disallowing Federal Contractor Reimbursement for Persuader Activities.

The long awaited oral argument in the seminal meal and rest break decision involving Brinker Restaurant finally occurred today. Before a packed courtroom, lawyers for a hopeful class of waiters and waitresses and the representatives of California employers battled it out before the seven justices of the California Supreme Court.

At issue are critical issues of interpretation that plague California businesses daily, and have sparked literally thousands of lawsuits, most brought as class actions seeking to recover the one hour “premium pay” owed for every missed meal or rest period.

• What does it mean to “provide” an uninterrupted 30 minute off-duty meal period—is it sufficient to make that meal period “available” to the employees and allow the employee to decide whether to take that time off, or must the employer “ensure” that the employee in fact did no work for 30 minutes?


• When must that meal period be taken to be legally compliant—could Brinker require employees to take that meal period within the first two hours of their shifts so they would be available to service customers during busy periods?


• “Must a meal period be provided every five hours? If an employee takes an early meal period after the second hour, would the employee be entitled to two meal periods in one eight-hour shift?”


• Must a rest period be offered within the first four hours of a shift, or could Brinker delay the rest period until after 4 hours had been worked?


• Must that rest period be offered before the meal period is made available?

What Does It Mean to “Provide” a Meal Period?

Counsel for the employees, Kimberly Kralowec, argued that California law protects employees by requiring affirmative steps to be taken by the employers to ensure that work stops for the required 30 minutes for meal periods. She was immediately pummeled with questions by most of the justices regarding this position, particularly the practical effect on both employees and employers. A majority of the court seemed inclined to interpret the statutes and wage orders to give employees the flexibility to decide whether to work through meal periods.

Justice Goodwin Liu asked plaintiffs’ counsel, “isn’t the hallmark of a meal period that the employer suspends control? Shouldn’t the employee be allowed to work if he wants?” When plaintiffs’ counsel responded, “no, the employee can’t work; the employer exercises control over the employee to prevent the employee from working,” Justice Liu followed up by asking “isn’t this coercive? Isn’t the most worker-friendly interpretation that the employee can do what he or she wants?” Plaintiffs’ attorney disagreed.

Justice Kennard similarly inquired “how does the employer enforce that standard? Isn’t that tantamount to an “ensure” standard? Why not give the employee the flexibility?” Justice Baxter asked how it could be “protective” of the employee to require the employer to discipline or terminate the employee if that employee disregards the employer’s instructions and works during a meal period? Justice Werdegar skeptically asked plaintiffs’ counsel, “you’re saying in order to protect the employee, if the employee freely chooses to work he should be disciplined?” Plaintiffs’ counsel responded, “yes,” because the off-duty meal period is mandatory, the employer is in control and therefore should discipline the employee if he or she works during the meal. This standard, Ms. Kralowec contended, is the same as with overtime, where an employee can be fired for working without authorization but still must be paid.

Defense counsel Rex Heinke argued that an employer has an affirmative duty to provide an opportunity to take a 30-minute meal period relieved of all duty, but agreed with Justice Kennard that the statutory language provides some flexibility because the employee decides whether to take that time as an off-duty period.

When Must a Meal Period Be Provided?

Another issue raised by this appeal is?when?the employer must provide a meal period—in the middle of the shift or anytime within the shift? Brinker employees did not necessarily wait until the middle of their shifts to take a meal period and thus might work more than five hours before receiving a second meal period or ending their shifts. Plaintiffs contended that Labor Code section 512 requires employees to be provided a meal before the end of the fifth hour and at least once every five hour “work period.”

Justice Kennard interpreted the plaintiffs’ argument as providing no flexibility on this issue, summarizing that “after five hours you stop work.” She read a long passage from a Labor Commissioner’s hearing in which restaurant workers, truck drivers, nurses and other employees objected to being forced to take meal breaks by the end of the fifth hour. She thus seemed sympathetic to Brinker’s position that meal periods can be offered anytime within the shift.

Brinker’s attorney argued that the wage order does not say that an employee earns a meal period for each consecutive five hours of work. The statute says only that those employees working “more than 10 hours per day” are entitled to two meal periods, and that plaintiffs’ interpretation renders the language requiring a second meal after ten hours a day “mere surplusage.” The Industrial Welfare Commission, moreover, specifies that rest periods shall, insofar as practicable, be offered in the middle of the work period, but makes no similar requirement for meal periods, except in the wage order governing the entertainment industry. To the extent the Wage Orders require meal periods for every five hours of consecutive work, even if the Wage Order would give employees “greater protections”—that interpretation conflicts with the Labor Code and should be disregarded, according to Brinker’s attorneys.

Justice Liu, however, differed with that interpretation, contending that the language of the Wage Order instead means that after any work period of five hours—including one taken after a 30-minute meal—gives the employee the right to a meal period, even a second meal period in an 8- or 9-hour day. For instance, if the employee started work at 8 a.m., took a meal period from noon to 12:30 p.m., and then worked until 6 p.m., he would be entitled to a second meal because he worked more than 5 hours after lunch. Mr. Heinke responded that the commission that issued the wage orders specifically deleted language that would have so required, and adopted the words “per day” to specify the obligation as to provide one meal period per day unless the employee worked 10 or more hours in that day. Since the other justices did not offer an opinion, it is unclear which way the court will go on this issue.

Rest Periods

The parties’ positions were just as much at war with respect to the interpretation of the employer’s obligation to authorize and permit rest periods. Plaintiffs in their briefs characterized the court of appeal’s ruling as entitling an employee working an eight hour shift to only one rest break because the first rest break would be granted only “after” the first four hours of work. Brinker retorted that the appellate court found that such an employee would be entitled to two rest breaks in one eight-hour period.

In oral argument before the California Supreme Court plaintiffs focused on their contention that Brinker’s policies discouraged or impeded employees from taking rest breaks. Brinker never paid the one hour’s wage to any employees, never conducted a compliance audit, and did nothing to determine or monitor compliance, they argued. Plaintiffs claimed that Brinker’s policies impeded, frustrated or dissuaded employees from taking rest breaks because their tips were not pooled, so they would lose tips when they took rest breaks. Justice Corrigan inquired whether plaintiffs were arguing that the employer “must” use a tip-pooling policy, and plaintiffs’ counsel responded, no, but the court erred in not allowing plaintiffs as a class to challenge the practice of penalizing employees who took rest breaks. Justice Liu seemed incredulous, asking why can’t the employer structure tips as it chooses, and how is this unlawful? Plaintiffs responded that Brinker’s practice of denying tip pooling created a “coercive atmosphere” that in their view violated the Labor Code and the Wage Orders.

Class Certification

Equally important given the flood of class actions being brought, the California Supreme Court has been asked to decide some difficult and important issues involving the standards for certifying classes alleging missed meal and rest periods, particularly what evidence can establish liability on a class-wide basis:

• Did individual issues predominate over common issues, thereby precluding class certification?


• Could Brinker’s meal policy coupled with records of workers’ shift lengths establish violations of Labor Code section 226.7, supplemented with representative employee evidence and survey/expert testimony—even assuming that meal periods only had to be “made available” to employees?


• Could plaintiffs establish liability for rest period violations through common corporate policies, corporate time records, representative employee testimony and/or survey evidence?


• Did plaintiffs’ expert survey and statistical evidence prove common issues sufficient to support class certification?


• Did the appellate court reweigh the evidence in overturning class certification?

The trial court certified a class back in 2006, finding that a common legal question of whether Brinker must force employees to take meal breaks predominated despite the individualized questions Brinker raised to defend against a finding of liability. The appellate court reversed, and plaintiffs now seek to reinstate that class.

Unfortunately, the parties did not have sufficient time to address these issues in oral argument. Plaintiffs’ counsel did argue that class certification was appropriate based on what he characterized as common issues regarding Brinker’s asserted policies or practices to dissuade, impede or discourage taking rest breaks. Justice Liu asked how rest periods could be susceptible to class treatment when the employer is not required to keep records showing that they were in fact taken, particularly without a written policy that proved that rest periods were denied or impeded. Justice Werdegar followed with her own question that suggested that she agreed that at least this issue was amenable to class certification. Justice Liu returned to this issue by challenging plaintiffs’ counsel as having no basis to show that Brinker acted unlawfully if it allowed each waiter to keep his/her own tips rather than pooling them.

We now will await the court’s decision, due out by early February 2012.

By: Alison Hightower

OSHA Issues Interim Regulations and Request for Comment on Certain Whistleblower Protections Added by Dodd-Frank Act.

Legislation Introduced to Update FLSA Computer Employee Exemption.

2011 is a sexual harassment prevention training year for many California employers with 50 or more employees. If this applies to you, there’s only a short time left to meet the year-end deadline for mandatory AB 1825 supervisor training.

In?State Department of Health Services v. Superior Court (McGinnis) (2003), a company avoided legal penalties by demonstrating it took all reasonable steps to prevent sexual harassment — including training for employees. That’s tangible proof of the value of harassment prevention training.

We can help you with your sexual harassment training either online or onsite. Contact us at 888-353-2976 to get more info.

Order Grants General Counsel Certain Powers in the Event NLRB is Left with Two Sitting Members.