Yahoo’s Ban on Working from Home: Does it Raise Red Flags For Other Companies?

By: Lynne Anderson

Yahoo’s widely reported decision to require its remote workforce to physically report to one of Yahoo’s office locations – or face termination of employment – has caused a social media stir. Here are some of the common questions, and our thoughts about whether Yahoo’s decision signals a trend applicable to other companies.

Q: Can Yahoo fire its remote workforce if they refuse to return to the office?

A: For the most part – yes.  If employees are employed “at-will,” then they can be fired with or without cause, and without notice. In other words, Yahoo’s statement that they feel the business is best served by the regular, spontaneous interactions resulting from having employees in the office is a legitimate non-discriminatory reason to require employees to return to the offices.  Therefore, any employee who refuses to physically report to a Yahoo office location can be lawfully fired for his/her refusal. Exceptions are generally limited to a circumstance where Yahoo had agreed, in writing, that the employee was guaranteed the ability to work from home.  Another limited exception is if the employee is allowed to work from home for a specified period of time, as a reasonable accommodation for a verified disability.

Q: Does Yahoo’s decision signal that the other industries should re-evaluate the use of remote workers?

A: While it is always productive to re-evaluate the effectiveness of workforce models, a wholesale rejection of the remote worker model does not necessarily serve an industry’s business needs, or risk management objectives.

First, Yahoo’s action is perceived as providing an opportunity to pare down a “bloated” workforce in an effort to limit the need for extensive reductions in force.  Yahoo is betting on there being less morale and legal risk associated with an employee’s resignation vs. an involuntary termination.  While companies may face the business need to ramp down certain departments depending on where they are in the approval process, targeted restructurings are generally a more appropriate response.

Second, many companies, such as Life Sciences companies that are paring down costs as they await FDA approval, use remote workers as a cost-savings method, to reduce office overhead costs. In contrast, it has been reported that Yahoo has “excess” office space that presumably would not be cost-effective to offload or sublease.  Also, the majority of Life Sciences companies are clustered in the areas of metro NY/NJ, Boston, the Bay Area and LA. Clearly, traffic is a significant issue in these areas and working remotely can offset the loss of productivity caused by lengthy daily commutes.

Remote work is also a necessity for many Life Sciences companies.  For example, clinical trials are conducted at investigator sites in the U.S. and around the world.  Employees in clinical operations must not only travel on a regular basis, but the ability to work remotely for much of the time when they are not traveling is valued.  Also, using a remote workforce is a common response to growth and expansion, especially when there is a need to locate your sales force in states outside of company headquarters and manufacturing facilities.

Fourth, most industry jobs do require a Bachelor’s degree, and workforce studies indicate that approximately one-fifth of Life Sciences jobs require an advanced degree.  Clearly, the ability to attract and retain a highly skilled and well-trained workforce has been recognized as a necessity to remain competitive – and that applies to small start-ups and large multi-national pharmaceutical companies.  The ability to work remotely, at least part of the time, can be an effective recruiting and retention tool.

Q: What are the emerging HR issues with regards to the use of remote workers?

A: While mobile technology is a tremendous asset in terms of collaboration, the law does not always keep pace with the cross-over intersection of business and personal use of mobile technology.  As a result, it is a “new frontier” and employers are faced with having to anticipate the potential legal liability. For example, to the extent that your company is monitoring employees’ e-mail/text and other use of mobile technology to ensure productively, it is critical to warn employees that they are being monitored, and they should have no expectation of privacy.  We are also seeing an increasing rise in litigation and employer-adverse agency decisions resulting from employers’ use of information about employees’ non-work activities gleaned from review of their personal Facebook accounts as a basis to discipline or terminate employees.  Also, many states have enacted or proposed legislation that makes it unlawful for an employer to directly or indirectly obtain access to an employee’s Facebook account.  As a result, we recommend that concerns about employee abuse of telecommuting are best addressed by routine and regular performance management, rather than social media spying.

We also recommend proactive management of concerns relating to data confidentiality and network security.  This includes review of existing restrictive covenant agreements to insure that enforceable non-disclosure, non-solicit and, if warranted, non-compete agreements are in place, tailored to protect those assets most critical to your business.  Choice of law provisions also need to be considered when the employee is in a different state or country than the HQ location.  In addition, we recommend providing the equipment used by the remote employee (phone/laptop, etc.), so that equipment – and all the programs and data contained on those devices – can be legally recovered at the end of the employment relationship.  Protocols should also be in place to restrict access to proprietary and other confidential information, to demonstrate that your company has a legitimate need to protect certain information.

Finally, we urge caution when allowing non-exempt employees to work remotely.  Wage and hour laws require that the hours non-exempt employees work are accurately tracked, and that they receive overtime for extra hours recorded, including for hours that the Company was on notice that the employee was working, even if those extra hours were not recorded.  Employers are being deemed as “on notice” when they are aware that the employee is e-mailing or texting supervisors about work during “off-hours” based on the access provided by mobile technology that might not be otherwise available to a non-exempt employee who is not working remotely.

(Editor’s note – This post was distributed as a Drinker Biddle Client Alert on February 27, 2013.  To read other Drinker Biddle alerts and publications click: http://www.drinkerbiddle.com/resources)

Second Circuit Rejects Application of McDonnell Douglas to New York City Human Rights Law – But Grants Summary Judgment Under More Lenient Analysis

By: William R. Horwitz

The U.S. Court of Appeals for the Second Circuit recently affirmed a district court’s summary judgment dismissal of a lawsuit that an attorney filed against her former employer alleging race discrimination under federal, state and New York City law.  In Simmons v. Akin Gump Strauss Hauer & Feld, LLP, 2013 U.S. App. LEXIS 1571 (2d Cir. 2013), the Court explained that the trial court had erroneously applied the McDonnell Douglas analysis to a New York City Human Rights Law claim, rather than only to the federal and state claims.  Nonetheless, the Second Circuit concluded that the trial court properly dismissed all of the claims.

Plaintiff Tameka Simmons worked as an associate for defendant law firm, Akin Gump Strauss Hauer & Feld, LLP (“Akin Gump”), from 2007 to late 2009.  In 2009, the firm was “experiencing significant economic difficulties.”  For economic reasons, Akin Gump laid off forty-seven attorneys in March 2009.  In April 2009, the firm announced deferred start dates for incoming associates.  In June 2009, the firm converted a full-time associate to an hourly employee.  At the end of 2009, the firm discharged Simmons.

Simmons filed a lawsuit against Akin Gump in the U.S. District Court for the Southern District of New York.  Her claims included race discrimination in violation of:  (1) Section 1981 of the Civil Rights Act of 1866, 42 U.S.C. § 1981; (2) Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq.; (3) the New York State Human Rights Law, N.Y. Exec. Law § 296; and (4) the New York City Human Rights Law, NYC Admin. Code § 8-101 et seq.  After discovery, Akin Gump filed a motion for summary judgment.  The district court granted the motion, dismissing the lawsuit in its entirety.  Simmons appealed.

The Second Circuit analyzed the federal and state claims under the “burden-sifting framework” of the McDonnell Douglas case.  In so doing, the Court considered whether Simmons could establish a prima facie case of discrimination by showing:  (1) that she was a member of a protected class; (2) that her job performance was satisfactory; (3) that she experienced an adverse employment action; and (4) “circumstances giving rise to an inference of discrimination” based on her membership in the protected class.

The Court concluded that Simmons could not establish the fourth prong of the analysis, because no evidence gave “rise to a reasonable inference of discrimination due to her race.”  According to the Court, the evidence demonstrated that Akin Gump terminated her employment solely for economic reasons.

In any event, the Court explained, even if Simmons had been able to establish a prima facie case of discrimination, she could not have satisfied the next step in the McDonnell Douglas analysis, which was demonstrating that the firm’s proffered reason for her termination was pretextual.  To satisfy this burden, Simmons would have had to present “sufficient evidence to support a rational finding that the legitimate, non-discriminatory reasons proffered by [the firm] were false, and that more likely than not discrimination was the real reason for the employment action.”  The Court acknowledged that Simmons provided “some evidence” – such as the “low percentage of African-American associates” in her department of the firm – but it was insufficient.  According to the Court, “[n]o reasonable jury could have found, on this record, that Simmons was selected for the reduction-in-force at least in part because of her race.”

The Second Circuit then turned to Simmons’ claims under the New York City Human Rights Law.  The Court explained that the New York City law “was intended to provide a remedy reaching beyond those provided by the counterpart federal civil rights laws.”  Accordingly, under the City law, Akin Gump could only obtain summary judgment by “showing that, based on the evidence before the court and drawing all reasonable inferences in [favor of Simmons], no jury could find that [Akin Gump] treated Simmons ‘less well’ than other employees at least in part because of her race.”

The Second Circuit observed that the district court had erred in failing to apply this more lenient analysis.  Nonetheless, even under this analysis, the Second Circuit concluded that Simmons could not maintain her claim.  The Court concluded that “Simmons failed to raise a triable issue as to whether she was treated less well than other employees based in whole or in part on discrimination, and not because of the non-discriminatory reasons proffered by [Akin Gump].”

As the Simmons v. Akin Gump case makes clear, the analysis that courts apply to discrimination claims under the New York City Human Rights Law is more lenient than the analysis under federal and state anti-discrimination laws.  Employers with New York City employees should be aware of the more liberal analysis, but understand that – even under this analysis – courts will dismiss claims as long as employers can provide adequate support for their decisions.  The keys to this effort include maintaining clear policies and documenting reasons for employment decisions.

Noel Canning: Where do we go from here?

By: Jerrold J. Wohlgemuth

The U.S. Court of Appeals for the D.C. Circuit determined last week in Noel Canning v. NLRB that the recess appointments of Board Members Flynn, Block and Griffin were unconstitutional because the Senate was not technically in “recess” when they were appointed in January 2012.  That decision does not mean – as some have insisted – that the Board must stop all proceedings until new members are confirmed.  Quite the contrary.

With respect to internal Board proceedings, the decision will have no impact on the work of either the General Counsel’s Office or the Regional Offices in conducting investigations or issuing complaints.  Indeed, we should fully expect the Acting General Counsel to continue to pursue his ambitious and controversial agenda.

As recently made clear by Board Chairman Mark Gaston Pearce, the Board takes the view that the D.C. Circuit opinion applies only to invalidate the specific decision in the Noel Canning case, and it has historically viewed circuit court opinions as non-binding beyond the specific case at issue.  Accordingly, the NLRB, as constituted, will continue to issue decisions until the recess appointment question is resolved by the Supreme Court.  In this regard, the D.C. Circuit opinion is already in conflict with an earlier decision of the Eleventh Circuit in Evans v. Stephens, and the issue has been raised in more than a dozen cases pending review in other circuits.  The validity of recess appointments will be raised first at the February 5 oral argument before the Fifth Circuit in D.R. Horton v. NLRB, which concerns the similar recess appointment of Former Member Becker in 2010, and then again in March when the question concerning the appointments of Members Block and Griffin will be addressed at oral argument before the Third Circuit in New Vista Nursing and Rehabilitation v. NLRB.  Other cases are pending throughout the circuits.

Nevertheless, the appeal process may take longer than expected because the recess appointment question may not be addressed in some or all of the cases pending on appeal.  That is because of the established principle of constitutional law that a court will not consider a constitutional challenge if the case can be disposed of on other grounds.  So, for example, the Fifth Circuit will not address the constitutional question in D.R. Horton unless it first determines that the Board was correct in deciding that class action waivers in arbitration agreements violate Section 8(a)(1) of the Act.  If, as anticipated, the Fifth Circuit rejects the Board’s legal analysis, it will have no reason to address the challenge to the recess appointments.  The same will hold true going forward with respect to many of the highly controversial Board decisions issued in the last year which are pending review in the circuit courts.

Even though the recess appointment issue has apparently been resolved in the D.C. Circuit, the future of cases pending there remains unclear.  First, the Board has until March 11 to file a petition for rehearing in banc, or until late April to file a petition for certiorari to the Supreme Court.  In the interim, the Circuit Court issued an order holding many of its the pending NLRB cases – including the appeal of the Banner Health decision – in abeyance for the foreseeable future.  That order may have a substantial impact on the appeals process inasmuch as Section 10(f) of the Act permits any aggrieved party to file an appeal in the D.C. Circuit irrespective of where the events in question took place.  While employers would naturally want to appeal to the court that has already ruled that otherwise enforceable Board decisions involving Members Block and Griffin are invalid, doing so may result in their cases not being heard on any grounds until after the recess appointments issue has been resolved.