Laborsphere

Daughter’s Facebook Post Leads to Costly Breach by Father of a Confidentiality Clause in His Settlement Agreement With Former Employer

A recent decision by a Florida appeals court, Gulliver Schools, Inc. v. Snay, stands as a stark reminder of the perils of trying to maintain confidentiality in the age of social media where news can travel faster than the speed of sound and inadvertent dissemination of information that is intended to be “confidential” can be difficult, if not impossible, to prevent.

Patrick Snay sued his former employer, Gulliver Schools, for age discrimination and retaliation under the Florida Civil Rights Act after his contract as the school’s headmaster was not renewed. The parties reached a settlement in the amount of $150,000 ($10,000 in back pay, $80,000 for non-wage damages, and $60,000 in attorney’s fees), and agreed that the “existence or terms” of the agreement were to be kept strictly confidential. The confidentiality provision prohibited Snay from “directly or indirectly” disclosing or discussing the case or the settlement with anyone except “his attorneys or other professional advisors or spouse.” It contained a clawback or liquidated damages provision allowing for the disgorgement of plaintiff’s portion of the settlement payments in the event of a breach.

Only four days after the parties had signed the settlement agreement, the school notified Snay that he had materially breached the agreement based on a Facebook posting of Snay’s college-age daughter, who boasted to approximately 1200 Facebook friends (many of whom were either current or past Gulliver students): “Mama and Papa Snay won the case against Gulliver. Gulliver is now officially paying for my vacation to Europe this summer. SUCK IT.”

Mr. Snay testified that he believed his daughter was retaliated against at Gulliver, that she was “very concerned about” the lawsuit, and that after the settlement was reached he and his wife decided to tell their daughter that the case had settled and that they were happy with the result. They apparently did not tell her that the settlement was confidential or that she should not disclose such information to anyone else. The trial court found that neither Snay’s comments to his daughter nor his daughter’s Facebook comment constituted a breach. The appeals court disagreed and reversed, ruling that Mr. Snay “violated the agreement by doing exactly what he had promised not to do,” and “[h]is daughter then did precisely what the confidentiality agreement was designed to prevent, advertising to the Gulliver community that Snay had been successful in his age discrimination and retaliation case against the school.”

Confidentiality clauses like the one in the Snay/Gulliver settlement agreement are common and should be enforced when they are clear, unambiguous and voluntarily and knowingly agreed to. From a drafting standpoint, if it was important for Mr. Snay to have disclosed certain information about the settlement to his daughter (as he had claimed at his deposition), then the confidentiality provision could have included “immediate family” as permissible recipients of confidential information and have subjected those family members to the same confidentiality obligations as Mr. and Mrs. Snay.

In addition, attorneys should take heed of this opinion in light of their ethical and legal obligations to protect client confidences. The duty to protect privileged and confidential client information extends to current clients (RPC 1.6), former clients (RPC 1.9), and prospective clients (RPC 1.18). Zealous representation and confidentiality are at the foundation of the attorney-client relationship, but if an attorney’s spouse, family member, or co-worker, inadvertently or otherwise posts on social media client or case information that is confidential (e.g., “mom just settled big toxic tort case, off to Mexico for much needed family vacation!”), such disclosure could be disastrous.

Proposed California Paid Sick Leave Law Will Require Employers to Provide Paid Sick Leave to Employees

Are you a California employer currently providing paid sick leave to your employees? You may soon have to! California Assemblywoman Lorena Gonzalez (D-San Diego) recently introduced legislation (Bill AB1522) approved by the Assembly Labor and Employment Committee requiring employers in the State of California to provide their employees with paid sick leave.

This bill would enact the Healthy Workplaces, Healthy Families Act of 2014 to provide, among other things, that an employee who works in California for 7 or more days in a calendar year is entitled to paid sick days to be accrued at a rate of no less than one hour for every 30 hours worked. An employee would be entitled to use accrued sick days beginning on the 90th calendar day of employment. And employers would be subject to statutory penalties as well as lawsuits, including the recovery of attorneys fees by the aggrieved employee against employers, for alleged violations.

It is important to note that this type of bill is not new in California, as the San Francisco Paid Sick Leave Ordinance became effective on February 5, 2007 and all employers must provide paid sick leave to each employee — including temporary and part-time employees — who performs work in San Francisco.

The California Chamber of Commerce as well as other employer groups are opposed to this bill and view it as a job killer.

Stay tuned….

Just Don’t Ask: With The Fair Chance Ordinance, San Francisco Joins A Growing Number Of Jurisdictions That Restrict Employers’ Pre-Hire Inquiries About Applicants’ Criminal Histories

In February 2014, San Francisco joined the growing number of jurisdictions that have enacted so-called “ban the box” laws. Like many of its counterparts, San Francisco’s Fair Chance Ordinance, which will become effective in August 2014, significantly limits employers’ abilities to inquire about and/or consider applicants’ and employees’ criminal records when making employment decisions.

Pursuant to the Ordinance, San Francisco employers are prohibited from asking about applicants’ criminal histories until either (a) after the applicants’ first live interview, or (b) after a conditional offer of employment has been extended. However, the Ordinance places considerable limits on obtaining and using any information obtained. Specifically, employers are prohibited from inquiring about or taking any adverse action against applicants or current employees based on: (a) any arrests not leading to a conviction, except for some unresolved (i.e., pending) arrests; (b) participation in or completion of a diversion or deferral of judgment program; (c) convictions that have been judicially dismissed, expunged, voided, invalidated or otherwise rendered inoperative; (d) convictions or other determinations of the juvenile justice system; (e) convictions older than seven years; and/or (f) information pertaining to any offense other than a felony or misdemeanor (e.g., infractions). Before making any inquiry about an applicant’s conviction history, the Ordinance requires that the employer provide the applicant in question with a notice promulgated by the San Francisco Office of Labor Standards Enforcement (“OLSE”).

The Ordinance also requires that employers engage in an individualized assessment and consider only directly-related convictions when making decisions about applicants. Employers also must consider the amount of time that has elapsed since the applicants’ convictions and any evidence of rehabilitation, inaccuracy of the applicants’ records, and/or other mitigating factors. Before making any adverse decision, employers are required to provide the employee with a written notice of their intention to make such a decision, detailing the reasons for the decision. In addition, if any background report was considered by the employer, the employer must also provide that to the applicant. Any affected candidate has seven days following receipt of the employer’s notice to submit evidence regarding: (i) the inaccuracy of the criminal history information; or (ii) rehabilitation or mitigating factors. If the employer receives such information from an applicant, it must delay its intended action and consider the additional information.

In addition to the above restrictions, the Ordinance contains strict anti-retaliation/interference provisions. The Ordinance also requires that employers post a notice of applicants’ and employees’ rights in a conspicuous place at every workplace, job site, or other location in San Francisco that is under the employer’s control and that is frequently visited by employees or applicants. In addition, any job postings must contain a notice that the employer will comply with the Ordinance’s requirements.

Though San Francisco’s ordinance is particularly stringent, the City is by no means alone in banning employers from inquiries about applicants’ criminal pasts: dozens of cities and several other states – including Hawaii, Massachusetts, Minnesota, and Rhode Island – have enacted similar “ban the box” legislation. Moreover, there are a growing number of organizations pushing for the enactment of similar laws and ordinances across the country.

Employers in jurisdictions that have already enacted “ban the box” laws should ensure that they avoid any impermissible inquiries. Employers in locations that have not yet been affected should closely monitor developments in their jurisdictions to avoid any exposure.

Cheryl Orr and Sarah Millar Quoted in InsideCounsel Labor & Employment Digest: April 2014

Cheryl Orr, partner and co-chair of the Labor & Employment group, and Sarah Millar, partner and vice chair of the Employee Benefits & Executive Compensation group, were both quoted in InsideCounsel’s April 2014 Labor & Employment Digest. The monthly digest “brings together the voices of labor & employment and employee benefits lawyers to get their take on the issues shaping the policies of workplace compliance and regulation.” Sarah’s quote looked at how employers can avoid the challenges presented by tobacco cessation programs and Cheryl’s looked at how the anti-drug policies of companies located in states where marijuana is now legal for medical or recreational use are affected. Both quotes are below in their entirety.

Avoid the challenges of tobacco cessation programs

“Tobacco cessation programs structured outside a health plan can be problematic. Some state laws prevent employers from making hiring and firing decisions based on someone’s smoking status. It puts employers between a rock and a hard place. The law is complicated and ties your hands in some respect, but there are options and creative ways to incentivize healthy behavior. It’s a matter of walking through the steps and thinking it through, then coming up with an effective communication plan.”

Marijuana legalization and anti-drug policies

“Companies located in one or more of the 21 states that allow the use of medical marijuana need to understand the laws may affect a company’s anti-drug policy. For employers that have federal contracts or are otherwise subject to federal regulations concerning drug-free workplaces, your practices do not need to change. Otherwise, employers should expect more challenges from staff that fail drug tests but claim they weren’t impaired while working. Training programs for managers will help them recognize signs of impairment and answer inquiries regarding the use of medical marijuana.”

Are College Football Players on Scholarships “Employees?” An NLRB Regional Director Says “Yes”

On March 26, 2014, the National Labor Relations Board’s Regional Director (RD) in Chicago ruled that Northwestern University’s football players who receive scholarships are “employees” under the National Labor Relations Act and have the right to form a union. The potential implications of this ruling are significant. If the decision is not overturned by the National Labor Relations Board (NLRB) or a federal court, every private college and university in the country that has scholarship athletes could face the unionization of athletes in sports that generate significant revenue. Public universities could also be affected under state labor laws.

The RD found that the university, through the football program, exerts significant control over the football players. During the six-week training camp immediately before the season, athletes are given daily itineraries that dictate football-related activities for that day. During training camp, the players spend between 50 and 60 hours every week engaged in football-related activities. In season, the players spend between 40 and 50 hours per week in practice, travel and playing games. The coaching staff sets all of the details for away games and the activities of the players throughout the trip. During the off season, players are expected to spend 12 to 25 hours of work on football activities. In addition, the players must follow rules set by the coaching staff, including regulations concerning personal conduct, alcohol and tobacco use, and internet conduct and protocol.

The economics of college football played a large part in the RD’s decision. From 2003-2012, the football program generated almost $235 million in revenue for the university through ticket sales, TV deals, merchandise and licensing agreements. For their football services, the players receive tuition, fees, books, and room and board for up to five years. These benefits have a monetary value up to $76,000 per year and $380,000 over five years. The players do not receive a paycheck, but the RD found that the players “nevertheless receive a substantial economic benefit for playing football.” Another significant fact was that each season the players had to sign a “tender” for their scholarships, which the RD determined to be “an employment contract.” According to the RD, “it is clear that the scholarships that players receive are in exchange for the athletic services being performed” since the scholarships are tied to the players’ athletic performance; the scholarships can be revoked if players quit the team or violate team rules. On the other hand, the RD found that walk-on players were not employees because they do not receive scholarships or any other economic benefit from the school.

Northwestern can appeal this decision to the NLRB in Washington D.C. and the legal battle could go on for several years. In the meantime, the RD will schedule an election for the scholarship football players to vote on being represented by the College Athletes Players Association (CAPA).

Among the several questions/issues raised by this decision are:

Would scholarship athletes in sports that generate little or no revenue be considered employees?

As employees, are the football players entitled to minimum wage and overtime pay?

Are they covered by the Occupational Safety and Health Act and other employment-related laws?

Will this decision impact college graduate assistants, who are not employees under current NLRB law?

This unprecedented ruling is consistent with other recent Labor Board decisions establishing new law or reversing long-standing decisions, which make the National Labor Relations Act more favorable to labor unions. This agenda is unlikely to change in the near future.

U.S. Supreme Court Ruling in Quality Stores Clarifies That Severance Pay is Taxable—in Most Cases

On Tuesday, March 25, 2014, the U.S. Supreme Court, in an 8-0 decision, ruled in Quality Stores, Inc., et al., 12-1408 that severance payments made to employees who are involuntarily terminated are taxable wages under the Federal Insurance Contributions Act (FICA). The Court reversed the Sixth Circuit Court of Appeals ruling in favor of Quality Stores, which was seeking a $1 million tax refund based on its argument that severance payments were not covered by FICA and were excluded from taxation based on the Internal Revenue Code. The Court’s ruling resolved a split between the Sixth Circuit and the Federal Circuit, and ended a legal battle with more than $1 billion at stake in potential tax refunds to employers involved in 11 separate cases with more than 2,400 refund claims.

Quality argued that its severance payments to terminated employees were actually supplemental unemployment compensation benefits (SUB), which are not considered “wages” under the Internal Revenue Code. According to the company, “a SUB payment is a type of payment that—although made by an employer to [its] former employee—nonetheless does not meet the statutory definition of ‘wages’ because it is not remuneration for services.” The Court noted that the severance payments were made only to employees and were based on employment-driven criteria including the position held, the employee’s length of service with the company and salary at the time of termination. Relying on the “broad definition of wages under FICA,” the Court ruled that severance payments to employees who are terminated involuntarily are taxable under FICA.

However, in its decision the Court noted IRS revenue rulings that severance payments tied to the receipt of unemployment compensation benefits “are exempt not only from income tax withholding but also FICA taxation.” Thus, employers appear to continue to be able to make severance payments that are exempt from income tax withholding and FICA through a carefully crafted structure linking the severance payments to the employee’s receipt of unemployment compensation benefits.

If you have any questions about the impact of this decision, please contact Mark Nelson or Alejandra Lara, or any other member of the Labor & Employment Group.