Employment Practices Loss Prevention Guidelines. A Practical Guide from Chubb

Transcription

1 Employment Practices Loss Prevention Guidelines A Practical Guide from Chubb

2 Copyright 1999, Chubb & Son, a division of Federal Insurance Company

3 Employment Practices Loss Prevention Guidelines A Practical Guide from Chubb Prepared by Seyfarth, Shaw, Fairweather & Geraldson for the Chubb Group of Insurance Companies Contents Introduction 5 Overview of Employment Statutes 6 Statutes Prohibiting Discrimination in Employment Other Statutory Protections Common Law Claims Under State Law 23 Wrongful Discharge/Discharge in Violation of Public Policy Breach of Contract Promissory Estoppel Covenant of Good Faith and Fair Dealing Tortious Interference with Contract Invasion of Privacy Assault and Battery False Imprisonment Negligence Claims Intentional Infliction of Emotional Distress Defamation Fraud and Misrepresentation 1

4 The Hiring Process 31 General Principles for Employers to Consider Before the Hiring Process Begins Employment Applications Interviews Employer Investigations: References and Other Employee Background Checks Hiring the Applicant Employee and Applicant Testing 41 Medical Testing Drug and Alcohol Testing Psychological or Honesty Tests Lie Detector Tests HIV Testing Performance and Aptitude Tests Fingerprinting Personnel Policies and Employee Handbooks 47 Disclaim Any Promise of Job Security Avoid Making Contractual Obligations Use Clear and Concise Language Specifically Allow for Flexibility and Modification Suggested Policies to Include in Employee Handbooks Problematic Employee Handbook Policies Revising the Handbook Employee Evaluations 53 General Guidelines Instructions for Supervisors Supervisor Training Job-Related Appraisals Review by Objective Person Meaningful Evaluations Employee Acknowledgment 2

5 Discipline/Corrective Action 58 The Importance of Documentation Investigations General Principles Regarding Discipline Terminating the Employment Relationship 62 Policies to Limit Liability Avoid Post-Termination Conduct That Could Lead to Claims Severance Agreements Layoffs and Reductions In Force (RIFs) 66 Preparation for RIF-Related Interviews Other Considerations Alternative Dispute Resolution (ADR) 69 Advantages of ADR Disadvantages of ADR The Use of Personnel Records in Employment Litigation 72 Assume All Documents Are Available to Your Opponent The Benefits of Properly Prepared Documents Problematic Documents Document Retention Policies Practices Liability Insurance 76 Conclusion 78 Note: The views expressed in this handbook are those of the author and may or may not reflect the views of any members of the Chubb Group of Insurance Companies. 3

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7 Introduction Employers are facing increasing legal obligations in managing their workforces. Labor and employment laws continue to impose significant burdens on employers. Correspondingly, the high visibility of a handful of million-dollar verdicts encourages employees who perceive their treatment as unfair to claim such treatment is unlawful and file lawsuits. The cost to employers to defend against such suits is high, regardless of the ultimate outcome of the cases. Additionally, with the increase in new legal developments involving the employment relationship, many employers find it difficult to keep up-to-date on what laws apply to their operations and what obligations such laws impose on them. Nonetheless, employers can limit their exposure to potential claims involving their employees. First, employers should stay up-to-date and fully understand which laws apply to their organizations. Second, employers can institute policies that limit potential claims as well as make actual claims easier and less costly to defend. These guidelines seek to provide assistance in both areas. The guidelines first provide an overview of the significant laws that impact the workplace. Next, the guidelines provide practical suggestions to limit liability throughout the employment relationship, from interviewing through termination of employment. We are pleased to share the information in this handbook with you. If you already have a program in place to help your organization manage its employment practices, we hope that our handbook will serve as a practical resource. If not, then it s never too soon...or too late...to begin thinking about protecting your organization from the effects of an employment-related lawsuit or allegation. Let our handbook be the basis for laying the foundation for a strong loss prevention program that will meet your individual needs. Gary J. Tully Senior Vice President and Managing Director Chubb & Son 5

8 Overview of Employment Statutes There are many laws that impact employment, either directly or indirectly. To acquire knowledge of all such laws is not practical and probably not necessary. Nonetheless, there are a number of laws that are extremely significant in the employment context. All employers should be aware of these laws and the legal obligations they impose. The following summary provides an overview of these laws. Statutes Prohibiting Discrimination in Employment Various federal statutes impose upon employers the obligation to provide equal employment opportunity to employees without regard to age, sex, pregnancy, race, color, national origin, religion, disability or military status. Many states (and some cities and counties) have statutes that provide not only similar but also additional protections as those afforded employees under federal law. Employers today are frequently faced with charges of violating one or more of the statutes prohibiting discrimination. These allegations of discrimination most often follow employment decisions that adversely affect an individual or group of individuals, such as the discharge or discipline of an employee, the denial of a promotion or the rejection of an applicant. Title VII of the Civil Rights Act of 1964 (Title VII) Title VII is one of the most common sources of employment litigation. The statute makes it unlawful for an employer to fail or refuse to hire or to discharge any individual, or otherwise to discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment because of race, color, religion, sex, including sexual harassment, national origin, and pregnancy, childbirth, or related medical conditions. Claims under Title VII are established through either direct evidence of an intent to discriminate, or indirect (circumstantial) evidence, including statistical imbalances (known as disparate treatment and disparate impact, respectively). A Title VII claim may arise from an alleged unlawful difference in treatment afforded similarly situated employees based upon one of the above classifications or from an employment practice that appears non-discriminatory but that has an adverse impact upon employees in a protected class. 6

9 Overview of Employment Statutes Most commonly, claims under Title VII allege that an individual was treated less favorably regarding a term or condition of employment because the individual belonged to a protected class. To state such a claim, the individual must show that he or she belongs to a protected class; that the individual was qualified for a position; that the individual was denied the position; and that the job remained open or was filled by an individual that was not in the protected class. After the employee establishes the foregoing, the employer can avoid liability by articulating a legitimate nondiscriminatory reason for its actions. If the employer establishes a nondiscriminatory reason for its actions, the employee must then prove that the employer s reason is pretextual. Title VII applies to employers with 15 or more employees. All employees, including parttime and temporary workers, are counted for purposes of determining whether an employer has the requisite number of employees. Title VII cases are initially processed by the Equal Employment Opportunity Commission (EEOC) or an equivalent state agency. Following the initial processing of the case, the complaining party is issued a notice of his or her right-tosue. Individual employees or the EEOC may then bring suit in federal court. A charge alleging a violation of Title VII must be filed within 300 days of the alleged unlawful act (180 days in some states). A lawsuit must be filed within 90 days after receipt of the notice of the right-to-sue. Generally, remedies for unlawful employment discrimination include reinstatement or hiring, court orders to eliminate discriminatory practices, lost wages, damages and attorneys fees. Based on amendments enacted as part of the Civil Rights Act of 1991, compensatory and punitive damages are also available from private employers. The size of the employer determines the maximum compensatory and punitive damages available: $50,000 for employers with employees; $100,000 for employers with employees; $200,000 for employers with employees; and $300,000 for employers with more than 500 employees. 7

10 Overview of Employment Statutes NOTE: Rules for Claims of Sexual Harassment As a result of decisions of the United States Supreme Court in July 1998, there are new rules for employer liability for claims under Title VII alleging sexual harassment in the workplace. The crux of the Court s rulings is that an employer s efforts at prevention and correction of sexual harassment will be key to defending sexual harassment claims. Under the rule of these decisions: An employer that does not have a disseminated sexual harassment policy with a complaint procedure will be automatically liable for sexual harassment by its supervisors. Employers with a disseminated sexual harassment policy that has a complaint procedure, however, will have an affirmative defense to claims of sexual harassment by their supervisors if the harassment did not result in a tangible employment action (the employee being fired, demoted, caused to lose benefits, etc.) and if the employee unreasonably failed to use the complaint procedure. Employers will be vicariously liable for sexual harassment by supervisors, regardless of the existence of a sexual harassment policy, if the harassment results in a tangible employment action. Employers will be liable for sexual harassment by non-supervisors (co-workers, customers, vendors and independent contractors) based on a negligence standard that the employer knew or should have known of the harassment. Although not explicitly stated by the Court, it appears that employers will be vicariously liable for all harassing conduct by the highest-level managers, regardless of whether the employer has a disseminated sexual harassment policy and complaint procedure, whether the conduct resulted in tangible job detriment, or whether the employee complained of the conduct. The Court specified that the complaint procedure should provide alternative avenues of complaint so that the victim is not forced to complain first to his or her supervisor who may be the very one committing the harassment. 8

11 Overview of Employment Statutes Section 1981 of the Civil Rights Act of 1866 Section 1981 is frequently the basis for race discrimination claims typically brought in connection with a claim under Title VII. Section 1981 was enacted following the Civil War and makes it unlawful for any person to be denied the same right... to make and enforce contracts... as is enjoyed by white citizens.... Section 1981 has been interpreted to protect against discriminatory employment practices. Section 1981 defines race in a curious way. It permits a race discrimination lawsuit to be brought by any employee whose ethnic background made the employee an object of discrimination in the post-civil War era. Section 1981 protects all identifiable classes of persons who are subjected to intentional discrimination solely because of their ancestry or ethnic characteristics which, according to the U.S. Supreme Court, includes Arabs and Jews. Section 1981 applies to all employers both private and public. Therefore, employers who are not covered by Title VII are covered by Section 1981, and employers who are covered by Title VII are covered by both laws. However, cases alleging discrimination based upon a disparate impact can only be brought under Title VII because Section 1981 requires proof of intentional discrimination. Section 1981 cases do not require the same administrative prerequisites required under Title VII (e.g., there is no requirement to file a charge with the EEOC) and can be filed directly in federal court. Generally, back pay and benefits can be awarded along with reinstatement, injunctive relief, and the plaintiff s attorneys fees and costs. Compensatory and punitive damages can also be awarded, but unlike Title VII, there are no statutory caps for damages. The applicable state statute of limitations for tort claims, usually two years, applies to Section 1981 claims. Equal Pay Act (EPA) The Equal Pay Act deals specifically with unlawful differentials in compensation based on sex. This Act makes it unlawful to pay employees at a rate less than the rate applicable to employees of the opposite sex for equal work on jobs requiring equal skill, equal effort, equal responsibility, and where the work is performed under similar working conditions. 9

12 Overview of Employment Statutes There are a number of exceptions where a differential can be justified. The most significant exception is where a wage differential is based on some factor other than sex such as seniority. The Equal Pay Act applies to most employers. Individuals claiming a violation of the Equal Pay Act may either directly bring a lawsuit in federal court or may, at their discretion, file a charge with the EEOC. The statute of limitations for EPA claims is two years unless the violation is willful, in which case the period is three years. Successful plaintiffs can recover back pay, an equal amount in liquidated damages (absent an employer s good faith where there are reasonable grounds for believing that no violation was occurring). Injunctive relief and attorneys fees are also available. Executive Order Executive Order establishes non-discrimination and affirmative action requirements for federal contractors. It prohibits discrimination and requires affirmative action with regard to race, sex, ethnicity and religion. Except for contractors exempted by regulation, Executive Order covers contractors with a federal construction contract or with a federally assisted construction or nonconstruction contract in excess of $10,000. Such contractors must comply with and include in their contracts an Equal Opportunity Clause wherein the contractor agrees to make certain disclosures and certain statements of non-discrimination to employees, applicants, collective bargaining representatives, subcontractors and vendors. 10

13 Overview of Employment Statutes Additionally, contractors with 50 or more employees and government contracts of $50,000 or more are also covered by Executive Order These contractors must develop written affirmative action plans (AAPs). The Office of Federal Contract Compliance Programs (OFCCP) regulations set forth the required contents of an AAP, including both written and statistical portions. These requirements include the following: The AAP must include a written statement of the contractor s commitment to equal employment opportunity; The contractor must disseminate its equal employment opportunity policy internally (to all employees) and externally (to potential applicants and the community); The contractor is required to implement the AAP commitments, by assigning AAP responsibilities to various levels of management; The contractor must identify problem areas and the corrective action to be taken, by evaluating personnel practices and policies such as selection processes, transfer and promotion activities, applicant flow, seniority practices, training programs and similar activities, to determine whether they may limit the selection and advancement of minorities and women; The contractor should establish and maintain: (1) logs for monitoring personnel transactions and conducting the required analyses, and (2) a system for the periodic review of the logs; The OFCCP Regulations discuss the development and execution of action-oriented programs designed to eliminate problem areas to attain established goals; The contractor must comply with the sex discrimination guidelines in the OFCCP Regulations; The AAP must reflect that the contractor provides active support to local and national community action programs designed to improve the employment opportunities of minorities and women; As part of maintaining and updating the AAP annually, the contractor must prepare a report of the results of the program s goals; 11

14 Overview of Employment Statutes The contractor is required to consider minorities and women not currently in the workforce (hard-core unemployed) who have requisite skills and can be recruited through affirmative action measures; and, The contractor must analyze and discuss hiring practices for the past year, including recruitment sources and testing, to determine whether the EEO policy is being followed for all job categories. Similarly, an impact ratio analysis of upgrading, transfers and promotions must be conducted. Additionally, there are numerous statistical analyses requirements, such as a Workforce Analysis, Job Group Analysis, Availability Analysis, Utilization Analysis, and a setting of annual Goals. The OFCCP conducts periodic compliance reviews of federal contractors during which time an employer s affirmative action and employment practices are examined. The OFCCP will also investigate complaints filed by individuals alleging discrimination. No private right of action exists. Failure to comply with an administrative determination finding a violation of Executive Order shall result in the immediate cancellation, termination and suspension of the respondent s contracts and/or debarment of the respondent from further contracts. Age Discrimination in Employment Act (ADEA) The ADEA makes it unlawful relative to any employees who are age 40 and over for an employer to fail or refuse to hire or to discharge any individual or otherwise discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual s age. Significantly, under the ADEA an employer is not required to provide equal health insurance, life insurance, or disability benefits to older workers if it costs more to do so, provided it spends the same amount on both older and younger workers. The ADEA frequently poses particularly difficult problems in the context of hiring decisions and reductions in force. 12

15 Overview of Employment Statutes The ADEA covers employers with 20 or more employees. Like Title VII cases, ADEA cases are initially processed by the Equal Employment Opportunity Commission (EEOC) or an equivalent state agency, then can result in a federal court suit. In addition to allowing recovery of lost wages, lost benefits and reinstatement, the ADEA provides for liquidated (double) damages in cases of willful violations and attorneys fees. Front pay may also be awarded. A charge alleging a violation of the ADEA must be filed within 300 days of the alleged unlawful act (180 days in some states). A lawsuit must be filed within 90 days after receipt of the notice of the right-to-sue. Although the ADEA only protects individuals age 40 and over, many states prohibit age discrimination against employees age 18 and over or, in some states, protect all individuals regardless of age. Older Workers Benefit Protection Act (OWBPA) In the OWBPA of 1990, Congress established a number of threshold requirements to ensure that an employee s waiver of the right to sue under the ADEA would be knowing and voluntary. Currently, a valid waiver of an ADEA claim must include the following criteria: written in language that can be understood by the employee; a specific reference to a waiver of ADEA rights; that future rights or claims arising after the agreement cannot be waived; additional consideration to which the employee is not already entitled; advice to consult an attorney before signing the agreement; a 21-day waiting period for the employee to consider the agreement; and, a 7-day revocation period after the signing of the agreement. In cases involving an exit incentive or other employment termination program offered to a group or class of employees, the 21-day period is extended to at least 45 days, and there are additional requirements (for example, various types of age data, eligibility factors, time limits and related information must be disclosed.) 13

16 Overview of Employment Statutes Americans with Disabilities Act (ADA) The Americans with Disabilities Act imposes a broad array of requirements that relate to employees who have a disability, which is defined as (1) having a physical or mental impairment that substantially limits one or more of the major life activities of the individual; (2) having a record of such an impairment, or (3) being regarded as having such an impairment. The ADA prohibits discrimination on the basis of disability against a qualified employee, defined as an individual with a disability who, with or without reasonable accommodation, can perform the essential functions of the employment position for which the individual holds or desires. The ADA requires employers to make reasonable accommodations for disabled employees unless the accommodation would pose an undue hardship on the employer. Undue hardship means an action requiring significant difficulty or expense, taking into account the employer s size and resources. In addition, the ADA allows for a separate cause of action for unlawful preemployment inquiries. The duty of reasonable accommodation under the ADA has a broad impact on the importance of job descriptions, pre-employment physical examinations, pre-employment inquiries, and other employment practices. The ADA covers employers with 15 or more employees. ADA cases are initially processed by the Equal Employment Opportunity Commission (EEOC), then can result in a federal court suit. Generally, back pay and benefits can be awarded along with reinstatement, injunctive relief, and the plaintiff s attorneys fees and costs. Based on amendments enacted as part of the Civil Rights Act of 1991, compensatory and punitive damages are also available, depending on the employer s number of employees, up to a maximum of $300,000. A charge must be filed within 300 days of the alleged discrimination (180 days in some states). A lawsuit must be filed within 90 days after receipt of the right-to-sue notice. 14

17 Overview of Employment Statutes Many states also have statutes that impose similar requirements upon employers. For example: The Illinois Human Rights Act makes it unlawful to discriminate on the basis of race, color, religion, sex, national origin, ancestry, age, marital status, physical or mental handicap, military status, or unfavorable discharge from military service in connection with employment. (775 ILCS 5/1-102.) There are also affirmative action requirements for (775 ILCS 5/2-105.) The California Fair Employment and Housing Act, Cal. Gov. Code 12940, makes it an unlawful employment practice to discriminate on the basis of disability. One of the policies behind the statute was to make it broader than the ADA. For example, the California law reaches employers with more than one employee. In New York, it is an unlawful employment practice to refuse to hire or employ or to bar or to discharge from employment, or to consider when acting upon applications, a person s age, race, creed, color, national origin, sex, disability, genetic predisposition or carrier status, or marital status. N.Y. Exec. Law 296. The New York Human Rights Law applies to employers with more than four employees. Rehabilitation Act of 1973 The Rehabilitation Act prohibits handicap discrimination in employment by federal employers (Section 501), employers with federal contracts over $10,000 (Section 503), and programs receiving federal financial assistance (Section 504). The prohibition against handicap discrimination states that no otherwise qualified individual may solely by reason of his [or her] handicap be excluded from or otherwise discriminated against. The Act requires employers to provide a reasonable accommodation to an otherwise qualified handicapped individual up to the point that the accommodation would cause undue hardship. Generally, employers who are in compliance with the requirements of the ADA will also be in compliance with the requirements of the Rehabilitation Act. Applicants or employees may file an administrative complaint with the Office of Federal Contract Compliance Programs of the Department of Labor. Violations of the Rehabilitation Act can result in the termination of federal funding. Moreover, individuals affected by unlawful handicap discrimination may also maintain a private lawsuit in federal court. 15

18 Overview of Employment Statutes Immigration Reform and Control Act of 1986 (IRCA) The Immigration Reform and Control Act has essentially placed private employers in the role of policing the federal government s immigration policies. This law prohibits any employer s employment of illegal or unauthorized aliens and, accordingly, requires all employers to verify the identity and employment authorization of every new employee. The statutory provisions and regulations governing the employment verification process are quite complex, and the Act imposes extensive record keeping requirements on employers. In addition to prohibiting employment of unauthorized aliens, the Immigration Reform and Control Act prohibits employers not covered by Title VII (i.e., an employer with four to fourteen employees or one specifically exempted from Title VII) from discriminating against an individual on the basis of his or her national origin in hiring, discharge, recruitment or referral for a fee. This prohibition against citizenship or national origin discrimination was designed to prevent employers from refusing (out of an overabundance of caution ) to hire individuals who, based on their citizenship or national origin, might appear to be illegal aliens. However, it is not unlawful for an employer to prefer a U.S. citizen over a non-citizen to the extent that two individuals are equally qualified. IRCA s anti-discrimination provisions apply to employers with four or more employees. To avoid charges of discrimination, yet still comply with IRCA, an employer should only ask what is necessary to determine whether an individual is authorized to work in the United States and should avoid additional questions concerning an applicant s national origin or birthplace. The Immigration Reform and Control Act is administered by the Immigration and Naturalization Service, but the Act s non-discrimination provisions are processed by a Special Counsel within the Justice Department. The non-discrimination provisions of the Immigration Reform and Control Act are, to a significant extent, still untested. Successful plaintiffs can recover back wages and benefits, reinstatement, civil penalties, attorneys fees, and equitable relief. For IRCA discrimination claims, a charge must be filed within 180 days. 16

19 Overview of Employment Statutes Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA) The USERRA prohibits discrimination against employees who leave their jobs to serve in the uniformed services and establishes a comprehensive set of statutory reemployment rights. The USERRA replaces the Veterans Reemployment Rights Act. The purpose of the USERRA is to ensure that veterans suffer no detriment for having left their civilian employment to serve in the uniformed services. Reservists generally are afforded the same protections as inductees. Employees alleging violations of the USERRA can file complaints with the Veterans Employment and Training Service of the U.S. Department of Labor. Employees also have the option of filing private lawsuits at anytime. USERRA permits recovery of back pay, benefits and attorneys fees. Damage awards may be doubled for willful violations. Vietnam Era Veterans Readjustment Assistance Act of 1974 Section 402 of this Act prohibits federal contractors and subcontractors from discriminating against disabled veterans and veterans of the Vietnam Era and requires affirmative action to ensure nondiscrimination in employment decisions regarding such individuals. The Act is enforced by the Department of Labor. There is no private right of action. State Discrimination Laws Federal antidiscrimination laws do not preempt more restrictive state laws. Most states and many local governments have some kind of antidiscrimination law. Many of these laws apply to smaller employers that may be exempt from compliance with the comparable federal law. Some states also protect individuals from discrimination on other grounds, including the use of tobacco products outside work, marital status, and sexual preference or orientation. It is imperative that employers discern what obligations their local jurisdictions impose. 17

20 Overview of Employment Statutes Other Statutory Protections Family and Medical Leave Act (FMLA) The FMLA provides certain employees with up to 12 work weeks of unpaid, job-protected leave a year, and requires group health benefits to be maintained during the leave as if employees continued to work instead of taking leave. An employee is eligible for FMLA leave if the employee: 1) works at a work site with 50 or more employees or at a work site with 50 or more employees within 75 miles of the work site; 2) has worked for the employer for 12 months; and 3) has worked at least 1,250 hours in the year before the leave commences. The FMLA entitles eligible employees up to 12 weeks of unpaid leave per 12 month period for: 1) child care following the birth of a child or placement of a child for adoption or foster care; 2) care for a spouse, child or parent of the employee who has a serious health condition; or 3) a serious health condition that makes the employee unable to perform an essential function of his or her position. The FMLA is administered by the U.S. Department of Labor. An employee can file a complaint with the Department of Labor or pursue a private action in either state or federal court. Successful plaintiffs can recover back pay and benefits, actual monetary losses, an equal amount of back pay in liquidated damages, attorneys fees and equitable relief. The statute of limitations for FMLA claims is two years, or three years for willful violations. Fair Labor Standards Act (FLSA) The Fair Labor Standards Act is the statute best known for establishing the minimum wage and maximum hour/overtime requirements. The FLSA requires any nonexempt employee who works over forty hours a week to receive overtime at a rate not less than one and onehalf times the regular rate at which he [or she] is employed. The FLSA can be quite difficult to administer in a variety of situations, and the calculation of an individual s regular rate of pay frequently causes practical problems. The FLSA is subject to a host of technical exemptions and exceptions for example, it does not govern 18

21 Overview of Employment Statutes employees working in a bona fide executive, administrative, or professional capacity... or in the capacity of outside salesman... The FLSA contains record keeping requirements, in addition to provisions governing the employment of children under the age of 16 (the Secretary of Labor has the power to restrict the employment of children between the ages of 16 and 18 in occupations declared to be particularly hazardous ). The FLSA is administered by the Wage and Hour Division of the Department of Labor. An employee can file a complaint with the Department of Labor or pursue a private action in either state or federal court. Successful plaintiffs may recover back wages and benefits, an additional equal amount of back wages as liquidated damages (unless the employer acted in good faith with reasonable grounds for believing its actions were lawful) and attorneys fees, and equitable relief. The statute of limitations is two years, or three years for willful violations. National Labor Relations Act (NLRA) The NLRA is the basic statute governing collective bargaining and union relations in the United States. Although the collective bargaining requirements imposed under the NLRA are extensive and, in some respects, extremely technical, the NLRA ostensibly is neutral on the basic issue of whether or not employees should decide to form a union. Although the NLRA protects the right of employees to bargain collectively through representatives of their own choosing, the NLRA also specifically states that employees shall also have the right to refrain from any or all such activities.... The process by which a union seeks employer recognition under the NLRA is also complex. The Act requires that a labor organization designated or selected for the purposes of collective bargaining by a majority of employees in an appropriate bargaining unit becomes the exclusive representative for all employees in the unit relative to rates of pay, wages, hours of employment, or other working conditions. Complicated rules have been developed under the NLRA dealing with what employers may and may not do in connection with union activity or organizing efforts, picketing, strike and replacement situations, business restructuring, and so on. Questions in these areas should be resolved in consultation with experienced labor counsel. 19

22 Overview of Employment Statutes The NLRA is administered by the National Labor Relations Board ( NLRB ). Depending upon the specific matters that are at issue, the finding of an employer or union unfair labor practice can result in a cease and desist order, reinstatement and/or back pay. In cases involving NLRB findings of egregious unfair labor practices during union organizing campaigns, Board remedies may include a bargaining order without a rerun election. Additionally, where the Board finds that an employer unlawfully subcontracted or relocated a plant or operation without engaging in decision-bargaining (if required), the Board may order that the discontinued plant or operation be reestablished while decision-bargaining takes place. Worker Adjustment and Retraining Notification Act (WARN) The Worker Adjustment and Retraining Notification Act requires that employers provide 60 days written notice in advance of any plant closing or mass layoff. The terms plant closing and mass layoff are misleading, and care must be taken to ensure that the statutory definitions are understood. Notice, when required, must be served on: (a) unions; (b) unrepresented affected employees; (c) the appropriate local government; and (d) the state dislocated worker unit. WARN s administration in practice can be extremely complex. Additionally, the Act has a variety of ambiguous exceptions, exemptions and exclusions. WARN is enforced by the direct filing of lawsuits by employees, unions or government officials in federal district court (either where the closing or mass layoff occurred or any district where the employer transacts business). Although a court cannot issue an injunction under WARN to block a closing or mass layoff, an employer who fails to provide required notice may be liable for up to 60 days wages and benefits to all aggrieved employees who should have been afforded notice, plus a fine of up to $500 per day (i.e., up to $30,000 over 60 days) for any failure to serve notice on the local government. Additionally, prevailing parties can recover attorneys fees and costs. WARN liability is offset by severance pay only if the severance pay was not provided pursuant to a legal obligation (i.e., where it was not required under a labor agreement or binding severance policy). The $500/day fine is nullified if a violating employer pays all employees the amount the employer is liable for within three weeks after the plant closing or mass layoff. 20

23 Overview of Employment Statutes The U.S. Department of Labor has promulgated detailed WARN regulations, although the Department has no other authority (apart from the promulgation of regulations) to enforce or administer WARN s requirements. Fair Credit Reporting Act (FCRA) The Consumer Credit Reporting Act of 1996, effective October 1, 1997, amended the Fair Credit Reporting Act to significantly expand employer obligations with respect to disclosing and obtaining applicant consent to investigations. The FCRA governs two types of reports: (1) consumer reports: any written, oral, or other form of information provided by a consumer reporting agency (CRA), which addresses creditworthiness, credit standing, or credit capacity, character, general reputation, personal characteristics or mode of living, and (2) investigative consumer reports: a consumer report or portion thereof in which information on an individual s character, general reputation or mode of living is obtained through personal interviews with neighbors, friends, associates or with others with whom the individual is acquainted or who may have knowledge regarding the information sought. An employer who wishes to order either type of report on an applicant or employee must provide the individual a written statement disclosing that a report may be obtained and obtain the individual s written authorization and release. Investigative consumer reports require an additional disclosure describing the information that may be obtained. The statute imposes other specific requirements for a valid disclosure. Before taking any adverse employment action based on a consumer report (i.e., refusing to hire a person or denying a promotion to a current employee), the employer must provide the individual with a copy of the consumer report and a written description of the consumer s rights under the FCRA. 21

24 Overview of Employment Statutes In addition, after taking an adverse employment action based on a consumer report, the employer must provide the applicant or employee with the following: notice of the adverse action; the name, address and telephone number of the CRA (including a toll-free number for nationwide CRAs); a statement that the CRA did not make the adverse action decision and is unable to provide the employee with specific reasons as to why the adverse action was taken; and notice of the applicant s right to obtain a free copy of the consumer report from the CRA within 60 days and dispute the accuracy of any information in the report. State or federal actions and private lawsuits are available to enforce compliance with the Act. Further, any person who knowingly and willfully obtains a consumer report under false pretenses may face criminal prosecution. 22

25 Common Law Claims Under State Law Many states recognize common law claims which afford employees additional causes of action against their employers. As a general rule, an employment relationship for no specific duration may be terminated any time, for any reason or for no reason at all, at the will of either the employer or the employee. This is referred to as the employment-at-will doctrine. Under this rule, the reason for terminating an employee does not matter, even if the reason was unfair. Over the past several years, however, an employer s ability to discipline or discharge its employees at will has become more and more restricted in many states. There are a number of recognized exceptions to the general employment at-will rule. For example, employees working under a union contract generally can be discharged only for just cause. Various discrimination statutes protect employees from being discharged on the basis of a protected classification. Many laws also prohibit retaliation against employees for exercising rights protected by statute, such as filing workers compensation claims or discrimination charges. Additionally, some written employment contracts may specifically limit the circumstances under which an employee may be terminated. Wrongful Discharge/ Discharge in Violation of Public Policy A wrongful discharge case is a case in which a court restricts an employer s right to terminate an at-will employee. A number of courts recognize a wrongful discharge claim for termination in violation of a well-established public policy. Cases alleging discriminatory discharge fall under this broad category. Another example of a public policy discharge is a claim for retaliatory discharge. Classic examples of public policy retaliatory discharge lawsuits involve employees who claim they were terminated for: whistle-blowing reporting unlawful activities to law enforcement officials (or sometimes even complaining to the media or another company employee); filing workers compensation claims; refusing to perform illegal, unethical or unsafe activities on behalf of an employer; fulfilling a legal duty, such as serving on a jury or attending court when subpoenaed as a witness; and cooperating in a governmental investigation involving the employer. 23

26 Common Law Claims Under State Law A major concern with public policy discharge cases is that they often are treated as torts (like personal injury cases) which means that employees who win these lawsuits may be able to collect compensation for mental anguish and punitive damages that can greatly exceed the actual economic damage or lost wages and benefits. Breach of Contract The most common form of wrongful termination lawsuits alleges that an employer breached a contract, whether formal or informal, not to terminate employment except for good cause. If an employer expressly or implicitly agrees, orally or in writing, to hire an employee for a specific period, to discharge only for just cause, or to abide by progressive disciplinary procedures, that agreement may be determined by a court to constitute an enforceable employment contract. Express Contracts. Lawsuits challenging terminations in violation of alleged express contracts are not limited to high-level executives with formal, written, signed employment agreements or to employees who are covered by union contracts. Courts have permitted individual employees to sue for breach of contract simply on the basis of informal promises, made orally by managers or other individuals in positions of authority. Implied Contracts. In cases where no specific promises were made, courts nonetheless have sometimes determined that there was an implied contract that an employee would not be discharged except for good cause. The wide variety of facts and evidence courts have found relevant in determining if an implied contract exists include: language in employee handbooks that states employees will be provided an initial probationary period; language in disciplinary policies that states employees will be discharged only for particular offenses; language in progressive disciplinary policies that states employees will receive chances to improve their performance; language in handbooks or records that states fairness or special consideration will be given employees because of longevity or seniority; an employee s work history that reflects regular merit raises, good performance evaluations, praise and promotions; the employer s practice of discharging employees only for good cause; and an industry-wide practice that employees are treated fairly or terminated only for good cause. 24

27 Common Law Claims Under State Law Many of these factors are present in most American businesses. Therefore, unless an employer takes affirmative steps to declare its employer-at-will status, employment may not be truly at-will. Damages for breach of contract typically attempt to put the employee in the same position, and no better, than he or she would have been if the contract had not been breached. Promissory Estoppel Promissory estoppel claims are used to enforce promises in the absence of a contract. To recover, an employee must prove that his or her employer made an unambiguous promise to him or her, that the employer reasonably expected him or her to rely on the promise, and that he or she in fact relied. The employee must also prove that the reliance was detrimental and that injustice can only be avoided by enforcement of the promise. Accepting or continuing employment alone is usually not sufficient reliance to support a claim. Covenant of Good Faith and Fair Dealing Courts in several states have held that all employment relationships are contractual in nature and contain an implied promise of good faith and fair dealing. The basic theory is that a party to a contract must not act in bad faith so as to deprive the other party of the benefits of the agreement. Good faith and fair dealing cases often involve abusive and highly offensive discharges, such as: termination of an employee to avoid paying a sales commission; retaliation for refusing to become romantically involved with a supervisor; or retaliation for publicizing or alleging wrongdoing on the part of the employer. Tortious Interference with Contract This type of claim alleges that an individual, without privilege to do so, caused a third party 25

28 Common Law Claims Under State Law not to enter into or continue a business relationship. It typically involves allegations that individual supervisors or managers interfered with the contractual relationship between employees and their employers. An example of such a claim is where a supervisor knowingly communicates false information about an employee to higher management that results in the employee s termination. These claims are often brought against individual co-workers or supervisors. Invasion of Privacy There are many common law torts that potentially address privacy issues. The three most prevalent theories follow: Intrusion Upon Seclusion. This is the most common invasion of privacy claim brought by employees against their employers. It protects employees from intentional intrusions into their private affairs. To create liability, the employee must prove the following: intentional intrusion by the employer on the seclusion or solitude of the employee or the employee s private affairs or concerns; and the intrusion was in a manner that would be highly offensive to a reasonable person. For example, a former employee brought a discrimination and invasion of privacy action against her former employer based on invasive questioning by the employer of whether the employee was married and ever planned to have children. Public Disclosure of Private Facts. This tort seeks to protect employees from public disclosures regarding their private lives. To create liability, the publicity must be highly offensive to a reasonable person, and the subject matter must not be of a legitimate concern to the public. The facts made public do not have to be false to establish this tort. Unauthorized disclosure of medical records may be the basis for such a claim. False Light. This tort protects employees from false or misleading public statements about them. To create liability, the employer must publicize false or misleading information; the information must be highly offensive or defamatory; and the employer s conduct must be intentional or in reckless disregard of the truth. Invasion of privacy liability can be minimized by removing any expectation of privacy. 26

29 Common Law Claims Under State Law For example, an employer can establish, distribute and post policies that publicize the fact that personal items, lockers, purses and automobiles are subject to search. Employers with systems should consider having a log-in screen that reminds the user that is not private and may be read by anyone. Protecting the confidentiality of employee evaluations, medical records and disciplinary records will also reduce exposure to liability. Assault and Battery Assault and battery claims frequently are brought with claims of sexual harassment, in connection with employer drug testing, or in connection with employees being forcibly detained or removed from an employer s premises. Assault consists of an unlawful attempt, and an ability, to inflict physical injury. The victim must have a reasonable apprehension of an immediate offensive physical touching. Battery consists of a completed assault after physical contact is made. The attacker must have intended to threaten or injure the victim, and there must have existed a substantial certainty that the attacker s conduct would threaten or harm the victim. False Imprisonment False imprisonment claims typically arise from the detention of employees suspected of theft or other unlawful behavior. To prevail, an employee must show that he was unlawfully detained and that he was restrained by force from leaving. Negligence Claims Negligent Hiring. The tort of negligent hiring is an expansion of the so-called fellow servant rule, under which an employer is required to select employees who will not endanger fellow employees. The modern view stresses the duty to hire and retain competent employees for the benefit of third parties as well as co-workers. The tort is now recognized in almost every state. Generally, an employer may be liable for negligent hiring where it is established that: (1) the employer knew or should have known that the employee in question had a particular unfitness for the position so as to create a danger of harm to third persons; (2) such particular unfitness was known or should have been known at the time of hiring; 27

30 Common Law Claims Under State Law and (3) the particular unfitness proximately caused the claimed injury. An employer should assess the nature of the position at issue and its relationship to the public and other employees. Depending upon the risks involved in the position, the employer should determine what information is necessary to assess whether an applicant is appropriate for the position. Gathering the information required for the position, including checking references and assessing the applicant s suitability should be performed in the context of the particular needs of the position. For instance, criminal background checks and any indication of violent tendencies are appropriate subjects of investigation for positions involving security access or use of potentially dangerous weapons (e.g., security guard). Negligent Evaluation. This claim takes two forms. One is where an employee who is not evaluated claims that the employer was negligent in not performing a job evaluation, despite a duty to do so. The second is where an evaluation is performed, but the employee alleges that it was done negligently or improperly, and that if the employer had not been negligent, it would have realized that the basis for discipline or discharge was improper. Negligent evaluation claims are not recognized in most states. Nonetheless, poorly completed or forgotten evaluations can give rise to defamation, discrimination, or breach-of-contract claims. Negligent Training, Retention and Supervision. Negligent training and supervision claims assert that, had the employer exercised due care in training and supervising an employee, an injury to a third party could have been prevented. Negligent retention claims assert that an employer knew or should have known of problems with an employee that indicated unfitness yet failed to take corrective action. Negligent retention claims frequently involve allegations of sexual harassment. Intentional Infliction of Emotional Distress This type of action includes allegations that the discharge of an employee was carried out in an intentionally and extremely abusive, degrading or humiliating manner. Many states do not recognize these claims in the employment context or may provide relief solely through their workers compensation statutes. In those states where these claims are recognized, the employer s actions generally must exceed all bounds of decency. 28