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Beyond The Legalese

Why You Need to Update Employment Agreements - Right Now

7/25/2016

 
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Employment agreements generally include non-disclosure provisions (“NDAs”).  Without an NDA, an employer may not be able to stop an employee from misappropriation of company trade secrets or other confidential information. By signing an NDA, an employee agrees to keep the details of his or her work confidential.

But what about illegal activity that employees may witness? Are they prevented from reporting that too, for fear of breaching their NDAs? Under the Defend Trade Secrets Act 2016 (“DTSA”), signed into law by President Obama on May 13, 2016, the short answer is “No.” 

The DTSA expressly states that an individual cannot be held criminally or civilly liable under any federal or state trade secret law if they disclose a trade secret “(A)…in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.”(18 U.S.C. § 1833.) In other words, DTSA provides immunity to “whistle-blowers.”

The DTSA requires employers to alert their employees about the trade secret "whistle-blower immunity" clauses in any employee contract or agreement that is entered into or updated after May 13, 2016.  In practice, this means employers should revise employment agreements, alert anyone who has signed one (e.g., employees, third-party contractors, and consultants) about the new law, and have them sign a revised agreement.  Each company will need to determine its own appropriate revised NDA language.  There is no particular penalty per se for non-compliance, but failure to comply may prevent the employer from recovering exemplary damages or attorney fees in an action brought under the DTSA for theft of trade secrets against an employee to whom no notice was provided.

While the full impact of DTSA on the area of trade-secrets law remains to be seen, one thing is clear: Employers should ensure that their NDAs comply with the new law. And that means changing employment agreements - right now. 

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Highway Robbery?  FedEx Ground Drivers [Take the] Stand and Deliver

10/31/2014

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The independent contractor business model has been around for quite some time, and has recently been moving beyond the construction and technology spheres (where it was most commonly utilized), into industries such as janitorial services, home health care, and even the restaurant business.  An Intuit trend report published in 2010 projected that by the end of this decade, 40% of the American workforce will be comprised of contingent workers—a class that includes temps and independent contractors.  While many companies stand by this hiring practice, others criticize the model as a way for businesses to penny-pinch when it comes to taxes, insurance, and Social Security contributions.  Independent contractors’ salaries are not dictated by wage and hour rules, so they are not entitled to overtime pay, either (nor may they unionize).  Their non-employee status also excludes them from the protection afforded by other labor laws such as those enforced by the U.S. Equal Employment Opportunity Commission.

According to current secretary of the U.S. Department of Labor, Tom Perez, not an insignificant percentage of employers are actually misclassifying their workers as independent contractors.  In his March 2008 testimony before the House Economic Matters Committee, Perez declared this to be a “pervasive practice that cheats the state out of revenue, creates an unlevel playing field for businesses and deprives workers of their basic rights in the workplace.”  This very concern is the basis of a slew of class-action suits that have been brought by hundreds of current and former FedEx Ground delivery drivers in dozens of states, who claim that the shipping subsidiary has been taking advantage of them ever since the company acquired Roadway Package System in 1998 and adopted the policy of treating drivers as independent contractors and not as employees.  The plaintiffs are demanding back-pay for overtime and reimbursement for paycheck deductions for items such as professional uniforms and equipment, and vehicle cleaning and maintenance.  They contend that they should be considered full employees in light of the extent to which FedEx Ground strictly dictated their hours and routes, personal appearance on the job, and other work-related expectations, as laid out in their carefully-worded contracts.

FedEx Ground has been facing these suits since 2009 and, for a few years, they were largely successful in convincing the judges of the legality of their policies; appeals courts in numerous states decided in their favor.  This past August, however, the U.S. Ninth Circuit Court of Appeals in San Francisco revisited and overturned an earlier decision and ultimately declared Oregon and California drivers to be actual employees, deserving of the rights and benefits associated with such a status.  This opened the door for other similar cases to be reviewed, and it appears as though the pendulum is swinging more consistently towards the rights of the workers, and away from the company employing them.  Earlier this month in Kansas, the Supreme Court issued a ruling that validated the employee status of FedEx Ground drivers.  That same week, the National Labor Relations Board came to the same conclusion.  Yet, despite these losses (and the fact that they’re repeatedly being accused of playing dirty pool), the industry leader still maintains that the independent contractor arrangement benefits their workers as well as the company’s own bottom line.  The shipper’s position is that the practice encourages entrepreneurship and offers more freedom and flexibility than the traditional workforce model, thus empowering the small business owners who work for them—and who were required to officially incorporate as such in order to keep their jobs, according to one plaintiff counselor Beth Ross.  Workers’ rights groups, as well as the drivers, themselves, are adamant that the flexibility and advantages primarily benefit the employer, leaving the independent contractors with only a fraction of their earned income after having to bear the financial burdens that would (and should) have fallen squarely on the shoulders of FedEx Ground, had their employee status been honored from the outset.  If all of the class actions in progress resolve in favor of the workers, their employer may have to deliver hundreds of millions of dollars in potential damages.  The prospect of similar consequences—along with various state bills enforcing the proper classification of employees—just might encourage other businesses to take a closer look at their personnel policies.

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Internships: To Pay or Not to Pay?

6/6/2014

 
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The U.S. Department of Labor (DOL) recently filed an amicus brief in support of a group of interns who brought a class action suit against the Hearst Corporation.  The plaintiffs worked in unpaid internship posts at a number of the defendant’s magazines, and then alleged that they were entitled to minimum wages and overtime.  They claim that their work earned them the protection under the Fair Labor Standards Act (FLSA).  The DOL points to its Wage and Hours Division (WHD) Fact Sheet #71, which outlines six specific criteria to determine whether or not an intern or trainee is considered a full employee under the law.  The DOL asserted that the six-part test more accurately “captures the economic reality of the relationship,” as it provides more objectivity in its definition of what does or does not constitute an employee, and “ensure[s] that the agency applies a consistent standard across the country.”

In addition to those six criteria, there are other factors to determine the legality of an unpaid internship in the “for-profit” private sector.  When an internship is structured more as an extension of an individual’s educational environment than as an integral part of the employer’s operations, there may be more room to justify an unpaid internship. But once an intern’s responsibility shifts towards filling more productive roles normally handled by salaried employees, compensation may be required.  Similarly, if the employer takes on an intern for a “trial period” in anticipation of possibly hiring the individual as a full employee (essentially treating the internship as an extended job interview), that intern would generally be entitled to the same benefits as an employee under the FLSA.

In an increasingly competitive job market, internships serve as a particularly attractive “foot-in-the-door” for students who want to improve their chances of securing a job once they graduate.  However, as valuable as that experiential learning is, “the hope for a better ‘someday’ should not come at the cost of working without pay today,” according to WHD deputy administrator Laura Fortman.  For this reason, many legal and career service professionals believe that unpaid internships are unfair.  Interns may be unaware of their legal rights under employment law, and thus not know enough to demand fair compensation.  Also, an unfortunate result of the oft-cutthroat race to job placement and success is an uneven playing field.  Says Mikey Franklin, co-founder of the Washington, D.C.–based Fair Pay Campaign: “People who can afford to work for free get ahead.  People who can't afford to work for free fall behind.”  Franklin initiated his grassroots organization last year, and is working to develop it into a national campaign to end unpaid internships.  After all, he quips, one “cannot pay for groceries with college credit.”



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