Employment Law Lookout

Be-Leave It — New EEOC Guidance Emphasizes Leaves of Absence as Reasonable Accommodations

Posted in Absence Management & Reasonable Accommodation, ADA, EEOC

By Tracy M. Billows and Sara Eber Fowler

Seyfarth Synopsis: The EEOC recently issued “new” guidance for addressing leave as a reasonable accommodation. Employers must remember to consider unpaid leave as an accommodation, when appropriate, even if an employee would not otherwise be entitled to a leave of absence. 

Recently, the EEOC published “new” guidelines about the rights of employees seeking leave as a reasonable accommodation under the Americans with Disabilities Act (“ADA”), “Employer-Provided Leave and the Americans with Disabilities Act.”  The publication is intended to guide employers about when and how leave must be granted “to promote voluntary compliance with the ADA.”  While essentially reiterating the EEOC’s long established positions on many facets of leave as an accommodation, the guidance specifically highlights several “trends” observed in recent ADA charges and discusses how the EEOC views such practices.

What’s on the EEOC’s radar?

  • Maximum leave policies — policies limiting the amount of leave an employee can take
  • “100 percent healed” policies — policies that do not allow employees to return to work if they have ongoing medical restrictions
  • Policies that do not consider reassignment as a potential accommodation

At its core, the guidance probably does not tell you anything you did not already know – ADA accommodations are incredibly fact-intensive and employers must engage in the interactive process, address an employee’s needs on a case-by-case basis, and unpaid leave as a possible accommodation.

You have also probably heard that, in the world of the ADA, some rules (aka, policies) are meant to be broken. But just in case the message has not quite sunk in, the EEOC makes their case quite clear: “the ADA’s reasonable accommodation obligation is to require employers to change the way things are customarily done to enable employees with disabilities to work.” The guidance also provides examples of how the EEOC views employers’ obligations under various scenarios.

So before you go pointing to Part IV, Section 2.6, subpart (b) of your Employee Handbook and denying an employee’s accommodation request, be sure to consider the following tips from the EEOC.

  • Unpaid Leave. Employers MUST consider unpaid leave as a reasonable accommodation, “if the employee requires it,” and so long as doing so does not create an undue hardship. The EEOC cautions that it does not matter if an employee already exhausted the leave available under company policy or the FMLA, or if the employee is not otherwise eligible for leave.  So, for example, if your leave policy only covers employees who work a minimum amount of hours per week or who have worked for a minimum duration, you still must consider whether unpaid leave is a reasonable accommodation, notwithstanding the employee’s ineligibility.  Per the EEOC, “[t]he ADA requires that employers make exceptions to their policies, including leave policies, in order to provide a reasonable accommodation.”
  • “Maximum leave policies” may be permissible, but employers must grant exceptions when necessary as an accommodation.  For instance, an employer who grants its employees five absences per year before being subjected to discipline may need to adjust its policy — as applied to absences for a disability — as a reasonable accommodation.
  • “100% healed policies” may easily run afoul of the ADA. Employers cannot prohibit employees from returning to work merely because they have ongoing medical restrictions.  In fact, the EEOC makes its position extremely clear: “An employer will violate the ADA if it requires an employee with a disability to have no medical restrictions” before returning to work where the employee can perform her job with or without a reasonable accommodation, unless undue hardship or a direct threat would result.  In short, where employees seek to return from leave with ongoing medical restrictions, employers must engage in the interactive process and determine whether those restrictions can be accommodated.
  • Reassignment is a potential accommodation. The EEOC’s position is that, if reassignment is required, an employer must (1) place the employee in a vacant position for which he is qualified; and (2) cannot require that the employee compete with other applicants for the open position.  (Note: this does not include promotions or uniform seniority systems.)  This position is not new for the EEOC, but now, there is no mistaking its stance.
  • Undue hardship remains a defense to providing an accommodation. The EEOC lists several factors to consider in assessing whether an accommodation would result in an undue hardship, including (i) the amount and/or length of leave required; (ii) the frequency of the leave; (iii) whether there is any flexibility as to the days the leave is taken; (iv) whether the need for intermittent leave is predictable or unpredictable; (v) the impact of the employee’s absence on coworkers and whether specific job duties are being performed in an appropriate and timely manner; and (vi) the impact on a company’s operations and its ability to serve customers/clients (which also takes into consideration a company’s size).  Generally, the guidance is not clear on when these factors may result in an undue hardship.  But, the EEOC reiterated that indefinite leave — an inability to say when or if an employee will return to work at all — IS an undue hardship and is NOT a reasonable accommodation.

Addressing requests for accommodation are challenging, particularly when they involve leaves of absence. And though these guidelines are not binding, they provide helpful tools when engaging in the interactive process and may help avoid landing on the EEOC’s radar.

For more information about this article, please contact the authors, your Seyfarth Attorney or a member of the Firm’s Absence Management and Accommodations Team. [http://www.seyfarth.com/Absence-Management-and-Accommodations]

 

Maryland Passes One of Nation’s Most Expansive Equal Pay Laws

Posted in Diversity, Retention & Pay Equity

By Annette Tyman, Katherine Mendez, and Christopher W. Kelleher

Seyfarth Synopsis:  Maryland Governor Hogan has signed into law a new pay equity bill that strengthens protection against pay discrimination in the workplace, and prohibits employers from providing less favorable employment opportunities because of sex or gender identity. 

Maryland has joined states such as California and New York by passing one of the country’s most aggressive equal pay laws. Governor Hogan signed Senate Bill 481 (cross- filed with House Bill 1003) on Thursday, April 19, 2016.  The law will go into effect in October.

While federal law has long prohibited pay discrimination for equal work on the “basis of sex” for employees working at the same location and under similar working conditions, Maryland’s updated Equal Pay for Equal Work Act prohibits pay discrimination on the “basis of sex or gender identity,” and covers employees who work for the same employer at workplaces located in the same county of the state and who “perform work of comparable character or work in the same operation, in the same business, or of the same type.” Thus, the new measure drastically expands protections for Marylanders.

The law covers more than just pay disparities. It also prohibits employers from “providing less favorable employment opportunities,” which includes placing employees into “less favorable career tracks” or positions, “failing to provide information about promotions or advancement,” and “limiting or depriving” employees of employment opportunities because of sex or gender identity.  Additionally, employers may not forbid employees from “inquiring about, discussing, or disclosing” their wages or the wages of other employees.

Additionally, Governor Hogan also signed into law House Bill 1004, which established an Equal Pay Commission. The Commission will:

  1. Evaluate wage disparities between individuals of one race, sex, or gender identity and individuals of another race, sex, or gender identity, based on all available data;
  2. Establish a mechanism for the Commissioner to collect data from employers in the state to assist the Commission in its efforts to evaluate the disparities listed in item (1);
  3. Develop a strategy to determine and recommend best practices regarding equal pay for equal work to individuals, employers, and policymakers;
  4. Study and make recommendations regarding whether and to what extent administrative and legal processes and remedies can be streamlined with other anti-discrimination laws;
  5. Develop partnerships with private sector entities to identify:   (a) methods of developing data collection; (b) methods raising employer awareness; and (c) potential fundraising sources;
  6. Share data and findings with the Commissioner to assist in enforcement actions.

With states like Maryland joining efforts on the federal landscape to collect compensation data from employers in an effort to evaluate pay disparities, savvy employers should carefully conduct proactive pay assessments to ensure they understand reasons for pay differences. This may include conducting internal audits, evaluating permitted hiring criteria, and modifying policies.  The Commissioner of Labor and Industry, which is responsible for enforcement of the Act, will consult with the Maryland Commission on Civil Rights to develop educational and training materials to help employers comply with the updated law.

Senator Alexander versus the EEOC – Goal to Reduce Case Backlog

Posted in EEOC

By Abigail Cahak

Seyfarth Synopsis: Senate Committee on Health, Education, Labor and Pensions Chairman Lamar Alexander (R-TN) takes aim at the EEOC’s EEO-1 data collection proposal and systemic litigation efforts through proposed legislation.

On March 16, 2016, Senate Committee on Health, Education, Labor and Pensions Chairman Lamar Alexander (R-TN) introduced a bill taking aim at the EEOC’s new EEO-1 data collection proposal, penchant for systemic litigation, and lack of transparency regarding its litigation-related expenditures. The proposed EEOC Reform Act (Senate bill S.2693) would require that:

  • Before the EEOC implements its new EEO-1 data collection proposals, the agency must collect the same data from the executive branch as well as verify, compile, ensure confidentiality, and protect that information. It must calculate the amount of time this takes—including how many staff hours were reallocated from working on tackling its backlog of complaints of discrimination—and submit annually a report to Congress on this information.  This report must also be made available to the public for comment.
  • The EEOC prepare a comprehensive plan for how it will use, collect, verify, protect, and ensure the confidentiality of the new EEO-1 data and not begin collecting this information until the agency reduces its backlog of 76,000 private sector complaints of discrimination to fewer than 3,660—the same number of data points employers will be required to provide under the EEOC’s new EEO-1 proposal.
  • Individual Commissioners have the power to require the Commission to approve of any proposed litigation and that there must be a Commission vote before the agency proceeds with any litigation involving multiple plaintiffs or allegations of systemic discrimination. Votes must be posted on the EEOC’s website.
  • The EEOC provide information to Congress, on its website, and in its annual report of each case litigated by the agency, including any cases resulting in fees, costs, or sanctions, regardless of whether the case was authorized by the Commission or initiated by the EEOC itself. The agency must also conciliate in good faith and allow judicial review of those efforts.

According to Senator Alexander, “[t]his legislation would give the EEOC a dose of its own medicine—requiring them to collect the same data on federal employees, to see how much that costs in time and money before it makes that requirement of 61,000 private sector employers.”

S.2693 remains pending and is currently co-sponsored by Senators John McCain (R-AZ), Pat Roberts (R-KS), and Johnny Isakson (R-GA).

On April 21, 2016, the Senate Appropriations Committee advanced legislation which included two priorities offered by Senator Alexander, once again intended to direct the EEOC to reduce its backlog of more than 76,000 private sector discrimination complaints and 12,000 public sector hearings, and to allow public input into any new guidance it proposes. Included within the Fiscal Year 2017 Commerce, Justice, Science, and Related Agencies Appropriations Bill, Senator Alexander’s proposals require, first, that the Committee direct the EEOC to prioritize its staffing and resources toward reducing the backlog and, second, provide 30 days for public comment on new guidance when so requested by at least two Commissioners.

According to Senator Alexander: “[f]ocusing on the backlog will force the agency to focus on its core mission of protecting American workers. Giving the public at least 30 days to comment on any new guidance will help ensure that the agency’s guidances are not implemented without giving the public an opportunity to have a say.”

Senator Alexander is one of many critics of the EEOC’s enforcement priorities but is certainly one of the more notable. Without a doubt, the EEOC Reform Act, in particular, has potential to reduce the burden on employers attempting to comply with the agency’s demands.  However, whether the proposal has a long-term future remains to be seen.

If you have any questions regarding this article, please contact the author or your Seyfarth attorney.

Spokeo v. Robins: The U.S. Supreme Court Finds Concrete Injury Is Required Under Article III But Remands Back To The Ninth Circuit

Posted in Class Action Avoidance

By Gerald L. Maatman, Jr., Pamela Q. Devata, Robert T. Szyba, and Ephraim J. Pierre

supremecourt-150x112Seyfarth Synopsis: In deciding Spokeo v. Robins, the U.S. Supreme Court reaffirmed that plaintiffs seeking to establish that they have standing to sue must show “an invasion of a legally protected interest” that is particularized and concrete — that is, the injury “must actually exist.” Bare procedural violations are not enough.

Today, the U.S. Supreme Court issued its long awaited decision in Spokeo, Inc. v. Robins, No. 13-1339 (U.S. 2016), which we have been watching closely for its possible dramatic implications on the future of workplace class action litigation.

In a 6 to 2 opinion authored by Justice Samuel A. Alito, Jr., the Supreme Court held that the Ninth Circuit’s injury-in-fact analysis under Article III was incomplete. According to the Supreme Court, of the two required elements of injury in fact, the Ninth Circuit addressed only “particularization,” but not “concreteness,” which requires a plaintiff to allege a “real” and not “abstract” injury. Nevertheless, the Supreme Court took no position on the correctness of the Ninth Circuit’s ultimate conclusion: whether Robins adequately alleged an injury in fact.

Based on its conclusion, the Supreme Court vacated the Ninth Circuit’s ruling and remanded for further consideration consistent with the Opinion. Justice Thomas concurred, while Justice Ginsburg (joined by Justice Sotomayor) dissented.

Given the stakes and the subject matter, the ruling is a “must read” for corporate counsel and all employers.

The Case’s Background

This ruling is likely to have substantial impact on class action litigation overall, as we have discussed in our prior posts here, here, and here.

In Spokeo, the issues focused on the Fair Credit Reporting Act (“FCRA”), which requires that consumer reporting agencies (“CRAs”) follow reasonable procedures to assure maximum possible accuracy of its consumer reports (15 U.S.C. § 1681e(b)), issue specific notices to providers and users of information (1681e(d)), and post toll-free phone numbers to allow consumers to request their consumer reports (1681b(e)).

The purported CRA in this case was Spokeo, Inc. (“Spokeo”), which operates a “people search engine” — it aggregates publicly available information about individuals from phone books, social networks, marketing surveys, real estate listings, business websites, and other sources, which it organizes into comprehensive, easy-to-read profiles. Notably, Spokeo specifically states that it “does not verify or evaluate each piece of data, and makes no warranties or guarantees about any of the information offered . . .,” and warns that the information is not to be used for any purpose addressed by the FCRA, such as determining eligibility for credit, insurance, employment, etc.

In July 2010, Plaintiff Thomas Robins filed a putative class action alleging that Spokeo violated the FCRA because it presented inaccurate information about him. He alleged that Spokeo reported that he had a greater level of education and more professional experience than he in fact had, that he was financially better off than he actually was, and that he was married (he was not) with children (he did not have any). But beyond identifying the inaccuracies, he did not allege any actual damages. Instead, he argued that Spokeo’s alleged FCRA violation was “willful” and therefore he sought statutory damages of between $100 and $1,000 for himself, as well as for each member of the purported nationwide class.

The district court dismissed the case, finding that “where no injury in fact is properly pled” a plaintiff does not have standing to sue. In February 2014, the U.S. Court of Appeals for the Ninth Circuit reversed, holding that the “violation of a statutory right is usually a sufficient injury in fact to confer standing” and that “a plaintiff can suffer a violation of the statutory right without suffering actual damages.”

In its petition for certiorari, Spokeo posed the following question to the Supreme Court: “Whether Congress may confer Article III standing upon a plaintiff who suffers no concrete harm and who therefore could not otherwise invoke the jurisdiction of a federal court, by authorizing a private right of action based on a bare violation of a federal statute.” Spokeo highlighted a circuit split, as the Fifth, Sixth, and Seventh Circuits previously lined up with the Ninth Circuit’s approach, while the Second, Third, and Fourth Circuits generally disagreed and required an actual, concrete injury.

After being granted certiorari, Spokeo argued that the Ninth Circuit’s holding was inconsistent with the Supreme Court’s precedents, the Constitution’s text and history, and principles of separation of powers. More specifically, Spokeo argued that Robin’s bare allegations of FCRA violations, without any accompanying concrete or particularized harm, were insufficient to establish an injury in fact, and thus failed to establish Article III standing.

Robins responded that the Supreme Court’s precedent established that Congress may create private rights of action to vindicate violations of statutory rights that are redressable through statutory damages.

The U.S. Solicitor General also weighed in, appearing as an amicus in support of Robins, and argued that the Supreme Court should focus on the specific alleged injury — the public dissemination of inaccurate personal information — and, specifically, the FCRA. The Government argued that the FCRA confers a legal right to avoid the dissemination of inaccurate personal information, which is sufficient to confer standing under Article III.

The Supreme Court’s Decision

Writing for the majority on the Supreme Court, Justice Alito held that Ninth Circuit failed to consider both aspects of the injury-in-fact requirement under Article III when analyzing Robin’s alleged injury, therefore its Article III standing analysis was incomplete. Slip. Op. at *8. The Supreme Court determined that to establish injury in fact under Article III, a plaintiff must show that he or she suffered “an invasion of a legally protected interest” that is both “concrete and particularized.” Slip. Op. at *7. For an injury to be “particularized,” it “must affect the plaintiff in a personal and individual way.” Id. “Concreteness,” the Supreme Court found “is quite different from particularization.” Id. at *8. A concrete injury must “actually exist” and must be “real” and not “abstract.” Id.

The Supreme Court further stated that concreteness includes both easy to recognize tangible injuries as well as intangible injuries. Id. at 8-9. The Supreme Court instructed that when considering intangible injuries, “both history and the judgment of Congress play important roles.” Id. In particular, Congress may identify intangible harms which meet Article III’s minimum requirements. Id. Nevertheless, the Supreme Court cautioned that plaintiffs do not “automatically” meet the injury-in-fact requirement where the violation of a statutory right provides a private right of action. Id. Thus “Robins could not, for example, allege a bare procedural violation divorced from any concrete harm, and satisfy the injury-in-fact requirement of Article III.” Id. The Supreme Court also added that the “risk of real harm” may also satisfy the concreteness requirement, where harms “may be difficult to prove or measure.” Id.

Viewing the FCRA in light of these principles, the Supreme Court recognized that while Congress “plainly sought to curb the dissemination of false information by adopting procedures designed to decrease that risk . . .[,] Robins cannot satisfy the demands of Article III by alleging a bare procedural violation.” For example, the Supreme Court noted it would be “difficult to imagine how the dissemination of an incorrect zip code, without more, could work any concrete harm.” Id. at * 11.

Justice Thomas concurred, reviewing the historical development of the law of standing and its application to public and private rights of action, finding the standing requirement a key component to separation of powers.

Justice Ginsberg, joined by Justice Sotomayor, largely agreed with the majority, but nevertheless dissented. She departed from the majority’s reasoning on the issue of concreteness, but based on the injury alleged, not on the fact that concrete harm wasn’t required. Id. at *3 (Ginsberg, J., dissenting). Under her analysis, Justice Ginsberg would have found that the nature of Robin’s injury was sufficiently concrete because of his allegation that the misinformation caused by Spokeo “could affect his fortune in the job market.” Id. at *3-5 (Ginsberg, J., dissenting).

Implications For Employers

Spokeo can be interpreted as a compromise – with some useful language and reasoning for employers to use in future cases. While the Supreme Court avoided a broader question of Congress’s ability to create private rights of action and other weighty separation of powers issues, it announced the proper analytic framework for assessing the injury-in-fact requirement under Article III. The Supreme Court provided some good news for employers, consumer reporting agencies, and other corporate defendants, as well as potential plaintiffs with respect to class action litigation under a variety of federal statutes, including the FCRA. In particular, the Supreme Court was clear that alleged injuries must be both particular and concrete, meaning that injuries must be “real” and not “abstract.” Thus, a mere procedural violation without any connection to concrete harm cannot satisfy the injury-in-fact requirement of Article III.

However, the Supreme Court may not have shut the door on lawsuits alleging intangible injuries based on violations of statutory rights. While the Supreme Court’s opinion today may discourage some consumer, workplace, and other types of class actions seeking millions in statutory damages, potential litigants will likely have to be more creative in how they frame alleged injuries tied to violations of statutory rights.

Spokeo also transcends the employment context, as the constitutional requirement of Article III applies in all civil litigation. Plaintiffs seeking to file lawsuits in other regulated areas, such as under ERISA, the Americans with Disabilities Act, as well as a host of other statutes are likewise affected by today’s decision. Without particularized, concrete injury, federal jurisdiction is beyond the reach of plaintiffs seeking statutory damages for technical violations.

Obama Signed the Defend Trade Secrets Act — Management Alert and Webinar

Posted in Trade Secrets

By Amy A. Abeloff, Daniel P. Hart, Robert B. Milligan

SS Trade Secrets-Pass It OnSeyfarth Synopsis: Yesterday, May 11, 2016, President Obama signed the Defend Trade Secrets Act (“DTSA”), which Congress passed on April 27, 2016. With President Obama’s signature, the DTSA has now become the law of the land, and a federal civil remedy for trade secrets misappropriation now exists.  

Seyfarth’s Trade Secrets, Computer Fraud & Non-Competes Practice Group is on top of the concerning issues to protect company’s trade secrets and avoid DTSA claims, and we wanted to share the following valuable materials that you or a member of your team may find useful:

  • Management Alert: A new federal civil cause of action is now available to trade secrets owners seeking to pursue claims of trade secret misappropriation under the Defend Trade Secrets Act. To take full advantage of the remedies provided  under the DTSA, companies have an immediate obligation to provide certain disclosures in all non-disclosure agreements with employees, contractors, and consultants that are entered into or updated following today. Our Alert provides a brief history and summary of the DTSA, and, notably, provides business owners a list of tips and strategies to implement in light of the DTSA’s passage. To read the full Alert, click here.
  • Webinar: Seyfarth is hosting a webinar on Monday, May 16, at 2:00 p.m. Central. The program will provide practical tips and strategies concerning the pursuit and defense of trade secret cases in light of the DTSA, and provide some predictions concerning the future of trade secret litigation. For more information and registration, click here.

What Does the Passage of the Defend Trade Secrets Act Mean for Your Business?

Posted in Legislation, Trade Secrets

By Amy Abeloff and Robert B. Milligan

shutterstock_267261659Seyfarth Synopsis: New federal civil cause of action is now available to trade secrets owners seeking to pursue claims of trade secret misappropriation under the Defend Trade Secrets Act (“DTSA”).  Our post provides a brief history and summary of the DTSA, and, notably, provides business owners a list of tips and strategies to implement in light of the DTSA’s passage.

Congress passed federal trade secrets legislation today. On April 4, 2016, the Senate passed S. 1890, the Defend Trade Secrets Act of 2016 (“DTSA”). Soon after, on April 20, 2016, the House Committee approved S. 1890 by voice vote. Today, the House passed the DTSA. President Obama has voiced his support for the DTSA, which indicates that he will sign it.

What does the passage of the DTSA mean for your company? In a nutshell, it means your company can now pursue claims for trade secret misappropriation in federal court like other forms of intellectual property (i.e., patent, trademark, copyright) and seek remedies such as a seizure order to recover misappropriated trade secrets. It also serves a reminder that trade secrets can be highly valuable to your company and that you should ensure that your company has reasonable secrecy measures in place to protect them.

Below we outline a brief history of the DTSA, describe what legal structure and remedies the DTSA creates, and describe the unique provisions of the DTSA. We also provide tips and strategies in light of the passage of the DTSA. Brief History of the Defend Trade Secrets Act

On July 29, 2015, with bipartisan and bicameral support, Congressional leaders Senators Orrin Hatch (R-UT), Christopher Coons (D-DE), and Representative Doug Collins (R-GA) introduced bills to create a federal private right of action for the misappropriation of trade secrets. The identical bills, HR 3326 and S. 1890, were then referred to their respective judiciary committee. The proposed legislation, titled the “Defend Trade Secrets Act of 2015” followed an unsuccessful attempt the previous year to pass the “Defend Trade Secrets Act of 2014.”

The Senate Judiciary Committee later held a hearing on December 2, 2015 (about which we blogged and held a Live Tweet), which featured intellectual property counsel from DuPont and Corning and a trade secret expert who spoke out in favor of the legislation.

In January 2016, Senators Hatch and Coons presented two “groups” of amendments to the DTSA (blogged here), taking into consideration suggestions from other members of the Senate Judiciary Committee. The Committee unanimously adopted both groups of amendments, and held a voice vote in favor of the passage of the now amended Defend Trade Secrets Act of 2016.

Senator Grassley of the Senate Judiciary Committee authored a Report about the now amended DTSA on March 7, 2016, in which he described the background and purpose of the bill. It describes a “trade secret” as a “form of intellectual property that allow[s] for the legal protection of commercially valuable, proprietary information.” The stated purpose of the bill, per the Report, is to allow trade secret owners to “protect their innovations by seeking redress in Federal court,” which would allow them to bring “their rights into alignment with those long enjoyed by owners of other forms of intellectual property.”

As noted above, the Senate passed the DTSA on April 4, and the House Judiciary Committee approved the Senate’s version of the DTSA on April 20. On April 27, 2016, the House voted in favor of the DTSA. President Obama has indicated that he will sign the bill.

What Does the DTSA Provide?

The DTSA would authorize a civil action in federal court for the misappropriation of trade secrets that is related to a product or service used in, or intended for use in, interstate or foreign commerce. Trade secret claims are presently state law claims, and 48 states have adopted some version of the Uniform Trade Secrets Act (UTSA). New York and Massachusetts, the only two states that have yet to adopt a version of the UTSA, provide civil remedies under the common law for trade secret misappropriation.

The DTSA seeks to do the following: 1) create a uniform standard for trade secret misappropriation by expanding the Economic Espionage Act of 1996 (“EEA”) to provide a federal civil remedy for trade secret misappropriation; 2) provide parties pathways to injunctive relief and monetary damages in federal court to prevent disclosure of trade secrets and account for economic harm to companies whose trade secrets are misappropriated, including via ex parte property seizures (subject to various limitations), which means that a plaintiff can seek to have the government seize misappropriated trade secrets without providing notice to the alleged wrongdoer; and 3) harmonize the differences in trade secret law under the UTSA and provide uniform discovery.

The current legislation is the final product of a series of amendments made since the introduction of the Defend Trade Secrets Act of 2014. The significant aspects of the DTSA are summarized below:

  • The DTSA provides for actual damages, restitution, injunctive relief, significant exemplary relief (up to two times the award of actual damages), and attorney’s fees.
  • Ex parte property seizures are available to plaintiffs, but subject to limitations. As noted above, an ex parte seizure means that an aggrieved party can seek relief from the court against a party to seize misappropriated trade secrets without providing notice to the alleged wrongdoer beforehand. As a measure to curtail the potential abuse of such seizures, the DTSA prohibits copies to be made of seized property, and requires that ex parte orders provide specific instructions for law enforcement officers performing the seizure, such as when the seizure can take place and whether force may be used to access locked areas. Moreover, a party seeking an ex parte order must be able to establish that other equitable remedies, like a preliminary injunction, are inadequate.
  • Injunctive relief for actual or threatened misappropriation of trade secrets is limited in that a court will not grant injunctive relief if it would prevent a person from entering into an employment relationship. A court could further place conditions on that employment relationship only upon a showing through evidence of “threatened misappropriation and not merely on the information the person knows.” This language was added to guard against plaintiffs pursuing “inevitable disclosure” claims.
  • The statute of limitations is three years. A civil action may not be commenced later than 3 years after the date on which the misappropriation with respect to which the action would relate is discovered or by the exercise of reasonable diligence should have been discovered.
  • An immunity provision exists to protect individuals from criminal or civil liability for disclosing a trade secret if it is made in confidence to a government official, directly or indirectly, or to an attorney, and it is made for the purpose of reporting a violation of law. This provision places an affirmative duty on employers to provide employees notice of the new immunity provision in “any contract or agreement with an employee that governs the use of a trade secret or other confidential information.” An employer will be in compliance with the notice requirement if the employer provides a “cross-reference” to a policy given to the relevant employees that lays out the reporting policy for suspected violations of law. Should an employer not comply with the above, the employer may not recover exemplary damages or attorney fees in an action brought under the DTSA against an employee to whom no notice was ever provided. Curiously, the definition of “employee” is drafted broadly to include contractor and consultant work done by an individual for an employer.
  • The “Trade Secret Theft Enforcement” provision increases the penalties for a criminal violation of 18 U.S.C. § 1832 from $5,000,000 to the greater of $5,000,000 or three times the value of the stolen trade secrets to the organization, including the costs of reproducing the trade secrets.
  • The DTSA also contains a provision that allows trade secret owners to be heard in criminal court concerning the need to protect their trade secrets.
  • The DTSA further amends the RICO statute to add a violation of the Economic Espionage Act as a predicate act.

In sum, the DTSA provides aggrieved parties with legal recourse in federal court via a federal trade secret cause of action (whereas previously, relief was only available under the state law UTSA or common law claims), as well as new remedies, including a seizure order. A party can now sue in federal court for trade secret misappropriation and seek actual damages, restitution, injunctive relief, ex parte seizure, exemplary damages, and attorney’s fees under the DTSA.

Provisions Unique to the DTSA

The DTSA differs from the UTSA in several important aspects. Before delving into the differences further, it bears noting that the UTSA regime will not be preempted by the DTSA; in other words, UTSA claims will still be available to aggrieved parties. Most notably, it opens the federal courts to plaintiffs in trade secrets cases. The DTSA also allows for an ex parte seizure order. A plaintiff fearful of the propagation or dissemination of its trade secrets would be able to take proactive steps to have the government seize misappropriated trade secrets prior to giving any notice of the lawsuit to the defendant. However, the ex parte seizure order is subject to important limitations that minimize interruption to the business operations of third parties, protect seized property from disclosure, and set a hearing date as soon as practicable. The proposed seizure protection goes well beyond what a court is typically willing to order under existing state law. Of course, as referenced above, the ex parte seizures are limited and may only be instituted in “extraordinary circumstances.” The DTSA also contains no language preempting other causes of action that may arise under the same common nucleus of facts of a trade secret claim, unlike the UTSA as interpreted by some states which preempt such claims.

Unlike the UTSA, the DTSA also provides protection to “whistleblowers who disclose trade secrets to law enforcement in confidence for the purpose of reporting or investigating a suspected violation of law,” and the “confidential disclosure of a trade secret in a lawsuit, including an anti-retaliation proceeding.”

With Passage of the DTSA, What Should An Employer or Business Do?

What is an employer or business to do if it wants to avail itself of this new law? What should employees now be apprised of? Here are some tips and strategies we believe will assist employers and business owners in complying with and taking full advantage of the relief available under the DTSA:

  1. Review: Have qualified counsel review policies and relevant agreements to ensure that they contain language required under the DTSA, such as proper notice of the immunity provision referenced above. Additionally, ensure that your company is using non-disclosure agreements with your employees and that such agreements have clear definitions of trade secrets and confidential information and are not overly broad.
    1. Should you file suit under the DTSA if your agreement or policy does not contain the required immunity language? If you do not include the necessary immunity language in your employment or confidentiality agreements or policies, your company will not be able to avail itself of all the remedies under the DTSA. In other words, you will not be able to obtain attorney’s fees or exemplary damages if you bring a suit under the DTSA.
    2. It is a good practice to include the required immunity language under the DTSA in your agreements and also have clear definitions of trade secrets and confidential information that are not overly broad given the government’s enhanced scrutiny of overly broad confidentiality language, such as the NLRB, EEOC, and SEC.
  2. Ensure and Protect: Do you have valuable information that could be protected as a trade secret? First, identify valuable sources of information in your organization. You should then check to see how your company protects such information. You will only be to pursue trade secrets claims if you can show that your company employs reasonable secrecy measures to protect its trade secrets. Check out one of our recent webinars discussing best practices for the proper treatment of trade secret information. We have found that a trade secret audit with the assistance of counsel can be valuable for companies trying to identify and protect their trade secrets.
  3. Prepare: To pursue and avoid DTSA claims against your company, maintain proper on-boarding and off-boarding procedures and counsel your employees regarding the handling and further protection of your company’s confidential and trade secret information, including recurring employee training. Also closely monitor relationships with vendors and contractors who may have access to your company’s trade secrets and confidential information and ensure that there are appropriate protections in place.

It will be a brave new world with the passage of the DTSA. Federal courts will likely become the new forum for trade secret litigation. Make sure that your company is ready.

Further Information

Please visit our blog, Trading Secrets, for further coverage of the DTSA. We regularly update our page featuring DTSA developments, and we recently recorded a webinar and podcast featuring the most recent updates (as of April 11, 2016) to the DTSA. We are happy to discuss with you what the DTSA may mean for your company.

Governor Christie Conditionally Vetoes New Jersey’s Pay Equity Bill

Posted in Uncategorized

By Maria Papasevastos and Nadia Bandukda

Seyfarth Synopsis:  New Jersey Governor Chris Christie has conditionally vetoed a pay equity bill that would have strengthened protections against pay discrimination in the workplace. The bill’s sponsors will now decide whether they want to override the veto, accept the Governor’s changes or rewrite the bill.

On Monday, Governor Chris Christie conditionally vetoed proposed amendments to the New Jersey Law Against Discrimination concerning equal pay for women in the workplace. As we reported previously, both the Assembly and Senate passed a bill that would impact New Jersey employers by making it an unlawful employment practice for an employer to discriminate on the basis of gender under a “substantially similar work” standard.  The bill also would have allowed employees to be compared even if they do not work in the same establishment, with no geographic limitation; and, unlike other recently-enacted fair pay laws in New York and California, would have permitted unlimited back pay.

Governor Christie has vetoed bills with similar language in the past, stating that their penalties and requirements were too broad.  However, he has now provided some additional insight in his conditional veto recommendation for this bill.  Specifically, Governor Christie criticized the bill’s allowance of unlimited back pay as going beyond what the Lilly Ledbetter Fair Pay Act provides, and recommended limiting back pay to two years.

The Governor also stated that while he supported an “explicit prohibition on wage discrimination on the basis of gender,” the bill in its current form went too far in changing the legal standard for establishing wage discrimination and “would require an oversimplified comparison of wages while ignoring any consideration of the employer’s practices or facilities,” thus making New Jersey “very business unfriendly.”  He recommended that the standard for comparing employees be whether they are performing “substantially equal” work, rather than “substantially similar” work, and that employees only be compared if they are performing such work “under similar working conditions,” among other changes.

Additionally, Governor Christie remarked on axing the bill’s treble damages provisions, which he believed would “make New Jersey a liberal outlier,” as well as his disagreement with – and suggested removal of – the bill’s reporting requirements for state contractors.

The bill’s sponsors can now attempt to override the veto, accept Governor Christie’s changes or rewrite the bill.

Monitoring Employee Communications: A Brave New World

Posted in Social Media, Workplace Policies and Processes

By Karla Grossenbacher

shutterstock_328329848-300x200Seyfarth Synopsis: This blog considers the blurring of the lines between personal and work-related communications which has created novel legal issues when it comes to determining whether an employer has the right to access and review all “work-related communications” made by its employees.

Over the last decade, communication via email and text has become a vital part of how many of us communicate in the workplace. In fact, most employees could not fathom the idea of performing their jobs without the use of email. For convenience, employees often use one device for both personal and work-related communications, whether that device is employee-owned or employer-provided. Some employees even combine their personal and work email accounts into one inbox (which sometimes results in work emails being accidentally sent from a personal account). This blurring of the lines between personal and work-related communications creates novel legal issues when it comes to determining whether an employer has the right to access and review all work-related communications made by its employees.

Employers have legitimate business reasons for monitoring employee communications. Take, for example, the scenario in which an employee leaves her employment, and the employer is concerned that she has taken proprietary information or solicited clients in violation of her duty of loyalty or a contractual agreement. Another common scenario that gives rise to the need for employers to review all of an employee’s work-related emails is when the employer is in litigation that requires production of employee communications.

Most employers are comfortable with the notion that, with a properly worded policy that provides notice to employees of the ability and intent to monitor email, an employer can access emails on an email server provided by the employer. However, what about cases in which the employer does not provide the email service? With employees using web-based emails, like Gmail and Hotmail, and texts to communicate in the workplace, the relevant communications may be elsewhere. In these situations, what are an employer’s rights to access and review such communications?

An employer’s ability to review electronic communications is governed by the Electronic Communication Privacy Act (ECPA) and the Stored Communications Act (SCA). The ECPA prohibits the interception of electronic communications, and the term “interception” as used in the ECPA has been interpreted so narrowly that this title of the ECPA rarely comes into play in cases involving an employer’s review of employee email or texts. The SCA makes it illegal to access without authorization a facility through which electronic communication service is provided and thereby obtain access to communications in electronic storage.

With regard to an employer’s review of employee emails sent through web-based email accounts like Gmail or Hotmail, the most frequent scenario confronted by courts is one in which a former employer accesses the web-based email of a former employee, looking for evidence of malfeasance. In these cases, the former employer is typically able to access the former employee’s web-based email account because the employee has saved her username and password on a device provided by the employer, which was returned at termination, or failed to delink an account from such a device. In these cases, courts have been reluctant to punish the former employee for failing to take appropriate steps to secure their own personal, and allegedly private, communications.

For example, a district court in New York considered an employee’s claim that his former employer’s review of emails in his Hotmail account after his termination violated the SCA because it was unauthorized. The defendant argued that its review of the emails did not violate the SCA because the employee had implicitly authorized its review of the emails on his Hotmail account because the employee had stored his username and password on the employer’s computer system or forgot to remove such an account from an employer-provided phone before returning it.

The court rejected this argument, holding that it was tantamount to arguing that, if the employee had left his house keys on the reception desk at the office, he would have been implicitly authorizing his employer to enter his home without his knowledge. The court also noted that the employer’s computer usage policy did not provide the necessary authorization because it only referred to communications sent over the employer’s systems.

Likewise, a district court in Ohio confronted with similar facts, refused to hold the plaintiff responsible for his own failure to safeguard his information. In this case, the employee had turned in a company-issued blackberry upon termination without first deleting the Gmail account he had added to the phone. The former employer reviewed the emails in the former employee’s Gmail account, and the former employee alleged that this violated the SCA. The former employer argued that the former employee had negligently or implicitly consented to their review of the emails in her Gmail account by returning the blackberry to the company without deleting the account. However, the court held that the employee’s “negligence” in leaving the Gmail account on her phone when she turned it in was not tantamount to her authorizing the defendant to review the emails on her Gmail account.

However, a federal district court in California reached a different result in a case involving text messages. In this case, a company had sued its former employee for misappropriating trade secrets when it discovered, upon his termination, a number of text messages on the former employee’s company-issued iPhone that documented his misappropriation. The former employee had forgotten to delink his Apple account from the company phone he returned, and thus, his text messages continued to go to the phone — and his former employer. The court granted the company’s motion to dismiss the former employee’s counter claim that the company’s review of his text messages violated the SCA. The court held that text messages stored on phones are not in “electronic storage” within the meaning of the SCA, citing a Fifth Circuit case that reached the same conclusion about text messages. Of course, a violation of the SCA is not the only issue in these cases.

For example, in this case, the employee also alleged that his employer had invaded his privacy. However, the court held that the employee had no reasonable expectation of privacy in a company-owned phone that was no longer in his possession. In contrast to the two cases above, the court found that the employee’s failure to undertake precautions to maintain the privacy of his text messages showed he had no right to exclude others from accessing them.

The main lesson from these cases is that, if an employer wants to have the ability to review all employee communications that take place in the workplace, the employer needs to have, at a minimum, a policy that specifically provides for the right to monitor and review, for legitimate business reasons, any work-related communications made by the employee on a device provided by the company or a personal device used for work purposes. (Although the SCA does not require any showing about the employer’s motives in accessing the emails, a traditional invasion of privacy analysis would take this into account.) As a practical matter, the employer may not have the ability to access such accounts, but where access is available, this policy language is critical.

Fourth Circuit Holds that “Sex” Under Title IX Incorporates Gender Identity

Posted in Title IX, Workplace Policies and Processes

By Kylie Byron, Abigail Cahak, Mary Kay Klimesh, and Sam Schwartz-Fenwick

Seyfarth Synopsis: The Fourth Circuit in a case of first impression held that Title IX entitles transgender students to use the bathroom that matches their gender identity. Though that ruling only discusses Title IX, the Court’s language and reasoning may have implications for Title VII jurisprudence.

The Fourth Circuit has become the first Federal Circuit to weigh in on bathroom access for transgender students. In G.G. v. Gloucester County School Board, Case No. 15-2056 the court deferred to the U.S. Department of Education’s guidance that Title IX, which permits segregation of toilet, locker room, and shower facilities on the basis of “sex,” prohibits restriction of restrooms on the basis of “gender identity” as well as assigned sex. This ruling not only places the Circuit at odds with state “bathroom bills”, but also has potential implications for the Circuit’s interpretation of Title VII.

In G.G., plaintiff, a transgender boy, was prevented from using the men’s restroom at his high school due to a policy enacted by the school board specifically in response to his gender transition. G.G. sued for gender discrimination under Title IX and the Equal Protection Clause and requested a preliminary injunction allowing him to use the bathroom aligning with his gender identity.  The District Court for the Eastern District of Virginia dismissed G.G.’s Title IX claim holding that Title IX prohibits discrimination on the basis of sex and not on the basis of other concepts such as gender, gender identity, or sexual orientation.

The Fourth Circuit reversed the District Court’s dismissal of G.G.’s Title IX claim. The Court held that Auer deference required the Court to defer to the Department of Education’s interpretation of Title IX regulations, which indicated that transgender students could use hygienic facilities (such as restrooms) consistent with their gender identity regardless of the sex assigned at birth. The Court further found the Department of Education’s position regarding access to restrooms for transgender individuals consistent with the position of other federal agencies, including the Equal Employment Opportunity Commission.

G.G. is an important decision for employers. While the lawsuit arose under Title IX not Title VII, the reasoning of the Court readily applies to Title VII given the similar verbiage of the statutes and the regular practice of courts to look to case law under both statutes.  It is expected that Title VII litigants going forward will increasingly cite G.G, to bolster their argument that courts should defer to the EEOC’s position that Title VII’s prohibition on sex-discrimination encompasses gender identity. Indeed, as we have blogged previously, a case, ACLU v. McCrory, has already been filed challenging North Carolina’s “bathroom bill”, alleging harm under Titles IX and VII and under the Equal Protection Clause of the Constitution.

While the reasoning of G.G. is unlikely to be universally adopted by courts analyzing gender identity claims under Title VII or Title IX, the decision adds voice to the growing chorus of support for the argument that claims of gender identity discrimination are actionable under current Federal law. Employers should consult with counsel to evaluate their internal policies, practices and procedures with an eye toward gender identity claims.

Off the Record? Workplace Perils of Video Recording and Social Media

Posted in NLRB, Social Media, Workplace Policies and Processes

By Scott Rabe and Samuel Sverdlov

Seyfarth Synopsis: With seemingly every employee having access to a smart-phone or other recording device, employers without strong social media policies may be placing themselves at greater risk of creating workplace incidents that could be avoided. 

Just a few weeks ago, a video leaked of Los Angeles Lakers rookie, D’Angelo Russell, recording teammate, Nick Young, describing adulterous sexual encounters with a 19-year-old during his engagement to pop star, Iggy Azalea.  The incident has since been described as a prank that backfired.  But this “prank,” and the ensuing media attention it drew, has caused the Los Angeles Lakers to endure a media frenzy, a fractured locker room, and being booed by their hometown fans.

The Lakers incident is just one of the more recent, and public, examples of the risks employers face when employees introduce audio and video recording devices into the workplace. Viral videos such as this example may tarnish a company’s reputation.  A leaked audio recording may disclose important company trade secrets or confidential information.  Or a video recording may misleadingly appear to reveal unlawful practices at a company that could lead to litigation or other unwanted attention.

Where employers may once have understood the work place to be a semi-private space, that has changed. As a result, information and behavior that could be counted on to remain within the confines of the workplace now has the potential to become very public very quickly, with some pretty hefty consequences.

So what can employers do?

One of the best things an employer can do to hedge against these risks is to create a comprehensive social media policy that explicitly defines employee responsibilities with regard to social media. The social media policy should:

  • be geared towards the company’s business and its workforce;
  • underscore the importance of acting professionally when utilizing social media in connection with work as well as the importance of, where possible, maintaining a separation between personal and professional use of social media;
  • strictly prohibit the sharing of non-public confidential or proprietary information, or trade secrets, on social media;
  • be distributed to new hires at orientation and be regularly provided as a reminder to existing employees;
  • make clear that employees can be disciplined for violating the employer guidelines.

An employer may also want to consider putting in place a policy that regulates the use of audio or videotaping in the workplace more generally.   Although the National Labor Relations Board (“NLRB”) has said that wholesale bans on video recording in the workplace are unlawful since they could deter employees from exercising rights guaranteed to them under the NLRA, an employer may want to put in place a policy that prohibits surreptitious recording in the workplace or one that prohibits recording of other employees in the workplace without permission. Additionally, employers should be mindful that many states prohibit any kind of video or audio recording where all participants do not consent to being recorded. Given the scrutiny social media policies receive, however, employers are encouraged to consult with counsel before implementing any policy governing the use of audiotaping or videotaping in the workplace.

Employers should also consider making an investment in the education of managers and supervisors regarding best practices for upholding and enforcing the company’s social media and video recording policies. Given the ubiquity of social media today and its importance to employees’ personal and professional lives, there is significant value to employers in having a workforce that is educated on how to use social media effectively while avoiding potential costly pitfalls.

Warning to Employers: Employee audio and video recordings may be protected

The NLRB has taken an aggressive stance in the last few years in connection with its regulation of employer-imposed limitations on social media use. (To read more about the NLRB’s take on social media use, please see our blogs: here and here.)  In particular, the NLRB has taken increasing action against employers who have sought to prohibit employees from engaging in public discourse regarding the terms and conditions of their employment, especially when such discourse occurs on social media.   As a result, employers need to be careful that their social media and related policies do not place undue limitation on the forum or content where employees can engage in discourse regarding their employment.  For example, an employee’s video post to YouTube where she complains about her wages likely would be considered protected concerted action, and the employer could face liability for interfering.

Relatedly, the Equal Employment Opportunity Commission has also made clear that it views the prohibition by an employer of an employee from recording evidence of discrimination by video or audio means may be “retaliation.” This is true even if the employer maintains a workplace policy forbidding such recording.  Thus, employers should be extra careful before disciplining or regulating the conduct of employees who have already raised claims or complaints against the company.

For more information, please contact the authors, your local Seyfarth attorney or a member of Seyfarth’s Social Media Practice Group [http://www.seyfarth.com/SocialMedia].