Skip to content

Workforce

Category: Legal

Posted on April 15, 2019June 29, 2023

Firing an Employee Because of His Heart Problems? Rethink That One

Jon Hyman The Practical Employer

Jonathan Baum worked as a scheduler for Metro Restoration Services.

In late 2014, he began to suffer cardiac problems. Over the course of the next several months, he went to the ER fearing a heart attack, had a heart catheter implanted, had an echocardiogram and wore a heart monitor. He occasionally also missed work for medical tests and treatments and sometimes worked remotely. His boss, and the owner of Metro, Patrick Cahill, was aware of Baum’s medical issues.

Following a work day on which Baum had worked remotely from his home, Cahill fired him. The expressly stated reason: “health issues and doctors’ appointments.”

Oops.

Baum then sued for disability discrimination.

Even with all of Baum’s cardiac issues, the 6th Circuit held that he could not establish that he suffered a physical impairment that substantially limited one or more major life activities. Therefore, Baum did have a legally protected actual disability. Baum had failed to identify a medical expert to testify and establish whether his cardiac problems substantially limit his cardiovascular and circulatory functions.

So do Baum’s impairments limit his cardiovascular and circulatory functions? They might. But to conclude that they did, a jury would need to understand them—how they function, and what that means for Baum. And to understand them, jurors would need an opinion from someone with “scientific, technical, or other specialized knowledge”: expert testimony.

Because Baum failed to disclose his doctor—or anyone else with specialized medical knowledge—as an expert witness, he lacks the evidence he needs. And without that evidence, he hasn’t created a factual issue over whether he is actually disabled.

Case closed, right? Not so fast.

The ADA does not only protect actual disabilities, but also perceived disabilities. On this latter claim, Metro had a huge problem.

Unlike actual disability claims, an employee proceeding on a claim of perceived disability need not prove a limitation of a major life activity, but only that the employer took an adverse action “because of an actual or perceived physical … impairment.” Thus, the lack of a medical expert was not fatal to this claim.

Baum argues that a jury could find that Metro fired him because Cahill thought Baum was disabled. For support, he relies on Cahill’s knowledge of Baum’s catheter, CAT scan, trip to the ER, and period where he wore a heart monitor. Baum also points to Cahill’s stated reason for firing him: his “health issues and doctor’s appointments.” …

Cahill’s knowledge of Baum’s medical issues—alone—is insufficient to carry the day.… But Baum has more—he has Cahill’s stated reason for firing him: his “health issues and doctor’s appointments.” That statement is what creates a factual dispute and makes it material. Giving Baum the benefit of the doubt, a jury could find that Cahill meant what he said. And if a jury so found, it could also find that Cahill perceived Baum to have a physical impairment and fired Baum because of that perception.

In other words, employers, it’s not the best idea to tell your employee that you are firing them because of their medical issue. It will not end well for you.

Posted on April 8, 2019June 29, 2023

The 10th Nominee for the Worst Employer of 2019 Is … the Exorcising Employer

Jon Hyman The Practical Employer

Is it too early to declare a winner for 2019’s contest?

According to the complaint Jason Fields filed against the Hazard, Kentucky, Hampton Inn at which he worked, and its manager, Sharon Lindon, he had to endure some pretty odd stuff during his employment.

As he tells his story, Lindon decided to help Fields after she learned of his impending divorce. How? By offering to exorcise him.

I can’t do this story any better justice than how Field’s describes it in his lawsuit:

Lindon told the Plaintiff that the reason for his marital problems was that he had demons.

Lindon told the Plaintiff that if he were going to work for her he had to be cleansed.

Lindon told the Plaintiff she had been cleansed three or four times and it was similar to an exorcism.

The Plaintiff was also given a packet of papers by Lindon to be completed and turned in. The packet contained 1 page of instructions, 2 pages containing a release and indemnity agreement, and 9 pages of questions.…

The Plaintiff was told once he had completed the questionnaire, he would need to meet Lindon at the church and have a cleansing performed.…

The Plaintiff refused to participate in any exorcism.

After the Plaintiff refused to complete the form, and then after he completed it, but refused to give it to Lindon, and then refused to participate in a cleansing, (1) his shift was changed, (2) his job duties changed, (3) he was not allowed to take his days off, (4) he was threatened daily concerning the loss of his job, and (5) he did not receive a raise.     

Fields ultimately quit.

What information did Lindon pressure Fields to provide? 

For starters, workplace-inappropriate information about his religious beliefs and practices:

  • What is your church background?
  • Briefly explain your conversion experience.
  • In one word, who is Jesus Christ to you?
  • What does the blood of Calvary mean to you?
  • What is your prayer life like?
  • Were you conceived out of wedlock?

And then stuff just got weird:

  • Have you, your parents or grandparents been in any cults?
  • Have you ever made a pact with the devil?
  • Have you ever visited heathen temples?
  • Do you have any witches, such as “good luck kitchen witches,” in your home?

And then downright off-the-rails offensive:

  • Do you have lustful thoughts?
  • To your knowledge, was their evidence of lust in your family line?
  • Do you frequently masturbate?
  • Have you ever been a victim of incest by a family member?
  • Have you ever committed incest, rape or molested anyone?
  • Have you ever committed fornication, adultery, been with prostitutes, had homosexual or lesbian desires or experience?
  • Have you ever sexually fantasized about an animal?
  • Have you been in involved in oral or anal sex?
  • Have you fathered a child that has been aborted?
  • Has pornography ever attracted you?
  • Do you have desires of having sex with a child?

I’m a defense lawyer, trained to look at an employee’s allegations with a healthy dose of skepticism. But, does anyone think, after reading Fields’ allegations, that this didn’t happen? Who could make this up? Fields alleges that he “has the form and will produce it.”

Thus, even if just part of this happened, this employer has well earned its nomination as the Worst Employer of 2019.
   
Thanks to Eric Meyer, who brought this doozy to my attention.

Previous nominees:

The 1st Nominee for the Worst Employer of 2019 Is … the Philandering Pharmacist

The 2nd Nominee for the Worst Employer of 2019 Is … the Little Rascal Racist

The 3rd Nominee for the Worst Employer of 2019 is … the Barbarous Boss

The 4th Nominee for the Worst Employer of 2019 is… the Flagrant Farmer

The 5th Nominee for the Worst Employer of 2019 is… the Fishy Fishery 

The 6th Nominee for Worst Employer of 2019 Is … the Diverse Discriminator

The 7th Nominee for Worst Employer of 2019 Is … the Disability Debaser

The 8th Nominee for the Worst Employer of 2019 Is … the Lascivious Leader

The 9th Nominee for the Worst Employer of 2019 Is … the Exorcising Employer

Posted on April 4, 2019June 29, 2023

Flatulence as Harassment? It’s a Thing in Australia

Jon Hyman The Practical Employer
An Australian court has rejected an employee’s claim that his supervisor unlawfully harassed him by farting on him.
David Hingst sought 1.8 million Australian dollars ($1.3 million) in damages based on a claim his supervisor would enter his small, windowless office several times a day and “break wind on him or at him … thinking this to be funny.”

According to NBC Chicago, Hingst said that his supervisor at Construction Engineering, Greg Short, would “fart behind me and walk away. He would do this five or six times a day.” For his part, Hingst would respond by spraying Short with deodorant and calling him “Mr. Stinky.”

The court was not persuaded that the stink bombs were illegal.

In oral submissions, the applicant put the issue of Mr Short’s flatulence to the forefront. He submitted that ‘flatulence is substance’, not merely peripheral, and that the judge should have so found. The applicant submitted that the flatulence constituted assaults, and challenged the notion that he had accepted that the issue was peripheral.

Yet, the court found that the “farting” was not “bullying in the ‘legal sense.’”

This case got me to thinking, has an American tribunal ever dealt with a similar issue?

The closest I could find is Stanford v. Department of the Army, an EEOC decision. The case involved a white male alleging race and sex discrimination. The allegations stemmed from what he perceived as the Department’s different treatment of his farting in the presence of female co-workers as compared to that of an African American co-worker.

Complainant argues that he was “written up” because a Black female accused him of “farting” …. He argues that Black males can “fart” in the presence of the Deputy and other co-workers and not be disciplined….

We find … that complainant’s harassment claim is severe or pervasive enough to state a claim of harassment.

I’m not sure I would have reached that same result.

But here’s the thing. Can we all just act like adults? Yes, farts can be funny. My 10-year-old laughs at them all the time. But he’s 10. He’s not a grown-up, working at a job. So can we all try to act like grown-ups, treat each other with respect, and not make a federal case out of every trivial thing that happens at work? We will all be the better for it.

Posted on April 3, 2019June 29, 2023

The 9th Nominee for the Worst Employer of 2019 Is … the Fertile Firing

Jon Hyman The Practical Employer

MoMA PS1, a Queens, New York, art museum, has agreed to settle a pregnancy discrimination claim brought by Nikki Columbus, hired by the museum to direct its performance program.

She alleged that the museum rescinded her job offer after it learned she had recently given birth.

According to The New York Times, Columbus, five months pregnant when she applied for the job, chose not to disclose her pregnancy until after she was hired.

“I just went forward thinking that this is not their business, it’s not relevant to the job and to my abilities,” she told the Times. She added that Peter Eleey, the museum’s chief curator, told her during her interview that her predecessor had been “much less present” after she had a baby.

After being offered the job, Columbus asked Eleey for a soft transition-in period because she was recovering from just having a baby.

Eleey’s response, she alleged, “Why didn’t you tell me this two months ago?” A few days later, the museum rescinded its job offer, telling her that her conversations with Eleey “indicated that [she] would not be able to perform the job as it was structured.”

According to a museum spokesperson, “MoMA PS1 at all times has been compliant with the law and remains committed to supporting women and caregivers. We are satisfied with the agreement and are happy to put this matter behind us.”

Nevertheless, if you fire a new mom because she just had a baby, you might be the worst employer of 2019.

Previous nominees:

The 1st Nominee for the Worst Employer of 2019 Is … the Philandering Pharmacist

The 2nd Nominee for the Worst Employer of 2019 Is … the Little Rascal Racist

The 3rd Nominee for the Worst Employer of 2019 is … the Barbarous Boss

The 4th Nominee for the Worst Employer of 2019 is… the Flagrant Farmer

The 5th Nominee for the Worst Employer of 2019 is… the Fishy Fishery 

The 6th Nominee for Worst Employer of 2019 Is … the Diverse Discriminator

The 7th Nominee for Worst Employer of 2019 Is … the Disability Debaser

The 8th Nominee for the Worst Employer of 2019 Is … the Lascivious Leader

Posted on March 13, 2019June 29, 2023

The 8th Nominee for the Worst Employer of 2019 Is … the Lascivious Leader

Jon Hyman The Practical Employer

I can’t do any better of job than the EEOC did in describing the parade of horribles that one supervisor wrought at Sys-Con, a Montgomery, Alabama, general contractor:

According to the EEOC’s lawsuit, from December 2015 to May 2017, a supervisor at Sys-Con’s worksite at the Hyundai manufacturing plant in Montgomery, demanded sexual favors from two non-English speaking Hispanic female employees and watched pornographic videos in front of them. The EEOC further charged that the supervisor sexually assaulted one of the employees and sub­sequently taunted her, asking whether she “liked it.”

Thereafter, the EEOC said, the super­visor threatened to fire both his victims and their husbands, who were also Sys-Con employees, if they reported his harassment. When one of the employees refused his sexual advances, the supervisor terminated her.

For all of this, the EEOC settled the claims against Sys-Con for (what I consider to be) a paltry $70,000.

Folks, if you employ a supervisor who not only sexually assaults one of your employees but then taunts her about it after the fact, you might be the worst employer of 2019.

Big thanks to my friend Eric Meyer who brought today’s nominee to my attention at his Employer Handbook Blog.

Previous nominees:

The 1st Nominee for the Worst Employer of 2019 Is … the Philandering Pharmacist

The 2nd Nominee for the Worst Employer of 2019 Is … the Little Rascal Racist

The 3rd Nominee for the Worst Employer of 2019 is … the Barbarous Boss

The 4th Nominee for the Worst Employer of 2019 is… the Flagrant Farmer

The 5th Nominee for the Worst Employer of 2019 is… the Fishy Fishery 

The 6th Nominee for Worst Employer of 2019 Is … the Diverse Discriminator

The 7th Nominee for Worst Employer of 2019 Is … the Disability Debaser

Posted on February 14, 2019June 29, 2023

The Rumor Mill Can Create a Sexually Hostile Work Environment

Jon Hyman The Practical Employer

Just in time for Valentine’s Day, I bring you the story of a employee rumored to be sleeping with her boss to get a promotion. She wasn’t, but the workplace rumor mill sure thought she was.

Evangeline Parker began working for Reema Consulting Services, Inc., as an entry-level clerk. She received six promotions during her first 15 months of employment, ultimately to the position of Assistant Operations Manager.

Two weeks after her final promotion, Parker learned that “certain male employees were circulating … an unfounded, sexually-explicit rumor about her,” that she had slept with her manager, Demarcus Pickett, to obtain her management promotion. Participation in the rumor mill spread all the way up to the plant’s highest level manager, Larry Moppins, who asked Pickett, “You sure your wife ain’t divorcing you because you’re f–king [Parker]?”

Parker claimed that as the rumors spread, her coworkers, including those she supervised, treated her with “open resentment and disrespect.” It culminated in a staff meeting from which Parker was forcibly excluded, during which the rumor was openly discussed.

When Parker later tried to talk to Moppins about the issue, he blamed her for “bringing the situation to the workplace,” and told her that “he could no longer recommend her for promotions or higher-level tasks because of the rumor,” and that he “would not allow her to advance any further within the company.” A follow-up meeting several days later ended with Moppins screaming at Parker.

Thereafter, Parker and Donte Jennings (the man she accused of starting the rumor) filed harassment complaints against each other. In response, Moppins simultaneously issued Parker two written warnings and fired her.

In Parker v. Reema Consulting Services, the 4th Circuit held that Parker sufficiently pleaded that she had been subjected to a hostile work environment based on sex.

RCSI argued (and the district court concluded) that the rumors could not support a sexual harassment claim because they had nothing to do with Parker’s gender, but instead were about her conduct. The 4th Circuit rejected this argument and reversed the district court:

As alleged, the rumor was that Parker, a female subordinate, had sex with her male superior to obtain promotion, implying that Parker used her womanhood, rather than her merit, to obtain from a man, so seduced, a promotion. She plausibly invokes a deeply rooted perception — one that unfortunately still persists — that generally women, not men, use sex to achieve success.…

In short, because “traditional negative stereotypes regarding the relationship between the advancement of women in the workplace and their sexual behavior stubbornly persist in our society,” and “these stereotypes may cause superiors and coworkers to treat women in the workplace differently from men,” it is plausibly alleged that Parker suffered harassment because she was a woman.

No good ever comes from the workplace rumor mill, especially when the rumors are about an employee sleeping her way to the top. According to one recent poll, 97% of employees report that spreading rumors about a co-worker’s sex life is the most inappropriate office behavior.

What can you do to limit the harm caused by workplace gossip, especially that about an employee’s sex life? Consider the following 5 suggestions.

  1. Implement a “no-gossip” policy. A year ago I would have told that the NLRB would have serious issues with such a policy as a violation of employees’ rights to engage in protected concerted activity by talking about their terms and conditions of employment. Currently, however, the NLRB concludes that no-gossip policies are perfectly legal under its new Boeing rules on facially neutral handbook policies.
  2. Keep private matters private. If you don’t want employees gossiping about their co-workers’ private lives, then encourage employees to keep their private lives private. Employees can’t gossip about that which they do not know. That said, in the age of social media, when we are all connected with each other 24/7, this goal is increasingly difficult to accomplish.
  3. Set a positive example. The rumors in Parker were bad, but became that much worse when management began participating. If you want your employees to stop gossiping and spreading rumors about each other, set a positive example, and expect all employees to follow suit.
  4. Encourage complaints. Employees need to know that HR and management are receptive to complaints about gossip and rumors. Even if not sex-based, take the complaint, and treat it seriously. This means investigating, and talking to those starting or spreading the rumors to make sure they stop.
  5. Spread positive news. Is an employee doing a good job? Did he or she go above and beyond? Spread that type of news around the work place. The flip-side of negative rumors are positive stories about employees, customers, and culture. Good news stories will help drown out the negative.

And, for goodness sake, do not in any way, shape, or form permit employees to suggest that another slept her way to the top, or discipline the victim when she complains.

Also in The Practical Employer: Training Won’t Fix Your Hostile Work Environment 

Posted on February 12, 2019June 29, 2023

A Textbook Lesson: The ADA’s Interactive Process

Jon Hyman The Practical Employer

Does an employer have an obligation to return an employee to work following an extended unpaid leave of absence granted as a reasonable accommodation under the ADA?

You might be inclined to say, “Of course.” The answer, however, is nuanced, and depends on the length of the leave, the composition of your workforce at the time the employee seeks to return to work, and your efforts to engage in the ADA’s interactive process with the employee during the leave.

For your consideration: Brunckhorst v. City of Oak Park Heights.

Gary Brunckhorst worked as an accountant for the city of Oak Park Heights, Minnesota, for over 15 years. In April 2014, he contracted Fournier’s gangrenous necrotizing fasciitis — a rare, life-threatening disease otherwise known as “flesh-eating” bacteria. He had three life-saving surgeries, spent five months in a hospital and nursing care facility and suffered long-term injuries. 

At the outset of his hospitalization, Brunckhorst requested, and the city granted, FMLA leave. When that leave expired, the city granted an additional 60 days of unpaid medical leave and told Brunckhorst that he could qualify for an additional 30 more days thereafter. On Sept. 14, 2014, (the end of the initial 60-day unpaid leave), the city sent Brunckhorst his job description and asked him whether he could perform all of its essential functions of his position. Brunckhorst’s doctor responded that he was not able to return to work and that he needed additional unpaid leaves of absence, which was extended in serial through April 1.

In December 2014, however, the City Council had voted to eliminate Brunckhorst’s position as unnecessary. In an effort to soften the blow to Brunckhorst, is offered him the choice of a severance package or a return to work when he was able to do so in a new position, albeit with a 30 percent reduction in salary. Brunckhorst refused both, stating that he wanted to return to his original position. The city kept him on his unpaid leave in the interim, since he was not yet ready to return to work anyway.

Ultimately, the city gave Brunckhorst a hard April 1 deadline to return to work in the new position or be fired. Brunckhorst, through his attorney, refused and instead requested that the city permit him to work from home. The city refused, stating that remote work was not possible for the new position. It instead offered Brunckhorst a limited schedule as an accommodation — four hours per day four days per week in the office. When Brunckhorst declined the offer, the city terminated his employment.

The 8th Circuit Court of Appeals concluded that the city had not violated the ADA by eliminating his position, refusing to offer remote work as an accommodation, or otherwise failing to engage in the interactive process.

No reasonable juror could conclude that the City had failed to participate in the interactive process. Brunckhorst attempts to narrow the window of the interactive process to the last few days prior to his termination and claims that the City offered him only one, take-it-or-leave-it accommodation. To the contrary, the record shows that the City engaged in an interactive dialogue with Brunckhorst for months regarding his return to work. During that time, the City extended his leave multiple times, made multiple requests for information regarding what accommodations he required, and offered accommodations consistent with his doctor’s restrictions. There is no genuine issue of material fact that the City engaged in anything but a good-faith interactive dialogue.

This case provides a textbook roadmap for employers to follow when handling an employee on an extended medical leave. An employer can eliminate a position if the bona fides of its business and economic needs support that decision. It is not required to keep a position, or create a position, as a reasonable accommodation. It may have to offer an existing, vacant position, however. It also does not have to offer remote work if the essential functions of the position dictate otherwise.

If you are considering terminating an employee out on a non-FMLA unpaid medical leave, consider this question — will it appear to a reasonable jury that you tried to work with the employee to return him or her to work. If the answer is an objective “yes,” then you are likely on solid footing terminating the employee who refuses your offers to return to work (understanding that you may have to justify your actions and decisions in litigation).

Posted on February 4, 2019June 29, 2023

The 5th Nominee for the Worst Employer of 2019 is … the Fishy Fishery

Jon Hyman The Practical Employer

Atlantic Capes Fisheries agreed to pay $675,000 to settle a lawsuit filed by the EEOC alleging sexual harassment and retaliation.

The allegations that lead to the settlement, and this nomination as the worst employer of 2019?

A male supervisor, Fidel Santos, asked a new female employee, Esdeyra Rosales, about her personal life, stood close behind her while she was working, touching her back, hips, and buttocks. When she objected, he told her there was no work for her. When Rosales asked, and was granted, reassignment to another line, Santos’s harassment did not stop. He continued to make rude comments about her body and solicit her for sex. On one occasion, Santos approached Rosales from behind and asked her to touch his penis. When she refused, he pressed up against her, rubbing his penis against her buttock. Rosales complained to management, but they told her either to ignore it, or that they would “look into it.” The harassment, however, continued.

The harassment was not isolated to Rosales. Santos also allegedly harassed Margarita Fuentes, Mirna Pacaja, and others.

worst employer 2019

On Fuentes’s first day of work, Santos grabbed her buttocks. When she objected, Santos told her, “Here, anything goes.” Fuentes immediately complained to a manager, who told her that Santos was “crazy” and that she should just ignore him. The very next day, Santos came up behind Fuentes, grabbed her hand, pulled it behind her back, and placed it on his penis. When she resisted, Santos called her a “stupid old lady,” and that she was expected to do what she was told. Fuentes again complained to management, who again told her just to ignore it. The alleged harassment even after Fuentes ultimately secured a transfer away from Santos. He would find her, and call her “stupid” and “good for nothing,” question why she would not submit to him sexually, and hypothesize about her sex life.

Pacaja had worked for the fishery for 4 years before being transferred to Santos’s line. He allegedly similarly harassed her, almost from the start. He would grab her waist and hips, comment on her genitalia and buttocks, complain that she would not submit to him sexually, ask her to touch his penis, rub his hands on her breasts, and rub his erect penis up against her.

When Pacaja and Rosales ultimately complained to the HR manager, and then filed discrimination charges with the EEOC, they started receiving written warnings concerning alleged interpersonal issues with their co-workers. Within weeks they were both fired.

According to EEOC Senior Trial Attorney Sara Smolik, “The brave women who filed discrimination charges with the EEOC in this case alerted the agency to widespread sex harassment that was adversely affecting them and many of their female co-workers in the facility. Because they had the courage to step forward, the EEOC was able to investigate and bring this lawsuit to improve the working conditions for every­one.”

It also might lead to this employer being named the worst employer of 2019.

Previous nominees:

The 1st Nominee for the Worst Employer of 2019 Is … the Philandering Pharmacist

The 2nd Nominee for the Worst Employer of 2019 Is … the Little Rascal Racist

The 3rd Nominee for the Worst Employer of 2019 is … the Barbarous Boss

The 4th Nominee for the Worst Employer of 2019 is… the Flagrant Farmer

Posted on January 29, 2019June 29, 2023

When Can I Fire an Employee on Medical or Pregnancy Leave?

Jon Hyman The Practical Employer

medical and pregnancy leave One of the questions that clients ask me most often is, “________ is out on a medical/pregnancy leave (or just returned); can we fire him/her?”

My response, always: “Why?”

There are several reasons why you might need to fire an employee who is absent from work on, or just returned from, an otherwise FMLA or ADA protected leave.

  • While picking up the absent employee’s work, you discover he or she was not doing his or her job.
  • You uncover misconduct committed by the employee (fraud, theft, etc.).
  • You need to reduce headcount or eliminate the employee’s position.

Thus, my answer is always the same — “Would you have fired or RIFed the employee absent the otherwise protected leave of absence?” If so, then you can go ahead with the termination, understanding that a large amount of legal risk does exist. It does not mean that the employee is bulletproof, but it does mean that you need to tread carefully, make sure everything is well documented, confirm consistent treatment, and understand you will need to pay severance in exchange for a release or face the prospect of a lawsuit.

Case in point: Nieves v. Envoy Air, Inc. (6th Cir. 1/14/19).

Nieves worked as a gate agent for an affiliate of American Airlines for 19 years. His employer permits employees to fly for free, but prohibits employees from sharing their free travel benefits with anyone other than spouses or children. In April 2015, the employer randomly selected Nieves for an audit of its free travel program. In the middle of the audit, Nieves went out on an FMLA leave of absence. Upon his return to work, the audit continued, ultimately uncovering that Nieves had shared his travel benefit with ineligible individuals (his mother’s boyfriend, and non-children). Accordingly, the employer fired Nieves, just as it did with anyone it determined violate the free travel program.

Nieves sued, claiming that his termination, less than six weeks after he returned from FMLA leave, was in retaliation for the FMLA leave. The court disagreed:

Nieves argues that his travel log was given heightened scrutiny and that this raises an inference of a causal connection. However, nothing in the record supports that he was subject to increased scrutiny beyond the ordinary inquiry that follows a travel audit within the company. Envoy maintains that Nieves was flagged for an audit due to the number of entries on his travel log. According to American and its Matrix, an employee’s abuse of travel privileges is a terminable offense, regardless of whether the ineligible individual is currently listed or was in the past.

If you are going to fire someone during, or on the heels of, an FMLA or ADA leave of absence, you need a good reason, consistency, and the support of solid documentation. And even in that case, you face the choice of likely litigation, or a separation agreement with a payment of severance in exchange for a release. In all but the most egregious of terminations, I recommend the latter because the risk of the former is so great.

Also in The Practical Employer: Your 2019 Employment Law Compliance Checklist

NLRB Flip-Flops on Key Independent Contractor Test

Posted on January 25, 2019June 29, 2023

Labor Issues a Costly Concern During Acquisitions

When a company is considering a merger or weighing the idea of an acquisition, it is crucial to assess the impact on operations and, specifically, on labor and employment issues.acquisition

Deal attorneys and bankers focus on the underlying value analysis and purchase documents, which clearly are important.

However, liability for labor and employment issues can be created by acts or omissions and rarely is avoided solely by virtue of indemnification clauses or seller warranties in deal documents.

Put simply, our legal system operates in large part to protect the “little guy,” which in the employment context, means the employee, not the company. This means that, despite the iron-clad separation of entities from a financial perspective, if operations continue following deal closure, an acquiring entity may be held liable for workplace obligations agreed to by the seller-predecessor or for acts or omissions creating liability prior to the close of the purchase. 

The Employee’s Right

How can this be, you ask? Remember the little guy. If they felt like they were wronged before the deal closed, they will chase both companies (especially if the selling entity was in financial distress). From a legal standpoint if, from our employee’s perspective, nothing changed after the deal closed — same physical office, same managers, same processes — it is possible the buyer may be found liable for the wrongdoings of the predecessor entity.

The idea is that a company should not be able to escape liability to its employees solely by changing its corporate name and closing a deal. Someone needs to make sure the little guy’s wrongs are righted.  The way the courts often do it is by extending that liability to the “new” entity. The question is, how does “NewCo” avoid this? Ensure labor and employment are key components of due diligence, including the following:

Wage and hour. If you are the seller, conduct internal policy and practice audits on wage and hour issues as part of due diligence. These audits can reveal existing procedural violations that could mushroom into “bet the company” class actions if not cured (or expressly carved out of the purchase price!). Some examples of such issues are pay stub compliance, meal/rest break issues, and employee or contractor misclassification. One of the most frequently overlooked areas of exposure is unpaid vacation or paid time off for employees of the selling entity — all of whom would technically be terminated (and thus owed these monies) in an asset purchase. Even if the buyer hires every one of them.

Employment agreements. Know your obligations to employees, no matter the role. High-level executives who are key to the transition often have change in control or severance provisions in employment agreements that trigger significant payouts in an asset deal. If the buyer wants to retain these folks, the terms of new employment should be agreed-upon before closing. The buyer also should be conscious of any restrictive covenants — if key personnel are departing as part of the deal, make sure you are protecting your assets by limiting their ability to go across the street and start a competing concern. Even in California, noncompetition arrangements are available for limited purposes in the context of a purchase or sale of a business.

Turnover/hiring practices. Prepare yourself for WARN Act obligations, which require extended notice/payout periods, even if employees are not going to miss a day of work because they are being hired by NewCo. Diligence should include a discussion of which entity will be handling WARN and COBRA notices. And once NewCo takes over, to help avoid the type of pass-through liability described above in the context of an asset deal, it should follow standard hiring practices for each of the “old” employees. Assess them like any other new hire, and ensure all paperwork is completed to establish the new business relationship.

Labor union issues. Make sure you know about the seller’s union agreements or activity. Ask whether there have been organizing drives or union activity.  If there is any organized labor, ask to see all collective bargaining agreements and review all grievances. The CBAs may contain clauses obligating the buyer to assume the terms contained therein and the seller to expressly disclose the potential of a deal. If you are not planning to transition the organized operations to NewCo post-close, you may be responsible for posting a bond to cover the withdrawal liability for the multi-employer pension plan into which the seller previously contributed. This can be hundreds of thousands (or even millions) of dollars, and it is held in escrow for five years.

Immigration. Understand your employee base. Does the selling entity have employees for whom it has sponsored work visas? If so, there needs to be an assessment of transferability and a discussion regarding that process. Does the deal involve international payments or taxes or transfers of operations that will necessitate analysis of non-U.S. issues?

Any company considering a merger or acquisition is acutely focused on the potential effect on its balance sheet from a pure numbers standpoint. It is axiomatic that a business’s largest asset (or liability) can be its workforce. Remember that effectively transitioning operations requires careful planning and educated decision-making as to how, or if, NewCo will be adopting the prior workforce and the policies and practices that applied to it. In order to make responsible decisions regarding the value of any prospective transaction, and the risks associated with it, both sides should look beyond the balance sheet to the people on the ground.

As these issues highlight, diligence regarding matters of potential exposure stemming from the labor and employment function is crucial when assessing the true net impact of a potential deal on your company’s bottom line. The little guys can have a huge impact; don’t overlook that in your focus on the paperwork.

Posts navigation

Previous page Page 1 … Page 17 Page 18 Page 19 … Page 70 Next page

 

Webinars

 

White Papers

 

 
  • Topics

    • Benefits
    • Compensation
    • HR Administration
    • Legal
    • Recruitment
    • Staffing Management
    • Training
    • Technology
    • Workplace Culture
  • Resources

    • Subscribe
    • Current Issue
    • Email Sign Up
    • Contribute
    • Research
    • Awards
    • White Papers
  • Events

    • Upcoming Events
    • Webinars
    • Spotlight Webinars
    • Speakers Bureau
    • Custom Events
  • Follow Us

    • LinkedIn
    • Twitter
    • Facebook
    • YouTube
    • RSS
  • Advertise

    • Editorial Calendar
    • Media Kit
    • Contact a Strategy Consultant
    • Vendor Directory
  • About Us

    • Our Company
    • Our Team
    • Press
    • Contact Us
    • Privacy Policy
    • Terms Of Use
Proudly powered by WordPress