Category: Legal

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Employer Not Obligated to Rehire Poor-Performing Worker Under USERRA: Court

An employer is not obligated under the Uniformed Services Employment and Reemployment Rights Act to rehire a returning veteran with a poor work performance who was terminated as part of a reduction in force, said an appellate court Dec. 5.

According to the ruling by the 8th U.S. Circuit Court of Appeals in St. Louis in Douglas Milhauser v. Minco Products Inc., Milhauser, a maintenance technician whose work performance was considered to be “inconsistent and sometimes poor,” was included among those terminated as part of a reduction in force at his Fridley, Minnesota-based firm. As a result, he was dismissed when he reported for work after his military service had concluded in June 2009.

Milhauser sued, charging the company with discrimination on the basis of military service and with failure to provide re-employment as required by USERRA. A jury ruled in Minco’s favor on both counts, and Milhauser appealed on the USERRA issue.

The appellate court said under USERRA, employees returning from military leave must be re-employed in the “position of employment in which they would have been employed” had their continuous employment not been interrupted by military service, which is known as the escalator principle.

“Milhauser asserts that termination cannot be a ‘position of employment’ under USERRA,” said the appellate court.

But a three-judge panel disagreed: “The jury’s finding that Milhauser’ s position of employment would have been termination had he not left for military service is entirely consistent with USERRA’s text and its implementing regulations,” said the court, in affirming the lower court’s judgment.”

“The Secretary of Labor’s regulations on USERRA confirm that the escalator principle may properly be applied to result in an employee’s termination … We accord considerable deference to the Secretary’s interpretation” because she is charged with implementing USERRA’s provisions, said the court, which also stated other courts’ rulings agree.

Experts have said complying with the broadly worded USERRA can be a challenge for employers.

Judy Greenwald writes for Business Insurance, a sister publication of Workforce Management. Comment below or email editors@workforce.com.

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Oracle, CedarCrestone Legal Battles Heat Up

On Dec. 5, Oracle International Corp. and CedarCrestone Inc. representatives will face off in court for the first time since the software giant accused its former partner of copyright infringement and fraudulent practices in a lawsuit that highlights Oracle’s continued quest to protect its software-maintenance business in the face of changing industry practices.

In the first of dueling lawsuits filed in California federal court, Oracle in September accused CedarCrestone of stealing customers and intellectual property, specifically updates for tax and regulatory software originally developed by PeopleSoft, which Oracle acquired in 2005.

CedarCrestone, which has sold maintenance support for the software as an approved Oracle partner since 2005, filed its own lawsuit in mid-October denying any wrongdoing. The company claims the lawsuit is part of Oracle’s “broader war on competition,” against third-party providers of consulting, implementation and support for its software.

CedarCrestone also alleges that Oracle knew about the business practices in question for several years, yet never complained about them until the day before filing its lawsuit, and earlier this year, even renewed CedarCrestone’s partnership agreement and invited the firm to join an elite tier of Oracle business partners.

The software support in question accounts for approximately $1 million in yearly sales, and represents less than 1 percent of CedarCrestone’s annual revenue, according to CedarCrestone’s countersuit.

Golden Gate Capital, a San Francisco-based private equity firm, paid more than $79 million to buy the privately held Marietta, Georgia-based company in 2011, according to the San Francisco Business Times.

Representatives from Oracle declined to comment. A CedarCrestone lawyer confirmed the companies will meet Dec. 5 for a hearing in U.S. District Court in San Francisco, but declined to provide additional details.

Because CedarCrestone is much smaller than SAP, some industry watchers don’t put it in the same league as other competitors Oracle has sued in recent years, including SAP and Rimini Street. Still, it shows how serious Oracle is about protecting its maintenance business, says Jason Averbook, CEO of human resources consultant Knowledge Infusion. “The minute someone starts screwing with it, they come out with gloves off,” he says.

Averbook predicts that legal squabbles over software maintenance and support fees will go away as more companies stop using the kind of on-premise HR software that’s at the heart of the litigation, software that companies must license on an annual basis and run on their own servers. In its place, they’re adopting cloud-based software services that are accessed over the Internet and paid for through subscription fees that include updates.

But that transition isn’t happening overnight. Small and midsize companies may be moving to cloud-based HR software, but it will be slower going for large enterprises. “It’s going to take longer to wipe out your whole ERP system and move to the cloud,” says Adam Mansfield, director of services for Upper Edge, referring to enterprise resource planning systems. Upper Edge is a Boston consultant that helps companies negotiate maintenance contracts for Oracle and other HR and business software. “This Oracle third-party support issue is still going to be very relevant for those size organizations for many years to come,” Mansfield says.

According to Mansfield, Oracle’s legal actions have an unintended silver lining for companies evaluating service contracts. By exposing details of service contracts from Oracle and its competitors, the lawsuits provide companies with leverage to better negotiate their own deals. “This allows us early on to coach our clients to really force Oracle to provide a stronger value proposition, what they’ll give and why it’s valuable,” he says.

CedarCrestone is the latest of three former business partners Oracle has sued over copyright infringement and other issues related to ongoing support for Oracle software from outside providers. In August, SAP agreed to pay Oracle $306 million after admitting liability for illegal downloads by TomorrowNow, a third-party support provider that SAP acquired in 2005. SAP shut down its TomorrowNow operations in 2008. Oracle is appealing the settlement as part of its efforts to obtain $1.3 billion in damages related to the lawsuit.

Oracle is also suing Rimini Street, a third-party support vendor headed by TomorrowNow’s former founder and chief executive. Oracle based some claims in its lawsuit against CedarCrestone on material the company uncovered while collecting information for lawsuits against Rimini Street and SAP.

Michelle Rafter is a Workforce contributing editor. Comment below or email editors@workforce.com.

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Big Lots Settles Sexual Harassment Lawsuit with EEOC for $155,000

Bargain retailer Big Lots Stores Inc. has agreed to pay $155,000 to settle a sexual harassment lawsuit filed by the U.S. Equal Employment Opportunity Commission.

The settlement resolves a 2011 lawsuit filed against a Big Lots store in Fort Smith, Arkansas, for allegedly violating Title VII of the Civil Rights Act of 1964 after a store manager sexually harassed a class of female employees.

In the suit, the EEOC alleged that in 2009 store manager Robert Muntz began sexually harassing Lacey Deaton, a customer service specialist, by repeatedly requesting to see her breasts, according to court documents.

Deaton complained of Muntz’s sexual harassment by calling Big Lots’ corporate office. While the harassment temporarily stopped, Muntz eventually resumed his behavior, according to court documents filed in U.S. District Court for the Western District of Arkansas, Fort Smith Division.

The Columbus, Ohio-based retailer allegedly failed to protect employees from continued sexual harassment, the EEOC said in a Nov. 27 statement.

Muntz allegedly similarly harassed other female employees at the Fort Smith location and also sent pictures of his genitals to at least one female employee, the EEOC said in the suit.

Big Lots “failed to take appropriate remedial measures to protect a class of female employees from sexual harassment … (and) is strictly liable for the sexual harassment of a class of female employees because of Mr. Muntz’s status as store manager at defendant’s Fort Smith, Arkansas, facility,” according to the lawsuit.

In addition to paying $155,000 to four claimants, Big Lots must redistribute its harassment-free environment policy, provide anti-discrimination training, and report future complaints of sexual harassment to the EEOC for one year, among others.

Having and distributing an anti-harassment policy to employees is not enough to avoid potential claims, the EEOC said in the statement.

“The policy must be enforced,” said Faye Williams, a regional attorney in the EEOC’s Memphis, Tennessee, district office, in the statement. “When the policy is not enforced, employers risk liability.”

Big Lots did not immediately return calls for comment.

Mike Tsikoudakis writes for Business Insurance, a sister publication of Workforce Management. Comment below or email editors@workforce.com.

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Another Reason Not to Ban Social Media on Company Time (Hint: It’s the NLRB)

I’ve written before about the practical problems employers face when trying to ban employees from accessing social media at work.

Last week, an National Labor Relations Board administrative law judge provided us another reason for employers not to implement workplace bans on social media—such a ban might be an unlawful infringement on employees’ rights to engage in protected concerted activity.

In Dish Network [pdf], the ALJ considered the following policy in the company’s employee handbook:

Unless you are specifically authorized to do so, you may not … Participate in these activities [Social Media—blogs, forums, wikis, social and professional networks] with DISH Network resources and/or on Company time.

The ALJ struck down the policy as an unreasonable restraint on the right of employees to engage in protected concerted activity:

The Social Media policy is unlawful…. [T]he policy banned employees from engaging in negative electronic discussion during “Company time.” The Board has found that equivalent rules, which ban union activities during “Company time” are presumptively invalid because they fail to clearly convey that solicitation can still occur during breaks and other non-working hours at the enterprise.I’ve written before about the logistical problems of workplace social media bans.

If you are going to consider banning social media in your workplace, the practical reasons far outweigh the legal issues (Dish Network notwithstanding). I call it the iPhone-ification of the American workforce. If most of your employees can take their smartphones out of their pockets to circumvent your policy, how can you possibly police workplace social media access? Why have a policy you cannot police and enforce?

Instead of legislating an issue you cannot hope to control, treat employees’ use of social media for what it is—a performance issue. If an employee is not performing up to standards because he or she is spending too much time on the Internet, then address the performance problem. A slacking employee will not become a star performer just because you limit his or her social media access; he or she will just find another way to slack off.

When dealing with employment concerns, there are legal issues and there are business issues. Decisions cannot be made without considering both, and sometimes one must trump the other. In this case the legal issue and the business issue happen to jive. The legal issue, however, remains in flux, as the NLRB continues to grapple with the role of technology in the 21st century workplace. The business issue, though, dictates the employers think long and hard about implementing a policy they will struggle to enforce.

The blog is taking the rest of the week off. I’ll be back on Nov. 26 with fresh content. In the meantime, enjoy your holiday, and take a moment to say thank you to that and those for which you are grateful.

Written by Jon Hyman, a partner in the Labor & Employment group of Kohrman Jackson & Krantz. For more information, contact Jon at (216) 736-7226 or jth@kjk.com.

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IHOP Franchisee Settles EEOC Sex Discrimination Lawsuit for $1 Million

A franchisee of IHOP IP L.L.C. breakfast restaurant chains in New Mexico has agreed to settle a class sex discrimination lawsuit filed by the U.S. Equal Employment Opportunity Commission, paying $1 million to resolve the case.

In the suit filed in September 2011 against Fahim Adi, owner and operator of at least six IHOP restaurants in the Albuquerque, New Mexico, area, the EEOC alleged that Lee Broadnax, a general manager at the IHOP restaurants, sexually harassed a class of female employees, the EEOC said Nov. 13 in a statement.

Broadnax allegedly subjected the female employees to sexually offensive conduct, including sexual comments, innuendo and unwanted touching, according to court documents.

After complaints were made about Lee Broadnax’s behavior, IHOP failed to take reasonable measures to prevent and promptly correct sexual harassment allegations, according to court documents.

In some cases, the sexual harassment allegedly caused some women to quit their jobs, the EEOC said.

“Managers must constantly be reminded of their obligation to maintain workplaces where employees are not subjected to illegal harassment or forced to quit because of the harassment,” said Mary Jo O’Neill, regional attorney at the EEOC’s Phoenix district office, in the statement. “Where managers fail to satisfy these obligations, it is the employer’s responsibility to correct the violations and prevent other violations from occurring.”

In addition to the $1 million settlement, which is expected to be divided among at least 22 women, the IHOP franchisee, which employees more than 300 workers in Albuquerque, agreed to provide its employees anti-discrimination training and notice of the settlement, among other things, the EEOC said.

Attempts to reach the IHOP franchisee for immediate comment were unsuccessful.

Mike Tsikoudakis writes for Business Insurance, a sister publication of Workforce Management. Comment below or email editors@workforce.com.

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Do You Know What to Do When Severe Weather Strikes Your Workplace? #Sandy

I don’t know if you’ve heard, but there this little storm named Sandy trekking toward the mid-Atlantic and New England.

The storm is so potentially dangerous that the National Weather Service is sending out passive-aggressive warnings, just in case people are thinking of riding it out: “If you are reluctant, think about your loved ones, think about the emergency responders who will be unable to reach you when you make the panicked phone call to be rescued, think about the rescue/recovery teams who will rescue you if you are injured or recover your remains if you do not survive.”

Do you know what to do with your workers when a weather event such as Sandy aims for your workplace?

Two winters ago, I offered five suggestions for your workplace extreme weather policy, including how to handle issues such as attendance, wage and hour, and telecommuting.

In light of this week’s storm of apparently historical proportions, I thought it best to revisit that post: Do you have a severe weather policy?

Written by Jon Hyman, a partner in the Labor & Employment group of Kohrman Jackson & Krantz. For more information, contact Jon at (216) 736-7226 or jth@kjk.com.

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University of Virginia Whistle-Blower Gets $819,000 Jury Award

A federal jury in Charlottesville, Virginia, has awarded $819,000 to an academic whistle-blower who complained he was retaliated against after he complained his mentor at the University of Virginia had misappropriated National Institutes of Health Funds.

The jury verdict in favor of Weihua Huang was reached Oct. 12 and announced by Huang’s attorney Oct. 15.

In addition to the university, named as defendants in the False Claims Act litigation was Huang’s former mentor, Ming D. Li, and Bankole A. Johnson, chairman of the university’s psychiatry and neurobehavioral sciences department.

Huang claimed he was retaliated against after he complained about Li’s misuse of federal research grants for a project on the genetics of nicotine and addiction.

According to the original complaint, which was filed in in August 2011, Li submitted false status reports in connection with the project so that he and a laboratory assistant could devote more time to other research projects while drawing on the National Institute of Health project’s funding. When Huang complained of this, he was told his contract would not be renewed.

Huang’s law firm, the Employment Law Group, said in a statement a later ruling by the judge in the case, Norman K. Moon in the U.S. District Court for the Western District of Virginia, will determine whether there will be an additional award for lost future earnings or a requirement for Huang’s reinstatement.

A university spokesman said in a statement that the university is evaluating the case and will have no further comment.

Judy Greenwald writes for Business Insurance, a sister publication of Workforce Management. Comment below or email editors@workforce.com.

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Former Assistant Football Coach McQueary Files Whistle-Blower Suit Against Penn State

Former Pennsylvania State University assistant football coach Michael J. McQueary on Oct. 2 filed a whistle-blower lawsuit against the university claiming unfair termination, defamation and misrepresentation in connection with the child sexual abuse allegations against former assistant football coach Gerald A. Sandusky.

McQueary alleged that Penn State terminated his employment as assistant football coach earning a base salary of $140,400 because of his cooperation with Pennsylvania Attorney General investigators. McQueary testified he observed Sandusky sexually abusing a boy in a Penn State shower facility and reported the incident to school officials in 2002, according to the lawsuit.

Sandusky in June was found guilty of 45 of 48 child sexual abuse counts involving 10 victims over 18 years, often on Penn State property.

Unfair action also was allegedly taken against McQueary because he is expected to be a key prosecution witness at the criminal trials of former Penn State Athletic Director Tim Curley and former Senior Vice President of Finance Gary Schultz, according to the suit, which was filed in the Court of Common Pleas in Centre County, Pa.

Messrs. Schultz and Curley were charged with perjury and failure to report in connection to the Sandusky case. Both stepped down from their positions after the grand jury’s report in November 2011. Their perjury case is set to begin Jan. 7.

McQueary also alleged that Penn State did not offer to reimburse counsel fees incurred during the grand jury investigation, said he was misled by school officials as to how Penn State would handle the Sandusky matter, and was publically humiliated for testifying that school officials did not report the abuse.

Statements by school officials “have irreparably harmed the plaintiff’s reputation for honesty and integrity, and have irreparably harmed the plaintiff’s ability to earn a living, especially in his chosen profession of coaching football,” according to the lawsuit.

McQueary is seeking $8 million in lost future earnings, among other damages.

Penn State declined to comment on the lawsuit.

The embattled university faces complex civil lawsuits, compounded by an independent investigation that concluded that top officials at the school did nothing to investigate child sexual abuse allegations, which is likely to make it more difficult and costly to reach settlements of the cases, experts say.

As of February, the university has spent $7,577,643 in legal fees and to consulting and public relations firms as it addresses the fallout from the Sandusky scandal, according to Penn State’s website.

Mike Tsikoudakis writes for Business Insurance, a sister publication of Workforce Management. Comment below or email editors@workforce.com.

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Contraceptive Coverage Legal Battle Looms for Missouri

Missouri lawmakers on Sept. 12 overrode Gov. Jay Nixon’s veto of legislation that would allow employers and insurers to deny contraceptive coverage, setting the stage for yet another legal battle over contraceptive coverage.

In fact, immediately following the legislative action, the Greater Kansas City Coalition of Labor Union Women filed suit in a Missouri circuit court seeking an injunction to block enforcement of the measure.

Under the measure, S.B. 749, employers, insurers or other health care plan sponsors cannot be compelled to provide coverage for contraceptives, abortion or sterilization “if such items or procedures are contrary” to their religious beliefs or moral convictions.

In his earlier veto message, Gov. Nixon said giving employers and insurers such power would take “the authority to make decisions about access to contraceptive coverage away from Missouri women” and families.

While the measure allows employers and insurers to opt out of providing the coverage if they have religious or moral objections, U.S. Department of Health and Human Services health care reform law-related regulations require most employers to begin offering full coverage for prescription contraceptives for plan years beginning on or after Aug. 1, 2012. For employers with calendar year plans, the requirement will take effect on Jan. 1, 2013.

In the case of nonprofit employers, such as hospitals and universities, that are affiliates of religious organizations, their health insurers will be required to offer the coverage at no cost. That part of the regulation would apply for plan years starting on or after Aug. 1, 2013.

However, numerous suits have been filed by Catholic or Catholic-related organizations to block the mandate. In the suit filed in U.S. District Court for the District of Columbia, the Archdiocese of Washington and several other organizations that joined the suit said the mandate would require Catholic entities to “violate their sincerely held religious beliefs.”

In addition, Oklahoma City-based Hobby Lobby Stores Inc., a privately held, self-described Christian-owned and -operated retail chain, filed suit this week in federal court challenging the rules.

Jerry Geisel writes for Business Insurance, a sister publication of Workforce Management. To comment, email editors@workforce.com.

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Ex-Morgan Stanley Smith Barney Exec: I Was Fired for Whistle-blowing

A former risk officer at Morgan Stanley Smith Barney claims he was fired for blowing the whistle on a variety of infractions by the firm’s registered representatives, including the churning of preferred securities by a star broker the firm recruited last year from rival Bank of America Merrill Lynch.

Clifford Jagodzinski alleged in a complaint filed last month that his firing in April by MSSB was “an action for unlawful retaliation under the Dodd-Frank Act,” as well as claims under state law.

Chief among Jagodzinski’s claims was that late last year, he discovered that one of the firm’s newest wealth managers, Harvey Kadden, “was flipping preferred securities in a manner that was generating tens of thousands of dollars in commissions but causing losses or minimal gains for his clients and exposing (them) to unnecessary risks,” according to the complaint, which was filed in U.S. District Court in the Southern District of New York.

“These trades were obviously designed to bilk investors,” according to the complaint.

A superstar producer, Kadden was a 30-year veteran of Merrill Lynch before joining MSSB last October. According to the lawsuit, he got a $25 million guarantee for signing on.

Kadden has been listed regularly on the Barron’s Top 1,000 advisers list.

“Consequently, [MSSB] had very significant earnings expectations for Kadden and did not want to take any steps to jeopardize his book of business,” the complaint alleges. Jagodzinski was thus “told to stop investigating Kadden,” according to the complaint.

MSSB spokeswoman Christine Jockle said: “We believe the complaint is without merit and we intend to vigorously defend ourselves.”

Citigroup Inc., a minority stakeholder in the MSSB joint venture, also was named in the suit. A spokesman did not immediately respond for a request to comment.

The role of whistle-blowers is gaining some attention and notoriety on Wall Street. Sept. 11, the Internal Revenue Service said that the whistle-blower in a tax fraud case against the Swiss bank UBS AG, which involved wealthy Americans hiding assets in offshore accounts, would receive $104 million for revealing secrets about UBS’s dealings with some clients.

The whistle-blower, Bradley Birkenfeld, who spent 30 months in prison for withholding other information, will net about $44 million of the award after taxes and lawyer fees, according to published reports.

The Dodd-Frank Act prohibits retaliation against whistle-blowers, according to the complaint filed by Jagodzinski.

Kadden leads a four-man team which had combined production of more than $14 million in the trailing 12-month period and manages assets in excess of $1 billion.

In December 2011, Jagodzinski’s supervisors, branch manager David Turetsky and complex manager Ben Firestein, gave him a pat on the back for raising the red flag about Kadden, according to the complaint.

“Indeed, Firestein said, ‘Great job for catching this scam,’ while Mr. Turetzky said in sum and substance, ‘I don’t want to be on a beach in Bermuda, fishing with my son, and get a subpoena for what Harvey Kadden is doing — flipping these preferreds,'” according to the complaint.

In a response to the claim, which was filed Sept. 7, MSSB acknowledged that Jagodzinski was asked to investigate certain trades in customer accounts served by Kadden’s team and that he had discussed those trades with his superiors. The firm, however, denied the other allegations.

Jagodzinski had made inquiries into other MSSB, according to the complaint.

After he learned that another broker was making unauthorized trades on behalf of a client, that broker admitted to making 80 such trades, according to the lawsuit.

Turetzky later told Jagodzinski that he didn’t want to see the broker in question lose his job because he was a “stand-up guy” and that firing the broker would have exposed the firm to fines and penalties, according to the lawsuit.

Between December 2011 and April, when he was fired, Jagodzinski reported several violations by brokers to Turetzky. They included improper trades of Treasuries by another MSSB employee, the failure of some of the firm’s brokers to register home offices as alternate work locations and drug abuse by one of the firm’s brokers.

“Finally, during a conversation during the week of April 4, Mr. Jagodzinski told Mr. Turetzky that these violations should be reported” to the Financial Industry Regulatory Authority Inc., according to the complaint. “Mr. Turetzky bristled at this declaration, and less than 10 days later, Mr. Jagodzinski was fired.”

Bruce Kelly writes for InvestmentNews, a sister publication of Workforce Management. To comment, email editors@workforce.com.

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