I heard a statistic today that the Equal Employment Opportunity Commission (EEOC) is expecting over 100,000 charges in FY2011 – the highest number ever in its history.  Dealing with an increasing number of discrimination, wage & hour, and other employment-related claims is, unfortunately, the state of affairs in the workplace for some time to come.   

EEOC Charge Statistics.jpg

Chart published in the EEOC’s Fiscal Year 2011 Congressional Budget Justification showing EEOC Private Sector Charges Pending Ending Inventory at Year End for Fiscal Years 2007 through 2013.

So, what is an employer to do?  One option is to stay the course, keep doing what you’ve been doing and hope you can, with some luck, stay out of the line of fire.  Another option is to be proactive and try to mitigate risk before a claim, lawsuit, class action, or government investigation ensues.   Based on the cases I’ve seen of late, here are my top 5 recommendations for companies to help mitigate exposure and risk: 

  1. Maintain Accurate Time Records – Wage & hour claims are on the rise.  Under federal and state law, it is always the employer’s obligation to create and maintain accurate time records for all employees.  If an audit or claim arises, the Department of Labor doesn’t look kindly on employers who fail to keep track of hours worked, overtime hours, and employee meal and rest periods.  Even worse, if there are no records or the records are inaccurate, the employees’ recount of hours worked or missed meal periods will generally rule the day. 
  2. Update Employee Handbooks – There is no one-size-fits-all Employee Handbook.  Likewise, a Handbook that is over 2-3 years old or was pulled off the Internet is no good to an employer.  Laws have changed and new laws have cropped up.  Various laws apply only to employers with a certain number of employees.  If Handbooks contain policies incorporating laws or regulations that otherwise would not apply to an employer, the employer may unknowingly adopt those laws.  If Handbooks don’t contain the required disclaimers, breach of contract claims come into play.  Not to mention that without the right policies in place, important legal defenses may be foreclosed that could save the company a lot of money (e.g., the Faragher/Ellerth defense in sexual harassment cases and the safe harbor defense in FLSA cases).    
  3. Have Written Job Descriptions & ADA-compliant Applications – Employee classification challenges are on the rise and so are ADA discrimination claims.  Without up-to-date job descriptions, dealing with an overtime claim based on a FLSA miclassification is an uphill battle; so is dealing with an employee that may be unable to perform all the essential functions of the job, particularly if it is not clear to either the employer or employee what those essential functions are.  In addition, not only is asking about an applicant’s physical limitations a no-no in a job interview, it is also prohibited in an application.  It is best to leave all the reasonable accommodation issues for after hire.   
  4. Conduct Sexual Harassment Training – Sexual harassment is still a prevalent issue in the workplace.  All too often, employee complaints to supervisors fall on deaf ears.  Many times, the supervisor doesn’t even know to recognize that it was a complaint of harassment in the first instance requiring employer action.  Training is a must.
  5. Treat Departing Employees With Dignity and Respect – Finally, brash and undignified employee exits only invite claims.  Giving an employee an unexpected pink slip and escorting them out of the office with a box of their stuff in front of all of their co-workers should be avoided.  When possible, make sure employees are aware of performance deficiencies or concerns so that they aren’t taken off guard by a termination decision, document attendance, performance and other issues that arise, and consult with legal counsel if there is any question about possible claims.  

On September 30, 2010, oral argument (audio file) took place in an important case regarding non-compete law before the Colorado Supreme Court.  The case is Lucht’s Concrete Pumping, Inc. v. Horner et al., Case No. 09SC627, and the issue on appeal is whether continued at-will employment is sufficient consideration to enforce a non-competition agreement entered into after the employment relationship commenced

Other states, including South Carolina, Washington and Montana, have already addressed this issue, finding that continuation of at-will employment alone is insufficient consideration for a non-compete.  Here, in Colorado, however, we await this important decision.  It’s worth noting that Colorado has a strong public policy against the enforceability of non-competes generally, subject to narrow exceptions outlined by statute

Background Facts & Decisions Below:

  • Lucht’s Concrete Pumping, Inc. (LCP) is a concrete pumping company that supplies ready-mix concrete in the Rocky Mountain region.
  • In 2001, Tracy Horner began his employment with LCP as its mountain division manager.  Essentially, he was a relationship guy who was responsible for building the clientele of LCP.
  • On April 15, 2003 (2 years later), Mr. Horner (an at-will employee) was asked to sign, and did sign, an Employee Non-Disclosure and Confidentiality Agreement with LCP.  No additional consideration was given to Mr. Horner in exchange for his execution of the agreement, which included a 1-year non-competition covenant. 
  • On March 12, 2004, Mr. Horner resigned from LCP. 
  • On March 15, 2004 (3 days later), Mr. Horner began working for Everist – a direct competitor of LCP in the ready-mix concrete supply business. 
  • LCP’s business in the mountain region tanked, and LCP brought suit.  (Thereafter, in 2008, LCP filed for Chapter 11 bankruptcy.)
  • TRIAL COURT DECISION: The trial court granted summary judgment in favor of Mr. Horner, holding that the non-compete agreement was unenforceable due to lack of consideration.  A bench trial was held on the remaining claims, all of which were resolved in favor of Mr. Horner and Everist. 
  • COURT OF APPEALS DECISION: The Colorado Court of Appeals, 2009 WL 1621306 (Colo.App. June 11, 2009), affirmed the trial court’s decision and noted that “[Mr.] Horner did not receive anything in return for his promise not to compete.”  Although the Court of Appeals didn’t specify how much consideration would be sufficient, it did characterize the type of consideration necessary to enforce a non-compete entered into after employment begins such as a “pay increase, promotion, or additional benefits.”   

If the Colorado Supreme Court affirms the Court of Appeals, the unanswered question will then become how much consideration is enough to support a non-compete agreement entered into at any other time but hire. 

Stay tuned for an update on my blog once the Colorado Supreme Court publishes its ruling. 

Birthday.jpgIn 1938, during the Great Depression, Congress enacted the Fair Labor Standards Act (FLSA) to:

“aid the unprotected, unorganized, and lowest paid of the nation’s working population; that is those employees who lacked sufficient bargaining power to secure for themselves a minimum subsistence wage.”

At that time, we had an industrial workforce and most jobs had a fixed beginning and end to the workday.  Today, the workforce is technology driven with a virtual workplace and many employees work from remote locations.  Still, we are largely operating under the 72-year-old language in the FLSA that defines occupations and job roles that are out of touch with the increasing number of professional and administrative positions in business. 

Although the regulations have been amended over the years, employers are seeing an increasing number of claims by highly paid employees in a two-pronged attack: (1) the Department of Labor (DOL); and (2) private litigation. 

On April 1, 2010, the DOL launched its “We Can Help” campaign using public serving announcements from celebrities such as Jimmy Smits.  It also hired 250 new investigators – an increase by 1/3. 

Some important DOL statistics:

  • Each year, between 23,000 and 32,000 wage and hour complaints are made with the DOL.
  • On average, the DOL spends 97 days to resolve a complaint.
  • Only 20% of the complaint investigations result in a finding of no violation.
  • In FY2008, only 33% of back wages collected were for low wage workers, with 67% of back wage payments going to highly paid workers 

With respect to private litigation:

  • Since 2000, the number of FLSA claims filed has increased by 77%
  • In 2009, the ABA reported that non-government wage and hour settlements increased by 44%.
  • The ABA also reported that the value of the top ten private wage and hour settlements in 2009 totaled nearly $364 million – MORE THAN FOUR TIMES THE VALUE OF THE TOP TEN SETTLEMENTS IN DISCRIMINATION ACTIONS.

The expectation for 2010: wage and hour claims will continue to grow and will see the highest rise of all employment-related claims, in the form of collective and class actions (which carry the most exposure for employers).  Instead of the FLSA being used as it was intended – a shield to protect low wage workers, it has now become a sword that is invoked by highly-paid employees and the plaintiff’s bar seeking to exploit vague regulations to drive high dollar settlements.  This view has been expressed by both the HR Policy Association in a recent September 23, 2010 letter (PDF) to the Secretary of Labor, Hilda Solis, and the U.S. Chamber of Commerce

The fact that 80% of DOL investigations result in FLSA violations is strong evidence that employers are being forced to comply with a confusing and rigid law that is inapplicable on many levels with the flexible and evolving workplace desired by employers and employees alike.  Running the risk of non-compliance with an outdated and archaic set of laws is no way for business to prosper, create jobs, and help improve the economy.  

Your Weight in Gold.jpgOn September 17, 2010, jetBlue named Joanna Geraghty as its first Chief People Officer (CPO).  There is some speculation that the timing of the Steven Slater incident may have helped fuel this decision.  But still, jetBlue has taken the leap and appears to be at the forefront of companies appointing CPOs, which are anything but the norm.  

Today, human resource professionals can play a crucial role in the success or failure of business.  One need look no further than the increasing number of ‘pattern and practice’ class action lawsuits challenging subjective decision-making (e.g., hiring, firing, and promotion) to see that not having an organized, strategic and uniform HR function can have expensive (and disastrous) consequences. 

EXAMPLE: Major national company is named in a nationwide class action lawsuit for ‘pattern and practice’ discrimination against minorities.  Basis of claims is that the company has no formal practices or policies for promotion, all decisions are made locally by the individual managers.  In fact, major national company has no central HR function, and no top-level decisionmaker driving policy and procedures across all locations.  What does that mean?  It means that the major national company’s reputation and litigation exposure is left in the hands of individual managers or regional folks with varying levels of education, training and experience, and unfortunately, possible discriminatory motives.

Not only are these massive cases being pursued by private classes of plaintiffs, the Equal Employment Opportunity Commission (EEOC) has made ‘pattern and practice’ cases an enforcement priority.  But, beyond exposure to ‘pattern and practice’ class action litigation, there are two other important reasons why companies should seriously consider a CPO:

  1. Compliance with evolving employment laws and regulations
  2. Hiring and retaining top talent

Jim Collins, the author of “Good to Great,” has said that people can be a company’s greatest asset and make the difference between good and great companies.  However, he is careful to clarify that this concept only applies to the right people.  Arguably, companies should consider following jetBlue’s concept of getting the right people in place, from the top, down.  Seems to me this move would be worth its weight in gold.