NLRB Continues the March Madness by Recognizing College-Athletes as Employees

Yesterday, the Chicago regional office of the National Labor Relations Board (“NLRB”) issued a decision that could dramatically change the landscape of college athletics as we know it today. The Regional Director for the NLRB found that scholarship football players at Northwestern University are considered employees within the meaning of the National Labor Relations Act (“NLRA”), and therefore, eligible for union representation. This drastic departure from the traditional notion of a student-athlete will almost certainly be appealed and litigated for years to come.

In reaching its conclusion, the Regional Director defined an “employee" as "a person who performs services for another under a contract of hire, subject to the other's control or right of control, and in return for payment." The RD found that the scholarship football players performed valuable services for the university that resulted in Northwestern generating approximately $235 million in revenue over a nine year period. The RD found that these players were compensated in the form of tuition, fees, room and board up to $76,000 per year and that the “tender” they signed before being granted a scholarship was akin to an employment agreement. The RD also found the players are subject to the university’s control taking into consideration the fact that players devoted almost 40-50 hours of their time each week to football-related activities and the coaches exercised control over most aspects of the players’ private lives, including living arrangements, outside employment, and even Internet postings.

The university argued that the scholarship football players were analogous to graduate assistants, who were previously found by the NLRB to not be employees. The Regional Director distinguished this argument by finding that football players are not primarily students given their time commitment to football-related activities, the fact that their athletic duties did not constitutes a core element of their educational degree, and ultimately found “that the overall relationship between the graduate assistants and their university was primarily an educational one, rather than an economic one.”

The Northwestern football players are seeking to bargain for guaranteed scholarships, post-career medical benefits, and limited contact for practices. If this ruling is upheld, players would now be able to bargain for additional matters such as allowing athletes to accept endorsements while in school or even being paid for playing collegiate athletics. As we’ve seen with professional sports, collective bargaining can also lead to player strikes and lock outs, which has canceled seasons in their entirety in the event players and universities are at an impasse.

Though this could lead to a significant change in college athletics, the decision is limited to scholarship players (not walk-ons) at private schools. Public universities comprise the vast majority of FBS Division I teams, and they would need to follow their own state’s laws related to collective bargaining. However, the ripple effects of this decision could lead to other employment related consequences, such as a determination that players are considered “employees” under the FLSA, thereby entitling them to back wages and potential overtime claims, workers compensation claims from football-related injuries, and unemployment compensation in the event a student is cut from the program.

In our opinion, this decision undermines the true meaning of collegiate student athletes – they are students first, and athletes second. By regarding students as “employees,” this administration is now taking the position that these players should be considered blue-collar workers. By treating students as blue-collar workers, the true reason for why they are at a given university – to receive an education – is eroded even further, if not entirely as universities will now view their players purely through economic lenses and measured by the revenue they bring in.

A more practical approach to solve this dilemma may be to set up an educational trust for these athletes. Revenue generated from collegiate programs could go into a trust that is set-up exclusively to benefit these athletes’ continued educational pursuit. The vast majority of collegiate athletes will not go on to play professionally and by setting up a trust that can be used to pursue graduate and doctoral degrees, you are incentivizing these athletes to continue their education, and using their prior athletic commitment as a means to fund that pursuit. This is just one of the alternatives we feel is better than throwing blue collars on these student athletes and leaving the majority of them at the end of their collegiate career without any means to pursue a career in anything other than sports. The government should not pigeonhole these student athletes into the football field or basketball court, but rather, promote incentives that allow these players to continue their educational pursuit beyond their playing days.

Nick Johnson is an attorney with Washington, DC business law firm Berenzweig Leonard. He can be reached at njohnson@BerenzweigLaw.com.

Are You Committing Data Theft at Work Without Even Realizing It?

Violating the Virginia Uniform Trade Secrets Act (VUTSA) is easier than you might think. A federal court recently held that an employee downloading company information to an external storage device or emailing it to a personal email address may be liable for trade secret theft regardless of whether that information is actually used in an improper way. Something as casual or seemingly innocuous as using a flash drive to bring work home could implicate Virginia’s uniquely broad trade secret theft statute.

In Marsteller v. ESC Federal, Inc., a government contractor notified an employee that she was being terminated. Prior to her termination, the employee, who had signed an agreement requiring her to hold proprietary company information “in strictest confidence,” downloaded information to an external storage device and emailed it her personal email account as well. She was sued by her former employer for VUTSA violations. Although there were no allegations that Marsteller actually used the proprietary information that she downloaded and emailed to herself, the U.S. District Court for the Eastern District of Virginia held that allegations of improper acquisition alone are sufficient for a VUTSA claim to survive a motion to dismiss.

In Virginia, “improper acquisition” is described as “theft, bribery, misrepresentation, use of a computer or computer network without authority, breach of a duty or inducement of a breach of duty to maintain secrecy, or espionage through electronic or other means.” While that list is comprised of obviously unacceptable means of acquiring information on its face, the Marsteller decision gives broad applicability to the “use of a computer or computer network without authority” aspect. Something as simple as downloading proprietary company information onto a thumb drive (which may be proscribed by your employment agreement), at least in Virginia, may leave you open to liability for trade secret theft, whether you make improper use of that information or not.

Frank Gulino is an associate attorney with Washington, DC business law firm Berenzweig Leonard. He can be reached at fgulino@BerenzweigLaw.com.

Did Boss's Shoulder Touching and Suggestive Comment Constitute Sexual Harassment?

A female sales manager for an office furniture company alleged that on two separate occasions, her male supervisor acted inappropriately while driving her back to her hotel after company-sponsored training sessions. In the first instance, the pair had been at dinner with a group of co-workers when the supervisor insisted on driving the female employee back to the hotel. During this drive, the supervisor reached his arm around the female employee who was sitting in the passenger seat, and he put his hand on her right shoulder where he left it for about a minute. During the ride, the supervisor is alleged to have said that he had done a lot to get the female employee the job, and that she owed him to do “the right thing by him.” A few nights later after a similar post-training group dinner, the supervisor again insisted on driving the female employee back to the hotel. He again extended his arm to put his hand on her right shoulder, leaving it there for most of the fifteen- to twenty-minute drive back to the hotel.

The female employee was eventually fired for poor performance in a decision made by the male supervisor, and she then sued the company for sexual harassment. But her claim for sexual harassment was dismissed. A Massachusetts federal appeals court acknowledged that it would be “uncomfortable” for a female employee to have her male supervisor’s unwelcome arm around her while commenting that she owed him for hiring her. But the court noted that the two incidents ended quickly, and for the next ten months of employment there was no allegation of further inappropriate conduct by the supervisor. Citing the well-established legal standard for hostile work environment claims, the court concluded that the supervisor’s objectionable conduct was not pervasive by any measure, and that compared to other sexual harassment cases that had come before that court, this case was not even close.

Declan Leonard is managing partner of the Washington, DC regional business law firm Berenzweig Leonard, LLP. He can be reached at DLeonard@BerenzweigLaw.com. 

Supervisor’s Comment About Employee Was Not Evidence Of Age Discrimination

An IBM employee with a spotty performance record claimed his firing was the result of age discrimination.  As evidence, he produced a text message between two HR managers at IBM in which one asked about the employee’s “shelf life.”  The fired employee also claimed that an employee retention program at IBM called “Project Blue” was an allusion to blue rinses used by older people.  After being sued, IBM denied the allegations of age discrimination and claimed the employee’s firing was the result of his poor performance record.

A federal appeals court in Oklahoma recently found in favor of IBM and dismissed the employee’s age discrimination case.  The appeals court acknowledged that the “shelf life” comment could be interpreted as an age bias statement, but there was a more innocent explanation for why the HR manager used that phrase relating to the employee’s pending billable workload that the court found more plausible.  And the court outright rejected any age bias associated with the name “Project Blue,” given that IBM is sometimes referred to as “Big Blue.”

While IBM ultimately prevailed, this case is a good example of how managers who handle employment matters need to be extra careful about what they put in writing and be sensitive about how phrasing that is intended as innocuous could be interpreted as being discriminatory.

Declan Leonard is a managing partner at DC regional business law firm, Berenzweig Leonard, LLP. Declan can be reached at dleonard@berenzweiglaw.com.

EEOC’s Policy On Employee Criminal Records Scrutinized

The Equal Employment Opportunity Commission (EEOC) announced last year a new enforcement guidance under Title VII of the Civil Rights Act of 1964 to employers regarding the use of arrest and convictionrecords in employment decisions. Though there is no federal law prohibiting an employer from asking about arrest and/or conviction records, this recent guidance informed employers that even a neutral and uniformly applied “policy (e.g., excluding applicants from employment based on certain criminal conduct) may disproportionately impact some minority groups protected under Title VII, and may violate the law if not job related and consistent with business necessity.” If a background check is in fact necessary, the EEOC recommended that the policy at least consider “the nature of the crime, the time elapsed, and the nature of the job, and then provide an opportunity for an individualized assessment for people excluded.”

This guidance left employers in quite a dilemma, as on one hand if employers continued to uniformly use neutral background checks on all employees, they may run the risk of being subject to a disparate impact lawsuit. On the other hand, refusing to conduct background checks may be problematic as they have played a vital role in enabling employers to comprehend employees’ criminal history in an effort to avoid liability for criminal or fraudulent acts committed by employees and/or avoiding claims of negligent retention.

Faced with this predicament, a recent federal court in Baltimore cast serious doubt on the EEOC’s background check guidance. In the case, the EEOC filed a lawsuit against a corporate events provider that had a uniformly applied policy of running background checks on all prospective employees prior to commencing employment. The EEOC challenged this policy claiming that it had a disproportionate effect on minorities due to the higher statistical incarceration rates for minorities. The court dismissed the case on summary judgment in favor of the company due to the unreliability of the EEOC’s witnesses; however, the judge went out of his way to state his strong disdain for the EEOC’s guidance. Specifically, the judge noted that the EEOC’s guidance places employers in an unworkable position due to the inherent risks that can come from ignoring criminal history checks and employers should not have to second guess their decision to obtain fundamental information on their potential workers.

Although this opinion casts doubt on the EEOC’s enforcement of background checks, this opinion does not affect the guidance itself and best practices suggested by the EEOC. Unfortunately, there is no bright line rule governing background checks and companies should be sure to consult with an attorney before implementing a background check policy that could include criminal history or credit checks.

Nick Johnson is an associate attorney with Berenzweig Leonard, LLP, a DC regional business law firm. He can be reached at njohnson@BerenzweigLaw.com.

Intern or Employee? Don’t Find Out the Hard Way

Unpaid internships have become a prevailing part of the corporate landscape.  They serve as a means for students and recent graduates to gain experience in their chosen fields and give businesses the opportunity to develop relationships with new talent.  What many do not realize, though, is that the intern-business relationship is governed by a network of state and federal laws that, if ignored, can lead to very expensive consequences.

Recently, Fox Searchlight Pictures, P. Diddy’s Bad Boy Entertainment, The Hearst Corporation, Condé Nast, and other businesses have been forced to grapple with the effects of such laws.  Each of these companies has been sued by former unpaid interns who contend that they are entitled to back wages and benefits because of the nature of the work performed.  NBCUniversal is one of the most recent high-profile targets, and recently filed a response in a class action suit that may end up costing the company a tremendous amount of money.

In their suit, former NBC interns Jesse Moore and Monet Eliastam claim that NBC violated portions of the Fair Labor Standards Act and several state regulations in failing to pay wages for kinds of work that must be compensated under the law.  The Department of Labor has stated that interns may only work without pay in certain situations, and the NBC interns argue that because their work at the company does not fall within the protected categories, they are entitled to back pay.

The NBC suit and others like it have touched off a firestorm in the business community, with some calling out for better treatment and fair compensation for under-advantaged interns, while others argue that businesses should jettison their intern programs altogether to avoid potential liability.  One thing is certain: the issues raised in the intern lawsuits are not going away ‒ Fox lost during the first stage of its lawsuit and now has an appeal pending, other companies have settled, and the trend in intern lawsuit filings shows no signs of slowing.  In the end, these stories highlight how important it is for business owners to understand the laws that govern the business-intern relationship; when it comes to interns, it is definitely better to be safe than sorry.

Ryen Rasmus is an associate attorney for the Washington, DC regional business law firm Berenzweig Leonard, LLP.  He can be reached at RRasmus@BerenzweigLaw.com.

Is It Negligent for a Company to Hire Someone Who Turns Out to be a Thief?

An administrator for a Vienna law firm was accused of stealing over half a million dollars from a client.  The client had hired the law firm to pursue a specific type of immigration visa that entailed making a commercial investment of $500,000.  The employee directed the client to deposit this money in a bank account that he controlled, and the employee later absconded with the money instead of using it for the client’s visa process. The employee fled overseas and faces criminal prosecution.

The client sued the law firm over the stolen funds, alleging among other legal claims that the law firm was negligent in hiring the administrator in the first place.  The client claimed that if the law firm had done the appropriate background check on the employee prior to hiring him, it would have discovered that he and his family had several unsatisfied monetary judgments against them.  Therefore, the employee should not have been entrusted with a position that entailed handling large sums of client money and the law firm was negligent in bringing him on board.  The law firm countered that it had no reason to suspect that the employee would end up being a thief, and therefore, the firm was not negligent in hiring him.

A federal judge in Alexandria recently dismissed the client’s negligent hiring claim against the law firm.  The judge stated that, in Virginia, the test for negligent hiring is whether the employee has negligently placed an unfit person in an employment situation that could cause unreasonable risk of harm to others.  The judge concluded that even if the administrator had money troubles in his past, causing financial harm to others is not enough to raise a claim for negligent hiring.  There must be actual physical injuries inflicted by an employee before an employer can be held liable for negligent hiring.  It should be noted that the client made several other legal claims against the law firm related to the theft, and some of those claims are still pending.

Declan Leonard is managing partner of the Washington, DC regional business law firm Berenzweig Leonard, LLP. He can be reached at DLeonard@BerenzweigLaw.com.