Daughter’s Facebook Post Reveals Father’s Breach of Settlement, Costing Dad $80,000

Confidentiality clauses are typical in settlement, severance, and separation agreements, as employers typically want to avoid a situation where a former employee openly discloses the amount of a settlement or severance payment. Employers often offer significant monetary consideration in exchange for, among other things, the employee’s discretion. Recently, a Florida appeals court found that a former school headmaster violated the terms of a confidential age discrimination settlement with the school, after his daughter jokingly mentioned the settlement in a Facebook post saying “Mama and Papa Snay won the case against Gulliver. Gulliver is now officially paying for my vacation to Europe this summer. SUCK IT.” The settlement required the employee and his wife not to reveal the existence and terms of the settlement agreement to anyone other than their attorneys or professional advisers. As a result of his daughter’s gleeful disclosure, the employee’s payout was reduced by $80,000!

For employers, this case highlights the importance of including confidentiality language in settlement agreements which clearly communicates what conduct is prohibited and who can learn information about the settlement. In addition, if an agreement indicates that others are expressly permitted to learn of the agreement’s terms, such as a spouse or immediate family member, it is prudent to also specify that a breach by any of those individuals will be considered a breach by the employee, and as a result, will subject the employee to the same penalties. Moreover, adding an express reference to social media may be worthwhile. The agreement at issue in the Florida case did not, and it took two courts to finally determine, much to dad’s chagrin, that disclosure on Facebook constituted a breach.

The case also shows a willingness of courts to enforce reasonable confidentiality terms, especially in a situation where the result of the breach is exactly the type of harm the company sought to prevent. When considering what types of penalties to include for a breach, it is important to ensure that the penalty is not oppressive and/or punitive. In this case, the company paid the employee the agreed-upon back pay and attorneys’ fees and sought only to recover the amount provided for punitive damages. However, a court may be less likely to enforce a penalty for a breach that goes well beyond the amount contemplated by the settlement agreement.

Lastly, as this case demonstrates, even inadvertent disclosures, whether online or in some other forum, can prove costly and result in legal and financial liability. Consequently, companies should take proactive steps to prevent such disclosures. For instance, companies should put physical and electronic safeguards in place to protect confidential information, only disclose confidential information to employees with a need to know, and if such information is disclosed, ensure that employees understand their obligations to keep the information confidential.  Following basic rules and common sense can avoid odd conclusions the dad was forced to live with in Florida.

Sara Dajani is an Associate Attorney with the DC region business law firm of Berenzweig Leonard, LLP. Sara can be reached at sdajani@BerenzweigLaw.com.

EEOC Takes Aggressive Position On Severance Agreements

The Equal Employment Opportunity Commission (“EEOC”) recently filed a lawsuit against one of the nation’s largest pharmacy chains, CVS, claiming its separation agreements violate Title VII of the Civil Rights Act. This action by the EEOC is surprising and significant, since the targeted provisions are ones that are commonly found in severance agreements. According to the lawsuit, the EEOC claims that CVS conditioned payment of severance benefits on execution of severance agreements that contained overly broad, misleading, and unenforceable language that unlawfully prevents employees from communicating with the agency or filing discrimination claims. In its lawsuit, the EEOC claims the following provisions of the agreement violate Title VII:

• A cooperation clause requiring employees to notify the company of contacts relating to legal proceedings;
• A non-disparagement clause;
• A non-disclosure of confidential information clause; and 
• A general release and covenant not to sue clause.
  

The EEOC is seeking a permanent injunction prohibiting CVS from restricting the rights of former employees to file charges or participate in agency proceedings, reformation of CVS’s separation agreement, and for CVS to provide 300 additional days for any former employee who signed the agreement to file administrative charges.

The EEOC claims that being able to bring charges and communicate with employees plays a critical role in the EEOC’s enforcement policy because it informs the agency of employer practices that may be unlawful. An employee’s right to communicate with the EEOC is protected under federal law, and therefore, the EEOC claims that when employers have language similar to that found in CVS’s severance agreements, it has the effect of buying an employee’s silence regarding discriminatory practices.

The EEOC’s claims are a departure from its prior position in which it previously determined similar language was in compliance with Title VII. In fact, CVS modeled its severance agreements with language the EEOC previously found compliant in an earlier lawsuit. This can be rightly viewed as an overreach by the EEOC to strike down provisions of severance agreements that are used almost universally by employers and have been previously approved by the agency.

If the EEOC is successful in this lawsuit, employers will need to revisit their severance agreements and make any necessary changes to comply with the court’s decision. However, unless the court strikes down the provisions in the case, or another court acts otherwise, we are not currently recommending a drastic departure from our prior severance agreements based on this lawsuit. While we believe it is unlikely that the EEOC will be successful on all of its claims against all provisions of CVS’s agreements, this new aggressive stance by the agency is a good reminder to employers to always revisit severance agreements to ensure they are legally compliant, and consider taking steps to avoid similar claims.

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

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.