Changes to Georgia Law on Restrictive Covenants

Sexy title huh? Well, not so much, (I can see your eyes glazing over now and you are moving the mouse). But stay with me a moment if you do business in the State of Georgia, have employees in the State of Georgia, or you would like to do business in the State of Georgia, because these changes have made your life as an employer (or franchisor, or lessor, or partner, or a seller of a business) EASIER.

I had the good fortune to attend a session on The Who, What, Where and When of Georgia's Restrictive Covenant Law O.C.G.A 13-8-50 et seq., conducted by attorneys Erika Birg and Bob Stevens of Seyfarth Shaw's Atlanta office. (And you thought my title was unsexy???) They were covering the constitutional amendment that the voters of Georgia passed in the November election (and they were serving cocktails and hors d'oeuvres). What the voters did was make it easier for businesses to enforce non-competes, non-solicitation and non-disclosure agreements. Up until this point most of these agreements were unenforceable in the State of Georgia because the way common law had defined how these agreements were dealt with.

Let me explain a bit more. Up until this point most restrictive covenants in an employment situation were unenforceable because most were written too broadly, in the opinion of most of the courts. And because the law in Georgia did not allow judges to alter or "blue pencil" agreements this meant that if the judge in a case decided that one portion of the agreement was too restrictive on the employee, because of a too broad definition of competition, contact, geography or time, then the judge was compeled to nullify the entire agreement. Thus employees were able to go scot free taking trade secrets, customer lists, or relationships and were able to go to work for a competitor with no reprecussions. As you can imagine business were not too happy with this and it was determined that many businesses were not opting to move to Georgia because of the potential losses they might suffer.

Well the voters changed that! The new constitutional amendment has given judges the opportunity to edit or alter (blue pencil) an agreement. No more nullifying an entire agreement. Thus, though something may be found to broader than a judge likes, they may now alter the agreement to be more "reasonable" leaving the majority of the restrictive covenant in force. The employer still has to be careful in crafting these agreements as statements of geography, scope, competitors, etc. still have to be seen as reasonable. For one thing "reasonable" may prevent litigation from the very start.

Ms. Birg and Mr. Stevens stated that the law is not retro active to previous agreements. They suggested if you are unsure or unhappy with your agreements you may want to have your attorneys draft new ones, but if you have one now that is well crafted a change may be uncessessary. Ms. Birg did suggest however, that she thinks it is a good idea to just build a system of annual agreements to allow them to be altered for changing circumstances, such as new territories, new customers, new competitors or new jobs. She said to sell the agreements by saying that the company is attempting to protect what the employee is helping to build.

As a closing note there are some challenges to the new law, which they feel will not be upheld. But they are suggesting that no NEW agreements be drawn up until after 1/1/2011.

And the final point was, while non-competes and non-solicitation agreements have limited applicability to certain classes of employees, they think that ALL EMPLOYEES should be required to sign a non-disclosure.

If you have any legal questions about this contact your attorney or the offices of Seyfarth Shaw here.

Credit Checks: Yes or No?

As reported by the Wall Street Journal and by SHRM the EEOC has been holding hearings whether the use of credit checks on potential employees should be utilized by a company in making a hiring decision. Representatives from SHRM (tesitmony can be found here), the US Chamber of Commerce, the law firm of SeyfarthShaw, LLP, and others testified on behalf of continuing the practice of using credit checks. Advocates for low income individuals testified against their use. The major point appears to be that poor credit potentially could be a bar to gaining employment in these tougher economic times. I have had some clients and students inquire about the use of credit checks as well. So I thought I would weigh in on the subject for my readers.

Credit checks usage as a background check, and indeed all background checks, are treated the same as consumer credit checks and are governed by the Fair Credit Reporting Act. The FCRA requires that you have an applicants permission to check their background. It also requires that if you make some adverse determination on the basis of that background check that you inform them, give them an opportunity to respond and to potentially correct the information if it is indeed incorrect. You can find the entire FCRA here. (Note it is an 86-page document.) The law does hold a company to the standard of insuring that their practices do not result in disparate impact, recognizing that minorities have historically have poorer credit records than do non-minorities, in some cases due to discrimination.

So the major complaint about the use of credit history as a hiring tool is that some companies use it across the board for all applicants as an indicator of "character" and "personal responsibililty." They deem this as "fitness for the job." In my opinion this is a poor decision making process and a misuse of the law. Character and personal responsibility are better left to the interview. Using the credit report is the lazy way out. Of course if they screw this up, they may be conducting illegal interviews as well.

What is the proper use of the credit check as a decision making tool? Determining if the position requires the employee to handle company money, company credit, customer money or customer credit, such as access to credit cards. Putting people in these positions without a credit check could expose the company to liability, either due to internal theft or to theft of consumer information. Let me give an example. I once ran across a company that would do a credit check on an employee on a whim. Poor decision making. Unfortunately for them, the one person they did not credit check was the person they hired to be their accountant. She had a good resume and she interviewed very well. She came across as trustworthy. So imagine their surprise when auditors discovered that she had embezzled over $60,000. If they had check her credit they would have discovered that she was $120,000 in debt. That might not have altered their decision to hire her, after all she was a good accountant. But it might have put them on alert to more closely manage her work. Either way money, time, effort, and heartache might have been prevented.

So my answer to the question in the title is YES. I would use, and have used, credit checks in making determinations on candidates for positions in which the future employee would be exposed to things that might damage my company or a client of the company. If you are running a piece of machinery, interviewing candidates, emptying the trash, filing reports, sewing clothes, cleaning the carpet I don't care what your credit history has been. I just require that you come to work and do a good job. If your credit history gets your car repossed then it might become an issue, but only if you can no longer get to work.

Will companies continue to use the credit check incorrectly? I am pretty sure the answer to that is YES. These are probably also the same companies that violate the FLSA, the Civil Rights Act, FMLA, the ADA and most of the other laws. Does that mean all of those have to be changed? Nope. Just need to penalize companies that violate them.

There is no one-to-one connection between your character and your credit... not today anyway.

So what do you do? Are you a YES or a NO?

You can find a differing opinion from Lance Haun here.

US Department of Labor: It's War! And Employers Are The Enemy

In a press release issued April 1 (yes April Fools Day, but this is no joke) Secretary of Labor Hilda Solis announced the release of the "We Can Help Program." If you were a trusting soul you might think this was a program to help employers correct wage and hour mistakes so that workers would be properly compensated. The FLSA is not an easy law to understand and deal with. After all there over 700 pages of regulatory text and over 50 statutory exemptions. So what would be better than a program to help employers to better understand this law. Well if this is what you think then you are the April FOOL.

The "We Can Help Program" is "being spearheaded by the department's Wage and Hour Division, will help connect America's most vulnerable and low-wage workers with the broad array of services offered by the Department of Labor. The campaign will place a special focus on reaching employees in such industries as construction, janitorial work, hotel/motel services, food services and home health care. It also will address such topics as rights in the workplace and how to file a complaint with the Wage and Hour Division to recover wages owed."  (My emphasis.) The AFL-CIO touted this announcement as a war on "wage theft" and Solis reiterated this by saying "If someone is stealing your wages, you can and should call the Department of Labor….We can help, and we will help. If you work in this country, you are protected by our laws. And you can count on the U.S. Department of Labor to see to it that those protections work for you." Employees are going to be "helped" to identify you as a thief and be taught how to report you. Luck you.

 

As further evidence that the USDOL is not going to be a friend of the American employer they have announced, according to Seyfarth Shaw attorney, and former Deputy and Acting Administrator of the USDOL, Alexander J. Passantino, that NO MORE opinion letters will issued. So an employer cannot ask for the USDOL to rule on a position to determine if it is exempt or not. Additionally, another 293 Wage & Hour investigators have been hired and trained and another 90 have been requested. A Chief Enforcement Officer has been appointed to head this effort up.
 
Additionaly actions that have or will occur include:

• Previous investigations will prompt more investigation
• An employers investigation history will be available on the website of the USDOL
• If  you accepted any stimulus money you will be investigated or if you are a subcontractor to someone who accepted stimulur money or is subject to Davis Bacon you will be subject to investigation.
• Information about investigations may be shared with other Federal agencies, such as the IRS and Department of Homeland Security and also with state department of labors.

One of the major outcomes of the second bullet is that personal injury attorneys these days are getting into the Wage & Hour business. They are bringing lawsuits on behalf of employees or ex-employees. They advertize on daytime TV these days. With the records of an investigation against you now being published on the USDOL website they now have identified targets and have been known to seek out your ex-employees or even your current employees. They are even actively soliciting the business when someone calls into them about other lawsuits, according to Seyfarth Shaw attorney, Louisa Johnson.

The USDOL has also announced increased OSHA efforts targeting employers and the NLRB will also step up efforts detrimental to businesses. Both of these issues will be discussed later in the week.

The net result of this new world order is that a BIG  target has been painted on the back of businesses and it is going to require you to be vigilant and proactive.

Tomorrow I will post on some of the Wage & Hour areas you need to pay particular attention to and what you should be looking for and doing with them. In the meantime, please pass this blog post around to other HR folks you know and in particular to any small businesses you know as well. Small business is particulary vunlerable just because they lack HR resources. Until tomorrow.....

Did You Know That OSHA Repairs The Holes in SOX?

There is an old saying that "You learn something new everyday." (For those of you with memory problems that statement is "You learn something knew everyday", LOL) Well today I did. I got One Minute Memo from the Seyfarth Shaw law firm entitled OSHA Steps Up Enforcement of Sarbanes-Oxley Whistleblower Claims. My first reaction to that headline was WHAT????  What does OSHA have to do with enforcing Sarbanes-Oxley violations? I was truly puzzled. What does violations of a financial disclosure law have to do with the agency that does safety inspections??
 
Do you know the answer? (Before you read the answer.)
 
Well it turns out that anyone that claims violations of Sarbanes-Oxley, in particular claims retaliation for reporting violations, must make the claim with the US Department of Labor. OSHA is part of the Department of Labor. And they just happen to have a lot of experience in investigating claims of retaliation for safety violations. As quoted in The Whistleblower Provisions of the Sarbanes-Oxley Act of 2002 by George R. Salem and Laura M. Franze:

"In the past, the Occupational Safety and Health Administration (OSHA) has reviewed the bulk of the complaints received by DOL, probably because most of the current whistleblower statutes administered by DOL involve allegations of safety violations. OSHA also has significant experience in handling allegations of retaliation. It is possible that a new unit, possibly one with specific financial experience, will be set up to handle initial investigations under Sarbanes-Oxley. However, OSHA currently has jurisdiction. Under current practices, the DOL investigates and then issues a “determination letter.” If the letter determination is not accepted by both parties, or the case is not otherwise resolved, the matter is assigned to the Office of ALJ and goes to administrative hearing. These hearings are relatively formal and resemble full-blown trials."

 

This was written in 2003. Given the One Minute Memo from Seyfarth Shaw it is apparent that no new unit was created. So if you are a public company who retaliates against employees for reporting financial violations you will be dealing with OSHA. Given that the Obama Administration Department of Labor has already announce increased enforcement in Wage & Hour and workplace safety this is an indication that SOX enforcement may also be stepped up. As a result Seyfarth Shaw recommends "...employers covered by SOX ... take steps to minimize the risk of claims alleging retaliation for protected whistleblowing. In particular, covered employers should promulgate appropriate ethics and anti-retaliation policies, train supervisors to comply with those policies, and implement hotlines and other methods by which complaints can be fielded and appropriately resolved without actual or perceived retaliation."

 

The lesson here is to make sure you darn your own SOX before OSHA comes in and sticks it to you!

GINA is Here: Complying With "HER" Regulations

Ok, I know that I took some liberties with "Geena" to match "GINA" in sound, but hey, it is Monday morning. GINA, or the Genetic Information Nondiscrimination Act went into effect on Saturday and as of that date employers must comply with Title II of the act. (Title I is a requirment for insurance companies to comply with the act.) I hope everyone was proactive and downloaded the poster to put up showing that you are complying with the new law.

The law firm, SeyfarthShaw, in one of their alerts listed the things that employers must do to be able to work within the confines of the law. Their advice includes:

• Conducting self audits, adjusting policies and conducting training.
• omitting genetic information from post-offer, pre-employment health history examinations and/or questionnaires;
• updating policies to prohibit discrimination based on genetic information;
• adding claims of “genetic discrimination” to waivers and releases where appropriate;
• and segregating lawfully-acquired genetic information from personnel files.

For those of you that would like to read SeyfarthShaw's entire announcment can click on here. For additional information you may also read my August 4th post and my May 24, 2008 post where I give more information about complying with GINA, including the Child Labor provisions.

On a different note, as a holiday bonus the Carnival of HR, hosted by Mike VanDervort at The Human Race Horses blog  is asking all contributors to designate a charity to which they would like readers to donate at this time of year. There are so many that would could be on my list to ask you to make a donation to, but I have a personal connection that compels me to designate the National Multiple Sclerosis Society. Clicking on the MS Society link will take you to the donation page.

EEOC Is Making a List and Checking It Twice and It Isn't Even Christmas Time Yet

Here we are in the middle of October. The end of the year is rushing toward us, probably faster than we want it to. The Halloween decorations will be down in the retail stores and they will be putting the "ThanksChristmasGivingDay" decorations up and Santa will appear in the malls. The song that features the words "..he's making a list and checking it twice" will be blaring on the radio and over the store speakers. (Did that reminder of how close Christmas is make you wince?)

Well there is already one group that is making a list and checking it twice and it is NOT Santa. It is the EEOC. A One Minute Memo from the law firm SeyfarthShaw, LLP arrived in my email this morning entitled EEOC Takes Aim at Companies Policies Limiting The Duration of Medical Leaves. (click on the title to see the pdf) The opening line for this document is "Recent actions by the U.S. Equal Employment Opportunity Commission (EEOC) have signaled its intent take a more aggressive approach in enforcing the Americans with Disabilities Act (ADA). One employment practice that the EEOC is specifically targeting involves company medical leave of absence policies that place limits on the amount of medical leave."

When the ADAAA (The Americans with Disabilties Act Amendments Act of 2008) became effective on January 1, 2009 it was evident that, with the broadened definitions of disability and the requirement for an active accommodation discussion, more lawsuits would be filed against employers. And this is becoming true. The SeyfarthShaw memo goes on to say "Over the past two months, the EEOC has also filed a number of pattern and practice lawsuits on behalf of employees of large employers alleging that the employers violated the ADA by rejecting extensions of medical leave as a reasonable accommodation for employees with disabilities. The EEOC asserts that any employer that maintains an inflexible maximum leave policy, which it will not extend or otherwise modify in order to accommodate individuals with disabilities, is unlawful." And along with this statement a warning from the EEOC was issued "Acting Chairman of the EEOC, Stuart J. Ishimaru, highlighted the administration’s increased focus on ADA enforcement, noting that these cases 'should send a wake-up call to corporate America that violating the American with Disabilities Act will result in vigorous enforcement by the EEOC.' EEOC Regional Attorney John Hendrickson confirmed the EEOC’s position that policies that 'set arbitrary deadlines for returning to work after medical treatment unfairly keep disabled employees from working.'"

So what does this mean for HR? It means you need to review your policy and make sure it it up to date. You need to make sure that if someone asks for an accommodation you engage in a vigourous interactive process that is documented. And you need to realize that an extension of a medical leave will probably be seen as a reasonable accommodation.

The big question yet unanswered is: When will an extension be considered unreasonable? This will probably only be decided by a court case. Which one of you out there wants to be the test case?

Stimulus = Free COBRA: Say What?????

According to an alert sent out by the law firm SeyfarthShaw, LLC, one of the provisions of the "stimulus" bill (also known as the American Recovery and Reinvestment Bill of 2009) is subsidised COBRA for people involuntarily terminated. Depending on what the final version is, employers will have to subsidise COBRA payments by either 50% or 65%. This will be available to anyone involuntarily terminated since September 1, 2008. If someone did not elect to have COBRA at that time they will be given a 60 day opt-in period.

The ex-employee would pay their portion to the employer or insurer and the employer would make up the remainder. The employer would then apply that amount as a deduction against payroll taxes. If that is insufficient to cover the COBRA expense then the U.S. Treasury would pay the remaining amount. This payment would continue for a period of 12 months, rather than the 18 months of COBRA. They would cease if someone became covered by other insurance, including Medicaid.

An additional provision would allow involuntarily terminated workers over the age of 55 to take COBRA on a permanent basis.

All of this could be effective as early as March 1st of 2009. To read SeyfarthShaw's full alert click here.

Welcome to the Brave New World. (I have provided a link to a description of Huxley's work in case you missed it in high school.)