Minnesota Employers – Are You Ready to “Think Outside the Box”?

Posted on May 10, 2013 by

I must admit, I was glued to Minnesota Public Radio yesterday (May 9, 2013). Although this is not a new phenomenon for me, yesterday I was particularly eager as I awaited the historic Minnesota House vote that would take Minnesota one step closer to becoming the next state to allow same sex couples to legally marry.  The vote came in around noon, and the bill will now move to the Senate. Five hours later, as I got in my car to go home, the trusted voice of MPR Reporter Annie Baxter reminded me that there was another significant vote in the Minnesota House yesterday. The House also passed a bill that will “ban the box,” on employment applications, as they call it. Come 2014, Minnesota employers will be banned from asking about criminal history on initial employment applications.

The new law will make it illegal for employers to ask about applicants’ criminal history in the initial employment application. That little check box that has been part of your employment application for decades now, right after where the applicant is asked whether they are legally authorized to work in the United States, will soon be gone. Here’s why: The Equal Employment Opportunity Commission issued a Guidance in April 2012 finding that asking about an applicant’s criminal history (and then excluding that applicant if they “check the box”) in the early stages of the application process has the effect of eliminating certain minorities from the applicant pool at a high rate. Specifically, the EEOC found that 1 in 3 African American men and 1 in 6 Hispanic men will serve time in prison in their lifetime, compared to only 1 in 17 white males. The EEOC found that such early elimination could give rise to a “disparate impact” discrimination claim.

Long story short, if you ask about criminal history at the beginning of the application process, and eliminate applicants based on that information alone, you are eliminating certain races of applicants at a higher rate than others. This can be seen as discriminatory – and the EEOC (as well as local agencies charged with investigating discrimination in employment) is ready to go after employers because of it. Minnesota lawmakers agree, as both the House and the Senate have approved Senate File 523 which will “ban the box” on all Minnesota employment applications (there are exceptions, mostly relating to public safety employers; schools and other professions working with juveniles; and certain medical professions). If signed by Governor Dayton (as is expected), the law will go in to effect in January 2014. It will be enforced (in large part) by the Minnesota Department of Human Rights (MDHR), which will start issuing warnings to employers in 2014 if their applications are not in compliance.

Starting in 2015, fines may be imposed on employers without warning. These fines can be up to $500 per violation. This does not mean that employers must hire individuals with criminal convictions, if that individual would present a risk for the business. As Commissioner Lindsey of the MDHR has stated, employers should at least have a “conversation” as opposed to making categorical denials of employment. But the decision not to hire must be done thoughtfully and – of course – without a discriminatory motive. It can be done, but the process will be more complicated than it was in the days when “the box” was still legal.

Employers should meet with their employment attorneys to make sure they have a plan in place so that they can be in compliance with these new requirements come January 1, 2014. The potential for large fines and the relatively easy fix leaves employers with a clear plan of action: REVISE YOUR EMPLOYMENT APPLICATIONS! And do it quickly – 2014 is just around the corner.

For a review of your company employment applications for compliance with this and other state and federal requirements, or for other employment-related questions, please contact Minneapolis employment law attorney Greta Bauer Reyes at greyes@foleymansfield.com.

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State Medical Board Organization to Explore Licensing Compact to Help Enable Use of Telemedicine

Posted on May 3, 2013 by

Physicians who wish to practice across state lines using telemedicine may soon have new support from the Federation of State Medical Boards (“FSMB”) in obtaining licensure and approval to do so.

The FSMB, a national non-profit organization representing all medical boards within the United States, recently approved a resolution to explore the creation of a new system that would promote cooperation among various state licensing entities. The resolution calls for the creation of an “interstate compact” that would constitute a formal agreement between states to facilitate the delivery of medicine across state lines.

The FSMB’s acknowledgement of a need for such an interstate compact it critical given the recent growth of telemedicine. Importantly, while technologies such as “Skype” and other real-time audio-video platforms enable practitioners to “virtually” treat patients anywhere, physicians are limited by scope of practice laws. Specifically, most state medical boards take the position that the “practice of medicine” occurs where the patient is located. Therefore, for example, a Michigan physician cannot treat an Ohio patient using telemedicine.

Since physician licensing is controlled separately by each state, physicians who seek more than one license – even if it is just across state lines 20 miles away – must navigate through multiple licensure processes. Some states, such as Alabama, provides for a special purpose license to practice medicine across state lines. Others do not permit such activities at all.

The goal of the interstate compact would be to set parameters for one uniform system of multi-state licensing, therefore enabling the use of telemedicine. Pursuant to the resolution, the FSMB must convene representatives of state medical boards and other experts by July of this year to study the practical implications of a medical licensing compact.

The FSMB resolution serves as an important reminder that while technological means to use telemedicine currently exist, the law is extremely unsettled on this topic. Physicians and other health care providers who wish to use telemedicine must consider a variety of issues ranging from privacy considerations to scope of practice regulations to reimbursement.

Mercedes Varasteh Dordeski is a health care attorney practicing in Foley & Mansfield’s Detriot and Grand Rapids offices.  She can be reached at mdordeski@foleymansfield.com.  If you are a health care provider interested in using telemedicine, please contact Foley & Mansfield’s experienced health care law attorneys for more information.

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Contractors Should Review Statutory Warranties

Posted on April 25, 2013 by

The St. Paul Pioneer Press recently released an article discussing expected home sales this Spring. According to the report, despite the shortage of inventory currently on the market, buyers are still being selective, and specifically making inspections part of their offers. As Summer draws nearer and home sellers are preparing to place their homes on the market, it can be expected that homeowners will hire contractors to fix up their homes so that they can increase the value of their homes, and at the very least, pass the home inspections.

As a homeowner or as a home improvement contractor, it is important to remember that Minnesota law provides statutory warranties for the work performed on the home:

- For work involving major structural changes or additions to the home, the contractor must provide a one-year warranty from defects caused by faulty workmanship and defective materials due to noncompliance with building standards. The contractor must also provide a ten-year warranty from major construction defects due to noncompliance with building standards.

- If the work involves plumbing, electrical, or heating or cooling systems, the contract must provide a two-year warranty from defects caused by faulty workmanship and defective materials due to noncompliance with building standards.

As a contractor, it is important to remember that these warranties can be extended if you return to a client’s home to perform repair work. It is also important to remember there certain notice requirements must be met in order for homeowners to benefit from these warranties. Please be sure to review Minnesota’ s notice requirements provided in Minn.Stat. 327A, or seek the advice of counsel if you have received any homeowner complaints or if a homeowner has requested that you repair earlier work.

For additional information or assistance on warranty issues, contact Dahrim Boulware in Foley & Mansfield’s Contruction Law group – dboulware@foleymansfield.com.

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The Ramifications That Can Result From an Enforcement Action

Posted on April 8, 2013 by

Last month, The New York Times reported the ongoing issues faced by LPL Financial with respect to customer complaint arbitrations and regulatory enforcement actions.  According to the report, recent customer complaints and other matters have caused LPL to be on the radar screen of state and federal regulators “more than any other firm.”  In the past 18 months, state regulators in Illinois, Massachusetts, Montana, Oregon and Pennsylvania have sanctioned LPL for allegations of failure to supervise its brokers in an appropriate manner.  As a result, LPL reports that it increased its risk and compliance budgets by 5 and 11 percent, respectively, in 2013.  Although such efforts may assist in preventing regulatory and legal battles in the future, such an adjustment will likely have no impact on LPL’s ongoing attempt to resolve actions based upon prior actions.

When state and federal (namely FINRA and the SEC) regulators investigate and sanction broker / dealers and their registered representatives, the regulatory enforcement actions are usually only a portion of the headaches the broker / dealers will experience.  Although the regulatory enforcement action process can be frustrating and painful, especially the branch inspections, on-the-record interviews (“OTRs”) and ultimate findings, the effect of those actions can be even more painful and frustrating.  For example, if a state regulator commences an enforcement action, said action should only apply to the broker / dealer’s activities within that state.  Depending on the state’s findings, the federal regulators (i.e., FINRA and the SEC) may commence similar enforcement actions involving the broker / dealer’s activities in other states.  Furthermore, depending on the severity and nature of the allegations, the enforcement actions could result in criminal proceedings or result in similar actions by the IRS.  Finally, after any of the regulators (state or federal) make a finding of wrongdoing by the regulators, the vultures will begin to circle to pick at the remnants of the broker / dealer’s carcass, namely the claimants and their counsel hoping to take advantage of the regulators’ various findings by obtaining arbitration awards against broker / dealers and recovering said awards from the firms’ insurance policies.  In any customer-based arbitration, exhibit A will always be the findings of any state or federal regulators in the event the enforcement action is even remotely related to the basis of the customers’ complaints.

Given all the ramifications that can result from an enforcement action, regardless of the size or enforcing body, it is important that the subject firm be prepared for all possible outcomes.  The best way to be prepared is through the retention of counsel who is not only well-versed in the enforcement action process, but likewise is prepared represent the firm in customer-complaint arbitrations.  For example, some counsel will respond to a document request in an enforcement action without giving consideration to potential arbitration or litigation defenses.  Furthermore, counsel may produce communications with an attorney in response to an enforcement action request without considering whether a waiver of the attorney-client privilege is appropriate in order to preserve a reliance on counsel defense.  Finally, counsel may not consider the bigger picture from the enforcement action – namely the inevitable customer-complaint arbitrations – and as such may not preserve sufficient insurance policy funds for the purpose of defending the arbitrations rather than spending all available funds on the enforcement action.  Fortunately for firms, there are counsel who can handle all of these matters and concerns, but without them, the unfortunate fate of the firm is inevitable.

For information or assistance, contact Christopher Parrington, chair of Foley & Mansfield’s national securities group at cparrington@foleymansfield.com.

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Doug Wah Wins Ruling in Louisiana Asbestos Appeal

Posted on April 3, 2013 by

A recent ruling by a Louisiana state appellate court highlights the degree of success asbestos manufacturers and other defendants can have  – even in jurisdictions which are historically hostile to asbestos defense claims. Foley & Mansfield partner Douglas Wah appeared before the panel for Steel Grip, Inc., the appellant in this case.

The case and decision, Landry et al. v. Avondale Industries Inc. et al., No. 2012-CA-0950, 2013 WL 830673 (La. Ct. App., 4th Dist. Mar. 6, 2013), reversed a trial court ruling which granted the plaintiffs summary judgment on their claims against two defendants relating to asbestos exposure.  The appellate court found fact questions relating to whether exposure to both defendants’ products occurred and was a substantial factor in causing the plaintiff’s mesothelioma.  Specifically, the appellate court held that there was genuine issues of fact as to how much asbestos the plaintiff may have inhaled from the defendants’ respective products.

During his time as a pipe fitter, the plaintiff claimed that asbestos from the defendants gloves was a significant contributing factor to the plaintiff’s mesothelioma and death.  He later admitted he did not know if the gloves were asbestos and he did not know the manufacturer of the product. Nevertheless, the trial court granted the plaintiff’s summary judgment motion;  the appellate panel reversed this ruling.  It found that there was an issue of fact as to whether or not the asbestos dust to which plaintiff was exposed came from the appellant’s gloves or from other manufacturer’s asbestos products. The court ordered a trial on issue of whether the plaintiff was exposed to asbestos from the Steel Grip  products at all, since the evidence presented on this issue was inconclusive and only raised a “possibility” that defendants were present at the shipyard and liable.

The case is scheduled to proceed to trial November 2013.

Visit this link to read the Court’s opinion. 

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Number of Top Level Web Domains to Expand – Are Your Trademarks Protected?

Posted on April 1, 2013 by

Currently, we all navigate to a website by typing a second level domain name (SLDN), e.g. “microsoft”, “amazon”, or “ebay” followed by one of a relatively small handful of top level domains (TLD’s), such as, “.com”, “.gov”, or “.biz”.  However, the number of TLD’s is going to grow exponentially with more than 1900 new “dot blanks” having already been applied for.

Many of these TLD’s are going to be allowed and then introduced over the next two to three years, with the first “tranche” possibly coming out in July of 2013.  Just like the “land grab” of the mid 1980’s for SLDN’s at the beginning of the .com TLD, those with websites or planning one are now going to have to be concerned with the possibility of scammers and cyber squatters attempting to compromise their exclusive SLDN rights. A listing of all 1900+ applied for gTLD’s can be seen at the following link:  https://gtldresult.icann.org/application-result/applicationstatus/viewstatus

In order to hopefully prevent a chaotic and costly repeat of that history, the Internet Corporation for Assigned Names and Numbers (ICANN) – the organization responsible for managing the internet’s systems of unique identifiers and for keeping the internet running smoothly – has created the “Trademark Clearinghouse” (TMCH).   The TMCH was created to help minimize the problems of squatters/ interlopers interfering with the SLDN rights of registered trademark holders.  However, trademark owners have to file with the TMCH in order to obtain notice of the introduction of a new TLD.

Thus, if an SLDN is based on a trademark that is in use but it is not registered, a registration should be considered.  The next step, or first step if the mark is already registered, is to file with the TMCH.  The TMCH provides a “sunrise” program that gives a trademark owner that has filed with them at least a thirty day notice of the introduction of a new TLD so that they have ample time to object to the TLD or to register for a SLDN in that new TLD ahead of everyone else.  After that sunrise period has elapsed, trademark owners that have filed with the TMCH will also then be provided with a notice of a filing by another of an SLDN identical to their trademark in a newly online TLD.  That notice will give the trademark owner an opportunity to then contest that domain registration.  Filing a trademark with the TMCH will cost $150 per year, however the TMCH will only provide alerts for registrations that are, as stated, identical with the mark that has been filed with them.

Private domain alert providers exist and offer to provide trademark owners notice of registration of SLDN names that are not only identical but that are also similar to their mark as well.  Some of these alert service companies will also file in the TMCH so that the trademark holder will have the benefit of the sunrise service and the broader based alerts.  The cost for filing with the TMCH and a private alert service will be about $250 per year and should be continued at least for the three-year TLD introduction period.  Many SLDN holders will then want to continue with an alert service indefinitely because of the ongoing potential for registration of the same or similar SLDN’s in the new TLD’s.  It will no doubt be debated for some time whether or not this rapid and large expansion of TLD’s is a good idea, but what will not be debated is that it will impose further costs on owners of websites and trademarks.

 

For additional information or assistancer, contact intellectual propoerty attorney Sten Hakanson in Foley & Mansfield’s Minneapolis office at 612-338-8788.

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California Supreme Court Decides Mixed-Motive Discrimination Case

Posted on February 22, 2013 by

On February 7, 2013, the California Supreme Court decided Harris v. City of Santa Monica, a mixed-motive discrimination case, bringing California in line with federal law.  The case is important to California employers and practitioners because up to now, California has been walking in the dark when it comes to the mixed-motive defense.

A mixed-motive defense can occur when an employer has a legitimate business reason for taking adverse employment action against an employee, but the adverse action is also motivated by some discriminatory conduct, feelings or animus.  There is no true single reason for the employer’s action.  But in deciding Harris, the court, even though it mirrored federal law, refrained from providing guidance on important evidentiary issues raised by mixed-motive cases which will result in trial and appellate courts inevitably having various interpretations of the court’s decision.  Ultimately, these issues will circle right back to the court to deal with again at some later date.

In Harris, the court held that under California’s Fair Employment and Housing Act (FEHA), “when a jury finds that unlawful discrimination was a substantial factor motivating a termination of employment, and when the employer proves it would have made the same decision absent such discrimination, a court may not award damages, back pay or an order of reinstatement. But the employer does not escape liability.  In light of the FEHA’s express purpose of not only redressing but also preventing and deterring unlawful discrimination in the workplace, the plaintiff in this circumstance could still be awarded, where appropriate, declaratory or injunctive relief to stop discriminatory practices.  In addition, the plaintiff may be eligible for reasonable attorney’s fees and costs.

There are several important practice tips from this decision.  First, the court found that the mixed-motive defense is available only when there is “proof that the employer, in the absence of any discrimination, would have made the same decision at the time it made its actual decision.”  This is in line with current federal decisions and authorities.  Second, the court held that an employer need only prove the same-decision showing by a preponderance of the evidence as opposed to the more strict clear and convincing standard.

Third, the court held that if the mixed-motive defense is available, it does not act as a complete bar to liability when “the plaintiff has proven that discrimination on the basis of a protected characteristic was a substantial factor motivating the adverse employment action.”  However, this is where the court’s train leaves the rails.  In holding that a plaintiff must show that the discrimination was a “substantial factor motivating” for the adverse employment action, the court then stated: “[g]iven the wide range of scenarios in which mixed-motive cases might arise, we refrain from opining in the abstract on what evidence might be sufficient to show that discrimination was a substantial factor motivating a particular employment decision.”

As a consequence, plaintiffs and defendants will be left to grapple with proving or disproving mixed-motive cases with evidence between “motivating factor” and “substantial motivating factor” without clear guidance from the court as to the sufficiency of the proof, or what conduct may be only motivating, but not substantially motivating.

Fourth, as to the issue of remedies, the court again ruled in conformance with federal authorities.  Any award giving a plaintiff a right to reinstatement or damages for economic losses or emotional distress would result in a unjustified windfall for the plaintiff.  However, the court also found that an employer’s “same-decision showing does not make a finding of unlawful discrimination an empty gesture.”  Here, the court held that declaratory and injunctive relief would be available.  Also, the court held that when a plaintiff has “proven unlawful discrimination, a plaintiff may be eligible for ‘reasonable attorney’s fees and costs.’”

However, as most defendants experience, attorney’s fees are often the tail wagging the dog in discrimination cases.  Even though this ruling brings California in line with federal law, it will in no way act as a deterrent to the filing of frivolous cases as long as the court refrains from providing clear guidance on the evidentiary issues, and as the specter of attorney’s fees hangs over an employer’s head.

Employers’ Take Away:  Prior to taking any adverse employment action against an employee, thoroughly review the reasons and motivations for such action.  Be sure you are in the position to be able to document and support any adverse employment action.  Seek guidance when necessary and bring counsel in early to evaluate any potential issues.

For more information on this issue or assistance with applicable workplace policies and procedures, contact Lou Klein at lklein@foleymansfield.com.

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BrokerCheck’s Impact on Customer Complaints

Posted on February 15, 2013 by

In January 2013, the Federal Register reported that FINRA has proposed a new rule that  would require broker / dealer firms to include on their website, a description of and link to BrokerCheck in order for customers and potential customers to have easy access to perform background checks on the specific brokers with whom they are working for investment purposes.    Currently, FINRA requires broker / dealers to provide the BrokerCheck hotline number and FINRA website address to their customers in writing; however, prior to this rule, a direct link from the broker / dealer’s website was not required.  BrokerCheck is an online source of information on brokers, their background, types of practice and whether they have previously been disciplined by FINRA or other regulators.

FINRA has indicated that this proposed rule will increase investor awareness and allow investors to make more informed changes about the individuals and firms with whom they conduct business.  Although this would be ideal, the reality is that investors already have the ability to perform background checks on those with whom they conduct business, but often elect not to for a variety of reasons.  Furthermore, just because the BrokerCheck link is accessible to customers does not mean that customers will take advantage of this accessibility, especially senior investors that may not be familiar with a broker / dealer’s website or otherwise fluent with online background checks.  Therefore, even though the BrokerCheck link will be more accessible to customers, the customers must still take advantage of the accessibility provided to them.

This rule will, however, have a significant impact on customer complaints resolved by way of FINRA arbitrations.  In cases involving brokers with prior complaints or regulatory matters, customers often complain that the broker / dealer failed to disclose the broker’s prior to investments being made.  With the requirement that the BrokerCheck link be accessible through a broker / dealer’s website, those broker / dealers will be able to argue that background information on their brokers was made available to customers through the website.  Furthermore, FINRA is making a clear statement through this rule that customers have some responsibility for researching those with whom they conduct business, otherwise, FINRA would have gone a step further and required the broker / dealers to print off the broker’s BrokerCheck report and provide it to clients, rather than provide access to BrokerCheck through their websites.  Hopefully this is a sign of further rules in the future that will place some burden or responsibility upon investors with respect to their investment decisions, rather than having blind faith in everyone else to make the right decisions for them, with no responsibility imposed upon them.

 

For more information or assistance, contact Christopher Parrington , chair of  Foley & Mansfield’s securities group.

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US Patents – From First to Invent to First to File: What is Prior Art?

Posted on February 13, 2013 by

When a patent application is filed with United States Patent and Trademark Office, (USPTO) it is assigned to an examiner, who determines if the invention it describes is worthy of receiving patent protection.  Primarily, the examiner decides whether or not the invention is novel  - and whether or not it is obvious.  These two determinations are made by reviewing the known and most relevant pre-existing technology, i.e. the “ prior art” that is closest to the invention.  In this second article on the change of our patent system from first to invent to first to file, which occurs on March 16, 2013, I investigate the impact that change will have on how we determine what is prior art.

Under the former first to invent system, any art that was publicly known within a one year “grace period” extending prior to an applicant’s filing date was excluded.  Thus, the examiner could not use this excluded art in making his or her novelty and obviousness decisions, even though it was available and “prior” to the inventor’s patent application filing date.  Art that existed prior to the applicant’s filing date could also be barred if it nevertheless became known after the applicant’s date of invention. Since, determining the date of invention is oftentimes problematic, so would be ascertaining correctly if certain art was or was not “prior”.  This first to invent approach then introduces uncertainty into the patent process, especially with regard to determining obviousness, which  may then impact the validity of an issuing patent.  It also arguably resulted in somewhat more protracted and expensive patent prosecutions by forcing the examiner to guess as to the invention date and the applicant having to provide proof thereof.

Under a first to file system determining the prior art is more clear. The prior art is defined as any technology that is in the public domain before the applicant’s filing date.  So, if someone discloses a technology or files for a patent on that technology one day before another applicant, that disclosure is applicable by the examiner against the later filer.  The short term consequence of this change is to, if possible, strongly consider filing a patent application prior to March 16th of this year. The long term consequence is that after that date, inventors do not want to procrastinate with regard to filing a patent application.  The sooner they have an idea and they can develop it to the point that they have sufficient information to prepare an application and file, the better.  In other words, there is more pressure on applicants to file in a timely manner.

One surviving aspect of the old law in this new patent law “regime” is the one year grace period with respect to the inventor’s own prior art.  In other words, US inventors will still be able to sell their invention or publicly disclose it provided they file their patent application within one year of doing so.  Without this provision, the public disclosure of an invention by the inventor would constitute prior art useable by the examiner against a later patent application thereon filed by the same inventor.  However, the disclosures of other parties will now be citable against an inventor’s application up to the day they file, so even if an inventor has the ability to wait a year, it probably is not a good idea to do so.  Also, most other nations do not have an applicant based prior art exception and strictly require inventors to file first before they make any public disclosure of their invention or otherwise lose their right to obtain patent protection.  So, unless you are just interested in patent protection in the US, have your application prepared and filed before you go public with it in any manner.

You might be wondering; “Why did we make this change?”  In addition to the more straight forward prosecution and the issuance of stronger patents resulting from more accurate prior art assessments, I believe the major reason was to harmonize US patent law with that of the rest of the world.  This was done in order to provide a level playing field for all inventors working in what has been for some time, a global economy.  Also, US inventors arguably had an advantage versus foreign inventors to the extent they were able to use the one year grace period to exclude relevant prior art developed overseas.

This situation made it more difficult for business and political leaders in the US to argue for the respect of US IP rights and the prevention of anticompetitive behavior abroad – counterfeiting of US good costs American businesses billions of dollars per year – if we were to a certain extent, susceptible of being charged with protectionist  behavior at home.  Of course, regardless of the reasons for the change, the change is coming; and don’t forget, if you have an invention that you want to patent, try and file your application before March 16th of this year.

 

This is part two of recent developments in US Patent Law.  Read part one here.   For more information, contact Sten Hakanson, Senior Patent Counsel at Foley & Mansfield at 612.338.8788 or shakanson@foleymansfield.com.

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Supreme Court Rejects Bid to Review Validity of President Obama’s NLRB Recess Appointments

Posted on February 12, 2013 by

On February 6, 2013, the U.S. Supreme Court denied an emergency stay application filed by HealthBridge Management, LLC (a nursing home operator).   The application attempted to block a preliminary injunction issued in December 2012 by the National Labor Relations Board (NLRB).  HealthBridge claimed that the  NLRB order was invalid  because of the D.C. Circuit’s January 25, 2013 ruling that President Obama’s recess appointments to the  NLRB were unconstitutional.  See Noel Canning v. NRLB, Case Nos. 12-1115 & 12-1153 (D.C. Cir. Jan. 25, 2013).  The preliminary injunction requires HealthBridge to reinstate striking workers while the NLRB considers the employees’ unfair labor practices complaint against HealthBridge.  The Supreme Court’s order gave no reasoning for denying the stay application.

In the Noel Canning case, the D.C. Circuit held that President Obama’s recess appointments of three NLRB members on January 4, 2012 were invalid because the Senate was not officially in recess.  Consequently, the NLRB lacked a legitimate quorum of members to act since the unconstitutional appointments. The ruling has cast much doubt and confusion over the legality of the NLRB’s rulings and actions since the invalid appointments, including the numerous decisions issued by the NLRB  over the last year aimed at employer’s social media policies, handbook provisions, class action waivers, and investigation confidentiality.  In filing its stay application, HealthBridge  tried to have the Supreme Court step into the fray and confusion created by the Noel Canning decision.

In responding the Noel Canning case, NLRB Chairman Mark Gaston Pearce issued a statement disagreeing with the decision.  He stated that the D.C. Circuit’s order related to only one specific case and that “similar questions have been raised in more than a dozen cases pending in other courts of appeals.”  In a somewhat defiant stance dismissing the potentially far-reaching decision, Chairman Pearce further stated that “[i]n the meantime, the Board has important work to do. . .  we will continue to perform our statutory duties and issue decisions.”

This is far from the end of the story.  Following the Noel Canning decisions, Senate Republicans introduced two bills seeking to limit the NLRB’s power.  Senate Bill 190 would prohibit the NLRB and the Consumer Financial Protection Bureau from enforcing or implementing decisions and regulations.  Senate Bill 180 would freeze any decisions, regulations or rulings made by the NLRB until a final resolution of the issue in the courts.  Additionally, at least 40 Republican senators sent a letter to two of the “invalidly” appointed NLRB members  requesting that they immediately vacate and resign their positions and stop drawing salaries.

In the meantime, federal Courts of Appeals are set to hear oral argument in several pending cases regarding the validity of the NLRB appointments.  This is most likely the reason that the Supreme Court  decided to reject HealthBridge’s emergency stay application.  If the question of validity is decided by one of the Appellate Courts, the Supreme Court will likely grant review.  Additionally, the NLRB has until mid-March 2013 to file a petition for rehearing en banc with the D.C. Circuit, or until April 2013 to file a petition for certiorari to the Supreme Court.  It now becomes a waiting game.  Meanwhile, uncertainty concerning the legality and validity of the NLRB’s decisions continues to mount.

However, there is Supreme Court precedent that may provide employers with some guidance.  On June 17, 2010, the Supreme Court, in New Process Steel, LLP v. NLRB, held that the NLRB did not have authority to decide approximately 600 decisions from January 1, 2008 to March 27, 2010 when there were only two confirmed Board members.  In a 5-4 decision, the Court held that Section 3(b) of the National Labor Relations Act (NLRA) requires that when the NLRB delegates its authority to a three-member panel, the panel must maintain a membership of three in order to exercise the delegated authority of the Board.

The Court further held that when the membership of the panel falls below three,  that is not a quorum permitted to exercise the delegated authority of the Board.  Effectively, because of the Noel Canning decision, the NLRB  has been operating below the required membership, and therefore lacked a quorum, from the time of the invalid recess appointments.  Hundreds of Board decisions since January 2012 stand to be invalidated.  If this is indeed the case, the NLRB , once it is fully constituted, will more than likely seek to have its previous invalidated decisions re-decided as it did in many of the cases following the New Process Steel decision.

Until a clear decision is rendered by the Supreme Court or proper confirmation proceedings ensue, employers will remain at a disadvantage when dealing with the current NLRB.  Employers should continue to review workplace policies and procedures that would tend to violate an employee’s ability to engage in concerted and protected activity as defined by the NLRA.  As always, employers are urged to discuss their workplace practices and rules with experienced employment counsel before acting on issues related to recent NLRB decisions.

For more information on this issue or assistance with applicable workplace policies and procedures, contact Lou Klein at lklein@foleymansfield.com.

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The NLRB and Confidentiality Clauses

Posted on February 5, 2013 by

On January 28, 2013, an NLRB Administrative Law Judge (“ALJ”) found that even though an employer’s overly broad confidentiality clause violated Section 8(a)(1) of the National Labor Relations Act (“NLRA”), the employee’s termination did not because she was not engaged in protected activity.  This is an important distinction because many employers have very far reaching and ambiguous confidentiality and non disclosure agreements with their employees.  This decision seems to indicate that an overly broad confidentiality rule will not always lead to sanctions levied by the NLRB against an over-zealous employer.

The case, Flex Frac Logistics LLC and Silver Eagle Logistics, LLC (Joint Employers), Case No. 16-CA-27978, was on remand from the NLRB for further factual findings related to the employee’s termination and whether the employee’s discussions constituted protected activity.  On September 12, 2012, the NLRB had found that the employer’s confidentiality provision violated the NLRA because it was “broadly written with sweeping, nonexhaustive categories that encompass nearly any information related to [the employer],” including the reasonable interpretation that it prohibited employees from discussing wages or other terms and conditions of employment. 358 NLRB No. 127.  As the NLRB stated, “Board law is settled that ambiguous employer rules – rules that reasonably could be read to have a coercive meaning – are construed against the employer.”  Id.  Whether the employer intended such a consequence has no bearing on the analysis.

In Flex Frac, the employer acknowledged that the employee was terminated pursuant to the confidentiality agreement, but that the termination was based on the employee disclosure of sensitive customer contract rates as opposed to the employee’s discussions related to wages.  The ALJ agreed.  In making the findings that the employee was not engaged in protected activity, the ALJ relied on the NLRB’s decision in Continental Group, 357 NLRB No. 39, slip op. at 2 (2011) for the proposition that discipline imposed pursuant to an unlawfully overbroad rule violates the NLRA when the employee has engaged in protected conduct or has engaged in conduct that otherwise implicates the concerns underlying Section 7 of the Act.  The ALJ further stated that “an employer will avoid discipline imposed pursuant to an overly broad rule if it can establish that the employee’s conduct actually interfered with the employee’s own work or that of other employees or otherwise actually interfered with the employer’s operations.”  The Flex Frac employer provided evidence that the employee had disclosed confidential customer information and had disrupted and interfered with the work of two different departments.  The ALJ found this evidence to be credible.

The Flex Frac decision lies in opposition to another NLRB ALJ’s recent decision in Quicken Loans, Inc. (Case No. 28-CA-75857)(January 8, 2013).  In Quicken Loans, the ALJ ruled that two provisions in an employment agreement signed by all Quicken Loans, Inc.’s mortgage bankers (confidentiality and nondisparagement) were overly broad and unlawfully hindered employees’ rights to engage in protected concerted activity as in the Flex Flac case.  Quicken Loans had filed suit against several former employees for violating the noncompete sections of their agreements.  The employees, in turn, sought a ruling from the NLRB regarding the propriety of the terms of the agreements.

The ALJ reviewed these provisions to determine whether the rules would reasonably tend to chill employees in the exercise of their Section 7 rights.  The ALJ found that the provisions would not allow employees to discuss wages and other benefits they receive with their co-workers or union representatives.  Further the ALJ found that employees are allowed to criticize their employers within certain limits and that the effect of the non-disparagement provision would be to prohibit such lawful activity.

Flex Frac and Quicken Loans remind us that the NLRB and its Administrative Law Judges are grappling with the Board’s activist decisions.  There will continue to be disparate rulings that will leave employers with questions regarding their workplace policies, procedures and conduct.  In the meantime, it is a good practice to review employer policies related to confidentiality, nondisclosure and at-will provisions to determine whether they could “reasonably” be read to have a coercive meaning.

For more information or assistance, contact employment attorney Louis C. Klein in our Los Angeles office at lklein@foleymansfield.com.

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Michigan’s New Internet Privacy Protection Act (MIPPA)

Posted on February 5, 2013 by

Michigan recently passed the Internet Privacy Protection Act (MIPPA), which prohibits employers and educational institutions from requiring employees and students to provide passwords and login infor­mation related to personal Internet accounts.

The Purpose of the Act

The MIPPA protects the privacy of employees and job ap­plicants as well as current and prospective students by allowing them to keep private logins, user names, passwords, and other access information related to their personal Internet accounts.  However, the Act does not interfere with an employer’s ability to monitor its electronic devices or computer systems or investi­gate whether confidential information has been disclosed or an employee has committed work-related misconduct.

Restrictions on Employers

Under the MIPPA, it is unlawful for an employer (defined as any person engaged in business, industry, or the like, and includes any agent, representative, or designee of the employer) to ask an employee or applicant to grant access to, allow observation of, or disclose information that allows access to or observa­tion of the employee’s or applicant’s personal Internet account. Similarly, you cannot discharge, fail to hire, or otherwise penalize an employee or applicant for failing to do so.

However, the Act does not prohibit an employer from re­questing or requiring disclosure of information to gain access to or operate an (1) electronic communica­tions device paid for by the employer or (2) account or service provided by the employer or used for the employer’s business. The Act also doesn’t prohibit you from disciplining or discharging an employee for disclosing your proprietary, confidential, or financial information through the employee’s personal Internet account without your authorization.

The Act does not prohibit employers from conducting an investigation related to activity on an employee’s personal Internet account for the purpose of ensur­ing compliance with applicable laws or prohibitions against work-related employee misconduct or the un­authorized disclosure of proprietary, confidential, or financial data. In addition, it is not unlawful for an employer to investigate whether an employee violated a restriction prohibit­ing access to certain websites while using an electronic communications device paid for by the employer or an employer’s network or resources.

Further, the MIPPA does not prohibit an employer from monitoring, reviewing, or accessing electronic data stored on an electronic communications de­vice paid for by the employer or traveling through or stored on the employer’s network. Finally, the Act does not prohibit or restrict an employer from view­ing, accessing, or using information about an em­ployee or applicant that (1) can be obtained without access information or (2) is available in the public domain.

Restrictions on Educational Institutions

Under the MIPPA, an “educational institution” in­cludes public and private educational institutions. An educational institution cannot ask a current or prospective student to grant access to, allow observa­tion of, or disclose information that allows access to or observation of the individual’s personal Internet account. An educational institution also cannot expel, discipline, fail to admit, or otherwise penalize a cur­rent or prospective student for refusing to grant ac­cess to, allow observation of, or disclose information that allows access to or observation of a personal In­ternet account.

However, the Act does not prohibit an educational institution from requesting or requiring a student to disclose in­formation to gain access to or operate (1) an electronic communications device paid for in whole or in part by the educational institution or (2) an account or ser­vice provided by the educational institution or used by the student for educational purposes. The Act also does not prohibit or restrict an educational institution from viewing, accessing, or using information about a student or applicant that (1) can be obtained without any required access information or (2) is available in the public domain.

Penalties

A violation of the Act is a misdemeanor punish­able by a fine of not more than $1,000. Individuals can sue to recover up to $1,000 in damages plus rea­sonable attorneys’ fees and court costs and injunc­tive relief.

 

Melinda A. Balian is a partner in the Detroit and Grand Rapids offices of Foley & Mansfield, focusing her practice in employment law and litigation.  She also works extensively with health care professionals and organizations.  For addition information or assistance, contact Melinda at mbalian@foleymansfield.com.

 

 

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Berger Secures More than $980,000.00 for Native American Claimants in Keepsagle v Vilsak

Posted on February 4, 2013 by

Jana M. Berger, a partner in Foley & Mansfield’s Detroit, Michigan office, recently secured more than $980,000.00 in damages and debt relief for Native American claimants pursuing settlement funds in the Keepseagle v Vilsak class action lawsuit.

The Keepsagle v Vilsak lawsuit involved claims by Native Americans against the United States Department of Agriculture (“USDA”) as a result of discriminatory lending practices during the 1980’s and 1990’s with regard to its farm loan program. The lawsuit alleged that the USDA denied thousands of Native American farmers and ranchers the same opportunities to get farm loans and loan servicing that otherwise were given to white farmers and ranchers.

An unprecedented $760 million settlement was reached between the federal government and the class, with settlement distributions made in late August 2012.

“Listening to the stories … it was jaw-dropping to hear what my clients were put through. While the figures look rewarding, there’s really little that can heal the emotional scars left by the deplorable treatment these folks received at the hands of the USDA.  You can just hear it in their voices,” explains Ms. Berger.  “I am very pleased to have had the opportunity to participate and to assist my clients with gathering and submitting proofs to establish their claims to settlement funds.”

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FINRA Disputes: Analyzing the Benefits of All-Public Arbitration Panels

Posted on January 28, 2013 by

2012 was a year of significant change for the FINRA arbitration process.  Specifically, 2012 was the first full year in which investors initiating customer-complaint arbitrations in FINRA had the option of having their claims decided by an all-public panel.  According to statistics recently released by FINRA, investors received damages in 51% of the cases before an all-public arbitration panel, while investors who had a panel with a securities-industry affiliation panelist (non-public) received damages in only 45% of their cases.

However, FINRA has reported that in 2012, there were only 92 cases decided by all-public arbitration panels.  These statistics suggest that it is beneficial for investors to always demand an all public arbitration panel in their claims against registered representatives and broker / dealers; however, it is not always that simple for either side when selecting the panel that will decide the parties’ fate.

There are many considerations for investors, industry members and lawyers to consider when selecting a panel to decide arbitration claims.  For example, it is important to research the potential panelists’ prior panel experience and award history when ranking panelists for potential appointment to your case.  Furthermore, it is important to research the potential panelists’ education and employment background.  It is also worth researching the panelists experience as an investor himself or herself, for any experience and potential biases with the financial services industry as a whole.  Finally, it is important to know if any of the potential panelists have ever worked together on other panels, and if so, research the experience of the parties and counsel on those other matters.

Prior to February 2011 (when FINRA began allowing all-public arbitration panels), these were some of the main decisions to be made in selecting an arbitration panel; since February 2011, however, the type of panelists is now another issue for investors to consider.

Although it is easy to presume that an all-public arbitration panel will generally lean in favor of investors when issuing an award, such a conclusion is not always the case.  For example, industry members often read investment-based periodicals such as Investment News, and as such are more attuned to which members of their industry have been in the press regarding their business practices in case those members are also named as respondents in the arbitration.

Furthermore, industry members may have preconceived notions of how a registered representative should act or how a broker / dealer should operate, and if the respondent registered representative or broker / dealer acted in a contrary manner, they may be more inclined to issue an award against them for acting differently. Finally, the industry member panelists are likely familiar with the inner-workings of the various NASD, FINRA, NYSE and SEC rules and might have their own interpretations of what those rules require, prior to hearing any expert testimony during the final hearing.

However, public panelists may not have this experience, understanding or pre-conceived notions, and as a result, might be more willing to enter a final hearing with an open mind (whether intentionally or based upon their lack of experience).  Depending on the allegations and parties involved, such an open mind may actually benefit registered representatives and broker / dealers, especially where the investors can easily be made to look greedy or overreaching in their claims.  As a result, just because all-public panels issued awards to investors 6% more of the time than panels with an industry member, does not necessarily mean that all-public panels are always in the best interest of the investors, and panels with an industry member are always in the best interest of the registered representatives and broker / dealers.

Much like everything in the law, the selection of the best possible arbitration panel depends on the facts and circumstances at the time, and when selecting a panel, investors, industry members and lawyers must analyze all factors of their decisions.

For information or assistance with FINRA dispuites, contact Chris Parrington (cparrington@foleymansfield.com) at Foley & Mansfield.

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Tranferring Reps- B/D’s Need to Examine Potential Liabilities

Posted on January 15, 2013 by

Investment News recently published an article on discussing the ongoing practice of registered reps moving between brokerage firms throughout the financial services industry.  Oftentimes, reps will move to a new firm because of a more favorable compensation structure, other times because of a difference of opinion with the firm’s management or a change in management.

Regardless of the reason, oftentimes the moving rep can bring a significant amount of baggage to their new organizations – namely potential customer complaints involving securities recommended to their clients prior to the move.  This can be especially true with the smaller, independent B/D firms who may not have a large enough compliance department to perform the necessary background checks prior to becoming affiliated with the firm. B/D firms need to be cognizant of certain issues before becoming affiliated with reps in order to make sure that the unknown, unwanted baggage does not also accompany them.

In terms of risk management control with respect to transferring reps, there are many things a B/D firm can and should do to ensure a smooth transfer without liability.  For example, if a B/D firm is seriously contemplating an affiliation with a rep leaving another firm, the acquiring B/D should be sure to perform all the necessary background checks before making an actual hire.  However, the firm should also inquire about the rep’s specific client base at the old firm, including clients that terminated their relationship with the rep during that period of time.  Likewise, the firm should be familiar with the types of securities sold by the rep at his or her prior firm, namely whether the rep was engaged in the sale of reg-D offerings.  In the event the rep was engaged in such business, then the firm should be sure to review each and every one of those clients’ files to make sure that they also would have recommended the securities to the client – in the event the new firm would not have recommended those securities, then the new firm should not affiliate with the rep, or at the very least not allow that client’s account to be transferred, in the event the securities go south and client decides to name everyone possible in a FINRA arbitration.  Unfortunately it has become more and more common for clients to not only name the selling firm in a FINRA arbitration, but all other firms with whom the rep was affiliated during the time period of the investment.

Not only should the firm inquire about the clients being transferred along with the rep, but the firm should also inquire about any and all clients of the rep that are NOT transferring their accounts to the new firm.  Specifically, the new firm should inquire about all clients not being transferred, the investments made by those clients, and why those clients are not transferring their accounts with the reps.  The new firm should also keep a list of those clients so that the new firm’s compliance department can run random tests during its audits to ensure that the rep is not still providing advice to the client after the transfer, at risk of subjecting the new firm to a selling away complaint.  Furthermore, the new firm may be able to acquire more information about the rep’s business and activities based upon his or her dealings with clients not transferring their accounts than inquiring about clients moving with the rep – perhaps the rep is not bringing certain clients with him or her because of prior poor investment recommendations.  Such inquires about non-transferring clients can help a firm assure that the rep is not simply moving to the new firm in order to reap the benefits of the new firm’s Errors & Omissions insurance for an anticipated customer complaint, which can be a very common practice by reps since the recent wave of TIC and REIT-related arbitrations.

It is important to note that there is nothing wrong with a registered representative deciding to move from one B/D to another.  In fact, often times it is in the best interest of the client for a rep to make such a move.  However, firms need to be proactive and gain a solid understanding of who they are acquiring and why the move is being made.  Otherwise, the firm could be acquiring a book of goods that was not desired or anticipated, which depending on the circumstances, could be significantly detrimental to the firm’s future.

For more information or assistance, contact Christopher Parrington at Foley & Mansfield.

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