Category Archives: Employment Policies

What Damages Can You Recover In A Non-Compete Case?

Contributed By Jeffrey Glass, May 6, 2021

employment law books and a gavel on desk in the library. concept of legal education.

In the typical non-compete lawsuit, an employer seeks to block the defendant, often an ex-sales representative, from calling on or doing business with the company’s clients. However, in some cases, the defendant succeeds in taking some business, thereby raising the issue of monetary damages.  So, how are damages calculated in a non-compete case? 

In a recent decision, the U.S. District Court for the Northern District of Illinois addressed this issue. In Zurich American Ins. Co. v. Hill, the defendant insurance salesman admitted that he improperly did business with a certain client of the plaintiff; thus the only issue was calculating an appropriate monetary award. The court explained that, pursuant to Illinois law, the employer is entitled to recover “net lost profits” that were traceable to the defendant’s breach. Net lost profit is gross revenue based on the contract price, less any expenses necessary for plaintiff’s performance of the contract. Depending on the circumstances, a plaintiff’s expenses could include direct costs (e.g., labor, materials) and indirect costs (e.g., overhead expenses). Direct costs, along with any portion of indirect costs that can be avoided by defendant’s breach (“variable indirect costs”) are subtracted from the gross revenue. But any portion of indirect costs that cannot be reduced by defendant’s breach (“fixed indirect costs”) are not subtracted, because plaintiff already incurred and paid those costs.

Applying this framework, the employer established that the company’s overall customer retention record was over 90% and therefore the customer that the defendant “took” could reasonably have been expected to stay with the plaintiff for a year. Although the plaintiff argued that it should recover three years of net profit, the court declined this request based, among other things, on evidence that the customer in question had been somewhat inconsistent with its business in recent years. 

After holding that the employer was entitled to one year of net profit on the customer in question, the court then deducted direct costs. These were the commission that the sales representative would have received, and also insurable losses that reasonably could have been expected to have been paid out on the polices. 

Finally, there was a dispute over whether some amount of variable overhead should be deducted, which would have further reduced the employer’s net lost profit. The court stated that some type of variable overhead could only be deducted if the defendant could show that the overhead could have been avoided by the defendant’s breach. Because the defendant could not prove any such overhead, the court declined to deduct any type of variable overhead.   

Therefore, the final award represented the gross revenue that would have been received from the customer in question for one year, minus the sales representative’s commission and the losses that would have been paid out on the policy.

State Survey – Considering Criminal Convictions in Private Employment Decisions

Contributed By Suzanne Newcomb, April 22, 2021

cv review flat illustration. hand with magnifier over curriculum vitae

As we previously discussed, Illinois has moved beyond “ban-the-box” and now significantly restricts employers’ ability to consider criminal convictions when making employment decisions. (For more details see our employer’s guide and join our complimentary webcast on April 29, 2021.)

Illinois is not an outlier. Several states have enacted or are considering similar legislation. Below is a short summary of these state laws applicable to private employers. All of these statutes have exceptions. Note too, the fact that a state is not listed does not necessarily mean it has no restrictions. These laws are nuanced and rapidly changing and many local governments have enacted their own regulations. Seek advice from trusted counsel before basing an employment decision on an individual’s criminal history.

California: Employers with 5 or more employees may not deny a position based (in whole or in part) on a criminal conviction without first making an individualized assessment (in accordance with the statute) as to whether the conviction has a direct and adverse relationship to the job such that it justifies denying the position. The law sets forth a detailed process to regulate an employer’s consideration of criminal convictions and imposes notice, disclosure, and waiting period requirements if an employer acts on a conviction.

Connecticut: It is currently unlawful to deny employment with the state on the basis of a criminal conviction without considering factors set forth in the statute. Pending legislation would expand the law to private employers.

Hawaii: It is unlawful to base an employment decision on a conviction unless it is a felony conviction in the last 7 years, or a misdemeanor conviction in the last 5 years, and the conviction bears a “rational relationship” to the duties of the position. 

New York: It is unlawful to take an adverse action based on criminal history unless there is a direct relationship between the conviction and the employment position or if the employment would pose an unreasonable risk. The statute includes factors to be considered in making this assessment. Upon request, the employer must provide a written statement setting forth the reasons for denying employment on the basis of conviction. 

Pennsylvania: It is unlawful to consider a job applicant’s conviction history unless the conviction relates to the applicant’s suitability for the particular position sought. An employer also must notify the applicant if employment was denied, in whole or in part, on the basis of criminal history.

Washington D.C.: Private employers with more than 10 employees may not base employment decisions on criminal convictions unless there are reasonable and legitimate business reasons in accordance with factors set forth in the statute.

Wisconsin: It is unlawful to discriminate on the basis of an arrest record or conviction record. There are exceptions to this rule for convictions and pending criminal charges that substantially relate to the particular job.

In addition, ban-the-box laws apply to private employers in California, Colorado, Connecticut, Hawaii, Illinois, Maryland, Massachusetts, New Jersey, New Mexico, Oregon, Rhode Island, Vermont, Washington, and Washington D.C., as well as many other cities and counties across the country (and a total of 36 states have some form of ban-the-box laws applicable to public employment). Many state and local governments also prohibit or regulate employers’ consideration of convictions that have been sealed or expunged, arrests that did not result in conviction, and/or juvenile convictions.

So Your Employee Wants to Work Remotely Out of State

Contributed by John R. Hayes, March 8, 2021

Work Remotely memo stick. Laptop for remote job.

Given the “new normal” of remote work for many employees throughout the country, the question as to whether to allow an employee to work in another state – either permanently or temporarily – has become something employers are now scrambling to answer.  However, it is not as simple as determining whether the employee can do the work remotely, there are numerous considerations and implications employers should be aware of if they have employees working in a different state than the location of their main operations. 

First, employers should have clear guidelines and policies regarding what is expected of the employee in terms of hours, availability, and work product. That is true wherever they are remotely located. Some general areas to consider include:

  • Detailing their normal work duties and responsibilities;
  • Making clear the hours of work the employee is expected to put in along with strict adherence to any timekeeping policies;
  • Setting the hours of availability to communicate regarding company business and job duties;
  • Determining how to handle communication of work assignments and personal needs, including reporting absences of work due to injury, illness, or caring for a family member;
  • Discussing the use of company equipment and materials;
  • Ensuring the employee protects company information by following the company’s policies and practices regarding information security and data protection; ensure that unauthorized individuals do not access company data, either in print or electronically; and not accessing restricted-level information in print or electronically unless approved by the supervisor; and
  • Maintaining a safe environment in which to work.

Next, for employees wanting to work out of state either all the time or for a period of time, there are potential tax and payroll issues for both the employee and the employer. Unfortunately, there is no one size fits all answer. It will depend on the state the individual is performing work in, how long they are there, and a host of other factors.  When an employee is working outside of the state where the employer operates the employer may be responsible for the other state’s taxes, including income taxes. Each state’s income tax and withholding requirements vary significantly, and may be based on both personal residence and/or work location. Making it even more complicated, states have differing thresholds for when an individual working remotely in that state triggers tax implications, for example in Illinois it is 30 days and in New York it is 14 days.

COVID-19 related remote work has dramatically impacted this area of the law, as it has exponentially increased the numbers of employees working in a different state than where the employer is located or where they reside, and many states have been slow to adjust to this. However, several states have implemented “COVID-19 Rules” regarding the tax implications for remote workers. Again, this is a state-by-state analysis that needs to be done by the employer for each employee wishing to work remotely out of state. 

In addition to state and local taxes, the labor and employment laws of the state where a remote employee is working may apply to the employment relationship.  An employer needs to examine the state’s (and possibly the county’s and/or the city’s) employment laws to see whether there are specific laws that would affect the employee, such as posting requirements and paid family or sick leave, amongst others.

Employers should also be aware of state laws regarding workers’ compensation insurance and unemployment insurance. Employers usually must obtain workers’ compensation insurance in the state where the employee is actually working. It may be the case that the workers’ compensation laws in the employer’s state would not apply to the employee working remotely in another state. The same also applies to unemployment insurance, where the out of state employee would likely trigger the state’s requirements that the employer register for and pay the unemployment insurance premiums through that state’s particular unemployment insurance program.

Ultimately, the decision to allow remote location work is up to the employer and depends on the particular facts and circumstances of each employment situation.  Given the complexity of having to figure out other states’ employment, tax, and other state-specific laws, employers may be justified in saying no to such arrangements.  The answer really depends on the employer’s desire to hire/retain the individual, and whether remote work is a means to that end.  And once such a remote work arrangement is granted to one employee, employers must be mindful in granting/denying it to others, as allowing it for one employee but denying it to another could potentially be considered discriminatory, depending on the facts of each situation.

Any remote work arrangement should be carefully considered in advance, a written policy and understanding between the employer and employee should be put in place, and the particular laws of the remote work location should be examined and understood, ideally by experienced counsel.

Does Your Attendance Policy Violate the FMLA?

Contributed by Steven Jados, September 5, 2019

The recent decision in Dyer v. Ventra Sandusky, LLC, issued by the U.S. Sixth Circuit Court of Appeals (which has jurisdiction over Kentucky, Michigan, Ohio, and Tennessee), should motivate employers to take another look at whether their attendance policies run afoul of the Family and Medical Leave Act (FMLA).

There are plenty of gray areas in the law, but it is generally clear that employees are not to be disciplined because they are absent for FMLA-covered reasons. That also means that employees should not accumulate attendance “points,” e.g., under a no-fault attendance policy, for FMLA-covered absences when such points can contribute to discipline up to and including termination of employment.

Clocking In

To its credit, the employer in Dyer did not assign attendance points for FMLA-covered absences.  But unfortunately for the employer, that is not the end of the story.

Under the employer’s attendance policy, employees were eligible for a one-point “reduction” of their attendance point balance for every 30-day period in which the employee had “perfect attendance.” The employer’s definition of perfect attendance was not self-explanatory.  For instance, an employee could be absent for several different reasons — including vacation, bereavement, jury duty, military duty, holidays, and union leave — and still have “perfect attendance” and eligibility for attendance point reductions.

However, FMLA-covered absences were not included among the types of absences that preserved perfect attendance status and point-reduction eligibility. And if an employee had a FMLA-covered absence, his progress toward the 30-day point reduction goal was reset to zero.

The Sixth Circuit noted that the FMLA’s regulations generally require that an employee not lose benefits while on FMLA leave. Because attendance point reductions (and progress toward such reductions) are benefits, the Sixth Circuit noted that, at the very least, progress toward the 30-day goal should be frozen while employees are on FMLA leave, rather than being reset to zero. The court also indicated that if other “equivalent,” but non-FMLA forms of leave were counted toward the 30-day goal, then FMLA-covered absences should also be counted toward the 30-day goal.

The bottom line is that the Dyer decision instructs employers that disciplinary and benefit policies must be closely scrutinized to determine whether they might dissuade employees from taking FMLA leave — or otherwise harm employees who take FMLA leave. If harm results, or if employees are faced with the decision of taking FMLA leave or forgoing benefits, potential exposure to liability under the FMLA may exist.

Are Employment Rules Getting Hazier With Legal Marijuana?

Contributed by Noah A. Frank, April 18, 2019

the cannabis leaf and judge gavel

Like a majority of U.S. states, Illinois’ legal stance on marijuana is becoming more tolerant and liberal – with regard to both medical and recreational use (also called “adult use”). As we previously reported on November 6, 2018, the Alternatives to Opioids Act of 2018, PA 100-1114 amended Illinois’ Medical Cannabis Pilot Program to allow individual prescribed opioid medication to enroll in the Illinois Opioid Alternative Pilot Program (OAPP). The OAPP allows these individuals to seek relief through the legal use of medical cannabis, rather than opioid medications. In the first two months of the program, 1,000 patients registered (compared with 61,231 qualifying patients that have been registered under the medical cannabis pilot program since September 2, 2014). This can be attributed to the decrease in time it takes to register, as well as the decrease in requirements and restrictions for qualifying as a registered patient under the OAPP.

Additionally, like many other state legislatures, the Illinois legislature has proposed bills, including HB-0902 which would legalize recreational use of marijuana. (See our prior post on this proposed bill). Even the federal government loosened its regulations regarding marijuana products through the Agricultural Improvement Act of 2018 (AIA), which specifically addressed and legalized the research and production of industrial hemp (marijuana plants having less than .03 percent THC concentration). In particular, the AIA legalized CBD (the non-psychoactive component of marijuana) derived from industrial hemp plants. (See our prior post on this act). It is important to note that while there are legal CBD products, which are derived from industrial hemp plants, CBD derived from marijuana plants with higher THC levels are NOT legal on the federal level.

It is likely that 2019 will see continued and increasing tolerance of medical and recreational marijuana on federal, state, and local levels. Employers should implement the following steps now to protect their businesses.

  • Determine corporate tolerance for marijuana use (at least off-duty), and how that will impact drug testing.  For example, if off-duty use is a non-issue, then consider the type of drug test used for testing marijuana or removing marijuana from the drug panel for certain tests (e.g. applicants) – which can only indicate the presence of the drug in the system and not actual impairment, or how you will treat positive tests for marijuana depending on the type of test and positions. However, be aware that making exceptions for particular candidates or employees could leave the company susceptible to discrimination claims (such as, but not limited to, disability claims).
  • Update policies to comply with the laws (disability, medical leave, registered user protections), company tolerance, and external pressures (e.g., contracts). 
  • Review and update job descriptions – especially for safety sensitive positions. 
  • Implement appropriate management training – including identifying impairment and mandating substance testing, how and when to involve human resources, medical nature of information and company’s policies on marijuana.
  • Understand that disability laws, which never protect at-work impairment, may protect an underlying medical condition, and as such companies should be prepared to engage in the ADA interactive process. 
  • Similarly, understand the implications of and interactions with other laws – like the FMLA, Workers’ Compensation, and equal employment opportunity laws.
  • Enforce policies consistently to avoid discrimination claims.
  • Seek the advice of experienced employment counsel to deal with difficult employees or potentially risky discipline/termination situations.

While these steps are useful for protecting businesses in light of developing marijuana legalization trends, they are also practical audit and compliance reminders under other laws, including but not limited to the Americans with Disabilities Act and mandated leave laws.

Conducting an HR Audit for 2019

Contributed by Jeffrey Risch, December 17, 2018

When was the last time you conducted an HR audit for your organization?

We’re all busy and get distracted easily. Often times HR considers a thorough review of the Employee Handbook is enough to ensure all is well from a legal compliance perspective as to personnel policies and practices. Not quite. A closer examination of an employer’s forms, contracts, procedures, practices and actual day-to-day management is essential. In other words, a deeper dive into an organization’s HR-universe is necessary these days. In a world of increased workplace regulation and litigation risks, a more thorough review and audit is required.

For a sample of a comprehensive checklist of the subjects, topics, and issues that a common HR audit entails, please take a moment and familiarize yourself with our HR Audit Checklist here.

The New Year is Coming…Is Your Office Prepared with the Required Illinois Posters for 2019?

Contributed by Sara Zorich, November 20, 2018

As the holidays are quickly approaching and the hustle and bustle of the end of the year begins, it is important to focus on compliance for 2019. Illinois employers need to ensure that they have the required Illinois postings displayed in their workplaces. The following Illinois posters are required for the designated Illinois employers:

  1. NEW Discrimination and Sexual Harassment Poster (Required to be posted by ALL ILLINOIS EMPLOYERS as of September 2018). In addition, employers should review the notice to employers which outlines information about the poster AND the additional posting requirements necessary in the Company’s handbook.
  2. NEW Illinois Service Member Employment and Reemployment Rights Act (ISERRA) Poster (Required to be posted by ALL ILLINOIS EMPLOYERS by January 1, 2019). This is a new law applicable to public and private employers governing military service leave which aligns Illinois’ military law with the federal law USERRA. For private employers, there are some additional requirements beyond USERRA regarding performance reviews addressed in Section 330 ILCS 61/5-5(3) of the Act. This new law has NO IMPACT on the Illinois Family Military Leave Act which is still applicable law.
  3. Pregnancy Notice (Required to be posted by ALL ILLINOIS EMPLOYERS)
  4. Know Your Rights Poster (Required to be posted by ALL ILLINOIS EMPLOYERS)
  5. Workers Compensation (Required to be posted by ALL ILLINOIS EMPLOYERS)
  6. Unemployment Insurance Benefits Notice (Required to be posted by ALL ILLINOIS EMPLOYERS)
  7. Emergency Choking Notice (Required to be posted by ALL ILLINOIS EMPLOYERS)
  8. Smoke Free Illinois Act Notice (Required to be posted by ALL ILLINOIS EMPLOYERS)
  9. Sexual Harassment in Higher Education Act Poster (Required for those entities who are a public university, a public community college, or an independent, not-for-profit or for-profit higher education institution located in Illinois)
  10. Employee Classification Act of 2008 Poster (Required to be posted by ALL ILLINOIS CONSTRUCTION CONTRACTORS that have one or more individuals that are not classified as employees)
  11. Illinois Occupational Safety & Health Act Poster (Required to be posted by ALL ILLINOIS PUBLIC SECTOR EMPLOYERS)
  12. Illinois Day and Temporary Labor Services Act (Required to be posted by ALL ILLINOIS TEMPORARY LABOR AGENCIES)

Dust off Those Handbooks: NLRB Restores Sanity to Employment Policies

Contributed by JT Charron, December 27, 2017

Thirteen years ago the National Labor Relations Board issued its decision in Lutheran Heritage Village-Livonia, 343 NLRB 646, which held that facially neutral work rules violated the National Labor Relations Act if employees would “reasonably construe” the rule to restrict the employees’ rights to engage in protected concerted activity under Section 7 of the Act. Following that decision, the Board used the “reasonably construe” standard to invalidate even the most well intentioned work rules. See e.g., T-Mobile USA Inc., April 29, 2016 (finding that employer’s policy requiring employees to maintain a positive work environment violated the NLRA).

On December 14, in The Boeing Company, 365 NLRB 154, the Board overturned Lutheran Heritage and articulated a new test for evaluating the validity of facially neutral work rules. In place of the unworkable “reasonably construe” standard, the Board introduced a balancing test for analyzing facially neutral work rules. Under the new standard, the Board will “evaluate two things: (i) the nature and extent of the potential impact on NLRA rights, and (ii) legitimate justifications associated with the rule.” (emphasis in original).

Workplace investigation

Examining Documents

Utilizing this standard, the Board reversed the administrative law judge’s decision that Boeing’s no-camera rule violated the NLRA. Instead, it found that the employer’s legitimate business reasons for the policy — protecting proprietary information and national security interests — outweighed any potential Section 7 violation. The Board also articulated three broad categories of work rules that would result from the new balancing test:

  • “Category 1 will include rules that the Board designates as lawful to maintain, either because (i) the rule, when reasonably interpreted, does not prohibit or interfere with the exercise of NLRA rights; or (ii) the potential adverse impact on protected rights is outweighed by justifications associated with the rule.”
  • “Category 2 will include rules that warrant individualized scrutiny in each case as to whether the rule would prohibit or interfere with NLRA rights, and if so, whether any adverse impact on NLRA-protected conduct is outweighed by legitimate justifications.”
  • “Category 3 will include rules that the Board will designate as unlawful to maintain because they would prohibit or limit NLRA-protected conduct, and the adverse impact on NLRA rights is not outweighed by justifications associated with the rule.”

Boeing is a big win for employers and represents a clear change in the Board’s attitude towards work rules. While only time — and additional Board decisions — will tell, the new standard should provide “far greater clarity and certainty” to employers in drafting workplace policies. Additionally, employers may want to consider taking a second look at policies previously removed and/or revised in the wake of Lutheran Heritage and its progeny. Finally, as we head into 2018, employers should evaluate all workplace policies in light of the Board’s new balancing test and be prepared with strong justifications for any policies that have the potential to infringe on an employee’s rights under the Act.

Oh No, Not You (Again): Serious Enforcement of Harassment Policies Is Absolutely Necessary

Contributed by Steven Jados, November 22, 2017

During the past several weeks, it seems that every day has featured new allegations of sexual harassment involving celebrities, politicians, and others in positions of power.

These allegations invite a question to employers: Do you want to be in the news for all the wrong reasons? No? Good, because this moment in time should impress upon all businesses the importance of vigilant enforcement of anti-harassment policies.

HandbookThe first step in enforcement is ensuring that anti-harassment policies are properly communicated to all employees—from entry-level to C-Suite.  All employees should be told, in no uncertain terms, on day one of their employment and regularly thereafter, that they have the right not to be sexually harassed at work. The company’s management—all the way to the top of the organization—must also be put on notice that employees have the right not to be sexually harassed at work, and that credible allegations of harassment will carry real consequences for those who engage in such unacceptable behavior.

Employees must also be trained on how to make internal complaints of harassment within the company.  On that point, employees should know that they can contact human resources, or any appropriate member of management with whom the employee is comfortable with, to disclose improper conduct without fear of retaliation.

Training must also extend to human resources and all members of management, so that they know to recognize harassment complaints for what they are—and so the company’s investigation and enforcement procedures can promptly be put into action. Management must take all complaints or possible situations of harassment seriously, and investigate them to their reasonable conclusion.  There can be no off-the-record complaints; companies cannot look the other way because an accused manager was “just kidding” or, even worse, because an individual “gets to do whatever he or she wants.”  In the end, appropriate disciplinary action and re-training must follow when the company’s investigation determines that harassment occurred.

While proper investigation procedures can shield companies from liability in certain circumstances, failures in implementation, training, investigation, and enforcement of anti-harassment policies are more likely to result in legal liability, negative publicity and adverse financial implications.

Attention employers: Do you have questions on how to implement or communicate anti-harassment policies? Are you uncertain how you should respond to employee complaints? Do you need help in training your employees and management on company anti-harassment policies and procedures? Or, like many employers, are you simply hesitant to investigate harassment allegations against high-level managers?

Ultimately, if you are asking these questions, the best approach is to seek the advice of experienced employment counsel so that potential areas of liability can be contained and minimized, or better yet, eliminated as soon as possible.