Lock v British Gas - eagerly awaited holiday pay Judgment now handed down

This post was written by Amy Ferrington and Michael Smith.

The recent line of holiday pay cases has led to widespread media coverage suggesting some employers’ payroll costs are due to soar. Businesses have therefore been eagerly awaiting the Employment Tribunal’s decision in Lock v British Gas, which has now been handed down on the question of whether commission structures will impact holiday pay. In short, many employers are to pick up a bill, but the question of quantum here is yet to be determined.

Summary

In our previous blog on this case, we described the decision of the European Court of Justice which established that, in some circumstances, a worker’s holiday pay should be calculated based on salary and commission payments, not just basic pay, where commission payments are “intrinsically linked” to the performance of tasks required to be carried out by a worker. The ECJ left it to the Employment Tribunal to decide the method of calculating commission payable to workers away on annual leave.

The case returned to the Tribunal in February this year, and in the Judgment handed down this week, the Tribunal has held that the Working Time Regulations 1998 should be interpreted so that an employee’s holiday pay includes an element of commission. A further Employment Tribunal Hearing will be held to determine the applicable reference period for calculation purposes (i.e., over what period a worker’s earnings should be averaged to calculate holiday pay) and how to quantify claims.

Facts

Mr Lock was a sales consultant with British Gas. Mr Lock’s wage was made up of basic monthly salary plus commission payments, which were calculated in accordance with the level of sales achieved. Commission earned in one month was paid in subsequent months. Accordingly, when on annual leave, Mr Lock received commission payments relating to his sales achieved in previous months. However, Mr Lock incurred a reduced income in the months following his annual leave because he had not generated any sales during his period of holiday. Mr Lock argued that the reduced income constituted a breach of the Working Time Regulations 1998.

The case was referred to the ECJ, which held that where a worker's remuneration includes contractual commission, which is determined by reference to sales achieved, a national law that calculates statutory holiday pay based on basic salary alone will be incompatible with the Working Time Directive.

The case therefore returned to the Employment Tribunal, to determine the extent to which the WTR 1998 could be read consistently with the EU law and, if not, whether words should be added to the WTR to ensure conformity.

Tribunal Decision

The Tribunal held that it was necessary to interpret the domestic legislation (i.e., the WTR 1998) to require that employers take results-based commission into account when calculating pay for annual leave. The Tribunal went on to decide that a conforming interpretation of national law could be achieved by adding a new sub-paragraph to the WTR 1998.

The new sub-paragraph provides that where remuneration includes commission or similar payments, employers should calculate “a week’s pay” for holiday pay purposes on the basis that remuneration varies with the amount of work done. In short, this will likely mean that under the WTR 1998, employers are now required to calculate the employee’s holiday pay by reference to the previous 12 weeks’ total earnings, including commission.

Unfortunately for employers, however, key issues have been set aside for determination at a later date, including what the correct reference period should be for calculating commission payments due during holiday (i.e., whether it should be more than 12 weeks). The issue before the Tribunal at this stage was purely conceptual, that is, how to resolve any potential conflict between EU and domestic law.

This means that a definitive conclusion regarding the reference period for calculation and how to quantify Mr Lock’s claim has been reserved for a future Hearing, and therefore employers cannot be assured just yet that all uncertainty in this area has been resolved.

Also, note that a further potential frustration for employers is the reference in the new WTR wording to both commission and “similar payments”. So while this case should ultimately provide clarity for employers on commission payments in particular, this change to the WTR could throw up a wealth of related claims on other types of remuneration.

A Note on Limitation Periods

Employers can take some comfort from the Deduction from Wages (Limitation) Regulations 2014, which came into force on 8 January 2015. The Regulations provide that for most claims for unlawful deductions, there is a new backstop period of two years. This will apply to claims concerning commission, holiday pay, bonuses, fees and other emoluments (but not other types of remuneration, such as statutory sick pay and statutory maternity pay). The Regulations will take effect for claims presented on or after 1 July 2015.

UK update - Type 2 diabetes controlled by diet is not automatically a disability

This post was written by David Ashmore and Amy Treppass.

In Metroline Travel v Stoute, the Employment Appeal Tribunal (“EAT”) decided that employees with type 2 diabetes controlled by diet (rather than medication) are not automatically protected by disability discrimination legislation.

The Facts

Mr Stoute was employed by Metroline and worked for them as a bus driver for 21 years. He suffered from type 2 diabetes. To keep his blood sugar levels low, he followed a low sugar diabetic diet which mainly consisted of avoiding soft drinks.

On 11 March 2013, he arrived late at work and was dismissed for gross misconduct. He claimed that his late arrival at work was the result of diarrhoea, which was a consequence of his diabetes.

Mr Stoute brought claims against Metroline of unfair dismissal, discrimination arising from disability, and failure to make reasonable adjustments. A preliminary hearing took place to determine if type 2 diabetes meant that he was disabled under the Equality Act 2010.

The Employment Tribunal (“ET”) referred to a medical report where it was noted that for two periods of time, Mr Stoute was not taking medication which reduces blood sugar levels, but was following a controlled diet.

In rendering its decision, the ET had regard to guidance from the Equality and Human Rights Commission on the definition of disability. The guidance provides that if a person suffers from an impairment and is undergoing treatment or correction for that impairment, then the impairment is to be treated as having a substantial adverse effect if, without the treatment or correction, the impairment was likely to have that effect.

The ET decided that a controlled diet amounted to treatment or correction of an impairment, and that Mr Stoute was disabled within the meaning of the Equality Act as a consequence of his type 2 diabetes.

The EAT’s decision

The EAT found that the ET had made an error of law in concluding that anyone with type 2 diabetes was automatically disabled under the Equality Act. In the EAT’s view, abstention from sugary drinks did not amount to medical treatment that had to be ignored when determining the issue of disability. The EAT also pointed out that a coping or avoidance strategy (such as a controlled diet) might result in the effects of an impairment being reduced to the extent they are no longer substantial, with the outcome that an individual is not disabled under the Equality Act 2010. The EAT also concluded that diabetes controlled by diet does not amount to an impairment or interference with normal day-to-day activities. The EAT allowed the appeal and ordered Mr Stoute to pay the appellant’s fees in full.

What does this decision mean for employers?

This is an interesting and potentially important decision. Type 2 diabetes is by far the most common type, with 90% of approximately 3.1 million diabetics in the UK having type 2 diabetes. This case illustrates the fact that even where a medical condition is clinically well recognised, that in itself is not sufficient for it to be a disability. This case will also likely make it harder for people suffering from nut allergies, lactose intolerances, etc., who manage their conditions by avoiding certain foods/drinks, to claim that they are disabled. Note that the EAT accepted that medicated diabetes sufferers (type 1 or type 2) are regularly considered to be disabled for the purposes of the Equality Act.

Webinar: Philadelphia's New Paid Sick Leave Law

Philadelphia Mayor Michael Nutter recently signed the “Promoting Healthy Families and Workplaces” Ordinance, adding Philadelphia to the growing list of cities and states to require sick leave. The new law, which takes effect May 13, 2015, generally requires employers to provide workers with 40 hours of sick leave each year.

On Thursday, April 16 at 12 p.m. EDT, Reed Smith attorneys John DiNome and Lindsay Freid will present a webinar: “Employer Briefing: Philadelphia’s New Paid Sick Leave Law.” They will provide an overview of how the new law will affect employers.

Topics include:

  • Which employees are entitled to paid sick leave, which employees and employers are exempt, and exactly what qualifies as “sick leave”
  • How sick leave accrues and how it may be used
  • Obligations employers may impose on employees to entitle them to sick leave
  • New employer obligations – including record-keeping and notice requirements – as well as prohibited conduct
  • What to do now to ensure compliance with the law on its effective date

This webinar is part of Reed Smith’s ongoing series, "What Employers Need To Know in 2015." We invite employers to register here.

Thursday Webinar: Managing the Risks of Social Media in the Workplace

Facebook, Twitter, and other social media have become ubiquitous in the workplace, with a staggering 75 percent of employees using social media at work. But employers face a great deal of uncertainty about what restrictions on social media use are permissible – and which could get them into trouble.

On Thursday, March 26 at 12 p.m. EST, Reed Smith attorneys Joel Barras, Cindy Schmitt Minniti, and Keri Bruce will present a webinar: “Beyond the Water Cooler: Managing the Risks of Social Media in the Workplace.” They’ll address practical steps for managing the risks of social media in the workplace.

Topics include:

  • The NLRB’s recent decisions on social media use, and what they mean for union and non-union employers
  • Tips for drafting enforceable electronic-use policies
  • Use of social media in employment decisions
  • Determining whether an employee’s social media activity is legally protected
  • What to do when an employee goes rogue on social media

This webinar is part of Reed Smith’s ongoing series, "What Employers Need To Know in 2015." We invite employers to register here.

Employment Appeal Tribunal gives guidance on what constitutes sufficient knowledge of a disability to give rise to a duty to make reasonable adjustments

In Donelien v Liberata, the Employment Appeal Tribunal (“EAT”) has held that an employer did not have constructive knowledge of an employee’s disability, even though further steps could have been taken to investigate her condition.

Background

Under the Equality Act 2010, employers are obliged to make reasonable adjustments to help disabled employees overcome disadvantages arising from working rules and practices, the physical features of the workplace, and the need for auxiliary aids. However, that duty only arises where an employee is disabled within the meaning of the Equality Act 2010 and the employer knows (i.e., has “actual knowledge”) or could reasonably be expected to know (i.e., has “constructive knowledge”) that the employee is disabled. This case was decided under the Disability Discrimination Act 1995, which was replaced by the Equality Act 2010. However, the legal principles are the same.

Whether an employer has constructive knowledge of an employee’s disability will be determined by an Employment Tribunal looking at all of the facts of the case, including the information known to the employer and the efforts made to investigate the employee’s medical condition and its effect on the employee. This will often involve referring employees to Occupational Health or another medical expert so a report can be prepared. However, in Gallop v Newport City Council, the Court of Appeal held that the employer in that case had constructive knowledge of the employee’s disability, even though the Occupational Health report indicated that the employee was not disabled. An employer must therefore form its own view of whether an employee is disabled, and cannot uncritically rely on an Occupational Health report.

The facts

Ms Donelien was employed by Liberata as a Court Officer. She was dismissed in October 2009 for unsatisfactory attendance, a failure to comply with sickness notification procedures and a failure to work her contractual hours. This followed Ms Donelien being absent from work for 128 days in the last year of her employment for a variety of different reasons, including stress, colds, stomach upsets, a viral infection and high blood pressure.

Liberata had instructed its Occupational Health provider to prepare a report on Ms Donelien’s condition in May 2009. The enquiries put to the provider included (i) whether Ms Donelien suffered from a medical condition which explained her pattern of absences; (ii) whether any such condition impacted her ability to carry out her role; (iii) how long any such condition would be likely to last; (iv) whether any such condition amounted to a disability; and (v) whether any reasonable adjustments were recommended. The Occupational Health report provided general information but did not fully engage with these enquiries. Accordingly, Liberata followed up by telephone and received a more detailed response. However, although the second response stated that Occupational Health did not believe Ms Donelien to be disabled, it was still lacking in detail, including by not explaining the impact of her medical conditions and their likely duration. However, Liberata did not ask for more information again.

Following her dismissal, Ms Donelien brought Employment Tribunal claims, including for disability discrimination for an alleged failure to make reasonable adjustments.

At a preliminary hearing, the Employment Tribunal determined that Ms Donelien was disabled by August 2009 at the latest. In contesting liability for a failure to make reasonable adjustments, Liberata denied having actual or constructive knowledge that Ms Donelien was disabled. The Employment Tribunal agreed with Liberata.

The decision of the EAT

Ms Donelien appealed to the EAT on two grounds:

  1. In reaching its decision, the Employment Tribunal had failed to take account of Gallop v Newport City Council when determining whether Liberata had constructive knowledge of Ms Donelien’s disability. Liberata had unreasonably relied on the Occupational Health report and failed to form its own view of whether Ms Donelien was disabled.
  2. The Employment Tribunal’s decision that Liberata had done what it reasonably could to investigate Ms Donelien’s medical conditions was incorrect, such that Liberata did have constructive knowledge of her disability.

The EAT dismissed both grounds of appeal.

In relation to the first ground of appeal, the EAT, in reviewing the Employment Tribunal’s judgment, decided that the Employment Tribunal had made a determination that Liberata formed its own view that Ms Donelien was not disabled and had not uncritically relied on the Occupational Health report. The EAT noted that Ms Donelien had a variety of apparently unconnected medical complaints, and that it was also difficult for Liberata to draw a distinction between what she could not do and would not do. As such, the Employment Tribunal was entitled to find that Liberata did not have constructive knowledge of Ms Donelien’s disability from the information available to it.

In dismissing the second ground of appeal, the EAT accepted the Employment Tribunal’s finding that Liberata had taken reasonable steps to understand Ms Donelien’s medical position. Clear instructions had been sent to Occupational Health, and Liberata had followed up when the initial response was lacking in detail. Although some employers may have followed up again when the second response still lacked particularity, the test for whether an employer had constructive knowledge is one reasonableness, and Liberata was not required to conduct the perfect investigation.

What does the case mean?

The case is helpful for employers in that it confirms that Employment Tribunals may give them some latitude in determining whether they have constructive knowledge of an employee’s disability. However, care should be taken in seeking to rely on this case as grounds for limiting investigations into an employee’s state of health. The decision of the Employment Tribunal was highly fact-sensitive, and another Employment Tribunal may have taken a different view.

Accordingly, it remains best practice to conduct as thorough an investigation as possible into the medical reasons for employee absence, and to follow up with Occupational Health providers and other medical professionals if their reports are lacking in detail.

Newsflash: New ACAS Code Now In Force

This post was written by Amy Ferrington.

ACAS has issued a new Code of Practice on Disciplinary and Grievance Procedures, which came into force last Wednesday (11 March 2015).

The new Code has been issued due to uncertainty regarding workers’ statutory rights to be accompanied by a trade union representative or fellow worker at disciplinary and grievance hearings, following the EAT decision in Toal and another v GB Oils Ltd.

In Toal, the EAT held that an employee's right to choose a companion is an absolute right, which is subject only to the requirement set out in the Employment Relations Act 1999 that the companion be a trade union representative or fellow worker.

This decision was at odds with the previous version of the ACAS Code, which stated “To exercise the right to be accompanied a worker must first make a reasonable request. What is reasonable will depend on the circumstances of each individual case.”

In the new Code, ACAS reflects the decision in Toal, stating “The statutory right is to be accompanied by a fellow worker, a trade union representative, or an official employed by a trade union. A trade union representative who is not an employed official must have been certified by their union as being competent to accompany a worker. Employers must agree to a worker’s request to be accompanied by any companion from one of these categories” (emphasis added).

This could give rise to potential issues, for instance where an employee’s chosen companion is somehow involved in the matter under investigation, meaning that they may have a conflict of interests.

Note that employees may receive compensation for a breach of the right to be accompanied, up to a maximum of two weeks' pay.

No other parts of the ACAS Code have been changed.

UK update - TUPE service provision changes become more complex with the potential involvement of multiple clients and contracts

In Ottimo Property Services Ltd -v- Duncan and another, the Employment Appeal Tribunal has decided that, where several different clients change service provider at or around the same time, each individual service provision change can be considered together to decide how TUPE applies.

The facts

Mr Duncan worked as a site maintenance engineer at a residential estate called Britannia Village. The estate was made up of several different blocks, each of which had a residents' management company. Each of these companies was a separate legal entity which contracted separately for the provision of property management services for each block. Additionally, a general management company at the estate contracted for the maintenance of the common parts, such as the estate car park and gardens.

Initially, Mr Duncan's employer was responsible for providing the maintenance work under most of the maintenance contracts at Britannia Village, but, gradually, those contracts were lost to other contractors. Between May and August 2012, Mr Duncan's employer, Ottimo, lost work under five of the contracts to Warwick Estate Properties. Warwick employed a property manager to work on the contracts and also engaged contractors to provide some of the services. Warwick did not believe that TUPE applied to transfer Mr Duncan's employment to it and did not consider him for the property manager's position. In July 2012, Ottimo terminated Mr Duncan's employment.

Mr Duncan brought a claim in the Employment Tribunal. The Tribunal had to decide whether Mr Duncan's employment had transferred to Warwick under TUPE when Warwick acquired the five contracts. The Tribunal decided that there had been no transfer. The key part of their decision concerned whether there had been a "service provision change" from Ottimo to Warwick which might have caused TUPE to apply to transfer Mr Duncan's employment.

Service Provision Changes under TUPE

Regulation 3(1)(b)(ii) of TUPE says that a service provision change can occur where:

"activities cease to be carried on by a contractor on a client's behalf……and are instead carried out by another person…" [emphasis added]

Ottimo and Mr Duncan argued that the word "client" should not be limited to the singular; in other words, where several clients changed service provider as here, those changes should be considered together as one single service provision change. If there was one single larger service provision change, Mr Duncan would be better able to say that he was assigned to that service, such that TUPE applied to transfer his employment, rather than having the more difficult task of arguing that he was assigned to one of the individual contracts that had been transferred to Warwick.

The Tribunal disagreed. It said that, reading TUPE literally, a service provision change occurred when a single client changed contractor; in other words each client's situation needed to be looked at individually, not together with other service provision changes going on at the same time. In this case, while it could be argued that the service provision change provisions of TUPE applied to the change of contractor made by each individual residents' management company, Mr Duncan was assigned to none of these contracts, and so his employment did not transfer to Warwick under TUPE.

The EAT's decision

On appeal, the Employment Appeal Tribunal overturned this decision. It said that the word "client" in regulation 3(1)(b) of TUPE could be read as the plural "clients", so long as the clients retained their identity before and after the service provision change (as was the case here). However, the EAT was keen to emphasise that there must be some commonality, or link, between those clients for individual service provision changes to be considered together. This does not mean that there needs to be a single "umbrella" contract between all the clients and the contractor. The fact that each client contracted individually with the contractor in this case was not fatal. However, in this case, the EAT said the fact that each individual client contracted with the contractor using the same standard form contract did not necessarily mean that there was such commonality. The case has been sent back to the Tribunal to decide the point.

Practical Issues for Employers

Unfortunately, this case does muddy the waters for employers deciding whether the service provision change provisions of TUPE might apply. The EAT's decision makes clear that where several different clients change contractors at or around the same time, the employer cannot focus on an analysis of each individual contract change to decide how TUPE might apply. Where there is some "commonality", there is a risk that a Tribunal may analyse each service provision change together to decide how TUPE might apply.

For the time being, and until a Tribunal makes a decision on what "commonality" might mean, employers may understandably struggle to come to a conclusion as to whether a contract change needs to be considered in isolation or together with other changes going on at the same time. This may have a significant impact on the analysis of those employees who may be in scope to transfer under TUPE.

New York Employment Roundup: February 2015

This post was written by Cindy S. Minniti and Mark S. Goldstein.

Today’s New York employment law landscape is increasingly dynamic, with a constant stream of new legislation and judicial opinions. To keep our readers current on the latest developments, we will share regular summaries of recent developments affecting Empire State employers. Here’s what happened in February 2015:

Likely Rise in Pre-Tip Minimum Wage for Tipped Workers

Last month, we wrote about a series of recommendations made by a state wage board to the acting Commissioner of Labor regarding New York’s tip credit structure. Chiefly, the wage board advocated in favor of an increase in the pre-tip minimum wage – to $7.50/hour – for all tipped workers in New York state. On February 24 – just weeks after the wage board’s recommendations were submitted for his review – the Commissioner adopted four of the wage board’s five suggestions, all but ensuring that the pre-tip minimum wage will increase at year-end.

The recommendations adopted by the Commissioner include:

  • Eliminating the different pre-tip minimum wages for food service workers and non-food service workers
  • Increasing the pre-tip minimum wage to $7.50/hour effective December 31, 2015 (causing a corresponding reduction in the state’s tip credit, which permits businesses to pay tipped employees less than the minimum wage – provided that the employees earn enough gratuities to cover the difference)
  • Further increasing the pre-tip minimum wage by an additional $1/hour for workers in NYC in the event that state lawmakers enact a separate minimum wage for the city

Notably, the Commissioner rejected the lone employer-friendly recommendation, which would have reduced the tipped minimum wage by $1/hour for tipped workers who make substantially more than the minimum wage as a result of their tips.

De Blasio Convenes Paid Sick Leave Advisory Panel

On February 4, NYC Mayor Bill de Blasio announced the formation of an advisory panel to study the impact of the city’s paid sick leave law on the business community. As readers will undoubtedly recall, the NYC Earned Sick Time Act took effect April 1, 2014, and requires that businesses with five or more employees provide those employees with up to 40 hours of paid sick leave per calendar year. The panel, which is expected to meet twice a year, comprises – among others – Andrew Rigie of the Hospitality Alliance, two City Council members, and the presidents of the five borough chambers of commerce.

Employee Misclassification Remains a Significant Problem According to Task Force

As many Empire State businesses are aware, New York has emerged as a national leader in combatting misclassification of employees as independent contractors. Indeed, one of Governor Andrew Cuomo’s first acts in office was to continue the Joint Enforcement Task Force on Employee Misclassification, a coalition consisting of six state agencies, chaired by the Commissioner of Labor. The main goal of the Task Force is to investigate the practice of worker misclassification, coordinate state agencies to ensure enforcement of state law when employers misclassify workers, and develop legislative proposals and other tools to combat misclassification. According to the Task Force, “[m]isclassification occurs when an employee is incorrectly labeled an independent contractor, or is not reported by the employer in any capacity (i.e. ‘off the books’).”

On February 1, the Task Force issued its annual report to Gov. Cuomo. Perhaps most significant, the report noted that in 2014, the Department of Labor alone “completed over 12,000 employee misclassification audits and investigations, finding over 133,000 misclassified workers and unpaid contributions due of over $40.4 million.” Overall, the Task Force members discovered nearly $316 million in unreported wages. Given the state’s emphasis on fighting misclassification, New York businesses should assess all independent contractor designations and perform a self-audit in order to evaluate areas of potential exposure.

Buffalo E-Cigarette Ban Impacts Employers

On February 3, Buffalo Mayor Byron Brown signed into law a bill prohibiting the use of e cigarettes in any location where smoking tobacco cigarettes is already prohibited. For most employers, this means that employees may not use e-cigarettes in the workplace. Similar legislation took effect in NYC last spring, and a statewide bill is currently under deliberation in Albany.

Contractual flexibility clauses must be clear and unambiguous to give an employer a right to make unilateral changes

In the case of Norman and others v National Audit Office UKEAT/0276/14, the Employment Appeal Tribunal (“EAT”) confirmed that flexibility clauses in employment contracts which seek to give employers the right to make unilateral changes to the contract’s terms will be interpreted restrictively against employers.

In reaching its decision, the EAT overturned an Employment Tribunal’s decision that the National Audit Office (“NAO”) had the power to unilaterally vary its employees’ contracts in relation to their leave and sick pay terms.

The Facts

Under their contracts of employment, NAO staff had entitlements to ‘Privilege Leave’ (an additional leave benefit beyond standard holiday entitlements) and generous enhanced sick pay benefits. The NAO sought to reduce those benefits and commenced consultation with the employees’ trade union in 2012. That consultation was ultimately unsuccessful in reaching agreement and, in spring 2013, the NAO sought to impose the changes on its employees unilaterally, relying on what it asserted was a clause in the employees’ contracts allowing the NAO to make unilateral changes without the agreement of the employees.

The NAO’s HR Manual contained two key provisions in this respect. The first (the “Variation Clause”) covered changes to terms and conditions of employment and provided that:

  • Conditions of service are “subject to amendment”
  • Any significant changes will be notified to staff by one of a number of specified methods

The second provision entitled “Settlement of Disputes” stated that:

  • Wherever possible, management and the Trade Union will try to reach agreement before implementing any changes that affect staff
  • Changes to working practices or terms and conditions will not be implemented whilst negotiations are taking place, or whilst the issue is under referral to ACAS, unless management considers this essential to the operation of the NAO

The employees sought a declaration from the Employment Tribunal that their terms of employment were unchanged and contained the original Privilege Leave and Sick Pay provisions. However, the Employment Tribunal found in the NAO’s favour.

The EAT’s decision

On appeal, the EAT disagreed with the Employment Tribunal for two reasons:

1. The Variation Clause was not sufficiently clear and unambiguous to give the NAO a unilateral right to amend the employees’ contractual terms.

The statement that conditions of service are “subject to amendment” did not, when read objectively, give the NAO discretion to change contractual terms unilaterally. In fact, the provision said nothing about which party to the contract could amend it and how. The stipulation that significant changes would be notified to staff did nothing to change that, and was entirely consistent with the NAO not having discretion to amend contractual terms unilaterally.

2. The Settlement of Disputes provision did not give the NAO the right to amend the contracts unilaterally.

The EAT made this finding for two reasons. First, on the facts, the provision did not have contractual effect, such that it could not give the NAO a unilateral variation right. Second, even if it did have contractual effect, it could at most give the NAO a power to unilaterally implement changes which were “essential to the operation of the NAO”. The EAT was not persuaded that the NAO had met that criterion.

The EAT therefore determined that the employees’ Privilege Leave and Sick Pay provisions remained unchanged.

What does this decision mean for employers?

The case emphasises the need to be cautious when seeking to rely on purportedly wide flexibility clauses to make unilateral changes to employees’ terms and conditions without their consent. Clear and unambiguous wording will be required to give an employer a discretion to make changes and, in most cases, the discretion will need to be expressly stated to cover the area which the employer is looking to change. For that reason, when drafting employment contracts, express reference should be made to terms where flexibility is likely to be required, such as an employee’s place of work. A blanket general right for the employer to make changes unilaterally to any term of the contract is unlikely to work.

The duty on employers to maintain their relationship of trust and confidence with employees means that, whatever the contractual position – before making unilateral contractual changes – consultation with employees should be undertaken. In this case, the NAO had consulted with the employees’ trade union and taken measures to lessen the impact of the changes. However, that was not enough to overcome the absence of an adequate flexibility clause.

Where employee consent is not forthcoming and changes that are not permitted by the contract are required, an employer could decide to follow a dismissal procedure and offer to reengage the employees on the required new terms. That is, however, always a risky process, not least because it triggers the right for employees who qualify to bring unfair dismissal claims. The process needs to be managed carefully to limit the scope for successful unfair dismissal, breach of contract and other claims.

Must a Company Reveal Trade Secrets to Prove Trade Secret Theft

This post was written by Mark D. Temple and Peter J. Stuhldreher.

When you learn a former employee has stolen your trade secrets to take them across the street to benefit a competitor, your quickest remedy is to sue him and try to shut him down through an injunction. Oftentimes, the new employer is also sued because it may have helped him breach his agreement not to unfairly compete. An important consideration in deciding whether to sue the new employer and your competitor is whether it is worth the risk that you may be forced to disclose the very trade secrets you are seeking to protect.

This issue is pending before the highest court in Texas in a dispute between National Oilwell Varco LP (NOV) and M-I SWACO (M-I). In that case, M-I filed an action against a former employee and his new employer – NOV – claiming the former employee stole trade secrets and had disclosed (or would disclose) them to NOV.

During the preliminary injunction hearing, M-I requested that NOV’s trial representative leave the courtroom while its trade secrets were discussed. The judge denied M-I’s request and, instead, simply told NOV’s representative that he could not use or disclose M-I’s trade secrets.

M-I appealed, arguing before the Texas Supreme Court that the judge “imposed a Hobson’s choice” on it by forcing it to either (1) disclose its trade secrets to a competitor in an effort to protect them from future use; or (2) choose not to enforce its rights and keep its trade secrets close to the vest.

This case highlights the difficult situation employers can find themselves in when trying to protect trade secrets. They don’t want to disclose their trade secrets to a competitor, but the competitor may claim that it cannot defend itself unless it knows what the trade secrets are that the party is trying to protect.

Employers should carefully consider whether they are willing to disclose their trade secrets to their competitor before suing that competitor for stealing trade secrets. Of course, as part of any trade secrets lawsuit, employers should obtain a strong protective order, ensuring that any trade secrets divulged as part of the lawsuit will only be disclosed to attorneys involved in the case, and their experts. But, employers must realize that, to prove their trade secrets claim, they will likely have to talk freely about their trade secrets in the courtroom, which a judge may require be done right in front of a competitor’s representative.

This is another reminder of the importance of taking a careful and measured approach to litigation before initiating a lawsuit, and how the failure to do so can actually put you in a worse position than you were in when you started.

Reminder for New Jersey Employers: Statewide 'Ban the Box' Law Takes Effect March 1

This post was written by Meghan Offer and E. David Krulewicz.

As previously reported, New Jersey’s version of the “ban the box” law, entitled “Opportunity to Compete Act” (the Act), goes into effect March 1, 2015. The Act limits covered employers’ ability to inquire into a job applicant’s criminal record.

In less than a week, public and private employers that have 15 or more employees hired to work in 20 or more calendar weeks will be prohibited from inquiring about an applicant's criminal record until after the employers have completed the "Initial Employment Application Process" which runs from when the employer or employee first makes an inquiry about the position until the employer conducts the first interview.

Even after these initial steps are complete, employers are still prohibited from inquiring into: expunged criminal records; arrests that did not result in conviction; disorderly conduct convictions in which the date of sentence or the release from jail (whichever is later) occurred five or more years ago; and conviction of crimes of the fourth degree (or out-of-state equivalent) in which the date of sentence or the release from jail (whichever is later) occurred 10 or more years ago.

The Act also limits employers from posting job advertisements that state they will not consider applicants who have been arrested or convicted of a crime, unless the advertisement seeks applicants for one of the exempt positions set forth in the Act.

Covered employers that violate the Act will face civil penalties of $1,000 for first violations, $5,000 for second violations, and $10,000 for subsequent violations. The Act does not, however, provide for any private right-of-action against employers (such as by individual applicants or employees).

Finally, the Act prohibits local governments from enacting their own laws as to the same subject matter, and effective March 1, 2015, all pre-existing, local ban-the-box laws – such as those in Newark, N.J. – are preempted.

With the Act set to go into effect in a few days, we remind covered employers to review and revise employment applications and job postings to eliminate any references or inquiries into applicant criminal backgrounds. Covered employers should also revisit their interview processes and materials, and remind those involved in the interview process of the prohibition against inquiring about an applicant’s criminal background until after the initial employment application process is complete.

Reminder for N.Y. Employers: Significant Labor Law Amendments Take Effect February 27

This post was written by Cindy S. Minniti and Mark S. Goldstein.

As we previously reported, the New York State Legislature last June passed a Bill, intended to revitalize the Wage Theft Prevention Act (WTPA), that proposed significant changes to the state’s labor laws. Among other things, the Bill eliminated the requirement that employers furnish annual wage notices to employees between January 1 and February 1. On December 29, 2014, Gov. Andrew Cuomo signed the Bill into law, with an effective date of February 27, 2015.

With the Bill set to take effect in just a few days, Empire State employers should familiarize themselves with its requirements and obligations. The following is a summary of the Bill’s most significant provisions:

Elimination of the Annual Wage Notice for N.Y. Employers

Initially enacted in 2010 to curb wage payment abuses, the WTPA required employers to furnish written wage-related information – including pay rate, employer intention to claim an allowance, overtime entitlement and applicable rate and regular payday – to all existing employees between January 1 and February 1 of each year, and to all new hires upon commencement of employment.

In a welcome move for employers, the Bill eliminated the WTPA’s annual wage notice requirement. As we previously explained, this was the only provision of the Bill that took effect December 29, when Gov. Cuomo signed it into law.

Increased Penalties for Other WTPA Violations

The WTPA originally sought to combat employee misclassification. Recognizing that the annual wage notice obligation failed to achieve this, lawmakers strengthened other WTPA provisions. Despite abolishing the annual notice, the Bill still requires employers to furnish wage notices to all new hires, and increases the penalties for non-compliance.

Originally, the WTPA levied a $50 penalty – per workweek, per worker – against an employer that failed to provide a wage notice upon commencement of the employment relationship, up to $2,500. As amended by the Bill, the WTPA now imposes a $50 penalty – per workday, per worker – against an employer that fails to provide a wage notice within the first 10 days of employment, up to a maximum assessment of $5,000.

The Bill also increases the penalties for employers that fail to provide employees with a written statement identifying the employee’s pay rate and related information with each wage payment, as required by the WTPA. Under the Bill, the affected employee and the New York State Department of Labor (NYSDOL) may now recover $250 per workday from delinquent employers, also subject to a $5,000 cap.

An employer facing sanctions for failure to provide compulsory wage notices or wage statements may still evade liability by proving: (1) that it made complete and timely payment of all wages to the affected employee(s), or (2) that it reasonably believed, in good faith, that it was not required to provide the notice or statement to the employee. The employer bears the burden of establishing each of these affirmative defenses.

Despite these affirmative defenses, employers should be sure to provide timely wage notices to new employees, and wage statements to new and existing employees alike. The penalties for noncompliance are now greater than ever.

Creation of New Successor Employer Liability

In addition to augmenting the WTPA, the Bill creates new successor liability for certain entities. Specifically, it provides that an employer similar in operation and ownership to an entity that previously committed labor law violations will be held accountable for the acts and liabilities of the predecessor entity. For purposes of the Bill, the successor employer will be deemed the “same employer” as its predecessor where “the employees of the new employer are engaged in substantially the same work in substantially the same working conditions under substantially the same supervisors, or if the subsequent employer has substantially the same production process, produces substantially the same products and has substantially the same body of customers.” We anticipate disputes regarding the inherent ambiguity of this language and its practical application.

The successor liability clause effectively precludes companies from restructuring operations, or dissolving and creating a new entity with the same business purpose, to sidestep wage-related liability. Entities can no longer merely switch names or corporate identities to elude the NYSDOL’s grasp.

Imposition of Individual Liability for Certain LLC Members

Consistent with its stated purpose of “provid[ing] additional protections for employees against wage theft,” the Bill amends the New York Limited Liability Company Law by specifying that the 10 members of a New York LLC with the largest ownership interests may be held personally liable for any unpaid wages. This provision echoes a similar obligation already embodied in the Business Corporation Law, pursuant to which employees may recover unpaid compensation from the 10 largest shareholders of a corporation.

However, in order to recover wages from an LLC member, an employee must first provide prior written notice to such member. In addition, any action to collect unpaid sums from an LLC member must be commenced within 90 days after “the return of an execution unsatisfied against the Limited Liability Company upon a judgment recovered against it.”

Like the creation of new successor liability, the amendment to the Limited Liability Company Law provides an avenue for employees and the NYSDOL to seek redress where an entity is dissolved or restructured, or where it simply attempts to eschew its wage payment obligations.

Increased Penalties for Repeat Wage and Hour Offenders

One of the Bill’s primary emphases is on preventing repeated violations of the wage and hour laws. For instance, if the NYSDOL issues an order directing payment of wages for a “repeated, willful, or egregious violation,” the errant employer must now report to the NYSDOL certain employee and wage data, which the department will in turn post on its website. The required data includes: (1) the number of permanent and temporary full-time and part-time employees, and the number of temporary staffing agency employees rendering services to the company; (2) the respective hourly pay rates of such employees; and (3) the number of hours worked by such employees during the relevant calendar period, organized in five-hour and 10-hour increments. Given that the Bill does not discern between exempt and nonexempt employees, compliance with the latter two requirements may prove especially challenging.

In another measure intended to deter recidivism, the Bill doubles the maximum civil penalty – from $10,000 to $20,000 – for employers found to have committed a second labor law violation within a six-year period.

It remains unclear how these provisions will affect employers who agree to settle administrative claims pending before the NYSDOL, or how they will affect the threshold decision of whether to settle. What is clear, however, is that employers should strive to avoid falling prey to these sanctions.

Contractors Must Provide Written Notice of Violations

Another statutory change intended to safeguard against wage theft is that construction contractors and subcontractors found to have violated the labor law must notify all of their respective employees of the violation(s). Notification must be made via paycheck attachment in a form and manner to be determined by the NYSDOL.

How Does This Affect My Company?

Once it takes effect February 27, the Bill presents a mixed bag for employers. On one hand, elimination of the annual wage notice requirement eradicates a significant administrative headache. On the other hand, the vast majority, if not all, of the remaining provisions of the Bill are employee-friendly, intending to deter violations – especially repeated violations – of New York’s wage and hour laws. To that end, expect the NYSDOL to waste little time effectuating its apparent mandate from the state legislature to vigorously prosecute wage and hour violations. Consequently, all New York employers, regardless of size, should immediately review their wage payments practices to ensure compliance with both the WTPA and the Bill.

Whistleblower Protection Around the World

This post was written by Séverine Martel, Marie Brunot, Claudia Röthlingshöfer, Jan Weißgerber, Desmond Liaw, Anita Wan, Michael Smith, Amy Ferrington, and Joel Barras.

Welcome to Reed Smith’s monthly global employment law blog post. This month’s post covers the protection afforded to whistleblowers around the world.

France

Under French law, employees cannot be sanctioned, dismissed or be subject to direct or indirect discriminatory measures (especially concerning salary, training, reclassification or appointment) for reporting in good faith suspected wrongdoing by their employer.

French companies are not obliged to adopt a written whistleblowing policy. However, whistleblowing procedures in France must comply with the principles set out by the CNIL (i.e., the French Data Protection Authority). These rules are primarily designed to protect employees from invasion of privacy, potential breaches of individual liberties, false denunciation and wrongful data management.

Any form of retaliation taken against an employee who has used a whistleblowing mechanism in good faith is deemed to be null and void. By way of exception to this legal principle, an employee may face a disciplinary sanction and even incur criminal liability should he or she report a violation in bad faith or with malicious intent.

Germany

There is no legislation relating specifically to whistleblower protection in Germany. The rights and duties of employees in this respect are determined by the general rules and obligations applicable to the employer-employee relationship. In short, employees must be loyal to their employer and protect its business.

German labour courts have considered the validity of sanctions that employers have applied to employees who have raised concerns with third parties outside of the company (such as police and public authorities), after escalating – or without trying to escalate – an issue with the employer first.

German courts have deemed terminations or sanctions based on whistleblowing actions as invalid, where employees have tried to address illegal behaviour of a colleague/superior internally without success before informing third parties outside the company. The courts have stated that any sanction violates the principle of protection against victimisation and retaliation, provided that the whistleblowing was justified. In such cases, dismissed employees must be reemployed.

The entire whistleblowing topic is still under development in Germany, and several Acts covering these issues have been discussed recently. As there is no clear legal regulation in place, there is still a lot of uncertainty as to which disclosures are protected.

Hong Kong

In Hong Kong, no legislation specifically offers whistleblower protection. To gain protection from having “blown the whistle”, an employee has to rely on other rights found in employment and anti-corruption legislation.

For instance, under the Employment Ordinance (Cap. 57), an employee who gives evidence in any proceedings regarding the enforcement of labour legislation, industrial accidents, or breach of work safety regulations, is protected from dismissal and discrimination. An employer who dismisses or discriminates against such a whistleblowing employee commits a criminal offence and is liable to pay a fine of HK$100,000 and/or compensation to the employee.

Further, a whistleblowing employee is protected from allegations of breaches of confidentiality in the following circumstances:

  • Where it is in the public interest to make the disclosure under common law
  • Where the disclosure is made under a Court Order or under the directive of a statutory inspector
  • Where the disclosure relates to suspected money laundering or other serious crimes, and is made under certain pieces of legislation to an “authorised officer” (e.g., a police officer, a member of the Customs and Excise Service, the Joint Financial Intelligence Unit)
  • Where the disclosure relates to corruption and bribery and is made under the Prevention of Bribery Ordinance (Cap. 201)

The Stock Exchange of Hong Kong Limited has amended its Corporate Governance Code to state that it is recommended best practice for all Hong Kong-listed companies to establish a whistleblowing policy, under which employees may raise concerns about possible improprieties in confidence. This is not compulsory, but listed companies that fail to comply must explain non-compliance in their annual report.

United Kingdom

In the UK, the Public Interest Disclosure Act 1998 (“PIDA”) protects whistleblowers in two respects:

  • Dismissal of employees will be automatically unfair if the reason, or principal reason, for their dismissal is that they have made a “protected disclosure”
  • Workers (a wider category of individuals than employees) are protected against being subjected to any detriment on the grounds that they have made a protected disclosure. “Detriment” is defined very widely and can include any circumstances in which a worker might reasonably take the view that they have been disadvantaged.

A whistleblower will only qualify for the protection described above where they have made a qualifying disclosure which is also a protected disclosure.

A qualifying disclosure for these purposes is a disclosure of information which, in the reasonable belief of the worker making it, tends to show that malpractice (e.g., a breach of a legal obligation regarding health and safety) has taken place, is taking place, or is likely to take place. Following reform in this area, a disclosure made on or after 25 June 2013 will only be a qualifying disclosure if the worker has a reasonable belief that the disclosure is in the public interest.

Whether or not a qualifying disclosure will amount to a protected disclosure depends upon the identity of the person to whom the disclosure is made. PIDA generally encourages disclosures to be made internally, to the employer, and further conditions apply to disclosures to third parties.

USA

U.S. law prohibits employers from taking adverse action against employees who engage in whistleblowing activities. Federal law specifically protects those employees who blow the whistle on environmental, workplace safety, and securities laws violations. Federal whistleblower laws also prohibit retaliation against employees who participate in governmental or administrative investigations into potential workplace law violations – even if that employee did not initiate the complaint.

The Occupational Health and Safety Act of 1970, for instance, protects workers from retaliation as a result of reporting/investigating health or safety violations in the workplace. Similar laws address specific industries or niche categories, such as commercial motor vehicle safety and environmental hazards.

The Sarbanes-Oxley Act of 2002 (“SOX”) and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 work in tandem to protect whistleblowers at all publicly traded companies. Employers at publicly traded companies are prohibited from taking adverse action against any employee in retaliation for that employee “initiating, testifying in, or assisting in any investigation or judicial or administrative action” related to the employer’s violation of the federal securities law. The SOX and Dodd-Frank whistleblower protections are particularly broad, encompassing adverse action taken even in minor part as a result of protected activity. Thus, even if an employee has committed an otherwise terminable offense, if that employee has also engaged in whistleblowing activity, he or she may be protected from adverse employment action.

In addition, many individual states have independent whistleblower statutes protecting employees of private companies. In New York, for example, both public and private employers are prohibited under state law from disciplining or taking retaliatory action against any employee who has disclosed or threatened to disclose policies or practices that violate the law or that otherwise threaten public health or safety.

What is an 'establishment' for collective redundancy consultation purposes?

This post was written by Eleanor Winslet.

The Advocate General has given a preliminary opinion in the case of USDAW & Wilson v Woolworths and others (“the Woolworths case”) on the question of whether there is a requirement to aggregate the number of employees across different locations to meet the thresholds for collective consultation obligations (in England and Wales, of 20 employees in a 90-day period).

Advocate General Wahl found that the meaning of “establishment”, for the purposes of calculating whether the threshold has been met, did not necessarily mean all affected locations owned by the employer. Instead, the Advocate General stated that an “establishment” is effectively a “local employment unit” which it is for a national court to determine.

Background

In England and Wales, collective consultation obligations arise where 20 or more dismissals are proposed at one “establishment” within a 90-day period (as set out in the Trade Union and Labour Relations (Consolidation) Act 1992 (“TULRCA”)).

The well-known Woolworths case relates to claims by former employees of the now insolvent retail group, that they should have been entitled to protective awards for failure to comply with collective consultation obligations. The approach taken by Woolworths was to consider whether there were 20 or more employees at one location and, if not, to take the view that collective consultation obligations did not apply.

The Employment Tribunal agreed that each store should be considered as a separate “establishment”. On appeal, the Employment Appeal Tribunal held that the provisions of TULRCA were incompatible with the European Directive from which they were derived. The reason for this is that the Directive does not refer to the need for employees to be based “at one establishment”.

The EAT therefore stated that the words “at one establishment” should be disregarded, meaning that the threshold of 20 employees may be met by calculating the number of dismissals for one employer across all locations. This could have a huge impact, particularly on larger businesses with a number of sites across the country, and could make collective consultation processes far more frequent.

The matter was appealed to the European Court of Justice (“ECJ”) to decide the point.

Questions asked to the ECJ

  • When calculating whether 20 or more employees are at risk of dismissal, does this relate to the number of employees in one establishment or across locations?
  • What is the meaning of an “establishment”?
  • Should the Directive be seen as having “direct effect”, i.e., be able to be relied on even if it was not properly put in place by the member state?
  • Would the member state be liable in circumstances where the employer was insolvent and could not satisfy the claim?

Advocate General’s position

Prior to the matter being considered by the ECJ, Advocate General Wahl set out his view on the case. Two other cases were linked with the Woolworths case and they were considered together.

On the question of whether proposed dismissals across location must be aggregated, he considered that the Directive did not confirm the position either way, and confirmed that it is for the member states to make a choice.

He stated that the meaning of “establishment” was a “local employment unit”. In the decision, the Advocate General referred to the importance of having protection in place where a large number of dismissals are to be made in the same local area (given the impact this would have on the local community and the limited jobs available in one location). This suggests that there should be some geographical limitation when assessing an establishment. The Advocate General also stated that a local employment unit could be determined by member states, and would be on the facts of each case.

The Advocate General declined to give an opinion on the questions relating to direct effect and liability of member states.

What does this mean for employers?

While it is not certain that the ECJ will follow the Advocate General’s opinion, this is usually the case.

A number of questions remain unanswered, but the good news for employers is that the decision suggests that when calculating the number of proposed dismissals, an “establishment” should relate to employees within the same general locality, even if this is not limited to one office or location.

When thinking about whether the collective consultation obligations should apply, employers should look at whether employees are located in such a way that they could be considered to be a “local employment unit”. Existing case law suggests that there should be a distinct entity in place with a degree of permanence and stability which has a structure in place to enable it to fulfill certain tasks (for example, a number of sites controlled by a regional management structure might be regarded as a “local employment unit”). It will be a question of fact whether employees across locations should be aggregated when assessing whether the 20-employee threshold is met.

Roses Are Red, Violets Are Blue, I'm Prepared to Deal with Office Romances, How 'Bout You?

This article was posted by Cindy Schmitt Minniti, Mark S. Goldstein, and Michael R. Kleinmann.

Valentine’s Day is a day of love and romance for many, often times between co-workers. For employers, it provides a fitting opportunity to re-examine workplace romance and sexual harassment policies. Indeed, there is no better time to ensure sure that your personnel policies adequately address office relationships, and more importantly the fallout from failed relationships. With Valentine’s Day fast-approaching, we have compiled a list of tips to safely guide employers through the office romance minefield.

Don’t Impose a Blanket Ban on Office Romances

Dealing with office relationships, and the associated gossip and fallout, requires employers to walk a delicate tightrope. An outright ban on workplace romances, however, is rarely effective and inadvisable from both a logistical and practical perspective.

The reality for most employers is that employees will fraternize, both during and after work hours, and, inevitably, some will develop romantic relationships. Accepting this reality and taking proactive steps to ensure that all employees enjoy a safe work environment will yield better results than attempting to altogether eliminate romances in the first place. Banning office romances may also mean that an employer will be forced to discipline and potentially discharge otherwise capable employees, lest the employer be accused of not enforcing its personnel policies.

Moreover, in some states, like California, an outright ban on workplace romances may be illegal insofar as it conflicts with an employee’s right to privacy outside of the office.

So What Can Employers do about Office Romances?

Although outright bans on office romances should be avoided, other personnel policies can shield or limit employers from legal exposure and protect their workforce. Some companies, for instance, implement policies that require disclosure of workplace relationships and attempt to limit any associated conflicts of interest (for example, by re-assigning an employee romantically involved with his/her supervisor). Policies that remind employees to maintain professionalism in the workplace – e.g., no blatant sexual behavior, kissing, or cuddling on the job – can also be effective. Whatever policies are ultimately adopted, extending them to encompass relationships not only between co-workers, but also between workers and vendors or contractors engaged by the company, is important.

So-called “love contracts” can also provide value. In essence, a “love contract” acknowledges that the employees are engaged in a consensual relationship, that the relationship will not interfere with the work environment, that no employment decisions will be affected by the relationship, and that both employees agree to abide by the company’s sexual harassment policy. Although not necessarily a panacea in the event a sexual harassment claim is filed, the “love contract” can help establish that, as far as the employer was aware, the relationship was consensual and the employees involved both had knowledge of the harassment policy.

Sexual Harassment Policies are a Must

Unfortunately, many workplace romances fail, sometimes leading to allegations of sexual harassment. In other instances, claims of harassment arise when one employee romantically over-pursues a co-worker. Because of this, sexual harassment policies are an absolute must for all employers.

Sexual harassment policies should be clear about the conduct they prohibit (if possible, provide examples) and also prescribe a clear complaint procedure for employees to lodge grievances. This procedure should identify specific individuals to contact in the event an employee believes that (s)he is being harassed. If feasible, an anonymous 1-800 hotline may also be effective to combat harassment. These avenues for complaint should be clearly communicated to all employees. Harassment policies should also establish a standard procedure for investigating complaints of wrongdoing.

Because an uncommunicated and unenforced sexual harassment policy does little good, training employees about harassment is critical. Indeed, it is strongly encouraged, and in many states legally required, that employees receive regular training on these issues (and Valentine’s Day provides a great opportunity to broach this subject). This training should touch upon all relevant company policies and legal requirements, and explain in detail the procedure for making a complaint. Wherever possible, conduct separate training sessions for managers and lower-level workers.

Finally, in the event a sexual harassment complaint is made, promptly investigate and effectively resolve the claims. If you discover evidence substantiating the complaint, take immediate action to correct the harassing behavior. These actions may absolve or at least reduce corporate liability.

Avoid Valentine’s Day Parties

As with other office holiday parties, employers considering whether to throw Valentine’s Day parties should proceed with caution. The most prudent approach, of course, is to simply not have a Valentine’s Day party – you save money, dodge possible headaches, and can just make the next company event that much better. If you do throw a party, reinforce your employment policies before the festivities begin, moderate the flow of alcohol at the party itself, and promptly investigate any post-party complaints of inappropriate behavior.

What Does This Mean for My Company?

Valentine’s Day evokes images of hearts, chocolate, and epic romances. For employers, however, it is an opportune time to re-visit your workplace romance and sexual harassment policies, and to remind employees about appropriate workplace behavior. Employers with concerns should contact counsel to discuss these and related matters.