Ohio Appeals Court: Use of Illegal Drugs Was Not Sufficiently Gross Misconduct to Disqualify Employee from Payment for Unused Vacation Pay.

Last month, the Ohio Court of Appeals for Summit County affirmed judgment in favor of a manager who was terminated for failing a drug test (for cocaine and marijuana) on his claim for payment of unused vacation pay under the employer’s policy. Lang v. Quality Mold, Inc., 2008-Ohio 4560. Under the employer’s policy, an employee could be paid for unused vacation pay when the employee was guilty of one instance of serious misconduct or incompetence, but was not entitled to be paid for unused vacation pay when terminated for gross misconduct. Neither the employee handbook nor any other written policies specified whether a positive drug test constituted gross misconduct or was merely serious misconduct. Accordingly, the trial court decided to construe the handbook against the employer (who drafted it) and considered court decisions construing the statutory standard under COBRA (which denies continued medical coverage when an employee is terminated for gross misconduct).

The Court ultimately determined that testing positive for illegal drugs was merely serious misconduct and not gross misconduct. In reaching this conclusion, the court disregarded the undisputed testimony of the Human Resources Director that the employer’s past practice was to deny payment for vacation pay to employees who were terminated for illegal drug use. It is also worth noting that COBRA does not define “gross misconduct,” but that some courts required the behavior to be extreme and outrageous, while other courts have found that it merely needed to be intentional. The court was influenced by the fact that there was no evidence that the terminated manager had been dealing drugs or that his job performance or attendance had been affected by use of illegal drugs.

Insomniacs can read the full decision at http://www.sconet.state.oh.us/rod/docs/pdf/9/2008/2008-ohio-4560.pdf.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Happy Anniversary To Me

It’s been one year since I began posting FYIs on this blogsite. I’ve appreciated feedback from my faithful readers and am somewhat amused by the number of my competitors who keep up with my blog. Feel free to drop me a line if there are topics which you feel that I am neglecting. Of course, not every post will be relevant to every reader, but I try to find those amusing or scary local cases which make for good conversation at work.

Ohio’s Minimum Wage to Increase to $7.30 on January 1, 2009.

Because Ohio’s minimum wage is part of the Ohio Constitution (and cannot be easily amended) and contains a provision for automatic increases in the minimum wage tied to the annual Consumer Price Index as of September 30, the Ohio Department of Commerce has announced that the minimum wage will increase to $7.30 on January 1 based on the CPI as of Tuesday, September 30, 2008. The minimum wage for tipped employees will increase to $3.65/hour.

Insomniacs can read the full announcement (along with how it will affect youth wages) at http://www.com.ohio.gov/laws/docs/laws_2009MinimumWage.pdf.

Sixth Circuit: Eligibility Determination for Intermittent Leave Begins With Each FMLA Year Regardless of When FMLA Absence Began.

Today, the Sixth Circuit affirmed dismissal on summary judgment of an FMLA claim where the employee began intermittent leave on December 13 for chronic depression and did not return to work until January 15. Davis v. Michigan Bell Telephone Co., 07-1512 (6th Cir. 9/29/08). Although the employee had been eligible for FMLA leave when she began her absence on December 13, she had not worked 1250 hours in 2004 and, thus, was ineligible for FMLA leave in 2005. When her therapist informed her employer that she was capable of returning to work on January 3, but she did not return until January 15 – despite a warning from her employer, the employer deemed her absence as unexcused and terminated her employment in February for the chronic poor attendance. Although another physician later certified in March that the plaintiff’s continuing absence was related to her chronic depression, the employer determined that she was ineligible under the FMLA because a new leave year began on January 1 and she had not worked 1250 hours in the preceding calendar year. The Court rejected the plaintiff’s claim that she was not given effective notice of her ineligibility.

According to the Court, “[w]hen an employee has a chronic health condition for which intermittent FMLA leave has been approved, the leave commences upon the occurrence of the first absence caused by that condition, and it extends to cover every other absence caused by that condition during the same twelve-month FMLA period.” Thus, once an employee is deemed eligible for FMLA leave, every period of intermittent leave taken during the rest of that FMLA leave year for the same medical condition is deemed to be covered – regardless of the intermittent periods of work and regardless of whether the employee had worked 1250 hours in the twelve months preceding each absence. “In other words, each absence subsequent to the first absence is not treated as a separate period of FMLA leave with its own commencement date. To hold otherwise would render the term “intermittent leave” meaningless and would effectively read it out of the FMLA since a period of intermittent leave “must, by definition, comprise periods . . . in which the employee is present at work.” Id. “Thus, a series of absences, separated by days during which the employee is at work, but all of which are taken for the same medical reason, subject to the same notice, and taken during the same twelve-month period, comprises one period of intermittent leave.”

On the other hand, that intermittent leave, “can only extend to the end of the twelve-month FMLA period in which it began. See id. at 681-83. Once a new twelve-month FMLA period begins, any additional absences caused by that same chronic condition would constitute a new period of intermittent FMLA leave. See id. at 681. Otherwise, there would be no point at which the initial period of intermittent FMLA leave ended and a new period commenced. Under that scenario, employees would never have to reestablish their eligibility for FMLA leave and would therefore be perpetually entitled to twelve weeks of FMLA leave per year based on a single eligibility determination . . . . a period of intermittent leave cannot last beyond the specific twelve-month FMLA period in which it begins. Therefore, absences caused by the same chronic condition, but occurring in different twelve-month FMLA periods, must constitute different periods of FMLA leave. And as different periods of leave, they must have different times of commencement. The clear consequence of this is that [plaintiff’s] unexcused absences
in January of 2005, if approved as FMLA leave, would have constituted a new period of FMLA leave that commenced in January of 2005. Therefore, [plaintiff’s] FMLA eligibility was appropriately reevaluated in January of 2005, and the defendant was correct in determining that [plaintiff] was not eligible for FMLA leave with respect to her unexcused absences.”

The Court rejected “the concept of intermittent leave . . . should be considered a single period of leave simply because it is a continuous period of absence. A period of intermittent leave, however, is not made up of a single continuous absence. As explained above, an employee does not begin a new period of leave with each new absence. An obvious corollary to this rule is that the simple act of returning from an absence does not itself terminate a period of intermittent leave. Since a period of intermittent leave is not terminated solely by the act of returning to work, there is no basis for saying that [plaintiff’s] intermittent leave terminated when she returned to work on January 15. But it is obvious that the period of intermittent leave that began in September of 2004 must end at some point. If the intermittent leave that began in September of 2004 instead ended upon the beginning of a new twelve-month FMLA period, then [plaintiff’s] request for FMLA leave in 2005, if approved, would have constituted a new period of FMLA leave commencing in January of 2005. Thus, the ultimate question presented by [plaintiff’s] argument is whether her intermittent leave in 2004 ended upon the occurrence of a new twelvemonth FMLA period, or whether it ended at some arbitrary point, such as her return to work on January 15. Since the act of returning to work itself does not terminate a period of intermittent leave, there is no principled reason to conclude that [her] intermittent leave should cover absences up to January 15, but not those occurring thereafter. There is, however, a logical basis for concluding that [her] intermittent leave terminated upon the beginning of a new twelve-month FMLA period. Because the FMLA speaks in terms of twelve-month periods, see 29 U.S.C. § 2612(a), the most reasonable conclusion is that a period of intermittent leave terminates when a new twelve-month FMLA period begins.”

The Court based its conclusion on a balancing of the needs of the employee with the needs of the employer. “It would be unduly burdensome on a business’s need to operate efficiently and profitably if the business were required to provide an employee with twelve weeks of intermittent leave per year perpetually based on the fact that the employee was eligible for FMLA benefits on a single day. In order to accommodate the reasonable interests of businesses, it must be possible to reevaluate employees’ eligibility at some point, and the only logical method of finding that point is to conclude that a new period of intermittent leave commences when a new twelve-month period begins.”

The Court also rejected the employee’s equitable estoppel and faulty notice arguments on the grounds that an ineligible employee is not entitled to FMLA leave even if the employer were late in notifying the employee of his or her eligibility.

Insomniacs can read the full opinion at http://www.ca6.uscourts.gov/opinions.pdf/08a0353p-06.pdf.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Sixth Circuit Reinstates Trade Secret Claim By Lowering Evidentiary Burden for Small Companies.

Last week, the Sixth Circuit reinstated a trade secret claim by lowering the evidentiary burden for small companies who have to show the existence of a statutory trade secret. Niemi v. NHK Spring Co., 07-3536 (6th Cir. 9/19/08). In that case, the plaintiff father-son partnership created “machines and tools to manufacture stabilizer bars for automobiles,” and often conducted business on a handshake. Despite not having written confidentiality agreements, the Court held that a dispute of material fact existed as to whether the plaintiff had taken reasonable steps under the circumstances to protect the secrecy of its alleged trade secret and remanded the case to be decided by a jury.

The plaintiff signed a standard purchase order with the defendant which contained “a statement of standard terms and conditions providing that ‘no other or different terms or conditions shall apply to this order unless specifically agreed to in writing’” by the buyer. The plaintiff company did not insist on a written confidentiality agreement protecting the exclusivity of their designs or processes because he claimed that the defendant buyer assured him “that the new method ‘would remain confidential’ even before he disclosed it. and because plaintiff trusted the defendant-buyer for being “honorable people of integrity I’ve dealt with for thirty years.” A few years later, the plaintiff claimed that the defendant-buyer asked for a written exclusivity agreement (and promise not to share the design with other manufacturers) and he signed the agreement in exchange for a verbal assurance that he would continue to be the exclusive designer of the defendant company and would also receive the opportunity to bid on design work for the defendant’s parent company. A few years later, the plaintiff learned that a new engineering manager at the defendant company was using other designers (in violation of the verbal exclusivity agreement) and sharing details of the trade secret design (in violation of the verbal confidentiality agreement). When the dispute could not be resolved, the plaintiff brought suit for, among other things, violation of Ohio’s trade secret statute and promissory estoppel.

Under the Ohio statute, “trade secret” means “information, including the whole or any portion or phase of any scientific or technical information, design, process, procedure, formula, pattern, compilation, program, device, method, technique, or improvement, or any business information or plans, financial information, or listing of names, addresses, or telephone numbers, that satisfies both of the following: (1) It derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use. (2) It is the subject of efforts that are reasonable under the circumstances to maintain its secrecy” It is the second prong of the test which was at issue in the litigation.

While the district court did not believe that the plaintiff took reasonable efforts to protect the secrecy of its designs, the Sixth Circuit found there to be a disputed issue of fact on that issue. In particular, the plaintiff presented evidence that “he maintained complete control over his drawings and blueprints for the new manufacturing process in a secret, locked location in his house . . .. [and] did not disclose them to anyone other than his son and partner . . . , and agents of [defendant]—and to them only after receiving assurances of confidentiality.” Moreover, “[w]hen drawings were transported to and from [defendant’s] place of business in Toledo, they were always personally hand-delivered either by [plaintiff] or his son or by [defendant’s] personnel, who were required to sign for them. . . . No trade secret information was ever communicated by [plaintiff] via electronic media. . . . In addition, [plaintiff] was well aware of the security measures consistently employed by [defendant] at its facility.” The plaintiff also produced evidence “that he created standardized drawings of standardized manufacturing machine parts. This enabled [defendant] to order the fabrication of different tools by different manufacturing or ‘build’ shops without needing to disclose the complete set of prints to any one shop, thereby preserving the secrecy of the trade secret method.” Importantly for the Court, although the defendant attempted to minimize the importance of these facts, it did not present any evidence to refute or contradict them. When the defendant argued that plaintiff was careless in not marking the drawings “confidential,” the plaintiff explained that it was not necessary since no individual drawing alone disclosed the entire process. “Hence, this standardizing technique is said to represent a reasonable and effective effort to preserve secrecy even without labeling the individual drawings ‘confidential.’”

In addition, the plaintiff produced “deposition testimony detailing the conversation he had with [defendant’s manager] in 1993 or ‘94, when he remembers signing the exclusivity agreement and [the manager] reportedly assured him that [defendant] would continue to direct its design needs to him as long as he maintained the secrecy of his new method” In turn, the manager “testified that he is unaware of any such written agreement and he doesn’t recall agreeing that [plaintiff] would be [defendant’s] exclusive designer. However, [the manager] acknowledged that [plaintiff] had been [defendant’s] ‘primary, if not exclusive designer.’ Hence, although [the manager’s] testimony does not directly corroborate [plaintiff’s evidence] that there was an exclusivity agreement, his recollection of the parties’ relationship and course of dealing from 1991 to 1997 affords de facto corroboration.”

The plaintiff also produced expert testimony that “that it is customary in the automotive industry for small companies such [plaintiff] to rely on oral assurances of confidentiality regarding proprietary information when dealing with large automotive companies. . . . . Absent such evidence of customary practice in the industry, reliance on an oral promise could well be deemed not to represent a ‘reasonable effort’ to maintain secrecy.”

The plaintiff also argued that the Sixth Circuit should follow the Seventh Circuit opinion in Learning Curve Toys, Inc. v. PlayWood Toys, Inc., 342 F.3d 714 (7th Cir. 2003) applying Illinois’ version of the Uniform Trade Secrets Act (with an identical definition of trade secret). “Learning Curve teaches simply that whether efforts taken to maintain the secrecy of a trade secret are reasonable under the circumstances depends on the circumstances; that what is reasonable for a small company may be different from what is reasonable for a large company; and that the determination ordinarily represents a question for the jury. Id. at 724-25. The court observed that “only in an extreme case can what is a ‘reasonable’ precaution be determined as a matter of law, because the answer depends on a balancing of costs and benefits that will vary from case to case.” Id. at 725.” In that case, the “court upheld the jury’s verdict based on evidence of an oral confidentiality agreement, coupled with evidence that oral confidentiality agreements were customarily relied on. Id. at 725-26. The court readily acknowledged that PlayWood could and should have done more to protect its secret, but concluded the evidence was sufficient for the jury to determine that PlayWood, the smaller and less sophisticated of the parties, took reasonable precautions under the circumstances. Id.”

In short, the Court concluded that, “except where the evidentiary showing of reasonable efforts could not conceivably support a judgment in favor of the plaintiff, the reasonableness of the efforts is a question for the trier of fact. Because, depending on the credibility of the witnesses, it is conceivable, based on the present record, that a reasonable jury could find that [plaintiff’s] efforts to maintain the secrecy of his trade secret were reasonable, in light of his long term relationship with [defendant] and the relative sophistication of the parties, we conclude that the district court’s summary judgment ruling on the claim for misappropriation of trade secret was in error.”

The Court also found that the plaintiff’s promissory estoppel claim should survive summary judgment and be resolved by a jury.

Insomniacs can read the full decision at http://www.ca6.uscourts.gov/opinions.pdf/08a0349p-06.pdf.


NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.