DOL Proposes to Limit Exempt Companion Status

Yesterday, the Department of Labor announced that it intends to propose a new regulation which would limit the overtime pay exemption available for individuals employed as companions. “The proposal will revise the companionship and live-in worker regulations under the Fair Labor Standards Act to more clearly define the tasks that may be performed by an exempt companion, and to limit the companionship exemption to companions employed only by the family or household using the services. In addition, the Department proposes that third party employers, such as in-home care staffing agencies, could not claim the companionship exemption or the overtime exemption for live-in domestic workers, even if the employee is jointly employed by the third party and the family or household.” This proposal comes following a 2007 Supreme Court decision in Long Island Care at Home Ltd v. Coke, which found that the FLSA regulatory exemption for individuals employed as companions for the elderly and infirm applied to exempt the employee regardless of whether the employee was employed by a third-party provider or by the client or client family.

The proposed regulation has not yet been published in the Federal Register, which will give the public the opportunity to comment upon the proposed regulation.

Among other things, the proposed regulation would limit to 20% of the employee’s time spent in incidental activities unrelated to fellowship and protection: “The proposed regulation provides an illustrative list of permissible incidental services that may be provided by an exempt companion, such as occasional dressing, grooming, and driving to appointments, if this work is performed in conjunction with the fellowship and protection of the individual, and does not exceed 20 percent of the total hours worked by the companion in the workweek.” Similarly, the proposed regulation would preclude the employee from performing housework if the employer wants to maintain the exemption: “any performance of general household work would result in the loss of the exemption for the week.” Thus, regardless of whether the companion is employed by a third-party provider or an individual family, the companion would be entitled to overtime if s/he performs any household cleaning or any other task (such as driving, grocery shopping, dressing, or grooming), more than 20% of the time.

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.

Ohio Supreme Court Entertains Oral Arguments on Termination of Non-Compete Agreement Upon Merger

On Tuesday, the Ohio Supreme Court entertained oral argument on a non-compete case that had been appealed by the employer from the Hamilton County Court of Appeals. Acordia of Ohio, L.L.C. v. Fishel, 2010-Ohio-6235. In that case, most of the defendant employees had signed non-compete agreements with a small insurance company which was acquired years later in a merger with an Accordia entity. The Accordia entity was eventually merged years later into a larger Accordia entity, Accordia of Ohio LLC, which ultimately merged with Wells Fargo. The employees years later resigned en masse and went to work for a competitor of Accordia. Accordia filed suit seeking a preliminary injunction based on the non-compete agreements which the employees had signed with the predecessor company more than ten years before and for theft of trade secrets. The court refused to grant an injunction and ultimately entered summary judgment in favor of the employees on the grounds that the non-compete agreements had expired years earlier.
In particular, the court found that the terms of the non-compete agreements provided that the two-year non-compete period began to run upon the employee's termination of employment with the predecessor employer. The court also found that the employee's employment with the predecessor was terminated by operation of law when the predecessor employer merged with Accordia and ceased to exist. Nonetheless, upon the merger, Accordia succeeded to the predecessor's enforcement rights under the non-compete agreement. Therefore, if the employees had gone to work for a competitor within two years of the merger, Accordia would have had the right to enforce the non-compete restriction because it had stepped into the predecessor's shoes. As it was, the employees waited approximately ten years – long after the non-compete agreement and two-year non-compete period had expired – to compete against Accordia.
On appeal, the employer argued that the appellate court erred in holding that the non-compete enforcement rights survived the merger, but not the employees' employment. The employer argued that the employees remained employed at will following the merger (even though Justice McGee Brown raised factual issue about I-9 forms and employment applications). Therefore, the employer argued, there was no break or termination in employment in fact, in law or under the non-compete agreement. Second, the non-compete agreements were assets acquired by Accordia and should have been enforced as though Accordia were the predecessor employer because it acquired all of the predecessor's rights under all contracts – whether those contracts were with customers or with employees. Some justices were sympathetic to the argument that Accordia should have had equal rights under both customer and employee contracts to step into the shoes of the employer.
There was also some discussion about the intent of the parties when the employees had entered into a non-compete agreement with a small insurance agency, which ultimately was acquired by Wells Fargo – with a national presence. Would it be fair to the employees' reasonable expectations to enforce a non-compete against them which might preclude competition anywhere in the United States when they originally signed thinking they were only giving up their rights to compete in one Ohio county. The employer pointed out that the same result could have arisen if the small insurance company had grown and acquired other companies, instead of visa versa.
The employees continued to argue that the terms of the non-compete specifically provided that the non-compete period began to run when their employment with the predecessor was terminated. It did not contain a successor clause (i.e., defining "company" under the contract to include both the predecessor and any successor). However, the employees did not make a compelling argument why their contracts should be treated differently than customer contracts. They also continued to argue that Accordia assumed the predecessor's rights to enforce the non-compete agreements if the employees had begun to compete within two years of the termination of their employment with the predecessor.
Of course, all of this could have been avoided if Accordia had simply entered into new non-compete agreements with each of the employees following the merger or required the former non-compete agreements to be amended prior to the merger to avoid this issue.
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.

Franklin County Appeals Court: Incomplete Promises from Offer Letter Formed Binding Contract

Last week, the Franklin County Court of Appeals reversed a summary judgment previously entered on behalf of an employer on a breach of contract claim involving stock options promised in an offer letter. McGonagle v. Somerset Gas Transm. Co., L.L.C., 2011-Ohio-5768. The offer letter discussed the intent for the parties to enter into a later, more detailed employment agreement specifying the terms, but no such agreement was ever drafted, exchanged or signed. The trial court had found that the offer letter only constituted an agreement to later enter into a binding agreement, but the Court of Appeals disagreed.

According to the Court’s opinion, following negotiations, the plaintiff’s offer letter specified his salary, paid vacation, severance pay, eligibility for various bonuses and stock options, a portion of which would vest every six months within the next two years at a certain price and would immediately vest if he were fired without cause or if there were a change in control of the company. The offer letter provided that a more detailed employment agreement would later be provided specifying what could constitute termination “without cause,” or “with cause.” Both the employer and the plaintiff employee signed the offer letter. However, no detailed employment agreement was ever signed by the parties. The plaintiff was later provided with a management grant agreement concerning stock options in 2006, but he never signed it. He later resigned in 2007 and filed suit in 2008 for the stock options which he had been promised in 2002.

The employer argued that the offer letter was too vague to constitute an enforceable contract and left open a number of significant conditions, including the excise period and whether the plaintiff had ever vested in the options. The trial court concluded that the offer letter only constituted an offer to negotiate and later make a contract and, in the alternative, was too vague to be enforceable. The Court of Appeals reversed.

The Court found that the letter covered the essential terms of the parties’ agreement and could be enforced. "[I]f a term cannot be determined from the four corners of a contract, factual
determination of intent or reasonableness may be necessary to supply the missing term." The parties may rely on extrinsic evidence – such as the negotiations and later discussions -- to explain their intent. The introduction of such extrinsic evidence is permitted by the parol evidence rule, which only prohibits the admission of extrinsic evidence to explain the terms of an integrated (or complete) agreement after it has been reduced to writing. Where the parties have an incomplete agreement – or partially integrated agreement, extrinsic evidence is admissible to explain the missing terms.

A contract is partially integrated if the parties adopt it as a final expression of only one portion of a larger agreement, making the contract incomplete. Id. at ¶37. A party may introduce extrinsic evidence to supplement, but not vary or contradict, the written terms of a partially integrated contract. Id. at ¶38; Williams at ¶28, 30.

The fact that not all of the details (such as the affect of a resignation or duration of the options) had been explained in the offer letter does not mean that a contract was not formed.

The parties may have agreed that appellant's voluntary resignation would have no effect on his vested option to acquire stock or perhaps the parties did not reach an agreement on this issue because it was not contemplated by the parties. Similarly, the parties may have intended an option of unlimited duration or failed to contemplate a specified duration for the option. Regardless, we cannot conclude the letter lacks such enforceable clarity such that a factual determination of reasonableness or intent cannot be utilized to supply the relevant terms that are allegedly omitted from the letter.

In addition, it was not clear when the right to the options was triggered. “Thus, there is a genuine issue of material fact remaining as to whether or not the triggering event, equity financing, has occurred so as to entitle appellant to the stock option.” Therefore summary judgment was not appropriate for either party and the case was remanded “to the trial court for factual determinations of the relevant missing terms and, also, whether equity financing has occurred.”

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.

OSHA Issues Enforcement Guidance on Assessing Workplace Violence

Last month, the federal Occupational Safety and Health Administration (OSHA) issued enforcement guidance to its regional offices to establish uniform procedures for investigating and assessing incidents of workplace violence, like the one last Friday afternoon in a California hair salon. Workplace violence has ranked in the top four causes of death for more than fifteen years. “Workplace homicides remained the number one cause of workplace death for women in 2009.” “Employers may be found in violation of the general duty clause if they fail to reduce or eliminate serious recognized hazards.” In Ohio, it could also lead to public policy discharge and retaliation claims. A complaint concerning workplace violence could trigger an OSHA investigation into many of the employer’s safety and recordkeeping practices. According to OSHA, a combination of administrative, engineering and education measures can greatly reduce, if not eliminate, workplace assaults and other violence. The enforcement guidance also contains a checklist of steps employers can take to improve workplace assessments and safety. Interestingly, OSHA refuses to investigate complaints of co-worker disputes or bullying.

Workplace violence is recognized as an occupational hazard in some industries and environments which, like other safety issues, can be avoided or minimized if employers take appropriate precautions. At the same time, it continues to negatively impact the American workforce. Workplace violence has remained among the top four causes of death at work for over fifteen years, and it impacts thousands of workers and their families annually.

The Bureau of Labor Statistics’ (BLS) Census of Fatal Occupational Injuries (CFOI) shows an average of 590 homicides a year from 2000 through 2009, with homicides remaining one of the four most frequent work-related fatal injuries. Workplace homicides remained the number one cause of workplace death for women in 2009 . . . . In addition, during the same time period, survey results showed that 19% of victims of workplace violence worked in law enforcement, 13% worked in retail and 10% worked in medical occupations.

Research has identified factors that may increase the risk of violence at worksites. Such factors include working with the public or volatile, unstable people. Working alone or in isolated areas may also contribute to the potential for violence. Handling money and valuables, providing services and care, and working where alcohol is served may also impact the likelihood of violence. Additionally, time of day and location of work, such as working late at night or in areas with high crime rates, are also risk factors that should be considered when addressing issues of workplace violence.

By assessing their worksites, employers can identify methods for reducing the likelihood of incidents occurring. The Directive also includes a list of best practices, including the following:

● Conduct a workplace violence hazard analysis (this includes analyzing vehicles used to transport clients).
● Assess any plans for new construction or physical changes to the facility or workplace to eliminate or reduce security hazards.
● Provide employees with training on workplace violence.

● Implement Engineering Controls, such as:
- Install and regularly maintain alarm systems and other security devices, panic buttons, hand-held alarms or noise devices, cellular phones and private channel radios where risk is apparent or may be anticipated. Arrange for a reliable response system when an alarm is triggered.
- Provide metal detectors—installed or hand-held, where appropriate— to detect guns, knives or other weapons, according to the recommendations of security consultants.
- Use a closed-circuit recording on a 24-hour basis for high-risk areas.
- Place curved mirrors at hallway intersections or concealed areas.
- Lock all unused doors to limit access, in accordance with local fire codes.
- Install bright, effective lighting, both indoors and outdoors.
- Replace burned-out lights and broken windows and locks.
- Keep automobiles well maintained if they are used in the field.
- Lock automobiles at all times.

● Implement Administrative Controls—to change work practices and management policies in order to reduce exposure to hazards. Such controls include:
- Establish liaisons with local police and state prosecutors. Report all incidents of violence. Give police physical layouts of facilities to expedite investigations.
- Require employees to report all assaults or threats to a supervisor or manager (in addition, address concerns where the perpetrator is the manager). Keep log books and reports of such incidents to help determine any necessary actions to prevent recurrences.
- Advise employees of company procedures for requesting police assistance or filing charges when assaulted and help them do so, if necessary.
- Provide management support during emergencies. Respond promptly to all complaints.
- Set up a trained response team to respond to emergencies.
- Use properly trained security officers to deal with aggressive behavior. Follow written security procedures. [Do they know how to respond to armed aggression? Have you asked about the training your security contractor provides to security guards assigned to your facility?]
- Develop a written, comprehensive workplace violence prevention program, which should include:
- policy statement regarding potential violence in the workplace and asignment of oversight and prevention responsibilities.
- workplace violence hazard assessment and security analysis, including a list of the risk factors identified in the assessment and how the employer will address the specific hazards identified.
- Development of workplace violence controls, including implementation of engineering and administrative controls and methods used to prevent potential workplace violence incidents.
- A recordkeeping system designed to report any violent incidents. Additionally, the employer shall address each specific hazard identified in the workplace evaluation. The reports must be in writing and maintained for review after each incident and at least annually to analyze incident trends.
- Development of a workplace violence training program that includes a written outline or lesson plan.
- Annual review of the workplace violence prevention program, which should be updated as necessary. Such review and updates shall set forth any mitigating steps taken in response to any workplace violence incidents.
- Development of procedures and responsibilities to be taken in the event of a violent incident in the workplace.
- Development of a response team responsible for immediate care of victims, reestablishment of work areas and processes and providing debriefing sessions with victims and coworkers. Employee assistance programs, human resource professionals and local mental health and emergency service personnel should be contacted for input in developing these strategies.

● Limit window signs to low or high locations and keep shelving low so that workers can see incoming customers and so that police can observe what is occurring from the outside of the store.
● Ensure that the customer service and cash register areas are visible from outside of the establishment.
● Use door detectors so that workers are alerted when someone enters the store.
● Have height markers on exit doors to help witnesses provide more accurate descriptions of assailants.
● Establish a policy of when doors should be locked. Require workers to keep doors locked before and after official business hours.
● Train all staff to recognize and defuse verbal abuse that can escalate to physically combative behavior.
● Train all staff and practice drills for physically restraining combative patients or clients, including the use of physical restraints and medication, when appropriate.
● Provide employee “safe rooms” for use during emergencies.
● Provide staff members with security escorts to parking areas in evening or late hours. Ensure that parking areas are highly visible, well lit and safely accessible to the building.

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.

Franklin County Court of Appeals Affirms Stay in Favor of Arbitration Despite $23K Arbitration Cost for Plaintiff

Last week, the Franklin County Court of Appeals affirmed a trial court’s order staying litigation pending arbitration without first holding an evidentiary hearing despite evidence that the plaintiff would be required to deposit over $23,000 with the American Arbitration Association in order to pursue her claims of disability discrimination. Shearer v. VCA Antech, Inc., 2011-Ohio-5171 (10-6-11). The plaintiff had filed suit challenging the arbitration proceedings and, in doing so, apparently only challenged the arbitration clause on the basis of procedural and substantive unconscionability under state law. She did not rely on any federal court precedent that such expensive arbitration expenses could deprive a victim of discrimination of the benefit of the Americans With Disabilities Act and, thus, be unenforceable. Thus, the Court had no difficulty finding that the arbitration agreement was enforceable when presented with documentary evidence that the plaintiff had consulted with counsel and negotiated over some of its terms and had never been concretely mislead. While the defendant employer had persuaded her to agree to the terms by claiming that it had never sought legal enforcement in the past and was unlikely to do so in the future, it wanted to reserve its right to sue in the event that she prematurely resigned her employment.

According to the Court’s opinion, the plaintiff sold her veterinary practice to the defendant employer. In doing so, she signed an agreement of sale and an employment agreement. Both contained arbitration clauses. They also both required her to remain employed for four years and precluded any voluntary resignation before that time. Before signing, she consulted with counsel and negotiated a requirement to use the AAA in the arbitration clause. The employer refused to include her proposed revision giving her the right to resign on 30 days notice. When she expressed concern, they assured her that they could not force her to continue working, but did not want her to quit right after selling the practice because of her clients would probably go elsewhere. While they had never enforced the termination clause in the past, they wanted the ability to do so in the future – just in case.

A year later, the plaintiff resigned – despite the termination clause requiring her to work four years – and the employer filed a claim with the AAA. She counterclaimed that it had failed to accommodate her disability and retaliated against her, among other things. The AAA ultimately required each party to deposit over $23,000 before proceeding to hearing. At that point, the plaintiff filed suit objecting to the cost of arbitration. There is no discussion in the decision of the Morrison v. Circuit City opinion where the Sixth Circuit found such cost sharing/shifting provisions to be inconsistent with federal employment statutes, and thus, unenforceable. Rather, the only discussion is whether the arbitration clauses – and cost shifting provisions – are procedurally or substantively unconscionable. The Court found they were not.

The plaintiff also objected to the lack of an evidentiary hearing. The Court noted that a hearing was discretionary when the party only sought to stay arbitration and were not mandatory unless the party sought to compel arbitration.

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.