Last week, the New Jersey Supreme Court ruled that an employee has a reasonable expectation of privacy in communications with her lawyer via a personal, password-protected e-mail account, even if accessed on company-issued computer equipment. In Stengart v. Loving Care Agency, Inc., a forensic expert was hired by Loving Care to image Stengart’s laptop after she left her position and filed a lawsuit against the company. In the process, several e-mails exchanged between Stengart and her lawyer through her personal Yahoo e-mail account, were retrieved. The e-mails were reviewed by Loving Care’s counsel, and at least one was utilized in responding to discovery demands. The trial court found no violation of the attorney-client privilege, ruling that Loving Care’s electronic communications policy placed Stengart on sufficient notice that her e-mails were considered company property. However, an intermediate appellate court reversed. It found that the attorney-client privilege applied to the e-mails and ordered the return of the e-mails. In addition, it sent the case back to the trial court for a hearing on potential sanctions against counsel.

After Loving Care appealed those rulings, New Jersey’s highest court agreed, finding that Stengart had a subjective expectation of privacy because she took steps to protect her e-mails, sending them from her personal, password-protected account and not saving her password to the computer. Several factors also convinced the Court that her expectation of privacy was objectively reasonable. For one thing, the precise scope of the company’s e-mail policy was unclear. It did not address use of personal web-based e-mail accounts on company equipment nor did it warn employees that e-mails sent through personal accounts could be forensically retrieved and reviewed. And although the policy provided that e-mails were not to be considered private and confidential, it nevertheless permitted “occasional personal use”, thereby creating ambiguity as to whether personal e-mail was company or private property. The Court also found it significant that the e-mails did not constitute illegal or inappropriate material stored on company equipment, and that the e-mails from Stengart’s attorney included a standard notice as to the personal, confidential, and, possibly, attorney-client nature of the communication. Because Stengart reasonably expected her e-mails would remain private, the court concluded, the attorney-client privilege protected those e-mails from disclosure and no waiver occurred. The Court then expanded on its ruling, declaring that even if a policy expressly banned all personal computer use and unambiguously notified employees that the company could retrieve and read their attorney-client communications sent via a personal, password-protected e-mail account on company equipment, it would nevertheless be outweighed by the public policy concerns underlying the attorney-client privilege and rendered unenforceable.

The New Jersey decision is not binding precedent in New York, although it could be influential. Neither the Second Circuit nor New York’s Court of Appeals have addressed this issue. However, in Scott v. Beth Israel Medical Center, a New York trial court found no privilege where the attorney-client e-mails were exchanged via a company-issued e-mail address on company equipment. In that case, however, the employer’s e-mail policy – which expressly banned any personal e-mail use and further provided that any e-mails received or sent using company equipment were company property – was “critical” to the Court’s decision.

New York employers who permit some personal e-mail use should consider taking a proactive approach by revising their existing technology policies with the Stengart and Scott decisions in mind. Suggested revisions include expressly notifying employees that all e-mails sent or received using company equipment may be reviewed at the company’s discretion, and that all materials accessed, created, received or sent on company-issued computer equipment, including e-mail communications, may remain stored on that equipment even after deletion and retrieved by the employer. Employers should also establish protocols and train appropriate employees in handling potentially privileged communications that may turn up in the course of electronic monitoring.

 

This post continues our comprehensive overview of New York's new WARN regulations.  In yesterday's post, we addressed coverage and triggering events.  Today, we address notice requirements, exceptions to the notice requirements and penalties and enforcement.

Notice Requirements

How May Notice be Served?

Notice must be served 90 days prior to layoff. It may be served by first class mail, personal delivery with optional signed receipt, or by e-mail. The notice must be sent on the employer's official letterhead. The new regulations require that the notice be signed by an individual who has "the authority to bind the employer." Additionally, the signatory must attest to the truthfulness of all information provided in the notice. If the notice is sent by first class mail, it must be post-marked at least 90 days prior to the employment loss.

As noted, the revised regulations provide for the option of sending a NY WARN notice by e-mail. The regulations state that e-mail may be used where "all affected employees have regular access in the workplace to personal computers at which e-mail may be received and viewed during work hours." The following additional requirements must also be satisfied:

1. The employer must be able to demonstrate that the e-mail notice was received by each affected employee;

2. The e-mail address used must be an employer provided e-mail address, used in the conduct of business;

3. The e-mail must be marked "urgent;"

4. If the e-mail is returned as "undeliverable," notice must be given as expeditiously as possible (e.g. overnight delivery, hand delivery, inter-office mail, etc.);

5. If an attempt to deliver the notices exceeds five days, the employer must extend the notice period by the number of days between the time notice was first attempted and when it was finally effectuated; and

6. The e-mail notice must be sent via the employer's computer network.
 

Who Receives Notice?

The following individuals must receive notice under the NY WARN Act: affected employees; representative(s) of affected employees; the Commissioner of Labor; and the Local Workforce Investment Board(s) ("LWIB"). An employee who may experience an employment loss due to seniority bumping rights, for example, must also receive a notice, as long as the individual can be identified at the time notice is required to be given.

Under the revised regulations, the DOL specifically states that service of notice upon the "chief elected official of the local unit of government" in accordance with the federal WARN statute, is not sufficient to meet the notice requirements to the LWIB under the NY WARN Act. Similarly, service of notice on the LWIB may not be sufficient for notice to the chief elected official under the federal WARN statute.

Contents of the Notice

The regulations provide a detailed list of information that must be included in each notice, depending on the recipient of the notice. Notice to the affected employees must be in a language that is understandable to the employees. The notice must include, among other things: the expected date of the first separation of employees and the date the individual employee will be separated; a statement as to whether the action is temporary or permanent and whether any bumping rights exist; the identity and contact information of an employer representative; and information concerning unemployment insurance, job training and available re-employment services. In addition, the notice to an affected employee must also include the paragraph set forth below, with the underlined sentence added by the revised regulations:

You are also hereby notified that, as a result of your employment loss, you may be eligible to receive job retraining, re-employment services, or other assistance with obtaining new employment upon your termination. You may also be eligible for unemployment insurance benefits after your last day of employment. The New York State Department of Labor will contact your employer to arrange to provide additional information regarding these benefits and services to you through workshops, interviews, and other activities that will be scheduled prior to the time your employment ends. You can also access reemployment information and apply for unemployment insurance benefits on the Department's website, or you may use the contact information provided on the website to contact the Department for further information and assistance.

The notices to the Commissioner of Labor, union representative, and the local Workforce Investment Board, as described in the regulations, require certain additional information, including, for example, the date and method of delivery of the NY WARN notices, a sample of the NY WARN notice provided to the employees, and a statement as to whether other required NY WARN notices were delivered.

Exceptions to Notice

NY WARN has several exceptions to the notice requirements for certain events.

Temporary Facilities and Project Completions

No notice is required under NY WARN if the plant closing is of a temporary facility or if the plant closing or mass layoff results from the completion of a particular project or undertaking and the affected employees were hired with the understanding that their employment was limited to the duration of the facility or project or undertaking. The revised regulations require that an employer be able to demonstrate that it informed each employee at time of hire that the job was temporary.

Seasonal Employment

The revised regulations also exempt seasonal employment from coverage under NY WARN. Thus, if a layoff or closing is the result of a particular seasonal project or the affected employees were hired with the understanding their employment was limited to the seasonal project, an employer need not provide notice to the affected employees under NY WARN. However, the employer must demonstrate that it informed each employee at the time of hire that the job was seasonal. Additionally, the revised regulations state that employment in an industry that is typically seasonal in nature does not necessarily make the employment seasonal for purposes of NY WARN.

Natural Disasters and Strikes/Lockouts

NY WARN includes an exception from the notice requirement for employment losses due to "any form of natural disaster" including floods, earthquakes, droughts, storms, tidal waves, tsunamis, or similar effects of nature. An employer also is not required to serve written notice where it is permanently replacing an economic striker, as defined under the National Labor Relations Act.

Faltering Company

NY WARN contains a faltering company exception which eliminates the need for notice if: (1) at the time notice would have been required, the employer was actively seeking capital or business; (2) there was a realistic opportunity to obtain the capital or business; (3) the needed capital or business if obtained would enable the employer to avoid or postpone the employment action; and (4) the employer reasonably and in good faith believed that the giving of notice would have precluded the employer from obtaining the needed capital or business. The regulations state that the faltering company exception will be viewed on a "company-wide" basis. A company with "access to capital markets or with cash reserves" cannot avail itself of this exception by looking solely at the financial condition of the single site of employment. As noted, the revised regulations make explicit that employment losses caused by a bankruptcy may still trigger notice under NY WARN.

Unforeseeable Circumstances

NY WARN dispenses with the notice requirement if the need for notice was not "reasonably foreseeable" at the time notice would have been required. A business circumstance is not reasonably foreseeable, according to the proposed regulations, upon the occurrence of some "sudden, dramatic, and unexpected action or condition outside the employer's control." Examples in the regulations include: "a principal client's sudden and unexpected termination of a major contract with the employer, a strike at a major supplier of the employer, an unanticipated and dramatic major economic downturn, or a government-ordered closing of an employment site that occurs without notice."

Penalties and Enforcement

Unlike the federal WARN Act, which may be enforced only by commencing an action in court, NY WARN may be enforced by NYS DOL through its administrative procedures, in addition to a cause of action in court. The agency's authority includes its ability to examine "any information of an employer" that is necessary to assess whether a violation occurred or the applicability of any defense. The revised regulations include a provision which allows the DOL to share a NY WARN Act violation with other public entities who are making fitness, responsible contractor or due diligence inquiries.

An employer found to have violated NY WARN is subject to a civil penalty of not more than $500 for each day of the employer's violation. An employer also is liable to each employee who did not receive the proper notice for backpay and benefits for the period of violation, up to a maximum of 60 days. According to NYS DOL Counsel's Office, backpay liability under NY WARN is calculated by determining the wages owed to an employee up to a maximum of 60 days' wages. Under the federal WARN law, backpay liability is generally measured by counting the number of work days that would have been worked in a 60 day period and assessing liability equal to wages that would have been earned during that period. Thus, backpay liability under NY WARN is likely to be greater than under the federal WARN statute.

An employer is not subject to the civil penalty under NY WARN if, in lieu of notice, it pays the affected employees all of their wages and benefits for the notice period, within three weeks from the date the employer orders the plant closing or other triggering event, and the employer includes a short form notice to the employees at the time of their final wage payment or termination.
An employer's liability may also be reduced by any voluntary payments made by the employer to the affected employees, which were not required to satisfy any legal obligations. Therefore, severance or other payments that may be required under a collective bargaining agreement or pursuant to a separation agreement will not be credited against an employer's liability.

Finally, the revised regulations added that where an employer fails to give notice, the period of violation is 90 days. However, the regulations do not reconcile this violation period provision with the 60-day maximum penalty provision. At this point, it remains somewhat unclear what the effect is of this new provision in the revised regulations and how to reconcile it within the 60-day maximum backpay liability under NY WARN.

Conclusion

While NY WARN contains many provisions and requirements that mirror those found in the federal WARN statute, there are also significant differences in coverage, triggering events, and the form of notice. Further, some of the revised emergency regulations significantly affect an employer's obligations under NY WARN and will require particular attention from New York employers that are contemplating work force reductions.
 

As we reported earlier this year, the New York State Department of Labor ("NYS DOL") recently issued revised, emergency regulations concerning the New York State Worker Adjustment and Retraining Notification Act ("NY WARN"), Section 860 of the New York Labor Law. The revised regulations, 12 NYCRR Part 921, are effective immediately and replace the regulations first published by the agency in January 2009. This two-part post provides an overview of NY WARN, and specifically addresses the major revisions contained in the revised regulations, including the use of e-mail to notify employees, expanded information now required in the notices, a requirement that an employer representative "attest to the truthfulness of all information" contained in the WARN notices, and a specification that WARN notice may be required even where the triggering event was caused by a bankruptcy. In today’s post, we address coverage questions and triggering events. In tomorrow’s post we will cover notice requirements, exceptions to the notice requirements, and penalties and enforcement.

NY WARN Coverage

Generally, NY WARN requires 90 days advance notice to employees and other designated officials prior to a mass layoff, plant closing, relocation, or covered reduction in hours which, in general, affects 25 or more employees. Employers in New York have been required to comply with the federal WARN Act notice requirements for over 20 years. NY WARN however, applies to more employers and requires more notice than the federal WARN statute. Failure to comply with the advance notice requirements before laying off workers may subject an employer to significant back pay liability and other penalties.

Who is Covered by the NY WARN Act?

Employers with 50 or more employees within New York State must comply with NY WARN. The regulations require an employer to count every employee, other than part-time employees, toward the 50-employee threshold. In addition, an employer must count all employees (other than part-time employees) on temporary layoff or on leave, if the individual has a reasonable expectation of recall. The NY WARN regulations, like the federal WARN Act, define a "part-time employee" as an employee who is employed for an average of fewer than 20 hours per week OR an employee who has been employed for fewer than 6 of the 12 months preceding the date on which notice is required.

An employer may also be required to comply with NY WARN even if it does not employ 50 or more full-time employees. Specifically, if the employer employs 50 or more employees (including all employees regardless of status as part-time or full-time), and those employees work in the aggregate 2,000 or more hours per week, the employer must comply with the NY WARN Act.

What Triggers the Requirement for NY WARN Notice?

According to the statute and the revised regulations, there are four events that trigger the notice requirement under NY WARN:

Mass Layoff

The notice requirements under NY WARN are triggered where there is a reduction in the work force that results in an employment loss at a single site of employment during any 30-day period for:

1. 25 employees, excluding part-time employees, constituting at least 33% of the employees at the site (For example, a layoff of 30 employees at a single site with a total of 90 employees); or

2. 250 or more employees, excluding part-time employees.

Plant Closing

The 90-day NY WARN notice is also required for the permanent or temporary shutdown of a single site of employment, or of one or more facilities or operating units within a single site of employment, if the shutdown results in an employment loss during any 30-day period for 25 or more employees, excluding part-time employees. The NY regulations follow the federal WARN Act and define an "operating unit" as "an organizationally or operationally distinct product, operation, or specific work function within or across facilities at a single site of employment." Under NY WARN, a covered plant closing may occur where an employer closes a department or assembly line in a plant or facility, if it results in an employment loss for at least 25 employees.

Relocation

A "relocation" is a unique triggering event under NY WARN and is not included in the federal WARN statute. Under the regulations, a relocation is defined as "the removal of all or substantially all of the industrial or commercial operations of an employer to a different location 50 miles or more away from the original site of operation, where 25 or more employees, excluding part-time employees, suffer an employment loss"

Covered Reduction in Hours

The NY WARN notice requirement is also triggered where there has been a 50% or more reduction in the hours of work during each month of any consecutive six-month period. The revised regulations specify that to be covered, the reduction of hours must affect:

1. at least 25 employees constituting at least 33% of the employees at the site; or

2. 250 or more employees.

Notably, the NY regulations specifically exclude from the definition of "employment loss" a covered reduction of hours where an employer participates in NYS DOL's Shared Work Program. The Shared Work Program permits an employer to reduce the hours of work of employees, up to a maximum of 60%, and the employees are able to supplement lost income with partial unemployment insurance benefits from NYS DOL. Therefore, as long as an employer validly participates in NYS DOL's Shared Work Program, a reduction in hours of work that would otherwise trigger the NY WARN Act requirements, would be exempt from the notice requirement.

Aggregation

When determining whether notice is required for NY WARN, employers must aggregate employment losses over a 90-day period. Generally, an employer should look backward 90 days and forward 90 days to assess whether actions, taken and planned, will in the aggregate, reach the minimum number to trigger notice. The only exception to aggregating employment losses is where the employer can demonstrate that the losses resulted from separate and distinct actions and causes.

Transfer of Employees

No notice is required if the employer offers to transfer employees to a different site of employment within a reasonable commuting distance, which is defined by the revised regulations to mean "the distance an individual could be reasonably expected to commute." However, in no event shall that distance exceed that which can reasonably be traveled in one and one-half hours, when the site of employment is being moved to a location within New York City or Long Island, or one hour anywhere else in the state. The revised regulations add a provision that eliminates the transfer offer notice exception where the new job otherwise constitutes a constructive discharge. 

In tomorrow's post we will cover notice requirements, exceptions to notice requirements and penalties and enforcement.
 

On March 27, President Obama announced 15 recess appointees to administrative posts, including controversial Democratic nominee Craig Becker, along with union labor attorney Mark Pearce, as members of the National Labor Relations Board. The recess appointees, particularly Becker, were criticized by Republicans and business groups and praised by Democrats and labor leaders. Becker has been a controversial nominee due to some of his past academic writings and his current employment as in-house counsel at the Service Employees International Union and the AFL-CIO. Many fear that Becker and Pearce, along with current NLRB Chair Wilma Liebman, could effect significant labor law changes, either through the adjudication process with changes to significant case law or via administrative rule making. We have previously reported on some of the potential case law changes that may be in the offing.

The EEOC nominees given recess appointments were Jacqueline Berrien (Associate Director-Counsel of NAACP) to serve as EEOC Chair, Victoria Lipnic (Of Counsel to Seyforth Shaw) and Chai Feldblum (Georgetown University Law Center Professor) as EEOC Commissioners, and P. David Lopez as General Counsel (EEOC Trial Attorney).

The recess appointments will last until the end of 2011 Congressional session. Notwithstanding the recess appointments, the nominations will remain pending in the Senate for confirmation, according to the White House. Not included in the list of NLRB recess appointments was the third nominee to the agency – Republican Brian Hayes, a former management attorney and current Labor Policy Director for the Republicans on the Senate Committee on Health, Education, Labor and Pensions.
 

Often the simplest and most straightforward cases serve as helpful reminders of best practices. This is certainly true of a recent federal court decision applying New York contract law and the New York Labor Law (“NYLL”) to a claim for bonus compensation. In that case, including the right language in an offer letter made it easy for the court to dismiss the claims.

There are a number of best practices applicable to offer letters. At a minimum, of course, the offer letter should include an employment at-will statement, unless the employment is not intended to be at-will. But simply including that statement does not mean the offer letter cannot be contractual in nature for purposes unrelated to the right to discharge. Representations made in the offer letter can be enforceable, particularly representations about bonus compensation. If the offer letter refers to potential bonus compensation, it should also incorporate by reference the terms of the bonus plan, and explicitly describe any eligibility requirements, including, if applicable, the requirement of active employment on the payout date. Most important, if the bonus plan is a discretionary plan – meaning that whether there will be a payout and how much the payout will be is entirely discretionary with the employer -- that fact should be stated. Language like that can provide a complete defense to a claim by a discharged employee that he was entitled to bonus compensation as unpaid wages under the NYLL. Bonus compensation can be “wages” under the NYLL, but only if it has already been “earned” at the time of termination. It is not “earned,” if, at the time of discharge, the payment is conditioned on some future event or left to the discretion of the employer.

On the less intuitive side, consider including what lawyers refer to as a “merger clause.” A merger clause states that the offer letter supersedes prior discussions and agreements, if any, between the parties. When such a clause is included in an offer letter, it can be used to defeat a breach of contract claim based on an alleged oral promise of something different than what was stated in the offer letter.

Some employers do not like to complicate an offer letter or make it too lengthy. In many cases that is not necessary, but in others inserting some complication in the letter is just prudent risk management, which can pay significant future dividends.
 

The Department of Labor’s Office of Federal Contract Compliance Programs (“OFCCP”), the Federal agency responsible for enforcing affirmative action mandates against Federal contractors and subcontractors, recently reported on its enforcement efforts for fiscal year 2009. OFCCP collected $9.31 million in back pay from 94 federal contractors through settlements of discrimination claims last year. It completed close to 4,000 compliance evaluations, resulting in conciliation agreements with nearly 700 employers. OFCCP issued this data in connection with its budget request for 2011, which anticipates continued growth and aggressive enforcement efforts. Federal contractors can anticipate that OFCCP’s enforcements efforts will likely increase this year. The Agency’s budget for fiscal year 2010 was increased significantly by the Obama administration in order to increase the number of compliance officers and to meet the agency’s goal of conducting more on-site compliance reviews.

As reported by BNA’s Daily Labor Report, in 2010, the agency also intends to change its focus by increasing its affirmative action compliance efforts and more closely scrutinizing Federal contractors’ affirmative action plans. Construction industry employers are among those who are likely to be targeted in the coming year.

OFCCP has also announced a renewed emphasis on affirmative action efforts for veterans and disabled workers, which includes plans to amend and strengthen regulations under the Vietnam Era Veterans’ Readjustment Assistance Act and Section 503 of the Rehabilitation Act. In light of OFCCP’s expressed intent to make affirmative action its enforcement priority, federal contractors should ensure that their Affirmative Action Plans, and related data on employment actions, are in place, up to date, and in full compliance with regulatory requirements.
 

There is a second bite at the COBRA apple for employees who initially lost group health plan coverage as a result of a reduction in hours of employment during the period beginning September 1, 2008, which is followed by an involuntary termination of employment on or after March 2, 2010. These individuals (and their affected family members) would normally not be eligible for COBRA continuation of coverage because they were not covered by the health plan on the day before the termination of employment. However, the Temporary Extension Act of 2010 extends the availability of COBRA continuation of coverage, and the 65% COBRA subsidy, where there is a reduction in hours (resulting in a loss of coverage) followed by an involuntary termination of employment.

If the employee did not make a COBRA election when eligible as a result of the reduction in hours, or made the election and later dropped coverage, the involuntary termination of employment is treated as a qualifying event. However, the 18 month period of COBRA continuation is considered to have begun at the reduction in hours qualifying event. Therefore, the COBRA subsidy for involuntary terminations is only available for the difference between 18 months and the number of months of COBRA available after the loss of coverage due to reduction in hours.

For example, if a reduction in hours qualifying event occurred on 11/30/2009, COBRA would have begun on 12/1/2009 and would end on 5/31/2011. If that individual had an involuntary termination on 3/9/2010 (with the loss of coverage at the end of the month in which the termination occurred, 3/31/2010), the post-termination COBRA continuation would be offered from 4/1/2010 through 5/31/2011 (18 months – 4 months of reduction-of-hours COBRA = 14 months). Because the entire post-termination COBRA period is less than 15 months, the 65% COBRA subsidy will be available for the entire 14-month period.

The COBRA administrator must provide a notice describing this new right to elect subsidized COBRA to qualified beneficiaries who lost group health plan coverage as a result of reduction in hours on or after 9/1/2008 and who are terminated between 3/2/2009 and 3/31/2009 (proposals in Congress would extend this date to 12/31/2009). The notice must be provided within 60 days following the involuntary termination of employment.
 

U.S. employers continue to rely upon the H-1 B Specialty Occupation Worker category to facilitate the temporary employment of foreign nationals in professional positions.  In 2010, the U.S. Citizenship and Immigration Services ("USCIS") is authorized to issue 65,000 H-1 B approvals for those beneficiaries who possess at least a bachelor's degree, and an additional 20,000 approvals for those beneficiaries who have obtained a master's or higher degree from a college or university in the United States. These limits are often referred to as the "H-1B cap." These approvals authorize employment beginning October 1, 2010 (the beginning of the federal government's fiscal year).

Pursuant to federal regulations, interested U.S. employers may file H-1 B petitions six months in advance of the start of the fiscal year. This means that the earliest that a U.S. employer may submit a petition for a new H-1B worker, who has not already been counted against the H-1B cap, is April 1, 2010.
 

Over the past several years, the USCIS reached its 65,000 H-1B cap in two days, having received almost twice as many petitions as the allotted quota by April 2. Further, it took approximately four weeks for the USCIS to reach the H-1 B quota for master's level candidates. The remaining H-1 B cases were rejected.

While the H-1 B cap for 2009 was not fully exhausted until December 2009, we nevertheless anticipate a strong influx of H-1B filings this year. Employers are well advised to file their petitions for new H-1 B employees on April 1, 2010 to avoid being closed out of consideration by the H-1B cap.

In April 2009, the U.S. Department of Labor ("DOL") implemented a new electronic process for filing the Labor Condition Application ("LCA"), a necessary component of the H-1 B petition dealing with prevailing wage issues. Prior to April 2009, employers and their legal representatives could instantaneously certify the LCA. Since the LCA can no longer be automatically certified, the application must now be manually verified by the DOL. This new verification system, known as i-CERT, can take a minimum of seven (7) days to be completed by the DOL. Accordingly, additional time is needed to prepare this portion of the H-1 B petition.
 

We previously reported on President Obama’s nomination of three individuals, Democrats Craig Becker and Mark Pearce, and Republican Brian Hayes, to the National Labor Relation Board (“NLRB”). The most controversial nominee, AFL-CIO Associate General Counsel Becker, has come under criticism from lawmakers and employers for his well-documented pro-union views. Becker’s nomination has been blocked by Republican senators in light of these concerns, as well as concerns that he would have to recuse himself from a great number of cases for up to two years after his confirmation in light of his current employment with the AFL-CIO and the Service Employees International Union.

Department of Labor Secretary Hilda Solis, speaking at the AFL-CIO’s Executive Council meeting on March 3, indicated that unions would be very pleased with how Becker’s nomination gets resolved. This implies that Becker will be appointed to the NLRB as a recess appointment later this month, which does not require Senate approval, for a term of up to 20 months.

If Becker and fellow Democratic nominee Pearce, a former NLRB Regional Attorney from Buffalo, are appointed, they would join current NLRB Chair Wilma Liebman to form a three person Democratic majority on the NLRB. There is concern that Becker, and this new found majority, might attempt to implement some parts of the Employee Free Choice Act via administrative rule making or by means of NLRB decisions and case law. Possible changes could include more expeditious representation elections and/or the use of card check for recognition in some situations.

This development bears watching. The potential for change in a number of areas with a change in the composition of the Board is great. This includes a number of Bush-Board NLRB decisions about which we have previously reported.
 

At a time when many companies are owned or heavily leveraged by private equity firms, a decision by the District Court for the District of Connecticut in Austen v. Catterton Partners V, LP serves as a warning that such entities may be held liable for WARN Act violations by companies in which they have invested. The Federal WARN Act generally requires at least 60 days’ notice prior to a mass layoff or plant closing.  In New York, the state WARN Act requires 90 days’ notice of such events.

Catterton Partners V, LP, a Greenwich, Connecticut-based private equity firm, with over $2.0 billion in holdings such as Outback Steakhouse, Breyers Yogurt and Restoration Hardware, also owned Archway & Mother’s Cookies, Inc., (“Archway”) whose companies produced various brands of cookies, including cookies sold under private label programs for national retailers such as Target and Kroger.

Archway filed for bankruptcy protection in October 2008, shortly after it closed its factories and laid off hundreds of workers without notice. In a class action WARN Act complaint filed in August 2009, plaintiffs, who are former Archway employees, alleged that Catterton was an “employer” for WARN Act purposes and should be held liable for the failure to provide workers with notice prior to shutdown of the factories and termination of their employment.
 

On February 17, 2010, the United States District Court for the District of Connecticut denied Catterton’s motion to dismiss, holding that the private equity firm and the bankrupt cookie company may be considered a “single employer” for WARN Act purposes.  In so concluding, the Court adopted a five-part test contained in the federal regulations implementing the WARN Act, which assesses whether two separate entities should be combined for purposes of WARN Act liability. 20 C.F.R. § 639.3(a)(2). The test assesses whether: (1) the entities are subject to common ownership; (2) the directors and/or officers of the entities are the same; (3) the parent exercises de facto control over the subsidiary; (4) there is a unity of personnel policies emanating from a common source; and (5) there is a dependency of operations among the entities.

Notably, the Court concluded that the de facto control prong is perhaps the most important aspect of the test, because it assesses whether the parent was the decisionmaker who is responsible for the actions giving rise to the litigation. Because the complaint alleged that Catterton made the decision to shut down the factories, terminate the employees and file for bankruptcy, there was no dispute as to the extent of Catterton’s control over Archway. Based on application of the test to the allegations of the complaint, the Court’s ruling means that Catterton may be held liable for WARN Act damages for a class of perhaps 600-700 employees.  Given the widespread nature of private equity investment in American companies and the ongoing economic downturn, Austen v. Catterton Partners V, LP may be a harbinger of other efforts to reach into the “deep pockets” private equity firms.
 

This morning, President Obama signed the Temporary Extension Act of 2010 (H.R. 4691) after Senator Jim Bunning of Kentucky agreed to end his filibuster and the Senate voted Tuesday night to pass the measure.

The Act, generally referred to as an extension of unemployment benefits, also extends eligibility for the 65% COBRA subsidy to individuals who have involuntary terminations through March 31, 2010. Eligibility had expired for terminations after February 28, 2010. The law is retroactive, so that persons who were involuntarily terminated on March 1st and 2nd are eligible for the subsidy. No other changes in the terms of the COBRA subsidy were made.

Employers and other health plan sponsors should adjust their COBRA notices to reflect the new March 31, 2010 subsidy eligibility expiration date.
 

Social networking and blogging sites, such as Facebook and Twitter, continue to grow in popularity. The number of participants is staggering. Facebook alone recently reported that it now has more than 400 million active users.

Given the rise in use of social networking sites, employers should consider implementing  a policy governing employee use of such sites. A well-drafted social networking policy is essential because an employer’s existing policies, such as those governing confidentiality or the use of the employer’s computer systems, may not be broad enough to protect against employee misuse of these sites. This post covers some of the issues to consider in drafting an effective social networking policy, and also discusses the practicalities of investigating alleged violations of such a policy.
 

One of the first things to consider in drafting a social networking policy is whether to allow employees to access the sites through the use of the employer’s technology, such as computer and email systems or handheld devices, and whether access will be permitted during work time. The answer to these questions may depend upon the nature of the employer’s business and whether there are business-related reasons for employees to use the sites.

A social networking policy should also prohibit inappropriate postings on, or the inappropriate use of the sites, and should advise employees what is considered inappropriate. Defining the line between appropriate and inappropriate, however, may be the most difficult challenge, particularly for those employers employing a relatively young workforce. Examples of inappropriate postings include comments and complaints that are disparaging to the employer, or the disclosure of an employer’s proprietary or confidential information or of any information that is protected by law. Employers should also consider whether to forbid employees from posting any information about the employer, or if certain information would be permissible with the employer’s prior approval. Employees should generally not be allowed to speak on behalf of their employer, unless specifically authorized to do so. See our January 27, 2010 post.

In defining what constitutes impermissible conduct under the policy, employers must use caution to avoid infringing on employees’ rights under Section 7 of the National Labor Relations Act. The policy cannot be drafted in a way that employees would reasonably construe as prohibiting discussion of wages, hours, and working conditions. A policy which prohibits and specifically describes a broad range of inappropriate communication is less likely to run afoul of the National Labor Relations Act.

Because enforcing a social networking policy can be difficult, the policy should require employees to report known violations to the human resources office or a member of management. As with other key policies, employees should be told that it is their “responsibility” to help the employer ensure compliance with the policy. The potential consequences of a violation of the policy should also be described. This can be as simple as a warning that an employee may be subject to discipline, up to and including discharge.

Once developed, the policy should be distributed to all employees, who should be required to acknowledge in writing that they have received it. The policy should be redistributed to employees periodically.

A social networking policy is most effective when developed in conjunction with a policy governing employee use of technology belonging to the employer. A policy of this kind should be designed to lower employees’ expectations of privacy when using the employer’s technology by including language stating that the employer reserves the right to access, intercept and monitor all information accessed, sent, or received through the employer’s systems. Employers should also obtain the express consent of employees both to monitor communications and to access stored communications. This is best accomplished by requiring employees to sign written consent forms. Alternatively, an employer can establish that employees have consented to the monitoring and accessing of communications by requiring them to click on a pop-up screen acknowledging consent to the employer’s policies before access is granted to the employer’s computer systems.

Even with a well-drafted social networking policy in place, investigating potential violations, such as an allegation that an employee has posted something inappropriate on a site, can be challenging. It may be difficult to verify that the alleged misconduct occurred because the information may be posted on a secured site not accessible to the public or it may be deleted before the investigation has been completed. If the posting was prepared or accessed using technology belonging to the employer, an employee’s consent to access that information could be obtained through the type of technology use policy discussed above.

If the employer’s technology was not used, it may be impossible to view the posting without the employee’s consent. In that scenario, an employer may have no recourse other than to simply question the employee about the posting, and to speak to any co-workers who may have seen it. Employers should hesitate before asking employees for their personal log-in information. Aliases or similar surreptitious means to access a secured site should not be used, and an employer should take steps to protect an employee’s privacy in the investigation.

If an investigation concludes that an employee has violated the social networking policy, appropriate discipline should be considered, but an employer should use caution when meting out discipline. Public employers should also be aware that the First Amendment may protect an employee who speaks on what is considered to be a matter of public concern.