As discussed in the recent New York Times article, federal and state officials, many facing record budget deficits, are starting to aggressively pursue companies that try to pass off regular employees as independent contractors.

President Obama's 2010 budget assumes that the federal crackdown will yield at least $7 billion over 10 years.  More than two dozen states also have stepped up enforcement, often by enacting stricter penalties for misclassifying workers.  This effort is intended to reign in what regulators believe is a trend among companies to cut costs by classifying regular employees as independent contractors, though they often are given desks, phone lines and assignments just like regular employees. Moreover, the experts say, workers have become more reluctant to challenge such practices, given the tough job market.

To determine if you or your company is complying with the rules and regulations as applicable to independent contractors, please call your attorney.  

Effective July 24, 2009, the federal minimum wage increased from $6.55 per hour to $7.25 per hour for all non-exempt employees.  The 2009 increase in the federal minimum wage was the third and final increase to the federal minimum wage pursuant to Fair Minimum Wage Act of 2007.  Under the 2007 Act, the minimum wage established by the Fair Labor Standards Act increased in three steps from $5.85 per hour effective July 24, 2007, to $6.55 per hour effective July 24, 2008, and to $7.25 per hour effective July 24.

In addition to the establishment of the minimum wage, the Fair Labor Standards Act establishes overtime pay requirements, record keeping and posting requirements, and youth employment standards.  Under the Fair Labor Standards Act, non-exempt employees must be paid at least the minimum wage per hour, and one and one half times the employee’s “regular rate of pay” (not necessarily their hourly rate) for all hours worked over forty hours per work week. 

Section (13)(a)(1) of the Fair Labor Standards Act provides an exemption to both the minimum wage and overtime obligations. Under Section (13)(a)1, employees employed as bona fide executive administrative, professional employees, and outside sales people are considered “exempt” if: (1) certain tests regarding their job duties are met; and (2) the employee is paid on a “salary basis.”  The employee’s specific job duties, not title, dictate whether the employee is exempt or non-exempt. Although state law provides for breaks for minors, the Fair Labor Standards Act does not require breaks or meal periods.  Nor does the Fair Labor Standards Act define “full-time” employment.  This designation “full-time” (versus part-time) employment is determined by the employer.  Likewise, the Fair Labor Standards Act does not require severance pay, sick leave, vacation, or holidays.

The final revised FMLA regulations issued by the DOL on November 17, 2008 became effective January 16, 2009. The regulations address the FMLA military family leave entitlements and also include other, significant changes to prior regulations. Some of the changes involving employer notices are described in 29 C.F.R. §825.300 and include:

Eligibility Notice -
29 C.F.R. § 825.300(b). An employer must notify an employee who requests FMLA leave within five business days whether the employee is eligible and, if not eligible, the notice to the employee must provide at least one reason for the ineligibility. Notice may be oral or in writing. For subsequent requests by the same employee during the applicable 12-month period, the employer need not provide another eligibility notice unless the employee’s eligibility status has changed. A prototype written notice form is provided at Appendix D of the regulations.

Rights and Responsibilities Notice -
29 C.F.R. § 825.300(b). Also, “each time” an eligibility notice is provided to an employee, a Rights and Responsibilities Notice must be provided. This notice is incorporated into the prototype Notice of Eligibility and Rights and Responsibilities at Appendix D of the regulations. If certification forms will be required by an employer to substantiate the need for leave, the notice may attach the required forms.

Designation Notice -
29 C.F.R. § 825.300(d). When an employer has enough information to determine whether the leave is being taken for an FMLA-qualifying, the employer must provide written notice to the employee within five business days as to whether the leave will be designated and counted as FMLA leave. The notice must state whether a fitness for duty certificate will be required at the end of the leave. Though the regulations provide that generally, only one designation notice must be given to an employee for each qualifying reason within a twelve-month period, the regulations also provide that if the information changes (such as when leave is exhausted), the employer must issue a written notice of the change within five business days of the employee’s request for leave subsequent to the change. The employer must notify the employee of the amount of leave counted against the employee’s leave entitlement. If the amount of leave is unknown at that time (because, for example, the leave will be unforeseeable intermittent leave), then an employer must provide notice of the amount of leave counted against the employee upon the employee’s request, but no more than one in a 30-day period and only if leave was taken in that period. A prototype designation notice form is provided by the DOL at Appendix E.

Failure to comply with the posting or notice requirements may subject an employer to civil money penalties or other civil liability. A complete copy of the regulations and prototype forms are available at the DOL website.
 

As we continue our shift to a more knowledge-based economy, frequently the greatest assets of a company reside in the creativity of its employees. This is especially true for service companies in which the services can be repeated for multiple customers (example: software). Whether or not a company owns something that has been created by one of its employees will depend to a great extent on the category of intellectual property into which the creation is classified. Generally, the creations or discoveries of employees will fall into the intellectual property categories of copyright, patent, or trade secret.

The legal standard used in determining whether a company owns a patentable invention is narrower than the “scope of employment” standard used in copyright law. For patentable inventions, the courts look to whether the employee had a “duty to invent.” We return to the above example of Mr. Jones, the dispatcher. Suppose the creation by the dispatcher was capable of patent protection. Because Mr. Jones was a dispatcher, who did not have a specific duty to invent, it is likely the company would not own any patent that might be issued to cover the invention.

For trade secrets, the law is less clear than the law for copyright and patent. Generally, trade secret law states that a trade secret will exist if the underlying information has value by not being generally known and is the subject of reasonable measures to keep it secret. Trade secrets are normally the property of the company, and not the individual employees. However, as a practical matter trade secrets are harder to control than patents or copyrights. If an employee maintains a list of customer contacts on her personal cell phone, and the employer does not have a specific policy stating that customer contacts are the property of the employer; it will be difficult for the employer to assert that the contact information is a company trade secret when that employee leaves the company.

Companies should use their information technology management practices to bolster the company’s trade secret practices. For example, if the sales person above had been provided a company Blackberry, and if the system ensured that all contact information was stored on company servers; the company would have a stronger basis for arguing that the customer contact information is a trade secret. The company would be in an even stronger position if it had a written policy regarding the company’s trade secret practices. Additionally, trade secret obligations should be included in employment agreements as well.

Employment agreements can also be used to clarify the company’s ownership of copyrights and patents. The company can make clear that the “scope of employment” for copyrights is considered very broad. Also, the company could impose a duty to invent on all employees. Additionally, the employee agreement can clearly state, under a simple contractual basis, that all inventions or works of authorship created by employees are owned by the company.

A company can properly protect and claim ownership over the creations of its employees. Doing so requires a knowledge of the different areas of the law that apply and appropriate company practices. Those practices should take advantage of the applicable law and should fill in the gaps where the law does not adequately address the situation.
 

After April 3, 2009, the U.S. Citizenship & Immigration Service ("USCIS") will require employers to complete a new version of the familiar I-9 form for all new employees. The USCIS delayed implementation of the new rule requiring the new I-9 until April 3.

In July of 2008, Gov. Jindal signed Senate Bill no. 51 into law. Senate Bill no. 51 has been dubbed the “take-your-gun-to-work law.” The new statute took effect on August 15, 2008. The United States 10th Circuit Court of Appeals recently upheld a similar Oklahoma statute.

Louisiana is not the first state in the nation to enact such legislation. Other states with similar laws include Alaska, Kentucky, Mississippi, Georgia, Florida, and Oklahoma. Legal challenges to the statutes followed.
 

Louisiana’s Senate Bill no. 51 enacts La.R.S. 32:292.1 and makes it lawful for a person who “lawfully possess” a firearm to transport or store the firearm in a locked, privately-owned vehicle in any parking lot, parking garage, or other designated parking area. Property owners, tenants, employers, and businesses may not prohibit any person from transporting or storing a firearm in a locked, privately-owned vehicle in any parking lot, parking garage, or other designated paring area. But, employers and business entities may adopt polices specifying that the firearms must be hidden from plain view or within a locked case or container within the vehicle.

The statute does not apply to vehicles “on property controlled by” employers or businesses if access to the property is restricted through the use of a fence, gate, security station, or other means of limiting access to the general public; and either one of the following applies: (a) the employer or business entity provides for the temporary storage of unloaded firearms, or (b) the employer or business entity provides an alternative parking area (“reasonably close”) to the main parking area where employees and others may transport or store firearms in locked, privately-owned motor vehicles.

Property owners, tenants, employers, or businesses may not be held liable for damages “resulting from or arising out of an occurrence involving a firearm transported or stored” pursuant to the new law. But property owners, tenants, employers, or businesses may be held liable for damages for prohibiting the otherwise authorized transportation or storage of firearms.
 

On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009 (the “ARRA”), the comprehensive economic stimulus package. Among its other provisions, the ARRA includes an extension of the right to elect COBRA coverage, a reduction in COBRA premiums for eligible participants, and new notice obligations for employers.

Reduction of COBRA Premium: In addition to the opportunity to elect COBRA coverage, the ARRA offers a reduction in COBRA premiums for assistance eligible individuals. Assistance eligible individuals can receive a 65% premium reduction subsidy for the cost of COBRA coverage after February 17, 2009 (the day the ARRA was signed). But the premium reduction ends upon the sooner of: the eligibility for other group coverage or Medicare; after 9 months of receiving the reduction; or when the maximum period of COBRA coverage ends, whichever occurs first. Individuals paying reduced COBRA premiums must also inform their plans if they become eligible for coverage under another group health plan or Medicare.

Assistance eligible individuals are those former employees (and members of their families) who were eligible for COBRA at anytime between September 1, 2008 and December 31, 2009, lost their job due to an involuntary termination, and who elect COBRA coverage. Assistance eligible individuals are required to pay only 35% percent of the COBRA premium. Under the ARRA, once the beneficiary pays his or her 35% of the COBRA premium, the COBRA premium is considered paid. The employer, insurer, or health plan then picks up the remaining 65% of the premium, but is allowed a tax credit against certain employment taxes. The credit can only be taken after the 35% premium has been paid. According to the IRS, if the credit claimed is greater than the tax due, the Secretary of the Treasury will directly reimburse the employer, insurer or plan for the excess. The premium reduction only applies to periods of coverage beginning on or after February 17, 2009.

Additional Notice Obligations: Finally, the ARRA requires employers or plan administrators to provide eligible employees and covered family members with notice regarding the special COBRA-election period on or before April 17, 2009. Notice must also be provided regarding the premium reduction for those who had a COBRA-qualifying event between September 1, 2008 and December 31, 2009. This notice must be sent regardless of whether COBRA coverage was elected.

The Employee Benefits Security Administration is working on guidance regarding the ARRA, and the IRS may be able to provide additional guidance. Also, model notices are expected to be issued.
 

On January 29, 2009, President Barack Obama signed into law the Lilly Ledbetter Fair Pay Act. The Act amends four federal laws by redefining the events that trigger the charge-filing and limitations periods for cases alleging discrimination in compensation. The most important consequence of the Act is that the time limit for initiating a pay discrimination claim will regenerate with each allegedly discriminatory paycheck the employee receives.

Congress found that the Ledbetter decision “significantly impair[ed] statutory protections against discrimination in compensation [established by Congress] . . . and undermine[d] those statutory protections by unduly restricting the time period in which victims of discrimination can challenge and recover for discriminatory compensation decisions or other practices. . . .” Therefore, through the Act, Congress set out to expand the period for challenging such decisions.

The Act declares that the period for filing a charge of discriminatory compensation under Title VII of the Civil Rights Act of 1964 (“Title VII”) (the broad federal anti-discrimination statute), the Americans with Disabilities Act of 1990 (“ADA”), the Age Discrimination in Employment Act of 1967 (“ADEA”), or the Rehabilitation Act of 1973 (“Rehabilitation Act”) begins when any of the following events occur: (1) a “discriminatory compensation decision or other practice is adopted”; (2) “an individual becomes subject to a discriminatory compensation decision or other practice”; or (3) “an individual is affected by application of a discriminatory compensation decision or other practice, including each time wages, benefits, or other compensation is paid.” Simply put, this means that the period for filing a claim of discrimination in compensation is resurrected each time an employer issues a discriminatory paycheck.

Regarding compensation, the Act clarified that an employee who succeeds in his claim for discrimination in compensation under Title VII, the ADEA, or the Rehabilitation Act may recover back pay for up to two years preceding the filing of a charge if the discrimination in compensation that took place outside of the filing period was “similar or related to” the discrimination that occurred during the charge-filing period. Also, it is important to note that by its terms, the Ledbetter Act takes effect as if it was enacted on May 28, 2007, and it applies to all claims of discrimination in compensation pending on or after that date.

The Ledbetter Act will have a huge impact on employers and is predicted to spawn a dramatic increase in claims of discrimination in compensation. Prior to the Act, the Ledbetter decision insulated an employer from being forced to defend lawsuits challenging pay decisions made years beforehand. Under the new legislation, the limitations period for bringing a claim of discrimination in compensation will start afresh each time the employer issues an allegedly discriminatory paycheck. Essentially, as long as the employee remains employed, the time limit for challenging discriminatory pay will never expire.

As a result of the Act, an employer must be prepared to defend pay decisions made years ago. Employers can expect to face claims of discrimination in compensation based on gender, race, disability, age, and other protected classes, as the Act applies the nearly limitless filing period to claims of pay discrimination under Title VII, the ADA, ADEA, and Rehabilitation Act. Commentators have urged employers to examine their record retention policies in order to ensure that documentation needed to defend claims regarding discrimination in compensation is not destroyed over time. Also, employers should review current pay practices, as an employee has the ability to challenge an allegedly discriminatory pay decision, irrespective of when the decision was made.
 

On December 23, 2008, President Bush signed the Worker, Retiree, and Employer Recovery Act of 2008 (the Act) into law.  Section 201 of the Act waives any required minimum distributions (RMDs) for 2009 from retirement plans that hold each participant's benefit in an individual account, such as § 401(k) plans and § 403(b) plans, and certain § 457(b) plans.  The Act also waives any RMD for 2009 from an Individual Retirement Arrangement (IRA).

The Act does not waive any 2008 RMDs, even for individuals who were eligible and chose to delay taking their 2008 RMD until April 1, 2009 (e.g., retired employees and IRA owners who turned 70 1/2 in 2008).  These individuals must still take their full 2008 RMD by April 1, 2009.  The 2009 RMD waiver under the Act does apply to individuals who may be eligible to postpone taking their 2009 RMD until April 1, 2010 (generally, retired employees and IRA owners who attain age 70 1/2 in 2009).  However, the Act does not waive any RMDs for 2010.

If a beneficiary is receiving distributions over a 5-year period, he or she can now waive the distribution for 2009, effectively taking distributions over a 6-year rather than a 5-year period.  See IRS Notice 2009-9 which can be found here.  

One likely result of the recent Presidential and Congressional elections is that the executive and legislative branches will be open to pushing the legislative agendas of organized labor.  There is little doubt that the proposed Employee Free Choice Act, H.R. 800, 110th Cong. (2007)(“EFCA”) is at the top of this legislative agenda.  The EFCA is something to which employers should pay serious attention.  If enacted, the EFCA would make it easier for employees to form, join, or assist labor organizations and would provide for mandatory injunctions for unfair labor practices during organizing efforts and for other purposes.  Moreover, if enacted, certain unions are already estimating that they will be able to organize millions of new workers.

Under the current National Labor Relations Act, employees select a bargaining representative through a secret ballot election process. Generally, in order to get to an election, a union seeking to represent employees must show the National Labor Relations Board that there is a sufficient showing of employee interest in favor of the union.  Unions typically show there is an interest in the union by collecting employee signatures or signed authorization cards from 50% - 75% of employees.

The union then files a representation petition with the National Labor Relations Board.  Approximately five weeks later (sometimes sooner), the Board conducts a secret ballot election, and all the effected employees are allowed to cast ballots in favor of, or against, the union.

During the period leading up to the election, both the union and the employer typically “campaign” and state their cases regarding union representation.  However, employers are bound by the “TIPS” rules and may not threaten (“T”), intimidate (“I”), or make promises (“P”) to employees to encourage them to vote against the union and employers may not spy (“S”) on employees. Unions are not similarly bound.

In order for a union to be designated the employees’ collective bargaining representative, the union must win a majority of the votes cast in a secret ballot election. (Again, the National Labor Relations Board conducts the election.)  Following the secret ballot election, if a union is certified as the employee representative, the employer and the union are then required to bargain in good faith over a collective bargaining agreement.  However, the National Labor Relations Acts does not require either party to agree to anything. The EFCA changes all that.

Among other things, the EFCA eliminates secret ballot elections. I nstead, once a union collects authorization cards from a majority of the employees, the National Labor Relations Board would certify the union as the employees’ bargaining agent without an election.  The employer would not be allowed to state its case to its employees, and employees would not be allowed to cast ballots in secret, away from peer pressure and intimidation.

The EFCA would also severely impact the bargaining process.  Under the Act, the parties would have 90 days to reach an initial contract.  If an initial contract is not reached in 90 days, the parties would then have an additional 30 days to reach an agreement with the assistance of the Federal Mediation and Conciliation Service (“FMCS”). If the parties are unable to reach an agreement after 120 days, the issue would be submitted to binding arbitration, and an arbitrator (not the parties) would determine the terms of the initial contract, and the parties would be bound for two years.  Even more problematic is that the EFCA is not helpful on the procedure of these proposed arbitrations.  The Act relies on the FMCS to promulgate proposed rules and receive comments on the arbitrations. None of this has been done. Thus, if enacted, the EFCA would leave more questions than answers.

Finally, the EFCA adds civil penalties and increased back pay for certain unfair labor practices.  The bill would require the NLRB to seek a federal court injunction against an employer whenever there is reasonable cause to believe that the employer has discharged or discriminated against employees, threatened to discharge or discriminate against employees, or engaged in conduct that significantly interferes with employee rights during an organizing or first contract drive.  The EFCA also authorizes the courts to grant temporary restraining orders or other appropriate injunctive relief.  The bill also calls for increases in the amount an employer is required to pay when an employee is discharged or discriminated against during an organizing campaign or first contract drive to two times back pay as liquidated damages, in addition to the back pay owed, for a total of three times the back pay.  Current damages are limited to back pay, lest any wages earned by an employee if they are hired by another employer.  Last, the bill would provide for civil fines of up to $20,000 per violation against employers found to have willfully or repeatedly violated employees’ rights during an organizing campaign or first contract drive.  Currently there are no civil fines for violations.

The history of the EFCA shows it already has much support. On March 1, 2007, the House of Representatives passed the bill, 241 to 185. On March 30, 2007, Senator Ted Kennedy (D-MA), Chairman of the Senate Committee on Health, Employment, Labor, and Pensions, introduced the Senate version of the EFCA (S. 1041).  The Senate on June 26, 2007 voted 51 to 48 on a Motion to Invoke Cloture on the Motion to Proceed to Consider H.R. 800 (the House version). Because 60 votes were needed to invoke cloture, the bill did not pass during the 110th Congress.

It is even more likely that the EFCA will pass in some form during the 111th Congress.  President-Elect Barack Obama co-sponsored S. 1041 and promised to sign the EFCA should he become President. Democrats have increased their majority in the Senate.  After the defeat in the 110th Congress, proponents of the EFCA, such as Senator Kennedy and John Sweeney (President of the AFL-CIO), were quoted as saying they will continue to push this piece of legislation.

The Employee Free Choice Act is a hot item.  Unions have rallied and are pushing for passage of the Act. Likewise, business leaders are equally energized and have spoken out against the legislation. F or the time being, the outcome does not look good for employers.  Employers are encouraged to monitor the Act and lobby for either a complete defeat or an Act in a final form that is not as harsh toward employers as is the current Act.
 

Offers and sales of “securities” must be registered unless there is an applicable exemption from the federal and state securities laws. The most commonly known exemption is the private placement exemption set forth in Regulation D promulgated by the Securities and Exchange Commission under the Securities Act of 1933 (and corresponding private placement exemptions under applicable state “blue sky” laws).

Regulation D was primarily designed to facilitate capital raising transactions, as opposed to employee stock option or stock purchase plans. Many people are unaware that when an employer (or controlling Shareholder) sells stock to an employee (even at a discount, or even if to an executive), such a sale is subject to the securities laws and applicable federal and state exemptions from registration must be found.
 

In 1988, the SEC adopted Rule 701 which exempts from registration securities issued pursuant to a written compensatory employee benefit plan or written contract by a nonreporting (i.e., privately held) company. An employee benefit plan includes any purchase, savings, option, bonus, stock appreciation, profit sharing, thrift, incentive, pension, or similar plan. The participants in the plan (or party to the contract) must be employees, directors, general partners, trustees (if a business trust), officers, consultants, or advisers.

The plan or the contract setting forth the arrangement must be in writing and a copy must be given to the employees. The exemption is available only to the securities offered or sold by the issuer, which means the employee must find another exemption for their resale.

Rule 701 contains a limitation on aggregate sales price or amount sold in any consecutive 12-month period based upon the greatest of $1 million, 15 percent of the company’s assets, and 15 percent of the outstanding securities of the class.

Rule 701 also contains a disclosure requirement. The disclosure requirements apply only if the aggregate sales price or amount of securities sold during any consecutive 12-month period exceed $5 million. Subject to that qualification, an issuer relying upon Rule 701 is required to provide to investors, a reasonable period of time prior to sale, (1) a copy of the plan or contract; (3) a copy of the summary plan description required by ERISA or, if the plan is not subject to ERISA, a summary of the material terms of the plans; (3) information concerning risks associated with the securities sold; and (4) financial statements required by Part F/S of Form 1-A as of a date no more than 180 days prior to sale. Providing financial statements would be difficult for some issuers since, even though the statements do not have to be audited unless the issuer otherwise has audited statements available, they must be prepared in accordance with GAAP. It should err on the side of caution and make the required disclosures if there is a possibility that sales will exceed the $5 million limitation.

State Law

Until recently, Louisiana did not exempt sales of stock by employers to employees unless the sale was effected pursuant to a special type of stock option plan or pursuant to a stock purchase plan qualified under the Internal Revenue Code of 1986 (as amended), as Louisiana did not automatically exempt all types of transactions exempt under Federal Rule 701. Thus, unless one of the narrow Louisiana exemptions applied, privately held companies which desired to sell stock to Louisiana employees were forced to try to find another exemption, absent which they were forced to either (a) register the transactions with the Louisiana Commissioner of Securities, or (b) as was more likely the case, simply not proceed with the proposed sale to employees. However, the Louisiana Office of Financial Institutions recently promulgated a rule which provides that any transaction exempt under Federal Rule 701 is now exempt under Louisiana law. Louisiana Administrative Code, Title 10, Part XIII, § 801. A copy of the Rule can be found at www.ofi.louisiana.gov. The promulgation of this new rule has the effect of broadening the exemptions available to privately held companies which desire to sell stock to Louisiana employees.

For example, the sale of stock pursuant to a stock purchase plan (regardless of whether qualified under the Internal Revenue Code) or other written compensatory agreement which meets the requirement of Federal Rule 701 will now be exempt under Louisiana law. In addition, although Louisiana law has long exempted the issuance of stock options (and the exercise of such options) if issued pursuant to a plan which limited participation to employees only, Louisiana law did not exempt stock plans if the plan allowed for the issuance of options to non-employees (e.g., non-employee directors). Federal Rule 701 contains no such limitation with respect to option plans which authorize the issuance of options to non-employees and thus the new Rule seems to provide more flexibility for stock option plans as well.

Privately held companies which desire to sell stock or other equity ownership to one or more Louisiana employees should consider the securities laws implications of doing so before effecting any offers or sales.

The U.S. Department of Labor has released the new Family and Medical Leave Act regulations. The new regulations will become effective January 16, 2009. The DOL issued its proposed new regulations in February 2008.

Still, the Fifth Circuit notes: "If Cenac had established a health insurance plan that covered both work-related and non-work-related injuries and contained specific language requiring that benefits received under the plan be set-off against a judgment adverse to the tortfeasor [Jones Act employer], then a court might find that the plan was intended to indemnify the tortfeasor from liability."  [See Allen v. Exxon Shipping Co., 639 F.Supp. 1545, 1549 (D.Me. 1986).]

Leroy Johnson, a Jones Act Seaman employed as a tankerman by Cenac Towing, injured his back while carrying a 175-pound cross-over hose aboard a Cenac vessel. Johnson had applied for employment with Cenac on two occasions. Both times, Johnson indicated that he had never suffered any on-the-job injuries and that he did not have any physical conditions that might interfere with or hinder his job performance. In connection Cenac’s pre-employment physical examinations, Johnson completed medical history questionnaires. Both times, Johnson indicated that he had never hurt his back and had never received disability compensation. Yet Johnson had suffered work-related injuries on two occasions prior to his employment with Cenac. In 1994, Johnson sustained neck and back injures that left him disabled for 10 months; Johnson underwent neck surgery for these injuries. In 2001, Johnson re-injured his back and was disabled for 13 months; Johnson received steroid injections for the re-injury.

Johnson then injured his back in 2005 while working for Cenac. Johnson applied for and received insurance benefits for his back injury under an employer financed insurance plan, which provided coverage only for non-work-related injuries.

District Judge Sarah Vance denied plaintiff maintenance and cure benefits on the grounds that plaintiff had willfully concealed his pre-existing medical conditions. Judge Vance awarded plaintiff damages under the Jones Act. While Judge Vance found the plaintiff’s injuries to be aggravations of his pre-existing conditions, the Fifth Circuit found that Judge Vance’s ruling was unclear as to whether the plaintiff had been contributorily negligent by willfully concealing his prior injuries from Cenac. The Fifth Circuit remanded the case to the District Court to determine whether plaintiff had been contributorily negligent in “exposing himself to heavy labor with a weakened back.” The Fifth Circuit’s decision did not make a determination on Johnson’s contributory negligence.
 

Louisiana's non-competition statute, La. R.S. 23:921, was amended effective August 15, 2008, to provide additional situations in which non-competition agreements may be enforced. The recent amendments allow for the enforcement of certain non-competition and non-solicitation agreements between a corporation and its individual shareholders; between a partnership and its individual partners; and between a limited liability company and its individual members.

As with other types of non-competition and non-solicitation agreements, we anticipate the courts will enforce only those agreements which meet the strict wording of statute. Thus, it is extremely important that special care be taken in the drafting of such agreements.

Did you know that an employer may be liable for failure to properly screen employees when such failure results in hiring someone that has a history of violent or criminal acts? Louisiana recognizes claims against an employer that hires an employee with dangerous propensities when that employee injures third persons at work. An employer may be liable for negligent hiring if it knew or should have known that the employee posed a threat to others. Similarly, an employer is liable for negligent retention when it continues to employ an employee knowing of his dangerous propensities.

Louisiana law requires injured third parties to prove the following elements to prove negligent hiring: (a) a duty owed by the employer in selecting or retaining the employee; (b) breach of that duty; (c) the breach of that duty must be the cause-in-fact of the injury; (d) the resulting harm must fall within the scope of the employer’s duty; and (e) damages sustained by the third party.

One example of a negligent hiring claim is shown in a recent case heard by the United States Court of Appeals for the Fifth Circuit (the federal appellate court in which Louisiana sits). In Khan v. Houston NFL Holdings, L.P., 2008 WL 1984425 (5th Cir. 2008), four individuals brought suit against multiple defendants for injuries they suffered in an altercation with security guards during an event at a football stadium. The plaintiffs attended an event on the third-floor club level of the Reliant Stadium in Houston, Texas. The “Halloween Bash” that they attended was sponsored by Houston NFL Holdings, L.P. (“HNH”), the owner of the Houston Texans franchise of the National Football League. HNH hired the security guards for the purpose of the “Halloween Bash.”  

During the “Halloween Bash,” a confrontation between some of the plaintiffs and security guards occurred inside the stadium. The plaintiffs were escorted out of the stadium by several guards. There was evidence that at least some of the plaintiffs were intoxicated, made threats and used profane language. A physical struggle occurred when arrests were made outside the stadium. The plaintiffs alleged that the guards used excessive force, assaulted them and fabricated charges against them.

In support of their negligent hiring claim, the plaintiffs argued that HNH should have discovered internal police personnel files on the officers, which would have put HNH on notice that one officer had numerous complaints filed against him. HNH submitted evidence that the three officers were hired because of their law enforcement training. Each was in good standing with the Houston Police Department (“HPD”). The plaintiffs submitted evidence that one of the officers had violated HPD regulations by missing a court appearance, using a bathroom in a strip club while in uniform and having a verbal confrontation with another officer. Also, the evidence showed the officer had been at fault in causing an automobile accident in which a child was killed.

Applying Texas law regarding negligent hiring (which is similar to Louisiana law regarding negligent hiring), the Fifth Circuit found that the evidence presented would not support a negligent hiring claim. The Fifth Circuit based its reasoning on a finding that even if HNH had known of these incidents, it still was not negligent to hire a trained policeman who was then employed by and in good standing with the HPD. Even if HNH had requested disciplinary records, there were no confirmed allegations of excessive force. Also, the Fifth Circuit noted there was no evidence presented of an industry practice that an employer would seek confidential discipline histories of policemen that they were considering hiring for off-duty work. 

What this case and the general Louisiana standard for negligent hiring show is that employers should consider the particularities and standards of their industry in determining how much due diligence should be done for hiring. There are certain state and federal statues and regulations that govern whether an employer is required to conduct a background check in connection with hiring. Employers should make sure they are in compliance with these statutes and regulations. Moreover, employers should consider the nature of the work that they do and the probability that a third person would be injured at the hands of one of their employees. If this analysis shows that there is a chance that third persons could be injured at the hands of an employer’s employees, then an employer may want to consider doing more research during the hiring process to minimize the risk of a negligent hiring claim. 

        On May 19, 2008, OSHA Directive Number 08-03 became effective. That directive provides the criteria by which OSHA will conduct the 2008 Site-Specific Targeting (“SST-08”) plan. OSHA’s SST program is the main programmed inspection plan for non-construction workplaces that have 40 or more employees.

       OSHA’s SST-08 plan has three listings of “establishments” that will be targeted. The focus of the agency’s unannounced comprehensive safety inspections under SST-08 are approximately 3,800 high-hazard workplaces contained on OSHA’s Primary List.  The workplaces on the Secondary List and Tertiary List will only be inspected pursuant to SST-08 if all of the workplaces on the Primary List are inspected. 

          The Primary List of workplaces for the STT plan for 2008 (“SST-08”) is based on OSHA’s 2007 Data Initiative. The 2007 Data Initiative is based on injury and illness data reported to OSHA for the 2006 year by 80,000 workplaces with 40 or more employees in historically high-rate industries. Appendix A to SST-08 lists the workplaces that were the focus of the 2007 Data Initiative Survey.

          The 3,800 workplaces on the SST-08 Primary List are:

(1)      those worksites that have a DART rate at or above 11.0 – any           worksite that reported 11 or more injuries or illnesses resulting in       days away from work, restricted work activities, or job transfer for      every 100 full-time employees; or

(2)      those worksites that have a DAFWII (the Days Away From Work Injury and Illness) case rate at or above 9.0- meaning 9 or more           cases that involve days away from work per 100 full-time           employees.

         OSHA will also include 175 worksites from high-rate industries that reported low injury and illness rates to OSHA on the Primary List. The purpose for inspecting those low rate workplaces is to allow OSHA to verify the reliability of claims by establishments that have achieved low DART rates. The 175 worksites are approximately 10 percent (10%) of the workplaces that meet the low rate criteria. Moreover, the low rate workplaces chosen for inspection will not be eligible for a “records only” inspection.   Also, the low rate workplaces can only be deleted from the Primary List if the Area Office determines that the establishment consists only of an office.

        Additionally, a random sample of worksites that did not provide rate information in accordance with the 2007 OSHA Data Initiative survey will also be placed on the Primary List for the SST-08 plan. The purpose of the inspections of the non-responding workplaces is to discourage employers from not responding to the data initiative surveys to avoid inspections. These establishments may not be deleted from the Primary List.

SECONDARY LIST-

          A Secondary List for worksites to be inspected under the SST-08 plan will also be created. The Secondary List will contain workplaces:

          (1)      with DART rates of 7.0 or greater, but less than 11.0, or

          (2)      with DAFWII case rates of 5.0 or greater, but less than 9.0.

          The Dart rate for the Secondary List under the SST-08 plan did not change, but the DAFWII case rate was increased to 5.0 (meaning 5 or more cases that involve days away from work per 100 full-time employees). The OSHA notice states the Area Office can obtain additional workplaces to inspect from the Secondary List “[i]f an Area Office completes its inspections of all establishments on its Primary List before the expiration of this SST program . . . .”

TERTIARY LIST-

          SST-08 also allows an Area Office that completes all of the inspection on its Primary List and Secondary List before the expiration of the SST program to obtain additional workplaces to inspect from the Office of Statistical Analysis (“OSA”). The OSA will randomly select and provide each Area Office with the number of workplaces the office requested. However, no workplace with a DART rate of 4.6 or lower and a DAFWII case rate of 2.6 or lower will be included in the Tertiary List.

SST-08 INSPECTIONS IN WORKPLACES WITH FEWER THAN 40 EMPLOYEES-

          If a workplace that is on an inspection list under the SST-08 plan has fewer than 40 employees at the time the inspector arrives on site to begin the inspection, the inspection will be conducted if:

(1)      the workplace has more than 10 employees and

(2)      its DART rate or its DAFWII case rate is at or above twice the           private sector 2006 national incidence rate- meaning that the DART          rate is 4.6 or the DAFWII case rate is 2.6. 

          Further, the inspection will also occur if there are no records available at the time of the inspection. 

OSHA’S EMPHASIS INSPECTION PROGRAM-

          In Directive 08-03, OSHA has indicated that in addition to the SST-08 program, that it will continue the use of national and local “emphasis” inspection programs to target high-risk hazards and industries. The eight National Emphasis Programs (NEPs) now focus on amputations, crystalline silica, shipbreaking, trenching/excavations, petroleum refinery process safety management, microwave popcorn processing plants, and combustible dust. Furthermore, OSHA has 140 Local Emphasis Programs (LEPs) in place at this time.   

          Additionally, OSHA runs the Enhanced Enforcement Program (EEP) that focuses on employers that repeatedly ignore safety and health obligations under the OSHA regulations. The EEP cases can result from a programmed OSHA inspection (a SST, NEP, or LEP inspection), or an un-programmed OSHA inspection resulting from imminent danger, a fatality or catastrophic incident, complaints, or referrals.

FULL CONTENT OF DIRECTIVE 08-03-

          The full text of Directive 08-03 which establishes SST-08 can be located at http://www.osha.gov/OshDoc/Directive_pdf/CPL_02_08-03.pdf. Importantly, the method for setting the inspection schedules, including deferrals, the specifications for deletions of workplaces from the inspection cycle, and the inspection procedures are located at Sections XII, XIII, and XIV, respectively in the full text. 

In a recent decision from the federal court for the Southern District of Texas, a refinery’s refusal to hire an applicant who admitted to having weakness on the right side of his body did not violate the Americans With Disabilities Act (ADA). In E.E.O.C vs. Lyondell-Citgo Refining, L. P. (slip copy, 2008 WL 961909), the defendant withdrew a conditional offer of employment based on a third party medical evaluation and determination that the applicant was not medically qualified for an Operator position due to residual right-sided weakness from a blunt force head trauma suffered as a teenager.

The EEOC did not contend that the applicant actually suffered a substantially limiting impairment to a major life activity, but rather that defendant “regarded” the applicant as disabled or alternatively, that the applicant had a “record of” disability. Since “climbing” is not a major life activity under the ADA, and the applicant was medically disqualified solely due to his inability to safely climb ladders, there was insufficient evidence that defendant “regarded” the applicant as substantially limited in a major life activity. This failure by the EEOC to establish its prima facie case resulted in summary judgment for defendant on the “regarded as disabled” claim. Concerning the EEOC’s alternative theory that the applicant had a “record of” disability, the Court noted that, “At most, his medical disclosures reflect a record of impairment, which is insufficient to raise a genuine issue of material fact as to whether those impairments substantially limited his ability to engage in any particular major life activity.” As such, defendant’s motion for summary judgment on the EEOC’s “record of” disability claim was likewise granted.

On January 28, 2008, the Family and Medical Leave Act (“FMLS”) was amended as part of the National Defense Authorization Act (“NDAA”) for Fiscal Year 2008. A copy of the amended FMLA is available at www.dol.gov. The amendments provide special leave rights to family members of certain servicemembers. There are two different types of leave rights created by the amendments:

(1) The circumstances for which up to 12 weeks of FMLA leave is available in a 12 month period are extended to include an additional qualifying reason ---“because of any qualifying exigency (as the Secretary shall, by regulation, determine) arising out of the fact that the spouse, or a son, daughter, or parent of the employee is on active duty (or has been notified of an impending call or order to active duty) in the Armed Forces in support of a contingency operation.” 29 USC 102(a)(1)(E). Until regulations define a “qualifying exigency”for which the leave is available, employers should not be required to extend this leave. An employer may require certification for this leave should the Secretary’s regulations provide for the manner and timing of any such certification. 29 U.S.C. Sec. 103(f).

            Both types of leave may be taken intermittently or on a reduced leave schedule, subject to any certification requirements.

            All FMLA rights afforded employees (such as reinstatement, maintenance of health benefit coverage, etc.) are made applicable to the new types of FMLA leave.

The issue of the enforceability of an arbitration clause in a service contract was recently addressed in Wright v. 3P Delivery, L.L.C., 2007 WL 3171260 (La. App. 3d Cir. 2007). In this action, Plaintiff Chester Wright and Defendant 3P Delivery, L.L.C. entered into the contract entitled “Driver Service Agreement.” The contract called for the Plaintiff to “provide pick up and delivery service,” to “provide loading and unloading of ... shipments,” and to “handle, load, unload, and transport shipments... and equipment.” The contract also contained an arbitration clause. Plaintiff filed suit claiming breach of contract. In response thereto, the Defendant filed a Motion to Compel Arbitration and Stay Litigation. 

The Third Circuit stated that although this was a contract entitled “Driver Service Agreement,” the terms of the contract set forth its true nature, which can be discerned from the wording thereof. The Court looked beyond the mere title of the contract and said that “loading, unloading, and handling of shipments and equipment” clearly require the application of “physical force, or brawn and muscle” as opposed to the performance of mental tasks or services of those recognized as professional men or women. From the four corners of the contract, the parties intended that Mr. Wright engage primarily in labor services. The Court stated, “Although these activities may provide a ‘service’ to their recipient, all of these activities are accomplished through physical labor.”    Thus, the Court concluded that pursuant to La. R.S. 9:4216, the contract was exempt from mandatory arbitration. The Court affirmed the trial court ruling denying the Motion to Compel Arbitration and Stay Litigation.

Louisiana law prohibits arbitration clauses in “contracts of employment of labor.” In Wright v. 3P Delivery, LLC, 2007-683 (La.App. 3 Cir. 10/31/07) --- So.2d ----, the court was asked to consider whether an arbitration clause in a contract requiring the plaintiff, an individual, to provide transportation services along with handling, loading and unloading of shipments for defendant, fell within this prohibition. The issue to be decided was whether the contract was one wherein the plaintiff provided service(s) to the defendant, thus making the arbitration clause valid, or was the contact one wherein the plaintiff provided labor to the defendant, thus rendering the clause invalid.

Many service contracts require the provision of only physical labor (e.g., maintenance contracts). This case decision now begs the question of whether arbitration clauses in those contracts are enforceable. Perhaps the court was influenced by the fact that the service provider was an individual versus an entity. In any case, this decision seems to depart from the trend of readily enforcing arbitration clauses in commercial contracts.