Author Archives: Brian F. Chandler

1. What Employers Should Know About Criminal Background Checks

   April 22, 2013 1:39 pm Leave a Comment

   With increasing frequency, employers are using criminal background checks as one tool in screening potential candidates for employment. Employers should understand, however, that the use of such background checks come with some complexity relating to Title VII racial discrimination prohibitions.

   Although there are certainly circumstances where a criminal background check provides valuable information about potential employees, the Equal Employment Opportunities Commission (“EEOC”) has determined that the reliance on conviction records by employers may result in a disparate impact upon certain racial groups. The EEOC has noted in a recent report that “African Americans and Hispanics are arrested at a rate that is 2 to 3 times their proportion of the general population.” As such, the EEOC has warned that blanket employer refusals to hire applicants with any past criminal convictions may create a disparate impact on minorities and therefore constitute a violation of Title VII.

   The EEOC, and some courts, have concluded that excluding an employment applicant on the basis of a criminal conviction must be both job-related and consistent with business necessity. The determination of excluding a candidate on the basis of past criminal convictions is best accomplished on an individual case-by-case basis. Among the factors the EEOC recommends employers consider in making this determination include:

   • The nature and gravity of the offense or conduct;
   • The time that has passed since the offense, conduct and/or completion of the sentence; and
   • The nature of the job held or sought.

   Special attention is perhaps best spent on the last factor- the nature of the job held and sought. Employers should know that in the event where a prior conviction would have some bearing or create some risk in the event the candidate filled the position applied for, the employer may consider the past conviction in determining whether the candidate is a good fit for the job. For example, if a candidate was applying for a job as a comptroller, a prior conviction for embezzlement is likely a valid consideration in considering a candidate. However, if a candidate is applying for a job as a truck driver and was convicted of shoplifting 25 years ago, the employer would likely be best served from not immediately excluding that candidate on that basis alone.

   Criminal background checks can be a valuable tool for mitigating risk in employment decisions. Nevertheless, employers are best served to evaluate each candidate’s criminal background on an individual basis and to consider whether a prior conviction would hinder an employee in performing the duties in the position being offered.

2. Supervisors Can Now be Sued Individually for Wrongful Discharge

   November 30, 2012 1:44 pm Leave a Comment

   The Supreme Court of Virginia found that an individual supervisor can be sued for wrongful discharge in VanBuren v. Grubb (click here for opinion). The Court held that Virginia law recognizes a common law tort claim of wrongful discharge in violation of public policy against an individual who committed the wrongful act(s) that violated public policy and who participated in the wrongful firing, but who was not the plaintiff’s actual employer.

   In creating this new standard of liability, the Court decided that the tortious act is not solely the act of firing itself but includes the wrongful reasons behind it. The discharge becomes tortious due to the wrongful reasons behind it. Thus, it is appropriate to hold the supervisors who committed the wrongful acts liable. The court reasoned that holding the supervisors personally liable is the only way to punish those supervisors who leave their employment the minute their employer business is sued.

   Angela VanBuren was a nurse at Virginia Highlands Orthopedic Spine Center, LLC. Her supervisor, Dr. Stephen Grubb, allegedly sexually harassed her for a period of three years, despite her telling Grubb that his advances were unwelcome. After VanBuren refused to leave her husband for Grubb, Grubb fired her, without providing any other reason for the termination. Grubb provided VanBuren with one month’s severance pay to keep quiet about the harassment.

   VanBuren sued Grubb and Virginia Highlands for wrongful discharge. She also sued just Virginia Highlands for gender discrimination under Title VII. After the suit was filed, Grubb left the practice he started and joined another practice.

   Virginia follows the employment-at-will doctrine. However, in Bowman v. State Bank of Keysville, it was held that termination of an employee in violation of the policy underlying a statute will, in narrow instances, give rise to a common law cause of action for wrongful discharge. 229 Va. 534 (1985). According to the Court, VanBuren’s claim fell under one such narrow exception previously recognized by the Court: discharge based on the employee’s refusal to engage in a criminal act, the criminal act here, according to VanBuren, being adultery (which is still illegal in Virginia).

   VanBuren alleged that she was fired because she would not give in to Grubb’s unlawful demands. The Court held that because Grubb was an owner of the company as well as her supervisor, if what VanBuren alleged Grubb did was true, then Grubb should be held liable like he would if he had committed any other tort.

   If the individual who committed the tort leaves his place of employment as soon as a lawsuit is filed, as Grubb did here, then “[e]mployer-only liability would be insufficient to deter wrongful discharges . . . . The purpose of the wrongful discharge tort –namely, the deterrence of discharge in violation of public policy– is best served if individual employees in a position of power are held personally liable for their tortious conduct.” Op. at 11.

   This case is important for Virginia employers because it means that owner-supervisors cannot always be shielded by a limited liability entity, such as a corporation.

3. Are Unpaid Internships Legal?

   July 24, 2012 1:55 pm Leave a Comment

   For many college students, summer is a time for them to build skills through summer internships. Employers are also frequently attracted to the use of unpaid interns, especially in this era of budget tightening. Many employers, however, are not aware of the legal ramifications of using unpaid internships.
   The minimum wage requirements of the Fair Labor Standards Act apply to any person an employer “suffers or permits to work”. Generally, an unpaid internship is permissible only if the internship program meets all of the following six criteria:

   1. The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;
   2. The internship experience is for the benefit of the intern;
   3. The intern does not displace regular employees, but works under close supervision of existing staff;
   4. The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operation may actually be impeded;
   5. The intern is not necessarily entitled to a job at the conclusion of the internship; and
   6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

   As can be seen by this criteria, the use of unpaid interns for work that an employer would generally assign to an employee is generally not permitted. An employer usually cannot use interns to augment an employer’s workforce. If the employer would have hired additional employees or require existing staff to work additional hours had the intern not performed the work, the intern will be considered an employee and entitled to compensation, including overtime compensation to the extent the intern works more than a forty hour week.

   Virginia employers should use care in establishing internship programs. Unless the interns are paid a minimum wage, it is essential an employer meet all six criteria set out by the Department of Labor in order to ensure compliance with the Fair Labor Standards Act.

4. A Federal Judge in Virginia Applies a Different State’s Law to a Non-Compete Through a Choice of Law Clause

   May 23, 2012 2:00 pm Leave a Comment

   In Western Industries-North, LLP v. Lessard, et al., 2012 U.S. Dist. LEXIS 33683, United States District Judge James Cacheris, a U.S. District Court Judge in Alexandria, Virginia, recently granted a plaintiff’s motion for a temporary restraining order based on a non-compete and non-solicitation agreement containing a New Jersey choice of law provision. In this case, plaintiff, which provided bed-bug control and detection services through the use of specially trained bedbug detection dogs, filed suit and sought a temporary restraining order against a former employee who left with one of the bedbug detection dogs and started his own bedbug detection business.

   The non-compete at issue likely would not have withstood the scrutiny of a Virginia court under the Virginia Supreme Court’s recent Home Paramount case. This non-compete barred the former employee from being a “ ‘stockholder of any corporation’ in any county or counties in the state in which [the employee] worked” during his previous employment with his former employer.  Such a broad bar to passive investment in a competing business would likely not survive scrutiny under Home Paramount.  Judge Cacheris, however, held that under New Jersey law, a court possesses the authority to limit the application of an overly-broad non-compete.This case again shows the usefulness of choice of law clauses in non-compete agreements. It is likely that the non-compete at issue would not have survived if Virginia non-compete law was applied to this case. By including a valid forum selection clause choosing a different state’s law, the plaintiff was able to enforce the non-compete clause

5. Employee Handbooks: Benefits and Pitfalls

   January 31, 2012 2:02 pm Leave a Comment

   One of the questions employers frequently have is whether it is good policy to distribute and employee handbooks to employees. The answer I most readily give employers is yes, as long as the handbook is carefully drafted as it might be better to have no employee handbook than an incomplete and/or poorly written handbook.

   Employee handbooks may provide many valuable roles for employers. First, employment handbooks help employers think about and implement uniform policies in relation to their employees. Uniformly applied policies help mitigate any argument that an employer enforces policies in a discriminatory or capricious manner.  Also, through a handbook, an employer can ensure that employees are given notice about certain policies. For example, a company’s anti-sexual harassment policy may require that an employee promptly report any sexual harassment. If an employee fails to report any alleged sexual harassment and later files a lawsuit against the employer, the employer may assert as a defense that the employee was required to report the harassment so that the employer may take remedial measures.

   An employee handbook also may be a convenient method by which to provide employees with certain required notices, such as the required notices under the Family and Medical Leave Act, the Uniformed Services Employment and Reemployment Rights Act, and the continuation of benefits provisions of COBRA.

   There are pitfalls in distributing employee handbooks if the handbook is not properly and comprehensively drafted. Perhaps the most dire problem may result from a failure to include the necessary “employment at will” disclaimers in the handbook. In the event such disclaimers are not included, it is possible that a judge may view the handbook as an employment contract. Employers should also be cautious when describing the general procedures used in addressing employee misconduct or poor performance. Without the proper disclaimers, an employee may assert that the handbook procedures provide him with certain due process procedural guarantees. These are just some of the many pitfalls an employer may experience as a result of employee handbooks.

   In sum, Virginia employers are usually well served in putting the time and investment into a well-drafted employee handbook. It is always important for counsel to review, if not actually draft a company’s employee handbook in order to ensure the maximum amount of protection is provided to the company and to avoid any drawbacks of handbooks.

6. The Risks of Giving Negative Employee References to Potential Employers- Defamation Lawsuits

   December 2, 2011 2:07 pm Leave a Comment

   It came out in the news this week that Dakota Meyer, the only living Marine to receive the Congressional Medal of Honor since the Vietnam War, recently filed a lawsuit against his former employer, the defense contractor BAE Systems. Meyer alleges in his lawsuit that one of his supervisors at BAE effectively blocked his employment at another defense contractor by claiming that Mr. Meyer was not mentally stable and had a drinking problem, which Mr. Meyer asserts are false and defamatory statements. Undoubtedly, this dispute with Mr. Meyer is a public relations disaster for BAE Systems and will be costly in time and legal fees regardless of the case’s outcome.

   This lawsuit demonstrates the risks involved in providing substantive references to potential employers of former employees.  Providing substantive references provides little benefit to the former employer (since the employee no longer works for the company) and may provide a basis for a former employee to file a lawsuit. I have seen defamation cases filed against employers in Virginia, and these cases universally cause financial harm to the employers who are left to defend against such cases. Consequently, more and more employers are establishing firm policies concerning what information may be divulged in employee references. Frequently, references are limited to the dates of employment and the former employee’s position.

7. Title VII Protection: Internal Investigations May Protect Employers From Liability But Beware Of Waiver Issues

   November 22, 2011 3:22 pm Leave a Comment

   The Faragher-Ellerth affirmative defense can be used in Title VII actions to avoid employer liability where the employer exercised reasonable care to promptly prevent and correct the actions complained of by the employee and the employee unreasonably failed to take advantage of any protective or corrective opportunities provided by the employer or to avoid harm otherwise. Two United States Supreme Court cases decided in 1998, Burlington Industries, Inc. v. Ellerth and Faragher v. Boca Raton, established the defense. In preparation for asserting this defense, it is common for employers to have their attorneys internally investigate the employee’s allegations to find out what really happened. In the course of these investigations, the attorney may interview employees and write down his or her findings in a report.

   The attorney-client privilege protects confidential communications between an attorney and a client on matters relating to legal representation and the work product doctrine protects documents prepared by an attorney in anticipation of litigation. By relying on an attorney’s investigation report as part of an affirmative defense, the report itself and the documents underlying the report are put at issue.

   Many United States district courts around the country have ruled that when an employer relies on the Faragher-Ellerth affirmative defense premised on an internal investigation, the employer implicitly waives the attorney-client privilege and work-product protection as to the investigative report and even documents underlying the report. The waiver thus applies to memos authored by the investigator and interviews of employees conducted during the investigation. This waiver may be an unintended negative result of using the affirmative defense.

   The reasoning behind the waiver is that the only way the plaintiff can determine whether the investigation was reasonable is through full disclosure of the contents thereof.

   There may be good reasons to rely on the affirmative defense and forgo the work product and attorney-client privileges in some cases. In others, forgoing the affirmative defense to protect the investigative reports and supporting documents might be the better option. Virginia employers should be aware of their alternatives and have internal discussions with their attorneys to decide the best move for their situation, which may depend on a number of factors specific to their case.

8. Big Penalties For Overly Broad Non-Competes in Virginia: Entire Provision May Be Struck

   November 15, 2011 3:23 pm Leave a Comment

   On November 4, 2011, the Virginia Supreme Court struck an entire non-compete provision in an employment agreement for containing language that was too broad. Although many states will simply “blue pencil” the non-compete by striking only those overly broad portions, the Virginia Supreme Court reinforced the trend in wholly striking down overbroad non-competes in Home Paramount Pest Control Companies, Inc. v. Justin Shaffer, et. al. 

   Justin Shaffer was an employee of Home Paramount Pest Control Companies, Inc. and signed an employment agreement with his employer containing a non-compete clause that restricted him from engaging in “any manner whatsoever” in a pest control or similar business as an owner, agent, servant, representative, or employee, and/or as a member of a partnership and/or as an officer, director or stockholder of any corporation. After working at Home Paramount, he became employed with Connor’s Termite and Pest Control, Inc. Paramount sued alleging breach of contract.

   In determining whether a non-compete is enforceable, Virginia courts consider function, geographic scope, and duration. Here the Virginia Supreme Court emphasized that even if the scope and duration elements of the non-compete minimally restrict the former employee, this does not make up for an overly strict function. In considering the function element, the court has consistently considered whether the prohibited activity is of the same type as that actually engaged in by the former employer.  Prohibiting former employees from working in the same industry in a role which would compete with the business of the former employer is generally acceptable.  When employers use provisions prohibiting employees from working in any capacity for the same type of company, they go too far.  Blanket prohibitions against working for a competitor are inappropriate. An agreement restricting competition is enforceable only if it “is narrowly drawn to protect the employer’s legitimate business interest, is not unduly burdensome on the employee’s ability to earn a living, and is not against public policy. Opinion at 2, quoting Omniplex World Servs. Corp v. U.S. Investigations Servs., Inc., 270 Va. 246, 249 (2005). A former employee may engage in activities that do not compete with the former employer. When a former employer prohibits a former employee from working for its competitors in any capacity and does not restrict the function component, it must have a legitimate business interest that it can prove in order for the restriction to be valid.

   Here, the provision at issue went too far and prohibited Shaffer from working for a business in the pest control industry in any capacity. The provision did not limit the function element to those activities it actually engaged in.  The provision went so far as to bar Shaffer from merely being a “passive stockholder of a publicly traded international conglomerate with a pest control subsidiary.” Opinion at 7. Although the court upheld a non-compete containing identical language in the 1980s, it explained that changes in law since then justified overruling Home Paramount’s non-compete.

   The Virginia Supreme Court has become more aggressive in striking down broad non-competes. Virginia employers should be careful to not use broad language in non-competes or risk losing the entire agreement- a grave penalty for not taking the time to narrowly tailor the non-compete. Specifically, to satisfy the function element, Virginia employers should restrict only activities that are of the same kind the employee performed for that employer.

9. U.S. Supreme Court Rejects Class Action Against Wal-Mart

   June 24, 2011 3:24 pm Leave a Comment

   Earlier this week, perhaps the largest Title VII employee class action case ever contemplated was considered by the Supreme Court. Around 1.5 million female Wal-Mart employees claimed discrimination and a class action was initiated. The focus of their claim was that the discretion given to local Wal-Mart supervisors over pay and promotion matters violates Title VII of the Civil Rights Act of 1964 by discriminating against women. The informal opinion can be found here.

   The three main plaintiffs who initiated the suit claimed that their local managers favored male employees for pay increases and promotions, which caused a disparate impact on female employees. These plaintiffs argued that Wal-Mart’s refusal to curtail its managers’ authority amounts to disparate treatment.

   In this case, the plaintiffs claimed that the existence of a blatant “corporate culture” permitted bias against women, and consciously or subconsciously influenced the local managers’ pay and promotion decisions. Plaintiffs alleged that this “culture” breeds a common discriminatory practice that essentially affects every woman working at Wal-Mart.

   A class must meet the commonality requirement to survive de-certification of the class action. Members of the class must have suffered more or less the same treatment. Here, the plaintiffs could not establish that Wal-Mart has a “general policy of discrimination.” In fact, the Court held that the record demonstrated that Wal-Mart has a policy that penalizes discriminatory acts. Because supervisors had broad discretion, and did not discriminate under general corporate direction, the plaintiffs were unable to identify a uniform employment practice that ties all 1.5 million claims together or that provides the commonality needed for a class action. Giving local supervisors broad discretion on employment decisions is the opposite of having uniform employment practices, the court noted.

   Moreover, plaintiffs failed to identify a valid common mode of exercising discriminatory discretion that pervades the entire company. The court added that “[i]n [General Telephone Co. of Southwest v.]Falcon, we held that one named plaintiff’s experience of discrimination was insufficient to infer that “discriminatory treatment is typical of [the employer’s employment] practices.”

   The court also concluded that respondents’ claims for back pay were improperly certified under Federal Rule of Civil Procedure 23(b)(2), which does not authorize class certification when each class member would be entitled to a different injunction or individualized award of monetary damages.

   While the Supreme Court’s ruling does not bar the original plaintiffs from suing Wal-Mart, the Court’s decision prevents this case from moving forward as a class action. This decision is an important result for employers located in Virginia and throughout the United States as it will now generally require plaintiffs in Title VII actions to establish the common nature of any alleged discrimination with greater specificity and particularity.

10. Federal Judge in Virginia Holds That Noncompete Included in Settlement Agreement is Reasonable

    May 19, 2011 3:27 pm Leave a Comment

    A Virginia federal district court judge recently held that a noncompetition agreement included in a settlement agreement may be subject to a more liberal standard of reasonableness than a typical noncompete which might be found in an employment agreement. InMcClain & Co. v. Carucci, 2011 U.S. Dist. LEXIS 48404 (W.D. Va. 2011), Judge Norman K. Moon, of the United States District Court for the Western District of Virginia, denied a former employee’s motion to dismiss and found a noncompetition agreement included as part of a settlement agreement to be reasonable.

    The former employee in this case was accused of misappropriating $285,000 from his former employer. In order to settle this claim, the former employee agreed to pay back $250,000 to the employer and agreed to a 30 month noncompete barring him from performing any competing services in his former sales territory, as well as from owning any business that provides services which compete with the employer.

    After his departure, the employee allegedly worked with his grandfather in order to establish a competing business. The employer filed a suit against the employee seeking to enforce the 30 month noncompete. The employee filed a motion to dismiss claiming that the noncompete he signed did not contain reasonable restrictions and was unenforceable as a matter of Virginia law. Judge Moon declined to apply the “more restrictive standard designed to review covenants contained in employment contracts.” Id.at 16. Instead, the Court found that this “was not a ‘take it or leave it’ situation in which an employee must agree to a noncompete covenant in order to secure a job.” Id. at 17. Instead, the Court held that “bargaining power was more equally distributed, with Carucci [employee] allegedly in possession of over $250,000 in company funds, and McClain [employer] entitled to sue Carucci for their recovery or seek other legal remedies.” Id.  Also, since the Court held that the noncompete in this case was part of an “agreement settling a private dispute, which, as a highly favored agreement in the law, should not be subjected to undue limitations on its enforceability.” Id.

    This case contains many lessons for Virginia employers. Employers likely have greater latitude in crafting a broader noncompete if the covenant is included as part of settlement agreement signed by an employee accused of wrongdoing.   Employers may be well served to include noncompete provisions in settlement agreements in order to provide a remedy in the event a former employee uses knowledge or property wrongfully gained during his employment to the disadvantage of their former employer. Also, this case demonstrates the flexible “reasonableness” standard applied by courts in Virginia and the ability of this standard to adapt to the particular circumstances of a given case.