6th Circuit: No RICO claim due to employers’ alleged scheming to deny workers’ comp benefits

The Sixth Circuit has held that RICO provides no remedy for alleged racketeering associated with the (alleged) denials of workers’ compensation benefits. Click here to read the opinion

5th Circuit: Personal Computers and Devices Not Protected by the Stored Communications Act

You know that massive Stored Communications Act lawsuit you were planning? The one based on your opponent’s sinister and entirely unconsented intrusions into your clients’ personal laptops and mobile devices? Yeah, well you can forget about that.

At least in the Fifth Circuit, that is. The Fifth Circuit, in its new decision in Garcia v. City of Laredo, has held that personal computers, laptops, mobile devices, and whatnot are entirely unprotected by the Stored Communications Act. Mrs. Garcia was a former police officer who had left her phone in an unlocked locker at the police station, whereupon “a police officer’s wife” just happened to find it (?) and discovered several texts and images which, as the court put it, constituted “evidence of violations of a department policy.” (The Court did not describe the policy-or the images–any further, and for that, we are all grateful.) Mrs. Garcia was fired, and she claimed that the above events infringed upon her rights under the SCA.

The SCA protects data that resides in any “facility through which an electronic communication service is provided,” and generally proscribes attempts to extract that data without a valid consent from its owner. The question is whether or not the above personal devices constitute “facilit[ies] through which an electronic communication service is provided.” The Fifth Circuit tossed its hat in with a handful of other courts which have held that:

the relevant ‘facilities’ that the SCA is designed to protect are not computers that enable the use of an electronic communication service, but instead are facilities that are operated by electronic communication service providers and used to store and maintain electronic storage. [emphasis in original]

The Fifth Circuit also noted that even if personal computers and devices were the type of “facility” covered by the SCA, the data stored on these devices were not either in “temporary, intermediate storage” or in storage “by an electronic communication service for purposes of backup protection,” other requirements of various parts of the SCA.

There had been a small handful District Court level decisions on this issue which had likewise rejected SCA protection for personal computers and devices (in California, Michigan, and Ohio; they are cited in the opinion). But this is the first Circuit level rejection that I have seen. One wonders if this case might have been different had the employer in question gained access to locally cached copies of cloud content (stored on Google Drive, or in iCloud, or someplace like that), since that data is probably stored on exactly the type of “facility” contemplated by the SCA “for purposes of backup protection” (a key purpose of any cloud service). Technology marches on, for better or for worse, with the law in tow behind it. Maybe. Stay tuned.

What happens in Vegas…is FMLA-protected.

By: Helena Oroz*

The beginning of that tag-line is perfectly obnoxious and overly worn, but the ending is new, and, interestingly enough, true—at least according to the Illinois federal court that recently handed down its decision in Ballard v. Chicago Park District. In Ballard, the U.S. District Court for the Northern District of Illinois held that an employee who provided care to her terminally ill mother during a Las Vegas vacation “cared for” her mother within the meaning of the FMLA.

In Ballard, the employee filed suit under the Family and Medical Leave Act (“FMLA”) after she was terminated for unauthorized absences from work. She alleged that her former employer interfered with her rights by denying her request for leave to care for a sick parent. The employee was the primary caretaker for her terminally ill mother and did almost everything for her: prepared her meals; administered medicine; operating a pump to remove fluids from her mother’s heart; bathed her; provided her with transportation; and provided comfort and support, among other responsibilities. Why would her employer deny her leave under such seemingly clear-cut circumstances?

Vegas, baby.

Yes, the employee in this case requested leave to accompany her sick mother to that adult playground in the desert, Las Vegas, Nevada; and this detail, probably more than any other in this case, has captured the hearts and minds of employers (and their lawyers) everywhere. Vegas? Vegas?! Why would a super fun trip to Vegas be FMLA protected?

The court closely reviewed the (pre-2009 amendment) FMLA regulations to make just that determination: whether the employee was entitled to leave under the FMLA to “care for” her mother on the Vegas trip, as the employee argued. The employer argued that the trip was not FMLA protected because the “care” has to have some connection with the family member’s need for treatment, and the mother did not seek treatment during the trip. The court disagreed, finding that the FMLA includes no such limitation.

Under the FMLA, an eligible employee is entitled to leave to “care for” a parent with a “serious health condition.” The Court noted that FMLA’s implementing regulations explain that “to care for” encompasses both physical and psychological care; but such care does not depend on a particular location or on participation in medical treatment itself.

There was no question in the case that the employee’s mother suffered from a “serious health condition” (end-stage congestive heart failure); that she was unable to care for her own basic needs; and that the employee provided physical care for her mother at home. The court reasoned that because her mother’s needs did not change during the trip, the employee also “cared for” her mother while traveling to and vacationing in Las Vegas.

The court also gave short shrift to the employer’s argument that the employee did not “care for” her mother because there were no plans for the mother to seek medical care or treatment in Las Vegas. The court found “no statutory or regulatory text stating something to the effect that ‘care’ must involve some level of participation in the ongoing treatment of the family member’s condition under the FMLA” as the regulations cover “terminal illnesses for which there is no active treatment at all.”

The court opined that at base, the text of the FMLA requires only that the employee sought leave to “care for” her mother who had a “serious health condition.” “So long as the employee provides ‘care’ to the family member, where the care takes place has no bearing on whether the employee receives FMLA protections.”

Fiji, anyone?

Whether or not such a decision actually “broadens” the FMLA is debatable. While not relevant to the legal analysis, it should be noted that the Vegas trip here was a gift, a charitable grant from an organization that grants wishes to persons with terminal illnesses. The employee asked for leave to take the trip so that her dying mother could take the trip. This is not a common situation for most employers (and arguably, considering the circumstances, one that the employer could have met with less scrutiny and more compassion).

It does, however, seem to open the door to abuse, a la “I need two weeks off to travel to (fill in fun destination) to care for my ill (family member)!” But at the end of the day, the same rules would apply to such a request as to any regular FMLA leave request, and the same tools would be available to the employer to determine its legitimacy.

*Helena Oroz practices in all areas of labor and employment law. For more information about FMLA leave, please contact Helena (hot@zrlaw.com) at 216.696.4441.

It’s Usually a Bad Idea to Fire an Employee Who is 8 Months Pregnant

The title of this post is a bit strong. There are, on occasion, times where it might make sense to fire an employee who is very, very pregnant. Maybe she was caught stealing. Maybe she punched out her supervisor. Maybe she’s botching her job so badly that customers and co-workers are in an uproar and the situation cannot wait.

But ordinarily, taking action against an employee in the middle of her pregnancy–even for a good reason–creates all sorts of wrong impressions, and is highly likely to draw a lawsuit. Even if there is a good reason to take action, it is almost always advisable to wait.

Washington Supreme Court: Ministerial Exception Barred Negligent Hiring, Supervision Claims

The Washington Supreme Court has held that the First Amendment to the U.S. Constitution barred a Presbyterian church elder’s negligent retention and supervision claims against her church, but that her Title VII claims needed more analysis.

The elder in question had raised objections to the manner in which her church’s pastor was conducting church tours and was ultimately fired. She brought suit for, among other things, negligent retention and supervision, and sex discrimination under Title VII. (She had brought other claims too, but they were not at issue in the Supreme Court’s opinion.)

The Supreme Court passed on the question of whether the ministerial exception barred the Title VII claim, because the factual record concerning whether this particular woman qualified as a “minister” was “not developed sufficiently to make the determination.”

However, since there was no apparently no dispute that actual pastor in question (as well as his superiors) were bona fide ministers, the Supreme Court held that allowing negligent retention or supervision claims to proceed against the church, based on allegations that the pastor was negligently retained or supervised, would constitute impermissible entanglement with the church’s right to pick the minister of its choosing.

The case is Erdman v. Chapel Hill Presbyterian Church.

South Carolina Supreme Court: Webmail Not Procted by Stored Communications Act

This is interesting. The South Carolina Supreme Court last week ruled that keeping old emails stored in webmail was not considered storage “for the purposes of backup protection” within the meaning of the Stored Communications Act.

The Court–in a very short opinion–held instead that “retaining an opened email” in one’s Yahoo! mail account did not constitute “storing it for backup protection under the Act.” Why not? The only explanation offered by the Supreme Court was a reference to the Merriam-Webster Dictionary definition of “backup”:

We decline to hold that retaining an opened email constitutes storing it for backup protection under the [Stored Communications] Act. The ordinary meaning of the word “backup” is “one that serves as a substitute or support.” Merriam-Webster Dictionary, [citation omitted]. Thus, Congress’s use of “backup” necessarily presupposes the existence of another copy to which this e-mail would serve as a substitute or support. We see no reason to deviate from the plain, everyday meaning of the word “backup,” and conclude that as the single copy of the communication, Jennings’ e-mails could not have been stored for backup protection.

In other words, because there wasn’t some other copy of the email floating around somewhere, the email living in Yahoo! webmail was not “backup” of anything.

Hmm…

The Court remarked in passing that its holding essentially contradicted virtually every prior case on this subject, most especially Theofel v. Farey-Jones, 359 F.3d 1066, 1075 (9th Cir. 2004). The Court’s explanation of why it was blowing past this line of prior cases? “[W]e believe the plain language of subsection (B) does not apply to the e-mails in question,” based on the aforementioned reference to the dictionary. The Court also stated, without explanation, that it “question[ed] the reasoning expressed in Theofel that such passive inaction” pertaining to email retention “can constitute storage for backup protection under the SCA.”

What does this holding mean? Well, if other courts adopt the reasoning of this new case, emails and other communications residing in web storage (Gmail, Yahoo! mail, Facebook messages, etc.) would likely be fair game for subpoenas in litigation. Right now, anyone lobbing a subpoena over the bow of Facebook, etc., is likely to get a form letter in response, pointing to the Stored Communications Act and explaining that the Act does not permit a response to the subpoena. This case, if it stands, opens things up a bit. Perhaps a lot.

Incidentally, this new case did not involve a subpoena, but rather a curious someone who hacked into a cheating husband’s Yahoo! mail account “by guessing the correct answers to his security questions.” The emails from said cheating husband were subsequently printed and given to his wife’s lawyer. Lovely.

The case is Jennings v. Jennings, and you can read it by clicking the link below.

Ohio Supreme Court Reverses Itself, Holds that Successors May Be Able to Enforce Old Noncompetes

Today, the Ohio Supreme Court reversed itself. The Court has vacated its earlier opinion in Acordia of Ohio LLC v. Fishel [see our prior post on that decision], and has held instead that a successor entity can jump into the shoes of its predecessor and enforce the predecessor’s noncompetition agreements.

The earlier opinion had stated that the predecessor entity met its end once the merger took place, and that this event started the running of the “noncompete clock” if that clock was triggered by the employee’s termination of employment with the predecessor entity (as opposed to termination of employment with the predecessor entity “or its successors and assigns” or some such).

The problem with the earlier opinion, according to the Court, was its false assumption that once an entity merged into some other entity, the older entity necessarily ceased to exist. That’s a wrong statement of Ohio corporation law, according to today’s opinion.

Instead:

the absorbed company becomes a part of the resulting company following merger. The merged company has the ability to enforce noncompete agreements as if the resulting company had stepped into the shoes of the absorbed company. It follows that omission of any ‘successors or assigns’ language in the employees’ noncompete agreements in this case does not prevent the L.L.C. from enforcing the noncompete agreements.

The Supreme Court did note that this does not necessarily mean that old noncompetes that had passed through several iterations of mergers and whatnot are always enforceable:

[T]he employees still may challenge the continued validity of the noncompete agreements based on whether the agreements are reasonable and whether the numerous mergers in this case created additional obligations or duties so that the agreements should not be enforced on their original terms.

Since the lower courts had not yet analyzed whether or not the particular noncompete agreement at issue in Fishel was reasonable under this test, the Supreme Court sent the case back down to the lower court for that analysis to be conducted.

As a side note, I love how the Ohio Supreme Court waited until virtually every employment lawyer in Ohio was squirreled away at a conference in Columbus to announce this major reversal. (Smile.)

As before, the new decision is called Acordia of Ohio, LLC v. Fishel. Click the link to read and enjoy.

Washington Supreme Court: 2006 Amendments to the LAD Not Retroactive

The Washington (State) Supreme Court has held that the 2006 amendments to the Washington Law Against Discrimination (which added “sexual orientation” as a protected class) were not retroactive. As a result, a University of Washington employee could not sue for sexual orientation-based harassment based on alleged anti-homosexual comments made by her supervisor prior to the effective date of the amendment.

However…

The Court also noted that that this same pre-amendment conduct could still be relevant to “prove intent behind postamendment conduct.” And in this case, there was one allegedly hostile act that took place after the effective date of the amendment to the WLAD. According to the plaintiff, this same supervisor had stated, in reference to the prospect of dealing with the plaintiff’s homosexuality, that he was “going to come back a very angry man” when returning from a tour in Iraq.

That was enough for the Supreme Court, which held that the plaintiff’s hostile environment claim should survive, since the “angry man” comment was sufficiently severe when illumined against the background of the earlier pre-amendment anti-gay statements.

The case is Loeffelholz v. University of Washington.

6th Circuit Rejects Company’s Sexual Harassment Policy

An interesting new decision from the 6th Circuit today, reversing a grant of summary judgment in a sexual harassment lawsuit. The District Court had granted summary judgment on the basis of the Faragher/Ellerth defense, due to the company’s sexual harassment complaint procedure and the company’s response to the employee’s complaint.

The 6th Circuit first attacked the policy:

We question whether FCIS’s Anti-Harassment Policy facially satisfies all of the requirements of an effective policy… . While the policy allows employees to make “reports” of harassment, it does not inform employees that their complaints may be informal and need not be placed in a formal writing. And while the language requiring a report to “management or Human Resources” conceivably permits employees to report harassing behavior of a supervisor to a higher level of management or to Human Resources, the policy does not expressly instruct the employees on any particular mechanism to bypass a harassing supervisor when making a complaint of harassment.

Then, the 6th Circuit criticized the company’s handling of the employee’s complaint because the company had merely smacked the alleged harasser with a disciplinary warning, but “produced no evidence that it took steps to monitor [his] conduct after receiving [the employee’s] complaint or after disciplining [the harasser]…”

The case, which is fascinating, is Shields v. Federal Express Customer Information Services, Inc.

Interesting New California Decision About Employee Vacations

Most employers doing business in California know that California law requires (in most cases) that all of an employee’s accrued and unused vacation time must be paid out to the employee when his or her employment ends. This is because of Labor Code § 227.3:

Unless otherwise provided by a collective-bargaining agreement, whenever a contract of employment or employer policy provides for paid vacations, and an employee is terminated without having taken off his vested vacation time, all vested vacation shall be paid to him as wages at his final rate in accordance with such contract of employment or employer policy respecting eligibility or time served; provided, however, that an employment contract or employer policy shall not provide for forfeiture of vested vacation time upon termination. ….

There have been a multitude of court decisions interpreting this statute. While full payout of accrued vacation is required, these earlier court decisions have recognized that the statute does not mandate that employers actually offer vacation time to employees, or in any particular amounts. The law also does not require employers to continue awarding new vacation time to employees ad infininitem while those employees already sitting on a huge bank of unused time; the company is free to set an “accrual cap.” to prevent the endless accumulation of vacation time.

This week, a new California decision, Bell v. H.F. Cox, Inc., addressed two other interesting questions associated with Labor Code § 227.3 and the vacation requirements under California law: (1) is Labor Code § 227.3 preempted by ERISA; and (2) whether current employees must receive vacation pay at their regular rate.

The answer given by the court in Bell, at least on the facts of that case, was no to both questions.

The vacation policy at issue in the Bell case was a bit unusual. Employees would be awarded a certain number of weeks of vacation time each year, based on their length of service. But when they took the vacation, they would be paid at a flat rate of $500 per week (later increased to $650 per week), instead of at their regular rate of pay. When the employees left employment, their unused time was forfeited.

A group of employees sued, arguing that the policy violated Labor Code § 227.3 both as to terminated employees, and as to current employees because of the flat payment provision. The plaintiffs argued that Section 227.3 of the Labor Code requires all vacation time – including vacation time taken by current employees – to be paid out at the employee’s regular rate of pay.

First, ERISA preemption.

The policy’s provision requiring a forfeiture of vacation upon termination appears at first blush to be an obvious violation of Section 227.3, which prohibits vacation policies which “provide for forfeiture of vested vacation time upon termination.” Yet the employer in Bell argued that Labor Code § 227.3 in this instance was preempted by ERISA because its vacation policy was actually an ERISA plan.

This sort of arrangement – an ERISA vacation plan that preempts state law – is indeed possible, as the U.S. Supreme Court discussed in a case called Massachusetts v. Morash, 490 U.S. 107 (1989). But as reflected by the Morash case (and other cases since then), in order for the ERISA vacation plan concept to work, the vacation plan must meet the requirements of an ERISA plan. Among other things, this means that the plan must be funded–the company must dedicate a pile of money for the payment of vacation benefits, and vacation benefits can only be paid from this pile. If the company pays for vacation benefits out of its general checkbook, it’s not an ERISA plan and there is no ERISA preemption.

And that was the problem in the Bell case. The employer offered testimony that it had set up and funded an irrevocable trust to pay vacation benefits and that all benefits were paid by this trust. That might have been enough to show ERISA preemption–if it were the only evidence on the subject. Alas, it was not. The company had also filed a few tax forms which stated that employee vacations were paid from “[g]eneral assets of the sponsor.” Whoops. The company argued that the statements about vacation pay in these tax forms were a mistake, but as far as the court in Bell was concerned, the language of those tax forms created a jury question about whether or not there was truly a separate and dedicated trust for the payment of employee vacations, or whether vacation was paid from the “general assets” of the company. Hence, the trial court’s grant of summary adjudication on the ERISA preemption question was found to be improper.

Next, the “regular rate” issue.

The plaintiffs in the Bell case also argued that the company’s practice of paying out vacation time to current employees at a flat rate of $500 (or $650) per week, rather than at the employee’s regular rate for a week of pay, was a violation of Labor Code § 227.3. They pointed to the portion of Section 227.3 which requires payouts of vacation time to be at the employee’s “final rate in accordance with such contract of employment.”

The problem with this argument, according to the court, was that the rate provision of Section 227.3, by its terms, does not kick in until an employee’s employment as been terminated, and thus the provision could not have no effect upon current employees:

Labor Code section 227.3, by its express terms, applies only to the situation where an employee is terminated without having taken off his or her vested vacation time. Neither Labor Code section 227.3 nor any other authority cited by plaintiffs supports the proposition that, apart from the situation where an employee is terminated with unused vacation time, a vacation benefits policy must provide for payment of vacation time at an employee’s regular rate of pay. [Ed. note – italics in original.]

In other words, it’s only at the end of employment where an employee must be paid out accrued vacation “at his final rate in accordance with such contract of employment or employer policy respecting eligibility or time served” (to use the language of Section 227.3). While employment is still ongoing, Section 227.3’s rate provision has no application.