Legal Updates

E-Verify Now Required for Most Georgia Employers

As of July 1, 2013, all private employers in Georgia with 11 or more employees must use E-Verify, the federal online system for confirming whether new hires are legally authorized to work in the United States.  This requirement has been in place for the last year and a half for larger employers, following passage of Georgia’s Immigration Reform and Enforcement Act of 2011 (IREA).  All employees who work at least 35 hours per week count toward the new coverage threshold of 11 employees.

The Georgia legislature also recently expanded the IREA to require the use of E-Verify by private employers contracting with public entities to provide labor or services of $2,500.00 or more, regardless of the number of employees.  By adding “or services” to the statute’s original language, the legislature expanded the law’s reach beyond providers of physical labor and construction to providers of services such as information technology, accounting, or auditing. The requirement also applies to all subcontractors and sub-subcontractors.

The new Georgia law states that a public employer shall not enter into a contract with a private company unless the company registers and participates in E-Verify.  To ensure compliance, the private employer’s bid or contract to provide labor or services must include a signed, notarized affidavit attesting that it uses E-Verify, that it will continue to use E-Verify, and that it will ensure that all sub-contractors will do the same.  The affidavit must include the company’s federal work authorization user ID number and date of authorization.

Lastly, before any county or municipality in Georgia issues a business license, occupational tax certificate, or other document required to operate a business, the business applicant must provide an affidavit that it uses E-Verify, employs fewer or 11 employees, or is otherwise exempt from the E-Verify requirement.  The affidavit also must include the affiant’s work authorization user ID number and date of authorization.

For more information, contact Chris Arbery.

11th Circuit: Bosses Can Be Personally Liable for Unpaid Overtime Even if Workers Are Undocumented

Many employers would be surprised to learn not only that undocumented workers can sue for unpaid overtime under the federal Fair Labor Standards Act (FLSA), but also that company supervisors, officers, directors, and owners can be personally liable for such damages.  In Lamonica et al. v. Safe Hurricane Shutters, Inc. et al. (No. 07-cv-61295), the federal 11th Circuit Court of Appeals (covering Georgia, Florida, and Alabama) recently held that two salaried workers were entitled to recover back pay, liquidated damages, and attorneys’ fees from their employer, a hurricane shutter installer, and two of the company’s owners.  At trial, the plaintiffs were found to be non-exempt workers who were entitled to overtime.

The Court rejected arguments by the employer and two individual owners that the workers should be precluded from recovering back pay because one or both were undocumented aliensand allegedly used false social security numbers to obtain the jobs.  Regardless of any alleged wrongdoing by the workers, the Court held, the employer still was responsible for payment of wages under the FLSA for work already performed.  The Court distinguished a previous decision by the U.S. Supreme Court, Hoffman Plastic Compounds, Inc. v. NLRB (2002), which held that undocumented workers could not recover back wages for wrongful termination because they were not entitled to the job in the first place.  In that case, the 11th Circuit observed, the workers had not already performed work for which they were seeking compensation.

Further, even though the two owners were minority shareholders and were not present in the workplace for more than a few days or weeks each month, the Court held that they had “sufficient control of the company’s financial affairs to cause the corporation to compensate or not to compensate employees in accordance with the FLSA,” and therefore they could be deemed “employers” along with the company.  As a result, the Court held that the owners/board members were individually and personally liable to the plaintiffs.

This case highlights the importance to business owners and managers alike of ensuring that all employees are properly classified (as either exempt or non-exempt from overtime requirements) and compensated under the FLSA.  Overtime pay requirements are applied rigidly and are the source of a surprisingly large amount of employment litigation.  The best way to avoid such litigation is to have a qualified employment attorney conduct a privileged audit of pay practices, including an evaluation of all positions as either exempt or non-exempt.

U.S. Supreme Court Will Decide Standard of Proof in Title VII Retaliation Cases

In what is likely to be one of the more important decisions in the employment law arena this year, the U.S. Supreme Court will hear a case in which it will decide whether, in a Title VII retaliation action, a plaintiff employee must prove that the employer would not have taken an adverse employment action but for the employee’s protected activity, or instead need only prove that the protected activity was just one of the motivating factors for the adverse action.

In University of Texas Southwestern Medical Center v. Nassar, 674 F.3d 448 (5th Cir. 2012), cert. granted, 81 U.S.L.W. 3234 (U.S., Jan. 18, 2013) (No. 12-484), the plaintiff was a university faculty member who alleged that he was constructively discharged as a result of workplace harassment and discrimination based on his Middle Eastern ancestry. He also claimed that, after resigning his position, the University retaliated against him by blocking his employment at a hospital affiliated with the University. A jury found that the university retaliated against Nassar and awarded him close to $4 million in back pay, compensatory damages, attorneys’ fees, and costs. The trial court had instructed the jury that retaliation could be found based on a “mixed-motive” theory (i.e., that the employee’s protected activity was one of several motivating factors). The university appealed, and the Fifth Circuit Court of Appeals affirmed, finding no error in the instruction. Citing a split in the circuits, the Supreme Court granted certiorari.

In a “mixed motive” case, an employee may prove discrimination even if the employer simultaneously possessed a legitimate, nondiscriminatory reason for taking adverse action against the employee. In other words, the employee need only demonstrate that retaliation was one of the motives for the adverse action. On the other hand, if the “but for” standard applies, the employee must demonstrate that the adverse action would not have occurred but for the employer’s discriminatory motive. In Nasser, although the University presented evidence of a legitimate, non-retaliatory reason for blocking Nasser’s subsequent job opportunity, Nasser offered evidence that the University’s action was in retaliation for asserting a claim of harassment. Instructed on the “mixed motive” theory, the jury found that the University illegally retaliated against Nasser in violation of Title VII.

The Supreme Court’s decision will have broad implications. The Court has announced that it will consider not only whether Title VII’s retaliation provision requires “but for” causation, but also whether “other similarly worded employment statutes” (e.g., the Americans With Disabilities Act, etc.) require this level of proof. The “but for” standard is preferred by employers, since it requires a plaintiff to demonstrate that retaliation was the only reason for the adverse action. According to the Supreme Court’s website, oral argument in this case will be held on April 24, 2013.

Training Tip: Hit All the Right Notes in Employment Decisions

Employers often ask whether an employment action would comply with employment laws.  Often, that is the wrong question.  Ultimately, whether a decision is lawful often depends on motive, which can be a matter of dispute.  Employers should ask, “In the event of a legal dispute regarding this decision, who would be believed, and why?”

Even better, before taking a significant action, an employer should ask the following question:  “How can I support the decision, avoid an unnecessary dispute, and improve our business?”

While each employment action may have a different level of risk, employers can reduce their overall risks by keeping in mind a general framework for decision making.  Just remember the familiar phrase from childhood piano lessons for the notes on the treble clef:  “Every Good Boy Does Fine.”

Reminder From Texas That Oral Employment Agreements Can Be Enforced

A recent case from Texas serves as a good reminder that promises made in the workplace can be enforced under certain circumstances, even if they are not in writing. The Texas Court of Appeals was not persuaded by an employer’s argument that an agreement to continue providing sales commissions to its employee even after his employment ended was unenforceable simply because it was an oral agreement. The court explained that the agreement constituted an enforceable oral employment agreement of indefinite duration. Because the agreement could potentially be fully performed by the parties in less than a year, the agreement was not rendered void under the Statute of Frauds, which normally requires certain contracts to be in writing. See Kalmus v. Ella Oliver and Financial Necessities Network, Inc., No. 05-11-00486-CV (Tex App., November 20, 2012). Oral employment agreements can be enforceable in most states. In Georgia, for example, employees have successfully enforced such oral employment agreements to obtain, among other things, the right to participate in a profit sharing plan (see Wood v. Dan P. Holl & Co., 169 Ga. App. 839 (1984)) and the right to receive three months’ notice before termination (see Parker v. Crider Poultry, Inc., 275 Ga. 361 (2002)).

Employer Wellness Program Did Not Violate ADA

A decision by the U.S. Court of Appeals for the Eleventh Circuit may encourage employers to offset rising healthcare costs through the use of wellness programs and the implementation of fines for nonparticipation in such programs. According to the Eleventh Circuit, under certain circumstances the medical examinations and inquiries connected with wellness programs do not violate The Americans with Disabilities Act’s prohibition on “required” medical examinations and disability-related inquiries, even when employers charge fees for nonparticipation in such programs. Wellness programs can fall within the ADA’s “safe harbor” provision, which exempts certain insurance plans from the ADA’s general prohibitions, as was successfully argued by Broward County, Florida, in defense of a class action filed by one of its former employees after the County instituted a $20 bi-weekly nonparticipation fee. See Seff v. Broward County, Florida, No. 11-12217 (11th Cir., Aug. 20, 2012).

The former employee argued that the County’s wellness program did not qualify as a term of a “bona fide benefit plan” under the ADA, and therefore did not fall within the safe harbor provision, because the wellness program was not explicitly identified in the group health plan. The Eleventh Circuit rejected that argument, finding that the wellness program was a term of the group health plan because it was (1) part of the County’s contract with the insurer; (2) only available to group plan enrollees; and (3) presented as part of the group health plan in at least two employee handouts.

It is important to note that, while the County charged a fee for nonparticipation in its program, participation in the wellness program was not ultimately a condition for enrollment in the group health plan. Moreover, the insurer, not the County, utilized and had access to the information gathered from the examinations and inquiries. While pursuing a plan like the one utilized by Broward County may be attractive, obtain legal advice before instituting such a plan, especially if your business considers implementing the type of paycheck deductions used by Broward County, which tend to provoke litigation.

Court of Appeals Emphasizes Duty of Employer in Harassment Case

The Seventh Circuit Court of Appeals recently affirmed a finding of liability and reinstated a punitive damages award against an automobile manufacturer based on a jury’s reasonable conclusion that the employer did not promptly or adequately respond to an employee’s complaints of harassment. Although the employee was unable to identify who had left harassing and threatening notes in his toolbox and work area and vandalized his vehicles, the jury found that the employer could have done more to investigate and address the allegations. See May v. Chrysler Group, LLC, Nos. 11-3000 & 11-3109 (7th Cir., August 23, 2012). This decision highlights the need for every employer to take prompt and appropriate actions in response to employee complaints of harassment. Even in the face of egregious harassment by an employee, the employer can avoid liability by implementing reasonable policies and practices (including anti-harassment training) and by promptly investigating and taking reasonable steps to stop harassing conduct.

Georgia Non-Compete Law Effective May 11, 2011

The Eleventh Circuit Court of Appeals has ruled that Georgia’s new covenant laws (O.C.G.A. § 13-8-51 et seq.) greatly enhancing the enforceability of employment-related restrictive covenants in Georgia do not apply to contracts entered into prior to May 11, 2011. While the ultimate authority on this question of Georgia law is the Supreme Court of Georgia, which has not ruled on this issue, for now the ruling by the Eleventh Circuit in Becham v. Crosslink Orthopaedics (June 4, 2012) should be considered definitive: covenant agreements entered into prior to May 11, 2011, will remain governed by Georgia’s traditional common law, hostile to enforceability. For covenant agreements entered into on or after May 11, 2011, Georgia’s new laws providing for greater enforceability of restrictive covenants will govern.

EEOC Issues Guidance on Criminal Records

The Equal Employment Opportunity Commission recently issued new “Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII of the Civil Rights Act of 1964.” The Guidance addresses the use of criminal records by employers when making hiring or other employment decisions. As general rule, Title VII does not prohibit employers from seeking criminal history information from applicants and employees, so long as the use of such information does not result in unlawful disparate treatment or disparate impact on the basis of race, national origin, or other classification protected by Title VII. The new Guidance consolidates prior guidelines on these topics and incorporates various federal court decisions published in the past two decades. EEOC provides examples of policies and practices relating to the use of criminal histories that will consistently support a defense that the practice is “job-related and consistent with business necessity.” The EEOC also suggests certain “best practices” to avoid liability, such as developing a “narrowly tailored” written policy for screening applicants based on criminal conduct, limiting inquiries about criminal records to those that would be job-related for the position, and maintaining the confidentiality of criminal records.

The Five Most Important Things Your Business Needs to Know Now About Georgia’s New Restrictive Covenant Law

Georgia’s new restrictive covenant law will become effective on November 3, 2010, if, as expected, Georgia voters ratify a proposed constitutional amendment on this year’s ballot. Here are five things your business needs to know right now:

1. Georgia’s new covenant law is likely to become effective immediately on November 3, 2010 – but will only apply to new contracts entered on or after that date.  The stage is set for Georgia voters on November 2 to approve an amendment to the Georgia Constitution that will dramatically change the landscape of employment restrictive covenants in Georgia.  If the amendment is approved, as expected, the new law will take effect immediately – but only prospectively.  Contracts dated prior to November 3 will continue to be evaluated (stricken or upheld) according to the traditional strict scrutiny analysis.  Only new contracts entered into on or after November 3 will be governed by the dramatically different new law.
2. Non-compete covenants are back!  Under the new law, non-competition covenants will reemerge as viable means for Georgia employers to protect their investments in human capital.  This means that qualifying employees can be prohibited from competing for up to two (2) years in a specified geographic territory.  Under the new law, the covenant need not precisely define the geographic scope as long as the maximum geographic scope can be reasonably determined at the time of termination.  Thus, it will be essential to specify the maximum geographic scope to a departing employee upon separation.
3. Customer non-solicitation covenants remain a good option, and are now even better.  Employers will be even better positioned to prohibit former employees from soliciting clients on behalf of a new employer.  While historically non-solicitation covenants have been a good option for Georgia employers, the new law permits non-solicitation covenants to be more broad, and more enforceable, than ever.
4. “Blue penciling” is now permitted, but is not mandatory.  Perhaps the most significant reversal from current law is that a court may now salvage an otherwise unenforceable covenant by modifying, or “blue penciling,” the invalid portions and enforcing the remainder.  This provision, however, is not mandatory — a court is not required to modify a covenant that is unreasonably overbroad, or if it appears that the employer was overreaching.  At this point, it is difficult to predict how often and under what circumstances Georgia courts will employ or reject the new “blue pencil” option.  Accordingly, even though the new law will allow more aggressive covenants, it is still important to draft reasonable covenants within the boundaries of the new law.
5. Your company’s “confidential information” can now be protected indefinitely, as long as it qualifies as “confidential information.”  For years, Georgia law has permitted employers to protect “confidential information” (i.e., proprietary information falling short of formal “trade secret” status) for only a limited period of time – usually about two years after separation from employment.  Now, employers can protect their “confidential information” and “trade secrets” for as long as the information remains sensitive and confidential.

Georgia’s new covenant law is complex and, because it is brand new, untested in the courts.  These headlines offer a summary of certain key aspects of the anticipated new law.  Please understand, however, that these headlines are merely summaries.  Restrictions and qualifications abound, so consult your attorney before undertaking to revise or draft contracts under the new law.

If you have any questions about this Employment Law Headline, or about any legal matter relating to your company’s workplace, please contact any member of our firm.