Walcheske & Luzi, LLC Employment Law Firm http://www.walcheskeluzi.com Wisconsin's Employment Lawyers Fighting Discrimination, Harassment, FMLA, Retaliation, Rights & Benefits Mon, 08 Feb 2016 14:43:02 +0000 en-US hourly 1 http://wordpress.org/?v=4.2.1 In the News: Prayer Breaks and Religious Accommodations http://www.walcheskeluzi.com/blog/in-the-news-prayer-breaks-and-religious-accommodations/ http://www.walcheskeluzi.com/blog/in-the-news-prayer-breaks-and-religious-accommodations/#comments Mon, 08 Feb 2016 14:43:02 +0000 http://www.walcheskeluzi.com/?p=3793 Last week, local manufacturer Ariens Co. made headlines when it fired seven Muslim employees for taking unscheduled prayer breaks in violation of company policy. Reports indicate that Ariens recently changed its policy on this issue, asking employees to pray during scheduled breaks. Reports also claim employees were previously allowed to leave their work stations at different times to pray.

An advocate for the employees has already suggested they may file a charge over the terminations. Some readers might ask, what is the legal analysis here? We won’t take a position on the likelihood of any outcome, but we can provide some information on what the Equal Employment Opportunity Commission or a federal court will examine.

Employers are prohibited from discriminating against an individual on the basis of their religion under Title VII of the Civil Rights Act of 1964. An employer is also required to accommodate an employee’s religious practices unless an accommodation would cause “undue hardship” to the employer. An employer bears the burden of demonstrating an accommodation causes an undue hardship if an employee is able to meet the basic elements, or what is known in the legal world as a prima facie case, of religious discrimination. The central issue of any legal dispute between Ariens and its recently discharged Muslim employees is likely to be whether allowing the employees to pray outside of scheduled break times would cause Ariens an undue hardship. Reports on this issue have described that Ariens claims such accommodation would cause it millions of dollars.

Readers may recognize the terms “reasonable accommodation” and “undue hardship” from issues involving the Americans with Disabilities Act. However, it is important to note that an employer bears a lower burden of demonstrating undue hardship in the Title VII religious discrimination context than it does under the ADA. The Seventh Circuit, the federal appellate court controlling in Wisconsin, has recently described this burden as more than a showing of “minor inconveniences.” However, the United States Supreme Court long ago held that an employer will meet this burden by showing the accommodation requires “more than a de minimis cost” to the employer.

Federal regulations offer some additional help to guide whether a religious accommodation is a reasonable one that does not cause undue hardship. Those regulations include the example that “flexible work breaks” may be a means of providing reasonable accommodation for an employee’s religious practices. However, the regulations go on to explain that the “de minimis cost” analysis will include examining “the identifiable cost in relation to the size and operating cost of the employer, and the number of individuals who will in fact need a particular accommodation.” In other words, the same religious accommodation may be an undue hardship for the mom and pop shoe store but not for the international conglomerate. Of course, federal regulations are not binding authority for any court but typically are persuasive for any decision.

At least one federal district court took on the issue of Muslim prayer breaks and reasonable religious accommodations in Haliye v. Celestica Corporation out of the District of Minnesota. There the court found issues of fact over whether the requested break accommodation caused the employer an undue hardship so that a summary judgment decision was not appropriate. The court credited the employees’ argument that other employees were permitted to take unscheduled breaks for other reasons, such as using the restroom. The court’s decision did not mean the plaintiffs “won” but instead that it wasn’t appropriate for the court to decide the issue as a matter of law. Additionally, it should be noted that these decisions are very fact intensive and can vary widely from one situation to the next.

The Ariens matter will certainly be one to follow as it has already made local headlines. Assuming the employees decide to pursue a charge of discrimination, Ariens may have a successful defense if it can demonstrate there is a significant cost to allow employees to take unscheduled prayer breaks. For updates and additional information, stay tuned to the Walcheske & Luzi, LLC blog.

A quick reminder that this blog is only intended to provide information on the subject matters discussed and does not constitute legal advice. Any insight, analysis, and information may change as facts are established and developed.

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DOL Highlights Joint Employer Liability Under FLSA http://www.walcheskeluzi.com/blog/dol-highlights-joint-employer-liability-under-flsa/ http://www.walcheskeluzi.com/blog/dol-highlights-joint-employer-liability-under-flsa/#comments Tue, 26 Jan 2016 21:37:18 +0000 http://www.walcheskeluzi.com/?p=3786 The U.S. Department of Labor (DOL) recently called attention to joint employer relationships through an administrator’s interpretation issued on January 20, 2016. While not binding law, the release from DOL should alert employers who knowingly share employees with other entities to potential liability they may face under the federal Fair Labor Standards Act (FLSA).

Readers may recall that the FLSA is the federal law that regulates wage and hour practices in workplaces. It requires employers to do things like pay employees a minimum wage and pay non-exempt employees an overtime rate for all hours worked over 40 in a week. Although individuals may rely on civil litigation to enforce violations, the DOL’s Wage and Hour Division also enforces the FLSA. As the government’s enforcing agency, courts typically give DOL’s opinion great weight when evaluating cases.

In its January 20, 2016 administrator’s interpretation, DOL stated that many current employment relationship models involve two or more employers. DOL breaks it down into two types of joint employment: horizontal and vertical.

Horizontal joint employment exists where “two (or more) employers each separately employ an employee and are sufficiently associated with or related to each other with respect to the employee.” Think of the franchise owner who has employees working at different locations that may operate under different legal entities but are all managed by the same people. DOL advises that determining whether a horizontal joint employment relationship exists focuses on the relationship of the employers to each other.

DOL also identified vertical joint employment as another relevant relationship. This occurs where an employee of one employer is economically dependent on another employer. This type of relationship may exist with employers who rely on staffing agencies to fill some hiring needs or subcontractors on construction projects. In contrast with horizontal joint employment, DOL advises that the analysis for vertical joint employment focuses on an employee’s relationship with the potential joint employer.

Although joint employment relationships of either nature are important for a number of reasons, two significant ones relate to liability. If a joint employment relationship exists, an employee’s hours worked for each employer will be combined to determine whether the employee must be paid overtime. For example, assume Employer A and Employer B are horizontal joint employers of Bill. In a given week, Bill works 25 hours at Employer A and works 20 hours at Employer B. Under a joint employment relationship between Employer A and Employer B, Bill should receive 5 hours of overtime pay (25 hours + 20 hours = 45 hours). If Bill is not receiving overtime pay when he works over 40 hours, Employer A and Employer B violate the FLSA.

A second significant reason joint employment relationships are important deals with who can be held accountable if there is a FLSA violation. Take our example with Bill above. If Bill is owed but not receiving overtime compensation each week, he could sue to recover the unpaid wages. Under a joint employment relationship, Employer A and Employer B are what is called “jointly and severally liable” for Bill’s damages. That is, Employer A and Employer B can each be required to pay Bill’s damages regardless of whether Bill worked at Employer A or Employer B more. When employers employ large workforces, even small violations can quickly accrue to large damages, which are significant to any party that may be held jointly and severally liable.

DOL’s administrative interpretation also offers guidance for employers to assist in determining whether a joint employment relationship exists. While helpful, much can be at stake if an employer attempts to rely on its own analysis alone. Employers with questions about even the possibility of a potential joint relationship should consult with counsel experienced in employment law to make sure you know your status and avoid any violations.

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The Supreme Court’s Latest and just what is a Rule 68 Offer of Judgment Anyway? http://www.walcheskeluzi.com/blog/rule-68-offer-of-judgement/ http://www.walcheskeluzi.com/blog/rule-68-offer-of-judgement/#comments Fri, 22 Jan 2016 14:13:51 +0000 http://www.walcheskeluzi.com/?p=3783 Chances are that if you’ve paid any attention to the rising number of Fair Labor Standards Act (“FLSA”) class and collective actions around the country concerning unpaid wages or overtime, you’ve run into something called an “offer of judgment” or, more formally, a “Rule 68 offer of judgment.” We’ll get to the Supreme Court’s decision yesterday affecting the reach of an offer of judgment, but let’s start with what an offer of judgment is and why they’re important.

In the Federal Rules of Civil Procedure, there’s “Rule 68. Offer of Judgment.” Fed. R. Civ. P. 68(a) states,

At least 14 days before the date set for trial, a party defending against a claim may serve on an opposing party an offer to allow judgment on specified terms, with the costs then accrued. If, within 14 days after being served, the opposing party serves written notice accepting the offer, either party may then file the offer and notice of acceptance plus proof of service.

In wage and hour cases (where these offers of judgment are fairly common), a defendant makes an offer of judgment if it sees the writing on the wall in terms of liability, meaning that it knows it (or likely) did not properly compensate the plaintiff(s), and is willing to accept a judgment against it in exchange for a specified, monetary sum. Essentially, it’s a settlement offer with a judgment attached.

The interesting aspect of these is what can happen if an offer of judgment is not accepted.

Fed. R. Civ. P. 68(d) states, “If the judgment that the offeree finally obtains is not more favorable than the unaccepted offer, the offeree must pay the costs incurred after the offer was made.” In simpler terms, if a plaintiff gambles and loses, in that s/he rejects an offer of judgment and ends up winning less than what the defendant offered, the plaintiff is on the hook for the defendant’s costs between the time of the offer and the time judgment is entered.

In 2012, the Supreme Court took the potential consequences a step further, holding in Genesis Healthcare Corp. v. Symczyk that if a plaintiff brings a collective action on behalf of her/himself and other similarly affected employees and rejects an offer of judgment that would fully satisfy the plaintiff’s own, personal claim, then the plaintiff’s claim is moot and the entire case can be dismissed unless the plaintiff can demonstrate a personal interest in representing the other class members. This was dubbed “picking off” the plaintiff, because if a defendant made such an offer and it was rejected, the defendant could avoid facing the costs and potential exposure of a collective action brought by that plaintiff.

Fast forward to yesterday, when the Supreme Court made an about face in Campbell-Ewald Company v. Gomez. In Gomez, the Court adopted Justice Kagan’s dissent in Genesis Healthcare and held that an unaccepted offer of judgment has no force. “Like other unaccepted contract offers, it creates no lasting right or obligation. With the offer off the table, and the defendant’s continuing denial of liability, adversity between the parties exists.” Translation: a plaintiff can no longer be picked-off in an attempt to avoid a larger, collective action.

What does this mean on a very practical level? (1) It’s time to get your attorney on the phone to setup a wage and hour audit of your workplace if you have not done one already. Class and collective actions are on the rise, a trend that we expect to continue for some time. This is particularly true with the new salary-level regulations going into effect later this year, which have a far-reaching impact; and (2) Rule 68 offers of judgment remain a useful tool for defendants in wage and hour litigation; however, offers of judgment no longer offer an avenue to halting a collective action in its tracks in their early stages.

 

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Is Your Wellness Program “Well” According to the EEOC? Part II http://www.walcheskeluzi.com/blog/is-your-wellness-program-well-according-to-the-eeoc-part-ii/ http://www.walcheskeluzi.com/blog/is-your-wellness-program-well-according-to-the-eeoc-part-ii/#comments Mon, 18 Jan 2016 20:46:40 +0000 http://www.walcheskeluzi.com/?p=3776 Last year, we wrote about recent challenges by the EEOC to the lawfulness of company wellness programs under the Americans with Disabilities Act. One of the cases highlighted in that discussion was a lawsuit brought in the Western District of Wisconsin against Flambeau Inc. District Judge Barbara Crabb ended the calendar year with a decision that should be celebrated by employers in concluding that Flambeau’s wellness program did not violate the ADA.

Flambeau offered its employees health insurance and in 2010 established a wellness program for those employees who enrolled in its health insurance plan.

The wellness program had two components—a health risk assessment and a biometric test. The health risk assessment required each participant to complete a questionnaire about his or her medical history, diet, mental and social health and job satisfaction. The biometric test was similar to a routine physical examination: among other things, it involved height and weight measurements, a blood pressure test and a blood draw.

At first, Flambeau offered a financial incentive to participate in the wellness program. Later, it eliminated that incentive and instead made the wellness program a requirement to participate in health insurance plan benefits.

The question for the court was whether Flambeau’s wellness program was a violation of the ADA, which provides that a “covered entity shall not require a medical examination . . . unless such examination is shown to be job-related and consistent with business necessity.” Flambeau successfully argued that its wellness program was protected by the ADA’s “safe harbor” provision for insurance benefit plans. The safe harbor provision establishes that the ADA “shall not be construed to prohibit or restrict” an employer from establishing or administering “the terms of a bona fide benefit plan that are based on underwriting risks, classifying risks, or administering such risks.”

The court highlighted that Flambeau’s wellness program was tied to its health insurance plan in finding that the safe harbor provision applied. Thus, it is important for employers with a wellness program, or that are considering adding a wellness program, that it is not “a stand-alone wellness program unrelated to the administration of insurance risks.” A wellness program should be tied to the employer’s health insurance plan to take advantage of the safe harbor provision and not violate the ADA prohibition against medical examinations.

This case is probably not the final word on the issue of wellness programs and the ADA. The EEOC very likely will appeal this decision to the Seventh Circuit Court of Appeals, and other cases with similar issues are currently pending. Check back here for updates and developments on this topic.

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FAQ: Are Non-Compete Agreements Enforceable in Wisconsin? http://www.walcheskeluzi.com/blog/faq-are-non-compete-agreements-enforceable-in-wisconsin/ http://www.walcheskeluzi.com/blog/faq-are-non-compete-agreements-enforceable-in-wisconsin/#comments Tue, 17 Nov 2015 23:01:15 +0000 http://www.walcheskeluzi.com/?p=3770 For some reason or another, we’ve experienced a significant up-tick in the number of times this question is coming up, so we wanted to take a moment to answer it with a stereotypical attorney response: “Yes, but not always.”

Currently (more on this in a bit), in order for a non-compete agreement to be enforceable in Wisconsin, it must:

  1. Be necessary for the protection of the employer;
  2. Have a reasonable time restriction;
  3. Have a reasonable territorial limit (distance from the employer or geographical area);
  4. Not be harsh or oppressive to the employee (i.e., be too overbroad); and
  5. Not contradict public policy (e.g., eliminating the only certified cat surgeon in a 50-mile radius from being a cat surgeon within a 50-mile radius)

Further, “consideration” (some sort of benefit) must be provided to the employee in exchange for signing the agreement. Notably, the Wisconsin Supreme Court held this year that continued employment can be sufficient consideration for a non-compete agreement. This of course means that in order for an employer to make continued employment the consideration for signing such an agreement, it must be prepared to terminate the individual in the event s/he does not sign it, but I digress.

So, assuming that the non-compete agreement is necessary to protect the employer, contains reasonable time and geographic restrictions, is not overly oppressive to the employee, and does not contradict public policy, the agreement will be enforceable in Wisconsin. If not, then it will not be enforceable.

However, to circle back on the “Currently” while also reinforcing the importance of keeping up to date with the constant changes in employment law, this all may soon be changing. This year legislation was introduced that would significantly alter the non-compete landscape and make them significantly easier to enforce. For more information on this potential change, click here and scroll to the section of the blog titled “2015 Senate Bill 69 – Restrictive Covenant Reform.” If these changes do go through, be sure that we will cover them here.

Of course, for further guidance on properly drafting a non-compete agreement for your workplace of having your current agreement reviewed for enforceability, please contact any of the fine attorneys at Walcheske & Luzi.

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So a Wisconsin Employee Shows Up on the Ashley Madison Hack Information… http://www.walcheskeluzi.com/blog/so-a-wisconsin-employee-shows-up-on-the-ashley-madison-hack-information/ http://www.walcheskeluzi.com/blog/so-a-wisconsin-employee-shows-up-on-the-ashley-madison-hack-information/#comments Thu, 27 Aug 2015 17:57:16 +0000 http://www.walcheskeluzi.com/?p=3734 Last week, hackers dumped 9.7 gigabytes of account information from the Ashley Madison website. For those of you who don’t know what Ashley Madison is – bless you – it is a dating website that serves would-be adulterers. Perhaps the most highly publicized account holder from the scandal was reality TV star Josh Duggar of TLC’s show “19 Kids and Counting.”

Of course, we’re interested in the employment law link on this blog. This leads to the important question of this post – what are the implications if an employee is terminated because the employer finds his or her name among the gigabytes of account information from Ashley Madison?

The Wisconsin Fair Employment Act creates two protected classes not found in federal law relevant to this discussion: (1) arrest or conviction record; and (2) use or nonuse of lawful products off the employer’s premises during nonworking hours.

The protected class of arrest or conviction record is raised here because adultery is a crime in Wisconsin. Wisconsin Statutes Chapter 944 addresses Crimes Against Sexual Morality, and Wisconsin Statute § 944.16 prohibits adultery. Specifically,

Whoever does either of the following is guilty of a Class I felony:

  • A married person who has sexual intercourse with a person not the married person’s spouse; or
  • A person who has sexual intercourse with a person who is married to another.

So an employer who makes an adverse employment decision based on an individual’s arrest or conviction for adultery may face liability under the Wisconsin Fair Employment Act. However, this would really only be relevant if a person was actually arrested or convicted for adultery. Moreover, under the Onalaska defense of Wisconsin law, an employer can take an adverse action when it is not based on an arrest or conviction but rather based on the employer’s own investigation and questioning that the individual committed an offense. Thus, if an employee is not arrested or convicted or if the employer is strictly relying on its own investigation, the employer probably is not facing liability under this protected class.

Perhaps the more interesting protected class to this discussion is the protection for use or nonuse of lawful products off the employer’s premises during nonworking hours. Most of the decisions dealing with this protected class address use of alcohol or drugs, so there is not clear precedent to go by. However, Ashley Madison seems to fit the bill of a lawful product, as morally offensive as it may be. If the employee’s use of the Ashley Madison website is strictly during nonworking hours, then the employee is likely protected from an adverse decision based on that conduct. But if the employee is using the site during working hours, then an adverse decision based on that use is not protected. The best policy for employers in these circumstances is to have a clear, well-articulated policy that prohibits the use of company devices for purposes not related to work.

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2015-2016 Wisconsin Legislature Update Part 2  http://www.walcheskeluzi.com/blog/2015-2016-wisconsin-legislature-update-part-2/ http://www.walcheskeluzi.com/blog/2015-2016-wisconsin-legislature-update-part-2/#comments Wed, 20 May 2015 19:22:21 +0000 http://www.walcheskeluzi.com/?p=3641 This week, our legislative update continues with three more additions to the list of new proposals. In this post, we’ll also tackle two of the most controversial topics taken up by the Wisconsin legislature. One of these, popularly titled “right to work” legislation, passed earlier this year. The other, requiring unemployment benefit recipients to undergo drug testing, appears well on its way to become the latest workplace law.

Assembly Bill 192 – Unemployment Insurance Drug Testing

Perhaps one of the most controversial proposals, AB192 would require certain applicants for unemployment insurance benefits to submit to drug testing to receive payments. In its current form, AB192 would require testing from those who were terminated for unlawful use of controlled substances or those individuals looking for suitable work in an occupation that regularly conducts drug testing. However, those occupations would be determined by the federal Department of Labor, which has yet to finalize the list of jobs to which this requirement may apply.

Even if passed, AB192 may face an additional hurdle of federal law. Late in 2013, a Florida federal district court found that a state law requiring recipients of Temporary Assistance to Needy Families benefits to submit to drug testing violated the Fourth Amendment restriction against unreasonable searches. Such an argument may significantly affect any Wisconsin law passed imposing similar requirements on unemployment benefit recipients. However, the Florida law broadly affected all recipients in contrast with the more-limited Wisconsin proposal.

The Department of Workforce Development’s Fiscal Estimate, received May 6, 2015, foresees $2.862 million in one-time costs to implement the proposal in its current form and $1.059 million in annual costs going forward. AB192 was read its third and final time in the Assembly and passed on May 13, 2015. Next, the Wisconsin Senate will take up the bill. With seemingly strong support of legislative Republicans, passage of AB192 is likely.

Assembly Bill 118 – Day of Rest Reform

Under Wisconsin’s current “one day of rest in seven” law, employees of factory or mercantile establishments, with some exceptions, must receive one day off every seven consecutive days. Employers who violate this law are subject to fines up to $100 for each offense. AB 118 would add an exception to this law so that an employee can voluntarily waive this legal requirement. Under the proposal, an employee must provide this waiver in writing by stating he or she voluntarily chooses to work without at least 24 consecutive hours of rest in 7 consecutive days.

AB 118 was introduced on March 27, 2015, and immediately referred to the Committee on Labor, where it currently remains.

2015 Wisconsin Act 1

Of course, most attention this legislative session has been dedicated to a bill that already passed into law. On March 10, 2015, Wisconsin became the latest “right to work” state with the publication of 2015 Wisconsin Act 1. This law prohibits employers from including as part of a collective bargaining agreement a term that requires all employees to become members of a union. Local publications have criticized the law for wanting evidence of any positive economic outcome, while at the same time one Milwaukee area CEO claimed the legislation was necessary to preserve area jobs. Regardless, this legislative session began with passage of a significant piece of workplace legislation.

 

 

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2015-2016 Wisconsin Legislature Update Part 1 http://www.walcheskeluzi.com/blog/2015-2016-wisconsin-legislature-update-part-1/ http://www.walcheskeluzi.com/blog/2015-2016-wisconsin-legislature-update-part-1/#comments Fri, 08 May 2015 14:45:26 +0000 http://www.walcheskeluzi.com/?p=3638 With the current Wisconsin legislature well under way, it is a good time to take a look at proposed and passed bills affecting labor and employment laws. Some of these are very likely to pass, while others stand little chance of becoming law given the political makeup of the 2015-2016 session. We’ll break the legislative activity up into two parts and provide detailed analysis in the future for any one of them that passes.

2015 Senate Bill 2 – Minimum Wage Reform

In a nutshell, SB2 seeks to raise the state minimum wage over the next few years and thereafter provide for regular increases. Currently, the minimum wage rate for employees generally in Wisconsin is $7.25 per hour, and for tipped employees $2.33 per hour. If passed, SB2 would provide for an immediate increase to $8.20 per hour for employees generally and to $3.00 per hour for tipped employees. Employees generally would then have a minimum wage of $10.10 per hour two years after SB2 passes. SB2 also provides for future regular increases of the state minimum wage for both employees generally and tipped employees that is tied to a formula based on the consumer price index. Tipped employees would also receive an annual increase in the minimum wage of 95 cents until the rate is 70% of the minimum wage for employees generally.

SB 2 was referred to the Committee on Labor and Government Reform on January 6, 2015. It remains in committee though a fiscal estimate on its effects for the Department of Workforce Development was received on April 28, 2015.

2015 Senate Bill 5 – Wage and Hour Claim Reform and New Disclosure Requirement

SB5 seeks to make several changes to the rules on filing a wage claim in Wisconsin. The bill would bring the Fair Labor Standards Act collective action concept to state law and allow an individual to file a claim on behalf of oneself and other employees who consent in writing. SB5 also increases the statute of limitations, or the time in which an employee can file a claim, from two to four years. The bill would also increase the liquidated damages an employer may be ordered to pay if found liable under Wisconsin wage and hour law. Currently, if an employee files a circuit court claim after an investigation by the Department of Workforce Development, he or she can collect an additional 100% of the unpaid wages as damages or 50% if he or she foregoes such an investigation. Those additional damages would increase to 200% and 100% respectively. With respect to wage claims, SB5 would also create penalties in the form of interests and surcharges for noncompliant defendants.

SB5 also creates a new disclosure statement requirement for all employers. The statement outlined by SB5 requires an employer to affirm the terms of employment to the employee. Such statement would need to be distributed to an employee at the time of hiring, on January 1 of each year, and no later than seven days prior to any change in the terms of employment. The “terms of employment” required by the disclosure statement include the employer’s contact information, wage and payment frequency information; when an employee may be paid at a higher rate; and other benefits the employer provides the employee. An employer failing to comply with this requirement may be forced to pay $50 per day that the statement is not provided and reasonable costs and attorney fees.

SB5 was referred to the Committee on Labor and Government Reform on January 16, 2015, where it remains. It has since received fiscal estimates from three government agencies, the most recent of which was from the Department of Workforce Development and is dated April 22, 2015.

2015 Senate Bill 69 – Restrictive Covenant Reform

SB69 would make significant changes to the law controlling enforcement of restrictive covenant agreements in Wisconsin. Restrictive covenant agreements include such contracts as non-compete agreements and non-solicitation agreements. These agreements are currently regulated by a Wisconsin statute, Wis. Stat. § 103.465, and a long line of court decisions.

If passed, SB69 will affect nearly everything lawyers know about enforcement of restrictive covenant agreements. For example, continued employment would constitute valuable consideration to support a restrictive covenant following passage of SB69 whereas current law does not recognize continued employment as sufficient consideration.

Perhaps most significantly, SB69 would make Wisconsin a “blue pencil” state with respect to restrictive covenants. That is, SB69 gives a court the power to rewrite an unenforceable agreement to make it enforceable. This is a major change as Wisconsin courts are not able to rewrite such agreements under current law.

SB69 was introduced on March 5, 2015. A similar bill, 2015 Assembly Bill 91, was also introduced in the Assembly on March 12, 2015. The senate version was immediately referred to the Senate Committee on Judiciary and Public Safety, where it remains as of this writing. As SB69 was introduced and co-sponsored by Republican legislators, in a Republican majority legislature, and enjoys the backing of the Wisconsin Manufacturers and Commerce lobbying group, SB69 stands a strong chance of becoming law. Check back with the Walcheske & Luzi blog for a detailed analysis if SB69 passes.

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Wisconsin Supreme Court Adds New Twist to Restrictive Covenant Law http://www.walcheskeluzi.com/blog/wisconsin-supreme-court-adds-new-twist-to-restrictive-covenant-law/ http://www.walcheskeluzi.com/blog/wisconsin-supreme-court-adds-new-twist-to-restrictive-covenant-law/#comments Wed, 06 May 2015 14:00:22 +0000 http://www.walcheskeluzi.com/?p=3636 Every few years the Wisconsin Supreme Court gives us a significant change or new addition to the law on restrictive covenants in our great state. True to form, the Court published Runzheimer International, Ltd. v. David Friedlen, et al., which should give employers good cause to reexamine their restrictive covenants with employees.

Let’s start with the basics. A restrictive covenant, for purposes of this discussion, is an agreement between an employer and an employee for the individual to not do something after the employment relationship ends. In Wisconsin, they are governed by statute, Wis. Stat. § 103.465. Typically, these agreements come in the form of noncompetition or nonsolicitation terms. With a noncompetition agreement, the employee agrees not to work for certain competitive businesses within a certain area and for a certain amount of time after the employment relationship ends. A nonsolicitation agreement usually requires that the employee agree not to try to convince other employees to leave employment for a competitor for a certain amount of time after the employment relationship ends.

Restrictive covenants are contracts and subject to the legal requirements of contracts. One of those requirements is that a contract must be supported by consideration to be enforceable. Very basically summarized, this means that the employee has to receive something or the employer has to experience something to its detriment for the promise of the employee. Prior to Runzheimer, consideration could take the form of things like money, such as a bonus, or the promise of new employment. However, the prevailing understanding in Wisconsin was that continued employment, where an employee was asked to sign a restrictive covenant agreement after commencing employment, could not suffice as consideration to make those terms enforceable.

Runzheimer changes this principle and holds that the condition of continued employment can serve as adequate consideration. In this case, David Friedlen worked for Runzheimer International, Ltd. for fifteen years when the company asked all employees to sign a restrictive covenant agreement. Friedlen was given a choice to either sign the agreement or be fired. Friedlen did not receive anything else. Friedlen signed the covenant and worked for two more years before he was fired. After that employment relationship ended, Friedlen tried to work at a competitor of Runzheimer’s, Corporate Reimbursement Services. Runzheimer then brought suit against Friedlen and CRS to enforce the agreement.

The Wisconsin Supreme Court found that Runzheimer’s restrictive covenants with Friedlen were enforceable. On the specific issue before the Court, it found that Runzheimer’s promise not to terminate Friedlen if he signed the agreement was the necessary legal consideration to make it an enforceable restrictive covenant. The Court did not take the path of requiring a certain period of continued employment to follow to make the agreement enforceable. Rather, the Court’s analysis focused on Runzheimer’s promise not to terminate Friedlen at the time if he signed the agreement. This promise to forebear its right to terminate an at-will employee was the necessary consideration to support the restrictive covenants.

Four takeaways from Runzheimer:

  • The promise not to fire an employee should be clear. The Court distinguished Runzheimer from NBZ Inc. v. Pilarski, where there was no evidence that the employer explicitly conditioned continued employment on agreeing to the restrictive covenant. Therefore, an agreement is more likely to be enforceable where continued employment is made explicitly conditional on assent to the restrictive covenant terms.
  • How long of a period of continued employment must follow assent to a restrictive covenant? Other states, such as Illinois, hold that two years of continued employment is required for there to be sufficient consideration. Essentially, the concurring opinion of Chief Justice Abrahamson seems to suggest that the appropriate analysis would look at the period of employment following assent to the restrictive covenant agreement. But the majority opinion takes a narrower view where a short period of continued employment can negate the agreement because it does not rely on continued employment as consideration – rather, it is the promise to forebear on its right to terminate. This issue will likely be an argument for future courts to clarify.
  • Speaking of length of continued employment . . . employees still have an out. The Court specifically cited legal claims such as “fraudulent inducement or good faith and fair dealing” that might make a restrictive covenant unenforceable where it relies on the condition of continued employment as consideration. This is seemingly a more complicated means of addressing adequacy of consideration than other courts follow to set out how long the employment relationship must continue to be considered lawful consideration. Employees who are employed for a short period of time after agreeing to the terms of a restrictive covenant are likely to channel those facts through these claims identified by the Court.
  • Whether an employee quits or is terminated may be significant to the issue of consideration. Throughout the opinion, the Court’s analysis focused on employer conduct in examining consideration. Whether an employee quits after a short period of continued employment may be significant to whether a restrictive covenant agreement is enforceable.
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Is Your Wellness Program “Well” According to the EEOC? http://www.walcheskeluzi.com/blog/wellness-program-well-according-eeoc/ http://www.walcheskeluzi.com/blog/wellness-program-well-according-eeoc/#comments Tue, 21 Apr 2015 15:53:34 +0000 http://www.walcheskeluzi.com/?p=3532 On Monday, April 20, 2015, the EEOC took a big step towards clarifying some hot button questions concerning the Americans with Disabilities Act and employer wellness programs by issuing a notice of proposed rulemaking. Much confusion has been generated in recent years over how wellness programs interact with the ADA. By providing notice of proposed rules, the public now may provide comment before these rules go into effect.

A wellness program is offered as part of an employer’s health insurance benefits. It is intended to provide an incentive to improve any participant’s health. Wellness programs are divided into two categories: (1) participatory or (2) health contingent. A participatory wellness program provides a reward for showing up. That is, an employee might receive reimbursement for maintaining a gym membership. A health contingent wellness program requires an individual to perform. For example, an employee might receive a reward under the wellness program if he or she quits smoking.

Wellness programs received a stamp of approval of sorts from the Obama Administration when in 2013 the Departments of Health and Human Services, Labor, and Treasury issued final rules on wellness programs following implementation of the Affordable Care Act. Generally, these final rules set limits on the effects and standards of wellness programs out of concern for the safety of some participants.

However, in recent years, the EEOC has raised some eyebrows over litigation that addresses employers’ attempts to implement certain wellness programs. Some of these lawsuits are occurring right here in our backyard of Wisconsin. For example, in October 2014, the EEOC announced a lawsuit against an employer that alleged, in part, the employer’s wellness program required medical examinations and made disability-related inquiries in violation of the ADA. In another suit announced by the EEOC, an employer was alleged to have also violated the ADA’s prohibition against disability-related inquiries through the employer’s requirement that employees complete biometric testing as part of its wellness program.

Since the EEOC filed these lawsuits, many employers and practitioners have begged for clarification on when a wellness program conflicts with the ADA. Much of the confusion comes from the ADA allowing health-related inquiries or medical examinations when they are voluntary. Determining what exactly is permissibly voluntary or impermissibly required by an employer is perhaps the most significant issue the proposed rules, available here, seek to clarify. On this issue, the proposed rules explain:

“[T]he maximum allowable incentive for a participatory program that involves asking disability-related questions or conducting medical examinations (such as having employees complete a [Health Risk Assessment]) or for a health contingent program that requires participants to satisfy a standard related to a health factor may not exceed 30 percent of the total cost of employee-only coverage.”

Thus, the EEOC’s proposed rule does “well” to add some certainty to this area. It provides a hard number to refer to in examining a wellness program. Employers can now look at the value of the incentive they wish to provide and compare it to the cost of health benefits to the individual employee and determine whether their wellness program complies with the ADA.

Other useful materials provided by the EEOC related to the new proposed rules include a Fact Sheet for Small Businesses and a Q&A document.

The public has 60 days or until June 19, 2015 to provide comment on the proposed rules. Stay tuned to the Walcheske & Luzi blog for an update when the final rules go into place.

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