Legal Report March 2013

​U.S. JUDICIAL DECISIONS

EMPLOYMENT. The National Labor Relations Board (NLRB) has ruled that a company violated federal law when it fired an employee for writing offensive and threatening remarks on newsletters in a staff break room. According to the NLRB, the company knew or should have known that the employee’s motive was to promote union activity rather than to frighten coworkers.

In September 2009, Kevin Grosso was employed by Fresenius, a manufacturer and distributor of disposable dialysis products. Grosso, who worked in one of the company’s warehouses, was part of a work force that had been unionized the year before. A petition had been submitted to decertify the union following a failed attempt to reach a collective bargaining agreement. The vote on the decertification was scheduled for September 23.

On September 10, three of the union newsletters in the employee break room were vandalized. On one newsletter, someone had written a vulgar term to describe employees. Another newsletter read: “Hey cat food lovers, how’s your income doing?” And, on the third newsletter, someone had written: “Warehouse workers, RIP.” Each handwritten statement was anonymous.

After seeing the comments, several employees complained to management, saying they found the statements to be offensive and threatening. Managers asked the employees to submit their complaints in writing. After receiving the complaints, the company launched an investigation.

One employee came forward to say that she recognized the handwriting on the newsletters. The employee offered copies of the handwritten logs kept by company drivers. The handwriting of one employee, Grosso, matched the statements. Grosso was interviewed about the incident by several company managers, including Fresenius Vice President Kevin King. Grosso denied writing anything on the newsletters.

The next day, Grosso tried to call his union representative to discuss the issue. However, Grosso mistakenly called King. Grosso then confessed to writing the statements on the newsletters. King identified himself and told Grosso to report to work to discuss the issue. Grosso was then suspended pending further investigation.

After reviewing the issue with HR, King terminated Grosso’s employment. Grosso was told that he was being fired because of the comments on the newsletters and because of his dishonesty during the investigation. Grosso appealed his firing to the NLRB.

During the trial proceedings, Grosso said that he did not intend to threaten or offend anyone. He said that he used offensive terms to indicate that employees should take action to oppose the decertification. Further, the “RIP” statement meant that employees would lose their livelihood if the union was quashed.

The NLRB found that the company did not violate labor law through its investigation and questioning of Grosso. The company, ruled the board, never questioned Grosso about his union activity or his union views. However, the NLRB ruled that Grosso was fired illegally. His motivation for writing on the newsletters was to encourage his fellow coworkers to oppose the decertification.

The only way Grosso could be fired for his protected activity, ruled the board, was if his actions were so egregious as to cause the loss of that protection. According to the NLRB, Grosso’s actions did not rise to this level. In the written opinion of the court, the NLRB said: “Fresenius and the warehouse workers knew or reasonably should have known that Grosso’s comments had nothing to do with harassment and everything to do with the upcoming decertification election in the warehouse unit.”

One board member, Brian Hayes, offered a dissenting opinion. Hayes argued that the decision offers too much protection to employees and hampers employers’ ability to comply with harassment laws. In his dissent, Hayes writes of the decision: “These pronouncements confer on employees…a degree of insulation from discipline for misconduct that the [law] neither requires nor warrants.”

Hayes goes on to predict that the decision will be applied too broadly in the future and will come into conflict with other workplace laws. He writes that the decision will “impermissibly fetter the ability of employers to comply with the requirements of other labor laws and to maintain civility and order in their workplace by maintaining and enforcing rules nondiscriminatorily prohibiting abusive and profane language, sexual harassment, and verbal, mental, and physical abuse.” (Fresenius USA Manufacturing, National Labor Relations Board, No. 02-CA-039518, 2012)

BACKGROUND SCREENING. A federal district court upheld a provision of federal law that makes it illegal for consumer reporting agencies to disclose background check information that is more than seven years old. The law was challenged on the grounds that it violates the First Amendment. The court ruled that the law passes constitutional muster.

In early 2010, Shamara King applied for a job with the U.S. Postal Service. In considering her application, the postal service ordered a background check from General Information Services (GIS). The report GIS provided on King included criminal charges that had been voluntarily dismissed by the prosecution 10 years earlier.

On behalf of herself and others, King filed a class action lawsuit against GIS, claiming that the company violated the Fair Credit Reporting Act (FCRA). Specifically, King alleged that GIS reported information that was 10 years old even though the FCRA limits disclosures to the previous seven years.

GIS then filed a motion claiming that the FCRA’s time limit of seven years is unconstitutional because it violates the First Amendment right to free speech.

The court noted that restrictions may not be put on speech concerning public matters under the First Amendment. However, in the case at hand, the court ruled that information being exchanged was private and was gathered for a narrow, commercial purpose. In the written opinion of the case, the court wrote that “the private nature of these consumer reports does not significantly contribute to the public dialogue and, accordingly, this court finds that such information warrants a reduced constitutional protection.”

The ruling allows King to pursue her class action lawsuit against GIS. (King v. General Information Services, Inc., U.S. District Court for the Eastern District of Pennsylvania, 2012)

INVESTIGATIONS. The Illinois Supreme Court has ruled that a company is liable for pretexting undertaken by a third party on the company’s behalf. The court ruled that the company must pay compensatory and punitive damages to the employee who was the target of the investigation.

Kathy Lawlor was a top saleswoman at North American Corporation in Chicago in 2005. By that time, she had been employed for seven years in the company’s printing division, and in 2004 alone, she had earned more than $200,000. She was about to land the company a five-year account with MapQuest, a major client that would bring in several million dollars, when she was called into a meeting with the company’s owner. The executive told Lawlor that her normal commission of 30 percent would not be applied to the new account. Lawlor was told to sign a document consenting to the new arrangement. The owner warned that if Lawlor did not sign the document, she would not be paid. Instead of signing, Lawlor resigned.

The next week, Lawlor received a letter from her former employer demanding more than $20,000 it said she was overpaid in commissions. Lawlor found this surprising since she believed the company owed her commissions on accounts she had finalized before she resigned. Lawlor hired a lawyer and sued North American, seeking thousands of dollars in compensation.

North American, meanwhile, was concerned that Lawlor was trying to steal the MapQuest account away from the company and might have disclosed confidential information during a job interview with a competitor in 2004. The company hired a private investigations firm to ascertain whether these suspicions were true. The private investigator hired a third-party researcher to gather information. This third party obtained Lawlor’s telephone records without her consent and turned the data over to North American.

Lawlor found out about the investigation and expanded her lawsuit to include invasion of privacy. The company filed a separate claim against Lawlor for anticompetitive conduct. The judge in the company’s suit found that Lawlor had behaved inappropriately and ordered her to pay North American more than $630,000 in commissions and punitive damages. The jury deliberating Lawlor’s claim, however, found that the company did invade her privacy and awarded her $65,000 in compensatory damages and $1.8 million in punitive damages. Both parties appealed. (At a separate trial appealing the amount of the punitive damages, the court reduced the punitive damages to $650,000.)

The Illinois Court of Appeals affirmed the damages against North American, finding that the company did sanction its investigators to use pretexting to get Lawlor’s telephone information. The court reversed the judgment against Lawlor, ruling that the company’s claim of disclosure of confidential information was based on an “unproven assertion.” North American appealed the decision.

On appeal before the Illinois Supreme Court, North American changed legal arguments. The company conceded that obtaining Lawlor’s telephone records was wrong. However, the company claims that it cannot be held responsible because a third party conducted the pretexting. The state supreme court upheld the lower court’s decision, ruling that there was sufficient evidence to prove that the third party gathered the information at North American’s request. Therefore, ruled the court, North American was liable for the actions of the third party.

However the court further reduced the amount of Lawlor’s punitive damages. According to the court, the punitive damages should be $65,000, to match the compensatory damages. In the written opinion of the case, the court explained: “There was no evidence presented to the jury that North American has an intentional, premeditated scheme to harm Lawlor. As recognized by the trial court, the phone records were obtained as part of a legitimate investigation into a possible violation of a noncompete agreement, not out of any animus toward Lawlor.” (Lawlor v. North American Corporation of Illinois, Illinois Supreme Court, No. 112530, 2012)

STATE LEGISLATION

California
EMPLOYMENT. A new law (formerly A.B. 2674) specifies when and how employees may request copies of their personnel file. Under the new law, requests must be in writing; an employer must respond to the request within 30 days, but prior to making the copies available, the employer must redact the names of any nonsupervisory employees in the record. Employers must retain copies of personnel records for at least three years after the employee’s termination.

Michigan
MONITORING. A new law (formerly S.B. 1291) in Michigan will impose new licensing fees on alarm monitoring companies. Under the law, alarm monitoring companies will be required to renew their licenses annually and pay an annual fee.

Companies will also be required to perform background checks on any employee or contractor who enters a customer’s premises to sell, lease, maintain, repair, install, or provide other service to the alarm system. Companies may not hire employees if the background check reveals that the employee served a felony prison sentence or was convicted of a felony involving assault, dishonesty or fraud, unauthorized divulging or selling of information or evidence, impersonation of a law enforcement officer or government employee, illegal weapons use or possession, drug possession, or two or more alcohol related offenses. Employees may not be hired if they had been adjudged insane or if they have any outstanding arrest warrants. The law provides some exemptions.

This column should not be construed as legal or legislative advice.