1 2014 ACC-SoCal In-House Counsel Conference #IHCC14 “That’s Entertainment! Well, At Least The Lawyers Will Enjoy It” January 22, 2014 Beverly Hills, California

12014 ACC-SoCal In-House Counsel Conference #IHCC14

“That’s Entertainment!Well, At Least The Lawyers Will Enjoy It”

January 22, 2014Beverly Hills, California

Sponsored By Ogletree, Deakins, Nash, Smoak & Stewart P.C.

Moderator: Tiffany W. Easton, Esq.

Panelist(s): Keith A. Watts, Esq.

#IHCC12

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#IHCC142014 ACC-SoCal In-House Counsel Conference

Insert Sponsor Logo here

Overview – Lights! Action! Litigate!

Unpaid interns

Individual expression

Bullying in the workplace

Trade secrets

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Overview

Unpaid interns

Bullying in the workplace

Trade secrets

Individual expression

Clashes between the rights of employees and the employer’s business interests.

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Interns and Volunteers

“Attention To Detail” is “Key”

State and federal labor laws define “employee” very broadly.

“Employees” are subject to federal and state minimum wage and overtime laws.

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The DOL has made clear that most volunteers and interns will be viewed as employees: – “Under the [FLSA], employees

may not volunteer services to for-profit private sector employers.”

– “Internships in the ‘for-profit’ private sector will most often be viewed as employment . . . .”

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Lawsuits brought by unpaid workers such as volunteers and interns are on the rise.

In August a putative class action was brought against MLB by event “volunteers” who worked at All-Star Games and related events, such as FanFest. Potential class could include at least 2,000 people.

Law is short on guidance with respect to volunteers.

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USDOL has made clear that sports leagues and teams are subjects of interest.

USDOL has contacted MLB and investigated the wage practices of two MLB clubs.

USDOL will be meeting with all MLB clubs at the Winter Meetings on various topics of concern – including unpaid interns, exemptions, and daily-rate paid employees.

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Numerous class action lawsuits have been filed in the sports and entertainment industries alleging that unpaid interns are subject to minimum wage and overtime laws.

– E.g., Pittsburgh Power (arena football), Fox Searchlight (interns from “Black Swan” film), MSG, Hearst Corp., Sony, Warner, etc.

State of case law is in flux and several decisions are on appeal.

Expect more cases to filed until standard is clarified.

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Volunteers

DOL has taken the position that employees may not volunteer services to for-profit private sector employers,

However, there are situations in which they may do so for private, not-for-profit employers if:

– the individual neither contemplates nor receives compensation (but may collect paid expenses, reasonable benefits, or a nominal fee);

– the services have a civic, charitable, or humanitarian purpose;

– the services are provided without pressure or coercion; and

– the services rendered are not the same type of services rendered by the individual in his/her capacity as an employee of the same entity.

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Volunteers

DOL has taken the position that employees may not volunteer services to for-profit private sector employers,

However, there are situations in which they may do so for private, not-for-profit employers if:

– the individual neither contemplates nor receives compensation (but may collect paid expenses, reasonable benefits, or a nominal fee);

– the services have a civic, charitable, or humanitarian purpose;

– the services are provided without pressure or coercion; and

– the services rendered are not the same type of services rendered by the individual in his/her capacity as an employee of the same entity.

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Volunteers

Some leagues, e.g., the NFL, have used a not-for-profit “host committee” to organize their volunteers.

It is, however, unlikely that a not-for-profit entity would escape liability for wage and hour violations stemming from the use of volunteers because the services the volunteers provide is not civic, charitable, or humanitarian in nature.

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Volunteers

Examples of what the USDOL considers to be “civic, charitable, or humanitarian” in nature:– Men's or women's organizations sending members or

students into hospitals or nursing homes to provide certain personal services for the sick or elderly;

– Parents assisting in a school library or cafeteria as a public duty to maintain effective services for their children;

– Individuals volunteering to perform such tasks as driving vehicles or folding bandages for the Red Cross; and

– Working with disabled children or disadvantaged youth.

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Internships

Private sector employers must pay their interns unless they meet a very rigid six-factor test under the federal law.

Some states, such as California, look at additional Interns and Volunteers factors.

Main focus of analysis is whether the internship is primarily for intern’s benefit.

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Internships

Private sector employers must pay their interns unless they meet a very rigid six-factor test under the federal law.

Some states, such as California, look at additional factors.

Main focus of analysis is whether the internship is primarily for intern’s benefit.

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The Criteria for Internshipsto be Unpaid under Federal Law

1. The internship is similar to training that would be given in an educational environment

2. The experience is for the benefit of the intern

3. The intern does not displace regular employees and works under close supervision of existing staff

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The Criteria for Internships to be Unpaid under Federal Law (cont’d)

4. Employer derives no immediate advantage from the activities of the intern, and on occasion its operations may be actually be impeded

5. No promise of a job at the conclusion of the internship; and

6. Mutual understanding that the intern is not entitled to wages for the time spent in the internship.

Fact Sheet #71, USDOL

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Federal Exemption May Apply

Interns/volunteers are exempt from federal minimum wage and overtime laws if employees of an “amusement or recreational establishment” and if:

– The establishment doesn’t operate for more than 7 months in any calendar year; OR

– In the preceding calendar year, the monthly average of total receipts for the lowest six months is not more than 33⅓ percent of the receipts for the greatest six months.

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Considerations in Relying on Amusement/Recreational Exemption

“Major league baseball teams may properly be considered ‘recreational establishments, or establishments designed for ‘amusement.’” And, “establishments” include “sports events.” Adams v. Detroit Tigers

Case law calls into question proper method of accounting – cash or accrual method?

Consider the practical implications of disclosing confidential revenue figures.

Also consider implications of what is defined as revenue for HRR.

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Additional Criteria under California Law

Students working as interns or trainees to fulfill licensing requirements, or to qualify for a skilled vocation or profession, are not employees if the training is academically oriented and designed primarily for the benefit of the student. The DLSE requires that the training be an essential part of an established course at an accredited school, or of an institution approved by a public agency to provide training for licensure.

The program may not be for the benefit of any one employer, a regular employee may not be displaced by the trainee, and the training must be supervised by the school or a disinterested agency. The DLSE considers a student receiving on-the-job training with a specific employer to be an “employee" covered by state wage-and-hour laws. An employer may not avoid wage and hour laws by calling an employee a 'trainee.'

An employee may be paid a subminimum wage as a 'learner' during the first 160 hours of employment in occupations in which the learner has no previous or similar or related experience.

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Don’t Forget! Joint Employer Issues . . . .

“Employer” includes “any person” other than a labor organization “acting directly or indirectly in the interest of an employer in relation to an employee.” 29 U.S.C. § 203(d).

Thus, more than one employer (e.g., both the league and the club) can be responsible for minimum wage and overtime violations.

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Potential Liability – Interns

Liquidated damages (double damages)

Attorneys’ fees

Defense costs

Statute of limitations is 3 years under federal law.

Example: – One intern works 30 hours/week at $7.25/hour (minimum

wage) for a year = $11,310

– Ten interns working 30 hours/week at $7.25/hour for a year = $113,100

– Ten interns working 30 hours/week at $7.25/hour for 6 years = $678,600

– Liquidated (double) damages = $678,600

– Total = $1,357,200 plus costs and fees

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Potential Liability – Volunteers

Example: The NFL has 15,000 volunteers, each of whom must work 2 shifts of 4 hours each. – 15,000 volunteers at $7.25/hour for 8 hours =

$870,000

– Liquidated (double) damages = $870,000

– Total = $1,740,000 plus costs and fees

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Possible Solutions

Pay interns and volunteers a minimum wage, limit number of hours worked, and record hours; or

For interns, create a formal internship program with scheduled start and end dates. – Maintain records of hours worked.– Emphasize and put into practice the training and

supervisory characteristics of the internship program. – Internship should not be used as a substitute for regular,

paid employees or as a trial period for individuals seeking employment at the end of the internship.

– Provide a written offer letter to the student intern, stating that (a) the internship is unpaid; and (b) that a job is not guaranteed upon completion of the training or completion of the person’s schooling. And act accordingly.

– When publicizing the internship, state that applicants who will receive college credit are preferred.

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Expression

How to address economic and political activism on and off the job

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Economic Speech

NLRA Section 7 protects an employee’s right to discuss wages, hours and other terms and conditions of employment

State laws protect similar conduct, i.e., California wage discussions

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Economic Speech

But there are limits . . . – Sit down strikes

– Disclosing confidential business information

– False allegations where the allegations are malicious or made with a reckless disregard for the truth

– Disparagement of an employer’s business unrelated to employee interests and/or working conditions

– Violence, profanity and vulgarity

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Political Speech

State laws may protect certain political speech outside the workplace

State laws that apply to any off-duty lawful conduct

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Non-Solicitation Policies

What should employers do?– Adopt a non-solicitation policy

– Ban solicitations / distributions by non-employees on company property

– Ban all solicitations / distributions during work hours and in working areas

– Ban all organizational solicitations / distributions on company property at all times

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Non-Solicitation Policies

What should employers allow?– Charitable solicitations

– Invitations for personal events

– Personal email communications

BUT– Cannot allow some commercial

solicitations but not others

– Cannot selectively enforce policies

– Cannot allow solicitations from one union and not another

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Non-Verbal Expression

What to do with the employees who feel the need to “dress up” for work

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Religious Discrimination

Cloutier v. Costco, 390 F.3d 126 (1st Cir. 2004)

– Plaintiff was a member of the Church of Body Modification

– Costco adopted a grooming policy that prohibited facial piercings

– Employee refused to remove facial piercings (although no customers complained about the piercing)

– she was fired

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Costco – held: it was an undue hardship to accommodate her religious beliefs given that she regularly interacted with customers, and Costco determined her piercings detracted from the company’s image

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EEOC v. Red Robin, 2005 WL 2090677 (W.D. Wash 2005)

– Plaintiff was a member of Kemeticism, an ancient Egyptian religion

– Red Robin’s grooming policy required employees to cover any tattoos

– Employee refused to cover his tattoos and (although no customer complained about his tattoo)

– he was fired

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Red Robin – held: that it was not an undue hardship to allow him to show his very small tattoo even though he regularly interacted with customers, and RR determined that his tattoo detracted from its family-friendly image

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Brown v. F.L. Roberts & Co., 896 N.E.2d 1279 (Mass. 2008)– Plaintiff was a practicing Rastafarian

– F.L. Roberts (Jiffy Lube) initiated new grooming policy which required employees with customer contact to be clean-shaven and hair should be clean, combed, and neatly trimmed or arranged

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Brown v. F.L. Roberts & Co., 896 N.E.2d 1279 (Mass. 2008)– Employee refused to shave or cut

his hair, so employee was transferred to work only in lower bay, with no customer contact

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Brown – held: exemption from a grooming policy could never amount to an undue hardship

once employee made clear he could not comply with the policy for religious reasons, the employer was obligated to engage in an interactive process to find a reasonable accommodation

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What employers should do– Adopt written criteria for the hiring process

– Train recruiters about what questions can and cannot be asked in the hiring process Don’t ask about an

applicant’s religious beliefs, affiliations, participation, commitments and/or past, current, or future practices

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What employers should do – May ask potential employees if they are

available to work on weekends / overtime but cannot ask whether employees observe specific religious holidays.

– Cannot automatically deny positions to applicants who cannot work the hours because of their religious—accommodation

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CA -- Wearing Religious Clothing or Hairstyle is Protected Activity

AB 1964 clarifies that wearing religious clothing or a religious grooming practice as a belief or observance is protected by the Fair Employment and Housing Act.

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Model Grooming Policy

Adopt a Grooming Policy– Provide expectations for

professional appearance

– Provide business attire examples Dress shirts, ties, business

heels, etc.

– Prohibit torn, dirty or frayed clothing

– Ban clothing that reveals too much cleavage, stomach or back

– Ban beach wear and tattoos and piercings

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Electronic Expression

Bring Back the Typewriter

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What Is Bullying?

Bully = A blustering, quarrelsome, overbearing person who habitually badgers and intimidates smaller or weaker people

Bullying = – Attack or intimidation with the intention to cause fear,

distress, or harm that is either physical (hitting, punching), verbal (name calling, teasing), or psychological/relational (rumors, social exclusion);

– A real or perceived imbalance of power between the bully and the victim; and

– Repeated attacks or intimidation between the same children over time.

Cyber-Bullying = bullying that occurs through e-mail, a chat room, instant messaging, a website, text messaging, or videos or pictures posted on websites or sent through cell phones.

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What Drives Bullying

Driven by perpetrators' need to control the targeted individual(s);

Initiated by bullies who choose targets, timing, place and methods; and

May escalate to involve others who side with the bully, either voluntarily or through coercion.

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Prevalence of Cyber Bullying

According to a study by the Cyber bullying Research Center, approximately 20% of young people reported experiencing cyber bullying in their lifetimes.

Another study by Cox Communications and the National Center for Missing & Exploited Children indicates that about 1 in 10 teens have cyber bullied someone online or by text message and 16% have seen or heard of a friend who bullied others.

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How Serious is Bullying?

Recent instances have led to suicide.

“Bullies” have faced serious criminal charges, including invasion of privacy.

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What can you do?

Be vigilant.

Be aware:– Visit http://www.stopbullying.gov/

– Visit http://thebullyproject.com/indexflash.html

Speak up.

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Why Worry About Intellectual Property?

Lifeblood of your business

You paid for it

Advance planning can prevent disputes

You can get blamed for employee abuses

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Protectable Assets

Confidential information

Physical property

Relationships–With employees

–With customers

–With suppliers

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Examples of Trade Secrets

Client/customer lists (relating to non-public information; e.g., pricing information, buying habits, etc.)

Business or commercial plans, including marketing strategies and infrastructure organization

Technical information and devices

“Know-How” and “Negative Know-How”

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Some Examples of What Is NOT A Trade Secret

Information derived from reverse engineering

Business forms and procedures

Patented inventions

Sales telemarketing scripts and pitch materials

Course and training materials, and instruction materials

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How do you “maintain secrecy?”

Training

Employment handbooks/manuals

Stamp confidential documents

Password/firewall protection

Lock and key

Monitoring electronic/telephonic usage

Prohibition of recording devices

Non-disclosure agreements for employees, visitors, recruits, business partners

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CA Has Strong Public Policy In Favor Of Allowing Employee Mobility

Business and Professional Code § 16600 Invalidates restrictions on lawful business

Business and Professional Code § 17200 prohibits business practices that are– unfair

– fraudulent

– illegal

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What is the Status of the Law?

Edwards v. Arthur Anderson LLP, 44 Cal. 4th 937 (2008)

No non-competes (and we really mean it)

Not even “narrow restraints”

Trade secret exception viable?

Limited statutory exceptions still apply

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Uncertain Grounds for Customer and Employee Solicitation Agreements?

Retirement Group v. Galante (2009) 176 Cal.App.4th 1226, 1237 – Agreements restricting employments are void but

tortious conduct is actionable

Dowell v. Biosense Webster, Inc. (2009) 179 Cal.App.4th 564, 577:– Questions continued viability of trade secret

exception

Richmond Technologies, Inc. v. Aumtech Business Solutions, No. 11–CV–02460–LHK, 2011 WL 2607158 (N.D.Cal. July 1, 2011)– Interpreting existence of trade secret exception

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Drafting Enforceable Agreements

Identify your core concern and protectable interest

Don’t get greedy

Narrowly tailor the covenant

Consider choice of law issues

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What Security Measures Can You Take To Protect Your IP?

Restrict access to and physical segregation of information

Use of confidentiality agreements with employees/visitors/business partners

Stamp confidential documents

Use computer passwords and firewalls

Monitor employee telecommunication devices

Examine employment history when hiring

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Other Sources of Protection

Duty of loyalty

Duty of disclosure

Duty not to usurp corporate opportunities

Fiduciary duties

Everything except wages belongs to the employer

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Other Sources of Protection

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Summary & Key Takeaways

Review Your Policies and Practices Regarding Interns & Volunteers

Review Your Policies Regarding Freedom of Expression In The Workplace – And All Its Permutations

Implement a Bullying Policy – And Take Bullying Seriously

Review Your Trade Secret Policies And Practices – Protect “The Crown Jewels!”

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Open Forum - Questions

632014 ACC-SoCal In-House Counsel Conference #IHCC14

THANK YOU!!

“That’s Entertainment!Well, At Least The Lawyers Will Enjoy It”

Sponsored by Ogletree, Deakins, Nash, Smoak & Stewart P.C.

Moderator: Tiffany W. Easton, Esq.Panelist(s): Keith A. Watts, Esq.

#IHCC12

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11th Annual In-House Counsel ConferenceJanuary 29, 2014 (Los Angeles, CA)

#IHCC1464

www.acc.com/chapters/socal/

Documents

1 2014 ACC-SoCal In-House Counsel Conference #IHCC14 “That’s Entertainment! Well, At Least The Lawyers Will Enjoy It” January 22, 2014 Beverly Hills, California