January 2010

Tiger Woods was silent for almost a week amidst wide-spread media coverage of his suspicious late night car accident. For months Toyota was not only silent about the real problem with their gas pedals, they tried to initially blame the acceleration problem on floor mats. Both stories continue to have intense media coverage which includes reports on every new twist or detail, while rehashing the basic facts over and over again.

In contrast, David Letterman self-reported his sexual trysts with female staffers on his own terms, in his own words, ahead of a threatened blackmail scheme. Media coverage of Letterman’s trysts has dried up and the matter is now considered a non-story. What is the difference and what can businesses learn from these major news stories?

Self-reporting of problems helps to control the message and the timing, and seems to shorten the media life of a story. Coming clean can help a business move on past the initial media flurry, return to business as usual faster, and hopefully preserve sales and reputation. Businesses should consider credibility and accountability, and the perception of the public. Admitting mistakes and accepting responsibility is more than just something your mother tried to teach to you. It applies to businesses, sports superstars, and celebrities as well.


 We all know the words, "You’re Fired," but what does that mean for unemployment benefits.  Generally, employees who quit, are discharged for employment misconduct or are discharged because of aggravated employment misconduct are not entitled to receive unemployment benefits from the State of Minnesota. Of course, there are some exceptions to these rules.

One new change with respect to misconduct involves whether or not the employee was discharged due to a single incident, which did not have a significant impact on the employer. Previously, if an employee was fired for committing a single incident of misconduct which did not have a significant impact on the employer, the employee would have been entitled to receive unemployment benefits under Minnesota law. Single incidents used to be excluded from the definition of misconduct, however, that is no longer the case today.

In 2009, the Minnesota Legislature revised Minn. Stat. § 268.095, Subd. 6(d). A single incident of misconduct will now be considered an important factor in deciding whether or not the conduct rises to the level of misconduct, thereby excluding an employee from receiving benefits.

Now, employees are no longer guaranteed a free bite at the apple for an anomalous isolated incident which did not substantially harm their employer.

It is important for employers to keep these things in mind when responding to unemployment benefit claims filed by employees, because if you don’t raise the issue, the employee may be granted unemployment benefits they would not have otherwise been entitled to receive.

The United States Supreme Court has agreed to hear a case regarding the arbitrability of race discrimination and retaliatory termination claims made by an employee who has alleged the arbitration agreement with his employer was unconscionable.

Gavin Craig, Minnesota attorney and publisher of Twin Cities Business Litigation Blog, warns about courts rewriting contracts.

“This is an odd case. If you accept the premise that the arbitration Agreement is a contract, and that the parties are bound by their contracts, the Ninth Circuit is wrong. The court is essentially re-writing the contract and deleting a provision. That is not right. Courts are not supposed to rewrite contracts. But that is the effect of the Ninth Circuit ruling. (pdf)"

The United States Supreme Court will now be deciding if a district court is required to determine the unconscionability of an arbitration agreement, even when the parties to the agreement have clearly and unmistakenly assigned this “gateway” issue to the arbitrator for decision?

The U.S. Supreme Court’s decision may have a far reaching impact on arbitration agreements between employers and employees, but for now we will have to wait and see.

Does your workplace seem like a dysfunctional family reunion that keeps happening day after day after day? This may be in part due to four distinct generations of employees in your workplace, and the disconnect in values, priorities, and communication which can occur. This is the first time in American history that workplaces are struggling with four very different generations of employees working side-by-side.

Veterans, Baby-boomers, Generation X and Generation Y employees have very different approaches to money, careers, loyalty, and communication styles. Veterans think work is life, and don’t understand why everyone else seems to be in a hurry. They are generally very loyal to their employer and do not like change. Baby-boomers are retirement ready and probably under-funded in today’s economy. They are frustrated with younger employees who resemble too closely their own children, and their children’s friends.  Generation X is noted for being intense, insensitive to others, and in need of control. They are fearful about the future and know they will not be as successful as their parents. Generation Y wants everything now, and is not prepared for the world of work. They avoid conflict, criticism, and disappointment, having been accustomed to their parents (Baby-boomers) running interference for them for their entire lives.

Books have been written on the subject which can help employers recognize the inherent dysfunction between the generations, and try to turn it around to capitalize on the unique strengths of each of them. 

In the words of author Willa Cather “The dead might as well try to speak to the living as the old to the young.” Willa Cather (1873-1947).

Tips to help employers address generational issues:

  • Recognize and acknowledge generational differences;
  • Ask questions of employees to help build teamwork and lead to better understanding;
  • Identify different motivations and values of employees; 
  • Train supervisors and staff on generational differences.

In February 2009, President Obama signed The American Recovery and Reinvestment Act of 2009 (ARRA), which included changes to health insurance benefit provisions under COBRA. Under the ARRA, eligible former employees, enrolled in their employer’s health plan at the time they lost their jobs, are only required to pay 35% of the cost of COBRA coverage. Employers must treat the 35% payment by eligible former employees as full payment, and in return the employers are entitled to a credit for the other 65% of the COBRA cost on their payroll tax return.

Originally, the federal government’s reduction of health insurance premiums was to last nine months for covered workers who were involuntarily terminated on or before December 31, 2009. Last month, the ARRA was amended to extend health insurance premium assistance to eligible employees for up to 15 months, and to those who were involuntarily terminated on or before February 28, 2010.

In Minnesota, qualified individuals can file for the Minnesota COBRA Premium Subsidy program, where the State will pay the 35% cost of the COBRA coverage to the individual’s former employer. It is being reported the Minnesota House is intending to make a proposal extending the benefits under the Minnesota COBRA Premium Subsidy Program during the upcoming legislative session.

What do employers need to do?

  • Update your COBRA notices (General – rtf) (Alternative – rtf) to reflect the accurate eligibility period for use in any involuntary terminations between now and February 28, 2010.
  • Notify employees who were involuntarily terminated after September 1, 2008, and are or were receiving premium assistance, of these changes (rtf), so they may determine if the extension applies to them.

Cindy Hanson and Kali Wilson Beyah of “Corporate Counsel” magazine and blog, warn employers to stop using credit reports and criminal background checks to weed out job applicants, or risk being embroiled in an EEOC lawsuit.

EEOC has taken the position that, due to the disproportionate conviction and arrest numbers of African American and Hispanic people as compared to white people, blanket policies regarding employment decisions based on arrest and conviction information are presumed to have a disparate discriminatory impact on African American and Hispanic applicants.

Until the issues are resolved by the courts, employers should make sure background checks are job-related for the position in question and are consistent with business necessity.

I agree with the authors suggestions for employers to;

  • Apply testing criteria in the same way to all individuals.

  • Audit hiring pools to determine if there is a disparate hiring impact on any one group of applicants.

  • Tailor the type of the background check conducted to the nature of the position.

  • Document the rationale for the type of the background check conducted.


It is being reported there has been a 77% increase in Fair Labor Standard Act (FLSA) claims against employers alleging wage and hour violations since 2004. A large number of the claims and probably the most expensive have been about disputes over underpaying or failing to pay overtime to employees due to job misclassification.

Most recently AT & T was sued for $1 billion dollars in two class action suits, alleging a new company-wide policy exempting first line managers from overtime, violated federal law. The first line managers claimed they fill low level supervisory positions, and they do not meet the standards established to qualify as “exempt” employees.

To avoid this type of costly FLSA claim:

  • 1. Conduct a comprehensive job analysis to determine if someone is an “exempt or a non-exempt employee.” Jobs are classified as non-exempt or exempt based on:
  • Nature of the work performed,
  • The extent of the discretion exercised in the job,
  • Level of compensation, and the education, training, and
  • Credentials of the person filing the position.

2. Once employees are properly classified as exempt or non-exempt, do a check to insure employees’ wages and benefits match their federal FLSA exempt or non-exempt status. If their wages and benefits do not match their FLSA status, correct the problem immediately.

Astronomical claims by employees against their employers, and the wide-spread press coverage they receive are sure to lead to copycat cases against smaller and mid-size employers. Costly FLSA claims over job misclassifications can be easily avoided with a moderate amount of effort by employers.

Many employers mistakenly think if they don’t have a written contract with employees or their employees don’t have a union, then the employees are “at-will.” “At-will” employment may be terminated by an employer or an employee at any time for basically any reason.  In Minnesota, employees are presumed to be employed “at-will.”

It is possible for an employer to unintentionally alter an employee’s “at-will” status and create an expectation of job security. Minnesota courts follow two major exceptions to “at-will” employment. One being an employer may not discharge an employee when the termination is against a well-established public policy, for example, firing an employee for filing a workers’ compensation claim after being injured at work. The second is the creation of an implied contract based on either policy statements made in an employee handbook or oral representations made by an employer to an employee.

If your employees are “at-will” employees, do not include the following in your employee handbook:

Probationary terms – “At-will” employees are “at-will” before, during, and after probationary periods. Having probationary language may be interpreted as providing a guaranteed term of employment.
Specific discipline procedures Minnesota courts (pdf) have decided when an employee handbook includes specific disciplinary steps to be taken prior to termination, an employee’s “at-will” status is modified and some job security is presumed.
“Just cause” for termination – Can create expectations of job security.
Defining employees as “permanent” – Can create expectations of job security.

If you have “at-will” employees, you should not make specific promises in your employee handbooks which could lead employees to believe they had a guarantee to continued employment, and you should include clear and prominent disclaimers to prevent the creation of unilateral contracts with employees.