The Stakes Are Getting Bigger In The Employment Law Arena

Saturday, November 1, 2008 - 01:00

Editor: Would each of you gentlemen tell our readers something about your professional experience.

Duston: I am a partner in Saul Ewing's Washington, DC office and co-chair of the firm's Labor and Employment Employee Benefits Practice Group. Most of my work has been in the employment law area, balanced between counseling and litigation, especially employment discrimination, wrongful discharge and non-competes. I also defend businesses on other types of civil rights matters, including ADA public accommodation cases.

Nagle: I am a partner in the same practice group, residing in the Philadelphia office, and I represent employers in all areas of labor and employment law, with an emphasis on traditional labor law, including union organizing campaigns, contract negotiations, arbitrations and other labor relations matters, as well as counseling and litigation in the area of non-compete agreements and trade secrets. Like Rob, I also defend employers against all kinds of workplace litigation, including wage/hour matters, employment discrimination suits and retaliation claims.

Duston: Let me add that Bob and I are representative of the entire practice group, which has a mid-Atlantic footprint from New York to Washington, DC but constitutes a national practice. If a matter involves employee issues, we do it. We have great litigators who know this field, but also a deep bench of partners who can take a call from a general counsel or employment law counsel and provide experienced, practical advice. I think of myself as a business lawyer, not just an employment lawyer.

Editor: Speaking of the practice group, please tell us how the practice has evolved over the years you have been engaged in it.

Duston: The laws have changed - and have become more complex - but the questions remain the same. In the early 1980s we were being asked about the implications of downsizing, the avoidance of litigation, handling workplace harassment issues, and so on. But the complexity of what employers must address has increased - in part as a consequence of technological advances and by the number of new federal and state laws in the area of employer-employee relations..

Nagle: At the beginning of my career I spent a lot of my time representing employers involved in union organizing campaigns, strikes and picketing. In recent years, as a variety of manufacturing activities has been sent offshore or simply evaporated altogether, the percentage of private sector employees represented by labor unions has declined precipitously. That aspect of my practice has changed significantly as a result of this development, but the increase of wage and hour litigation, in suits for overtime or unpaid travel time, for example, has increased almost in direct proportion to the decrease in the traditional labor practice. Many of these issues present themselves as class action undertakings, so the stakes are vastly higher than they were in the past. In addition, as we have shifted from an industrial economy to one that is knowledge- and service-based, the need for the employer to protect its intellectual property interests has become extremely important, and restrictive covenants counseling and litigation, accordingly, has moved to center stage both for in-house counsel at large companies and also for management of smaller businesses and entrepreneurs.

Editor: Speaking of corporate counsel, what are the things that our publication should be calling to the attention of our readership, particularly in light of the current financial markets crisis?

Nagle: Corporate layoffs during hard economic times are nothing new. We had a significant economic downturn in 1991-92 which was accompanied by major employment dislocations. This spawned litigation under recently enacted federal laws including the Workers Adjustment and Retraining Notification Act and the Older Workers' Benefits Protection Act. One thing that is different today, however, derives from the fact that much of the employee's retirement is tied up in the market. This was not necessarily the case 20 years ago. What this means is that the employer can anticipate claims to the effect that the employee did not receive appropriate advice in connection with the 401(k) plans sponsored by the employer, that the employer failed to meet some fiduciary duty imposed by ERISA, or mismanaged the funds entrusted to its care, and so on.

Duston: In addition, the senior executive who might have accepted a severance package 18 months ago in anticipation of being able to land another job relatively quickly, in what appeared to be a robust economy, is now going to attempt to negotiate a much more generous package. If hard negotiations do not have the desired result, the executive is much more likely to bring a lawsuit than he or she would have done until quite recently. In other word, what differentiates this crisis from its predecessors is the degree to which the stakes have gone up on both sides of the equation.

Nagle: I think that is right on target. Corporate counsel are going to be called upon to address a range of claims that is much more extensive than what we saw in the past. No employee thinks that his termination was fair - there must have been some improper reason - and unhappy former employees and creative plaintiffs' lawyers will strive to characterize their particular termination as tainted by some age, gender or racial discrimination. Add wage-hours issues, ERISA fiduciary claims, inconsistency in the payment of bonuses, and the like to the traditional basis utilized for claims of unlawful termination and you have some conception of the complexity of the challenge faced by corporate counsel.

Editor: What should employers be doing now to mitigate the risk?

Nagle: Mitigation begins long before the decision to terminate. If the groundwork has been laid - if the employee's records include documentation of unsatisfactory performance, formal notification, follow-up on the part of the employee's supervisors, and so on - the employer's ability to negotiate a satisfactory severance package is much improved. The package itself can be an effective mitigation tool if negotiated with a sense of the surrounding circumstances. Releases which are taken verbatim from a form book are not always helpful; releases which are specifically negotiated to reflect enforceability at a time of financial instability invariably are. The best advice I have for corporate counsel in these circumstances is to bring qualified outside counsel - people with the requisite employment law experience and expertise - into the picture as early on as possible.

Editor: How have the ADA amendments affected the latitude that employers have in the present environment?

Duston: Even without the financial markets crisis, the ADA amendments are going to have a substantial impact on what the employer must do to provide a workplace environment in compliance with the statute. Since the definition of who is disabled, i.e., who must be accommodated under the statute, has been expanded, the ability of the employer to have claims dismissed has been considerably reduced. In light of the current crisis, then, a range of claims that may never have been thought suitable to link to a discriminatory termination in the past is now available for use. This is good news for the plaintiffs' bar.

Editor: And the Employee Free Choice Act? In light of the fact that this legislation did not make it through this Congress, why is there continuing concern?

Nagle: While the bill was not passed by the current Congress - the threat of a presidential veto was very strong - there is an overwhelming likelihood that it will get through the next Congress - probably in the first 100 days of an Obama Administration. Unquestionably, organized labor sees this election as a huge opportunity - and perhaps their last chance - to turn back the tide on what has been a losing battle over the past 30 years.

Today, only about 7.5 percent of private-sector workers in the U.S. are represented by a labor union. That means in excess of 90 percent are potential targets for organization, and many of these workers are in industries other than the traditional blue-collar industries where the labor movement had its initial success. Organized labor sees the enactment of the Employee Free Choice Act, I think, as their last, best chance to reverse the huge losses in membership in recent decades, and they will focus their efforts on workers whose work cannot be sent overseas and industries which cannot be outsourced, including healthcare, hospitality, and transportation.Duston: An obvious question is whether, assuming I am general counsel in some industry other than those Bob has mentioned, I should be concerned. The answer, I think, is absolutely. Mandatory Binding Interest Arbitration , assuming that survives the legislative process, brings a whole new dimension to labor negotiations, and has the potential to make someone lacking the requisite background and experience the key decision-maker on wages, hours, benefits and so on. I think it is naïve to expect that what happens with respect to these fundamental employment issues in the organized labor arena has no impact outside that arena. Indeed, if, as a consequence of the enactment of this legislation, a pro-labor trend does begin to take hold, not only will we see more workers gravitate to unions and more industries become organized, but also the wages and benefits that prevail in the organized arena will serve as something of a benchmark for the non-organized arena.

Editor: What should employers be doing now in anticipation of the enactment of an Employee Free Choice Act?

Nagle: There is an old saying among management-side labor lawyers to the effect that the only companies that get unionized are the ones that deserve to be unionized. There is considerable wisdom in that statement. Companies that do not treat their employees fairly, companies that discriminate in a variety of ways - whether they do so blatantly or with a degree of finesse - companies where discipline is imposed arbitrarily and there is no objectivity or transparency in the disciplinary process, and companies where wages and benefits do not measure up to industry standard are obvious targets for organization. To a large extent, the employees' perception is the employer's reality in these areas, so it is crucial for management to engage their employees on these issues. Companies which are attentive to what their employees think about workplace conditions, relations with supervisory staff - and remember, the person on the shop floor is probably going to have very little contact with the CEO and other members of the senior management team - and whether management really cares about their plight have much less to be concerned about with respect to organization.

One of the first things we ask of a client facing a union organizing effort is that they review their internal practices, including management, supervisory and the whole range of employee relations policies and practices that influence the employees' perceptions about the employer. It is no surprise that a company whose employees are seeking union representation is often perceived by its employees as being indifferent to their concerns, or as saying one thing and doing another.

Organized labor likes to say that employees want a voice at work. Of course they do, but a labor union is not the only outlet for employees looking for a way to express themselves to their employer. I think the wise employer will recognize this and look upon it as an opportunity to establish, in a rational, non-confrontational manner, a strong working relationship with the workforce.

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