Retailer - Fall 2014

by Constangy, Brooks, Smith & Prophete, LLP
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The Express Lane

  • Retailer's Recap
  • Noteworthy Numbers
  • News and Analysis
    • Criminal Background Checks: Three Tips for Retail Employers
    • Is EEOC Bound by Statutory Limitations Period When Making Pattern-or-Practice Claims?
    • More Social Media Angst for Retailers

Fall 2014

Retailer's Recap

Counting the Cost of Payroll Cards: Are they Worth it for Employers? Retailers, as well as other employers, have grown to rely on payroll cards to compensate employees who may not have bank accounts. What are the legal risks of paying with payroll cards, and what precautions should retailer employers take? Read all about it!

NLRB takes aim at franchising relationships. The National Labor Relations Board is aggressively finding "joint employer" relationships wherever it can, and the General Counsel has issued an opinion that franchisors may be joint employers with their franchisees, a position that ought to cause concern to retail employers.

An In-Depth Look at the EEOC's New Enforcement Guidance on Pregnancy Discrimination. Do retail employers have to make reasonable accomodations for pregnancy? Maybe so.

NLRB Just Keeps Strikin' Down Those Workplace Rules. Among the latest victims are Hooters, which prohibited insubordination (the horror!) and Kroger, which had a social media policy requiring employees to post disclaimers along with anything that they said about the company. Will the NLRB let employers have any rules?

So many harassment mistakes, so little time. Retail employers make these "dirty dozen" harassment mistakes at their peril. But employees can mess up too, by not reporting the harassment or by not cooperating in the investigation.

Disability accommodation, the EEOC, and the most expensive bag of potato chips ever. Inventory shrinkage at Walgreen's and the $180,000 bag of chips.

ADA Interactive Process: A Quiz for Employers. Are you and your store managers properly handling the "interactive process" under the Americans with Disabilities Act? A lot of employers are not. Take this quiz and find out where you stand.

Grocery Workers Stage Strike – to Bring Back their CEO! If you're getting tired of bad or alarming news, here is a story that will make you all warm and fuzzy again. (And, by the way, after this was published, the CEO made a deal to buy the company, so we have a happy ending, too.)

Noteworthy Numbers

Retail Sales at a Glance

Online Pricing, Shopping Continue to Hurt Brick-and-Mortar Retail Stores

By Tam Yelling
Birmingham Office

According to a recent article in The Wall Street Journal (paid subscription may be needed to access the full article), in-store retail traffic has been declining by about 5 percent a month for the past two years, as consumers increasingly do their shopping online, or at least use mobile phones and computers to research products and find the best deals. An important byproduct of the change in shopping habits is that customers are less likely to browse in physical stores where they can be tempted to make impulse purchases.

Approximately $70 million in retail lease obligations nationwide are due to expire in 2018, and many retailers are expected to start closing stores at that time. "We're in a transformation where retailers are recognizing the Internet isn't going anywhere and to be competitive, you have to have a more compelling online presence and an efficient [physical] store base," according to a Moody's analyst quoted in the article. The article predicts that the most closings will occur in the office supply, specialty retail, and convenience store sectors.

Will these store closings result in lower retail employment, or will the physical store jobs be replaced with internet sales/customer service/order fulfillment jobs? We will see.

BARGAIN-BASEMENT CYBERSECURITY?

Percent of IT Budget Spent on Cybersecurity

Dollars Per Employee Spent on Cybersecurity

 

SOURCE (both charts): Rachael King, "Retail Spends Less on Cybersecurity Than Banking, Healthcare," The Wall Street Journal, Sept 2, 2014. (Paid subscription may be needed to access article.)

News and Analysis

Criminal Background Checks: Three Tips for Retail Employers

By Doris Del-Castillo
Tampa Office

Retail employers have turned to the information contained in criminal background checks to vet employment candidates. In doing so, retailers attempt to secure a safer working environment and reduce losses due to theft and other kinds of dishonesty. However, overbroad use of criminal background information has been criticized by the Equal Employment Opportunity Commission because the use of such information tends to disproportionately screen out African-American and Hispanic males. The following three tips will help retail employers keep a secure workplace without running afoul of the EEOC.

First, a criminal background check should be deferred until after a successful interview, or even later in the hiring process. Many states have "ban the box" provisions that prohibit employers from requesting criminal background information on employment applications. To be in compliance with as many states as possible, the request for criminal background information should occur as late in the hiring process as possible. And don't forget – if you use a third party to conduct your criminal background checks, you will have to comply with the Fair Credit Reporting Act, and possibly other laws.

Second, do not take a blanket approach to criminal convictions. Your policy, application forms, and other relevant paperwork should include a statement that the background check will not automatically disqualify the candidate from employment. Each conviction should be reviewed on a case-by-case basis, taking into account the type of crime that was committed, the time that has passed since the conviction, the age of the applicant when the crime was committed, and the relevance of the crime to the position being applied for, as well as other factors.

Third, retail employers should make sure that managers and supervisors are trained on the policy and the proper use of criminal background information. This is especially true in retail environments, where managers at remote locations often have to make employment decisions "on the fly" without easily accessible support from Human Resources or even their regional managers.

Is EEOC Bound by Statutory Limitations Period When Making Pattern-or-Practice Claims?

By Toby Dykes
Birmingham Office

The EEOC continues to aggressively pursue litigation, and when the EEOC files suit, retail employers can expect a costly and protracted legal battle. The agency may not even be limited by the 180-day or 300-day charge-filing period, according to a recent decision from a federal court in Minnesota.

The EEOC filed a pattern-or-practice lawsuit against PMT Corporation, alleging that the company maintained a hiring system that discriminated against female and older applicants for sales positions. Specifically, the EEOC claimed that of the 70 sales representatives PMT hired between January 1, 2007, and October 27, 2010, none were female or over the age of 40.

Because the EEOC did not file a charge until October 27, 2010, PMT argued that any hiring decisions made more than 300 days before that date were not actionable. Accordingly, PMT moved to dismiss the lawsuit, contending that the EEOC did not attempt to conciliate in good faith because it sought relief for untimely claims.

The court denied PMT's motion. Although generally the 300-day period applied in Minnesota, the court said, older alleged discriminatory acts could be considered if there was a continuing violation. And if the EEOC could prove a pattern or practice of discrimination, then it would also establish a continuing violation for timeliness purposes. Therefore, the court said, "relief for conduct outside the 300-day period is not categorically barred, and the EEOC did not act in bad faith by attempting to obtain relief for such conduct."

(Minnesota, and many other states, have fair employment practice agencies. In those states, an EEOC charge must generally be filed no later than 300 days after the last act of alleged discrimination. In states without such agencies, the deadline for filing an EEOC charge is generally 180 days after the last act of discrimination.)

Not all courts have reached the same result as the PMT court. A federal judge in Maryland found that the 300-day limitations period did apply in an EEOC pattern-or-practice suit against Freeman, which involved criminal background checks. That case is now at the U.S. Court of Appeals for the Fourth Circuit, which hears appeals from federal courts in Maryland, the Carolinas, Virginia, and West Virginia.

But back to PMT: In addition to finding that a pattern-or-practice claim could be brought for allegations outside of the statutory limitations period, the Minnesota federal court found that the lawsuit did not have to identify the alleged victims by name. Instead, the Court found that by identifying the time period of the alleged discrimination, the alleged perpetrator of the discrimination, and the alleged discriminatory conduct, the EEOC had stated its claims with sufficient particularity to survive a Motion to Dismiss.

The EEOC also filed individual claims of retaliation and constructive discharge on behalf of the Human Resources Manager who brought the alleged discrimination to light, but the court granted PMT's motion to dismiss those claims.

More Social Media Angst for Retailers

By Toby Dykes
Birmingham Office

Courts, state legislatures, and the National Labor Relations Board continue to limit employers' control over social media accounts and postings.

Under a law in New Hampshire that was signed by the governor on August 1 and became effective September 30, employers are barred in most instances from requiring employees or job applicants to provide log-in information for personal social media accounts. The law makes exceptions for employers who are investigating whether the social media account was involved in the unauthorized transfer of confidential, financial, or proprietary information, as well as investigations necessary to ensure compliance with laws, regulations, or workplace conduct rules.

Employers are prohibited from requiring that employees or applicants "friend" them or add them to lists that have access to the social media accounts. Additionally, the law prohibits employers from disciplining employees who refuse to provide access to the log-in information for personal and social media accounts.

At press time, not only New Hampshire, but also Arkansas, California, Colorado, Illinois, Maryland, Michigan, Nevada, New Jersey, New Mexico, Oklahoma, Oregon, Rhode Island, Tennessee, Utah, Washington, and Wisconsin had enacted laws limiting employers' access to the social media accounts of employees and applicants.

Meanwhile, over at the NLRB, the Board ordered that two employees of a non-union bar and restaurant be reinstated and made whole after they were terminated for a Facebook discussion lambasting their employer. In Three D, LLC, several employees learned that that they would owe more in Connecticut state income taxes than they had anticipated, and they blamed the company for failing to do proper withholding. After a spirited group discussion on Facebook, in which "F bombs" were flying, one of the two terminated employees called "Ralph" (apparently the employee who had payroll responsibilities) an "a**hole." The other terminated employee merely "liked" a comment from someone else who said she was going to complain to the labor board. The two terminated employees filed unfair labor practice charges, alleging that they were discharged for engaging in protected concerted activity. An NLRB administrative law judge agreed with them in 2012, and last month, the NLRB issued its decision, agreeing with the ALJ and the two employees.

Three D argued the two employees lost the protection of the National Labor Relations Act because they had adopted defamatory and disparaging comments. But the Board determined that the use of a single expletive (in the case of the one employee) and a "like" (in the case of the other) was not enough to result in a loss of NLRA protection. The Board also found that the comments were not "disloyal" to the company because the employees did not even mention its products or services, much less disparage them.

The two Democrat members who decided the case – Kurt Hirozawa and Nancy Schiffer – also determined that Triple D's Internet/Blogging policy violated the Act because employees would have reasonably interpreted the policy to prohibit the type of protected Facebook activity that led to the unlawful discharges. The policy that Hirozawa and Schiffer found to violate the Act prohibited "engaging in inappropriate discussions about the company, management, and/or co-workers, the employee may be violating the law and is subject to disciplinary action, up to and including termination of employment." Republican Member Phil Miscimarra dissented from this part of the decision.

Three D has now petitioned for review by the U.S. Court of Appeals for the Second Circuit, which hears appeals from federal courts in Connecticut, New York, and Vermont.

Retail employers, beware: (1) protected concerted activity claims apply to non-union, as well as unionized, employers; and (2) employers should carefully review their social media policies to make sure that they are in compliance with the law as it currently stands. Needless to say, all employers should be extremely cautious before taking action against an employee based on his or her social media activity.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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