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In contract law, every agreement between parties requires “consideration,” or something of value, in order to be valid. In a recent landmark ruling, the Kentucky Supreme Court has held that employment alone is no longer sufficient consideration to justify enforcement of a non-compete agreement. This ruling could not only provide employees with more freedom of movement from employer to employer, but also potentially provide employees with more bargaining power at the outset of employment.

gavel-5-1409595-m.jpgNon-compete agreements are provisions within contracts that state an employee will not work for a competitor for a certain period of time after leaving employment with the current employer. In the case of Creech, Inc. v. Brown, it involved a non-compete agreement lasting three years. Donald Brown was hired by Creech in 1990 to provide hay and straw to horse farms in Kentucky and other states. In 2016, Creech requested that Brown sign a document entitled “Conflict of Interest,” which would prevent Brown from working for another company that directly or indirectly competed with Creech for three years if Brown left without Creech’s consent. Although Brown signed the Conflict of Interest, no one from Creech signed on the other end. Shortly after, Brown was transferred to a new position with the same salary but decreased responsibilities. In 2008, he resigned from Creech and took a position with Standlee Hay Company, Inc., a company that also provided hay and straw for farms. Creech did not oppose the move and in fact signed a partial waiver of Brown’s non-compete clause. However, after hearing rumors that Brown had contacted Creech employees, suppliers, and customers, Creech filed a lawsuit against Brown, claiming breach of contract and seeking injunctive relief. Brown, in turn, argued that he had received no consideration for the Conflict of Interest provision he signed.

The state trial court ruled that Brown’s continued employment alone was sufficient consideration and sided with Creech against Brown. Brown appealed to the Court of Appeals, and the trial court’s decision was reversed. The Court of Appeals suggested that a six-part test be applied in determining whether the non-compete clause was enforceable. However, the Court also took the view that Brown’s continued employment with Creech was sufficient consideration for the Conflict of Interest. Both parties sought a discretionary review from the Kentucky Supreme Court.
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In an unsurprising, yet disheartening, ruling, the United States Supreme Court held in NLRB v. Noel Canning that President Obama’s recess appointments to the National Labor Relations Board (NLRB) were invalid because the United States Senate was still “in session.” In the broad sense, this will severely limit President Obama’s or any future president’s ability to evade a Senate filibuster and appoint individuals to fill government agency positions. In the more narrow sense, it not only invalidates President Obama’s NLRB recess appointments but also potentially the decisions those members made that affect workers across the country.

u-s--supreme-court-roof-and-columns-658253-m.jpgThe situation began back in 2012, when President Obama used the recess appointment power to appoint members to the understaffed NLRB. These members had already been nominated, but Senate Republicans refused to permit a Senate-wide vote, instead opting to filibuster the nominees. At the time, a filibuster of presidential appointments required a 60-vote threshold to overcome, a tough challenge in the sharply divided Senate. Since that time, the rule has been changed so that only a simple majority is required for approval of recess appointments. During the winter break, Senate Republicans held pro forma sessions every three days to prevent the body from truly going into recess in order to prevent President Obama recess appointments.

The Supreme Court justices were unanimous in their view that the recess appointments were not valid in this case, but they differed in terms of how they would have applied the recess appointment power correctly. The majority, consisting of Justice Breyer, Justice Kennedy, Justice Ginsburg, Justice Sotomayor, and Justice Kagan, stated that the President had the right to make recess appointments, but not when the Senate considered itself to be “in session.” The Senate had the right to determine when it was still in session. The remaining justices, Chief Justice Roberts, Justice Scalia, Justice Thomas, and Justice Alito, agreed with the opinion, but stated that they would have gone further, banning all recess appointments except for when vacancies arose during the recess.
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The United States Supreme Court is expected to issue rulings this month on three cases that could have a significant impact on employment across the country, including Kentucky and Indiana.

u-s--supreme-court-1-1038827-m.jpgOne case that has been discussed on this blog, Burwell v. Hobby Lobby, involves whether a closed corporation can refuse to comply with the Affordable Care Act mandate that requires employers to provide health plans to their employees that include birth control coverage. The owners of Hobby Lobby, an Arkansas-based craft store chain, believe that all forms of birth control are “abortofacients” and that the birth control mandate imposes too great a burden on their free exercise of religion. Until this point, the only institutions exempt from the birth control mandate have been religious institutions, not private companies.

Hobby Lobby asks the question of whether corporations can have “religious beliefs,” even closed corporations. Furthermore, what does it say if the Supreme Court allows private employers to always exercise their religious beliefs at the expense of their employees’ beliefs? Is it fair for an employer’s freedom of religion to outweigh the employee’s?
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The Seventh Circuit declined to rehear the issue of whether employees should be paid for donning and doffing their clothing. In contrast to another Seventh Circuit case involving the issue, eventually decided by the U.S. Supreme Court, this case involved food processors of JCG Industries and Koch Foods.

construction-workers-872475-m.jpgThe more recent case involved a class-action lawsuit by JCG and Koch employees who worked shifts that were 8.5 hours long. They claimed that, as part of their work schedule, they were required to clock in 15 minutes before the start of their shifts in order to don their work clothing. In addition, they were required to remove their clothing before lunch, which was 30 minutes of unpaid time. Because of the time required to don and doff, the employees claimed that they never had a full lunch break and should have been paid overtime for the extra time spent donning and doffing.

However, the Seventh Circuit panel disagreed, prompting the employees to file an appeal for the case to be heard en banc, or by all of the Seventh Circuit judges. In a 6-4 decision, a majority of judges denied a rehearing. They supported the panel’s finding that, rather than a continuous workday, as defined by the Fair Labor Standards Act (FLSA), the lunch break represented the end of the first of two four-hour shifts. The employees therefore were not entitled to overtime pay.
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Recently, fast food workers in Indiana and Kentucky went on strike again — a message that the issue of fair wages will not disappear after the United States Senate failed to pass a bill for a wage increase. That increase would have raised the current federal minimum wage from $7.25 an hour to $10.10 an hour.

burgers-on-the-grill-129504-m.jpgThe U.S. Senate held the vote late last month, with Indiana’s Senators splitting – Senator Donnelly voting in favor and Senator Coats opposing – and both of Kentucky’s Senators voting in opposition. Even though the measure had bipartisan support, it could not get the 60 votes needed to prevent a Republican filibuster. Thus, even though there were more than 50 votes lined up to pass the bill, it failed. Had it succeeded, there is no guarantee that a similar measure would have passed the Republican-led House of Representatives.

Those in favor of the bill, like Senator Donnelly, claimed that it would create more opportunities for families in Indiana and elsewhere. Right now, a parent could work a full-time job and still fall below the poverty line. By contrast, Coats and others who opposed the bill claimed that raising the minimum wage would kill one million jobs and only help 19 percent of those currently in poverty.
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The Sixth Circuit Court of Appeals recently tightened the definition of who could be considered an employee whistleblower in Sexton v. Panel Processing, Inc.

designing-on-a-tablet-1361061-m.jpgThe case involved Brian Sexton, who worked as a general manager for Panel Processing in its Coldwater, Michigan facility, as well as trustee for the company’s employee retirement program. In 2011, Sexton and one of the other trustees campaigned on behalf of two employees who were running for Panel Processing’s board of directors. Though these employees won election, the board refused to seat them because it would violate the company’s bylaws, which placed a limit on the number of inside directors. The board also removed Sexton and the other trustee from the retirement plan trusteeship.

Sexton responded by sending an email to the chairman of the board. In it, he complained that the board’s actions were violations of both ERISA and the state’s Corporations Business Act, as well as other state and federal laws. Sexton stated that he intended to bring these violations to the attention of the federal Department of Labor and the state Department of Licensing and Regulatory Affairs unless they were corrected immediately.
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A recent Seventh Circuit case involving Wisconsin could have implications for Indiana collective bargaining agreements. In Laborers Local 236 v. Walker, the Seventh Circuit rejected a constitutional challenge to a controversial law that restricted the collective bargaining rights of public employee unions.

peace-3-128318-m.jpgWisconsin’s Act 10, also known as the Wisconsin Budget Repair Bill, was passed in 2011, purportedly to address an expected $3.6 billion budget deficit. The Act impacted public sector employees’ collective bargaining rights, along with compensation, retirement, health insurance, and sick leave. Notably, it prevented the state from even recognizing unions unless 51 percent of all potential members, not just those voting, supported the union in annual elections. Only police and fire department employees were exempted. Public sector employees charged the legislature and Governor Scott Walker with using Act 10 as a ruse to weaken their union protection, and that Act 10 was no meaningful budget solution.

The Act went through a series of legal challenges, including that it infringed upon federal constitutional protections, violating the Equal Protection Clause of the Fourteenth Amendment and the First Amendment. In September 2013, a district court judge rejected this argument, claiming that it did not violate the free association clause of the First Amendment because the First Amendment did not require an affirmative response from government entities, simply the absence of a negative restriction. Nor did the law impermissibly disadvantage represented employees — or those who chose to express their grievances by joining a union. The judge claimed that because union representation is not a suspect classification, it is only entitled to a rational basis review, the lowest standard required. Under that low standard, the state of Wisconsin had a rational basis for passing Act 10.
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In a recent ruling, the Sixth Circuit Court of Appeals expanded the instances where telecommuting could be considered reasonable accommodation for employees who were disabled.

laptop-work-1260785-m.jpgEEOC v. Ford Motor Company, Jane Harris was hired in 2003 to be a resale buyer at Ford, a position that required her to be the intermediary between steel suppliers and “stampers,” or companies that used steel to manufacture parts for Ford. One role of the resale buyer was to respond to emergency supply issues in order to ensure that there was no gap in steel supply to the parts manufacturers. While some individual tasks, like updating spreadsheets and periodic site visits, were involved, the core of the job was to group problem solve, requiring the buyer to be available to interact with members of the resale team, suppliers, and other members of Ford when there were problems. Ford managers had determined that these types of meetings were best conducted face-to-face, and that email and teleconferencing did not work as substitutes.

Harris suffered from a condition called irritable bowel syndrome, which caused her significant distress. On her worst days, she was unable to drive to work or stand up from her desk without soiling herself. As a result, she began to take leave under the Family and Medical Leave Act (FMLA). During her employment, Harris was considered to be a competent, but not perfect employee. Performance reviews taken from 2004 to 2008 rated her as “excellent plus” and noted that she worked diligently with “minimal supervision.” However, she received low rankings on her contribution assessment, and on most job-related skills in 2007 and 2008. After she began taking FLMA leave, her absences hurt her job performance. In order to help her keep up, Harris’s supervisor let her do a flex-time telecommute schedule where Harris worked evenings and weekends to keep up with her work. However, Ford did not credit her with work performed outside of core business hours because she could not engage in team problem solving or access suppliers for information.
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The Sixth Circuit recently sided against the Equal Employment Opportunity Commission (EEOC) in a case involving whether black applicants for employment were rejected at a higher rate than white applicants due to their credit scores.

prancheta-192682-m.jpgIn EEOC v. Kaplan Higher Education Corp., Kaplan offered both graduate and undergraduate degrees, with some of the students receiving financial aid through the Department of Education. As Kaplan’s employees had access to student financial records, there was a troubling string of events where employees were stealing checks intended for students and causing other irregularities. To prevent further problems, Kaplan installed a pre-employment credit check system for anyone applying to executive, financial aid, or accounting positions.

Third-party vendors performed the credit checks, flagging any applicants who filed for bankruptcy, were delinquent on their child support payments, any outstanding civil judgments worth more than $2,000, garnishment of wages, and Social Security numbers that did not match what the credit bureau kept on file. Kaplan then reviewed the applications and determined which ones should move forward.
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This past month, a federal court in Indiana allowed a class-action employment suit to move forward after affirming in part and denying in part the employer’s motion to dismiss. In Harris v. Reliable Reports, Inc., the named plaintiff, Matthew Harris, claimed that the Fair Labor Standards Act (FLSA) and wage and hour laws in six states had been violated. He sought court certification for a class-action lawsuit.

house-in-field-of-flowers-1440514-m.jpgHarris initially filed a 44-page complaint against Reliable Reports, Inc., for whom he had worked as a field reporting specialist from March 2011 to April 2013. Reliable Reports operated in 22 states, where it employed field reporting specialists to inspect both residential and commercial properties. Part of a field reporting specialist’s job was to log into Reliable Reports’s computer network to download addresses of properties to be inspected; call to arrange inspection appointments and prepare route maps; load coordinates into their GPS units; drive to inspection sites and inspect and photograph the properties; respond to calls and texts from Reliable Reports and other interested parties; contend with traffic delays; and log into the computer network at the end of the day to enter hours worked and miles traveled.

For this, field reporting specialists were paid at a piece rate, which meant that they received a set fee for every report of the inspection completed and passed, as opposed to a standard hourly rate. Harris claimed that despite traveling hundreds of miles from home each day, field reporting specialists were not compensated for that time. Nor did they receive a true lunch break, being required to drive to appointments, get gas, or respond to calls during that time. Overall, though Harris claimed to have worked 60 to 65 hours per week, he had just $21,334.19 to show for it. Reliable Reports allegedly told employees that they must not report their actual hours and miles. The company also failed to fully compensate employees for mileage, despite claiming that it would in the employee manual.
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