USA Regional Employment 2019 Comparisons

Last Updated July 08, 2019

Law and Practice

Authors



Barnes & Thornburg LLP 's attorneys routinely defend clients against claims of wrongful discharge, harassment, discrimination, workplace defamation, breach of contract, invasion of privacy, ERISA violations, illicit drug testing and other federal and state law claims, and enforce non-competition and non-solicitation agreements. The firm’s extensive traditional labour practice encompasses defending against unfair labour practice charges and union-organising campaigns, negotiating and administrating union contracts, and coaching and training on lawful union-avoidance techniques. Barnes & Thornburg's primary practice areas are: employment litigation, traditional labour, OSHA, immigration, supervisor training, employment counselling, trade secret and non-compete claims, employment contracts, class action defence, state and federal laws, NLRB, affirmative action plans.

The “Gig” Economy

In many respects, the law has struggled to keep up with rapid advances across industries. Employers have warmed to the “gig” economy approach, sometimes relying heavily on transient, temporary and short-stint workers, many focused on particular projects or ventures. With industry experts predicting a steady increase in the gig economy, employers need to understand the challenges and risks. While the economy has drastically changed, applicable U.S. law has not.

Employers (or entities contracting for services or personnel) must consider the costs, savings and potential risks related to particular choices in this framework. Misclassifying workers as “independent contractors” who should be classified as “employees” leads to legal issues, including in the following areas: collective bargaining; taxes; wage and hour compliance; benefits; and anti-discrimination laws.

All of these areas are based on workers having “employee” status. Independent contractors typically have no such protections under federal and most state employment laws. The question regarding whether a worker or group of workers is properly classified can easily lead to disputes before administrative agencies and state and federal courts. See more detailed information on the independent contractor relationship in 2 Nature and Import of the Relationship.

Artificial Intelligence

Artificial intelligence is capable of streamlining and focusing decision-making processes, but the risk for employers is that the assumptions used may have an inadvertent discriminatory impact on a legally protected class of employees. The fact that a computer program has sorted employment candidates, for instance, will not protect an employer from potential liability under a federal or state employment statute (such as Title VII of the Civil Rights Act of 1964) if disparate impact occurs in relation to age, race, disability or any other protected characteristic. A disparate impact is a legal concept that results in liability even in the absence of wrongful intent when statistical evidence would indicate that a facially neutral policy or practice has a disproportionate adverse effect on a legally protected group of individuals.

Cyberspace and Social Media

In the information age current and former employees, and even current and former applicants, have the ability to publicly vent their opinions about their employers to a wide audience.

Under the National Labor Relations Act, U.S. employers cannot preclude many forms of free expression related to work matters and work conditions (and cannot easily take adverse action against those engaging in such free expression). Employers, however, can restrict the sharing and/or misappropriation of their confidential information and trade secrets, including in on-line forums.

Technological Advances

Technology has allowed employers to be flexible with their workforce, allowing employees to address work issues outside of the traditional office environment. However, hourly workers not exempt from the requirements of the Fair Labor Standards Act (“FLSA”) likely will need to be paid for work performed after hours. U.S. employers need to have clear policies that address their compensation policies with respect to the use of these devices and after hours work.

While U.S. employers have adopted and implemented longstanding policies prohibiting harassment based on legally protected characteristics, the attention placed on this issue by the “Me Too” movement and the publicity generated in recent high-profile cases has initiated a seeming cultural shift from preventing conduct that is illegal to promoting a respectful and inclusive work environment. This shift can be seen in the types of training being provided by employers (more focused on civility training and respect), as well as the focus of anti-harassment policies. The promotion of environments that encourage reporting and offer multiple avenues to bring concerns forward, coupled with an appropriate response to the behaviors at issue, are important components of such a program.

Late last year, Congress passed a comprehensive tax reform bill. Section 162(q) of the Internal Revenue Code now eliminates a tax deduction in a sexual harassment or sexual abuse settlement if the settlement or payment is subject to a nondisclosure agreement. Accordingly, while settlement payments made to claimants in connection with employment-related disputes are generally treated as deductible business expenses, this tax benefit no longer exists for confidential settlements involving a claim of sexual harassment. This provision forces companies to choose between economic incentives and public scrutiny in an attempt to create greater transparency and accountability for unlawful sexual conduct in the workplace.

In Michigan, absent a contract or policy to the contrary, private sector employees do not have “due process” rights like their public sector counterparts.

Many companies prefer to operate union-free for various reasons, such as avoiding limitations on dealing directly with their employees, maintaining full operational flexibility and minimizing the risk of work stoppages. Union membership has been on a significant decline in the United States for decades, with private sector union membership hovering around 6.5% now, but their ranks remain strongest on the coasts (e.g., New York, California, etc.). The South historically has the lowest unionization rate, but many states in the Midwest have seen their union numbers dwindle increasingly in recent years. Effective March 28, 2013, Michigan became a “Right to Work” state. As a “Right to Work” state it is unlawful for a collective bargaining agreement in Michigan to require employees to pay union dues. In 2017, 15.6% of Michigan wage earners belonged to a union.

The National Labor Relations Board (“NLRB”) governs private sector labor relations in the United States, and its regulations and administrative decisions apply to all 50 states. It consists of five members appointed by the President, so their views can change from administration to administration. We anticipate more employer-friendly decisions, rules and regulations under the current NLRB. At the end of the day, though, the agency is vested with enforcing the National Labor Relations Act (“NLRA”), which provides workers with certain rights with respect to unionizing and discussing, protesting, etc. their terms and conditions of employment. Because the law is national in scope, no specific region, generally speaking, has a “leg up” on another when it comes to U.S. labor law.

There are a variety of different types of service arrangements in the United States. As a result, it is important that the parties agree on the terms and conditions at the outset of their relationship, and ensure that the agreement reached is consistent with applicable law. Failing to properly do this at the commencement of the engagement not only creates unnecessary uncertainty, it increases the organization’s legal exposure with regard to future disputes.

Employment

The default service relationship in the United States is that of employer and employee. Most states, including Michigan, are “at-will” employment jurisdictions, meaning that either party (the employer or the employee) can terminate the relationship at any time and without having to provide a reason – provided, of course, that the termination decision is not otherwise prohibited by law (i.e., due to unlawful discrimination or retaliation). In some situations, employees may have contracts specifying the terms and conditions of their employment. Such contracts are not required in the United States, but occasionally may be warranted depending on certain factors such as the type of employee in question (i.e., an executive). Barring a formal written contract, terms regarding the employment relationship typically are relegated to documents such as offer letters, job descriptions, employment policies or employment handbooks. 

Joint Employment

Joint employment is not the norm and applies only in limited circumstances – usually in a legal proceeding as a mechanism by which an employee attempts to recover damages against a third party. However, to show that a third party is a joint employer, the third party must do more than simply allow another employer’s employee to work at its facility. Instead, the third party must have exerted significant control over the employee. Factors to consider in determining joint employer status are: (1) supervision of employee’s day-to-day activities; (2) authority to hire or fire the employee; (3) promulgation of work rules and conditions of employment; (4) issuance of work assignments; and (5) issuance of operating instructions.

Under the NLRA, the NLRB currently may find two or more entities are joint employers if they are both employers within the meaning of the common law and if they share or codetermine matters governing the essential terms and conditions of employment. The primary inquiry by the NLRB is whether the purported joint employer possesses the actual or potential authority to exercise control over the primary employer’s employees, even if the authority has not been exercised. This current NLRB joint-employment standard could change through case law or rule making.

Independent Contractors

The importance of control in a relationship also extends to the determination of whether a worker is an independent contractor. Contracting is very popular in the United States: the number of contractors as a percentage of the workforce has doubled since the 1990s. See GAO-15-168R Contingent Workforce. As contracting has grown in popularity, it has attracted more scrutiny from the courts, lawmakers and administrative agencies. Accordingly, simply describing a worker as an independent contractor is not sufficient – what matters is how the parties act in practice based on the totality of the circumstances. The law in this area is rapidly evolving and there are no rigid rules for determining whether a person is an independent contractor or an employee. Various jurisdictions and administrative agencies in the United States have adopted different tests to determine whether an individual is an independent contractor.

Most of the enforcement activity for improperly classifying a worker as an independent contractor instead of an employee is at the federal level. The U.S. government will seek unpaid income taxes, unemployment taxes and overtime – as examples. Misclassified independent contractors can also seek benefits (health insurance and retirement) under the federal Employee Retirement Income Security Act. The federal government, generally, applies a common law control test, exemplified by the six factors used by the U.S. Department of Labor:

“(1) the degree of control that the putative employer has over the manner in which work is performed, (2) the worker’s opportunities for profit or loss dependent on this managerial skill, (3) the worker’s investment in equipment or material, or his employment of other workers, (4) the degree of skill required for the work, (5) the permanence of the working relationship, and (6) the degree to which the services rendered are an integral part of the putative employer’s business.”

At the state level, the primary potential misclassification liabilities are income tax, unemployment and workers’ compensation. In Michigan, an “economic reality test” has traditionally been applied to determine if an employer/employee versus independent contractor relationship exists. That test focuses primarily on whether the work performed is an integral part of the employer’s business and if the worker depends on the compensation from the employer as his or her primary income source. Recently, the Michigan unemployment agency adopted the U.S. Internal Revenue Service 20-factor test.

Business and workers are often complicit in the objective to characterize the relationship as a non-employment independent contractor – both parties save money. However, governments lose a lot of revenue and critically examine those relationships. Also, if the relationship sours or the worker is injured while working, the independent contractor will often seek employment-related benefits, such as workers’ compensation or unemployment, and the business will have no insurance coverage in place to manage the risk. Best practice, at a minimum, is to be conservative in characterizing workers as independent contractors and to make sure appropriate insurance coverages are in place for non-employee independent contractors.

Franchising

Most typical workplace scenarios in the United States do not involve franchising. While there is some overlap between the terminology of an independent contractor and that of a franchise, the structure of the relationship is different: a franchise involves a relationship whereby the franchisee undertakes to conduct a business or sell a product or service in accordance with the methods and procedures prescribed by the franchisor, and the franchisor undertakes to assist the franchisee through advertising, promotion and other advisory services. Franchises in Michigan are governed by state statute. The Michigan Franchise Investment Law distinguishes franchise contracts from other agreements by way of a three-prong test: (1) a franchisee is granted the right to engage in the business of dispensing goods or services, under a marketing plan or system prescribed in substantial part by a franchisor; (2) the operation of the franchisee’s business pursuant to such a plan is substantially associated with the franchisor’s trademark, service mark, trade name, logotype, advertising, or other commercial symbol designating the franchisor or its affiliate; and (3) the person granted the right to engage in this business is required to pay a franchise fee. MCLA 445.1502(3). Michigan recently amended its franchise law to confirm that a franchisee is the sole employer of its workers. MCLA 445.1504b. That amendment provides clarity for Michigan franchises under Michigan law (income tax, unemployment and workers’ compensation – as examples), though this issue remains contested under federal law.

Internships

Unpaid internships have been the subject of considerable scrutiny in the past few years – notably from the standpoint of whether private businesses can rely on unpaid interns. The U.S. Department of Labor’s Wage and Hour Division has developed a test for evaluating whether an individual constitutes a “trainee” (intern) for the purposes of the FLSA and thereby not required to be paid. The following seven factors are considered in determining whether a for-profit employer lawfully can utilize an unpaid intern: (1) the extent to which the intern and the employer clearly understand that there is no expectation of compensation – any promise of compensation, express or implied, suggests that the intern is an employee – and vice versa; (2) the extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions; (3) the extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit; (4) the extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar; (5) the extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning; (6) the extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern; and (7) the extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.

See Fact Sheet #71: Internship Programs Under The Fair Labor Standards Act, available at https://www.dol.gov/whd/regs/compliance/whdfs71.htm#2. Michigan does not have different enforcement guidance.

At-Will Employment

Michigan, like most states, presumes that the employment relationship is “at will.” This means that if there is no contract setting forth a specific term for the employment relationship or limiting the means by which an employee can be terminated, the employer can lawfully terminate the employee at any time without giving notice of the termination or providing a reason for the termination – as long as the termination is not otherwise prohibited by law. Of course, the at-will relationship does not extinguish or limit any other statutory or legal right an employee has under applicable federal, state or local laws, and employers must comply with all laws that govern the employment relationship in the jurisdiction in which the employee works. Thus, clear documentation and communication of the basis for the termination decision will serve employers well should their decision be challenged under the various civil rights or leave laws applicable to the specific situation.

Although Michigan is an employment-at-will jurisdiction, an employer can forfeit its at-will right to terminate an employee by promising employment for a fixed period of time or stating (including verbally) that employment will only be terminated under certain circumstances such as only for “good cause or reason.” Either situation may create an enforceable “contract of employment.” Similarly, promises that an employer makes to a prospective employee regarding compensation also may be enforceable. Such promises could entitle a terminated employee to a jury trial regarding whether the terms of the employment commitment were met. Consequently, if employees are promised a set wage rate, commission benefit or bonus, they may sue to enforce such promises. There are also judicially created exceptions to the at-will doctrine. In Michigan, the primary judicially created exception to the presumption of at-will employment is if an employee’s discharge violated “public policy” – defined as an employee’s failure or refusal to violate a law in the course of employment or an employee’s exercise of a right conferred by a well-established legislative enactment.

Employment Contracts

Employers may create enforceable employment contracts if they choose to do so. Typically, contracts are entered into in limited situations involving high-level or critical employees, such as senior executives, research scientists, etc. Any employment agreement that is entered into between an employer and employee will be subject to the same general parameters applicable to any regular contract: whether there was an offer and acceptance for the terms embodied in the agreement and whether there was consideration provided for the promises contained in the agreement.

The terms of an employment agreement will vary significantly depending on the circumstances and the parties at issue. Agreements can be limited to specific issues such as restrictive covenants. On the other hand, agreements also can cover most of the terms of employment. In those cases, the agreements will tend to cover the employee’s duties and responsibilities, compensation and benefits, the term of the relationship and the parameters by which the relationship can be terminated – including whether it is terminable for cause and the circumstances defining cause. Such agreements also typically address whether the employee would be eligible to receive severance and the terms and conditions associated with the severance package, including whether the employee is required to release any claims they may have against the company before receiving such severance.

Offer Letters

Offer letters are commonly used to communicate the basic terms of employment to a prospective employee. Typically, these identify the type of job that is being offered to the employee (probationary, temporary, part-time, full-time), the department the person will be working in, who they will report to, and their wages or compensation structure. The offer letter also presents an opportunity to provide a copy of the job description which may go into more detail about the requirements for the position, as well as covering any unique aspects of the offer, such as whether the employee will be required to abide by restrictive covenants (which usually will be set forth in a separate agreement) as a condition of accepting the position. Offer letters for at-will employees should also contain appropriate language that affirms the at-will nature of the employment relationship and that limits the verbal or written modification of the at-will relationship. Because the contents of an offer may become the basis for a later claim of breach of contract or a promissory estoppel claim, many employers require that the employee sign the offer to acknowledge receipt and acceptance of the terms that are specified.

Employee Handbooks

Most employers provide employee handbooks to inform employees about the company, and the policies and regulations that the company has adopted for the workplace. Handbooks are reference tools which help to promote consistency in the workplace and ensure that all members of management and all employees understand the company’s requirements, policies and benefits. Handbooks can address a wide array of employment terms, including – among other things – the company’s nondiscrimination and harassment policy, the regular hours of operation, exempt and non-exempt status, how requests for leave should be made and handled, employment benefits, discipline and discharge procedures, and the usage of company property and equipment.

To protect against potential contract-based claims associated with employee handbooks, most employers incorporate disclaimers that the document does not create a contract with the employee, that the employment relationship is “at will,” with limited modification, and that the terms of employment can be revised at the employer’s discretion. Despite such contractual disclaimers, some handbook policy statements will be enforced like a contract, with any ambiguity construed against the drafting employer. For example, in Michigan, its Wages and Fringe Benefits Act will construe and apply policy statements regarding when paid vacation is accrued or forfeited as if a contract.

Exempt and Non-Exempt Status

Exempt and non-exempt status in the United States is determined by the FLSA as well as individual state laws addressing this issue. The FLSA applies to all businesses or similar entities that have annual sales or business of at least USD500,000 or to individuals who are engaged in interstate commerce or in the production of goods for interstate commerce. The FLSA imposes various requirements on employers, including obligations to make and preserve records on employee pay; child labor restrictions; minimum wage; and overtime at time and a half the regular hourly rate for all hours worked in excess of 40 hours in a seven-day workweek.

Generally, to establish that an employee is exempt from the FLSA’s overtime requirements, an employer must show that an employee (a) is paid on a salary or fee basis, (b) is paid the minimum salary (currently USD455) per week, and (c) primarily performs so-called white-collar duties that are excluded from the overtime requirements. An employee’s “primary duty” is defined by the regulations as the “principal, main, major or most important duty that the employee performs.” In assessing whether or not an employee properly is exempt based on the performance of his or her primary duty, the regulations look to the character of the employee’s job as a whole, not what a company labels an employee. Although there are several exemptions, the ones most commonly used by employers are the “white collar” exemptions – executive, professional and administrative. In order to come within the scope of the executive exemption, an employee who is paid on a salary basis at the threshold level must also have the primary duty of managing the business (or a department of the business), customarily and regularly direct the work of at least two other full-time employees or their equivalents, and have the authority to hire and fire other employees or have his or her suggestions and recommendations on key personnel decisions such as hiring, firing and promotions be given “particular weight.” The professional exemption requires that employees – in addition to being paid the required amount – perform work requiring advanced knowledge in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction, or work which requires invention, imagination, originality or talent in a recognized field of artistic or creative endeavor. The administrative exemption requires – in addition to being paid the required amount – that employees exercise discretion and independent judgment with respect to matters of significance to the business. This area has been the subject of considerable and ongoing litigation. Accordingly, prudent employers identify the proper classification which may be applicable to workers before the commencement of the employment relationship. Michigan generally does not impose stricter requirements on employers in the delineation of whether a position is exempt or non-exempt.

Employees who are not U.S. citizens or permanent residents must have some form of work authorization from the federal government to be employed, and employers must verify this information when completing an I-9 form within three days of the start of employment. The I-9 form is a document that must be completed by all new hires to verify eligibility to be lawfully employed in the United States. With immigration law having become ever more complex and confusing over the past several decades, adjudication of petitions for work authorization being more closely scrutinized, and compliance investigations (with severe consequences for errors) on the rise, it is ever more important to grasp the possibilities, requirements and responsibilities in this area and to develop legal, effective strategies for proceeding.

The Hiring Process

While the I-9 process requires that an employer review documents sufficient to complete an I-9 form and establish both identity and work authorization, employers also may be subject to charges of discrimination or document abuse by requiring too many or specific documents as a part of that process, or by asking the wrong questions during an interview process. For example, applicants may not be asked if they are U.S. citizens or if they have a green card (or be asked to show employment authorization) prior to hiring. An employer may ask if a potential hire is currently authorized to be permanently employed in the United States and if the person will need now or in the future the company’s sponsorship for a work visa or permanent resident status. Applicants should not be told that only citizens are hired. Applicants should not be told that the organization does not sponsor visas – unless that truly is the case. Employers also should be aware that some categories of work authorization must be paid for by the employer and may not be paid for by the employee; others may be paid by either or the cost divided up. Importantly here, punitive agreements to pay the employer back for immigration or work authorization related costs are generally unenforceable, although in certain cases a forgivable loan agreement, which reduces over time, may be permissible. Also, because no entity can predict with certainty whether a governmental agency will grant a request for work authorization or permanent residence, a company may choose to state that it will attempt to assist a worker with these efforts, but it should not promise to obtain any specific result. While in the past, the focus may have been on ensuring that protected classes and foreign workers were not discriminated against, recent compliance and enforcement measures indicate that action may be taken equally aggressively against action deemed discriminatory toward U.S. workers (citizens and permanent residents).

Corporate Structure and Relationships

An entity with operations in at least one foreign country may wish to consider whether or not common ownership and control (at least 51%) exists with the planned U.S. operation; if it does, the organization may be able to transfer specialized knowledge or managerial and executive employees from the foreign operation to the U.S. entity after one year of qualifying service. Specialty occupations (those occupations requiring at least a relevant bachelor’s degree) may also potentially be filled by foreign professionals. However, demand far exceeds the number of available H-1B visa slots and new H-1B slots are typically used within the first few days of filing each year. H-1B is a status potentially available for foreign workers where the position to be filled is a “specialty occupation” and for which the foreign worker has earned at least a relevant bachelor’s degree or the foreign equivalent. Some exceptions exist to this quota system in that workers previously granted an H-1B in the last six years may be exempt from the cap, while some university and research or nonprofit employers may not be subject to the cap. Because workers who were previously counted under the cap are not again subject to the cap within those six years, many organizations take advantage of this to hire existing H-1B workers from other organizations (which also means an organization could easily lose an H-1B to another entity as well). Importantly, a relatively new exception to the cap exists for entities having a formal affiliation agreement with a university or research institution; structured correctly, this can be a valuable tool for H-1B for an otherwise-cap-subject employer. For organizations originating in certain foreign countries having treaties of commerce and navigation with the United States, those companies may be able to establish U.S. organizations or activities utilizing citizens of that country to work in the United States in “E status.” E status requires that a qualifying entity be an organization of a treaty country (i.e., the company is considered a “national” of that country), and that the individuals working under E status share that same nationality; if these conditions are met, certain acts of commerce or corporate activity may qualify for E status.

Employing Recent University Graduates and Use of e-Verify

Another source of professional employees is new foreign graduates of U.S. colleges and universities. While some of these recent graduates are hired in H-1B or some other moderate-term employment status, many are employed for a short time, post-graduation, in Optional Practical Training (OPT) status. This is a process by which the university may grant up to 12 months of practical training authorization (minus time spent working as a student) in order for the individual to work in a field related to his or her studies. This is a relatively simple and inexpensive option for employers, albeit very short-term. At the end of this time, the employer must either discontinue employing the person, or move him or her to another status, such as H-1B status. However, for graduates in certain STEM fields, the initial 12 months of OPT may be extended by up to an additional 24 months of STEM OPT – if the university agrees. Important aspects of this 24-month potential extension of work authorization include the requirement that the employer develop a specific training plan, the job to be done must be one of the approved STEM occupational fields on the government list (and must be related to the field that the person studied), and the employer MUST be a participant in e-Verify. E-Verify is not required for the initial OPT employment, but an employer must participate in e-Verify in order to qualify to utilize STEM OPT. Decisions about location of hiring sites and storage and maintenance of I-9 records may also be impacted by the decision to utilize e-Verify (or its mandatory use, where required).

Maintenance of Status and Compliance Issues

Compliance with I-9 regulations and rules affiliated with non-U.S. workers and various work-authorized statuses have also increased in importance in the past several years. Federal agencies such as ICE and the Department of Labor have greatly increased their investigation and routine compliance monitoring, as well as having expanded methods for the general public or interested parties to report violations. Fraud, noncompliance and even some unintentional errors can lead to the loss or denial of work authorization, large fines, and in the most egregious cases, even criminal charges for responsible management or ownership. This stresses the importance of accurately completing immigration and I-9 paperwork, correcting any mistakes, and ensuring that any terms and conditions of the status are followed and that any material changes are examined for potential consequences. A robust system of tracking I-9 expiration dates and compliance and for monitoring and requesting or renewing any needed work authorizations is necessary. Most non-immigrant work authorizations need to be periodically renewed, and many statuses have a maximum number of years for which it may be used. Many are also employer and location specific and do not directly transfer to another employer, or even another job within the same employer. As a part of certain processes, such as H-1B and labor certification, as well as the H2 program for filling temporary or seasonal needs, information such as the job availability and wage or wage range may be required to be disclosed publicly via prominent posting or notice to the relevant union.

If an entity purchases a non-union business or starts up a business, to the extent the company desires to remain union-free, the importance of hiring a strong human resources and employee relations staff who can establish a positive culture and get buy-in from the managers cannot be overstated. The vast majority of union campaigns start because of perceived toxicity in the workplace (e.g., favoritism, no outlets for employees to express their views, etc.). Being union-free vests the organization with the autonomy to make decisions about policies and other terms and conditions of employment. If the employees are represented by a union and/or ever vote a union into the workplace, an employer has a legal obligation to bargain virtually every potential change to workers’ terms and conditions employment with the union. Accordingly, many employers strive to remain union-free in order to enjoy maximum flexibility.

If an entity acquires a business where employees are represented by a union, the entity may have options under the NLRA depending on the nature of the transaction. If the acquisition is a stock transaction, a stock purchaser is almost always bound by the existing collective bargaining agreement with the union. If, however, the acquisition is an asset purchase, the purchasing entity generally has the right to either assume or not assume the existing collective bargaining agreement. If there is continuity in the “employing industry” (with the most significant factor being the continuity of the workforce), the purchasing entity of the assets becomes a “successor” with an obligation to recognize and negotiate with the union. Depending on the specific facts, a “successor” may be able to establish “initial terms and conditions” of employment prior to negotiating with the union.

The pre-hire and interviewing process is a significant opportunity for Michigan employers to use the process wisely to identify and hire the strongest candidate for the positions in question. Prior to the employment interview, employers should consider requiring applicants to complete an employment application which accurately describes prior educational and work history, reasons for leaving prior employment, references, and any special skills. While many applicants currently seek to replace completing the work history part of the application with a resume, employers should consider requiring the applicants to complete the application as well, as the questions on the application seek additional information not included on a resume, such as dates of employment and reasons for leaving.

As a best practice, the employment application should include a certification by the applicant that he or she provided complete, accurate and truthful information on the application. This certification provides employers with a means to limit or mitigate damages in an employment discrimination case. The employment application also should contain an affirmation of the “at-will” nature of the employment relationship, and employers should refrain from making verbal or written assurances of “long term” or “permanent” employment, or other statements that could adversely affect the employer’s ability to successfully assert that the employee was employed at will at a later time. In addition, to the extent that any post-offer testing is to be conducted, employers should include that information in the employment application to ensure that applicants are aware of the requirements and allow them to request reasonable accommodations, if needed.

The employment application and the interview process, as a best practice, should not ask questions or elicit information about legally protected characteristics, such as age, national origin/race, religious practices, pregnancy or desire to have children, sex, sexual orientation or gender identity, or medical conditions or disabilities, and similarly should avoid questions that would elicit this type of information. 

A common aspect of the hiring process is a limited criminal background check for the successful candidate. While this due diligence provides benefits for employers, such as a defense to a negligent hiring claim and the avoidance of a high-risk hire, this is an area of the law that is currently evolving on the national, state and local level. The Equal Employment Opportunity Commission has taken the position that given the fact that minorities are disproportionately adversely affected with regard to both convictions and arrests, criminal convictions should only be considered if it is job-related to the particular position being sought. Employers should consider doing a case-by-case analysis, and review the type of conviction, the date of the conviction, the nature of the job in question, and any exceptional circumstances before making a decision about employment based on a criminal conviction.

Another common component of a background check involves credit checks. Again, because credit checks tend to disproportionately disqualify minorities, it is best practice to conduct a similar analysis of the job-relatedness of a credit check to the position in question to avoid unnecessary legal exposure.

The Americans with Disabilities Act (“ADA”) also imposes restrictions on employers with regard to what information can be sought or discussed during the hiring process. The ADA generally prohibits employers from any pre-employment inquiries about an applicant’s medical condition. Thus, the employer may not ask any questions designed to elicit medical information prior to a conditional job offer being made. 

After a conditional offer of employment has been made, the employer may then conduct a post-offer medical examination, provided that this is required of all applicants for the position. However, to withdraw an offer of employment, the employer must be able to demonstrate that the individual is unable to perform the essential functions of the job in question, even with reasonable accommodations. Thus, to the extent that post-offer testing is to be completed, employers should ensure that the components of the test directly correlate to the essential functions of the position.

Employers may also require physical agility testing. Depending on how these tests are constructed, they may or not be considered a “medical examination” under the ADA. For example, if an agility test simply requires an employee to pick up products and carry them a certain distance, such a test would not be a medical examination. However, if the tester measures the employee’s physiological response to the activity (e.g., pulse and blood pressure), the test very well may be considered a medical examination subject to the ADA restrictions on such testing. Even such agility tests must be job-related and consistent with business necessity, in essence accurately depicting the physical demands of the position in question. As this is a highly technical area of the law, employers are well advised to seek legal assistance with these determinations.

The Genetic Information Nondiscrimination Act (“GINA”) similarly imposes restrictions on employers during the hiring process (and afterward), making it unlawful for employers to request genetic information with respect to employees. Because genetic information is defined broadly to include family medical history, employers should ensure that any post-offer medical examinations, even those conducted by occupational doctors, do not elicit this information. 

Finally, the ADA requires employers to provide reasonable accommodation to disabled applicants to permit them to participate equally in the hiring process. While reasonable accommodations may take many forms, such as having an interpreter for a hearing-impaired applicant, administering a test in an accommodated format (more time, reading the questions, answering in a different format (e.g., dictating), ensuring access to the testing site, etc., the employer is not required to “carve off” essential functions of the position in question as such an accommodation would not be reasonable.

Michigan Job Application Requirements

The Michigan Persons with Disabilities Civil Rights Act, MCLS 37.1101 et seq., requires employers to notify job applicants of their right and responsibility to request a workplace accommodation in writing within 182 days after knowing an accommodation is needed to enable a disabled person to perform the duties of a particular job. MCLS § 37.1210(18), (19). This notice may be provided by a workplace posting, or other appropriate means, such as a statement in job application materials. MCLS § 37.1210(19).

Michigan Job Application Restrictions

Michigan employment applications may not include questions regarding an applicant's:

  • age, date of birth;
  • birthplace, national origin, ancestry, nationality, citizenship (employers may ask questions relevant to the Federal I-9 form after hiring an employee);
  • religion or creed, religious holidays or practices;
  • race, color;
  • height, weight;
  • marital status;
  • sex;
  • pregnancy, childbirth, or a related medical condition;
  • disability (mental or physical) unrelated to job duties;
  • genetic information;
  • misdemeanor arrests that did not result in a conviction (except for government law enforcement positions);
  • clubs or organizations which indicate the race, color, national origin, religion or ancestry of their members.

Michigan Anti-Discrimination Laws

Under Michigan, it is illegal for employers to discriminate in the hiring process based on certain protected categories, as detailed below.

The Elliott-Larsen Civil Rights Act (ELCRA)

Michigan's Elliott-Larsen Civil Rights Act (ELCRA), MCLS § 37.2101 et seq., prohibits job application questions about the following protected characteristics of the applicant: race, color, national origin, age, sex, height, weight, or marital status. MCLS § 37.2206(2). MCLS § 37.2202(1)(d) prohibits hiring discrimination due to a person's pregnancy, childbirth, or a related medical condition. MCLS § 37.2205a prohibits application questions regarding an applicant’s misdemeanor arrest, detention, or disposition that did not result in a conviction.

The Michigan Persons with Disabilities Civil Rights Act

The Michigan Persons with Disabilities Civil Rights Act, MCLS 37.1101 et seq., prohibits job application questions concerning the disability of a prospective employee that are unrelated to the duties of the particular job. MCLS § 37.1206(2)(a). The law also prohibits hiring discrimination on the basis of an applicant's disability or genetic information unrelated to the duties of a particular job. MCLS § 37.1202(1)(a). Employers may not refuse to hire an individual when adaptive devices or aids would enable the individual to perform the job. MCLS § 37.1202(1)(f).

The Michigan Department of Civil Rights Pre-Employment Inquiry Guide

The Michigan Department of Civil Rights Pre-Employment Inquiry Guide provides practical guidance to employers regarding the legal limitations on job applications in Michigan. The publication is on the Department's website, available at http://www.michigan.gov/documents/mdcr/Preemploymentguide62012_388403_7.pdf 

Local Anti-Discrimination Ordinances

In addition to the classifications protected by state law, several Michigan cities have passed ordinances that prohibit hiring discrimination based on sexual orientation, gender identity, gender expression and other characteristics. These ordinances include the following:

  • Ann Arbor, Michigan. The city prohibits hiring discrimination on the basis of family responsibilities, educational association, sexual orientation, gender identity or HIV status of another person or that person's relatives or associates. Michigan Code of Ordinances §§ 9:151, 9:154;
  • Detroit, Michigan. The city prohibits hiring discrimination on the basis of sexual orientation and gender identity or expression. Michigan Code of Ordinances Sec. 27-3-1;
  • East Lansing, Michigan. The city prohibits hiring discrimination on the basis of sexual orientation, gender identity or expression, student status, or use of adaptive devices or aids. Michigan Code of Ordinances Sec. 22-33;
  • Lansing, Michigan. The city prohibits hiring discrimination on the basis of student status, marital status, familial status, housing status, veteran status, political affiliation or belief, sexual orientation, gender identity or expression, mental or physical limitation, and source of income. Michigan Code of Ordinances Sec. 297.02, 297.03; and
  • Saugatuck Township (Allegan Co.), Michigan. The township prohibits hiring discrimination on the basis of sexual orientation, gender identity or gender expression. Michigan Code of Ordinances Sec. 2-252.

In Michigan, the enforceability of restrictive covenants changed significantly in 1985. Prior to 1985, restrictive covenants were considered void and illegal as restraints of trade under Michigan statutory law. On March 29, 1985 this statute was repealed and replaced with MCLA §445.774(a), which is now applicable to restrictive covenants and agreements entered into after March 29, 1985. The 1985 statute now permits a restrictive covenant which “protects the employer’s reasonable competitive business interests” provided the restrictive covenant is “reasonable as to its duration, geographical area, and the type of employment or line of business.”

A restrictive covenant must be supported by “sufficient consideration.” The courts continue to define and evaluate “sufficient consideration,” “reasonable duration” and “geographical area.” A Michigan Court of Appeals decision found the “[m]ere continuation of employment is sufficient consideration to support a non-compete agreement in an at-will setting.” With respect to duration the courts have generally found a period of six months to three years to be reasonable. The reasonableness of the geographical area will be determined by the scope of the business and the legitimate competitive business interests of the party seeking to enforce the restrictive covenant. Restrictive covenant provisions seeking to preclude an individual from working in any capacity in any location for a competitor have been found to be unreasonable.

If a court finds a restrictive covenant to be “unreasonable in any respect,” the Michigan statute permits a court to “limit the agreement to render it reasonable in light of the circumstances in which it was made and specifically enforceable agreement as limited.”

Michigan has adopted the Michigan Uniform Trade Secrets Act (“MUSTA”). MCLA 445, 1901 et seq. Under MUSTA “trade secret” means information (which includes formula, pattern, program, device, method, technique or process) having independent economic value from not being generally known or readily ascertainable that has been subject to reasonable efforts to maintain its secrecy. The party seeking to protect a trade secret must also demonstrate the defendant did not have express or implied consent to disclose or use the trade secret information.

Michigan’s definition of trade secret does not protect all information a company may consider either proprietary or confidential, and courts require the party alleging a trade secret violation to specifically identify the alleged misappropriated trade secret. Examples of information that have garnered trade secret protection include: information regarding specialized equipment and industrial processes, chemical processes, manufacturing methods, marketing and sales strategies, contractual details for customers, pricing lists and profit margins. Customer lists may be protected, but if such lists are compiled from personal or publicly available sources or if the information is readily ascertainable from other channels they may lose protection. Software, computer programs, data compilations and automation tools are not automatically entitled to trade secret protection and also must meet MUSTA’s elements required for such protection.

A party making a MUSTA trade secret claim must do so within three years. Remedies may include both injunctive relief and damages both for the actual loss (compensatory damages), unjust enrichment or a reasonable royalty for the unauthorized disclosure. Attorneys’ fees may also be recovered. Other civil remedies for trade secret protection under tort and other common law theories are displaced by MUSTA’s remedies; however, a party may still pursue contractual remedies. Because not all information may be considered a trade secret by Michigan courts and because contractual remedies are not preempted by MUSTA, contractual protection of information through confidentiality agreements more broadly defining proprietary and/or confidential information is a common and recommended practice. Such agreements are generally enforceable in Michigan.

Privacy rights in Michigan are covered by both common law and statutory protections. The Supreme Court of Michigan has recognized four common law privacy claims: (a) intrusion upon an individual’s seclusion, solitude or private affairs; (b) public disclosure of embarrassing private facts; (c) publicity that places an individual in a false light in the public; and (d) appropriation of an individual’s name or likeness for another’s advantage. In some respects these claims overlap, each turning on particular facts that generally involve the disclosure of information that is either “highly offensive,” “unreasonable” or “false” and that are private and/or disclosed publicly or to a large number of people.

Michigan also provides statutory privacy protections for certain information. Michigan has an eavesdropping statute prohibiting eavesdropping by third parties, including employers, on private conversations. MCLA 750.539a et seq. In such cases, all participants in the conversation must consent to recording the conversation. A participant in the conversation may, however, record the conversation. Michigan’s Persons with Disabilities Civil Rights Act prevents employers from performing genetic testing or requesting genetic information. MCLA 37.1101 et seq. Michigan’s Social Security Number Privacy Act, MCLA 445.81 et seq., limits how an employer may use, display or transmit an employee’s social security number and violations may result in civil and/or criminal penalties. Among other things, this statute requires encryption if four or more consecutive numbers of a person’s social security number will be used to gain access to the internet, websites or computer systems or networks. Michigan’s Internet Privacy Protection Act, MCLA 37.271 et seq., generally prohibits employers from accessing personal internet or social media accounts of employees and prohibits retaliation against a person who fails to disclose such information.

Employers in Michigan can generally prescribe limits on an employee’s use of its data or equipment, but exceptions do apply. For example in Purple Commc’ns, Inc., 361 NLRB 126 (2014), the NLRB held that “employee use of email for statutorily protected communications on nonworking time must be permitted by employers who have chosen to give employees access to their email systems.”

Many federal laws prohibit discrimination, harassment and retaliation based on legally protected characteristics (sometimes referred to as “immutable traits”) or based on legally protected activity by an employee. The legally protected characteristics that are protected under federal law include age, gender (including sex and potentially including sexual orientation and/or gender identity), pregnancy, race, color, national origin, disability, military or veteran status, genetic information, religion and citizenship. In addition to federal laws, Michigan’s civil rights laws expand the coverage of legally protected characteristics to include height, weight and marital status. While federal coverage is currently unsettled, many counties and municipalities in Michigan have adopted ordinances prohibiting discrimination based upon an employee’s sexual orientation and gender identity.

Employees do not have to first exhaust administrative remedies by filing a charge with the Michigan Department of Civil Rights before bringing a civil suit alleging discrimination, harassment and/or retaliation under Michigan’s civil rights laws. The limitations period for filing a civil suit is three years, although most courts enforce agreements to abbreviate the limitations period that applies to actions brought to enforce Michigan civil rights in employment laws. An explicit policy prohibiting discrimination, harassment and retaliation is a key component in addressing employee concerns and defending against a civil suit. Equally important, in terms of both regulating workplace behaviors and defending against litigation, is the provision of periodic training, and especially supervisors’ training; supervisors, as the employer’s agents, are subject to individual liability under many Michigan civil rights laws. Training, which should be mandatory, will identify the types of behaviors that are inappropriate in the workplace, how to report concerns and specifically identify who to report those concerns to, and prohibit retaliation against those who pursue complaints or assist in an investigation. Supervisors’ training should also identify the supervisor’s role in communicating with applicants and employees, and how to appropriately escalate, investigate, document and address reports of prohibited behaviors, including through any needed intermediate remediation and discipline. Most employers also include workplace respect, diversity and anti-bullying training designed to foster an inclusive and respectful workplace.

The Occupational Safety and Health Administration (“OSHA”) is the federal agency charged with enforcing all applicable safety laws and regulations in the OSH Act. Roughly 22 states have applied for and have been granted authorization to establish state plans to administer and enforce the applicable safety and health compliance program in their states. While state plans must be at least as effective as the federal standards, states can be stricter than their federal counterpart with regard to regulatory compliance. Michigan has an approved state plan, and the Michigan Occupational Safety and Health Administration (“MIOSHA”) administers the OSHA statutory and regulatory mandates. Michigan typically follows the federal OSHA regulations and does not implement standards that are stricter than the federal guidelines, though MIOSHA-specific standards must always be checked. For example, MIOSHA maintains “General Rules” in its Part I regulations, unique requirements for Powered Industrial Trucks in Part 21, and more up-to-date chemical exposure limits – all that are different from federal OSHA. Generally, the employer’s obligation under the OSHA statute and regulatory framework runs to employees, not third party non-employees or members of the public.

The Michigan worker’s compensation framework has several advantages for employers, including relatively modest statutory caps on benefits available under the Act, the ability of the employer to direct authorized medical care, and a robust exclusivity provision. The Michigan Worker’s Compensation Act is adjudicated through an administrative law structure, with hearings being held by a single hearing member assigned to that geographic location. Appeals from the decision of the single hearing member may be appealed to the full Board.

The provision of employee benefits and the documentation of employee benefit plans is largely a matter of federal law under the Employee Retirement Income Security Act of 1974 (“ERISA”). Generally, state law is preempted as it relates to employee benefit plans.

Nonetheless, federal courts have jurisdiction to interpret how ERISA applies to employee benefit plans and these interpretations can vary from geographic region to geographic region. The federal courts that have authority for interpreting ERISA as it applies to employers located in Michigan have generally been more employer-friendly in their interpretations.

Terminating an employee is one of the most difficult decisions and processes facing employers and is also the most likely to result in litigation.

At-will terminations

If the employment relationship is at-will, that fact should be disclosed within the employment application and in an employee handbook at the outset of the relationship. Many employers also have new employees sign an acknowledgment that theirs is an at-will employment relationship. Care must be taken throughout employment to ensure that the at-will status is maintained. Best practice is to have at-will statements included in the employment application, offer letters and employee handbooks/manuals. These statements will make clear that the relationship is at-will, meaning either party can terminate the relationship at any time, with or without notice, for any reason or no reason. It is good practice to also state that the at-will relationship may not be altered except in a writing signed by the CEO or President of the company.

Notwithstanding the ability to terminate at will employment relationships for “any or no reason,” employers are, of course, called upon to explain their termination decision. Most notably, in the context of a lawsuit claiming that the challenged action was discriminatory or retaliatory, many statutes permit an employer to avoid liability where they are able to articulate a legitimate, non-discriminatory (and/or non-retaliatory) basis for making their decision. Thus, while it could and should be enough to simply state that the employer exercised its at-will prerogative, a more successful defense would be to consider providing a reasonable explanation, often having to do with performance, misconduct, attendance or poor judgment, to name a few.

Termination of Employment by Operation of Contract

Where the employer and employee have entered into an employment agreement, that agreement will often address how and under what circumstances the employment relationship will terminate. Employers are well advised to pay close attention to the language of the employment agreement, especially where there are defined terms addressing termination for “cause,” “change of control” and other provisions. Employees are not entitled to severance pay as a result of termination unless the employer agrees to provide it according to the terms of an agreement or policy. Best practices dictate that severance or separation agreements include a release and waiver of all claims against the employer (unless where release and waiver is precluded by explicit operation of law).

Separation Agreements and Releases

Severance or separation agreements are treated as contracts, and generally subject to enforcement as such. Waivers by employees age 40 or over are subject to special scrutiny under the federal Age Discrimination in Employment Act (“ADEA”) which prohibits discrimination against employees age 40 or over who work for companies with 20 or more employees. In order for a waiver of claims to be valid under the ADEA, the release and waiver provisions must (a) be written in plain language understandable by the average individual eligible for the severance; (b) must specifically refer to ADEA claims and rights; (c) may not cover prospective or future rights or claims; (d) must be in exchange for valuable consideration in addition to any benefits or pay to which the employee was already entitled; (e) must advise the employee, in writing, to consult with an attorney before signing; (f) must provide the employee 21 days to consider the agreement, and (g) must permit the employee to revoke the agreement within seven days after it is executed by the employee. In the case of a group termination, i.e., involving termination of two or more employees, the additional requirement that gives the employees 45 days (not 21 days) to consider the agreement (again, with a seven-day revocation provision) must be provided. In addition, affected employees in the group termination scenario must be provided with a memorandum identifying (a) the class of employees eligible to receive the severance package; (b) any specific eligibility requirements for inclusion in the group termination; (c) time limits on participation; (d) the ages of all employees selected for participation in the termination program; and (e) the ages of all employees within the same job classification, division or organization who are not eligible or selected for participation in the termination program.

WARN Act Obligations

The Worker Adjustment Retraining and Notification Act of 1988 (“WARN Act”) applies to any business that employs 100 or more employees (excluding part-time employees) and terminates employees under circumstances that qualify as a “plant closing” or “mass layoff.” In those instances, the employer must provide affected employees and certain government officials at least 60 days' advance notice of the job loss event. Employers who fail to do so may be required to pay the affected employees’ back pay for each day of the violation, reimburse for any loss of benefits and medical expenses incurred and pay civil penalties.

In addition to the federal WARN Act, Michigan has its own “mini-WARN” Act. Michigan’s mini-Worker Adjustment and Retraining Notification (mini-WARN) law, the Employee-Owned Corporation Act, MCL §§ 450.731–450.738, encourages (but does not require) an employer to notify the Michigan Department of Licensing and Regulatory Affairs (LARA), the affected employees, any employee organization representing them, and the affected community as soon as possible after making a decision to close a facility at which at least 25 employees work.

Alternative Dispute Resolution

U.S. law generally favors the private adjudication or arbitration of disputes, rather than the filing of civil actions in a court of law. This policy was codified in the Federal Arbitration Act (“FAA”) which “manifests a liberal federal policy favoring arbitration agreements” and requires courts to “rigorously enforce agreements to arbitrate.” Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 270 (1995); Floss v. Ryan’s Family Steak Houses, Inc., 211 F.3d 306 (6th Cir. 2000). Arbitration agreements are enforceable under the FAA and Michigan law where (1) there is a valid written agreement that is binding under Michigan law; (2) the claims asserted fall within the scope of the arbitration agreement; (3) the party seeking arbitration has not waived its right to arbitration; (4) Congress did not intend the claims asserted to be non-arbitral; and (5) the agreement to arbitrate is a contract involving commerce.

Under Michigan law, the written agreement to arbitrate may take the form of an employer policy requiring arbitration as a condition of employment. An employee manifests acceptance of the policy requiring arbitration, by continued employment with the employer after notice of it is given to the employee. The arbitration agreement must meet certain standards of fairness to be enforceable, meaning generally, that the arbitration policy does not destroy any legal rights; it only changes the forum in which those rights will be resolved. The standards of fairness include (1) clear notice that the employee is waiving the right to bring a civil action; (2) the right to an attorney; (3) a neutral arbitrator; (4) reasonable discovery; and (5) a fair arbitral hearing. Arbitration agreements can, if so defined, apply to cover the full range or potential claims employees might raise against employers, including discrimination and harassment claims and, as of the U.S. Supreme Court decision in Epic Systems Corporation v. Lewis, 584 U.S. __ (2018), can waive an employee’s right to participate in a class or collective action against the employer.

As indicated earlier, Michigan law presumes that the employment relationship is at-will and terminable by either party for any reason or no reason at all. As also indicated earlier, care must be taken to ensure that an employer follows Michigan requirements for preserving the at-will status of the employment relationship.

The antithesis of at-will is an employment relationship that requires there be “just cause” in order to terminate. Typically, in a unionized environment, “just cause” is defined within a labor agreement or “collective bargaining agreement” between the union and the employer. “Just cause” is a murky standard that is viewed differently by arbitrators, and union employee termination or discharge cases are most frequently pursued in arbitration as a breach of the labor agreement. However, failure, refusal or inability to perform, following an unambiguous warning and progressive discipline, as well as intentional misconduct (again, after being warned/disciplined for earlier violations) are typical grounds for “just cause” termination. Labor arbitrations generally only provide a terminated employee with back pay and/or reinstatement.

In a non-union work environment, where there is a written contract of employment, or an agreement that the employment relationship will continue for a specified, definite duration, termination of the employment agreement proceeds according to the terms of that agreement. If termination violates the terms of that agreement, the offending party may be subject to a breach of contract/wrongful termination claim. In Michigan, a non-union employee who argues that his or her employment is not at-will, but rather requires “just cause” to terminate, may attempt to do so in one of three ways: (1) proof of a contractual provision for a definite term of employment or a provision forbidding discharge without just cause; (2) an express agreement, either written or oral, that expressly and unequivocally supplies job security; (3) an implied contract where the promises made within an employer’s policies and procedures instill a “legitimate expectation” of job security in the employee. While the proof required to overcome the presumption of at-will employment is daunting, it bears repeating that an employer’s emphasis of the at-will nature of employment and use of a contractual disclaimer (in employment applications, offer letters, handbooks, policy statements, etc.) and the employer’s reserved right to change or terminate its policies at any time (and with or without notice) is critical to limiting liability and avoiding a plaintiff/employee’s argument that he or she may only be terminated for “just cause.” Also, supervisory training to avoid misleading assurances or implied promises of continued employment is required to avoid the creation of circumstances supporting a “just cause” claim.

Note that there are several agreements which an employer will want to carry the weight and enforceability of a contract, even within the context of an at-will relationship. Those agreements, including an agreement to arbitrate and waive class action participation, and/or an agreement to shorten the statute of limitations among others, should be set forth in writing separate from the employer’s handbook and other policies, and acknowledged and signed by the employee.

Michigan courts generally find that employer’s handbooks and policies do not create an enforceable contract with employees. A prudent employer will include a clear disclaimer that the handbook or policy is not a contract, and that the employment relationship remains at-will absent clear agreement to the contrary signed by the chief executive of the employer, and that policy may be changed at any time, for any reason and without prior notice. In any event, good policy dictates that employers generally follow the terms of their policies with consistency in order to avoid claims of disparate treatment based on an employee’s legally protected characteristic or activity.

In all but a very few instances, the FLSA governs wage and hour claims brought by employees in Michigan. The FLSA requires that all covered, non-exempt employees be paid at least minimum wage for every hour worked, and receive overtime pay at no fewer than 1.5 times the regular rate of pay for all hours worked in excess of 40 within a workweek. Potential wage and hour related claims can include misclassification of a worker as an independent contractor or consultant (rather than as an employee), misclassification as exempt, payroll docking policies and practices, “off-the-clock” unpaid work hours, meal periods, breaks, overtime, record-keeping, deductions from pay and rounding, to name a few. Because an individual employee’s claim is usually small, claims under the FLSA are often brought in a class action (referred to as a Rule 23 class) or a collective action under Section 216(b) of the FLSA. Through either framework, a large number of employees citing similar wage or compensation errors may join together to seek back pay, front pay, punitive or liquidated damages and attorneys’ fees. Carefully crafted individual agreements to arbitrate claims, including a waiver of the right to proceed in a class or collective action, can help combat the risks and costs associated with class and collective actions.

Nearly every federal and Michigan employment law protects employees who report perceived unlawful acts, or participate in an investigation into the same. Even if it is ultimately determined that the employee’s perception is wrong, the employee will generally have “a right to complain” and still be protected unless it is shown that the employee knew he or she was making a false report. Thus, protection is granted to employees who report or complain about job safety issues, discrimination or harassment, violation of the Affordable Care Act, wage payment violations, environmental violations, fraud against the government including tax evasion and misappropriation or misuse of investor funds in the context of a public company. Employers are well advised to establish a stand-alone non-retaliation policy. When an employee who has engaged in protected conduct must be disciplined or discharged, an employer should be able to provide substantial (and ideally, documented) evidence of its non-retaliatory basis for the discipline or discharge.

Many employer policies request an employee to present a claim or grievance against the employer by way of a complaint to the supervisor/manager or to human resources. While lack of notice and an opportunity to remediate are often components of an employer’s defense to some employment claims, there is nothing that expressly requires an employee to first follow the employer’s internal processes, and employees can and do pursue an administrative claim and even legal action while still employed; these instances obviously create unique circumstances requiring the employer to safeguard against retaliation. When a complaint is received (whether internal or notice by filing a legal action), an employer should have explicit policies and procedures for addressing those complaints. Employees should be trained in those policies which will specify when to make the complaints and who to report them to. As well, an employer should have trained personnel to investigate all complaints, to include interviewing, document review, and preparation of an investigation report. Remediation of actual workplace problems and correcting perceived bias are the intended goals of this effort. And, because many laws permit an employer to avoid liability based on its response to a complaint, taking proactive steps to address employee concerns and dutifully maintaining records of each step in the process is critical to defending against those claims that proceed to litigation.

When there is an enforceable arbitration agreement, the employer and employee or former employee will proceed in the forum selected; the arbitration process typically provides the parties more control over their proceeding on a swifter and less costly basis. Typical arbitration proceedings include a limited form of document and information exchange and depositions of witnesses, culminating in a final hearing before an arbitrator. With few exceptions, the arbitration decision is final and not appealable. Similar to arbitration, mediation is an alternative dispute resolution procedure that may be selected by the parties involved. The mediator, however, acts as a negotiator and tries to achieve resolution of the dispute which is then memorialized in an agreement between the parties. The mediator does not issue any decision, although he or she typically provides input on the relative strengths and weaknesses of the parties’ respective positions. Mediation can be employed either before or after a lawsuit is filed (and is often ordered by the trial court) and has the benefit of being a means of quick and relatively inexpensive resolution of disputes.

There are both federal and state administrative agencies which present an avenue for employees pursuing claims against employers. In Michigan, the Michigan Department of Civil Rights (“MDCR”) is empowered to receive and investigate claims alleging violation of Michigan’s civil rights laws, notably Michigan’s Elliott-Larsen Civil Rights Act and Michigan’s Persons with Disabilities Act, among others. The MDCR may act in concert or separately from the federal Equal Employment Opportunity Commission (“EEOC”) which has jurisdiction over federal laws regarding discrimination, harassment and retaliation. There is no requirement that an employee first “exhaust” his or her claims with the MDCR prior to bringing legal action based on state laws. However, an employee who seeks to bring a legal action based upon federal discrimination, harassment and retaliation laws must first “exhaust” or submit those claims to the EEOC within 300 days of the challenged action (age discrimination claims under the ADEA must be submitted within 180 days). In many cases, the administrative agency dismisses the charge after investigation, and will issue a notice of suit rights. Once it does so, the employee has 90 days to thereafter file a lawsuit claiming violation under the federal laws.

As indicated above, many wage and hour claims are brought as a class or collective action. In addition, certain forms of discrimination claims may be brought as a class action under Federal Rule of Civil Procedure 23. A class action allows a large number of employees citing similar allegedly discriminatory practices to join together and make claims for monetary and equitable relief.

Most statutes specify the nature of relief that may be recovered for violation of its provisions. Injunctive relief, which involves asking the court to order the other party to do something (or refrain from doing something) is often requested, but less often ordered. Plaintiffs in most employment actions typically seek the actual damages they have suffered as a result of the defendant’s conduct – referred to as back pay. Prospective damages, or front pay, may also be claimed in order to compensate for damages going forward in time that an employee expects to experience. Damages for emotional distress, punitive or exemplary damages to punish the defendant for extreme or outrageous conduct and attorneys’ fees are also typically sought. The available damages vary based on the law under which the claim is brought, and some of those referred to above may not be available in all instances. Most employment statutes permit recovery of attorneys’ fees by a prevailing plaintiff (typically the employee or former employee), but not by a prevailing defendant (typically the employer).

Overseas assignments and hiring U.S. citizens abroad may trigger the potential application of U.S. law. U.S. employment statutes do not usually apply over its border. In fact, there is a presumption against applying any U.S. law on an extraterritorial basis. For example, the overtime provisions of the FLSA and the provisions of the Family and Medical Leave Act do not apply to employees who are employed outside of the United States or covered U.S. territories.

Other employment statutes, including Title VII of the Civil Rights Act of 1964 (precluding discrimination on the basis of race, gender or certain other protected characteristics), the ADA and the ADEA, explicitly provide for certain extraterritorial applications. These statutes cover employees working outside the United States if the employee is a U.S. citizen working for a U.S. employer, or a foreign employer controlled by a U.S. entity.

The wording of an assignment, employment or other contract may be important in the analysis will not be dispositive. Further, employers need to take care not to inadvertently incorporate language of a jurisdiction (e.g., the United States), if that is not to their advantage.

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Barnes & Thornburg LLP 's attorneys routinely defend clients against claims of wrongful discharge, harassment, discrimination, workplace defamation, breach of contract, invasion of privacy, ERISA violations, illicit drug testing and other federal and state law claims, and enforce non-competition and non-solicitation agreements. The firm’s extensive traditional labour practice encompasses defending against unfair labour practice charges and union-organising campaigns, negotiating and administrating union contracts, and coaching and training on lawful union-avoidance techniques. Barnes & Thornburg's primary practice areas are: employment litigation, traditional labour, OSHA, immigration, supervisor training, employment counselling, trade secret and non-compete claims, employment contracts, class action defence, state and federal laws, NLRB, affirmative action plans.

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