Archives for September 2014

Employees’ Facebook Gripe Session Is Protected ‘Concerted’ Activity: Retaliation Firing Violates NLRA

image

It’s against a cultural backdrop of social media ubiquity and nonexistent online anonymity that today’s post vividly illustrates the tricky intersecting legal issues involving employee free speech rights and online privacy concerns.

In Three D, LLC d/b/a Triple Play Sports Bar and Grille, 361 NLRB No. 31 (August 22, 2014), a Facebook on-employee group gripe session turned ugly for two of the participants when their boss – a sports bar owner – fired them after he found out they trashed him in a group message.

Seems the employees were upset that their employer miscalculated their income tax withholding amounts so they decided to air their grievances on Facebook.  One employee (a claimant in the NLRB proceeding) blasted her employer (“what an asshole!”) while the other claimant said nothing: all she did was  “like” another participant’s (an ex-employee) hostile comment about the tax mishap.

The National Labor Relations Board (NLRB or “Board” ) found that the employer violated the National Labor Relations Act (NLRA or “Act”) by firing the employees for their Facebook activity.  The Board held the employees’ discussion was protected “concerted activity” that involved improving employment conditions.  By firing the employees for protected activity, the employer violated the Act.

Reasons:

Section 7 of the NLRA protects employees’ rights to engage in concerted activity for their “mutual aid or protection.”  29 U.S.C. s. 157.  This Section extends to social media comments that address improving workplace conditions or that vocalize legitimate employment concerns.

NLRA Section 8 outlaws an employer’s attempt to interfere with an employee’s exercise of concerted activity rights.  29 U.S.C. s. 158.

An employee’s concerted activity rights aren’t unlimited, though.  The law recognizes that where an employee disparages an employer’s products or services or defames an employer, the employee’s conduct loses the Act’s protection.

For an employee communication to meet the defamation or disparagement test, the challenged statement must be false, malicious (knowingly or recklessly false) and it must cause damage.

The Board ruled that the employee comments were part of an conversation involving  a legitimate workplace concern – employee tax liability.

The Board also found the simple act of “liking” a group member’s derisive comments about the boss merited Federal protection since it involved the other Facebook participants’ work-related concerns and opinions.

The Board rejected the employer’s argument that the “what an asshole” comment was defamatory and unprotected as a result.  The Board stated that while the comment was certainly rude, it was protected as rhetorical hyperbole.

The Facebook invective wasn’t factual enough (after all, how do you objectively verify if someone is an a-hole?) to constitute  defamation.  And since neither employee claimant disparaged the sports bar’s services, the activity was protected.

The Board also struck the employer’s Internet policy on the basis that it encroached on employees’ protected rights under the NLRA.  An employer social media policy violates the NLRA when it chills an employee’s concerted activity rights.

Here, the employer’s Web policy outlawed, among more specific items, “inappropriate” Internet use.  The Board found the policy’s reference to “inappropriate” social media discussions was too vague and overbroad and could reasonably be viewed as punishing protected activity.

Afterwords:

– The Board extends concerted employee activity to social media communications;

– An argument can be made in the wake of this decision that as long as an employee couches his inflammatory rhetoric beneath a veneer of legitimate workplace concerns, an employee’s comments are protected from employer retaliation.

 

 

The IL Fiduciary Obligations Act: Added Protection Against Bank Liability

ATMProfessional Business Automation Technology, LLC v. Old Plank Trail Community Bank, 2014 IL App (3d) 130044-U presents a recent illustration of the Fiduciary Obligations Act, 760 ILCS 65/7 (the “Fiduciary Act”) – a statute that immunizes banks from liability to a corporate customer that gets fleeced by a high-ranking employees.

The only exceptions are where the bank (1) has actual knowledge of a fiduciary’s breach or (2)  exhibits bad faith in allowing a questionable transaction to take place.  An example would be where a business’s accountant endorses checks payable to the business to herself and the bank sees this and allows it to happen.

In Professional Business, a former member of the plaintiff LLC deposited about $45K over a five-month period in an account he set up under a fictitious but similarly worded (to the plaintiff) entity about 10 days after he resigned as member of the plaintiff LLC.  All funds deposited were intended for the plaintiff – the rightful payee.

When plaintiff found out about the ex-member’s scheme, it sued the bank for negligence and conversion on the theory that the bank shouldn’t have allowed the ex-member to open the sham account or to deposit monies in it.  The plaintiff also argued that the bank should have been more diligent in verifying the corporate status of the account holder before opening the account.  The trial court granted the bank’s summary judgment motion.

Affirming, the court held that the plaintiff failed to show bad faith by the bank or that it had actual knowledge that the former LLC member was breaching obligations owed to his principal.

Actual knowledge means “awareness at the moment of the transaction” that a fiduciary is defrauding the principal or using funds for private purposes in violation of a fiduciary relationship.  (¶  13).

Bad faith  means the bank was commercially unreasonable by remaining passive in a dubious situation and refusing to learn readily available facts surrounding the questionable transaction (like a corporate employee endorsing corporate checks to herself).

Here, the plaintiff failed to present any evidence that the bank had actual knowledge that the individual opening the dummy account was violating any fiduciary duties to a corporate principal.  The Court also found that the bank followed normal procedures when opening the account and there was nothing to alert the bank that the member was defrauding the plaintiff.

The bank offered sworn testimony (via affidavit) that it adhered to all internal protocols for opening a corporate account as it required the account opener to supply a corporate resolution and a FEIN number.

The bank officer also testified that she looked at the Secretary of State website and didn’t see anything suspicious – even though there was no mention of the account holder entity’s name as a valid corporation.

The Court also found that the bank defeated plaintiff under UCC Section 3-404 and 3-420.  The former section relieves a bank from liability where it pays out in good faith to an imposter or fictitious payee.  The latter statute (3-420) controls conversion of instruments and only allows actions by parties who actually receive an instrument (i.e., a check).  Here, since the plaintiff never actually received the deposited checks, the bank had no conversion liability under the UCC.  (¶ 15).

Take-away:

It’s difficult to sue and win against a bank.  Not only can the bank rely on the Fiduciary Act, but various sections of UCC Article 3 also provide safe harbors from liability to a bilked bank customer.  Business account holders should be vigilant and keep tabs on corporate employees who have broad money depositing and withdrawal authority.

As this case shows, the hurdles a plaintiff must clear to successfully hold a bank responsible for a corporate employee’s misdeeds make it all the more important for a company to have a system of checks and balances: no single employee should have free reign over a firm’s bank deposits and withdrawals.  The temptation to cheat is probably too great.

 

 

Court Slashes $25K From $30K Attorneys Fees Request Where Plaintiff Loses Most Claims (ND IL)

timesheet

After winning one out of nine claims, the plaintiff – a recently fired loan officer – sued to recover about $30K in attorneys’ fees under the Illinois Wage Payment and Collection Act (IWPCA) from his former employer. 

Awarding the plaintiff just a fraction (just over $5K) of his claimed fees, the Northern District in Palar v. Blackhawk Bancorporation, 2014 WL 4087436 (N.D.Ill. 2014), provides a gloss on the factors a court considers when assessing attorneys’ fees.  The key principles:

 – the lodestar method (hours worked times the hourly rate) is the proper framework for analyzing fees in a IWPCA claim;

– a court may increase or decrease a lodestar figure to reflect multiple factors including (i) the complexity of the legal issues involved, (ii) the degree of success obtained, (iii) the public interest advanced by the suit);

– the key inquiry is whether the fees are reasonable in relation to the difficulty, stakes and outcome of the case;

– a court shouldn’t eyeball a fee request and chop it down based on arbitrary decisions though: the court must provide a clear, concise explanation for any fee reduction;

– an attorneys’ reasonable hourly rate should reflect the market rate: the rate lawyers of similar ability and experience charge in a given community;

– “market rate” is presumably the attorney’s actual billing rate for comparable work;

– if the attorney has no bills for comparable work to show the court, the attorney may instead (a) submit supporting affidavits from similarly experienced attorneys attesting to the rates they charge clients for similar work, or (b) submit evidence of fee awards the attorney has received in similar cases;

– once the fee-seeking attorney makes this market rate showing, the burden shifts to the opponent to demonstrate why the Court should lower the rate;

(**4-5).

The Court then set down the governing rules that apply when a plaintiff wins some claims and loses others; and how that impacts the fee award calculus:

– a party may not recover fees for hours spent on unsuccessful claims;

– where the successful and unsuccessful claims involve a common core of facts and are based on related legal theories, time spent on losing claims may be compensable: litigants should be penalized for pursuing multiple and alternative avenues of relief;

– when reducing a fee award based on certain unsuccessful claims, the court should identify specific hours to be eliminated;

– attorneys can recover fees incurred in litigating the fee award those fee petition fees must not be disproportionate to the fees spent on litigating the merits;

– the Court should consider whether hours spent on the fee request bear a rational relationship to the hours spent on the merits of the case;

– the Seventh Circuit recognizes 15 minutes per hour ratio of fee hours vs. merits hours as excessive (so 1 hour on fee issue for 4 hours on merits would be disproportionate).

(*5).

With these guideposts in mind,  the Court reduced plaintiff’s claimed fees by deducting (a) fees spent on unsuccessful and unrelated (to the IWPCA count) claims; and (b) fees incurred litigating the fees dispute. 

The combined reductions amounted to almost $25K out of the $30K plaintiff claimed in his fee petition.  The Court held that a $5K fee award on final compensation of about $1,500 was justified given the IWPCA’s mandatory fee provision and stated policy of deterring employers from refusing to pay separated employees’ wages.

Afterwords:

There is no precise formula governing fee awards.   The court will consider the amount claimed versus the fees sought and whether they are congruent with those figures. 

This case also illustrates that a court will look at how many claims the plaintiff won and lost in the same case when fashioning a fee award.