Employment Law Update

What you need to know about changes in employment law.

Q: What should my association know about recent employment law developments?

A: Many organizations have recently reduced their workforces under circumstances that could produce allegations of discrimination and claims of unequal treatment.

Of the numerous employment law topics receiving attention in the past year, four stand out:

  1. Age discrimination;
  2. Disparate-impact discrimination;
  3. Misuse of confidential information;
  4. Mandatory employment arbitration.

Age Discrimination

Many people affected by layoffs last year were 40 or older. Age discrimination complaints filed with the Equal Employment Opportunity Commission have dramatically increased since 2008 and will likely continue to increase as companies react to the downturn.

Last year the Supreme Court considered the case of Gross v. FBL Financial Services, Inc., a suit brought under the Age Discrimination in Employment Act (ADEA), which protects employees and applicants over 40 from age-based discrimination. The key holding of Gross is that an employee bringing a claim under the ADEA must prove, but for his age, he would not have been subject to an adverse action. This case was viewed as a victory for employers because the burden of proof never shifts to the employer. Due to substantial criticism of Gross, Congress is considering the Protecting Older Workers Against Discrimination Act, which would amend the ADEA to lessen the burden on those attempting to prove age discrimination. Many believe this legislation will pass.

Disparate-Impact Discrimination

Disparate-impact situations arise when policies, practices, or methods of selecting employees appear neutral but adversely affect a disproportionate number of employees in a protected group when applied.

An important decision regarding disparate impact discrimination is Meacham v. Knolls Atomic Power Laboratory. In Meacham, a group of terminated employees over 40 claimed the selection method used to reduce the company's workforce was skewed against older employees. The Supreme Court held that the employer must prove the reasonableness of the policy or practice that has created the disparate impact. This case was viewed as a victory for plaintiffs because its holding shifts the burden of persuading the jury or judge to the employer.

Employment law experts believe that Meacham will make it easier for plaintiffs to win discrimination suits based on alleged disparate impact.

To protect against these types of claims, employers should review the results of decision processes for reducing the workforce and ensure these processes do not unevenly affect any protected group of employees. Employers should also carefully document factors used in the reduction selection process and certify that each factor is reasonable in light of the specific job and future business plans.

Misuse of Confidential Information

Employers who believe employees have engaged in the misuse of confidential employer information through allowed computer access may potentially bring claims alleging misappropriation of trade secrets, breach of fiduciary duty, and violations of the Computer Fraud and Abuse Act.

Courts have reached different conclusions on the misuse of employers' confidential information. The U.S. Court of Appeals for the 9th Circuit has held that if employees are granted permission to use a company computer, those employees have the authority to do anything with the accessible information that has not been specifically prohibited. However, the U.S. Court of Appeals for the 7th Circuit has held that employees who exceed their authorized access to information are prohibited from misusing confidential information.

Employers can best protect themselves by having employees sign confidentiality agreements with language referencing computer-systems policies to avoid questionable use of confidential information.

Mandatory Employment Arbitration

In recent years, some have claimed that mandatory arbitration agreements signed prior to a dispute are unfair to employees. The proposed Arbitration Fairness Act of 2009 would outlaw all enforcement of predispute arbitration agreements. It is currently unclear whether Congress will pass the bill. If passed, the legislation would have a significant impact on the use of arbitration proceedings to resolve discrimination claims.

As many of the employment law topics that were important in the past year are still developing, employers should continue to follow these issues in 2010.

Gregory S. Jacobs and Leslie A. Peterson are attorneys at Reed Smith in Washington, DC. Email: [email protected], [email protected]