Business LawLegal Mail – 2018-10

UTAH COURT EXPANDS RANGE OF CLAIMS AGAINST EMPLOYERS: The Utah Appeals Court recently issued a decision that somewhat expands the range of possible claims an employee can make against an employer. The case involved a salesperson whose employment was terminated while he was procuring a number of sales that could have earned him commissions under plans promulgated by the company. He sued after he was fired, and alleged that although he was an at-will employee, the employer breached what is known as the “implied covenant of good faith and fair dealing” attached to the company’s compensation and bonus agreements. The heart of the ex-employee’s claims was that the employer terminated him for the express purpose of avoiding paying him commissions. The Utah court noted that the implied covenant of good faith “imposes on parties the duty to perform in good faith the obligations arising from and created under the contract” and to “refrain from actions that will intentionally destroy or injure the other party’s right to receive the fruits of the contract.” The court decided that although the implied covenant will not create a right to employment other than at will (e.g. a right to be terminated for cause or to be employed for a set period of time), it can be used to enforce what might be other underlying contractual elements of employment, i.e. to “protect justified expectations arising from agreements attendant to an at-will employment relationship.” This could include a company’s agreement to provide increased compensation or sick leave or other benefits of an employment relationship, such as an opportunity to receive a bonus or commissions. The court noted that this was a “narrow” extension of the legal doctrine: “The implied covenant may not be used as an avenue to avoid termination of the at-will employment relationship itself. While an at-will employee may have a right to certain benefits arising under an attendant compensation agreement, the employee has no right to continued tenure under an at-will employment relationship.”

WHAT DOES THE NEW UTAH COURT RULING MEAN FOR EMPLOYERS? The new Utah Court of Appeals ruling discussed above should be carefully considered by employers when terminating employees. The ruling creates a new “red flag” for an employer to consider when analyzing the possible risks of a discharge. If a termination appears to coincide with, or be related to, a circumstance where an employee is receiving, or is about to receive, a benefit, the employee may have a claim that denial of the benefit is the real motivation for the discharge. The classic examples of this situation would be a termination when an employee is using or about to use a substantial PTO benefit or just before a large bonus or commission is due to be earned or paid. The Utah court described how such a case could unfold- “the employee must demonstrate that (1) his or her employment was terminated in bad faith to deprive him or her of benefits under a compensation agreement and (2) he or she does, in fact, have a justified expectation for receiving the benefits to which entitlement is claimed. Of the latter, the employee will typically be required to demonstrate that, but for the bad faith termination, he or she would have received the benefits under the terms of his or her compensation agreement because of his or her past, related work.” Obviously, one of the best ways for an employer to mitigate this risk is simply to have a good, justified, documented reason for a termination that is not connected to the benefit in question. In other words, an employer that terminates a salesperson for engaging in documented dishonest misbehavior (misconduct that consistently gets other employees fired too), probably is not at great risk under the new ruling even if the termination coincides with a time when an employee may have eventually earned a large commission had the termination not occurred.

#METOO REACHES CHINA: A recent Reuters news report confirms that the #MeToo movement has reached the other side of the world. China’s top legislature is reviewing ways to limit sexual harassment at work by considering implementation of a new civil code. Despite some efforts at state censorship, Chinese social media has been full of recent reports of misconduct in the workplace, including last year when a software engineer published a blog accusing a Beijing University professor of sexual harassment. The proposed new civil code requires employers to take reasonable measures to prevent, stop, and deal with such harassment complaints, and imposes civil liability for the failure to do so.

NLRB RECONSIDERS PROPER USE OF EMPLOYER EMAIL: The National Labor Relations Board (NLRB), whose membership reflects the political party of the president in the White House, has invited the submission of briefs addressing the question of what access employees should have to employer email systems (and other communications platforms) for communications protected by the National Labor Relations Act (NLRA). The NLRA protects, among other things, employee concerted activity and communications about the terms and conditions of employment. Specifically, the NLRB is reconsidering its ruling in a 2014 case (Purple Communications, Inc.) that held employees who have been given access to employer email systems for work purposes have a presumptive right to also use that system for communications protected by the NLRA, such as union organizing, as long as it is done during nonworking time. Prior to Purple Communications, NLRB case law said that while such email communications could not be banned because they were protected, e.g. union-related, an employer’s facially-neutral policies (e.g. those that banned all non-work solicitations) were not unlawful simply because they also may have banned union-related communications. Stay tuned for developments!

UTAH AG WEIGHS IN ON LGBTQ WORKPLACE BIAS CASE: Utah Attorney General (AG) Sean Reyes has weighed in on a pending case involving workplace bias against the LGBTQ community, see: Utah has joined 15 other states in filing a “friend of the court” brief asking the United States Supreme Court to review a ruling concluding that a Michigan funeral home violated federal antidiscrimination law when it fired a transgender employee. The key question at issue in the litigation is whether bias against a transgender person is covered by the existing federal prohibition against sex discrimination. The brief filed by Reyes’s office concludes that the decision should be reversed because Congress has not plainly defined the term “sex” to include transgender, see here for the full statement from the Utah AG: A Utah state statute already prohibits discrimination against workers based on sex, sexual orientation, or gender identity. For more information on the applicable state law, see:



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