Labor and Employment Law Weekly Update

03 January 2011 Publication
Authors: Lawrence T. Lynch

Legal News: Employment Law Update

Can Accusing a Former Employee of Stealing Trade Secrets Be Unlawful Retaliation?
By Michael C. Lueder

Employers can be subject to lawsuits for actions they take after an employee leaves their employment. Luzenac American fired Sanford Lee Hertz in January 1998. Shortly after his termination, Mr. Hertz sued Luzenac for religious discrimination and retaliation in connection with the firing. The case went to trial and a jury returned a verdict in favor of Mr. Hertz.

While the case was on appeal, Mr. Hertz entered into a consulting agreement with IMI Fabi to help it manufacture and market a product to compete with a Luzenac product. Once Luzenac got the news, it sent a letter to Mr. Hertz demanding he stop misappropriating its trade secrets. Luzenac’s counsel sent a cease-and-desist letter to Mr. Hertz’s counsel, copying IMI Fabi, alleging that Mr. Hertz was illegally using Luzenac’s proprietary information to compete against it.

In response to the cease-and-desist letter, Mr. Hertz filed a lawsuit seeking a judgment that he had not misappropriated trade secrets and that Luzenac’s accusations were made just to retaliate against him for pursuing his employment discrimination claim. Luzenac filed counterclaims saying Mr. Hertz had stolen trade secrets and interfered with its business. It later filed a motion asking the judge to throw out Mr. Hertz’s retaliation claim because protecting trade secrets cannot be viewed as an adverse, retaliatory employment action. Last month, a United States District Court judge in Colorado ruled (http://hr.cch.com/EMPNews/hertz02.pdf) that Mr. Hertz can go to trial on this claim of retaliation.

The court ruled that Luzenac’s e-mail to IMI Fabi stating that Mr. Hertz was using stolen property and the lawyer’s cease-and-desist letter could be retaliatory (http://www.lawmemo.com/blog/2006/06/burlington_nort_1.html). It said both the e-mail and letter might have dissuaded a reasonable employee from “supporting a charge of discrimination.” Because the e-mail and letter were sent while Mr. Hertz’s initial discrimination case was pending, a reasonable jury could find it to be a materially adverse action supporting a claim for unlawful retaliation.

The court ruled, however, that Luzenac’s filing the counterclaim could not support a retaliation claim because in that situation Mr. Hertz was in the position of an improper competitor — as opposed to an employee. The court reasoned:

The filing of the counterclaims clearly would not have served to dissuade Hertz — or any other reasonable person in his position -- from continuing to support or pursue his discrimination claim … . I agree with Hertz that the act of filing a counterclaim could under different circumstances constitute an adverse action in support of a retaliation claim. But in this case Hertz is not in the posture of an employee or even a former employee, but rather is a plaintiff in a case that is fundamentally about whether or not he misappropriated trade secrets.

The court recognized that once people leave their employment, there are still adverse actions that can be taken that would be considered retaliatory. Even protecting your proprietary interest might get you in trouble if you are not careful. The lesson: Before sending off a cease-and-desist e-mail or letter to a former employee who brought employment claims, make sure you have a good factual basis for doing so.

NLRB Proposes New Employer Notice to Inform Employees of Their NLRA Rights
By Lawrence T. Lynch

On December 22, 2010, the NLRB published a proposed rule (http://edocket.access.gpo.gov/2010/pdf/2010-32019.pdf) in the Federal Register that would require all employers who are subject to the NLRB’s jurisdiction to post a notice that explains the rights of employees under the National Labor Relations Act (NLRA). The notice would inform employees that under the NLRA they have the right to self-organization, to form, join or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for their mutual aid or protection as well as the right to refrain from engaging in such activities.

The NLRB’s proposed rule would require employers to post the notice where they usually post similar notices as well as to distribute it electronically if they usually communicate with employees that way. An employer that fails to post the notice would commit an unfair labor practice under the NLRA. In addition, the six-month statute of limitations for filing an unfair labor practice charge with the NLRB could be considered “tolled” if an employer fails to post or distribute the required notice. The NLRB is accepting comments on the proposed rule and notice through February 20, 2011. The public can submit comments (http://www.regulations.gov/#!home) to the NLRB.

The NLRB’s proposed notice is similar to the Department of Labor notice that President Obama recently required federal contractors to post under his Executive Order 13496 (http://www.dol.gov/olms/regs/compliance/EO13496.htm), which was effective on June 21, 2010. That Executive Order overruled the Bush administration’s “Beck” Executive Order for federal contractors.

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