Flying Blind

Major corporations often have large in-house legal teams. These internal lawyers review contracts and documents, advise human resources on employment law matters, and help to avoid expansion missteps caused by regional or national variations in regulations. Hiring a lawyer or lawyers to provide the first line of defense against expensive legal screw-ups is just a part of doing big business.

But smaller companies, especially those with less-experienced management, often forgo the hiring of in-house counsel or the retention of outside legal advisors, sometimes for years. Usually this is due to budget constraints, but even fast-growing young companies with money to burn can put off adding legal staff for far too long, confident that a lack of legal trouble early on means no legal trouble will ever develop.

But if a company has clients and hires employees, eventually they will find themselves in a legal dispute. It's inevitable; a predictable cost of doing any kind of business.

It is a common occurrence in any kind of employment practice to see employee agreements with horrible flaws, such as illegal provisions regarding hours and overtime, unnecessary arbitration clauses, unenforceable non-compete clauses, and the like.

Or you will see contracts signed with clients that lack vital terms of the deals - like payment schedules or rainy-day backup plans - leaving it up to a court to figure out what performance the parties owed to each other when they inevitably disagree and accuse each other of breach.

Too often small companies try to coast on their history of legal peace, confident that simply because they have not so far been sued by anyone that they will never be sued. But as they grow and employ more people and take on more clients, the odds of conflict increase dramatically. It's just a matter of statistics. The more people you work with, the greater the chance of legal dispute. Not every deal will work out. Not every employee will be compliant. Not every manager will behave themselves.

Though the majority of my practice is on the plaintiff's side of employment disputes, it would not hurt my feelings at all if more companies took the important step to add wise internal counsel to avoid or mitigate many of the conflicts that can arise in the usual course of doing business. The fewer employees who suffer discrimination, the better. The fewer client contracts that turn out to be huge legal losses instead of huge revenue gains, the better. The fewer managers who have to take the stand and risk the reputations of themselves and their companies by giving embarrassing testimony about their mistakes, the better.

Young and growing business owners: when it comes to legal issues, don't fly blind.

Accepted at Last

I took a seminar on employment law during my last semester of law school in early 2012. The final grade for that class was based primarily on the writing of a law review article. For my article, I chose the topic of Kentucky employment retaliation law, something I was familiar with from my clerking for Clay Daniel Walton & Adams attorney Dan Canon (once my boss, now my colleague).

The paper took weeks to research and write and I got a good grade on it. My teacher, UofL Law professor Ariana Levinson, encouraged me to seek publication. I was wary because I was never on the law review during school and my topic was very narrowly focused on recent case law in just one state. How many law reviews would be interested? Perhaps just three (each law school in Kentucky has its own review, and Northern Kentucky had previously published work similar to my own).

I graduated, took the bar exam and passed, then got busy working as an attorney. The paper sat dormant for months. As a survey of recent case law, the passing time made the paper less accurate the longer it remained unfinished.

Finally, in late 2013, I picked it up again and began revisions. I had worked on more retaliation cases since I began my law practice, so had a better understanding of the issues and impact of each case I discussed. I had also improved my legal writing (at least in my own opinion). The revision and updating process took a few more weeks. By January of this year, I felt I had sufficiently polished it to try for publication.

I submitted the paper to the three main Kentucky law reviews - Louisville, Kentucky, and Northern Kentucky. I heard nothing for months. Then, in June, I presented the paper and associated topics on retaliation law at the annual Warns-Render Institute conference here in Louisville. My talk (with the help of Mr. Canon) was well-received.

Shortly after, I finally got the news I had been waiting for: the University of Louisville Law Review wanted to print the article. I gladly accepted their offer. The article, Navigating Kentucky Employment Retaliation Law in the Wake of Brooks v. Lexington-Fayette Urban County Housing Authority, was published this week.

Academic articles are the domain of law professors. Their career success partially hinges upon how much they write and how often they are published. Attorneys in private practice publish far less often, however, usually due to a lack of time and fewer professional incentives to do so.

There is one nice incentive, though: CLE credit. In order to remain in good standing with the bar, attorneys in Kentucky must get a large number of CLE credits each year. Conveniently, the Kentucky Bar Association awards up to six Continuing Legal Education hours for published legal writing. That's a nice bonus to the intellectual glory of appearing in a scholarly journal.

Because I am aggressively literate, I have another academic paper in the works. And because I am busy in my law practice, it sits dormant most of the time, gathering whatever the digital equivalent of dust might be. Hopefully soon I'll be able to get back at it. I'm the kind of weirdo who loves this stuff.

Credit Checks Where Credit Checks Are Due

One of the more controversial applicant screening methods adopted by employers in recent years is the credit check. Traditionally reserved for situations in which a consumer seeks financing for expensive purchases (like houses or cars), credit checks are now a common hurdle for job-seekers.

After suffering a number of thefts by employees, Kaplan Higher Education Corporation added credit checks to their own applicant screening process ten years ago, ostensibly to identify and exclude applicants more inclined to steal. The Equal Employment Opportunity Commission took issue with this, and sued Kaplan in the United States District Court for the Northern District of Ohio (Cleveland), alleging that the credit check process had a "disparate impact" on African-American applicants. A disparate impact is a form of discrimination prohibited by Title VII of the federal Civil Rights Act.

To prove this, the EEOC attempted to introduce the findings of psychologist Kevin Murphy, who claimed to have developed a system of proving that African-Americans were more frequently - and unfairly - screened out of the hiring process by credit checks. Unfortunately for the EEOC, the district court rejected Murphy's expert testimony and ruled in favor of Kaplan.

So the EEOC appealed to the U.S. Court of Appeals for the Sixth Circuit (Michigan, Ohio, Kentucky, and Tennessee), arguing that the district court's exclusion of Murphy's findings was a reversible error. Unfortunately again for the EEOC, the Sixth Circuit disagreed and affirmed the district court ruling. Part of the reason (other than Murphy's insufficient expert credibility) was that the EEOC actually uses the same credit check system to screen their own applicants:

In this case the EEOC sued the defendants for using the same type of background check that the EEOC itself uses. The EEOC's personnel handbook recites that "[o]verdue just debts increase temptation to commit illegal or unethical acts as a means of gaining funds to meet financial obligations."

EEOC v. Kaplan, No. 13-3408, 2 (6th Cir. 2014).

Our legal system gives private businesses a lot of deference when it comes to their employment practices. As long as those practices aren't discriminatory, harassing, or otherwise unfair to people based on various classifications including race, age, sex, or religion, courts generally do not interfere with them.

In this case, the EEOC alleged that credit checks were a form of racial discrimination in the hiring process. The courts rejected this argument because the EEOC couldn't offer a reliable way to prove that allegation. What the courts didn't consider at all was whether or not credit checks really do identify potential theft risks among applicants; do overdue debts really increase the temptation to commit illegal or unethical acts at the workplace?

The Cato Institute, today gloating about the Sixth Circuit's ruling, and indeed the EEOC itself, assume as a fact that applicant credit checks truly are a "reasonable business practice." And certainly, the federal Fair Credit Reporting Act allows them. However, critics such as Amy Traub at have studied the use of credit checks in the hiring process and find many faults: American health care, education, and daily living are expensive and lots of people (even honest ones who would never steal) carry lots of debt; the credit reporting system is flawed and often unreliable; and while Kevin Murphy couldn't prove it, there does seem to be discrimination - if not at the time of hiring, then in the underlying report itself. Other critics have specifically challenged the assumption that bad credit makes someone more likely to steal from their employers. And Massachusetts Senator Elizabeth Warren has introduced new federal legislation to ban pre-employment credit checks entirely, citing evidence that they have no reasonable business justification and unfairly exclude people from the job market.

In the wake of the Sixth Circuit ruling, this does appear to be a legislative issue, not a judicial one. Unless believable experts can prove in court that pre-employment credit checks create a disparate racial impact on job applicants, the best method for defeating them is through new laws. Otherwise, the courts will have little choice but to defer to business judgment. As long as a non-discriminatory business practice is "reasonable," a business can do whatever it wants, and mere "reasonableness" is a low standard indeed.

Improving the Law Firm as a Workplace

Before I graduated from law school, passed the Kentucky bar exam, and entered practice as an attorney, I spent ten years of my life as a department manager for two large employers, one for-profit, and one non-profit. A lot of people have had me as their boss. In my time as a department supervisor, I hired, trained, and unfortunately sometimes fired, dozens and dozens of people.

From my past career I learned important lessons: work doesn't have to suck and bosses don't have to be jerks. In fact, believe it or not, your workplace can be somewhere you actually like to be. Granted, being at work will almost always be worse than being somewhere else (with the exceptions of the DMV, prison, and maybe your in-laws' house on Thanksgiving), but being at work doesn't have to be miserable. It really doesn't.

Personnel management is tough. "Herding cats" is nowhere near as difficult as herding people. Human beings are complicated in every possible way; each employee brings with them their own peculiar personality traits, their own work ethics, their own perceptions of what "work" should be, and their own financial worries and demands. There is a reason that universities offer specialized degrees in management and human resources. No good manager ever suffered from too much guidance.

Law firms are peculiar workplaces. Many - even small ones - are extraordinarily complex, lucrative businesses that deal with many millions of dollars and hundreds of clients (or "customers" if you prefer). Law firms don't just consist of lawyers, either. They're staffed by armies of secretaries, clerks, paralegals, runners, and IT staff. These law businesses are not usually run by trained managers, however. They're run by lawyers. And most lawyers didn't go to business school or have long careers as department supervisors before entering the business of the law.

For that reason, law firm management can be a big mess. In the interest of helping attorneys who run law firms, I wrote an article titled Staff Management Tips for the Small Law Firm, which was published in the current issue of the Kentucky Justice Association's magazine The Advocate. Hopefully my experience as a manager can help my fellow attorneys who may not have the same background.

Unemployment Benefits and Allegations of Misconduct

Unemployment benefits have been in the news a lot lately. When an extension to long-term benefits funding was omitted from the latest federal budget, Democrats in the U.S. Congress had to begin a separate push for money that has so far been opposed by all but a few Republicans. It's an important battle as unemployment remains high across the country.

But this post isn't about politics. It's about what happens when regular working people lose their jobs, apply for unemployment benefits, and then are denied when their former employers file protests.

In Kentucky, KRS 341.370 provides several reasons why a former employee can be disqualified from receiving unemployment benefits. The most commonly known reason is voluntarily quitting "without good cause attributable to the employment." In other words, if you quit your job just because you felt like it, you are disqualified from receiving unemployment benefits.

The justification for benefits denial that I see most often in my practice is misconduct. Employers will protest an employee's benefits claim on the basis that he/she did something especially bad at work. KRS 341.370(b) states that a worker is disqualified from benefits if he/she has been discharged for misconduct connected with the work he/she was performing for the employer.

But what does "misconduct" mean? Is simply breaking a rule or violating a policy enough? KRS 341.370(6) explains:

'Discharge for misconduct' as used in this section shall include but not be limited to, separation initiated by an employer for falsification of an employment application to obtain employment through subterfuge; knowing violation of a reasonable and uniformly enforced rule of an employer; unsatisfactory attendance if the worker cannot show good cause for absences or tardiness; damaging the employer's property through gross negligence; refusing to obey reasonable instructions; reporting to work under the influence of alcohol or drugs or consuming alcohol or drugs on employer's premises during working hours; conduct endangering safety of self or co-workers; and incarceration in jail following conviction of a misdemeanor or felony by a court of competent jurisdiction, which results in missing at least five (5) days of work.

That's a lot of words to say a worker can't get unemployment benefits if he or she really screws up at work and gets fired for it.

It's important to note that KRS 341.370(6) doesn't list reasons an employee can be fired; being fired has a much lower standard. Kentucky is an "at-will" state, which means that a worker can be fired for most any reason or no reason at all (with a few exceptions for discrimination and protected activities).

But what KRS 341.370 does say is that even though employees can be fired for no reason at all, employers need a good reason to protest their unemployment benefits. A worker must have done something pretty bad to have their benefits denied.

"Misconduct" is the most common reason given by employers for the clients I represent in unemployment appeals. It's a convenient excuse that companies frequently rely upon to spare the expense of providing unemployment benefits to terminated workers.

Unfortunately for employers, though, when workers appeal the denial of benefits, the employers bear the burden of proving there was actual misconduct. Burch v. Taylor Drug Store, 965 S.W.2d 830, 835 (Ky. Ct. App. 1998). And like I said above, misconduct is more than just breaking a rule or being tough to work with. Misconduct is "a wilful and wanton disregard of the employer's interests." Masonic Homes of Ky., Inc. v. Ky. Unemployment Ins. Comm'n, 382 S.W.3d 884, 886-87 (Ky. Ct. App. 2012).

For example, if the employer alleges that a uniformly enforced rule was violated by the former employee, they have to produce evidence to show that the rule was reasonable and that it applied to all employees all the time. The employee then gets the opportunity to rebut this claim, usually by testifying personally that others often or sometimes broke the same rule but suffered no consequences. Or the employee can show that the rule was arbitrary and had no reasonable basis connected with the work. Witness testimony from fellow employees can be invaluable in such cases.

Ultimately, it's the employer's burden to prove misconduct. This is why appealing a denial of benefits can be crucial for an employee --- it puts the onus on the employer to actually prove their allegation, and they often cannot do so. Employers have a lot of leeway when it comes to firing their employees, but they don't, and shouldn't enjoy as much freedom to deny unemployment benefits. After all, the purpose of unemployment benefits is to relieve "the stress of economic insecurity due to unemployment through little or no fault of the worker." Shamrock Coal Co. v. Taylor, 697 S.W.2d 952, 954 (Ky. Ct. App. 1985).