Employment Law

EU Permits Employers to Monitor Private Employee Communications

Why it matters

In a favorable ruling for employers, the European Union's (EU) highest court concluded that an employee's right to privacy was not breached by an employer who monitored his private communications during working hours. Romanian engineer Bogdan Mihai Barbulescu was fired for using a Yahoo! Messenger account to communicate with his family members while on the job. Although the Yahoo! account was in his name, it had been set up for the purpose of dealing with clients and the company had a policy that expressly prohibited the use of computers, telephones, and other company resources for personal purposes. The European Court of Human Rights recognized that the EU's Convention on Human Rights respects the right to a private life, including private communications on personal matters. However, the employer's monitoring was limited in scope and proportionate, the court held, so no violation of the Convention occurred. "[I]t is not unreasonable for an employer to want to verify that the employees are completing their professional tasks during working hours," the 6-to-1 court wrote. While the decision does not provide carte blanche to employers to monitor their workers, it offers guidance to EU companies on the boundaries of permissible surveillance (with advance notice, on employer equipment, during working hours, and limited in scope, for example).

Detailed discussion

A resident of Bucharest, Bogdan Mihai Barbulescu was an engineer for an unnamed company. At his employer's request, he created a Yahoo! Messenger account for the purpose of responding to client inquiries. Pursuant to a company policy, the use of computers, telephones, and other company resources for personal purposes was prohibited and employees were notified that the employer could monitor their communications.

In July 2007 the employer informed Barbulescu that it had been monitoring his Messenger communications over the prior week and that the records showed he had used the Internet for personal purposes. The employee said he had used the account only for professional reasons, but when presented with a 45-page transcript of his communications—including correspondence with his fiancée and his brother about personal matters—he argued that the company had violated his right to privacy.

After the employer terminated Barbulescu, he challenged the decision. Both a trial court and an appellate panel in Romania dismissed his complaint and the case went to the European Court of Human Rights (ECHR), the highest court in the EU.

Barbulescu argued that Article 8 of the EU's Convention on Human Rights and Article 26 of the Romanian Constitution provided protections for his private life and correspondence and that the employer's monitoring of his personal messages violated those rights.

The employer countered that a Directive issued by the Data Protection Working Party provided that surveillance and the monitoring of electronic communications in the workplace are appropriate in proportion to a recognition of workers' privacy, taking into account factors such as necessity, fairness, and transparency. Barbulescu was on notice that his communications could be monitored and he violated company policy, the employer added.

Although the ECHR noted that prior precedent has adopted a "broad concept" of what constitutes a private life, the 6-to-1 majority found that the employer struck "a fair balance between the applicant's right to respect for his private life and correspondence and his employer's interests."

The employer accessed the Yahoo! Messenger account in the belief that it had contained professional messages, the court said. "[I]t is not unreasonable for an employer to want to verify that the employees are completing their professional tasks during working hours," the ECHR wrote. "In addition, the Court notes that it appears that the communications on his Yahoo! Messenger account were examined, but not the other data and documents that were stored on his computer. It therefore finds that the employer's monitoring was limited in scope and proportionate."

Barbulescu also "has not convincingly explained why he had used the Yahoo! Messenger account for personal purposes," the court added, affirming dismissal of the complaint.

A dissenting opinion expressed concern about whether Barbulescu was actually on notice about the possibility of the employer's surveillance. "Workers do not abandon their right to privacy and data protection every morning at the doors of the workplace," the dissent noted, quoting a Working Party Directive.

To read the opinion in Barbulescu v. Romania, click here.

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Blowing the Whistle as a "Company Outsider" Nets Third Party $700,000 From SEC

Why it matters

The Securities and Exchange Commission (SEC) provided a reminder to employers that whistleblowers can be non-employee third parties with the announcement of a $700,000 award to a "company outsider." The anonymous third party "conducted a detailed analysis that led to a successful SEC enforcement action" against an unnamed company, the agency explained, noting that the submission of "high-quality analysis by industry experts can be every bit as valuable as first-hand knowledge of wrongdoing by company insiders." Chief of the SEC's Office of the Whistleblower Sean X. McKessy said the award "demonstrates the Commission's commitment to awarding those who voluntarily provide independent analysis as well as independent knowledge," adding that the agency welcomes "analytical information from those with in-depth market knowledge and experience that may provide the springboard for an investigation." Since 2011, the whistleblower program has only continued to grow, with more than $55 million paid to 23 whistleblowers.

Detailed discussion

Since the SEC established a new program for corporate whistleblowers at the direction of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the program has grown exponentially. The SEC's Office of the Whistleblower (OWB) began its efforts in August 2011, and each year since the agency has seen the number of reports—and the related awards—increase.

In fiscal year 2015, for example, whistleblower tips came in from all 50 states and 61 different foreign countries, with tips on a variety of alleged wrongdoing, from Foreign Corrupt Practices Act-related activity to insider trading to problems with corporate disclosures. Eight awards were doled out in FY 2015 totaling $34 million, including the first 30 percent recovery award and the first award in an anti-retaliation case. Whistleblower awards can range from 10 to 30 percent of the money collected when monetary sanctions exceed $1 million.

Providing the most recent example of the breadth of the program, the SEC announced a whistleblower award of more than $700,000 to a "company outsider" who "conducted a detailed analysis that led to a successful SEC enforcement action."

"The voluntary submission of high-quality analysis by industry experts can be every bit as valuable as first-hand knowledge of wrongdoing by company insiders," Andrew Ceresney, Director of the SEC's Enforcement Division, said in a press release about the award. "We will continue to leverage all forms of information and analysis we receive from whistleblowers to help better detect and prosecute federal securities law violations."

The agency did not disclose any information that might directly or indirectly reveal the identity of the whistleblower.

McKessy added, "This award demonstrates the Commission's commitment to awarding those who voluntarily provide independent analysis as well as independent knowledge of securities law violations to the agency. We welcome analytical information from those with in-depth market knowledge and experience that may provide the springboard for an investigation."

To read the SEC order determining the whistleblower's claim, click here.

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California Federal Court: Paid Leave Does Not Amount to Termination

Why it matters

Paid leave is not equivalent to termination, a California federal court told the Equal Employment Opportunity Commission (EEOC) in a case involving a worker alleging discrimination based on national origin. Marcela Ramirez claimed she was on the receiving end of comments including "Mexicans like you would rather lie than tell the truth" and "I never trusted your kind of people" during her time working at Peters' Bakery. She was fired in 2011, but the bakery was later ordered to reinstate her with back pay by a union arbitrator. The EEOC then filed suit on behalf of Ramirez. Last July the federal court judge overseeing the case granted a preliminary injunction preventing the bakery from terminating her employment until the lawsuit was resolved. When the bakery placed Ramirez on paid leave at the end of December, the EEOC filed a motion to show cause why a contempt order should not be granted. But the judge sided with the bakery. Although the plaintiff might prefer to continue working on-site, the court could not find any authority for the proposition that fully paid leave constituted a constructive termination. As long as Ramirez continued to receive her wages and medical insurance, the employer would not be in violation of the injunction, the court said.

Detailed discussion

According to the complaint filed by the EEOC on behalf of Marcela Ramirez, she was subject to years of discrimination and harassment based on her national origin in violation of Title VII while employed by Peters' Bakery, on the receiving end of comments including "Mexicans like you would rather lie than tell the truth" and "I never trusted your kind of people."

In August 2011, Ramirez was fired. She was later reinstated after she filed a union grievance but was subject to retaliation after she later filed a charge of discrimination with the EEOC. After the agency filed its complaint, she claimed the bakery again tried to terminate her employment in July 2015.

On the EEOC's motion, U.S. District Court Judge Beth Labson Freeman granted a temporary restraining order and then entered a preliminary injunction ordering that the employer "is enjoined from terminating Ms. Ramirez's employment pending resolution of this lawsuit or until further order of the Court."

The agency returned to court in January, however, to consider a motion for an order to show cause why a contempt order should not be granted. Ramirez had again been terminated effective December 31, 2015, the EEOC told the court, in violation of the July order.

Bakery owner Charles Peters instructed Ramirez's supervisor not to schedule her for any shifts after December 31 and remove her from the work schedule for any shifts after that date. The owner stated "I don't want her here," adding that Ramirez was "bad for [his] health," the supervisor said in a declaration, explaining that "I am not firing her, I just want you to take her off the schedule."

These instructions were "in clear violation" of the preliminary injunction, the EEOC argued, demonstrating "not just a defiance of the Court's order, but arguably a deliberate and intentional maneuver to circumvent it by not 'terminating' Ms. Ramirez's employment, but rather simply forbidding her supervisor from giving her any hours of work. If an employee is not scheduled to work any hours, clearly that employee's employment is terminated."

The EEOC requested a stay of the removal of Ramirez from the work schedule, reimbursement for any shifts, and sanctions for violation of the court order.

But Judge Freeman sided with the bakery. The employer represented that Ramirez continues to receive her wages and medical insurance despite the fact she will not be scheduled for work hours and will continue to do so pending resolution of the lawsuit.

"While Plaintiff's counsel expressed Ms. Ramirez's preference to continue actually working on-site at the bakery, counsel has not cited any authority for the proposition that placing an employee on fully paid leave constitutes a constructive termination," the court wrote.

The cases the court discovered in its own research held to the contrary, the judge noted, citing a decision from a Nevada federal court where an employee who was initially told she would be terminated and then negotiated paid administrative leave pending an investigation failed to state a claim for constructive termination.

"Based upon the representation of Defendant's counsel that Ms. Ramirez will continue to receive her wages and medical insurance, the Court concludes that Plaintiff has not established a violation of the preliminary injunction," Judge Freeman concluded.

To read the order in EEOC v. Peters' Bakery, click here.

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Employer Feeling Better After Court Tosses EEOC Challenge to Wellness Program

Why it matters

With the question of the Americans with Disabilities Act's (ADA) application to employer wellness programs still uncertain, one federal court judge made his position clear by tossing an Equal Employment Opportunity Commission (EEOC) lawsuit accusing an employer of violating the statute by mandating that employees take part in a wellness program. Last year, the agency filed multiple suits challenging employer wellness plans, including a complaint alleging that Flambeau, Inc., required its workers to complete a health risk assessment and biometric screening to be eligible for participation in the company's group health insurance plan in violation of the ADA. The employer moved to dismiss the suit, and the court granted the motion. The health risk assessment and biometric screening were terms of the plan and used to enable the employer to "underwrite, classify, and administer" its health insurance risks more effectively, the court found. Therefore, the program fell within a safe harbor in the ADA for employers to administer the "terms of a bona fide benefit plan." Although the EEOC has issued proposed rules in an effort to clarify the application of the ADA to wellness programs, employers still face uncertainty due to discrepancies between the proposed guidance and the rules for wellness programs under the Affordable Care Act and Health Insurance Portability and Accountability Act.

Detailed discussion

Wisconsin-based Flambeau, Inc., manufactures and sells plastic products. The company offers employees various benefits including the ability to participate in its self-funded and self-insured health insurance plan. Participation in the health insurance plan—administered by a third party—is wholly voluntary.

In 2010, Flambeau established a "wellness program" for employees who wanted to enroll in the health insurance plan for the 2011 benefit year. The wellness program had two components: a health risk assessment, which required each participant to complete a questionnaire about his or her medical history, diet, mental and social health, and job satisfaction, and a biometric test (involving heath and weight measurements, a blood draw, and a blood pressure test).

The information gathered through the program was used to identify the health risks and medical conditions common among the plan's enrollees. With one exception—tobacco use—the health risks and medical conditions identified were reported in the aggregate. Flambeau used the information to estimate the cost of providing insurance, set participant premiums, adjust co-pays, and evaluate the need for stop-loss insurance.

For the 2011 benefit year, the first the wellness program was in place, the employer promoted it by giving employees a $600 credit if they participated and completed both the health risk assessment and biometric test. Flambeau eliminated the credit for the following years, instead adopting a policy of offering health insurance only to those employees who completed the wellness program.

From 1990 until 2014, Dale Arnold worked at the company's manufacturing facility in Baraboo, Wisconsin. In 2011, he participated in the wellness program and received the $600 credit. However, he failed to complete the assessment and tests by the established deadline for the 2012 benefit year and his insurance was discontinued.

Arnold then filed a union grievance, a complaint with the Department of Labor (DOL), and a complaint with the Equal Employment Opportunity Commission (EEOC). Working with the DOL, Flambeau agreed to reinstate Arnold's insurance if he completed the required testing and assessment. Despite this compromise, the EEOC filed suit on Arnold's behalf.

Specifically, the agency alleged that the employer violated Section 12112(d)(4)(A) of the Americans with Disabilities Act (ADA), which provides that a "covered entity shall not require a medical examination … unless such examination is shown to be job-related and consistent with business necessity."

Flambeau moved for summary judgment, arguing that its wellness program is protected by the ADA's safe harbor found in Section 12201(c)(2), which states that the ADA "shall not be construed to prohibit or restrict" an employer from establishing or administering "the terms of a bona fide benefit plan that are based on underwriting risks, classifying risks, or administering such risks."

U.S. District Court Judge Barbara B. Crabb agreed that the employer's program fell within the safe harbor, granting the motion to dismiss and entering judgment in Flambeau's favor.

The EEOC's proposed regulatory rules governing health programs did little to support the plaintiff's case, the court said. According to the proposal, "[t]he Commission does not believe that the ADA's 'safe harbor' provision applicable to insurance … is the proper basis for finding wellness program incentives permissible."

"Even if I were bound by plaintiff's proposed regulations, which I am not … plaintiff's proposed regulation speaks only to the safe harbor's application to 'wellness program incentives,' " Judge Crabb wrote. "It says nothing about the safe harbor's applicability to medical examinations that are part of a wellness program and are used to administer and underwrite insurance risks associated with an employer's health plans."

The court was similarly not persuaded by the EEOC's position that the court should construe the safe harbor narrowly as an exception to a remedial statute. A more limited reading would still not allow the court to ignore the safe harbor altogether, the court said.

Having concluded that the safe harbor may extend to wellness programs that are part of an insurance benefit plan, Judge Crabb then found it applied to protect Flambeau.

"It is clear that the wellness program requirement was a 'term' of defendant's benefit plan," she said. "First and foremost, plaintiff's entire claim is premised on its undisputed allegation that defendant's employees were required to complete the wellness program before they could enroll in the plan. It is difficult to fathom how such a condition could be anything other than a plan term. Additionally, plaintiff does not allege that defendant failed to provide its employees adequate notice of the wellness program requirement."

Handouts were distributed to workers informing them of the wellness program requirement, the court noted, and the fact that the health assessment and biometric testing were not set forth in the summary plan description or collective bargaining agreement was not dispositive, as "it is well-recognized that a summary plan description does not establish the terms of an employee benefit plan."

Further, the wellness program requirement was "based on underwriting risks, classifying risks, or administering such risks," as set forth in the safe harbor, the court said. "The undisputed evidence establishes that defendant's consultants used the data gathered through the wellness program to classify plan participants' health risks and calculate defendant's projected insurance costs for the benefit year," the judge wrote.

The consultants then provided recommendations about what to charge for plan premiums (including higher premiums for smokers) and how much to charge for maintenance medications and preventative care, as well as the decision to purchase stop-loss insurance. "These types of decisions are a fundamental part of developing and administering an insurance plan and therefore fall squarely within the scope of the safe harbor," the court added.

Finally, the court rejected the EEOC's argument that the defendants were using the safe harbor as a "subterfuge," finding the agency's position to be "based on a flawed understanding" of the ADA's purpose. "Contrary to the plaintiff's contention, the purpose of the ADA is not to prohibit employers from asking for medical and disability-related information," Judge Crabb wrote. "Instead, its purpose is 'to provide a clear and comprehensive national mandate for the elimination of discrimination against individuals with disabilities.' "

A benefit plan term does not operate as a subterfuge unless it involves a "disability-based distinction" that is used to discriminate against disabled individuals in a non-fringe benefit aspect of employment, the court held. "Defendant's wellness program clearly did not involve such a distinction or relate to discrimination in any way," the court said. "Regardless of their disability status, all employees that wanted insurance had to complete the wellness program before enrolling in defendant's plan. Furthermore, there is no evidence that defendant used the information gathered from the tests and assessments to make disability-related distinctions with respect to employees' benefits."

Judge Crabb granted summary judgment in favor of Flambeau and dismissed the EEOC's claim with prejudice.

To read the opinion and order in EEOC v. Flambeau, Inc., click here.

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