In the latest HR headline from the start-up world, the offending executive doesn’t fit the typical mold, but the lesson remains the same: don’t ignore human resources.

Miki Agrawal, the self-proclaimed “SHE-eo” of THINX, and her “boundary pushing” workplace demeanor are the focus of a New York City Commission on Human Rights complaint by the former head of public relations, Chelsea Leibow. Leibow alleges that Agrawal created a hostile work environment through her constant discussion of sex, nudity around employees, and inappropriate touching of employees’ breasts.

THINX, the “period underwear” company that seeks to disrupt the menstrual products world, intentionally pushes boundaries with its marketing strategies. In her role, Leibow was responsible for PR emails, which were the subject of media attention highlighting the emails’ casual, “millennial-speak.” According to Leibow in an interview with New York Magazine, the company also pushed internal boundaries of professionalism.  Leibow alleges that, just a few months after she joined THINX Agrawal, “helped herself” to Leibow’s breasts and engaged in a variety of other sexualized conduct.  Leibow asserts that Agrawal drove a casual culture, and that many employees engaged in more casual (and often sexually-inappropriate) conversations out of fear of losing their jobs.

Leibow alleges that she made multiple internal complaints, including to the CFO and CCO, about Agrawal’s behavior, but those complaints were ignored. Rather than establish a formal HR function, Agrawal introduced “Culture Queens” to manage internal disputes. Neither of these individuals had HR experience, and the reporting line brought all complaints back to Agrawal – even those complaints about her. In fact, Leibow alleged that it was ingrained into the culture that the employees and the executive team “operated on different planes.”

In response to Leibow’s complaint and subsequent publicity, Agrawal published a blog acknowledging that THINX failed to appropriately establish a human resources function early enough in the formation of the company. Like many start-ups, when THINX had only 15 employees, Agrawal did not make hiring an HR professional a priority.  She acknowledges that the failure to address human resources was a “problem area,” but “to sit down and get an HR person and think about [health insurance, vacation days, benefits, and maternity leave] were left to the bottom of the pile of things to get done.” THINX has commissioned an employment law firm to investigate these claims, along with several other allegations being anonymously reported to various news outlets.

Following the complaint, Agrawal has stepped down as CEO, and THINX is hiring a new CEO and a HR manager. Our attorneys have seen a continuing pattern of successful start-up companies ignoring human resources functions in favor other responsibilities to launch the business.  But as this example teaches, start-ups and other small businesses should not leave HR-planning to the end. Although managing the HR function early on seems less important than getting the business off the ground, failing to establish basic workplace rules, including a harassment complaint procedure, can lead to major problems.

Employers in the technology industry should take note of last week’s decision by the U.S. Court of Appeals for the Sixth Circuit in EEOC v. New Breed Logistics (PDF).  The court declined to reconsider a panel holding that, in the context of a retaliation claim, “a demand that a supervisor cease his/her harassing conduct constitutes protected activity under Title VII.”

Three former employees of New Breed Logistics, a supply-chain logistics company, asserted that they had engaged in protected activity by telling their supervisor to stop making advances and sexual comments.  The district court agreed, holding that protected conduct “can be as simple as telling a supervisor to stop.” The Sixth Circuit (PDF) affirmed, relying on the EEOC’s interpretation of Title VII’s opposition clause and finding that an oral complaint to a harassing supervisor – even if no other manager or supervisor ever learns of the complaint – constitutes protected activity.

The employer moved for a rehearing en banc, arguing that the Sixth Circuit’s decision created a split with the Fifth Circuit, which in 2004 had held that a single express rejection to a harassing supervisor did not constitute protected activity.  The employer also argued that an employer should not have to face a retaliation claim if the only person to have received the complaint was the alleged harasser.  In denying the motion for rehearing, however, the Sixth Circuit found that these issues were fully considered in the court’s original decision.

The Sixth Circuit’s decision highlights the need for an employer to train its workforce on its complaint procedures.  Although employees may engage in protected activity by orally rejecting a harassing supervisor’s advances – at least in the Sixth Circuit and in the eyes of the EEOC – they should be made aware of all avenues of complaint so that the employer has an opportunity to learn of and address the complaint.  Importantly, supervisors must be trained on how to handle any such complaints and to report them to human resources.

My colleague Nathaniel M. Glasser recently authored Epstein Becker Green’s Take 5 newsletter.   In this edition of Take 5, Nathaniel highlights five areas of enforcement that U.S. Equal Employment Opportunity Commission (“EEOC”) continues to tout publicly and aggressively pursue.

  1. Religious Discrimination and Accommodation—EEOC Is Victorious in New U.S. Supreme Court Ruling
  2. Transgender Protections Under Title VII—EEOC Relies on Expanded Sex Discrimination Theories
  3. Systemic Investigations and Litigation—EEOC Gives Priority to Enforcement Initiative
  4. Narrowing the “Gender Pay Gap”—EEOC Files Suits Under the Equal Pay Act
  5. Background Checks—EEOC Seeks to Eliminate Barriers to Recruitment and Hiring

Read the Full Take 5 here.

Epstein Becker Green will host a complimentary webinar, “Hi-Tech Compliance in the Digital Age” on June 25th from 1:00 p.m. – 2:30 p.m. (EDT) presented by Epstein Becker Green attorneys Michelle Capezza, Nathaniel M. Glasser, Adam C. Solander, and Joshua A. Stein.

Below is a description of the webinar:

All employers face unique challenges in having to comply with both overarching and targeted labor and employment, employee benefits, and civil rights laws and regulations that greatly impact their workplace and business model.  As employers — including those operating in the technology, media, and telecommunications industry — you need to understand the rapidly evolving developments in federal and state laws and regulations and determine whether they require you to take actions today to minimize your company’s legal exposure.

Join our experienced panelists as they review critical hi-tech issues that should be at the top of your workplace compliance list.

Topics will include:

  • Privacy and Security Questions When Dealing with Employees
  • Fiduciary Responsibilities in Connection with Plan Participant Data
  • Website Accessibility

To register for this complimentary webinar, please click here.

One day before the U.S. Department of Labor’s Family & Medical Leave Act (“FMLA”) same-sex spouse final rule took effect on March 27, 2015, the U.S. District Court for the Northern District of Texas ordered a preliminary injunction in Texas v. U.S., staying the application of the Final Rule for the states of Texas, Arkansas, Louisiana, and Nebraska. This ruling directly impacts employers within the technology, media, and telecommunications industries who are located or have employees living in these four states.

Background

In United States v. Windsor, the U.S. Supreme Court struck down Section 3 of the Defense of Marriage Act (“DOMA”) as unconstitutional, finding that Congress did not have the authority to limit a state’s definition of “marriage” to “only a legal union between one man and one woman as husband and wife.”  Significantly, the Windsor decision left intact Section 2 of DOMA (the “Full Faith and Credit Statute”), which provides that no state is required to recognize same-sex marriages from other states.  Further to the President’s directive to implement the Windsor decision in all relevant federal statutes, in June 2014, the DOL proposed rulemaking to update the regulatory definition of spouse under the FMLA. The Final Rule is the result of that endeavor.

As we previously reported, the Final Rule adopts the “place of celebration” rule, thus amending prior regulations which followed the “place of residence” rule to define “spouse.”  For purposes of the FMLA, the place of residence rule determines spousal status under the laws where the couple resides, notwithstanding a valid out-of-state marriage license.   The place of celebration rule, on the other hand, determines spousal status by the jurisdiction in which the couple was married, thus expanding the availability of FMLA leave to more employees seeking leave to care for a same-sex spouse.

The Court’s Decision

Plaintiff States Texas, Arkansas, Louisiana, and Nebraska sued, arguing the DOL exceeded its authority by promulgating a Final Rule that requires them to violate Section 2 of the DOMA and their respective state laws prohibiting the recognition of same-sex marriages from other jurisdictions.  The Texas court ordered the extraordinary remedy of a preliminary injunction to stay the Final Rule pending a full determination of the issue on the merits.

The court first found that the Plaintiff States are likely to succeed on at least one of their claims, which assert that the Final Rule improperly conflicts with (1) the FMLA, which defines “spouse” as “a husband or wife, as the case may be” and which the court found was meant “to give marriage its traditional, complementarian meaning”; (2) the Full Faith and Credit Statute; and/or (3) state laws regarding marriage, which may be preempted by the Final Rule only if Congress intended to preempt the states’ definitions of marriage.

The court then held that the Final Rule would cause Plaintiff States to suffer irreparable harm because, for example, the Final Rule requires Texas agencies to recognize out-of-state same-sex marriages as valid in violation of the Texas Family Code.

Lastly, although finding the threatened injury to both parties to be serious, the court decided that the public interest weighs in favor of a preliminary injunction against the DOL.  The court found in favor of upholding “the stability and consistency of the law” so as to permit a detailed and in-depth examination of the merits.  Additionally, the court pointed out that the injunction does not prohibit employers from granting leave to those who request leave to care for a loved one, but reasoned that a preliminary injunction is required to prevent the DOL “from mandating enforcement of its Final Rule against the states” and to protect the states’ laws from federal encroachment.

What This Means for Employers

Although the stay of the Final Rule is pending a full determination of the issue on the merits, the U.S. Supreme Court’s decision in Obergefell v. Hodges likely will expedite and shape the outcome of the Texas court’s final ruling.  In Obergefell, the Supreme Court will address whether a state is constitutionally compelled under the Fourteenth Amendment to recognize as valid a same-sex marriage lawfully licensed in another jurisdiction and to license same-sex marriages.  Oral arguments in Obergefell are scheduled for Tuesday, April 28, 2015, and a final ruling is expected in late June of this year.

Before the U.S. Supreme Court decides Obergefell, however, employers in Texas, Arkansas, Louisiana and Nebraska are advised to develop a compliant strategy for implementing the FMLA—a task that may be easier said than done.  Complicating the matter is a subsequent DOL filing in Texas v. U.S. where the DOL contends that the court’s order was not intended to preclude enforcement of the Final Rule against persons other than the named Plaintiff States, and thus applies only to the state governments of the states of Texas, Arkansas, Louisiana, and Nebraska.

While covered employers are free to provide an employee with non-FMLA unpaid or paid job-protected leave to care for their same-sex partner (or for other reasons), such leave will not exhaust the employee’s FMLA leave entitlement and the employee will remain entitled to FMLA leave for covered reasons.  We recommend that covered employers that are not located and do not have employees living in one of the Plaintiff States amend their FMLA-related documents and otherwise implement policies to comport with the Final Rule, as detailed in EBG’s Act Now Advisory, DOL Extends FMLA Leave to More Same-Sex Couples.  Covered employers who are located or have employees living in one of the Plaintiff States, however, should confer with legal counsel to evaluate the impact of Texas v. U.S. and react accordingly, which may depend on the geographical scope of operations.

Virginia has now joined the chorus of jurisdictions that ban social media snooping by employers.  As we previously reported here and here, in a growing trend a number of states prohibit employers from requiring prospective or current employees to provide access to their social media accounts during the hiring process.  On March 7, 2015, the Virginia legislature passed H. 2081, a law prohibiting employers from asking or requiring employees or applicants (1) to disclose the username and password to their social media accounts, and (2) to add an employer to the list of contacts associated with their social media accounts.  This law will take effect upon signature by Governor Terry McAuliffe or, if he does not sign or veto the bill, on March 29, 2015.

Regardless of whether employers review individuals’ social media accounts as an applicant-screening tool or as a method to protect proprietary information or trade secrets, companies doing business in Virginia must cease asking these workers for their social media usernames and passwords once the law takes effect.  The new law does not prevent employers from reviewing any public posts made by the employee or applicant, nor does it penalize an employer that inadvertently receives login information through the employee’s use of an employer-monitored electronic device or network, as long as the employer does not use this login information to access an employee’s social media account.

Importantly, employers may still request an employee’s login information if necessary to comply with applicable law, or if the employee’s social media activity is “reasonably believed” to be relevant to a formal investigation conducted by the employer into allegations of the employee’s unlawful activity or violation of the employer’s written policies.

With the passage of this new law, Virginia employers should educate their recruiters not to ask for passwords to applicant’s personal social media accounts (or even to stand over an applicant’s shoulder while logging in).  Any background research on an applicant should be limited to publicly available information.  Employers also should review their social media and electronic communications policies to ensure that employees’ rights to confidentiality in their social media accounts is properly protected, while preserving the employer’s rights to oversee its electronic systems and to request the production of login information as part of formal investigations into unlawful conduct.

Also keep in mind the other jurisdictions that have passed or are considering similar legislation.  In addition to Virginia, thirteen other states have now enacted social media privacy laws: Arkansas, California, Colorado, Illinois, Maryland, Michigan, Nevada, New Jersey, New Mexico, Oregon, Utah, Washington, and Wisconsin  According to the National Conference of State Legislatures, in 2015 alone, twenty states have introduced or considered legislation regarding access to social media accounts.  Employers must be aware of the various levels of privacy protections afforded to social media accounts in each state in which they operate or do business.  Epstein Becker & Green, P.C., attorneys can assist with navigating the various applicable state laws and with updating existing, or developing new, social media and electronic communications policies to comply with these laws.

No software company wants to lose its best programmer for an extended period.  But employers should take heed of the recent decision by the District of Columbia Circuit Court of Appeals when considering employee requests for leave under the Family and Medical Leave Act.  In Gordon v. United States Capitol Police, No. 13-5072 (D.C. Cir. Feb. 20, 2015), the D.C. Circuit held that an employer who discourages an employee from taking FMLA leave may be liable for an interference claim, even if that discouragement was “ineffective.”  In other words, don’t bully, discourage, or make employees jump through unnecessary hoops if they ask for FMLA leave, because those employees may still have a viable lawsuit for FMLA interference despite having received the requested leave.

Judy Gordon, an officer with the Capitol Police, was granted FMLA leave to address intermittent periods of severe and incapacitating depression.  Before her leave commenced, Gordon’s superiors ordered her to submit to a “fitness for duty examination” because of her FMLA request.  While waiting for the examination, Gordon was reassigned to administrative duties, resulting in a loss of $900 (the equivalent of three days’ pay).  Gordon passed the examination, was reinstated to her prior post, and took the requested FMLA leave and returned without incident.  Nonetheless, Gordon sued, asserting claims of interference and retaliation under the FMLA, and alleging that the presence of the “fitness for duty examination” on her permanent record would be detrimental to her prospects for pay increases, promotions, and transfers.

Addressing an issue of first impression for the D.C. Circuit, the court considered whether Gordon could proceed with her FMLA interference claim even though she was granted and ultimately took the requested leave.  Drawing an analogy between the interference provisions of the FMLA and the NLRA – which courts have interpreted to permit NLRA Section 8 claims based on actions that have a “reasonable tendency” to interfere with employees’ rights, regardless of whether they actual did – the court held that “an employer action with a reasonable tendency” to interfere with an FMLA right may support a valid interference claim “even where the action fails to actually prevent such exercise or attempt.”

Here, the D.C. Circuit reinstated the inference claim because it found that subjecting Gordon to a fitness for duty examination, which resulted in her loss of $900 and potentially impacted her future career prospects, would have a “reasonable tendency” to interfere with an employee’s exercise of FMLA rights.  The court also appeared to be influenced by allegations in the complaint that upper-managers frowned upon FMLA leave generally and were looking for ways to prevent Gordon from taking leave.

In its decision, the court set a low threshold for what constitutes an adverse action sufficient to support an FMLA retaliation claim.  One of the elements of a prima facie case of FMLA retaliation is a showing that the plaintiff was adversely affected by an employment decision.  The court refused to decide whether that element requires a showing of “material adversity” – as articulated for Title VII claims in Burlington Northern & Santa Fe Railway Co. v. White, 548 U.S. 53, 68-70 (2006) – or something less, such as any monetary loss, no matter how small – as suggested in Ragsdale v. Wolverine World Wide, Inc., 535 U.S. 81 (2002).  Rather, the court concluded that the loss of $900, the equivalent of three days’ pay, was more than de minimis and met the higher “material adversity” threshold, allowing the FMLA retaliation claim to proceed.

This decision is a reminder to employers, particularly those with operations in Washington, DC, to tread carefully when processing requests for leave under the FMLA.  Although leaves of absence can be disruptive to the workforce, and employers are within their rights to make certain inquiries into the need for leave, the mere fact that FMLA leave is ultimately granted will not insulate an employer from potential liability for conduct that has the potential to dissuade an employee from requesting leave.  To avoid unnecessary litigation, employers should instruct their leave administrators and supervisors to refrain from openly questioning or criticizing an employee’s request for leave and from requiring additional certifications beyond those contemplated by the law.