Major Supreme Court Decision Clarifies Compensation for Security Screening

A recent decision from the U.S. Supreme Court could dramatically change the employment landscape on employee compensation for time spent going through security screening and could likely extend to other pre- and post-shift employee activities. The case of Integrity Staffing Solution, Inc., v. Busk involved warehouse employees working at storage and order-filling facilities for Amazon. A number of the company’s hourly paid workers sued Integrity under the Fair Labor Standards Act in response to the company requiring workers to go through security screening before leaving the premises at the end of their shift - a policy designed to deter employee theft of merchandise. The workers claimed that they had to wait sometimes up to twenty-five minutes after their shift to go through the screening. The workers argued that this procedure was a required part of their job, imposed by the company, and that they should therefore be entitled to be paid for time spent going through the screening.

The trial court dismissed the lawsuit for failure to state a claim; however, the 9th Circuit reversed concluding that Integrity had to pay overtime for the screening because this after-work procedure was a job requirement and was for the company’s benefit. The Supreme Court took up the case and in a 9-0 decision reversed the 9th Circuit declaring that such screening procedures were not an “integral” part of the job.

Justice Thomas delivered the opinion and held that for workers to be paid, the activity must be "an intrinsic element" of the job and "one with which the employee cannot dispense if he is to perform his principal activities.” Applying the rule to this case, the Supreme Court ruled that the workers were not hired to go through security screening, but rather to take products off the shelves and package them for shipment for Amazon. In reaching this conclusion, the Court relied on a federal law which exempted employers from liability under the FLSA for "activities which are preliminary to or postliminary to [the] principal activity or activities" employees are required to perform as a condition of employment. Here, and unlike the pre-shift donning of protective gear, Integrity could have eliminated the screenings without in any way affecting the safety or ability of the worker’s to complete their normal tasks.

There are a couple big takeaways employers can glean from this ruling: First, the Supreme Court explicitly held that an activity is not compensable simply because it is required by the employer. Rather, a court’s focus is on whether the activity in question is related to the employee’s principal duties he or she is employed to perform. Also, the Court held that an activity is not compensable simply because it is for the benefit of the employer. Instead, the activity must be “integral and indispensable” to the employee’s productive work. Furthermore, as security concerns in the workplace continue to grow, this decision may have the practical effect of more employers beginning to conduct security screenings at the end of the workday. This decision may also very well extend to other preliminary and postliminary employment activities such as time spent on bag checks, logging into the company network, changing clothes, or locking up the office as long as the employer can show that the activity is not an “integral and indespensible” activity and one “with which the employee cannot dispense if he is to perform his principal activities.” Ultimately, this decision is a major victory for employers that provides much needed clarity to the issue of whether security screening is compensable at a time when such procedures are becoming more and more prevalent in the workplace in an effort to promote security and cut down on employee theft.

Nick Johnson is an attorney with Washington, DC business law firm, Berenzweig Leonard. He can be reached at njohnson@BerenzweigLaw.com. 

Sandwich Secrets “They” Don’t Want You to Know About: Have Non-Competes Gone Too Far?

Litigation over non-compete provisions continues to make up a large segment of the lawsuits arising out of the employer-employee relationship, and that trend does not appear to be reversing itself any time soon. Some companies are relentless in their quest to gain an edge over the competition, and many are doing so in the name of protecting legitimate business interests by requiring all new employees—in some instances, even lower-level workers making the minimum wage—to sign non-compete agreements.

Jimmy John’s, the popular sandwich shop chain with over 2,000 locations, now requires all employees to sign non-compete agreements that prohibits them from taking a large number of jobs during and for a period of two years following their employment. Typically reserved for executives, managers, and other high-level employees possessing sensitive business information, non-compete provisions are designed to prevent employees of one company from jumping to an industry competitor and divulging their insider information. At Jimmy John’s however, the non-compete agreements extend to low-wage sandwich makers and delivery drivers as well—employees who are several steps removed from the corporate decision-making process and are unlikely to have any sensitive business information that would be of value to an industry competitor.

The extremely broad non-compete by Jimmy John’s would prevent employees from working for “any business which derives more than ten percent (10%) of its revenue from selling submarine, hero-type, deli-style, pita and/or wrapped or rolled sandwiches and which is located within three (3) miles of either [the Jimmy John’s location they are working at] or any such other Jimmy John’s Sandwich Shop.” Because Jimmy John’s operates over 2,000 locations in 44 states and the District of Columbia, the blackout area in which a former Jimmy John’s employee would be prohibited from working for any business that sells sandwiches covers over 6,000 square miles in many of the country’s largest metropolitan areas—even if that employee did nothing but make sandwiches while working there.

Individual Jimmy John’s franchisees do have the option of not requiring their own employees to sign the non-compete agreement, and it remains to be seen whether Jimmy John’s will seek to enforce the provision against former employees. The non-compete does not appear to have been challenged yet, but would probably not be enforceable in Virginia courts. Compared to existing Virginia non-compete law, the Jimmy John’s non-compete is arguably overbroad in terms of timing (2 years), geographic scope (within 3 miles of any Jimmy John’s nationwide), in its definition of a “competitor” (any business deriving 10% of its revenue from selling sandwiches), and in its applicability to all company employees (regardless of whether they have legitimate business information to protect). While the provision would likely be struck down in Virginia courts, the very fact of its existence suggests that we won’t be seeing a downturn in non-compete litigation any time soon.

Although prospective Jimmy John’s employees may be put off by the overbreadth of these non-competes, we expect that some courts, especially those in Virginia, will find these provisions equally hard to swallow.

Frank Gulino is an associate attorney at Berenzweig Leonard.  He can be reached at FGulino@BerenzweigLaw.com.

Courts Embrace the Use of GPS Evidence

We’ve all used GPS technology to make life easier. Whether in our cars or on our phones, Global Positioning System technology allows us to pinpoint our location on a map and track where we’ve been. Now, in addition to having already replaced maps, GPS may be replacing expert witnesses in some circumstances.

In cases where a disputed fact concerns the location of a person or vehicle at a particular time, expert testimony was necessary. Now, however, the U.S. Court of Appeals for the Eighth Circuit has ruled that because of GPS technology’s intrinsic accuracy, satellite data can be used to determine location in litigation. In the case before that Court, a bank teller placed a GPS tracking device in the stack of bills demanded by a bank robber. Following the tracking device, police apprehended a man fitting the robber’s description, located the cash that had been stolen from the bank, found items of clothing resembling those worn during the robbery, and located the vehicle that the robber had used to flee the bank. Despite the defendant’s objection to the admission of GPS tracking data into evidence, the trial court not only admitted the data, but took judicial notice of its reliability and accuracy. The Eighth Circuit affirmed the trial court’s decision.

Because judicial notice allows a court to accept as a true a fact that is so well-known or authoritatively tested that it cannot reasonably be doubted, the fact that federal courts have begun to take judicial notice of the accuracy of GPS tracking data is an important step for plaintiffs and alarming for defendants. While some critics of this decision point to the fact that GPS signals can be lost in buildings or tunnels, and individual tracking devices may be unreliable, others assert that even where a tracking device is reliable, it may pose serious constitutional concerns, raising Fourth Amendment questions.

Parties litigating cases that involve GPS evidence shouldn’t simply rely on the fact that it will be admissible no matter what, however. Especially in bigger cases, where the parties have the resources to do a thorough job, parties should be prepared to address not only the accuracy of GPS in general, but the accuracy of the particular device used in the situation.

Frank Gulino is an associate attorney at Berenzweig Leonard.  He can be reached at fgulino@berenzweiglaw.com.

Winning Attorneys’ Fees in Patent Trolling Cases Just Got Easier

Patent trolling, the latest abuse of the laws enacted to protect intellectual property, occurs when a “patent troll” (sometimes euphemistically called a “patent assertion entity” or “non-practicing entity”) tries to generate revenue by enforcing patent rights against accused infringers, but does not manufacture products or provide services based on the patents it holds. Because patent trolls try to take advantage of businesses, an increased ability to recoup fees in litigation against trolls is an important development for any companies that productively use valuable intellectual property.

In most instances, the troll reaches out to the accused infringer, demanding a licensing fee for the use of its patent and threatening litigation if such fee is not paid, despite the fact that it has no intention of productively using the patent. Additionally, trolls sometimes stretch the limits of patentability, seeking to protect intentionally vague processes to maximize the number of would-be infringers and, consequently, the amount of revenue to be derived through licensing fees and litigation.

While patent cases traditionally followed the “American Rule” where parties paid their own attorneys’ fees regardless of outcome in all but the most “exceptional” cases, the Supreme Court’s recent decision in Octane Fitness, LLC v. Icon Health & Fitness, Inc. seems to have strengthened a company’s ability to obtain its attorneys’ fees from patent trolls. In its decision, the Supreme Court rejected the Federal Circuit’s old standard for what constituted an “exceptional” patent case, noting that it was “overly rigid” and “inflexible.” The Octane Fitness decision not only defined an “exceptional” patent case as one that “stands out from others with respect to the substantive strength of a party’s litigating position . . . or the unreasonable manner in which the case was litigated,” but also lowered the requirement of proving one’s entitlement to attorneys’ fees from “clear and convincing” to a “preponderance of the evidence” standard.

The first company to gain an edge in litigation following Octane Fitness is startup FindTheBest, a website that allows you to find a topic, compare your options, and select the best choice. FindTheBest was sued by Lumen View Technology, a patent troll seeking a $50,000 licensing fee for FindTheBest’s use of allegedly patented matchmaking technology. FindTheBest has argued both that it hasn’t infringed upon Lumen’s patent, and also that Lumen’s patent was invalid in the first place. Although a ruling has not come out in the FindTheBest case just yet, we may see the first application of the Supreme Court’s new definition of an “exceptional” patent litigation case, as well as an award of attorneys’ fees to FindTheBest.

Frank Gulino is an associate attorney at Berenzweig Leonard, LLP. He can be reached at fgulino@berenzweiglaw.com.

A New Reason to Think Twice Before Representing Yourself in Litigation

If you have ever considered representing yourself in litigation (proceeding “pro se,” in legal parlance) as a cost-saving measure, a recent decision by the U.S. Court of Appeals for the Third Circuit might give you a reason to hesitate. Although pro se litigants typically enjoy leniency from the courts, the case of Baldinger v. Ferri is illustrative of why parties to a lawsuit should secure representation by counsel. Many pro se parties are not equipped to participate fully in the litigation process, including responding to discovery requests, attending court dates, and complying with judicial orders. Federal judges at both the trial and appellate levels have now ruled that such a failure to participate can result in the entry of a default judgment and the imposition of sanctions, even against unrepresented parties who pursue litigation without an attorney’s guidance.

In Baldinger, the Third Circuit affirmed a default judgment of over $1 million against a pro se litigant who failed to respond to interrogatories and requests for the production of documents. The default judgment was issued pursuant to the Federal Rules of Civil Procedure, which provide for the imposition of sanctions for failure to obey a discovery order—even against unrepresented parties. Interrogatories and document requests are among the most common vehicles through which discovery is conducted, but they should still be navigated with the assistance of an attorney. Approximately one-third of the judgment in Baldinger was comprised of punitive damages attributable to the pro se defendant’s failure to participate in discovery rather than to any compensable wrongdoing that gave rise to the litigation in the first place.

Courts are becoming less forgiving of the failure to participate fully in the legal process.  The Federal Rules of Civil Procedure provide not only for sanctioning the failure to comply with discovery orders under Rule 37, but also for sanctioning parties that bring frivolous or otherwise improper lawsuits under Rule 11. Those potential penalties apply to represented and unrepresented parties alike, but can be easily avoided by retaining litigation counsel who can distinguish meritorious claims from frivolous ones prior to filing. The Third Circuit’s willingness to uphold the award of massive punitive damages in the Baldinger case indicates that it is increasingly worthwhile to hire an attorney for litigation rather than risk the imposition of potentially severe sanctions in representing oneself.

Frank Gulino joined Berenzweig Leonard as an associate attorney in September 2013.  He can be reached at fgulino@berenzweiglaw.com.

Companies Can Now Fight Back Against Anonymous Online Criticism

It is every company’s worst nightmare: An anonymous poster goes online and makes negative and disparaging statements about the company.  In the social media age we are in, this unfortunate scenario has played out countless times on such sites as Yelp, Rip-Off Report, and other online review sites.  Companies faced with this situation have largely felt powerless to counteract anonymous posters or even find out who the posters are.  But a recent decision by the Virginia Court of Appeals will now give companies some much needed leverage to fight back.

Yelp was forced this week by the Virginia Court of Appeals to “unmask” anonymous posters who posted negative, and possibly false, reviews about a local Virginia carpet cleaning company, Hadeed Carpet Cleaning. Hadeed believed that seven negative Yelp reviews of its services were false, and so it filed a defamation lawsuit against the anonymous posters, naming them as “John Does.” In order to unmask the anonymous posters, Hadeed then sent a subpoena for documents to Yelp, which Yelp objected to on First Amendment grounds.

The Virginia Court of Appeals ruled that Yelp had to comply with the subpoena and provide information about the identities of the online posters.  The Court balanced the First Amendment rights of the anonymous posters versus the rights of companies to protect their reputations, and stated that false statements are not protected by the First Amendment. Yelp argued that Hadeed Carpet Cleaning had to prove its defamation case before Yelp could be forced to unmask its posters – even though Virginia law does not require companies to meet that burden. The Court clarified that Virginia’s unmasking procedure only requires a company to have a legitimate good faith basis to contend that it has been a victim of defamation. Yelp now has to produce the records and disclose the people who posted the negative reviews.

This is a very significant decision in the social media arena, and provides some much-needed leverage for businesses seeking to protect their online reputations against false and often faceless posters. Businesses often need to protect themselves against online attacks by posters who post false reviews, and this recent decision clarifies the legal avenues available to companies in Virginia and potentially elsewhere to protect against malicious posters seeking to damage business reputations.

Seth Berenzweig is a managing partner at the DC regional business law firm, Berenzweig Leonard, LLP. Seth can be reached at sberenzweig@berenzweiglaw.com. Katie Lipp, an attorney with the firm, co-authored this post. Katie can be reached at klipp@berenzweiglaw.com.

Venue Selection Clauses Give Companies Leverage in Litigation

Many contracts, especially those between sophisticated parties, contain clauses specifying the state in which disputes arising out of the agreement must be litigated.  For instance, a company headquartered in Virginia would want to specify that all disputes be litigated in a predetermined county or federal court in Virginia.

While many courts have historically enforced forum selection clauses as written, others have been reluctant to enforce the provisions where doing so would compel litigation in a state that seemed extremely unfair based upon a consideration of “the convenience of parties and witnesses” and “the interest of justice.”  Resolving that circuit split, the Supreme Court of the United States recently decided the case of Atlantic Marine Construction Co. v. United States District Court for the Western District of Texas, addressing for the first time the extent to which forum selection clauses are enforceable and ultimately concluding that courts should enforce such clauses as written, in all but the rarest circumstances.

The Court’s decision alleviates an uncertainty previously faced by contracting parties.  In the wake of Atlantic Marine, parties can now confidently rely on the enforceability of the forum selection clauses contained in their agreements, and accurately predict the state in which they will litigate.  By resolving the circuit split in favor of the majority view, the Court has created an environment where parties are able to bargain over forum selection as efficiently as any other contract term; a party may, for instance, stipulate to litigating in a less convenient state in exchange for receiving a discounted contract price, or offer pay additional consideration in order to guarantee the opportunity to litigate somewhere they consider favorable.

Atlantic Marine marks an important point in High Court jurisprudence, and one that business leaders and other contracting parties should be aware of.  In addition to promoting the freedom of parties to bargain with one over contract terms going forward, this decision also provides certainty and predictability to forum selection clauses contained in existing agreements.  This predictability allows companies to keep costs down by litigating in a friendly state and being able to efficiently fend off motions to transfer venue.  “When the parties have agreed to a valid forum-selection clause,” Justice Alito writes in Atlantic Marine, “a district court should ordinarily transfer the case to the forum specified in that clause.”  Excepting “extraordinary circumstances unrelated to the convenience of the parties,” the Court’s decision allows contracting parties to place unprecedented confidence in their forum selection clauses, and maintain more control as they resolve business disputes.

Frank Gulino joined Berenzweig Leonard as an associate attorney in September 2013.  He can be reached at fgulino@berenzweiglaw.com.