Lessons for Employers and Managers . . . from Paula Deen

The controversy swirling around Paula Deen,, and her purported use of the "N" word as part of her vocabulary,  has been at the center of a media maelstrom.  On one side we see Ms. Deen losing her lucrative position as a Food Network celebrity chef, the cancellation of most of her even more lucrative endorsement arrangements, and the vitriolic enmity of much of the mainstream media.  On the other side, Ms. Deen is defended by those who argue there is a double standard, and that simply because she used an offensive racial epithet in the past she shouldn't be shunned by society, when so many celebrities and other public figures have done so much worse.  For example, there has been a Facebook "Meme" circulating listing many of the other Food Network Celebrity Chefs and all of their social slips and legal conundrums, including adultery, slander, financial fraud, and sexual harassment.  Surely Paula's "slip of the lip" in the past pales by comparison.

But Paula Deen's use of the "N" word must be kept in proper context -- a context in which Employers and Managers must be wary.  Paula's indiscreet comments weren't overheard at a cocktail party.  She didn't slip up in a casual conversation.  She is accused of regularly using this language in the context of a workplace environment, where it is allegedly part of an overall employment atmosphere that was hostile to African American workers.

Paula Deen, in partnership with her brother,  runs a very famous and successful restaurant in Savannah, Georgia.  An employee of that restaurant filed a lawsuit, complaining of sexual harassment and discrimination in the workplace.  One of the specific allegations was that Deen and other restaurant managers often made racist comments disparaging African-Americans -- specifically using the "N" word.

After this civil suit was filed, the plaintiff's attorney deposed Ms. Deen.  He asked her pointed questions about what was going on at the restaurant on a day to day basis, and what kind of things managers would say to employees.  Ms. Deen was under oath, and had to tell the truth.  While she may have attempted to soft pedal the matter, she ended up admitting that she had used racially charged language in the workplace.  The reason why its become a matter of public speculation is that a copy of Ms. Deen's deposition testimony was filed with the court, making it a matter of the public record.

This means that anyone can see exactly what Paula Deen said.  The evidence is pretty damning.  This isn't a case of Ms. Deen merely telling a racist joke,  or slipping up and falling back into the phrases she may have heard as a child growing up in the South (I've heard that used as an excuse often by older white folks to justify their continued entrenchment in a segregated mind set.  "Back in my day, we used that word all the time, and nobody thought nuthin' of it").  Paula Deen wasn't just expressing her opinion, or exercising her first amendment rights.  She was using this offensive language in the context of managing her employees.  In the context of conducting business.  And while it could be argued that the degree of her offense might not be as great as public opinion finds, there is one inescapable conclusion.  She admits to doing it, under oath.

I advise my business clients to be so careful about these things.  Not just intend to do right, but establish well written, easy to understand employment policies that express not just that such behavior will not be tolerated, but that those who do not comply will be disciplined or terminated. That violations will be promptly investigated and decidedly dealt with.  I advise them to send a message to their employees that management will protect not just their livelihood, but their dignity.  They need to establish a workplace atmosphere that will remain as free from this kind of hostility as possible.

Paula Deen is accused of much more than just blithely dropping the "N" word on occasion.  She is charged with fostering an atmosphere of racial discrimination against African Americans in her place of business.  The context of the situation cannot be minimized.  She now watches her livelihood slip away from her not because she was a bad person or "politically incorrect."  She was (allegedly) a poor manager, allowing unacceptable social concepts to control the business environment under her authority.

The lesson employers and managers can take away from Paula Deen is that the lack of solid employment policy making and our own insensitivity to our employees can lead to ruin.  Many of my business clients with employees want me to help them to head off employee charges and lawsuits, and then, when charges are filed, to help dispose of them or win.  But Paula Deen's situation shows that there is so much more at stake than a lawsuit.  She may eventually lose everything she has over this.  Even before the pre-trial conference is held.

And that should make Employers and Managers pause, and ponder these concepts.

CLIENTS NEED MORE THAN LEGAL ADVICE REGARDING CONTRACTS

It was one of the most frustrating concepts I regularly dealt with when I worked as an in-house counsel.

One of my duties was "contract review."  The legal oversight of all the contractual relationships for the company where I worked.  It became a daunting task.  I was expected to review and approve the language in almost every contract the organization entered.  With almost a dozen health care and housing sites to manage, and several subsidiary service companies, this became hugely time consuming.  So I taught the managers of the company how to do a basic review of all the basic vendor contracts they entered into, and what to watch for.

But the biggest problem I often encountered -- and still do with my clients who ask me to review clients today -- is that the folks who ask me to review the contract presume that if I approve the language of a contract, then it must be alright to sign it.

But here's the rub.  While a legal analysis of any contract is extremely important, it has certain limitations.  There are many things a legal analysis simply does not address.  An attorney, by his own experience and expertise, has certain limitations.  A lawyer's review of a contract is not all inclusive. Therefore, there are certain things a client cannot assume even the most experienced attorneys can address (although some lawyers will have the experience to offer more).

For example, my review of your contract does not address the issue of common sense or good business judgment. In the decade and a half I spent as a corporate general counsel, there were numerous times where a manager was frustrated with the results of a business deal, and in working with me to try and fix the problem would say in exasperation, "but you approved this contract!"  Sure I did.  But I had no idea whether the business deal at the core of the contract was wise.  I didn't know the other party was a weasel.  I didn't know the market would change, or understood the pricing practices of that particular business sub-set, or that the equipment you bought at such a cut rate would break down.  Because of my experience in certain areas, I now can certainly advise a client when I suspect a business deal isn't a good idea.  But a strict "legal" analysis doesn't address this issue.

My review of your contract does not require that records or understanding must be complete. If I am not part of the negotiation that went into the contract, I won't know whether your understanding of the "deal" is actually reflected within the four corners of the document.  If you don't explain that to me, I won't know to look for it.

Any attorney's analysis of a contract will involve making judgments based on established principles of equity and legality. As an attorney, I am generally not a stakeholder in the process of constructing a contract.  My insight is much narrower.  I focus on making sure the contract follows established legal standards, and that the rights of my client under the terms of the contract can be enforced.  Some of my clients bring me closer into the inner workings of their business, but even then, there is a need for clarity regarding what my role will be and what the client expects.

A client often comes to me with a demand that I just do a "quick review" of this contract.  They want the comfort of knowing their lawyer giving them a "thumbs up" on a transaction, but they don't want to pay a lot for it.  "Don't spend a lot of time on this," they say.  I can give them my review of the legal boilerplate, and whether the basic concepts are covered (e.g. Is the contract as a whole enforceable? Are there particular clauses that are not enforceable? Does it comply with statutory or regulatory requirements? Are there any important provisions missing? Are the termination and remedy provisions clear and unambiguous?)  A lawyer experiences frustration when he or she feels that the business people are abdicating responsibility for making business judgments.  On the other hand, I understand when the client feels frustrated because they feel the lawyer won't give them an opinion that is more airtight -- they expect when their lawyer says "OK" everything will truly be "Ok."

I try and make these things clear to my clients -- that they understand the scope of my review of their contracts. But more and more, clients are expecting so much more.  While my 23 plus years of experience might help me to offer a more comprehensive review of a client's proposed business transaction, I cannot assure my clients that the contract they enter into will produce positive results.  I can help ensure compliance,  enforceability, remedy, and as painless a termination as can be negotiated.  But I also must make sure my clients understand the limits of my role, and work towards being as much of a help as I possibly can. 

Sometimes the best advice I can offer a client is to ask them to make sure the "deal" is everything they think it is.  In the Bible, in Luke 14:28, Jesus offers this advice, “Suppose one of you wants to build a tower. Won’t you first sit down and estimate the cost to see if you have enough money to complete it?"  Even the Lord advises us to ultimately consider common sense and good business judgment.  That should be the first consideration before entering into a contract.  A legal analysis won't often sniff out a bad business decision.

INDIANA BUDGET DEAL MEANS INCOME TAX CUTS AND ELIMINATION OF INHERITANCE TAX!

Big news for my Indiana clients!

Indiana Gov. Mike Pence and legislative leaders reached a budget deal Thursday that will cut the state’s personal income tax rate by 5 percent over the next four years while giving small increases to school funding.

The tax-cut plan would reduce the state’s current 3.4 percent tax rate to 3.3 percent in 2015 and then reduce that to 3.23 percent in 2017.

Pence issued a statement calling the cut “a great victory” for taxpayers even though it is half of what he proposed and is phased in over a much longer period.

Republican legislative leaders had resisted Pence’s push for a 10 percent tax cut to be fully implemented by July 2014. The House approved a budget plan in February without an income tax cut and the Senate this month had backed just a 3 percent cut.

Republican House Speaker Brian Bosma said his priorities had always been that the state’s budget be strong enough to avoid big spending cuts or the need for tax increases in the future.

“We believe this blend is the right blend, it’s at the right amount, it’s at the right time to be sustainable for the future,” Bosma said.

The Republican-dominated House and Senate are both expected to vote on the two-year budget plan on Friday, which is expected to be the final day of this year’s legislative session.

The proposed budget also calls for repealing the state’s inheritance tax retroactive to Jan. 1 of this year, which will reduce state revenue by about $150 million. Legislators last year had approved a 10-year phase out of that tax.

The spending plan gives 2 percent and 1 percent increases for school funding over the next two years, for about a $330 million hike.

Democrats have criticized the school funding increase as inadequate after former Gov. Mitch Daniels cut some $300 million from school spending during the recession.

The budget plan would also increase state funding for road and bridge projects by $215 million a year.

Pence said in his statement that the tax cuts put the state’s taxpayers first.

“The combination of a 5 percent individual income tax cut, inheritance tax repeal and additional tax relief for businesses is the right tax relief at the right time and will give a much needed boost to working families, small businesses and family farms,” Pence said.

(Taken from story published in the Louisville Courier-Journal on April 25, 2013; Written by Tom LoBianco and Tom Davies)

New FMLA Regulations: Employers need to know!

On February 5, 2013, twenty years to the day after the Family and Medical Leave Act (FMLA) was signed into law, the U.S. Department of Labor (DOL) issued a revised Final Rule implementing recent expansions to the FMLA, effective March 8, 2013. This Final Rule expanded FMLA protection for military families, airline personnel and flight crews, and also requires covered employers to update their FMLA posters and policies. In addition, the Final Rule also implements clarifying changes for the calculation of intermittent and reduced schedule leave.

If your business has employees who have military personnel in their families, the Final Rule implements the following changes regarding Military Leave: 

• Extends the availability of FMLA leave to family members of members of the National Guard, Reserves, and the Regular Armed Forces for qualifying exigencies arising out of the servicemembers’ deployment
• Adds a qualified exigency leave category for parental care leave, allowing an employee to take leave to care for a military member’s parent who is incapable of self-care when the care is needed due to the servicemember’s covered active duty
• Increases the amount of time an eligible family member can take for Rest and Recuperation from five days to a maximum of 15 calendar days to spend with a military member on rest and recuperation leave orders
• Extends FMLA military caregiver leave for family members of current servicemembers to include an injury or illness that existed prior to service and was aggravated in the line of duty
• Extends FMLA military caregiver leave to family members of certain veterans with serious injuries or illnesses
• Provides that periods of absence from work by qualifying military members which are due to USERRA-covered service is counted in determining an employee’s eligibility for FMLA leave

The Final rule clarifies how Covered Employers calculate intermittent and "Reduced Schedule" Leave:

• Clarifies that an employer may not require an employee to take more leave than necessary
• Clarifies that FMLA leave may only be counted against an employee’s FMLA entitlement for leave actually taken and not for time that is worked
• Clarifies that an employer must track FMLA leave using smallest increment of time used for other forms of leave with a one hour maximum
• Clarifies that the physical impossibility exception is to be applied only in the most limited circumstances, and the employer has the responsibility to restore the employee to the same or equivalent position as soon as possible 

The Final Rule contemplates that all employers must post revised FMLA posters to reflect these new regulations, effective March 8, 2013. The updated poster can be found here.  Its also a good idea to update  your FMLA forms.  Our firm can certainly assist here, but you can see the DOL's suggested form updates here. We can also help Employers revise their policies and procedures to help comply with the updated FMLA regulations. 
 

The DOL also offers a most helpful side-by-side comparison chart to help Employers understand the changes in the Final Rule here.

Our Office has relocated . . . again!!

Yes, for those who are paying attention, John R. Russell, Ltd. wants to make it clear.  Our office has relocated to the South Holland Professional Center at 15525 South Park Avenue, Suite 104, South Holland, Illinois 60473.  I am sharing office space with veteran attorney Thomas Gilley, and I am looking forward to the new opportunities my new location will offer.  Please come and visit. 

Secession . . . Seriously???

I have to take a time out and comment on the latest internet based political argument.  Supposedly, up to thirty states now have some sort of internal call for secession from the Unite States.  This is not some official act by any of these states’ governments, but citizens signing petitions on the internet, asking that their state (i.e. Texas) to secede from the United States, just like the Confederacy attempted in the 1860s.  

I’ll speak to some specifics about this in a moment.  But are we really serious about this?  Look, republicans/conservatives lost the election.  A close election (by popular vote, anyway) mind you, but those of us who aspire to conservative values lost the election.  So are we going to take our ball and go home?  How mature!  There are plenty of real, practical ways to work towards getting the nation back on track.  The concept of secession is absurd.  

Why won’t secession work? 

It’s illegal.  It’s unconstitutional.  Our Constitution replaced the Articles of Confederation, which was basically a loose-fitting regime of sovereign states involved in multilateral negotiations with each other.  The Constitution replaced that with something much better – the democratic rule of law.  Every State in the Union has ratified the Constitution. This means the Constitution is “the supreme law of the land.”  This is clearly present in the ratification debates which led to the adoption of the original Constitution.  Its’ clear in the preamble’s reference to a “more perfect union.”  Our founding fathers never considered an “exit option.”  The Constitution is not an “at will” contract.  It is, by definition and the will of the people of every State in this nation, the “law of the land.”  Instead of each sovereign State being able to engage in multilateral negotiations, the Constitution sets in place national democratic institutions with authoritative dispute resolution by the federal courts.  This was the concept the southern states failed to recognize in 1860. The US Supreme Court, in interpreting contractual disputes involving the Confederate government during the Civil War, settled on the concept that such contracts were void because the Confederate government never had a right to exist.  Not because they lost the war, but because as a matter of law, there is no authorization to secede. Those who clamor for secession today also refuse to see this fundamental and foundational concept. 

Does anyone honestly think there is unanimity of purpose in any single state for secession?  I’d be willing to wager my annual income that no one could find even 75% unanimity for one side of the political spectrum on their own city block, let alone across an entire state.  We are a nation divided, indeed, but not based on geography.  The threat of secession doesn’t make any sense at all.  

Is anyone clamoring for the secession of states like Indiana or Nebraska thinking of the practical implications?  What happens to all the federal property within these states?  (Property paid for by the collective tax support of all 50 states).  Will Indiana reimburse the federal government for the unwarranted taking of this property?  And what about access to services, communication, travel etc. provided by the federal government or other states that choose to remain in the Union?  Will Indiana be able to access the drinking water from Lake Michigan? Will they pay the federal government for such access?  What about currency, or a monetary system?  What about mail delivery?  What happens when the corporation you work for, which has its headquarters in a state that stays loyal to the union, pulls out after secession?  What happens when airlines simply refuse to serve seceding states? What if the seceding states are blockaded, like during the Civil War?  How soon after secession will there be food on grocery store shelves, or consumer goods, or gasoline for your cars?  What happens when the federal government closes the interstate highway systems leading into the seceding states?  Our states are so intertwined with each other and the federal government, to even attempt to secede would be like cutting your midsection out, and expecting your legs to continue to function. 

Finally, the most compelling argument against secession is the federal “gravy train.”  Will any state, and its inhabitants, simply agree to forego all of the federal benefits and programs they currently enjoy?  The Federal Government currently spends about 3.8 trillion dollars every year.  The collective spending of the 50 states amounts to about 1.6 trillion.  The 50 states collectively spend about a half trillion on health care.  The federal government spends 1 trillion on health care alone.  Twice as much.  Will the individual states simply agree to forego these benefits for their citizens? What about all the internal state improvements funded by federal dollars?  Federal support of education?  What about pensions funded by federal funds?  How will each of these states raise armies?  Where will the money come from?  Especially in a state like Illinois, which is basically bankrupt to begin with. 

Secession didn’t work in 1860.  It won’t work now.  Its stupid, foolish speculation.  It only serves to allow those on the political left to paint all conservatives as stereotypes -- “right wing wack jobs.” Let’s find solutions that work, instead of this craziness.  Let’s pray for the electorate to wake up and realize the wrong path we’re going down.  Let’s be sensible and credible. 

Sending Your Kids to College . . . Are they Protected?

It’s that time of year – the end of August.  If you are the parent of a college student, you’ve either already moved them into their dorm rooms or apartments, or will be doing so by the end of next week.  The move to college takes a lot of planning – your college student has had to make sure they have what they need – clothes, school supplies, bedding, computer, refrigerator, etc. You’ve probably helped them make sure they have everything they need to be ready for the upcoming semester.  But have you thought of everything?  What would happen if your child became ill or was injured, and you needed to contact them?  What if the worst happened and your student was missing? How would you get the information you need to help them, or to find them?  

  

The problems I have just mentioned are exacerbated by the fact that most freshmen in college either are, or will become 18 years old.  In other words, they are legally an “adult.” Therefore, if you as a parent are to have the authority or ability to get the information you need to help your child in need, your 18 year old child needs to give you the legal authority to act on their behalf should they become disabled and unable to communicate.  Why?  Because health care providers and the colleges your child attends consider your child an adult when it comes to decisions relating to health care and school records.  Add to this the ramifications of the Health Insurance Portability and Accountability Act (known by its infamous acronym “HIPAA”), and health care providers become loathe to disclose any information about your son or daughter. 

This shouldn’t happen.  The HIPAA privacy regulations offer exceptions which give health care providers some “common sense” discretion to disclose “personal health information” to “a family member, other relative, or a close personal friend.” (45 CFR 164.510(b)). This rule goes on to specifically allow a provider to use its professional judgment and experience with common practice in deciding whether and what to tell such persons. 

But many providers overreact, and interpret HIPAA’s privacy protections as an absolute barrier to all disclosure.  This leads to absurd results. For example, a client told me about a college sophomore who traveled to an “away game” for the school’s hockey team.  This young lady was somehow injured at the game, and transported by ambulance to a local hospital.  The student’s parents were notified that their daughter had been hospitalized, but no one was willing to disclose where she had been taken, or the extent of her injuries.  Those parents spent a sleepless night worrying until their daughter contacted them the next morning, fortunately not seriously injured.

How can parents avoid this?  By having their college aged children execute a durable power of attorney (or “POA” for short).  This is a legal document that permits the child to appoint a parent (or other person) as agent to carry out certain functions and make decisions in their place. It is a simple form that is “fill in the blanks” and signed – no court order or other action is needed (though I do recommend consulting an attorney -- the instructions in the body of the document should be tailored for the specific situation).  Under Illinois law, a Durable Power of Attorney for Health Care permits your child to appoint you or your spouse as an agent while expressing their per­sonal wishes about health care decisions in the event they become incapacitated. In addition, I recommend executing a Durable Power of Attorney for Property to cover issues relating to school records (e.g. in the event of an emergency when the child is unavailable or missing, the school clearly understands the child’s intent to allow information to be given to his/her parents). Besides HIPAA, there is another federal statute known as FERPA (the "Family Educational Rights and Privacy Act"), which protects the privacy of student education records.  Most colleges are proactive in providing students with FERPA waiver forms to allow parents access to school records, but careful drafting of the POA for Property can expressly give parents access to any school records or be able to talk to any professor or other college employee in order to get critical information about your child.  

Some students might balk at the idea of their parents having access to their records, but these documents can be personalized to only allow such access in the event of an emergency.  I have personally assured my own college aged children of this limitation, and have respected those boundaries. But the usefulness of this kind of planning can go beyond emergencies. For example, if a student has a chronic health problem or a disability, the parent, as an agent under a POA, can be more involved with on-campus health services and the student’s instructors to monitor progress. 

While the exceptions to the HIPAA privacy regulations should allow parents to receive critical information about the medical treatment of their adult college-aged children, a properly worded and executed power attorney gives parents the specific, direct authority to overcome the misinterpretation of privacy rules. I recommend that parents of college aged children arrange to have their kids execute the appropriate powers of attorney as they begin school in the fall, and have copies filed with the appropriate authorities and health care providers on campus.  Then, they can head off situations like the one I described, and be assured that whatever happens, they will be “in the know” regarding their child’s status while away at college.