Labor: Spotting employment law concerns in “non-employment” statutes

Four recent regulations with profound effects for employers.

Issue spotting—the time-honored method of testing law students’ knowledge of the law by burying legal hazards in a hypothetical final exam question—remains a critical skill for in-house counsel seeking to guide clients through the maze of employment laws. Lately, that skill has been further tested by the passage of a raft of federal laws and regulations that, superficially, do not appear to affect the balance of employers’ rights and responsibilities; in fact, several do, in profound ways.

The Dodd-Frank Act

Enacted in July 2010 “to promote the financial stability of the United States,” the Dodd-Frank Act provides substantial protections for, and incentives to, employees in the financial services industry who provide government agencies with information about perceived securities law violations. Whistleblowers may now receive 10 percent to 30 percent of any sanctions imposed by the Securities and Exchange Commission (SEC), as well as a private right of action for any retaliation they contend they suffer as a result of their report.

Many critics contend these provisions substantially decrease employees’ incentive to report perceived irregularities internally, and that they will instead rush to the government first. The Act also bars mandatory arbitration and waivers of employee rights under Sarbanes-Oxley. Accordingly, in addition to revising arbitration and waiver language, employers would be well advised to restructure their responses to government inquiries to avoid learning the identity of whistleblowers, and it is recommended that they enhance internal reporting mechanisms to make them as attractive as possible to employees.

The Federal Trade Commission Act

Effective Dec. 1, 2009, the Federal Trade Commission (FTC) expanded its enforcement oversight to explicitly prohibit employees from posting endorsements of their employers’ goods or services on social media with the intent or effect of:

1. Failing to disclose their affiliation with the product

2. Making false or unsubstantiated claims about the product

As the FTC has announced its intent to place legal liability for such activity on the employer, companies are best advised to expressly prohibit their employees from engaging in such behavior.

The Fair Credit Reporting Act

As of July 21, 2011, employers that take adverse action against current or prospective employees based even in part on information contained in a consumer report will be obligated to disclose that information to the affected individual. For example, employers will now have to disclose an adversely impacted individual’s credit score and related information if such data is used in evaluating their candidacy. Given that the Equal Employment Opportunity Commission has signaled its intent to carefully scrutinize and litigate employers’ use of credit scores and criminal background searches given their disparate impact on minorities, employers are urged to carefully review their reliance on such data.

Export Administration Regulations

Since February 2011, employers have been required to certify that none of their foreign workers are given unlicensed access to certain classified technology or technical data, lest it be deemed an “export” to foreign nationals in violation of the International Traffic in Arms Regulations. Accordingly, prior to completing this certification form (Part 6 of Form I-129), human resources managers are advised to coordinate with technical or other managers to assess their compliance with this requirement.

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