Oregon Court of Appeals supports broad protection of "mediation communications"

By Lori Irish Bauman
July 27, 2015

The Oregon Court of Appeals last week reinforced the broad scope of Oregon's law stating that "mediation communications" are inadmissible in subsequent proceedings.

In Yoshida's Inc. v. Dunn Carney Allen Higgins & Tongue, the issue was whether emails related to a mediation could be admitted into evidence in a separate legal malpractice case.  The client in the malpractice case contended that the defendant lawyer had failed to provide a timely notice to terminate an equipment and software lease, resulting in an automatic renewal of the lease.  The client hired a different lawyer to resolve the matter with the lessor, and in a mediation the client agreed to pay a sum of money to terminate the lease and purchase the equipment and software from the lessor.  In the trial of the subsequent malpractice case, the trial court admitted into evidence emails associated with the mediation.  Defendant lawyer contended that the emails showed that the client suffered no damages as a result of the alleged negligence.  A jury entered a verdict in favor of the defendant lawyer.

The Court of Appeals held that it was reversible error to admit the emails.  ORS 36.222 states that "mediation communications" -- meaning all communications make in the course of or in connection with a mediation -- are not admissible in any subsequent proceeding, and on that basis the trial court had erred.

Department of Labor issues guidance on classifying employees and independent contractors

By Leslie Bottomly
July 15, 2015

Today the U.S. Department of Labor issued an Administrator’s Interpretation of the Fair Labor Standards Act, offering guidance on whether a worker should be classified as an employee or an independent contractor. The Administrator’s Interpretation signals the DOL’s desire to expand the reach of the FLSA to protect the largest possible group of workers. It rejects the common law “control test,” which analyzes whether a worker is an employee based on the employer’s control over the worker.  Instead, it focuses on a broad “suffer or permit” standard.

According to the DOL, an entity ‘suffers or permits’ an individual to work if, as a matter of economic reality, the individual is dependent on the entity, as determined by a multi-factor “economic realities” test. The factors typically include: (A) the extent to which the work performed is an integral part of the employer’s business; (B) the worker’s opportunity for profit or loss depending on his or her managerial skill; (C) the extent of the relative investments of the employer and the worker; (D) whether the work performed requires special skills and initiative; (E) the permanency of the relationship; and (F) the degree of control exercised or retained by the employer.  While the Interpretation is not binding, the courts will generally defer to an agency's view of the law so long as it is not clearly erroneous.

Contact Ater Wynne's employment practice group for assistance in applying the DOL Interpretation to the circumstances of your business. 


Oregon Court of Appeals recognizes novel basis for wrongful discharge claim

By Lori Irish Bauman
July 14, 2015

While an at-will employee may generally be discharged for any reason, a discharge may be deemed wrongful -- and will form the basis of a common law wrongful discharge claim -- if it occurred because the employee fulfilled some important public duty.  Last month the Oregon Court of Appeals expanded the important-public-duty exception, holding that a domestic employee who is fired for reporting that the employer had committed a crime involving child abuse has a wrongful discharge claim.

In McManus v. Auchincloss, plaintiff was a domestic employee who reported to the police that defendant, his employer, possessed child pornography.  Defendant allegedly fired plaintiff in retaliation for the police report, and plaintiff sued for wrongful discharge.  The trial court dismissed, holding that the facts did not support a common law wrongful termination claim.  While a state statute prohibits an employer from terminating an employee in retaliation for making a good faith report of criminal activity, that statute expressly does not protect domestic employees.  Because the legislature omitted domestic employees from the statute, the trial court held that plaintiff had no common law claim based on performing an important public duty. 

On review, the Court of Appeals reversed.  The court noted that the legislature has expressed a general public policy in favor of protecting employees who report criminal activity.  That policy supports a common law claim by the plaintiff in this case, even though he was not protected by the express language of the legislation. 

Supreme Court reaffirms rule prohibiting royalties for expired patents

By Dan Larsen
June 24, 2015

Nearly 50 years ago, the United States Supreme Court held in Brulotte v. Thys Co. that a patent holder may not collect royalty payments from a licensee after the date on which the patent expires. Since that time, the so-called Brulotte rule has survived despite criticism and attacks by lower federal courts.   

In 2013, the Ninth Circuit begrudgingly applied the Brulotte rule in Kimble v. Marvel Enterprises, Inc., to void an agreement between a patent holder and Marvel. In that case, the court held that the agreement was unlawful because it required Marvel to pay royalties for patents and other know-how without a reduction in price after expiration of the patent.  According to the court, "a license for inseparable patent and non-patent rights involving royalty payments that extends beyond a patent term is unenforceable for the post-expiration period unless the agreement provides a discount for the non-patent rights from the patent-protected rate."  However, at the same, the court complained that the Brulotte rule is "counterintuitive" and "its rationale is arguably unconvincing." 

The Supreme Court then granted review, and on Tuesday the Court affirmed, declining to abrogate a half century of case law.  Accordingly, Brulotte is alive and well, and patent holders may not receive royalties for patent rights that have expired.  When licensing hybrid intellectual property rights, such as a combination of patent rights and trade secrets or know-how, the parties must agree to a reduction of royalty payments at the end of the patent term.

Caitlyn Jenner, Formerly Bruce Jenner, Spotlights Transgender Issues

By Leslie Bottomly
June 8, 2015

Given the awkward questions, gossip, and perhaps outright discrimination that may occur when an individual comes out as transgender on the job, it would be understandable if an individual decided to resign rather than continue working through the transition.  

With Caitlyn Jenner's public announcement that she is transgender, it is possible employees will be more comfortable transitioning without changing jobs. This means employers may increasingly grapple with how to accommodate an employee undergoing a transition. In some workplaces, the issues may not be particularly sticky. In others, such as workplaces in which the employees and/or customers are conservative, or in which many different cultures and religions are represented, where employees wear sex-specific uniforms, where employees share locker rooms, and where the employee bathrooms contain multiple semi-private stalls, the issues will be more numerous and more difficult.

In Oregon, transgender employees are protected from discrimination in employment. Specifically, employers cannot discriminate based on sexual orientation. Sexual orientation is defined as including gender expression (meaning the manner in which an individual's gender identity is expressed, including, but not limited to, through dress, appearance, manner, or speech, whether or not that expression is different from that traditionally associated with the individual's assigned sex at birth) and gender identity (meaning an individual's gender-related identity, whether or not that identity is different from that traditionally associated with the individual's assigned sex at birth, including, but not limited to, a gender identity that is transgender or androgynous). ORS 659A.030; OAR 839-005-0003.

One of the most sensitive issues arises with bathroom use. In Oregon, it's pretty clear. Individuals must be allowed to use the bathroom consistent with their expressed gender.  OAR 839-005-0003. At times, transgender employees would prefer to make other arrangements (such as using  a private bathroom (assuming one is available) for a period of time). Employers may enforce valid dress codes provided they make reasonable accommodation of an individual based on the health and safety needs on a case by case basis. It seems likely that the Oregon Bureau of Labor & Industries will require an employer to allow a transgender employee to wear the uniform consistent with the gender they are presenting.

There are many resources available on the internet to assist employers and employees in the process of accommodating a transgender employee.

Typically these resources recommend a meeting or two with the individual to come up with a  plan of communication with co-workers and a date to announce the change. The employer may need to conduct training on diversity issues, including transgender transition, in order to proactively address concerns that may arise. Foreign language translators may be needed to convey complex issues.

It is advisable as part of this training to address some of the most common questions co-workers and manager may have, such as "What if I call him/her by the incorrect pronoun?" (It's understandable if it happens a few times - but not if it becomes routine. It's appropriate to apologize on-the-spot for doing it automatically out of habit). "My religion sees this as a sin, I cannot condone it" (what you believe in is up to you - we focus on behaviors in the workplace). "What if a customer makes a rude comment"? (Make note of the interaction and let your manager know immediately. We cannot allow customers to create a hostile environment).  "Is he or she undergoing sex reassignment surgery" (Sorry, as with any other medical issue, that is private). Stressing that joking and teasing are not tolerated is particularly important. Of course, checking in with the transgender employee from time to time is also helpful.

The Federal Government's own guide on accommodating an employee's transition is an example available to employers approaching this question for the first time.  View the guide here.

Some employers have been accommodating transgender employees in the workplace for years. Others are more recently being asked to help an employee stay on the job through this important life transition. Employers that are new to this process should seek out educational materials, consultants, and of course, their legal counsel, to ensure compliant and positive transition for all.

This blog post has been prepared for clients and friends of Ater Wynne LLP and should not be relied upon as legal advice. For more information please contact Leslie Bottomly, Partner, Ater Wynne Labor and Employment Group.  

1 The issue of whether transgender individuals qualify as "disabled" for purposes of accommodation under the Americans with Disabilities Act and the similar Oregon disability law, and issues pertaining to insurance coverage for medical treatment associated with sex reassignment are complex and beyond the scope of this article.

Oregon Court of Appeals rejects product line exception to successor liability

By Lori Irish Bauman
May 17, 2015

If the manufacturer of a defective product sells its assets and goes out of business, can a party injured by the product sue the purchaser of the assets on a products liability theory?  The general rule of successor liability is that purchaser is not liable for the debts and liabilities of the transferor, unless (1) the purchaser agreed to assume the liabilities, (2) the transaction amounts to a consolidation or merger, (3) the purchaser is a mere continuation of the seller, or (4) the transaction was entered into fraudulently to escape liability.

In Gonzalez v. Standard Tools and Equipment Co., the plaintiff sought to add a fifth exception to the no-liability rule, called the "product line" exception.  Courts in other states have adopted that exception, holding that, where a successor company continues to produce the same type of product as the original company, the successor assumes tort liability for defects in units from the same product line.  The Court of Appeals last month rejected plaintiff's argument, declining to add a new exception to the "long-established rule" of successor liability.

Enforcement of voidable noncompete is not tortious, Oregon Court of Appeals holds

By Dan Larsen
May 14, 2015

Under Oregon law, a noncompetition agreement is "voidable," as opposed to void, if the employer fails to give notice two weeks before an employee starts work that the agreement is a condition of employment.   In Bernard v. S.B., Inc., the Oregon Court of Appeals last week examined whether a demand letter based on a voidable noncompetition agreement constitutes tortious interference with economic relations. 

In Bernard, plaintiff's former employer sent the noncompetition agreement to plaintiff's new employer with a demand that plaintiff stop working.  Plaintiff sued the former employer for tortious interference, contending that because the noncompetition agreement was voidable, the former employer acted tortiously when it attempted to invoke the agreement.  The Court held that the agreement was in fact valid at the time the employer attempted to enforce it because plaintiff took no steps to void it.  Invoking the express terms of a valid contract cannot constitute tortious interference, and as a result the Court concluded that the employer was not liable in tort for sending the demand letter.

Arbitrator may order remedies beyond the agreed scope of arbitration

By Lori Irish Bauman
April 27, 2015

If parties involved in an arbitration agree to resolve only the issue of liability, may the arbitrator issue an order determining not only liability but the appropriate remedies as well?  According to the Oregon Court of Appeals, the answer is yes, as long as the parties don't waive the statute that gives the arbitrator broad authority to order remedies.

In Couch Investments, LLC v. Peverieri, a landlord and tenant submitted to an arbitrator a dispute regarding allocation of responsibility for the cost of improvements to the property.  The agreement to arbitrate stated that liability was "the only issue to be resolved."  Notwithstanding the agreement, the arbitrator decided liability and also issued an order setting out a process for completion of the improvements. The landlord objected that the remedies were outside of the parties' agreement. 

ORS 36.695(3) states that "an arbitrator may order such remedies as the arbitrator considers just and appropriate under the circumstances."  According to the Court of Appeals, that statute acts as a default to grant arbitrators broad authority to order remedies.  If the parties do not express an intent to waive the statute, the arbitrator may properly order remedies.  Accordingly, the Court of Appeals affirmed a judgment in the form of the arbitration award. 

What's the Fuss About Electronic Discovery?

By Anna Jeno
April 8, 2015

The decade-old Zubulake v. UBS case set off a seismic shift in electronic discovery that many lawyers and litigants still don't fully comprehend.  One lesson many have learned the hard way is that the electronic discovery rules and practices that have been developed post-Zubulake must be a regular part of every organization's document management plans.

Zubulake was a standard employment discrimination lawsuit in the U.S. District Court for the Southern District of New York that is now seen as a turning point in electronic discovery.  This article provides an excellent summary of Zubulake and its impact. 

Increasingly, courts are disinclined to tolerate a party's failure to work cooperatively to minimize the cost of eDiscovery, as this plaintiff painfully discovered.   

Give just a moment to consider your organization’s electronic document protocols. Processes should be in place long before any subpoena or request for records arrives.  When your organization is hit with a lawsuit, what is the plan for preserving, requesting, organizing and producing documents? 

The Litigation Technology Team at Ater Wynne manages electronic documents and eDiscovery for clients in litigation of all sizes, from small document collections with just one or two file types to large, complex sets involving terabytes of data, millions of documents, and dozens of file types.  We utilize protocols and best practices developed in-house and multiple eDiscovery software platforms, keeping document management practices up-to-date and satisfying the courts' requirements.

In matters of eDiscovery, an ounce of prevention is better than a pound of cure.  For more information about Ater Wynne’s Litigation Technology Team, contact Kara Lindsay, Chief Litigation Technology Specialist at kzl@aterwynne.com.

NLRB issues further guidance on employment policies

By Stacey Mark
March 22, 2015

On March 18, 2015, the General Counsel for the NLRB issued a new memo providing guidance on common employer rules and policies that run afoul of Section 7 of the National Labor Relations Act.  The memo is divided into two parts.  In the first, the NLRB compares rules it found lawful with those that are unlawful, and provides its reasoning for both conclusions. The section includes employer rules that are frequently at issue before the agency, addressing issues such as:

  • Confidentiality
  • Professionalism and harassment
  • Communication with the media
  • Restrictions on the use of company logos, copyrights, and trademarks
  • Prohibitions on photography and recording (including the possession and use of personal recording devices)
  • Restrictions on leaving work
  • Conflicts of interest

The second section of the memo addresses handbook rules from a recently settled unfair labor practice charge against Wendy's International LLC, which followed an initial determination by the NLRB that several of Wendy's handbook rules were unlawful.  

Consistently with prior GC memos, the differences between rules and policies the NLRB found lawful and unlawful were not always obvious, or even consistent with each other or past interpretations.   Nevertheless, the memo is worth reviewing as a summary of the NLRB's current thinking and should serve as a reminder to employers that, if they have not updated their handbooks in a while, this is a good time to do it.  

Employers that take such advice to heart should also keep in mind the NLRB's recent reversal of the longstanding precedent under which employers were permitted to ban employees from using the company's email system for non-business purposes.   In Purple Communications, Inc., decided December 11, 2014, the NLRB held that employers given access to the company's email system must be permitted to use the system for communications protected under Section 7 during non-working time, unless the employer can show that special circumstances exist (most will not be able to make the required showing).

You can review our previous coverage of NLRB actions on rules, policies, and settlement terms here and here and here.  You can also find more in depth coverage on our website, here (see part 7, Employer Confidentiality Policies Under Attack by Federal Agencies).