Pennsylvania Labor and Employment Lawyer & Attorney : McNees Wallace & Nurick Law Firm : Human Resources, Workplace and Business Law : Harrisburg, Lancaster, Allentown, Lehigh

Lehman Brothers, a 158-year-old investment bank choked by the credit crisis and falling real estate values, filed for Chapter 11 protection in the biggest bankruptcy filing ever on Monday, putting its 25,000 employees worldwide on the unemployment lines or waiting for a selloff to another company. Chapter 11 bankruptcy filing allows a company to restructure its debt and contracts. The restructuring process has many impacts on employees including the following:

• All equity-based compensation may be worthless. Employee stock options, ESOP holdings, Stock Appreciation Rights and other compensation and incentives tied to the value of the company’s stock may have no value or minimal value once the company emerges from bankruptcy. Lehman Brothers employees owned a large share of the company through its ESOP.
• Company 401k matches made in company stock may also be worthless.  Employees can take a big hit to their retirement accounts when the company matches 401k contributions with its own stock.
• Employment and union contracts may be voidable.
• Employees may lose their jobs through downsizing and reorganization of the company.
• Remaining employees may be poached by competitors or leave because of the uncertainty created by the bankruptcy.

Given the uncertainty created by a bankruptcy filing, Human Resources must communicate with employees concerning their future with the company. Matthew Angello is Founder and Principal at Bright Tree Consulting Group (www.brighttreecg.com) a leadership coaching and consulting company located in Lancaster, PA.   Matt has a wealth of experience in the strategic importance of communication and his commentary is as follows:

Having experienced leading an organization through Chapter 11 when I was the head of HR for Armstrong World Industries, I can personally attest to the power of regular and strategic communication with employees. In my current practice, I coach CEOs and other senior executives of the importance of communication, even to the extent that I call them the CCO (Chief Communication Officer).

In bankruptcy, the communication “ante is upped” by an order of magnitude. Even in normal business conditions, an information vacuum leads employees to “fill in the blanks” regarding the direction and vitality of the business, leading to loss of focus and compromised results. In bankruptcy, because the stakes are so high, information voids take on a more insidious nature as the workforce becomes fixated on the “rumor du jour” as opposed to those activities that are necessary to drive results (and ultimately facilitate the best outcome for all stakeholders).

Like any other successful aspect of the business, communication (especially during bankruptcy) must be strategic, planned, targeted and implemented. Informal channels cannot be relied upon during bankruptcy because the specific and technical content of the communication is vitally important. Put a plan together that includes regular written updates to employees, postings on the company intra-net (if you have one), and most importantly, regular briefings from the CEO (face to face or video presentations). The strategic communication plan should govern the frequency of the various forms of communication. I strongly advise that no more than a one-month interval between formal written communication and three months between all employee meetings. Even if there is little “new news” to report, these tools will be highly effective at blunting the “mis-information superhighway” that is prone to develop in a company in financial distress.

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 Many organizations take great pride in their employment practices striving to keep them free from employment discrimination. For such companies, a discrimination charge or lawsuit strikes at the very core of the organization’s values.  For example, AARP was recently sued for age discrimination by an employee who alleges she was passed over for promotions, laid off, and never recalled despite openings. The irony of such claims plays well in the media, but shouldn’t derail the organization’s efforts if properly managed.

Organizations need to develop an approach to address high profile public relations matters in advance. The approach should coordinate internal and external communications among company officials, PR firms and attorneys and could include the following:

·         Immediate press release or comment to the media. You may only get one chance to blunt the media impact of a discrimination claim so having something more to say than “no comment”. Lawyers fear public comments about pending litigation because of the lack of control and the potential that statement may be used to impeach the company official who made them. Comments need not address the merits of the claims, but can reaffirm the organizations commitment to its core values. However, comments to the media should be handled by authorized employees and there should be a clear employment policy prohibiting other managers from speaking to the media about official company positions.

·         Internal communications to employees. Employees are sometimes forgotten in the rush to deal with external communications. Information about lawsuits should not be left to the rumor mill. Employers may be limited in what they can say about the facts, particularly if the litigant is still employed. However, at the very least, internal communications should include the fact of the suit, a denial of wrongdoing, and a reaffirmation of EEO policies.

·         Use of non-public forums for dispute resolution. The EEOC, state discrimination agencies and the courts have alternated dispute resolution mechanisms including mediation. ADR can be an effective, less costly and more private forum of resolving discrimination claims.

Obviously, public disclosure of a discrimination claim can hurt a company’s image. Managing internal and external communications with advanced planning can mitigate the adverse impact.

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The prevalence of e-mail and texting communications can aid an employer in its investigation of workplace misconduct; provided, the employer’s policy adequately preserves its right to access the data. However, overstepping rights to access e-mail and other electronic communication media can result in criminal prosecution under state and federal law.

Recent high profile firings of Philadelphia TV anchors highlight the role of electronic evidence in an employer’s investigations and the pitfalls of illegal access to private computer data, in this case by an employee. Fired TV newscaster Larry Mendte was charged July 21, 2008 with hacking into the e-mail of his younger co-anchor. Mendte was previously fired based on an independent investigation by CBS as he allegedly hacked into Lane’s e-mail account from work and home and then revealed information to news outlets about Lane’s legal troubles. Lane was fired in January by CBS after she was accused of assaulting a New York City Police Officer and other public gaffes which gained media attention. Lane since sued KYW-TV, claiming that the station exploited her, tore her down and defamed her on her way out the door. She also claims that KYW management failed to investigate leaks of personal information about her and also engaged in a pattern of "deep-seated gender-discriminatory animus" toward her and other female employees.  Undoubtedly, CBS's investigation into the circumstances of both firings will be the critical issues in subsequent lawsuits.

Federal and State laws protect employers and employees from unauthorized access to computers, servers and electronic data. There may be additional limitations on an employer’s access to employee e-mails and text messages sent from employer accounts when the messages are stored on third party provider’s servers and are not stored on employer’s internal network. In Quon v. Arch Wireless Operating Co. Inc., a federal appeals court in California held that a public employer cannot access the content of text messages and e-mails sent at work because the data was stored on a third party service provider’s server and the employees had a reasonable expectation of privacy in these accounts. An employer’s e-mail policy may eliminate the expectation of privacy as to e-mails stored on its servers.  However, the text messages held by “remote computing service” are protected under the Stored Communications Act and cannot be obtained by an employer without the employee’s consent.

Employers must carefully draft policies related to employee use and access to all electronic media so as to preserve its property interest in the data, ensure rights to unfettered access and prevent misuse of the media and information.

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