Recruiting, Hiring, and Retention

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This post was contributed by Stephanie Carfley, a Member in McNees Wallace & Nurick LLC’s Litigation and Injunction practice groups in Lancaster, Pennsylvania.

In a case of first impression for the appellate courts of this Commonwealth, the Pennsylvania Superior Court recently ruled in Socko v. Mid-Atlantic Systems of CPA, Inc. that language contained in an employment agreement entered into after commencement of employment, which indicated the parties’ "intent to be legally bound" was insufficient consideration to support a non-compete agreement. In reaching its decision, the Superior Court rejected the application of the Uniform Written Obligations Act ("UWOA"), which provides that a written agreement may not be avoided for lack of consideration if it contains language expressing the intent of the parties to be legally bound, in the context of an agreement containing a covenant not to compete. The Superior Court declined to follow the reasoning of a Pennsylvania federal court which previously had held that the UWOA applied to non-competition agreements and permitted enforcement of such agreements even in the absence of any additional consideration. In so holding, the Superior Court also clearly distinguished between the "valuable consideration" required to support a non-compete entered into after employment had commenced and the consideration that would support other types of contracts, i.e. continuation of at-will employment, contracts signed under seal and nominal consideration ($1.00).

The Superior Court’s ruling in Socko definitively resolves the issue of the insufficiency of "intent to be legally bound" language as consideration for a restrictive covenant agreement and offers employers and employees alike some clear guidance as to the "valuable consideration" required to uphold the validity of a non-compete entered into after the commencement of employment. Employers should keep this decision in mind when preparing non-compete agreements for current employees and when considering whether to hire an employee subject to a non-compete agreement.

This post was contributed by Eric N. Athey, Co-Chair of McNees Wallace & Nurick LLC’s Labor and Employment Law Practice Group. 

In Pennsylvania, a non-compete agreement (NCA) must be supported by legal "consideration" in order to be enforceable. If a newly hired employee signs a NCA at the time of hire as a condition of employment, the new job is the consideration for the agreement not to compete in the future. On the other hand, once an employee is already employed, his employer cannot foist an NCA on him and expect it to be enforceable unless new consideration is given (e.g. a special bonus, job protection, promotion, severance benefits, etc.). These basic principles are well established under Pennsylvania law.  But what happens if an employer presents a NCA to a new hire after he accepts a written job offer but before he actually starts work?  This scenario was recently addressed by the Supreme Court of Pennsylvania in Pulse Technologies, Inc. v. Notaro.

In Pulse Technologies, the company provided Mr. Notaro with a 2 ½-page offer letter that included a description of the job, salary, benefits, and start date. The letter also stated: "You will also be asked to sign our employment/confidentiality agreement. We will not be able to employ you if you fail to do so." The letter further explained that the employment agreement would contain "definitive terms and conditions" of employment. Mr. Notaro signed and returned his offer letter as instructed. On his first day of employment, he was provided with an "employment/confidentiality agreement" that contained a non-compete provision. Notaro read and signed the agreement without objection, understanding that it contained restrictions on his ability to compete in the future. Significantly, he signed the agreement before he began performing his new job.

Over four years later, Mr. Notaro left Pulse Technologies to take a managerial position with one of the company’s competitors.
 

Continue Reading You’ve Got the Job, Details Will Follow – Employment Offer Letters & Non-Compete Agreements

This post was contributed by Jennifer LaPorta Baker, Esq., an attorney in McNees Wallace & Nurick LLC’s Labor and Employment Law Practice Group and based in the Scranton, Pennsylvania office.

U.S. Citizenship and Immigration Services (USCIS) recently released the revised Employment Eligibility Verification Form I-9, which employers are required to use to verify the identity and employment authorization of newly hired employees. Starting May 7, 2013, employers must use the new Form I-9 (with a revision date of 03/08/13) to comply with their employment eligibility verification responsibilities. The new Form I-9 was first published by U.S. Immigration and Customs Enforcement (ICE) on March 8, 2013, and had been authorized for use, along with the previous Form. Now, use of the new Form I-9 will be mandatory.

An electronic version of the new Form I-9 is available on the USCIS website. USCIS has also released an updated Handbook for Employers (M-274) available here (pdf). A Spanish version of the new form is also available on the USCIS website for use in Puerto Rico only. Spanish-speaking employers and employees in the 50 states, Washington, DC, and other U.S. territories may use the Spanish version for reference, but must complete the English version of the form.

Employers using an electronic version of the Form I-9 should receive an updated product from their software providers. Those employers must transition electronically to the new Form I-9, or otherwise take steps to implement a compliant system for completing the new Form I-9, by May 7.

Employers who fail to use the new Form I-9 on and after May 7 may be subject to penalties issued by ICE and/or the Department of Justice.

Employers should conduct internal audits of immigration policies and protocols as necessary to assess and maintain legal compliance and reduce the significant risks and liabilities associated with non-compliance. Failure to maintain compliance may result in hefty fines and stiff penalties. Common employer violations include failure to obtain the correct employee documentation as required by federal law, as well as improperly completed I-9s. Remember, there is no “good faith” defense for I-9 paperwork violations. The best defense is to conduct annual self-audits and correct defective I-9 Forms before an aggressive government agency is at your door.

This blog post originally appeared in an Employer Alert published by McNees Wallace & Nurick LLC’s Labor and Employment Group in October 2012. The Employer Alert can be accessed here.

The newly created Consumer Financial Protection Bureau (“CFPB”) recently issued regulations that modify the notices required under the Fair Credit Reporting Act (“FCRA”). The new regulations include one change that is significant to employers who regularly obtain criminal background reports, credit history reports, and other background checks on their applicants and employees.

The CFPB’s regulations modify the “Summary of Consumer Rights under the FCRA.” The FCRA requires that employers provide this standard notice to applicants and employees when, among other things, a pre-adverse action notice is sent. The regulations require that employers begin using the new form on January 1, 2013; until then, employers should continue to use the old form.

The biggest change to the notice is that consumers are now directed to the CFPB to obtain information about their rights under the FCRA, rather than to the Federal Trade Commission. (The Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law by President Obama in 2010, transferred rulemaking authority over the FCRA to the CFPB.) The CFPB made similar changes to the notices that consumer reporting agencies are required to provide.

Model forms are available in the appendix to the FCRA regulations at 12 C.F.R. § 1022 and likely will be posted on the CFPB’s website, www.consumerfinance.gov, come the new year. The new form can also be downloaded here (.pdf).

In light of the significant changes to the regulatory framework surrounding the FCRA and the increasing concern about consumer privacy, we can expect that this will not be the CFPB’s last word on employee screening and background checks. We will keep you updated on additional changes to the FCRA in the future.

This post was contributed by Adam R. Long, a Member in McNees Wallace and Nurick LLC’s Labor and Employment Group and Osazee Imadojemu, a summer associate with McNees. Mr. Imadojemu will begin his third year of law school at George Washington School of Law in the fall, and he expects to earn his J.D. in May 2013.

Prior to a 2006 amendment to the Pennsylvania Child Protective Services Law ("CPSL"), employers covered by the CPSL’s mandatory pre-hire criminal background and child abuse history record check requirements were limited and well defined. Specifically, the statute applied to "all prospective employees of child-care services, prospective foster parents, prospective adoptive parents, prospective self-employed family day-care providers and other persons seeking to provide child-care services under contract with a child-care facility or program." Covered employers knew that before an employee was hired, that applicant needed to obtain these background checks.

With the 2006 amendment, the prospective employees covered under the statute expanded considerably. Section 6344.2 was added to the CPSL, and it required any employee hired into a position with a "significant likelihood of regular contact with children, in the form of care, guidance, supervision or training" to obtain a Pennsylvania Criminal History Check, a fingerprint-based national criminal history record check processed by the FBI, and a Pennsylvania Child Abuse History Record Check. This includes occupations such as such social service workers, hospital personnel, mental health professionals, members of the clergy, counselors, librarians and doctors.

Pennsylvania employers with positions covered by the 2006 amendment should ensure that they identify those positions within their organizations subject to the mandatory background check requirements and that they obtain the mandatory pre-hire background checks. Many employers currently are considering whether and to what extent to conduct pre-hire criminal background checks, and Pennsylvania employers should be aware of this little-known requirement.
 

Thanks to recent headlines about the increase in employers demanding social media passwords of employees and job applicants, employers have gotten a quick lesson on the increased the risks of this practice, especially if the employer neglects to have the proper policies and procedures in place.

For organizations who still insist on reviewing social media data to determine whether an applicant would be a good fit in their organization, they can start by appointing a social media screener not involved in the decision-making process. Also, the employer should implement a policy and procedure to identify who will be involved in the decision, what data will be collected, when it will be collected and from what sites, and how the data will be communicated to the hiring manager.

http://www.jdsupra.com/videoembed/?fid=40eef8f6-dbfe-4285-8db4-cf84ae9c4ebc

This video is also posted on www.JDSupra.com.

There has been a lot of backlash against the practice of employers asking potential employees for their Facebook password. So much so that U.S. senators are calling on the EEOC and the U.S. Department of Justice to launch an investigation to determine whether this practice is lawful. Facebook is also weighing in and threatening legal action against employers who engage in this practice.

Employers can avoid the current controversy by using other less risky approaches to screen applicants. One such practice is to conduct a thorough background check that complies with the Fair Credit Reporting Act. Be sure to disclose the background check to the applicant, receive authorization in writing, and use the information the applicant directly provides to you to minimize legal liabilities and inaccurate results.

 

 

http://www.jdsupra.com/videoembed/?fid=05e7eb5d-d2a6-43a7-8617-8700f1156741

You can also view this video at www.jdsupra.com. 

This week, Philadelphia Mayor Michael Nutter signed the Fair Criminal Record Screening Standards Ordinance (the "Ordinance").  This “ban the box” legislation is designed to limit Philadelphia employers’ ability to request applicants’ criminal history information in the initial steps of the hiring process. 

  • Who is Covered?  The Ordinance covers any person, corporation, company, labor organization or association that employs 10 or more persons within the City of Philadelphia.        
     
  • What Inquiries Are Prohibited?  Employers cannot inquire (directly or indirectly) about an applicant’s criminal convictions at any time during the application process, before the first interview, or during the first interview.  Notably, an employer that does not conduct an interview is prohibited from making any inquiries or gathering any information regarding the applicant’s criminal convictions. 
     
  • What Inquiries Are Allowed?  The Ordinance does not prohibit employers from making hiring decisions based upon criminal conviction history; however, such inquiries must be delayed until a second interview (or as part of a post-conditional offer criminal history check).  Additionally, if an applicant voluntarily discloses his or her own criminal history during the application process or the first interview, the employer then is permitted to discuss the disclosed information. 
     
  • What is the Penalty for Violations?  Violations of the Ordinance can result in the assessment of a maximum civil penalty of $2,000 per violation.  

The Ordinance becomes effective on July 17, 2011.  If you are an employer with 10 or more employees within the City of Philadelphia, now is the time to review your application and interview materials to ensure compliance with the new Ordinance.  In addition, employers should remain aware of their obligations under Pennsylvania’s Criminal History Record Information Act, which permits consideration of felony and misdemeanor convictions only to the extent that they impact an individual’s suitability for the position in question.  The Act also requires employers to give a rejected applicant written notice that the criminal conviction was used in whole or in part as the basis for the employment decision.

The Internal Revenue Service ("IRS") recently released a revised Form 941, the Employer’s Quarterly Federal Tax Return, and related instructions to guide eligible employers in claiming the payroll tax exemption offered under the Hiring Incentives to Restore Employment ("HIRE") Act (H.R. 2847). The HIRE Act offers a tax exemption from having to pay the employer’s 6.2% share of social security tax on the wages paid to a qualified employee from March 19, 2010, through December 31, 2010. In order to receive this tax benefit for qualified new hires, employers must claim the exemption on their quarterly federal tax returns, beginning with the second quarter of 2010. The exemption applies to wages paid to qualified employees from March 19, 2010, through December 31, 2010.

President Barack Obama signed the HIRE Act into law on March 18, 2010. As detailed in our blog post, HIRE Act Provides Employers with Tax Incentives for Hiring and Retaining Qualified Employees, the HIRE Act amended the Internal Revenue Code to provide tax incentives for employers to hire unemployed workers. Specifically, the HIRE Act created two new tax benefits for eligible employers: the aforementioned payroll tax exemption for certain new hires, and a tax credit for retaining the qualified new hires. The IRS previously released a sample affidavit form, which employers’ qualified hires must complete as part of the qualification process for the tax exemption. The newly-released Form 941 will allow qualifying employers to claim the HIRE Act tax exemption on their Quarterly Tax Returns. Employers must claim the retention tax credit on their 2011 tax returns.

For additional information on the tax benefits offered under the HIRE Act, and related qualifications, visit the IRS’s website to read their Frequently Asked Questions regarding the HIRE Act tax benefits, or contact one of the attorneys in McNees Wallace and Nurick LLC’s Labor and Employment Practice Group. 

On March 18, 2010, President Barack Obama signed into law the Hiring Incentives to Restore Employment ("HIRE") Act (H.R. 2847).  The HIRE Act amends the Internal Revenue Code ("IRC") to provide certain tax incentives for employers to hire unemployed workers.  Specifically, the HIRE Act creates two new tax benefits for eligible employers: a payroll tax exemption for certain new hires, and a tax credit for retaining the qualified new hires. 

First, the HIRE Act provides eligible employers with a payroll tax exemption for qualified employees hired between February 3, 2010, and January 11, 2011.  This tax benefit is an exemption from having to pay the employer’s 6.2% share of social security tax on the wages paid to the qualified employee from March 19, 2010, through December 31, 2010.  Employers may claim this tax exemption on their quarterly tax returns, starting with the second quarter of 2010. 

Second, the HIRE Act also provides eligible employers with a business tax credit for each qualified employee that is retained for at least one year, or 52 consecutive weeks.  The employer may claim a credit of up to 6.2% of the wages paid to the retained employee over the one-year period, or a maximum of $1,000 per qualified employee, on its 2011 tax return. 

Continue Reading HIRE Act Provides Employers with Tax Incentives for Hiring and Retaining Qualified Employees