Olympia Business Watch

Wash. Supreme Court Sides with Employees In Punitive Damages Case

One of the few areas where Washington law allows the imposition of punitive damages is in employment law, where an employer may be found liable for double damages and attorney's fees when he or she "wilfully and with with intent to deprive the employee of any part of his wages" fails to pay the employee all the wages he or she is due.  This law also one of the few areas that "pierces the corporate veil" in that corporate officers are personally (as opposed to corporately) liable for the damages.

So it's a big deal. And there has been some uncertainty over what the law means by a failure to pay wages that is "wilful" and "with intent to deprive."  Our Supreme Court has previously held that a struggling employer's financial inability to pay wages owed is no defense to a finding of willful withholding.

This morning, the Supreme Court extended that principle to hold that a legal inability to pay wages is also no defense.  In Morgan v. Kingen, the court held 6-3 that an employer's involuntary chapter 7 bankruptcy proceeding, in which its assets are under court supervision and it lacks any legal ability to pay wages, still counts as failing to pay wages "wilfully and with intent to deprive."

Oregon becomes first state to pass union "gag rule" bill

Oregon became the first state in the nation** to pass the national AFL-CIO's model "Worker Freedom Act," the gag rule bill known in Washington the last several sessions as the "Worker Privacy Act."  It purports to rebalance federal labor law in unions' favor by restricting employers' ability to effectively communicate with employees about labor issues during organizing and bargaining campaigns.  The Oregonian reports here, with statehouse coverage here.

The bill now heads to Governor Ted Kulongoski, who the Oregonian reports is expected to sign it.  After the Washington version of this proposal died last session, Governor Gregoire was quoted as saying she would have vetoed it had it passed.

With good reason.  If the measure is signed, expect a court fight.  One of the reasons it took national unions so long to find a state willing to pass the bill is its extremely dubious legality. Especially in light of the U.S. Supreme Court broadly striking down a similar California measure aimed at employer speech about unions, these proposals have been viewed as attempting to take away rights that employers clearly enjoy under federal labor law -- something states are pre-empted from doing.

** The Oregonian imprecisely implies Oregon joins New Jersey in passing this bill.  New Jersey passed a version in 2007 that did not include the provisions related to employer speech about unions.  No other state has passed this full version of the model "Worker Freedom Act" bill.

Mandatory Paid Sick Leave Ordinance Struck Down in Milwaukee

We have been following the national debate over a bill in Congress mandating employers provide paid sick days to employees, and noting implications of the debate for employers in Washington (most recently, here and here). 

Interestingly, while no state has passed such a requirement (Senator Karen Keiser, D-Des Moines, introduced a version in Washington in 2006 but it died in committee), three municipalities have adopted paid sick leave ordinances: San Francisco, Washington D.C., and Milwaukee. 

Milwaukee's ordinance, which was adopted by referendum last November, was struck down last Friday.  A Circuit Court judge declared the law invalidly enacted and unconstitutional in a challenge brought by the local chamber of commerce. 

Both legal defects stemmed from the insertion of mandatory time off for victims of domestic violence, sexual assault, or stalking, which the judge found to be neither reasonably referenced in the referendum's ballot title nor reasonably related to the underlying purpose of the ordinance.

The Milwaukee ordinance was somewhat unique in this regard.  The "Healthy Families Act" pending in Congress does not include a domestic violence provision.  And while Washington, in 2008, joined a relatively small handful of states requiring time off for victims of domestic violence, sexual assault, and stalking, there is no requirement that time be paid. 

Paid leave proponents in Milwaukee how vowed an appeal.  Whether the ruling stands, and has more than merely local signifcance to the overall debate about mandated paid leave, remains to be seen.

Putting Together a Social Media Policy

Jason Hagey posted this morning about some of the risks and rewards of business embracing social media, with some thoughts and recommendations derived from a seminar earlier this week by attorneys at AWB member law firm Perkins Coie in Seattle.  

Recommendation number one is "develop a social media policy and enforce it."  What should a social media policy say?

Here is one HR professional's take, writing at the social media wesbite Mashable.com: 10 Must Haves For Your Social Media Policy.  It includes as examples social media policies from a couple different companies.

Take a look.

Social media offers businesses potential profits - and pitfalls

Sure, your company is experimenting with social media.

But does it have a social media policy? And are you taking steps to minimize the potential public embarrassment -- and worse, legal liability -- that it could bring?

To help make sense of the social media phenomenon from a business perspective, three attorneys from the Seattle office of Perkins Coie law firm put on a seminar this week entitled “Critical Legal Questions for Companies Participating in Social Media.”

The program included practical suggestions for how to make the most of the various social media while still protecting your business.

 “Social media is changing the way we do business,” attorney Tom Bell said.

Among the suggestions:

Breastfeeding at Work?

From law firm Stoel Rives's World of Work law blog: US Senator Jeff Merkley, D-Oregon, has announced his sponsorship of the Breastfeeding Promotion Act (BPA) in the U.S. Senate, following introduction of a companion in the U.S. House yesterday.  The measure would amend the anti-discrimination provisions of the Civil Rights Act of 1964 to:

• protect breast-feeding in the workplace;
• provide tax incentives for employers that establish private lactation methods in the workplace;
• establish minimum safety standards for breast pumps;
• make breast feeding equipment tax deductible; and
• create time and privacy for working mothers to express milk.

Oregon May Be First to Pass Labor's "Gag Rule" Bill

Organized labor's top legislative priority the last couple years -- the inaptly titled and gratuitously unconstitutional "Worker Privacy Act" -- failed to move in Washington this session after examination of its legal and policy defects slowed it, and a bizarre e-mail scandal killed it.

But the misguided measure appears to have life across the southern border.  The Statesman Journal reports this morning that the Oregon Senate has passed a functionally identical version of the bill.  The vote sends it to the Oregon House, which has already passed the bill in a prior session. 

Under the guise of protecting employees from forced communication about matters of political or religious belief, the law is designed to restrict effective employer-employee communication during labor organizing and collective bargaining campaigns.  Federal labor law balances what unions and employers may do and say during organizing and bargaining. 

The purpose of this bill is to use state law (and the threat of an employment lawsuit and punitive damages) to tilt the balance in the union's favor by taking away the employer's right to call a meeting of its employees to express its views.  To paraphrase the U.S. Supreme Court, it would allow the unions to continue fighting freestyle while requiring the employer to follow the Marquis of Queensbury rules. 

If Oregon passes the measure and Governor Kulongoski signs it, it will be the first state in the country to have adopted the full version of this national AFL-CIO model bill.  Because of the bill's dubious legality, however, a legal challenge would be reasonably anticipated.

Washington Supreme Court Expands Retroactive Liability for Manufacturers, Sellers

In another pro-plaintiff holding in an important case for the business community, the Washington Supreme Court this morning released its decision in Lunsford v. Saberhagen Holdings, a products liability case involving asbestos exposure. 

The court held 9-0 that strict liability applies retroactively to all claims, even those occurring before the state actually adopted the rule of strict liability against manufacturers and sellers.  

In general, strict liability means a manufacturer or seller is liable for a defective or dangerous product even if it wasn't negligent in manufacturing or selling the product. 

Here, Lunsford's claim arose in 1958. Washington adopted strict products liability in 1969 against manufacturers, and 1975 against sellers. Today, the court held this half-century old claim will be governed by rules that didn't exist -- and couldn't be planned against -- at the time.

The US Chamber of Commerce, our national affiliate, filed a coalition friend of the court brief in the case arguing against retroactive application. The Chamber pointed out that retroactive application of strict liability would be inconsistent with the court's own recent rulings about retroactivity and particularly troubling for products liability defendants in the state.

Interestingly, last year, the Supreme Court of Ohio had a virtually identical case before it and reached the exact opposite result, which was left undisturbed on appeal to the US Supreme Court.  

State Supreme Court Again Makes Washington a Corporate Law Outlier

Self-consciously adopting a new rule from which the majority of other states are recoiling, the Washington Supreme Court this morning released its decision in In re F5 Networks, Inc., a case that sets an important legal standard for corporate litigation in Washington State. 

The issue involves the standard by which shareholders may commandeer control of a corporation to sue in its name in what is called a shareholder derivative lawsuit.  Such suits are a limited and disfavored exception to the rule that corporate governance is vested in the business judgment of officers and directors. Before taking the reins of a company in a lawsuit, must a shareholder first make demand of the corporation to take action itself, and then only proceed if the corporate leaders refuse the demand?  Or could shareholders excuse themselves from the requirement by claimint demand would be "futile"? Far from an esoteric journey through the business law textbook, the question has real consequences for current and potential Washington companies because shareholder derivative suits are very susceptible to a form of lawsuit abuse called the "strike suit."

House Passes Workers' Comp "Ex Parte" Bill

Last night just after midnight, the House of Representatives passed HB 1402, a measure opposed by the business community because it introduces more adversarial legal process into the state's workers' comp appeals system.  It is designed to prevent effective communication between employer representatives and claimant medical providers by channeling those contacts through the claimant's attorney. 

The bill passed 55-42, with a handful of Democrats crossing party lines to vote no.  the Department of Labor & Industries, which in past years has opposed the legislation, stayed on the sidelines this year, having brokered with the bills' proponents an exemption from the bill's more onerous features. 

The bill, if it passes the Senate and becomes law, is expected to add delay, and therefore cost and inefficiency, to the resolution of disputed workers' compensation claims.  It undoes a 1992 decision of the Washington Supreme Court, Holbrook v. Weyerhaeuser, in which the court, surveying the prior 80 years of workers' compensation law, observed "[t]he Legislature has determined that a free flow of information is necessary for the efficient and proper resolution of industrial insurance claims."  (Holbrook, 118 Wn.2d 306, 318).

Evidently, at the behest of the politically powerful claimants' bar, the Legislature, and to a certain extent the Department of Labor & Industries, is willing to revisit that determination.