What Businesses Should Keep In Mind When Terminating an Employee

Ruth Binger was asked a few employment law questions by Ron Ameln, editor of St. Louis Small Business Monthly. Click here to see the first question about non-compete agreements and Ruth’s response. 

Firing an employee is always tricky. What are some things owners need to keep in mind if they let an employee go?

It is always hard to fire an employee. Employees strike back in a myriad of ways, some fair and some not so fair, such as filing a discrimination claim with the Missouri Human Rights Commission or the EEOC, complaining bitterly on the Glassdoor website, or, absent a non-compete, going to work for your competition or soliciting your employees and customers.

Positive actions include offering a severance agreement which includes a non-compete. Some employers make introductions to other employers where the fit might be better. This works well if the employee is not being let go because of performance but because of a lack of work or occupying the wrong seat on the bus. You could also put the employee on paid or unpaid leave for 3-6 months until the employee finds a job. It is easier to find a job if you have a job.

How important is it to have the proper documentation before firing an employee? Continue reading »

What Businesses Should Keep In Mind About Non-Compete Agreements

Ruth Binger was asked a few employment law questions by Ron Ameln, editor of St. Louis Small Business Monthly. Here is the first question with her response. Click here to see Questions 2 & 3 about things to keep in mind when terminating an employee.

With the tight labor market, business owners are doing everything they can to keep employees. Some are looking at non-compete agreements. Others hope their current agreements will help keep employees in the current environment. What should businesses keep in mind with these agreements?

Non-compete agreements are negative guardrail enforcement to protect your business. To enforce a non-compete, you must be able to prove that the business has a protectible interest in its trade secrets and customer relations and the covenants are reasonable. The key is to have your employees sign non-compete agreements on the first day of employment. If you require that the employees sign the agreement post-hiring, you will have issues with morale (employee may leave) and enforceability. To ensure enforceability of post-hiring agreements, you should consider providing additional consideration, such as bonus, raises, promotions, or benefits.  Inception of employment is consideration for the on-hire non-compete.

The term “non-compete” is used to describe three types of restrictive covenants, and people use the term interchangeably. Continue reading »

Missouri’s New Marijuana Amendment: Workplace Testing and Employees “Under the Influence”

Missouri’s newly approved constitutional Amendment 3 regarding marijuana use will go into effect on December 8, 2022.  With a total of 49 pages, the Amendment 3 has two sections: revised Section 1 (former Amendment 2), which focuses on medicinal use, and Section 2, which focuses on marijuana recreational use.

Employers have long had Drug-Free Workplace policies that test employees for various illegal drugs.  Common tests are pre-employment, random, reasonable suspicion, and fitness for duty/return to work/follow up after rehab or last chance.

The original Amendment 2 regarding medicinal use was passed in 2018.  Employers responded to this amendment in several ways including choosing to keep their policies the same but providing reasonable accommodation under the disability statutes or to simply quit testing for THC altogether except for reasonable suspicion.

Now, employers will have to go back to the drawing board.

Section 1: Medicinal Use of Marijuana

Section 1 of Amendment 3 revises the original Amendment 2 in its entirety. One of the revisions/additions includes adding a nondiscrimination in employment section. It prohibits employers from discriminating against “medicinal cardholders” based on off-duty use unless the person was “under the influence of medical marijuana” at or during work. Further, it specifically prevents employers from relying solely on a positive THC test result to terminate a medicinal cardholder unless the person used, possessed, or was “under the influence” of medical marijuana at or during work.

There are exceptions to the “under the influence test” for medicinal cards for the following situations:

1. If the employer would lose a monetary or licensing related benefit under federal law,
2. If the employee has a job where “legal use of a lawful marijuana product affects in any manner a person’s ability to perform job-related employment responsibilities, or
3. If it conflicts with a bona fide occupational qualification that is reasonably related to a person’s employment.

This exception protection does not appear to apply to “recreational” users who do not have a “medicinal card.”

There is no readily available test to scientifically confirm whether someone is “under the influence of marijuana” nor what the threshold of impairment is under BAC for alcohol. How long a person will test for marijuana depends on a multitude of factors but is not limited to: Continue reading »

Updated EEO “Know Your Rights” Poster Now Available

On October 22, 2022, the Equal Employment Opportunity Commission issued an updated EEO poster, a copy of which is attached to this blog post. This is to replace a previous EEO poster and addendum issued by the EEOC in 2019.

In many cases, employers have posted what is known as a 6-way poster, which sets forth an employee’s rights under various federal laws, including Title VII and the Americans with Disabilities Act. You may wish to acquire an updated 6-way poster, or you can simply post the October 2022 poster next to the 6-way poster, or over the section on Equal Employment Opportunity on existing 6-way posters.

Who is Required to Post this Notice?

Any employer with more than 15 employees is required to post the updated notice.

When Should I Put This Up? Continue reading »

Your Business Needs an Estate Plan, Too

Yes, small businesses need estate plans. Business estate plans determine what happens if the owner can no longer operate the business due to death or disability. A plan must be in place to address either potentially devastating situation.

Businesses with multiple owners commonly use Buy/Sell Agreements for such a plan. These provisions can be inserted into the Operating Agreement if the business is a limited liability Company (LLC) or can be provided in a separate agreement if the business is a corporation or partnership. There are two general forms used:

• Buy/Sell Provisions: Remaining owners (whether shareholders, members, or partners) buy the deceased owner’s interest from the estate. A life insurance policy can provide funds for the purchase.
• Redemption Agreement: The company buys the deceased owner’s interests from the estate. The remaining owners own the company. Proceeds from the sale go to the estate. This arrangement can also be funded by a life insurance policy.

Because of the tax and legal considerations involved, it is critical that these plans be thought out and planned in advance with the advice and input of the business’ attorney, accountant, and insurance professional.

If no agreement exists, the remaining owners must deal with the deceased owner’s estate, possibly controlled by the spouse, children, or other persons not involved in the business. This can be very disruptive. The business may have to be sold or liquidated to the detriment to all concerned. The value of the business is not passed on to the estate. The remaining owners must deal with a hostile party and potential litigation which could destroy the business.

The loss of an owner can also cause a vacuum in the management of the company. Continue reading »

Getting Through Chapter 11 – Part Two: Plan of Reorganization

Part 5.2 of a 5-part series: Options for Small Business Owners in Financial Distress

Your company’s Chapter 11 bankruptcy has been filed and you’re now running your business under the provisions of the United States Bankruptcy Code.

It’s now time to work toward the ultimate goal of a Chapter 11: a Plan of Reorganization, confirmed by the court, allowing your company to restructure its debts, exit Chapter 11, and continue in business. It is important that you explain all of your concerns about all aspects of your business to your attorney and provide complete and accurate information, all before you even file the case. This will help both of you develop good ideas for successfully navigating your reorganization case and getting a plan confirmed. Advise your attorney if a new problem develops so you can consider all the potential solutions available to you.

Your next steps in planning for reorganization will include you and your attorney:

• Participating in two mandatory meetings with a U.S. bankruptcy trustee within the first 30 days after filing and begin filing monthly operating reports.
  1. “Initial debtor interview:” Learn procedural issues such as the ins and outs of filing periodic operating reports such as monthly operating reports and where and how your company can bank.
  2. Section 341 “meeting of creditors:” Be questioned under oath by the U.S. trustee’s office about your need to file Chapter 11, your plan to exit bankruptcy, how you will implement your ideas, etc. This meeting is open to all interested parties.
• Negotiating the terms of your proposed plan with the creditors’ committee if one has been formed by large unsecured creditors.
• Negotiating lease terms. Any lease which commenced prior to the filing can be “rejected.” You can then renegotiate the terms or terminate the lease, in which case the lessor’s claim will be treated as a pre-petition claim.
• Treating an equipment lease as an installment purchase agreement secured by the equipment, possibly converting a portion of the secured debt to unsecured and altering the terms of repaying the secured debt.

Continue reading »

Business Beware: You Can’t Take Deceptive Steps to Manipulate the Collection or Publishing of Negative Reviews on Your Website

Businesses are to avoid potentially deceptive conduct that would confuse consumers under Section 5 of the Federal Trade Commission Act, and the FTC is now focusing very heavily on deceptive customer reviews and endorsements. Deceptive conduct includes any conduct which treats positive and negative reviews unequally, thus misleading consumers of useful information and inflating the product’s star rating.

In one of its first cases, the FTC pursued Fashion Nova, LLC, a fast fashion retailer that attempted to conceal negative reviews. According to the complaint, “Fashion Nova used a third- party online product review management interface to post four- and five-star reviews and hold off on lower star reviews [estimated in the hundreds of thousands] for the company’s approval.” Fashion Nova never approved or posted the lower star reviews. In its settlement with the FTC, Fashion Nova is prohibited from suppressing customer reviews of its products and is required to pay $4.2 million to settle the FTC’s allegations.

What does this mean for businesses that use or consult regarding consumer reviews? Continue reading »

Getting Through Chapter 11 – Part One: After Filing

Part 5.1 of a 5-part series: Options for Small Business Owners in Financial Distress

Your attorney has just filed your company’s Chapter 11 reorganization case and you have no clue what to do next. Seriously, the first thing you should do is nothing. Take a breath and keep running your business.

That’s not to say there’s nothing for you to do during the entire Chapter 11 process – there’s actually quite a lot for which you will be responsible. Any competent bankruptcy attorney already has discussed your statutory and practical responsibilities in a Chapter 11 case with you prior to filing.

Now is the time to implement those decisions made before the case was filed. If you forget a decision you made (or come across an issue you hadn’t discussed), call your attorney. The two of you should be in frequent contact during the case to be sure that you don’t take any actions which don’t make sense in the Chapter 11 context, or which might violate the Bankruptcy Code, Bankruptcy Rules, or Local Rules.

Your primary concern after the case is filed is, of course, money to operate with. That topic should be discussed thoroughly with your attorney prior to filing. Be sure your attorney discusses post-petition financing and use of ‘cash collateral’ with you. Be sure that you have post-petition financing lined up before you file, either from internal operations or from a lender. If your post-petition financing falls through, or you’re not as profitable as you expected to be after filing, you may not be able to afford to operate during the Chapter 11. If so, there is  no way for you to reorganize and your Chapter 11 case may be dismissed outright. Continue reading »

Religious Exemptions to COVID-19 Vaccination Mandates under Title VII and the EEOC’s Additional Guidance

With continued and widespread COVID-19 infection and the FDA’s full approval of the Pfizer-BioNTech COVID-19 vaccine, many employers have instituted COVID-19 vaccination mandates. Title VII requires employers to provide reasonable accommodations for employees with sincerely-held religious beliefs that conflict with getting vaccinated. Given that religious beliefs are difficult to disprove, many employees have taken this as an opportunity to request religious exemptions to avoid COVID-19 vaccination mandates.

The Law – Title VII

Title VII of the Civil Rights Act of 1964 prohibits employment discrimination on the basis of religion and requires employers to provide reasonable accommodations to employees claiming their sincerely-held religious beliefs conflict with getting vaccinated. Title VII protects not only people who belong to traditional, organized religions, such as Buddhism, Christianity, Hinduism, Islam, and Judaism, but also others who have “sincerely-held religious, ethical or moral beliefs.”

Given this sweeping definition of religion, the U.S. Equal Employment Opportunity Commission (“EEOC”) has cautioned that an employer should generally assume that an employee’s request for a religious accommodation is based on a sincerely-held religious belief. Nevertheless, an employer is permitted to question the sincerity of an employee’s purported religious belief where there is an objective basis for doing so. Further, an employer is not required to accommodate an employee’s religious beliefs and practices if doing so would impose an “undue hardship” on the employer’s legitimate business interests. For the EEOC’s list of factors to be considered when determining whether an accommodation imposes an undue hardship on an employer, visit: EEOC Undue Hardship.

The EEOC’s Guidance on Religious Exemption Requests

On October 25, 2021, the EEOC updated its technical assistance related to the COVID-19 pandemic, which included additional guidance on how employers should handle religious exemption requests (Section L). Read the full EEOC update here.

The key takeaways are:

1. Employees who have a religious objection to receiving a COVID-19 vaccination must inform their employer and request a reasonable accommodation to be afforded protection under Title VII. Reasonable accommodations may include telework or reassignment.
2. If an employer has an objective basis for questioning either the religious nature or the sincerity of a particular belief, the employer can make a limited factual inquiry seeking additional supporting information.
3. An employer who objectively demonstrates that it would be an “undue hardship” to accommodate an employee’s request for religious exemption to the employer’s vaccination mandate is not required to provide the accommodation.
4. An employer is not required to grant all employees’ requests for religious exemptions on the basis that it has granted some employees requests for religious exemptions. The determination is fact-intensive and specific to every request.
5. While an employer should consider the employee’s preference, if there is more than one reasonable accommodation that would resolve the conflict between the vaccination requirement and the religious belief without undue hardship, the employer may choose which accommodation to offer.
6. An employer has the right to discontinue a previously granted religious accommodation. If the employer learns that the belief is not religious in nature or sincerely-held, or if the accommodation becomes an undue hardship, the employer can discontinue the accommodation.

Continue reading »

Medical Marijuana Use by Employees in Missouri: Where Are We Now?

Due to the pandemic and labor shortage, Missouri courts have not had an opportunity to consider Amendment 2 and employment issues related to medical marijuana in the workplace. Amendment 2 allows state licensed physicians to recommend medical marijuana to patient employees diagnosed with chronic debilitating conditions. It also protects employees with a medical marijuana card issued by the Department of Health and Senior Services (DHSS) from being terminated unless the employer proves that the employee is “under the influence of marijuana.”

There are no reliable tests available yet to scientifically confirm if someone is “under the influence” of marijuana. A person will test positive for marijuana for up to 25 days after use. However, there are impairment tests on the market that can help determine whether workers in safety-sensitive positions are at risk by testing current fitness for duty.  Those tests include computer-based alertness tests similar to a video game and apps that test for cognitive and motor impairment. Some tests take 20 seconds and are advertised as testing for fatigue, dehydration, emotional distress, alcohol, cannabis, etc.

Without more guidance, employers will have to create Observed Behavior tests that are signed by company personnel to bolster an argument of “under the influence.” Further, because Amendment 2 is a constitutional amendment, it would necessarily trump existing Missouri law found in laws such as workers’ compensation and unemployment statutes.

Another possible employee defense is an Americans with Disabilities Act (ADA) defense where the employee is taking physician-prescribed medical marijuana for a chronic debilitating condition that is protected by the disability laws. Missouri has no case law at this time. U.S. case law trends are that when courts are asked to apply federal law (the ADA) versus state law (i.e., Missouri Human Rights Act), federal courts are not finding a protected disability due to the employee using an illegal drug. Continue reading »