Issue 3 - 2005

Your employee requests a leave of absence to care for the serious health condition of his/her family member under the California Family Rights Act (CFRA) and the Family and Medical Leave Act (FMLA). You request the employee to provide you with a medical certification regarding the serious health condition. You doubt the validity of the certification subsequently provided to you - what can you do?

Under the CFRA, if the certification provides: (1) the date, if known, on which the serious health condition commenced, (2) the probable duration of the condition, (3) an estimate of the amount of time which the health care provider believes the employee needs to care for the child, parent or spouse, and (4) a statement that the serious health condition warrants the participation of the employee to provide care, you must accept it as sufficient.

In contrast, if the leave requested was for an employee's own serious health condition (as opposed to that of the employee's family member) and you doubt the validity of the certification, you could require, at your own expense, that the employee obtain the opinion of a second health care provider, designated or approved by you, concerning any information in the certification. Further, if the second opinion differs from the opinion in the original certification, you could require, at your expense, the opinion of a third health care provider.

Does the FMLA provide an employer who doubts the validity of the certification of the serious health condition of an employee's family member with any greater ability to investigate a questionable certification than that provided by the CFRA? The answer is yes. The FMLA does not make a distinction between leave for the employee's own serious health condition and leave for a family member's serious health condition. Where the employer doubts the validity of the certification of the serious health condition of either the employee or the employee's family member, the employer may require, at its own expense, that the employee obtain the opinion of a second health care provider designated or approved by the employer. In any case in which the second opinion differs from the opinion in the original certification, the employer may require, at its own expense, that the employee obtain the opinion of a third health care provider.

So what's an employer to do? As is the case with most employment laws, you must apply the applicable law that gives the employee greater rights. Here, the CFRA rules prohibiting second and third opinions regarding family members applies.

Beware of a fast-growing type of trade secret lawsuit: companies claiming that competitors have unlawfully taken trade secrets by tapping former employees for information.

Although most people think "trade secrets" only include technical or sophisticated information, this is not the case. Legally, a trade secret consists of any information that has potential or actual economic value by virtue of not being generally known to one's competitors, as long as reasonable efforts are undertaken to keep the information a secret. Trade secrets can even include customer lists, customer contracts and marketing strategies.

A company does not have to break into a competitor's office and take sensitive information to violate trade secret laws. Companies who elicit competitors' trade secrets from new employees coming from their competitors, or allow their new employees to use trade secrets of their prior employers, may be in violation of trade secret laws. For example, in the case of Surgidev Corp. v. Eye Technology, Inc. (648 F. Supp. 661), a former employer ("Surgidev Corp.") brought a legal action against its competitor ("Eye Technology") and former employees for misappropriation of trade secrets. Former employees of Surgidev Corp. used Surgidev Corp.'s confidential customer information to the advantage of their new company, Eye Technology. Eye Technology knew what they were doing. The Court ruled in favor of Surgidev Corp., finding that this was an unlawful use of its corporate trade secrets.

In the event of misuse by a company and its new employee, the owner of the trade secret may be entitled to an immediate injunction and to damages compensating it for the loss, plus punitive damages and attorneys' fees.

What happens if your new employee uses trade secrets he or she learned of at his or her last company without your knowledge? In order to help thwart a lawsuit or defend yourself in litigation, how are you going to prove that your company was not aware of what he or she was doing?

A key defense is to tell potential and current employees clearly that your company will not allow employees to use confidential information acquired from their prior employers. The following instructions given to an employee, in writing, may help prevent a claim. Depending on the situation, these instructions should be given early, such as in the offer letter. Certain instructions also should be reinforced in proprietary information agreements with new and current employees.

In the following instructions, John Smith is the individual you want to hire; Corp. is Smith's current employer, and Inc. is your company.

Smith should not disclose to Inc. or use for Inc's benefit any trade secrets or confidential information belonging to Corp. (Smith should be given examples of what could constitute trade secrets or confidential information.)

Smith should not disclose to Inc. confidential personnel information regarding other employees of Corp. including their salaries, compensation and special skills.

Smith should review any material (including, but not limited to, papers, files and computer software) that he intends to take upon his departure from Corp. to purge it of any trade secrets or confidential information.

Smith should prepare a written inventory of any material that he intends to take upon his departure and obtain from Corp. approval in writing.

Smith should take careful notes of any instructions or directions from Corp. regarding protection of trade secrets and confidential information or solicitation of employees.

Before Smith leaves Corp., he should not solicit other employees of Corp. to work for Inc. He should refrain from any actions which could be viewed as recruitment. (However, depending upon the relevant facts, Smith may tell co-employees he is leaving.)

Should the individual you are hiring be subject to any written restrictions in contracts or policies (e.g. no solicitation of customers or no solicitation of employees clauses), your instructions may need to be altered or expanded.

In implementing this checklist, your company should educate managers and other personnel interfacing with the new employee about your instructions to him or her. Managers need to be alert if the new employee violates his or her instructions. Employees involved in hiring procedures (e.g., human resources) should also be mindful of these instructions.

A new law authorizes employers to retain the Form I-9 in electronic format and authorizes attestations on the Form I-9 to be an electronic signature. The new law took effect on April 28, 2005.

U.S. Immigration and Customs Enforcement (ICE) has issued interim guidelines for the use of electronic Form I-9's. According to the interim guidelines, employers have a variety of electronic Form I-9 options. For example, employers may continue to complete Form I-9's on paper, but store the forms electronically. Alternatively, employers may complete and retain the Form I-9 wholly electronically.

The ICE interim guidelines further provide that standards by other federal agencies (e.g. the IRS) may serve as a helpful reference for employers until regulations are issued. The ICE guidelines set forth the following examples of following Internal Revenue Service Revenue Procedures:

1. if a Form I-9 is completed electronically, the electronic signatures used to manifest the required attestations should be created through the use of a system that includes a method to acknowledge that the attestation to be signed has been read by the signatory and attach (or logically associate) the electronic signature to an electronically completed Form I-9 at the time of the transaction;
2. a quality assurance program for the electronic storage system would include periodic checks of electronically stored data and methods to prevent and detect the unauthorized creation of, addition to, alteration of, deletion of, or deterioration of electronically stored data; and
3. an electronic storage system should include an indexing system and ability to reproduce legible and readable hard copies of electronically stored Form I-9's.

Effective June 1, 2005, the Federal Trade Commission's "Disposal Rule" requires all businesses to properly destroy (i.e. shred) or erase all consumer information that is derived from a consumer credit report before discarding it. Like the California rule, the new federal rule is aimed at reducing the risk of identity theft and related harm from improper disposal. The "Disposal Rule," broad in scope, requires the destruction of "any record about an individual, whether in paper, electronic, or other form that is a consumer report or is derived from a consumer report" which can identify a person individually. The "Disposal Rule" also requires that all businesses take reasonable steps to protect against the unauthorized access to or use of the information in connection with its disposal. As such, businesses must implement policies for the proper destruction or erasing of consumer information. If your employees' information is stolen, your company may be subject to individual suits brought by the employees whose information/identities were stolen, statutory damages of up to $1,000 per employee, civil fines of up to $2,500 per employee and potential class action lawsuits.