Join us for Business Law and Order Part II of our Employment event series.

1. Business Law & Order:
Employment II
March 18, 2013
© Ann Arbor SPARK

2. Minimizing Organizational and Personal Liability
from Employment Discipline and Termination
THE IMPORTANCE OF DOCUMENTATION
Presented by
Randolph T. Barker, Esquire
BERRY ♦ MOORMAN
Professional Corporation
www.berrymoorman.com

3. The Fundamental Truths
• Employers who lack well thought out policies
and personnel management skills inevitably
fail, regardless of capability in their trade.
• Employees who are not introspective and
have a low level of self-accountability not
only fail, but often lay blame elsewhere.
• Effective documentation of policies and
employee issues provides a formidable
defense to suits.

4. Topics
• Terms & Concepts
• Hypothetical
• Documentation and Discipline

5. The Obligatory Lawyer Joke…

6. At-Will Employment?
• Terminable at will of employer or
employee
• With or without notice?
• With or without cause?
• Conditions requiring termination for
cause: Employment contracts

7. Understanding Terms
• Discrimination:
On basis of one or more protected classes:
Race, color, national origin, sex,
marital/family status, height, weight, age
(old and young), genetics, disability,
perceived disability, …
• Maybe: Sexual orientation
• Definitely not: Hair color

8. Additional Terms
• Retaliation:
Action taken against an employee for having
made a claim of discrimination, used FMLA
leave, taken military leave, etc.
• Whistleblowing:
Action taken against an employee for making a
claim with a public agency or threatening to do
so.

9. Lawsuits
• Employees may sue both the employer and the
supervisors for claims of discrimination, retaliation,
and/or “whistleblowing.”
• Claims can be made by every single employee who
reports to you
• You may be individually sued for damages
• Proper investigation and documentation is critical to
protect you and the Company

10. Avoiding Whistleblower Claims
Whistleblower lawsuits can be very damaging to a
company’s reputation and pocketbook. You can go a long
way towards preventing whistleblower claims by following a
few simple steps:
•Don’t blame the messenger
• Adopt a complaint policy
• Investigate complaints, and document the investigation
• Be specific and cautious when disciplining a whistleblower
for unrelated conduct
* Steps ensure that internal complaints are taken seriously

11. Barriers to Reporting
• Lack of trust in the internal system
• Unwillingness of employees to be “snitches”
• Misguided worker solidarity
• Fear of alienation from peers
• Fear of retaliation
• Belief that management is not held to the same
standard
• Office culture contributes to these barriers

12. Strengths of Plaintiff’s Cases
• Failure to document offenses
• Failure to follow policies
• False or contrived reasons for discipline
• Arbitrary or inconsistent application of
policies or standards
• Policies tailored to targeted employee
• Over-documentation?

13. Documentation Hypothetical
• Victor Manufacturing is in the bowl business. Hired in 2008, its senior manager, Rich,
has always had problems getting his work done and getting his team to perform.
Rich’s management style involves making his team do most of the work while his
attendance is something left to be desired. Four months into the job, Rich’s team had
lost 9 of 12 contracts (although they did get a key deal away from Badger
Manufacturing). Major industry conventions held in December and January snubbed
the company for the first time in 33 years.
• Yet during in his performance review, Rich’s supervisor Bill gave a 3 out of 5 and
noted “needs improvement.” In the first two months of 2009, he completed 5 projects
right out of the gate, but generally could not complete another during the company’s
peak season. His biggest competitors, Mark and Jim, always seemed to get the best
of him and put him on a bad streak. After losing a major contract to Jim at the end of
2009, the company was snubbed again by the conventions. Rich got off to another
fast start in 2010. Industry insiders thought this would be a good year for Victor.
After a slow finish, Victor was again invited to a January convention.

14. Hypothetical (Cont)
• During his brief tenure with the company, several members of the team
expressed dissatisfaction with his attendance and attitude: key figures have
moved on to competitors. It seems like every time you meet with Rich, he
looks tired and disheveled. Bill also liked to be hands-off, and merely gave
Rich verbal warnings about his attendance and performance. Under
pressure from shareholders, Bill was let go in late 2010 and replaced with
David. In David’s first meeting with Rich, David warned Rich that poor
performance would no longer be tolerated. Rich and his team embarrassed
Victor at the January, 2011 convention in Florida The next day, Rich told
David that he would not be coming to work because he found out Victor was
engaging in illegal hiring practices that gave Victor an unfair advantage in
the marketplace. He then threatened to report Victor to the National
Concave Artifacts Authority (NCAA), a federal agency.
• What should David do?

15. Documentation: 4 Types
• Written performance reviews;
• Incident reports;
• Written records of counseling; and
• Formal Action Plans

16. Written Reviews
• Performance reviews can help or hinder a company in
preventing or defending a claim of unlawful
discrimination, depending on how consistently and
constructively they are used.
If a supervisor:
• does not document an employee’s performance
problem, and then continues to rate him/her satisfactory,
good or excellent on his/her performance review, that
evaluation will be used against the employer in a lawsuit.
• has provided the necessary feedback, the employee
should not be surprised by a negative review.

17. Reviews: Important Considerations
• Timely and regular: e.g., 6 months/annual.
• Job-related criteria;
• Provide comments;
• Give examples;
• Identify milestones and discipline; and
• Consider conducting additional reviews if
changes occur in an employee’s
performance or duties.

18. Reviews: Open and Honest
• Honesty is crucial in ratings - No “gentlemen C’s”.
• Supervisors have many reasons for not being honest:
– “I didn’t want to discourage the employee;”
– “I didn’t want to have a confrontation with the
employee;”
– “I’m afraid the employee might sue because he/she is
a member of a protected class;” or
– “I (as supervisor) might be revealed as part of the
problem.”

19. Incident Reports
• A variation on the counseling record that some employers use is the
incident or disciplinary action report.
• Documents an incident that requires an immediate disciplinary
action, such as:
• Being under the influence alcohol/drugs;
• Violent behavior or threats of violence;
• Carrying a weapon;
• Disregarding safety rules;
• Theft, destruction of Company property, or falsifying documents;
• Insubordination; and
• Job Abandonment (no call/no show).

20. Principles of the Counseling Process
• Timeliness;
• Identify Policy or Rule in question;
• Employee response/version;
• Reference to previous counseling; and
• Provide warning of disciplinary
consequence of repeat offense.

21. Formal Action Plans
• If you make a formal action plan, it may include the following
additional elements:
• A statement of the policy, rule, or practice that was violated,
• The steps employee agrees to follow to correct the problem or
meet the desired level of performance, attendance, or behavior,
• Any commitments of assistance or support that the manager or
supervisor has made,
• The time frame to be followed in achieving the goal of improved
performance, attendance, or behavior, and
• The consequences that will occur if the performance,
attendance, or behavior is not improved within the specified time
frame, including suspension or termination, if those are intended
consequences.

22. Disciplinary Action: 4 Types
• Verbal warning
• Written warning (with possible formal
action plan)
• Suspension
• Termination

23. Verbal Warnings
• This is generally the first step, although an employee might
receive several verbal warnings before progressing to the next
step.
• For a serious problem or policy violation, skip this step.
• Verbal warnings should always be done calmly, objectively,
and privately.
• If the supervisor is angry with the employee, make sure
he/she waits until he/she has cooled down to talk with the
employee.
• When appropriate, have a second supervisor present.
• Document the verbal warning with a formal memo, or informal
note, in the employee’s personnel file.

24. Written Warnings
• Generally preceded by a verbal warning.
• The manger or supervisor should meet with the employee and
a second manager may be present.
• The employee should be given, and allowed to review, a
formal written warning.
• Have the employee sign the document, acknowledging that
he or she has received the warning, regardless of whether he
or she agrees with the contents of the warning.
• If the employee refuses to sign, another manager or
supervisor should be called as a witness to observe that the
employee has been presented with the warning and refused
to sign it, and that witness should sign the warning.

25. Written Warnings: What to Include
• The date of the incident
• The name of the manager or supervisor administering the warning
• A description of the misconduct or inadequate performance,
• Prior discipline,
• A signature line for the manager or supervisor,
• A signature line for the employee, with a notation such as the
following:
“The employee’s signature indicates only that the warning was received. It does
not necessarily indicate that the employee agrees with the contents of the
warning.”
• You may also attach or include a formal “action plan,” depending
upon the nature and severity of the offense
• Employee response?

26. Suspensions
• May range from one day to one week or more,
depending upon the circumstances, and is
almost always unpaid.
• As a general rule, each suspension should be
longer than the last, with termination as the final
result.
• The employee should be informed, in writing,
that further infractions will result in termination,
if that is the intended consequence.

27. Termination
• Before terminating an employee, you should review the
personnel file and all relevant documents in order to
determine if the termination is appropriate given the facts
and circumstances.
• Follow your policy/process.
• Ensure that similarly situated employees have been
treated similarly in the past.
• Are there other alternatives (demotion, transfer, reduced
raises or bonuses, or a last chance agreement)?

28. Communication
• Disciplinary policies and procedures should be
clearly communicated to employees.
• You should require your employees to sign a
document indicating that they received and read
their handbooks. This form should include an
acknowledgment of at-will status and be placed
in their personnel file.
• Re-review policies as needed.

29. Tips
• Be timely: Document the information while it is fresh.
• Be accurate: Documentation should contain information
that you know to be true and which can be objectively
substantiated.
• Stick with the facts: A description of the offense or
problem should minimally include:
• Names, dates, times, place of the events and/or
warnings; and
• The duration and frequency of the problem or offense.

30. More Tips
• Be informative.
• Identify the policy or rule that was violated.
• Documentation should be stated in simple terms so
employees understand employer concerns and
expectations
• Explain what the employee must do to correct the
problem.
• Do not make legal conclusions.
• Do not write statements such as “You sexually
harassed a co-worker.” Simply state policy or rule that
employee violated.

31. Tips: Record Retention
• What is and is not part of an employee’s file?
• Pertinent papers should be kept. For example;
• Memos,
• Attendance records,
• Incident reports,
• Phone/text messages,
• Client complaints, and
• All prior warnings or memos concerning the employee.
• Not: Medical records or confidential contents of client files.
• Prepare and follow document retention policy that reflects needs,
limitations periods and other regulatory requirements (e.g., OSHA,
FLSA).

32. Hypothetical Review
• There are endless ways to cause a
problem, and only a few (often costly)
ways to solve them.
• Where did things go wrong? What fault
lies with each player?
• What should you do in each situation?

33. And the Moral of the Story is…
Good documentation habits make a difference
in the outcome of an employee’s lawsuit, and
can help prevent them.
BUT…
No good deed goes unpunished!

34. Thank You!
Randolph T. Barker
BERRY ♦ MOORMAN
Professional Corporation
900 Victors Way, Suite 300
Ann Arbor, Michigan 48108
(734) 668-4100
rbarker@berrymoorman.com

35. INTELLECTUAL PROPERTY ISSUES
AND THE EMPLOYMENT RELATIONSHIP
Ann ARBOR SPARK
EmPlOymEnt BASicS ii
mARch 18, 2013
Prepared and Presented by:
Peter M. Falkenstein
Jaffe Raitt Heuer & Weiss, P.C.
© 2013 Jaffe Raitt Heuer & Weiss, PC. All Rights Reserved.

36. What is Intellectual Property?
PATENTS -- Protect inventions and some methods of doing business.
COPYRIGHTS – Protect works of “original authorship”
TRADEMARKS – Protect branding devices (words, phrases, symbols)
TRADE SECRETS – Protect proprietary and confidential information of
commercial value to the owner.
Intellectual Property law does not protect IDEAS,
unless they have been adequately memorialized.

37. PATENTS –
Utility patents may be granted to anyone who invents or discovers any
new and useful process, machine, article of manufacture, or composition of
matter, or any new and useful improvement thereof;
Design patents may be granted to anyone who invents a new, original,
and ornamental design for an article of manufacture;
Plant patents may be granted to anyone who invents or discovers and
asexually reproduces any distinct and new variety of plant; and
Business method patents are a class of patents which disclose and claim
new methods of doing business. This may include new types of e-
commerce, insurance, banking, tax compliance, etc.

38. COPYRIGHTS –
17 U.S.C.§102 · Subject matter of copyright: In general
(a) Copyright protection subsists . . . in original works of authorship fixed in any tangible
medium of expression . . . from which they can be perceived, reproduced, or otherwise
communicated, either directly or with the aid of a machine or device. Works of
authorship include the following categories:
(1) literary works;
(2) musical works, including any accompanying words;
(3) dramatic works, including any accompanying music;
(4) pantomimes and choreographic works;
(5) pictorial, graphic, and sculptural works;
(6) motion pictures and other audiovisual works;
(7) sound recordings; and
(8) architectural works.
(b) In no case does copyright protection for an original work of authorship
extend to any idea, procedure, process, system, method of operation, concept,
principle, or discovery, regardless of the form in which it is described, explained,
illustrated, or embodied in such work

39. TRADEMARKS –
Words symbols or other devices that are used to associate particular good or
services with a particular producer of the goods or services.
Trademarks are marks that are used on goods.
Service marks are marks that are used to brand services.
Trademarks or service marks that are arbitrary or fanciful may be protected without
a showing that they have attained a particular level of recognition by the public.
(E.g. Xerox, Microsoft, Nike)
Marks that are descriptive of the goods or services to which they are attached may
be protected only with a showing of “secondary meaning” in the consuming public.
(E.g., The Home DME, Oatnut, 1-800-MATTRESS)
Generic marks, i.e., those that merely restate what the goods or services are, can
never be protected. (E.g., Aspirin, Baking Soda, Escalator, Zipper, Answering
Service)

40. TRADE SECRETS –
The Michigan Uniform Trade Secrets Act
(Michigan Compiled Laws sec. 445.1902)
(d) Trade secret means information, including a formula, pattern, compilation,
program, device, method, technique, or process, that is both of the following:
•(i) Derives independent economic value, actual or potential, from not being
generally known to, and not being readily ascertainable by proper means by, other
persons who can obtain economic value from its disclosure or use.
•(ii) Is the subject of efforts that are reasonable under the circumstances to maintain
its secrecy.
The broad definition of trade secret may include not only scientific and technical
information, but financial and customer information; business methods; commercial
and sales information, etc.

41. KEY EMPLOYMENT RELATED I.P. ISSUES
Who will own intellectual property created by an employee or contractor of the
company?
How does the company protect against improper disclosure of its IP, particularly
trade secrets?
How does the company protect against a former employee’s use of company IP,
trade secrets, or other “know-how”?
How does the company provide for licensing of its employee-created IP, possibly to
the employee him/herself? (Reserved for a subsequent session.)

42. THE “WORK MADE FOR HIRE” DOCTRINE
The Work for Hire Doctrine is applicable, in slightly varied concepts, both in relation
to PATENTS and COPYRIGHTS.
In general, your company will be able to secure patents and copyrights in any
inventions and creative works developed by your employees within the scope of
their employment. (What exactly that means will be discussed shortly.)
However, an independent contractor who develops something for you automatically
owns the rights to any patent or copyright– unless the contract specifies otherwise.

43. OWNERSHIP OF INVENTIONS UNDER PATENT LAW–
The “hired to invent” doctrine is an exception to the rule that an inventor owns all
rights to his invention. In general, an employee who is hired for the purpose of
invention, who succeeds in accomplishing the task during the performance of the
contract, is bound to assign to the employer all rights to the invention. The simple
principle is:
1. Employer pays employee to invent something.
2. Employee does what he/she is asked to do.
3. Employer owns the invention.
In reality, this principle is not so easily or uniformly applied.

44. Whether someone is “hired to invent” or is subject to the Work for Hire doctrine turns
on whether the circumstances of the employment show an agreement (explicitly or
implicitly) by the employee to assign all rights of his or her invention to the employer.
Courts examine many different factors to determine if there was, in fact, an
agreement to assign rights. While there is no exact list, most courts generally look to
some or a combination of these factors:
1. The employment agreement or absence of one;
2. Past employment agreements or policies regarding patent rights;
3. Whether the employee worked in an inventive capacity;
4. When the inventive work was performed;
5. Where the inventive work was performed;
6. Employee’s acquiescence in or objection to the employers’ use of the invention,
or vice versa;
7. Guidance and direction given by the employer; and
8. Whose materials were used in developing the invention.
The first factor relates to establishing an explicit agreement. The others are used to
determine whether an implicit agreement should be construed.

45. AVOID THE “IMPLIED CONTRACT” ANALYSIS
BY USING WRITTEN AGREEMENTS WITH A WORK
FOR HIRE CLAUSE –
Most employment and independent contractor agreements now contain work for hire
clauses. If your company does not use employment agreements, you may still
require your employees to sign separate work for hire agreements, dealing solely
with that issue.
It is highly advisable to nail down in writing the Company’s rights to intellectual
property created by the employee/contractor.

46. INDEPENDENT CONTRACTOR WMFH CLAUSE –
Should include, at the least, the following basic concepts:
The parties intend that the Company be the owner of all rights in the Work or
Works created by the contractor.
A definition or description of the Work(s) subject to the WMFH agreement.
The Work is a commissioned work made for hire. If the WMFH doctrine is
determined to be inapplicable, Contractor “shall and hereby does assign” to the
company all rights in and to the Work, including without limitation all intellectual
property and proprietary rights therein.
The contractor acknowledges and shall not challenge the Company’s rights to the
Work and shall cooperate in perfecting said rights.
The contractor has no rights to use or transfer rights in the Work, or to make any
derivatives of the Work.
Contractor warrants and represents non-infringement of third party rights.

47. EMPLOYMENT AGREEMENT WMFH PROVISIONS –
An employment agreement should contain at least the following basic WMFH
concepts:
Definition of “works” or “creations” to be as broad as possible.
Employee agrees that all creations (s)he individually or jointly develops during
employee’s employment shall be the property of the company.
 During working hours or otherwise?
 How closely related to the “business of the company” must the creation be?
 Employee shall promptly disclose to company all such creations and assign them to
the Company.
Employee shall disclose to Company all patents and applications, as well as
copyrights taken out in Employee’s name. Company disclaims all rights in the listed
properties.
Also include the language from WMFH clause on previous slide.

48. PROTECTING TRADE SECRETS –
In order to protect a trade secret, one must take “efforts that are reasonable under
the circumstances to maintain its secrecy,” as stated in the Michigan Uniform Trade
Secrets Act.
In the employment context, this generally means imposing confidentiality
restrictions on employees and contractors who may have access to those trade
secrets.
 In the absence of such an express contractual provision, the company
would have to rely on arguments relating to the course of dealings
between the parties, or the employee’s constructive knowledge that (s)he
was required to maintain the secrecy of certain information.

49. OBTAIN A NON-DISCLOSURE/ CONFIDENTIALITY
AGREEMENT FROM YOUR EMPLOYEES –
If you use an Employment Agreement for your employees, include a provision
prohibiting them from divulging any company proprietary or confidential information
to any third parties (other than as expressly required and/or permitted in the
performance of their duties for the company)
If you do not use an Employment Agreement (relying on common law principles of
at-will employment, have each employee sign a separate non-
disclosure/confidentiality agreement.
Absent such an agreement, courts are likely to find that the company did not
employ “efforts that are reasonable under the circumstances” to maintain the
secrecy of its trade secrets

50.  Also, take additional steps to secure the company’s trade secrets, such as:
 Providing enhanced security systems against system hacking;
 Using sound password encryption for employee access;
 Implementing written policies governing the scope of permitted employee
access to the company’s servers;
 Requiring the return of all company materials (including proprietary
information) upon the termination of employment
 Use of non-competition agreements (a separate issue, but overlaps with
protection of trade secrets)
 Remember, however, that applying for intellectual property registrations,
such as copyrights or patents, may remove the proprietary information from
the protected trade secret classification, by placing it in the public record.

51.  Another common problem is a former employee using materials owned by the
company in their future jobs.
 These could be marketing materials (most commonly); technical materials;
etc.
 Generally, these materials will not be considered trade secrets if they have
been distributed publicly.
 These materials, will, however, be subject to copyright protection.
Therefore, it is important to obtain copyright registrations for all materials
the company believes are of significant economic value; and would be, as
well, in the hands of a competitor.
 Copyright registrations are inexpensive to obtain and well worth the effort.
 In addition to providing protection against misuse by former employees,
intellectual property registrations significantly enhance the valuation of the
company.

52. PROTECTING TRADEMARKS IN THE EMPLOYMENT
RELATIONSHIP –
The company should register all trademarks and service marks that it believes are
worth protecting. Common law protections, while existing, are inferior to rights
provided by federal (and international) trademark registrations
Common problems with employee’s leaving to start their own business or go to a
competitor are:
 Deciding to use a name that is strikingly similar to the Company’s;
 Promoting themselves in a manner that suggests some continued affiliation with or approval by the
Company, as to the employee’s new business
The Employment Agreement should contain a provision prohibiting the use of the
company’s trademarks or service marks, or any confusingly similar mark.
The Employment Agreement should also make clear that the employee is
prohibited from using the company’s name or marks in any manner other than to
accurately state that the employee was formerly employed by the company.

53. ABOUT THE PRESENTER –
Peter Falkenstein is a partner and shareholder in Jaffe Raitt Heuer & Weiss, PC,
working out of the Ann Arbor office. He concentrates in intellectual property law –
obtaining IP protection from federal and international agencies; licensing of IP rights;
and enforcement of IP rights through litigation and ADR.
He is a magna cum laude graduate of the University of Michigan Law School and
has been selected as a Michigan Super Lawyer in intellectual property law by
SuperLawyer magazine for the past seven consecutive years.
If you have any questions related to IP law, he can be reached via e-mail at
pfalkenstein@jaffelaw.com or by telephone at (734) 222-4776.

54. Next Business Law & Order:
E-Commerce & Advertising Online
March 18, 2013
© Ann Arbor SPARK