What was the second-most watched sporting event after the Super Bowl? What does that event have to do with employment law? 


Foster Pepper published a White Paper (PDF) about League of Legends, a “multiplayer online battle arena” game with teams, a league, professional players, sponsors, and even team swag.  Notice the evolving employment law challenges on pages 4 and 5. 


And notice our firm’s complete lack of gloating over the Seahawks’ drubbing of the Denver Broncos on Sunday. 

The upcoming game has created great excitement here in Seattle, even for employment lawyers.

Team Pride Doesn’t Always Pay. ESPN reports that a Tacoma teenager was terminated for wearing a Denver Broncos jersey deep in Seahawks territory. Rather than comply with the company dress code, which required wearing either a company uniform or Seahawks apparel on game days, he instead wore a Denver Broncos jersey. The worker was terminated only after he was sent home to change, and never returned to work.

Super Slump In Workplace Productivity. According to one survey, employee morale may rise on the Monday after the Super Bowl. However, productivity takes a nosedive, and some employees even take the day off or call in sick.

Super Charging Business Relationships. For those who may not closely follow pro football this year, a Seahawks sideline reporter has created “10 Talking Points for Super Bowl XLVIII” – perfect for use in the workplace or in other business conversations.

Super Prediction: Seahawks by 3.

The answer: each group has received recent attention from the US Department of Labor, Wage and Hour Division.
Domestic Service Workers: The Fair Labor Standards Act exempts from minimum wage and overtime requirements (1) workers who provide “companionship services” to elderly people or people with illnesses, injuries, or disabilities, and (2) domestic service workers who reside in the home where the services are provided.  The DOL now has issued new rules that narrow the definition of “companionship services” and exclude employers such as home care agencies from the exemption.

Law Firm Interns: As we explained here and here, for-profit enterprises cannot engage unpaid volunteers, and unpaid interns are permitted only if the internship program meets specific requirements.  In response to an inquiry from the American Bar Association, DOL confirmed that law firms may engage unpaid law school interns to work on pro bono assignments.

San Francisco Giants Employees: The DOL announced that the baseball team agreed to pay $544,715 to 74 employees.  A DOL audit found that some clubhouse employees were paid only $55 for days that averaged 12 to 15 hours, and that other workers (including clubhouse managers and video operators) were misclassified as exempt from overtime.

Before leaving for the holiday weekend, we pause to congratulate the US Department of Labor on its 100th anniversary.  We also are grateful for the role that OSHA (a DOL agency) has played in reducing the numbers of fatal workplace accidents.  And we encourage everyone to drive carefully, especially if you visit Los Angeles, Newark, New Haven (CT), Arlington (VA), San Francisco, Alexandria (VA), Philadelphia, Glendale (CA), Hialeah (FL), Providence, Baltimore, or Washington DC, the 10 cities over 50,000 residents with the highest rates of motor vehicle accidents.  We can’t help but notice that four of these cities are within commuting distance of the DOL’s national headquarters on Constitution Avenue.

Outrageous Facebook Comments Not Enough to Fire New York Public School Teacher. Christine Rubino seemed to be in the wrong line of work. Just after a child from another school tragically drowned in June 2010, she shared her thoughts on Facebook: “I am thinking the beach sounds like a wonderful idea for my 5th graders! I HATE THEIR GUTS! They are all the devils spawn!” “I wld not throw a life jacket in for a million.” She later tried to cover up and deny her comments, and she was fired. However, a judge ruled in 2012 that the termination was improper. Now an appellate court has agreed, finding that the discharge was “shocking to one’s sense of fairness.” That court cited Ms. Rubino’s lack of prior discipline and her expressions of remorse. No word yet whether the City will appeal to New York’s highest court.

Washington Residents Least Likely to Curse on the Phone: The Marchex Institute reports that Washingtonians are less likely to curse on the phone than residents of any other state. Researchers examined more than 600,000 phone calls placed by consumers to businesses across 30 industries, and found that Washington residents were least likely to use specified offensive words. Evergreen State residents also ranked in the top third of the country for saying “please” and “thank you.”

Watch Your Tweets – We Know Where You Live: Students at Humboldt State University in California traced the origin of 150,000 tweets, finding that most with racist and homophobic content came from users in smaller towns and rural areas.  They even developed a map, so curious users can find where there are concentrations of offensive tweeters.  In Washington state, hot spots for objectionable tweets are Aberdeen and rural areas west of Olympia.

Productivity = 10,000 Steps On a Single Conference Call: A recent New York Times report covers the growing trend of treadmill desks and stand-up work stations in the workplace. Expect to hear more about the stand-up work trend in the new year, as the National Institute for Occupational Safety and Health (NIOSH) has launched a pilot program in its own offices to assess the possible health benefits for American workers.

Productivity = Maximizing Your High Maintenance Employees: Fortune’s “Ask Annie” column addresses the problem of managing “high-maintenance, high-performance” employees.

Productivity = Baby Animal Pictures: The Washington Post and PLOS One report that work performance will improve after workers look at pictures of kittens, puppies and other little critters.  Researchers from Hiroshima University found that university students who viewed pictures of baby animals did more productive work afterward, compared with those who saw pictures of adult animals or pleasant food.  We especially like the baby pandas, and feel really productive now.

Employers with severance, change in control or other deferred compensation obligations that permit employees to determine the timing of the payment by deciding when to execute releases or other documents should determine whether those agreements or arrangements violate the Internal Revenue Code (the “Code”). If so, there is an opportunity to correct the problem, but it is important to act before the end of the year.

The Potential Tax Problem

Internal Revenue Code section 409A governs non-qualified deferred compensation arrangements, including many change in control, severance and employment arrangements (generally, “arrangements”). Failure to comply with section 409A results in negative tax consequences to employees covered by the arrangements.

Under many of these arrangements, payments are available only if the employee signs an additional agreement, often a release of claims or a noncompetition agreement. For example, some employment agreements provide for payment of severance after termination of employment, but only if the employee signs a separate release of claims. Depending on the wording of the employment agreement, payment might be scheduled on a date certain (such as 60 days after termination), while other agreements set payment based on when the employee chooses to sign the document.

In 2010, the IRS announced that some arrangements that schedule severance payments based on when the employee signs the document may violate section 409A. The IRS reasoned that an employee should not be able to choose the year in which payment would be made and therefore reduce taxes.

We note that this problem does not affect many arrangements. A severance arrangement will not be subject to challenge under section 409A if:

  • Severance is paid only upon involuntary separation from service or resignation due to “good reason” as defined by section 409A; and
  • The total amount of severance is less than the lower of (i) twice the employee’s annual compensation, or (ii) $500,000.

In addition, section 409A will continue to have no application to payments that are only briefly deferred (i.e., “short term deferral”).

The IRS will permit employers to amend potentially noncompliant arrangements in effect before January 1, 2011 by adopting a correction provision approved by the IRS. However, the amendment must be adopted by December 31, 2012.

What Employers Should Do

Employers can avoid section 409A problems due to these severance issues by taking the following steps before the end of the year for all arrangements that first came into effect in 2011 and 2012:

  1. Review each arrangement to determine whether it is subject to section 409A and, if so, whether its terms may create a concern under the IRS announcement.
  2. If there is any question whether the severance arrangement poses problems under section 409A, consult with employment or benefits counsel.
  3. If there is a concern under section 409A, prepare an amendment to the arrangement. The amendment would schedule severance payments on a fixed date or during a fixed period after termination of employment. Note that the amendment need not eliminate the usual requirement of a release of claims; it only would prevent the employee from having the opportunity to time the tax year of payment.
  4. If necessary, obtain written consent from affected employees.
  5. Include a statement of these steps as part of the employer’s 2012 income tax return.

If you would like assistance in determining whether any arrangements require amendments prior to December 31, 2012, please contact Scott Galloway (206.447.8919; gallj@foster.com) or Steve Peltin (206.447.6215; pelts@foster.com).



Most organizations attempt to motivate employees through positive reinforcement – rewarding good behavior and performance through praise, compensation, or other benefits. Negative reinforcement – such as harsh criticism, threats of termination, or loss of compensation or benefits – often is believed to reduce motivation and therefore lower performance.

NPR reports on a new study that challenges these beliefs, at least for public school teachers. Three groups of teachers in Chicago Heights, Illinois were asked to raise student achievement test scores. One group received no special incentives. The second group was promised a bonus if student math scores improved. Teachers in the third group received an immediate bonus of $4000, with a contract requiring return of the money if student scores did not get better.

The results? The first two groups performed about the same. Teachers who were promised a bonus achieved no better results than teachers who were asked to improve scores without any financial benefit. However, the teachers who received bonuses in advance did far better than the other two groups. The researchers believe that the third group was highly motivated by “loss aversion” – the idea that once a person has a benefit, it would be very painful to give it up.

The Chicago Heights research is preliminary and may not translate well to other workplaces. And many workers and employers would be uncomfortable with the idea of contingent compensation. But perhaps there is a place for “loss aversion” in your organization.

EEOC Releases Charge And Litigation Statistics: The EEOC has released its final statistics for fiscal years 2009-2011. Among other things, the agency released state-by-state statistics detailing the number and types of discrimination charges filed by individuals.

Beat The Heat: As summer heat bears down on much of the country, it’s a good time for employers to review state and federal heat exposure rules. OSHA’s Campaign To Prevent Heat Illness raises awareness about the hazards of working outdoors in hot weather. OSHA’s educational resources provide valuable information to employers on heat illnesses and related prevention measures. At the state level, the Outdoor Heat Exposure Rule applies to Washington employers from May 1 to September 30 each year. Employers with employees who work outdoors and are exposed to high temperatures must provide training for workers and actively encourage workers to stay hydrated. The Department of Labor and Industries’ website provides training modules and related background information.

Washington Weekends: School is out and summer is almost here, which means it’s time to plan your summer weekends. From scenic natural beauty, wine tasting, shopping, and more, check out the Experience Washington website. And for those of you in the Seattle area, it’s never too early to plan your Seafair activities.