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Beginning July 1, 2022 – New Sexual Harassment Obligations for Chicago Employers

Stopping sexual harassment where religious communities meet

On April 27, 2022, Chicago’s City Council approved important amendments to Chicago’s sexual harassment laws. These changes impose additional requirements on covered employers to provide notice of the new sexual harassment laws and enhanced training. These changes also expand the type of misconduct covered under the ordinance and increase the penalties for businesses that violate the ordinance’s requirements.

What Was Changed

1. As of June 4, 2022, the definition of “Sexual Harassment” was amended to include “sexual misconduct,” which is now defined as “any behavior of a sexual nature which also involves coercion, abuse of authority, or misuse of an individual’s employment position.”
2. As of July 1, 2022, covered employees must have a written policy regarding sexual harassment that complies with the ordinance, and must also display a poster regarding sexual harassment.
3. As of June 4, 2022, the time period within which the Chicago Commission on Human Relations (“Commission”) must notify the respondent (the person causing harm) increases from 10 days to 30 days to mitigate against any retaliation.
4. Charging parties now have 365 days, instead of 300 days, to file complaints with the Commission.
5. As of July 1, 2022, all covered employers must provide enhanced training each year that includes: (a) 1 hour of sexual harassment prevention for all employees; (b) 1 hour of bystander training; and (c) 1 hour of additional training for all supervisors and managers.
6. As of June 4, 2022, penalties for violations increased from $500 – $1,000 per violation to $5,000 – $10,000 per violation.

What Should Covered Employers Do?

The obligations for covered employers go into effect on July 1, 2022. Employers will need to do several things to ensure they are compliant and to avoid the significant increase in penalties:

• Update or draft a sexual harassment policy to comply with the new changes.
• Post the updated poster regarding sexual harassment.
• Update annual sexual harassment training programs to include the additional training required by the City of Chicago.

Illinois’ current sexual harassment training template is sufficient for 1 hour of training required by these changes. However, covered entities will need to provide up to an additional 2 hours of training. The City of Chicago will create separate training modules for employers covering the additional hour of training for supervisors and managers, as well as the additional hour for bystander training. These modules will be available by July 1, 2022.

These changes go into effect shortly, and it is important for employers to take steps to meet their obligations imposed by the new Chicago sexual harassment laws. If you have questions about how Levin Ginsburg can help, please reach out to Walker R. Lawrence, a partner in the employment law practice at Levin Ginsburg, at 312-368-0100 or wlawrence@lgattorneys.com.

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Do you Have an Up-To-Date Buy-Sell Agreement?

28,746 Buy Sell Business Agreement Stock Photos, Pictures & Royalty-Free Images - iStock

Judy and John started ABC Manufacturing Co. in 1980.  At the time, they outsourced all their manufacturing needs.  They had no employees and leased a small warehouse.  They prepared a “buy-sell” agreement restricting the transfer of their shares to anyone else and agreed that a “fair purchase” price would be the “book value” of the business.  At that time, the company was not profitable and Judy and John each borrowed the necessary capital to acquire the furniture, furnishings, and equipment of the business.  They also contributed whatever funds were required for the expenses of the business.

The business took off quickly.  Within five years, the sales were $5,000,000 annually.  They hired a sales force and other employees.  Then the business really exploded.  They bought a warehouse and began to manufacture their own products.  The business expanded into several locations and employed 150 employees.  Revenues reached $100,000,000 per year.

Then the unexpected happened.  John suffered a stroke and was unable to return to the business.  According to the buy-sell agreement, he was entitled to receive one-half the “book value of the business” within one year.  According to the buy-sell agreement, John’s share of the company was to be determined by taking the book value of all the assets, and deducting any debt of the business.

Unfortunately for John, ABC Manufacturing Co. was worth substantially more than “book value.”  The main assets of the business were greatly depreciated for book purposes.  The equipment had very little book value and the real estate had also depreciated for book purposes.  The “fair market value” of the real estate was considerably higher.  Based upon “book value,” John was entitled to receive approximately $5,000,000.  In fact, the business had recently received an unsolicited offer for $25,000,000.

This resulted in a “good deal” for Judy.  But she was lucky.  What if she had suffered the stroke?

A buy-sell agreement and its valuation process should be periodically reviewed to ensure that it continues to meet the owners’ needs and expectations.  Suppose the value was based on “fair market value,” which at the time was minimal and was required to be paid within one year?  Now, perhaps fair market value is $25,000,000.  Could the remaining owner’s business pay $12,500,000 in one year?

Events which might cause owners to review their existing buy-sell agreement include:

  • Admission of other shareholders
  • Use of life insurance or disability insurance to fund a purchase
  • Change in tax status, such as from a C-corporation to an S-corporation or a partnership
  • Changes in the business such as having new lines of business, or changing the fundamental business (for example, going from manufacturing to distribution, or to brokered sales)
  • If the shareholders acquire assets for use in the business (for example, they acquire real estate and lease it to the business)

If you have any questions regarding your existing buy-sell agreement or the preparation of a new buy-sell agreement, please call Levin Ginsburg at (312) 368-0100 and ask to speak with Morris Saunders or any of our attorneys in our business transactions department.

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Employers Beware – The NLRB May be Coming for Your Handbook

Employee Handbook And Policies – Team Smart HR

Employee handbooks are common in most businesses, and employers often prepare one (or find a template) and then forget about it. During the Obama administration, handbooks became a hot topic in the employment arena because the National Labor Relations Board (“NLRB”) attacked employee handbooks from every conceivable angle by arguing that a harmless neutral policy infringed on an employee’s right to engage in protected concerted activity. Handbooks became boring again under Trump, but with the increase in unionization across the country, the NLRB has once again set its sights on employee handbooks. The NLRB recently filed a complaint against Starbucks alleging that 19 of its policies violated its employees’ right to exercise their protected rights.

The NLRB complaint was surprising because its allegations challenge NLRB’s own precedent ruling that a facially neutral policy will be reviewed under a “reasonable interpretation” standard. Under that rule, if a policy does not, on its face, interfere with an employee’s rights, it is presumed lawful.

The Starbucks complaint filed by the NLRB appears to be attacking this precedent because several of the policies in the complaint are facially neutral. The NLRB argued that the following policies violated employees’ rights to engage in protected concerted activity:

  1. Prohibition Against Harassment
  2. A Respectful Workplace Is Everyone’s Responsibility
  3. Shirts, Sweaters and Jackets
  4. Pins
  5. Personal Mobile Devices
  6. Personal Telephone Calls and Mail
  7. Social Media
  8. Soliciting/Distributing Notices
  9. Video Recording, Audio Recording and Photography
  10. Acceptable Use of Starbucks Electronic Communications Systems
  11. Confidentiality
  12. Conflicts of Interest
  13. Media Inquiries
  14. Mobile Computing
  15. Requests for Partner Information
  16. How We Communicate
  17. Conflict Resolution
  18. Corrective Action
  19. [Back Cover]

Why is this important?

Employers will need to review their employee handbooks if the NLRB reverses its precedent. With the NLRB and union activity growing recently, businesses may find themselves facing allegations that their employee handbook is infringing its employees’ rights to unionize. This situation only highlights how important it is for business to review their employee handbooks at least once per year. For additional help navigating these issues, feel free to contact Walker R. Lawrence, a partner in the employment law practice at Levin Ginsburg, at wlawrence@lgattorneys.com, or (312) 368-0100.

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Class Action Claims Proceed Swimmingly Against ALDI

On May 17, 2022, the United States District Court for the Northern District of Illinois entered order denying the national grocery retailer ALDI’s motion to dismiss class action claims alleging that ALDI falsely and deceptively marketed its Atlantic Salmon as “sustainably sourced.”

The class action complaint alleges that contrary to ALDI’s representation “Simple. Sustainable. Seafood.” on their salmon packaging shown below, ALDI sources its salmon from environmentally destructive fish farms.

Class Action Alleges Aldi's 'Sustainable' Atlantic Salmon Farmed in Ways that 'Shock the Conscience'

Among other things, the plaintiffs allege that the fish farms used to source the salmon apply unsustainable practices by corralling thousands of fish into cages in natural waterways, which poses a risk to aquatic life. Accordingly, the plaintiffs assert claims for false advertising, breach of warranty, unjust enrichment and injunctive relief.

In its motion to dismiss, ALDI argued that consumers are not misled by its labeling. ALDI contended the label “BAP Certified” (meaning Best Aquaculture Practices) also appears on the package, and when “Simple. Sustainable. Seafood.” and “BAP Certified” are read together, a reasonable consumer would know that the salmon is sustainable because it is BAP certified.

The court disagreed. It reasoned that the labels were not only separated by proximity and color scheme on the package, but that reasonable consumers would not know what the BAP label means – much less know how it relates to ALDI’s claim of sustainability. The court also ruled that sufficient facts were pled to show injury because the class representative claimed she paid a premium for the salmon, but did not receive a sustainable food product as advertised. Therefore, the court declined to dismiss the false advertising and breach of express warranty claims.

The court did, however, dismiss the plaintiffs’ unjust enrichment and injunctive relief claims, ruling that (a) the express warranty (i.e., that the food product was sustainable) precluded an unjust enrichment claim concerning the same subject matter, and (b) the class representative could not establish that she will be harmed again without an order prohibiting ALDI from marketing the fish as sustainable, because she could simply choose not to purchase the salmon.

Do you look at the labels on food packaging when you grocery shop? They may have major implications. To understand the risks and benefits associated with advertising or defending claims brought against you regarding similar marketing strategies, please contact Joseph A. LaPlaca of Levin Ginsburg at (312) 368-0100 or jlaplaca@lgattorneys.com.

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Today’s BIPA Ruling is Brought to You By the Letter I

Important Developments in lL Biometric Information Privacy Act

Some judges have an extraordinary ability to explain their decisions in an easily understood and relatable manner. Such was the case in a very recent decision involving whether an employer’s commercial general liability insurance policy (“CGL”) covered an employee’s claims under the Illinois Biometric Information Privacy Act (“BIPA”). In State Automobile Mutual Insurance Company v. Tony’s Finer Foods, No. 20-cv-6199, Judge Steven Seeger of the United States District Court for the Northern District of Illinois was tasked with deciding whether a standard exclusion in a CGL policy relieved the insurer of its duty to defend a BIPA claim. BIPA is an Illinois statute that, among other things, requires private entities that obtain biometric information from an individual to first inform the individual that the information was being collected and stored and obtain a release from the subject. In the employment context, oftentimes employers collect biometric information (such as fingerprints) for time keeping purposes. In the last seven years, litigation over alleged BIPA violations have exploded and employers often look to their insurance companies to assist in the defense. Judger Seeger ultimately held that the “employment-related practices” exclusion did not preclude insurance coverage, undoubtedly good news for employers.

An “Employment-Related Practices” exclusion is common in CGL policies. Essentially, the exclusion precludes coverage for certain employment-related claims made by employees against their employers. In the policy at issue in the State Automobile case, coverage was specifically excluded for “personal or advertising injury” to “any person” arising out of  “(a) refusal to employ that person; (b) termination of that person’s employment; or (c) employment-related practices, policies, acts or omissions, such as coercion, demotion, evaluation, reassignment, discipline, defamation, harassment, humiliation, or discrimination…”  The court recognized that subparts (a) and (b) were not at issue and the only question was whether the underlying lawsuit was about an injury to the employee arising out of “employment-related practices.”  The insurance company argued that the exclusion applied because the case arose out of the manner in which employees clock in and out of work.  While the argument was “an appealing one,” the court took a closer look at the exclusion and determined that it did not apply. First, the court recognized that the exclusion was the “third part of a trilogy” with the first two parts covering hiring and firing. The judge reasoned that the third subpart, “arising out of employment related practices,” read with parts one and two appears to apply specifically to adverse employment action “and not any and all claims about something that happens at work.”  The judge further stated that even though clocking in or out is an employment practice or policy, the fact that the text then contains a “laundry list” of targeted disciplinary practices, “using one’s finger to clock-in and clock-out is an awkward fit in that string, at best.”  In determining that the third clause, when read in tandem with the first two clauses, could not be interpreted as generally excluding all claims arising out of employment, Judge Seeger cited to the well-known and respected Sesame Street doctrine of “one of these things is not like the others – one of these things just doesn’t belong.”  After recognizing that other courts have come to differing conclusions, the court nonetheless ruled in favor of the employer and denied the insurer’s motion for summary judgment on whether it had a duty to defend the BIPA claim.

If you would like to discuss these or similar issues in more detail, please contact Howard L. Teplinsky at (312) 368-0100 or hteplinsky@lgattorneys.com.

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No More Surprise Medical Bills

NO Surprises Act 2022 | TeamstersCare 25

The No Surprises Act (“Act”) for healthcare went into effect on January 1, 2022.  There are several key provisions.

Most significantly, the “Self-Pay Rule” under the Act generally requires healthcare facilities and providers to:

  1. Post required notices concerning an “uninsured (self-pay)” patient’s right to obtain a good faith estimate at the provider’s offices and on its website.
  2. When a person seeks care, determine whether the patient is a self-pay patient.
  3. Inform self-pay patients orally and in writing that they have the right to obtain a good faith estimate of charges upon request or upon scheduling an appointment.
  4. Provide the required written good faith estimate to the self-pay patient within the time required, as follows:
  • If the service is scheduled at least 3 business days in advance: not later than one 1 business day after the date of scheduling;
  • If the service is scheduled at least 10 business days in advance: not later than 3 business days after the date of scheduling; or
  • If a good faith estimate is requested by a self-pay patient, or if a patient inquires about the cost of care: not later than 3 business days after the date of the request.

The Self-Pay Rule requirements seem to apply only to self-pay patients who schedule their appointment at least 3 days in advance, and possibly to those who request an estimate in advance.  However, in the case of a patient who schedules an appointment less than 3 business days in advance, the rules require the provider to provide the good faith estimate not later than 1 business day after the date of such scheduling.  The rules also acknowledge that in the case of emergency care, a good faith estimate may not be required.

The main consequence for billing an amount in excess of the good faith estimate is that a patient may initiate a Selected Dispute Resolution process and likely avoid paying his or her full bill if the actual charges are more than $400 over the estimated charges. In addition to the Selected Dispute Resolution consequences, failure to comply with the No Surprises Act may subject the provider to additional adverse action by state or federal agencies. States have the primary responsibility for enforcing the No Surprises Act and related regulations; however, if a state fails to substantially enforce the requirements, the U.S. Department of Health and Human Services can impose a corrective action plan and/or monetary penalties of up to $10,000 per violation.

If you would like to discuss these or similar issues in more detail, please contact Jonathan M. Weis at (312) 368-0100 or jweis@lgattorneys.com.

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The Great Resignation – Employers Beware

Resignation Letter" Images – Browse 1,242 Stock Photos, Vectors, and Video | Adobe Stock

The job market continues to be volatile, and businesses are willing to take more risks to hire proven talent. That means taking the best people from their competition. Business owners therefore need to start preparing for when (not if) a key employee leaves to join a competitor.

Below are some ideas to help you prepare for a key employee’s potentially sensitive exit to a competitor and ensure your business is protected: begin preparing and setting up a plan of action so you are prepared to handle.

• Review current restrictive covenant and confidentiality agreements. This is particularly important right now because non-compete laws are changing in Illinois and in other states in the US.
• Update confidentiality agreements to require employees to submit information about their digital footprint on their personal devices, including making those devices available for a forensic review upon the employee’s exit.
• Consider implementing phantom equity programs or bonus plans.
• Evaluate your hybrid-work environment and focus on flexibility.
• Audit your IT protocols and ensure your most important data is being monitored and its confidentiality maintained.
• Limit which employees get access to sensitive information – gone are the days that every employee gets access to all your information.

When an employee leaves to join a competitor, employers should immediately take certain preliminary steps to identify possible wrongdoing:

• Preserve the employee’s email and activity logs. This data is often auto deleted unless you place a hold on the information.
• Review emails sent to personal email addresses.
• Review all emails sent with attachments.
• Review activity logs.
• Preserve any devices used by the employee.
• Conduct an internal investigation to determine if there has been any other unusual activity.
• Retain a computer forensic expert.

Once these preliminary steps are completed, consider sending a cease-and-desist letter to the former employee and the new employer to ensure any damage is contained. Depending on the circumstances, filing a lawsuit (including seeking immediate injunctive relief) may offer the best protection for your business.

The attorneys at Levin Ginsburg can help businesses prepare for and react to the departure of key employees so that any impact is mitigated. For additional help navigating these issues, feel free to contact Walker R. Lawrence, a partner in the employment law practice at Levin Ginsburg, at wlawrence@lgattorneys.com, or (312) 368-0100.

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Licensing Your Product

What is Product Licensing and How to Use it with Your Invention

You have spent years — maybe even decades — developing and creating your product. Finally, your product is ready to be put to market, and you plan on licensing it to other companies or individuals. But how do you protect yourself and your rights in the product while allowing another person or entity to use it?

The first step is knowing that nobody understands your product better than you. You should learn the reasons why the licensee plans to use your product and what other entities or individuals will have access to it (e.g., third parties working with the licensee). Next, consider whether you want to continue developing the product while licensing it, or if the product is in “final” form. This should spark other considerations, including:

• Ownership rights in your product – the licensee must realize that, unlike full ownership, the license is merely a group of specific rights that the licensee obtains while product ownership remains with you.
• How long and for what price should the license be granted – this will be dictated by the market, but research should be done to ensure profitability.
• Any required maintenance on the product while it is being licensed and what that process will entail – will there be maintenance fees associated with the licensing?
• Audit rights – determine the number of users of your product and ensure you are being compensated appropriately.
• Should specific restrictions or permissions be in place to alter or improve the product? Who owns any alteration or improvement made during the licensing period?
• Indemnification – will licensee defend you against claims made by third parties? Determine which claims the licensee is responsible for and which claims you are responsible for.
• Taxes – Be specific about the allocation of tax liability. Certain states have laws that restrict the ability to allocate.
• Limitation of liability – if the product malfunctions or is defective, you may be on the hook for things such as the lost profits of the company to whom you licensed the product unless your license agreement states otherwise. Additionally, you likely want licensee to provide proof of insurance before licensing.

These are just some of the things you should consider before licensing your product. Along with other contractual terms and conditions, these items should be included in a written license agreement signed by both parties. It is better to work with your legal, technical, and finance teams before finalizing a written license agreement to ensure profitability and the full protection of rights in your product. Levin Ginsburg regularly deals in the licensing of products to help grow businesses. If you are considering licensing your product and would like to discuss these, or any other related issues, please contact Joseph A. LaPlaca at jlaplaca@lgattorneys.com or (312) 368-0100.

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What Does your Insurance Policy Actually Cover?

New York Ends the Year with Onerous New Insurance Coverage Disclosure Rules for Defendants in Product Liability Litigation | Product Liability Advocate

Insurance is a key part of managing risk and protecting against unexpected financial losses. Individuals and businesses alike can benefit from the right coverage, whether it be your personal auto policy, commercial general liability policy, or property damage coverage. But don’t assume that just because you have a policy you are fully covered. Insurance policies are often full of exclusions and fine print. Even with the most reputable insurers, policies are rarely “one size fits all.”

A recent Illinois appellate court decision is a prime example. In Farmers Insurance Exchange v. Cheekati, et al., 2022 IL App (4th) 210023, the insureds were homeowners who, while unable to sell their property, rented it to a tenant. That tenant was injured when a defective staircase at the home collapsed. The insureds made a claim under their homeowner’s policy with Farmers, undoubtedly expecting they would be covered for the injury occurring in their home. They were not—Farmers denied coverage based on two policy exclusions: the first preluded coverage for bodily injury to any insured or any “resident of the residence premises;” the second precluded coverage for bodily injury “in connection with the rental or holding for rental” of the premises. Based on those exclusions, the appellate court affirmed the trial court’s judgment in favor of Farmers, declaring that it had no duty to defend or provide coverage to its insureds.

The lesson here: review your policy documents carefully and make sure you are getting the coverage you think you are paying for. For more information regarding these or similar issues, please contact Mark L. Evans at mevans@lgattorneys.com or (312) 368-0100.

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Important Change to the Illinois Equal Pay Act

California Fair Pay Act vs Equal Pay Act, What's the Difference?

An amendment to the Illinois Equal Pay Act (“Illinois EPA”) that took effect January 1, 2022 clarified that the Illinois EPA does not prohibit employers from discussing with job applicants the unvested equity or deferred compensation that the applicant would forfeit upon resigning from the applicant’s current employer.

While the Illinois EPA continues to restrict employers’ ability to ask applicants questions about their compensation, the amendment clarifies that employers may discuss unvested equity and deferred compensation, only if an applicant for employment voluntarily discloses that the applicant would forfeit unvested equity and/or deferred compensation by resigning from their current employer. If an applicant voluntarily discloses that they will forfeit unvested equity or deferred compensation, employers may request that the applicant verify the aggregate amount of such compensation.

Employers and employment recruiters should be cognizant of this important change to the Illinois EPA, particularly given the current labor market. Further, employers and employment recruiters should be careful to not violate the Illinois EPA if the applicant does not voluntarily disclose compensation from his or her prior employer.

Having an experienced employment attorney evaluate your employment issues is critical to avoiding problems resulting from failing to comply with state and federal law. For more information regarding these or similar issues, please contact Mitchell S. Chaban at mchaban@lgattorneys.com or (312) 368-0100.

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