Nebraska Supreme Court Upholds PSC Approval of Keystone XL Route

On August 23, the Nebraska Supreme Court issued its long-awaited opinion in the Keystone XL pipeline route approval case that was argued before the court in fall, 2018. Issued as In Re Application No. OP-0003 and cited as 303 Neb. 872, the opinion stems from a suit brought by landowners and advocacy organizations in opposition to the Nebraska Public Service Commission's decision in November of 2017 to approve the Mainline Alternative Route (MAR) for the Keystone XL Pipeline.

In a 59-page, unanimous decision, authored by Justice Funke, the Court stated:

"In summary, the PSC is an elected body created by the Nebraska Constitution to serve the public interest... the legislature determined that '[t]he construction of major oil pipelines in Nebraska is in the public interest...' The Legislature designated the PSC as the agency responsible for determining which pipeline route is in the public interest. After months of careful consideration, the PSC determined that the evidence showed that the MAR (Mainline Alternative Route) is in the public interest. Upon de novo review, we find there is sufficient evidence to support the PSC's determination that the MAR is in the public interest. The assignments of error are without merit."

While those who argued in favor of the project welcomed the news, those who have long opposed the project, like Bold Nebraska founder and current Chair of of the Nebraska Democratic Party, Jane Kleeb, issued comments stating the Legislature, or a new President in 2020 could seek to undo the opinion issued by the Supreme Court.

Nebraska Supreme Court Draws a Fine Line Between Federal and State Arbitration Laws in Home Sales

On any given day, millions of Americans are entering into contracts both big and small. Some of these contracts represent the terms and conditions for a major life decision for those people, while other contracts represent transactions that no one would give a second thought to. For example, as you are reading this article there is likely someone signing their name to a contract for a mortgage on the home they plan to raise their children in. Meanwhile someone somewhere else is agreeing to the terms and conditions of a mobile app designed to super impose animated animals over their face in a selfie. Regardless of the seriousness of the contract, people are more often than not agreeing to arbitration clauses that they never read.

Most people do not even realize that they are agreeing to arbitration clauses that will keep them out of the courthouse when they enter into these contracts. Even more people do not realize that arbitration is governed by one of two sets of laws in most cases, and parties who are not carefully drafting those clauses might find them unenforceable. Recently, in a nasty dispute between a property management company and a home buyer, the Nebraska Supreme Court in Garlock v. 3DS Properties, L.L.C., considered whether an arbitration clause found in the contract for the sale of a home was governed by Nebraska arbitration law or federal arbitration law.

In Garlock, the Garlocks purchased a home from 3DS Properties. The Garlocks later sued 3DS Properties for damages they alleged were caused by serious problems in the home which 3DS Properties did not disclose as required by law. The Garlocks brought this lawsuit in state court, and 3DS Properties sought to have it removed from state court and taken to arbitration. Both the Garlocks and 3DS Properties disagreed on where the Garlock’s claim should be considered. The dispute lasted several years until it eventually landed in the Nebraska Supreme Court. That dispute highlighted two important distinctions that should always be considered by anyone entering into a contract with an arbitration clause in Nebraska.


Because the Garlocks wanted their case to be heard in state court rather than in an arbitration court, they argued that the arbitration clause in the contract between them and 3DS Properties was unenforceable under Nebraska’s Uniform Arbitration Act. The Garlocks based this argument on the fact that the contract between them and 3DS Properties contained a clause above the signature line that read:


The Garlocks reasoned that because this notice was not underlined it was not enforceable under Nebraska’s Uniform Arbitration Act. The Nebraska Uniform Arbitration Act requires that all contracts with binding arbitration clauses include the above notice which must be capitalized and underlined in order to be enforceable. Because this notice was not underlined the Nebraska Supreme Court reasoned that, standing alone, the arbitration clause in the contract between the Garlocks and 3DS Properties was unenforceable on its face under Nebraska law.

This one minor detail was missed by 3DS Properties in the drafting of its real estate sale contract and highlights the importance of utilizing a qualified attorney in the contract review process. 3DS Properties was not without a strong counterargument, however.


3DS Properties badly wanted to have this dispute heard in arbitration court. To do this, 3DS Properties had to counter the Garlock’s argument that the arbitration clause was unenforceable because it failed to have an all capitalized and underlined notice. Rather than accepting Nebraska law as the governing choice of law, 3DS Properties argued that the arbitration clause governed by federal arbitration law and therefore did not have to include an underlined notice.

This argument was based on the Nebraska Supreme Court’s holding in Wilczewski v. Charter West National Bank where the Court held that federal arbitration laws applied to all contracts formed in interstate commerce under Title 9 of the United States Code. In cases where federal arbitration laws apply, contracts do not have to meet the requirements under Nebraska’s Uniform Arbitration Act. In Wilczewski, the sale of a home under foreclosure contained an arbitration clause which the buyers argued was unenforceable under Nebraska’s Uniform Arbitration Act. There, the Court reasoned that the arbitration clause did not have to comply with Nebraska’s Uniform Arbitration Act because the sale of homes in foreclosure are done by banks who are integral parts of the stream of interstate commerce.

3DS Properties tried to harness this reasoning in their dispute against the Garlocks. The Nebraska Supreme Court, however, disagreed when they determined that the simple sale of a home, rather than a foreclosure done by a bank, was purely an intrastate activity rather than an interstate activity. In other words, contracts governing the sale of real estate in Nebraska which do not involve parties from other states or lenders from other states is considered an intrastate activity and must conform to the requirements of the Nebraska Uniform Arbitration Act for arbitration to be binding.


First, the details really do matter. Whether you are drafting a contract, or you are agreeing to a contract someone else has drafted it is important to fully understand all terms, conditions, and laws that govern those terms and conditions. In the case of Garlock, the parties could have avoided thousands of dollars in expenses, and years of litigation by simply underlining a single sentence in their sale contract. Moreover, the parties could have saved a great deal of trouble by having a qualified attorney review their sales contract prior to its execution.

Second, the context of a contract can completely change the arbitration laws it is governed by. If you are a party who prefers arbitration over traditional litigation, it is imperative that you understand the context in which your contract is being executed. In Garlock, the parties were selling a home in a simple real estate transaction and therefore the arbitration laws of Nebraska applied to the formation of their contract. However, had these parties been using an out of state lender, or selling the property in a foreclosure, the federal arbitration laws would have applied to the formation of their contract.

If you are in the middle of trying to sort out the contents of an important contract, please do not go it alone unless you fully understand the legal ramifications of what you are drafting or agreeing to. If you have questions about contracts, the clauses in those contracts, or arbitration and arbitration clauses make sure you get in touch with a qualified attorney before it becomes a mess you cannot get out of.

Title Defect Renders Collateral Useless; Bank Unable to Cover Losses from Loan Default

A recent Nebraska Supreme Court decision illustrates why individuals should always seek advice of counsel before entering into a financial agreement. In Foundation One v. Svoboda, the Nebraska Supreme Court affirmed a lower court’s ruling that a Bank could not recover vehicles pledged as collateral to secure a loan because a gap in title indicated the Borrower did not own the vehicles. 303 Neb. 624, ___ N.W.2d ___ (2019).

Foundation One loaned $200,000 to Jason Svoboda upon Svoboda pledging two Mack trucks as collateral to secure the loan. In order to maintain the priority of its claim to the vehicles the Bank paid $85,141.40 to remove several preexisting liens on the truck titles. When the Svoboda defaulted on the loan, the Bank repossessed both trucks, eventually selling one for $95,000. Before the Bank could sell the second truck, however, the legal owner intervened in the case.

The trial to determine the legal owner of the trucks brought some startling facts to light. Prior to obtaining the loan, and unbeknownst to the Bank, Svoboda had engaged in a scheme to fraudulently transfer title from the legal owner, Lehr, Inc., back to Svoboda, to use the trucks as collateral for his loan. This scheme left a gap in the trucks’ chain of title. Lehr, Inc. presented evidence at trial showing that the trucks were, at all relevant times, the legal property of Lehr, Inc., and not Svoboda.

The jury verdict ordered the Bank to return the truck remaining in its possession, and to pay an additional $95,000 to Lehr (the amount the Bank received for the sale of the other truck). The jury verdict left the Bank with the full $200,000 amount of the loan, less any payments made before the Borrower’s default. Reviewing the case on appeal, the Nebraska Supreme Court commented that the Bank is required to show a clear chain of title from any previous owners of the trucks to the Borrower, and from the Borrower to the Bank. Id. at 633, ___ N.W.2d at ___. Ultimately, the Bank could not claim an interest in either truck because “the evidence, on its face, . . . showed a break in the chain of ownership between Lehr and [the Borrower] and did not show clear title in [the Bank].” Id.

If the Bank had conducted a more thorough investigation regarding the vehicles offered by Svoboda, it would have avoided the loss in question.

Nebraska Supreme Court Upholds Decision of Zoning Board of Appeals Limiting Business Owner’s Use of Land

The Nebraska Supreme Court recently ruled on claims for a variance from the requirements of Omaha’s zoning code based alleging unnecessary hardship. The case is a helpful reminder of the importance of seeking legal advice before making substantial investments or changes relating to land use

Nebraska Legislature Considers Property Tax Relief Procedure for Property Owners Whose Property has been Damaged by a Natural Disaster

Lawmakers heard LB512, introduced by Senator Lou Ann Linehan, on April 9. The bill contains alterations in state tax law that were requested by the state Department of Revenue. The bill allows for a property owner to petition his or her county assessor for a reassessment of property value if the property was damaged or destroyed by a natural disaster. Senator Steve Erdman introduced an amendment, adopted 41-0, which would require the county assessor to report all real property destroyed by a fire or other natural disaster to the county board of equalization. The county board would then adjust the value. Senator Curt Friesen supported the amendment and stated that the amendment would not have a significant effect on a political subdivision tax revenue. Property owners who suffered significant losses in this year’s flooding should consider consulting with counsel to determine their options to reduce property tax liability.

Personal Assets are Not Protected If Corporate Formalities Are Not Followed

A recent Nebraska Supreme Court case illustrates the need for your business to comply with basic corporate formalities to protect yourself from personal liability.  In Thomas Grady Photography v. Amazing Vapor, the Nebraska Supreme Court held that a business owner must disclose his or her capacity as an agent of a corporation to escape personal liability for contracts made. 301 Neb. 401 (2018). Grady Photography filed suit against Amazing Vapor, MCJC Companies, Manuel Calderon, and Thomas Anderson for breach of contract for failing to pay on two contracts for photography services.  The court ultimately held that Anderson was individually liable for breach of both oral contracts because Anderson did not inform Grady of the corporate status of Amazing Vapor throughout the entirety of their business relationship. 

Erickson | Sederstrom’s attorneys have significant experience working with entities of all sizes to ensure that their corporate structure protects them from personal liability.  If you have any questions about whether your entity is in fact protecting you from personal liability or if you need assistance in forming a corporation, limited liability company or other entity to protect your personal assets, attorneys Paul Heimann, Bill Foley, Andrew Collins and Michelle Elkin would be happy help. 

Nebraska Supreme Court emphasizes statute of limitations and uniformity of policies in employment discrimination and retaliation claims

The Nebraska Supreme Court recently ruled on claims for disability discrimination and alleged retaliation against an employee for her filing of a worker’s compensation claim. Neither claim withstood a motion for summary judgment. The case is a helpful reminder of the importance of adhering to your policies in every instance and also shows how strictly courts will apply statutes of limitations, to an employer’s benefit here.

Facts of the Case

            Regional West Medical Center in Scottsbluff employed Melinda Brown as a customer service representative in its financial services department. She fell in the parking lot on August 16, 2011, injuring her hand and wrist. Ms. Brown filed a worker’s compensation claim with the medical center. She took twelve weeks of leave under the Family Medical Leave Act.

            Following the FMLA leave, Ms. Brown was granted another eight weeks of director-approved leave, consistent with the medical center’s policies. Also consistent with such policy, the eight week leave was granted but the medical center did not guarantee her position would be held for her at its expiration, and informed her she should apply for open positions during the leave. This leave was to expire on January 7, 2012.

            While on leave, Ms. Brown submitted a request for a reasonable accommodation to perform her customer service job. Her alleged impairment was limited use of her injured hand. The accommodation requested was simply to have a job to come back to after she was cleared of restrictions by her physician. Ms. Brown never returned to work after the accident or after her periods of approved leave.

            Instead, she was placed on furlough status on January 8, 2012, in further accord with Regional West Medical Center’s policies. The policy was to place an employee who does not return from leave on furlough status for up to one year from the date of the initial absence, during which she continued to receive employee benefits, was not paid salary, and in which her job was not held for her. To return during the one-year furlough, Ms. Brown would have to apply and be approved for an open position at the medical center. Ms. Brown received a letter January 12, 2012 informing her of this.

            Ms. Brown’s furlough expired on August 15, 2012; one year after her work-related injury absences began. She applied for no jobs at the medical center during furlough. On that same date, the medical center sent Ms. Brown a termination letter, citing the expiration of the furlough as the reason for “administratively ending your employment.”

Employee’s Claims and Suit

            Ms. Brown filed a charge of disability discrimination under the Americans with Disabilities Act and the Nebraska Fair Employment Practice Act on December 20, 2012. She claimed that she was denied a reasonable accommodation and terminated because of her disability. The Nebraska Equal Opportunity Commission ultimately issued a right to sue notice.

            The ADA and NFEPA claims were brought in the District Court of Scottsbluff County along with a common claim of retaliation for filing a worker’s compensation claim. That court entered summary judgment on all claims, and the employee appealed to the Nebraska Supreme Court.

            The issue on appeal with regard to the ADA and NFEPA claims of discrimination involved the statute of limitations for filing those charges with the NEOC. There was no genuine dispute of material fact that Ms. Brown was sent the letter notifying her of the expiration of her furlough’s expiration date and that she would be terminated upon that occurrence. The date of the letter was January 8, 2012, and she acknowledged receiving it soon after within her NEOC charge of discrimination.

            It was that letter that constituted the adverse act by the medical center against Ms. Brown. The letter was clear that she was going to be terminated on August 15, 2012 unless she applied and obtained another position during her furlough. She never even applied for another position during that time. Thus, the medical center’s decision was known to Ms. Brown in January 2012.

            A charge of discrimination under Nebraska and federal law must be filed with the NEOC within 300 days of the adverse action against the employee. The Court found that date was in January 2012 here, yet Ms. Brown did not file her charge until December 20, 2012, more than 300 days after the letter was sent to her. As a result, the Court affirmed the lower court’s dismissal of the claims because of the expired statute of limitations.

            The claim of retaliation for filing a worker’s compensation claim did not have to be submitted first to the NEOC or any agency. It was appropriately brought in court and within the requisite time period. However, that claim failed because the undisputed material facts showed it could not be proven to any reasonable jury at a trial.

            To establish retaliation in this context, a plaintiff must establish that she filed a worker’s compensation claim, that she was terminated from employment, and that a causal link exists between the termination and filing the claim. A retaliatory motive may be shown by proximity in time between filing the worker’s compensation claim and the termination, coupled with satisfactory prior work performance and good supervisor evaluations.

            In Ms. Brown’s case, the evidence indisputably showed that there were 20 weeks between the time of filing for worker’s compensation benefits and her administrative furlough. It was even longer until she was administratively terminated (which occurred one year after her first absence for the work-related injury). Most significant, Regional West Medical Center’s human resource officers had testified in depositions that they followed the absence, leave, and furlough policies to the letter and in the same manner as with employees similarly situated to Ms. Brown. Thus, there was no evidence of a retaliatory motive and the time between the worker’s compensation claim and the termination was not proximate.

Brown vs. Regional West Med. Ctr. 300 Neb. 937 (2018).

Takeaway for employers

            This case shows two important principles that repeat in employment claims. First, the statute of limitations can be powerful. Second, clear policies for human resources and supervisors to execute can be equally powerful. Applying those policies similarly in each instance can go a long way to negate any claim of improper motive or unfairness in the policy’s effects. If you have questions about how to craft a clear and easy to execute policy, keep your attorneys just a phone call or email away.

U.S. Supreme Court Takes Broad View of Qualified Immunity for Police Officers

       The United States Supreme Court recently held that a police officer who shot a woman holding a knife outside her home was entitled to qualified immunity because his actions did not violate clearly established statutory or constitutional rights that a reasonable person would have known. Kisela v. Hughes, 584 U.S. ___, 138 S. Ct. 1148 (2018).

       In May 2010, Andrew Kisela and other officers responded to a 911 call that a woman carrying a knife was acting erratically. Officers spotted Sharon Chadwick in the driveway of a nearby house. Then, Amy Hughes, matching the 911 description of the woman acting erratically, emerged from the house carrying a large knife. Hughes stopped near Chadwick, at which time the officers drew their guns. After officers told Hughes to drop the knife twice, Kisela shot Hughes four times. Less than one minute passed from the time the officers first saw Chadwick to when Kisela shot Hughes.

       Hughes sued Kisela under 42 U.S.C. § 1983, alleging Kisela used excessive force in violation of the Fourth Amendment, which the Court did not decide. Instead, it held Kisela was entitled to qualified immunity, even if a Fourth Amendment violation did occur.

       The Court explained that, “although existing case law does not have to be directly on point…existing precedent must have placed the statutory or constitutional question at issue beyond debate” to deny a police officer qualified immunity. Excessive force, particularly, “is an area of the law in which the result depends very much on the facts of each case, and thus police officers are entitled to qualified immunity unless existing precedent squarely governs the specific facts at issue.” Thus, an officer does not violate a clearly established right unless “the right’s contours were sufficiently definite that any reasonable official in the defendant’s shoes would have understood that he was violating it.”  The Court held the facts in Kisela were “far from an obvious case in which any competent officer would have known that shooting Hughes to protect Chadwick would violate the Fourth Amendment.”

       This decision is in line with other recent Supreme Court decision on excessive use of force by police officers.  Claimants asserting excessive use of force claims against police officers must overcome strong deference in favor of the police officers in order to prevail on their claims.

Interaction Between Nebraska Statutes Defining When a Judgment is Entered and Bankruptcy Law

Under federal law, filing a petition in bankruptcy implements an automatic stay regarding judicial actions against the debtor. The Nebraska Supreme Court has clarified whether a judgment violates the automatic stay when the judgment is announced verbally prior to a bankruptcy filing, but signed and file stamped after the filing.

In Doe v. Fireman’s Fund Insurance Co., Jane Doe filed suit in Lancaster County District Court against Red Willow Dairy, Jim Huffman and Ann Huffman. 287 Neb. 486 (2014). Jim and Ann Huffman owned Red Willow Dairy, and Doe alleged the company failed to investigate and supervise an employee that assaulted Doe. Doe filed a motion for default judgment on December 14, 2009, after all defendants failed to answer her complaint. On December 18, 2009, the court sustained the motion for default judgment and directed Doe’s attorney to submit a proposed order within seven days. On December 21, 2009, Red Willow Dairy and the Huffmans filed for bankruptcy.  On December 22, 2009, the judge signed an order for the default judgment, and the Lancaster County District Court Clerk file stamped the order.

As part of a bankruptcy settlement, Doe received rights the Huffmans and Red Willow Dairy might have against Fireman’s Fund Insurance Company for its actions relating to the original lawsuit. Doe filed a complaint against the company, alleging it breached its duty to defend Red Willow Dairy and the Huffmans. In return, Fireman’s filed a motion for partial summary judgment, arguing that the entry of the default judgment violated the automatic stay even though the court announced the judgment three days prior. The district court agreed and granted the motion for partial summary judgment.

Doe appealed the district court’s decision, arguing that signing the order previously announced and file stamping were only clerical in nature and Nebraska should adopt the ministerial exception referred to by United State Court of Appeals for the First Circuit. The “ministerial exception” reasons that when a judicial decree is so clear and unambiguous, the judicial action is complete. Any subsequent announcements that provide a court with no discretion do not violate the automatic stay rule.

The Nebraska Supreme Court declined to adopt this exception, noting that the exception contradicts Nebraska Statute §25-1301. The Nebraska law resolves any uncertainty regarding the commencement of the time to appeal a judgment by defining “judgment” as a decision that is rendered and entered. The court reasoned that the rendition in this case occurred when the default judgment was announced on December 18, 2009. The entry of the default judgment did not occur until December 22, one day after the Huffmans and Red Willow Dairy filed for bankruptcy. Because the district court did not sign and file stamp the judgment until December 22, it did not become a “judgment” until that day. The court reasoned that because the judgment was not finalized until December 22, it violated the automatic stay rule regarding the bankruptcy petition filed on December 21, 2009.

The Nebraska Supreme Court’s decision ensured that the definition of “judgment” stays clear and consistent in Nebraska. Although creditors in other jurisdictions do not violate the automatic stay rule when future proceedings involve only clerical matters, Nebraska creditors must be cautious when it comes to such proceedings.  If you have questions regarding application of the automatic stay rule with regard to collection actions, please contact one of the Erickson|Sederstrom attorneys working in the creditors rights area.

What Happens To My Online Accounts When I Die?

The 2017 Nebraska Revised Uniform Fiduciary Access to Digital Assets Act now allows an individual to provide for their electronic assets in an estate plan. 

        Nebraska, along with over 30 other states, enacted a law which discusses what happens to digital assets after death. The Nebraska Revised Uniform Fiduciary Access to Digital Assets Act (“the Act”) went into effect January 1, 2017, and provides guidance concerning how a fiduciary (e.g. Trustee, Personal Representative) may gain access to the digital devices of a deceased user.

        So what does the Act really mean for you? It’s simple. You can now grant someone the absolute authority to control any and all Digital Devices and digital information in your estate plan.  This, in turn, will provide an easier avenue for a specified individual to gain access to accounts and will grant them with widespread power over your digital devices, whether for the purpose of continuing your business efforts, settling your affairs, or to simply collect lifelong memories. 

        Let’s take a moment to reflect on all the ways we rely on the internet and different online applications in our daily lives.  Some may conduct significant business transactions via PayPal and Gmail; while others may market services, acquire clientele and procure payment through social media accounts, such as Etsy, Twitter, Facebook, and Instagram. Although every person uses technology in varying ways and for different reasons, many do not consider what happens to their digital records upon death.  

       Prior to the enactment of the Act, unless you left a specific person with all your username and password information prior to death, it was common for an individual to have to jump through quite a few hoops if they wanted to acquire access to and control of “digital assets” and digital information of a deceased user from the corresponding provider.  In essence, this meant that even after someone died, many of their digital assets continued to exist, leaving no one the power to access, modify, delete, control or transfer any digital information or communications. If the internet plays such an abundant role in our day-to-day lives, why do we put such a huge emphasis on planning for all other aspects of our lives, but not for this one? After all, time is money, and the effort spent gaining access to an account could undeniably be better spent actually running the account.

        It is also important to note that arrangement for your digital assets is only one aspect of estate planning. Incapacity issues, asset protection for you and for beneficiaries, avoiding probate, and minimizing income taxes are all other aims that can be achieved with proper planning.  In addition, changes in your family or to your assets may render your current estate plan outdated. Therefore, we welcome the opportunity to meet and to discuss all of these matters to ensure that your estate plan reflects your current objectives. 

        For more information on the Nebraska Revised Uniform Fiduciary Access to Digital Assets Act, how to provide for the Act in your estate plan, or any other matters relating to estate planning and probate, please contact Michelle J. Elkin with Erickson | Sederstrom.


Does a Small Business Lose Protection under the Iowa Civil Rights Act When It Incorporates?

In a case of first impression, the Iowa Supreme Court recently determined that a corporation cannot qualify for the family-member exemption under the Iowa Civil Rights Act. The Iowa Civil Rights Act prevents discriminatory employment practices and does not apply to “any employer who regularly employs less than four individuals.” Individuals who are members of the employer’s family are not counted as employees under this section.

            In Cote v. Derby Insurance Agency, Inc., the plaintiff filed suit pursuant to the Iowa Civil Rights Act, alleging sexual harassment. The employer, a corporation employed less than four employees, excluding family members, during the relevant time. In December 2015, the employer filed a motion for summary judgment, alleging that the Iowa Civil Rights Act did not apply because the employer regularly employed fewer than four individuals, not counting family members. The district court denied this motion, and the case was appealed. The Iowa Court of Appeals determined that “employer” in the statute is limited to “individuals”, and that the district court correctly denied the employer’s motion for summary judgment.

            After further appeal, the Iowa Supreme Court noted that the Iowa Civil Rights Act defines “employer” to include “every other person employing employees within the state”. “Person” can be defined as a corporation, unless the context otherwise requires. The court stated that the legislature, broadly intending to protect family-owned small businesses, may have intended to exclude from the Iowa Civil Rights Act all businesses, incorporated or not, with fewer than four nonfamily-member employees. However, in analyzing the ordinary meaning of the statutory language, the court concluded that a corporate employer has no family members as employees. Thus, a corporate employer cannot qualify for the family-member exemption under the Iowa Civil Rights Act and may be held liable for discriminatory employment practices if it otherwise meets the statutory requirements.

            This opinion affects many family-owned businesses. Although the Iowa legislature may choose to change the language in the Iowa Civil Rights Act to clearly include corporations in the exemption, small businesses should consider the protections it may be losing by operating as a corporation.

Nebraska Supreme Court Clarifies Duty Analysis in Negligence Cases

           The Nebraska Supreme Court recently clarified the test for determining whether a party owes a duty of reasonable care to another, a threshold requirement for cases dealing with anything from car accidents to malpractice. To establish negligence in Nebraska, a plaintiff must show that the defendant owed a duty of reasonable care, that the defendant failed to act reasonably, and that the defendant’s failure to act reasonably caused the plaintiff damages. Whether someone owes a duty of reasonable care to another is a question of law for a judge, and a case could be dismissed if the plaintiff cannot establish a duty.  In 2010, the Nebraska Supreme Court adopted a new test to determine whether a duty of reasonable care exists, opining that a person owes a duty to another if the person engaged in conduct that created a risk of physical harm to another.

            In Bell v. Grow With Me Childcare & Preschool, parents of a child tragically killed by his nanny alleged that the nanny’s former employers were at least partially responsible for his death. They alleged that the daycares knew the nanny was a danger to children at the daycare, but that the daycares failed to report the nanny’s behavior to the Nebraska Department of Health and Human Services. The daycares alleged that their duty of reasonable care did not extend to the plaintiffs, as they had never used the daycares services or contacted the daycares prior to filing suit. The lower court refused to dismiss the suit based on failure to meet the duty requirement, finding that “the alleged conduct of not reporting suspected child abuse created a risk of physical harm”.

            After the case was appealed, the Nebraska Supreme Court determined that this analysis was made in error. The court noted that engaging in “conduct that created a risk of physical harm to another” must be an affirmative act rather than passive inaction. This is true because, barring narrow circumstances, if a defendant has not acted in a way to create a risk of harm to another, the defendant is not required to act in a specified manner. The court further explained that, to determine whether a person engaged in conduct that created a risk of harm to another, it is helpful to ask whether that same risk of harm would have been present to another if the defendant had been absent.

            In this case, the court determined that the lower court erred in its duty analysis for numerous reasons. First, the plaintiffs’ allegation that the daycares failed to act was not an affirmative action, but was merely passive inaction that does not create a risk of harm. Second, any actions by the daycare prior to the time that the plaintiffs hired the nanny did not increase the risk of harm already posed by the nanny herself.

            The Nebraska Supreme Court’s opinion in this case is the first where the court fully explored what actions trigger a requirement to help others under the framework adopted in 2010. By opining that an actor must affirmatively act in order to create a duty, the Nebraska Supreme Court placed a necessary constraint on negligence cases that is consistent with prior case law. By being able to better identify who owes a duty to whom, Nebraskans can have a better understanding about potential risks stemming from everyday actions.

Inverse Condemnation Claims/Political Subdivision Tort Claims Act


The case is Essink v. City of Gretna, 25 Neb. App. 53, 901 N.W.2d 466 (2017).  In that case, the plaintiffs sued the City of Gretna for inverse condemnation action and negligence as a result of two sanitary sewer backups.  These were the only two backups Plaintiffs experienced.  The inverse condemnation claim was tried to a jury.  The Court allowed the jury to consider general theories of negligence that it was foreseeable that backups were likely to occur somewhere within the City of Gretna's sewer system.

            The initial question in an inverse condemnation case is not whether the actions of the governmental entity are the proximate cause of the plaintiffs' damages.  Instead, the initial question is whether the governmental entity's actions constitute the taking or damaging of property for public use.  That is, it must first be determined whether the taking or damaging was occasioned by the governmental entity's exercise of its power of eminent domain.  Essink v. City of Gretna, 25 Neb. App. 53, 901 N.W.2d 466-474; citing Henderson v. City of Columbus, 285 Neb. 482, 827 N.W.2d 486 (2013).  In order to meet the initial threshold that the property has been taken or damaged for public use, it must be shown that there was an invasion of property rights that was intended or was the foreseeable result of authorized governmental action.  Id.

            On appeal, the Court of Appeals reversed the jury verdict and ordered the case remanded with directions to enter a directed verdict in the City's favor.  The Court found that general theories of negligence cannot be used to support a claim for inverse condemnation.  Instead, plaintiffs must prove that the backups were: 1) both frequent or recurring; and, 2) that the City knew or could have foreseen that damage would occur to plaintiffs' specific property.  Because plaintiffs failed to present evidence of frequent or recurring backups and failed to prove that the City knew that damage would occur to their specific property as a result of the backup, the Court of Appeals concluded that a directed verdict should have been entered.


            Under the Political Subdivision Tort Claims Act, no suit shall be commenced against any employee of a political subdivision for money on account of damage to or loss of property caused by any negligent or wrongful act or omission of the employee while acting in the scope of his or her office or employment unless a claim has been submitted in writing to the governing body of the political subdivision within one year after such claim occurred.  Neb. Rev. Stat. § 13‑920(1).  All claims must be in writing and set forth the time and place of the occurrence giving rise to the claim and such other facts pertinent to the claim as are known to the claimant.  Neb. Rev. Stat. § 13-905.  A written claim to the political subdivision must demand the satisfaction of an obligation.  Jessen v. Malhotra, Essink at 478 citing Jessen v. Malhotra 266 Neb. 393, 665 N.W.2d 586 (2003). 

            In Essink, the plaintiffs submitted their cleaning bills to the City Clerk's office and argued these bills were sufficient to meet the notice requirements under the Act.  But the bills did not demand the satisfaction of an obligation.  Also, there were no documents submitted with the cleaning bills.  The bills only showed the date the work was performed, the location of the work, the reason for the work and the specific amount for such work.  The bills were addressed to the plaintiffs indicating they were responsible for payment of the bills.  And, the bills only indicated that they were the result of water damage in the plaintiffs' home - there was no allegation that the City caused the water damage, no reference to the sewer backups and no indication as to why the City would be responsible for the bills.  The only reference to the City was a statement in the bills that indicated Plaintiffs would submit them to the City for payment.  The Court of Appeals concluded that the content of the bills did not satisfy the notice requirements under the Act.  It therefor reversed the trial court's finding that the cleaning bills constituted a claim and overturned the judgment in plaintiffs' favor on their negligence claim.

Tortious interference among set of valuable tools for employers to protect their information from misuse by former employees

Recently, the Eighth Circuit Court of Appeals reviewed an appeal out of the District of Nebraska. The multiple claims against former employees, including a claim for tortious interference with business relationships, a claim not often considered by employees and employers, but which can make a wide array of damages available to a plaintiff. The claim often arises alongside claims that former employees have taken trade secrets or used confidential information to solicit clients or other employees. Read on to learn more!

Factual Background

            Bryce Wells (“Wells”) was the president and shareholder of West Plains Company. Wells sold West Plains Company to West Plains, L.L.C. (West Plains), in February 2012. West Plains operated a freight brokerage operation called CT Freight. When Wells sold West Plains Company, the employee defendants and Jodi May (“May”) all continued to work for West Plains in the same positions they held prior to the sale. The employee defendants signed the West Plains Employee Handbook, “which prohibited employees from engaging in conflicts of interest and disclosing confidential information to a competitor.”

            In October of 2012, Wells began forming Retzlaff Grain Company, a freight brokerage company. Retzlaff Grain Company did business as RFG Logistics. Wells recruited four of the employee defendants who “signed confidentiality and consulting agreements with Wells.” Wells provided them each with $5,000 as a consulting fee.

            These four employee defendants worked with Wells in creating RFG Logistics and recruited the remaining employee defendants to join RFG Logistics by the end of January, 2012. The employee defendants then submitted their resignations from CT Freight.

Procedural History

            In February 2012, West Plains brought suit, alleging “(1) misappropriation of trade secrets against all defendants; (2) tortious interference with business relationships against all defendants; (3) tortious interference with employment relationships against Wells and RFG Logistics; (4) breach of the duty of loyalty against the employee defendants; (5) civil conspiracy against all defendants; and (6) a violation of the Computer Fraud and Abuse Act . . . against [one of the employee defendants].”

            The district court granted a temporary restraining order against the defendants “prohibiting them from contacting and providing freight brokerage services for the customer and carriers of CT Freight” until the court ordered and to return all documents taken from West Plains. The temporary restraining order was extended to April 5, 2013. The district court ruled in favor of the defendants regarding the claims for tortious interference with employment relationships and the claim under the Computer Fraud and Abuse Act.

            At trial, the jury found in favor of West Plains on the tortious interference with business relationships claim as to all defendants except for three. The jury also found a breach of the duty of loyalty by all employee defendants. Finally, the jury found that all defendants, except May, entered into a civil conspiracy. According to these findings, the jury awarded West Plains $1,513,000 in damages and required forfeiture of compensation of all employee defendants. The defendants appealed.

Tortious interference with business relationships

            In order to prove tortious interference with a business relationship in Nebraska, the following must be shown: 1) “the existence of a valid business relationship or expectancy”, 2) that the person interfering had knowledge of the business relationship or expectancy, 3) “an unjustified intentional act” by the interferer, 4) a showing that the interference caused the harm, and 5) damage to the party whose business relationship or expectancy was interfered with. The defendants alleged that that their conduct did not amount to unjustified interference and that West Plains did not prove their conduct caused that damages sustained by West Plains after the temporary injunction expired.

Acts of Unjust Interference

            Often the key question in a tortious interference claim is whether the acts that interfered were justified and proper. In this case, the Eighth Circuit Court of Appeals determined that “a jury could find Wells unjustly interfered with West Plains’ business relationship by knowingly paying, recruiting, and seizing CT Freight’s workforce, infrastructure, and customer relationships.”

            The court reasoned that Wells knew that by recruiting freight brokers away from CT Freight that he could essentially own CT Freight without having to pay for it. Although Wells instructed the employee defendants not to take any customers from CT Freight, he recruited the leaders of CT Freight and began a plan “that effectively would remove CT Freight’s business to RFG Logistics.” The group resignation resulted in an inability by CT Freight to “broker large quantities of freight.”

            The court also found that “the employee defendants took it upon themselves to take CT Freight’s customer lists, documents, and confidential information.” There were messages between some of the employee defendants discussing how to send the customer information to their personal emails. During the process of their departure, the defendants took steps to not “disrupt their business with their existing customers, whom they admittedly planned to bring with them the moment they left CT Freight.” The court held that “[w]hile there was nothing unjust about the employee defendants’ choice to leave at-will employment with West Plains, there was evidence the employee defendants knew and understood their group resignation would decimate CT Freight.”

Damages after April 5, 2013

            The defendants argued that there was not enough evidence to prove that the defendants’ resignations caused the losses suffered by CT Freight. The Eight Circuit determined that “[the defendant’s] concerted action . . . resulted in tortious interference that caused damage to West Plains.”

            West Plains went from a profit of over $800,000 in 2012 to a net loss of $150,000. West Plains tried to preserve the business by recruiting employees but could not find employees for the business. The court reasoned that even though West Plains did hire new employees, these employees did not have sufficient experience or a customer base in the industry. The Eighth Circuit concluded that “the evidence was sufficient to show the defendants’ actions caused a loss of profits to West Plains, and that loss continued after the expiration of the temporary injunction.”

Breach of Duty of Loyalty

            The Eight Circuit determined that the employee defendants breached their duty of loyalty, as well. The employee defendants, while employed by West Plains, “intended to hinder CT Freight’s business” by giving CT Freight information to Wells and resigning together in order to make sure customers followed. The employee defendants signed an agreement prohibiting them from partaking in conflicts of interests and distributing company information. Seven of the employee defendants signed the confidentiality and consulting agreements with Wells, violating their employment agreement with West Plains. Also, four of the employee defendants received the compensation from the consultation with Wells.

            The employee defendants also argued that the forfeiture of their pay was excessive. The Eighth Circuit determined that there was “adequate support for each award” based on the extent of involvement with RFG Logistics.

Civil Conspiracy

            A civil conspiracy can arise when two or more people accomplish, by concerted action, an unlawful object. A finding that the defendants committed unjustified interference with West Plains’ business or breached their duty of loyalty “would support the conspiracy claim.” The Eighth Circuit determined that “[t]here was abundant evidence showing the defendants entered into an agreement tortuously to interfere with West Plains’ business or to breach their duty of loyalty.”


            The defendants argued that West Plains did not show that it mitigated its damages upon the resignation of the employee defendants. The Eighth Circuit determined that West Plains immediately transferred employees from another division to CT Freight and contacted its customers that left with the employee defendants in an attempt to retain their business. CT Freight even expanded its business into other sectors of the industry. This all satisfied its duty to mitigate damages.

West Plains, L.L.C. v. Retzlaff Grain Co., 870 F.2d 774 (8th Cir. Aug. 30, 2017).


Takeaway for employers

            If you suspect former employees are appropriating your confidential information to consult with your clients or employees or may be planning to appropriate your information to form a competing venture, it is best to get your attorney involved right away. You may have rights to assert through a cease and desist letter, and could ultimately be vindicated in a court of law.

Nebraska Supreme Court defines “restore” and “suitable employment” for vocational rehabilitation plans

Nebraska law permits the Nebraska Workers’ Compensation Court to approve vocational rehabilitation plans for certain injured workers to facilitate their return to gainful employment. Read on to learn about the Nebraska Supreme Court’s recent consideration of what the law means to “restore” an employee to work and in “suitable employment.”

Factual Background

            Charles Anderson injured his arm while working as a millwright with EMCOR Group, Inc. When Anderson was injured, he was making $26.50 an hour and $1060 per week. When Anderson reached maximum medical improvement, the workers’ compensation court determined that he was entitled to a vocational rehabilitation evaluation. Anderson and EMCOR agreed on a vocational rehabilitation counselor, Lisa Porter.

            Porter prepared a “Vocational Rehabilitation Plan Justification for Formal Training Proposal.” Under Nebraska statute, there are five priorities that must be used in developing and evaluating a vocational rehabilitation plan. A higher priority may not be used “unless all priorities below it are unlikely to result in suitable employment.” For Anderson, the three lowest priorities were inadequate as they involve a plan to work for the same employer. EMCOR did not have any suitable employment available for Anderson. Porter decided that the next highest priority would be unavailable to Anderson as well, which involved employment with a new employer. Porter’s research showed that available jobs for Anderson paid $9 to $11 an hour; not suitable in light of his earnings at EMCOR of $26.50 per hour. Porter also contacted other employers but they did not have suitable employment for Anderson.

            As a result, Porter decided the only option for Anderson was under the highest priority plans. This priority involved “formal training that will lead to employment in another career field.” Anderson had grown county-fair award winning vegetables in the past. Anderson also had an interest in this area. Therefore, Porter felt the career field best suited for Anderson would be in horticulture or agriculture.

            Upon making this finding, Porter prepared the plan for Anderson. Under her plan, Anderson “would obtain a 2-year associate’s degree of applied science in agriculture business and management with a focus in horticulture at Southeast Community College in Beatrice, Nebraska.” Anderson’s hourly wage would be $13.20 after completing his education.

            After the plan was created by Porter, it was evaluated by a vocational rehabilitation specialist appointed by the compensation court. The vocational rehabilitation specialist denied Porter’s plan. Based on information the court’s specialist learned from the community college’s placement services director, formal training was unnecessary for the job goals of the plan. The specialist also stated that the job search done by Porter showed six jobs that did not require training and that paid between $9 and $14 per hour. The specialist ultimately decided that Porter’s formal training plan was “not reasonable or necessary” as one of the plan goals (employment as a vegetable farmer) was something that Anderson was already performing so he had no need for further training.

            After the specialist denied the plan, EMCOR petitioned to modify the award of vocational rehabilitation benefits and services. EMCOR alleged that Anderson’s “condition and circumstances no longer support an award of such services.” EMCOR claimed these services were no longer necessary because Anderson was already partaking in the practice of gardening and Anderson admitted “his inability to earn a similar or increased wage performing the work for which he seeks vocational rehabilitating retraining, and consent to earning such a lower wage.” Anderson responded by filing a motion requesting the implementation of Porter’s plan.

Anderson’s Testimony

            The court heard evidence on Anderson’s motion. Anderson testified that he had earned his GED and received a diploma in computer-aided drafting in 1998. Due to changes in technology, this education was no longer useful. Anderson testified that there were few jobs available in his area, and he was unwilling to work more than 25 miles away from his hometown. Anderson did not seek employment in the previous year but did earn $150 a week for five months from selling vegetables that he grew in his garden. Collectively, Anderson and his wife made $8,000 per year. Anderson testified that his “ultimate career employment goal was to be self-employed.” Anderson wanted to expand his greenhouse. Formal education would qualify him for jobs in selling chemicals, farm management, or as a golf course manager. In learning these potential jobs, he could then build a greenhouse and become self-employed.

Compensation Court’s Opinion

            The compensation court dismissed EMCOR’s petition to modify the award of vocational rehabilitation benefits and services and declared that Anderson was “entitled to participate in the proposed plan” because his current job of farming was not “suitable employment.” The court then determined that it was “unable to conclude that [Porter’s] plan will not lead to a suitable job.” EMCOR then appealed.

Nebraska Supreme Court Ruling

            In considering the appeal, the Nebraska Supreme Court noted one of the primary purposes of the Nebraska Workers’ Compensation Act is “restoration of an injured employee to gainful employment” and that if an employee is “unable to perform suitable work for which he or she has previous training or experience, the employee is entitled to vocational rehabilitation services as may be reasonably necessary to restore him or her to suitable employment.” The central focus of EMCOR’s appeal was on whether the vocational rehabilitation plan set forth by Porter would restore Anderson to “suitable employment.”

            The court explicitly adopted definitions of “restore” and “suitable employment.” “Restore” was defined to mean “to put back.” The court defined “suitable employment” to mean “employment which is compatible with the employee’s pre-injury occupation, age, education, and aptitude.”

            The compensation court determined that income of less than $8,000 per year was not “suitable employment” for Anderson. In order for him to gain employment in the relevant field of horticulture, additional education would be required. The compensation court had also taken into consideration the fact that job opportunities were limited in the area where Anderson lived. The Supreme Court held there was sufficient evidence to support the lower court’s findings in this regard.

            Porter’s plan involved Anderson working full-time as a supervisor or manager and the median annual wage in the area of farming, fishing, and forestry was $49,100. The Court held that Porter’s plan would place Anderson into employment making similar wages prior to the injury and “in a field that would be compatible with his age, education, and aptitude.”

            Since the plan “was reasonably necessary to restore Anderson to suitable employment, the [compensation] court did not err in ordering that Anderson was entitled to participate in it.”

For employers

            When you have an employee claiming a workplace injury or are facing issues with regarding an employee’s claim to benefits following an injury, engaging an experienced workers’ compensation attorney is vital.

Bitcoins and the Law

Last year Bitcoin and other cryptocurrencies went “mainstream” with regular financial reporting of prices and tales of fortunes made or lost.  This has prompted many ordinary investors to try their hand at cryptocurrency investing.  This has fed an ever widening set of cryptocurrency products being offered to consumers and businesses alike.  These products range from Wall Street backed crypto currency exchanges like to initial coin offerings (“ICOs”) now being used by start-ups to attempt to bypass the regulations that normally apply to the capital-raising process.
The sheer exuberance surrounding cryptocurrencies and the often inaccurate depiction of cryptocurrencies as not subject to ordinary laws is fertile ground for fraudsters and high-risk unsound investment schemes.   For example, numerous market players still promote their ICOs as not subject to state or federal securities regulation despite convincing and sound conclusions to the contrary.  In fact, use of an ICO may very well expose the entity (and its individual managers) using it as a capital-raising device to potential civil and criminal charges, sanctions, and personal liability to individual investors.  
Due diligence requires that before you or your business involves yourself in any crypto currency undertaking that you consult with competent and experienced business counsel so you can fully understand the true risk of the undertaking.  Investors who have already lost money in a crypto currency scheme should also exercise due diligence by consulting with counsel because, under existing law, those who involved them in the scheme may be personally obligated to repay for the lost investment. 

Durational terms in an offer created an employment agreement—not at-will employment

In an employee’s appeal, the Nebraska Court of Appeals recently considered an offer of employment, whether its acceptance by the employee created a valid employment contract, and whether the employer had cause to revoke the offer upon learning new information. The trial court had ruled for the employer as a matter of law, but the Court of Appeals recently sent the case back down to the trial court so a jury can decide these issues. Read on to learn more!


    Paula Crozier (“Crozier”) was employed as executive director of a nonprofit organization. She resigned from that position in March of 2014. She then applied for the position of marketing and communications director at Brownell-Talbot School (“Brownell”). During an interview for the positon, Crozier was asked why she left her previous employment. She answered, “due to differences in business practices and ethical standards.” 
    Crozier was offered the position, and Brownell sent an offer letter for her to sign and return. The letter stated that Crozier would be hired for a twelve-month position but then stated her period of employment would be May 5, 2014 to July 30, 2015, a period of about fourteen months. The letter also stated that Crozier would receive an annual salary of $55,000 and made reference to various benefits that Crozier would receive after two years of employment.
    The letter was sent by Brownell on April 28, 2014 and was signed and returned by Crozier on April 29, 2014. On May 1, 2014 Brownell made an announcement that it had hired Crozier.
    On May 2, 2014 a newspaper article was published that described several issues involving Crozier’s former employer. The issues included billing and management problems and a failure to respond to an allegation of sexual abuse by an employee. Neither Crozier’s name nor any dates coinciding with Crozier’s dates of employment were mentioned in the article.
    Crozier brought the article to her direct supervisor who brought it to the attention of the head of the school. That day, the head of the school held a meeting with Crozier. At the meeting, Crozier explained she was not responsible for any of the problems and that she had resigned before the incident regarding the sexual abuse. Crozier also explained that she left her former employer upon discovering the issues that were mentioned in the article. Crozier reported the issues to the attorney general and the Department of Health and Human Services.
    Later that day, Brownell retracted the offer to Crozier over fears of public relations and damage to its reputation.
    Crozier filed a complaint against Brownell alleging a breach of contract and lack of good cause to revoke the offer of employment.

District Court Proceedings
    The district court found that the “durational terms in the letter were ambiguous and there was no clear intent sufficient to overcome the presumption of at-will employment.” The district court also found that Brownell had good cause in revoking the offer to Crozier. Subsequently, Crozier appealed.

Court of Appeals’ Ruling
    a.  Contract of Employment. The court noted that a contract is considered ambiguous “when a word, phrase, or provision in the contract has, or is susceptible of, at least two reasonable but conflicting interpretations or meanings.” Here, the court determined that the contract was in fact ambiguous. The contract identified Crozier’s job as a “twelve-month position” and conferred an “annual salary” but then stated the term of Crozier’s employment will last from May 5, 2014 to June 30, 2015, a total of 14 months. The court stated that there is no way to read the letter that “can reconcile these conflicting durations, which stand in direct contradiction of one another.” Since a term in the contract was susceptible to two different interpretations, evidence beyond just the terms of the contract could be considered to construe the parties’ actual agreement. 
The court then considered the testimony of Brownell’s director of business and finance. He stated that the reference to the 12 month period was in order to distinguish Crozier’s employment from that of a 10-month or 9-month employee. He further specified the salary stated in the offer was for determining Crozier’s monthly rate of pay. 
The court concluded that, in light of this testimony, a jury could find Crozier was to be employed for a definite term from May 5, 2014 to June 30, 2015 for a specific rate of pay. As a result, the question of breach of contract should have proceeded to the jury, and the court of appeals reversed the trial court’s decision.
    b.  Good Cause for Revoking Offer
    The court clarified that an employer can terminate an at-will employee at any time for any reason but if an employee is contracted for a defined term, that employee “cannot lawfully be terminated prior to the expiration of that term without good cause.” The court defined “good cause” in terms of what a reasonable employer would determine to be a good reason for terminating an employee. 
    The court determined that reasonable minds could differ as to whether Brownell revoked its offer to Crozier for good cause. Brownell stated that it terminated Crozier out of public relations concerns and that it could harm its reputation. Crozier presented evidence that her name was not mentioned anywhere in the news article and those allegations stated in the article were the reason she resigned from her previous employment in the first place. As a result, this issue should also have been left to a jury to decide. 
    The matter will be returned to the district court for trial of these issues to a jury.
Crozier v. Brownell-Talbot School, 25 Neb. App. 1 (2017).

Takeaway for employers
    Placing temporal terms on an offer of employment can transform what might otherwise have been an offer of at-will employment. Think carefully about crafting offer letters and involve your legal counsel for any special circumstances when offering new employment or renewing employment.
Bonnie Boryca can be reached at or (402) 397-2200.

Can’t Tell the Difference? Eighth Circuit distinguishes protected concerted efforts from employee disloyalty and malice

    Whether you employ unionized employees or not, Nebraska employers must be aware of the concept of protected concerted activity under the National Labor Relations Act. Employees who engage in concerted (i.e., joint) efforts with co-workers to address their working conditions or terms of employment, may be engaging in conduct protected by federal law. Terminating or disciplining because of that conduct can give rise to an unfair labor practice charge before the National Labor Relations Board. Recently, the Eighth Circuit Court of Appeals (whose decisions govern Nebraska employers) recognized the difference between protected concerted activity and employee conduct that is disloyal, reckless, or maliciously untrue—and not protected. Read on to better understand the important distinction!


    MikLin Enterprises (“MikLin”) owns and operates ten Jimmy John’s sandwich shops in the Minneapolis-St. Paul area. Michael Mulligan is the owner and co-owner and Robert Mulligan is the vice-president. MikLin workers started an organizing campaign, attempting to gain union representation by the Industrial Workers of the World (“IWW”).   
    As part of the campaign, employees demanded paid sick leave. The MikLin handbook stated that MikLin did not allow people to simply call in sick  ̶  they were required to find their own replacements for any time off. The IWW began posting on community bulletin boards in MikLin stores. These posters contained two identical Jimmy John’s sandwiches next to each other and stated above one sandwich:  “Your sandwich made by a healthy Jimmy John’s worker,” and above the other identical sandwich: “Your sandwich made by a sick Jimmy John’s worker.” Below the sandwich was the question, “Can’t tell the difference?” followed by:  “That’s too bad because Jimmy John’s workers don’t get paid sick days. Shoot we can’t even call in sick.” 
MikLin managers quickly removed the posters from the stores.   IWW dispersed a press release, posters, and a letter to over 100 media contacts.  It discussed “unhealthy company behavior” and concluded by threatening that if Robert and Michael Mulligan would not meet with the IWW supporters to discuss their demands, “dramatic action” would be taken and they would display their posters around the city. Within the letter, there was an assertion that MikLin stores committed health code violations daily. The letter went on to state that because of the sick leave policy, MikLin was jeopardizing the health of their customers.
    Four IWW organizers met with Mulligan, and he stated that MikLin was in the process of amending its policies. The new policy involved a point system for absences. If an employee received four disciplinary points in a twelve-month period, he or she would be terminated.  This new policy stated that employees were not allowed to work until any flu-like symptoms had subsided for a 24-hour period.
    After the implementation of the new policy, the IWW supporters followed through with their threat but this time created posters with Mulligan’s phone number on them, encouraging people to call him. Mulligan and store managers removed these posters and Mulligan fired six employees who organized the campaign and delivered written warnings to three others who aided in the attack.  This gave rise to charges of unfair labor practices.

NLRB Finds an Unfair Labor Practice

    The Administrative Law Judge with the National Labor Relations Board, ruled that MikLin violated Sections 8(a)(1) and 8(a)(3), of the National Labor Relations Act, which protects concerted  activities of employees  ̶   “Section 7 of the NLRA protects employee communications to the public that are part of and related to an ongoing labor dispute.” Employee communications are not protected if they are “disloyal, reckless, or maliciously untrue.” To lose protected status, the employee communications must have been made with a “malicious motive” or have been “made with knowledge of the statements’ falsity or with reckless disregard for their truth or falsity.”
    The ALJ determined that the posters, press release, and letter were all related to the ongoing labor dispute as they dealt with the sick leave issue. Although the posters were not literally true (employees could call in sick; they just had to find coverage for their missed shift), employees were disciplined if they failed to find a replacement.  Therefore, it was a “protected hyperbole,” or somewhat exaggerated truth.
    The ALJ also found that, even though MikLin had only been investigated twice by the Minnesota Department of Health for food borne disease, it was possible that MikLin’s sick leave policy could increase the risk of food borne disease.  Again, that statement was considered to be true or hyperbole.
    The ALJ ruling then went to the NLRB.  A divided NLRB affirmed the ALJ’s conclusions. It determined that the posters were clearly related to the ongoing labor dispute over the sick leave and the statements were not “so disloyal, reckless, or maliciously untrue so as to lose the Act’s protections.”

The Eighth Circuit Declines to Enforce Much of the NLRB’s Ruling

    (1)    “Sick Day” Poster Issues

    The court noted that an employer commits unfair labor practices if it terminates an employee for engaging in activities that are protected under the NLRA, including  communications to third parties or the public that are utilized to improve their position as employees. But, Section 10(c) of the NLRA allows employers to terminate employees for cause.
    Courts have determined that disloyalty to an employer amounts to “cause” under Section 10 (c).  In determining disloyalty, the central question is “whether employee public communications reasonably targeted the employer’s labor practices, or indefensibly disparaged the quality of the employer’s product or services.” The former is protected and the latter is not. The court also stated that an employee’s disloyal statements can lose protection under section 7 of the NLRA without a showing that the statements were made with actual malice.
    Here the court agreed with the NLRB that the sick day posters, press release, and letter were related to other section 7 protected concerted activity intended “to improve the terms and conditions of their employ by obtaining paid sick leave.” However, the court determined that the posters, press release, and letter were not protected because they were a “sharp, public, disparaging attack upon the quality of the company’s product and its business policies.” This was evidenced here by the fact that the posters, press release, and letter were done to convince customers that they may get sick if they eat a Jimmy John’s sandwich, attacking the product itself.  An allegation that a food industry employer is selling unhealthy food is the “equivalent of a nuclear bomb” in a labor-relations dispute. The nature of the attack was likely to outlive, and also unnecessary to aid, the labor dispute.
    The court also determined that claims about the sandwiches were “materially false and misleading.” The press release and the letter claimed that MikLin committed health code violations daily, putting customers at risk of getting sick. The court stated that these were not true statements, evidenced by MikLin’s record with the Minnesota Department of Health over ten years and requiring employees to call in sick if they have had any flu-like symptoms in the previous 24 hours.
    In sum, MikLin had cause to terminate and discipline the employees involved.
    (2)     Facebook Postings by MikLin Supervisors
    The Eighth Circuit considered other aspects of the NLRB ruling.  As the IWW began organizing, a MikLin employee created a “Jimmy John’s Anti-Union” Facebook page. On this page, MikLin employees posted disparaging comments about an IWW supporter. The ALJ determined that these posts violated section 8(a)(1) of the NLRA by encouraging harassment of the IWW supporter, which the NLRB affirmed.
    The appeals court determined that the public disparagement and degradation of the union supporter “restrained or coerced MikLin employees in the exercise of their section 7 rights” out of fear they would suffer similar treatment if they chose to support the IWW.  Thus, this aspect of the NLRB ruling was enforced.

    (3)    Removal of In-Store Union Literature

    After losing the first election, the IWW had filed unfair labor practice charges and objections to the election with the NLRB. MikLin and the IWW settled by stipulating to set aside the election and hold a re-run election.  After this, a MikLin employee posted a notice on a bulletin board to the employees (pursuant to the settlement) of the settlement and what it meant. A union supporter posted next to this notice an IWW “FAQ about the Union Election & Settlement.” The IWW post was taken down repeatedly.  The ALJ had determined that this was a violation of section 8(a)(1) of the NLRA, and the NLRB affirmed.
    The court enforced the NLRB’s order on this issue.  Section 8(a)(1) protects employees’ rights to “bargain collectively through representatives of their own choosing.” Removal of the IWW poster interfered with union supporters’ right to communicate about their organization in violation of section 7 of the NLRA. 
Miklin Enterprises, Inc. v. NRLB, Nos. 14-3099 & 14-3211 (8th Cir. July 3, 2017).

Bottom Line for Employers

    If you face efforts from employees that may deal with their working conditions or terms of their employment but believe they may be acting in a disloyal, reckless, or malicious way, contact your employment and labor attorney to fully discuss the issue.

Bonnie Boryca may be reached at (402) 397-2200 and

Department of Labor Clarifies Test for Determining Whether an Intern is an Employee under the FLSA

On January 5, the United States Department of Labor clarified that, going forward, it will use the “primary beneficiary” test a number of federal appellate courts use to determine whether interns are considered employees under the Fair Labor Standards Act. This decision was announced after the United States Court of Appeals for the Ninth Circuit, in December, became the fourth appellate court to reject the Department of Labor’s prior six-part test for the same topic.

Under the Department of Labor’s prior six-part test, an intern was considered an employee unless all the following factors were met:

1.       The internship is similar to training which would be given in an educational environment;

2.       The internship experience is for the benefit of the intern;

3.       The intern does not displace regular employees;

4.       The employer provides that the training derives of no immediate advantage from the activities of the intern, and on occasion its operations may actually be impeded;

5.       The intern is not necessarily entitled to a job at the end of the internship;

6.       The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

However, the Ninth Circuit, along with the Second, Sixth, and Eleventh Circuits, expressly rejected this test.  Instead, the courts preferred the “primary beneficiary test”. Under this more flexible test, discussed by the Second Circuit in Glatt v. Fox Searchlight Pictures Inc., courts and employers would weigh and balance seven non-exhaustive factors. These factors are:

1.       The extent to which the intern and the employer clearly comprehend that there is no anticipation of compensation.

2.       The extent to which the internship provides training similar that would be given in an educational environment.

3.       The extent to which the internship is linked to the intern’s formal educational program by coursework of academic credit.

4.       The extent to which the internship accommodates the intern’s academic schedule.

5.       The extent to which the internship’s duration is limited to the time period when the intern is provided beneficial learning by the internship.

6.       The extent to which the intern’s work supplements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.

7.       The extent to which the intern and the employer understand that the internship is directed without entitlement to a paid job at the end of the internship.

Employers should take time to examine any internship positions to determine if an intern could possibly be considered an employee under the Fair Labor Standards Act.

EEOC Sues Employer for Gender Discrimination Related to Parental Leave Policy

Recently, the Equal Employment Opportunity Commission (“EEOC”) filed suit against cosmetic company Estee Lauder Companies, Inc. alleging the company discriminated against men by providing less parental leave benefits than women. Under federal law, men and women are allowed equal pay for equal work.

The EEOC alleges that the company’s leave policy allows for six weeks of leave for new mothers and “primary caregivers” and two weeks for “secondary caregivers”.  According to the suit, a male employee applied for primary caregiver status, but was denied. The employee was allegedly told that the “primary caregiver” designation only applied to surrogacy situations and would not apply to men avowing they would be the primary caregiver to their child. The EEOC argued that such a policy violates Title VII of the Civil Rights Act of 1964, which prohibits discrimination based on gender, and the Equal Pay Act of 1963, which prohibits discrimination based on gender when men and women work at the same company under comparable circumstances.

At this time, there does not appear to be an issue with the “primary caregiver” and “secondary caregiver” designation that many employers use when the policy is gender neutral. However, critics state that defining “primary caregiver” and “secondary caregiver” without utilizing gender stereotypes is easier said than done and could lead to gender discrimination when applied incorrectly.

With more companies allowing parental leave for both mothers and fathers, employers should review their policies to ensure that parental leave policies are not discriminatory. For example, an employer could provide the same benefits to mothers and fathers for the birth or adoption of a child, while allowing additional benefits tied directly to medical disability for pregnancy, childbirth, or similar circumstances. Such a policy may help avoid the issue of defining who is considered the “primary caregiver”, and it be more straight-forward for employees to apply in the workplace.