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In early December, Juliana Rubenstein was in an uncomfortable position. Granted, the former VP of technology at Hollywood Stock Exchange was nine months pregnant, but that wasn’t the source of her discomfort: She faced the difficult task of finding a new employer that would allow her to take an immediate maternity leave. According to a 23-page legal complaint Rubenstein filed with the California Department of Fair Employment and Housing, she wasn’t in this position by choice. She’s charging Hollywood Stock Exchange with wrongful termination and pregnancy discrimination. If Rubenstein’s case against her former employer is true, the exec was laid off because she was pregnant and had planned to take a maternity leave in late December. She alleges in her lawsuit that her boss, Douglas Scott, executive VP of product and technology at the West Hollywood, Calif.-based online entertainment site, informed her that management had decided to include her in a round of layoffs because the company felt she was at risk of not returning to work after her maternity leave. Rubenstein says she was not targeted for the layoff list before announcing her pregnancy. Infuriated, Rubenstein said that she planned to hire an attorney. She claims that HSX executives then threatened to take away her severance package if she did. On Sept. 27, she filed a wrongful- termination complaint, and HSX promptly fired her. Within 24 hours of filing, Rubenstein says her status at HSX nose-dived from star performer — she says she had received raises and was praised in a July press release for being “vital” to the company’s “continued growth” — to outcast. Both executives at HSX and Rubenstein’s attorney, Aylene Geringer of Korshak, Kracoff, Kong & Sugano in Los Angeles, declined to speak on the record about the case. While the matter has not been resolved, employment attorneys say that Rubenstein may end up demanding millions of dollars in damages — especially since she couldn’t effectively apply for jobs so late in her pregnancy. Since such suits are typically settled out of court, it’s hard to determine how prevalent they are. But such incidents don’t surprise labor law attorneys, who have seen hundreds of similar lawsuits at Internet companies in recent years and expect the number of cases to rise with the recent spate of layoffs. IT’S THE LAW The situation is exacerbated when companies crash and burn just as quickly as they get big. With waves of layoffs hitting the Internet industry, labor laws have never been more germane. As Walker Digital found out after it was sued by the Connecticut attorney general, companies with more than 100 employees planning cuts of 50 or more employees from one location, or otherwise more than one-third of the workforce, must give employees 60 days’ notice, not the one day given by Walker. And Etown of San Francisco is learning about union-organizing laws the hard way: Recently fired customer-service employees at the consumer electronics site have filed a complaint with the National Labor Relations Board, alleging they were laid off because they were unionizing. “There are little land mines waiting to blow up out there,” says Baldwin Lee, an employment litigator and co-chair of the employment group for Farella Braun & Martel of San Francisco. “Companies need to consider more carefully how they are going to go about terminating their employees.” LEGAL EAGLES Internet companies certainly are not the only employers being sued for wrongful termination. According to Equal Employment Opportunity Commission statistics, more than 4,000 pregnancy discrimination charges were filed in 1999. (The EEOC does not track “wrongful termination” as a category.) But labor law attorneys say Internet and technology companies, by their very nature, are vulnerable to these type of suits. Their anti-bureaucratic cultures and their desire to be different from stodgy old companies can easily result in an environment where managers make their own rules. Worse, executives too often disregard, or are unaware of, basic labor laws. Not only are pregnant employees protected under the Family and Medical Leave Act, which specifies that they are eligible for 12 weeks’ leave and must not be demoted upon return, but also some states have additional protections. In California, pregnant employees are allowed up to four months of additional time off for sickness related to their pregnancies. While labor law experts can help companies navigate the maze of federal and state laws, even huge companies with in-house counsel are not immune to wrongful-termination suits. America Online settled a claim out of court in March when a former employee sued for $4 million in damages. Jasmine Hakki alleged she was fired for taking too much time off in 1998 when caring for her terminally ill mother. According to the complaint, Hakki’s supervisor neglected to inform her she was entitled to 12 weeks leave under the Family and Medical Leave Act when she sought more flexible working hours to care for her dying mother. While the FMLA is the source of current laws on maternity leave, it also allows workers time off when they face a family or personal crisis. Hakki claimed she had never been informed about the FMLA while she worked at AOL and was even pressured to leave town on business while her mother was extremely ill. Hakki was fired less than a month after her mother died of cancer in January 1999. AOL’s attorney, John Joseph Michels Jr. of McGuireWoods in Tysons Corner, Va., would not comment about Hakki or her case, other than to confirm that AOL denies all the charges. Nicholas Graham, a spokesman for AOL, says the company has taken strides to ensure that the FMLA is followed to the letter. Michels would not reveal the size of AOL’s settlement, but says “both parties are pleased with the agreed amount.” CUTTING YOUR LOSSES Needless to say, companies that neglect labor laws don’t stand much of a chance if they’re sued for wrongful termination. They’ll settle rather than risk a protracted public-relations fiasco. But companies can reduce the amount of a settlement if they take precautions, attorneys say. For instance, if AOL had posted information about the FMLA in an employee handbook or on its intranet, the company may have had more leverage in reducing its settlement. Two 1998 U.S. Supreme Court rulings held that if companies provide harassment training (which incorporates pregnancy discrimination) or post the FMLA publicly, they have more of a defense against lawsuits or hefty settlements. (For more information, see Burlington Industries vs. Ellerth, and Faragher vs. The City of Boca Raton, Fla.) Companies should also be careful when it comes to terminations. Hasty decisions can be a red flag for judges, suggesting irrational — and perhaps illegal — behavior. Lee of Farella Braun & Martel represents an unnamed pregnant executive who was fired from a San Francisco Bay Area company. He is confident the company will have to pay a large settlement because of the way company executives treated his client when she was fired. According to Lee, the woman was called into a meeting expecting to discuss her bonus, and instead was told she was terminated and had to leave that day. Termination without notice typically won’t “pass the smell test” with judges, Lee says. His advice: Slow down. Even if a company is pressured by sagging stock prices and nagging investors demanding layoffs, attorneys advise hiring consultants before firing or laying off anyone to make sure no labor laws are being broken, or could be construed as such. “I represent mostly Internet companies,” Lee notes. “I’ve had people call me at 8 a.m. leaving the message, ‘Give me a call by 9 because we want to get rid of someone.’ They can wait.” To be safe, attorneys advise young companies to hire labor law experts or human resource executives once they hit 50 employees, since at that stage they must comply with a host of labor laws such as the FMLA. Perhaps more companies will listen: Legal troubles are the last thing struggling Internet businesses need to deal with now. Laura Roe Stevens is a writer in Los Angeles. Her e-mail address is [email protected]

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