Employee Fired for Working Additional Hours Eligible for UC Benefits Despite Prior Warning

This post was contributed by Joseph S. Sileo, an Attorney in McNees Wallace & Nurick LLC's Labor & Employment Practice Group in Scranton, Pennsylvania.

In a recent unreported decision, the Pennsylvania Commonwealth Court considered a part-time employee's eligibility for Unemployment Compensation ("UC") benefits after she was fired for disregarding her employer's prior directive to not work past the end of her shift after punching out. The unemployment claim yo-yoed through the administrative process: after the claimant was initially determined eligible for UC benefits, the Referee reversed that decision and determined the claimant ineligible, and then the Board of Review reversed the Referee's decision and determined the claimant eligible for benefits.

On appeal to the Commonwealth Court, the record contained credible evidence submitted by the employer that the claimant-employee was informed during a morning meeting that working past her scheduled hours, after punching out, violated both wage and hour laws as well as the employer's policy, and that she must stop the practice immediately. Despite this, at the end of her shift that same day, the claimant once again continued to work beyond her scheduled shift after punching out. She was terminated as a result.

Although acknowledging that her employer in fact had at least mentioned that working after punching out was in violation of wage and hour laws, the claimant downplayed that part of the discussion, claiming that the primary topic of the meeting was the claimant's recent history of reporting to work late. The claimant further testified that because the meeting made her very upset and anxious, she simply forgot the discussion about working past her scheduled shift and therefore she did not act willfully or deliberately disregard the employer's directive when she again worked past the end of her scheduled shift after punching out later that day.

The Commonwealth Court agreed with the Referee and found that the record "amply supported" the factual finding that the claimant simply "forgot" the discussion only a few hours earlier that morning about working off the clock hours because she was stressed and distraught. Consequently, the Court ruled, the Board of Review did not commit an error of law when it determined that the claimant's failure to comply with the employer's directive prohibiting working after punching out was not intentional or deliberate; meaning that, because the claimant's separation from employment was not due to "willful misconduct," she was eligible for UC benefits under Section 402(e) of the Law.

Although the employer in this case did the right thing from a wage and hour perspective, by informing its employee that working "off the clock hours" was prohibited, its good intentions and correct approach in that respect failed to carry the day in the unemployment compensation arena. In that regard, this case is but another example of how the eligibility standards for unemployment benefits are applied very liberally in favor of employees. Although we do not view this decision as well reasoned, balancing the potential risks and liabilities, the employer nonetheless took the better approach by addressing the more significant and potentially more costly wage and hour issue in spite of, and even if doing so compromised, the unemployment eligibility outcome. One recommendation: confirm similar directives to employees in writing.

If you have any questions regarding this post or need assistance with an unemployment compensation matter, please contact any member of our Labor and Employment Practice Group.

Recent Workers' Compensation Cases Focus on "Going and Coming" Rule

This post was contributed by Paul D. Clouser, an Attorney in McNees Wallace & Nurick LLC's Labor & Employment Practice Group in Lancaster, Pennsylvania.

As a general rule, an employee is deemed not to be "in the course and scope of employment" and is therefore not entitled to workers' compensation benefits, while commuting to and from work. This is known as the "going and coming" rule. However, if the employee is deemed to be a "traveling employee" (as opposed to a stationary employee with a fixed place of work), the scope of employment is much broader and the employee is entitled to a presumption of coverage while commuting, unless his actions at the time of injury were so foreign to and removed from his usual activities, as to constitute an abandonment of employment.

In Holler v. WCAB (Tri-Wire Engineering Solutions), the Claimant was employed as a cable technician, responsible for installing cable and network services at customers' homes and businesses. He began each day by reporting to his employer's facility, where he checked in, received his assignments for the day and picked up his equipment. He then spent the rest of the day traveling to and working at various customer locations. Employer allowed Claimant to take a company vehicle home each evening and then use it to return to work in the morning. Claimant was prohibited from using the vehicle for any purpose other than commuting or traveling between customer locations.

On the morning of August 13, 2010, on his usual commute to work, Claimant was seriously injured when his vehicle ran off the road and struck a utility pole. He was life-flighted to the hospital and was unable to return to work following the accident.

The WC Judge and Appeal Board both denied benefits, on the basis of the familiar "going and coming rule," and since Section 301(c)(i) of the Act specifically states that injuries are not compensable if those "injuries [are] sustained while the employee is operating a motor vehicle provided by the employer if the employee is not otherwise in the course of employment at the time of injury." However, the Commonwealth Court reversed and awarded benefits, noting that Claimant was more accurately described as a "traveling employee," despite the fact that he briefly reported to the employer's office each morning, before beginning to make his rounds. Accordingly, the "going and coming" rule was inapplicable and Claimant's morning "commute" to the office was presumed to be part of his work and the resultant injuries compensable.

In Simko v. WCAB (U.S. Steel Corporation), the WC Judge awarded benefits for a severe brain injury sustained by Claimant, while he was commuting to the employer's premises for a safety meeting. Claimant was a member of the safety committee and was required, on a monthly basis, to report to work one and one-half hours before the start of his regular shift. Attendance was mandatory and Claimant was paid for this time. Additionally, "stand-down" meetings were held less frequently, when serious accidents or fatalities would occur. Testimony established that on the morning of the accident, Claimant was heading into a combination monthly meeting/stand-down meeting.

The WC Judge held that although Claimant was a stationary employee and therefore subject to the "going and coming rule," an exception to the rule exists for "special missions" that further the interests of the employer. Claimant was engaged in such a "special mission" when he left his home on the morning of the accident, to meet with management and other safety committee members for a "stand-down" meeting, prior to his regularly scheduled shift.

The Board and Commonwealth Court reversed, however, holding that meeting attendance is deemed to be a part of an employee's regular work duties, and that traveling to or from such meetings is not a special mission. Also rejected, was Claimant's argument that the "special circumstances" exception to the going and coming rule applied. In other words, Claimant argued that he was in fact furthering the interests of his employer by commuting to work for a meeting on workplace safety, which by definition promotes the employer's safety goal. Once again, however, the Court noted that although attendance at such meetings may further the employer's safety goal, it is still a part of Claimant's regular work duties. Further, Claimant did not dispute that the safety meetings were treated as a part of his regular duties and pay, and that the meetings were held on the same premises where he performed his regular job as a strand operator.

If you have any questions or concerns as to whether an employee was truly in the "course and scope" of his or her employment, thus entitling the employee to payment of WC benefits, please contact Paul Clouser or Denise Elliott in our Lancaster office.

Feds Tighten the Belt on "Skinny Plans" and Other ACA Workarounds

This post was contributed by Eric N. Athey, an Attorney in McNees Wallace & Nurick LLC's Labor & Employment Practice Group in Lancaster, Pennsylvania.

On January 1, 2015, employers with 100 or more "full-time equivalents" will be subject to the "Pay or Play" regulations under the Affordable Care Act ("ACA"). Over the past few years, many consultants have sought to identify loopholes in the law and lower-cost strategies for complying. Unfortunately for employers who were banking on these "workarounds," the Internal Revenue Service and the U.S. Department of Labor both issued guidance this week dismissing several of the more aggressive strategies that have garnered attention in the press.

Skinny Plans Kaput? A 2013 article in the Wall Street Journal highlighted the possibility that employers might offer low-cost "skinny plans" to avoid some or all of the "pay or play" penalties under ACA. Skinny plans typically offer little or no hospitalization benefits or physician services and only minimal preventive services. The legitimacy of skinny plans under the ACA appeared to be secure when they were not expressly addressed in final regulations governing "minimum value." In addition, many skinny plans appeared to pass muster under the "minimum value calculator" that was developed by the feds for use by employers and carriers. However, on November 4, 2014, the IRS issued Notice 2014-69 indicating that they will promptly be issuing proposed regulations stating that plans which do not offer hospitalization and/or physician service benefits do not constitute "minimum value" coverage under the ACA. The forthcoming proposed regulations will not apply to skinny plans that were in existence before November 4, 2014; however, such plans will lose their exempt status at the end of the plan year beginning no later than March 31, 2015.

The recent IRS guidance further states that employers may not issue any notices to employees suggesting that their skinny plan is considered "minimum value" under ACA or will otherwise affect an employee's eligibility for a tax subsidy – and that any prior notices to this effect must be rescinded and clarified. The practical impact of this change is that employers who solely offer skinny plans that do not qualify as minimum value coverage may be subject to a penalty of $3000 for every full-time employee who qualifies for a tax subsidy to purchase coverage on the health insurance exchange. Notwithstanding this development, skinny plans will likely continue to qualify as "minimum essential coverage" and thereby prevent imposition of the "no coverage penalty" (i.e. $2000 for all but 30 full-time employees); however, it remains to be seen whether they will be adopted by many employers for this reason.

Reimbursing Employees For the Cost of Individual Plans. Some employers have considered dropping group coverage but reimbursing full-time employees for part or all of the premium for a policy purchased on the individual market. Doing so could constitute a valuable employee benefit and some believed it could minimize employer pay or play penalties under ACA. However, in guidance issued on November 6, 2014, the U.S. Department of Labor ("DOL") indicated that such arrangements constitute "part of a plan, fund, or other arrangement established or maintained for the purpose of providing medical care to employees." This being true, the DOL found that these payment arrangements must comply with ACA's market reform provisions – including free preventive care requirements and no annual or lifetime limits. According to the DOL, payment arrangements of this nature cannot be "integrated" (i.e. combined) with individual market policies in order to comply with these requirements. Significantly, the DOL guidance applies to these arrangements regardless of whether the employee payments or reimbursements are handled on a pre-tax or after-tax basis.

What if an Employee is Reimbursed Via a Section 105 Plan Through a Broker or Agent? Some vendors have sought to avoid the status of "employer reimbursement plans" (discussed in the paragraph above) by setting up their own Section 105 plans through which client-employers can reimburse their employees for the cost of individual coverage. In their recent guidance, the DOL specifically pointed out that these arrangements are, in themselves, health plans and will disqualify participating employees from receiving tax subsidies on the exchange. In addition, as health plans, these arrangements will be subject to ACA requirements regarding free preventive care and annual and lifetime limits. This conclusion is consistent with prior guidance issued by the IRS. Employers that pursue such arrangements do so with substantial risk.

Paying Plan Participants with High Claims to Drop Coverage. ACA prohibits employers from discriminating against employees who qualify for a tax subsidy to purchase coverage on the exchange (which will often trigger an employer penalty). However, the Act says nothing about employers who offer cash incentives to employees to drop employer-provided coverage. Over the past year, a number of commentators argued that such employer "cash-outs" or "dumping" of high-risk or high-claim participants would save costs for employer group health plans and threaten the viability of exchange plans. Although the ACA is silent on this specific practice, the DOL's November 6, 2014 guidance indicates that offering cash to such participants would violate HIPAA's non-discrimination rules and may constitute a violation of Section 125 non-discrimination rules. Suffice it to say, the DOL's reasoning is somewhat strained and does not bear repeating here; however, the guidance makes it clear that such "cash out" programs targeted at high-risk or high-claim participants are likely to be challenged by the Department.

The ACA provides ample room for employers to be creative in their compliance strategies. However, many of the "silver bullet" strategies that have been touted by some consultants over the past 18 months always seemed too good to be true and, it turns out, they are. Employers that have been considering these strategies will need to redirect their efforts or proceed with knowledge that they are likely to face a challenge if audited. Only time will tell whether the positions taken by the IRS and DOL in the recent guidance will hold up in court. Employers who prefer to stay out of court are well-advised to steer clear of these workarounds.

McNees Labor & Employment Group Ranked Tier 1 Practice By U.S. News & World Report and Best Lawyers

We are pleased to announce that U.S. News and World Report and Best Lawyers ranked the McNees "Employment Law - Management" and "Labor Law - Management" practices as Tier 1 practices in the Harrisburg metropolitan area.

The "rankings are based on a rigorous evaluation process that includes the collection of client and lawyer evaluations, peer review from leading attorneys in their field, and review of additional information provided by law firms as part of the formal submission process."

While we don't want to gloat, we are also thrilled to be joined on this elite list by 15 additional McNees practice areas including Energy Law, Health Care Law, Insurance Law, Tax Law, and Trusts & Estates Law.

Thank you for being a loyal reader of the Pennsylvania Labor & Employment Blog. As always, if you have any labor or employment needs, please reach out to the McNees attorney with whom you regularly work or any one of our "Tier 1" Labor & Employment attorneys.

Board Continues Aggressive Policing of Employee Social Media Use

This post was contributed by Adam L. Santucci, an Attorney in McNees Wallace & Nurick LLC's Labor & Employment Practice Group in Harrisburg, Pennsylvania.

Stop me if you heard this one: the National Labor Relations Board recently reinstated employees who were discharged for comments made on their Facebook pages and found that the employer's social media policy was unlawful.

We have covered this topic in detail before (herehere and here for example), and you can check out these posts and others in our Archive for some background information on the Board's aggressive approach to social media issues. In Triple Play Sports Bar and Grille, the Board made clear its position that under the National Labor Relations Act, employees have the right to act together to improve the terms and conditions of their employment and to "improve their lot." The Board went on to state that this includes the right to use social media to communicate with each other and with the public for this purpose.

On the other hand, the Board also noted that online communications can implicate legitimate employer interests, including the right to maintain employee discipline. The Board noted that the competing interests of the employees and the employer must be weighed carefully (yes, you know where this is headed). In this case, not surprisingly, the Board found that the employees' interests outweighed the employer's interests and that the employees' conduct did not lose the protections of the Act despite the use of some pretty offensive language.

Let's take a look at the facts.

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NLRB Modifies Standard Remedial Notice to Include QR Code and Link to Board's Web Site

This post was contributed by Adam L. Santucci, an Attorney in McNees Wallace & Nurick LLC's Labor & Employment Practice Group in Harrisburg, Pennsylvania.

The National Labor Relations Board recently took the opportunity, in a case dating back to 2011, to update and modernize some of the standard language contained in the remedial notice that the Board requires to be posted as a remedy for unfair labor practices. By way of background, in nearly every case in which the Board finds a violation of the Act, it requires the offending party (union or employer) to post or otherwise furnish a notice to employees setting forth their rights under the Act. The notice will also include information regarding the remedial actions that will be taken by the violating party. In the recent past, the Board has begun to require parties to issue the notice in electronic format, but for the most part the standard language in the notice has not changed.

In Durham School Services, L.P., the Board upheld an ALJ decision reinstating an employee who was allegedly discharged in retaliation for supporting the union during a hotly contested union election. The Board also affirmed the ALJ's finding that the employer engaged in objectionable conduct during the period prior to the election, which warranted the setting aside of the election results which had been in favor of the employer. As a result, the ALJ ordered that a third election be held (the first election was also overturned).

Those of you who have been following the Board's decisions of late were probably not surprised to see that the employer lost on all fronts. That result is not what makes this case of note. What makes it noteworthy is that the Board took the opportunity, at the request of the union, to prospectively modify the standard language it includes in all remedial notices.

In Durham, the Board granted the union's request that it modify its current standard notice to inform employees that a copy of the Board's full decision and order are available on the Board's web site. The notices will now include a link to the decision/order and a QR code that will take employees directly to the Board's web site. The Board found that making the decisions and orders more readily available will facilitate a better understanding of the violations that occurred and why the Board granted the remedies it directed. It will be interesting to see what the future holds for the Board's standard notice as the Board continues its unprecedented outreach efforts and continues to attempt to facilitate employees' understanding of the Act.

Workers' Compensation: Advantages of Self-Insurance

This post was contributed by Paul D. Clouser. While Paul has over 25 years of experience representing clients in workers' compensation matters and employment litigation, Paul is new to McNees Wallace & Nurick LLC's Labor & Employment Practice Group in Lancaster, Pennsylvania.

Employers in Pennsylvania can often benefit from self-insuring their workers' compensation plan, rather than simply opting for carrier based coverage year after year. The advantages of self-insurance include the following:

  • Reduced Cost: Self-insured employers bear the costs, but also keep any profits that are normally "built into" traditional insurance premiums. Per claim costs are usually reduced in self-insurance arrangements, as the employer has a direct and vested interest in reducing costs through a "hands-on" approach to managing claims. 
  • Cash flow: Self-insured employers also appreciate cash flow advantages, as medical bills and wage loss benefits are paid when these items are required to be paid, rather than when the insurance carrier decides that premiums or special assessments are due.
  • Ability to select counsel and claims management vendors: Self-insured employers have the freedom to select their own legal representatives, nurse case manager, IME physicians, and investigators, and to reduce the risk of "spin off" ADA, PHRC, FMLA, wrongful discharge or other costly lawsuits that are often not on the radar of carrier-appointed defense counsel.
  • Cost control: Self-insured employers are able to control risk and financial exposure through the purchase of specific and aggregate reinsurance. In addition, self-insureds enjoy the benefit of investment income on funds that are set aside to pay claims.

The path to becoming self-insured typically involves a multi-step process including preliminary review, a more detailed feasibility study, a plan implementation phase, and fine tuning or monitoring the program, once it is in place.

Since self-insurance is not a suitable option for all companies, the first step, or preliminary review, should address some very basic questions. What does the company currently spend, on an annual basis, for its workers' compensation coverage? As a general rule of thumb, self-insurance can become cost effective once annual workers' compensation expenditures exceed $500,000. In which states does the company do business? Most states permit self-insurance in the workers' compensation realm, but the requirements and timeline for achieving self-insured status will vary from state to state. What has the loss experience been for the specific business and for the industry in general? Does your business consistently pay out more premiums than it had paid in claims?

Once these initial questions have been addressed, the company can move on to a more detailed feasibility analysis, with respect to possible self-insurance. A capable risk management consultant will typically gather the necessary data, perform the financial and actuarial analysis, and review the specific state requirements to guide the company in its final decision making process. Key to this study will be the decision as to whether day-to-day claims should be handled internally or assigned to a third party administrator. A third party administrator (TPA) arrangement is generally preferable, at least in Pennsylvania, as the workers' compensation statute and regulations are quite complex, with many traps for the unwary. Some newly self-insured employers opt for initial TPA coverage, with the goal of attaining "self-administration" status after several years.

The implementation phase includes obtaining approval from the state to self-insure and meeting any state statutory regulatory requirements. Section 305 of the Pennsylvania Workers' Compensation Act, for instance, provides that an employer desiring to be self-insured must submit an application to the Department of Labor and Industry demonstrating its ability to pay compensation. The application process is now done on the Bureau's new computer platform, WCAIS (Workers' Compensation Automation and Integration System). A business applying for self-insurance must meet 3 basic requirements under the Pennsylvania statute:

1. The company must have been in business for at least three consecutive years;
2. It must provide proof of incorporation or organization under the laws of a state within the United States; and
3. It must have an adequate accident and illness prevention plan.

A $500 application fee is required and the primary focus of the department's review will be on the company's ability to pay claims and its ability to provide security for the ability to pay in the future. The employer seeking self-insurance status must also demonstrate that it has ample facilities and competent personnel to adjust and pay its claims. As noted, the employer may contract with a registered claims service or third party administrator, to provide these services.

An employer wishing to self-insure or a group of employees wishing to pool their liabilities, must "post a bond or other security, including letters of credit drawn on commercial banks with a Thompson Bank Watch rating of B/C or better or a Thompson Bank Watch score of 2.5 or better for the bank or its holding company or with a CD rating of BBB or better under "Standard and Poor's." Pennsylvania Workers' Compensation Act, Section 305(a)(3).

Finally, once implemented, the employer will need to "fine-tune" or monitor its self-insurance program, to make sure that the expected cost savings are realized and that the program is running smoothly. Regular quarterly meetings between the employer, TPA, legal counsel, broker, and nurse case manager are an important step toward transparency and keeping the program "on track." The company and its TPA must have an accurate system for tracking claims and monitoring losses, in addition to allocating costs to the appropriate company subsidiaries or departments. Regular auditing and actuarial reserve analysis will be necessary to ensure that there are no unknown financial liabilities lurking beneath the surface and to give the excess carrier the requisite assurance that the program is running smoothly.

Despite the effort needed to establish and monitor a self-insurance workers' compensation program, our clients routinely report that the process is well worth it. Controlling ones' own destiny is frequently mentioned as the key reason why others may wish to chart a similar course.

If you have any questions regarding this article or workers compensation liabilities in general, please contact Paul Clouser or Denise Elliott in our Lancaster Office.

EEOC's Attack On Severance Agreements Dealt Blow

This post was contributed by Adam R. Long, an Attorney in McNees Wallace & Nurick LLC's Labor & Employment Practice Group in Harrisburg, Pennsylvania.

As we noted earlier this year, the EEOC has begun filing legal challenges to relatively common provisions found in form severance agreements, based on the EEOC's belief that such language unlawfully interferes with employees' rights to file charges with and provide information to it. Specifically, the EEOC has attacked non-disparagement and confidentiality provisions and general release language that it has deemed to be overly broad. The EEOC's position on this issue represents a significant shift from its prior position on what language is acceptable for use in severance agreements.

In February 2014, the EEOC filed a lawsuit against CVS Pharmacy, Inc., claiming that various provisions in CVS's form severance agreement violated Title VII. This lawsuit garnered significant attention and represented the EEOC's most aggressive and significant action to date on this issue. CVS moved to dismiss the lawsuit in April 2014, arguing that the EEOC failed to state a claim upon which relief could be granted.

Last week, U.S. District Judge John Darrah announced at a status hearing that he would grant CVS's motion and dismiss the lawsuit. The court has indicated that it will issue a written opinion confirming and explaining the dismissal by October 2.

After Judge Darrah issues his decision, we will provide an update on the decision and what it means for employers. In the meantime, it appears that CVS has obtained a significant initial victory for employers in what likely will be a long legal fight over the EEOC's current position on common severance agreement provisions.

Court Weighs In On Employee Tip Pools

This post was contributed by Adam L. Santucci, an Attorney in McNees Wallace & Nurick LLC's Labor & Employment Practice Group in Harrisburg, Pennsylvania.

We recently prepared a post for our friends at www.jurisbrewdence.com, who write about interesting issues in the craft beer industry (yeah we know, rough life right?). Our post was about a recent decision from the United States District Court for the Middle District of Pennsylvania, which brought some clarity to the issue of which employees may participate in employee tip pools. As you may recall, we previously discussed employee tip pools, which can be risky and problematic, particularly when deciding which employees will share in the pooled tips.

You can check out the full article on on Jurisbrewdence by clicking here

Would You Like Fries . . . and an Unfair Labor Practice Charge with That?

This post was contributed by Bruce D. Bagley and Lee E. Tankle of McNees Wallace & Nurick LLC's Labor & Employment Practice Group.

Mainstream media, attorneys, and business owners are discussing the meaning and impact of a two paragraph press release issued on July 29 by the Office of the General Counsel of the National Labor Relations Board (NLRB). That Office is the "prosecuting arm" of the NLRB, and in the press release, the General Counsel indicated he has authorized the issuance of unfair labor practice (ULP) complaints against franchisor McDonald's USA, LLC for the actions of its franchisees. In a typical franchisor-franchisee relationship, a franchisor, like McDonald's, may contract with a franchisee to provide the latter with use of the franchise name, logo, processes, recipes, etc., in exchange for an upfront franchise fee and sales-based royalties. So is this press release declaring McDonald's a "joint employer" with potentially over 13,000 United States franchisees the super-sized issue pundits have made it out to be?

Over the past two years, 181 ULP charges have been filed with the NLRB involving numerous McDonald's restaurants. The charges arose largely from the termination of a number of fast food workers who had participated in various protests and union organizing efforts at McDonald's franchised stores across the country. Per the General Counsel's press release, 68 of those cases were found to be meritless, 64 are pending investigation, and 43 were found to have merit. In those 43 cases found to have merit, the General Counsel contends that the various franchisees and McDonald's USA, LLC (the franchisor headquartered in Illinois) are "joint employers" and will therefore be named as parties to the complaints.

We have previously discussed the United States Court of Appeals for the Third Circuit's views on joint employer status under the Fair Labor Standards Act (FLSA), a different federal statute.

Why all the hubbub now under the National Labor Relations Act (NLRA)?

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