You're fired! Want to continue to work for us as an Independent Contractor?

This post was contributed by Jennifer E. Will, an Attorney in McNees Wallace & Nurick LLC's Labor & Employment Practice Group in Harrisburg, Pennsylvania.

If you do, you'll need to sign a release and waive all of your employment law claims first. Oh, and if you don't, you'll still be bound by your noncompete. Huh?

The facts are more complicated than that, but after Allstate Insurance decided to reorganize and shift all of its agents to an independent contractor model, it became a target of the EEOC. In its attempts to avoid litigation, Allstate decided to terminate all of its agents who were classified as employees. At the same time, the Company offered those employees a series of choices, which included a $5000 conversion bonus for those who wished to become independent contractors and a year of severance pay, for those who didn't. In either event, a release of all discrimination claims was required.

After a few of those terminated employees filed charges, the EEOC filed a civil action of its own, seeking to invalidate the release itself, on the ground that it constituted retaliation. The EEOC took issue with Allstate only permitting employees to continue their careers if they waived all discrimination claims. What's wrong with that?

Nothing, said the District Court (twice). Nothing, said the Court of Appeals (after a remand). Turning to well-established law, the Court rejected the EEOC's claims that offering to convert an employee to independent contractor status was "illegal" and that the conversion bonus was insufficient consideration for a release.

How's this for a quote? "[W]e are not persuaded by the [EEOC's] efforts to arbitrarily limit the forms of consideration exchangeable for a release of claims by a terminated employee." In sum, it is the employer, and not the EEOC, that gets to decide what post-termination benefits to offer an employee in exchange for a release. The act of refusing to sign a release is NOT protected activity and, therefore, cannot give rise to a claim of retaliation.

While this is certainly a piece of good news for employers, we continue to offer caution to employers in the area of severance agreements, as caselaw and statutes (such as the Older Workers Benefits Protection Act) continue to refine what it takes to achieve an enforceable release. Please contact any member of the McNees Labor & Employment Law Practice Group for assistance.

Best Practices for Handling Unemployment Compensation Claims Part 3: Appeals, Legal Counsel, & Quarterly Reports

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

Pennsylvania employers can achieve positive results and realize other important gains by wisely and effectively responding to, and when appropriate, contesting unemployment compensation claims. This post is Part 3 of a 3 part series on handling UC claims and addresses best practices for appealing to the Unemployment Compensation Board of Review/Commonwealth Court, when to involve legal counsel, and mandatory electronic filings of UC quarterly reports. Part 1 can be viewed here and Part 2 can be viewed here.

Appeal to the Unemployment Compensation Board of Review (UCBR)

  • It is important that you file your appeal within 15 days from the date the Referee’s Decision/Order is issued (not the date of employer's receipt)
  • This is a simple process and can be completed by letter or by filling out a UC Appeal petition form. You can mail, fax, or e-mail the appeal letter/petition.
  • Be sure to include the claimant's name, UC claim number, last four digits of the claimant's social security number, the date of the decision, and statement of the reasons for the appeal.
  • This is a paper appeal. There is no additional hearing. An additional hearing will only be ordered in very rare instances to take additional evidence if the initial hearing was not complete. The Board will consider the Referee's hearing transcript and exhibits and will issue a Decision and Order.
  • The appealing party can request a copy of the hearing transcript and permission to submit a letter highlighting why the decision should be reversed or a more formal brief with legal authority in support of an appeal--but a supporting letter/brief is not required. Likewise, the non-appealing party can request a transcript and permission to submit a letter or brief in opposition to appeal (but neither is required).

Appeal to Commonwealth Court

  • You can appeal the decision of the UCBR to the Pennsylvania Commonwealth Court. This is more complex and costly than administrative appeals to the Referee or the UCBR.
  • A petition for appeal must be filed with the Court within 30 days of the date of the Board's Decision/Order (not from date of employer's receipt).
  • An appeal to the Commonwealth Court is a much more formal and has detailed procedural requirements including the provision of a reproduced record and supporting/opposing briefs. Technically you can "do it yourself" but you should have an attorney involved due to substantial procedural requirements.

When to Involve Legal Counsel in UC Cases

  • Involving legal counsel at the earliest stage, when necessary, can greatly increase an employer's chances of success and limit exposure to more significant liability in certain cases.
  • Example of when to involve counsel include:

A) complex cases involving difficult factual or legal issues (independent contractor vs. employee classification issues, separations due to failed drug test);

B) When there is the possibility of exposure to other more significant potential liabilities, such as when a claim of discrimination has been made or is anticipated in connection with the employee separation related to the UC benefit application; or

C) When the claimant has legal counsel.

Mandatory Electronic Filing of UC Quarterly Reports

Effective with the first quarter of 2014, employers are required to electronically file quarterly UC tax and wage reports through the Unemployment Compensation Management System (UCMS). Employers will not receive and may not file paper filing forms unless a waiver has been requested and granted. Failure to electronically file as required may result in assessment of a penalty (10% of quarterly contributions for the period with a minimum $25 and maximum $250 penalty amount).

If you have any questions regarding any of the information discussed in this 3-part series or need assistance with an unemployment compensation matter, please contact any member of our Labor and Employment Law Group.

Best Practices for Handling Unemployment Compensation Claims Part 2: The Referee's Hearing

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

Pennsylvania employers can achieve positive results and realize other important gains by wisely and effectively responding to, and when appropriate, contesting unemployment compensation claims. This post is Part 2 of a 3 part series on handling UC claims and addresses best practices for preparing for and participating in a Referee's Hearing. Part 1 can be viewed here.

Preparing for the Referee's Hearing

  • Know relevant facts inside and out. 
  • Review Notice of Hearing to confirm issues that will be addressed at the hearing.
  • Identify and prepare necessary witnesses. Only present witnesses with first-hand, direct knowledge of relevant facts. Avoid hearsay and second-hand testimony.
  • Timely request and serve a subpoena for any necessary adverse or other witness that is not readily available to you. Be sure to check the availability of all necessary witnesses in advance!
  • Timely request a continuance if necessary.
  • Identify, assemble, and organize relevant documents to be introduced at the hearing. Each document used at the hearing must be identified and authenticated by a proper witness (one with first hand knowledge of what the evidence is). Bring 4 copies of each document to the hearing (one each for the witness, the employer's presenter/representative, claimant/opposing attorney, and the Referee).
  • Review the Referee’s file prior to the hearing. You can do this the day of prior to the start of the hearing or prior to the hearing date.
  • Request copies of any claimant statements or other documents that you don’t have which could be helpful to (or hurt) your case.
  • Prepare an outline and/or questions in advance to avoid missing any important points.

Telephone Testimony

  • Determine if any witness qualifies and will need to testify by telephone and if so make a prompt request. The Referee may schedule testimony by telephone when a party or witness is located at least 50 miles from the hearing location.
  • Testimony by telephone of a party or witness may also be allowed, at the request of a party, when the parties consent to the receipt of testimony by telephone or the party or witness is reasonably unable to testify in person due to a compelling employment, transportation, or health reason, or other compelling problem.
  • Special rules apply to hearings involving telephone testimony. For example, special notices must be issued by the Referee’s office well in advance of a hearing involving telephone testimony (as much as 14 days in advance). Submit a request for permission to present telephone testimony as soon as possible.
  • Documents to be used in connection with the telephone testimony must be identified, exchanged, and provided to the witness who will testify by telephone in advance. The party requesting testimony by telephone is responsible for identifying, assembling, and providing documents. The requesting party must supply the name, location, and telephone number of any witness who will testify by telephone. The witness may be questioned to confirm identity.

At the Hearing

  • Be respectful and polite to the Referee, the other side, and witnesses despite the adversarial nature of the hearing. Referees will evaluate your actions during the hearing including an assessment of your credibility. Substance/facts--neither style nor grandstanding--will carry the day.
  • Organize and present your case in a logical and clear manner. Start with relevant background, present a chronology of events, and tell the Referee what the case is about early on (e.g., the Claimant was terminated for stealing), then go back and fill in details.
  • Stick to relevant facts: Get all important facts in the record; avoid getting side tracked and distractions.
  • Object to irrelevant or improper testimony or documents. Use your judgment and common sense, if it does not seem relevant, state an objection on the record.
  • State on the record if you feel that the Referee is precluding you from presenting relevant information. This could be important if there is an appeal.

Stay tuned for Part 3 of this series. In part 3, we will provide tips for appealing a Referee's decision, when to involve legal counsel, and filing required reports.

Best Practices for Handling Unemployment Compensation Claims Part 1: Responding to the Initial UC Claim and Appealing the Initial Determination

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

Pennsylvania employers can achieve positive results and realize other important gains by wisely and effectively responding to, and when appropriate, contesting unemployment compensation claims. This post is Part 1 of a 3 part series on handling UC claims and addresses best practices for responding to the initial UC claim.

Responding to the Initial UC Claim

  • Prior to termination, think about possible claims. If applicable, couch the decision in terms of willful misconduct. If you issue a discharge letter, be sure to cite relevant policies.

Respond to all claims (both contested and uncontested).

  • A late 2013 amendment to PA’s UC Law provides that an employer’s UC reserve account will be charged for claimant overpayments as a result of an employer’s failure to respond or late response to information requests by UC authorities.
  • An Employer’s response will be considered inadequate if “the response misrepresents or omits facts that, if represented accurately or disclosed” would have been the basis for denying a claimant benefits. Other penalties can apply.
  • The days of not responding are over -- Employers can no longer risk playing too fast and loose with responding to requests for information relating to UC benefit applications.
  • Be careful of “assisting” separating employees with obtaining UC benefits or promising not to contest benefits.

Respond timely.

  • 14 days to respond (from date on UC questionnaire form (not date of employer's receipt).
  • Consequence of failure to respond or late response: an eligibility determination may be issued without consideration of employer’s information.

Be accurate and consistent.

  • Provide clear, first-hand information regarding reason for separation.
  • Inconsistencies, inaccuracies and exaggerations can come back to bite an employer in connection with other more significant matters! (Example - discrimination claims).

Appealing the Initial Determination

  • Simple process: can be by letter or a UC appeal petition form
  • Can mail, fax, or e-mail appeal letter/petition
  • Be sure to include the claimant's name, UC claim number, last four digits of the claimant's social security number, the date of the decision, and statement of the reasons for the appeal.
  • Submit timely appeals --15 days from the date of the decision (not the date of the employer's receipt). The appeal is timely if post-marked by the appeal deadline date or otherwise upon receipt.

Stay tuned for Part 2 of this post where we will explore preparing for a referee's hearing and what to do at the hearing!

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.

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.

Long-Term Employee Ineligible for UC Benefits for Violating Workplace Conduct Policies

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

After nearly 21 years of employment, a full-time clerk with Turkey Hill lost her job for engaging in several instances of bad behavior within a short period of time. The employee initially received a verbal counseling from her supervisor after telling two Spanish-speaking co-workers to stop speaking Spanish at work because it was a "pet peeve" of hers that employees should speak English when working in the United States. Then, only a few months later, the employer received a complaint that that employee was involved in an argument with a driver over the telephone during which she displayed her "middle finger" to the phone as the call ended, an unseemly gesture that was witnessed by an outside store vendor. Following this incident, the employee was advised that her behavior must improve and she was issued a written warning; when her supervisor attempted to give her copies of the Company polices that she had violated, the employee attempted to throw the policies in the garbage. Having had enough, the employer terminated the employee.

The employee filed a claim for unemployment compensation (UC) benefits and Turkey Hill challenged the employee's UC application. Turkey Hill pointed to its disciplinary policy prohibiting loud, argumentative, disruptive or otherwise unprofessional conduct toward or in the presence of others, including associates, vendors, visitors and the public, as well as its "Enduring Principles" policy which, among other things, required employees to treat others with fairness and respect and practice honesty and integrity in all relationships. Turkey Hill argued that the employee's conduct violated both policies and that her termination for such willful misconduct rendered her ineligible for UC benefits.

Not surprisingly, the employee's testimony differed significantly as compared to the employer's witnesses. As a result, the outcome of the case turned primarily on witness credibility. The employee testified that she "politely" asked her two co-workers not to speak Spanish when she was standing between them as it was rude for them to do so, she did not make a crude "middle finger" gesture during the phone call, and she never refused to read or attempted to throw away any policies presented to her by her supervisor.

Both the Referee following the hearing, and then the UC Board of Review on appeal, credited the testimony of the employer's witnesses over the employee's testimony, and determined that the employee's separation from employment was due to willful misconduct thus rendering her ineligible for UC benefits. The employee appealed.

Continue Reading...

NLRB Upholds Discharge for Deliberate Betrayal, Despite Reliance on Unlawful Policy

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

The National Labor Relations Board recently issued a somewhat surprising decision that provides useful guidance to employers facing employee misconduct. In Flex Frac Logistics, LLC, the Board found that an employee's discharge for breaching the employer's confidentiality policy was lawful, despite the Board's finding that the confidentiality policy was unlawful.

In a prior decision, the Board found that the confidentiality policy was unlawfully overbroad because it prohibited or could be interpreted to prohibit employees from discussing wages, hours and other terms and conditions of employment. We have previously discussed with you the Board's aggressive enforcement stance with respect to employer policies of all types. As part of that prior decision, the Board remanded to an Administrative Law Judge ("ALJ") the question of whether the employee's termination pursuant to the confidentiality policy was also unlawful.

The ALJ held, and the Board affirmed, that the employer did not violate the National Labor Relations Act when it discharged the employee. Discipline pursuant to an unlawful policy is only unlawful if the employee violated the rule by engaging in protected activity under the Act, or by engaging in conduct that otherwise implicates the concerns underlying the Act. The Board found that even though the employee's conduct implicated the concerns underlying the Act, her discharge was lawful because the employee deliberately betrayed the employer's strong, expressly articulated confidentiality interests.

The Board noted that there was no dispute that the employer had a legitimate business interest in maintaining the confidentiality of the rates it charged its customers, and that the employer was harmed by the employee's disclosure of that information. The Board found that it was clear that the employee was not discharged for engaging in protected activity but was instead discharged for deliberately violating the confidentiality policy. Importantly, the Board noted that the employer cited the employee's interference with its operations as the reason for her discharge.

This decision was surprising to us given the Board's strong defense of employee rights under the Act. But, as was previously discussed, there are some limits to the protections of the Act. The Flex Frac decision has a good discussion of the types of misconduct that will not be protected by the Act, even if the employer relied on an unlawful policy in taking disciplinary action against the employee.

Although helpful, employers should still work to ensure that their policies will withstand scrutiny under the Act, and that any disciplinary actions are carefully vetted for compliance.

Supreme Court Clarifies that Severance Payments are Taxable

This post was contributed by Tony D. Dick, an Attorney in McNees Wallace & Nurick's Labor & Employment Practice Group in Columbus, Ohio.

On Tuesday, the U.S. Supreme Court ruled unanimously (Justice Kagan recused herself) in United States v. Quality Stores, Inc., Case No. 12-1408 that severance payments made to employees who were involuntarily terminated are taxable wages under the Federal Insurance Contributions Act (FICA). The decision overturns a previous ruling from the Sixth Circuit Court of Appeals in favor of Quality Stores which was seeking a $1 million tax refund from the IRS based on its claim that severance payments were not covered by FICA.

At issue was the definition of “wages” under FICA. Under federal tax law, “wages” are defined as “all remuneration for employment, including the cash value of all remuneration (including benefits) paid in any medium other than cash.” Quality Stores contended that its severance payments to its terminated employees fell outside the definition of “wages” and constituted supplemental unemployment compensation benefits (SUBs) which are not considered taxable under the Internal Revenue Code.

In support of this contention, Quality Stores pointed to 26 U.S.C. § 3402(o) – a statute which deals with income tax withholdings – which provides that SUBs “paid to an individual . . . shall be treated as if it were a payment of wages by an employer to an employee….” According to Quality Stores, this language established that SUBs were not actually wages, but were only to be treated "as if" they were wages for income tax withholding purposes and since FICA uses a substantially similar definition, SUBs should not be found to be wages for FICA tax purposes.

The Supreme Court ultimately disagreed with Quality Stores’ position. In the unanimous opinion written by Justice Kennedy, the Court held that FICA defines wages broadly as “all remuneration for employment,” and includes “not only work actually done but the entire employer-employee relationship for which compensation is paid.” This would include the severance payments at issue. In further support of its holding, the Court also referenced the legislative history of FICA and cited to 26 U.S.C. 3121(a)(13)(A) which exempts from “wages” severance payments provided “because of . . . retirement for disability.” The Court reasoned that the fact that FICA contained this and other exemptions was further support for the proposition that severance payments are wages. Otherwise, the exemption would be superfluous.

After the Sixth Circuit’s ruling in this case, many employers filed refund claims for FICA taxes previously paid on severance payments. Those claims are now moot. Any employer who stopped withholding FICA taxes on severance payments in reliance on the Sixth Circuit’s earlier ruling will likely need to amend previous returns to pay the outstanding FICA taxes.

Last Call! Third Circuit Court of Appeals Rules That Employer Can Terminate Employee For Violating Strict No Alcohol Return to Work Agreement

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

The Third Circuit Court of Appeals recently issued a decision holding that an employer's termination of an employee for violating a very broad and restrictive return to work agreement (RWA), which prohibited the employee from all drug and alcohol use during both work and personal time, was lawful.

In that case, Ostrowski v. Con-Way Freight, Inc., the employer maintained strict drug and alcohol screening policies, in compliance with federal motor carrier safety regulations issued by the Department of Labor, as well as an Employee Assistance Program. The employee, a Driver Sales Representative, requested a leave of absence under the Family and Medical Leave Act (FMLA) in order to voluntarily participate in a treatment program for alcoholism, which the employer approved. Following completion of his treatment program, the employee returned to work subject to a strict RWA by which he agreed to remain "free of drugs and alcohol (on company time as well as off company time) for the duration of [his] employment." Within only a month of his return to work, the employee relapsed and resumed drinking alcohol, leading him to once again admit himself into a treatment program. At that time, the employer terminated the employee for violating the RWA.

The employee filed a lawsuit in federal court claiming that his termination violated the Americans with Disabilities Act (ADA), the Pennsylvania Human Relations Act (PHRA) and the FMLA. More specifically, the employee alleged claims of disability discrimination, retaliation and failure to accommodate his disability under the ADA and PHRA and claims of retaliation, interference and unlawful denial of FMLA-protected leave. The District Court granted summary judgment in favor of the employer on all claims; the employee then appealed to the Third Circuit Court of Appeals.

In support of his ADA and PHRA claims, the employee argued that his violation of the RWA could not serve as a legitimate basis for termination because the RWA itself ran afoul of the ADA's prohibition against applying employment qualification standards, tests or other selection criteria that screen out or tend to screen out an individual with a disability. In rejecting this argument, the Third Circuit agreed with court decisions in other jurisdictions, concluding that a return-to-work agreement which imposes employment conditions different from those applied to other employees does not necessarily violate the ADA. While acknowledging that the RWA did impose standards different than those applied to the employee's co-workers, the court observed a nuanced but critical distinction that the difference in treatment resulted from the terms of the agreement rather than disability discrimination.

In addition, the court noted that the employee failed to demonstrate how the RWA subjected him to discrimination based on his alleged disability (alcoholism) as opposed to regulating his conduct (drinking alcohol). In this regard, the court reasoned that the RWA did not restrict or preclude individuals who may suffer from alcoholism from working for the employer, but simply prohibited an employee subject to its terms from drinking alcohol.

The court concluded, therefore, that because the RWA was not invalid under the ADA, the employee's violation of its terms was a legitimate, non-discriminatory reason for the employer to terminate his employment. Moreover, because the employee failed to produce any evidence that his termination based on violation of the RWA was a pretext for disability discrimination, summary judgment dismissal of his ADA and PHRA claims was warranted.

The court also rejected the employee's FMLA claims for similar reasons. More specifically, the court concluded that there was no evidence to suggest that the employee was terminated for requesting medical leave or for any reason other than his violation of the RWA. The court noted that there was no evidence to suggest that the employee would not have been terminated for violating the RWA if he had not requested FMLA leave. Moreover, the court rejected the employee's argument that the RWA's strict no alcohol requirement violated the FMLA because it had the effect of chilling and discouraging his right to request benefits and protections under the FMLA. The Court noted that the employer requested the RWA for a legitimate business reason, namely, pursuant to its obligations under DOT regulations to maintain strict drug and alcohol policies for covered employees. In our opinion, an employer that is not directly subject to DOT regulations presumably would also have the ability to impose a reasonable return to work agreement following an employee's leave for alcohol or drug treatment, particularly if there are clear and established drug and alcohol policies in place prior to requiring such an agreement.

This decision was issued by the Third Circuit as a non-precedential (non-binding) decision. Nonetheless, the decision provides valuable insight and serves as a good indicator of how the Third Court and district courts within our jurisdiction will rule in future cases on this same issue. This case illustrates that carefully drafted and tailored return to work agreements can be used by employers to manage problematic employee conduct. Such conduct, if left unattended, can turn into lengthy and recurring ordeals that become costly, frustrating and drain valuable company resources. A suitable return to work agreement may be a very good option in certain cases. Beware, however, that not all return to work agreements are created equal. It is advisable, therefore, that counsel should be consulted in advance to ensure that any return to work agreement under consideration is properly drafted to protect the employer's interests and legally compliant to the fullest extent possible.

Calling Your Boss a Clown: No Laughing Matter

A Pennsylvania man lost his job in September 2012 and is now without unemployment compensation. Why? He called his boss a "clown."

On October 17, 2013, the Pennsylvania Commonwealth Court affirmed the decision of an unemployment compensation Referee and the Unemployment Compensation Board of Review denying Alfonso Miller unemployment benefits.

Miller, a 5-year employee of a private Philadelphia-based organization providing comprehensive services to individuals with disabilities, had some choice words for his supervisor during his regularly scheduled performance evaluation. After calling his supervisor a "[expletive] clown" and referring to the entire evaluation process as a joke, Miller was fired from his job.

Under Pennsylvania law, a former employee is ineligible for unemployment compensation for any week "in which his unemployment is due to his discharge or temporary suspension from work for willful misconduct connected with his work." An employer always has the burden of proving that an employee engaged in willful misconduct and Pennsylvania courts define "willful misconduct" as:

1. a wanton and willful disregard of the employer's interests;
2. a deliberate violation of the employer's rules;
3. a disregard of the standards of behavior that an employer rightfully can expect from its employees;
4. negligence that manifests culpability, wrongful intent, or evil design; or
5. an intentional and substantial disregard of the employer's interests or the employee's duties and obligations.

Miller argued to the court that an employer should expect that its employees will not always get along, that an employee and his supervisor might sometimes disagree and "questionable language" may occasionally be used by an employee when disagreeing with his supervisors. While an employer may expect this type of behavior, the Commonwealth Court has confirmed that there is no need for an employer to tolerate it and that such language can bar a claimant from being awarded unemployment compensation benefits. Miller never challenged his employer's right to fire him. Rather, he asserted that his comments were protected by the First Amendment to the federal constitution and that denial of benefits amounted to unconstitutional censorship. The court did not buy this argument.

The Commonwealth Court stated that "an employee’s use of abusive, vulgar or offensive language toward a superior is a form of insubordination that can constitute willful misconduct, even if the employer has not adopted a specific work rule prohibiting such language" and that even one instance of profanity can constitute willful misconduct. Furthermore, the court found that the First Amendment argument was a non-starter because Miller was neither speaking out on a matter of public concern nor was his employer a public entity subject to the constraints of the First Amendment.

Employers should remember that former employees are not automatically awarded unemployment compensation. Employees can be ineligible for unemployment benefits for engaging in a number of activities, which may constitute willful misconduct under the law.

NLRB Finds Discussions With Employees of Another Employer Can Constitute Protected Activity

As we discussed with participants in our recent Labor and Employment Law Seminar, despite recent setbacks, the National Labor Relations Board continues to issue decisions that are concerning for employers. These decisions, which impact union and non-union employers alike, often take an expansive view of the protections afforded employees by the National Labor Relations Act. In a recent case involving a complaint filed by an (alleged) independent contractor working for a non-union employer, the Board found that the contractor's electronic communications, directed at employees of a different employer, were protected by the Act because the communications constituted union organizing activity.

In New York Party Shuttle (pdf), the Board first considered whether the complaining party, a tour guide, was an employee or an independent contractor. The Tour Guide was regularly hired by Party Shuttle to provide guided tours of New York City. He also maintained his own tour company, and booked and provided tours through his own company. The Board held that Party Shuttle failed to establish that that the Tour Guide was an independent contractor. In making its decision, the Board applied a common law test that considers a multitude of factors and places the burden on the employer to establish independent contractor status. In this case, the Board found that Party Shuttle failed to establish that the tour guide as an independent contractor.

After determining that the Tour Guide was an employee, the Board turned to the next issue, the Tour Guide's termination.

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Unemployment Compensation Case Update: Employees Who Accept Voluntary Early Retirement Incentive Offers Are Eligible for Benefits

For years, Pennsylvania courts have consistently denied unemployment compensation benefits to employees who accept early retirement incentive packages. Recently, however, the Pennsylvania Supreme Court overruled this well-established precedent. In Diehl v. Unemployment Compensation Board of Review, the Supreme Court found that employees who accept early retirement packages offered pursuant to employer-initiated workforce reductions are eligible for benefits. 

In Diehl, the employer initiated a reduction in force due to deteriorating business conditions. To encourage high seniority employees to leave voluntarily, the employer offered employees over age 60 an early retirement package. Diehl accepted the early retirement package, believing that he also would be entitled to receive unemployment compensation benefits. 

Under Pennsylvania’s Unemployment Compensation Law (“Law”), generally, a claimant who voluntarily quits his job will be ineligible for benefits unless he can prove that he had a "necessitous and compelling" reason to quit. In cases involving an employee’s acceptance of an early retirement package, the Pennsylvania Commonwealth Court typically has granted benefits only where the employee demonstrated a justifiable belief that his job was imminently threatened. Importantly, however, the Supreme Court did not apply this general “voluntary quit” rule in this case. Instead, the Court focused on a “voluntary layoff option” proviso under the Law (“VLO Proviso”). 

The VLO Proviso provides in part that an employee who voluntarily resigns his employment will not be denied benefits when he exercises “the option of accepting a layoff ... pursuant to an established employer plan, program or policy.” 43 P.S. § 802(b). For years, the Pennsylvania Commonwealth Court has consistently refused to apply the VLO Proviso to employees who voluntarily accepted severance or retirement incentives offered by their employers.

The Supreme Court reversed the Commonwealth Court’s long-standing precedent. Specifically, the Supreme Court considered whether the option to accept an early retirement plan offered as part of an employer-initiated workforce reduction was equivalent to the “option of accepting a layoff” under the VLO Proviso. The Court found the options to be equivalent, as both essentially were a termination of employment initiated by the employer. The Supreme Court concluded that the VLO Proviso applies to employees who accept employer-offered early retirement packages as part of a workforce reduction, and as such, voluntary acceptance does not automatically disqualify them from eligibility for benefits. 

The Diehl decision is notable because it increases the likelihood that employees who elect a retirement or severance incentive package also will be granted unemployment compensation benefits. Although the Law does provide a severance pay offset against unemployment compensation benefits, which may be available for some employers, the availability of the offset will depend upon the type of payment and the amount paid to the employee. As a result, employers must carefully consider potential unemployment compensation costs when evaluating the merits of offering incentive programs to employees during a reduction in force. 

Board Affirms Decision Ordering Reinstatement of Employees Terminated for Facebook Comments

On September 20, 2011, we reported on Hispanics United of Buffalo, Inc., the first National Labor Relations Board Administrative Law Judge decision examining an employee's discharge for social media activity. Recently, the Board made Hispanics United its second decision examining protected, concerted activity involving Facebook, and held that the employer violated the National Labor Relations Act when it discharged five employees for criticizing another employee on Facebook. Although examining a new media, the Board stated that it was relying on established precedent to find that the activity in question was for “mutual aid or protection” within the meaning of Section 7 of the Act. Accordingly, the Board affirmed the ALJ's decision ordering reinstatement of the discharged employees.

The employees who were discharged were discussing another employee who had often criticized the job performance of her coworkers. One of those employees initiated a discussion of the criticism online, and several other employees vented in a thread on Facebook. The discharged employees essentially stated that the criticism was unfair because of staffing and other concerns. The employee who was the target of the Facebook thread complained to Hispanics United's executive director, and after an investigation, the employees who engaged in the discussion were terminated for violated Hispanics United's harassment policy.

The Board stated that in determining whether rights under the Act are implicated, one must consider all of the facts and circumstances. Unfortunately, this directive does not offer much guidance for employers. Needless to say, employers must continue to be careful and must evaluate all available information before discharging an employee based on his or her social media activity.

Drug Testing Policies Up in Smoke?

We have been getting a lot of questions from employers about how employees' legal use of marijuana impacts an employer's ability to enforce its drug testing policy. Most of these questions were generated by the recent actions by voters in Colorado and Washington who legalized the recreational use of marijuana in those states. While Colorado and Washington are the first states to approve the recreational use of marijuana, numerous other states have legalized the use of marijuana for medical purposes for several years. Now, however, employers are asking: what happens if an employee tests positive for marijuana under our workplace drug and alcohol policy, but says that he or she used marijuana legally either for medicinal purposes or while in a state that has legalized marijuana for all purposes?

Our answer is usually:

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Pennsylvania Unemployment Compensation Reform Law Expected to Result in Savings for Employers

Last month, Pennsylvania Governor Tom Corbett signed into law an unemployment compensation ("UC") reform bill. The law, considered by many to be largely pro-employer, is designed to restore solvency to the state's unemployment compensation trust fund by 2019. Several of the major provisions of the UC reform law are outlined below.

  • The law authorizes the Commonwealth of Pennsylvania to refinance the trust fund's existing $3.9 billion debt by issuing bonds with a lower interest rate, which is expected to result in significant savings for employers. 
  • Employers' UC tax rate will be adjusted by increasing the taxable wage base from $8,000 to $10,000 and decreasing the state adjustment factor from 1.5% to .75% incrementally by 2018. 
  • Last year, Act 6 of 2011 froze claimants' weekly maximum benefit at $573 for 2012. The new law extends this maximum benefit freeze through 2019. From 2019 to 2023, this maximum weekly benefit may increase annually, but by no more than 8%.
  • Claimants' partial benefit credit will be reduced from 40% to 30%; in other words, claimants who work part-time while receiving benefits will have their benefits off-set by their earnings where they earn 30% or more of their benefit.
  • Claimants must earn 49.5% of their base year earnings outside of their highest quarter in order to be financially eligible for UC benefits.

Employers should familiarize themselves with the UC reform law and with the changes that will go into effect over the next several years. We will continue to keep you updated on any additional developments in this area.

Unemployment Compensation: Case Update

Should an employee who agrees to resign her employment as part of the settlement of her workers’ compensation claim be eligible to receive unemployment compensation benefits? According to a recent decision from the Commonwealth Court of Pennsylvania, the answer to this question is a firm “no.”

An employee who voluntarily quits her employment will not be eligible to receive unemployment compensation benefits unless she can establish that she had “necessitous and compelling” cause – in other words, good cause – to quit. In Lee v. Unemployment Compensation Board of Review, the plaintiff argued that she should be eligible for unemployment compensation benefits where she agreed to resign her employment in consideration for a workers’ compensation settlement agreement. The Court disagreed, rejecting Lee’s argument that she was under psychological pressure to settle the workers’ compensation claim and that her attorney advised her that the settlement would not happen without the resignation and release. 

Notably, the Court also rejected Lee’s argument that the resignation and release was invalid under section 701 of Pennsylvania’s Unemployment Compensation Law, which states that “[n]o agreement by an employe to waive, release, or commute his rights to compensation, or any other rights under this act, shall be valid.” 43 P.S. § 861. Although the Court noted that a waiver of the right to unemployment benefits is invalid, it emphasized that this provision only becomes relevant once it is established that the claimant has the right to benefits under the Law. Lee failed to establish her right to benefits because her decision to terminate her employment in order to settle the workers’ compensation claim did not amount to good cause under the Law.

This is good news for employers. This decision provides good authority for any unemployment compensation case involving an employee who resigns pursuant to a workers’ compensation settlement agreement.

Labor & Industry Revises New Active Search Requirements for UC Eligibility, Drops "28 Calendar Days" Recall Requirement for Temporary Layoff Exception

In June 2011, the Pennsylvania General Assembly enacted a law amending the Pennsylvania Unemployment Compensation Law (“Law”). Many of the amendments' provisions took effect January 1, 2012. In addition to providing for a severance pay offset against unemployment compensation benefits, the amendments added additional "active search for employment" eligibility requirements for claimants to collect UC benefits.

Specifically, a claimant who applies for UC benefits on or after January 1, 2012 must establish that he is in “active search for suitable employment” or, alternatively, that one of the exceptions to the requirement applies. The Law provides an exception to the active search requirement for a claimant “who is laid off for lack of work and advised by the employer of the date on which the claimant will return to work.”

The Pennsylvania Department of Labor and Industry (“L&I”) established specific steps that a claimant must take to satisfy the active search requirement. L&I also added the caveat that, to be relieved from the active search requirement under the layoff/lack of work exception, the claimant must have a projected return to work date within 28 calendar days of when he last worked. The addition of the 28-day requirement caused significant concern for employers who engage in seasonal layoffs, particularly those in the construction industry. To be sure, these seasonal layoffs often last longer than 28 days. And with the 28-day recall requirement, employees laid off seasonally because of a lack of work would not qualify for the exception and would need to comply with the new active search requirements.

The cause for concern, however, was short-lived.

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REMINDER: Severance Pay Offset to Unemployment Compensation Benefits Takes Effect January 1, 2012 In Pennsylvania

This post was contributed by Adam R. Long, Esq., a Member in McNees Wallace & Nurick LLC's Labor and Employment Group.

As a reminder, amendments to the Pennsylvania Unemployment Compensation Law that provide for severance pay offsets against unemployment compensation benefits take effect January 1, 2012. We discussed in a prior post the amendments' definition of "severance pay" and how the severance pay offset will be calculated.

Please note that severance agreements reached between an employer and employee in 2011 should not impact the employee's unemployment compensation benefits, even if the severance pay continues into 2012. The offset will apply, however, to agreements reached on or after January 1, 2012.

Some questions still exist regarding how exactly the offset will be calculated and implemented. For example, it is unclear how the Pennsylvania Department of Labor and Industry will treat payments made by an employer directly to a former employee's attorney as part of a separation or settlement agreement. We expect that some of these questions will be answered in the near future through implementation, the issuance of additional guidance from the Department of Labor and Industry, or litigation. In the meantime, employers and employees alike should be aware of the new rules regarding severance and unemployment compensation benefits when making post-employment plans that include severance.

Recent Amendments to Pennsylvania Unemployment Compensation Law Include Severance Pay Offset

This post was contributed by Adam R. Long, Esq., a Member in McNees Wallace & Nurick LLC's Labor and Employment Group.

Act 6 of 2011, which was signed into law on June 17, 2011, amended the Pennsylvania Unemployment Compensation Law in a number of ways. These changes include for the first time a severance pay offset against unemployment compensation benefits. Under the new law, "severance pay" is defined as:

one or more payments made by an employer to an employe on account of separation from the service of the employer, regardless of whether the employer is legally bound by contract, statute or otherwise to make such payments. The term does not include payments for pension, retirement or accrued leave or payments of supplemental unemployment benefits.

The offset is calculated by subtracting 40 percent of the "average annual wage" under the Unemployment Compensation Law from the total severance amount. Currently, this "40% of the average annual wage" calculation equals $17,853, which means that claimants can receive up to $17,853 in total severance pay before their unemployment compensation benefits are affected. The amount of the severance attributed as an offset in any given week will equal the claimant's full-time daily or weekly wage, and the offset begins with the first week immediately following the claimant's separation from employment.

The effective date of the Act's severance pay provision is January 1, 2012. Severance agreements reached between an employer and employee in 2011 should not impact the employee's unemployment compensation benefits, even if the severance pay continues into 2012. The Act states that its severance pay provisions apply to benefit years that begin on or after the effective date, but will not "apply to severance pay agreements that were agreed to by an employer and employee prior to the effective date."

As we approach 2012, employers and employees should be aware of these new severance pay offset rules and their impact on unemployment compensation benefits when considering severance arrangements.

Superior Court Recognizes Another Exception to the Pennsylvania At-Will Employment Doctrine

On January 19, 2011, a three judge panel of the Superior Court of Pennsylvania recognized another exception to the at-will employment doctrine. In Haun v. Community Health Systems (pdf), the court affirmed the trial court's order, which recognized a new exception to the at will rule, and refused to dismiss the wrongful termination claim of a former hospital employee. 

The at will employment rule basically provides that, absent an employment contract that provides otherwise, either the employee or the employer may terminate the employment relationship at any time and for any reason. However, over the years, the courts have created numerous exceptions to the rule that have greatly limited the ability of employers to terminate employees.

Haun, the former Chief Financial Officer of the hospital, filed suit against the hospital and other defendants after he was fired for bringing a medical malpractice claim against the hospital. Haun and his wife brought the malpractice claim on behalf of their newborn son who was seriously injured while in the hospital's neonatal intensive care unit.

The Superior Court adopted wholesale the trial court's decision regarding the wrongful termination claim without analysis. The trial court stated that there had been no prior determination that there is an exception to the at will employment rule that would bar termination of an employee who is suing an employer to protect the rights of his or her child. Nonetheless, the trial court went on to state that public policy supports allowing victims to receive compensation for medical malpractice, and supports parents asserting legal claims on behalf of their children. Therefore, the court found that Haun's claims met the public policy exception to the at will rule, and the claims were not dismissed.

There was some good news for employers. While the Superior Court recognized a new public policy exception to the at will employment rule, the court rejected Haun's tortious interference with contractual relations claim, which was brought against the hospital's corporate parents. The court held that an at will employee cannot sue a third party for tortious interference with a currently existing at will employment relationship.

The recognition of another exception to the at will rule adds to the growing list of such exceptions. As recently as January 17, 2011, we reported that a federal court, the District Court for the Western District of Pennsylvania, had recognized another new exception to the at will rule. Employers faced with the need to discharge an employee must be aware of the growing list of exceptions to the at will rule to ensure that the discharge will withstand challenge. 

Federal Court Creates New Exception to Pennsylvania At Will Employment Doctrine

Pennsylvania has long been considered an "employment at will" state – meaning that employers and employees may terminate their employment relationship at any time with or without cause or prior notice. However, the number of exceptions to the "at will doctrine" seems to grow every year. The year 2010 was no exception. In Hamovitz v. Santa Barbara Applied Research Inc., 2010 WL 4117270 (W.D. Pa. Oct. 19, 2010), the U.S. District Court for the Western District of Pennsylvania recognized a new exception to the at will doctrine involving an employer's refusal to hire an applicant based on prior service in the National Guard.

In Hamovitz, the plaintiff claimed that the employer refused to rehire him based on his service in the National Guard. In addition to filing statutory claims under the Uniform Services Employment and Reemployment Rights Act ("USERRA") and the Pennsylvania Military Affairs Act ("PMAA"), the plaintiff brought a common law wrongful discharge/failure to hire claim seeking the court to apply a "public policy" exception to the employment at will doctrine. In Pennsylvania, exceptions to the at will doctrine are rare. Under the "public policy" exception, a plaintiff may have a viable wrongful discharge claim if he can show that his termination violated a clear mandate of public policy.

In order to show that an employer's actions offended a clear mandate of public policy, the plaintiff must show that he or she was terminated for: (1) engaging in conduct required by law or (2) refusing to engage in conduct prohibited by law. In such cases, the public policy cited by the plaintiff must have legislative or constitutional endorsement, and it must be clear and specific.

In Hamovitz, the court created a new exception to the at will doctrine: "where an employer's actions impinge upon protected rights of employees." The court found that the employer in Hamovitz may have impinged upon the employee's rights under the PMAA, and therefore, the plaintiff was allowed to proceed with his wrongful discharge claim.

By allowing this claim to go forward, the court also enabled the plaintiff to avoid the statutory limitations on damages found in USERRA and the PMAA. Although not available under the PMAA or USERRA, the court found that the plaintiff in Hamovitz would be entitled to recover punitive damages if he were to prevail on his common law wrongful discharge claim.

Unless the Hamovitz decision is reversed on appeal, this new exception to the at will doctrine may trigger a wave of litigation as plaintiffs seek broad interpretations of "actions that impinge upon protected rights of employees." Courts have long held that employees sacrifice certain rights in the workplace; for example, an employer may restrict free speech by prohibiting offensive language or behavior at work. Now, however, plaintiffs may argue that a termination, or even a refusal to hire, "impinges upon protected rights" in any number of situations that previously fell under the employment at will doctrine.

Employee Who is Repeatedly Found Sleeping on the Job Entitled to Unemployment Compensation

The Commonwealth Court of Pennsylvania recently concluded that an employee who was found sleeping on the job four (4) times was entitled to unemployment compensation benefits under the Pennsylvania Unemployment Compensation Law ("Law"). Phila. Parking Auth. v. Unemployment Comp. Bd. of Review, 1 A.3d 956 (Pa. Commw. Ct. 2010) (pdf). Under the Law, an employee is not eligible for unemployment benefits if his or her unemployment is due to willful misconduct. Willful misconduct includes, among other things, a deliberate violation of the employer's work rules. In cases involving a work rule violation, the employer has the burden of establishing that: (1) a work rule existed, (2) the former employee was aware of the rule, and (3) the former employee deliberately or intentionally violated the rule. If the employer can establish these three things, then the burden shifts to the employee to show that there was good cause for the rule violation.

In Phila. Parking Auth., the former employee, who worked the 3:30 p.m. to midnight shift in the employer's "money room," fell asleep during her shift on four (4) occasions in January 2009. Prior to these incidents, the former employee complained that there were long periods of time during her work day when she had no work to do. The former employee was diagnosed with sleep apnea and claimed that she needed additional work to keep her from falling asleep. Other than providing additional assignments on two (2) occasions, the employer did not provide her with any additional duties. After she was found sleeping four (4) times, the former employee was terminated under the employer's rule prohibiting sleeping on duty.

The court held that the employer adequately proved it had a work rule prohibiting sleeping on duty, and that the former employee was aware of the rule. However, the court further held that the employer failed to adequately address the former employee's requests for additional work assignments and, for this reason, she did not deliberately violate the rule – and did not commit willful misconduct. For this reason, the court awarded benefits to the terminated employee.

This decision is certainly unusual, and a warning that employers must take appropriate action when an employee complains that she does not have enough work to keep her awake!

Third Circuit Distinguishes "Sexual Stereotyping" from "Sexual Orientation" Discrimination

In Prowel v. Wise Business Forms, Inc., the Third Circuit reversed a district court's granting of summary judgment in favor of an employer on a claim of gender stereotyping discrimination. The claim was brought by an admittedly homosexual employee who alleged he was subject to gender discrimination, retaliation and religious discrimination based on his effeminate actions and mannerisms. The Third Circuit acknowledged that Title VII does not protect employees from discrimination based upon their sexual preference, but may allow claims for gender stereotyping. The Third Circuit noted that a “gender stereotyping” claim was first recognized by the Supreme Court as a viable cause of action in Price Waterhouse v. Hopkins, 490 U.S. 228 (1989).

In reversing summary judgment, the Third Circuit held that

"…every case of sexual orientation discrimination cannot translate into a triable case of gender stereotyping discrimination, which would contradict Congress’s decision not to make sexual orientation discrimination cognizable under Title VII. Nevertheless, [an employer] cannot persuasively argue that because [an employee] is homosexual, he is precluded from bringing a gender stereotyping claim. There is no basis in the statutory or case law to support the notion that an effeminate heterosexual man can bring a gender stereotyping claim while an effeminate homosexual man may not. As long as the employee — regardless of his or her sexual orientation — marshals sufficient evidence such that a reasonable jury could conclude that harassment or discrimination occurred “because of sex,” the case is not appropriate for summary judgment."

The Court's decision raises obvious issues for employers in dealing with sexual harassment and sex discrimination claims. Employers cannot automatically assume the sexual orientation claims will be dismissed by a court as unprotected under Title VII. The allegations of discrimination must be evaluated in light of gender stereotypes.

In Prowel, the employee alleged the following facts in support of his claim:

"Prowel identifies himself as an effeminate man and believes that his mannerisms caused him not to “fit in” with the other men at Wise. Prowel described the “genuine stereotypical male” at the plant as follows:

[B]lue jeans, t-shirt, blue collar worker, very rough around the edges. Most of the guys there hunted. Most of the guys there fished. If they drank, they drank beer, they didn’t drink gin and tonic. Just you know, all into football, sports, all that kind of stuff, everything I wasn’t.

In stark contrast to the other men at Wise, Prowel testified that he had a high voice and did not curse; was very well-groomed; wore what others would consider dressy clothes; was neat; filed his nails instead of ripping them off with a utility knife; crossed his legs and had a tendency to shake his foot “the way a woman would sit”; walked and carried himself in an effeminate manner; drove a clean car; had a rainbow decal on the trunk of his car; talked about things like art, music, interior design, and decor; and pushed the buttons on the nale encoder with 'pizzazz.'"

Employment Law implications of Obesity and BMI after the ADA Amendments Act

The ADA Amendments Act re-wrote the definition of disability so that it will likely include obesity-related health conditions and perhaps obesity itself as a protected disability. Before the ADA Amendments, being overweight and even obese was not generally considered a "disability". For example in EEOC v. Watkins Motor Lines, Inc., a court determined that non-physiological morbid obesity was not a protected disability.

The EEOC is considering regulations regarding the equal employment provisions of the ADAAA.  In December 2008, the EEOC commissioners deadlocked along party lines on whether to approve former Chair Naomi Earp’s proposed regulations. According to the EEOC’s agenda, a notice of proposed rulemaking will be issued by August of this year.  I predict that obesity will become a protected disability requiring employers to reasonably accommodate the condition.  I also expect that the correlation between BMI and obesity will be challenged by agruing that disqualifying an employee based on a high BMI consistitutes "regarded as" disability discrimination.

The ADA changes have important implications for businesses including employment discrimination claims, health plan design, and wellness program administration. There are several issues that merit discussion when examining obesity such as following. 

What is Body Mass Index (BMI)? BMI has become the unofficial scientific measure for assessing obesity. BMI is a function of height and weight (BMI calculator). The Center for Disease Control classifies a person who has a BMI of less than 18.5 as underweight; normal is 18.5-24.9; overweight is 25-29.9; obese is over 30; and extremely obese is over 40.

What is the BMI analysis telling us about our weight? A Report by the Trust for America's Health recently disclosed statistics about obesity trends. In the Report, Pennsylvania had the 24th highest rate of adult obesity with 25.7 percent of its population having a BMI over 30. The Report correlated obesity figures with other factors like Diabetes and Hypertension rates. It also noted levels of admitted physical activity (or inactivity). Twenty-Four percent of Pennsylvanians admit no physical activity.

How good is BMI as a measure of obesity? Martica Heaner points out the limitations of BMI in her posts BMI Blues and Is Body Mass Index a Bad Measure?:

The BMI works well for research purposes, but doesn’t necessarily translate precisely to the individual. Unfortunately, it tends to convey that people that exercise regularly, for example, are overweight, when they are not actually overfat. A fit person tends to have more muscle, so their body weight is a reflection of body fat as well as muscle and other lean tissue.

Since the problem with being overfat is that health risks are increased, a BMI in the overweight range is probably not a negative indicator for a fit person. Regular exercise, low body fat and increased muscle mass are all factors that tend to outweigh any health risks suggested by a higher BMI.

Is there correlation between high BMI and bad health? According to the CDC, the BMI ranges were established based on the health consequences associated with obesity as determined by different BMIs. Some, like Paul Campos in his book, The Obesity Myth, challenge this conclusion. However, the correlation between high BMI and bad health is quickly becoming an assumption.

Other than being incorrectly labeled "overweight" or "obese", why should we care whether BMI is a accurate health status predictor? BMI is fast becoming the legal standard for determining whether someone is "obese" and therefore a "health risk". Those with high BMIs can face increase cost and eligibility barriers for certain employee benefits.

Individual insurance policies for life, disability and medical insurance almost universally use underwriting procedures that take into account BMI as a basis for determining insurability and premium. A survey by the Texas Office of Public Insurance Counsel found that insurance company individual health plan underwriting guidelines used BMI as a basis to deny coverage, charge a higher premium, and offer less coverage. The California Insurance Commission has made comments alerting consumers about BMI as a basis for insurance denial.

Some group health plans are community rated and not subject to medical underwriting. These plans calculate premium based on the expected claims of the community not the individual employer group. Other group health insurance programs can be subject to medical underwriting in which BMI analysis and other factors will be used to price the coverage for the group. An employer with a compliment of employees with potential for high claims (including high BMI) will face higher premiums or denial. Likewise, self-insured medical plans that utilize stop loss coverage may undergo medical underwriting where BMI will be factored into the rate for reinsurance.

Group health plan wellness program incentives may be keyed to BMI targets for premium discounts and other incentives. The availability of incentives to those with high BMI is subject to limitations including situations when it is "unreasonably difficult" or "medically inadvisable" for a participant to attempt to achieve the BMI standard.

Arbitration of Discrimination Claims upheld by U.S. Supreme Court

The United States Supreme Court upheld a provision in a collective-bargaining agreement that clearly and unmistakably requires union members to arbitrate ADEA claims is enforceable as a matter of federal law. Accordingly, there is no legal basis for the Court to strike down an arbitration clause in a collective bargaining agreement, which was freely negotiated by a union and company, and which clearly and unmistakably requires employees to arbitrate the age-discrimination claims. However, the Court declined to rule on specific factual issued related to whether the waiver of discrimination claims under the contract by employees' in this case was clear and unmistakable. It also would not rule on whether the contract waived substantive rights protected by federal law which could not be vindicated in an arbitration. These issues were not properly before the Court.

The decision in 14 Penn Plaza LLC v. Pyett has important implications for unionized employers who face employment discrimination charges and lawsuits. These claims may be forced into the arbitration forum and out of court depending on the language in the contract. The scope of the arbitration clause including any limitations will be an important focus of future litigation.

Important IRS clarification of COBRA Subsidy Provisions

On March 31, 2009, the IRS issued a notice relating to premium assistance for COBRA continuation coverage under the American Recovery and Reinvestment Act of 2009 (ARRA). Notice 2009-27 contains many helpful clarifications on the following topics:


The Q&A section answers many nagging questions particularly on "involuntary termination" eligibility including the following as meeting the definition:

  • An involuntary termination means any severance from employment due to the independent exercise of the unilateral authority of the employer to terminate the employment, other than due to the employee’s implicit or explicit request, where the employee was willing and able to continue performing services (this leaves in question where employees accepting a "voluntary layoff" may qualify).
  • Any temporary layoff with recall rights qualifies as a termination, but a reduction in hours does not qualify. However, an employee’s voluntary termination in response to an employer-imposed reduction in hours may be an involuntary termination if the reduction in hours is a material negative change in the employment relationship for the employee.
  • Any termination elected by the employee in return for a severance package.
  • Any employee-initiated termination from employment constitutes an involuntary termination from employment for purposes of the premium reduction if the termination from employment constitutes a termination for good reason due to employer action that causes a material negative change in the employment relationship for the employee.

Employers should be complying with the Notice requirement of the ARRA before April 18, 2009.


Time to Re-evaluate Employment Practice Liability Insurance

Employment Practices Liability Insurance (EPLI) can provide valuable protection; particularly,  given the predicted rise in employment related legal claims and enhanced government enforcement initiatives. Furthermore, EPLI remains a relative bargain in the continued “soft” insurance market and employers should consider adding or increasing insurance coverage to protect against employment claims. EPLI insurance is somewhat quirky and the following are some considerations when evaluating policies:

1.         Coverage: EPLI policies usually cover claims of wrongful discharge, workplace harassment and discrimination. Many offer a more comprehensive list of covered acts, including negligent hiring/supervision/evaluations, invasion of privacy, defamation and intentional infliction of emotional distress. Coverage typically applies to claims made by full time employees so as to exclude those by part-timers, temporary, seasonal and independent contractors. In comparing policies, look for one that has the most expansive coverage. 

2.         Exclusions: EPLI policies exclude many claims based on the statute that creates the legal right or the activity that gives rise to the claim. Exclusions apply to the Fair Labor Standards Acts; the National Labor Relations Act; the Worker Adjustment and Retraining Notification Act (WARN); the Consolidated Omnibus Budget Reconciliation Act (COBRA); the Employee Retirement Income Security Act (ERISA); the Occupational Safety and Health Act (OSHA); the costs associated with providing "reasonable accommodation" under the Americans with Disabilities Act (ADA); as well as claims arising out of downsizing, layoffs, workforce restructurings, plant closures or strikes. Punitive damages are always excluded. Carefully evaluate the excluded claims in light of your business practices. In the case of multi-state operations, be aware that some state laws create substantial employment rights that must also be evaluated under the policy language.

3.         Policy Limits and Deductibles: Policy limits and deductibles usually apply on a per claim and aggregate basis. For example, coverage may be limited to $250,000 for each separate claim with an overall aggregate cap of $1 million for all claims. Employers must formulate their insurance goals in setting the appropriate deductibles and limits. Some employers view EPLI insurance as catastrophic coverage and are willing to accept a high deductible that allows them to handle smaller claims themselves. However, other employers are looking for more blanket coverage.

4.         Defense Costs, Selection of Counsel and Settlement: Defense costs are usually included within the EPLI policy’s limits, which has good and bad points. Many times, the legal expense is the largest cost to an employer in dealing with merit less claims. However, including defense costs means that every dollar an employer spends defending a claim reduces the amount available for settlement or to pay a judgment. Since the existence of insurance coverage must be disclosed as part of discovery in most law suits, a plaintiff’s attorney will factor insurance coverage into his or her case evaluation. The defense cost feature may influence plaintiffs’ counsel to try to settle early, rather than force an employer to incur litigation costs that will only erode the insurance dollars available for potential settlement. Employment claims often have significant employee relations ramifications making settlement a particularly important issue. Insurers view employment claims the same as any other insurance matter by evaluating only the potential for liability and the amount of damages. The employer and insurer may be at odds over settling a case. EPLI policies address this stalemate by either giving the insurer the right to settle without the employer’s approval or, more frequently, giving an employer control over settlement, but adding a “hammer clause”. These clauses are designed to limit the insurer’s potential exposure if the policyholder passes up an opportunity to settle a claim recommended by the insurer. Hammer clauses provide that if there is an offer to settle a claim that the policyholder refuses accept, then the insurer will not be liable for a subsequent settlement or judgment in excess of a rejected settlement amount.  

5.         Policy Types and Insurance Company Notification: EPLI policies are typically written on a “claims made” basis meaning that the claim must be incurred during the coverage period and reported to the insurer during an extended reporting period. Employers who have already experience significant layoffs prior to the effective date of coverage will not have claims arising from those actions covered by new insurance; however, if an employer increases coverage, it may be able negotiate a retroactivity for the larger policy limits. Since employment actions may take years to turn into a claims, an employer may be left with no coverage if the policy is dropped or tail coverage isn’t purchased. Untimely notice to an insurance carrier can void coverage for and employment claim.

New COBRA Model Notice for ARRA Compliance Published by DOL

The Department of Labor Published Model Cobra Notices implementing the provisions of the American Recovery and Reinvestment Act of 2009. 

Individuals eligible for the special COBRA election period described above also must receive a notice informing them of this opportunity. This notice must be provided within 60 days following February 17, 2009. Plan administrators must provide notice about the premium reduction to individuals who have a COBRA qualifying event during the period from September 1, 2008 through December 31, 2009. Plan administrators may provide notices separately or along with notices they provide following a COBRA qualifying event. This notice must go to all individuals, whether they have COBRA coverage or not, who had a qualifying event from September 1, 2008 through December 31, 2009.

Individuals involuntarily terminated from September 1, 2008 through February 16, 2009 who did not elect COBRA when it was first offered OR who did elect COBRA, but are no longer enrolled (for example because they were unable to continue paying the premium) have a new election opportunity. This election period begins on February 17, 2009 and ends 60 days after the plan provides the required notice. This special election period does not extend the period of COBRA continuation coverage beyond the original maximum period (generally 18 months from the employee's involuntary termination). COBRA coverage elected in this special election period begins with the first period of coverage beginning on or after February 17, 2009. This special election period opportunity does not apply to coverage sponsored by employers with less than 20 employees that is subject to State law.

UPDATE:  IRS Notice 2009-27 clarifies many issues related to implementation of the COBRA subsidy.

Employment Discrimination Litigation will Increase in 2009 and Beyond

Business downsizing, a poor job market, and increased government enforcement will dramatically increase employment discrimination lawsuits for the foreseeable future. We got a glimpse of this trend with the Equal Employment Opportunity Commission (EEOC) release of 2009 charge statistics noting a record number of discrimination claims filed last year. The EEOC report shows that 95,000 charges were filed, up 15%. The agency also reports financial recoveries of $376 million for victims of discrimination.

Charge activity for 2009 should rise exponentially. The economy shed 2.4 million jobs in the last 4 months mostly due to permanent layoffs. Job prospects are bleak with current unemployment at 8.1 %, the highest level in 25 years. The Obama Administration's budget increases spending on Department of Labor enforcement activities.

Employees have up to 300 days to bring a discrimination charge with the EEOC so many of the potential claims from recent layoffs haven't yet been filed. An employee's proclivity to sue an employer for discrimination is related in part to economics. In a good economy, employees find new jobs quickly and don't look back. While unemployed, economic and emotional factors may motivate employees to pursue litigation. Recent news reports describe the plight of many workers facing job loss and financial ruin.

Employers limited in use of Genetic Information

The Genetic Information Nondiscrimination Act of 2008 (GINA) was enacted to curtail the use of genetic history in employment-related areas. GINA includes two titles. Title I, which amends portions of the Employee Retirement Income Security Act (ERISA), the Public Health Service Act, and the Internal Revenue Code, addresses the use of genetic information in health insurance. Title II prohibits the use of genetic information in employment, prohibits the intentional acquisition of genetic information about applicants and employees, and imposes strict confidentiality requirements.

The law is effective November 21, 2009. The EEOC has begun its regulatory and information process with the issuance of EEOC's Questions & Answers on GINA and Proposed Regulations.

IRS Releases Information for Employers to Claim COBRA Assistance Credit on Payroll Tax Form

On February 26, 2009, the Internal Revenue Service released detailed information that will help employers claim credit for the COBRA medical premiums they pay for their former employees.

Under the new law, eligible former employees, enrolled in their employer’s health plan at the time they lost their jobs, are required to pay only 35 percent of the cost of COBRA coverage.  Employers must treat the 35 percent payment by eligible former employees as full payment, but the employers are entitled to a credit for the other 65 percent of the COBRA cost on their payroll tax return.

  • Employers must maintain supporting documentation for the credit claimed. This includes:
  • Documentation of receipt of the employee’s 35 percent share of the premium.
  • In the case of insured plans: A copy of invoice or other supporting statement from the insurance carrier and proof of timely payment of the full premium to the insurance carrier.
  • Declaration of the former employee’s involuntary termination.

The informational Release is IR-2009-15, includes an amended Form 941 and the Instructions,  together with a Q&A for Employers.  The Q&A makes the following notes on implementing and claiming the subsidy:

  • The Employer may provide the subsidy (65%) and take the take the credit on its employment tax return only after it has received the 35% premium payment from then intdividual.
  • The law became effective on the date of enactment, Feb. 17, 2009. However, under a transition rule, the regular premium amount may continue to be paid for up to two months after enactment (e.g., for March and April), and the subsidy can be provided retroactively.
  • An employer can reduce its tax deposits or claim the credit on its quarterly return.
  • An assistance-eligible individual can be any COBRA qualified beneficiary associated with the related covered employee, such as a dependent child of an employee, who is covered immediately prior to the qualifying event. The qualifying event for purposes of eligibility for the subsidy is involuntary termination of the covered employee’s employment that occurs during the period beginning Sept. 1, 2008, and ending Dec. 31, 2009. The individual must also be eligible for COBRA coverage, or similar state coverage, during this period.
  • Model notices implementing the law will be issued shortly apparently by the Department of Labor.


Premium Assistance for COBRA Benefits a part of Stimulus Legislation

The American Recovery and Reinvestment Act has passed both the House and Senate and awaits the President's signature. The substance of the Act as it relates to COBRA continuation subsidies is as follows:

COBRA Subsidy: Eligible Employees who are involuntarily separated from employment can receive a 65% subsidy toward COBRA premiums for up to 9 months. The Eligible Employee or a third party must pay the remaining 35% of the COBRA premium. Employers cannot pay this amount. Severance agreements that offer employer-paid health continuation should be drafted to take advantage of the subsidy.

Employee Eligibility: Individuals who have been involuntarily terminated between September 1, 2008 and December 31, 2009 with annual incomes less than $125,000 (individual) or $250,000 (joint) are eligible for the COBRA premium assistance. The amount of the subsidy covers both employee and family coverage. The premium assistance is not considered income to the Eligible Employee. 

Employer/Health Plan Payroll Tax Credit: Employers or health plans (if they administer COBRA benefits) must front the COBRA subsidy amount and in exchange receive a credit against payroll taxes for the cost of the subsidy. 

Duration of Subsidy: The subsidy terminates upon offer of any new employer-sponsored health care coverage or Medicare eligibility.

Special Elections and Alternate Enrollment Options: Qualified individuals, who initially decline COBRA coverage, have an additional 60 days after they receive notice of the special election period to elect to receive the subsidy. The election period begins on the date of enactment. Group health plans may provide a special enrollment right for eligible individuals to elect different coverage under the plan in conjunction with a COBRA continuation coverage election. The alternate coverage must meet certain requirements and may not be more expensive than the original coverage.

 Notice Requirements: COBRA notices must include information on the availability of the premium assistance. Model notices from the Department of Labor will be published 30 days after enactment.

Effective Date:  The law is effective for premiums as of the first calendar month following the date of enactment.

UPDATE:  IRS Releases Information for Employers to Claim COBRA Assistance Credit on Payroll Tax Form

Ledbetter now Law: Employers must Focus on Compliance

President Obama signed into law the Ledbetter Fair Pay Act nullifying the U.S. Supreme Court decision in Ledbetter v. Goodyear Tire & Rubber Company. Previous posts on the content and effect of the law are as follows:

Ledbetter Fair Pay Act passed by Senate and awaiting Obama Signature

Bad News: Ledbetter Fair Pay Act and Paycheck Fairness Act Pass the House.

Record Retention Nightmare Created by Ledbetter Fair Pay Act

An employer's first concern should be the revival of claims otherwise thought extinguished under the Ledbetter decision. The law is retroactive to overrule the Supreme Court standard for assessing the timeliness of wage discrimination claims. A wage-based discrimination claim in Pennsylvania can now be filed within 300 days of the last paycheck affected by the discriminatory pay action.

An employer's next focus should be on creating a pay and evaluation system that preserves evidence supporting the nondiscriminatory basis of the decisions. The system must capture both witnesses' recollections and records associated with the decisions for all similarly situated employees.

The difficulty in defending these "old" claims lies in documenting both the decision made relative to the employee bringing the claim and the treatment of comparable employees. The legal analysis of a discrimination claim involves a comparison of the compensation paid to a member of a protected class as compared with those outside the protected class. If a compensation disparity is shown, the employer must demonstrate a legitimate nondiscriminatory reason for the difference in compensation. Once demonstrated by the employer, the employee may show that the employers reason is a pretext for discrimination. Much of this analysis will change if the Paycheck Fairness Act also becomes law.

The EEOC has a road make for its analysis of compensation discrimination claims under its Compliance Manual. The types of evidence the EEOC collects and evaluates in assessing a claim includes the following:

  • Initially the EEOC determines if a wage differential exists by evaluating documents including the following:
    • Organization charts and other documents which reflect the relative position of the charging party in comparison to other employees, including written detailed job descriptions;
    • Written descriptions of the respondent's system for compensating employees -- including collective bargaining agreements; entry level wage rates or salaries; any policies or practices with regard to periodic increases, merit and other bonus compensation plans; and the respondent's reasons for its pay practices; and
    • Job evaluation studies, reports, or other analyses made by or for the employer with respect to its method of compensation and pay rates.
  • If a compensation differential(s) exists, the employer should be asked to produce a non-discriminatory reason for the differential. If a an employer leaves the pay disparity unexplained, or provides an explanation that is "too vague, is internally inconsistent, or is facially not credible," the investigator should find "cause." If the employer does provide a nondiscriminatory reason, an inquiry should be made into whether it satisfactorily explains the pay differential.
  • The EEOC requests information explaining the pay decisions of comparable or similarly situated employees. The EEOC may also request pay information for similarly situated employees to evaluate a disparate impact case based on a statistical analysis of compensation decisions and treatment.


Title VII's Antiretaliation Protections can extend to an Employee's Involvement as a Witness in an Employer's Internal Investigation

In its decision in Crawford v. Metropolitan Government of Nashville and Davidson City, the United States Supreme Court considered the scope of Title VII protections from retaliation for employees who act as witnesses in an employer's internal investigation into harassment. The Court held that an employee's involvement in the employer's internal investigation constituted opposition to unlawful employment practices when she responded to her employer's questions in a manner disapproving of accused harasser's sexually obnoxious behavior toward her. The Court's decision unfortunately does not create a bright line standard for employers defining the scope of an employee's involvement in an internal investigation which can trigger protections from retaliation. Employers should tread very carefully in this area.

Continue Reading...

Bad News: Ledbetter Fair Pay Act and Paycheck Fairness Act Pass the House.

Congress has passed The Lilly Ledbetter Fair Pay Act of 2009 (H.R. 11) and The Paycheck Fairness Act (H.R. 12). Anaylsis of the new legislation to come.

The Ledbetter Fair Pay Act is discussed in a prior post on Record Retention Nightmare Created by Ledbetter Fair Pay Act .  The Paycheck Fairness Act changes the burden of proof in gender based pay claims requiring the employer to affirmatively demonstrate that any pay differential is not based on sex. Employers who cannot meet this burden face unlimited compensatory and punitive damages. The EEOC would be required to collect employer payroll information based on sex, race, and national origin thereby targeting its enforcement activities. The Bill also changed rules on class actions automatically including employees in such claims unless they specifically opt out.  PFA subjects employers to wage related class actions with unlimited damages and makes it easier for employees to prove such claims.

Ann Bares analyzes the impact of the new law from a compensation perspective in her post: Dear Legislators: A Missing Link to Paycheck Fairness?


ADA Amendments Act Compliance Tips

The ADAAA was effective January 1, 2009 requiring employers to focus their approach to disability accommodation. The Job Accommodation Network (JAN) of the Office of Disability Employment Policy recently published a compliance resource identifying four Practical Tips which can be expanded upon as follows:

Review Job Descriptions, Qualification Standards and Accommodation Procedures

Developing job descriptions is a daunting task for employer and many don't know where to start. JAN has a good resource explaining the role and function of job descriptions. The resource also gives some basic parameters on what should be included.

Job descriptions provide a written record of the qualification standards and essential functions of a position for the purpose of assessing whether and employee or applicant is "qualified" and for evaluating reasonable accommodations or establishing undue hardship. From a legal perspective, a well-written job description is essential to defending an ADA claim.

Written accommodation procedures promote communication and uniformity. The federal government has developed a lengthy process that may be a reference for employers developing a procedure. The government's procedures are extremely detailed and employers should be careful to develop a process which they can follow or they risk claims based on procedural missteps.


Focus Job Actions of Performance and Conduct

The ADAAA refocuses compliance from determining whether a disability exists to evaluating reasonable accommodations. Employers need to assess what an employee (i) can and cannot do in light of the job's essential functions or (ii) has or hasn't done under its work rules. The EEOC has issued Guidance on Applying Performance and Conduct Standards to Employees with Disabilities.


Train Frontline Supervisors and Managers

Many disability compliance problems start with a frontline supervisor's reaction to a performance problem. Dealing with the employee's disability, managing coworker reactions, and keeping medical information confidential are only some of the issues which confront managers. Comments made by supervisors can create claims based on retaliation or being "regarded as" disabled.


Document Actions and Decisions

A written record of an employers actions and decisions has many benefits in terms of both clear communication with employees and defense of ADA claims. The transitory nature of many workplaces make tangible records more important than ever to establish an institutional memory of important events.


Thanks to the Delaware Employment Law Blog for the pointing out the JAN resources.

Record Retention Nightmare Created by Ledbetter Fair Pay Act

Ledbetter Fair Pay Act (H.R. 2831/ S. 1843) is on the fast track with full support of the Obama Administration. LFPA overturns the Supreme Court’s decision in Ledbetter v. Goodyear Tire and Rubber Co. effectively eliminating the 180 or 300-day statute of limitations for filing a wage-related discrimination claim. The Bill allows family members and others affected by discrimination to file claims and reinstitutes the Paycheck Accrual Rule for determining when a claim arises. It also allows claims based on paychecks and annuity payments which would permit retirees to bring claims.

Ms. Leddbetter's discriminatory pay claims originated from pay raises allegedly denied her based on supervisor's discriminatory evaluations of her performance conducted over a period between 1979 and 1998. The U.S. Supreme Court held that the pay setting was a discrete act triggering the180 day limitations period for filing a discrimination claim, therefore a timely discrimination claim must be based on acts of discrimination occurring within the 180 day period. Leddbetter argued that“[E]ach paycheck that offers a woman less pay than a similarly situated man because of her sex is a separate violation of Title VII with its own limitations period, regardless of whether the paycheck simply implements a prior discriminatory decision made outside the limitations period”.

The effect of the argument is to call into question decisions of supervisors made almost 20 years before the employer received notice of the alleged discrimination. Leddbetter counters that she had no way of knowing about her discriminatory treatment because of the confidentiality of the performance reviews and salary adjustments

In its Ledbetter decision, the Supreme Court enunciated a classic application of the statute of limitations governing the time period for bringing legal claims:

Statutes of limitations, which "are found and approved in all systems of enlightened jurisprudence, represent a pervasive legislative judgment that it is unjust to fail to put the adversary on notice to defend within a specified period of time, and that "the right to be free of stale claims in time comes to prevail over the right to prosecute them. These enactments are statutes of repose; and although affording plaintiffs what the legislature deems a reasonable time to present their claims, they protect defendants and the courts from having to deal with cases in which the search for truth may be seriously impaired by the loss of evidence, whether by death or disappearance of witnesses, fading memories, disappearance of documents, or otherwise. (emphasis added). 

The implication's are huge for employers in terms of faulty memories, missing witnesses, and mountains of documents. Defense of decades old discrimination claims will necessitate the retention of more documents for longer time periods. The expense associated with storage and production of documents (whether paper or electronic) may be staggering. Imagine a Request for Production of Documents or subpoena that demands access to 20 or 30 years of employer records associated with the evaluations and salary adjustments for an employee (or retiree) claiming pay discrimination. Add in all of the employee's peer comparators who were similarly situated over the same time period for a truly nightmarish perspective. Now the rationale for the statute of limitations becomes clearer.

Department of Labor Issues FMLA posters and Forms

The DOL issued a revised Family and Medical Leave Act (FMLA) poster, reflecting the recently published final rule which is now available for viewing and downloading. Every employer covered by the FMLA is required to post and keep posted on its premises, in conspicuous places where employees are employed, a notice explaining the Act’s provisions.  

The Department provides optional forms for use by employers and employees during the FMLA process.  The Department has revised its Certification of Health Care Provider form (WH-380), and divided it into two separate forms for an Employee’s Serious Health Condition (WH-380E) and a Family Member’s Serious Health Condition (WH-380F).  The Department has also revised its Notice of Eligibility and Rights and Responsibilities form (WH-381).  In addition, the Department has added new forms for Designation Notice to Employee of FMLA Leave (WH-382), Certification of Qualifying Exigency for Military Family Leave (WH-384), and Certification for Serious Injury or Illness of Covered Servicemember for Military Family Leave (WH-385).

The poster and forms become effective on January 16, 2009.  Additional compliance assistance materials are also available on our FMLA Final Rule Web site at Employers must also amend handbook provisions to reflect the new regulations.

Separation Agreements: Benchmarking Severance Pay Amounts

Reductions in Force, Layoffs, Downsizing, Rightsizing or whatever you may call it is occurring with greater frequency as the economic conditions continue to deteriorate. The business objects are reducing costs, preserving talent, treating separated employee with compassion and avoiding litigation. The compassion and litigation avoidance may go hand in glove.

The most prevalent litigation avoidance strategy is getting a release from separated employees for which a company pays severance and provides other benefits. Some companies pay severance without requiring a release and others pay enhanced severance if the employee releases claims.

I frequently get asked how much severance is appropriate. There is no right answer to this question, but depends on a myriad of factors including the size of the company, its financial condition, the number and positions of employees being released, the tenure of the employees and the risk of litigation.

Ann Bares at Compensation Force has a post that notes Global and US Severance Pay Benchmarks. There is a caveat on the international benchmark information. Severance pay is mandated by some governments outside the United States including Canada and many European countries. The amount of mandated severance varies depending sometimes on age, years of service and the reason for separation. Also missing from the analysis might be unemployment benefits received by US employees. As usual, it is not an "apples-to-apples" comparison.

Also keep in mind that releases of employment-related claims should be reviewed by legal counsel.

HR GENERALIST RESOURCES: Inclement weather policies in Pennsylvania

With the first measurable snowfall hitting many parts of Pennsylvania this week, it's time to start thinking about inclement weather policies. Closing a business for any reason can have a dramatic impact on customers and employees.  Many employers struggle with business closings and delays necessitated by inclement weather. Good communication and planning can help eleviate some of the issues created weather-related closures.  However, there are a few legal issues thrown in this wintery mix.  I recommend adopting a policy that addresses at least the following three areas:

Will employees be paid for the time when the business is closed?

Nonexempt employees need not be paid for time when they do not work because the business is closed. Exempt employees must be paid their salary for the week regardless of the business closing. PTO or vacation may be charged, but exempt employee salaries may not be docked for time when the business is closed. A Department of Labor Compliance Assistance Letter details some of the Wage and Hour considerations applicable to the payment of wages for exempt employees.


Will employees be paid if they don’t report to work due to inclement weather when the business is open?

Nonexempt employees need not be paid for times they are absent from work. Exempt employees need not be paid for a whole day absence taken due to inclement weather. An exempt employee absent for part of a day may be forced to use vacation or PTO time. If the exempt employee has no vacation or PTO time, his or her salary may not be docked for a partial day absence.  The same Department of Labor Compliance Assistance Letter addresses this situation.


Can an employer discipline or discharge and employee for failing to report to work due to weather conditions when the business is open?

An employer may generally apply its normal attendance policy to weather related absences; however, most will make an exception for absences due to weather if the employee makes a reasonable effort to get to work. Collateral issues abound such as childcare, public transportation, and the “snow phobic” employee (chionophobia). With the ADA Amendments Act, this may be an area of accommodations. Keep in mind that “exceptions” should be uniformly made to avoid discrimination claims.


There is one major legal exception. Under Pennsylvania law (43 P.S. §§ 1481-1485), an employer may not discipline or discharge an employee who fails to report to work due to the closure of the roads in the county of the employer's place of business or the county of the employee's residency, if the road closure is the result of a state of emergency declared by the Governor.  The most obvious and likely scenario is a snow storm or other inclement weather.


Employers are not required to pay an employee who is a no show based on road closures, unless a union contract dictates otherwise.  An employee who can prove the employer's "knowing and intentional" violation of the law may recover lost pay, be reinstated or have discipline revoked, and may collect attorneys fees and costs.The law does not apply to the following jobs: drivers of emergency vehicles, essential corrections personnel, police, emergency service personnel, hospital and nursing home staffs, pharmacists, essential health care professionals, public utility personnel, employees of radio or television stations engaged in the gathering and dissemination of news, road crews and oil and milk delivery personnel.

Final FMLA Regulations issued with an Effective Date of January 16, 2009

The Department of Labor issued 762 pages of regulations covering the FMLA. . As expected, 2009 will be a busy year for Human Resources Professionals because of compliance and legislative changes.  The following is a brief summary of the regulatory changes:

Military Caregiver Leave: Implements the expanded FMLA protections for family members caring for a covered service member with a serious injury or illness incurred in the line of duty on active duty. These family members are able to take up to 26 workweeks of leave in a 12-month period.
Leave for Qualifying Exigencies for Families of National Guard and Reserves: The expanded FMLA protections allow families of National Guard and Reserve personnel on active duty to take FMLA job-protected leave to manage their affairs — "qualifying exigencies." The rule defines "qualifying exigencies" as: (1) short-notice deployment (2) military events and related activities (3) childcare and school activities (4) financial and legal arrangements (5) counseling (6) rest and recuperation (7) post-deployment activities and (8) additional activities where the employer and employee agree to the leave.
The Ragsdale Decision/Penalties: The updated rule contains technical changes to be consistent with the U.S. Supreme Court's decision in Ragsdale v. Wolverine World Wide Inc. The court ruled that the regulation's so-called "categorical" penalty (requiring an employer to provide 12 additional weeks of FMLA-protected leave after the employee had already taken 30 weeks of leave) was inconsistent with the statutory limit of only 12 weeks of FMLA leave and contrary to the law's remedial requirement that an employee demonstrate individual harm. The new rule removes these penalties and clarifies that if an employee suffers individual harm because the employer did not follow the notification rules, the employer may be liable for the leave and penalties.
Waiver of Rights: Employees may voluntarily settle their FMLA claims without court or DOL approval. However, prospective waivers of FMLA rights are prohibited.
Serious Health Condition: The six individual definitions of "serious health condition," are continued with guidance on their implementation. First, the rules clarify that if an employee is taking leave involving more than three consecutive calendar days of incapacity plus two visits to a health care provider, the two visits must occur within 30 days of the period of incapacity. Second, they define "periodic visits to a health care provider" for chronic serious health conditions as at least two visits to a health care provider per year.
Light Duty: Time spent in "light duty" work does not count against an employee's FMLA leave entitlement, and the employee's right to job restoration is held in abeyance during the light duty period. If an employee is voluntarily doing light duty work, he or she is not on FMLA leave.
Perfect Attendance Awards: Companies need not grant a "perfect attendance" award to an employee who does not have perfect attendance because he or she took FMLA leave — but only if the employer treats employees taking non-FMLA leave in an identical way.
Employer Notice Obligations: All employer notice requirements into a "one-stop" section of the regulations to clear up some conflicting provisions and time periods. Further, the final rule clarifies and strengthens the employer notice requirements to employees in order that employers will better inform employees about their FMLA rights and obligations, and allow for a smoother exchange of information between employers and employees.
Employee Notice: Employee must follow the employer's normal and customary call-in procedures, unless there are unusual circumstances. The final rule modifies the current provision that had been interpreted to allow some employees to notify their employers of their need for FMLA leave up to two full business days after an absence, even if they could provide notice sooner.
Medical Certification Process (Content and Clarification): The rule limits who may contact the health care provider and bans an employee's direct supervisor from making the contact. The rule address the requirements of HIPAA's medical privacy rule to communications between employers and employees' health care providers.


Employer's Strategic Planning for an Obama Administration

President-Elect Obama told his hometown crowd that "Change has come to America." Through his election speeches, website and co-sponsorship of Senate Bills there is a road map of what changes will likely be coming to the American workplace.

Employers would be well served by examining the impact of likely legislation on their business and planning accordingly. The most significant changes will likely come from the Employee Free Choice Act  and RESPECT ACT which will reshape union organizing. The building trades, healthcare, and manufacturing will be the first to feel the effects, but so will business that were not traditionally union targets like financial services.  The balance of Senator Obama's legislative agenda involves expanding existing areas of employment protection through the Paycheck Fairness Act, Ledbetter Fair Pay Act, Employment Non-Discrimination Act.

Prior posts have summarized the content of these bills and their impact on the workplace. In the coming weeks, we will provide more extensive guidance on planning to meet the changes posed by these and other legislative initiatives.

Related Posts:
Employer's Guide to the Election
Obama Victory may give rise to Unprecedented Unionization of the American Workplace

Bosses do not Deserve RESPECT

Injunction "No-Match" for DHS Rulemaking

On October 23, 2008, the Department of Homeland Security (DHS) released an advance copy of its supplemental final no-match safe harbor regulation initially issued in August 2007. The original regulation was set to take effect in September 2007 but was enjoined by the U.S. District Court for the Northern District of California. The revised regulation is expected to be published in the Federal Register any day, and will take effect immediately. Of course, it is possible (even likely) that another lawsuit may be filed seeking to block this final regulation.

While the substance of the regulation has not changed, DHS did address the two main concerns that lead the court to enjoin the original regulation. First, the preamble of the new regulation clarifies that employers will be considered to have constructive knowledge only if they receive a no-match letter from the Social Security Administration (SSA). That is, DHS will not impute constructive knowledge based on any other communication from the SSA. Second, DHS explained that it would not take action based on no-match letters involving employees hired before November 6, 1986 (the date the Immigration Reform and Control Act was enacted).

The revised regulation outlines the steps an employer must take in order to benefit from a “safe harbor” if the employee named in a no-match letter turns out to be an unauthorized worker. Upon receipt of a no-match letter, the employer should check internal records and either make appropriate corrections or ask the employee to correct the discrepancy within 90 days. Once the discrepancy is resolved, the employer should update the relevant I-9 paperwork and notify agencies of the correction. If the discrepancy cannot be resolved within 90 days, the employer must complete a new I-9 form for the employee by the 93rd day. In completing this new I-9, the employer may not accept any document with the social security number contained in the no-match letter. In addition, the new verification document must include a photo. If the employer is still unable to verify the identity and employment authorization of the employee, the safest course of action is to terminate the employee, or risk facing charges.

Employers should develop and implement a policy to ensure compliance with the process described in our August 2007 Employer Alert. Employers should note, however, that no-match letters were not issued in 2007 and will most likely not be issued in 2008.

ADA Amendments may Open the Door for Nicotine Addiction Claims

Today’s smokers [are] more addicted to nicotine according to a new study, which notes that 73% of those trying to quit are “highly dependent”. The Center for Disease Control and Prevention estimates that 20.2% of Americans are smokers. Pennsylvania has a slightly higher rate of smoking at 21.5 % with 51.9% attempting to quit. Many of these smokers are also employees.

Smokers are feeling the heat in the workplace through smoke-free workplace policies. Jon Hyman at the Ohio Employer’s Law Blog has a post asking Are there legal risks with smoking bans?  He notes that pushing back on these employer initiatives are  29 states which have enacted laws protecting employees who smoke from discrimination.

Pennsylvania has no law protecting smokers from discrimination. To the contrary, Pennsylvania’s new Clean Indoor Air Act mandates smoke-free workplaces and precludes employees from smoking indoors. However, the law allows employers to prohibit smoking anywhere on company property; it does not prevent the continuation of outdoor smoking areas. Employers are left with the sometimes delicate task of crafting a policy concerning outdoor smoking and monitoring the break schedules of employees who wish to smoke. In addition, many wellness programs have targeted smoking with cessation programs coupled with both financial incentives and penalties.

The Americans with Disabilities Act was recently amended to expand the definition of “disability” to the point that it may encompass nicotine addiction. The few ADA cases on “smoking” as a disability have not recognized a claim based on the pre-amendment definition of disability. However, the rationale for denying disability status to “smoking” or “nicotine addiction” is squarely predicated on the remedial nature of the condition exempting it from coverage of the ADA as expounded in Sutton v. United Airlines, Inc. The ADA Amendments expressly abrogated Sutton.  In the only published case of which I am aware, the court in Brashear v. Simms set forth the following rationale in dismissing a smoker’s ADA claim:

…[E]ven assuming that the ADA fully applies in this case, common sense compels the conclusion that smoking, whether denominated as “nicotine addiction” or not, is not a “disability” within the meaning of the ADA. Congress could not possibly have intended the absurd result of including smoking within the definition of “disability,” which would render somewhere between 25% and 30% of the American public disabled under federal law because they smoke. In any event, both smoking and “nicotine addiction” are readily remediable, either by quitting smoking outright through an act of willpower (albeit easier for some than others), or by the use of such items as nicotine patches or nicotine chewing gum. If the smokers' nicotine addiction is thus remediable, neither such addiction nor smoking itself qualifies as a disability within the coverage of the ADA, under well-settled Supreme Court precedent.

Pennsylvania employers can and must adopt policies prohibiting smoking in the workplace. However, employers may well be required to reasonably accommodate nicotine-addicted employees much as they would need to do so with other addictions, like drugs and alcohol. The scope of such accommodations must be explored. Section G of the EEOC’s Guidance on Applying Performance Standards to Employees with Disabilities may prove helpful.


UPDATE:  How will this new wrinkle weigh in the mix: Under Obama will smoking become  "cool" again?

Employer's Guide to the Election

The election rhetoric has been relatively quiet on employment-related topics, except for the brief mention in the last debate. Candidate Obama has a clear agenda employment legislation based on his co-sponsorship of various bills and other media comments. Candidate McCain’s position is less clear. Detailed below is a summary of the key legislative initiatives considered by Congress in 2008, all of which have passed the House of Representatives except the RESPECT Act.

Employee Free Choice Act (H.R. 800 and S. 1041)

Summary:  The EFCA amends the NLRA to change the procedures for union certification and first contract negotiation. The primary components of the act are as follows:

  • Allows NLRB certification of a relevant bargaining unit upon authorization card showing from 50% plus one of employees bypassing secret ballot election.
  • Mandates initial collective bargaining contract be negotiated within 120 days or first contract is produced by an arbitrator covering employees for 2 years.
  • Provides new fines for employer unfair labor practices.

Impact:   EFCA is a monumental change to the NLRA. Much has been made of the abrogation of the secret ballot election, but equally dramatic are the limitations placed on collective bargaining and contract determination by an arbitrator if no agreement is reached in 120 days of negotiations.   If enacted, EFCA will result in unprecedented organizing activity with employers losing their ability to demand an election and engage in hard bargaining over a first contract.

Candidate Positions:  H.R. 800 passed the House but did not receive enough votes for consideration by the Senate. Candidate Obama is a co-sponsor of the Senate Bill and supports its passage. Candidate McCain opposes the Senate Bill.

Prior Posts:  NOW is the Time for Employers to Gear up for the Employee Free Choice Act (Unions Are)


Employment Non-Discrimination Act (H.R. 3685/ no Senate Bill)

Summary:  ENDA adds sexual orientation to the protected classes under Title VII for all employers except religious organizations. It allows reasonable access to adequate facilities that are not inconsistent with the employee’s identified gender, but does not require domestic partner benefits or protect “gender identity”.

Impact:  ENDA adds a protected class to employment discrimination protections allowing compensatory and punitive damage claims against employers.     

Candidate Positions:  H.R. 3685 passed the House but did not receive enough votes for consideration by the Senate.  No legislative position by either candidate.   Candidate Obama’s website expresses support for the legislation.


Ledbetter Fair Pay Act (H.R. 2831/ S. 1843)

Summary:  FPA overturns the Supreme Court’s decision in Ledbetter v. Goodyear Tire and Rubber Co. effectively eliminating the 180 or 300-day statute of limitations for filing a wage-related discrimination claim. The bill allows family members and others affected by discrimination to file claims and reinstitutes the Paycheck Rule for determining when a claim accrues. It also allows claims based on paychecks and annuity payments which would allow retirees to bring claims.

Impact:  FPA virtually eliminates the statute of limitations for wage-related claims.

Candidate Positions:  H.R. 2831 passed the House but did not receive enough votes for consideration by the Senate.  Candidate Obama is a cosponsor of the Bill. Candidate McCain has expressed no opinion on the Bill.


Paycheck Fairness Act (H.R. 1338/ S. 766)

Summary:  PFA changes the burden of proof in gender based pay claims requiring the employer to affirmatively demonstrate that any pay differential is not based on sex. Employers who cannot meet this burden face unlimited compensatory and punitive damages. The EEOC would be required to collect employer payroll information based on sex, race, and national origin thereby targeting its enforcement activities. The Bill also changed rules on class actions automatically including employees in such claims unless they specifically opt out.

Impact:  PFA subjects employers to wage related class actions with unlimited damages and makes it easier for employees to prove such claims.

Candidate Positions:  H.R. 1338 passed the House but did not receive enough votes for consideration by the Senate.  Candidate Obama is a cosponsor of the Bill. Candidate McCain has not taken any position on the Bill.


RESPECT ACT (H.R. 1644/ S. 969)

Summary:  The so-called Re-Empowerment of Skilled and Professional Employees and Construction Tradesworkers (RESPECT) Act would change the NLRA definition of “supervisor” to exclude “working supervisors” who do not spend a majority of their worktime in strictly managerial duties excluding the tradition duties of assigning work and directing the activities of others.

Impact:  Respect would allow many working or front line supervisors to join a union dividing their loyalties to the company, as they would be permitted to assist in the unionization of the company.

Candidate Positions:  Candidate Obama is a cosponsor of the bill and Candidate McCain has taken no position on the Bill.

Prior Posts: Bosses do not Deserve RESPECT


If there is a Democratically-controlled House, Senate, and President, it is likely that some or all of the above legislation will be enacted in 2009. Others have commented on the HR landscape following the election:

What The Future of HR Looks Like in 2009

Small business owner’s guide to the election

HR GENERALIST RESOURCES: Payroll Tax Withholding from Severance Pay and Other Supplemental Wage Payments

Employers offering severance payment to employees are typically uncertain about the payroll taxes that may apply to these additional payments. Severance pay is treated as “supplemental wages” because it is not a payment for services in the current payroll period but a payment made upon or after termination of employment for an employment relationship that has terminated. As supplemental wages, special payroll tax withholding rules apply. The Internal Revenue Service recently clarified its position on withholding for supplemental wages, including severance pay.  Employers should also make sure that severance payments offered in conjuntion with a waiver and release comply with the ADEA and WARN requirments.

Revenue Ruling 2008-29 addresses nine different situations where supplemental payments are made to employees that require additional payroll tax withholding as follows:

  1. commissions paid at fixed intervals with no regular wages paid to the employee;
  2. commissions paid at fixed intervals in addition to regular wages paid at different intervals;
  3. draws paid in connection with commissions;
  4. commissions paid to the employee only when the accumulated commission credit of the employee reaches a specific numerical threshold;
  5. a signing bonus paid prior to the commencement of employment;
  6. severance pay paid after the termination of employment;
  7. lump sum payments of accumulated annual leave;
  8. annual payments of vacation and sick leave; and
  9. sick pay paid at a different rate than regular pay.

For the supplemental wage payments identified above that do not exceed $1 millon, the amount of income tax withholding is determined under the rules provided in § 31.3402(g)-1(a)(6) and (7). These paragraphs describe two procedures for withholding on supplemental wages: the aggregate procedure and optional flat rate withholding. The Revenue Ruling explains the application of the two procedures to each of the nine payment types. A Supplemental to Circular E also provides guidance on withholding in Publication 15 and Publication15A.

Employer Dress Code Standards: "Neat, Clean and Professional" may not be Enough

The New York Times article Tattoos Gain Even More Visibility discusses the rising popularity of body art and challenges facing employers in regulating employee dress. The article focuses on tattoos but raises the larger issue of employer dress code standards and their challenges in terms of both employee retention and legal compliance.

Jon Hyman at the Ohio Employers Law Blog notes that Employment decisions based on tattoos are not discriminatory and I would add “per se”. In fact, most courts defer to an employer’s evaluation of dress standards focusing on whether the policy is discriminatory or fails to reasonably accommodate religious practices. For example, in Coulter v. Costco Wholesale Corp., a court determined that “Costco has made a determination that facial piercings, aside from earrings, detract from the "neat, clean and professional image" that it aims to cultivate. Such a business determination is within its discretion. As another court has explained, ‘Even assuming that the defendants' justification for the grooming standards amounted to nothing more than an appeal to customer preference, . . . it is not the law that customer preference is an insufficient justification as a matter of law.’"

Courts may not question the business reason for the dress code standard, but the application of the standard across the pool of applicants and employees is clearly, where discrimination can occur. Discrimination is more likely to occur where managers are called upon to subjectively evaluate compliance. As noted in the NYTimes article, “Defining what the courts in the Cloutier case called a “neat, clean and professional” workplace image becomes more challenging when you consider that in 2006, a Pew Research Center survey found that 36 percent of people age 18 to 25, and 40 percent of those age 26 to 40, have at least one tattoo.” The difficulty arises from both the prevalence of tattoos and the excessive subjectivity of the standard.

Human Resource Professionals and managers loathe their role as fashion policy, but the subjectivity of some dress code standards invites claims of discrimination. For example, an employer requires all applicants to have a “neat, clean and professional appearance”. If hiring managers are called upon to describe this qualification standard, it is likely that all will have different measures.  If the subjective dress standard disproportionately disqualifies applicants in a protected class, it may be challenged as discriminatory.

Kris Dunn at the HR Capitalist gives a great perspective on customer preference in his post  Your Employee's Tattoo Is Causing a Consumer Confidence Issue....John Phillips at The Word on Employment Law also comments on the subject in his post  Coming to Your Workplace: Visible Tattoos.

Managing Layoffs and Reductions in Force

As the economic meltdown cascades through the financial, banking and related sectors, many employers are planning staff cuts.  Selecting employees for lay off must be collaboration between managers and human resources. HR must be able to influence the process to reduce legal risks and assuage the anxiety of remaining employees:

Establishing Business Justification and Layoff Selection Criteria:

The business justification for the reduction in force or layoff must be established. The justification for layoff typically gives rise to the selection criteria. For example, if a large contract was lost, the production and support functions related to the lost contract will be the focus or the layoff.

Layoff decisions may be challenged under discrimination laws, so it is advisable to develop selection criteria that support the business reasons for selecting one employee over another. Unless dictated by union contract, employers have discretion in developing the selection criteria which can include factors like, seniority, relative skills, performance, and/or disciplinary record.  More than one factor may be used.

Forced Ranking Systems are sometimes utilized to rank employees against one another from the top down based on performance criteria. The subjectivity in forced ranking can be challenged as discriminatory unless uniformly and rationally applied.

Evaluating Impact of Selection Criteria including Bumping, Transfer and Recall Rights:

Once employees are identified for layoff, the results of the section criteria must be assessed in terms of disparate impact and other special circumstances. A disparate impact analysis should be conducted to assess whether the selection criteria have resulted in the disproportionate layoff of members of a protected class. Likewise, special circumstances should be evaluated such as employees with recent employment complaints, union activity, FMLA leaves, etc.  Consider documenting the final layoff decisions, but not the deliberations leading up to them.

Thought must be given to collateral job rights employees may have under employment policies and practices. Typical areas involve shift or department transfers, supervisor demotion in lieu of layoff, and voluntary layoffs. Likewise, the parameters of recall, if any, should be described.

WARNA Obligations:

Federal and state plant closing/mass layoff laws must be considered. Although Pennsylvania has no state law equivalent to WARNA, employers with multi-state operations must assess the application of such laws. Coverage under WARNA can be complex as it has look back rules which aggregate layoffs for determining triggering events. WARNA coverage will trigger the sixty-day notice period which has a tremendous impact on layoff planning raising issues of pay in lieu of notice, retention, and publicity.

Severance Benefits and Releases:

Careful consideration must be given to describing the benefit package, if any, offered to employees. If an employer is offering benefits that exceed those already provided by policy or mandated by law, it should consider obtaining a release. The federal Age Discrimination in Employment Act (ADEA) contains special rules for waivers of rights of claims of age discrimination including a 45-day consideration and seven-day revocation period for such releases. Furthermore, the ADEA contains informational requirements that mandate publication of summary of employee demographic information in connection with the release.

Communications Plan:

Effective communication is paramount in reducing employee legal claims and assuaging the anxiety of remaining employees. Everything that is said about the reasons for the layoff will be scrutinized in litigation. Consider scripting communications for group meetings and avoid individual discussions of the reason for selection. Large layoffs may generate news media interest for which a press release is a helpful way to influence the message.



Jerry Kalish at the Retirement Plan Blog made a great observation about layoffs in his post Does a reduction in force or layoff beget a partial termination of a retirement plan?.  He refers to the IRS rules on partial termination of a retirement plan based on the significant reduction in plan participation resulting from the layoff.  IRS Guidance entitled 401(k) Resource Guide - Plan Participants - Plan Termination includes the following summary:

Although a 401(k) plan must be established with the intention of being continued indefinitely, an employer may (fully) terminate its 401(k) plan at its discretion. In certain cases, a partial plan termination is deemed to occur. Whether a partial termination occurs depends on the individual facts and circumstances of a given case. In general, a partial termination is deemed to occur when an employer-initiated action results in a significant decrease in plan participation. As an example, a partial termination may be deemed to occur when an employer reduces its workforce (and plan participation) by 20%.

ADA Amendments expand Disability Coverage

President Bush will sign legislation amending the Americans with Disabilities Act, which overwhelmingly passed through Congress. The ADA Amendments Act is designed to convey Congressional intent that “the primary object of attention in cases brought under the ADA should be whether entities covered under the ADA have complied with their obligations, and to convey that the question of whether an individual’s impairment is a disability under the ADA should not demand extensive analysis.”

The goal of expanding the coverage of the ADA is achieved by changing the definition of “disability” to:

  • Prohibit the consideration of measures that reduce or mitigate the impact of impairment—such as medication, prosthetics and assistive technology—in determining whether an individual has a disability under the law.
  • Cover workers whose employers discriminate against them based on a perception that the worker is impaired, regardless of whether the worker has a disability.
  • Clarify that the law provides broad coverage to protect anyone who faces discrimination on the basis of a disability.

Congress expressly reversed several Supreme Court decisions that restricted the scope of the ADA. Congress rejected the standard that ameliorative effects of mitigating measures must be considered in determining whether a person is disabled found in Sutton v. United Air Lines, Inc. Congress also rebuked the Court in its restrictive interpretation of “disability” by rejecting the terms “substantially limits ” and “significantly restricted” because the terms as outlined in Toyota Motor Mfg, Kentucky, Inc. v. Williams are too narrow.


The ADA amendments will  refocus disability discrimination lawsuits downplaying the examination of whether an employee meets the definition of disability.  Daniel Schwartz of the Connecticut Employment Law Blog discusses the practical impacts.

Managing a Business and its Employees in Financial Crisis Requires Communication from HR

The specter of business failure and personal financial setbacks wreak havoc on employee morale challenging Human Resources with dual management problems. First, HR needs to formulate a communication strategy to address the concerns of employees surrounding job security and compensation. Employee jitters surround the viability of their employer and the security of their jobs. Retirement savings evaporate as the stock market plummets leading some to forego matching 401k contributions. Compensation packages and incentives tied to stock continue their downward spiral. Wordsmith the message that the CFO might send out: “They are lucky to have a job.”

Second, HR must manage the collateral effects of an employee’s personal financial problems, which can lead to bankruptcy, foreclosure and even divorce, any of which may influence his or her job and job performance. Businesses must be prepared to respond to employee performance issues created by financial problems. Employers should be aware of legal limitations placed on their actions with regard to an employee’s financial problems. In addition, human resource professionals should appreciate the relationship between their performance management program and other resources to address employee issues created by financial distress.


Pennsylvania and federal laws limit actions employers may take against employees that file for bankruptcy or are subject to wage attachments. Many employers, particularly those in the financial sector, face customer relation problems when one of their employees does not pay his or her bills or files for bankruptcy. Legal limitations on employer responses are as follows:

  • Garnishment/Attachment of Wages. Pennsylvania prohibits garnishment/attachment of wages for the repayment of personal debts, except in limited circumstances for child support, alimony or student loans.   Employees may not be disciplined, discriminated against or discharged because of wage garnishments.
  • Employee BankruptcySection 575 of the Bankruptcy Act protects employees and applicants from discrimination if an individual:(1) is or has been a debtor under this title or a debtor or bankrupt under the Act; (2) has been insolvent before the commencement of a case under the Act or during the case but before the grant or denial of a discharge; or (3) has not paid a debt that is dischargeable in a case under this title or that was discharged under the Act. Courts have limited the reach of this provision by requiring that the discrimination be "solely because" of the individual's bankruptcy participation.
  • Worries about Temptation for Theft. Businesses may become concerned that an employee in financial distress may be more likely to embezzle and react by trying to find out the scope of an employee’s credit problems. The Fair Credit Reporting Act limits an employer’s use of employee credit information. A business’ usual financial controls should be uniformly applied, but, if inadequate, should be revised for all employees.

Employees experience financial distress are subject to performance problems including declining productivity, absenteeism and depression.  The usual performance management tools can be used: however, special attention should be paid to other resources like the EAP and Debt/Credit counseling.


Benchmarking against the Federal Government's EEO Performance

The EEOC released its Annual Report on the Federal Workforce for Fiscal Year 2007 (period October 2006 to September 2007).  For those employers who may be benchmarking against the federal government, it seems to me that the government performs at a level that the EEOC would never accept from other employers. Here is a sampling of report’s findings:

·         The federal government employs almost 2.6 million workers of which 56.8% are men and 43.2% are women.

·         The federal workforce’s demographic composition is 7.8% Hispanic or Latino; 65.8% White; 18.4% Black or African American; 6% Asian; 0.2% Native Hawaiian/other Pacific Islander, 1.7% American Indian/Alaskan Native; and 0.2% reported 2 or more races.

·         Hispanic or Latinos, Whites, women and persons of Two or More Races remained below their overall availability in the national civilian labor force, as reported in the 2000 census (CLF).  Black or African Americans, Asians, Native Hawaiian/Other Pacific Islanders, American Indian/Alaska Natives and men remained above their overall availability in the CLF.

·         Federal employees and applicants filed 16,363 complaints alleging discrimination.

·         Unlawful discrimination was found in 2.8% of the 7,673 cases that were closed on the merits.

·         85% of federal agencies provided their EEO staff with required training.

·         58% of federal agencies have an Anti-Harassment Policy.

The good news is that the government is evaluating its EEO performance and publishing the results.

Revisiting Baseline Qualifications For Certain Positions: How Objective Qualifications, When Used Properly, Can Save The Day In Defending A Discrimination Claim

In Makky v. Chertoff, the Third Circuit Court of Appeals recently addressed the importance of objective job qualifications in evaluating the merits of a discrimination claim. Employers that establish clear baseline standards for position through their job descriptions, advertisements and other records are better able to defend discrimination claims by showing that the applicant or employee does not meet minimum qualifications for the position.

The Makky case involved the termination of employment of Dr. Wagih Makky who was employed by the United States government in the Federal Aviation Administration and Transportation Safety Administration for fifteen years. In his various positions, Dr. Makky was required to obtain security clearance. A descendant of Egypt, Makky was the only Muslim and only person of Arab descent in his division. Makky's security clearance was suspended due to safety concerns, including his dual citizenship with Egypt, foreign relatives and associates, foreign countries visited, and alleged misuse of his government computer. Makky was placed on paid administrative and subsequently terminated when the TSA issued its final denial of security clearance. Although Makky appealed the determination through the government's processes, the determination was upheld.

Makky filed a lawsuit including a claim for employment discrimination under Title VII of the Civil Rights Act. Makky's Title VII claim was premised on a mixed motive theory of discrimination which recognizes that an employment decision can at times be based on both (1) a legitimate non-discriminatory reason and (2) discriminatory animus. Here, Makky argued that while he was suspended without pay and terminated because he did not pass the security clearance, the TSA's actions were also motivated by discriminatory animus based on his national origin because the agency did not offer him other positions or keep him on paid leave. Although the Court recognized that the analysis is factually sensitive , it held that when a plaintiff does not possess the objective baseline qualifications to do his or her job, the discrimination claim will fail on its face because he or she cannot establish a prima facie case of discrimination. Applying the holding to the facts at hand, the Court found that Makky's inability to retain a security clearance rendered him expressly unqualified for the TSA position. Analogizing Makky's situation to a more mainstream occupation, the Court explained, "if the hospital employing a person who has been performing surgery learns that the employee falsified his or her qualifications and never went to medical school, that employee could not establish a prima facie mixed-motive case irrespective of allegations of racial or ethnic discrimination."

So what can an H.R. specialist take away from Makky? When a position requires a baseline objective qualification, like a license or degree, make sure it is expressly stated in all hiring materials including: (1) job advertisements; (2) position descriptions; and (3) application materials. Notably, if the degree or license it is merely the company's "preference" for someone in the position, it is important to consider whether making the "preference" appear as a "qualification" may lead to problems in the future. For example, suppose that Company X states that a sales position requires a Bachelor's Degree. When Company X interviews its two top choices, however, the female candidate who possess a Bachelor's Degree has the personality of dry toast, while the male candidate who has waitered all his life and does not have a Bachelor's Degree has a dynamic sales personality and will surely do well with Company X. If Company X believes that the male applicant is better suited for the position than the female applicant, should the Bachelor's Degree have been a required qualification in the first place? Probably not. Accordingly, it is important to have a process in place to review your company's job advertisements and position descriptions before posting for openings. While certain baseline objective qualifications can often be beneficial in refuting a prima facie discrimination claim, turning a mere "preference" into a "qualification" can have the opposite result because it may be used as evidence of a discriminatory motive.

HR GENERALIST RESOURCES: EEOC Issues New Compliance Assistance on Religious Discrimination and Accommodation

On July 22, 2008, the EEOC issued a new section of its Compliance Manual addressing the subject of religious discrimination. The section "provides guidance and instructions for investigating and analyzing charges alleging discrimination based on religion." The new section does not change a Pennsylvania employer's legal obligations, imposed by Title VII of the Civil Rights Act of 1964 ("Title VII") and the Pennsylvania Human Relations Act ("PHRA"), as amended, with respect to religious discrimination and accommodation. It does, however, provide a handy reference tool for many religious discrimination issues and offer some insight into the EEOC's current thinking on this often difficult subject. 

As a protected trait under both Title VII and the PHRA, religion may form the basis of disparate treatment, harassment, retaliation, and failure to accommodate claims by applicants and employees. The EEOC's new section is divided into five sections reflecting the different types of possible religion discrimination claims:

  • Coverage issues, including the definition of "religion" and "sincerely held," the religious organization exception, and the ministerial exception.
  • Disparate treatment analysis of employment decisions based on religion, including recruitment, hiring, promotion, discipline, and compensation, as well as differential treatment with respect to religious expression; customer preference; security requirements; and bona fide occupational qualifications.
  • Harassment analysis, including religious belief or practice as a condition of employment or advancement, hostile work environment, and employer liability issues.
  • Reasonable accommodation analysis, including notice of the conflict between religion and work, scope of the accommodation requirement and undue hardship defense, and common methods of accommodation.
  • Related forms of discrimination, including discrimination based on national origin, race, or color, as well as retaliation.

In addition to the standard harassment, disparate treatment, and retaliation requirements, the EEOC continues to recognize and enforce the following employer obligations:

  • Reasonable Accommodation. Once on notice, an employer must reasonably accommodate an employee whose sincerely held religious belief, practice, or observance conflicts with a work requirement, unless providing the accommodation would create an undue hardship. A reasonable religious accommodation can be any adjustment to the work environment or requirement that will allow the employee to practice his religion. Examples of such accommodations may include allowing flexible scheduling, voluntary substitutions or swaps, job reassignments and lateral transfers, and modification of grooming requirements and other workplace practices and rules.
  • Undue Hardship. An employer need not accommodate an employee's religious beliefs and/or practices if doing so would impose an undue hardship on the employers' legitimate business interests. The undue hardship defense to providing religious accommodation requires a showing that the proposed accommodation in a particular case poses a “more than de minimis” cost or burden. This standard is far lower than that required for an undue hardship under the ADA, which is defined in that statute as “significant difficulty or expense."
  • Religious Expression and Participation. Employers must permit employees to engage in religious expression, unless the religious expression would impose an undue hardship on the employer. Generally, an employer may not place more restrictions on religious expression than on other forms of expression that have a comparable effect on workplace efficiency. Likewise, employees cannot be forced to participate, or not participate, in a religious activity as a condition of employment.

In addition to a description of the applicable legal requirements, the EEOC's new Compliance Manual section on religious discrimination also contains questions-and-answers and "best practices" information designed to assist employers with their compliance obligations. 

The issuance of this new compliance assistance demonstrates that the EEOC remains focused on religious discrimination and accommodation issues. For this reason and numerous others, employers also should be aware of and compliant with these requirements.

Legal System to Blame for Humorless Work Environment?

Hard economic times, perpetual threat of layoffs, workers stretched too thin could all be contributing to the “increasingly humorous American workplace” according to MSNBC author Eve Tahmincioglu in her post No joke! The workplace needs a good laugh. However, others are pointing to our legal system’s clamp down on “hostile work environments” as the cause of a joyless workplace:

What’s exacerbating the joylessness this recession has spawned, some believe, is decades of joke slap-downs in offices and factories. “The whole issue of political correctness has gone too far when it comes to the criteria for determining an offensive comment,” says Thierry Guedj, workplace psychology expert and professor at Boston University. “If anybody is offended, then it’s offensive. The criteria has become much too personalized. It only takes one person being slightly upset at something for it to become offensive.” It started in the 1980s, he continues, got worse in the 1990s and “has now reached its maximum.”

It is true that more claims of workplace harassment are being filed. The EEOC received 27,112 charges of harassment in 2007, up almost 18% from the prior year. Employer’s settlement payments of $65.6 million for these charges are no laughing matter. From a legal perspective, should employees be worried about injecting humor into the workplace and is an employer’s “joke slap-down” necessary? If your humor doesn’t demean people based on their membership in a protected class, then joke away.

It is the “off-color jokes” and other “humor” related to gender, race, national origin, religion or other protected classifications that can be considered harassment. These types of comments always find their way into allegations of discrimination or harassment when a complaint is filed. However, there is an important distinction between remarks uttered by a supervisor (quid pro quo harassment) verses those spoken by a co-worker (hostile environment harassment).

Potentially discriminatory remarks or jokes spoken by a decision maker are evidence of discriminatory motive in adverse employment decisions as noted by the Supreme Court in Ash v. Tyson Foods. A couple of off-color jokes followed up by a disciplinary suspension may give a discrimination charge some merit. On the other hand, mere utterance of a joke or other inappropriate remarks by a co-worker may not sufficiently affect conditions to create a hostile environment as noted in Meritor Savings Bank v. Vinson.   But that’s your risk.

According to EEOC Policy Guidance, a "hostile environment' harassment takes a variety of forms, many factors may affect this determination, including: (1) whether the conduct was verbal or physical, or both; (2) how frequently it was repeated; (3) whether the conduct was hostile and patently offensive; (4) whether the alleged harasser was a co-worker or a supervisor; (5) whether the others joined in perpetrating the harassment; and (6) whether the harassment was directed at more than one individual. 

Severity and the pervasiveness of alleged hostile activities are the focus of the legal analysis. This is a very fact sensitive inquiry which depends in part on what a reasonable person would find offensive. For example, the New Jersey Supreme Court has held that some racial slurs and jokes are so historically offensive that their use in the workplace, even once, can lead to liability for an employer who doesn’t respond appropriately. A single utterance of an epithet can create a hostile work environment if it is viewed as “severe” and it is aimed at the individual rather than a generalized comment.  

Professor Guedj is correct that workplace humor has changed; but, perhaps the change was needed.  The impact of hypersensitivity is theoretically mitigated by the reasonable person standard.  However, the gray of the law may have led some workplace humorist to abstinence. Alternatively, practicing “safe humor” could include the following prophylactic measures:

  • Evaluate the content of the humor; some words and subjects are never appropriate for the workplace.
  • Know your audience.
  • Save your stand up routine for the comedy club where patrons are willing participants.
  • Don’t make jokes personal by singling out one individual as the butt of your humor.
  • Stop joking with people who seem uncomfortable with it.
  • Don’t ridicule co-workers who don’t like your humor
  • Try ask whether someone is offended by the humor.
  • If a co-worker’s joke offends you, then say something to the jokester.
  • Don’t e-mail jokes to everyone in the office.
  • Take seriously complaints about inappropriate humor, but remember the conduct must offend a reasonable person.


Switching to a Paid Time Off Program (PTO) has Practical and Legal Implications

Traditional leave programs segregate time off into categories like vacation, sick time and personal time requiring HR professionals to track both the time off and the reason it is being taken. Sick time abuses are addressed by tightly monitoring the reasons for sickness-related absences and disciplining employees for excessive absenteeism. Many employers have decided to get away from policing the circumstances of an employee's absence by just creating a bank of paid time off that can be used for any reason. Once PTO is exhausted, time off is unpaid and subject to the attendance discipline policy. This certainly sounds like a great idea, but here are some practical and legal considerations in converting from a traditional sick pay program to a PTO plan:

Timing the Change Over to PTO:

Changes in leave policies should be coordinated with either the end of the leave year period or some other workplace change like moving to a four-day workweek. The obvious choice is converting to PTO bank at the end of the year, since most employers administer their time off programs on a calendar/fiscal year. For employers using anniversary date leave years, it is too difficult administratively to run dual programs, so they should pick a date and change over for everyone.

Effect on Four-Day Workweeks

Employers need to remember that a change in workweek from five eight days to four day ten hour days also affects time off policies. A handbook or CBA may describe time off (PTO, vacation, holidays, personal and sick time) in terms of “days”. However,

a workday, which used to be an 8-hour day, is now a 10-hour day. The 8-hour day was 20% or the workweek, but the 10-hour-workday is 25% of the workweek. If a day expands to 10 hours, employees are getting more time off and, as a result, the company is losing 5% productivity. If a day stays at 8 hours then employees can’t cover the whole day off. Converting the whole PTO bank to hours can address this situation. (see Energy Expenses And Gas Prices Motivate Employers To Move To Four Day Workweek: What Are The Legal Issues?)

Addressing the Perception of a "Take Away":

Converting to PTO means combining vacation, sick days, personal days, and other time off into one bank. Employers almost never credit the entire amount of sick time to PTO banks. Therefore, employers need to address the perception that employees are losing sick time. I have found that referring to the statistic mentioned in the prior posting (average 8 sick days, use 5) makes some sense. Based on this ratio, I convert 60% of sick days to PTO and couple it with an explanation about trade offs.

Dealing with Accumulated Sick Time:

Some employers allow the accumulation of unused sick time as an incentive not to use it. (This practice drives accountants crazy). The accumulated time may be used in some of the following ways: to satisfy a waiting period for STD/LTD; as a pay out upon separation, typically at a reduced percentage (50%); or it is simply forfeited. Employers may seize the opportunity to clean up their balance sheet and pay out a portion of the accumulated time or convert it to PTO. This approach softens the blow of the perceived take away mentioned above. However, an employer's flexibility in dealing with accumulated sick time depends on its written policy and practice with regard to payouts. Be careful not to create a claim for unpaid fringe benefits under the Pennsylvania Wage Payment and Collection Law.

Exhausting PTO:

Employees who use all of their PTO are unpaid for additional absences and are subject to discipline under the attendance policy. Some traps for the unwary include: the prohibition on salary docking for exempt employees; additional unpaid leave as an accommodation under the ADA, and discrimination claims under the ADA.

Administering FMLA:

FMLA administration becomes more challenging in a PTO program since the employer is not necessarily aware of the reason for an absence. A serious health condition under the FMLA triggers an obligation to notify an employee of his or her FMLA rights and starts the counting of the time against the 12 weeks of leave. Employers must also address the concurrent use of PTO and FMLA leave in their policies.

Integrating STD and other Leave Programs:

Some sick leave policies were designed to integrate with the waiting period for STD benefits. A move to PTO creates a disconnect. The disconnect can be mitigated by allowing an employee with accumulated sick time to use it to satisfy the waiting period if he or she becomes eligible for STD benefits. Otherwise, PTO or unpaid time is used during the waiting period. Employers might address hardships by creating a PTO donation program where employees may donate unused PTO to a fellow worker who needs additional time.

Contesting Unemployment Claims:

 An employer's proof of willful misconduct to deny unemployment benefits will generally look at the incident that gave rise to the discharge. If the reason is a violation of employer's attendance policy, the employee can show that the violation was not his or her fault. An employee who is fired for excessive absences after "squandering" PTO, may still be eligible for unemployment if the absence that gave rise to termination was for a legitimate illness.

Drafting a Policy:

A written policy on PTO is strongly suggested and it should address at least the following areas:

  • Accrual Basis or Award Basis
  • Notice of Absence
  • Unused PTO carryover or forfeiture
  • Concurrent use of FMLA and PTO
  • Consequences of Exhausting PTO
  • Discipline/Discharge

Violence in the Workplace: A Legal Perspective

HR professionals are reminded of their workplaces’ vulnerabilities every time an episode of workplace violence is reported in the media like this morning’s headline “6 dead in plastics factory shooting rampage.”  The scope of the problem set out in statistics. There were 5734 workplace fatalities reported to OSHA (2005 is the last year statistics are available). Assaults and Violent Acts accounted for 792 workplace fatalities.

Media accounts typically report about the “warning signs” that were missed and speculate on how the incident may have been prevented. There are, of course, psychological tests and assessment tools that are predictive of violent behavior, but there are significant legal restrictions on their use. Assessments that are not "medical tests" may be used on a pre-employment basis, but should not be used as the principal reason for a hiring or promotion decision.

There is no profile of a potential workplace violence perpetrator; however, there are traits when coupled with at risk situations that increase the likelihood of violent behavior. Sheryl and Mark Grimm of the Workplace Violence Headquarters have developed a Formula for Workplace Violence that includes a list of traits as follows:

  • Previous history of violence, toward the vulnerable, e.g., women, children, animals
  • Loner, withdrawn; feels nobody listens to him; views change with fear
  • Emotional problems, e.g., substance abuse, depression, low self-esteem
  • Career Frustration, either significant tenure on the same job of migratory job history
  • Antagonistic relationships with others
  • Some type of obsession, e.g., weapons, other acts of violence, romantic/sexual, zealot (political, religious, racial), the job itself, neatness and order.

There is a major legal distinction made between an employer's treatment of an applicant with a potentially violent personality and addressing employee conduct that expresses violent behavior. The EEOC has stated that its position on the distinction between perception and conduction in its  Enforcement Guidance for Individuals with Psychiatric Disabilities :

34. When can an employer refuse to hire someone based on his/her history of violence or threats of violence?

An employer may refuse to hire someone based on his/her history of violence or threats of violence if it can show that the individual poses a direct threat. A determination of "direct threat" must be based on an individualized assessment of the individual's present ability to safely perform the functions of the job, considering the most current medical knowledge and/or the best available objective evidence. To find that an individual with a psychiatric disability poses a direct threat, the employer must identify the specific behavior on the part of the individual that would pose the direct threat. This includes an assessment of the likelihood and imminence of future violence.

30. May an employer discipline an individual with a disability for violating a workplace conduct standard if the misconduct resulted from a disability?

Yes, provided that the workplace conduct standard is job-related for the position in question and is consistent with business necessity. For example, nothing in the ADA prevents an employer from maintaining a workplace free of violence or threats of violence, or from disciplining an employee who steals or destroys property. Thus, an employer may discipline an employee with a disability for engaging in such misconduct if it would impose the same discipline on an employee without a disability. Other conduct standards, however, may not be job-related for the position in question and consistent with business necessity. If they are not, imposing discipline under them could violate the ADA.

OSHA’s General Duty Clause requires employers to “furnish to each of his employees employment and a place of employment which are free from recognized hazards that are causing or are likely to cause death or serious physical harm to his employees.” OSHA provides some resources to help employers meet this requirement.

Given the legal limitations confronting employers in their efforts to provide a safe workplace, the following are some suggestions in development of a Violence Program:

  • Establish and communicate a written violence policy
  • Consider pre-employment assessments and background checks
  • Establish an Employee Assistance Program
  • Train supervisors to recognize warning signs of employee violence
  • Recognize "at risk" situations like employee discipline or discharge and plan accordingly
  • Consider professional evaluations of at-risk employees based on objective signs of workplace problems
  • Assess workplace security measures
  • Develop and Communicate a Disaster Management Plan

U.S. Supreme Court Decides Several Employment-Related Cases

On June 19, 2008, the United States Supreme Court issued four employment-related decisions that are briefly summarized as follows:

Meacham v. Knolls Atomic Power Laboratory:  The government ordered its contractor to reduce its workforce. The contractor had its managers select employees for layoff based on factors including performance, flexibility, critical skills and seniority. The resulting reduction in force netted 31 employees, 30 of which were over 40. Several laid off employees sued claiming the neutral factors used for layoff had a disparate impact on older workers.

The Court noted that the employees in a disparate impact case must isolate and identify specific employment practices that are allegedly responsible for the statistical disparity disfavoring older workers. The employer must prove that the neutral factors constitute “reasonable factors other than age”. Reasonableness differs from business necessity.

Chamber of Commerce v. Brown:  The Court struck down a California law that prohibited employers who receive state funding from using those funds to “assist, promote, or deter union organizing.” The Court held that the NLRA preempts state laws that attempt to regulate areas that the NLRA protects or prohibits.

Kentucky Retirement System v. EEOC:  Kentucky’s pension program imputed additional years of service for workers in “hazardous positions” who became disabled so as to credit them with service to reach “normal retirement” under the plan. An employee who worked past normal retirement age and then became disabled challenged the plan on the basis of age discrimination. He argued that the disability pension calculation disadvantaged older workers based on their aged.

The Court noted the distinction between “age” and “pension status”. When an employer adopts a pension plan that includes age as a factor, and that employer treats employees differently based on pension status, a plaintiff must prove that the differential treatment was “actually motivated” by age and not pension status to prevail under the ADEA.

Metropolitan Life Insurance Co. v. Green:   A life insurance company was the administrator of an employer’s long-term disability plan so it decided an employee’s eligibility for benefits and paid the claim out of its pocket. The insurer determined that an employee was not eligible for benefits and the employee appealed.

The Court analyzed the standard of review of a plan administrator’s denial of benefits under ERISA when the administrator is both the decision maker and the payer of benefits. In such a situation, the administrator has a conflict of interest, which a court may consider as a factor in accessing whether the decision is an abuse of its discretion under the plan. The administrator’s decision is entitled to “deference” and the court may not substitute its judgment for that of the administrator; however, it may consider the conflict as part of its assessment.

Hat tip to Connecticut for being faster by a nose.


The scenario is a common one. An employee quits or is discharged before the end of the pay period. The employer has the employee's final paycheck, and the employee has certain property belonging to the employer (e.g., a uniform, laptop computer, cell phone). The employer explains to the employee that it will give the employee his/her final paycheck as soon as the employee returns the employer's property.

In Pennsylvania, the employer's proposed swap of paycheck for property may run afoul of the law. The Pennsylvania Wage Payment and Collection Law expressly states that whenever an employee is separated from employment, the wages or compensation earned "shall become due and payable not later than the next regular payday of his employer on which such wages would otherwise be due and payable." 

Simply put, a employer in Pennsylvania cannot use the final paycheck as leverage to recover its property, even if it is not disputed that the employer is legally entitled to the property. Holding the final paycheck exposes an employer to potential liquidated damages and liability for the employee's attorney fees, in addition to the value of the withheld wages.

Employers essentially have two options (neither of which are ideal) when giving employees property for their use that the employer wants returned at the end of the employment relationship. In the first option, the employer can get written authorization from the employee to deduct the cost of any unreturned equipment from the employee's final paycheck. This option, however, presents some risk. The Wage Payment and Collection Law allows deductions from the paycheck with the employee's written authorization if the deduction is "for the convenience of the employe[e]." It is unclear whether deducting the cost of an unreturned laptop from an employee's final paycheck is a deduction "for the convenience of the employee" and thus permissible. In addition, the final paycheck itself may be insufficient to cover the cost of the unreturned property. This problem is made worse by the fact that the deduction should not take an employee's wages during the final pay period below the statutory minimum wage.

The second option is to pursue legal action against the employee for the cost of the unreturned property. In many cases, such legal action would be in the form of a civil action filed with a District Justice. In many circumstances, an employer spends time and resources pursuing the property in such a legal action well in excess of the value of the property itself.

There exists no perfect solution to the problem of employees failing to return an employer's property upon separation of employment. Despite the lack of good solutions, holding the final paycheck as leverage is not a permissible option and may result in additional liability.

Job Duty of Getting Coffee for Boss is not Sexual Harassment and Early Departure With Pay is Not Actionable Retaliation

The act of getting coffee is not a gender specific act that can form the basis for a sexual harassment claim according to a recent court decision in Klopfenstein v. National Sales and SupplyThe plaintiff had asserted that being compelled to perform what she considered to be a ‘servile task’ was, in and of itself, gender discrimination and gender based harassment so clearly stereotypical as to not specifically require comparator evidence. In essence, the plaintiff was contending that asking a female employee, regardless of the position that she held, to get coffee for her boss was per se because of her gender. Keep in mind that the plaintiff was a receptionist who did not object to getting coffee and refreshments for clients and vendors.

Despite the absence of any contention that she was subject to sexual advances, the plaintiff also sought to characterize her being required to get coffee as what she called “quasi quid pro” harassment.   Rather than being required to submit to a sexual advance, the gravamen of a quid pro quo theory, the plaintiff contended that she was required to conform to an outdated gender stereotype. This theory also rejected.

Finally, the plaintiff sought an expansive interpretation of what may constitute adverse action sufficient to support a claim of retaliation. After being advised that she would be discharged and paid for the rest of her last day, the plaintiff implored her employer to work through the end of the day. When she subsequently indicated that she might file a complaint, she was told to leave but still was paid for the rest of the day. The court noted that this could not constitute materially adverse action by the employer that might well dissuade a reasonable person from making a complaint. If anything, the Court noted, such a worker’s resilience in pursuing a charge or complaint “would likely be emboldened”

The court granted the employer's motion for summary judgment ruling that a female receptionist/data entry clerk could not make out a prima facie case for retaliation, sexual harassment or gender discrimination. National Sales and Supply was represented by Brian F. Jackson and Marcy L. McCullough of McNees Wallace & Nurick LLC.

On-Line Postings And Your Corporate Image: Can You Terminate Employees For Personal Postings?!?

Freedom of Speech is a right granted by The United States Constitution and enjoyed by all Americans. Employees exercising their free speech rights by blogging, posting on MySpace and YouTube may be surprised to learn limits of their Constitutional protections and should acquaint themselves with the term “dooced”.

Generally, employees of private sector employers have no constitutional “free speech” rights in the workplace and beyond.  A quick civics’ lesson reveals that the Bill of Rights creates limits on the government’s actions to curb constitutional rights but does not typically restrain private employers from restricting an employee's speech and expression.

Employees should pause before reporting to work wrapped solely in a flag, speaking their mind or blogging about the cruelties of their employer. Freedom of speech may only go as far as an employer’s tolerance for commentaryPennsylvania courts have rejected wrongful discharge claims based on First Amendment protections asserted by employees who were terminated for criticisms of their employers. Geary v. U.S. Steel Corp., 456 Pa. 171, 319 A.2d 174 (1974) and Wagner v. General Elec. Co., 760 F.Supp. 1146 (E.D. Pa. 1991).

Every employee owes the employer a duty of loyalty. The duty of loyalty owed by an employee to his or her employer is fairly broad and may encompass: "harmful speech, insubordination, neglect, disparagement, disruption of employer-employee relations, dishonor to the business name, product, reputation or operation, or nondisclosure of important information to the employer." Lee, Konrad, Anti-Employer Blogging: Employee Breach of the Duty of Loyalty and the Procedure for Allowing Discovery of Blogger's Identity Before Service of Process is Effected.

Employee comments need not be made at work. Employees have been fired for blogging and posting on MySpace. In one of the more infamous cases Ellen Simonetti, a flight attendant for Delta Air Lines, was fired in 2004 because of her "Queen of the Sky" blog content. Simonetti posted provocative pictures of herself in a Delta uniform on a Delta airplane.

The airline, concerned for its image, found her inappropriate actions to be grounds for her termination. While the case remains unsettled due to an administrative discharge under bankruptcy laws, Simonetti has gone on to publish a book and is reportedly trying to seal a movie deal—all based on her termination from employment for her blog. 

An employer’s power to terminate an employee for expressions of opinion is not absolute. Notable exceptions exist for “union activity”, anti-retaliation provisions of discrimination laws, and Sarbanes-Oxley Act compliance.  An excellent discussion of the law in these areas appears in a New York Law Journal article by Jeffery S. Klein and Nicholas J. Pappas entitled When Private Sector Employer Fires Worker for Blogging.

Many employers have chosen to adopt policies on employee communications for a whole range of purposes. Policies can be helpful in defining an employee’s actions in the following areas:

  • Authority to comment to news media on official matters
  • Authority to communicate with or about customers and vendors
  • Use of work time
  • Use of employer’s computer and other resources
  • Disclosure of confidential or proprietary information
  • Prohibition on content of communication that is disloyal, discriminatory, inflammatory, threatening, or disparaging of the company, its employees, customers, products, etc.
Since many corporations have blogs, they have also developed blogging policies and guidelines. IBM’s Blogging Policy is an example of one employer’s approach.

Sex may Sell, but Gender-based Employment Decisions are Unlawful Discrimination

The EEOC announced a $1 million settlement for sex discrimination against men arising from a restaurant’s preference for hiring and promoting only women into bartending positions. The lawsuit highlights the tension between a business’s marketing efforts and legal compliance. What marketers may pander to in the name of “customer preference,” employment laws prohibit as discrimination.

Businesses spend millions of dollars to find out what motivates customers to buy by evaluating their preferences. Demographics play an important role in tying the right product to the right market. Also critical is having the “right” salesperson to make the pitch.

A business’s natural, but unlawful reaction may be to make staffing decisions based upon appealing to a target demographic group.  The “customer preferences” for the right salesperson cannot create employer hiring or promotion criteria for someone of a particular gender, religion, age, etc. Courts have universally rejected this form of customer preference, except in the narrow case where it is a Bona Fide Occupational Qualification (BFOQ). A BFOQ may exist where it is necessary for the purpose of authenticity or genuineness, such as, a model for gender specific clothing. 

In its lawsuit, the EEOC said that Razzoo's, a Cajun food restaurant chain, refused to hire or promote men to the position of bartender. The EEOC had evidence that the restaurant's management set up and communicated to managers by e-mail, a plan for an 80-20 ratio of women to men behind the bar. Male applicants and servers were told that management wanted mostly “girls” behind the bar. Men who worked as servers at the restaurant were generally denied promotion to bartender because of their gender. The few men who were promoted to bartender were not allowed to work lucrative “girls-only” bar­tend­ing events.

The EEOC’s settlement with Razzoo shows a developing trend in the agency of making an employer improve its approach to human resources. In addition to paying $775,000 to be divided among a class of male applicants, male servers, and male bartenders who were discriminated against, Razzoo's was also required to retain the services of a human resources consultant or to develop an in-house human resources department spending no less than $225,000 for these human resources services.   Razzoo's agreed to injunctive relief requiring training on equal employment opportunity for all its employees, the posting of an anti-discrimination notice, and EEOC monitoring of employee complaints of discrimination.

Suzanne M. Anderson, EEOC supervisory trial attorney and lead counsel on the lawsuit, summed up the EEOC’s position by saying that, "Some may think that sex sells drinks, but gender ratios are illegal… Razzoo's decision to hire and promote by gender is a clear violation of federal law. A hiring ratio is illegal whether it is 80-20 whites to blacks or 80-20 women to men."   It will be interesting to see how far the law will go in policing an employer’s efforts to appease a customer preference. For example, would an OBGYN practice be subject to an EEOC lawsuit if it specifically hired a female doctor based on the preference of its patients?