The first cases addressing the impact of Pennsylvania’s Construction Workplace Misclassification Act (“CWMA”) in the context of the Pennsylvania’s Workers’ Compensation Act, have finally reached the Appellate Courts. The CWMA, which became effective on February 10, 2011, imposes criminal and administrative penalties for the misclassification of employees as “independent contractors” at commercial and residential construction sites in Pennsylvania. “Construction” is broadly defined to include “erection, reconstruction, demolition, alteration, modification, custom fabrication, building assembly, site prep and repair work,” at both residential and commercial sites.

The CWMA details a multi-prong test for determining whether a worker is an “employee” or “independent contractor” for purposes of the Act:

  1. The individual must have written contract to perform such services;
  2. The individual must be free from control or direction over the performance of such services, both by contract and in fact;
  3. The individual must be customarily engaged in an independently established trade, occupation, profession or business, with a business location separate from the location of the person for whom services are being performed; and
  4. The individual must maintain liability insurance during the term of the contract of at least $50,000.

What had been unclear for some time, was whether the formal requirements of the CWMA would supplant the common law definition of “employee” under the Pennsylvania Workers’ Compensation Act, which had focused primarily on a traditional “direction and control test” for distinguishing between independent contractors and employees. This issue was recently addressed in D & R Construction v WCAB. The Commonwealth Court in D & R Construction ruled that, for injuries occurring at construction sites on or after February 10, 2011, the injured worker will be deemed an employee, unless all of the mandatory criteria are in place for a finding of independent contractor status, pursuant to the CWMA. Additionally, all criteria should be given equal weight by the WC Judge, and if any one is absent, the injured worker will be deemed to be an “employee” of the business entity requesting the services.

In light of this ruling and pending clarification by the Pennsylvania Supreme Court, it is critically important that employers utilizing subcontractors at Pennsylvania residential and commercial project sites, make sure that such subcontractors and their employees meet the definition of “independent contractors” under the CWMA and are properly insured for both liability and workers’ compensation. Contractual indemnification language may also be advantageous, in the event of an unexpected construction site injury or claim.

For further information on construction site injuries or guidance, please contact Micah Saul, Denise Elliott, or Paul Clouser in the Lancaster office.

That sound you just heard was employers everywhere breathing a sigh of relief, and maybe even high-fiving.  That’s because the newly constituted National Labor Relations Board fired off several pro-employer decisions in the last week. The decisions were released in rapid succession in the days prior the expiration of the term of Board Chairman Phil Miscimarra.

As we reported just this week, the Board decided to modify the standard by which it determines whether employer policies are unlawful under the National Labor Relations Act.  That decision will provide some very welcome relief to employers who saw the Obama-era Board find just about every employer policy unlawful.  We also reported that we anticipate that the Board’s approach to social media will similarly become more fair and predictable.

The Trump-Board also made quick work of one of the Obama-Board’s most controversial decisions, Browning-Ferris, which created a new “joint employer” test.  We reported on the new expansive joint employer test adopted by the Board in Browning-Ferris, and expressed our concern regarding increased liability for employers under the new standard.  Browning-Ferris allowed for a joint employer finding, and increased liability, based on theoretical or “reserved” power/control, even if such control was never exercised.  In Hy-Brand Industrial Contractors, the Board abandoned the Browning-Ferris standard and declared that joint-employer status requires proof that the putative joint employer has actually exercised joint control over essential employment terms, rather than merely having reserved the right to exercise control.

The Board also reversed the Obama-Board’s Specialty Healthcare decision, which allowed unions to form “micro-units.”  That decision essentially required the Board to rubber stamp the union’s definition of the appropriate bargaining unit for purposes of a union election and bargaining.  This approach exposed employers to an increased risk of organizing campaigns, and the possibility of having to negotiate with several different unions.  On December 15, 2017, in PCC Structurals, Inc., the Board abandoned the Specialty Healthcare standard and returned to its prior framework for determining the scope of a bargaining unit.

Also on December 15, 2017, the Board reversed another Obama-era decision, E.I. DuPont de Nemours, Louisville Works, which had overturned 50 years of precedent.  In DuPont, the Obama-Board dramatically expanded the definition of “change” for purposes of determining whether an employer made an unlawful unilateral change to the terms and conditions of employment.  Under DuPont, an employer was found to have engaged in an unfair labor practice charge for simply continuing to do what it had done many times previously—for years or even decades. Last week, in Raytheon Network Centric Systems, the Trump-Board reversed DuPont, and announced the return to the prior standard for determining whether an employer is authorized to make changes to the terms and conditions of employment after the expiration of a collective bargaining agreement.

These decisions are certainly indicative of a return to a more employer-friendly Board.  These decisions reversed some of the more controversial, and problematic, decisions of the Obama-Board.  We are certainly hopeful these are a sign of things to come from the Board.  However, with the expiration of the term of Chairman Miscimarra, we may need to wait some time before we receive another batch of pro-employer decisions.

Last year, OSHA issued a new electronic reporting rule that requires employers with more than 250 employees in industries covered by the OSHA recordkeeping regulations, as well as employers with 20-249 employees in designated “high-risk industries” (including manufacturing, construction, and many healthcare establishments), to electronically submit injury and illness data from their OSHA 300 logs and related forms. Much of the information electronically will be made available to the public on OSHA’s website because, in OSHA’s view, “behavioral economics tells us that making information publicly available will ‘nudge’ employers to focus on safety.”

The original July 1, 2017 deadline by which covered employers were required to submit data from their Form 300A Annual Summary for 2016 was previously extended by OSHA in order to “provide the new administration the opportunity to review the new electronic reporting requirements prior to their implementation and allow affected entities sufficient time to familiarize themselves with the electronic reporting system.”   The deadline is now December 15, 2017. Accordingly, covered employers must log onto OSHA’s Injury Tracking Application (ITA) and submit their 2016 OSHA Form 300A information electronically on or before December 15, 2017.

Whether OSHA will maintain the future electronic reporting requirements under the new rule remains to be seen. A recent OSHA press release indicates that “OSHA is currently reviewing the other provisions of its final rule to Improve Tracking of Workplace Injuries and Illnesses, and intends to publish a notice of proposed rulemaking to reconsider, revise, or remove portions of that rule in 2018.” Considering the Trump administration’s record of scaling back Obama era government regulations, it would not be a surprise to see a change here as well.

Stay tuned for additional updates in 2018 …

Last November, we explained the decision in the case of U.S. Equal Employment Opportunity Commission v. Scott Medical Health Center, P.C., from the U.S. District Court for the Western District of Pennsylvania.  There, the court concluded that Title VII of the Civil Rights Act of 1964 prohibits discrimination and harassment based on sexual orientation.  Our previous post on this case can be found here.

To recap, the Equal Employment Opportunity Commission’s (“EEOC”) filed the lawsuit on behalf of a gay, male former employee of Scott Medical, alleging that his supervisor subjected him to anti-gay epithets and a hostile work environment based on his sexual orientation.  The court refused to dismiss the case because, in the words of U.S. District Judge Cathy Bissoon, “discrimination on the basis of sexual orientation is a subset of sexual stereotyping and thus covered by Title VII’s prohibitions on discrimination ‘because of sex’.”

On September 25, 2017, the court entered a default judgment against Scott Medical on the issue of liability.  The court found that the company had committed an intentional violation of Title VII.  This finding was based on the fact that Scott Medical’s Chief Executive Officer was aware of the supervisor’s harassing actions and refused to take any action to stop the conduct or correct the hostile work environment.

On November 16, 2017, after a trial on issue of damages, Judge Bissoon ordered Scott Medical to pay the employee $5,500.43 in back pay and prejudgment interest.  More importantly, she also ordered Scott Medical to pay the statutory maximum amount of $50,000 as compensatory and punitive damages.  If not for the statutory cap on such damages, Judge Bissoon opined that “punitive damages in the amount of $75,000 would be warranted by the evidence” in this case.

Notably, the supporting evidence cited by the court included the fact that Scott Medical failed to train the harassing supervisor on its anti-harassment policy.  In fact, Scott Medical could not identify anyone who would have provided such training to any of its supervisors.  Similarly, the former employee testified that he never received a copy of the Company’s anti-harassment policy and was never trained about harassment in the workplace.

There are several clear takeaways from this case.  First, as we explained here, regular and effective anti-harassment training is an essential part of preventing harassment in any organization.  This case provides 55,000 reasons to ensure that such training is provided to supervisors and managers, as well as all other employees.

The second takeaway is to revisit your organization’s Equal Employment Opportunity and Anti-Harassment policies, and consider adding sexual orientation as a protected trait.  As you update your policies, keep in mind the importance of responding promptly and appropriately when complaints are raised about harassment – including harassment based on sexual orientation.  It also may be a good time to update your anti-harassment training to specifically address issues of discrimination and harassment based on sexual orientation.

There also may be more to come with the Scott Medical case.  Now that a final judgment has been entered, an appeal to the Third Circuit Court of Appeals may be forthcoming.  If the case is appealed, the Third Circuit likely will be forced to reconsider several prior decisions in which it found that sexual orientation was not protected under Title VII.  We will continue to provide updates as developments in this area occur.

An ever-increasing number of employers are sponsoring wellness incentives as a means of encouraging employees to developing healthy habits. In turn, employers gain healthier, more productive work forces.  Wellness incentive programs aren’t without their risks, however.  In this podcast, Denise Elliott discusses whether employees are covered by workers’ compensation benefits for injuries sustained while participating in an employer-sponsored wellness program.

Picture this.  You have just settled a problem workers’ compensation case and you or your carrier have disbursed settlement checks totaling $100,000 in exchange for a full and complete compromise and release of “any and all past, present and/or future benefits, including but not limited to, wage loss benefits, disfigurement benefits, medical benefits, or any other monies of any kind including, but not limited to, interest, costs, attorney’s fee and or penalties for or in connection with the alleged 08/12/2015 work injury claims Employee may have with or against Employer…”

Several months later, the same employee sues your company in Federal Court for violating his FMLA rights, retaliation for exercising FMLA rights, and for wrongful discharge based upon unlawful retaliation for filing a workers’ compensation claim in violation of Pennsylvania common law.

“What on Earth,” you say.  “But we just paid out a $100,000 settlement!” Unfortunately, the employee may pursue these additional claims because they were not properly released at the time of the workers’ compensation settlement.  The United States Court of Appeals for the Third Circuit recently held that a Compromise and Release Agreement under the Pennsylvania Workers’ Compensation Act, covers only those matters which “may fairly be said to have been within the contemplation of the parties when the release was given.”  Zuber v. Boscov’s, No. 16-3217 (United States Court of Appeals for the Third Circuit, opinion filed September 11, 2017).  In Zuber, the agreement referenced only work injury claims and as such, the settlement document was only read to prevent the employee from seeking additional money related to an alleged work injury claim.  Likewise, the employee certification page of the subject agreement specifically stated that the employee “understands that the Compromise and Release is a settlement of his workers’ compensation claim only” and thus, the document was “unambiguously” a specific and limited release rather than a general release.

The above problems could have been avoided, of course, by utilizing separate release documents, coupled with a properly worded letter of resignation, to make it clear that the employee was indeed consenting to and bargaining for a global resolution of all employment issues, including a full compromise and release of his workers’ compensation rights, and a settlement and release of other potential employment claims under other laws and statutes including the FMLA, ADA, ADEA and wrongful discharge.

Often times defense counsel assigned by an insurance carrier in workers’ compensation matters will proceed to settlement without proper consideration of other ancillary employment matters and exposures.  Accordingly, employers must be vigilant in making sure that their interests are properly protected and that employees who accept workers’ compensation settlements do not return to court seeking other costly benefits or remedies. Fully insured employers should insist that the carrier appointed attorney consult with employment law counsel on the settlement. Employers who are self-insured or have large deductible plans, who have more leeway in selecting defense counsel should insist on hiring workers’ compensation defense counsel who are familiar with employment laws and statutes, to avoid the result in the Zuber case.

For further information, on this subject, please feel free to contact Denise Elliott, Micah Saul or Paul Clouser, in our Lancaster office.

Most employers take proactive steps to prevent and eliminate workplace harassment. Until recently, courts recognized and rewarded the proactive approach.  Businesses in Pennsylvania, New Jersey and Delaware could avoid liability for hostile work environment claims if they rooted out the problem before it became “severe and pervasive.”

Courts had long held that a single slur, even if highly offensive, was not pervasive and therefore could not trigger employer liability.  The United States District Court for the Middle District of Pennsylvania upheld that standard in Castleberry v. STI Group, a 2015 case involving African American workers who were subjected to a racial slur and threatened with termination in a single incident.  The District Court dismissed the claim.

On appeal, the Third Circuit overturned the District’s ruling.  In doing so, the Court noted that the “plaintiffs alleged that their supervisor used a racially charged slur in front of them and their non-African-American co-workers…Within the same breath, the use of this word was accompanied by threats of termination (which ultimately occurred).”  Under these facts, the Third Circuit held that a single, isolated slur constitutes severe conduct that could create a hostile work environment.

Castleberry is now the law of the land for all Pennsylvania employers (and those in New Jersey and Delaware) who are subject to federal anti-discrimination laws. And it is certainly bad news for employers.  The ruling makes it much easier for a hostile work environment plaintiff to survive summary judgment, leading to increased defense costs and greater potential for a costly verdict.

In light of the Third Circuit’s holding, employers would be wise to take inventory of its anti-discrimination and anti-harassment policies to ensure that they are up to date and prohibit all occurrences of discriminatory harassment. Supervisors and managers should also be made aware that even a single, isolated racial slur can now lead to liability.

We will continue to monitor Third Circuit cases that develop under Castleberry and any updates will be reported here on our blog.

The Pennsylvania Personnel Files Act (also known as the Inspection of Employment Records Law), grants employees in Pennsylvania, or their designated agents, the right to inspect certain portions of their personnel records. The Act requires employers, upon an employee’s request, to permit the employee to inspect the portions of his or her personnel file used to determine qualifications for employment, promotion, additional compensation, termination or disciplinary action.  Employers must make the records available during regular business hours and may require employees to submit a written request form.

Until recently, the right to inspect records even extended to former employees within 30 days following their date of discharge pursuant to a rule adopted by the Pennsylvania Department of Labor and Industry.  However, in Thomas Jefferson University Hospitals, Inc. v. Pa. Department of Labor & Industry, the Pennsylvania Supreme Court held that former employees do not have the right to inspect their personnel records.

Allowing discharged employees and their attorneys to access personnel files prior to litigation afforded them great insight into potential legal claims. This type of access to information was often used in developing a strategy for negotiations, future litigation or deciding which claims to assert.  The discharged employees and their attorneys could weigh how the employer’s articulated reason for termination lined up with (or in some cases did not line up with) what the employer documented in the personnel file.

Now, because of the Supreme Court’s decision, employers can safely refuse to grant discharged employees access to their personnel files.  The background behind the Supreme Court’s decision in Thomas Jefferson University Hospitals is explained below.

At the outset, a former employee filed a request, through her attorney, to view her personnel file just one week after she was discharged. The employer denied this request on the basis that the former employee was no longer employed.  The former employee filed a complaint with the Department of Labor and Industry claiming that the employer wrongfully denied her request for access to her personnel file. Ultimately, the Department granted the former employee’s request to inspect her personnel file.  The employer appealed to the Commonwealth Court.  On January 6, 2016, the Pennsylvania Commonwealth Court issued its decision in Thomas Jefferson University Hospitals, Inc. v. Pa. Department of Labor & Industry, finding a recently discharged employee, was still an “employee” under the Personnel Files Act.

While the definition of employee under the Act (any person currently employed, laid off with reemployment rights or on a leave of absence) appears straightforward, the Commonwealth Court found that the definition did not prohibit a recently terminated individual from obtaining his or her personnel file.  The Court did note that the request must be made contemporaneously with termination or within a reasonable time immediately following termination.  This rationale was based on the 1996 Commonwealth Court decision in Beitman v. Department of Labor & Industry.  In that case, an employee requested access to her personnel file 2 years after her employment was terminated.  The majority of the Commonwealth Court found that the former employee was not permitted to access her file under the Personnel Files Act 2 years after her termination from employment.  However, the Court left open the possibility that discharged employees could access their personnel file when they requested access within a reasonable time following their termination from employment.

Following the Beitman case, the Pennsylvania Department of Labor & Industry adopted a policy that provided former employees access to their personnel files so long as they made the request within a reasonable time after termination from employment, which they determined to be approximately 30 days.  Because of this policy, employers were often required to provide former employees with access to their personnel files even after their termination from employment.

This was the background leading up to the Supreme Court’s decision.   The Supreme Court’s full opinion can be found here.

In contrast to the Commonwealth Court, the Supreme Court took a plain language approach in interpreting the definition of “employee.”  In doing so, the Supreme Court concluded that former employees who were not laid off with re-employment rights and who were not on a leave of absence, have no right to access their personnel file under the Act, regardless of how soon after termination the employee made the request.  The Supreme Court also specifically overruled the Beitman decision stating that the Commonwealth Court’s holding was dicta and not controlling.

While the Supreme Court’s decision is favorable to employers, this a good time to remember the importance of including proper documentation in personnel files. A well-documented personnel file that persuasively demonstrates that an employee was discharged for legitimate, nondiscriminatory reasons will go a long way in supporting an employer’s defenses to a former employee’s legal claims.  After all, while a former employee may not be able to review his or her record pursuant to the Act, he or she may be able to obtain a copy pursuant to a subpoena or discovery request in litigation.

Prior to June 20, 2017, a powerful tool was available to employers and workers’ compensation carriers to cap exposure on long term workers’ compensation claims.  That tool, provided by the Act 44 amendments in 1996, was called an impairment rating evaluation (IRE) and generally worked like this: once a claimant had received 104 weeks of total disability benefits and had reached maximum medical improvement, the employer could request an IRE.  A doctor was assigned to perform the evaluation and was required by statute to consult the most recent version of the American Medical Association’s guidelines.  If, under those guidelines, the IRE doctor determined that the claimant’s injury caused less than 50% whole body impairment, the employee’s workers’ compensation benefits could be modified from total to partial disability status, with a corresponding time limitation on future indemnity benefits.  The process was helpful in resolving serious injury cases, where the employee was too disabled to work but had reached a medical plateau.

Pennsylvania workers’ compensation law places no cap on the length of time in which a claimant can receive total disability benefits.  Partial disability benefits, however, are capped at 500 weeks.  Thus, via the IRE process, it was possible to prevent a claimant from receiving total disability benefits indefinitely by modifying their status to a maximum of 500 weeks of partial disability benefits.

On June 20, 2017, the Pennsylvania Supreme Court changed all of this with its decision in Protz v. Workers’ Compensation Appeal Board.  In that case, the Court held that the IRE process was unconstitutional because the legislature is not permitted to delegate its authority to issue impairment rating guidelines to a non-legislative body (i.e. the American Medical Association).  Since the IRE provisions are legislated to be applied under the most current version of the American Medical Association guidelines (which are frequently updated), the Supreme Court struck down the IRE provisions of Pennsylvania’s Workers’ Compensation Act as an unconstitutional delegation of legislative authority.

The immediate impact of Protz on future claims is clear – unless the Pennsylvania Supreme Court reconsiders and reverses its decision, the IRE process is no longer available to employers and workers’ compensation insurance carriers.  This means that it will be considerably more difficult to cap exposure on workers’ compensation claims where an employee has received 104 weeks of temporary total disability benefits and has reached maximum medical improvement.  Indeed, a reversion to the use of vocational experts to establish job availability is likely, where light duty work at the time-of-injury employer is not available.  For claims where the IRE process was used prior to the court’s decision in Protz, outcomes are less clear.

Employers who are litigating a modification of benefits based on an IRE would do well to withdraw the modification petition.  Now that the IRE process has been deemed unconstitutional by the Pennsylvania Supreme Court, an IRE can no longer serve as a valid basis for future modification of benefits.  Without a valid basis to litigate a modification petition, employers who continue to rely on an IRE in litigation are exposed to penalties and unreasonable contest fees.

Likewise, employers who are actively seeking to obtain an IRE should refrain from doing so.  Again, the evaluation cannot provide a valid basis for modification of benefits, and the Bureau of Workers’ Compensation has also indicated that it will no longer assign IRE physicians in the wake of Protz.

So what about claims where benefits have been modified or a claimant’s status has been changed as the result of a past IRE where the claimant failed to appeal?  Employers likely have no affirmative obligation to restore the pre-IRE, pre-modification status quo, but claimants may file petitions seeking to do just that.  While Pennsylvania law typically prevents the retroactive application of judicial decisions to matters that have been fully and finally determined, it is unclear how workers’ compensation judges, the Appeal Board, and Pennsylvania Courts will approach the issue. In cases where an employer obtained a modification of benefits because of an IRE and the claimant did not appeal, the doctrine of res judicata may serve to prevent re-litigation of the case.

We will continue to monitor the status and impact of Protz; additional developments will be reported here on our blog.

In September of 2015, two delivery drivers filed a class action lawsuit in the United States District Court for the Middle District of Pennsylvania. The employees alleged that their former employer violated the Fair Labor Standards Act by failing to pay them overtime between 2012 and 2015. The class subsequently ballooned to 474 members (and an additional 588 former and current delivery drivers remain eligible to opt into the class). The members asserted that over that three year period, the employer denied them overtime for five to ten hours per workweek, totaling over $10 million in allegedly unpaid wages.

The employer initially argued that the employees were exempt from overtime requirements. It claimed that in addition to making deliveries, as “Route Sales Professionals,” the drivers could make additional sales, fill orders, and upsell when making deliveries. Therefore, according to the employer, the drivers fell within the FLSA’s “outside sales person” exemption. The drivers maintained that sales were not part of their job duties; they were simply delivery drivers who did not fit within the outside sales exemption.

After two years of discovery, in April of this year, the parties notified the court that they had reached a settlement agreement. They asked the court to approve agreement, as is required with both FLSA claims and class actions lawsuits.

The amount: $2.5 million.

This month, the court approved the FLSA settlement. It also preliminarily granted approval of the class action settlement, subject only to a fairness hearing scheduled for September.

For our blog subscribers that have delivery drivers who also engage in incidental sales, now is the time to reevaluate how you classify those employees. In addition, this case serves as an important reminder for all employers that FLSA classifications turn on the actual job duties of the position, not the job title. In fact, a written job description will not even be controlling, unless it is an accurate reflection of the employee’s job duties.