As we enter the traditional "dog days" of summer, the world of labor and employment law remains active.  Here are are some highlights of important and interesting news this week:

1.   Furloughs

Although there is some indication the recession is easing, many employers remain concerned about the economy.    Pay reductions and temporary furloughs provide a means by which employers can manage payroll expense while still retaining valued employees.   As we discussed in this post a couple of months ago, however, it is important to plan ahead and understand how the wage and hour laws impact your ability to use furloughs with certain types of employees.  To help employers comply with the wage and hours laws as they relate to furloughs, the Department of Labor Wage and Hour Division recently issued a memo containing many of the frequently asked questions posed to the Division.  The memo is available on the DOL website, or can be accessed here.

Employers are urged to access the DOL memo or consult with counsel before implementing any kind of furlough program, particularly if it involves exempt employees.

(Hat tip: Florida Employment and Immigration Law Blog)

2.  Other Wage and Hour Issues in the News

Speaking of wage and hour problems, the convenience store chain QuikTrip, which has a substantial presence in Iowa, recently agreed to pay 3,800 employees approximately $750,000 in back pay.   A Department of Labor Investigation revealed that the employees had not been paid an overtime premium that was due on certain performance related bonuses.  QuikTrip blamed a computer glitch for the error.  Details of the story can be found here.  

Lesson: it might be wise to audit payroll systems from time to time to ensure your employee records and payroll systems are up to date and accurate.

3.  Proposed EFCA Compromise Is Still Bad News for Employers

As a means of garnering the support of some reluctant Senators, promoters of EFCA have proposed removing the "card check" provision in law the law that would have permitted union certification without a secret ballot election.   For a discussion of the current state of EFCA, including the recently proposed compromise, see Justin Wilson’s post here.  However, even in its compromise form, EFCA is still a bad deal.   Even though union interests may be willing to give up on card check, at least for now, they still are demanding the opportunity to hold an election in a shorter period of time after a petition is filed with the National Labor Relations Board than is currently available.   That means employers will have less time to provide information to their employees in response to a union campaign.  Moreover, the binding arbitration requirements of EFCA remain in the compromise legislation, which will provide an incentive for union negotiators not to compromise during the early phases of a negotiations, with the expectation an arbitrator will grant more union demands than would have been granted as part of a good faith negotiating.

 

 

Earlier this year, we identified the Amendments to the ADA–known as the "ADAAA" –as one of the top human resources challenges of 2009.   The amendments became effective January 1, 2009.   One of the most significant changes in the new law as compared to the old ADA concerns the definition of "disability".   One of Congress intentions in the ADAAA was to overrule several U.S. Supreme Court cases which had interpreted the meaning of "disability" in a narrow way.   The Court’s interpretation of "disability" under the old ADA caused many plaintiffs to have their discrimination suits dismissed because they were deemed as not having a disability.  Under the new law, most lawyers believe it will be much easier for a plaintiff to qualify as disabled.

One question that remained unanswered when the law became effective was whether the new definition of disability applied to alleged acts of discrimination that occurred before January 1, 2009. 

Two U.S. Circuit Courts of Appeal have now answered that question: the Fifth and D.C. Circuits.  In both cases, the courts held the ADAAA was not retroactive, and therefore applied only to alleged discrimination occurring after January 1, 2009.   Thus, for the cases based upon alleged discrimination before that date, the old standards still apply.  While other Circuits, including the Eighth, have not weighed in on this subject, it is doubtful any court will apply the law retroactively.    Unless Congress expressly mandates retroactive application of a law, which it did not in the case of the ADAAA, there is a presumption that it applies only to events that occur after the law becomes effective.    

In addition to decisions on this issue from the courts, it will be wise to keep track of the EEOC’s new rules interpreting the ADAAA, which are still being developed.  The EEOC takes the position that the law itself is not retroactive, but it may contend that its regulations interpreting the law will be retroactive to January 1, 2009.  Because courts often defer to the EEOC’s interpretation the anti-discrimination laws, the EEOC’s rules are important to monitor.

We will keep you posted on decisions from other Circuits, as well as developments in the EEOC, addressing this important issue.

Hat Tip:  World of Work

There is an interesting debate occurring in the legal blogosphere concerning LinkedIn, a popular business social networking site.   It started with an article a couple of weeks ago in the National Law Journal, where management side lawyers were quoted giving warnings about the dangers of  using LinkedIn to provide recommendations to current or former employees.   The concern is that a terminated employee may use favorable recommendations on LinkedIn as evidence that the employer’s stated reason for termination–poor performance–is merely a pretext for discrimination, retaliation, or harassment.

Two posts appearing yesterday take an opposing view.   Daniel Schwartz (Connecticut Employment Law Blog) and Molly DiBianca (Delaware Employment Law Blog) downplay the danger to employers of LinkedIn recommendations.  Dan contends the warnings of management side lawyers are overblown, while Molly argues that news stories such as appeared in the National Law Journal are simply propaganda.

With all due respect to my colleagues in Connecticut and Delaware, in my judgment, employers should be concerned about their managers communicating about an employee on LinkedIn.  It’s easy to argue in the abstract that statements on social networking sites are no big deal, but as a practical matter, any communications concerning employee performance, regardless of the media, are potential evidence in a lawsuit.  The unfortunate reality is that many people, including managers or supervisors who probably should know better, tend to be careless when communicating through electronic media, whether that media is text messaging, e-mail, or social networking sites.   Employee lawsuits are a fact of life in today’s world, but many of them go away, either through a relatively inexpensive settlement or a dismissal via summary judgment.  What most employers really fear is the suit that is not settled, survives summary judgment, and must be tried to a jury.   A careless recommendation on LinkedIn is just the sort of evidence that can generate a genuine factual dispute in a case and make it more risky and expensive than it otherwise would have been.

This is an important discussion because social networking remains a relatively new phenomenon that the law has not yet caught up with.    We welcome more comments and debate on this issue.

 The National Law Journal reports today that text messages are becoming a growing liability concern for employers.    Offensive and inappropriate texts are increasingly being used as evidence in sexual harassment cases.  According to the article, the main culprit is male bosses sending scandalous messages to female subordinates asking them on dates or making promises in return for sexual favors.    What used to be a "he said she said" case can now be proved with electronic evidence.

What is an employer to do?   First, it is important to note that a bona fide sexual harassment reporting procedure is still the best defense against these kinds of claims.   Once there is a report of harassment, it is important to conduct a thorough investigation, including obtaining copies of the offending texts in question.  Text messaging also raises e-discovery concerns.   Whether an employer has unfettered access to text messages may depend upon who owns or pays for the mobile phone where the texts were received or sent. 

[Hat Tip: Workplace Prof Blog]

Between a busy trial schedule and the other distractions of summer, we have been a little delinquent in keeping you up to date during the past couple of weeks.  We apologize for the inactivity on the blog, as there have been many developments in the employment law world since our last posting at the end of June.   The following is a brief summary of four of the more interesting and important current events:

1.  Ricci v. DeStefano. 

The Supreme Court issued its opinion on June 29.   This is a significant case dealing with the sensitive and controversial issue of reverse discrimination.   The case is notable not only for the subject matter, but because Sonia Sotomayor, whose Senate confirmation hearings are now underway, was one of the judges on the Second Circuit Court of Appeals who decided the case below.  

The case was about firefighers in New Haven, Connecticut who applied to be on the promotion list for captain and lieutenant positions.   A candidate’s rank on the list was determined by process that included written and oral exams.    After the testing process, only white and Hispanic candidates qualified for a promotion to captain, and only white candidates for lieutenant.   The City’s Civil Service Board refused to certify the test results because it would result in no black candidates being eligible for promotion. 

The Ricci case presents a clash between two types of discrimination, disparate treatment and disparate impact.  Disparate treatment is intentional discrimination based upon race or some other legally protected classification.  Disparate impact, on the other hand, is not necessarily intentional discrimination, but occurs when job criteria that are neutral on their face have an adverse impact on certain groups.   In this case, the black firefighters contended the testing process was discriminatory because it resulted in no black candidates qualifying for the promotions list.     The City’s defense in the lawsuit brought by the white firefighters was that it could not certify the list because if it did, it would be subject to disparate impact liability.   In other words, the City did not believe it could promote only white candidates because it would be sued by the non-white candidates who did not qualify for promotion.

The Supreme Court held it was unlawful for the City to refuse to certify the results of the promotional exam based solely upon the relative racial make-up of the candidates who qualified versus those who did not qualify.  The Court sympathzed with the City’s position that it would be liable for disparate impact discrimination if the test results had been certified.  However, Justice Kennedy, writing for a 5-4 majority, held that, at least in this case, such concerns did not justify denying promotions to candiates who had the highest scores because no black candidates were in that group.   

Is is ever permissible to make an employment decision based upon an employee’s race because of the fear of disparate impact liability to persons of another race?  The Court concluded such a decision would be permissible only if there is a  "strong basis in evidence" it would be subject to disparate impact liability.  In the Ricci case, the Court concluded, the evidence showed the City had taken great care to ensure its testing process was free from discriminatory impact and reasonably related to the jobs for which it tested.  Therefore, there was insufficient basis for the City to conclude its tests had an unlawful disparate impact.

For detailed discussion, analysis, and contrasting arguments on the Ricci case, I recommend the following posts:  First, for a local flavor, Connecticut Employment Law Blog provides a good summary of the lessons to be learned from the case.   Employee rights attorney Ellen Simon opines at Employee Rights Post that the Ricci decision was not only wrongly decided, but is bad for both employers and employees.  Finally, for an analysis without the rhetoric, try SCOTUSblog.

2.   Employers and Social Networking

Facebook, Linked In, and other social networking sites have exploded in popularity in recent years.  Are employers entitled to make employment decisions based upon information an employee posts on the internet outside of work time?  Should an employer allow or even encourage employees to use the social networking on the internet? 

For a detailed analysis of some of the issues surrounding social networking, I recommend the following:

  • In "The Voice", a weekly publication of the Defense Research Institute, attorney Helen Adams writes about the employment implications of "Doocing", a new slang word to describe terminations based upon an employee’s activities on the internet. 
  • The Delaware Employment Law Blog discusses reasons employers should have a policy covering social networking sites.   
  •   The National Law Journal reports that some management side lawyers have warned about the use of Linked In to make recommendations of employees, for fear it will be used against the employee in the event  of a termination.
  • Locally, The Des Moines Register reported on the case of a police officer who was asked to resign because of photographs she posted on Myspace. 

Suffice it to say that social networking is not going away any time soon, and employers would be well advised to develop practices and policies for dealing with its impact on the workplace. 

3.  Al Franken Certified as the Winner of the Senate Race in Minnesota

This is imporant because Mr. Franken becomes the 60th Democratic Senator, giving the party a filibuster proof majority.   The Senate thus constituted is in a better position to pass EFCA, or the so-called "Employee Free Choice Act."  EFCA would have a substantial impact on labor law in the United States and present many challenges for employers.  I recommend the the blog at Laborpains.org to keep track of the latest developments on EFCA and other labor union matters.

4.  WARN Act

The WSJ Law Blog notes that litigation relating to layoffs is heating up, particularly under the heretofore seldom utilized WARN Act.  WARN requires employers under certain circumstances to provide at least 60 days notice of plant shutdowns or significant layoffs.   A violation means the employer has to pay wages to the laid off employees for the sixty period, plus other potential penalties.   However, the fact that the downturn occurred so swiftly and is protracted  may provide a defense to a WARN Act claims.

Stay Cool!

On June 18 the United States Supreme Court issued its opinion in the case of Gross v. FBL Financial Services, an age discrimination case arising out of Iowa.   We first reported on the Gross case when the Court heard arguments a couple of months ago.   Since the decision was issued, many commentators have opined that the ruling was a "win" for employers because it will make it more difficult for employees to prove age bias. 

This case presents a fairly typical age discrimination claim: the plaintiff, Jack Gross, was a 54 old middle manager who reassigned as part of a reorganization and replaced by a younger employee he used to supervise.  Although his pay was not reduced, Gross nonetheless believed his new assignment was a demotion, and filed a lawsuit alleging age discrimination.  The case was tried in the U.S. District Court for the Southern District of Iowa.  The jury found Gross was a victim of age discrimination and awarded him $47,000 in damages.

The trial judge gave the jury a "mixed motive" instruction.  That means there was evidence the employment decision was motivated by both permissible and impermissible factors.   If the plaintiff proved that age was a motivating factor in the decision to demote him, the burden shifted to the employer to prove it would have taken the same action "regardless of age"; that is, the other factors that motivated the decision would have resulted in the same action despite the plaintiff’s age.

FBL appealed the verdict to the U.S. Court of Appeals for the Eighth Circuit.  The Circuit Court decided that the trial judged erred in his instructions to the jury, and returned the case for a new trial.   The Eighth Circuit held the court should not have imposed upon FBL the burden of proving the "same decision", because Gross did not have "direct evidence" of discrimination.  "Direct evidence" generally means statements or actions by the relevant decision makers that tend to show in a direct way the decision maker is biased.  In Gross’ case, he had no such direct evidence of discrimination, and so relied entirely upon circumstantial evidence.  In a case lacking direct evidence of discrimination, the Circuit court held that, the burden of proving age discrimination should have remained with the plaintiff, rather than shifting the burden to the employer to prove that factors other than age prevailed in the decision making process.

The issue presented to the Supreme Court was whether a plaintiff must present direct evidence of discrimination in order to obtain a mixed motive instruction in an age discrimination case.    However, Justice Thomas, writing for a 5-4 majority, did not ever address that particular question.  Rather, the Court concluded the text of the Age Discrimination in Employment Act (ADEA)  does not permit an employer to be liable based upon a "mixed motive".   In other words, it is never sufficient for a plaintiff to prove simply that age was a motivating factor; rather the plaintiff in an ADEA claim must prove the adverse action occurred "because of" age-it must be the motivating factor.   Moreover, the burden of proving discrimination always rests with the plaintiff; it does not shift to the employer.

 The case will now return to the U.S. District Court for the Southern District of Iowa for another trial.  This time, the jury will be instructed consistent with the standard articulated by the U.S. Supreme Court.    It may be more difficult for Jack Gross to prove his age was the motivating factor his his new assignment, rather than simply a motivating factor.  This one word change in the jury instruction, combined with the employer having no burden to prove the same decision defense, should make it easier for employers to prevail in age cases, particularly at trial, but perhaps also at the summary judgment stage.  Trial courts are likely to require plaintiffs to present both more and stronger proof of discrimination to clear the summary judgment hurdle.

What doe the future hold for ADEA cases?   It is possible Congress will step in an amend the ADEA to bring back the mixed motive instruction.   That is precisely what Congress has done in the past to remedy Court decisions it deemed unfair to employees.   As noted in prior posts, the present Congress and President have been particularly active in enacting new employment laws to protect employees, and thus it would not be surprising to see Congressional action in the wake of the Gross decision.  

We will continue to monitor developments in this area and keep you posted. 

A recent study of Iowa employers revealed that 51 percent offered some type of health screening to their employees.  Many companies also offer other "wellness" benefits to encourage employees to exercise and adopt healthy lifestyles.   The wellness program of a prominent Des Moines employer was recently profiled in the Des Moines Register (link here). 

Company wellness programs present many benefits for employers and employees, including increased productivity and lower health costs.   Like other benefits, however, there are limitations and restrictions about what can be offered without running afoul of federal and state laws governing health insurance, benefit plans, and discrimination. 

First is the Health Insurance Portability and Accountability Act (HIPAA), which prohibits denying an employee eligibility or charging higher premiums to individuals based upon eight health factors, including health status, medical condition (including both physical and mental illnesses), claims experience, receipt of health care, medical history, genetic information, evidence of insurability (including conditions arising out of acts of domestic violence), and disability.   A summary of the Department of Labor’s Guidelines concerning application of HIPAA to wellness programs is here.

In addition, to the extent a wellness program provides rewards to employees (such as reduced health insurance premiums, deductible waivers, etc.), the plan should  be carefully tailored so as to reward participation, and not results.   Some of the criteria for evaluating whether a wellness program is bona fide under the HIPAA regulations include the following:

  1. The cost of the wellness program mustn’t exceed 20% of the cost of coverage under the group health plan. When calculating the 20%, you must include all of the plan’s wellness programs that require individuals to meet a health-related standard.
  2. The program must be reasonably designed to promote health or prevent disease.
  3. Individuals must have a chance to qualify for the reward at least once a year.
  4. The reward must be available to all similarly situated individuals and must provide a reasonable alternative standard for obtaining the reward for individuals for whom it’s unreasonably difficult to satisfy the standard because of a medical condition.
  5. All group health plan materials that describe the wellness program must disclose the availability of a reasonable alternative standard.

Other laws that may impact wellness programs include the Employee Retirement Income and Security Act (ERISA), which governs employee benefit plans, and the Americans with Disabilities Act (ADA).   For example, the ADA prohibits an employer from inquiring about medical conditions unless the inquiry is job related and a business necessity.   Any information gathered in connection with a wellness program must be truly voluntary to meet ADA requirements, and must be done in a manner so as to preserve the confidentiality of the information and prevent it from being relied upon to make employment or benefit decisions.  Finally, employers are required to offer reasonable accommodation to employees who cannot participate in any aspect of a wellness program because of a disability.

As with many employment decisions, it is wise to consult counsel to ensure your company’s wellness program complies with applicable laws and regulations.

Many businesses in Iowa and elsewhere continue to experience slack demand, lower revenue, and low to non-existent profits.   Economic indicators in Iowa continue to sink.   As a means of trimming payroll expenses while avoiding long term or permanent lay-offs of employees, many employers are looking to voluntary or even mandatory unpaid furloughs.  

Employers should be cautious when implementing an employee  furlough program, particularly when it involves furloughs of professional or administrative employees who are paid a set salary regardless of the number of hours worked.   Such employees are considered "exempt" under the federal Fair Labor Standards Act (FLSA) because they are not entilted to overtime in the event they work more than forty hours per week.   On the other hand, if such an employee works less than forty hours per week because of reductions in business, the employer’s right to pay the employee less than his or her regular salary is limited.   

A recent opinion from the Department of Labor purports to clarify when an employer may deduct from an exempt employee’s salary because of time off work.   Generally speaking, an employer that requires exempt employees to take mandatory furloughs cannot reduce the employee’s pay unless the furlough last at least one week.   Exempt employees who are required to take furloughs of less than one week are still entitled to receive their full salary.  

If the employee’s leave of less than one week is truly voluntary, his or her salary may be reduced by an amount proportionate to the time off work (i.e. if the employee takes one day off, the salary paid can be 4/5 of the regular salary).  However, the employee must be off work a minimum of one full day.  In other words, if the exempt employee works part of the day and is off the rest, the employer may not reduce the employee’s salary to account for the time off.    It is also critical to note that the employee must be completely free of any obligation to work on the day off–even a requirement to check voice mail or e-mail may trigger the employer’s obligation to pay the full salary.

The Department of Labor has promulgated rules on this subject, but the rules are complex and sometimes difficult to understand.  Employers are advised to seek counsel before making furlough decisions about exempt employees.

Much ink has been spilled over the last week analyzing the background and record of Judge Sonia Sotomayor, the nominee to replace Justice David Souter on the United States Supreme Court.    Given that the Supreme Court’s docket has included a large number of employment related cases in recent years, a record which is likely to continue given the many changes to the federal employment laws under the Obama administration, how will a Justice Sotomayor potentially affect the jurisprudence in this area?

Judge Sotomayor has served as a judge on the U.S. Court of Appeals for the Second Circuit since 1998, and before that was a U.S. District Court judge in New York.   In one of her most notable cases as a trial court judge, Judge Sotomayor issued an injunction which prevented the Major League Baseball owners from using replacement players during the 1995 season.   

More recently, Judge Sotomayor was part of a three judge panel of the Second Circuit that issued a controversial opinion in the case of Ricci v. DeStefano ,a case which ultimately was appealed to the U.S Supreme Court.    Ricci involves a claim of reverse discrimination by a group of firefighters in New Haven, Connecticut, seventeen of whom are white and one who is Hispanic.    Based upon the results of written and oral promotional exams, only white and Hispanic candidates qualified for promotion to the position of Captain, and only white candidates qualified for promotion to Lieutenant.   Because no black candidate had a high enough score to be considered for the available captain and lieutenant positions, the City’s Civil Service Board refused to certify the results of the exam, which prevented the promotions from occurring.  The trial court found that the City’s refusal to allow the promotions did not constitute race discrimination, and granted summary judgment to the City (a thorough discussion of the decision is reported at Connecticut Employment Law Blog). 

The three judge panel on which Judge Sotomayor sat issued a short opinion affirming the trial court, but did not analyze any of the substantive issues.    Notably, another judge on the Second Circuit was critical of the panel for failing to address the important constitutional claims at issue in the case, stating that "this perfunctory disposition rests uneasily with the weighty issues presented by this appeal."    At least one critic has opined that Judge Sotomayor’s apparent refusal to weigh in on this important issue of civil rights law does not make her a jurist worthy of serious consideration for the Supreme Court. 

Judge Sotomayor certainly has a compelling personal story, and she may have empathy, but it remains to be seen whether she will make positive contributions to the development of employment law.   Stay tuned.

 

 

 

Conventional wisdom in the world of layoffs and reductions in force has held that older workers are more at risk for layoff because they generally earn higher salaries than their younger colleagues.  However, in this downturn, employers’ concern about the high cost of age bias claims may have put the jobs of younger workers more at risk. According to recent Department of Labor figures, the unemployment rate among the 24-35 age group was 9.7% in April 2009, compared with a rate of 6.4% for workers over age 55.   One year ago, those figures were 5.1% and 3.1% respectively. 

The federal Age Discrimination in Employment Act (ADEA) prohibits an employer from treating employees over the age of forty less favorably than younger employees because of their age.   To effectively defend against a claim of age bias, an employer making a lay off decision must rely upon non-age related criteria.   Using compensation as a factor is generally not advisable because pay selecting higher paid employees for lay off will generally result in more workers over forty being in the lay off pool.    For better or for worse, it appears many employers have concluded it is easier to defend an age bias claim when the last employees hired are the first ones who are let go as part of a reduction in force.

Age bias claims are little more complicated under Iowa law.  The Iowa Civil Rights Act protects any employee from age discrimination who is 18 or older.    Therefore, under Iowa law, employers must be especially vigilant to avoid using factors that are related to age when making lay off decisions–whether the age is younger or older.  

According to a recent Wall Street Journal Article ("With Jobs Scarce, Age Becomes an Issue"), older employees might also be favored because of personal circumstances that are not likely to affect as many  younger, single employees, such as children in college or a spouse’s health problems. Another potential factor favoring older employees, as discussed in a a recent post here, is that the EEOC has recently issued guidelines for avoiding discrimination against employees who are caregivers.

To avoid age bias claims, or at least make them more defensible, employers may want to consider some of the following criteria when identifying employees for lay off:

1.  Use as many objective criteria as possible when evaluating employees;

2.  Avoid using salary or benefit levels as a criteria; some courts have held that the use of such criteria creates an inference of age discrimination;

3.   If performance criteria are used, determine whether existing performance data is current and relevant; consider risks and benefits of updating performance evaluations (e.g., a sudden downward change in performance might be viewed as a pretext for age discrimination)

 4.  If performance reviews are updated prior to the RIF, it is better if the reviewing manager has little or no knowledge concerning the RIF;

 5.   Consider who will make the decisions based upon the established criteria;

 6.  Stick to the criteria;

 7.  Be aware of the presence in the RIF group of “whistle-blowers” or persons about to vest pension or retiree health benefits;

 8.  Consider obligations under collective bargaining agreement or seniority system;

 9.  Consider whether “bumping” will be permitted, and if so, how it will be administered.