General Counsel, P.C. — August 16, 2011 Corporate Counselor

August 16, 2011

Some Common Issues with Separation Pay Plans

Clients often ask us if there are any legal issues if their separation pay plans (often referred to as severance plans) extend payments beyond an employee’s termination date.  Such plans may raise potential ERISA (the Employee Retirement Income Security Act) and 409A (IRS regulations relating to non-qualified deferred compensation plans) issues to the extent that they give rise to an employee receiving a legally binding right to receive payments after the year in which the related services are performed.

ERISA

Any severance plan that requires ongoing administration for the payment of benefits (i.e., any plan that provides for more than a lump sum payment) is likely subject to ERISA (see Fort Halifax Packing Co., Inc. v. Coyne, 481 US 1 (1987)).  Even if a client does not intend for a severance plan to be an ERISA plan, it may become a “de facto plan” or an ERISA-governed plan.  For most of our smaller clients, we advise structuring severance plans to limit ERISA liability rather than adopt a formal ERISA plan and following burdensome ERISA requirements.  Suggested steps include:

  • Limit your severance plan so that it only applies to executive employees pursuant to written employment agreements.
  • To the extent that you offer severance payments to other employees (even if it is only a week or two of pay), do not alter the benefits you pay to various employees.  If you historically paid two weeks severance, don’t begin limiting those payments to newly terminated employees.  Also, you should treat all similarly situated employees the same, regardless of the reason for termination.
  • To the extent possible, limit severance to fixed dollar amounts paid automatically (make it as simple as possible).
  • Limit all severance payments to two times the final rate of annual pay.
  • Limit all severance periods to no more than 24 months from termination.
  • Make sure all employees receiving severance execute a global release, including a release from ERISA claims.

For clients with a large number of employees subject to a severance plan (particularly 100 or more), or for clients who plan on terminating a large number of employees, we advise that such clients put significant thought into adopting a formal plan that meets all applicable ERISA requirements.

409A

Treas. Reg. Sec. 1.409A-1(b)(9)(iii) specifically exempts, “A separation pay plan that […] provides for separation pay only upon an involuntary separation from service.”  So, if severance is payable only if the employee’s employment is terminated by the company (with or without cause) (an involuntary termination), it is exempt.

If severance is also payable if the employee terminates employment (a voluntary termination), then it is not exempt from 409A unless termination is pursuant to a window program meeting certain dollar limit and timing restrictions (think a voluntary early retirement plan) (see Treas. Reg. Sec. 1.409A-1(b)(9)(iii)), or if the voluntary termination is for “good reason” (see Treas. Reg. Sec. 1.409A-1(n)(2)).   “Good reason” must be defined to require actions taken by the company resulting in a “material negative change” to the employee, such as a change in, “the duties to be performed, the conditions under which such duties are to be performed, or the compensation to be received for performing such services.”  The payments should also be similar to the payment received upon an involuntary termination, and the employee should also be required to give the company notice of the good reasons (within 90 days of occurrence) and a reasonable opportunity to cure (at least 30 days).

Exception:  Pursuant to Treas. Reg. Sec. 1.409A-1(b)(9)(i), If the severance plan acts as a substitute for, or replacement of, amounts deferred by the company under a separate non-qualified deferred compensation plan, it will not be able to take advantage of these exemptions.  For example, if an employee loses his right to deferred compensation upon termination employment but instead severance payments, the severance payments may be construed as an acceleration of the deferred compensation.   This can easily be overcome if the severance payments stay in effect even after the deferred compensation vests on its own.

In summary, severance arrangements that are typically included in executive employment agreement can be drafted to meet the exemptions from 409A so long as they are carefully tailored to comply with the requirements set forth above.  Careful attention must be paid to agreements that provide for severance payments upon a termination of employment by the employee.  409A issues can still be mitigated if the exemptions are not met, but doing so will require more detailed expert analysis of the particular severance plan.

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Posted by Kevin Learned

Supreme Court Decision Highlights Need for Robust Employee Communications Policies

June 21, 2010

The Supreme Court reached a 9-0 decision last week in City of Ontario v. Quon, finding that the defendant had not violated the Fourth Amendment when it searched the pager messages of its employee, because (1) the search was motivated by a legitimate work-related purpose, and (2) because it was not excessive in scope.

Although Quon involved a government-employer, which raises distinct Constitutional issues that are not present when a private-employer is involved, the Court’s opinion suggests that this standard may also be applicable outside of the government-employer context. In addressing some of the concerns voiced by Justice Scalia, Justice Kennedy, for the majority, stated that the standard used in Quon – that the “employer had a legitimate reason for the search, and that the search was not excessively intrusive in light of that justification” — indicated to the Court that the search “would be regarded as reasonable and normal in the private-employer context.”

Although this case will be an important precedent for private employers, because the Court declined to set forth broad rules governing the scope of the Fourth Amendment in the digital age, much of this area of law will remained unsettled. Still, there are important hints in the opinion for how private employers can best protect themselves.

The Court’s limited decision may have been influenced by the Electronic Frontier Foundation, who filed an amicus opinion in the case arguing that “[t]his Court accordingly should proceed with caution, and take care to limit its decision here to the specific factual situation before it. The Court’s ruling otherwise could have unjustified and unintended, but extremely significant, implications for the continued protection under the Fourth Amendment of Americans’ most private communications, which increasingly are conducted using these new technologies.” The Court acknowledged in its holding that a broad opinion was not warranted at this time:

[T]he Court would have difficulty predicting how employees’ privacy expectations will be shaped by those changes or the degree to which society will be prepared to recognize those expectations as reasonable. Cell phone and text message communications are so pervasive that some persons may consider them to be essential means or necessary instruments for self-expression, even self identification. That might strengthen the case for an expectation of privacy. On the other hand, the ubiquity of those devices has made them generally affordable, so one could counter that employees who need cell phones or similar devices for personal matters can purchase and pay for their own. And employer policies concerning communications will of course shape the reasonable expectations of their employees, especially to the extent that such policies are clearly communicated.

A broad holding concerning employees’ privacy expectations vis-à-vis employer-provided technological equipment might have implications for future cases that cannot be predicted. It is preferable to dispose of this case on narrower grounds.

Thus, while the Quon decision is a narrow one, there is a key lesson for employers here: an employer’s communications policy is of the utmost importance when it comes to determining whether or not an employee possesses a reasonable expectation of privacy. In Quon’s case,

Before acquiring the pagers, the City announced a Computer Usage, Internet and E-Mail Policy” (Computer Policy) that applied to all employees. Among other provisions, it specified that the City “reserves the right to monitor and log all network activity including e-mail and Internet use, with or without notice. Users should have no expectation of privacy or confidentiality when using these resources.” In March 2000, Quon signed a statement acknowledging that he had read and understood the Computer Policy.

Although the Computer Policy did not cover text messages by its explicit terms, the City made clear to employees, including Quon, that the City would treat text messages the same way as it treated e-mails. At an April 18, 2002, staff meeting at which Quon was present, Lieutenant Steven Duke, the OPD officer responsible for the City’s contract with Arch Wireless, told officers that messages sent on the pagers “are considered e-mail messages. This means that [text] messages would fall under the City’s policy as public information and [would be] eligible for auditing.”

The language of the employee communications policy in Quon was robust enough to prevail before the Supreme Court, although the employer’s case could have been even stronger had it taken care to enumerate all the communications methods that the policy covered. In light of Quon, here are the steps private employers should take in order to best protect their right to monitor work-place computer equipment:

(1) Have a robust employee communications policy in place, which disclaims any possible reasonable expectation of privacy in the communications conducted over employer-owned equipment;

(2) Make sure that all relevant communications mechanisms are covered by the policy, and, as communication methods evolve and change, regularly update your employees on how the communications policy applies in light of those changes;

(3) Have employees sign a release that affirmatively acknowledges that they have read and understood the employer’s communications policy; and,

(4) Employers should actually abide by and follow the policy they have in place. If the policy is there for legal reasons, but not actually followed in the course of daily business operations, the protections afforded by the policy will be severely weakened.

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Posted by Susan Simpson

To Maintain Faragher and Ellerth Defense, Have Employees Affirmatively Acknowledge Receiving Anti-Harassment Training

May 12, 2010

The “Faragher and Ellerth” affirmative defense is available to employers facing hostile work environment claims (e.g., sexual harassment suits) for cases where a supervisor of the employer has not taken any “tangible employment actions” against the plaintiff-employee. (If the employer did take a tangible employment action — such as demoting the employee, cutting pay, or transferring the employee to a position with unbearable work conditions — the employer will be strictly liable and this defense is not available.)

Where an employee is claiming a supervisor has engaged in sexual harassment via unofficial acts, however, an employer can avoid liability by showing: (a) “the employer exercised reasonable care to prevent and correct promptly any sexually harassing behavior;” and (b) “the plaintiff employee unreasonably failed to take advantage of any protective or corrective opportunities provided by the employer or to avoid harm otherwise.” Burlington Industries, Inc. v. Ellerth, 524 U.S. 742 (1998); Faragher v. Boca Raton, 524 U.S. 775 (1998). This means that, for companies with anti-harassment policies that create reasonable methods for employees to report any harassment that does occur, the employer has an affirmative defense to any sexual harassment claim where the plaintiff failed to report the harassment.

The “Faragher and Ellerth” defense also applies to constructive discharge cases, where an employee has left their employment position as a reasonable response to the offending conduct they experienced at their place of employment. Pennsylvania State Police v. Suder, 124 S.Ct. 2342 (2004). This means that, even where the employee is not deliberately fired by the company, if the employee reasonably quit — i.e., was “constructively” fired — in response to the harassing conduct done by a supervisor acting as a company official, then the company remains strictly liable.

Under “Faragher and Ellerth,” then, employers can avoid costly liability by ensuring that they have well-written anti-harassment policies. That’s only part of the defense, however: a good anti-discrimination policy is no use if it exists in a void. In order to keep the Faragher and Ellerth defense available, employers should go the extra mile and ensure that their employees have actually seen, read, and understood the company’s policies — and that employers should require employees to sign an acknowledgment that they have received training and information in regards to such policies.

A case recently out of a district court in Tennessee has reaffirmed the need for employers to explicitly brief all non-supervisory employees about the employer’s anti-harassment policies. In Bishop v. Woodbury Clinical Laboratory, No. 3:08-cv-1032 (M.D. Tenn. 2010), an employer was unable to defend itself under the “Faragher and Ellerth” affirmative defense, because although the employer possessed an anti-harassment policy, and that policy had in fact been distributed to the employee alleging discrimination, the employee claimed she had not read or understood it. Accordingly, the employee could not effectively comply with the employer’s discrimination reporting procedures, and acted reasonably in not following them.

Reed v. MBNA Marketing, a case from the First Circuit, had a similar outcome. There, the Court of Appeals held that even though the company had reasonably promulgated anti-harassment policies and procedures, a question of fact still remained on whether or not the employee had acted unreasonably in failing to utilize those procedures.

In order to make sure your anti-harassment policy is one which employees can reasonably be expected to follow, here are some tips to keep in mind:

  • Do not specify conditional protection for employees who bring harassment complaints. Anti-harassment policies that prohibit retaliation or adverse action against employees who bring harassment complaints in “good faith” have a converse implication that the companies will allow for retaliation in “bad faith.” This implication can be found to reasonably discourage employees from reporting harassment complaints.
  • Give employees plenty of options for reporting complaints. Courts are inclined to allow employers to raise the “Faragher and Ellerth” defense where an employer’s policies provide alternative routes for reporting harassment problems, and have also rejected claims that such policies are unclear, because even if a single provision is unclear, other options are abundantly available.
  • Allow employees who are reporting discrimination to not only to bypass supervisors, but also to avoid the chain of command entirely by going straight to Human Resources.
  • Have anti-harassment policies include the names of contact persons as well as telephone numbers and e-mail addresses, and other means for making reporting easy. If possible, specify a contact for employees to go to with any questions they may have about proper reporting procedure.
  • Allow for redundancy in the complaint reporting process. Courts have approved of policies which specify that, if a problem is not resolved to an employee’s satisfaction by the person designated to receive such complaints, the employee should go to the next level of management.

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Posted by Susan Simpson

“Extended Premises” Can Extend Farther Than Employers Realize

April 19, 2010

In American Trucking Association v. Stallings, issued on Feb. 23, 2010, the Virginia Court of Appeals upheld a decision by the Workers’ Compensation Commission finding that an employee who is injured outside of an employer’s office building on her way in to work is eligible for compensation under the “extended premises” doctrine.

Stallings involved an employee who was injured from a slip on an icy sidewalk while returning to work from her lunch break. The fall occurred in an area that was not controlled or owned by her employer, but which an employee was necessarily required to traverse in order to reach the office space. Because the Court found that the employee was returning to her place of employment and was crossing an area she was rightfully allowed to pass through, the injury occurred on the employer’s extended premises.

An injury incurred while going to or from work is generally not compensable under Virginia’s Workers’ Compensation Act. However, there is an important exception to this rule under the “extended premises” doctrine. This means that if an employee is injured in a common area of her place of employment, such as “common stairs, elevators, lobbies, vestibules, concourses, hallways, walkways, ramps, footbridges, driveways, or passageways,” the injury does fall under the Workers’ Compensation Act. Whether or not the employer owns or maintains the portion of its extended premises where the accident occurred is irrelevant, so long as the employee as a right of passage over the area, or in the Court’s words, “something equivalent to an easement.”

In determining whether the extended premises doctrine covers a given location, courts look at whether the area is “in such proximity and relation as to be in practical effect a part of the employers’ premises.” Courts probably will find this standard to be satisfied where the area constitutes “an essential means of ingress and egress from the public right-of-way to [the employer's] place of business.”

While the most common scenario involves employees injured in the common areas of an office building which is owned and operated by a third party, there is no requirement that the injury occur on private premises for the employee to be eligible for workers’ compensation. Even if the slip-and-fall occurs on a public sidewalk outside of the office building’s entrance, if the employee was required to cross that portion of the sidewalk in order to access the building, the accident is likely to be covered.

The take-home message for employers: If an employee has no choice but to cross an area in order to reach your office, it doesn’t matter whether you own it or control it. That section is a part of your employment premises for purposes of Workers’ Compensation.

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Posted by Susan Simpson

The Impact of Health Care Reform on Employers

April 5, 2010

The heath care reform measures recently signed into law by signed by President Obama promise to have a significant impact on every American.  Because employer-provided health insurance and related tax incentives will remain an important part of the post-reform system, businesses should pay particular attention to the new rules

Below is a brief overview and summary of the key components of the health care reform legislation and how it may impact individuals and small businesses. In a broad sense, the legislation will:

  • Mandate that everyone must have insurance.
  • Provide for subsidized coverage for people that can’t afford it and increase the number of people that will qualify for Medicaid.
  • Make cuts to Medicare Advantage Plans and change their payment formula.
  • Make many changes to the way insurance companies do business from not allowing them to restrict coverage based on pre-existing conditions to limiting their rates based on medical loss ratios.

Specific changes that take effect this year include:

  • Tax credits for certain small businesses
  • Small businesses qualify for a 35% tax credit if they have 10 or fewer employees, and they earn less than $25,000/year on average.
  • Small businesses qualify for a smaller tax credit if they have 25 or fewer employees with an average wage of $50,000/year or less.
  • However, small businesses do not qualify for a tax credit if they have more than 25 employees; also, any employee who earns more than $80,000/year will be excluded from the credit.
    • In 90 days, the bill will enact a temporary reinsurance program that allows employers to provide coverage for employees over the age of 55 who are not eligible for Medicare.  Concurrently, the bill enacts a temporary high-risk insurance pool for individuals with pre-existing conditions that have not had insurance for at least six months.
      • Closing the so called “doughnut hole” by providing immediate tax credits for Medicare patients who face a gap in prescription drug coverage.
      • Creation of a temporary reinsurance program to provide coverage for retirees over 55 who are not eligible for Medicare.

Those changes that are expected to take effect in, or by, 2014 are:

  • Beginning in 2014, the maximum small business tax credit will increase to 50% of the cost of health insurance obtained through an Exchange. When determining the number of full-time employees for this purpose, all members of the employer’s controlled group are taken into account, and the aggregate hours of part-time employees are converted into full-time equivalents (based on service of 2,080 hours per year). After 2014, the credit may not be taken for more than two consecutive years, beginning with the first year in which the employer offers health insurance through the Exchange.
  • By no later than 2014, states will have to set up Small Business Health Options Programs, or “SHOP Exchanges,” where small businesses will be able to pool together to buy insurance, where small business is defined as 100 employees or less though states will have the option of limiting pools to companies with 50 or fewer employees.   
  • Starting in 2014, an employer that offers a group health plan must provide “free choice vouchers” for the purchase of health coverage through an Exchange to any employee who is eligible for a premium subsidy and whose required contribution to the employer’s plan would exceed 8%, but not exceed 9.8%, of his or her household income, in each case indexed for the rate of premium growth. The voucher must be for no less than the maximum amount that the employer would have contributed to provide group health care to the employee. If the voucher exceeds the health care premium under the Exchange, the employee may receive the difference in cash, subject to income taxes.
  • Starting in 2014, businesses with more than 50 employees will be required to either offer healthcare coverage or pay a penalty of $750 a year per full-time worker. 
  • Effective upon the issuance of implementing regulations, employers with more than 200 employees will have to automatically enroll full-time employees in health coverage. The legislation would allow employees to opt-out of the coverage after automatic enrollment.
    • Elimination of pre-existing conditions and an increase in dependent coverage to age 26
    • The legislation would also require that health plans that provide dependent coverage to provide it up to age 26. Under the modified legislation, this provision would apply to existing health plans in addition to new plans beginning six months after enactment. For coverage of these non-dependent children prior to 2014, the requirement on group health plans is limited to those adult children without an employer offer of coverage.

 Those changes that are expected to take effect after 2014 are:

  • Beginning in 2018, there would be an excise tax on any “excess benefit” of employer-sponsored coverage. The legislation defines “excess benefit” as one that exceeds $10,200 for individual coverage and $27,500 for family coverage. The thresholds would be indexed to inflation.

Businesses should consult with their insurance brokers, CPAs, and lawyers to determine how the post-reform health care system affects their particular situation.  Congress and the president likely will continue to tinker with additional changes and amendments, so businesses should continue to stay informed of how they should prepare and budget for health insurance in the future.

If you would like to discuss how these changes will affect your workplace, please contact Merritt Green or Jessica Kelty of General Counsel, P.C.’s Employment Practice Group.

Leave a Comment » | Employment Law, Taxation Law | Permalink
Posted by Brandon Okes

Severance Payments, FICA Taxes, and Possible Refunds

April 2, 2010

Has your business paid severance to employees within the last three tax years?  Did the business withhold FICA taxes on those severance payments?  If so, you may want to notify the IRS that your business is claiming a refund.

The federal tax code specifies that employers must withhold income taxes on most severance payments to employees.  Courts have been struggling for several years over whether employers must also withhold FICA taxes – the payroll taxes that cover Social Security and Medicare programs.

The IRS has taken the position that income taxes and FICA taxes are both due on severance payments.  Some taxpayers have disagreed and taken that disagreement to court.  The dispute centers on whether the reference to income taxes in the relevant section of the tax code (a) constitutes an exclusive list of required withholdings and thus employers should not also withhold FICA taxes from severance payments,  or (b) constitutes an example of required withholdings and thus employers are required to withhold FICA taxes from severance payments just as they would have withheld FICA taxes from regular salary payments.  The results of those cases have not been consistent.

THE COURT DECISIONS (SO FAR)

As of this writing, there are two relevant cases working their way through the courts.

In the first case, CSX Corp., Inc. v. United States (the “CSX case”), the U.S. Court of Federal Claims  found that severance payments were not subject to FICA tax.  The IRS appealed and the U.S. Court of Appeals for the Federal Circuit held that severance payments are subject to FICA tax.

In the second case, Quality Stores, Inc. v. United States (the “Quality Stores case”), the Bankruptcy Court for the Western District of Michigan found that severance payments are not subject to FICA tax and, on appeal, the U.S. District Court for the Western District of Michigan agreed (and expressly disagreed with the Federal Circuit’s logic in the CSX case).  The IRS is appealing the Quality Stores case to the U.S. Court of Appeals for the Sixth Circuit.

WHAT BUSINESSES SHOULD DO TODAY

If your business has paid severance since 2006, you should consider whether to file a request for a refund of FICA payments related to that severance.  Because the courts are clearly split, there is a significant chance that the end result will be a decision that FICA taxes are owed on the severance payments.  But you certainly will not receive a refund if you do not file a request for one.

Businesses may apply for a refund for any FICA taxes they paid on severance pay.  Because of a three year deadline, any request for a refund for severance payments that occurred during 2006 must be made by April 15, 2010.  The IRS has two options for handling the refund requests: it may defer any decision on the requests until the Quality Stores case reaches a final resolution or it may immediately reject the requests based on the decision in the CSX case.  If the IRS rejects the requests, then an applicant business will have to take court action within two years to attempt to have the court order the IRS to make the refund.

Thus, you must decide whether it is worth the time and expense of preparing a refund request given the uncertainty of success.

If you want to discuss these issues with a General Counsel, P.C. attorney and develop a strategy the works best for your business, please contact Merritt Green or Jessica Kelty of General Counsel, P.C.’s Employment Practice Group.

1 Comment | Employment Law, Taxation Law | Permalink
Posted by Brandon Okes

Tax Incentives to Hire the Unemployed

April 1, 2010

Continuing on our theme of incentive given to expanding businesses, today we draw your attention to the potential tax benefits of hiring unemployed workers.  The provisions were included in Congress’s HIRE Act, which was recently signed by President Obama.

For purposes of the incentives, unemployed workers are persons who have not worked more than 40 hours in the 60 days before being hired.  The reason the person has not been working is immaterial.  These incentives may not be used to hire relatives of the business owner and may not be used to replace employees laid off fewer than 60 days before the new hire is made.

The incentives have two parts.  The first is an immediate payroll tax exemption: during calendar year 2010, an employer will not pay their portion of the payroll taxes for any unemployed worker they hire.  The second part is a tax credit: if the employer retains the unemployed worker for a year, then the employer receives a $1,000 tax credit.

The IRS has a detailed set of questions and answers about the tax incentives.

As your business adds employees, keep these incentives in mind.  And, contact Jessica Kelty or Merritt Green of our Employment Practice Group to discuss other issues you should consider when bringing on employees.

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Posted by Brandon Okes

Employee Misconduct Does Not Including Failing to Agree to Unreasonable Employer Policies

March 25, 2010

With at-will employment, employers are within their rights to fire employees who fail to agree to company policies. This is true regardless of whether those policies are reasonable or unreasonable. The Virginia Court of Appeals recently decided, however, that although an employer may choose to terminate an employee who is unwilling to agree to an unreasonable policy, the employee’s refusal will not constitute “misconduct” so as to bar a claim for unemployment benefits.

In Williamson v. VEC (March 23, 2010), Plaintiff Williamson refused to sign his employers’ company vehicle policy. The policy went far beyond what a standard company vehicle policy might require, and contained a clause stipulating that employees would be bound by any company policies “that might be enacted in the future.”

Instead of agreeing to the policy as written, Williamson proposed his own policy to the employer, which was substantially similar in form and content, but clarified some of the parameters of when liability would be assigned, and removed the “future enacted policies” clause. His employer then promptly fired him, stating it was less due to any objections to the proposed policy and more to the fact that Williamson had thought he was entitled to write company policy himself. Williamson then tried to claim unemployment benefits, and the case was appealed up to the Court of Appeals.

Under Va. Code § 60.2-618(2)(a), unemployment benefits are not available to an employee who has lost their position “if the [Virginia Employment] Commission finds such individual is unemployed because he has been discharged for misconduct connected with his work.” Although purposeful violation of a company rule that is “reasonably designed to protect the [employer's] legitimate business interests” constitutes misconduct, the Court of Appeals found in this case that the policy the employer had instituted “far exceeded [the] employer’s interest in the operation of its vehicles.” It was therefore not a reasonable means of promoting any legitimate business interest, and it was not tantamount to misconduct to refuse to sign it.

As the Court stated, “The proposed policy further binds all employees to ‘any policies now in place or that might be enacted in the future.’ … One who agrees to abide by an undisclosed future policy as a condition of continued employment would be foolhardy.” Of course, the employer had not acted improperly by asking the employee to sign the foolhardy agreement, nor by firing the employee when he declined to do so; the employer simply could not claim that the termination had been for misconduct.

Leave a Comment » | Employment Law, Workers' Compensation | Permalink
Posted by Susan Simpson

The Rise Of “Twitigation?”

January 7, 2010

The blog for the Virginia Lawyers Weekly compiled a recent spate of lawsuits resulting from posts on the popular Twitter website.  Many of these lawsuits predictably concern allegations of libel, although employers need to consider how employee and manager/executive tweets can create problems in the workplace, affecting discrimination/harassment claims, the dissemination of proprietary information and trade secrets, and other problems.  The rise of online social media, as we have discussed previously here, may provide a fertile ground for lawsuits in 2010 and beyond, and employers should be quick to adopt policies to address these issues before issues arise.

Leave a Comment » | Civil Litigation, Employment Law | Permalink
Posted by merrittgreen

New Rule: Government Contractors Must Post Information On Employee NLRA Rights

December 24, 2009

Signaling a shift in how the Obama Administration intends to address labor issues, earlier this month the Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council have issued a new rule pursuant to Executive Order 13496 that directly rescinded Executive Order 13201 by former-President Bush.  Under the previous Order, government contractors were required to post a notice reminding workers of their rights regarding union dues and fees, and that workers could not be compelled to join a union or maintain union membership to keep their jobs.  The new Order requires that contractors post a notice that informs workers of their rights under the National Labor Relations Act, which ”encourages collective bargaining, allowing workers to freely associate, self-organize, and designate representatives of their own choosing for the purpose of negotiating the terms and conditions of their employment or other mutual aid or protection.”

Information about the new rule is here.  Some exceptions to the notice posting requirement include collective bargaining agreements, federal contracts below the simplified acquisition threshold of $100,000, and contracts issued by agencies or departments that the Secretary of Labor chooses to exempt.  The new poster from the Department of Labor is expected to be available in mid-2010.

Leave a Comment » | Administrative Law, Employment Law, Government Contracts | Permalink
Posted by merrittgreen

Many Military Contractors May No Longer Use Arbitration Clauses For Employment Disputes

December 22, 2009

The National Law Journal reports that tucked into the 2009-10 spending bill for the Department of Defense, signed last weekend by President Obama, is a provision that prohibits prime contractors for the military from forcing employees to agree to arbitration clauses in their employment contracts.  The article states: “Under §8116 of the bill, no money can go to a defense contractor unless the contractor agrees not to enter into or enforce any employment contract ‘that requires, as a condition of employment, that the employee or independent contractor agree to resolve through arbitration any claim under title VII of the Civil Rights Act of 1964,’ or many tort claims.”  The article adds: “In six months, the restrictions will apply also to subcontractors.  Contracts and subcontracts under $1 million are exempt from the provision.  The defense secretary or his deputy may also grant a waiver if doing so is ‘necessary to avoid harm to national security interests of the United States,’ though the waiver will become public.”

1 Comment | Employment Law, Government Contracts | Permalink
Posted by merrittgreen

AT&T Socked With Wage And Hour Class Action Suits

December 18, 2009

An article in The American Lawyer details new class-action lawsuits filed against AT&T for alleged wage-and-hour violations, in which AT&T allegedly classified thousands of employees as “first-level managers,” and accordingly classified them as exempt employees under federal wage laws who could not earn overtime, even though those employees did not have any actual managerial authority.

Although we do not speculate on the probability of success in that case, employers need to make sure they are not cutting any corners in abiding by federal and state wage laws, like the Fair Labor Standards Act.  Trying to classify non-exempt employees as exempt employees, classifying employees as independent contractors, and so on are common things that employers have done to try to cut payroll and overhead costs in this tough economy.  But these actions only get the employer in trouble down the road.  Employers should contact Jessica M. Kelty before trying to get too creative in evading these regulations, to make sure that additional liability (and future lawsuits and class-actions) is not on the horizon.

Leave a Comment » | Employment Law, FLSA | Permalink
Posted by merrittgreen

U.S. Supreme Court To Determine Privacy Of Employee Text Messages

December 15, 2009

We have been discussing (perhaps ad nauseum) the recent court trends regarding whether employee emails sent from employer computers were entitled to privacy protection.  Well, now the big dog, the U.S. Supreme Court, has decided to wade into the fray.  Yesterday, the Court agreed to hear City of Ontario v. Quon, where California police officers challenged their city’s ability to read texts those officers sent on their city-issued pagers that were intended for work use only.  This case is in the context of the Fourth Amendment, however, in that the texts turned out to be fodder for criminal actions against the officers, and the officers are now seeking to use the exclusionary rule to keep those texts out. 

This is somewhat different from the attorney-client privilege the previous cases addressed, since courts are much happier to enforce that privilege than they are to let criminals off the hook on a technicality.  Some think that the Court may rethink the general expectation of privacy that employees have argued for in the past.  There is some interesting analysis on why the Court may have chosen to take the case over at the Volokh Conspiracy.

Leave a Comment » | Appellate Law, Employment Law | Permalink
Posted by merrittgreen

Another Court Blocks Employer — This Time The Government — From Access To Private Emails Sent While At Work

December 14, 2009

As we have discussed previously, courts appear to be more willing to prevent an employer from accessing an employee’s private emails to the employee’s attorney even when the employee is sending the email on the employer’s computer, and during work hours.  The U.S. District Court for the District of Columbia has recently followed suit, only this time the employer is the U.S. Government, and a third party is trying to get the emails.  A new article in the National Law Journal describes the effort of a former federal prosecutor, who maintains he was fired for being a whistleblower, to obtain emails sent by a current federal prosecutor, Jonathan Tukel, to Tukel’s attorney while at work.  The former prosecutor argued that there was no reasonable expectation of privacy in the emails since they were sent through a government computer during work hours.  One would also presume that the U.S. government, as touchy about security as it is, would have a tight leash on the private use of government computers.  However, Chief Judge Royce Lamberth denied access to the emails.  “The DOJ maintains a policy that does not ban personal use of the company email. Although the DOJ does have access to personal emails sent through this account, Mr. Tukel was unaware that they would be regularly accessing and saving emails sent from his account. Because his expectations were reasonable, Mr. Tukel’s private emails will remain protected by the attorney-client privilege,” the judge ruled.

The opinion does leave open the possibility that an employer (or third party) could gain access to attorney-client emails if the employer’s policy is absolutely rigid in saying that under no circumstances may the employee use the employer’s computer(s) for personal communications.  But given the realities of the workplace these days, it would seem that such a policy would be difficult to enforce.

Leave a Comment » | Civil Litigation, Employment Law | Permalink
Posted by merrittgreen

New Opinion: D.C. Human Rights Act Applies Outside Of D.C.

November 20, 2009

Unless an employment agreement contains a choice of law clause for the District of Columbia or another state, most employers would assume that Virginia law would govern claims by an employee who did all of their work in Virginia and applied for the job while in Virginia.  However, a new opinion by the D.C. Court of Appeals held that an employee could sue in the D.C. courts under the D.C. Human Rights Act (“DCHRA”) against their D.C.-based employer even though the employee never set foot in the District.  In Monteilh v. AFSCME, AFL-CIO, the Court found that it would be contrary to the purpose of the DCHRA “to place beyond its reach a discriminatory decision made in the District because the effects — say, a lost job or promotion — were felt only elsewhere by the employee.”

As a result, employers based in the District must consider their employment decisions to be subject to the DCHRA no matter where their employees are located — whether just across the Potomac or on the moon.

Leave a Comment » | Employment Law | Permalink
Posted by merrittgreen

Court Trend Appears To Limit Employer Access To Employee Emails

November 19, 2009

A new article in the Wall Street Journal examines the trend in courts to limit employer access to an employee’s private emails, even when the employee is using the employer’s computer during work hours.  The article relates the Virginia case where an employer monitored an employee’s personal AOL account, and the employee sued and won at trial for the unauthorized access.  Notably, since 52% of workers access their personal email at work, and 38% of employers with 1,000 or more employees assign people to monitor outgoing email, this issue will only get more prevalent, and perhaps more contentious.

We discussed some lessons for employers from recent court decisions here, and more generally addressed the limits of employee monitoring by employers here.

Leave a Comment » | Employment Law | Permalink
Posted by merrittgreen

Primer On The Genetic Information Nondiscrimination Act Of 2008

November 18, 2009

The Genetic Information Nondiscrimination Act (the “Act”) was signed into law on May 21, 2008.  Pursuant to the Act, on November 21, 2009 employers covered under the Act, meaning those with 15 or more employees, will have to post information about the new regulations, and understand the ramifications thereof.  Principally, the Act prohibits the use of genetic information to discriminate against individuals with regards to employment or healthcare coverage.  The Act also includes a retaliation provision that prohibits discrimination against an individual for opposing an unlawful genetic discrimination practice or for testifying, assisting or participating in a related investigation.  Read more about how the Act affects employers after the jump.

Read the rest of this entry »

Leave a Comment » | Employment Law | Permalink
Posted by merrittgreen

New EEOC Poster For Genetic Information Nondiscrimination Act Of 2008 Required November 21

November 16, 2009

On November 21, employers covered under the Genetic Information Nondiscrimination Act of 2008, meaning those with 15 or more employees, will have to post information about those new regulations.  Employers can obtain a poster supplement or a new poster for free from the EEOC here.  The Laconic Law Blog has analysis of the new regulations here.  If you would like more information on how the Act affects your business, please contact Jessica M. Kelty.

Leave a Comment » | Employment Law | Permalink
Posted by merrittgreen

H1N1 In The Workplace

November 12, 2009

Given the H1N1 scare that has been circulating, along with the fact that it is flu season anyway, employers have been asking employment lawyers how they should deal with sick employees who come to work anyway — referred to as “presenteeism” in this Recorder article.  As one lawyer said for the article, “If you have someone with a communicable disease that is spread by breathing on people, and you’re allowing that to continue, you’re not creating a safe workplace.”  So can an employer simply send a sniffling employee home?  Not necessarily, since the employee might have a claim against the employer if it turns out the employee didn’t have a communicable disease after all.  However, one potential solution is to require that employee to provide a doctor’s note stating that they are safe for the workplace.

More information on flu policies at the workplace is available at our previous blog posting on the topic here.

2 Comments | Employment Law | Permalink
Posted by merrittgreen

FedEx Ground Drivers Are Independent Contractors According To IRS

November 12, 2009

This BusinessWeek article reports on how the Internal Revenue Service, without explanation, decided that some 12,000 delivery people working for FedEx Ground were properly classified as independent contractors instead of employees, thus enabling FedEx to not have to pay $319 million in unpaid employment taxes.  While that is good news for FedEx, the IRS also announced that early next year it will be undertaking extensive audits of some 6,000 other companies, yet to be determined, to see if they are properly categorizing their workers.

The holiday season often features an increase of hiring to handle Christmas shopping, and some economists are predicting that most laid off workers that get rehired will be rehired as independent contractors instead of employees when the economy improves.  As a result, it is important for employers to understand the difference between employees and independent contractors so that they won’t run afoul of the IRS.  We blogged earlier on the IRS’s tips on distinguishing between these types of hires here.

Leave a Comment » | Employment Law, Taxation Law | Permalink
Posted by merrittgreen

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