Criminal Charges, Convictions and Employment

When I read that Lancaster City Council voted on October 1, 2014 to delete the box inquiring whether an employment applicant had been convicted of a crime from Lancaster City’s employment application form, it reminded me of how conflicted our positions are on criminal activity and employment. 

The “Ban the Box” movement is a nationwide effort to reduce the effects of criminal convictions on employment. At the same time that Council is explaining that taking this action is necessary to give people a fair chance for a job, others are criticizing NFL officials for failing to ban football players from the League when accused of off-field violence, sometimes before they are even charged, much less convicted. Is domestic violence different from other crimes, or are football players different from Lancaster City employees?  What does this mean for other employers?

Pennsylvania’s Criminal History Record Information Act provides that an employer may consider felony and misdemeanor convictions “only to the extent to which they relate to the applicant’s suitability for employment." The Act is often cited for the proposition that summary offenses and charges that do not rise to convictions may not be considered in hiring. 

Notwithstanding the Criminal History Record Information Act, each body of the Pennsylvania General Assembly has enacted substantially similar legislation that would require an applicant for a position involving direct contact with children to provide a written statement of whether the applicant “has been the subject of an abuse or sexual misconduct investigation by any employer . . . unless the investigation resulted in a finding that the allegations were false.”  Employers will be asked to indicate whether a former employee “was the subject of any abuse or sexual misconduct investigation.”  This legislation, referred to as “Pass the Trash”, has the admirable goal of protecting school children from sexual abuse. But considering an “investigation” conducted by a prior employer and perhaps in the remote past certainly doesn’t comport with the policy requiring consideration only of criminal convictions, not unproven charges.  See my blog post on Employment Law Lessons from the Penn State Scandal.

Now, Lancaster City Council will consider a resolution calling on other employers to “Ban the Box.”  At the same time, the Pennsylvania legislature may in its few remaining session days enact “Pass the Trash” legislation. This is an interesting area where employers’ obligation to protect workers, customers and students, employees’ civil rights and public policy to employ those who have paid their debt to society intersect. 

Christina Hausner is an attorney at Russell, Krafft & Gruber, LLP in Lancaster, PA. She received her law degree from Duquesne University School of Law and has practiced in the area of employment law for over 25 years.

Think Before You Post - Employment Discrimination and Confidentiality

Settlements are the grease that makes the wheels of justice run. Without plea bargains, the criminal court system would grind to a halt.  The civil justice system depends on reliable monetary settlements as well.  Lawyers are used to working within this framework, but every so often, some sand gets thrown in the machinery, and it grinds to a halt. 

With most civil settlements, particularly those involving employment law, confidentiality is key.  Employers don’t want others knowing the payout made to buy peace.  Exceptions may be specified for counsel and tax advisors, but generally litigants cannot discuss the facts or terms of a settlement even with a spouse unless the spouse agrees to maintain confidentiality as well. 

In the old days when oral rumors were the rule, it might be tough to prove a breach of confidentiality.  But in the 21st century, we have social media to establish beyond a reasonable doubt who spilled the beans.

In the age discrimination claim of Patrick Snay v. Gulliver Preparatory School, it was the daughter of the plaintiff who posted to her 1,200 Facebook friends:  “Mama and Papa Snay won the case against Gulliver. . . . Gulliver is now officially paying for my vacation to Europe this summer.  SUCK IT.”  The daughter was a student at the school her father had sued, so her post broadcast to current and former students that Gulliver had lost its case with its former headmaster.

Four days after signing an $80,000 settlement agreement, the school cried foul and refused to pay.  Now over two years later and after two court appeals, Florida’s Third District Court of Appeal sided with the school and refused to enforce the settlement agreement.  “Snay violated the agreement by doing exactly what he promised not to do. . . . His daughter then did precisely what the confidentiality agreement was designed to prevent,” said Judge Linda Ann Wells in her ruling on February 26, 2014.

Maybe this case will go back to court, and how much impetus will there be for the school to offer a voluntary settlement?  Lots of work for everyone involved just because of a slip of the mouse. 

Always take a confidentiality clause seriously and never document any breach on social media.

Christina Hausner is an attorney at Russell, Krafft & Gruber, LLP in Lancaster, PA. She received her law degree from Duquesne University School of Law and has practiced in the area of employment law for over 25 years

From 'Philadelphia' to 'Modern Family'

Matt Grosh recently talked about Cam and Mitchell from Modern Family as a backdrop to the IRS's recent revenue ruling. That ruling recognized same-sex marriages for federal tax purposes even when a couple resides in a state that does not permit same-sex marriages.  The couple must only have been validly married in a state that recognizes same-sex marriage.

After last summer's Supreme Court decision analyzing the Defense of Marriage Act, numerous questions arose regarding legal treatment of same sex couples.  Employers were confused about their obligations regarding benefits such as health insurance and retirement plans.  After consultation with the Department of Justice and the Department of Treasury (Internal Revenue Service), the United States Department of Labor (DOL) issued Guidance to Employee Benefits Plans on the definition of spouse and marriage.

The DOL advised that employers are to recognize "spouses" and "marriages" based on the validity of the marriage in the state where the couple was married rather than the state where they reside.  The DOL concluded that such an interpretation would make it easier for employers to uniformly administer benefits to all employees, in addition to offering more protection to same-sex couples.  In effect, the Department of Labor Regulations, Rulings, Opinions and Exemptions will assume that the term "spouse" refers to any individual who is legally married under any state law. Consistent with the IRS ruling, the terms "spouse" and "marriage" will not include individuals in domestic partnerships or civil unions.  

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THINK Before You Fire - What Claire Underwood Did Wrong

Although I don't spend much time watching TV, I came across the new Netflix series House of Cards in which all 13 episodes were released at once for back to back watching. I enjoyed the series for its political perspective, but found it interesting as an employment lawyer as well.

Claire Underwood played by Robin Wright is the cold and beautiful wife of Francis Underwood, House Majority Whip (Kevin Spacey). Claire is the director of the non-profit Clean Water Initiative (CWI). In the beginning of the season, she fires half her staff, assigning the actual serial ax job to the office manager, who is terminated by Claire immediately after the firings are completed. She then actively recruits Gillian Cole (Sandrine Holt). When Claire first interviews Gillian, she is ill and, even before she is hired, Claire sends her to her personal physician, all expenses paid, a novel recruiting tool. Once she is on the job for a few months, Gillian tells Claire that she is pregnant as an explanation of why she cannot fly on CWI business. Gillian begins missing work periodically, and childless Claire makes a remark questioning her priorities and commitment to CWI. Ultimately, Gillian defies Claire on a matter of principal and Claire fires her on the spot for her insubordination. When Claire is later visited by counsel, we find out that not only has Gillian sued CWI but that she will not accept any monetary amount to settle her claim. Gillian tells Claire that the publicity resulting from her suit will cost CWI, Claire and her high profile politician husband more than any settlement payment and insure a better world for her unborn child. She also has many witnesses happy to testify for her including the former office manager, and adds that any embellishment of her testimony is justified by the need to expose CWI as a sell-out to corporate interests.  

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Employment Law Lessons From The Penn State Scandal

"Lessons from the Lion's Den:  Employment Law Takeaways from the Penn State Scandal" is the title of one of the sessions I will be attending at the Employment Law Institute, a gathering of employment lawyers in Philadelphia later this month. I anticipate this will be a popular session as the Penn State scandal has changed much of the way we approach not only employment law but education processes and non-profits' conduct as well. 

As a volunteer Master Gardener through the Penn State Cooperative Extension, I have been recently notified that all Master Gardeners must have background checks performed. One of the forms that I just received and must complete, along with all other volunteer Master Gardeners, is a Disclosure Statement in which I must report professional misconduct or sanctions, and any harassment or discrimination that I was found to have committed by any court, adjudicative body or administrative body including, but not limited to, any findings of harassment or discrimination made by present or former employers. I am further to report any felony or misdemeanor for which I was convicted or pled no contest. 

Although I am told that engagement in such conduct may not, in and of itself, disqualify me, failure to disclose this information or any misrepresentation is grounds to revoke my volunteer certification as a Master Gardener. 

Certainly, criminal convictions in which an individual is afforded due process protection, and which are public record, are something that is reasonable to report. However, findings of harassment or discrimination made by present or former employers is not in the same category. I advise both employers and employees that any internal investigation of harassment or discrimination in the workplace is distinguishable from criminal process in that due process rights do not exist. Someone about whom a harassment or discrimination complaint is made is not entitled to counsel, not entitled to cross-examine his or her accuser and not entitled to notice of interrogation.

Requirements for disclosure, such as I just received, will increase the pressure on both employers and employees to engage in a more legalistic process within the workplace before findings are made that could have long term ramifications. 


Christina Hausner is an attorney at Russell, Krafft & Gruber, LLP in Lancaster, PA. She received her law degree from Duquesne University School of Law and has practiced in the area of employment law for over 25 years.


Happy Labor Day!

In honor of Labor Day, Russell, Krafft & Gruber, LLP will be closed on Monday, September 3, 2012 , as we celebrate the dedication and achievements of the American worker. The first Labor Day was celebrated on Tuesday, September 5, 1882 in New York City as planned by the Central Labor Union. In the 1800s the average worker made less than $20 per week. Average income is not the only thing that has changed significantly over the years; labor laws and workplace trends are constantly changing. If this Labor Day reminds you of employment concerns you have as an employee or an employer, you may want to check out the Employment Law section listed under topics of this blog.

Labor Day also marks the end of summer as children go back to school. If you are squeezing in one last trip over the holiday weekend, remember that automobile accidents often occur over long weekends due to the increase in the number of cars on the road and unsafe or impaired drivers. Be aware of your surroundings and take extra care on the roads this weekend. Have a happy and safe Labor Day weekend!

Overtime - "Managers" Exempt or Not?

You may have recently read that Rite Aid is paying almost $21 million to settle multiple claims that it improperly failed to pay time-and-a-half for hours worked over forty in a week by its managers. State statutes and the federal Fair Labor Standards Act (FLSA) regulate the payment of overtime wages. Careful attention needs to be paid to the so-called white collar administrative and executive exemptions, particularly in view of the increasing numbers of class action suits.

I work with employers who have questions regarding the proper classification of employees. The number one misconception that I still see is the belief that paying an employee an annual salary makes him exempt from overtime payment. Another major misconception is undue reliance on a job title or written description. It does not matter what the title of the job is or what the job description says - what matters is what the employee is actually doing. If the work that the employee performs changes, even if the job title doesn't, the exemption status can change as well.

The Wage and Hour Division of the United States Department of Labor publishes fact sheets that are a good start in examining your particular situation. To qualify for the administrative exemption, the employee's primary duty must be the performance of work directly related to management or general business operations of the employer and include the exercise of discretion and independent judgment. The executive exemption applies to those whose primary duty is managing a department, and who customarily and regularly direct the work of at least two full time employees or their equivalent.

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Veteran Tax Incentives and Lower Unemployment Rates

In December, I wrote about the extension of several tax incentives for employers who hire veterans. According to an article by CNN, those incentives appear to be working.

In the past month, the jobless rate for all generations of veterans has been around 7.5%, although the rate for young veterans returning from Iraq and Afghanistan is slightly higher at 10.2%. These numbers show an improvement from this time last year, when the jobless rate for Iraq and Afghanistan veterans was 12.5%.

The veteran tax incentives are in the form of two tax credits:

  • The Returning Heroes Tax Credit is a credit of up to $5,600 per employee for employers that hire veterans who were looking for employment for more than six months. If the veteran has been looking for employment for less than six months, the credit is generally up to $2,400 per employee. 
  • The Wounded Warriors Tax Credit can be up to $9,600 per employee for employers that hire veterans with service-connected disabilities who have been looking for employment for more than six months.  

Both of those credits took the place of the Work Opportunity Tax Credit (WOTC), which expired at the end of 2011. The WOTC was designed to spur employers to hire individuals from targeted groups that have a high unemployment rate, including qualifying veterans. Both the Returning Heroes and Wounded Warriors Tax Credits are currently scheduled to expire after December 31, 2012. Both credits are also available to tax-exempt employers. 

Because some of the calculations and qualification criteria related to the credits are complex, I suggest that you consider consulting with a tax professional if your business or nonprofit organization is planning on utilizing one of the credits. For more information, please see the IRS website.

Matthew Grosh is an attorney at Russell, Krafft & Gruber LLP in Lancaster, Pennsylvania. He received his law degree from Villanova University and practices in a variety of areas including Taxation and Nonprofit & Tax-Exempt Organizations.

IRS Wage Garnishment and Employment

Wage garnishment – if you haven't heard of it before, you may picture crisp dollar bills surrounded by lettuce and tomatoes on a platter, or perhaps a paycheck "garnished" with a few extra zeroes. Unfortunately, wage garnishment is not typically a pleasant matter. It can occur in a variety of situations, including nonpayment of taxes. When the IRS garnishes a person’s wages, it can also impact his or her employment and, in certain cases, may raise concern in an employer’s mind.

What is Wage Garnishment?

When a person has fallen into certain types of debt, the law allows those who are owed the debt, i.e. the creditors, to obtain a court order requiring the employer of the debtor to withhold payments from his/her wages. The garnished wages are then paid directly to the creditor and are applied to the debt. IRS garnishment arises when it is determined, through the proper channels, that a taxpayer owes past due taxes. As a side note, another common area for garnishment to arise is with child support payments.

Can Garnishment Lead to Job Termination?

In my practice, I have encountered situations where employees had workers whose wages were being garnished by the Internal Revenue Service (IRS). In one instance, an employer asked whether the employee could be terminated because of the garnishment. Often, employees also wonder if the garnishment could jeopardize their employment. Many are surprised to learn that as long as the IRS garnishment is the only garnishment against an employee's wages, it would be illegal to terminate the employee for this reason.

The Law: Title III

With regard to the question at hand, IRS garnishments are surprisingly governed neither by the Internal Revenue Code nor the IRS. Instead, it is covered by Title III of the Consumer Credit Protection Act (Title III) and the United States Department of Labor’s Wage and Hour Division. More specifically, Title III states that “[no] employer may discharge any employee by reason of the fact that his earnings have been subjected to garnishment for any one indebtedness." Other related laws make it clear that Title III applies to the IRS’s tax collection process. Title III imposes a fine of no more than $1,000 or no more than one year of imprisonment on employer’s who willfully violate the requirements of Title III.

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Changes to PA Unemployment Compensation, Part 2:

Severance Pay and UC Benefits in Pennsylvania

In PA Unemployment Compensation Law Update, Part 1, we covered changes in Pennsylvania's Unemployment Compensation (UC) Law in regard to active job search requirements for claimants. In Part 2, we will discuss how the amended law impacts UC benefits when former employees also receive severance pay.

As an employer, it is sometimes difficult to terminate an employee's job. It is also difficult for employees who are "let go." In some cases, employees are offered severance packages by their employer. Severance is money or benefits paid to employees when employment ends, also called separation or termination pay. It is not required by law but may be paid in accordance with an employment contract, collective bargaining agreement or an employer's policy.

Severance pay can work as a financial buffer, helping former employees pay their bills as they make difficult transitions. Unemployment compensation benefits serve a similar purpose. Employees who receive both often wonder whether their severance pay can count against their UC benefits. Some have been surprised to find out that in Pennsylvania, an unemployed employee could receive full UC benefits even while the employer had paid or was making severance payments.

At least, that was the case until this year. The law has been amended by Act 6 of 2011 to provide that, in UC benefit years beginning January 1, 2012, employees will be paid their weekly benefit rate less the amount of severance pay that is attributed to that week. In other words, severance pay can offset UC benefits, but only when an employee's total severance pay exceeds and amount equal to 40% of the state average annual wage. Currently, 40% of Pennsylvania's average annual wage is $17,853. If terminated employees receive any amount up to $17,853 in severance, there will be no deduction or effect on their UC rate.

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Changes to PA Unemployment Compensation Law, Part 1

After the holiday season, there is typically a national spike in unemployment claims. This year is no exception. For employers and employees in Pennsylvania, 2012 also brings changes to the state's Unemployment Compensation (UC) laws. In a series of posts, we will discuss aspects of the amended UC laws that will impact both claimants and employers.

Is Your Job Search Meeting the UC Requirements?

Until 2012, Pennsylvania's Unemployment Compensation (UC) laws required claimants to "register" for work, then continue to "report" to an unemployment office to be eligible for benefits. As of January 1, 2012, only claimants who are "making an active search for suitable employment" will be eligible for UC benefits within the meaning of Section 401 of Act 6 of 2011, "Qualifications Required to Secure Compensation."

What does it mean to make an "active search," and what qualifies as "suitable employment"? At a minimum, the new requirements are:

  1. Registering for employment search services through Pennsylvania CareerLink within 30 days of the initial application for benefits.
  2. Posting a resume on CareerLink's database.
  3. Applying for positions that offer employment and wages similar to those that the claimant had prior to unemployment and which are within a 45-minute commuting distance.

The statute provides that an active search for suitable employment has been made "if the claimant's efforts include actions comparable to those traditional actions in their trade or occupation by which jobs have been found by others in the community and labor market in which the claimant is seeking employment."

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Tax Incentives for Employers Who Hire Veterans Extended

In November, President Barak Obama signed into law the Three Percent Withholding Repeal and Job Creation Act. A part of this sweeping legislation provides incentives to employers for hiring veterans. 

The new legislation is an enhancement of the Work Opportunity Tax Credit ("WOTC"), which will sunset at the end of 2011. The WOTC was designed to spur employers to hire individuals from targeted groups that have a high unemployment rate, including qualifying veterans. 

For veterans, the new legislation takes the place of the WOTC by creating the Returning Heroes Tax Credit and the Wounded Warriors Tax Credit. Employers that hire veterans who have been looking for employment for more than six months may be eligible for a Returning Heroes Tax Credit of up to $5,600.00 per employee. Employers that hire veterans who have been looking for employment for less than six months may be eligible for a credit of up to $2,400.00 per employee. Under the Wounded Warriors Tax Credit, employers that hire veterans with service-connected disabilities who have been looking for employment for more than six months may be eligible for a $9,600.00 credit per employee.

Both of the credits apply to individuals who begin work for the employer after November 21, 2011, and the credits are scheduled to expire after December 31, 2012. Additionally, both credits are applicable to tax-exempt employers. Some of the calculations and qualification criteria related to the credits are sophisticated, so I suggest that you confer with a tax professional if your business is planning on utilizing one or both of them.

Women in Business: Attorneys Christina Hausner, Holly Filius and Julie Miller

Russell, Krafft and Gruber, LLP is excited to be featured in the Women in Business section of the November/December 2011 issue of Susquehanna Style. The feature highlights just some of the great qualities and community work of Christina Hausner, Holly Filius and Julie Miller. If you are interested in viewing the feature, you can purchase a copy at newsstands or view the publication online (page 91-92). Susquehanna Style is a bi-monthly regional lifestyle magazine for the residents of south central Pennsylvania.

In conjunction with the Women in Business feature, Chris, Holly and Julie will be attending the Celebrate Women event held on November 30, 2011, at the Accomac Inn. If you are interested in attending, you can purchase tickets and find out more information on Susquehanna Style's website. The $10 admission donation will benefit the Power Packs Project which is a school hunger initiative.

National Legislation Introduced to Further Protect Children - The Speak Up Act

As we have witnessed the Penn State Scandal spark movement toward change in state legislation, it is no surprise that its impact has now reached Washington, D.C. Yesterday, Pennsylvania Senator Robert Casey and California Senator Barbara Boxer introduced the Speak Up to Protect Every Abused Kid (Speak Up) Act of 2011. The purpose of the Act is to ensure that all adults, no matter what profession, will be legally obligated to report cases of suspected child abuse and/or neglect. The Speak Up Act would require all states to enforce this law and would also make clear to whom suspected abuse should be reported, either directly to law enforcement or to state Child Protective Services.

For more information on this legislation please visit:


Pennsylvania Legislature to Strengthen Reporting Requirements of Sex Abuse

On Friday I posted an article regarding Pennsylvania's Mandatory Reporting Statute which requires certain people to report suspected child abuse to the proper authorities.  I highlighted some of the changes that have occurred in the law and the continuing confusion with the current law.  I suggested that our legislature may be prompted to take a look at the current law.   If you were watching the interview with Governor Tom Corbett on Meet the Press on Sunday morning, he confirmed that the move to strengthen the law has already begun. posted an Associated Press article with more details on the interview. The article says in part:

State lawmakers from both parties have proposed changes to toughen the law that governs the reporting of sex assaults, Corbett added. He said he would not be surprised to see it strengthened this year. 

“We have to make sure the change in the law is one that is effective,” he said.


The Penn State Child Sex Abuse Scandal and the Legal Obligation to Report

Unless you have avoided picking up a newspaper, turning on the television or conversing with friends, family or co-workers recently, you probably have heard about the scandal surrounding Penn State University and the sexual abuse allegations against former defensive coordinator, Jerry Sandusky. The scandal, however, extends beyond the football program and has resulted in criminal charges being filed against former athletic director, Tim Curley, and finance and business administrator, Gary Schultz. The charges against these two individuals are perjury and failure to report child abuse. The allegations surrounding the Penn State football program and the charges against its administration, aside from becoming major national news, have brought significant attention to the Pennsylvania Child Protective Services Law and have raised a number of questions about who is required to report child abuse and when.

The current Child Protective Services Law in Pennsylvania requires that someone who, in the course of their employment, comes into contact with children must make a report to the appropriate Children & Youth Service or police when they have reasonable cause to suspect that a child has been a victim of abuse. The Law further goes on to specifically list a number of categories of persons who are required to report suspected abuse including, but not limited to:

  • Any licensed physician, osteopath
  • Medical Examiner, Coroner
  • Funeral Director
  • Dentist
  • Optometrist
  • Chiropractor
  • Podiatrist
  • Intern
  • Registered Nurse
  • Licensed Practical Nurse
  • Hospital personnel engaged in the admission, examination, care or treatment of persons
  • Christian Science practitioner
  • Member of the Clergy
  • School administrator, teacher, school nurse
  • Social services worker
  • Day-care center worker or any other child-care or foster-care worker
  • Mental health professional
  • Peace officer or law enforcement official

This list is not meant to be exclusive of others, but provides specific examples of those required to report. The Law also provides that any person may, even if not included in the above list, report suspected child abuse, although the Law does not impose a specific duty to do so.

The language of the Child Protective Services Law, while seemingly clear in its intent to require those in contact with children to report abuse, does leave open the question of what constitutes contact with children during one’s course of employment. Does it require constant contact? Occasional contact? It has been found that incidental contact with children during employment is not enough to trigger a reporting duty under the Law. In one case decided by a federal court interpreting this law, the Court found that a photo lab worker in a retail store was not under the purview of the Child Protective Services Law. Because the photo lab worker did not have regular contact with children during the course of her employment, she did not have a duty to report suspected abuse she perceived from photographs she processed in the lab.

Much has been made of the legal duty to report child abuse in the context of the allegations against the Penn State administrators. The question has been raised by at least one of the administrator's attorneys as to whether a crime was actually committed by the administrator’s failure to report the information provided to him by Joe Paterno and the former graduate assistant who allegedly witnessed the sexual abuse of the child. It has also been pointed out by legal journals and commentaries that in 2002, when these alleged failure-to-report crimes occurred, the law was different than it is today. The 2002 law required that the abused child come directly in contact with a person in his or her professional capacity in order for that person to be considered a mandatory reporter. The law was then amended in 2007 to broaden the reporting requirements and include those who received the information second-hand. 

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IRS Voluntary Worker Classification Settlement Program

I would like to thank Timothy Kershner, CPA for providing his accounting and tax expertise for this blog article.

Timothy Kershner, CPA is a partner at the accounting and consulting firm of Walz, Deihm, Geisenberger, Bucklen & Tennis, P.C. He has more than 20 years of experience in public accounting and operates as the partner in charge of the firm's accounting and consulting division.

One important decision most business owners must confront is whether to treat certain workers as employees or independent contractors. An employer who makes the mistake of incorrectly classifying an employee as an independent contractor can face tax consequences and incur heavy penalties. Fortunately, the Internal Revenue Service ("IRS") has launched the Voluntary Classification Settlement Program (“VCSP”), which will enable many employers to reclassify workers as employees with minimal penalties. For those who are unsure of whether they are correctly classifying their workers and are concerned about possible audits, the VCSP can work as a "reset" button that offers a fresh start.

Employees vs. Independent Contractors

Before addressing the VCSP itself, it is important to understand a few basic concepts regarding tax reporting and withholding requirements for employers. If a worker is treated as an employee, the tax law requires the employer to withhold certain portions of the worker’s pay and pay those amounts directly to the federal government. The amounts withheld are generally reported to the IRS on payroll tax returns and to the employee on IRS Form W-2. In addition, the employer must remit their portion of payroll taxes.   

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COBRA Subsidy Expires Sept 1

Last year, we wrote about how the American Recovery and Reinvestment Act (ARRA) included a COBRA subsidy that reduced the amount certain laid-off workers pay for health benefits by 65%. Without the subsidy, those workers would have been responsible for the entire cost of continuing to receive health benefits from their former employers. 

Because enrollment for the subsidy was closed at the end of May, 2010, and because the subsidy was available for up to fifteen months after termination of employment, September 1 marks the date on which the subsidy expires for the last remaining workers taking advantage of the subsidy. An exception would be where a worker was terminated before May 31, 2010 but did not receive COBRA benefits until a later date. For example, if an individual was involuntarily terminated on  May 31, 2010 and, due to the terms of a severance agreement, their COBRA coverage did not start until November 1, 2010, he or she would still be eligible for the full 15 months of subsidy through January 31, 2012

Because COBRA is typically expensive without the subsidy, it is expected that many unemployed workers will go without health insurance, especially in light of the Commonwealth's termination of the adultBasic program last May. Some unemployed workers may find some relief with the Health Coverage Tax Credit, but availability is limited because of strict eligibility requirements. Also, unemployed workers with children should look into the Pennsylvania CHIP program, which generally covers all uninsured children and teenagers in Pennsylvania.

National Small Business Week: May 16-20 2011

This week from May 16 - 20, is National Small Business Week. National Small Business week was proclaimed in 1963 to recognize the positive contributions small businesses make to the United States economy. Here are a few facts about small businesses from the National Small Business Week website:

  • There are an estimated 27.2 million small business owners in the United States.
  • More than half of Americans either own or work for a small business.
  • Small businesses are responsible for creating 60-80 percent of new jobs in the country.
  • Small businesses drive innovation, create 21st century jobs and increase U.S. competitiveness.
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National Labor Relations Board Says Employee Facebook Posts About Employer Protected

I recently read an article on, Feds settle case of woman fired over Facebook comments, which discussed a settlement in Connecticut which will have a significant long-lasting impact on employers' policies regarding their employees' conduct on the internet. The National Labor Relations Board ("NLRB") reached a private settlement with American Medical Response of Connecticut, Inc. for the termination of an emergency medical technician who posted what the article called an expletive-filled posting which referred to the employee's supervisor as the company's code for a psychiatric patient. The ambulance company had an employment policy which prohibited employees from disparaging the company over the internet or depicting the company in anyway.

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IRS Standard Mileage 2011

The Internal Revenue Service has announced a new standard mileage rate for 2011, which is generally used to estimate the costs of operating an automobile for tax purposes. The new rate, effective January 1, 2011, is 51 cents per mile, up one cent from last year. In addition, the standard mileage rate for medical or moving and medical expenses has been raised from 16.5 to 19 cents per mile, and the rate for charitable purposes remains at 14 cents per mile.

While there are generally no Pennsylvania laws requiring employers to use the IRS' rate, there may be some tax advantage for doing so. The IRS will deem employers who make qualifying reimbursements up to 51 cents per mile as meeting their accounting requirements, thus no income reporting or withholding is required for those reimbursements. However, employers need to make sure that their employees have provided adequate proof that the mileage was strictly for business use. Qualifying employees who are not reimbursed for their business mileage will be able to deduct 51 cents per mile on their individual tax returns.

Possible Tax Consequences of Covenants Not to Compete

This blog has made several posts regarding covenants not to compete. Covenants not to compete are generally viewed as positive steps for businesses to protect their interests and prevent key employees from leaving and taking clients with them. A recent federal district court opinion, Howard v. United States, suggests that consideration of future tax ramifications for professional services providers that incorporate and subsequently sell their practices are now necessary.

On July 30, 2010, a federal district court in Washington held that a dentist’s covenant not to compete he signed with his own practice, a C-Corporation, converted his goodwill, which is ordinarily personal, into a corporate asset. The effect of converting his otherwise personal goodwill to a corporate asset was that upon sale of his practice, his goodwill was taxed at the corporate level, then taxed again when it was distributed as a dividend to him. If his goodwill had been considered personal it would have been taxed once as a long-term capital gain, which is currently taxed at a lower level than a dividend which is taxed as ordinary income.

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COBRA Subsidy Extended Through May 31, 2010

The 65% COBRA Federal Premium Assistance has been extended once again. The last extension covered involuntary terminations through March 31, 2010. On April 15 the President signed H.R. 4851 extending several government programs including unemployment benefits. The COBRA subsidy will now cover qualified individuals who are involuntarily terminated on or before May 31, 2010.

The U.S. Department of Labor has updated its Fact Sheet on the COBRA Premium Reduction. There is also additional information regarding eligibility of terminations from March 2, 2010 through May 31, 2010 which followed a reduction in hours: 

  •   March 2, 2010 through May 31, 2010 if:

o        the involuntary termination follows a qualifying event that was a reduction of hours; and

o        the reduction of hours occurred at any time from September 1, 2008 through May 31, 2010 (a reduction of hours is a qualifying event when the employee and his/her family lose coverage because the employee, though still employed, is no longer working enough hours to satisfy the group health plan’s eligibility requirements).  

COBRA premium assistance continues to be limited to 15 months as provided in the first extension and ends upon eligibility for other coverage. For additional information you may want to check out another page on the DOL’s website that includes video messages and other FAQs.

COBRA Subsidy Extended Through March 31, 2010

The COBRA subsidy, originally outlined in the American Recovery and Reinvestment Act (ARRA) and subsequently extended, covered involuntary terminations through February 28, 2010. Without another extension, employees involuntarily terminated beginning March 1 would not have been eligible to receive this COBRA premium assistance. 

Congress had been attempting to push back the extension one more month, but that bill was blocked by Senator Jim Bunning. However, Bunning yielded last Tuesday and the extension has now been officially pushed back until March 31, 2010. This will allow qualified individuals who are involuntarily terminated before that date to reduce their health plan costs by 65% through the subsidy. A bill called the American Workers, State and Business Relief Act of 2010 includes a provision to extend the subsidy through year-end. We will continue to monitor this ever-changing situation, so please be sure to check back.  In the meantime, for additional information, check the recently updated Fact Sheet posted by the United States Department of Labor.

Insurance Coverage for Adult Children Under Act 4 Optional for Employers

We have had a number of inquiries and comments on our blog post regarding Act 4, the amendment to Pennsylvania's insurance company law relating to health insurance coverage for adult children up through and including age 29. Prior to Act 4, if an employer offered dependent coverage, insurance companies were only required to provide coverage to children on their parents' insurance until the age of 19. The Pennsylvania Insurance Department estimates that almost 40% of those who were uninsured in Pennsylvania are between the ages of 19 and 29. 

A key phrase of Act 4 provides that the insurer's obligation to provide coverage to a child of an insured employee beyond a specified age, up through and including the age of 29, is "at the option of the policyholder", meaning the employer.   Also, coverage would be provided at the insured employee's expense. Employees may wonder why an employer would not choose to provide this coverage and what the value is of legislation mandating insurers to offer coverage while giving employers the ability to opt out. In addition, if an employer is self-insured, Act 4 does not make any change in what coverage must be offered because it applies only to insurers.

While insurers may appreciate the opportunity to provide coverage to the group of young adults who are underserved, employers are not likely to be as supportive. It has been projected that the mandate would increase employees' contributions to their group health insurance, since insurance laws require additional costs to be spread among all employees, and not just those with adult children. This may result in overall health insurance premiums rising for employers and all employees. In addition, this effect could result in more employers becoming self insured to avoid legal mandates such as extended adult child coverage or Pennsylvania mini COBRA application requiring COBRA coverage for employers employing fewer than 20 employees.

You can visit the Pennsylvania Insurance Department's website for additional information regarding Act 4.

Updated COBRA Continuation Links on the Department of Labor Website

The United States Department of Labor's Employee Benefits Security Administration released two new resource links on the COBRA Continuation coverage.

According to the United States Department of Labor (DOL) the FAQ and other information will be updated sometime this week. If you are interested in receiving immediate updates from the DOL, consider subscribing to their COBRA webpage. By subscribing you can receive notification when the site is updated with new information. 

COBRA Subsidy Extended

Legislation enacted by Congress and signed by President Obama on December 21, 2009, extends the ARRA COBRA premium reduction eligibility for two months, from December 31, 2009 to February 28, 2010, and increases the maximum period for receiving the subsidy to a total of 15 months instead of 9 months. 

With the new changes, the law provides that the 65% premium subsidy for COBRA continuation health benefits is available to individuals who are eligible for COBRA as a result of an involuntary termination between September 1, 2008 and February 28, 2010. The law previously required that both the involuntary termination and the eligibility for COBRA coverage occur before the last effective date of the subsidy, but now only the involuntary termination need take place on or before February 28, 2010, not the COBRA eligibility.

Last month, when we posted on the duration of the COBRA ARRA subsidy, we noted that legislation was introduced to extend the deadline for eligibility as well as the duration of the subsidy. The change enacted this month was not a result of passage of the October legislation but rather changes added to the Department of Defense 2010 Appropriations Act.

Continue Reading...

IRS Standard Mileage Rate for 2010

The Internal Revenue Service has announced a new standard mileage rate for 2010, which is generally used to estimate the costs of operating an automobile for tax purposes. The new rate, effective January 1, 2010, is 50 cents per mile, down 5 cents from last year. In addition, the standard mileage rate for medical or moving and medical expenses has been lowered to 16.5 cents per mile, and the rate for charitable purposes remains at 14 cents per mile.

While there are generally no Pennsylvania laws requiring employers to use the IRS' rate, there may be some tax advantage for doing so. The IRS will deem employers who make qualifying reimbursements up to 50 cents per mile as meeting their accounting requirements, thus no income reporting or withholding is required for those reimbursements. However, employers need to make sure that their employees have provided adequate proof that the mileage was strictly for business use. Qualifying employees who are not reimbursed for their business mileage will be able to deduct 50 cents per mile on their individual tax returns.

Update on the COBRA Subsidy and When it Will End

We have posted on the 65% COBRA subsidy several times since the American Recovery and Reinvestment Act (ARRA) was enacted.  ARRA provided for a premium subsidy for COBRA continuation health benefits to "assistance eligible individuals."  Those individuals are defined as an employee or member of his/her family who is eligible for COBRA continuation coverage:


1)      at any time between September 1, 2008 and December 31, 2009

2)      elects COBRA coverage, and

3)      is eligible for COBRA as a result of an involuntary termination between September 1, 2008 and December 31, 2009. 

Some changes may be effected if the Extended COBRA Continuation Protection Act of 2009, H.R. 3930, introduced in the House of Representatives on October 26, 2009 and referred to Committees on Education and Labor, Energy and Commerce, and Ways and Means, is enacted.   

Continue Reading...

PA Mini-COBRA Law Effective July 10, 2009

If you thought that no one in Harrisburg was doing anything but wringing their hands about the Pennsylvania state budget for the last 3 months, think again! The Pennsylvania Senate and House of Representatives got together and signed Act 2 of 2009 on June 10, mandating continuing health insurance for employees of employers with fewer than 20 employees, effective July 10, 2009.

Since 1985, the federal Consolidated Omnibus Budget Reconciliation Act (COBRA) has required employers of 20 or more employees to provide its employees and eligible dependents continuing health insurance if they experience a qualifying event.

Under COBRA, employees or their dependents are required to pay the cost, up to 102% of the employer’s cost, to continue their health insurance. In February 2009, President Obama signed the American Recovery and Reinvestment Act providing for subsidized COBRA premiums for those employees who were involuntarily terminated after September 2008. Instead of 102%, the employees only pay 35%, and the employer fronts the remainder and receives a payroll tax credit for its payment. But this plan was available only to those who were subject to COBRA, not the smallest of employers. 

On July 10, 2009, when the Pennsylvania Mini-COBRA law becomes effective, the ARRA subsidy will apply to almost all employers in Pennsylvania. Currently, employers with fewer than 20 employees are not required to offer COBRA continuation coverage, leaving employees to shop for transitional policies which may not provide coverage for pre-existing conditions, prescriptions or maternity. Now employers who sponsor group medical insurance and have 2-19 employees will be required to offer employees and their dependents the opportunity to purchase up to nine months of continuation coverage on the employers group plan. 

While Pennsylvania’s Mini-COBRA is modeled after the federal COBRA law, there are some differences:


Federal COBRA

Applies to employers with 2-19 employees

Applies to employers with 20 or more employees

Requires continuation coverage for up to nine months

Coverage is generally capped at 18 months, and may extend to 36 months

Applies only to insured group major medical, hospital or surgical policies. Also, Health Savings Accounts and other medical spending accounts are treated differently.

Applies to all ERISA group health plans

Applies only to insured arrangements, not self-insured programs

Covers both insured and self-insured

Permits an employer to charge up to 105% of group rate

Provides for a maximum charge of 102%

Coverage ends when a participant becomes eligible for other coverage, a group health plan or Medicare

Coverage ends when a participant enrolls in another group plan or Medicare

The insurer is given most of the burden of compliance with this Act

The employer is ultimately responsible for compliance, including providing proper notification to eligible individuals

Individuals must have 3 months of preceding coverage to be eligible

Eligible individuals need only one day of coverage before the qualifying event

Act 4 - Amendment to Insurance Company Law

On June 10, 2009 Governor Rendell signed Act 4 which amends the Insurance Company Law. Now insurers who provide coverage to children of employees must offer, at the policyholder's option and at the insured's expense, coverage for children up through and including the age of 29, provided that the child meets all of the following requirements:

    1.  Is not married.

    2.  Has no dependents.

3. Is a resident of Pennsylvania or is enrolled as a full time student at an   institution of higher education.

4.  Is not provided coverage under any other group or individual health insurance policy or entitled to benefits under any government health care benefits program, including under the Social Security Act.

This Act applies to new contracts and contract renewals occurring after December 7, 2009.  

Central Penn Business Journal Features Article on Non-Competes

The Central Penn Business Journal recently posted an interesting article regarding non-compete agreements - Recession Intensifies Non-Compete Enforcement:

The recession is deepening employers' interest in non-compete agreements, which curb employees from bolting to a rival company or starting their own, according to local attorneys.

The agreements have become increasingly common over the last few years, even as Pennsylvania courts have made them tougher to enforce, attorneys said.

A good non-compete agreement may be even more important during an economic downturn when the loss of a key employee could potentially impact your business beyond recession related losses.  However, a non-compete that is not enforceable will provide a false sense of security.  Last year I posted a popular article on our employment law blog that outlined some things to consider - Non-Competes: Pigs Get Fed, But Hogs Get Slaughtered.

Maintaining Eligibility for the COBRA Subsidy

I recently received a question from a reader that may be of interest to others. Following is a portion of the question and my response:

I read your article on COBRA it was very informative, Could you please tell me where I can get an answer to this question. I was laid off from my job in February. I am getting COBRA under the ARRA where my former employer pays 65% of my health benefits. I also am collecting unemployment.

My former company wants me to work a few weekend for them, will I loose my COBRA benefits if I do this.

The American Recovery and Reinvestment Act (ARRA) premium assistance subsidy ends not when you become employed but only when you become eligible for Medicare or another group health plan (such as a plan sponsored by a new employer or a spouse's employer). In fact the law imposes a duty on the recipient to notify the plan if they become eligible for coverage under another group health plan or Medicare, and failure to do so can result in a tax penalty. The subsidy will also end 9 months after the first day of the first month to which the subsidy applies or when COBRA benefits are no longer available to you. 

Generally, COBRA coverage is available for 18 months after termination of employment and may end earlier if: 

  • Premiums are not paid on a timely basis
  • The employer ceases to maintain any group health plan
  • After the COBRA election, coverage is obtained with another employer group health plan that does not contain any exclusion or limitation with respect to any pre-existing condition of such beneficiary. However, if other group health coverage is obtained prior to the COBRA election, COBRA coverage may not be discontinued, even if the other coverage continues after the COBRA election.
  • After the COBRA election, a beneficiary becomes entitled to Medicare benefits. However, if Medicare is obtained prior to COBRA election, COBRA coverage may not be discontinued, even if the other coverage continues after the COBRA election.

The COBRA statute provides that eligibility for coverage ends on the date that the individual first becomes covered under any other group health plan (as an employee or otherwise) which does not contain any exclusion or limitation with respect to any preexisting condition of such beneficiary. However, this year's ARRA provides that eligibility for subsidy ends the first date that the individual is eligible for coverage under any other group plan, coverage under a flexible spending arrangement or coverage of treatment furnished by the employer, without mention of any exclusion or limitation with respect to any pre-existing condition.

I hope this answers your question, which we thought was an interesting one.


Personal Financial Issues in the Workplace

In tough economic times, businesses tend to focus on larger issues such as their bottom lines, falling profit projections, and the streamlining of production. However a key component in the health of a business is often overlooked – the effects that economically stressed employees can have on their employers. Such effects include personal bankruptcies, wage attachments, theft and a decline in productivity caused by the psychological stress. Thus it is essential for employers to understand the key factors at play and implement sound policies to minimize damage.

  • Stress and Loss of Productivity   Like many other types of psychological stress, anxiety caused by economic problems prevents employees from focusing on their work. Simply put, employers are getting less production per dollar of wages or salary paid. While identifying those in need of psychological counseling will help, many businesses have had success providing economic counseling and education as well to make their employees more financially literate. Please click here for more detailed information from the Partnership for Workplace Mental Health on combating the effects of such stress.

Other issues that will arise more frequently in the coming months include:

We addressed these issues in a blog post in April 2008, when we still referred to the condition of our economy as only an “economic downturn” but the general principles still apply. Please review this post to learn more about legal limitations placed on employer actions with regard to an employee’s financial problems. 

Is Your Small Business Affected By the New COBRA Subsidy?

The American Recovery and Reinvestment Act (ARRA) provides a COBRA subsidy for Employees who lost or will lose health insurance coverage under an employer-sponsored plan due to an involuntary termination of employment between September 1, 2008 and December 31, 2009. Many employers have no doubt that they are subject to these changes and are currently in the process of implementing updates. However, with the recent news about changes to COBRA, some small employers are asking themselves, do my employees qualify and am I required to provide COBRA continuation coverage? The good news is that the ARRA has not expanded the type of employer-provided plans subject to the Act, so if employers were not required to provide COBRA continuation coverage prior to the ARRA, they would not be required to do so now. 

COBRA continuation coverage applies to all private sector group health plans which are maintained by employers that have at least 20 employees on more than 50% of its typical business days in the previous calendar year. In determining the total number of employees, full and part-time employees are counted. However, each part-time employee counts as a fraction of a full-time employee. The fraction for a part-time employee equals the number of hours the part-time employee worked, divided by the hours an employee must work to be considered full-time. Therefore, if a private sector employer is offering a group health plan with at least 20 employees as calculated above, the employer must provide COBRA continuation coverage and will be required to abide by the new provisions in ARRA. COBRA continuation coverage also applies to state and local government-sponsored plans, but does not apply to plans sponsored by the federal government or by churches and church-related organizations. 

If you are not currently providing COBRA coverage but you think you may be nearing the threshold described above, it is imperative that you carefully review your 2008 employee census to determine if you are required to provide continuation coverage under COBRA.

Updated Resources for COBRA Continuation Assistance under ARRA

Many employers and third party administrators have been waiting for guidance from the DOL before issuing the new COBRA notices required under the American Recovery and Reinvestment Act (ARRA). The wait is over. The Department of Labor has finally updated its FAQs For Employers About COBRA Premium Reduction Under ARRA.  It now includes the much anticipated  model notices. The DOL website gives the following guidance for notice requirements and deadlines:

  • A general notice to all qualified beneficiaries, whether they are currently enrolled in COBRA coverage or not, who have a qualifying event during the period from September 1, 2008 through December 31, 2009. This notice may be provided separately or with the COBRA election notice following a COBRA qualifying event.
  • A notice of the extended COBRA election period to any Assistance Eligible Individual (or any individual who would be an Assistance Eligible Individual if a COBRA continuation coverage election were in effect); who had a qualifying event at any time from September 1, 2008 through February 16, 2009; and who either did not elect COBRA continuation coverage or who elected but subsequently discontinued COBRA. This notice must be provided within 60 days following February 17, 2009.

The DOL’s COBRA Continuation Coverage Assistance Under The American Recovery And Reinvestment Act Of 2009 page continues to be updated with additional resources. You can download Job Loss Posters and Flyers and review Frequently Asked Questions for employers and employees.

In addition the DOL site also provides a link to the page the IRS has dedicated to COBRA Health Insurance Continuation Premium Subsidy. This page includes the updated Form 941 and Instructions and information on the phase out of the subsidy:


  • This subsidy phases out for individuals whose modified adjusted gross income exceeds $125,000, or $250,000 for those filing joint returns. Taxpayers with modified adjusted gross income exceeding $145,000, or $290,000 for those filing joint returns, do not qualify for the subsidy.

COBRA Changes under the American Recovery and Reinvestment Act (ARRA)

Everyone's trying to get up to speed on the changes prescribed under Title III of the American Recovery and Reinvestment Act signed into law by President Obama on February 17, 2009. Unlike most legislation which allows for a lengthy lead time for implementation, this Act will affect those who were involuntarily terminated even before the enactment of ARRA, and new COBRA notices are required by April 18. The new notices will need to be sent to employees who were involuntarily terminated from employment after September 1, 2008, whether the employees elected COBRA coverage or not.


Employees (and employers of employees) who lost or will lose health insurance coverage under an employer-sponsored plan due to a involuntary termination of employment between September 1, 2008 and December 31, 2009 (but not if individual's modified gross income exceeds $290,000 for joint return filers and $145,00 for all others. Those with joint adjusted gross income of $250,000/$125,000 are entitled to a reduced subsidy.)


"Assistance eligible individuals" will be able to secure COBRA health insurance continuation coverage for 35% of the cost as opposed to 102%.


Now.   The subsidy is available for a maximum of 9 months, and ends upon eligibility for coverage under any other group health plan, or the expiration of the maximum allowable period of continuation coverage.


Every workplace subject to COBRA, generally those employing more than 20 employees.


With so many losing work, and health insurance premiums so high, a 65% reduction in premium will allow more unemployed persons to continue coverage.


The employer pays the 65% balance which is then reimbursed to the employer by a credit on payroll taxes.   Employees who were involuntarily terminated after September 1, 2008 and before February 17, 2009 (the effective date of ARRA) who did not elect COBRA coverage will now be given another opportunity to do so. Employees who were involuntarily terminated after September 1, 2008. and did elect COBRA coverage prior to February 17, 2009 can receive the subsidy from the effective date of ARRA either by reimbursement from the employer or through a credit against future COBRA premium payments.

Although COBRA continuation coverage is available to individuals who lose their employment for any reason (except gross misconduct which generally is criminal conduct), this subsidy is available only to those whose employment was involuntarily terminated. It does not apply to those who voluntarily terminated employment, or to those who became eligible for COBRA coverage by reason other than a separation from employment. The existing prohibition from COBRA eligibility for gross misconduct continues to apply.

The Secretary of Labor or the Secretary of Health and Human Services, in consultation with the Secretary of the Treasury, shall implement an appeal process for those who are denied the COBRA subsidy in which a determination regarding eligibility shall be issued within 15 business days. This is the process in which questions such as whether termination was voluntary or involuntary will be decided. (If you think that's not something that would often be contentious, think again, or ask an Unemployment Compensation referee.)

Dealing with Layoff and Recall in an Unpredictable Economy

We received a question relating to employment in the economic downturn.  Is it legal in Pennsylvania to layoff an employee for lack of work, and a month later, replace that laid off employee with someone new.  I thought this would be a good topic to address in our blog. Generally, in the absence of a collective bargaining agreement or employment agreement providing for limitations on termination of employment, such an action on the part of an employer does not violate the law.

However, further inquiry can be made as to the true motive of the layoff.  Was the employee terminated because of his/her membership in a class protected under Pennsylvania and federal discrimination statutes?  Is she being replaced with someone not a member of the same protected class?  For example, replacement by an individual under the age of 40 can establish a preliminary claim for age discrimination if the employee replaced is over 40.

While the employer's proffered reason for termination, economic necessity, can appear to be pretextual if the employer is hiring a replacement soon after the layoff, the employer may have a logical reason for the new hire if it has secured new orders or new business.  And absent an agreement to the contrary, the employer has no obligation to recall laid off employees if business does turn around.

What do you know about Employment References?


References may be the first and last thing you think about in an employment relationship. Are employers required to provide them, and what information regarding former employees may be communicated? 

There is no statute or law requiring employers to provide references. As a result, and due to fear of providing the "wrong" information, many employers adopt a policy of providing information limited to confirming dates of employment and position(s) held. What can happen if an employer gives out "wrong" information? It could be subject to a claim of defamation, if the statement is factually false and tends to blacken the character, such as alleging criminal behavior. Or it could be claimed to constitute the tort of intentionally interfering with prospective contracts, if the information is shown to have cost the employee a job. 

But several factors limit employer liability in the employer reference area. First, employment matters are often "privileged," meaning that employer's conduct and statements are excused because it falls within the employment context. Second, Pennsylvania law confers immunity from civil liability to an employer who discloses information about a current or former employee's job performance to a prospective employer, unless the employer disclosed information that the employer knew was false or materially misleading, or in the exercise of due diligence should have known was false, the information was false and rendered with reckless disregard as to the truth or falsity of the information, or was information which the disclosure was prohibited by contract, civil, common law or statutory right, 42 Pa. C.S. § 8340.1.

From my experience, the best course is for employer and departing employee to understand exactly what employer will do and say about the employee in response to inquiries from third parties. If the employer has no stated policy with respect to references, a letter can be drafted by the employer or the employee so that it is clear what will be stated. In addition, the employer should have procedures in place so that information is disseminated only by a limited number of people and that only the agreed upon information is released. In most cases, it is to the benefit of both employer and employee for the employee to be gainfully employed again as soon as possible.

Employer/employee issues can sometimes be complicated even under the best of circumstances. If you have questions regarding employment references or any other employment issues, please contact an employment attorney.

The Old Switcheroo: An Employer's Obligation to Employee Work Hours


A reader recently asked if it is legal for an employer to cut an employee's hours and assign work instead to an employee who is newly hired.

The short answer to the question is a qualified yes. The exception is if the employer's action is prohibited by the terms of a collective bargaining agreement if it is a case in which there is union representation. The other exception is if the employer's treatment of the employee is because of his or her protected class. Protected class includes race, religion, gender, age, disability and national origin.

So, if the boss is assigning your hours to the new hire because the new hire is of a different race, religion, gender, etc., that action could violate local, state and federal laws against discrimination. However, seniority, in and of itself, is no protection unless pursuant to the terms of an employment contract or collective bargaining agreement.


IRS Standard Mileage Rate Change... Again

No one can accuse the Internal Revenue Service of sleeping on the job.

You may remember a blog post of mine dated June 30th, 2008 called "IRS Standard Mileage Rate Change" in which I noted how quickly the IRS reacted to rising gas prices and increased their standard mileage rate change, effective July 1, 2008, from 50.5 cents to 58.5 cents per mile. This generally allowed employers to avoid reporting or withholding from increased reimbursements to employees for the remainder of the year.

As quickly as the IRS reacted to the rising gas prices, it has reacted just as quickly to the recent fall. Through IRS Rev. Proc. 2008-72, the IRS has lowered the standard mileage rate to 55.0 cents per mile for 2009. In addition, the standard mileage rate for medical or moving and medical expenses has been decreased from 27 to 24 cents per mile, and the rate for charitable purposes remains at 14 cents per mile.

According to IRS News Release IR-2007-192, the rates are based "on an annual study of the fixed and variable costs of operating an automobile . . . [and of] medical and moving purposes."

While We Were Out

It's been a while since our last posting to the PA Employment Law Blog. While it's really inexcusable, I must let you know that we have been working on some upcoming projects that we are excited to reveal in the coming weeks.

Most recently, Chris Hausner spoke with a reporter from Money Magazine.  The magazine features an article highlighting 9 Tips to Tough Out the Times. Chris' advice appears in the section of the article dealing with employment, How to Maximize Your Take if You Get Laid Off. The article is available online and featured in the November issue, on newsstands now.


Harrisburg City Council Proposes "Life Partnership Registry"

Typically  a full time employee is afforded the benefit of health insurance by an employer.  A full time employee is usually able to cover a spouse and children at an additional cost.  However more and more companies have been extending health insurance to also include a domestic partner of a full time employee.

Just two weeks ago Harrisburg City Council Vice President, Dan Miller proposed an ordinance that would create a "life partnership registry" for the City of Harrisburg. The proposed legislation would create a registry where individuals could voluntarily register their life partners. The registry would be used as a base business record for businesses who choose to offer health insurance to an employee's unmarried partner. The registry would cover individuals who live or work in Harrisburg. 

The concept of a domestic registry is not new. States like Maryland, Vermont,  California, Hawaii, New Jersey, Maine and the District of Columbia have established registries.  Similarly Philadelphia and Pittsburgh have also established registries.  Several states already have statutes on civil unions and domestic partnerships.

The Harrisburg City bill's proponent advised that the Harrisburg City government already offers benefits to employees' domestic partners as a matter of policy. The proposed legislation would not mandate city employers provide life partners health benefits, but would assist employers and registered life partners should the employer choose to offer the coverage. The life partner designation would also grant domestic partners, committed to each other's maintenance and well being, visitation rights in health care facilities located within Harrisburg City limits. Eligible couples need to be over 18 years old and living in the same home. They also need to meet three of five financial criteria, such as sharing a mortgage, bank account or being designated as a beneficiary on their partners' life insurance policy. The bill is expected to be voted on in the Fall of 2008, and has the backing of two other City Council Members.

Advocate groups were quick to point out that the bill benefits the unmarried heterosexual community as well as the homosexual community. "We think this is an important step toward assuring that those citizens who share a committed life partnership are granted the same rights as any other citizen in the same situation." Council Vice President Miller said. "This includes health care and visitation rights." 

Making the Most of a Layoff

I was recently contacted by a reporter and asked to describe steps employees who are laid off from employment may take to maximize what they take away. As I prepared my response it occurred to me that some of the readers of this blog may find this information helpful. With the unemployment rate growing, there is a lot of advice available on the internet for those who find themselves in this unfortunate circumstance. has A Guide to Layoff Survival that provides some practical advice on dealing with emotions, managing finances and finding another job. I have focused on maximizing your benefits in a layoff situation. Following are some of my suggestions:

·         Explore whether benefits or other parts of a severance package are negotiable. Consider whether you can offer your employer an executed covenant not to compete or non-solicitation agreement. If you have already signed these documents, this is not an option, but if not, your employer may be willing to pay you for not competing or not soliciting either its customers or employees for a specific period of time. 

·         If you have not been offered a severance package, or if it is minimal, evaluate whether you have something to offer your employer in exchange for severance payments or other consideration. Can you offer to waive claims relating to your employment or termination that may have arisen out of the Employment Retirement Income Security Act, or due to discrimination on the basis of age, disability, sex, race, religion or national origin?   (Workers Compensation and minimum wage-overtime claims cannot be waived.)

·         Find out about Unemployment Compensation - the amount of benefits and the amount of time you can expect to receive them. Are there eligibility questions either because of your lack of earnings record, or because you were terminated for willful misconduct, or you voluntarily quit? 

·         Could you continue to provide services to your employer as either a consultant or on a part-time basis? Assuming the relationship is good and the termination is simply economic, these could be alternatives that would be acceptable to you and your employer. In Pennsylvania, you may earn up to 40% of your weekly benefit rate (partial benefit credit) before any deduction is taken from your unemployment compensation weekly benefit. 

Of course, it makes sense to consult with an attorney to explore these options and evaluate your best course of action. Although generally applying for Unemployment Compensation benefits is the first thing you should do, if there is any question about your eligibility status, or if the facts of whether there was a firing or a quit will be disputed, it makes sense to consult an attorney before making an application for benefits. 

Non-Competes: Pigs Get Fed, But Hogs Get Slaughtered

So you've got your program all lined up - every new employee, regardless of job duties - signs a ten-year covenant not to compete with an unlimited geographical scope. No exceptions. Everyone knows the rules, so you are ready to go to court when Joe, whose sales territory was the Northeast United States, goes to work for your competitor in the mid-West. 

Not so fast. Nothing frustrates clients as much as being told that a court won't enforce an agreement that is clear and in black and white. But in order to be enforceable, a non-compete must be reasonably limited in duration and territory. The duration of the covenant cannot be longer than reasonably necessary to protect legitimate interests, such as customer goodwill, trade secrets or specialized training. For example, your agreement should be no longer than the time it will take a new hire to demonstrate his or her effectiveness to customers if the non-compete seeks to protect customer goodwill. Odds are that it is not ten years. In addition, the geographic scope needs to be limited to the territory covered by the employee during his or her employment in customer goodwill cases. Courts don't readily enforce multi-country restrictions against sales people with limited territories. 

Although there are many cases in which courts have reformed or rewritten an overly broad non-compete, if an employer is a real hog, the court will simply state that it will not rewrite a non-compete and refuse to enforce it at all. This was clearly the case in 1973 in Reading Aviation Service, Inc. v. Bertolet, when the Pennsylvania Supreme Court said that they would not rewrite a non-compete that was unlimited in time and space. More recently, U.S. District Court Judge Stewart Dalzell in Fres-Co System USA, Inc. v. Bodell, reacted the same way and declined to reform an overly broad non-compete agreement stating that to do so would have sanctioned the employer's use of his excessive bargaining power to insist upon unreasonable and excessive restrictions upon its employee. The court stated that the non-compete's terms far exceeded what was reasonably necessary to protect plaintiff's business interests because employer's business was selling coffee packaging materials in the Southeastern United States and the Caribbean, whereas the non-compete spanned four industries on three continents. 

Many employers try to avoid this result by including a provision in the non-compete stating that should any portion or term of the non-compete be deemed unenforceable, the parties agree that the court should reform the agreement to one which is enforceable. However, the best practice is to include no terms in your non-compete that exceed what is reasonably necessary to protect your legitimate business interests. That analysis requires looking at each employee differently to determine what business interests would be jeopardized were there no restriction on his post-employment activities. Is it goodwill? Is it protection of trade secrets? What is the low end of the range of term of duration and geographic scope that will adequately protect you? Be honest and not overreaching, and you will be have a covenant that has a much greater chance of being enforced. 

IRS Standard Mileage Rate Change

These days, everyone is reacting to rising gas prices, including the Internal Revenue Service. Through Announcement 2008-63, the IRS is raising the optional standard mileage rate for operating a vehicle for business purposes from 50.5 cents to 58.5 cents per mile, effective July 1, 2008. 

The new rate applies to applies to qualifying expenses that are both incurred and reimbursed on or after July 1.

While there are generally no Pennsylvania laws requiring employers to use the IRS' rate, there may be some tax advantage for doing so. The IRS will deem employers who make qualifying reimbursements up to 58.5 cents per mile as meeting their accounting requirements, thus no income reporting or withholding is required for those reimbursements. However, employers need to make sure that their employees have provided adequate proof that the mileage was strictly for business use.

Qualifying employees who are not reimbursed for their business mileage will be able to deduct 58.5 cents per mile on their individual tax returns. However, it is important that the qualifying miles incurred between January 1, 2008 and June 30, 2008 are recorded separately from the miles accrued on and after July 1 because the old rate continues to apply to them

More information on this topic is available in section 5 of IRS Publication 15, although the Publication does not currently take into account the new rate.

Legal Requirements for Breaks, Meal Periods and Overtime

We have tackled a number of complex employment topics in our blog. Recently, feedback and questions have led us to "go back to the basics" and visit the topic of General Wage and Hour.

The Pennsylvania Department of Labor and Industry attempts to answer many questions about wages and hours in the FAQs section of their website. While the Department of Labor and Industry's site isn't an all inclusive legal resource, it does provide cursory answers to the questions asked most regularly.

  • What is my legal responsibility to employees regarding breaks and meal periods?

The Pennsylvania Department of Labor and Industry states, "Pennsylvania employers are not required to provide breaks to employees age 18 and over.  If the employer permits break periods, and they last less than 20 minutes, the employee must be paid for the break.  If the employer allows meal periods, the employer is not required to pay the employee if the employee does not work during the meal period and it lasts more than 20 minutes.  Employers and employees may agree to different terms of the employment is governed by a collective bargaining agreement."

  • Am I required to pay overtime wages, if so, to whom and who is excluded?

The laws and rules surrounding overtime are governed by the Fair Labor Standards Act.   The Act requires employers to pay employees one and half times their regular rate for all hours worked over 40 in a week.  However exemptions to the general rule exist.  An article featured on, Who's Exempt From Overtime by Nancy Cooper, provides guidelines on properly classifying an employee. In some cases it is difficult to make the proper determination and it would be advisable to consult an attorney.

Employee Vacation Time Could Cost Employers

 In a weakening economy, employers should pay attention to their vacation policy.   If you need to cut costs with lay offs, you could end up losing your shirt on pay outs for vacation pay. Employers need to decide and articulate whether vacation is paid if accrued and not taken. Limits should be placed on how much vacation can be accrued, that is, rolled over from year to year. There aren't requirements to pay accrued, but unused vacation pay unless that is your policy. Employers are free to specify that vacation is a benefit to be taken or used, and if not used, will not be paid. Please consider the following when determining how to handle unused vacation time:

  • Considerations When Paying Accrued but Unused Vacation Pay

If you pay accrued but unused vacation, will you pay it in all circumstances? To the person you just fired for stealing? To the person who quit without notice and is setting up a competing business and taking a few of your key employees to work for him? 

 Your policy can provide that vacation pay will be paid to employees who are laid off but not those who are fired for willful misconduct or who voluntarily quit. This does make your job more complicated, however. Suddenly, at the termination of employment, you are acting as an unemployment compensation referee in making a determination as to the nature of the termination in order to decide whether to pay vacation benefits. 

  • How not Paying Vacation Benefits Can Effect You

A decision against paying vacation benefits can come back to haunt you in a wage payment and collection claim. Vacation pay is considered wages if the employer's policy is to pay earned but unused vacation. Add the headaches and penalties and attorney fee liability, and that is no vacation. 

  •  Managing Employee Expectations

Is your vacation policy clear? As prices rise, are you prepared to deal with employees who are coping by staying home and continuing to work expecting to be paid for their unused vacation? Also, if you are willing to pay have you considered your budget to pay employees 56 weeks in a year? If you are not planning to pay existing employees, even if they are working 52 weeks a year and take no vacation, be sure to communicate your policy to avoid a misunderstanding.

Also consider the sad situation where an employee hasn't taken a vacation in years, and you have no policy regarding rollover? If the employee's entitlement is four weeks a year, at year 13, they may be thinking that they are going to get a year off with pay. Crazy as it seems, you should be sure they understand that is not happening.

Payroll Taxes for a Single Member LLC

So you finally did the right thing.   You converted your sole proprietorship to a single member Limited Liability Company so that you and your personal assets are protected from the liabilities of the business. Now you can sleep more soundly at night because your LLC is busy keeping your house, bed and pillow safe from evil creditors, right? If your LLC has employees, the Internal Revenue Service would say "not so fast - what about payroll taxes?"

Employers are generally obligated to withhold FICA and income taxes, the "payroll taxes", from an employee's wages and pass on those amounts to the federal government. Stiff penalties can result if those obligations are not met. Still, if your LLC is the employer, shouldn't those penalties apply to the LLC and not you personally? The IRS disagrees.

When you created your LLC, you were required to file a form with the IRS to obtain a tax identification number. To complete the form, you had to "check-the-box" to choose if the LLC will be taxed as a corporation, partnership or as a disregarded entity. Because you didn't want to be double-taxed on the business and personal level, you didn't choose to be taxed as a corporation, and because you are a single member LLC, you couldn't choose to be taxed as a partnership because there needs to be more than one partner. As a result, your single member LLC is categorized by the IRS as a disregarded entity for federal tax purposes.

This is where personal liability comes in. Through Notice 99-6, the IRS decided to hold owners of single member LLCs personally liable for payroll taxes. The rationale was that because single member LLCs are disregarded for federal tax purposes, they are ignored and the owner is the "employer" for federal tax purposes. While state law normally provides that LLC owners are not to be held personally responsible for their LLC's liabilities, the IRS trumps those laws with the Supremacy Clause of Article VI of the United States Constitution.

However, there is some light at the end of the tunnel, but it's a good-news/bad-news scenarios. The good news is that on August 16, 2007, the IRS finalized new regulations stating, among other things, that they will no longer ignore single members LLCs for employment tax purposes. As a result, owners of single member LLCs will not be treated as employers for federal tax purposes. The bad news comes in two parts. First, the new regulations only begin to apply to employment taxes effective for periods beginning on or after January 1, 2009, so relief is not immediate. Second, owners of single member LLCs are still personally liable for the "Responsible Person Penalty" under Section 6672 of the Internal Revenue Code.

The "Responsible Person Penalty", also known as "trust-fund recovery penalty" and the "100-percent penalty" generally penalizes anyone who willfully fails to collect and pay over employee income tax and the employee portion of FICA taxes. The specific penalty is equal to the amount of tax not withheld and paid over. The liability of the "responsible party" is independent of the LLC's liability, and owners of single member LLCs are generally treated as "responsible parties." 

As a result, if you own a single member LLC with employees, it is very important for you to verify that your payroll taxes are being handled properly. If not, you could be putting yourself at risk. 

Expanding the PA Human Relations Act

A lawsuit filed by the Greek Island of Lesbos wants to restrict the use of the word Lesbian. The island claims that Lesbians are the citizens of Lesbos and has no connection to the sexual orientation of a person. One plaintiff in the lawsuit claims that use of the word lesbian by the gay community is an insult to the identity of the inhabitants of Lesbos. While Andrea Gilbert, spokesperson for Athens Pride 2008 and a member of OLKE, told, "The claim is based in serious prejudice and hatred."

This is just one example of controversy surrounding issues of sexual orientation. On a local level, a recent poll in the Central Penn Business Journal revisited the House Bill 1400 and asked readers: Should Pennsylvania pass House Bill 1400, which would prohibit discrimination on the basis of sexual orientation and gender identity? Without providing the number of replies to the poll, the Journal reported that the reader response was 70% in favor and 30% opposed to passing the Bill. The reasoning and written feedback by readers in support of their position was widely varied.

House Bill 1400 proposes to expand the protections already offered under the Pennsylvania Human Relations Commission. The Pennsylvania Human Relations Act prohibits certain practices of discrimination because of race, color, religious creed, ancestry, age, national origin, handicap or disability and use of a support animal. House Bill 1400 proposes to include sexual orientation, gender identity or expression to the existing list.

This Bill defines "sexual orientation" as actual or perceived heterosexuality, homosexuality or bisexuality. "Gender identity or expression" is defined as actual or perceived identity, appearance, behavior, expression or physical characteristics whether or not associated with an individual's assigned sex at birth.

The Bill was co-sponsored by a record 70 members of the House, and in April 2007, the Senate sponsored a similar bill (SB761) with 22 co-sponsors. The Senate Bill remains in the Senate Judiciary Committee. The House Bill also counts among its sponsors Steve Glassman, Chair of the Pennsylvania Human Relations Commission.

Thirteen Pennsylvania municipalities have already enacted laws pointed at protections based on sexual orientation, gender identity or expression. House Bill 1400 was introduced on June 13, 2007, the matter was referred to the Committee on State Government on June 18, 2007, and the Bill continues to produce revolving rumblings from diametrically opposed factions.

Related Links on House Bill 1400:

Equality Advocates of Pennsylvania

Michael Mahler's Blog

American Family Association of Pennsylvania

Interaction Between FMLA & ADA - Don't Get Tripped Up

The Family and Medical Leave Act (FMLA) turns 15 this year and workers’ rights advocates, the Bush Administration and the Labor Department are weighing in on proposed changes to the law. According to an April 24 article in the Washington Post,

“...workers would have to tell their bosses in advance when they take nonemergency leave, instead of being able to wait until two days after they left. They would have to undergo "fitness-for-duty" evaluations if they took intermittent leave for medical reasons and wanted to return to physically demanding jobs. To prove that they had a "serious health condition," they would have to visit a health-care provider at least twice within a month of falling ill. What's more, employers would have the right to contact health-care providers who authorized leave.”

As I reviewed these proposals it occured to me that some of these changes may serve to blur the distinction between the FMLA and the Americans with Disabilities Act of 1990 (ADA). It is not uncommon for employees to bring claims under both the FMLA and ADA. Avoid getting tripped up in the similarities of FMLA and ADA by understanding the distinctions between the two laws.



  • is enforced by the Department of Labor (DOL)
  • is enforced by the Equal Employment Opportunity Commission (EEOC)
  • applies to employers with 50 or more employees
  • applies to employers with 15 or more employees
  • eligible employees must have been employed for at least 12 months and worked 1,250 hours in the previous 12 months of employment
  • no eligibility restrictions
  • only requires an individual (or family member) to have a "serious health condition"
  • only covers individuals with a disability
  • there may be individual liability
  • no individual liability
  • no punitive or emotional damages can be awarded
  • punitive and emotional damages can be awarded

Managing Employees with Personal Financial Problems

The economic downturn affects businesses but also impacts the daily lives of employees. An employee’s personal financial problems can lead to bankruptcy, foreclosure and even divorce, any of which may impact his or her job and job performance.

Businesses must be prepared to respond to employee performance issues created by financial problems. Employers should be aware of legal limitations placed on their actions with regard to an employee’s financial problems. In addition, human resource professionals should appreciate the relationship between their performance management program and other resources to address employee issues created by financial distress.

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

  • Employee BankruptcySection 575 of the Bankruptcy Act protects employees and applicants from discrimination if an individual:
    • is or has been a debtor under this title or a debtor or bankrupt under the Act;
    • has been insolvent before the commencement of a case under the Act or during the case but before the grant or denial of a discharge; or
    • has not paid a debt that is dischargeable in a case under this title or that was discharged under the Act.

Courts have limited the reach of this provision by requiring that the discrimination be "solely because" of the individual's bankruptcy participation.

  • Worries About Temptation for Theft. Businesses may become concerned that an employee in financial distress may be more likely to embezzle and react by trying to find out the scope of an employee’s credit problems. The Fair Credit Reporting Act limits an employers use of employee credit information. A business’ usual financial controls should be uniformly applied, but, if inadequate, should be revised for all employees.                                 

Financially distressed employees may exhibit other performance problems ranging from declining productivity to depression. The usual performance management system should be utilized to correct deficiencies; however, special attention should be paid to other resources like the EAP and  Debt/Credit counseling. Some businesses may wish to go further. Susan S. Windham believes that Financial Distress for Employees Means Lower Profits for Employers. She advocates workplace financial education as the answer.

Restaurants Face Unique HR Compliance Challenges

The EEOC announced a $505,000 sexual harassment settlement with a McDonald’s Franchise on behalf of a class of young female employees, including teens. The EEOC contended that a male supervisor engaged in serious harassment including physical contact, sexual comments and offers of favoritism. In addition to the monetary award, the franchisee was required to provide letters of apology to the victims, conduct training on sexual discrimination for its franchise locations, and post nondiscrimination notices in its workplaces.

The EEOC has a national initiative designed to educate young workers on their employment rights. There is a stand-alone website that has been featured on highlighting discrimination protections.

Restaurant operators face difficult HR compliance issues based on several factors including the following:

  • Workforce Demographics:  Diversity management is a challenge for the entire food service industry. EEOC workforce demographic information for the Accommodations & Food Service Industry reports a workplace composition for workers (operatives, laborers and service) that are 52% female and 47% minority. While managers for the same group are 68.8% male and 74% white. The prevalence of younger workers adds to the management challenge.
  • Wages and Employee Turnover:     Lower wage earners make for job hoppers. Pennsylvania reports food service worker wages ranging from $15.05/hr for serving workers to between $7.37 and $7.70/hr for fast food cooks and counter attendants.
  • Management Turnover:       The Restaurant Industry Blog by Kenneth Rexrode notes that turnover of managers and employees necessitate constant training and inhibit the development and continuity in a management staff.
  • Dispersed Operations:          Some restaurant operations, particularly franchised operations have multiple locations and depend upon managers traveling between locations. This can make for spotty supervision and training.

Solving compliance problems may be a matter of adopting effective policies on EEO compliance, training managers and educating employees. The most frequent misstep I see is concentrating too much control in a site manager so that employees feel they have no avenue to direct concerns to higher levels.

The Political Future of Affirmative Action

As Pennsylvania’s Primary Election approaches, one of the unexpected political issues is affirmative action.  Newsweek columnist Seth Colter Walls discusses the situation in Obama’s Postracial Test. The column describes the election battleground created by state ballot initiatives like California’s Proposition 209 and Michigan’s Proposal 2 that prohibit public institutions from considering race, sex or ethnicity in hiring, contracting for goods/services or college admissions. Similar ballot initiatives may appear in Arizona, Colorado, Missouri, Nebraska and Oklahoma.  For now, Newsweek's Dahlia Lithwick states in her column, A Complicated Record On Race, that both sides think Mr. Obama agrees with them.

The Timeline of Affirmative Action began with the Civil Rights Act of 1964 and has taken many forms since then. Most of us in the employment world are familiar with the Affirmative Action Programs created by Executive Order 11246. However, there are many other state and federal programs which create preferences based on gender and race. These programs have judicial approval provided the government can pass the “strict scrutiny test” by demonstrating that there is a compelling need for the program and the program is narrowly tailored to meet the need. As the economy contracts, the most contentious areas of debate may focus on government “set-aside” programs for purchased goods and services.

The United States Supreme Court has considered contracting programs in three of its decisions. In its 1980 decision in Fullilove v. Klutznick, the Supreme Court ruled that some modest quotas were perfectly constitutional. The Court upheld a federal law requiring that 15% of funds for public works be set aside for qualified minority contractors. The "narrowed focus and limited extent" of the affirmative action program did not violate the equal rights of non-minority contractors, according to the Court—there was no "allocation of federal funds according to inflexible percentages solely based on race or ethnicity."

In City of Richmond v. Croson, the Supreme Court went the other way ruling that an "amorphous claim that there has been past discrimination in a particular industry cannot justify the use of an unyielding racial quota." It maintained that affirmative action must be subject to "strict scrutiny" and is unconstitutional unless racial discrimination can be proven to be "widespread throughout a particular industry." The Court maintained that "the purpose of strict scrutiny is to ‘smoke out' illegitimate uses of race by assuring that the legislative body is pursuing a goal important enough to warrant use of a highly suspect tool. The test also ensures that the means chosen `fit' this compelling goal so closely that there is little or no possibility that the motive for the classification was illegitimate racial prejudice or stereotype." This case involved affirmative action programs at the state and local levels—a Richmond program setting aside 30% of city construction funds for black-owned firms was challenged. For the first time, affirmative action was judged as a "highly suspect tool."

In Adarand Constructors, Inc. v. Peña,  the Court again called for "strict scrutiny" in determining whether discrimination existed before implementing a federal affirmative action program. "Strict scrutiny" meant that affirmative action programs fulfilled a "compelling governmental interest," and were "narrowly tailored" to fit the particular situation. Although two of the judges (Scalia and Thomas) felt that there should be a complete ban on affirmative action, the majority of judges asserted that "the unhappy persistence of both the practice and the lingering effects of racial discrimination against minority groups in this country" justified the use of race-based remedial measures in certain circumstances.

ESOPs and Company Stock Matches to 401(k): The Bear Stearns Lesson

Charley Blaine hit the nail on the head with his observation about the Bear Stearns' fallout appearing  in his posting MSN moneyblog:

My guess is that Bear Stearns' 14,000 employees will be the biggest losers. The company's employee-stock-ownership plan owned 23% of the shares as of Feb. 14. The shares that day had a market value of $2.18 billion. It's almost gone now. Needless to say, Bear Stearns employees aren't happy. Check here for a sampling of their anger.

ESOPs and matches in company stock have long been touted as aligning incentives, but this selling point can lead to litigation when the company stock takes a dive or the employer files for bankruptcy protection. It's even more disastrous for employees who have been “incentivized” to put so many of their retirement eggs in one basket. If the company tanks, an employee loses a job and a big chunk of retirement savings.

A statistical profile of Employee Ownership as published by the National Center for Employee Ownership estimates the number of plans, participant employees and asset value for ESOPs and 401(k) plans with significant company stock matches. For early 2008, the estimates are as follows:

Type of Plan

Number of Plans
(as of early 2008)

Number of Participants
(as of early 2008)

Value of Plan Assets
(as of early 2008)

ESOPs, stock bonus plans, & profit sharing plans primarily invested in employer stock


11.2 million

$928 billion+

401(k) plans primarily invested in employer stock


1.5 million

$133 billion

The prevalence of company stock based incentives may make employees nervous in light of the high profile failures. Human Resources may need to manage expectations in its recruiting and retention activities.

Retaliation Claims: Five Things Every HR Generalist Should Know*

The EEOC’s Report of Discrimination Charge filings notes that Retaliation claims rose 18% to a record high, doubling since 1992. There were 26,663 retaliation based charges filed in 2007 up from 22,555 the previous year. The trend might be explained, in part, by employees filing both a discrimination charge and a retaliation claim; increased awareness by employees, or employers mishandling employee internal complaints of discrimination.

Claims of retaliation take a very predictable path like the one recounted in a recent EEOC lawsuit. Vanguard Group settled a suit filed by the EEOC for a racial retaliation claim for a payment of $500,000.    The suit was based upon an employee’s complaint to management that he was being treated less favorably and discriminated against based on his race. Thereafter, the EEOC contended that the employee began to experience acts of retaliation, including unfavorable changes in his work conditions and assignments, from the managers he accused of race discrimination. The EEOC alleged that this pattern of retaliation resulted in the employee’s termination. The following may help HR Generalist avoid mishandling internal complaints.

  1. What is Unlawful Retaliation?

An employer may not fire, demote, harass or otherwise "retaliate" against an individual for filing a charge of discrimination, participating in a discrimination proceeding, or otherwise opposing discrimination. The same laws that prohibit discrimination based on race, color, sex, religion, national origin, age, and disability, as well as wage differences between men and women performing substantially equal work, also prohibit retaliation against individuals who oppose unlawful discrimination or participate in an employment discrimination proceeding. Retaliation occurs when an employer, employment agency, or labor organization takes an adverse action against a covered individual because he or she engaged in a protected activity.

  1. What is “Adverse Action” by an Employer?

An adverse action is an action taken to try to keep someone from opposing a discriminatory practice, or from participating in an employment discrimination proceeding. According to the EEOC, examples of adverse actions include:

  • Employment actions such as termination, refusal to hire, and denial of promotion;
  • Other actions affecting employment such as threats, unjustified negative evaluations, unjustified negative references, or increased surveillance; and
  • Any other action such as an assault or unfounded civil or criminal charge that is likely to deter reasonable people from pursuing their rights.

On the other hand, the EEOC states that adverse actions do not include petty slights and annoyances, such as stray negative comments in an otherwise positive or neutral evaluation, "snubbing" a colleague, or negative comments that are justified by an employee's poor work performance or history.

  1. What is “Protected Activity” by an Employee?

Protected activity includes either opposing a practice reasonably believed to be unlawful discrimination or participating in a discrimination procedure. 

Opposition is informing an employer that you believe that he/she is engaging in prohibited discrimination. Opposition is protected from retaliation as long as it is based on a reasonable, good-faith belief that the complained of practice violates anti-discrimination law; and the manner of the opposition is reasonable.  The EEOC cited examples of protected opposition to include:

  • Complaining to anyone about alleged discrimination against oneself or others;
  • Threatening to file a charge of discrimination;
  • Picketing in opposition to discrimination; or
  • Refusing to obey an order reasonably believed to be discriminatory.

According to the EEOC, examples of activities that are NOT protected opposition include:

  • Actions that interfere with job performance so as to render the employee ineffective; or
  • Unlawful activities such as acts or threats of violence. 

Participation means taking part in an employment discrimination proceeding. Participation is a protected activity even if the proceeding involved claims that ultimately were found to be invalid. Examples of participation include:

  • Filing a charge of employment discrimination;
  • Cooperating with an internal investigation of alleged discriminatory practices; or
  • Serving as a witness in an EEO investigation or litigation.
  • A protected activity can also include requesting a reasonable accommodation based on religion or disability.
  1. Promptly Investigate Comments and Complaints Concerning Discrimination

Some HR action should be taken on all communications from employees that could later be “characterized” as either opposition or participation. At a minimum, get the facts underlying a comment about “unfairness” or “discrimination”. Obviously, you can spend your entire workday chasing down spurious remarks. You can circumvent a lot of problems merely by developing a practice of asking “what do you mean when you say it’s discriminatory?” Not taking complaints or comments seriously can be costly.

  1. Monitor Supervisors for Adverse Actions following an Employee Complaint

I would wager that most acts of “retaliation” go unnoticed on HR’s radar screen because no one is actively monitoring the situation. If someone has complained about discrimination by a supervisor, HR should follow up informally with the employee to make sure that there is no real or perceived retaliation. 

* Not meant to be exhaustive.

Scandal Management: Any Lessons for Human Resources?

Today’s headlines about Governor Eliot Spitzer’s link to a prostitution ring recount another scandal involving a high level government official. Spitzer attempted to “manage” the scandal by calling a press conference, his spouse at his side, apologizing for his behavior and describing the rest as a “private matter”.   After this "ritual of repentance", Spitzer is “weighing his resignation”. To this, I refer back to a statement attributed to  Representative Dick Armey who was asked if he had been in President Clinton’s place after the Monica Lewinsky scandal would he have resigned? He purportedly responded: “If  I were in the President’s place I would not have gotten a chance to resign. I would be laying in a pool of my own blood, hearing Mrs. Armey say : ‘How do I reload this damn thing?’”

While I don't advocate this approach, an organization's or individual's response to a scandal can make or break it.  Human Resources professionals may be called upon in times of turmoil to be the spokesperson for the organization. I have no training in public relations, but from a legal perspective here are some things I can say don’t play well for future litigation:

  • The “categorical denial” that proves otherwise like “I never had sexual relations with that woman”.
  • Legalistic answers like those that turn on the definition of “is”.
  • Opinions offered without facts or investigation.
  • Any comments made by a company official in handcuffs or an orange prison jump suit.

Occasionally, I will get contacted by a company facing adverse publicity.  Here are some general rules that I remind clients when they call in a crisis:

  • Consider the quick engagement of a PR firm.
  • You don’t have to say anything and that may be the best course.
  • Identify one spokesperson and tell everyone else to refer questions there.
  • Plan what you will say and provide a written press release
  • If you don’t know the facts, don’t speculate
  • If you don’t have something to say then don’t talk.
  • You don’t have to answer questions and be very careful if you do.
  • You can end a press conference of interview at any time, just try to do it gracefully.

Scandal Management: Any Lessons for Human Resources?

Today’s headlines about Governor Eliot Spitzer’s link to a prostitution ring recount another scandal involving a high level government official. Spitzer attempted to “manage” the scandal by calling a press conference, his spouse at his side, apologizing for his behavior and describing the rest as a “private matter”.   After this "ritual of repentance", Spitzer is “weighing his resignation”. To this, I refer back to a statement attributed to  Representative Dick Armey who was asked if he had been in President Clinton’s place after the Monica Lewinsky scandal would he have resigned? He purportedly responded: “If  I were in the President’s place I would not have gotten a chance to resign. I would be laying in a pool of my own blood, hearing Mrs. Armey say : ‘How do I reload this damn thing?’”

While I don't advocate this approach, an organization's or individual's response to a scandal can make or break it.  Human Resources professionals may be called upon in times of turmoil to be the spokesperson for the organization. I have no training in public relations, but from a legal perspective here are some things I can say don’t play well for future litigation:

  • The “categorical denial” that proves otherwise like “I never had sexual relations with that woman”.
  • Legalistic answers like those that turn on the definition of “is”.
  • Opinions offered without facts or investigation.
  • Any comments made by a company official in handcuffs or an orange prison jump suit.

Occasionally, I will get contacted by a company facing adverse publicity.  Here are some general rules that I remind clients when they call in a crisis:

  • Consider the quick engagement of a PR firm.
  • You don’t have to say anything and that may be the best course.
  • Identify one spokesperson and tell everyone else to refer questions there.
  • Plan what you will say and provide a written press release
  • If you don’t know the facts, don’t speculate
  • If you don’t have something to say then don’t talk.
  • You don’t have to answer questions and be very careful if you do.
  • You can end a press conference of interview at any time, just try to do it gracefully.

EEOC Reports 9% Increase in Discrimination Charges for 2007

The number of Discrimination Charges filed with the EEOC increased to 82,792 in 2007, up from 75,768 the previous year. Race, Gender and Retaliation charges were the most frequently reported charges.  The EEOC’s nonsensical reporting style makes it difficult to glean much more information since the report doesn’t account for individuals claiming multiple types of discrimination. Also irritating for employers is the EEOC’s explanation for the increase in the number of charges:

EEOC Commission Chair Naomi C. Earp chastised employers in her press release noting that “Corporate America needs to do a better job of proactively preventing discrimination and addressing complaints promptly and effectively. To ensure that equality of opportunity becomes a reality in the 21st century workplace, employers need to place a premium on fostering inclusive and discrimination-free work environments for all individuals.”

Jon Hyman’s Ohio Employer’s Law Blog correctly notes that the increased number of charges has many origins other than a lack of corporate commitment to equal employment opportunity. The unfortunate bias here seems to be the EEOC’s presumption that employers aren’t doing enough to prevent discrimination claims without regard to any evaluation of the merit of charges.

Pennsylvania Enacts New Open Records Law: Public Access to Government Personnel Records

In response to heavy lobbying by the Pennsylvania Newspapers Association, Pennsylvania enacted legislation overhauling what was largely regarded as one of the worst open records laws in the country.   The “Right-to-Know Law” is generally effective January 1, 2009, and applies to the public records of state and local agencies, the state legislature, municipalities and the judicial system. All records are presumed to be public records unless subject to specific exemption, protected by legal privilege or exempt by regulation or judicial order. The exemptions applicable to employment related public records are as follows:

  • Medical, psychiatric or psychological records;
  • Personal identification information like social security, telephone or other personal financial information except that a government employee’s name, position, salary and employment contract are not considered personal identification information;
  • Employment records including the following:
    • Reference letters and recommendations;
    • Performance reviews;
    • Civil service test results;
    • Employment applications of those not hired;
    • Written criticisms of an employee;
    • Grievance material including documents related to discrimination and sexual harassment; and
    • Preliminary disciplinary or discharge information; however, the “final action” of an agency that results in demotion or discharge is a public record;
  • Collective bargaining strategy or negotiations and arbitration proceedings except as to the final contract or arbitrator’s decision; and
  • Trade secrets or confidential proprietary information.

The Right-to-Know Law is a big change from the prior law that protected personnel records. Salaries of Pennsylvania’s public employees were not subject to disclosure under the previous open records law leading to great speculation about Penn State Coach Joe Paterno’s salary.   Had the secrecy of JoPa’s salary not been resolved by a 2007 lawsuit, it would have been subject to disclosure under the new law. By the way, his salary is around $500,000.


The subject of “ageism” is a hot topic in the press and among employment commentators. As Baby Boomers grow older so does the  percentage of the United State population perceived as old and protected by age discrimination laws.

According to AARP, the percentage of people 65 and older who work has grown from 10.8 percent in 1985 to 16 percent last year. For people ages 55 to 64, the numbers also are up, from 54.2 percent in 1985 to 63.8 percent in 2007. The statistics on the aging workforce are astounding as demonstrated by Ira Wolfe in his book  and blog called The Perfect Labor Storm 2.0. This effect is seen everywhere and plays out differently in different forums.

In politics age is a negative. Michael Hirsh of Newsweek writes about McCain’s Unseen Adversary: Ageism in which he cites some survey information and posits  that “Indeed, according to a survey done by the Pew Research Center, Americans are a lot less comfortable voting a man in his 70s into the Oval Office than they are voting for a woman or an African-American for president.”

In law, age is a positive. Mark Sherman of The Boston Globe notes that the Supreme Court considering 5 ageism cases the growing prevalence of which he attributes to the aging population. He also notes that it “There is only one antibias law - the one against discrimination based on age - that would cover all nine Supreme Court justices, if such laws applied to them.”

In the workforce age is both a positive and a negative. Kate Lorenz at opines that Ageism on the Job can be turned into an advantage by older workers because of their education, sophistication and clout.

The tension between “young” and “old” is summed up in Granny verses the Mercedes: 

EEOC Intake Questionnaire is a "Charge" according to the Supreme Court

In Federal Express Corp. v. Holowecki, the United State Supreme Court ruled that the EEOC’s Intake Questionnaire adequately meets the requirements of a “Charge” to trigger an employee’s rights to sue his or her employer in court. The plaintiff submitted to the EEOC an Intake Questionnaire with an affidavit contending that her employer was engaging in age discrimination. The EEOC did nothing with the Questionnaire for six months. The employer was not notified and no charge number was assigned. The employee subsequently filed a Charge of Discrimination and proceeded almost directly to court avoiding the EEOC’s conciliation process entirely. 

Justice Thomas the former Chairman of the EEOC points out the practical problems with the lack of a clear definition on what constitutes a Charge and the implications on notice to employers. His comments are somewhat ironic since the crux of the problem is the EEOC’s failure to turn the Intake Questionnaire into a Charge of Discrimination and mail it out to the employer. The Court does not hold the EEOC accountable for these administrative failings by allowing a vague assertions to trigger the judicial process:

The implications of the Court's decision will reach far beyond respondent's case. Today's decision does nothing—absolutely nothing—to solve the problem that under the EEOC's current processes no one can tell, ex ante, whether a particular filing is or is not a charge. Given the Court's utterly vague criteria, whatever the agency later decides to regard as a charge is a charge—and the statutorily required notice to the employer and conciliation process will be evaded in the future as it has been in this case. The Court's failure to apply a clear and sensible rule renders its decision of little use in future cases to complainants, employers, or the agency.

The EEOC issued a Memorandum addressing the timeliness of notice to employers noting that an Intake Questionnaire may constitute a Charge if it contains a “clear request for the agency to act.” The Memorandum also notes that notice of a charge must be sent to respondents within 10 days of receiving the charge.

Thanks to Jon Hyman at the Ohio Employer’s Law Blog who has a great analysis of the impact on employers who lose the ability to conciliate claims.

Supreme Court Restricts Evidence of Employer's Alleged Discrimination against other Employees

The United State Supreme Court issued its decision limiting the role of so called “me too” evidence in discrimination cases. In Sprint/United Management v. Mendelsohn, the Court ruled that an employee does not have an automatic right to introduce testimony by nonparties alleging discrimination at the hands of the company where the alleged discriminatory actions involve supervisors who played no role in the employment decisions related to the employee in the case.

The Ohio Employer’s Law Blog has a legal analysis of the ruling. The practical effect limits the types of evidence that courts (and hopefully administrative agencies like the EEOC) will consider in accessing the merits of a discrimination claim. Evidence of an employer’s treatment of “similarly situated employees” may be considered but must be closely related to the employee’s circumstances and theory of the case.   Who is “similarly situated” becomes the issue.

Employee Cell Phone Use: Adopt a Policy on Talking, Texting, and E-mailing while Driving

We have all witnessed dangerous driving maneuvers by individuals talking on cell phones. What if this driver is one of your employees? What if the employee causes an accident while conducting company business on a cell phone?

Employers may be liable for accidents where an employee’s job-related cell phone use contributed to the accident. Whether the cell phone use is within the scope of employment depends upon many factors including such things as the employee’s job duties, who provided the phone, when the accident occurred, whether it was a business call, and whether the employee was complying with the employer’s policy on cell phone use.

Don Heyrich at the Washington Labor, Employment & Employee Benefits Law Blog notes a $5.2 million settlement by an employer whose employee caused a serious traffic accident while talking on her company-supplied cell phone. Details of the case appearing in a newspaper account describe a very typical scenario for employees who multi-task while driving. There is no mention as to whether the employer had a policy prohibiting or limiting employee cell phone use while driving, so the impact of such a policy on the employer’s liability is unclear.

  • Company’s can try to manage their liability by adopting a policy on cell phone use and then enforcing it. A policy should consider the following:
  • Directing employees to comply with all applicable state and local laws governing cell phone use. Banning cell phone use while driving.
  • Requiring employees to use hands-free devices while driving.
  • Providing company cell phones with hands free features.
  • Prohibiting the use of text message and e-mail features while driving.
  • Requiring employees to pull over to take phone calls.
  • Instructing employees to avoid or to terminate phone calls involving stressful or emotional conversations.
  • Limiting the scope of job descriptions for some positions exclude using cell phones while driving.
  • Prohibiting cell phone use in adverse weather or difficult traffic conditions.
  • Restricting driver cell phone use to brief conversations.
  • Emphasizing safety while taking phone calls on the road.

Employee Cell Phone Use: Adopt a Policy on Talking, Texting, and E-mailing while Driving

We have all witnessed dangerous driving maneuvers by individuals talking on cell phones. What if this driver is one of your employees? What if the employee causes an accident while conducting company business on a cell phone?

Employers may be liable for accidents where an employee’s job-related cell phone use contributed to the accident. Whether the cell phone use is within the scope of employment depends upon many factors including such things as the employee’s job duties, who provided the phone, when the accident occurred, whether it was a business call, and whether the employee was complying with the employer’s policy on cell phone use.

Don Heyrich at the Washington Labor, Employment & Employee Benefits Law Blog notes a $5.2 million settlement by an employer whose employee caused a serious traffic accident while talking on her company-supplied cell phone. Details of the case appearing in a newspaper account describe a very typical scenario for employees who multi-task while driving. There is no mention as to whether the employer had a policy prohibiting or limiting employee cell phone use while driving, so the impact of such a policy on the employer’s liability is unclear.

  • Company’s can try to manage their liability by adopting a policy on cell phone use and then enforcing it. A policy should consider the following:
  • Directing employees to comply with all applicable state and local laws governing cell phone use. Banning cell phone use while driving.
  • Requiring employees to use hands-free devices while driving.
  • Providing company cell phones with hands free features.
  • Prohibiting the use of text message and e-mail features while driving.
  • Requiring employees to pull over to take phone calls.
  • Instructing employees to avoid or to terminate phone calls involving stressful or emotional conversations.
  • Limiting the scope of job descriptions for some positions exclude using cell phones while driving.
  • Prohibiting cell phone use in adverse weather or difficult traffic conditions.
  • Restricting driver cell phone use to brief conversations.
  • Emphasizing safety while taking phone calls on the road.

Will the Supreme Court's Decision in LaRue Result in a "Slew of Meritless Litigation?"

The United State Supreme Court ruled that ERISA allows individual claims by plan participants for breach of fiduciary duty that result in losses to an individual account rather than only to the entire plan. In LaRue v. DeWolff, Boberg, & Assoc., Inc., an employee brought an ERISA claim against his employer who was the plan administrator of a 401k plan. The employee claimed $150,000 in losses to his 401k account caused by his the failure to make the changes the employee directed in the investments held in his account. The employee claimed that the failure to make the changes was a breach of fiduciary duty under ERISA. The Court noted the change in the retirement plan landscape from defined benefit plans to defined contribution plans necessitates the recovery of fiduciary breaches in a participant’s individual account. The Court did not decide whether the employer breached its fiduciary duty.

The effect of allowing breach of fiduciary duty claims by individual participants is yet unknown. John Phillips at The Word on Employment Law observes that “Many are predicting that the Court’s ruling will result in a slew of meritless litigation from employees whose 401(k) plans aren’t doing as well in a shaky economy.” Some additional observations about ERISA plan administration may help evaluate this premise:

  • Defined Contribution Plans typically identify the employer as the Plan Administrator but very few employers actually administer their plans.
  • The Employer acting as Plan Administrator will contract out investment and other day-to- day “administrative” activities to other providers such as banks, mutual funds, consultants, etc.
  • These other providers may or may not be “fiduciaries” within the meaning of ERISA. So ERISA-type claims by participants may not lie against them.
  • An ERISA fiduciary breaches its duty if it fails to discharge his duties with respect to a plan with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims.
  • An employer may limit its fiduciary liability by selecting competent expert advisors and then monitoring their performance. The Boston ERISA & Insurance Litigation Blog’s post on The Benefits of Relying On Investment Managers is a great summary of this concept. The DOL also has tips for selecting and monitoring service providers including consultants and auditors.
  • If other providers fail to perform there responsibilities their liability may be limited to contractual damages and subject to limitations of contractual indemnity. Employers should carefully review contacts with providers that limit liability of a provider with terms like “gross negligence.”
  • The result may be that the employer faces the ERISA claims alone and is left with contract claims against the providers for resulting damages.
  • ERISA provides for attorney’s fees for successful employee claims.

The answer may be that LaRue opens another avenue for lawsuits against employers, but an employer that carefully selects and monitors its relationships with pension plan providers will be in a better place to defend claims that it breached its fiduciary duty.

Will the Supreme Court's Decision in LaRue Result in a "Slew of Meritless Litigation?"

The United State Supreme Court ruled that ERISA allows individual claims by plan participants for breach of fiduciary duty that result in losses to an individual account rather than only to the entire plan. In LaRue v. DeWolff, Boberg, & Assoc., Inc., an employee brought an ERISA claim against his employer who was the plan administrator of a 401k plan. The employee claimed $150,000 in losses to his 401k account caused by his the failure to make the changes the employee directed in the investments held in his account. The employee claimed that the failure to make the changes was a breach of fiduciary duty under ERISA. The Court noted the change in the retirement plan landscape from defined benefit plans to defined contribution plans necessitates the recovery of fiduciary breaches in a participant’s individual account. The Court did not decide whether the employer breached its fiduciary duty.

The effect of allowing breach of fiduciary duty claims by individual participants is yet unknown. John Phillips at The Word on Employment Law observes that “Many are predicting that the Court’s ruling will result in a slew of meritless litigation from employees whose 401(k) plans aren’t doing as well in a shaky economy.” Some additional observations about ERISA plan administration may help evaluate this premise:

  • Defined Contribution Plans typically identify the employer as the Plan Administrator but very few employers actually administer their plans.
  • The Employer acting as Plan Administrator will contract out investment and other day-to- day “administrative” activities to other providers such as banks, mutual funds, consultants, etc.
  • These other providers may or may not be “fiduciaries” within the meaning of ERISA. So ERISA-type claims by participants may not lie against them.
  • An ERISA fiduciary breaches its duty if it fails to discharge his duties with respect to a plan with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims.
  • An employer may limit its fiduciary liability by selecting competent expert advisors and then monitoring their performance. The Boston ERISA & Insurance Litigation Blog’s post on The Benefits of Relying On Investment Managers is a great summary of this concept. The DOL also has tips for selecting and monitoring service providers including consultants and auditors.
  • If other providers fail to perform there responsibilities their liability may be limited to contractual damages and subject to limitations of contractual indemnity. Employers should carefully review contacts with providers that limit liability of a provider with terms like “gross negligence.”
  • The result may be that the employer faces the ERISA claims alone and is left with contract claims against the providers for resulting damages.
  • ERISA provides for attorney’s fees for successful employee claims.

The answer may be that LaRue opens another avenue for lawsuits against employers, but an employer that carefully selects and monitors its relationships with pension plan providers will be in a better place to defend claims that it breached its fiduciary duty.

Romance in the Workplace: Happy Valentine's Day

I consulted the on line Encarta Encyclopedia for the origins of Valentine’s Day and found the following description:

The holiday probably derives from the ancient Roman feast of Lupercalis (February 15), also called the Lupercalia. In an annual rite of fertility, eligible young men and women would be paired as couples through a town lottery. Briefly clad or naked men would then run through the town carrying the skins of newly sacrificed goats dipped in blood. The women of the town would present themselves to be gently slapped by the strips and marked by the blood to improve their chances of conceiving in the coming year.

In one sense, the holiday’s evolution to cards and candy has been well received, at least by the goat population. I don’t think Lupercalis is celebrated at the EEOC. Nonetheless, workplace romance gone bad accounts for a significant number of sexual harassment claims as noted on my prior post Fishing off the Company Dock: A Legal Perspective. Similar advice and anecdotal observations appear at the Ohio Employer’s Law Blog’s post on When office romances go bad and the Washington Labor, Employment & Employee Benefits Law Blog’s post on Romance in the Workplace & “Love Contracts”.

So what are the legal ins and outs of office romance and how can a business employ prophylactic measures to protect itself. Here is a list of things I can recommend:

Implement a Strong Policy Against Sexual and other Harassment

The EEOC has issued extensive guidance on sexual harassment policies and there ability to reduce an employer's liability for harassment.   One of the most critical components of such a policy is an effective complaint procedure to redress claims of harassment.

Develop a Policy on Office Romance without calling it "Fraternization"

It doesn't take a NASA scientist to realize organizations may need a policy addressing workplace romance (or maybe it does). According to Office Politics, thirty-five percent of companies have no formal workplace romance policy. Develop a policy, but avoid overly broad definitions and in particular the word "fraternize' which was the court's primary objection in the in Guardsmark case.

Train Supervisors

Supervisory training on sexual harassment can demonstrate a company's good faith attempts to comply with the law. Such training should explain the types of conduct that violate the employer's anti-harassment policy; the seriousness of the policy; the responsibilities of supervisors and managers when they learn of alleged harassment; and the prohibition against retaliation.

Proactively Evaluate and Confront Situations

Most employers are content to sit passively and watch "As the World Turns". Many will not act unless it "becomes a disruption". Consider some proactive steps. If the romance is between co-workers, make sure they understand that it cannot impact productivity. If it is between a supervisor and subordinate, evaluate whether there should be changes in the reporting structure. Don't automatically transfer or reassign the female in the relationship or you will risk a discrimination claim.

Employment Practice Liability Insurance: Five Things every HR Generalist should Know.*

Employment Practices Liability Insurance (EPLI) may be a relative bargain in the continued “soft” insurance market and employers should consider adding or increasing insurance coverage to protect against employment claims. EPLI insurance is somewhat quirky and the following are some considerations when evaluating policies:

  1. Coverage:  EPLI policies typically cover claims of wrongful discharge, workplace harassment and discrimination. Many offer a more comprehensive list of covered acts, including negligent hiring/supervision/evaluations, invasion of privacy, defamation and intentional infliction of emotional distress.  Coverage typically applies to claims made by full time employees so as to exclude those by part-timers, temporary, seasonal and independent contractors.  In comparing policies, look for one that has the most expansive coverage. 
  2. Exclusions.  EPLI policies exclude many claims based on the statute that creates the legal right or the activity that gives rise to the claim. Exclusions apply to the Fair Labor Standards Acts; the National Labor Relations Act; the Worker Adjustment and Retraining Notification Act (WARN); the Consolidated Omnibus Budget Reconciliation Act (COBRA); the Employee Retirement Income Security Act (ERISA); the Occupational Safety and Health Act (OSHA); the costs associated with providing "reasonable accommodation" under the Americans with Disabilities Act (ADA); as well as  claims arising out of downsizing, layoffs, workforce restructurings, plant closures or strikes. Punitive damages are always excluded. Carefully evaluate the excluded claims in light of your business practices. In the case of multi-state operations, be aware that some state laws create substantial employment rights that must also be evaluated under the policy language.
  3. Policy Limits and Deductibles: Policy limits and deductibles usually apply on a per claim and aggregate basis. For example, coverage may be limited to $250,000 for each separate claim with an overall aggregate cap of $1 million for all claims. Employers must formulate their insurance goals in setting the appropriate deductibles and limits. Some employers view EPLI insurance as catastrophic coverage and are willing to accept a high deductible that allows them to handle smaller claims themselves.  However, other employers are looking for more blanket coverage.
  4. Defense Costs, Selection of Counsel and Settlement: Defense costs are usually included within the EPLI policy’s limits, which has good and bad points. Many times, the legal expense is the largest cost to an employer in dealing with merit less claims. However, including defense costs means that every dollar an employer spends defending a claim reduces the amount available for settlement or to pay a judgment.  Since the existence of insurance coverage must be disclosed as part of discovery in most law suits, a plaintiff’s attorney will factor insurance coverage into his or her case evaluation. The defense cost feature may influence plaintiffs’ counsel to try to settle early, rather than force an employer to incur litigation costs that will only erode the insurance dollars available for potential settlement.  Employment claims often have significant employee relations ramifications making settlement a particularly important issue. Insurers view employment claims the same as any other insurance matter by evaluating only the potential for liability and the amount of damages. The employer and insurer may be at odds over settling a case. EPLI policies address this stalemate by either giving the insurer the right to settle without the employer’s approval or, more frequently, giving  an employer control over settlement, but adding a “hammer clause”. These clauses are designed to limit the insurer’s potential exposure if the policyholder passes up an opportunity to settle a claim recommended by the insurer.  Hammer clauses provide that if there is an offer to settle a claim that the policyholder refuses accept, then the insurer will not be liable for a subsequent settlement or judgment in excess of a rejected settlement amount.  
  5. Policy Types and Insurance Company Notification: EPLI policies are typically written on a “claims  made” basis meaning that the claim must be incurred during the coverage period and reported to the insurer during an extended reporting period. Since employment actions may take years to turn into a claims, an employer may be left with no coverage if the policy is dropped or tail coverage isn’t purchased.  Untimely notice to an insurance carrier can void coverage for and employment claim.

* Not intended to be Exhaustive.

New Proposed FMLA Regulations published by DOL.

The Department of Labor released the new proposed FMLA regulations on Monday, February 11, 2008. I am in the process of digesting the new regs and will post a summary shortly. Thanks to Michael Fox at Jottings By An Employer’s Lawyer for the early release tip.

Blogosphere version of a Chain Letter or Building Block of Cultural Evolution

Rush Nigut of Rush on Business tagged me.  The rules of “tag” are simple:

  • Link to the person that tagged you and post the rules on your blog.
  • Share 7 random and or weird things about yourself.
  • Tag 7 random people at the end of your post and include links to their blogs.

I wondered if this “tag” is a blogosphere version of a chain letter. I quickly did some research and discovered that it’s a meme. A meme (pronounced /mi:m/), as defined by memetic theory, constitutes a theoretical unit of cultural information, the building block of culture or cultural evolution which spreads through diffusion propagating from one mind to another analogously to the way in which a gene propagates from one organism to another as a unit of genetic information and of biological evolution. To avoid the bad luck that will befall me if I don’t send this “meme” on to seven other bloggers, I will dutifully comply.

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Risk Management in Employee Terminations: Sometimes the How is as Important as the Why.

What motivates a terminated employee to sue his or her employer is a complex issue. In my experience, the manner in which an employee is “fired” is at least as likely to lead to a lawsuit as the “reason” given for his or her termination. Many lawyers spend all their time on justifying the reasons for why an employee is being let go which are important because they form the basis for the legal defense. However, I believe that not getting sued at all is better for my clients than having a great defense.

I advocate planning both the “How” and the “Why” of an employee termination.  Managing the manner of termination reduces the risk of lawsuits and incidents of workplace violence. The following are ten suggestions I have on handling a workplace termination:

  • Treat the employee with dignity and respect. Don’t get personal in the termination meeting.
  • Avoid humiliation. Don’t make the employee do the walk of shame or leave your business under circumstances that lead others to think he or she stole from you or committed some other serious misconduct. I have several cases where the employee’s major motivation for suing is being lead to an exit escorted by a security guard while carrying a cardboard box containing personal items. Allow the employee to come back later to collect personal affects or clean out an office or locker.
  • Select an appropriate time and location. Avoid times and locations that are highly visible to other employees. Many employers select the end of the business day at the end of the work week, but this may be the wrong time for employees who may need access to support services like the EAP.
  • Consider giving a reason. When asked in a deposition why an employee sued, the most common answer I hear is that “I was never given a reason for being fired.” There may be legal circumstances for avoiding an explanation, but they are rare. Formulate a reason and articulate it to the employee. Reserve some latitude to supplement the reason, but at least have some explanation. Once given, don’t debate its merits, but listen to the employee’s response. You might hear something that makes you reconsider your decision, like “this all started when I refused to sleep with my supervisor”.
  • Plan your communication. Consider scripting what you will say and formulate responses to typical questions, like “Can I resign.” Don’t text message termination or layoff decisions unless there is just no other way to communicate. Consider a follow up letter that gives your reasons and preserves your right to supplement it with additional reasons. Don’t blame the decision on others like the “home office” or “management”.
  • Agree on a Reference, if possible. If the employee knows what the company will say in response to a reference request, then he or she can address it in an interview or on an application. If the reference is inconsistent then the employee won’t get a new job and will be more likely to sue the company.
  • Offer Assistance like the EAP or Outplacement. Consider resources that may help an employee with emotional problems or assist them in a job search.
  • Protect your employees and business assets. Plan the termination to protect your employees from violence in the workplace and your business assets from sabotage or damage, but don’t overreact. Armed guards and lock changing may not be necessary. Retrieving keys, credit cards, passwords and canceling computer access are.
  • Communicate with remaining employees. Plan some formal communication with other employees and individuals outside the company. This is difficult and uncomfortable, but necessary.
  • Control the rumor mill. Don’t allow gossip to incorrectly communicate any information.

Let’s face it, it’s a bad situation. But it is one that can be made worse through poor communication. Respect and empathy go a long way. Take for example the infamous Cheers episode entitled the Executive’s Executioner in which Norm becomes his employer’s designated terminator because he is so empathetic. Since no YouTube clip is available, the following is the dialog between Norm and his boss:

[Mr. Hecht, Norm's boss, confronts him in Cheers' restroom]
Mr. Hecht: We want you to be our corporate killer.
Norm: The guy who fires people?
Mr. Hecht: That's right. You see, we decided that terminating employees puts too much stress on our executives. We think you'll be perfect.
Norm: Why me?
Mr. Hecht: Because studies have shown that, uh, it's particularly humiliating when you're fired by somebody who's clearly and markedly superior to yourself. And, uh, that just wouldn't be the case with you, Norman. See, uh, you're just an ordinary Joe. As a matter of fact, we, uh, we checked out your homelife. You have absolutely nothing anyone could possibly envy or resent.
Norm: I'm honored, sir. But I, this, this sounds like a horrible job, frankly.
Mr. Hecht: It's a 300% raise and if you don't take it you're fired.
Norm: Sir, I will have you know that I cannot be bought... and I cannot be threatened; but you put the two together and I'm your man.

Retention Bonuses: Talent Management Tool for Businesses in Transition

Microsoft Corp. tendered an unsolicited takeover offer of $44.6 billion for Yahoo, Inc. As with any acquisition/merger, both businesses need to calm the troops by making assurance of job security. In today’s world, every employee knows that the buzz words like “business synergies” and “market overlap” mean layoffs for employees whose jobs are “redundant”. As reported by MSNBC,  Microsoft said” it sees at least $1 billion in cost savings generated by the combination, and intends to offer significant retention packages to Yahoo engineers, key leaders and employees.”

Retention Bonuses are an important talent management tool for all size companies when the organization faces uncertainty due to merger, bankruptcy or other business transition that creates uncertainty for employees. I have seen retention bonuses used successfully by businesses in financial hardship because of the loss of a large contract, exiting form bankruptcy protection, or to counter a competitors raiding of its talent. However, the communications and documentation of a bonus program must be carefully managed to avoid unintended consequences.

Kate DCamp takes the contrary view in her posting “Do Retention Bonuses Work? She believes that the money motivator almost never works:

In most situations, what works is specific to the problem diagnosed. In a business turnaround, tripling communications and sharing some of the "upside" can be very effective to keep critical talent. An opportunity to have more impact on the business and a chance to earn extra money by achieving business goals sends a clear signal about someone's importance to the company.

Dr. John Sullivan posting on “Retention Bonuses – Are they a good idea?” has a great laundry list of “unintended consequences” including:

  • Creating uncertainty in those who are not offered the bonus
  • Exacerbating a we verses them mentality in the case of a merger of two companies
  • Having those employees who will depart anyway conduct their job search on your time
  • Denigrating the principle that performance matters
  • Creating job security for those who may not deserve it

From a legal point of view, any bonus plan should be in writing with specific eligibility and trigger requirements. Careful consideration must be given to selection criteria to defend against discrimination claims. Bonus payments are treated as wages and subject to payroll taxes.

President signs Family Leave Provisions for Military Families

The White House announced that President Bush signed of the National Defense Authorization Act (H.R. 4986) which includes additional FMLA leave for military families.  Section 585 (full text set forth below) of the bill (similar to the one vetoed in December) adds two new FMLA-qualifying events, expanding FMLA to include employees caring for an injured service member as well as family members who have a family member called to active duty.

The DOL has summarized the provisions and indicated that the caregiver provisions of the law are effective immediately while the other provisions aren’t effective until DOL issued final regulations. The DOL is “working quickly” to prepare comprehensive guidance, and will require employers to act in good faith until guidance is issued. Employers should immediately adopt FMLA-type procedures for substitution of paid leave and notice as it applies to the new legislation.

Under the new law, FMLA-eligible employees will now be entitled to the following:

Caregiver Leave for an Injured Servicemember:  This benefit permits a “spouse, son, daughter, parent, or next of kin” to take up to 26 workweeks of leave to care for a “member of the Armed Forces, including a member of the National Guard or Reserves, who is undergoing medical treatment, recuperation, or therapy, is otherwise in outpatient status, or is otherwise on the temporary disability retired list, for a serious injury or illness.”

Family Leave Due to a Call to Active Duty:   This benefit provides 12 weeks of FMLA leave for “any qualifying exigency (as the Secretary [of Labor] shall, by regulation, determine) arising out of the fact that the spouse, or a son, daughter, or parent of the employee is on active duty (or has been notified of an impending call or order to active duty) in the Armed Forces in support of a contingency operation.”

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Classification of Workers as Employees or Independent Contractors: Five Things Every HR Generalist should know.*

The Manpower Employment Blawg post on $319 Million Fine for FedEx? highlights the enormous downside of misclassifying workers. There are many motivations to classify a worker as an independent contractor rather than an employee including payroll tax savings, benefit plan and insurance savings, increased workforce flexibility and headcount management to name a few. The test for worker classification isn’t crystal clear but there are some common errors. The first two points involve classification mistakes that are entirely avoidable and easily discovered by the IRS:

  1. Same Job but Different Classification.  If your employees are working next to your independent contractors, doing the same or similar jobs, you have a problem with classification. The problem becomes worse when the job being performed is an integral part of your business. I see this problem frequently in some industries such as  transportation, trade services  like telecommunications and HVAC, and construction.
  1. Retire or Fire Employee and then Rehire as Independent Contractor. Sometimes its attractive for both the employee and the employer to allow someone to “retire” and then be hired back as an independent contractor. The employee starts collecting a pension, social security and still has some income from the old job. There are many problems with this situation and it is easily discovered by the IRS since the worker will likely receive both a Form W-2 and Form 1099 from the same company in the same tax year.
  1. Misclassification has Benefits Plan and Insurance Issues.  A worker incorrectly characterized as an independent contractor may have been eligible to participate in your health, retirement and other benefit programs available to employees. In addition, the worker should have been covered under your worker’s compensation policy. Finally, there may be back wages for unpaid overtime, vacation and other benefits. On the other hand, incorrectly treating an independent contractor as an employee (although rare) has the opposite impact. The worker may have been provided medical and retirement benefits to which he or she was not entitled resulting in a violation of the terms of the plan.
  1. State Law Classification Test may Differ from Federal Law. As I have previously commented, state laws may differ from federal laws in classifying workers. Some states, like Pennsylvania, use a test that requires independent contractors to be free from control or direction over the performance of the services involved and be customarily engaged in an independent trade, occupation, profession or business. 
  1. Misclassification Fixes. The IRS provides for tax relief for misclassified workers if the employer can demonstrate a “reasonable basis” for treating a worker as an independent contractor rather than an employee. Reasonable Basis can be demonstrating as follows:
    • Reliance on court decisions or IRS rulings;
    • Prior IRS audit where similar workers were not reclassified
    • Treatment of workers as independent contractors by a significant industry segment;
    • Reliance on professional advice of a lawyer or accountant who knows the facts about your business.

Retirement Plan Blog post on What to do when an independent contractor is really an employee describing the pension plan self-correction procedures with the IRS.

* Not intended to be exhaustive.

Employer's Response to an "Inappropriate Remark" Can Avoid Legal Problems

In my previous post, I explained how a court can seize on one remark by a supervisor to infer a discriminatory motive for an employment decision. I have also commented that even a single remark, if sufficiently sever, can create a hostile work environment for the purposes of a harassment claim. What does this do to communication in the workplace? Perhaps The Boss on Dilbert could concoct a policy requiring legal pre-approval of workplace remarks. For the rest of us, we are better served by managing the situation after it occurs.

How an employer responds to an inappropriate remark can make all the difference in managing the legal fallout. I believe the ingredients of a response are (1) a succinct acknowledgement of the inappropriateness (but not necessarily the illegality) of the remark; (2) an apology from the company and the maker of the remark; (3) a reaffirmation that such conduct is not acceptable in the employer’s workplace; and (4) some appropriate remedial or disciplinary action.

Take for example, the Golf Channel’s suspension of anchor Kelly Tilghman for two weeks for saying that young players who wanted to challenge Tiger Woods should “lynch him in a back alley.” The Golf Channel’s Editor’s Note is a roadmap for handling the situation:

Editor's Note: The GOLF CHANNEL released the following statement on Jan. 9th:
The GOLF CHANNEL regrets the poorly chosen remarks made by Kelly Tilghman on a recent broadcast and, again, extends our apologies to anyone who was offended.
There is simply no place on our network for offensive language like this.
While we believe that Kelly's choice of words were inadvertent and that she did not intend them in an offensive manner, the words were hurtful and grossly inappropriate.
Consequently, we have decided to suspend Kelly for two weeks, effective immediately

Ms. Tilghman was completely contrite about her misstep, but some employees are not. Nonetheless, the employer must take action and oft times wade into difficult situations. Such an example is reported by Ann Belser in her Pittsburgh Post-Gazette article Ex-employee of Mellon loses religious bias suit.

The bank was sued for religious discrimination after it disciplined an employee for his offensive reply to e-mail sent by fellow employees inviting him to a luncheon hosted by Mellon’s gay, lesbian, bisexual and transgender employee group. His note stated that he did not want to be lumped in with other groups including those that “have this sickness called gay or lesbian.”

After a complaint to HR, the employee was told that his reply was offensive and that he was required to treat his co-workers with respect. He replied, “The true friend of gays and lesbians is the one who points them to help.” For this, the employee was disciplined. He then filed a religious discrimination claim based upon his Orthodox Jewish religious beliefs. The court dismissed the case, finding that the employee was disciplined because his actions were offensive, not because of his religion.

The Limits of Customer Preference in Hiring and Promotion Decisions and Helping Managers Communicate with Employees

A recent federal court of appeals decision in Simple v. Walgreens Company is a case study on two important points. First, how the pressures of marketing in a competitive retail environment can overtake the limits of discrimination laws. Second, how a supervisor’s communication with an employee can create an issue of discrimination.

Like many retailers, Walgreens tracks demographic data and relates it to each retail store. At issue in the case was whether the racial demographic data was used in promotion decisions to assign personnel to “black” or “white” stores depending on the race of the employee. The court noted as follows:

There is no evidence that [the successful white candidate] was more qualified to manage the store in Pontiac[, Michigan] than the plaintiff, who had twice her experience as an assistant manager, the mandatory stepping stone to store manager. But she is white, and the store is in a predominantly white neighborhood, while the plaintiff is black and so was twice offered a "black" store--and when the store manager's job at the "white" store fell vacant he was ignored.

The evidence of the company’s racial motivation was found in a supervisor’s comments to the plaintiff in an effort to make him feel better:

"I may have stated that Pontiac was possibly not ready to have a black manager. It is well known in this area that some of the smaller, outlying towns have some very racist tendencies, and I was simply trying to make [the plaintiff] feel better because my feeling was he may not have been very happy working there."

From this statement, the court concluded as follows:

The significance of [the supervisor's] remark about racism in Pontiac lies in the fact that as an experienced Walgreens store manager (it appears that she had been one for at least four years) she was undoubtedly aware of what [the district manager] was looking for in a store manager in Pontiac, and one interpretation of the remark is that the plaintiff's race would bar him from consideration…. The plaintiff would not feel "happy" among Pontiac's white racists, which is a standard euphemism for refusing a job to someone of a different race from the people he would be associating with. Racial segregation is obviously a form of racial discrimination.

The presumption underlying “customer preferences” is that people prefer to interact with those of the same race, gender, religion, or other characteristic. Employment decisions are justified by appealing to a target demographic group. Courts have universally rejected customer preference as a basis for employment decisions except in the narrow case where it is a Bona Fide Occupational Qualification (BFOQ).

The attorneys at Godfrey & Kahn have a great post analyzing the role of customer preference in health care marketing called Can We Use Gender in Our Hiring Decisions? The Discrimination Bona Fide Occupational Qualification (BFOQ) Applied to Health Care.  Fay Hansen’s post Recruiting on the Right Side of the Law describes the pressures of retail establishments to market an image through their sales associates and the resulting discrimination issues.

President Bush joins Blogosphere

The Associated Press reports that Bush Administration blogging Mideast trip and notes that “Everybody's doing it, so why not the White House? President Bush's team is joining the blogosphere, planning regular postings during his Mideast trip.”   The blog can be found at Let the comments begin!

Ford Motor Company and UAW Settle Class Action Race Discrimination Suit based on Biased Testing Program

Ford Motor Co., along with two related companies and a national union, will pay $1.6 million and provide other remedial relief to a class of nearly 700 African Americans to settle a major race discrimination lawsuit brought by the U.S. Equal Employment Opportunity Commission (EEOC). The EEOC had charged in the litigation that a written test used by Ford and the UAW, Visteon and Automotive Components Holdings (ACH) to determine the eligibility of hourly employees for a skilled trades apprenticeship program had a disproportionately negative impact on African Americans.

The EEOC in its Press Release  touts two of its initiatives. First, the E-RACE Initiative (Eradicating Racism And Colorism from Employment), a national outreach, education, and enforcement campaign to raise public awareness about new and emerging race and color issues in the 21st century workplace. Further information about the E-RACE Initiative is available on the EEOC’s web site. Second, the EEOC issued a new Employment Testing Fact Sheet which cites the Ford case.   The Fact Sheet is not particularly illuminating from a legal or policy standpoint, but it does highlight the agency’s interest in employer testing practices.

There are general legal restrictions on the use of employment testing (whether pre or post employment) in addition to the general prohibitions on discrimination found in Title VII and the Pennsylvania Human Relations Act. The Uniform Guidelines on Employee Section Procedures prohibit the use of a test or selection process that has an adverse impact on individuals in a protected class unless the test has criterion-related, content and construction validation studies. The validation studies must consist of empirical data demonstrating that the test is (1) predictive of performance of important elements of job performance; (2) contains content which tests important aspects of performance on the job; and (3) consists of procedures that assess identifiable characteristics that have been determined to be important to job performance.

We have previously blogged on the subject of Pre-employment testing at Employment Screening and Background Checks - Part III.

But Names will Never Hurt me...Not so for Racial Slurs

As to our previous post on taking seriously complaints of racial harassment, thanks to Jon Hyman at the Ohio Employer’s Law Blog who posted the EEOC’s press release and commented on the case. The press release details the types of harassment as follows:

The EEOC charged that Daniels [the employee] was the target of persistent verbal abuse by coworkers and a supervisor whose racial slurs and offensive language included calling him the “N-word” and saying “we should do to blacks what Hitler did to the Jews” and “if the South had won then this would be a better country.”  Daniels was also subjected to multiple physical threats, such as lynching and other death threats after he reported the harassment.

Commentators have observed that the settlement amount paid [$2.5 million] “seems excessive for someone who was subjected to words, no matter how offensive they might be”. I know what they are driving at because, in many contexts, the law expects people to have a thick skin as it relates to the free expression of ideas (no matter how offensive).   However, unlawful harassment  arises from conduct that is severe or pervasive enough to create a work environment that a reasonable person would consider intimidating, hostile, or abusive.

The severity and the pervasiveness are the focus of the legal analysis. This is a very fact sensitive inquiry. For example, the New Jersey Supreme Court has held that some racial slurs are so historically offensive that their use in the workplace, even once, can lead to liability for an employer who doesn’t respond appropriately. A single utterance of an epithet can create a hostile work environment if it is view as “severe” and it is aimed at the individual rather than a generalized comment. I believe the weight of court authority would probably evaluate both the severity and the pervasiveness of the racial comments and that one comment might not be sufficient to create a hostile work environment. Certainly the use of racial slurs by a decision maker is evidence of discriminatory motive in adverse employment decisions as noted by the Supreme Court in Ash v. Tyson Foods.

Why did Lockheed pay $2.5 million to settle this case? The words were severe, the words were threats directed at an employee, and the company didn’t take appropriate remedial action.

Not Taking Complaints of Race Discrimination Seriously can be Costly

When an employee complains about how co-workers are treating him or her it is never appropriate to respond, “That’s just boys being boys, and that’s the way it is here at [insert defendant company’s name].”

According to media accounts that is how Lockheed handled complaints of racial harassment that included being called derogatory names and being threatened by co-workers.  Lockheed settled for a record $2.5 million (the largest settlement of an individual race discrimination case filed by the EEOC).

Discrimination claims involving harassment by co-workers are some of the more manageable HR situations. However, if the first point of contact for a complaint doesn’t treat the allegations seriously, the employer loses its ability to manage the situation. Employers have a good defense to harassment claims if the following are present: an effective complaint procedure; an adequate investigation into the complaint; and prompt and appropriate remedial action.

The effectiveness of the complaint procedure is greatly enhanced if first line supervisors and managers are trained to treat seriously conversations with or comments by employees that may later be characterized as complaints of discrimination.

New I-9 Form now Mandatory

Effective December 26, 2007, employers were required to use the new version of the I-9 Form. The new form and instructions are available on line. Highlights of the changes in acceptable documentation were previously posted: Revised I-9 Form Issued: Changes Acceptable Documentation.

EEOC allows Employers to Coordinate Retiree Plans with Medicare

The EEOC issued final regulations that create a specific exemption from the Age discrimination laws (ADEA) allowing employers to coordinate (meaning alter, reduce or eliminate) health benefits for retirees who become eligible for Medicare. The EEOC regulations describe the exemption as follows:

Some employee benefit plans provide health benefits for retired participants that are altered, reduced or eliminated when the participant is eligible for Medicare health benefits or for health benefits under a comparable State health benefit plan, whether or not the participant actually enrolls in the other benefit program. Pursuant to the authority contained in section 9 of the Act and in accordance with the procedures provided therein and in Sec. 1625.30(b) of this part, it is hereby found necessary and proper in the public interest to exempt from all prohibitions of the Act such coordination of retiree health benefits with Medicare or a comparable State health benefit plan.

According to the NY Times, 10 million retirees rely on employer-sponsored health plans as their primary source of coverage or as a supplement to Medicare. With the rising cost of healthcare, many employers were considering the elimination of retiree benefits. The motivation for employers to eliminate retiree health coverage was greatly increased following a ruling by the Third Circuit Court of Appeals in 2000. In its decision in Erie County Retirees Association v. County of Erie, the Court held that the ADEA required that health benefits offered to Medicare-eligible retirees must be the same, or have the same cost to the employer, as benefits offered to employees under age 65. The ruling prohibited an employer from taking into account Medicare coverage in providing health benefits to retirees. Employers scrambled to justify plan designs that almost universally coordinated with Medicare.

In 2004, the EEOC issued proposed regulations that created an exemption in response to the Erie County decision. The American Association of Retired Persons (AARP) filed suit and won an injunction barring the EEOC from implementing the exemption. On appeal, the same Third Circuit Court of Appeals that decided Erie County ruled that the EEOC had properly issued the exemption under its authority in the ADEA. AARP has sought an appeal to the US Supreme Court.

The EEOC exemption gives employers an important cost control option in designing retiree health benefit programs. Barring an unexpected ruling by the U.S. Supreme Court, the uncertainty created in this area should subside.

Acknowledging the End of 2007: Why or Why Not?

Since I am a relative newcomer to the blogosphere, I tried to follow the lead of my counterparts in recognizing the end of the year. I looked around and what I learned is there are no traditions. Most blogs let the year expire without any fanfare or even acknowledgment.

Under “Modern Practices”, January 1st marks a period of remembrance of a particular passing year and includes the making of New Year’s resolutions. The history of resolution is recounted at the GoalsGuy. There are Lists of Top Ten New Year’s Resolutions like the one prepared by Kimberly & Albrecht Powell at Pittsburgh (David Letterman’s 2006 list is all we can refer to now)

There as some good posts on New Year’s Resolutions in the HR World as follows:

My approach will be reflecting on the blessings of the year with my family and hoping for a great 2008. Happy New Year!

NLRB Rules that Employees have No Right to Use Employer E-mail for Union Solicitations and Announces New Standard for Discriminatory Policy Enforcement Charges

One December 16, 2007, the Board issued its much anticipated decision in Guard Publishing Company d/b/a Register Guard and Eugene Newspaper Guild, CWA Local 37194 holding an employer did not violate section 7 by maintaining a policy that prohibited employees from using the employer’s e-mail system of any “non-job-related solicitations.”

The NLRB’s 3-2 decision also announced and applied a new standard for determining whether an employer has violated the act by discriminatorily enforcing its policies to disadvantage protected union-related activity. The new standard distinguishes between personal nonwork-related messages and “group” or “organizational” messages such as a union. Therefore, “discrimination under the Act means drawing distinctions along Section 7 lines.”

In Guard Publishing, the employer had a written policy prohibiting e-mail use for non-work-related solicitations. However, the employer allowed several such communications like jokes, party invitations, request for services such as dog walking, etc, but it never allowed e-mail use for solicitation by or on behalf of outside organizations other than the United Way. The employer issued two warnings to an employee who sent three union-related e-mails, which lead to the charge of discriminatory enforcement of the policy.

The Board majority held that two of the three e-mail communications were direct solicitations to join the union and violated the policy; however, the third message was not a solicitation, merely a clarification of events surrounding a union event. Therefore, under the newly announced standard, the employer did not discriminate along section 7 lines when it disciplined the employee for the two union solicitation e-mails since it had never allowed employees to use its e-mail system to solicit on behalf of any other outside group. However, the employer’s enforcement of the policy with respect to the third e-mail which was not a solicitation was unlawful.

The new standard should have an important impact on employer’s e-mail policies and charges related to discriminatory enforcement of employer’s policies.

Employee/Independent Contractor Misclassification under State Laws

Most of the Human Resources world looks to federal law when it considering the classification of a worker as an employee or an independent contractor. The IRS and most federal employment statutes use a common law rules which analyze the degree of control and the degree of dependence in the relationship between the business and the worker. The IRS recommends using Form SS-8 for this determination; however, the usefulness of this process is marginal.

To make matters more difficult, state laws also impact worker classification using sometimes differing legal standards. The post –gazette NOW Business reports that FedEx Grounds was fined $190,000 by the Massachusetts Attorney General for misclassifying 13 drivers as independent contractors. The Massachusetts test for an independent contractor differs focusing on three factors: the degree of control; work outside the usual course of business of the company; and the person engaging in a business that is customarily conducted as an independent trade or profession.

Pennsylvania has similar test for independent contractors which requires that the individual be free from control or direction over the performance of the services involved and be customarily engaged in an independent trade, occupation, profession or business. The impact of misclassification frequently appears in unemployment and workers’ compensation cases, but also had important tax and other compliance issues.

The state law employment classification issue may well be fertile ground for multistate litigation and class actions. Employers face real difficulties in complying with 50 states laws on employment classification along with a nebulous federal standard. Likewise, I don’t see how a worker could be classified as an employee for state law purposes and an independent contractor under federal law.

Health Insurance Reforms: First Dominos are Set to Fall

BusinessWeek reports that the California State Assembly passed a major health care reform plan that would expand coverage to almost 70% of the state’s uninsured at a cost of $14.4 billion. Under the Governor’s proposal, everyone would be require to buy minimum health insurance coverage. Insurers could not deny coverage based on age or medical condition and would be required to spend 85% of premium dollars on actual patient care. Revenue to fund the reform would come from taxes on hospitals, cigarettes and employers who do not provide a minimum level of health insurance.

Pennsylvania’s Governor has a similar Health Care Reform Act, the highlights of which are as follows:

  • Establishes a basic health insurance program for employees of small low-wage employers and uninsured adult individuals, without waiting periods and pre-existing condition exclusions
  • Creates a “Fair Share Tax” on all employers equal to 3% of payroll through 2010 and increasing to 3.5% thereafter.
  • Provides for a small employer tax credit for first 5 years
  • Provides a tax credit for all employers that offer a minimum level of coverage to all employees who work 30 or more hours per week based on the out of pocket cost to the employee and level of employee participation
  • Requires insurers offering small group plans to:
    • use modified community rating in setting rates taking into account only age, geographic region, and family composition
    • vary rates by a factor no greater than 33%
    • maintain a medical loss ratio of no less than 85%

These reforms are coming and they will impact employers by mandating a level of minimum coverage for employees and by taxes those employers who don’t offer coverage. Keep tabs on Pennsylvania’s Health Care Reform at the Governor’s website dedicated to this project.

Responding to EEOC and State Agency Discrimination Charges: Five Things Every HR Generalist should know.*

The EEOC receives over 75,000 discrimination charges annually each of which requires a response by an employer.   How companies respond to charges varies greatly. In the legal community there are two schools of thought on the scope of EEOC responses. The first approach follows a minimalist path under the rationale that anything sent to the EEOC is “free discovery” or commits to a defense before all the facts are fully developed. The second approach provides a more detailed response with the goal of getting rid of the claim more quickly. The approach chosen will depend on an evaluation of the claim and the employer’s defenses. The following should be assessed in determining how your company will respond to an EEOC charge or state commission claim:

1.      Time Limitations for Charges and Lawsuits: It can take years for a charge to turn into a lawsuit. During this time, potential back pay is mounting, witnesses are disappearing, and memories are fading. EEOC discrimination charges must be filed within 300 days of the discriminatory action (or 180 days in states do not have discrimination statutes and investigatory agencies). Lawsuits must be filed by the employee within 90 days after the EEOC issues a right to sue letter. It is impossible for me to interpret the EEOC’s data on charge resolutions, but my experience is that the EEOC does not decide many cases and charges remain dormant for long periods of time when the parties don’t move them forward. The delay can work to the advantage of an employer if the employee (or his or her attorney) loses interest in the charge. When the EEOC ultimately closes the case and issues a right to sue letter, the employee may never act on it by filing a lawsuit. In Pennsylvania, the PHRC has a similar track record. Likewise, an employee must file a lawsuit within 2 years of the PHRC’s closing of the complaint.

2.      Shaping the Defense: An investigation of the charge should lead to formulation of a strategy for responding to the EEOC. At that point your defense is limited by your prior response. Inadequately investigated charges and poorly written position letters can severely hamper an employer’s defense. I have seen situations in which “home made” responses gave away or limited important legal defenses.

Information sent to the EEOC may be disclosed to the employee in the course of the investigation and the entire file may be subpoenaed once a lawsuit is filed. The minimalist approach might be appropriate if the facts are bad and you are looking for a quick settlement. A detailed response may be right if you want to convince the EEOC or the employee’s attorney that the case has no merit. I personally don’t like to “lie in the weeds” and hope the employee will go away.

3.      Using Affidavits to Preserve Evidence: Creating an institutional memory of the facts underlying your defense to an EEOC charge is worth considering. People come and go with amazing frequency. So, tracking them down (years later) and hoping they will remember the events with great detail is a risk. If a witness’s recollection is important to your defense, have them sign an affidavit.  Affidavits also keep witnesses from changing their stories as their allegiances change.

4.      Record Retention: Once a charge is filed, a company has an obligation to preserve tangible and electronic records that relate to the employee’s claims. The scope of records may include e-mails, personnel file and other records for the employee and comparable employees. Inadvertent destruction of records even pursuant to a policy can have grave consequences to an employer’s defense including court sanctions, prohibitions on presenting a defense, and jury instruction allowing an adverse inference to be drawn from the absence of the record. The jury may be allowed to presume that a missing or destroyed record would have favored the employee.

5.      Trial Use of EEOC Determinations: Many employers are surprised to learn that an EEOC’s finding of probable cause may be admitted as evidence in a discrimination trial and considered by a jury. As noted by Michael Fox at Jottings by an Employer’s Lawyer, some courts recognize the imperfection of allowing jury consideration of EEOC determinations. Nonetheless, it is powerful evidence when a government agency believes that an employer engaged in discrimination, making it all the more important to carefully tailor your response.

* Not meant to be exhaustive.

Year End Bonuses and Gifts: Watch Out for Wage & Hour Mistakes

Many employers traditionally provide year end bonuses and holiday gifts for their employees. Bonuses may be included in a nonexempt employee’s regular rate depending upon the manner in which the bonus is calculated and the company’s prior communication. Inclusion in the regular rate impacts overtime calculations and payments.

Bonuses paid to nonexempt employees are included in the determination of the employees’ regular rate under section 778.208 unless the bonus falls into one of several exceptions. The bonuses are allocated to the pay period and added to other wages paid to nonexempt employees and then divided by the hours worked for the same period to determine the new regular rate under the methodology described in section 778.209. For bonuses earned over more than one work week, the bonus must be allocated to pay periods to which the bonus applies and the regular rate recalculated. If overtime was worked during this period, the overtime rate must be revised to be time and a half the recalculated regular rate that includes the bonus payment. This is a nightmare.

Department of Labor regulations provide for several exclusions. Among these excludable bonus payments are discretionary bonuses, gifts and payments in the nature of gifts on special occasions, contributions by the employer to certain welfare plans and payments made by the employer pursuant to certain profit-sharing, thrift and savings plans. These exemptions are discussed in Section 778.211 Discretionary Bonuses, Section 778.212 Gifts and Holiday Bonuses, Section 778.213 Qualified Profit Sharing and Savings Plans, and Section  778.214 Other Qualified Plans.  Bonuses which do not qualify for exclusion from the regular rate as one of these types must be totaled in with other earnings to determine the regular rate on which overtime pay must be based.

Typically any bonus announced in advance and tied to work performance, hours or other productivity will not qualify for an exemption.  There three ways to manage the recalculation problem, other than utilizing qualified plans:

1. Holiday Bonuses: The Holiday Gift and Bonus exemption under section 778.212 allows for the exclusion from calculation of an employees “regular rate” of pay “sums paid as gifts; payments in the nature of gifts made at Christmas time or on other special occasions, as a reward for service, the amounts of which are not measured by or dependent upon hours worked, production, or efficiency…”   The following sets forth some of the parameters of the exclusion:

If the bonus paid at Christmas or on other special occasion is a gift or in the nature of a gift, it may be excluded from the regular rate under section 7(e)(1) even though it is paid with regularity so that the employees are led to expect it and even though the amounts paid to different employees or groups of employees vary with the amount of the salary or regular hourly rate of such employees or according to their length of service with the firm so long as the amounts are not measured  by or directly dependent upon hours worked, production, or efficiency. A Christmas bonus paid (not pursuant to contract) in the amount of two weeks' salary to all employees and an equal additional amount for each 5 years of service with the firm, for example, would be excludable from the regular rate under this category.

2. Discretionary Bonuses: This is an area of DOL audit scrutiny and should not be used on a regular or aggressive basis. Truly discretionary bonuses are not included in the regular rate of pay under section 778.211, if both the fact that payment is to be made and the amount of the payment are determined at the sole discretion of the employer at or near the end of the period and not pursuant to any prior contract, agreement, or promise causing the employee to expect such payments regularly. The following sets forth some of the parameters of the exclusion:

For example, any bonus which is promised to employees upon hiring or which is the result of collective bargaining would not be excluded from the regular rate under this provision of the Act. Bonuses which are announced to employees to induce them to work more steadily or more rapidly or more efficiently or to remain with the firm are regarded as part of the regular rate of pay. Attendance bonuses, individual or group production bonuses, bonuses for quality and accuracy of work, bonuses contingent upon the employee's continuing in employment until the time the payment is to be made and the like are in this category. They must be included in the regular rate of pay.

3. Percentage Total Earnings Bonus: Bonuses based on a percentage of the nonexempt employee’s total earnings under section 778.210 do not result in a recalculation of the regular rate because overtime is already been accounted for in the calculation.   Under this method, the bonus is described as a percentage of the nonexempt employee’s total (W-2) earnings, thereby including both regular and overtime payments and obviating the need for recalculation of the regular rate.

Inclement Weather Policies: Don't Get Lost in the Storm

Many employers struggle with business closings and delays necessitated by inclement weather. I recommend adopting a policy that addresses at least the following three areas:

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

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

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

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

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

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

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

Employers are not required to pay an employee who is a no show based on road closures. An employee who can prove the employers "knowing and intentional" violation of the law may recover lost pay, be reinstated or have discipline revoked, and may collect attorneys fees and costs.

The law does not apply to the following jobs: drivers of emergency vehicles, essential corrections personnel, police, emergency service personnel, hospital and nursing home staffs, pharmacists, essential health care professionals, public utility personnel, employees of radio or television stations engaged in the gathering and dissemination of news, road crews and oil and milk delivery personnel.

Mere Presence of Pornography in the Workplace: I never tell war stories, except one.

There is only one war story I ever tell because I don’t talk about my client’s problems with anyone no matter how humorous they might be.   The Connecticut Employment Law Blog and  Ohio Employer’s Law Blog have postings on an employer’s liability for the “mere presence” of pornography in the workplace. All I can say is sometimes the most obvious things are overlooked.

About ten years ago, I  was asked by corporate counsel to conduct sexual harassment training at a series of distribution centers. At one remote location space was tight so the plant manager had set up rows of chairs in the receiving department. What had escaped his notice was on the wall of the receiving department behind the podium from which I was to make my presentation was a collage of every Playboy Centerfold for the preceding 20 years. The pin up shrine went from floor to ceiling and encompassed an area about 40’ X 40’.  I thought I was on candid camera.

My first reaction (well maybe my second) was to cancel the training, but it was obvious that this company was in dire need of it.  In any event, I also realized that I had hit the mother lode of future business in defending  this company from discrimination claims.  I decided to orient the chairs in the other direction and go on with the training. Admittedly, I downplayed some training materials on the problems with sexually explicit materials in the workplace.

The training went surprisingly well, with no mention of the “wall”.  Perhaps it had been there so long, no one even notice it anymore, but you can bet it would have been the centerpiece of any sexual harassment claim.  After the training was over, I read the plant manager the riot act.

The next time I was in that plant, no mention was made of the shrine but it was gone.  In its place was one of those signs detailing the number of days since the last lost time accident.   I wasn't sure I had gotten my point across to this company until I drove out of the parking lot.  It was then that I saw the three guys from the  receiving department  standing in an open garage bay giving me the finger. I thought again about the mother lode of future business.

Corner Office No Place for Workplace Romance: The Legal Risk of Sexual Favoritism

The CEO of the American Red Cross resigned after disclosure of a relationship with an employee.  The Red Cross Board of Governors stated that his resignation was requested for using “poor judgment” that “diminished his ability to lead the organization in the future”.   It amazes me that this type of leadership gaff can be repeated across so many organizations.

Strictly speaking, “sexual favoritism” is not unlawful sex discrimination so long as the relationship is consensual and does not discriminate against other men and women in the workplace. The EEOC’s Guidance on Employer Liability for Sexual Favoritism which was last updated in 1999 states as follows:

It is the Commission's position that Title VII does not prohibit isolated instances of preferential treatment based upon consensual romantic relationships. An isolated instance of favoritism toward a "paramour" (or a spouse, or a friend) may be unfair, but it does not discriminate against women or men in violation of Title VII, since both are disadvantaged for reasons other than their genders.

Strictly speaking, sexual favoritism by a high level executive is an employee relations problem and an unacceptable legal risk. Organizations cannot rely on the relationship remaining consensual and hazard the legal and public relations consequences.

Nonetheless, office romance is more prevalent than I ever appreciated until I researched a prior post on Fishing off the Company Dock: A Legal Perspective. Here are some of the proactive steps an employer can take to anticipate and manage the situation:

Implement a Strong Policy against Sexual and other Harassment

The EEOC has issued extensive guidance on sexual harassment policies and there ability to reduce an employer's liability for harassment.   One of the most critical components of such a policy is an effective complaint procedure to redress claims of harassment. Obviously, the avenue for making a complaint cannot be exclusively with a supervisor.

Develop a Policy on Office Romance without calling it "Fraternization"

According to Office Politics, thirty-five percent of companies have no formal workplace romance policy. Develop a policy, but avoid overly broad definitions and in particular the word "fraternize' which was the court's primary objection in the in Guardsmark case.

Train Supervisors

Supervisory training on sexual harassment can demonstrate a company's good faith attempts to comply with the law. Such training should explain the types of conduct that violate the employer's anti-harassment policy; the seriousness of the policy; the responsibilities of supervisors and managers when they learn of alleged harassment; and the prohibition against retaliation.

Proactively Evaluate and Confront Situations

Most employers are content to sit passively and tolerate the employee relations fall out of an office romance. Many will not act unless it "becomes a disruption". Consider some proactive steps. If the romance is between co-workers, make sure they understand that it cannot impact productivity. If it is between a supervisor and subordinate, evaluate whether there should be changes in the reporting structure. Don't automatically transfer or reassign the female in the relationship or you will risk a discrimination claim. 

OSHA Rule on Personal Protective Equipment Requires Employers to Pay.

The OSHA PPE Final Rule generally requires employers to pay for PPE, and sets forth specific exceptions where employers are not required to pay for such equipment.    Employers are responsible for paying for the minimum level of PPE required by the standards and must amend their policies within six months.  If an employer decides to use upgraded PPE to meet the requirements, the employer must pay for that PPE. If an employer provides PPE at no cost, an employee asks to use different PPE, and the employer decides to allow him or her to do so, then the employer is not required to pay for the item. The employer must also pay for the replacement of PPE used to comply with OSHA standards except in circumstances in which an employee has lost or intentionally damaged the PPE issued to him or her, an employer is not required to pay for its replacement and may require the employee to pay for such replacement.

The rule enumerates the following exceptions to the employer pay requirement:

1. Non-specialty safety-toe protective footwear and non-specialty prescription safety eye wear. Employers are not required to pay for ordinary safety-toe footwear and ordinary prescription safety eye wear, so long as the employer allows the employee to wear these items off the job-site.

2.   Metatarsal protection. Employers are not required to pay for shoes with integrated metatarsal protection as long as the employer provides and pays for metatarsal guards that attach to the shoes.

3.    Logging Boots. Employers are not required to pay for the logging boots required by 1910.266(d) (1) (v), but leaves the responsibility for payment open to employer and employee negotiation.

4.   Everyday clothing.  OSHA recognizes that there are certain circumstances where long-sleeve shirts, long pants, street shoes, normal work boots, and other similar types of clothing could serve as PPE. Nonetheless, employers are not required to pay for such everyday clothing. Similarly, employers are not required to pay for ordinary clothing used solely for protection from weather, such as winter coats, jackets, gloves, and parkas. In the rare case that ordinary weather gear is not sufficient to protect the employee and special equipment or extraordinary clothing is needed to protect the employee from unusually severe weather conditions, the employer is required to pay for such protection. However, clothing used in artificially-controlled environments with extreme hot or cold temperatures, such as freezers, is not considered part of the weather gear exception.

The most interesting part of OSHA’s final rule, as noted by Michael Fox at Employer’s Lawyer, is that it took 8 years to promulgate the rule.

Layoffs and Reductions in Force: Five Things every HR Generalist should know.*

As credit related losses ripple through the financial and construction sectors, many organizations will be forced to consider job cuts. Selecting employees for lay off must be collaboration between managers and human resources. HR must be able to influence the process to reduce legal risks and assuage the anxiety of remaining employees:

1)     Establishing Business Justification and Layoff Selection Criteria:

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

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

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

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

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

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

3)     WARNA Obligations:

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

4)      Severance Benefits and Releases:

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

5)     Communications Plan:

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

*Not meant to be exhaustive.

Why Wage & Hour Class Action Lawsuits are so Attractive to Plaintiffs' Lawyers

A state court judge ordered Wal-Mart to pay over $36.5 million in attorneys’ fees to the plaintiffs’ lawyers who represented the 186,000 present and former Pennsylvania employees in a class action lawsuit filed in state court. The total hit to Wal-Mart was $187.8 million which breaks down as follows:

  • $78.8 million in a jury verdict for off the clock work by employees.
  • $62.3 million in liquidated damages under PWPCL.
  • $10.2 million in interest.
  • $36.5 in attorney’s fees and costs to the Plaintiff’s lawyers.
  • $?? in Wal-Mart legal fees to its own legal counsel.

The employee class members were ordered to pay their lawyers $12.7 million in fees out of the damage award of $141.1 million plus $10.2 in interest. The average employee award for the 186,000 class members appears to be $745.16 (less taxes and withholding). 

Michael Donovan of Donovan Searles, LLC was the lead plaintiffs counsel. As reported by the Philadelphia Inquirer, “Donovan's firm will not get the entire $49.2 million. He and his firm were assisted by other attorneys across the nation who share discovery strategies and expertise in these large and data-intensive cases. All together, 26 attorneys and 17 paralegals worked five years on the plaintiffs' case.” 

In awarding the fees, Judge Mark I Bernstein noted that “Plaintiffs' success has delivered a message to employees and employers across the commonwealth, which proclaims that work without pay is not tolerated in Pennsylvania." Appeals to the award are pending.

Sexual Harassment Policy & Practice

The Ohio Employment Law Blog has a couple of posts that highlight court decisions involving the employers’ sexual harassment policies and practices. The posts put bring home the “real life” implications of an employer’s actions.

In EEOC v. V&J Foods, the court considered the language of an employer’s sexual harassment policy and found it to be “unreasonable” thereby invalidating the employer’s defense to a hostile environment sexual harassment claim. The case makes several good points about sexual harassment policies. The policy must be reasonable in light of the employment circumstances which means cookie cutter policies may not be enough. The policy must be tailored to the employer’s business. The court noted several problems:

  • A policy is not effective for those employees who do not speak English unless it is translated into a language that can be understood.
  • A policy must be tailored to the educational level of the average employee such as part timers, high school students, etc.
  • There must be more than one individual or class of individuals with whom a complaint may be filed so that a victim’s sole remedy doesn’t begin with the alleged harasser.
  • For a toll free hot line reporting mechanism to be effective, it should be answered by trained personnel who identify themselves as part of the human resource department.   

I have review hundreds of these policies in employee handbooks.  I almost always find some important deficiencies that need to be addressed.   Here are the typical problems I see:

  • Lack of dual avenues for filing complaints including one outside the chain of command.
  • Requirements that the complaint be in writing in order to be investigated.
  • Failure to advise complainants and witnesses that they will be protected from retaliation.
  • Assurance about confidentiality of the allegations, to the extent possible, while conducting an effective investigation.

The EEOC has scant guidance on the content of sexual harassment polices; however, there is one controversial position taken by the EEOC with regard to informing employees of their legal rights to file a complaint:

It also is important for an employer's anti-harassment policy and complaint procedure to contain information about the time frames for filing charges of unlawful harassment with the EEOC or state fair employment practice agencies and to explain that the deadline runs from the last date of unlawful harassment, not from the date that the complaint to the employer is resolved.

In Engle v. Rapid City School District, the Court reviewed an employer’s response to a complaint of sexual harassment, specifically, the adequacy of the remedial action. This post lists factors to consider upon receipt of a complaint.

I have previously posted on sexual harassment issues as follows:

High Profile Sexual Harassment: Outsiders must Investigate

Sexual Harassment Complaints require Prompt and Carefully Planned HR Actions

Revised I-9 Form Issued: Changes Acceptable Documentation

A revised I-9 Employment Verification Form was issued by the Homeland Security that includes the following changes to the Form I-9 process:

  • Five documents have been removed from List A of the List of Acceptable
    • Documents:Certificate of U.S. Citizenship (Form N-560 or N-561)
    • Certificate of Naturalization (Form N-550 or N-570)
    • Alien Registration Receipt Card (I-151)
    • Unexpired Reentry Permit (Form I-327)
    • Unexpired Refugee Travel Document (Form I-571)
  • One document was added to List A of the List of Acceptable Documents:
    • Unexpired Employment Authorization Document (I-766)
  • All Employment Authorization Documents with photographs have been consolidated as one item on List A:
    • I-688, I-688A, I-688B, I-766
  • Instructions regarding Section 1 of the Form I-9 now indicate that the employee is not obliged to provide his or her Social Security number in Section 1 of the Form I-9, unless he or she is employed by an employer who participates in E-Verify.
  • Employers may now sign and retain Forms I-9 electronically. See instructions on page 2 of the Form I-9.

Note: The Spanish version of Form I-9 may be filled out by employers and employees in Puerto Rico ONLY. Spanish-speaking employers and employees in the 50 states and other U.S. territories may print this for their reference, but may only complete the form in English to meet employment eligibility verification requirements.

The electronic form is available for fill in and download.  The PDF versions in English and Spanish are also available.  Download I-9Download I-9 (Spanish version) 

Options for Bridging the Funding Gap in a High Deductible Health Plan

Rising costs have motivated many employers to adopt High Deductible Health Plans (HDHP) increasing the amount paid by employees for health care coverage. The Towers Perrin 2008 Health Care Cost Survey notes that employees are responsible for 22% of the cost of coverage or about $2000 per employee plus the cost of deductibles and co-pays. The average out of pocket expense for an employee is has doubled in the last 5 years.

Employers face employee relations challenges when attempting to pass along the out of pocket increases to employees without offering some funding assistance on either a transitional or ongoing basis. There is a significant learning curve for many of the accounts both in terms of evaluating the amount of employee/employer contributions and navigating the claims/reimbursement process.

Several options exist for employers to bridge the funding gap created by migrating to a HDHP from a more traditional indemnity arrangement including the following:

Health Savings Accounts (HSA) HSAs can be funded by both voluntary tax deductible employee contributions and/or tax exempt employer contributions allowing the combination of employer employee contributions to fully fund the deductible (up to the IRS limit). The contributions remain in the HSA and accumulate interest on a tax free basis. Distributions are tax free as long as the funds are used for Qualified Medical Expenses. An HSA may be moved to successive employers or used in retirement. The advantages or an HSA are portability; tax-free contributions, accumulations, and distributions; ownership of the account by the employee. The disadvantages of HSAs are that they can only be used with a HDHP; must be uniformly funded by employers; may discourage employees from seeking medical treatment; and are limited in their use with other types of accounts like FSAs and HRAs. Other problems have been identified in a previous post.

Medical Savings Accounts (MSA) MSAs may be established by self-employed individuals or employees of small employers (less than 50). The MSA is a tax exempt trust held by a financial institution and operates like an HSA.  Employers may contribute to an Archer MSA, but if they do, the employee may not contribute for that year. Contributions are limited to 75% of the annual HDHP deductible. Employers must make uniform contributions to their employees if they choose to contribute. The additional advantage of an MSA is that it may be established by an employee without employer sponsorship.

Flexible Spending Accounts (FSA)  Employees may contribute to an FSA on a pre-tax basis as part of an employer sponsored cafeteria plan. Both employers and employees can contribute to an FSA.      FSAs fund Qualified Medical Expenses, except health insurance premiums and long term care expenses. The big disadvantage of an FSA is that any money remaining in the account that is not used to reimburse expenses is forfeited. There is no accumulation of money in the account from one year to the next.

Health Reimbursement Arrangements (HRAHRAs may only be funded by employers on a uniform basis for all participating employees. Employees may not contribute. There are no limits on the amount of employer contributions, but HRA funds may only be used for Qualified Medical Expenses which include health insurance premiums. HRA contributions are tax free and unused amounts may be carried over to subsequent years. HRAs are not portable and do not accumulate earnings on account balances. They compare favorably with FSA because there is no use it or lose it. An employer may offer both an HRA and FSA, but there are complex ordering rules coordinating the interaction of FSA and HRA payments and prohibitions on funding the HRA with FSA contributions.

Combined Accounts (MSA, HRA and FSA)   It is possible, but complex, to offer multiple arrangements in an attempt to bridge the funding gap. There is IRS guidance on the interaction of HSAs and other Health Arrangements.

Obviously, legal advise is paramount in plan design and drafting.

Carnival of HR # 18

The latest installment of Carnival of HR is hosted by HRO Manager, a blog dedicated to human resources outsourcing information and comment. There are several interesting posts including one by HR Wench lamenting about the lack of support for HR professionals in a post entitled “There is No HR for HR.” Along similar lines, Debra Owen of 8 hours and a lunch posts on “how sensitive should HR be?

The Interviewing and Hiring Process: Five Things every HR Generalist should know*.

Many managers view the efforts of HR to bring order to the hiring process as meddlesome, bureaucratic and dilatory. “Just find me someone to fill this position” is the usual approach. There are several things that an HR generalist can bring to the table in terms of education and organization without slowing the process:

Uniformity of Process: Companies should develop an interview process and follow it. Haphazard hiring practices are difficult to defend from discrimination claims. Every interview process includes the following actions:

  • Identify in writing the minimum qualifications of the position and review the job description.
  • Establish criteria for an “applicant” including whether you will consider unsolicited resumes, internet inquiries, and recruiter referrals.
  • Identify the qualified applicants and the process for selecting the most qualified.
  • Develop a base set of job related questions for interviewers.
  • Develop a simple applicant assessment form.
  • Document the reasons for selection of the successful candidate.
  • Make sure the process is followed.

Documentation:   In response to any government investigation or as part of discovery in litigation, an employer will be required to turn over its written documentation of the hiring and interview process. To the extent possible, I recommend controlling the documentation that is created so that there are no smoking guns. Many legitimate hiring selections are called into question because of things that are written by interviewers in the margins of resumes. Try to review the interview forms for inappropriate comments and send them back for revision, if necessary. Furthermore, an “institutional memory” is created by written documentation that survives the departure of interviewers and other personnel.

Prohibited Questions:   Many state anti-discrimination laws and regulations prohibit certain types of employment inquiries. For example, the Pennsylvania Human Relations Act (43 P.S. Section 955 (b) (1)) prohibits employers from eliciting information or using any form of application that contains questions or entries concerning race, color, religious creed, ancestry, age, sex, national origin, past handicap or disability. Federal law prohibits asking for disability information except as part of a voluntary questionnaire under an affirmative action plan for the purpose of applicant tracking.  Otherwise, it is unlawful to discriminate and ask for medical information prior to an offer of employment under federal law.  There is not an absolute prohibition on soliciting other protected class information, but it should be done only as to a bona fide occupational qualification.

Applicant Communication:   Many organizations take a minimalist approach to communications with applicants foregoing acknowledgment of applications and rejection letters. While this correspondence may seem like a recruiting nicety, it serves a legal purpose by defining the applicant pool for a particular position.   If the parameters of consideration are not defined, enforcement agencies will look to all applicants to analyze discrimination claims.  At a minimum an employer should identify who was considered for a position and how long an individual’s application will remain active for future consideration. This exercise is very important for government contractors that may face OFCCP audits; particularly in light of the agency’s definition of “internet applicant”.

Training:   Very few managers and supervisors are good interviewers. Asking irrelevant questions, seeking unlawful information, or alienating good prospects are only some of the problems. Without training, many managers do not obtain enough information to critically evaluate the abilities of the applicants they have interviewed. Training on the interview process and techniques might prove invaluable to reducing turnover created by poor hiring decisions.

*Not meant to be an exhaustive list.

Health Plan Renewal Time: 2008 Employee Health Care Costs Expected To Exceed $9,300 Per Employee

The average corporate health benefit expenditure in 2008 will be $9,312 per employee—an increase of 7 percent over 2007—with annual per-employee contributions exceeding $2,000, according to Towers Perrin's 2008 Health Care Cost Survey. Some highlights of the survey are as follows:

  • Employers are expecting to subsidize 78 percent of next year's premium costs, and employees will have to cover the remaining 22 percent, plus usage-based co-pays, deductibles and co-insurance.
  • Employee contributions, on average, will jump by $156 per employee per year to $2,040, an 8 percent increase that is roughly twice that of annual employee merit increases.
  • Analyzing the data by coverage level, the average reported 2008 cost of annual medical coverage will be:
    • Employee-only coverage:              $4,704
    • Employee-plus-one coverage:       $9,660
    • Family coverage:                         $13,704

The Towers Perrin Survey also tracks the cost variations across “High-Performing” and “Low-Performing” Companies noting a cost disparity per employee per year of $8,844 and $10,320 which is explained as follows:

According to the Towers Perrin data, these [high-performing] companies have clear strategies in place to drive improvements in employees’ overall health and wellness, engagement in health care decisions and health-related behaviors, as well as to identify problems early and take advantage of opportunities for improvement by understanding the current state of their benefit program and the health care system overall.

To the extent that high performance is enhanced by plan design, I am seeing a strong trend to High Deductible Health Plans coupled with either Health Savings Accounts, Medical Savings Accounts or Health Reimbursement Arrangements. The pros and cons of some of these arrangements have been discussed previously in Problems with Health Savings Accounts (HSA)

There is also a clear trend among employers to adopt wellness programs with financial incentives for behavior changes.  Some of the issue surrounding wellness programs have been discussed in Wellness Programs Must Comply with HIPAA Restriction;Successful Wellness Programs Implemented by D&E Communications Sizing Up Obesity: Can Wellness Programs Curb BMI?

First Baby Boomer applies for Social Security: Employers Beware

On October 16, 2007, Kathleen Casey-Kirschling, a former teacher from New Jersey, applied for benefits over the Internet becoming the nation’s first baby boomer to make a claim for Social Security. The Chicago Sun-Times reports that Casey-Kirschling was born one second after midnight on January 1, 1946, making her the first baby boomer -- a generation of nearly 80 million born from 1946 to 1964.

The social, economic, and political implications of this “demographic tsunami” will have dramatic impact on employers through worker shortages and increased government spending. Tony Allison has a great summary of these issues in his article The Boomer are Coming, The Boomers are Coming- Demographic Tsunami is at the Gate, where he comments on impact of government spending and Medicare costs.

From a legal perspective, the greatest impact on employers of baby boomer retirements may be on employee benefit plans. I would expect that government efforts to cover the sky rocketing expenses of the Medicare Program and Social Security will result in increased cost shifting to already strained employer health and retirement plans.

Cost shifting mechanisms already exist from Medicare to employer sponsored health plans in the form of Medicare’s Secondary Payer Rules (MSP). MSP rules act as coordination of benefit provisions shift first payer status to medical plans, auto insurance policies and worker’s compensation insurance coverage. It is likely that these types of coordination of benefit approaches may increase. For example, H.R. 2549 would extend Medicare Secondary Payer to recover Medicare payments from workers' compensation settlements.

The Medicare Secondary Payer Rules apply when an employee or an employee’s spouse is covered by or entitled to Medicare and the group health plans of employers with 20 or more employees as more fully described in extensive regulations. However, there is an excellent booklet entitled Medicare and Other Health Benefits: Your Guide to Who Pays First which describes the various scenarios that can arise. The biggest issues for employers arise from two areas. First, an employer/insurer may not discriminate in terms of coverage or charge more for individuals who are covered or entitled to coverage under Medicare. Second, Employers and insurers are prohibited from offering a financial incentive not to enroll or to terminate enrollment in a group health plan so as to make Medicare a primary payer.

Employers will need to be increasingly cautious in plan design to anticipate the impact of future government efforts to shift the cost of medical and retirement benefits to private employers.

No-Match Program on Indefinite Hold

Daniel Schwartz of the Connecticut Employment Law Blog reports that New Employment Verification Rules on Indefinite Hold After Court Ruling. The decision bars the Social Security Administration from sending out an estimated 114,000 no-match letters covering some 8 million employees. The primary basis for the judge’s opinion seems to be the likelihood that legally authorized workers might be fired because of their inability to resolve the discrepancies giving rise to the no-match notification. As the NY Times notes, government audits found significant problems with the data base:

In a December 2006 report cited in the court documents, the inspector general of the Social Security Administration estimated that 17.8 million of the agency’s 435 million individual records contained discrepancies that could result in a no-match letter being sent to a legally authorized worker. Of those records with errors, 12.7 million belonged to native-born Americans, the report found.

We have previously posted on the no match and other immigration issues as follows:

Four Reasons to take a "Wait and See" approach to using E-Verify

No-Match Letters Place Undue Burden on Employers

When is a "Safe Harbor" not so Safe: New Immigration Regulations for No-Match Letters

Reconciling Hazelton's Illegal Immigrant Ordinance and the Nation's Predicted Worker Shortage

Wage & Hour Class Action Lawsuits: Little Mistakes add up to a lot of Money

A Federal Court judge in Philadelphia added another $62.3 million to a previous $78.5 million class action award for Wal-Mart workers who were working off the clock. The additional award was under Pennsylvania’s Wage Payment and Collection Law (WPCL) which, among other things, imposes penalties on employers that don’t pay wages within 30 days of the time they are due. The WPCL penalty is the greater of $500 or 25% of the unpaid wages. The additional award pays each of the 125,000 class members $500 each.

Class action wage & hour lawsuits pose a significant risk to large employers as observed in a recent BusinessWeek article. Class action cases are attractive to employees and lawyers because dollars grow quickly and attorney’s payoffs are big. Some of the specific aspects of these suits are as follows:

1)      Calculations of Damages under the FLSA.    Awards to class members consist of back pay (for a period of two or three years); back pay may be doubled for willful violations as liquidated damages; interest and attorneys fees. Sometimes examples can better make a point. Employers can mismanage lunch periods by automatically deducting 30 minutes a day from employee’s pay. An employee may later allege he or she regularly worked through lunch. For an employee, who is paid $12.00 per hour and who work only 40 hours per week, the mismanaged 30 minute lunch yields 2 ½ hours of unpaid overtime each week. That's fifteen dollars of unpaid overtime a week, for 52 weeks, for 2 years, for one employees or a total back pay of $1,560. Then the amount is doubled for a grand total of $3,120. For a small employer with 20 employees that amounts to $62,400.00. For Wal-Mart with 100,000 employees, it amounts to $624 million.

2)    Ease of Proof in Class Actions. Class action claims involve challenges to employer’s policies or practices that implicate a large group of similarly situated individuals. There is a relaxed standard of proof for the individual employee. Therefore, the particular facts of each employee’s situation are less important, so long as the policy or practice applied to them.

3)    Attorneys Fees. The FLSA provides for attorneys fees award to successful litigants. Typically legal fees in a class action dwarf recoveries by individual class members. Contingent fees are typical. Imagine 20-30% of $62.3 million. Although classifying the fees as “excessive” is the subject of some debate. The race to the courthouse for some class action cases has lead to allegations of kickbacks and other attorney misconduct.

I have previously posted on wage and hour issues that could be the subject of class action claims.

The Five Most Common Wage and Hour Mistakes

Wage and Hour Violations: What are the Consequences?

Ten Tips for Surviving a Wage and Hour Audit

High Profile Sexual Harassment: Outsiders must Investigate

Yesterday’s $11.6 million jury verdict in the Isiah Thomas/New York Knicks sexual harassment case is generating tremendous blog commentary. Here’s what some are saying about the Knicks’ lawsuit and its “Wake-Up Call” potential:

Kris Dunn at HR Capitalist has a post on Fire, Suspend or Play On?... Isiah Thomas Trial Verdict.... Since the start of the trial, Kris has been soliciting opinions on how the Knicks should address Mr. Thomas’ employment. Now that the verdict is in, it is easier to address his employment and many sports analysts are calling for his termination.

Rush Nigut at Rush on Business has a post on Could the Knicks Have Avoided Sexual Harassment Claims? Rush gives some good advice on avoiding sexual harassment claims in the context of Knicks approach to the sexual harassment claim.

Daniel A. Schwartz at Connecticut Employment Law Blog has a post on Sexual Harassment Prevention Checkup - The Basics of Training and Posting Dan highlights the importance of supervisor training.

Michael Fox at Jottings by and Employer’s Lawyer has a post Isn't It Time for Basketball Yet?. Michael analyzes the jury’s deliberations.

What I take away from this case is that the investigation was botched because a high level executive used his power to derail or dissuade the company from doing an adequate investigation. When a company’s executives or board members stand accused of harassment, the investigation needs to be done by outside experts. Only an experienced outsider can effectively accomplish what needs to be done to protect the company and manage the whole situation including the following:

  • Taking company management out of the hot seat by planning and conducting an appropriate, unbiased, and comprehensive investigation.
  • Squelching the accused executive’s ability to influence, obfuscate, or bully the investigator.
  • Asking all the hard questions of both the accuser and the accused without fear of reprisal. (You might lose a client, but that’s part of deal).
  • Mitigating the emotion involved in accusations of misconduct to avoid really bad reactionary decisions. (Like firing the accuser or accused before conducting an investigation).
  • Preserving relationships among and between executives and the board by adding independence to the conclusions of the investigation.
  • Advising the decision makers (typically the board of directors) on the import of the facts, necessity of confidentiality, appropriateness of prompt remedial action, and prohibition on retaliation.

HR Carnival #17

The Pennsylvania Employment Law Blog participates in and will host the HR Carnival on May 28, 2008. The HR Carnival is the brain child of Evil HR Lady who was the subject of a recent and exclusive interview by this blog.   This weeks carnival is hosted by  The Work Clinic a blog in the UK and features a compilation of interesting HR related posts from different perspectives.. Continue Reading...

Gender Stereotyping: Disparate Treatment of Workers with Caregiver Responsibilities

The Sunday News features an article In job searches, women take hit that discusses the gap in legal protections under federal and Pennsylvania law for women when it comes to prohibitions against discrimination based on marital status or family status. The article contains the following legal summary that screams out for context and clarification:

When you apply for a job in Pennsylvania, an employer is prohibited from asking you about, among other things, your age, race, religion or ancestry.

But he can ask you if you have children. He can ask you when and if you plan to have kids. He can ask if you're married, single, separated or divorced.

And he can refuse to hire you on the basis of your marital or familial status.

In Pennsylvania, there is nothing illegal about treating employees and prospective employees differently, based on marital or family status. You can be refused a job or refused a promotion simply because, for instance, you're a single parent.

While it is technically correct that it is not unlawful to discriminate based on marital or family status, there are legal prohibitions against employment practices that have a disparate impact against individuals based on their gender or disability.  Gender Stereotyping is a recognized and growing basis for discrimination claims.  An employer’s gender stereotyping can be demonstrated by interview questions, workplace comments and attitudes about a woman’s role in family matters.  For example, in Back v. Hastings on Hudson Union Free Sch. Dist., the court ruled that comments made about a woman's inability to combine work and motherhood -- in particular, that a woman cannot "be a good mother" and have a job that requires long hours or that a mother who received tenure "would not show the same level of commitment [she] had shown because [she] had little ones at home," constituted direct evidence of sex discrimination under a stereotyping theory. Other cases follow similar reasoning.

The EEOC is also seeking to fill this void with its recently published Enforcement Guidance on Unlawful Disparate Treatment of Workers with Caregiving Responsibilities in which the agency acknowledges that there are no express protections from discrimination based solely on parental or caregiver status. However, unlawful disparate treatment may arise when a caregiver is subject to discrimination based on sex and/or race or because of his or her association with an individual with a disability. The Guidance highlights some common circumstances that the EEOC believes might constitute unlawful disparate treatment:

The EEOC is serious about its enforcement actions.  On September 27, 2007,  the EEOC announced that it has filed suit against Bloomberg L.P. for demoting a class of women and reducing their pay after they announce pregnancies and after they took pregnancy leave.  An EEOC trial attorney is quoted in the announcement  concerning sexual stereotyping:  "This case exemplifies an increasing trend where employers engage in stereotyping of female caregivers and act to limit their employment opportunities.  Pregnant women and mothers who work hard and perform well should be valued for their work, not penalized for their gender."

Employers should ask only job related interview questions, treating male and female applicants identically. Avoid stereotyping the roles of men and women in your interview, evaluation and promotion procedures. Don’t get caught off guard with a claim of family responsibility discrimination.

The Ultimate Interview Question may Lead to the Ultimate Deposition Question: How is this Job-related?

Frank Roche of the KnowHR Blog posits his ultimate interview question: “Do you recline your airplane seat? Explain.”  While not listed as one of the top 15 interview questions, I found his inquiry rather interesting.  I followed the links to find that there are a number of interview chat forums that highlight the off-beat interview questions of companies like Google, Microsoft and eBay. These job applicants face question like how many golf balls can fit inside a school bus. Or how much you would charge for washing all the windows in Seattle. Or why, exactly, manhole covers are round and not, say, square.

I wondered if this was the product of a slow day in the recruiting department or if there was some method to this madness. According to a article Want a job at Google? Try these brainteasers first, there is a rationale:

Seemingly random questions like these have become commonplace in Silicon Valley and other tech outposts, where companies aren't as interested in the correct answer to a tough question as they are in how a prospective employee might try to solve it. Since businesses today have to be able to react quickly to shifting market dynamics, they want more than engineers with high IQs and good college transcripts. They want people who can think on their feet.

Most behavioral based interviewing techniques are not quite as far out, but they still ring of subjectivity in assessing an applicant’s fitness for a particular job. How do these far out interview questions bode from a legal perspective?

Commentaries on Best Practices for Interviewing identify both job relatedness and uniformity as hallmarks of an appropriate process. These are also paramount in defending legal claims arising from a selection process. The key for employers is to demonstrate that the questions are accurate predictors of job performance and that all applicants had the same chance to succeed. Obviously, the more preposterous the question, the more a judge or jury might question a company’s hiring practices and infer discrimination.

Unsuccessful applicants often point to the subjectivity in an interview process as a basis of discriminatory treatment. Courts note that subjective considerations are not unlawful per se, but obviously subjective decision making provides an opportunity for unlawful discrimination.  See, e.g., Santana v. City and County of Denver. Furthermore, the OFCCP and EEOC abhor subjectivity as a basis for employment decisions because of its potential to have a disparate impact on a protected class. This has been noted in previous postings. Systemic Discrimination: EEOC's Latest Tactic to Redress Discrimination and OFCCP Audits Focus on Systemic Discrimination.

So, if you are an interviewer who wants to find out whether an applicant reclines his or her airplane seat and why, be prepared to explain [in court] how the inquiry might be job-related and ask the same question to everyone you interview.

Freedom of Speech in the Workplace: Think again.

The United States Constitution is often invoked as a source of workplace rights, particularly as it relates to freedom of speech, freedom from unreasonable search and seizure, and even the right to bear arms. A quick civics lesson reveals that the Bill of Rights creates limits on the government’s actions to curb constitutional rights but does not typically restrain private employers from trampling constitutionally guaranteed freedoms.

Generally, employees of private sector employers have no constitutional “free speech” rights in the workplace, so take pause before you wrap yourself in the flag and speak your mind. In both Geary v. U.S. Steel Corp., 456 Pa. 171, 319 A.2d 174 (1974) and Wagner v. General Elec. Co., 760 F.Supp. 1146 (E.D. Pa. 1991), Pennsylvania courts rejected wrongful discharge claims based on First Amendment protects asserted by employees who were terminated for criticisms of their employers.

Gary Huber of the News Journal has an article on Freedom of speech? ... better ask your boss which explores the circumstances of  firings for employees expressing their opinions. Employee comments need not be made at work. Employees have been fired for blogging and posting on MySpace.   Some sites offer advice on how to avoid termination for blogging.

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

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

  • Authority to comment to news media on official matters
  • Authority to communicate with or about customers and vendors
  • Use of work time
  • Use of employer’s computer and other resources
  • Disclosure of confidential or proprietary information
  • Prohibition on content of communication that is disloyal, discriminatory, inflammatory, threatening, or disparaging of the company, its employees, customers, products, etc.

Since many corporations have blogs, they have also developed blogging policies and guidelines. IBM’s Blogging Policy is an excellent example of one employer’s approach.

Sexual Harassment Complaints require Prompt and Carefully Planned HR Actions

As noted by the hr capitalist, sexual harassment complaints can lead to adverse publicity, undermine management's effectiveness, and cost companies big bucks. Although this situation cannot be entirely avoided, it can be managed with effective investigation of complaints.

Complaints directed at high level executives present particular problems for HR.  The executive absolutely cannot have any direct or indirect control over the investigation.  Claims involving the company's CEO may require HR to go directly to the board of directors to protect the company.  Obviously, such action puts HR in an impossible position, so consider using outside counsel to manage the situation.

The EEOC's Questions & Answers for Small Employers on Employer Liability for Harassment by Supervisors has the following summary about what an employer should do when it receives a harassment complaint:

How should an employer investigate a harassment complaint?

An employer should conduct a prompt, thorough, and impartial investigation. The alleged harasser should not have any direct or indirect control over the investigation.

The investigator should interview the employee who complained of harassment, the alleged harasser, and others who could reasonably be expected to have relevant information. The Guidance provides examples of specific questions that may be appropriate to ask.

Before completing the investigation, the employer should take steps to make sure that harassment does not continue. If the parties have to be separated, then the separation should not burden the employee who has complained of harassment. An involuntary transfer of the complainant could constitute unlawful retaliation. Other examples of interim measures are making scheduling changes to avoid contact between the parties or placing the alleged harasser on non-disciplinary leave with pay pending the conclusion of the investigation.

The Link in EEOC's Q&A takes you to the EEOC's Enforcement Guidance which provides a rudimentary outline for an effective investigation, including Questions to Ask Parties and Witnesses, making Credibility Determinations, and Taking Corrective Action.  It is a good starting point for formulating your investigation strategy.

A recent appellate court decision in Dominic v. DeVilbiss Air Power Co., makes clear that an employer's "good faith" efforts in investigating a complaint can limit its liability. The court enumerated good-faith efforts engaged in by the company:

  • Adopted a formal zero tolerance anti-harassment policy.
  • Launched a total of four separate investigations into the employee’s claims.
  • Limited the direct communication between the employee and the offender.
  • Encouraged the employee to report any incident of retaliation to management
  • Requested a written statement from the employee and a witness list.
  • Questioned all the employee’s witnesses.
  • Consulted with outside counsel to ensure that it was adequately investigating the employee’s claims.
  • Counseled the offender.
  • Set up sexual harassment training requiring all salaried personnel to participate.

Pennsylvania Whistleblower Law protects Employees of Public Bodies

The Whistleblower Law prohibits discharge or discrimination by a "public body" against an employee who makes a good faith report to the employer or appropriate authority concerning an instance of wrongdoing or waste. Claims must be filed within 180 days of the violation of the law. Employers may defend the whistleblower claim by proving that the employment action was for a separate and legitimate reason, and not merely pretextual. The aggrieved employee must show some nexus between the complaint and the violation of the law. Golaschevsky v. Commonwealth Dept of Environmental Protection.

Why we Blog?

Tony Karrer of eLearning Technology has an older post on Top Ten Reasons to Blog and Top Ten Not to Blog. This post has a great summary of blogger motivations collected from those who do it. 

We all have our reasons. For example,  there are a lot of business reasons for doing it, but that's not what sustains my efforts. From my perspective, blogging is social networking in an intellectual forum (and without the drunken photos of MySpace and FaceBook). 

There is an amorphous network of human resource bloggers out there whom I will probably never meet face to face (thanks to the restraining order they filed). I find their posts thought provoking, but also fun.  The network also has a regular carnival which moves around to different blogs, its competitive with HR Power Rankings, its creative with cool aliases like Execupundit  and  Evil HR Lady, but mostly it shares ideas about human resources subjects from different perspectives.

I thank those who have read, commented and referred to this blog.

What to Do when an Employee asks you about "Decertifying the Union"

The Lancaster New Era has an interesting article entitled "Worker strikes down union at Lancaster parts maker" which describes a twenty-three year old employee's motivations to decertify the Steelworker's union which had represented employees at the plant for 37 years. By a vote of 11-6, the employees voted to become nonunion for reasons which may be typical for many employees (particularly for Generation Yers):

The key issue in the 2005 strike was the Steelworkers' desire to keep Mac-It a "closed shop," meaning hourly workers who were covered by the union contract had to be union members.

Management wanted to delete the "closed shop" provision, contending it caused some workers to leave Mac-It and made it hard to recruit new ones.

"We wanted people to have a choice," Stillman said. "This is America. People should have a choice."

Walton concurred with management. He wasn't happy that he had to join the Steelworkers.

He wasn't happy that 1.3 percent of his gross pay, including overtime and bonuses, was deducted for union dues.

And he wasn't happy that the union contract, not his productivity, set his pay, and that the contract, not his willingness to take initiative, set what tasks he could perform.

"How to Guides" for decertification appear on several websites, like the National Right to Work Foundation. Union decertifying is governed by the National Labor Relations Act and begins with the filing of a decertification petition supported by 30 percent of the employees in the unit covered by the union. The NRLB imposes time frames on filing a decertification petition that generally coincide with contract expiration. The process of certifying and decertifying a union are almost identical, except for the role that an employer is permitted to take in the decertification process.

When approached by an employee who asks "how to get ride of the union" employers must contain their glee and realize their role is limited as follows:

  • An employer may not initiate, instigate, solicit, encourage or actively assist in the filing of a decertification petition. Promoting decertification is impermissible because these activities interfere with employees' free choice.
  • An Employer may provide "Ministerial Assistance." If an employee asks a management representative how to remove the union, the representative may lawfully inform the employee of the decertification process.
  • Once a petition has been filed, an employer may actively campaign to decertify the union. An employer may give employees arguments for voting against the union; communicate its views in writing, including handouts, posters and letters; and otherwise do anything it is permitted to do in a recognition campaign. 

Employers must tread carefully in the decertification process so as not to invalidate the efforts of their employees.   A union may challenge a decertification vote on the basis of employer interference. The decertification petition may trigger other employer rights associated with the withdraw of recognition of the union as the bargaining agent for the unit. These are complex legal issues that depend on careful evaluation of the facts and circumstances.

Strictly Speaking Equal Employment Opportunity Means Neutrality

Certainly the Congressional policy underlying Title VII encourages efforts to improve employment conditions for minorities and women.  However, sometimes employers lose sight of the fact that the discrimination laws are written to prohibit employment decisions based on factors such as race, gender, age, religion, disability, etc.  Instead of being a neutral factor, these protected classifications can end up playing a role in employment decisions under the auspices of voluntary affirmative action plans, diversity programs, or even "risk management".   The result can be a claim for "reverse discrimination".

There are legal restrictions on preferences that take into account race, sex and national origin under employment policies like voluntary affirmative action and diversity programs. EEOC regulations outline the circumstances under which an employer may undertake a voluntary affirmative action program. Courts typically apply a three-part test to evaluate voluntary affirmative action plans under Title VII. First, there must be a manifest imbalance in the relevant workforce. Second, the plan must be temporary, seeking to eradicate traditional patterns of segregation. Finally, the plan cannot “unnecessarily trammel the rights” of non-beneficiaries. See, e.g., Johnson v. Transportation Agency, Santa Clara County.  Recently, in Decorte v. Jordan,  a federal appeals court ruled that a cultural-diversity report constituted  a voluntary affirmative action plan which was evidence of reverse discrimination because the plan had a 'focus on race in employment decisions and an intent to achieve a desired racial balance."

Favoring a protected class under notions of "risk management" is reverse discrimination.  It is true that reverse discrimination cases constitute only a small fraction of total discrimination complaints received by the EEOC, but that doesn't make this practice legal. I am surprised by how many companies will select non-minority employees for layoff in a reduction in force or discipline believing that they have eliminated potential discrimination claims.  See, e.g., McDonald v. Santa Fe Trail Transp. Co.   Likewise, hiring only employees in a protected class doesn't avoid discrimination litigation.  For example, the EEOC sued L.A. Weight Loss Centers alleging that the company engaged in a pattern or practice of disparate treatment against men in its recruiting, hiring, and assignment of employees. In its suit, the EEOC also charged that LAWL disciplined and ultimately terminated an employee, a trainer with the company, in retaliation for attempting to hire male applicants and for her complaints that LAWL failed to hire qualified male applicants because of their gender.

There are even a small number of cases where outright discrimination is alleged. Two recent cases involve white employees successful discrimination claims based on a demotion and racially motivated verbal harassment.

The Collision of an Employee's Work and Personal Lives: The Role of the EAP Referral

Kris Dunn at the HR Capitalist has a thought provoking post on the value of EAPs that includes the following comment:

Want to get a bunch of HR people nodding their heads?  Make a statement about the value of the Employee Assistance Program (EAP) our companies offer, usually as part of the Life Insurance suite.  It's true, it's a great product and every once in a while we get a great chance to refer someone to it and it does some good.  Much patting on the back usually commences...

Before we start the head nodding and the back patting, consider also the limits of EAPs. Many serious and festering situations aren't appropriately handled by saying "Hey buddy, you know the company has an EAP." This approach is a product of not wanting or knowing how to get involved. It is rationalized by the misapplied legal advice that states "keep it job-related".

There is a dangerous trap created by compartmentalize an employee's "work life" and "home life". It may be appealing, but many times this dichotomy is wholly impractical. The two personas of work and home are inextricably tied and that's what makes mental health and other personal problems one of the biggest challenges facing employers. The challenge often cannot be met by a chance interaction with the EAP (no matter how well it is promoted).

One in five American workers suffer mental illness which makes the odds high that an employer will need to manage such a "personal problem". A difficult task given the stigma attached to mental illness which is made harder by the high level of expertise needed to manage performance issues with a mental health aspect. The result of a mismanaged situation is at best a poor performing employee, possibly an ADA claim, or at worst an act of violence in the workplace.

Statistics on the effectiveness of EAPs are scant, possibly because of the confidentiality that surrounds them. I applaud what EAPs seem to do well: facilitate referral/intake for employees who choose to continue participation beyond the three or so free session provided under the typical plan. I caution on what EAPs don't do at all: absolve employers from liability for ADA and other workplace claims.

Employers may need to consider mandatory referral to a health care professional or EAP. There is a distinct difference between management referrals vs. mandatory referrals. Typical situations may involve alcoholism, drug abuse, or risks of violence in the workplace. A mandatory referral requires that the employee consult a healthcare provider as a condition of continued employment. It may be used in compliance with the ADA Guidelines on Medical Exams when an employer "has a reasonable belief, based on objective evidence", that: (1) an employee's ability to perform essential job functions will be impaired by a medical condition; or (2) an employee will pose a direct threat to himself of others due to a medical condition.

The medical information obtained from the EAP referral is not confidential and needs HIPAA consent. It can be a part of the "interactive process" mandated by the ADA for assessing disability-related accommodations and/or as part of the employer's performance management-disciplinary process. The referral generates an assessment that determines whether the employee is able to perform the essential functions of a position, evaluates accommodations, recommends follow up treatment, and may set conditions on the return to work. It may implicate FMLA leave.

Mandatory referrals are high-stakes, high-energy actions that bring workplace issues to a head. They give an employer the medical information to achieve a positive result with legal protections. If done with honesty, dignity and compassion, they can be very successful. However, success doesn't always equate to a happy ending for everyone.   Sometimes employers are left in the unenviable position of deciding which lawsuit they would rather defend: the one that says   "The Company cared too much, and got too involved" or the one in which you are left saying, "Did I mention he could have gone to the EAP?"

Seven Ways to Avoid Whistleblower Lawsuits

A jury ruled in favor of two former Detroit police officers Tuesday, awarding them $6.5 million in a whistleblower lawsuit that focused on allegations of misdeeds by the mayor's staff and extramarital affairs by the mayor himself. One officer alleged he was fired because of his investigation into the mayor's security detail's cover up of mayoral misconduct. The other officer alleged he was demoted because he was the member of the security detail who was named in a police report as the source of information about the mayor's activities. Both officers' claims were based on Michigan's Whistleblower Protection Act.

When you look at this news report, you are left wondering how the city's HR department could have blown it so badly and why their lawyers would have taken a jury trial on these seemingly horrible facts. The city apparently defended the cases based on documented performance problems by both employees arguing that the alleged whistle blowing was no more than a political hack job. The jury thought otherwise.

Whistleblower type claims are difficult for employers to confront for several reasons. First, an obvious whistleblower claim puts and organization on the defensive because it implicates managers in "wrongdoing". As a manager, it is difficult to work with someone who has accused you of violations of law, regulations or code of ethics; particularly, if you view the accusations are chronic, "half-baked", or concocted  to deflect employee performance issues.  So naturally, that manager want to get rid of that bothersome employee.

Second, whistleblower-type cases don't usually present themselves as such at the time of separation. They are typically amorphous and only crystallize post-termination when the former employee consults an attorney. Very few cases involve clear connections between an employee's opposition to an employer's (alleged) illegal conduct and his or her termination from employment. In the vast majority of situations, "whistle blowing" is raised by employees to rebut an employer's explanation for the discharge or under a theory of retaliation.

To avoid making the headlines for a whistleblower claim, I suggest some up front action as follows:

  • Ask the Question: Specifically determine whether the to-be-terminated employee has ever made any complaints or comments about the company's business practices such as safety, environmental, employment law compliance, or other legal-regulatory-ethical violations.
  • Investigate even the Half Baked Complaints: Hindsight is 20/20 and its what employers are judged by in court. If an employee takes the time to complain about "illegal actions" then you take the time to make an investigation. First, ask the employee make a complete report of his suspicions. If the complaint involves you, let someone else do the investigation, please.
  • Chronic Complainers are Occasionally Right: The boy who cried "wolf" was ultimately right much to the chagrin of the sheep.
  • Take the Accused Manager out of the Decision Making Process: Bias and retaliation arise when the decision maker is accused of wrongdoing or complacency.
  • Make a Written Finding: In the event of whistleblower type complaints, make a written finding that they were investigated and played no part in the termination decision and why.
  • Manage the Appearance of Retaliation: Examine the timing of the whistleblower complaints and any discipline or termination decisions.
  • Don't be intimidated into Inaction: Don't tolerate the chronic, half-baked complainers who deflect performance criticisms by accusing others of misconduct, if that is in fact what they are.

Judge puts No-Match Program on Hold

A federal judge in San Francisco issued a temporary restraining order blocking implementation of the new  No-Match program regulations issued by DHS and SSA. The regulations were to take effect on September 14, 2007. They are delayed until at least October 1, 2007 when the next court hearing is scheduled.

The lawsuit was initiated by the ACLU and other plaintiffs including the AFL-CIO. A posting by Bill Leonard for SHRM summarizes the gist of the complaint and decision:

In the complaint, the ACLU stated that the DHS and SSA had overstepped their authority by attempting to use wage and tax information to enforce immigration law. U.S. District Judge Maxine Chesney agreed and stated that there were serious questions whether the new regulations were authorized by law. The judge said that the federal government would suffer little inconvenience if enforcement of the rules were delayed.

Reminder: EEO-1 Report with New Format due September 30, 2007

EEO-1 reports under the new reporting format are due at the end of the month.  On line access to the form can be obtained from the EEOC website.   Filing information and technical assistance are also available on line.  E-mail extension requests can be made, but are not guaranteed.

There are several areas of change in the EEO-1 Form and some guidance on collecting information.  Employers have always faced a dilemma on how to collect the information. The EEOC previously encouraged employers to identify the race and/or ethnicity of their employees by visual inspection.   The EEOC now prefers that employers gather data through voluntarily self-reporting by employees.

The new EEO-1 Reports also have revised job categories for "Officials and Managers" by dividing it into two categories based on responsibility and influence within the organization as follows:

  • Executive/Senior Level Officials and Managers (plan, direct and formulate policy, set strategy and provide overall direction; in larger organizations, within two reporting levels of CEO)
  • First/Mid-Level Officials and Managers (direct implementation or operations within specific parameters set by Executive/Senior Level Officials and Managers; oversee day-to-day operations)

The revised EEO-1 also will move business and financial occupations from the Officials and Managers category to the Professionals category (to improve data for analyzing trends in mobility of minorities and women within Officials and Managers).

The new EEO-1 Report also made the following changes to the race and ethnic categories:

  • the addition of a new category entitled “Two or more races”;
  • the separation of “Asian” and “Native Hawaiian or other Pacific Islander” into two categories;
  • the replacement of the category “Black” with “Black or African American”; and
  • the replacement of the category “Hispanic” with “Hispanic or Latino.”

The revised EEO-1 Report can be found at: EEOC revised EEO-1 Report.  Additional information from the EEOC about the revised form can be found at: Q&A: Revisions to the EEO-1 Report.

Employment Implications of Obesity based on BMI

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

What is the BMI analysis telling us about our weight?   A Report by the Trust for America's Health recently disclosed statistics about obesity trends.  In the Report, Pennsylvania had the 23rd highest rate of adult obesity with 24.5 percent of its population having a BMI over 30.   The Report correlated obesity figures with other factors like Diabetes and Hypertension rates. It also noted levels of admitted physical activity (or inactivity). Twenty-Four percent of Pennsylvanians admit no physical activity.

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

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

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

Is there correlation between high BMI and bad health? According to the CDC, the BMI ranges were established based on the health consequences associated with obesity as determined by different BMIs. Some challenge this conclusion saying  that the obesity/health correlation is a myth. However, this the correlation between high BMI and bad health is quickly becoming an assumption.   Others have even gone as far as implying that there is a "conspiracy" perpetuated by those who are making fortunes in weight loss products.

Other than being incorrectly labeled "overweight" or "obese", why should we care whether BMI is a accurate health status predictor? BMI is fast becoming the legal standard for determining whether someone is "obese" and therefore a "health risk". With this label comes a whole host of employment and benefit consequences:

  • Cost of and Eligibility for Certain Employee Benefits

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

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

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

  • Employment Discrimination

Under the rationale in EEOC v. Watkins Motor Lines, Inc., being overweight and even obese is not generally considered a "disability".    On the other hand, severe obesity, which has been defined as BMI greater than 40, is clearly an impairment.   In addition, a person with obesity may have an underlying or resultant physiological disorder, such as hypertension or a thyroid disorder. A physiological disorder is an impairment. See 29 C.F.R. § 1630.2(h). Employee who are regarded as disabled due to obesity are also protected under the ADA.

The ADA prohibits disability based distinctions in health plans. So far the EEOC's Guidance in this area has not classified obesity as prohibited basis for making distinctions. However, if the presumption of health risks continues to be tied to BMI, this area may be reevaluated.

Pennsylvania's First ever BMI Bowl

Since I know nothing about science, I took an unscientific approach to the question of whether BMI is a good measure of health. I made an assumption that professional athletes are in good shape. So I calculated the BMIs for various Pennsylvania and other sports rosters and compared them with the Body Mass Index Table.  Results: Philadelphia Eagles edge Pittsburgh Steelers with the highest average BMI and Roster Percentage of BMI over 30. MVP of the BMI Bowl is Nick Cole (BMI 47.46).

 Here are how the teams finished in the BMI Bowl:

TEAM Average  BMI % Roster with BMI  >   30 
    Philadelphia Eagles    32.77    62.96%
    Pittsburgh Steelers    31.84    56.7%
    Pittsburgh Pirates    27.30    9.67%
    Philadelphia Phillies    27.16    3.1%
    Philadelphia Flyers    26.82    0%
    Pittsburgh Penguins    26.58    4.5%
    Philadelphia 76ers    24.51    0%
    Detroit Shock (WNBA)    23.26    0%
1996 U.S. Olympic Women's Gymnastics    18.79    0%

Sizing Up Obesity: Can Wellness Programs Curb BMI?

News outlets have offered up a smorgasbord of statistics highlighting America's weight problem based on the upward trend of the average Body Mass Index (BMI).  The annual cost to employers of obesity is estimated to exceed $13 billion leading some large employers to announced plans to fight obesity among employees.  The primary vehicles for employers to proactively combat employee health issues take the form of education or premium discounts offered in connection with wellness programs.  I have posted on wellness programs before by highlighting successful programs and providing commentary on the process for adopting one.

Typical stand alone wellness program focuses on education as a means of changing employee lifestyles from unhealthy to healthy. The typical incentive plans tie health premium discounts to participation in wellness initiatives. Such actions by insurers have been applauded in the Health Care Policy and Marketplace Review which noted new program announced by United Health, in which health plan participants who take tests and other evaluations to prove they are meeting goals for blood pressure, cholesterol, height/weight ratio, and smoking status would be eligible to receive $500 reductions in their health plan deductible ($1,000 family) for every goal met.  However, many others refer to such actions as fining employees for poor health screening scores.

Nonetheless, legal restrictions curb an employer's flexibility in utilizing healthy living incentives.  Under HIPAA regulations that became effective on July 1, 2007, wellness programs that give rewards for healthy conduct or that penalize unhealthy activities must meet all of the five following standards:

  • Limited Reward:       All rewards offered under the program must not exceed 20% of the cost of coverage (total amount of employee and employer contribution). The reward can be in the form of a discount or rebate of premium or contribution; waiver of deductible, co-payment or coinsurance; or the value of a benefit provided under the plan.
  • Reasonably Designed to Promote Health or Prevent Disease:    The plan must have a reasonable chance of improving health or preventing disease in a way that is not overly burdensome.
  • No More that Annual Qualification for Award:    Individuals eligible to participate must be given the opportunity to qualify at least once a year.
  • Uniform Reward Availability for "Similarly Situated" Individuals: The reward must be available to all similarly situated individuals and there must be a reasonable alternative for receiving the reward for any individual for whom it is unreasonably difficult due to a medical condition or for whom it is medically inadvisable to attempt to obtain the applicable standard. Physician verification may be required.
  • Plan Material must Describe all Terms:     The plan must describe all terms of the program and the availability of a reasonable alternative. The following language may be used to satisfy the alternative:

"If it is unreasonably difficult due to a medical condition for you to achieve the standards for the reward under this program, or if it is medically inadvisable for you to attempt to achieve the standards for the reward under this program, call us at           and we will work with you to develop another way to qualify for the reward."

Do Leaders Have to Follow all the Rules?

Bob Rosner posed this question at the height of the controversy surrounding Paul Wolfowitz, the then president of the World Bank, when Mr. Wolfowitz engaged in workplace favoritism to the benefit his girl friend. Mr. Rosner concluded that in the case of organizational policies, the answer was a resounding, "Yes."

Employment lawyers would agree that following the rules is essential. Whether the rules are laws, regulations or company policies, the failure to follow them leads to legal claims.   However, the ethics of bending or breaking the rules is viewed differently among highly successful leaders. Even in Human Resource circles there is a debate about the need to follow the rules. Here are some quotes that show the varying attitudes of great leaders about the rules:

"The truth is that many people set rules to keep from making decisions. Not me. I don’t want to be a manager or a dictator. I want to be a leader—and leadership is ongoing, adjustable, flexible, and dynamic. As such, leaders have to maintain a certain amount of discretion."

 -Coach K  

 "Hell, there are no rules here, we are trying to accomplish something."

-Thomas Alva Edison

"Life is too complicated not to be orderly."

-Martha Stewart

"You have to learn the rules of the game. And then you have to play better than anyone else."

-Dianne Feinstein

"If I'd observed all the rules, I'd never have got anywhere."

-Marilyn Monroe

"Integrity has no need of rules."

-Albert Camus

"The rule book is only good for you when you go deer hunting and run out of toilet paper."

-Billy Martin

"Murphy's golden rule: whoever has the gold makes the rules."


The role of rules defines the culture of an organization. From the top to the bottom, the rules impact leadership selection, organizational development, and succession planning. I invite the HR community to critique the leadership skills of Paul Newman as demonstrated in this clip; particularly, his unique approach to the rules.


World of HR Blogs Gets Power Rankings

There are a lot of good HR-related Blogs out there many of which I read on a daily basis. The HR Capitalist has undertaken an ambitious project to rank these resources. For readers seeking a compilation of HR Blogs, this is an excellent site for one stop shopping. Incidentally, Kris Dunn's HR Capitalist Blog is one of the best.

Four Reasons to take a "Wait and See" approach to using E-Verify

Remember the old adage that "No good deed goes unpunished?" I think it applies to voluntarily using the various electronic verification systems available in E-Verify and SSNVSAlthough there are electronic resources to assist employers in complying with the I-9 verification requirements, I don't think employers should jump to use them until they are forced to which is clearly on the horizon. Federal Contractors will be forced to use the E-Verify system under administration proposals.

My reasons for taking a "wait and see" approach are as follows:

  1. Using the E-Verify does not provide safe harbor from worksite DHS enforcement.   It only protects the employer from assertions by DHS that the employer actual knowledge knowingly hired an unauthorized alien and that only applies if the social security and e-verify documents match to the employee. If the documents don't match, the employer has actual knowledge of a potential unauthorized employee and cannot continue to employee that individual. There is no protection from the employee's claims that the employer engaged in immigration-related discrimination.   Although ICE takes the position that an employee is not liable for employee terminations under the safe harbor, that doesn't apply to E-Verify and doesn't stop an employee from filing a claim.
  2. Data base inaccuracies and limitations can put employers at risk for immigration claims. If the data base is inaccurate, which whole justification for the No-Match letters, then employers are inviting immigration complaints by employees terminated for E-Verify problems.   Statistically, the E-Verify system states that participating employers matched 92% of employment inquiries. Of the remaining 8%, one percent of the employees contested the E-Verify results. To me, that's the number of potential claims against employers who couldn't hire the employees. That doesn't even include employees who provide one of the myriad of other documents used for I-9 authentication that are not in the data base.
  3. Sources predict the E-Verify system will be overwhelmed when estimated 200,000 government contractors are required to use it. DHS states that the system can handle 25 million inquiries annually. It currently has 19,000 registered employers increasing at a rate of 1000 per month. Employers have only three days to verify I-9 documents and, once they elect E-Verify, they must use it for all employees (not only those who may have immigration issues).
  4. Changes in I-9 documentation requirements will make compliance simpler and E-Verify more effective. The number of Form I-9 documents used to establish identity and employment eligibility will be reduced from the current 29 categories. Employers have little capacity to verify the authenticity of these current documents, and the sheer quantity of accepted documents is an invitation to fraud. This regulation will reduce unlawful employment by weeding out insecure documents now used often for identity fraud. Simultaneously, the government will enhance the E-Verify System to include 14.8 million images stored on the DHS database including green cards. Passport and VISA data will also be added.

Until the system proves its reliability and demonstrates responsiveness, employers could experience unacceptable delays and errors leading to litigation and staffing problems.

Religious Discrimination: Employer's Responses to Workplace Issues

The Pittsburgh Post-Gazette is featuring an article entitled Religion at work: A growing number of discrimination cases center on employees' beliefs noting that a post 9/11 world has increased the number of religious harassment and discrimination claims. Religious accommodations can be difficult for employers to handle because they may pit one group against another.

Both Title VII of the Civil Rights Act and The Pennsylvania Human Relations Act prohibit religious discrimination and harassment. The EEOC has issued Guidance on Religious Discrimination obligations of employers including the following:

  • Employers must reasonably accommodate employees' sincerely held religious practices unless doing so would impose an undue hardship on the employer. A reasonable religious accommodation is any adjustment to the work environment that will allow the employee to practice his religion. An employer might accommodate an employee's religious beliefs or practices by allowing: flexible scheduling, voluntary substitutions or swaps, job reassignments and lateral transfers, modification of grooming requirements and other workplace practices, policies and/or procedures.
  • An employer is not required to accommodate an employee's religious beliefs and practices if doing so would impose an undue hardship on the employers' legitimate business interests. An employer can show undue hardship if accommodating an employee's religious practices requires more than ordinary administrative costs, diminishes efficiency in other jobs, infringes on other employees' job rights or benefits, impairs workplace safety, causes co-workers to carry the accommodated employee's share of potentially hazardous or burdensome work, or if the proposed accommodation conflicts with another law or regulation.
  • Employers must permit employees to engage in religious expression, unless the religious expression would impose an undue hardship on the employer. Generally, an employer may not place more restrictions on religious expression than on other forms of expression that have a comparable effect on workplace efficiency.
  • Employees cannot be forced to participate -- or not participate -- in a religious activity as a condition of employment.
  • Employers must take steps to prevent religious harassment of their employees. An employer can reduce the chance that employees will engage unlawful religious harassment by implementing an anti-harassment policy and having an effective procedure for reporting, investigating and correcting harassing conduct.

There is also specific EEOC Guidance on Workplace rights of Muslims, Arabs, South Asians, and Sikhs.

Protections from discrimination based upon religion can pose a challenge for employers for the following reasons:

Defining "Religion"

The law protects any "religious practice or belief" which is defined to include any "moral or ethical beliefs as to what is right and wrong which are sincerely held with the strength of traditional religious views". Advocacy sites exist for many nontraditional Religions. Don't dismiss an employee's request simply because they involve views that aren't main stream religions.

Accommodating Religious Practices

An employer must consider reasonable accommodations that do not pose an undue hardship. The employer can evaluate different alternatives to accommodations and may reject any that has more than a de minimis cost. However, providing voluntary swaps for scheduling accommodations is required even if it results in administrative costs.  Claims by coworkers might be "upset" or "uncomfortable" when they see the religious expression (like a turban)  is not an undue hardship. The key to an employers approach to an accommodation request is to evaluate its impact and not to dismiss it out of hand.

Balancing Competing Workplace Religious Practices

Employers struggle when forced to balance workplace exercises of religion that conflict with each other. For example, pro-life verses  pro-choice or Anti-Gay religious practices have factionalized workplaces over religious accommodation. In addition, employers can become involved in disagreements stemming from workplace proselytizing. Employers must carefully balance workplace religious expressions and refrain from treating them differently than other speech.

After the original publication, I came across a very expansive summary of religous accommodation situatations perpared by Vadim Liberman in his article "What happens when an employee's freedom of religion crosses paths with the company's intereest?"

Electronic Resources for Form I-9 Completion

There are electronic resources to assist employers in complying with the I-9 verification requirements including workers' names and Social Security numbers (SSN) and validating work eligibility.  However, there is no safe harbor for using such resources. Before using theses resources, read my post entitled "Four Reasons to take a "Wait and See " approach to E-verify".

Social Security Number Verification Service (SSNVS)

• To verify up to five names. Call SSA toll-free, (800) 772-6270, or call the general SSA number at (800) 772-1213. Both numbers are open for service weekdays from 7 a.m. to 7 p.m., Eastern Standard Time.

• To verify up to 10 names. Use the agency’s web site, which provides an instant response. Or receive the results of up to 250,000 names and SSNs overnight (which requires registration by employers.) SSA website information.

Department of Homeland Security E-Verify.  Employers may verify the eligibility of individuals to work in the U.S. by matching their names, SSNs and immigration status.  E-Verify Website

Electronic I-9 Signatures.  Employers are permitted to store Forms I-9 electronically. Maintaining electronic signatures helps some employers reduce storage and recordkeeping burden and costs.  Regulations  allowing for electronic storage.

Employment Law Forms: Not so Hidden Dangers

Rush on Business has a good post on "Copy Another Company's Handbook at Your Peril" that summarizes several postings on the downside of adopting employment policies when you don't fully appreciate their applicability to your business. We all like to save time and money by not reinventing the wheel; however, the risks of these shortcuts are amply demonstrated in the case law.

Employers who adopt or copy policies may find themselves covered by laws and regulations that wouldn't otherwise require their compliance. One example cited in a post by Eric Swenson at Managing People in the 21st Century involves a case in which an employer included an FMLA provision into its handbook without appreciating the fact that the company didn’t meet the statutory threshold for coverage at a particular facility. A federal court held that an employer can be bound by "misrepresentations" in its employee handbook that lead workers to believe they are eligible for FMLA benefits - if an employee reasonably relies on the misrepresentation and is harmed as a result. Michael Fox at Jottings from an Employer's Lawyer follows similar case results in which an employer with less than 20 employees became covered by COBRA because of an employee handbook statement.

The other area of risk involves an employer's misunderstanding of the copied policy or its failure to follow the policy at all because its not part of their normal business practice. In both situations, employers can be held liable for their employment policies or statements about what the policy means even with a strong handbook disclaimer. Pennsylvania courts almost never give contractual status to employee handbooks, if a disclaimer is present. However, a handful of cases have held a company liable when it violates its handbook provisions.

A balance can certainly be struck between a form handbook and one made from scratch. When working with businesses on developing or reviewing an employee handbook, it is important that the lawyer understand the company's business in terms or its size, locations, and activities. Of course there are certain generic policies, but most policies on benefits, operational procedures, and work rules must be customized. Many employment lawyers can provide you with a checklist of the types of policies that businesses should consider adopting and even some sample language. However,  there is no substitute for individualized policies and a legal review of the policy manual. Many businesses also find audits of their existing practices to be helpful in terms of legal compliance and best practices.

Meyers-Briggs Personality Testing: Anecdotal Observations

Personality tests have always held a certain amount of fascination for me. I vacillate between thinking they have the same credibility as horoscopes and really believing they have some keen insights. I have blogged on personality assessments previously so I won't repeat the legal issue.

Kris Dunn, at the hr capitalist has a great post on Hiring Jason Bourne via the Myers-Briggs Assessment. Kris concludes that Jason Bourne is an ISTP. I was wondering if this classification appropriately places him in his current occupation (CIA hit man). Furthermore, how would he fit in your organization?

Career and Personality Tests On-Line lists the following traits for many ISTPs in an organization:

[A] good job includes being rewarded for paying attention to what is logical, allows for hands-on experiences, and gives them freedom to do the work as they see fit. They often enjoy work that is project oriented and task focused, particularly if it involves immediate problem solving. Independence and autonomy are likewise important for ISTPs at work. Action is usually more important and interesting to them than long discussions. ISTPs often lead by example, and expect each person to contribute to the group effort. They can be quite expedient, finding the best solution for the moment. They usually dislike both giving and receiving close supervision. Many ISTPs can keep track of all kinds of detailed information and can become the source of "institutional knowledge" for an organization.

Some areas where ISTPs can have difficulties include taking shortcuts to get things done and skipping important steps. They might miss sharing information with others, who then assume the ISTP is uninvolved, unconcerned, and lacks interest. Sometimes, in their hurry to get things done, they can jump to a new task before the previous one is finished. Perseverance can be a problem. Likewise, goal setting can be difficult. The focus on the immediate can make it hard to look at the long term and plan accordingly, or even create a plan in the first place.

Based on this summary, I'm thinking Jason Bourne, Vice-President of Human Resource.   The Personality Page has a Geocities page that list the following occupations for an ISTP:

Police, detectives, forensic pathologists, computer programmers, system analysts, computer specialists, engineers, carpenters, mechanics, pilots, drivers, athletes, entrepreneurs, firefighters, paramedics, construction workers, dental hygienists, electrical engineers, farmers, military, probation officers, steelworkers, transportation operatives, hitmen. With the ability to stay calm under pressure, they excel in any job which requires immediate action.

Right now, I am in the camp of thinking these personality test are right on the mark.  But wait, how can hit men and dental hygienists both be ISTPs?  Now, I am vacillating again.  Jason Bourne, Dental Hygienist?  That's why I'm not the Hollywood director.

No-Match Letters Place Undue Burden on Employers

The so called safe harbor from prosecution/sanction for immigration law violations arising from an employer’s handling of No-Match letter places a heightened burden on employers and may only exacerbate an already growing worker shortage. It is a poor effort to solve the problems created by a lack of consensus on a national immigration policy. It has collateral effect of heightening employer’s liability for immigration-related discrimination and employee relations problems.

Many Commentators believe that No-Match letters are not an effective mechanism for ferreting out illegal immigration, so granting a safe harbor to employers for playing along is meaningless. Some of the facts that lead me to this observation are as follows:

  • The I-9 Form process is complicated with  a maze of documents that can be used to authenticate work eligibility and identity . Some are temporary and require re-certification when they expire.
  • Employers  face liability for actual and constructive knowledge of employment of unauthorized workers. The actual knowledge standard can make HR managers avoid answering employee questions when it comes to immigration status. It can also make HR Managers rumormongers and workplace immigration police when they must reasonably investigate third party comments on immigration status. The constructive knowledge standard is addressed in the safe harbor.
  • Placing onuses on employees to resolve no match discrepancies within 90 days is untenable. My limited experience with SSA and Immigration leads me to believe that almost nothing can happen in 90 days.

My conclusion is that employers will be whipsawed  by worker shortages, immigration sanctions for hiring illegal workers, discrimination claims by fired workers who lack documentation and employee relations issues including unionization. 

I received several questions about  my contrast of the No-Match safe harbor and  a perfect storm. I borrowed the “perfect storm” allusion from my friend Ira Wolfe who has written a book entitled The Perfect Labor Storm which highlights the impact of demographic trends on national employment.

When is a "Safe Harbor" not so Safe: New Immigration Regulations for No-Match Letters

The Department of Homeland Security (DHS) issued new regulations that create a "safe-harbor" for employers who either receive a (i) no-match letter from the Social Security Administration or (ii) written notice from DHS questioning an I-9 Form. Employers who follow the protocol and timeline set forth in the regulations will not be charged with "constructive knowledge of employment of an unauthorized worker"; hence, being shielded from civil and criminal sanctions in a subsequent DHS audit. However, when one examines the safe-harbor, it clearly puts the employer in a position of terminating employees who cannot meet government requirements and time frames thereby facing discrimination claims and employee backlash.

The safe-harbor protocol requires that the employer complete the following steps within the prescribed time frames:

  • Within 30 days of the letter, check employer records to determine if there is an employer error like a typo or transcribed number/misspelled name.
  • If unresolved, employers must ask the employee to confirm accuracy of records. (Employers may wish to immediately inform employees about their obligation to resolve the disparity explaining that resolution of the mismatch could take time…. a lot of time).
  • If the employer is able to resolve the mismatch, the employer should follow the instruction in the No-Match letter.
  • If unresolved, the employer should inform the employee that the employee has 90 days from the date the employer received the No-Match letter to resolve the matter with SSA.
  • If the discrepancy is not resolved within 90 days of receipt of the No-Match letter, the employer should complete, within three days, a new I-9 Form as if the employee in question were newly hired, except that no document may be used to verify the employee's authorization for work that uses the questionable Social Security number. Additionally, the employee must present a document that contains a photograph in order to establish identity or both identity and employment authorization.

Completing a new Form I-9 without reliance on the old disputed documents or social security numbers, will be difficult if not impossible. Furthermore, reliance on the government's voluntary E-verify system provides no safe harbor for I-9 compliance. If the employee is unable under such circumstances to provide satisfactory documentation, the I-9 instructions state that "employment should be discontinued."    In the case the employee provided false information but somehow manage to comply with the Form I-9 requirements the second time, the same instruction suggest an employer follow its policy on employees who provide false information.

In either case, an employer is prohibited from discriminating against applicants or employees based on their national origin. Employers must also manage the perception among employees that this bureaucratic approach to national immigration policy isn't the employer's doing. The new regulations create a "safe-harbor" from DHS prosecution and an employee relations perfect storm.

Appearance Bias: It's what's in the wrapper that counts?

An Associated Press article by Lindsey Tanner reports that McDonald's wrapper tricks kids' taste buds:

Anything made by McDonald's tastes better, preschoolers said in a study that powerfully demonstrates how advertising can trick the taste buds of young children.

Even carrots, milk and apple juice tasted better to the kids if it was wrapped in the familiar packaging of the Golden Arches.

The study had youngsters sample identical McDonald's foods in name-brand or unmarked wrappers. The unmarked foods always lost the taste test.

This doesn’t surprise me or others one bit. The Evil Hr Lady take is that the wrapper perception created by titles pervades corporate decision-making. The result is that good ideas in the wrong wrappers don't get their just due.  I took a different direction.  When I saw the same article, I thought of appearance bias.

We are about due for another round of surveys or articles about how good looking people get better jobs, raises, and service for no other reason then they are attractive. Some older articles make this point like CNBC's Hidden Camera investigation entitled "Face Value", Catherine Kaputa's Why Attractive People Get Paid More and What You Can Do About It, or Kate Lorenz's Do Pretty People Earn More?

To use a cliché, perceptions are reality. The concept of evaluating people and their ideas on their merits is intellectually unassailable. However, if it were universally practiced, society wouldn't need laws against discrimination and job bias. Discrimination is, at least partially, a bias based on the wrapper, rather than the content. Certainly, "unattractive" is not a protected class. However, unattractive can be a code word for appearance prejudices that are legally prohibited such as those based on race, sex, national origin, age, and disability.

No where is the difference between the wrapper and its contents more important than in the defense of a discrimination claim. TheMcDonnell Douglas Test uses a three step legal standard for evaluating such claims. In the first step, the employee/applicant must show they are in a protected class, are qualified for a job and suffered some adverse employment action. In the second step, the employer must that it had a legitimate business reason for its decision. In the third step, the employee may show that the employer's "reason" is a pretext for discrimination.

Don't let the McDonald's/kid's eating habits analogy trivialize my point, employment decisions must be based on content and qualifications. When evaluation of the content involves subjective assessments make sure that decisions aren't influenced by stereotypes or biases resulting from perceptions.  Interviewers should be trained to appreciate the legal importance of job content in their evaluations of candidates.  Everyone should assess the role of their own hidden biases and their impact on workplace decisions.

Working at Home as a "Reasonable Accommodation" under the ADA

Telecommuting (a.k.a. working at home) has been buffeted about in a whole host of recent surveys which are nicely summarized in a SHRM article by Kathy Gurchiek entitled Upper Management Distrusts Telecommuting but Cites Benefits.   There is a mixed perception of the work at home world the travails of which are discussed at the Telecommuting Journal, a blog dedicated to the subject. Many employers believe that that there is no substitute for face to face communication. It may come down to "trust" with telecommuting still viewed as a "perk" that may hold back a career.

Despite these management perspectives, an employer's reluctance to allow telecommuting may be trumped by the American's with Disabilities Act's provisions on reasonable accommodation. The EEOC has published guidance stating that "allowing someone with a disability to work at home may be a form of reasonable accommodation." The EEOC's Fact Sheet explains issues ranging from whether a particular job can be performed at home to the frequency with which work at home must be offered.

Courts reviewing employee claims for a work at home accommodation focus on many things to determine the feasibility including the following:

  • The employer's ability to supervise the employee adequately.
  • whether any duties require use of certain equipment or tools that cannot be replicated at home.
  • whether there is a need for face-to-face interaction and coordination of work with other employees.
  • whether in-person interaction with outside colleagues, clients, or customers is necessary.
  • whether the position in question requires the employee to have immediate access to documents or other information located only in the workplace.

Employers should not summarily deny a work at home disability request. They must engage in an "interactive process" with the employee to assess the reasonableness of the requested accommodation.

Employment Record Retention/Destruction Policies: What not to do.

Electronic discovery promises to be a real brier patch for employers. It has already sprouted several blawgs dedicated to e-discovery topics. There are some good resources on eDiscovery Source, Electronic Discovery Law, and Sound Evidence: E-Discovery Simplified.

I have traded a series of posts and comments with fellow lawyer and blogger Rush Nigut at Rush on Business. We have both exposed the merits of a thoughtfully developed record retention policy. We have begun to explore the "what ifs" in the context of business litigation.

Employment discrimination cases will undoubtedly have a component of electronic discovery in terms of e-mails between the "key players". When an employer has a threatened claim, it has an obligation to preserve electronic and other evidence even before a lawsuit is filed. Intentional or inadvertent destruction of this evidence can result in sanctions such as loss of the case, monetary sanctions or an adverse inference instruction to the jury. These sanctions can occur even if records were destroyed pursuant to a valid record retention policy.

For example, a recent court decision involving a common factual scenario highlights the issues involving record retention and destruction. In Floeter v. City of Orlando, a female employee filed an internal complaint of sexual harassment including allegations of pornographic e-mails. She later filed a lawsuit in which the pornographic e-mails were subpoenaed. Because of the application of a record retention policy, the employer could not produce or unequivocally state that the e-mails did not exist. After considering a variety of sanctions, the judge ruled that the jury might receive an "adverse inference" instruction which allows the employee to argue that the e-mails existed and the employer intentionally destroyed them.

The employer's predicament was caused, in part, by its record retention policy including:

  • Failure to put a hold on electronic records when litigation was possible, i.e., the filing of an internal complaint.
  • Failure to preserve computer records when new computers are issued or employees leave and their computers are reassigned.
  • Routine erasure of back up tapes pursuant to policy.

When and employer has a threatened legal claim there are several things it should not do as demonstrated by excerpts from these real cases:

  • Don't send out an e-mail reminding the IT department and employees of the company's heretofore unenforced record retention policy. Arthur Anderson took this tact and ended up in the United States Supreme Court arguing about overturning criminal convictions.
  • Don’t adopt a record retention policy and schedule a Shredder Day

Fishing off the Company Dock: A Legal Perspective

There is an interesting post by Kate Lorenz at asking the question "Is Workplace Romance Really Taboo?" Ms. Lorenz observes that "society no longer frowns upon romance that blooms between co-workers." The ups and downs of office romance are even recounted in articles on

There is evidence that the taboos are truly gone. According to a 2007 Vault Survey, sixteen percent of employees confess to getting caught canoodling at the office. Office romance is embraced by all three branches of government (executive, legislative, and judicial). In fact the D.C. Court of Appeals in Guardsmark v. NLRB overruled an employer's no fraternization rule because it violated the rights of employees to engage in concerted activities. News outlets publish "How to Strategies". The Workplace Fairness Blog has some provocative comments in a post called "Love and Marriage at Work (and a Little Sex Too)"

While taboos may have eased, legal problems persist.   David Javitch notes in his post on "Dealing with an Office Romance", there may be even bigger workplace risks for morale problems created by perceived favoritism and the looming sexual harassment claim. Courts have found employer's liable for the sexual favoritism created by a supervisor's romantic involvement with subordinates. Sexual harassment claims remain high with the EEOC reporting over 12,000 claims filed in 2006 resulting in EEOC settlements totaling almost $50 million. Million Dollar verdicts are common.

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Ten Reasons to have an Employee Handbook

Some businesses are loath to write things down because of a fear that it may "come back to bite them later". In the case of an employee handbook, I think exactly the opposite is true. 

  1. Marketing Your Business Culture: Employers can present a professional image to their employees and prospective employees through a well written employee handbook.
  2. Economizing on Explanations: I can't imagine being responsible for explaining every benefit and work rule to every employee. More importantly, I would be scared to death over what supervisors were saying and what employees were hearing.
  3. Avoiding Contradictory Communication: Uniform administration of policies is the hallmark of good employee relations and legal compliance. Written communication memorializes what is being said, leaving to argument only what it means. In court, an employee can deny he or she was told something unless it is in writing.
  4. Thinking it Though: David Gray at Communication Nation observes that "writing things down forces you to think them though". Looking at the whole work environment, benefit package, and company culture by writing down your policies can give a business valuable introspection.
  5. Establishing Work Rules: Knowing the rules makes for a more harmonious work environment. It also helps in court when you don't have to prove what the rules were and that the employee actually knew them.
  6. Summarizing Employee Benefits: Disputes over benefit eligibility can be avoided or quickly resolved when communications are clear and in writing. Make sure references are made to insurance policies and benefit plans that establish the terms on which benefits are offered.
  7. Notifying Employees of Legal Rights and Obligations: Particularly in the area of sexual and other harassment, having a policy and complaint procedure provides an employer with a defense that is not otherwise available. There are other laws that give employer's more protection if they adopt policies.
  8. Protecting Employment at Will Presumption: Pennsylvania is one of a dwindling number of states that has a strong employment at will presumption. Take advantage of it by having an at-will statement. Also make sure to disclaim contractual status of your handbook.
  9. Complying with Certain Laws: The FMLA is one of the few laws that must be addressed in an employer's handbook, if the business has one.
  10. Defending Against Legal Claims: Legal decisions usually come down to fairness. Most judges, administrative agencies, and juries that evaluate employee claims against companies expect that, at a minimum, employers will have reasonable workplace rules, communicate the rules in an understandable manner, and then uniformly follow them. What will you say on the witness stand when the employee's lawyer asks you, "Well if it was so important, why didn't you just write down the policy?"

Employment References In Pennsylvania: The Truth or Nothing at All

I received a call from a very irritated client who just hired a new book keeper only to find out the new hire had just been arrested for embezzling from the same prior employer who gave her a glowing reference. Ethics aside, what are the legal parameters for giving a reference?

Frankly, misleading references involve a developing area of the law that is based on negligence theories. To be liable for negligence, you must owe a duty to someone, breach that duty, and the breach must cause damage. The best way to avoid being sued for a reference is not to give one.

No state imposes a duty on an employer to provide a reference on behalf of an employee. However, if a business chooses to provide a reference, it must do so uniformly and may be liable to the employee, other businesses or third parties if the reference is negligent. Negligent references are either inaccurate, materially incomplete, or both.

Pennsylvania law gives employers some protection in lawsuits by employees; provided, the employer acts in "good faith" when it discloses information. Lack of good faith must be established by clear and convincing evidence that the employer disclosed information:

  • Knowing it was false or should have known it was false
  • Knowing it was materially misleading
  • With reckless disregard of the truth or falsity.
  • In violation of some other contract or legal right of the employee.

However, the employer's "opinions" about the quality of work are not generally considered to be slanderous or libelous, unless the opinion implies undisclosed defamatory facts as the basis for the opinion. For example, stating that someone is dishonest is an "opinion" which implies undisclosed and potentially defamatory facts. Stating that someone did "poor quality work" does not.

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Pennsylvania Finally Posts (some of) it's Statutes On Line

Until July 13, 2007, Pennsylvania was the only state that did not publish its state statutes on line.  Fortunately, the General Assembly put some of the Consolidated Statutes on line in a seachable in both text and PDF format.  Before you get too excited, Pennsylvania's labor laws (Title 43) are not yet on line.The Pennsylvania Regulations have been on line for some time.  Some news coverage was given to the on line publication.  The PAPower Port has not yet been modified to reflect the change.

Reconciling Hazelton's Illegal Immigrant Ordinance and the Nation's Predicted Worker Shortage

A federal judge struck down the City of Hazelton's ordinance which was enacted to combat criminal and social service problems blamed on the influx of "illegal immigrants" into the area. The court's 206 page opinion ruled that the ordinance violates federal constitutional protections and was pre-empted by federal immigration laws.

The ordinance call the "Illegal Immigration Relief Act" prohibited employment and apartment rentals to illegal immigrants. It subjected anyone who hired an illegal immigrant or rented an apartment to loss of their business license and significant fines. The ordinance also required Hazleton landlords to present the  City with a passport, birth certificate or immigration documents or citizenship to show that he renter was in the country legally. The names were then checked against a federal data base to determine their immigration status.

The City of Hazelton's frustration is a microcosm for the national immigration debate. According to news reports, these types of ordinances are being adopted by localities out of frustration with the lack of Congressional action to address issues created by the estimated 10 million illegal immigrants now living in the U.S.  In late June, Congress rejected the controversial Immigration Reform legislation. Cited as reasons for the bill's failure were the grant of amnesty for current illegal immigrants and the resulting cost increases in government spending (estimated at $126 billion).

The public sentiments reflected in anti-immigrant legislation will be difficult to reconcile with the predicted labor shortage in the U.S. Many groups have already bemoaned worker shortages, particularly among skilled workers. One of the best resources for putting the whole problem in perspective is Ira Wolfe's book entitled the Perfect Labor Storm, an update of which is due out in October. It is a compilation of facts about demographic trends in the global and U.S. economies in the areas of worker shortages, aging, employee turnover, obesity, education, literacy and others. Some of the many facts can be found on his website.

Juxtaposing the lack of national immigration reform, the backlash of public sentiment against immigrants and the demographic analysis of the U.S. labor market leads to very troubling conclusions which cannot be addressed by one judge's opinion striking down a local ordinance.

Pennsylvania Announces Reduction in Unemployment Tax Rate

The Governor's Office announced a reduction in the U.C. tax rate. Beginning Jan. 1, 2008, the average U.C. tax rate for businesses is projected to be 4.7 percent, down from 5 percent in this year and 5.4 percent in 2006.  The average employer cost for unemployment compensation per employee is projected to drop by $28. Benefit payments will continue without reduction for the second year in a row, and the tax rate on employee wages will drop from .09 percent to .06 percent.

Pennsylvania Unemployment tax rates apply to the first  $8,000 of wages. Rates depend on several factors. The "New Employer" rate applies to employers for up to the first 2 or three calendar years. The rate amount differs for nonconstruction and construction employers and ranges from  3.7520% to 10.3984%. The "Standard Rate" applies to employers with a sporadic contribution history so that they cannot get an Experienced Based Rate. The rate level depends on whether the employer has a positive or negative reserve account balance and ranges from 6.1888% to 10.2624%.

The Experienced Based Rate applies to all other employers. An employer's experience based contribution rate is comprised of six components. The Computation Rate components are:

Rating Your Boss: When does the Lawyer see the Feedback?

It won't surprise you that I read other Blogs. There is a posting on Evil HR Lady about a new website called eBoss Watch where you can anonymously rate your boss and search other employee's ratings. I think the sight is largely an effort to capitalize on wave of "bullying" articles that have appeared lately.

The Evil HR Lady doesn’t like the site and I agree. These anonymous ratings are purely cathartic and usually don't have enough structure to give meaningful feedback. I tried to take the eBoss survey, but it was blocked by the office firewall. Major marketing oversight.

There are a whole host of management assessment tools that include employee feedback. Whether its called 360 degree feedback or some other name, it sometimes finds its way to a lawyer's desk as evidence in a termination case.

The peer feedback and evaluation contained in a 360 feedback can be powerful evidence in employment discrimination cases arising from a performance termination or reduction in force. Although the opinions expressed are entirely subjective, the structure of a 360 evaluation makes it seem objective. In the cases that I have presented 360 evaluation evidence to a judge or jury, it has been a powerful persuader because 360 feedback:

  • Demonstrates that the employer had a process that was designed to help the employee improve performance.
  • Includes both a numeric rating and anecdotal comments.
  • Usually isn't all negative.
  • Bases its assessment on a broader group of people.
  • Communicates clearly and in writing.

On the other hand, I can't imagine relying on anonymous website gossip to convince someone that my boss's performance was good or bad.

DOL pulls plug on America's Job Bank

The Department of Labor closed America's Job Bank- a national online job board- effective July 1, 2007. The decision was somewhat controversial leaving some government contractors with no good alternative to comply with OFCCP regulations mandating job posting.

The Department of Labor has not published a final rule for compliance with Mandatory Job Postings Requirement under VEVRAA. Regulations for government contractors (41 CFR § 60-250.5) require contractors to list job openings with the appropriate local employment service office. Listing openings with America's Job Bank is expressly recognized as a method for satisfying the obligation.  As an alternative, OFCCP recommends that contractors take the following affirmative steps:

  • Create partnership arrangements with local and national recruiting sources for referral of qualified covered veteran applicants;
  • Establish a relationship with the Local Veterans' Employment Representative or his or her designee;
  • Recruit covered student veterans at educational institutions;
  • Create partnership arrangements with veterans' service organizations to employ qualified covered veterans;
  • Establish relationships with the Veterans Administration Medical Center job placement programs;
  • Advertise job openings and recruit qualified covered veterans during company career days and/or related activities in the local community;
  • Encourage subcontractors to seek qualified covered veterans for employment opportunities; and
  • Contact the Local Veterans' Employment Representative when new Federal contracts are obtained, or when significant hiring will occur.

There are other solutions mentioned in Kurt Ronn's Business Week article. An alternative for Pennsylvania employers is to post with Pennsylvania CareerLinkPennsylvania's Comprehensive Workforce Development System (CWDS) is scheduled to launch in September of 2007. The CWDS will allow employers to post profiles and job orders on line.

OFCCP Audits Focus on Systemic Discrimination

The OFCCP reports coordination of EO Surveys with statistical analysis techniques to predict "systemic discrimination" in order to target its compliance audits. The result from using data from 3,723 establishments that responded to the EO Survey, together with the findings from 2,651 completed compliance evaluations was that 89 cases of systemic discrimination were found.  In 2006, the OFCCP recovered a record $51.5 million for over 15,000 workers. Of the recovery, 88% was collected for cases of systemic discrimination in the application process because of unlawful employment policy or practice.

Government contractors are selected for audit in several ways including the use of a mathematical model that predicts the likelihood of a finding of systemic discrimination. The model analyzes data from five years of OFCCP compliance evaluations to formally identify and characterize relationships between reported EEO-1 workforce profiles and findings of discrimination.

I have been involved is several of these style OFCCP audits and the approach is the same. The audit is triggered by an anomaly in a business' EO Survey which shows a statistical disparity in either hires or terminations. For example, the percentage of minority applicants differs by more than 80% from the percentage of minorities hired (the four-fifths rule). The investigation into the disparity in the hiring process follows the road map set out in the OFCCP's Compliance Manual as follows:

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The Snow Storm Law: "State of Emergency" Prevents Employer Discipline for Work No Show

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

Employers are not required to pay an employee who is a no show based on road closures. An employee who can prove the employers "knowing and intentional" violation of the law may recover lost pay, be reinstated or have discipline revoked, and may collect attorneys fees and costs.

The law does not apply to the following jobs: drivers of emergency vehicles, essential corrections personnel, police, emergency service personnel, hospital and nursing home staffs, pharmacists, essential health care professionals, public utility personnel, employees of radio or television stations engaged in the gathering and dissemination of news, road crews and oil and milk delivery personnel.

Pennsylvania Trade Secrets Act protects Business Information

The Uniform Trade Secrets Act (12 Pa.C.S.A. §§ 5301-5308) protects businesses form misappropriation of trade secrets by allowing injunctive relief for actual or threatened disclosures or recovery of monetary damages. In the case of a willful and malicious misappropriation, punitive damages may be awarded.

Trade Secrets include information, including formula, drawing, pattern, compilation, including a customer list program, devise, method, technique or process that:

  • Derives independent economic value from not being generally known to, and not being readily ascertainable by a lawful means by, other persons who can obtain economic value from its disclosure.
  • Is the subject of efforts that are reasonable under the circumstance to maintain its secrecy.

Systemic Discrimination: EEOC's Latest Tactic to Redress Discrimination

The EEOC announced a $20 million settlement with Walgreens based upon "systemic discrimination" against African American retail management and pharmacy employees in promotion, compensation and assignment. In addition to the monetary relief for an estimated 10,000 class members, the consent decree prohibits store assignments based on race.

The EEOC's lawsuit is part of its Systemic Initiative launched in April of 2006 based on a Systemic Task Force Report. The Report recommends, among other things, that the agency make a "top priority" the following:

  • Developing of systemic investigation plans for each District Office.                                  
  • Staffing systemic investigations and litigation with agency members with specialized training.
  • Creating "incentives" through performance plans to encourage investigators to "successfully identify, investigate, and litigate systemic cases."
  • Linking agency charge data with EEO-1 Survey and using technology to trigger investigatory efforts and litigate cases.

According to the OFCCP Blog Spot, both the OFCCP and EEOC have made systemic discrimination and testing top enforcement priorities. However, the EEOC doesn't have a formal definition of "systemic discrimination" but enforces it as a hybrid of traditional "pattern and practice" discrimination and disparate impact

No matter how the EEOC tries to repackage it, pattern and practice or disparate impact discrimination cases are not new. Most cases involve a single employee or a class of employees claiming that a facially neutral employment practice had a significant discriminatory impact on a protected class of individuals. In these situations, the Supreme Court has stated that the employee must point to some specific aspect of the employment process and then must prove that the processes caused disparate impact on the protected group.

What is new is the method that the EEOC and OFCCP are going about pursuing the claims. A rudimentary statistical review of employment data provided in the EEO-1 Report or EO Survey can now lead to a government investigation and a potential class action for systemic discrimination. Some, like Mary Swanton in her article "Offensive Measures" theorize that the EEOC (not unlike the plaintiff's employment bar) is trying to get more bang for its buck by taking on larger class action type suites. When you combine this trend with the audit tactics that I will outline in my next posts, it looks ominous for employers.

Drug Testing: One in Twelve Employees Admit Illegal Drug Use

A recent government survey revealed that 8.2 percent of full-time workers admit illegal drug use during the preceding month. Use rates are even higher for some industries: restaurant workers, 17.4 percent, and construction workers, 15.1 percent.

Estimates vary on the percentage of employers that conduct drug testing. The Society for Human Resource Management said in a 2006 report that 84 percent of private employers conduct pre-employment testing, 39 percent conduct random screening of employees, 73 percent conduct for-cause testing, and 58 percent require drug tests after on-the-job accidents. On the other hand, a recent article entitled "Whatever Happened to Drug Testing" states that "Despite the growing demand for drug tests in sports and other fields, the percentage of employers with testing programs has dropped steadily since 1996, from 81% to 62% in 2004, according to the American Management Association, which sees the trend continuing."

Other commentators question the drug testing return on investment (ROI) given multiple factors like a tight labor market, the cost of testing and the pervasiveness of test beating tactics. On balance, I still recommend that employers strongly consider pre-employment drug testing for the following reasons:

  • The deterrent effect that testing has on applicants; particularly, if you advertise that drug testing is a part of the application process.
  • The statement it makes about your company culture: Drug Free Workplace.
  • The safety, wellness and attendance benefits (although the ACLU argues that this is illusory).

Implementing a drug testing program involves a careful balance of legal and employee relations considerations. I will be developing a series of white papers for downloading from this site which outlines considerations for this and other employment issues.

The Art of Employment Releases

Obtaining a release from an employee that waives the myriad of federal and state employment law claims is an art and not a science. It requires balancing contradictory government regulations, harmonizing competing employee relations goals, and cajoling, a more than likely, disgruntled employee.

When a business pays money to a departing employee, it wants the matter over. However, the patchwork of government regulations and varying court decisions interpreting them make it difficult to obtain that degree of certainty. Sometimes employees challenge the validity of a release and try to pursue their claims. In some cases, regulations even allow an employee to keep the money while suing the employer.

The legal standard for obtaining a valid release generally involves assessing whether the employee's waiver of claims was "knowing and voluntary". In the case of claims under the Age Discrimination in Employment Act (ADEA), the U.S. Department of Labor used 9 pages of regulations to define when a waiver is knowing and voluntary. In other cases, Pennsylvania courts assess the knowing and voluntary release of discrimination claims based on the following factors:

  • The clarity and specificity of the release language
  • The employee's educational and business experience
  • The time given the employee to deliberate before signing the release
  • Whether the employee knew or should have known what rights he or she was giving up
  • Whether the employee was encouraged to seek or sought legal counsel
  • Whether there was an opportunity to negotiate over the terms
  • Whether the employee was given consideration exceeding the benefits he was already entitled to receive.
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New Pennsylvania and Federal Minimum Wage Posters Available for Download

Pennsylvania and Federal Minimum wage posters may be downloaded at the website locations listed below.  Posters must be placed in a conspicuous place in the work site where they can be seen by employees at all work site and business locations.  The DOL has a "Poster Advisor" that helps employer's identify which posters it may be required to post.  The Pennsylvania Department of Labor and Industry also has a webpage with "Mandatory Postings for Pennsylvania Employers".

Fair Labor Standards Act (FLSA) Minimum Wage Poster effective July 24, 2007

Pennsylvania Department of Labor and Industry Minimum Wage Poster effective July 1, 2007

Public Employee's Claims that a Union Breached its Duty of Fair Representation must be Made in Court not at the PLRB

In Case v. Hazelton Area Educational, the Pennsylvania Commonwealth Court held that "[i]ndividual claims by employees against the union that allege a breach of the duty of fair representation do not qualify as [complaints of] unfair labor practices in violation of the PERA [Public Employe Relations Act]." This ruling forces public employees to assert their individual claims against their union for violation of the duty of fair representation in court and not with the Pennsylvania Labor Relations Board (PLRB). The court expressly overruled Segilia v. Riverside School Service Personnel Association, 526 A.2d 832 (Pa.Cmwlth. 1987), to the extent that case allowed individual claims before the PLRB.

English-Only Rules: New Immigration Battleground?

The immigration reform battle on Capital Hill turned into a skirmish over the EEOC's enforcement of to English-Only rules in the workplace. By a narrow 15-14 margin, a Senate Appropriations Committee voted June 28 to approve an amendment designed to prevent the EEOC from bringing new lawsuits against companies that adopt English-Only workplace rules. As is often the case, Congressional policy disputes find their way into agency funding bills.

The EEOC views English-Only Rules as potential national origin discrimination and has adopted regulations prohibiting them unless the employer can show that the rule is justified by business necessity.   According to the EEOC's COMPLIANCE MANUAL, an English-only rule is justified by "business necessity" if it is needed for an employer to operate safely or efficiently. The following are some situations in which business necessity would justify an English-only rule under the EEOC's view:

  • For communications with customers, coworkers, or supervisors who only speak English
  • In emergencies or other situations in which workers must speak a common language to promote safety
  • For cooperative work assignments in which the English-only rule is needed to promote efficiency
  • To enable a supervisor who only speaks English to monitor the performance of an employee whose job duties require communication with coworkers or customers
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EEOC Amends Age Discrimination Regulations to Conform with U.S. Supreme Court Decision

The U.S. Equal Employment Opportunity Commission (EEOC) today issued revised regulations on age discrimination in the workplace in accordance with a 2004 Supreme Court decision, General Dynamics Land Systems, Inc. v. Cline. The updated regulations, published in the July 10, 2007 Federal Register, are available on

The revised regulations clarify that the Age Discrimination in Employment Act (ADEA) does not prohibit employers from favoring an older employee over a younger one when both are protected by the Act. The EEOC initially proposed these changes in 2006 and, after receiving public comments on its proposal, unanimously voted to approve the revisions.


The Pennsylvania Employment Law Blog has added another new section which spotlights a Pennsylvania business and how it confronted a workplace issue commonly faced by human resource professionals. Click on the link titled "HR Navigators: How We Did it!" on the upper right side of the page. 

Beginning July 11, 2007, we will publish a semi-monthly article authored by a human resource practitioner. The posting will discuss business solutions to common HR problems, innovative approaches to managing workplace issues, or topics of general interest. We hope to generate a discussion where ideas can be exchanged and questions answered. 

Perfume Sensitivity: ADA Claim or Office Nonsense?

Most HR professionals abhor their role as "fashion police" and arbiter of seemingly childish workplace skirmishes over perceived wardrobe malfunctions, odoriferous perfumes/colognes and other personal hygiene gaffs. However, ignoring these matters can land an employer in court for an alleged violation of the American's with Disabilities Act ("ADA").

A recent AP article entitled "Eau de Lawsuit: Woman sues over scent" describes an employee in the Detroit planning department who claims she is severely sensitive to perfumes and other cosmetics. She has sued the city, saying a co-worker's strong fragrance prohibits her from working. Her lawsuit under the ADA claims that her employer failed to accommodate her disability by banning perfumes in the workplace.

Seem odd? A quick review of the ADA case law shows no less that 18 reported court decisions with similar facts. In Davis v. Utah State Tax Commission, the employer was held liable for an ADA violation because it failed to engage in the interactive process to evaluate possible accommodations. In Kaufmann v. GMAC Mortgage Corp., the employer prevailed because it took steps to accommodate and the court recognized that providing a completely scent-free environment was unreasonable.

The difficult employee relations issue presented is the balancing of one employee's ADA rights with other employees' personal rights. As many employer's have learned, the ADA rights trump personal rights in the workplace. Nonetheless, employer's must avoid disclosing too much confidential medical information or allowing the disabled employee to be ridiculed or harassed for the requested accommodations.

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Limited Liability Company may not Protect Sole Owner from Payroll Tax Liability

The sole owner of an LLC was individually liable to the IRS for unpaid payroll taxes under a recent federal appeals court ruling in S.P. McNamee, CA-2 Docket 05-6251-cv, May 23, 2007. The owner, a sole proprietor of an LLC, failed to remit payroll taxes to the IRS. The IRS ignored the LLC status and assessed the unpaid taxes personally against the LLC's sole owner by placing a lien against his property.

The appeals court held that a single owner LLC's can elect to be treated for tax purposes as corporation or as a sole proprietor. If the LLC elects sole proprietor tax treatment than its owner is liable for unpaid taxes. If corporate tax treatment were elected by the LLC, then the owner avoids personal liability.

Single member LLCs should factor the added potential liability of federal payroll taxes when selecting their business form.

Protecting Your Business with Noncompetition Agreements

The incidents of corporate raiding and mass employee defections to competitors are on the rise as businesses scramble to find and retain high quality employees. Under any business model, it is far easier to recruit away a group of experienced employees with a "book of business" than it is for an employer to start from scratch.   Whether or not these actions are "illegal" or just aggressive competition primarily turns upon the existence of any contracts limiting competitive activities by employees and former employees.

Corporate raiding isn't just a Wall Street phenomenon. It was recently reported that Resource Bank, a Virginia based subsidiary of Fulton Financial Corporation, was hit with a defection of nearly its entire mortgage company staff to a rival lender. The employees allegedly followed two executives who are now accused of orchestrating an employee raid. The former Resource Bank executives signed employment agreements containing restrictions on soliciting employees on behalf of a rival business. This good business practice will undoubtedly form the primary basis for legal claims by Resource Bank against its competitor.

Noncompetition Agreements are invaluable in protecting legitimate business interests provided they are carefully drafted and properly executed. Such agreement typically contain some or all of the following clauses:

  • Prohibitions on a former employee's competition by working for or starting a competitive business.
  • Restrictions on soliciting, selling to, or providing services to customers and prospective customers of the former employer.
  • Restrictions on soliciting employees of the former employer.
  • Prohibitions on using or disclosing confidential business information of the former employer.

There are special legal requirements for noncompetition agreements under Pennsylvania law. As restrictions on free trade, these agreements must be:

  • Necessary to protect an employer's legitimate business interest
  • Entered into at the commencement of the employment relationship or supported by "additional consideration" in the form of a promotion or payment
  • Reasonably limited in duration and geographic scope

On the other hand, prohibitions on disclosure of confidential information need not be supported by consideration or limited in duration. However, it is essential for an employer to define the scope of what is confidential by delineating the specific categories of material and taking steps to keep it from entering the public domain.

Give Your Laptop a Vacation?

Yes, I am one of the 60 percent of Americans who bring their laptop on vacation.  But this time, two good things happened.  First, I eventually got my computer to work.  Second, I was able to read a very nice article about our blog written by Judy Strausbaugh entitled "The paperless chase" that appeared in the Lancaster Sunday News on June 24, 2007.  I was also able to update the blog.  I must confess that it has become rather addictive.

Immigration Law Compliance: How good are your I-9s?

It starts out as a normal workday in the HR department of XYZ company…You just deleted 54 spam e-mails, listened to 27 inane voice messages, and refilled the empty coffee pot (again). You look out the window to the parking lot (because those are the types of scenic views HR managers get in the corporate hierarchy). You notice several buses surrounded by black clad, gun wielding figures with the letters "INS" on their jackets. This can't be good. You look over to the file cabinet with the drawer labeled "I-9 Forms". Your next thought… "I hope I'm not Paris Hilton's cell mate?"

This may have been how it went down at Iridium Industries' Artube Division in East Stroudsburg, Pennsylvania when 81 employees were arrested in an immigration raid. Fortunately for them, the target was a temporary agency operating in the area. The subject of immigration compliance for temporary agencies has been covered by me in a previous post.

The immigration raids are conducted by the U.S. Immigration and Customs Enforcement (ICE) as part of its "Worksite Enforcement Initiative". These raids target "egregious employers involved in criminal activity or worker exploitation." However, the scope of ICE operations might suggest more as it operates 17 teams making 15,049 immigration arrests.

The INS has several mechanism to discover the employment of illegal workers including the following:

  • Social Security Mismatch Letters: Coordination between the IRS and the SSA began in 2002 with the issuance of "mismatch letters" that require an employer to check and report on discrepancies between SSN# and W-2 forms. The SSA process and ramifications are summarized in a posting by Linda S. Husar.
  • DOL and OFCCP Audits: Several government agencies conduct random audits of employer's I-9 forms as a part of their other audit activities.
  • Proposed Electronic Employment Verification System (EEVS): The White proposal for an electronic verification system under the Immigration Reform Bill is likely to succeed. Under this system, employers will be required to verify the work eligibility of ALL employees.

The consequences to a business and individuals for noncompliance with immigration laws including correct I-9 reporting are significant. The following is a partial list of penalties:

  • For employers who fail to properly complete, retain, or make I-9 Forms available for inspection, fines range from $100 to $1,100 per individual I-9.
  • For employers who knowingly hire or knowingly continue to employ unauthorized workers, civil penalties range from $250 to $11,000 per violation.
  • For employers engaging in a pattern or practice of knowingly hiring or continuing to employ unauthorized workers, fines can be as much as $3,000 per employee and/or 6 months in imprisonment.

Ten Tips for Surviving a Wage and Hour Audit

  1. The Fair Labor Standards Act is Archaic.

The FLSA was enacted in 1938 with only minor amendments since then. It doesn't fit into today's economy. For example, Overtime is still described and viewed as a "penalty". It is designed to discourage employers from working employees for more than 40 hours per week and instead encourage them to hire more employees.

  1. Understand the Mindset of a Wage and Hour Investigator.

The investigator is examining your business with the goal of finding areas of "noncompliance". The DOL publishes a Field Operations Handbook that instructs investigators on FLSA interpretations and how to conduct an audit. Remember, auditors are typically focused on certain compliance areas, industries or are investigating a complaint, but they won't tell you how you were chosen for an investigation, so don't waste time asking. They know a lot about the FLSA, just ask them. They generally don't know much about running a business. They know nothing about employee relations.

  1. Assess Your Weaknesses.

Businesses should conduct a self-audit to determine areas of risk like those identified in my previous post. Your audit likelihood increases based on two factors:

  • if you are in an industry or subject matter area targeted for a compliance initiative by the DOL. Current DOL initiatives are in the following areas:
    1. Off the Clock Compliance,
    2. Workers with Disabilities,
    3. Healthcare, and
    4. Garment Workers.
  • if you have recently undergone a messy human resources issue like a termination or organizing campaign and you have an employee who may seek vengeance through a DOL complaint.      
  1. Records are a Business' only True Defense

The DOL mandates certain recordkeeping and an employer's failure to keep adequate records of hours worked, wages paid and overtime is a violation of the FLSA. It is also very helpful to have job descriptions that attempt to establish any exemptions from overtime that my be applicable. An absence of documentation seriously undermines a business' ability to get through an investigation. Absent records, the investigator will interview employees about their hours worked and job duties.

  1. Control Your Supervisors

Meet with and educate your supervisors in advance of any DOL interview. You also have a right to sit in on any DOL interview of a supervisor so exercise that right. You are not able to sit in on employee interviews, but if the DOL identifies a larger group of employees try suggesting that they use a written survey rather than an interview. This takes the ambiguity out of both the question and the answer.

  1. Don’t be a Jerk.

As best I can tell, the Wage and Hour Division's compliance budget is almost $190 million dollars. Don't make them spend it all on you. If you tell them to get a subpoena, they will. And instead of one investigator, they'll send five. There are ways to be firm and courteous. Manage the investigation as best you can while still running your business. Here are a few simple tips:

  • Establish a point person for dealing with the investigator and have all requests for information go through that person
  • Give the investigator a place to work that is out of contact with employees but reasonably comfortable
  • Try to get a summary of the audit and the document needs of the auditor, so that you can manage his or her expectations about providing them
  • Make employees available for interview during work hours so they are not contacted at home
  • Try to wrap up the audit in one or two days, if possible. Don't let the investigator think up more questions and come back again.
  1. Investigators Don’t Always Play Fair

Employee interviews are the area where things can go horribly wrong. As every lawyer knows, a leading question is the best way to get the answer you want; particularly, if the witness is in an uncomfortable position of being quizzed by a government enforcement agent. Compare the following two questions and guess which one the investigator will ask your employees if you are a jerk to him:

  • How many hours do you normally work in a week?
  • You look like a really conscientious person, I bet you work one or two extra hours each week and don't even tell your employer?
  1. Let’s Make a Deal

The field investigators have limited ability to compromise a claim when it is reduced to a specific dollar amount based on investigative findings. If things are going badly in an area, you still have the ability to strike a deal before the investigator leaves and does his or her final calculations. Even if the investigator comes up with a number, remember there is a chain of command that you can use for further negotiations. There are Area Administrators, Regional Administrators and the DOL's legal solicitors.

  1. Expect Publicity for Noncompliance

As a means of justifying its enforcement activities, the DOL is much more likely use newspaper and website publicity that names the employer and the amount of a settlement.

    10.    Fix your Mistakes… They’ll be back.

Many settlements with the DOL involve follow up reporting and compliance agreements. In addition, the DOL does re-investigate businesses. Penalties for repeat violations are greater and lead to willful violation findings.

Comparison of Pennsylvania and Federal Minimum Wage Rate Increases

The Fair Minimum Wage Act of 2007, signed into law by President Bush on May 25, 2007 increases the federal minimum wage for the first time in 10 years. In a three-step process, the Federal minimum wage will increase to $5.85 on July 24, 2007; $6.55 on July 24, 2008; and $7.25 on July 24, 2009. Employers must pay the higher of the Federal or Pennsylvania minimum wage. In all cases, the Pennsylvania minimum wage rate is equal to or higher than the Federal minimum wage rate:

  PA Minimum Wage

PA Small Business

Federal Minimum Wage
July 1, 2007 $7.15 /hour $6.65/hour $5.85/hour
July 24, 2008  


July 24, 2009 $7.25/hour $7.25/hour $7.25/hour

Pennsylvania's Minimum Wage Increases to $7.15 per Hour on July 1, 2007 for Most Employers

The second installment of Pennsylvania's minimum wage increase takes effect on July 1, 2007. For most employers, the Pennsylvania Minimum Wage Act increases Pennsylvania’s minimum wage as follows:

·         To $6.25 per hour effective January 1, 2007.

·         To $7.15 per hour effective July 1, 2007.

·         To $7.25 per hour effect July 24, 2009.

There is delayed effective date for small employers. A small employer is defined as one who has an employee complement composed of the equivalent of 10 or less full-time employees. Small employers may use the following minimum wage implementation schedule:

·         To $5.65 per hour effective January 1, 2007.

·         To $6.65 per hour effective July 1, 2007.

·         To $7.15 per hour (the regular Pennsylvania minimum wage) effective July 1, 2008.

·         To $7.25 per hour (the Federal mandated minimum wage) effective July 24, 2009.

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Wage & Hour Compliance Assistance from the DOL

Last month the Department of Labor announced the addition of its "Overtime Calculator" to the five other previously published FLSA Advisors. Although it is unlikely that the Calculator will displace Spider Solitaire as my lunchtime dalliance, it was educational to run through the program which has links to a lot of the terminology used in the FLSA. The calculator operates with the same backwards logic of a tax return, but this shows you how mechanically the DOL applies the law to the facts.

Three of the five other FLSA Advisors are good resources for FLSA compliance. I recommend the "Hours worked", FLSA exemptions, and "Child Labor" Advisors: Continue Reading...

The Five Most Common Wage and Hour Mistakes

Having identified several of the most common Wage & Hour mistakes in the last post, I wanted to expound upon 5 of them that I see over and over again:

1.    Misclassifying nonexempt employees as exempt and the resulting failure to pay overtime.

The so called "White Collar Exemptions" were revamped in 2004 DOL regulations, but still remain a source of interpretive confusion or corporate intransigence. The exemptions to minimum wage and overtime requirements apply to executive, administrative, and professional employees (including teachers and academic administrative personnel in elementary and secondary schools), outside sales employees, and employees in certain computer-related occupations. In my experience, the three most frequent errors occur for the following jobs: Working Supervisors; Administrative Assistants; IT Help Desk Employees.

Corporate intransigence remains for job titles that have traditionally been treated by a company as exempt positions and paid a salary, but which don't really qualify for any exemption.  For example, there are many clerical positions for which an employer tries to recognize the significant contribution and responsibility by treating them as exempt, but these positions don't meet the "administrative" exemption. An employer's hesitancy to address the employee relations issue associated with an incorrect exemption is like a ticking time bomb. Continue Reading...

Pennsylvania Child Labor Laws

Now that summer is here, many employers will be hiring teenagers to fill temporary jobs. There are state and federal limitations on the maximum hours of work, types of work, and work authorization documentation for "child labor". Different aged children are limited in the jobs they can perform and the hours they can work. The use of child labor is an situation that employers need to carefully monitor in their workforces because it is frequently audited and highly regulated by the Pennsylvania Department of Labor and Industry.

Bankruptcy cannot be Used to Discriminate against Applicant

Employers who obtain credit information in compliance with the Fair Credit Reporting Act must be aware of the limitations on its use created by the Bankruptcy Act. Section 575 of the Bankruptcy Act protects employees and applicants from discrimination if an individual:

  • is or has been a debtor under this title or a debtor or bankrupt under the Act;
  • has been insolvent before the commencement of a case under the Act or during the case but before the grant or denial of a discharge; or
  • has not paid a debt that is dischargeable in a case under this title or that was discharged under the Act.
Courts have limited the reach of this provision by requiring that the discrimination be "solely because" of the individual's bankruptcy participation.

Wage and Hour Violations: What are the Consequences?

The Central Penn Business Journal's Morning Roundup featured an Associated Press article entitled "Small Business Owners shouldn't use interns as substitute employees". This is the same issue that I commented on in my last posting, but it reminded me that I missed a chance to describe the ramifications of getting it wrong.

There are significant consequences for violating the Fair Labor Standards Act (FLSA) by incorrectly paying minimum wage or overtime. Fixing a violation may involve more than just paying the compensation that was owed.

For FLSA violations, an employee may recover both back pay and liquidated damages (which is a penalty equal to the amount of the back pay). The double damages recoverable by an employee give the FLSA some real teeth.

The FLSA may be enforced by either the Department of Labor or by a private lawsuit by an employee. Listed below are methods which the FLSA provides for recovering unpaid minimum and/or overtime wages:

(1) The Wage and Hour Division may supervise payment of back pay.

(2) The Secretary of Labor may bring suit for back wages and an equal amount as liquidated damages.

(3) An employee may file a private suit for back pay and an equal amount as liquidated damages, plus attorney's fees and court costs.

(4) The Secretary of Labor may obtain an injunction to restrain any person from violating the FLSA, including the unlawful withholding of proper minimum wage and overtime pay.

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Summer Internships: To Pay or Not to Pay

The Human Resource Blog has a great post on the benefits of hiring a summer intern. At the risk of throwing the legal wet blanket on internship programs, employers need to be cautious when it comes to unpaid interns. The FLSA provides minimum wage and overtime protection to those employed within the meaning of the Act. FLSA section 3(g) states that to “employ” means to “suffer or permit to work.” The Supreme Court in Walling v. Portland Terminal Co., 330 U.S. 148, 152 (1947), identified six factors to evaluate whether a trainee, intern, extern, apprentice, graduate assistant, or similar individual is to be considered an employee. If all of the following six factors are met, then an employment relationship does not exist and compensation is not due:

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U.S. Supreme Court Limits Pay Disparity Claims

On May 29, 2007, the United States Supreme Court ruled that employees may not bring suit for sex discrimination in an employer's pay practices under Title VII of the Civil Rights Act of 1964, unless they have filed a charge with the EEOC within 180 days (300 days in the case of Pennsylvania) after their pay was set. The clock begins to run even if the effects of the initial discriminatory act were not immediately apparent to the worker and even if they continue to the present day.

In Ledbetter v. Goodyear Tire & Rubber Co., the majority rejected the view of the EEOC, that each paycheck reflects the initial discrimination is itself a discriminatory act that resets the clock on the 180-day or 300-day period, under a rule known as “paycheck accrual.”

The impact of the decision on women may be somewhat limited by the availability of another federal law against sex discrimination in the workplace, the Equal Pay Act (EPA), which does not contain the 180-day/300-day requirement. The EPA has additional procedural hurdles and a low damage cap that excludes punitive damages. It does not cover discrimination on the basis of race or Title VII’s other protected categories. However, the decision may signal the Court's willingness to limit the concept of a "continuing violation" which allows employees to circumvent the limitations periods for filing charges with the EEOC by showing that the effects of a discriminatory act continue to the present time.

Revised EEO-1 Report Required Starting September 2007

Beginning September 30, 2007, Employers who are required to submit EEO-1 Reports to the Equal Employment Opportunity Commission (“EEOC”) must do so on a new form. The EEO-1 Report collects annual data on the race, sex, and ethnicity of the workforce of private employers with 100 or more employees and certain federal contractors.

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Converting to a Paid Time Off System: Practical and Legal Pointers

Merrill Lynch tried to prevent abuses in sick time by clamping down on the reasons for sickness related absences and disciplining employees for excessive absenteeism. Many employers have decided to get away from policing the circumstances of an employee's absence by just creating a bank of paid time off that can be used for any reason. Once PTO is exhausted, time is unpaid and subject to the attendance discipline policy. This certainly sounds like a great idea, but here are some practical and legal considerations in converting from a traditional sick pay program to a PTO plan:

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Abuse of Sick Days: Analyzing the Merrill Lynch Response


Merrill Lynch is reportedly cracking down on time off abuses through new attendance guidelines that provide for a verbal warning and possible loss of pay after use of four sick days and termination after use of nine sick days without valid excuse. The new corporate policy is purportedly designed to reign in workers who misuse sick days by playing hooky on nice summer days, extending weekends, etc. The new policy replaces a program that providing up to 40 sick days per year.

Sick day programs are one of the most fretted over of all employment policies because they involve so many management and legal issues. Sick time is disruptive to the workplace because it is almost always unscheduled. Misuse of sick time has a dramatic impact on employee morale because of work inequity perceptions. Employers must manage abuses within the legal parameters imposed by the wage & hour laws, disability discrimination protections, Family and Medical Leave Act compliance, and wage payment regulations.

Almost every employer offers some form of sick time benefit.   Statistics show that the average business offers 8.1 sick days per year, but employees use only 5.2. However, the growing trend is away from traditional sick days to creating a paid time off bank (PTO). PTO programs combine into one pot all categories of time off, like vacation, sick days, personal days, and floating holidays. Some of the advantages and disadvantages of PTO are as follows:

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Legal Issues arise when Helicopter Parents act as Helicopter Managers

Helicopter parents may hover over their children, but what's their management style in the workplace when it comes to other people's kids and their peers? Phyllis Weiss Haserot on her Blog "Practice Development Counsel" posted a set of questions concerning how Helicopter Parents operate as managers in the workplace some of which are as follows:

  • Do the helicopter parents (those that hover too much and interfere) exhibit similar behavior with their juniors as they do with their children? Do they bring their parenting style to the workplace to over-protect and push their people ahead?
  • Or do they take an opposite approach and expect great results without giving the guidance and support they want for their children?
  • Are Baby Boomer managers (only some of whom are "helicopter parents") hard on younger generation workers because they are demanding the results they would like to see from their children, but without the coddling they give their kids?
  • Is it because many Boomers are so competitive and status conscious that they want everyone (children, junior people on their work teams, etc.) to make them look good?

If we assume that Helicopter Parents operate as Helicopter Managers too, what impact will that have on the workplace culture and risks of litigation?

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Workers' Compensation Insurance Discount for PA Certified Safety Committee

Pennsylvania law allows for a 5% annual discount on workers' compensation insurance premiums to employers that  establish a certified safety committee.

To qualify for the insurance discount, an employer must establish a safety committee that meets certain requirements, fill out a committee certification application, and have it approved by the Department of Labor and Industry.

The requirements for a committee are as follows:

  • Committees must have a minimum of 2 employer and 2 employee representatives, meet monthly and be in operation for at least 6 full months.
  • All committee members must be trained by qualified trainers in safety committee operation, hazard inspection and accident investigation.
  • Committee meeting agendas, attendance lists and meeting minutes must be kept.

The Department of Labor and Industry Website has the following helpful links:

Process Overview:

Certification Process Overview

Application for Initial Certification:

Online Filing using HandS 

PDF Application (LIBC-372) 

Application for Renewal Certification:

Apply for Renewal Certification

Help in Getting Certified:

Health & Safety Division Contact Information

Safety Committee Technical Assistance Manual

Required Committee Member Training

Certified Employer Network

Mentoring or Meddlesome: Human Resources Needs to Decide

The Today Show featured a story on "Helicopter Parents : Helping Your Child Get a Job" which was an interesting foil to our recent posting.   Matt Lauer's guest was Dr. Michele Borba (whose blog appears on iVillage website). Dr. Borba referred to some helicopter parents as 'Blackhawks" and said  that these parents haven't struck the correct  balance between "mentoring and meddlesome". However, the show noted that many large companies like General Electric are embracing helicopter parents by inviting them into the recruiting process and targeting them with advertising. I think  employers will need to be flexible in their approach to parents in the recruiting phase. Human resource professionals face the challenge of drawing the boundary at the workplace once the recruit is hired.

New Hire Reporting Required in PA

All Pennsylvania employers are required to report all newly hired employees to the Pennsylvania New Hire Reporting Program within 20 days of the date or hire. Pennsylvania will match New Hire Reports against its child support records to locate non-custodial parents, establish child support orders, or enforce existing orders. Pennsylvania will also transmit the data to the National Directory of New Hires to match against child support orders from other states.

Employers may report their new hires by any of the following methods:

  • W-4 Form - Date of hire, contact name and contact phone number must be listed separate, signature date is not a valid date of hire. Please make sure you complete all employee and employer information including lines 10 & 12.
  • New Hire Form
  • Diskette or Magnetic Tape
  • E-mail or FTP

An employee must be reported as a "new hire" under the following conditions:

  1. a new employee
  2. a former employee who is:
    • rehired following termination,
    • rehired following separation,
    • returning to work following a lay off, or
    • returning to work following a requested leave of absence without pay greater than 30 days

If the employee does not fall into any of the above categories, the employee does not need to be reported as a new hire. A temporary agency does not need to report an employee for each work assignment.

State Website addressing FAQs:

Workers' Compensation Health Care Provider Panels

The PA Workers' Compensation Act gives employers the right to establish a list of designated health care providers. When the list is properly posted, injured workers must seek treatment for the work injury or illness with one of the designated providers for 90 days from the date of the first visit. There are some specific guidelines provided in the rules and regulations[Subchapter D, Sections 127.751 through 127.755 of the rules and regulations found on page 237 of the Workers' Compensation Act] for these lists:

  • The employer must provide a clearly written notice to employee of the employee's rights and duties.
  • The notice must be signed by the employee at the time of hire, whenever changes are made in the list and at the time of injury.
  • The list must contain at least six providers; three of the six providers must be physicians.
  • Providers as defined in the Act are more than just physicians (includes chiropractors) .
  • Each provider's name, address, telephone number and specialty must be included on the list.
  • If a particular specialty is not on the list and the specialty care is reasonable and necessary for treatment of the work injury, the employee will be allowed to treat with a health care provider of his or her choosing.
  • The employer may not direct the employee to any specific provider on the list.
  • The employee may switch from one designated provider to another designated provider.
  • Listed providers must be geographically accessible.
  • Listed providers must contain specialties appropriate for the anticipated work-related medical problems of the employee.
  • If employer's list of designated providers fails to comport with the Act and the regulations, the employee has the right to treat with a provider of his or her choice.

Non-lawyer Representation at U.C. Hearings

This post is largely for historical purposes as the status quo has been restored on the matter of non-lawyer representation at Unemployment Compensation hearings.  By action of both the State Legislature and now the Pennsylvania Supreme Court, non-lawyers may represent employers at U.C. hearings reversing the anomaly created by the earlier lower court's decision in Harkness v. UCBR.  The Supreme Court's decision may have some impact on other quasi-judical forums (like zoning appeals) where non-lawyer participants may arguably engage in the practice of law.

Mandatory Postings for Pennsylvania Employers

Pennsylvania employers are required to post certain notices in their worksites so employees have access to and information about applicable labor laws. These posters can be downloaded for free from the Department of Labor and Industry website.  The website identifies each poster with links to the content of the poster, which employers are required to post it and contact information should you require additional information.

All notices must be posted in a conspicuous place so that they can be seen and read by employees. Failure to post notices can result in penalties and possible fines. In addition to the notices listed below, all government agencies and private employers with government contracts over $25,000 are required to publish and post an anti-drug policy statement in accordance with the Drug-Free Workplace Act of 19

HR's Response to the Helicopter Parent

Imagine that your company has decided to make a job offer to a very promising Ivy League MBA candidate. You call the candidate to communicate your company's very generous offer and what's the response?

"My mom will call you back to negotiate my compensation package". Welcome to your first encounter with a "Helicopter Parent". For the moment, let's leave aside the issue of whether this level of parenting does more harm than good and focus on the issue as framed by Stephanie Armour in her recent USA TODAY article:

Employers are finding that parents are increasingly involved in their children's job choices, as "helicopter parenting" extends to the workplace.

As Generation Y enters the job force, parents of new hires are calling employers to negotiate salary and benefits, and some are even showing up at job fairs. It's a new dynamic that has some employers responding by training recruiters and managers how to handle "helicopter parents," who hover over their children's lives.

Here are some considerations that I think are worth evaluating in anticipation of Mom or Dad's call:

  • Temper your Gut Reaction: The almost universal reaction of most Baby Boomers and Gen X'ers to this scenario is shock and aghast. How can this seemingly bright candidate allow parents to run his or her life? However, this is a value judgment that ignores the sociological and demographic facts. The real questions are: Do you want the candidate or not? Are you willing to negotiate under these terms?
  •  Balance the Pushback: Hey why not? Professional athletes and Hollywood stars, have agents do their negotiations and no one considers that a poor reflection on their future job performance. Evaluate whether parental involvement at the recruiting stage is really indicative of an inability to perform in the job. Obviously, these three-way conversations will have to stop once the candidate becomes an employee because that truly relates to job performance.
  • Consider the Sociology: Generation Y also called the Millennials has already been labeled with there own set of workplace attitudes which may not respond well to the traditional recruiting model. Gen Y'ers collaborative relationship with others including their parents may make others a natural part of their decision making process. But where does it stop? Certainly parents cannot become an ongoing collaborator in workplace performance and personnel issues. Undoubtedly taking a cue from the academic world ,which is ahead of the curve on this one, would be appropriate. Academia's approach has been to develop a hard line in keeping parents out of the classroom.
  • Recognize the Demographics: Following the acclimation of Gen-X'ers into the workforce, demographics have become a worthy consideration for HR professionals in sculpting corporate culture. The challenge becomes integrating the next generation of Helicopter Parents and Boomerang Kids. As noted by Carolyn Tang in her article "The Great Divide":

Traditional suit-and-tie Baby Boomers are interacting with denim-clad colleagues from both Generations X and Y. Disparities in career expectations and attitudes between the old guard and the new are causing subtle, yet significant shifts in corporate culture and the working environment. And perhaps some tension as well.

So what's the recommendation on HR's approach to helicopter parenting?

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Employment At Will Defined

Pennsylvania is a strong at will employment  state, but what does that really mean? Employment at will is only a contract term. It creates a rebuttable presumption that all employment contracts can be terminated by the employer or the employee at any time, for any reason. However, the "reason" cannot violate discrimination laws, government regulations, or public policy. The Pennsylvania Supreme Court has been very conservative in recognizing public policy exceptions to the at will employment presumption limiting them to the following circumstances:

  • Supervisor fired for refusing to dissuade employee from seeking W/C benefits
  • Employee fired for filing a worker's compensation claim
  • Employee fired for filing unemployment claim
  • Employee fired for refusing to take polygraph test.

Don't think that you don't need a "reason" to terminate an employee in Pennsylvania.  And make sure its not an illegal one.


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Violence in the Workplace: Observations and Recommendations

There are psychological tests and assessment tools that are predictive of violent behavior, but there are significant legal restrictions on their use. Assessments that are not "medical tests" may be used on a pre-employment basis, but should not be used as the principal reason for a hiring or promotion decision.

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

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

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

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Former Employee may Inspect Personnel File

Although the Personnel Files Act limits inspection rights to "any person currently employed", it does not prohibit an individual from obtaining access when the individual makes a request contemporaneously with termination or within a reasonable time immediately following termination. Beitman v. Dept of Labor and Industry, 675 A.2d 1300 (Pa. Cmwlth 1996).  Remember that disciplinary records that may form a basis for defense of a legal claim should be included in the personnel file unless prepared in anticipation of litigation.  If documents are not in the personnel file when inspected by a former employee, an argument can be made that they were fabricated after the fact.

Mandatory Direct Deposit

Many employers rely on the decision in Statler  v. U.C.B.R, 728 A.2d 1029 (Pa. Cmwlth 1999) as a blanket justification for mandating that all employees submit to direct deposit.  In Statler, a union employee refused to sign a direct deposit authorization form as mandated by the collective bargaining agreement and the employee was fired. He was ruled ineligible for unemployment benefits because he engaged in willful misconduct because his refusal was unreasonable.

Those who rely on this case may be right; however, there is an important assumption underlying this reliance which can be described as follows:

  • The Pennsylvania Wage Payment and Collection Law requires the payments of wages be made in cash or check;
  • The Pennsylvania Electronic Fund Transfer law allows payment of wages by electronic transfer whenever a party requests the method of payment in writing;
  • The request must be in a written agreement that includes the terms under which a wage earner may withdraw the request and terminate the agreement;
  • Unionized employees make their collective request through the terms of the collective bargaining agreement negotiated by their authorized bargaining agent (the "Union").

Can nonunion employees be compelled to authorize or "request" direct deposit as a condition of employment or continued employment?

When Psychopaths Go to Work

As a follow up to the previous posting, Dr. Ira Wolfe offers his thoughts on Psychopathy in the Workplace based in part on his experience with personality assessments conducted through his business Success Performance Solutions. Thank you Ira for your contribution. 

When Psychopaths Go to Work 

We may never know the final diagnosis that drove Cho Seung-Hui to his mass murder spree at Virginia Tech but one thing is for sure: our desire to know "What on earth is wrong with that guy?" will continue. 

Fortunately most of us will never have to face what the students and faculty did on April 16, 2007. What many of us have and will experience are our interactions with an equally destructive and dangerous group that lurks behind many resumes and executive desks. Specifically I'm writing about psychopaths who are walking and working among us every day.

Many of you will likely have the same reaction as I did when I picked up a copy of a new book, "Snakes in Suits: When Psychopaths Go to Work": you're thinking serial killers and stalkers or picturing Hannibal Lecter, Freddy Krueger, and Dr. No. Reality however paints a far different picture. Psychopathic behavior is not illegal. It is not in fact even classified as a mental illness. Psychopathy is a personality disorder and hiring managers today often confuse its symptoms with success attributes.

Psychopaths live and work freely among us. In fact in today's dog-eat-dog world where greed is good and the survivor of the fittest earns the most riches, psychopathic behavior is innocently recognized as talent. For example, how many rising stars have you known who are driven, ambitious, resilient, charming, articulate, intelligent, and charismatic? Their mere presence disarms the most skeptical while their supporters fawn and idolize them. Now remove a moral conscience and the incapability of empathy, guilt or loyalty to anyone but themselves and viola - you have a psychopath. What interviewers see is not always what they get.

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Job Protection for Volunteer Firefighters and EMTs

Volunteer firemen, fire police, or any volunteer member of an ambulance service or rescue squad may not be disciplined or terminated for responding to a call prior to the time he is due to report to work that results in loss of work time. The employee need not be paid for the missed time. The employee must provide a statement from the chief executive officer of the fire or ambulance company stating that he or she responded to a call and the time of the call. 43 P.S. §§1201-1205; Guiffra v. International Paper Co., 931 F.Supp 372 (E.D. Pa. 1996).

Did You Know? Pennsylvania Law Highlights Section

The Pennsylvania Employment Law Blog has added a new section which highlights and/or discusses legal situations which commonly confront human resource professionals. Click on the link titled "Did You Know? PA Employment Law Highlights" on the upper right side of the page. The short informational postings address Pennsylvania law's impact on specific HR activities to promote compliance, proactive risk management, and issue identification.   The postings will be made on a regular basis and archived in this special section of the blog for our reader's reference and review. 

Psychological Testing and Profiling to Prevent Violence in the Workplace/Classroom: Fact or Fiction?

By Dr. Ira Wolfe and Michael Moore

In the aftermath of Cho Seung-Hui’s mass killing of 32 people at Virginia Tech, the question that dominates discussions from the water cooler to the halls of Congress after every incident of workplace or classroom violence is: How could this have been happened and what can we do to prevent it from happening again?

The prevention analysis is already following the familiar two-step paradigm of trying to assess an individual's propensity for violence and then excluding the potential perpetrator from school or work based on the risk. However, both steps of assessment and exclusion pose a risk for employers.

The assessment aspect has likely captured the most attention, especially with employers.  Psychological testing for job fit got its start nearly ninety years ago. The Surgeon General's staff administered intelligence and personality tests during World War 1 to the almost two million recruits of the American Expeditionary Force. The soldiers were given the Wordsworth Personal Data Sheet, a 125-question inventory, that was supposed to detect personalities that would crumble under fire. Although this test led to mixed results, it spawned a revolution in psychological research and the creation of predictive personality models and assessments. 

The majority of these early assessments, including the Minnesota Multiphasic Personality Index (MMPI), were clinical in nature, constructed and validated to diagnose psychiatric disorders.  The MMPI is considered one of the most researched psychological tests and, as a result, remains consistently ranked as one of the most reliable psychological instruments used by psychologists today.

With that endorsement you would expect every employer, college president and school superintendent to be ordering up MMPI evaluations as fast as shoppers flock to malls during post-holiday sales.  If only it were that easy.  Despite the requirement that employers provide a safe environment for their workers, government regulations place an even higher priority on protecting the rights of the individual.

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Compensation for Breaks and Meal Periods

Federal law does not require lunch or coffee breaks. However, when employers do offer short breaks or "rest periods" (usually lasting about 5 to 20 minutes), federal law considers the breaks work-time that must be paid. Unauthorized extensions of authorized work breaks need not be counted as hours worked when the employer has expressly and unambiguously communicated to the employee that the authorized break may only last for a specific length of time, that any extension of the break is contrary to the employer's rules, and any extension of the break will be punished. Bona fide meal periods (typically lasting at least 30 minutes), serve a different purpose than coffee or snack breaks and, thus, are not work time and are not compensable.

Wellness Programs Must Comply with HIPAA Restrictions

Design of an effective wellness program requires collaboration between insurance brokers, benefit providers and legal advisors in light of limitations placed on certain aspects of their design by HIPAA's Nondiscrimination Requirements.    Under the final regulations that take effect for plan years beginning after July 1, 2007, HIPAA impacts the design of wellness programs that take into account "health factors" when providing incentives under the program. Programs such as the following that do not take into account a participant's health factors when a reward is given or withheld for participation by an employee or beneficiary:

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Successful Wellness Programs Implemented by D&E Communications

As Steve Buterbaugh noted in the previous post, successful Wellness Programs need specific goals and top level support. These two factors play out in the design and implementation of the programs.

Wellness Programs have been successfully implemented by many central Pennsylvania companies.  One successful program was highlighted by David Wenner in a recent article about D&E Communications.  D&E's Wellness Program likely succeeded because it had a specific goal (90% employee participation in a health assessment) and it had a commitment from the top of the organization(CEO personal appeals).  These aspects are outlined in Mr. Wenner's article as follows:

D&E had been looking for a way to hold down health insurance premiums, which had risen 12 percent in 2005 and 20 percent in 2004, said Judy Naylor, vice president of human resources.

Highmark Blue Shield recommended its wellness program, Lifestyle Returns. The insurer offered D&E a 2 percent premium reduction this year if 90 percent of employees participated in the first two steps of Lifestyle Returns, Naylor said. Employees had to pledge to become more health conscious and complete an online health risk assessment.

D&E qualified for the premium reduction, which amounted to about $100,000. It divided the money among participating employees, giving each a $200 reward.

 Participation reached 65 percent after about six months, then stalled.  CEO James Morozzi begin visiting each work site and making personal appeals. In the end, 96 percent of employees completed the health risk assessment, which asks about their health-related habits.

Compensation for Training Time

Training time is counted as hours worked and therefore compensable even if it occurs after normal business hours.  It is compensable at the employee's normal rate and counts toward overtime if the employee exceeds 40 hours in that week.  If an employer has an established training rate, it could pay the training time at a different rate; however, most employers don't  pay at a different rate. There is an exception to the requirement that the training time be paid, if all the following can be met:

  • Attendance is outside the employee's normal work hours;
  • The employee's attendance is completely voluntary (meaning attendance is not expressly or impliedly a condition of employment or advancement)
  • The training is NOT directly related to the employee's job duties
  • The employee does not perform any productive work during his or her attendance.

There is also an exception for voluntary attendance at a lecture or course that is job related if the course or lecture is offered by a third party like a school or vocational institute not affiliated with the employer. For more information see the Department of Labors Bulletin on this subject.

Benefits of a Company Sponsored Wellness Program

Design of an effective wellness program requires collaboration between insurance brokers, benefit providers and legal advisers. There are particular considerations relating to HIPAA's Nondiscrimination Requirements which I will discuss in my next post. Before we get to that, I am pleased to share the following contribution from Steven P. Buterbaugh, CPCU, AAI of E.K. McConkey & Co. Insurance. Thank you to Steven for being our first guest blogger. 

Wellness Programs Have Positive Impact on Group Health Insurance and Overall Company Productivity

Businesses are under constant and increasing pressure to find ways to manage and reduce health benefit expenses while maintaining or improving employee morale and productivity.

Benefit redesign and changing employee contributions are often the first options to consider, but these can strain the important relationship between employer and employees. Significant long term savings will only occur when member health is actually improved, and this is where a wellness initiative can make an impact.

There is a wide disparity between the average claims and cost/person for someone who has a chronic illness and the average claims and cost/person for someone with non-chronic illness.  (See Chart) 

As we often are reminded through the media, there has been an increasing prevalence of chronic illness in our society including Obesity, Diabetes, and Heart Disease. Following are some compelling statistics:

  • Obesity- The CDC’s Health-E Stats for 1999-2002 show that 64% of adults in America age 20 and over are overweight or obese.
  • Diabetes- the National Diabetes Information Clearinghouse states that:
    • Each year, approximately 798,000 people are diagnosed with diabetes
    • Diabetes is a leading cause of death and disability and costs $92 billion per year in direct medical costs.
  • Heart Disease- in 2002, there were 23 million adults diagnosed with heart disease according to the Centers for Disease Control Summary Statistics for U.S. adults. The CDC also reports heart disease as the number one cause of death in the United States.

While these “big three” chronic health conditions are to some extent preventable and/or treatable, current health protocols can only do so much to address these problems.

Long term, the most effective way to control claims costs and keep insurance premiums down is to prevent claims from being incurred through health improvement.

The positive effects of a wellness initiative are cumulative. The longer the company participates, the greater the impact you should see. Taking action now could help stave off the development of future chronic conditions that will inevitably affect your bottom line and productivity in the future.

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Garnishment of Wages

Both Pennsylvania and Federal Laws apply to the garnishment of employee wages. Under Pennsylvania Law, wages and earnings of employees may not be garnished or attached except for repayment of student loans, child & spousal support and to collect unpaid taxes. 42 Pa.C.S.A §8127. Under the federal Consumer Credit Protection Act (CCPA), employees are protected from discharge by their employers because their wages have been garnished for any one debt, and limits are imposed on the amount of an employee's earnings that may be garnished in any one week. The Department of Labor has published guidance on the limitations imposed on wage garnishment.   Fact Sheet # 30 also describes the amount that may be withhold for specific types of garnishments.

Assignment of Noncompetition Agreements in Business Sales

A restrictive covenant or noncompetition clause contained in an employment agreement is not assignable to purchasing a business entity, in the absence of a specific assignability provision, where the covenant is included in a sale of assets. Hess v. Gebhard & Co., 570 Pa. 148, 808 A.2d 912 (2002). Business should carefully review the provisions of employment contracts and noncompete agreements to determine if the agreements are assignable to successor companies. 

Genetic Information Nondiscrimination Act passes in U.S. House of Representatives

The Genetic Information Nondiscrimination Act of 2007 (GINA) was passed in the U.S. House of Representatives on Wednesday, by a vote of 420-3. The act will protect individuals against discrimination based on their genetic information when it comes to health insurance and employment.  Title II addresses employment and provides that it shall be an unlawful employment practice for an employer--

  1. to fail or refuse to hire, or to discharge, any employee, or otherwise to discriminate against any employee with respect to the compensation, terms, conditions, or privileges of employment of the employee, because of genetic information with respect to the employee; or
  2. to limit, segregate, or classify the employees of the employer in any way that would deprive or tend to deprive any employee of employment opportunities or otherwise adversely affect the status of the employee as an employee, because of genetic information with respect to the employee.
  3. to request, require, or purchase genetic information with respect to an employee or a family member of the employee.

Powers, remedies and procedures are patterned after the Civil Rights Act of 1964 (42 U.S.C. 2000e-4 et seq.) and section 1977A of the Revised Statutes of the United States (42 U.S.C. 1981a), existing anti-discrimination federal legislation. 

The Act is available online at The Library of Congress site.  The National Human Genome Research Institute has also posted information on their website. 

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Corporate Officer Liability for Violation of Wage Payment Law

Officers of a corporation can be personally liable for unpaid wages and fringe benefits under the Pennsylvania Wage Payment and Collection Law, if they have an active role in the decision-making of the company. International Ass'n of Theatrical Stage Employees Local Union No. 3 v. Mid-Atlantic Promotion, Inc., 856 A.2d 102 (Pa. Super. 2004). 43 P.S. 260.9a.

PA Income Tax and Withholding Summary for Employment Related Programs and Benefits

In many significant ways, Pennsylvania Income Tax and Withholding laws differ from federal tax regulations. The most notable difference involves Pennsylvania's taxation of elective employee contributions to 401k and other retirement plans. Having completed the mind numbing task of researching this area, I decided that it might be helpful to others to have a resource for some of their Pennsylvania tax questions.  Or, you may consider using this post as an excellent cure for insomnia. 

In any case, the following is a general summary of Pennsylvania's tax treatment of various employee benefits and includes links to additional information. The summary is not intended as a substitute for professional tax advise as individual tax situations vary widely.




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Employee Personnel File Access

An employee or a designated representative has a right to inspect the employee's personnel file including all records that are used to determine the employee's own qualifications for employment, promotion, additional compensation, termination or discipline. 43 P.S. §§1321-1323.   The employer may impose the following restrictions on the inspection:

  • Employee may be required to provide written notice of either the purpose of inspection or parts of record to be inspected
  • Inspection may be limited to times during employer's normal work hours
  • Inspection may be mandated during employee's "free time"
  • Employer may limit the employee's ability to remove the file or copy any part of it
  • Employee may take notes
  • Company official may be present during inspection
  • Except for reasonable cause, employer may limit inspection to once every calendar year by an employee and once by a designated representative

Employee who Revokes Resignation may be UC Eligible

An employee who revokes or withdraws a resignation before its effective date is eligible for unemployment compensation benefits if the employer separates him or her from employment, unless the employer has taken steps to replace the employee. Spadaro v. UC Board of Review, 850 A.2d 855 (Pa. Cmwlth 2004). Steps to replace the employee may include reassigning other employees, advertising the opening, interviewing replacements, or offering the position to someone else.

Enforcing Noncompetition Agreements against Fired Employees

A noncompetition agreement may not be enforceable against an employee who is terminated for poor performance. Under a court ruling, an employer who fires and employee for failing to perform deems the employee "worthless" and the noncompete is no longer necessary to protect the employer's business interests. Insulation Corporation of America v. Brobston, 446 Pa.Super 520, 667 A.2d 729 (1995).

Pre-employment Medical Examinations

It is a criminal offense for a Pennsylvania employer to require any employee or applicant for employment to pay the cost of a medical examination, required by the employer as a condition of employment, if the applicant or employee works for the employer for one week or more. There is an exemption for medical examinations required by law. 43 P.S. § 1001- 1003.   There is no case law interpreting this section to give guidance on whether Pennsylvania would follow the federal rules that do not consider a drug test to be a "medical examination". 

Employment Screening and Background Checks - Part III

Many employers utilize some form of pre-employment testing to assist them in hiring decisions. A 2000 study by the American Management Association reported that 69% of firms used some form of job skills testing and 33% used psychological testing. 

There are general legal restrictions on the use of pre-employment testing in addition to the general prohibitions on discrimination found in Title VII and the Pennsylvania Human Relations Act. The Uniform Guidelines on Employee Section Procedures prohibit the use of a test or selection process that has an adverse impact on individuals in a protected class unless the test has criterion-related, content and construction validation studies. The validation studies must consist of empirical data demonstrating that the test is (1) predictive of performance of important elements of job performance; (2) contains content which tests important aspects of performance on the job; and (3) consists of procedures that assess identifiable characteristics that have been determined to be important to job performance.

Both the ADA and the Pennsylvania Human Relations Act prohibit the use of "medical tests" prior to an employer extending a conditional offer of employment. A medical test is generally one that seeks information about an individual's physical or mental health or impairments. Courts examining whether a test is "medical" have looked at the following factors: (1) administration or interpretation of the test by a medical professional; (2) intent of design of the test to reveal a medical or mental impairment; (3) conducting the test in a medical setting; (4) measurement of the individual's psychological responses to performing a task; (5) necessity of medical equipment to perform the test; and (6) invasive nature of the procedure.

Following is a summary of some of the more popular pre-employment tests employed by businesses to assess applicants:


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Did You Know? Pennsylvania Law Highlights Section

The Pennsylvania Employment Law Blog has added a new section which highlights and/or discusses legal situations which commonly confront human resource professionals. Click on the link titled "Did You Know? PA Employment Law Highlights" on the upper right side of the page. The short informational postings address Pennsylvania law's impact on specific HR activities to promote compliance, proactive risk management, and issue identification.   The postings will be made on a regular basis and archived in this special section of the blog for our reader's reference and review. 

Employment Screening and Background Checks - Part II

Newspaper headlines are replete with cases of embezzlement by employees and violence in the workplaceGovernment statistics note alarming trends for increases in criminal activity at the workplace. To stem this tide, employers have turned to Credit Reports and Criminal Record Checks as two sources of information they may legally obtain about prospective and existing employees.  However, there are statutes that govern the use of the data employers obtain.


  • Credit reports - The Fair Credit Reporting Act, 15 U.S.C. § 1681, (FCRA) requires employee consent and disclosure.  Employees or applicants must be notified of the existence of a report, consent to the disclosure of the report and be provided with a copy of the report if it results in an adverse personnel action.  The employer must certify that it is requesting the credit report for employment purposes, that it has made the required written disclosure to the individual, and that it has obtained the individual's written authorization permitting the procurement of the report.  The employer must also certify that it will provide the required disclosures if any information in the report results in adverse action against the individual. 

Be aware in using credit reports to evaluate candidates that the Federal Bankruptcy Act prohibits an employer from discrimination in hiring or retaining an employee solely because the employee or someone associated with him/her has filed for bankruptcy or has not paid a debt dischargeable in bankruptcy, see Thomas v. Dennis Real Estate, 1989 WL 114165 (E.D. Pa. 1989). Many employers question the benefit of credit checks since they are prohibited from using bad credit as a reason for not hiring someone when the individual his filed for bankruptcy. The result is only those individuals with late payment histories and charge offs can be weeded out, while those with bankruptcies can not be treated discriminatorily.


  • Criminal Record Check - A Pennsylvania employer's use of criminal history record information must be in compliance with the Criminal History Record Information Act.   Felony and misdemeanor convictions may be considered only to the extent to which they relate to the applicant's suitability for employment in the position for which he/she has applied, 18 Pa.C.S.A. § 9125(b).

If the employer's decision not to hire the applicant is based in whole or in part on criminal history record information, the employer must notify the applicant in writing, 18 Pa.C.S.A. § 9125(c). 

By implication the Act appears to prohibit consideration of arrests, or convictions of summary offenses.   Therefore, consider only felony and misdemeanor convictions, not summary convictions or charges without a conviction.


These are examples of issues of which you should be aware when doing any employment screening.  You should consult with an employment law attorney before you begin a screening program.  There are numerous issues that must be considered. 

Pre-Employment Screening and Background Checks - Part I

There is a growing trend among employers to use various pre-employment testing and background checks. Screening can range from credit reports and criminal checks to education and reference verification or motor vehicle records checks. I frequently answer questions for employers who are concerned about the legal issues related to obtaining this information. In my next few posts I will address some frequently asked questions.

What is an Employer's obligation to obtain background information on prospective and existing employees?

  • Employers are under a common law duty to exercise reasonable care in selecting, supervising and controlling employees.
  • The duty includes reasonable investigation into the prospective employee's work experience, background, character and qualifications.
  • Look at the relationship between your customers and employees - is the potential for harm foreseeable? What kind of work and contact with the public do your employees have?
  • Look at relationships between employees - has any conduct or history made the potential for harm foreseeable?

How can I minimize the risk of being sued when using background information?

  • Apply the same procedure to all employees and/or applicants to avoid claims of discrimination in evaluation.
  • Observe the requirements imposed by the statutes governing the data you obtain.

In my next post we will review some of the statutes that apply to some of the more commonly used reports. 

Temporary Agency Agreements: How to avoid becoming a joint employer with your temporary agency

Employers can take steps to minimize and/or manage their potential for "joint employer" status with a temporary agency. To avoid the creation of a joint employment relationship, the following is a list of some of the contractual and policy steps that should be undertaken:

  • Right to Direct and Control Work of Temps - The right to direct and control the activities or the temporary employees should rest exclusively with the temporary agency.
  • On Site Supervision - The temporary agency should have an on site supervisor to direct the work of the temps; otherwise, the default supervision will be the company's supervisors
  • Disclaim Company Control - Company should not have the right to direct or control the activities or temps
  • Disclaim Joint Employment Relationship  - Although it is largely window dressing, any agreement should state expressly that it does not create a join employment relationship
  • Mandate Legal Compliance by the Temporary Agency - The legal compliance provisions set forth in the next section should be addressed
  • Require Proper Payroll Reporting and Recordkeeping - Require that the agency be responsible for all payroll taxes, withholding and tracking of hours for FLSA compliance. Make certain that unemployment taxes and social security withholding are accomplished
  • Require Evidence of Insurance - Obtain proof that the agency has appropriate insurance coverage for workers compensation, employment practice and liability insurance
  • Obtain Indemnification from the Temporary Agency  - Obtain contractual indemnification which provides that the agency will pay damages and defense costs should the company be charged with employment law violations, unpaid taxes, unemployment or workers' compensation awards
  • Limit Assignment of Temporary Workers - Limit the duration of assignment of a worker to your work site to no more than six months. Longevity of the placement is an indication of employment relationship; particularly, if temporary workers perform operations integral to the business. Companies risk creating "permatemps" who may seek benefits.
  • Avoid Changing Employee Status - Except in the context of PEO's, don't outsource a group of employees to a temporary agency so that one day they are performing work as an employee and the next day as a temp.
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Temporary Staffing Agency Relationships: Who is the employer for legal compliance?

Staffing is a critical and time consuming function for human resource professionals. To expedite the process, many employers turn to staffing agencies to assist in or even take over the staffing function. Relationships with staffing agencies can take a variety of forms including temporary placements, temp to hire arrangements, and employee leasing with a professional employer organization (PEO).


 Many employers are surprised to learn that their company may have legal responsibility and even liability for temporary and leased employees. Liability arises when a company has the right to control the manner of the performance of the worker's activities.   When such a right to control is present, a company may be a joint employer with the temporary agency or PEO. Most common temporary agency relationships create joint employment because the temporary worker performs services at the company's business location under the direction and supervision of the company.


 The prime example of the joint employment principal in Pennsylvania is found in the case of JFC Temps, Inc. v. WCAB (Lindsay and G&B Packing), 680 A. 2d 862 (Pa. 1996). In JFC Temps, a worker was hired by a temporary agency, and was assigned to work for a trucking company. The worker performed his services at the trucking company, and the trucking company manager informed him of his work hours, the equipment he would be using, and the locations to which he was to drive. No representative of the temporary agency was ever at the trucking facility. The worker was injured in the course of the performance of the services for the trucking company. The injured worker sought workers' compensation benefits from the temporary agency.

Under these circumstances, the Pennsylvania Supreme Court held that the trucking company (not the temporary agency) was the injured worker's employer for worker's compensation purposes because the trucking company possessed the right to control the manner of the performance of the claimant's work. In fact, the Court noted, the temporary agency had no substantial contact with the claimant other than processing his paycheck, and, as such, could not be said to have controlled the manner of performance of the work. The Court so held despite the fact that the temporary agency had the authority to terminate the injured worker's employment.

The obvious problem for the trucking company was that the workers' compensation claim was likely uninsured since it did not consider the temporary worker to be one of its employees. This type of unexpected liability translates into other areas of the employment relationship like pension and medical benefits, payroll taxes, and discrimination laws. 

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FMLA, ADA, COBRA, OSHA . . . is your workforce covered?

Who's an Employer?  In the past week, I've had occasion to talk to several HR professionals about how the number of employees can define whether various employment laws apply, and that just a few employees either way can make a big difference, particularly for small employers.  Pay attention to the following shortlist, particularly if you have turnover and frequent changes in the number in your workforce.  Remember that how part time employees are counted also changes from statute to statute.  There may also be exemptions from coverage for certain industries like agriculture.    

      Total Number of Employees:                          Subject to the following employment laws:

  • All employers regardless of size . . . . . . OSHA, Equal Pay Act (EPA), Immigration Reform and Control Act (IRCA)
  • You have 4 or more employees . . . . . .  Pennsylvania Human Relations Act, Lancaster County Human Relations Ordinance
  • You have 15 or more employees . . . . . . Title VII,   Americans with Disabilities Act (ADA)
  • You have 20 or more employees . . . . . .  Age Discrimination in Employment Act, COBRA  
  • You have 50 or more employees . . . . . . Family and Medical Leave Act (FMLA)
  • You have 100 or more employees . . . . . . Worker Adjustment and Retraining Notification Act

The above is a partial list of statutes and law that apply to employers in Pennsylvania. For more information federal discrimination laws, consult the EEOC website.

FMLA, ADA, COBRA, OSHA . . . is your workforce covered?

Who's an Employer?  In the past week, I've had occasion to talk to several HR professionals about how the number of employees can define whether various employment laws apply, and that just a few employees either way can make a big difference, particularly for small employers.  Pay attention to the following shortlist, particularly if you have turnover and frequent changes in the number in your workforce.  Remember that how part time employees are counted also changes from statute to statute.  There may also be exemptions from coverage for certain industries like agriculture.    


      Total Number of Employees:                          Subject to the following employment laws:

  • All employers regardless of size . . . . . . OSHA, Equal Pay Act (EPA), Immigration Reform and Control Act (IRCA)
  • You have 4 or more employees . . . . . .  Pennsylvania Human Relations Act, Lancaster County Human Relations Ordinance
  • You have 15 or more employees . . . . . . Title VII,   Americans with Disabilities Act (ADA)
  • You have 20 or more employees . . . . . .  Age Discrimination in Employment Act, COBRA  
  • You have 50 or more employees . . . . . . Family and Medical Leave Act (FMLA)
  • You have 100 or more employees . . . . . . Worker Adjustment and Retraining Notification Act

The above is a partial list of statutes and law that apply to employers in Pennsylvania. For more information federal discrimination laws, consult the EEOC website.

Union Card Check Legislation: A Big Deal to Non Union Employers

The U.S. House of Representatives voted 241 to 185 to pass H.R. 800 which is a bill that would change the process for unions to organize a workforce.  The bill would require the NLRB to certify a union when a majority of workers sign authorization cards that designate the union as their bargaining representative.  The card check process would eliminate the secret ballot election traditionally used to determine union representation. 

Under the current law, union organization of a workforce occurs after a showing of interest to the NLRB by the presentation of authorization cards together with a recognition petition identifying what the union believes to be an appropriate unit for organizing.  The employer may contest the appropriateness of the unit by demanding a hearing before an NLRB representative.  After the unit is certified as appropriate by the NLRB, a secret ballot election is held (generally within about 30-45 days after the petition was filed).  If the union receives a majority of the ballots cast by employees in the unit, it wins the right to represent the employees in an appropriate bargaining unit.

Eliminating the secret ballot has a tremendous impact on an employer's ability to combat organizing attempts.  The following is a partial list of problems created by the card check process:



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