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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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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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.

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. 

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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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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.

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 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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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.

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.

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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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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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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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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