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.

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.

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.

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 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

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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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.

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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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. 

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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Developing a Record Retention Policy

Last week we discussed some of the new issues that arise regarding electronic records. I summarized the results of a pre-federal rule amendment case, Zubalake v. UBS Warburg.

If you've decided to do your best to protect yourself from similar circumstances, consider developing and implementing a written record retention policy. Following are some things to keep in mind:

  • Identify the types and sources of both electronic and hard copy documents;
  • Evaluate the business need for the various types of electronic records and documents. Keep in mind that some records have mandatory retention periods.
  • Determine the retention or destruction period for classes of records.
  • Anticipate the arguments that may be made and inferences that could be drawn from the destruction of certain documents and weigh it against the expense of retaining and producing the documents.
  • Establish a storage and retrieval system for retained records evaluating its cost and efficiency.
  • Develop, communicate, and enforce a policy on record retention.
  • Establish a system for placing a "litigation hold" on records when a claim is threatened, administrative claim commenced, or a law suit filed. This will protect your company against sanctions for destroyed documents.

Record Retention in an Electronic World: Time to Clean House?

Most Human Resource professionals tend to be pack rats. When documentation is typically hard to come by, no one in his or her right mind would put it in the shredder. In fact, the inclination might be to keep it forever. Recent changes in court procedures may require re-evaluation of company record retention practices, particularly when it comes to "electronically stored information". It's time for all employers to get a handle on the sources of electronic information and develop a record retention policy for its preservation, production and destruction.

On December 1, 2006, the Federal Rules of Civil Procedure were amended to address court procedures for disclosing electronic information during the discovery phase of litigation. The new court rules begin to apply to a company when litigation is "reasonably anticipated". At that point, a company must put a "litigation hold" on its electronic and other records that may be discoverable in litigation. Companies that take this step will be protected against court sanctions, so long as they take reasonable steps to protect and preserve information.

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