Category Archives: New Developments

New Aid to Employers Paying Health Benefits for Early Retirees

The White House announced Tuesday that it would help pay medical bills for early retirees who have health insurance provided by their former employers. Under the program, the federal government can reimburse employers for 80 percent of the cost of claims from $15,000 to $90,000 a year for a retired worker who is 55 or older and not eligible for Medicare.

The program will run from June 1 of this year to Jan. 1, 2014, when many early retirees will be able to enroll in health plans offered through new state-based markets known as insurance exchanges. John J. Castellani, president of the Business Roundtable, which represents large employers, welcomed the new program, saying it would make health benefits “more affordable for employers and early retirees and their families.” Kathleen Sebelius, the secretary of health and human services, predicted that 4,500 employers — 3,000 private entities and 1,500 state and local governments — would seek federal aid under the program.

Employers can apply through the U.S. Department of Health and Human Services. Applications will be available by the end of June 2010.

The federal aid will be available to private employers, state and local governments, nonprofit and religious organizations and labor unions that sponsor health benefit plans. It will be available to employers who pay premiums to insure early retirees, as well as to employers who assume the risk themselves and pay claims with their own assets. Under the new law, employers must use the federal money to reduce “health benefit costs” for themselves or their retirees — for example, by reducing premiums, deductibles or co-payments. As a condition receiving federal aid, employers must maintain their current contributions to the cost of retiree health benefits. Many companies expected to apply for the new program already receive federal subsidies under a 2003 law to help offset the cost of providing prescription drug benefits to retirees, Ms. Sebelius said.

Edited from the New York Times, May 7, 2010

Federal Minimum Wage Increases

Effective July 24, 2009, the federal minimum wage increases to $7.25 per hour. This is the last increase required by the 2007 Minimum Wage Act.

Employers of covered employees must post a notice that describes, among other things, employees’ minimum wage rights. A link for posters is available below, under “Resources.” Note that the U.S. Department of Labor is likely to revise the currently available posters.

Minnesota employers who are not covered by the federal Fair Labor Standards Act’s minimum wage provisions are likely to be covered by the state’s wage and hour laws. Minnesota’s minimum wage remains unchanged, at $5.25 per hour for employers grossing less than $625,000 and $6.15 per hour for employers at or above that level. More information on Minnesota’s minimum wages, including some exemptions, information on the training wage, and discussion of the fact that there is no tip credit allowed in Minnesota, is provided in the official notice available below, under “Resources.”

Whether a particular classification of employee is covered by the federal minimum wage law is an analysis that is beyond the scope of this brief article. The answer depends in part on the nature of the employer’s enterprise and in part on the specific duties of the employee. If you have questions about coverage, you might contact any of the following: the Wage and Hour Division of the Employment Standards Administration of the U.S. Department of Labor; your employment law advisor; or this firm.

Resources:

  1. Federal minimum wage and other wage-and-hour posters
  2. Frequently asked questions about federal employment posters
  3. Compliance assistance with federal wage-and-hour issues
  4. Minnesota employment posters
  5. Information on Minnesota minimum wage law

E.F.C.A. Moves Ahead with Revisions

The Employee Free Choice Act is a bill that was drafted when it had no chance of moving successfully through Congress. It sought to eliminate union elections by allowing unions unlimited time to campaign and then requiring employers to accept the union if sufficient numbers of employees expressed interest. The Bill’s supporters argued that eliminating secret ballot elections would prevent employers from coercing employees during a campaign period. In reality, however, coercion occurs at the point when organizers ask coworkers to sign on to a union campaign. The Bill would have retained that problem, while eliminating an employer’s right to express differing views.

Yesterday Democratic Senators negotiated a compromise to the Bill by retaining an employee’s right to a secret ballot election on becoming unionized. This is a significant development and a gain for employees and management alike.

The Bill still retains other, poorly thought out provisions. For example, if there is an impasse in negotiating a first contract, a third party will be brought in to impose contract terms. But the agency that would manage that process is not presently staffed to do so, and the procedure by which a third party would decide which proposals to impose has not been outlined. Additionally, the civil penalties provided in the Bill would be based on a host of factors that do not include the effect on the employer.

It is clear that the Bill is progressing through the Senate, but it is not the cakewalk that it’s organized supporters had hoped for. Stay tuned.

Resources:

  1. The text of E.F.C.A. as it was introduced originally in the House.
  2. An article in the N.Y. Times on the recent negotiations to retain the secret ballot.

New E.E.O.C. Guidance on Severance Agreements

On July 15, 2009, the U.S. Equal Employment Opportunity Commission issued updated and comprehensive guidance on the issue of employee waivers of discrimination claims contained in severance agreements. Although the recent guidance is directed to employees, it contains valuable information for management, as well. The document
addresses, among other topics, the requirements of the Older Workers Benefit Protection Act. It also provides a checklist for employees, which has obvious value for human resources staff who are drafting material or preparing for layoff conferences, and model text for an enforceable waiver.

The guidance pertains only to the limited issues presented by discrimination waivers in severance agreements. There are many related issues regarding both general compliance requirements and also problems arising from specific workers or worksites that the guidance does not attempt to address. It is important, therefore, not only to review this recent expression of the E.E.O.C.’s position but also to continue to use more comprehensive checklists, involve in-house expertise, or consult with an employment lawyer.

F.M.L.A. Amended: 26 Weeks for Military-related Medical Reasons

The federal Family and Medical Leave Act has been amended to add two types of required leaves of absence. The 2008 National Defense Authorization Act (“N.D.A.A.”) amends the F.M.L.A. to provide a new 26 week leave to care for a family member who is in the military and is undergoing treatment or is temporarily disabled due to a serious injury or illness. The N.D.A.A. also extends the familiar 12 week leave to care for a family member who has experienced an as-yet-undefined “qualifying exigency.”

Prior to the 2008 N.D.A.A., the F.M.L.A. required covered employers to grant eligible employees up to twelve workweeks of unpaid leave during a twelve month period for one or more of the following reasons:

  • for the birth and care of the newborn child of the employee;
  • for placement with the employee of a son or daughter for adoption or foster care;
  • to care for an immediate family member (spouse, child, or parent) with a serious health condition; or
  • to take medical leave when the employee is unable to work because of a serious health condition.

The National Defense Authorization Act amendments to the F.M.L.A. extend the scope of the law to permit a “spouse, son, daughter, parent, or next of kin” to take up to 26 workweeks of leave to care for a “member of the Armed Forces, including a member of the National Guard or Reserves, who is undergoing medical treatment, recuperation, or therapy, is otherwise in outpatient status, or is otherwise on the temporary disability retired list, for a serious injury or illness.” This part of the N.D.A.A. became effective on January 28, 2008. The Department of Labor is preparing guidance and proposed regulations to implement the new leave.

The amendments also extend the F.M.L.A. by permitting an employee to take leave for “any qualifying exigency (as the Secretary [of Labor] shall, by regulation, determine) arising out of the fact that the spouse, or a son, daughter, or parent of the employee is on active duty (or has been notified of an impending call or order to active duty) in the Armed Forces in support of a contingency operation.” This part of the amendment is not yet effective; it will become effective after the Department of Labor issues final regulations defining “any qualifying exigency.”

Limitations on Vacation Leave Payouts

Minnesota’s highest court has issued its opinion in Lee v. Fresenius Medical Care, Inc. This case addresses the question of whether an employer can attach conditions to an employee’s being paid for accrued but unused vacation leave.

Susan Lee worked for Fresenius Medical Care, and had accrued unused paid time off. Fresenius terminated Lee for alleged misconduct. The Fresenius employee handbook provided:

Unless otherwise required by state law, if you do not give acceptable notice, you may not be paid for earned but unused PTO, and you may not be considered eligible for re-employment. In addition, if your employment is terminated for misconduct, you will not be eligible for pay in lieu of notice or payment of earned but unused PTO unless required by state law.

Fresenius denied Lee payment for her unused PTO; Lee sued, arguing that, because she had earned the PTO under the employer’s policy and because accrued PTO is a type of wage, Fresenius violated a Minnesota wage payment statute by refusing to pay for the unused time.

The Minnesota Supreme Court ruled that employers are not required to offer vacation leave or pay in lieu of leave. If they do extend such an offer, they can define eligibility for the leave or payments as they wish, so long as the policy does not violate any law. For example, an employer could offer vacation leave so that it accrues at a certain rate each month, but condition the use of the leave on approval by a manager; or an employer could limit the carryover of leave from one year to the next and require that most or all of an employee’s available leave be taken within some period of time; or—as in the Lee case—an employer could require a minimum notice of termination before the employee is entitled to be paid for accrued but unused leave, or even prohibit such payments completely if the employee is terminated for cause.

In Lee, the Court ruled:

[W]hen employers choose to offer paid time off as a benefit, employers and employees can contract for the circumstances under which employees are entitled to paid time off and payment in lieu of paid time off, so long as the contract provisions are not prohibited by or otherwise in conflict with a statute.

The Court essentially adopted its now-familiar analysis of how an employee handbook can become a binding contract. If the policy text is sufficiently clear, if the employee has sufficient notice of the policy, and if the employee thereafter signifies his or her acceptance of the policy by continuing to work for the employer, then the policy may be contractually binding.

Since the Supreme Court announced this “unilateral contract” approach to employee handbooks in 1983, most employers with handbooks have attempted to avoid any potentially binding effect by plainly stating that the provisions of the handbook are not intended to form a contract. The Lee case, however, supports the better practice of disclaiming the contractual effect of only some provisions while emphasizing that certain other provisions are binding, including for example the limitations on vacation leave or pay.

The Lee case had a strenuously argued dissent. The dissenting judge wrote that, if an employer’s policies define how vacation leave is earned, then once it has been earned it cannot be taken away without constituting an unlawful forfeiture. The majority rejected that analysis, finding instead:

[E]mployers may offer, and employees may accept, a contract provision that attaches conditions to the right to accrued vacation “wages,” whether in the form of actual paid time off or payment in lieu of paid time off…. [S]uch conditions define what has been earned.

The principles of the Lee case apply to vacation, paid time off, non-statutory sick leave, and a range of other benefits that are not mandated by law. Most vacation leave or paid time off policies that were written or revised by Nierenberg Employment Law have been carefully drafted to provide a benefit of time off only, and not payment in lieu of leave; those policies are consistent with this new case and should not need revision. However, all employers should nevertheless review their vacation, sick leave, and paid time off policies to be sure that they reflect the policies and values of the organization and that, if desired, they take advantage of the opportunities presented by this case.

Preserving Electronic and Other Evidence

An increasing amount of an organization’s information is recorded electronically. Electronically stored data is as important as any other form of information to assessing, pursuing, or defending employment claims. There are, however, some unique legal issues that arise due to the specific nature of electronic data. In an effort to manage the production and use of such data, the federal rules governing civil proceedings have recently been modified. It is likely that state rules around the country will soon be modified to reflect the federal changes.

In order to implement the newly amended rules, it is critical that organizations understand their data management practices and review or institute certain controls. The process is complicated and time-consuming, so the time to begin preparing is now, before the inevitable need actually arises.

When it appears that a dispute may wind up before an arbitrator or judge, it will be important that all relevant data is preserved. It will become common for parties to send and receive letters similar to the following edited excerpt from the standard letter that I send:

Please take affirmative steps to preserve without alteration all records and tangible things of whatever type and form that are in the possession, custody, or control of you or an agent and that relate in any manner to any of the following: [the allegations, claims, and defenses of all parties; the statements made by witnesses; relevant conduct of parties or witnesses; previous allegations of a substantially similar nature regardless of who made them or when they were made]. The records and things to preserve include without limitation analog recordings of images, sounds, or other data; digital recordings of images, sounds, or other data; notes, reports, letters, drafts, e-mail, and memoranda; database components, including tables, indices, memos, and queries; electronically created or stored files; electronically created or stored backup files and electronically created or stored backup fragments; all logs related to all such documents; and all other material that is likely to be within the scope of [federal and state rules allowing liberal discovery of documents and things that may lead to relevant information, even if the initially discovered documents and things are not themselves relevant to the matter] regardless of whether the material is available from more easily accessible sources. The preserved material should be maintained in its native format as well as in all currently existing usable formats. PLEASE BE AWARE THAT, IN VIEW OF THIS HOLD LETTER, NO INFORMATION THAT IS SUBSEQUENTLY DELETED, LOST, OVERWRITTEN, OR OTHERWISE ALTERED AS A RESULT OF THE OPERATION OF YOUR INFORMATION SYSTEMS OR DATA RETENTION POLICIES WILL BE CONSIDERED TO HAVE BEEN COMPROMISED IN GOOD FAITH.

In order to manage the information necessary to promote your organization’s own interests while also complying with the type of “hold letter” quoted above, I recommend that you take the following steps:

  • Assemble your information systems managers. Include outside consultants if you do not have the human resources in house. Managers of other functional divisions will also need to be part of the process.
  • Determine what types of data your organization creates.
  • Determine where all information resides, including old paper and old electronic data.
  • Determine what types of backup operations are in place or contemplated, and where the backup data is located. Note whether the backup data are complete or fragmentary, i.e., incremental.
  • Determine what your actual information retention policies are. Then determine what you want them to be. (Note that overwriting an existing file with new or adjusted information is generally equivalent to destroying the previous version.)
  • Document and control:
    – Where and how information is recorded;
    – Where, how, and for how long information is stored;
    – When, how, and what information is destroyed.
  • Determine now what procedures will be necessary for the following:
    – To produce data on any particular topic
    – To discontinue normal overwrite and destruction procedures
  • Maintain the ability to extract information from your data, which will mean either:
    – Preserving hardware and software capable of reading various types of files in their native format, or
    – Converting electronic data to a commonly accessible format other than its native format as part of the archiving process.
  • Ensure that all affected persons are aware of the policies and procedures.

The question is not whether undertaking this process will be helpful, but how soon it will prove itself to be helpful. The need sooner or later for an organization to control its electronic data in order to comply with the new rules of litigation is inevitable. Taking these steps now, and ensuring that the policies and procedures are implemented throughout the organization, will make a substantial difference in the cost and effectiveness of pursuing and defending legal claims in the future.

“Newer” New Rules for Filing EEO-1 Reports in 2007

Quick Summary: Covered employers are not required to resurvey their workforces pursuant to the revised ethnic and racial categories until the reporting period ending September 30, 2008, one year past the original effective date. Other aspects of the revised EEO-1 procedure continue to take effect with the close of the 2007 reporting period.

First, the “Old” New Rules

Last year, the U.S. Equal Employment Opportunity Commission revised its EEO-1 survey procedure. The EEO-1 is, for many employers, a mandatory survey and reporting process that has been in use since 1966 to chart the patterns of women and minorities in the workforce. In November 2005, the E.E.O.C. issued final regulations that modified two aspects of the report, the ethnic and racial categories and the job categories. Along with the category changes, the EEO-1 report itself was revised.

Use of the revised report to survey and report the newly defined categories was initially scheduled to be required next year, with the reporting period that closes September 30, 2007. Now, the process is being phased in as described below.

Who Is Affected

The E.E.O.C.’s Standard Form 100, commonly called the EEO-1, must be filed by:

1. All private employers that:

  1. Are subject to Title VII of the Civil Rights Act of 1964, as amended, with 100 or more employees excluding state and local governments, primary and secondary school systems, institutions of higher education, Indian tribes and tax-exempt private membership clubs other than labor organizations;
  2. or

  3. Are subject to Title VII, as amended, who have fewer than 100 employees if the company is owned or affiliated with another company, or there is centralized ownership, control or management (such as central control of personnel policies and labor relations) so that the group legally constitutes a single enterprise, and the entire enterprise employs a total of 100 or more employees.

and also by

2. All federal contractors (private employers) that:

  1. Are not exempt pursuant to 41 C.F.R. § 60-1.5, and
  2. Have 50 or more employees, and
    • Are prime contractors or first-tier subcontractors, and have a contract, subcontract, or purchase order amounting to $50,000 or more; or
    • Serve as a depository of Government funds in any amount, or
    • Constitute a financial institution which is an issuing and paying agent for U.S. Savings Bonds and Notes.

Only those establishments located in the District of Columbia and the 50 states are required to submit EEO-1s. No reports should be filed for establishments in Puerto Rico, the Virgin Islands or other American Protectorates.

The Category Revisions:

The racial and ethnic categories were changed in the following ways:

  • Adding a new category entitled “Two or more races”
  • Dividing “Asian or Pacific Islander” into two separate categories: “Asian” and “Native Hawaiian or other Pacific Islander”
  • Renaming “Black” to “Black or African American”
  • Renaming “Hispanic” to “Hispanic or Latino”
  • Endorsing self-identification of race and ethnic categories, as opposed to visual identification by employers.

The job categories were changed in the following ways:

  • The category of “Officials and Managers” was divided into two levels based on responsibility and influence within the organization. The two new levels are:
    1. 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)
    2. 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 moves business and financial occupations from the Officials and Managers category to the Professionals category.

Now, the “New” New Rules

The new reporting form, i.e., the revised EEO-1 report, is still required for the reporting period ending on September 30, 2007.

The revised job categories are still required to be used for the reporting period ending on September 30, 2007.

If an organization will have knowledge of its workforce based on the revised ethnic and racial categories, then that information should be reported for the period ending on September 30, 2007.

However–and this is the “new” part–the E.E.O.C. will not require reporting employers to survey their workforces for information required by the revised ethnic and racial categories until the reporting period ending on September 30, 2008.

The E.E.O.C. encourages employers to obtain the revised ethnic and racial information by having employees “self-identify.” The process of self-identification and the development of a related database for EEO-1 purposes can begin as soon as practicable. It is not required to begin until the organization prepares to file in 2008.

More Information

Answers to frequently asked questions and instructions for filing the new reports can be found on the EEO-1 portal in the E.E.O.C. web site. Or contact us, and we’ll help.

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