The proposed overtime regulations: what they say, what they mean, and what to do now.

Keep Calm

The U.S. Department of Labor’s long-awaited proposed rule regarding federal overtime pay regulations under the Fair Labor Standards Act (FLSA) was issued in a June 30, 2015 Notice of Proposed Rule Making (NPRM), and the firestorm of praise/criticism has begun.

While the final rule is months away, controversy started long before the NPRM was issued this week. President Obama’s March 2014 memorandum to the Secretary of Labor, captioned “Updating and Modernizing Overtime Regulations,” started this process. That memorandum directed the Secretary to:

  • Consider how the regulations could be revised to update existing protections consistent with the intent of the FLSA;
  • Address the changing nature of the workplace; and
  • Simplify the regulations to make them easier for both workers and businesses to understand and apply.

The NPRM – entitled “Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees” – is nearly 300 pages long (the Table of Contents alone is two full pages in length), and includes a legislative and regulatory history of the FLSA, an overview of the existing overtime regulations and requirements, and numerous exhibits and appendices. (That fact seems to indicate that the NPRM may have missed the mark set by President Obama’s third point.)

As most employers are aware, the FLSA provides basic rights and wage protections for U.S. workers, including both federal minimum wage and overtime requirements. Most workers covered under the FLSA must receive overtime pay of at least 1.5 times their hourly rate for hours worked in excess of 40 per week, unless otherwise exempted.

Under the current regulations, the salary threshold for that exemption is $455 per week ($23,660 per year) – in other words, unless an individual earns at least $455 a week, he or she automatically is not exempt from the overtime provisions of the FLSA.

Further, to be excluded from overtime, that same employee must hold a position that falls within specific exempt classifications: executive, administrative, and professional positions (“white collar” jobs), all of which are further defined in the regulations. To fall within a white collar exemption, an employee must meet the “duties test” for one of the white collar categories.

In addition, highly compensated employees (HCEs) may be exempt from overtime payments if they earn over $100,000 a year (which can include commission payments, nondiscretionary bonuses, and other nondiscretionary compensation), and if they earn at least $455 a week in salary or fees, and “customarily and regularly” perform the duties of one of the white collar positions listed in the FLSA.

What the NPRM says:

The NPRM focuses primarily on the existing salary thresholds required for white collar workers to be exempt, and proposes the following:

  • Re-setting the standard salary level from $455 per week to $921 per week, which equates to a yearly salary of $47,892 (although, by the time the rule is final, the number are likely to be closer to $970 and $50,440);
  • Increasing the total yearly compensation requirement needed to exempt HCEs – currently $100,000 – to $122,148; and
  • Establishing a mechanism for automatically updating the salary and compensation levels going forward to assure that the levels accurately reflect economic reality.

What that means:

The proposed revisions mean higher minimum salaries for exempt employees. For example, an individual designated as within the “executive” exemption (which includes management and supervisory responsibilities) will have to be earning at least $47,892 – otherwise, that person will not meet the criteria for the white collar exemption from overtime pay, regardless of what his or her duties comprise.

The alternative is that employees with management or supervisory responsibilities earning less than the proposed threshold automatically will be entitled to overtime pay for hours worked in excess of 40 per week.

The proposed regulation revisions also mean that employers must remain alert and up-to-date on possible further changes to salary and compensation levels for qualification of exempt status.

What employers should do now:

Once these proposed regulations are published in the Federal Register, there will be a period of 60 days (which could be extended) within which interested parties can submit comments. Individuals, companies, and organizations interested in doing so should first:

  • Review the Fact Sheet published on the DOL’s website to obtain a high-level view of the basic provisions of the NPRM;
  • Look at the DOL’s Q&A on the new NPRM;
  • Meet with legal counsel and human resource personnel to discuss whether to submit comments, or to participate in a group effort at comments;
  • Be aware that while the NPRM included no changes to the white collar “duties test,” the DOL has asked specifically for comments regarding what, if any changes should be made in that test and that it is therefore likely that such changes may be included in the final regulations;
  • Begin to review the salary bands of employees to determine the effect of the proposed changes on existing job responsibilities and titles;
  • Proactively prepare for any necessary re-classification of employees from exempt to non-exempt status if/when the revisions are formalized, to avoid unintended legal liability once revisions become effective; and
  • Recognize that nothing is final yet. In fact, with the notice and comment period, and with possible extensions of that period, the final regulations are not likely to go into effect until sometime in 2016.

For now, the best course of action is to stay calm, become knowledgeable, and work proactively to assure compliance with final regulations developed over the coming months

Do performance deficiencies preclude reinstatement after an unlawful firing? Not always, says the NLRB.

Return to work

A recent decision of a three-member panel of the National Labor Relations Board (NLRB) is sure to start conversations regarding the parameters for remedial reinstatement of individuals with observed performance deficiencies.

The controversial issue is whether two nursing home employees should have been reinstated – as part of the resolution of a discrimination claim – in spite of a determination that alleged deficiencies in the job performance of the two “threatened the public interest in patient safety” at the nursing home facility at which they worked. 1621 Rte 22 West Operating Company, dba Somerset Valley Rehabilitation and Nursing Center and 1199 SEIU Unites Healthcare Workers East, NJ Region, Cases22-CA-029599, 029628, and 029868, June 11, 2015.

Here are the facts:

  • In 2012, a Decision and Order was entered by the NLRB regarding four employees claiming to have been fired for their union connections, holding that the four were, in fact, unlawfully discharged.
  • The Board rejected the employer’s claim that the employees had been discharged for performance deficiencies; it also rejected the employer’s claim that even if the firings were unlawful, the deficiencies alone precluded reinstatement.
  • On appeal, a federal district court reinstated two of the four, but declined to order interim reinstatement of the other two because their alleged performance deficiencies, in the view of the court, adversely affected the safety of the patients in the nursing center at which the two were employed.
  • A federal appeals court remanded the case for a de novo review of the decision after the Supreme Court’s decision in Noel Canning, a decision which led to the re-review of numerous NLRB decisions since 2014.

Where an employer claims that an unlawfully discharged employee is not entitled to reinstatement because of alleged misconduct that occurred before her firing, it is – under NLRB precedent – that employer’s burden to prove that the misconduct engaged in by the employee “would have disqualified any similarly situated employee from continued employment.” Inherent in that burden is the assumption that the employer was not aware of the alleged misconduct prior to the firing – otherwise, the employer cannot show that the misconduct was egregious enough to preclude reinstatement.

In this case, the employer/nursing home was unable to carry that burden with respect to the two employees seeking reinstatement.

The first of the two employees failed to assess a patient’s pain upon admission, which led to “very severe” harm to the patient. However, the incident occurred more than a year prior to the employee’s firing; and while the employer was fully aware of the issue, it allowed the employee to continue working for over a year. In addition, the employee frequently – even after the incident – had been designated as a “charge nurse” with special responsibilities reserved for high-performing nurses. Therefore, the employer could not rely on the pre-discharge incident to defeat the individual’s right to reemployment.

The second employee’s reinstatement was objected to because that individual had made several scheduling errors that cause potential staffing gaps. The district court pointed out the testimony of the employer’s expert witness, that scheduling problems are “the single most frequent cause of abuse and neglect” in care facilities. However, while the NLRB accepted, for purposes of its analysis, the accuracy of that statement, it found that the statement itself did not answer the question of whether the employer had established – as was its burden – that it would have disqualified any employee who made such errors. In addition, while the employee had made such errors prior to the union election, no disciplinary action was taken at that time. Instead, she was fired when she made scheduling errors after her protected union-related activity.

In spite of the alleged performance deficiencies, the NLRB ordered both employees to be reinstated to their prior positions (or substantially equivalent positions). It also ordered:

  • Payment of full backpay to each employee;
  • Full compensation to each for “adverse tax consequences,” if any, of receiving a lump-sum backpay award;
  • Removal, from the personnel files of the affected employees, “any reference to the unlawful employment actions taken against the employees”;
  • Posting, for 60 consecutive days, of a notice of employee rights under federal labor law.

It also ordered the employer to “cease and desist” from actions that could be deemed to interfere with, restrain, or coerce employees in the exercise of rights protected by the National Labor Relations Act.

When the layers of this case are peeled back, the message is a familiar one to employers: consistent disciplinary actions, fully and objectively documented, should be a constant goal. In this case, the fact that the two employees were disciplined for actions only after being involved in a union election, even though they had taken those same actions prior to the election, created the risk that led to this adverse decision.

Sixth Circuit decision reminds employers of simple mechanisms for avoiding legal risk.

firefighter agility testing

Long-standing and consistently applied policy, coupled with clear and objective documentation of the employer’s financial status form the basis of a decision by the 6th U.S. Circuit Court of Appeals to uphold the dismissal of an employee’s age discrimination claim. Green v. Twp. Of Addison, 6th Cir., No. 14-1607, unpublished (May 27, 2015).

Linda Green, hired by Addison Township (Michigan) in 1999 as a fire department clerk, was serving as the department’s Office Manager and only clerical employee in 2010 when the township finances began to decline.

In light of those declining finances, coupled with an increase in the number of fire-and-rescue calls, the township’s Fire Chief decided to eliminate Green’s clerical position and create a hybrid “firefighter/EMT/office manager” position. That employee would be expected to perform clerical tasks, but also go on daytime fire-and-rescue runs. The hybrid position required applicants to possess Michigan Fire Fighter’s Training Council Firefighter II certification and Michigan EMT-B certification.

Once the hybrid position was approved by the fire department and township boards, the Chief offered the position to Green who, at the time, was 55 years old. Because Green lacked the required certifications, the Chief offered to send Green to training programs, using township funds. However, as a pre-requisite, Green would have to complete – as all other novice fire fighter candidates did – a 7-stage agility test.

Green attempted the agility-test requirements, but was unable to complete that testing. In fact, she quit the testing when she was unable to complete the first of the seven steps. Her employment was terminated three days later. The hybrid position ultimately was filled by a 29 year old female firefighter who performed all of the department’s clerical tasks, while answering daytime 911 calls and going on daytime fire-and-rescue runs.

Green ultimately filed a lawsuit, alleging that the reason for her firing was age, and that the testing issue was simply a pretext for discrimination. The district court granted summary judgment in the township’s favor. That decision was affirmed by the Sixth Circuit.

In order to have succeeded in her claims, Green would have had to show that the township did not honestly believe that its economic issues required a reduction in payroll or a consolidation of positions. However, in the court’s words, the record “exhaustively details the township’s deteriorating finances.” Therefore, Green could not present evidence that economic necessity did not actually motivate the township to create the consolidated daytime position.

In addition, Green alleged that the township did not believe that she could perform firefighting tasks at age 55 and therefore forced her to take a test that we would be certain to fail. However, Green was unable to refute evidence showing that the Chief required all novice firefighter candidates to pass the agility test before the township would pay for firefighter training. That pre-test was necessary, according to the Chief, as candidates who could not complete the agility test would likely be unsuccessful in firefighter testing, causing the township to “waste [its] money.”

Green was unsuccessful in this case because the township treated Green as it treated every other candidate for the consolidated position, and because there was clear documentation of the financial difficulties suffered by the township. The take-away from this case is clear: consistently applied processes and procedures, coupled with complete and objective documentation, effectively work to avoid legal risk.

OMG! Panic over the Supreme Court’s decision on religious discrimination.

samanthaelauf

The U.S. Supreme Court’s decision on June 1, 2015, in EEOC v. Abercrombie & Fitch Stores, Inc. (FEP Cases 157) has resulted in a deluge of case summaries and commentaries, and engendered some level of panic among employers, who believe that the case has created a seismic shift in hiring criteria. But has it, really?

The basic facts of the case are:

  • Abercrombie has a policy that prohibits “caps” as too informal for its stores’ desired image;
  • Samantha Elauf is a practicing Muslim who wears a headscarf, consistent with her understanding of her religion’s requirements;
  • Elauf applied for a sales position at an Abercrombie store, and was interviewed for the position by the store’s assistant manager;
  • Elauf was given a rating that qualified her to be hired;
  • After the interview and rating, the assistant manager sought guidance – first from the store manager, and then from the district manager – as to whether Elauf’s headscarf would violate the “no caps” policy;
  • The assistant manager opined to the district manager, without actual knowledge, that Elauf wore the headscarf for religious reasons;
  • The district manager determined, without further investigation or additional discussion with Elauf, that the headscarf would violate the company’s “no caps” policy;
  • Elauf was not hired for the position.

The EEOC filed a lawsuit on Elauf’s behalf, claiming that the refusal to hire Elauf violated Title VII’s ban on religious discrimination. The district court granted the EEOC’s motion for summary judgment on liability; and a jury awarded $20,000 in damages to Elauf.

The company appealed to the 10th U.S. Circuit Court of Appeals, which reversed the district court’s decision and awarded summary judgement in favor of the employer. That decision was based on the conclusion that an employer cannot be held liable under Title VII for failure to accommodate a religious practice until the applicant/employee provides the employer with actual knowledge of the need for an accommodation.

When the EEOC appealed that holding, the U.S. Supreme Court granted certiorari and reviewed the case. The Supreme Court reversed the Tenth Circuit’s decision, and remanded the matter back to the lower court for further consideration. The basis of that remand was the Supreme Court’s interpretation of the language in the applicable statute, Title VII of the Civil Rights Act of 1964, as amended.

Title VII prohibits a prospective employer from refusing to hire an individual applicant in order to avoid accommodating a religious practice that could be accommodated without undue hardship to the company.

Title VII does not impose a “knowledge” condition in its prohibition of discrimination. Instead, Section 2000e-(a)(1) states it shall be an unlawful employment practice for an employer:

“to fail or refuse to hire or to discharge any individual, or otherwise to discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s race, color, religion, sex, or national origin . . . .”

Significantly, and as noted by the Supreme Court, the “because of” language of Title VII imposes no specific knowledge requirement, although some federal anti-discrimination statutes do. The Americans with Disabilities Act (ADA), for example, defines discrimination to include an employer’s failure to make accommodation for “known” physical or mental disabilities.

This is where the Supreme Court’s opinion gets a little esoteric, and includes the statement that employers now are tripping over: “Motive and knowledge are separate concepts.” However, the Court provides an explanation for that phrase that forms the crux of the Court’s opinion:

An employer who has actual knowledge of the need for an accommodation does not violate Title VII by refusing to hire an applicant if avoiding the accommodation is not his motive. Conversely, an employer who acts with the motive of avoiding accommodation may violate Title VII even if he has no more than an unsubstantiated suspicion that accommodation would be needed.

This paragraph provides direction to employers, and should help to lessen the panic among those who make hiring decisions. Notice that the Court defines the “motive” requirement as including at least an “unsubstantiated suspicion” of the need for an accommodation. This eliminates the circumstance where there is not only a lack of knowledge, but absolutely no reason to suspect that an individual’s appearance/dress/ornamentation is related to his or her religion.

It also is noteworthy that the Court did not find that Abercrombie was liable for hiring discrimination – it simply remanded the case for the district court to revisit the matter under the rationale provided and the facts of the case.

What are the take-aways from this case? There are two: (1) hiring procedures should be reviewed (and supervisor training provided) to assure consistency in the questions asked and the criteria imposed for new employees; and (2) when an issue of religion is raised – either directly by an applicant, or indirectly, through an interviewer’s “suspicion” that a quality or characteristic contradicts company policy – further attention should be paid.

At the least, the relevant company policy should be discussed with the individual (“Our company has a policy against headwear – will you have any difficulty complying with that?”). Once the issue is raised, it can be interactively discussed to determine whether an accommodation is possible without undue hardship to the company.

No panic required, right?

OFCCP positions itself as primary agency for investigation of complaints based on gender identity or sexual orientation.

Rainbow hands

In its own words, the purpose of the Office of Federal Contract Compliance Programs (OFCCP) is to: “enforce, for the benefit of job seekers and wage earners, the contractual promise of affirmative action and equal employment opportunity required of those who do business with the Federal government.”

The OFCCP is part of the Department of Labor (DOL), and assures non-discrimination within federal contractor workforces. There have been a number of governmental actions that have expanded the responsibilities of the OFCCP, including:

  • Executive Order (EO) 11246, signed by President Lyndon B. Johnson in September of 1965, which prohibits covered ($10,000 or greater in Government business in one year) federal contractors and subcontractors from discriminating on the basis of race, color, religion, sex, or national origin;
  • EO 13672, signed by President Obama on July 21, 2014, which amended EO 11246 by adding sexual orientation and gender identity to the characteristics protected under EO 11246;
  • Final Rule in support of EO 13672, published in the Federal Register on December 9, 2014 and effective on April 8, 2015, changing OFCCP’s regulations to require federal contractors and subcontractors to treat applicants and employees without regard to their sexual orientation or gender identity and, most recently,
  • A directive from the OFCCP, effective as of April 16, 2015, establishing that agency’s policy and procedure for accepting and investigating complaints regarding both individual and systemic discrimination based on sexual orientation and gender identity.

Title VII of the Civil Rights Act, the most widely recognized federal anti-discrimination law, and one primarily enforced by the Equal Employment Opportunity Commission (EEOC), currently does not cover sexual orientation or gender identity discrimination. Therefore, one of the purposes of the recent OFCCP directive is to clarify the fact that the OFCCP will accept and investigate not only systemic complaints of discrimination against governmental contractors based on those protected characteristics, but will do the same for individual complaints, expanding the OFCCP’s previous authority.

Both the Federal Contract Compliance Manual (FCCM) – which spells out the parameters of the OFCCP’s enforcement responsibilities – and a previous memo of understanding between the OFCCP and the EEOC state that the OFCCP generally will refer individual employment discrimination complaints made against government contractors to the EEOC for investigation, retaining only class and systemic discrimination complaints.

However, EO 13672 gives specific authority to the OFCCP to assure that federal contractors do not discriminate against employees because of sexual orientation or gender identity. While the OFCCP has agreed to continue to coordinate and share information with the EEOC regarding such complaints, it is clear that the OFCCP now considers itself to be the primary enforcement agency for sexual orientation or gender identity complaints against governmental contractors.

Employers who are, have been, or are considering becoming government contractors must be aware of this expansion of anti-discrimination law applicable to their company. In addition, all employers should become knowledgeable about the expanding number of state-based anti-discrimination laws related to sexual orientation and gender identity, and should work to remain in compliance with those laws.

Does no good deed go unpunished under the National Labor Relations Act?

no-good-deed

A three-member panel of the National Labor Relations Board (NLRB) recently found that employee handbook provisions drafted in 2010 supported an unfair labor practice charge, even though those provisions were replaced by acceptable language in 2013.

That panel found that the employer’s issuance of a revised handbook in May of 2013 “did not constitute effective repudiation of its [2010] unfair labor practices” because the company failed to explain to its employees the reasons for the revision. Boch Imports, Inc. d/b/a Boch Honda and Internat’l assoc. of Machinists & Aerospace Workers, 362 NLRB No. 83 (April 30, 2015).

Until May of 2013, Boch Enterprises maintained an employee handbook that included provisions regulating confidential and proprietary information, discourtesy, inquiries concerning employee dress code and personal hygiene, solicitation and distribution, and a social media policy deemed to have been overly restrictive. A complaint was issued on December 31, 2012, alleging violation of Section 8(a)(1) of the National Labor Relations Act (NLRA).

After consulting with the NLRB’s Regional office, the company rescinded the provisions, with the exception of the dress code, which prohibited employees from wearing pins, insignias, or other “message” clothing. The company then issued a new handbook in May 2013 containing corrected provisions, and provided it to all employees who previously had received the prior version.

However, the administrative law judge who originally heard the case, and then the NLRB panel who reviewed it, found that under the prevailing case law, the company did not do enough to repudiate its earlier versions of the handbook policies. Under that case law, in order to relieve itself of liability, an employer’s repudiation must be timely, unambiguous, and “specific in nature to the coercive conduct.” In addition, “such repudiation or disavowal of coercive conduct should give assurances to employees that in the future their employer will not interfere with the exercise of their Section 7 rights.”

Here, the employer’s 2013 revisions were found to be insufficient to avoid liability for two reasons: first, because one provision (“dress code and personal hygiene”) was left unrevised; and second, because there were no specific assurances to employees that in the future the company would not interfere with the employees’ Section 7 rights, regarding protected concerted activity.

This decision may create frustration among employers who are willing to make revisions in their handbooks once made aware of problematic language or policies. Here, not only did the company revise the offending policies, but it did so after cooperation with – and direction from – the NLRB’s Regional office.

The Region reviewed and approved the 2013 handbook revisions before they were issued. One can only wonder why the communications between the Region and the employer did not include some mention of the need for more explicit language regarding future non-interference with Section 7 rights – language that would have avoided the adverse determination and the penalties imposed in this case.

However, this decision does include template language that can be used by an employer who revises handbook policies after being informed of ambiguity or concern in policy language. Based on this case, wise employers will use such language to assure non-violation of the NLRA.

Is the NLRB is expanding its list of “inherently” concerted protected activities under Section 7?

Shackleton-Recruitment-Ad

Employee, fired after mentioning of a help-wanted ad to a co-worker, was fired in unlawful retaliation for engaging in “inherently concerted activity,” according to the National Labor Relations Board. Sabo, Inc. d/b/a Hoodview Vending Co. and Assoc. of Western Pulp and Paper Workers’ Union, 362 NLRB No. 81, April 30, 2015).

Section 7 of the National Labor Relations Act (NLRA) protects employees who engage in concerted activity for the purpose of mutual aid or protection. Section 8 of that Act makes it unlawful for an employer to “interfere with, restrain, or coerce” an employee for engaging in such activity.

The NLRB recently expanded the class of activities falling under Section 7 protection to include certain topics that it deems “inherently” concerted – for instance, telling an employee not to discuss wages and threatening to discharge him if he did so was held to be “inherently concerted activity,” even though the alleged individual gripes to other employees were not meant to initiate or support group action.

Last month, (April 2015), two of the three members of an NLRB panel reversed an administrative law judge’s decision, and found that an employee, LaDonna George, who was fired for gossiping after a brief discussion with a co-worker about a help-wanted ad, was engaged in activity protected by the NLRA. The panel’s majority took the position that because the discussion – in which George voiced concern that her employer was planning to fire one of its employees – may have been premised on the issue of job security, it was “inherently concerted activity.”

In a detailed dissent, the third Board member, Philip Miscimarra, set forth his rationale for disagreeing with the expansion of the class of inherently concerted activities. Stating his position that the theory of “inherently concerted activity” has no good support in the law, Miscimarra went on to say that when activity involves only one speaker and one listener, it can be protected only if “at the very least” the activity “was engaged in with the object of initiating or inducing or preparing for group action,” or had some other relationship to group action taken in the employee’s interest. The majority disagreed, and LaDonna George was reinstated to her position.

Until recently, the cases have been clear: while contemplation of group action is not specifically required in every circumstance in which concerted activity is found to exist, a prerequisite for Section 7 protection always has been that the activity be conducted for the purpose of “mutual aid or protection.” The Board’s recent decisions have been moving the bar, and indicate that the definition of “inherently concerted activity” may be broadening to include circumstances in which a mutuality of purpose is not clearly established.

Getting with the (Wellness) Program: EEOC Proposes New ADA Regulations for Wellness Programs

Health Overhaul

This post was written by Ogletree Deakins attorneys, Jeanne E. Floyd (Of Counsel, Richmond Office), and Ruth Anne Collins Michels (Shareholder, Atlanta Office), and was published originally on the firm’s website on April 21, 2015.

For some time, employers have faced uncertainty about the status of their wellness programs under the Americans with Disabilities Act (ADA). While the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and the Affordable Care Act (ACA) have allowed employers to provide financial incentives for employee participation in wellness programs for several years, the U.S. Equal Employment Opportunity Commission (EEOC) increased employer anxieties over otherwise-compliant wellness programs in 2013 and 2014 by suing several large companies over alleged ADA-related defects in the design of their wellness programs.

After holding contentious public hearings on wellness programs in 2013, the EEOC seemed poised to throw sand in the gears of the wellness machine, but on April 16, 2015, the EEOC had a surprise for the employer community in the form of highly anticipated proposed rules that attempt to reconcile the ADA with HIPAA and the ACA. The proposed rules  provide guidance on the extent to which employers may use incentives (such as rewards or penalties in the form of prizes, cash, or a reduction or increase in health care premiums) to encourage employees to participate in wellness programs that include disability-related inquiries and/or medical examinations.

Background

The ADA prohibits employers from making disability-related inquiries or requiring medical examinations; however, employers may conduct “voluntary” medical examinations or obtain medical histories as part of an employee health program, including wellness programs.

Previous EEOC guidance provided that a wellness program is “voluntary” if an employer neither requires participation by employees nor penalizes employees who do not participate. However, no guidance addressed the extent to which incentives (or penalties) might affect the “voluntary” nature of a wellness program for ADA purposes.

This lack of guidance created uncertainty regarding the application of the ADA to wellness programs, particularly in light of the EEOC’s pursuit of claims against employers asserting that certain potentially punitive wellness program designs violated the ADA.

The Proposed Rules

The Voluntary Standard. The proposed rules list several requirements that must be satisfied for an employee health program (or wellness program) to meet the “voluntary” standard (and thus, comply with the ADA). Specifically, an employer may not require employees to participate in an employee health program or wellness program, may not deny access to health coverage or limit coverage for non-participation, and may not take adverse action, retaliate or take similar action—such as intimidation or coercion—against employees.

In addition, if the wellness program is part of a group health plan, the employer must provide employees with a notice explaining what medical information will be obtained, how it will be used, who will receive it, the restrictions on its disclosure, and steps the employer will take to prevent improper disclosure.

Many wellness programs will not encounter difficulty with these proposed requirements, but more aggressive plan designs may require adjustment to avoid EEOC scrutiny. Communications regarding wellness programs are also likely to require updates to provide more detailed disclosures about the particulars of the information to be collected through wellness testing and how that information will be used and safeguarded.

Incentive Limits. The proposed rules also set limits on the incentives that employers may use to encourage participation in wellness programs. However, because these limits do not exactly track those under HIPAA and the ACA, further clarification may be necessary in the final EEOC guidance.

Under the proposed rules, the maximum permitted incentive for all wellness programs offered as part of a group health plan (regardless of whether those programs are participatory or health-contingent programs under the HIPAA regulations), cannot exceed 30% of the total cost of “employee-only coverage.”

However, HIPAA and the ACA not only permit an incentive of up to 30% of the “total cost of the coverage in which the employee and any dependents are enrolled,” but also provide that the limitation is applied only with respect to health-contingent wellness programs.  Thus, under HIPAA and the ACA, an employer could offer incentives for participatory wellness programs that would not be aggregated with the health contingent programs in determining whether the 30% limitation was exceeded.

Further, an employee could receive an incentive of up to 30% of the total cost of family coverage if an employee is enrolled in family coverage versus self-only coverage.  The EEOC’s final rule may address this discrepancy. If not, the EEOC will have introduced new complexities into the design and administration of wellness programs.

Smoking Cessation Programs. While HIPAA and the ACA permit incentives up to 50% of the employee-only premium (or family premium in some circumstances) for participation in a smoking cessation program, the 30% limitation found in the proposed rules may cap that incentive for some smoking cessation programs.

Interpretive guidance issued with the proposed rules provides that the 30% incentive limit would apply to a smoking cessation program that includes a biometric screening or other medical examination, but a smoking cessation program that merely asks employees whether or not they use tobacco (e.g., by completion of an affidavit) could continue to use the “50% of the cost of employee coverage” limitation permitted under HIPAA and the ACA.

As is suggested by the proposed “voluntary” standard, the EEOC appears to be concerned about more intrusive wellness testing methods such as blood tests to confirm non-use of tobacco products and has therefore limited the extent to which larger incentives may be used to encourage participation.

Not content to cede the wellness stage to the EEOC, the other three regulatory agencies with jurisdiction over wellness programs (i.e., the U.S. Department of Health and Human Services, the U.S. Department of Labor, and the U.S. Department of Treasury (the Departments)) issued their own guidance on April 16 in the form of additional frequently asked questions on its FAQs about Affordable Care Act Implementation (Part XXV) page.

This guidance reiterates previous wellness guidance issued by the Departments, but also cautions that compliance with the Departments’ wellness program regulations is not determinative of compliance with other laws, such as the ADA. The EEOC indicated that the Departments worked in conjunction with one another on the proposed rules, but the EEOC and the Departments may recognize that all wellness program guidance is not perfectly reconciled.

Employer Action Items

While employers are not required to comply with the proposed rules at this time, it would be wise to review wellness programs now in light of these rules, particularly for wellness programs that use stricter standards or impose larger penalties on their prospective participants.

In particular, employers should review the financial incentives currently provided under their wellness programs to see where they fall in relation to the 30% limitation of the new rules.  In addition, employers should review their smoking cessation programs to determine whether those programs will be aggregated within the 30% rule or may continue to rely on the 50% limitation under HIPAA and the ACA.

 

 

When is a background search not a background search . . . ?

Reference

In a thoroughly reasoned and illustrative opinion, one federal court magistrate judge recently dismissed the claims of a group of individuals who alleged they were not hired because a potential employer used LinkedIn’s “Reference Search” feature to obtain background information. Sweet v. LinkedIn Corporation, NDCA, No. 5:14-cv-04531, April 14, 2015.

The Fair Credit Reporting Act (FCRA) was enacted to insure that consumer reporting agencies act with “fairness, impartiality, and respect for the consumer’s right to privacy.” But one federal court held recently that LinkedIn’s search technology does not make that site a “consumer reporting agency” for purposes of FCRA.

LinkedIn, the online professional network, allows users to create, manage, and share professional identities online. When a user adds information to his or her profile page, that information is added to LinkedIn’s professional database. LinkedIn’s “proprietary search technology” allows users to search that data. Part of that search functionality is the Reference Search feature, which allows subscriptions users to search for “references” for any LinkedIn member (“searched member”).

The Reference Search lists the searched member’s name, along with the names of his or her current and former employers. The Reference Search then provides a list of other members in the same network as the searcher, and who may have worked at a particular company during the same period as did the searched member.

The Reference Search results encourage search initiators to contact the listed references, but does not do that for them; it also does not tell searched members when users run searches on them.

The plaintiffs in the California lawsuit alleged that LinkedIn violated their rights under the FCRA by furnishing information for employment purposes. They sought certification of a class, demanding actual damages, punitive damages, attorney’s fees, and costs. LinkedIn moved to dismiss the case, arguing that the plaintiffs failed to state a claim under the FCRA.

The federal judge reviewing the case held that the plaintiffs were unable to set forth a right to relief above the speculative level, and that they failed to raise facts sufficient to “support a plausible inference that the Reference Searches are within the FCRA’s definition of a consumer report.”

The judge listed four reasons for that holding:

  • that the publications of employment histories of the searched members are not consumer reports because they came solely from LinkedIn’s transactions with these same consumers (that is, the purpose of LinkedIn is for consumers to “share their professional identities online”);
  • that a “consumer reporting agency” regularly assembles or evaluates consumer credit/background information for the purpose of furnishing reports to third parties (whereas, the function of LinkedIn is to “carry out consumers’ information-sharing objectives”);
  • that because the search results come from people in the searchers’ networks, and not the searched members’ networks, the results do not indicate that the searched member is well-connected in the industry; and
  • that LinkedIn does not market the results of the search as a source of reliable feedback about job candidates and, therefore, plaintiffs cannot establish that the results themselves are used or intended to be used to determine a searched member’s eligibility for employment.

While the court made a thorough analysis of the situation, its holding included permission for the plaintiffs to amend their complaint to attempt to come within the parameters of a FCRA cause of action, so we may be seeing more of this issue before it is fully resolved.

An article in Forbes.com, commenting on the case, provides a common sense view of the court’s decision, and the decision itself points out the various increasing uses and end-results of electronic searches and tools. But the question raised by recent cases in this area is whether the expanded use of electronic search tools will lead to a parallel increase in the regulation of social media, especially as it relates to employment issues.

Employee’s online and obscenity-laced rant viewed as protected activity by the NLRB.

Facebook firing 2

By a two-to-one vote, a three-member panel of the National Labor Relations Board (NLRB) upheld an administrative law judge’s findings that an employer unlawfully discharged an employee because of social media comments – including strong obscenities – that were personally critical of a company manager. Pier Sixty, LLC and Hernan Perez, et al, NLRB Cases No 02-CA-068612 and 02-CA-070797, March 31, 2015.

Pier Sixty operates a catering service company in Manhattan, NY. In early 2011, the company’s employees expressed interest in union representation, based in part because of concerns that management treated them “disrespectfully and in an undignified manner.” Those efforts resulted in a successful organizing campaign, after which the Union was certified as the exclusive collective bargaining representatives for the servers, captains, bartenders and coat checkers in the company’s banquet department after an October 27, 2011 election.

Two days before that election, Hernan Perez, a long-term employee, was working as a server at an event. During the cocktail service, a company manager, Robert McSweeney, allegedly approached and – in a loud voice and in front of guests – addressed Perez and two other employees, using an unnecessarily harsh tone, and waiving his arms. McSweeney was one of the company managers identified by employees as treating company workers disrespectfully.

Upset with McSweeney’s treatment, Perez took a break and, outside of the banquet facility, posted from his phone a message to his personal Facebook page. The message referred to McSweeney as a “NASTY M***** F***er” and a “LOSER!!!!,” stated “f*** his mother and his entire f***ing family,” and ended with “Vote YES for the UNION!!!!!!!”

After being made aware of that posting, the Company fired Perez for violation of its obscenity policy. Two charges subsequently were filed: one on behalf of Perez for his firing, and one on behalf of the Union stating that Pier Sixty had threatened employees with loss of jobs and benefits if the Union was chosen as a collective bargaining agent.

The case was tried before an administrative law judge (ALJ), who found on behalf of Perez and in favor of the Union on the charges. The decisions were appealed and reviewed jointly, and the NLRB panel that reviewed the cases upheld the ALJ’s decisions. The Union’s complaints were found to be substantiated, based on remarks made by the Company’s general manager interpreted by employees as threatening jobs, benefits, and access to Company managers.

The panel also upheld the ALJ’s determination that Perez’s firing violated the National Labor Relations Act (NLRA) because Perez’ Facebook post was deemed to be protected concerted activity. Although the Company argued that Perez had violated Company policy regarding obscene language, it was determined that since 2005, the Company had issued only five written warnings to employees who had used obscene language, and had discharged no one on that basis.

Further – and importantly – it was found that Perez’ use of obscene language in his posting was not “qualitatively different from profanity regularly tolerated by [the Company].” According to the NLRB, “the overwhelming evidence establishes that, while distasteful, [the Company] tolerated the widespread use of profanity in the workplace, including the words “f***” and “motherf*****.” Considering that setting, the panel held that Perez’ language in his posting should not have cause him to lose the protections allowed under the NLRA for protected speech.

While critics of this decision have focused on the strongly personal nature of the obscenities used by Perez, a broader reading could serve as a warning to employers who institute anti-obscenity and anti-bullying policies, but fail to implement them consistently. In this case, had the Company regularly trained supervisors, managers and employees on appropriate workplace behavior, and had discipline been imposed consistently for violations of policies related to that behavior, this case may have ended differently.

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