Employment Law Matters : Employment Lawyer & Attorney : Ogletree Deakins Law Firm : Labor Law, Human Resources

The Internal Revenue Service has developed a form (Form W-11) for use by employers to confirm that an employee is a qualified employee under the Hiring Incentives to Restore Employment (HIRE) Act. While it is acceptable to use a similar statement, such alternate statement will only be acknowledged by the IRS if it contains the information set forth in Form W-11, and the if employee signs it under penalties of perjury. As set forth in the version of the Act signed by President Obama last month, an employer may not claim HIRE Act benefits, including the payroll tax exemption or the new hire retention credit, unless the newly hired employee completes and signs an affidavit or statement under penalties of perjury, and is otherwise a qualified employee.

According to the Employer Instructions that accompany Form W-11, a “qualified employee” is an employee who:

• begins employment with the employer after February 3, 2010, and before January 1, 2011;

• certifies by signed affidavit, or similar statement under penalties of perjury, that he or she has not been employed for more than 40 hours during the 60-day period ending on the date the employee begins that employment;

• is not employed to replace another employee unless the other employee separated from employment voluntarily or for cause (including downsizing); and

• is not related to the employer. An employee is considered to be “related” if he or she is the employer’s child or a descendent of the employer’s child, a sibling or stepsibling, a parent or an ancestor of a parent, a stepparent, niece or nephew, aunt or uncle, or in-law of the employer. An employee also is related to the employer if he or she is related to anyone who owns more than 50% of the outstanding stock or capital and profits interest of the company, or is a dependent either of the employer or of anyone who owns more than 50% of the outstanding stock or capital and profits interest of the company.

The text of the IRS’ affidavit simply states: “I certify that I have been unemployed or have not worked for anyone for more than 40 hours during the 60-day period ending on the date I began employment with this employer.” The affidavit must be signed, dated, and a Social Security Number must be indicated, as well as the first date of employment. The signature line should follow a statement that “Under penalties of perjury, I declare that I have examined this affidavit and, to the best of my knowledge and belief, it is true, correct, and complete.” The form is not submitted to the IRS, but must be kept by the employer to document the information.

As has been stated on other occasions, employers should realize that the HIRE Act does not excuse them from complying with existing anti-discrimination and employment-related laws, and should be aware that the increased hiring generated by the Act also will require increased diligence in compliance with those existing laws.
 

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On March 18, 2010, President Obama signed the Hiring Incentives to Restore Employment (HIRE) Act, which contains more than $17 Billion in tax credits aimed to stimulate employment, and includes $20 Billion for highway and transit infrastructure programs. One of the most important provisions for businesses is a tax credit for hiring from the ranks of the unemployed.
Under the HIRE Act, the employer of a “qualified employee” is excused from paying the employer match for the 6.2% Social Security portion of that employee’s wages in 2010. A qualifying employee is one who is hired after Feb. 3, 2010 and before Jan. 1, 2011, is not hired to replace another employee, is not related to the employer, and certifies under penalty of perjury that he or she has not been employed for more than 40 hours during the 60-day period ending on the date that employment begins with the new employer. This incentive can save the employer up to $6,621.60 for each qualified employee hired (6.2% of the maximum Social Security withholding for 2010), with increased savings for hiring qualified veterans, whose maximum Social Security withholding amount is higher. Employers also can receive a tax credit on their 2011 return for each new employee hired and retained for 52 weeks under certain criteria; that credit is the lesser of $1,000 or 6.2% of the wages paid to the employee for those 52 weeks.
These tax incentives are meant to spur job creation, especially for small businesses who are undecided about whether to begin to ramp up company-building efforts in light of recent economic difficulties. In addition, the Act includes a one-year extension of expensing thresholds so that small businesses may elect to write-off up to $250,000 of certain capital expenditures (subject to a phase-out once those expenditures exceed $800,000) in 2010 in lieu of depreciating those costs over time. The goal of that provision is, of course, to provide an incentive to businesses to invest immediately in equipment and inventory to jump-start economic activity.
The Act also extends current federal aid for certain highway programs, saving existing jobs associated with that work. Further, it establishes a new Build America Bonds program that will provide an optional direct subsidy for bonds issued for certain school and energy projects.

One key revenue source for the Act’s programs is a limitation on the ability of multinational corporations to shift assets among foreign institutions in order to minimize withholding tax. In 2004, Congress provided to certain taxpayers an election to take advantage of a rule for allocating interest expense between U.S. sources and foreign sources for purposes of determining that taxpayer's foreign tax credit limitation. The phase-in of that rule previously was delayed a number of times. The HIRE Act further delays the implementation to 2021, which is estimated to raise nearly $10 Billion over the next ten years.

Congressional leadership has called the HIRE Act the “first of several” laws intended to stimulate job creation. Employers should make themselves aware of the opportunities that are becoming codified in new laws, and should maximize on those opportunities for employing and re-employing qualified individuals. However, employers also must recognize that these new laws do not excuse employers from complying with existing anti-discrimination laws, and should be aware that increased hiring may also call for increased diligence in compliance with those laws.

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In an unpublished opinion, a federal district court in New Jersey has upheld a jury verdict in which a company was found liable for violating the federal Stored Communications Act (SCA). The violation occurred when the company’s managers intentionally accessed a “chat group” on an employee’s MySpace account without having received authorization from the MySpace member to join the group. Further, the court upheld the jury’s finding of malicious conduct, which supported an award of punitive damages. Pietrylo v. Hillstone Restaurant Group d/b/a Houston’s, D.N.J., No. 06-5754, unpublished, Sept. 25, 2009.

Brian Pietrylo and Doreen Marino filed suit against their employer, Houston’s Restaurant, after two of the restaurant’s managers accessed a MySpace chat group maintained by Pietrylo during his non-work hours. The chat group, called the “Spec-Tator,” was accessed via an electronic invitation from Pietrylo. If the user accepted that invitation, he or she could access the site only by using a personal password. The site included language that indicated that the group was private, and that it was a place in which Hillstone employees could talk about the “crap/drama/and gossip” related to their workplace. No Hillstone upper manager was invited to join the group, and members accessed the site only during non-work hours and on non-company computers.

One employee/chat group member, Karen St. Jean, made a Houston’s manager aware of the site. St. Jean later provided her password to another manager, Robert Anton, who shared the information with a regional manager, Robert Marano. In spite of the privacy warning on the page, Anton and Marano accessed the site on multiple separate occasions. After determining that the content of the postings in the chat group were “offensive,” Anton and Marano fired Pietrylo and Marino.

Pietrylo and Marino then sued Houston’s, alleging, in part, that the company violated the SCA and a parallel New Jersey statute, the New Jersey Wiretapping and Electronic Surveillance Control Act. A jury found in favor of the employees, awarding modest compensatory damages, but adding punitive damages after finding that the company acted maliciously. Houston’s challenged the verdict in a motion for judgment, and requested a new trial. Both motions were denied by the district court, which found that the verdict and the damages were supported by the evidence.

Under the SCA, the plaintiffs had to prove that Houston’s managers accessed the chat group “knowingly, intentionally, or purposefully,” and without authorization. Although Houston’s argued that St. Jean willingly volunteered her password to Anton, St. Jean’s trial testimony included the fact that she would not have provided that information to Anton if he had not been a manager. Interestingly, the court’s decision turned partly on the fact that there was no documentary evidence concerning the authorization, and so the jury had to rely on the testimony and demeanor of the witnesses. The court held that the jury could infer from St. Jean’s testimony – specifically her statement that she felt that she “would have gotten in trouble” if she hadn’t provided her password – that the purported authorization was coerced. In addition, the court cited that particular testimony, in conjunction with the fact that the restaurant’s managers viewed the site on several different occasions, even though the site specifically contained warnings that it was “private” and accessible to “members only,” to support its decision to deny Houston’s motions.

While this decision is a district court case and therefore open to appeal, the decision is one of which employers should be aware. The lack of documentation regarding how the company obtained the password, the use of a self-designated “private” chat room by individuals without an actual invitation, and the continued use of the site with specific knowledge of its invitation-only status all provided a basis for the court to support the jury’s findings against the company. While employers have certain rights and obligations with respect to company-related computer equipment and electronic sites, this case points out the pitfalls of an attempt to extend that authority to non-work-related equipment and sites. This area of the law is developing quickly, and employers should be attuned to the ways in which courts are addressing the issues that arise in that area.
 

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Litigation often ends when one party files a motion for summary judgment, asking the court to determine that there is no issue of material fact for the jury, and asserting that a decision can be made in its favor based solely on the legal issues. In reviewing a motion for summary judgment, a court must view the record in the light most favorable to the non-moving party. Recently, the 2d U.S. Circuit Court of Appeals reversed summary judgment for an employer in an age discrimination case, holding that the lower court “failed to construe the evidence in the light most favorable to [the employee] and to draw all permissible inferences in [his] favor.” Weiss v. JPMorgan Chase & Company, 2d Circ., No. 08-0801, June 5, 2009.

David Weiss alleged that he was terminated from his position at JPMorgan Chase & Company in violation of the Age Discrimination in Employment Act (ADEA) after he was replaced, at age 56, by an individual 16 years his junior. The parties agreed that Weiss presented a prima facie case of discrimination, and that JPMorgan introduced evidence that it had a legitimate non-discriminatory reason for firing Weiss. At the final stage of the now-familiar McDonnell-Douglas analysis, Weiss was required to satisfy the ultimate burden of proving that JPMorgan’s proffered reasons actually were a pretext for age discrimination. The district court reviewed the evidence, and found in favor of JPMorgan. On appeal, the Second Circuit reversed that decision, and held that based upon the available facts – when viewed in a light most favorable to Weiss – a jury may have been able to infer pretext regarding JPMorgan’s reasons for Weiss’ termination. The Second Circuit addressed each of the arguments asserted by Weiss in response to the reasons proffered by JPMorgan, and found each to have created such an inference.

JPMorgan’s asserted reasons for Weiss’ termination centered around complaints by Weiss’ sales team regarding his leadership style, and included the subjective determination (made by a supervisor who only had known Weiss for four months) that “the team had lost confidence in Weiss.” Weiss argued that his team was dissatisfied with their bonuses, over which he had little or no control; that the defection of his top sales person was not due to any action on Weiss’ part, but on JPMorgan’s refusal to match an offer to that individual made by a competitor; and that Weiss never had been put on notice regarding his failure to “cover” certain accounts, which ultimately led to his firing.

Importantly, the Court went into detail about the company’s “shifting explanations” for Weiss’ termination, stating specifically that “[i]nconsistent or even post-hoc explanations for a termination decision may suggest discriminatory motive.” After characterizing JPMorgan’s explanations as “vaguely formulated and technically inaccurate,” the Court pointed out that a jury can infer pretext from the company’s failure to present those termination reasons to Weiss initially, especially in light of an HR employee’s testimony that the company advocated “giving true reasons” to employees who are fired. Further, the Court pointed out that JPMorgan acted outside of its normal termination procedures by failing to allow Weiss an opportunity to correct his filings prior to the termination decision. While the company asserted that urgent business circumstances justified the deviations from its customary procedure, the Court stated that “Whether Weiss’ superiors were persuaded by a sense of business urgency or [by] age discrimination to contravene normal procedures to terminate Weiss is a question for the jury.”

This case is a strong reminder to employers to: (1) act consistently with company policies and procedures; (2) train supervisors and managers to effectively conduct termination meetings; (3) base employee discharge decisions on business-related, fully-documented reasons. To do otherwise may be to create a circumstance in which the company is forced to rely on subjective assessments and incomplete rationales, which can, as in this case, lead a court to find sufficient issues of material fact to allow the matter to be decided by a jury.
 

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An employee alleging a violation of the Sarbanes-Oxley Act (SOX) must file a complaint within 90 days from the date of that alleged violation. That 90-day period begins to run from the date on which the complainant knows or reasonably should know that the complained-of act has occurred. In whistleblower cases under SOX, the 90-day statute of limitations runs from the date on which the employee receives “final, definitive, and unequivocal notice” of an adverse employment decision. As defined in SOX, the term “unequivocal” means that the notice is not ambiguous, and is free from misleading possibilities.

On April 30, 2009, a Department of Labor Administrative Review Board (ARB) determined that an employer’s notice to its employee was ambiguous and did not trigger the 90-day statute of limitations, because the letter included language that indicated that the company was willing to review and consider any evidence from the employee that could refute the termination decision. Snyder v. Wyeth Pharmaceuticals, DOL ARB, No. 09-008 (4/30/09, released 5/7/09). Based on that fact, the employee’s complaint to OSHA was timely, even though the complaint was filed more than six months after the employee received the letter which ostensibly indicated that the company had decided to terminate his employment.

Gregg Snyder was employed by Wyeth Pharmaceuticals as an Engineer IV, responsible for all Building System functions at the company’s Cambridge, Massachusetts facility. In September 2007, Wyeth’s HR director informed Snyder that he was being suspended with pay pending an investigation of allegations that he had improperly accessed confidential information. On October 1, while suspended, Snyder sent an e-mail to Wyeth, alleging certain Code of Conduct violations by Wyeth officials, and alleging that his suspension was part of a continuing course of retaliation by Wyeth. On October 17, Snyder received a letter from Wyeth’s HR Director (Lingen) which stated that prior to Snyder’s October 1 e-mail, the company already had made a decision to terminate Snyder’s employment. However, the letter also stated that “if you would to provide me with specific information in writing as to why you think your termination is not justified or specific details of the ‘harassment’ you feel you have received, I would be happy to review it.” Snyder responded on October 19 by again alleging retaliation and harassment.

On February 11, 2008, Wyeth sent a letter to Snyder stating that the company “has concluded that the decision to terminate your employment is appropriate,” and informed Snyder that the termination was effective as of that date.

On May 8, 2008, Snyder filed a SOX complaint with the Occupational Safety and Health Administration (OSHA). OSHA found that the complaint was untimely because it had not been filed within 90 days of October 17, when Snyder received Lingen’s letter regarding the pre-October decision to terminate him. Upon review, that decision was upheld by an Administrative Law Judge. However, the ARB subsequently reversed the decision, finding that the wording of Lingen’s letter offered to allow Snyder to provide information that might change the termination decision, injecting an element of ambiguity into the communication. Therefore, the letter did not constitute a final, definitive, and unequivocal notice of termination sufficient to commence the running of the statute of limitations.

This decision tells employers that threats of termination that include either an opportunity for performance improvement or a mechanism for avoiding the threatened firing do not actually constitute the “final, definitive, and unequivocal notice” necessary to start to 90-day statute of limitation running under SOX for a whistleblower claim. While this should not preclude employers from allowing individuals to avoid employment termination by improving performance, it does provide a warning that once a termination decision is made and appropriately substantiated, it should be implemented without delay, unless there is a legitimate business-related reason for that delay.

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As you plan for 2009, every employer should take steps to address the amendments to the Americans with Disabilities Act (ADA), the new Family and Medical Leave Act (FMLA) regulations, and the anticipated passage of the Employee Free Choice Act (EFCA). The following is a suggested "to do" list.

www.ogletreedeakins.com/publications/index.cfm

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