Governor’s gaffe and family responsibilities

I’m a huge fan of Pennsylvania Governor Ed Rendell. We share a common passion – Philadelphia sports teams. Although, I’ve never been involved in beaning Jimmy Johnson with a snowball.

Earlier this week at the National Governors Conference, he made a huge gaffe when a microphone picked up the following comment about President-elect Obama's choice for Secretary of Homeland Security, Arizona Gov. Janet Napolitano:

Janet's perfect for that job. Because for that job, you have to have no life. Janet has no family. Perfect. She can devote, literally, 19-20 hours a day to it.

On cnn.com, Campbell Brown correctly points out that if a man had been Obama’s choice, family responsibilities would never have been raised by anyone as an issue.

Gov. Rendell’s off-the-cuff comment runs in stark opposition to President-elect Obama’s own goals. The following comes from the President-elect's website, as one of the key policy points for his administration:

Protect Against Caregiver Discrimination: Workers with family obligations often are discriminated against in the workplace. Barack Obama and Joe Biden will commit the government to enforcing recently-enacted Equal Employment Opportunity Commission guidelines on caregiver discrimination.

For employers, Gov. Rendell’s comment illustrates that we still have a long way to go to eliminate unconscious biases that form the maternal wall. To combat these biases, decisionmakers need to ensure that all employment decisions are based on ability and performance, free from preconceptions about an employee’s outside responsibilities.

Take care in submitting health insurance applications

In Medical Mutual of Ohio v. k. Amelia Enterprises (6th Circuit 12/2/08), the 6th Circuit dismissed a claim brought by Medical Mutual against an employee, his employer, and the employer’s CFO after the insurance company discovered that the employee had failed to disclose his son’s pre-existing condition on his insurance application. The Court dismissed the claims because Medical Mutual had not timely filed them within the statute of limitations.

Even though Medical Mutual’s late filing of the claims let the employer and its CFO off the hook, an important lesson can still be learned from the genesis of this case. Like all group insurance applications, Medical Mutual required k. Amelia employees to complete Medical History Questionnaires as a condition of coverage by the group health insurance plan. k. Amelia’s CFO signed the Group Application, which included the Medical History Questionnaires. Medical Mutual terminated the employee’s coverage and sued for prior paid benefits after it discovered that the employee had not disclosed his son’s pre-existing hemophilia.

The employer should not be liable unless it knew or should have known that an employee had submitted false information. The question for k. Amelia is whether it knew of the son’s hemophilia when it submitted the questionnaire. If it had such knowledge, for example, through the processing of a prior health insurance application or through an employee’s use of FMLA leave for the excluded condition, then it could be on the hook for the misrepresentation. An employer should not be required, though, to independently verify each and every employee’s insurance applications for veracity and completeness. An employer should be entitled to rely on its employees’ honesty, unless it knows or has reason to know that false or misleading information has been submitted.

The lesson for employers is not to blindly submit an insurance application without first reviewing the information provided by employees. If an employee submits information that an employer knows or should know is false, the employer has a duty not to submit the application without correcting or removing the information. A little due diligence on the front end could save a company years of litigation on the back end.

Do you know? EEOC filings reach a record number

Do you know? In 2008, the EEOC received 95,402 private sector charges of discrimination, which is a 15.2% increase from 2007. Given the current state of the economy, it is fair to assume a larger percentage increase for 2009, brining the EEOC’s charge processing well into six digits for next year.

The information comes from the EEOC’s Fiscal Year 2008 Performance and Accountability Report, which is akin to its annual report if it was a publicly traded company. Other highlights:

• In 2009, the EEOC will publish regulations providing guidance to employers and employees on the Genetic Information Non-Discrimination Act (GINA), which prohibits public and private employers from using genetic information in employment decisions.
• The EEOC will issue regulations implementing the Americans With Disabilities Act Amendments Act of 2008, which changes the way EEOC will be evaluating charges of discrimination received under Title I of the ADA.
• The EEOC will continue to pursue its E-RACE Initiative by taking a hard look at issues that impact race and color discrimination.
• The EEOC will focus its resources on combating systemic workplace discrimination.

What does this mean for you? For one thing, there is a good chance that a terminated employee who belongs to a protected class will pursue a claim at least via the filing of an EEOC or OCRC charge. Secondly, employers will get much needed guidance on how the EEOC will interpret GINA and the ADA Amendments. While this guidance is not binding on courts, it is very persuasive and will provide employers with a great jumping off point on how to put these new laws into play in the workplace. Finally, if your company has a policy or practice that systemically targets a protected class, there is a decent chance you will find yourself on the EEOC’s radar, if not in 2009 then at some point.

The Employee Free Choice Act publicity machine ramps up

Last week, I was jarred out of a comfortable evening of family television by the following commercial:

We’ve grown accustomed to endless political ads after a presidential campaign that seemed to go on forever. It’s one thing to see an ad for a ballot measure that we all get to vote on. It’s another to see an ad for a bill on which only 435 Representatives and 100 Senators will have any say-so. It’s a testament to how well-funded and savvy this union-backed campaign is.

There is a very compelling story to tell on why the ECFA is simply bad policy. It’s un-democratic in doing away with secret ballot union elections. It’s draconian in imposing first contracts through binding arbitration. It’s bad economic policy in adding significant costs to companies that are struggling to make it by as is. Does anyone doubt for a second that huge labor costs built into collective bargaining agreements are a big part of the Big 3’s big problems? I’ve yet to hear one person express why the EFCA is good policy for anyone other than the labor unions. I’ve also yet to hear one EFCA supporter in Congress explain why it’s okay to oppose NAFTA provisions that did not mandate secret ballot union election in Mexico, but it’s not okay to have the same protections for our own workers.

It is important to contact your Representative and Senators to tell them to vote against the ECFA. (How to contact your Senator; Write your Representative). The EFCA is not a done deal just because we have a Democratic President and Democratic majorities in both houses of Congress. Let our elected officials know that a yes vote for the EFCA as quid pro quo for union support will result in a vote for the other party in the next election.

The “Cat’s Paw” is alive and well in the 6th Circuit -- Pro se plaintiff’s trial win affirmed by Sixth Circuit

File this case under the category of never underestimate your opponent. The 6th Circuit has affirmed a trial court’s $120,000.50 verdict in a race discrimination case in which the plaintiff appeared pro se (without an attorney). In Madden v. Chattanooga City Wide Service Dept. (6th Cir. 11/25/08), the plaintiff was fired by management after a supervisor reported him for setting off firecrackers at a work site. The problem for the employer is that the plaintiff happened to be black, and he knew of two white employees who had done the exact same thing without being reported by the same supervisor.

The appellate court was unfazed by the fact that the person with the discriminatory animus, the reporting supervisor, was not the ultimate decisionmaker in Madden’s termination. Instead, the Court imputed the supervisor’s animus to the decision makers under what is known as “cat’s paw” liability. Cat’s paw liability is when an adverse employment decision is made by a person who lacks impermissible bias, but was influenced by another individual who was motivated by such bias.[1] The court found that the employer was liable because the supervisor discriminatorily decided which employee to report for identical misconduct.

There is the problem posed by the fact that Madden was fired not by his supervisor, Templin, but by senior managers—Templeton and Leach—who were unaware of incidents in which white workers set off fireworks without facing discipline. … We have held that when a plaintiff challenges his termination as motivated by a supervisor’s discriminatory animus, he must offer evidence of a “causal nexus” between the ultimate decisionmaker’s decision to terminate the plaintiff and the supervisor’s discriminatory animus. … In the instant case, there was an investigation of the events for which Madden was fired, which was conducted by Boyd and Templeton. This investigation led to Templeton’s recommendation that Madden be fired, which Leach accepted. … There was evidence that Templin discriminated in the information that he provided about employee misconduct to senior managers by reporting the misconduct of a black employee, but not the virtually identical misconduct of white employees. By relying on this discriminatory information flow, the ultimate decisionmakers “acted as the conduit of [the supervisor’s] prejudice—his cat’s paw.”

Because the decisionmaker acted on the supervisor’s word, without any additional investigation, the court imputed the supervisor’s animus to the decisionmaker.

There are two important lessons for employers to take from this case:

1. Never underestimate your opponent. It’s impossible to know whether Chattanooga acted out of hubris in taking this case all the way to trial. What we do know is that bad facts are bad facts, whether or not the plaintiff is represented or acting pro se.

2. As long as cat’s paw liability is a valid theory of discrimination, it is imperative that decisionmakers verify the information upon which they are relying. Unless the decisionmaker has first-hand knowledge of the reasons justifying the action, he or she should undertake some investigation and independently verify that the decision is the result of a legitimate non-discriminatory reason and not an unlawful animus.

The Blawg is taking the rest of the week off for the Thanksgiving Holiday. Everyone enjoy your turkey. I’ll be back on Monday with thoughts on the aggressive advertising campaign started by labor organizations in support of the Employee Free Choice Act. What I’m Reading This Week will return next Friday with a supersized edition.

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[1] “Cat’s paw” derives from a fable in which a monkey tricks a cat into scooping chestnuts out of a fire so that the monkey can eagerly gobble them up, leaving none left for the cat. It generally describes a situation where one is unwittingly manipulated to do another's bidding. See Read Book Online.

Do you know? Year-end bonus payments may affect overtime rates

Do you know? Year-end bonus payments could count as part of a non-exempt employee’s regular rate of pay, thereby increasing the overtime premium owed to that employee. Given the current economic state, fewer companies are likely to pay bonuses this year, but these rules are important to heed when bonuses are paid to hourly and salaried non-exempt employees.

Section 7(e) of the Fair Labor Standards Act requires the inclusion in the regular rate of pay all remuneration for employment except seven specified types of payments. Bonuses that do not qualify for exclusion from
the regular rate under one of the seven exceptions must be totaled with other earnings to determine the regular rate upon which the overtime premium rate must be based.

A bonus could fall under one of two exceptions: discretionary payments, or gifts made at Christmas time or on other special occasions. Each of these two categories, however, has specific criteria that must be met before a bonus payment can be excluded from the regular rate.

Discretionary Bonus Payments

For a bonus to qualify for exclusion as a discretionary bonus, the employer must retain discretion both as to the fact of payment and as to its amount. Consider the following examples:

• An employer promises at the beginning of the year to pay a bonus at year-end in some undetermined amount. It has given up discretion as to the fact of the bonus, but not as to its amount.

• An employer promises employees that they will receive a bonus based on some mathematical formula, but if the company determines that it can afford to make the payments at that time. It has given up discretion as to the bonus’s amount, but not as to the fact of payment.

In both examples, the bonus is not discretionary, albeit for opposite reasons. For a bonus to be truly discretionary, the employer would have to retain complete discretion as whether to make the payment, and if so, in what amount. The employer cannot rely on any prior promise or agreement in making the payment or determining its amount.

Gifts, Christmas and Special Occasion Bonuses.

To qualify for exclusion under this exception, the bonus must be a bona fide gift. If it is measured by hours worked, production, or efficiency, is so large that employees would reasonably consider it part of their wages for hours worked, or is paid pursuant to some agreement or policy, then the bonus cannot be considered to be a gift.

According to the Department of Labor, the following circumstances will not disqualify a year-end payment as a gift:

• If an employer pays it with such regularity that employees are led to expect it from year-to-year.

• The amounts paid vary among employees or groups, or are tied to salary, wage, or length of service. For example, a Christmas bonus paid in the amount of two weeks’ salary to all employees and an equal additional amount for each 5 years of service with the firm would be excludable from the regular rate.

The key factors are whether there is a contract, and whether the amount is specifically tied to hours worked, production, or efficiency.

Calculating the Regular Rate with a Bonus Payment

Where a bonus payment is considered a part of the regular rate at which an employee is employed, it must be included in computing the regular hourly rate of pay and overtime compensation. For purposes of calculating the regular rate of pay, the bonus does not have to be included in its entirety in the week it is paid. Instead, an employer can apportion the bonus amount back over the workweeks of the period during which it was earned. The employee must then receive an additional amount of compensation for each workweek that he worked overtime during the period equal to one-half of the hourly rate of pay allocable to the bonus for that week multiplied by the number of statutory overtime hours worked during the week. If it is impossible to allocate the bonus, an employer can select some other reasonable and equitable method of allocation.

If a bonus payment already accounts for the overtime premium, then no additional payment is required. For example, a bonus plan may pay, as a bonus, a 10% premium of an employee’s total compensation, including overtime premiums. In this instance, the payment already covers overtime, and no additional overtime is required.

Conclusion

Like most wage and hour issues, the handling of bonus payments to non-exempt employees is complex, and presents a real trap for the unwary employer. If you are considering paying a year-end or other bonus to hourly and salaried non-exempt employees, seriously consider running it past employment counsel before making the payments.

New FMLA Regulations: What do they mean to notice and designation obligations to employees?

Administration of FMLA leave probably causes more headaches for HR professionals than any other facet of their jobs. As if the FMLA is not complex enough, the new regulations radically revamp the notice and certifications processes for employers to follow when an employee seeks FMLA leave. The following summarizes these new responsibilities.

Required Postings and Policies

All covered employers who are required to post the prescribed FMLA notice in the workplace, even if they do not have any eligible employees. Employee handbooks will still have to contain FMLA policies. Companies that do not have a handbook, however, will be required to deliver a written FMLA notice at the time of hire. This written notice is separate from the FMLA posting discussed above.

The Eligibility Notice

Under the current iteration of the FMLA, employers only have one designation requirement to employees seeking FMLA leave – Form WH-381 – which is the employer’s response to an employee seeking FMLA leave. The new regulations break this process into two steps, requiring the use of several different documents. After January 16, 2009, old Form WH-381 will no longer be valid and should not be used.

Under the new regulations, when an employee requests FMLA leave, employers must notify employees of their eligibility to take FMLA leave. Employers must provide this notice of eligibility within five business days of the employee’s request for leave or the employer’s other notice of the need for leave, absent exigent circumstances. If an employer is going to seek medical certification for the leave, the employer can provide a copy of the medical certification form along with the eligibility notice. Additionally, the eligibility notice accomplishes the following:

1. It tells the employee the date the leave was requested and the employer’s understanding of the reason supporting the leave.
2. It tells if the employee is eligible to take FMLA leave, and if not, why.
3. For eligible employees, it gives a date certain for the employee to return any requests documentation for the leave, such as a medical certification.
4. It discusses arrangements for payment of health insurance premiums while on leave, the use of concurrent paid leave, whether the employee is considered a “key employee”, and any requirements for periodic status reports.
5. It gives the employer’s chosen method for calculating the FMLA leave year.

Eligibility is determined, and this notice must be provided, at the beginning of the first instance of leave for each FMLA-qualifying reason in the applicable 12-month period. All FMLA absences for the same qualifying reason in the same FMLA year are considered a single leave, and the employee maintains eligibility as to that reason during the entire 12-month period. 

If an employee is eligible for FMLA leave, at the same time an employer provides the eligibility notice the employer must also provide a written notice of “Rights and Responsibilities” under the FMLA. This notice details the specific expectations and obligations of employees under the FMLA.

The old form WH-381 (which was optional, but preferred), will be replaced by a new, mandatory WH-381. The new WH-381 encompasses both the eligibility notice and the “Rights and Responsibilities” notice. The new forms are already available as Appendices C & D to the new FMLA regulations (at pp. 191-193).

The Designation Notice

Once an employer has received sufficient information to determine whether an employee’s leave is covered by the FMLA, the employer must notify the employee within five business days that the leave is designated as FMLA leave, absent exigent circumstances. Note that the five business days is a ceiling, not a floor, and employers can provide the designation notice sooner, or even concurrently with the eligibility notice, if the employer has sufficient information available to do so. A copy of the designation form is available as Appendix E to the new FMLA regulations (at p. 194).

The designation notice tells employees one of five things:

• The leave is approved;
• More information is needed to determine if the leave can be approved;
• The leave is denied;
• The FMLA does not cover the leave request; or
• The employee has exhausted his or her FMLA leave entitlement for that 12-month period.

If the leave is approved, the employer must designate how much leave is expected to be taken, whether paid leave will be taken concurrently with the FMLA leave, and whether a fitness-for-duty certification will be required before the employee will be permitted to return to work.

If more information is necessary for an employer to make a determination, the employer must advise either what information is needed and give the employee at leave seven calendar days to provide it, or notify the employee that a second or third medical opinion, at the employer’s expense, is required. If an employee fails to meet these requests, the employer can then deny the FMLA leave.

In considering whether to approve an FMLA leave, employers can consider, in addition to the employee’s medical certification, any information received during an ADA interactive process or an employee benefit program.

The new regulations permit retroactive notice if the employer fails to provide timely notice and the delay does not cause employee harm or injury. If, however, an employer fails to provide a written designation notice, the new regulations make clear that such failure can be considered “interference” with an employee’s FMLA rights, for which the employee can seek damages included “any other relief tailored to the harm suffered.”

What this means for you

These new regulations provide a fundamental change in how employers will manage FMLA leave requests. The process is now bifurcated, splitting eligibility and designation. It eliminates the problems employers faced in having to conditionally certify leave as FMLA leave before having all of the information necessary to make a proper determination. Coupled with the new medical certification rules, employers will have much greater access to information in making FMLA decisions. While these regulations are largely a benefit to employers, they do pose significant new requirements with which employers must comply. It is incumbent on all HR professionals to learn these new rules and be prepared to implement them on January 16, 2009.