Stimulus Bill to provide for subsidized COBRA coverage for laid-off employees

COBRA provides workers and their families who lose health benefits the right to choose to continue group health benefits provided by their group health plan for up to 18 months. Historically, the cost of COBRA continuation coverage is borne 100% by the employee. Tomorrow in Denver, President Obama will sign into law the American Recovery and Reinvestment Bill of 2009, commonly known as the economic stimulus bill. This law will alter employers’ COBRA obligations by providing for subsidized COBRA premiums by employers.

The law will provide for a 65% subsidy of certain employees’ COBRA premiums for nine months. The subsidy will be available to any employee involuntarily terminated (except those severed because of gross misconduct, to whom COBRA does not apply) from employment between September 1, 2008, and December 31, 2009. The employer will pay 65% of the COBRA coverage premium, which would then be applied as a credit against payroll taxes. The employee would remain responsible for the other 35% of the COBRA premiums. Employers will have to amend their COBRA notices to include information about the availability of this subsidy.

Importantly, this subsidy is to be applied retroactively. Employees who were involuntarily terminated on or after September 1, 2008, but before the enactment of the stimulus bill, and who did not previously elect COBRA coverage, must be given an additional 60-day window to elect COBRA and benefit from the subsidy. If an employee elects COBRA after receiving the new notice, coverage would begin on February 17, not on the date of the actual termination.

Companies with 20 or more employees (COBRA’s coverage limit) must heed these changes. COBRA notices need to be amended for the remainder of 2009, and any employee involuntarily severed between September 1, 2008, and February 17, 2009, will have to be re-noticed to advise of the subsidy.

WIRTW #66

Overlawyered brings us the story of the week. File this one under what goes around comes around. A California attorney settled a consumer class action via the payment of gift cards for the class members. Since the class was being paid by gift cards, the court thought it was only fair that the lawyer be paid his fees the same way, 12,500 ten-dollar gift cards.

Gruntled Employees ticks off eight ways for a company to lose a non-compete case. Number 8 is the best tip, and its lesson translates to any employment case, not just non-compete cases:

Focus on the law instead of on the story. This is the most important lesson. Lawyers often fall in love with their legal arguments. But noncompete cases are equity cases, not law cases. To be sure, that distinction means less than it did a hundred years ago. But if you have a brilliant, clever, technical legal argument and an unsympathetic story, you are way more likely to lose.

Did you know that part of the Economic Stimulus Package will require employers to pay at least half of the COBRA premiums for involuntarily terminated employees? Me neither, until I read this article from HR Observations.

The Connecticut Employment Law Blog issue-spots the legal risks for employers using Google Map’s new locator service.

George’s Employment Blawg summarizes the FMLA’s new notice rules.

World of Work lists words to avoid in describing employees over 40.

The Delaware Employment Law Blog asks if the recession is going to put work-life balance initiatives at risk.

Trading Secrets correlates mass layoffs with the risk for mass theft of intellectual property.

Work Matters discusses the “one free dog bite” rule in retaliation cases.

Courts open Pandora’s Box in applying the Ledbetter Fair Pay Act

Today I am going to get technical and talk about statutory interpretation. Bear with me, though, because how some courts are incorrectly interpreting the Ledbetter Fair Pay Act has crucial implications for businesses

Michael Fox at Jottings by an Employer’s Lawyer highlights the following key passage in the Ledbetter Act:

For purposes of this section, an unlawful employment practice occurs, with respect to discrimination in compensation in violation of this title, when a discriminatory compensation decision or other practice is adopted, when an individual becomes subject to a discriminatory compensation decision or other practice, or when an individual is affected by application of a discriminatory compensation decision or other practice, including each time wages, benefits, or other compensation is paid, resulting in whole or in part from such a decision or other practice.

Plaintiffs are arguing that the phrase “or other practice” covers the full panoply of employment decisions, such as promotions and demotions, and not just pay-setting decisions or policies. At least two courts have bought this argument:

• Bush v. Orange County Corrections Dept., (M.D. Fla. 2/2/09), which held that plaintiffs could timely challenge demotions, which resulted in reductions in pay, that occurred 16 years before earlier than their EEOC charges.

• Gilmore v. Macy’s Retail Holdings, (D.N.J. 2/4/09), which held that the Ledbetter Act applies to a discriminatory promotion that would have been to a higher paying job.

Applying the Ledbetter Act to cases such as Bush and Gilmore, which  involved long-ago promotions and demotions, is misplaced. For “or other practice” to have the expansive meaning given by the Bush and Gilmore courts, a comma is missing. Because there is no comma between “decision” and “or other practice,” “or other practice” modifies “compensation.” Thus, the more reasoned interpretation of this provision of the Ledbetter Act is that the Act covers a discriminatory compensation decision or other discriminatory compensation practice. A promotions or demotion is a personnel decision, not a compensation decision or practice.

The overly broad interpretation applied by the Bush and Gilmore courts goes well beyond the issue in the Ledbetter decision that the Ledbetter Act intended to overturn. Every employment decision, whether a hiring, promotion, demotion, or termination, has some effect on compensation. The Ledbetter Act cannot be so broad as to cover any and every personnel decision. This broad of a reading of the statute will eliminate virtually every statute of limitations in federal discrimination claims, providing employees with an unlimited amount of time to file any discrimination claim. If the Ledbetter Act means what Bush and Gilmore say it means, the Ledbetter Act could prove to be devastating for employers.

No Ohio court has yet to apply the Ledbetter Act. Ultimately, the meaning of “or other practice” will be up to the courts of appeals and the Supreme Court. Nevertheless, it is important for employers to realize that only two weeks into its life, at least two courts have broadly applied the Ledbetter Act to cover much more than the Ledbetter decision it overturned.

A primer on employee polygraph testing

As I’ve previously reported, as the recession deepens, incidents of employee theft are on the rise. It should go without saying that just about any employee who steals should be fired. How can companies confirm that the theft actually occurred to support the termination? One available tool is a polygraph test. Employers who use polygraphs, however, must tread carefully to avoid running afoul of the specific requirements of the federal law that regulates their use in the workplace, the Employee Polygraph Protection Act of 1988.

The EPPA applies to the use of any device used to render a diagnostic opinion as to the honesty or dishonesty of an individual, such as polygraphs, deceptographs, voice stress analyzers, or psychological stress evaluators. It applies to private employers, but not federal, state, or local governments.

It prohibits employers from:

• Requiring, requesting, suggesting, or causing an employee or prospective employee to take or submit to any lie detector test.

• Using, accepting, referring to, or inquiring about the results of any lie detector test of an employee or prospective employee.

• Discharging, disciplining, discriminating against, denying employment or promotion, or threatening to take any such action against an employee or prospective employee for refusing to take a test, on the basis of the results of a test, for filing a complaint, for testifying in any proceeding, or for exercising any rights afforded by the EPPA.

Despite these strict prohibitions, there are limited exceptions when an employer can administer a polygraph test, but not other forms of lie detector tests. One exception covers prospective employees of armored car and other similar security companies. Another covers prospective employees of companies that manufacture controlled substances.

Of more general application to most employers, the third exception covers employees who are reasonably suspected of involvement in a workplace incident that results in economic loss to the employer and who had access to the property that is the subject of an investigation. Thus, the employer who reasonably believes that an employee has stolen is able to administer a polygraph to confirm the employee’s culpability.

Even if this exception applies, employers cannot use polygraphs carte blanche. There are certain key limits on their administration:

• The employee must be provided a written notice explaining the employee’s rights and the limitations imposed, such as prohibited areas of questioning and restriction on the use of test results.

• Prior to the polygraph test, the employee also must be provided a notice explaining the specific incident or activity being investigated and the basis for the employer’s reasonable suspicion of the employee’s involvement.

• The employee can refuse to take a test, terminate a test at any time, or decline to take a test because of a medical condition.

• The results of a test alone cannot be disclosed to anyone other than the employer or employee without their consent.

• The polygraph examiner must be licensed, and bonded or insured. Also, the examination is subject to strict conduct standards.

Polygraph examinations provide employers a powerful tool to confirm and confront employee theft. Employers must carefully follow the EPPA’s requirements so that a slam dunk termination does not turn into a sure-fire lawsuit for the employee.

Do you know? Unpaid internships

Do you know? There are specific standards that govern whether an unpaid internship passes muster under the Fair Labor Standards Act. If you business uses unpaid interns or externs, these rules are worth paying attention to.

The Department of Labor’s Wage and Hour Division uses a six-factor test to determine whether a trainee, intern, extern, apprentice, graduate assistant, or similar individual is an employee. If even one of these factors fails, then the individual is an employee and all of the regular minimum wage and overtime rules apply. The six factors are:

1. The training is similar to what would be given in a vocational school or academic educational instruction;

2. The training is for the benefit of the trainees or students;

3. The trainees or students do not displace regular employees, but work under their close observation;

4. The employer that provides the training derives no immediate advantage from the activities of the trainees or students, and on occasion the employer’s operations may actually be impeded;

5. The trainees or students are not necessarily entitled to a job at the conclusion of the training period; and

6. The employer and the trainees or students understand that the trainees or students are not entitled to wages for the time spent in training.

In the typical internship or externship program (i.e., where the work is simply an extension of an academic program), these factors are usually met, an employer-employee relationship does not exist, and the business does not have to worry about minimum wage or overtime laws for the interns or externs. If you use interns and are concerned about whether they are considered employees that must be paid minimum wage and overtime, consult an employment attorney.

‘Tis better to have learned and lost

Brown v. Nutrition Management Services Co., from the Eastern District of Pennsylvania, is a good reminder that ignorance of the law is never an excuse. It also underscores the importance of training.

In Brown v. Nutrition Management Services Co., a jury awarded plaintiff Melissa Brown $74,000 in back pay. The federal judge doubled that award under the FMLA’s liquidated damages provision after deciding that an in-house lawyer’s failure to research whether a pregnant worker was covered by the FMLA showed a lack of good faith.

Under the FMLA a prevailing party is entitled to liquidated damages equal to the amount of damages awarded for lost compensation plus interest unless the employer proves that the violation was in good faith and it had reasonable grounds to believe that it was not violating the FMLA. Reasonable good faith requires an employer to take affirmative steps to determine the requirements of the law. The Court found Nutrition Management’s in-house counsel’s action in determining Brown’s FMLA coverage lacking:

Nutrition Management argues it had a reasonable belief that Brown’s termination would not violate the law because it believed Brown’s probationary status rendered her ineligible for FMLA benefits. Nutrition Management’s alleged good faith belief would only be reasonable if it took affirmative steps to determine the legal effect of Brown’s probationary status; it did not….

Scott Murray, an attorney with general knowledge about employment law and Nutrition Management’s director of human resources, testified at trial that he determined it was “okay” to terminate Brown because she was a “brand new employee.” … Nutrition Management’s reliance on Mr. Murray’s cursory determination was inadequate…. Nutrition Management presented no evidence that it researched or had an attorney research the requirements of the FMLA, or was otherwise aware of the factors governing whether the FMLA would apply to Brown’s request for leave. Nutrition Management, having made no legal inquiry into the requirements of the FMLA, had no reasonable ground to believe Brown’s termination was not a violation.

It didn’t help Nutrition Management’s good faith argument that when asked for a reason to document for Brown’s termination, its CEO said, “he wanted the fat bitch out of there.”

The new FMLA regulations drastically alter the landscape of how companies handle and process employee’s FMLA claims. If for no other reason than to avoid double damages when an employee’s FMLA claim gets botched, organizations should be educating themselves on how to implement these new rules.

WIRTW #65

This week’s review starts with a couple of follow ups on early posts. Wage and Hour Counsel reports on an 11th Circuit decision discussing the FLSA’s outside sales exemption (see Do you know? The FLSA’s exemptions for salespeople), and KnowHR provides some tips on drafting a snow day policy (see A primer on inclement weather policies)

The Delaware Employment Law Blog posts a very useful PowerPoint from a recent FMLA presentation.

The Workplace Prof Blog [courtesy of Slate] reports on what may be the world’s worst HR department.

Human Rights in the Workplace gives some more tips on the use of social networking tools in hiring.

Evil HR Lady offers some information on how to deal with ill employees who are being laid off.

The Business of Management provides advice on handling employees and confidential information.

The Connecticut Employment Law Blog uses Joe Torre’s book as a springboard to talk about non-disparagement clauses.

Ohio Practical Business Law writes a primer on tortious interference.

The ChamberPost reports on a new academic study which that makes the case against the Employee Free Choice Act.