Maybe Microsoft is reading the blog

Yesterday I reported on Microsoft’s gaffe in overpaying severance to laid-off employees. Caught in a potential public relations maelstrom, Microsoft has relented. It issued the following statement yesterday:

Last week, 25 former Microsoft employees were informed that they were overpaid as a part of their severance payments from the company. This was a mistake on our part. We should have handled this situation in a more thoughtful manner. We are reaching out to those impacted to relay that we will not seek any payment from those individuals.

Cnet has the rest of the details.

Do you know? Continued health benefits under COBRA

Last week, the federal government mandated a 65% employer-sponsored subsidy of employees’ health insurance premiums under COBRA for those employees involuntarily severed from employment between September 1, 2008, and December 31, 2009.

Do you know? What is COBRA, who and what does it cover, and what does it require?

“COBRA” stands for the Consolidated Omnibus Budget Reconciliation Act of 1986. It covers employer-sponsored group health plans of businesses that employed at least 20 employees (both full-time and part-time) on more than 50% of its typical business days in the previous calendar year. COBRA only applies to group health plans. It does not cover other type of employer-sponsored plans, such as disability or life insurance plans.

It requires employers to offer continuation coverage to covered employees, their spouses, their former spouses, and their dependent children when group health coverage would otherwise be lost due to certain specific events. The following chart summarizes the various qualifying events under COBRA, which beneficiaries are eligible for continuation coverage, and for how long:

QUALIFYING EVENT	QUALIFIED BENEFICIARIES	MAX. PERIOD OF CONTINUATION COVERAGE
Termination for reasons other than gross misconduct) or reduction of hours of employment	Employee Spouse Dependent Child	18 months
Employee enrollment in Medicare	Spouse Dependent Child	36 months
Divorce or legal separation	Spouse Dependent Child	36 months
Death of employee	Spouse Dependent Child	36 months
Loss of “dependent child” status under the plan	Dependent Child	36 months

 

Employers may require individuals who elect continuation coverage to pay the full cost of the coverage, plus a 2% administrative charge.

When a qualifying event occurs, employers must provide the employee or other beneficiary a notice describing their rights under COBRA and a form under which they can elect whether to continue group health coverage under COBRA.

Note that Ohio has its own mini-COBRA law, which requires the extension of COBRA benefits for 6 months to employers of as few as 10 employees.

Microsoft gaffe illustrates importance of administration of severance programs

For today’s worker, there is perhaps nothing more terrifying than being told that you are being laid off. The companies that can soften the blow with severance often do so. Imagine, though, that you have just been laid off, and receive in the mail from your former employer a letter telling you that your severance pay was miscalculated and that you have to return some of it. That is exactly what happened last week to a group of employees recently laid off by Microsoft.

The letters advise of the administrative error and the severance overpayment, and request repayment of the overage within 14 days. The letter does not spell out what consequences one could suffer by ignoring the request and keeping the extra cash. The legal fees in brining a lawsuit to collect each overpayment probably outweigh the amounts of the overpayments by several times, thus making legal action against the individuals unlikely. But, one never knows.

What a nightmare for Microsoft. It is unknown how many of the 1,400 laid-off employee were overpaid. Assume, however, that every employee was overpaid two weeks at an average salary of $1,000 per week. That mistakes would equal a potential $2.8M nut. The question for Microsoft is whether that amount of money (whatever it is) is worth the awful publicity that is being generated by the appearance of kicking these employees when they are down.

So, what lessons can other employers learn from Microsoft’s mistake?

1. Layoffs are time and paper intensive. They are often put together quickly under tremendous time constraints. They are also paperwork intensive. Decisions need to be made who to lay off, how and when to communicate the layoff, whether the layoff appears discriminatory by the demographics of the included employees, and whether to pay severance and if so how much. If releases are sought they must be drafted, and, very importantly, for workers over 40, OWBPA disclosures must also be drafted. In other words, layoffs are prone to mistakes. Take the time to make sure they are done properly in every aspect. It is much easier to do a layoff correctly than undo it when a mistake is made.

2. Especially in 2009, layoffs are very sensitive for employees. They must be delicately handled. How employees are told the news goes a long way in determining whether they will sign a release or go talk to a lawyer.

3. If a mistake is made, equal care should be taken in how to communicate that mistake to employees. If you ask for reimbursement of an overpayment, it is not a bad idea to actually show how the overpayment was calculated. Think about it. Are you more likely to send a check in response to a letter that simply says we overpaid you, or explains with detail how the overpayment happened?

My advice to Microsoft would be simple – you made the mistake, and you asked for the money back. Even if nary and employee reimburses you, I would chalk this mistake up to a lesson learned in how to handle layoffs and drop the issue.

[Hat tip: The Boy Genius Report]

WIRTW #67

Fellow blogger Teri Rasmussen, at her Ohio Practical Business Law blog, has compiled an exhaustive list of every Ohio-based legal blog. Thank you, Teri, for considering my little project one of the top 3 legal blogs in our state. The compliment is appreciated.

To follow up my post from yesterday on employers’ federal court successes in discrimination cases, the California Employment Law Report wonders if this trend will lead to the filing of more wage and hour cases, where employees enjoy better success.

Along the same vein, Gruntled Employees gives employers the lowdown on how to lose a wage and hour case.

Meanwhile, the Connecticut Employment Law Blog gives some suggestions on how to limit liability risks from layoffs.

The Delaware Employment Law Blog examines layoffs from the perspective of pregnant employees.

The Business of Management tries to put a cost on smoking cessation programs.

The Trade Secrets Blog discusses how many dollars trade secret misappropriations cost businesses last year.

Today’s Workplace talks about workplace harassment of teenagers.

Washington D.C. Employment Lawyer Update provides information on the Family-Friendly Workplace Act, which would amend the Fair Labor Standards Act to allow private employers to award comp time in lieu of overtime. For more on this issue under the current wage and hour laws, see Do you know? “Comp” time in lieu of overtime.

Finally, Death by Email offers some pointers on how to use Facebook and other social networking sites. The advice – consider the following three questions before posting something on Facebook: “Would you be upset if your mother saw it? Would you be upset if the most nefarious person you ever heard about saw it? Would you be upset if it was on the front page of USA TODAY?” This advice hold true for anything you write, whether it’s posted online, in an email, or in an internal document. If you wouldn’t want it read by a judge, read to a jury, or printed on the front page of the newspaper, don’t commit it to writing.

Documentation is key to dismissal of discrimination cases

While the laws under which employees can bring lawsuits are expanding, employees’ successes continue to retract, at least in federal court. Consider the following statistics, culled from an article in today’s Wall Street Journal on employers’ degree of success in federal court cases.

• From 1979 through 2006, federal plaintiffs won 15% of employment discrimination cases, as compared to a 51% success rate in all other civil cases.

• 12.5% of federal employment discrimination cases are terminated via summary judgment, with employers filing 90% of those motions. By comparison, only 3% of contract cases and 1.7% of personal-injury and property damages cases were summarily dismissed.

The explanation of U.S. District Court Judge David Hittner as to why employers enjoy this level of success in employment cases is very insightful: “Companies often have an extensive record that this [employee] was not doing their job well and that is the reason for the termination.”

Employers should heed Judge Hittner’s words. Success in discrimination cases is related to the employer’s ability to prove that it had a legitimate reason for the employment action taken. That reason will be much more believable, and much less likely to be criticized, if it is well-documented. Courts often remind us that they do not sit as super-personnel departments and will not second-guess employers’ reasoned business decisions. By having a historical paper trail to support all employment decisions, employers have taken the crucial first step toward the dismissal of any later challenges.

Five action points when your company is sued

Over the course of the past years, I’ve written a lot about best practices to prevent employee lawsuits. The fact remains, though, that no matter how good a company’s HR practices are, and no matter how proactive a company is with its legal compliance, a certain percentage of terminations and other employment decisions will turn into lawsuits. It is the simple the cost of doing business in 2009, especially as the economy worsens and more employees look to judges and juries for assistance.

The following are five things a company should be actively thinking about when it receives the inevitable lawsuit:

1. Relevant documents should be identified and preserved. Employment lawsuits are not as document intensive and some other disputes in which businesses are involved. Nonetheless, the documents are crucial. They provide a roadmap to the justification for the termination or other employment action, and the reasonableness of the employer’s actions. Key documents (personnel files, handbooks, other policies, investigative reports, emails, and other communications) should be gathered and set aside. Also, a litigation hold should be put in place to ensure that no relevant documents are accidentally destroyed.

2. Under Ohio’s discrimination law, managers and supervisors can be personally liable for their own individual acts of discrimination. Often, they are sued in their individual capacity along with the company. Potential conflicts of interest among any individual defendants and the company must be evaluated very early in the case to ensure that conflicts of interest do no exist. If they do, one attorney cannot represent all defendants. If conflicts are not identified until well into the case, the lawyer may have to withdraw, which could irreparably damage the defense.

3. Fight the urge to take it personally. When an ex-employee claims discrimination, companies can lose sight of the fact that lawsuits are part of doing business. Employer often shift into attack mode because they are accused of being bigots. There is a huge difference between aggressively defending a case and attacking for the sake of attacking. The former is smart strategy; the latter often leads to greater costs by losing focus. It also risks taking action that could be viewed as retaliatory and bring further claims. Extra care must be taken when the plaintiff is current employee, as opposed to an ex-employee.

4. If your company has Employment Practices Liability Insurance, timely file a claim with the insurer. If you have purchased a rider that permits you to select counsel, make sure you enforce that right. If you have not purchased that protection, consider having a candid conversation with the insurance company about the counsel they will choose for you.

5. Hire experienced employment counsel to defend the claim. Employment law is highly specialized. Retaining counsel that knows that ins and outs of this area of law is the best way to keep costs down as much as possible, while at the same time doing everything possible to aggressively defend the company.

Do you know? Agreements cannot waive future claims

Do you know? One of the mistakes that I see made over and over again in agreements I review is waivers of future claims. Take, for example, Hamilton v. General Electric Co. (6th Cir. 2/12/09), in which an employee had signed a “last chance agreement.” In exchange for reinstatement following an earlier termination, the employee agreed that he would not file legal action over any future termination. The 6th Circuit found that promise unenforceable because it amounted to a release of future claims.

For a waiver and release of claims to be valid, it only can release claims based on past conduct, and not future claims: As explained by the 6th Circuit in Adams v. Philip Morris, Inc.:

An employer cannot purchase a license to discriminate. An employment agreement that attempts to settle prospective claims of discrimination for job applicants or current employees may violate public policy … unless there were continuing or future effects of past discrimination, or unless the parties contemplated an unequivocal, complete and final dissolution.

If you are using any agreements for employees (such as severance agreements in connection with layoffs), be careful to ensure that they are not seeking to waiver any claims based on future conduct.