First Impression: WPA, ministerial exception

In an issue of first impression, the Michigan Court of Appeals held the "ministerial exception" may be applied to WPA claims involving a religious institution and a "ministerial employee," and the trial court properly granted summary disposition as to plaintiff's WPA claim in favor of the defendants.

Also, based on the record, the court held the trial court did not err in determining consideration of the relevant factors established plaintiff was a ministerial employee and defendants were entitled to summary disposition of her CRA claim.

Plaintiff, a teacher, alleged violations of the CRA and the WPA after her contract was not renewed for the 2005-2006 school year. Regarding the first factor used in determining if a plaintiff was a ministerial employee, the court found no error in the trial court's conclusion plaintiff's duties were primarily religious, despite the fact she taught four mathematics and two religion classes in her last year of teaching. She stated she incorporated her religious teachings into her mathematics lessons. As to the second factor, plaintiff's teaching of religion classes and her involvement in planning masses and preparing students for confirmation and reconciliation services clearly had religious significance. Concerning the third factor, the trial court found plaintiff's position was primarily religious because, as a teacher of religion, she was involved in proselytizing on behalf of the Church. The court agreed. As the trial court noted, educating and indoctrinating the children was important to and furthered the purposes of the Church. The court held the fourth factor presented a closer question, given plaintiff did not assume a liturgical role within the entire congregation. However, she was intimately involved in liturgical planning of worship services, as well as confirmation and reconciliation services, for students. Further, her role as a religion teacher involved propagation of defendants' doctrine to students, which included guidance in worship services and rituals. The court noted some claims by ministerial employees are not necessarily foreclosed by the ministerial exception, but none of those exceptions applied because plaintiff's WPA claim alleged retaliation by termination.

The case represents a further setback for employees and demonstrates that the judiciary charged with interpreting the law is just as important as the legislature in shaping employee rights and expectations, as well as the hurdles for employees in pursuing those expectations when they are created.

Weishuhn v. Catholic Diocese of Lansing. (Michigan Court of Appeals) No. 07-72277 (Shapiro, J., joined by Meter and Borrello, JJ.)

State of the Union: Employment Law

Like most employment law observers, I thought that the election of Obama was likely to usher in a period of new employment legislation. I underestimated how much was on Congress's, and the President's, plate. So far, the only law to be enacted occurred early in the Obama administration: Lilly Ledbetter Fair Pay Act.

In light of the State of the Union speech, it seems unlikely that any employment legislation will be enacted in 2010, and was clearly not a priority. The president mentioned only three employment law issues: (1) greater enforcement of civil rights laws against employers that discriminate; (2) greater enforcement of the Equal Pay Act to ensure equal pay for women; and (3) immigration reform. The first two involve enforcement of laws that already exist. The third involves a possible law that has little chance of passing.

Certainly, health care is the most important benefits-related legislation.

There are plenty of pending real employment legislation proposals that could be passed. The President admonished Democrats to govern and not run for the hills; he admonished the Republicans to govern and not merely block legislation. Mid-term elections occur this year so the passage of any controversial laws like EFCA is highly unlikely, especially when all the political chips are in on health care.

btw, did anybody see Justice Alito furiously shaking his head and mouthing 'not true' as Obama took a swipe at the Supremes for overturning campaign finance law last week?

Mission: Improbable

Heard on the TMZ grapevine: Brittany Murphy's husband, Simon Monjack, says Warner Brothers is responsible for the death of his wife and he plans to file a wrongful death lawsuit against the company.

Apparently Monjack told The Daily Beast Murphy was devastated after reportedly losing a role in the sequel to "Happy Feet." Monjack believes losing the movie caused Murphy to have a heart attack.

The L.A. County Coroner has not released the cause of death.

I am not a tort attorney, but wrongful death seems a bit farfetched. Wrongful termination? Maybe that wouldn't net as much $$$ as a lead theory. I don't think I'll be following this case, but it sounds like a cautionary tale for employers of elite employees who have the wherewithall to muster even what looks like a speculative suit. I'm guessing that severance agreements aren't SOP in these types of situations, whatever 'this type of situation' could be.

Quiz: Are Salaried Employees Entitled to Overtime?

Yes, salaried employees are often entitled to overtime! People frequently assume that overtime pay is only for hourly employees, but this is wrong. Being paid a salary is not a factor – what matters most is the kind of work you do.

A salaried employee, like an hourly employee, must be paid overtime unless he or she meets the test for exempt status as defined by federal laws. So – the easy answer to this common question is that being paid a salary is not a factor. Do not assume that you are not entitled to overtime pay just because you are paid a salary--you may be entitled to overtime pay.

ADAAA and the 'Interactive Process': What Employers should be doing now

With the enactment of the ADA Amendments Act of 2008 (ADAAA) and the new expansive interpretation of “disability,” employers will more frequently face the issue of whether an applicant or employee can be “accommodated.”

The determination of whether and how to accommodate an employee involves engaging in an “interactive process” with the employee. The interactive process is a dialogue
between the employer and employee designed to identify the precise limitations resulting from the disability and the potential reasonable accommodations that would enable the employee to perform the essential functions of his or her job.

The law is clear that employers have an affirmative duty to engage in this dialogue to explore whether there are actions the employer can take so the employee can continue to work. What is less than clear, however, is when this duty arises.

Obviously, the duty to engage in the interactive process is triggered when an employee requests an accommodation; however, the duty can be triggered in several less obvious ways. For example, employers are advised to initiate the interactive process when any of the following occurs: an employee presents with work restrictions or is limited to “light duty” work; an employee (or his or her representative) informs you that he or she is suffering from an impairment or
disability; or an employee appears to have difficulty performing his or her job.

Once an employer has knowledge of any of the above, it should promptly meet with the employee to determine whether the employee can be reasonably accommodated. Employers can demonstrate good faith in attempting to provide a reasonable accommodation by doing the following:

• Analyzing the job at issue and identifying its essential functions and purpose;
• Meeting with the employee who requests an accommodation and asking the employee what might help him or her;
• Showing some sign of having considered the employee’s request; and
• Offering and discussing available alternatives if the employee’s request is too burdensome.

Every step of this interactive process should be well documented so the employer can, if necessary, defend itself against charges of discrimination. Employees are not necessarily entitled to the accommodation of their choice, but employers should explore all available alternatives that would enable the employee to continue working without imposing an undue hardship on the employer’s operations.

Employers must be mindful that disability and reasonable accommodation issues must be analyzed on a case by case basis – there is no “one size fits all” analysis--a policy, which, unfortunately, is conducive to both litigation and relatively intense effort to prevent litigation.

Now is a perfect time to review job descriptions and consider the process to be used
when an individual requests an accommodation or submits work restrictions. Given the recent changes in the law, employers should consider reviewing past denied requests if the employee is still failing on the job. Managers and supervisors should also be instructed to consult with Human Resources when an employee seeks an accommodation and to refrain from taking immediate action to either refuse or grant
the request.

caring about your standard of care, again

Last Wednesday, petitioners (Xerox’s ERISA plan administrators) contended that the Second Circuit “got it backwards” when it afforded deference to the district court’s – but not the Plan Administrator’s – interpretation of the company’s ERISA plan.

This case continues a recent trend of the Court taking on ERISA cases that pose very finite issues, ones that aren’t likely to recur frequently but that pose the opportunity to present some sense of what are the outer guidelines of ERISA litigation - how broad is deference, does it apply when there is a conflict, what kind of conflict matters, how much room does the administrator get to work with plan language, and what is the proper balance between the plan administrator and the district courts (and eventually the circuit courts) in deciding factual and plan language issues in ERISA cases. Much of this goes back to Firestone, and the universe governing ERISA cases that it spawned; what we are likely to see are cases like this one being decided in a manner intended to reign in the outer limits of the universe spawned by Firestone, which means I call this one for the participants, with a finding that the plan administrator gets deference only the first time around.

Many of the justices seemed to follow what the Chief Justice characterized as “one strike and you’re out” approach, which seemed to be the trend of the Seventh Circuit in Gross as well.

The upshot is, again, like Gross, the 'due deference' that a court is likely to give a plan administrator is not going to be much. Plan administrators are going to need solid cases in making their determinations and not rely on 'arbitrary and capricious standards' to do the work for them.

Conkright v. Frommert (08-810);

BLS report: a sign of the times

The Bureau of Labor Statistics issued a press release Friday indicating union membership declines during 2009.

In 2009 union membership dropped from 12.4% to 12.3%, down by 771,000 to 15.3 million.

Private sector: Down from 7.6% to 7.2%.

Public sector: Up from 36.8 to 37.4.

The upshot: for the first time ever, more public sector employees (7.9 million) belonged to a union than did private sector employees (7.4 million), although there are 5 times more wage and salary workers in the private sector.

The Crystal Ball: ADA, Breastfeeders, GINA

Usually I like to focus on current issues, but just as I emphasize to clients to be proactive, so, too, it's good for lawyers to think proactively about issues that might affect people in the future. One of those increasingly likely concerns are classes of employees that will receive protection under the law.

ADA Amendments

On September 23, 2009, the Equal Employment Opportunity Commission issued proposed regulations under the ADA Amendments Act of 2008 (ADAAA) which was effective January 1, 2009. The period for submitting comments to the proposed regulations has expired. The proposed regulations leave no doubt that vast numbers of heretofore "non-disabled" employees and applicants will now fall under the protection of the ADAAA. An individual is now disabled if any one of an expansive number of "major life activities" is limited or restricted – and not necessarily "significantly" limited. "Mitigating measures" such as medication which controls high blood pressure, high cholesterol or diabetes or prosthetic devices or hearing aids can no longer be considered when making this determination. Further, the proposed regulations clarify that individuals claiming to be protected because they were "regarded as" being disabled no longer have to prove that an employer regarded them as substantially limited in a major life activity. The foregoing major changes to federal disability law will greatly increase the number of employees (and applicants for employment) entitled
to protection under the ADAAA.

GINA

The employment provisions of the Genetic Information Nondiscrimination Act of 2008 (GINA) became effective on November 21, 2009. Employers with 15 or more employees now are prohibited from discriminating against employees or applicants based upon genetics or genetic information. Under GINA, employers are prohibited from using genetic information in making employment decisions, intentionally acquiring genetic information or disclosing genetic information. "Genetic information" is defi ned expansively under GINA and includes not only information about an employee's genetic tests and genetic tests of family members, but also includes information related
to family medical history. Therefore, information that is routinely shared at some workplaces by employees regarding family member illnesses/medical conditions may subsequently give rise to a claim of genetic discrimination should the employee subsequently be laid off or terminated. These claims will no doubt be included in employment discrimination lawsuits.

Sexual Orientation and Gender Identity

Federal legislation prohibiting discrimination on the basis of sexual orientation and gender identity likely will pass this year. Proposed federal legislation would add sexual orientation and gender identity or expression to the list of protected
classes under Title VII of the Civil Rights Act of 1964, as amended, and would apply to employers with 15 or more employees.

Breastfeeders

Proposed federal legislation, dubbed the Breastfeeding Promotion Act of 2009, would add lactating mothers to the list of protected classes under Title VII of the Civil Rights Act of 1964, as amended. The proposed legislation would make breastfeeding
and expressing breast milk protected activities. Additionally, the proposed legislation requires employers to provide lactating mothers reasonable break times to express milk and a private place, other than a bathroom, to express milk. Versions of proposed federal health care also contain language requiring
breaks for lactating mothers. Similarly, about half of the states have passed or proposed legislation encouraging or requiring employers to provide breaks to lactating mothers.

With so many protected classes, it may be increasingly difficult to find somebody who isn't protected in some manner. From a practical policy perspective, I think this moves us closer and closer to a 'just cause' standard when considering discharging an employee, and an increasingly 'inflexible' labor market.

A much needed boost for lobbyists

The Supremes have struck down campaign spending bans on corporations--the holding stuck down a prohibition against firms airing their own campaign ads, but left in place a prohibition against direct contributions to a candidate.

The next question is whether/when the same principle is applied to prohibitions against union spending. There is no legal difference between the two and I expect courts will hold now that broad bans on union spending are also unconstitutional. Unions obviously have to be careful not to use objectors' dues for political campaigns, but beyond that this appears to open the door significantly for both labor and management to pour more resources into the political process.

Just what we need...more money in politics!

Citizens United v. FEC, No. 08-205

Of Interest

The Supremes recently heard attorneys argue whether Section 301 of the Labor-Management Relations Act, which allows federal courts to hear lawsuits "for violation of contracts" between employers and labor unions, gave a court jurisdiction to hear a claim that the International Brotherhood of Teamsters interfered in contract talks between a California company and a Teamsters
local.

Granite Rock Co. counsel argues lower courts improperly denied the company an opportunity to pursue a tort claim against the IBT. He says the claim was "grounded" in the local union's collective bargaining agreement and therefore fell within the scope of Section 301.

IBT argues that allowing Granite Rock to pursue a tort claim under a statute that refers only to the enforcement of contracts would effect a "big change" in the framework that Congress has established. Major issues of labor law "such as ... economic weapons that parties can use should be decided by Congress through statute and by the National Labor Relations Board through the application of the statute."
But several justices question whether failing to allow such claims would leave
employers without redress for misconduct by international unions.

Granite Rock Co. v. Int'l Bhd. of Teamsters, U.S., No. 08-1214, oral
argument 1/19/10


The Supremes also denied review of a 401(k) plan fees case against Deere & Co. that has drawn a considerable amount of attention after the Seventh Circuit last year upheld the dismissal of fiduciary breach claims against Deere. Basically, the lower court found that providing a very expansive list of mutual funds for 401k participants, satisfied the plan administrator/employer's duty of fiduciary care to plan participants.

The denial of Supreme Court review comes as a surprise to many as the case has spawned a large-scale debate among ERISA practitioners, fiduciaries, and academics over the fiduciary responsibilities tied to the investment choices made for 401(k) plans. In my opinion, the Supremes passed up a good opportunity to offer some much needed guidance to the community.

Hecker v. Deere & Co., U.S., No. 09-447, cert. denied 1/19/10

Of Interest

The Supreme Court has granted certiorari on two issues pertinent to the concerns of this blog.

Ever wonder about the meaning of "prevailing party" under Section 502(g) of ERISA? The U.S. Supreme Court is about to take on this issue, perhaps as soon as April, in Hardt v. Reliance Standard Life Ins. Co., 09-448, a case from the Fourth Circuit. More details from the SCOTUS blog:

Issues: (1) Whether ERISA § 502(g)(1) provides a district court with discretion to award reasonable attorney’s fees *only* to a prevailing party; and (2) whether a party is *entitled* to attorney’s fees pursuant to § 502(g)(1) when she persuades a district court that a violation of ERISA has occurred, successfully secures a judicially ordered remand requiring a redetermination of entitlement to benefits, and subsequently receives the benefits sought on remand.

Also, last Friday, the Supremes granted cert on Rent-A-Center West v. Jackson (09-497). An employee sued for race discrimination and argued that the predispute arbitration agreement he had signed was unconscionable. A provision in the agreement gave arbitrators exclusive authority to resolve disputes over enforceability of the agreement. The Ninth Circuit ruled 2-1 last September that a court, not an arbitrator, should have ruled on the issue of unconscionability.

Quality Control at the NLRB; Happy MLK Day!

The NLRB's quality committee formed by the General Counsel has recently issued a 54 page report on best practices for handling unfair labor practices and representation hearings. The committee was formed originally in February 2004 and issued a report after each fiscal year detailing lessons learned from the review process and litigation. It decided to consolidate those earlier reports in this large report for training and guidance purposes. Three areas are also covered that were not in earlier reports: the importance of maintaining the appearance of neutrality, interviewing witnesses of a charged party that refuses to give Board affidavits, and improper retention of a showing of interest in the represenation case file after it has been closed. The General Counsel has encouraged managers and supervisors to use this report and provide a copy to new agents, so this is definitely worth a review if you have any Board practice and are wondering how the Board may approach various issues.

And...Happy MLK Day!

Seventh Circuit applies Gross

The Seventh Circuit overturned its precedent and held that a plaintiff in an ADA case alleging that she was discriminated against by an employer who regarded her as disabled had to demonstrate that the perceived disability was the but-for cause of the adverse employment action taken against her.

The court reasoned that the Supreme Court in Gross v. FBL Fin. Servs., had essentially held that the importance that the court attached to the express incorporation of the mixed-motive framework into Title VII suggests that when another anti-discrimination statute lacks comparable language, a mixed-motive claim will not be viable under that statute. The upshot is that unless a statute provides otherwise, demonstrating but-for causation is part of the plaintiff’s burden in all suits under federal law.

While the ADA explicitly incorporates the remedies in Title VII available for disparate impact cases, it did not expressly incorporate the codification of mixed motives liability in 42 U.S.C. § 2000e-2(m). Because the plaintiff did not demonstrate that the plaintiff's perceived disability was the but-for cause of her termination, the district court's decision that the defendant was liable for discrimination had to be reversed.

Stay tuned: we'll see how ADA amendments may alter this result in the future.

Serwatka v. Rockwell Automation Inc., No. 08-4010 (2010)

An ounce of prevention and the FLSA

The number of FLSA collective actions had an uptick in 2009, along with alot of other employment litigation--predictable as the workforce encounters an economic crunch... This trend will undoubtedly continue in 2010.

In wage and hour class actions, recent cases of note include Foot Locker Retail Inc., Vermont state employees, H&R Block, AT&T call center workers, Cemex Inc. and First Residential Mortgage Network Inc.

Given the increase in FLSA collective action activity, all employers should be mindful of their classifications of employees and pay practices. As usual, an ounce of prevention is worth a pound of cure.

Employer should spend a little money up front to (1) confirm that job descriptions truly describe exempt executive, administrative, professional, computer professional or outside sales positions; (2) confirm that employees are actually doing what their job descriptions say they are supposed to do; and (3) ensure that exempt employees are being paid at least the minimum qualifying salary. In addition, to avoid other potential wage and hour litigation, employers should confirm that non-exempt employees are recording all hours worked and that individuals that are treated as independent contractors are not really employees.

As the economy eventually rebounds and temporary workers or independent contractors are hired to fill gaps before permanent positions are created, employers are particularly advised to handle these groups with care.

Supremes not ready for Prime Time

In a per curiam opinion, the Supremes voted 5-4 to stay the broadcast of the Proposition 8 trial in San Francisco. The heart of the underlying suit is whether Proposition 8 violates the due process and equal protection clauses of the Constitution.

The dissent was written by Breyer, and joined by Sotomayor, Stevens, and Ginsburg.

Looking into my crystal ball, watch for a decision on the merits of the case to break down the same way. Anybody want to take the over or under on that one?

Christmas comes late for Plan Administrators

The DOL has finally published model notices concerning the extended COBRA subsidy. The notices are 'Updated General Notice,' 'Premium Assistance Extension Notice,' and 'Updated Alternative Notice.' ARRA, as amended by the Department of Defense Appropriation Act, 2010 (2010 DOD Act--yes the COBRA subsidy was passed as part of a defense bill!), mandates that plans notify certain current and former participants and beneficiaries about the premium reduction. The Department created model notices to help plans and individuals comply with these requirements. Each model notice is designed for a particular group of qualified beneficiaries and contains information to help satisfy ARRA's notice provisions, including those added by the 2010 DOD Act.

The notices are available now on the DOL website.

Separately, the DOL announced the publication of a final rule to protect employee contributions deposited to small pension and welfare benefit plans with fewer than 100 participants: the safe harbor is 7 days.

Currently, employers of all sizes must transmit employee contributions to pension plans as soon as they can reasonably be segregated from the general assets of the employer, but no later than the 15th business day of the month following the month in which contributions are received or withheld by the employer. The latest date for forwarding participant contributions to health plans is 90 days from the date on which such amounts are received or withheld by the employer.

The new rule is published in the January 14, 2010 Federal Register.

Rule 12(b)(6)? Tastes just like Rule 56!

Suja Thomas's new article argues that recent Supreme Court cases have made it possible for Rule 12(b)(6) to be used the same way as Rule 56, even earlier in litigation. Of course, Rule 56 is standard operating procedures these days for bouncing employment discrimination claims--an evolving use of 12(b)(6) could be used to save more money and time. I think as a practical matter a judge is going to feel better about a Rule 56 motion after discovery etc. rather than shoot from the hip in a 12(b)(6), although in the short run with claims of varying quality on the increase, this approach is worth thinking about a little more, especially with marginal claims. Her article is The New Summary Judgment Motion: The Motion to Dismiss Under Iqbal and Twombly. Here's her abstract:

Civil procedure scholars have extensively discussed the new 12(b)(6) standard articulated by the Supreme Court in Ashcroft v. Iqbal and Bell Atlantic Corp. v. Twombly. In this discourse, however, an interesting development has not been explored. The standard for the motion to dismiss has evolved in such a way as to make the motion to dismiss the new summary judgment motion. Despite different words in Federal Rules of Civil Procedure 12(b)(6) and 56 and no discovery before dismissal under 12(b)(6), the new 12(b)(6) dismissal standard now tracks the standard for summary judgment. Moreover, the motion to dismiss under the new summary judgment-like standard may have effects similar to those experienced under summary judgment, including a significant use of the procedure by courts, a related increased role for judges in litigation and a corresponding increased dismissal of employment discrimination cases. This essay describes the similarities between the motion to dismiss and the motion for summary judgment, and also explains how, as a result of these similarities, Swierkiewicz v. Sorema may no longer be good law. This essay further proposes that differences between the motions, including discovery, cost and the role of the courts, call into question the propriety of the changes under Iqbal and Twombly.

DOL COBRA Subsidy information released

In the waning days of 2009, the COBRA extension was passed, causing a bit of a kerfuffle in terms of compliance questions for eager-beaver administrators that had already made plans for New Year's. At last, the United States Department of Labor updated its website yesterday to include new information about the COBRA subsidy extension that was passed at the end of 2009.

Among the new documents:

•Updated Fact Sheet
•FAQs for employees and employers
•A new job loss poster
•A new flyer for employees
•A new flyer for employers
•A new flyer for employees on the application for review

Some of the forms have yet to be updated so employers should either seek legal advice if they need to send out such forms or stay tuned from the Department of Labor for updates.

the case for revisiting workplace policies

Recently, the Supremes agreed to hear a case that will permit it to provide guidance to employers about their right to monitor its employees' electronic communications, at least in the public employer context. The Supremes will review a Ninth Circuit finding that a city police officer had a reasonable expectation of privacy in personal text messages that were sent from his city-issued pager.

Like most employers, the City had a written electronics communications policy that expressly prohibited personal use of its computers and notified employees that they had no expectation of privacy with respect to any communications using the city's computer systems. The City's policy, however, did not make clear that this policy applied to its police officers' pagers or to text messaging. Instead, the city informally permitted the use of pagers for personal reasons. After reviewing transcripts of messages, the city was shocked, shocked to learn the pagers were used for personal purposes. Upon learning that their texts had been reviewed, Sergeant Quon sued the city under the Fourth Amendment and the Stored Communications Act.

The Ninth Circuit's decision seems contrary to the general trend permitting employers to monitor employees' emails on employer computers once they put employees on such notice. But the City's electronics communications policy did not explicitly address text messages. Then, the City permitted an informal practice to develop. By not updating its electronics communications policy and by permitting informal practices to develop, the City let the horses out the barn door.

This case seems pretty straightforward under present law--the City should have revisited its policies. Quon is likely going to get a Phyrric victory here. So why grant cert.? Maybe to provide a clue to provide guidance in this context. Federal district courts continue to reach conflicting results when addressing whether employees waive the attorney-client privilege by communicating with a personal attorney using their employer’s electronic resources. The upshot is that with yet another federal court recently finding no waiver, employers should revisit and revise their electronic resources policies to increase their chances of winning the waiver battle.

Again, as I stated recently, it's important for employers to have workplace policies in place before a problem develops, and to follow those policies consistently.

Convertino v. United States DOJ, 2009 U.S. Dist. LEXIS 115050 (D.C. Dec. 10, 2009)
Alamar Ranch, LLC v. County of Boise, 2009 U.S. Dist. LEXIS 101866 (D. Idaho Nov. 2, 2009)
Quon v. Arch Wireless Operating Company, Quon v. Arch Wireless Operating Company, Inc., Ninth Circuit, No. 07-55282 (2009)

don't be penny wise and pound foolish

Here's a useful article written for the small business owner about when you should call a lawyer.

http://www.microsoft.com/smallbusiness/resources/finance/legal-expenses/7-good-reasons-to-call-a-lawyer.aspx#goodreasonstocallalawyer

It lists starting a business, collecting debts, and resolving business disputes. A theme is that it makes more sense to get legal help from the beginning, rather than wait for something to go wrong before seeking advice. It is almost always less expensive to get help up front, because once the horses are out the barn door, it is much more difficult to corral them.

There are also employment-specific reasons to get legal help at an early stage: firing someone, offering severance benefits, and drafting or evaluating non-compete agreements. Another is employee handbooks. No matter what you may hear, in most states drafting an employee handbook is not a game for do-it-yourselfers. Don't be penny wise and pound foolish in these respects.

caring about your standard of care

One of the enduring sources of work for employee benefits attorneys are clients who fail to follow their own procedures, or follow them in a sham manner. This can happen with employee policies and procedures in promotion, hiring, or administration, and in the administration of employee benefits.

The Seventh Circuit recently issued a rare decision that overturns a decision made by a Plan administor, which ordinarily enjoys an 'arbitrary and capricious' deferential standard of review. The Court focused on tiny details of the administrator’s handling and the the medical review relied on by the administrator, finding that a flaw in the medical review warranted overturning the denial. This is far different from a 'some evidence' standard. The modern trend is to test the quality of that evidence, followed by a decision as to whether the evidence is of a sufficient quality, and not just quantity, to support the administrator’s decision.

Such nit-picking adds to instability in practice in order to promote equity. You would think that an 'arbitrary and capricious' would preserve your client's decision. The upshot is that practicioners increasingly need to treat benefit denial appeals with as much tender loving care, as, say, dismissals in the employment context. Document, document, document, and follow your procedures!

Majeski v. Metropolitan Life Insurance Co., No. 09-1930 (7th Cir. Dec. 29, 2009)

holiday reading and non-spousal rollovers

One of the great things about the holidays is catching up on reading, like the IRS Retirement News for Employers.

Non-spousal rollovers were not available before the new Pension Protection Act provision, which became effective for distributions made after December 31, 2006. After PPA, plans were permitted to allow non-spouse beneficiaries the option of rolling over distributions, but plans were not required to provide that option. The Worker, Retiree and Employer Recovery Act of 2008 makes the non-spousal rollover provision mandatory for plan years beginning after December 31, 2009.

Plans will have to offer the rollover alternative to non-spouse beneficiaries receiving plan death benefits. Plans are required to offer a non-spouse beneficiary the option to do a direct rollover (a trustee-to-trustee transfer) of an eligible rollover distribution to an inherited IRA.

Plan administrators are required to give all non-spouse beneficiaries a written notice explaining the direct rollover rules and the mandatory 20% income tax withholding rules for distributions not directly rolled over. This explanation should be provided to the non-spouse beneficiary no earlier than 180 days and no later than 30 days before making the distribution. Just in time for the holidays, sample notices to non-spouse beneficiaries are available in IRS Notice 2009-68.

So as we start out 2010, add the stocking stuffer of model notice 2009-68 to your plan administration toolkit.

And, if you have not looked at the new required amendments for 2010, consider invitign your legal counsel to lunch for information about other law-related gifts for your Plan.

plaintiffs check your guts

On December 23, 2009, the Sixth Circuit ruled in a case of first impression that where defendants in a labor dispute persuaded the federal district court to dissolve a state-court temporary restraining order (TRO), they may recover damages, fees and costs under section seven of the Norris-LaGuardia Act, 29 U.S.C. sec. 107, even though no injunction bond was imposed on plaintiffs.

It's a principle of the Federal system that the state courts are always open. In this case, the plaintiffs obtained an injunction at the state court, but had their case removed to federal court. The defendants had the TRO dissolved. But who pays the fees and costs is the critical question.

The Sixth Circuit puts the burden on the plaintiffs, based on a policy argument: seeking a TRO involves a 'gut-check' that plaintiffs had better be willing to pay.

The problem is that in this situation it is clearly difficult for plaintiffs to estimate what the potential costs could be.

With this precedent, though, plaintiffs are going to have to have a bond in place going forward in this type of case.

Was plaintiffs' counsel in this case just 'too clever by half' in not originating the action in federal court in the first place--just to avoid the cost of a bond? Now the plaintiffs(?) are going to be out of pocket all the amounts up to the amount of the bond they should have obtained.


Michigan American Federation of State County and Municipal Employees v. Matrix Human Services, et al. (6th U.S. Circuit Court of Appeals)(Martin, J., joined by Rogers, J., and Reeves, J., sitting by designation) On appeal from the United States District Court for the Eastern District of Michigan.