NASA blasts off into employment law case

The United States Supreme Court recently granted cert a public employee privacy case which will consider whether NASA, a federal agency, violated the informational privacy rights of employees, who worked in non-sensitive contract jobs, by asking certain invasive questions during background investigations.

The Government is asking the Court to overturn the 9th Circuit decision which directed a district court to issue a preliminary injunction on behalf of contract workers at NASA's Jet Propulsion Laboratory (JPL) operated by the California Institute of Technology under a contract with the federal government. The Government maintains that the privacy expectations of the employees are minimal because they have are in the government employment context, these are standard background forms that the government is using, and the Privacy Act of 1974 protects this information from disclosure to the public.

The case was originally brought in 2007 by twenty-eight scientists and engineers employed as contractors at JPL on behalf of a potential class of 9,000 employees that NASA classifies as low-risk employees. Questions included in the background check ask about “any treatment or counseling” for illegal drug use, and forms issued to references seek “adverse information” about the workers' employment, residence, and activities regarding violations of the law, financial integrity, abuse of alcohol or drugs, mental or emotional stability, general behavior, and “other matters.”

This will be an interesting case for a number of reasons. First, it does not squarely fit into either the public employee drug testing cases (Von Raab & Skinner), nor does it focuses on a public employee's privacy rights in their physical belongings (Ortega). Rather, it focuses on an area of public employment constitutional law that has received less attention: the informational privacy rights of these employees. The Court has "hinted" at a constitutional right to informational privacy in two cases in the 1970s and then "never said another word about it." Judge Kozinski is his dissent from denial of rehearing en banc (citing Whalen v. Roe, 429 U.S. 589 (1977), and Nixon v. Administrator of Gen. Servs., 433 U.S. 425 (1977)).

Normally, because of the fact that the government is acting in its employer capacity, it would have more latitude to infringe on its employee's rights under the Fourth Amendment. This means that a balancing test is most appropriate. Such a test would balance the need of the employee for informational privacy against the needs of the government employer. In this case, it would appear that employees are seeking to protect confidential and potentially embarrassing personal information against the government's need to obtain information to protect and secure its federal facilities.

NASA v. Nelson, No. 09-530

Supreme Court considers oral complaints under FLSA

The U.S. Supreme Court has agreed to consider whether the anti-retaliation
provision of the Fair Labor Standards Act, which prohibits discrimination
against an employee who "filed a complaint," covers an employee who orally
complained to supervisors that the location of time clocks prevented employees
from being paid for time spent donning and doffing required protective gear.

Plaintiff, who was fired by Saint-Gobain Performance Plastics Corp. for
violating time-clock procedures, is asking the justices to overturn the Seventh
Circuit's June 2009 decision that he did not engage in protected activity under
the FLSA because he did not complain in writing. The statute's use of the
language "filed" shows that Congress intended employees to submit written wage
and hour complaints to be shielded from retaliation, the court said.

The Seventh Circuit denied Plaintiff's request for rehearing
en banc. The three dissenting judges asserted that the interpretation that the
FLSA's anti-retaliation provision does not cover oral complaints is "unique
among the circuits" and conflicts with the Labor Department's position.

Kasten v. Saint-Gobain Performance Plastics Corp., U.S., No. 09-834, cert.
granted 3/22/10

Form 5500 Reporting for 403(b) Plans Clarified

As § 403(b) plan administrators and plan auditors prepare to file the 2009 Form 5500 - which, for most plans, will be the initial annual report - the Department of Labor issued new guidance to clarify when certain annuity contracts and custodial accounts can be excluded.

Change in Reporting Obligation for § 403(b) Plans

IRC § 403(b) provides a tax-sheltered annuity program for public school employees, employees of certain tax exempt organizations, and certain ministers. Historically, these arrangements were treated as a collection of individual contracts or accounts controlled by the employee without the involvement of the plan administrator. However, this changed for tax years beginning in 2009, when § 403(b) plans - other than those qualifying as "governmental plans" or non-electing "church plans" - became subject to ERISA's general reporting requirements. As a result, plan administrators became obligated to report financial information regarding pre-2009 individual contracts and custodial accounts over which, in many cases, they had little knowledge. The new reporting also obligated § 403(b) plans with 100 or more participants to file audited financial statements, and obligated all § 403(b) plans to report the plan's aggregate financial information.

2009 FAB Relief

Recognizing the difficulties administrators would face in complying with the new reporting requirements the Department of Labor issued Field Assistance Bulletin 2009-02. For purposes of satisfying the reporting requirements, this FAB allows administrators to exclude annuity contracts and custodial accounts as part of the plan or as plan assets if:

The contract or account was issued to a current or former employee before 2009,
The employer ceased to have any obligation to make, and ceased making contributions to the contract or account before 2009: The rights and benefits under the contract or account are all legally enforceable by the individual owner against the insurer or custodian without involvement by the employer, and the individual owner is fully vested in the contract or account.

2010 Further Relief

In response to questions it received regarding the scope of this relief, the Department issued Field Assistance Bulletin 2010-01. Among the main clarifications are:

Involvement by the Employer - Discretion or Approval not Permitted. The new FAB makes clear that, although the relief under FAB 2009-02 would be available where the employer performs the limited function of making information available to the § 403(b) provider (e.g., reports employment status), the relief would not be available if the employer must consent to, or make discretionary decisions regarding enforcement of, the employee's rights under the contract. Prohibited approval would include, for example, where the employer must certify that the employee is eligible for distribution under the IRC, or must approve a hardship distribution or loan. Q&A-1.

Making Contributions - Loan Repayments Count. If an employer forwards employee loan repayments to the provider, the contract or account would not be eligible for the relief. Where the employee forwards the loan repayments directly to the provider, however, the contract or account would be eligible for the relief if the other requirements are satisfied. Q&A-2.

Large & Small Plans - Relief Applies to Both. The relief applies to large and small plans - both for determining what accounts are plan assets for purposes of the audit and for determining the plan assets to be reported on the financial statement. Moreover, it applies in determining the number of plan participants and whether the plan is a "large plan" subject to the audit requirements. Q&A-5.

Qualified Opinions - Department Will Not Reject Filing. The Department will not reject a Form 5500 filing where the plan's independent accountant issues a "qualified," "adverse" or "disclaimed" opinion if the opinion states that the sole reason for the designation is because pre-2009 contracts were not covered by the audit or included in the financial statements. Q&A-6.

Election to Exclude - Auditor's Role. While the administrator is responsible for determining whether the requirements for relief are met, the FAB makes clear that if the independent accountant discovers contracts were incorrectly excluded from the financial statements, the accountant is expected to alert the plan administrator. If the parties cannot agree, the independent accountant is expected to note the issue in the audit report. Q&A-7.

Post 2009 - Relief Applies. The relief under FAB 2009-02 applies to 2009 and later reporting years. Q&A-11.

Pre-2009 Contributions - Includes 2009 Contributions Attributable to 2008. Contributions attributable to 2008, but not deposited until 2009, would not make the account or contract ineligible for the relief. Q&A-13.

The FAB also addresses the regulatory "safe harbor" by which § 403(b) arrangements funded solely through salary reduction contributions are not considered employee pension plans - and, therefore, not subject to the reporting requirement. The safe harbor is set out in Labor Regulation § 2510.3-02(f). It requires (a) employee participation to be voluntary, (b) all rights under the contract to be enforceable only by the employee, (c) the employer to have only limited involvement, and (d) the employer to receive no compensation other than for expenses in handling salary reduction contributions. The FAB clarifies that the employer cannot, consistent with the safe harbor, appoint a third-party administrator to make discretionary decisions, and cannot itself retain discretionary authority to exchange or move funds from the § 403(b) provider. It can, however, select contracts where the provider is responsible for discretionary decisions. The arrangement generally must offer a choice of more than one § 403(b) contractor and more than one investment product.

Facebooking while working carries risks for employers

Last October, the Federal Trade Commission (FTC) issued guidelines stating that bloggers who offer endorsements must disclose any payments they have received from the subjects of their reviews or face penalties of up to $11,000 per violation.

The agency, charged with protecting consumer interests, had not updated its policy on endorsements in nearly three decades, well before the Internet became a force in shaping consumer tastes. Now, new rules attempt to make more transparent corporate payments to bloggers, research firms, and celebrities that help promote a product.

As the importance of social networking and blogging continues to grow in today’s increasingly Internet-dominated business world, the FTC has revised its Guides Concerning the Use of Endorsements and Testimonials in Advertising, published in the Federal Register at 16 C.F.R. Part 255.

These new guidelines address the application of Section 5 of the Federal Trade Commission Act, which prohibits unfair or deceptive acts or practices and unfair competition in or affecting commerce. If your company provides services or sells products and your employees are blogging about them or talking about them on their Facebook accounts, the presumption may be that they are doing so with the company’s support and for the company’s benefit. This could lead to liability for your company for false statements made by your employees under the Federal Trade Commission.

This is another reason to review your employee handbooks and review policy on social networking, especially if your company permits employees to Facebook during regular business hours.

Sixth Circuit errs on the side of Free Speech for public employees

In a surprise for free speech advocates, city police department employees fired after filing a report critical of the department may proceed with a lawsuit asserting their terminations violated the First Amendment and the Kentucky Whistleblower Act, the U.S. Court of Appeals for the Sixth Circuit rules in an unpublished opinion.

Writing for the 2-1 majority, Judge Clay says under precedent from the
Kentucky Supreme Court, the city of Jeffersontown was the former "employer" of
Melvin Kindle for purposes of the whistleblower law. Clay writes that the
district court had also erred in granting summary judgment as a matter of law
to the city on the First Amendment claim because Kindle's misconduct report was
on a "matter of public concern." Clay vacated and remandsed the case to the
district court for further proceedings.

Judge Guy dissents, writing that he would have certified the state law
question to the Kentucky Supreme Court, and that Kindle's report was on purely
internal personnel issues and not of public concern. There is nothing stunning or innovative about the majority or dissent opinions, but it is increasingly rare for public employees to exercise free speech related to their jobs, or even off their jobs, so this case comes as a pleasant surprise.

Kindle v. Jeffersontown, 6th Cir., No. 09-5119, unpublished opinion 3/15/10

UPS Violated SPD by Singling Out Retirees of Teamsters Union Local

In a case that reminds Plan Sponsors to tread carefully when dealing with retire health care in the collective bargaining context, a court has recently ruled that United Parcel Service of America, Inc., violated the terms of a summary plan description when it imposed "increased health care premiums on retirees who were represented by International Brotherhood of Teamsters Local 705, while not imposing the same increases on retirees of the Teamsters International Union.

In a 2002 labor contract with Local 705, United Parcel Service (UPS) agreed to provide health insurance to retirees as outlined in the SPD, which stated that if retirees' contributions were increased, the higher rates would not be implemented until after the expiration of the "current" contract. Another provision of the SPD stated that if UPS's annual cost-per-retiree rose above $6,250, all retired employees would "share equally" in paying increased contributions. In 2006, after costs rose above $6,250, UPS informed retirees that in 2008 their premiums would increase. UPS and the international Teamsters reached an agreement that UPS would not collect increased retiree contributions until the contract with the international expired. UPS did not extend the agreement to Local 705 retirees, who filed suit under the Employee Retirement Income Security Act. A federal district court in Illinois found that UPS had violated the SPD but that the company could impose a premium increase before the expiration of the 2008 contract.

The Seventh Circuit affirmed, finding that the SPDs required that all retirees share equally in the cost of their benefit. The Court also threw a bone to the company and held that UPS would not need to wait until the 2008 contract expired before it could charge all retirees the increased premiums because the SPD "current" language referred to the 2002 contract.

(Green v. UPS Health & Welfare Package, 187 LRRM 3298, 7th Cir., No. 09-2445, 2/10/10)

DOT issues final rules concerning employer release of drug and alohol tests

The Department of Transportation (DOT) is issuing three final rules that allow employers to disclose drug and alcohol test results to state driving licensers and update alcohol testing forms and probedures, according to notices published in the Feb. 25 Federal Register (75 Fed. Reg. 8524).

One of the rules adopts without change an interim final rule authorizing employers in DOT's drug and alcohol testing program to disclose to state commercial driver licensing authorities the drug and alcohol violations of employees who hold commercial drivers' licenses when a state law requires such reporting. DOT said 49 CFR 40.321 generally prohibits the release of individual drug or alcohol test results to third parties without the employee's specific written consent.

Nevertheless, the Transportation Department said, several states have laws requiring employers to provide individual test results to the state entity that issues commercial drivers' licenses "when holders of such licenses test positive for drugs or have a breath alcohol concentration of 0.04 or greater."

DOT issued the interim final rule June 13, 2008 permitting these parties to provide the information required by state laws without violating 49 CFR 40.321. DOT said that unless it modifies its procedures, employers and third patty administrators for owner-operator drivers could be in violation of the regulation
49 CFR 40.321 if they release this information.

A second final rule relates to the use of a new alcohol screening device.
This final rule, also adopts without change the interim final rule, which DOT said did not receive any relevant comments:

Transportation Department regulations require that an alcohol screening device be approved by the National Highway Traffic Safety Administration and be published in the Federal Register. The main procedural difference made by the interim final rule and adopted in this final rule concerns the technician's reading of the alcohol result, DOT explained.

The third final rule makes technical amendments to DOT's drug and alcohol testing procedures so employers can begin using updated versions of DOT's alcohol testing form and management information system data collection form. In the rule, the Transportation Department said the new versions of the forms update the form numbers and DOT's contact information and reduce the legends in the test result boxes so they do not obscure test results printed on the form.

First impressions count

In an issue of first impression deciding whether a teacher at a sectarian school classifies as a "ministerial employee," the court held the district court erred in its legal conclusion classifying plaintiff as a ministerial employee and the "ministerial exception" did not bar her claims against defendant.

The case arose from plaintiff's employment relationship with defendant, which terminated plaintiff from her teaching following an illness. Plaintiff filed a charge of discrimination and retaliation with the EEOC alleging defendant discriminated and retaliated against her in violation of her rights under the ADA. The parties did not dispute "religious institutions" include religiously affiliated schools and defendant met this requirement. Thus, the first requirement under the ministerial exception was present. The primary issue was whether plaintiff served as a ministerial employee. She spent approximately 6 hours and 15 minutes of her 7-hour day teaching secular subjects, using secular textbooks, without incorporating religion into the secular material. Thus, it was clear her primary function was teaching secular subjects, not "spreading the faith, church governance, supervision of a religious order, or supervision or participation in religious ritual and worship." The fact she participated in and led some religious activities throughout the day did not make her primary function religious. Teachers were not required to be "called" or even Lutheran to conduct these religious activities. In addition, the fact defendant had a generally religious character - as do all religious schools by definition - and characterized its staff members as "fine Christian role models" did not transform plaintiff's primary responsibilities in the classroom into religious activities. The district court relied on the fact defendant gave plaintiff the title of commissioned minister and held her out to the world as a minister by bestowing this title on her. "However, the title of commissioned minister does not transform the primary duties of these called teachers from secular in nature to religious in nature." The "primary duties analysis" requires objective examination of "an employee's actual job function, not her title, in determining whether she is properly classified as a minister." Further, contrary to defendant's assertions, plaintiff's claim would not require the court to analyze any church doctrine.

In the end, this is, like we said in Texas, a case of putting lipstick on a pig. Or, a rose by any other name would smell as sweet. Courts are willing to look beyond titles in assessing the substantive position under these circumstances.

EEOC v. Hosanna-Tabor Evangelical Lutheran Church & Sch.

Wage and Hour Reality Check

The Ninth Circuit Court of Appeals recently held that some work performed by employees at home, as well as time spent commuting, may have to be paid in certain circumstances.

The plaintiff in Rutti was a technician for Lojack, Inc. ("Lojack") who installed car alarms. In the morning, Rutti, as well as Lojack's other technicians, would receive their assignments for the day, map the route to their assignments, and prioritize the jobs. While traveling to the first job in the morning, as well as when traveling home at the end of the day, technicians were required to keep their cell phones on and drive directly between home and the job site without making any additional stops. After returning home, technicians were required to upload data received at the job sites from a portable data terminal ("PDT") to the company by hooking the PDT up to a modem.

The Ninth Circuit determined that the technicians' commute time was compensable under state law, but not federal law. The federal Portal-to-Portal Act, as amended by the Employment Commuter Flexibility Act, explicitly provides that employers need not compensate employees for time spent traveling to and from where they perform their job duties. The result under federal law was not changed by the fact that Lojack's technicians drove company cars, or that they were subject to certain employer-mandated restrictions while driving.

California, however, maintains stricter wage and hour laws. Under California law, the relevant question is whether the employee's time is "subject to the control" of the employer. The Ninth Circuit found that because technicians had to keep their cell phones on, and could not make additional stops while going to and from the job site (such as dropping children off at school), the time was subject to the employer's control and had to be paid under California law.

The Ninth Circuit went on to find that under federal law, the technicians' job tasks before the "start" of the work day were not compensable, but that time spent uploading data from the PDT "after work" might have to be paid. Under federal law, the question of whether these types of "preliminary and postliminary" activities must be paid depends on whether they are part of the "principal activities" that the employee is employed to perform. Even if these tasks are part of the employee's "principal activities," they need not be paid if they are de minimus. In deciding whether certain job tasks are de minimus under federal law, courts examine the practical administrative difficulty of recording the additional time, the aggregate amount of time at issue, and the regularity of the additional work.

Applying those factors, the Court held that even if the tasks performed by technicians prior to leaving home were part of their "primary activities," they were de minimus. These tasks took only a matter of minutes to complete, and it would be very difficult to record the time that technicians spent working on them. However, time spent uploading data from the PDT might be compensable. There was evidence that this task took anywhere from 5 to 15 minutes each night. While the Court acknowledged that there would likely be some administrative difficulty recording this time, it found that the time added up to over an hour per week, and was a regular part of the employees' job duties, and therefore might not be de minimus. Accordingly, the time might have to be paid, depending on the specific facts.

Still, even if this activity was found to be compensable under federal law, that did not mean that the technicians' travel time home had to be compensated, even under the "continuous workday doctrine." Under this doctrine, which the U.S. Department of Labor has adopted, an employee's workday generally lasts until he has completed all of his principal activities during the day. The Ninth Circuit found that the "continuous workday" rule did not apply in these circumstances because technicians were relieved of all duties upon returning home, and could input the data from the PDT at a time of their choosing. Federal regulations preclude application of the "continuous workday doctrine" where employees are relieved from all duty for a long enough period to be able to use that time for their own purposes. Still, this commute time generally has to be paid under California law. Here, the Ninth Circuit did not reach the issue of whether the "preliminary and postliminary" activities performed by the technicians had to be paid under California state law.

This case reminds employers that there can be significant differences between federal and state law in the wage and hour areas, and that they need to ensure that their practices comply with both sets of laws.

Rutti v. Lojack Corporation, Inc., March 2, 2010

IRS takes the initiative

Employers of all sizes and types should be aware of a major IRS audit initiative focusing on underpayment of employment taxes.

The IRS has launched a new employment tax National Research Program that it has been planning for at least a year. As part of the program―the first in the employment tax area since 1984―the IRS will randomly select 6,000 taxpayers (2,000 taxpayers in 2010 for the 2008 tax year and 2,000 taxpayers each in 2011 and 2012 for the 2009 and 2010 tax years, respectively) and conduct in-depth audits of those taxpayers’ employment tax issues, tracing them into federal income tax returns that report deductions of the payments as well as federal income tax returns that report the income from such payments. The IRS described the audits as “comprehensive in scope.” The IRS is using the program to accurately gauge the extent to which taxpayers and tax-exempt entities properly comply with employment tax laws.

The IRS has two main goals for the program:
• Securing statistically valid information for computing the “gap” between taxes that are accurately reported to the IRS and those actually owed; and
• Determining common compliance characteristics so that the IRS can concentrate on the most significant compliance issues.
The audits likely will begin with a review of IRS Forms 941 (federal employment tax returns) but will further involve detailed information requests by the IRS. In addition to identifying organizations that fail to file employment tax returns at all, the comprehensive audits will focus on at least four major employment tax issues:
• Classification of workers as employees or independent contractors;
• Reasonableness of executive compensation;
• Tax treatment and reporting of fringe benefits as tax-free or as taxable compensation; and
• Tax treatment and reporting of employee reimbursements.

The IRS also will review the taxpayer’s history of reporting payments other than wages or compensation (e.g., such as dividends reported on IRS Forms 1099) and backup withholding. Additionally, we expect that the IRS will focus on recently promulgated Treasury Regulations that require disregarded entities to withhold, report, and pay employment taxes in their own name. (See “Final Regulations Treat Disregarded Entities as Separate for Employment Tax and Related Reporting Requirements” (December 11, 2007) and “Disregarded Entities Are Now Responsible for Their Own Employment Taxes” (July 20, 2009))

Although the reasonableness of executive compensation is usually thought to involve the payment of excessive compensation, the program likely will focus on the underpayment of compensation to shareholder-employees of S corporations. Such shareholder-employees are perceived to avoid employment tax by receiving dividends and other corporate distributions in lieu of compensation for services.

To the extent that a taxpayer has consistently treated workers as independent contractors and the IRS properly determines that the workers should have been treated as employees, the audited taxpayer still may avoid owing back taxes, interest, and penalties if it satisfies the now notorious Section 530 of the Revenue Act of 1978. If certain requirements are satisfied, Section 530 prevents the IRS from retroactively reclassifying workers. Although we do not know how much support there is in Congress, in the Fiscal Year 2011 budget, the Obama Administration proposed eliminating Section 530 and believes that a crackdown on employment tax issues could yield as much as $7 billion over the next 10 years.

Finally, the in-depth nature of the audits will provide the IRS with an opportunity to review an employer’s executive compensation arrangements. In addition to confirming that such arrangements are compliant with the employment tax rules, employers should review the extent to which their executive compensation arrangements are compliant with other federal income tax rules, such as the section 162(m) and section 280G deduction limits and the section 409A deferred compensation restrictions. Employers who act quickly may be able to take advantage of recent IRS correction guidance for section 409A violations, which offers the possibility of reduced penalties. (See “IRS Releases Section 409A Correction Program for Nonqualified Plan Document Failures” (January 6, 2010))

Drafting reminder

The Michigan Court of Appeals waves a red flag for employers who use employment agreements by ruling that a trial court erred by granting defendant's motion for summary disposition and dismissing the plaintiff's discrimination claim against him under the Michigan Civil Rights Act (CRA) based on an arbitration agreement in plaintiff's employment contract. It was clear from the terms of the agreement the only parties to the contract were the Ennis Center and plaintiff.

The employment contract defined the Ennis Center as "the Agency," and provided if the employee had "any dispute with the Agency" the dispute would be submitted to arbitration. Although defendant signed the employment contract, the contract specified he did so "For the Agency." The contract language specifying he signed it "For the Agency" clearly indicated he signed the contract solely as an agent for the Ennis Center. Plaintiff's claim against defendant implicated his potential personal liability under the CRA, not the Ennis Center's potential vicarious liability for his alleged discriminatory conduct.

The court rejected defendant's argument that the clause specifying the "agreement shall be binding on the heirs and representatives of parties hereto" allowed him or any other person, as Ennis Center's agent, to compel arbitration in an individual capacity. The phrase did nothing more than state what the law might presume in the absence of express language to bind heirs and representatives of a contracting party. The phrase also did not make defendant an intended third-party beneficiary of any contractual promise under MCL 600.1405. The court declined to apply the broad construction given to an arbitration provision in a stock purchase agreement in Arnold for purposes of holding that corporate agents had a right to compel arbitration of claims brought against them in an individual capacity. The fact that an individual is a corporate agent does not reveal an intent to protect the individual through arbitration. Unlike the broad language in Arnold found to reflect a basic intent to provide for a single arbitral forum to resolve any disputes arising out of a stock purchase agreement, plaintiff and the Ennis Center did not agree to arbitrate any dispute arising out of the employment relationship. The arbitration provision was confined to disputes with "the Agency," which was defined as the Ennis Center. Although plaintiff's claims against defendant might be interwoven with her claims against the Ennis Center, because plaintiff and the Ennis Center did not agree to give the Ennis Center's agents the protection of the arbitration provision in the employment contract with respect to their own potential individual liability, the court held defendant could not compel arbitration.

This case is a reminder for all those employers who use employment agreements with arbitration clauses to protect individual corporate agents as well as the corporation. A suit that proceeds against individual corporate agents could manifest issues that might be preclusive against the corporate entity. The goal of limiting discovery and other costs associated with a lawsuit that arbitration is intended to accomplish are also frustrated in this situation.

Riley v. Ennis, Michigan Court of Appeals (unpublished)

COBRA extension extended

Last Tuesday night, President Obama signed into law legislation that provides a stopgap, 31-day extension of federal subsidies of COBRA health care premiums.

The measure was approved earlier Tuesday by the Senate on a 78-19 vote, while the House cleared it last week.

Under H.R. 4691, the 65%, 15-month premium subsidy for laid-off workers is extended to those involuntarily terminated from March 1 through March 31.

Without the extension, employees laid off after Feb. 28 would have been ineligible for the subsidy.

The measure also will allow employees to receive the subsidy if they first lost group coverage due to a reduction in hours and then were terminated after enactment of the legislation, if certain conditions are met.

Consideration of an extension of the premium subsidy to employees laid off through Dec. 31, 2010 continues.

HR Professionals beware! Potential Emerging Split concerning individual liability

In a ruling that defines the scope of individual liability under the Family and Medical Leave Act (FMLA), a federal judge has refused to dismiss claims against individual human resources executives and a manager who allegedly set out to find a reason to fire a worker soon after learning that he needed to schedule a leave for a surgery.

In the suit, plaintiff, an industrial designer, claims that just a few days after he informed his bosses at Cardone Industries of his need for surgery, he was called in to a meeting and confronted with a pornographic e-mail found on his work computer. Plaintiff responded by filing a suit that named not only the company, but also the company president and four other individuals who, he claims, each played a role in orchestrating and carrying out a plan to violate his rights under the FMLA and the Employee Retirement Income Security Act (ERISA). Defendants filed answer to the suit for Cardone Industries that denied the allegations, but argued in a separate motion that the individual defendants should be dismissed from the case.

Plaintiff argued that each of the five named individuals qualifies as an "employer" under the FMLA, and that the allegations in the suit went beyond merely citing their job titles.

The District Court found that while "conclusory" allegations are insufficient, Plaintiff had gone further by alleging that each of the individual defendants "participated in the forensic search of his computer with the goal of finding a reason to justify his termination because he had requested FMLA leave." The Court concluded that all five of the individuals were properly named as defendants because each one is alleged to have had the power to fire and to have played a role in the decision to oust the plaintiff.

Similarly, the Court concluded that all five must answer ERISA claims of interfering with his plan benefits because the suit properly alleged that they were the "decisionmakers" who allegedly decided to conduct a forensic search of the plaintiff's computer within a few days of learning that he was planning to take a medical leave. Timing was the crucial issue for the Court.

The significance of the case is that the Court refused to follow a string of decisions from federal courts in Utah, Minnesota and Kansas that have said FMLA's individual liability provisions apply only to corporate officers.

This case represents a crack in the door for opening liability under FMLA to individuals who are not corporate officers.

Narodetsky v. Cardone Industries, No. 09-4734, February 24, 2010

Remember Goldilocks in filing your lawsuit

It's important for plaintiffs to be aware that, once you initiate litigation, you no longer retain the initiative in all instances.

A post from the Blog of Legal Times lays out the basics. Plaintiff sued in state court; the employer removed the case to federal court and filed an answer. Six months later the plaintiff decided that she wanted to dismiss the complaint voluntarily and filed a motion to do so. The court denied the motion, on the procedurally correct ground that that once an answer is filed a case cannot be dismissed unilaterally by the plaintiff. Thus, the order forced the action to continue.

But why would a defendant turn down a voluntary dismissal? One possibility is that, because an age discrimination case is a fee-shifting case, the defendant may think that it will prevail on the merits and can force the plaintiff to pay their attorney's fees. This would be rare. Another possibility is that the defendant wants further terms in the dismissal, like a "with prejudice" designation, or some other settlement details, like nondisclosure. This has been my experience when my plaintiff wanted to dismiss voluntarily.

In sum, for plaintiffs and their lawyers, while it's important to observe the time limitations in many employment actions and get to the courthouse on time, at the same time you want to look before you leap. That is, there is a "Goldilocks period" where filing your suit will be just right.

Unintended Consequences

Paul Secunda recently posted an article on SSRN (Social Science Research Network): Addressing Political Captive Audience Workplace Meetings in the Post-Citizens United Environment. Here's the abstract:

Citizens United has wrought widespread changes in the election law landscape. Yet, a lesser-known impact of this watershed case might have a significant impact in the workplace: It may permit employers to hold political mandatory captive audience meetings with their employees.

To eliminate this danger, and consistent with the First Amendment framework for election law issues post-Citizen United, this Article urges Congress to consider language similar to that enacted by the Oregon Worker Freedom Act Law, SB 519 (effective Jan. 1, 2010). SB 519 prohibits termination of employees for refusing to attend mandatory political, labor, or religious meetings held by their employers.


Such a federal law would constitute permissible employment standards legislation and also would not run afoul of the First Amendment speech rights of employers under Citizens United. Employers would still able to communicate their views about political candidates and parties with their employees as the First Amendment now contemplates, but they will not be able to force them to listen to such speeches at the risk of losing their jobs or other benefits of employment.

This would be an intriguing issue for the NLRB to address at some point...by the time such an issue found its way to the Board, perhaps there might even be three members.