EMPLOYMENT LAW QUARTERLY | Spring 2010, Volume XII, Issue i

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• EMPLOYERS BEWARE: Use of Fake Job References On The Rise
• To Report or Not To Report an EPLI Claim
• FMLA ENFORCEMENT: Northern District Of Illinois Bans Employers Doctor’s Note Policy
• THE EMPEROR’S NEW CLOTHES: Fourth Circuit Rules On Donning and Doffing of Protective Gear Under a Collective Bargaining Agreement
• BULLS ON PARADE: Do State Laws Follow the Lilly Ledbetter Fair Pay Act
• EEOC Claims Drop Slightly in 2009
• Z&R Shorts

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EMPLOYERS BEWARE: Use of Fake Job References On The Rise

by Jason Rossiter*

There is a new breed of service providers that create fake job references for people struggling to find jobs. For an initial cost of $60 to $200, plus monthly fees, these services create fake companies, complete with telephone numbers, logos, websites, a LinkedIn profile and live references. Additionally, these service providers sell fake diplomas, transcripts, letters of recommendation, landlord references, doctor’s excuses and even funeral excuses.

Founders of these companies claim that applicants utilize their services to get ahead in today’s competitive job market. According to these companies, they simply provide a service made necessary by the poor economy. When asked about the ethical implications, one company proclaimed that it is helping its customers feed their families. One company claims to have guidelines including reviewing criminal backgrounds prior to giving references and refusing to provide references for lawyers, health care professionals and those seeking employment with the federal government. However, all other industries appear susceptible.

Questions regarding the legality of these services remain unanswered. In fact, even these service providers question the legality of their services by warning customers to check state laws regarding the legal implications of lying on one’s resume. As for the legal implications to the service providers, speculation exists that they could face claims of fraud, misrepresentation and detrimental reliance, and could potentially face criminal prosecution, regardless of their disclaimers.

Hiring mistakes cost employers valuable resources. To avoid such mistakes, employers should consider the following practices:

Cross reference past employers listed on a resume or application against an applicant’s social networking profile. Many social networking sites such as LinkedIn allow subscribers to list their employment history.

Insist on talking to real people when checking references. Fake employers often avoid live conversations with reference checkers. If the reference insists on faxing or sending written responses this may indicate a fake reference.

Verify a referring employer’s incorporation. Ask the referring employer its state of incorporation. Follow up with the office of the secretary of state of the alleged incorporating state to verify.
Amend employee handbooks, application forms and workplace policies to make clear that falsifying a resume, application or reference is grounds for immediate termination.

Question inconsistencies on an applicant’s resume with answers given during interviews.

*Jason Rossiter has extensive experience in developing hiring and retention employment policies. If you need further information about updating or developing employment policies please contact Zashin & Rich at 216.696.4441.

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To Report or Not To Report an EPLI Claim

by Stephen S. Zashin*

The Supreme Court of Connecticut in National Waste Associates, LLC v. Travelers Casualty and Surety Co. of America, 294 Conn. 511 (2010), reestablished the importance of employers timely notifying their employment practices liability insurance (“EPLI”) carrier of events potentially covered by their policy. National Waste Associates, LLC (“NWA”) filed a complaint against Travelers Casualty and Surety Co. of America (“Travelers”), after Travelers refused to provide a defense or indemnify NWA for a wrongful termination claim filed by one of NWA’s former employees. Connecticut’s highest court held that Travelers had no duty to indemnify NWA.

NWA purchased an EPLI policy from Travelers for the period of February 15, 2007 to February 15, 2009. On May 12, 2007, one of NWA’s former employees filed a wrongful termination action against NWA. Prior to filing her wrongful termination complaint and prior to NWA’s EPLI policy start date, the former employee also filed an action for unemployment benefits alleging that NWA wrongfully discharged her.

Based on the following provision in NWA’s EPLI policy, Travelers successfully argued that its policy precluded coverage:

This [l]iability coverage shall not apply to, and [Travelers] shall have no duty to defend or to pay, advance or reimburse [d]efense [e]xpenses for, any [c]laim…based upon, alleging, arising out of, or in any way relating to…any fact, circumstance, situation, transaction, event or [w]rongful [a]ct underlying or alleged in any prior or pending civil, criminal, administrative or regulatory proceeding..., against any [i]nsured as of or prior to [the effective date of the policy].

The Court agreed with Travelers that NWA’s former employee’s unemployment benefit proceeding was an “administrative proceeding” subject to the provision above. NWA’s former employee made the same allegations in both her unemployment proceeding and later filed complaint – that NWA wrongfully discharged her. Since the unemployment proceeding occurred prior to the start of NWA’s EPLI policy’s coverage date, Travelers was not required to defend or indemnity NWA against its former employees later filed wrongful discharge complaint.

As this case demonstrates, it is critical for an employer to understand the intricacies and nuances of its EPLI policy. When it is unclear as to whether an incident should be reported to the carrier, employers should err on the side of reporting the incident so as to not preclude them from coverage later. More specifically, employers should alert their EPLI carriers when a former employee alleges wrongful discharge even if done in connection with a claim for unemployment benefits.

*Stephen S. Zashin, an OSBA Certified Specialist in Labor and Employment Law, has extensive experience representing employers covered by EPLI insurance against claims of workplace discrimination, harassment and retaliation. If you need further information about EPLI coverage or reporting claims to EPLI providers please contact Stephen at 216.696.4441 or ssz@zrlaw.com.

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FMLA ENFORCEMENT: Northern District of Illinois Bans Employers Doctor’s Note Policy

by Patrick M. Watts

Recently, the court for the Northern District of Illinois ruled that a policy requiring employees to produce a doctor’s note for each absence occurring during intermittent family medical leave violated the Family Medical Leave Act (“FMLA”). In Jackson v. Jernberg Industries, Inc., 2010 U.S. Dist. LEXIS 1581 (January 26, 2010), the court reasoned that such a policy was an impermissible interference by the employer. The court held that the policy was not supported by the language of the FMLA and accompanying administrative rules and it discouraged an employee’s right to leave under the FMLA.

The employer, Jernberg Industries, Inc., (“Jernberg”) maintained an attendance policy that assigned employees points for each day an employee missed work. Generally each absence equated to one point. However, if an employee missed two or more consecutive days and produced a doctor’s note Jernberg awarded only one point for all days missed. Jernberg expunged points upon the one year anniversary of receipt of a point. Accumulation of points triggered disciplinary actions: five points resulted in a written warning, eight points resulted in a second written warning, twelve points resulted in a three day suspension and fourteen points resulted in termination. The policy excluded leave taken under the FMLA. To receive FMLA leave, Jernberg required employees to sign a form stating they, “understood and agreed that for intermittent leave, documentation must be presented with each absence for the absence to be applied to the FMLA status.” To satisfy this requirement, Jernberg required a doctor’s note verifying the leave was related to an FMLA-certified condition.

The plaintiff went on continuous family medical leave from August 4, 2004 through October 24, 2004. Jernberg assessed no points to the plaintiff for this leave. On August 28, 2005, the plaintiff applied for intermittent family medical leave by completing Jernberg’s form with the above detailed language. Prior to his leave, the plaintiff produced a Certification of Health Care Provider stating that the plaintiff’s condition was a FMLA-certified condition, but did not list the specific dates the plaintiff would miss work. Jernberg approved the plaintiff’s intermittent leave. Between August 29, 2005 and February 6, 2006, the plaintiff took 88 days of intermittent FMLA-leave, all of which were supported by a doctor’s note verifying that the days were related to his FMLA-certified condition.

Between February and June of 2006, The plaintiff missed an additional 12 days of work, which he verbally claimed were related to his FMLA-certified condition but failed to produce a supporting doctor’s note. Jernberg assessed the plaintiff one point for each of the 12 days missed. By the end of June 2006, the plaintiff exceeded the allowable points limit, and on June 29, 2006, Jernberg terminated the plaintiff’s employment.

The plaintiff brought suit arguing that Jernberg’s policy interfered with his FMLA rights. In particular, he argued the policy was an impermissible recertification requirement. Under 29 U.S.C. § 2615 an employer cannot interfere with, restrain or deny the exercise of or the attempt to exercise any FMLA rights, including intermittent leave. Further, under 29 C.F.R. 825.220(b) an employer cannot refuse or discourage an employee from taking family medical leave. In response, Jernberg argued its policy was a reasonable safeguard against employee abuse of FMLA leave.

The Court granted the plaintiff’s motion for summary judgment finding that Jernberg’s policy of requiring third party approval was onerous, and thus an impermissible interference with the plaintiff’s FMLA rights. The court reasoned that the FMLA and supporting regulations do not expressly permit employers to request medical verification to substantiate absences taken during intermittent leave. To the contrary, the regulations expressly restrict employers from requesting additional information from health care providers beyond that required by a certification form. Additionally, the regulations provide employers the option of verifying absences through the recertification process once the recertification requirements are satisfied. However, even upon recertification, an employer cannot request a doctor’s note because it can only seek information required by a certification form. The court further noted, that as a practical matter, Jernberg’s policy discouraged the plaintiff from taking FMLA leave because it required the plaintiff to produce five doctor’s notes in a 12 month period and required him to produce an additional six more to satisfy its policy.

This case demonstrates that employers should not request medical information from a health care provider beyond that expressly permitted by the FMLA. In addition, employers that have policies similar to Jernberg should rewrite their policy to avoid violating the FMLA, and may want to contact an attorney to audit the entirety of their FMLA policies.

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THE EMPEROR’S NEW CLOTHES: Fourth Circuit Rules On Donning and Doffing of Protective Gear Under a Collective Bargaining Agreement

by Jon M. Dileno*

Recently, the United States Court of Appeals for the Fourth Circuit upheld a decision allowing an employer to maintain a policy of not paying employees for time spent donning and doffing protective gear. Generally, the Fair Labor Standards Act (“FLSA”) requires employers to include in compensable work time the time spent donning and doffing if it is an integral and indispensible part of an employee’s principal activities. Under 29 U.S.C. § 203(o), an employer may exclude from compensable work time any time spent “changing clothes or washing at the beginning or end of each work day. . . by the express terms of or by custom or practice under a bona fide collective bargaining agreement. . . .” In Sepulveda v. Allen Family Foods, Inc., 591 F.3d 209 (4th Cir. 2009), the Fourth Circuit agreed that donning and doffing protective gear is “changing clothes” within the meaning of 29 U.S.C. § 203(o), thus, allowing an employer with an organized workforce to exclude this time from compensable work time if doing so is an established practice under a bone fide collective bargaining agreement (“CBA”).

The employer, Allen Family Foods (“Allen”), processed poultry. Prior to the start of a shift, Allen required employees to don protective gear in its locker room and to sanitize the gear by dipping their gloves into a tank, splashing solution onto their aprons and stepping through a foot bath. Allen gave employees a thirty minute lunch break during which time the production line was nonoperational. During scheduled lunch breaks, employees typically removed some of their protective gear. Upon returning to work, employees put their protective gear back on and re-sanitized. At the end of the shift, employees doffed their protective gear before leaving the site. As a long standing practice under their bona fide CBA, Allen did not pay its unionized employees for time spent donning and doffing protective gear before and after shifts or during lunch breaks.

In 2002, the union representing Allen’s employees attempted to negotiate pay for time spent donning and doffing protective gear. While it was the subject of collective bargaining, Allen rejected this term, and the parties did not incorporate such a term into the employee’s CBA. In 2007, employees initiated a lawsuit against Allen claiming violations of the FLSA for failing to compensate them for time spent donning and doffing protective gear. As their primary argument, the employees asserted that donning and doffing protective gear did not constitute “changing clothes” within the meaning of 29 U.S.C. § 203(o).

Upon completion of discovery, Allen filed a motion for summary judgment arguing that the plain meaning of § 203(o) permitted its pay practice. The District Court granted Allen’s motion finding that donning and doffing protective gear was “changing clothes” within the meaning of § 203(o). On appeal, the Fourth Circuit determined that two conditions must be met in order to trigger § 203(o): (1) the activity must constitute “changing clothes,” and, (2) the express terms of a CBA or practices under a bona fide CBA must exclude from compensable work time the time spent “changing clothes.”

Ultimately, the Fourth Circuit considered the plain meaning of the terms “changing” and “clothes” with the purpose of § 203(o) and determined that donning and doffing protective gear constituted “changing clothes.” Additionally, the employees conceded that Allen had a long standing practice under the CBA to exclude time spent donning and doffing protective gear from compensable work time. The Fourth Circuit found that § 203(o) permitted Allen’s pay practice.

As an ancillary argument, the employees argued sanitizing protective gear did not constitute “washing” under § 203(o). However, the Fourth Circuit disagreed, finding that the plain meaning of “washing” included sanitizing protective gear. The Fourth Circuit also rejected the employee’s argument that they should be paid for time spent donning and doffing before and after lunch breaks. The Court reasoned that this time actually occurred during a bona fide meal period under 29 U.S.C. § 785.19 and, in the alternative, that this time was de minimis.

In summary, § 203(o) applies only when the express terms of a bona fide CBA or customs or practices under a bona fide CBA exclude the donning and doffing of protective gear from compensable work time. Due to the complexity of this issue and the FLSA, employers should seek the advice of counsel if they have questions related to employee compensation.

*Jon M. Dileno has extensive experience in handling FLSA allegations and negotiating collective bargaining agreements for public and private sector employers.  If you need further information about the FLSA or collective bargaining please contact Jon at 216.696.4441 or jmd@zrlaw.com.

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BULLS ON PARADE: Do State Laws Follow the Lilly Ledbetter Fair Pay Act

by Lois A. Gruhin

In December 2009, the New Jersey Superior Court decided that it will not follow the recent Congressional Amendment to Title VII known as the Lilly Ledbetter Fair Pay Act of 2009 (the “Act”). The Act, in its preamble, expressly rejects the United States Supreme Court decision Ledbetter v. Goodyear, 550 U.S. 618 (2007) (the “Ledbetter case”). The Act also extends the definition of unlawful employment practices. The extended definition includes occurrences when an individual is affected by application of a discriminatory compensation decision, including each time compensation is paid. In Alexander v. Seton Hall Univ., 410 N.J. Super. 574 (2009), the New Jersey Superior Court upheld a ruling that the plaintiff’s claims were time barred under the New Jersey Law Against Discrimination (“LAD”) despite the fact that Plaintiffs received a paycheck reflecting pay discrimination within the two year statute of limitations. This decision flatly rejected the Act by: (1) following the Ledbetter case and (2) failing to recognize an unlawful employment practice occurring when an individual receives compensation reflecting a discriminatory decision.

In August 2005, the plaintiffs discovered that their salaries were disproportionately lower than less senior, younger male faculty in similar positions. In July 2007, the plaintiffs filed their complaint alleging pay discrimination based on sex and age. Seton Hall filed a motion to dismiss arguing that the plaintiffs’ claims were time barred because they were not brought within the two year statute of limitations from the date Seton Hall made the alleged discriminatory decision to pay male faculty more then female faculty. The plaintiffs argued that their claims were not time barred because each paycheck reflecting pay discrimination constituted a continuous violation of LAD rather than a discrete discriminatory act occurring outside the statute of limitations.

The trial court granted Seton Hall’s motion to dismiss relying on the Ledbetter case. In the Ledbetter case, the United States Supreme Court ruled that Ledbetter was time barred from bringing her claim because the discriminatory decision to pay her less than her male counterparts occurred outside the statute of limitations. The United States Supreme Court rejected the argument that each paycheck constituted a continuous violation. The New Jersey Superior Court applied the reasoning in the Ledbetter case and held that the Act did not amend the LAD. As such, the Superior Court concluded that the statute of limitations for pay discrimination claims begins to run at the time the discriminatory decision is made. Any claims brought outside of the statute of limitations are time barred.

It remains unclear whether other states will follow the New Jersey decision to reject the Act or if this decision will spur state legislatures to amend state anti-discrimination laws to read similar to the Act. Therefore, until these questions and other interpretation questions are answered, employers should continue to monitor and retain compensation records indefinitely.

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EEOC Claims Drop Slightly in 2009

by Jessica T. Tucci

COMPLAINTS FILED ANNUALLY WITH EEOC
Category	FY 2008	FY 2009	Percent Change
Total Charges	95,402	93,277	(2.2)%
Race	33,937	33,579	(1.1)%
Retaliation	32,690	33,613	2.8%
Sex	28,372	28,028	(1.2)%
Age	24,582	22,778	7.3%
Disability	19,453	21,451	10.3%
National Origin	10,601	11,134	5.0%
Religion	3,273	3,386	3.5%
Equal Pay Act	954	942	(1.3)%
Source: Equal Employment Opportunity Commission (Complaints can be filed in multiple categories.)

The number of workplace discrimination claims filed with the Equal Employment Opportunity Commission (“EEOC”) fell slightly from a record high of 95,402 claims filed in 2008 to 93,277 claims filed in 2009. The EEOC experienced a 15% spike in the number of discrimination claims filed in 2008 over the previous year, which led at least one EEOC official to incorrectly predict that claims might rise above 100,000 in 2009. While the number of claims filed in 2009 decreased, claims based on disability, religion, national origin and retaliation hit an all-time high. The record high number of disability claims comes in the wake of the Americans with Disabilities Act Amendments Act of 2008, which became effective January 1, 2009, and expanded protections under the law for disabled Americans.

To avoid facing an EEOC charge, employers should maintain open lines of communication with their employees so that their employees are less likely to cry foul in the event of a layoff, termination, reduction in hours or other important employment decision. Being concise, clear, open and honest with employees about changes in their employment status often provides an employee with a sense of closure and prevents the hassle of dealing with frivolous discrimination claims. Furthermore, employers should maintain clear and consistent Equal Employment Opportunity and anti-harassment reporting policies and take allegations of discrimination and harassment seriously by conducting thorough well documented investigations.

Factors influencing the large number of discrimination claims include increased diversity and demographic shifts in the labor force, a heightened awareness of the laws enforced by the EEOC and the high unemployment rate. Traditionally, the number of claims filed with the EEOC increases in tough economic times. As the economy continues to rebound, employers must maintain vigilant in their approach in understanding and complying with employment laws.

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Z&R Shorts

Zashin & Rich Co., L.P.A. is pleased to announce the addition of Roy E. Lachman as the chair of the firm’s Class, Collective and Multidistrict Actions Group and Scott Coghlan as chair of the firm’s Workers’ Compensation Group.

Roy E. Lachman has over twenty-six years of experience as bank counsel, having served as General Counsel of AmTrust Bank and a number of its affiliated corporations. In addition, he also worked at a global law firm and as a Staff Attorney for a federal appeals court. He specializes in the law of banking and financial transactions, employment and discrimination matters, complex and class litigation, financial fraud, real estate and securities brokerage, insurance, legal compliance and internal investigations, and general commercial litigation. He has extensive experience dealing with administrative and regulatory agencies, both in helping clients avoid legal exposure and in limiting such exposure once it has arisen.

Scott Coghlan has over seventeen years of experience defending workers’ compensation claims. Scott has represented employers in hundreds of workers’ compensation lawsuits in more than fifty of Ohio’s common pleas courts, five courts of appeal, and the Ohio Supreme Court. Scott has won numerous jury verdicts resulting in the return of premiums to employers and regularly prosecutes and defends mandamus actions before the Franklin County Court of Appeals. He has also successfully obtained orders preventing claims for permanent total disability. Scott also defends employers with respect to claims of successorship liability, intentional torts and Violation of Specific Safety Rule (VSSR). He regularly counsels employers about developing workplace safety programs and establishing workers’ compensation premium reduction programs.

If you have any workers’ compensation issues or any employee injury issues, please contact Scott (sc@zrlaw.com) at 216.696.4441.

Zashin & Rich Would Like to Congratulate its 2010 SUPERLAWYERS®

George S. Crisci
Jon M. Dileno
Victoria A. Glowacki
Patrick J. Hoban
Jason Rossiter
Patrick M. Watts
Andrew A. Zashin
Stephen S. Zashin

Upcoming Speaking Engagements

Patrick Watts will be one of the presenters of “Employment Law Alphabet Soup” on June 8, 2010 at the Holiday Inn, Independence, Ohio. For more information, go to www.nbi-sems.com.

George Crisci will present “Human Resources Issues” on June 16, 2010 at the Holiday Inn, Independence, Ohio. For more information, go to www.nbi-sems.com.

Should Your Company Have a Mandatory Arbitration Program? The Supreme Court of the United States suggests that it might deter class/collective claims.

*By Stephen S. Zashin

On April 27, 2010, the United State Supreme Court held that a party to an arbitration agreement may not be compelled to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to arbitrate class claims. The Supreme Court in effect vacated the decision of an arbitration panel allowing class claims under an arbitration clause that was silent on the issue on grounds that the panel’s decision was not based in the terms of the arbitration agreement, but on its own conception of “good policy.” In so doing, the Supreme Court reinforced the principle that parties to an arbitration agreement are only bound to arbitrate those claims falling within the terms of the agreement. 

In Stolt-Nielsen S.A. v. Animalfeeds Int’l Corp., No. 08-1198 (April 27, 2010), the parties’ contract (the “Contract”) included an arbitration clause subjecting “any dispute” arising from the execution of the contract to arbitration in accord with the Federal Arbitration Act (the “FAA”). A party to the contract demanded class arbitration representing a class of claimants. The opposing party objected to the class arbitration demand and the parties agreed to submit the question of whether the arbitration clause permitted class arbitration to an arbitration panel (the “Panel”). At the outset, the parties stipulated that the arbitration clause was “silent” with regard to the question of class arbitration.

The arbitration panel concluded that because the evidence – including the terms of the Contract - did not show that the parties intended to preclude class arbitration, class claims were allowed. The panel stayed proceedings to allow the parties to seek vacatur or confirmation of its decision – which it described as a “partial final decision” - under the FAA.

After lengthy appeals, the U.S. Supreme Court granted certiorari on the issue of whether imposing class arbitration on parties whose arbitration clauses are silent on that issue is consistent with the FAA.

The Supreme Court concluded that instead of interpreting the arbitration agreement in light of law and industry practice, the panel simply imposed what it felt was sound policy and, in so doing, exceeded its powers. On this ground, the Supreme Court determined that the panel’s decision should be vacated and reversed. In doing so, the Supreme Court stressed that, under the FAA, arbitration was solely a matter of consent. As a result, the FAA forbids a party from being compelled to submit to class arbitration absent some contractual basis showing that it agreed to submit class claims disputes to arbitration. In this context, the Court reasoned, silence regarding class arbitration indicates that the parties did not intend to allow it.

In the end, Stodlt-Nielson clearly establishes that parties to a contract containing an arbitration clause that is silent with regard to class arbitration cannot be forced to submit to class arbitration absent some clear evidence of their intent to be bound.

What does this mean for employers? This decision strongly suggests that employers with established arbitration programs may enjoy significant protection against the class/collective actions so prevalent in employment litigation. As a result, all employers should consider whether to implement an arbitration program as a way of avoiding expensive class/collective employment actions in the future.

*Stephen S. Zashin is an OSBA Certified Specialist in Labor and Employment Law has extensive experience in all aspects of workplace law, including the development and administration mandatory arbitration programs.  For more information about mandatory arbitration programs, please contact Stephen at 216.696.4441 or ssz@zrlaw.com.

Feds Extend Unemployment Benefits and COBRA Subsidies for a Third Time

*By Patrick J. Hoban

On April 15, 2010, both houses of the U.S. Congress passed and the President signed H.R. 4851 which extends unemployment compensation benefits and ARRA COBRA subsidies.  As enacted, H.R. 4851 – now Public Law 111-157 the “Continuing Extension Act of 2010” (the “CEA”) – extends unemployment benefits through June 2, 2010 and extends the eligibility period for ARRA COBRA subsidies for those who involuntarily lose employment and associated group health insurance coverage through May 31, 2010.  This is the third extension of the COBRA subsidies since they were first established in the American Reinvestment and Recovery Act in February 2009.  CEA also extends federal government funding of physician Medicare payments and the National Flood Insurance Program.

CEA includes a provision requiring employers to provide supplemental notice of ARRA COBRA entitlement for employees who involuntarily lost employment and employer-provided group health insurance coverage between the March 31, 2010 expiration date of the prior extension and the date the CEA went into effect on April 15.  In short, employers must notify any employee eligible for the ARRA COBRA subsidy between April 1 and April 15 due to the passage of CEA of their eligibility for the subsidy if they have not already done so.  The Employee Benefits Security Administration (“EBSA”), the federal government agency responsible for administering COBRA benefits, has updated information concerning the application and enforcement of the pending legislation. (www.dol.gov/ebsa).

*Patrick J. Hoban has extensive experience in all areas of labor and employment law, with a focus on private and public sector labor law.  For more information about this pending legislation or other ARRA COBRA or COBRA issues, contact Pat at 216.696.4441 or pjh@zrlaw.com.

IF YOU BUILD IT THEY WILL COME: Tax Benefits for Employers Hiring New Employees

By Jessica Tucci

President Obama signed H.R. 2847- the Hiring Incentive to Restore Employment (HIRE) Act- into law on March 18, 2010. HIRE amends the Internal Revenue Code by providing two new tax benefits to employers hiring unemployed workers. The first tax benefit essentially exempts employers from paying their share of Social Security taxes (or 6.2%) on wages paid to newly hired employees after March 18, 2010. Employers still must pay their share of Social Security taxes from new hires and then claim the payroll tax benefit on their 2010 federal employment tax returns. The second tax benefit affords employers a general business tax credit of up to $1,000 per new employee if the employer retains the new employee for at least one year.

Tax benefits are not automatic. The employer must be a business, agricultural employer, tax-exempt organization or public college or university. Household employers do not qualify for the tax benefits. Employers must hire new employees between February 3, 2010 and January 1, 2011, and the new employee must fill a newly added position or a position that was previously occupied by an employee that voluntarily left or was terminated for cause. Finally, employers must obtain a form from the new employee attesting that he or she was unemployed for the 60 days prior to starting work or worked less than 40 hours total for a different employer during the 60 days prior to starting work. The Internal Revenue Service will post the new tax provisions and the required form in the coming weeks at www.irs.gov.

Ohio Supreme Court Upholds Ohio's Employer Intentional Tort Statute

*By George S. Crisci

For almost three decades, the Ohio General Assembly has attempted to limit an employee’s ability to sue an employer on grounds that the employer’s intentional actions caused a workplace injury or occupational disease. The Ohio Supreme Court has struck down no fewer than three such pieces of legislation as unconstitutional since 1982. In the absence of a limiting statute, Ohio common law has allowed such “employer intentional tort” suits to proceed outside the workers’ compensation system. As a result, juries have often found employers subject to increased liability for workplace injuries based, for all practical purposes, on little more than negligence.

The General Assembly’s string of failed attempts was broken when the Ohio Supreme Court issued two companion decisions on March 23, 2010, ruling that Ohio Revised Code Section 2754.01, which limits an employee’s ability to sue an employer for an intentional tort, did not violate the Ohio Constitution.

The statute, passed in 2005, provides that an employer is immune from liability when sued by employees or their dependent survivors for an intentional injury unless the plaintiff proves that the employer acted with the “intent to injure the employee” or “with the belief that the injury was substantially certain to occur.” The statute defines the phrase “substantially certain” as meaning that “an employer acts with deliberate intent to cause an employee to suffer an injury, a disease, a condition, or death.” The statute further provides that an employer’s deliberate removal of equipment safety guards or deliberate misrepresentation of a toxic or hazardous substance creates a rebuttable presumption that these actions were committed with the intent to injure another.

In Kaminski v. Metal & Wire Products Company, 2010-Ohio-1027, the Ohio Supreme Court found that R.C. §2745.01 did not violate Sections 34 (authorizing employment workplace laws) and 35 (authorizing workers’ compensation laws) of Article II of the Ohio Constitution. Specifically, the Court held that those provisions granted the General Assembly broad authority to enact legislation and did not prohibit limitations on employer intentional torts. The Court further explained that because R.C. §2745.01 merely limits, but does not eliminate, an employee’s ability to sue an employer for intentional tort, it is constitutional.

In Stetter v. R.J. Corman Derailment Services, LLC, 2010-Ohio-1029, the Ohio Supreme Court further established the constitutional validity of R.C. §2745.01. Responding to issues referred to it by a federal court, the Ohio Supreme Court ruled that the statute does not on its face violate a number of the Ohio Constitution’s provisions including those concerning access to the courts, the right to a jury trial, and equal protection under the law. Notably, the Ohio Supreme Court explained that while R.C. §2745.01 does not eliminate the common-law cause of action for an employer intentional tort, it does significantly limit an employee’s ability to bring such an action.

Thus, for the first time in almost 30 years, the Ohio Supreme Court has denied a challenge to limits on the employer intentional tort. As a result, employers face reduced risk that an employee can successfully seek to recover for workplace injuries and/or occupational diseases outside the limits of the workers’ compensation system. Most importantly, it is now easier for employers to defend against meritless intentional tort lawsuits and the sizeable damage awards or settlements that flow from them.

If you have any questions how the unemployment benefits extension may affect your business, please contact George S. Crisci at 216.696.4441 or gsc@zrlaw.com.

*George S. Crisci is an OSBA Certified Specialist in Labor and Employment Law and has extensive experience in all aspects of workplace law. For more information about defending allegations of public policy discrimination, please contact George at 216.696.4441 or gsc@zrlaw.com.

Health Care Reform Legislation Passes the House and Is On Its Way to the President – What Does It Mean for Employers?

*By Patrick J. Hoban

Last night, the U.S. House of Representatives passed the “Patient Protection and Affordable Care Act” – H.R. 3590 (the “Senate Bill”) – by a vote of 219-212. The U.S. Senate passed the identical bill on December 24, 2009, and, after President Obama signs the bill, it will become law. Supporters claim that the bill’s combination of taxes, regulations, and health insurance subsidies will result in “comprehensive” reform of health care in the United States. Opponents counter that the bill’s provisions are too costly and that its regulations will only serve to drive up the cost of health care and reduce access.

Among the Senate Bill’s many terms are provisions requiring employers employing more than 50 employees to pay an “assessment” to the federal government when one of its full-time employees is eligible for government health care subsidies based upon their compensation as a percentage of the Federal Poverty Limit. The Senate Bill defines “Full-Time” as any employee who works at least an average of 30 hours per week as determined by regulations to be issued by the Secretary of Health and Human Services in consultation with the Secretary of Labor. The Senate Bill also includes the following provisions which take effect on January 1, 2014:

• Employers who do not offer health care coverage meeting federal minimal essential coverage standards are required to pay the federal government a flat dollar amount per full-time employee;
  
  
• Employers who do offer health care coverage meeting federal minimal essential coverage standards are required to pay either $3,000.00 per subsidy-eligible employee or a flat dollar amount per each full-time employee, which ever is less;
  
  
• Employers who impose a waiting period before employees can enroll in employer provided health coverage are required to pay $400.00 per employee for 30-60 day waiting periods and $600.00 per employee for 60-90 day waiting periods;
  
  
• Employers who provide health care coverage meeting federal minimal essential coverage standards to their employees must provide a voucher equal to the employer’s cost of providing such coverage to employees whose income is less than 400% of the Federal Poverty Limit (e.g., $88,050.00 for a family of four) if the employee’s share of health insurance premiums is between 8% and 9.8% of their income and the employee chooses insurance coverage through a federal health insurance exchange.
  
  
• Employers must automatically enroll all employees for health care coverage, but employees may opt out of coverage.

In addition to the foregoing provisions, the Senate Bill also provides small employers with tax credits for offering their employees health care coverage. In tax years 2010-2013, employers with fewer than 25 employees and average annual wages of less than $50,000.00 may take a tax credit of up to 35% of employee health premiums if the employer pays at least 50% of the premium for minimal essential coverage. Additionally, until January 1, 2014, the federal government will reimburse employers who provide health insurance coverage for retirees over the age of 55 years but not Medicare-eligible for up to 80% of retiree health insurance claims up to $90,000.00. Reports indicate the President will sign the Senate Bill today or tomorrow.

Importantly, in addition to passing the Senate Bill, last night, the House also passed the “White House/Congressional Leadership Reconciliation Bill Health Care and Education Affordability Act of 2010” – H.R. 4872 (the “Reconciliation Bill”) by a vote of 220-211. The Reconciliation Bill contains a series of amendments to the Senate Bill and will have to get through the reconciliation process with at least 51 votes (as President of the Senate, Vice President Joe Biden can break any ties) and be signed by the President before becoming law. Importantly, the Reconciliation Bill changes some of the employer-specific provisions contained in the Senate Bill. The Senate is expected to take up the Reconciliation Bill this week.

In addition to the President’s signature, full implementation of the Senate Bill will require regulatory guidance from the Internal Revenue Service, the Department of Health and Human Services, and the Department of Labor. However, all employers should consult with their health insurance brokers, tax advisers, and review collective bargaining agreements to develop a strategy that allows them to best adapt to the drastically changed national health insurance landscape.

*Patrick J. Hoban, practices in all areas of labor and employment law, with a focus on private and public sector labor law. If you have any questions about the effect of recent health care legislation on employers, contact Pat Hoban at pjh@zrlaw.com or 216.696.4441.

President Obama Signs H.R. 4691 Extending Unemployment and ARRA COBRA Subsidy Benefits Through March 31, 2010

*By Patrick J. Hoban

On March 2, 2010, President Obama signed H.R. 4691 – the “Temporary Extension Act of 2010” (the “Act”) into law. The Bill, which became Public Law 111-144, provides short-term extensions of several authorities, including those related to: (1) unemployment compensation; (2) ARRA COBRA premium subsidies; (3) Medicare physician payments; (4) Medicare therapy caps; (5) surface transportation programs; (6) flood insurance programs; (7) retransmission of television broadcasts; (8) Federal poverty guidelines; and (9) Small Business Administration loan guarantees.

In addition to extending the ARRA COBRA premium subsidies to individuals who become eligible through March 31, 2010, the Act clarifies the eligibility of individuals who lose group health insurance coverage due to the reduction in hours of an employee. The Act specifies that the loss of group coverage due to a reduction in hours only triggers eligibility for COBRA continuation coverage but not the ARRA COBRA subsidy. However, an individual who loses group coverage due to a reduction in hours and is later involuntarily terminated is entitled to elect ARRA COBRA coverage at the time of his or her involuntary termination.

Importantly, per the “clarification” set forth in the Act and as confirmed by the Employee Benefits Security Administration (“EBSA”), the total period for COBRA continuation coverage eligibility (with or without the ARRA premium subsidy) initially extends for 18 months from the triggering event (i.e., loss of group coverage due to an hours reduction or termination of employment). Currently, the ARRA COBRA premium subsidy extends for 15 months from the date of involuntary termination. However, EBSA has confirmed that the ARRA COBRA premium subsidy does not extend the period of COBRA continuation entitlement. Thus, when a covered individual loses group coverage due to a reduction in hours, the clock starts ticking on his or her COBRA continuation eligibility. If that employee is later involuntarily terminated, he or she will be entitled to elect the ARRA COBRA premium subsidy but that election will not extend the period of COBRA continuation coverage to which he or she is entitled.

Although the Act only extended the ARRA COBRA premium subsidy to eligible individuals through March 31, 2010, there are currently two bills pending in the U.S. Congress that would extend the premium subsidies through June 30, 2010. Employers should expect Congress to take further action on COBRA within the month.

*Patrick J. Hoban, practices in all areas of labor and employment law, with a focus on private and public sector labor law. If you have any questions about this legislation or other ARRA COBRA or COBRA issues, contact Pat Hoban at pjh@zrlaw.com or 216.696.4441.