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    Welcome to the Labor and Employment Law Update where attorneys from SmithAmundsen blog about management side labor and employment issues. We cover topics including addressing harassment and discrimination in the workplace, developing labor law, navigating through ADA(AA), FMLA and workers’ compensation issues, avoiding wage and hour landmines, key legislative, case law and regulatory changes and much more!
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Employers May Soon Be Required To Report Pay Information in Their EEO-1 Reports

Contributed by Debra Mastrian

Employers, including federal contractors, who are required to file annual Employer Information Reports (also known as EEO-1 reports) with the U.S. Equal Employment Opportunity Commission (EEOC) and the Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP), may soon have additional reporting requirements. Currently, employers with more than 100 employees and certain federal contractors with 50-99 employees, have to report the number of full-time and part-time employees by sex, race, ethnicity and job category on their EEO-1 reports.

CashThe EEOC recently announced a revision to the EEO-1 report to add aggregate pay data on pay ranges and total hours worked for employers, including federal contractors, with 100 or more employees. Federal contractors with 50-99 employees would not report the aggregate pay data but would continue to report the other required information. The announcement was made on January 29, 2016 at the White House Equal Pay Event commemorating the anniversary of the Lilly Ledbetter Fair Pay Act. The Chair of that event noted that the EEOC has made equal pay a national priority.

The proposed revision was made after commissioning independent studies and gathering input from various sources. The EEOC and the OFCCP will use the information to detect pay discrimination and trends in occupations and industries. The federal agencies also believe the information will help employers assess their own pay practices.

The pay data would be based on employees’ W-2 earnings. For each of the defined EEO-1 job categories (Executive/Senior Level Officials and Managers, First/Mid-Level Officials and Managers, Professionals, Technicians, Service Workers, etc.), employers would have to include the number of employees by sex, race and ethnicity that fall in certain defined pay bands. In determining which pay band is appropriate, employers would use employees’ total W-2 earnings for a 12-month period looking backward from a pay period between July 1st and September 30th. The total number of hours worked by the employees in each pay band would also be reported.

The EEOC and OFCCP plan to develop statistical software to analyze the reported data. It is not yet clear what will be considered as a discriminatory pay practice. Perhaps most concerning to employers is that non-discriminatory factors (such as differences in experience or education) will not be reflected in any statistical analysis because, under the current proposed rule, there is no provision for collecting that information.

The proposed revision, which is available on the Federal Register website, was published on February 1 and is open for public comment through April 1. The EEOC will consider any public comments and hold a public hearing before publishing the final rule.  The final rule would take effect for the September 2017 EEO-1 reports.

SUPER BOWL SPECIAL – NFL Teams Serve as a Reminder of Wage and Hour Issues

Contributed by Michael Wong

As many prepare this week for Super Bowl parties to cheer on their favorite team, NFL teams’ treatment of cheerleaders serves as a reminder to employers that no one can escape wage and hour laws. Moreover, it serves as reminder that if businesses/franchises worth billions of dollars have made the mistake of misclassifying an individual as an independent contractor instead of an employee, then so can you.

Over the past few years, more than five NFL teams including the Buffalo Bills, Cincinnati Bengals, New York Jets, Tampa Bay Buccaneers and Oakland Raiders have faced class action wage and hour lawsuits brought by their cheerleaders. In an industry, where many players and coaches make hundreds of thousands of dollars per game, it was “industry standard” to classify cheerleaders as independent contractors and only pay an appearance fee for each game.

Football stadiumDespite identifying cheerleaders as independent contractors, teams would typically exert significant control over how the cheerleaders performed – including their attire, dances, music, when and where they were to appear, participation in mandatory promotional events, and promotional materials. Additional mistakes included waiting to pay cheerleaders their appearance fees until the end of the season – at which time a team may unilaterally deduct fines. Similarly, many times expenses incurred by the cheerleader, such as travel, equipment, uniforms, etc., were deemed the sole responsibility of the cheerleader.

The Cost: The Oakland Raiders agreed to a $1.25 million dollar settlement; the Tampa Bay Buccaneers an $825,000 settlement, New York Jets a $325,000 settlement, Cincinnati Bengals a $255,000 settlement. Be aware, damages for wage and hour claims can grow very quickly and be enticing to pursue as they include liquidated damages, interest, and attorneys’ fees and costs.

What to Avoid:

  • Do not blindly follow industry standard. Class action lawsuits are changing the “industry standard” in many industries, including but not limited to construction contractors, truck drivers, limo drivers, taxi drivers, security guards, painters, cable installers, etc.
  • Understand if they are independent contractors – this means they must truly be independent from your control.  So, if you control the number of hours they work, where they work, how they work, their appearance, what tools they use, how much they charge, or what they must do, then you may really be their employer.
  • Are you the only company the individual does work for? If so, the scale just leaned a little more in favor of employee rather than independent contractor.
  • Finally, do not blindly follow the advice of your accountant. While some accountants are aware of the legal standards, your accountant may not be aware of the most recent changes or case law.

If you are unsure of the individual’s classification, seek the advice of legal counsel to determine whether the position is properly classified and what, if any, changes must be made to ensure you have a strong defense against a lawsuit or DOL audit.

ERISA Plans: Don’t Wait Until the Money’s All Gone

By: Rebecca Dobbs Bush

On January 20, 2016, the Supreme Court made it clear, in Montanile v. Board of Trustees of National Elevator Industry Health Benefit Plan, that ERISA plans wanting to enforce subrogation rights against a participant need to act quickly. If the participant spends all of his/her settlement funds on nontraceable items before the plan files suit for reimbursement, the plan is out of luck.

In December of 2008, plan participant, Robert Montanile, was severely injured when a Health Insurance and Moneydrunk driver ran through a stop sign and crashed into his vehicle. The health plan, in which Montanile was a participant, paid at least $121,044.02 for Montanile’s initial medical care. Not only did Montanile’s health plan contain a typical subrogation provision, Montanile also signed a separate reimbursement agreement reaffirming his obligation to reimburse the plan from any recovery or settlement he received.

Montanile pursued litigation against the drunk driver and obtained a $500,000 settlement. From those funds, Montanile paid his attorneys $200,000 plus $60,000 for costs advanced to him during the litigation. Montanile’s attorney set aside the remaining $240,000 in a client trust account.

However, when the plan sought reimbursement, Montanile’s attorney did not agree.  Settlement discussions eventually broke down. At that point, Montanile’s attorney notified the plan that he was distributing the entire $240,000 directly to Montanile unless they objected within 14 days. The plan didn’t respond and instead, six months later, filed federal litigation seeking reimbursement pursuant to ERISA §502(a)(3). Meanwhile, Montanile’s settlement funds were disappearing.

The Supreme Court confirmed in its opinion that ERISA §502(a)(3) limits subrogation claims to equitable relief. More simply put, a plan is only allowed to collect from the specific funds that a participant receives as settlement or judgment resulting from his/her injury. The Court held that if Montanile did not keep the settlement funds in a separate account or if he spent the whole settlement on nontraceable items (for instance, on services or consumable items like food), there would be nothing else that ERISA would allow the plan to seek reimbursement from – regardless of Montanile’s wrongful behavior.

The Court acknowledged the plan’s concerns that such an interpretation of ERISA would take away effective or cost efficient remedies for plans and encourage participants to spend settlement funds as quickly as possible. However, the Court indicated that health plans are in a position to control and prevent such behavior by monitoring medical care participants require and tracking and investigating expensive claims.

What does it all mean for employers? Employers with fully-insured health plans can most likely leave it to their insurance carrier to track and investigate expensive claims. However, employers with self-insured health plans should work with their TPA to make sure a process is in place to monitor and track expensive claims preserving their right to subrogation.

Eleventh Circuit Resurrects Transgender Mechanic’s Title VII Gender Discrimination Claim

Contributed by Suzanne Newcomb

Recently the Eleventh Circuit Court of Appeals (covering Georgia, Florida and Alabama) reversed a District Court decision which dismissed a Title VII gender discrimination claim brought by an auto mechanic who is transgender, Chavez v. Credit Nation Auto Sales, LLC (11th Cir. Jan. 14, 2016). In reinstating the plaintiff’s claim, the Eleventh Circuit reaffirmed its earlier pronouncement that discrimination based on gender nonconformity is unlawful sex discrimination.

The employer claimed to have terminated the plaintiff for sleeping on the job. Because plaintiff admitted she fell asleep while on the clock, the District Court granted the employer’s motion for summary judgment finding there was no evidence of pretext and therefore, plaintiff could not   prove discrimination as a matter of law. The Court of Appeals disagreed.

DiscriminationDespite her admission, the Court of Appeals concluded that plaintiff presented sufficient evidence from which a jury could conclude that discriminatory intent was a motivating factor in the termination decision. Plaintiff presented evidence that the decision maker was nervous about her gender transition and its ramifications on the business, blamed plaintiff’s gender transition for another employee’s resignation, felt plaintiff’s gender transition would negatively impact his business, told plaintiff not to bring up the subject of her gender transition with other employees, and instructed her not to wear a dress or anything “outlandish.” This evidence, combined with testimony from another member of the management team that plaintiff was subjected to heightened scrutiny as the employer searched for a “legitimate” reason to terminate her employment, the Eleventh Circuit concluded, was enough to survive summary judgment on a mixed motive theory.

The decision reminds employers that while sexual orientation and gender identity are not protected classes under federal law per se (though several states and municipalities have added specific LGBT protections to their own anti-discrimination laws), Title VII has long been interpreted to prohibit employers from mandating that employees conform to gender-specific stereotypes and to prohibit discrimination against those employees who fail to adhere to such stereotypes.

As far back as 1989, in Price Waterhouse v. Hopkins, the U.S. Supreme Court made clear that Title VII prohibits discrimination based on an employee’s failure to conform to gender norms.  Evidence that the accounting firm insisted Hopkins conform to gender stereotypes – it was alleged that to increase her chance of making partner she should “walk more femininely, talk more femininely, dress more femininely, wear make-up, have her hair styled, and wear jewelry” — amounted to gender discrimination.

To avoid similar allegations, employers must be sensitive to the rights of all employees, even in jurisdictions in which sexual orientation and gender identity are not specifically articulated as protected classes under relevant law. Concern about the perceptions of customers or other employees does not justify disparate treatment against employees who fail to follow gender-specific social norms.

7th Circuit Affirms Employer Victory: Discharge Proper for Employee Who Could Not Perform Essential Job Function

Contributed by Jonathan Hoag

The ADA Amendments Act of 2008 (ADAAA) brought broad speculation that a large percentage of employees would qualify as “disabled”  as defined under the amended ADA and employers would have to focus attention on engaging in the interactive process to identify a reasonable accommodation. While it is true that the ADAAA has increased the Injured personimportance of engaging in the interactive process to review possible accommodations, it is still equally important to consider whether the employee is a “qualified individual with a disability” under the ADAAA.  The 7th Circuit’s recent ruling in Equal Employment Opportunity Commission v. AutoZone, Inc., No. 15-1753 (7th Cir. Jan. 4, 2016), upheld dismissal of a disability claim because the employee could not perform the essential functions of the job and, thus, was not a “qualified individual with a disability.”

Margaret Zych started work with AutoZone in 2005 and was promoted to Parts Sales Manager (PSM) in 2007.  Following her promotion, Zych suffered a work-related injury and in 2009, Zych was permanently restricted from lifting with her right arm anything that weighed over 15 pounds. AutoZone terminated Zych’s employment when it was unable to reasonably accommodate her lifting restriction, asserting that lifting was essential to the job.

The EEOC filed suit against AutoZone alleging it failed to accommodate Zych’s lifting restrictions. As part of its claim, the EEOC was required to prove Zych was a qualified individual with a disability. Under the ADAAA, this means the EEOC had to prove Zych could perform the essential functions of the job with or without reasonable accommodation.

AutoZone was able to submit substantial evidence to show that lifting objects over 15 pounds was a regular and essential part of the PSM job.  Importantly, AutoZone was able to prove it did not have a practice of reassigning the lifting requirement of the job.  If there is evidence that the employee reassigns a task to other employees, the court views this as a strong showing the task is marginal (and not essential) to the job. The 7th Circuit pointed to numerous cases finding that it is not a reasonable accommodation to require another employee to do the lifting. As a result, Zych was not a qualified individual with a disability under the ADAAA.

AutoZone prevailed because it had substantial evidence to show lifting was an essential job function and there was no way to reasonably accommodate Zych’s restrictions. The ADAAA certainly places more emphasis on the employer’s obligation to review reasonable accommodations and engage in the interactive process. However, the 7th Circuit’s ruling is a reminder for employers to work with counsel to simultaneously analyze whether the employee is a “qualified individual with a disability.” This threshold issue remains an important component of limiting legal exposure to disability-related employment claims.

Federal Contractors and Subcontractors Top 10 Affirmative Action Checklist

Contributed by Heather Bailey

Any federal government contractor or subcontractor can testify to how much work really goes into complying with Affirmative Action obligations. Here is just a quick, non-exhaustive checklist to highlight many of your affirmative action to-dos:

  1. Are you “listing” your job openings with the nearby unemployment agencies?
  2. Are you asking your job applicants to self-identify their gender, race, veteran status and whether they are disabled or not?
  3. Are you asking those individuals that you have given an offer of employment to self-identify again their veteran status and whether they are disabled or not?
  4. Did you perform your annual compensation review to determine any pay disparities among employees in the same job groups and titles?
  5. Did you file your EEO-1?
  6. Did you file your VETS-4212 form?
  7. Did you update and post your affirmative action policy statement for employees and applicants to see?
  8. Did you have a refresher course with management and those employees in charge of hiring on the importance of affirmative action and their obligations in hiring and managing the workforce?
  9. If you are a contractor who hires subs to work on federal government work, did you include the requisite EEO and affirmative action compliance language in your agreement with your sub?
  10. Did you update your annual affirmative action plan?

It’s best to seek guidance from your employment labor counsel to ensure you are in compliance with all affirmative action requirements. Waiting until the OFCCP audit letter comes may be too late.

On Second Thought, That Bum Shoulder Is a Disability

Contributed by Beverly Alfon

A federal appellate court unanimously found that an individual’s difficulty with lifting his right arm above his shoulder, constituted a disability under the ADA Amendments Act of 2008, which amended the Americans with Disabilities Act of 1990 (ADA), Cannon v. Jacobs Field Services North America, Inc., Case No. 15-20127 (5th Cir., 1/13/16).

In this case, a construction firm offered the plaintiff, Michael Cannon, a job as a field engineer. Cannon participated in a pre-employment physical, which revealed a rotator cuff injury. The doctor cleared him for work, but only with accommodations: no driving of company vehicles, no lifting, no pushing or pulling of more than 10 pounds, and no working with his hands above shoulder level. On the same day the company received the doctor’s paperwork, they determined that Cannon was not physically capable of performing the job and then rescinded the offer. The company told Cannon that the construction worker-ladderreason for the rescission was his inability to climb a ladder – an essential function of the job. Despite Cannon’s multiple attempts to prove otherwise (even sending a video of himself doing so), the company ceased communication. Cannon filed suit. The lower court granted summary judgment to the company, concluding that the injured rotator cuff did not constitute a disability under the ADA.

The appellate court reversed the lower court, finding that the lower court ignored the ADA amendments’ more relaxed standard of “a degree of functional limitation” versus the higher standard of “substantially limits” a major life activity. The appellate court also found that the company’s “belief” that Cannon suffered from a substantial impairment was also enough to satisfy the disability element of the claim. Ultimately, the court concluded that the company “never cited a reason for rescinding Cannon’s offer […] which is divorced from his physical impairment.”

This brought the court to the next question of whether or not, despite Cannon’s impairment, he was still qualified for the field engineer position. The court reasoned that in light of evidence that the candidate could climb a ladder (i.e., the video footage), it was enough to reverse summary judgment and force the case to jury trial. The Court pointed out that had the company conducted a more thorough inquiry after learning about the injury, it would have been able to get to the bottom of the ladder climbing question.

Bottom line:  The ADA 2008 amendments made it much easier for a plaintiff to establish a disability. Your defense should focus on the issue of whether or not an individual is qualified for the position, despite any impairment. This requires you to fully engage in the interactive process and build a solid record of evaluation of the candidate’s qualifications before making a decision to rescind an offer.   

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