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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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    The Labor and Employment Law Update is provided for information purposes only, and should not be construed as legal advice on any subject matter, nor should it be construed as creating an attorney client relationship. Do not send confidential information or facts about a legal matter. The opinions of this blog's contributors do not reflect the opinions of SmithAmundsen LLC as a whole. See the disclaimer page for further information.

“The Customer is Always Right” Results in Liability for Employer

Contributed by Suzanne Newcomb

We have all heard the mantra “the customer is always right,” but what is an employer to do when a customer’s request conflicts with an anti-discrimination law? As a Florida security firm learned last week, an employment decision that is based on disability violates the Americans with Disabilities Act (ADA) even if the decision is made in direct response to a specific customer complaint. Alberto Tarud-Saieh lost his right arm in a car accident. Later, he was hired by Florida Commercial Security Services as a security guard and assigned to provide security services for a community association.

Although Tarud-Saieh was qualified and fully licensed for his position, the president of the community association complained immediately, stating, “The company is a joke. You sent me a one-armed security guard.” In an effort to appease its customer, the security company removed Tarud-Saieh from his post. The EEOC brought suit on Tarud-Saieh’s behalf and on October 23, 2014, a jury found the company guilty of violating the ADA and awarded Tarud-Saieh nearly $36,000 in lost wages; a rather hefty sum considering Tarud-Saieh earned only eight dollars an hour. So hefty in fact that local news reports quote the owner of the company stating the lawsuit will put his company out of business. In 2010 the Seventh Circuit Court of Appeals addressed the issue of customer preferences in the context of a nursing home resident who preferred to be cared for by white nursing assistants stating unequivocally, “a company’s desire to cater to the perceived racial preferences of its customers is not a defense under Title VII for treating employee’s differently based on race.” Chaney v. Plainfield Healthcare Center, 612 F.3d 908, 913. Courts allow only a very limited exception for gender preferences in a health-care setting in order to accommodate patients’ privacy concerns.

The bottom line: An employment decision that is based on a protected characteristic, i.e., race, gender, national origin, religion, disability or age, is unlawful even if it is prompted by a specific customer request or complaint.

Up Up and Away the Minimum Wage Rate Goes?

Contributed by Julie Proscia

On November 4, 2014, five states — Illinois, Alaska, Arkansas, Nebraska, and South Dakota — as well as a handful of cities and counties, will all vote on various binding and non-binding initiatives that contemplate raising the minimum wage.  These state and local initiatives arise after a failed attempt to bring the issue on the federal level earlier this year, and are important to watch in an ever borderless commerce system.

The state roundup of Minimum Wage Initiatives is as follows:Ballot Box


The Illinois Minimum Wage Increase Question, which is on the November 4, 2014 ballot, is an advisory question and is NON-binding. The measure asks voters whether or not they support increasing the hourly minimum wage rate from the current rate of $8.25 per hour to $10.00 per hour by January 1, 2015. Although the result of the question is not binding, supporters are hoping to use an affirmative vote to increase momentum for subsequent legislation.


The Arkansas Minimum Wage Initiative is on the November 4, 2014 ballot as an initiated state statute. After much litigation, the Arkansas State Supreme Court denied a Little Rock businessman’s effort to block the ballot question and the initiative will be voted on. If successful, the Arkansas state minimum wage rate would increase from $6.25 to $7.50 per hour on January 1, 2015; to $8.00 per hour on January 1, 2016; and to $8.50 per hour on January 1, 2017. Employers in Arkansas that do more than $500,000 in business per year are currently required to pay at least the federal minimum wage rate of $7.25 per hour.


The Alaska Minimum Wage Initiative is on the November 4, 2014 ballot.  If successful, it would increase the state’s minimum wage rate from $7.75 per hour to $8.75 per hour beginning January 1, 2015, and the rate will increase again to $9.75 per hour on January 1, 2016. After 2016, the rate would be adjusted either based on inflation, or remain $1.00 higher than the federal minimum wage, whichever amount is greater.


The Nebraska Minimum Wage Initiative is on the November 4, 2014 ballot as an initiated state statute. If successful, the measure would increase the state’s minimum wage rate from $7.25 per hour to $8.00 per hour on January 1, 2015, and from $8.00 per hour to $9.00 per hour on January 1, 2016.

South Dakota

The South Dakota Minimum Wage Initiative is also on the November 4, 2014 ballot as an initiated state statute. If successful, the measure would increase the minimum wage from $7.25 per hour to $8.50 per hour beginning on January 1, 2015. Thereinafter, an increase in the minimum wage rate would occur each year based on inflation.

Although midterm elections are typically not as exciting as presidential years, the November 4, 2014 election has the potential to impact numerous employers in multiple states throughout the country and is definitely one to watch. We will keep you posted!

Corporation Can Have a Specific Race

Contributed by Terry Fox

A few years ago, courts recognized that corporations have First Amendment rights to speech.  E.g. Citizens United v. Federal Elections Commission (2010).  Recently, a federal court deemed that a minority-owned contractor corporation – a legal entity, not a person – is African American for purposes of anti-discrimination in contracting law.  Is recognizing a corporation’s “race” just a logical “next step” or does this “race” attribute open up unworkable and unforeseen consequences?

Federal laws prohibit discrimination in contracting based on race. Title VI specifically prohibits race discrimination with any contract funded by federal monies.  A minority-owned contractor, Carnell Construction Corporation, contracted with the Danville (Virginia) Housing Authority to perform site work on a Blaine Square Development for low income housing. Carnell Construction Corp. v. Danville Redevelopment & Housing Authority, 745 F.3d 703 (4th Cir. 2014). Disputes surfaced before the completion date for the site work, including failure to pay, re-work, and other issues the authority claimed were due to contractor competence and the contractor attributed to poor planning by the authority.  When the owner failed to pay for completed work and when mediation failed, the contractor filed suit. The contractor alleged, in part, that the reason it was not paid for work completed was due to race discrimination.  Carnell Construction was a certified minority-owned contractor, its president and sole shareholder being African American.  On appeal from a jury verdict in favor of the contractor for $915,000 on the $793,000 site work contract, the court of appeals for the fourth circuit held that Carnell Construction could sue for race discrimination.

As surreal as it may seem, application of anti-discrimination laws to protect corporations, coupled with other rulings that corporations have certain constitutional rights, may result in corporations being sued specifically by employees on grounds of discrimination due to or arising from the corporation’s specific race.  Business owners should keep in mind that discrimination claims can come from both employees and other individuals — and now, from corporations.

Are You Sure You Can’t Accommodate? Time As A Potential Determining Factor In ADA Accommodations

Contributed by Steven Jados

The Seventh Circuit Appellate Court’s decision last week in Kauffman v. Petersen Health Care VII, LLC, makes clear that the time an employee spends on a given job duty is critically important when it comes to reasonable accommodation requests under the Americans with Disabilities Act (ADA).  The Kauffman case also reinforces an important lesson on a reasonable accommodation pitfall that employers must absolutely avoid.

The employee, Debra Kauffman, was a hairdresser at a nursing home, and one of her duties in that role was to push wheelchair-bound residents to and from the home’s beauty parlor.  After undergoing a surgical procedure, and on her doctor’s orders, Kauffman asked her employer for an accommodation in the form of being excused from pushing residents in wheelchairs.

The employer’s response was “no,” essentially because the home did not allow people with medical restrictions to continue working for the home.

Lesson one: don’t do that.  The law on reasonable accommodations is substantially well-developed on certain points, which is why we can advise employers, without hesitation, that a blanket policy (sometimes called a “100%  healed” policy) that bars all employees with medical restrictions from returning to work, without any individualized inquiry as to the nature of the medical restrictions at issue and the employer’s capability to provide some accommodation, is extremely risky in terms of exposing employers to potential legal liability and the costs and uncertainty of litigation.

So, as an initial matter, the home’s reliance on the blanket policy (and failure to consider what could be done to allow Kauffman to continue working) was unlawful.  The proper response is to engage in an individualized, interactive inquiry into what is being requested and what the employer is able to provide.

Lesson two: when an employee asks to be excused from certain duties, the employer must realistically assess how much of the employee’s working time the duties at issue consume.  The employer must also realistically assess what the potential burden—financial and otherwise—of eliminating or re-allocating the job duties will be for the employer.  And the employer must be absolutely certain to document these various assessments in writing so that if an employee ever files an EEOC or state agency charge or a lawsuit, the employer will be in a strong position to defend itself.

The key to ADA accommodations is, of course, individualized inquiries into what the employee needs and what the employer can provide.  That said, in light of the Kauffman decision, employers in Illinois, Indiana, and Wisconsin are likely to face considerable difficulty in establishing that a hardship prevents granting a reasonable accommodation in situations in which an employee asks to be excused from a duty that consumes only a small portion of her workday.

If employers refuse to consider the amount of working time at issue in an accommodation request, the Kauffman decision makes clear that the consequences may include a jury trial in federal court—and the considerable expense and risk that accompany such a trial—plus the costs and potential embarrassment of a jury verdict against the employer.

EEOC Targets Employer Wellness Programs

Contributed by Jonathon Hoag

The U.S. Equal Employment Opportunity Commission (EEOC) recently announced that it has filed suit against a second employer alleging the employer’s wellness program is in violation of the Americans with Disabilities Act (ADA).  The EEOC’s first lawsuit of this kind was filed a couple months ago alleging the employer’s wellness program was not voluntary and the employee was discharged for failing to participate in the program.  The ADA concern is that wellness programs often require “medical examinations” and involve “disability-related inquiries,” so participation in these programs must be voluntary (or job-related and consistent with business necessity).

In the latest case, the EEOC alleges that the employer imposed significant penalties on non-participating employees, which eliminated the voluntary nature of the program.  The EEOC claims that employees who refused to participate faced cancellation of medical insurance or the requirement to pay the entire premium cost.  Employees who participated in the program maintained coverage and only had to pay 25% of the premium cost.  The EEOC acknowledged that voluntary wellness programs are lawful, but it is scrutinizing whether the program is truly voluntary.  According to the EEOC, if the employer places significant penalties on employees who choose not to participate (e.g., shifting 100% of the premium cost to such employees, disciplining employees, or cancelling medical insurance), the program is not voluntary.

The EEOC previously announced that it intends to initiate rulemaking to address wellness programs, but proposed rules have yet to be published.  To date, the EEOC’s activity only indicates it is targeting programs that impose significant penalties on non-participating employees.  There has been no indication that the EEOC will target wellness programs that simply offer slight incentives to encourage participation, but the forthcoming rules should help shed more light on the EEOC’s enforcement plans in this important area.  In the meantime, employers should review current wellness plans to ensure they are truly voluntary in nature.

ACA Employer Reporting Obligations are Effective January 1, 2015 – Are You Ready?

Contributed by Kelly Haab-Tallitsch

Beginning January 2015, employers will be subject to extensive ACA reporting requirements. Although submission of the data for 2015 will not take place until early 2016, employers and insurers need to start capturing the required data in January and should ensure that all the proper data can be captured and tracked prior to the beginning of the year.

The rules require extensive data reporting and are intended to help the IRS enforce various tax provisions of the ACA, including the employer and individual mandates.  Proposed instructions for reporting and draft forms were issued by the IRS at the end of August.

Employer Mandate Reporting – IRC Section 6056

Employers with more than 50 full-time equivalent employees are required to report if they made a “qualifying offer” of coverage to individual full-time employees and their dependents on a per month, per employee basis. The required amount of data is extensive and includes:

  • Name, address, and SSN of each full-time employee and the months, if any, during the calendar year which the employee was covered under the health plan;
  • The months for which minimum essential coverage was available;
  • Each full-time employee’s share of the lowest cost monthly premium (self-only) for coverage providing minimum value offered to that full-time employee under an eligible employer-sponsored plan, by calendar month; and
  • The number of full-time employees for each month during the calendar year.

Certain additional information will be required through indicator codes.

Individual Mandate Reporting – IRC Section 6055

Employers with self-funded plans (including those with under 50 employees) and insurers are required to report overall information on the plan and the plan sponsor, as well as data for each individual covered under the plan. The required individual information includes:

  • Name, address, and SSN (or date of birth if SSN not available) of each individual covered; and
  • Months during the calendar year when the individual was covered.

Employers who are self-funded are subject to both the required individual mandate reporting and the employer mandate reporting and will report for both at the same time on the same forms.

Timing and Implications

Under both IRC Sections 6055 and 6056, the reporting entity (employer or insurer) is required to report data on the prior calendar year to employees by January 31 and to the IRS by March 31.

Even though reports will first be submitted in early 2016 for calendar year 2015, the reporting period begins January 1, 2015, requiring employers to start capturing the needed data as of that date. Employers must take necessary steps now to ensure that all required data can be tracked prior to the first of the year.


OSHA Strengthens Whistleblower Retaliation Enforcement

Contributed by Noah A. Frank

Recently, OSHA announced that it would be lowering the burden of proof for whistleblower claim investigations from “reasonable cause” to a mere “preponderance of the evidence.” As a result, employees need only show that, more likely than not, there was an adverse employment action as a result of an OSHA complaint, rather than showing that the adverse employment action was the direct result of the OSHA complaint.

At the same time, OSHA is seeking to hire 20% more full-time employees in its whistleblower programs and will be hiring in each region an Assistant Regional Administrator for Whistleblower Protection, responsible for direct caseload management and oversight of investigations. Between 2009 and June 2014, OSHA issued 3,726 whistleblower merit determinations and obtained $119 million in damages against employers, and reinstated 389 employees. OSHA also announced it would be exchanging information with the Federal Motor Carrier Safety Administration (FMCSA) to further prosecute allegations of whistleblower retaliation.

The Bottom Line:

Retaliation claims are on the rise (another employment agency, the EEOC, reported that in 2013, retaliation charges accounted for over 41% of all charges). Facing an increased number of OSHA employees to investigate whistleblower claims under a decreased burden of proof, employers will need to tread carefully when dealing with their employees who have reported unsafe conditions to them, threatened to go to OSHA, or are suspected of having made a safety report to OSHA. When dealing with these employees, employers should:

  • Carefully follow their own published employment policies (handbooks, safety rules, etc.);
  • Treat all employees fairly and equally;
  • Document the basis for an discipline or other adverse employment action (and, to avoid claims of non-promotion, etc., document why other employees received raises, promotions…); and
  • Engage counsel when dealing with potentially sticky situations.

For more information: OSHA Announcement: https://www.osha.gov/pls/oshaweb/owadisp.show_document?p_table=SPEECHES&p_id=3259


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