Contributed by Steven Jados, August 7, 2018
With the dust settling on the U.S. Supreme Court’s decision upholding the validity of class and collective action waivers in employee arbitration agreements, there is no better time to double-check that employee arbitration agreements are in proper form. A recent decision from the Seventh Circuit highlights one particular area for review: the employer’s name.
In Goplin v. WeConnect, Inc., the employee, Goplin, worked for WeConnect, and he signed an arbitration agreement at the beginning of his employment. Unfortunately for WeConnect, the arbitration agreement never once mentioned WeConnect. Instead, the agreement referred to an entity named “AEI”—which was not Goplin’s employer.
When WeConnect attempted to enforce the arbitration agreement to compel Goplin to pursue his legal claims with an arbitrator, the court agreed with Goplin that WeConnect was not a party to the arbitration agreement, so WeConnect could not use the agreement to prevent Goplin from suing in court.
The bottom line is that employers must closely review employee arbitration agreements to ensure that all parties to the agreement are properly named—particularly when the employer has undergone a name change or merger in the time since the agreement was drafted. Doing so will help ensure that the agreement has a greater likelihood of enforceability if the agreement is challenged in court.
Contributed by Rebecca Dobbs Bush, July 30, 2018
The Health Insurance Portability and Accountability Act of 1996 (HIPAA) addresses, among other things, the use and disclosure of individually identifiable health information, referred to as “protected health information” or PHI. Many employers are confused as to how the HIPAA Privacy Rules apply to them. With requests for FMLA and accommodations for disabilities, employers are handling very sensitive and private information about their employees on a daily basis. While it is impossible to thoroughly address the multitude of issues within the HIPAA privacy rules in a short article, following are some basic points that should help most employers in navigating compliance with HIPAA privacy rules.
HIPAA privacy rules generally do not directly affect employers unless they are a “covered entity” as defined under HIPAA. Covered entities typically include health plans, health care clearinghouses, and most health care providers. Even a health care provider may not be directly subject to HIPAA Privacy Rules in their role as an employer. HIPAA regulations provide an example involving a health care employee: When a clinic employee visits a doctor for treatment, her medical file is PHI. However, when that employee takes the doctor’s note she received during her visit and turns it in to HR for attendance purposes, the document is now part of her employment file and is no longer PHI in that setting.
Avoid receiving PHI from your group health plan. If you do not maintain a self-insured health plan you can minimize the need to comply with HIPAA privacy rule requirements simply by restricting your insurer from sharing the information. Generally an insurer should not be sending PHI to the employer unless the plan document specifically states which employees may receive PHI and for what purposes. Your plan document should not unnecessarily designate employees to receive PHI. It is a good idea to review insurance contracts and plan documents and make sure they limit the role the employer plays in administering the group health plan.
Outsource Administration of group health plans, including flex spending accounts. If you have a self-insured health plan and/or a flex spending plan, you need to make sure those plans are administered in compliance with HIPAA privacy rules. However, if you hire a third party administrator, you can and should shift the flow of the PHI to the third party administrator who will be handling the claims. This step greatly simplifies what an employer has to do to be in compliance with HIPAA as it greatly limits the amount of PHI the employer receives. Instead, you can focus on making sure you have a Business Associate Agreement in place with the third party administrator.
As with everything, there are exceptions to these basic points. For example, the privacy rules contain special provisions relating to workers’ compensation laws allowing for an employer to obtain PHI directly from a health care provider when “necessary” to comply with workers’ compensation laws. Another exception exists in the privacy rules excluding self-administered plans with fewer than fifty (50) participants from being subject to HIPAA privacy regulations. It is always best for an employer to consult with counsel on any of these issues.
Contributed by Allison Sues, July 23, 2018
In the wake of the #MeToo movement, companies have been reviewing their sexual harassment training and investigation practices, and many states have considered the need for additional legislation offering protection to employees. For example, we previously covered legislation discouraging confidential settlements of sexual harassment claims in Tennessee, Washington, and New York. Recently, California enacted new legislation that protects employees who report sexual harassment from lawsuits claiming that they defamed the alleged harasser. Assembly Bill No. 2770, signed into law on July 9, 2018, codifies the common law rule that an employee’s complaint of sexual harassment, made without malice and based on credible information, is privileged and cannot give rise to liability for libel or slander.
scales of justice and gavel on orange background
This Act is notable in the protection it offers to employers. Assembly Bill No. 2770 also provides that an employer’s truthful reference is privileged when it reveals to a prospective employer that a former employee was involved in sexual misconduct or other harassment. The legislative counsel’s digest attached to the bill states that the bill “would authorize an employer to answer, without malice, whether the employer would rehire an employee and whether or not a decision to not rehire is based on the employer’s determination that the former employee engaged in sexual harassment.” This bill should assure employers that they will not be held liable for defamation while they conduct investigations into sexual harassment complaints and respond to reference inquiries regarding workplace harassers. This legislation will hopefully benefit employers on both ends of the reference process. The former employer is free to warn other employers about problem employees without fear of liability, and the potential new employer benefits from a more transparent hiring process and gains the knowledge necessary to avoid hiring someone who may victimize other employees in the new workplace.
All employers – both inside and outside of California – should always be careful when providing references. On the one hand, an employer’s negative reference may lead to claims for defamation and interference with contract if the former employee claims he was denied other employment because of the reference. On the other hand, an employer who refrains from providing truthful information about an employee who engaged in sexual harassment, sexual misconduct, or violence in the workplace could face a claim for negligent misrepresentation or negligent referral if the former employee is involved in an incident at the new workplace that could have been predicted based on prior behavior. To reach a balance between these two risks – and in the interest of promoting safe workplaces – employers should provide truthful references through objective and easily verifiable facts. For example, an employer should not provide subjective commentary about an employee terminated for harassment or sexual misconduct, but may report that the employer investigated complaints that the former employee engaged in sexual harassment and disciplined the employee after the investigation corroborated the complaints.
Contributed by Suzannah Wilson Overholt, June 20, 2018
As promised earlier this year, we have an update regarding the new health care company being formed by Amazon, Berkshire Hathaway and JPMorgan Chase, which still lacks an official name. In February, Warren Buffett announced that a CEO would be named within a year. The group later announced that a search was underway, and then, in early June, announced that a new CEO had been identified and would be named in two weeks.
True to their promise, on June 20, 2018, the triumvirate of Warren Buffett (Berkshire Hathaway), Jeff Bezos (Amazon) and Jamie Dimon (JPMorgan Chase) announced that Dr. Atul Gawande will serve as CEO of the new company starting July 9. Dr. Gawande currently practices general and endocrine surgery at Brigham and Women’s Hospital and is a professor at Harvard’s School of Public Health and Medical School. He is also the founding executive director of Ariadne Labs, which, according to the Ariadne Labs website, is a joint center between Brigham and Women’s Hospital and Harvard’s School of Public Health. Its mission is to “create scalable health care solutions that deliver better care at the most critical moments in people’s lives, everywhere.” The web site indicates that Dr. Gawande is also chairman of Lifebox, “a nonprofit reducing surgical deaths globally.” CNBC reported that Dr. Gawande will not be giving up his positions at Harvard or Brigham and Women’s Hospital and is transitioning to the position of chairman of Ariadne Labs.
When initially announced in January, the primary purpose of the new company was portrayed as an effort to reduce health care costs for employers. The appointment of Dr. Gawande adds a bit more insight into how that goal may be achieved. According to Bloomberg, the selection of Dr. Gawande has led analysts to conclude that the new company will take an expansive look at how to approach fixing health care. In a letter to his shareholders, Dimon indicated that the new company’s agenda will include aligning incentives among doctors, insurers and patients; reducing fraud and waste; giving employees more access to telemedicine and better wellness programs; and figuring out why so much money is spent on end-of-life care. Some have been critical of his statements, indicating that they are focused on the wrong issues.
The new company will be headquartered in Boston, most likely because that is where Dr. Gawande is located. Bloomberg reported that additional details such as the size, budget and authority of the new company are still not available. However, it will be “an independent entity that is free from profit-making incentives and constraints.” We will continue to monitor this and provide updates.
Contributed by Noah A. Frank, June 7, 2018
Technology is great. I can use my smartphone to change a million TV channels without getting up (of course, there’s still nothing to watch until Game of Thrones returns).
Close up of business man working on blank screen laptop computer
Employers, too, are reaping the benefits of technology for the most routine areas of employee and facilities management – including timekeeping and building security. But with the transitions from handwritten and manually punched time cards to fingerprint scanner timeclocks, and mechanical keys to retinal scanners, employers face significant risk under privacy laws.
As a result, many states are beginning to pass employee privacy laws related to biometric data (including but not limited to retina or iris scans, fingerprints and voiceprints, and hand and face geometry). And with laws and regulations, comes the need for compliance to stave off lawsuits, including private causes of action and class actions.
For example, a Federal Court in Illinois recently found that, despite no concrete damage, an employee (and her putative class) might have a triable cause of action for violating her privacy and right to control her biometric data. The employer and its timekeeping vendor allegedly failed to:
- inform the employee of the specific purpose or length of time fingerprints were to be collected, stored or used;
- make available any biometric data retention policy or guidelines (if there was one);
- obtain employee releases and authorizations for the collection and use such biometric data;
- and implement reasonable procedural safeguards.
The employer is further alleged to have systemically disclosed the biometric data by sharing it with the timekeeping vendor.
Biometric Data Done Right.
Biometric data is not something to be afraid of, as long as it is administered and used appropriately. The following key steps can help businesses ensure that they are complying with relevant laws:
- Establish a written policy that addresses the purpose(s) of biometric data use, how it will be collected, and how it will be stored.
- Be prepared to address any requests for reasonable accommodations based on disability, religious, or other reasons.
- If biometric data might leave a closed system, ensure that there are proper safeguards in place, including contractual liability shifting.
- Ensure that employees whose biometric data is used acknowledge the policy, and authorize its use and collection.
- Train supervisors on the company’s policies and practices to ensure consistency.
- Have the biometric data systems audited to ensure that data is not open to the public or a systems breach.
- Finally, consult with competent employment counsel to ensure that policies and practices comply with relevant law.
Contributed by Rebecca Dobbs Bush, May 31, 2018
Every employer offering a 401(k) plan is faced with decisions about what investment options to make available to participants. Investment options carry different risks as well as different costs. In designing available investment options, most plan sponsors rely on a third-party advisor. Industry estimates indicate that approximately 90% of these financial advisors are brokers, i.e., commissioned-based sales consultants.
Third-party financial advisors may or may not maintain fiduciary status in regards to the 401(k) plan (this depends on the specific terms of each individual plan). Where an advisor does not maintain fiduciary status, an employer is ultimately the party responsible for selection and monitoring of available investment options.
Person sitting at desk with a sign that says “Employer”
The final rule, issued back on April 8, 2016, increased the level of responsibility for every third-party advisor to a 401(k) plan from a weaker “suitability” standard to a “best interests” standard, meaning they must only offer advice in the best interests of plan participants and beneficiaries and must disclose any potential conflicts of interest. Understandably this is an incredibly difficult standard for a broker/financial advisor to meet and the financial industry has protested the rule vigorously. In March of 2018, the Fifth Circuit Court of Appeals vacated the Department of Labor (DOL) rule and the DOL has indicated they won’t be challenging that decision. On May 7, 2018, the DOL went a step further and issued Field Assistance Bulletin No. 2018-02 announcing a temporary non-enforcement policy.
Should employers be grieving the death of the fiduciary rule? Perhaps, but not necessarily. Ultimately no one will work for free and third-party advisors are no different. If broker/financial advisors can’t collect adequate compensation through commissions, they will likely change their fee structure to charge more direct service fees. At the end of the day, the costs to the plan and its participants would arguably be equivalent. That said, employers relying on third-parties for financial advice in designing and maintaining their plans need to keep this in mind. Blind trust is not an option when there is an inherent conflict of interest due to commission-based compensation. Employers are fiduciaries regardless of the death of the DOL’s fiduciary rule and need to be diligent in ensuring they understand their plan and are protecting the participants.
Contributed by Allison P. Sues, May 15, 2018
“FMLA Family Medical Leave Act” with doctor in background
Last month, the United States Court of Appeals for the Fifth Circuit issued an opinion that provides a helpful reminder about the extent to which an employer may ask an employee to work during a leave taken under the Family Medical Leave Act (FMLA). In D’Onofrio v. Vacation Publications, Inc., a sales representative requested FMLA leave to care for her husband, who had suffered a major back injury. Her employer gave her two options – she could either go on unpaid leave or she could log on remotely a few times per week during her leave in order to service her existing accounts and keep her commissions. The sales representative opted to continue servicing her accounts during her leave. Later, the sales representative sued her employer and alleged, among other claims, that her employer denied her entitlements under the FMLA by requesting that she work during her leave. The court quickly dismissed this claim because the sales representative had voluntarily agreed to the work. The employer had not coerced this work and had not conditioned the sales representative’s continued employment on completing the work during her leave. The court stated that “[g]iving employees the option to work while on leave does not constitute an interference with FMLA rights so long as working while on leave is not a condition of employment.”
This case serves as an example of a black and white rule – an employer may not condition continued employment on completing work while on FMLA leave or otherwise coerce or require an employee to work while out on FMLA leave. However, there is a lot of gray area surrounding this clear rule. While an employer may not require an employee to complete full assignments or regular work during leave, nothing in the FMLA statute or regulations prohibits an employer from contacting an employee during leave with de minimis requests or short and simple questions. For example, an employer may contact an employee on FMLA leave to request a password to access a file, to locate paperwork, or to obtain a quick update on where a particular matter was left.
To best avoid interference claims under FMLA, employers should limit contact with employees who are on leave. Any communication about work assignments should be short and not require the employee to travel to the workplace or otherwise require the employee to expend significant time or effort. Should an employee voluntarily agree to work during leave, the employer should communicate that the work is not required and document the nature of the voluntary agreement. And, if the employee is out on unpaid FMLA and has agreed to complete some assignments, the employer should ensure the employee is compensated to avoid any wage and hour issues.