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Archive for the ‘Employment Law/Legislation’ Category
Wednesday, November 17th, 2010
On November 9, 2010, the Equal Opportunity Commission published the final implementing regulations for Title II of the Genetic Information Nondiscrimination Act (GINA). The new regulations contain significant revisions from the proposed regulations submitted for public comment on March 2, 2009.
GINA went into effect on May 21, 2008. The statute prohibits employers from discriminating on the basis of genetic information when making employment decisions, including health insurance determinations. It also creates a civil cause of action for employees who allege they were discriminated against on the basis of genetic information. GINA is primarily concerned with protecting employees whom the employer believes may develop a condition in the future. The American Disabilities Act already protects employees who are currently disabled from discrimination. All private employers with more than 15 employees, labor unions, and joint management programs are subject to the provisions of GINA.
GINA prohibits employers from requesting or requiring genetic information concerning their employees. Genetic information includes: an employee’s family medical history, genetic tests, genetic tests of a family member, requests for and receipt of genetic services by the employee or a family member, and genetic information about a fetus carried by an individual. Both the statute and the new regulations exclude information about an employee’s age or gender from the definition of genetic information. In addition, the new regulations clarify that an employee’s race or ethnicity is not considered genetic information subject to GINA, unless it is derived from a genetic test.
The new regulations create two major exceptions to GINA’s general prohibition on employer’s collecting genetic information. First, employers who inadvertently obtain genetic information are not in violation of the statute. This exception was specifically designed to protect employers from the “water cooler problem” in which an employer overhears a disclosure of genetic information, or acquires it during a conversation with an employee. The exception also covers situations where an employee discloses genetic information in response to a general inquiry about their health such as “How are you” or “will your child be okay.” However, an employer who learns inadvertent information may not respond by asking probing follow up questions such as whether other family members have the condition or if the employee has been tested for it.
Second, employers are permitted to request or require genetic information if they offer voluntary wellness programs. A wellness program will only be considered voluntary under the regulations if the employer does not require participation or issue penalties for nonparticipation. To ensure that participation is voluntary, employers must use authorization forms that are written in language that would be understood by the employee, describe the type of genetic information that will be obtained, and the limitations on the disclosure of the information.
An employer may offer financial inducements to encourage participation in programs in wellness, disease management, and healthy lifestyles. However, an employer may not offer those financial incentives for the specific purpose of inducing employees to reveal genetic information. For instance, it would not be a violation of GINA to offer employees a financial incentive for completing a health risk assessment that included questions concerning family medical history so long as the award was not contingent on the employee answering the questions related to genetic information.
The new GINA regulations substantially clarify the law employers must follow in relation to employee genetic information. Employers should be very careful not to request genetic information or make employment decisions on the basis of genetic information. A prudent employer should also post notices on employee rights under GINA, include the safe harbor language in requests for medical information and train supervisors to understand and comply with the statute.
Posted in Employment Law/Legislation, Health & Safety, Industry News | No Comments »
Monday, October 18th, 2010
Many states allow employers to require tip pooling. In a tip pooling arrangement, all employees subject to the pool have to chip in a portion of their tips, which are then divided among a group of employees. But be careful, and look before you leap!
The following is a brief survey of the applicable federal law and relevant state laws in New England regarding tip pooling.
Fair Labor Standards Act (FLSA)
The FLSA expressly permits employees to pool their tips. Employer can even require employees to pool their tips. Employers can also determine tip-pooling arrangement among employees in the tip pool.
There are, however, two exceptions: (1) A tip pooling arrangement is invalid if an employee must relinquish more than a “customary and reasonable” amount of tips to the pool, (but the law does not place any ceiling on the amount of tips contributed to a pool); (2) Only employees who customarily and regularly receive tips can participate in a tip pool (e.g., waiter, bellhop, busboy, counter personnel, and service bartender); by contrast, employees who do not customarily and regularly receive tips cannot participate in a tip pool (e.g., janitor, dishwasher, chef, cook and laundry room attendant).
As a general rule of thumb: whether an employee can participate in a tip pool depends on whether the employee’s occupation entails regular interactions with customers. If yes, the employee can participate in a tip pool. Courts have held that hosts and hostesses, and maîtres d’ hôtel can participate in a tip pool, but salad mixers and kitchen helpers cannot.
Employers, however, cannot participate in a tip pool. An “employer” is “any person acting directly or indirectly in the interest of an employer in relation to an employee.” Courts use the “economic reality test” to determine whether someone is an employer. That test looks at whether the individual in question: (1) has the power to hire and fire employees, (2) supervises and controls employee work schedules or conditions of employment, (3) determines the rate and method of employees’ pay, and (4) maintains employment records.
The greater number of these factors are present, the more likely an individual will be deemed to be an employer or agent of the employer and, thus, ineligible to participate in a tip pool (e.g., shareholders or board members of restaurant, general manager).
Massachusetts
Massachusetts does not outlaw tip pooling altogether. It merely specifies who may participate lawfully in a tip pool. An employer cannot require or permit a service employee to participate in a tip pool with non-service employees. It does not prohibit, however, a tip pooling arrangement between service employees.
However, a “service employee,” in part, means one who does not have “managerial responsibility.” “Managerial responsibility” is not defined. The better view on what constitutes “managerial responsibility” argues against making shift supervisors, who may themselves be non-exempt hourly workers, into people with “managerial responsibility” because such an approach would stretch that term beyond its intended meaning and possibly be unfair.
New Hampshire
New Hampshire is very straightforward. A valid tip pool is one that (1) the employee “voluntarily and without coercion” agrees to participate in and (2) the employer does not require or control in any manner. If the employee agrees to participate, the employer can administer the tip pool but cannot exercise any control over the manner in which tips are pooled other than for accounting and bookkeeping purposes. In addition, anyone can participate.
Connecticut
Connecticut is even simpler. There is no Connecticut law on tip pooling. Thus, employers should use the FLSA (see above) as guidance.
Tip Pooling is often a forgotten area of the law, but it is not that difficult to follow, and it will obviously protect you from liability.
Tags: tip pool, tip pooling, tip sharing
Posted in Employment Law/Legislation, Industry News, Restaurant Liability | No Comments »
Monday, August 16th, 2010
The following recent developments in New Hampshire law relate specifically to and impact, employers and restaurants:
SB 416 (Effective July 8, 2010)
Senate Bill 416 is the most interesting of these changes in New Hampshire law because it clarifies the applicability of the state minimum hourly wage to tipped restaurant employees. It amends the introductory paragraph of RSA 279:21 to include within the definition of a “Restaurant” the following: “an establishment in a temporary or permanent building, kept, used, maintained, advertised, and held out to the public to be a place where meals are regularly prepared or served for which a charge is made and where seating and table service is available for customers or where delivery services are available.” “The bill also includes, within the definition of “Tipped employees,” the following: “employees who deliver meals prepared in a restaurant to the customer’s home, office, or other location.” “Thus, under the bill, pizza delivery businesses would be able to cut their drivers’ wages in half because they can classify such drivers as tipped employees, and the minimum wage for such workers is 45 percent of the minimum wage.
SB 358 (Effective July 20, 2010)
Senate Bill 358 amends RSA 275-E and concerns whistleblower protection and waste prevention in state government. “Specifically, it expands the provisions of the whistleblower protection act to include employees who object to or refuse to participate in any activity that the employee believes is a violation of law.” This bill also authorizes the labor commissioner to investigate allegations of fraud, abuse, or waste in the expenditure of public funds and adds additional protections to the whistleblower protection act for public employees who file such complaints. Thus, the bill expands whistleblower protections for public employees by allowing them to expose waste, fraud, and abuse of public funds without fear of retribution.
HB 1137 (Effective August 13, 2010)
House Bill 1137 amends RSA 275:48, I(b)(9) and (10) by adding to the purposes for which employers may withhold a portion of an employee’s wages. “Specifically, employers may withhold wages for” [l]egal plans and identity theft plans without financial advantage to the employer when the employee has given his or her written authorization and deductions are duly recorded.” Thus, under HB 1137, workers “if their employers adopt the program” would be able to prepay for legal services through payroll deductions just as they can prepay for health benefits or day care.
These developments in New Hampshire law will have an “immediate impact on businesses, so employers should consult their counsel and determine how these new laws specifically” affect them.
Tags: new hampshire law
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Thursday, May 27th, 2010
A common employment application question may soon become a thing of the past in Massachusetts, as the House voted 138 to 17 to pass legislation banning employment applications from inquiring into criminal history, and taking a stand to “ban the box” as activists have advocated for years. Briefly, the House approved a provision that would seal records of felony convictions, making them unavailable to potential employers, after 10 years. The provision would also seal records of misdemeanor convictions after 5 years. In addition, the House voted to “ban the box,” adding a provision that would ban employers from including questions in their job application forms about a person’s criminal background.
But there are some loop holes. First, records for some crimes, such as murder and manslaughter, would never be sealed from a criminal background (or CORI) check under this House bill. Second, while employers will not be able to ask about criminal records on application forms, they will be permitted to ask during a job interview.
Whether this is a good idea remains to be seen. People in Massachusetts still remember the Christa??Worthington case, where the estate of a woman murdered by a trash collector sued the trash collection company for failing to conduct criminal background checks that would have disclosed the collector’s violent past. While reintegration of convicts back into productive society can serve to reduce crime generally, hiring an individual with a violent past can serve to increase an employer’s potential liability, not to mention the risk to unsuspecting customers and other members of the public.
The state’s Senate passed a similar version of the bill with a few variations, such as including sex crimes among the list of crimes exempted from the sealed record requirement. That said, a bill with these general provisions will likely be passed into law soon, and only time will tell whether society will be better off when it decides to “ban the box.”
Christopher Vrountas, Chair of the Employment Counseling and Litigation Practice Group, contributed this entry.
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Monday, March 29th, 2010
The Massachusetts Data Privacy Act (201 CMR 17), now recently revised,??went into effect March 1, 2010.?? It??applies to many businesses in a variety of industries.?? The law does not merely apply to retailers, financial institutions, or other companies whose day-to-day operations involve the gathering and sharing of personal information.???? Rather, it applies generally to those businesses that ???own or license??? personal information about Massachusetts residents.?? ???Personal information??? includes ???a Massachusetts resident???s first name and last name or first initial and last name in combination with??? any of the following: Social Security number, driver???s license number or state-issued identification card number, or financial account number, or credit or debit card number.?? Therefore, if you have any employees, receive payments from individuals (whether by check or credit card), or send out 1099s, your business owns or licenses personal information and, thus, must comply with the law.
Compliance with the law is much more straightforward and less burdensome than its language might suggest.?? The law requires businesses to ???develop, implement, and maintain a comprehensive information security program??? (???CISP???) that ???contains administrative, technical, and physical safeguards.????? However, it takes a risk-based approach by allowing businesses???in implementing these safeguards???to account for their ???size, scope and type of business,??? ???the amount of resources available,??? ???the amount of stored data,??? and ???the need for security and confidentiality of both consumer and employee information.???
In addition, the law contains other provisions that make compliance less demanding.?? The definition of ???encrypted??? is general and neutral and merely refers to ???the transformation of data into a form in which meaning cannot be assigned without the use of a confidential process or key.??????? Moreover, the law states that the minimum requirements for the computer security system included in the CISP must be applied only ???to the extent technically feasible.????? In other words, if there is a reasonable, technological means to develop and implement this computer security system, that reasonable means must be used.?? Businesses must also ???take reasonable steps to select and retain??? third-party service providers capable of maintaining security measures compliant with the law.?? Thus, with respect to development and implementation, the law places a significant amount of discretion with businesses and avoids a one-size-fits-all approach.
The law is much more specific, however, with respect to the CISP.?? When drafting the CISP, businesses should rely on their attorneys.?? Before drafting it, however, businesses should make certain determinations that will help them identify the specific information they must include in the CISP.?? They must identify where personal information comes from, where it is stored, who uses it, and how it is used.?? They must also identify reasonably foreseeable internal and external risks to the security, confidentiality, and integrity of any electronic, paper, or other records containing personal information.?? They must assess the likelihood and potential damage of these threats.?? Before deciding on any changes to company policy, they should evaluate the sufficiency of existing policies, procedures, customer information systems, and other safeguards in place to control risks.?? Finally, they should devise a plan to eliminate or, at worst, reduce those risks.
The CISP itself should set forth its objective and its purpose and define ???personal information.????? It should identify what kind of personal information it owns or handles, how it uses that personal information, and how it protects the information from internal and external threats.?? In particular, the CISP???s description of how the business protects personal information from threats should include several critical elements:
(1) It must designate an information security manager.?? This person will initially implement the CISP; train employees; test the CISP???s safeguards; evaluate the ability of each of the business???s third party service providers to protect the personal information to which the business has permitted them access and take reasonable steps to ensure that those third party service providers are applying appropriate security measures to personal information; review the scope of the security measures in the CISP at least annually, or whenever there is a material change in business practices that may implicate the security or integrity of records containing personal information; and conduct an annual training session for all owners, managers, employees, and independent contractors, including temporary and contract employees who have access to personal information on the elements of the CISP.?? Choosing such a point person will streamline and facilitate implementation of the CISP and compliance with the law.
(2) The CISP must describe how the business ensures that its employees follow the CISP.?? This should involve re-training of employees, training new employees, amendment of employee contracts (where applicable), annual refresher training, signed written agreements to follow the CISP, and an understanding that employees who fail to follow the CISP will be warned and/or terminated.
(3) It should limit the personal information acquired to an amount that is ???reasonably necessary??? to accomplish the business???s objectives.
(4) The CISP must limit access to records containing personal information to those persons reasonably required to know such information in order to accomplish the business???s purpose or to comply with other state or federal regulations.
(5) It must require that all security measures be reviewed at least annually, or whenever there is a material change in business practices that may reasonably implicate the security or integrity of records containing personal information.
(6) It should encourage employees to report any suspicious or unauthorized use of personal information.
(7) It must explain the procedure for handling security breaches, including a mandatory post-incident review of events and actions taken and a determination about whether any changes in security practices are required.
(8) It must restrict access to electronically stored personal information to those employees that have a unique log-in ID.?? Re-log-in should be required when a computer has been inactive for more than a few minutes.
(9) It must provide for the protection of paper files containing personal information, especially them they are used by employees, and it must require that, at the end of the day, all files and other records containing personal information be secured in a manner that is consistent with the CISP???s rules for protecting the security of personal information.
(10) It must provide proper methods for the disposition or destruction of paper or electronic records containing personal information.
(11) It must devise a policy and procedure for dealing with visitors and restricting visitor access to files containing personal information.
(12) It must require reasonably up-to-date firewall protection and operating system security patches, both of which must be designed to maintain the integrity of the personal information installed on all systems processing personal information.
(13) It must require reasonably up-to-date versions of system security agent software, including malware protection, and reasonably up-to- date patches and virus definitions, installed on all systems processing personal information.
(14) It must require the encryption of all personal information stored on laptops or other portable devices and all records and files transmitted across public networks or wirelessly.
(15) It must require that all computer systems must be monitored for unauthorized use of or access to personal information.
(16) It must contain a detailed password and user-authentication policy.?? The law specifically addresses passwords and states that they must be in such a format so that they are not compromised.?? In other words, passwords should contain a certain number of characters, including a combination of numbers, letters, and symbols, and must be difficult to crack.?? In addition, passwords should be changed periodically.?? Electronic access via passwords after multiple unsuccessful attempts to gain access must be blocked.
(17) It must describe how it protects and secures computer backups.
(18) It must include a section on third-party vendor compliance that explains how and in what manner the business shares personal information with third-party vendors and how it ensures that vendors comply with the CISP.
After finalizing the CISP, businesses must train their employees about the importance of protecting personal information and the security of the computer network.?? Most important, businesses must determine how they are going to accomplish these tasks and develop a reasonable secure network.?? They must decide if the internal resources they have are sufficient or if external help is necessary.
Once the CISP is finalized and implemented, businesses should monitor and update the effectiveness of the security measures and safeguards in place.
Robert Fojo, the newest member of the Employment Counseling and Litigation Practice Group, contributed this posting.
Tags: CISP, data management, data protection, employee protection, employee rights, Massachusetts Data Privacy Act
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Wednesday, March 24th, 2010
Although it may appear to be yet another act by the federal government to control daily life, this is one intrusion that has been supported by the hospitality industry for some time. Local communities, such as New York, Philadelphia, and states such as Massachusetts, have begun to enact menu labeling laws requiring certain restaurant chains to post various kinds of nutritional information prominently on their menus. Some require only calorie counts while others require information regarding trans-fats, sodium, carbohydrates and so on. Other states, such as Connecticut, have rejected such laws altogether, although in that case only by a recent governor’s veto. Faced with a patchwork of varying and complicated regulations, the industry supported federal regulation in this area so that businesses can deal with a single, consistent set of rules throughout the country.
And the rules are fairly straight forward, for now. The new healthcare reform law calls upon the FDA to develop new regulations that will set forth national standards for restaurants to post the calories of the various food items offered on the menu. The anticipated regulations will govern all restaurants with 20 or more locations. Once issued, these regulations will preempt local and state laws in the field and create an environment less likely to ensnare an operator by surprise.
That said, the industry still needs to deal with those plaintiffs lawyers. Class actions have been brought against restaurants who have sought to market “healthier options” on the grounds that such marketing campaigns and associated menu explanations fail to disclose the full nutritional story on the plate. Whether the federal labeling law will protect restuarants the way the surgeon general’s warning protected tobacco companies for years remains to be seen, but the Supreme Court has ruled that labeling laws do not necessarily preempt false advertising and fraud claims.
What does all this mean? It means restaurants will need to follow the FDA process closely these next several months and, in the meantime, continue to watch for what local law requires. In all cases, menus and other marketing materials must not serve to mislead, and any representations should first be vetted and confirmed before they are circulated to the public.
NKMS has presented on the patchwork of regulations concerning menu labeling across the country as well as on the class actions that have been brought asserting these claims these last two years. Be sure to watch this page and catch one of our upcoming webinars to keep up with this developing trend.
Tags: FDA, Food and Drug Administration, health care, health care bill, health care bill details, healthcare, healthcare reform, healthy living, Menu Labeling, menu labeling laws, regulations, restaurant, restaurants
Posted in Employment Law/Legislation, Industry News, Menu Labeling | No Comments »
Monday, March 22nd, 2010
Last night, the House of Representatives passed the Senate???s health care bill (???Senate bill???) and a reconciliation ???fix it??? bill (the ???reconciliation bill???) that makes certain changes to the Senate bill.?? Regardless what you think about health care, the landscape this morning is much different than before, and it is important for businesses and individuals to take note of the key provisions in both bills.
There are still some legislative steps that must be completed before either bill becomes law.?? The President must first sign the Senate bill in order for it to become law.?? The signing ceremony is scheduled for tomorrow.????Then the Senate can take up the reconciliation bill.?? It is expected that the Senate will pass the reconciliation bill, which will alter the main Senate bill by eliminating certain controversial provisions in it.?? Together, however, they constitute sweeping reform of the health care industry.?? Beginning in 2014, coverage will begin to expand to the estimated 32 million uninsured Americans, and by 2019, it is estimated that 95% of eligible Americans would have coverage.
Here are the key provisions of both bills and when most of them take effect:
Coverage Mandates
In 2014, individuals will be required to purchase health insurance.?? Those who fail to purchase coverage will be fined $325 in 2015, $695 in 2016, and as much as 2.5% of their income in 2016 if the total is greater than the flat payment.?? There is an exemption for low-income people.
In 2014, employers with 50 or more workers who do not offer health insurance coverage will be fined $2,000 per full-time employee.?? Companies with 50 or fewer workers are exempt from the requirement.?? Part-time workers are included in the calculations: two part-timer workers equal one full-time worker.
Insurance Market Reform
This year, insurers will be barred from placing lifetime coverage limits on policies, denying coverage to children based on pre-existing conditions, and canceling policies due to illnesses (i.e., rescission).?? Insurers must also disclose their rate increases.
Also, beginning this year, parents??? health care policies will cover dependent children until age 26.
Beginning in 2011, insurers are required to spend at least 85 cents of every premium dollar on medical care in small group markets and 80 cents in large group markets. ??Medicare Advantage insurers are also required to spend at least 85% of revenues on medical care.
Beginning in 2014, insurers will be barred from excluding anyone for pre-existing medical conditions or charging them more.
Also, beginning in 2014, small businesses and individuals without employer-sponsored coverage can shop for health insurance plans through new state-based purchasing pools called ???exchanges.????? (???Small businesses??? are defined as those with no more than 100 employees, but states have the option of limiting exchanges to companies with 50 or fewer employees through 2016. ??Companies that grow beyond the size limit will also be grandfathered in.)?? The plans offered on the exchanges will have to meet certain minimum benefit requirements.?? Until these exchanges are available, there will be a temporary insurance program for the uninsured.
In addition, until the exchanges are available, businesses with 10 or fewer full-time-equivalent employees earning less than $25,000 a year on average will be eligible for a tax credit of 35% of health insurance costs. (Companies with between 11 and 25 workers and an average wage of up to $50,000 are eligible for partial credits.)?? The tax credit will remain in place and increase to 50% of costs for the first two years a business purchases insurance through its state exchange.
Taxes
Beginning in 2018, there will be a 40% excise tax on high-cost health insurance plans, otherwise known as ???Cadillac plans??? (plans costing $10,200 for individuals and $27,500 for family coverage). ??A higher threshold is allowed for plans covering mostly women, older workers, retirees, and those in high-risk professions.
In 2013, payroll taxes for Medicare (the government health insurance plan for the elderly and disabled) will increase to 2.35% (from the current 1.45%) for individuals earning $200,000 or more and for couples earning $250,000 or more.
The new Medicare tax will also apply to ???unearned income??? (i.e., investment income) for those high-income groups as an additional 3.8% surtax.?? Specifically, it will apply to income from interest, rent, royalties, and passive S-corporation and partnership profits for families making more than $250,000 annually and singles making more than $200,000.?? This tax is in addition to the current tax rate on such income.?? It will also likely apply to capital gains.
Beginning in 2013, individuals under 65 cannot deduct medical expenses until they exceed 10% of income (up from the current threshold of 7.5%).?? Retirees, however, will keep the lower threshold.
Beginning in 2011, there will be new restrictions on what can be purchased using special savings accounts funded with pre-tax dollars (including health savings accounts).?? Improper withdrawals from the accounts will incur a 20% tax.?? In addition, there is a new limit of $2,500 on what people can contribute to employer-sponsored flexible spending accounts (another type of account funded with pre-tax dollars that can be used to pay for medicines, co-payments, and other expenses).?? Before this cap, employers set their own limits, typically between $3,000 and $5,000.
Beginning in 2013, there will be fees on medical device manufacturers, insurance providers, and brand-name pharmaceuticals.
Insurers will also be denied deductions for executive pay over $500,000.?? (Under current law, businesses can deduct up to $1 million a year in compensation for executives.)
Finally, beginning this year, there will be a 10% tax on indoor tanning services that use ultraviolet lamps.
Federal Subsidies
Beginning in 2014, federal subsidies will be provided to help people with incomes of up to 400% of the poverty level (approximately $88,000 per year) purchase health insurance on the exchange. ??Those subsidies will be higher for lower income people.
Medicaid Expansion
Beginning in 2014, Medicaid (the government health insurance program for the poor) will be expanded to everyone with incomes of up to 133% of the poverty level.?? That equates to $10,830 for an individual and $29,327 for a family of four. ??(Many states have eligibility requirements below those levels.)
The reconciliation bill eliminates a special deal that would have provided more money to Nebraska to cover costs of increased Medicaid coverage.
Medicare
In 2011, payments to insurers that provide coverage to Medicare patients will be frozen.?? The law begins reducing this subsidy in 2012.
Effective immediately, the law begins to close the gap in drug coverage for Medicare beneficiaries (known as the ???donut hole???).?? Those who enter the coverage gap in 2010 will receive a $250 rebate. ??In 2011, they will receive a 50% discount on brand-name drugs.?? When the gap is completely eliminated in 2020, seniors will still be responsible for 25% of the cost of their medications until Medicare’s catastrophic coverage kicks in.
Student Loans
The law will also eliminate a $60 billion program that supports private student loans with federal subsidies, effectively eliminating private-sector student loan lending, and replace it with government lending to students.
Tags: health care, health care bill, health care bill details, health care bill provisions, health care bill take effect, healthcare
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Thursday, February 18th, 2010
The Obama Administration continues to make vigorous enforcement of employment laws an essential part of its economic program. We earlier commented on this blog about the Administration’s push to enforce wage and hour and anti-dsicrimination laws. Later, the White House issued notice that its budget projections assume greater enforcement of laws requiring employers to classify workers properly as employees rather than as independent contractors. Today, we have learned from a report in The New York Times that such enforcement is expected to yield Seven Billion Dollars to the United States Treasury.
Why does the government care? Lots of workers would rather be be paid cash without withholdings and be issued a 1099 rather than have their pay reduced by federal and state withholdings and receive a W2 at the end of the year. But that is precisely the problem from the government’s perspective. Those misclassified as independent contractors end up not paying their social security taxes or medicaid taxes, and their employers end up not paying for unemployment insurance, workers compensation insurance or their share of the social security tax to the government. In addition, the Department of Labor argues that employers undermine the entire welfare state structure that is geared to protect workers as that structure assumes workers shall be treated as employees rather than as independent contractors. Workers compensation laws, unemployment insurance, even anti-discrimination laws protect employees, not independent contractors.
To add to the difficulty, every state has its own set of rules to determine whether a worker can be treated as a contractor or must be treated as an employee, while the IRS has its own set of standards. On top of that, one set of rules may apply to unemployment insurance and workers compensation while another set may apply to tort liability and tax obligations.
What’s an employer to do? First, be honest. Do not play close to the edge to get a tax benefit or to obtain some other short term cost savings. The long run cost, including potential enforcement actions, could likely set you back much farther. Second, go to the relevant government websites, including the IRS, the United States Department of Labor, or your local state DOL and learn the relevant standards. Third, seek the advice of counsel. You may actually decide to ask the IRS directly through a form SS8, which allows you to seek an opinion in advance of going forward with any hire as to whether such hire should be considered an employee or independent contractor. The IRS might not tell you want you want to hear, but you will get a response of some kind. A word to the wise should be sufficient to take the proper course and reduce the risk of multiple damages, fines and attorneys fees, not to mention potential class action liability, in the event you misclassify your workers.
Chris Vrountas contributed this posting.
Tags: Department of Labor, DOL, Federal Budget, independent contractors, Internal Revenue Service, IRS, New York Times, Obama, Obama Administration, taxes, unemployment insurance, United States Treasury, workers compensation
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Sunday, February 7th, 2010
Usually, the answer is yes, says Lewis Maltby in his new book entitled, “Can They Do That” which was recently featured on National Public Radio. Like most employment lawyers, Maltby says he has received numerous calls from friends and clients literally asking, “Can they do that?” as they refer to an unpopular action taken by their employer. Bottom line, in the “at will” world in which we leave, chances are the answer is “yes.” An employer can discharge a worker for any reason or for no reason at all, unless there is an employment contract stating to the contrary. There are few exceptions to the “at will” doctrine, although the law varies amongst the several states. Typically, the only exceptions to the “at will” doctrine are statutory (such as the anti-discrimination laws, whistleblower protection laws, or other anti-retaliation statutes) or limited common law exceptions (including the “public policy” exception to the “at-will” doctrine which prohibits employers from taking action against employees for doing what public policy would encourage or refusing to do what public policy would discourage). Most of the slings and arrows of outrageous fortune that employees face in the workplace do not fall within these exceptions.
In other words, it’s a free country, and if you don’t like your job, you can leave any time you want. But that freedom for the most part is mutual, and if your employer at any time just gets sick of looking at you, there’s little law to stop that from happening.
That said, every state is different. In the allegedly conservative State of New Hampshire, the jury, not the judge, defines what constitutes a “public policy” that could form an exception to the “at will” doctrine. That approach makes it very difficult for employers to have public policy wrongful discharge cases dismissed before trial, and once something is in front of a jury, anything can happen. Indeed, the seminal case in New Hampshire, Monge v. Beebe Rubber Co., 114 NH 130, suggests that the “public policy” exception amounts to another way of describing “bad faith” employment termination, and further explained that “a termination by the employer of a contract of employment-at-will which is motivated by bad faith or malice or based on retaliation is not in the best interest of the economic system or the public good and constitutes a breach of the employment contract.” Monge v. Beebe Rubber Co., 114 NH 130 (1974).
By contrast, the allegedly liberal Commonwealth of Massachusetts has through its judicial opinions identified a very limited set of matters that could be considered of the sort implicated a “public policy.” See Wright v. Shriners Hospital, 412 Mass. 469 (1992). The failure of a discharged employee to assert circumstances falling within such matters would likely lead to summary dismissal, either at summary judgment or even earlier, leaving the employee with little legal recourse.
As we have noted recently in this blog when reporting a recent federal court decision out of New Hampshire, not every act of unkindness constitutes a “public policy” violation, although where to draw the line in some states may well be in the eye of the beholder. As for statutory claims, the federal courts have frequently noted that the anti-discrimination laws are not a “code of ettiquette” and that only “severe and pervasive conduct” that creates a “hostile work environment” can create liability for employers. Even then, not all “hostile work environments” are unlawful. Only those environments that are hostile as a result of unlawfully discriminatory practices are unlawful. A mean boss, who may be hostile, does not necessarily create an unlawfully hostile environment.
So what? While the deck may appear stacked against the employee, the law does allow for enough ambiguity to create messy litigation for employers who engage in what may appear to be unfair acts, even if such acts may not be unlawful. The best approach for employers is to focus on the business, make decisions based on objective criteria, and remember TCD: i.e. timing, consistency and documentation. For any employment decision, employers should take action soon after the event that gives rise to the need to take action (i.e. avoid discrimination claims by disciplining immediately and not waiting until after, by some bad luck, the employee tells you he needs leave or an accommodation), treat all employees consistently (consider a progressive discipline policy for all managers to follow so that employees at all areas in the company receive at least similar treatment), and document decisions and their bases well (make a record that reflects the legitimate basis for decisions as juries and judges believe paper more than memories). That way, employers can go a long way towards protecting themselves from a wrongful discharge claim.
Meanwhile, employees should be advised that, while there always may be legal weapons for the opportunistic, the legal landscape in the end does not seek to or even purport to address all ills in the workplace.
Chris Vrountas, Chair of the Employment Counseling and Litigation Group, contributed this posting.
Tags: at will doctrine, bad faith, book, Can They Do That?, discrimination, Lewis Maltby, National Public Radio, NPR, public policy, reading, termination, whistleblower protection
Posted in Diversity, Employment Law/Cases, Employment Law/Legislation, Industry News | No Comments »
Monday, February 1st, 2010
The French have found what they believe will be a direct line to gender equality according to this morning’s broadcast of NPR News. The national government has proposed a quota requirement for all businesses listed on the Paris stock exchange that would require these companies to have their boards of directors contain at least 40% women within the next 5 years. French companies average 8% women on corporate boards as compared to 15% in the United States. But the French seek to follow Norway, which has a similar law and now boast of over 40% participation of women in board rooms. Some in France believe the quota system at the top will have a trickle down effect for women’s pay down the corporate ladder, as women generally continue to be compensated less than men in the French economy. Others view the proposed law as a clumsy blunt instrument that will do nothing more than promote “yes women” that will support current insiders. Meanwhile, the bill has general support from both the right and left in France and prognosticators expect it to pass by the end of the year.
The quota approach is clearly not the American way to achieve diversity, as evidenced by recent Supreme Court jurisprudence. While the gender pay equity remains disparate, the gap is narrowing while the number of women exceed men in workforce and as the recession in America has negatively affected men more than women. That said, evolution can be slow. As John Maynard Keynes once said, “In the long run, we’re all dead.” Companies can encourage and promote diversity in a responsible manner and in compliance with US law so long as they have a responsible goal, a narrowly tailored plan, and the discipline to carry it through.
In 5 years, which economy will have more opportunities for women and which one will have a quota system? One can only speculate and wait and see.
Chris Vrountas, Chair of the Employment Counseling and Litigation Practice Group, contributed to this posting.
Tags: employing women, France, gender pay, gender pay equity, Keynes, National Public Radio, Norway, NPR, Paris stock exchange, quota system, recession, women
Posted in Diversity, Employment Law/Legislation, Industry News | No Comments »
Thursday, January 28th, 2010
Chris Vrountas has posted the following:
President Obama delivered his first State of the Union address to a Joint Session of Congress and to the American people last night. He covered quite a bit of ground about the economy, health care and national security, among other things, but he also specifically discussed his administration’s policy regarding civil rights and wage law enforcement. The president’s strident tone should provide notice to business and other employers that the federal government will be looking to enforce the anti-discrimination and wage laws vigorously and, in some cases, looking to make examples of certain violators. Here is a brief portion of the speech last night:
. . .
Abroad, America’s greatest source of strength has always been our ideals. The same is true at home. We find unity in our incredible diversity, drawing on the promise enshrined in our Constitution: the notion that we are all created equal, that no matter who you are or what you look like, if you abide by the law you should be protected by it; that if you adhere to our common values you should be treated no different than anyone else.
We must continually renew this promise. My Administration has a Civil Rights Division that is once again prosecuting civil rights violations and employment discrimination. We finally strengthened our laws to protect against crimes driven by hate. This year, I will work with Congress and our military to finally repeal the law that denies gay Americans the right to serve the country they love because of who they are. We are going to crack down on violations of equal pay laws - so that women get equal pay for an equal day’s work. And we should continue the work of fixing our broken immigration system – to secure our borders, enforce our laws, and ensure that everyone who plays by the rules can contribute to our economy and enrich our nations.
In the end, it is our ideals, our values, that built America – values that allowed us to forge a nation made up of immigrants from every corner of the globe; values that drive our citizens still. Every day, Americans meet their responsibilities to their families and their employers. Time and again, they lend a hand to their neighbors and give back to their country. They take pride in their labor, and are generous in spirit. These aren’t Republican values or Democratic values they’re living by; business values or labor values. They are American values.
. . .
So, it is “let the word go forth” time for this administration and its policy on civil rights and wage and hour enforcement. Employers should mindfully review their policies, develop their training, ensure compliance, make HR available and noticeable, take internal complaints seriously and resolve them fairly because employers who do not manage their workplaces actively may have the EEOC or the DOL doing it for them.
Tags: civil rights, Congress, Constitution, constitutional law, Department of Labor, discrimination, DOL, economics, EEOC, Equal Employment Opportunity Commission, equal pay, equal pay laws, health care, health care bill, healthcare, Obama, Obama Administration, SOTU, State of the Union
Posted in Diversity, Employment Law/Legislation, Health & Safety, Industry News | No Comments »
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