Friday, February 26, 2010

Why we need health insurance reform

On February 25, an extraordinary event took place in Washington D.C. Prompted by President Barack Obama, leaders from both political parties appeared at a lengthy discussion of prospective elements and flaws of a health insurance reform bill. The so-called “summit” was extraordinary for its publicly televised nature and for the mere fact that the two parties managed to agree on certain aspects.

At the heart of the health insurance reform debate is a stark, almost-apocalyptic vision of America’s economic future. Eighteen percent of every dollar earned now goes to medical care. Over the last decade, the average annual premium for employer-sponsored family insurance coverage rose from $5,800 to $13,400, and the average cost per Medicare beneficiary went from $5,500 to $11,900. The current system has helped capsize the American auto industry, emptied state and federal coffers, and the ramifications only threaten to deepen. If the rate of increase is not slowed, the cost of family insurance is projected to reach at least $27,000 in a decade; such an increase will absorb one-fifth of every dollar earned.

And the money earned may well decrease as insurance costs increase. Businesses are predicted to see a rise in health-coverage expenses from 10 percent of their total labor costs to 17 percent. If left unchecked, healthcare spending will eviscerate future wage increases and stop economic growth.

How do we know this? Because it already has. From 2000 to 2006, health insurance premiums in Ohio grew 8.4 times faster than wages. WellPoint, Inc just announced a 39-percent rate increase in California. The company argued that the increases, set to take effect March 1, reflect soaring medical costs and an exodus of healthy consumers from its ranks.

And don’t look for these soaring rate increases to suddenly fall. In April, 2009, WellPoint’s CEO, Angela Braly, told investors, "We will not sacrifice profitability for membership." Essentially, the nation’s largest health insurance company argues that because healthy people are leaving its ranks, it has to raise rates, but it won’t lower rates to bring in healthier customers.

All of this argues for action, immediate action. If the projections prove correct, in ten years, a family currently making $100,000 will actually earn $73,000, post-insurance payments. That’s a family car, nine months of a mortgage, a year of college. Some have said that we can’t afford to change the current system, that our current economic situation won’t allow it.

Well, if the number discussed above are accurate, we can’t afford not to try. The alternative is a sinking American economy dragging employers, employees and the world economy behind it.

As the President said during the summit, in reference to a suggestion that anyone can get medical care at an emergency room, “When that happens, who pays for it? We do. We’re already ready putting the money in, it’s just in an inefficient way.”

It’s time to get efficient.

Wednesday, February 24, 2010

Employers, text this message to your employees: ST&D (stop texting and drive)

Doing other things while driving an automobile is nothing new. From putting on make-up, to using an electric shaver to get rid of that five o’clock shadow, we have all witnessed the dangerous acts that others do while trying to drive at the same time. Yet, these days, a more common picture is of someone driving with one hand on the steering wheel and the other hand holding a mobile device, not to talk, but to text. This has become a real danger, not only for the driver-texter, but for others on the roads, sidewalks, etc.

This growing problem was realized by President Obama, who issued an Executive Order on October 1, 2009, which directed federal employees not to engage in text-messaging while driving government-owned vehicles, when using electronic equipment supplied by the government or while driving privately owned vehicles when they are on official government business. The order also encourages federal contractors and others doing business with the government to adopt and enforce their own policies banning texting while driving on the job. Federal employees were required to comply with the ban starting December 30, 2009.

More recently, and in an effort to curb this practice on a state wide level, the National Highway Traffic Safety Administration, along with some safety and industry organization, prepared a sample state law, which is to be used as an aid by state legislators in putting together laws to ban texting while operating an automobile. "Our top priority is safety and we are determined to help the states eradicate the dangerous practice of texting while driving," said David Strickland, Administrator for the National Highway Traffic Safety Administration.

While these laws will serve to ban texting by all drivers, employers and employees need to take immediate notice of these changes. Today’s employees are “wired into” their jobs at all times, and are often expected to answer text messages, and even e-mails, at a moment’s notice. The fact is, employers are not spending millions of dollars a year on corporate Blackberry and iPhone accounts so their employees can download the newest “app” that lets them use their phones like “light sabers,” right? Of course not, employers get these phones so employees are accessible anytime and anywhere. And the employee, especially in this economy, can ill-afford to wait to get into the office to respond to that urgent text, right?

Therein lies the problem, and it is one that employers and employees both face. And it’s not just those employees wearing suits either. These devices are used by drivers of delivery trucks, school personnel, laborers, etc. They are utilized by every type of business, and in every type of work setting, and so the changing landscape of laws regarding texting while driving needs to be taken seriously, especially by employers. The fact is, many lawyers can probably see a whole new area of legal troubles stemming from driving and texting, or driving and e-mailing.

It isn’t just the state fines that employers need to pay close attention to; employers need to be mindful of the old Latin legal term, respondeat superior, which essentially can make an employer liable for the actions of an employee when those actions take place within the scope of employment. If litigation has already started from accidents by employees while driving and texting, it is not a stretch to think they are not right around the corner. The simple truth is, an employee who, in responding to an urgent text from his or her employer in the middle of rush hour, then slams into another vehicle, may subject his or her employer to a lot more than a state fine.

Which is why employers need to revisit their policies with regard to the use of these devices by employees, and explain not only the proper use of the devices, but also the corporate policy forbidding its use while operating a motorized vehicle. Otherwise, a failure to do so may subject employers and employees to costs that far outweigh any improper overages incurred on an employee’s mobile device bill.

---Currently, nineteen states (Alaska, Arkansas, California, Colorado, Connecticut, Illinois, Louisiana, Maryland, Minnesota, New Hampshire, New Jersey, New York, North Carolina, Oregon, Rhode Island, Tennessee, Utah, Virginia and Washington) and the District of Columbia have texting laws covering all drivers. A ban on the use of hand-held devices while driving has been enacted in California, Connecticut, District of Columbia, New Jersey, New York, Oregon, Washington and the Virgin Islands. In 2009, more than 200 distracted driving bills were considered by state legislatures and legislative activity is expected to remain strong in 2010.

Watch Secretary LaHood answer questions about the Distracted Driving Summit, Sept. 30 and October 1, 2009.

Tuesday, February 23, 2010

US Supreme Court: “Nerve center” is corporation’s principal place of business

A corporation’s principal place of business is the place where its officers direct, control, and coordinate its activities, a unanimous US Supreme Court ruled on Tuesday, adopting a “nerve center” test for determining corporate citizenship and rejecting a “plurality of business activities” approach for analyzing whether diversity jurisdiction exists (Hertz Corp v Friend, USSCt, Dkt No. 08-1107, February 23, 2010).

In the underlying case, two Hertz Corp employees in California filed a putative class action against the employer for violations of the state’s wage and hour laws. Hertz sought to remove the case to federal court, claiming diversity jurisdiction existed since the plaintiffs were citizens of California while Hertz, headquartered in Park Ridge, New Jersey, was a citizen of that state. The district court found the amount of Hertz’ business activity is “significantly larger” in California than in other states and, as such, the “plurality of each of the relevant business activities” took place there, making California the company’s principal place of business. Concluding it lacked jurisdiction, the district court remanded. The Ninth Circuit affirmed.

In an opinion written by Justice Breyer, the Supreme Court rejected the “plurality of business activities” approach, finding it invites greater litigation and can lead to “strange results.” For example, citing the Ninth Circuit’s own reasoning in a 2009 case, the High Court noted that if a company’s principal place of business were determined based on amount of sales, then by virtue of California’s size and population alone, “`nearly every national retailer—no matter how far flung its operations,’” would be deemed a citizen of California. (Talk about a wave of wage-hour litigation!)

The simpler method—one that does not require courts to weigh corporate functions, assets or revenues—was to follow a “nerve center” approach, the Court held, finding “principal place of business” makes the most sense when read as the place where “a corporation’s high-level officers direct, control, and coordinate the corporation’s activities.” In practice, the nerve center will normally be corporate headquarters, provided that the headquarters is the company's actual center of direction and control “and not simply an office where the corporation holds its board meetings.” The Court rejected an overly simplistic approach, however, dismissing the notion that merely identifying a corporation’s “principal executive offices” on an SEC Form 10–K filing should be enough to establish a corporation’s nerve center. Such a standard “would readily permit jurisdictional manipulation,” it cautioned.

“The metaphor of a corporate `brain,’ while not precise, suggests a single location,” Breyer wrote. “By contrast, a corporation’s general business activities more often lack a single principal place where they take place.” As such, the language of 28 USC 1332(c)(1) supports the nerve center approach as well, since the statute’s word “place” is singular, not plural, and “principal” requires that the main, or most important place be chosen.

There may be no perfect test, the Court conceded, noting there will be “hard cases” under the method adopted today—particularly in an era of telecommuting, where corporate officers may be working at several different locations and communicating over the Internet. “That said, our approach provides a sensible test that is relatively easier to apply, not a test that will, in all instances, automatically generate a result.”

Friday, February 19, 2010

EEOC’s proposed RFOA regulations provide age bias risk-avoidance checklist

The US Equal Employment Opportunity Commission’s (EEOC) proposed regulations defining “reasonable factors other than age” (RFOA) under the Age Discrimination in Employment Act (ADEA) provide a checklist for employers contemplating an employment action that has the potential to adversely impact older workers.

The proposed regulations were published in the Federal Register on February 18, 2010. The EEOC initially published proposed ADEA disparate impact regulations back in March 2008. Based on comments received about the proposed rulemaking, and the Supreme Court’s decisions in Smith v City of Jackson, 544 U.S. 228, 86 EPD ¶41,882 (2005), and Meacham v Knolls Atomic Power Lab, 554 U.S. ___, 128 S. Ct. 239, 91 EPD ¶43,231 (2008), the federal agency decided to issue additional regulations addressing the scope of the RFOA defense.

The 2008 proposed regulations state that an employment practice that has an adverse impact on individuals within the protected age group on the basis of older age is discriminatory unless the practice is justified by a “reasonable factor other than age.” When the RFOA exception is raised, the employer has the burden of showing that a reasonable factor other than age exists factually.

What, exactly, constitutes “a reasonable factor other than age,” is the million-dollar question for employers – especially given the prevalence of reductions in force in a still-struggling economy. According to the EEOC, the question is determined based on all the particular facts and circumstances of the situation.

What is reasonable? That the non-age fact is reasonable is a key element of the RFOA defense, the EEOC says. The test is an objective one based on what a reasonable employer, one that is prudent and mindful of its responsibilities under the ADEA, would do in like circumstances. And a prudent employer knows, or should know, that the ADEA was designed to avoid application of neutral employment standards that disproportionately affect employment opportunities of older individuals. Thus, “a reasonable factor is one that an employer exercising reasonable care to avoid limiting the employment opportunities of older persons would use,” the EEOC explains in its notice of proposed rulemaking.

An employer seeking to establish the RFOA defense must show that the employment practice under scrutiny was: (1) reasonably designed to further or achieve a legitimate business purpose; and (2) administered in a manner that reasonably achieves that purpose in light of the particular facts and circumstances known, or that should have been known, to the employer.

Determinative factors. The EEOC’s proposed regulations provide a nonexclusive list of factors relevant to determining whether an employment practice is reasonable:
  • Whether the employment practice and the manner of its implementation are common business practices;
  • The extent to which the factor is related to the employer’s stated business goal;
  • The extent to which the employer took steps to define the factor accurately and to apply the factor fairly and accurately (e.g., training, guidance, instruction of managers);
  • The extent to which the employer took steps to assess the adverse impact of its employment practice on older workers;
  • The severity of the harm to individuals within the protected age group, in terms of both the degree of injury and the numbers of persons adversely affected, and the extent to which the employer took preventive or corrective steps to minimize the severity of the harm, in light of the burden of undertaking such steps; and
  • Whether other options were available and the reasons the employer selected the option it did.
Employer checklist. In light of these factors, and the EEOC’s stated reasons for the proposed revisions to its regulations, prudent employers should consider the following questions before implementing a business practice that has the potential to adversely impact older applicants or employees:
  1. Is the contemplated business practice, and the manner of implementation, common among businesses in like circumstances? Use of a common business practice weighs in an employer’s favor.
  2. Is the non-age factor that justifies the contemplated business practice closely related to the stated business goal(s)? Granting larger raises to lower-echelon employees in order to bring compensation in line with that of surrounding police forces responded to the legitimate goal of retaining police officers in the Smith case.
  3. What steps have been taken to define the non-age factor accurately and apply it fairly and accurately? Consider training managers to avoid age-based stereotyping, and if relevant, how to identify the specific knowledge or skills sets implicated by the contemplated business practice. Decisionmakers should also be trained or given guidance on how to implement the contemplated business practice.
  4. Has the potential for an adverse impact on older applicants or employees been assessed? A reasonable employer implementing a business practice that harms a large number of employees would perform an assessment of whether the practice would have a disproportionate impact based on age. An employer’s failure to measure the impact of a practice that has a substantial age-based adverse impact will not protect it from a determination that it should have known of the impact.
  5. How many older workers would be adversely impacted and how severely would they be harmed by the contemplated business practice? The more severe the harm, the greater the care the employer should exercise. While a reasonable employer may not be required to entirely eliminate the impact, it would nonetheless investigate the reason for the impact and try to reduce it to the extent appropriate given the facts.
  6. If the harm that would result from implementing the contemplated business practice is more than negligible, what steps have been taken, or could be taken, to prevent or minimize the severity of the harm, and what are the burdens associated with taking those steps? Where the harm is severe, the reasonableness determination will include whether the employer knew, or should have known, of measures that would eliminate or reduce the harm, and the extent to which the employer would be burdened by the implementation of such measures.
  7. Are there alternative options available and, if so, why is the contemplated business practice the option of choice? While employers are not required to use the least discriminatory alternative, the employer’s knowledge of, and failure to use, equally effective but less-biased alternatives is relevant to whether the chosen practice is reasonable – especially when there is a significant adverse impact on older workers with only a marginal advancement of a minor goal. Conversely, the fewer the alternatives, the more reasonable the business practice appears.
Factors other than age. Employers should be aware that the RFOA defense is available only when the challenged practice is not based on age. As the EEOC’s proposed regulations state, when the challenged employment practice is based on an objective non-age factor, only the reasonableness of the practice is at issue. But, when disparate impact results from giving supervisors unchecked discretion to engage in subjective decision making, an adverse impact may, in fact, be based on age because decisionmaking supervisors may have acted on the basis of conscious or unconscious age-based stereotypes. The proposed regulations set forth three nonexclusive factors relevant to determining whether the factor on which the practice is based is “other than age”:
  • The extent to which the employer gave supervisors unchecked discretion to assess employees subjectively;
  • The extent to which supervisors were asked to evaluate employees based on factors known to be subject to age-based stereotypes; and
  • The extent to which supervisors were given guidance or training about how to apply the factors and avoid discrimination.
The EEOC is seeking comments on its proposed RFOA regulations, and it remains to be seen whether further revision will follow. In the meantime, employers should consider them a valuable risk-avoidance tool.

Wednesday, February 17, 2010

Shiu’s direction for OFCCP already showing distinctions from recent administrations

Since Patricia Shiu took the helm of the OFCCP last fall, the current administration has taken actions that distinguish it from the previous two administrations. Among those actions are town hall meetings on its Fall 2009 regulatory agenda, a bold commitment to affirmative action, and a highly unusual press release to publicize an administrative law judge’s decision in a high profile and protracted case.

Town hall meetings. On January 12, 14 and 20, 2010 the OFCCP held, via webinars, national town hall “listening sessions” regarding its Fall 2009 regulatory agenda, which was issued on December 7, 2009. The agency followed those up with live sessions in Chicago on February 4 and 5, and additional listening sessions were held in San Francisco yesterday and today (February 16-17) and scheduled for New Orleans on March 17-18.

At the session held the afternoon of February 4 in Chicago, Shiu explained that the agency wanted to reach out to those stakeholders who do not usually submit written comments on proposed regulations. "We want you to participate as we listen," she said. And the indications were that the agency was serious about listening. In addition to Shiu and OFCCP Chicago Regional Director Sandra Ziegler, an attorney from the DOL solicitor’s office and two of the individuals who will be drafting the upcoming regulations, including Terry Hankerson, the OFCCP’s Branch Chief for Regulation Development and Evaluation, were present at the Chicago sessions. A court reporter was also there to transcribe the sessions. In contrast, the previous two administrations would rarely entertain questions from stakeholders during public forums (such as the Industry Liaison Group national conferences), much less hold such sessions specifically for the purpose of seeking public comments.

Affirmative action. The OFCCP has the unique authority to enforce affirmative action requirements that apply only to those employers who have covered federal contracts and subcontracts. Although President Clinton expressed support for affirmative action (the famous quote being “mend it, don’t end it”) both the Clinton (especially in the later years) and George W. Bush Administrations de-emphasized affirmative action in favor of addressing systemic discrimination. Indeed, the Bush Administration rarely mentioned affirmative action in regard to OFCCP enforcement.

Recent statements by Director Shiu indicate that the current administration will not be shying away from this often-controversial subject. “Even though [affirmative action] hasn't been a focal point in the past 10 years, it is a focal point now," Shiu said at one of the town hall meetings in Chicago on February 5, adding that affirmative action means "a level playing field," and not quotas. According to Shiu, "[v]iable and effective affirmative action programs are a critical component of the federal contractor workplace." A document on the OFCCP’s fiscal year 2011 budget justification to Congress posted online also includes details about the OFCCP’s shift in enforcement strategy and its intention to “implement full scale, aggressive enforcement efforts” including strengthening affirmative action.

Press release regarding administrative ruling in Bank of America case. Earlier this month, the OFCCP issued a press release to publicize a January 21, 2010 ruling issued by a Department of Labor Administrative Law Judge (ALJ) in one of the agency’s most notable cases. In the most recent decision issued in the case, the ALJ issued a recommended ruling that Bank of America (then NationsBank) discriminated against African-American job applicants for entry level positions in Charlotte, North Carolina in 1993 and from 2002 to 2005. The case began in 1993 when the OFCCP requested information from NationsBank as part of a compliance review. After the OFCCP advised the bank in 1995 of its findings of discrimination, the bank brought a federal court challenge to the agency’s authority to conduct the review, arguing that the OFCCP’s action violated the bank's Fourth Amendment rights (NationsBank Corp v Herman, 4thCir, 75 EPD ¶45,814 (1999)). After the court challenge failed and Labor Department attorneys filed an administrative complaint, the bank pursued the case in the administrative forum.

Such press releases, while ubiquitous from the EEOC, have been pretty much unheard of for the OFCCP. During the last two administrations, OFCCP press releases (never common, especially compared with the numerous press releases issued by the EEOC) have been limited to settlements following compliance reviews, and, to a lesser extent, new directives or regulatory developments. It’s hard to tell whether this press release is the result of the case’s high profile (it is probably the first or second most discussed case at OFCCP-related conferences) or is the result of the new OFCCP leadership. If the OFCCP, under Director Shiu, continues to issue press releases regarding case decisions, it will be further evidence that the Obama Administration intends to allow for a higher profile OFCCP than previous administrations.

Friday, February 12, 2010

Bill would deploy E-verify to mortgage application process

On February 5, Congressman Kenny Marchant (R-TX) introduced his new bill, H.R. 4586, the Mortgage E-Verify Act. The bill would require, as a condition for modification of a home mortgage loan held by Fannie Mae or Freddie Mac or insured by the Federal Housing Administration, that the mortgagor be verified under the E-verify program. Marchant believes his bill will potentially save millions by cutting down on fraudulent claims from illegal immigrants and protect taxpayers from subsidizing the restructuring or renegotiation of mortgages.

Marchant cites a major Nevada case where a mortgage company branch manager conspired to manufacture and submit false employment and income documentation for borrowers, most of whom were illegal immigrants. Fifty-eight of the 233 fraudulent FHA loans totaling $6.2 million have, not surprisingly, gone into default, costing HUD nearly $2 million. The branch manager was found guilty on 32 counts of submitting false information to HUD, and one count of conspiracy.

“E-verify is a fantastic program which I have supported making permanent for employers. Mandating its use as a condition for home mortgage loan modifications would help eliminate waste, fraud, and abuse in the system and bring integrity to the process. In fact, the Treasury Department’s Financial Crimes Enforcement division estimates that mortgage fraud increased 1,411 percent from 1997 to 2005. Furthermore, two-thirds of fraud reports in the last decade are due to falsified statements on loan documents. My bill would curb these abuses and protect the taxpayers,” said Marchant.

This proposed extention of E-verify comes on the heals of the Obama administration's mandate that federal contractors use the system for screening workers' legal status. Troubling to many is the system's penchant, real or perceived, to return inaccurate results. Though the program has been heavily criticized, the error rate, currently around 8 percent, is decreasing, as many of the errors come from changing last names after marriage, or not informing the government of citizenship status. We shall see what other crafty applications of the system our legislators can devise in the months ahead.

Wednesday, February 10, 2010

Bill ensuring technology accessibility for blind individuals introduced to Congress

Imagine finally taking the plunge and updating your office equipment with the latest versions of everything, only to find that one or more of your employees are unable to use the equipment because they cannot see the controls. Technology has significantly changed much of the equipment at our disposal. Buttons, knobs and switches have been replaced with some type of visual display that is difficult or impossible for individuals who are blind or have low-vision to see. In an effort to make things easier and prevent people who are blind or have low-vision from being left behind, Rep Jan Schakowsky (D-IL) recently introduced the Technology Bill of Rights for the Blind (H.R. 4533) into Congress.

“The importance of access to technology in today’s society cannot be overstated. In many cases, a person’s livelihood depends upon the ability to use technology,” said Schakowsky. She feels the bill will enable people who are blind or have low-vision to compete “with their sighted peers and remain productive members of society.”

H.R. 4533 provides for a study and report on accessibility by blind consumers and will establish minimum nonvisual standards for “certain electronic devices.” Although the bill is concerned with consumption of “everyday products” like consumer electronic devices and home appliances (i.e. televisions, dishwashers, etc.), the bill specifically mentions office technology devices and notes that many new devices “require user interaction with visual displays, on-screen menus, touch screens, and other interfaces that are inaccessible to blind or low-vision individuals.”

While the bill is aimed at manufacturers, one can’t help but wonder if employers will be affected. Under H.R. 4533, in the section granting a private right of action, there is a provision under relief that states that if an employment opportunity is lost because of equipment that does not meet the minimum standard, that person may be awarded monetary damages “the value of such employment opportunity.” Would an employer be required to participate in a lawsuit in order to determine the accurate value of the opportunity or would a court use some other method?

The bill also provides for the establishment of an office within the Department of Commerce to enforce its standards. H.R. 4533, cosponsored by ten Representatives, was referred to the House Committee on Energy and Commerce on January 27, 2010.

Monday, February 8, 2010

Whole Foods’ new employee health initiative: trend-setting or discriminatory?

Whole Foods CEO John Mackey, on a roll after taking recent controversial public stands against universal health care and the very notion of climate change, recently announced a new opt-in health benefits incentive program for employees. While the regular 20% store discount is still available to all workers, Mackey has sweetened the perks for non-smokers who enjoy a low body mass index (BMI), low blood pressure and low cholesterol. There are four categories: the "bronze" (22%), "silver" (25%), "gold" (27%) and "platinum" (30%) levels. The better the numbers, the better the discounts or, as some have referred to it: weigh less, pay less.

Call me crazy, but it seems ironic that the ones who are deemed most "healthy" are given the biggest discounts--shouldn't that be the other way around?

Now, admittedly, it's pretty hard to fault any company who seeks to not only keep down health care costs but also sees many other advantages in offering wellness program incentives to its workers. And no one's saying that we all can't eat a lot more sensibly. But where Mackey veers off track, in the opinion of many critics, is his use of BMI--which does not take into account muscle mass versus body fat--as an accurate measure. So, on the one hand, you have women and athletes, who normally have higher-than-average BMIs. The other side of the coin might be a thin person with a "normal" BMI who could potentially have an eating disorder.

As noted by author Karen Greco on Technorati, the results of a Mayo Clinic study, presented during a 2008 study at the American College of Cardiology Annual Scientific Session, showed that more than half of American men and women who had "normal" BMIs actually had higher body fat percentages that put them at risk for illness such as type 2 diabetes. "It's completely feasible that a 'silver' level employee is actually less healthy than the 'bronze' counterpart," Greco notes, "although this 'silver' employee qualifies for a healthier healthy discount."

And what of the legalities of singling out thinner employees, who may or may not be healthier than their co-workers, for special perks? Granted, smoking is a choice, but in many instances, high blood pressure and cholesterol can be genetic. Would that be discriminatory? Also, what about the ageist implications? How many 20-year-olds versus 50-year-olds have high blood pressure?

The employee initiative begins in March, with the proviso that employees who don't initially qualify can still become eligible for the larger discounts as they become more "healthy." Since Whole Foods has the reputation for leading the way in many areas, it will be interesting to note: (a) whether there is any legal fallout, or (b) whether they are successful enough in persuading other companies to follow suit.

Friday, February 5, 2010

Grist from the sausage mill (Congress laboring on labor)

It’s been an interesting week, labor-wise, in Congress and the big events offered reason for both optimism and despair regarding the ability of the legislative branch to proceed on legislative matters designed to address issues facing the nation’s labor force.

Senators Charles Schumer (D-NY) and Orrin Hatch (R-Utah), on Wednesday, February 3rd, offered details about legislation that would exempt any employer that hires a worker, who has been without full-time work for at least 60 days, from paying the employer’s share of 2010 Social Security taxes on that worker. According to its sponsors, the advantage of the Hire Now Tax Cut Act of 2010 (S. 2983) is that it rewards businesses immediately for the “good” behavior of hiring out-of-work workers, rather than offering them a 2011 tax cut for decisions made in 2010. Furthermore, the longer the employer employs, and the more it pays the worker, the benefits would increase, up to the maximum Social Security wage of $106,800. In order to be eligible, the employee’s pay in the second 26-week period must be at least 80 percent of the pay in the first 26-week period.

From this perspective, the simple nature of the bill, along with the bi-partisan nature of its support, make it a superb candidate for passage. President Obama has said that 2010 will be all about the jobs and a bill that rewards employers for hiring workers should be supported.

However, another labor-related issue may be more emblematic of the politics that currently choke progress in our nation’s capital. Sen. Harry Reid (D-Nev.) has filed cloture on the nomination of Craig Becker to be a member of the National Labor Relations Board, but this time the impediment to Becker’s ascension may have nothing to do with his stances on labor issues. Senator Richard Shelby (R-Ala.) has put a hold on all of Obama’s pending nominations, including Becker’s. Therefore, under Senate rules, at least 60 Senators must vote to end debate on the nomination. Needless to say, with Scott Brown’s victory in the recent Massachusetts special election, the odds of the Senate achieving that mark have considerably lengthened.

Shelby has placed the hold in an effort to ensure the award of an air-tanker contract to French manufacturer Airbus over American manufacturer Boeing. Airbus would build the tankers in Alabama, which apparently is how Shelby justifies shutting down the confirmation process for 70 of the President’s nominees. This is precisely the kind of “inside baseball” that has slowed all progress on essential legislation to a standstill. The view here is that Shelby’s Republican colleagues should put pressure on the good Senator to end his obstruction.

Wednesday, February 3, 2010

Will Ledbetter Act’s anniversary breathe new life into the Paycheck Fairness Act?

Last Friday marked the one-year anniversary of the Lilly Ledbetter Fair Pay Act (P.L. 111-2), the first major legislation President Obama signed into law, and the first dealing with labor and employment law. For a year, though, its companion legislation, the Paycheck Fairness Act (H.R. 12/S. 182), which already passed the House, has remained stalled in the Senate…until now.

At a press conference celebrating the one-year anniversary of the Ledbetter Act, Senator Chris Dodd (D-CT) announced that the Senate Health, Education, Labor and Pensions Committee will hold hearings on the Paycheck Fairness Act in the next four to six weeks. During the State of the Union, Obama confirmed the Administration’s continued support for the Paycheck Fairness Act, giving a nod to the bill in his speech. “We are going to crack down on violations of equal pay laws – so that women get equal pay for an equal day’s work,” he said. Among those in opposition to the bill are various business groups, including the US Chamber of Commerce.

So what is the Paycheck Fairness Act?

Provisions. The Paycheck Fairness Act, which passed the House last January in a 256-163 vote, would allow prevailing plaintiffs to recover compensatory and punitive damages under the Equal Pay Act (EPA), which currently provides only for liquidated damages (fixed and limited) and back pay awards. To recover punitive damages, however, a plaintiff must show intent (i.e., malice or reckless indifference). In addition, the bill would allow EPA lawsuits to proceed as class actions, as governed by the Federal Rules of Civil Procedure. The bill also would modify the EPA’s requirement that men and women receive equal pay for equal work in the “same establishment.” It clarifies that employees will be deemed to work in the “same establishment” if they work for the same employer at workplaces located in the “same county or similar political subdivision of a state.”

Employers would be prohibited from retaliating against employees who have “inquired about, discussed or disclosed the wages of the employee or another employee.” But the retaliation provision does not apply to instances where an employee who has “access to the wage information of other employees as a part of that employee’s essential job functions” discloses those wages to individuals who do not otherwise have access to such information (i.e., HR professionals). Disclosures can be made in response to a complaint or charge or in furtherance of an investigation.

The bill would also clarify when employers may assert as an affirmative defense that a pay differential (unequal pay for equal work) is based on “factors other than sex.” Employers asserting the affirmative defense must prove those factors are “job-related” and “consistent with business necessity.”

If enacted, the bill would also mandate that the Equal Employment Opportunity Commission (EEOC) and Department of Labor’s (DOL) Office of Federal Contract Compliance Programs train employees and other affected individuals on matters involving wage discrimination. Within 18 months of the bill’s enactment, the EEOC would be required to complete a survey about pay information and to issue regulations providing for the collection of pay information data from employers as described by the sex, race and national origin of employees. In addition, the bill would require the DOL to make competitive grants available that would help provide “effective negotiation skills training” for girls and women (and the bill expressly prohibits grant programs created by the EPA from being used for Congressional earmarks). Further, nothing in the Paycheck Fairness Act would affect the obligation of employers and employees to fully comply with all the nation’s immigration laws.

The Paycheck Fairness Act, which has 37 cosponsors, would take effect six months after the date it is enacted.

What we do know. Data released from the US Bureau of Labor Statistics confirms that the gender wage gap is increasing, reports the Institute for Women’s Policy Research. The ratio of women’s median annual earnings in 2008 was 77.1 cents for full-time, year-round workers for each dollar earned by their male counterparts, down from 77.8 cents in 2007. (This means the gender wage gap is now 22.9 percent). Women’s real (inflation-adjusted) annual earnings fell 2.0 percent from 2007 to 2008, to $35,745, while men’s fell 1.0 percent, to $46,367. This has not gone unnoticed by the Obama Administration, which announced in conjunction with the State of the Union that it would implement both an equal pay initiative to improve compliance, public education and enforcement of equal pay laws and a National Equal Pay Enforcement Task Force to ensure that the agencies with responsibility for equal pay enforcement are coordinating efforts and limiting potential gaps in enforcement.

Stay tuned.

Monday, February 1, 2010

Compliance officer alert: mitigating corporate culpability for criminal wrongdoing

Corporate compliance officers don’t need a crystal ball to figure out that the enforcement environment under the Obama administration is getting more serious. But as to white collar crime, the outlook may be improving for corporations with effective compliance and ethics programs in place – or at the very least, there is now a little more guidance on how to mitigate corporate culpability for criminal conduct.

On January 21, the US Sentencing Commission (USSC) published its proposed amendments to the sentencing guidelines, policy statements and commentary, including proposed changes related to sentencing of organizations (75 FR 3525). The USSC also made a request for comment that should be on every corporate compliance officer’s radar – whether the three-point reduction in culpability score awarded for effective compliance programs should be permitted even when high-level personnel are involved in the commission of a criminal offense.

This very desirable credit at sentencing would be awarded only if:

  1. The responsible compliance personnel have direct reporting authority to the board of directors level (e.g., a board audit committee);

  2. The compliance program successfully detected the offense before discovery, or a reasonable likelihood of discovery, outside of the organization; and

  3. The organization promptly reported the offense to the appropriate authorities.

The contemplated change is designed to encourage reporting to the board by responsible compliance personnel. Obviously such a structure would permit compliance officers to bypass high-level offenders who would otherwise be motivated to conceal, rather than reveal and remedy, the wrongdoing. For corporations that are serious about implementing effective compliance programs, this can’t be a bad idea.

And it permits the court to reduce fines and penalties against a corporation even when its officers are involved in criminal conduct – that’s good for the corporation, and perhaps more importantly, it’s good for the real owners, who are its shareholders.

Document retention policies. As to the seven minimum requirements under §8B2.1(b) of the guidelines, a proposed amendment expands the application note for the second requirement, which is directed to high-level knowledge and responsibility for effective programs (§8B2.1(b)(2)). The amendment clarifies that “high-level personnel and substantial authority personnel should be aware of the organization’s document retention policies and conform any such policy to meet the goals of an effective compliance program under the guidelines and to reduce the risk of liability under the law.”

A similar proposed amendment applies to employees. The application note for §8B2.1(c), which requires that an organization periodically access the risk of criminal conduct and take appropriate steps to reduce the risk identified, adds an assessment of ethics and compliance functions, and the example that “all employees should be aware of the organization’s document retention policies and conform any such policy to meet the goals of an effective compliance program under the guidelines and to reduce the risk of liability under the law.”

Both of these proposed amendments would add another compliance hoop to jump through, but arguably, it makes good business sense that corporations have document retention policies that are effective and understood and implemented by both employees and upper management.

When criminal conduct is discovered. An application note would also be added for the seventh minimum requirement of effective corporate compliance and ethics programs (§8B2.1(b)(7)), which sets forth the reasonable steps that should be taken after criminal conduct is detected:

First, the organization should respond appropriately to the criminal conduct. In the event the criminal conduct has an identifiable victim or victims the organization should take reasonable steps to provide restitution and otherwise remedy the harm resulting from the criminal conduct. Other appropriate responses may include self-reporting, cooperation with authorities, and other forms of remediation. Second, to prevent further similar criminal conduct, the organization should assess the compliance and ethics program and make modifications necessary to ensure the program is more effective. The organization may take the additional step of retaining an independent monitor to ensure adequate assessment and implementation of the modifications.

This is where the rubber meets the road – will the corporation become part of the problem or part of the solution? Arguably, good business sense dictates remediation of the harm – as to self-reporting, that may be harder to sell.

The USSC is accepting comments through March 22, 2010 on its proposed amendments and issue for comment. Will the proposed amendments and the issue for comment become final? That remains to be seen.

In the meantime, forward-looking corporate compliance officers should contemplate changes to corporate compliance and ethics policies based on the USSC’s proposed amendments. Considering that one of the principles under the sentencing guidelines permits a federal court to divest an organization of all its assets when it has operated primarily for a criminal purpose or by criminal means, there’s a lot at stake. It’s true that such a sentence is rarely imposed, but culpability plays a key role in sentencing – erring on the side of policies that mitigate any culpability just makes good business sense.