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VP Legislative Action Robert Hambright, Orgain Bell & Tucker, LLP
March/April 2011
LEGISLATIVE UPDATE MAY/JUNE 2011
- EDITING IN PROGRESS BELOW

MC SHRM Update on Pending Legislative and Legal Developments May 9, 2011
Robert J. Hambright, VP of Legislative Affairs

Final ADAAA Regulations to Become Effective May 24, 2011 EEOCs regulations implementing ADAAA will become effective May 24, 2011. For a copy of the regulations and EEOCs supplementary information, see http://www.federalregister.gov/articles/2011/03/25/2011-
6056/regulations-to-implement-the-equal-employment-provisions-of-the-americans-with-disabilities-act-as. In keeping with the ADA Amendments Act of 2008, signed by President George W. Bush, the regulations make it easier for individuals seeking ADA protection to establish the requisite disability.

Reasonable Accommodation Did Not Exist for Unfit Employee

An employee of Continental Airlines at IAH Airport was not allowed to return to work following an accident in which he drove a van at high speed through the front wall of a building, injuring five employees and sending three by ambulance to the hospital. The employees job required driving in safety-sensitive areas of the airport. When questioned about the accident the employee could offer no explanation other than a faulty gas pedal and that the accident was inevitable because of a dream his wife had. He was later examined by a series of company-paid and independent doctors, most of whom concurred that the employee suffered from impaired cognitive functioning and was not fit to drive or to perform safety-sensitive tasks. To the extent here material Continental concluded that no alternative position existed and that the employee could not return to work. This decision prompted the employee to sue under the ADA (among other federal EEO laws).

In Toronka v. Continental Airlines, the Fifth Circuit Court of Appeals ruled for the airlines on all of the plaintiffs claims. On the ADA claims the court held that, while the employer had allowed employees to work temporarily in certain non-safety-sensitive positions it was not required to create such a job for the employee permanently. Further, while certain employees held non-safety-sensitive positions on other shifts, the employees seniority did not entitle him to such a position, and the airlines was not required to violate its collective bargaining agreement by breaking seniority to provide him with one. With language useful to employers faced with similar challenges the court wrote: Toronka & [contends] that Continental was required to provide a job for which he was qualified, but Toronka misunderstands the responsibility of an employer to provide a reasonable accommodation for a disabled employee. It is not an employers responsibility to fashion a new job, as Toronka asserts. For reassignment to be a reasonable accommodation, a position must first exist and be vacant. Therefore, if Toronka was not qualified for any of the existing, vacant positions at Continental, Continental did all it could, and Toronka has not shown that he can be reasonably accommodated by reassignment.

Facebook and Twitter Developments at NLRB

As noted in the February 2011 update below, the National Labor Relations Board filed a complaint alleging that an employer had illegally discharged an employee for posting negative remarks about a supervisor on Facebook. NLRB maintained that the posting was concerted activity protected by Section 7 of the National Labor Relations Act. That case was settled on the eve of trial. According to a press release by NLRB, under the terms of the settlement the employer agreed to revise its overly broad rules to ensure that they do not improperly restrict employees from discussing their wages, hours and working conditions with co-workers and others while not at work, and that they would not discipline or discharge employees for engaging in such discussions. In a similar case, NLRB filed a complaint against build.com alleging that the web-based home improvement retailer had unlawfully discharged an employee for posting certain negative comments about the company on Facebook.

According to a press release by NLRB on April 27, 2011, the employer agreed to pay the employee back pay and to post a notice at the workplace for 60 days stating that employees have the right to post comments about terms and conditions of employment on their social media pages, and that they will not be terminated or otherwise punished for such conduct. In another case, NLRB advised Thomson Reuters that it intended to file a complaint against that news gathering organization after an employee had been confronted by a supervisor for posting a message on Twitter that said, One way to make this the best place to work is to deal honestly with Guild Members. The tweet was posted in response to a request by Reuters for employee suggestions about how to improve the organization. According to the employee, after her tweet was posted a supervisor called her at home and told me that Reuters had a policy we were not supposed to say something that would damage the reputation of Reuters News or Thomson Reuters. I felt kind of threatened. I thought it was some kind of intimidation. http://www.nytimes.com/2011/04/07/business/media/07twitter.html. It is anticipated that the case will be resolved without the filing of a formal complaint.

Background Checks of Government Contractors Held Constitutional

In NASA v Nelson, the United States Supreme Court recently reversed the federal appeals court in California and held that certain background checks of employees working at NASAs jet propulsion laboratory did not violate the United States Constitution. A group of 28 employees filed suit after the Bushera Department of Commerce mandated that contract employees with long-term access to federal facilities complete a standard federal background check. The process included a form that inquired about several facets of an employees life such as whether the employee had used, possessed, supplied or manufactured illegal drugs in the past year. An employee answering yes was directed to provide additional details including information about any treatment or counseling received. A provision on the form stated that truthful responses could not be used against an employee in criminal proceedings. The process further called for questionnaires to be sent to schools, former employers and acquaintances of each employee asking openended questions about knowledge of any adverse information concerning the employees violations of law, alcohol or drug abuse, financial history, mental stability and other behavior. The information collected was subject to the disclosure restrictions of the Privacy Act, 5 U.S.C. ᄃ 552a.

The Supreme Court assumed without deciding that the background inquiry process implicated privacy interests of constitutional significance. However, the Court held that whatever the scope of this interest, it does not prevent the Government from asking reasonable questions of the sort included on &[the forms] in an employment background investigation that is subject to the Privacy Acts safeguards against public disclosure.

USERRA Does Not Provide Cause of Action for Hostile Work Environment

Several employees of Continental Airlines brought suit alleging that they had been subjected to a hostile work environment. Suit was based on USERRA which, among other things, prohibits the denial of a benefit of employment because of covered military service. The employees alleged that supervisors had ridiculed them by making statements such as: If you guys take more than three or four days a month in military leave, youre just taking advantage of the system; I used to be a guard guy, so I know the scams you guys are running; Your commander can wait. You work full time for me. Part time for him; Its getting really difficult to hire you military guys because youre taking so much military leave; and You need to choose between . . . [Continental] and the Navy. In a case of first impression the Fifth Circuit Court of Appeals concluded in Carder v. Continental Airlines that the language of USERRA differs from that of other EEO statutes such as Title VII, and therefore, service members may not bring a freestanding cause of action for hostile work environment against their employers. The court was careful to emphasize, however, that nothing in this opinion alters the ability of service members to sue under USERRA for the denial of contractual benefits of their employment on the basis of military service as defined in the statute. To be Entitled to FMLA Leave an Employee Must Make the Employer Aware of Both the Need for Leave and the Anticipated Timing and Duration of Leave In Wilson v. Noble Drilling Services, Inc., the Fifth Circuit Court of Appeals considered a retaliatory discharge case brought under the FMLA. The plaintiff and his wife were expecting a baby and planned for the plaintiffs mother-in-law to serve as the babys caretaker. When the plaintiffs mother-in-law was diagnosed with breast cancer the plaintiff gave his supervisor, Kurt Hoffman, a heads up that he might need to take off some time to help care for the baby "after the first of the year." Subsequently, Hoffman recommended the plaintiff for a promotion. The plaintiff was dissatisfied with the size of the raise he received, however, and fired off an angry email to Hoffmans boss. Hoffman lost confidence in the plaintiff and the plaintiffs employment was terminated. The Fifth Circuit decided that the FMLA retaliation claim was properly dismissed by summary judgment. First, the court determined that the plaintiff could not present a prima facie case that he had made an effective request for FMLA leave. The court acknowledged that an employee need not specifically request FMLA leave to receive the benefit of the statute. However, quoting the regulations, the court emphasized that the employee must provide at least verbal notice sufficient to make the employer aware that the employee needs FMLA-qualifying leave, and the estimated timing and duration of the leave. 29 C.F.R. ᄃ 825.302(c). Here the plaintiffs heads up that he might need leave at some unspecified time in the future was not a sufficient FMLA leave request. Second, the court determined that, even if the plaintiff had made a qualifying request for FMLA leave, there was no showing that the plaintiffs discharge for sending the angry email was a pretext for FMLA retaliation. Citing earlier cases the court concluded that suspicious timing alone is not enough to establish pretext.

FLSAs Anti-Retaliation Protection Extends to Oral Complaints
Consistent with most employment laws, FLSA contains a prohibition of employer retaliation against employees who seek to avail themselves of the rights of the statute. FLSA prohibits discharge or other retaliation against an employee who, among other things, has filed any complaint alleging a violation of the Act. In Kasten v. Saint-Gobain Performance Plastics, the United States Supreme Court considered the
case of an employee who had been discharged after making a number of oral complaints within his company about the location of a time clock. According to the plaintiff he had made oral complaints that the placement of the clock shorted employees for time spent donning and doffing PPE and walking to work areas. Further, the plaintiff alleged that he had told one HR representative if they were to get challenged
on the time clock location in court, they would lose. He also told his foreman that he was thinking about starting a lawsuit about the placement of the time clocks. The plaintiff was discharged for refusing to use the time clocks and he brought suit under the FLSA contending that he had been unlawfully retaliated against.

The Seventh Circuit Court of Appeals held that the plaintiff had no valid FLSA retaliation case because he had not filed a complaint within the meaning of the Act. The Supreme Court disagreed, however, reasoning that the plaintiff had been engaged in protected FLSA conduct for which he could not lawfully be discharged. The Court concluded that the words any complaint were broad enough to cover oral complaints and that reading the statute restrictively to require the "filing" of a written complaint could unreasonably exclude from the statutes protection those who would find it difficult to reduce their complaints to writing, particularly illiterate, less educated, or overworked workers. The Court was clear that
not every internal gripe can be considered the filing of any complaint and that to be protected there must be fair notice that an employee is in fact making a complaint about an Act violation. In the words of the Court:
To fall within the scope of the anti-retaliation provision, a complaint must be sufficiently clear and detailed for a reasonable employer to understand it, in light of both content and context, as an assertion of rights protected by the statute and a call for their protection. This standard can be met, however, by oral complaints, as well as by written ones.
Interestingly, the Supreme Court refused to consider the employers alternative argument that the FLSA anti-retaliation provision should apply only to complaints "filed" with the Government, and not to complaints made internally to a private employer. The Court found that this argument had been waived procedurally by the employer's attorneys and expressly stated no view on the merits of it. Oral Agreements Made During Conciliation Process are Not Enforceable Title VII requires EEOC to engage in conciliation if the agency decides that there is reasonable cause to believe that the allegations of a discrimination charge are true. The conciliation process is different than mediation where the services of a neutral are brought to bear to facilitate settlement. Instead, at the conciliation stage, guilt has already been determined in EEOCs eyes and the process normally consists of EEOC advising an employer what the agency will require to resolve the matter. Conciliation is confidential, however, and Title VII prohibits EEOC from publicly disclosing -- or using in subsequent proceedings --
anything said or done during conciliation.

In EEOC v. Philip Services Corp., the Fifth Circuit Court of Appeals considered the question whether an oral settlement agreement made during the conciliation process with EEOC is enforceable. EEOC alleged that during conciliation the employer had agreed to settle the charges of nine individuals and had exchanged emails negotiating settlement terms. However, while EEOC was reducing the parties agreement
to a formal agreement, the employer abruptly withdrew from conciliation and refused to settle. EEOC brought suit seeking to enforce the parties oral agreement to settle the case. The Fifth Circuit affirmed dismissal of the case, holding that the non-disclosure provisions of Title VII meant that EEOC could use no evidence of an alleged oral agreement reached at conciliation in a subsequent breach of contract action.
Because EEOC could use no evidence from the conciliation process it had no proof that an oral settlement had been reached. The courts opinion was limited to the facts presented and it does not call into question the enforceability of a written Conciliation Agreement signed by all parties.
Supreme Court Holds that Arbitration Agreements Can Exclude Class Actions An employers decision whether or not to institute an ADR or arbitration program to avoid courthouse
lawsuits by discharged employees is a complicated one that requires balancing a number of considerations. One of those considerations is whether an arbitrator can be held to certain procedural standards when deciding claims or is free to "make up the rules" from case to case. For example, some arbitrators have applied class action rules in unique ways to greatly expand the scope of proceedings against employers.

Keeping it Real: Supreme Court Recognizes "Cat's Paw" Theory of Discrimination
Robert J. Hambright

For many years human resource professionals have been trained to make sure that proper documentation exists to support every disciplinary action, especially terminations. No statute or law "requires" this practice but, as a practical matter, supporting documentation should be in place to help defend against the many types of employment law claims that can be asserted today. A recent case by the United States Supreme Court serves as a reminder, however, that "good documentation" for discipline may not be enough to win an employment law claim where there is evidence that discrimination or retaliation contributed to the decision.

In Staub v. Proctor Hospital, the Supreme Court decided a case concerning the so-called "cat's paw" theory of employer liability. The term "cat's paw" derives from an Aesop's fable in which a monkey uses flattery to cause a cat to remove some chestnuts roasting in a fire. The cat is induced to remove the chestnuts, burning its paws. Unfortunately for the cat, the monkey swipes the chestnuts and leaves the cat with nothing.

The Staub case arose under the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA). Generally speaking, USERRA prohibits discrimination based on an employee's uniformed military service. While the case arose under USERRA, the principles announced likely will be applied to cases based on other anti-discrimination laws.

Staub worked at the Proctor Hospital in Peoria, Illinois as a technician. He also had part time obligations as a military reservist that required him to miss work. There was evidence that Staub's supervisors became hostile toward him because his absences for military service interrupted work flow and created extra work for others. Testimony revealed that Staub's supervisor, Janice Mullaly, had scheduled Staub to work additional shifts without notice so he would "pay back the department for everyone else having to bend over backwards to cover [his] schedule for the Reserves." There was also testimony that Mullaly had asked a co-worker to help "get rid" of Staub and that Mullaly's boss, Michael Korenchuk, referred to Staubs' military obligations as "a b[u]nch of smoking and joking and a waste of taxpayers['] money." Korenchuk admitted that he knew Mullaly was "out to get" Staub. One day Mullaly issued Staub a "corrective
action" disciplinary warning for violating a company rule that purportedly required him to notify his supervisor before leaving his work area. Staub protested that the corrective action was "false" because not only had he not left his work area as alleged, no such rule even existed. Nevertheless, the "corrective action" was placed in Staub's personnel file.

Staub continued to miss work because of his military duties. Ultimately, his absences were brought to the attention of the Hospital's CEO, who directed Korenchuk and the VP of Human Resources, Linda Buck, to create a plan that would solve Staub's "availability problems." Before the plan could be created, Korenchuk informed Ms. Buck that Staub had again left his desk without informing a supervisor in violation of the previous "corrective action." Based only on her review of Staub's personnel file, and Korenchuk's accusation, Ms. Buck fired Staub for violating the "corrective action." During a later grievance proceeding Ms. Buck stuck to her decision despite Staub's claim that the original "corrective action" had been fabricated by Mullaly to get rid of him because of his military obligations and, even so, he had not violated the "corrective action" because he had left Korenchuk a voicemail before leaving his work area.

At trial Staub made no effort to prove that Ms. Buck fired him because she harbored an illegal motive. Instead, Staub contended that Mullaly and Korenchuk's unlawful actions caused Ms. Buck to fire him on behalf of the Hospital in violation of USERRA. The jury agreed with Staub and awarded him $57,640 in damages. The Seventh Circuit Court of Appeals reversed the award, holding that the Hospital could not be held liable for discrimination because there was no evidence that Ms. Buck, who made the termination decision on behalf of the Hospital, had been motivated by unlawful bias.

The Supreme Court reversed the Seventh Circuit, concluding that it was error to focus exclusively on Ms. Buck's bias-free "independent review" of Staub's personnel file and to ignore the reality of the role the supervisors had played. With language only lawyers could love the Supreme Court held that "if a supervisor performs an act motivated by antimilitary animus that is intended by the supervisor to cause an adverse employment action, and if that act is a proximate cause of the ultimate employment action, then the employer is liable under USERRA." Applying the test to the facts before it the Court concluded that there was ample evidence that Mullaly and Korenchuk acted with discriminatory intent and caused Staub's dismissal by the hapless Ms. Buck.

While newsletters and blogs now hype the "cat's paw" theory of employer liability as something revolutionary, this is not entirely correct. For example, over 10 years ago the Fifth Circuit Court of Appeals, which covers Texas, recognized and applied the "cat's paw" theory in Russell v. McKinney Hospital Venture. In that case the court held:

"We therefore look to who actually made the decision or caused the decision to be made, not simply to who officially made the decision. Consequently, it is appropriate to tag the employer with an employee's age-based animus if the evidence indicates that the worker possessed leverage, or exerted influence, over the titular decisionmaker."

History aside, the message is the same: human resource professionals should conduct thorough investigations of the circumstances of every disciplinary matter. Good supporting documentation remains an important part of any disciplinary case. However, Staub and other "cat's paw" cases remind us that human resource professionals should not rely on documentation or hearsay reports alone. Rather, due diligence requires verifying both the accuracy and legitimacy of the paperwork hopefully with face-to-face discussions with the persons involved. Information gaps or "red flags" may indicate the need for follow up investigation appropriate to the circumstances. Sometimes this is the only way to "keep it real" and to be certain that the correct employment decision is made.
VP Legislative Action Robert Hambright, Orgain Bell & Tucker, LLP
February 2011
PPACA Declared Unconstitutional
The United States District Court for the Northern District of Florida has agreed with Texas and 25 other states that the Patient Protection and Affordable Care Act's "individual mandates" requiring the purchase of health insurance are unconstitutional. http://www.flnd.uscourts.gov/announcements/documents/10cv91doc150.pdf.
A severability clause in a statute provides that if any portion of a law is struck down as unconstitutional the remaining portions survive. The court concluded that because PPACA contains no such clause the entire statute is void. There are other lower court decisions on this question and the matter is expected to go to the Supreme Court for ultimate resolution.

Final GINA Regulations Issued
EEOC has released final regulations interpreting the Genetic Information Nondiscrimination Act of 2008 (GINA). Importantly, the regulations provide "safe harbor" language that employers can use on medical inquiry forms to warn providers against providing them genetic information. If a provider gives the employer genetic information despite the warning the employer will not be in violation of GINA.
http://www.federalregister.gov/articles/2010/11/09/2010-28011/regulations-under-the-genetic-information-nondiscrimination-act-of-2008

Third Party Retaliation Claim Recognized by U.S. Supreme Court
The United States Supreme Court has decided that Title VII prohibits "associational" or "third party" retaliation in some circumstances. In Johnson v. North American Stainless, LP, ___ U.S. ___ (January 24, 2011), the Court held that Title VII prohibited the retaliatory firing of an employee whose fianc← had filed a charge of discrimination against the employer. http://www.supremecourt.gov/opinions/10pdf/09-291.pdf

PPACA FAQs Issued on Grandfathered Status of Plans
The federal HHS, Labor and Treasury Departments have released a series of FAQs providing guidance on grandfathered plan issues arising under PPACA. Part I (September 20, 2010): http://www.dol.gov/ebsa/faqs/faq-aca.html; Part II (October 8, 2010): http://www.dol.gov/ebsa/faqs/faq-aca2.html; Part III (October 12, 2010): http://www.dol.gov/ebsa/faqs/faq-aca3.html; and Part IV (October 29, 2010): http://www.dol.gov/ebsa/faqs/faq-aca4.html.

President Obama Directs Review of Federal Regulations
President Obama has issued an executive order with the stated purpose of requiring all agencies to review and improve federal regulations to bring them into the 21st century and to promote economic development.
http://www.whitehouse.gov/the-press-office/2011/01/18/improving-regulation-and-regulatory-review-executive-order

OSHA Considering Requirement That All Businesses Implement Injury and Illness Prevention Plans
OSHA is developing regulations to mandate that employers develop programs to "systematically identify and remediate risks to workers" and "to provide workers with opportunities to participate & and help monitor" implementation.
http://www.dol.gov/regulations/factsheets/osha-fs-I2P2.htm

DOL to Direct Claimants to Plaintiff Attorneys
When the Wage Hour Division of the Department of Labor determines not to pursue a wage claim it will now provide the claimant with contact information for ABA-approved plaintiff lawyers.
http://www.dol.gov/whd/resources/ABA
ReferralPolicy.htm

Employers to be Required to Justify Independent Contractor Classifications
DOL plans to issue "Right-to-Know" regulations requiring, among other things, that employers notify workers about whether or not they have been classified as independent contractors. http://www.dol.gov/whd/regs/unifiedagenda/fall
2010/1235-AA04.htm. According to DOL, "Any employers that seek to exclude workers from the FLSA's coverage will be required to perform a classification analysis, disclose that analysis to the worker, and retain that analysis to give to WHD enforcement personnel who might request it."
http://www.dol.gov/regulations/factsheets/whd-fs-flsa-recordkeeping.htm

Record Number of EEOC Charges Filed in FY2010
There were a record number of almost 100,000 EEOC charges filed in the fiscal year ending September 30, 2010 according to a press release by EEOC issued January 11, 2011. For the first time since EEOC began operation in 1965 the number of retaliation charges surpassed race discrimination charges.
http://www.eeoc.gov/eeoc/newsroom/release/1-11-11.cfm

Bureau of Labor Statistics Reports Union Membership Dropping
A report by DOL's BLS advises that the percentage of workers covered by labor unions in the United States dropped to 11.9 % in 2010. There are more unionized government workers (36.2 %) than unionized workers in the private sector (6.9 %).
http://www.bls.gov/news.release/union2.nr0.htm

Employers to be Required to Advise Employees of Right to Unionize
In an effort to reduce the declining trend of union membership the National Labor Relations Board has proposed a rule requiring employers to post a notice advising employees of their right to unionize.
http://www.nlrb.gov/shared_files/Press%20Releases/2010/R-2806.pdf

Discharge of Employee for Critical Facebook Posting Said to Violate NLRA
The National Labor Relations Board has filed a complaint against an employer that discharged an employee for posting negative remarks about a supervisor on Facebook. NLRB contends that the posting was "concerted activity" protected by Section 7 of the National Labor Relations Act. This development highlights the need for employers to be sure that their social media and networking policies do not prohibit employees from saying or publishing "anything or everything" about a company.
http://www.nlrb.gov/shared_files/Press%20Releases/2010/R-2794.pdf
MC SHRM Update on Pending Legislative and Legal Developments
May 9, 2011
Robert J. Hambright, VP of Legislative Affairs
Final ADAAA Regulations to Become Effective May 24, 2011
EEOCs regulations implementing ADAAA will become effective May 24, 2011. For a copy of the regulations
and EEOCs supplementary information, see http://www.federalregister.gov/articles/2011/03/25/2011-
6056/regulations-to-implement-the-equal-employment-provisions-of-the-americans-with-disabilities-act-as. In
keeping with the ADA Amendments Act of 2008, signed by President George W. Bush, the regulations make
it easier for individuals seeking ADA protection to establish the requisite disability.
Reasonable Accommodation Did Not Exist for Unfit Employee
An employee of Continental Airlines at IAH Airport was not allowed to return to work following an accident in
which he drove a van at high speed through the front wall of a building, injuring five employees and sending
three by ambulance to the hospital. The employees job required driving in safety-sensitive areas of the
airport. When questioned about the accident the employee could offer no explanation other than a faulty
gas pedal and that the accident was inevitable because of a dream his wife had. He was later examined by
a series of company-paid and independent doctors, most of whom concurred that the employee suffered
from impaired cognitive functioning and was not fit to drive or to perform safety-sensitive tasks. To the
extent here material Continental concluded that no alternative position existed and that the employee could
not return to work. This decision prompted the employee to sue under the ADA (among other federal EEO
laws).
In Toronka v. Continental Airlines, the Fifth Circuit Court of Appeals ruled for the airlines on all of the
plaintiffs claims. On the ADA claims the court held that, while the employer had allowed employees to work
temporarily in certain non-safety-sensitive positions it was not required to create such a job for the employee
permanently. Further, while certain employees held non-safety-sensitive positions on other shifts, the
employees seniority did not entitle him to such a position, and the airlines was not required to violate its
collective bargaining agreement by breaking seniority to provide him with one. With language useful to
employers faced with similar challenges the court wrote:
Toronka & [contends] that Continental was required to provide a job for which he was
qualified, but Toronka misunderstands the responsibility of an employer to provide a
reasonable accommodation for a disabled employee. It is not an employers responsibility
to fashion a new job, as Toronka asserts. For reassignment to be a reasonable
accommodation, a position must first exist and be vacant. Therefore, if Toronka was not
qualified for any of the existing, vacant positions at Continental, Continental did all it
could, and Toronka has not shown that he can be reasonably accommodated by
reassignment.
Facebook and Twitter Developments at NLRB
As noted in the February 2011 update below, the National Labor Relations Board filed a complaint alleging
that an employer had illegally discharged an employee for posting negative remarks about a supervisor on
Facebook. NLRB maintained that the posting was concerted activity protected by Section 7 of the National
Labor Relations Act. That case was settled on the eve of trial. According to a press release by NLRB, under
2
the terms of the settlement the employer agreed to revise its overly broad rules to ensure that they do not
improperly restrict employees from discussing their wages, hours and working conditions with co-workers
and others while not at work, and that they would not discipline or discharge employees for engaging in
such discussions.
In a similar case, NLRB filed a complaint against build.com alleging that the web-based home improvement
retailer had unlawfully discharged an employee for posting certain negative comments about the company
on Facebook. According to a press release by NLRB on April 27, 2011, the employer agreed to pay the
employee back pay and to post a notice at the workplace for 60 days stating that employees have the right
to post comments about terms and conditions of employment on their social media pages, and that they will
not be terminated or otherwise punished for such conduct.
In another case, NLRB advised Thomson Reuters that it intended to file a complaint against that news
gathering organization after an employee had been confronted by a supervisor for posting a message on
Twitter that said, One way to make this the best place to work is to deal honestly with Guild members. The
tweet was posted in response to a request by Reuters for employee suggestions about how to improve the
organization. According to the employee, after her tweet was posted a supervisor called her at home and
told me that Reuters had a policy we were not supposed to say something that would damage the
reputation of Reuters News or Thomson Reuters. I felt kind of threatened. I thought it was some kind of
intimidation. http://www.nytimes.com/2011/04/07/business/media/07twitter.html. It is anticipated that the
case will be resolved without the filing of a formal complaint.
Background Checks of Government Contractors Held Constitutional
In NASA v Nelson, the United States Supreme Court recently reversed the federal appeals court in
California and held that certain background checks of employees working at NASAs jet propulsion
laboratory did not violate the United States Constitution. A group of 28 employees filed suit after the Bushera
Department of Commerce mandated that contract employees with long-term access to federal facilities
complete a standard federal background check. The process included a form that inquired about several
facets of an employees life such as whether the employee had used, possessed, supplied or manufactured
illegal drugs in the past year. An employee answering yes was directed to provide additional details
including information about any treatment or counseling received. A provision on the form stated that truthful
responses could not be used against an employee in criminal proceedings. The process further called for
questionnaires to be sent to schools, former employers and acquaintances of each employee asking openended
questions about knowledge of any adverse information concerning the employees violations of law,
alcohol or drug abuse, financial history, mental stability and other behavior. The information collected was
subject to the disclosure restrictions of the Privacy Act, 5 U.S.C. ᄃ 552a.
The Supreme Court assumed without deciding that the background inquiry process implicated privacy
interests of constitutional significance. However, the Court held that whatever the scope of this interest, it
does not prevent the Government from asking reasonable questions of the sort included on &[the forms] in
an employment background investigation that is subject to the Privacy Acts safeguards against public
disclosure.
USERRA Does Not Provide Cause of Action for Hostile Work Environment
Several employees of Continental Airlines brought suit alleging that they had been subjected to a hostile
work environment. Suit was based on USERRA which, among other things, prohibits the denial of a benefit
of employment because of covered military service. The employees alleged that supervisors had ridiculed
them by making statements such as: If you guys take more than three or four days a month in military
3
leave, youre just taking advantage of the system; I used to be a guard guy, so I know the scams you guys
are running; Your commander can wait. You work full time for me. Part time for him; Its getting really
difficult to hire you military guys because youre taking so much military leave; and You need to choose
between . . . [Continental] and the Navy.
In a case of first impression the Fifth Circuit Court of Appeals concluded in Carder v. Continental Airlines
that the language of USERRA differs from that of other EEO statutes such as Title VII, and therefore,
service members may not bring a freestanding cause of action for hostile work environment against their
employers. The court was careful to emphasize, however, that nothing in this opinion alters the ability of
service members to sue under USERRA for the denial of contractual benefits of their employment on the
basis of military service as defined in the statute.
To be Entitled to FMLA Leave an Employee Must Make the Employer Aware of Both
the Need for Leave and the Anticipated Timing and Duration of Leave
In Wilson v. Noble Drilling Services, Inc., the Fifth Circuit Court of Appeals considered a retaliatory
discharge case brought under the FMLA. The plaintiff and his wife were expecting a baby and planned for
the plaintiffs mother-in-law to serve as the babys caretaker. When the plaintiffs mother-in-law was
diagnosed with breast cancer the plaintiff gave his supervisor, Kurt Hoffman, a heads up that he might
need to take off some time to help care for the baby "after the first of the year." Subsequently, Hoffman
recommended the plaintiff for a promotion. The plaintiff was dissatisfied with the size of the raise he
received, however, and fired off an angry email to Hoffmans boss. Hoffman lost confidence in the plaintiff
and the plaintiffs employment was terminated.
The Fifth Circuit decided that the FMLA retaliation claim was properly dismissed by summary judgment.
First, the court determined that the plaintiff could not present a prima facie case that he had made an
effective request for FMLA leave. The court acknowledged that an employee need not specifically request
FMLA leave to receive the benefit of the statute. However, quoting the regulations, the court emphasized
that the employee must provide at least verbal notice sufficient to make the employer aware that the
employee needs FMLA-qualifying leave, and the estimated timing and duration of the leave. 29 C.F.R. ᄃ
825.302(c). Here the plaintiffs heads up that he might need leave at some unspecified time in the future
was not a sufficient FMLA leave request. Second, the court determined that, even if the plaintiff had made a
qualifying request for FMLA leave, there was no showing that the plaintiffs discharge for sending the angry
email was a pretext for FMLA retaliation. Citing earlier cases the court concluded that suspicious timing
alone is not enough to establish pretext.
FLSAs Anti-Retaliation Protection Extends to Oral Complaints
Consistent with most employment laws, FLSA contains a prohibition of employer retaliation against
employees who seek to avail themselves of the rights of the statute. FLSA prohibits discharge or other
retaliation against an employee who, among other things, has filed any complaint alleging a violation of the
Act. In Kasten v. Saint-Gobain Performance Plastics, the United States Supreme Court considered the
case of an employee who had been discharged after making a number of oral complaints within his
company about the location of a time clock. According to the plaintiff he had made oral complaints that the
placement of the clock shorted employees for time spent donning and doffing PPE and walking to work
areas. Further, the plaintiff alleged that he had told one HR representative if they were to get challenged
on the time clock location in court, they would lose. He also told his foreman that he was thinking about
starting a lawsuit about the placement of the time clocks. The plaintiff was discharged for refusing to use
the time clocks and he brought suit under the FLSA contending that he had been unlawfully retaliated
against.
4
The Seventh Circuit Court of Appeals held that the plaintiff had no valid FLSA retaliation case because he
had not filed a complaint within the meaning of the Act. The Supreme Court disagreed, however,
reasoning that the plaintiff had been engaged in protected FLSA conduct for which he could not lawfully be
discharged. The Court concluded that the words any complaint were broad enough to cover oral
complaints and that reading the statute restrictively to require the "filing" of a written complaint could
unreasonably exclude from the statutes protection those who would find it difficult to reduce their
complaints to writing, particularly illiterate, less educated, or overworked workers. The Court was clear that
not every internal gripe can be considered the filing of any complaint and that to be protected there must
be fair notice that an employee is in fact making a complaint about an Act violation. In the words of the
Court:
To fall within the scope of the anti-retaliation provision, a complaint must be sufficiently
clear and detailed for a reasonable employer to understand it, in light of both content and
context, as an assertion of rights protected by the statute and a call for their protection.
This standard can be met, however, by oral complaints, as well as by written ones.
Interestingly, the Supreme Court refused to consider the employers alternative argument that the FLSA
anti-retaliation provision should apply only to complaints "filed" with the Government, and not to complaints
made internally to a private employer. The Court found that this argument had been waived procedurally by
the employer's attorneys and expressly stated no view on the merits of it.
Oral Agreements Made During Conciliation Process are Not Enforceable
Title VII requires EEOC to engage in conciliation if the agency decides that there is reasonable cause to
believe that the allegations of a discrimination charge are true. The conciliation process is different than
mediation where the services of a neutral are brought to bear to facilitate settlement. Instead, at the
conciliation stage, guilt has already been determined in EEOCs eyes and the process normally consists of
EEOC advising an employer what the agency will require to resolve the matter. Conciliation is confidential,
however, and Title VII prohibits EEOC from publicly disclosing -- or using in subsequent proceedings --
anything said or done during conciliation.
In EEOC v. Philip Services Corp., the Fifth Circuit Court of Appeals considered the question whether an
oral settlement agreement made during the conciliation process with EEOC is enforceable. EEOC alleged
that during conciliation the employer had agreed to settle the charges of nine individuals and had
exchanged emails negotiating settlement terms. However, while EEOC was reducing the parties agreement
to a formal agreement, the employer abruptly withdrew from conciliation and refused to settle. EEOC
brought suit seeking to enforce the parties oral agreement to settle the case. The Fifth Circuit affirmed
dismissal of the case, holding that the non-disclosure provisions of Title VII meant that EEOC could use no
evidence of an alleged oral agreement reached at conciliation in a subsequent breach of contract action.
Because EEOC could use no evidence from the conciliation process it had no proof that an oral settlement
had been reached. The courts opinion was limited to the facts presented and it does not call into question
the enforceability of a written Conciliation Agreement signed by all parties.
Supreme Court Holds that Arbitration Agreements Can Exclude Class Actions
An employers decision whether or not to institute an ADR or arbitration program to avoid courthouse
lawsuits by discharged employees is a complicated one that requires balancing a number of considerations.
One of those considerations is whether an arbitrator can be held to certain procedural standards when
deciding claims or is free to "make up the rules" from case to case. For example, some arbitrators have
applied class action rules in unique ways to greatly expand the scope of proceedings against employers.
5
VP Legislative Action Robert Hambright, Orgain Bell & Tucker, LLP
January 2011
LABOR AND EMPLOYMENT LAW ISSUES REGARDING CLASSIFICATION OF WORKERS AS EMPLOYEES OR INDEPENDENT CONTRACTORS IN TEXAS

Sometimes Texas employers engage independent contractors instead of employees. There can be several advantages to the practice but misclassification of workers as independent contractors who are in reality employees carries significant risk of liability under a number of federal and state employment laws. The purpose of this update is to identify in general terms some of the risks of misclassification under the labor and employment laws that cover Texas employers.

Where a bona fide independent contractor relationship exists, minimum wage and overtime compliance under the FLSA is not required, payroll tax and certain reporting obligations do not apply, and there can be other advantages. For example, independent contractors may not be entitled to benefits under an employer's benefit plans. In addition, lawsuit costs may be reduced because independent contractors are generally not protected by the Texas Labor Code's prohibition of discrimination against "employees" and applicants on the basis of race, color, disability, religion, sex, national origin and age, and independent contractors also do not count toward the 15 employee threshold requirement for coverage by the statute. Further, independent contractors generally cannot vote in union elections.

There can be disadvantages to engaging independent contractors instead of employees. For example, workers compensation insurance protects a subscribing employer against tort lawsuits and liability for workplace injuries sustained by employees and, normally, independent
contractors aren't covered by a workers' compensation insurance policy. Even this disadvantage is not insurmountable, however, at least in some cases. For example, a general contractor, motor carrier or "hiring contractor" may elect to be considered an 'employer" of an
independent contractor and its employees, if any, for the sole purpose of obtaining workers' compensation insurance protection. For this single purpose classification to apply there must be a written agreement and certain other statutory conditions must be satisfied.

Even though the use of independent contractors can be advantageous, misclassification of workers carries significant risk of liability for Texas employers. Exposure to minimum wage and overtime claims under the FLSA and related DOL regulations receives considerable attention in HR circles but there are a number of comparatively lesser known state statutes that also should be considered.

Under the FLSA, "employees" are entitled to be paid minimum wage and "non-exempt" employees are entitled to overtime pay for hours worked more than 40 per week. If an employer has misclassified an "employee" as an independent contractor the employer can be held liable for unpaid minimum wage and overtime payments in some cases stretching back up to three years. Although the particulars are beyond the scope of this update, generally speaking the FLSA classification test is whether, "as a matter of economic reality," the worker is economically dependent upon the alleged employer so as to be considered an employee or, instead, is 'in business for himself" as an independent contractor. Thibault v. BellSouth Telecommunications, Inc., 612 F. 3d 843, 845 (5th Cir. 2010).

While Texas has a state statute specifying that "each employer shall pay to each employee the federal minimum wage," there is no comparable state statute requiring Texas employers to comply with federal law in regard to overtime pay or as to the proper classification of workers for overtime pay purposes. However, the Texas Payday Act, which requires a Texas employer to "pay wages to an employee" by prescribed deadlines, empowers the Texas Workforce Commission ("TWC") to administer an unpaid wage collection process. The agency's "Payday Rules" reference federal law by providing that TWC will "look to" the FLSA and DOL's regulations in "determining an individual's entitlement to federal minimum wage or overtime."

TWC also administers the unemployment benefit system in Texas. Texas employers are required to report and pay taxes on the wages paid for "employment" of workers in the state. The statute's general definition of "employment" is a service "performed by an individual for wages or under an express or implied contract of hire, unless it is shown to the satisfaction of the commission that the individual's performance of the service has been and will continue to be
free from control or direction under the contract and in fact." TWC considers a worker to be an employee "if the purchaser of that worker's service has the right to direct or control the worker, both as to the final results and as to the details of when, where, and how the work is done." To guide its analysis of the employee versus independent contractor classification issue, TWC has adopted a 20-point test covering all facets of the relationship between the worker and the
alleged employer. A discussion of the factors is beyond the scope of this update but, generally speaking, the factors consider the economic reality of each situation and the alleged employer's right to control the specifics of the work.

TWC is responsible for auditing businesses for compliance with the law requiring the payment of taxes on employee wages. A TWC audit may arise when a worker classified as an independent contractor files a claim for unemployment benefits and the employer has not reported the worker as an employee. TWC may also perform audits in response to complaints, randomly, or as part of an audit of targeted industries or geographical areas. If TWC determines
that an employer has misclassified a worker as an independent contractor and failed to properly report and pay taxes on wages for "employment," it will assess back taxes and interest. In addition, TWC will inform IRS of the misclassification, which could trigger employer liability
under the federal payroll tax laws. Finally, to assist with the enforcement of child support obligations, employers are required to report new employee hires in Texas under the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, 42 U.S.C. ᄃ 653a(b). If TWC determines that an employer has misclassified an employee as an independent contractor it will cross-match with the new hire database of the Child Support Division of the Texas Attorney
General's Office to determine whether penalties are due for the employer's failure to report all new employee hires.

Accurate classification of workers requires careful attention. The classification tests vary in some respects depending on the context. Importantly, labels and even written agreements stating that an independent contractor relationship exists are not controlling. Instead, classification questions must be resolved based on "economic reality" and the facts of each case. As with most HR matters, it is much better to review the tests and make classification decisions proactively before any adversarial claims or proceedings arise.
VP Legislative Action Robert Hambright, Orgain Bell & Tucker, LLP
2010
PROVIDING INTERMITTENT FMLA LEAVE CAN ALTER
ESSENTIAL FUNCTIONS OF JOB FOR ADA PURPOSES

In Carmona v. Southwest Airlines Company, 604 F.3d 848 (5th Cir. 2010), a flight attendant had psoriatic arthritis, which causes painful swelling and stiffness in the joints during flare ups. The condition rendered him unable to move without a great deal of pain several times per month on average. The employee was discharged for accumulating too many "points" under Southwest's attendance policy after he had exhausted eligibility for FMLA leave. The plaintiff brought suit under the ADA and recovered a jury verdict for $80,000 in lost pay.

On appeal Southwest argued that the ADA did not apply because the statute only protects a "qualified" individual with a disability who can perform the "essential functions" of a position. Southwest contended that the flight attendant was not a "qualified" person protected by the ADA because he could not perform the essential function of reporting to work. The fifth circuit concluded that the flight attendant was a "qualified individual with a disability" and that the evidence supported the jury's verdict that the airline violated the ADA by discharging him.

The fifth circuit refused to issue a definitive ruling on whether regular attendance was an essential function of a flight attendant's job. Instead, the court wrote:

"We are sympathetic to the argument that Carmona was not qualified to be a flight attendant at Southwest because his disability prevented him from showing up for work on scheduled days. Although the evidence showed that Southwest's flight attendants have nearly unlimited discretion in determining when and how often they may want to work, it did not show that they may skip the days they have scheduled at will.

However, we do not think Southwest can establish that it was unreasonable for the jury to find that Carmona was qualified for his job. There is no dispute that Carmona was able to perform the essential functions of his job as a flight attendant when he showed up for work. The dispute is whether irregular attendance made him unqualified. Even if we assume that attendance was an essential function of Carmona's job, Southwest's own measure of whether or not a flight attendant's attendance was adequate was its attendance policy, which was extremely lenient. Carmona managed to stay within the bounds of this policy for seven years, despite his irregular attendance, and despite his disability. Therefore, we do not think that his disability made him unqualified for his job, even though it often caused him to miss work."

The court concluded that "even if" regular attendance was considered an essential function of the flight attendant position, the evidence supported the jury's finding of disability discrimination because other flight attendants without disabilities had violated the employer's attendance policy without being discharged.

The court could have decided the case on the foregoing ground alone. Unfortunately, it ventured further with a long and seemingly unnecessary footnote in which it suggested that Southwest had "arguably" modified the essential functions of the job by allowing the employee to take intermittent FMLA "without notice" for 7 years. The court observed:

"Southwest's decision to grant Carmona intermittent FMLA leave despite the fact that he was frequently unable to give Southwest notices of his absences in advance, and without transferring him to a different position in the company, suggests that attendance was not in fact an essential requirement of his job."

The court acknowledged that a dilemma exists for employers attempting to comply with both the FMLA and the ADA:

"Because the FMLA is designed to excuse employees from work, an awkward situation arises, legally speaking, when an employee seeks intermittent leave from a job where attendance is essential. On the one hand, the FMLA is designed to excuse attendance requirements. On the other hand, if the employee cannot attend a job where his attendance is vital, he cannot perform one of the essential functions of his job, and a heavy burden is placed on his employer if it must grant him intermittent leave."

The court reasoned however, that Southwest could have resolved the dilemma by transferring the employee to a different position with equivalent pay and benefits to accommodate the employee's absences. Instead, Southwest had elected to allow the employee to remain in his same position and miss work intermittently for 7 years thereby altering the essential functions of the position. Further, the court suggested that "the FMLA does not provide an employee . . . with a right to 'unscheduled and unpredictable, but cumulatively substantial, absences' or a right to 'take unscheduled leave at a moment's notice for the rest of . . . [his] career.'" The FMLA allows employers to require employees using such leave to follow reasonable notice and procedural requirements within certain limits. According to the court, the fact that the airline had allowed the flight attendant in effect to set his own schedule undercut the argument that regular and predictable attendance was an essential function of the job.

In view of Carmona, employers should carefully consider the consequences of potentially modifying the essential functions of a position by allowing intermittent leave under the FMLA indefinitely and without close attention. Analytically, the result of the case is not much different than those cases holding that where an employer provides "modified" or "light duty" work for an employee the employer can thereby risk redefining the essential functions of a position, depending on the circumstances and how the matter is handled.

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BLANKET APPLICATION OF NEUTRAL ABSENCE
CONTROL POLICY CAN VIOLATE ADA

Workers' compensation retaliation cases in Texas are particularly dangerous. An employee cannot be discharged or otherwise discriminated against because he or she has "filed a workers' compensation claim in good faith" or engaged in other protected activities listed in the statute. See Tex. Lab. Code ᄃ 451.001. Some Texas employers have adopted "facially neutral" or "no fault" absence control policies that call for termination of employees off work for a specified period of time regardless of the reason. The Texas cases are clear that if an employer administers such a policy uniformly it can avoid Section 451 liability even if an employee is off work because of a workers' compensation injury. See Texas Division - Tranter, Inc. v. Carrozza, 876 S.W.2d 312, 313 (Tex. 1994) ("Uniform enforcement of a reasonable absence control provision, like the three-day rule in this case, does not constitute retaliatory discharge.").

Even though neutral absence control policies can be helpful in defending against state law workers' compensation retaliation cases, EEOC asserts that insistence on such policies can be inconsistent with an employer's duty to make reasonable workplace accommodations under the ADA. According to EEOC:

"May an employer apply a "no-fault" leave policy, under which employees are automatically terminated after they have been on leave for a certain period of time, to an employee with a disability who needs leave beyond the set period?

No. If an employee with a disability needs additional unpaid leave as a reasonable accommodation, the employer must modify its "no fault" leave policy to provide the employee with the additional leave, unless it can show that:
(1) there is another effective accommodation that would enable the person to perform the essential functions of his/her position, or
(2) granting additional leave would cause an undue hardship. Modifying workplace policies, including leave policies, is a form of reasonable accommodation."

http://www.eeoc.gov/policy/docs/accommodation.html

EEOC has brought several class action suits against employers that have maintained neutral attendance policies. On February 5, 2010, EEOC announced that the court in its class action suit against Sears, Roebuck & Co. had approved distribution of a $6.2 million compensation fund in the largest ADA settlement in a single lawsuit in EEOC history. In the lawsuit EEOC alleged that Sears had violated the ADA by rejecting extensions of medical leave without first attempting to determine on a case-bycase basis whether accommodation would have been reasonable for employees with ADA-covered disabilities. In 2009, EEOC settled a similar case against J.P. Morgan Chase for $2.2 million and filed a similar case against UPS which is still pending.

On September 30, 2010, EEOC announced that it has filed a class action suit in Chicago against one of the largest towing companies, United Road Towing. According to EEOC, the employer violated the ADA both by maintaining an "inflexible" policy requiring termination following 12 weeks off work and by not re-hiring employees with disabilities who had been terminated under the policy.

While useful in some contexts, rigid application of neutral control policies can create problems under the federal disability nondiscrimination laws. The "buzz" generated by EEOC's recent court filings in this area may create more claims. Therefore, employers covered by ADA should engage in a reasonable accommodation analysis before terminating an employee under a neutral absence control policy.

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DOL POSTS USEFUL ON-LINE DISABILITY LAW ADVISOR

DOL has posted an on-line compliance advisor covering the various federal employment nondiscrimination laws covering individuals with disabilities. The advisor, available at http://www.dol.gov/elaws/odep.htm, allows users to input relevant characteristics about a business (private/ governmental, with/without federal contracts, more/fewer than 15 employees, etc.) to produce lists and summaries of the federal disability nondiscrimination laws that apply. The summary of Section 503 of the Rehabilitation Act, which covers employers that have certain federal contracts, contains a sample affirmative action plan ("AAP").

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CRIMINAL HISTORY INQUIRIES AND
BACKGROUND CHECKS UNDER SCRUTINY

There has been some activity recently in the area of background checks. EEOC has long taken the position that an employer's practice of "excluding individuals from employment on the basis of their conviction records has an adverse impact on Blacks and Hispanics in light of statistics showing that they are convicted at a rate disproportionately greater than their representation in the population." http://www.eeoc.gov/policy/docs/convict1.html. Where a person has been denied employment or discharged as the result of a "conviction policy or practice that has an adverse impact" on a protected group, an employer must justify the "business necessity" of its decision. According to EEOC, an employer in this situation must show that it considered the following factors:

"1. The nature and gravity of the offense or offenses;
2. The time that has passed since the conviction and/or completion of the sentence; and
3. The nature of the job held or sought."

On April 18, 2010 a nationwide class action was filed in federal court in New York asserting that the management consulting firm Accenture maintains an unlawful blanket ban on hiring or retaining persons with any criminal history. The named class representative, Roberto Arroyo, worked for Accenture satisfactorily for 17 months. According to the suit, he was fired when Accenture discovered that he had a 10-year old conviction for vehicular manslaughter while driving under the influence. In the 10 years since the conviction Mr. Arroyo had completed a bachelor's degree and served in the Army in Desert Storm. The case asserts that automatic disqualification on the basis of criminal records without the requisite showing of "business necessity" violates Title VII. There is no indication yet as to whether Arroyo completed an employment application and, if so, whether he truthfully answered any inquiry as to his criminal past. Nor has there been a determination as to the appropriateness of the class. Even though the case is in its preliminary stages it has drawn considerable attention to the danger of routine rejection of applicants or discharge of incumbent employees with criminal records.

On April 13, 2010, a similar class action was filed in federal court in New York against the Secretary of the Commerce Department asserting that the U.S. Census Bureau violated Title VII by screening out certain candidates for temporary census worker jobs. The suit alleges that over 3.8 million persons applied for over 1 million temporary census worker positions and that the Bureau's selection procedures had a disparate impact on a class of 100,000 blacks, Hispanics and Native Americans. As part of its application process the Bureau required that applicants disclose their criminal arrest histories and produce within 30 days the "official court documentation" for any and all of their arrests - regardless of whether a conviction resulted. The proposed class consists of protected group members who either could not produce the required "official court documentation" or who were denied employment on the basis of what they submitted. The lead plaintiff in the case, Ms. Houser, contends that she was denied employment as a 2010 census worker on the basis of a misdemeanor conviction in 1981 for "cashing a single check she found in a dumpster to feed her family." Another one of the named plaintiffs, Precious Daniels, alleges that she was denied employment as a census worker based on an arrest, but no conviction, for "participating in a peaceful protest against Blue Cross Blue Shield of Michigan to pressure them to stop paying lobbyists to weaken health care coverage." Significantly, the suit alleges that EEOC warned the Bureau that its criminal history inquiries could well have a racially discriminatory impact in violation of Title VII "but Census failed to revise its screening procedures to rectify the problem." This suit is also in the preliminary stages but the press it has received may generate similar claims elsewhere in the country.

The potential disparate impact of criminal history inquiries is not limited to classes of Blacks and Hispanics. In September 2009, EEOC filed a nationwide class action suit against Freeman Companies, a convention and corporate events marketing company, for refusing to hire a class of rejected applicants. The case, which is still pending, contends that Freeman's use of criminal background checks has a disparate impact not only on Black and Hispanic applicants, but also male applicants. The suit contends that males are statistically more likely to be arrested than females.

While most cases in this area concern criminal background checks, EEOC has taken the position that credit history checks can also have a discriminatory adverse impact. In the class action case against Freeman Companies, EEOC also alleges that the Company's use of credit history checks has a disparate impact on black applicants. EEOC has requested the court to order Freeman to hire the rejected applicants and to compensate them with back pay from the time they were rejected.

Sophisticated employers are aware of the requirements of the Fair Credit Reporting Act when third parties are used to conduct background checks. It should be noted that a bill has been introduced in Congress by Representative Sheila Jackson-Lee of Houston, and others, called the "Equal Employment for All Act," that would prohibit employers from taking adverse personnel action against persons on the basis of credit checks except in limited circumstances such as when a "consumer applies for, or currently holds, a supervisory, managerial, professional, or executive position at a financial institution." http://www.govtrack.us/congress/billtext.xpd?bill=h111-3149. The proposed legislation is not yet law but bears watching.

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EMPLOYEE HANDBOOK DISCLAIMER
COMPLICATES VACATION QUESTION

Many employee handbooks contain an "at will employment" disclaimer with language emphasizing that the document does not constitute a contract and is merely a general guideline that can be modified by the employer at any time. This language came back to haunt the employer in the circumstances before the court in Robinson v. Old World Industries, Inc., et al, 2010 U.S. Dist. LEXIS 44252 (S.D. Tex. 2010). Robinson had received and signed an offer letter that set out his salary and described his benefits. There was a separate employee handbook outlining benefits and other employment information. The handbook contained typical employment at will language and a comprehensive disclaimer which provided, among other things, that "this handbook does not contain all the information you will need as an employee. You will receive other information through written notices as well as orally. . . . Company policies may also be changed at any time." After he was terminated, Mr. Robinson brought suit seeking $60,000 in unpaid salary and $40,000 in unused vacation days. The Court decided that the plaintiff had been employed at will and, therefore, dismissed the plaintiff's claim for unpaid future salary. However, the Court refused to dismiss Robinson's claim for unpaid vacation.

The offer letter that Robinson signed stated that he would receive vacation "consistent with standard Old World policies." The Company's employee handbook provided that no more than five unused vacation days could be carried forward per year and that any remaining unused time was forfeited and lost. Old World contended, therefore, that under "standard Old World policies" Robinson was not entitled to unpaid vacation stretching back through the entire course of his employment. Robinson testified, however, that he had been told orally when hired that all of his unused vacation time from one year would carry forward into the next. The court concluded that, if true, this oral statement may have modified the handbook's provisions. The court reasoned that the offer letter's reference to "standard Old World policies" could be construed as including either the handbook's "use it or lose it" provision or oral statements by agents of the company. Further, the Court rejected the argument that the employee handbook's "use it or lose it" provision should be considered the final word on vacation pay because of the handbook's express disclaimer of any binding contractual obligation and reference to the existence of unspecified oral information that an employee would receive. Therefore, the court held that the vacation pay question should be sorted out by a jury because fact questions existed as to the parties' agreement.

Handbook disclaimers are useful in defeating claims that employment at will has been modified by "contract." The adage "be careful what you ask for" can apply, however, if an employer seeks to rely on portions of an employee handbook that may be inconsistent with other employee documents. Particular care must be taken in drafting "offer letters" and similar communications so that ambiguity and inconsistencies are avoided.

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July 19, 2010

U.S. Supreme Court Decides that Search of
Text Messages was Constitutional

The Fourth Amendment to the United States Constitution prohibits unreasonable searches and seizures by the Government. In the employment context, where
employees have a reasonable expectation of privacy a governmental employer can only perform workplace searches that are reasonable under all the circumstances. In years
past the Supreme Court was called upon to consider the contours of the Fourth Amendment in cases involving government employee offices and "searches" of bodily
fluids for drug testing. The digital age finally reached the Court in City of Ontario v. Quon, ___ U.S. ___, 2010 U.S. LEXIS 4972 (2010).

The City of Ontario, California provided police officers with alphanumeric pagers capable of sending text messages. The City paid a third party provider a monthly subscription fee for a specific number of minutes per device. Some officers used more than the allotted minutes and the City incurred additional charges. At first officers were allowed to reimburse the City for the extra charges but patterns emerged suggesting that officers either needed additional minutes for work tasks or were spending too much time on personal matters. The City investigated by requesting "transcripts" of the officers' text messages from the third party provider. The transcripts showed that during one month an officer sent or received 456 messages but only 57 were work related and
many were sexually explicit. The officer was disciplined.

In response to the discipline, Officer Quon filed suit in federal court contending that the City had violated the Fourth Amendment by conducting an unlawful "search" of messages in which he had a reasonable expectation of privacy. The California federal courts held that the search was unlawful and the case ultimately reached the Supreme Court. The Supreme Court reversed the California courts and decided that the search was constitutional.

As part of its decision that the "search" was reasonable, the Supreme Court determined that the City had a legitimate business interest in determining whether it should make any necessary adjustments in its third party contract or corrections to employee behavior. Further, the Court concluded that whatever expectation of privacy the officers had in their text messages was necessarily reduced because the City had an IT policy that allowed inspection of messages traveling through its server, and had communicated orally that the IT policy applied to the pagers even though the data traffic was handled by third party servers. Finally, the Court concluded that the search was appropriately narrow because only two months of transcripts were collected and the third party provider was specifically instructed to make no transcripts of texts the officers had sent while off duty.

Contrary to some published reports, the Supreme Court assumed -- but did not decide -- that the officers had at least some expectation of privacy in the text messages. Unfortunately, the Court refused to issue definitive guidance on the level of privacy employees may expect in messages sent by all forms of electronic communications. Thus, while general principles are now in place, future cases will turn on the specific facts of each case. One sentence in the Court's opinion is especially important for HR professionals working for public employers: ". . . [E]mployer policies concerning
communications will of course shape the reasonable expectations of their employees, especially to the extent such policies are clearly communicated." Enough said.

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U.S. Supreme Court Clarifies Availability of
Attorney's Fee Awards Under ERISA

ERISA provides for court review of disputed benefit claims and authorizes an award of reasonable attorney's and costs "to either party." Unlike statutes such as Title VII, however, ERISA does not specifically state that an attorney's fee award is available only to a "prevailing party." In Hardt v. Reliance Standard Life Ins. Co., ___ U.S. ___, 130 S. Ct. 2149 (2010), the Court held that a federal district judge acted within his discretion to award attorney's fees to the plaintiff even though the case was resolved short of a court judgment in her favor.

Ms. Hardt brought suit in federal court challenging her employer's denial of her claim for LTD benefits. At the pre-trial motion stage of the lawsuit the judge concluded there was insufficient evidence to support the denial of benefits. Without deciding the case in Ms. Hardt's favor, the court "remanded" the case to the employer to address the
deficiencies in its approach. Reading the handwriting on the wall, the employer reversed its decision and awarded Ms. Hardt LTD benefits. Not satisfied with the benefits alone, Ms. Hardt moved for and was awarded attorney's fees for bringing her suit. The employer fought the attorney's fee award on grounds that it had effectively decided to pay benefits voluntarily and the plaintiff had not "prevailed" by winning her case in court. The Supreme Court ultimately decided that the award of fees to Ms. Hardt was proper, and held that ERISA gives the district courts discretion to award
attorney's fees to "either party," regardless of the technical outcome of a case.

The Hardt case is important for a number of reasons. It reinforces that benefit claims should be taken seriously and that administrative records should contain proper
evidentiary support. The case further illustrates that even garden variety benefit disputes can land in court and carry exposure to significant attorney's fee awards. Finally, the case shows that while later "do overs" may be possible to correct benefit decisions, the financial consequences to employers can be expensive nonetheless.

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Texas Supreme Court Decides that THCRA Preempts
State Tort Claims Based on Same Facts

Chapter 21 of the Texas Labor Code (the "TCHRA") prohibits sexual harassment in the workplaces of covered employers and provides for administrative and court review of claims. The statute sets out the relief recoverable in court, such as lost pay and attorney's fees, as well as compensatory and exemplary damages subject to "caps" depending on the size of the employer. Sometimes the conduct that gives rise to a
statutory sexual harassment claim also satisfies the elements of "common law" tort theories such as assault, battery and negligent supervision or retention. State tort claims are popular with plaintiff attorneys because there is no prerequisite for administrative review, the limitations periods for filing suit are longer, and TCHRA's "caps" on compensatory and exemplary damages do not apply. State tort theories have often been asserted in addition to statutory sexual harassment claims to "up the ante" in litigation.

In Waffle House, Inc. v. Williams, 2010 Tex. LEXIS 416 (Tex. 2010), the Texas Supreme Court held that the TCHRA preempts (i.e., nullifies) common law negligence claims based on the same facts. A jury had found for the plaintiff and awarded damages on both her statutory sexual harassment and state tort negligent retention claims. The plaintiff "elected" to receive the tort award of $850,000 because it was significantly larger than the TCHRA award.

On appeal the Texas Supreme Court took the award away from the plaintiff, holding that a tort claim is not available where the same facts support liability under the TCHRA. The Court reasoned that the Legislature's "comprehensive remedial scheme [does not] allow[ ] aggrieved employees to proceed on dual tracts -- one statutory and one common-law, with inconsistent procedures, standards, elements, defenses, and remedies." The case was remanded for further consideration of the TCHRA claim.

The preemption ruling in Waffle House is an important one for business because it reduces exposure to tort damage awards in sexual harassment cases. However, exposure under the TCHRA remains substantial and Waffle House does not change or reduce the need for HR professionals to assist in avoiding workplace sexual harassment in the first place.

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Wage and Hour Division of DOL Announces
Discontinuation of "Opinion Letters"

For many years the Wage and Hour Division (WHD) of DOL issued "opinion letters" to provide FLSA compliance guidance on specific circumstances presented by requesting employers. These opinion letters were not considered binding precedent, except as between DOL and the parties who requested them, but they were made public and constituted useful reference material as to DOL's position on the subjects covered. They also helped requesting employers to demonstrate good faith compliance with the law. In recent years a sizable backlog of such requests developed. In the waning days of the Bush Administration a number of opinion letters were completed and prepared for mailing. However, the Obama Administration literally retrieved the opinion letters from the mailroom to stop their issuance pending "further study."

On March 24, 2010, WHD announced that it has completely discontinued the practice of issuing opinion letters. Instead, only "Administrator Interpretations" will be issued on subjects determined to be of general interest or significance. According to DOL's website:

"In order to provide meaningful and comprehensive guidance and compliance assistance to the broadest number of employers and employees, the Wage and Hour Administrator will issue Administrator Interpretations when determined, in the Administrator's discretion, that further clarity regarding the proper interpretation of a statutory or regulatory issue is appropriate. Administrator Interpretations will set forth a general interpretation of the law and regulations, applicable across-theboard to all those affected by the provision in issue. Guidance in this form will be useful in clarifying the law as it relates to an entire industry, a category of employees, or to all employees. The Administrator believes that this will be a much more efficient and productive use of resources
than attempting to provide definitive opinion letters in response to factspecific requests submitted by individuals and organizations, where a slight difference in the assumed facts may result in a different outcome. Requests for opinion letters generally will be responded to by providing references to statutes, regulations, interpretations and cases that are
relevant to the specific request but without an analysis of the specific facts presented. In addition, requests for opinion letters will be retained for purposes of the Administrator's ongoing assessment of what issues might need further interpretive guidance. Of course individuals with questions
about the application of wage and hour laws to their particular situation may also talk to a Wage and Hour Division representative by contacting the office nearest them listed at http://www.dol.gov/whd/america2.htm or by calling the Division's toll-free help line at 1-866-4USWAGE (1-866-487-
9243) Monday-Friday 8 a.m. to 8 p.m. Eastern Time."

Some employers had waited many years for opinion letters only to learn from DOL's website that no further opinions will be forthcoming.

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DOL Concludes that Time Spent
Donning and Doffing PPE is Compensable

The WHD of DOL has issued an Administrator's Interpretation concerning Section 3(o) of the FLSA, which states that time spent "changing clothes or washing at the beginning or end of each workday" is excluded from compensable time "if it has
been excluded by custom or practice under a bona fide collective bargaining agreement." In Administrator's Interpretation 2010-2, 6/16/10, DOL overruled the Bushera
Wage and Hour Opinion Letter FLSA 2002-2 and concluded that the term "clothes" does not extend to "protective equipment worn by employees that is required by law, by
the employer, or due to the nature of the job." Thus, according to WHD, time spent donning and doffing PPE is compensable time regardless of any collective agreement,
custom or practice to the contrary.

Administrator's Interpretation 2010-2 is in tension -- if not direct conflict -- with a decision by the federal appeals court covering Texas. In Allen v. McWane Inc., 593 F. 3d 449 (5th Cir. 2010), the Fifth Circuit held that "protective gear . . . including hard hats, steel-toed boots, safety glasses, and ear plugs" represented "clothing" within the meaning of Section 3(o) of the FLSA. According to the Fifth Circuit, the time employees spent donning and doffing this equipment at the start and end of each work day was non-compensable where a multi-year practice of not paying for the time existed at a
unionized company.

DOL Issues Expansive Interpretation of FMLA's Definition of Persons Standing "In Loco Parentis" Speaking generally, the FMLA provides federally mandated leave to employees
for the birth, placement or care of a "son or daughter." The Act defines a "son or daughter" as a "biological, adopted or foster child, a stepchild, a legal ward, or a child of a person standing in loco parentis, who is -- (A) under 18 years of age; or (B) 18 years of age or older and incapable of self-care because of a mental or physical disability."

In Administrator's Interpretation No. 2010-3, 6/22/10, the WHD of DOL issued an expansive definition of FMLA's definition of an employee standing "in loco parentis" to a
child. The agency reads the phrase "in loco parentis" to include situations in which an employee "intends" to assume the status of a parent, even where there is no biological
or legal relationship toward a child. Thus, according to DOL, an employee who will share equally in the raising of a child adopted by a same sex partner qualifies for FMLA leave even though no legal relationship exists between the employee and the child. Further, under DOL's interpretation, a child can have more than two persons who stand in loco parentis: "[f]or example, where a child's biological parents divorce, and each parent remarries, the child will be the 'son or daughter' of both the biological parents and the stepparents and all four adults would have equal rights to take FMLA leave to care for the child."

The guidance provides that if an employer questions whether the requisite relationship exists an employee may be required "to provide reasonable documentation or [a] statement of the family relationship." However, "[a] simple statement asserting that the requisite family relationship exists is all that is needed[.]"

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Federal District Judge Issues Ruling
on Spoliation of Evidence

Several engineers left the Rimkus Consulting Group to form a competing company. Litigation followed in both Louisiana and Texas concerning noncompetition and nonsolicitation agreements, and alleged misuse of trade secrets, customer lists and proprietary information. Pretrial discovery in federal court in Texas included the usual requests for all evidence, including e-mails, related to the case. The discovery process
revealed that the departed engineers had deleted certain
e-mails and attachments that had been sent both before and after they left Rimkus. Rimkus sought sanctions, alleging that the deletions occurred after the engineers knew or should have known that the evidence might be relevant to the case.

In a 54 page opinion the district judge outlined the facts, including details of complicated computer forensics used to recover portions of e-mails that had been deleted. Based on the record, the judge concluded that "death penalty" sanctions -- such as striking the engineers' pleadings -- were not appropriate because most of the evidence was recovered forensically. However, the court held that a jury would be
asked to decide whether the engineers had "intentionally deleted e-mails and attachments to prevent their use in litigation," and if so, whether to draw an adverse "inference that the lost information would have been unfavorable" to the engineers. Rimkus Consulting Group, Inc. v. Cammarata, et al, 688 F. Supp 2d 598, 620 (S.D. Tex. 2010). The court further ordered the departed engineers to reimburse Rimkus its attorney's fees expended in connection with recovering the missing evidence.

The Rimkus case illustrates several points that are important to HR professionals:
1. Document retention plans must be both well thought out and flexible enough to preserve evidence that might be relevant to litigation or future litigation.

2. It is important to preserve evidence that may be relevant to litigation or future litigation regardless whether the evidence is favorable or unfavorable. Otherwise, a jury may be allowed to draw an inference that deleted e-mails must have been unfavorable or they would not have been deleted.

3. A litigation "hold" should be broad enough to cover evidence stored electronically.

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April 1, 2010
Patient Protection and Affordable Care Act
Requires Unpaid Breaks for Nursing Mothers

Section 4207 of the recently enacted Patient Protection And Affordable Care Act ("PPACA") amends the Fair Labor Standards Act to add what will become 29 U.S.C. ᄃ 207(r),
as follows:

"SEC. 4207. REASONABLE BREAK TIME FOR NURSING MOTHERS.
Section 7 of the Fair Labor Standards Act of 1938
(29 U S.C. 207) is amended by adding at the end the following:
(r)(1) An employer shall provide-
(A) a reasonable break time for an employee to express breast milk for her nursing child for 1 year after the child's birth each time such employee has need to
express the milk; and
(B) a place, other than a bathroom, that is shielded from view and free from intrusion from co-workers and the public, which may be used by an employee to express
breast milk.
(2) An employer shall not be required to compensate an employee receiving reasonable break time under paragraph (1) for any work time spent for such purpose.
(3) An employer that employs less than 50 employees shall not be subject to the requirements of this subsection, if such requirements would impose an undue hardship by causing the employer significant difficulty or expense when considered in relation to the size, financial resources, nature, or structure of the employer's business.
(4) Nothing in this subsection shall preempt a State law that provides greater protections to employees than the protections provided for under this subsection.".

The statute does not impose monetary penalties for non-compliance. There is an exception for small employers with less than 50 employees but only if compliance would create "undue hardship." Texas state law encourages but does not require employers to provide breaks for nursing mothers. Under Section 165 of the Texas Health and Safety Code, Texas employers that provide such breaks are authorized to use the optional "mother-friendly" designation in
promotional materials: http://law.justia.com/texas/codes/hs/002.00.000165.00.html. The new federal provision requires virtually all Texas employers to become "mother-friendly."

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March 25, 2010
DOL Rules that Mortgage Loan
Officers are not Exempt Employees

On March 24, 2010, the Obama DOL issued "Administrator's Interpretation No. 2010-1," which reverses a key decision by the Bush DOL and declares that virtually all mortgage loan officers do not qualify as exempt "administrative" employees. See
http://www.dol.gov/WHD/opinion/adminIntrprtn/FLSA/2010/FLSAAI2010_1.htm.

The FLSA exemption for "administrative" employees is one of the least understood. An employee is considered an exempt administrative employee if (1) his/her "primary duty" is the performance of office or non-manual work directly related to
management policies or general business operations of the employer or the employer's customers, (2) such primary duty includes work requiring the exercise of discretion and
independent judgment, and (3) he/she meets both the minimum compensation requirement (at least $455 per week/$23,660 per year) and the salary basis test (no improper deductions).

DOL's regulations provide that work "directly related to the management policies or general business operations" of a company:

". . . refers to the type of work performed by the employee. To meet this requirement, an employee must perform work directly related to assisting with the running or servicing of the business, as distinguished, for example, from working on a manufacturing production line or selling a product in a retail or service establishment. ... Work directly related to
management or general business operations includes, but is not limited to, work in functional areas such as tax; finance; accounting; budgeting; auditing; insurance; quality control; purchasing; procurement; advertising; marketing; research; safety and health; personnel management; human resources; employee benefits; labor relations; public relations; government relations; computer network, internet and database administration; legal and regulatory compliance; and similar activities."

29 C.F.R. ᄃ 541.201(a)-(b). The foregoing language captures what has come to be known as the "production vs. staff dichotomy." Speaking generally, and for purposes of
the "administrative" employee exemption, employees involved in production activities are usually non-exempt whereas those persons engaged in staff or management roles
can be exempt.

The question whether mortgage loan officers qualify for exemption as "administrative" employees has been the source of considerable debate - and much litigation. In 2006, the Bush DOL issued an opinion that mortgage loan officers were properly classified as exempt "administrative" employees where they spent less than half of their time selling products and more than half of their time collecting and
analyzing the financial information of customers, assessing the financial circumstances of customers to determine qualifications for loans, advising customers about the risks
and benefits of loan alternatives, staying up-to-date on market conditions and using computer software to assist in the underwriting process. Department of Labor Opinion
FLSA 2006 - 31 (September 8, 2006). As part of the Obama administration's effort to dismantle all things Bush, "Administrator's Interpretation 2010-1- withdraws the 2006 Opinion Letter because of its asserted "misleading assumption and selective and narrow analysis."

Under Adminisrator's Interpretation 2010-1, virtually all mortgage loan officers working on residential loans are not exempt "administrative" employees, although there is a faint suggestion that some mortgage loan officers working in the commercial loan area might possibly be considered exempt administrators in very narrow circumstances. A mortgage loan officer might qualify under another FLSA exemption, such as those for "executive" or "outside sales" employees, but the "administrative" employee exemption is no longer available as a practical matter in most cases. Accordingly, employers in the financial services industry should review carefully how their mortgage loan officers are classified for FLSA purposes and make any corrections necessary to comply with DOL's Administrator's Interpretation 2010-1.

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March 9, 2010
Federal Stored Communications Act Requires Valid
Authorization to Access Employee's MySpace.com Account

The internet generally, and social networking sites in particular, contain a potential treasure trove of information about employees. However, the law significantly restricts access to the information in some cases. In Pietrylo v. Hillstone Restaurant Group d/b/a Houston's, for example, an employer learned the hard way that the Federal Stored Communications Act requires valid authorization to access an employee's MySpace.com account. The case is instructive.

The Pietrylo case arose when some restaurant employees established a chat group on MySpace.com called the "Spec-Tator," which apparently aired less than flattering comments about both management employees and customers. The chat
group could be accessed by invitation only using MySpace.com accounts and passwords. One employee, Ms. St. Jean, allowed the restaurant managers to see the
chat group page by giving them her password. There was evidence that managers accessed the site five times using Ms. St. Jean's password.

Some employees who had posted comments in the "Spec-Tator" were discharged and brought suit seeking money damages based on the restaurant's alleged violation of the number of laws including the Federal Stored Communications Act ("SCA"). The SCA makes it unlawful to access certain electronically stored information knowingly, intentionally or purposefully without authorization. One form of permitted
access is authorization "by a user of . . . [a covered] service with respect to a communication of or intended for that user."

In the federal court trial that resulted a jury concluded that the restaurant did not have valid authorization to access the site and awarded damages to the discharged employees. The federal judge decided there was evidence to support the jury's verdict because, while Ms. St. Jean had given her password to the managers, she testified that she felt she "probably would have gotten in trouble" if she had not done so. Further, one of the managers testified that he knew the employee was "uneasy" about giving her log-in information to the managers. Therefore, reasoned the court, the jury could reasonably conclude that Ms. St. Jean's authorization was coerced, involuntary and invalid.

The lessons to be learned from Pietrylo are:
ᄋ The Federal Stored Communications Act requires employers to have valid authorization to access an employee's private MySpace information.
ᄋ To be considered valid the authorization must be voluntarily given.
ᄋ Best practice requires written authorization with an express
acknowledgement that permission has been given voluntarily; otherwise, the matter can deteriorate later into a "he said, she said" contest about the employer's right to access protected information.

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Some Employment Arbitration Agreements
by Defense Contractors Prohibited

On Dec. 19, 2009, President Obama signed the Department of Defense appropriations bill H.R. 3326. The final enacted bill includes a controversial amendment introduced by Senator Al Franken (D-Minn.), which prevents the United States
Department of Defense from granting federal contracts in excess of $1 million to entities that require their employees to resolve certain claims through arbitration.

Specifically, effective February 18, 2010, the law requires covered defense contractors to agree not to enter into any new agreement with any employee or independent contractor, or to take any action to enforce any existing agreement with such persons, that mandates arbitration of "any claim under Title VII of the Civil Rights act of 1964 or any tor related to or raised out of sexual assault or harassment, including assault and battery, intentional infliction of emotional distress, false imprisonment, or
negligent hiring, supervision, or retention[.]" By June 18, 2010, covered defense contractors must also provide certification that their subcontractors are in compliance
with the arbitration prohibition. The penalty for non-compliance is nonpayment of defense contracts. There is a narrow exception if the Secretary of Defense concludes
that a waiver is necessary "to avoid harm to national security interests [.]" The full text of the legislation (see ᄃ 8116(a), page 113) is available on the web:
http:www.rules.house.gov/111/LegText/111_hr3326_hamnd.pdf.

The legislation arose after the well-publicized case of a defense contractor employee who was raped in Iraq. The victim was required by an employment agreement with her employer to submit her claims to arbitration rather than to a court and jury. The new law, which is sometimes called the "Al Franken Anti-Rape Amendment," effectively prohibits arbitration of similar cases in the future - and guarantees courthouse litigation - at least in the case of companies with defense contracts in excess of $1 million.

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DOL Publishes Model Employer CHIP Notice

On February 4, 2009, President Obama signed into law the Children's Health Insurance Program Reauthorization Act of 2009 ("CHIPRA"). CHIPRA requires, among other things, that covered employers notify employees of potential opportunities for group health plan premium assistance under Medicaid and the Children's Health Insurance Program ("CHIP"). Civil penalties of $100 per day are payable for noncompliance.

On February 4, 2010, the Department of Labor released explanatory guidance:
http://www.dol.gov/federalairregister/HtmlDisplay.aspx?Docld-23421&Month=2Year=2010.

An "Employer CHIP Notice" is required if a group health plan provides benefits for medical care directly (such as through an HMO) or through insurance, reimbursement, or other means in Texas (and other states where premium assistance is available), regardless of the employer's location or principal place of business or the location or principal place of business of the group health plan, its administrator, its
insurer, or any other service provider affiliated with the employer or the plan.

According to DOL's explanatory guidance, covered employers must provide the required notices by the date that is the later of (1) the first day of the first plan year after February 4, 2010; or (2) May 1, 2010. Accordingly, for plan years beginning between February 4, 2010 and April 30, 2010, the Employer CHIP Notice must be provided by May 1, 2010. For employers whose next plan year begins on or after May 1, 2010, the Employer CHIP Notice must be provided by the first day of the next plan year (January 1, 2011 for calendar year plans).

The model Employer CHIP Notice is available in modifiable, electronic form on the Department of Labor website: http://www.dol.gov/ebsa/chipmodelnotice.doc.

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Long Overdue "Interim Final Regulations"
on Mental Health Parity Amendments
Published by DOL, IRS and HHS

A Texasemployer that provides health benefits through insurance or otherwise is not required to provide coverage for mental health issues. However, under the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008, 29 U.S.C. ᄃ 1185a, if an employer does provide coverage for mental health issues it must also provide coverage for substance addiction treatment (i.e., "substance use disorder" benefits). In addition, the benefits an employer provides for mental health and "substance use disorders" must be equivalent to the employer's medical and surgical
benefits; i.e., there must be "parity" -- at the employer's cost, of course. In general, the statute is effective for plan years commencing after October 3, 2009 although special rules apply to plans maintained pursuant to collective bargaining agreements. To comply, an employer that provides coverage for mental health issues must add coverage for addiction treatment or drop coverage for mental health issues altogether. The penalty for noncompliance is an excise tax of $100 per day per individual for whom the required coverage was not provided. The federal agencies were directed to
promulgate regulations by October 3, 2009, but the interim final regulations were not published in the Federal Register until February 2, 2010. The interim final regulations,
which are still subject to public comment and change, can be found online at http://www.dol.gov/federalregister/HtmlDisplay.aspx?DocId=23511&AgencyID8&DocumentType=2.



human resources, knowledge management, management, human, resources, global new media Chapter 0592
National SHRM
www.shrm.org
human resources, knowledge management, management, human, resources, global new media
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