A recent decision from the United States Court of Appeals for the Eighth Circuit raises an interesting issue: can an employer be held liable for interference with FMLA rights if it discharges an employee after giving the employee reason to believe FMLA leave has been approved -- even if the employee is not in fact entitled to FMLA leave? In Murphy v. FedEx National LTL, Inc., the Court held that an employer could be liable, if the employee reasonably believes she has been granted FMLA leave and if she has put her employer on notice that she may need FMLA leave.

The following facts are taken from the Court’s opinion. Susan Murphy and her husband worked as truck drivers for FedEx. Ms. Murphy requested FMLA leave to care for her hospitalized husband, which was approved on August 31, 2006. On September 7, 2006, her husband died. Ms. Murphy called to notify her supervisor and to inquire about specific employee and bereavement-related benefits. Her supervisor offered to obtain the information for her because she was upset. Ms. Murphy remained out of work for three days on bereavement leave provided by FedEx.

Ms. Murphy’s supervisor spoke with her again on September 11, 2006, to inform her that her FMLA leave had expired on September 7. He also asked Ms. Murphy when she would return to work. She replied that she needed thirty days to “take care of things.” The supervisor then stated, “okay, cool, not a problem, I’ll let HR know.” The two had no further discussions regarding her leave request, nor did Ms. Murphy contact FedEx to seek any additional approval regarding the leave of absence. At trial, Ms. Murphy testified that following her husband’s death, she experienced difficulty sleeping and functioning, and she cried frequently. She also acknowledged that she did not notify FedEx that she was experiencing these symptoms. On September 12, her supervisor contacted the Human Resources Department and relayed Ms. Murphy’s request for a 30-day leave of absence to “put her affairs in order.” FedEx denied the leave request, and on September 15, the supervisor contacted Ms. Murphy to notify her that FedEx was terminating her employment. Ms. Murphy subsequently sued FedEx, claiming that FedEx interfered with her FMLA rights by denying her leave request and ending the employment relationship.

One of Murphy’s legal theories was equitable estoppel; that FedEx interfered with Murphy’s FMLA rights by representing that it had granted her leave, inducing her reasonable reliance on that representation and later terminating her. On that claim, the District Court rejected FedEx’s proposed jury instruction that would have required the jury to find, among other things, that Murphy had a serious health condition and had put FedEx on notice that she potentially had such a condition. The jury returned a verdict in favor of Ms. Murphy on the equitable estoppel claim.

On appeal, the Eighth Circuit found that the District Court erred when it gave the jury instructions on the equitable estoppel claim. Specifically, the Court of Appeals found that, while an employee need not actually have a serious health condition to prevail on an estoppel theory, the employee still bears the responsibility of adhering to the FMLA’s notice requirements, including providing the employer with information sufficient to indicate the requested leave may be FMLA protected. Simply stated: “[b]efore an employee can claim FMLA protection, whether through estoppel, waiver, or otherwise, the employee must put the statute in play – she must notify her employer that she may need FMLA leave… .”

Finally, the Court noted that on retrial, Murphy has to prove that she “reasonably believed,” FedEx approved her request for thirty days as FMLA leave, rather than “some other type of leave.” The Court noted that while vague representations by the employer are not sufficient, the employer does not have to mention the FMLA to create a reasonable belief. Consequently, employers should be aware that even simple affirmations of a leave request (i.e., okay, cool, not a problem, etc.) may be sufficient to support a claim of equitable estoppel.
 

Almost seven years ago, in Zheng v. Liberty Apparel Co., the Second Circuit Court of Appeals created a six factor test for assessing when businesses are liable as "joint employers" under the Fair Labor Standards Act (FLSA) for violations committed by their subcontractors. The Second Circuit held that, depending on the case, the following factors should be reviewed in determining joint employer status: (1) whether the workers work exclusively or predominantly for the purported joint employer; (2) the permanence or duration of the working relationship; (3) whether the purported employer’s premises and equipment are used by the workers; (4) the extent of control the putative joint employer exercises over the workers; (5) whether the outsourced workers can be considered an integral part of the business; and (6) whether the workers have a business organization that could shift as a unit from one putative joint employer to another. The Court also found that industry custom and historical practice could be considered to differentiate between legitimate subcontracting relationships and subterfuges intended to evade the FLSA.

The Second Circuit sent the case back to the District Court and, eventually, the case went to trial before a jury. At trial, the primary issue was whether the Liberty Defendants were plaintiffs' "joint employer" for purposes of the FLSA and analogous state law claims. The jury returned a verdict in favor of plaintiffs, and, following resolution of various post-trial motions, the District Court entered judgment accordingly. Liberty appealed that judgment, contending that the District Court, rather than the jury, should have determined whether it was the plaintiffs' joint employer. Recently, the Second Circuit affirmed, holding that the trial judge did not err in allowing a jury to decide the mixed question of law and fact as to whether Liberty was the plaintiffs' joint employer. Although Liberty argued that the lower court should have used a special verdict form allowing the judge to apply the six-factor test to the jury's factual findings, the Second Circuit said “such a rule would distort the jury's proper role” of applying law to fact.

The Second Circuit’s recent decision serves as a healthy reminder to employers who subcontract or outsource a portion of their business that they should carefully review such relationships to minimize the risk of potential FLSA liability.

A version of this post appeared previously on the Wage and Hour Defense Institute blog.
 

Pursuant to the Patient Protection and Affordable Care Act ("PPACA"), the Internal Revenue Service, the Department of Labor, and the Department of Health and Human Services (the “agencies") recently issued interim final rules for health plans and insurance issuers relating to: (1) preexisting condition exclusions, lifetime and annual limits, rescissions, and patient protections; and (2) claims, appeals, and review procedures.

Preexisting Condition Exclusions. Under the new rules, no group plan or issuer (except grandfathered plans that are individual insurance coverage) may impose a preexisting condition exclusion (including any exclusionary waiting period) for any enrollee under age 19 in plan years beginning on or after September 23, 2010, and any enrollee (regardless of age) in plan years beginning on or after January 1, 2014. The definition of "preexisting condition" includes any denial of coverage based on a preexisting condition (i.e., not just benefits related to the condition). As of the applicable effective date, plans and issuers must provide coverage on a prospective basis for individuals denied coverage based on a preexisting condition, and for benefits related to preexisting conditions that are currently excluded under a health plan. The rules also prohibit any limitation or exclusion based on information related to an individual's health status (e.g., such as a condition identified as result of a pre-enrollment questionnaire or physical examination).

Lifetime and Annual Limits. Effective for plan years beginning on or after September 23, 2010, all group plans and issuers (with the exception of certain account-based health plans and grandfathered plans that are individual insurance coverage) are prohibited from imposing lifetime or annual limits on the dollar value of "essential health benefits" (including at a minimum those benefits listed in PPACA Section 1302(b)). Until further guidance is issued, the agencies will take into account the consistent application of good faith reasonable interpretations of the term "essential health benefits" as applicable to the lifetime and annual limit prohibitions.

In an effort to provide transitional relief, the rules do permit plans and issuers to impose the following "restricted annual limits" ("RALs") in plan years beginning before January 1, 2014:

For plan years beginning on or after --                                Restricted Annual Limit

September 23, 2010 but before September 23, 2011         $ 750,000
September 23, 2011 but before September 23, 2012         $ 1.25 million
September 23, 2012 but before January 1, 2014                 $ 2 million

The rules clarify that the RALs are minimums for plan years beginning before January 1, 2014, so plans or issuers may impose higher limits or no limits. Generally, grandfathered plans that impose new limits or reduce the amount of an annual limit (in existence as of March 23, 2010) will lose grandfather status. Note, a grandfathered plan with an existing lifetime limit (as of March 23, 2010) and no existing annual limit, may impose a new annual limit (subject to the applicable RAL minimum) and retain grandfather status by eliminating the existing lifetime limit.
 

Certain limited benefit plans or policies (i.e., "mini-meds") may be eligible for a waiver program, in cases where annual dollar limits fall below the RAL minimums, and compliance would result in a significant decrease in access to benefits or a significant increase in premiums for enrollees or policyholders. HHS Guidance on the waiver application process is expected to be issued in the near future.

Lifetime Limit Notice. Individuals who have lost coverage because of reaching lifetime limits, and who would otherwise be eligible for coverage, must be given notice that the lifetime limit no longer applies. If such individual is no longer enrolled in the plan or policy, he or she must be given notice of the opportunity to enroll (during a special 30-day enrollment period) no later than the first day of the first plan year beginning on or after September 23, 2010. Model language is available at http://www.dol.gov/ebsa/lifetimelimitsmodelnotice.doc .

Rescissions. Effective for plan years beginning on or after September 23, 2010, all group plans are prohibited from rescinding coverage except in the case of fraud or an intentional misrepresentation of material fact. If such rescission is permitted, plans and issuers must provide participants with 30 days notice prior to the date coverage is rescinded. The term "rescission" means any cancellation or discontinuance of coverage that has retroactive effect. Note, retroactive cancellation of coverage due to nonpayment of premiums or contributions does not constitute a "rescission" under the rules.

Patient Protections. For plan years beginning on or after September 23, 2010, all new group plans and issuers that use provider networks must comply with the following rules relating to patient protections:

Choice of Health Care Provider. If an enrollee is required to designate a primary care provider ("PCP") under a plan or policy: (i) the plan or issuer must permit the enrollee to designate any PCP who is available to accept the enrollee; (ii) the plan or issuer must permit a child-enrollee to designate an in-network pediatrician as his or her PCP (if available to accept the child); and (iii) if a plan or issuer covers obstetrics/gynecological care, the plan or issuer must not require preauthorization before an enrollee seeks services from an in-network OB/GYN provider. Notice of changes required by the choice of provider rules must be provided when the plan or issuer provides an enrollee with an SPD or other summary of benefits. Model language is available at http://www.dol.gov/ebsa/patientprotectionmodelnotice.doc.

Coverage of Emergency Services. If a plan or issuer covers emergency care in a hospital, the plan or issuer may not require prior authorization for services even if the health care provider is out of network. In addition, plans must not impose coinsurance rates or copayments for out of network emergency services in excess of the amounts that would have otherwise been required for services provided in network. Out of network providers, however, may bill participants for any remaining balance after the plan or policy pays, provided the plan or policy complies with certain cost-sharing requirements.

Claims, Appeals and Review Procedures. For plan years beginning on or after September 23, 2010, all new plans and issuers must comply with the new rules related to internal claims and appeals and external reviews of adverse benefit determinations, including rescissions of coverage. These new procedural requirements add to the existing claims and appeals procedures currently required under ERISA, and requires that plans or issuers: (1) notify claimants as soon as possible, but no later than 24 hours after receipt of an urgent care claim; (2) provide claimants with any new or additional evidence that arises in connection with the claim; (3) ensure that claims are processed in a manner that avoids any conflict of interest; (4) ensure notices are culturally and linguistically appropriate, and contain certain required information; (5) strictly adhere to the required internal claims and appeals procedural requirements; and (6) continue to provide coverage pending the outcome of an internal appeal. A claimant is deemed to have exhausted administrative remedies if a plan or issuer fails (even if the failure is de minimis) to strictly adhere to the new internal claims and appeals procedural rules, and may immediately pursue external review. All new plans and issuers (applies only to the insurance issuer for insured plans) must comply with either a state or the Federal external review process, whichever is applicable under the rules. In certain cases, claimants may be permitted to simultaneously proceed with both the internal appeals process and expedited external review.

New individual health insurance issuers are subject to all the internal claims and appeals rules that apply to group plans and issuers, and must adhere to three additional standards: (1) decisions on initial eligibility are subject to internal claims and appeals procedures; (2) only one level of review is permitted for determinations of individual health coverage; and (3) all claims and notice records must be maintained and made available upon request for at least 6 years.

Most of the rules discussed above are effective for plan years beginning on or after September 23, 2010. Employers that maintain group health plans, and insurers that maintain group or individual policies, should evaluate and determine the extent to which current plan or policy provisions may need to be updated to comply with the new rules by the applicable effective date.
 

The end of August was a busy time for Governor Paterson who acted on 90 pieces of pending legislation. Several of those laws will have an impact on employers across the State. Below is a brief summary of the new laws.

Domestic Workers Bill of Rights

By signing the “Domestic Workers Bill of Rights” Governor Paterson made New York the first state to have such a law. When he signed the legislation, Governor Paterson remarked that: “Today we correct an historic injustice by granting those who care for the elderly, raise our children and clean our homes the same essential rights to which all workers should be entitled.” The law, which takes effect November 29, 2010, defines a protected domestic worker as a “person employed in a home or residence for the purpose of caring for a child, serving as a companion for a sick, convalescing or elderly person, housekeeping, or for any other domestic service purpose.” Excluded from the definition are persons who: work on a casual basis; provide companionship services and are employed by someone other than the family or household for which the services are provided; and relatives by blood, marriage or adoption of the employer or of the person for whom the worker is providing services under a program funded by a federal, state or local government. Among other things, the law provides the following protections and benefits for covered domestic workers:

1)  the right to overtime pay at time and a half after 40 hours of work in a week, or 44 hours for workers who reside in the employer’s home;

2)  one day of rest every seven days, or overtime pay if it is waived;

3)  three paid days of rest annually after one year of work;

4)  the removal of the domestic workers exemption from the Human Rights Law, and the creation of a special cause of action for domestic workers who suffer sexual or racial harassment; and

5)  the extension of statutory disability benefits to domestic workers, to the same degree as other workers.
 

Bereavement And Funeral Leave For Same-Sex Partners

Another bill signed by the Governor requires that employers who provide leave for the death of an employee's spouse or the child, parent or other relative of the spouse, must provide the same leave to an employee for the death of the employee's same-sex committed partner or the child, parent or other relative of the same-sex committed partner. The law, which is effective October 29, 2010, defines same-sex committed partners as “those who are financially and emotionally interdependent in a manner commonly presumed of spouses.”

Construction Industry Fair Play Act

Finally, in an effort to respond to the issue of employee misclassification in the construction industry, Governor Paterson signed the Construction Industry Fair Play Act, which takes effect on October 29, 2010. The Act creates a presumption that any person performing services for a construction contractor is an employee, not an independent contractor. The presumption can only be rebutted if the person satisfies the requirements to be classified as a separate business entity, as defined by the Act, or the person meets the following criteria which establish independent contractor status:

1)  the individual is free from control and direction in performing the job, both under his or her contract and in fact;

2)  the service must be performed outside the usual course of business for which the service is performed; and

3)  the individual is customarily engaged in an independently established trade, occupation, profession, or business that is similar to the service at issue.

In addition, and for the first time in New York State history, the Act imposes monetary and criminal penalties on construction industry employers that willfully misclassify employees.

Governor Paterson did veto several piece of legislation that would have affected employers across the state, including one which would have mandated that employers excuse the absence/lateness of an employee if such absence/lateness was due to the fact that the employee was responding to an emergency as either a volunteer ambulance worker or volunteer firefighter.

There are several pieces of employment-related legislation the Governor has not yet acted on. We will follow and report on those if and when the Governor signs them.
 

Several news stories over the past few weeks illustrate the potential expense and embarrassment public and private sector employers can experience from a class action employment discrimination lawsuit.  In the private sector, class action discrimination claims have been pursued with increased frequency over the past five years. These lawsuits have proven to be costly for both large and smaller employers. For example, the Rochester Democrat and Chronicle reported on August 10, 2009, that Elmer W. Davis Company, a commercial roofing contractor in Upstate New York, entered into a consent decree under which it agreed to pay $1,000,000 to resolve a class action race discrimination lawsuit brought by the Equal Employment Opportunity Commission. Msnbc.msn.com reports that the million dollar payout was the largest EEOC settlement ever in the Rochester area.

Elmer W. Davis Company’s settlement can now be added to a long list of multi-million dollar class action settlements. Large class action settlements have affected many national employers in virtually every type of business, including Coca-Cola ($192 million), Texaco ($176 million), State Farm Insurance ($156 million), Home Depot ($104 million), Federal Express ($55 million), Abercrombie & Fitch ($50 million), and Wal-Mart ($17.5 million). Many of these settlements have received considerable publicity and, as is the case with the Elmer W. Davis Company’s settlement, required these companies to implement training, monitoring, and other remedial programs in addition to making large settlement payments to the plaintiff class and its counsel.
 

These potential class action problems are not limited to private sector employers. Forbes.com recently reported that the federal government is defending itself from a class action discrimination claim brought by representatives of applicants for temporary census taker jobs. The plaintiff group, which potentially consists of up to 100,000 minority applicants, alleges that the U.S. Census Bureau discriminated by rejecting applicants with criminal records. The complaint was filed in the Southern District of New York in March 2010 and challenges, among other things, the U.S. Census Bureau’s alleged practice of rejecting applicants with arrest records, even when those arrests did not result in convictions. The complaint was recently amended and now also relies upon a letter that the EEOC’s former Acting Chair Stuart Ishimaru apparently sent to the Census Bureau in July 2009 after his agency received inquiries from many applicants who claimed to have been disqualified because of their prior arrest records. The complaint states that Mr. Ishimaru warned in his letter that the information the EEOC had gathered suggested that the “Census Bureau’s approach [was] overbroad and may run afoul” of Title VII.

The Daily Labor Report and Law 360° have also reported over the past few weeks on a number of other class action discrimination cases in which employers are facing multi-million dollar claims; these reports indicate that the employers have received mixed results in these cases. All of these cases highlight the need for employers of all sizes, in all industries, to take steps to address and to minimize potential class action discrimination problems. These steps can include implementing preventative and compliance measures, such as internal audit and review of hiring, promotional, and termination policies, and implementing procedures and safeguards for identifying and promptly responding to troubling claims involving pattern and practice discrimination allegations or multiple similarly situated employees.
 

Self-insured group health plans are not subject to the New York State Insurance Department's existing external appeals process for claims denied by insurers. However, a new interim enforcement rule issued by the Employee Benefits Security Administration requires that self-insured plans put external review procedures in place by the first day of the first plan year that begins on or after September 23, 2010 -- January 1st, for health plans with a calendar plan year. These rules (EBSA Technical Release 2010-1) require the group health plan to hire at least three independent review organizations (IROs) to make decisions with respect to the claims when an external appeal is requested.

The rules contain important requirements governing the selection of an IRO and the way the IRO functions. For example, an IRO cannot be hired or compensated based on the likelihood it will agree with the plan's prior decision. In addition, claims must be rotated among the IROs to ensure independence. The contracts with the IRO must contain specific terms detailing the IRO's responsibilities, such as timing and response criteria with respect to standard and expedited external appeals. In conducting the review, the IRO may not give any deference to the group health plan’s prior determination. The entire process, from the date or the request for external review to the final determination, must take no longer than 45 days. An expedited process must be available for decisions that: can seriously jeopardize the life or health of the claimant; would jeopardize the claimant's ability to regain maximum function; or relate to admission or emergency services and the claimant has not been discharged.

The group health plan has responsibilities, too. For example, the plan must quickly evaluate whether the claim is eligible for external review, and provide the documents and information that form the basis for the original denial.

Group health plans must quickly adopt procedures that are compliant with the EBSA Technical Release. IROs are already soliciting this business from self-funded group health plans. Remember, ERISA compels plan administrators to prudently select and monitor its service providers, including IROs. A group health plan sponsor should evaluate and document the qualifications of any IRO it considers hiring, and enter into fully compliant contracts, including business associate agreements, with such providers.
 

An interesting case from the United States District Court for the Western District of Kentucky addresses a particularly difficult religious accommodation question: at what point can an employer prohibit an employee from expressing religious views in the workplace? According to the Court’s opinion, the case involved a nurse employed by the University of Louisville’s medical center. Based on her reading of portions of the Bible, the employee believed she had calculated the date for either the end of the world or the coming of the Antichrist, 12/21/2033. She also believed that she was compelled by her religion to share her views and her calculations with her co-workers. The co-workers complained to their manager that the employee would not stop talking to them about the subject, even when they asked her not to, and that she was scaring them. The manager had a conversation with the employee and told her to stop or face discipline. Although the employee was not disciplined, she submitted her resignation as a result of the conversation.

In granting the Hospital's motion for summary judgment, the Court first noted that the employee could not establish a prima facie case of failure to accommodate her religious beliefs because she had failed to show the employer took any adverse action against her. The Court went on, however, to conclude that even if the employee had been disciplined, she could not state a failure to accommodate claim, because the employer was not required to accommodate the employee’s religious beliefs under these circumstances. Although the case was brought under Kentucky state law, the Court relied on federal court precedent in Title VII cases to find that an employer does not have an obligation to accommodate an employee’s desire to impose her religious views on co-workers by harassing them. Were an employer required to provide such an accommodation, it would create an undue hardship because it necessarily infringes on the rights of co-workers.

This does not mean, of course, that an employer can prohibit all forms of religious expression in the workplace. But where the employee’s expression consists of attempting to proselytize co-workers who object to the conduct, and amounts to harassment, the employer can ask the employee to stop, and if she does not stop, impose discipline.
 

Earlier this year, we posted on the New York State Department of Labor’s new regulations governing New York’s WARN Act, the state statute that requires certain employers to provide 90 days notice to employees, their employees’ unions, if any, and to government agencies, before engaging in certain actions which result in losses of employment. In July, the New York DOL issued revised emergency regulations which replace and supersede the existing regulations. The revisions are not extensive. However, a few of the changes may be significant for New York employers contemplating some form of reduction in force or work hours.

First, the new regulations change the definition of the term “affected employee” by stating that it does not include an officer, director, or shareholder. The initial regulation only excluded business partners, and consultants and contract employees who have employment relationships with other employers or who are self-employed.
 

Only employers with 50 or more employees are covered by New York’s WARN Act. The revised regulations impact coverage determinations by defining the point in time for measuring the number of employees as the date the first notice would be required to be given under the Act.

The revised regulations also make some minor modifications to the required content of the notices which must be provided. More significantly, the revised regulations now apply the notice requirements to employer decisions rescinding a previously issued notice of plant closing, mass layoff, relocation or covered reduction in hours. In other words, when an employer has given notice required by the Act, but then determines that it will not need to engage in the action for which notice was provided, it must use the same notice process to inform affected employees, their unions and the government that it is rescinding its decision.

Finally, the regulations provide that when an employer relies on one of the statutory exceptions, (unforeseeable business circumstances, a natural disaster and the faltering company exception) as a justification for not providing the 90-day notice, it must provide documentation to support the exception.

The revised regulations are still lengthy and complex. Any New York employer contemplating any form of reduction in employment, including a reduction in hours should carefully consider whether the regulations apply and, if so, how it will satisfy the regulatory requirements.

 

The New York State Department of Labor recently added to its website opinion letters written by its Counsel’s Office. The Counsel's Office provides legal advice and counsel to the Commissioner of Labor and to programs within the Department. The opinion letters are primarily responses to requests for advice submitted by employers. All the letters are text-searchable.  They cover three general topics: wage and hour law, public works projects and the State Worker Adjustment and Retraining Notification Act (“WARN”). The wage and hour law letters span a wide variety of topics from blood donation leave and accommodations for nursing mothers to employment classifications, independent contractor issues, meal and rest periods, overtime, and wage deductions under Labor Law Section 193. The public works projects letters deal with state requirements for payment of the prevailing wage (the local union wage) by private employers performing work on public works projects. Most of those letters address whether the prevailing wage law applies to particular types of work. There are only a few opinion letters related to WARN, which is not surprising because the statute and its implementing regulations are still relatively new. Interestingly, none of the letters made publicly available predate 2007, the first year of a newly elected Democratic administration.

An employer that has entered into a settlement agreement with OSHA, or that has been found in violation of OSHA regulations or the general duty clause--either by order of an Administrative Law Judge or as a consequence of accepting a citation--should adhere to all provisions of any agreement, and abate all cited conditions. An OSHA Area Office may assess a failure to abate penalty of up to $7,000 per citation item per day for each day the condition is not abated. Normally, the maximum time period is 30 days, for a maximum penalty per citation item of $210,000, but that time period may be increased in exceptional circumstances.

Last week, OSHA issued citations of over $200,000 each to two New York businesses. The first, totaling $210,000, was issued to Broadway Corp., doing business as Broadway Concrete, for failing to abide by a settlement agreement entered into after first receiving a citation for lack of fall protection back in 2008. OSHA conducted a follow-on inspection in January of this year, and in the new citation alleges that Broadway Concrete performed work at eight sites in New York City without adequate fall protection, in violation of the settlement agreement. The second citation issued last week, totaling $247,000, was issued to U.F.S. Industries, doing business as Sally Sherman Foods, for failing to abate conditions previously cited--lack of fall protection, machine guarding, and inadequate lockout/tagout--following a prior inspection at its Mount Vernon facility.

New York Area Offices have recently issued several other high-penalty failure-to-abate citations, suggesting that this may signal a new direction in enforcement in Region 2 (which includes New York and New Jersey):
 

• On July 20, OSHA issued citations totaling $112,000 in penalties to a Home Depot in West Nyack, chiefly for failure to abate items regarding potential employee exposure to methylene chloride.
• On June 2, OSHA issued citations totaling $346,500 in penalties to CEC Elevator Cab Corp in the Bronx, chiefly for failure to abate items regarding various programs and training.
• On April 28, OSHA issued citations totaling $107,000 to the Service Manufacturing Group in Buffalo, chiefly for failure to abate items regarding cranes, slings, fire extinguishers, and other issues, at its sheet metal fabrication plant.

Last, but certainly not least, last week OSHA issued the third largest citation in history, $16.6 million to several contractors and subcontractors for alleged violations associated with the February 7, 2010 explosion at the Kleen Energy power plant in Middletown, CT. (The two largest OSHA citations were issued to BP in association with a 2005 explosion at its Texas City refinery, and alleged failures to abate conditions following the expiration of a settlement agreement.) 

            On July 23, 2010, the Supreme Court of Albany County upheld the constitutionality of Chapter 45 of the Laws of 2010. Chapter 45, which was signed into law by Governor David Paterson on April 14, 2010, creates an early retirement incentive for employees in positions represented by collective bargaining units affiliated with the New York State United Teachers (“NYSUT”) who belong to either the New York State Employee Retirement System (“ERS”) or the New York State Teachers Retirement System (“TRS”), are at least 55 years of age, and have attained at least 25 years of creditable service (“55/25 Legislation”). The 55/25 Legislation allows eligible employees to retire without the reduction in retirement benefits that would normally apply to retirement system members who are on Tiers 2, 3, or 4, and who do not have 30 years of service. A more complete description of the 55/25 Legislation is set forth here.

            Two days after the 55/25 Legislation was signed into law, on April 16, 2010, the Empire State Supervisors and Administrators Association (“ESSAA”), a union that represents primarily administrators and supervisors in public school districts, and the Baldwin Supervisors Association (“BSA”), a local affiliate of the ESSAA, initiated a court proceeding challenging the 55/25 Legislation. Specifically, the ESSAA and BSA alleged that the 55/25 Legislation violated the First and Fourteenth Amendments of the United States Constitution, as well as Article 1, Section 11 of the New York State Constitution, by limiting eligibility only to individuals who are employed in positions represented by collective bargaining units affiliated with NYSUT. The ESSAA and BSA argued that the 55/25 Legislation violated their rights to equal protection and freedom of association.

           

        In the July 23, 2010 decision, the Court rejected the challenge to the 55/25 Legislation, finding that it was not irrational or illogical of the Legislature to limit eligibility only to employees in positions represented by bargaining units affiliated with NYSUT. The Court accepted the argument of the State and NYSUT that “early retirement incentives in the public school context can be particularly effective when targeted at teachers (i.e. individuals who provide direct classroom instruction) because a high-salaried teacher who accepts an early retirement incentive will often be replaced by a new, entry-level teacher at a lower salary” while in contrast “an outgoing administrator will typically be replaced by an individual closer in rank and, therefore, comparable in salary.” According to the Court, as NYSUT represents virtually all of the classroom teachers and teaching assistants employed in public schools across New York State, it was rational for the Legislature to limit eligibility to employees in bargaining units affiliated with NYSUT because “NYSUT affiliated locals are a reasonable proxy for teachers.”

            The Court recognized the fact that there are four public school districts in which NYSUT does not represent teachers and related teaching titles. If the plaintiffs in this case had been teachers at one or more of those public school districts who would have been eligible for the incentive but for their union affiliation, it is not clear whether the outcome would have been the same. It is possible that eligible employees in the same type of position supposedly targeted by the 55/25 Legislation (classroom teachers) who were excluded from the incentive simply because they were not in NYSUT bargaining units might have had an easier time establishing that the NYSUT-only restriction was not rational. In that context, the Court could not have focused solely on the teacher vs. administrator distinction, and the argument that “NYSUT affiliated locals are a reasonable proxy for teachers” would likely be much less persuasive. However, because the plaintiffs in this case were unions that represented primarily administrators and supervisors, the Court did not reach the issue of whether it was rational to exclude the few eligible teachers who are not part of NYSUT bargaining units.

 

            Within several days of the Court’s decision upholding the 55/25 Legislation, the ESSAA and BSA filed a Notice of Appeal. Accordingly, the fate of the 55/25 Legislation has not yet been conclusively determined. TRS recently released a statement that it will continue to implement Chapter 45 as written, but that “the payment of the unreduced retirement benefit to eligible members who retired pursuant to Chapter 45 will be subject to the final outcome of any appellate process.”

 

If the appellate court ultimately finds Chapter 45 to be unconstitutional, it is possible that individuals who have retired under its provisions may have their pensions reduced to reflect the penalty for retiring prior to attaining 30 years of service. However, it is also possible that the appellate court could eliminate the NYSUT-only restriction on eligibility, which would cure the unconstitutionality of the 55/25 Legislation while at the same time not causing a reduction in the pensions of individuals who retired in reliance upon the 55/25 Legislation.

As part of its Spring 2010 regulatory agenda, the U.S. Department of Labor (“USDOL”) has indicated it plans to revise its longstanding interpretation of federal law on the reporting and disclosure requirements for employers in connection with a union’s organizing campaign. Such reporting is required under the Labor-Management Reporting and Disclosure Act (“LMRDA”), which contains various financial disclosure requirements for employers, unions and others. Among other things, the LMRDA requires employers to file annual reports with the federal government to disclose agreements made with third parties (and any associated payments), where a purpose of the agreement is to persuade employees with respect to their right to unionize. A willful failure to submit a required report or material false statements made on the report are crimes.

However, the LMRDA does not require reporting to the federal government where the services rendered relate to the “giving or agreeing to give advice” to an employer. Since at least 1962, the long-standing interpretation of the “advice exception” excludes from reporting various persuader activities performed by third party consultants, including the preparation of documents and materials to be used by the employer during the organizing campaign. As long as the third party consultant does not meet directly with employees in connection with persuader activities, agreements relating to these types of services need not be reported. The Office of Labor-Management Standards, which enforces the LMRDA, states that the advice exception has been “broadly interpreted to exclude from reporting any agreement under which a consultant engages in activities on behalf of the employer to persuade employees concerning their bargaining rights but has no direct contact with employees, even where the consultant is orchestrating a campaign to defeat a union organizing effort.” (Emphasis added). In fact, Judge (now Justice) Ruth Bader Ginsburg upheld this interpretation of the “advice exception” when the United Auto Workers sought to challenge the agency’s position in the late 1980s. U.A.W. v. Dole, 869 F.2d 616 (D.C. Cir. 1989).
 

The Obama administration now seeks to narrow the scope of the “advice exception” to require greater reporting and disclosure of an employer’s use of consultants in connection with union organizing efforts. Given the dramatic decline in union membership (now just 7.2% of private sector workers), unions are exploring every avenue to stem the losses. And the Obama administration apparently believes that changing the USDOL's long-standing interpretation of the “advice exception” may help unions reverse that trend by requiring employers to disclose the dollars spent in opposing a union organizing effort.

Because the process of notice and comment rule-making is currently ongoing, with initial promulgation of the draft regulation slated for November 2010, it is not clear exactly what form the revised regulation will take. Many believe that the administration will attempt to revive some version of the regulation that was promulgated in the last days of the Clinton administration and quickly rescinded by the Bush administration. Were the proposed Clinton administration regulation adopted, all services related to the preparation of materials would be reportable, if a purpose of the materials was to persuade employees – even if the consultant never engaged in persuader activities directly with employees.