Pennsylvania Labor and Employment Blog

EEOC Guidance Highlights the Risks of Using Criminal History Checks in Hiring

Adam Santucci — Mon, 07 May 2012 17:19:44 -0500

This post was contributed by Eric N. Athey, Esq., a Member in McNees Wallace & Nurick LLC's Labor and Employment Practice Group in Lancaster, Pennsylvania.

According to the Equal Employment Opportunity Commission ("EEOC" or "Commission"), if current incarceration rates continue, 1 in 3 African-American men and 1 in 6 Hispanic men will be incarcerated during their lifetimes. The rate for white men is only 1 in 17. Given this disparity in incarceration rates, the EEOC has long been concerned that employer policies restricting hiring based on prior criminal convictions may unfairly deprive minorities of employment opportunities. In Enforcement Guidance issued on April 25, 2012, the EEOC outlined its approach for determining whether an employer's criminal history screening policies violate Title VII on the grounds of either "disparate treatment" or "disparate impact."

Disparate Treatment. Obviously, employers cannot hold applicants to tougher screening standards on the basis of their race or national origin. An employer that considers an applicant's prior criminal history during the hiring process must do so on a consistent, non-discriminatory basis. A disappointed minority applicant with a criminal history may be able to prove he was subject to unlawful discrimination by showing inconsistencies in the hiring process, derogatory statements regarding a particular class or evidence suggesting that certain protected classes are held to a stricter screening standard than other groups.

Disparate Impact. Under Title VII, employers may also be liable for hiring policies that are consistently enforced if the policy disproportionately screens out a particular protected class and the employer cannot show that the policy is job-related for the position and consistent with business necessity. The EEOC's recent Guidance notes that an employer may be liable for the "disparate impact" of a hiring policy even if the employer has a racially balanced workforce. In order to establish that a hiring policy that relies on criminal history information is job-related for the position and consistent with business necessity, the employer will need to show that it operates "to effectively link specific criminal conduct, and its dangers, with the risks inherent in the duties of a particular position." The EEOC notes two ways an employer can establish this: 1) by validating the criminal conduct screen for the position under the Uniform Guidelines on Employee Selection Procedures; or 2) developing a "targeted screen" which considers a number of factors, including the nature of the crime, the time elapsed and the nature of the job and then conducting an individualized assessment for the people excluded. In other words, if a screening policy has a disparate impact on certain protected classes, an employer must be able to show that the policy is nevertheless reasonable and necessary.

Other Laws. Title VII is only the tip of the iceberg when it comes to laws governing the use of criminal background checks in hiring.

Employers who use these checks also need to be aware of their responsibilities under the Fair Credit Reporting Act and the Pennsylvania Criminal History Information Act. In addition, some industries (e.g. banking, insurance, public schools) are subject to specific legislation prohibiting the hiring of individuals with certain types of prior convictions. Finally, there is a growing number of municipalities, including Philadelphia, that have passed "ban the box" ordinances that specifically prohibit employers from even asking about prior convictions until late in the hiring process.

What's an Employer to do? Several things are clear from the recent EEOC guidance. First, employers should not adopt blanket rules prohibiting the hiring of anyone with a prior conviction. Secondly, if screening procedures are not statistically validated, then the employer should develop a "targeted screen" that is "narrowly tailored" and that considers multiple criteria when determining whether a prior conviction renders an applicant unsuitable for a position – these include: the nature, severity and age of the offense, the nature of the job, the number of offenses, subsequent employment and rehabilitation efforts. Third, consideration of arrests that do not lead to convictions generally should not be considered.

Given the recent attention that criminal history screening has garnered from the EEOC and various municipalities, it is likely that employers will see increasing challenges from applicants who are rejected due to prior convictions. If you have any questions regarding the EEOC Guidance or this article, please contact a member of the McNees Labor and Employment Law Practice Group.

Independent Contractor Misclassification in the Crosshairs

Jodi Frankel — Wed, 25 Apr 2012 07:31:06 -0500

This post was contributed by Tony D. Dick Esq., an Associate in McNees Wallace & Nurick LLC's Labor and Employment Practice Group in Columbus, Ohio.

In recent weeks, identical bills were proposed in the House (H.R. 4123) and Senate (S. 2145) to eliminate the so-called “safe harbor” in the federal tax code that protects businesses that have misclassified employees as independent contractors and, thus, have avoided paying payroll taxes, unemployment insurance, workers’ compensation premiums and other costs. These bills mark the second time in 18 months that such legislation has been put forward. Though unlikely to pass, especially in this gridlocked Congress, the bills are just the latest in a number of recent endeavors by state and federal lawmakers and law enforcement agencies to curb independent contractor misclassification.

While the bills recognize that many workers are properly classified as independent contractors, the U.S. Department of Labor (DOL) estimates that as many as 30% of employers are misclassifying employees as independent contractors. According to the IRS, approximately $54 billion in tax revenues are lost annually because of independent contractor misclassification.

In light of these large numbers, this past September, the IRS and DOL announced a joint initiative aimed at businesses that misclassify employees as independent contractors. Under the agreement between the two agencies, the IRS and DOL will begin to share information with each other and coordinate vigorous efforts to crack down on the misuse of the independent contractor designation. The agencies will also provide educational materials to businesses using independent contractors and to employees who may be misclassified.

For employers who cannot take advantage of the safe harbor, the IRS also announced an employment tax “amnesty” program that allows businesses to rectify past independent contractor misclassifications at a reduced cost.

The IRS’s Voluntary Classification Settlement Program permits employers to prospectively reclassify independent contractors as employees. Employers who choose to participate in the program will only have to pay 10% of the employment tax liability that would have been due for the most recent tax year. Self-reporting business will not only avoid interest charges and penalties, but also will not be subject to IRS audits of their payroll taxes for prior years. Of course, participating employers are required to treat the reclassified workers as employees and pay all applicable state and federal payroll taxes going forward.

While the program may help employers avoid federal employment tax obligations, it has its drawbacks. Nothing in the IRS’s amnesty plan prohibits DOL or the previously misclassified workers, themselves, from pursuing claims against the self-reporting company, including claims for unpaid overtime wages and other penalties. Moreover, those that avail themselves of the program are not shielded from state agencies who seek to redress misclassifications.

The DOL and IRS announcements dovetail with President Obama’s most recent federal budget, which sets aside $46 million to combat independent contractor misclassifications, including $25 million for grants to states to identify misclassification and recover unpaid taxes and $15 million for additional personnel in DOL’s Wage and Hour Division to investigate misclassification.

States have also stepped up efforts to eliminate independent contractor misclassification. A growing number of states, including Ohio, New York, New Jersey, Massachusetts, Michigan, Iowa and Oregon have created their own misclassification task forces comprised of various state workforce and tax agencies. Dozens of states have also entered into Memorandums of Understanding with DOL to share information about companies that have misclassified independent contractors. In addition, more than 20 states have passed legislation aimed at ending the misuse of independent contractor status. Many of these laws are industry specific.

In Pennsylvania, for example, the Construction Workplace Misclassification Act was signed into law in late 2010. Under the law, an individual that performs construction work may be classified as an independent contractor only if the individual: (1) has a written contract; (2) is free from control regarding the manner in which he/she performs services; and (3) is customarily engaged in an independently established trade, business, or profession. Delaware has also enacted a law that presumes construction workers are employees, rather than independent contractors, unless the employer demonstrates the individual meets an enumerated test. And, in Maine, workers in the trucking and messenger service industries are presumed to be employees unless the employer can prove otherwise. Under these statutes, penalties for misclassification can include monetary fines, stop work orders, and even criminal charges.

Massachusetts, on the other hand, has taken a different tact. The state recently created a law that actually allows private citizens to sue companies that have misclassified independent contractors. Under the law, the plaintiffs are entitled to recover 25% of workers’ compensation premiums not paid by an employer due to non-compliance, plus liquidated damages. The remainder is deposited into the state’s Workers’ Compensation Trust Fund.

None of these efforts should come as a surprise given the fragile economy and ever-widening budget deficits. Given federal and state misclassification initiatives, employers must recognize that the classification of independent contractors can create significant risk. Unfortunately there are no bright-line tests for determining the proper classification of workers. When creating new positions and evaluating existing ones, employers should give careful consideration to the various factors used to distinguish between employees and independent contractors, properly document the nature and functions of the position, and avoid actions that are inconsistent with those classifications and applicable law.

Where a position poses a close call, legal counsel should be consulted. Additionally, an employer considering participation in the IRS amnesty program should discuss the options with an attorney. Otherwise, you may be exposing your business to significant and potentially avoidable liability.

NLRB Notice Posting Saga Continues: Federal Court Blocks Board's Rule

Jodi Frankel — Fri, 20 Apr 2012 08:04:36 -0500

The National Labor Relations Board’s notice posting rule has been under fire since it was issued last year. In the past few months, the rule has garnered significant attention in courts around the country. The rule would require all employers subject to the Board’s jurisdiction to notify employees of their rights under the National Labor Relations Act, including the right to unionize. To that end, employers were required to post a Notice of Employee Rights in the workplace by April 30, 2012.

Earlier this week, we reported on a recent decision from the U.S. District Court for the District of South Carolina striking down the Board’s notice posting rule because it went beyond the scope of the Board’s limited rulemaking authority. The South Carolina decision followed on the heels of a decision by the District Court for the District of Columbia that upheld the posting rule. (While the D.C. court upheld the posting requirement, it struck down the part of the rule that would impose penalties on employers who failed to comply.) Business groups immediately appealed the D.C. decision to the U.S. Court of Appeals for the D.C. Circuit.

In light of these conflicting decisions, and with the end of April quickly approaching, employers were left wondering whether the Board would again postpone the effective date of the rule. Well, employers just got an answer. Or at least a temporary one.

On April 17, 2012, in response to an emergency motion, the D.C. Circuit issued an injunction blocking the Board from implementing the posting rule during the appeal. In its decision granting the injunction, the D.C. Circuit referenced the earlier South Carolina opinion and the uncertainty about the enforcement of the rule.

As a result of the court’s injunction, employers nationwide are relieved from having to comply with the notice posting rule until the conclusion of the appeal. While the appeal is on an expedited schedule, a decision is not expected until September 2012 at the earliest.

Federal District Court Strikes Down NLRB Rule on Notice Posting

Adam Santucci — Mon, 16 Apr 2012 08:24:30 -0500

This post was contributed by Bruce D. Bagley, Esq., a Member in McNees Wallace & Nurick LLC's Labor and Employment Law Practice Group.

Readers of this blog may recall our article from March 6, 2012, where we noted that the NLRB’s controversial Final Rule requiring employers to notify employees of their NLRA rights had been upheld by the U.S. District Court for the District of Columbia (pdf). We pointed out at that time that there was another federal court challenge to the Final Rule which had not yet been adjudicated.

On April 13, 2012, Judge David C. Norton, of the U.S. District Court for the District of South Carolina, decided that the Board did not have the authority to issue the Notice Posting Rule (pdf) and therefore found it unlawful under the Administrative Procedure Act.

Unlike Judge Jackson of the D.C. District Court, who ruled that the Board had “broad authority” to issue such rules, Judge Norton found that the Board’s rule-making authority was limited to subjects necessary to carry out its functions under the NLRA, such as investigating unfair labor practice charges and conducting representation elections. The Board’s role was to be “reactive,” Judge Norton held, not “proactive.” He also questioned whether the Board's Final Rule was consistent with Congressional intent, noting as follows:

"Congress has inserted at least eight additional notice requirements in federal labor laws since 1934, while the NLRA remained silent. . . . Congress clearly knows how to include a notice-posting requirement in a federal labor statute when it so desires."

Of most immediate concern is how the Board will respond to the South Carolina decision, which on its face relieves only South Carolina employers from the obligation to post the Notice which is otherwise effective on April 30. No doubt the Board will appeal Judge Norton’s decision to the U.S. Court of Appeals for the Fourth Circuit. (The Court of Appeals for the D.C. Circuit is already considering appeals from Judge Jackson’s March 2012 decision.)

Will the Board voluntarily delay the effective date of the posting requirement pending further developments? We would hope that as a federal agency charged with implementing uniform, nation-wide labor relations policies, the Board will again postpone the posting requirement, but we shall await the Board’s pronouncement and will communicate further once the Board announces its decision.

Is there a way to safely use social media in the interview process?

Adam Santucci — Thu, 12 Apr 2012 13:54:21 -0500

Thanks to recent headlines about the increase in employers demanding social media passwords of employees and job applicants, employers have gotten a quick lesson on the increased the risks of this practice, especially if the employer neglects to have the proper policies and procedures in place.

For organizations who still insist on reviewing social media data to determine whether an applicant would be a good fit in their organization, they can start by appointing a social media screener not involved in the decision-making process. Also, the employer should implement a policy and procedure to identify who will be involved in the decision, what data will be collected, when it will be collected and from what sites, and how the data will be communicated to the hiring manager.

This video is also posted on www.JDSupra.com.

How to screen job applicants without asking for the Facebook password

Adam Santucci — Thu, 05 Apr 2012 10:13:51 -0500

There has been a lot of backlash against the practice of employers asking potential employees for their Facebook password. So much so that U.S. senators are calling on the EEOC and the U.S. Department of Justice to launch an investigation to determine whether this practice is lawful. Facebook is also weighing in and threatening legal action against employers who engage in this practice.

Employers can avoid the current controversy by using other less risky approaches to screen applicants. One such practice is to conduct a thorough background check that complies with the Fair Credit Reporting Act. Be sure to disclose the background check to the applicant, receive authorization in writing, and use the information the applicant directly provides to you to minimize legal liabilities and inaccurate results.

You can also view this video at www.jdsupra.com.

NLRB to Expand Outreach Campaign Targeting Nonunion Employees

Jodi Frankel — Fri, 30 Mar 2012 10:33:17 -0500

The National Labor Relations Board’s (“NLRB”) aggressive campaign to educate non-union employees about their rights under the National Labor Relations Act (“NLRA”) is in full swing.

In addition to the mandatory notice posting requirement that will go into effect for all employers on April 30, the NLRB recently announced its plan to launch a new website designed to educate both union and non-union employees about their rights under the NLRA. These rights include the rights to discuss working conditions and to present grievances to their employers. Under the NLRA, employees have a right to engage in such “protected concerted activity,” even when they are not union employees or involved in union organizing efforts.

The new website will be rolled out in mid-April, just before employers are required to post the Notice of Employee Rights. The NLRB also plans to distribute pamphlets, published in both English and Spanish, addressing workers’ rights and to publicly discuss this information across various media outlets.

This aggressive educational campaign could lead to more complaints from workers. Accordingly, employers should ensure that they have appropriate policies in place that comply with the NLRA. Employers also should ensure that their managers are properly informed of employee rights under the NLRA and trained on how to respond to employee complaints.

We will keep you updated as new developments are announced.

Second Verse: Worse Than the First!

Adam Santucci — Tue, 27 Mar 2012 17:28:04 -0500

This post was contributed by Jennifer E. Will, Esq., a Member in McNees Wallace & Nurick LLC's Labor and Employment Law Practice Group.

You may recall a prior entry on this site detailing the National Labor Relations Board's Acting General Counsel's first social media report. The Acting General Counsel's second report was issued just six months later, which highlights how quickly the issues surrounding social media in the workplace are developing. It is important for private sector employers to remember that the National Labor Relations Act ("Act") applies, whether or not employees are represented by a union.

According to the new report, the following common policy provisions may be unlawful because they "chill" employees' rights under Section 7 of the Act:

Employees are prohibited from making disparaging comments about the company through any media, including online blogs, other electronic media or through the media.
Employees should generally avoid identifying themselves as the company's employees, unless there is a legitimate business need to do so or when discussing terms and conditions of employment in an appropriate manner.
Insubordination or other disrespectful conduct and inappropriate conversations are subject to disciplinary action.
Employees are prohibited from using social media to engage in unprofessional communications that could negatively impact the company's reputation or interfere with the company's mission or unprofessional/inappropriate communications regarding members of the company's community.
Employees are prohibited from disclosing or communicating information of a confidential, sensitive, or non-public nature concerning the company to anyone outside the company without prior approval of senior management or the law department.
Employees are prohibited from using the company's name or service marks (trademark, copyright, logo, etc.) outside the course of business without prior approval of the law department.
Employees who identify themselves as employees of the company must expressly state that their comments are their personal opinions and do not necessarily reflect the company's opinions.

We have discussed this many times before in the last year, but it is worth repeating: now is the time to review and narrowly tailor your policies to ensure compliance with rapidly-developing Board case law. With carefully crafted policies, you can still protect the your organization's reputation and intellectual property; enforce attendance and harassment policies; and do so, without infringing on employees' right to engage in protected concerted activity.

Even with a state-of-the-art social media policy, you should still think twice before firing that employee who takes to Facebook to solicit her coworkers' sympathy about her supervisor, job responsibilities, lost promotion, etc.

Go ahead and ask for the Facebook password, IF...

Adam Santucci — Mon, 26 Mar 2012 10:40:12 -0500

Bottom line: There is nothing unlawful about an employer requesting that an applicant voluntarily provide a Facebook password. (Check out the site's policies though - that practice may violate Facebook's terms and conditions of use.)

However, such practice may open a Pandora's box of potential liability for employers who proceed without appropriate policies, procedures and safeguards in place. Among a host of other legal concerns, an applicant may claim that he or she was coerced into providing the log-in information in violation of the federal Stored Communications Act or a state law equivalent.

Best practice? Ensuring that policies and procedures are in place, and flexible enough to protect your organization from the pitfalls of social media in the workplace will be critical to defending claims that may arise following the adoption of these types of practices.

You can also view this video at www.jdsupra.com.

Unemployment Compensation: Case Update

Kelley Kaufman — Fri, 16 Mar 2012 12:15:17 -0500

Should an employee who agrees to resign her employment as part of the settlement of her workers’ compensation claim be eligible to receive unemployment compensation benefits? According to a recent decision from the Commonwealth Court of Pennsylvania, the answer to this question is a firm “no.”

An employee who voluntarily quits her employment will not be eligible to receive unemployment compensation benefits unless she can establish that she had “necessitous and compelling” cause – in other words, good cause – to quit. In Lee v. Unemployment Compensation Board of Review, the plaintiff argued that she should be eligible for unemployment compensation benefits where she agreed to resign her employment in consideration for a workers’ compensation settlement agreement. The Court disagreed, rejecting Lee’s argument that she was under psychological pressure to settle the workers’ compensation claim and that her attorney advised her that the settlement would not happen without the resignation and release.

Notably, the Court also rejected Lee’s argument that the resignation and release was invalid under section 701 of Pennsylvania’s Unemployment Compensation Law, which states that “[n]o agreement by an employe to waive, release, or commute his rights to compensation, or any other rights under this act, shall be valid.” 43 P.S. § 861. Although the Court noted that a waiver of the right to unemployment benefits is invalid, it emphasized that this provision only becomes relevant once it is established that the claimant has the right to benefits under the Law. Lee failed to establish her right to benefits because her decision to terminate her employment in order to settle the workers’ compensation claim did not amount to good cause under the Law.

This is good news for employers. This decision provides good authority for any unemployment compensation case involving an employee who resigns pursuant to a workers’ compensation settlement agreement.

Pennsylvania Whistleblower Law Restricts Ability of Public Employers and Non-Profits to Terminate Employees

Jodi Frankel — Tue, 13 Mar 2012 07:27:23 -0500

In Pennsylvania, as in the majority of states, most employees are presumed to be employed “at will.” Under the at-will employment doctrine, an employer does not need “cause” to terminate an employment relationship. Rather, the employer may terminate an employee at any time, for any reason or no reason at all. (At the same time, the employee reserves the right to terminate his or her employment for any reason.) The only caveat is that the employer’s reason for termination cannot be an illegal one.

Federal and state statutes, as well as the courts, have created a number of exceptions to the doctrine of at-will employment. To be sure, an employee cannot be fired (or demoted, transferred, denied a promotion, or subject to any otherwise “adverse employment action”) on the basis of race, religion, gender, national origin, age, or disability, among other things. In addition, under Pennsylvania law, certain employers may not terminate an employee who has reported that his or her employer is engaging in misconduct.

Such retaliation is prohibited by Pennsylvania’s Whistleblower Law, 43 P.S. § 1421 et seq. Specifically, the Whistleblower Law makes it unlawful for an employer to “discharge, threaten or otherwise discriminate or retaliate against” an employee for making a good faith report to a superior or to an “appropriate authority” about an instance of “wrongdoing or waste.” The Whistleblower Law also prohibits retaliation against an employee who has participated in an investigation, hearing, or inquiry into the employer’s alleged misconduct.

While the Whistleblower Law does create a significant carve-out to the at-will employment doctrine, the whistleblower protections afforded do not protect every gripe, objection, or criticism of a dissatisfied employee. Specifically, the Law extends whistleblower protections to only those employees who report “waste” or “wrongdoing.” These terms are narrowly defined to require more than a report of inefficient business practices or violation of internal policies. Rather, the Whistleblower Law requires a report of conduct that is (1) specifically prohibited by a particular federal, state, or local law or regulation; (2) a substantial abuse of public funds or resources; or (3) a breach of professional ethics. Moreover, the employee must report the misconduct internally to a supervisor or externally to a government body or agency with appropriate enforcement or regulatory authority over the subject of the report; a report to a co-worker, the general public, or a member of the media is not protected.

The most significant limitation on an individual’s ability to challenge his termination under the Whistleblower Law is that the statute extends whistleblower protections to only those who are considered “employees” within the meaning of the statute. Unlike many states who extend whistleblower protection to both public and private employees, the Pennsylvania Whistleblower Law narrowly defines “employee” to be an individual performing work for wages for a “public body.” In simple terms, a “public body” is a state or local government agency or department, or any entity “funded in any amount by or through Commonwealth or political subdivision authority.”

What then qualifies as a “public body”? Clearly, state agencies, departments, and commissions; county, city, and township bodies; municipal corporations; and school districts are public bodies. But beyond that, the answer depends on whom you ask.

Decisions by Pennsylvania’s state and federal courts have diverged on what constitutes a “public body” for purposes of the Whistleblower Law. Both state and federal courts have faced the issue of whether private corporations constitute a public body merely because they receive some sort of public money. Federal courts in the Commonwealth have held that indirect and attenuated receipt of public funds for services rendered to private individuals does not bring the recipient within the Whistleblower Law. For example, these courts have held that a for-profit corporation operating out-patient cancer treatment centers is not a “public body” simply because it receives Medicare reimbursements from the Commonwealth. The Pennsylvania state courts, however, repeatedly have found “public body” status based solely on the indirect receipt of such funds.

Despite the differing precedent, one thing is clear. The protections of the Whistleblower Law have been significantly expanded by court decision. No longer must an individual be a state or government worker to be protected. Courts have held that an individual working for a private corporation may fall within the protection of the Whistleblower Law if the corporation provides public services or performs governmental functions under a contract with the state.

Furthermore, in Johnson v. Resources for Human Development, Inc., a 2011 case before the United States District Court for the Eastern District of Pennsylvania, it was presumed that a non-profit is covered by the Whistleblower Law. In that case, the plaintiff was employed by a non-profit corporation that sponsored human services programs in multiple states. One such program, which provided job training for at-risk youth, received funding from the City of Philadelphia’s Department of Human Services. After being terminated, the plaintiff brought a claim under the Whistleblower Law. Specifically, she alleged that her termination was retaliation for informing her supervisor that a co-worker was having inappropriate relations with one of the youth participants. While the plaintiff’s whistleblower claim was ultimately rejected because her protestations did not constitute a “report” (and occurred five years before her termination), neither party contested that the non-profit was a “public body” subject to the prohibitions of the Whistleblower Law.

Ultimately, public employers, non-profit organizations receiving public funds, and other entities contracting with the Commonwealth must be aware of the protections afforded by the Whistleblower Law. The easiest way for such employers to avoid lawsuits is to establish a culture where employees are encouraged to raise legal and ethical concerns with management. Employers should develop internal reporting procedures for employees to voice such concerns. Managers and supervisors must be informed of the rights of employees to report concerns and informed that retaliation—whether in the form of termination, harassment, or blacklisting—is prohibited and subject to discipline. To be sure, a problem employee who underperforms or violates internal policy cannot shield himself or herself from discipline simply by making some complaint or allegation of employer misconduct. However, in light of Pennsylvania’s Whistleblower Law, employers must be particularly cautious when taking adverse action against these individuals.

Federal Court Gives Green Light To NLRB's Notice Posting Requirement But Strikes Several Enforcement Provisions from the Board's Final Rule

Adam Santucci — Tue, 06 Mar 2012 11:42:50 -0500

This post was contributed by Bruce D. Bagley, Esq., a Member in McNees Wallace & Nurick LLC's Labor and Employment Law Practice Group.

As readers of this blog may recall, on August 30, 2011, the National Labor Relations Board (Board) issued its Final Rule, “Notification of Employee Rights under the National Labor Relations Act.” The Final Rule required employers subject to the Act (virtually all private sector employers) to post a rather large conspicuous “Notice of Employee Rights” to inform employees that they have the right to join unions, organize, engage in collective bargaining, strike, picket, etc.

The National Association of Manufacturers (NAM) challenged the Board’s authority to require such posting and filed a lawsuit in federal district court in Washington, D.C. On March 2, 2012, Judge Amy Berman Jackson (appointed to the bench by President Obama in 2011), issued a “split decision” in the matter, upholding the Board’s right to require the notice posting, but finding unlawful and striking those provisions in the Rule which would have (1) automatically deemed the failure to post the notice to be an unfair labor practice (ULP), and (2) tolled the six-month statute of limitations for filing a ULP Charge against an employer who had failed to post the notice.

In finding that the Board had authority to require the notice posting, Judge Jackson found no indication that in enacting the Act, Congress clearly intended to preclude the Board from promulgating such a rule. She went on to find that the Board’s promulgation of the Rule was neither arbitrary nor capricious, and given the lack of Congressional prohibition, the Board had sufficient legal authority to require the notice posting.

But, according to Judge Jackson, the Board did not have the requisite authority to deem failure to post as a new category of ULP under the Act. She did, however, leave that door open a bit, holding that the Board could still find failure to post to be a ULP in an individual case based on the facts and circumstances of that case. The Board just could not make a blanket advance decision that in every case failure to post would automatically constitute a ULP.

Judge Jackson further found that the Board had exceeded its statutory authority by purporting to toll the statute of limitations against those employers who fail to post. The Court noted that it was the Board’s burden to prove, in any individual case, that there are equitable reasons to toll the statute of limitations, and that automatic tolling under the Final Rule would “turn the burden of proof on its head.”

All in all, NAM v. Nat'l Labor Relations Bd. was a disappointing decision for employers and probably for the Board as well. It should be noted, however, that this case was not the only legal challenge to the Board’s Final Rule. The U. S. Chamber of Commerce has a separate suit pending in federal district court in Charleston, SC, and Judge Jackson’s decision will not be binding in the South Carolina court. Additionally, it is quite likely that Judge Jackson’s decision will be appealed to the U.S. Court of Appeals for the D.C. Circuit. In the meantime, unless there is some further judicial action to the contrary, employers subject to the Act are advised to post the Notice of Employee Rights effective April 30, 2012, copies of which can be found and reproduced from the Board’s web site.

Ban on Texting While Driving in Pennsylvania & New CDL Requirements

Adam Santucci — Tue, 28 Feb 2012 17:34:20 -0500

Recently, members of McNees Wallace & Nurick LLC's Transportation, Distribution & Logistics Group issued an Alert containing two articles that will certainly be of interest to many employers. The Alert can be accessed by clicking here.

The first article, by Barbara A. Darkes, summarizes Pennsylvania's implementation of the new medical certification requirements for individuals holding Commercial Drivers Licenses.

The second article, by James J. Franklin, summarizes a new law which bans texting while driving on all Pennsylvania roadways effective March 9, 2012.

Employers should review these developments carefully and revise their policies as necessary.

Health Care Reform Updates: Final Regulations and Technical Release Issued

Kelley Kaufman — Thu, 23 Feb 2012 15:06:26 -0500

The past couple of weeks have been busy ones for the Department of Labor (“DOL”), the Department of Health and Human Services (“DHHS”) and the Department of Treasury (“DOT”) (collectively, the “Departments”). Since February 9, 2012, the Departments have issued two sets of final regulations and a Technical Release bulletin, providing some long-awaited guidance on a variety of requirements under the federal Patient Protection and Affordable Care Act (“PPACA”), the health care reform legislation signed into law under President Obama in early 2010. Links to the regulations, the Technical Release and additional materials can be found on the DOL’s PPACA Regulations and Guidance web page.

Technical Release Regarding Automatic Enrollment, Employer Shared Responsibility and Waiting Periods

On February 9, 2012, the Departments issued Technical Release 2012-01, which provides information regarding the PPACA provisions governing automatic enrollment, employer shared responsibility and the 90-day limitation on waiting periods. The Technical Release provides a Question and Answer discussion on each of these issues, including approaches that the Departments are considering for future regulations.

Importantly, the Departments also announced that the automatic enrollment guidance will not be ready to take effect by 2014. Until final regulations are issued and applicable, employers are not required to comply with this requirement. Keep an eye out for proposed regulations on each of these requirements under PPACA.

Final Regulations Regarding Summary of Benefits and Coverage and Uniform Glossary

On February 14, 2012, the Departments issued final regulations implementing the disclosure requirements under PPACA, which include the requirement to provide a Summary of Benefits and Coverage (“SBC”), notice of material modifications and a uniform glossary. This information is intended to help plan participants better understand their health coverage, as well as other coverage options.

In part, the regulations set forth 12 required content elements for an SBC, as well as appearance requirements. The Departments also provided supplemental information, including an SBC template, instructions and other related materials, which can be found on the DOL’s PPACA Regulations and Guidance web page.

Review the regulations carefully for additional information on who must provide each required disclosure, when the disclosures are required, what content must be provided, what format disclosures must take, and acceptable methods of disclosure. These requirements become effective on the first day of the first open enrollment period beginning on or after September 23, 2012. Failure to provide the information required can result in a significant monetary penalty, including a fine of up to $1,000 per failure.

Final Regulations Regarding Coverage of Preventive Services

On February 15, 2012, the Departments issued final regulations addressing the exemption of group health plans and group health insurance coverage sponsored by certain religious employers from having to cover certain preventive health services under provisions of PPACA, such as approved contraceptive methods and sterilization procedures.

The final regulations grant the DHHS’ Health Resources and Services Administration the discretion to exempt group health plans established or maintained by certain religious employers from the requirement to cover contraceptive services. For purposes of this exemption, a “religious employer”: (1) has the inculcation of religious values as its purpose; (2) primarily employs persons who share its religious tenets; (3) primarily serves persons who share its religious tenets; and (4) is a non-profit organization described under the Internal Revenue Code.

In addition, the regulations provide a temporary, one year enforcement “safe harbor” for employers who are non-exempted, non-profit organizations with religious objections to covering contraceptive services whose group health plans are not grandfathered health plans under PPACA.

Responding to the most recent controversy regarding PPACA, the Departments are expected to issue additional regulations addressing the religious objections of non-profit religious organizations who do not qualify as a “religious employer” under the narrow exemption. These regulations are expected to require the insurers of such organizations to cover contraception if a religious organization chooses not to do so. In such cases, the insurers would be expected to offer contraception coverage to women directly and free of charge, with no role for their religious employers who oppose contraception.

If you have any questions regarding these recent guidance materials or any other aspect of PPACA, please consult our prior posts or contact any of the attorneys in our Labor and Employment Practice Group.

Public Sector Supervisors Can Be Personally Liable for Violations of the FMLA

Adam Santucci — Thu, 09 Feb 2012 15:27:16 -0500

A recent Third Circuit Court of Appeals decision has made clear that supervisors in public agencies may be subject to individual liability under the Family and Medical Leave Act (FMLA). The court previously has held that public employers, private employers, and supervisors in the private sector may be liable for FMLA violations. Now, for the first time, in Haybarger v. Lawrence County Adult Probation and Parole, the court has extended FMLA liability to supervisors in the public sector.

The facts in Haybarger may seem eerily familiar to many of you. A public-sector employee took FMLA-covered absences for a number of different health issues. The supervisor, who served as the Director of the Probation and Parole Office, believed that the employee was under performing and that her attendance problems contributed to her poor performance. The supervisor wrote in the employee's performance evaluations that she needed to improve her overall health and cut down on the days that she missed due to illness (red flag!). The supervisor also formally disciplined the employee, placing her on probation for six months, which required weekly formal progress assessments and monthly meetings. While it is unclear who specifically made the ultimate decision to terminate the employee, she was terminated when her performance did not improve.

Not surprisingly, following her termination the employee brought suit raising a number of claims against the County, the Probation and Parole Office, and the supervisor. After many of the claims were dismissed, and a few were settled, all that remained for the court to decide was the FMLA claim against the supervisor. The supervisor argued that he was not liable under the FMLA.

Unfortunately for public sector supervisors, the court disagreed and held that public sector supervisors can be individually liable for violations of the FMLA.

This decision is scary for public sector supervisors, who now may be personally liable for back pay and other damage awards where their individual actions and decisions violate the FMLA. Whether or not an individual is a supervisor under the FMLA will depend on the facts and circumstances. While there might be a debate regarding who constitutes a supervisor in a particular situation, the message of Haybarger is clear: where a supervisor exercises supervisory authority over the complaining employee, and is responsible, in whole or part, for the alleged violations of the FMLA while acting in the employer's interest, that supervisor may face liability under the FMLA.

In Haybarger, the court concluded that the Director of Probation and Parole Office was a supervisor with respect to the particular employee. When acting on behalf of the employer (i.e., within the scope of his authority), he had control over the termination decision (even though he was not the final decision maker), he supervised her work, he completed her performance evaluations, and he had the authority to discipline the employee; as a result, the court concluded that he could be individually liable for FMLA violations that were a product of his supervisory actions.

With this decision, the court set up what is known as a circuit split, meaning that the different appeals courts around the country have decided the same issue differently. Often in these situations, the Supreme Court of the United States will step in and decide the issue to ensure consistency across the country. For now, though, the Haybarger decision is the law only in the Third Circuit, i.e. Pennsylvania, New Jersey, Delaware and the U.S. Virgin Islands.

Employers, both public and private, should make sure that supervisors receive regular FMLA training. While supervisors do not necessarily need to become experts, they should know: how to recognize a potential FMLA-covered absence; that employees cannot be disciplined for FMLA-covered absences; and that FMLA-covered absences should not be referenced in performance evaluations, among other things. In addition, employers should ensure that supervisory decisions related to the discipline and discharge of employees who are out of work on, or have recently returned from, FMLA leave are given more rigorous scrutiny.

Labor & Industry Revises New Active Search Requirements for UC Eligibility, Drops "28 Calendar Days" Recall Requirement for Temporary Layoff Exception

Jodi Frankel — Mon, 06 Feb 2012 11:33:58 -0500

In June 2011, the Pennsylvania General Assembly enacted a law amending the Pennsylvania Unemployment Compensation Law (“Law”). Many of the amendments' provisions took effect January 1, 2012. In addition to providing for a severance pay offset against unemployment compensation benefits, the amendments added additional "active search for employment" eligibility requirements for claimants to collect UC benefits.

Specifically, a claimant who applies for UC benefits on or after January 1, 2012 must establish that he is in “active search for suitable employment” or, alternatively, that one of the exceptions to the requirement applies. The Law provides an exception to the active search requirement for a claimant “who is laid off for lack of work and advised by the employer of the date on which the claimant will return to work.”

The Pennsylvania Department of Labor and Industry (“L&I”) established specific steps that a claimant must take to satisfy the active search requirement. L&I also added the caveat that, to be relieved from the active search requirement under the layoff/lack of work exception, the claimant must have a projected return to work date within 28 calendar days of when he last worked. The addition of the 28-day requirement caused significant concern for employers who engage in seasonal layoffs, particularly those in the construction industry. To be sure, these seasonal layoffs often last longer than 28 days. And with the 28-day recall requirement, employees laid off seasonally because of a lack of work would not qualify for the exception and would need to comply with the new active search requirements.

The cause for concern, however, was short-lived.

Even though the active search requirement has been in effect for only just over a month, L&I recently eliminated the 28-day return requirement for the layoff/lack of work exception. While it is unclear what prompted L&I’s addition, and subsequent deletion, of the 28-day qualification, this is a noteworthy turn of events for employers who engage in seasonal layoffs. Now, it appears that an employee who is temporarily laid off, yet has been advised by his employer in writing of an expected return to work date (regardless of how far away that date is) will be excepted from the active search requirement as a precondition for UC eligibility.

Under L&I's revised active search requirements, an employer who places an employee on temporary layoff status with the expectation that the employee will receive UC benefits should advise him in writing of the projected return to work date. The employee may be required to provide this return to work letter with his UC application to demonstrate that he is exempt from the active search requirement under the layoff/lack of work exception.

Ultimately, this recent change to the guidelines regarding UC eligibility is good news for both employers and employees. With the elimination of the 28-day requirement, employers no longer face the possibility of losing workers who find alternative employment during a seasonal layoff, and employees who are temporarily laid off no longer face a loss of benefits because of non-compliance with the active search requirements. As the recent flurry of changes demonstrate, however, these requirements are new and still in flux. There is no guarantee that L&I will not further refine their rules and guidelines. In other words...stay tuned.

Truck Drivers and the Pennsylvania Prevailing Wage Act

Adam Santucci — Wed, 01 Feb 2012 17:31:57 -0500

Recently, Andrew L. Levy, Esq., a Member in McNees Wallace & Nurick LLC's Labor and Employment Law Practice Group published an article titled: Truck Drivers Hauling Material Between a Turnpike Construction Site and a Borrow Pit Adjacent to the Project Are Entitled to be Paid the Prevailing Wage.

The article, which can be accessed by clicking here, discusses a recent Commonwealth Court of Pennsylvania decision that clarified the scope of coverage under the Pennsylvania Prevailing Wage Act with respect to truck drivers and other workers whose work in relation to a prevailing wage project extends beyond the actual project boundaries.

Appealing an Arbitration Decision - A Success Story

Adam Santucci — Fri, 27 Jan 2012 10:20:39 -0500

Recently, the Commonwealth Court of Pennsylvania issued an interesting decision involving the appeal of a grievance arbitration decision filed by a Commonwealth Agency – the Pennsylvania Department of Corrections. The decision, Department of Corrections v. Pa. State Corrections Officers' Association (pdf), offers unionized employers a reminder of the difficult hurdle that they face when appealing a grievance arbitration decision. But the decision also demonstrates that such appeals can be successful.

The decision resolved a conflict between the Department and the union that represents the Department's corrections officers regarding how positions, or posts, would be filled at state correctional facilities. The union was seeking to have all (or nearly all) posts be designated as “bid posts.” A bid post is one where, upon vacancy, the position would be filled according to a seniority bidding procedure that, in effect, left the choice to the officers. The Department, on the other hand, was trying to limit the number of bid posts so as to retain its right to assign employees to posts at its discretion. Bid posts had been a point of contention between the parties for some time and had been the subject of many prior disputes. In the past, the individual correctional facilities were left to determine through negotiations with the local union which posts would be designated as bid posts at the particular institution. This approach lead to a great deal of inconsistency in the designation of bid posts across the Department.

The parties continued to struggle over the bid post designation, and eventually an arbitrator defined the criteria to be used to designate jobs as "bid post" positions. The arbitrator’s definition of bid post was incorporated into the parties' 2008-2011 Collective Bargaining Agreement (“CBA”). The CBA also directed the parties to review all existing posts and mutually determine whether each post satisfied the arbitrator’s definition for a bid post. Not surprisingly, the parties could not agree on the application of the definition to the posts. In fact, the parties were unable to reach agreement on a single post designation. To break the logjam, the parties again turned to an arbitrator, who was asked to review every post in every correctional facility to determine whether it was a bid post.

This second arbitrator reviewed every post and, applying the original arbitrator’s definition, determined which posts would be bid by seniority. Interestingly, the arbitrator ordered that any post that previously had been designated as a bid post at the local level, whether it met the new definition or not, was also to remain a bid post. As this approach significantly increased the number of bid posts, the Department appealed this portion of the arbitrator's decision to the Commonwealth Court. On appeal, the Department argued that the arbitrator, by grandfathering the bid post designation for certain posts regardless of whether they met the new definition, contradicted the language of the CBA.

Those with experience in grievance arbitration know that attempting to overturn an arbitrator's decision can seem nearly impossible.

In fact, the Commonwealth Court noted in this case that courts owe great deference to arbitrator's decisions. Courts apply what is known as the "essence test" to review arbitration decisions on appeal. Under the essence test, an arbitration decision will be upheld so long as it is rationally derived from the language of the agreement. Only where the decision completely lacks foundation in, or fails to logically flow from, the collective bargaining agreement will it be overturned. In applying the essence test, a court does not consider whether the arbitrator's decision is factually or legally correct. Even where the court disagrees with the arbitrator’s interpretation or believes that the award is legally incorrect, the interpretation will be upheld as long as it is rationally derived from the language of the agreement.

Only if the decision is wholly illogical and altogether inconsistent with the language of a collective bargaining agreement will it be subject to reversal on appeal under the essence test. To be sure, this is a rather high hurdle to get over in most cases.

The Commonwealth Court concluded that, in this case, the arbitrator's decision, specifically the grandfathered bid post designations, was illogical. The Court found that not only was this portion of the award contrary to the language of the agreement, it was also contrary to the arbitrator's own conclusion! The arbitrator himself noted that some of the grandfathered bid post designations were inconsistent with the criteria set forth in the CBA, but nonetheless retained the bid post designation.

The Court concluded that the arbitrator acted with complete disregard for the CBA’s language when he reasoned that posts that did not meet the new bid post definition should nonetheless be designated as such. This portion of the arbitrator’s decision failed the essence test to the extent it was illogical and could not be reconciled with the language of the CBA.

Many labor practitioners have probably received arbitration decisions that have left them scratching their heads. This decision, while again highlighting the difficulty of successfully appealing an arbitration decision, provides a glimmer of hope. If a decision is completely irrational, illogical and contradictory, it can be successfully overturned.

Department of Labor Issues New Fact Sheets on Retaliation

Adam Santucci — Sun, 08 Jan 2012 13:57:18 -0500

This post was contributed by Tony D. Dick Esq., an Associate in McNees Wallace & Nurick LLC's Labor and Employment Practice Group in Columbus, Ohio.

More and more employers are recognizing what employment attorneys have long known. The most prevalent type of employment discrimination claim is not one based on race, sex, religion, disability or age. Rather, it is one alleging unlawful retaliation. In fact, in 2010, for the first time ever, retaliation claims surpassed race discrimination claims to become the most common type of claim filed with the Equal Employment Opportunity Commission (EEOC). This trend is not expected to end anytime soon.

Just before the holidays, the United States Department of Labor released three new fact sheets offering further guidance to employers on the topic of retaliation under the Fair Labor Standards Act (FLSA), the Family Medical Leave Act (FMLA), and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA). Each of these statutes contain specific provisions prohibiting employers from taking adverse employment actions against employees for asserting rights covered under these laws.

Fact Sheet #77A: Prohibiting Retaliation Under the FLSA, provides general information concerning the FLSA’s prohibition of retaliating against any employee who has filed a complaint or cooperated in an investigation where an FLSA violation is alleged. The fact sheet also incorporates last year’s U.S. Supreme Court decision in Kasten v. Saint-Gobain. There, the Court held that an employee’s verbal complaint about alleged wage and hour violations can be sufficient to trigger the anti-retaliation protections under the FLSA.

Fact Sheet #77B: Protection for Individuals under the FMLA, reiterates that employers are prohibited from retaliating against employees who exercise their right to take FMLA leave or any other FMLA right, complain about or oppose any unlawful practices under the FMLA, or participate in proceeding concerning FMLA rights. In addition, the fact sheet provides specific examples of prohibited retaliatory conduct under the FMLA. Examples include: refusing to authorize FMLA leave for an eligible employee, discouraging an employee from using FMLA leave, manipulating an employee’s work hours to avoid responsibilities under the FMLA, using an employee’s request for or use of FMLA leave as a negative factor in employment actions, such as hiring, promotions, or disciplinary actions, and counting FMLA leave under “no fault” attendance policies.

Fact Sheet #77C: Prohibiting Retaliation Under the MSPA articulates that certain agricultural employers may not “intimidate, threaten, restrain, coerce, blacklist, discharge, or in any manner discriminate against any migrant or seasonal agricultural worker” who files a complaint under the MSPA, participates in any proceeding under the Act, or exercises any MSPA right. The fact sheets also identifies what employers are subject to the statute and outlines the MSPA’s enforcement mechanisms.

As you can see, retaliation is hot topic,and retaliation claims are trendy. Now more than ever, employers, and more importantly supervisors and managers, must be aware of the risks of retaliation claims.

Pennsylvania Court Finds Employee Handbook Creates Contract, Upholds $187.6 Million Award

Jodi Frankel — Wed, 04 Jan 2012 13:26:48 -0500

The year 2011 saw a number of employee-friendly changes to the laws governing the workplace. The U.S. Supreme Court expanded the scope of retaliation claims under Title VII and under the Fair Labor Standards Act. The Equal Employment Opportunity Commission (EEOC) implemented regulations further broadening the definition of “disability” under the ADA. The National Labor Relations Board actively protected employee social media use. And the EEOC has cracked down on inflexible leave of absence and attendance policies.

Pennsylvania courts have not shied away from the action. In 2011, the Pennsylvania Superior Court upheld one of the largest awards in a wage and hour class action in the state’s history. In Braun v. Wal-Mart, the court awarded $187.6 million in back wages, damages, and fees to employees of Wal-Mart stores throughout Pennsylvania for paid rest breaks they were not permitted to take. Approximately 187,000 current and former hourly Wal-Mart employees claimed that the employee handbook promised paid rest breaks, but they were forced to work during those breaks and were not compensated for the missed breaks.

The employees brought their claims under Pennsylvania’s Wage Payment and Collection Law (WPCL). The WPCL does not entitle employees to wages or fringe benefits, but rather provides a remedy when an employer fails to pay for wages or benefits due under the terms of a contract or agreement. According to the court in Braun, payment associated with paid rest breaks pursuant to a contractual agreement between an employer and employee constitutes wages as that term is broadly defined in the WPCL. And the court ultimately found such a contractual agreement for paid rest breaks under the facts before it.

Particularly, Wal-Mart had several policies in place regarding rest breaks. The policies not only guaranteed, but also mandated, a single fifteen-minute rest break to an employee who worked more than three hours in a shift, and two such breaks if an employee worked more than six hours. Pursuant to the policy, the breaks were to be “full, timely, uninterrupted,” and employees were to receive compensation for break time at the applicable rate of pay. The rest break policy was set forth in Wal-Mart’s employee handbook, which was provided to all employees at the start of employment. Even though the employees were required to sign an acknowledgment page stating that the handbook was not a contract, the court found that Wal-Mart had promised employees paid rest breaks during which time they were to perform no work, and that promise amounted to a contract.

In finding a contract, the court not only relied upon Wal-Mart’s written policies, but also that paid rest breaks were repeatedly and consistently presented to employees as a benefit of employment. Not only was the policy presented in the employee handbook, but it was also referenced at orientation and in numerous postings throughout Wal-Mart stores. Employees and managers received in-person and computer-based training that emphasized compliance with Wal-Mart’s policies on breaks. Wal-Mart further reinforced the mandatory nature of the paid rest breaks by providing for disciplinary action for missed or shortened rest breaks. Ultimately, the court found that Wal-Mart’s employee handbook, as reinforced by its business practices, business records, orientation and training sessions, and policy of disciplining managers and employees who violated the rest break policy, created a contract between Wal-Mart and its employees promising paid rest breaks. The court held that when Wal-Mart required its employees to miss these paid rest breaks without additional compensation, it breached this contract. As a result, Wal-Mart was ordered to pay the class of employees for all of their missed breaks.

Employers may find it difficult to understand how employees were in fact denied compensation for missed rest breaks when they were paid regardless of whether they took a break or not. The court, however, reasoned that given the policy guaranteeing paid rest breaks in which the employee was to perform no work, Wal-Mart essentially promised to pay hourly employees for periods of work and for limited periods of uninterrupted rest. Accordingly, when an employee was denied that rest period and instead required to work additional hours, Wal-Mart owed him additional compensation. To summarize the court’s reasoning: “the WPCL does not permit an employer to escape liability when it receives the benefit of … an employee’s eight hours of labor when that employee agreed to be paid to work seven-and-a-half hours and to rest for one-half hour.”

The message of the Braun case is simple—an employee handbook can create a contract as to the form and amount of compensation, and such a contract can be enforced under the WPCL. Where policies, employee handbooks, and other communications make statements, representations, or other promises regarding wages or fringe benefits (or even rest breaks), employers may be legally bound by such promises. A disclaimer that a handbook does not change the at-will relationship and does not create a contract of employment may not be effective in preventing a court from finding that a contractual relationship exists as to certain terms and conditions of employment that are promised.

In the shadow of the court’s $187.6 million verdict against Wal-Mart, the start of 2012 affords a timely opportunity to review and update your policies and handbooks, with a particular focus on wage and hour practices. As the past year has demonstrated, the laws governing employment relationships are ever changing. The Labor and Employment Practice Group at McNees Wallace & Nurick is always available to assist you with auditing your Human Resources practices and to answer your questions regarding new laws, regulations, and court decisions.