KEY CASES

6thCir: Eligibility for leave did not carry over into new calendar year

Although an employee was eligible for FMLA leave when she began her absence in December 2004, she had not worked 1,250 hours in 2004 and consequently was ineligible for FMLA leave in 2005. Thus, the employee's FMLA interference claim based on her absences in 2005 was properly dismissed, the Sixth Circuit ruled. The employee first met the FMLA eligibility requirements and took leave for chronic depression in September 2004. She was granted additional intermittent leave in October and November. On December 13, 2004, she began an absence that continued into 2005. In January 2005, her employer recalculated her eligibility and denied her FMLA leave because she had not worked 1,250 hours in the 12 months preceding her first request for leave after the new year. As a result, she was terminated in February 2005 due to excessive unexcused absences. The Sixth Circuit rejected the employee's argument that her 2004 eligibility should carry over into 2005 based on her assertion that her FMLA leave commenced in September 2004, rather than January 2005. When an employer has approved intermittent FMLA leave, the leave commences upon the occurrence of the first absence caused by that condition, and it extends to cover every other absence caused by that condition during the same 12-month FMLA period, the court explained. However, that leave can only extend to the end of the 12-month period in which it began; once a new 12-month leave period begins, any additional absences caused by that same chronic condition constitute a new period of intermittent leave. Otherwise, the court noted, employees would never have to reestablish their eligibility, meaning they would be perpetually entitled to 12 weeks of FMLA leave per year based on a single eligibility determination (Davis v Michigan Bell Tel Co, September 29, 2008).

7thCir: Hospital could proceed on suit to recover FICA taxes for residents

A university hospital system could proceed with its lawsuit against the federal government in an effort to recover two years of FICA taxes that the hospital paid on behalf of its medical residents. The hospital contended the medical residents qualified for the "student exception" from FICA tax under the Internal Revenue Code. The Seventh Circuit joined the Eleventh Circuit in holding that the student exception is not per se inapplicable to medical residents as a matter of law, rejecting the federal government's assertion to the contrary. Rather, a case-by-case analysis is necessary to determine whether medical residents are students within the meaning of the Internal Revenue Code—and thus whether the exemption applies (Univ of Chicago Hospitals v U.S., September 23, 2008).

11thCir: Fact issue remains on FMLA claimant's in loco parentis status

A district court erred in granting summary judgment to a school district on the FMLA interference and retaliation claims of an employee who was out on approved leave to care for his grandchild when his employment contract was not renewed. The employee had three weeks left to improve his work performance and the school district had warned that it would not renew his contract if he took FMLA leave as scheduled. The lower court held the employee's claims were without merit, ruling that no reasonable jury could find the employee was entitled to in loco parentis status to care for his grandchild. However, the circuit court held there was a genuine issue of material fact regarding in loco parentis status. It noted the employee was providing a home and health insurance for his single daughter's child and took FMLA leave because his daughter was to be deployed pursuant to military obligations. Moreover, because the record evidence did not establish the employee would have been discharged despite FMLA leave, in particular given the close temporal proximity between his leave and his discharge, genuine issues of material fact remained to defeat summary judgment on the interference and retaliation claims (Martin v Brevard County Public Schools, September 30, 2008).

DDC: Partnership agreement's retirement clause was no evidence of age bias

An employee's reliance on a retirement provision in his employer's partnership agreement to demonstrate discriminatory intent in his own nonpromotion to partner was misplaced, ruled a federal district court in the District of Columbia. The employee, who claimed he was not promoted to partner due to age bias, argued that his employer had a written policy barring candidates over 60 from consideration for partnership and that such a policy was not only discriminatory on its face but was direct evidence of bias. However, the employee failed to point to a "'written policy' barring candidates over 60 from consideration for promotion to partner" but instead relied on the retirement provision in the partnership agreement, which applied only to partners and firm principals, not to employees, as proof his employer had such a policy. The partnership agreement was not a policy barring older candidates from partnership, but instead was an agreement among the partners to retire in the year in which they turned 60. Because the partnership agreement did not address or bind the employee in any way, he could not use it as the "sole basis" of his disparate treatment theory. Moreover, the employee failed to provide any other evidence of an age-related policy in connection with the partner admissions process. Accordingly, the employee failed to show his nonpromotion was due to age bias (Murphy v PricewaterhouseCoopers, LLP, September 24, 2008).

NDIll: Employer's refusal to authorize unescorted site access was arbitrable

An employer's decision to deny unescorted site access to a station laborer at a now-decommissioned generating station was arbitrable under a collective bargaining agreement, an Illinois district court ruled. The employee was laid off from his mechanic's position but, pursuant to an arbitration award that determined his layoff was improper, he was offered the opportunity to be recalled into a lower-paying position at another generating station. Although the employee had unescorted access authorization in all of his former positions with Exelon, he was unable to begin work at the new position because he was denied access by the nuclear security department when grandfathering provisions that had exempted him from pre-access screening became inapplicable. Noting that Nuclear Regulatory Commission regulations do not prohibit the arbitration of disputes involving the denial of site access, the court concluded that such a dispute falls within the scope of the arbitration agreement. Accordingly, the case was stayed pending arbitration and the parties were directed to arbitrate pursuant to the terms of their bargaining agreement (Exelon Generation Co v Local 15, IBEW, September 29, 2008).

DMich: Issues remain as to whether leave was negative performance factor

Triable issues existed as to whether a drug company interfered with a sales representative's rights under the FMLA, which prohibits employers from using the taking of "FMLA leave as a negative factor in employment actions," when it evaluated her sales performance in part based on the 12 weeks she spent on maternity leave and refused to adjust her sales quota to account for that leave. A few months after she returned from leave, the company placed the rep on a 90-day performance improvement plan (PIP) because she did not meet her sales goals. The rep complained the goal was unfair because she was out of her territory for three months on FMLA leave for the birth of her child. (The company claimed that, pursuant to its policy, it did not adjust sales goals for any employee for any reason, including FMLA leave.) Ultimately, she was discharged. "Although a year elapsed between [the representative's] FMLA leave and her ultimate termination, the performance issue which resulted in her termination was based in part on the score calculated during her absence," noted a federal district court in Michigan. As to pretext, the rep presented evidence that she had high performance ratings prior to her leave and that several male sales reps with worse performance were not placed on PIPs or discharged; rather, some male reps were even given extensions to meet their PIP goals (Wojan v Alcon Laboratories, Inc, Sept 15, 2008).

EDWi: Doctor's explanation helped explain employee's activity caught on tape

While an employer may have honestly believed that an employee misrepresented the circumstances of her FMLA leave, there were too many disputed facts to award summary judgment on her FMLA claim, a federal district court in Wisconsin ruled, in yet another case of an employer's surveillance of an employee on FMLA leave. The employer had surveillance tapes of the employee performing actions which her medical form said she could not do while on leave. Although the employee admitted she was the person on the tapes, she explained that she was able to do these activities when her symptoms were not present. Moreover, the employee's doctor had informed the employer that it was unpredictable as to when she could "stand, carry, sit, [or] speak," but that at home she could perform these activities if she felt up to it. The court reasoned that while a jury could certainly conclude the employer had an "honest belief" that the employee misrepresented her illness when it discharged her, the evidence brought forth by the employee, notably the doctor's explanation, could also lead a jury to conclude that the employer simply saw an opportunity to get rid of an employee with a chronic illness (Nelson v Oshkosh Truck Corp, September 23, 2008).

STATE LAW CASES

CA: San Francisco's "pay or play" health benefits law not preempted by ERISA

San Francisco's Health Care Security Ordinance, which requires employers either to contribute a specified amount toward their employees' health care costs on a regular basis or pay into a city health care fund for residents, is not preempted by ERISA, the Ninth Circuit held, handing down a long-awaited opinion on state "pay or play" laws. The ordinance applies to for-profit employers with at least 20 employees and non-profit employers with at least 50 employees (Golden Gate Restaurant Assn v City and County of San Francisco, 9thCir, September 30, 2008).

CO: Employee can't assert wrongful discharge claim for improper wage payment

A former sales manager could not proceed with her claim that she was terminated in retaliation for protesting her employer's failure to pay her, and the members of her team, commissions that they contended were due over an extended period of time. The sales manager's assertion that she was fired because she exercised her job-related right to be properly compensated implicated public policy, a federal district court noted. However, the court found that the majority of her other complaints that formed a part of the claim—relating to being placed on a Performance Improvement Plan (PIP), quotas assigned to her that she felt were incorrect, and her lack of involvement in the compensation appeals process—did not clearly express a public policy relating to her rights as a worker or an important job-related right or privilege. Moreover, the sales manager failed to establish that she was fired because she exercised her right to complain about pay, noting the evidence supported her employer's contention that she was fired as a result of an insubordinate e-mail she sent to her supervisor in response to being placed on the PIP (Stoney v Cingular Wireless LLC, DCol, September 22, 2008).

OK: Separation agreement barred claims against company and its officers

A former president of an acquired company's business unit relinquished her right to file suit against the acquiring company and two of its former executives when she entered into a separation agreement releasing all claims against the company and its "officers or directors," a federal district court in Oklahoma held. The plaintiff asserted fraud and negligent misrepresentation claims, alleging the defendants misrepresented the company's true financial condition, causing her to refrain from exercising her stock options and to incur significant losses when the stock value plummeted. The plaintiff contended the separation agreement did not release the individual named defendants because, under Oklahoma law, released parties must be "specifically named," and the codefendants were not expressly mentioned in the agreement. However, because the defendants were officers, and the agreement covered "officers" and "directors" as release parties, the separation agreement encompassed all defendants. The court also rejected the plaintiff's claim that the parties did not intend to release the individual defendants as evidenced by the $500,000 severance agreement, which she argued was inadequate consideration for waiving a $7 million fraud claim and thus reflected an intent to release only employment-related claims. The plaintiff here had confused the value of her right to sue with the value of her claim if successfully prosecuted, the court noted. Finally, the court found meritless the plaintiff's assertion that the company acted inequitably in executing the agreement, concluding that she failed to show she was the victim of economic duress. The separation agreement entailed a broad release of all claims against the company and its officers, and the agreement was enforceable. Thus, summary judgment was granted to the employer (McKissick v Yuen and Leung, NDOkla, September 18, 2008).

AGENCY DEVELOPMENTS

DOL: Final rule on union transparency establishes form for union trust reporting

The Office of Labor-Management Standards has issued a final rule that aims to enhance labor union financial reporting and provide union members with more complete information about finances held in union trusts. "With meaningful disclosure, the Department hopes to deter potential misuse of union trusts that have occurred in the past and allow union members to know exactly where their hard-earned dollars are being spent," said Don Todd, deputy assistant secretary for labor-management programs.

NLRB: Indian casino ordered to bargain with union

The NLRB last week ordered Foxwoods Resort and Casino to bargain with the dealers and assistant floor supervisors represented by the United Auto Workers and to recognize the union as bargaining representative for 2,600 casino employees. The Foxwoods dealers voted for the union in a November 2007 election, but the employer challenged the election, contending the NLRB lacked jurisdiction over the casino, which is located on the Mashantucket Pequot reservation and is run by the sovereign nation. Having previously rejected this contention, the Board declined to relitigate the jurisdictional issue. Also last week, the employer filed an appeal of the Board's order with the Second Circuit (Foxwoods Resort Casino, 353 NLRB No 32, September 30, 2008).

OFCCP: New directive requires 1/25 full desk audits, 1/50 full compliance audits

Under a new directive, the Office of Federal Contract Compliance Programs will conduct a full desk audit on one of every 25 establishments selected for a compliance audit, regardless of whether systemic discrimination indicators are present. A full compliance review, including an on-site review, will be conducted on one of every 50 establishments selected for review. The directive outlines the process and procedures for conducting non-construction compliance evaluations under the agency's "Active Case Management" approach.

OFCCP: New directive addresses procedures for inspection of Form I-9

The OFCCP has issued a new directive regarding the procedures for inspection of the Form I-9 while conducting the on-site phase of a compliance evaluation. Under the longstanding Memorandum of Understanding between the Immigration and Naturalization Service (now the DHS's US Citizenship and Immigration Services) and the Department of Labor's Employment Standards Administration, the OFCCP is authorized to inspect I-9 Forms for employees of federal contractors or subcontractors whenever an on-site review is performed during a compliance evaluation.

EEOC: Flurry of lawsuits filed as agency's fiscal year draws to a close

In a case that has "national implications," the EEOC filed suit last week against Dillard Store Services, Inc, a nationwide chain of department stores, alleging the company is violating the Americans with Disabilities Act by requiring employees to disclose personal and confidential medical information or face disciplinary action including termination. The agency claims the retailer's El Centro, California, store requires employees to reveal the specific nature of their medical illness in order to deem sick leave an excused absence. The EEOC contends this corporate policy, potentially affecting thousands of workers, is an unlawful disability-related inquiry under the ADA and not justified by business necessity.

The Dillard's suit is one of a spate of EEOC filings in recent weeks, as the agency's fiscal year drew to a close. Among other complaints filed last week:

• An ADA suit against a Pennsylvania hospital that failed to reasonably accommodate and then fired a business manager after she had surgery and underwent chemotherapy for cancer;
  Read » (ip access user) »
• A class action suit, filed after attempts to reach a voluntary settlement failed, against a Baltimore supermarket chain that refused to hire female applicants for meat cutter jobs;
Read » (ip access user) »
• A suit against a retirement center that allegedly discriminated against a pregnant employee by reducing her work hours even though she was medically cleared to work without restrictions;
  Read » (ip access user) »
• An ADA complaint against a temporary employment agency that refused to refer an employee for a food production job because he was deaf;
  Read » (ip access user) »
• A lawsuit against fast-food restaurant Jack in the Box for its failure to stop constant racial harassment by black females against a white employee despite numerous complaints;
  Read » (ip access user) »
• A religious discrimination claim against Northwest Airlines subsidiary Mesaba Airlines, which failed to accommodate and then terminated a customer service agent who refused to work on the Jewish Sabbath, assertedly due to its policy prohibiting shift swaps during the probationary employment period.
  Read » (ip access user) »

LEGISLATION

"Rescue" measure includes curbs on executive pay, mental health parity

The Emergency Economic Stabilization Act of 2008 (H.R. 1424), a "financial rescue" measure intended to stabilize the troubled financial markets, was signed into law by President Bush last week. In addition to major tax provisions that directly address current financial bailout measures, lawmakers enacted provisions to curb excessive executive compensation within the companies that will be directly assisted by the measure. It also limited the deductibility of compensation to $500,000 for CEOs, CFOs, and other executives of those companies. Lawmakers also voted to rein in so-called golden parachutes paid to departing executives. In certain situations, golden parachutes are prohibited altogether. The Treasury Department "clawback" power would allow the government to recover a bonus or other incentive paid to a senior executive of a company participating in the rescue package that had been paid based on statements of earnings, gains or other criteria that later are shown to be materially inaccurate. The legislation also includes a bipartisan measure designed to provide Americans with greater access to mental health and addiction treatments. The mental health parity provision would require employer-sponsored group health plans to offer the same level of benefits for mental health coverage as for other physical illnesses and diseases.

Bush signs continuing resolution extending E-Verify until March 6, 2009

President Bush signed a continuing resolution last week that will fund at current levels the budgets of various federal agencies until March 6, 2009. As part of the continuing resolution, he extended the federal government's E-Verify program to that date. E-Verify is the federal government's voluntary web-based program operated jointly by US Citizenship and Immigration Services in partnership with the Social Security Administration that allows participating employers to electronically verify the employment eligibility of their newly hired employees. The E-Verify program was scheduled to sunset at the end of November 2008 if it was not extended or reauthorized.

California amends computer software professional overtime exemption

Legislation signed by California Gov. Arnold Schwarzenegger on September 30 amended the overtime exemption requirements for employees in the computer software field to add an annual salary limit. State law exempts professional employees in the computer software field from overtime compensation requirements if the employee is primarily engaged in work that is intellectual or creative, the employee's hourly rate of pay is not less than $36, and the employee meets other requirements under the law. The law was amended to provide that the overtime exemption for employees in the computer software field applies if the employee is paid at an hourly rate of not less than $36 and, if the employee is paid on a salary basis, the employee earns an annual salary of not less than $75,000 for full-time employment, which is paid at least once a month and in a monthly amount of not less than $6,250. The provision took effect at signing.

ELECTION '08

Candidates' health care reform proposals take different paths

The health care platforms put forth by John McCain (R) and Barack Obama (D) take sharply different approaches to employer-provided health care plans. Here, CCH's resident benefits expert Ross Spencer takes a look at the major features of the candidates' proposals and how they would affect employer-provided benefits. Also noteworthy: a recent survey of corporate benefits professionals showed they were more concerned about the likely impact of the McCain proposal than of the Obama plan.

CONSIDER THIS

Managing 401(k) concerns in the face of Wall Street turbulence

How can employers help employees maintain confidence in their company and the stability of their retirement plans in the face of ongoing financial industry woes? Lynn Unsworth, regional manager at North Carolina's largest employers' association, offers some tips.

Five legal issues employers must consider amid economic crisis

On the heels of a massive financial industry bailout and a Labor Department report of a five-year high in job losses for September, Daniel Schwartz of the Connecticut Employment Law Blog urged employers last week to pay careful attention to five key legal issues.

PRACTICE TRENDS

Corporate law departments cut back on staffing, spending

"After years of stability surrounding legal staffing and spending, law departments are cutting back," according to the results of Hildebrandt International's 2008 Law Department Survey. The most significant change was seen in inside spending, the survey found. Yet labor and employment law continues to be a high-demand practice area, with 33 percent of inside counsel and law firm respondents forecasting an increase in demand for services.

IN OTHER NEWS

Business, labor unite to defeat Colorado ballot initiatives

Colorado labor and business leaders forged an unlikely alliance last week, the Denver Post reports, reaching a deal over contentious ballot initiatives that were slated for inclusion on the November ballot. The unions are dropping four ballot measures that were strongly opposed by employers in exchange for the business community's pledge to fight a "right to work" amendment and other anti-union measures.

State workers face bleak budget picture

"The economic downturn has hit states hard, and among those feeling the effects are state employees, whose salaries are being frozen, who are retiring before they wanted to, who are being asked to take furloughs, or unpaid days off, and who, in an estimated 7,000 cases, have been laid off," reports Stateline.org.

LAX hotels dealt another blow in bid to challenge wage ordinance

A federal judge last week tossed out a suit filed by Los Angeles Airport Hilton seeking to enjoin a living wage ordinance that took effect on July 5 imposing higher wage standards for workers employed by the 12 hotels in the airport corridor. The law requires hotels near the airport to pay their workers at least $10 an hour with medical benefits or $11.25 an hour without. According to The Los Angeles Business Journal, while most corridor hotels dropped their opposition to the ordinance after unsuccessful bids in state court to strike it down, the Hilton took the matter, to no avail, to federal court.

Arbitrator awards contractor $10 mil over carpenters' union "vendetta"

A Chicago-area construction contractor has been awarded nearly $10 million in damages against the Chicago Regional Council of Carpenters after the union carried out what the arbitrator described as a "vendetta" against the contractor, engaging in a course of conduct designed to put the company out of business.

Teamsters, Anheuser-Busch strike early contract deal

Negotiators for Anheuser-Busch and the Brewery and Soft Drink Workers Conference (Teamsters National Bargaining Committee) reached agreement late last week on a tentative five-year bargaining agreement, well ahead of the February 29, 2009 expiration date of the existing contract. The new agreement protects health and welfare benefits and provides for substantial pension and wage increases, according to the union. If ratified on the first vote, covered employees will receive a $1,000 ratification bonus. Ratification also would mean continuing job security for Anheuser-Busch employees, the union said, as outlined in the company's good faith contractual commitment to keep all 12 breweries open during the life of the new contract.

SHARE YOUR THOUGHTS

WorkWeek welcomes your feedback. Share your thoughts with our editor: Lisa.Milam-Perez@wolterskluwer.com.

Corporate Counsel Suite™

Fast answers, trusted analysis and time-saving resources.

This new online platform is designed exclusively for corporate counsel to provide fast answers and time-saving resources.

State Employment Law Compare

Quickly & easily compare state employment laws side-by-side

This new innovative tool uses "Smart Chart" functionality to instantly compare multiple state laws, all at the same time on the same chart.

Editor

Lisa Milam-Perez, JD

About CCH WorkWeek

This weekly newsletter provides corporate counsel and law firm practitioners with need-to-know employment and labor law information in a timely, yet manageable manner. Benefit from news and information in a broader context, with deeper analysis of recent developments and corresponding trends. Delivered to you every Monday, CCH WorkWeek offers timely coverage of breaking legislative developments, regulatory activity, state law changes, key case law and expert commentary by CCH editors.