Thursday, December 31, 2009

Reminder: COBRA Extension in 2010 Defense Budget

Today's Federal Register included the following notice relating to the extension of premium reductions for COBRA benefits when an employee is involuntarily terminated. It is worth passing on the information as a reminder:
  • On December 19, 2009, President Obama signed the Department of Defense Appropriations Act of 2010 (Pub. L. 111–118), which extends the availability of the health care continuation coverage premium reduction provided for COBRA and other health care continuation coverage as required by the American Recovery and Reinvestment Act (ARRA) of 2009 (Pub. L. 111–5). Assistance eligible individuals now can be eligible for the subsidy if they incur an involuntary termination of employment triggering a COBRA election opportunity by February 28, 2010. Before the extension, Assistance Eligible Individuals had to experience an involuntary termination of employment by December 31, 2009. The length of the premium assistance period also is extended from 9 months to 15 months.

Additional information on the extension can be found at this DOL website: http://www.dol.gov/ebsa/cobra.html. The link on this page to the IRS website (COBRA Health Insurance Continuation Premium Subsidy) is particularly helpful because the IRS goes into considerable detail for employers wanting to claim the tax credit that funds the COBRA subsidy.

The old model notice (not yet updated to account for the new dates in the COBRA extension) along with other notices can be found here: http://www.dol.gov/ebsa/COBRAmodelnotice.html

Thursday, December 10, 2009

New Regulations to Look for From the EEOC

On Monday, December 7, 2009, a number of federal agencies issued their "regulatory plans." A law called the Regulatory Flexibility Act requires agencies publish semiannual regulatory agendas in the Federal Register describing regulatory actions they are developing that may have a significant economic impact on a substantial number of small entities. These take two forms, a Regulatory Plan and a Regulatory Agenda, with the Regulatory Plan being a list of the most significant regulations the agency expects to issue in some form at some point in the future. The Regulatory Agenda/Plan are not used for announcing new rules (or pending rules). Rather, it is a complete list of what to expect from the agency.

The Agenda and Plan for each federal agency can be found at reginfo.gov. The site then links to the "Regulation Identifier Number" or "RIN" for the regulatory action.

The EEOC doesn't issue a great number of regulations. Half of the regulations under consideration are intended to modify existing regulations to conform to or clarify the effect of Supreme Court decisions. The other half implement new Acts of Congress.

One proposed rule the EEOC expects to issue will address "Reasonable Factors Other Than Age Under the Age Discrimination in Employment Act." The EEOC describes the rule it is considering as:

On March 31, 2008, the EEOC published a Notice of Proposed Rulemaking (NPRM) concerning disparate impact under the Age Discrimination in Employment Act. 73 FR 16807 (March 31, 2008). In addition to requesting public comment on the proposed rule, the Commission asked whether regulations should provide more information on the meaning of "reasonable factors other than age" (RFOA) and, if so, what the regulations should say. After consideration of the public comments, and in light of the Supreme Court decisions in Smith v. City of Jackson, 544 U.S. 228 (2005), and Meacham v. Knolls Atomic Power Lab., 554 U.S. ___, 128 S. Ct. 2395 (2008), the Commission believes it is appropriate to issue a new NPRM to address the scope of the RFOA defense. Accordingly, before finalizing its regulations concerning disparate impact under the ADEA, the Commission intends to publish a new NPRM proposing to amend its regulations concerning RFOA.

On a related matter, the EEOC also expects to issue a final rule addressing the "Disparate Impact Burden of Proof Under the Age Discrimination in Employment Act." The EEOC explained:

the EEOC is revising this regulation [29 CFR 1625.7(d)] to conform to both Smith and Meacham. In the March 2008 NPRM, the Commission also asked whether its ADEA regulation should provide more information on the meaning of RFOA and, if so, what the regulations should say. After consideration of the public comments, and in light of the Supreme Court decisions in Smith and Meacham, the Commission believes it is appropriate to issue a separate NPRM to address the scope of the RFOA defense. This new NPRM will be titled "Reasonable Factors Other Than Age Under the Age Discrimination in Employment Act." A Final Rule to be issued in October 2010, will cover the issues addressed in both NPRMs.

The EEOC expects to issue the RFOA and Disparate Impact rules in October. It will first, however, issue a proposed rule on the RFOA.

Turning to the ADA Amendments, I posted in September that the EEOC had issued a proposed rule on the new definition of "disability" added by the 2008 Amendments. The EEOC describes the regulatory action as:

The Americans With Disabilities Act Amendments Act of 2008 ("the Amendments Act") was signed into law on September 25, 2008, with a statutory effective date of January 1, 2009. EEOC proposes to revise its Americans With Disabilities Act (ADA) regulations and accompanying interpretative guidance (29 CFR part 1630 and accompanying appendix) in order to implement the ADA Amendments Act of 2008. Pursuant to the 2008 amendments, the definition of disability under the ADA shall be construed in favor of broad coverage to the maximum extent permitted by the terms of the ADA, and the determination of whether an individual has a disability should not demand extensive analysis. The Amendments Act rejects the holdings in several Supreme Court decisions and portions of EEOC's ADA regulations. The effect of these changes is to make it easier for an individual seeking protection under the ADA to establish that he or she has a disability within the meaning of the ADA.

The EEOC expects to issue the final rule in July.

Finally, the other significant regulation to look for will concern the Genetic Information Nondiscrimination Act ("GINA"). The EEOC issued a proposed rule in March but unfortunately failed to issue a final rule before GINA took effect on November 21, 2009. According to the agenda, the final rule should be issued this month.

I will try to cover the DOL's Regulatory Agenda/Plan in a later post.

Wednesday, December 9, 2009

Why Evaluations Must be Consistent

When I give talks and write about conducting reductions in force, I emphasize that current evaluations of an employee's performance (assuming performance is a factor in the layoff decision) must be consistent with the employee's past evaluations. No doubt, even good employees are laid off in a RIF but when the reason for the RIF evaluation is inconsistent with the prior evaluations, the employee has a much easier time in showing the RIF selection is pretextual.

An age discrimination decision involving the former Boeing commercial aircraft assembly plant in Kansas provides an example of the problem. Boeing sold the commercial manufacturing plant to a company that became known as Spirit Aerosystems. Spirit didn't have its own employees and didn't want to hire wholesale the existing crop of Boeing employees so it relied upon performance evaluations by Boeing managers. One of the employees ("Woods") who wasn't hired by Spirit sued Boeing and Spirit.

In his last annual performance evaluation before the sale, Woods received "met all expectations" ratings in all categories. The supervisor noted there had been few errors in Wood's work areas and that he had "performed well." In comparison to the others within Woods' group, his rating was the same as two workers, but not as good as two other workers.

Before Spirit took over, it asked the Boeing managers to review the employees and make recommendations regarding who should be hired. Woods was not hired but three employees in his job classification were (this is why it is significant that Woods rating was the same as two others workers, one of whom was hired by Spirit). This time, Woods' performance was described as "limited skills/low quality/ low productivity/marginal teaming abilities." Explaining this, the manager said that Woods didn't know how to use the software as well as the others and that he rated Woods quality as low because of Woods' failure to detect several errors in products he had checked. Of course, Woods was the oldest of the three employees (Woods included) who had scored "met all expectations" on the annual evaluation and Spirit hired the youngest of these three.

This was a close case. Whether or the decision is correct, the reason the court of appeals held a trial was necessary was because of the inconsistencies between the ratings on the annual evaluation and the evaluation prepared for Spirit.

And, to echo what I said in a prior post, employers need to realize, whatever is said by the ill-informed news media, that Gross v. FBL Financial doesn't make it easier to discriminate against older workers.

Tuesday, December 8, 2009

Sixth Circuit Rejects ADA Suit by Employee who Refused a Valid Request for a Medical Examination

The Goodyear plant in West Tennessee had an employee with progressive multiple sclerosis. He worked for 10 years without issue but then his symptoms worsened, in part, by his medications. The employee insisted he could perform his job safely despite his condition. Management learned, however, that the employee was holding onto machinery for support and that his co-workers were helping him perform tasks that required him to climb stairs or ladders. A safety issue also arose regarding forklifts but this was not clearly explained by the decision.

Union representatives met with the employee to tell him Goodyear was going to require him to take a functional capacity examination ("FCE") to determine whether he could safely continue in his job with or without accommodation. The union also advised him that if he "failed" the FCE, Goodyear would likely terminate him but that he had the option to take a medical retirement and receive temporary disability benefits. He took the Union's advice, retired, and sued the company.

Because the employee retired in order to avoid the FCE he had to prove that Goodyear's FCE demand itself constituted an adverse employment action. Citing one of its decisions from 10 years ago, the court held that a "valid FCE demand cannot constitute an adverse action" in a disability discrimination claim (the court left it open whether it could be adverse in a retaliation claim but it would be a stretch there too). The employee argued the examination was not valid, i.e., that the FCE was not job-related nor consistent with business necessity, but (and this is the interesting part of the decision), the Sixth Circuit held that because the employee retired without undergoing the FCE, he could not establish that the examination would have been invalid. An employee, it seems, cannot assume the worst about an employer's demand to submit to a medical examination.

The Sixth Circuit's decision reinforces the employer's right to require an employee to provide accurate medical information. These demands are not to be taken lightly, however. The court stressed that Goodyear required the FCE for valid and specific reasons, job safety concerns, that were "position-specific" and clearly articulated. The EEOC has published Enforcement Guidance which helps to describe when Medical Examinations will be job-related and consistent with business necessity.

Suppose, for the sake of argument, the employee had refused the valid FCE demand? What remedy would the employer have had? Refusal to obey a clear (and legitimate) job requirement is insubordination. Smart employers, however, will not summarily fire an employee upon the employee's initial refusal. Instead, they should write the employee a memo explaining why the employer believes the medical examination is necessary (citing the specific facts) and leaves no room for doubt about what is being required. This memo (or a follow up memo) should unambiguously state that the refusal to undergo the FCE will be regarded as insubordination and will be dealt with pursuant to the employer's disciplinary policies. The discipline imposed for a continued refusal should, of course, be consistent with past disciplinary decisions.

Also remember that the ADA does not permit a medical examination whenever an employee's performance lags. Generally, the EEOC says, "[a]n employer must have objective evidence suggesting that a medical reason is a likely cause of the problem to justify seeking medical information or ordering a medical examination." In the Goodyear case, the medical reason was obvious. That is not always the case and some courts have held that an employee's refusal to undergo a medical examination that fails the ADA requirements is protected activity for which the employee cannot be fired. In that situation, the employer's reason for firing would be per se illegitimate. Thus, smart employers make sure there is no doubt that the examination is authorized by the ADA before imposing discipline.

Monday, December 7, 2009

When Investigations Go Wrong



Just as a housekeeping matter, on July 27, 2010, the Home Depot decision I discussed in this post was vacated by the court of appeals and the lawsuit was dismissed.  (They even took down the reported decision so the link below doesn't work.)  This happens, most likely, when the parties reach a settlement, as one legal journal has reported.  It means that as legal precedent, the decision is no longer binding. Of course, the cost of taking the case all the way to court of appeals before settling it was significant so I hope employers will learn from Home Depot's experience.

I am returning to one of my frequent topics, how an employer can avoid liability by conducting an independent investigation.

I've emphasized that employers need to make sure to conduct a fair investigation. This means, as one post emphasized, that employers need to listen to the employee and form an opinion only after hearing the employee's version of events. It also means, as a minimal standard, looking into how similarly situated employees have acted without being disciplined.

An appeals court decision involving Home Depot managers from Florida and Alabama provides additional fodder for employer investigatory mistakes. Two Home Depot store managers were fired after complaining about sexual harassment by a regional HR Manager. The store managers lost the harassment claim but persuaded the appeals court to reverse the retaliation claim.

Home Depot deserves some criticism for the manner in which it terminated the store managers. They didn't produce a written policy (about personal use of a company cell phone) and did not have very strong evidence that the store managers gave out discounts to vendors beyond what other store managers had done. Worse still, there was some evidence that some of the "illegal" discounts were actually authorized by district managers; the discount policy was not put into evidence as an exhibit.

It is never good when the court's discussion of the investigation starts by saying that it was "riddled with inconsistencies and contradictions." Perhaps no adequate investigation could have rescued Home Depot - but that is an issue for a trial. For employers that want to avoid a jury trial in a termination case, however, the decision points to several problems to avoid in conducting an investigation into employee misconduct.

Timing is everything. Home Depot maintained it fired the store managers because it began investigating improper discounts in "late Spring of 2005." The earliest documentation in the investigatory file, however, was dated late September 2005. Also some of the documents that were purportedly relied to make the termination decisions were dated after the store managers were fired. (Even so, one decision-maker testified she reviewed these documents before she decided to fire the store managers.)

Conduct an even-handed investigation. Home Depot maintained that the investigation into improper discounts was district wide. Yet, the investigator's notes about the two store managers who were fired was "far more detailed" than for any other store manager. The investigator maintained he was "never particularly focused" on the two fired store managers. No doubt, it is natural to see an increase in detail when the violation might lead to firing an employee. The important point here is that in any investigation, the same type of information should be retrieved for everyone, not just the ones who are ultimately fired.

Firewall the accused. The whole point of an investigation is to provide the employer with a non-discriminatory motive. That point is lost where, as here, there was evidence that the person accused of harassment is not obviously excluded from the investigation (in any investigatory capacity). Home Depot maintained otherwise (it appears the decision-makers were never told about the allegation of harassment) but when the termination notice is signed by the accused harasser (among others), and the accused harasser delivers the bad news, the employer is not making it easy for the court to see that the investigation is fair and above board. (It didn't help that the accused harasser bragged, allegedly, about getting the store managers fired.)

Follow company policy. The court of appeals roundly criticized Home Depot because "no specific policy violations" were listed on the termination notices even though the forms said to specify the policy that had been violated. The problem was particularly acute here because the store managers maintained that there was no policy. Strictly speaking, this last point wasn't a failing of the investigation itself but the court found this failure called into question the legitimacy of the investigation. It is a good practice point. Any investigation should, at a minimum, identify the exact policy that governs the situation.