New Year’s Resolutions for Employers

If you are the sort of person that makes New Year's resolutions, perhaps you might want some hints as to some of the ways you, as a Tennessee employer, can help make 2009 less risky, from an employment litigation perspective.

Everyone's New Year's wish would be to avoid being sued but in today's climate, that is unrealistic. It takes very little money ($350.00, currently) to file a federal court lawsuit - much less in most Tennessee courts - and there are a good number of attorneys who will front that cost for an employee. In some instances, the only thing between you and a lawsuit is the retainer many attorneys charge before filing a suit. Pretty much any adverse employment action can be the basis for some kind of discrimination or retaliation claim even if it is not ultimately meritorious. It isn't as if there is some magical screening device to make sure only potentially valid suits get filed.

Now that I have your attention, what I tell folks is that while you can't always prevent a lawsuit, there are things that can be done to help increase the likelihood of getting the lawsuit dismissed early in the litigation process. Best of all, most of these things won't cost you anything (and if they do it is money well spent). So, here are a few resolution suggestions with links to several "best practices" my partners and I put together to give employers some things to think about. I am not going into important details here because that is supplied on the linked pages.

Have an employee handbook that accurately reflects your employment practices. Employees should acknowledge receipt of the handbook in writing and this page should include a statement where the employee acknowledges employment is "at will" and that the handbook is not a contract of employment for a definite term.

Have a policy (in your handbook) prohibiting harassment of any kind. Train all your employees about your harassment policies.

If you receive a complaint about sexual harassment or other illegal harassment, investigate it immediately.

If you get sued or if you receive a charge from the EEOC or THRC, place a "litigation hold" on your relevant documentation and electronic information.

Have sound hiring practices which rely upon accurate job descriptions, train you hiring managers, use structured interviews and document the reason for every decision (including for employees who are not hired).

Establish and follow a written compensation policy that addresses all the factors that go into a pay increase (or decrease) decision, which compares (and only compares) employees in similar or the same jobs, and includes a contractually imposed limitations period.

Have an Employee Technology Use policy that addresses all devices, tells employees you have the right to monitor use, forbid illegal activity, and ensure employees observe confidentiality requirements of customers.

Properly manage employee absenteeism and tardiness. Have a sound policy, keep careful notes, know which laws you must observe (i.e., based upon employee numbers) and retain all correspondence from employees and physicians relating to absences.

Take simple steps to avoid entanglement with Employee Benefit (ERISA) problems.

As I said, following these resolutions won't necessarily keep you out of court or avoid the EEOC altogether but if followed, they will help ease the financial pain such an encounter normally causes.

And finally, have a Happy New Year.

ERISA, Bargaining Agreements, Health Plans and Oral Modifications

One cost of doing business for most employers is health care for employees and retirees. The Sixth Circuit is the retiree health care forum of choice because of rulings from that court which impose a very strong but rebuttable "inference," UAW v. Yard-Man, Inc., 716 F.2d 1476, 1482 (6th Cir. 1983), that retiree medical benefits are vested if established by a bargaining agreement.

To vest makes a benefit forever unalterable, or at least, unforfeitable, a difference that comes into play because ERISA does not require vesting of non-retirement benefits. So employers have a choice whether or not to impose on itself the cost of providing lifetime retriee health benefits.

A recent Seventh Circuit decision was interesting not so much because it addressed the vesting issue, it didn't, but because it dealt with a retiree health care plan the employer could alter, but didn't do so validly.

The facts are not terribly important. You only need to know that the employer used unused sick leave to pay, partially, for retiree medical benefits by agreement with the union. The employer, with the knowledge, apparently, of the union, didn't observe the allocation in the plan so it overcharged the retirees, in effect, by drawing too much from the sick leave fund. The overcharged retiree sued, claiming the employer didn't comply with the terms of the CBA.

The employer argued the union had orally approved of the arrangement and that made it legal even if the CBA said otherwise. In the ordinary employer/union bargaining context, this argument might have had strength, for subsequent oral modifications to a CBA are not outright prohibited, just foolish, but in any event, there are strings attached. (The string in this case was to give notice to the affected employees.)

ERISA, however, requires benefits plans be "maintained pursuant to a written instrument,” and this, the court said, included modifications. That hosed the employer's argument that the oral agreement with the union defeated the retiree's claim.

Now comes the important point. Courts have increasingly recognized an exception to the "written instrument" requirement in the case where an employer representative promises something to an employee that the plan does not thus causing the empoyee to rely on the misbegotten promise. Lawyers call this "promisory estoppel", an overused and largely misunderstood legal term that prevents someone from promising something the person knows (or is charged with knowing) won't happen or can't be delivered.

How, then, the court asked, is its holding consistent with promissory estoppel claims? It isn't. Rather, the court announced, promissory estoppel claims (at least the ones that would vary the terms of a benefit plan) must themselves be based upon a written promise. It is true, as the court said, most promissory estoppel claims (or misrepresentation claims) in the ERISA context are based upon something said in writing. After all, for years, we employment lawyers have drilled into employers' heads that they must document, document and document. (Writing, of course, is interpreted liberally in this electronic age - where a sufficiently clear video can be irrefutable evidence.)

But there are decisions, at least one in the Sixth Circuit, where the writing requirement was, at least by outward appearances, no impediment to the imposition of a vested (and costly) retiree health care plan. One example is James v. Pirelli Armstrong Tire Corp., 305 F.3d 439, 449 (6th Cir. 2002), where the court's decision did not mention whether or not the promise that altered the written plan was in writing but it seems not to have been. The Sixth Circuit decisions do not seem to acknowledge the writing requirement / oral modification conflict even exists. So the employer was bound by the HR representative's inaccurate promise of lifetime retirement benefits to employees who were contemplating and later took eary retirement. The employer probably got what it deserved here by (1) not training the HR representative or (2) not answering all questions in writing.

The Seventh Circuit decision hints at some protection even though, ironically, it was the employer who wanted to rely on the oral modification. That protection requires some common sense. Statements about benefits, including possible future benefit, are not to be made by the untrained or unknowing. They should always be made in writing after careful review by ERISA counsel or benefits personnel to ensure the writing is consistent with the terms of the plan.