Posts belonging to Category legal issues

Giving HR the Boot

A story in today’s Wall Street Journal, titled “Is It a Dream or a Drag? Companies Without HR,” focuses on several mid-sized companies that have decided to get rid of their HR departments or never even had one in the first place.

These companies include LRN, a training and consulting firm (which has also served as a source for several stories we’ve written here at the magazine). David Greenberg, LRN’s executive vice president, told the Journal that the 250-employee company did away with its HR department several years ago because “we wanted to force people issues into the middle of the business.”

The story notes that companies are jettisoning their HR function because they’re concerned it bogs down innovation and nimbleness with too many rules and too much bureaucracy — and that software can handle most of the transactional stuff. I should add that the story doesn’t cite much in the way of statistics or research to support its thesis — in fact, the only figures it cites are from a SHRM study showing that U.S. employers had a median of 1.54 HR professionals for every 100 employees in 2012, which is actually up from a low of 1.24 in 2009. Nevertheless, the anecdotes within the story are interesting and offer some food for thought.

Steve Miranda, managing director of Cornell’s Center for Advanced Human Resource Studies, notes the benefits of having HR staffers available to protect companies from running afoul of federal laws such as the FMLA. And the story cites restaurant chain Outback Steakhouse, which created its HR department in the wake of a $19 million settlement with the EEOC over a sex discrimination lawsuit.

Yet companies such as Klick Health (which has also served as a source for at least one HRE story) have forgone creating an HR department because they believe training managers and employees to handle conflicts on their own is a better approach, according to the story. CEO Leerom Segal said that instead of an HR function, Klick Health has two employees with customer-service backgrounds serve as “concierges” — it’s their jobs to ensure a “frictionless work experience” for employees.  The concierges serve as part of what the company calls its five-person “mojo team.” However, a former employee told the story’s authors that he often worried about liability when he had to discipline or terminate a direct report during his time at Klick Health.

As regular readers of HRE well know, HR — at its best — does a whole lot more than just protect its company from liability. Smart HR pros help their companies attract, retain and develop their talent — no small thing in an era where innovation matters more than ever and employee tenure is shorter than ever. This is not something a piece of software can do, no matter how beautifully designed; it’s certainly not something a lawyer can do, nor can an outside expert substitute for an insider who truly knows the organization and its people. If you’re looking for greater proof of the value HR can add, just review some recent HR Execs of the Year or our HR’s Rising Stars feature.

Latest Wrinkle in Employers’ Severance Policies

More of a case has been made for some much-needed and immediate reviews of employers’ severance policies.

476619387 -- money and gavelAs this story from Bloomberg lays it out, the U.S. Supreme Court just decided in favor of the Obama Administration and its Internal Revenue Service in a dispute over taxes on severance compensation, overturning a lower-court decision that could have forced the IRS to refund more than $1 billion.

In its ruling in the case of Quality Stores Inc., the court has said payments to laid-off workers are subject to Social Security and Medicare taxes under the Federal Insurance Contributions Act. In essence, the defunct company fired 3,100 workers when it closed its stores in 2001 and 2002, paid the taxes on their severance and then asked a bankruptcy judge to order the IRS to refund $1 million.

Obviously, this is a huge victory for the IRS, which has been fighting more than 2,400 refund claims from companies and their ex-employees. It’s also a huge wake-up call in the business community. As Bob Hertzberg — the lawyer representing Quality Stores before the Supreme Court — told Bloomberg: “The decision is a huge blow for employers and employees alike. In addition to the impact on Quality Stores and its former employees, this ruling has far-reaching implications for the thousands of other organizations and workers fighting for refunds.”

This news comes right on the heels of a news analysis by HRE Staff Writer Mark McGraw about a U.S. Equal Employment Opportunity Commission lawsuit against CVS Pharmacy Inc. that experts say could also shake up how companies approach severance agreements.

In that case, the EEOC is charging that CVS “conditioned the receipt of severance benefits for certain employees on an overly broad agreement set forth in five pages of small print,” and interfered with their right to file discrimination charges and/or communicate and cooperate with the EEOC, according to the suit.

As A. John Harper III, a partner in the labor and employment practice group in the Houston office of Haynes and Boone, told McGraw, the provisions in the CVS separation agreement coming under scrutiny are “common in many severance and other employment-related agreements.”

Comments he got from Robert Hale, a Boston-based partner and chair of Goodwin Procter’s labor and employment practice, are worth repeating, too:

If the EEOC wins here, that would make it difficult for employers to reach agreements that prevent former employees who accept severance pay [from making] disparaging statements or [disclosing] personnel information that many employers understandably view as confidential.”

At the very least, as this case makes its way through the courts and as the Quality Stores decision continues reverberating, employers should be closely evaluating their severance agreements. As Hale puts it,

HR should work with counsel to take a hard look at existing severance agreement forms to determine whether any steps should be taken to reduce the risk that a decision in this case would make those existing agreements more vulnerable to legal challenge.”

Layoffs and Litigation

Gavel and JudgeSome employees may breathe a sigh of relief after surviving not one but two reductions in force. Roger Maxwell filed a lawsuit.

Maxwell, a disabled veteran and former manager of customer service with the U.S. Postal Service in Bloomfield Hills, Mich., filed an internal EEO charge in 2004 (for reasons not specified in Roger L. Maxwell v. Postmaster General of the United States).

Sometime after the EEO proceedings concluded, Frances Chiodini—an HR manager representing the Postal Service during the proceedings—adopted “an undisguised attitude of hostility toward [Maxwell] and undertook, over time, consistent adverse actions against Plaintiff in his employment,” according to the suit.

Among the allegations:

• Chiodini took adverse actions against Maxwell because he is male, and wrongfully rejected him from consideration for a promotion, which was subsequently awarded to a less-qualified female applicant.

• Maxwell was not included in a 2009 reduction in force, depriving him of a promotion and pay raise.

• His position was not upgraded from EAS-20 to grade EAS-21, while a “similarly situated” female was upgraded.

• Maxwell was not included in a 2010 downsizing, which again deprived him of a promotion and pay raise.

That’s right. Maxwell claims that emerging with his job after two rounds of layoffs adversely impacted his employment with the Postal Service.

How so?

As a disabled vet, Maxwell maintains he would have had certain rights in the event his position was included in a reduction in force, in the form of either an automatic upgrade to a new role or the permission to vie for a new position at a higher level. Instead, he was involuntarily transferred to a different facility, according to the complaint.

Maxwell subsequently sued, claiming retaliation and gender bias. While the Postal Service argued the transfer didn’t qualify as an adverse employment action, a trial court recently found that the transfer—which occurred in lieu of a promotion—could potentially constitute an adverse action.

The ruling is “fairly fact-specific and at a very early stage of litigation,” but the Maxwell case still holds lessons for employers and HR, says Eric Stevens, a Nashville, Tenn.-based attorney with Littler Mendelson.

“The transfer, in and of itself, appeared to be a neutral event,” says Stevens. “There was no change in compensation, duties, title or working conditions. Typically, such a move would not be considered a materially adverse change.”

However, he notes, the appeals court considered the potential effect of the transfer—disqualifying the plaintiff from an alleged automatic upgrade and pay increase—and found that effect sufficiently material to allow Maxwell to continue with the portion of his lawsuit relating to the transfer.

“There are occasions in which an employee may have been subject to inappropriate, possibly even unlawful treatment in the past,” continues Stevens. “Some employers, when they become aware of such circumstances, feel bound to avoid managing the employee as others would be managed because of that past improper conduct.”

This opinion demonstrates that, in the absence of a “longstanding and demonstrable policy of discrimination, an employer will not necessarily be liable for past, discrete violations,” he says.

“While no such violations should be countenanced by the employer, if one does occur, the employer should deal with it appropriately, and then continue to treat the aggrieved employee the same as any other employee.”

Employers’ ‘Scariest Issues’ in 2014

I don’t know how frightened you are by all these. I do know you’re aware of each and every one of them. But I thought I’d share them anyway.

465250769 -- frightenedWhat intrigued me about this free downloadable list of the 11 (not 10, mind you) Scariest Issues Employers Face in 2014 from XpertHR is how cleanly they’re all packaged. And the list itself seems pretty accurate as well: medical (and, yes, recreational) marijuana in the workplace, same-sex marriage, technology in the workplace, healthcare reform, immigration and Form I-9 compliance, misclassification of independent contractors, minimum wage and overtime violations, curtailing background checks, emerging protected classes and curbing workplace discrimination, employee leaves and reasonable accommodations, and expansion of “protected concerted activity.”

Whoever put this together knows a little something about HR leaders’ sleepless nights, I’m thinking.

I also like the way each topic is broken down into two parts: “The Issue” and “What an Employer Should Do.” Hey, those are certainly two of the most important points we need to cover in our features and news analyses here at HRE.

The same-sex-marriage section was especially helpful, laying out specifically how United States v. Windsor (in which the U.S. Supreme Court declared Section 3 of the Defense of Marriage Act unconstitutional) impacts employers:

Following this landmark decision, both the Internal Revenue Service and Department of Labor adopted a state of celebration rule, meaning that a valid same-sex marriage from another state must be recognized for federal tax purposes in all states. Thus, even if an employee resides in a state that does not recognize same-sex marriage, that employer must comply with IRS regulations regarding the tax treatment of employee benefits. The DOL has pronounced that in the wake of Windsor, same-sex spouses are now eligible for the same benefits and protections as opposite-sex spouses under employer health plans, retirement plans and other benefits covered under the Employee Retirement Income Security Act. Same-sex spouses are also entitled to leave under the Family and Medical Leave Act if living in a state recognizing same-sex marriages.”

Kind of wraps it up nicely. The advice to employers is what you’d expect, and what we’ve written about, but it’s still nice to see it packaged concisely as well:

Accordingly, employers should review their employee handbooks, policies and procedures — particularly pertaining to discrimination, benefits and leaves — and make any necessary revisions regarding the treatment of same-sex spouses. Further, employers should know what types of same-sex relationship their states recognize, the tax benefits provided to an employee’s same-sex spouse or partner, and whether the state follows or departs from federal law under Windsor.”

Also helpful, and in one place, is a chart listing where every state stands on legalized marijuana, same-sex-marriage recognition, minimum wage (with each state’s wage listed) and adoption of Ban-the-Box (criminal background) legislation.

Again, you may not learn anything startlingly new, but armed with brief rundowns and good advice on each of these “scary issues” might help alleviate some trepidation.

I know I plan to hang onto it for some handy frames of reference.



More Restrictions on Criminal-Background Checks

California appears to be the latest state to join the criminal-background-restriction bandwagon. A new law enacted last month amends the California Labor Code to prohibit public and private employers from asking job applicants about criminal records that have been expunged, sealed or dismissed.

gavel and handcuffs -- 162424875“The good news is that [the law] doesn’t break entirely new ground, but instead modifies existing law,” says Brian Inamine, a LeClairRyan labor and employment attorney and shareholder in the firm’s Los Angeles office, in this release about it. “The bad news is that it represents one more hurdle that businesses have to contend with.”

Indeed, as my Nov. 13 news analysis on HREOnline points out, the hurdles are racking up. To date, 43 cities, counties and municipalities, and 10 states have passed “ban the box” legislation for public-only or public and private employers, making questions about criminal convictions on job applications illegal.

What’s more, as that story points out, there’s still a lot of confusion about what’s required of employers under the U.S. Equal Employment Opportunity Commission’s guidelines on criminal-background checks.

Actually, as it says, nothing’s really required. There’s no federal law being dictated in the guidelines, but failing to follow them could lead employers to discrimination charges under Title VII of the 1964 Civil Rights Act, which the guidelines are based on. The EEOC maintains criminal-history checks disproportionately impact minority candidates. For a rundown of some of the events and issues leading up to the EEOC’s guidelines, take a trip here through some of our earlier blog posts.

Another recent news analysis of mine looks at an additional potential punishment, under the Fair Credit Reporting Act, that Disney recently found itself ensnared in. In a class-action lawsuit, Culberson vs. The Walt Disney Company, Robert L. Culberson claims Disney illegally barred him from employment by failing to provide him with the proper adverse-action notice — required by the FCRA when an adverse-employment decision is based on any portion of a background check.

In that case, Culberson’s background check showed a criminal conviction on a battery charge from 1998 — when he was 19 years old — that had been expunged from his record in 2010. He claims he was not given the opportunity to correct the information before the company decided not to hire him, nor did Disney re-evaluate his application after the background-screening company, Sterling Infosystems Inc., eventually removed the conviction from his record and issued a new report.

As the new California law reminds us, and as the sources in all these linked stories and posts underscore, make sure you know what criminal-background laws govern the jurisdiction(s) you’re in and — equally important — what other laws might come in to play should you fail to follow proper procedures.



A Valuable Legal Lesson

courtroomThis recent Michigan court ruling may seem like a bit of a puzzler, but it could also be instructive for employers.

The United States Court of Appeals for the Sixth Circuit is sending the case of Deleon v. Kalamazoo County Road Commission to trial, ruling the plaintiff can proceed with suing the county for an adverse employment action motivated by discrimination—after being granted the very job transfer he had previously sought.

According to the suit:

In 2008, Kalamazoo County employee Robert Deleon applied for an internal transfer to the position of equipment and facilities superintendent. According to the job description, the role entailed working primarily in an office as well as a “garage where there is exposure to loud noises and diesel fumes.”

Initially passed over for the job, Deleon was involuntarily transferred into the position when it became available again in 2009. He subsequently sued the county, claiming the transfer was a retaliatory adverse employment action, in addition to alleging the working conditions in his new job led to him developing bronchitis as well as a cough and sinus headaches due to the aforementioned diesel fumes.

According to Kalamazoo County, Deleon never withdrew his initial request for the transfer, and did not complain at the time he received it.

In its ruling, however, the appeals court found Deleon had provided sufficient evidence that he was exposed to toxic and hazardous diesel fumes on a daily basis, and that his work environment was “objectively intolerable.” The court also noted that Deleon applied for the position under the impression the move would include a $10,000 raise; a raise he never received, advancing the argument that his transfer was involuntary.

The case is “a classic example” of the challenges employers face in defending against discrimination claims, says Joel S. Barras, a Philadelphia-based partner in Reed Smith’s labor and employment practice.

Employers often spend tens of thousands of dollars in these cases, “which typically involve disproving a negative,” he says. “[It’s] no wonder there’s a cottage industry of plaintiffs’ lawyers who indiscriminately file claims against ‘deep-pocket’ employers, which only serve to detract focus from the cases of actual discrimination and retaliation.”

Nevertheless, this particular decision holds a valuable lesson for employers and HR, says Barras.

“The takeaway … is to always go the extra step, even if the outcome seems obvious.

“Common sense alone may not guarantee summary judgment,” he continues, advising employers in similar situations to ask the applicant if he or she still wants the job, clearly describe the working conditions, and make sure the candidate truly understands what the job entails.

There is a direct correlation between the amount of time and effort HR professionals expend on the front [end] of employment decisions and the chances for getting discrimination and retaliation suits dismissed quickly and relatively inexpensively.”

College Football Team Wants to Unionize

football playersCollege athletics are a multi-billion dollar business — with most of that revenue generated by college football players. The players are, of course, unpaid — but that isn’t stopping the football team at Northwestern University from trying to form a union.

As reported on, Ramogi Huma, president of the College Athletes Players Association, filed a petition at the Chicago office of the National Labor Relations Board on behalf of the Northwestern University Wildcats football team. Northwestern U. is located in the Chicago suburb of Evanston, Ill. “This is about finally giving college athletes a seat at the table,” Huma told ESPN. “Athletes deserve an equal voice when it comes to their physical, academic and financial protections.”

Concussions, and the alleged lack of attention devoted to preventing them by the NCAA, represent one of the chief concerns of the Northwestern players and is a big reason why they’re trying to form a union, Huma said:

It’s become clear that relying on NCAA policymakers won’t work, that they are never going to protect college athletes, and you can see that with their actions over the past decade. Look at their position on concussions. They say they have no legal obligation to protect players.”

Wildcats quarterback Kain Colter, who reached out to Huma last spring for help in getting the players representation, told ESPN that “we love Northwestern” and that the players have no issue with their treatment by the university, but that the NCAA has failed to adequately address safety issues such as concussions and that they’re seeking to organize on behalf of all college players: “Right now the NCAA is like a dictatorship. No one represents us in negotiations. The only way things are going to change is if players have a union.”

In a statement, Northwestern said it supports having a dialogue around the issues and the right of the football team to have a voice in that dialogue, but that it does not support the players organizing through a labor union.

The NCAA issued a statement from chief legal officer Donald Remy:

This union-backed attempt to turn student-athletes into employees undermines the purpose of college: an education. Student-athletes are not employees, and their participation in college sports is voluntary. We stand for all student-athletes, not just those the unions want to professionalize.”

Huma and the Wildcats football team are being backed in their efforts by the United Steelworkers union, which will pay CAPA’s legal expenses.

The unionization effort isn’t aimed at getting salaries for the football players, although Huma didn’t specifically rule that out as a long-term goal in the ESPN interview. Instead, the focus is on getting guaranteed coverage for sports-related medical expenses for current and former athletes, and compensation for sponsorships. The group also plans to establish a trust fund to help former players complete their degrees and push for an increase in athletic scholarships.

Jeff Kessler, a Winston & Strawn partner who helped bring free agency to the NFL, told Bloomberg News that the petition will likely be appealed past the NLRB to the courts. Last fall Kessler said he was starting the first college-focused division at a major law firm to represent players, coaches, schools and conferences against the NCAA.

“This proceeding will present the fundamental issue as to whether or not students athletes should be considered employees who can unionize for purposes of the national labor relations act,” Kessler told Bloomberg News.

HR Plaintiffs Build Their Case Against Lowe’s

Worker misclassification is back in the news again, this time with Lowe’s Home Centers the center of attention.

Lowes_Sanford_Opening1-330x500Earlier this month, U.S. District Judge Virginia M. Hernandez Covington conditionally certified as a nationwide class a lawsuit brought by former Lowe’s employees, stating that the suit sufficiently showed that Lowe’s misclassified Lizeth Lytle and similarly situated workers and failed to pay them “the FLSA-mandated time-and-a-half hourly rate for any hours worked beyond 40 in a week, even though the workers lacked discretionary authority over hiring, firing and supervising other employees.”

In the complaint, the plaintiff asserted that Lowe’s …

… willfully and intentionally engaged in a nationwide pattern and practice of violating the provisions of the [Fair Labor Standards Act (FLSA)], by misclassifying Human Resources Managers as exempt under the FLSA overtime wage provision, thereby improperly failing and/or refusing to pay [Lytle] and the Plaintiff Class, comprised of all current and former similarly situated employees who work or have worked over forty (40) hours per week, overtime compensation pursuant to FLSA [29 U.S.C. §§ 206-207].

Of course, cases involving the misclassification of workers aren’t uncommon. But what’s particularly interesting about this suit—which was initially filed in August 2012—is that it involves at least 1,750 HR managers who claim “they weren’t actually managers and were willfully misclassified as exempt from overtime pay requirements.”

I recently spoke with Thomas Lewis, an attorney with Stevens & Lee in Princeton, N.J., about the significance of this case. As might be expected, he immediately pointed to challenges that could easily arise in a case involving HR professionals as the plaintiffs.

“What makes this particularly interesting isn’t just that there’s potentially a Fair Labor Standards Act violation here, but that it’s always difficult when the plaintiff is an HR professional,” Lewis said. “You have to be very careful when the plaintiffs are in HR, because they know all of the hidden secrets of the company and can therefore be ferocious plaintiffs.”

We’ll obviously have to wait and see how this case plays out. But some experts believe it also serves as an important reminder that HR departments aren’t immune from overtime lawsuits.

In a blog post, David L. Barron, an attorney in Cozen O’Connor’s Houston office, writes …

Many exempt HR personnel do not qualify for the executive exemption because they do not directly supervise two or more full-time employees. The administrative exemption, which likely would apply to HR staff, can pose challenges in ligation because it revolves around the level of discretion enjoyed by the employee (which can be subjective). Prudent employers should make sure to keep records of exempt HR employees being involved in hiring, firing or discipline of employees. Keep in mind that the law does not require the exempt employee to have final authority to make decisions, only that he or she be allowed to make recommendations which are given substantial weight. Keeping such records will make it very difficult for the exempt employee to sue for mis-classification and overtime.”

Certainly that’s sound advice in any setting, but especially for those cases involving HR as the plaintiff.

The Ever-Expanding ADA

Gavel and JudgeMany employers are already unclear on what employees are protected under the American with Disabilities Act, and unsure of their responsibilities in complying with the ADA.

And, the ranks of the disabled continue to grow, as we recently saw when the American Medical Association issued guidelines classifying obesity as a disease.

An appeals court’s recent decision in the case of Anthimos Gogos v. AMS Mechanical Systems Inc. may broaden the ADA just a bit further, to include individuals with temporary conditions.

The details, according to the lawsuit:

Anthimos Gogos began working as a welder and pipe fitter for AMS in December 2012. The following month, Gogos’ blood pressure spiked significantly, and he experienced intermittent vision loss. Soon after arriving for work on Jan. 30, 2013, Gogos discovered redness in his right eye. With his supervisor’s permission, Gogos left to seek medical treatment, but encountered his general foreman before he left the building. According to court records, Gogos told the foreman he was heading to the hospital because “my health is not very good lately.” The foreman “immediately fired” Gogos.

Gogos sued the company, alleging disability bias. A lower court initially ruled that high blood pressure didn’t qualify as a disability, as it is a “transitory” condition. An appeals court recently disagreed, however, overturning the ruling in favor of Gogos.

In its decision, the appeals court explained that an impairment may qualify for ADA protection even if it is “transitory and minor” or episodic. In this case, the employee’s high blood pressure and recurrent blindness significantly impaired his circulatory function and eyesight. The case now heads to trial.

The court’s ruling that the plaintiff’s spikes in blood pressure and intermittent vision loss satisfied the definition of disability “wasn’t surprising,” says Ellen McLaughlin, a partner in the Chicago office of Seyfarth Shaw and past national chair of the firm’s labor and employment law department.

“The [ADA] Amendments Act made it clear that, if an impairment substantially limits a major life activity, an employee will be determined to be disabled,” says McLaughlin, “even if the impairment is transitory or minor.”

The difficulty for employers and HR, she says, “lies in determining how long an impairment must last to be considered a disability under the Amendments Act.”

HR must be “very cautious” in making judgments that impairments of short-term duration are not disabilities, says McLaughlin.

“Instead, [HR] should look to see how the case law is developing in this area. It’s always easier to have bright-line tests, but, unfortunately, for the time being this area is for the most part very grey.”

No Notice Required

courtroomYou’re always welcome to remind employees of their right to form a union, but it looks like you won’t have to if you don’t want to.

According to a statement issued by the National Labor Relations Board this week, the organization has chosen not to seek Supreme Court review of two U.S. Court of Appeals decisions invalidating the NLRB’s Notice Posting Rule, which would have required most private sector employers to post notifications in the workplace reminding employees of their right to unionize.

In August 2011, the National Labor Relations Board approved a rule obliging employers to display a poster informing workers of the rights afforded to them by the National Labor Relations Act, including the right of employees to organize and bargain collectively with their employers. A three-judge panel for the U.S. Court of Appeals for the D.C. Circuit struck down the rule in May 2013, with another panel for the Fourth Circuit doing the same the following month. The NLRB had until last week to file an appeal to the U.S. Supreme Court, which the agency ultimately decided against doing.

That decision was “not unexpected,” says Ronald Meisburg, the Washington, D.C.-based co-head of Proskauer’s labor management relations group and former NLRB general counsel.

“The chance of obtaining Supreme Court review—much less reversal—was very small,” says Meisburg, “and carried the risk of a ruling placing even greater restrictions on the NLRB’s rulemaking authority.”

This development figures to go down well with many business groups, some of which had accused the NLRB of overstepping its bounds in its efforts to make posting the notifications mandatory. Associated Builders and Contractors Inc., for example, had previously described the posting rule as “a perfect example of how the pro-union board has abandoned its role as a neutral enforcer and arbiter of labor law.”

The National Association of Manufacturers, meanwhile, quickly issued its own statement on the heels of the NLRB’s announcement that it wouldn’t seek Supreme Court review in the posting requirement rule case. In a press release, the organization states the NLRB “has acknowledged its overreach in the case, permanently validating the NAM’s victory.”

“This is the culmination of the NAM’s aggressive legal pursuit against a government-imposed regulation that would create a hostile work environment while injecting politics into manufacturers’ day-to-day business operations,” said Jay Timmons, NAM president and CEO.

Nevertheless, the NLRB appears to remain undaunted in its effort to make employees aware of their right to unionize.

In the aforementioned statement, the agency reiterated its commitment to “ensuring that workers, businesses and labor organizations are informed of their rights and obligations under the National Labor Relations Act. Therefore, the NLRB will continue its national outreach program to educate the American public about the statute.”