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THE EMPLOYMENT LAWYER BLOG BY JOHN F. BUCKLEY IV

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EMPLOYMENT DISCRIMINATION: Religious Harassment in Workplace—Cautionary Tale for Employers

  
  
  
  

The Lawletter Vol 39 No 2

John Buckley, Senior Attorney, National Legal Research Group

     Although sexual harassment is now a well‑known pitfall for employers, the potential exposure to liability for harassment based on religion often receives less attention. Recent decisions from state and federal courts show, however, that employers must be proactive to avoid potential claims based on religious harassment. See May v. Chrysler Group, LLC, 716 F.3d 963 (7th Cir. 2013); Cowher v. Carson & Roberts, 40 A.3d 1171 (N.J. Super. Ct. App. Div. 2012).

     The case of Detail v. Best Chevrolet, Inc., 655 F.3d 435 (5th Cir. 2011), serves as a cautionary example for employers. In that case, a used-car salesman asserted a claim of religious harassment against his former employer. More specifically, he claimed that when his supervisor learned of his request for time off to attend a church event on the morning of July 4, the supervisor declared, "[I]f you go over there, I'll fire your f‑‑‑ing ass." Id. at 438. The plaintiff claimed that the supervisor's preventing him from attending his church on July 4 under the guise of requiring him to be at work had been pretext, because he had been forced to come in early that day, well before anyone else. Further, when the supervisor admonished the plaintiff early that morning to get out on the floor, the plaintiff replied that he was reading his Bible. The supervisor made other disparaging comments related to the plaintiff's religion, such as "God would not put food on your plate" and "go to your f‑‑‑ing God and see if he can save your job." Id. The plaintiff alleged that these comments created a hostile environment and resulted in his constructive discharge.

     The district court granted summary judgment, finding that these and other comments, which were made over a two‑month period, were stray remarks and did not create a hostile environment. The Fifth Circuit Court of Appeals reversed the grant of summary judgment. Although the disparaging comments, considered separately, may not have been sufficiently severe or pervasive to establish an actionable claim, the court explained that a continuous pattern of less severe incidents can create a hostile work environment in violation of Title VII.

     A simplistic approach to the issue, such as barring religious expression at work, is more likely to backfire and result in a discrimination claim than it is to insulate an employer from liability. See EEOC v. Univ. of Chi. Hosps., 276 F.3d 326 (7th Cir. 2001) (finding that prohibition of religious articles in office constituted evidence of religious discrimination); Altman v. Minn. Dep't of Corr., 251 F.3d 1199 (8th Cir. 2001) (finding discrimination based on employer reprimand of Christian employees for expressing religious objection to diversity training related to homosexuality). Thus, employers must be circumspect in the promulgation and enforcement of a policy prohibiting religious harassment in the workplace.

EMPLOYMENT LAW: Employment Non-Discrimination Act ("ENDA")

  
  
  
  

The Lawletter Vol 38 No 10

John Buckley, Senior Attorney, National Legal Research Group

     A bill (S. 815) that would provide employment discrimination protections to individuals based on their sexual orientation and gender identity passed the U.S. Senate on November 7, 2013 by a 64-32 vote. Called the Employment Non-Discrimination Act of 2013 ("ENDA"), the bill would extend federal employment laws, which currently prevent employment discrimination on the basis of race, religion, gender, national origin, age, and disability, to cover sexual orientation and gender identity as well. The House introduced an inclusive version of ENDA (H.R. 1755) on April 25, 2013 and referred it to the Subcommittee on Workforce Protections. The bill has 200 cosponsors, but it is unlikely to be taken up by the full House in the foreseeable future. Boehner Sees 'No Basis or Need' for ENDA. ENDA would prohibit employers, employment agencies, labor organizations, and joint labor-management committees from firing, refusing to hire, or discriminating against those employed or seeking employment on the basis of their actual or perceived sexual orientation or gender identity. "Sexual orientation" is defined as homosexuality, heterosexuality, or bisexuality, and "gender identity" is defined as the gender-related identity, appearance, or mannerisms or other gender-related characteristics of an individual, with or without regard to the individual's designated sex at birth.

     Regardless of the ultimate outcome of ENDA, counsel should be aware that 21 states have already amended their civil rights and fair employment practices statutes to prohibit discrimination on the basis of sexual orientation. Seventeen of these states include gender identity within the prohibition, with a few states adding civil union or domestic partnership satus to the protected class.

     Oregon's legislation is representative. Adopted in 2008, it prohibits discrimination based on sexual orientation and/or gender identity and provides legal recognition of domestic partnerships between same-sex couples. More specifically, it bans lesbian, gay, bisexual, and transgender discrimination in the workplace, housing, and public accommodations. Employers, employment agencies, and labor organizations are prohibited from discriminating in terms of employment, compensation, membership, and job referrals, unless in the employment or job referrals there is a bona fide occupational qualification reasonably necessary to the normal operation of an employer's business. The law makes exceptions regarding churches and other religious institutions in certain situations, such as employment actions based on a bona fide religious belief about sexual orientation; or employment positions closely connected to the primary purpose of the church or religious institution and where there is no connection to a nonreligious/nonchurch commercial or business activity; or employment directly related to the operation of the church or religious institution, such as clergy, religious instructors, and support staff. The law does not prohibit an employer from enforcing an otherwise valid dress code or policy, as long as the employer provides, on a case-by-case basis, reasonable accommodation of an individual based on the health and safety needs of the individual.

     The Oregon law also established legal recognition of same-sex domestic partnerships so that domestic partners have the same responsibilities, privileges, immunities, rights, and benefits as married couples. With these measures, Oregon became the 18th state to establish antidiscrimination protections based on sexual orientation and the eighth state to extend broad recognition to same-sex couples.

District of Columbia Circuit Holds 2012 Recess Appointments to NLRB Invalid

  
  
  
  

John Buckley, Senior Attorney, National Legal Research Group

On January 25, 2013, the U.S. Court of Appeals for the D.C. Circuit held that the President lacked authority under the Constitution to fill three of the National Labor Relations Board's (NLRB) five seats through  “recess appointments” made on January 4, 2012.  Noel Canning v. NLRB, 705 F.3d 490 (D.C. Cir. 2013).  The President attempted to fill the seats after Congress began a new session on January 3 and while that new session continued.  The court’s decision emphasized the Constitution’s use of the word “the” in the phrase “the Recess” in the Recess Appointments Clause of Article 2. U.S. Const. art. 2, § 2, cl. 3.  Under this Clause, the President has the power to make recess appointments only between sessions of Congress—so-called “intersession appointments,” the court held.  This decision is significant not only for the NLRB, but also for all federal agencies.   More recently, the Third Circuit Court of Appeals joined with the D.C. Circuit to strike down an intrasession recess appointment to the Board, and similar challenges are pending in other courts.

The controversy arose after three seats on the Board came vacant between 2010 and 2012.  The President tried to fill all three seats onJanuary 4, 2012, when the Senate had declared it was in session, but the President claimed Congress was actually in a recess because the Senate was operating only pro forma sessions every three business days fromDecember 2, 2011throughJanuary 23, 2012. 

The case was on appeal by the corporate employer Noel Canning, a division of the Noel Corporation, which argued that that a quorum of three NLRB members did not exist on the date the Board rendered an order adverse to the employer.  Specifically, the NLRB had ruled that the employer violated the National Labor Relations Act by failing to reduce to writing and execute a collective bargaining agreement reached with Teamsters Local 760.  A quorum was lacking, according to the employer, because only one member voting for the decision had been confirmed by the Senate; the other two owed their positions on the Board to the challenged recess appointments.  The Supreme Court had previously held in a 2010 decision, New Process Steel, L.P. v. NLRB, 130 S. Ct. 2635 (2010), that the NLRB cannot act without a quorum of three members.

The Recess Appointments Clause provides that “[t]he President shall have Power to fill up all Vacancies that may happen during the Recess of the Senate, by granting Commissions which shall expire at the End of their next Session.”  U.S. Const. art. II, § 2, cl. 3. The employer argued that the phrase “the Recess” refers to the intersession recess only. The Board argued that “the Recess” also includes intrasession recesses, noting that the Eleventh Circuit has interpreted the language in this fashion.  See Evans v. Stephens, 387 F.3d 1220 (11th Cir. 2004) (en banc).  The D.C. Circuit agreed with the employer, stating: “As a matter of cold, unadorned logic, it makes no sense to adopt the Board’s proposition that when the Framers [of the Constitution] said ‘the Recess,’ what they really meant was ‘a Recess.’ This is not an insignificant distinction. In the end, it makes all the difference.”  Noel Canning, 705 F.3d at 500.

Moreover, stated the court, for nearly a century after the Constitution was ratified, no president had ever attempted intrasession recess appointments, and for decades thereafter such appointments were exceedingly rare.

Additionally, the court held that the vacancies on the Board did not “happen” during the recess of the Senate within the meaning of the Recess Clause.  It was undisputed that the three vacancies had occurred on August 27, 2010, August 27, 2011, and January 3, 2012.  After determining that the word “happen” means “arise” or “begin,” the court held that none of the vacancies had “happened” during the intersession Senate recess, as required by the Clause.  The court rejected the Board’s argument that the word “happen” means “happen to exist,” thus enabling the President to fill any vacancies that “happen to exist” during the recess.  The “arise” interpretation is more consistent with other usages of the word “happen” in the Constitution, the court explained.

Although the court limited its decision invalidating the NLRB ruling to the Noel Canning case, the decision calls into question the validity of all NLRB decisions issued after the date the purported recess appointments were made—decisions which number in the hundreds.  No doubt anticipating a petition for review of the case to the Supreme Court, the court of appeals issued orders holding in abeyance other appeals pending in the D.C. Circuit presenting the same issue.  This includes the NLRB’s appeal of a May 2012 district court ruling invalidating the Board’s controversial union election rulemaking.  In Chamber of Commerce v. NLRB, No. 1:11-cv-02262-JEB (D.D.C. filed Feb. 3, 2012), appeal pending, No. 12-5250 (D.C. Cir.),  the U.S. District Court for theDistrict of Columbia had held that the NLRB lacked a quorum when it published a rule revising its representation election procedures.

Within hours of the release of the Noel Canning decision, NLRB Chair Mark Gaston Pearce issued the following statement:  “The Board respectfully disagrees with today’s decision and believes that the President’s position in the matter will ultimately be upheld. . . . In the meantime, . . . [the Board]  will continue to perform [its] statutory duties and issue decisions.”  NLRB News Release (Jan. 25, 2013), available at  www.nlrb.gov/news-outreach/news-releases/statement-chairman-pearce-recess-appointment-ruling (paragraphing omitted).

The NLRB did not seek rehearing en banc by the D.C. Circuit but, rather, filed a petition for review of the Noel Canning case by the Supreme Court. No. 12-1281 (filed Apr. 25, 2013).  Given the importance of the issue and the conflict with the Eleventh Circuit’s decision, it appears likely that Supreme Court review will be granted.

On May 16, 2013, the Third Circuit Court of Appeals weighed in on the issue, holding that the recess appointment of former NLRB member Craig Becker was invalid, and therefore a three-member panel of the Board comprised in part of Becker was improperly constituted when it denied reconsideration of a prior Board order in a case involving a nursing home.  NLRB v. New Vista Nursing & Rehab., Nos. 11-3440, 12-1027, 12-1936, 2013 WL 2099742 (3d Cir. filedMay 16, 2013).  The Third Circuit concluded that the phrase “the Recess of the Senate” in the Recess Appointments Clause refers only to intersession breaks, and Becker had been appointed during an intrasession break—a 17-day adjournment during 2010.  The court therefore vacated the 2011 NLRB order denying reconsideration.

In the New Vista case, the order that the Board declined to reconsider had found that the employer nursing home unlawfully refused to bargain with a newly elected union.  The Third Circuit did not consider the merits of the refusal-to-bargain issue but, rather, limited its focus to the validity of the Board’s order denying reconsideration (and several subsequent orders in the case) in which member Becker had been involved.  After conducting an exhaustive analysis, the court agreed with the D.C. Circuit’s conclusion that the phrase “the Recess of the Senate” refers only to intersession breaks.  Because there was no dispute that Becker had been appointed during an intrasession break, the court concluded that the three-member panel of the Board lacked jurisidiction when it issued the order denying reconsideration (and subsequent orders) in the case.  The court also rejected the Board’s argument that the meaning of “the Recess” in the Clause is a nonjusticiable political question—an argument not advanced before the D.C. Circuit. One judge dissented from the majority’s decision, believing that the majority had ignored and undone an appointments process that had successfully operated within the constitutional separation of powers regime for over 220 years.

Additional federal courts of appeals’ decisions on this issue are pending. On March 22, 2013, the Fourth Circuit heard oral argument in a challenge to a 2012 NLRB decision after ordering the parties to brief the effect of the Noel Canning decision on the case.  Huntington Ingalls Indus. v. NLRB, Nos. 12-1514, 12-2000, 12-2065 (4th Cir.).  The issue is also before the Fifth Circuit.  D.R. Horton, Inc. v. NLRB, No. 12-60031 (5th Cir.).  Decisions on the merits of the issue from these circuits will necessarily conflict with either the Eleventh or the D.C. and Third Circuit decisions, thus enhancing the likelihood of Supreme Court review.

If you would like a more detailed article on these decisions which includes discussion of NLRB decisions which are in jeopardy as a result of the rulings, send an email to jbuckley@nlrg.com with the words “NLRB Appointments Article” in the subject line.

The American Taxpayer Relief Act of 2012

  
  
  
  

 John Buckley, Senior Attorney, National Legal Research Group

In a major development affecting all employers and most taxpayers, the House of Representatives on January 1, 2013 approved the American Taxpayer Relief Act of 2012 ("the Act"), H.R. 8, Pub. L. No. 112-240, 126 Stat. 2313, passed by the Senate earlier in the day.  The President signed the Act on January 3, 2013.  The Act made permanent the "Bush era" tax cuts for most Americans.  Although the tax cuts technically expired just after midnight on December 31, 2012, the legislation was made retroactive. Significantly, the legislation did not extend the 2% reduction in the employee portion of the Social Security tax that had been in place for the past two years under the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 and subsequent legislation.

The Act permanently extended the Bush‑era tax rates for all incomes up to $400,000 for individuals and $450,000 for joint filers.  The tax rates that applied to incomes above those levels expired.  Specifically, the top rate rose from 35% to 39.6%.  The legislation also permanently adjusted the income exemption levels for the Alternative Minimum Tax for inflation.  On January 3, 2013, the IRS published revised 2013 percentage‑method withholding tables in IRS Notice 1036, Early Release Copies of the 2013 Percentage Method Tables for Income Tax Withholding, www.irs.gov/pub/irs‑pdf/n1036.pdf.

Effective for wages paid on and after January 1, 2013, employers must also withhold Social Security tax at a rate of 6.2% from all wages up to $113,700.  As noted above, this represents a 2% increase from the 2011 and 2012 tax rate, which was 4.2%.

The Act also makes permanent the tax credit for employer‑provided child-care facilities and services.  Furthermore, it extends permanently the adoption credit and the income exclusion for employer-paid or reimbursed adoption expenses up to $10,000 (indexed for inflation) both for non-special needs adoptions and special needs adoptions.  Additionally, the Act extends permanently the exclusion from income and employment taxes of employer‑provided education assistance of up to $5,250.  The employer may also deduct up to that amount annually for qualified education expenses paid on an employee's behalf.

The increase for the exclusion for employer‑provided transit and carpool benefits was also extended permanently.  The exclusion had been increased to $240 a month through 2012 but had been scheduled to fall back to $125 at the beginning of 2013.

For businesses, the legislation extended for two years several tax breaks, including a production tax credit for developers of wind projects, the research and development tax credit, and a measure allowing for bonus depreciation.  The Work Opportunity Tax Credit, which rewards employers for hiring individuals from certain disadvantaged groups (such as unemployed veterans), was revived and extended through 2013.  The employer wage credit for activated military reservists was also revived and extended through the same time period.

The Act extended for one more year the federally funded unemployment compensation benefits available to unemployed workers who have exhausted their initial period of state benefits (typically 26 weeks).  Without the extension, it was estimated that more than two million of the long‑term unemployed would have run out of benefits.

Since June 2008, a series of federal legislative measures have extended the period for such benefits.  These measures included the American Recovery and Reinvestment Act of 2009 and, most recently, the Extended Benefits, Reemployment, and Program Integrity Improvement Act of 2012.

The Act also contains a number of provisions of interest to individual taxpayers.  To the extent that taxable income exceeds the threshold amounts for the 39.6% tax rate, long-term capital gains and qualified dividends are subject to a 20% rate, an increase from the Bush-era maximum rate of 15%. Capital gains and qualified dividends that would be subject to the 25% or 35% rates if they were ordinary income continue to be subject to the 15% capital gains rate. A 0% rate  continues to apply to capital gains and qualified dividends that would be taxed at the 15% rate if they were ordinary income. (For 2013, ordinary income below $72,500 for joint filers and $36,250 for single filers will be taxed at the 15% rate.)

The Act also reinstated the limitation that reduces itemized deductions for taxpayers who meet certain thresholds by 3% of the amount by which the taxpayer's AGI exceeds the thresholds. The threshold amount is $250,000 for single taxpayers and $300,000 for married taxpayers filing joint returns. These thresholds are subject to adjustment for inflation for tax years after 2013. Under this limitation, the amount of itemized deductions cannot be reduced by more than 80%.  The personal exemption phaseout was also revived by the Act.

Concerning estate and gift taxation, for 2013 the maximum estate tax rate was scheduled to revert to 55%, and the exclusion amount was scheduled to be reduced from $5 million to $1 million. The Act provides for a maximum rate of 40% and a lifetime exemption amount of $5 million, subject to adjustment for inflation for taxpayers dying after December. 31, 2012. For 2013, the inflation-adjusted amount is $5.25 million. In addition, the Act unifies the estate, gift, and generation-skipping tax, creating a single rate of 40% and a single exemption amount of $5 million.

EMPLOYMENT LAW UPDATE: Supreme Court Upholds ACA—What Employers Must Do Now

  
  
  
  

July 19, 2012

John F. Buckley IV, Senior Attorney, National Legal Research Group

            On June 28, 2012, the Supreme Court announced its greatly anticipated decision in National Federation of Independent Business v. Sebelius, Nos. 11-393, 11-398, 11-400, 2012 WL 2427810 (U.S. Jun. 28, 2012), the case challenging the constitutionality of the Patient Protection and Affordable Care Act ("ACA"), Pub. L. No. 111-148 (Mar. 23, 2010), as modified by the Health Care and Education Reconciliation Act, Pub. L. No. 111-152 (Mar. 30, 2010).  The ACA as modified contains comprehensive health-care reform provisions, including a mandate that by 2014 all individuals must obtain a minimum level of health insurance coverage or pay a penalty.  In a 5-4 decision, the Court ruled that the mandate exceeded Congress's power under the Commerce Clause, but it upheld the Act's individual mandate/penalty provision as a valid exercise of Congress's taxing authority.  Chief Justice Roberts, joined by Justices Ginsburg, Breyer, Sotomayor, and Kagan, joined in the "individual mandate/penalty" portion of the Court's decision.  A different majority of the Court then ruled that the States must be permitted to opt out of the Act's expansion of Medicaid assistance.  Chief Justice Roberts, joined by Justices Scalia, Thomas, Kennedy, and Alito, joined in the "Medicaid expansion" portion of the Court's decision.  The rest of the ACA was left intact.  Justices Scalia, Thomas, Kennedy, and Alito dissented, believing the ACA to be unconstitutional in its entirety.

            As a result of the Court's ruling, except for the mandatory nature of the Medicaid expansion, all provisions of the ACA remain in effect.  This includes the market reforms already in effect (such as the adult-child coverage, the phaseout of annual/lifetime limits, and the requirements for preventive care) as well as the disclosure and reporting requirements already announced by federal regulatory agencies (such as the Summary of Benefits and Coverage).  Although it is still possible that the November 2012 elections might ultimately result in a congressional repeal or modification of the ACA, employers must nevertheless be prepared to meet the Act's impending deadlines.  The following analysis is designed to help employers prepare for compliance with the Act in the event that it is not repealed:

 

Pressing Deadlines

1.         Form W-2 reporting:  The ACA requires employers to disclose the aggregate cost of employer-sponsored health insurance coverage provided to their employees on the employee's Form W-2.  This employer disclosure requirement was optional for the 2011 tax year, but it is mandatory for the 2012 tax year.  The Internal Revenue Service ("IRS") has offered guidance on how to report the cost of employer-provided health care, what coverage to include, and how to determine the cost of the coverage in I.R.S. Notice 2011-28, 2011-16 I.R.B. 656.  The Notice is in a Question-and-Answer format and is available at the IRS website, www.irs.gov/irb/2011-16_IRB/ar08.html.

2.         Summary of Benefits and Coverage; Uniform Glossary:  For plan years beginning on or after September 23, 2012, employers must provide their employees with a written Summary of Benefits and Coverage ("SBC") as well as make available a Uniform Glossary of Terms commonly used in health insurance coverage (such as "deductible" and "copayment").  The IRS and the Departments of Labor ("DOL") and Health and Human Services ("HHS") have jointly issued final regulations implementing these disclosure requirements of the ACA. The regulations permit the SBC to be provided either as a stand-alone document or in combination with other summary materials (such as a pension/retirement plan Summary Plan Description).  A list of FAQs about these new disclosure requirements is available at the DOL website, www.dol.gov/ebsa/faqs/faq-aca8.html#1.

3.         Comparative effectiveness research fees:  The ACA imposes a research fee on plan sponsors of self-funded plans and issuers of individual and group policies, beginning in 2012 and phasing out in 2019.  The assessed fees are contributed to a trust, the Patient-Centered Outcomes Research Trust Fund," that will fund comparative effectiveness research to be conducted by the Patient-Centered Outcomes Research Institute.  The research will evaluate and compare health outcomes and the clinical effectiveness, risks, and benefits of medical treatments and services.  Group health plans must pay a per-participant fee as follows:  $1 per plan participant for the first year ending between October 1, 2012 and September 30, 2013, and $2 per plan partici­pant, indexed, thereafter through October 1, 2019.

4.         FSA contribution limit:  In 2013, salary reduction contributions to health-care flexible spending accounts ("FSAs") must be limited to $2,500.

5.         Notice of health exchanges:  In 2013, employers must give their employees written notice of the availability of health insurance through the relevant state-operated health insurance exchange (or the federal exchange if the State in question does not operate such an exchange).  Regulations addressing this notice are pending.

 

Strategic Planning

            In addition to meeting the impending deadlines for matters such as notice, disclosure, and reporting requirements, employers that have not already done so should engage in comprehensive planning regarding the health-care benefits package they offer, or might wish to offer, to their employees.  Employers should carefully consider the following:

1.         "Play or pay" analysis:  Employers should consider the strategic implications of offering or not offering a health-care plan after 2013.  Starting January 1, 2014, the ACA requires employers with 50 or more full-time employees to provide at least a minimum amount of health coverage or to pay a $2,000 fee per employee if at least one full-time employee enrolls in a qualifying (non-employer-provided) plan and receives the premium tax credit for enrollment.  The Congressional Research Service has issued a report describing and illustrating the employer penalties, which is available at www.ncsl.org/documents/health/EmployerPenalties.pdf.  Depending upon the employer's size as well as other factors (such as tax implications), it may be desirable to simply not offer a health-care plan and pay the resulting penalty instead.

2.         "Grandfathered plan" analysis:  If a health-care plan was in effect on March 23, 2010 (the date of enactment of the ACA), employers should perform a qualitative analysis on whether to retain it as a grandfathered plan.  Certain group health plans providing coverage on that date are considered by the ACA to be "grandfathered plans" exempt from some, but not all, of the Act's requirements.  A regulation jointly issued by the IRS, DOL, and HHS provides guidance on what employers must do to maintain the grandfathered status of their plans, including what changes will cause a plan to lose the status.  Employers should decide whether the value of maintaining grandfathered status for their health plans outweighs the value of making changes to the plans to control costs or achieve other business objectives.  Questions and Answers written for employers about grandfathered plans can be found at the following HHS website:  http://cciio.cms.gov/resources/factsheets/aca_implementation_faqs4.html.

3.         Eligibility/affordability analysis:  Employers should conduct a qualitative analysis to determine whether existing plans meet the ACA's eligibility and affordability standards.  An employer will be considered to be failing to provide minimum coverage if the cost of the employer-provided health insurance is 9.5% or more of the employee's household income or if the plan pays for less than 60% on average of covered health-care expenses (e.g., the coverage offered does not have at least a 60% actuarial value).  In I.R.S. Notice 2011-73, 2011-40 I.R.B. 474, the IRS set forth its proposal of a "safe harbor" to make it easier for employers to determine whether the health coverage they offer is "affordable."  The safe harbor would use 9.5% of wages the employer paid to an employee, instead of the employee's household income, as the standard for affordability.

4.         "Cadillac" plan analysis:  Employers should project the effect of the excise tax that will take effect in 2018 on high-cost ("Cadillac") plans.  A 40% tax will be imposed on health coverage providers to the extent that the aggregate value of employer-sponsored health coverage for an employee exceeds a threshold amount.  (High-cost plans are currently defined as those that cost more than $10,200 for an individual or $27,500 for a family, annually.  These limits are indexed annually to inflation and are adjusted for specified factors, such as age, gender, and high-risk professions.)

            There are many pitfalls employers may encounter in preparing to comply with the ACA.  Although the links to government resources listed in this article provide some guidance, many employers will face questions that require expert analysis.  If you or your clients need assistance with ACA compliance or another employment-related issue, contact me at jbuckley@nlrg.com or (800) 727-6574 for a complimentary initial consultation.

EMPLOYMENT LAW UPDATE: Legislation Banning Employer Requests for Social Media Information

  
  
  
  

July 10, 2012

John F. Buckley IV, Senior Attorney, National Legal Research Group

            Recent news reports have detailed an increase in the number of employers requiring job applicants and employees to provide usernames and passwords for social media websites such as Facebook and Twitter. Some employers have asked job applicants during interviews to log into their accounts and allow the employer-interviewer to browse the applicant’s profile, acquaintances, and other information.  This practice has generated a significant amount of controversy and is now the subject of both enacted and proposed legislation.

            On May 2, 2012, Maryland became the first state in the nation to pass a law prohibiting employers from requesting or requiring the social media passwords or from accessing the social media accounts of prospective and current employees.   S. 433, 2012 Md. Laws 233 (to be codified at Md. Code Ann., Lab. & Empl. § 3-712) (effective Oct. 1, 2012).  According to the synopsis, the legislation prohibits "an employer from requesting or requiring that an employee or applicant disclose any user name, password, or other means for accessing a personal account or service through specified electronic communications devices."  Id.  The Maryland legislation grew out of the publicity over a challenge by the American Civil Liberties Union to a demand by the Maryland Division of Corrections that an employee provide his Facebook login credentials during a recertification interview.

            Although Maryland is currently the only state with such a prohibition, similar legislation is pending in a number of other states, including California, Illinois, Michigan, and Minnesota.  In addition, legislation introduced in the U.S. Senate, the Password Protection Act of 2012, S. 3074, 112th Cong., 2d Sess. (May 9, 2012), would bar employers across the country from requiring or requesting employees or job applicants to provide password information for their social media and email accounts as a condition of employment.

            According to proponents of the federal Act, the measure would strengthen existing laws to bar employers from compelling or coercing employees or applicants into giving access to their private accounts. Employers could not condition employment on gaining access to an employee’s or applicant’s private account, and they would be barred from either discriminating or retaliating against any employee or applicant who refused to provide such information. Employers could, however, still establish policies relating to employer-owned computer systems, hold employees liable for theft of data, and allow social networking within their offices.

            A similar bill, the Social Networking Online Protection Act ("SNOPA"), H.R. 5050, 112th Cong., 2d Sess. (Apr. 27, 2012), was introduced in the House of Representatives earlier in the year.  This Act would prohibit current or potential employers from requiring a username, password, or other access to online content, and would extend that prohibition to colleges, universities, and K-12 schools. In addition, the bill would prohibit employers from demanding such access in order to discipline, discriminate against, or deny employment to individuals, and from punishing individuals for refusing to volunteer such information.

           In addition to direct requests for passwords, some supervisors use a more subtle approach by asking an employee to include the supervisor as a "friend" or contact on the employee's social media sites.  Whether or not such requests or more direct requests for passwords violate current law, they are arguably not sound or productive HR practices.  Employees may perceive such requests as innapropriate intrusions into their private lives, and the result may be to turn an otherwise productive employee into a disgruntled one.  Such practices may be justified if an employee is the object of a a legitimate investigation into specific misconduct, but the cost likely outweighs the benefit for the average employee or applicant.  Furthermore, in anticipation of these requests some applicants and employees now maintain duplicate social media sites with the purpose of using a "sanitized" site to show an employer.

           Employment laws are constantly changing, not only as they relate to background checks and social media but also in relation to many other areas as well.  Therefore, it is imperative that employers maintain current, written policies and that these policies be periodically reviewed and revised to ensure compliance with applicable laws.  If you or your clients need assistance promulgating or reviewing employment policies, feel free to contact me at jbuckley@nlrg.com or 800-727-6574 for a complimentary initial consultation.

Challenges to the Individual Mandate Under the New Health-Care Law

  
  
  
  

May 15, 2012

John F. Buckley IV—Senior Attorney, National Legal Research Group

On March 23, 2010, President Obama signed into law a sweeping health-care reform measure entitled the "Patient Protection and Affordable Care Act" ("PPACA"), Pub. L. No. 111-148, 124 Stat. 119 (Mar. 23, 2010).  The Act was modified by the Health Care and Education Affordability Reconciliation Act, Pub. L. No. 111-152, 124 Stat. 1029, signed on March 30, 2010.  The PPACA as modified contains extensive health-care reform provisions, including a mandate that will require all individuals to obtain a minimum level of health insurance coverage by January 1, 2014.  The Act also imposes many requirements that will impact employers regardless of whether they provide health insurance to employees.  It is the individual coverage requirement, however, that has generated the most controversy and given rise to the greatest number of legal challenges.  The most frequently asserted claim is that Congress lacks the power under the Constitution to require individuals to purchase private insurance.

The challenges to the PPACA have been received with mixed results by the courts.  In November 2010, a federal district court in Virginia held that the employer and individual coverage provisions of the Act are lawful under the Constitution.  Declaring that the provisions "are a regulation of interstate commerce authorized by the Commerce Clause," the court dismissed the lawsuit brought by an employer and several individual plaintiffs.  Liberty Univ., Inc. v. Geithner, No. 6:10-cv-00015-nkm, 2010 WL 4860299 (W.D. Va. Nov. 30, 2010).  An appeal to the U.S. Court of Appeals for the Fourth Circuit is expected.

The U.S. District Court for the Eastern District of Virginia found that Congress’s imposition of the individual requirement to purchase private insurance exceeded congressional power under the Commerce Clause and that the Necessary and Proper Clause did not save the measure.  Further, the requirement could not survive as a tax because it was intended to penalize individuals who fail to obtain insurance, not to raise revenue. However, because the mandate could be severed from the rest of the PPACA, the court declined to strike down the entire Act.  Virginia ex rel. Cuccinelli v. Sebelius, CA No. 3:10CV188-HEH, 2010 WL 5059718 (E.D. Va. Dec. 13, 2010).  The federal government has indicated its intention to appeal this ruling.  http://blogs.usdoj.gov/blog/archives/1106.

Two federal appellate courts have now ruled on constitutional challenges to the Act. The U.S. Court of Appeals for the Sixth Circuit upheld the Act in a 2-1 decision. Thomas More Law Center v. Obama, ___ F.3d ___, 2011 WL 2556039 (6th Cir.Jun. 29, 2011).   The court held that the Act’s individual coverage requirement was a lawful exercise of Congress's power under the Commerce Clause. Asserting that Congress has the power under the Commerce Clause to regulate the interstate markets in health care delivery and health insurance, the court determined that Congress, in enacting the PPACA, had a rational basis for concluding that the individual coverage requirement was essential to the Act’s broader reforms to the interstate markets.  Thus, the court held that the individual coverage requirement was facially constitutional under the Commerce Clause. The court also ruled, however, that the requirement could not survive as a tax because the penalty imposed for an individual’s failure to obtain insurance was intended as a regulatory penalty and not a revenue-raising measure. The plaintiff in the case, a public interest law firm, has filed a petition for review of the Sixth Circuit’s decision by the Supreme Court.

In a suit brought by twenty-six states, private individuals, and an organization of independent businesses, the Eleventh Circuit court of appeals upheld by a 2-1 majority the ruling of a federal district court that the individual mandate exceeded the boundaries of Congress's enumerated power under Commerce Clause.  Florida ex rel. Atty. Gen. v. U.S. Dept. of Health and Human Services, 2011 WL 3519178 (11th Cir. 2011).   Furthermore, the court ruled that the individual mandate operated as a civil regulatory penalty, not a tax, and therefore could not be authorized pursuant to the Taxing and Spending Clause.  The court reversed one part of the district court’s opinion, however, holding that the unconstitutional individual mandate could be severed from the remainder of the Act's reforms.  Although this part of the court’s ruling would allow the continued enforcement of provisions of the Act currently in effect, the central provisions of the Act designed to reform the health care insurance system are unlikely to be effective without the individual mandate.  As one analyst has observed, “Take away the mandate, and what you’re left with is an insurance market that really wouldn’t work.”  The court’s ruling makes the individual mandate unenforceable in Alabama, Florida and Georgia.

The Supreme Court granted a petition for review from the Eleventh Circuit decision, and heard oral argument in the case on March 28, 2012.  The Court is set to review the following issues: 1) The constitutionality of the individual mandate requirement; 2) Whether some or all of the overall law must fail if the mandate is struck down; 3) Whether the Anti-Injunction Act bars some or all of the challenges to the insurance mandate; and 4) The constitutionality of the expansion of the Medicaid program for the poor and disabled.  The questions and comments from the Justices have led some Court-watchers to conclude that the Supreme Court may strike down the individual mandate.  Predicting the outcome of a decision based on what is said in oral argument, however, is always a difficult proposition.  The fact that the Court granted an unusually large amount of time for oral argument—five and one-half hours—indicates that the Justices view the decision as a close one.

CYBERLAW: Potential Liability for Operating a Website

  
  
  
  

The Lawletter Vol 36 No 7

John Buckley, Senior Attorney, National Legal Research Group

Maintaining a website has become a matter of business necessity for most professional, commercial, and retail establishments.  Despite its undisputed advantages, however, the operation of a website also presents new areas of exposure to liability for its owner or operator.  Fifty percent of businesses now report experiencing between one and five cyber risk incidents, and several recent high‑profile cases have significantly increased interest in a new form of insurance:  Cyber Liability Insurance.  This type of insurance is designed primarily to protect businesses from liability arising from the ownership or operation of a website.  Sources of potential liability include infringement, privacy, defamation, reliance, or accessibility. 

In addition to these sources of liability, a recent case involving a popular social media website demonstrates that there are other potential sources of liability for operating a website.  In late 2011, Match.com settled a lawsuit filed by a victim of sexual assault and agreed to screen its members against state and national sex offender registries.  See Doe v. Match.com (Cal. Super. Ct. filed Apr. 13, 2011).

Although the potential for liability is not in dispute, there is some debate about the degree of care a social media site must exercise.  Some experts believe that the accessibility of sex offender registries will create a duty on the part of other sites to screen users, while other experts believe that Match.com made a mistake in agreeing to screen users and that the screening itself may give rise to liability.  Nevertheless, eHarmony and Zoosk have since indicated that they, too, would be enhancing security for members and screening for sex offenders.

Although this Match.com lawsuit did not establish any legal precedent, it does underscore the trend toward increasing recognition of website liability.  On the other hand, it may be the case that Match.com unnecessarily exposed itself to liability for the voluntary screening.  Should a sex offender make it through the screening process and cause injury to another user, it could be significantly more difficult for Match.com to argue in a subsequent lawsuit that it does not have a duty to screen for not only sex offenders but other potentially dangerous users as well.  Thus, the case has significance beyond the social media context, in that it demonstrates the difficulty website operators face in establishing policies calculated to reduce liability.

The Match.com lawsuit was preceded by two earlier actions asserting more conventional bases for liability.  In Nat'l Fed'n of the Blind v. Target Corp., 582 F. Supp. 2d 1185 (N.D. Cal. 2007), a lawsuit was brought against Target Corporation, based on the retailer's failure to make its website accessible to blind persons by including coding that would make the website compatible with screen‑reading software that vocalizes text and describes graphics.  After several years of litigation, Target agreed to modify its website for blind users and to pay $6 million into a settlement fund that would be used to pay valid claims submitted by members of the California subclass.  See also In re Nations Title Agency, Inc., No. 052‑3117, 2006 WL 1367834 (FTC May 10, 2006) (despite having assured consumers that it maintained "physical, electronic, and procedural safeguards" to protect their personal information, real estate title company nonetheless discarded unshredded consumer home loan applications into open trash dumpster, for which it faced FTC charges of inadequate storage and disposal procedures for sensitive consumer information; charges ultimately settled for undisclosed amount).

[The attorneys of the National Legal Research Group have prepared a White Paper that analyzes the many potential sources of website liability and shows owners/operators of websites how they can avoid liability.  This White Paper includes actual examples of how some website owners/operators have been exposed to liability and how others have avoided liability.  We have also prepared a White Paper addressing the special problems involved in law firm websites, including compliance with ethics and lawyer advertising rules.  If you or your clients operate a website, you need to be aware of the legal implications.  These White Papers gather together the information that you and your clients need to cover all the bases.  To order, click here and select either Employer and Law Firm Website LiabilityCLaw Office Edition or Employer and Law Firm LiabilityCStandard Edition. You may also call our toll-free number, 1‑800‑727‑6574, to order.]

EMPLOYMENT LAW: Supreme Court Upholds Arizona Illegal Workers Law Against Preemption Challenge

  
  
  
  

January 24, 2012

John F. Buckley IV, Senior Attorney, National Legal Research Group

            In 2007, the State of Arizona enacted the Legal Arizona Workers Act,  Ariz. Rev. Stat. §§ 23-211 to -216, which imposed what were at the time the nation’s toughest sanctions against employers that knowingly hired undocumented workers.  The Act provided that an Arizona business caught in more than one such violation would lose its license to operate. In addition, the Act required all employers to check the legal status of their new hires using the federal E-Verify program.  A federal court challenge to the new law was unsuccessful at the district court level, and, on March 1, 2008, Arizona’s county prosecutors became authorized to prosecute employers for violations of the Act. On May 1, 2008, Arizona’s governor signed legislation amending the Act to provide additional safeguards for employers who made good-faith efforts to comply with the law.

            In the meantime, the federal court challenge to the Act worked its way up to the Court of Appeals for the Ninth Circuit, which affirmed the district court’s order upholding the Act.  Chicanos por la Causa, Inc. v. Napolitano, 558 F.3d 856 (9th Cir. 2009). Ultimately, the case reached the U.S. Supreme Court, and, on May 26, 2011, the Court upheld the Act in a 5-3 decision, U.S. Chamber of Commerce. v. Whiting, 131 S. Ct. 1968 (2011).  First, the Court determined that the provision of the Act allowing suspension and revocation of business licenses fell within the federal Immigration Reform and Control Act’s (“IRCA”) savings clause for licensing laws and that, therefore, the provision was not expressly preempted by the federal law. The Court noted that the Arizona law did no more than impose licensing conditions on businesses operating within the state. Although the IRCA prohibits states from imposing civil or criminal sanctions on those who employ unauthorized aliens, it expressly preserves state authority to impose sanctions through licensing and similar laws. Next, the Court held that the provision was not impliedly preempted by the IRCA, as the regulation of in-state businesses through licensing laws does not involve uniquely federal areas of interest and the operation of the Arizona law does not interfere with the operation of a federal program.  Finally, concerning the Arizona law’s E-Verify requirement, the Court held that the requirement was not preempted, either expressly or impliedly, by any provision of federal law. Although the federal Illegal Immigration Reform and Immigrant Responsibility Act of 1996 made the E-Verify program voluntary at the national level, it expressed no intent to prevent the states from mandating participation in the program, and Arizona’s use of the program did not conflict with the federal scheme.

EMPLOYMENT LAW: New NLRB Rule Mandates Posting of Employee Union Rights

  
  
  
  

December 23, 2011

John F. Buckley IV, Senior Attorney, National Legal Research Group

The National Labor Relations Board ("NLRB") has promulgated a new rule, 76 Fed. Reg. 54006 (Aug. 30, 2011) (to be codified at 29 C.F.R. pt. 104), requiring employers to post and maintain a notice of employee rights under the National Labor Relations Act ("NLRA"), 29 U.S.C. §§ 151–169.  The rule was originally scheduled to take effect on November 14, 2011, but on December 23, 2011, the NLRB announced that it would postpone the effective date until April 30, 2012.  Pursuant to this rule, an employer who falls under the NLRB's jurisdiction must post a notice of employees' rights to organize a union and bargain collectively with the employer.  The rule also sets out the size, form, and content of the notice and contains enforcement provisions.  According to the NLRB, the rule is needed because employees are not aware of their union rights under the NLRA, and the rule will increase awareness to allow employees to effectively exercise those rights.  See 76 Fed. Reg. at 54006. 

The rule applies to any employer covered by the NLRA.  Those employers who are excluded from coverage under the NLRA are not subject to the rule, including the federal government, any state or political subdivision, any person subject to the Railway Act, and any labor organization (other than when acting as an employer).  As to retail businesses, including home construction, the NLRB will assert jurisdiction over employers that have a gross annual volume of business of $500,000 or more.  For nonretail businesses, the standard is based upon either the amount of goods sold or services provided by the employer out of state, or the goods or services purchased by the employer from out of state.  Jurisdiction attaches to an employer that has an annual inflow or outflow of at least $50,000. The rule also sets out a table categorizing certain employers and the required amounts of annual gross volume of business required to meet NLRB jurisdiction.  See 29 C.F.R. § 104.204 tbl.

The NLRB will provide at no cost to employers the actual form notice, entitled "Employee Rights under the National Labor Relations Act," to be posted at workplaces.  Id. § 104.202. The notice must be 11 inches by 17 inches and may be printed in black and white. The notice must be displayed conspicuously in a place where the employer customarily posts such notices.  If the employer has an intranet or Internet website on which personnel rules or policies are customarily posted, the employer must also post the notice there.  In addition, if at least 20% of the employees are not proficient in English, the notice must be posted in the language that those employees speak.

The rule sets out the content that must be included in the notice, informing employees that they have the right to organize a union to negotiate with the employer concerning wages, hours, and other terms and conditions of employment; to form, join, or assist a union; to bargain collectively with the employer for wages, benefits, hours, and other working conditions; to discuss wages and benefits and other terms and conditions of employment or union organizing with coworkers or with a union; to take action with one or more coworkers to improve working conditions; to strike or picket, depending on the purpose or means of the strike or picketing; and to choose not to do any of the activities, including joining or remaining a member of a union.

The rule further sets forth illegal conduct by the employer, including prohibiting employees from talking about or soliciting for a union during nonwork time; questioning employees about union support or activities in a manner that discourages them from engaging in that activity; firing, demoting, or transferring employees because of their support of, or membership in, a union; and threatening to close the workplace if workers choose to join a union. The rule also sets out unlawful conduct by the union, including threatening or coercing employees; refusing to process grievances because of an employee's criticism of a union; and taking adverse action against an employee because he or she has not joined or does not support the union.  See id. subpt. A app.   Employees must be informed that if they believe their rights have been violated, they must file a complaint generally within six months of the unlawful conduct.  See id.; see also 29 U.S.C. § 160(b).

A significant aspect of the rule is that an unfair-labor-practice finding may be made against an employer for the employer's failure to post the notice.  Although the NLRB states that most failures to post the notice will be inadvertent and may be informally remedied, the NLRB has the right to bring formal charges against the employer for unfair labor practices.  29 C.F.R. § 104.210.  The NLRB asserts that an employer's failure to post the notice may be considered interfering with, restraining, or coercing employees in the exercise of the rights guaranteed under the NLRA.  Furthermore, the six-month statute of limitations under the NLRA may be tolled in other unfair-labor-practice actions based on the employer's failure to post the notice.  Id. § 104.214(a).  Tolling will not apply, however, if the employee had actual or constructive notice that the employer's conduct was unlawful.  Id.  Significantly, if an employer's failure to post the notice is deemed to be knowing and willful, it may be used as evidence of motive in cases in which motive is an issue.  Id. § 104.214(b).

Noting that union membership has declined significantly, the NLRB contends that employees are not organizing or joining unions because they are not aware of their NLRA rights and that the notice will increase their awareness.  See 76 Fed. Reg. at 54006.  The rule is controversial, and employer groups and members of Congress have questioned the NLRB's statutory authority to enact it.  Other federal Acts, such as Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e-10, the Age Discrimination in Employment Act, 29 U.S.C. § 627, and the Family and Medical Leave Act, 29 U.S.C. § 2619(a), expressly require employers to post the notices.  However, the NLRA is silent on that issue.  The Society for Human Resources Management ("SHRM") opposed the rule, maintaining that the NLRB had exceeded its authority.  Furthermore, the NLRB is expressly creating a new unfair labor practice for failure to post the notice, a task that, SHRM maintains, should be left to Congress through legislation.  Because the six-month statute of limitations may now potentially be tolled by the NLRB in any unfair-labor-practice charge against an employer if the employer has failed to post the notice, such tolling could subject employers to unfair-labor-practice claims that were previously barred.  Legislation has been proposed that would reverse the NLRB's August 30 decision.  H.R. 2833, 112th Cong. (Sept. 1, 2011); see http://thehill.com/blogs/floor-action/house/179513-quayle-bill-would-reverse-nlrb-requirement-to-post-employee-rights.

The NLRB will have the notice available for download on its website, http://www.nlrb.gov/poster, by November 1, 2011.  Employers may also request a copy of the notice by contacting the NLRB at 1099 14th Street, N.W., Washington, DC 20570, or by contacting one of the NLRB's regional, subregional, or resident offices.  29 C.F.R. § 104.202(e).

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