Video Surveillance and ERISA Disability Claims

Many insurance companies use video surveillance in an attempt to "prove" that participants in ERISA-governed disability benefit plans are not "disabled" within the meaning of the plans. However, often times, the surveillance video footage doesn't really have any bearing on the individual's claimed disability. Insurance companies frequently require participants to submit to independent medical exams during the benefit application and appeal process and/or after benefits have already been granted. The companies then hire private investigators to take video footage of the participant the day of the exam. The investigators, in turn, videotape the participants leaving their homes, driving to the appointments, and returning home. Frequently, the video footage will show that the participant stopped to pick up a few groceries or dry cleaning on the way home. The insurers then argue that the video footage is proof that the participant is not "disabled" from performing their job duties.

Courts have historically been persuaded by this video evidence, even where it doesn't show the individual doing anything inconsistent with the claimed disability (i.e., just because one can drive to an appointment or carry a few groceries, doesn't mean that one can sit in front of a computer for the entirety of an eight hour work day). A recent case from the United States Court of Appeals for the First Circuit (the federal appellate court covering most of New England) shows that at least some courts will not be persuaded by such tactics. In Maher v. Massachusetts General Hospital Long Term Disability Plan (1st Cir., No. 10-1321, 12/7/11), the First Circuit ruled that a long-term disability benefit plan administrator gave too much weight to video surveillance of a plan participant's activities when it reviewed the participant's benefit claim, and thus the participant's claim had to be remanded to the administrator.

By way of background, Deborah Maher received long-term disability benefits through the Massachusetts General Hospital's long-term disability plan for chronic fibromyalgia. After five years, the plan's claim processor terminated Maher's benefits because surveillance videos showed Maher engaged in physical activity and playing with her son. The claim processor said that Maher was not totally disabled and could perform a sedentary nursing job. On administrative appeal, the plan administrator—Partners HealthCare System Inc.—upheld Maher's benefit termination. Maher then filed a lawsuit U.S. District Court for the District of Massachusetts. Applying a deferential standard of review, the district court upheld the plan's termination of Maher's benefits. In vacating the lower court's motion for summary judgment for the plan, the First Circuit failed to find any inconsistency between the video surveillance and the participant's claim of total disability. After working as a registered nurse, Maher subsequently appealed to the First Circuit. The appeals court was not persuaded, stating that Partners' video surveillance of Maher “confirm[ed] her lifestyle as generally housebound.” According to the court, 30 minutes of playing with her child in 90 hours of surveillance could not support the termination of Maher's benefits. The weight given to surveillance depends on both the amount and nature of the activity, the court said.

Settlement on the Horizon in Wal-Mart "Excessive Fee" 401(k) Lawsuit

The United States District Court for the Western District of Missouri granted preliminary approval earlier this week to a $13.5 million settlement of a putative "excessive fee" class action filed by participants in Wal-Mart Stores Inc.'s Section 401(k). In granting preliminary approval of the settlement, the District Court in Braden v. Wal-Mart Stores Inc., W.D. Mo., No. 6:08-cv-03109-GAF. noted that it was “preliminarily satisfied” that the settlement was “fair, reasonable, and adequate, such that it is appropriate to consider whether to certify a class for settlement purposes, whether the Settlement is sufficient to warrant issuance of notice to Class members, and whether the proposed notices adequately inform Class members of the material terms of the Settlement and their rights relating thereto.”

If the settlement is approved, Wal-Mart and co-defendant Merrill Lynch & Co. will pay $13.5 million to the participants, which will include attorneys' fees and costs. In addition, Wal-Mart's retirement plan committee will be required to: (1) retain an independent fiduciary to provide advice and recommendations on selecting and monitoring plan investment options; (2) review the consultant or independent adviser for conflicts of interest on an annual basis; (3) continue to make available to participants web-based investment education resources, including a retirement planning calculator; (4) remove and preclude the addition of fund investment options that are retail mutual funds; funds that pay Rule 12b-1 fees under federal securities law; and funds that provide revenue sharing, per-position or per-participant subtransfer agent fees, or other fees, to any party-in-interest as defined in Section 3(14) of the Employee Retirement Income Security Act, including the plan's trustee or recordkeeper; and (5) consider adding additional low-cost index funds as plan options.

By way of background, a plan participant filed a lawsuit in 2008 alleging that between January 2002 and the date he filed the lawsuit, the plan paid somewhere between $62 million and $92 million in fees to the plan's service providers. The plan, one of the largest Section 401(k) plans in the United States, offered its participants various investment choices, including 10 mutual funds, a common/collective trust, Wal-Mart common stock, and a stable value fund. All 10 of the mutual funds were retail class shares, which are generally more expensive than institutional class shares available to large retirement plans. The 10 mutual funds were predominantly actively managed rather than passively managed, which resulted in higher expenses, the lawsuit alleged.The Plaintiff further alleged in his lawsuit that the plan's fiduciaries who were responsible for the selection of the plan's investment options failed to prudently and loyally evaluate the investment options for participants and that they instead selected unreasonably expensive mutual funds that substantially diminished the retirement savings of plan participants. The lawsuit also alleged that the fiduciaries engaged in prohibited transactions under ERISA by allowing plan assets to be paid to the plan's trustee, Merrill Lynch, in the form of revenue-sharing payments. In addition, the lawsuit asserted that the fiduciaries breached their duties by failing to completely and accurately inform the plan's participants about the impact the mutual funds' excessive fees had on their retirement savings.

NLRB Votes To Shorten Timelines in Representation Elections

The National Labor Relations Board voted 2-to-1 last week to approve a resolution to proceed with a limited number of amendments to the NLRB election process. The amendments are drawn from a more comprehensive proposal put forward by the Board in June. Chairman Mark Pearce and Member Craig Becker voted in favor of the resolution, while Member Brian Hayes voted against it, during a one-hour public meeting at Board headquarters on Wednesday, Nov. 30. A video recording of the meeting is available on the Board website (www.nlrb.gov). As a result of the vote, a final rule will be drafted containing the proposed six amendments, which seek to reduce "delays" and "unnecessary" (in the words of the NLRB") litigation in the pre-election process. The final rule will be subject to approval of the Board, and if approved, will be published in the Federal Register.

The Board's action is a result of the failure of the Employee Free Choice Act ("EFCA") to pass Congress. In June, the Board submitted a proposal to compress the union representation election process into a shorter time frame. That proposal drew criticism from some in Congress and the business community, who argued that shortening the (what many employers view as an already short) time frame would deprive employers of the ability to effectively communicate their views to employees regarding union representation prior to elections. This, according to the critics, would result in an unbalanced playing field - with unions being able to communicate with employees about the benefits of union representation both pre- and post-petition (i.e., over a lengthy period of time) and employers' communications with employees in this regard being limited to a matter of days or weeks.

Last week, Board Chairman Mark Pearce offered a modified version of new regulations without some of the most controversial portions. The cumulative effect of these provisions is to shorten the time before a representation election is conducted following the filing of an election petition by a union seeking to represent a group of employees. As relevant here, the Resolution provides as follows:

• Appeals to the Board pertaining to both pre-election and post-election issues are consolidating into one post-election "request for review," resulting in a shortened period from petition filing to election.
• By eliminating the possibility of appealing pre-election matters, the time between the filing of an NLRB election petition and an election will be significantly reduced.
• The NLRB Hearing Officer will determine whether post-election hearing briefing is necessary.
• The Hearing Officer may reject an attempt by the parties to fully litigate issues not deemed to be related to a "Question Concerning Representation" ("QCR"). Although the Board has not yet defined that term for purposes of the rule, there are indications that the majority does not consider determination of an individual's supervisory status to be relevant to the determination of a QCR. That often crucial initial question for employers would be put off until after the election, where long and drawn out hearings could defeat the majority's articulated quest for speedy resolution.

The portions "left for future consideration" from the original proposal are:
• Electronic filing of election petitions;
• Mandatory scheduling of hearings seven days after the notice of hearing is served;
• Filing of position statements by the parties;
• Inclusion of telephone numbers and e-mail addresses on the Excelsior voting list; and
• Reducing an employer's time to file an Excelsior voting list from seven to two working days.

The Resolution must still go through formal drafting procedures and a final vote followed by review by the Office of Management and Budget. However, since Member Becker's appointment expires at the end of the year and the Board will be unable to act with only two members in place, it is expected that Board action will occur before December 31.

Court Rules for Xerox on Remand in Frommert v. Conkright

The United States District Court for the Western District of New York ruled recently that Xerox Corp.'s pension plan administrator reasonably determined that Xerox can offset the accrued benefit of employees rehired by the company prior to 1998 by the actuarial equivalent of their earlier lump-sum distributions. (Frommert v. Conkright, W.D.N.Y., No. 00-CV-6311L, 11/17/11). In so ruling the District Court afforded deference to the administrator's plan interpretation, following the United States Supreme Court's remand of the case.

The case arose from a dispute over Xerox's use of a “phantom account offset” to calculate the benefits of employees who were rehired after they had previously received lump-sum distributions of their pension benefits. A group of employees argued that the use of this offset violated ERISA. In 2004, the District Court ruled that Xerox did not illegally reduce benefits by applying the offset . On appeal, the U.S. Court of Appeals for the Second Circuit ruled that Xerox had violated ERISA's anti-cutback provision, and remanded the case to the district court, instructing it to craft a remedy. The administrator proposed taking prior distributions into account by expressing those distributions as an annuity starting at normal retirement age. According to the administrator, this approach would offset each employee's accrued benefit by the actuarial equivalent of the prior lump-sum distribution. The District Court did not give any deference to this proposed interpretation and instead ruled that Xerox had to pay anyone rehired prior to 1998 who had received a distribution of benefits the difference between the lump-sum pension benefits they received when they first left Xerox and the benefit they earned after they were rehired. The Second Circuit affirmed. In April of 2010, the Supreme Court ruled that the lower courts had to give deference to the administrator's interpretation of the plan with respect to the treatment of prior distributions to employees who were rehired prior to 1998 and remanded the case to the Second Circuit, which in turn remanded the case to the district court.

In the current decision, the District Court, guided by the Supreme Court's “admonitions,” ruled the administrator's proposed interpretation was reasonable and accepted that interpretation. The District Court said the administrator's interpretation reasonably and equitably took into account the time value of money. According to the District Court, the administrator's proposal was a reasonable attempt to apply the plan in a way that took into account prior distributions, consistent with what was disclosed to the employees in plan summaries and other communications. The District Court rejected the employees' argument that the administrator's interpretation could not stand because they were not provided with adequate notice of any “appreciated” offset to their benefits. The District Court noted the administrator's proposal was equitable because the employees were on notice that some offset would be applied to their prior distributions.

Is UGLY a Protected Class Under the Employment Discrimination Laws?

Check out this humorous clip from Comedy Central Network's the Daily Show, in which a well-respected economist at the University of Texas notes that how a person looks has an impact on pay and suggests that "ugly" should be a protected classification under the employment laws. Obviously, the Daily Show clip is meant to entertain (if not offend) and make the viewer laugh (or become enraged), but the issue is a real one. Economic studies show that attractive people earn more on average than less-attractive individuals. A recent article by a well-respected law professor noted that "unattractive" graduates of her law school earned significantly less on average than "attractive" graduates.

http://www.thedailyshow.com/watch/mon-november-14-2011/ugly-people.

Bailey & Ehrenberg Recognized By U.S. News

The Washington D.C. law firm Bailey Ehrenberg PLLC was recently recognized by, and listed in, U.S. News and World Reports for its ERISA litigation expertise. See http://lnkd.in/M96BS9

Employers Must Be Careful In Regulating Employees' Use of Social Media

There are interesting article in today's Chicago Tribune and Washington Post regarding companies' efforts to limit what their employees say about work online without running afoul of the law. According to the articles (http://www.chicagotribune.com/business/breaking/chi-nlrb-juggling-more-facebook-social-media-cases-20110926,0,6993316.story) (http://www.washingtonpost.com/business/technology/firings-discipline-over-facebook-posts-lead-to-surge-in-legal-disputes/2011/09/26/gIQAPN1ByK_story.html), confusion about what workers can or can't post has led to a surge of more than 100 complaints at the National Labor Relations Board (most within the past year) and created uncertainty for businesses about how far their social media policies can go. According to the articles, in one case, a car salesman was fired after going on Facebook to complain that his BMW dealership served overcooked hot dogs, stale buns and other cheap food instead of nicer fare at an event to roll out a posh new car model. The NLRB's enforcement office found the comments were legally protected because the salesman was expressing concerns about the terms and conditions of his job, frustrations he had earlier shared in person with other employees. The article notes that the NLRB's attorneys reached the opposite conclusion in the case of a Wal-Mart employee who went on Facebook to complain about management "tyranny" and used an off-color Spanish word to refer to a female assistant manager. In that matter, the board's attorneys said the postings were "an individual gripe" rather than an effort to discuss work conditions with co-workers and declined to take action against Wal-Mart. The articles goes on to note that the number of filings of such complaints increased greatly last year after the NLRB sided with a Connecticut woman fired from an ambulance company after she went on Facebook to criticize her boss. That case settled earlier this year, with the company agreeing to change its blogging and Internet policy that had banned workers from discussing the company over the Internet.

The articles are timely, as employees' use of social media and the limits on employers ability to regulate such use are developing areas of law. Social media comes into play in all aspects of workplace law, including in the area of employee benefits. For instance, many employers and insurance companies have denied (and/or attempted to deny) employees' claims for long term disability benefits or claimed need for family and medial leave where employees claimed an inability to work due to severe depression but subsequently posted pictures of themselves dancing, vacationing and and smiling on Facebook (i.e., the employees were yucking it up while they were out on disability or medical leave allegedly due to severe depression). It will be interesting to see how the law develops around these issues. Employers and employees should stay tuned for more.

DOL To Re-Propose Rule on Definition of Fiduciary

The U.S. Department of Labor's (DOL) Employee Benefits Security Administration (EBSA) will re-propose its rule on the definition of a fiduciary. According to EBSA, the re-proposal is designed to inform judgments, ensure an open exchange of views and protect consumers while avoiding unjustified costs and burdens. The decision to re-propose is in part a response to requests from the public, including members of Congress, that the agency allow an opportunity for more input on the rule. This extended input will supplement more than 260 written public comments already received by EBSA, as well as two days of open hearings and more than three dozen individual meetings with interested parties held by the agency. According to an EBSA press release, the DOL anticipates revising provisions of the rule including, but not restricted to, clarifying that fiduciary advice is limited to individualized advice directed to specific parties, responding to concerns about the application of the regulation to routine appraisals and clarifying the limits of the rule's application to arm's length commercial transactions, such as swap transactions. Also anticipated are exemptions addressing concerns about the impact of the new regulation on the current fee practices of brokers and advisers, and clarifying the continued applicability of exemptions that have long been in existence that allow brokers to receive commissions in connection with mutual funds, stocks and insurance products. DOL/EBSA is seeking to amend a 1975 regulation, which defines when a person providing investment advice becomes a fiduciary under the Employee Retirement Income Security Act (ERISA), in order to (according to DOL/EBSA) adapt the rule to the current retirement marketplace. The proposal's goal is (again, according to DOL/EBSA) to ensure that potential conflicts of interest among advisers are not allowed to compromise the quality of investment advice that millions of American workers receive.

Bailey & Ehrenberg PLLC Announces Arrival of Terrence M. Deneen

Bailey & Ehrenberg PLLC is pleased to announce that Terrence M. Deneen, formerly Chief Insurance Program Officer at the federal Pension Benefit Guaranty Corporation, has joined the firm as Of Counsel. As the CIPO from 2004 until his retirement in early 2011, Terry was one of the highest-ranking career employees at PBGC and led the staff of nearly 150 attorneys, financial analysts, and actuaries who represent the agency in negotiations, bankruptcies and litigation with plan sponsors, including in high profile matters such as the Chrysler, General Motors, and Delphi bankruptcies. He is well-known for his work with underfunded multiemployer retirement plans and financially distressed corporate plan sponsors.

Terry began his career with PBGC as a staff attorney from 1978-81 and helped secure the passage of the landmark Multiemployer Pension Plan Amendments Act of 1980, the first significant amendment to ERISA. Terry returned to PBGC in 1992 following a stint in private practice, and served in senior legal positions before his appointment as CIPO. With this move, Terry re-unites with B&E partner Jeff Cohen as they team up for the third time in their careers. In the early 1980’s they worked together on the legal staff of the UMWA Health & Retirement Funds, and then served the public together in senior positions at PBGC for many years. Terry is a Charter Fellow of the American College of Employee Benefits Counsel and a recipient of PBGC’s Distinguished Career Service Award.

The addition of Mr. Deneen and his unparalleled depth and breadth of knowledge and experience in ERISA matters is the latest step in the growth of B&E’s employee benefits practice. The firm advises on all aspects of employee benefits law and litigates a broad range of benefits issues. Bailey & Ehrenberg PLLC handles the most sophisticated legal matters while providing clients with personalized service. Our partners are experienced attorneys with solid reputations as strategic problem solvers, skilled negotiators, and aggressive litigators. Please contact our offices to find out how we can help you or your organization.

EEOC Tries to Catch a Big Fish - Sues Bass Pro Shops

In a lawsuit filed last week, the United States Equal Employment Opportunity Commission (EEOC) alleged that Bass Pro Outdoor World, LLC (Bass Pro), a nationwide retailer of sporting goods, apparel, and other miscellaneous products, engaged in a pattern or practice of failing to hire African-American and Hispanic applicants for positions in its retail stores nationwide, and retaliated against employees who opposed the discriminatory practices. According to the EEOC’s suit filed in U.S. District Court for the Southern District of Texas, Houston Division (Civil Action No. 4:11-CV-3425), Bass Pro has been discriminating in its hiring since at least November 2005. The EEOC’s suit alleges that qualified African-Americans and Hispanics were routinely denied retail positions such as cashier, sales associate, team leader, supervisor, manager and other positions at many Bass Pro stores nationwide. The lawsuit also alleges that managers at Bass Pro stores in the Houston area, in Louisiana, and elsewhere made overtly racially derogatory remarks acknowledging the discriminatory practices, including that hiring black candidates did not fit the corporate profile. The lawsuit also claims that Bass Pro unlawfully destroyed or failed to keep records and documents related to employment applications and internal discrimination complaints. Bass Pro punished employees who opposed the company’s unlawful practices, in some instances firing them or forcing them to resign. If true, this alleged behavior would violate Title VII of the Civil Rights Act of 1964, which prohibits discrimination based on race and national origin, and prohibits employers from retaliating against employees who complain about employment discrimination and requires them to keep certain employment records.

The EEOC’s administrative investigation culminated in findings of class-wide hiring discrimination based on statistical and anecdotal evidence, and retaliation. The EEOC attempted to reach a voluntary settlement with Bass Pro before filing suit. The lawsuit seeks a permanent injunction prohibiting Bass Pro from engaging in race discrimination, national origin discrimination, retaliation, and improper record destruction. It also seeks back pay on behalf of victims of hiring discrimination and/or retaliation, compensatory and punitive damages and other relief, including implementing fair recruitment and hiring procedures, and reinstatement or rightful-place hiring of mistreated job applicants and former employees.

IRS Announces Independent Contractor Misclassication Correction Program

The Internal Revenue Service (IRS) has developed a new program to permit taxpayers to voluntarily reclassify workers as employees for federal employment tax purposes. The Voluntary Classification Settlement Program (VCSP) allows eligible taxpayers to voluntarily reclassify their workers for federal employment tax purposes and obtain relief similar to that obtained in the current Classification Settlement Program (CSP). The VCSP is optional and provides taxpayers with an opportunity to voluntarily reclassify their workers as employees for future tax periods with limited federal employment tax liability for the past nonemployee treatment. To participate in the program, the taxpayer must meet certain eligibility requirements, apply to participate in VCSP, and enter into a closing agreement with the IRS.

Whether a worker is performing services as an employee or as an independent contractor depends upon the facts and circumstances and is generally determined under the common law test of whether the service recipient has the right to direct and control the worker as to how to perform the services. In some factual situations, the determination of the proper worker classification status under the common law may not be clear. For taxpayers under IRS examination, the current CSP is available to resolve federal employment tax issues related to worker misclassification, if certain criteria are met. The examination CSP permits the prospective reclassification of workers as employees, with reduced federal employment tax liabilities for past nonemployee treatment. The CSP allows business and tax examiners to resolve the worker classification issues as early in the administrative process as possible, thereby reducing taxpayer burden and providing efficiencies for both the taxpayer and the government.

In order to facilitate voluntary resolution of worker classification issues and achieve the resulting benefits of increased tax compliance and certainty for taxpayers, workers and the government, the IRS has determined that it would be beneficial to provide taxpayers with a program that allows for voluntary reclassification of workers as employees outside of the examination context and without the need to go through normal administrative correction procedures applicable to employment taxes.

The VCSP is available for taxpayers who want to voluntarily change the prospective classification of their workers. The program applies to taxpayers who are currently treating their workers (or a class or group of workers) as independent contractors or other nonemployees and want to prospectively treat the workers as employees. To be eligible, a taxpayer must have consistently treated the workers as nonemployees, and must have filed all required Forms 1099 for the workers for the previous three years. The taxpayer cannot currently be under audit by the IRS. Furthermore, the taxpayer cannot be currently under audit concerning the classification of the workers by the Department of Labor or by a state government agency. A taxpayer who was previously audited by the IRS or the Department of Labor concerning the classification of the workers will only be eligible if the taxpayer has complied with the results of that audit.

A taxpayer who participates in the VCSP will agree to prospectively treat the class of workers as employees for future tax periods. In exchange, the taxpayer will pay 10 percent of the employment tax liability that may have been due on compensation paid to the workers for the most recent tax year, determined under the reduced rates of section 3509 of the Internal Revenue Code; will not be liable for any interest and penalties on the liability; and will not be subject to an employment tax audit with respect to the worker classification of the workers for prior years. Additionally, a taxpayer participating in the VCSP will agree to extend the period of limitations on assessment of employment taxes for three years for the first, second and third calendar years beginning after the date on which the taxpayer has agreed under the VCSP closing agreement to begin treating the workers as employees.

Eligible taxpayers who wish to participate in the VCSP must submit an application for participation in the program. Information about the VCSP and the application will be available on www.irs.gov. Along with the application, the name of a contact or an authorized representative with a valid Power of Attorney (Form 2848) should be provided. The IRS will contact the taxpayer or authorized representative to complete the process once it has reviewed the application and verified the taxpayer's eligibility. The IRS retains discretion whether to accept a taxpayer's application for the VCSP. Taxpayers whose application has been accepted will enter into a closing agreement with the IRS to finalize the terms of the VCSP and will simultaneously make full and complete payment of any amount due under the closing agreement.

Not A Happy Chanukah - EEOC Sues "Menorah House" For Religious Discrimination

A Baca Raton nursing and rehabilitation facility violated federal law by firing an employee over Sabbath-keeping issues, the U.S. Equal Employment Opportunity Commission (EEOC) charged in a lawsuit it filed today. According to the EEOC’s suit (EEOC v. Menorah House, case no. 9:11-cv-80825) filed in the U.S. District Court for the Southern District of Florida, that Boca Group LLC, doing business as Menorah House, denied a religious accommodation to Philomene Augustin and fired her because of her religious beliefs. Augustin, who worked at Menorah House as a certified nursing assistant, is a Seventh-Day Adventist, and her Sabbath is from sundown on Friday to sundown on Saturday evening. Menorah House had accommodated Augustin’s request not to work on her Sabbath for over ten years until management instituted a new policy requiring all employees to work on Saturdays, regardless of their religious beliefs. Such alleged conduct, if proven, would violate Title VII of the Civil Rights Act of 1964, which prohibits religious discrimination and requires employers to make reasonable accommodations to employees’ sincerely held religious beliefs so long as this does not pose an undue hardship. According to the EEOC, “[t]he law seeks to strike a balance between reasonably accommodating religious beliefs and respecting legitimate business concerns ... [u]nfortunately, in this case the employer refused its legal obligation to pursue a solution that’s fair for all concerned.” The EEOC filed suit after first attempting to reach a pre-litigation settlement through its conciliation process. The agency is asking the court to grant a permanent injunction enjoining Menorah House from further engaging in any employment practice that discriminates against employees because of their religious belief and requiring the company to reasonably accommodate the religious beliefs of employees. The suit also asks the court to order Menorah House to reinstate Augustin, grant back pay, provide compensatory and punitive damages and award any other relief the court deems necessary and proper.

EEOC Examines Criminal Background Checks

The Washington Post reports that the United States Equal Employment Opportunity Commission ("EEOC") is holding a hearing today on whether arrest and conviction records are a hiring barrier for minorities. According to the Post article, an increasing number of employers are seeking background checks out of security concerns. Federal policy currently prevents companies from using criminal records to screen out job applicants unless the criminal conduct is job related. The EEOC and other anti-discrimination advocates argue that because African Americans and Hispanics have higher rates of arrest and convictions than whites, they could suffer discrimination if companies do blanket criminal background checks that eliminate them from consideration for a job. The article also reports that credit background checks, which are permitted under federal law, are not up for reconsideration. See www.washingtonpost.com for the full article.

Employers Cutting Workplace Benefits

There is an interesting article in today's Chicago Tribune on the decline of workplace benefits. According to the article, traditional pension plans, paid family leave, and even the company picnic are all on the decline, as employers have significantly cut many of the benefits they offer to workers over the past five years. Here is a look at the workplace perks that have significantly declined since 2007. Some of the traditional workplace perks that have declined over the past few years include:

Traditional (i.e., defined benefit) pension plans. Traditional pensions were offered at 40 percent of the companies surveyed in 2007. Now just 22 percent of firms provide access to a retirement plan that guarantees payments for life.

Retiree health care coverage. The proportion of companies offering retiree health insurance declined from 35 percent in 2007 to 25 percent in 2011.

Long-term care insurance. Just over a quarter of employers provide long-term care insurance for workers, down from 46 percent in 2007.

HMOs. The number of companies with HMOs decreased from 48 percent in 2007 to 33 percent today.

Paid family leave. A third of companies offered paid family leave in 2007, but now only a quarter of companies provide paid time off for births, deaths, and other significant family events.

Adoption assistance. Adoption assistance is another waning employer benefit, with just 8 percent of companies helping with adoption costs, down from 20 percent five years ago.

Professional development opportunities. While nearly all (96 percent) companies paid for professional development opportunities in 2007, only 87 percent will in 2011.
Life insurance for dependents. About half (55 percent) of companies provide life insurance for children and other dependents, down from 65 percent in 2007

Incentive bonus plans. Incentive bonus plans for high-level employees are down 10 percentage points since 2007.

Casual dress day. Only about half (55 percent) of employers say they encourage or allow employees to dress casually one day per week, down from 66 percent in 2007. Legal assistance. One in five companies provides legal assistance or services to workers, down from a third of employers five years ago.

The company picnic. Only about half (55 percent) of firms scheduled a company picnic in 2011, down from 64 percent in 2007.

See http://www.chicagotribune.com/features/tribu/ct-tribu-benefits-disappearing-story,0,7928170.story for the full article.

Supreme Court Issues Significant ERISA Remedies Decision

In CIGNA Corp. v. Amara, the United States Supreme Court vacated a federal district court's decision that had ordered CIGNA Corp. to reform its cash balance pension plan to remedy the company's violations of its ERISA notice obligations. In so ruling, the Court had cause to interpret two frequently litigated sections of ERISA - Sections 502(a)(1)(B) and Section 502(a)(3).

By way of background, in February 2008, the U.S. District Court for the District of Connecticut ruled that CIGNA violated ERISA's notice and disclosure requirements when it issued SPDs and summaries of material modifications that did not explain that participants' benefits would be subject to “wear away." In June 2008, the District Court issued a decision addressing the remedies available to the participants for CIGNA's violation of the notice and disclosure requirements of ERISA. The District Court specifically said that the remedies would fall under ERISA Section 502(a)(1)(B), and the court shied away from determining whether the remedies would qualify as equitable remedies under Section 502(a)(3). The district court said the participants were “likely harmed” by the SPDs' failure to mention that benefits would be subject to “wear away” and rejected CIGNA's contention that the participants needed to show they detrimentally relied on the SPDs. In October 2009, the U.S. Court of Appeals for the Second Circuit affirmed the lower court's decision without giving an explanation for its rationale. CIGNA then filed a petition for Supreme Court review, urging the high court to adopt a detrimental reliance standard. The Supreme Court granted review of the case and heard oral arguments last November.

Once the case reached the Supreme Court, CIGNA argued that the only remedy available to the participants for a deficient SPD would be under the equitable remedies provision of ERISA Section 502(a)(3). Thus, CIGNA argued that the District Court's remedies decision should be vacated because it was premised on ERISA Section 502(a)(1)(B). The Supreme Court accepted this argument and ruled that it was an error for the District Court to base its remedies on Section 502(a)(1)(B). According to the Court, although Section 502(a)(1)(B) allows courts to enforce the “terms of the plan,” nothing in Section 502(a)(1)(B) grants district courts the power to change plan terms. Interpreting Section 502(a)(1)(B), the unanimous Court held that the District Court erred when it issued remedies under this provision of ERISA. According to the Court, Section 502(a)(1)(B) cannot be used to enforce the terms of summary plan descriptions, as SPDs do not qualify as “plan terms.”

The Court’s decision did not stop there, a fact that has created a fair amount of controversy in the legal community. The Court went on to find that while Section 502(a)(1)(B) did not authorize the relief issued by the District Court, ERISA Section 502(a)(3)‘s equitable remedies provision conceivably could provide a source of relief. Cigna had argued that, in order for the participants to obtain relief under Section 502(a)(3) for SPD disclosure violations, they had to demonstrate detrimental reliance. The Supreme Court rejected this argument – sort of – stating that ERISA sets out no particular standard for determining whether participants have been harmed by a faulty SPD. According to the Court, although courts of equity traditionally required a plaintiff to prove detrimental reliance when they brought estoppel claims, equity courts did not insist upon a showing of detrimental reliance in other cases that would be analogous to the participants' case against CIGNA. The Court went on to state that other types of equitable remedies, such as surcharge, only required a showing of actual harm. “[A]ctual harm may sometimes consist of detrimental reliance, but it might also come from the loss of a right protected by ERISA or its trust-law antecedents. In the present case, it is not difficult to imagine how the failure to provide proper summary information, in violation of the statute, injured employees even if they did not themselves act in reliance on summary documents—which they might not themselves have seen—for they may have thought fellow employees, or informal workplace discussion, would have let them know if, say, plan charges would likely prove harmful. We doubt that Congress would have wanted to bar those employees from relief.” The Court said that for the plan participants to obtain relief for CIGNA's violations of ERISA's SPD disclosure requirements, they would need to show that they were actually harmed by the violation, but they would not need to prove detrimental reliance.

Justices Scalia and Thomas joined in the Court's decision, stating they agreed with the court that Section 502(a)(1)(B) does not authorize relief for misrepresentations in SPDs. But the two justices said the Court should have gone no further than to find that Section 502(a)(1)(B) provided no remedy. “Nothing else needs to be said to dispose of this case. The District Court based the relief it awarded upon ERISA §502(a)(1)(B), and that provision alone,” Scalia wrote. Scalia asserted that it was not the Court’s usual practice to decide issues that a lower court did not decide. Here, the District Court did not decide whether remedies would be available under Section 502(a)(3) and thus the Supreme Court should not have delved into that issue. Scalia said the Supreme Court had “guessed” that the District Court would have issued remedies under both Section 502(a)(1)(B) and 502(a)(3) had the District Court not been hesitant about the availability of equitable remedies under Section 502(a)(3). “This speculation upon speculation hardly renders our discussion of §502(a)(3) relevant to the decision below; it is utterly irrelevant.” Scalia also said that the Court’s discussion of the Section 502(a)(3) remedies was “purely dicta” and would not be binding on the Supreme Court in future cases, or on the District Court on remand. “The District Court need not read any of it—and, indeed, if it takes our suggestions to heart, we may very well reverse.”

Employers Should Take Care When Using Unpaid Interns

In a world where the United States’ economy is attempting to recover from a recession and the work force is saturated, some for-profit entities may receive inquiries from individuals about working for them as unpaid interns. For-profit entities should be aware that allowing individuals to work unpaid internships may run afoul of the Fair Labor Standards Act (“FLSA”) if not done pursuant to the narrow exclusion to the FLSA carved out by the Supreme Court.

By way of background, the FLSA places on employers the requirement of paying to all individuals they employ minimum and overtime wages. Accordingly, if an individual is an employee of the employer the FLSA applies. The FLSA defines broadly the term “employ” to include “‘to suffer or permit to work’ and . . . defines ‘employee’ as ‘any individual employed by an employer.’” Walling v. Portland Terminal Co., 330 U.S. 148, 152 (1947) (quoting 29 U.S.C. § 214 (3)(g)). Conceivably then, all unpaid internship could fall under such a broad definition. The Supreme Court has instructed, however, that the FLSA “was obviously not intended to stamp all persons as employees who, without any express or implied compensation agreement, might work for their own advantage on the premises of another.” Id. In other words, the FLSA “cannot be interpreted so as to make a person whose work serves only his own interest an employee of another person who gives him aid and instruction.” Id. Thus, for-profit entities are not subject to the requirements of the FLSA when they hire an intern whose work serves their own interest and only receives aid and instruction from the for-profit entity.

For-profit entities should note that the exclusion is not dependent on statements by individuals and/or the for-profit entities that the individual is working on a “volunteer” basis. As the Supreme Court has stated, “[i]f an exception to the [FLSA] were carved out for employees willing to testify that they performed work ‘voluntarily,’ employers might be able to use superior bargaining power to coerce employees to make such assertions, or to waive their protections under the [FLSA].” Tony & Susan Alamo Found. v. Sec’y of Labor, 471 U.S. 290, 302 (1985). So when does the exclusion apply to unpaid internships?

Recently, the Wage and Hour Division of the DOL established the following test to assist for-profit entities in making the determination of whether the exclusion applies to individuals working unpaid internships. If all of the following criteria apply, the trainee or students are not employees within meaning of the Act:
1. The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;
2. The internship experience is for the benefit of the intern;
3. The intern does not displace regular employees, but works under close supervision of existing staff;
4. The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;
5. The intern is not necessarily entitled to a job at the conclusion of the internship; and
6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship. (Internship Programs Under The Fair Labor Standards Act).

The test is essentially one of “economic reality” that should be employed on a case by case basis. See Tony & Susan Alamo Found., 471 U.S. at 301.

In sum, for-profit entities should be careful when considering whether to allow an individual to work an unpaid internship. Failure to adequately consider the “economic reality” of the relationship between the intern and the for-profit entity prior to the commencement of the relationship could result in unintended losses for the employer.

Supreme Court Issues Potentially Signficant ERISA Decision

In CIGNA Corp. v. Amara, --- U.S. ----, 2011 U.S. LEXIS 3540, 50 EB Cases (BNA) 2569 (2011), CIGNA Corporation changed the pension plan for its employees. The employees challenged the change on the ground that “CIGNA had failed to give proper notice of changes to their benefits, particularly because the new plan in certain respects provided them with less generous benefits.” The District Court sided with the employees and ordered that the new plan be reformed finding legal authority to do so in Section 502(a)(1)(B). The Second Court affirmed the District Court’s decision and the parties appealed to the Supreme Court. The Supreme Court granted certiorari on one issue, “whether a showing of ‘likely harm’ is sufficient to entitle plan participants to recover benefits based on faulty disclosures.”

Before reaching the question on which it granted certiorari, the Supreme Court considered, based on CIGNA’s briefing, whether Section 502(a)(1)(B) authorized the relief the District Court awarded. The Supreme Court held that it does not. Rather than stopping there, the Court went on to state, in dicta, that the relief the District Court awarded could be provided under Section 502(a)(3). The Supreme Court reasoned that the relief provided by the District Court closely resembles three other traditional equitable remedies: reformation; equitable estoppel; and surcharge. Importantly, the Supreme Court opined that surcharge was a form of monetary compensation for a loss resulting from a trustee’s breach of duty, or to prevent the trustee’s unjust enrichment. The further stated, “insofar as award of make-whole relief is concerned, the fact that the defendant in this case, unlike the defendant in Mertens, is analogous to a trustee makes a critical difference.” Nevertheless, the Supreme Court remanded the case to the District Court to revisit its determination of an appropriate remedy for the violations of ERISA it identified.

Justice Thomas joined Justice Scalia in concurring in the judgment. Justice Scalia emphasized, however, that neither the District Court nor the parties to the case squarely addressed whether relief was available under 502(a)(3). Thus, Justice Scalia reasoned, “[t]he Court’s discussion of the relief available under [Section] 502(a)(3) and Mertens is purely dicta, binding upon neither us nor the District Court. The District Court need not read any of it—and, indeed, if it takes our suggestions to heart, we may very well reverse.” The Supreme Court’s decision, therefore, places in doubt what relief is available under 502(a)(3) and exactly under what circumstances. These issues will likely be clarified by the lower courts in the time to come.

Another Ruling in the YRCW Stock-Drop Litigation

The U.S. District Court for the District of Kansas issued another ruling last Friday in In re YRC Worldwide Inc. ERISA Litigation, D. Kan., No. 2:09-cv-02593-JWL-JPO (April 15, 2011 ) that we recently reported on. Specifically, the District Court ruled that ERISA’s fiduciary safe harbor provision, Section 404(c), does not relieve fiduciaries of liability if they assemble an imprudent menu of plan investments. Section 404(c) provides a defense to a breach of fiduciary duty claim if the loss caused by the breach resulted from a plan participant's exercise of control over his or her investments. The plaintiffs in the case filed a motion to strike several of the defendants' asserted affirmative defenses. In their motion to strike the Section 404(c) defense, the plaintiffs cited to the U.S. Court of Appeals for the Seventh Circuit's recent decision in Howell v. Motorola Inc., 663 F.3d 552 (7th Cir. 2011), where the Seventh Circuit adopted the DOL’s view that Section 404(c) does not immunize plan fiduciaries that make imprudent investment selections. The YRC defendants attempted to downplay the significance of Howell by saying the Seventh Circuit's discussion of Section 404(c) was mere dicta. The defendants also argued that even if the Section 404(c) discussion in Howell was not dicta, it extended only to the “selection” of investment options, not the decision to continue offering an investment once it is selected. The District Court rejected the defendants’ arguments stating that (1) the Seventh Circuit's decision regarding Section 404(c) was not dicta and, (2) the Howell opinion “is in no way limited” to the selection of investment options. According to the District Court, “[t]he opinion expressly references the decision ‘to continue offering a particular investment vehicle'—allegations which are clearly encompassed in the Amended Complaint—and the rationale offered by the Seventh Circuit clearly applies to decisions from the initial selection decision to other decisions relating to the investment menu offered under the Plan.” The District Court also rejected the defendants' argument that the court should follow the lead of a minority of federal courts, including the U.S. Court of Appeals for the Fifth Circuit, that have declined to give effect to the DOL’s interpretation of Section 404(c). The District Court noted its belief that, if confronted with this issue, the U.S. Court of Appeals for the Tenth Circuit would conclude, like the Seventh Circuit, that Section 404(c) does not insulate a fiduciary from liability for assembling an imprudent investment menu.

Federal Court Grants Class Certification in YRC Worldwide "Stock-Drop" Litigation

The United States District Court for the District of Kansas has certified a class of approximately 17,000 YRC Worldwide Inc. (“YRCW”) employees who invested their retirement plan accounts in YRCW stock, and allegedly saw a decline in their accounts balances as the value of the shares plunged. See In re YRC Worldwide Inc. ERISA Litigation, D. Kan., No. 2:09-cv-02593-JWL-JPO (4/6/11). The class certification ruling comes approximately five months after the District court denied YRCW’s motion to dismiss the stock-drop lawsuit filed by employees who claimed the stock should have been taken out of YRCW’s 401(k) plan.

The decision is significant because it provides support for the minority view that the "Moench “presumption of prudence" discussed in our prior blog entries can be overcome at the pleading stage. As we have noted, the Moench presumption more frequently than not prevents plaintiffs from getting to the discovery phase of litigation – as plaintiffs typically cannot, or do not, allege enough facts in their complaint to show that they can rebut the presumption.

The YRCW case involved some interesting class-action stock-drop defense arguments. By way of background, the plaintiffs alleged that the fiduciaries YRCW’s 401(k) plan breached fiduciary duties under ERISA when they continued to invest in YRCW's stock even as the stock price plummeted. The plaintiffs alleged that YRCW’s stock dropped from a high of $25.96 per share in October 2007 to a low of 45 cents per share in March 2010. The fiduciary defendants offered several arguments as to why the court should not certify the lawsuit as a class action. One argument was that the typicality requirement for class certification could not be met in this stock-drop case, where there was no allegation that the fiduciaries failed to make “full disclosure” about YRCW’s financial struggles. [In most of the stock-drop cases, there are two allegations of wrongdoing on the part of ERISA fiduciaries. First, plaintiffs typically allege that plan fiduciaries breached their duty of prudence under Section 404(a) of ERISA by continuing to invest in company stock, even after the stock price spiraled downward. Second, plaintiffs frequently assert that the fiduciaries made misrepresentations or failed to disclose material information about the company's finances, and that had they known this information, the plaintiffs/participants which would have taken other action.] In the YRCW case, there was no allegation that YRCW had not made full disclosure to the participants about the performance YRWC, and the defendants argued that in the absence of a disclosure claim, class certification was inappropriate because the District would need to examine the prudence claim by looking at participants' individual investment choices. The District Court rejected this argument, stating that it could find no legal authority to support the YRCW fiduciaries' position. According to the District Court, “courts presented with both prudence claims and communications claims consistently treat those claims as entirely distinct such that the alleged misrepresentations or nondisclosures appear to have no bearing whatsoever on the prudence claim.”

The District Court also rejected the defendants’ argument that Section 404(c) of ERISA (which provides a defense to a breach of fiduciary duty claim if the loss caused by the breach resulted from a participant's exercise of control over his or her investments). The District Court also rejected the defendants’ argument that the Supreme Court’s 2008 LaRue decision brought an end to class certifications under Federal Rule of Civil Procedure 23(b)(1)(B) for ERISA fiduciary breach claims brought by defined contribution pension plan participants. [Many defendants in stock drop cases have argued that LaRue casts doubt on whether fiduciary breach claims brought under Section 502(a)(2) of ERISA are suitable for class action treatment given that the Supreme Court found in LaRue that individuals can bring their own claims.] According to the District Court, nothing in LaRue prevents class certification under Rule 23(b)(1)(B) of ERISA breach actions brought under ERISA Section 502(a)(2).

Coca-Cola and the Inconsistent Oral Promise

A participant in Coca-Cola Enterprises Inc.'s ("Coke") pension plan can continue with his claim alleging Coke calculated his benefits in a way that did not account for an oral agreement to not offset his Coke plan benefits with benefits he accrued while he was a union employee and participated in a retirement plan through the union. See Giordano v. Coca-Cola Enterprises Inc., E.D.N.Y., No. 08-0391 (WDW), 3/7/11. The case involved an "inconsistent oral promise" - a situation often confronted in ERISA benefit cases. The issue in such cases is whether courts should recognize oral agreements that conflict with the terms of written plan documents. In general, courts have found that oral promises cannot modify the terms of written ERISA plan documents.

By way of background, the participant began working for Coca-Cola Bottling Co. of New York (CCBCNY) in November 1971 and participated in the Soft Drink and Brewery Workers Union Local 812 retirement plan. He worked for CCBCNY as a union employee for nearly 26 years, until he was promoted to a nonunion position in March 1997. At that time, he ceased to accrue benefits under the union's plan and became a participant in CCBCNY's retirement plan for nonunion employees. CCBCNY's plan for nonunion employees stated that benefits were subject to a reduction for any benefit an employee was eligible to receive on account of participation in a union retirement agreement to which the company contributed. The participant argued that this provision did not apply to him because of an oral agreement negotiated prior to his accepting the nonunion position. Under that oral agreement, CCBCNY allegedly agreed to pay him benefits based on a hiring date of November 1971 with no offset of any union benefits. The participant also alleged he received benefit statements over the course of 10 years that confirmed this agreement. However, the statements included disclaimers that benefits would be calculated in accordance with plan documents.

In denying Coke's motion for summary judgment as to the participant's benefit claim under ERISA Section 502(a)(1)(B), the court noted that the U.S. Court of Appeals for the Second Circuit has held that oral promises generally are unenforceable under ERISA. However, the court said material issues of fact remained that prevented entering summary judgment for CCE on Giordano's benefit claim. However, the court noted there are exceptions for promissory or equitable estoppel where “extraordinary circumstances” are shown. Facts demonstrating extraordinary circumstances must go beyond a showing of reliance, harm, or injustice, the court said. The court said that regardless of whether the case involved promissory or equitable estoppel, the alleged oral agreement and the 10 years of statements that appeared to confirm the terms of the alleged agreement presented issues of material fact and inferred that they amounted to extraordinary circumstances, if proven. The court added that issues of fact remained regarding the discrepancy between the benefit estimates and the final benefit.

PBGC Proposal Links Timing of Guaranteed Benefits to Plan Shutdowns

The Pension Benefit Guaranty Corporation ("PBGC") released a proposed rule this morning that would amend PBGC's regulation on benefits payable in terminated single-employer plans by adding rules for phasing in PBGC-guaranteed pension benefits. The proposed amendments would implement Section 403 of the Pension Protection Act of 2006, which makes the phase-in period for guaranteed benefits contingent on the occurrence of an “unpredictable contingent event,” such as a plant shutdown. Under the proposed rule, PBGC-guaranteed benefits could begin no earlier than the date of a plant shutdown or other unpredictable contingent event. The public comment deadline for the proposed rule is May 10.

D.C. Court Denies Motion to Compel Arbitration in MTV "Real World" Litigation

The United States District Court for the District of Columbia ruled today that a woman who appeared on an episode of MTV's "The Real World" may maintain her lawsuit in federal court and will not have to arbitrate her claims based on video footing the Defendants allegedly obtained without the Plaintiff's authorization while she was intoxicated. Although not an employment or benefits case, we think the case worth mentioning here as it involves the arbitrability of disputes in general, an issue that frequently arises in the employment law context (it is also worth mentioning because our firm represents the plaintiff in the case).

By way of background, the Plaintiff brought suit in the Superior Court of the District of Columbia alleging invasion of privacy, intentional infliction of emotional distress, and negligent infliction of emotional distress against Defendants Viacom, Inc., MTV Networks, and Bunim-Murray Productions, based on her allegedly unauthorized appearance on MTV's "The Real World" reality television show. Specifically, the Plaintiff alleged in Counts I and II of her Complaint, that Defendants invaded her privacy by portraying her in a false light and by disclosing private facts about her without her consent. In Count III, she alleged that Defendants intentionally caused her emotional distress by airing the episodes and outtakes and by continuing to disseminate the footage after she notified Defendants that the footage had caused her severe emotional distress. Lastly, in Count IV, the Plaintiff claimed that the Defendants negligently caused her emotional distress by airing the footage. With regards to Counts III and IV, the Plaintiff emphasized that Defendants knew or should have known that she was particularly susceptible to emotional distress because she stated in part of the footage Defendants obtained and aired on MTV's networks that she suffered from anxiety.

On May 12, 2010, the Defendants removed the action to the United States District Court for the District of Columbia pursuant to 28 U.S.C. §§ 1332, 1441, and 1446. The Defendants then filed a Motion to Compel Arbitration, or in the Alternative, to Stay the Litigation. The Defendants argued that, prior to Defendants obtaining any video footage of Plaintiff, the Plaintiff had signed a release authorizing Defendants to use any video footage taken while Plaintiff was in the Real World house and that the Plaintiff agreed in the release to submit any disputes arising under the release to arbitration. The Defendants argued that the Federal Arbitration Act dictates that the dispute had to be decided in arbitration and not in federal court. The Plaintiff countered that the FAA also dictates that certain issues must be decided by the courts. The Plaintiff noted that Section 4 of the FAA, which was at issue in the case, provides that “[i]f the making of the arbitration agreement or the failure, neglect, or refusal to perform the same be in issue, the court shall proceed summarily to the trial thereof.” The Plaintiff argued that her intoxication placed the “making of the arbitration agreement” at issue and therefore the enforceability of the agreement was for the Court to decide (not surprisingly, the Defendants argued, on the other hand, that the case law compelled the conclusion that the intoxication challenge should be decided by the arbitrator in the first instance).

Ultimately, the Court agreed with the Plaintiff. The Court noted that the Plaintiff challenged the making of the Arbitration Agreement on the grounds of intoxication and that under relevant law, voluntary intoxication is a type of mental capacity defense that permits an individual to avoid a contract if she was so intoxicated at the time of formation that she could not understand the terms and conditions of the agreement. The Court concluded that because this mental capacity defense went to the formation, or the “making” of the Arbitration Agreement, under § 4 of the FAA it must be decided by this Court. Consequently, the Court denied Defendants’ Motion to Compel Arbitration.

Finally, the Court noted that the Defendants also sought, through their motion to compel and stay, summary judgment on Plaintiff’s intoxication defense, arguing that Plaintiff cannot bear her burden of proof. The Court noted that the had offered evidence suggesting that she was inebriated when she signed the Agreement and that the issue of whether Plaintiff was so intoxicated on the night of September 11, 2009, that she was incapable of understanding the terms of the Arbitration Agreement was thus a genuine issue of material fact is in dispute. Consequently, the Court concluded that summary judgment is not appropriate.

Stay tuned for more about this case.

Supreme Court Expands Retaliation Protection

The United States Supreme Court recently expanded the scope of protection from retaliation under Title VII of the Civil Rights Act of 1964 (“Title VII”) to cover associational retaliation. In Thompson v. North American Stainless, LP, __ U.S. __, 131 S. Ct. 863 (January 24, 2011), the Court ruled that in certain situations, Title VII allows an employee who has not personally previously engaged in protected activity to bring a retaliation claim against an employer who has taken action an adverse employment action against that individual.

By way of background, Thompson and his fiancée were both employed by North American Stainless (“NAS”). NAS fired Thompson shortly after (approximately three weeks) Thompson’s fiancée filed an EEOC sex discrimination charge against NAS. Thompson then filed his own EEOC charge under Title VII’s anti-retaliation provision, claiming that NAS fired him in retaliation for his fiancée’s protected activity. Thompson subsequently filed a lawsuit in federal district court. The district court granted summary judgment to NAS, finding that Title VII does not allow for third-party retaliation claims. On appeal, the United States Court of Appeals for the Sixth Circuit held that Thompson did not have a cause of action under Title VII because he had not personally engaged in statutorily protected activity, such as filing an EEOC charge.

After agreeing to entertain Thompson’s petition for certiorari, the Supreme Court addressed two issues. First, did NAS’s firing of Thompson constitute unlawful retaliation? And second, did Thompson have standing to maintain a cause of action under Title VII? In addressing the first issue, the Court looked to its decision in Burlington N. & S. F. R. Co. v. White, 548 U.S. 52 (2006), where it held that Title VII’s anti-retaliation provision prohibits any action that “well might have dissuaded a reasonable worker from making or supporting a charge of discrimination.” Looking to the facts in Thompson’s case, the Court determined that it was “obvious that a reasonable worker might be dissuaded from engaging in protected activity if she knew that her fiancé would be fired.” Thus, Title VII’s anti-alienation provision covered Thompson’s firing.

In addressing the second, more difficult question, of whether Thompson had standing to bring an action against NAS under Title VII, the Court applied the “zone of interests” test set forth in Lujan v. National Wildlife Federation, 497 U.S. 871 (1992). Under that test, an individual has standing if he or she falls within “the zone of interests sought to be protected by the statutory provisions whose violation forms the legal basis for his complaint.” The Court held that Thompson fell within that zone because Title VII’s purpose is to protect employees from unlawful actions, and that hurting Thompson to punish his fiancée was such an unlawful act. Moreover, the Court found, Thompson was not an “accidental victim” or “collateral damage” in the case, “but to the contrary, injuring him was [NAS’s] means of harming [his fiancée].”

The Court declined to define the class of protected relationships entitled to coverage under Title VII’s anti-alienation provision, stating that “[w]e expect that firing a close family member will almost always meet the Burlington standard, and inflicting a milder reprisal on a mere acquaintance will almost never do so, but beyond that we are reluctant to generalize.” However, the Court emphasized that “the provision’s standard for judging harm must be objective” and not based on an individual’s subjective feelings.

Because the Supreme Court’s ruling in Thompson opens the door to “third party” or “associational” lawsuits against employers -- but does not provide precise guidance on what degree of action and what level of relationship will create potential liability -- employers must recognize the added risk of taking some action that may not only be viewed as retaliating against an employee engaging in protected activity, but also against others in some undefined level of relationship with that person. The Supreme Court has left it to the lower courts, at least for now, to define the class of protected relationships entitled to coverage.

b&e Partner Jason Ehrenberg to Teach Class on “Employment Law: Independent Contractors’ Rights”

Program Description
Avoid Classification Violations
The federal government has stepped up its enforcement of proper employee classification, and now misclassifying employees as independent contractors can mean hefty fines and back taxes for employers. Are you up to date on the legal definition of an employee versus independent contractor? Do you understand the independent contractor’s rights, as well as the employer’s wage/benefits advantage? Explore the fundamental legal issues of the new Independent Contractor Proper Classification Act and learn best practices for limiting employer liability in this strategic course. Register today!

* Determine how to properly classify workers as employees or independent contractors.
* Recognize the employer penalties associated with misclassifications.
* Understand the rights that independent contractors are entitled to.
* Learn best practices for limiting employer liability in regard to hiring independent contractors.

Who Should Attend
This timely course is designed for attorneys. It may also benefit in-house counsel, human resources directors and risk managers.

Course Content
* Independent Contractor or Employee?
* The Department of Labor’s “Misclassification Initiative”
* The Rights of Independent Contractors
* Independent Contractors and Benefits Issues
* Best Practices for Limiting Liability
* New Legislation
* Other Legal Questions Related to Independent Contractors

Agenda / Content Covered:
Session Time: 2:00 PM – 3:30 PM Eastern
Presenter: Jason H. Ehrenberg

* Independent Contractor or Employee?
* The Department of Labor’s “Misclassification Initiative”
* The Rights of Independent Contractors
* Independent Contractors and Benefits Issues
* Best Practices for Limiting Liability
* New Legislation
* Other Legal Questions Related to Independent Contractors


For more information and to register, cut and paste the following link into your web browser:

http://www.nbi-sems.com/SemTeleDetails.aspx/Employment-Law-Independent-Contractors-Rights/Teleconference/R-55904ER%7C?NavigationDataSource1=Rpp:25,Ro:50,Nrc:id-3-dynrank-disabled,Nra:pEventDate%2bpEventStartTime%2bStates%2bCredits%2bScope+of+Content%2bpLocationCity%2bpDescription%2bpProductId%2bpProductDescription%2bProductCode+%28HIDDEN%29%2bpAdditionalFormats%2bDivision,N:304