Monday, September 26, 2011

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 (,0,6993316.story) (, 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.

Sunday, September 25, 2011

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.

Thursday, September 22, 2011

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 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.