EEOC Issues New Pregnancy Discrimination Guidelines

As of July 14 2014, the Equal Employment Opportunity Commission (EEOC) has issued a new guidance on pregnancy discrimination, updating and replacing its previous longstanding guidance. With this new guidance the EEOC hopes to address the longstanding uncertainty revolving around the interaction between the Pregnancy Discrimination Act (PDA) and the Americans with Disabilities Act (ADA). However, the EEOC’s decision to replace its 1983 guidance, comes as the Supreme Court prepares to hear Young v. UPS. Here the Supreme Court has been asked to determine what accommodations, if any, the PDA requires from employers. So there is a potential that the EEOC’s new guidelines may be made moot, depending on the Court’s ruling.

Pending the ruling in Young, the EEOC’s new guidance covers the best ways that employers can avoid unlawful discrimination against pregnant employees.  The new guidance includes equal access to benefits such as light duty, leave, and health care. Also the new guidance sets forth reasonable break times for nursing mothers. The EEOC also stated that employers may be in violation of VII by providing health insurance plans that exclude coverage for prescription contraceptives. However, given the recent ruling in Hobby Lobby, the EEOC will need to clarify its position to stay within the bounds of the Court’s ruling in Hobby Lobby.  

Pennsylvania Federal Court Awards Life Insurance Beneficiaries Relief in Form of Equitable Surcharge

A federal judge awarded the beneficiaries of a deceased life insurance participant $120,000 in equitable surcharge after finding that the plan administrator breached its duties by misrepresenting coverage. See Weaver Bros. Ins. Assocs., Inc. v. Braunstein, 2014 BL 160149, E.D. Pa., No. 2:11-cv-05407-JHS, 6/10/14). According to the United States District Court for the Eastern District of Pennsylvania, U.S. Supreme Court's ruling in CIGNA Corp. v. Amara, 131 S.Ct. 1866 (2011), empowers courts to award monetary relief under the Employee Retirement Income Security Act's equitable remedies provision. The opinion was issued June 10 by Judge Joel H. Slomsky.

By way of background, following Deborah Braunstein was an employee of Weaver Bros. After her death in January 2011, Weaver Bros. and its claims administrator, Fortis Benefits Insurance Co., denied life insurance benefits to Deborah's beneficiaries under her life insurance policy with Weaver Bros. on the grounds that her policy lapsed in October 2010, one year after her cancer diagnosis caused her to take disability leave. Weaver Bros. sought a judicial declaration that it wasn't obligated to inform Braunstein of the policy lapse or the need to convert to individual coverage. Braunstein's beneficiaries counterclaimed for fiduciary breach and sought equitable surcharge to cover the loss of life insurance benefits. In March 2013, the court determined that Weaver Bros. was an ERISA fiduciary and that it breached its duties by failing to provide Braunstein with an adequate summary plan description. One year later, the court held a non-jury trial on the remaining claims.

 

In addition to providing an inadequate SPD, the court said that Weaver Bros. made material misrepresentations to Braunstein about the status of her benefits during her period of disability.

Specifically, the court said that the human resources manager for Weaver Bros., Sandra Colangelo, told Braunstein that she would be treated as an active employee even though Colangelo hadn't read the plan's certificate of insurance or SPD. Colangelo also failed to inform Braunstein of the conversion requirement when she sent her beneficiary designation forms to update, the court said.

Further, the court said that evidence in the record demonstrated that Braunstein relied on these misrepresentations to her detriment, because she would have converted her policy to individual coverage had she known about the lapse. The court also rejected the argument of Weaver Bros. that it had no affirmative duty to inform Braunstein about the need to convert her policy. “Because Colangelo knew that Braunstein had cancer and that she sought Colangelo's assurance that her paperwork was sufficient, Colangelo had an affirmative duty to at least read the SPD and Certificate of Insurance and give Braunstein proper advice on which she could rely,” the court concluded. Weaver Bros.' argument that it didn't intentionally deceive Braunstein also failed to sway the court, which found that evidence of intentional deception wasn't required to establish a fiduciary breach based on a plan administrator's material misrepresentations.

 

Weaver Bros. also argued that it couldn't be liable for Colangelo's oral misrepresentations, because they contradicted the written terms of the plan. The company pointed to decisions of Second and Seventh circuit holding that participants bringing misrepresentation claims must point to written statements containing the alleged misrepresentations. Noting that the Third Circuit hadn't “specifically addressed this precise question,” the court nevertheless declined to follow the reasoning of the Second and Seventh circuits. According to the court, Third Circuit precedent makes clear that ERISA forbids fiduciaries from materially misleading participants, and such precedent “does not exclude oral misrepresentations from ERISA's reach.”Further, the court said that even if it followed the Second and Seventh circuits' reasoning, Weaver Bros. still wouldn't prevail, because Colangelo “confirmed her misrepresentations” in a letter to Fortis.

 

Finally, the court found that the beneficiaries' claim for surcharge to cover the lost life insurance benefits qualified as appropriate equitable relief under ERISA Section 502(a)(3). The court said that the Supreme Court's Amara ruling empowered it to “award monetary compensation analogous to the historical relief of ‘surcharge' to the Braunstein Beneficiaries for Weaver Bros.' breach of fiduciary duty.” Given this, the court awarded the beneficiaries surcharge totaling $120,000, along with prejudgment interest.

 

The beneficiaries were represented by James C. Bailey, Michael A. Tilghman II and Jason H. Ehrenberg of Bailey & Ehrenberg PLLC, Washington.

b&e Obtains Victory After Bench Trial In ERISA Case

Firm partner James Bailey obtained a victory on behalf of Firm clients in an ERISA fiduciary breach case in the United States District Court for the Eastern District of Pennsylvania.  After a bench trial before Judge Joel Slomsky, the Court found in favor of b&e's clients on all dispositive legal issues, namely, that the employer was acting as an ERISA fiduciary, that the Summary Plan Description at issue was inadequate,  and that the employer made material misrepresentations to a former employee concerning her employee benefits.  

The Proliferation of Noncompetition Agreements

Interesting article on the expansion of noncompetition agreements/clauses in today's New York Times. Whereas noncompetes used to be geared mostly towards positions in the technology and related sectors (which positions were highly paid and highly skilled), we are starting to see more and more businesses in other, unrelated areas use them as a tool to keep employees and/or keep departing employees from competing. The Times article notes that non-competes have made their way into jobs such as summer camp counselors and hair stylists. There are policy arguments both for and against noncompetes. Traditionally, the argument was that an employer should be allowed to keep an employee who has been trained and paid well by the employer from competing for a reasonable period of time after the employment relationship ends (based on the notion that the employer spent time and money educating and training the employee). However, noncompetes have made their way into lower-paying, less-skilled positions. It is somewhat difficult to articulate a reasonable basis for such agreements where significant time and expense has not been put into training. The article can be found at http://www.nytimes.com/2014/06/09/business/noncompete-clauses-increasingly-pop-up-in-array-of-jobs.html?ref=us&_r=0.

Texas University’s Race Admissions Policy Is Debated Before 5th Circuit Court of Appeals

Interesting article in today's NY Times about the Fisher case the Supreme Court heard a while back. The Fifth Circuit just held oral argument. http://www.nytimes.com/2013/11/14/us/texas-universitys-race-admissions-policy-is-debated-before-a-federal-court.html?ref=us

IRS,DOL and HHS Issue Final Wellness Program Regulations

On May 29, 2013, the U.S . departments of Health and Human Services and Labor and the Internal Revenue Service issued final regulations regarding employee wellness programs under the Patient Protection and Affordable Care Act (PPACA). The final rules were published in the Federal Register on June 3, 2013 (78 F.R. 33157) and will take effect 60 days later, on August 2, 2013.

Under the final regulations implementing the Health Insurance Portability and Accountability Act (HIPAA) non-discrimination and wellness provisions issued in 2006, wellness programs are divided into two categories:  “participatory wellness programs” and “health-contingent wellness programs.” The new final regulations under the PPACA further divide health-contingent plans into two sub-categories: “activity-only” wellness programs and “outcome-based” wellness programs. 

The final rules require that health-contingent wellness programs be reasonably designed, uniformly available to all similarly situated individuals and accommodate recommendations made at any time by an individual’s physician, based on medical appropriateness. The final rules also clarify the “reasonable design” requirement for health-contingent wellness programs and the reasonable alternatives they must offer to avoid prohibited discrimination. Notably, the final rules establish criteria for an affirmative defense against a claim that the plan discriminated based on health status in violation of HIPAA.  

The final rules are largely consistent with earlier proposed regulations, which were released on November 20, 2012, but are reorganized for clarification. The final regulations also increase the maximum permissible reward under a health-contingent wellness program offered in connection with a group health plan (and any related health insurance coverage) from 20 percent to 30 percent of the cost of employee coverage, and further increase the maximum permissible reward to 50 percent for programs targeting tobacco use prevention or reduction.

The final regulations are effective for plan years beginning on or after January 1, 2014, and apply to both insured and self-funded health plans, regardless of grandfathered status. 

Five Bailey & Ehrenberg Attorneys Honored as 2013 Super Lawyers and Rising Stars

Bailey & Ehrenberg is pleased to announce that five of the firm’s attorneys have been named to the 2013 Washington, D.C. Super Lawyers and Rising Stars lists as being among the top attorneys in Washington, D.C. Three of Bailey & Ehrenberg’s partners have been selected to the 2013 Washington, D.C. Super Lawyers in the areas of employment law and employee benefits. Only five percent of all attorneys in Washington, D.C. are recognized as Super Lawyers each year. The following Bailey & Ehrenberg attorneys were named as 2013 Super Lawyers:

• James C. Bailey (Employment & Labor)
• Jeffrey B. Cohen (Employee Benefits/ERISA)
• Jason H. Ehrenberg (Employee Benefits/ERISA)

In addition, two of our attorneys have been selected to the 2013 Washington, D.C. Rising Stars list. The Rising Stars list recognizes attorneys who are 40 years old or younger, or who have been practicing for 10 years or less. Each year, no more than 2.5 percent of the lawyers in a state are selected by Super Lawyers to receive this honor. Bailey & Ehrenberg’s attorneys included in this year’s Rising Stars list are:

• Michael A. Tilghman II (Employee Benefits/ERISA)
• Sara M. Klayton (Employment & Labor)

Super Lawyers, a Thomson Reuters business, is a rating service of outstanding lawyers from more than 70 practice areas who have attained a high degree of peer recognition and professional achievement. The annuals selections are made using a rigorous multiphase process that includes statewide surveys of lawyers, an independent research evaluation of candidates and peer review by practice area. Selections are made on an annual, state-by-state basis.