ERISA Lawyer Blog

The New York City Council has voted to require private-sector NYC employers with at least 20 employees to provide up to 40 hours of paid sick leave per year. The Council has sufficient votes to overcome a threatened veto by Mayor Bloomberg. The paid sick leave requirement will start to apply on April 1, 2014, provided that, on December 16, 2013, the NYC economy is performing at least as well as it was in January, 2012 (otherwise the requirement will not apply until after the NYC economy meets this threshold). The 20 employee threshold is decreased to 15 employees after the new law has been in effect for 18 months (that is, by October 1, 2015, if the April 1, 2014 effective date applies).

An employee who works in NYC for more than 80 hours in a calendar year is eligible for the paid sick leave. The employee would be entitled to one hour of paid sick leave, up to 40 hours in a calendar year, for every 30 hours worked. Leave first becomes available four months following the later of the effective date of the new law or the date of hire. Employees may carry over accrued but unpaid leave to future years, subject to the 40 hour cap per year, but the employer is not required to pay for any unused time at termination of employment. The employee may generally take paid sick leave for any mental or physical illness, injury or health condition. The employee may also take the leave to care, in certain instances, for family members.

The new law does not apply to certain manufacturers. Special rules apply with respect to domestic workers and union employees. Employers with less than 20 (or 15) employees must still provide them with up to 40 hours per year of unpaid sick leave, once the law goes into effect.

As a reminder, as of May 7, 2013, employers must use the newly revised Form I-9, to meet federal requirements to document verification of the identity and employment authorization of each new employee. The revised Form I-9 and instructions are here.

Generally, the revised Form I-9 would not be completed for an employee who was hired before May 7 and for whom a Form I-9 is already on file, unless there is a particular need to reverify that employee (e.g., she is rehired or her work authorization expires).

In Foster v. Nationwide Mutual Insurance, No. 12-3107 (6th Cir. 2013), the plaintiffs, who are or had been special investigators ("SIs") at Nationwide Mutual Insurance Company ("Nationwide") ,were appealing the district court's judgment against them in their claim that, among other matters, Nationwide had improperly classified the SIs as exempt from the overtime requirements of the Fair Labor Standards Act (the "FLSA").

In this case, Nationwide is an insurance company in the business of providing a wide range of insurance products. It employs the SIs to investigate nonmeritorious claims against insurance policies. The Sixth Circuit Court of Appeals (the "Court") noted that the FLSA exempts from its overtime requirements any employee employed in a bona fide executive, administrative, or professional capacity. The Court further noted that the administrative exemption is the potentially applicable exemption here. Under the FLSA regulations, an administrative employee is one: (1) who is compensated at a rate of not less than $455 per week, (2) whose primary duty is the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer's customers and (3) whose primary duty includes the exercise of discretion and independent judgment with respect to matters of significance. The Court said that condition (1) is met and not in issue here.

The Court concluded that condition (2) was satisfied, since an SI's work is office or non-manual. Also, claims adjusting is ancillary to Nationwide's general business operations, and the SIs' investigative work drives the claims adjusting decisions with respect to suspicious claims, so that such work is directly related to assisting with the servicing of Nationwide's business. The Court concluded that condition (3) was satisfied, since the Court agreed with the district court's conclusion, based on its factual findings, that the SIs'primary duty was to conduct investigations of suspicious claims with the goal of determining if fraud had occurred, and this involves the exercise of discretion and independent judgment with respect to matters that are significant to Nationwide. As such, the Court found that the administrative exemption applies to the SIs, and it affirmed the district court's judgment against the plaintiffs.

In Knutson v. Schwan's Home Service, Inc., No. 12-2240 (8th Cir. 2013), the plaintiff, Jeffrey D. Knutson ("Knutson"), had brought suit against the defendant , Schwan's Home Service, Inc.("Home Service"), alleging that Home Service had terminated his employment in violation of the Americans with Disabilities Act (the "ADA"). The district court had granted summary judgment to Home Service, and Knutson appealed.

In this case, Knutson had been manager at Home Service, who was sometimes required to drive a delivery truck. As to his truck driving responsibilities, Home Service's position description states that Knutson must meet the Federal Department of Transportation ("DOT") eligibility requirements, including obtaining an appropriate driver's license and a corresponding medical certification (an "MEC"). Knutson suffered a penetrating eye injury, and thereafter was unable to obtain an MEC or waiver thereof. Home Service later fired him. This suit ensued.

In analyzing the case, the Eighth Circuit Court of Appeals (the "Court") said that, to establish a prima facie case under the ADA, Knutson was required to show that he was disabled within the meaning of the ADA, was qualified to perform the essential functions of his job, and suffered an adverse employment action because of his disability. The Court determined that Knutson was not qualified to perform his job's essential functions. No genuine issue of material fact exists that being DOT qualified to drive a delivery truck is an essential function of Knutson's position. The Home Service position description indicates that such qualification is an essential job function. Since he could not obtain an MEC after the eye injury - and therefore was not DOT qualified after the injury - he was not qualified to perform an essential job function. As such, the Court affirmed the district court's summary judgment in Home Service's favor

In Reilly v. Lehigh Valley Hospital, No. 12-2078 (3rd Cir. 2013), the plaintiff, Robert Reilly ("Reilly"), was appealing the district court's grant of summary judgment in favor of the defendant, Lehigh Valley Hospital ("LVH"), on Reilly's disability discrimination claims under the Americans with Disabilities Act (the "ADA") and similar state law.

In this case, Reilly was employed by LVH as a part-time Security Officer from August 2006, until May 2, 2008. After receiving a conditional employment offer, Reilly completed and signed a six-page employee health information form (the "Employment Form") as part of LVH's hiring process. The final two questions on the Employment Form inquired as to whether Reilly had ever been recognized as having, or had ever been treated for, alcoholism or drug addiction. Reilly answered "no" to both questions. He signed the Employment Form, subject to the condition that falsifying of this information could result in withdrawal of the employment offer or if subsequently discovered termination of his employment.

Reilly subsequently disclosed to LVH that he has a history of narcotics use and is a recovering drug addict. On May 2, 2008, LVH terminated Reilly's employment, on the basis of his being untruthful about prior drug addiction on the Employment Form. Reilly subsequently brought this suit against LVH, alleging disability-based employment discrimination in violation of the ADA and similar state law. After reviewing the case, the Third Circuit Court of Appeals (the "Court") concluded LVH articulated a legitimate, nondiscriminatory reason for terminating Reilly - his dishonesty on the Employment Form - and Reilly failed to produce sufficient evidence to show that this reason was pretextual and a cover for discrimination. As such, the Court affirmed the district court's summary judgment in LTV's favor.

In Wardia v. Department of Juvenile Justice, No. 12-5337 (6th Cir. 2013) (Unpublished Opinion), the plaintiff, John Wardia ("Wardia"), had brought suit against the defendant, the Department of Juvenile Justice (the "Department"), for wrongful termination under the Americans with Disabilities Act (the "ADA"). The district court granted summary judgment to the Department, and Wardia appealed.

In this case, Wardia had been terminated from his position as a Youth Worker at the Campbell County Regional Juvenile Detention Center, after an injury prevented him from performing physical restraint on detained juveniles. Wardia had argued in the district court that physical restraint of juveniles, in practice, was not an essential function of the job, and that the Department had unreasonably refused to grant him the permanent accommodation of a job in the facility control room.

In analyzing the case, the Sixth Circuit Court of Appeals (the "Court") implicitly applied the rule that a former employee cannot prevail in a claim for wrongful termination under the ADA, if the employee's disability prevented him or her from performing an essential function of the job even with a reasonable accommodation. The Court said that official Department policy treats the ability to perform physical restraints of juveniles as an essential function of Youth Workers. The written job description specifically lists performing restraints as one of the essential functions of the job, and Youth Workers are required to undergo safe-physical-management-skills training for three months upon entry and on an ongoing monthly basis. Thus, without reasonable accommodation, Wardia cannot do one essential functions of his job.

Further, the Court said that Wardia did not identify any reasonable accomodation that would help him. Having other employees assist him whenever restraint is required is not a reasonable accommodation, since the ADA does not require employers to accommodate individuals by shifting an essential job function onto others. Also, assignment to the facility control room is not the type of accommodation that an employer is required to provide under the ADA-it is a light-duty, temporary or rotating position and employers cannot be required to convert either rotating or temporary positions into permanent positions under the ADA. Thus, the Court affirmed the district court's summary judgment in favor of the Department.

In Teed v. Thomas & Betts Power Solutions, L.C.C., Nos. 12-2440, 12-3029 (7th Cir. 2013), the defendant was Thomas & Betts Power Solutions, L.C.C. ("Thomas & Betts"). Its parent company, the Thomas & Betts Corporation, had bought the assets of the plaintiff's employer, and placed them in Thomas & Betts. Due to such activity, the plaintiffs brought this suit, seeking damages for the employer's alleged violations of their rights under the Fair Labor Standards Act (the "FSLA"). The question for the Seventh Circuit Court of Appeals (the "Court"): whether Thomas & Betts may be held liable, by virtue of the doctrine of successor liability, for the damages owed the plaintiffs under the FLSA.

In analyzing this question, this Court said that, when a company is sold in an asset sale as opposed to a stock sale, the buyer acquires the company's assets but not necessarily its liabilities; whether or not it acquires them is the issue of successor liability. Most states limit such liability, with exceptions irrelevant to this case, to sales in which a buyer (the successor) expressly or implicitly assumes the seller's liabilities. Wisconsin, the state whose law would apply if the underlying claim were based on state law, is such a state. But when liability is based on a violation of a federal statute relating to labor relations or employment, a federal common law standard of successor liability is applied that is more favorable to plaintiffs than most state-law standards to which the court might otherwise look. What happens, then, when the alleged liability is based on the FLSA.

The Court concluded that the successor liability rules transfer damages under the FLSA to the buyer in an asset sale. This obtains, the Court said, because successor liability is appropriate in suits to enforce federal labor or employment laws--even when, as here, the successor disclaimed liability when it acquired the assets in question--unless there are good reasons to withhold such liability. Lack of notice of potential liability or insolvency of the original employer are examples of such reasons. But there were no such reasons that factored into the instant case. As such, the Court ruled that Thomas & Betts may be held liability for the damages owed to the plaintiffs under the FLSA.

In McMillan v. City of New York, Docket No. 11-3932 (2nd Cir. 2013), the plaintiff, Rodney McMillan, was appealing the district court's summary judgment in favor of the City of New York ("New York") on McMillan's disability discrimination and failure to accommodate claims under the Americans with Disabilities Act of 1990 (the "ADA").

In analyzing the case, the Second Circuit Court of Appeals (the "Court") said that it was undisputed that McMillan's severe disability- schizophrenia- required treatment that prevented him from arriving to work at a consistent time each day. In many, if not most, employment, a timely arrival is an essential function of the position, and a plaintiff's inability to arrive on time would result in his failure to establish a fundamental element of a prima facie case of employment discrimination.

Here, however, drawing all reasonable inferences in McMillan's favor--as the Court must at the summary judgment stage--it is not evident that a timely arrival at work is an essential function of McMillan's job, so long as he is able to offset the time missed due to tardiness with additional hours worked to complete the actual essential functions of his job. The problem according to the Court: the district court did not conduct a sufficiently detailed analysis of the facts that tend to undermine New York's claim that a specific arrival time is an essential function of McMillan's position before granting summary judgment. As such, the Court overturned the district court's summary judgment, and remanded the case back to the district court.

In Brown v. ScriptPro, LLC, No. 11-3293 (10th Cir. 2012), the plaintiff, Frank Brown ("Brown"), had filed suit against his former employer, ScriptPro, LLC ("ScriptPro"), claiming that the termination of his employment by ScriptPro violated, among other things, the Fair Labor Standards Act ("FLSA"). The district court granted summary judgment in favor of ScriptPro, and Brown appealed.

In the case, Brown claimed to have performed 80 hours of overtime work at home. He did not record this time in ScriptPro's KRONOS timekeeping system, or otherwise report these hours on time sheets. ScriptPro's employee handbook does not specify how to report overtime. However, it does require employees like Brown to turn in time sheets recording hours worked. ScriptPro never paid Brown for the 80 hours of overtime. ScriptPro later terminated Brown for certain unresolved performance issues. Brown then filed a suit in district court under the FLSA, in order to receive payment for the 80 hours of overtime work he allegedly performed at home.

In analyzing the case, the Tenth Circuit Court of Appeals (the "Court") said that, to succeed on an FLSA claim for unpaid overtime, the plaintiff, such as Brown, has the burden of proving that he performed work for which he was not properly compensated. This means that Brown's burden is to produce sufficient evidence to show the amount and extent of that work as a matter of just and reasonable inference. At the summary judgment stage-which is where the case was at the time- Brown must set forth specific facts showing there is a genuine issue for trial. Here, Brown failed to show the amount of overtime by justifiable or reasonable inference. He chose not to enter any of the hours he allegedly worked from home in ScriptPro's timekeeping system, or otherwise keep any other record of these hours. ScriptPro keeps accurate records of hours worked, and employees can even access the KRONOS timekeeping system from home. There, Brown easily could have entered his hours. The Court ruled that, under these circumstances, where the employee fails to notify the employer through the established overtime record-keeping system, the failure to pay overtime is not a FLSA violation. As such, the Court affirmed the district court's summary judgment on the FLSA claim.

In Kelley v. Correctional Medical Services, Inc., No. 11-2246 (1st Cir. 2013), the plaintiff, Katherine Kelley ("Kelley"), was appealing the district court's grant of summary judgment in favor of the defendant, Correctional Medical Services, Inc. ("CMS"), on her retaliation claim under the Americans with Disabilities Act (the "ADA"). Kelley had claimed that she had been terminated by CMS in retaliation for asking for an accommodation for leg and health issues from which she suffered.

In analyzing the case, the First Circuit Court of Appeals (the "Court") indicated that, to survive summary judgment on a retaliation claim under the ADA, the plaintiff must first establish a prima facie retaliation claim, by showing that: (1) she engaged in protected conduct; (2) she experienced an adverse employment action; and (3) there was a causal connection between the protected conduct and the adverse employment action. Once the plaintiff has made a prima facie showing of retaliation, the defendant must articulate a legitimate, non-retaliatory reason for its employment decision. If the defendant meets this burden, the plaintiff must then show that the proffered legitimate reason is pretextual and that the job action was the result of the defendant's retaliatory animus. Requesting an accommodation is protected conduct under the ADA's retaliation provision.

The Court then said that the issue on appeal is whether the plaintiff has shown that CMS's reason for the termination was pretextual and that the termination was retaliatory. After reviewing the record, the Court concluded that the plaintiff had made such a showing, based primarily on evidence of a supervisor's hostility towards Kelley's disability and several requests for accommodation. The Court therefore overturned the district court's grant of summary judgment and remanded the case back to the district court.

It has been a week since employers have been required to use the DOL's new poster notice (and revised model forms) for FMLA. The new notice poster and revised forms reflect changes to the FMLA regulations made recently to include rules for, among other things, military caregiver leave for a veteran, qualifying exigency leave for parental care, and the special leave calculation method for flight crew employees.

One important point: The FMLA rules require that, in addition to displaying the poster notice, the employer must provide a general notice containing the same information that is in the poster in its employee handbook (or other written material about leave and benefits). This means that, if you have not already done so, you now have to revise your employee handbook (or other material) to reflect the changes the DOL made to the poster notice. Any questions?

In Milton v. Texas Department of Criminal Justice, No. 12-20034 (5th Cir. 2013), the plaintiff, Tina Milton ("Milton"), had brought suit against her former employer, the Texas Department of Criminal Justice (the "TDCJ"), claiming violations of the Americans with Disabilities Act (the "ADA") and the Family and Medical Leave Act (the "FMLA"). The district court granted summary judgment in favor of TDCJ, and Milton appealed.

In this case, Milton was a clerical employee with TDCJ from November 1990 until April 19, 2007. She was employed at the Wynne Unit in Huntsville, Texas, where she was responsible for looking for coded gang messages in inmate mail. She was terminated, administratively, in April 2007 after failing to provide medical documentation verifying her FMLA leave. Milton's allergic reaction to the use of scented candles and wall plug-ins around her work area is the basis of her ADA claim. Exposure to those items causes her asthma attacks, headaches, nausea, chest tightness, coughing, rhinitis, and sinusitis. Due to her condition, Milton took FMLA leave, effective January 3, 2007. A condition of Milton's leave, however, was that she submit medical certification of her continued illness, as provided by the FMLA. Milton provided this certification in January 2007, and continued to do so until March 2007. TDCJ never received Milton's March 2007 certification. Milton was not informed of the missing March certification until April 19, after she had been administratively terminated. This suit ensued.

As to the FMLA claim, the Fifth Circuit Court of Appeals (the "Court") noted that, when an employee takes an FMLA leave, the employer can require periodic medical certification for the leave. The governing regulations do not require employers to advise employees of missing certifications. Rather, if the employee fails to provide certification, the employer may deny the taking of FMLA leave. Here, there is no dispute that the medical certification due in March, 2007 was never received by TDCJ. Since the medical certification was not provided, TDCJ could terminate Milton without violating the FMLA. As such, the Court affirmed the district court's summary judgment in favor of TDCJ.

Note: The Court also determined that Milton was not disabled within the meaning of the ADA. However, the Court noted that it was not applying the amendments to the ADA made in 2008. Those amendments substantially expanded the conditions that are considered to be a disability.

In IR-2013-23, the Internal Revenue Service (the "IRS") reminds us that it recently expanded the Voluntary Worker Classification Program (the "VCSP"). Here is a summary of what the IRS said:

The VCSP provides partial relief from federal payroll taxes for eligible employers who are treating their workers or a class or group of workers as independent contractors or other nonemployees and now want to treat them as employees. Businesses, tax-exempt organizations and government entities may qualify.

Under the VCSP, as recently revamped, employers under IRS audit, other than an employment tax audit, can qualify for the VCSP. Furthermore, employers accepted into the program will no longer be subject to a special six-year statute of limitations, rather than the usual three years that normally applies to payroll taxes. These and other permanent modifications to the program are described in Announcement 2012-45 and in questions and answers, posted on IRS.gov. Normally, employers are barred from the VCSP if they failed to file required Forms 1099 with respect to workers they are seeking to reclassify for the past three years. However, for the next few months, until June 30, 2013, the IRS is waiving this eligibility requirement. Details on this temporary change are in Announcement 2012-46.

To be eligible for the VCSP, an employer must currently be treating the workers as nonemployees; consistently have treated the workers in the past as nonemployees, including having filed any required Forms 1099; and not currently be under audit on payroll tax issues by the IRS. In addition, the employer cannot currently be under audit by the Department of Labor or a state agency concerning the classification of these workers or contesting the classification of the workers in court.

Interested employers can apply for the program by filing Form 8952, Application for Voluntary Classification Settlement Program, at least 60 days before they want to begin treating the workers as employees. Employers accepted into the program will generally pay an amount effectively equaling just over one percent of the wages paid to the reclassified workers for the past year. No interest or penalties will be due, and the employers will not be audited on payroll taxes related to these workers for prior years. Employers applying for the temporary relief program available for those who failed to file Forms 1099 will pay a slightly higher amount, plus some penalties, and will need to file any unfiled Forms 1099 for the workers they are seeking to reclassify.

The U.S. Department of Labor (the "DOL") has issued revised poster notice and revised model forms for the Family and Medical Leave Act (the "FMLA"). The revised forms should be used starting March 1, and the notice poster should be put up and replace the existing notice poster by March 8. An employer may have to revise the model forms to fit its particular situation and/or comply with state and local requirements. The revised forms and notice poster reflect changes to the FMLA regulations made recently to include rules for, among other things, military caregiver leave for a veteran, qualifying exigency leave for parental care, and the special leave calculation method for flight crew employees.

The new notice poster may be found here.

The new model forms may be obtained by clicking on the form name below:

WH-380-E Certification of Health Care Provider for Employee's Serious Health Condition

WH-380-F Certification of Health Care Provider for Family Member's Serious Health Condition

WH-381 Notice of Eligibility and Rights & Responsibilities

WH-382 Designation Notice

WH-384 Certification of Qualifying Exigency For Military Family Leave

WH-385 Certification for Serious Injury or Illness of Current Servicemember - - for Military Family Leave

WH-385-V Certification for Serious Injury or Illness of a Veteran for Military Caregiver Leave

In Hallmark Cards, Inc. v. Murley, No. 11-2855 (8th Cir. 2013), the plaintiff, Hallmark Cards, Inc. ("Hallmark"), sued the defendant, former employee Janet Murley ("Murley"), for a breach of the parties' separation agreement. Hallmark won a $860,000 jury verdict on its breach of contract claim. Murley appealed.

In this case, Murley had served as Hallmark's group vice-president of marketing from 1999 to 2002. In this capacity, she was responsible for product and business development, advertising, and research, and had access to confidential information including Hallmark's business plans, market research, and financial information. In 2002, Hallmark eliminated Murley's position as part of a corporate restructuring. Murley and Hallmark entered into a negotiated separation agreement which laid out the terms of Murley's departure. Pursuant to the agreement, Murley agreed not to work in the greeting card or gift industry for a period of eighteen months, solicit Hallmark employees, disclose or use any proprietary or confidential information, or retain any business records or documents relating to Hallmark. She also agreed to release Hallmark from any claims arising from her termination. In exchange, Hallmark offered Murley a $735,000 severance payment, eighteen months of paid COBRA benefits, executive outplacement services, and paid tax preparation for two years.

In 2006, after the expiration of her non-compete agreement, Murley accepted a consulting assignment with Recycled Paper Greetings ("RPG") for $125,000. Murley admits that in the course of that assignment, she disclosed to RPG confidential Hallmark information including slides from Hallmark's business model redesign, information regarding Hallmark consumer buying process, and long-term industry analysis gathered from Hallmark's market research. Hallmark did not discover Murley's disclosures until 2009, when RPG was purchased by American Greetings, and a third-party review of RPG's records revealed the disclosed information. This suit for breach of contract ensued.

On the appeal, the Eighth Circuit Court of Appeals (the "Court") dealt with the issue of whether the jury's verdict was excessive. The $860,000 verdict consisted of the $735,000 severance payment that Hallmark had made to Hurley under the separation agreement and the $125,000 Murley later received from RPG in exchange for her consulting services. As to the claim for the return of the $735,000 severance payment, the Court said that, in determining if a damage award arising from a state-law claim-as the one made here- is excessive, state case law guides our inquiry. In Missouri (the applicable state), courts generally defer to the jury's decision concerning the amount of damages, and only overturn a jury's verdict when the defendants demonstrate that: (1) some event occurred at trial that incited the bias and prejudice of the jury and (2) the verdict is so grossly excessive so as to shock the conscience of the court. Here, Murley could not demonstrate (1) or (2). As such, the Court upheld the jury verdict against her, to the extent of the $735,000 amount.

As to the claim for the $125,000 consulting fee, the Court said that, in an action for breach of contract, a plaintiff may recover the benefit of his or her bargain as well as damages naturally and proximately caused by the breach and damages that could have been reasonably contemplated by the defendant at the time of the agreement. Here, by awarding Hallmark more than its $735,000 severance payment, the jury award placed Hallmark in a better position than it would find itself had Murley not breached the agreement. Accordingly, the Court overturned the jury verdict, to the extent it included the $125,000 amount.