January 13, 2014

ERISA-DC Circuit Rules That Reliance On Counsel's Advice Was Reasonable And Allowed Plan Fiduciaries To Avoid A Breach Of Duty

In Clark v. Feder Semo and Bard, P.C., No. 12-7092 (DC Cir. 2014), the law firm of Feder Semo had closed its doors and terminated its retirement plan (the "Plan"). Plaintiff Denise Clark ("Clark") was an attorney at the law firm for almost a decade and participated in the Plan. Unfortunately, when the Plan was terminated, there were not enough assets to satisfy all of its obligations. Dissatisfied with the amount of money that came her way, Clark sued, alleging that decisions made by Joseph Semo and Howard Bard (the law firm's directors who administered the Plan) breached their fiduciary duties under ERISA. The district court rejected all of Clark's claims, and The DC Circuit Court of Appeals (the "Court") affirmed.

In affirming the district court's decision, the Court pointed out that the defendants-Plan fiduciaries- had relied on the advice of counsel when determining the amount payable to Clark from the Plan. In ERISA, Congress provided that a fiduciary must act "with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use." 29 U.S.C. § 1104(a)(1)(B). Doing so, ERISA adopted much of what the common law had, over time, come to require of fiduciaries. However, the courts must be on the lookout for instances in which ERISA departs from the common law, sometimes requiring more, other times requiring less, of fiduciaries. As such, a fiduciary may rely on the advice of counsel when reasonably justified under the circumstances. Here, the district court found that the fiduciaries rightly relied on counsel's advice, so no breach of ERISA fiduciary duties obtained.

January 10, 2014

Employee Benefits-IRS Provides Guidance For Cafeteria Plans And Health Savings Accounts On Participation Of Same-Sex Spouses After Windsor

In General. In Notice 2014-1, the IRS provides guidance on the application of the rules under section 125 of the Internal Revenue Code (the "Code") (relating to cafeteria plans, including health, dependent care or adoption assistance flexible spending arrangements ("FSAs")), and section 223 of the Code (relating to health savings accounts ("HSAs")), to the participation by same-sex spouses in FSAs and HSAs following the Supreme Court decision in United States v. Windsor and the issuance of Rev. Rul. 2013-17. The Notice amplifies the previous guidance provided in Rev. Rul. 2013-17. The Notice includes the following rules.

Mid-Year Election Changes. Under the Notice, a cafeteria plan may treat a participant, who was married to a same-sex spouse as of the date of the Windsor decision (June 26, 2013), as if the participant experienced a change in legal marital status for purposes of Treas. Reg. § 1.125-4(c). Accordingly, the plan may permit that participant to revoke an existing election and make a new election in a manner consistent with the change in legal marital status. For purposes of election changes due to the Windsor decision, an election may be accepted by the cafeteria plan if filed at any time during the cafeteria plan year that includes June 26, 2013, or the cafeteria plan year that includes December 16, 2013. Further, for periods between June 26 and December 31, 2013, a cafeteria plan may permit a participant with a same-sex spouse to make a mid-year election change under Treas. Reg. § 1.125-4(f), on the basis that the Windsor decision resulted in a significant change in the cost of health coverage.

Any coverage under the cafeteria plan required by a change in election, which was made by a participant in connection with the Windsor decision between June 26, 2013 and December 16, 2013, must become effective in accordance with plan's usual procedures when a change in election is made, but no later than by a reasonable period of time after December 16, 2013.

Pre-Tax Salary Reduction Elections. An employer who, before the end of the cafeteria plan year including December 16, 2013, receives notice-through an election change or revised Form W-4- that a participant has a same-sex spouse receiving health coverage through the plan, must do the following. The employer must begin treating the amount that the participant pays for the spousal coverage as a pre-tax salary reduction under the plan, by the date on which a change in legal marital status would be required to be reflected for income tax withholding purposes under Code section 3402, but by no later than a reasonable period of time after December 16, 2013.

In the case of a cafeteria plan participant who elected to pay for the cost of health coverage for the participant on a pre-tax basis through salary reduction under the plan, and also paid for the cost of health coverage for a same-sex spouse under the employer's health plan on an after-tax basis, the following applies. The participant's salary reduction election under the cafeteria plan is deemed to include the cost of spousal coverage, so that the amount that the participant pays for spousal coverage is excluded from the gross income and is not subject to federal income or federal employment taxes. This rule applies to the cafeteria plan year including December 16, 2013 and any prior years for which the applicable limitations period under Code section 6511 has not expired.

In general, the Notice allows a cafeteria plan participant to choose to pay for the cost of same-sex spouse coverage on a pre-tax basis through the remaining pay periods in the current cafeteria plan year, by providing notice of the participant's marital status to the employer, or to continue paying for these benefits on an after-tax basis. In either case, the participant may seek a refund of federal income or federal employment taxes paid on any amounts representing the cost of spousal health coverage that were treated as after-tax and may exclude these amounts from gross income when filing an income tax return for the year.

FSA Reimbursements. A cafeteria plan may permit a participant's FSA, including a health, dependent care, or adoption assistance FSA, to reimburse covered expenses of the participant's same-sex spouse or the same-sex spouse's dependents that were incurred during a period beginning on a date that is no earlier than (a) the beginning of the cafeteria plan year that includes the date of the Windsor decision or (b) the date of marriage, if later. For this purpose, the same-sex spouse may be treated as covered by the FSA, even if the participant had initially elected coverage under a self-only FSA, during that period.

Cafeteria Plan Amendments. A cafeteria plan containing written terms permitting a change in election upon a change in legal marital status generally is not required to be amended to permit a change in status election with regard to a same-sex spouse in connection with the Windsor decision. To the extent that the cafeteria plan sponsor chooses to permit election changes that were not previously provided for in the written plan document, the cafeteria plan must be amended to permit such election changes on or before the last day of the first plan year beginning on or after December 16, 2013. This amendment may be effective retroactively to the first day of the plan year including December 16, 2013, provided that the cafeteria plan operates in accordance with the Notice's guidance.

January 9, 2014

ERISA-Second Circuit Rules That A Proposed Offest Is An Unreasonable Interpretation Of A Retirement Plan And Fails To Provide Notification In Accordance With ERISA

In Frommert v. Conkright, Docket No. 12-67-cv (2nd Cir. 2013), the plaintiffs had brought a claim against, among others, Xerox Corporation ("Xerox") and the Xerox Retirement Income Guarantee Plan (the "Plan"). They were appealing a decision by the district court, which applied a deferential review and held that the plan administrator's proposed offset-which reduced the plaintiffs' benefits- was a reasonable interpretation of the Plan, and that the Plan had given the plaintiff's adequate notice of the offset.

In analyzing the case, the Second Circuit Court of Appeals (the "Court") ruled that the proposed offset is an unreasonable interpretation of the Plan, and that it violates ERISA's notice provisions. As such, the Court vacated the district court's decision, and remanded the case back to the district court for further proceedings.

The plaintiffs are Xerox employees who left the company but were subsequently rehired, having received a lump-sum distribution of their then-accrued pension benefits when they left. At issue in this case is how the prior lump-sum distribution affects the determination of benefits under the Plan. Prior to this litigation, in general, the Plan took the lump-sum distribution into account, offsetting a participant's ultimate benefit from the Plan by the amount of the distribution . The plaintiffs argued that this offset was contrary to the Plan's terms. In reviewing the case, the Court concluded that, even affording deference to the plan administrator's decision, offsetting the benefit by the lump sum is inconsistent with the Plan's plain terms, and is therefore an unreasonable interpretation of the Plan. Further, since the offset was not adequately explained in the Plan's summary plan description (the "SPD"), and ERISA requires the SPD to describe any such offset, the plaintiffs were not given adequate notice of it.

January 8, 2014

Employment-New York Court Of Appeals Holds That Plaintiff 's Claim Of Disability Discrimination Under New York City Human Rights Law Survives Motion To Dismiss

In Romanello v. Intesa Sanpaolo, S.p.A. (2013 NY Slip Op 06600), the plaintiff, Giuseppe Romanello ("Romanello"), had been an executive of the financial services firm, defendant Intesa Sanpaola, S.p.A. ("Intesa"). Romanello had worked for Intesa and its predecessor for approximately 25 years when he became ill and unable to work. He was diagnosed with a series of disorders including major depression. After a period of absence, Intesa terminated Romanello's employment. Romanello then brought this suit, claiming that, by terminating him, Intesa discriminated against him on the basis of his disability in violation of the New York State Human Rights Law (the "State HRL") and the New York City Human Rights Law (the "City HRL").

In analyzing the case, the New York Court of Appeals (the "Court") ruled that Romanello did not state a claim under the State HRL, since indefinite leave is not an accommodation under State HRL, and here Romanello never indicated when he might return to work from his absence. However, the Court said that the City HRL affords broader protections than the State HRL . The City HRL declares that it shall be construed liberally for the accomplishment of the uniquely broad and remedial purposes thereof, regardless of whether federal or New York State civil and human rights laws have been so construed. As such, the Court said that it has held that the provisions of the City HRL should be construed broadly in favor of discrimination of plaintiffs, to the extent that such a construction is reasonably possible.

Continuing, the Court said that the City HRL requires that an employer make reasonable accommodation to enable a person with a disability to satisfy the essential requisites of a job, provided that the disability is known or should have been known by the employer. Contrary to the State HRL, it is the employer's burden to prove undue hardship to avoid the need to provide reasonable accommodation. Also, the City HRL provides employers an affirmative defense if the employee cannot, with reasonable accommodation, satisfy the essential requisites of the job. Thus, the employer, not the employee, has the pleading obligation to prove that the employee could not, with reasonable accommodation, satisfy the essential requisites of the job.

In this case, Romanello, by letter from his counsel, made his disability known to Intesa. Intesa did not meet its obligation under the City HRL to plead and prove that plaintiff could not perform his essential job functions with an accommodation. The Court ruled that, because Intesa made no such allegation or showing the City HRL claim must survive Intesa's motion to dismiss.

January 7, 2014

Employment-NYC Makes Available Notice To Be Provided To Employees About Their Rights To Reasonable Accommodation For Pregnancy, Childbirth Or Related Medical Conditions

Yesterday's blog discussed the new law requiring NYC employers to provide reasonable accommodation to employees for pregnancy, childbirth or related medical conditions. The new law requires that notice be provided to employees about their rights under the new law. This notice must be provided to new employees beginning on January 30, 2014, and to existing employees by May 30, 2014. NYC has now issued the notice to be used. The notice is here. The notice may, but need not, be posted.

January 6, 2014

Employment-NYC Passes Law Requiring Reasonable Accommodation Of An Employee's Pregnancy, Childbirth Or Related Medical Condition

The New York City Council has passed a new law which requires NYC employers to provide reasonable accommodation for an employee's pregnancy, childbirth or related medical condition. The new law applies to an employer with at least 4 employees (including independent contractors). It becomes effective on January 30, 2014. Here is what the new law provides:

Unlawful Discriminatory Practice. It is an unlawful discriminatory practice for an employer to refuse to provide a reasonable accommodation (see definition below) to the needs of an employee for her pregnancy, childbirth, or related medical condition, that will allow the employee to perform the essential duties of the job.

A Reasonable Accommodation. For these purposes, a "reasonable accommodation" is an accommodation that can be made, and does not cause an undue hardship to the employer. The employer has the burden of proving undue hardship. Factors which may be considered to determine whether an undue hardship will exist include, but are not limited to: (1) the nature and cost of the accommodation; (2) the overall financial resources of the facility or the facilities involved in the provision of the reasonable accommodation; the number of persons employed at such facility; the effect on expenses and resources, or the impact otherwise of such accommodation upon the operation of the facility; (3) the overall financial resources of the employer; the overall size of the business of the employer with respect to the number of its employees, and the number, type, and location of its facilities; and (4) the type of operation or operations of the employer, including the composition, structure, and functions of the workforce of the employer; the geographic separateness, administrative, or fiscal relationship of the facility or facilities in question to the employer.

Condition of Application. The unlawful discriminatory practice will not arise, unless the employee's pregnancy, childbirth, or related medical condition is known or should have been known by the employer. In any case in which the need for reasonable accommodation is placed in issue, it will be an affirmative defense of the employer that the employee could not, with reasonable accommodation, perform the essential duties of the job.

Notice of rights. The employer must provide written notice, in a form and manner to be determined by the NYC Commission on Human Rights, of the right to be free from discrimination in relation to pregnancy, childbirth, and related medical conditions to: (1) new employees at the commencement of employment and (2) existing employees by May 30, 2014 . This notice may also be conspicuously posted at an employer's place of business in an area accessible to employees.

January 2, 2014

Employment- The Annual Notice Required By The New York Wage Theft Prevention Act Is Due By February 1, 2014

The New York State Department of Labor website says the following:

The Wage Theft Prevention Act (WTPA) took effect on April 9, 2011.

The law requires employers to give written notice of wage rates:

• To each new hire
• To all employees by February 1 of each year

The notice must include:
• Rate or rates of pay, including overtime rate of pay (if it applies)
• How the employee is paid: by the hour, shift, day, week, commission, etc.
• Regular payday
• Official name of the employer and any other names used for business (DBA)
• Address and phone number of the employer's main office or principal location
• Allowances taken as part of the minimum wage (tips, meal and lodging deductions)

The notice must be given both in English and in the employee's primary language (if the Labor Department offers a translation). The Department currently offers translations in the following languages: Spanish, Chinese, Haitian Creole, Korean, Polish and Russian.

Sample Pay Notices

The employer may provide its own notice, as long as it includes all of the required information, or use the Department's sample notices. See our Wage Theft Prevention Act Forms for pay notices in a variety of languages.

More Information

The WTPA also included other provisions that employers need to know, such as stronger protections for whistleblowers and increased penalties for wage theft. Employers are strongly encouraged to review the Wage Theft Prevention Act Fact Sheet, and the Wage Theft Prevention Act Frequently Asked Questions.

December 31, 2013

Employment-NYS Raises Minimum Wage, Effective Today

A reminder-Effective today (December 31), New York State raises its minimum wage from $7.25 per hour to $8.00 per hour. There is an updated minimum wage poster, reflecting the new minimum wage, that employers have to put up in a conspicuous place prior to January 1. An updated poster and other information may be found here.

The federal minimum wage remains at $7.25, but I've heard that the President and others want to raise it to $10 or more. Stay tuned.

December 30, 2013

Employment-Second Circuit Upholds The Plaintiff's Claim Of Retaliation Under Title VII And New York State And City Law

In Kwan v. The Andalex Group LLC, Docket No. 12-2493-cv (2nd Cir. 2013), the plaintiff, Zann Kwan ("Kwan"), was appealing the judgment of the district court, which granted summary judgment to the defendant, The Andalex Group LLC ("Andalex"), dismissing various claims including retaliation in violation of Title VII and New York State and City law.
In this case Adalex terminated Kwan's employment, after Kwan complained to Andalex that she was being discriminated against because of her gender. Kwan alleged that the termination was in retaliation for so complaining.

In analyzing the case, the Second Circuit Court of Appeals (the "Court") affirmed the district court' summary judgment, except that it overturned the judgment against and dismissal of the retaliation claim. The Court found that, based on the discrepancies between an EEOC statement and subsequent testimony, a reasonable juror could infer that the explanation given by Andalex for the termination was pretextual, and that, coupled with the temporal proximity (3 weeks) between the complaint and the termination, Kwan's complaint to Andalex about the discrimination was a but-for cause of Kwan's termination. Viewing the evidence in the light most favorable to Kwan, as required on a motion for summary judgment, there is sufficient evidence to require denial of the summary judgment motion on the retaliation claim.

December 19, 2013

Employee Benefits-IRS Amends Safe Harbor 401(k)/(m) Rules To Provide Guidance On Reduction Or Suspension Of Safe Harbor Contributions

On November 15, 2013, the Internal Revenue Service (the "IRS") has issued an amendment to the safe harbor 401(k)/(m) rules to provide guidance on permitted mid-year reductions or suspensions of safe harbor nonelective contributions, effective for plan amendments provided for such a reduction or suspension adopted after May 18, 2009. The amendment also revises the requirements for permitted mid-year reductions or suspensions of safe harbor matching contributions for plan years beginning on or after January 1, 2015.

The highlights of the new amendment are:

--To reduce or suspend safe harbor contributions nonelective contributions, the employer must be operating at an economic loss as described in section 412(c)(2)(A) of the Internal Revenue Code. However, the employer may reduce or suspend such contributions without regard to its financial condition, if notice is provided to participants before the beginning of the plan year which discloses: (1) the possibility that the contributions might be reduced or suspended mid-year and (2) that a supplemental notice will be provided to participants if a reduction or suspension does occur and that the reduction or suspension will not apply until at least 30 days after the supplemental notice is provided.

--The rules that apply to mid-year plan amendments reducing or suspending safe harbor matching contributions are revised so that the requirements that apply to a mid-year reduction or suspension of safe harbor nonelective contributions are not stricter than (and can be the same as) those that apply to a mid-year reduction or suspension of safe harbor matching contributions.

-- The reduction or suspension in safe harbor nonelective or matching contributions cannot be effective earlier than the later of the date the amendment providing for the reduction or suspension is adopted or 30 days after eligible employees are provided the supplemental notice. Thus, the minimum 30-day waiting period applies solely with respect to the date the supplemental notice is provided and not the date the amendment is adopted.

December 18, 2013

ERISA-Supreme Court Upholds A Plan's Own Statute Of Limitations For Filing A Lawsuit For A Benefit Claim Denial

In Heimeshoff v. Hartford Life & Accident Insurance Co., No. 12-729 (decided December 16, 2013), the defendant, Hartford Life & Accident Insurance Co. ("Hartford"), was the plan administrator of Wal-Mart Stores ("Wal-Mart"), Inc.'s Group Long Term Disability Plan (the "Plan"). The Plan's insurance policy requires any suit filed in a court to recover benefits under ERISA § 502(a)(1)(B) to be filed within three years after "proof of loss" is due. The plaintiff, Heimeshoff, had filed a claim for long-term disability benefits under the Plan with Hartford. After Heimeshoff exhausted the mandatory administrative review process, Hartford issued its final denial. Almost three years after that final denial, but more than three years after proof of loss was due, Heimeshoff filed a claim in court pursuant to ERISA § 502(a)(1)(B). Hartford and Wal-Mart moved to dismiss on the ground that the claim was untimely. The district court granted the motion, recognizing that while ERISA does not provide a statute of limitations, the contractual 3-year limitations period was enforceable under applicable State law and circuit precedent. The Second Circuit affirmed.

In analyzing the case, the U.S. Supreme Court (the "Court") held that the Plan's limitations provision is enforceable. It said that the courts of appeals require participants in an employee benefit plan covered by ERISA to exhaust the plan's administrative remedies before filing suit to recover benefits. A plan participant's cause of action under ERISA § 502(a)(1)(B) therefore does not accrue until the plan issues a final denial. But it does not follow that a plan and its participants cannot agree to commence the limitations period before that time.

Further, the Court said that the rule set forth in Order of United Commercial Travelers of America v. Wolfe, 331 U. S. 586, 608, provides that a contractual limitations provision is enforceable so long as the limitations period is of reasonable length (i.e., as here, not unreasonably short) and there is no controlling statute to the contrary. That is the appropriate framework for determining the enforceability of the Plan's limitations provision. The Wolfe approach necessarily allows parties to agree both to the length of a limitations period and to its commencement. The principle that contractual limitations provisions should ordinarily be enforced as written is especially appropriate in the context of an ERISA plan. Heimeshoff's cause of action is bound up with the written terms of the Plan, and ERISA authorizes a participant to bring suit "to enforce his rights under the terms of the plan." ERISA § 1132(a)(1)(B). This Court has thus recognized the particular importance of enforcing plan terms as written in § 502(a)(1)(B) claims, see, e.g., CIGNA Corp. v. Amara, 563 U. S. ___, ___, and will not presume from statutory silence that Congress intended a different approach here.

Based on the above, the Court affirmed the lower courts' decisions.

December 17, 2013

Employment-Second Circuit Rules That A Company Which Operates An Entity Could Be Considered A "Single Employer" With That Entity And Thus Be Liable For That Entity's WARN Act Violations

In Guippone v. BH S&B Holdings LLC, Docket No. 12‐183‐cv (2nd Cir. 2013), the Second Circuit Court of Appeals (the "Court") faced the issue of who is liable for violations of the Worker Adjustment Retraining and Notification Act ("WARN").

In this case, the Court ruled that: (1) the district court had correctly determined that the defendants who are private equity funds were investors, not "single employers", with their subsidiary within the meaning of WARN, and therefore could not be liable for the subsidiary's WARN violations, and (2) the district court erred in granting summary judgment to BHY S&B Hold Co, LLC ("BHY"), which operated the entity the plaintiff worked for, because the plaintiff raised a question of material fact as to whether BHY was a "single employer" with that entity, and thus could be liable for that entity's WARN violations.

December 16, 2013

ERISA-Sixth Circuit Upholds Judgment For Disgorgement of Profits, Stemming From Denial Of Disability Benefits, Of Almost $3.8 Million On The Equitable Theory Of Unjust Enrichment-This In Addition To Upholding The Entitlement To The Disability Benefit

In Rochow v. Life Insurance Company of North America, No. 12-2074 (6th Cir. 2013), Daniel J. Rochow ("Rochow") had been President of Arthur J. Gallagher & Co. ("Gallagher"). As an employee of Gallagher, Rochow was covered under a Life Insurance Company of North America ("LINA") policy which provided a disability benefit.

Rochow began to experience short term memory loss, occasional chills, sporadic sweating, and stress at work. Gallagher then demoted Rochow from President to Sales Executive-Account Manager, because Rochow could no longer perform his duties as President. Rochow continued to have difficulties, and as a result of his inability to perform his job, Gallagher forced Rochow to resign. Rochow was subsequently diagnosed with HSV-Encephalitis, a rare and severely debilitating brain infection. Rochow then filed a claim with LINA for a long term disability benefit under the policy. LINA denied the benefit and ultimately this suit ensued. In the suit, Rochow stated two claims under ERISA: one to recover full disability benefit due him under the policy("claim 1"), and one to remedy the breach of fiduciary duty under the policy caused by the denial of the disability benefits ("claim 2").

The district court rendered judgment, granting Rochow his disability benefit (claim 1). The Sixth Circuit Court of Appeals (the "Court") affirmed this judgment. It ruled that LINA's denial of Rochow's claim for a disability benefit was arbitrary and capricious, was not the result of a deliberate, principled reasoning process, and did not appear to have been made solely in the interest of the participants and beneficiaries and for the exclusive purpose of providing benefits to participants and their beneficiaries as required by ERISA. Thus, Rochow prevailed on claim 1.

As to claim 2, the following transpired. Rochow died on October 16, 2008, and the representatives of his estate became the plaintiffs in this action. On November 10, 2008, LINA filed a statement of resolved and unresolved issues and the plaintiffs filed motions for attorneys' fees and costs, and for equitable accounting and disgorgement of profits, the disgorgement arising from LINA's breach of its fiduciary duties when denying the disability benefit, and being necessary to prevent LINA's unjust enrichment resulting from profits it earned on the wrongfully retained benefits. The district court granted the plaintiffs' motion for an equitable accounting of profits and disgorgement of the profits, on the equitable theory of unjust enrichment, in the amount of $3,797,867.92. LINA appealed. The Sixth Circuit affirmed the district court's judgment. In particular, the Court held that prevailing on claim 1(under section 502(a)(1) of ERISA) did not bar the equitable relief under claim 2(under section 502(a)(3) of ERISA)-under the "no double remedy rule", particularly when, as here, the later relief is needed to make the plaintiff whole.

December 12, 2013

Employment-Seventh Circuit Rules That A Financial Consultant Is Exempt From Overtime Pay Requirements

In Blanchar v. Standard Insurance Company, No. 12-2745 (7th Cir. 2013), the plaintiff, Thomas Blanchar ("Blanchar"), brought suit against the defendant, Standard Insurance Company ("The Standard"), to recover overtime pay pursuant to the Fair Labor Standards Act ("FLSA"). The Standard moved for summary judgment, arguing that Blanchar qualified as a bona fide administrative employee, and so was exempt from the FLSA's overtime requirement. The district court granted summary judgment in The Standard's favor, and Blanchar appeals.

In analyzing the case, the Seventh Circuit Court of Appeals (the "Court") noted that, to qualify under the bona fide administrative employee exemption, the employee must meet the following conditions: (1) he or she must be compensated on a salary or fee basis at a rate of not less than $455 per week ... exclusive of board, lodging, or other facilities; (2) his or her primary duty is the performance of office or nonmanual work directly related to the management or general business operations of the employer or the employer's customers; and (3) his or her primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.

The parties agree that condition (1) is met. To meet condition (2), the Court said that an employee "must perform work directly related to assisting with the running or servicing of the business, as distinguished, for example, from working on a manufacturing production line or selling a product in a retail or service establishment." 29 C.F.R. § 541.201(a). "[E]mployees acting as advisers or consultants to their employer's clients or customers (as tax experts of financial consultants, for example) may be exempt." § 541.201(c). "Employees in the financial services industry generally meet the duties requirements for the administrative exemption if their duties include ... determining which financial products best meet the customer's needs and financial circumstances; advising the customer regarding the advantages and disadvantages of different financial products; and marketing, servicing, or promoting the employer's financial products. However, an employee whose primary duty is selling financial products does not qualify for the administrative exemption." § 541.203(b).

As to the instant case, the Court said that Blanchar's primary duty was to work with salespeople to promote the sales of The Standard financial products. He fielded calls from salespeople, recommended marketing materials and plans for certain customers, and educated The Standard's salespeople on the different types of plans. He did not directly engage in the sales of any 403(b) or 457 plans; he merely assisted salespeople with those sales. He frequently provided talking points and advice to pension salespeople, spoke at industry conferences and seminars, and educated firms about 403(b) plans. Since Blanchar was involved in advising salespeople and promoting the sales of 403(b) and 457 plans generally, the Court found that his duties and responsibilities satisfy condition (2).

As to condition (3), the Court said that "Factors to consider when determining whether an employee exercises discretion and independent judgment with respect to matters of significance include, but are not limited to ... whether the employee provides consultation or expert advice to management; [and] whether the employee is involved in planning long- or short-term business objectives." 29 C.F.R. § 541.202(b). The phrase "work involving discretion and independent judgment" implies that an employee "has authority to make an independent choice, free from immediate direction or supervision." § 541.202(c). "The term `discretion and independent judgment' does not require that the decisions made by an employee have a finality that goes with unlimited authority and a complete absence of review. ... The fact that an employee's decision may be subject to review ... does not mean that the employee is not exercising discretion and independent judgment." Id.

As to the instant case, the Court said that Blanchar's duties --promoting sales, advising sales staff, and fielding questions--required the exercise of discretion and independent judgment. He scripted talking points for consultants to further the sales of 403(b) and 457 plans. He used his knowledge and experience to develop presentation materials and to answer questions from pension consultants. When presenting or speaking at conferences, Blanchar used materials he himself had prepared, which were later approved by The Standard's legal and marketing departments. He worked largely alone and met with his supervisor only once a year. Though Blanchar lacked final decision-making authority, his work involved a great deal of discretion and independent judgment. The Court concluded that Blanchar meets condition (3). Meeting all the conditions, the Court further concluded that Blanchar is an exempt bona fide administrative employee, and it affirmed the district court's summary judgment.

December 11, 2013

Employment-Fifth Circuit Rules That Former Employee Has Made Out A Prima Facie Case Of Retaliation Under Title VII

In Royal v. CCC&R Tres Arboles, No. 12-11022 (5th Cir. 2013), the plaintiff, Tonia Royal ("Royal"), worked at an apartment complex for only four days before she was fired by defendant CCC&R Tres Arboles ("CCC&R"). During this brief time, she was regularly visited in her small office by two maintenance men who hovered over her and sniffed her in a sexually suggestive manner. When she complained to her superiors about this sexually harassing behavior, she was then fired for unspecific reasons. Royal then filed this suit, claiming retaliation in violation of Title VII for complaining to the supervisors. The district court granted summary judgment against her on the retaliation claim, and she appeals.

In analyzing the case, the Fifth Circuit Court of Appeals (the "Court") said that Royal has shown genuine issues of disputed material facts whether the described conduct created a hostile work environment in violation of Title VII, and, if so, whether her complaint about that conduct was causally related to her termination. As such, Royal has made out a prima facie case on her retaliation claim. Consequently, the Court vacated the district court's summary judgment and remanded the case back to the district court for further proceedings.