Aiken & Aiken

Michele Aiken September 10th, 2008

Most employers have a standard release and waiver that is usually used in conjunction with severance packages for former employees. The former employee agrees not to bring suit against the employer in exchange for the offered severance package. Most release and waivers use broad, inclusive language (as broad as permitted by various employment laws) to ensure that the employer gains the most protection it can. In general, the release and waiver would include language that releases the employer from any claims for employment and/or re-employment by the employee and discharges the employer from any and all causes of actions arising from the employee’s employment. Within this language, specific causes of action and/or statutes are named as examples, including the Employee Retirement Income Security Act of 1974 (ERISA).

Generally, severance release and waivers are held to be enforceable, provided they comply with specific provisions required by laws such as the Older Workers Benefit Protection Act (OWBPA). However, with regards to waiving ERISA rights, a couple of recent cases indicate that employers need to evaluate their release and waiver language and procedures to ensure that they are getting the maximum protection against ERISA claims by former employees.

In March 2006, the U.S. District Court for the District of Connecticut ruled on Linder v. BYK-Chemie USA Inc. In this case, an executive executed a release and waiver upon termination of employment. However, after termination, he brought suit against his former employer based on the calculations used in the executive’s supplemental executive retirement plan (SERP). The court ultimately found that, in this specific case, the executive was barred from bringing suit by the executed release. However, in its ruling, the court adopted the position that the release of ERISA/benefit claims should require a greater scrutiny than the release of general claims. Therefore, the totality of the circumstances surrounding the release should be reviewed to ensure that the employee’s waiver of claims was voluntary and knowing.

In September 2007, the U.S. District Court for the District of Minnesota ruled on Groska v. Northern States Power Co. Pension Plan. In this case, two employers merged and employees were offered a choice of either competing for remaining positions or terminating employment with severance benefits. The plaintiff, Groska, opted to terminate employment and accept severance benefits, which required the execution of a release and waiver. Groska subsequently filed suit under ERISA, alleging improper claim denial and breach of fiduciary duty. With regard to the improper claim denial allegation, the court found that Groska had knowingly and voluntarily signed the release and waiver, so it was enforceable and barred the claim for improper denial. However, the court did not dismiss the breach of fiduciary claim as barred by the release and waiver. The court held that because ERISA recognizes the plan as a separate and distinct legal entity from the employer/plan sponsor, the release and waiver in favor of the employer did not automatically release the plan. Therefore, participants were still able to bring a claim against the plan itself under ERISA.

These decisions should prompt employers to review their “standard” release and waiver language and their processes for obtaining the executed release from former employees. Since the waiving of ERISA claims can be seen as needing a greater level of scrutiny than general contract claims, employers should evaluate whether the language currently being used provides the greatest shield possible. Additionally, since an employer’s release and waivers may not extend protection to the ERISA plan, the language should be updated to ensure the plan itself is afforded the greatest degree of protection available through the employer’s release and waiver. Benefits counsel can assist employers in reviewing the existing release and waiver language. Please contact our office with any questions or for additional information on how our attorneys can assist you.

• Benefits , ERISA , Employment
• Comments(0)

Michele Aiken June 10th, 2008

In today’s competitive business environment, employers and HR personnel are all too often put in the position of having to pay insufficient attention to employment and employee benefits legal compliance until problems arise - resulting in dire and costly consequences.  Failure to comply with the complex and ever-changing laws in these areas often results in one or a combination of: substantial penalties, steep fines, governmental agency audits, and / or litigation.  Unfortunately, all of these options usually have a very expensive price tag attached.

Consider the following:

Employment Practices

• 67% of all employment cases that litigate result in a judgment for the plaintiff
• 1/3 of employment case verdicts award punitive damages
• 75% or more of the total judgment amount awarded in an employment case is usually for punitive damages
• Based on 2000 data, median compensatory awards for employment cases were:
  • $268, 926 for age discrimination
  • $120,951 for race discrimination
  • $100,000 for gender discrimination
• Median compensatory awards rose from $78,592 to $218,000 between 1994 and 2000

Employee Benefits Plans

• From 2000 to 2001 the number of ERISA civil suits filed increased from 9,124 to 10,292 (almost 13%)
• In 2001, the Department of Labor investigated 4,862 businesses and recovered $648 million in penalties and damages
• In 2000, the average defense cost of a fiduciary liability claim was $124,000
• In 2000, 47% of fiduciary liability claims were based on benefits disputes (including denial of benefits)

How can an employer protect itself:

Self-Audits are reviews that companies usually undertake with the assistance of benefits counsel to identify legal compliance gaps in their plans, policies and/or operational procedures.  The audit focuses on areas that could place the company at risk for governmental fines and penalties, as well as expose the company to an increased risk of lawsuits.  These audits can be done for either or both a company’s employment practices and employee benefits plans. 

The scope of an audit can vary from a basic overview of plans, policies and procedures with identification of possible compliance gaps, to a comprehensive assessment and analysis with specific recommendations for methods of correction of any identified gaps and drafting and/or updating any needed plans, policies and procedures.  By conducting these voluntary self-audits, a company can significantly reduce the costs of future problems - costs that can have a huge impact on the company’s bottom line.

Employers should consider performing self-audits at least annually.  Additionally, when there are major changes to the law or major changes to the business, a self-audit should be done.  Employers should work with professionals with experience conducting these audits.  Employment and benefits lawyers can assist employers in auditing their policies, practices and plans.  Proactively identifying and addressing issues can be the best protection from legal action for an employer.

• Benefits , ERISA , Employment , General
• Comments(0)

Sheila Aiken May 28th, 2008

President Bush signed the Genetic Information Nondiscrimination Act (GINA) of 2008 on May 21^st.  GINA is designed to protect against discrimination in health insurance and employment based on genetic information.

This new law makes changes to the Health Insurance Portability and Accountability Act (HIPPA), the Public Health Service Act (PHSA) and the Internal Revenue Code (Code).  The provisions relating to health plans are effective as of May 8, 2009 and those relating to employment are effective November 8, 2009.  Additionally, the law provides that where states have more restrictive protection in place, the state law will continue to apply and employers will need to comply with the state law in addition to GINA.

This law prohibits health plan sponsors and health insurers from restricting enrollment or adjusting premiums based on genetic information.  It also restricts them from requesting or requiring genetic testing.  There are a few limited exceptions to these requirements and genetic information may be used by health plans for payment determinations.  However, the information must be handled in the same manner that other HIPAA-protected information is handled. 

Additionally under GINA, federal anti-discrimination laws such as Title VII of the Civil Rights Act (Title VII) and the American with Disabilities Act (ADA) are broadened.  Employers are prohibited from discriminating based on genetic information.  This includes discriminating in hiring, training and retraining, compensation and/or other terms and conditions or employment.  Employers may not segregate or classify employees based on genetic information in any manner that would deprive them of employment opportunities and they may not request, require or purchase genetic information.  Further, employers are prohibited from disclosing personal genetic information.

Under the new law, genetic information includes an individual’s or family member’s genetic tests, diseases and disorders and any request for or receipt of genetic services.   This includes genetic test results and participation in genetic research as well as the manifestation of a particular disease or disorder.  It does not include information such as a person’s gender or age.  However, there are some limited circumstances under which an employer may acquire genetic information. 

The Department of Labor (DOL) has been tasked with issuing final regulations on the health insurance provisions by May 21, 2009.  Additionally, the DOL will enforce the new law and has the authority to assess penalties.

Civil penalties of up to $100 per day per individual for violations may be imposed.  Additionally, if violations are not corrected, a minimum penalty of $2,500 for de minimis violations or $15,000 for material violations may be imposed.  There is a cap on penalties of the lesser of 10% of the amount paid by the plan sponsor during the preceding taxable year or $500,000.  However, under certain circumstances the DOL may waive penalties.

Employers, health plan sponsors and insurers will need to become familiar with the new requirements under the law.  They will need to ensure their practices are compliant with the new requirements and make certain that any genetic information they have about employees is treated with strict confidentiality, as required.  Employers should seek the advice of their benefits counsel to fully understand the law and its impact on their current and future practices and procedures.

• ADA , Benefits , ERISA , Employment , HIPAA , Health Care , Title VII
• Comments(0)

Sheila Aiken April 14th, 2008

Title VII of the Civil Rights Act of 1964 prohibits employers (with 15 or more employees) from discriminating against any individual with respect to the individual’s compensation, terms, conditions, or privileges of employment due to the individual’s race, color, religion, sex, or national origin.  However, Title VII also includes a defense to discrimination known as the “bona fide occupational qualification” defense, or “BFOQ” defense.   

Title VII allows for employers to discriminate on the basis of religion, sex, or national origin in their hiring and employment practices in instances where religion, sex, or national origin is a “bona fide occupational qualification reasonably necessary to the normal operation of that particular business or enterprise …”.  Courts have determined that discrimination on the basis of religion, sex, or national origin is permissible if the discriminatory action is required due to the “essence of the business”.  Note that “race” and “color” are conspicuously absent from the allowed BFOQ defense.  Under Title VII, there cannot be any reason that would justify discrimination on the basis of race or color.

In order to show that a discriminatory action was allowable as a BFOQ, an employer must prove:

1. There is a direct relationship between the protected characteristic and the ability to perform the job duties;
2. The bona fide occupational qualification directly relates to the “essence” or to the “central mission of the employer’s business”; and
3. There is no less-restrictive, reasonable alternative available to the employer

Employers who attempt to use the BFOQ “defense” to discrimination need to be aware that courts have interpreted the statute very narrowly and will only infrequently find that a permissible BFOQ exists.  One of the seminal cases on BFOQ exceptions is International Union, United Automobile, Aerospace & Agricultural Implement Workers of America, UAW, et. al. v. Johnson Controls, Inc.  In that case, the employer established a policy excluding fertile women from working in a position that required exposure to high doses of lead, in order to protect the possible unborn fetuses from damage due to the lead exposure. 

In that case, the U.S. Supreme Court found that the BFOQ defense was not available to the employer.  The Court specifically stated that the BFOQ exception must be interpreted narrowly, and advised that “[n]o one can disregard the possibility of injury to future children; the BFOQ, however, is not so broad that it transforms this deep social concern into an essential aspect of battery-making.”

When considering whether to adopt a discriminatory business practice due to a BFOQ, employers should seek advice from legal counsel before taking any action.  Because of the restrictive language of the statute itself, and the extremely narrow interpretation of the statute by the judiciary, advice from an attorney on whether a specific situation would rise to the level of an allowable BFOQ would be invaluable in preventing liability for discrimination claims down the road. 

• Employment
• Comments(0)

Michele Aiken April 10th, 2008

Most employers are familiar with the “usual” ADA discrimination prohibitions - namely that any employer with 15 or more employees may not discriminate against an employee who: has a physical or mental impairment which limits one or more major life activities; has a history of such impairment; or is regarded as having such impairment. However, there is another, lesser known, discriminatory prohibition covered under the ADA which is becoming more prevalent - that of association discrimination.

In addition to the three prohibitions listed above, the ADA also forbids an employer from discriminating against an employee who has a relationship or association with an individual who has a physical or mental impairment which limits one or more major life activities. According to the EEOC, the purpose of this provision is to prevent employers from taking adverse employment actions based on unfounded stereotypes and assumptions about individuals who associate with people who have disabilities.

A familial relationship is not required to support a claim of discrimination by association. The association may be with a family member or anyone else with whom the employee has an association. For example, an employer would violate this provision of the ADA if it took adverse employment action against an employee who volunteers at a homeless shelter which has a high population of HIV/AIDS individuals, if the employer’s decision was based on concerns about the disabilities of the individuals that the employee works with at the shelter.

The association provision does not require an employer to provide a reasonable accommodation to a person without a disability on the basis of that person’s association with a disabled individual. However, an employer must avoid treating an employee in a different manner than other employees based on the employee’s relationship or association with a disabled person. For example, an employer would not be required to modify its leave policy for an employee who needs time off to care for a disabled child as a “reasonable accommodation” under the ADA.

According to the EEOC, types of employer conduct that would be prohibited under the association provision include:

• Terminating or refusing to hire an individual due to his/her known association with a disabled individual
• Denying an employee promotion or advancement opportunities due to the employee’s association with a disabled individual
• Denying an employee health care coverage that is available to other employees because of the disability of someone with whom the employee has an association

In February 2008, the Seventh Circuit handed down a decision in an ADA association discrimination case - Dewitt v. Proctor. In that case, a nurse was fired by the hospital due to the excessive health care costs incurred by her husband during his treatment for prostate cancer. In its decision, the Court held that an individual may establish a case for association discrimination under the ADA by showing that:

1) The individual was qualified for the job at the time of the adverse employment action;

2) The individual was subjected to an adverse employment action;

3) The individual was known by the employer to have a relative or associate with a disability; and

4) The individual’s case falls within one of three categories: the employer believes the individual will be: costly to the employer, distracted from work, or a possible threat in spreading the disabling condition.

If the individual is successful in establishing these requirements, the burden then shifts to the employer to prove a non-discriminatory reason for the adverse employment action in question.

With the increased litigation being brought under the association provision, the EEOC is increasing its scrutiny of allegations of association discrimination made by employees. Employers would be well-served to review their own policies and procedures with counsel to ensure that they don’t run afoul of the ADA’s prohibition against association discrimination.

• Employment
• Comments(0)