Archive for the 'Title VII' Category

Employment and ERISA Law Considerations When Reducing or Laying Off Employees

January 7th, 2009

According to the Administrative Office of the U.S. Courts, for the 12-month period ending June 2007, there were a total of 23,889 business bankruptcy filings.  For the same period ending June 2008, business bankruptcy filings had increased by more than 40% (33,822 filed for the 12-month period ending June 2008).  With the downturn of the U.S. economy, many companies are struggling to reduce costs in order to remain in business.

Unfortunately, during tough times, companies are forced to make hard decisions in order to survive.  One of the largest expenses for most companies is human capital and the associated costs, such as salaries and employee benefits programs.  As companies analyze whether to use terminations and/or layoffs as a means to control or reduce costs, they need to ensure that the analysis includes consideration of legal risks involved and ensure that the ultimate course of action complies with any applicable laws.  Some of the laws that should be taken into consideration include the Family Medical Leave Act (FMLA), the Americans with Disabilities Act (ADA), the Uniformed Services Employment and Reemployment Rights Act (USERRA), the Older Workers Benefit Protection Act (OWBPA), the Employee Retirement Income Security Act (ERISA), Equal Employment Opportunity (EEO) laws and the Consolidated Omnibus .Budget Reconciliation Act (COBRA).

For example, when determining which employees will be terminated and/or laid off, companies need to ensure that the criteria used is objective and does not create a disparate impact on a protected class.  One of the most common mistakes companies make is to use compensation as criteria for determining which employees will be reduced.  In many cases, employees with the highest wage rates in positions generally tend to be older because their salaries have increased with their work experience and time in a position.  Employers should ensure that they are using objective, legitimate business criteria to make their selections, so they do not leave themselves open to an age discrimination claim.

Additionally, depending on the size of the employer and the number of employees being laid off, companies may need to comply with The Worker Adjustment and Retraining Notification Act (WARN).  WARN is a federal law that requires that employers with greater than 100 employees (excluding part-time employees) provide 60 calendar days advance notice of mass layoffs.  A mass layoff is defined as a layoff that either (1) involves at least 50 employees who make up at least 33% of the employer’s work force, or (2) involves at least 500 employees.  Additionally, some states have enacted their own versions of the WARN Act that have lower thresholds which trigger a notice period.  This analysis can be complex for employers to determine whether these laws will apply to them, especially if there have been intermittent lay-offs of some workers during periods of slow downs.

Making the decision to reduce headcount in order to help a company survive is probably one of the toughest decisions an employer can make.  Frequently, an employer is focused on its financial situation and can overlook potential legal pitfalls associated with the decision. 

Companies should consult with legal counsel when they face these difficult situations so that they ensure they comply with all applicable laws and that they have as much legal protection as possible.  Please contact our office with any questions you have or for additional information.

Genetic Information Nondiscrimination Act (GINA) Signed Into Law

May 28th, 2008

President Bush signed the Genetic Information Nondiscrimination Act (GINA) of 2008 on May 21st.  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.