In a decision issued during 2010, the U.S. Supreme Court ruled that the authority of the five-member NLRB could not be delegated to a panel with fewer than three members. On August 27, the term of NLRB Chairman Wilma Liebman expired, leaving the board with only three members. Craig Becker, a former lawyer for the Service Employees International Union (SEIU) and AFL-CIO, has been serving since April 2010 on a recess appointment that will end this December. Thus, as of the end of the year, the board will be down to two members, Mark Pearce, the former union-side lawyer who has been appointed chairman to replace Liebman, and the lone Republican on the board, Brian Hayes. Because the board lacks the ability to render decisions with only two members, many expect the NLRB to issue a great number of rulings and do everything possible to improve the status of organized labor before the end of the year.

Consistent with the prediction of increased pro-labor rulings, in August the NLRB issued three rulings that will be of great value to organized labor. All three decisions overruled cases decided when Republicans constituted a majority of the board. Two of the decisions delay how soon unions can be challenged as bargaining representative, after a new union is recognized, or when new owners take over a company.

In the first case, UGL-UNICCO Serv. Co., the board ruled 3-1 to restore a “successor bar” doctrine requiring employers to recognize incumbent unions for a “reasonable period” after a business transition without challenging the majority status of the union. The prior NLRB precedent had ruled that an incumbent union in a successorship situation enjoys only a rebuttable presumption of majority status, and thus the majority status could be quickly challenged where there was proof of loss of majority. However, the new ruling says that the successor bar better achieves the Act’s policy of preserving industrial peace by promoting stability in collective-bargaining relationships. This type fact pattern arises when an entity purchases the assets of another entity having a collective bargaining relationship with the union. The issue comes up when the union wants to negotiate an agreement with a new entity, and the question is whether the new entity has to recognize the collective bargaining relationship or not, particularly when employees indicate during the same time period that they do not want union representation.

In a second case, Lamons Gasket Co., the board similarly overruled precedent and ruled that a representation election petition is barred for a reasonable period of time following voluntary recognition of a union designated by a majority of employees. The fact patterns giving rise to this issue occur when an employer voluntarily recognizes a union through a “card-check” or some similar voluntary recognition, and employees find out about the voluntary recognition and take steps to show that a majority of employees do not want the union.

The third case may end up being the most important of the three, Specialty Healthcare Rehab. Ctr. of Mobile. This case narrows the appropriate voting unit where a union seeks an election among a smaller group of employees. In the ruling, the 3-1 majority notes that the Act requires only that an election be conducted in appropriate unit, and that once the NLRB determines that employees in a proposed voting unit share a community of interest, the petitioned-for unit would not be rendered inappropriate unless the party seeking a larger unit “demonstrates the employees in a larger unit share an overwhelming community of interest with those in the petitioned-for unit.”

Dissenting member Hayes warns that the majority has adopted a bargaining unit test that “obviously encourages unions to engage in incremental organizing in the smallest units possible.” Employers fear that unions will seek elections in “gerrymandered” smaller voting units in favor of the union, and use the success in those smaller units to organize larger units. Some commentators refer to unions now being able to form Amicro-unions in small parts of a company.

Many observers believe that it is unlikely that a third member of the board will be appointed to allow the board to have a quorum after December. Republicans are angered by recent board actions that they see as pro labor, and Democrats in control of the Senate will not allow another Republican member.

On Nov. 30, 2011, the board dropped its attempt to implement a “quickie election” rule prior to losing its quorum at the end of the year. Obama appointees Mark Pearce and Craig Becker moved forward with only some portions of the proposal designed to speed up union elections, removing the most controversial change, which would have shortened the waiting period for a secret ballot vote to 10 to 14 days. Currently, companies have five to six weeks to make their case before a union election at a work site.  As expected, Pearce and Becker, both of whom have close ties to organized labor, voted in favor of the watered-down proposal, which limits litigation surrounding union elections, and Hayes voted no. At this point, it is doubtful that the board will revisit the hot-button quickie election issue and enact the full package this year.

Retaliation now the most common EEOC charge

For the first time in history, retaliation charges filed with EEOC have surpassed race as the most frequently filed EEOC charge. Some suggest that the economy has something to do with the situation, as employees sometimes file a discrimination charge or complaint thinking they will thereby protect their jobs because any subsequent discipline may result in a charge of retaliation for filing the charge or for complaining about discrimination. Sloppy employer procedures and documentation add to the situation, particularly if employees are thereafter disciplined for matters for which they received no prior written warning. Further, some supervisors still make negative comments to employees who have filed a charge or complained of discrimination, which some lawyers refer to as a “smoking gun” of showing discrimination or retaliation. Almost every federal and state employment law has some sort of anti-retaliation provision, and employees and their attorneys are increasingly sophisticated about bringing such claims.

To avoid retaliation claims, employers must evaluate carefully any discipline or other adverse employment actions against an employee after a complaint or charge of discrimination is filed. Employers must separate the investigation of the complaint or charge of discrimination, from the investigation of the subsequent disciplinary action. The situation is particularly dangerous if the disciplinary action is determined by the same person who was previously the subject of the complaint or charge of discriminatory conduct. In such situations, it almost always helps to have a higher authority within the company do a separate and independent review, in an attempt to avoid a contention that the decision has been tainted or prejudiced by the accused supervisor’s input into the decision making process.

In both cases, the workers appealed to the Labor Board to reverse their discharge and other discipline, and in both of the cases the NLRB declined to issue complaints on the workers’ behalf.  However, the NLRB did file a complaint against an ambulance service provider for firing an employee who had called their supervisor a “mental patient” on her Facebook page.  The employee had criticized her boss by stating, “love how the company allows a 17 to become a supervisor,” with “17” being an insider’s term for a psychiatric patient.  Her employer, American Medical Response, had a policy that forbade employees from criticizing the company online, but the Labor Board issued a complaint, arguing that such a policy was too broad, and that the online griping amounted to “protected concerted activity” under the National Labor Relations Act, for which an employer cannot fire or discipline a worker.  The NLRB basically argued that the Facebook chatter was no different from workers gathering around the water cooler to discuss working conditions.

In general, to be “protected, concerted” activity under NLRB protection, the activity must be both “protected,” and “concerted.”  To be “concerted” the activity must in some way relate to group action, such as “acting with the authority of” co-workers, seeking to initiate and induce or prepare for a group action, or “bringing truly group complaints to the attention of management.”  On the other hand, if the employees are engaging in activities solely on their own behalf, or if their comments are deemed “mere griping,” they are not protected.  The line gets even more difficult to discern when an employee does something that can be argued to be “disloyal.”  In another case, the NLRB general counsel concluded that an employee did not lose the protection of the Labor Act when she used the term “scumbag” and other similarly negative terms to describe her supervisor in remarks posted on her Facebook page.  He stated that “the Board has found more egregious name-calling protected.”

Company policies on social media

On other issues, the general counsel addressed the legality of company policies aimed at conduct like blogging, social media participation, and other public communications.  He cited case precedent that even if an employer rule does not explicitly limit Labor Act-protected activities, an unfair labor practice finding will be supported where (1) employees would reasonably construe the rule to prohibit protected activities; (2) the rule was promulgated in response to union activity; or (3) the rule is applied to restrict the exercise of employee rights under the Labor Act.

In the case of the employee who called her supervisor names online, the employer maintained a policy that prohibited employees from posting in any media pictures of themselves that depicted the company’s logo, uniforms, or vehicles.  The general counsel found the policy to be unlawful:  “We concluded that this language violated Section 8(a)(1) because it would prohibit an employee from engaging in protected activity; for example, an employee could not post a picture of employees carrying a picket sign depicting the company’s name, or wear a t-shirt portraying the company’s logo in connection with a protest involving terms and conditions of employment.”

In another case, the general counsel discussed a hospital that issued a policy on social media, blogging and social networking that prohibited in broad terms employee conduct that disregarded any person’s privacy or confidentiality rights.  The policy also prohibited communications or postings that constituted embarrassment, harassment or defamation of the hospital or any employees, or that might damage the reputation or goodwill of the institution, its staff or employees.  The general counsel said the hospital applied the privacy rule to protected concerted activity and “absent any limitations on what was covered” by the rule, it “could reasonably be interpreted as prohibiting protected employee discussion of wages and other terms and conditions and was therefore overbroad.”

But in another case, the general counsel found that a grocery store did not violate the Labor Act by maintaining an employee handbook provision on media relations and press interviews.  The handbook informed employees that the company’s public affairs office was responsible for external communications and that it was important for one spokesman to act for the company in order to deliver its message and avoid the distribution of misinformation.  He concluded that “a media policy that simply seeks to ensure a consistent, controlled company message and limits employee contact with the media only to the extent necessary to affect that result cannot be reasonable interpreted to restrict (Labor Act-protected) communications.”  Noting that the policy was explained as an effort to ensure that only one person spoke for the company, he concluded that the rule did not convey the impression that employees were barred from speaking out concerning their own employment.

Conclusion

There are difficult lines to be drawn in drafting company policies on social media and in making decisions whether disciplinary action is appropriate.  If employers wish to design their policies to address these issues, legal counsel should be consulted to draft or at least review such provisions, because broad prohibitions of any criticism of the employer are likely to be held to violate the Act.  Policies will have to be narrowly written so as to avoid any restriction of protected concerted activity, and possibly also contain disclaimers of any interference with protected concerted activities.  The stronger the company rationale for having such policies, the more leeway the NLRB is likely to give the employer in determining the validity of the policy.

Further complicating the issue is the fact that many employers assume that the Labor Board only protects “union-related” conduct.  However, “protected, concerted” activity cases often arise in the context of a totally non-union environment.

Jerome Pinn is an attorney in the Knoxville office of Wimberly, Lawson Seale & Daves.  He welcomes your comments on this topic or other employment law issues, and can be reached at (865)546-1000.

The NLRB Associate General Counsel issued a guidance memorandum on Aug. 26, 2011 regarding the Board’s recently adopted regulation. The memorandum reiterates that U.S. employers subject to the NLRB’s jurisdiction will be required to post the notice. In an important development, the memorandum indicates that federal contractors that post the Labor Department Notice of Employee Rights required by Executive Order 13496 will not be required to post the NLRB notice, because the DOL notice contains an “almost identical” statement of employee rights.

In an interesting development, Gov. Nikki Haley of South Carolina, has indicated on her Facebook page that “Right next to that sign that is being mandated by Barrack Obama’s union cheerleaders at the NLRB, I encourage all S.C. employers to put up another sign: ‘In our state, every worker has the freedom to reject the efforts to form unions and keep their paychecks for themselves and their families instead of paying union dues to union bosses in Washington.’” Employers may wish to consider posting a “side notice,” near the NLRB poster, should the posting requirement take effect early next year. They should review the contents of a side notice with their legal counsel beforehand.

Health care issues likely to be resolved by next June

It is likely that the U.S. Supreme Court will make a ruling on the constitutionality of the Obama health care plan by next June, right in the middle of the U.S. presidential election campaign. One thing is for sure — both sides want to have the case resolved quickly. Two of the three federal appeals courts that have ruled on the issue thus far have found the health care law to be constitutional. The third appeals court, the 11th Circuit in Atlanta, ruled that the law’s “individual mandate” — the requirement that most Americans carry health insurance or pay a penalty — was unconstitutional, but allowed the rest of the law to be implemented. The 11th Circuit case is considered the most prominent of the health care challenges because it involves a lawsuit brought by a group of Republican governors and attorneys general from 26 states. The key legal issue is whether the health care law exceeds Congress’s power to regulate interstate commerce by compelling an individual to undertake a commercial activity — purchasing health coverage — or pay a penalty.

While the Supreme Court is not required to hear the case, because of the importance of the issues, the divided opinions by the federal appeals courts, and the request for both sides for an early ruling, it will likely hear and decide the case in its current term. The most important parts of the new law are scheduled to take effect in 2014.

New IRS program allows penalty-free conversion of independent contractors

Employers save about 30 percent on compensation by using independent contractors rather than employees, due to lack of payroll taxes and benefits. Further, independent contractors are not subject to the discrimination and other employment laws, and some consider them to be better workers. Nevertheless, those employers that use independent contractors on a large-scale basis are constantly facing legal challenges regarding their use. The proper classification often depends on various factors including an employer’s level of control over a worker, but there is no clear formula in determining the classification issue. Litigation over the issue often involves claims for back payments of all payroll taxes, penalties and interest.

A new IRS initiative called the Voluntary Worker Classification Settlement Program encourages businesses to re-classify their independent contractors as employees, without having to worry about a big penalty. Employers who join the program will owe 10 percent of the tax liability that would have been due on employees’ compensation for the past year, without interest or penalties.

To be eligible, a company must consistently have treated the workers as independent contractors; must have filed required Form 1099 for the past three (3) years; and must not be under a worker-classification audit by federal or state agencies. The program is open to companies of any size, and was introduced by the IRS on Sept. 21, 2011. The initiative is part of a broader effort to address the misclassification issue. A few days earlier, officials from the Labor Department, IRS and seven states announced an agreement to work together to combat misclassification. Further, the Obama administration has asked Congress to change the current provisions of the law on the classification issue. The government is concerned that misclassification results in unpaid federal taxes, plus unpaid assessment for state workers’ compensation and unemployment insurance programs.

Jerome Pinn is an attorney in the Knoxville office of Wimberly, Lawson Seale & Daves.  He welcomes your comments on this topic or other employment law issues, and can be reached at (865)546-1000.

Fast forward to the amendments to the Americans with Disabilities Act (ADA), which became effective Jan. 1, 2009, under which most absences due to physical or mental impairment could be covered by the ADA, whereas in the past they were not serious enough to constitute a “disability” under the ADA. Thus, many more employees than previously can now claim that they were terminated because of their disability, because of absences due to their disability. They will argue that a no-fault attendance policy does not meet employers’ obligations to reasonably accommodate their disability.

This argument was made in a case involving a settlement entered into on July 6, 2011, between the Equal Employment Opportunity Commission (EEOC) and Verizon Communications. EEOC v. Verizon Del. LLC. According to the EEOC, this settlement is the largest disability discrimination settlement of a single lawsuit in the EEOC’s history. Under the settlement, Verizon will pay $20 million and provide various other forms of relief to a class of former and current employees. The additional relief includes modifying attendance policies to include measures for accommodating qualified individuals with disabilities, and excusing a disability-related absence as “non-chargeable” as a reasonable accommodation under the ADA.

Many employers believe that claims attacking no-fault attendance policies lack merit, inasmuch as the policy itself is a form of accommodation, and an employee not at work at all cannot really be “qualified.” In any event, employers can expect large numbers of these claims to be brought, and apparently some employers are settling these types of claims rather than defending such claims on the merits.

The EEOC also reported that in fiscal year 2010, private sector workplace discrimination charge filings with the EEOC hit an unprecedented level of 99,922, which included a record-high number of disability charges (25,165) — an increase of 17.3 percent in disability charges over the prior fiscal year.

The settlement between the EEOC and Verizon provides some insight into the EEOC’s view on how employers should deal with ADA issues relating to no-fault attendance policies. Section 20.03 of the settlement agreement provides:

20.03. In determining whether a Current Associate’s absence should be non-chargeable, Verizon will evaluate on an individual case-by-case basis whether each of the following is satisfied:

(a) the Current Associate has a mental or physical impairment that substantially limits one or more major life activities of such individual as defined by the ADA, and for the period on and after Jan. 1, 2009, as amended through the ADA Amendments Act of 2008;

(b) the Current Associate’s absence was caused by a disability;

c) the Current Associate or someone else on the Current Associate’s behalf requested through the Company’s designated process a period of time off from work due to a disability;

(d) the Current Associate’s absences have not been unreasonably unpredictable, repeated, frequent or chronic;

(e) the Current Associate’s absences are not expected to be unreasonably unpredictable, repeated, frequent or chronic;

(f) Verizon was able to determine, from the request by or on behalf of the Current Associate or through the interactive reasonable accommodation process, a definite or reasonably certain period of time off that the Current Associate would need because of a disability; and

(g) the Current Associate’s need for time off from work as a reasonable accommodation does not pose a significant difficulty or expense for Verizon’ s business.

If each of the foregoing is satisfied a Current Associate’s absence shall be non-chargeable. If (a), (b), (c), (d), (e), (f) or (g) is not satisfied, Verizon may, as Verizon deems appropriate, determine that an absence is chargeable.

In other words, the settlement suggests a way for employers to modify their procedures to require that a disabled employee (or someone acting on behalf of the disabled employee) request leave of a definite duration so that the employer can evaluate whether the accommodation would pose significant difficulty or expense.

What can employers do?

For those who want to avoid the ire of the EEOC, or a plaintiff’s attorney, prepare to engage in a multi-step analysis when an employee is absent from work for personal medical reasons. First, does the employee have an impairment that substantially limits one or more activities? Second, was the absence caused by the disability? Third, did the employee or his representative request time off from work because of a disability? Fourth, are the employee’s absences unreasonably unpredictable, repeated, frequent or chronic? Fifth, does the employee need a definite or reasonably certain period of time off because of the disability? Sixth, would granting the employee time off pose a significant difficulty or expense for the employer?

Assuming the employer wants to be quite conservative and avoid these type claims being made (regardless of their ultimate validity), the important question becomes how the employer can design or modify its no-fault policy to meet these requirements. Even in the Verizon settlement, there is a key phrase that the employee has “requested through the company’s designated process for a period of time off from work due to a disability.”

This key phrase as well as the rationale of the issue suggests that an employer can make a minor modification to its no-fault policies to allow for such an exception, as the law requires an employee with a disability to initiate the request for a reasonable accommodation, following the employer’s published policies. Thus, through the use of this concept, many of the problems associated with the Verizon-type issue can be safely handled without a significant burden on employers.

For employers who are willing to accept some risk, there are some simpler procedures. First, implement an ADA accommodation policy that applies to all other policies and procedures of the company. Second, wait to see if an employee requests an accommodation in accordance with the ADA accommodation policy. Third, if the disabled employee requests an accommodation, evaluate whether the accommodation will enable the employee to do the job. Fourth, if not, then engage in an interactive process with the employee to determine whether there is any accommodation that will enable the employee to perform the job. At the same time, remember that you cannot discriminate against a disabled employee because of the disability. In other words, if other similarly situated employees receive leave, be sure that you treat the disabled employee fairly.

Jerome Pinn is an attorney in the Knoxville office of Wimberly, Lawson Seale & Daves.  He welcomes your comments on this topic or other employment law issues, and can be reached at (865)546-1000.

First, the HIRE Act provided for a reduction of 2010 payroll tax liability. An employer who hired certain unemployed workers after Feb. 3, 2010 and before Jan. 1, 2011 was eligible to qualify for exemption from its share of Social Security taxes on wages paid to these workers after March 18, 2010. This reduced tax liability had no effect on the employee’s future Social Security benefits, and the employer still needed to withhold the employee’s 6.2-percent share of Social Security taxes, as well as income taxes. The employer and employee’s shares of Medicare taxes also still applied to these wages.

Second, the HIRE Act provided for a credit against 2011 income tax liability. For each worker retained for at least a year, an employer may claim an additional general business tax credit, up to $1,000 per worker, when it files its 2011 income tax return. An employer can take this credit only for those employees who worked for a maximum of 40 hours in the 60 days prior to their hire date and who have remained employed for 52 consecutive weeks. Also, pay in the last 26 weeks cannot be less than 80% of the pay in the first 26 weeks.

Reasonable break time and area for nursing mothers

The federal health care law passed last year contained an amendment to the wage-hour laws (FLSA) pertaining to nursing mothers. The provision requires employers to provide “reasonable break time for an employee to express milk for her nursing child for one year after the child’s birth each time such employee has need to express the milk.” Employers are also required to provide “a place, other than a bathroom, that is shielded from view and free from intrusion from co-workers and the public, which may be used by an employee to express breast milk.”

This break time requirement is now in effect, and the Department of Labor (DOL) has issued Wage and Hour Fact Sheet #73: “Break Time for Nursing Mothers under the FLSA.” The Fact Sheet indicates that a bathroom, even if private, is not a permissible location under the Act. The location provided must be functional as a space for expressing breast milk. If the space is not dedicated to the nursing mother’s use, it must be available when needed in order to meet the statutory requirement. A space temporarily created or converted into a space for expressing milk or made available when needed by the nursing mother is sufficient provided that the space is shielded from view, and free from any intrusion from co-workers and the public.

Only employees who are not exempt from Section 7 of the FLSA, which includes the FLSA’s overtime pay requirements, are entitled to breaks to express milk. While employers are not required under federal law to provide breaks to nursing mothers who are exempt from the overtime requirements, they may be obligated to provide such breaks under state laws, including Tennessee law.

Employers with fewer than 50 employees are not subject to the federal break time requirement if compliance with the provision would impose an undue hardship. All employees who work for the covered employer, regardless of work site, are counted when determining whether this exemption may apply.

Employers are not required under the FLSA law to compensate nursing mothers for breaks taken for the purpose of expressing milk. However, where employers already provide compensated breaks, an employee who uses that break time to express milk must be compensated in the same way that other employees are compensated for break time. In addition, the law’s general requirement applies that an employee must be completely relieved from duty or else the time must be compensated as work time.

The law does not require employers to allow employees to extend their work day to make up for unpaid break time used for expressing milk. Where it is not practical for an employer to provide a room for expressing milk, the DOL’s initial interpretation is that the requirement can be met by creating a space with partitions or curtains. Further, an anteroom or lounge area connected to a bathroom may be sufficient to meet the requirements of the law. Locker rooms that function as changing rooms may also be adequate so long as there is a separate space designated within the room for expressing milk that is shielded from view and free from intrusion. In order to be a functional space that may be used by an employee to express breast milk, at a minimum, a space must contain a place for the nursing mother to sit, and a flat surface, other than the floor, on which to place the pump. The DOL interprets an employee’s right to express milk for a nursing child to include the ability to safely store the milk for her child. While employers are not required to provide refrigeration options for nursing mothers for the purpose of storing the expressed milk, they must allow a nursing mother to bring a pump and an insulated food container to work for expressing milk and storing the milk and ensure there is a place where she can store the pump and insulated food container while she is at work. In situations where the employee is off-site, the DOL recommends that the employer arrange with the client to allow the employee to use a space at the client’s site for the purpose of expressing milk.

EEOC sues employer over random alcohol tests

The Equal Employment Opportunity Commission (EEOC) is suing U.S. Steel in Pennsylvania after the company fired an employee based on a positive alcohol test result, under the U.S. Steel policy of requiring a random alcohol test for all probationary employees. The EEOC asserts that alcohol tests fall under the category of medical exams because they are “invasive” and normally require blood, urine, or breath to be drawn. Such exams are permitted only when the outcome is “job-related and consistent with business necessity.” Under these qualifiers and the ADA, medical exams are only permitted when an employer has a “reasonable belief, based on objective evidence, that a particular employee will be unable to perform the job or will pose a direct threat due to a medical condition.” Under this view, employers engaging in alcohol testing of current employees without any observed, objective evidence of a problem, are inviting a claim under the ADA. There may be an argument that random alcohol testing is permissible as a preventative measure in a safety sensitive position, however. By contrast, drug testing is allowed for employees because of a special provision of the ADA, indicating that drug testing is not considered a medical examination.

The exit polls showed some interesting voting patterns, with the Republicans making significant gains among women, middle-income and blue collar workers, seniors and independent voters, although polls indicated that both parties were viewed unfavorably. The economy was generally listed as the most important issue, as well as skepticism of big government and opposition to Democratic party policy directives such as the president’s economic stimulus package and the health care overhaul. Exit polls also indicated that about 40 percent of those polled said they were supporters of the Tea Party movement, while 31 percent said they were opponents of the Tea-Party. While Tea-Party candidates brought additional enthusiasm and turnout for Republican voters, some believe that Tea Party-backed candidates appear to have cost the Republicans Senate races in Nevada, Delaware and Colorado.

Significant differences appeared in what national priorities should be going forward. Voters appear divided as to whether the country’s economic problems could be addressed by cutting the budget deficit or spending more to bring additional job growth.

One wonders what direction the administration will take in light of the Republican sweep. President Bill Clinton had significant mid-term election setbacks following his first two years, and responded by moving to the center, gaining enormous popularity in the process. The complication is that today, political parties are more philosophically divided, with moderate Democrats suffering the greatest losses on the Democratic side, while conservative Republicans appear to be gaining. Liberal elements within the Democratic Party may be reluctant to support efforts at moderation and compromise, and instead ironically urge the following of Ronald Reagan to “stay the course” or Harry Truman to “stick to principles and if Congress doesn’t go along, to blame Congress.” Democrats will have to overcome internal divisions and avoid opposition building to President Obama within the Democratic Party. Republicans similarly will have to be prepared to present alternatives instead of simple opposition to the president’s programs and show some bipartisan accomplishments, while adjusting to the pressure from the right from the Tea Party candidates.

In terms of the Congressional agenda, common ground may be found between the administration and the Republicans over limiting federal spending, extending some Bush tax cuts, promoting jobs through infrastructure investments and international trade, education, and energy. While there will likely be efforts, particularly in the House, among Republicans, to repeal the Obama health care law, another possibility is to amend or add to the law providing additional acceptable options or limit funding for the law. While some would argue that a divided government makes it hard to pass legislation, history suggests that the combination of one party controlling the White House, and the other the Congress, has actually led to a favorable environment for some significant legislative compromises. The pressure will be on both the president and the Congress to move forward in a bipartisan manner. Core Republican principles of cutting spending, lowering taxes, and maintained a strong national defense, will also be the key elements of its Congressional posture along with creating additional jobs.

Outside the above areas, compromises between the administration and Republicans appear dim. Immigration reform and climate-change legislation appear dead, at least for the present, as well as the union card-check union organizing bill and other controversial new employment laws. Nevertheless, enormous power still rests with the administration to make significant change through the regulatory process, which is largely unaffected by the Republican gains in Congress. Over the last year or so, regulatory policies towards wage-hour and safety and health have changed enormously, along with significant changes in immigration enforcement. Organized labor is quite pleased with administration changes at the National Labor Relations Board (NLRB) allowing immediate injunctive relief (without an administrative hearing) to reinstate terminated union organizers in a union organizing drive, and changes are expected in the near future to speed up union elections, currently with a median election date of 38 days after the union’s filing of an election petition. The NLRB, currently consisting of three former union lawyers and one Republican, is in the process of major revisions to NLRB policies that will assist unions in organizing and make it less likely for them to be voted out. Other NLRB rules that could change by administrative fiat include additional access for organizers to the workplace, shorter election campaigns, union representation of staffing employees, and moving voting away from the workplace through internet or mail ballots. In fact, even without new legislation, many current labor and employment related policies can be significantly changed by administration appointees. The Administration’s appointees have stated publicly that they will use their authority to make regulatory and policy changes. About the only way the Republicans can limit the power of the administrative agencies is through threatening to withhold funding and/or the withholding of funding. However, Republicans may remember the adverse public reaction when federal funding was frozen during the tenure of House Speaker Newt Gingrich.

IRS to expand independent contractor review

The government has the belief that extensive use by companies of independent contractors makes it harder to collect taxes, and the current administration is promoting a significant crackdown to correct perceived abuses. The use of independent contractors provides enormous advantages to companies, and some estimate that their cost is 30 percent less than use of employees. Workers themselves sometimes view the independent contractor status favorably because they can set up their own retirement plans, and more effectively deduct tools and equipment, because their expenses are deducted before the self-employment tax calculation.

The IRS has announced that it has started a National Research Project to examine businesses’ practices of classifying workers as either employees or independent contractors. The agency is expected to check around 6,000 businesses as part of this review. The IRS has indicated it may look to audit companies that issued 1099 forms of $25,000 or more to five or more workers who reported no other income on their personal returns. Therefore, companies expecting that they have independent contractors working solely for them may want to examine the propriety of those worker-company relationships.

Workers may also initiate an audit by filing an SS-4 Form and an 8919 Form, in which an individual claims he was an employee but that employment taxes were not withheld and paid, as a way to reduce his taxes when he realizes he may owe more than he can pay.

There is a favorable provision in federal tax law, Section 530, which limits the power of the IRS to classify workers as employees if the companies could demonstrate a reasonable basis for treating the workers as independent contractors based on certain criteria. This provision is still in effect, and in addition, the IRS has issued Revenue Ruling 87-41, which lists 20 factors to consider for classifying the worker. However, none of the factors alone are controlling, and so determinations of actual status are still difficult. To make matters even more confusing, each separate type of employment law may contain its own definition of an employee or independent contractor, or at least add some nuances to the general common law definition, which generally centers around how much an employer controls the details of the worker’s performance.

Employers utilizing independent contractors should make sure that independent contractor status will hold up, if subjected to IRS scrutiny. The penalties for misclassifying workers as contractors can be significant (including but not limited to back taxes, overtime pay, workers’ compensation, employee health benefits, and retirement benefits).

Jerome Pinn is an attorney in the Knoxville office of Wimberly, Lawson Seale & Daves.  He welcomes your comments on this topic or other employment law issues, and can be reached at (865)546-1000.

In reviewing the issue, the U.S. Supreme Court noted that it had not reviewed the scope of an employee’s Fourth Amendment privacy rights in over 20 years. In its earlier 1987 opinion in O’Connor v. Ortega, the Court had addressed the privacy rights of government employment in two steps. First, because some government offices may be so open to fellow federal employees or the public that no expectation of privacy is reasonable, the court must consider the operational realities of the workplace in order to determine whether an employee’s Fourth Amendment rights are implicated. Using this analysis, the question whether an employee has a reasonable expectation of privacy must be addressed case-by-case. Where it is determined that an employee has a legitimate privacy expectation, “an employer’s intrusion on that expectation for a non-investigatory, work-related purpose, as well as for investigations of work-related misconduct, should be judged by the standard of reasonableness under all the circumstances.”

The Court first stated that if it were to get into the “operational realities” issue under O’Connor, it would be necessary to ask whether the employer official’s statements could be taken as announcing a change in the computer policy, and if so, whether he had, in fact or appearance, authority to make such a change and to guarantee the privacy of text messaging. It would also be necessary to consider whether a review of messages sent on police pagers, particularly sent while officers are on duty, might be justified for other reasons. These matters would all bear on the legitimacy of an employee’s privacy expectation.

The Court decided that it must proceed with care when considering the whole concept of privacy expectations and communications made on electronic equipment owned by a government employer, particularly because of emerging technology before its role in society has become clear. The Court decided instead to dispose of the case on narrower grounds, by assuming for the purposes of deciding the case that the employee had a reasonable expectation of privacy in the text messages sent on the pager provided to him by the City, that the employer’s review of the transcript was a search within the meaning of the Fourth Amendment and that the principles applicable to a government employer’s search of an employee’s physical office (the fact pattern in the Ortega case) apply with at least the same force to an employer’s intrusion on an employee’s privacy in the electronic arena.

After assuming, without deciding, these propositions for the purpose of deciding the case, the Court decided to dispose of the case based on the issue of whether the search was reasonable. The Court concluded that since the search was motivated by a legitimate work-related purpose, and because it was not excessive in scope, the search was reasonable and therefore did not violate the Fourth Amendment.

While the Supreme Court’s ruling in Quon deals with public employment, and the Fourth Amendment does not directly apply to private employers, court decisions in public employment cases nevertheless often have application to the private sector. Based upon the Quon case, employers are well advised to have clear written policies concerning communications and technology, including text messages and other forms of messaging. It is a good idea for employers to regularly review and update their “acceptable use” policies to make sure that they cover advancing technology, such as text messaging, instant messaging and social networking.

Inspection of third parties’ communication systems (i.e., text messages, cell phones, etc.), without an employee’s consent, may violate the Stored Communications Act. In the future, third-party communication providers may be less likely to provide information requested by an employer without employee consent.

Jerome Pinn is an attorney in the Knoxville office of Wimberly, Lawson Seale & Daves.  He welcomes your comments on this topic or other employment law issues, and can be reached at (865)546-1000.

Employers who perform credit checks and/or criminal background checks performed by third parties should be aware that these checks are regulated by the Fair Credit Reporting Act (FCRA), which sets forth numerous and highly technical requirements governing their use. These requirements include the following:

• An employer must disclose to the applicant or employee that a background check will be obtained for employment purposes.

• A disclosure must be made in a document that consists only of the disclosure.

• The employer must obtain the applicant’s or employee’s written authorization to perform the background check.

• Before taking any adverse action against the applicant or employee based upon information contained in the background check, the employer must provide the applicant or employee with a copy of the background check and a summary of his/her rights under FCRA.

• The employer must then wait a reasonable time before taking any adverse action against the applicant or employee.

• When taking an adverse action against an applicant or employee on the basis of information contained in a background check, the employer must provide the applicant or employee with the name and contact information for the entity from which the background check was obtained, along with other information regarding the applicant’s or employee’s rights under FCRA.

In an informal advisory letter dated March 9, 2010, the EEOC issued an opinion that an employer’s use of credit checks to screen job applicants could be illegal, if it leads to a disproportionate exclusion of minorities and other protected groups from the workforce. The letter said that although discrimination laws do not directly prohibit discrimination based upon credit information, laws such as Title VII bar employment practices that disproportionately screen out racial minorities, women or other protected groups, unless the practice is job-related and “consistent with business necessity.” The letter cited as an example of “business necessity” situations where employees are required to handle large amounts of cash. Thus, according to the EEOC, if an employer’s use of credit information disproportionately excludes African-American and Hispanic candidates for a job, the practice would be unlawful unless the employer could establish that the practice is needed for it to operate safely or efficiently.

Leave of absence policies can lead to expensive litigation

Most employers covered by the Family and Medical Leave Act (FMLA) and the Americans with Disabilities Act (ADA) are aware that, in appropriate situations, they must grant leaves of absence to eligible employees. However, there are a number of “special” situations which over the years have generated a great deal of litigation.

A recent development generating increasing litigation is the common practice of many employers’ leave policies that include an automatic termination provision (sometimes called an administrative separation) after an employee is absent a set period of time, such as six (6) months, one year, etc. Over the years, the EEOC has taken the position that such policies violate the ADA as they do not consider brief leave extensions to help employees return to work. In a settlement reached in late 2009, Sears Roebuck paid $6.2 million to satisfy an ADA claim resulting from such a set period for automatic termination policy. The case arose when Sears fired an employee when his workers’ compensation leave expired. Following discovery, the EEOC filed a lawsuit claiming that Sears had discharged hundreds of employees without seriously considering granting additional leave as a reasonable accommodation, in order to permit the employees to return. In September 2009, Sears agreed to settle the matter and pay $6.2 million in damages to more than 400 former employees. (EEOC v. Sears Roebuck & Co.)

The company agreed to adopt more flexible return-to-work strategies as part of the settlement, providing among other things, notifying injured employees 45 days before their leaves expire that they could request an accommodation in the form of additional leave in order to enable their return to work.

Many employers apparently feel that their only obligation is to provide the minimum of 12 weeks under the FMLA, and/or the appropriately designated time for workers compensation, without considering the ramifications of the ADA. Although the courts have generally not been as receptive to the EEOC’s position on administrative separation policies, many employers are nevertheless modifying their policies to in some way allow a timely request for a leave extension where the employee has a disability and can otherwise return to work in the near or foreseeable future.

Another quirk in leave policies can occur if an employer does not allow any leaves of absence for a set period of time, such as during the initial probationary period, relying on the fact that the FMLA generally does not kick in until the employee has worked for one year. However, the ADA may require that a leave of absence be granted before employees work for a set period of time. A related problem occurs when females become pregnant and are not granted leave because they do not have enough length of service. To prevent lawsuits being brought based on these types of policies, employers should at least consider accommodations and/or encourage employees who do not meet generally applicable requirements for recall to reapply when they are able return to work.

Another issue is that some employers have exceptions for additional leave for workers compensation claimants, often designed to minimize the employer’s workers compensation expenses. The question is whether the employers granting a longer, more beneficial leave of absence to a workers compensation claimant, can result in claims by others that they should be granted similar treatment, or else be subject to discrimination claims. The majority rule in the courts appears to be that persons on workers compensation leave can be treated more favorably. However, the cases are not completely uniform in this regard.

A recent case arose when the EEOC sued an employer who operated a rigid leave policy that prevented employees from taking leave for any reason during certain critical periods in its annual business cycle. To settle the lawsuit, the employer agreed to pay $50,000 to two former employees. (EEOC v. Beverage Solutions.) According to an EEOC spokesperson, “companies are free to encourage their employees to structure periods of leave at times of the year when business is slow … but under the ADA, there are situations where medical leave is necessary as a reasonable accommodation.”

Jerome Pinn is an attorney in the Knoxville office of Wimberly, Lawson Seale & Daves.  He welcomes your comments on this topic or other employment law issues, and can be reached at (865)546-1000.

The case arose in 2001 when several current and former female employees sued Wal-Mart alleging that the company pays women less than men in comparable positions, even when the women have higher performance ratings and greater seniority, and that the company provides women fewer promotions. The plaintiffs allege that Wal-Mart has a strong, centralized corporate structure that fosters sex stereotyping and discrimination in its 3,400 stores, that policies and practices supporting such discrimination are consistent throughout all the stores, and that sex discrimination is common to all women who work or have worked for the company. The plaintiffs requested certification of a nationwide class of current and former female employees holding a wide range of positions, seeking back pay and punitive damages. Plaintiffs ask that the class include women who worked for Wal-Mart as far back as 1998.

A lower court had certified the class for the pay discrimination allegations, and the U.S. Court of Appeals for the Ninth Circuit ruled on April 26 2010, in a 6-5 decision, that the district court did not abuse its discretion in finding that the six named plaintiffs’ claims were typical of the class and that the case should proceed as a nationwide class action. The dissenting opinion stated that “No court has ever certified a class like this one, until now. And with good reason….” The dissent pointed out that the six named plaintiffs have worked in 13 of Wal-Mart’s3,400 stores and yet “seek to represent every woman who has worked in those stores over the course of the last decade — class estimated in 2001 to include more than 1.5 million women…”

Another large employer found out what a jury trial of a nationwide class action for discrimination in pay can lead to. On May 17, 2010, a federal jury in New York awarded $3.4 million in damages to 12 female plaintiffs who testified as witnesses against the Novartis Corp., in a nationwide class action of female sales representatives. The damages awarded were for pain and suffering and loss of enjoyment. On May 19, 2010, the same federal jury awarded $250 million in punitive damages in the same case, an amount described by the plaintiffs’ attorney as the largest ever in a sex discrimination verdict. These punitive damages were in addition to $3.4 million in compensatory damages already awarded to the 12 testifying plaintiffs. The case involves a nationwide class of some 5,600 current and former female sales representatives who worked for the company between 2002 and 2007.

The plaintiffs’ attorney stated that three major areas were targeted in the case including the company’s performance management system, compensation system and access to promotions. Ironically, Working Mother magazine has designated Novartis as one of the top 100 companies for working mothers 10 years in a row, and the company has been included since 2005 on a Top 50 list named by Diversity Inc. magazine. The lesson of these cases is that sex discrimination claims involving large numbers of plaintiffs are on the rise. Employers should try to ensure that their pay and promotion practices offer both sexes equal opportunities.

Unions winning elections more often

The Bureau of National Affairs has released a report that unions won 68.5 percent of representation elections conducted by the NLRB in 2009, the highest win rate since BNA began analyzing NLRB data in 1984. At the same time, the number of elections held in 2009 dropped to the lowest level since 1984. The unions have won more than half of all NLRB representation elections in each over the past 13 years. Of course, the NLRB statistics do not reflect the full extent of organizing being conducted by unions. Many unions organize through neutrality and card check recognition agreements.

The Supreme Court invalidates hundreds of NLRB decisions

On June 17, 2010, the U.S. Supreme Court ruled that hundreds of NLRB rulings are invalid, because the five-member National Relations Board issued the decisions with only two members. The National Labor Relations Board (NLRB) generally has five members, with three of them in the party occupying the White House. During the last months of the Bush administration, Democrats blocked President Bush’s nominees on complaints that they were biased in favor of the business. Subsequently, Republicans fought President Obama’s nominees, complaining they were biased in favor of unions. As a result, the NLRB shrunk to only two members, but while more members were still on the Board they delegated the authority to issue decisions to two members in order to keep moving the cases.

The statute requires there to be three members to act for the Board. In a 5-4 ruling authored by Justice John Paul Stevens, the Court ruled that less than three members lacked a quorum and that allowing two members to run the NLRB because Congress and the White House cannot agree on new members would be like letting the Board “create a tail that would not only wag the dog, but would continue to wag after the dog has died,” Justice Stevens wrote.

The decision means that more than 500 of the cases decided by the NLRB while its members had dropped to two, may have to be reopened by the NLRB, which currently has four members. The NLRB currently consists of three members appointed by President Obama (all union lawyers), and one Republican. It is likely however, that the current four-member NLRB may in effect “rubber-stamp” many of the prior rulings.

Jerome Pinn is an attorney in the Knoxville office of Wimberly, Lawson Seale & Daves.  He welcomes your comments on this topic or other employment law issues, and can be reached at (865)546-1000.

According to DOL statements on this strategy, Plan/Prevent/Protect is aimed at those employers who have not taken the necessary steps to ensure compliance. DOL states its recognition that some employers’ lack of compliance is the result of difficulty understanding the laws and regulations that govern America’s workplaces. For other employers, DOL’s opinion is that complacency or a “catch me if you can” philosophy may be why they have not taken more proactive actions to achieve compliance.

The Labor Department seeks to change the behavior of such employers by requiring employers to “find and fix” problems, rather than waiting for a Labor Department investigator to discover the problems and enforce the law. Although the specifics will vary by law, industry and regulated enterprise, this “Plan/Prevent/Protect” strategy will require all regulated employers to take three steps to ensure safe and secure workplaces and compliance with the law:

* “PLAN”: The Department will propose a requirement that employers create a plan for identifying and remedying risks of legal violations and other risks to workers – for example, a plan to search their workplaces for safety hazards that might injure or kill workers. The employer would provide its employees with opportunities to participate in the creation of the plans. In addition, the plans would be made available to workers so they can fully understand them and help to monitor their implementation.

• “PREVENT”: The Department will propose a requirement that employers thoroughly and completely implement the plan in a manner that prevents legal violations. The plan cannot be a mere paper process. The employer cannot draft a plan and then put it on a shelf. The plan must be fully implemented for the employer to comply with the “Plan/Prevent/Protect” compliance strategy.

• “PROTECT”: The Department will propose a requirement that employers ensure that the plan’s objectives are met on a regular basis. Just any plan will not do. The plan must actually protect workers from violations of their workplace rights.

What the strategy proposes is that employers be required to assemble plans, create processes and designate people charged with achieving compliance. They will be required to implement these plans and evaluate their effectiveness in achieving compliance.

New rules will primarily target compliance with the Fair Labor Standards Act (FLSA), the Occupational Safety and Health Act (OSHA), the Federal Mine Safety and Health Act of 1977 (Mine Act), the Employee Retirement Income Security Act (ERISA), and Executive Order 11246 (affirmative action for federal contractors and subcontractors).

As part of the recordkeeping requirements of the Fair Labor Standards Act, the DOL proposes to establish a requirement that employers perform a classification analysis for any worker that the employer classifies as an independent contractor. The employer would then be required to disclose that analysis to the worker and retain that analysis to give to DOL investigators who might request it.

Without a doubt, DOL’s new enforcement program will compel employers to institute more proactive policies and actions to attempt to ensure their compliance with Federal employment laws. The first step is for employers to “find and fix’ violations – that is, assure compliance – before a Labor Department investigator arrives at the workplace. The audit can then be used as the basis for writing and implementing a compliance plan to prevent future violations. The plan must contain implementation steps such as annual compliance audits, methods for employees to participate in the plan, and designation of particular employees who are responsible for ensuring compliance. Ongoing education and training for these designated employees will also be a necessity, as well as a system for compliance reporting.

Employers who fail to take the steps necessary to comprehensively address the risks, hazards, and inequities in their workplaces will be considered out of compliance by DOL and, depending upon the agency and the substantive law it is enforcing, subject to remedial action. In other words, “Tag, You’re It” for developing, implementing and enforcing company policies that will ensure your company’s compliance with employment, safety and employee benefit laws.

Jerome Pinn is an attorney in the Knoxville office of Wimberly, Lawson Seale & Daves.  He welcomes your comments on this topic or other employment law issues, and can be reached at (865)546-1000.