Legal Briefs for HR

Welcome to Legal Briefs for HR, an update on employment issues sent to over 4000 HR professionals, in-house counsel and business owners to help them stay in the know about employment issues.  Anyone is welcome to join the email group . . . just let me know you’d like to be added to the list and you’re in!  Back issues are posted on my firm’s website at www.munckcarter.com under E-Newsletter.  Welcome to new subscribers who attended my speeches for Odyssey One Source and the Fort Worth chapter of the National Association of Women in Construction!

1. This Little Piggy– Here are just a few of the websites that may become useful to you as we all watch and hold our breath as the swath of H1N1 (swine flu) expands.  For workplace safety advice, go to www.osha.gov/Publications/OSHA3327pandemic.pdf.   For medical information, including the locations of reported cases, go to www.cdc.gov/swineflu/.  Dust off your FMLA policy and take note of the changed definitions (underlined below) that took effect on January 16.  For example, a serious health condition may qualify under “continuing treatment” if it lasts more than three consecutive, full calendar days and also involves at least two in-person health care provider visits within the first 30 days of incapacity OR one in-person health care provider visit within the first seven days of incapacity plus a regimen of continuing treatment.  Where FMLA does not apply, take a look at your absence control and paid time off polices and be mindful that unpaid leave for many folks is a big incentive to come to work sick, which you do not want them to do.  And don’t forget the FLSA regulations that limit your ability to dock exempt workers’ salaries when they are absent without jeopardizing the exemption.
2. A Different Kind of Swine– Heads up, employers in IL.  The IL Supreme Court held that under the state anti-discrimination law, an employer is strictly liable for the hostile environment created by a supervisor, even where the alleged victim did not work for the harasser and he had no authority to affect the terms and conditions of her employment.  Sangamon County Sheriff’s Dep’t v. IL Human Rights Commission ( IL S. Ct. 4-09).  In this case, a male sergeant/supervisor sent a female records clerk a letter, purportedly from the state health department, informing her that she had a communicable disease.  He claimed it was a practical joke, but the court was not amused and said “Not only are supervisors the ‘public face’ of the employer, but employers are in the best position to train supervisors and make them aware of the law prohibiting sexual harassment.”  Most employers are mindful of the potential for strict liability where the supervisor harasser engages in the quid pro quo variety of harassment (i.e., conditioning term(s) of employment on receipt of sexual favors), but all should note the trend at the state level to use that same standard (rather than a negligence standard) when the harassment is of the hostile environment variety.  In any case, your best offense and defense is to [1] have a well-written and widely disseminated policy that prohibits such behavior; [2] include a procedure for reporting violations in the policy that does not force the alleged victim to start the process by reporting it to his or her supervisor; and [3] train your staff on this issue, especially your managers and supervisors.
3. Thank You, Supremes!– The days when Texas employers muttered “Why bother?” when asked if they would try to enforce a noncompete against a former employee are becoming a faded memory.  In late 2006, the Texas Supreme Court put on their practical hats by holding that a noncompete could become enforceable when the employer provided the trade secrets or special training which served as consideration for the employee’s promise not to compete.  Before then, if the employee’s  written promise to not noncompete and the employer’s offer of secrets/training didn’t occur at the same time, there was no enforceable noncompete.  Now, fast forward to April 2009 for more good news.  A tax manager tried to get the noncompete he’d signed with his former employer declared unenforceable by pointing out that the agreement did not expressly state that he would be provided with confidential info.  The court took a dim view of this argument and pointed out that [1] the nature of his duties as tax manager required that he be given access to all sorts of company and customer confidential info; and [2] in his employment agreement, he promised that he would not use or disclose confidential information obtained while he was employed.  That promise made no sense unless he was, in fact, given confidential info.  The Court sided with the employer and explained that the employer’s implied promise in the employment agreement to provide confidential info was good enough and the parties had entered into an “otherwise enforceable agreement” which is one of the requisites for enforcing a noncompete restrictive covenant in Texas.  Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding (TX S. Ct. 4—09)  Take that, tax man!
4. A Taxing Situation– Employers with employees serving in the U.S. military who are offering those employees gap pay (i.e., the difference between their civilian and military paycheck), take note.  The IRS changed the rules regarding tax treatment of these payments, eff. January 1, 2009.  These payments are wages for income tax purposes, but employers are not required to withhold and remit social security and Medicare taxes (FICA). Ers will put the amount of payment in Box 1 of the ee’s Form W-2.  These amounts are subject to withholding for federal income tax and should be reported on Form 941.  The ee who receives these payments will report them on Line 7 of Form 1040.  If the ee is receiving large sums over time and is worried about accruing a big tax bite, he or she can make quarterly estimated tax payments.  The IRS suggests using the Electronic Federal Tax Payment System (EFTPS) to facilitate that process.
5. Third Time’s a Charm? – There is another delay in implementation of a regulation intended to force certain federal contractors and sub-contractors to enroll in E-Verify and begin using it within 30 days of being awarded a contract.  The rule was to take effect on January 15, but has been pushed to February 20, May 21 and now to June 30.  In the meantime, there is activity at the state level relating to E-Verify as follows:
   1. The Rhode Island  Superior Court has upheld the Governor’s right to require that all persons and businesses, including grantees, contractors and their subcontractors and vendors doing business with the state use E-Verify to verify employee eligibility to work in the U.S.
   2. The Governor of Nebraska signed a bill (L.B. 403) that requires public employers and those who receive state/local contracts or tax incentives to use E-Verify on all newly hired employees, effective October 1.
   3. Texashas a bill pending (H.B. 266) which, if passed, will force government entities and businesses who contract with them to use E-Verify or a similar federal program on all new hires.  The Texas AG has opined that the bills presented in this legislative session (unlike the ones in the 2007 session) would likely pass constitutional muster.
6. Fair WARNing– An amendment to the Worker Adjustment and Retraining Notification (WARN) Act was filed on April 23 in Congress.  If passed, H.R. 2077  would expand notice requirements to include mass layoffs that occur at more than one site of an employer (instead of focusing on the “single site” analysis) and increase penalties from “back pay” to “two times the amount of back pay.”  You can always find full text and current status of federal bills at http://thomas.loc.gov.
7. More Fun with FMLA– Two pending bills and a useful court case:
   1. H.R. 2132(filed April 28) – Would expand scope of FMLA by allowing an eligible employee to use FMLA to care for a same-sex spouse, domestic partner, parent-in-law, adult child, sibling or grandparent who has a serious health condition.
   2. H.R. 2161(filed April 29) – Would nullify certain regulations and revise others; the intent is to undo many of the recent changes to FMLA regulations that favor employers (e.g., waiving FMLA rights as part of a settlement agreement, allowing an er to have direct contact with ee’s health care provider, denying or reducing attendance bonuses where ee took FMLA leave).  The bill is not posted on http://thomas.loc.gov yet but you can read about it on the website of the bill’s author, Rep. Carol Shea-Porter (NH) at www.house.gov.  Click on “Representatives” to navigate to her site.
   3. While You Were Gone– How many times have you reassigned existing staff or hired a temp to cover for an employee on leave, only to discover that the absent employee wasn’t so hot at doing his or her job?  If that leave was FMLA, you may have been reluctant to effect a discharge and risk an interference claim, but the 7^th Circuit shows that it can be done.  In upholding summary judgment for the employer on a claim of FMLA retaliation, the Court said “the fact that the leave permitted the employer to discover the problems cannot logically be a bar to the employer’s ability to fire the deficient employee” and the fact that he was fired on his first day back from leave did not establish that the leave was the cause of being fired.  Kevin Cracco v. Vitran Express, Inc. (7^th Cir. 3-09).
8. More Contractor Conundrum– Add Ohio to the list of states that have self-surveyed in order to measure the scope and impact of employers who misclassify their employees as independent contractors.  The result?  In a 2-18-09 report, the AG’s office estimates annual losses to state coffers of $100 million in unemployment comp payments, more than$510 million in workers’ comp premiums and almost $180 million in state taxes.  Add to that tally more than $100 million lost by cities/towns  in local income tax revenues and $7.8 million lost by school districts. Those kinds of numbers are getting the attention of state legislators and agency administrators who are struggling with slashed budgets.  With no state income tax and a voluntary workers’ comp system, Texas employers may be tempted to think compliance efforts won’t darken their doors, but the drumbeat has spread from state-level action to a bill filed last year in Congress (See LB4HR #10-2008) that would affect virtually all U.S. employers.  H.R. 6111 & S. 3648 are expected to be refiled in Congress shortly.
9. FAR Out Requirement– The Federal Acquisition Regulation (FAR) is putting federal government contractors in an uncomfortable role, via language in the final rule for the Trafficking Victims Protection Act (TVPA).  The TVPA is meant to stem the tide of human trafficking, whether it be for slavery, sexual exploitation or similar reasons.  The final rule says neither contractors nor their employees are to engage in human trafficking or use forced labor, during the term of the government contract and an employee’s off-the-clock lapse in judgment, shall we say, may result in revocation of said contract.  During the comment period, it was argued that surely the FAR did not mean to encompass employee conduct that occurs after hours and/or off the clock, but FAR nipped that view in the bud by stating that the statute would be inadequately implemented if that interpretation were true “since employee violations are more likely to occur after working hours.”  To top it off, there is no exclusion for commercial sex acts that are obtained lawfully (think NV brothels) and the final rule requires employers to self-report any violations.  For materials on this touchy subject, go to www.state.gov/g/tip/c26189.htm.  
10. For the Birds– If you like being “tweeted” and want breaking news on employment law changes, follow me on Twitter.  I’m at @amross. 

Until next time,

Audrey E. Mross
Labor & Employment Attorney
Munck Carter LLP
600 Banner Place
12770 Coit Road
Dallas, TX  75251

972.628.3661 (direct)
972.628.3616 (fax)
214.868.3033 (iPhone)
amross@munckcarter.com
www.munckcarter.com

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