Inside the Mind of the EEOC, May 26, 2005
Want a look at the EEOC’s strategy for litigation? The Commission has just issued a revised Regional Attorneys’ Manual that provides agency guidance on litigation procedures. It includes information on settlement standards, trial practice and appellate procedure to be followed by EEOC attorneys. The manual is designed to provide internal guidance, but is available on the Commission’s website at http://www.eeoc.gov/litigation/manual/index.html.
Waiting on the DOL, May 24, 2005
In what has become a ritual hollow promise, the Department of Labor has again stated that it expects to publish a proposed rule revising its regulations under the Family and Medical Leave Act (FMLA) by the end of this month. Like a check in the mail, the DOL has made this promise for the past two years but the new regulations are yet to appear. The need for revision came about after the Supreme Court’s decision in Ragsdale v. Wolverine Worldwide Inc., 535 U.S. 81 (2002), which struck down one section of the DOL’s 1995 regulations as beyond the scope of the FMLA. A number of other regulations have also been struck down or heavily criticized by appellate courts. So, hold your breath if you want, but .
The DOL has also said that it will release a final rule outlining employer requirements under the Uniformed Services Employment and Reemployment Rights Act (USERRA) by September. The law does not require the promulgation of implementing regulations, but the DOL's Veterans' Employment and Training Service (VETS) has suggested that rulemaking would further the agency's efforts to promote employer compliance with USERRA.
Ehrlich Vetos Maryland Minimum Wage Increase, May 24, 2005
Governor Ehrlich vetoed legislation (H.B. 391) last week that would have raised Maryland’s minimum wage to $6.15/hour on Jan. 1, 2006. The current rate is $5.15/hour. Senate President Miller has said that expects the General Assembly will override that veto when it reconvenes in January 2006.
Maryland CSA Upholds Circuit City Arbitration Requirement, May 24, 2005
In Holloman v. Circuit City Stores, Inc., No. 1145 (Md. App. May 5, 2005), the Maryland Court of Special Appeals recently became one of a limited number of courts to uphold as valid and enforceable the employment arbitration agreement that Circuit City Stores employees sign when they are hired. Most recently, the Ninth Circuit held in Ingle v. Circuit City Stores, No. 04-55927 (9th Cir. May 18, 2005) that the agreement was unenforceable. The court held previously that the agreement was procedurally and substantially unconscionable under California contract law. This time the court sanctioned Circuit City for brining a frivolous appeal. Employment arbitration agreements are governed by state law, which is why results vary.
Is It Too Late?, May 20, 2005
Title VII of the Civil Rights Act, the federal law which prohibits discrimination, applies only to employers who have 15 or more employees. What happens if an employer who employs less than the required number of workers but fails to defend on the basis that it is not covered by the law? Some circuit courts have held that it is a defense that must be raised before trial on the merits while other circuit courts have ruled that the minimum employee requirement must be established at the threshold to give a court jurisdiction over the case.
The issue came up recently in a case where an employee sued her employer for sexual harassment. After a jury verdict in favor of the employee, the employer contended that it did not have enough employees to be covered by the law. The trial court agreed and entered judgment for the employer. On appeal, the circuit court followed the cases which held that the fifteen or more employee requirement was jurisdictional and affirmed the judgement.
The employee asked the Supreme Court to review the decision pointing out that the law is inconsistent between the circuits. Recently, the Court granted certiorari to review the issue.
As of now, the Fourth Circuit, which covers cases in Maryland, Virginia, North Carolina, and West Virginia, follows the line of cases which have held the employee count requirement is jurisdictional. We'll see if the Supreme Court changes that.
Docking Lawyers Approved by DOL, May 18, 2005
Under the Fair Labor Standards Act, most employees exempt from overtime must be paid a salary. In many cases, docking a salaried employee for absences makes that otherwise exempt employee eligible for overtime. The Department of Labor, however, recently approved a docking scheme for government lawyers that does not cause the lawyers to lose their professional exemption from overtime.
The DOL stated that the employer can consider absences in performance evaluations, require the lawyers to keep track of their time, and dock their pay when they have used up all their sick leave. This DOL opinion letter confirms existing law surrounding docking practices for exempt employees. If you do dock your salaried employees, you may want to have your practices reviewed to make sure they comply with DOL regulations
FMLA Costs Employers $21 Billion In 2004, May 5, 2005
by Eric Paltell
When President Clinton signed the Family and Medical Leave Act ("FMLA") into law in 1993, proponents predicted this would be law with only a minimal burden on business. However, history has proven the cynics to be correct, as a recent study by the Employment Policy Foundation found the FMLA cost employers $21 billion in 2004 alone.
Almost half of the cost imposed by the FMLA is attributed to labor costs for replacing absent workers. These costs including wages paid to employees working additional shifts and overtime expenses. Health care costs for those on leave totaled $5.9 billion, and lost productivity was estimated at $4.8 billion.
The study also found that FMLA use has increased significantly in recent years. Whereas a 2000 study by the United Stated Department of Labor found that only 25% of employees used the FMLA more than once annually, the Employment Policy Foundation study found that 52% of workers took FMLA leave more than once in 2004.
Also significant were findings about the lack of notice given by employees taking FMLA leave. According to the study, about half of all persons taking FMLA leave fail to provide notice before the day the leave is taken. In about 30% of those cases, the employees did not provide notice until after the leave had started.
This new study reinforces the perception among many business people that the FMLA imposes a hefty burden on employers. The law, with its mandate to provide 12 weeks of intermittent leave for an employee's health problems, creates a federally mandated right to 60 sick days per year. While larger corporations may be able to absorb this kind of burden, small to medium sized businesses find FMLA compliance to be quite difficult.
Court Enforces Offer Letter's Severance Pay Promise, May 4, 2005
by Eric Paltell
Many times employers try to summarize employee benefits in offer letters. However, a poorly drafted offer letter can become a legally enforceable contract. A recent decision from the United States Court of Appeals for the 4th Circuit which required the employer to pay an employee one year's severance pay based on language in an offer letter underscores this point. Gresham v. Lumberman's Mutual Casualty Company, 10 WH Cases 2d 801 (4th Cir. 2005).
The case involved Thomas Gresham, who was hired by the Kemper Insurance Company in 1998 as a Vice President in its professional liability division. His offer letter provided, in relevant part: "Your compensation package will consist of . . . severance protection - one year base salary will be paid if terminated without cause." Kemper had in place a written severance pay plan that provided for one week's pay for each year of service, but made no reference to it in Gresham's offer letter.
In 2003, Kemper sold its professional liability division to the St. Paul Insurance Companies. St Paul extended an offer of employment to Gresham, who accepted the offer. As a result, Gresham continued performing the same functions at the same office, but with a different title and for a different employer.
Following his hiring by St. Paul, Gresham asked for his one year's severance pay. Kemper rejected his claim because the Company's written severance pay plan denied severance pay to an employee who is offered employment by a purchasing company. Kemper also argued that it had "cause" to terminate Gresham.
Although Kemper won the case at the trial court level, Gresham appealed to the United States Court of Appeals for the 4th Circuit. The appellate court reversed the trial court and ruled in favor of Gresham. First, the appellate court ruled that Kemper's severance plan document, which denies severance pay to employees who are offered employment by a purchasing company, was not referred to in Gresham's offer letter, and, therefore, it did not apply to Gresham. Second, the appellate court ruled that Gresham was not fired for cause. The Court ruled that, as a matter of law, an employee is terminated for purposes of a severance agreement when his employer sells the business in which the employee works. Thus, termination in these circumstances is not a termination for cause, and Gresham was entitled to severance pay.
The Gresham case illustrates the dangers of trying to summarize employee benefits in offer letters. Employers need to be careful to point out that plan documents set forth benefits terms in more detail, and should invite the employee to request copies of those documents from the Company if they require more information about the benefits.
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