New York Labor and Employment Law Report : New York Employment Lawyer & Attorney : Bond Schoeneck & King Law Firm : NY Labor Relations, Employee Benefits

Most employers that engage in a reduction in force are aware of their obligations under the federal WARN Act, the New York WARN Act, the federal Consolidated Omnibus Budget Reconciliation Act (COBRA) and New York’s mini-COBRA statute, and we have posted several times on these topics. Employers should not, however, ignore some of the less popularized obligations to terminated employees created by state law.

For example, Section 195 of the New York Labor Law requires an employer to give an employee written notice of the “exact date” of his or her termination, as well as written notice of the “exact date” of the cancellation of the employee’s benefits. Notice must be provided within five “working” days of the date of the termination.
 

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“In one of the first cases of its kind to make it to the summary judgment phase,” a federal district court in Indiana found last month that under the recent amendments to the Americans with Disabilities Act (“ADAAA”), cancer even while in remission is a disability, Hoffman v. Carefirst of Fort Wayne Inc. The case is significant because it is one of the first cases to interpret broadly the ADAAA’s expanded definition of disability and to rely on Equal Employment Opportunity Commission (“EEOC”) guidance in doing so. It is also significant because it imposes a reasonable accommodation obligation for an impairment that did not substantially limit a major life activity at the time the accommodation was requested.

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As all employers know, the Immigration and Nationality Act (“INA”) makes it unlawful for an employer to employ an individual who is not authorized to work in the United States. However, the non-discrimination provisions of the INA prohibit an employer from discriminating against certain individuals based on national origin or citizenship status with respect to, among other things, hiring and termination. As a result, employers are often faced with a dilemma: how far can an employer go to obtain information regarding an applicant’s immigration status during the hiring process without violating the INA. This dilemma may appear to be particularly difficult when making an employment decision based on an individual’s need for visa sponsorship. But, as explained below, that problem can be solved relatively simply.

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Effective for plan years that begin on or after September 23, 2010, annual plan limits are being phased out. The minimum annual limit is $750,000 in the upcoming plan year. The Department of Health and Human Services is taking the position that the restriction on annual limitations applies to Health Reimbursement Arrangements, other than Retiree-only HRAs and HRAs that are integrally tied to another group health plan (e.g., that reimburse only for a deductible, co-payment or other cost sharing in the group health plan, have no carry-over from one year to the next, and do not reimburse for any other, more general, medical expenses).

Because HRAs are not generally designed to reimburse $750,000 in medical expenses per participant, if the HRA is to continue it must apply for a waiver of the annual limit. The waiver application must be filed not less than 30 days before the first day of the year or, for plan years beginning after September 22, 2010 and before November 2, 2010, not less than 10 days before the beginning of the plan year. Therefore, a HRA with an October 1 plan year must file TODAY!

Instructions for the waiver are in the following notice.

http://www.hhs.gov/ociio/regulations/patient/ociio_2010-1_20100903_508.pdf
 

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A recent decision from the United States Court of Appeals for the Eighth Circuit raises an interesting issue: can an employer be held liable for interference with FMLA rights if it discharges an employee after giving the employee reason to believe FMLA leave has been approved -- even if the employee is not in fact entitled to FMLA leave? In Murphy v. FedEx National LTL, Inc., the Court held that an employer could be liable, if the employee reasonably believes she has been granted FMLA leave and if she has put her employer on notice that she may need FMLA leave.

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Almost seven years ago, in Zheng v. Liberty Apparel Co., the Second Circuit Court of Appeals created a six factor test for assessing when businesses are liable as "joint employers" under the Fair Labor Standards Act (FLSA) for violations committed by their subcontractors. The Second Circuit held that, depending on the case, the following factors should be reviewed in determining joint employer status: (1) whether the workers work exclusively or predominantly for the purported joint employer; (2) the permanence or duration of the working relationship; (3) whether the purported employer’s premises and equipment are used by the workers; (4) the extent of control the putative joint employer exercises over the workers; (5) whether the outsourced workers can be considered an integral part of the business; and (6) whether the workers have a business organization that could shift as a unit from one putative joint employer to another. The Court also found that industry custom and historical practice could be considered to differentiate between legitimate subcontracting relationships and subterfuges intended to evade the FLSA.

The Second Circuit sent the case back to the District Court and, eventually, the case went to trial before a jury. At trial, the primary issue was whether the Liberty Defendants were plaintiffs' "joint employer" for purposes of the FLSA and analogous state law claims. The jury returned a verdict in favor of plaintiffs, and, following resolution of various post-trial motions, the District Court entered judgment accordingly. Liberty appealed that judgment, contending that the District Court, rather than the jury, should have determined whether it was the plaintiffs' joint employer. Recently, the Second Circuit affirmed, holding that the trial judge did not err in allowing a jury to decide the mixed question of law and fact as to whether Liberty was the plaintiffs' joint employer. Although Liberty argued that the lower court should have used a special verdict form allowing the judge to apply the six-factor test to the jury's factual findings, the Second Circuit said “such a rule would distort the jury's proper role” of applying law to fact.

The Second Circuit’s recent decision serves as a healthy reminder to employers who subcontract or outsource a portion of their business that they should carefully review such relationships to minimize the risk of potential FLSA liability.

A version of this post appeared previously on the Wage and Hour Defense Institute blog.
 

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Pursuant to the Patient Protection and Affordable Care Act ("PPACA"), the Internal Revenue Service, the Department of Labor, and the Department of Health and Human Services (the “agencies") recently issued interim final rules for health plans and insurance issuers relating to: (1) preexisting condition exclusions, lifetime and annual limits, rescissions, and patient protections; and (2) claims, appeals, and review procedures.

Preexisting Condition Exclusions. Under the new rules, no group plan or issuer (except grandfathered plans that are individual insurance coverage) may impose a preexisting condition exclusion (including any exclusionary waiting period) for any enrollee under age 19 in plan years beginning on or after September 23, 2010, and any enrollee (regardless of age) in plan years beginning on or after January 1, 2014. The definition of "preexisting condition" includes any denial of coverage based on a preexisting condition (i.e., not just benefits related to the condition). As of the applicable effective date, plans and issuers must provide coverage on a prospective basis for individuals denied coverage based on a preexisting condition, and for benefits related to preexisting conditions that are currently excluded under a health plan. The rules also prohibit any limitation or exclusion based on information related to an individual's health status (e.g., such as a condition identified as result of a pre-enrollment questionnaire or physical examination).

Lifetime and Annual Limits. Effective for plan years beginning on or after September 23, 2010, all group plans and issuers (with the exception of certain account-based health plans and grandfathered plans that are individual insurance coverage) are prohibited from imposing lifetime or annual limits on the dollar value of "essential health benefits" (including at a minimum those benefits listed in PPACA Section 1302(b)). Until further guidance is issued, the agencies will take into account the consistent application of good faith reasonable interpretations of the term "essential health benefits" as applicable to the lifetime and annual limit prohibitions.

In an effort to provide transitional relief, the rules do permit plans and issuers to impose the following "restricted annual limits" ("RALs") in plan years beginning before January 1, 2014:

For plan years beginning on or after --                                Restricted Annual Limit

September 23, 2010 but before September 23, 2011         $ 750,000
September 23, 2011 but before September 23, 2012         $ 1.25 million
September 23, 2012 but before January 1, 2014                 $ 2 million

The rules clarify that the RALs are minimums for plan years beginning before January 1, 2014, so plans or issuers may impose higher limits or no limits. Generally, grandfathered plans that impose new limits or reduce the amount of an annual limit (in existence as of March 23, 2010) will lose grandfather status. Note, a grandfathered plan with an existing lifetime limit (as of March 23, 2010) and no existing annual limit, may impose a new annual limit (subject to the applicable RAL minimum) and retain grandfather status by eliminating the existing lifetime limit.
 

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The end of August was a busy time for Governor Paterson who acted on 90 pieces of pending legislation. Several of those laws will have an impact on employers across the State. Below is a brief summary of the new laws.

Domestic Workers Bill of Rights

By signing the “Domestic Workers Bill of Rights” Governor Paterson made New York the first state to have such a law. When he signed the legislation, Governor Paterson remarked that: “Today we correct an historic injustice by granting those who care for the elderly, raise our children and clean our homes the same essential rights to which all workers should be entitled.” The law, which takes effect November 29, 2010, defines a protected domestic worker as a “person employed in a home or residence for the purpose of caring for a child, serving as a companion for a sick, convalescing or elderly person, housekeeping, or for any other domestic service purpose.” Excluded from the definition are persons who: work on a casual basis; provide companionship services and are employed by someone other than the family or household for which the services are provided; and relatives by blood, marriage or adoption of the employer or of the person for whom the worker is providing services under a program funded by a federal, state or local government. Among other things, the law provides the following protections and benefits for covered domestic workers:

1)  the right to overtime pay at time and a half after 40 hours of work in a week, or 44 hours for workers who reside in the employer’s home;

2)  one day of rest every seven days, or overtime pay if it is waived;

3)  three paid days of rest annually after one year of work;

4)  the removal of the domestic workers exemption from the Human Rights Law, and the creation of a special cause of action for domestic workers who suffer sexual or racial harassment; and

5)  the extension of statutory disability benefits to domestic workers, to the same degree as other workers.
 

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Several news stories over the past few weeks illustrate the potential expense and embarrassment public and private sector employers can experience from a class action employment discrimination lawsuit.  In the private sector, class action discrimination claims have been pursued with increased frequency over the past five years. These lawsuits have proven to be costly for both large and smaller employers. For example, the Rochester Democrat and Chronicle reported on August 10, 2009, that Elmer W. Davis Company, a commercial roofing contractor in Upstate New York, entered into a consent decree under which it agreed to pay $1,000,000 to resolve a class action race discrimination lawsuit brought by the Equal Employment Opportunity Commission. Msnbc.msn.com reports that the million dollar payout was the largest EEOC settlement ever in the Rochester area.

Elmer W. Davis Company’s settlement can now be added to a long list of multi-million dollar class action settlements. Large class action settlements have affected many national employers in virtually every type of business, including Coca-Cola ($192 million), Texaco ($176 million), State Farm Insurance ($156 million), Home Depot ($104 million), Federal Express ($55 million), Abercrombie & Fitch ($50 million), and Wal-Mart ($17.5 million). Many of these settlements have received considerable publicity and, as is the case with the Elmer W. Davis Company’s settlement, required these companies to implement training, monitoring, and other remedial programs in addition to making large settlement payments to the plaintiff class and its counsel.
 

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Self-insured group health plans are not subject to the New York State Insurance Department's existing external appeals process for claims denied by insurers. However, a new interim enforcement rule issued by the Employee Benefits Security Administration requires that self-insured plans put external review procedures in place by the first day of the first plan year that begins on or after September 23, 2010 -- January 1st, for health plans with a calendar plan year. These rules (EBSA Technical Release 2010-1) require the group health plan to hire at least three independent review organizations (IROs) to make decisions with respect to the claims when an external appeal is requested.

The rules contain important requirements governing the selection of an IRO and the way the IRO functions. For example, an IRO cannot be hired or compensated based on the likelihood it will agree with the plan's prior decision. In addition, claims must be rotated among the IROs to ensure independence. The contracts with the IRO must contain specific terms detailing the IRO's responsibilities, such as timing and response criteria with respect to standard and expedited external appeals. In conducting the review, the IRO may not give any deference to the group health plan’s prior determination. The entire process, from the date or the request for external review to the final determination, must take no longer than 45 days. An expedited process must be available for decisions that: can seriously jeopardize the life or health of the claimant; would jeopardize the claimant's ability to regain maximum function; or relate to admission or emergency services and the claimant has not been discharged.

The group health plan has responsibilities, too. For example, the plan must quickly evaluate whether the claim is eligible for external review, and provide the documents and information that form the basis for the original denial.

Group health plans must quickly adopt procedures that are compliant with the EBSA Technical Release. IROs are already soliciting this business from self-funded group health plans. Remember, ERISA compels plan administrators to prudently select and monitor its service providers, including IROs. A group health plan sponsor should evaluate and document the qualifications of any IRO it considers hiring, and enter into fully compliant contracts, including business associate agreements, with such providers.
 

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An interesting case from the United States District Court for the Western District of Kentucky addresses a particularly difficult religious accommodation question: at what point can an employer prohibit an employee from expressing religious views in the workplace? According to the Court’s opinion, the case involved a nurse employed by the University of Louisville’s medical center. Based on her reading of portions of the Bible, the employee believed she had calculated the date for either the end of the world or the coming of the Antichrist, 12/21/2033. She also believed that she was compelled by her religion to share her views and her calculations with her co-workers. The co-workers complained to their manager that the employee would not stop talking to them about the subject, even when they asked her not to, and that she was scaring them. The manager had a conversation with the employee and told her to stop or face discipline. Although the employee was not disciplined, she submitted her resignation as a result of the conversation.

In granting the Hospital's motion for summary judgment, the Court first noted that the employee could not establish a prima facie case of failure to accommodate her religious beliefs because she had failed to show the employer took any adverse action against her. The Court went on, however, to conclude that even if the employee had been disciplined, she could not state a failure to accommodate claim, because the employer was not required to accommodate the employee’s religious beliefs under these circumstances. Although the case was brought under Kentucky state law, the Court relied on federal court precedent in Title VII cases to find that an employer does not have an obligation to accommodate an employee’s desire to impose her religious views on co-workers by harassing them. Were an employer required to provide such an accommodation, it would create an undue hardship because it necessarily infringes on the rights of co-workers.

This does not mean, of course, that an employer can prohibit all forms of religious expression in the workplace. But where the employee’s expression consists of attempting to proselytize co-workers who object to the conduct, and amounts to harassment, the employer can ask the employee to stop, and if she does not stop, impose discipline.
 

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