One of the cases I’ve covered on this blog since the beginning, was a lawsuit challenging CIGNA’s change from a traditional defined benefit plan to a cash balance plan.

In plain English, it was basically (and I’m oversimplifying) a conversion from a pension plan to a 401(k) plan.

That case has gone all the way up to the U.S. Supreme Court.

(And, in the interests of full disclosure, one of the named plaintiffs is a family friend who attended my wedding many years ago.)

Today comes word that the matter is reaching a conclusion, in a report by Mara Lee of The Hartford Courant.

Fifteen years after Cigna Corp. employees and former employees first sued over 1998 changes to the company pension plan, a federal court ordered the company in January to provide a list of all 27,000 people in the class-action lawsuit and how much each one is owed. There are 3,620 Connecticut residents in the lawsuit.

The conversion from a pension to a cash balance plan was legal, and did not discriminate against older workers, a U.S. District judge in New Haven found. But because the way the company described the changes was misleading, the court found Cigna liable for paying for what they are owed from the original pension, frozen at the end of 1997, plus additions to the lump sums the pensions were converted to.

Lawsuits like this one are rare. But after 15 years of pursuing the claims, the current and former employees look to finally get some closure on the matter later this year with payouts.  The exact amount is still to be determined but the company has reserved over $180M for the potential payouts.

robertsFirst things first. My favorite David Bowie song is “Heroes” (though I remember really being struck by its use in the 2001 movie, Moulin Rouge).

But the Bowie song that comes to mind today for various reasons is “Changes” and how it ties into another big story of the day — an oral argument before the U.S. Supreme Court in a case involving public employers.

At issue is whether public employees who do not want to be part of a union can still be required to pay an “agency fee”, which is typically the equivalent of the dues that union members pay as well.

The case is revisiting a 1977 case (the Abood case if you’re interested) which that requiring non-union members to pay fees for collective bargaining was constitutional.

The SCOTUSBlog sets up the argument on behalf of the non-union members like this:

Here is their logic: because unions cannot charge non-members for political activity and since non-members argue that everything a public-sector union does — even bargaining — is political in nature, it follows that any fees violate their First Amendment right not to pay for activity to which they object. Their target, in union parlance, is the “agency fee.”

The State of Connecticut has come out firmly on the side of upholding the current law.  In November 2015, it joined an amicus brief from New York urging the court to not change the current law and leave it to the state to determine the full scope.

It noted that 23 states permit these “agency fees” (also known as “fair share” fees) to “provide a mechanism for ensuring that represented employees contribute to  union costs germane to collective bargaining. The majority of these statutes make agency-fee requirements a permissible subject of bargaining and  authorize (but do not require) agency-fee provisions as part of public-sector collective-bargaining agreements.”
In the amicus brief, New York (and Connecticut) argue that the court should uphold the current scheme “recognizing that the government must have flexibility to manage its own internal operations, especially with respect to
matters affecting the delivery of government services.”

Why is this important, according to the states? A few things:

A lack of adequate funding can reduce a union’s ability to maintain the staff expertise necessary to perform collective-bargaining functions. Eliminating agency fees as a secure funding mechanism may require unions to focus disproportionate effort on recruiting members and collecting fees, thereby diverting attention from bargaining and contract-administration responsibilities. Moreover, the absence of secure funding may create skewed incentives for unions to make excessive bargaining demands or disparage management as antagonistic to labor, in order to encourage employees to give financial support.

Notably, a separate amicus brief filed by 18 other states argue the opposite.

It is time to abandon the meaningless distinction between collective bargaining and other political activity.  In the public sector, core collective bargaining topics such as wages, pensions, and benefits inherently implicate public policy, and in ways that matter.

Like lobbyists, public sector unions obtain binding agreements from the government that have enormous public impact — all without the natural counterweight of a financial market that exists in the private sector. In the public sector, it is taxpayers, not business owners and consumers, who foot the bill — and the bill is often steep.

Some pundits predict that the court will strike down agency fees.  Consistent with my post lack week, I won’t make any such predictions, but this case has significant implications obviously for public employers and it’ll be interesting to watch whether there will be any impact on private employers as well.

In any event, stay tuned and be sure to listen to some David Bowie in the meantime.

Governor Malloy with current CTDOL Commissioner Sharon Palmer

You’ve no doubt heard lots about how the U.S. Department of Labor is cracking down on independent contractors.  I’ve recapped it before and my former colleague, Jonathan Orleans, has a new post regarding Uber & electricians.

But in my view, there is a larger, more important battle now being fought in Connecticut and you may not be aware of it.  I touched on it briefly in a post in July but it’s worth digging a little deeper.  Disappointingly, I have not seen anything written about this in the press (legal or mainstream).

A case recently transferred to the Connecticut Supreme Court docket threatens to cause lots of havoc to company usage of independent contractors in Connecticut. The Connecticut Department of Labor has taken an aggressive stance in the case which is leading to this big battle.

The case is Standard Oil of Connecticut v. Administrator, Unemployment Compensation Act and is awaiting oral argument.  You can download the state’s brief here and the employer’s brief here.  The employer’s reply brief is also here.

The employer (Standard Oil) argues in the case that it uses contractors (called “installers/technicians”) to install heating oil and alarm systems and repair and service heating systems at times of peak demand.  The state reclassified the installers/technicians as employees and assessed taxes and interest.  At issue is the application of the ABC Test which is used in Connecticut to determine if these people are employees or independent contractors.

As explained by the CTDOL:

The ABC Test applies three factors (A, B, and C) for determining a worker’s employment status. To be considered an “independent contractor,” an individual must meet all three of the following factors:
A. The individual must be free from direction and control (work independently) in connection with the performance of the service, both under his or her contract of hire and in fact;
B. The individual’s service must be performed either outside the usual course of business of the employer or outside all the employer’s places of business; and
C. The individual must be customarily engaged in an independently established trade, occupation, profession or business of the same nature as the service performed

In the Standard Oil case, the employer is challenging the findings on various elements of this test. One of them – Part B , the “places of business” — is potentially far-reaching, according to the briefs filed in the case.  The issue is whether the customers’ homes are “places of business”; if they are, then the consultant cannot be said to be performing services “outside” the employer’s places of business.  The employer argued that viewing customers’ homes as places of business “does nothing to further the Act’s purpose and its practical implications are damning to Connecticut industry….”

Indeed, the employer argues that “it will be impossible for [the employer]-or any Connecticut business–to ever utilize the services of an independent contractor.”

Continue Reading The Real Battle over Independent Contractors and the ABC Test In Connecticut

IMG_7496 (2)Did you enjoy the fireworks last week?

I’m not talking about the real Independence Day fireworks; rather, it’s a new Second Circuit decision that should have employment lawyers popping this morning.

For a while, we’ve been talking about interns.  Indeed, back in 2013, I talked about how a wage/hour case involving interns on the movie “Black Swan” had the potential to change how employers use interns.

In that case, a federal district court judge essentially adopted a six-factor test used by the U.S. Department of Labor to determine if an intern was really an employee.

Flash forward to last Thursday.  In somewhat of a surprise, the Second Circuit — which covers cases in Connecticut — reversed that federal district court court’s decision and rejected the DOL’s six-factor approach.

In its place, the court adopted what Jon Hyman properly termed, a “more flexible and nuanced primary-benefit test.”

[T]he proper question is whether the intern or the employer is the primary beneficiary of the relationship. The primary beneficiary test has two salient features. First, it focuses on what the intern receives in exchange for his work.… Second, it also accords courts the flexibility to examine the economic reality as it exists between the intern and the employer.…

In the context of unpaid internships we think a non‐exhaustive set of considerations should include:

1. The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee—and vice versa.

2. The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands‐on training provided by educational institutions.

3. The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.

4. The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.

5. The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.

6. The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.

7. The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.…

Continue Reading DOL’s Internship Test Rejected by Second Circuit Creating Conflict with New Connecticut Law

aslWhat does it really mean to provide a reasonable accommodation to an employee who has a disability?

That’s a question I talk about a bunch with clients.  The employee may request one thing but the employer may think that another accommodation can accomplish close to the same thing, perhaps at a lower cost.  Who wins?

It’s not a new question; I’ve talked about it before here on the blog too.

But a recent case by the Second Circuit adds some layering to that discussion.  The case, Noll v. IBM, isn’t one that you’ll see on the front page of The New York Times.  I found out about it from the always reliable (and underrated) Wait a Second Blog.

That blog’s recap is appropriate here:

Noll worked in Poughkeepsie, N.Y., but IBM is a huge corporation for which internal communication were broadcast over a company-wide intranet. Noll asked for captioning of certain intranet videos or transcripts of audio files. Instead, as noted above, IBM gave him transcripts and access to ASL interpreters. Noll said these alternatives were not good enough it was “confusing and tiring” to look back and forth between the video and the ASL interpreter. Also, it sometimes took five days or longer for transcripts to be made available to Noll, and links to the transcripts were sometimes broken.

The IBM Media Library stores over 46,000 video files (!), only 100 of which were captioned.  As for live meetings, IBM provided him with ASL interpreters and Noll found those to be “effective.”  But he didn’t like the interpreters for the videos because he found it “confusing and tiring.”

The Second Circuit noted that determinations of the reasonableness of accommodations are typically fact-specific, but summary judgment can be granted to an employer if the accommodations are “plainly reasonable.”  (Pro tip: If the court is setting forth this standard, you can figure out where it is headed.)

This is an important point to emphasize and the court seems to be setting forth a standard that hasn’t been utilized much before in discussions. “In other words, the plain reasonableness of the existing accommodation ends the analysis. There is no need to engage in further burden‐shifting to consider whether the employee’s requested accommodation would have been reasonable.”

Reasonable accommodation can take many forms, but must be “effective”, the court said.  And, at the same time, employers are not required to provide the “perfect” accommodation or even the “very accommodation most strongly preferred” by the employee.  “All that is required is effectiveness.” 

Here, the court found that the accommodations from IBM were indeed “effective”.  While Noll said the interpreters were not as effective as captioning and that it was “tiring” to watch it, that objection is not enough to get him to a jury trial, let alone victory.

This disadvantage does not render interpretive services ineffective. A person who is deaf necessarily receives auditory information from other senses (principally sight); so it can be expected that many accommodations of deafness — ASL interpretive services as well as captioning — will tax visual attention to some degree. An accommodation for deafness therefore cannot be rendered ineffective by the need to divide visual attention, without more.

For employers, this is an important case to consider. IBM here had access to many more resources than most employers. And even with all the services it provided, it was sued for still not doing enough. The Second Circuit put an end to that — no doubt after IBM spent significant sums to defend itself.  Smaller employers may not be so fortunate.

Still, for employers, showing that you have entered into the interactive process with employees and provided what it believes to be an “effective” reasonable accommodation can still provide a path to success if sued.

As I said before, the notion that this might be a quiet year for employment law legislation at the Connecticut General Assembly has long since left the train station.

Indeed, we’ve appear to be swinging completely in the opposite direction. Anything and everything appears up discussion and possible passage this year — including items that really stood no chance in prior years.

GA2I’ll leave it for the political pundits to analyze the why and the politics of it all. But for employers, some of these proposals are going to be very challenging, at best, if passed.

One such bill, which appeared this week on the “GO” list (meaning its ready for considering by both houses) is House Bill 6850, titled “An Act on Pay Equity and Fairness”.  Of course, you won’t find those words in the bill itself which is odd.  There is nothing about pay equity in the bill; indeed, it is much much broader than that.

It stands in contrast to, say, the Lilly Ledbetter Fair Pay Act, which tried to tackle gender discrimination in pay directly.

This bill would make it illegal for employers to do three things. If passed, no employer (no matter how big or small) could:

  • Prohibit an employee from disclosing, inquiring about or discussing the amount of his or her wages or the wages of another employee;
  • Require an employee to sign a waiver or other document that purports to deny the employee his or her right to disclose, inquire 1about or discuss the amount of his or her wages or the wages of  another employee; or
  • Discharge, discipline, discriminate against, retaliate against or otherwise penalize any employee who discloses, inquires about or discusses the amount of his or her wages or the wages of another employee.

You might be wondering: Isn’t this first bill duplicative of federal law? And the answer is yes, and then it goes beyond it.  Federal labor law (the National Labor Relations Act) already protects two or more employees discussing improving their pay as a “protected concerted activity”.  It’s been on the books for nearly 80 years. So, as noted in an NPR article:

Under a nearly 80-year-old federal labor law, employees already can talk about their salaries at work, and employers are generally prohibited from imposing “pay secrecy” policies, whether or not they do business with the federal government.

This provision goes beyond that by making it improper for an employer to prohibit an employee from even disclosing another employee’s pay.

Continue Reading “Pay Secrecy” Bill Goes Above and Beyond Other Proposals

DontWorryBeYesterday, the U.S. Supreme Court ruled that the EEOC has a duty to conciliate that has go a bit beyond words before filing suit as a party.  In the case, EEOC v. Mach Mining (download here), the employer argued that the EEOC cannot just say that it has tried to resolve the matter through conciliation; the Supreme Court agreed, but barely, saying that in many cases, an affidavit from the EEOC attesting to its efforts is going to be sufficient. And even if it isn’t, the EEOC can get a do-over (my words, not the courts) if a court finds that its conciliation efforts did not meet the statutory minimum.

To some, this decision is a huge deal: “The implications for employers as a result of this decision cannot be overstated.”  Why? Because the EEOC will have to revisit its litigation strategy and focus on being able to show its conciliation efforts before a “third party”.

To others, the decision is disappointing “because the Court declined to authorize dismissal of the EEOC’s lawsuits if conciliation efforts were not undertaken.”

What are the implications though for Connecticut employers?

For the overwhelming majority of Connecticut employers, my take is different from both of these and is essentially the title to a Bobby McFerrin song: Don’t Worry, Be Happy. 

Sure, be happy that the Court agreed that the EEOC cannot pay lip service to conciliation efforts.  It’s a small “victory” for employers.  It could be worse.

But don’t worry about this decision because you’re very likely to never have to deal with this issue.

Why? Because in Connecticut, the state agency — the Connecticut Commission of Human Rights and Opportunities — mainly calls the shots.  Indeed, in the last ten years since April 2005, the EEOC has brought suit only five times against Connecticut employers in federal court here (though, 3 of those suits are in the last 2 years).

Quite simply, the EEOC plays a very very small role in how employment laws in this state are enforced.  Thus, any decision that affects how the EEOC handles the small numbers of cases it brings against employers is going to have just a minimal impact in Connecticut.

To be sure, in the unlikely event you end up being the subject of an EEOC investigation, you should take your efforts to conciliate with the EEOC seriously and document them. But most employers here will never have that happen. Indeed, you’re much more likely to get a lawsuit by an employee.

So, read the decision if you must. But focus on other areas of compliance instead of getting caught up in the latest and greatest from the Supreme Court.

And feel free to whistle with the earworm that is “Don’t Worry Be Happy” below.

Well, so much for a slow legislative session. New proposals keep popping up with changes big and small for employers.

The latest was reported on by the CBIA in a post entitled “Double Trouble for Businesses?” and talks about Senate Bill 106, which you can download here.

The bill purports to protect immigrants, but as noted by the CBIA, a good portion of it is preempted by federal law.  It would create a new class of discrimination and retaliation complaints entitled “unfair immigration-related practice” that would allow employees to file claims for a variety of reasons, including if an employer “contacted” immigration authorities.

But perhaps most concerning relating to these new immigration-related claims is a presumption that an employer has retaliated against an employee if any action occurs within 90 days of the employee “exercising” his or her rights.  That would create a whole new class of retaliation claims far beyond what even the courts have been willing to do.

Despite its label as a immigration-related bill, the proposal would also amend the state’s wage & hour rules to remove “a judge’s discretion to award less than double damages in a civil action to collect unpaid regular and overtime wages.”

The CBIA notes:

What is gained by mandating double damages when a judge already has the power to impose the penalty on truly bad-acting employers?

Could the answer be that it is to make the penalty so harsh that employers would be forced to settle wage disputes every time, even when the employer believes they did nothing wrong?

If the business doesn’t cut its losses and settle, even when in the right, the only other option is to undergo the expense of defending themselves through costly litigation. In other words, even when the employer is right, they lose.

Hard to argue with the CBIA on this point.  Wage & hour complaints have been one of the biggest areas of growth in employment law in the last decade and are outstripping all other class actions.

Again, it seems like a solution in search of a problem. Stay tuned.

 

 

 

My colleague Peter Murphy and I have been talking a lot about background checks lately.  It’s easier than ever to run a basic Internet search on someone, but what information do you find? And are there any limts?

Today, Peter talks about two recent settlements of background check claims against employers. Both cost the employers big dollars. Here’s what you can learn from them.

Peter Murphy

 

Back in March, Dan noted that plaintiffs’ lawyers were brining an increasing number of lawsuits under the Fair Credit Reporting Act (“FCRA”).

This seems to be occurring for two reasons. First, the FCRA contains very specific steps an employer must follow when obtaining and then using a background check for employment related purposes, including the following:

  1. Make a clear and conspicuous written disclosure to the job applicant that a consumer report may be obtained for employment purposes;
  2. Have the applicant authorize in writing the procurement of the report;
  3. And, before taking any adverse action based in whole or in part on the report, provide the applicant with:
    1. a copy of the report; and
    2. a description in writing of the employee’s rights under the FCRA.

If one of these steps is being systematically violated by an employer, then there is the potential for a lawsuit involving multiple plaintiffs or even a class of plaintiffs across the employer’s operations.

The second reason for the increasing number of FCRA lawsuits is that they expose employers to damages for each FCRA violation, as well as punitive damages, costs, and significant attorney’s fees.

Thus, unless employers review their hiring practices and ensure FCRA complaint, they could be exposed to costly lawsuits, as Dan and others warned back then.

Their warnings were prescient, as demonstrated by two recent settlements in FCRA cases.

In the first case, the employer accepted online job applications–just like almost all employers. The applicants alleged that the employer’s online application system did not comply with the FCRA’s procedural provisions addressing authorizations for a background check, or provide FCRA mandated disclosures to the applicants.

These procedural violations could have been enough to expose the employer to liability under the FCRA.

According to the applicants, however, the employer also was taking adverse employment actions based on information in the background checks without providing them a copy of the report or the required opportunity to correct or explain any discrepancies.

Although the employer denied any wrongdoing, it ultimately agreed to a $5.053 million settlement that recently was approved by a district court judge.

The only ones getting rich as a result of this settlement, though, were the plaintiffs’ lawyers, who received about $1.52 million in attorneys’ fees in comparison to the $50 payment to each of the eligible class members.

Plaintiffs’ attorneys were just as pleased with a district court’s preliminary approval of an FCRA settlement in a case pending in Virginia. Just like the prior case, the claims in this case stemmed from allegations that the employer violated the procedural protections of the FCRA, and then also failed to give job applications the ability to respond to adverse information in the background check.

Under the judge’s recent order, the plaintiffs’ attorneys would get 25 % of the $4,000,000 proposed settlement, and each potential class member would receive statutory damages of $53.

The numerous procedural and substantive provisions of the FCRA can be difficult to decipher, and as the above examples demonstrate small compliance mistakes can lead to costly and time consuming lawsuits.

Although we may sound like a broken record, employers should therefore consult with trusted counsel when necessary to ensure that their job application process can survive a FCRA challenge, and that their authorization forms and disclosure notices comply with FCRA’s requirements.

It’s not as easy as it first appears.

Just a quick followup today on a post from last month.

As I reported then, a District Court judge dismissed a closely-watched EEOC lawsuit against CVS challenging a pretty standard severance agreement.  But the grounds for the dismissal were unknown back then.

The wait is over; the written decision was released yesterday.  For those that were hoping that the court might shut this issue down, you will be disappointed because the court decided the case largely on procedural grounds.  The Court found that the EEOC had not exhausted its conciliatory efforts required by law.

Yawn.

And so, we’re back to where we were at the start of the year.  The EEOC is likely to continue to push this issue.

Still, I remain unconvinced by the merits of the EEOC’s arguments.  Courts have, for example, routinely upheld enforcement of severance agreements — albeit in different contexts.  But the arguments raised by the EEOC appear to be a stretch to me.

So, for now, employers should continue to stay alert on this issue but until we hear otherwise, it also seems that many will find it best to continue to use these agreements without further modification.