Pennsylvania Employment Lawyer & Attorney : Russell Krafft & Gruber Law Firm : Lancaster, York, Harrisburg

The economic downturn affects businesses but also impacts the daily lives of employees. An employee’s personal financial problems can lead to bankruptcy, foreclosure and even divorce, any of which may impact his or her job and job performance.

Businesses must be prepared to respond to employee performance issues created by financial problems. Employers should be aware of legal limitations placed on their actions with regard to an employee’s financial problems. In addition, human resource professionals should appreciate the relationship between their performance management program and other resources to address employee issues created by financial distress.

Pennsylvania and federal laws limit actions employers may take against employees that file for bankruptcy or are subject to wage attachments. Many employers, particularly those in the financial sector, face customer relation problems when one of their employees doesn’t pay his or her bills or files for bankruptcy. Legal limitations on employer responses are as follows:

• Garnishment/Attachment of Wages. Pennsylvania does not allow garnishment/attachment of wages for the repayment of personal debts, except in limited circumstances for child support, alimony or student loans.   Employees may not be disciplined, discriminated against or discharged because of wage garnishments.

• Employee Bankruptcy. Section 575 of the Bankruptcy Act protects employees and applicants from discrimination if an individual:
  • is or has been a debtor under this title or a debtor or bankrupt under the Act;
  • has been insolvent before the commencement of a case under the Act or during the case but before the grant or denial of a discharge; or
  • has not paid a debt that is dischargeable in a case under this title or that was discharged under the Act.

Courts have limited the reach of this provision by requiring that the discrimination be "solely because" of the individual's bankruptcy participation.

• Worries About Temptation for Theft. Businesses may become concerned that an employee in financial distress may be more likely to embezzle and react by trying to find out the scope of an employee’s credit problems. The Fair Credit Reporting Act limits an employers use of employee credit information. A business’ usual financial controls should be uniformly applied, but, if inadequate, should be revised for all employees.                                 

Financially distressed employees may exhibit other performance problems ranging from declining productivity to depression. The usual performance management system should be utilized to correct deficiencies; however, special attention should be paid to other resources like the EAP and  Debt/Credit counseling. Some businesses may wish to go further. Susan S. Windham believes that Financial Distress for Employees Means Lower Profits for Employers. She advocates workplace financial education as the answer.

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The EEOC announced a $505,000 sexual harassment settlement with a McDonald’s Franchise on behalf of a class of young female employees, including teens. The EEOC contended that a male supervisor engaged in serious harassment including physical contact, sexual comments and offers of favoritism. In addition to the monetary award, the franchisee was required to provide letters of apology to the victims, conduct training on sexual discrimination for its franchise locations, and post nondiscrimination notices in its workplaces.

The EEOC has a national http://www.eeoc.gov/initiatives/youth/index.html initiative designed to educate young workers on their employment rights. There is a stand-alone website that has been featured on MTV.com highlighting discrimination protections.

Restaurant operators face difficult HR compliance issues based on several factors including the following:

• Workforce Demographics:  Diversity management is a challenge for the entire food service industry. EEOC workforce demographic information for the Accommodations & Food Service Industry reports a workplace composition for workers (operatives, laborers and service) that are 52% female and 47% minority. While managers for the same group are 68.8% male and 74% white. The prevalence of younger workers adds to the management challenge.
• Wages and Employee Turnover:     Lower wage earners make for job hoppers. Pennsylvania reports food service worker wages ranging from $15.05/hr for serving workers to between $7.37 and $7.70/hr for fast food cooks and counter attendants.
• Management Turnover:       The Restaurant Industry Blog by Kenneth Rexrode notes that turnover of managers and employees necessitate constant training and inhibit the development and continuity in a management staff.
• Dispersed Operations:          Some restaurant operations, particularly franchised operations have multiple locations and depend upon managers traveling between locations. This can make for spotty supervision and training.

Solving compliance problems may be a matter of adopting effective policies on EEO compliance, training managers and educating employees. The most frequent misstep I see is concentrating too much control in a site manager so that employees feel they have no avenue to direct concerns to higher levels.

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As Pennsylvania’s Primary Election approaches, one of the unexpected political issues is affirmative action.  Newsweek columnist Seth Colter Walls discusses the situation in Obama’s Postracial Test. The column describes the election battleground created by state ballot initiatives like California’s Proposition 209 and Michigan’s Proposal 2 that prohibit public institutions from considering race, sex or ethnicity in hiring, contracting for goods/services or college admissions. Similar ballot initiatives may appear in Arizona, Colorado, Missouri, Nebraska and Oklahoma.  For now, Newsweek's Dahlia Lithwick states in her column, A Complicated Record On Race, that both sides think Mr. Obama agrees with them.

The Timeline of Affirmative Action began with the Civil Rights Act of 1964 and has taken many forms since then. Most of us in the employment world are familiar with the Affirmative Action Programs created by Executive Order 11246. However, there are many other state and federal programs which create preferences based on gender and race. These programs have judicial approval provided the government can pass the “strict scrutiny test” by demonstrating that there is a compelling need for the program and the program is narrowly tailored to meet the need. As the economy contracts, the most contentious areas of debate may focus on government “set-aside” programs for purchased goods and services.

The United States Supreme Court has considered contracting programs in three of its decisions. In its 1980 decision in Fullilove v. Klutznick, the Supreme Court ruled that some modest quotas were perfectly constitutional. The Court upheld a federal law requiring that 15% of funds for public works be set aside for qualified minority contractors. The "narrowed focus and limited extent" of the affirmative action program did not violate the equal rights of non-minority contractors, according to the Court—there was no "allocation of federal funds according to inflexible percentages solely based on race or ethnicity."

In City of Richmond v. Croson, the Supreme Court went the other way ruling that an "amorphous claim that there has been past discrimination in a particular industry cannot justify the use of an unyielding racial quota." It maintained that affirmative action must be subject to "strict scrutiny" and is unconstitutional unless racial discrimination can be proven to be "widespread throughout a particular industry." The Court maintained that "the purpose of strict scrutiny is to ‘smoke out' illegitimate uses of race by assuring that the legislative body is pursuing a goal important enough to warrant use of a highly suspect tool. The test also ensures that the means chosen `fit' this compelling goal so closely that there is little or no possibility that the motive for the classification was illegitimate racial prejudice or stereotype." This case involved affirmative action programs at the state and local levels—a Richmond program setting aside 30% of city construction funds for black-owned firms was challenged. For the first time, affirmative action was judged as a "highly suspect tool."

In Adarand Constructors, Inc. v. Peña,  the Court again called for "strict scrutiny" in determining whether discrimination existed before implementing a federal affirmative action program. "Strict scrutiny" meant that affirmative action programs fulfilled a "compelling governmental interest," and were "narrowly tailored" to fit the particular situation. Although two of the judges (Scalia and Thomas) felt that there should be a complete ban on affirmative action, the majority of judges asserted that "the unhappy persistence of both the practice and the lingering effects of racial discrimination against minority groups in this country" justified the use of race-based remedial measures in certain circumstances.

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Charley Blaine hit the nail on the head with his observation about the Bear Stearns' fallout appearing  in his posting MSN moneyblog:

My guess is that Bear Stearns' 14,000 employees will be the biggest losers. The company's employee-stock-ownership plan owned 23% of the shares as of Feb. 14. The shares that day had a market value of $2.18 billion. It's almost gone now. Needless to say, Bear Stearns employees aren't happy. Check here for a sampling of their anger.

ESOPs and matches in company stock have long been touted as aligning incentives, but this selling point can lead to litigation when the company stock takes a dive or the employer files for bankruptcy protection. It's even more disastrous for employees who have been “incentivized” to put so many of their retirement eggs in one basket. If the company tanks, an employee loses a job and a big chunk of retirement savings.

A statistical profile of Employee Ownership as published by the National Center for Employee Ownership estimates the number of plans, participant employees and asset value for ESOPs and 401(k) plans with significant company stock matches. For early 2008, the estimates are as follows:

Type of Plan	Number of Plans (as of early 2008)	Number of Participants (as of early 2008)	Value of Plan Assets (as of early 2008)
ESOPs, stock bonus plans, & profit sharing plans primarily invested in employer stock	9,774	11.2 million	$928 billion+
401(k) plans primarily invested in employer stock	748	1.5 million	$133 billion

The prevalence of company stock based incentives may make employees nervous in light of the high profile failures. Human Resources may need to manage expectations in its recruiting and retention activities.

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The EEOC’s Report of Discrimination Charge filings notes that Retaliation claims rose 18% to a record high, doubling since 1992. There were 26,663 retaliation based charges filed in 2007 up from 22,555 the previous year. The trend might be explained, in part, by employees filing both a discrimination charge and a retaliation claim; increased awareness by employees, or employers mishandling employee internal complaints of discrimination.

Claims of retaliation take a very predictable path like the one recounted in a recent EEOC lawsuit. Vanguard Group settled a suit filed by the EEOC for a racial retaliation claim for a payment of $500,000.    The suit was based upon an employee’s complaint to management that he was being treated less favorably and discriminated against based on his race. Thereafter, the EEOC contended that the employee began to experience acts of retaliation, including unfavorable changes in his work conditions and assignments, from the managers he accused of race discrimination. The EEOC alleged that this pattern of retaliation resulted in the employee’s termination. The following may help HR Generalist avoid mishandling internal complaints.

1. What is Unlawful Retaliation?

An employer may not fire, demote, harass or otherwise "retaliate" against an individual for filing a charge of discrimination, participating in a discrimination proceeding, or otherwise opposing discrimination. The same laws that prohibit discrimination based on race, color, sex, religion, national origin, age, and disability, as well as wage differences between men and women performing substantially equal work, also prohibit retaliation against individuals who oppose unlawful discrimination or participate in an employment discrimination proceeding. Retaliation occurs when an employer, employment agency, or labor organization takes an adverse action against a covered individual because he or she engaged in a protected activity.

2. What is “Adverse Action” by an Employer?

An adverse action is an action taken to try to keep someone from opposing a discriminatory practice, or from participating in an employment discrimination proceeding. According to the EEOC, examples of adverse actions include:

• Employment actions such as termination, refusal to hire, and denial of promotion;
• Other actions affecting employment such as threats, unjustified negative evaluations, unjustified negative references, or increased surveillance; and
• Any other action such as an assault or unfounded civil or criminal charge that is likely to deter reasonable people from pursuing their rights.

On the other hand, the EEOC states that adverse actions do not include petty slights and annoyances, such as stray negative comments in an otherwise positive or neutral evaluation, "snubbing" a colleague, or negative comments that are justified by an employee's poor work performance or history.

3. What is “Protected Activity” by an Employee?

Protected activity includes either opposing a practice reasonably believed to be unlawful discrimination or participating in a discrimination procedure. 

Opposition is informing an employer that you believe that he/she is engaging in prohibited discrimination. Opposition is protected from retaliation as long as it is based on a reasonable, good-faith belief that the complained of practice violates anti-discrimination law; and the manner of the opposition is reasonable.  The EEOC cited examples of protected opposition to include:

• Complaining to anyone about alleged discrimination against oneself or others;
• Threatening to file a charge of discrimination;
• Picketing in opposition to discrimination; or
• Refusing to obey an order reasonably believed to be discriminatory.

According to the EEOC, examples of activities that are NOT protected opposition include:

• Actions that interfere with job performance so as to render the employee ineffective; or
• Unlawful activities such as acts or threats of violence. 

Participation means taking part in an employment discrimination proceeding. Participation is a protected activity even if the proceeding involved claims that ultimately were found to be invalid. Examples of participation include:

• Filing a charge of employment discrimination;
• Cooperating with an internal investigation of alleged discriminatory practices; or
• Serving as a witness in an EEO investigation or litigation.
• A protected activity can also include requesting a reasonable accommodation based on religion or disability.

4. Promptly Investigate Comments and Complaints Concerning Discrimination

Some HR action should be taken on all communications from employees that could later be “characterized” as either opposition or participation. At a minimum, get the facts underlying a comment about “unfairness” or “discrimination”. Obviously, you can spend your entire workday chasing down spurious remarks. You can circumvent a lot of problems merely by developing a practice of asking “what do you mean when you say it’s discriminatory?” Not taking complaints or comments seriously can be costly.

5. Monitor Supervisors for Adverse Actions following an Employee Complaint

I would wager that most acts of “retaliation” go unnoticed on HR’s radar screen because no one is actively monitoring the situation. If someone has complained about discrimination by a supervisor, HR should follow up informally with the employee to make sure that there is no real or perceived retaliation. 

* Not meant to be exhaustive.

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Today’s headlines about Governor Eliot Spitzer’s link to a prostitution ring recount another scandal involving a high level government official. Spitzer attempted to “manage” the scandal by calling a press conference, his spouse at his side, apologizing for his behavior and describing the rest as a “private matter”.   After this "ritual of repentance", Spitzer is “weighing his resignation”. To this, I refer back to a statement attributed to  Representative Dick Armey who was asked if he had been in President Clinton’s place after the Monica Lewinsky scandal would he have resigned? He purportedly responded: “If  I were in the President’s place I would not have gotten a chance to resign. I would be laying in a pool of my own blood, hearing Mrs. Armey say : ‘How do I reload this damn thing?’”

While I don't advocate this approach, an organization's or individual's response to a scandal can make or break it.  Human Resources professionals may be called upon in times of turmoil to be the spokesperson for the organization. I have no training in public relations, but from a legal perspective here are some things I can say don’t play well for future litigation:

• The “categorical denial” that proves otherwise like “I never had sexual relations with that woman”.
• Legalistic answers like those that turn on the definition of “is”.
• Opinions offered without facts or investigation.
• Any comments made by a company official in handcuffs or an orange prison jump suit.

Occasionally, I will get contacted by a company facing adverse publicity.  Here are some general rules that I remind clients when they call in a crisis:

• Consider the quick engagement of a PR firm.
• You don’t have to say anything and that may be the best course.
• Identify one spokesperson and tell everyone else to refer questions there.
• Plan what you will say and provide a written press release
• If you don’t know the facts, don’t speculate
• If you don’t have something to say then don’t talk.
• You don’t have to answer questions and be very careful if you do.
• You can end a press conference of interview at any time, just try to do it gracefully.

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The number of Discrimination Charges filed with the EEOC increased to 82,792 in 2007, up from 75,768 the previous year. Race, Gender and Retaliation charges were the most frequently reported charges.  The EEOC’s nonsensical reporting style makes it difficult to glean much more information since the report doesn’t account for individuals claiming multiple types of discrimination. Also irritating for employers is the EEOC’s explanation for the increase in the number of charges:

EEOC Commission Chair Naomi C. Earp chastised employers in her press release noting that “Corporate America needs to do a better job of proactively preventing discrimination and addressing complaints promptly and effectively. To ensure that equality of opportunity becomes a reality in the 21st century workplace, employers need to place a premium on fostering inclusive and discrimination-free work environments for all individuals.”

Jon Hyman’s Ohio Employer’s Law Blog correctly notes that the increased number of charges has many origins other than a lack of corporate commitment to equal employment opportunity. The unfortunate bias here seems to be the EEOC’s presumption that employers aren’t doing enough to prevent discrimination claims without regard to any evaluation of the merit of charges.

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The Bureau of Labor Statistics recently published statistics on Union Membership for 2007 which note a slight increase in the percentage of the national workforce which is unionized. Union workers now account for 12.1% of all wage earners down from 20.1% in 1983. The BLS report notes some interesting trends on national data:

• Workers in the public section had a union membership rate nearly five times that of private sector employees.
• Education, training, and library occupations had the highest unionization rate among all occupations, at 37.2 percent, followed closely by protective service occupations at 35.2 percent.
• Among demographic groups, the union membership rate was highest for black men and lowest for Hispanic women.
• Wage and salary workers ages 45 to 54 (15.7 percent) and ages 55 to 64 (16.1 percent) were more likely to be union members than were workers ages 16 to 24 (4.8 percent).

Overall union membership as a percentage of the Pennsylvania workforce increased from 13.6% to 14.7%. The regional trends in Pennsylvania are nicely summarized by Jim T. Ryan of the Central Penn Business Journal in his posting “Unions see more members”.   I agree with Jim’s conclusion that growth in union membership is largely attributable to hiring by unionized companies and not by union organizing of new companies. Union organizing efforts could get a real shot in the arm if the Employee Free Choice Act becomes law. I have previously blogged on the impact of Union Card Check Legislation.

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In response to heavy lobbying by the Pennsylvania Newspapers Association, Pennsylvania enacted legislation overhauling what was largely regarded as one of the worst open records laws in the country.   The “Right-to-Know Law” is generally effective January 1, 2009, and applies to the public records of state and local agencies, the state legislature, municipalities and the judicial system. All records are presumed to be public records unless subject to specific exemption, protected by legal privilege or exempt by regulation or judicial order. The exemptions applicable to employment related public records are as follows:

• Medical, psychiatric or psychological records;
• Personal identification information like social security, telephone or other personal financial information except that a government employee’s name, position, salary and employment contract are not considered personal identification information;
• Employment records including the following:
  • Reference letters and recommendations;
  • Performance reviews;
  • Civil service test results;
  • Employment applications of those not hired;
  • Written criticisms of an employee;
  • Grievance material including documents related to discrimination and sexual harassment; and
  • Preliminary disciplinary or discharge information; however, the “final action” of an agency that results in demotion or discharge is a public record;
• Collective bargaining strategy or negotiations and arbitration proceedings except as to the final contract or arbitrator’s decision; and
• Trade secrets or confidential proprietary information.

The Right-to-Know Law is a big change from the prior law that protected personnel records. Salaries of Pennsylvania’s public employees were not subject to disclosure under the previous open records law leading to great speculation about Penn State Coach Joe Paterno’s salary.   Had the secrecy of JoPa’s salary not been resolved by a 2007 lawsuit, it would have been subject to disclosure under the new law. By the way, his salary is around $500,000.

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