Pennsylvania Employment Law Blog

While We Were Out

rbk@rkglaw.com (Rose Krause) — Thu, 30 Oct 2008 11:07:51 -0500

It's been a while since our last posting to the PA Employment Law Blog. While it's really inexcusable, I must let you know that we have been working on some upcoming projects that we are excited to reveal in the coming weeks.

Most recently, Chris Hausner spoke with a reporter from Money Magazine. The magazine features an article highlighting 9 Tips to Tough Out the Times. Chris' advice appears in the section of the article dealing with employment, How to Maximize Your Take if You Get Laid Off. The article is available online and featured in the November issue, on newsstands now.

Harrisburg City Council Proposes "Life Partnership Registry"

rbk@rkglaw.com (Roxanne Garner) — Wed, 30 Jul 2008 10:37:53 -0500

Typically a full time employee is afforded the benefit of health insurance by an employer. A full time employee is usually able to cover a spouse and children at an additional cost. However more and more companies have been extending health insurance to also include a domestic partner of a full time employee.

Just two weeks ago Harrisburg City Council Vice President, Dan Miller proposed an ordinance that would create a "life partnership registry" for the City of Harrisburg. The proposed legislation would create a registry where individuals could voluntarily register their life partners. The registry would be used as a base business record for businesses who choose to offer health insurance to an employee's unmarried partner. The registry would cover individuals who live or work in Harrisburg.

The concept of a domestic registry is not new. States like Maryland, Vermont, California, Hawaii, New Jersey, Maine and the District of Columbia have established registries. Similarly Philadelphia and Pittsburgh have also established registries. Several states already have statutes on civil unions and domestic partnerships.

The Harrisburg City bill's proponent advised that the Harrisburg City government already offers benefits to employees' domestic partners as a matter of policy. The proposed legislation would not mandate city employers provide life partners health benefits, but would assist employers and registered life partners should the employer choose to offer the coverage. The life partner designation would also grant domestic partners, committed to each other's maintenance and well being, visitation rights in health care facilities located within Harrisburg City limits. Eligible couples need to be over 18 years old and living in the same home. They also need to meet three of five financial criteria, such as sharing a mortgage, bank account or being designated as a beneficiary on their partners' life insurance policy. The bill is expected to be voted on in the Fall of 2008, and has the backing of two other City Council Members.

Advocate groups were quick to point out that the bill benefits the unmarried heterosexual community as well as the homosexual community. "We think this is an important step toward assuring that those citizens who share a committed life partnership are granted the same rights as any other citizen in the same situation." Council Vice President Miller said. "This includes health care and visitation rights."

Making the Most of a Layoff

rbk@rkglaw.com (Christina Hausner) — Tue, 15 Jul 2008 16:03:04 -0500

I was recently contacted by a reporter and asked to describe steps employees who are laid off from employment may take to maximize what they take away. As I prepared my response it occurred to me that some of the readers of this blog may find this information helpful. With the unemployment rate growing, there is a lot of advice available on the internet for those who find themselves in this unfortunate circumstance. FastCompany.com has A Guide to Layoff Survival that provides some practical advice on dealing with emotions, managing finances and finding another job. I have focused on maximizing your benefits in a layoff situation. Following are some of my suggestions:

· Explore whether benefits or other parts of a severance package are negotiable. Consider whether you can offer your employer an executed covenant not to compete or non-solicitation agreement. If you have already signed these documents, this is not an option, but if not, your employer may be willing to pay you for not competing or not soliciting either its customers or employees for a specific period of time.

· If you have not been offered a severance package, or if it is minimal, evaluate whether you have something to offer your employer in exchange for severance payments or other consideration. Can you offer to waive claims relating to your employment or termination that may have arisen out of the Employment Retirement Income Security Act, or due to discrimination on the basis of age, disability, sex, race, religion or national origin? (Workers Compensation and minimum wage-overtime claims cannot be waived.)

· Find out about Unemployment Compensation - the amount of benefits and the amount of time you can expect to receive them. Are there eligibility questions either because of your lack of earnings record, or because you were terminated for willful misconduct, or you voluntarily quit?

· Could you continue to provide services to your employer as either a consultant or on a part-time basis? Assuming the relationship is good and the termination is simply economic, these could be alternatives that would be acceptable to you and your employer. In Pennsylvania, you may earn up to 40% of your weekly benefit rate (partial benefit credit) before any deduction is taken from your unemployment compensation weekly benefit.

Of course, it makes sense to consult with an attorney to explore these options and evaluate your best course of action. Although generally applying for Unemployment Compensation benefits is the first thing you should do, if there is any question about your eligibility status, or if the facts of whether there was a firing or a quit will be disputed, it makes sense to consult an attorney before making an application for benefits.

Non-Competes: Pigs Get Fed, But Hogs Get Slaughtered

rbk@rkglaw.com (Christina Hausner) — Thu, 10 Jul 2008 10:36:01 -0500

So you've got your program all lined up - every new employee, regardless of job duties - signs a ten-year covenant not to compete with an unlimited geographical scope. No exceptions. Everyone knows the rules, so you are ready to go to court when Joe, whose sales territory was the Northeast United States, goes to work for your competitor in the mid-West.

Not so fast. Nothing frustrates clients as much as being told that a court won't enforce an agreement that is clear and in black and white. But in order to be enforceable, a non-compete must be reasonably limited in duration and territory. The duration of the covenant cannot be longer than reasonably necessary to protect legitimate interests, such as customer goodwill, trade secrets or specialized training. For example, your agreement should be no longer than the time it will take a new hire to demonstrate his or her effectiveness to customers if the non-compete seeks to protect customer goodwill. Odds are that it is not ten years. In addition, the geographic scope needs to be limited to the territory covered by the employee during his or her employment in customer goodwill cases. Courts don't readily enforce multi-country restrictions against sales people with limited territories.

Although there are many cases in which courts have reformed or rewritten an overly broad non-compete, if an employer is a real hog, the court will simply state that it will not rewrite a non-compete and refuse to enforce it at all. This was clearly the case in 1973 in Reading Aviation Service, Inc. v. Bertolet, when the Pennsylvania Supreme Court said that they would not rewrite a non-compete that was unlimited in time and space. More recently, U.S. District Court Judge Stewart Dalzell in Fres-Co System USA, Inc. v. Bodell, reacted the same way and declined to reform an overly broad non-compete agreement stating that to do so would have sanctioned the employer's use of his excessive bargaining power to insist upon unreasonable and excessive restrictions upon its employee. The court stated that the non-compete's terms far exceeded what was reasonably necessary to protect plaintiff's business interests because employer's business was selling coffee packaging materials in the Southeastern United States and the Caribbean, whereas the non-compete spanned four industries on three continents.

Many employers try to avoid this result by including a provision in the non-compete stating that should any portion or term of the non-compete be deemed unenforceable, the parties agree that the court should reform the agreement to one which is enforceable. However, the best practice is to include no terms in your non-compete that exceed what is reasonably necessary to protect your legitimate business interests. That analysis requires looking at each employee differently to determine what business interests would be jeopardized were there no restriction on his post-employment activities. Is it goodwill? Is it protection of trade secrets? What is the low end of the range of term of duration and geographic scope that will adequately protect you? Be honest and not overreaching, and you will be have a covenant that has a much greater chance of being enforced.

IRS Standard Mileage Rate Change

rbk@rkglaw.com (Matthew Grosh) — Mon, 30 Jun 2008 15:00:38 -0500

These days, everyone is reacting to rising gas prices, including the Internal Revenue Service. Through Announcement 2008-63, the IRS is raising the optional standard mileage rate for operating a vehicle for business purposes from 50.5 cents to 58.5 cents per mile, effective July 1, 2008.

The new rate applies to applies to qualifying expenses that are both incurred and reimbursed on or after July 1.

While there are generally no Pennsylvania laws requiring employers to use the IRS' rate, there may be some tax advantage for doing so. The IRS will deem employers who make qualifying reimbursements up to 58.5 cents per mile as meeting their accounting requirements, thus no income reporting or withholding is required for those reimbursements. However, employers need to make sure that their employees have provided adequate proof that the mileage was strictly for business use.

Qualifying employees who are not reimbursed for their business mileage will be able to deduct 58.5 cents per mile on their individual tax returns. However, it is important that the qualifying miles incurred between January 1, 2008 and June 30, 2008 are recorded separately from the miles accrued on and after July 1 because the old rate continues to apply to them

More information on this topic is available in section 5 of IRS Publication 15, although the Publication does not currently take into account the new rate.

Legal Requirements for Breaks, Meal Periods and Overtime

rbk@rkglaw.com (Roxanne Garner) — Tue, 24 Jun 2008 01:34:27 -0500

We have tackled a number of complex employment topics in our blog. Recently, feedback and questions have led us to "go back to the basics" and visit the topic of General Wage and Hour.

The Pennsylvania Department of Labor and Industry attempts to answer many questions about wages and hours in the FAQs section of their website. While the Department of Labor and Industry's site isn't an all inclusive legal resource, it does provide cursory answers to the questions asked most regularly.

What is my legal responsibility to employees regarding breaks and meal periods?

The Pennsylvania Department of Labor and Industry states, "Pennsylvania employers are not required to provide breaks to employees age 18 and over. If the employer permits break periods, and they last less than 20 minutes, the employee must be paid for the break. If the employer allows meal periods, the employer is not required to pay the employee if the employee does not work during the meal period and it lasts more than 20 minutes. Employers and employees may agree to different terms of the employment is governed by a collective bargaining agreement."

Am I required to pay overtime wages, if so, to whom and who is excluded?

The laws and rules surrounding overtime are governed by the Fair Labor Standards Act. The Act requires employers to pay employees one and half times their regular rate for all hours worked over 40 in a week. However exemptions to the general rule exist. An article featured on Inc.com, Who's Exempt From Overtime by Nancy Cooper, provides guidelines on properly classifying an employee. In some cases it is difficult to make the proper determination and it would be advisable to consult an attorney.

Employee Vacation Time Could Cost Employers

rbk@rkglaw.com (Christina Hausner) — Wed, 11 Jun 2008 10:28:05 -0500

In a weakening economy, employers should pay attention to their vacation policy. If you need to cut costs with lay offs, you could end up losing your shirt on pay outs for vacation pay. Employers need to decide and articulate whether vacation is paid if accrued and not taken. Limits should be placed on how much vacation can be accrued, that is, rolled over from year to year. There aren't requirements to pay accrued, but unused vacation pay unless that is your policy. Employers are free to specify that vacation is a benefit to be taken or used, and if not used, will not be paid. Please consider the following when determining how to handle unused vacation time:

Considerations When Paying Accrued but Unused Vacation Pay

If you pay accrued but unused vacation, will you pay it in all circumstances? To the person you just fired for stealing? To the person who quit without notice and is setting up a competing business and taking a few of your key employees to work for him?

Your policy can provide that vacation pay will be paid to employees who are laid off but not those who are fired for willful misconduct or who voluntarily quit. This does make your job more complicated, however. Suddenly, at the termination of employment, you are acting as an unemployment compensation referee in making a determination as to the nature of the termination in order to decide whether to pay vacation benefits.

How not Paying Vacation Benefits Can Effect You

A decision against paying vacation benefits can come back to haunt you in a wage payment and collection claim. Vacation pay is considered wages if the employer's policy is to pay earned but unused vacation. Add the headaches and penalties and attorney fee liability, and that is no vacation.

Managing Employee Expectations

Is your vacation policy clear? As prices rise, are you prepared to deal with employees who are coping by staying home and continuing to work expecting to be paid for their unused vacation? Also, if you are willing to pay have you considered your budget to pay employees 56 weeks in a year? If you are not planning to pay existing employees, even if they are working 52 weeks a year and take no vacation, be sure to communicate your policy to avoid a misunderstanding.

Also consider the sad situation where an employee hasn't taken a vacation in years, and you have no policy regarding rollover? If the employee's entitlement is four weeks a year, at year 13, they may be thinking that they are going to get a year off with pay. Crazy as it seems, you should be sure they understand that is not happening.

Better to have Blogged and Lost (A Blogger), than Never to Have Blogged At All

rbk@rkglaw.com (Rose Krause) — Fri, 30 May 2008 09:59:21 -0500

The Pennsylvania Employment Law Blog has experienced some change recently. Those who read our blog regularly know most of our content has been generated by Michael Moore. Mike has left Russell, Krafft & Gruber, LLP to pursue a position with another law firm. We are grateful for the time and effort Mike has put into our blog and we would like to continue to uphold the standard he has set for our readers. We wish Mike well but as they say, "the show must go on."

Our readers can look forward to content by Christina L. Hausner and Roxanne C. Garner. We also look forward to utilizing the expertise of other lawyers in our firm to help expand the information contained in our blog. For example, Matthew A. Grosh made his first appearance last week with his post Payroll Taxes for a Single Member LLC.

We recognize that many of you have become regular readers and we greatly appreciate your interest. It's important to us to hear from you. Do you have a particular subject on which you would like us to post? Have we blogged on a subject you would like us to revisit? We will continue to blog about matters that are of interest to us but we also want to hear from you.

Payroll Taxes for a Single Member LLC

rbk@rkglaw.com (Matthew Grosh) — Wed, 21 May 2008 14:27:18 -0500

So you finally did the right thing. You converted your sole proprietorship to a single member Limited Liability Company so that you and your personal assets are protected from the liabilities of the business. Now you can sleep more soundly at night because your LLC is busy keeping your house, bed and pillow safe from evil creditors, right? If your LLC has employees, the Internal Revenue Service would say "not so fast - what about payroll taxes?"

Employers are generally obligated to withhold FICA and income taxes, the "payroll taxes", from an employee's wages and pass on those amounts to the federal government. Stiff penalties can result if those obligations are not met. Still, if your LLC is the employer, shouldn't those penalties apply to the LLC and not you personally? The IRS disagrees.

When you created your LLC, you were required to file a form with the IRS to obtain a tax identification number. To complete the form, you had to "check-the-box" to choose if the LLC will be taxed as a corporation, partnership or as a disregarded entity. Because you didn't want to be double-taxed on the business and personal level, you didn't choose to be taxed as a corporation, and because you are a single member LLC, you couldn't choose to be taxed as a partnership because there needs to be more than one partner. As a result, your single member LLC is categorized by the IRS as a disregarded entity for federal tax purposes.

This is where personal liability comes in. Through Notice 99-6, the IRS decided to hold owners of single member LLCs personally liable for payroll taxes. The rationale was that because single member LLCs are disregarded for federal tax purposes, they are ignored and the owner is the "employer" for federal tax purposes. While state law normally provides that LLC owners are not to be held personally responsible for their LLC's liabilities, the IRS trumps those laws with the Supremacy Clause of Article VI of the United States Constitution.

However, there is some light at the end of the tunnel, but it's a good-news/bad-news scenarios. The good news is that on August 16, 2007, the IRS finalized new regulations stating, among other things, that they will no longer ignore single members LLCs for employment tax purposes. As a result, owners of single member LLCs will not be treated as employers for federal tax purposes. The bad news comes in two parts. First, the new regulations only begin to apply to employment taxes effective for periods beginning on or after January 1, 2009, so relief is not immediate. Second, owners of single member LLCs are still personally liable for the "Responsible Person Penalty" under Section 6672 of the Internal Revenue Code.

The "Responsible Person Penalty", also known as "trust-fund recovery penalty" and the "100-percent penalty" generally penalizes anyone who willfully fails to collect and pay over employee income tax and the employee portion of FICA taxes. The specific penalty is equal to the amount of tax not withheld and paid over. The liability of the "responsible party" is independent of the LLC's liability, and owners of single member LLCs are generally treated as "responsible parties."

As a result, if you own a single member LLC with employees, it is very important for you to verify that your payroll taxes are being handled properly. If not, you could be putting yourself at risk.

Expanding the PA Human Relations Act

rbk@rkglaw.com (Roxanne Garner) — Wed, 14 May 2008 15:36:25 -0500

A lawsuit filed by the Greek Island of Lesbos wants to restrict the use of the word Lesbian. The island claims that Lesbians are the citizens of Lesbos and has no connection to the sexual orientation of a person. One plaintiff in the lawsuit claims that use of the word lesbian by the gay community is an insult to the identity of the inhabitants of Lesbos. While Andrea Gilbert, spokesperson for Athens Pride 2008 and a member of OLKE, told PinkNews.co.uk, "The claim is based in serious prejudice and hatred."

This is just one example of controversy surrounding issues of sexual orientation. On a local level, a recent poll in the Central Penn Business Journal revisited the House Bill 1400 and asked readers: Should Pennsylvania pass House Bill 1400, which would prohibit discrimination on the basis of sexual orientation and gender identity? Without providing the number of replies to the poll, the Journal reported that the reader response was 70% in favor and 30% opposed to passing the Bill. The reasoning and written feedback by readers in support of their position was widely varied.

House Bill 1400 proposes to expand the protections already offered under the Pennsylvania Human Relations Commission. The Pennsylvania Human Relations Act prohibits certain practices of discrimination because of race, color, religious creed, ancestry, age, national origin, handicap or disability and use of a support animal. House Bill 1400 proposes to include sexual orientation, gender identity or expression to the existing list.

This Bill defines "sexual orientation" as actual or perceived heterosexuality, homosexuality or bisexuality. "Gender identity or expression" is defined as actual or perceived identity, appearance, behavior, expression or physical characteristics whether or not associated with an individual's assigned sex at birth.

The Bill was co-sponsored by a record 70 members of the House, and in April 2007, the Senate sponsored a similar bill (SB761) with 22 co-sponsors. The Senate Bill remains in the Senate Judiciary Committee. The House Bill also counts among its sponsors Steve Glassman, Chair of the Pennsylvania Human Relations Commission.

Thirteen Pennsylvania municipalities have already enacted laws pointed at protections based on sexual orientation, gender identity or expression. House Bill 1400 was introduced on June 13, 2007, the matter was referred to the Committee on State Government on June 18, 2007, and the Bill continues to produce revolving rumblings from diametrically opposed factions.

Related Links on House Bill 1400:

Equality Advocates of Pennsylvania

Michael Mahler's Blog

American Family Association of Pennsylvania

Interaction Between FMLA & ADA - Don't Get Tripped Up

rbk@rkglaw.com (Christina Hausner) — Tue, 06 May 2008 15:34:14 -0500

The Family and Medical Leave Act (FMLA) turns 15 this year and workers’ rights advocates, the Bush Administration and the Labor Department are weighing in on proposed changes to the law. According to an April 24 article in the Washington Post,

“...workers would have to tell their bosses in advance when they take nonemergency leave, instead of being able to wait until two days after they left. They would have to undergo "fitness-for-duty" evaluations if they took intermittent leave for medical reasons and wanted to return to physically demanding jobs. To prove that they had a "serious health condition," they would have to visit a health-care provider at least twice within a month of falling ill. What's more, employers would have the right to contact health-care providers who authorized leave.”

As I reviewed these proposals it occured to me that some of these changes may serve to blur the distinction between the FMLA and the Americans with Disabilities Act of 1990 (ADA). It is not uncommon for employees to bring claims under both the FMLA and ADA. Avoid getting tripped up in the similarities of FMLA and ADA by understanding the distinctions between the two laws.

FMLA	ADA
is enforced by the Department of Labor (DOL)	is enforced by the Equal Employment Opportunity Commission (EEOC)
applies to employers with 50 or more employees	applies to employers with 15 or more employees
eligible employees must have been employed for at least 12 months and worked 1,250 hours in the previous 12 months of employment	no eligibility restrictions
only requires an individual (or family member) to have a "serious health condition"	only covers individuals with a disability
there may be individual liability	no individual liability
no punitive or emotional damages can be awarded	punitive and emotional damages can be awarded

Managing Employees with Personal Financial Problems

rbk@rkglaw.com (Michael Moore) — Wed, 23 Apr 2008 14:25:19 -0500

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.

Restaurants Face Unique HR Compliance Challenges

rbk@rkglaw.com (Michael Moore) — Thu, 10 Apr 2008 14:03:35 -0500

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.

The Political Future of Affirmative Action

rbk@rkglaw.com (Michael Moore) — Mon, 31 Mar 2008 16:31:40 -0500

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.

ESOPs and Company Stock Matches to 401(k): The Bear Stearns Lesson

rbk@rkglaw.com (Michael Moore) — Tue, 18 Mar 2008 16:22:12 -0500

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.

Retaliation Claims: Five Things Every HR Generalist Should Know*

rbk@rkglaw.com (Michael Moore) — Fri, 14 Mar 2008 08:52:11 -0500

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.

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.

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.

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.

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.

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.

Scandal Management: Any Lessons for Human Resources?

rbk@rkglaw.com (Michael Moore) — Tue, 11 Mar 2008 15:42:48 -0500

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.

EEOC Reports 9% Increase in Discrimination Charges for 2007

rbk@rkglaw.com (Michael Moore) — Mon, 10 Mar 2008 12:05:19 -0500

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.

Union Growth in Pennsylvania

rbk@rkglaw.com (Michael Moore) — Thu, 06 Mar 2008 08:54:47 -0500

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.

Pennsylvania Enacts New Open Records Law: Public Access to Government Personnel Records

rbk@rkglaw.com (Michael Moore) — Tue, 04 Mar 2008 09:30:29 -0500

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.