Financial Ability Immaterial in OSHA Fines

• WORKPLACE INVESTIGATIONS (FCRA)
• WAGES AND HOURS (FLSA)
• PENSIONS AND BENEFITS (ERISA)
• DISABILITY DISCRIMINATION (ADA)
• FAMILY AND MEDICAL LEAVE (FMLA)
• EMPLOYMENT DISCRIMINATION (OTHER THAN AGE)
• AGE DISCRIMINATION (ADEA)
• OCCUPATIONAL SAFETY AND HEALTH (OSHA)

WORKPLACE INVESTIGATIONS (FCRA)

Workplace Investigations Freed from FCRA Pre-Investigation Burdens

As we anticipated the Fair and Accurate Credit Transactions Act (FACT) has become law. FACT reauthorizes and amends the Fair Credit Reporting Act (FCRA). In addition to its much-touted measures to help reduce identity theft, this amendment eliminates significant obstacles to workplace investigations created by the Federal Trade Commission’s interpretation of FCRA’s notification and disclosure requirements. With the passage of FACT, employers no longer will be required to seek and obtain an employee’s permission before engaging a third-party to conduct an internal investigation of “suspected misconduct relating to employment” or “compliance with Federal, State, or local laws and regulations, the rules of a self-regulatory organization, or any preexisting written policies of the employer.” Pre-employment background checks by third parties, however, continue to be “consumer reports.”

In addition, FCRA will now require that, if adverse action is taken against an employee in whole or in part based on a third-party workplace investigation, the employer must provide a summary of the “nature and substance” of such third-party investigation, but disclosure of the sources of information used in the investigation will not be required.

WAGES AND HOURS (FLSA)

District Court Decides Motor Carrier Exemption Issues

Recently, a federal district court in Illinois ruled on several issues involving the “Motor Carrier Exemption” to the FLSA, which excludes employees who are subject to the wage and hour regulations of the Department of Transportation. Thus, as far as federal wage and hour law is concerned, employees whose duties “directly effect” the “safety of operation” of motor vehicles in the transaction of interstate commerce are exempt from the provisions of the FLSA and do not have to be paid overtime or the federal minimum wage. The case involves drivers for a delivery company that regularly engages in interstate commerce because, among other things, it makes airport pickups of checks for distribution to Chicago area banks. However, the court held that the activities of the enterprise as a whole are not controlling. Instead, in order to determine which employees are exempt, the court had to review the activities of each individual employee, to determine, for example, if that particular employee was one of the drivers who regularly made the airport pickups or was subject to being called to make an airport pickup. The court’s decision highlights the intricacies of the Motor Carrier Exemption and the fact-specific, individualized inquiry necessary to apply this complicated and little-known exemption from federal overtime and minimum wage law.

PENSIONS AND BENEFITS (ERISA)

Termination of Retiree Medical Plan Does Not Violate ERISA

Retirees do not have a vested right to lifetime health benefits when the retiree health plan reserves the employer’s right to amend, modify or terminate the plan, despite a provision in the retiree health plan that benefits will be provided “indefinitely.” In International Union of United Auto Workers v. Rockford Powertrain Inc., the U.S. Court of Appeals for the Seventh Circuit (IL, IN, WI) upheld the employer’s right to terminate its retiree health plan because it had specifically reserved the right in the plan document. The court rejected the retirees’ argument that benefit calculation sheets provided to each retiree upon retirement constituted a promise of benefits for life. The court determined that even when an employer intends, at a given time, that benefits shall be continued indefinitely, when it reserves the right to modify or terminate a plan, it may change its mind based on financial pressures or other changes in circumstances that occur at a later date. This case demonstrates how critically important it is to include “reservation of rights” language in employee benefit plans.

Retaining Employees During RIF Not ERISA Violation

Twenty-five employees who lost the opportunity for enhanced retirement benefits by being kept employed during a reduction in force do not have a claim under ERISA. The U.S. Court of Appeals for the Fifth Circuit (LA, MS, TX) held that the employer did not act for the purpose of depriving the employees of the enhanced benefit when it kept them on staff during a massive reduction, while the discharged employees received an enhanced retirement package. The Court explained that ERISA’s anti-discrimination provisions are intended to prevent employers from taking adverse actions against employees for the purpose of denying them benefits to which they are otherwise entitled. In this case, the employer acted for business reasons in maintaining a small staff while downsizing. Moreover, the enhanced retirement benefits were temporary, and not a permanent part of the retirement plan.

DISABILITY DISCRIMINATION (ADA)

Worker Suffering from “Occasional Difficulties” Not Covered by ADA

An employee who was laid off after surgery to remove a tumor from his tailbone has no claim under the ADA because he cannot show that his physical impairments “substantially limited” his performance of major life activities, a Minnesota federal judge has ruled in EEOC v. Seagate Technology. The EEOC argued that a former Seagate shipping clerk, who was diagnosed with neurofibromatosis and had surgery to remove a nonmalignant tumor on his tailbone, was covered by the ADA because he is substantially limited in the major life activities of sleeping, eating, caring for himself, concentrating, lifting and bending. The Court rejected the claim, concluding that the evidence indicated that, although the employee might have experienced occasional difficulty in some of these activities, he was not “substantially limited” in any of those areas within the meaning of the ADA. Relying on the Supreme Court’s decision in Toyota Motor Mfg. v. Williams, the court observed that the “relevant inquiry” is whether the impairment “prevents or restricts . . . performing tasks that are of central importance to most people’s daily lives.” The court found that the evidence merely shows occasional trouble sleeping, occasional decreased appetite due to pain, occasional difficulty concentrating, and occasional difficulty lifting or bending. Such occasional difficulties are insufficient to constitute a substantial limitation on major life activities, the court concluded.

FAMILY AND MEDICAL LEAVE (FMLA)

Discharging Employee During Leave, No Violation of FMLA

Firing an employee the day before her scheduled return from medical leave was found to have been for legitimate business reasons and not in retaliation for the employee’s medical absence, in Coulter v. Deloitte Consulting LLC. The U.S. Court of Appeals for the Sixth Circuit (KY, MI, OH, TN) held that the employee failed to show that the employer’s stated reason, poor performance, was not the true reason. While the employee was on FMLA leave for surgery, her supervisors conducted her annual performance review, which had been previously scheduled and was performed each year at the same time of year. The evaluation disclosed that the majority of the individuals the employee worked with were dissatisfied with her performance and lack of responsiveness and that her inefficiency had prompted them to work around her. The employee alleged that the timing of her termination was sufficient to indicate a causal connection with her medical leave. However, the court dismissed her FMLA claim, finding that she produced no evidence of pretext, and that it was merely a coincidence that her absence coincided with her annual review period.

EMPLOYMENT DISCRIMINATION (OTHER THAN AGE)

Vicarious Liability for Nonsupervisor?

The U.S. Supreme Court declined to hear the appeal of a case holding that an elevator “mechanic-in-charge” could be considered a supervisor for purposes of holding an employer vicariously liable for sexual harassment under Title VII, even though the mechanic had no hiring or firing authority over his co-workers. In Otis Elevator Co. v. Mack, the U.S. Court of Appeals for the Second Circuit held that an elevator mechanic’s helper could sue the company for alleged harassment by the senior mechanic on site, even though he did not have the authority to hire, fire, promote, reassign or change the helper’s benefits. The senior mechanic on sight made and oversaw daily work assignments for mechanics and mechanics’ helpers, and this “enabled him, or materially augmented his ability to impose a hostile work environment,” according to the Second Circuit. The Second Circuit pointed out that, under Burlington Indus. Inc. v. Ellerth and Faragher v. Boca Raton, an employer may be subject to vicarious liability for sexual harassment by an employee with immediate authority over the complaining worker. In reaching its conclusion, the Second Circuit also looked to EEOC guidelines, under which an employee is another employee’s supervisor if the individual has the power to undertake or recommend tangible employment decisions or to direct the employee’s daily work activities. The Second Circuit’s decision in Otis Elevator conflicts with the Seventh Circuit’s decision in Parkins v. Civil Constructors Inc., which set out narrower test, but resolution of those differences will have to await another case.

AGE DISCRIMINATION (ADEA)

Are Disparate Impact Claims Viable Under the ADEA?

The U.S. Court of Appeals for the Fifth Circuit (LA, MS, TX) recently held that disparate impact cases may not be brought under the Age Discrimination in Employment Act (ADEA). The Fifth Circuit thus joins the First, Seventh, Tenth and Eleventh Circuits in so holding; the Second, Eighth and Ninth Circuits disagree. To prove a disparate impact case, employees must show that a policy and/or practice has an adverse impact on a particular demographic group and is not justified by business necessity. The Fifth Circuit based its reasoning on the exception in the ADEA “based on reasonable factors other than age,” which is not contained in Title VII. Thus, employers may act on non-age factors unless they are so closely related to age, that they are pretexts for age discrimination. Depending upon the federal circuit in which the employer is located, it will be necessary to be aware of these disparate impact claims. The Supreme Court ducked an opportunity to decide this issue definitively in ADEA cases in 1993, but will probably do so in the near future.

OCCUPATIONAL SAFETY AND HEALTH (OSHA)

Financial Ability Immaterial in OSHA Fines

Howard Sokol

OSHA has fined an upstate New York manufacturing company $120,000 in proposed penalties for its failure-to-abate three violations. In response to a complaint, OSHA inspected the company’s facility and issued citations that included five serious violations alleging the unsafe use of mechanical power presses. When the employer repeatedly failed to take corrective action with respect to the use of the power presses, OSHA assessed a penalty of $120,000. It was of no matter that the company was a small operation, without substantial resources. A company commits a failure-to-abate violation, according to OSHA, when an employer is cited for a violation of an unsafe piece of equipment or condition and does not take corrective action within the deadline set by OSHA. Failure to abate violations results in a daily penalty that can lead to fines far in excess of the $70,000 maximum, for example, for a repeat violation in those situations where abatement is actually accomplished but a similar violation arises thereafter.