Labor and Employment Update - Winter 2009

ARBITRATION POLICY MAY NOT PREVENT EMPLOYEES FROM PURSUING A CLASS ACTION

One of the primary advantages of implementing a policy that requires mandatory arbitration of all employment related disputes is that it may prevent individual employees from pursuing a class action lawsuit. This is particularly effective when an employee has a claim that would otherwise be too small to be litigated individually. Generally, those provisions have been upheld. However, the California Court of Appeals ruled recently in Sanchez v. Western Pizza Enterprises, Inc., that not only could a group of Domino’s Pizza drivers pursue their wage and hour disputes as a class action, but also that the employees were not required to pursue the class action in an arbitration forum.

The court ruled that the class action waiver provision was unenforceable because it would effectively preclude employees from pursuing such relief under the Wage and Hour statutes. Moreover, the court went on to hold that failing to disclose that the company would have a significant advantage by being a “repeat player” with a particular arbitrator was unconscionable and made the agreement unenforceable. 

With the plethora of class action lawsuits being pursued around the country, it is likely that this aspect of mandatory arbitration policies will be challenged in other jurisdictions. However, it may still be advantageous for an employer to consider implementing mandatory arbitration for employment disputes. These advantages typically include reduced litigation costs, smaller damage awards, and a more streamlined procedure. 

HEALTHCARE PREMIUMS PAID BY STIMULUS PACKAGE

When President Obama signed the American Recovery and Reinvestment Act of 2009 (“ARRA”), perhaps the most direct impact it has on employers is the COBRA subsidy requirements for employees who lost or will lose group health coverage as the result of an involuntary termination between September 1, 2008 and December 31, 2009. 

The ARRA offers a subsidy of 65% of the continuation coverage premiums for a period of up to nine months. Essentially, the employer pays the subsidy and they are “reimbursed” the amount of the subsidized premiums through a credit towards federal withholding and FICA taxes owed by the employer. Employers must post notices advising employees of the potential coverage and must also send notices to anyone who was laid off between September 1, 2008 and the present. These notices must be provided to such individuals no later than April 18, 2009. 

The United States Department of Labor has posted model notices on its website at http://www.dol.gov/ebsa/COBRAmodelnotice.html.

STRICTER ADA PROVISIONS TO GO INTO EFFECT

On September 25, 2008, former President Bush signed into law the ADA Amendments of 2008 (“the Act), which were designed to strengthen the provisions of the Americans with Disabilities Act of 1990 (“the ADA”) and reverse the holdings of several U.S. Supreme Court Opinions that have narrowed the ADA’s scope.

In particular, the amendments to the Act specifically state that:

The term “disability” should be construed in favor of “broad” coverage of individuals. “Qualification” for the position in question is eliminated as part of the “disability” determination.

Courts are not permitted to consider the existence of “mitigating measures” – such as eyeglasses, medication, hearing aids, prosthetics and other medical technology – in determining whether an individual has a disability. Thus, an individual may still be considered “disabled” even if medication, equipment or other measures eliminate or significantly lessen the impact of the physical or mental impairment on the individual’s ability to perform major life activities.

An individual need only establish that he/she is substantially limited in one “major life activity” in order to be considered “disabled”; there is no need for a showing that the individual is substantially limited in more than one major life activity to be considered disabled. “Substantially limited” is defined as “materially restricts.” The list of “major life activities” is expanded and now includes bodily functions.

An individual with a physical or mental condition that is episodic (such as an epileptic) will be considered disabled, even if the condition is in remission, provided that he/she would be substantially limited in a major life activity when the condition is active.

“Reverse” disability discrimination claims are prohibited, i.e., disputes raised by an individual without a disability who claims that he/she was discriminated against in favor of a person with a disability.

An individual proceeding with a “regarded as disabled” claim need not establish that he/she was perceived as being substantially limited in a major life activity, only that he/she was perceived as being “impaired.” These individuals, however, are not permitted to bring a claim for “failure to accommodate.”

As a result of these amendments, many individuals who were not previously protected by the ADA may now be considered covered by the Act’s provisions. Employers should review their policies and procedures carefully to account for these changes to the ADA and should further be aware that some analysts anticipate an increase in possible requests for accommodation and disability claims following the Amendments’ passage. Finally, it should be noted that the amendments specifically state that they are not intended to alter the standards for impairment or disability under states’ workers compensation laws. The amendments went into effect on January 1, 2009. 

EMPLOYERS MAY BE HELD LIABLE FOR SAME-RACE HARASSMENT

In Pollock v. City of Philadelphia, the United States District Court for the Eastern District of Pennsylvania recently clarified that employers can be held liable for same-race harassment.

In Pollock, the Plaintiff, an African-American male, claimed that he had been harassed and discriminated against by his supervisor, who was also an African-American male, on account of his race. The supervisor was alleged to have engaged in various forms of verbally abusive and harassing behavior, including referring to the Plaintiff with racial slurs. The Plaintiff’s coworkers began referring to the Plaintiff as “T.J.” – referring to a character in the movie “Soldier’s Story,” where an African American army sergeant mistreated an African-American soldier because of his race. The Plaintiff complained to the City, but City personnel appeared to assume that the issue was not one involving race discrimination. After the Plaintiff was terminated from employment, he filed suit. The City moved for summary judgment, arguing that the case should be dismissed on the grounds that an individual would not discriminate against someone of the same race. The Pollock court cited Supreme Court holdings and rejected this argument, holding that there was no “conclusive presumption” against a same-race harassment claim. Indeed, the Court noted that, while a jury would be entitled to consider the supervisor’s race in evaluating the claim, it was for the jury to make that determination.

Employers should be aware that a race discrimination or harassment claim may exist between members of the same race. Among other things, employers should be careful not to assume that they are immune from liability if racial slurs are used between employees of the same race, as this may give rise to a racial harassment claim under Title VII. As always, employers are advised to prohibit inappropriate language and conduct in the workplace. In addition, employers are cautioned to take care to investigate and deal appropriately with any claims of same-race harassment or discrimination immediately; they should not assume that such claims are not cognizable under the law.

NEW OBLIGATIONS TO NOTIFY WORKERS OF LAYOFFS AND PLANT CLOSINGS

As economic vitals flat-lined last fall, job losses spiked to a rate of more than a half million jobs per month. Many weakened companies, struggling to tread water in a steadily rising tide of corporate bankruptcies, are now turning to employee layoffs to cut overhead and preserve cash. Less fortunate companies are simply forced to close entirely, resulting in even greater job loss.

Now, more than ever, employers should be aware that failing to notify employees about a layoff or plant closing might create liability under newly enacted legislation. Those liabilities, and accompanying litigation expenses, could very well negate any cost savings that motivated the layoff or plant closing in the first place.

Many employers are familiar with the federal requirements for certain employers to give notice to employees prior to layoffs and plant closings under the Worker Adjustment and Retraining Notification Act (WARN Act). However, state legislatures are enacting more restrictive and punitive WARN laws, with which employers may not be as familiar.

These state WARN laws are commonly referred to as “mini” or “baby” WARN Acts, but those names are misleading. The state WARN Acts often apply to employers not covered by the federal WARN Act. They also frequently require employers to provide more notice than is required under federal law, and an employer that fails to fully comply with state WARN Acts could easily incur liabilities greater than those incurred under the federal statute. 

New York, for example, enacted a WARN statute that became effective February 1, 2009. The New York WARN Act is significantly stricter because it applies to employers with 50 or more employees and requires 90 days notice, whereas the federal Warn Act only applies to employers with 100 or more employees and requires just 60 days notice.

New Jersey’s WARN Act is an example of a baby-WARN with a big bite. It penalizes employers who fail to give 60 days notification by mandating that the employer pay a full week of severance pay for every year of employment. For employers with long-term employees, this penalty will likely exceed the one day of back pay for each day of violation proscribed under the federal WARN Act.

Other states that have enacted legislation addressing layoffs include California, Connecticut, Hawaii, Illinois, Kansas, Maine, Massachusetts, Michigan, Minnesota, New Hampshire, Oregon, Rhode Island, South Carolina, Tennessee, and Wisconsin. Although Pennsylvania is not among them, Philadelphia does have local regulations that address plant closures and layoffs. The table below provides a non-comprehensive summary highlighting some differences among four WARN statutes.

Although there are exceptions to the federal and state WARN Acts, prudent employers may prefer to give sufficient notice even if they clearly fall within an exception. Otherwise, the employer will likely incur expenses litigating whether the exceptions did in fact apply.

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The Labor and Employment Group represents and counsels employers in all aspects of the employment relationship, including EEO litigation, union avoidance, negotiations, arbitrations, executive compensation, corporate transactions, and non-competition/non-solicitation agreements, as well as compliance with federal and state laws such as the Family and Medical Leave Act, the Americans with Disabilities Act, the Health Insurance Portability and Accountability Act, the Fair Labor Standards Act and the Occupational Safety and Health Act. This document is published for the purpose of informing clients and friends of Klehr Harrison about developments in the areas of labor, employment and benefits, and should not be construed as providing legal advice on any specific matter. For more information about this publication or Klehr Harrison, contact Charles A. Ercole, Chair of the Labor and Employment Group, at (215) 569-4282 or visit the firm’s Web site at www.klehr.com