Labour And Employment Law Update - August 2008

NATIONAL FOCUS

Nationwide Push For Paid Sick Leave Gains Momentum

The presidential campaign is heating up, but a different campaign is also rapidly gaining momentum: the campaign for paid sick leave. This issue has largely been a sleeping giant these past few years while attention has been focused on minimum wage legislation. Since the 2007 passage of the federal minimum wage law, national attention has been shifting toward paid sick leave.

No state currently requires employers to provide paid sick leave, although San Francisco and Washington DC do, and many states are considering this issue. For example, Ohio voters are likely to decide this issue in the fall and the California Assembly approved a paid sick leave bill this spring, although it has since been sidetracked because of its expense. A bill has also been introduced in Congress, but has been moving slowly. Demonstrating the increasing momentum of this issue, the paid sick leave campaign has spread to more than a dozen locations, with at least 11 bills introduced and one enacted and one defeated during the first half of 2008:

Common Features Of Paid Sick Leave Bills

These paid sick leave bills, sometimes dubbed "Healthy Families" or "Healthy Workplace" Acts, are similar in many regards. They all call for paid sick leave, often around seven days per year (nine in California), though some call for fewer days for part-time employees or for employees of small employers. These bills most often insist on the accrual of one hour of sick leave per a certain number of hours worked (e.g., one hour of sick leave accruing for every 30 hours worked). Some bills provide an exemption for small employers while others do not. Most bills also require completion of an initial 90-day period of employment prior to using any paid sick leave.

These bills generally allow sick leave to be used for medical care, including preventive care, for an employee or the employee's family members. Many bills also allow this leave to be used to address the effects of domestic or sexual violence. Most bills prohibit discrimination and retaliation for using or complaining about paid sick leave. They also impose various and sometimes onerous recordkeeping requirements, and many bills address under what circumstances employers may use paid time off in place of separate paid sick leave.

Although these bills are similar, the differences can be quite significant to employers. As an example, Washington DC recently passed a paid sick leave law, but only after heated negotiations led to several 11th-hour amendments to address business needs. These amendments include a requirement that employees be on the job for one year prior to becoming eligible for paid sick leave; an increased threshold (100 or more employees) to trigger seven days of paid sick leave; an exemption for certain health care workers, wait staff and student employees; and an exemption for businesses that can prove hardship. These important modifications make this law in some ways much less burdensome than many of the other pending proposals.

Disadvantages Of Paid Sick Leave Laws

Paid sick leave attracts good employees in addition to other benefits, which is why many employers currently offer paid sick leave even though not required by law to do so. The disadvantages of an unfunded mandate on this issue, however, are many including:

• This mandate detracts from a state's ability to attract business which in turn could harm the state's economy and the state's workers. The differences between bills demonstrates how some bills are more burdensome and would certainly make some locations less attractive to business.
  
  
• It forces a one-size-fits-all approach in place of flexible arrangements designed by employers to fit their specific needs. Currently, employers who are unable to afford paid sick leave may instead offer flexible schedule changes to accommodate illness or, alternatively, a higher hourly rate in place of paid sick leave. A paid sick leave mandate eliminates the flexibility to develop these creative solutions.
  
  
• Even employers that currently offer generous leave policies will be burdened by onerous recordkeeping requirements and the need to review and revise policies. Employers may also lose the competitive advantage attained by voluntarily offering paid sick leave.
  
  
• This mandate increases the potential for abuse by less motivated employees without providing controls to curb such abuse. The bills generally allow employees to take short periods of sick leave with limited circumstances for employer verification. It is possible, for example, that an employee may falsely claim sudden illness and take paid sick leave often on Friday afternoons an hour before quitting time. Although the bills may not intend to authorize such conduct and it seems likely courts and regulatory agencies will allow employers to take reasonable steps to monitor abuse as they can under other leave laws, the laws do not provide clear guidance for employers on this issue.
  
  

What To Do Now

Employers should be aware of any paid sick leave bills that are pending where they conduct business. They can then give input as desired and can review or implement leave policies as needed. Because this issue may be particularly susceptible to a snowball effect, employers will want to generally watch developments across the nation, with an eye currently on Ohio.

Washington DC employers also will need to review and possibly revise their leave policies prior to November 2008. Ohio employers should consider reviewing their leave policies now in order to benefit from the deference afforded by the proposed bill to certain "equivalent" policies that are in effect upon enactment. (More specific information on Ohio's Healthy Families Act can be found here.) Because of the recent activity nationwide, other employers who have been considering a review of employee leave policies would be wise to consult counsel in determining whether and how to move forward with a proactive review at this time.

Supreme Court: Year In Review

In a flurry of June activity, the US Supreme Court closed out this term's extremely active labor and employment case docket by issuing five additional opinions. The Court is now on a break from hearing arguments until the new term begins in October. Opinions of interest to employers this year include:

• Chamber of Commerce v. Brown. The Court held that federal labor law preempts a portion of California's "neutrality law," which effectively regulates employer speech during union organizing campaigns by prohibiting employers from using state funds "to assist, promote, or deter union organizing." The Court found this law to be preempted because it regulates conduct within "a zone protected and reserved for market freedom." Bottom Line: This decision is a huge victory for employers because the so-called neutrality law, sponsored by the labor movement, provides a very powerful advantage to unions during organizing campaigns. This case strikes down the California law, and ripples will be felt in other states that either have or are considering similar laws.
  
  

• Metropolitan Life Insurance Co. v. Glenn. The Court held that a conflict of interest exists when a plan administrator fills the dual role of determining eligibility for benefits under an ERISA plan and paying claims under that same plan. It also held that a reviewing court should consider this conflict as a factor when determining whether the administrator abused its discretion in denying benefits, with the significance of this factor depending on the facts of each particular case. Notably, this conflict will prove less important where the administrator has taken active steps to reduce potential bias, for example by "walling off" claims administrators. Bottom Line: This decision may result in increased litigation expense for ERISA plan administrators, which in turn could result in increased premiums for employers. Also, employers that self-fund an ERISA plan will want to review their claims evaluation procedures in light of this decision.
  
  

• Meacham v. Knolls Atomic Power Laboratory. An age discrimination case where former employees alleged that an involuntary reduction in force (RIF) had a disparate impact on older workers, but the employer asserted that the RIF was based on "reasonable factors other than age." The Court held that the employer bears the burden of proving the affirmative defense that the RIF was based on "reasonable factors other than age." In other words, the employer must prove that the factor causing the disparate impact was "reasonable." Bottom Line: This decision will make disparate impact age litigation "harder and costlier" for employers, in the words of the Court. Its primary legal impact, however, will be in cases "where the reasonableness of the non-age factor is obscure." This case also highlights that it remains essential to undertake RIFs in a careful, thorough manner with guidance and training on how to avoid legal problems.
  
  
• Kentucky Retirement Systems v. EEOC. The Court held that Kentucky's disability-retirement plan, which uses age as a factor in calculating benefits, does not violate the Age Discrimination in Employment Act (ADEA). The Court explained that "[w]here an employer adopts a pension plan that includes age as a factor, and that employer then treats employees differently based on pension status, a plaintiff, to state a disparate treatment claim under the ADEA, must [show] that the differential treatment was 'actually motivated' by age not pension status." Bottom Line: The many state pension plans and the many collectively-bargained pension plans that are structured like the Kentucky plan remain secure.
  
  
• Enquist v. Oregon Department of Agriculture. The Court held that a public employee who is not a member of a protected class (e.g., based on race, gender, etc.) cannot bring a lawsuit under the Fourteenth Amendment on the basis that the public employer treated her differently from similarly situated employees without a rational reason. In other words, the Court rejected what is commonly called the "class-of-one" theory. Bottom Line: This decision preserves public sector employment-at-will and keeps the courts from becoming involved in subjective, individual public employment decisions.
  
  
• Hall Street Associates v. Mattel, Inc. The Court held that an arbitration agreement cannot expand the scope of judicial review under the Federal Arbitration Act (FAA) beyond the grounds specified by the FAA for vacating or modifying an arbitration ruling. Bottom Line: This decision resolves a split among the circuit courts, and employers in circuits that previously allowed parties to contract for expanded judicial review under the FAA are no longer able to do so.
  
  
• Details on the May decisions in CBOCS West, Inc. v. Humphries and Gómez-Pérez v. Potter can be found here.
  
  

• Details on the February decisions in Federal Express Corp. v. Holowecki, Sprint/United Management Co. v. Mendelsoh, LaRue v. DeWolff, Boberg & Associates, Inc. and Preston v. Ferrer can be found here.
  
  

Pros And Cons Of Using E-Verify To Determine Employment Eligibility

Federal law requires that all employers verify the identity and employment eligibility of all new employees within three days of hire. As part of this process, employees are required to complete Form I-9 and provide employers with documentation establishing their identity and authorization to work in the United States.

What Is E-Verify?

E-Verify is a voluntary electronic system established by the Department of Homeland Security (DHS) in partnership with the Social Security Administration (SSA) to help employers verify work authorization of new hires by matching Social Security numbers and other Form I-9 information. E-Verify is a free, Internet-based system that most often returns initial verification results within seconds.

The initial result will be either a confirmation or a tentative nonconfirmation of employment eligibility. If a tentative nonconfirmation, the employer must follow certain procedures in notifying the employee, providing a referral letter so the employee can contest the result with the SSA or DHS, and obtaining the final result which will be either a confirmation or a final nonconfirmation.

To enroll in E-Verify, an employer must execute a "Memorandum of Understanding" with the DHS and SSA. The employer designates the job sites that will be enrolled in the program. The employer must then use E-Verify at those job sites unless it terminates its participation in the program. (Employers using E-Verify are still required to use Form I-9 for every new hire.) Although E-Verify is scheduled to sunset in November, Congress is considering various bills to continue the system.

Are Employers Required To Use E-Verify?

President Bush recently signed an Executive Order requiring federal contractors to use E-Verify, but this requirement will not take effect until after a final regulation on it is issued. Congress is also considering whether to require other employers to use E-Verify.

In addition, the use of E-Verify is or will soon be mandatory in some states. All employers are or will soon be required to use E-Verify in Arizona, Mississippi and South Carolina, with the caveat that South Carolina employers may, in the alternative, employ only workers who possess or are eligible to obtain a valid South Carolina driver's license or identification card or who possess an equivalent from another state.

Certain employers (e.g., employers contracting with the state) are or will soon be required to use E-Verify in Colorado, Georgia, Minnesota, Missouri, Rhode Island, Utah and possibly Oklahoma. In Oklahoma, a federal district court issued a preliminary injunction stopping the E-Verify and employer sanctions provisions of Oklahoma's immigration law from taking effect as scheduled on July 1.

Other states also are considering bills that would require the use of E-Verify. Contrary to this trend, however, Illinois passed a law effectively prohibiting the use of E-Verify unless otherwise required by federal law, but it has agreed not to enforce this law pending litigation over it. The California Assembly also has approved a bill that would prohibit the state from using E-Verify unless otherwise required by federal law, prohibit local governments from requiring the use of E-Verify and discourage private employers from using E-Verify. The California Senate is now considering this bill.

What Are The Pros And Cons Of E-Verify?

Some advantages to using E-Verify include that the system is designed to quickly verify employment eligibility and that participation should significantly reduce the likelihood of getting Social Security "No-Match" letters. Also, an employer that verifies work authorization through E-Verify enjoys a legal presumption that the employer did not knowingly hire an unauthorized worker. Employers in some states may be able to pursue certain types of business (e.g., state contracts) or may benefit from legal presumptions or defenses by using E-Verify. Finally, participation is required by an employer that wants to help secure a 17-month extension for a student with an F-1 visa who has a science, technology, engineering or mathematics degree and who is performing post-graduation "Optional Practical Training."

Some disadvantages to using E-Verify include the requirement that participating employers allow the SSA and DHS to perform periodic audits. Also of great significance, E-Verify has been known to have mismatch problems, thereby carrying a risk of erroneous nonconfirmations that expose an employer to legal action either for wrongful termination or for hiring an unauthorized worker. The mismatch rate is higher with respect to foreign-born employees, making E-Verify less appropriate for companies that employ many legal foreign workers. However, DHS announced improvements in May that should help reduce the mismatch rate. In addition, an employer must make an administrative commitment to the program including the designation and training of program administrators and the diligent and timely management of the program. Program administrators who improperly use E-Verify for pre-employment screening or to re-verify current employees expose employers to liability. Finally, it is uncertain whether the technical capacity of E-Verify can handle a heavy load and whether the SSA is capable of quickly resolving numerous confirmation issues.

Bottom Line

Whether it makes sense for an employer to enroll in E-Verify depends on the particular circumstances of that employer. An employer should consider the states in which it conducts business, examine its current employment verification procedures, and balance the pros and cons of E-Verify. Prior to enrolling in E-Verify, employers should consult with counsel and conduct a thorough internal I-9 audit.

INTERNATIONAL FOCUS

Work-Life Balance Developments

United Kingdom: Right To Request Flexible Working Extended

In the United Kingdom, the flexible working law currently allows parents with a child under age 6 or with a disability to request a flexible work schedule, and employers must consider this request seriously and reject it only for good business reasons. In May, the government announced an extension of the right to request a flexible work schedule to all parents with children under the age of 16. This extension is expected to give an extra 4.5 million parents the right to request flexible working hours. It is anticipated that this extension of the right to request a flexible work schedule will take effect in April 2009.

France: 35-Hour Work Week Will Remain Law

In 1998, France reduced the work week from 39 hours to 35 hours with no loss of pay to workers, with the goal of reducing unemployment and allowing workers more personal time. This law has been controversial, with many believing it has not achieved its goals and has hurt France's competitiveness. Current president Sarkozy has made promises to end the 35-hour work week, advancing a work more/earn more view. To that end, France's government has adopted legislation easing restrictions on overtime, and another measure is expected to make it easier for companies to negotiate longer work weeks. However, in the face of some fierce opposition, president Sarkozy retreated in May from his previous promises and confirmed that the work week will remain 35 hours. Although the partially watered-down 35-hour work week seems secure for now, it remains to be seen how long the government can keep up its political acrobatics on this controversial issue.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.