HIGHLIGHTS FOR THE MONTH OF NOVEMBER 2008

By: Melissa C. Hammock

RECENT DEVELOPMENTS

E-Verify Mandatory For Federal Contractors

Beginning January 15, 2009, federal contractors and subcontractors will be required to use the federal E-Verify system to verify an employee's authorization status.

Background of the E-Verify System: E-Verify is an alternative to the I-9 system whereby employers may verify a worker's authorization status through the internet. E-Verify cross-references information submitted by the employee on his or her I-9 with records maintained by the Social Security Administration and the Department of Homeland Security and provides employers with a determination of the worker's status within seconds. Until recently, participation in E-Verify was voluntary, with the exception of some states, which mandated that specific employers use the system.

As we previously reported (June 2008 E-Update; October 2008 E-Update), on June 6, 2008, President Bush signed an Executive Order requiring employers with federal contracts to use the E-Verify system to confirm the employment eligibility of their workforce. On October 1, 2008, Congress voted to extend the E-Verify system through March 6, 2009. On November 14, 2008, a final rule implementing the Executive Order was published. Pursuant to the new regulations, beginning January 15, 2009, federal contractors and subcontractors will be required to use E-Verify as explained below.

Summary of the New Regulations: The regulations apply to all federal contracts awarded and solicitations issued on or after January 15, 2009.

• All covered federal contracts must contain a clause wherein the contractor agrees to use E-Verify to confirm that all the contractor's new hires (irrespective of whether they are working on the federal contract) and all the contractor's employees (new and existing) directly performing work on the federal contract are authorized to work in the United States ("E-Verify Clause").

• Existing contracts with an indefinite delivery or quantity that have a remaining period that extends at least six months after January 15, 2009, must be amended to include the E-Verify Clause for future orders.

• The E-Verify Clause must be included in all sub-contracts (for services or construction) that exceed $3,000.

• Employers who are not already enrolled in E-Verify have thirty (30) days from the date of the contract award to complete enrollment. They then have ninety (90) days from enrollment to initiate E-Verify requests.

• Employers who have been enrolled in E-Verify for at least ninety days must verify new hires within three days from the date of hire and existing employees assigned to the contract within ninety days.

• In "exceptional circumstances," the head of the contracting activity has the authority to waive the requirement that the E-Verify Clause be included in the contract.

The E-Verify requirement does not apply to:

o Contracts for commercially available off-the-shelf ("COTS") items.

o Prime contracts for less than $100,000.

o Contracts lasting less than 120 days.

Prior to these Regulations, E-Verify was limited to new hires. Under the new regulations, however, E-Verify must now be used for all employees assigned to perform work on a contract. Thus, contractors will either have to develop a system to ensure that all employees assigned to federal contracts have been verified, or verify their entire workforce. Contractors who choose to verify their entire workforce must notify the Department of Homeland Security and then must begin verifications within 180 days of such notice, instead of the ninety (90) days recited above. Employers may enroll in E-Verify at any time and need not wait for the effective date. To assist with compliance, the Department of Homeland Security, U.S. Citizenship and Immigration Services has issued a FAQ on E-Verify and federal contractors.

Mandated Inpatient Alcohol Treatment Does Not Violate The Americans with Disabilities Act

The Court of Appeals for the Eighth Circuit recently held that an employer did not violate the Americans with Disabilities Act (“ADA”) when it required its employee to undergo inpatient alcohol treatment.

Facts of the Case: In Kozisek v. County of Seward, the plaintiff, a Vietnam War veteran, suffered from Post Traumatic Stress Disorder (“PTSD”), although the employer was not aware of his condition. Plaintiff was required to take medication to control his PTSD symptoms. After failing to take his medication for several days, plaintiff left work early and became intoxicated. In his intoxicated state, plaintiff brandished firearms and killed and/or wounded several of his farm animals, including the family dog, and threatened his wife. The police arrested plaintiff and charged him with making terroristic threats and using a firearm to commit a felony. Based upon the incident and arrest, plaintiff and his employer agreed that he would undergo psychological and substance abuse evaluations. Plaintiff met with a licensed mental health professional, who recommended that he complete inpatient alcohol treatment. Plaintiff refused inpatient treatment, but told his employer that he would participate instead in outpatient treatment. Based upon the mental health worker’s recommendation, the employer notified plaintiff that he must complete inpatient treatment or be terminated. Plaintiff never submitted proof that he completed inpatient treatment and he was terminated. Plaintiff filed suit alleging, among other things, that his employer regarded him as an alcoholic in violation of the ADA. The district court granted summary judgment in favor of the employer and the plaintiff appealed.

The Court’s Ruling: Pursuant to the ADA, an employer regards an employee as disabled when it assumes that an employee’s “physical ailments substantially limit his ability to work.” The Court of Appeals noted that the purpose of the “regarded as” provision is to “ ‘combat archaic attitudes, erroneous perceptions, and myths’ working to the disadvantage of the disabled or perceived disabled.” The Court found that the employer’s actions were not based upon its perception that plaintiff was disabled. Rather, the employer’s actions were based upon the serious incident, resultant criminal charges, and most importantly, the professional mental health worker’s recommendation that plaintiff complete inpatient alcohol treatment. The employer, thus, did not regard plaintiff as disabled and his termination did not violate the ADA.

Lessons Learned. The employer was successful in defeating plaintiff's claim because it obtained a medical professional's recommendation and then based its decision on that recommendation. In so doing, the employer was able to require plaintiff to undergo inpatient treatment without relying upon its own judgment that plaintiff required such intervention. Therefore, to withstand scrutiny in these types of situations, an employer's actions should be based upon the recommendation of a medical professional and not its own subjective judgment.

TAKE NOTE

"Me Too" Evidence. The Court of Appeals for the Fourth Circuit recently held that affidavits from a plaintiff’s co-workers are relevant in determining whether a work environment is hostile. In Ziskie v. Mineta, the plaintiff alleged that she and other female employees were exposed to “unremitting use of profanity, sexual innuendos, mass flatulence, and other behaviors designed and intended to make female workers uncomfortable and ill at ease,” resulting in a sexually hostile work environment. In support of her claims, plaintiff submitted affidavits from co-workers, which detailed offensive and harassing conduct they experienced in the workplace (so-called “me too” evidence). The district court refused to consider the affidavits because the events described therein were not experienced by the plaintiff first-hand. In reversing the district court’s ruling, the Fourth Circuit held that evidence of how others perceive the work environment is relevant because it can support a plaintiff’s claims that the work environment is hostile. Though not cited by the Court of Appeals, this decision is in line with Sprint v. Mendelsohn, where the U.S. Supreme Court ruled that, in the trial of an employment discrimination claim, the testimony of other employees who claim to have been subject to discrimination may be admissible, depending on the facts of the case. To learn more about the Supreme Court’s decision, see our prior E-lert.

New Jersey Paid Family Leave. Pursuant to New Jersey's Temporary Disability Benefits Law, beginning July 1, 2009, eligible employees are entitled to receive up to six weeks of paid leave to bond with a newborn or newly adopted child or to care for a domestic or civil union partner, child, spouse, or parent with a serious health condition. If the employer is covered by the Unemployment Compensation Law, then its employees are covered under the new leave law. To ensure compliance with the new law, New Jersey employers must:

• On or before December 15, 2008, post in each workplace and provide to each employee a copy of the Family Leave Insurance Poster. Employers must also provide a copy of the poster when an employee requests leave pursuant to the Act; at the time of an employee's hire; and whenever an employee requests a copy.

• Choose whether they will participate in the State Plan or a Private Plan .

  o Under the State Plan, employers must begin making payroll deductions for family leave insurance benefits on January 1, 2009.

  o If the employer chooses a Private Plan (either self-insured or through an insurance policy), it must obtain approval of the plan from the Division of Temporary Disability Insurance. The employer must also obtain consent from a majority of its employees by written election to make plan contributions through payroll deductions. The amount of the deduction under a Private Plan shall not exceed the contribution that would be paid under the State Plan.

The New Jersey Department of Labor and Workforce Development, has issued a fact sheet that addresses frequently asked questions regarding this law .

Intermittent FMLA Leave. The Court of Appeals for the Sixth Circuit recently held that eligibility to take FMLA leave terminates when the controlling FMLA leave year ends, and that employees must be eligible anew for FMLA leave for the subsequent FMLA leave year. In Davis v. Michigan Bell Telephone Co., the plaintiff, who suffered from depression, requested FMLA leave on several occasions from 1999 through 2004, but was denied because she was not eligible for FMLA leave (she had not worked 1,250 hours in the year preceding any request). In September 2004, plaintiff became eligible for FMLA leave, and the employer approved her request for intermittent FMLA leave. On December 13, 2004, plaintiff went on leave that continued through January 2005. The employer calculated its twelve-month FMLA period on a calendar year basis. The employer re-evaluated plaintiff’s FMLA eligibility as of January 2005 and determined that she was not eligible for leave as she had not worked 1,250 hours in the preceding year. The absences in January were, thus, unexcused and she was terminated. The plaintiff sued and the employer was granted summary judgment. In affirming the trial court’s decision, the Sixth Circuit held that a period of intermittent leave does not carry over into a new FMLA leave year unless the employee remains eligible for FMLA leave. Employers should diligently monitor the hours worked by employees on FMLA leave, especially intermittent leave, to ensure that they remain eligible when a new FMLA year begins.

Mandatory Subjects of Bargaining. In UNITE HERE v. NLRB, the Court of Appeals for the Second Circuit held that an employer's one time stock award to its employees was a gift and not subject to mandatory bargaining. After a successful transition from a privately held company to a public company, the employer gave 100 shares of company stock to every full time employee with at least six months of service. The shares were initially awarded as stock units, which would be converted to shares of stock so long as the worker remained a full time employee for six months following the award. The company never bargained, nor sought to bargain, with the union over the stock award. The union filed an unfair labor practice charge alleging the employer should have provided the union with notice and an opportunity to bargain before issuing the stock award. The Court of Appeals upheld the National Labor Relations Board's ruling against the union, holding that the stock award bore an insufficient connection to the employees' performance, wages, or any other employment related factor. As such, the stock award was properly classified as a gift and not subject to mandatory bargaining.

TOP TIP

Frequent Salary Adjustment May Destroy an Overtime Exemption

Over the past few years, collective action wage and hour claims have exploded, resulting in numerous high-profile, multi-million dollar awards. A recent case serves as a reminder that employers must be careful when adjusting an exempt employee’s salary. In Archuleta v. Wal-Mart Stores, Inc., a class of 573 pharmacists sued alleging they were entitled to overtime. The employer paid the plaintiffs a salary based upon the number of hours each employee agreed to work each week. If the employee worked less hours, his or her salary remained the same. If the employee worked more hours, however, he or she was paid a prorated hourly amount to compensate for the additional hours. The employees claimed that, because of the frequency with which the employer changed their base salaries, they were effectively hourly employees entitled to overtime compensation.

In reviewing the employees’ claims, the Court of Appeals for the Tenth Circuit upheld the district court’s dismissal as to 571 plaintiffs because the changes in their base salaries were infrequent. With respect to the two remaining plaintiffs, however, the Court of Appeals found that their salaries and base hours had been changed approximately seventeen times in a nine-month period. The frequency with which their salaries and hours had been changed was enough to necessitate a trial to determine whether the employer, in effect, paid them as hourly employees.

Employers typically pay close attention when first classifying employees as exempt or non-exempt. This case, however, serves as a reminder that employers have an ongoing duty to make sure appropriate standards are followed so as to not risk losing the exemption. Thus, managers at all levels must understand that frequent changes to an employee’s salary can destroy an exemption.

For greater clarification of any of these issues, you may contact any Shawe Rosenthal attorney.

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