We told you to expect new content – and you got it! If you haven’t had the chance to download our free investigation tool kit, check it out now in the right margin.

We told you to expect new features and new ways to connect with us – and here’s the first of our exciting new features!  Today, we are launching a regular column that we hope you will find fun and informative.  Check out Vanessa’s Views for a unique perspective on employment issues by clicking in the box above.  We hope you enjoy it, and invite you to tell us what you think.

This is the question I asked myself when I was approached to write this column.  Okay, I don’t actually think in rhyme – most of the time.  But seriously, why are “Vanessa’s Views” better than anyone else’s here on the Employment Essentials blog team?  The easy answer is, “They’re not.”  What I do have going for me, though, is the prism through which I view the world around me.

I’ve heard that everything you ever needed to learn, you learned in kindergarten.  Well, I’ve learned it through motherhood.  I find a lot of parallels between employment law and raising my boys.  For example, I recently put them on the payroll here at home.  Perhaps not surprisingly, I’ve noticed that the issue of wages is a really hot topic with my workforce of three.  My middle son in particular is committed to earning some dough (he actually walked in the door from school the other day and opened the dishwasher to see if it needed unloading).  To reward his initiative, I’ve ordered the current object of his obsession, and he’s working off the debt.  We keep track on a white board.

In West Virginia, wage advances can be a tricky proposition for employers.  While it seems only fair that employee advances can be deducted from their pay per a “handshake agreement,” the truth is far from it.  All employers who want to deduct an amount owed by an employee from that employee’s wages must have a very specific, written authorization.  Employers commonly have policies or practices that require employee payment for uniforms or for damage done to (or loss of) tools, equipment, or company vehicles.  Some employers may allow personal charges on a company credit card.  Others may advance wages to employees in times of financial crunch.  A simple signed I.O.U. or a handshake will not protect an employer when it seeks repayment for these types of debts.

The West Virginia Wage Payment and Collection Act prohibits employers from withholding wages without a proper authorization.  The West Virginia Division of Labor has helpfully provided the appropriate form and instructions at its website:  www.wvlabor.com.  The form should be strictly followed because the penalties are stiff.  Any employer who fails to pay wages without the proper authorization must repay the amount withheld plus triple that amount as punishment for the violation.  If the employee gets a lawyer involved, the employer has to pay for that as well.

While I’m going to take my chances with my ten-year old (good thing I’m his attorney), you as an employer should not.  If you have any questions with regard to the propriety of a wage deduction, make the call to your counsel – in my view, it’s cheaper in the long run.

All U.S. employers are required to comply with the federal regulations requiring verification of the employment eligibility of all workers. Verification is made by having every employee complete a Form I-9 (Employment Eligibility Verification Form).  Failure to complete the process can result in fines levied against an employer, and in cases involving willful refusal to comply, criminal charges can be brought against the individual(s) within the company responsible for compliance.

In the past, Immigration and Customs Enforcement (or ICE, formerly known as the INS) limited its enforcement sanctions to relatively small fines; however, this is no longer the case.  Under the Obama administration, the ICE has established a practice of significantly increasing the number of I-9 audits performed and of levying substantial fines on companies that fail to comply with federal regulations.  According to testimony provided by Secretary Napolitano to a U.S. House of Representatives Committee, since 2009, the ICE has conducted more than 6,000 I-9 audits of U.S. employers and issued more than $75 million in fines.  Therefore, the risks for non-compliance are potentially costly.

Answering the Five Big Questions (Who, What, When, How & Where) To Form I-9 Compliance

Who needs to complete a Form I-9? – To remain in compliance with the federal regulations, all employees are required to complete a Form I-9 and provide eligibility documentation, no matter how short the term of employment.  If an employee is going to be paid, even if only for one day of work, an employer must complete the form and verify the worker’s documents.  This includes both regular and temporary personnel who are to be given W-2 forms at the end of the year as well as “day workers” who are paid immediately.  Only independent contractors are exempt from the requirement of completing a Form I-9.

What documents can be used to verify employment eligibility? – Employers may not specify which documents or combination of documents an employee submits to comply with employment eligibility requirements.  Rather, an employer must accept any lawful document or combination of documents specified on the Form I-9.  It is the responsibility of the person completing the Form I-9 on behalf of the employer to confirm that the documents presented match the employee.  It is important that the reviewer record all file number(s) and validity period information shown on documents provided by the employee.

When must an employee complete a Form I-9? – Section 1 (Employee Information and Verification) of Form I-9 must be executed on the day that an employee begins work.  In this section, the employee declares whether he or she is a U.S. citizen, lawful permanent resident, or nonimmigrant authorized to accept employment.  The employee MUST execute and sign this portion of the form BEFORE starting work.  The remainder of the form (Section 2) must be executed and signed within three (3) business days of the start of the worker’s employment with the employer. 

How Does An Employer Complete the I-9 Process? – Section 2 (Employer Review and Verification) of the Form I-9 can be completed by a HR Representative or the on-site person responsible for management of the location where the new employee is assigned.  The designated company representative must personally review and verify the documents presented by the worker to comply with Section 2 of the form within three business days of the date of hire.  One exception to this rule would be for employees who are expected to work less than three days, in those situations Section 2 must be completed on the date of hire. 

Where Should Form I-9 Documents Be Kept? – It is recommended by the U.S. Citizenship and Immigration Service (USCIS) that employers keep completed Form I-9s separated from employee’s regular personnel file.  Further, forms for terminated employees should be kept in a separate file from active employees.

The USCIS does not provide a definitive answer on the question often asked, which is “should I make a copy of the documentation presented by the employee to keep in the file?” Therefore, it is up to the employer to decide if copies are made and maintained in the I-9 Folder.  However, consistency is vital.  Should copies be made of the documents provided by one employee, it is required that they be made for all employees. 

A Bonus “W”:  When Should Form I-9s Be Discarded? – For former employees, the employer should destroy all I-9s when the present date is more than three years since the date an employee was hired and one year from the date of termination of employment. 

Some Last Thoughts 

Given the increased number of audits being performed by the ICE, it is recommended that all employers establish an I-9 Compliance Plan and complete a review of their I-9 files every six months to assure that records are up-to-date.  This review should include verifying that forms are completed for all employees, required information is current (particularly checking dates of expiring work visas) and forms for terminated employees are purged from the files.  The establishment of a plan and review process prior to an audit request from the government may go a long way in reducing any potential fines or criminal prosecutions that can be levied if violations are found.

Lastly, if a Notice of Inspection or Audit Request is received, it is recommended that you notify counsel as soon as possible, given the potential for substantial fines and/or criminal charges.   It is critical that all documents gathered in response to the Notice are reviewed thoroughly, are well-organized, and are presented in the best light possible.

To all our Employment Essentials readers, do we have a gift for you! Over the next few months, the EE blog team will be rolling out several new features that we hope you will enjoy. Today marks the start of those efforts, where we celebrate Valentine’s Day with a link to a free sexual harassment investigative toolkit in the right margin. Download the PDF today, because this content will be available on our blog for only a short time.  Better still, keep coming back regularly, because more new features on our blog are right around the corner!

Late last year, the Equal Employment Opportunity Commission (EEOC) approved a draft final regulation which everyone in the employer community should know about.

Specifically, the EEOC defined the scope of the “reasonable factors other than age” (RFOA) defense under the Age Discrimination and Employment Act (ADEA).  Believe it or not, a revision of this regulation – found at 29 CFR § 1625.7 – has been in the works since 2008.

Initially, on March 31, 2008, the EEOC issued a notice of proposed rulemaking (NPRM) to amend § 1625.7 primarily in response to the Supreme Court’s decision in Smith v. City of Jackson, 544 U.S. 228 (2005).  In Smith, the Supreme Court held that the ADEA authorizes recovery for disparate-impact claims of age discrimination.  In other words, in addition to protecting workers against individualized age discrimination (i.e., disparate treatment), the Act also prohibits employers from implementing seemingly age-neutral employment practices that disproportionately affect workers 40 and over.   The Court in Smith also determined that an employer may escape liability in a disparate impact claim if it can be shown that the employment practice at issue was based on “reasonable factors other than age” (RFOA).

The U.S. Supreme Court’s reliance in Smith on the “reasonable factors other than age” test was a significant change in the law.   Previously, the more difficult “business necessity” test was used to determine the lawfulness of a neutral employment practice that disproportionately impacted older workers, as it was and still is with Title VII claims for disparate impact discrimination based on race, gender, etc.  Therefore, at the time of its initial proposed rulemaking in 2008, the EEOC looked to clarify the applicability of the RFOA standard, and clarify the fact that it would be an affirmative defense the employer must prove.  In the process of that rulemaking, however, the EEOC determined that it should provide further guidance on the meaning of the RFOA defense.  Accordingly, the EEOC issued a second NPRM on February 18, 2010 for that purpose.

By the time November, 2011 rolled around, the EEOC finally finished its work on this, and its proposed regulation included several noteworthy provisions.  First, it emphasized the need for an individualized, case-by-case approach to determining whether an employment practice is based on “reasonable factors other an age”.  It also set forth a non-exhaustive list of factors relevant to determining whether an employment practice is “reasonable,” including whether the practice is a common business practice, the extent to which the employer took steps to assess and ameliorate the adverse impact on older workers, and the availability of other ways for the employer to achieve its goals that involve less of a disparate impact on older workers.

Additionally, the proposed regulation provided a list of factors relevant to determining whether an employment practice is based on a factor “other than age,” including the extent to which the employer gave supervisors unchecked discretion to assess employees subjectively, the extent to which supervisors were asked to evaluate employees based on factors known to be subject to age-based stereotypes, and the extent to which supervisors were given guidance or training about how to apply the factors to avoid discrimination.

However, perhaps the most important part of the proposed rule for employers to be aware of is how the EEOC defines “reasonable.”  Interestingly, the EEOC turned to tort law, explaining that a “reasonable factor” is one is that is objectively reasonable when viewed from the position of a prudent employer mindful of its responsibilities under the ADEA under like circumstances.  The EEOC instructs in its proposed rule that the determination of reasonableness requires considerations of what an employer knew or should have known about an employment practice’s impact on older workers.  According to the EEOC, an employer cannot escape liability in a disparate impact claim simply by claiming that it lacked knowledge about the impact of its policy on older workers.

In effect, this proposed new rule imposes a duty on employers to assess and measure the impact of employment practices on older workers before implementing them.  Employers should keep this obligation in mind, especially when implementing practices and policies that harm significant numbers of employees, such as workforce reductions.

Before the rule takes effect, it must first be reviewed by the Office of Management and Budget (OMB) – an agency within the Executive Office of the President – and that is currently ongoing.  If the OMB approves the rule, the EEOC then must pass the final version of the regulation before it becomes effective.  That is likely to happen sometime in 2012.  Stay tuned.

In a decision that could render illegal several common personnel policies, the National Labor Relations Board has held that an employer violated federal law by enacting rules requiring employees to perform only work during working hours, maintain the confidentiality of personnel files, and voice complaints to their supervisors or human resources rather than to each other.  The Board also struck down workplace policy provisions that prohibited disclosure of electronic messages to unauthorized persons and prevented workers from discussing matters that were under investigation by the employer’s human resources department. 

The Board held that Hyundai America Shipping Agency, Inc., a non-union international shipping company based in Texas, had committed an unfair labor practice by “maintaining or enforcing” rules that the Board found might “reasonably tend to chill employees” in the exercise of their right to form unions, bargain collectively, and act together for their mutual aid or protection.  

The decision continues the Board’s expansion of its enforcement of federal labor law in the non-union workplace. Congress created the Board in 1935 as part of the federal law that affirmed the right of workers to form labor unions and bargain with employers.  Through the years, the Board has focused predominantly on union elections and unfair labor practice charges. 

But the reach of federal labor law extends to most non-union as well as union workplaces.  The current Board has made clear its intention to enforce its interpretation of federal labor law in workplaces throughout the nation, regardless of whether they are covered by a collective bargaining agreement.

In its Hyundai opinion, the Board upheld the administrative law judge’s decision that Hyundai’s rule prohibiting employees from “[p]erforming activities other than Company work during working hours” was “facially invalid as it is overly broad.”  The Board reasoned that employees might reasonably believe that the rule prevented them from engaging in union solicitation or activities “even during breaks and lunches.”  The phrase “working hours,” according to the ALJ’s decision adopted by the Board, “connotes periods from the beginning to the end of work shifts, periods that include the employees’ own time, such as lunch and break periods.” 

Hyundai’s policy concerning employee personnel files stated: “Any unauthorized disclosure of information from an employee’s personnel file is a ground for discipline, including discharge.”  The Board adopted the ALJ’s conclusion that this rule was “unlawful as it is written so broadly as to prohibit employees’ disclosure of any information contained in personnel files,” including information like wages or disciplinary actions which the Board has held that employees have a right to discuss.

Another of Hyundai’s policies encouraged employees to “[v]oice your complaints directly to your immediate supervisor or to human resources through our ‘open door’ policy” and reminded employees that “[c]omplaining to your fellow employees will not resolve problems.”  The Board held that this policy violated federal labor law because it prohibited employees from speaking to co-workers about terms and conditions of employment.  The ALJ had found that the policy stated more than a preference that employees not complain to one another, but rather stated a “directive” that “implicitly prohibits employees from making complaints to other employees or entities.” 

The Board also found illegal a provision of Hyundai’s Electronic Communications and Information Systems policy.  The policy, which governed employees’ use of the company’s e-mail, messaging, and telephone systems, cautioned that “employees should only disclose information or messages from these [sic] systems to authorized persons.”  The ALJ wrote, and the Board agreed, that while an employer has the right to restrict the use of its electronic communications systems to company purposes only, the policy as written “could reasonably include discussions of wage and salary information, disciplinary actions, performance evaluations, and other kinds of information that are of common concern among employees, and which they are entitled to know and discuss with each other.”  The ALJ wrote that the employer should have limited the prohibition to matters that are “truly ‘confidential,’ and which do not involve terms and conditions of employment.”  “[Hyundai’s] employees should not have to decide at their own peril what information is not lawfully subject to such a prohibition,” the ALJ wrote.

Also illegal according to the Board was Hyundai’s unwritten but routinely communicated rule prohibiting employees from discussing personnel matters that the company was investigating.  Noting that the company routinely admonished employees not to discuss investigations in every case, the ALJ wrote that, “without any individual review to determine whether such confidentiality is truly necessary,” the rule was “overly broad and discriminatory.”  The Board held that the company could warn employees not to discuss an ongoing investigation only where it has determined that testimony is in danger of being fabricated, witnesses need protection, or evidence is in danger of being destroyed.  Absent a valid reason for such concerns, the company could not lawfully order its employees to keep the investigation confidential, the Board held. 

The Board reversed the ALJ’s decision that two additional Hyundai policies were unlawful.  The ALJ had held that the company’s policies prohibiting “harmful gossip” and “negative attitude” also violated federal law.  Two of the three members of the Board disagreed, and held that it was unlikely those rules would be construed by employees as prohibiting protected, concerted activity.

Ironically, the ALJ and two members of the three-member Board voted to uphold Hyundai’s discharge of the employee at the center of the case.  The employee had “engaged in a number of actions – unrelated to any protected, concerted conduct – that significantly troubled both management and her coworkers,” the Board wrote.  The employee’s misconduct had included, among other things, giving an unauthorized refund to a customer and then lying to the company about it, encouraging other employees to “exaggerate” complaints to human resources, breaking into an apartment where two of her co-workers lived and then calling them at work to tell them where she was, and making an inappropriate sexual comment to a co-worker.  There was also evidence that the employee had used marijuana at work.  Despite all this, Board member Mark Pearce voted that her discharge was unlawful. 

The Hyundai decision gives all employers yet another set of issues to consider when reviewing personnel policies for legal compliance.  It serves as a particularly acute reminder to non-union employers who may never have considered how federal labor law might apply in their workplaces. 

Many common personnel policies, including most policies that require or even encourage employees to maintain confidentiality about personnel-related matters of any kind, are unlikely to withstand scrutiny under the analysis the Board used in this decision.  Although it is clear that the Board frowns on any policy or practice that compels confidentiality or restricts free discussion of personnel matters, the standard it will use to evaluate employer policies remains vague.  Until the Board provides more guidance about how it will analyze employer policies and offers direction about what policy provisions it finds acceptable, it will be difficult for employers to be confident their policies and practices are in compliance.  As the Board continues its current activist phase, we will continue to keep you updated.

As always, this letter is for informational purposes only, is not intended as legal advice and is not a substitute for independent legal analysis and advice on a particular issue. Please contact an attorney in Steptoe & Johnson’s Labor Department if you would like further information on these matters.

As we have discussed here many times before, the National Labor Relations Board is no stranger to headlines, and it is once again at the center of a political and constitutional showdown in Washington.

At the end of 2011, with the recess appointment of Board member Craig Becker expiring, the NLRB was down to only two members – less than the quorum (3 of 5 members) it needed to conduct official business.  Therefore, on January 4, President Obama made three appointments to the NLRB – Sharon Block, Richard Griffin, and Terence Flynn.  Making those appointments seemed simple enough, but at the Board, things are almost never uncontroversial these days. 

According to President Obama, the appointments he made were recess appointments and, therefore, did not require Senate confirmation.  That matters because – probably not surprisingly – the Senate had previously blocked confirmation of each of the three appointed Board members.

Now, every President since George Washington has exercised his constitutional power to make appointments when the Senate is in recess.  This authority stems from a provision in the United States Constitution about that process, dating back to when such appointments were more frequently necessary in the early days of the Republic because the Senate was only in session for short periods and positions needed to be filled.  Although the Senate is now in session for a majority of the year, presidents from both political parties have continued to use recess appointments over the years to appoint controversial figures who otherwise would not be confirmed by the Senate – such as in this case.

Not surprisingly, Republicans and pro-business groups have argued that President Obama’s “recess” appointments in January were invalid because the Senate was not in recess when the appointments were made and, in fact, held pro-forma sessions every three days during the Senate’s usual holiday break in order to keep session open.  Therefore, according to these groups, the President’s Board appointments must be subject to Senate confirmation before they can be valid.  The key question then is whether the Senate was in recess within the meaning of the U.S. Constitution when the appointments were made?

This issue will likely be decided by the courts, inasmuch as the first lawsuit has been filed by the National Federation of Independent Business (and others) to block the appointments.  While the issue will not be resolved soon and will likely be determined ultimately by the United States Supreme Court, the matter is significant because if the appointments are later found to be invalid, then the decisions and regulations passed by the NLRB in the interim may be null and void.

Of course, with the Supreme Court already smacking the Board once about 18 months ago in the New Process Steel case – discussed here – for issuing a number of decisions unlawfully without having a proper quorum of members to act, it should be used to going through that process.  No matter how you look at it, though, every new dispute at the Board seems stained with an even greater layer of politics than the last one.  It is no wonder that there is so much dissatisfaction with the way Washington does business these days.

Earlier this month in a case styled Hosanna-Tabor v. EEOC, the U.S. Supreme Court handed down a significant decision for religious employers throughout the country.  For the first time, the U.S. Supreme Court recognized a ministerial exception to employment discrimination suits.  The ministerial exception bars discrimination claims by individuals in the clergy against certain religious organizations or religious educational institutions under the theory that government regulation of religion is prohibited by the First Amendment freedom of religion.

In Hosanna-Tabor, a teacher who held the title of “Minister of Religion, Commissioned” sued her employer — Hosanna-Tabor Evangelical Lutheran Church and School — when she was fired after being diagnosed with narcolepsy and missing the start of the school year.  She ultimately claimed retaliation under the ADA and the Michigan Persons with Disabilities Civil Rights Act.

Consistent with a long line of federal appellate court decisions, the U.S. Supreme Court first determined that a ministerial exception exists with regard to employment discrimination claims.  The Court then applied the exception to the teacher’s claims.

In determining that the exception applied to the claims brought by the teacher in Hosanna-Tabor, the Court considered the teacher’s title (Minister of Religion, Commissioned), the significant degree of training and the formal process of commissioning reflected by the title, the teacher’s use of the title, and the important religious functions that the teacher performed for the church.  Because the teacher was a minister within the meaning of the exception, the Court determined that the First Amendment requires dismissal of her suit against her religious employer.

Although the Court expressed no view regarding whether the ministerial exception bars actions such as those brought by employees alleging breach of contract or tortious conduct by their religious employers, the Hosanna-Tabor decision makes it clear that the ministerial exception bars an employment discrimination suit brought on behalf of a minister who is challenging her church’s decision to fire her.  The Court explained: “When a minister who has been fired sues her church alleging that her termination was discriminatory, the First Amendment has struck the balance for us.  The church must be free to choose those who will guide it on its way.”

Group health plans typically provide that when the plan pays benefits for treatment of injuries incurred as the result of a third party’s negligence, the plan is entitled to reimbursement for those payments from the proceeds of injured participant’s recovery (if any) from the third party.  In general, those kinds of provisions are enforceable under federal law, and careful drafting of precise and unambiguous language can help ensure that the plan is entitled to reimbursement even if the participant’s recovery does not fully compensate the participant for the harm suffered by the participant – that is, make the participant whole.  Further, again assuming appropriate language in the plan, the plan’s reimbursement will not be subject to reduction for a share of the participant’s attorneys’ fees.  That appears to be the state of the law in West Virginia, Ohio, and Kentucky.  Until about a month ago, it was the law in Pennsylvania as well.

On November 16, 2011, the U.S. Court of Appeals for the Third Circuit issued a ruling that might change things for plans administered in Pennsylvania, Delaware, and New Jersey:  U.S. Airways v. McCutchen, 2011 WL 5557411 (3d Cir. 2011).  McCutchen was severely injured in a “tragic car accident,” and the plan had paid medical expenses in the amount of $66,866 on his behalf.  He recovered $110,000 from third parties, 40 percent of which went to his attorneys for fees and expenses.  McCutchen’s net recovery was less that $66,000.  Under the terms of the plan, McCutchen was required to reimburse the plan for the medical expenses paid (up to the amount of the recovery), and the plan sued to enforce its rights.  The trial court ruled in favor of the plan based on the language of the plan’s subrogation provisions.  The total settlement amount — $110,000 – was, of course more than adequate to cover the plan’s claim.  Since the attorneys got paid first, however, the effect of permitting the plan to recover the entire $66,866 was that part of that recovery would have to be paid out of McCutchen’s pocket.

The court of appeals vacated the decision in favor of the plan.  In the appellate court’s view, the judgment requiring McCutchen to provide full reimbursement to the plan constituted “inappropriate and inequitable” relief.  Because the amount of the judgment exceeded the net amount of McCutchen’s third-party recovery, the court reasoned, it left him with less than full payment for his emergency medical bills, thus undermining the entire purpose of the plan.  Moreover, the court concluded, the judgment in favor of the plan amounted to a windfall for the plan. 

The court based its conclusions on the notion that general principles of equity permit the court to override the terms of the plan when justified by the “necessities of the particular case.”  That approach has not been adopted by courts elsewhere (at least not yet), and appears to conflict with the “strong preference” for adherence to the written terms of employee benefit plans.  In light of the novelty of the court’s ruling in this case, we would not be surprised if the plan were to seek rehearing from the court of appeals or consideration by the U.S. Supreme Court.

For all of our devoted readers out there, we want you to know that we’re not just content with the status quo.  Nope.  We want to be better, and to that end, we’re going to be rolling out several new things on the Employment Essentials blog in 2012, starting in February and continuing throughout the year.  While we don’t want to let the cat out of the bag early on what those are, we can tell you that a lot of what we plan to do is going to be somewhat unique in the blogosphere.  There are going to be new features, new content, and new ways for the Employment Essentials team to interact and connect with our readers and followers.  On our end, we’re very excited about these improvements, and we hope they’ll enhance your experience with us.  Keep visiting our blog regularly in 2012 as we reveal all the new ‘essentials’ you need in the world of employment, labor and HR!