Author: Gillian Flynn

A string of high-profile divorces among corporate executives have brought thewhole issue into the public eye. Recently, the wife of Ernst & Young’schief executive officer, Richard Bobrow, won access to the company’s financialdocuments during divorce proceedings–a move that would allow her lawyers todetermine Bobrow’s exact compensation. But no one requested that the files besealed, so they became a matter of public record. Suddenly, this privately ownedfirm saw its internal financial details become quite public.
    Similarly, lastyear, when former General Electric CEO Jack Welch landed in divorce court, hiswife revealed details about his cushy retirement package (which included a fancyapartment and goodies like free flowers and laundry service). The news raisedsuch ire that Welch decided to reimburse the company for its largess. The bottomline: Divorces can lead to the public airing of all sorts of corporateconfidences. Lynne Z. Gold-Biken, chair of the family law department of thePhiladelphia- based law firm Wolf, Block, Schorr and Solis-Cohen LLP, offersguidelines on how to keep a painful personal situation from becoming a problemfor the whole company.

Why did executive divorces create such problems for GE and Ernst & Young?

A corporation should never be doing anything that could embarrass it if thestockholders knew about it. It wasn’t that Jack Welch wasn’t the best CEOever, because he is. It wasn’t that he wasn’t worth every penny that theyultimately paid him. It was the form in which it was paid that was distasteful.So if they had quantified what it would cost for him to do his dry cleaning andpay for his apartment, and paid him, say, $500,000 a year more in severance,that would not have been as distasteful. Because everybody knows he made thatcompany and made his stockholders wealthy, nobody would have objected. It wasthe idea that his stockholders were paying for his dry cleaning that made itoffensive. So it wasn’t the amount of money, it was the form of it that wasembarrassing.

 

So what does HR need to keep in mind when executives divorce?

In most cases the spouses don’t know as much as Mrs. Welch knew. But theylearn everything there is to know in the process called discovery. There shouldbe an agreement that any information given to a spouse [during discovery] isgiven under a confidentiality agreement, so it can only be used in litigation.What you do in a discovery process is you say, I’m giving this information toyou in order for you to be on an equal playing field, so we can figure out howto whack up our property. Not so you can turn me into the IRS, embarrass me inpublic, or use it in the press.

 

And is there advice HR could give execs who are in the middle of a divorce?

Nobody should just turn over anything–and the corporation should take thatposition. You want to get divorced? Too bad, but before you give out anycorporate information, you make sure that whoever gets it can only use it forthe purposes of litigation–no other purpose. I do it all the time: You want theinformation? Sign the confidentiality statement that says you’re only using itfor litigation. I’m not turning over stuff otherwise.

 

At what point should the confidentiality agreement be submitted?

It’s not a bad idea when you [hire] a corporate executive to have thespouse immediately sign these statements, saying: “Any information you learnabout the corporation will not be used to hurt the corporation.” The variouslegal departments ought to be looking into the possibility [of theseagreements].

 

Can you make the spousal agreement be a prerequisite for the executive’shire?

Your company’s legal departments should be looking into what your statewill permit under these circumstances. I can’t speak for every state. But as acorporate lawyer, I would sure want to know that my corporate secrets are notgoing to go out the door. People learn things that can really hurt acorporation. It’s like if you’re a player on a football team and you learnall the plays, when you go over to another football team, can you use all that?This is not a game, this is serious stuff. You don’t want somebody leaving thecompany and taking corporate secrets, so you make them sign statements that theywon’t get hired by a rival for two years–but it also covers their ability toshare the information. Well, their spouses should share in that too–these guyscould be talking in their sleep.

 

What should the agreement look like–is it a basic confidentiality agreement?

It must make it clear that the spouses can’t reveal any corporate secretsor any inside information. Obviously, each one has got to be drafted for thecircumstance. In some cases it will cover corporate secrets, in other cases itwill cover financial information. You can’t use a boilerplate confidentialitystatement. It’s got to be specific to the facts of the case. It’s got to betailored.

 

Why is that?

Do you want to give the same prescription every time anybody’s got a cold?If it’s a cola company, you’re going to say: “If you learn the formula,you can’t reveal it.” If it’s an investment firm, you’re going to say:”If you learn the name of clients and contacts, you can’t reveal them.”

 

Any final advice?

Corporate America needs to be aware of the impact of divorce on their bottomline. Just as abuse has an impact on the bottom line of a corporation, so doesdivorce. The HR department ought to be providing communication skills and[similar] courses for executives so they can make their marriages better andstronger. Because it really is in the interest of the corporation to keepmarriages together. Divorce costs them a lot of money, for many reasons: time,productivity, bad publicity. But I’m very serious about these communicationskills. When people start getting in trouble with their partners, if they knowthere’s a place, as part of their perks, that they can go to for [counselingand help], it would cut down on the divorce rate, which would obviously cut downon this problem.

 The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.

Workforce, March 2003, p. 64 — Subscribe Now!

The clock is officially ticking. If your company has at least 50 employees,and you offer health benefits to them, you’re required to comply with HIPAA,the Health Insurance Portability and Accountability Act of 1996. On April 14,2003, HIPAA’s privacy rules regarding Protected Health Information go into effect–and if your companyisn’t well on its way to compliance, HR should jump-start the effort. John A.Knapp, a senior member of the health law group at Cozen O’Connor inPhiladelphia, offers advice.

What should HR professionals know about HIPAA?

It came out of the failed health-care reform effort of the Clintonadministration. In the early 1990s there was a lot of concern about people whowere restrained in moving from one employer to another because they were afraidof losing their health insurance due to pre-existing conditions. So although theoverall health-reform efforts failed, one of the things that came out of thoseefforts was this bill, which was aimed at allowing the portability of healthinsurance by preventing insurers from imposing requirements about pre-existingconditions when you move from one employer to another. At the time, employerswere concerned that this was going to lead to an increase in health insurancecosts. So there was an effort made to reduce costs in the health-care system asa way of offsetting the increased costs caused by these portabilityrequirements.

 

How was this done?

People quickly identified the amount of administrative expense throughout thehealth-care system caused by inefficient communications. For example, there aremore than 400 different formats in use throughout the country by whichhealth-care providers and insurers exchange information related to servicesprovided and payments made. So HIPAA contained within it a set of provisionsunder its administrative simplification section. The goal was to simplify theprocess by which health-care providers and health-care payors communicate witheach other. This will have a very dramatic effect. It’s going to standardizein one electronic format all of the information that gets exchanged. Now,Congress recognized that this was going to result in enhanced flow ofindividually identifiable health information in electronic format. There wasconcern that this would increase the risk of private health information beingimproperly disclosed. So part of the administrative simplification rules dealwith protective measures that health-care providers and payors have to take inorder to protect the privacy and security of this individually identifiablehealth information.

 

What do employers need to do regarding the privacy and security of healthinformation?

Since the plan has to deal with protected health information, HIPAA insiststhere be a firewall established. That can be established physically through useof things like security measures, computer passwords, firewalls, etc. Or it canbe implemented through policies, procedures, and training for people who handleprotected health information, to ensure that the HIPAA requirements areunderstood and followed. Organizations that have any form of self-insurance arerequired to appoint a privacy officer; oftentimes the privacy officer for theplan is going to be the head of HR or whoever oversees the plan.

 

What should the overall goal be?

The idea is to create a firewall between the plan and the employer, soprotected health information that the plan has access to is not communicated tothe employer for employment-related purposes. For example, someone who operatesthe plan might become aware that an employee is receiving health-care servicesfor cancer or a mental-health problem. That information cannot be communicatedto the employer because it might have an impact on a promotion decision orcompensation decision. So employers must establish the necessary barriers orfirewalls between the plan and the employer. The degree of these firewalls andpolicies and procedures varies based on whether the plan is self-insured. If anemployer offers health benefits to its employees but does so exclusively throughinsured products (you sign up through Blue Shield or Aetna) then there are stillHIPAA requirements, but they’re substantially less. But if the employer isself-insured in full or in part, even though they might use Blue Shield as athird-party administrator, then there are much broader requirements. If youoffer cafeteria plans that have health-benefit components, that’s a form ofself-insurance.

 

What else do the privacy rules require?

Employers are required to amend their ERISA plan to ensure that the employeracknowledges and respects this firewall that has to be created between the planand the employer. So there are going to be changes required to the ERISA plandocuments. Those plan documents, the amendment, may have to be filed with theIRS.

 

What about the security component of HIPAA?

The security rules are not yet out in final form [as of press time, they wereexpected in December]. They won’t become effective for two years after they’rereleased. So companies don’t have to worry about security, but they have tostart thinking about how to protect any electronically stored or transmittedinformation from improper use or disclosure. This may be as simple as physicallylimiting who has access to that information by the use of passwords, orestablishing that only certain computers allow access to this information. Or itcan be more sophisticated, with electronic firewalls and things of this nature.

 

Don’t employers also have to comply with HIPAA transaction standards?

If an employer’s health plan communicates with an insurer or third-partyadministrator electronically, then that communication must be done in accordancewith HIPAA’s standard electronic formats. So you’ve got to get your ISpeople involved and communicate with your insurers and find out how you need tonow interface with them. Those standards don’t go into effect until October2003, but you’re required to begin testing to make sure you’re on track forthat deadline by April 2003.

 

Any final thoughts on the privacy rules?

Small group health plans–those plans with less than $5 million per year ineither total health-care premiums or benefits paid out—have an additional yearto comply with the privacy rule, so they have until April 2004. As for the restof employers, most group health plans require some form of assistance fromlawyers, consultants, or others, to ensure they’re compliant by April 14,2003. If employers have not yet begun these compliance efforts, they shouldbegin them as quickly as possible, because there are penalties that, althoughthey’re likely to be moderate, could in some cases be as high as 10 years inprison and $250,000 in fines.

 

The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.

Workforce, January 2003, p. 64 — Subscribe Now!

Training has been thought of as HR’s great protector. It is commonly believed that if you train your employees, the company is safe from lawsuits. But if training is ineffective, the company may find itself in trouble. Even correct training doesn’t completely safeguard a company from legal peril. Paul Salvatore, an employment-law attorney at the New York City office of Proskauer Rose, tells HR how to best protect against lawsuits in the training arena.

First of all, does training help a company avoid liability for accidents and mistakes on the part of an employee?

The general rule is that employers are better off and better able to insulate themselves from liability if they provide proper training to employees in a whole variety of areas. For example: A bus driver who went through a training course made an error, and the question is whether an employer is liable. The fact that the company offered training is only going to be a positive factor — as long as the training is appropriate.

What if it turns out that the training wasn’t proper?

It’s a negligence issue. It’s going to fall in the doctrine of negligent hiring, or negligent retention, or negligent supervision. It’s a negligence theory that’s going to be brought against the employer. It will be based on the actions of the employee, and whether the employer contributed to the injury by failing to properly train in a way that would have prevented the accident.

So the training will be well scrutinized for correctness?

Yes, to determine to what degree the training was the cause of the accident or injury in question.

And if the employer is found guilty of negligence?

These are jury cases, so the jury could award damages. The more improper or incomplete the training is determined to be, the higher the degree of the employer’s negligence.

Does it matter if the training is provided by an outside vendor versus being conducted internally by the company?

It matters to some degree, but the company will probably still be liable. In the end, the company is the one providing the training. It’s delegating the task of training to an agent, which is representing it by doing the training. So it’s very important that employers are careful about the vendors they choose.

How much culpability will the company have if a vendor’s training is ineffective?

It will be very fact-specific. It’s going to depend on exactly what is being alleged. So there may be a situation in which the person who’s injured is suing both the employer and the trainer together. The jury would then have to apportion liability between the two of them. In some cases, the injured person may just sue the employer, and the employer, if it feels that the training company was negligent, may bring them in as a third-party defendant.

What if the company can prove it did its best to find a good vendor? Does it have an advantage over a company that just hired the first vendor it found?

Absolutely. The level of care you exercise and are able to show that you exercised in all aspects of training employees is very important, and that includes the selection of the vendor.

Does that go for training on sexual harassment, an area that’s more interpretive than how to drive a bus?

There are actual court cases where some trainer has gone crazy and has people calling each other racial epithets or has women imitating men’s private parts — in the training. There have been cases that have found actionable claims from such training. Or someone got terminated and they claim the training indicates a sexually charged, hostile environment that existed at the company. In this area particularly, you have to be very careful about who you hire and who your vendors are. It’s a lot more subjective and touchy-feely, and there are a lot more sensitivities than in how you operate the clutch on your vehicle.

Back to basic training: How often does a company have to train?

It’s often alleged by a plaintiff that the training wasn’t frequent enough. How often you do it depends on the type of training. Some training is regulated by OSHA or mandated by the Department of Transportation. So certainly you want to do the minimum that’s prescribed by any regulatory body, or is viewed as best practices in your industry.

What if there is no norm governing the frequency of training?

In areas where there are no norms, you want to make sure everyone is trained on a relatively consistent and periodic basis — so that anytime someone is involved in an incident, they will have received the training. Training needs to be part of a routine that begins with orientation and continues on a relatively periodic basis. Many times, training isn’t done often enough because it’s a hassle. You need to get a lot of people together at the same time, you need to get them all coffee, stuff like that. One of the great things employers can do today is utilize online learning. That enables employers to reach a whole bunch of people without them having to leave home or desktop. You don’t have to worry about scheduling — and they can provide their own coffee.

How does HR know for sure that its training works?

You test, and you record the results. That way, if there’s trouble, you can say, we trained them — and they passed! It’s like: What’s a mother to do? But you’ve done the right thing. In the employment-law area, there’s a growing trend in the courts that protects employers that have done the right thing.

Workforce, February 2002, pp. 70-71 — Subscribe Now!

 

Pre-employment testing seems like a pretty smart idea. Personality and aptitude tests offer useful insights into whether the person sitting across the desk from you will be a good fit with the company — and be able to do the job. But tests aren’t infallible. Improperly handled, they can leave your company vulnerable to lawsuits. Teresa Butler, a partner in the Atlanta office of Littler Mendelson, offers this examination of testing.

What is the first area of concern in testing?

First of all, aptitude testing is almost in a different bucket than personality testing. If you’re literally just testing the person on what they’re going to be required to do in the job, you’re fine. The personality testing is always more of a gray area. A lot of the personality tests were developed as assessment tools for the purpose of assisting people in what they should choose for their careers, or if they’re in counseling, how they might adjust the way they communicate or perceive others. They weren’t necessarily meant for employers to use in deciding how to slot people. Of course, some are developed and marketed that way because there’s a lot of money to be made. I can’t express a professional opinion on whether or not they work; I can only say they’re easily subject to legal challenge.

What should employers watch out for?

First and foremost from a legal standpoint, you have to make sure that the entity providing the testing has gone through the EEOC validation procedures. That means whatever you’re measuring has to be job related — that’s important under Title VII standards. Second, the test has to [work] without having a disparate impact on minorities, females, people with backgrounds or characteristics protected under the law. If it does have a disparate impact (meaning that minorities or women don’t perform as well or have results as positive as white males), you need to have a compelling reason why, which typically you’re not going to have.

How can a test have a disparate impact on women and minorities?

The language used in the tests can lead to disparate impact [because] individuals with different cultures, backgrounds, education, national origins might interpret that language differently. That’s when you get into issues that can be very thorny in terms of litigation. People can easily challenge these tests in that fashion. Then the employer and the testing entity must defend the testing tool and show what procedures they went through to ensure that it meets those two EEOC guidelines I mentioned before.

In a disparate-impact case, does the employer become co-defendant with the test provider?

In a discrimination suit, it’s going to be just the employer, because that’s the only party that can legitimately be sued under Title VII. Under federal and most state laws, you’re only going to be able to sue the employer or prospective employer.

An invasion-of-privacy claim is also a possibility with these tests. How?

It’s been a while since I’ve seen a test that really concerned me on this point, but I’ve seen tests where the questions can be very personal and very embarrassing for a person to answer. For instance, what their dreams are or what their sexual preferences are and what they think about certain kinds of sexual practices and what their religious beliefs are. The argument of most of the testing tools that provide that kind of questioning is that specific answers to specific questions are not going to be provided to the employer.

But it’s still a problem?

Arguably the testee still has a cause of action, because the company is requiring the individual to respond to very personal questions if they want the promotion or want the job. It’s also possible that the result of the test might reveal how you answered certain questions. Again, it depends on the quality of the tool. A good-quality testing tool a) will not ask incredibly offensive questions and b) would not reveal through the results how people answered specific questions. I’ve seen personality tests that ask questions related to ethical judgments — those are fine. The problem is when you’re getting into the types of assessment tools that might be used by a psychologist to evaluate a patient. To require people to answer such potentially offensive questions, even if the employer is not going to see it, I think can lead to real trouble.

Legally speaking, how much weight should HR place on test results?

Certainly an employer should not rely solely on a test. It should just be part of the overall review of a person and used to corroborate other information that you have about the individual. It should not be the driving force. It’s good to be able to show that in every hiring case, testing was only a factor in hiring, that the employer always had other information that made that person the more qualified individual. Because if it is the deciding factor and that happens frequently enough, you could get yourself in trouble.

If a test reveals that the candidate may be emotionally unstable, but you hire the person anyway, and he or she becomes violent in the workplace — is the company then liable?

If you have test results that indicate this person had anger-management problems, then certainly that can be used against you. It wouldn’t be a slam dunk, but it would certainly stack up as potential evidence that the employer had reason to know this individual had a tendency toward violent behavior. With testing, you need to think about what you’re asking for and whether you really want the information. If you’re getting the information, you’re going to need to use it. If you have adverse information about the individual that might indicate they could cause harm to others and you hire them anyway, then the fact that you received that information could become an issue.

What should HR look for in a test?

Finding a good test is like hiring a lawyer. You need to check on the qualifications and credentials. It’s a good idea to get references from other employers on how the test worked, and also any legal challenges they might have received. You should ask the testing entity too — has this been legally challenged anywhere, and if so, what was the outcome? Employers need to thoroughly check out the testing entity. Don’t just look at the glossy brochure and get all impressed with how pretty it looks; ask questions. Any reputable testing entity would welcome this and be ready to answer those kinds of questions. It’s even better if they proactively discuss the EEOC validation procedures and whether their product has been legally challenged, because that shows they know what they’re doing and know the issues and have handled them effectively.

The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.

Workforce, June 2002, pp. 92-94 — Subscribe Now!

Copyright 2002 Marc Tyler Nobleman

Most companies are already recruiting online, posting jobs and acceptingrésumés on the Internet, and corresponding with job candidates by e-mail. Inthe coming years, digital recruiting and hiring are expected to continue theirexplosive growth. By 2008, the Department of Labor predicts, employers willspend 10 times as much on electronic recruiting as they do today. But withe-recruiting comes many new legal liabilities. Joseph Beachboard, a partner inthe labor and employment law firm Ogletree, Deakins, Nash, Smoak & Stewart,identifies the five biggest e-recruiting risks and what you can do to safeguardyour company.

What’s the first issue that arises when a company institutes an onlinerecruiting system?

One of the legal risks is that employers, feeling overwhelmed by the amountof résumés they get, turn to résumé-screening software. That way they don’thave to look at every single résumé that comes in; the screening softwarehelps select the best applicants [by screening for certain words or phrases].Well, that approach only works as well as the software, and there’s asignificant legal risk in making a poor selection in your résumé-screeningsoftware.

What can happen with the wrong software?

Depending on how it sorts, it may exclude groups of people from variousprotected categories. There was a lawsuit against Walt Disney World, allegingthat their screening software created a sort of reverse selection process.Rather than deleting résumés, it picked out the ones that had the words orphrases the company was looking for. The argument was that the words used by thescreening software were not necessarily the same words that members of theAfrican-American community would use to convey information. They might very wellbe qualified for that job, but they didn’t use the terms that thisrésumé-screening software was using, because they were terms that wouldprimarily be used by Caucasians. The case was settled relatively quickly. There’svery little information on what the words were.

What’s the second potential problem with e-recruiting?

It concerns the impact e-recruiting has on who you consider for a job andultimately hire — and how that affects the diversity of your workplace. Byusing online recruiting as a means of identifying potential employees, are youexcluding large portions of the population? For instance, there’s the argumentthat more young people use the Internet than old people. So if you relyexclusively on e-recruiting, then you’re probably going to get more youngapplicants than older applicants. There are also arguments that generally, fewerminorities than whites have computers. So you might be excluding some of thosepeople by primarily requiring that applications be done electronically. That cancreate disparate impact: certain protected groups have less chance to be hiredthan others.

And the third issue to watch out for?

You’ve got the question of who is an applicant. Many employers — if theyhave federal contracts — must answer this question in order to meet obligationsto the Office of Federal Contract Compliance Programs. These employers arerequired to track what’s called applicant flow data. They’re required tokeep an eye on who’s applying for jobs and what protected categories theseapplicants are in, and then how many of those people are actually hired forthose jobs. If you’re a federal contractor, the OFCCP will review thatinformation and make sure you’re hiring people to work on federal contractsthat reflect the general population. Even if you’re not a federal contractor,you still have to keep information about who’s applying, because you may besued for discrimination; the EEOC may come in and challenge your hiringpractices.

How does e-recruiting figure into this?

Who your applicants are and where they fall in the different protectedcategories is important information. The question is: As you get theserésumés, how can you possibly track them all? Considering that someone cansend a résumé to literally thousands of employers, it creates a very bigproblem to track who is considered to be an applicant. So that’s a huge issue.

And the fourth trouble spot?

There’s an issue with the collection of the information itself. Can youproperly comply with all the different hiring requirements that might apply inyour state, and still find yourself [in gray areas in another state]. Californialaws place a lot more limitations on the amount of information employers cancollect than might be the case in Texas. So if you’re collecting informationfrom someone in California, and you’re based in Texas, but you’re doing itall electronically, whose law governs? Could you be collecting information fromthat California person that would be lawful if you were both in Texas, but maynot be in California?

What’s the final area of concern?

In the electronic context, there’s more risk of getting yourself intotrouble by making a comment or asking something that you wouldn’t in thehard-paper format. If you’re advertising in a newspaper, you have X amount ofcharacters, so you’re pretty succinct. On Web sites, you can go into as muchdetail as you want. You can put pages of information up there about who would bethe best candidate. That can be good for the applicant, but depending on thenature of the information, can also come back and be pointed to as evidence ofdiscrimination.

The second component of that is the general informality that exists online.If an HR person starts engaging in an e-mail correspondence with an applicant,people aren’t as careful in those e-mail discussions. They might say somethingor ask for some information that would be improper, something that may latercome back [to haunt them] when the applicant doesn’t get the job: “See, itdidn’t have anything to do with my qualifications; it was because she or helearned I was Asian or disabled or gay.”

Let’s address these problems. First, what’s your advice to an HRprofessional considering résumé-screening software?

Make a very educated decision about the right software for your company. Youshould probably involve your labor counsel to make sure you’re making theright decision and to evaluate whether that system creates any specific legalrisks.

Second, how can HR avoid disparate impact in its e-recruiting?

To begin with, it would be a mistake to abandon traditional methods ofrecruiting. When you start e-recruiting, you obviously broaden the number ofapplicants who can apply, because it’s much easier. But as we discussed, youcan limit the pool of people in protected categories: older workers andminorities, arguably. So you still have to maintain the traditional methods ofrecruiting. You also have to constantly be reviewing the results of youre-recruiting system and asking yourself: Are we drawing the right mix of peoplefor this job from the standpoint of avoiding a disparate-impact issue? You needto constantly check to make sure you’re achieving the results of creating adiverse workplace and thereby insulating yourself to some degree from liabilityand litigation.

What about the question of who is and who isn’t an applicant?

An applicant is defined by most of the federal agencies as someone who’sexpressed an interest in a job. Well, that’s pretty darn broad. You could justwalk in and say, “Wow, this looks like a nice place to work!” Now, have youjust expressed an interest and therefore become an applicant for that job? Someagencies would say yes. So you must have a very detailed system [narrowing thedefinition] that says: If you’re going to apply for a job — not just inquireabout hiring — you have to go through this application procedure, and you haveto submit something in writing that says you’re interested in a specificposition.

What else?

As part of that procedure, I think it’s important that the company maintaina dialogue with the individual — thanking them, alerting them that they’vereceived the résumé. Some employers are sending voluntary self-identificationforms electronically now. If you were governed by the OFCCP, that would be astandard part of your application procedure. But you can also design somethingthat would be sent back to you electronically, and that will help you gather andkeep that information.

What about the state-law quandary?

The most critical thing is to limit the information collected to that whichHR legitimately needs to make the hiring decision. Be circumspect in whatinformation the company is collecting. Because I don’t think any HRprofessional is going to know what the law is in all 50 states. That would beone remarkable HR person.

How should HR address the informal nature of e-recruiting?

Employers need to stick to the application procedure they draft. People tendto be a little less formal online, and it’s easy to slip away from it becauseyou’re in a hurry and just want to send a note back to this applicant. Thereare a lot of things that can go wrong, and if people don’t stick to theseprocedures, they’re going to be finding themselves in a lot of trouble downthe road.

Workforce, April 2002, pp. 70-72 — Subscribe Now!

The information contained in this article is intended toprovide useful information on the topic covered, but should not be construed aslegal advice or a legal opinion. Also remember that state laws may differ fromthe federal law.

 

As the new year begins, it’s an auspicious time to review recent changes in employment law, and to look at new workplace legislation. Last year brought significant changes in the Family and Medical Leave Act, and continued trends in the sexual harassment arena. In 2002, HR professionals should be aware of additional decisions on the FMLA, as well as crucial rulings that may affect the way employers can use mandatory arbitration. In addition, the Supreme Court will hear a case that could reshape the Americans with Disabilities Act. Maria Danaher, an employment attorney with the firm of Dickie, McCamey & Chilcote, reviews the key issues from 2001, and looks to the year ahead.

Looking at last year, what were the significant decisions?

One would be the Washington, D.C., circuit decision ruling that non-union employees are entitled to have a coworker present at an investigatory meeting. In this case, there were two guys who were trying to improve work conditions at a non-union shop. One was called into a meeting; he asked to have the other with him and the employer said no. The court ruled against the employer. That doesn’t mean that employers must inform employees that they have the right to have a coworker present at an investigatory meeting. But if the individual asks, you can’t say no-if there’s a reasonable expectation that the outcome of the meeting will include discipline. That’s important for non-union employers to note.

What was the hot legal issue for 2001?

The hot issue of 2001 was the FMLA. There were a number of circuit courts that decided issues regarding the FMLA. There was one major ruling: An employer’s mistake in granting FMLA leave to an ineligible employee doesn’t make that person eligible. In that case, an employer gave an employee FMLA leave, then found the employee had not worked for the requisite number of hours to be eligible for FMLA leave. But the employee demanded it anyway, because the employer had agreed to it. The court said no. So the courts have been using a commonsense approach in not expanding the language of the FMLA.

What were other big cases that helped interpret the FMLA?

The Seventh Circuit ruled that the right to be reinstated to employment after FMLA leave is not absolute. The court allowed a nursing-home employer to terminate an employee on her return from maternity leave because she had mismanaged her position. That’s a big issue for employers: “I’ve sent someone out on FMLA leave. When they come back, I can’t terminate them because the law requires me to keep their job open.” But in the Seventh Circuit case, there had been documentation of performance problems before the employee left. While she was out, the employer put somebody in her position who did a better job. When she came back, she was told about the complaints and offered an opportunity to resign, and she said they’d have to fire her. So they did. And when she sued them, the court ruled for the employer because there were discrepancies in the employee’s performance. It’s another tap on the shoulder to employers to understand how critical documentation is in these performance issues. The employer prevailed because it had documented her performance problems before she went on leave.

Have there been any other big issues that have been worked out in the courts in the past year?

We’re continuing on the path started by the 1999 Faragher and Ellerth sexual harassment decision: What kind of a response to an employee’s sexual harassment complaint really insulates an employer from legal liability? That’s come up in a number of circuits. The decisions are pretty consistently rational. There was a recent case in the Seventh Circuit where the court basically said: If you have managers with hiring authority and you don’t train them in the basic features of anti-discrimination law, then, in the court’s words, you are making an extraordinary mistake. So employers are understanding they need to put their managers through some kind of awareness training for how to investigate, respond, and follow up on these claims.

In 2002, it looks like the FMLA will remain an issue.

The Supreme Court will actually be looking at some FMLA cases in this term. One is Ragsdale v. Wolverine Worldwide. This concerns a DOL regulation stating that FMLA leave doesn’t start until an employer informs the employee he or she is on FMLA leave. So people were going on leave, then returning and demanding their 12 weeks of FMLA leave. They were getting chunks of medical leave they weren’t entitled to. In Ragsdale, the Eighth Circuit Court ruled that the regulation was invalid because it creates a right the statute didn’t confer. The statute only requires an employer to provide 12 weeks of unpaid leave, and under the DOL regulations, an employer can be forced to provide many more than 12 weeks. So this is the big one. It’s the case everyone’s looking at.

What is the expected outcome?

The Supreme Court is hesitant to allow a statute to be expanded-in a non-legislative manner-by the DOL. So it’s likely this Eighth Circuit Court decision will be upheld, but there’s no way to tell for sure.

Mandatory arbitration is another issue that will turn up this year, correct?

Yes, EEOC v. Waffle House will come in front of the Supreme Court. The question: Can the EEOC pursue a case on behalf of an individual who’s already agreed to arbitrate any employment claims? This is a big one for employers. “If I go through the trouble of getting my employees to sign an arbitration agreement, can the EEOC pick it up and take it to court anyway?” It really nullifies half of the benefits of having the arbitration agreement, because you still suffer the disruption and expense of the litigation you were trying to avoid. So that will be a big decision.

And finally, let’s talk about the major ADA case that will be resolved this year.

It’s huge: Toyota Motor v. Williams, about an ADA claim from a woman with carpal tunnel. It will be interesting to see whether the Supreme Court looks at this case narrowly or broadly. The narrow question is: Is carpal tunnel a disability? The broad question is: When is somebody truly disabled? The Sixth Circuit Court ruled in Williams that a woman’s carpal tunnel was sufficiently disabling to cover her under the ADA. The employer argued that to be covered by the ADA, you have to be substantially limited in a major life function-and working is a major life function. So even if I can eat, sleep, read, write, walk, if I can’t work-I’m not just unable to do one job function, but I’m unable to work-then I can be considered disabled. Toyota said the employee wasn’t unable to work. The only thing she couldn’t do was one particular job, where she had to hold brushes at shoulder level. But the court bypassed that rationale; it said that performing manual tasks is a major life activity. Even though it was only one aspect of her job, the fact that she can’t do manual tasks keeps her from performing a major life function.

So that’s a major development for employers.

That’s scary. Because that means people who aren’t necessarily disabled in a broad sense would be disabled for purposes of the ADA, if they had carpal tunnel syndrome. So the question is: What will the Supreme Court do with this? Will it deal narrowly with the Sixth Circuit’s rationale that performing manual tasks is a major life activity? Or will it rule on what it takes to include a person as disabled under the ADA? This is the one employers should keep their eyes on.

Update from January 8, 2002: After the publication of this article, the Supreme Court ruled that disabilities cannot be measured solely on the ability to do certain tasks at work. Justice Sandra Day O’Connor wrote that disabilities include “activities that are of central importance to most people’s daily lives,” such as seeing or hearing. You can get more information in the Legal Forum.

The information contained here is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion.

As the new year begins, it’s an auspicious time to review recent changes in employment law, and to look at new workplace legislation. Last year brought significant changes in the Family and Medical Leave Act, and continued trends in the sexual harassment arena. In 2002, HR professionals should be aware of additional decisions on the FMLA, as well as crucial rulings that may affect the way employers can use mandatory arbitration. In addition, the Supreme Court will hear a case that could reshape the Americans with Disabilities Act. Maria Danaher, an employment attorney with the firm of Dickie, McCamey & Chilcote, reviews the key issues from 2001, and looks to the year ahead.

Looking at last year, what were the significant decisions?

One would be the Washington, D.C., circuit decision ruling that non-union employees are entitled to have a coworker present at an investigatory meeting. In this case, there were two guys who were trying to improve work conditions at a non-union shop. One was called into a meeting; he asked to have the other with him and the employer said no. The court ruled against the employer. That doesn’t mean that employers must inform employees that they have the right to have a coworker present at an investigatory meeting. But if the individual asks, you can’t say no-if there’s a reasonable expectation that the outcome of the meeting will include discipline. That’s important for non-union employers to note.

What was the hot legal issue for 2001?

The hot issue of 2001 was the FMLA. There were a number of circuit courts that decided issues regarding the FMLA. There was one major ruling: An employer’s mistake in granting FMLA leave to an ineligible employee doesn’t make that person eligible. In that case, an employer gave an employee FMLA leave, then found the employee had not worked for the requisite number of hours to be eligible for FMLA leave. But the employee demanded it anyway, because the employer had agreed to it. The court said no. So the courts have been using a commonsense approach in not expanding the language of the FMLA.

What were other big cases that helped interpret the FMLA?

The Seventh Circuit ruled that the right to be reinstated to employment after FMLA leave is not absolute. The court allowed a nursing-home employer to terminate an employee on her return from maternity leave because she had mismanaged her position. That’s a big issue for employers: “I’ve sent someone out on FMLA leave. When they come back, I can’t terminate them because the law requires me to keep their job open.” But in the Seventh Circuit case, there had been documentation of performance problems before the employee left. While she was out, the employer put somebody in her position who did a better job. When she came back, she was told about the complaints and offered an opportunity to resign, and she said they’d have to fire her. So they did. And when she sued them, the court ruled for the employer because there were discrepancies in the employee’s performance. It’s another tap on the shoulder to employers to understand how critical documentation is in these performance issues. The employer prevailed because it had documented her performance problems before she went on leave.

Have there been any other big issues that have been worked out in the courts in the past year?

We’re continuing on the path started by the 1999 Faragher and Ellerth sexual harassment decision: What kind of a response to an employee’s sexual harassment complaint really insulates an employer from legal liability? That’s come up in a number of circuits. The decisions are pretty consistently rational. There was a recent case in the Seventh Circuit where the court basically said: If you have managers with hiring authority and you don’t train them in the basic features of anti-discrimination law, then, in the court’s words, you are making an extraordinary mistake. So employers are understanding they need to put their managers through some kind of awareness training for how to investigate, respond, and follow up on these claims.

In 2002, it looks like the FMLA will remain an issue.

The Supreme Court will actually be looking at some FMLA cases in this term. One is Ragsdale v. Wolverine Worldwide. This concerns a DOL regulation stating that FMLA leave doesn’t start until an employer informs the employee he or she is on FMLA leave. So people were going on leave, then returning and demanding their 12 weeks of FMLA leave. They were getting chunks of medical leave they weren’t entitled to. In Ragsdale, the Eighth Circuit Court ruled that the regulation was invalid because it creates a right the statute didn’t confer. The statute only requires an employer to provide 12 weeks of unpaid leave, and under the DOL regulations, an employer can be forced to provide many more than 12 weeks. So this is the big one. It’s the case everyone’s looking at.

What is the expected outcome?

The Supreme Court is hesitant to allow a statute to be expanded-in a non-legislative manner-by the DOL. So it’s likely this Eighth Circuit Court decision will be upheld, but there’s no way to tell for sure.

Mandatory arbitration is another issue that will turn up this year, correct?

Yes, EEOC v. Waffle House will come in front of the Supreme Court. The question: Can the EEOC pursue a case on behalf of an individual who’s already agreed to arbitrate any employment claims? This is a big one for employers. “If I go through the trouble of getting my employees to sign an arbitration agreement, can the EEOC pick it up and take it to court anyway?” It really nullifies half of the benefits of having the arbitration agreement, because you still suffer the disruption and expense of the litigation you were trying to avoid. So that will be a big decision.

And finally, let’s talk about the major ADA case that will be resolved this year.

It’s huge: Toyota Motor v. Williams, about an ADA claim from a woman with carpal tunnel. It will be interesting to see whether the Supreme Court looks at this case narrowly or broadly. The narrow question is: Is carpal tunnel a disability? The broad question is: When is somebody truly disabled? The Sixth Circuit Court ruled in Williams that a woman’s carpal tunnel was sufficiently disabling to cover her under the ADA. The employer argued that to be covered by the ADA, you have to be substantially limited in a major life function-and working is a major life function. So even if I can eat, sleep, read, write, walk, if I can’t work-I’m not just unable to do one job function, but I’m unable to work-then I can be considered disabled. Toyota said the employee wasn’t unable to work. The only thing she couldn’t do was one particular job, where she had to hold brushes at shoulder level. But the court bypassed that rationale; it said that performing manual tasks is a major life activity. Even though it was only one aspect of her job, the fact that she can’t do manual tasks keeps her from performing a major life function.

So that’s a major development for employers.

That’s scary. Because that means people who aren’t necessarily disabled in a broad sense would be disabled for purposes of the ADA, if they had carpal tunnel syndrome. So the question is: What will the Supreme Court do with this? Will it deal narrowly with the Sixth Circuit’s rationale that performing manual tasks is a major life activity? Or will it rule on what it takes to include a person as disabled under the ADA? This is the one employers should keep their eyes on.

Update from January 8, 2002: After the publication of this article, the Supreme Court ruled that disabilities cannot be measured solely on the ability to do certain tasks at work. Justice Sandra Day O’Connor wrote that disabilities include “activities that are of central importance to most people’s daily lives,” such as seeing or hearing. You can get more information in the Legal Forum.

The information contained here is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion.

The very phrase flexible work arrangement carries with it a feeling ofease. And the results of telecommuting and flextime sound even brighter. Companyafter company reports improved retention rates, increased productivity, andhigher morale.

    But these arrangements aren’t quite as trouble-freeas you’d imagine. They’re affected by the Fair Labor Standards Act, workers’compensation, the Occupational Safety and Health Act, and even anti-discriminationlaws. Companies that ignore these issues do so at considerable risk. Fortunately,staying on the right side of these laws isn’t overly complicated. Stick to astrict list of dos and don’ts, and you’ll find that flexible work arrangementscan work well.

First things first — getting started
    There is, of course, no law demanding that you offeryour employees flexible work arrangements. But there are laws that will determinethe wording and structure of your policy. The key thing to remember as you takeyour first step is that you must have a policy. “These arrangementsneed to be thought of as a job assignment,” says Camille Olson, a laborand employment partner in the Chicago office of Seyfarth Shaw. “There shouldbe legitimate, objective standards spelled out in a written policy about whatpositions are open to these arrangements and what are not. It should not beinformal, because it could be viewed as a reward.”

    If telecommuting and flexible work schedules are distributedlike prizes for good behavior, those employees who are left out may become disgruntled– and if they tend to be women, or people of color, they may indeed have somethingto be angry about. “Cases come up in the discrimination area,” Olsonsays, citing the example of companies that let men work flextime but not women.” Ninety percent of the time, the complaints are tied to EEO or fair-employmentpractice issues (concerning) age, sex, race, ethnicity, disability.”

    As you’re constructing your flex-policy, also keepan eye on the wording of your benefits plans. Some health plans expect employeesto work 40 hours a week in order to be covered. Make sure that employees’ eligibilitywon’t be jeopardized because they elect to work 50 hours one week in exchangefor a 30-hour week the next.

ATo-Do List for Flex Arrangements

In order to avoid being unfair to specific groups such as women and minorities, create a specific written policy that explains what kinds of jobs are and aren’t candidates for flexible arrangements. If an employee covered by the ADA asks for a flexible work arrangement, review the request carefully. Telecommuting is a potential option for someone with a disability. Review the wording of your benefits policies to make sure that employees aren’t accidentally rendered ineligible if they shorten their workweeks. For non-exempt employees: Structure the schedule of a compressed workweek to ensure that it doesn’t exceed 40 hours. If they telecommute, instruct them on the proper way to record their hours. For exempt employees: Remember that tracking their hours is risky. It implies that they are hourly employees, and they may be legally treated as such. If an employee reports a workers’ comp injury at home, get a detailed account of what work-related activities the employee was engaged in when he or she was injured.

Flexible schedules can mean trouble with the FLSA
    Once you have a policy established, you have to makesure you don’t bump up against the nemesis of flexible scheduling, the FLSA.By a wide margin, this legislation causes HR people the most trouble — forboth exempt and non-exempt employees. This brings up an important point: makesure you know beyond a doubt whether the employee who is planning a flexiblearrangement is truly exempt or not.

    Let’s begin with non-exempt employees and the FLSA.The basic rule impeding non-exempt workers from using flexible scheduling isthe fact that these employees are bound to a 40-hour workweek. For every hourthey work beyond that, they must be paid at least one and a half times theirregular pay. “Almost any problem you care to trace with flexible workweeksfor a non-exempt can be traced to the application of that seemingly simple rule,”says Dave Dabbs, a labor attorney in the Richmond, Virginia, office of McGuireWoodsLLP.

    It’s not an issue if you’re simply letting an employeework fewer hours and paying accordingly, or if you’re allowing employees topick their own starting time but maintain a 40-hour week. It becomes a big problem,however, if you’re trying to initiate a compressed workweek that looks somethinglike this: employees work a 44-hour week, with half of Friday off in exchangefor that extra four hours. Sounds great, but that structure means that all non-exemptemployees must be paid four hours of overtime. HR cannot simply call that Fridaya “comp day” and dismiss overtime pay. It’s illegal.

    There is an easy remedy. Simply structure the daysoff so that the 40-hour workweek isn’t exceeded. Many employers have turnedto four 10-hour days followed by a Friday off. HR should also take note of individualstate laws, which may impose additional wage and hour restrictions.

    Exempt employees present a different set of problems,because they must be compensated on a salary basis. Their earnings are basedon the quality of their work rather than the hours. “The essential problemwith doing flextime for exempts is that in some measure, exempts are alreadysupposed to be on flexible schedules, because you pay a salary for a job,”Dabbs says. “If the job gets done, you don’t need to make an inquiry intothe time spent doing it. It may have taken more than 40 hours a week, or less.But the idea is, Why should you care?”

    You can’t track the hours worked by exempts or placethese employees on a specific flexible schedule. To do so implies that theyare actually non-exempt, and that can spell big trouble. Ensure that your handbookdoesn’t contain language even implying that a salaried employee may be dockedwages in exchange for days off. “You can blow all your wage and hour exemptionswith that one mistake,” Dabbs says.

    In general, remember that exempt employees are by theirnature allowed to work flexibly if they can get the job done. Mary E. Bruno,a labor and employment law attorney with Greenberg Traurig, LLP, in Phoenix,says: “If an employer is keeping track of the hours worked by exempt employees,even just to see if they’re working a 40-hour week, the exemption can be lost.”

Telecommuting is easier under the FLSA — but there are other issues
    Because exempt employees are salaried, there are nospecific FLSA issues involved in telecommuting. For hourly workers, however,the timekeeping details are key. These employees have a different reportingrequirement if they work at home. Under federal law, hourly employees in theoffice must record to the nearest quarter hour the total hours worked that day– but exact time in and out for lunch and breaks doesn’t have to be noted.Hourly employees working from home, however, must record the actual hours theyspent providing their services. So if they stopped work at 10:15 for a personalphone call and returned to work at 10:30, this must be recorded. (Recordingcan be done by hand, however; there are no specific form requirements.)

    Many HR professionals have concerns about telecommutingcomplications resulting from the Occupational Safety and Health Act. As of now,there is little to worry about. OSHA suggested the idea of at-home inspectionslast year, but “they immediately pulled back — there was a firestorm,”Bruno says. For now, the only employees who can be subject to at-home inspectionsare those doing productive piecework such as lacing together purses or constructingwidgets. “But the concern is still out there: what is the employer’s obligationfor an employee who truly works from home?” Bruno asks.

    The issues surrounding workers’ comp are still beingresolved. If the employee is moving around her office, and trips on her dog,does this constitute a workers’ comp injury? “If you allow pets in yourworkplace, and you allow pets at home for this employee who is telecommuting,the answer is yes,” Olson says. But what about an employee who falls downwhile he’s walking to the door to sign for a package? If the package is fromwork, it’s probably a workers’ comp injury. If the package is a sweater he orderedonline, probably not. “The question will be: Were they doing work wheninjured?” Bruno says. “But workers’ comp can be a gray area at work.At home, it’s fraught with additional difficulties.”

    But as more and more companies take the plunge intonew ways of working, such problems will be straightened out. And in the end,most troubles are generally preventable — as long as HR remains fairly inflexibleabout understanding flextime arrangements.

---

Resources for Telecommuting:

• Research on work/familyissues, including flexible work arrangements.

• ITAC, the InternationalTelework Association & Council.

• The U.S. Office of Personnel Management, telecommutingpage.

• The Gil Gordon siteconsolidates information from around the world on telecommuting and relatedtopics.

• YouCanWorkFromAnywhere.com.Tips, tools, and resources to help improve the productivity of telecommutersand managers.

Workforce, October 2001, pp. 62-66 — SubscribeNow!

T

o avoid costly lawsuits, it is imperative that businesses understand what “exempt” truly means. Section 13(a)(l) of the FLSA exempts executive, administrative, professional, and outside sales employees from the FLSA’s overtime requirements — as long as they meet certain tests regarding job duties. Here are the categories and their requirements, according to the Department of Labor:

Executive Exemption
These employees have management as their primary duty.

• They direct the work of two or more full-time employees.

• They have the authority to hire and fire, or to make recommendations affecting the employment of others.

• They regularly exercise a high degree of independent judgment in their work.

• They receive a salary that meets the requirements of the exemption.

• They do not devote more than 20 percent of their time to non-management functions (or 40 percent in retail and service establishments).

Administrative Exemption
These employees perform office or non-manual work that is directly related to the management policies or general business operations of their employer or customers, or perform such functions in the administration of an educational establishment.

• They regularly exercise discretion and judgment in their work.

• They either assist a proprietor or executive, perform specialized or technical work, or execute special assignments.

• They receive a salary that meets the requirements of the exemption.

• They do not devote more than 20 percent of their time to work other than that described above (or 40 percent in retail and service establishments).

Professional Exemption
These employees perform work requiring advanced knowledge and education, work in an artistic field that is original and creative, work as a teacher, or work as a computer system analyst, programmer, software engineer, or similarly skilled person in the computer software field.

• They regularly exercise discretion and judgment.

• They perform work that is intellectual and varied in nature, and cannot be standardized as to time.

• They receive a salary that meets the requirements of the exemption (except doctors, lawyers, teachers, and certain computer occupations).

• They do not devote more than 20 percent of their time to work other than that described above.

Outside Sales Exemption
These employees engage in making sales or obtaining orders away from their employer’s place of business. They don’t devote more than 20 percent of the hours worked by non-exempt employees of the employer to work other than the making of such sales.

Workforce, October 2001, p. 38 — Subscribe Now!