Category: Legal

An employer did not violate employee privacy rights by installing a hidden camera aimed at catching a person viewing online pornography after business hours, California’s Supreme Court ruled.

The ruling in Abigail Hernandez et al. v. Hillsides Inc. et al. overturned a state appellate court’s finding that two employee plaintiffs in the case “suffered an intrusion into a protected zone of privacy that was so unjustified and offensive as to constitute a privacy violation.”

Hillsides operated a Pasadena, California, facility for neglected and abused children where the plaintiffs worked and shared an office, court records state.

In 2002, the facility’s director learned that at night, after the two plaintiffs left the premises, someone repeatedly used a computer in their shared office to view pornography. The director installed a hidden camera that was operated only at night after the plaintiffs left.

Nonetheless, the workers filed a tort claim after discovering the camera.

The employer argued it neither viewed nor recorded the employees, so it did not intrude on their privacy.

The California Supreme Court agreed.

While finding that the employees had a reasonable expectation that their employer would not record their activities on video, “any actual surveillance was drastically limited in nature and scope, exempting plaintiffs from its reach,” according to the court’s unanimous opinion.

The court also found that the company had a responsibility to protect the children for whom it was caring.

Filed by Roberto Ceniceros of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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An employer-friendly health care reform bill may be forthcoming from the Senate Finance Committee, according to a person familiar with the draft legislation, which would eliminate an employer mandate and a public health plan option.

On Wednesday, July 29, Max Baucus, D-Montana and chairman of the Senate Finance Committee, told reporters that the cost of his committee’s health care legislation would total $900 billion over 10 years.

To help pay for the bill, committee members have tentatively agreed to tax employers on health plans valued at $25,000 or more, according to the source. Such a proposal, which has been a stumbling block, could raise $90 billion to $190 billion in tax revenue over 10 years.

The developments among Senate Finance Committee members stood in contrast to an impasse in the House Energy and Commerce Committee, where conservative Blue Dog Democrats have pressed for concessions on a public plan and employer mandate, among other issues, from their liberal party members.

After a false start Wednesday, the energy committee said it would resume talks Thursday to produce a health care reform bill.

Regardless, Democrats have agreed to delay a full House vote until September to make sure the bill they vote on has support from Blue Dogs.

If the Blue Dog Democrats prevail in the House, a bill from the energy committee could look similar to the tentative draft coming out of the Senate Finance Committee.

Under that plan, a public health care option would be replaced by health cooperatives set up on the state level, funded initially with government money but then sustained through premiums from members.

In the Senate Finance Committee plan, according to the source, employers would be required to offer coverage but not pay for it. The health plans offered to employees would have to be valued at 60 percent of the value of the health plans enjoyed by federal employees.

That would mean high-deductible health plans with health savings accounts would qualify. A House bill would require plans to provide more benefits.

Employees would be allowed to drop employer coverage but employors would have to repay any government subsidy used by employees to purchase health care. Employees, meanwhile, could opt out of an employer health plan, but doing so would make them ineligible for government health care subsidies.

Unlike earlier proposals that would have taxed the health care benefits of employees, employers would be required to pay a 35 percent tax on the value of any health plan above the $25,000 threshold, according to the source.

The tax proposal drew sharp opposition Wednesday from labor leaders who have strongly opposed a tax on benefits, saying it would hit hard their members, who tend to have generous health care benefits.

“The Goldman-Sachs Cadillac plan for executives may be the target of this proposal, but it could well end up hitting benefits for working families and retirees already reeling from health care costs if lawmakers rely on this as a way to curb federal spending rather than enact real cost containment,” said AFL-CIO President John Sweeney in a statement.

Health care economists have said taxing so-called gold-plated health plans would be a powerful incentive for employers and employees alike to purchase more cost-efficient health plans or plans that offer fewer benefits to patients.

Though the Senate Finance Committee bill remains in its early draft stages, the House labor and tax committees as well as the Senate health committee have all approved health care reform bills. All were largely party-line votes and included both an employer mandate and a public plan option.

The Finance Committee is expected to approve its version of health care reform by August 7. The various proposals will be melded into one bill in each chamber before floor votes now scheduled for September.

Members of Congress will now spend most of August getting an earful from constituents about health care reform, which has bogged down in part because of fears over how changes contained in the bills—most of which cost upward of $1 trillion—will affect current coverage.

House Speaker Nancy Pelosi, D-California, and Majority Leader Steny Hoyer, D-Maryland, said she was pleased that discussions in the House energy committee were moving forward.

“Congress is closer than ever before in history to passing comprehensive health insurance reform,” Pelosi and Hoyer said in a joint statement. “In September, Congress will pass legislation that puts Americans and their doctors back in charge, holds insurance companies accountable, guarantees stability and peace of mind, lowers costs, and provides more choices for higher quality care.”

—Jeremy Smerd and Mark Schoeff Jr.

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Legislation expected to emerge from the Senate Finance Committee likely won’t include two key planks of a Democrat-backed platform to overhaul the U.S. health care system—a public health plan and a requirement that employers offer insurance.

Sen. Olympia Snowe, R-Maine, emerging from a closed-door meeting of Senate negotiators, said that the committee is strongly leaning against mandating employer-sponsored coverage and establishing “co-op” buying groups in place of a public health plan option.

Snowe and other senators on Monday, July 27, continued to suggest that nothing is final as the committee heads into the heavy lifting of figuring out how to finance such a package, which likely will near $1 trillion over the next decade.

“But the co-op is one of the more prominent options, it’s been fully explored,” she said. “It’s safe to say that it probably is going to remain in the final document.”

Snowe said that rather than force employers to offer health benefits to their workers, the so-called “free rider” initiative has become the favored option. Under the proposal, employers would be required to pay a certain amount if their workers were on Medicaid or got their insurance from the health insurance exchange.

“We still have various options on the table,” she said, but added: “We don’t mandate employer coverage, at least in some of the initial proposals.”

On Monday, White House spokesman Robert Gibbs provided details to statements made by administration officials that there is agreement on a solid majority of a health care bill, citing cost savings and increased access to care as just two examples.

Gibbs said “there is broad agreement” that a bill to overhaul the health care system should not add to the national debt and should reduce costs over the long haul and require health plans to accept everyone regardless of whether they are sick.

Even so, two bills to emerge from Capitol Hill include a public option and employer mandate.

The Finance Committee package likely will be in direct odds with those other plans. That sets the stage for what could be a messy melding period, where all three packages will have to merge into one. Senior White House advisor David Axelrod over the weekend said on the television program Face the Nation that there is agreement on 80 percent of a legislative package.

“Everybody I think wants to get something done, and now we are at that final 20 percent,” he said. “We are trying to work through those details.”

Filed by Matthew DoBias of Modern Healthcare, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com

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Financial services regulatory reform, including insurance regulatory reform, needs to be dealt with this year, Treasury Secretary Timothy Geithner told a House panel Friday, July 24.

Geithner offered his comments to the House Financial Services Committee in response to a question from Rep. Paul Kanjorski, D-Pennsylvania.

The Obama administration sent a package of draft legislation addressing a broad range of regulatory issues earlier this week, and Rep. Kanjorski asked Geithner how quickly Congress should move on the legislation.

The Treasury secretary replied that the legislation should be treated as a package, adding, “I think it’s very important we move this year.”

Rep. Kanjorski then asked whether failure to establish some sort of “national jurisdiction” over insurance would hamper the administration’s efforts to control systemic risk. Geithner replied that it was “very important” that insurance be part of the larger reform.

The administration has called for the creation of an Office of National Insurance within the Treasury Department as part of its regulatory reform legislative package. Among other things, the office would represent the U.S. in international insurance matters and in some cases could pre-empt state insurance regulators.

The proposal builds upon legislation introduced earlier this year by Kanjorski to create a more limited Office of Insurance Information.

Kanjorski praised the administration’s approach in his opening statement at Friday’s hearing, saying, “I am pleased that the administration calls for establishing an Office of National Insurance, an idea I first originated and for which I have strongly advocated for some time.”

Filed by Mark A. Hofmann of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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The New York City Fire Department’s reliance on two written firefighter exams constituted employment discrimination against minorities in violation of civil rights law, said a federal district court judge in a ruling Wednesday, July 22.

The federal government; the Vulcan Society Inc., a black firefighters organization; and three other plaintiffs had sued the fire department, claiming the city’s use of the two tests had a disparate impact on black and Hispanic candidates in violation of Title VII of the Civil Rights Act of 1964.

Judge Nicholas G. Garaufis of the U.S. District Court for the Eastern District of New York in Brooklyn agreed and granted summary judgment in favor of the plaintiffs. He noted in his 93-page decision that while 25 percent of the city’s residents are black and 27 percent Hispanic—as of 2007, when the litigation began—they accounted for just 3.4 percent and 6.7 percent, respectively, of firefighters.

The judge said in his decision that it is “natural to assume that the best performers on an employment test must be the best people for the job. But the significance of these principles is undermined when an examination is not fair.”

The city “did not take sufficient measures to ensure that better performers on its examinations would actually be better firefighters.”

The proceedings have been bifurcated, and Judge Garaufis said he will subsequently determine an “appropriate remedy.”

A New York City spokeswoman said the city will decide whether to appeal once the judge issues this second ruling in the case.

In addition, Georgia Pestana, chief of the labor and employment division of New York City’s law department, said in a statement that she disagrees with the decision. She said the city since has developed a new test that was administered in 2007 and that, combined with an outreach effort, has resulted in minorities now constituting 38 percent of the candidates on the passing list.

Judge Garaufis noted in his opinion also that the legal issue before his court was different from the one decided by the U.S. Supreme Court in Frank Ricci et al. v. John DeStefano et al., in which the city of Hartford, Connecticut, had rejected a promotion exam out of fear it would be sued for discrimination by minority candidates.

In June, the U.S. Supreme Court ruled in that case in favor of 18 firefighters—17 white and one Hispanic—who had brought the suit.

Filed by Judy Greenwald of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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Employers’ obligation to extend COBRA health care continuation coverage to former employees and dependents would be expanded dramatically under an amendment tucked into sweeping health care reform legislation approved by a House panel.

The House Education and Labor Committee on Friday, July 17, approved H.R. 3200. It includes the COBRA expansion amendment proposed by Rep. Susan Davis, D-California, which the panel approved in an earlier voice vote.

After COBRA coverage expires—typically 18 months for those who have been laid off or quit, and 36 months for those entitled to COBRA due to death, divorce or marital separation—the amendment would allow beneficiaries to continue COBRA coverage until becoming eligible under a new employer’s health care plan or through a federal or state-based health insurance exchange.

Those exchanges, which would be authorized under the broader bill, would not be established until at least 2013.

The amendment, which would apply to individuals receiving COBRA on or after the reform legislation is passed, would allow COBRA beneficiaries, in many cases, to obtain years of additional COBRA coverage from their former employers.

“This certainly would increase employers’ costs,” said Gretchen Young, vice president of health policy at the ERISA Industry Committee in Washington. “The result would be to punish those employers who are staying in the system and providing coverage to their employees.”

“This would have the effect of discouraging employers from offering health care coverage,” said Andy Anderson, partner-elect at Morgan, Lewis & Bockius in Chicago.

If the amendment were to become law, it would be the second time this year that Congress has sweetened COBRA coverage. As part of an economic stimulus measure, legislators earlier this year included a provision that provides a 65 percent COBRA premium subsidy for employees who are terminated involuntarily from September 1, 2008, through December 31, 2009. The subsidy is available up to nine months.

While the House committee approved adding the COBRA provision, there is nothing comparable in health care reform legislation that the Senate Health, Education, Labor and Pensions Committee approved last week.

Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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Patriot Services Inc. and owner-president Stephanie Blackmon have each agreed to plead guilty to a one-count charge filed Friday, July 17, in U.S. District Court in Kansas City, Kansas, of making a false statement to the Small Business Administration.

Patriot supplies temporary staffing services to various agencies and departments of the federal government throughout the United States. Under separate plea agreements, which are subject to court approval, Monroe, Georgia-based Patriot and Blackmon have agreed to cooperate with the department’s ongoing investigation.

Blackmon admitted to providing false information to the SBA that Patriot could qualify for certification under Section 8(a) of the Small Business Act. According to court documents, Blackmon purchased and became the president of Patriot in November 2003.

Although Blackmon was the actual owner-president of Patriot, she was primarily a figurehead whose status as an African-American was used to obtain 8(a) certification for Patriot, thereby enabling Patriot, and her former employer, to obtain government 8(a) set-aside contracts.

Specifically, Blackmon concealed the involvement of her former employer, who was not an economically disadvantaged person, in the management and operations of Patriot because revealing his involvement would have compromised Patriot’s chances of receiving 8(a) certification. By securing 8(a) certification, Patriot qualified for government contracts specifically set aside for 8(a) companies.

Blackmon faces a maximum sentence of two years in prison and a fine of $5,000 for the false-statement charge; Patriot faces a maximum fine of $5,000.

—Staffing Industry Analysts

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Senators who are trying to craft a bipartisan health care reform proposal are considering dropping a requirement that all employers provide medical coverage to employees.

In its place would be a “free rider” provision requiring employers to pay for employees who get their health care with government assistance, according to an outline of the committee’s policy proposals.

The legislation from the Senate Finance Committee is expected to be released after the July Fourth holiday. Two other drafts of health care legislation, one in the Senate and another in the House, would require employers to provide health insurance to employees.

Retailers and other businesses that have minimum- or low-wage employees, such as Wal-Mart, oppose the free-rider clause, which they are describing as a backdoor mandate, says a source who asked not to be named but who is familiar with Wal-Mart’s health care policy stance. Around 2.5 percent of Wal-Mart employees receive Medicaid, according to the company.

The Center on Budget and Policy Priorities, a policy group whose work focuses on low- and moderate-income individuals and families, said the free-rider clause could discourage companies from hiring low-income workers and employees with disabilities. People who are poor or disabled are eligible for Medicaid.

The policy group said an employer mandate was preferable because most employers would choose to provide adequate coverage. The fine paid by employers that choose not to provide coverage could help the government recover the cost of insuring workers who do not get insurance through an employer.

Last week, Senate Finance Committee Chairman Max Baucus, D-Montana, said his committee had shaved about $600 million off the cost of health care reform. The new price tag, $1 trillion over 10 years, would be achieved by taxing health benefits and replacing an employer mandate with a free-rider provision.

According to the outline that became public last week, the free-rider clause would require employers to pay half the average national cost of Medicaid for every employee who receives Medicaid. An employer would have to pay the full cost of any tax credit an employee uses to purchase health insurance.

An employer would not have to pay into the cost of Medicaid if the company offered health insurance that was considered affordable. The proposal says health insurance is affordable if it costs no more than 12.5 percent of a worker’s income.

That proposal alone would save the government $300 million, according to Sen. Kent Conrad, D-North Dakota and chairman of the Senate Budget Committee.

A proposal to tax health care benefits could generate as much as $418 billion, the bulk of the money needed to pay for health care reform without increasing the federal government’s deficit.

—Jeremy Smerd

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A narrow majority of the Supreme Court ruled on Monday, June 29, that New Haven, Connecticut, could not justify throwing out the results of employment tests that would have promoted only white firefighters to the rank of lieutenant or captain.

The 5-4 majority said that the city had to show a “strong basis in evidence” that the exams were not job related or that another, less discriminatory test existed.

The decision is sure to have an impact on the private sector, where employment tests are increasingly popular. Experts are urging companies to be careful when using them in the wake of the Supreme Court’s ruling.

After administering the promotion tests in November and December of 2003, the city decided not to certify the results because of concerns that it was not fair to African-American candidates and could leave the city open to a lawsuit.

Based on the tests, all the top 10 candidates for lieutenant were white and seven of the top nine for captain were white, along with two Hispanics.

The white firefighters, led by Frank Ricci, sued New Haven, arguing that they were unfairly denied promotions. A district court granted summary judgment in favor of New Haven, and the ruling was upheld by the 2nd Circuit Court of Appeals, where Supreme Court nominee Judge Sonia Sotomayor participated in the decision.

The Supreme Court majority overruled the 2nd Circuit, holding that New Haven effectively discriminated against the white firefighters in order to prevent discrimination against the African-American applicants. The former, “disparate treatment,” and the latter, “disparate impact,” are both prohibited by federal discrimination laws.

But the court ruled that in order to protect minorities against disparate impact, the city had to demonstrate that there was something wrong with the test, which it failed to do.

“[T]here is no evidence—let alone the required strong basis in evidence—that the tests were flawed because they were not job-related or because other, equally valid and less discriminatory tests were available to the city,” wrote Justice Anthony Kennedy for the majority that included Chief Justice John Roberts Jr. and Justices Antonin Scalia, Clarence Thomas and Samuel Alito Jr.

“Fear of litigation alone cannot justify an employer’s reliance on race to the detriment of individuals who passed the examinations and qualified for promotions,” Kennedy wrote.

In a dissent, Justice Ruth Bader Ginsburg said that the majority ignored evidence of flaws in the New Haven tests.

Ginsburg also noted that the court’s decision would prevent New Haven from achieving a diverse workforce. Despite having a population that is nearly 60 percent African-American and Hispanic, the city “must today be served … by a fire department in which members of racial and ethnic minorities are rarely seen.”

Writing for Justices David Souter, John Paul Stevens and Stephen Breyer, Ginsburg argued that an employer that scotches a test that disadvantages a minority group does not commit disparate treatment. In fact, the employer could only use such a test if it is a “business necessity.”

The majority’s position will make it harder for companies to stay within discrimination laws, according to Ginsburg.

“The strong-basis-in-evidence standard, however, as barely described in general, and cavalierly applied in this case, makes voluntary compliance a hazardous venture,” Ginsburg wrote.

Employment lawyers cautioned companies to proceed warily now that the Supreme Court has made it more likely that they must live with the results rather than change the test.

“Undertaking employment tests should be well thought out before [they] are utilized,” said Linda Cavanna-Wilk, of counsel to Ford & Harrison in New York. “The decision significantly increases the legal risk associated with the use of selection devices or employment tests. An employer’s back is somewhat against the wall.”

Companies must be prepared to show that exams are relevant in the hiring process.

“Employers really need to be careful to the way they design these tests to ensure that the questions in fact relate to the duties of the position,” said Peter Mina, an associate at Tully Rinckey in Washington.

In a pre-emptive strike against opponents of Sotomayor, Sen. Charles Schumer, D-New York and a member of the Senate Judiciary Committee, downplayed the fact that her position on the case was overturned by colleagues she may soon join if the Senate confirms her to replace the retiring Souter.

The Supreme Court majority “merely chose to look at the record in a different way,” Schumer said.

—Mark Schoeff Jr.

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