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New Guidance May Help Employers Avoid Significant Penalties: How to Prepare for 2014 and the New Employer Shared Responsibility Rules and Waiting Period Limitation

From our friends in the Employee Benefits and Executive Compensation Group: New guidance is available to help employers prepare for the significant new rules that become effective in 2014, including the employer shared responsibility mandate (i.e., the penalties that may be imposed on an employer that doesn’t offer certain health care coverage) and the prohibition on waiting periods in excess of 90 days, under the Patient Protection and Affordable Care Act of 2010 (health care reform).

Employers may rely on the new guidance through the end of 2014. Employers will not be required to comply with any subsequent guidance that is more restrictive until January 1, 2015 at the earliest. This is good news because it provides employers a measure of certainty about how to prepare for the 2014 employer shared responsibility mandate – particularly those employers concerned about what must be done to avoid significant penalties for failing to provide coverage, or for providing unaffordable coverage.

Click here to download a summary of the current rules to help determine who is a full-time employee for purposes of the employer shared responsibility mandate and the 90-day waiting period limitation, as well as suggested steps employers should take now to prepare for 2014.

PEPping Up the Economy and Employers

On October 26, Governor Tom Corbett (R-PA) signed into law the Promoting Employment Across Pennsylvania Act (PEP) (House Bill 2626). This law is touted as an attempt to create new jobs in Pennsylvania and promote economic development.

What does this mean for thousands of Pennsylvania employers? If you are able to create at least 250 new jobs in Pennsylvania within 5 years (with 100 of the new jobs created within the first 2 years), you will be eligible to retain 95% tax witholdings for the persons employed in the new jobs. Under the Act, the employer may select to remit all of the personal income tax witheld from employees then receive a rebate of the tax from the Commonwealth.

Job creators grow while growing the economy in the process. These tax savings may provide opportunities for employers to further increase their number of employees beyond the initial 250 or reinvest in other areas of the business. Presumably, the Commonwealth benefits as well. More persons employed in the Commonwealth lead to economic growth through purchasing power and sales tax revenues.

There are restrictions and critiques. Non-profit entities, religious organizations, utilities, restaurants/bars, gambling establishments, retail stores, and education or public administration offices need not apply. Plus, an open question remains whether the program amounts to an employee paying an employer for his/her job.

To take advantage of this opportunity, employers must enter into an agreement with the Department of Community and Economic Development (DCED). Any interested employer should move quickly because the ceiling for the program in Pennsylvania is $5 million per year. This Act expires January 1, 2018.

Extreme Weather, Natural Disasters and Personnel Issues

What happens when a business is temporarily closed due to extreme weather? What about overtime as employees try to catch up on work? These are questions that employers on the East coast find themselves asking in the wake of Hurricane Sandy. William Horwitz, counsel in the Florham Park office, has authored a client alert to answer these and other questions that employers are now faced with.

Read the full alert.

Who Owns a Social Media Account? Court Rules that Employer Did Not Violate the Computer Fraud and Abuse Act (CFAA) by Taking Over a LinkedIn Account

A recent summary judgment ruling issued out of the Eastern District of Pennsylvania, Eagle v. Morgan, et al., CIV-No. 11-4303, 2012 U.S. Dist. LEXIS 143614 (E.D. Pa. Oct. 4, 2012), highlights the need for employers to have clear policies regarding social media accounts established and used on the employer’s behalf. While plaintiff Dr. Eagle was president of defendant Edcomm, a banking education company, she created a LinkedIn account and used that account to promote Edcomm’s banking education services, foster her reputation as a businesswoman, reconnect with family, friends, and colleagues, and build social and professional relationships. Edcomm contended that it had an unwritten informal policy of “owning” the LinkedIn accounts of its former employees after they left the company. Dr. Eagle was terminated and subsequently denied access to her LinkedIn account by Edcomm, which had accessed her account, changed her password and altered her LinkedIn profile to display the company’s new president’s name and photograph while retaining some elements of Dr. Eagle’s profile.　 Dr. Eagle ultimately regained control of her LinkedIn account but nonetheless sued Edcomm and its employees, alleging, among other things, violations of the Computer Fraud and Abuse Act and the Lanham Act, and invasion of privacy by misappropriation of her identity.

On October 4, 2012, the district court granted Edcomm’s motion for summary judgment to dismiss Dr. Eagle’s federal claims. Holding that a reasonable jury could not find that Dr. Eagle had suffered a “legally cognizable loss or damage in the brief period in which her LinkedIn Account was accessed and controlled by Edcomm,” the district dismissed her CFAA claim. The district court concluded that Dr. Eagle’s claim of lost business opportunities and damage to her reputation were “speculative” at best and “not compensable under the CFAA,” and that even if types of damages were recoverable, she failed to present any evidence to quantify these damages. The district court also dismissed Dr. Eagle’s claims under the Lanham Act, finding that she had failed to produce any evidence of a likelihood of confusion to the public by switching her name and photo with that of her successor. However, the district court retained jurisdiction over Dr. Eagle’s remaining state law claims as well as Edcomm’s counterclaims (a conversion claim over a laptop and a misappropriation claim that asserts that Edcomm was the rightful owner of the LinkedIn account).

Given the rapidly evolving standards regarding employee/employer use of social media websites for marketing and business development (both for the employer’s business and the employee’s reputation), employers should take a proactive role in developing clear guidelines regarding the creation, control and ownership of business-related social media accounts.　 Policies stating, for example, that the company owns the social media site can help employers avoid disputes with departing employees. In addition, during exit interviews with departing employees, employers should consider inquiring generally about the employee’s social networking activities as they relate to his or her employment. Ask employees whether any client or customer information exists on their social networking accounts. If it does, request that this information be removed immediately. If an employer learns of an employee’s social networking activity that it believes violates a non-solicitation or other restrictive covenant, consider sending a cease and desist notice, including a specific request for the removal of any and all offending information. Finally, be prepared to adapt to changing norms, laws, rules and regulations affecting or regulating the use of social media sites.

Seventh Circuit: ADA Gives Disabled Employees Priority For Vacant Positions

A recent Seventh Circuit decision may require employers to select minimally qualified employees over far more qualified employees when filling vacant positions. In EEOC v. United Airlines, Inc., 2012 WL 3871503 (7th Cir. 2012), the Court held last month that, absent undue hardship, the Americans with Disabilities Act, 42 U.S.C. § 12101 et seq. (“ADA”), requires an employer to transfer a disabled employee to a vacant position ahead of more qualified non-disabled employees.

This case involved guidelines that United Airlines issued in 2003 for accommodating “employees who, because of disability, can no longer do the essential functions of their current jobs even with reasonable accommodation.” Under the guidelines, these disabled employees were eligible for placement in a vacant position and even received priority over otherwise equally qualified co-workers, but did not receive an open position over a genuinely superior candidate. The Equal Employment Opportunity Commission (“EEOC”) filed a lawsuit against United Airlines, which filed a Motion to Dismiss. The district court granted the motion, holding that a “competitive transfer policy does not violate the ADA.”

The EEOC appealed and the Seventh Circuit reversed. The Seventh Circuit acknowledged that, according to its own precedent, employers were not required “to reassign a disabled employee to a job for which there is a better applicant, provided it’s the employer’s consistent and honest policy to hire the best applicant for the particular job in question.” The Court concluded, however, that this precedent conflicted with the Supreme Court’s more recent decision in U.S. Airways, Inc. v. Barnett, 535 U.S. 391 (2002).

In Barnett, the Supreme Court considered whether a disabled cargo handler who could no longer perform his job was entitled to a mailroom position ahead of a more senior employee who was otherwise entitled to the job pursuant to a seniority system. The Barnett Court noted that “preferences will sometimes prove necessary to achieve the [ADA’s] basic equal opportunity goal” and articulated a “two-step, case-specific” analysis. First, the plaintiff/employee must show that an accommodation “seems reasonable on its face, i.e., ordinarily or in the run of cases.” After the plaintiff/employee satisfies the first step, the burden shifts to the defendant/employer to “show special (typically case-specific) circumstances that demonstrate undue hardship in the particular circumstances.” The Barnett Court concluded that, although a transfer to the mailroom may have constituted a reasonable accommodation, violating the seniority system was unreasonable. According to the Seventh Circuit, however, the Barnett Court “was not creating a per se exception for seniority systems.”

Relying on Barnett, the Seventh Circuit remanded the United Airlines case and directed the district court to apply the Supreme Court’s analysis. The Seventh Circuit observed that the Tenth and the District of Columbia Circuits have previously reached similar results. The Court gave little weight to a contrary Eighth Circuit decision that relied on the Seventh Circuit’s now-overruled precedent.

Practical Advice for Employers

Employers should have policies and procedures in place to address transfer requests by employees whose disabilities prevent them from performing their jobs. Within the Seventh Circuit (Wisconsin, Illinois and Indiana), employers should plan to give these employees priority for open positions and must understand that the Seventh Circuit will rarely accept an “undue hardship” excuse for denying the transfer.

Even outside of the Seventh Circuit, employers should be mindful of the United Airlines decision. Not only have the Tenth and District of Columbia Circuits reached similar rulings, but the Seventh Circuit’s interpretation of the Supreme Court’s Barnett decision will likely influence the decisions of courts that have not yet addressed this issue. Moreover, the EEOC clearly takes the position that anything less than mandatory reassignment violates the ADA.

U.S. Supreme Court to Define Who is a Supervisor Under Title VII

In a development that could have far reaching implications for employers, the U.S. Supreme Court has agreed to hear a case, Vance v. Ball State University, in which the central issue is the definition of “supervisor” for purposes of determining an employer’s liability for harassment under Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq. (“Title VII”). Under Title VII, if the alleged harasser is a supervisor, liability is generally imputed to the employer (unless the employer can show they it had an effective anti-harassment policy that the plaintiff unreasonably failed to utilize). On the other hand, if a hostile work environment is created by co-workers, not supervisors, the employer is liable only if the plaintiff proves that the employer failed to take reasonable measures to stop the harassment, a considerably more difficult standard for plaintiffs.

Although determining whether an employee is a “supervisor” is important in many cases, neither Title VII nor Supreme Court case law specifically defines the term. However, various circuit courts have crafted their own definitions of “supervisor” and two primary definitions have emerged. The First, Seventh and Eighth Circuits define a “supervisor” as an employee who possesses the power to make “consequential employment decisions” such as decisions about hiring and firing, promotions and demotions, and disciplinary actions. In contrast, the Second, Fourth, and Ninth Circuits (as well as the Equal Employment Opportunity Commission) have adopted a broader definition, holding that an individual qualifies as an employee’s supervisor if the individual: (1) has authority to undertake or recommend tangible employment decisions affecting the employee; or (2) has authority to direct the employee’s daily work activities. Under this broader definition, far more employees are “supervisors” and, as a result, may potentially subject their employers to vicarious liability.

In Vance, the plaintiff worked in Ball State University’s catering department. She alleged that another employee, Davis, subjected her to racially discriminatory remarks. According to the plaintiff, Davis directed her work and was, therefore, a “supervisor.” The district court granted summary judgment to Ball State, holding that Davis was not a supervisor because she did not have the power to hire, fire, or discipline Vance. The Seventh Circuit affirmed.

Whether the Supreme Court, in deciding Vance and resolving the split among the circuit courts, adopts a narrow or expansive definition of “supervisor” will have a significant effect on employer exposure in harassment suits. If the Supreme Court adopts a broader definition, the pool of employees who can potentially subject their employers to vicarious liability will be significantly greater, likely resulting in more suits against employers. Moreover, it will be more difficult for employers to prevail at the summary judgment stage of litigation, because a more fact-based inquiry will be needed to determine whether someone is a supervisor. While it is relatively straightforward to show whether an employee is responsible for hiring, firing, promotions and the like, the broader standard requires a more detailed examination of the employee’s role.

Oral argument is scheduled for November and a decision is expected early next year.