POSTED BY SCOTT T. SILVERMAN ON JUNE 28, 2012

The United States Supreme Court (the "Court") issued a historic holding today, June 28, 2012.  The Court has ruled that the Patient Protection and Affordable Care Act of 2010, together with the Health Care and Education Tax Credits Reconciliation Act of 2010 (collectively, the "Health Reform Act"), which had been signed into law in late March of 2010, is almost entirely constitutional.

The Court, in a 5 to 4 decision, opined that the portions of the Health Reform Act that most directly impact employers are lawful, including the polarizing individual coverage mandate taking effect in 2014.  The Court's rationale for upholding the individual mandate was not that Congress can force individuals to buy health insurance (as the Court found that the mandate would actually violate the Commerce Clause), but rather that Congress, under its power to "lay and collect taxes," is permitted to impose a tax on individuals for failing to have insurance. 

The immediate impact of this holding on employers is fully discussed in Akerman's Practice Group Update. In summary, the following main points should be kept in mind: (1) small employers with average wages of less than $50,000 who pay at least 50% of the premium for employees' health insurance will be able to take an income tax credit equal to a percentage of premiums paid; (2) plan mandates continue to apply, such as (i) certain restrictions on pre-existing condition exclusions; (ii) the reduction/elimination of lifetime dollar limits and caps on annual limits on essential health benefits; (iii) the restrictions on rescission of coverage; and (iv) the extension of dependent coverage to age 26 (though this requirement does not apply to grandfathered plans if the dependent is otherwise eligible for another employer-sponsored health plan); (3) a summary of benefits and coverage must be provided commencing in the fall of 2012; (4) the aggregate cost of health coverage must be included in the 2012 W-2 for employees; (5) the $2,500 limit on health FSA spending applies for plan years after January 1, 2013; (6) state exchanges for small business health option programs must be established by 2014; and (7) large employers with over 50 employees will be subjected to fines or penalties if they don't offer insurance, or the offered insurance is too expensive for employees, commencing in 2014.

POSTED BY SCOTT T. SILVERMAN ON JUNE 21, 2012

In Christopher, et al. v. SmithKline Beecham Corp., d/b/a GlaxoSmithKline, No. 11-204 (June 18, 2012), the Supreme Court held that pharmaceutical sales representatives qualify for the "outside salesman" exemption to the Fair Labor Standards Act and are, therefore, not entitled to overtime compensation for hours worked over 40 in a workweek.  Because representatives do not actually sell prescription drugs, but merely try to convince physicians in their assigned territory to write prescriptions in appropriate cases (a process called "detailing"), Plaintiffs argued that the outside sales exemption did not apply to them.  The DOL agreed and submitted an amicus brief, which argued that the exemption only applies where the employee actually transfers title to the property in question.

The Supreme Court disagreed with the DOL and affirmed the grant of summary judgment to Defendant. The Court held that deference was not required to the DOL position, because it amounted to "unfair surprise" in light of the longstanding industry practice of treating detailers as exempt and the massive amount of liability sought, and opined that the DOL stance was unpersuasive, because it was reached without public input and was contrary to the language of the FLSA.  The Court then focused on a functional inquiry of whether  the work of the detailers should qualify as sales, and found that the nonbinding commitments to prescribe drugs that the detailers obtained from physicians amounted to an "other disposition" of the property, in the context of the peculiar regulatory environment of the industry, so as to fall within the FLSA definition of sales.  In addition, the Court reasoned that the purpose of the FLSA exemption would be met by applying it to the pharmaceutical sales detailers, because the FLSA assumes that exempt employees earn well above the minimum wage, perform work that is difficult to standardize to a particular timeframe, and engage in activities that cannot be easily spread to other workers. The salesmen were not the type of workers that the FLSA was enacted to protect.

Three important points arise from this opinion for all employers: 1. because the DOL is expected to recognize the Court's criticism, employers must remain vigilant in staying abreast of the latest DOL interpretations applicable to their industry; 2. in deciding whether an exemption applies, courts should employ a functional, rather than formulaic, analysis, which will allow employers in exemption cases to argue the particular realities applicable to their industry; and 3. defendants' arguments that the employees in question are paid well above the minimum wage,  do not have a set work schedule and perform functions that cannot be assigned to other workers are entitled to careful consideration by a court when ruling on any exemption issue.

POSTED BY RICHARD D. TUSCHMAN ON JUNE 14, 2012

An employer’s unconditional offer of a light-duty position to a pregnant employee became a conditional offer after the employee filed an EEOC charge, and was rescinded when the employee refused to withdraw her charge. That was unlawful retaliation in violation of Title VII, according to the Eleventh Circuit in a recent decision, Chapter 7, Trustee v. Gate Gourmet, Inc. (11th Cir., June 11, 2012).

The employee’s job involved driving a truck from a warehouse to a gate where an airplane was docked, using a lift system to raise the truck’s storage container to the airplane’s height, and then pushing carts of food, drink, and ovens across a ramp from the truck to the airplane.  When the employee’s pregnancy made it impossible for her to perform her job, she submitted a doctor’s note listing various medical restrictions. Her supervisor initially told her that the company had no light duty positions available and purported to fire her.  When the employee filed a union grievance, the employer found a light duty job for the employee and offered to reinstate her in that job, which was consistent with company policy.  Subsequently, when the employer received the employee’s EEOC charge of pregnancy discrimination, the employer conditioned its offer upon the employee’s withdrawal of her charge.  When the employee refused to withdraw her charge, the employer rescinded its offer.

On one level, the employer’s response was natural.  Why would an employer want to reinstate an employee if she is not going to withdraw her charge of discrimination?  The problem here was that the employee should have been given a light duty position to begin with, and when the company realized its error, it offered to reinstate the employee unconditionally.  By imposing a condition on that offer after the employee filed her EEOC charge, the company was punishing the employee for filing the charge.  That is unlawful retaliation, according to the Eleventh Circuit.

The lesson is that once an employee files an EEOC charge, an employer must proceed very cautiously when dealing with the employee.  Employers are free to offer a benefit to an employee in an attempt to settle an EEOC charge. But conditioning the employee’s receipt of a benefit that the employer already owes to the employee on the withdrawal of the employee’s charge will be construed as retaliation.  The difference is critical.

POSTED BY SCOTT T. SILVERMAN ON JUNE 12, 2012

In Mortgage Bankers Association v. Solis et al., Case No. 1:11-cv-00073 (D.D.C. June 6, 2012), U.S. District Judge Reggie B. Walton ruled that the Department of Labor ("DOL") lawfully acted within its discretion when, in 2010, it stated that mortgage loan officers are not generally exempt from overtime pay. Judge Walton held that the DOL did not violate the Administrative Procedures Act ("APA") when it withdrew a 2006 opinion letter, which had suggested that mortgage loan officers were covered by the administrative exemption to the FLSA. The 2010 interpretation concluded that because loan officers' primary duties focus on sales, they do not perform the administrative work necessary for the exemption.

The lawsuit argued that, under the APA, the DOL was required to give notice of its intent to change policy, and provide interested parties an opportunity to comment, before switching positions. Judge Walton disagreed, reasoning that such a requirement only applies where there has been substantial and justifiable reliance on the agency interpretation, but the prior opinion letter had been written in 2006, just four years before the new interpretation in 2010.  Further, the Association had argued that its members could assert a "good faith" defense to liability and damages based on the 2006 letter, which, according to the Court, negated detrimental reliance.  Finally, Judge Walton found that  the DOL's position was not arbitrary, capricious or an abuse of discretion.

This decision clarifies any open question as to whether mortgage loan officers may be categorized as falling under the administrative exemption to the FLSA.  Typical loan officers, whose primary duties involve sales, cannot be categorized as exempt, unless they meet the test for the outside salesman or other exemption.

POSTED BY SCOTT T. SILVERMAN ON JUNE 12, 2012

In Rogers v. Vulcan Manufacturing Co., Inc., No. 11-3927 (Fla. 1st DCA June 1, 2012), the First District Court of Appeal explained that employers must carefully draft non-compete agreements to avoid owing attorneys' fees to former employees who do not pay for their own defense, but, rather, have it funded by a subsequent employer.  In the case, a former employee prevailed in a non-compete case when the former employer's suit was involuntarily dismissed for lack of prosecution. The contract provided for attorneys' fees to the prevailing party: "In any action to enforce any term, condition, or provision of this agreement, the prevailing party shall be entitled to recover the reasonable attorney's fee incurred to enforce same."  The trial court awarded $0 in fees, reasoning that the defendant did not personally "incur" any fees, because they were paid by the subsequent employer.  On appeal, the First DCA disagreed, opining that the clear intent of the agreement was for the loser to pay attorney's fees incurred in the case, regardless of the source of the funds.  The court stated that “If the parties had intended to limit entitlement to situations in which the prevailing party was the one who actually paid attorney’s fees and was seeking reimbursement, or incurred an obligation to pay such fees, the Agreement could have so provided. But it did not, and the trial court erroneously read such a limitation into the Agreement.”  This case illustrates the need for employers to consider revising their non-compete agreements to make sure that they are not obligated to pay fees in a losing effort to enforce a non-compete, where the defense is funded by a subsequent employer.  Although not an issue in the case, employers should also be aware that an agreement to fund defense of a non-compete may be grounds for a tortious interference claim against the subsequent employer.

POSTED BY SCOTT T. SILVERMAN ON JUNE 6, 2012

In Gowski v. Peake,  No. 09-16731 (11th Cir. June 6, 2012), the Eleventh Circuit held that claims of a retaliatory hostile work environment are cognizable under Title VII.  The court reasoned that all other federal circuit courts have recognized this cause of action, and, further, that allowing such a claim is consistent with the statutory text, congressional intent and the EEOC's interpretation of the statute.  The court made two other important points in applying its ruling: (1) the same legal standards governing claims of a hostile work environment on the basis of membership in a protected group, such as race, gender, national origin or religion, apply; and (2) a defendant cannot utilize the defense that it would have made the same decision in the absence of retaliatory animus.  Where an adverse action is partly motivated by retaliation, an employer may avoid liability for that particular action by establishing the "same decision" defense, but it does not eliminate the adverse action from consideration of a retaliatory hostile work environment.  Accordingly, employers should examine their policies to make sure that retaliatory harassment is forbidden and subject to the same reporting requirements as other hostile work environment claims.  In addition, employers should be certain to document that any adverse actions taken against an employee are completely unrelated to protected activity.

POSTED BY SCOTT T. SILVERMAN ON JUNE 4, 2012

On May 30, 2012, the National Labor Relations Board's ("Board") Acting General Counsel, Lafe Solomon, issued his Third Report on Social Media Cases. This Report describes the restrictions on employee use of social media that an employer may lawfully include in its policies.

Under the National Labor Relations Act ("Act"), an employer may not implement a policy that would reasonably tend to chill employees in the exercise of their rights. If the rule does not explicitly restrict protected conduct, then the Board considers the rule to violate the Act, if: (1) employees would reasonably construe the language to prohibit protected activity;  (2) the rule was promulgated in response to union activity; or (3) the rule has been applied to restrict protected rights. Ambiguous rules must contain both limiting language and examples of clearly illegal or unprotected conduct to clarify that the rule does not restrict protected rights and may not be reasonably construed to do so.

The Report identifies, in great detail, the application of the foregoing standards to seven social media policies.  In six of the cases, the General Counsel found certain aspects of the policy to be lawful, although certain parts were unlawful.  In the last case, the General Counsel held that the entire policy was lawful.  Of particular interest, the Report explains that the following clauses were not overbroad: (1) a prohibition on "inappropriate postings that may include discriminatory remarks, harassment and threats of violence or similar inappropriate or unlawful conduct," because it could not be reasonably construed to reach, and there was no evidence that the rule was used to discipline, protected activity; (2) a requirement that employees be "fair and courteous" and "respectful," because examples made it clear that the policy did not reach protected activity;  and (3) a restriction on divulging trade secrets or  private or confidential information, because employees have no right to divulge trade secrets and, again, the rule contained sufficient examples of prohibited disclosures so that employees could not reasonably conclude that protected communications were prohibited.  The Report reprints the entire policy.

Employers are encouraged to review the Report and discuss with counsel the need to revise their social media policies, as necessary.