MMC, INC. E-Newsletter Volume V, Issue No. 4

April 2009 

Spring Forward Into Optimism

Like most business leaders, your ability to face challenge with optimism and positive energy can be empowering to you and your workplace. Therefore, we celebrate optimism in this spring-time edition of MMC’s E-Newsletter. We encourage you to visit the links provided along the side panel of this newsletter and, as always, we welcome your calls for individual guidance for resolving workplace issues. On behalf of everyone at MMC, we wish you a Happy Easter, Passover, New Year. Most of all, we wish you and yours a very successful and invigorating Spring 2009. 

In this issue

• Your Workplace and Anti-Harassment Training 
• What is UI? Do I have a say in how claims are processed?
• COBRA Subsidy FAQ
• Should I Invest In A 401K Plan?
• Labor & Employment Law Updates

Your Workplace and Anti-Harassment Training

Written by: Michele O'Donnell, M.S. Human Resources Management

A major area for litigation that continues to grow on both the federal and state fronts is that of Harassment and Discrimination.  Under federal law, Title VII prohibits workplace harassment and discrimination based on race, color, national origin, religion, sex, pregnancy, sex stereotyping.  In California, the state legislature has adopted Title VII and expanded on the protections afforded under anti-harassment/discrimination laws to include protections based on religious creed, color, ancestry, physical disability, mental disability, medical condition, marital status, and perceived sexual orientation.

Federal law requires employers in the U.S. respond immediately to claims of sexual harassment and provide assurances that work environments are free from harassment. The EEOC has established minimum standards and guidelines which states should adopt in order to adhere to anti-harassment laws. The EEOC Enforcement Guidance provides that employers should ensure that supervisors and managers receive periodic training so they fully understand their responsibilities under anti-harassment laws and harassment/discrimination complaint procedures.

Many states, prompted by the federal government, have passed training mandates across a broad spectrum of topics for employers.  A prime example is California’s AB 1825 otherwise known as California’s Sexual Harassment Prevention Training law. California employers are subject to the following requirements if they have 50 or more employees. 

• Two Hours of Training Every Two Years. Must be provided to each supervisory employee, every two years.
• New Hires and Promotions. New supervisory employees must be trained within six months of their assumption of a supervisory position, and then every two years.
• High Quality Training Required. The training mandated must be of a high quality, conducted via "classroom or other effective interactive training" and must include the following topics: 
  • Information and practical guidance regarding federal and state statutory laws about sexual harassment.
  • Information about the correction of sexual harassment and the remedies available to victims of sexual harassment.
  • Practical examples aimed at instructing supervisors in the prevention of harassment, discrimination, and retaliation.
• Failure to Comply Opens the Door to Harassment Lawsuits. A claim that an employer failed to provide AB 1825-mandated sexual harassment training does not automatically result in the liability of an employer for harassment. Plaintiffs will argue, however, that the failure to meet the training mandate is evidence of an employer's failure to take all reasonable steps to prevent sexual harassment.

Workplace professionals argue that the training required under AB 1825 must extend beyond sexual harassment and to other forms of prohibited harassment, discrimination and retaliation.  Thus the well-rounded sexual harassment training will include, at the minimum, discussions of "how harassment of an employee can cover more than one basis.” 

Workplace training should be an ongoing concern and effort.  To learn more about how MMC can partner with your workplace to accomplish training goals or to learn about what training you must comply with call MMC’s Labor & Employment Law Department at (800) 899-MMCI (6624). 

What is UI? Do I have a say in how claims are processed?

Written by: Michele O'Donnell, M.S. Human Resources Management

The federal Unemployment Insurance Program (UI) provides weekly benefit payments for workers who lose their job through no fault of their own and are attempting to re-enter the workforce. Eligibility for benefits requires that the claimant be able to work, be seeking work, and be willing to accept suitable work. In California, the UI program is managed by the Employment Development Department (EDD).

The benefit amount is calculated on wages paid during a 12-month period, called the “Base Period.”  The Base Period is defined as the first four of the last five calendar quarters the claimant-employee completed during their employment, prior to filing for benefits. The quarter with the highest amount of wages during the Base Period will determine the weekly benefit amount. In California, the minimum weekly benefit amount is $40 and the maximum is $450. Generally, benefits may be collected for a maximum of 26 weeks or 1/3 of the total base period wages, whichever is less.

So, how are unemployment insurance claims investigated and processed by the EDD? To determine whether a claimant-employee is eligible for benefits, the EDD engages in a fact gathering of sorts on whether the job loss was based on no fault of the claimant-employee. Documentation of performance issues is critical. If employment was terminated because of a vague “he/she did not perform their job satisfactorily,” the EDD will interpret that the claimant-employee did not possess the training or skills necessary to perform the job and they will be awarded UI benefits. Under this scenario, EDD will award benefits and provide supporting explanation to the charged employer of: “The reasons for discharge do not meet the definition of misconduct connected with the work.”  

In a nutshell the UI process is:

• Employee is discharged;
• Employee files a UI claim with the EDD;
• EDD requests information and documentation from claimant and employer; and
• Initial decision is made based solely on the information provided by both parties.

If the decision is objected to by either the claimant-employee or the employer:

• An appeal is filed;
• Appeal hearing is scheduled and both parties appear and present their position in person;
• Initial appeal decision is made and a written decision is sent to each party;
• Benefits are paid or denied;
• Or Second Appeal is filed; and
• Appeals Board reviews appellate decision for errors.  If there are no errors of law, the decision will stand. If there is an error of law, the Appeals Board will reverse the decision and award or withhold benefits.

In conclusion, employers do have a say in how claims are investigated and processed. Terminating employees must be managed through sufficient documentation.  Additionally, there is an often overlooked benefit to managing UI claims. Costs can be substantially minimized when claims are kept to a minimum.   The cost of UI is generally based on the number of claims that impact an employer’s tax account. Helpful tips for managing costs include answering all EDD claims in a timely manner, appealing all unfavorable rulings, and reviewing costs regularly and carefully to avoid errors.

To learn more about UI and managing costs, call MMC’s Labor & Employment Law Department at (800) 899-MMCI (6624). You may also find it helpful to visit U.S. Department of Labor Website.

COBRA Subsidy FAQ

Written by: Kristy Kwan, Benefit and Retirement Plan Administrator

On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act (ARRA), which includes several important changes to COBRA administration. We have listed here a few frequently asked questions/concerns that employers may have on this issue.

What is my responsibility as an employer?

Employers whose healthcare plans fall under federal COBRA law need to ensure that all employees who have been involuntarily terminated on or after September 1, 2008 are given the opportunity to enroll for COBRA under the new stimulus package. Additionally, any eligible employee who originally declined, waived, or terminated their COBRA continuation must be given a “second chance” to enroll in the coverage, effective March 1, 2009.

**Please note that if you are an MMC, Inc. client, MMC fully administers your benefit plans and will assume responsibility for notifying your former employees. As an MMC, Inc. client, you do not need to take any action.

How do I notify employees? What is the deadline for enrollment?

The U.S. Department of Labor has released a model letter that employers can utilize to notify employees under the ARRA.  Employees have a 60-day period from the date the notification is mailed to return COBRA election forms.

Who is eligible for the COBRA subsidy?

Only employees who were involuntarily terminated within the specified time frame (September 1, 2008 – December 31, 2009) are eligible. Eligibility will terminate if the employee becomes eligible for another group plan or Medicare, or if the employee exceeds the 9 month subsidy time period. Employees who voluntarily quit or were involuntarily terminated for gross misconduct are not eligible for the subsidy. Employees whose modified adjusted gross income exceeds $145K ($290K if filing jointly) are also ineligible for the subsidy.

What if I have employees who are enrolled in COBRA continuation due to a change in status (from full-time to part-time)?

Employees who are still actively employed, whether on a part-time or “per diem” status, are not eligible for the COBRA subsidy.

If my company doesn’t have enough employees to fall under federal COBRA legislation, what do I need to do?

Employers with fewer than 20 benefit eligible employees fall under Cal-COBRA legislation.  Under Cal-COBRA, the insurance carriers bear the responsibility for notifying former employees eligible for COBRA subsidies. If you are unsure of your COBRA status, we advise that you contact your benefit carrier.

Should I Invest In A 401K Plan?

Written by: Kristy Kwan, Benefit and Retirement Plan Administrator

In our current unstable economic climate, it may seem like the worst time to be investing in your company’s retirement plan. It’s terrifying to see the news and witness, perhaps, your own 401k balance drop hundreds or thousands of dollars over the course of a few months. While your first instinct may be to stop investing, liquidate all savings, and hide everything under your mattress, consider this:

In actuality, now is a great time to invest. Though it seems counter-intuitive to buy into a volatile market, stock and mutual fund prices are the lowest they have been in a very long while. This means the ability to purchase more shares is made possible, despite being able to contribute perhaps only a limited amount. While MMC strongly advises all to consult with a certified financial advisor before making any substantial investments, continuing to fund a 401k account can pay-off in the long run. Remember, the 401k is a long-term savings vehicle. Do not allow a short-term, fickle market affect long-term retirement goals.

A 401k plan requires a significant amount of time, resources, and administration. The costs involved in maintaining these plans can involve fees for discrimination testing, tax filings, due diligence reports, auditing, and more. Overall, the costs can easily approach thousands. However, for MMC clients, a standard 401k plan is available to clients and their employees free of charge. Customization of the plan is also available. To learn more, please call the MMC Benefits Department at (800) 899-MMCI (6624).

Labor & Employment Law Updates

Written by: Crystal M. O'Brien, Esq.  

Seventh Circuit Clarifies Whistleblowing Protections

In Harp v. Charter Communications, Inc., an auditing department manager Mary Harp alleged her lay-off, occasioned by the elimination of the entire auditing department, was merely a ruse and was motivated by her recent discovery that the company was paying a contractor for work not performed.  While Harp had not reported the discovery to any regulatory agency she did voice her concerns to the company’s in-house counsel.  In response, counsel encouraged Harp to develop her concerns more fully through an investigation.  Before completing the investigation, Harp was laid off.  Harp subsequently brought a claim for retaliation alleging her whistleblowing activities were protected under provisions of the Sarbanes-Oxley Act.

The trial court concluded that Harp had not established a whistleblowing protection claim.  The Seventh Circuit on appeal from Harp reviewed and agreed with the trial court.  This is because Harp failed to establish by a preponderance of evidence that she reasonably and objectively believed her employer was engaging in fraud.  The Court clarified that it is an employee’s burden to (1) show by a preponderance of evidence that she engaged in protected whistleblowing activity, (2) that her employer had knowledge the employee engaged in protected activity, (3) the employee suffered an unfavorable personnel action, and (4) that the protected activity was a contributing factor in the unfavorable personnel action.  Upon meeting this evidentiary burden, the burden for disproving the claim would then shift to the employer to show that through clear and convincing evidence, the same unfavorable action against the employee/claimant would have occurred in the absence of the protected activity. 

What is unique about this case is that the federal court required Harp to establish that the payment by her employer for work she believed was not performed had to be judged from an objective standard.  In other words, it was not enough that Harp reasonably believed she discovered a fraudulent practice but would anyone similarly situated also find that the practice complained of amounted to fraud.

To read the full text of the case, please click here. 

Cal Courts Say “No” To UCL/Tip Pool Claims and “No” To Arbitration Clauses

In a series of cases this month, the California Court of Appeal is resounding a clear stance against bringing unfair business practice claims as part of well-plead wage and hour actions.  The courts are also demonstrating growing concern as to whether courts will enforce arbitration provisions within the context of employment law disputes.

In Grodensky and Budrow, Divisions Two and Eight of the Court of Appeal applied the rationale that because tip pooling is statutorily regulated by the Department of Industrial Relations it cannot constitute an unfair business practice as contemplated by Business and Professions Code section 17200 et seq. This is because violations of the labor code, in this instance, are statutorily addressed by the Department.  On a grander scale, cases like translate to really good news for California businesses because the legal exposure for multiple years to mounting wage and hour claims, interest and penalty appear to be disfavored by the judiciary.  To read these decisions in full, see Grodensky v. Artichoke Joe’s Casino Inc., and Budrow v. Dave & Busters of California, Inc..

Courts this month have also focused on the increasingly controversial question of whether arbitration can be compelled for employment disputes.  In Sanchez v. Western Pizza Enter., Inc. and Franco v. Athens Disposal Co., Inc., courts continue to highlight the detail to which arbitration provisions must be crafted so as to not prohibit claims which employees are entitled to as a matter of right and law. 

In Sanchez, Division Three of the Court of Appeal held that a waiver of class actions and  failure to provide discovery and evidentiary review in a manner approved by California law (as opposed to the Federal Arbitration Act), was sufficient to render an arbitration agreement entirely unenforceable.  While the Sanchez court recognized that an agreement the agreement in question was not likely to be understood by a lay person despite efforts by its drafters to make the agreement comply with current law in that it contained opt-out, employer paid, and clearly legible provisions.  In Franco, Division One held that a waiver of class actions and preclusion of an employee from bringing claims on behalf of others (such as under the Private Attorney General Act) was similarly sufficient to make an entire arbitration agreement unenforceable.  

What these cases collectively signal, in the backdrop of similar decisions being published around the nation, is that the future of enforceability of arbitration agreements, within employment, is seriously at risk.  To that end, employers are encouraged to review their arbitration clauses with legal counsel to determine the best way to assure enforceability or to evaluate whether the use of these agreements remains appropriate for a particular workplace.