Monthly Archives: December 2013

December 26, 2013

ERISA Plan’s Limitation Period Is Enforceable, Says U.S. Supreme Court

The U.S. Supreme Court recently issued a decision that provides some welcome guidance to insurers and employers sponsoring ERISA employee benefit plans. The Court upheld a three-year limitations period in a long term disability plan. The terms of the plan required participants to file a lawsuit to recover benefits within three years after “proof of loss.” Heimeshoff v. Hartford Life & Accident Ins. Co.,No. 12-729, 571 U.S. ___ (Dec. 16, 2013). The Court ruled that because ERISA itself does not specify a limitations period, the plan’s three year deadline was reasonable and therefore enforceable.

Benefit Plan Participant Filed Lawsuit After Benefits Were Denied

Julie Heimeshoff, a senior public relations manager for Wal-Mart Stores, was a participant in a long term disability plan administered by Hartford Life & Accident Insurance Company (Hartford). In 2005, she filed a claim for disability benefits following a diagnosis of lupus and fibromyalgia. On her claim form, her rheumatologist listed her symptoms as extreme fatigue, significant pain and difficulty in concentration. Hartford denied her claim after her rheumatologist failed to respond to its requests for more information. In 2006, Heimeshoff provided Hartford with an evaluation from another physician who also determined that she was disabled. Hartford retained a physician to review Heimeshoff’s records who concluded that she was able to perform the activities of her sedentary job. Hartford again denied her disability claim.

After granting Heimeshoff an extension to the appeal deadline to provide additional evidence and retaining two additional physicians to review her claim, Hartford issued its final denial of benefits on November 26, 2007. On November 18, 2010, Heimeshoff filed suit in district court seeking review of her denied claim under ERISA’s judicial review provision, known as ERISA Section 502. Hartford and Wal-Mart asked the court to dismiss her suit because she did not file the case within the limitations period provided for in the plan, namely within three years after the time that written proof of loss is required to be furnished to Hartford. The district court agreed that the lawsuit was untimely and dismissed her case. On appeal, the Second Circuit affirmed. The U.S. Supreme Court agreed to hear the case in order to resolve a split among the Courts of Appeal on the enforceability of an ERISA plan’s contractual limitations period.

ERISA Contractual Limitations Provisions Should Be Enforced As Written

The long-term disability plan at issue stated that legal action against Hartford could not be taken more than three years after the time that written proof of loss is required to be furnished according to the terms of the policy. Written proof of loss is necessarily due before Hartford and the participant complete the internal review process and before a plan participant is notified of a final denial of benefits which is necessary before filing a lawsuit in court. The result of this contractual limitations period is that a participant has less than three years to file a lawsuit in court after learning that their benefit claim has been finally denied.

In reviewing whether to enforce this limitations period, the Supreme Court relied on well-established precedent which states that in the absence of a limitations period provided by a controlling statute, a provision in a contract may validly limit the time for parties to bring an action on such contract to a period less than that prescribed in the general statute of limitations as long as the shorter period is reasonable. The Court noted that ERISA does not specify a statute of limitations. Consequently, the Court ruled that a participant and a plan may agree by contract to a particular limitations period as long as it is reasonable.

Heimeshoff argued that the contractual limitations period at issue was not reasonable because it began to run before a claimant could exhaust the internal review process which is required before seeking judicial review. The Court unanimously disagreed, concluding that the three-year limitations period from the date that proof of loss is due was not unreasonably short and therefore, was enforceable. Although Hartford’s administrative review process took longer than usual, Heimeshoff still had approximately one year to file suit before the limitations period was up. Because Heimeshoff filed her lawsuit more than three years after her proof of loss was due, as required contractually by the plan, her complaint was time barred. Therefore, the Court upheld the dismissal of Heimeshoff’s suit.

Significance for Employee Benefit Plans

The Court’s decision is welcome news for insurers and employers who want efficient resolution of ERISA claims disputes. Plan documentation should be reviewed, and where appropriate, language should be added or clarified to provide a reasonable limit on the time a participant has to bring a lawsuit to challenge a denied claim for benefits.

Disclaimer: This article is designed to provide general information on pertinent legal topics. The statements made are provided for educational purposes only. They do not constitute legal advice and are not intended to create an attorney-client relationship between you and Holland & Hart LLP. If you have specific questions as to the application of the law to your activities, you should seek the advice of your legal counsel.

December 17, 2013

Colorado Raises Minimum Wage for 2014: Checklist for Complying with New Employment Developments

By Jude Biggs

A new year is just around the corner. Along with champagne toasts and resolutions to lose weight, January 1 typically brings new laws and regulations in Colorado. 2014 is no different. Colorado employers should plan now for the changes going into effect in 2014. It is also a good time to make sure you are in compliance with the new laws that took effect in 2013. Here is a checklist to help you stay on the right side of the law.

Colorado Minimum Wage Goes Up to $8.00 per Hour on January 1. The Colorado Division of Labor has adopted Minimum Wage Order 30 which raises the state minimum wage from $7.78 (2013) to $8.00 per hour, effective January 1, 2014. The state minimum wage for tipped employees increases to $4.98 per hour, also effective January 1, 2014. Colorado’s minimum wage is adjusted annually for inflation pursuant to the Colorado Constitution. If this applies to any of your workforce, update your payroll practices to comply with the new rate on the first of the year.
Marijuana may be Legally Purchased and Possessed on January 1. Adults may legally buy, use and possess small amounts of marijuana in Colorado beginning January 1st. Because marijuana is still illegal under federal law, Colorado employers may continue to have workplace policies banning its use by employees and prohibiting possession of marijuana on company premises. Review and if necessary, update your policies to reflect that use of controlled substances and drugs that are illegal under either state or federal law are not permitted. The new year is a good time to communicate this to your employees.
Rules Implementing Employment Opportunity Act (Credit History Law) Effective January 1. Colorado’s Employment Opportunity Act, section 8-2-126, C.R.S., was enacted last spring and went into effect on July 1, 2013, restricting an employer’s use of credit history information on employees and applicants. (See our post on that new law.) The Division of Labor has adopted new rules, 7 CCR 1103-4, that go into effect on January 1 to implement the provisions of the act. The new rules include a couple of new definitions and clarifications not found in the act itself, including that “consumer credit information” does not include income or work history verification and that “prevailing party” means the employee who successfully brings, or the employer who successfully defends, the complaint. The new rules also describe the enforcement mechanism for violations, including how complaints must be filed, the investigation process, initial decisions and appeals.
Rules Implementing Social Media and the Workplace Law Effective January 1. Last spring, Colorado enacted a law, found at section 8-2-127, C.R.S., that restricts an employer’s access to personal online and social media sites of employees and applicants. (We previously wrote on that law here.) The law went into effect on May 11, 2013 but new rules implementing the law go into effect on January 1, 2014. In large part, the rules, 7 CCR 1103-5, mirror the act itself but add that it is OK for an employer to access information about employees and applicants that is publicly available online. The new rules also detail the complaint, investigation, decision, appeals and hearing process.
2013 Family Care Act Extends FMLA Coverage to Care for Civil Union and Domestic Partners. Effective August 7, 2013, Colorado’s Family Care Act, section 8-13.3-201 et seq., C.R.S., extends leave benefits under the federal Family and Medical Leave Act (FMLA) to eligible employees to care for their civil union and domestic partners with a serious health condition. If you are a covered employer under the FMLA, ensure that your FMLA forms, policies and practices provide that eligible employees may take leave to care for a seriously ill or injured civil union or domestic partner. Also, for multi-state employers subject to the FMLA, remember that if you have employees in states that recognize same-sex marriages, the FMLA definition of “spouse” will include employees’ same-sex spouses due to the U.S. Supreme Court’s decision in United States v. Windsor (further discussed here).
Age 70 Cap on Colorado Age Discrimination Claims Eliminated in 2013. Colorado’s legislature enacted changes to the Colorado Anti-Discrimination Act (CADA). Effective August 7, 2013, there is no longer an upper age limit of 70 years old for age discrimination claims under CADA, section 24-34-301, et seq..C.R.S. This brings Colorado’s age discrimination law in line with the federal Age Discrimination in Employment Act which makes it unlawful to discriminate against employees and applicants on the basis of age 40 or older with no upper age limit.
Prepare for Changes in Remedies Available for Colorado Discrimination Claims Beginning January 1, 2015. Colorado added new remedies, including punitive damages, that may be recovered for violations of CADA for claims alleging discrimination or unfair employment practices that accrue on or after January 1, 2015, section 24-34-405. C.R.S. With a year to prepare, now is the time to get policies in place to address reasonable accommodations, complaint procedures and other good faith measures to resolve workplace discrimination issues.

Start the year off right by making sure you comply with these new developments in Colorado employment laws. We wish you a happy, healthy, prosperous and compliant 2014!

For more information, contact Jude at 303-473-2707 or jbiggs@hollandhart.com.

December 9, 2013

Holiday Party Checklist—Plan Ahead to Minimize Employer Risks

By Mark Wiletsky

Delicious food, fine wines, music, camaraderie, laughter – all ingredients for a great holiday get-together. What could go wrong? Too much, unfortunately. Employees may drink too much, act inappropriately, offend co-workers or guests, hurt themselves or others, or even start a brawl. Depending on the circumstances, your company may find itself potentially liable for the inappropriate or unlawful actions of your employees at company-sponsored parties. You can help minimize the risks associated with holiday parties by following these five tips.

Avoid or Limit Alcohol

Employers face potential liability when providing alcohol at a company holiday event when someone gets hurt due to drunk driving, falling down, etc., or when inappropriate behavior crosses the line from embarrassing to unlawful, such as sexual harassment or violence during an argument. You can limit your company’s exposure for such conduct by either banning alcohol entirely (we know that may not be well-received in some situations), or limiting each person’s consumption through the use of drink tickets or a 2-drink limit. If you choose to allow alcohol at your events, don’t allow free access to the alcohol (e.g., open bar, self-serve beer or unlimited wine bottles). Instead have a professional, licensed bartender serve the alcohol as they are trained not to over-serve patrons. Be sure to offer plenty of food and non-alcoholic beverages. Arrange for taxis or hotel stays if someone over-indulges. Schedule the event during the week so folks are less inclined to get carried away. Set an end time for the party and shut down the bar at least a half hour before the event closes. Do not authorize or condone “after parties.” Finally, designate some supervisors or managers to refrain from drinking alcohol to make sure things don’t get out of hand.

Keep Harassing Behavior in Check

Make sure that your sexual harassment policy is up-to-date and that it applies to company parties, even if held off company premises. Send out a reminder to employees in advance of the party that all company policies, including those prohibiting harassment and other inappropriate conduct, apply to the party. Consider making the event a family party where employees may bring their spouse, significant other, or children as the presence of family members and children often deters inappropriate behavior which could give rise to a harassment complaint. Make sure that supervisors and managers watch out for potentially harassing conduct and are trained to intervene as necessary.

Respect Religious Differences and Keep the Party Neutral

Although many holidays toward the end of the year are religious in nature, be sensitive to your employees’ varying religious beliefs and avoid any conduct that could be construed as favoring one religious group over another. Refrain from calling your party a “Christmas Party” and stick with the neutral “Holiday Party” instead. Do not make attendance at the company-sponsored events such as parties, volunteer activities, food drives or other holiday outings mandatory. Make sure the timing of the company party does not exclude any employees for religious reasons. For example, because the Jewish Sabbath starts on Friday night, a party on a Friday evening may exclude Jewish employees. Avoid decorating with religious symbols, such as nativity scenes, menorahs or angels. There are plenty of neutral decorations, such as snowflakes, holly and reindeer, that can be used instead.

Be Wary of Gift Exchanges

Gift exchanges between employees may seem innocuous enough, but consider the potential issues a gift exchange may cause. Employees may not be able to afford to participate, even within a recommended cost guideline. Other employees may give sexy or “funny” gifts that end up offending others. The best practice is to avoid a company or department sponsored gift exchange altogether. If you decide to allow one among your employees, make sure it is entirely voluntary and no one is pressured or made to feel uncomfortable for not participating. Set cost guidelines and remind participants that gifts must be appropriate for the workplace.

Remember Wage and Hour Laws

If you assign any non-exempt employees to plan, prepare for and staff the party, their hours are likely work hours for which they must be paid. For example, if your office receptionist is required to be at the door of your holiday party to greet guests and hand out name tags, that individual is likely working and you need to include those hours in his or her weekly work hours when determining regular and overtime wages. You do not need to pay employees who are attending the party if their attendance is voluntary and they are not expected to provide services that benefit your organization.

Follow this checklist and you’ll avoid last minute holiday headaches and keep your organization out of trouble.

December 3, 2013

Divided Fifth Circuit Overturns D.R. Horton on Enforceability of Employer’s Arbitration Agreement Prohibiting Class Claims

By Jeffrey T. Johnson

In a much-anticipated decision, the Fifth Circuit Court of Appeals rejected the National Labor Relations Board’s controversial D.R. Horton decision, which held that an arbitration agreement requiring an employee to waive his or her right to bring class claims violated the National Labor Relations Act (NLRA). Agreeing with its sister circuit courts, the Fifth Circuit held that the NLRA did not override the Federal Arbitration Act (FAA) meaning the employer’s arbitration agreement must be enforced according to its terms, including the agreement’s preclusion of class claims. D.R. Horton, Inc. v. NLRB, No. 12-60031 (5th Cir. Dec. 3, 2013). The Court upheld, however, the NLRB’s finding that the arbitration agreement could be misconstrued by employees as precluding the filing of unfair labor practice charges which violates Section 8(a)(1) of the NLRA.

Arbitration Agreement Prohibiting Class Claims Does Not Violate NLRA

The Fifth Circuit’s ruling puts to rest a thorny issue for employers who have struggled with the Board’s D.R. Horton decision. The controversy arose in early 2012 when the NLRB concluded that home builder D.R. Horton violated Sections 7 and 8(a)(1) of the NLRA by requiring employees to sign a Mutual Arbitration Agreement that precluded employees from filing class or collective claims related to their wages, hours or other working conditions. In re D.R. Horton, Inc., 357 NLRB No. 184 (Jan. 3, 2012). The Board found that the agreement interfered with the exercise of employees’ substantive rights under Section 7 of the NLRA which allows employees to act in concert with each other for their mutual aid or protection.

Two of the three judges on the Fifth Circuit panel disagreed. First, the majority found that the use of class action procedures is not a substantive right but is instead a procedural device. Then, the judges analyzed whether there is a conflict between the NLRA and the FAA that would preclude application of the FAA to enforce the arbitration agreement according to its terms. Relying on the U.S. Supreme Court’s decision in AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740 (2011), the Fifth Circuit determined that requiring a class mechanism is an impediment to arbitration and violates the FAA so the Board’s attempt to fit its rationale into the FAA’s “savings clause” failed. The Court then concluded that neither the NLRA’s statutory text nor its legislative history contains a congressional command to override the FAA. Failing to find an inherent conflict between the NLRA and the FAA, the Court ruled that the arbitration agreement must be enforced according to its terms under the FAA.

The Fifth Circuit pointed out that every one of its sister circuits to consider this issue had refused to defer to the NLRB’s rationale in D.R. Horton, and had held arbitration agreements containing class waivers enforceable. The two judges in the majority stated, “we are loath to create a circuit split.” Judge Graves dissented, stating that he agreed with the Board that the arbitration agreement interfered with the exercise of employees’ substantive rights under Section 7 of the NLRA.

Agreement Violates NLRA Because Employees Might Believe it Prohibits Filing Unfair Labor Practice Charges

The arbitration agreement used by D.R. Horton required that employees agree to arbitrate “without limitation[:] claims for discrimination or harassment; wages, benefits, or other compensation; breach of any express or implied contract; [and] violation of public policy.” Although the agreement provided four exceptions to arbitration, none of the exclusions referred to unfair labor practice charges. All three judges found that this could create a reasonable belief that employees were waiving their administrative rights, including the right to file unfair labor practice charges under Section 8(a)(1) of the NLRA. Therefore, the Court enforced the Board’s order that D.R. Horton violated Section 8(a)(1) because an employee would reasonably interpret the arbitration agreement as prohibiting the filing of a claim with the Board, validating the need for D.R. Horton to take the ordered corrective action.

Challenges to Composition of the Board Rejected

While this case was on appeal to the Fifth Circuit, the D.C. Circuit issued its Noel Canning decision which vacated an order of the three-member panel of the Board by ruling that recess appointments of the panel members were invalid. Noel Canning v. NLRB, 705 F.3d 490 (D.C.Cir. 2013) cert. granted 133 S.Ct. 2861 (U.S. June 24, 2013)(No. 12-1281). Because the panel that decided the D.R. Horton case included a member appointed by recess appointment, the Fifth Circuit asked the parties to submit briefs on whether it must consider the constitutionality of the recess appointments. The Court ultimately decided it need not consider the issue, finding that it retained jurisdiction to resolve the dispute at hand and leaving it to the U.S. Supreme Court to decide the constitutionality of the Board’s recess appointments. The Fifth Circuit also rejected D.R. Horton’s challenges that Board Member Becker’s recess appointment expired before the Board issued its decision, and that the Board had not been delegated authority to act as a three-member panel.

Favorable Result for Employers

Although there are pros and cons to using arbitration agreements in the employment context, today’s ruling by the Fifth Circuit (absent review by the Supreme Court) removes the impediment to incorporating class action waivers in employment arbitration agreements. The decision reinforces, however, that certain language within an arbitration agreement may violate the NLRA if it is reasonably seen as limiting an employee’s right to file an unfair labor practice charge. Employers should consult with employment counsel to review whether arbitration agreements are appropriate for their workforce, and if so, to ensure the wording of the agreement is enforceable.