Category Archives: Colorado

June 26, 2015

Same-Sex Marriage Equality: What Employers Need to Know After Obergefell

Same-sex couples have a Constitutional right to marry and have their marriages recognized nationwide. In a 5-to-4 decision, the U.S. Supreme Court concluded that states are required to license a marriage between two people of the same sex under the Fourteenth Amendment. Obergefell v. Hodges, 576 U.S. ___ (2015). As a result, same-sex couples may now legally marry in all states. This ruling has massive implications, as rights and benefits extended to opposite-sex spouses will be available to same-sex spouses across the United States.

Marriage Equality Prevails

In an opinion authored by Justice Kennedy, the Court recognized that same-sex couples were not seeking to devalue the institution of marriage, but instead sought for themselves the respect, rights, and responsibilities that accompany a legal marriage. The Court held that under both the Due Process and the Equal Protection Clauses of the Fourteenth Amendment, same-sex couples have the fundamental right to marry.

The Due Process Clause provides that no state shall “deprive any person of life, liberty, or property, without due process of law.” The Court determined that same-sex couples may exercise the right to marry under this Clause for four reasons:

the right to make the personal choice of who to marry is inherent in the right of individual autonomy; choices concerning family relationships, whether to have children, and whether to use contraception are protected intimate decisions that extend to all persons, regardless of sexual orientation;
the right of couples to commit themselves to each other and enjoy intimate association extends to same-sex couples just as it does to opposite-sex couples;
protecting same-sex marriage safeguards children and families because without the recognition and stability of marriage, children of same-sex couples suffer harm and humiliation as well as material costs because of the stigma attached to “knowing their families are somehow lesser” than families of opposite-sex couples; and
marriage is a “keystone” of our country’s social order and national community; governmental recognition, rights, benefits and responsibilities depend in many ways on marital status and same-sex couples should not be denied the benefits that accompany marriage.

The Court also ruled that the right of same-sex couples to marry is a liberty protected by the Fourteenth Amendment’s guarantee of equal protection of the laws. The Court admonished that state laws that ban same-sex marriage deny same-sex couples the benefits afforded to opposite-sex couples, disparage same-sex couples’ choices, and diminish their personhood. The Equal Protection Clause prohibits such “unjustified infringement of the fundamental right to marry.”

Recognition of Marriages Performed in Other States

The Court also ruled that a state may not refuse to recognize the same-sex marriages lawfully performed in another state. The result is that any lawful marriage that has already taken place in the United States, whether same- or opposite-sex, must be recognized in all 50 states.

What This Means for Employers

Multi-state employers that have been dealing with state-specific policies that were dependent on state-law recognition of same-sex marriages may now want to implement a uniform policy that applies to all locations. Here are steps you should consider in light of the legalization of same-sex marriages nationwide:

FMLA leave: Same-sex spouses will be deemed spouses under the Family and Medical Leave Act (FMLA) no matter where the marriage took place or where the employee resides. This means that you need to permit eligible employees to take FMLA leave to care for their same-sex spouse with a serious health condition, for qualifying exigency leave if the spouse is being deployed and other qualifying reasons. Update your FMLA policies, forms and practices to permit this leave.
Bereavement and other leaves: If you offer bereavement leave for the death of a spouse or in-laws, you should update your policy to reflect that this leave includes same-sex spouses and relatives of the same-sex spouse. If you offer any other leaves that define immediate family or extend to familial situations, such as non-FMLA medical leave or military leave, update those definitions as well.
Marital status discrimination: If you operate in states that prohibit discrimination based on an employee’s or applicant’s marital status, you will be prohibited from discriminating based on same-sex marriages.
Emergency contacts and beneficiaries: Employees with a same-sex spouse may want to update their emergency contact or beneficiary information listed on group life insurance or retirement plans. Be prepared to administer these changes.
Employee benefits: Group insurance, retirement and other employee benefit plans will need to be reviewed and updated. Be certain to consult your benefits attorney and plan administrators for advice on required changes.
W-4 Forms and tax updates: In light of potential income tax implications for newly recognized same-sex spouses, some employees may want to change their tax withholding information. Be prepared to update W-4 and state withholding amounts upon request.

These and additional policies and procedures impacted by the Court’s ruling may require that you update your employee handbook, policies on your intranet, plan documents, forms, beneficiary designations and other personnel documents. Be sure to notify and train your human resources professionals and supervisors on all changes.

The Court’s landmark decision grants “equal dignity in the eyes of the law” to same-sex couples. Take this opportunity to review your employment policies and practices so your company does the same.

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June 25, 2015

Affordable Care Act Survives Challenge: Tax Credits Available For Federal Exchanges

By Bret Busacker and Gabe Hamilton

To avoid an economic “death spiral” of insurance markets, the U.S. Supreme Court ruled that tax credits are available to individuals in states that have a federal exchange under the Patient Protection and Affordable Care Act (ACA). King v. Burwell, 576 U.S. ___ (2015). In a 6-to-3 decision, the Court relied on context and policy to resolve an ambiguity in the statute, supporting the ACA’s tax credit in states where the health care exchange is established by the federal government.

An Exchange Established by the State-or the Federal Government

The question before the Court was whether the ACA’s tax credits are available to individuals in states that have a health exchange established by the federal government, or only to those in states where the exchange was established by the state. The ACA provides that individuals are only eligible for premium tax credits under the ACA if the individual obtains insurance through “an Exchange established by the State.” But the Act also provides that if a state fails to set up its own exchange, the federal government will establish “such Exchange.”

The Internal Revenue Service issued a regulation making ACA premium tax credits available regardless of whether the exchange was established and operated by the state or the federal government. The parties challenging that IRS regulation in this case argued that tax credits should not be available in states with a federal exchange as that was not an exchange “established by the State.”

Chief Justice John Roberts, writing for the majority, acknowledged that the challengers’ “plain-meaning” arguments were strong, but concluded that the context and structure of the statutory phrase meant that Congress intended the tax credits to apply to eligible individuals purchasing insurance on any exchange created under the ACA. He wrote that the statute is ambiguous and that plain meaning of a statute is but one means the Court uses to resolve an ambiguity. In this instance, context and structure of the statute were more persuasive.

Roberts noted that Congress passed the ACA to improve health insurance markets, not to destroy them. He cited studies that suggested that if tax credits did not apply to federal exchanges, premiums would increase between 35-47 percent and enrollment would decrease by about 70 percent. He wrote, “It is implausible that Congress meant the Act to operate in this manner.”

Tax Credits Are One of The ACA’s Key Reforms

The Court defined the tax credit scheme as one of the ACA’s three key health insurance reforms. The first key reform is the “guaranteed issue” requirement, which prevents insurance companies from denying health care insurance based on a person’s health, and a “community rating” requirement, which prohibits insurers from charging higher premiums to those in bad health.

The second key reform is the individual insurance mandate, requiring individuals to have health insurance coverage or pay a tax penalty. This reform is designed to get more healthy people into the insurance pool, lowering premiums across the board. Individuals are exempt from this requirement if the cost of buying insurance would exceed eight percent of their income.

The third key reform is providing tax credits to certain individuals in order to make insurance more affordable. People with household incomes between 100 and 400 percent of the federal poverty line are eligible to purchase health insurance on the exchange with tax credits which are provided directly to the insurance provider. The availability of premium tax credits through state and federal exchanges is seen as essential in getting more individuals insured and spreading the risk pool.

Acknowledging that the ACA included many instances of “inartful drafting,” the Court decided that limiting tax credits to state exchanges would gut the second and third key reforms in states with a federal exchange. The combination of no tax credits and an ineffective coverage requirement would result in insurance markets plunging into a “death spiral.” The Court concluded that Congress meant for all of the key reforms to apply in every state, including those with federal exchanges.

Result: No Change for Employers in ACA Requirements

By upholding the tax credit scheme in all states regardless of whether an exchange was set up by the state or the federal government, the Supreme Court supported the overall scheme of the ACA. Although Justice Scalia wrote a scathing dissent that was joined by two other justices, the ACA remains intact. Employers should continue to comply with all applicable ACA requirements.

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June 22, 2015

New FMLA Certification Forms Include GINA Safe Harbor Notice

By Jude Biggs

The U.S. Department of Labor (DOL) unceremoniously published new FMLA forms with an expiration date of May 2018. The only significant revision is the addition of a notice to employees and health care providers on the medical certification forms informing them not to reveal genetic information in violation of the Genetic Information Nondiscrimination Act (GINA).

Genetic Information Off-Limits to Employers

GINA, which went into effect in late 2009, applies to employers with 15 or more employees. It not only makes it unlawful for employers to discriminate or retaliate against employees and applicants because of their genetic information, but it also prohibits employers from requesting, requiring, purchasing or disclosing genetic information.

Genetic information is defined to include information about an individual’s genetic tests and the genetic tests of an individual’s family members, genetic services and an individual’s family medical history. Family medical history is included because it often reveals whether someone has an increased risk of getting a disease, disorder or condition in the future.

FMLA and GINA Intersect

Under the FMLA, employers may require that an employee requesting leave for his or her own serious health condition or to care for a family member with a serious health condition provide a medical certification form completed by a health care provider. Through the medical certification form, health care providers provide medical facts about the condition, such as the expected duration, the nature of treatments, and whether the employee is unable to perform his or her job functions as well as information about the amount of leave needed. In some circumstances, responses by health care providers may reveal genetic information that is protected by GINA.

Because of this intersection of the FMLA and GINA, the regulations implementing GINA offer suggested language that covered employers may use to specify that no genetic information should be provided when medical information is offered to support a request for FMLA leave. By utilizing this safe harbor language and advising the employee and the health care provider not to provide genetic information when completing the FMLA medical certification form, the inadvertent receipt of genetic information by the employer will not be deemed a violation of GINA.

In the past, the DOL’s model FMLA certification forms lacked this GINA safe harbor language. Consequently, employers had to offer it separately or utilize their own FMLA forms in order to take advantage of GINA’s safe harbor provision. Now, the DOL has included the following language in its model FMLA certification forms:

Do not provide information about genetic tests, as defined in 29 C.F.R. § 1635.3(f), or genetic services, as defined in 29 C.F.R. § 1635.3(e).

The certification form for an employee’s own serious health condition includes a statement that no information about the manifestation of disease or disorder in the employee’s family members, 29 C.F.R. § 1635.3(b), should be provided.

Use New FMLA Forms Or Update Your Own Forms

The new FMLA model forms, with fillable form fields, are linked here:

Take steps now to update your FMLA practices to use the new DOL forms, or if you use your own FMLA forms, update them to reflect the added recommended language.

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June 15, 2015

Employee Termination For Off-Duty Marijuana Use Legal, Says Colorado Supreme Court

By Emily Hobbs-Wright

In a nationally awaited decision, the Colorado Supreme Court upheld an employer’s termination of an employee who tested positive for marijuana due to his off-duty, off-premises marijuana use. Issued on June 15, 2015, the Court’s narrow decision in Coats v. Dish Network, LLC turned on the fact that marijuana use remains illegal under federal law. Construing the term “lawful” to encompass activities that are permitted by both state and federal law, the Court ruled that Coats’s off-duty marijuana use was not a protected activity within the meaning of Colorado’s lawful activities statute because marijuana use remains unlawful under the federal Controlled Substances Act. The Court refrained, however, from addressing the issue of whether the state’s Medical Marijuana Amendment confers a state Constitutional right to such use.

Although binding only on Colorado, this decision provides employers nationwide guidance in enforcing drug-free workplace policies as more and more states legalize some form of marijuana use.

Coats v. Dish Network: Employee Not Impaired By Marijuana At Work

Dish Network, LLC terminated Brandon Coats, a quadriplegic, for violating its zero tolerance drug policy after he tested positive for marijuana in a random workplace drug screen. Coats claimed he only used marijuana after work at home to treat painful muscle spasms caused by his quadriplegia. He stated that he did not use marijuana on Dish’s premises and was never under the drug’s influence at work.

After his termination, Coats sued Dish claiming his termination violated Colorado’s lawful activities statute, which broadly prohibits discharging employees for engaging in “any lawful activity off the premises of the employer during nonworking hours.” Colo. Rev. Stat. § 24-34-402.5(1). Coats argued that because his use of marijuana was legal under state law, he engaged in a lawful off-duty activity for which he could not be discharged. He further argued that the phrase “lawful activity” in Colorado’s statute must be defined in reference to state, not federal law.

Dish countered by focusing on the fact that marijuana remains illegal under federal law, and therefore, its use could not be a “lawful activity” under the Colorado statute, making Coats’s termination legal. The trial court agreed with Dish and dismissed the lawsuit finding that marijuana use is not lawful under state law. A divided Colorado Court of Appeals upheld the trial court’s decision on separate grounds (i.e., that in order for an activity to be “lawful” it cannot contravene state or federal law), which the Colorado Supreme Court has now affirmed.

“Lawful” Means Permitted By Both State and Federal Law

The Colorado lawful activities statute does not define the term “lawful.” Coats argued it should be read as limited to activities that are lawful under state law, which could include legalized marijuana use. The Court disagreed. It looked to the plain language of the statute to conclude that the term “lawful” means permitted by law, or not contrary to, or forbidden by law. The Court refused to impose a state law limitation to the term, ruling that because marijuana use is unlawful under federal law, it is not a “lawful” activity under the Colorado statute.

A successful appeal of the Court’s interpretation of the lawful activities statute to the U.S. Supreme Court is unlikely as the Colorado Supreme Court based its decision on a straightforward common sense construction of a state statute, which is deemed to be within the state’s highest court’s jurisdiction to decide.

Coats’s Impact on Marijuana in the Workplace

The Coats decision is significant to Colorado employers because it confirms that employers are entitled to enforce drug-free workplace policies without fear of violating the state lawful activities statute. Although this case dealt with marijuana use for medical purposes, the Court’s reasoning should apply to recreational marijuana use as well.

Notably, the Court did not decide whether off-duty marijuana use is protected under Colorado’s Medical Marijuana Amendment, which arguably only creates an exemption from criminal prosecution. Any such narrow ruling would almost certainly have spawned additional litigation over the different wording in Colorado’s more recent Recreational Marijuana Amendment, and whether that amendment made off-duty marijuana use “lawful.”

While the Coats decision resolves an important open issue under Colorado law, Colorado employers should continue to exercise caution when dealing with employee marijuana use outside the workplace. Drug testing policies should provide employees with clear notice of consequences for off-duty marijuana use. Further, employers must enforce zero tolerance policies consistently in order to avoid discrimination claims brought under statutes such as the Americans with Disabilities Act and the Colorado Anti-Discrimination Act. When dealing with an employee who uses marijuana off-duty and off-premises, employers should carefully evaluate the facts of each situation and consider the risks of violating other employment laws before making adverse employment decisions.

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June 10, 2015

Employers Must Raise Defense of Unverified EEOC Charge or It Is Waived

By Steven M. Gutierrez

According to the Tenth Circuit Court of Appeals, verifying an EEOC charge is not a jurisdictional requirement, necessary to give the federal courts the authority to resolve the case; rather, the Court ruled that verifying an EEOC charge is a condition precedent to filing a Title VII lawsuit in federal court, which may be waived if the employer does not challenge it when first responding to the lawsuit. Gad v. Kansas State University, No. 14-3050 (10th Cir. May 27, 2015).

Verification of EEOC Charge

Title VII, the federal statute that prohibits employers from discriminating on the basis of race, color, national origin, sex or religion, requires that claimants submit a charge to the EEOC prior to filing suit in federal court. That submission must be “in writing under oath or affirmation.” EEOC regulations require that the written charge be signed and verified, which means sworn under penalty of perjury or affirmed before a notary public, an EEOC representative or another person authorized to administer oaths.

So what happens if the individual asserting discrimination does not verify his or her EEOC charge prior to filing suit? Does the employer-defendant have to raise the issue of the unverified charge, or does the lack of compliance with the verification requirement mean that the federal court lacks jurisdiction to hear the case at all?

Verification Not a Jurisdictional Prerequisite to Title VII Lawsuit

Not every defect in the administrative process defeats jurisdiction, rendering federal courts without authority to hear the case, pointed out the Court. After discussing previous U.S. Supreme Court cases that examined Title VII jurisdictional issues, the Tenth Circuit focused on four key points:

Whether a Title VII statutory requirement is jurisdictional or not depends on whether it is written within Title VII’s jurisdictional subsection – here, the verification requirement is contained in a separate provision that does not deal with jurisdiction of the district courts;
Because non-lawyers initiate Title VII processes, courts should not interpret procedural rules in a way that deprives individuals of their rights under the law – here, interpreting the verification requirement as jurisdictional might lead to inadvertent forfeiture of Title VII rights;
Verification is intended to protect employers from the burden of defending against frivolous claims or claims of which they had no notice – here, because verification remains a Title VII requirement, an employer may raise the plaintiff’s failure to satisfy the requirement as a defense, which serves to protect employers; and
Failure to verify a document as required by a federal rule should not render the document fatally defective – here, if a claimant’s failure to verify destroyed subject-matter jurisdiction, it would make the charge fatally defective by destroying a court’s ability to hear the case at all.

Based on its analysis of these four points, the Court concluded that the EEOC verification requirement is not jurisdictional.

Lack of Verification As Defense

Because verification of the EEOC charge remains a Title VII requirement, an employer defending a Title VII discrimination claim may raise a plaintiff’s failure to satisfy the requirement and seek dismissal of the case on that basis. The Court likened the verification requirement to other Title VII requirements that have been deemed non-jurisdictional, waivable defenses. For example, compliance with the statutory time limit for filing EEOC charges is prerequisite to bringing a Title VII suit in federal court that has been ruled to be subject to waiver and estoppel. Similarly, TitleVII’s application to employers with 15 or more employees has been determined to be a non-jurisdictional requirement that is waivable by an employer. Consequently, if an employer fails to raise a known verification defect during the EEOC proceeding, it likely waives the requirement and the case proceeds.

Waiver Left For Further Analysis

Because the district court in Gad had dismissed the plaintiff’s case for lack of subject-matter jurisdiction, it had not examined the issue of waiver of the defense. The Tenth Circuit noted that Gad had not argued that her employer, Kansas State University (KSU), had waived the verification requirement. (In its answer, KSU stated generally that Gad had failed to exhaust her administrative remedies but did not specifically mention her failure to verify her EEOC charge.) Instead, Gad argued only that the EEOC had waived the verification requirement, due to an EEOC investigator allegedly telling Gad that she did not need to return the signed EEOC form.

In reversing on the jurisdictional issue, the Tenth Circuit sent the case back to the district court to determine whether the verification requirement had been waived. The Court stated that despite the conclusion that an employer may waive the verification defect, it “does not necessarily follow that the EEOC can waive the requirement unilaterally.” But, the Court noted that there may be extreme circumstances where non-compliance with the verification requirement might be excused, such as negligent EEOC conduct that would mislead a reasonable layperson into thinking that he need not verify the charge. The Court refused to define the scope or parameters of a waiver rule, as that specific issue was not before the Court.

What This Case Means to You

When faced with a Title VII lawsuit, get a copy of the EEOC file at the earliest possible moment and check whether the claimant’s EEOC charge was verified. If not verified, you should seek dismissal of the proceeding on the basis that the claimant failed to verify his or her EEOC. If you choose to respond to the merits of the lawsuit ,without asserting lack of verification as a defense, you have likely waived that requirement.

It does not, however, appear that you should always raise the issue of lack of verification prior to your first response to the federal lawsuit. That is because an EEOC regulation permits “an otherwise timely filer to verify a charge after the time for filing has expired” and to cure technical defects or omissions, including failure to verify the charge. Consequently, if you point out the defect at any time prior to the claimant filing the lawsuit, the claimant will likely be able to amend their charge to correct the verification defect. But you should always raise the defense before responding to the merits of the charge of discrimination to ensure that you do not waive the defense.

Less clear, however, is the issue of an EEOC waiver of the verification requirement. Because the Court did not define the circumstances, if any, under which a claimant may argue that the EEOC did not ask for or require verification, we must wait for further guidance before knowing whether a claimant may proceed with a Title VII lawsuit even after you’ve raised the unverified charge defense.

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June 1, 2015

Religious Accommodation: Employer Need Not Have Actual Knowledge of Accommodation Need, Says High Court

By A. Dean Bennett

An employer’s motives, not its actual knowledge, determine whether it has discriminated against an applicant or employee in violation of Title VII, ruled the U.S. Supreme Court today. In an 8-to-1 decision, the Court ruled that an employer that refuses to hire an applicant in order to avoid accommodating a religious practice may be liable for discrimination even though the applicant did not inform the employer of the need for an accommodation. As long the applicant can show that her need for an accommodation was a motivating factor in the employer’s decision to refuse to hire her, the employer can be liable for disparate treatment under Title VII. The Supreme Court reversed the Tenth Circuit’s opinion which held that liability for failure-to-accommodate a religious practice applies only when the applicant directly informs the employer about the need for an accommodation. EEOC v. Abercrombie & Fitch Stores, Inc., 575 U.S. ___ (2015).

Head Scarf Versus “Look Policy”

This case arose when Samantha Elauf, a seventeen-year old applicant, went to an interview for an in-store sales position at an Abercrombie & Fitch store wearing a headscarf. Although the topic of religion did not come up at the interview, the interviewer, assistant store manager Heather Cooke, assumed that Elauf was Muslim and that she wore the headscarf due to her Muslim religion.

Cooke rated Elauf as qualified to be hired but was concerned that the headscarf would conflict with Abercrombie’s strict “Look Policy” which forbids wearing of “caps.” Cooke consulted with her district manager who told Cooke not to hire Elauf because wearing the headscarf would violate the Look Policy, as would all other headwear, religious or otherwise.

The Equal Employment Opportunity Commission (EEOC) sued Abercrombie on Elauf’s behalf. The District Court granted summary judgment to the EEOC, finding Abercrombie liable for failing to accommodate a religious practice in violation of Title VII, with a jury awarding $20,000 in damages. Abercrombie appealed and the Tenth Circuit reversed, concluding that Abercrombie could not be liable for failing to accommodate a religious practice where Elauf never provided Abercrombie with actual knowledge of her need for an accommodation. The EEOC appealed to the Supreme Court.

No Knowledge Requirement in Title VII

“An employer may not make an applicant’s religious practice, confirmed or otherwise, a factor in employment decisions,” stated the Court in an opinion written by Justice Scalia. Intentional discrimination under Title VII looks only to the employer’s motives in making its employment decisions, not its actual knowledge. Consequently, if an employer thinks that a job applicant might need an accommodation, such as time off to attend religious observances, and denies the applicant a job in order to avoid that prospective accommodation, the employer violates Title VII, regardless of whether the employer actually knows of the applicant’s religious practices or need for accommodation.

ADA Has Knowledge Requirement

The Court recognized the difference in the reasonable accommodation duty under Title VII versus under the Americans with Disabilities Act (ADA). Discrimination under the ADA is defined to include an employer’s failure to make reasonable accommodations to the known physical or mental limitations of an applicant. However, Title VII does not include the knowledge requirement. Therefore, failure to accommodate a religious practice will be deemed discrimination under Title VII as long as the employer’s desire to avoid the accommodation was a motivating factor in its employment decision.

Neutral Policies Still Require Religious Accommodation

Abercrombie argued that its Look Policy was neutral and that it did not treat religious practices less favorably than similar secular practices so it could not be liable for intentional discrimination. The Court disagreed, stating that Title VII gives religious practices favored treatment. The Court acknowledged that an employer is entitled to have a neutral dress policy, such as a no headwear policy, but when an applicant or employee requires an accommodation as an aspect of a religious practice, Title VII requires that the employer accommodate that practice, in the absence of an undue hardship.

Lessons on Religious Accommodations

The practical implication of this decision is that you may not make employment decisions based on suspected religious accommodations. In other words, if you think that an applicant has certain religious beliefs which might lead to the need for an accommodation once hired, you cannot reject them – even if you never discussed or confirmed their religious practices. If the applicant’s potential need for an accommodation is a factor in your decision not to hire them, you may be found liable for discrimination under Title VII.

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May 18, 2015

Plan Fiduciaries Beware: Your Ongoing Duty to Monitor Investments Allows Beneficiaries To Claim Breach Within Six-Year Statute of Limitations

By Mike Beaver

In a ruling that will likely raise the anxiety level of plan fiduciaries, the U.S. Supreme Court unanimously ruled today that beneficiaries of a 401(k) plan could pursue their claim against the plan’s fiduciaries related to mutual funds that were added to the plan eight years before the complaint was filed, despite the six-year statute of limitations normally applying to ERISA breach of fiduciary duty claims. The Court concluded that because fiduciaries have a continuing duty to monitor investments and remove those that are imprudent, a claim for breach of that duty is timely so long as the alleged failure to monitor occurred within six years of the filing of the complaint. Tibble v. Edison Int’l, 575 U.S. ___ (2015).

Higher Administrative Fees Prompted Lawsuit

In 2007, several beneficiaries of the Edison International 401(k) Savings Plan (Plan) filed a class action lawsuit against the Plan fiduciaries to recover alleged losses incurred as a result of excessive mutual fund fees. According to the beneficiaries, in selecting the investment choices available to Plan participants, the Plan fiduciaries had chosen six “retail-class” mutual funds, instead of identical “institutional class” funds. The retail-class funds carried higher administrative and management fees than the institutional-class offerings. Three of the funds were chosen in 1999, and the others in 2002.

As to the funds selected in 2002, the lower courts found that the Plan fiduciaries offered “no credible explanation” for selecting the higher-cost retail funds. However, as to the 1999 funds, the Plan fiduciaries argued that the ERISA statute of limitations applicable to fiduciary breaches would bar the beneficiaries’ claims involving the 1999 funds, because they were selected more than six years before the lawsuit was commenced. The statute, 29 U.S.C. § 1113, bars a fiduciary breach claim brought more than six years “after the date of the last action which constituted part of the breach or violation,” or “in the case of an omission the latest date on which the fiduciary could have cured the breach or violation” (emphasis added). The Ninth Circuit Court of Appeals agreed with the fiduciaries, and dismissed all claims relating to the 1999 funds.

A unanimous Supreme Court, however, reinstated the beneficiaries’ claims pertaining to the 1999 funds. The Court found that, although the funds may have been chosen previous to the fiduciaries’ action in selecting the 1999 funds, the statute did not bar claims relating to the fiduciaries’ alleged omissions since that time. Specifically, the Court held that ERISA fiduciaries have a “continuing duty to monitor trust investments and remove imprudent ones.” This duty imposes a “continuing responsibility for oversight of the suitability of the investments already made.” Since such continuing reviews by the Plan fiduciaries might have been required within the six-year limitation period, a claim that the fiduciaries breached their oversight and review responsibilities could not be summarily dismissed.

No Guidance on Oversight Duty

Having held that Plan fiduciaries have a duty to oversee and monitor investment decisions previously made, the Court provided little guidance as to what that duty entails. The Court articulated the fiduciaries’ oversight and monitoring responsibilities only in a broad, theoretical way, holding that “a fiduciary normally has a continuing duty of some kind to monitor investments, and that “the nature and timing of the review [are] contingent on the circumstances.” Because these circumstances had not been fully developed by the lower courts, the Supreme Court remanded the case for further consideration, noting that it did not necessarily find that the Plan fiduciaries had violated any of their duties.

Lesson for Fiduciaries

The Supreme Court has made clear that benefit plan fiduciaries have a continuing responsibility to monitor the suitability and prudence of a plan’s investment choices, and that the six-year statute of limitations runs from the alleged breach of this ongoing responsibility, not from the date a particular investment was initially selected. However, the Court provided essentially no guidance concerning how fiduciaries can fulfill this ongoing responsibility. The parameters of a fiduciaries’ ongoing responsibility to monitor and evaluate investment choices will, in all likelihood, be developed only by extensive future litigation.

Because the Court provided little specific guidance concerning the ongoing duty to monitor investment choices, plan fiduciaries will need to increase their focus on what little regulatory guidance is provided by the U.S. Department of Labor, and many fiduciaries will likely increase their reliance on objective, professional investment advisors. Of course, the choice of an investment advisor is, itself, a fiduciary act, and under the guidance of the Tibble decision, it is likely the fiduciaries’ ongoing responsibility to monitor the suitability and performance of advisors as well. In short, the Tibble decision expands the potential for fiduciary liability without providing much guidance on how that liability might be minimized.

May 11, 2015

Recruiting Employees By Making False Promises Can Cost You

By Mark Wiletsky

You desperately want to hire a competitor’s top sales person, so to lure her away, you promise that she can expand the scope of her sales while continuing to serve her existing customers nationwide. What’s the harm if after she joins your team, you limit her territory and the type of products she can sell? For one computer company, it cost over $370,000 in damages and interest to the disgruntled, former employee. Add in the time and expense of defending the lawsuit and those seemingly innocuous recruiting statements can really come back to bite you.

Misleading Statements Meant to Entice

Hiring experienced executives, managers and sales persons can be tricky because the best performers are in high demand. In order to entice a quality person away from his or her existing company, you likely have to sweeten the compensation package, offer a promotion or growth potential, provide a better cultural fit, or some combination of these conditions of employment. You wine and dine your candidate and make assurances that things will be better if they leave their current, lucrative job and join your company.

But what if your promises don’t come to pass? What if your regional sales structure does not allow the sales executive to continue to service their national clients? What if the growth you promised isn’t in the cards? You could face a lawsuit alleging negligent misrepresentation, fraudulent inducement, promissory estoppel or other claims.

The federal court in Colorado recently handled such a case in which a successful computer sales person with national accounts left her lucrative position to join another computer company who had promised that she could keep her current accounts and expand the scope of her sales beyond mainframe computer systems. After her new employer assigned many of her lucrative accounts to other sales representatives and told her that she would not be able to sell outside of the mainframe area, she sued. Although her new employer claimed that its recruiting statements were nothing more than predictions or statements of future intent, a jury found in favor of the sales person on her claim of negligent misrepresentation. The jury awarded her damages in the amount of $231,665 and, after an appeal, an additional $139,625 in prejudgment interest. David v. Sirius Computer Solutions, Inc., 779 F.3d 1209 (10th Cir. 2015).

Don’t Make Promises You Can’t Keep

Tempting as it may be, refrain from making guarantees or promises to job candidates that you can’t fulfill. Executives and high-level sales persons typically have a lot at stake when switching companies, which consequently leads to significant damages should they sue.

In addition, be careful when putting any terms, such as pay, bonuses, commissions and benefits, in writing. If the terms can be changed or will be reviewed periodically, be sure to include that in the written document. If the employment relationship is “at-will,” be sure to specify that so there is no misrepresentation about a guaranteed period of employment. In short, when seeking to induce high performers to leave their current positions, talk up the attributes of your organization but be careful about making promises that you may not be able to keep.

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May 6, 2015

Colorado Legislators Fail to Pass New Employment Laws in 2015

By Emily Hobbs-Wright

The 2015 Colorado legislative session is ready to adjourn and few substantive bills related to labor and employment were passed by both chambers this session. Numerous bills on topics such as minimum wage, overtime and discrimination were introduced but with Republicans controlling the Colorado Senate and Democrats controlling the House of Representatives, it’s no surprise that little was enacted. Here's a look at employment-related bills that were considered this session.

Raise Colorado’s Minimum Wage – Concurrent resolutions in both the House and Senate sought to put Colorado’s minimum wage on the November 2016 ballot to allow voters to decide whether to amend the Colorado Constitution to increase the minimum wage to $9.50 an hour on January 1, 2017 with annual increases of $1.00 per hour until 2020, which would see a $12.50 minimum wage. In years thereafter, the minimum wage would be increased annually for inflation (which is the current adjustment provided in Colorado’s Constitution). Both bills failed. (HCR15-1001 and SCR15-003)

Overtime Fairness Act – This bill would have set a minimum salary requirement for administrative, executive, supervisor and professional exemptions at 120 times the state minimum hourly wage rate. At the current $8.23 minimum wage, the salary threshold would be $987.60 per week. This bill failed to pass. (HB15-1331)

Repeal of the Job Protection and Civil Rights Enforcement Act of 2013 – The 2013 law that established compensatory and punitive damage remedies for unfair employment practices under Colorado law was under attack in two bills. The Senate passed a bill that would have repealed all components of the 2013 law except for the expansion of age-based discrimination to individuals age 70 or older. (SB15-069) The House killed that bill. A separate bill introduced in the House sought to eliminate the punitive damage provision of the 2013 law. (HB15-1172) That bill never got out of the House.

Expand and Extend Parental Involvement in K-12 Education Act – The current Colorado law that entitles parents to take time off of work to attend their child’s academic activities is set to expire on September 1, 2015. This bill sought to extend the law indefinitely and to expand the types of academic activities for which parents could take this leave. The bill passed in the House but never got out of the Senate committee to which it was assigned. (HB15-1221)

Limit on Audits Performed by the Department of Labor and Employment – This bill sought to amend Colorado’s employment verification law by limiting audits by the Department of Labor and Employment (CDLE). Under this provision, the CDLE would be permitted to investigate only an employer’s compliance with the employment verification and examination requirements. This bill never got out of the House committee to which it was assigned. (HB15-1176)

Right of Private-Sector Employees to Inspect Their Personnel Files – This proposal would have created a right for employees and former employees to inspect or request copies of their personnel file within 30 days of a written request. This bill failed to pass the House. (HB15-1342)

Independent Contractor Determinations – Two bills sought to change the determination of independent contractor status under Colorado’s unemployment insurance law. The first sought to eliminate the requirement that the individual’s freedom from control and direction of the company must be shown “to the satisfaction of the division.” (SB15-107) This bill never got out of committee. The second bill before the Senate sought to create a bright-line test for whether an individual is an employee or an independent contractor. That bill proposed to establish a numerical standard so that an independent contractor relationship would be recognized if at least six of eleven factors listed in the proposed provision were found to exist. This bill, SB15-269, was introduced rather late in the session and at the time of writing (and with just one week before the session adjourns), was still in committee.

Additional bills were introduced that would have affected some Colorado employers, including a bill to require that youth sports organizations conduct criminal history checks on persons who work with children and a bill that would create an income tax credit for employers who assist employees in repaying their student loans for degrees in certain fields, such as science, technology and math. These bill also failed to make it to the Governor’s desk.

Wrap-Up: A Quiet Session for Colorado Employers

Colorado's legislative session adjourns for the year today, May 6th, and it concludes without Colorado employers having to learn new employment-related laws. Accordingly, on the state level, most of our labor laws are remaining status quo for another year. However, with so many recent changes related to federal employment laws, most Colorado employers will consider the lack of any new state employee protections good news.

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April 29, 2015

EEOC Conciliation Efforts Are Reviewable, Says Supreme Court

By Dustin Berger

Employers have a narrow right to seek judicial review of the Equal Employment Opportunity Commission’s (EEOC’s) statutory obligation to give an employer adequate notice of the charges against them, including the identity of the employees (or class of employees) claiming discrimination, and to engage in informal resolution of the charges. In a unanimous decision, the U.S. Supreme Court ruled that courts have the authority to review whether the EEOC has met its duty under Title VII to attempt informal resolution of alleged discriminatory practices prior to filing suit. Mach Mining, LLC v. EEOC, 575 U.S. ___ (2015).

While the scope of review is limited, it is good news for employers as it limits the EEOC’s ability to take high priority cases to court without first engaging in any discussion with the employer to remedy the alleged unlawful practices. Unfortunately, however, under the Supreme Court’s decision, the courts’ review of the EEOC’s conciliation efforts will be too limited to ensure that the EEOC makes a genuine and meaningful attempt to reach a voluntary resolution of a charge before the EEOC sues.

Title VII Mandates Informal Methods of Conciliation

Title VII, the primary federal law that prohibits employers from discriminating against individuals on the basis of race, color, sex, religion, or national origin, sets forth a procedure to be followed by the EEOC when handling a complaint of employment discrimination. In part, the law requires that when the EEOC finds reasonable cause to believe discrimination occurred, it must first attempt to eliminate the alleged unlawful practice through “informal methods of conference, conciliation, and persuasion.” The EEOC may choose which informal method it chooses to attempt resolution of the charge, and the agency ultimately retains the right to accept any proposed settlement or to sue the employer.

Letter From EEOC Without Follow-Up Was Insufficient Conciliation Effort

In the case before the Court, a female applicant filed a charge alleging that Mach Mining, LLC had refused to hire her as a coal miner because of her sex. The EEOC investigated her charge and found reasonable cause to believe that Mach Mining had discriminated against not only that applicant, but also a class of women who had similarly applied for mining jobs.

The EEOC sent Mach Mining a letter inviting both the company and the female applicant to participate in informal conciliation and stated that an EEOC representative would contact them soon. That never happened. Instead, about a year later, the EEOC sent Mach Mining a second letter stating that “such conciliation efforts as are required by law have occurred and have been unsuccessful” and further stated that any further efforts would be “futile.” The EEOC proceeded to sue Mach Mining in federal court alleging sex discrimination in hiring.

Mach Mining asserted that the EEOC had failed to conciliate in good faith prior to filing suit, as was required by Title VII. Although the federal district court agreed with Mach Mining that it should review whether the EEOC had met its conciliation duty, the Seventh Circuit Court of Appeals overruled that decision and held that a party could not assert as a defense that the EEOC had failed to conciliate the claim as Title VII required. The Seventh Circuit explained that conciliation was solely within the EEOC’s expert judgment and that there was no workable standard that would allow judges to review that process. Furthermore, the Seventh Circuit believed that court review of conciliation would complicate Title VII lawsuits by allowing the focus of the litigation to drift from the merits of the Title VII claim to the sufficiency of the EEOC’s conciliation effort.

Although other federal appellate courts, however, have held that Title VII does allow a court to review the EEOC’s conciliation effort, there was no uniformity among the other appellate courts in what that review should entail. The Supreme Court agreed to take the Mach Mining case to resolve whether and to what extent courts may review the EEOC’s conciliation attempts.

Notice to Employer and Discussion Required

Justice Kagan, writing for a unanimous Court, first explained that courts routinely enforce compulsory prerequisites to suit in Title VII cases. Although Congress had given the EEOC wide latitude over the conciliation process, the Court refused to allow the EEOC to police itself on whether it had complied with its conciliation duty. Accordingly, it overruled the Seventh Circuit’s decision and held that courts have the authority to review whether the EEOC has fulfilled its Title VII duty to attempt conciliation of discrimination charges.

The Court then turned to the proper standard of judicial review. In other words, it considered what the EEOC must show in order to meet its conciliation duty as a precondition to filing suit. The agency argued for minimal review, suggesting that its letters to Mach Mining were a sufficient attempt at conciliation. Mach Mining argued for a much deeper review, urging that the Court adopt a standard from the National Labor Relations Act that would require a negotiation in good faith over discrimination claims. The Court rejected both approaches and took a middle line.

The Court explained that judicial review was available but was limited to ensuring that the EEOC provided the employer with notice and an opportunity to discuss the matter tailored to achieving voluntary compliance. The Court stated that the EEOC must inform the employer not only about the specific allegations of discrimination, but also about which employees (or what class of employees) have suffered as a result. Ordinarily, the Court noted, the EEOC’s “reasonable cause” letter will provide this notice. Then, the EEOC must attempt to engage in some form of discussion with the employer to give the employer a chance to remedy the allegedly discriminatory practices prior to being sued. That discussion may be in written or oral form and the EEOC will retain a great deal of discretion about how to conduct its conciliation efforts and when to end them.

Evidence of the conciliation efforts may be supported or challenged through written affidavits. Ordinarily, the EEOC’s affidavit will show it has met its conciliation duty, but employers may create a factual issue through affidavits or other credible evidence that indicates that the EEOC did not provide the requisite information about the charge or attempt to engage the employer in discussion prior to filing suit. If a reviewing court finds in the employer’s favor on such a challenge, the appropriate remedy is for the court to order the EEOC to engage in conciliation.

Confidentiality of Conciliation

In reaching its decision, the Court focused in part on Title VII’s non-disclosure provision. This provision states that “[n]othing said or done during and as a part of such informal endeavors may be made public by the [EEOC], its officers or employees, or used as evidence in a subsequent proceeding without the written consent of the persons concerned.” Mach Mining argued that this confidentiality provision meant only that the actions taken and statements made taken during conciliation could not be used as evidence of the merits of the claim. The Court rejected that argument and reiterated that the non-disclosure provision protects actions and statements made during conciliation from disclosure for any evidentiary purpose. And, the Court explained, the non-disclosure provision alone precluded the courts from engaging in any deeper inquiry into the EEOC’s actions during conciliation.

What This Means For You

As the EEOC has been aggressively pursuing employers on novel theories of discrimination, it is beneficial to have the ability to ask a court to review whether the EEOC provided proper notice of the allegedly discriminatory practice and the employees allegedly affected by it and offered the employer an effort to discuss the matter for the purpose of achieving voluntary compliance. Although this review is narrow, it is an improvement over the Seventh Circuit’s view because it gives employers a limited opportunity to hold the EEOC accountable for satisfying its statutory obligation to conciliate claims. If your organization receives a “reasonable cause” finding, be sure to track what efforts the EEOC makes to engage you in discussions to pursue voluntary compliance. If those efforts do not meet the standard announced by the Court, you can seek to compel the EEOC to make an effort compliant with its statutory obligations before it proceeds with its suit.

What the Mach Mining decision will not do, however, is allow an employer to seek the aid of a court in requiring the EEOC to make a genuine effort to achieve a voluntary resolution of a charge. For instance, the Mach Mining decision does not require the EEOC to negotiate in good faith, apprise an employer of “the smallest remedial award the EEOC would accept,” lay out the legal and factual basis for its position or any request for a remedial award, refrain from “take-it-or-leave-it” offers, or provide any particular amount of time for an employer to consider and respond to the EEOC’s position or offers. Accordingly, you are well advised to set expectations of the conciliation process at a low threshold and, to the extent you believe voluntary resolution is desirable, take the initiative in working with the EEOC after receiving a reasonable cause determination letter.

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