Category Archives: Utah

June 10, 2015

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

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.

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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April 28, 2015

Retirement Plans: Proposed Changes to the Fiduciary Rules Offer An Opportunity For Introspection

By Bret Busacker

The Department of Labor (DOL) recently published long-promised revisions to the rules regulating investment advisers to retirement plans and their fiduciaries, participants and beneficiaries, as well as IRAs and their owners and beneficiaries (Advice Recipients). The new proposed fiduciary regulations (2015 Proposed Rule) are the DOL’s most recent attempt to modernize long-standing labor rules that predate the creation of the 401(k) plan and the widespread use of IRAs. In 2010, the DOL attempted to revise these same regulations, but withdrew the proposed changes after receiving significant pushback from stakeholders. We’ll have to see if its second effort is more successful.

Role of Investment Advisors Are At Issue

The crux of the issue is that plan fiduciaries must act in the best interest of their Advice Recipients. Under ERISA and the Internal Revenue Code, if a fiduciary uses plan or IRA assets for their own advantage, it is a prohibited transaction. For example, a fiduciary adviser who receives compensation from a third party (i.e., the plan recordkeeper or platform provider) to recommend a particular investment to an Advice Recipient may be engaging in a prohibited transaction. Fiduciaries who are a party to a prohibited transaction may be subject to penalties and lawsuits from plan participants.

In the past, investment advisers have navigated around this issue by serving in a non-fiduciary consulting capacity with respect to their Advice Recipients. The current long-standing regulations generally treat an adviser as a fiduciary only if the adviser enters into an agreement with an Advice Recipient to regularly provide individualized investment advice that will serve as the primary basis upon which the Advice Recipient will make investment decisions. (This is generally referred to as the “five-part test.”) Each element of the five-part test must be satisfied in order for an adviser to be considered a fiduciary.

Investment consultants take the position that they are not fiduciaries under the five-part test because they either do not provide regular advice to the Advice Recipient or the advice they provide is not the primary basis of the Advice Recipient’s investment decision. Plans that use investment consultants who do not assume fiduciary responsibility should be aware that the 2015 Proposed Rule may ultimately characterize these consultants as fiduciaries.

Expanded Fiduciary Activity

Under the 2015 Proposed Rule, an adviser will be a fiduciary to an Advice Recipient even if the adviser does not regularly provide investment advice to the Advice Recipient and even if the advice is not the primary basis for the Advice Recipient’s investment decision. Instead, under the 2015 Proposed Rule, an adviser may become a fiduciary if the adviser receives a fee for the advice and the adviser either (i) represents or acknowledges that he or she is acting as a fiduciary with respect to the Advice Recipient or (ii) agrees in writing or verbally to provide the Advice Recipient with advice that is individualized or specifically directed to the Advice Recipient.

Under the 2015 Proposed Rule, investment advice generally includes:

a recommendation to acquire, hold, dispose or exchange an investment, including in connection with a participant’s distribution or rollover from a plan or IRA;
a recommendation with respect to the management of an investment, including in connection with a participant’s distribution or rollover from a plan or IRA;
an appraisal, fairness opinion, or similar oral or written statement concerning the value of an investment in connection with a transaction involving a plan or IRA; or
a recommendation to hire another service provider who will provide investment advice.

Under the 2015 Proposed Rule, a “recommendation” includes an adviser’s suggestion for the Advice Recipient to take a particular course of action with respect to an investment under the Advice Recipient’s control.

Common Plan Administration Carve-Outs

Notwithstanding the apparent breadth of the 2015 Proposed Rule, the rule contains a number of helpful carve-outs that identify common situations in which an adviser will not be considered a plan fiduciary, as summarized below.

Providing a plan or IRA with an investment platform, provided that the recordkeeper or platform provider notifies the Advice Recipient that it is not providing investment advice or serving as a fiduciary.
Identifying investment options that satisfy the pre-established investment criteria of an independent plan fiduciary (e.g., expense ratios, size of fund, type of asset, etc.) and/or providing benchmarking information to the independent plan fiduciary.
Providing basic investment information that assists a plan in complying with reporting and disclosure requirements.
Providing investment education that is limited to investment concepts (e.g., risk and return, diversification and dollar-cost averaging) and objective questionnaires, worksheets and interactive software.
Selling investments to an Advice Recipient who has the requisite investment background and who is properly informed that the broker is not undertaking to impartially advise the plan. This carve-out generally only applies to larger retirement plans.

The 2015 Proposed Rule also provides a means by which an adviser who falls within the definition of a fiduciary may continue to receive conflict-of-interest compensation by satisfying certain safeguards and disclosure requirements.

Take Aways

The definition of a fiduciary under the 2015 Proposed Rule is quite broad and, if adopted, will certainly expand the number of advisers who are treated as adviser fiduciaries to retirement plans and IRAs. However, even if the 2015 Proposed Rule is not adopted, Advice Recipients should take this opportunity to review their relationship with their current investment adviser. If an adviser is not currently a fiduciary, but provides recommendations with respect to investments, consider asking the adviser whether he or she is able to be a fiduciary and whether changes will be required to the relationship if the rule is finalized. These questions may spark a helpful conversation that clarifies the adviser’s role and informs the Advice Recipient of whether changes to the relationship may be required (even if the rule is not finalized).

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April 3, 2015

Presidential Veto Quashes Congressional Attempt to Overturn NLRB “Quickie” Election Rules

By John Husband and Brad Williams

On March 31, 2015, President Obama vetoed a joint resolution passed by both houses of Congress that sought to overturn the National Labor Relations Board’s (NLRB’s) rules designed to speed up the union election process. Scheduled to go into effect on April 14, 2015, these so-called “quickie” or “ambush” election rules significantly shorten the period of time between a petition for a union election and a vote.

History of “Quickie” Election Rules

The “quickie” election rules have a tortured history. First proposed in June 2011, the rules faced immediate and severe criticism that led to a watered-down version of the rules being adopted in December 2011. These watered-down rules went briefly into effect in April 2012, but were quickly invalidated by a federal court just two weeks later. The court ruled that the Board had lacked a statutorily mandated quorum when it voted to adopt the rules.

Notably, the federal court also stated that nothing prevented a properly constituted quorum of the Board from voting to re-adopt the rules in the future. That is exactly what the Board did in February 2014. It re-proposed its original rules, and subsequently adopted the rules in December 2014. The new rules are slated to become effective on April 14th.

Legal Challenges Continue

Despite Congress’s ill-fated attempt to block the rules under the Congressional Review Act, the rules still face potential hurdles. For instance, the U.S. Chamber of Commerce filed a lawsuit in the District of Columbia in January 2015 seeking to vacate the rules and enjoin their enforcement. Business groups in Texas filed a similar lawsuit in January 2015. These lawsuits allege numerous reasons why the rules should be invalidated, including alleged violations of the National Labor Relations Act and Congressional intent, alleged violations of the First Amendment and due process protections, and arbitrary and capricious rulemaking under the Administrative Procedure Act. However, the lawsuits will take time to wind through the courts, and their chances of success are uncertain.

Anticipated Effects of Rules

Barring any unexpected injunction before April 14th, employers should anticipate big changes from the new rules. The rules will shorten the period of time between a petition for a union election and a vote to perhaps fifteen or fewer days (as opposed to the five or more weeks under current practice). The rules are expected to boost organizing activity as unions attempt to increase their membership – and dues-generated revenue – through “ambush” elections. The compressed timeline between a petition and vote will limit employers’ ability to fully explain the pros and cons of union representation before an election, and limit employees’ ability to cast an informed vote. To retain flexibility in dealing directly with their employees, employers should be ready at the first hint of union organizing to educate their employees about the desirability of union representation. Advance preparation, and a properly orchestrated counter-organizational campaign, will be key.

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March 30, 2015

Drafting Employee Handbook Policies That Pass NLRB Muster

By Brian Mumaugh

All employers, union and non-union alike, should think about making a thorough review of their employee handbook and policies in light of a recent report on employer workplace rules by the National Labor Relations Board’s (NLRB’s) General Counsel, Richard Griffin. In his report, Griffin describes a variety of employment policies that the Board has found unlawful and offers the Board’s reasoning as to why. He also points out acceptable policies and explains what wording or context made that policy lawful. The bottom line: a single word or phrase can, in this Board’s view, make the difference between an acceptable policy or one that violates the National Labor Relations Act (NLRA).

Overly Broad Handbook Policies Can Chill Employees’ Rights

The Board has long taken the position that even neutrally worded employment policies can violate the NLRA if they have a chilling effect on the right of employees to engage in protected concerted activities. These activities, referred to as Section 7 activities, include discussing wages, benefits, and other terms and conditions of employment with other employees and with outside parties, such as government agencies, union representatives and the news media.

In his March 18th Report, GC Griffin explains that the majority of policies found by the Board to violate the NLRA, were unlawful because employees could reasonably construe the language of the rule as prohibiting or infringing on Section 7 activities. Consequently, many well-intentioned, seemingly common-sense policies prove problematic for employers due to their possible interpretation as limiting an employee’s right to discuss their pay or working conditions with others.

Handbook Policies That Result in Violations

The report sets out eight categories of work rules that frequently violate the NLRA and then distinguishes between unacceptable and acceptable language for such rules. The categories and the unlawful aspects of each may be summarized as follows:

Confidentiality Policies: may not prohibit employees from discussing their wages, hours, workplace complaints or other personal information; prohibiting the disclosure of the company’s confidential information may be acceptable;
Employee Conduct Toward the Company and Supervisors: may not prohibit employees from engaging in negative, disrespectful or rude behavior or other conduct that may harm the company’s business or reputation; prohibiting employees from disparaging the company’s products, or requiring employees to be respectful to customers, vendors and competitors will typically be acceptable;
Conduct Toward Fellow Employees: may not prohibit “all” negative, derogatory, insulting or inappropriate comments between employees as that may interfere with the employees’ right to argue and debate with each other about management, unions and the terms and conditions of their employment; requiring employees to treat each other professionally and with respect as well as banning harassing and discriminatory conduct will typically be lawful;
Interactions with Third Parties: may not completely ban employees from talking to the media or government agencies; a policy noting that employees are not authorized to speak on behalf of the company without authorization may be considered lawful;
Restricting the Use of Company Logos, Copyrights and Trademarks: may not prohibit all use of company logos and intellectual property because the NLRB upholds employees’ right to use company names, logos and trademarks on picket signs, leaflets and other protest materials; policies that require employees to respect all copyright and intellectual property laws is acceptable;
Restricting Photos and Recordings: may not ban employees from taking pictures or making recordings on company property; a policy may limit the scope of such a prohibition depending on a competing protective right (such as a healthcare facility protecting patient privacy by limiting photos of patients);
Restrictions on Leaving Work: because employees have the right to go on strike, a policy that prohibits employees from “walking off the job” will be unlawful; policies stating that failure to report for a scheduled shift or leaving early without permission as grounds for discipline may be acceptable; and
Conflict-of-Interest Policies: policy may not ban any activity “that is not in the company’s best interest;” policies that give examples of what constitutes a conflict-of-interest, such as having a financial or ownership interest in a customer, supplier or competitor, or exploiting one’s position for personal gain will likely be lawful.

Few Bright Lines for Lawful Policies

The report goes on to offer analysis of additional policies dealing with topics such as handbook disclosure, social media and employee conduct related to a particular employer who agreed to revise their policies as part of a settlement agreement with the NLRB. You may have similar policies in your handbook, making it worthwhile to read what policy language the Board considers problematic and what may pass muster. The takeaway, however, is that the lawfulness of many policies may turn on a single word or phrase. At the present time, it is unclear whether GC Griffin’s report will withstand legal challenge. The best advice is that given the report and its contents, it is important to take time to review your handbook and compare your wording to the examples provided in the report. Although the report is not a legally binding interpretation of the NLRA, it can help you make an informed decision about the risks involved in including certain provisions in your employee handbook.

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March 26, 2015

Supreme Court: Pregnant Worker With Lifting Restrictions May Continue Lawsuit

By Jude Biggs

In a divided decision, on March 25, 2015, the U.S. Supreme Court released a long-awaited ruling involving a pregnant worker’s claim under the Pregnancy Discrimination Act (PDA). In its ruling, the Court held that the worker could proceed with her lawsuit, because disputes remain as to whether her employer treated more favorably at least some non-pregnant employees whose situation could not reasonably be distinguished from hers.

The majority of the Court forcefully rejected the 2014 guidance of the Equal Employment Opportunity Commission (EEOC) concerning the application of Title VII and the Americans with Disabilities Act (ADA) to the PDA, as it fell short on a number of fronts needed to “give it power to persuade.” Without ruling for either party, the Court adopted a new standard for courts to use when deciding PDA cases brought under a disparate treatment theory. Young v. UPS, 575 U.S. ___ (2015).

Despite the Court’s guidance, employers still will face many questions on what accommodations will be required in the future. The standards for “disparate treatment” and “disparate impact” cases may be more confusing in the future for employers who need to make decisions regarding whether and how to accommodate pregnant employees. As a result, employers are wise to respond carefully to accommodation requests by pregnant workers. Employers should review any policies that might have a disproportionate effect on pregnant workers, such as rules limiting job accommodations. In addition, employers should be careful to review restrictions on use of sick pay/sick time, leave eligibility outside of FMLA, lifting restrictions, and light duty assignments to determine: (1) if they disparately affect pregnant employees while accommodating others; and (2) what “strong” business rationale you can offer to defend the distinction.

For additional analysis of the Court's opinion and what it means for employers, please see our full article here.

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March 23, 2015

FMLA and FLSA Lawsuits Are Increasing

By Mark Wiletsky

The U.S. federal courts saw a whopping 26.3 percent increase in the number of Family and Medical Leave Act (FMLA) lawsuits filed last year over the prior fiscal year, according to statistics recently released by the Administrative Office of the U.S. Courts. Wage and hour lawsuits alleging a violation of the Fair Labor Standards Act (FLSA) were up a significant 8.8 percent. These filings are the highest they’ve been in the past 20 years of annual statistics reported by the courts.

The increasing numbers of lawsuits brought under those two employment laws may reflect how difficult it is to understand and administer wage and hour and leave laws. The increase also may be due to the heightened awareness by workers of their rights and benefits under these laws. Regardless of the cause of the increase, the numbers suggest that it is worthwhile for employers to focus their compliance efforts in these two areas.

Self-Audit Your Pay and Leave Practices

Before you find yourself defending a lawsuit, take the time to review your payroll and FMLA policies and practices, including these often tricky issues:

Classifying workers as exempt versus non-exempt from minimum wage and overtime pay requirements
Calculating each non-exempt employee’s regular rate of pay and overtime rate
Rounding time at the beginning and end of shifts
Automatic deductions for meal periods
Treating workers as independent contractors rather than employees
Tracking time worked remotely or “off-the-clock”
Providing FMLA notices within required time period
Calculating FMLA leave for workers with irregular schedules
Administering intermittent FMLA leave
Not penalizing employees who have taken FMLA leave

If your self-audit reveals any irregularities, take steps to revise your policies and practices to bring them into compliance with the applicable laws. Don’t forget state and local laws that may impose additional requirements related to pay and leave administration. If in doubt, don’t hesitate to consult with your legal counsel so that you don’t become one of next year’s statistics.

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March 17, 2015

Utah Adds Sexual Orientation and Gender Identity to Anti-Discrimination Laws

By Cecilia Romero

On March 12, 2015, Utah signed into law a bill that protects individuals on the basis of sexual orientation and gender identity in employment and housing. The law contains certain exceptions for religious organizations and permits employers to maintain reasonable dress codes and sex-specific facilities. Here are the details on the employment protections.

Discrimination, Harassment and Retaliation Prohibited

The new law adds sexual orientation and gender identity to the list of protected characteristics under Utah’s employment discrimination law, making it unlawful for Utah employers to refuse to hire, promote, discharge, demote, terminate, retaliate against, harass or discriminate in compensation or any other terms of employment because of an individual’s sexual orientation or gender identity. The full list of protected groups under Utah law is now race, color, sex, pregnancy/childbirth, age, religion, national origin, disability, sexual orientation and gender identity.

Sexual Orientation and Gender Identity Defined

Sexual orientation is defined as an individual’s actual or perceived orientation as heterosexual, homosexual or bisexual. Gender identity is defined by reference to the Diagnostic and Statistical Manual (DSM-5) which refers to individuals who see and feel themselves to be a different gender than their assigned gender.

Reasonable Dress Codes and Sex-Specific Facilities Permitted

The new law specifically addresses two frequent concerns for employers. First, the new law allows employers to adopt reasonable dress and grooming standards and second, employers are allowed to adopt reasonable policies that designate sex-specific facilities, such as restrooms, shower rooms and dressing facilities.

Exemptions for Religious Organizations and Protecting Religious Expression

The new law protects religious organizations and the expression of religious beliefs. The list of excluded religious groups was expanded through this law to include not only religious organizations, associations and corporations, but also religious societies, educational institutions and leaders, and the Boy Scouts of America.

State Law Trumps Local Laws

This new state law supersedes and preempts any laws, ordinances or regulations related to the prohibition of employment discrimination passed by a city, county or other local or state governmental entity. This should help employers maintain uniform policies statewide without having to account for local anti-discrimination laws. Complaints will be handled by the state antidiscrimination division. Recovery under the law is limited to actual damages, not punitive damages.

Practice Points to Employers

These new employment protections will affect many of your employment communications so take time now to:

Review and understand the new law;
Revise harassment and retaliation policies to include sexual orientation and gender identity as prohibited bases for harassment and retaliation; remember such statements might be contained in your employee handbook, on your job applications, in recruiting and training materials and on your website; and
Train managers and supervisors on the new law.

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