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March 1, 2001
Highlights
Reasonable Accommodations Depend on the Facts
Recent decisions issued by the United States Court of Appeals for the First Circuit (covering most of New England) illustrate that attention to detail makes the difference between winning and losing a disability discrimination lawsuit. In short, the "one size fits all" approach does not work in this area of the law.
In early cases applying the Americans with Disabilities Act (ADA), which was passed in 1990, courts adopted guidelines that served as safe harbors for employers. One of the best of these was the principle that coming to work was an essential function of every job. Although judges recognized that in certain situations a brief leave of absence could enable a disabled employee to return to productive work, the emphasis was on brevity and definiteness. Some courts went so far as to say that an extended or indefinite leave of absence was unreasonable as a matter of law, under any circumstances.
This principle, which lent some certainty to an analysis that causes employers significant difficulty (when to terminate an employee out of work on a medical leave), was upended in the First Circuit's decision in Garcia-Ayala v. Lederle Parenterals, Inc., 212 F.3d 638 (1st Cir. 2000). In that case, the employer, assuming that the court would conclude that the indefinite leave requested by the plaintiff was "per se" unreasonable, failed to introduce any evidence to show how such a leave would have caused it hardship. The First Circuit declined to adopt this rule. In order to prevail, the court stated, the employer had to come up with specific evidence to show that this particular job could not go unfilled, or could not feasibly be filled by a temporary worker. As no such evidence was presented by the employer, the court entered judgment for the plaintiff employee on the ground that the employer had failed to show that the requested extended leave of absence would have caused it undue hardship.
In Ward v. Massachusetts Health Research Institute, Inc., 209 F.3d 29 (1st Cir. 2000), the First Circuit took a similar fact-specific approach. Ward involved an employee with severe arthritis who had extreme difficulty getting to work on time as he was coping with the unpredictable effects of his condition. The employer had a flextime schedule policy that it offered all employees. Employees were free to start work between 7 and 9 a.m., and were permitted to leave for the day when they had completed 7.5 hours of work. Even with this flexibility, the plaintiff still was unable to arrive at work consistently on time. The employer viewed its flextime policy as sufficient accommodation, and it refused to allow the plaintiff to show up for work whenever he was able. As justification, the employer did not point to any specifics about the plaintiff's job but resorted instead to generalities about the need for employers to control the workplace and maintain standards. The court held that, based upon the evidence presented, there was no evidence to show that the plaintiff's job — lab assistant and data entry clerk — required his presence during any particular time period. The evidence suggested that he could work independently and, as long as his work was complete by the end of the day, there were no time constraints. By comparison, the court pointed to jobs where strict deadlines need to be met, where the operation of machinery requires the presence of other employees, where overlapping responsibilities require that employees on a team work together, or where the employee needs to open a store or teach a class that meets at a particular time. Nor did the record support the conclusion that allowing the plaintiff to work an open-ended schedule would impose an undue burden on the employer. The court in Ward was unsympathetic to the employer's asserted need to maintain control and set standards, stating: "Such an argument runs counter to the general principle behind the ADA that imposes a duty on the employer to modify some work rules, facilities, terms or conditions to enable a disabled person to work, and if [the employer's] position were given credence, it would defeat almost any reasonable accommodation."
Taking Ward and Garcia-Ayala together, the First Circuit has made it considerably more difficult for employers to dictate their disabled employees' work schedules and has added uncertainty to the process of determining what is and is not a reasonable accommodation. One thing that is certain, however, is that employers cannot rely on generalities and "per se" rules but must conduct a detailed inquiry that focuses on the characteristics of the particular individual, job and workplace in question. Where in the past the courts tended to defer to the employer's definition of what are the essential functions of a job, employers must now prepare to defend that determination with concrete evidence. Employers must identify the specific circumstances making an extended or indefinite leave, or an open-ended work schedule, unreasonable and unworkable. One step that can help is to make sure that written job descriptions include, as an essential element of the job, the need to be present at work on a regular, consistent basis (if there is a basis for such a requirement). Without good evidence, the decision to terminate a disabled employee who is on leave or has attendance problems can lead to the imposition of substantial civil damages, including punitive damages.
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Employers Failing to Pay Wages Subject to Mandatory Treble Damages as Well as Costs and Attorney's Fees
On May 30, 2000, Judge Josephson of the Massachusetts Superior Court affirmed that an award of damages for failure to pay wages must be tripled and supplemented by costs and attorney's fees. The issue arose in the case of Duct and Vent Cleaning of America v. Van Houten, et al., 2000 WL 1473507 (Mass. Super. Ct. May 30, 2000), in which an employer sued its former employee for breaching a non-compete clause and the employee counter-sued his former employer for failing to pay him earned commissions. In a mixed verdict, a jury awarded the plaintiff $11,084.74 in unpaid commissions. In a post-trial motion, the plaintiff sought to have this award trebled and supplemented with pre-judgment interest, litigation costs and attorney's fees.
The failure to pay earned commissions violates the statutory proscription against withholding of wages set forth in Chapter 149, § 148 of the Massachusetts General Laws. Employees aggrieved by a violation of this statute may under Section 150 recover damages in a civil action against their former employer "including treble damages for any loss of wages and other benefits." This section also provides that prevailing employees "shall be entitled to an award of the cost of the litigation and reasonable attorney's fees." Judge Josephson held that the jury's award for unpaid commissions had to be tripled because, under the plain language of the statute, the trebling of damages was mandatory, not discretionary. This finding was based upon (1) the plain language of the statute; (2) the fact that in other statutes, such as the Massachusetts Consumer Protection statute (G.L. c. 93A, §§ 9 and 11), where the legislature sought to confer discretionary authority on the courts to assess damages, such discretion was explicitly stated; and (3) the legislative intent in enacting the statute was to protect employees. Equally clear, the Judge found, was the statute's provision for attorney's fees and costs to the prevailing employee, and thus these amounts were added to the plaintiff's award as well.
The lesson for employers is clear. Make sure to pay your employees all wages due to them because the Massachusetts wage statute has a vicious bite and its three rows of sharp teeth do not distinguish between the unscrupulous and unwitting employer.
A subsequent development is noteworthy. Two months after the decision in Van Houten was issued, the Massachusetts Supreme Judicial Court issued its decision in Goodrow v. Lane Bryant, Inc., 432 Mass. 165 (2000). This case dealt with the failure to pay overtime and thus implicated a different statute, Chapter 151, § 1A of the Massachusetts General Laws. This statute also provides for treble damages, but its use of the term "may," the court held, conferred discretion on the court as to whether or not multiple damages were warranted. Going further, the court noted that multiple damages are "essentially punitive in nature" and are ordinarily applied against defendants with a higher degree of culpability. Finding that the defendant in that case showed no evil motive or reckless indifference, the court held that multiple damages were unwarranted. The court then concluded with this cautionary observation: "To do otherwise absent evidence of heightened culpability would very likely constitute an arbitrary or irrational deprivation of property . . . and thus would be constitutionally impermissible." Thus far, however, the constitutional limitations observed by the SJC in Lane Bryant have not been applied to the mandatory treble damages scheme set forth in G.L. c. 149, § 150 and applied in Van Houten.
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Employers Cannot Prohibit Employees from Discussing Wages
The United States Court of Appeals for the Sixth Circuit in NLRB v. Main Street Terrace Care Center, 218 F.3d 531, 534 (6th Cir. 2000), recently joined several other United States Courts of Appeal in determining that a rule prohibiting employees from discussing their wages constitutes an unfair labor practice under Section 8(a)(1) of the National Labor Relations Act. Section 8(a)(1) makes it unlawful for employers to "interfere with, restrain or coerce employees in the exercise of certain protected rights."
Main Street Terrace Care Center operates a nursing home for the elderly in Lancaster, Ohio. When Mary Craig was hired, her manager informed her of her wage and told her "not to tell anyone [how much money she would be making], because it caused hard feelings, and the management did not want it known." Mary's daughter, April Craig, was hired approximately one year later and was told by a different manager, Mary Jeffers, that employees were not allowed to discuss their paychecks with anyone.
During 1997, Mary assisted several dietary department employees with wage-related problems. First, shortly after she began working at Main Street, April noticed numerous problems with her paychecks, including Main Street's failure to pay her for overtime work. April asked her Mother to speak to Jeffers and to the payroll clerk about the problems she was having. Mary did so on several occasions and the paychecks were sometimes corrected. April accompanied her Mother to several of these discussions. On one occasion, when April went to Jeffers on her own, Jeffers told April that she needed to come to Jeffers alone to discuss payroll problems.
In the spring of 1997, another dietary employee also discussed a wage-related problem with Mary. The employee, who worked as both a cook and dietary aide, had previously been paid two different wages for the two positions but complained that her wage had been changed to a flat rate. Mary offered to speak with Jeffers about the complaint and subsequently did so.
Finally, in September of 1997, Jeffers informed Mary and another employee that they would be receiving a fifty-cent raise but told them "not to tell the other girls because they weren't getting a raise." By November, Mary and the other employee had received only a twenty-five cent raise while other employees had received no raise at all, and the two women had conversations about Main Street's failure to implement the promised raise. On one occasion when Jeffers asked Mary what was wrong with the other employee, Mary complained to Jeffers that "you promised us a raise and we didn't get it and Tracy's mad about it." Jeffers responded that it was an oversight and the raise was forthcoming.
After over one year of service, Mary received an overall "outstanding" performance evaluation with a recommendation of continued employment. Approximately two months later (after being voted "Employee of the Month" by other employees in the nursing home), Mary was discussing various items of discontent among the employees and stated "if we had a union they would not treat any of us this way." Mary testified that the Director of Nursing looked up when she said this. Four days later, Mary was terminated. She was told she was being fired for not getting along with a co-worker.
Mary believed that she was fired for her efforts to remedy the wage-related problems of other employees. She filed an unfair labor practice charge, alleging that Main Street violated § 8(a)(1) of the NLRA by promulgating a rule prohibiting employees from discussing wages among themselves and by discharging Mary for engaging in protected concerted activity.
Main Street argued that a manager's instructions not to discuss wages could not establish an unlawful rule because: (1) the rule was not written or acknowledged; (2) no manager had the authority to promulgate such a rule; and (3) the rule went unenforced. The Sixth Circuit rejected all three arguments explaining, first, that such a rule—whether oral or written—has the tendency to discourage employees from engaging in the protected activity of talking about the terms and conditions of their employment. Second, the Court found that because the manager had the authority to hire, fire, schedule, order and supervise, employees reasonably relied on her assertions of company policy. Finally, with respect to enforcement, the Court explained that "the actual effect of a statement is not so important as its tendency to coerce." The Court stated that "the mere existence of the rule inhibiting protected conduct, even if not enforced, constitutes an unlawful interference in violation of Section 8(a)(1) of the Act."
Several circuit courts have already decided similar cases. For example, the Third Circuit has stated that a broad rule prohibiting wage discussions is an unfair labor practice. Jeannette Corp. v. NLRB, 532 F.2d 916, 918 (3rd Cir. 1976). The Second Circuit has held that even in the absence of enforcement, an employee handbook which contained a rule prohibiting employees from making statements concerning wages, hours, and working conditions was unlawful because of the "likely chilling effect of such a rule." NLRB v. Vanguard Tours, Inc. 981 F.2d 62, 66-67 (2nd Cir. 1992). The Eighth Circuit has held that an unqualified rule barring wage discussions among employees, without limitations as to time or place, is invalid under the NLRA. Wilson v. Trophy Co. v. NLRB, 989 F.2d 1502, 1510 (8th Cir. 1993).
Two First Circuit cases support a similar result. In Texas Instruments, Inc. v. NLRB, 637 F.2d 822, 831 (1st Cir. 1981), the Court held that while the company had a right to keep a wage survey report, wage recommendations and data sheets confidential (information which the company had paid independent consultants to compile), its employees would have had a right to disseminate any bits of wage data they may have obtained from outside sources. Similarly, in NLRB v. American Spring Bed Mfg. Co., 670 F.2d 1236, 1240 (1st Cir. 1982), the First Circuit agreed with the NLRB that an employee's discussion of his wages, because it touched off a chain of discourse among his fellow employees, constituted protected activity under the Act.
Main Street serves as a reminder to employers that it is a violation of the National Labor Relations Act to prohibit employees from discussing their wages with each another. Oral and written policies and practices of supervisors prohibiting employees from discussing their wages with one another may be grounds for an unfair labor practice charge against the employer.
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New ERISA Regulations Issued by the Department of Labor
On November 21, 2000, the Pension and Welfare Benefits Administration of the United States Department of Labor issued new regulations under the Claims Procedure section (Section 503) of the Employee Retirement Income Security Act of 1974 (ERISA). These regulations establish new standards for processing employee benefit claims. Although some of the new requirements apply to all employee benefit plans, significant and widespread change has been made only to claims procedures for group health plans and plans providing disability benefits.
According to the Department of Labor, the new regulations "are intended to ensure more timely benefit determinations, to improve access to information on which a benefit determination is made, and to assure that participants and beneficiaries will be afforded a full and fair review of denied claims." The regulations, which replace regulations from 1977, apply to claims filed on or after January 1, 2002.
Time for Initial Decision
The first area of major change is the time frame in which a plan must make an initial decision on a claim. Under the 1977 regulations, all benefit plans must notify claimants of a denial of benefits within "a reasonable period of time," but no later than 90 days after the plan receives the claim. If "special circumstances" require an extension of time for processing the claim, the plan can take an additional 90 days to make its decision, as long as the plan notifies the claimant of the extension. Thus, a plan has an outside limit of 180 days to make a decision.
For group health plans, the new regulations carve out time frames for each of the new categories of pre-service, post-service, and urgent care claims. A pre-service claim is a claim for a benefit that requires pre-approval from the plan. A post-service claim is a claim for the payment or reimbursement of costs for care that has already been provided. An urgent care claim is a claim for which the time frames for pre-service and post-service claims could either (i) seriously jeopardize the claimant's life, health, or ability to regain maximum function, or (ii) subject the claimant to severe pain that cannot be adequately managed without the requested treatment.
Although other welfare and pension plans retain the 1977 time frame for initial decisions, the new regulations set out shorter time frames for the new claim categories and for plans providing disability benefits. For example, for urgent care claims, a health plan must notify the claimant of the plan's benefit decision, whether adverse or not, as soon as possible, "taking into account the medical exigencies," but no later than 72 hours after the plan receives the claim. The deadline for decisions on pre-service claims, whether adverse or not, is 15 days, and for adverse post-service decisions is 30 days. For pre-service and post-service claims, a time extension is available for matters beyond the plan's control, but the extension can last only 15 days.
The effect of the new group health plan time frames can be dramatic. For example, in the case of post-service claims, the current 180-day outside limit for a plan's initial decision will shrink to 45 days. For pre-service claims, the outside limit will be 30 days. The time frame for disability claims decisions, however, will not be reduced as drastically. Here, the 180-day outside limit of the 1977 regulations will shrink to 105 days: an initial 45-day deadline and two possible successive time extensions of 30 days each.
Time for Appeal
The second area of major change is the time frame for appeals of denied claims. The 1977 regulations currently provide an appeals time frame that applies to all welfare and pension plans. Plans must allow at least 60 days for a claimant to file an appeal, and plans must render a decision within 120 days: an initial 60-day deadline, with a 60-day extension available.
The new regulations will change the appeals time frames for group health plans and plans providing disability benefits but retain the 1977 time frames for all other plans. Most of the changes, however, are again significant. Group health plans and plans providing disability benefits will have to allow claimants at least 180 days to appeal a decision. Instead of 120 days, urgent care appeals will have to be decided within 72 hours, pre-service appeals within 30 days, and post-service appeals within 60 days. Only for disability claims are the changes somewhat moderate: an initial deadline of 45 days, with a 45-day possible extension.
Standard of Review
The third area of major change is the standard of review plans must use for appealed claims. The 1977 regulations currently require that claimants be able to file a written appeals request, review "pertinent" documents, and submit written comments. The new regulations expand these requirements for all welfare and pension plans. Most importantly, plans will have to allow claimants reasonable access to, and copies of, all information submitted, considered, or generated in the course of making the claim decision, without regard to whether the information was actually relied on in making that decision. Also, in support of the appeal, claimants will be able to submit information not provided to the plan in the initial benefit claim.
In addition, group health plans and plans providing disability benefits will be mandated, among other requirements, to have review procedures that do not afford deference to the initial decision to deny the claim. The review conducted by these plans will have to be made by an appropriately named plan fiduciary who is neither the person who made the initial decision nor the person's subordinate.
Denial Notice
The fourth area of significant change is the content of the denial notice that plans send to claimants. Under the current 1977 regulations, the notice of all plans must state: (1) the specific reasons for the denial; (2) specific reference to the pertinent plan provisions on which the denial is based; (3) a description of any information missing from the claim and an explanation as to why such information is necessary; and (4) the steps to be taken to submit the claim for review.
The new regulations substantially retain the 1977 requirements for all plans but provide additional requirements for the notices of group health plans and plans providing disability benefits. These notices will have to set forth either the criterion (such as a protocol) that was relied upon in making the decision or a statement that the criterion was relied upon and will be provided to the claimant, upon request, at no charge. If the decision is based on a medical necessity, experimental treatment, or other similar limit, the notice will have to either explain the scientific or clinical judgment behind the decision or state that such explanation will be provided, upon request, at no charge.
Other Changes
The recently released regulations also provide rules for: claimant requests to extend an ongoing course of "urgent care" treatment; a health plan's reduction or termination of an ongoing course of medical treatment ahead of schedule; arbitration of an appealed denial of benefits; and claims that are missing the information necessary for an initial decision.
The new regulations can be found at 29 C.F.R pt. 2560.
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Temporary or Contingent Workers May Unionize
Recently the National Labor Relations Board extended organization rights under the National Labor Relations Act to temporary or "contingent" workers. M.B. Sturgis, Inc., et al., 2000 WL 1274024 (Aug. 25, 2000). Undoubtedly, many unions viewed the NLRB's decision as opening up a huge potential membership opportunity. According to government statistics, the number of "temporary" jobs continue to rise. Contingent workers today comprise close to 30% of the nation's total workforce. The National Bureau of Labor Statistics projects that the temporary agency workforce will reach 4 million by the year 2006.
If an employer wishes to remain non-union, it is important to keep in mind the Board's decision when using temporary workers. When the NLRB is faced with a representation petition from a union asking for an election among a group of employees, the NLRB's primary concern is to group together in a single voting unit only those employees who have a substantial mutual interest in wages, hours and other conditions of employment. In other words, the employees to be included in a voting unit need to share a similar "community of interest." In applying this basic test for defining a bargaining unit, the NLRB looks to whether the employees to be put in the same bargaining unit have different or common work areas, produce the same work product and share the same work supervision and other working conditions.
In the Sturgis decision, the NLRB found that, in today's work environment, many regular and temporary employees are likely to work side by side in the same facility producing the same product under the same supervision, subject to the same working conditions. Accordingly, using its traditional "community of interest" test, the NLRB concluded that, based upon the facts of each case, regular and temporary workers could be in the same bargaining unit. In so deciding, the NLRB reversed long-standing precedent to the contrary. Nor does the fact that temporary workers are often employed by a staffing agency present an obstacle since the NLRB concluded that such temporary workers could easily be the employees of both the staffing agency and the "user" employer. Thus, both the staffing agency and the user employer would be the "joint employers" of the temporary worker.
The NLRB's decision also applies in a significant way to companies that already have a collective bargaining relationship with a union. Depending upon the provisions of the union contract, if such an employer uses temporary workers to perform the same work as those covered by the union contract, the incumbent union could request the NLRB to "accrete" or add the temporary employees to the existing collective bargaining unit.
In this area, as in traditional bargaining unit cases, each case will be decided on its own particular facts. As a result, employers should examine how they use contingent workers and to decide how vulnerable they want to be to unionization of those workers. Employers can take the following steps to reduce the possibility that temporary workers could be unionized along with regular employees:
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- utilize temporary workers only for a finite period of time so as to maintain high turnover and reduce community of interest;
- reduce contact between regular and temporary workers; and
- request that staffing agencies exercise a high level of supervision over their workers in areas such as recruiting, payroll, and onsite supervision.
Although debate continues about how the NLRB will apply the community of interest test, there is little disagreement that it has opened a new source of potential members for unions.
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