Nolo's Employment Law Blog

After the Senate finally convinced Senator Jim Bunning to stand down his one-man protest (covered in my previous post), Congress passed -- and the President signed -- an extension of the COBRA subsidy last week. (You can find the bill, called "The Temporary Extension Act of 2010," here.) The extension is clearly a stopgap measure: It lasts only until the end of this month (March), by which time Congress hopes to have passed a more comprehensive jobs bill that will keep the subsidy in effect through the end of this year.

But the one-month extension of the subsidy wasn't the only COBRA news in the Temporary Extension Act: The bill also expands eligibility for the subsidy to those who initially lose their health insurance coverage due to a reduction in work hours, then are laid off. This is a small but vitally important change: Many businesses have tried to weather the current economic storm by cutting back on hours worked (and how much employees are paid for those hours). The most recent figures from the Bureau of Labor Statistics (for February 2010) show that more than six million people are involuntarily working part time due to business conditions or lack of work. Unfortunately, given the current economic climate, many of these businesses will ultimately have to make deeper cuts -- and many of these involuntary part-timers will eventually lose their jobs altogether.  

The new law gives these employees another opportunity to elect COBRA coverage once they are terminated -- and, therefore, become eligible for the subsidy. A cut in hours that makes an employee ineligible for group health insurance through the employer's plan is already a COBRA qualifying event, and the new law doesn't change that. Nor does the law make employees who are still working at reduced hours eligible for the subsidy. What the law does is provide an additional election period to these employees if they subsequently lose their jobs and become eligible for the subsidy. If an employee initially declined coverage or elected coverage but let it lapse, the new law gives that employee another chance to elect coverage after a job loss.   

About a year ago, the Supreme Court found in favor of an employee, Vicky Crawford, who was fired after she participated in an investigation of workplace sexual harassment. (The case was Crawford v. Metropolitan Government of Nashville and Davidson County, Tennessee; you can read my previous post about it here.) The Court held that Crawford could sue for retaliation; Crawford's employer had argued that, because Crawford was only a witness in the investigation and not the person who had originally complained of harassment, she was not protected from retaliation. After the Supreme Court's decision kept Crawford's claim alive, the case went back to the federal district court for a trial on the facts.

A couple of weeks ago, the jury reached a verdict: Crawford was awarded $1.5 million in damages. After losing its legal argument that Crawford couldn't bring a retaliation claim, the employer tried a different tack: It argued that Crawford wasn't fired for participating in the harassment case, but for performance problems. The employer said Crawford was once a good employee, but her performance had been slipping; when an audit revealed problems in the payroll department, including checks that were never deposited, she was ultimately fired.

Of course, we can only know the facts that were recounted in news articles or court decisions about the case. Based on the information I've seen, I think there are a few lessons employers can take from what happened in this case:

• Timing is everything. Retaliation cases are all about timing, more specifically how much time passed between the employee's protected activity and the employer's alleged retaliation. The shorter the time period, the more it looks like retaliation. Here, the HR person who conducted the harassment investigation reported possible problems in the payroll department on the same day she filed her report in the harassment case. Same day plus same person involved in both issues equals huge mountain for the employer to climb to refute a retaliation claim.
• Can I get a witness? You don't necessarily need one to decide that harassment took place. It looks like another big problem for the employer in this case was that it fired three employees who participated in the investigation -- in which pretty bad behavior was alleged. Crawford said that the harasser pulled her head into his crotch, asked to see her breasts, and grabbed his own crotch, saying "you know what's up." Two other employees also said that they were harassed, and were also fired. Yet, the employer argued that it couldn't discipline the harasser because there were no witnesses to the behavior. Again, I've got no inside line on what "really" happened, but if three employees all allege that they were harassed, that's ample reason to take action. Often, there are no witnesses to harassment other than the harasser and the harassee. That doesn't relieve employers of their obligation to take action to stop harassment.
• The work environment affects performance. Here, the employer said Crawford was once a good employee, but her performance declined. We don't know the source of Crawford's performance problems, but in a situation like this, employers should consider whether poor performance might be explained, at least in part, by the harassment. Employees who have been harassed might have higher absentee rates, problems concentrating, and other performance issues. If the problems are attributable to the harassment, the employer should deal with the underlying issue, then work with the employee to help her get back on track.  

Over the weekend, the Senate passed a defense spending bill that included -- among many other things -- an extension of the COBRA premium subsidy provision that's about to expire. (You can find the entire bill at the website of the Library of Congress; search for the bill number, H.R. 3326, then skip ahead to Section 1010). The House already passed the bill, and it's been sent to the President for signing.

Currently, the COBRA subsidy allows those who are involuntarily terminated from September 1, 2008, through December 31, 2009 to receive a subsidy of 65% of their COBRA premium payments for up to nine months. The subsidy went into effect on March 1, 2009, which means that the first group of eligible folks -- those who had already lost their jobs and have been receiving the subsidy since the effective date of March 1 -- used up their nine months of subsidy coverage on November 30.

The extension would:

• allow those who are involuntarily through February 28, 2010, to receive the COBRA subsidy, and
• extend the subsidy period from nine months to a total of 15 months.

The extension to 15 months of subsidy eligibility also applies to those who have already used up their original nine months. For example, someone who was laid off and began receiving the COBRA subsidy on March 1, 2009, would have used up the nine months of subsidized coverage a few weeks ago. Now, that person will be eligible for an additional six months of subsidy payments. And, this coverage can be retroactive: That is, if an employee's subsidy ran out, and the employee didn't pay the full cost of COBRA coverage for December, the employee will have an opportunity to pay the lower amount to receive retroactive continuation coverage.  

As the end of the year approaches, Congress and President Obama are considering whether to extend several important economic benefits to help ease the effects of the recession. For instance, the tax credit for first-time homebuyers, an $8,000 credit that one economist says will have resulted in 400,000 home sales during its tenure, is set to expire on December 1, 2009. Unemployment benefits are another topic of discussion: The House of Representatives has already passed a bill that would provide an additional 13 weeks of unemployment benefits in states with unemployment rates of at least 8.5%. The Senate is considering a different approach, which would extend benefits for 14 weeks in every state, and by an additional six weeks in states with higher unemployment.

And what of the COBRA subsidy, by which the government picks up almost two-thirds of the tab for continuing health insurance for workers who have lost their jobs involuntarily? (Learn more about the subsidy in this article.) The subsidy, which lasts for nine months, applies only to employees who are fired or laid off by the end of this year. According to Workforce Management, the percentage of eligible employees who actually enroll in COBRA has doubled since the subsidy went effect. The White House has said that it is considering  seeking an extension of the subsidy. So far, however, Congress doesn't appear to have taken up any legislation that would effect this change. If Congress doesn't act, workers who are fired or laid off after the first of the year will once again have to pay the full cost of continuing health insurance -- and, given the statistics above, many are likely to decide that this is a luxury they can't afford.  

Managers routinely report that laying off workers is one of their least favorite job responsibilities. And it's no wonder why: Especially in our current tough economic climate, managers worry about whether laid off workers will be able to find a new job -- and make ends meet while they're looking. Add to that the stress of having to actually break the news to employees, worries over whether remaining employees will be able to handle the workload, and concern over whether the company itself will survive the recession, and you can see why layoffs provoke so much managerial anxiety.

Well, they've got even bigger concerns in France: kidnapping. As reported by CNN, there were three separate kidnapping incidents in March 2009, at Sony France, 3M France, and most recently at Caterpillar. Employees at Caterpillar, angered after hearing that the company had proposed laying off 700 workers, took four executives hostage; there's no word yet on whether they've been released. The workers did release a human resources director who recently had a heart attack. As tactics go, this one is proving to be effective: The kidnapping incidents at Sony France and 3M France both resulted in renewed discussions or negotiations between the union and the company, which is also what the Caterpillar workers say they want.

According to data released yesterday by California's Employment Development Department (EDD), 10.5% of Californians are unemployed -- which means able to work, available to work, looking for work, and not working at all. Behind the percentage points are almost two million people out of work, and fewer than half of those are currently collecting unemployment benefits. Over the past year, California's construction industry has seen the largest percentage of job losses, while employment in the fields of education and health services has actually grown a bit.

The numbers are echoed by recent figures on mass layoffs compiled by the federal Bureau of Labor Statistics, which show that California had the largest number of new claims for unemployment as a result of mass layoffs, in which at least 50 employees lose their jobs. In fact, California lost more than twice as many jobs in mass layoffs than any other state. And none of these numbers include those sometimes referred to as "underemployed," such as those who have taken part-time positions because they can't find a full-time job, those who have accepted a job that pays much less than a previous position, and those who are still working but have experienced hour or wage cuts.

For those of us who still have jobs and are wondering how we can help friends, relatives, and colleagues who haven't been so lucky, the New York Times published a great article by Ron Lieber today, called "Not Laid Off? How to Aid the Less Fortunate".

According to the Labor Department, the unemployment rate rose to 6.5% last month, the highest in 14 years. In the first ten months of this year, 1.2 million jobs have been lost in the U.S., more than half of them in the last three months. More than 10 million Americans are unemployed, and another 6.7 million are involuntarily underemployed -- working part time when they'd rather be working full time. (Check the grim data for yourself here.)

Lots of good information is out there for companies that have to conduct layoffs and employees faced with layoffs. And certainly, people who've lost their jobs deserve most of the attention, sympathy, and assistance.

But what about the employees who are left after the layoffs -- those who are expected to do the same amount of work (or more) with fewer resources and less help; who are anxious, sad, perhaps even angry about who was laid off or how it was handled; who may have had to make sacrifices of their own, such as pay cuts or loss of benefits; and who may be torn between their loyalties to the company and their need for job security? A great article in the most recent issue of HR Magazine (published by the Society for Human Resource Management) gives employers tips on how to help these employees -- and how to convince the best of them to stay the course. (SHRM members can find it here.)

The article explains that employees who are not laid off are likely to become more risk averse, concerned that failure could lead them to be next on the chopping block. This understandable concern leads to a more conservative approach to the development of new products, markets, and customers -- not the best outcome for a company in the throes of a downturn. The article also discusses the "survivor guilt" that can overcome remaining employees, as well as the long-term stress on employees who have to do more work to make up for missing colleagues. Statistics presented in the piece indicate that turnover -- in the form of employees leaving voluntarily -- increases dramatically at companies that have laid workers off. On average, companies that laid off .5% of their workforces sustained a 2.5% increase in turnover, which means that these companies lost five employees for every one they laid off.

So what can companies do? The article presents a number of valuable tips, including being honest and "overcommunicating" with employees who remain, making sure layoff and restructuring decisions are perceived as fair, allowing employees to vent, and giving remaining employees a reason to stay -- preferably with plausible details, such as careful plans to turn things around and timelines for improvement.  

Lisa Guerin

Giving references for an employee your company fired can be a very tricky business. If your company goes beyond the standard "name, rank, and serial number" approach -- typically, confirming only the dates the employee worked for the company, positions the employee held, and perhaps salary information -- you might be worried about a lawsuit from the former employee. Even though many states have laws that protect former employers from defamation claims based on a good-faith reference, you have to be careful not to go beyond information you know or reasonably believe to be true.

But courts are finding that it's just as bad to give a falsely positive reference for an employee who is actually dangerous. More than ten years ago, for example, the California Supreme Court found that an employer that chooses to give a detailed reference for a former employee has a duty not to misrepresent the facts. In that case, a female student at a California middle school claimed she was sexually molested by the vice principal, and sued his prior employer based on its glowing letter of recommendation; in fact, he had been accused of sexual misconduct and impropriety with students in his former job, as well. The Court allowed the case against the former employer to go forward.

A recent case from the Fifth Circuit Court of Appeals has facts that are similarly dreadful -- and a similar outcome. In that case, an anesthesiologist was fired for abusing Demerol on the job; his termination letter stated that his employment had been terminated for cause for reporting to work in an impaired condition and putting patients at risk. Nonetheless, he received positive reference letters from two of the doctors in the partnership that had fired him, stating that he would be an asset to any anesthesia service, was an excellent clinician, and was recommended highly. No mention was made of his drug abuse.

In his new position, the anesthesiologist failed to resuscitate a patient who was in for routine surgery; the family of the patient -- who ended up in a permanent vegetative state -- sued the new employer. The new employer, in turn, sued the former employers for misrepresentation. The Court of Appeals found that the former employers had no stand-alone duty to disclose the employee's drug abuse; once the doctor-owners provided a reference, however, they had a duty not to affirmatively misrepresent the facts. Because their referral letters were false and misleading, they could be partially liable for the patient's injuries.

The Supreme Court is busy these days, issuing its final decisions before beginning its summer recess at the end of this month. Today, the Court announced several employment law cases, including two age discrimination decisions. (The Court also invalidated a California law that prohibited employers who receive state funds from using that money to promote or discourage union organization; I'll write about that case, Chamber of Commerce v. Brown, in a future post).

One of the age discrimination cases, Meacham v. Knolls Atomic Power Laboratory, involved a reduction in force at a government contractor that designs naval nuclear reactors. Managers were asked to score employees for performance, flexibility, and critical skills, and those scores were used to determine which employees lost their jobs. All but one of the 31 employees who were let go were at least 40 years old, and most of them sued for age discrimination.

Among other things, the employees claimed that the scoring system had a disparate impact: Even though it didn't explicitly discriminate on the basis of age, the employees argued that it disproportionately screened out older workers. Knolls countered that its selection criteria for the RIF were "reasonable factors other than age" (RFOA), one of the exceptions to the Age Discrimination in Employment Act, and so were legal.

The argument in this case was over which party -- employer or employee -- ultimately has to prove the RFOA. The Court found that the RFOA is an affirmative defense, which means that the burden is on the employer to prove that its criteria were reasonable. As the Court admits, this case will make it more difficult for employers to defend against disparate impact claims in ADEA lawsuits.

In Kentucky Retirement Systems v. Equal Employment Opportunity Commission, a rare combination of five Justices (Breyer, Roberts, Stevens, Souter, and Thomas) decided that Kentucky's retirement system for employees in hazardous positions (such as firefighters and law enforcement officers) didn't violate the ADEA. This decision is tough to parse, not least because the facts of the case are a bit complicated (and there's math).

Here are those facts in a nutshell: Kentucky's system makes employees eligible to retire when (1) they have 20 years of service, or (2) they have five years of service and are at least 55 years old. Employees who suffer a disability are eligible for immediate retirement. If they haven't met one of the two criteria that usually apply, they are credited with enough additional years of service to qualify them for retirement, up to the number of years they have actually served. Retired employees were paid based on a formula that multiplies their years of service (whether actual or credited after a disability) by a factor of their annual pay when they retired.

The EEOC sued, claiming that the system discriminated against older workers because it allowed younger employees to receive higher payments than older employees with the same length of service. Because employees who were at least 55 only needed five years of service to retire, some younger employees who became disabled had to be credited with more years of service to be eligible for retirement -- which translates into more money. For example, an employee who suffered a disability at the age of 35 after ten years of service would receive credit for an additional ten years of service; an employee who suffered a disability at the age of 50 after ten years of service would receive credit for only an additional five years of service; and an employee who suffered a disability at the age of 55 after ten years of service would be credited with no extra years.

The Court decided in favor of Kentucky and upheld the system. The Court found that Kentucky wasn't motivated by age discrimination, but by a desire to allow those disabled on the job to receive compensation. Because the state's rules were based on pension eligibility rather than on age, the Court found that they should be upheld.

The dissent seems to have the better side of the argument on this one. They point out that the state's pension calculations are explicitly based on age. The state may be able to justify its rules using the equal cost defense, which allows employers to reduce certain benefits to older workers as long as it spends an equal amount on benefits for older and younger workers. But to say, as the majority opinion here does, that the state's system is not age-based seems incorrect. And even if the state has good intentions, as appears to be the case, it doesn't have to disadvantage older workers to achieve its goal of compensating employees who suffer disabilities.

Lisa Guerin

Firing an employee for having an abortion is a form of pregnancy discrimination, the Third Circuit Court of Appeal found in Doe v. C.A.R.S. Protection Plus, Inc. The facts of this case are particularly sad: Doe (a pseudonym) learned there might be problems with her pregnancy in August 2000, several months after she found out she was pregnant and told her employer. After tests showed severe deformities, Doe had an abortion, on her doctor's recommendation. On the day of the funeral ceremony, Doe was fired.

Her employer argued that she was fired for failing to comply with the company's procedures for being absent from work. However, Doe presented evidence that her husband had called in to arrange the time off, and that other employees were not required to follow the same rules. Another employee also stated that Doe's supervisor (who fired her) stated that Doe "didn't want to take responsibility," possibly in reference to her abortion. And, Doe was fired only three working days after the abortion. Taken together, the Court found that this evidence was enough to defeat the employer's motion for summary judgment.

At least one other federal Court of Appeals (the Sixth) has found that employers may not discriminate against employees who have had abortions, the same position the EEOC has taken. This precise issue hasn't come up much in court decisions, perhaps because many women keep quiet about having an abortion. Doe's employer knew about her abortion precisely because of the sad facts of the case: that it was a medically recommended termination of an apparently wanted pregnancy.

The term "abortion" does come up with some frequency in pregnancy discrimination cases, but not because the employee alleging discrimination had or even considered one. Instead, the employee sometimes claims that her manager brought up the possibility of an abortion (as in, "why don't you have one"), one piece of evidence that the manager was hostile toward the employee's pregnancy.

Thanks to the Law Memo's Employment Law Blog for alerting me to the case.

Lisa Guerin