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HR Matters
Employees Must Show "Similar Qualifications" in Failure to Promote Cases.
December 5, 2005
LABOR & EMPLOYMENT NEWS
Employees Must Show "Similar Qualifications" in Failure to Promote Cases. In a recent U.S. Court of Appeals case, the court ruled that an employee must demonstrate that the non-protected person, who was ultimately hired for the desired position, had similar qualifications to the employee to establish a prima facie case of discrimination. A female safety and crime prevention coordinator for the Columbus Metropolitan Housing Authority (CMHA) applied for a manager's position. The manager's position required the incumbent to have a bachelor's degree (preferably in criminal justice), knowledge of legal, investigative, and safety procedures, and 7-10 years of experience in the investigative/safety field. The coordinator was a college graduate with a major in sociology, a minor in psychology, and 7 years of experience. However, an outside male applicant had more than 17 years of experience, which included service as a military police officer. The court concluded that the outside applicant was better qualified than the coordinator. Therefore, the coordinator failed to establish a prima facie case of discrimination based on failure to promote. (White v. Columbus Metro. Hous. Auth.)
Arbitration Agreement in Job Application Found Unenforceable. The U.S. Supreme Court upheld a U.S. Court of Appeals decision not to enforce an arbitration agreement contained in a restaurant's job application package. The restaurant used a 12-page application package that included the arbitration agreement. An unusual feature of the arbitration agreement was that it was between the job applicant and an employment dispute service, which had a separate agreement with the restaurant. The service provided a list of adjudicators (generally supervisory or non-supervisory personnel from companies with contracts with the service), limited each party to one deposition, and reserved the right to modify its rules at any time. The Court of Appeals refused to enforce the arbitration agreement because employees received nothing of value in return for giving up their right to a jury trial, they did not knowingly and voluntarily waive their rights, and there was no mutual assent to arbitrate employment disputes. In sum, the arbitration system was so unfair that the Court of Appeals felt justified in excusing employees from participating in it. (Ryan's Family Steak Houses Inc. v. Walker)
Non-Exempt Employees May Receive Nominal Stipends for Coaching. In a recent opinion letter, the Department of Labor (DOL) approved the payment of small fees to non-exempt employees who volunteer to coach school sports. The Fair Labor Standards Act (FLSA) recognizes the generosity and public benefits of volunteering, and does not seek to impose unnecessary obstacles in the way of bona fide volunteer activities for charitable purposes. DOL emphasized that the payments cannot be a substitute for wages or be conditioned on the number of hours spent coaching. For more information regarding the volunteer activities or other issues under the FLSA, please contact us. (Wage & Hour Opinion Letter FLSA2005-51)
WORKPLACE HEALTH & SAFETY NEWS
Self-Employment Precludes Temporary Total Disability Compensation. An employee sustained a work accident and received temporary total disability (TTD) compensation. The employer filed a motion requesting that the temporary total paid to the employee be declared an overpayment because the employee was working in a self-employed capacity at a pizza shop. An employee who engages in remunerative (paid) activity is precluded from collecting TTD compensation. The employee argued that he was not engaged in remunerative activity because he did not receive wages for his services. The court found that even though the employee was not being paid in the form of wages, the activities that he undertook were income-generating activities that precluded TTD compensation. The employee's activities of preparing food, serving customers, working the cash register, and delivering pizzas were the very activities that generated income for the pizza shop. (State ex rel. Meade v. Indus. Comm.)
EMPLOYEE BENEFITS & EXECUTIVE COMPENSATION NEWS
Nonqualified Deferred Compensation Plans. The IRS has released new guidance with regard to nonqualified deferred compensation plans, which suspends certain employers' and payors' reporting and withholding requirements for 2005 with respect to Section 409A nonqualified deferred compensation amounts. The Notice states they do not have to report and withhold amounts that, under Section 409A, are includible in gross income of an employee (or independent contractor) but have not been actually or constructively received by that individual in 2005. However, the IRS notes that future guidance to be issued early in 2006 may require employers to provide corrected forms W-2 to affected individuals. The Notice also does not eliminate or postpone an individual's tax filing requirements, tax liability or interest on underpayments with respect to 2005 deferred compensation that is includable in the individual's gross income.
2005 Version of IRS Publication 969. The IRS has released an updated version of publication 969 on Health Savings Accounts (HSA) and other tax-favored health plans, for use in preparing 2005 tax returns. The publication provides summary information regarding available benefits, applicable eligibility requirements, contribution limits and distribution issues. More extensive information is provided about HSAs, including what happens after the account holder's death. The publication has been updated to reflect the 2005 limits for HSAs, the extended grace period under a cafeteria plan flexible spending account, the modified definition of dependent, and the tax treatment of HSA contributions made for partners or more than 2% shareholders of an S-corp.
2006 Mileage Rate. As we informed you in September, the IRS increased the standard mileage rate to obtain medical care from $.15 to $.22 per mile. This unusual mid-year change was provided because of the rapidly escalating gas prices. However, that increase only applied beginning September 2005. The IRS has now announced the standard mileage rate to obtain medical care for 2006 at $.18 cents per mile. Such mileage expenses may be deductible as medical expenses if they are primarily for, and essential to, medical care. These expenses can generally be paid or reimbursed on a tax-free basis through a cafeteria plan flexible spending account (FSA), health reimbursement account (HRA) or health savings account (HSA). If a participant in such an arrangement submits a claim for reimbursement for mileage incurred over several months, the plan administrator will need to make sure that it applies $.15 per mile from January through August 2005, $.22 per mile from September through December 2005, and $.18 per mile for 2006.
Graydon Head & Ritchey Opens New Office in West Chester!
Butler/ Warren Office
7759 University Dr.
Suite H
West Chester, OH 45069
Phone: (513) 755-9500
Fax: (513) 755-9588
Downtown Cincinnati Office
1900 Fifth Third Center
511 Walnut St.
Cincinnati, OH 45202
p: (513) 621-6464
f: (513) 651-3836
Northern Kentucky Office
2500 Chamber Center Dr.
Suite 300
P.O. Box 17070
Ft. Mitchell, KY 41017
p: (859) 282-8800
f: (859) 525-0214
GRAYDON HEAD & RITCHEY LLP WISHES YOU AND YOUR FAMILIES A HAPPY & HEALTHY HOLIDAY SEASON!
HR Matters is a publication of the Graydon Head & Ritchey Human Resources Department, the Employee Benefits & Executive Compensation and Labor & Employment practice groups and their members. Click here to learn more about our team.
HR MATTERS from GH&R
Volume IX, Issue 104 - December 2005
This Newsletter is a periodic publication of Graydon Head & Ritchey LLP and should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general information purposes only, and you are urged to consult your own advisor concerning your situation and any specific legal question you may have.