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HR Matters
EEOC Pays $1 Million in Fees and Expenses for Pursuing "Frivolous" Discrimination Suit
February 27, 2006
LABOR & EMPLOYMENT NEWS
EEOC Pays $1 Million in Fees and Expenses for Pursuing "Frivolous" Discrimination Suit. A federal judge in California labeled a sex and pregnancy discrimination lawsuit filed by the Equal Employment Opportunity Commission (EEOC) against a Pasadena firm as "unreasonable, frivolous and without foundation." The judge found that the EEOC did not adequately investigate the allegations and relied instead on statements by three "clearly-biased individuals." The judge said that those individuals were romantically involved, and used the EEOC as a "weapon" to destroy the firm and its namesake. The judge concluded that the EEOC either knew or inexcusably failed to deduce that it was being used as a weapon against the firm. Therefore, the judge awarded the firm over $1 million in attorneys' fees and litigation costs. (EEOC v. Robert L. Reeves & Assocs.)
Attending Mandated Therapy is Compensable Time. After an emergency dispatcher left her worksite abruptly because of stress, the employer required that the dispatcher attend weekly psychotherapy sessions as a condition of her continued employment. The employer did not allow the dispatcher to see her own therapist for the counseling sessions and the employer paid 90 percent of the therapy costs. The dispatcher claimed that she was entitled to payment for the time that she spent attending and traveling to and from the therapy sessions. In order to be compensable, the dispatcher had to show that the counseling sessions mainly served the interest of the employer. The time would not have been compensable if the counseling sessions were mainly for the dispatcher's benefit. The U.S. Court of Appeals for the Seventh Circuit agreed with the dispatcher and held that the therapy sessions were compensable because they were designed to help ensure the employee "properly responded to emergency calls and stayed on the job in a position that was short-staffed." (Sehie v. City of Aurora)
WORKPLACE HEALTH & SAFETY NEWS
PTD Awarded Despite Lack of Hearing Notice to Employer. An employee worked in the same plant for 25 years. When the employee began working at the plant, the plant was owned by Luxaire, Inc. About ten years later, York International Corporation (York), acquired the plant. During his years at the plant, the employee had several workers' compensation claims. The employee eventually filed for permanent total disability compensation (PTD). Although the employee listed his employer as "York International," the Industrial Commission (Commission) sent the hearing notice to "York-Luxaire, Inc." and to a third-party administrator, Gates McDonald & Company. The hearing notice addressed to "York-Luxaire" was sent to an address, which was the plant's address at one time before York expanded the facility and created a new road. York did not receive the notice. The Commission awarded PTD, and mailed the order exclusively to Luxaire. For the next four years, self-insured York paid PTD without objection. Then, York moved the Commission to vacate its order granting PTD arguing that it did not receive notice of the hearing. York did not prevail at the Commission. Eventually, the case came before the Supreme Court of Ohio, which ruled in favor of the employee. Upon discovering that it did not receive notice of a workers' compensation order, a party can petition the Commission for relief. York, upon discovering that it did not receive notice, elected to pay PTD benefits for several years instead of petitioning the Commission for relief. Consequently, York is not entitled to relief because it did not use the remedy provided by the Commission. (State ex rel. York Int'l Corp. v. Indus. Comm'n)
EMPLOYEE BENEFITS & EXECUTIVE COMPENSATION NEWS
Quit Smoking or Leave? A recent article in The Wall Street Journal detailed one company's plan to force employees to quit smoking or be fired. Firing workers who won't stop smoking is illegal in 30 states. Ohio does not have a smokers rights law, but a Kentucky statute prohibits employment discrimination against smokers. Some employers are not firing smokers, but are charging employees who smoke higher health insurance premiums. Under HIPAA, an employer can offer a premium differential between smokers and nonsmokers only as part of a bona fide wellness program. There are four requirements that the program must meet to comply with HIPAA: first, the premium differential must be limited; proposed regulations suggest a limit of 10-20 percent of the total cost of employee-only coverage; second, the program must be reasonably designed to promote good health or prevent disease; third, the differential must be available to all similarly situated individuals; and lastly, the terms of the program must include reasonable alternative standards, such as participation in a smoking cessation program in order to qualify for the premium differential.
Health Savings Accounts are Soaring. Health savings accounts (HSAs) are the latest development in trend towards consumer-directed healthcare. An HSA may only be established by or on behalf of an "eligible individual," which is an individual that satisfies the following four conditions on the first day of each month: (1) the individual must be covered under a qualifying high deductible health plan (HDHP); (2) the individual must not covered under any non-HDHP that provides coverage other than for permitted coverage, permitted insurance, and/or preventive care; (3) the individual must not be eligible to be claimed as a dependent on anyone else's tax return; and (4) the individual must not be entitled to Medicare (due to age or disability). An HDHP is any health plan (self-funded or insured) that has an annual deductible of $1,000 or more for self-only coverage, and $2,000 for family coverage, and has annual out-of-pocket maximums of no more than $5,000 for self-only coverage and $10,000 for family coverage. Typically, HSA contributions are made by the eligible individual's employer or the eligible individual, so long as they do not, in the aggregate, exceed the annual contribution limit. HSA contributions must be held in a trust or custodian account. Distributions from the HSA for eligible medical expenses are generally tax-free. Amounts can be withdrawn even though no medical expense has been incurred, but the distribution is treated as taxable income and is subject to an additional 10 percent tax.
Roth 401(k) Plans. The IRS issued final rules allowing employees to elect to designate after-tax contributions to a Roth 401(k) plan starting in 2006. The final regulations clarify that, in order to provide Roth contributions, a qualified cash or deferred arrangement must also offer pretax elective contributions. The IRS is continuing to issue guidance for Roth 401(k) plans.
Final 401(k) Regulations. The final 401(k) regulations issued in December 2004 are effective for all plan years beginning on or after January 1, 2006 and will require plan sponsors to review and amend their plans to comply. Most of the changes affect testing, safe harbor 401(k) plans, contributions and distributions. The rules limit the use of QNECs on a "bottom-up" basis. The final rules also clarify that safe harbor plans do not have to match catch-up contributions, and that the safe-harbor notice can be provided electronically. The final rules permit automatic enrollment if provided in the plan document. They also address hardship distributions, and expand the reasons for the availability of hardship withdrawals to include funeral expenses.
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.