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HR Matters
Bargaining Power Imbalance Does Not Make Independent Newspaper Carriers Employees.
September 5, 2005
LABOR & EMPLOYMENT NEWS
Bargaining Power Imbalance Does Not Make Independent Newspaper Carriers Employees. Several newspaper carriers filed an unfair labor practice charge with the National Labor Relations Board (NLRB) against a Missouri newspaper because the newspaper allegedly terminated the carriers' contracts for engaging in union activities and placing unauthorized materials on newspaper bundles. The newspaper stated that the carriers were not permitted to unionize because they were considered independent contractors and not employees. Although the contracts signed by the carriers specifically classified them as independent contractors, the carriers claimed that the relationship should be construed as an employee/employer relationship because of the relative imbalance in bargaining power between the newspaper and the carriers. Despite this argument, the NLRB ruled the relative bargaining power between the parties is just one factor that must be considered when examining whether a party is an employee or an independent contractor. The NLRB must also examine other factors such as the type of control over performance, ownership of tools, and control over the ability to hire. After reviewing all pertinent factors, the NLRB found that the newspaper carriers were best classified as independent contractors. (St. Joseph News-Press)
Releases Not Written in a Manner Calculated to be Understood Violate the ADEA. An employee of IBM, who was terminated in a reduction-in-force, signed a "General Release and Covenant Not to Sue" in exchange for six months of severance pay and benefits. Later, the former employee sued IBM under the Age Discrimination in Employment Act (ADEA) and claimed that the waiver was not knowing and voluntary because the agreement was "not written in a manner calculated to be understood." A Texas federal district court explained that an employer must comply with all of the Older Worker Benefits Protection Act's (OWBPA) requirements for an employee to effectively waive any ADEA claim. One of the OWBPA's requirements is that the ADEA waiver be written in a manner calculated to be understood. The court ruled that IBM did not prove the Agreement was written in a manner calculated to be understood by "the average person eligible to execute the Agreement" because the release was limited and did not include a description of the employee's ADEA rights. This decision underscores the importance of working with legal counsel when preparing severance agreements. (Hartger v. IBM)
WORKPLACE HEALTH & SAFETY NEWS
Industrial Commission Determines Evidentiary Weight and Credibility. An employee, injured while working for Nick Strimbu, Inc. (NSI), filed a request for temporary total compensation. While processing the request, NSI discovered that the employee had omitted a previous employer on his NSI job application. NSI's policy provides that if an employee falsifies his application, NSI may terminate him. NSI terminated the employee and argued that the employee was not entitled to temporary total compensation because the employee voluntarily abandoned his job by violating a written work rule. The Industrial Commission rejected NSI's argument. NSI appealed the decision to the Court of Appeals and then to the Supreme Court of Ohio. NSI had to prove that the omission was deliberate and motivated by an intent to deceive to justify terminating the employee and denying his temporary total benefits. Since the Industrial Commission, who has the exclusive responsibility for determining evidentiary weight and credibility, was persuaded to believe that the employee simply forgot to list the other employer on his job application, the Supreme Court upheld the Commission's decision. (State ex rel. Nick Strimbu, Inc. v. Indus. Comm.)
Injuries Sustained in Car Accident Not Work Related. After attending a one-day training seminar, two Domino's Pizza employees voluntarily drove to another store to pick-up employee payroll packets. After picking up the packets, the driver decided to deliver them to her store before giving a co-worker a ride home. The driver collided with another car while en route to her store which resulted in injuries to her co-worker. Consequently, the co-worker filed a workers' compensation claim. The Industrial Commission denied the claim and the co-worker appealed into court. The court upheld the denial finding that the injury was not in the "course of and arising out of" the co-worker's employment. An employee is entitled to worker's compensation benefits for an injury he or she suffers while traveling home from work if that employee was performing a special mission for the employer when the accident occurred. The mission must be the major factor in the journey or movement, not merely incidental. The route taken by the Domino's co-worker was merely incidental to the journey home, not a major factor because the decision to pick up the payroll packets was voluntary. (Cartwright v. Conrad)
EMPLOYEE BENEFITS & EXECUTIVE COMPENSATION NEWS
Executive Compensation Audits. As previously reported in HR Matters, the American Jobs Creation Act of 2004 included new rules for nonqualified deferred compensation arrangements in new Internal Revenue Code Section 409A. The IRS is currently training its agents on Section 409A for future audits. The IRS plans to audit the 2005 transition year for compliance with 409A, and issues for which the law was clear and additional regulatory guidance was not needed in 2005 would be subject to enforcement. The first audits will likely begin in 2007. Regulatory guidance is expected later this year to address some of the unclear 409A issues, including the deadline for amending nonqualified arrangements for compliance. Any bonus plans, employment agreements, or other programs that defer compensation should be reviewed immediately to assure that hey currently operate in compliance with 409A to the extent t hat guidance has been issued.
Mandatory Electronic Filing of Form 5500. The Department of Labor (DOL) recently proposed regulations that would mandate electronic filing of the Form 5500 via the internet. Currently they accept government generated hand printed forms submitted in paper form or computer generated forms either submitted in paper form or electronically. The DOL notes that the requirement to file electronically would not affect record retention or disclosure obligations under ERISA. The proposed regulations would apply for plan years beginning on or after January 1, 2007, with the first electronically filed forms due in 2008. Along with this proposal, the DOL intends to propose changes to the Form 5500, which should be issued in the next few months.
Increase in Standard Mileage Rate. The IRS has announced that the standard mileage rate to obtain medical care will be increased from $.15 to $.22 per mile for the period from September through December 2005. The IRS cited the recent increase in gas prices as the reason for this adjustment, but because of the possibility that gas prices may drop rapidly, the IRS has decided to wait before setting the 2006 rate. Transportation expenses may be deductible 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 cafeteria plan flexible spending accounts (FSAs), health reimbursement accounts (HRAs), or health savings accounts (HSAs). If a participant submits a claim for reimbursement for mileage incurred over several months, the plan administrator will need to verify that the increased rate is only applied for mileage incurred in the final four months of 2005.
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 101 - September 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.