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HR Matters
Disabled worker awarded millions against Wal-Mart.
March 30, 2005
LABOR & EMPLOYMENT NEWS
Disabled Worker Awarded $7.5 Million Judgment Against Wal-Mart. A jury in a federal case found that Wal-Mart had discriminated against a pharmacist with cerebral palsy. The disabled pharmacist argued that his supervisors discriminated against him by not consistently scheduling him to work in the pharmacy and ultimately assigning him to collect shopping carts in the parking lot because the head pharmacist did not consider him "fit for the pharmacy job." The jury found that Wal-Mart subjected the disabled pharmacist to a hostile work environment, failed to provide him with reasonable accommodation, and asked prohibited disability-related questions before making a conditional offer of employment. The jury awarded the disabled pharmacist $9,114 in economic damages, $2.5 million in compensatory damages and $5 million in punitive damages. (Brady v. Wal-Mart Stores, Inc.)
Arbitration Pact in Ryan’s Job Application is Unenforceable. The Sixth Circuit ruled that an arbitration agreement that applicants had to sign to even be considered for jobs at Ryan’s Steak House chain was unenforceable. Specifically, the court held that the arbitration agreement was not a valid contract because: (1) employees received nothing for giving up their right to a jury trial and did not knowingly and voluntarily waive this right, (2) there was no mutual assent to arbitrate employment disputes, and (3) the agreement contained fundamentally unfair provisions regarding discovery and the selection of arbitrators. The court held that these provisions were illusory and, therefore, inadequate consideration to support a contract. This case is a good reminder that, although arbitration provisions can be an effective hedge against run-away jury verdicts in employment cases, they must be drafted in a manner that is consistent with current law and permits the greatest likelihood of them being upheld by the courts. (Walker v. Ryan’s Family Steak Houses, Inc.)
Employment Discrimination is Costly. A federal jury in Cincinnati recently awarded a former employee $1.5 million in an age discrimination case. The median award for federal age discrimination cases from 1997 to 2003 is $223,000 with a plaintiff recovery rate of nearly 70 percent. In state courts, the median award for age discrimination is $283,000. The median award for all types of employment discrimination cases in Hamilton County since 1987 is $298,100. These statistics point out the importance of seeking legal advice before taking adverse employment actions.
WORKPLACE HEALTH & SAFETY NEWS
Tips Received as Part-time Bartender Constitute Payment. After being injured on the job, an employee received temporary total disability (TTD) benefits. The employee worked sporadically as a bartender and received tips from the bar patrons while temporarily disabled. A court upheld the Bureau of Workers’ Compensation termination of the employee’s TTD benefits and recoupment of TTD payments because the employee’s work as a bartender precluded receipt of TTD benefits. Although a bar patron is ordinarily not obligated to tip the bartender, the receipt of tips can be viewed as a general expectancy of a bartender for work performed. The tips an employee receives from bar patrons must be viewed as payment for the bartending services. (State ex rel. Peters v. Industrial Commission)
Workers’ Compensation Benefits Awarded for Stress-Induced Physical Injury. Over-pressurization of an employer’s refrigeration system released ammonia gas. An employee fixed the problem by manually starting the refrigeration system. Shortly after fixing the problem, the employee experienced a headache after breathing the ammonia. Eventually, the employee underwent a CT scan that showed abnormalities in his brain. The doctor diagnosed him with a ruptured aneurysm, which was determined to be hereditary. While undergoing surgery for the aneurysm, he suffered two major strokes and eventually died. Upon the employee’s death, his wife filed for workers’ compensation benefits, which the Industrial Commission denied. After a series of appeals, a jury overturned the Commission’s decision. The court of appeals upheld the jury’s verdict. To establish entitlement to benefits for a stress-related injury, an employee must show that the stress that he was subjected to "resulted from greater emotional strain or tension than that to which all workers are occasionally subjected." The employee also must establish a causal connection between the work place stress and the resulting injury. The jury found the incident at work caused the employee unusual mental and emotional stress, which, in turn, caused the rupture of his pre-existing cerebral aneurysm. (Johnson v. Cleveland Coca Cola Bottling Co., Inc.)
EMPLOYEE BENEFITS & EXECUTIVE COMPENSATION NEWS
Roth Contributions in 401(k) Plans. Starting Jan. 1, 2006, employers who sponsor a 401(k) plan may allow participants to make an irrevocable election to designate all or a portion of their elective deferrals as Roth contributions. The Roth contributions are subject to income tax in the year of deferral but distributions and earnings are tax-free if they are made at least five taxable years after the first contribution is made and after the attainment of age 59½, death, or disability. Since the Roth contribution is still considered an elective deferral the same rules apply with regards to vesting (100 percent), annual dollar limits ($15,000 in 2006), catch-up limits ($5,000 in 2006), ADP testing and distribution restrictions. However, Roth contributions may only be rolled over into a plan that has Roth contributions or a Roth IRA. Also, employers must maintain separate records for the Roth contribution accounts due to the different tax treatment. Any employer who wishes to add Roth contributions needs to amend their plan by the end of the plan year in which the optional provision is put into effect.
HIPAA Portability. Final HIPAA regulations have been issued regarding group health plan portability. The final regulations make changes and clarifications to the earlier regulations in the areas of pre-existing condition exclusions, notices of creditable coverage and special enrollment rights. For preexisting conditions, the regulations provide examples of hidden preexisting condition exclusions, such as a plan provision that denies coverage for pregnancy until 12 months after an individual becomes generally eligible for benefits under the plan or a plan provision that counts benefits received under prior health coverage against a lifetime limit. Such provisions are not permitted. The final regulations require that a general notice of preexisting condition exclusions must be provided as part of any written enrollment materials provided by the plan. Sample language is included in the regulations. An additional more specific notice is required for the plan to impose a preexisting condition exclusion to a particular enrollee. The regulations also expanded the list of situations that would constitute a loss of eligibility for coverage for purposes of triggering special enrollment rights.
HR MATTERS from GH&R
Volume IX, Issue 95 - March 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.