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HR Matters
Ohio Bans Charging Jury Duty to Vacation or Sick Leave.
July 29, 2005
LABOR & EMPLOYMENT NEWS
Ohio Bans Charging Jury Duty to Vacation or Sick Leave. The Jury Patriot Act became effective on May 18. The Act prohibits Ohio employers from taking disciplinary action against permanent employees called for jury duty and from requiring them to use their vacation or sick leave while serving on jury duty. Please contact us if you need assistance revising your employee handbooks, policies or practices, and collective bargaining agreements to comply with the Jury Patriot Act.
Humana to Pay Over $1 Million in Back Wages for FLSA Violation. The Department of Labor revealed that Humana agreed to pay over $1 million in back wages to 2,510 employees for violations of the Fair Labor Standards Act (FLSA). DOL investigators found that Humana failed to record and properly compensate its employees for off-the-clock time spent powering up equipment, logging onto the network and bringing up necessary computer programs. The violations occurred in Cincinnati, Ohio; Louisville, Ky.; and Green Bay, Wis. between 2003 and 2005. DOL noted that Humana denied any wrongdoing and cooperated with investigators. The Department of Labor revealed that Humana agreed to pay over $1 million in back wages to 2,510 employees for violations of the Fair Labor Standards Act (FLSA). DOL investigators found that Humana failed to record and properly compensate its employees for off-the-clock time spent powering up equipment, logging onto the network and bringing up necessary computer programs. The violations occurred in Cincinnati, Ohio; Louisville, Ky.; and Green Bay, Wis. between 2003 and 2005. DOL noted that Humana denied any wrongdoing and cooperated with investigators.
Sixth Circuit Rebuffs ADA Allegations of Procter & Gamble Workers. Two former employees sued P&G alleging that it violated the Americans with Disabilities Act (ADA) when it laid them off without accommodating their disabilities, while reassigning the vast majority of the other workers it laid off. The employees also claimed that P&G should have transferred them or modified their jobs to meet their limitations. In affirming the lower court, the Sixth Circuit found that the employees failed to prove their claims that P&G failed to reasonably accommodate their disabilities after eliminating their positions. The court also ruled that the requested accommodations were not required under the ADA, which only requires employers to restructure the non-essential duties or marginal functions of a job. The employees failed to prove that the modifications that they sought would have no impact on the essential functions of their jobs. (Bingaman and Brantley v. Procter & Gamble Co.)
Severing Damages Clause Not Fatal to Enforcing Arbitration Agreement. An employment arbitration agreement included clauses prohibiting punitive damages but allowing the severing of unreasonable or invalid provisions. An employee alleging racism challenged the agreement in court. The D.C. Circuit refused to enforce the prohibition against punitive damages because it was unconscionable under D.C. law, but upheld the severability clause and enforced the remainder of the agreement against the employee. The court noted that one unenforceable provision does not invalidate an entire agreement and that its decision in this case respected the parties' intent regarding the severability clause. (Booker v. Robert Half Inc.).
WORKPLACE HEALTH & SAFETY NEWS
Ohio Supreme Court Limits VSSR Grandfather Rule. In 1999, a canning company employee was injured by a rotating core knife on a cabbage-coring machine, which the company placed into service in 1970. The employee filed a Violation of Specific Safety Regulation (VSSR) application, relying on a safety requirement that all exposed power knives be guarded. This safety requirement was in effect on the day the employee was injured, but was not in effect when the machine was placed into service. The Industrial Commission denied the VSSR application based upon the law that safety requirements do not apply if they are not in effect at the time a machine is placed into service. This is known as the "grandfather rule." The Ohio Supreme Court changed the law and held that safety requirements in effect at the time of injury will apply unless the device causing the injury is an "installation" or "construction." Whether a device is an "installation" or "construction" is determined by the size, relative permanence, and immobility of the device. The Court found that the coring machine on which the employee was injured was covered by the grandfather rule because the machine was mobile. (State ex rel. Arce v. Industrial Commission)
"Love Offering" Constitutes Wages. Roger Rollins was injured while working for an elevator service company and began to receive temporary total benefits shortly thereafter. Two years later, the BWC was notified that Rollins was working and being paid as a church pastor while receiving temporary total. The BWC filed a motion for overpayment, and the Industrial Commission granted the motion. Rollins appealed and claimed that the check was a "love offering" and was too insubstantial to show he was working. The Ohio Supreme Court ruled that the payment did show that Rollins was working because the law does not define work based upon the amount of wages earned. (State ex rel. Rollins v. Industrial Commission)
EMPLOYEE BENEFITS & EXECUTIVE COMPENSATION NEWS
Selecting & Monitoring Pension Consultants. ERISA requires that fiduciaries of employee benefit plans administer and manage their plans prudently and in the interest of the plan's participants and beneficiaries. To help plan fiduciaries evaluate the objectivity of the advice and recommendations provided by pension consultants, the Department of Labor and Securities and Exchange Commission recently published guidance (in the form of questions) to assist the fiduciaries in addressing conflicts of interest that may arise when engaging pension consultants. Such conflicts of interest should be evaluated in order to help plan fiduciaries to evaluate the objectivity of the advice and recommendations provided by the pension consultant. The questions look at the financial relationship between the pension consultant and other service providers and the fees generated by those relationships. For a list of the questions visit the DOL Web site (www.dol.gov/ebsa/newsroom/fs053105.html) or contact your GH&R benefits attorney.
IRS Audits to Increase. IRS intends to become much more active in auditing employee benefit plans in the future. For example, the IRS expects to increase the number of qualified retirement plan audits from 7,000 to 9,000 for the fiscal year ending in 2006. In addition to looking for abusive transactions involving benefit plans, the IRS has formed compliance groups in the 401(k), 403(b)/457 and large case areas. Those groups will help to identify issues and plans that should be examined. The IRS has also hired 55 additional examination agents for qualified plans to assist in this compliance and enforcement effort.
Medicare Part D Subsidy Application. Beginning in 2006, employers that provide prescription drug coverage to individuals that are eligible for Medicare Part D benefits may be entitled to a 28 percent subsidy if the employer coverage provided is actuarially equivalent to the Part D coverage. An employer may be providing prescription drug coverage to individuals eligible for Medicare Part D benefits through retiree medical coverage or through its medical plan for active employees. The Centers for Medicare & Medicaid Services (CMS) have estimated that the average subsidy would be $668 per Part D eligible enrollee in 2006. CMS recently developed a Web site to assist employers with applying for the retiree drug subsidy (www.rds.cms.hhs.gov). Applications for the 2006 subsidy must be made between Aug. 1 and Sept. 30, 2005 and are completed electronically through the new Web site.
IRAs & Higher Education Bills. You may have seen a recent article in the Wall Street Journal regarding a local tax case. Linda Louise Lodder-Beckert stopped working for the University of Cincinnati in 1999 to attend college. She sought to transfer her account in the public employees' retirement system to an IRA when she learned that pending legislation would increase her value if she waited. In the meantime, she paid for her education expenses for 1999 - 2001 with student loans and credit cards. In 2001, she transferred her retirement account into an IRA and took a distribution from the IRA to pay the credit card debt she had incurred for her 1999 and 2000 education bills. Generally, if you are under age 59 1/2, you have to pay an additional 10 percent tax (in addition to regular income tax) if you withdrawal money from your IRA, unless the early distribution is used for specific purposes such as payment of your higher-education expenses for that taxable year. In this case, the Tax Court ruled that Ms. Lodder-Beckert had to pay the additional 10 percent tax on the 2001 distribution to the extent it exceeded her 2001 higher education costs. This case highlights that, while IRAs may be a source for paying college expenses, care must be taken with the timing and amount of distributions.
HR MATTERS from GH&R
Volume IX, Issue 99 - July 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.