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"Labor & Employment Vantage Point"
December 02, 2009
by Jon E. Anderson, Todd M. Cleary, Daniel J. Finerty, Kim M. Gasser, Rufino Gaytan III, John A. Haase, C. Wade Harrison, Margaret R. Kurlinski, Christine Liu McLaughlin, Tom O'Day, Ronald T. Pfeifer, James T. Prosser and Annie L. Raupp

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From the Editors, Tom O'Day & Margaret R. Kurlinski

In our Fall 2008 issue, we predicted that 2009 would be a year of significance for human resources and labor professionals. 2009 has not disappointed. In this issue of the Godfrey & Kahn Labor, Employment & Immigration Vantage Point, we touch on a number of recent issues relevant to our clients: the changing landscape of non-compete and other restrictive covenants in Wisconsin; recent changes in the federal Family and Medical Leave Act; timely legal guidance regarding implementation of furlough plans; strategies for handling the H1N1 influenza, proposed changes to the Americans with Disabilities Act; an update on the prospects of the Employee Free Choice Act; and more. We anticipate that 2010 will be an equally active year in labor and employment law, and it is more important than ever for human resource professionals to stay abreast of legal changes and developments. It is also necessary for employers to review and revise their policies, procedures and agreements to conform to and take advantage of recent changes in the law. As always, the attorneys in Godfrey & Kahn, S.C.'s Labor, Employment & Immigration practice area are here to help you -- we look forward to another great year and wish you holiday cheer.

In This Issue: (To read any article of interest in this newsletter, simply click on the article title below.)

• H1N1 Preparedness and Strategies
• Important Legal Considerations When Considering and Implementing Furloughs
• Enforcing Non-Compete Agreements Just Got A Little Bit Easier
• Court of Appeals Case Offers Insight on Supreme Court Decision in Star Direct
• Employee Free Choice Act Update
• On the Horizon - Pending Federal Legislation That May Affect Your Workforce
• Union Agreement to Indemnify Employer for Withdrawal Liability Enforced
• Wisconsin Health Insurance Continuation Rights Expanded
• Family and Medical Leave Act Amended, Again
• Unpaid Leave is Now Available for Members of the Civil Air Patrol
• Affirmative Action Update
• Proposed Americans with Disabilities Act Regulations Present Major Changes

H1N1 Preparedness and Strategies
By: James T. Prosser

What can I ask my employees? What do I do if an employee gets sick at work? Can I require my employees to have flu shots? Not only do employers have to deal with tough economic times and the regular challenges of the cold and flu season, but there is now the additional challenge of the H1N1 influenza (swine flu). Employers need to plan for outbreaks of the flu while being aware of the legal obligations and ramifications of any plan. The following guidance specific to federal law can be used to formulate the appropriate steps to manage the H1N1 influenza. Employers must also remember to comply with all applicable state laws in addition to applicable federal laws.

Americans with Disabilities Act ("ADA")
Any pandemic plan must comply with the requirements of the ADA and similar state disability laws. H1N1 is generally not considered a disability under the ADA, but could be considered a disability under state disability laws with lower standards. However, any inquiries or communication with employees must comply with the law.

In formulating a pandemic plan, ADA-covered employers need to consider what types of information they can solicit from and share with employees. The Equal Employment Opportunity Commission ("EEOC") has provided guidance in the form of its "Pandemic Preparedness in the Workplace and the Americans With Disabilities Act" which can be found on line at www.eeoc.gov/facts/pandemic_flu.html (last visited on November 29, 2009). ADA-covered employers may not ask an employee to disclose if they have a health condition that makes the employee more susceptible to complications of influenza. This would likely be an inappropriate disability-related question. Employers can, however, make inquiries regarding an employee's ability to work in the event of a pandemic.

During an influenza pandemic, employers may send employees home if they display influenza-like symptoms. The EEOC has opined that advising workers to go home is not a disability-related action. During a pandemic, employers may ask employees if they are experiencing influenza-like symptoms. However, the employer must maintain all information about the employee's illness as a confidential medical record in compliance with the ADA.

An employer may also ask an employee why the employee has been absent from work if the employer suspects a medical reason; such a question is not a disability-related inquiry. Finally, during a pandemic, an ADA-covered employer may require employees to adopt infection control practices or wear personal protective equipment. The Occupational Safety and Health Administration endorses the use of personal protective equipment as a way to minimize exposure during an influenza pandemic.

After a pandemic has ceased, employers may require a returning employee to provide a doctor's certification for fitness to return. However, it may be difficult for employees to provide such information in an H1N1 situation because they may not have seen a physician during their absence.

Family and Medical Leave Act
Under the federal Family and Medical Leave Act ("FMLA"), as well as the Wisconsin Family and Medical Leave Act ("WFMLA"), qualified employees are entitled to unpaid leave if they have an illness or if they are required to care for another with an illness and the illness falls within the definition of a "serious health condition." Under federal law, a "serious health condition" generally necessitates three full calendar days of incapacity and two follow-up visits to a medical professional (or one follow-up visit and a regimen of continuing treatment). Under Wisconsin law, a serious health condition need only involve a disabling physical condition including outpatient care and at least one follow-up visit with a medical professional. Accordingly, particularly severe cases of H1N1 that necessitate follow-up visits to a medical professional may be covered by federal and Wisconsin family and medical leave.

Note, however, that if an employee is absent to care for a child because the child's school is closed due to H1N1, the employee likely does not qualify for an FMLA absence. Also, if an employee chooses to be absent from work to avoid contamination from H1N1 he or she is not covered by the FMLA. While the FMLA typically will not apply to H1N1 absences, an employer should consider whether its normal attendance policies will apply in these types of situations.

Collective Bargaining Agreements
If employers have union employees, any pandemic planning must be considered within the context of the collective bargaining agreement(s). An employer's decision to impose a mandatory vaccination policy, reassign employees who fail to accept a vaccination or impose a "fitness for duty" requirement during a pandemic will likely be subject to bargaining by the collective bargaining agreement. Unilaterally taking these actions could be a violation of the agreement.

Mandatory Vaccinations
According to EEOC Guidance, an employer can mandate influenza vaccinations for its employees under limited circumstances. See www.eeoc.gov/facts/pandemic_flu.html (last visited on November 29, 2009). However, the EEOC recommends that vaccinations be done on a voluntary basis. Employers who do mandate vaccinations may generate backlash from their employees and may ultimately face litigation seeking to prevent the mandatory vaccination in the workplace.

Nevertheless, if the nature of your business creates the need to ensure a full workforce throughout the winter season, you might consider the option of mandatory vaccinations. If you choose to mandate vaccinations, you must provide exceptions. An employee would be entitled to an exception based on an ADA or state law disability, medical condition (i.e., an allergic reaction to a prior vaccination), or a sincerely held religious belief covered under Title VII of the Civil Rights Act of 1964. In each of those circumstances, an employer would be required to provide a reasonable accommodation, such as reassignment or wearing protective equipment. If employers decide to implement voluntary or mandatory influenza vaccinations, employees with complications resulting from the vaccinations will be covered under worker's compensation.

Conclusion
It is easy to see why employers will have difficulty administering pandemic plans during this year's cold and flu season. There are a significant number of legal implications in preparing and implementing any plan. While the recommendations of the government are relatively simple, employers must be fully aware of the various federal and state employment laws that affect the details of their plans. Recognizing these implications in the preparation of the plan will result in an employer's ability to implement an effective plan and maintain the overall performance in the workplace.

For more information, contact James Prosser (jprosser@gklaw.com, 920.831.6362) or another member of Godfrey & Kahn, S.C.'s Labor, Employment & Immigration practice area.

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Important Legal Considerations When Considering and Implementing Furloughs
By: Christine Liu McLaughlin and Tom O'Day

There is no question that if you were not familiar with the nuances of furloughs before 2008, you are now. Faced with the worst economy many of us have seen in decades, many employers are considering ways in which to cut company costs and many have or will contemplate furloughs.

There are several legal issues employers must take into account in order to minimize or avoid the possibility of violating state and federal wage and hour laws when enacting furlough programs. Violation of those laws, of course, could negate the entire value of the furlough program itself. This article highlights select legal issues for private and public sector employers, in no particular order of importance. The legal issues in this article are by no means exhaustive of all issues related to considerations of furloughs, and keep in mind that individual state wage and hour laws may impact an ultimate course of action. That being said, this article will get you thinking about often-forgotten legal issues in the context of furloughs.

Contractual Obligations
Employers will want to examine any possible contract they may have with employees to make sure a furlough program will not violate the contract. Possible contracts include employment agreements, collective bargaining agreements and, if they do not have the appropriate disclaimer language, simple offer letters and employee handbooks. Employers may also have an oral contract and contracts that are created by "course of dealings" or past practice, especially in the union context.

Qualified and Nonqualified Benefits
Employers need to examine not only employee group health and benefit plans, but also other fringe benefits that are often detailed in the employee handbook. There is no law that defines "part-time" or "full-time" employment status, but there are often employer requirements that specify a certain minimum number of hours an employee must work to qualify for certain benefits. Under the federal Family and Medical Leave Act, as well as the Wisconsin Family and Medical Leave Act, there is a certain number of hours an employee must work to be eligible for leave. Of course, there is also the Consolidated Omnibus Budget Reconciliation Act ("COBRA"). One of the qualifying events that trigger COBRA coverage is a reduction in the number of hours of employment that leads to a loss of health insurance coverage for the employee.

Employers will want to review the details of their fringe benefit plans to determine eligibility, accruals, and any limits on application or use to determine how those benefits will be affected by a furlough. If the policy provides for it, employers may have a situation where the company has agreed to allow accrual of vacation or paid time off to occur during the furlough. Once you know the impact, you will need to communicate effectively and provide appropriate notice concerning the effects of the furlough on employee benefits.

Wage and Hour Laws
Keep in mind that wage payment laws are different from "minimum wage laws" and different from labor laws that address employee overtime and exemptions from overtime pay. Minimum wage laws and wage payment laws generally are not impacted as a result of a furlough program; regardless of the number of days off, an employee must still continue to receive at least the minimum wage for work performed. In addition, employees must still get paid, with no deductions on the regularly scheduled pay date.

A furlough program does, however, directly impact compliance with the Fair Labor Standards Act ("FLSA") and other similar state laws. In this regard, you must examine hourly employees and salaried exempt employees separately. Under the FLSA, non-exempt hourly employees can be furloughed for hours, days, or weeks without violating the FLSA. Hourly pay and overtime is calculated on the same basis, using the 40-hour workweek and one and one-half times the hourly rate for overtime. So, for example, the furlough program could mandate one day off per week for six weeks for non-exempt hourly employees. In that case, weekly pay and overtime would continue to be calculated based on actual work performed during those furlough weeks.

With salaried, exempt employees however, there are special considerations because there is a real concern that furloughing exempt employees will compromise their exempt status by running afoul of the "salary basis test." The "salary basis test" essentially says that, to be exempt from overtime pay, an employee must be paid the same predetermined amount of money per workweek (not pay period), regardless of the quantity or quality of work. In addition, the FLSA requires that employers pay an exempt employee's full salary in workweeks during which he or she performs any work, no matter how little work is performed. Because of these provisions, to avoid losing the exempt status, exempt employees should be furloughed for entire workweeks. Under limited circumstances, two of which are detailed below, exempt employees in the private sector may be furloughed for periods of less than one workweek without jeopardizing exempt status; however, employers should consult with legal counsel before implementing such furlough programs given the risk of losing employees' exempt status.

Exempt employees in the public sector (e.g., government employees) may be furloughed for periods of less than one week, as long as they are treated as non-exempt employees for the period of time during the furlough, without jeopardizing their salary status in the future or in the past. Therefore, during the furlough period, the usually exempt employee must be paid overtime premium, if applicable.

State laws, which vary from state to state, must also be considered when contemplating a furlough program.

Disparate Impact
If the furlough program impacts all employees in the entire company, it should not raise any issues of illegal discrimination. If, however, the furlough program only impacts certain employees or classifications of employees, and it affects a disproportionate number of persons in a potential category, then there is protected exposure to state and federal claims that the furlough program has a disparate impact on a protected group that results in illegal discrimination. Although the company's intent is pure, the impact may be suspect and that is why you should review the groups identified for the furlough program and examine the impact the furlough will have on protected groups within the program itself. If there is a disproportionate impact, then you should consider adjusting the furlough program accordingly.

WARN Act / "Baby" WARN Acts
Under the Worker Adjustment Retraining Notification Act ("WARN Act") and similar state laws, furloughs that last for a period greater than six months are considered an "employment loss" such that those furloughs count toward the number of "affected employees" for purposes of determining whether a covered "mass layoff" has occurred. Employees who are furloughed for periods that extend longer than six months are counted for purposes of the WARN Act on the date on which they were furloughed.

In considering furloughs, it is important to consider whether the furloughs may in any conceivable way extend for a period greater than six months. If so, the company should evaluate its mass layoff numbers to ensure that the WARN Act and/or similar state law is considered and, if necessary, avoided.

Other Options
If full workweek furloughs are not desirable for your company, there are other options to reduce overhead costs for your exempt employees. The Department of Labor has made clear that a company may require its exempt employees to use vacation or other paid time off on days when the exempt employees are required not to work. The employee must, however, receive his or her full predetermined salary. Companies may make deductions in a vacation or paid time off account in hourly increments so long as the employee's salary is not reduced. The savings, of course, comes from mandating the use of vacation or paid time off banks.

Another option would be to offer exempt employees the option of selecting -- at the employees' sole discretion -- to take unpaid personal leave in full day increments. This form of leave does not jeopardize the salary basis test because it is taken at the voluntary election of the employee. In order to preserve the exemption, however, such voluntary unpaid personal days must be taken in full day increments and must be truly voluntary.

Conclusion
Exploration of furloughs as a means for cutting costs has become common of late. The Department of Labor, recognizing this phenomenon, has issued recent opinion letters and other guidance to assist employers in navigating the legal landmines of a furlough program. In addition to those guidance documents and the detail above, employers should consult with their legal counsel to ensure the specific details of the furlough program are contemplated by current law.

For more information, contact Tom O'Day (today@gklaw.com, 414.287.9523), Christine Liu McLaughlin (cmclaughlin@gklaw.com, 414.287.9232) or another member of Godfrey & Kahn, S.C.'s Labor, Employment & Immigration practice area.

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Enforcing Non-Compete Agreements Just Got A Little Bit Easier
By: John A. Haase and Annie L. Raupp

As most business leaders and human resource professionals know, securing an enforceable covenant not to compete can be a significant challenge in Wisconsin. A decision by the Wisconsin Supreme Court issued on July 14, 2009, however, is a ray of sunshine for employers in an otherwise cloudy legal landscape. Indeed, the practical result of the Court's decision in Star Direct, Inc. v. Dal Pra, 2009 WI 76, clarifies the law and places employers in a better position for drafting and enforcing post-employment restrictive covenant agreements.

The facts of the Star Direct case reflect a common circumstance for Wisconsin employers. Star Direct distributes merchandise, such as batteries, cigarettes, lighters and toys, to convenience stores. Its principal sales strategy employs the use of route salespersons, who are charged with developing long-term business and personal relationships Star Direct's customers.

Mr. Dal Pra worked for a competitor of Star Direct. After Star Direct acquired the competitor, it sought to retain Mr. Dal Pra and offered him a "very good" compensation package, which included a $30,000 bonus following 30 months of service. But, nothing is free; Star Direct conditioned its bonus offer on Mr. Dal Pra's signing a non-competition agreement. The agreement contained three post-employment restrictions which ran for a period of 24 months following the end of Mr. Dal Pra's employment: (1) it prohibited Mr. Dal Pra from stealing those current or former customers of Star Direct with whom Mr. Dal Pra dealt on behalf of Star Direct; (2) it prohibited Mr. Dal Pra from "becoming engaged" by a competitor or an organization substantially similar to Star Direct within a 50-mile radius of Rockford, Illinois; and (3) it prohibited Mr. Dal Pra from disclosing certain confidential and proprietary information of Star Direct.

Mr. Dal Pra worked for Star Direct for approximately four years and received his bonus of $30,000. He then quit his employment, started his own distribution company and engaged in activities which violated the non-compete agreement. Unsurprisingly, Star Direct was not charmed by Mr. Dal Pra's behavior; it filed suit to enforce the non-compete agreement and recover damages. The trial court and the Court of Appeals ruled that the non-competition agreement was unenforceable. In overruling the lower courts, the Supreme Court made several important decisions, which will help Wisconsin employers in creating and enforcing restrictive covenant agreements. A brief description of those decisions follows:

1. Although Wisconsin courts must interpret restrictive covenant agreements in favor of the employee, courts must still interpret such agreements "reasonably" by "giving the words their plain meaning."
It is well established under Wisconsin law that restrictive covenants are to be construed in favor of the employee. Courts have often relied on this employee-friendly rule of construction to invalidate non-compete agreements. However, in Star Direct, the Wisconsin Supreme Court clarified that interpreting restrictive covenants in favor of the employee does not mandate unreasonable interpretations in order to rule in the employee's favor. Rather, courts must interpret restrictive covenants "reasonably" by giving the words their plain meaning.

2. An employer can take reasonable steps to shield its recent former customers from unfair competition from former employees.
Prior to Star Direct, there was some debate regarding whether an employer had a protectable interest in shielding former customers from unfair competition from former employees. Significantly, in Star Direct, the Court sided with the employer and definitively ruled that employers do indeed have a legitimate, protectable interest in former customers. In reaching this decision, the Court reasoned that employees obtain significant knowledge about the employer and former customers during the course of their employment. An employee's use of such information, if not prohibited, would afford him an unfair advantage over the employer and other competitors. The Court further emphasized that employers do have a legitimate interest in winning back the business of "recent" past customers.

3. Businesses can shield customers from the competitive activities of former employees, even if the former employee has not dealt with the customer in the recent past.
The former employee in Star Direct argued that the restrictive covenant at issue was unreasonable and unenforceable because it prohibited him from soliciting customers that he had not recently serviced. The Court rejected the plaintiff's argument, holding that employers do have a protectable interest in shielding current customers from the competitive activities of former employees, even if the employee has not had recent contact with the customer. The Court explained that the lack of recent contact does not change the fact that confidential customer information obtained by the employee may pose a real competitive danger to the employer.

4. A business' failure to have the same or similar restrictive covenant agreements with all similarly situated employees does not render the agreements unenforceable.
One factor that courts consider in evaluating the enforceability of non-compete agreements is whether the agreement is necessary for the protection of the employer's interests. The plaintiff in Star Direct argued that the fact that the company had not obtained restrictive covenants from all route salespersons demonstrated that such covenants were not necessary for its protection.

In rejecting the plaintiff's argument, the Court suggested that the appropriate inquiry is not whether all similarly situated employees are subject to restrictive covenants, but rather whether the employer's actions demonstrate that it obtained the agreement because it "legitimately fears" post-termination competition. Thus, a business' failure to obtain similar restrictive covenants from all similarly situated employees does not necessarily render an agreement unenforceable if the employer can otherwise demonstrate that its justifications were credible and were for the protection of its legitimate business interests.

5. The existence of an unenforceable post-employment restrictive covenant does not render other, separate restrictive covenants contained in the same agreement as unenforceable as long as the separate provisions may be understood and independently enforced.
When a non-compete agreement contains multiple restrictive covenants, as was the case in Star Direct, employees often argue that the existence of an unenforceable covenant renders separate covenants unenforceable. The Star Direct court provided clear guidance on this issue, holding that one unenforceable covenant does not necessarily mean that other restrictive covenants are also unenforceable. The "foundational inquiry" is whether, if the unenforceable provision is stricken, the other provisions be understood and independently enforced. In concluding that two of the three restrictive covenants contained in Mr. Dal Pra's non-compete agreement were divisible, and therefore enforceable, the Star Direct court placed special emphasis on the fact that the covenants were contained in separate paragraphs, and did not contain any cross-references.

The Star Direct case represents a significant clarification of Wisconsin law as it pertains to post-employment restrictive covenant agreements. In the big picture, the decision represents a directive to lower courts that they should interpret non-competition agreements in a way that is designed to incorporate the intent of the parties, rather than accepting unreasonable interpretations of the agreements as a means to find them unenforceable. In litigation concerning non-competition agreements, the Star Direct case will prove to be a powerful tool to employers. More specifically, the Court's decision affirms the enforceability of certain types of post-employment restrictions favored by employers. As a result, businesses should immediately review their current non-competition agreements. In particular, employers should focus their review on whether their current agreements lump a number of distinct post-employment restrictions into a single paragraph in an agreement. In light of the Star Direct case, it is clearly advantageous to place separate and distinct post-employment restrictions in separate clauses of the agreement. Likewise, for employers with a need to restrict competition from former sales employees, the Star Direct decision allows employers to shield some former customers from a competing ex-employee.

As most business leaders know, sales programs are often enhanced by building successful personal relationships in the midst of highly competitive environments. Employers can go a long way to protecting those relationships from its former sales employees by drafting and implementing reasonable and well-drafted restrictive covenant agreements. The Star Direct case makes this task a bit easier for businesses to achieve that goal.

For more information, contact John A. Haase (jhaase@gklaw.com, 920.436.7669), Annie L. Raupp (araupp@gklaw.com, 920.436.7691) or another member of Godfrey & Kahn, S.C.'s Labor, Employment & Immigration practice area.

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Court of Appeals Case Offers Insight on Supreme Court Decision in Star Direct

By: Daniel Finerty

After deciding the Star Direct case, the Wisconsin Supreme Court asked attorneys representing parties in another covenant not to compete case to persuade the Supreme Court that the case was worthy of review after Star Direct. That case, Techworks, LLC v. Wille, was recently rejected for review by the Supreme Court. Given the Supreme Court's decision to let the Court of Appeals' decision stand, the Techworks case may form a natural adjunct to the Star Direct decision.

The combined effect of the Techworks and Star Direct cases is that enforcing a restrictive covenant in Wisconsin, which has proved difficult for so long, may now be that much easier and a more reasoned affair. These pro-enforcement cases will assist employers seeking to restrain the conduct of former employees based on their restrictive covenant agreements.

In the Techworks decision, the Court of Appeals overturned the Circuit Court's grant of favor of Techworks' former employee, Wille. The Circuit Court denied Techworks action to enforce its noncompete agreement with Willie. The Court of Appeals, however, reversed the Circuit Court and entered judgment for Techworks. In their analysis, the Court of Appeals found that Wille's noncompete with Techworks was enforceable because:

• The covenant was necessary for Techworks' protection because of the relationships and goodwill that Wille created during his employment;
• The covenant contained a reasonable two-year restriction, which has been the upper limit restriction for some time in terms of duration;
• The covenant contained a reasonable geographic restriction that protected 200 of Techworks' customers. The Court reasoned that Wille would have the ability to solicit 14,700 other potential customers in the restricted area who were not Techworks' customers. Further, the covenant contained a reasonable customer-based restriction that prohibited Wille from providing services to Techworks' customers that he actually serviced in the last two years of his employment;
• The covenant was not harsh or oppressive to Willie due not only to the vast number of potential customers in Southeastern Wisconsin that he could still service (14,700 according to Dun & Bradstreet) but also because he could work for his new employer without violating the covenant; and
• The covenant was not against public policy, such as where enforcement may endanger public health or safety.

What is striking about the Court of Appeals' discussion of the 5-part test is that the Court seemed less inclined to buy into the former employee's arguments, such as that the noncompete agreement was harsh and oppressive or contrary to public policy.

Whether the effect of the Techworks case, as well as the Star Direct case, will represent a shift in thinking with regard to restrictive covenants will develop over time. To a large part, however, the restrictive covenant game remains the same. Given these recent decisions, as well as others, employers should continue to regularly review and update their restrictive covenants.

For more information, contact John A. Haase (jhaase@gklaw.com, 920.436.7669), Annie L. Raupp (araupp@gklaw.com, 920.436.7691), Daniel J. Finerty (dfinerty@gklaw.com, 414.287.9262) or another member of Godfrey & Kahn, S.C.'s Labor, Employment & Immigration practice area.

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Employee Free Choice Act Update
By: Ronald T. Pfeifer and Daniel Finerty

Employee Free Choice Act ("EFCA") proponents have found that the legislation has stalled in the bright light of national publicity and in the murky depths of senatorial hesitation as well as the utter distraction provided by the health care debate. A group of about ten centrist Democrats has been unwilling to support legislation which contains the element the labor movement most wanted to accomplish: the "card check" feature, which would grant a union representation status on the basis of a majority of employees in a bargaining unit having signed authorization cards. Most seasoned observers believe that whatever legislation (if any) emerges from this Congressional session bearing the name of the "Employee Free Choice Act," it will not contain within it the "card check" feature organized labor so very much wanted to obtain.

Of course, it remains entirely possible that some spin-off of the EFCA might result. If that comes about, such legislation certainly could contain elements which are very much contrary to employers' interests, such as: (1) mandatory equal union access to employers' workplaces prior to elections; (2) shortened time lines with regard to union elections as well as the negotiation of collective bargaining agreements; (3) mandatory mediation/arbitration of impasse in negotiations; and (4) increased penalties for employers only for the commission of unfair labor practices. Employers should keep their eyes focused squarely on Washington, D.C. and should monitor the progress of this legislation; it goes to the heart of employer/employee relationships.

The key turning point may very well be the moment a modified version of EFCA makes its way to the Senate floor. This action may signal that the proponents believe they have the necessary 60 votes to "invoke cloture," or close debate in the Senate, and defeat an expected Republican filibuster. While it is possible that a proponent would bring the measure to the floor with less than 60 votes and hope to bring pressure to bear in order to secure the remaining votes needed, this is unlikely.

Some observers are concerned that labor may be able to obtain many of its objectives through other means. Currently, there are three vacancies on the National Labor Relations Board ("NLRB"), to be filled by Presidential appointment. Of course, it goes without saying that the opportunity to appoint members of the NLRB is a powerful one indeed and the National Labor Relations Board, if it has its own political agenda, can dramatically alter employer/employee relationships overnight through individual case decisions and increased regulation. If the President is able to gain confirmation of the individuals he has put forth, it is likely that employers will see a stream of decisions from the NLRB which will be unlike those they have seen in the last eight years and will certainly change the way business is done at the NLRB.

Either way, it is clear that with the winter chill has come a foreboding sense that change is in the air in Washington, D.C. It is likely to be change that employers will not like. However, whether it is change that employers can live with remains to be seen.

For more information, contact Ronald T. Pfeifer (rpfeifer@gklaw.com, 920.436.7668), Daniel Finerty (dfinerty@gklaw.com, 414.287.9262) or another member of Godfrey & Kahn, S.C.'s Labor, Employment & Immigration practice area.

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On the Horizon: Pending Federal Legislation That May Affect Your Workforce
By: Rufino Gaytán III

Since President Barack Obama took office in January 2009 and the Democratic Party gained substantial majorities in both houses of Congress, numerous bills affecting the employer-employee relationship have been introduced. Many of these bills would create new, and in some cases burdensome, responsibilities for employers.

Affordable Health Care for America Act of 2009, H.R. 3962 & 3200, S. 1796 & 3590, 111th Cong. (1st Sess. 2009)
Aside from making numerous and unprecedented changes to health insurance coverage generally, these bills also impact employers. The House passed H.R. 3962 on November 7, 2009 by a vote of 220 - 215. This law would require employers with payrolls greater than $500,000 per year to offer health benefits coverage to employees and to make the following contributions to employee health plans:

• For full-time employees with individual coverage, an employer would be required to make a contribution of not less than 72.5% of the premium of the lowest cost plan offered by the employer. A full-time employee using family coverage would get an employer contribution of not less than 65% of the premium of the lowest cost plan offered.
• For other than full-time employees, employers would be required to contribute a proportion of the minimum contribution required for full-time employees. The contribution would reflect the proportion of the average weekly hours of the employee to the minimum weekly hours specified by the Health Choices Commissioner (a position created by the bill) for an employee to be a full-time employee.

In addition, enrollment in employer-sponsored plans would be automatic, unless the employee opts out. Employees who opt out of an employer-sponsored plan may seek coverage through the Health Insurance Exchange ("Exchange") (also created by the bill and referred to as the "public option"). Employers would be required to contribute to the Exchange for these employees as well. The contribution would be 8% of the average wages paid by the employer during the period of enrollment but not to exceed the minimum amount required under the 72.5% rule described for full-time, individual-coverage employees. This contribution would be in addition to the required premium subsidy.

The bill also provides different Exchange contribution rates for "small employers," which are defined as employers with annual payrolls of less than $750,000. The contribution breakdown is as follows:

• Payroll does not exceed $500,000 - no contribution required
• Payroll exceeds $500,000, but does not exceed $585,000 - 2% contribution
• Payroll exceeds $585,000, but does not exceed $670,000 - 4% contribution
• Payroll exceeds $670,000, but does not exceed $750,000 - 6% contribution
• Payroll exceeds $750,000 - 8% contribution

The Senate version of the bill, which would amend H.R. 3590, was introduced by Senator Harry Reid (D - Nevada) on November 18, 2009. This bill is named the Patient Protection and Affordable Care Act. On November 21st, the Senate voted to open debate on the bill (60 - 39), clearing a key procedural hurdle.

There are several key differences between the Senate bill and H.R. 3962. First, the bill would impose a 40% excise tax on high-cost plans (popularly referred to as "Cadillac heath plans") offered by employers to their employees. The tax would apply to the value of insurance exceeding $8,500 for individual coverage and $23,000 for family coverage and is expected to be one of the most contentious points of debate. The tax is opposed by many unions, who argue that it will penalize workers who have sacrificed wage increases in exchange for better health benefits. Although the bill would also increase the Medicare payroll tax for certain high-income individuals, the employer tax would stay at its current level of 1.45%. Finally, and more importantly, the Senate bill does not require employers to offer healthcare insurance. However, employers with 50 or more employees who fail to offer coverage must pay a penalty ($750) for each employee that qualifies for a federal subsidy.

Healthy Families Act, H.R. 2460, S. 1152, 111th Cong. (1st Sess. 2009)
Representative Rosa L. DeLauro (D - Connecticut) introduced the Healthy Families Act on May 18, 2009. This legislation would require employers with 15 or more employees to provide seven paid sick days (56 hours) annually for employees working 30 or more hours per week. Under the bill, employees would earn one hour of paid sick time for every 30 hours worked. The bill would allow employees to accrue up to the full seven days (56 hours) of sick leave and to carry sick leave forward to the next year. However, employees would be able to carry over no more than seven days from one year to the next.

The bill would allow employees to take leave on an hourly basis (or in the smallest increment that the employer's payroll system uses to account for absences or leaves). Sick leave could be used for the employee's own physical or mental illness, injury, medical condition, preventive care, or treatment. Additionally, sick leave under this bill can be used to care for a child, parent, spouse, or other individual related by blood or affinity whose close association with the employee is equivalent to a familial relationship.

Employment Non-Discrimination Act ("ENDA"), H.R. 2981, 3017 & S. 1584, 111th Cong. (1st Sess. 2009)
Under ENDA, sexual orientation and gender identity would become protected classes, just like race, color, sex, age, religion, national origin, and disability. However, this legislation and its protections would only apply to employers with 15 or more employees. ENDA allows actions against the United States and the states, but it is inapplicable to religious organizations and the U.S. military. One key limitation of the legislation is that it would only permit liability against covered employers for disparate treatment.

Arbitration Fairness Act of 2009, H.R. 1020, S. 931, 111th Cong. (1st Sess. 2009)
This legislation is a response to recent court decisions and Congress' perceived imbalance of power in the making of arbitration agreements. The law would provide that no pre-dispute arbitration agreement is valid or enforceable if it requires arbitration of an employment, consumer, franchise, or civil rights dispute.

The bill defines a "pre-dispute arbitration agreement" as an agreement to arbitrate a dispute that has not arisen at the time of making the agreement. An "employment dispute" is a dispute between an employer and employee arising out of the employer-employee relationship (as defined in Section 3 of the Fair Labor Standards Act).

The law would exempt arbitration provisions in collective bargaining agreements, except that the Senate bill would deny such provisions the effect of waiving an employee's right to seek judicial enforcement of a right protected by the federal constitution, a state constitution, a federal or state statute, or a public policy.

Emergency Influenza Containment Act, H.R. 3991, 111th Cong. (1st Sess. 2009)
As a response to recent increases in H1N1 influenza cases in the United States, several members of the House of Representatives introduced H.R. 3991 on November 3, 2009. Under the bill, employers who direct employees (part-time or full-time) to leave work or stay home from work because the employer believes the employee has symptoms of a contagious illness, or has been in close contact with someone who has symptoms of a contagious illness, would be required to provide paid sick leave for each day missed as a result of complying with the employer's directions, up to five days per 12-month period. The paid sick leave would be calculated based on the employee's regular rate of pay and the number of hours the employee would otherwise normally be scheduled to work.

An employer may require that the employee follow reasonable notice procedures to continue receiving leave. The bill prohibits employers from discharging, disciplining, or discriminating against employees who comply with the employer's directives to stay home or for filing complaints related to this bill. An employer who fails to pay sick leave under the bill or who discharges an employee in violation of the bill would be in violation of the Fair Labor Standards Act and could face fines of up to $10,000, imprisonment, damages, and/or attorneys' fees and costs resulting from enforcement of the bill.

The bill exempts employers with less than 15 employees and employers who already provide at least five days of paid sick leave per 12-month period to their employees. The bill would expire two years after its effective date.

For more information, contact Rufino Gaytán III (rgaytan@gklaw.com, 414.287.9572) or another member of Godfrey & Kahn, S.C.'s Labor, Employment & Immigration practice area.

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Union Agreement to Indemnify Employer for Withdrawal Liability Enforced
By: Jon E. Anderson

The U S. Court of Appeals for the Third Circuit has determined that an agreement between a union and an employer that required the union to indemnify the employer for its liability associated with the employer's withdrawal from a multi-employer pension fund is not against public policy and should be enforced. Pittsburg Mack Truck Sales & Serv. Inc. v. Operating Eng'rs Local 66, 186 LRRM 3524, (3d Cir. No. 07-3938, 9/4/09).

Pittsburg Mack and Operating Engineers Local 66 were parties to a labor agreement that required Pittsburg Mack to make contributions to the multi-employer pension plan on a specified rate basis. The labor agreement also contained a clause that required the union to indemnify and hold the employer harmless for liability above the specified rate.

Pittsburg Mack decided to sell all of its assets to another company. The pension plan sent a letter to Pittsburg Mack stating that the sale had triggered a complete withdrawal from the pension plan. The letter also advised that the company was obligated to pay withdrawal liability.

Pittsburg Mack, relying on the indemnification language of the labor agreement, demanded that the union assume the liability. When the union refused, Pittsburg Mack filed suit for a declaration that the union was obligated to indemnify or hold the company harmless against the pension plan's claim. The District Court ruled the agreement unenforceable on public policy grounds.

The Third Circuit overturned the lower court ruling. The Appeals Court found that the public policy concerns premised in the Employee Retirement Income Security Act and the Multi-Employer Pension Plan Amendments Act were not "defeated" by the indemnification clause. The Court found that the employer remained primarily liable for the withdrawal liability notwithstanding the indemnification agreement and this ensured the required funding of the pension plan.

This case demonstrates how careful drafting of labor contract provisions relating to pensions can help an employer avoid withdrawal liability.

For more information, contact Jon E. Anderson (janderson@gklaw.com, 608.258.2901) or another member of Godfrey & Kahn, S.C.'s Labor, Employment & Immigration practice area.

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Wisconsin Health Insurance Continuation Rights Expanded
By: Todd M. Cleary

The Wisconsin Office of the Commissioner of Insurance ("OCI") has issued an emergency rule which temporarily requires an insurer to provide health insurance continuation coverage to certain individuals even after the applicable insurance policy has been terminated. Wisconsin insurance law generally allows a laid-off employee to continue health insurance coverage for up to 18 months under his/her former employer's group health policy. Historically, the employee's continuation coverage rights have ended if the employer terminated the insurance policy. However, under the emergency rule, if a group policy is (or was) discontinued on or after June 30, 2009 and is (or was) not replaced, then the continuation coverage generally must be made available to individuals who (1) experienced an involuntary termination of employment prior to January 1, 2010, and (2) are eligible for the federal government's 65% health insurance premium subsidy. For a policy that has already terminated, the coverage must be made available on a retroactive basis starting with the date of the policy's termination.

Although it is not clear at this point, it appears that the onus of this new rule will fall on insurers, rather than employers. For example, one requirement of the rule is that affected individuals must receive notice of the new continuation rights. The rule indicates that the employer generally must provide this notice prior to the termination of the policy (or, for a policy that had already been terminated, notice generally was required by the end of October). However, the rule further provides that the notice obligation transfers to the insurer if the employer fails to provide a timely notice. The rule does not impose any sanction on a non-compliant employer, which is unsurprising given that many affected employers have already gone out of business.

In any case, an employer that recently terminated a health insurance policy can expect to receive information regarding this new rule from the insurer or from the employer's health insurance broker. At this point, it is unclear what the employer has to gain by complying with the notice requirement. Finally, please note that this rule does not apply to self-insured health plans.

For more information, contact Todd M. Cleary (tcleary@gklaw.com, 414.287.9433) or another member of Godfrey & Kahn, S.C.'s Tax & Employee Benefits practice area.

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Family and Medical Leave Act Amended, Again
By: Margaret R. Kurlinski

On October 28, 2009, President Obama signed into law the Fiscal Year 2010 National Defense Authorization Act (the "Act"). The Act includes an expansion of the recently enacted "qualifying exigency" and caregiver leave provisions for military families under the federal Family and Medical Leave Act of 1993 ("FMLA"). The changes made by the Act were effective upon President Obama's signature on October 28, 2009.

"Qualifying Exigency" Leave Expanded to Include Active Duty Members of the Armed Forces
Under the FMLA, eligible employees may take up to 12 workweeks of unpaid leave to handle various "qualifying exigencies" arising out of the fact that the employee's spouse, son, daughter, or parent is on active duty or on call to active duty status as a member of the Reserves or National Guard in support of a "contingency operation." The Act now expands the qualifying exigency leave benefit to include family members of regular Armed Forces members who are on active duty in a foreign country or are called to active duty in a foreign country.

The eight types of "qualifying exigencies" for which eligible employees are entitled to leave have remained unchanged. Qualifying exigencies include short-notice deployments, military events and related activities, childcare and school activities, financial and legal arrangements, counseling, rest and recuperation, post-deployment activities, and additional activities.

Military Caregiver Leave Expanded to Include Veterans and For Aggravated Illnesses
Under the FMLA, eligible employees may take up to 26 workweeks of unpaid leave in a single 12-month period to care for a "covered servicemember" with a serious injury or illness related to certain types of military service. Prior to the recent changes, a "covered service member" was defined as a member of the Armed Forces, including a member of the National Guard or Reserves, who is undergoing medical treatment, recuperation or therapy, is otherwise in outpatient status, or is on the temporary-disability retired list because of a serious injury or illness. The Act now extends caregiver leave to veterans who are undergoing medical treatment, recuperation, or therapy for serious injury or illness that occurred any time during the five years preceding the date of treatment.
The Act also expands the definition of "serious injury or illness" for purposes of the military caregiver leave. "Serious injury or illness" is now defined to include not only injuries or illnesses incurred in the line of duty but also any pre-existing injuries or illnesses that are aggravated by service in the line of duty.

Next Steps
Congress' latest amendment to the FMLA will result in a larger percentage of the workforce that will be eligible for qualifying exigency or caregiver leave. Employers will need to update their existing FMLA policies and ensure that employees are aware that they may be entitled to additional leave. The Department of Labor will likely revise its required FMLA notice and its FMLA regulations to implement these new provisions.

For more information, contact Margaret R. Kurlinski (mkurlinski@gklaw.com, 414.287.9539) or another member of Godfrey & Kahn, S.C.'s Labor, Employment & Immigration practice area.

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Unpaid Leave is Now Available for Members of the Civil Air Patrol
By: Kim M. Gasser*

On October 28, 2009, Governor Doyle signed into law Assembly Bill 132 which requires those employers with at least 11 permanent employees to grant a leave of absence without pay to an employee participating in an "emergency service operation" of the Civil Air Patrol (2009 Wisconsin Act 56).

The law defines an "emergency service operation" as being any of the following: (1) a search and rescue mission; (2) an operation to provide disaster relief or humanitarian services; or (3) an operation in support of the U.S. Air Force. Members of the Civil Air Patrol who are participants in an emergency service operation are eligible for up to 15 days of unpaid leave per year; however, eligible employees may not take more than five consecutive days of leave at any one time.

In addition, the new law prohibits discrimination on the basis of Civil Air Patrol membership. Employee complaints related to the law are to be filed with the Wisconsin Department of Workforce Development. Such complaints will be processed in the same manner as other employment discrimination complaints are processed under current law.

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Affirmative Action Update
By: Margaret R. Kurlinski

Stimulus Fund Recipients Will Likely Be Subject to OFCCP Compliance Reviews
The new Secretary of Labor, Elaine Chao, has directed the Office of Federal Contract Compliance Programs ("OFCCP") to allocate resources in the coming months toward evaluating recipients of federal stimulus funds under the American Recovery and Reinvestment Act ("ARRA"). In September of this year, guidance was issued as to the manner that federal stimulus fund audits should occur. This guidance indicates that recipients of stimulus funds will likely be subject to full compliance audits (i.e., a desk audit, an on-site audit and an off-site audit) which is a departure from the OFCCP's customary practice of limiting an audit to the desk audit if no indicators of discrimination are discovered. In addition, stimulus recipients will not be granted the courtesy of a two-year grace period between audits. Instead, stimulus recipients may be audited every year. Finally, the OFCCP intends to conduct pre-audit reviews of federal stimulus fund contracts in excess of $10,000,000.

Accordingly, recipients of ARRA funds and parties interested in receiving ARRA funds should ensure that they are in full compliance with their affirmative action and equal employment opportunity obligations.

Obama Appoints Patricia A. Shiu as Director of OFCCP
Patricia A. Shiu assumed her role as Director of the OFCCP on September 29, 2009. Ms. Shiu was previously employed for 25 years at the San Francisco Legal Aid Society - Employment Law Center where she litigated employment cases and advocated on behalf of California employees. Ms. Shiu graduated from the University of San Francisco School of Law in 1982. Commentators expect that Ms. Shiu will likely expand the OFCCP's outreach efforts in the community. As Ms. Shiu's appointment occurred relatively late in the year, many believe we will not be able to fully gauge Ms. Shiu's influence on the OFCCP until early next year.

Employers Should Expect an Emphasis on Veterans' Rights
With the increasing number of veterans returning to the workforce and in anticipation for additional numbers of veterans joining the workforce in coming years, employers should expect that the OFCCP will pay particular attention to contractors' veterans-related obligations. Employers should ensure that their VETS-100 reports are current, and that they are complying with the job posting requirements of applicable veterans' laws.

For more information, contact Margaret R. Kurlinski (mkurlinski@gklaw.com, 414.287.9539) or another member of Godfrey & Kahn, S.C.'s Labor, Employment & Immigration practice area.

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Proposed Americans with Disabilities Act Regulations Present Major Changes
By: C. Wade Harrison & Kim M. Gasser*

The ADA Amendments Act of 2008 (ADAAA) was enacted on September 25, 2008, and became effective on January 1, 2009. The law made significant changes to the Americans with Disabilities Act ("ADA"), and Congress directed the Equal Employment Opportunity Commission ("EEOC") to amend its ADA regulations to reflect the changes made by the ADAAA. In response to this mandate, the EEOC published a Notice of Proposed Rulemaking ("Proposed Rules") on September 23, 2009, setting forth its proposed regulations and interpretive guidance.

According to the EEOC, a case brought under the ADA should not focus on whether an individual has a disability, but whether the individual has suffered any discrimination. Indeed, following the lead of the ADAAA, the Proposed Rules expand the scope of the ADA's definition of "disability," provide specific examples of disabling conditions and, ultimately, underscore the EEOC's intent to provide broad ADA protections. The most significant proposed ADA regulations are outlined below.

The ADAAA defines "disability" as:

1. a physical or mental impairment that substantially limits a major life activity; or
2. a record of a physical or mental impairment that substantially limited a major life activity; or
3. when an entity (e.g., an employer) takes an action prohibited by the ADA based on an actual or perceived impairment.

Major Life Activities/Bodily Functions - Major life activities are generally considered to be basic activities that most people can perform with little or no difficulty. Examples include caring for oneself, hearing, eating, sleeping and walking. The Proposed Rules incorporate the major life activities and bodily functions expressly referenced in the ADAAA, but add others to the proposed regulations' non-exhaustive list. For example, bending, reading and communicating have been added in the Proposed Rules as major life activities.

The EEOC has also expanded the definition of "major life activity" with the inclusion of major bodily functions such as breathing, immune system function, cell reproduction, sensing functions and digestive and bowel functions. In its discussion of the major bodily functions, the EEOC provided specific examples such as kidney disease affecting bladder function, cancer affecting normal cell growth and rheumatoid arthritis affecting musculoskeletal functions.

Substantially Limits - The concept of "substantially limits" - the standard for determining whether an impairment that impacts a major life activity rises to the level of an ADA disability - is also being revised in the Proposed Rules. The Proposed Rules indicate that an assessment of "substantially limits" involves a comparison of the ability of an individual to perform a major life activity as compared to most people in the general population. The Proposed Rules seek to create a "common sense" assessment in light of Congress' view that previous tests were too demanding. The Proposed Rules suggest that the term "substantially limits" will now be construed in favor of broad coverage and should not require extensive analysis.

List of Impairments - The Proposed Rules present a "per se" list of impairments that will consistently meet the definition of a "disability" under the ADA - blindness, deafness, intellectual disabilities, partially or completely missing limbs, mobility impairments, autism, cancer, cerebral palsy, diabetes, epilepsy, HIV or AIDS, multiple sclerosis and muscular dystrophy, major depression, bipolar disorder, post-traumatic stress disorder, obsessive compulsive disorder and schizophrenia. Existence of such an impairment does not, however, automatically mean that individuals so impaired will be entitled to accommodations or prevail in litigation.

The EEOC's list of impairments also provides examples of those impairments that are not "obviously" substantially limiting, but "may" be. The impairments of asthma, high blood pressure, coronary artery disease, learning disabilities, a back or leg impairment, carpal tunnel syndrome and psychiatric disabilities may be disabling for some individuals, but not for others.

Regarded As Having a Disability - Many believe the ADAAA's greatest impact will be felt through the changes made to the concept of "regarded as" having a disability. The Proposed Rules specify that an individual is "regarded as" having a disability if the individual is subjected to prohibited action - failure to hire, termination, etc. - because of an actual or perceived impairment. For example, an employer that refuses to hire someone because of a facial tic regards the individual as having a disability, even if the employer does not know that the facial tic is caused by, for example, Tourette's Syndrome.

Actions based on an individual's use of mitigating measures (e.g., medication) could be actions based on an impairment. For example, a person who is not hired for a driving job because he takes anti-seizure medication is deemed to be regarded as having a disability, even if the employer is unaware of the reason the employee is taking the medication.

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*Kim M. Gasser is a paralegal working in Godfrey & Kahn S.C.'s Labor, Employment & Immigration practice area.

For more information, contact C. Wade Harrison (wharrison@gklaw.com, 608.284.2207) or another member of Godfrey & Kahn, S.C.'s Labor, Employment & Immigration practice area.