News & Publications

"Winter 2008 Labor & Employment Law Vantage Point"
February 2008

From The Editor, Thomas N. Shorter
Welcome to the inaugural edition of the Godfrey & Kahn Labor & Employment Law Vantage Point e-newsletter. Recognizing that our clients are bombarded with email alerts and notices, the HR & Employment Law Team at Godfrey & Kahn has compiled employment law updates of recent importance into a single e-newsletter, instead of multiple client alerts. While, from time to time, there is a need to send an alert focused on an issue of significant importance, client feedback tells us that regular updates that don't need immediate attention are best set forth in this format. The Labor & Employment Law Vantage Point e-newsletter will be distributed exclusively in electronic format, but the entire newsletter may be printed for those who prefer a "traditional" paper copy.

We are also pleased to announce the dates of the 19th Annual Godfrey & Kahn Labor & Employment Law Update seminars. Please mark your calendar:

- Milwaukee, April 24, 2008 - Milwaukee Marriott West

- Green Bay, April 29, 2008 - KI Convention Center

- Madison, May 6, 2008 - Monona Terrace

The Annual Labor & Employment Law Vantage Point is designed to focus on our vantage point view on practical approaches to preventing and managing employment law problems.

You receive labor and employment news from many sources. We hope you find our Godfrey & Kahn Labor & Employment Law Vantage Point e-newsletter a useful addition. If you have any comments or suggestions, please feel free to contact me at tshorter@gklaw.com or 608-284-2239.

In This Issue:

• Congress Expands FMLA Benefits
• Guidance on Employer Discrimination Against Employees With Caregiving Responsibilities
• China Adopts New Labor Contract Law Effective January 1, 2008
• Workplace Violence Prevention
• 3rd Circuit Permits Coordination of Retiree Health Benefits with Medicare Eligibility
• E-Verify: Coming to a City Near You?

Congress Expands FMLA Benefits

by John A. Haaseand Thomas G. O'Day

For the second time in as many months, Congress has passed legislation to increase the benefits available under the Family Medical Leave Act (FMLA). Unlike the first time, however, President Bush signed the legislation into law.

The expanded benefits under the new law include the following:
1. Providing up to six months of leave for family members caring for military veterans injured while on active duty in the U.S. Armed Forces; and
2. Providing 12 weeks of leave to employees who have family members called to active duty in the military.

The first change more than doubles the amount of unpaid leave available to qualified employees who are caring for an individual injured while serving on active duty. Presently, an employee is entitled to up to 12 weeks of leave to care for a family member.
The second change creates a new circumstance under which an employee would be entitled to utilize family medical leave. The FMLA currently provides unpaid leave for the birth or adoption of a child, for the employee's own serious health condition or to care for a family member with a serious health condition. The new law allows 12 weeks of unpaid leave where a family member is called to active duty in the armed forces. The statute defines a "family member" as "next of kin" or "nearest blood relative" of the member of the armed forces. The circumstances where an employee is entitled to "call to active duty leave" is defined very broadly. The 12 weeks of leave are available for any "qualified exigency" arising out of the fact that the employee's spouse, child or parent has been called to active duty. Consistent with the current law, employers will be permitted to request a certification from the employee to prove that the service member at issue has indeed been placed on active duty.

In the future, the Department of Labor will draft regulations to implement these changes to the FMLA. Of particular importance will be the description of a "qualified exigency" which would allow an employee 12 weeks of unpaid leave due to a family member's activation.

Recommendation for Employers

The Department of Labor has requested that employers act in good faith to comply with these new requirements under the FMLA. Despite the fact that detailed regulations are not yet available, employers should make sure all individuals who have responsibility for administering FMLA are made aware of the new law. Supervisors should also be aware of the general aspects of the law so they can refer employees to the proper contact in the human resources department. Finally, every employer should begin the process of amending their FMLA policies and forms to recognize the changes to the federal FMLA.

For more information, contact John Haase (jhaase@gklaw.com or 920-436-7669), Tom O'Day (today@gklaw.com or 414-287-9523), or another member of Godfrey & Kahn, S.C.'s HR & Employment Law Team.

Guidance on Employer Discrimination Against Employees With Caregiving Responsibilities
by Margaret R. Kurlinski and Thomas N. Shorter

On May 23, 2007, the U.S. Equal Employment Opportunity Commission (EEOC) issued enforcement guidance entitled "Unlawful Disparate Treatment of Workers With Caregiving Responsibilities." This guidance does not create a new protected category of "caregiver"; however, it highlights how stereotypes associated with caregivers may form a basis for liability under current equal employment opportunity laws, including Title VII and the Americans with Disabilities Act (ADA). The guidance provides information regarding various forms of caregiver discrimination, including sex-based disparate treatment of female caregivers, pregnancy discrimination, discrimination against male caregivers, discrimination against women caregivers of color, unlawful caregiver stereotyping under the ADA, hostile work environment claims and retaliation.

The courts have been addressing employee discrimination claims involving caregiving responsibilities for many years, most frequently in the context of sex-based discrimination associated with pregnancy and motherhood. It is unclear whether the publication of this guidance, which categorizes and explains how various discrimination laws can be used to address caregiver responsibility discrimination, will increase the number of discrimination claims brought by caregivers. Nonetheless, with a workforce that is increasingly being populated with working mothers, employees caring for baby-boomer parents, and employees responsible for caring for family members with disabilities, employers should be familiar with the protections that the various laws provide employees with caregiving responsibilities.

Who is a caregiver?

The EEOC guidance explains that "caregivers" are employees who are primarily responsible for the care of another. Caregivers include employees with childcare responsibilities as well as employees who provide care to elderly family members and individuals with disabilities. While caregiving responsibilities disproportionately affect working women generally, the guidance acknowledges that these effects may be more pronounced among African-American women, who have a long history of working outside the home. Although women primarily shoulder the caregiving burden, men are increasingly taking on caregiving roles.

Examples of Unlawful Discrimination Against Employees with Caregiving Responsibilities:

• Firing employees because they are pregnant or will take maternity leave;
• Giving promotions to women without children, or fathers rather than more qualified mothers;
• Assigning women with caregiving responsibilities to less prestigious or lower-paid positions;
• Giving parents work schedules that they cannot meet for childcare reasons while giving non-parents flexible schedules;
• Harassing and penalizing workers who take time off to care for their aging parents or sick spouses; or
• Terminating an employee after she reports unlawful discrimination based on gender stereotypes of working mothers.

The FMLA as a Vehicle for Caregiver Claims

The EEOC enforcement guidance mentions that employers might also have specific obligations toward caregivers under other federal statutes, such as the Family and Medical Leave Act (FMLA) or other state laws, such as the Wisconsin Family and Medical Leave Act (WFMLA). These laws prohibit the interference by employers with their employees' qualified family and medical leave and prohibit discrimination against employees who take such qualified leave. A caregiver responsibility claim may arise under these statutes if an employer denies a qualified employee's request for time off to care for an ill or dying parent, requires an employee to return from leave early, or penalizes an employee who takes leave by demoting or harassing the employee.

Recommendations for Employers

Employee caregiver responsibility claims arise as a result of discriminatory personnel policies and practices or through daily interactions between employees and management. The following are some steps to take to ensure that employees are being treated fairly without regard to caregiver-based stereotypes:

• Examine attendance, leave and compensation policies to make sure they are free from biased standards;
• Review criteria for hiring and promoting to see if they disadvantage employees with family caregiving responsibilities;
• Review which employees within your company are assigned desirable work. (Is it only employees without caregiving responsibilities, such as women without children or men who have someone at home to provide care to children or family members?); and
• Consider the implementation of alternative work arrangements that will allow employees with caregiving responsibilities to customize their work schedules.

For more information, contact Margaret Kurlinski (mkurlinski@gklaw.com or 414-287-9539), Thomas Shorter (tshorter@gklaw.com or 608-284-2239), or another member of Godfrey & Kahn, S.C.'s HR & Employment Law Team.

China Adopts New Labor Contract Law Effective January 1, 2008
ByChristine Liu
McLaughlin& Margaret R. Kurlinski

On June 29, 2007, the Standing Committee of the National People's Congress of the People's Republic of China (PRC) passed the much anticipated Labor Contract Law. The new law, which is a product of over 18 months of deliberation and revisions by the Standing Committee, took effect on January 1, 2008.

The new law applies to all employers and governs the entire employment relationship from the initial employment contract to the role of labor unions to the termination of the employee's employment. Although Chapter 8 of the Labor Contract Law indicates that existing employment contracts will be grandfathered under the new law, employers will need to modify their practices and policies moving forward to comply with the requirements of the new law. The most significant aspects of the Labor Contract Law are highlighted below.

Written Employment Contracts

The new law requires that an employment relationship be based on an employment contract. A written employment contract must be executed when the employment relationship is formed. If an employee begins work prior to the execution of a written employment contract, a written contract must be signed by both parties within one month of the employee's first day of work. If a written employment contract has not been executed within an employee's first month of employment, the employer may be forced to pay the employee twice the usual remuneration for each month that the contract remains outstanding. Employment relationships that have lasted for over one year without a written employment contract will be considered open-ended.

The new law provides for three types of labor contracts: fixed-term, open-ended, and contracts based on the completion of an assignment. An opened-ended employment contract is a contract for which the employer and employee have agreed not to stipulate a definite ending date. An employee may be entitled to an open-ended contract, regardless of the employer's preference, if the employee has worked for the employer for more than 10 years, has concluded two fixed-term contracts with the same employer, or for certain other limited reasons.

Non-Compete and Confidentiality Provisions

The drafts of the labor law that were circulated prior to the adoption of the new law provided ambiguous and, at times, contradictory guidance on non-compete agreements. While the new law clarifies some aspects of China's treatment of non-compete agreements, it leaves many questions unanswered.

The new law allows employers to include non-compete provisions in the employment contracts of a limited group of employees including senior management, technical personnel and those employees with "confidentiality obligations." It is unclear from the text of the new law what kinds of information an employee must be exposed to in order to create "confidentiality obligations." The scope, territory and term of the non-compete provisions may be determined by agreement between the employer and the employee; however, the terms of the non-compete provisions may not be longer than two years. Employers may provide for liquidated damages in the event of an employee's breach of his or her non-competition obligations.

Employers may add confidentiality provisions to all of their employment contracts to protect the trade secrets and intellectual property of the employer.

In order to enforce post-employment non-compete or confidentiality obligations, the employer must provide for monthly compensation to the employee during the restricted period that follows the end of the employment contract. Earlier drafts of the labor law indicated that the post-employment payment to the employee must meet or exceed the employee's salary at termination. The new law fails to specifically identify whether "monthly compensation" must equal or exceed the employee's salary. This leaves open the possibility that local rules governing post-employment obligations will control the monetary terms of a non-compete agreement or provision.

Probationary Periods

Employers may include probationary periods in employment contracts that can last up to six months based on the term of the employment contract. Unlike the draft versions of the labor law, the new law does not delineate probationary periods based on job classifications. The probationary period may not exceed one month if the employment contract is for less than one year, two months if the contract is between one and three years, and six months for fixed-term contracts of more than three years or for open-ended contracts. During the probationary period, the salary of an employee may not be lower than the lowest salary for the same position or 80% of the salary provided in the employment contract.

Training

If an employer provides special funding for an employee's training, it may require a fixed term of service for such an employee. Contrary to various drafts of the labor law, the new law does not specify that the training be on a full-time basis; rather, it must be training that requires additional, specially funded costs to the employer. The employer may also recover liquidated damages from the employee, in an amount no greater than the actual costs incurred by the employer for training, in the event the employee terminates employment prior to the expiration of his or her employment contract. Employers wishing to recover special training costs or bind an employee to a term of employment based on the provision of specialized training must include the terms of such agreement in the employment contract.

Role of Labor Unions

Under the new law, trade unions have a much greater role in monitoring and approving employment changes. Generally, every employer policy, rule and procedure that governs its employees must be made in consultation with the union or an employee representative. The term "employee representative" is undefined in the new law. The new law also does not provide guidance as to the resolution of disputes between the labor union and employer if "consultation" does not lead to agreement between the parties.

The new law grants employees, represented by labor unions or "employee representatives" where there is no labor union, the right to negotiate collective contracts concerning remuneration, working hours, rest and leave entitlements, labor safety and hygiene, insurance, benefits and other matters. In cases where the employers have no labor unions, the new law permits labor unions at higher levels to "guide" employee representatives in collective contract negotiations.

Under the new law, unions play an integral role in all employee terminations. Employers must provide labor unions with advance notice of all unilateral terminations of an employment contract and provide the union with the reasons for the terminations. Labor unions must also be consulted by employers 30 days in advance of any reduction of 20 or more employees or 10% of a company's workforce.

Severance Pay

Under the new law, an employer must pay an employee severance in any of the following circumstances:

• An employee terminates the employment contract for legal reasons. For example, the employer has failed to pay the employee compensation in full or the employer failed to provide the working conditions promised under contract;
• An employer terminates the employment contract and reaches mutual agreement with the employee upon termination;
• An employer terminates the employment contract for cause, such as the employee's inability to perform in his or her position;
• An employer terminates the employment contract because of dissolution, cessation of business, bankruptcy or loss of business license;
• The employer terminates the fixed-term employment contract when the contract expires;
• The employer terminates the employee in conjunction with a restructuring under the PRC's Enterprise Bankruptcy Laws; or
• Other situations as may be stipulated by law.

The amount of severance must be at least one month's salary for each year of employment, up to 12 years. Employment lasting less than one year but more than six months shall be counted as one year for means of severance calculations.

Staffing Firms

The new law requires placement firms to sign contracts of at least two years in duration with its employees. The staffing firms must also provide at least minimum wage to all its employees when the employees are not assigned to a host employment site. Employees of a staffing firm have the right to join the labor unions of their staffing firm or the host employer.

The new law prohibits employers from creating staffing firms to place workers with itself or their subordinate units. It is unclear whether the new law will affect staffing firms' ability to provide employees to wholly owned foreign entities.

Recommendations for Employers

The new law provides Chinese employees with more protections and rights than have existed in the past. What remains to be seen is to what extent and in what manner the government of the PRC will enforce the new law. For now, international employers should undertake all reasonable steps necessary to immediately comply with the new law, which became effective on January 1, 2008.

For more information, contact Christine Liu McLaughlin (cmclaughlin@gklaw.comor 414-287-9232) or Margaret R. Kurlinski (mkurlinski@gklaw.com or 414-287-9539), or another member of Godfrey & Kahn, S.C.'s HR & Employment Law Team.

Workplace Violence Prevention
By Thomas G. O'Day

Workplace violence refers to behavior that generates a concern for personal safety either at or outside the workplace. Generally, workplace violence is an act of aggression causing emotional or physical harm. It can take many forms (e.g., emotional abuse, verbal abuse, direct or indirect threats, physical assault, hitting, pinching).  To combat these issues, employers have long recognized the need to implement a workplace violence prevention program and periodically review existing programs.

Preparedness and Prevention

A workplace violence prevention program consists of policies, structures, and practices adopted by an employer to prevent workplace violence. The most effective program is based on an assessment of the employer's specific risk of violence. Understanding the specific risks faced by an employer can help to ensure the development of preventive strategies appropriate for the workplace in question. The program should designate the personnel who will be specifically responsible for overseeing the employer's workplace violence policy, including threat assessment and crisis management.

Workplace Violence Policy

A workplace violence prevention program should include a zero-tolerance policy that is clearly communicated to all employees. The policy should set forth a code of employee conduct that defines unacceptable behavior and requires employees to promptly report suspected violations. The policy should clearly state that unacceptable behavior or failure to report unacceptable behavior will result in discipline, up to and including termination. In addition, the main policy should be accompanied by complementary policies that, together with the workplace violence policy, set clear expectations for appropriate workplace behavior. These policies typically should include: (1) injury and illness prevention policies; (2) a no-weapons policy; (3) an anti-harassment and anti-discrimination policy; (4) a drug and alcohol policy; (5) a code of business conduct/ethics policy; and (6) an electronic communications policy. Further, many employers adopt a search policy that alerts employees to the employer's right to gain access to an employee's computer, desk, locker, and other personal effects that might otherwise be searched.

Threat Management Team

Employers may also consider implementing a Threat Management Team in the workplace. A Threat Management Team, after proper training, is primarily responsible for preventing and responding to incidents of violence. This team should develop a workplace violence response plan, which includes provisions for protecting and isolating employees, notifying law enforcement and key company representatives, and providing trauma recovery and psychological support. The team should also be responsible for developing a centralized recordkeeping system and make sure that all reports of violations are recorded and tracked, while protecting confidentiality to the greatest extent possible.

Periodic Training

A workplace violence prevention program should include periodic training for supervisors and employees. Employees should be familiar with the policy and be able to recognize and report instances of violence, intimidation, and threats. Supervisors should learn how to detect behaviors of concern, and to properly handle a report or complaint from an employee. Supervisors must develop basic skills in handling crisis situations and behave compassionately toward employees who report incidents. Supervisors must also be trained not to promise outright confidentiality, though information should be kept confidential to the greatest extent possible. A violent act is often preceded by actions that signaled violence to come. While certain behaviors raise warning flags, certain behaviors can alert supervisors of possible problems that require investigation and intervention. Such problematic behavior or warning signs may include:

threats, harassment, aggressive outbursts, bullying, domestic violence, stalking, emotional abuse, intimidation; a fascination with weapons or violent events; verbal abuse of co-workers or customers; harassment via e-mail or telephone calls; extreme changes in behavior; jokes or offensive comments about violent acts.

If left unchecked, these warning signs may result in more serious violent behavior. Such behaviors are often accompanied by job performance problems, such as inconsistent productivity, excessive tardiness and absenteeism, and poor relations with coworkers.

Recommendations for Employers

Employers should commence a periodic review of the current workplace violence program, including a review of when the policy was last reviewed and when training was last conducted. Out-of-date workplace programs may open an employer to accusations that the issue is not treated seriously by the employer.

For more information, contact Tom O'Day (today@gklaw.com or 414-287-9523), or another member of Godfrey & Kahn, S.C.'s HR & Employment Law Team.

3rd Circuit Permits Coordination of Retiree Health Benefits with Medicare Eligibility
by Thomas G. O'Day

Background

A number of years ago, the American Association of Retired Persons (AARP), along with six individual members, filed suit in the Eastern District of Pennsylvania, challenging a regulation proposed by the Equal Employment Opportunity Commission (EEOC). The proposed regulation sought to allow "the practice of altering, reducing, or eliminating employer-sponsored retiree health benefits when retirees become eligible for Medicare or comparable state retiree health benefits." Essentially, the proposed regulation would allow an employer to coordinate retiree health benefits with Medicare benefits, regardless of whether or not the retiree enrolled in the government funded plan. The AARP contested that the proposed regulation was in direct conflict with the statutory language of the Age Discrimination in Employment Act (ADEA), against the Congressional intent behind the act, and outside the scope of the EEOC's authority. However, the EEOC maintained that employer-sponsored health benefit plans were decreasing, and therefore the exemption was in the public interest because it permitted employers to offer retiree health benefits as an incentive for early retirement, while not requiring the employer to absorb all of the costs. The dispute went before the district court twice, the first time resulting in summary judgment in favor of the AARP, and the second time resulting in a summary judgment in favor of the EEOC. The reversal prompted the AARP to appeal to the next level of federal courts.

Court's Analysis

In a decision issued on June 4, 2007, the Third Circuit Court of Appeals ruled in favor of allowing coordination of health benefits and Medicare eligibility. At the outset, the Court of Appeals established a critical issue that needed to be resolved: whether the exemption was within the EEOC's authority under the ADEA. In addressing this issue, the court paid significant attention to the EEOC's findings, which highlighted several reasons for a decrease in the number of employers offering retiree health benefits. According to evidence the EEOC obtained over a 10-year period, the ADEA was actually discouraging employers from providing retiree health benefits entirely because employees could not coordinate their plans with Medicare or state benefits.

Rather than allow employer-sponsored health benefit plans to disappear completely, the EEOC devised the exemption to create a bridge between early retirement and Medicare eligibility. Proposing the exemption made logical sense: Without it, retirees under the age of 65 who were not offered retiree health benefits would be forced to rely on other means to pay for healthcare. In the alternative, instituting the exemption would allow employers to maintain the practice of providing retiree health benefits as an incentive to early retirement, while not having to fear ADEA litigation. Thus, the EEOC calculated that the exemption would benefit a competitive marketplace because it would encourage employers to provide the retiree health benefit incentive.

Relying on the EEOC's findings, the court held that the EEOC had the authority to institute the exemption. Title 29, Section 628 of the United States Code provides that the EEOC has the authority to "establish such reasonable exemptions to and from any or all provisions of [the ADEA] as it may find necessary and proper in the public interest." Based on the statute, Congress had clearly expressed its intention to delegate authority to the EEOC to make reasonable and necessary exemptions to the ADEA. The court determined that in light of the decrease in employers providing retiree health benefits, the exemption was "reasonable." Similarly, the exemption was "necessary and proper in the public interest" because what is good for the market is good for the public.

The court concluded that the exemption was narrowly drawn to meet the goals of the ADEA, and it "provide[d] the greatest possible health benefits for all retirees."

EEOC Proposes Final Rule

Following the decision of the Third Circuit, the EEOC published the final rule regarding Retiree Health Benefits on December 26, 2007. The rule allows employers to coordinate retiree health benefits with Medicare, without ensuring that Medicare-eligible retirees are receiving the same benefits as younger retirees. This can be done by coordinating with Medicare, by supplementing the Medicare benefit or simply providing retirees under age 65 with health insurance to "bridge" the gap between the time they retire and the time they become eligible for Medicare.

Recommendations for Employers

Employers wishing to take advantage of coordination of retiree health benefits and Medicare eligibility should proceed with caution until the EEOC rule is finalized. The assistance of legal counsel is strongly recommended. Employers with collective bargaining agreements should begin planning on language proposals to address this issue.

For more information, contact Tom O'Day (today@gklaw.com or 414-287-9523), or another member of Godfrey & Kahn, S.C.'s HR & Employment Law Team.

E-Verify: Coming to a City Near You?
By Gene T. Schaeffer and C. Wade Harrison

Changes are afoot in the employment landscape as state governments and municipalities attempt to enter the immigration reform arena, which is traditionally an area reserved for management by the federal government under the Constitution. Thus far, the local laws tend to mirror the Immigration Reform and Control Act of 1986 (IRCA). IRCA attempted to reduce the number of unauthorized workers employed in the United States by prohibiting employers from hiring unauthorized aliens and requiring verification of each employee's employment eligibility with Form I-9. Arizona has entered the immigration reform arena by passing a mini-IRCA law which requires employers to use the federal program, E-Verify.

Electronic I-9 Data Comparison

An offshoot of the Basic Pilot Program created in 1997, E-Verify works by allowing participating employers to electronically compare employee information taken from Form I-9 against records in the Social Security Administration's database and the Department of Homeland Security's immigration database. Under ideal circumstances, results are returned within seconds. If a query results in a finding of "not authorized to work," the employee has the right to appeal the finding. Depending on the source, it is estimated that the error rate (the rate of false "not authorized to work" results) of E-Verify is between eight and 25 percent.

Voluntary or Mandatory?

E-Verify use is voluntary under federal law. As of January 1, 2008, E-Verify use is mandatory under Arizona law. In addition, the penalties under Arizona are more severe than federal penalties. Under federal law, employers can be penalized several thousand dollars for each violation of IRCA. Under Arizona law, a first offense results in the temporary suspension of an employer's business license and a second offense results in permanent revocation of a business license. In Arizona participation in E-Verify creates an affirmative defense that the employer did not intend to violate Arizona's mini-IRCA law, but it does not guarantee immunity.

On the opposite end of the spectrum, Illinois has a law that forbids employers from participating in E-Verify because of the high error rate associated with the program. Lawsuits have been filed challenging both the Arizona law and the Illinois law.

Recommendations for Employers

Moving forward, employers will need to be extremely astute when it comes to monitoring mini-IRCA laws being passed around the country. Active mini-IRCA legislation and hundreds of local ordinances are being considered in virtually every state. Time will tell whether the mini-IRCA laws will pass legal scrutiny, but until then caution is in order. Federal courts are currently split on the legality of mini-IRCA laws, and it will likely be years before the U.S. Supreme Court clarifies the matter. Until then, employers should comply and use caution to avoid potentially business ending penalties.

Godfrey & Kahn's employment lawyers can provide updated information about the status of the E-Verify rule as well as comprehensive advice on your I-9 and E-Verify obligations in the context of your fact-specific situation. We also can help prepare written policies and assist with internal I-9 audits to prevent unauthorized employment law problems.

For more information, contact Gene Schaeffer (gschaeffer@gklaw.com or 608-284-2655), C. Wade Harrison (wharrison@gklaw.com or 608-284-2207), or another member of Godfrey & Kahn, S.C.'s HR & Employment Law Team.