Employment Law Lookout

Pennsylvania Court Rules Payroll Cards Aren’t “Lawful Money,” Says Employers Must Pay Using Checks Or Dead Presidents

Posted in Diversity, Retention & Pay Equity, Wage & Hour Compliance, Workplace Policies and Processes

By Jacob Oslick

iStock_000023258402MediumWe have previously reported and blogged about challenges to paying employees through debit card-like “paycards.” A recent Pennsylvania decision has amplified those concerns.

In a case of first impression, the trial court in Luzerne County, Pennsylvania found that paying employees through mandatory payroll cards does not comply with a Pennsylvania law, the Wage Payment and Collection Law, which requires “wages” to be paid through either “lawful money of the United States” or a “check.” Siciliano v. Mueller, Case No. 2013-07010 (Pa. Com. Pl., Luzerne Cnty. 2015) (citing 43 P.S. § 260.3). Pennsylvania adopted this statutory language decades ago, principally to bar employers from paying employees in scrip (i.e., worthless Monopoly-style company money). But, if the Court’s ruling stands, Pennsylvania employers may now face liability if they pay their employees through a debit card instead of cash, check, or — upon the employee’s written consent — direct deposit. See 7 P.S. § 6121 (defining “check” to include direct deposit, if an employee requests direct deposit in writing).

Citing Black’s Law Dictionary, the Siciliano Court reasoned that payroll cards are not “lawful money of the United States,” because they are not “bills and coins” that have been approved “in a country for the payment of debts, the purchase of goods, and other exchanges of value.” Nor are they a check, because they are not “an unconditional written order” to “pay certain sum of money on demand.” Rather, the Court opined, payroll debit cards can only be turned into “lawful money” after a visit to the bank or ATM. Thus, the Court determined, the WPCL’s “plain language” compelled finding that payroll cards did not comply with the WPCL’s “lawful money” or “check” requirements. As a result, the Court effectively held that the employer’s practice of paying employees through paycards constituted a per se WPCL violation.

To its credit, the Court recognized that reasonable minds can differ, and certified the case for an immediate appeal to Pennsylvania’s Superior Court (intermediate appellate court). And the Court’s opinion might not hold up on appeal. For instance, despite the WPCL’s literal language, Pennsylvania courts have typically interpreted “wages” broadly, to encompass various forms of compensation — such as stock options and free rent — that are clearly neither “lawful money of the United States” nor “check[s].” See generally Braun v. Wal-Mart Stores, Inc., 24 A.3d 875, 954 (2011) aff’d, 106 A.3d 656 (Pa. 2014); Walker v. Washbasket Wash & Dry, 2001 WL 770804, at *15 (E.D. Pa. 2001). Moreover, the Court’s opinion – if upheld – could have bizarre consequences. It could, for instance, potentially forbid a Pennsylvania employers from offering their workers various non-monetary perks that do not fit within the WPCL’s relatively narrow definition of “fringe benefits and wage supplements.” As an example, using the Siciliano court’s logic, a brewer who gives his employees a free case of beer a week might get slapped with a WPCL suit, on the grounds that beer – though delicious – is sadly not “lawful money of the United States.”

Still, the prospect exists that the Superior Court will affirm the trial court’s ruling. If it does, plaintiffs will likely argue that, because they did not receive “lawful money of the United States,” they received no “wages” at all. Accordingly, plaintiffs will likely contend that their employer owes them full back wages, plus liquidated damages, even though they already received their pay on paycards. The statutory text, and the sheer equities, render such a result unlikely. Indeed, the WPCL expressly permits employers to claim a right of “set-off” that would may eliminate most of the plaintiffs’ claimed damages. And the WPCL, similarly, also permits employers to assert counterclaims. Thus, there is a good chance that the Court will permit the employer to use the original paycard payments to set-off any claimed damages or, alternatively, permit the employer to recover the original paycard payments to prevent unjust enrichment. In either circumstance, Plaintiff’s damages would be minimal (other than, perhaps, statutory attorneys’ fees). That being said, courts do sometimes reach results that seem irrational and unfair. And, in this case, permitting any recovery is likely irrational and unfair, given the nitpicky “gotcha” nature of plaintiff’s claims.

In any event, Pennsylvania employers should consider this decision carefully in deciding whether to revise existing paycard policies.

Jacob Oslick is an Associate in Seyfarth’s New York office. He is an experienced New York and Pennsylvania litigator. He has served as counsel of record in over 60 Pennsylvania matters. If you would like further information on this topic, please contact your Seyfarth attorney or Jacob Oslick at JOslick@seyfarth.com.

25 Easy Ways to Make Your Business More Accessible to Customers with Disabilities

Posted in Title III Access

By Kevin A. Fritz

Photo-Bush-300x199Signed into law today, 25 years ago, on July 26, 1990, the Americans with Disabilities Act is the most comprehensive civil rights law designed to prohibit discrimination against people with disabilities.

Each year since its passage, more people with disabilities are entering the workforce, earning income, and spending and consuming goods. Good access makes good business sense. By reaching customers with disabilities, businesses obtain more customers and improve their image.

In the spirit of anniversary of this legislation, here are 25 easy ways to make your business more accessible to customers with disabilities:

  1. If the main entrance of your business is not wheelchair accessible but there is an alternate accessible entrance, post clear signage by the main entrance giving directions. Also add the International Symbol of Accessibility at the accessible entrance and include key accessibility information about access, parking, or other services on your website (g., the rooftop bar is only accessible via stairs).
  2. Keep your lowered accessible counter clear at all times. Do not store or display items on this counter.
  3. Where there are corners, steps, and edges, mark these with high visibility contrasting colored material so that they can be easily seen.
  4. If your business provides table or bar seating, make sure you have accessible seating for wheelchair users. A table that provides space underneath the top that is 30” wide, 17” deep, and 27” high, with a top that is between 28” and 34” from the ground is accessible.
  5. Keep walkways and accessible parking access aisles clear and free from clutter or snow, and make sure your premises are well lit. Keep any bushes, trees, or flower arrangements near your business clipped so there are no low hanging hazards for persons who are blind or have low vision, or overgrown bushes obstructing the path of travel for those using wheelchairs or other mobility aides.
  6. Signage for permanent rooms, such as restrooms, must have braille and raised lettering. The background and foreground must contrast.
  7. Doors that are heavy and hard to open can be very difficult to use for the elderly or people who use wheelchairs or mobility aids. Adjust closers so that the doors require less force to open.
  8. In bathrooms, make sure wastebaskets or other moveable objects do not obstruct clear spaces next to the doors. Similarly, in accessible wheelchair stalls, keep the area around the toilet and under the sink clear. Doing so ensures that persons using wheelchairs can safely operate the door and navigate.
  9. If your place of business is not accessible for wheelchair users because there are steps at the entrance, consider how you can provide the goods and services to such customers in an alternative fashion (g., personal shopper, home delivery, or home visit service).
  10. Welcome service animals into your establishment. If you don’t know if it’s a service animal, you can ask two questions: (1) Do you need this animal because of a disability? (2) What work or tasks has this animal been trained to perform?
  11. When choosing signage, language matters. Instead of signs that use the word “handicapped” –which is considered offensive by many people with disabilities – opt for signs that use the word “accessible.”
  12. Consider how persons with disabilities will be evacuated from your facility in an emergency, and include that procedure in your emergency evacuation plan. Make sure your employees know the procedure.
  13. Use people first language when referring to someone with a disability. Refer to a person as an individual with a disability rather than a “disabled person,” or a “handicapped person.” In that vein, refer to a person as one who uses a wheelchair (rather than one “confined” to one) or one who is blind (rather than one who “suffers” from blindness).
  14. When speaking with a person with a disability who has a companion, direct your comments to the person with a disability to that person, not the companion – unless specifically instructed otherwise by the person with a disability.
  15. With all written information, structure content in a logical order using plain English and avoiding long sentences.
  16. People who are deaf make phone calls using a telecommunications relay service (TRS). Accept calls made through such services and treat them the same as other calls.
  17. Be prepared to read menus to customers who are blind or have low vision. Posting menus online provides such customers another way of reviewing the menu (using assistive technology such as screen readers) before they visit the restaurant.
  18. Make sure your employees are prepared to interact with customers who are blind or deaf. They should be ready to read written documents to customers who are blind or have low vision and to exchange notes with customers who are deaf, hard of hearing, or have difficulty speaking. Have a pad of paper handy for this purpose.
  19. People with hearing, speech, or sight disabilities may require extra time or a quiet area to talk with staff. Be patient with the extra attention that might be necessary to understand what is being said and how to assist.
  20. Make sure that your accessible register or checkout lane is always open when the store is open.
  21. Always ask first if a person with a disability needs assistance, never assume.
  22. If a customer who is blind needs to be led to a location in your business, offer the person your arm. Wait for them to accept the assistance.
  23. If a person with a disability requests that you modify a policy or provide additional assistance, consider the request meaningfully. There may be a legal requirement to do it. For example, if your business requires a driver’s license to rent an item, consider accepting another form of state-issued identification for an individual who is blind or physically unable to drive a vehicle.
  24. If you have a pool lift, make sure it is out and ready to be used (e., battery charged and lift uncovered) at all times when the pool is open.
  25. Customer feedback is a great opportunity to learn about your customers and their thoughts on how accessible your business actually is. Be open to receiving feedback and act on it. You may be preventing a lawsuit in the process.

Businesses can make it easier for people with disabilities – as well as other customers – to access and purchase the services or products they have to offer. In short, accessibility pays dividends and makes good business sense.

Kevin Fritz is an associate in the Chicago office of Seyfarth Shaw LLP where he focuses his practice on complex discrimination litigation, workplace counseling and solutions, and access defense.

EEOC Rules That Existing Federal Law Prohibits Employment Discrimination Based On Sexual Orientation

Posted in Diversity, Retention & Pay Equity, EEOC, Workplace Policies and Processes

By Laura Maechtlen and Sam Schwartz-Fenwick

In a landmark ruling on July 15, 2015 in _____ v. Foxx, EEOC Appeal No. 2012-24738–FAA-03 (July 15, 2015), the federal Equal Employment Opportunity Commission (“EEOC’) held for the first time that Title VII extends to claims of employment discrimination based on sexual orientation.

Specifically, the EEOC held that sexual orientation discrimination is per se sex discrimination, stating that: “We …conclude that allegations of discrimination on the basis of sexual orientation necessarily state a claim of discrimination on the basis of sex.”  Foxx at pg. 14.

Background

While the EEOC has yet to rule on the merits of the sexual orientation discrimination alleged in the Charge, its ruling is significant because it forcefully sets forth an expansive view of Title VII that protects employees (both homosexual and heterosexual) from workplace discrimination, and relies on existing Title VII authority to do so.  To date, Federal Courts have been largely reluctant to apply Title VII to claims of sexual orientation discrimination.  In the administrative context, and if Courts begin to adopt the reasoning of the EEOC, the ruling can significantly improve the workplace protections of LGB (Lesbian, Gay and Bisexual) employees because federal law does not explicitly protect workers based on sexual orientation, and an overwhelming number of states do not include sexual orientation as a protected class in state anti-discrimination statutes.

EEOC Administrative Decision

Complainant in the case is a temporary worker for the Federal Aviation Agency (the “FAA”).  He alleges that he was not selected for a permanent position at the FAA because he is gay.  He further alleges that his supervisor repeatedly made homophobic comments about him.

Complainant’s EEO complaint was first evaluated through the FAA’s administrative EEO process, resulting in a Final Agency Decision from the EEOC denying the claim.  Complainant appealed, and the administrative decision addressed two issues, one relevant here:  (1) whether the charge was filed timely (the EEOC determined it was); and (2) whether the EEOC had jurisdiction over a claim of sexual orientation discrimination.

Traditionally, it has been excepted that Title VII does not extend to claims of sexual orientation discrimination as “sexual orientation” is not listed anywhere in the statute or its underlying legislative history.  However, the EEOC held differently here.  In holding that allegations of sexual orientation state an actionable claim under Title VII, the EEOC opined that while Title VII does not expressly list “sexual orientation” as a prohibited bases for discrimination, such discrimination was prohibited as a form of sex discrimination.

The EEOC had several bases for the decision.  First, it noted that sexual orientation discrimination is sex-based because it is “premised on sex-based preferences, assumptions, expectations, stereotypes, or norms.”  Second, the EEOC opined that sexual orientation discrimination is sex-discrimination because it is “relational discrimination,” in that it involves treating a male employee who loves a man differently than a male employee who loves a woman, noting that courts regularly have applied this notion of relation discrimination in the race discrimination context.  Third, the EEOC determined that discrimination based on sexual orientation was sex discrimination because it relies on gender stereotypes as to how “real men” and “real women” should behave, and in so doing seeks to “enforce heterosexuality defined gender norms.”

The EEOC also attempted to pre-empt the anticipated criticism of its expansive view of Title VII.  It cites the Supreme Court’s decision in Oncale v. Sundowner Offshore Services, Inc., 523 U.S. 75 (1998), for the proposition that even if Congress did not intend Title VII to apply to this type of claim “statutory prohibitions often go beyond the principal evil [they were passed to combat] to cover reasonably comparable evils.”  The EEOC goes on to note that it is no matter that since the dawn of the Clinton administration in the early 1990s, Congress has been debating the extension of federal anti-discrimination legislation to LGB individuals through the oft-proposed, but never passed, Employment Non-Discrimination Act (“ENDA”).  The EEOC reasoned that this Congressional inaction may simply be the result of a recognition that Federal law already covers such claims.  For support, the EEOC noted that the creation of a new protected class is not required to extend protections to individuals claiming sexual orientation discrimination, given that in its view claims of sexual orientation discrimination were simply claims of sex discrimination — a category expressly found in Title VII.

Implications

While the EEOC had been pushing toward this decision with administrative guidance addressing coverage under Title VII for LGB individuals, the significance of this new ruling from the EEOC cannot be understated. In ruling that employees may state a claim for sexual orientation discrimination as a form of “sex” discrimination under Title VII, the EEOC explicitly issued a holding that is contrary to certain federal court rulings interpreting Title VII.  Going forward, it is expected that the EEOC’s decision will result in an increased number of charges of discrimination filed and investigated based on sexual orientation.  Moreover, given the EEOC’s key objectives in its Strategic Plan for 2012-2016 to ensure that members of the public understand their rights as well as the recourse available to them, employers can expect that the EEOC will take additional measures to educate future and potential claimants regarding this ruling.

While the EEOC’s ruling is not binding on federal courts, employers should be mindful that any allegations concerning sexual orientation discrimination – to the extent they can be interpreted to fall within the EEOC’s interpretation of “sex” – may expose them to liability, in addition to any protections that may exist under state or local laws.  Certainly, the extensive rationale provided by the EEOC in this decision was clearly intended to serve as a road map for individuals hoping to press their claims of sexual orientation discrimination at the administrative level, and in Federal Court.  The decision sets forth extensive references to case law that individuals can cite in support of this expansive view of Title VII.  Whether, the line of argument advanced by the EEOC will be adopted by Federal Courts remains an open question.  To date, Federal Courts have by an overwhelming margin been unwilling to allow such claims to survive the motion to dismiss stage.  However, given that the EEOC’s decision comes just weeks after the seminal gay-marriage victory in Obergefell v Hodges, courts may be more open to revisiting this issue and more generally the question of using courts, not the legislature, to advance LGB rights.  That being said, many Federal Courts will likely remain opposed to a more expansive reading of Title VII. Further, some jurists may cite the Supreme Court’s recent decision in Hobby Lobby v Burwell, to note that even if Title VII can be read to encompass LGB individuals, closely held corporations with religious objections to homosexuality can still permissibly discriminate against LGB individuals.

Based on these developments, and this evolving area of law, employers must familiarize themselves with issues related to sexual orientation to avoid potential liability.  Employers may wish consider the following:

  • Revisit Non-Discrimination Policies:  Although the EEOC’s decision is not binding and there is no federal law which explicitly protects LGB employees from discrimination, employers should consider revising internal equal employment, non-discrimination and anti-harassment policies to include sexual orientation as protected categories.
  • Conduct Training: Employers should also make their managers and employees more sensitive to sexual orientation by incorporating these topics in EEO and harassment training programs.
  • Health Insurance and Benefits: Employers may also consider whether changes can be made to its health benefits to extend such coverage to same-sex spouses and/or domestic partners.

In sum, employers should increase their awareness of and sensitivity to issues related to sexual orientation in the workplace.  Employers must be aware that LGB individuals may be protected under federal law in addition to relevant state or local laws, and that any allegations concerning sexual orientation discrimination require the same analysis, investigation and response as a traditional sex discrimination complaint.  Finally, employers must evaluate their internal policies, practices and procedures with an eye toward sexual orientation issues to avoid potential complaints and liability.

SEC Announces Third-Largest Dodd-Frank Bounty Award

Posted in Whistleblower

By Ada W. Dolph and Craig B. Simonsen

Blog picWhistleblowers continue to reap extraordinary awards under Dodd-Frank’s “bounty” program in exchange for bringing the Securities and Exchange Commission (SEC) “original” information that leads to a successful enforcement action. Most recently, the SEC announced its third-highest award since Dodd-Frank was enacted — an award of “more than $3,000,000” — to one such whistleblower. (See the SEC Order announcing the award here).

Careful to adhere to its statutory mandate to keep the identity of whistleblowers confidential, the SEC revealed only that the award was being made to an undisclosed “company insider” whose information helped the Commission “crack a complex fraud” “which otherwise would have been very difficult for investigators to detect.”

In a press release, Sean McKessy, Chief of the SEC’s Office of the Whistleblower, reminded would-be whistleblowers that if they provide the SEC with “unique and useful information” that contributes to a successful enforcement action, they too, may be eligible to “receive significant financial rewards.”

While $3 million is certainly nothing to sneeze at, the SEC previously issued a $30 million award in 2014, and a $14 million award in 2013.

At this rate, we can expect insiders to continue to provide information to the SEC. Publicly-traded companies and private companies that contract with those companies should continue to maintain robust (and SEC-compliant) compliance, reporting and investigative whistleblowing programs and policies to encourage employees to report alleged violations internally.

Ada W. Dolph is Team Co-Lead and Craig B. Simonsen is a member of the National Whistleblower Team. If you would like further information on this topic, please contact a member of the Whistleblower Team, your Seyfarth attorney, Ada W. Dolph at ADolph@Seyfarth.com, or Craig B. Simonsen at CSimonsen@Seyfarth.com.

To receive future Workplace Whistleblower Alerts, click here.

Colorado Supreme Court Upholds Firing For Medical Marijuana Use

Posted in Hiring, Testing & Selection, Workplace Arbitration, Workplace Policies and Processes

By Marc R. Jacobs

In a closely watched case, the Colorado Supreme Court ruled that an employer could lawfully terminate an employee who tested positive for marijuana in a random drug test, even though the employee’s use of marijuana was off-duty and prescribed under Colorado’s Medical Marijuana Amendment. Coats v. Dish Network, LLC, 2015 CO 44 (2015).

Brandon Coats is a quadriplegic. In 2009, he obtained a Colorado state-issued license to use medical marijuana to treat painful muscle spasms.  He consumed the prescribed medical marijuana in accordance with his license and the state law.  He was employed by Dish Network from 2007 to 2010 as a telephone customer service representative.  In May 2010, Coats tested positive for a component of medical marijuana during a random drug test.  He informed Dish that he was a registered medical marijuana patient and would continue to use it.  Dish terminated his employment under its drug policy.

Coats sued Dish, claiming that he was wrongfully terminated under Colorado’s “lawful activities statute” (Colo. Rev. Stat. Section 24-34-402.5) which generally prohibits the discharge of an employee based on the person’s “lawful” off-duty activities.  Coats essentially argued that because his use of medical marijuana was “lawful” and protected under Colorado law, the termination violated the lawful activities statute.  The trial court and appellate court rejected his claim.

In a unanimous decision (one justice did not participate), the Colorado Supreme Court affirmed the dismissal of Coats’ lawsuit.  Although Coats’ use of medical marijuana was lawful under Colorado’s medical marijuana law, marijuana is a “controlled substance” under the federal Controlled Substances Act and its use, even for medicinal purposes, is a federal criminal offense.  As a result, the Court held that Coats’ use of medical marijuana was not “lawful” and he was not protected from termination because of his use of medical marijuana.  The Court also rejected arguments that use of medical marijuana was no longer unlawful because: (a) the U.S. Department of Justice announced that it will not prosecute certain patients who use medical marijuana in accordance with state law; and (b) in December 2014, Congress passed an appropriations bill that prohibits the Department of Justice from using funds appropriated under the act to prevent states with medical marijuana laws (like Colorado) from implementing those laws.

Although this decision is only binding in Colorado, it provides guidance that other courts likely will consider and follow when applying similar “lawful activities” statutes. For this Court, so long as marijuana is listed as a controlled substance under the federal Controlled Substances Act, its possession and use is unlawful and is not lawful activity under the state law.

We will continue to monitor and report on developments in this area of the law.

 

What to Expect When The Legislature Is Expecting (To Reintroduce The Pregnant Workers Fairness Act)

Posted in EEOC, Hiring, Testing & Selection, Workplace Policies and Processes

By Katherine Mendez

Hot off the heels of the Supreme Court’s decision in Young v. United Parcel Service, Inc., recently, a bipartisan group of lawmakers declared their intent to reintroduce the Pregnant Workers Fairness Act.

You may recall that on March 25, 2015, the Supreme Court handed down its decision in Young v. United Parcel Service, Inc.  The Court vacated the Fourth Circuit’s decision and held that a pregnant worker seeking to show disparate treatment through indirect evidence may do so through the McDonnell Douglas burden shifting framework.

Under Young, a plaintiff may establish a prima facie case of discrimination by showing that she belongs to the protected class, she sought an accommodation, she was not accommodated, and that the employer accommodated other employees who were similar in their ability or inability to work.  If the plaintiff can establish her prima facie case, the burden shifts to the employer to articulate a legitimate non-discriminatory reason for denying the plaintiff the accommodation.  The reasons cannot consist simply of a claim that it is more expensive or less convenient to add pregnant women to the category of those whom the employer accommodates.

If the employer articulates a legitimate, nondiscriminatory reason, then the burden shifts back to the plaintiff to show that the employer’s reason is pretext for unlawful discrimination.  The plaintiff can show pretext by providing evidence that the employer’s policies impose a “significant burden” on pregnant workers and the employer’s legitimate, nondiscriminatory reasons are “not sufficiently strong” to justify the burden.  The plaintiff may do so by providing evidence that the employer accommodates a large percentage of non-pregnant workers while failing to accommodate a large percentage of pregnant workers.  (For a full analysis of the Young decision see Seyfarth Shaw’s One Minute Memo “SCOTUS Issues Decision in Pregnancy Accommodation Discrimination Case Against UPS.”)

Confused?  So was the legislature, which now seeks to cut the cord with the Supreme Court’s decision by delivering a new bill, which lawmakers claim will clarify ambiguities in the Supreme Court’s ruling in Young.  The bill articulates the following five unlawful employment practices: (1) failing to make reasonable accommodations to known limitations to the pregnancy, childbirth, or related medical conditions of job applicants or employees, unless the accommodation would impose an undue hardship on the employer’s business operation; (2) denying employment opportunities based on the need of the employer to make such reasonable accommodations; (3) requiring such job applicants or employees to accept an accommodation that they choose not to accept; (4) requiring protected employees to take leave if another reasonable accommodation can be provided for their known limitations; or (5) taking adverse action against an employee because she requests or uses a reasonable accommodation related to her pregnancy, childbirth, or related medical conditions.

In light of the recent developments in the law and the “bun” in the legislature’s oven, employers should strongly consider adopting practices that consider accommodation of pregnant employees, even if the pregnancy is without complications.

If you have questions regarding this topic, please contact the author, a member of Seyfarth’s Absence Manager & Accommodation Team [http://www.seyfarth.com/Absence-Management-and-Accommodations , or your Seyfarth lawyer.

SEC Interpretive Release on the Terms “Spouse” and “Marriage”

Posted in Diversity, Retention & Pay Equity, EEOC, Hiring, Testing & Selection, Workplace Policies and Processes

By Sam Schwartz-Fenwick and Craig B. Simonsen

Blog picIn another federal action that employers need take note of, last week the U.S. Securities Exchange Commission (SEC) issued its “Commission Guidance Regarding the Definition of the Terms ‘Spouse’ and ‘Marriage’ Following the Supreme Court’s Decision in United States v. Windsor.” SEC Interpretive Release No. 33-9850 (IR) (June 19, 2015), 80 Fed. Reg. 37536 (July 1, 2015).

This IR came out days after the U.S. Supreme Court issued its decision in Obergefell, et al. v. Hodges, Director, Ohio Department of Health. In Obergefell, the Supreme Court, as was noted in a related blog, ruled that “same-sex couples may exercise the fundamental right to marry in all States [and] that there is no lawful basis for a State to refuse to recognize a lawful same-sex marriage performed in another State on the ground of its same-sex character.”

Obergefell built on the Supreme Court’s prior same-sex marriage ruling in U.S. v. Windsor, 570 U.S. ___, 133 S. Ct. 2675 (2013). Windsor, issued in June 2013, held that the due process clause of the Fifth Amendment required the Federal Government to recognize as married, and thus to bestow the Federal rights and benefits of marriage to, legally married same-sex couples.

Subsequent to Windsor, Federal agencies, including the IRS and DOL, issued guidance clarifying whether they would consider a same-sex couple married based on the celebration rule (was the ceremony conducted in a state that recognized same-sex marriage?) or the residence rule (does the couple live in a state that recognizes same-sex marriage?).

In nearly all cases, Federal agencies determined that benefits would be determined based on the celebration rule. In accord with the majority rule, the SEC has adopted a celebration rule for defining the terms “spouse” and “marriage,” where they appear in federal securities statutes, rules and regulations, interpretive releases, orders, and guidance issued by the staff or the Commission.

The IR is significant mainly because it underscores the complexity of the guidance that was required to clarify the law after Windsor. In light of Obergefell, it will no longer be necessary to consider whether the celebration or residency rules applies, as the marriages of same-sex couples are now recognized throughout the United States.

 

 

Liability for Data Breach Involving Employee Information: Even the Federal Government and Third Party Vendors Are Not Immune

Posted in Class Action Avoidance, Workplace Arbitration, Workplace Policies and Processes

By: Karla Grossenbacher

In what is quickly becoming the newest trending topic in class action litigation, another class action has been filed alleging the disclosure of employee personally identifiable information due to a cyber attack.

This time, the employer is the federal government, and another target in the lawsuit is the third party vendor allegedly used by the federal government to conduct its background checks during the time of the breach.

On June 29, 2015, the American Federation of Government Employees filed suit against the U.S. Office of Personnel Management, as well as its Director and Chief Information Officer (the “OPM Defendants”) and KeyPoint Government Solutions (“KeyPoint”), on behalf of two named plaintiffs and a putative class of 18 million current and former employees and prospective employees (the “Plaintiffs”) of the federal government whose personally identifiable information was put at risk by a massive data breach suffered by OPM, which was made public early last month (AFGE, et al. v. OPM, et al., Case 1:15-cv-01015, D.D.C., June 29, 2015).

Although the claims asserted in the case are somewhat different than those we have seen in cases filed against private employers, the types of injuries for which the employees are seeking redress are not. In their Complaint, Plaintiffs are seeking to recover damages for the following alleged injuries that they claim to have already suffered or from which they are “at increased risk of suffering”:

– “out-of-pocket costs associated with the prevention, detection, and recover from identity theft or unauthorized use of financial and medical accounts,” such as putting in place credit monitoring and obtaining credit reports;

– “lost opportunity costs” associated with putting preventative measures in place, including time spent “researching how to prevent, detect, contest and recover from identity and health care/medical data misuse.”

– costs associated with the unavailability of frozen or flagged credit or assets and complete denial of credit or use of credit;

– freezing and unfreezing of credit and penalties resulting from the unavailability of frozen credit;

– diminution in the value and/or use of their personally identifiable information; and

– the continued risk to their personally identifiable information and future costs that will be expended to “prevent, detect, contest and repair the impact” of their compromised information.

It is unclear at this time what injuries the Court will deem sufficiently non-speculative to confer standing on Plaintiffs or establish a viable cause of action.

Plaintiffs are asserting claims against the OPM defendants for violations of the Privacy Act and the Administrative Procedure Act. However, Plaintiffs are also suing KeyPoint, which according to the Complaint, is the OPM contractor that handled the majority of the background checks for OPM at the time of the cyber attack. As is commonplace in suits of this nature, Plaintiffs assert a garden variety negligence claim against KeyPoint. The thrust of the negligence claim, as stated in the Complaint, is that KeyPoint owed Plaintiffs a duty of care and did not take reasonable steps to maintain and protect their personally identifiable information, especially in light of the fact that the “OPM employee data was an attractive target for cyber attackers” and KeyPoint’s cyber security systems had sustained a prior breach in late 2014.

Although the Plaintiffs in the OPM litigation do not advance a separate claim based on delayed notification of the data breach — despite the fact that Plaintiffs claim OPM delayed months in disclosing the data breach to those affected — many states have laws that require certain notifications to take place within a specific timeframe in the event of a data breach. Accordingly, employers need to make sure they are aware of such laws in the states in which their employees work and are prepared to comply with them in the event of a breach. Moreover, every company should have an information security policy in place that states what actions the employer will take in the event of a data breach. A number of the state data breach notification laws provide a safe-harbor for employers who comply with the notification procedure in their own information security policies in response to a breach.

It remains to be seen if the defendants in the OPM litigation will move to dismiss all or some of Plaintiffs’ claims and whether or not they will be successful if they do. However, the filing of this complaint serves as yet another cautionary tale about the many ways in which employees and applicants can seek to impose liability on employers in the event of a data breach. Moreover, the inclusion of KeyPoint in the lawsuit is a reminder to employers that they need to vet carefully any third party vendors to whom they entrust employee or applicant personally identifiable information. Employers should review their data security measures — as well as those of their vendors — in light of the ever-evolving threat posed by hackers. Employers need to ensure that the measures they have in place will be viewed as reasonable in light of the type of personally identifiable information that they obtain from employees (e.g., medical, financial, personal, etc.) and their history of vulnerability in this area. Companies should be expending the same level of effort to protect employee information as well as consumer information. Indeed, some might argue that a company’s duty of care to its employees is greater than the duty owed to consumers. A consumer has a choice in the free market about to whom he or she gives personally identifiable information; the same cannot necessarily be said of an employee whose employer requires that certain financial information be provided by the employee in order to have a paycheck deposited or that certain medical information be provided in order or process benefits.

For more information regarding this topic, please contact the author or your Seyfarth attorney.

Record $17M Settlement Of False Claims Act Lawsuit Alleging Doctor Kickbacks

Posted in Whistleblower

By Ada W. Dolph and Craig B. Simonsen

PostHailed as “another achievement” for the government’s Health Care Fraud Prevention and Enforcement Action Team (referred to as “HEAT”), the U.S. Department of Justice has announced that a Florida skilled nursing company and its former president and executive director will pay $17 million to resolve allegations that the company violated the False Claims Act by submitting claims to Medicare and Medicaid for patients that were referred to the company through illegal kickbacks.

The Department of Justice called this the largest settlement involving alleged violations of the Anti-Kickback Statute by a skilled nursing facilities company in the United States. Under the False Claims Act, the company’s former CFO, who initiated the lawsuit, will receive an eye-popping $4.25 million as his share of the recovery.

The CFO alleged that from 2006 through 2013, the company operated a kickback scheme in which they hired physicians as medical directors under contract. The lawsuit alleged that the medical director positions were actually “ghost positions,” which did not require the medical directors to perform any actual work; rather, they were on contract for their patient referrals to the company’s facilities. The CFO alleged that up to 70% of admissions to the skilled nursing facilities resulted from referrals by paid medical directors.

As part of the settlement, the company’s president agreed to resign from his position.  The company also entered into a five-year “corporate integrity agreement” with the Department of Health & Human Services Office of Inspector General, and agreed to change its policies on hiring and maintaining medical directors.

The Department of Justice asserted in its press release that with the help of HEAT, since January 2009 it has recovered more than $24 billion through False Claims Act cases, of which more than $15 billion was recovered in cases involving fraud against federal health care programs.

Ada W. Dolph is Team Co-Lead and Craig B. Simonsen is a member of the National Whistleblower Team. If you would like further information on this topic, please contact a member of the Whistleblower Team, your Seyfarth attorney, Ada W. Dolph at ADolph@Seyfarth.com, or Craig B. Simonsen at CSimonsen@Seyfarth.com.

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Obama Administration Proposes New Overtime Rules

Posted in Wage & Hour Compliance, Workplace Policies and Processes

President Obama announced last night that the DOL would be releasing its proposed amendments to the white collar exemption regulations today.

Our colleagues from the Wage Hour Litigation Practice Group blog about these matters and have been tracking the progress of the rules proposal during the past year and are already formulating how these new regulations may impact employers across the court.  To learn more, please review their blog posted here.