In today’s New York Times  an OpEd piece asserts the need for Federally-legislated procedures for insurance carriers to use to justify any proposed premium increases.  Of course, the NYT refers to legislation which will require actuarial standards to avoid the Anthem situation where “fuzzy” actuarial formulas were presented to support its 30% premiums increase. 

Legislation of this sort can provide external measures which, when coupled with an employer’s internal efforts, provide greater assist in containing or at least controlling health care costs.  Being that this idea seems to be one just percolating among the “liberal elite” it may be one which employers which see a value in this type of rationalized control over health care premiums could advance through their Congressional representatives, ERISA Industry Committee(“ERIC”) or other employer advocacy groups.

On Wednesday, the IRS issued guidance on the tax treatment of adult children to age 27 who will be covered under their parent’s plan.  Employers which will not extend this benefit to it employees in advance of the mandated January 1, 2011, implementation date may want to refer to  this for planning opportunities. 

The changes are explained in IRS Notice 2010-38 and are summarized:

• The tax treatment is effective March 30, 2010, for children covered under the plan who have not reached age 27 in 2010.  
• This change may have immediate application for Massachusetts employers providing health coverage to dependent children through age 26.
• Prior to the clarification, Internal Revenue Code (“Code”) Section 105(b) excludes from an employee’s gross income employer-provided reimbursements made directly or indirectly to the employee for the medical care of the employee, employee’s spouse or employee’s dependents.  As amended by the Affordable Care Act, the exclusion from gross income under §105(b) is now extended to employer-provided reimbursements for expenses incurred by the employee for the medical care of the employee’s child who has not attained age 27 as of the end of the taxable year.
• The guidance also clarifies that the same rules that apply to an employee’s child under age 27 for purposes of Code Sections 105(b) and 106 apply to flexible spending accounts (FSA) and health reimbursement arrangements (HRA) but not for health savings accounts (HSA).
• Coverage and reimbursements under a plan for employees and their dependents that are provided for an employee’s child under age 27 are not wages for FICA or FUTA purposes.
• The newly issued guidance notes that the IRS and Treasury intend to amend the regulation to include children who are under age 27 with respect to sickness and accident benefits paid from a VEBA, in order to conform to Code Sec. 501(c)(9), as amended by PPACA.  Until amended, employers are advised not to provide such benefits through a VEBA.

The IRS website provides some discussion on the amendment and the resulting tax treatment.  http://www.irs.gov/newsroom/article/0,,id=222193,00.html

On March 19, 2010, the US Circuit Court issued its opinion in Jobe v. Med. Life Ins. Co., 2010 WL 986642 (8th Cir. 2010) http://www.ca8.uscourts.gov/opndir/10/03/083505P.pdf  which speaks to the administration of ERISA-qualified plans.

The court’s opinion remains consistent  with the prevailing law in this area.  Which is why it is so curious that the lower court erred in its application of the appropriate standard of review.  Nevertheless, this is a reminder to plan administrators and to plan sponsors to take note of the plan documents which control the administration of the plan and the communications delivered to plan participants.

This case carries particular weight because it is an Eighth Circuit case with jurisdiction over Arkansas.  It makes these points:

1. When a plan document delegates authority to a particular fiduciary to exercise discretion in making a decision, then the court can only properly review the decision under an “abuse of discretion” standard which  does not challenge the decision but determines whether the fiduciary exceed its legal authority in making the decision. 

2. If the plan is silent or the plan delegates the authority to a person different than the one who made the decision, then the court is to review the decision “de novo” and challenge the decision itself to determine whether it is correct under the facts and circumstances. 

3. The plan document always trumps the SPD, especially when the SPD says that the plan document controls.
The implications from this case for Walmart plan administration are:

1. That the person or committee making fiduciary decisions be properly delegated that discretion in the plan document.
2. That the plan documents and the SPDs are always consistent in providing that the fiduciary may make decisions in its full discretion subject to the terms of the plan and controlling law.

On February 19th, I presented at the Arkansas Bar Association’s 33rd Annual Labor and Employment Law Conference in Little Rock, Arkansas.  My presentation covered the Americans with Disabilities Act Amendments Act of 2008 and the EEOC’s proposed implementing regulations.  The primary purpose of the Amendments Act and the implementing regulations is to more broadly redefine the ADA’s definition of disability.  Part of my presentation included a “top ten” list to highlight the extreme breadth of the ADA’s new definition of disability per Congress and the EEOC.  Enjoy.   

You Might Be Disabled If . . .

1.  If you are limited as compared to the general population in your ability to think, you might be disabled. 

2.  If you are limited as compared to the general population in your ability to communicate, you might be disabled.

3.  If you are limited as compared to the general population in your ability to interact with others, you might be disabled. 

4.  If you are limited as compared to the general population in your ability to eat, you might be disabled.

5. If your employer treats you differently because of impairment or perceived impairment, even though that impairment or perceived impairment does not substantially limit you, you might be disabled.

6. If your impairment is episodic or in remission, but would substantially limit you when active, you might be disabled.

7. If you use a mitigating measure, other than eyeglasses or contact lenses, that eliminates any limitation whatsoever, you may be disabled.

8.  If you are limited as compared to the general population in your ability to concentrate, you might be disabled.

9. If you are limited as compared to the general population in your bowel function, you might be disabled.

10. If you are a current user of illegal drugs, a transvestite, a transsexual, a pedophiliac, an exhibitionist, a voyeur, a compulsive gambler, a kleptomaniac, or a pyromaniac, you still are not disabled (at least for now).

On Friday, February 12, 2010, during a biology department meeting on the campus of the University of Alabama-Huntsville, Dr. Amy Bishop – a member of the department who had recently learned that she was being denied tenure – reportedly opened fire killing three of her colleagues and severely wounding three others.  Investigation by authorities into Dr. Bishop’s past uncovered two previous incidents of alleged violence.  Twenty-four years prior to the Huntsville shooting, Dr. Bishop fatally wounded her brother which was ruled accidental at the time.  In 1993, Dr. Bishop was questioned, but never charged, in an attempted mail bombing of a Harvard professor.

            The shootings and subsequent discovery of Dr. Bishop’s alleged past acts have raised the obvious question:  What actions, if any, can an employer take to prevent workplace violence?  The answer, unfortunately, is neither simple nor clear.

            Many employers conduct criminal background checks on employees prior to hiring them.  However, as the Huntsville shooting has demonstrated, criminal background checks may not prove helpful.  Because Dr. Bishop was never charged with the death of her brother or in the attempted bombing, neither of these incidents would have appeared on a criminal background check at the time of her hire at the University.

            It is also increasingly difficult for employers to obtain information about applicants from the applicants’ past employers.  Fearful of being sued by the former employee for defamation or tortious interference, employers often resort to only relaying the “name, rank and serial number” – or name, position, salary, and dates of employment – of the applicant.

            In Arkansas, an employer may be liable for negligent hiring or supervision if “the employer knew, or in the exercise of ordinary care should have known, that its employee’s conduct would subject third parties to an unreasonable risk of harm.”  Therefore, an employer must exercise “reasonable care” in selecting and retaining employees.

            What constitutes “reasonable care” is ultimately a decision that a jury may have to make.  However, an employer should consider taking the following steps when hiring potential employees:

-Do ask an applicant about all places that he has worked previously and the names of his supervisors

-Do contact previous places of employment and obtain as much information as possible about the applicant

-Do contact all persons listed or identified as references for the applicant

-Do ask strategic interview questions (e.g., “How do you ‘blow off steam’ when you are mad about something?”)

-Do consider obtaining a credit report under the Fair Credit Reporting Act

-Do consider requiring an applicant to sign an authorization pursuant to Ark. Code Ann. § 11-3-204 which provides former employers some protection for providing information about former employees such as whether the former employee made any threats of violence in the workplace

-Do train supervisors on how to recognize warning signs of “troubled employees”

An employer once asked me, “Brian, what is the single best piece of advice you can give me to keep my employees happy?”  My first answer was, sarcastically, “Pay them more.”  He did not laugh.  Then I seriously answered, “I believe one of the best rules for dealing with anyone – including employees – is the Golden Rule.”  Treat others as you would want to be treated.

It really is not rocket science, is it?  As an employer, put yourself in the shoes of the employee.  Ask yourself, “If I were in Sally’s situation, would I believe the company’s decision is fair?”  “If I were Bill who is about to be terminated, would I believe my termination is fair?”  Granted, there is some measure of reason that must apply.  Still, what is reasonable and fair can sometimes easily change when you change shoes.

Yes, Arkansas is an at-will state.  Legally speaking, a company can fire an employee for any reason, for no reason, or for even a “morally wrong” reason, as long as there is not a binding contract or a public policy (e.g., discrimination) prohibiting the decision.  But because the employer “can” do it does not always mean the employer “should” do it.  Such an approach often creates more problems than necessary – and some of those problems can be very expensive.  In all honesty, I would really prefer not to have to defend an employer’s “morally wrong” reason to a jury.

From a business perspective, your company most likely operates optimally when your employees are happy and dedicated.  Appreciation, in large part, fuels both of these.  Many times, employers can avoid the disgruntled employee situation with appreciation.  Acknowledge a “job well done” when deserved.  Say “thank you” here and there.  Make sure your employees know that the management team is human and they truly care about the employees as people first, workers second.  

From a risk and exposure perspective, the Golden Rule is one of the best preventative practices to avoid complaints and lawsuits from disgruntled employees.  True, there is no cure-all.  But I am often surprised at how an employer’s mercy and grace in deftly dealing with some of the most difficult situations can prevent subsequent litigation.  Many times, the employee simply wants a forum to make his case, aka, “venting the emotion.”  If the employer provides that forum via the employer’s policies and process, then the employee may be less inclined to seek that forum elsewhere.    

One of the largest challenges facing some employers in today’s market is sustaining a work environment of dignity, respect, and collaboration.  I find it difficult (and sad) when I encounter a manager who lacks this vision.  It is critical for employers to not only welcome different employee perspectives, but the prudent employer will seek them out, via inclusive diversity programs and employee resource groups.  This challenge also continues to grow as new generations enter the workforce, often with more demanding expectations for warmer employer-employee relationships than their more experienced co-workers and supervisors.

We all have a duty to treat those we encounter as unique individuals worthy of respect, dignity, and appreciation.  For employers, this equally applies to your employees.  My former boss, the Honorable Stephen M. Reasoner, once told me, “Brian, when you begin your law practice, treat every client as if he is your only client.”  I often tell employers the exact same thing – treat that employee as if he is your only employee.  If you do, then you will not only greatly increase your chances of successfully defending any lawsuit, but you will have also followed one of my favorite rules of life.

On December 14, 2009, the United States Supreme Court granted certiorari to a case from the Ninth Circuit Court of Appeals regarding whether a city employee had a reasonable expectation of privacy in text messages sent on a city issued two-way alphanumeric pager.  In Quon v. Arch Wireless Operating Co., 529 F.3d 892 (9th Cir. 2008), the Ninth Circuit Court of Appeals held that the City of Ontario, California violated a police sergeant’s rights under the Fourth Amendment to the United States Constitution by reviewing text messages sent and received by the sergeant.

The city had a written policy regarding computer usage, internet use and emails applicable to all employees that stated employees should have no expectation of privacy or confidentiality when using these resources, and that the city reserved the right to monitor an employee’s use with or without notice.  The policy did not specifically mention text messaging by use of the pagers.

Under the city’s usage contract, each pager was allotted 25,000 characters after which the city was required to pay overage charges.  The practice was for the employee to pay for any overage charges.  The employee responsible for procuring payment for overages informed the other employees that, if they paid the overage charges, the city would not need to audit the messages to determine whether they were work related.  Sergeant Quon exceeded his monthly limit on several occasions resulting in overage charges for which he reimbursed the city.

After Sergeant Quon and another officer again exceeded the usage limit, the city decided to audit the text messages to determine whether the messages were exclusively work related, thereby requiring an increase in the number of characters users were permitted, or if they were using the pagers for personal matters.   The city requested transcripts of the text messages from the service provider who provided them without the consent of the officers.  The transcripts of Sergeant Quoin’s text messages contained personal messages which were often “sexually explicit.”

In holding that the city violated Sergeant Quon’s Fourth Amendment rights, the Ninth Circuit determined that users of text messaging services generally have a reasonable expectation of privacy in text messages stored on the service provider’s network.  The court noted that while it is not reasonable to expect privacy in the information used to “address” a text message (i.e., the name of the recipient), a user does have a reasonable expectation of privacy in the content of the message itself.  The court went on to hold that Sergeant Quon had a reasonable expectation of privacy based on the city’s informal policy that text messages would not be audited if an employee paid for the overage charges.

The court next determined that the city’s search was not reasonable.  Although the city’s purpose of determining the “efficacy of the existing character limits to ensure that officers were not being required to pay for work-related expenses” was a legitimate, work-related purpose, the scope of the city’s search was unreasonable.  The court found that the city could have achieved its objective through less intrusive methods including warning Sergeant Quon that he could not use his pager for a given month for personal messages, and that the city  would review the content of all messages for that month to ensure that the pager was only be using for work-related purposes.