Many employers are justifiably confused as to whether they may accept a receipt notice showing that an employee has applied for a particular document that is acceptable for I-9 employment eligibility verification purposes. With U.S. Immigration and Customs Enforcement (“ICE”) serving an additional 1,000 Notices of Inspection to employers for I-9 audits in June 2011 alone, it is a good time to refresh your understanding about the use of receipts for initial verification, reverification and to correct errors found in the course of self-audits.

As a general rule, a receipt notice showing an application for an initial period of employment or for an extension of an expiring employment authorization period is not acceptable during the initial I-9 verification or a subsequent reverification. There are, however, exceptions. An employer must accept a receipt during the I-9 process in place of one of the otherwise accepted documents – known as a List A, List B or a List C document – set forth on the instructions accompanying the Form I-9 in the following circumstances:
 

1. Any employee may present a receipt showing that an application for a replacement List A, B, or C document has been submitted because the document was lost, stolen, or damaged. The receipt notice serves to verify the individual’s employment authorization for 90 days from the date of hire, or, in the case of reverification, the date the employment authorization expires. Upon the expiration of the receipt period, the employee must present the actual document for which the receipt was obtained.
2. An employee who is a lawful permanent resident may present a receipt that constitutes an arrival card which is a portion of Form I-94 or Form I-94A which contains a temporary I-551 stamp (and photograph). This temporary I-551 stamp placed on the I-94 card, which is found within the employee’s passport, is considered the receipt. This type of receipt is considered valid as long as it is submitted for I-9 purposes before the expiration date listed on the temporary I-551 stamp. If there is no listed expiration date on the I-551 stamp, the receipt expires within one year from the date of issue.
3. An employee who is a refugee may present a receipt that constitutes Form I-94 or Form I-94A with an unexpired refugee admission stamp. The receipt notice serves to verify the individual’s employment authorization for 90 days from the date of hire, or, in the case of reverification, the date the employment authorization expires. Upon the expiration of the receipt period, the employee must present an unexpired employment authorization document (i.e., Form I-766, Form I-688B) or an unrestricted Social Security Card combined with a valid List B document.
4. Certain employees who hold non-immigrant visas and who are authorized to work for a specific employer incident to status (e.g., E, H, L, O, P, and TN) may continue to work for their sponsoring employers up to 240 days following the expiration of their authorized period of stay. In order for this rule to apply, the application or petition for an extension of status must be filed in good faith and before the expiration of the original status. In these cases, a USCIS receipt showing that a timely extension application or petition was filed (i.e., Form I-797) must be accepted for reverification purposes.
5. Individuals holding valid H-1B visas for another employer may “port” or work for another employer once the new or prospective employer has timely filed an H-1B portability petition on behalf of the individual. An application is generally considered “filed” once it is accepted for processing by the U.S. Citizenship and Immigration Services (USCIS). A copy of the Receipt Notice for the filed H-1B portability petition, together with the copy of the alien’s unexpired I-94 card can be accepted as evidence of employment authorization for employment verification purposes. Once the H-1B portability petition is approved, the employer should update the I-9 by reviewing the passport with the newly issued H-1B Approval Notice for the employee at issue.
6. In April 2008, USCIS issued a rule specifically pertaining to F-1 students. Under the rule, if a student in lawful F-1 status is the beneficiary of a timely filed H-1B petition requesting a change of status (from F-1 to H-1B), the student’s status is extended, along with any grant of optional practical training (“OPT”) work authorization, until October 1. In these cases, the employer may accept the expired OPT work authorization document combined with an endorsed Form I-20 that demonstrates that the student’s employment work authorization – OPT – has been extended and is still valid, and the USCIS Receipt Notice (Form I-797) showing receipt of the timely filed H-1B Petition.

Employers should also be aware of the following additional considerations:

• A receipt showing an employee has applied for an employment authorization document – whether it is for an initial grant of work authorization or a renewal – cannot be accepted as sufficient evidence of work authorization for I-9 purposes.
• A receipt is never acceptable for employment lasting less than 3 days.
• An employer’s failure to honor a receipt in one of the circumstances or exceptions set forth above may constitute document abuse and is prohibited under the Immigration and Nationality Act. 

The Securities and Exchange Commission’s final rules (the “Rules”) clarifying Dodd-Frank whistleblower rewards and protections take effect on August 12, 2011. The Rules govern the payment of rewards to eligible individuals who report violations of the federal securities laws which lead to a successful enforcement action by the SEC in which monetary sanctions of over $1 million are collected. The SEC promulgated the Rules pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”), which requires the SEC, in certain cases, to award to qualifying whistleblowers no less than 10%, and no greater than 30%, of the total monetary sanctions collected because of the whistleblower’s information. The Rules detail, among other things, how the SEC will evaluate an individual’s right to a reward and, if qualified, the amount to be awarded. Significant aspects of the Rules are summarized in brief below.

Notably, a whistleblower can submit information to the SEC anonymously through counsel, and a whistleblower’s identity is kept confidential. Moreover, a whistleblower need not have “clean hands” to receive an award. While the culpability or involvement of a whistleblower is a factor in determining the amount of an award, a culpable whistleblower, in the absence of a criminal conviction, is not per se precluded from receiving an award.

The Rules also clarify the anti-retaliation protections afforded whistleblowers under Dodd-Frank. Whistleblowers who do not qualify for a reward are still protected by the anti-retaliation provisions as long as the individual has a “reasonable belief that the information he is providing relates to a possible securities law violation … that has occurred, is ongoing, or is about to occur.” 

Whistleblowers are not required to report their concerns internally to their employers before making a report to the SEC. The Rules do, however, include incentives intended to encourage whistleblowers to use their companies’ internal compliance and reporting systems. For example, one of the factors the SEC will consider in determining whether to increase the amount of the award, is whether the whistleblower participated in his or her company’s internal reporting system. Similarly, a factor in determining whether to decrease the amount of the whistleblower award is whether the whistleblower undermined the integrity of the company’s internal compliance and reporting system. In addition, a whistleblower remains eligible to receive an award for his or her original information, even if he or she first reports the possible violation to the company, and the company subsequently reports the information to the SEC or provides the SEC with the results of an internal investigation which was prompted by the whistleblower’s information. 

The SEC states in the Rules that it is not seeking to undermine effective company processes for receiving reports on possible violations. In appropriate cases, it will contact the company after receiving a complaint, describe the nature of the allegations, and give the company an opportunity to investigate the matter and report back. Among other factors the SEC will consider in determining whether to give a company this opportunity are the company’s existing culture related to corporate governance, and the company’s internal compliance programs, including what role, if any, internal compliance had in bringing the information to management’s or the SEC’s attention.

In light of these factors alone, companies should evaluate their current internal reporting processes and policies to ensure that they effectively encourage employees to report their concerns about potential violations and misconduct through internal processes, to minimize the risk of being blindsided by an enforcement action. An effective internal reporting system will: be uncomplicated and non-threatening; include a process for reporting and receiving concerns about possible violations, including anonymous submissions; and ensure that all allegations of misconduct are taken seriously and addressed in a timely manner. Companies should routinely train their employees on how to report potential violations using the company’s internal reporting system, promote the use of their internal compliance programs, and train supervisors how to respond to reports of potential violations.
 

Federal contractors should be aware that the Office of Federal Contract Compliance Programs (OFCCP) recently issued a much anticipated directive impacting certain affirmative action programs. The new directive, which became effective on June 14, 2011, outlines the procedures for developing and maintaining a “Functional Affirmative Action Program” (FAAP).  The directive ends OFCCP’s year-long moratorium on processing contractor requests to develop or renew FAAP agreements.

FAAPs are affirmative action programs covering a particular business function or business unit rather than covering a particular establishment or worksite. For example, covered contractors may develop an FAAP for all marketing associates across multiple offices in different states, instead of having to create affirmative action programs for each individual establishment where those associates work. Unlike establishment-based programs, covered contractors cannot implement FAAPs without first obtaining OFCCP approval and then entering into an agreement with the Agency.
 

The new directive makes what OFCCP considers to be “significant changes” to the FAAP approval and agreement processes. Under the directive, a contractor must obtain prior written approval from OFCCP before developing an FAAP. This terminates OFCCP’s past practice of allowing for automatic approval if the Agency failed to act on a contractor’s FAAP request within 120 days.

The directive also sets forth contractor eligibility requirements. Each business function or unit must meet the following criteria to be considered eligible for an FAAP:

• Currently exist and operate autonomously;
• Have personnel practices or transactional activities (e.g., hires, promotions, terminations, compensation decisions) that are distinguishable from other parts of the contractor’s organization;
• Include at least 50 employees;
• Have its own managing official; and
• Have the ability to track and maintain its own personnel activity.

In addition, FAAP agreements will now expire after three years, rather than five, and contractors could face compliance audits if they fail to submit an annual FAAP update.

In terms of practical guidance, the directive outlines the elements that must be included in an FAAP, the basic principles of FAAP agreements, and the procedures for requesting, modifying, updating, renewing, or terminating such agreements. Attachments to the directive provide a checklist of documents that must be submitted during the approval process and examples of how contractors may develop either an establishment-based affirmative action program or the alternative FAAP. OFCCP has also published a list of Frequently Asked Questions regarding FAAPs on its website.

Employers considering the use of FAAPs should carefully review the obligations and requirements imposed by the new directive. At the same time, employers with existing FAAPs should review the directive for guidance on renewing, modifying, or terminating such agreements.
 

Although many tend to think the days of intentional gender or race discrimination in hiring are long gone, the U.S. Equal Employment Opportunity Commission recently held a public meeting focusing on this very topic. Why is the EEOC focusing on discriminatory hiring? According to the EEOC’s press release, disparate treatment in hiring is widespread despite the fact that many employers today invest a significant amount of time and effort in diversifying their workforce in order to gain a competitive edge. The EEOC’s General Counsel, P. David Lopez, believes that minorities are unlawfully denied employment opportunities due to employers’ efforts to conform to discriminatory customer preferences, hiring managers’ reliance on prohibited stereotypes about certain jobs, and the use of narrow recruiting procedures which fail to attract a diversified applicant pool.

Over the past two years, failure to hire complaints have comprised only 6% of all charges filed with the EEOC. The most common were age discrimination cases. Yet, a plaintiff’s employment lawyer and several EEOC officials who testified at the meeting claimed that such discrimination is underreported and urged the EEOC to invest additional resources in investigation of systemic, pattern and practice cases of discriminatory hiring. A management-side attorney who testified at the hearing acknowledged the value of employer training in this area, but advised against implementing a “one size fits all” approach to mandatory training or other EEOC programs. The attorney also recommended that the Commission update its 1998 Best Practices of Private Sector Employers report.
 

EEOC Chair Jacqueline Berrien indicated that employers can expect the EEOC to implement more vigorous enforcement efforts targeting potential cases of disparate treatment in hiring. Specifically, we will likely see an increase in the number of EEOC-initiated charges and pattern and practice cases. EEOC investigators may also begin to more closely analyze employers’ EEO-1 and/or OFCCP reports, and rely on information gathered from their investigation of other charges in order to identify targets for investigation of possible systemic discrimination in hiring.

How can employers prepare for this enforcement initiative? While courts have recognized that employers must use subjective, business judgment when hiring employees, the use of objective criteria in evaluating applicants better ensures that selection procedures are applied in a nondiscriminatory manner. Employers will be better equipped to defend failure to hire claims if they: 1) maintain records of the hiring process, including, when possible, applications submitted through the internet; 2) provide diversity training for all employees to emphasize the importance of a diverse workforce; 3) update equal employment opportunity polices and take action against managers who fail to follow those policies; 4) conduct periodic internal audits to assess potential disparate impact in hiring practices and to ensure that employment decisions are job-related; and 5) provide up-to-date training for managers involved in the hiring process.
 

In yesterday’s post, we began a discussion of how New York’s Marriage Equality Act may impact employee benefit plans. We continue the discussion here with Part II.

How Does the Legislation Affect Self-Insured Health Plans and Other Self-Insured Welfare Benefit Plans?

Self-insured health plans and other self-insured welfare benefit plans that are subject to ERISA will not be subject to the new requirements imposed by the Legislation. ERISA preempts the Legislation insofar as it applies to self-insured ERISA plans (ERISA’s preemption provisions, however, generally do not apply to insured plans, which is why the Legislation will affect insured plans differently than self-insured ERISA plans). If no changes are desired in how a self-insured ERISA plan operates, an employer should still review any definition of spouse that appears in that plan in order to make sure it does not need to be revised. ERISA plans are required to be administered in accordance with their written terms, and employers will want to make sure any definition of spouse conforms to how each such plan is operated.

Even though a self-insured ERISA plan is not subject to the requirements of the Legislation, an employer with such a plan can voluntarily decide to provide comparable benefits to same-sex spouses. The tax status of such benefits generally will not be identical to the tax status of the benefits provided to opposite-sex spouses under such a plan, because the Code provides favorable tax treatment for eligible opposite-sex spouses but not for same-sex spouses (an exception applies if the same-sex spouse satisfies the Code requirements for being a dependent of the participating employee, but that exception can be difficult to satisfy). If an employer does decide to provide comparable benefits to same-sex spouses, the language of the applicable plan should be revised accordingly.

Certain governmental and church self-insured plans are exempt from ERISA. Such plans will not be covered by ERISA’s preemption provisions and, therefore, will have to comply with the Legislation (subject to a possible exception for plans maintained by Religious Organizations). Such plans should, therefore, be reviewed to determine whether the definition of spouse may need to be amended to include same-sex spouses who are married in New York State.
 

What Impact Does the Legislation Have on Other Benefit-Related Rights That Arise Out of Federal Law?

Under DOMA, any other benefit-related right that arises out of federal law generally will not be subject to the requirements of the Legislation, as long as the applicable federal law does not incorporate the definition of spouse used under state law. This would mean, for example, that the COBRA health continuation coverage rights for spouses generally will apply to eligible opposite-sex spouses rather than same-sex spouses. An exception to the preceding sentence could apply if an employer voluntarily decides to provide similar rights to the extent permitted by COBRA.

How Does the Legislation Affect Other Benefits That Are Exempt From ERISA?

• If a benefit is exempt from ERISA, it generally will have to comply with the new requirements imposed by the Legislation (subject to any requirement in the Code or other federal statute that provides otherwise). Examples include, but are not limited to:
• certain governmental and church plans that are exempt from ERISA (subject to a possible exception for plans maintained by Religious Organizations);
• plans without any employees (e.g., a plan that only covers a sole proprietor and his or her spouse, or that only covers partners and their spouses);
• certain voluntary group or group-type insurance plans that are paid for solely by participating employees;
• unfunded educational benefit programs (e.g., unfunded tuition reduction programs at universities and colleges that cover spouses, and other unfunded educational benefit programs that benefit spouses);
• employee discount programs that provide benefits for spouses;
• on-premise recreation or dining facilities;
• expense reimbursement programs that cover certain spousal expenses; and
• remembrance funds.

Such benefit plans and programs should, therefore, be reviewed to determine whether the definition of spouse may need to be amended to include same-sex spouses who are married in New York State.

Will the Legislation Change How Benefits For Same-Sex Spouses Are Taxed?

Under DOMA, a same-sex spouse will not be treated as a spouse for Code purposes. Therefore, even if a same-sex spouse becomes eligible for benefits as a result of the Legislation, he or she generally will not be eligible for any favorable tax treatment that applies to spouses under the Code (an exception will apply if the same-sex spouse qualifies as a “dependent” of the participating employee under the Code). Guidance is still pending on the extent to which the tax status of same-sex spouses under New York’s tax laws will change as a result of the Legislation. Section 607(b) of the New York State Tax Law currently provides that a taxpayer’s marital status for New York State tax purposes will be the same as the taxpayer’s marital status “for purposes of establishing the applicable federal income tax rates.” As a result of this statute, same-sex spouses generally are treated the same for New York State income tax purposes as they are treated for federal income tax purposes under the Code. However, Section 2 of the Legislation provides that “[t]he legislature intends that all provisions of law which utilize gender-specific terms in reference to the parties to a marriage, or which in any other way may be inconsistent with this act, be construed in a gender-neutral manner or in any way necessary to effectuate the intent of this act.” It is anticipated that the New York State Department of Taxation and Finance will be issuing guidance on how same-sex spouses should be treated for New York State Tax Law purposes, and employers should wait until that guidance is issued before changing how same-sex spouses are taxed for New York State tax purposes.
 

On June 24, 2011, Governor Cuomo signed the Marriage Equality Act  which will allow same-sex couples to be married in New York and to have, with certain exceptions, the same legal protections available to opposite-sex couples married in New York. The effective date of the Legislation is July 24, 2011, giving New York employers only a month to comply. For that reason, New York employers should immediately take the following steps to ensure their employee benefit plans, programs and policies (collectively, “Benefit Plans”) will comply with the Legislation:

• review the requirements imposed by the Legislation to determine how they will affect your existing Benefit Plans;
• determine what, if any, changes must be made to your Benefit Plans
• Begin implementation of necessary changes by preparing any necessary amendments to the affected Benefit Plans, coordinating with any applicable insurer or third party administrator about the changes being made, obtaining any necessary approval from the applicable Board of Directors or Board of Trustees, and preparing any necessary summary of material modification(s) or revised summary plan description(s);
• continue implementation by revising all other materials describing employee benefits (benefit summaries, benefit web pages, benefit forms, employee handbooks, etc.); and
• review any domestic partner policy, and any other employer policy that might be affected by the Legislation, (including an analysis of whether any changes are needed to help address potential discrimination claims, such as those that might be brought by opposite-sex domestic partners in certain circumstances).

What Are the Major Changes Made By the Legislation?

The major changes made by the Legislation include the following:

• no application for a marriage license in New York State will be denied on the ground that the parties are of the same sex;
• a marriage that is otherwise valid will be valid regardless of whether the parties to the marriage are of the same sex or different sex; and
• no government treatment or legal status, effect, right, benefit, privilege, protection or responsibility relating to marriage in New York State will differ based on the parties to the marriage being or having been of the same sex rather than a different sex.

The law contains special compliance exceptions for religious entities, benevolent organizations, and not-for-profit corporations that are operated, supervised or controlled by religious entities as defined in the Legislation
 

How Does the Legislation Affect Retirement Plans?

Spouses of participants in certain types of retirement plans that are subject to the requirements of the Internal Revenue Code (“Code”) and the Employee Retirement Income Security Act (“ERISA”) are entitled to special protections. These protections include the right to receive a qualified joint and survivor annuity or a qualified pre-retirement survivor annuity, if specified requirements are satisfied. With the enactment of the Legislation, an issue arises as to whether these spousal protections must be provided to a same-sex spouse of a New York participant in such retirement plans. For the reasons described below, the answer currently is no.
The Federal Defense of Marriage Act (“DOMA”) provides that, for purposes of all federal laws, the term “spouse” only refers to a person of the opposite sex who is a husband or wife. Under DOMA, the term “spouse” for Code and ERISA purposes will not include a same-sex spouse. In addition, ERISA generally preempts state laws, other than insurance laws and certain other laws.

Retirement plans that are subject to the requirements of the Code and ERISA, therefore, will not be subject to the new requirements imposed by the Legislation. However, employers still should verify that any definition of spouse in such plans will not inadvertently include same-sex spouses in a manner that creates issues under the Code or ERISA. Such retirement plans are required to be administered in accordance with their written terms, and employers with such plans will want to make sure that the change in the definition of spouse in the Legislation will not result in any inconsistency between how spouse is defined in the plan and how that definition is administered.

What Impact Does the Legislation Have on Insured Health Plans and Other Insured Welfare Benefit Plans?

In 2008, the New York State Insurance Department (“Insurance Department”) issued a Circular Letter and an opinion directing that same-sex spouses legally married outside of New York State must be treated the same as opposite-sex spouses for purposes of insured health, group long-term disability, group short-term disability, and group term life insurance plans that are subject to the requirements of the New York Insurance Law (collectively, “Insured Plans”). Effective July 24, 2011, same-sex spouses who are married in New York State will have the same rights under Insured Plans that were provided in 2008 to same-sex married spouses legally married outside of New York State.

Employers with Insured Plans, therefore, should review the language in their plan documents, summary plan descriptions, and insurance policies to see whether the definition of spouse will need any revision to include same-sex spouses who are married in New York State.

In tomorrow’s post, Part II, the Marriage Equality Act’s impact on self-insured health and welfare benefit plans, on non-ERISA plans, and on tax treatment.

On June 30, 2011, Governor Cuomo signed into law one of the most sweeping and restrictive property tax caps in the country. It applies to “taxes imposed on real property” by all local governmental entities (counties, cities, towns, villages and special districts) and by public school districts. The law will take effect in the 2012 fiscal year for local governments and in the 2012-13 fiscal year for school districts, and is currently scheduled to expire in June of 2016. However, for what appear to be purely political reasons, it will remain in effect beyond its scheduled expiration date as long as the “temporary” New York City rent control and regulation laws remain in place.

Under the new law, year to year growth in property tax levy increases will be capped at 2% or at the rate of inflation, whichever is less. However, the law provides that the tax levy cap will not apply to taxes necessary to:

1. support voter-approved school capital expenditures;
2. cover the expenses of an approved legal settlement of a tort action where such costs exceed 5% of the prior-year’s tax levy;
3. cover the costs of responsibilities shifted to the taxing jurisdiction from another local government;
4. cover the costs associated with pension contributions where there was growth in the annual required pension contribution exceeding two percentage points of payroll; or
5. cover the cost of added taxes generated by physical changes to assessed property values due to new construction.

If a taxing entity is fortunate enough not to utilize the entire available tax levy capacity in a given fiscal year, the law provides that unused tax levy capacity of up to 1.5% may be “carried over” to the following year. For example, if the cap is 2% for two consecutive years and a local government increases its tax levy by just 1.0% in the first year, the local government could apply a carryover of 1.0% and thereby permissibly increase its tax levy up to a maximum of 3.0% in the following year.

Although the law caps the available tax levy increase from year to year, local governments are authorized to exceed the cap in a given fiscal year if at least 60% of the members of the governing body (e.g., County Legislature, City Council, Town Board, etc.) approve such an increase. School districts are allowed to exceed the tax levy cap if the budget is approved by 60% or more of those voting on the budget.
 

The National Labor Relations Board has once again exercised its rarely used “rule-making” powers, this time to propose a shorter timetable for representation elections. On June 22, 2011, the Board published a notice of proposed rulemaking to change and tighten its procedures “prior and subsequent to conducting a secret ballot election to determine if employees wish to be represented for purposes of collective bargaining.”

The proposed rule:

• Establishes electronic filing of election petitions and other documents (intended to speed up processing).
• Requires pre-election hearings to begin seven days after a petition is filed (currently, up to two weeks).
• Defers litigation of all “eligibility” issues if they involve less than 20 percent of the bargaining unit until after the election. (These issues would be decided post-election if needed.)
• Eliminates pre-election appeals of rulings by NLRB Regional Directors.
• Reduces the time in which an employer must provide an electronic list of eligible voters from seven days to two days.

These proposed procedures will permit much quicker elections, and, in some cases, could result in union representation elections within as little as two to three weeks after a union files its election petition. Under current practice, an employer has a 42-day time period to give employees its position on unionization prior to a vote. Many employers believe that this six-week period after an election petition is filed is critical to an employer’s ability to make its case against union representation (because the Union has typically been actively campaigning before it files the election petition). The Board’s proposed change appears to be purposefully designed to improve the odds of a favorable election outcome for unions, a view expressed in dissent by Board Member Brian Hayes.

Comments on the proposed rule from interested parties must be received on or before August 23, 2011. After the comment period, the Board may revise the proposed rule, or may issue it as a final rule as early as September 2011.
 

Effective for plan years beginning on or after November 1, 2011, fiduciaries of participant-directed individual account based retirement plans will be required to provide plan participants and beneficiaries with certain fee, expense and investment-related information. These rules are part of a final regulation issued by the United States Department of Labor ("DOL") on October 20, 2010. In a proposed regulation issued on June 1, 2011, the DOL proposed a 60-day extension of the time period that a plan administrator has to provide certain initial disclosures, once the final regulation becomes applicable to the plan. Given the limited duration of the delay, however, plan administrators should begin or continue to take steps to comply with the requirements of the final regulations.

Background

To the extent that a plan assigns investment responsibilities to participants and beneficiaries, the DOL takes the position that pursuant to ERISA’s fiduciary obligations such individuals should be provided with sufficient information regarding plan fees, expenses and designated investment alternatives so that they can make informed investment decisions. Participant-directed individual account plans that elect to comply with ERISA Section 404(c) in order to protect plan fiduciaries from liability based on the investment choices made by participants are currently required to disclose certain investment-related information. The final regulation expands on the current disclosure requirements in the current ERISA Section 404(c) regulation. Significantly, the new disclosure rules apply to all individual account participant-directed plans covered by the final regulation, regardless of whether such plan is intended to comply with ERISA Section 404(c).
 

Plans Affected By The Final Regulations

All participant-directed individual account plans subject to ERISA are covered by the final regulation, except for plans providing for individual retirement accounts or individual retirement annuities under Sections 408(k) or 408(p) of the Internal Revenue Code (i.e., simplified employee pension plans and simple retirement account plans).

Disclosures Required By The Final Regulations

The regulation divides the required disclosures into two general categories: (i) plan-related information; and (ii) investment-related information. A plan administrator will not be liable for the completeness or accuracy of information used to satisfy the disclosure requirements, if the plan administrator reasonably and in good faith relies on information provided by a plan service provider or the issuer of a designated investment alternative. The disclosure must be made available to all eligible employees, regardless of whether the employee has enrolled in the plan (all such individuals are considered participants for purposes of the final regulation), and to all beneficiaries who have the right to direct the investment of their accounts.

With some exceptions, the required information must be provided to plan participants and beneficiaries on or before the date on which they can first direct their investments and at least annually thereafter. With respect to plan-related disclosures, if there is a change to the information disclosed, each participant and beneficiary must be furnished a description of the change at least 30 days, but not more than 90 days, in advance of the effective date, unless the inability to provide such advance notice is due to unforeseeable events or circumstances beyond the control of the plan administrator, in which case the notice must be provided as soon as reasonably practicable. Under the recently issued proposed regulation, a plan administrator may delay the initial disclosure until 120 days after the final regulation first becomes applicable to a plan. For calendar year plans, this means the initial disclosure may be delayed until April 30, 2012. For a summary of the types of information which must be disclosed click here.

Recommended Action

Plan administrators subject to the requirements of the final regulations should begin to prepare for the implementation of the new disclosure requirements. Plan administrators will need to coordinate with investment providers, record-keepers, and other service providers in order to obtain required information for the disclosure and to organize and prepare the information in accordance with the requirements of the final regulation. Due to the breadth and complexity of these disclosure requirements, plan administrators should begin the process of developing compliant disclosure materials as soon as possible to ensure compliance by the effective date of the final regulation (for calendar year plans, January 1, 2012). Plan administrators also should be aware that compliance with the disclosure requirements of the final regulation does not relieve a plan fiduciary from its duty to prudently select and monitor plan service providers and designated investment alternatives.
 

When an OSHA citation goes to the very heart of a business--such as requiring delivery-company employees never to place boxes on the floor while sorting them for shipment--it is sometimes best to enter into a corporate-wide settlement agreement (CSA), so both OSHA and the company have clearly defined expectations of what methods and workplace conditions will or will not lead to a citation. But companies must be careful. Failure to follow the terms of a CSA can create even greater liability. The largest OSHA citation in history--over $50 million dollars--was not a new citation, but rather a citation issued to BP in 2009 for failure to adhere to a CSA it had entered into in 2005. BP eventually agreed to pay the entire amount of the citation, and also agreed to spend $500 million more on a comprehensive safety and health program.

Why bring this up now? Last week, OSHA--without announcement or fanfare--issued a new directive regarding CSAs that are both national and regional in scope.  The directive states that CSAs may "go ... beyond the subject of the citations to include additional safety and health program enhancements" that were not the reason for the inspection or citation. CSAs may require employers to hire additional safety and health employees, or hire safety and health independent consultants to provide recommendations--but when a company does so, it may cede control to such consultants, as it generally must implement the recommendations or be subject to a failure-to-abate citation.  The new directive also sets a firm two-year time limit for CSAs. This firm time limit gives employers less time to make the agreed-upon changes before being subject to failure-to-abate citations.

A CSA may be the best outcome for both the employer and OSHA following a citation, but employers should be aware of the risks associated with CSAs before suggesting it as an alternative to litigation.
 

In a huge victory for the nation’s largest private employer, the United States Supreme Court ruled on June 20, 2011, that a class comprised of an estimated 1.5 million former and current female Wal-Mart employees could not proceed with a class action lawsuit alleging gender discrimination under Title VII of the Civil Rights Act of 1964. Due in part to the sheer magnitude of the proposed class, the case – Wal-Mart Stores, Inc. v. Dukes – has received an enormous amount of media attention. At least within legal circles, the decision is likely to continue to receive attention for years to come because it has a significant impact on the standard used to determine whether the claims of diverse plaintiffs have enough in common to be certified as a class action.   The decision will make it much more difficult for very large groups of plaintiffs to litigate their employment-related claims together and thereby increase their economic leverage in litigation.

The issue before the Court was whether the former and current employees could proceed with their claims together in the form of a class action sex discrimination lawsuit. The plaintiffs alleged that Wal-Mart discriminated against female employees by denying them equal pay and/or promotions. More specifically, the plaintiffs contended that the discrimination was due to Wal-Mart’s pay and promotions policy. The policy generally left pay and promotion decisions to the broad discretion of managers and supervisors. There was little oversight of such decisions by upper management. The plaintiffs contended that this broad discretion fostered a discriminatory corporate culture that included the use of gender stereotypes in pay and promotion decisions.
 

Wal-Mart countered by arguing that the plaintiffs could not satisfy the legal prerequisites for a class action. Under federal law, in order to be certified as a class, the plaintiffs must demonstrate that there are questions of law or fact common to the class. Wal-Mart contended that the plaintiffs could not meet this “commonality” standard because their individual experiences with the Company were so vastly different, decision-making was decentralized, and the only written policy that was relevant was one that prohibited all forms of discrimination. In other words, Wal-Mart argued there was no evidence of an illegal policy or practice common to all of the plaintiffs.

Ultimately, the Supreme Court agreed with Wal-Mart. The Court held that while the plaintiffs all alleged gender discrimination in pay or promotions, the mere evidence of a common injury (i.e., all members alleging a Title VII violation) does not meet the commonality standard. The Court explained that it was the plaintiffs’ burden to show “significant proof” that the Company operated under a “general policy of discrimination.” The Wal-Mart employees, however, could not point to any such policy. If anything, the Court noted that Wal-Mart’s policy was just the opposite of a uniform corporate policy. Each manager and supervisor had significant discretion in making pay and promotion decisions. The plaintiffs did argue that the practice of giving managers and supervisors discretion was a policy which had a discriminatory disparate impact. While acknowledging that such a policy could theoretically be the basis for a Title VII disparate impact claim, the Court concluded that this theoretical possibility was not sufficient alone to satisfy the commonality requirement. Instead, that policy of discretion had to be tied to a specific employment practice which, in turn, tied the 1.5 million claims together. The Court concluded that the plaintiffs had no such evidence, finding that the plaintiffs’ statistical evidence regarding pay and promotion, anecdotal accounts of discrimination by a fraction of the class members, and testimony from a sociologist about the impact of Wal-Mart’s corporate culture, were all insufficient to satisfy the plaintiffs’ burden of showing commonality.
 

Earlier today, the United States Department of Labor (“Department”) issued a Notice of Proposed Rulemaking which would expand the reporting requirements of employers and the labor relations consultants they hire to advise them during a union organizing campaign. The Labor-Management Reporting and Disclosure Act (“LMRDA”) already requires employers and labor relations consultants to file annual reports with the federal government to disclose agreements (and any associated payments), where a purpose of the agreement is to persuade employees “to exercise or not to exercise, or persuade employees as to the manner of exercising, the right to organize and bargain collectively.”

However, the LMRDA does not require a report when the services rendered relate to the “giving or agreeing to give advice” to an employer. This so-called “advice exception” has long been interpreted to exempt various activities engaged in by consultants, including the preparation of speeches and other written material used by an employer during a union organizing campaign, as long as the consultant does not meet directly with the employees for the purpose of engaging in persuader activity and the employer is free to accept or reject the written material prepared by the consultant.
 

The proposed rules narrow dramatically the advice exception. According to the proposed rules:

With respect to persuader agreements or arrangements, “advice” means an oral or written recommendation regarding a decision or a course of conduct. In contrast to advice, “persuader activity” refers to a consultant’s providing material or communications to, or engaging in other actions, conduct or communications on behalf of an employer that, in whole or in part, have the object directly or indirectly to persuade employees concerning their rights to organize and bargain collectively. Reporting is thus required in any case in which the agreement or arrangement, in whole or in part, calls for the consultant to engage in persuader activities, regardless of whether or not advice is also given.

This new definition would thus require reporting with respect to a variety of drafting and training activities which previously fell within the advice exception. For a list of those activities, click here.

The Department’s stated rationale for this change is that undisclosed persuader activities are having a deleterious effect on the rights of workers and that greater reporting will help employees make a more informed choice as to whether to exercise their Section 7 rights. Organized labor supports increased reporting because it believes an employer will be less likely to hire an outside consultant to counter an organizing effort if it has to disclose that it has done so and the amount it pays for the consultant’s services.

The Department is accepting public comment on the proposed rules until August 22, 2011. For more information on the comment process, click here.