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.
 

The New York State Department of Labor (“NYSDOL”) recently published additional guidance on compliance with the Wage Theft Prevention Act (“WTPA”). This guidance supplements the NYSDOL’s previously-issued templates, instructions and FAQs on the WTPA. Specifically, the NYSDOL recently published a “sample” paystub, demonstrating how employers should comply with the WTPA’s amendments to New York Labor Law Section 195(3). As we reported previously the amended Section 195(3), requires employers to include the following information in all employee paystubs:

• Dates of work covered by wage payment;
• Name of employee;
• Name of employer;
• Employer’s address and phone;
• Rate or rates of pay;
• Basis of rate(s) of pay (hourly, shift, day, week, salary, piece, commission or other);
• Gross wages;
• Deductions;
• Allowances, if any are claimed as part of the minimum wage (tips, meals, lodging); and
• Net wages. 

Additionally, the following information must be provided in paystubs for non-exempt employees:

• Regular hourly rate or rates;
• Overtime rate or rates;
• Number of regular hours worked; and
• Number of overtime hours worked.

Also, for employees paid by piece rates, their paystubs must include the applicable piece rates and the number of pieces completed at each rate.

The NYSDOL’s sample paystub provides only basic guidance on how the required information should be displayed for a non-exempt, hourly employee. It does not illustrate how this information should be displayed for other employee classifications, such as employees who earn multiple rates in a given pay period or employees who are paid, in whole or in part, by commission. The sample paystub can be accessed here. In addition to its sample paystub, the NYSDOL also recently issued a “Fact Sheet,” summarizing the WTPA and, among other things, its various notice and record-keeping requirements for employers. However, employers are not required to post this Fact Sheet, or to otherwise distribute the document to employees in any manner.

 

Over the last couple of years the New York State Department of Labor has issued several opinion letters which significantly narrow its interpretation of New York Labor Law Section 193, the law governing permissible deductions from wages. We have discussed some of these interpretations in prior posts. To summarize, NYSDOL  takes the position that a deduction from wages is not permissible unless it is a deduction which is similar to those expressly recognized in the statute as lawful, e.g. payments for insurance premiums, pension or health and welfare benefits. This interpretation varies from the Department’s historical focus on whether the deduction was for the “benefit of the employee.” Based on the newer standard, NYSDOL has rejected suggestions that an employer may make deductions from wages for items such as an overpayment of wages, parking, or for wage-linked card purchases of food at an employer-subsidized cafeteria.

The attack on deductions which are not similar to deductions for traditional employee benefits continued earlier this year when NYSDOL issued an opinion letter finding that deductions for overpayment of wages from a “paid time off” bank would also violate Section 193. In reaching this conclusion, the Department determined that paid leave time constitutes “wages,” so deducting from that time would be a deduction from wages covered by Section 193. Significantly, this interpretation runs counter to the long-time general rule in New York that an employer is required only to abide by the terms of its paid leave policy, because it is not required to provide paid time off at all. For example, “use it or lose it” polices are permissible in New York as long as the policy is clear and unambiguous. Under that rule, a paid time off policy which clearly states that accrued paid time off may be reduced by the amount of overpaid wages should also be permissible. NYSDOL’s most recent opinion letter on the subject serves as a reminder to employers that unless the deduction from wages is one that is actually listed in Section 193, the NYSDOL will probably view it as impermissible.

A recent decision from a United States District Court in Texas is a reminder of the risk created by an adverse employment action which follows closely in time the employer’s first knowledge of an employee’s disability or other protected characteristic. The situation where an employer learns of a disability, often through a leave request, just as it is about to impose discipline for performance problems or violations of policy is not at all uncommon. And it is very similar to the situation created when an employee who is about to be disciplined complains of discriminatory harassment. When such events occur, the employer is faced with a real dilemma: either impose the discipline and risk a retaliation or discrimination claim, or sit on the discipline for some undetermined period of time. Which course is best depends on a variety of facts and operational considerations. But one thing is certain. No action should be taken unless and until a complete and thorough investigation of the underlying performance issue or policy violation is completed. We have ridden the investigations hobby horse in other contexts. The Texas case plainly illustrates its importance in this context as well.

According to the Court’s opinion, a restaurant manager was discharged three days after he informed his supervisor that he had brain cancer and would need leave to seek treatment. The former manager sued for disability discrimination and for interference with his rights under the FMLA. The employer defended by arguing that it terminated the manager for improperly altering the time records of the employees who reported to him to deprive them of pay for time worked, a contention denied by the manager and at least some of the employees whose records were altered.

According to the Court’s opinion, which denied the employer’s motion for summary judgment, there were several holes in the employer’s argument. All of those holes were attributable to a poor investigation of whether the manager had in fact improperly altered time records to deprive employees of payment for time worked. For example, the Court noted that before the employer concluded the manager had committed a dischargeable offense, it never spoke to the employees whose records were altered, never spoke to the manager who altered the records, and never considered whether the time removed from the records was break time for which the employees failed to punch out. In addition, there was evidence suggesting that the plaintiff manager had been treated differently than other managers who engaged in the same conduct. Similar treatment for similar offenses is another basic principle of discharge and discipline investigations. All of these flaws could have been avoided through a proper investigation. The Court found that in light of these holes in the employer’s story, a reasonable jury could conclude that the employer did not have a good faith belief the manager had improperly altered time records, and could draw an inference of disability discrimination from the timing of the firing. That combination was enough to send the case to trial.
 

The subpoena power of the EEOC is very broad, and entitles the EEOC to obtain information relevant to its investigation of a charge of discrimination. But a federal district court recently concluded that there are limits to that power, and that it does not necessarily entitle EEOC to obtain information about corporate-wide policies or other potential claimants when the information sought will not shed light on the charge it is investigating.

The case arose when the former employee of a nursing home owned by the University of Pittsburgh Medical Center (“UPMC”) filed a charge of disability discrimination. According to the Court’s opinion, the nursing home responded to the charge by contending the former employee had been discharged pursuant to a policy which provided for a maximum medical leave of 14 weeks. The EEOC then served a subpoena on UPMC, not just the nursing home, demanding production of information on every UPMC employee, not just nursing home employees, terminated pursuant to the policy since July 1, 2008. UPMC has approximately 48,000 employees, the nursing home 170.
 

EEOC sought the information to investigate a corporate-wide application of the leave policy and to determine if there were other potential ADA claimants. The EEOC’s theory was that application of the policy could deprive employees of additional unpaid leave as a reasonable accommodation. UPMC objected to the subpoena and refused to comply, so EEOC sought to enforce the subpoena in court. The Court rejected that effort, concluding that the subpoena was an improper fishing expedition.

In reaching this conclusion, the Court relied on a 2010 decision from the United States Court of Appeals for the Third Circuit, EEOC v. Kronos, Inc., which holds that in order to be valid, an EEOC subpoena must seek information relevant to the charge under investigation. The Court noted that although the EEOC need not ignore facts that might be related to other claims of discrimination if it uncovers them during its investigation of a pending charge, the ability to pursue such facts does not give the EEOC “unconstrained investigative authority.” The information it seeks must still be relevant to the charge under investigation, and/or arise out of its investigation of the charge. The Court concluded that neither standard was satisfied in the case before it. The information was not relevant to the charge under investigation because the only reason EEOC wanted it was to conduct a broader investigation of UPMC’s corporate leave policy, and to find other potential claimants. EEOC offered no explanation of how the requested information might shed light on the charge under investigation. And the subpoenaed information did not arise out of the investigation of the charge, because it was clear from the facts that EEOC had not conducted any investigation of the facts related to the charge before issuing the subpoena.