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How Should IME (Independent Medical Examination) Doctors Apportion for Pre-Existing Impairment Using the AMA Guides and Rule 20 Guidelines?

In West Virginia, Workers’ Compensation statutes provide that an employee who has a definitely ascertainable impairment resulting from an occupational or non-occupational injury, disease, or any other cause, whether or not disabling, and the employee thereafter receives an injury in the course of and resulting from his employment, the prior injury and the effect of the prior injury and aggravation shall not be taken into consideration in fixing the amount of compensation or impairment allowed by reason of the subsequent injury. The statute provides that compensation, i.e., a permanent partial disability impairment rating, shall be awarded only in the amount that would have been allowable had the employee not had the pre-existing impairment.

No provision in this particular code section requires that the degree of pre-existing impairment be definitely ascertained or rated prior to the injury received in the course of and resulting from the employment or that the benefits must have been specifically granted or paid for the pre-existing impairment. Additionally, the degree of pre-existing impairment may be established at any time by competent medical evidence. It is not clear in the rules or statutes whether a reduction of an award for a pre-existing degenerative impairment should be calculated after the application of the tables in Rule 20 for determining impairment in regard to the lumbar, thoracic, or cervical spine or before the application of these tables.

In West Virginia, with regard to permanent partial disability evaluations and awards, such assessments shall be determined based upon the range of motion model contained in the AMA Guides, 4th Edition. Once an impairment level has been determined by range of motion assessment in regard to a claimant’s spine injury, that level will be compared with the ranges set forth in the corresponding tables for permanent impairment as found in Rule 20, W. Va. C.S.R. § 85-20 et seq. Permanent partial disabilities in excess of the range provided in the appropriate category as identified by the rating physician are reduced to within the ranges set forth in these tables found in Rule 20. A single injury or cumulative injuries that lead to permanent impairment to the lumbar, thoracic, or cervical spine area of one’s person shall cause an injured worker to be eligible to receive a permanent partial disability award within the ranges identified in the tables found in Rule 20.

The rating physician must identify the appropriate impairment category and then assign impairment within the appropriate range designated for that category. Rule 20 provides that all evaluations, examinations, reports, and opinions with regard to the degree of permanent whole body medical impairment which an injured worker has suffered shall be conducted and imposed in accordance with the AMA Guides, 4th Edition. Rule 20 does not specifically address allocation of physical impairment at any time but does dictate that degenerative conditions are not compensable. Also, Rule 20 allows for an evaluating physician to deviate from the rule with sufficient explanation for the deviation.

In a memorandum decision issued by the West Virginia Supreme Court of Appeals on June 11, 2014, the Supreme Court reversed and remanded a decision of the Office of Judges and Board of Review based on an employer’s appeal and found that the Office of Judges inappropriately concluded that the reviewing doctor did not correctly apportion for the claimant’s pre-existing condition when she did so after applying the table for impairment found in Rule 20. The Supreme Court specifically noted that the physician correctly and appropriately apportioned for a pre-existing impairment after applying the tables found in Rule 20. Even though this is a memorandum decision that does not have any specific syllabus points, it certainly is the only decision we have from the high court which shows that apportionment for a pre-existing condition should be made after applying the tables of impairment for the lumbar, thoracic, or cervical spine found in Rule 20.

ARTICLE BY

Alyssa A Sloan

Steptoe & Johnson PLLC

A Guide to Dealing with Illnesses in the Workplace

As a result of all of the media coverage surrounding the Ebola issues, many of our clients have wondered whether they need to do anything, as employers, to prepare for similar issues and to address related employment issues. Whether it is the Ebola virus or another virus or pandemic, the general rules for employers remain the same.

The Ebola Virus Basics

The key to contracting the Ebola virus is direct contact (through broken skin or mucous membranes in, for example, the eyes, nose or mouth) with someone who is carrying the virus. The Centers for Disease Control and Prevention (“CDC”) has a website dedicated to understanding, preparing for and preventing the spread of the Ebola virus. For additional information regarding the Ebola virus, including symptoms and other useful information, please visit the CDC’s website.

For employers, the key is not to panic. Given that we are at the early stages of flu season, employers should avoid overreacting at the first sight of an employee with flu-like symptoms. Employers concerned about particular employees should consult with legal counsel before taking any steps that may lead to liability under various employment laws (more on this below).

Important Employment Issues Each Employer Should Consider

Pandemics (whether the Ebola virus, the 2009 H1N1 virus or influenza) implicate a number of employment laws. Employers must strike a proper balance between protecting employees from infection and operating within the confines of applicable law.

1. Consider the requirements of the Americans with Disabilities Act before requiring employees to undertake a medical examination.

The Americans with Disabilities Act (“ADA”) prohibits, among other things, medical examinations for applicants and employees. An employer cannot require a current employee to undergo a medical examination unless the examination is job related and consistent with business necessity. According to the Equal Employment Opportunity Commission (“EEOC”), medical examinations of an employee are job-related and consistent with business necessity when an employer has a reasonable belief, based on objective evidence, that (1) an employee’s ability to perform essential job functions of his/her job will be impaired by a medical condition; or (2) an employee will pose a direct threat due to a medical condition. “Direct threat” means “a significant risk of substantial harm to the health or safety of the individual or others that cannot be eliminated or reduced by reasonable accommodation.” 29 C.F.R. § 1630.2(r). For additional guidance on direct threats, please see the EEOC’s website.

The EEOC’s 2009 guidance specific to the H1N1 virus sheds additional light on how employers should make direct threat assessments before requiring a medical examination. The EEOC states that whether a pandemic virus rises to the level of a direct threat depends on the severity of the illness. Helpful data points to determine the severity—and associated direct threat—of a virus are the warnings and guidance from government agencies such as the CDC, state health departments and other recognized authorities on illness and disease.

2. Consider the Occupational Safety and Health Act when accessing your workplace practices.

In addition to the ADA’s medical inquiry restrictions, most employers must follow the safety and health regulations dictated by the Occupational Safety and Health Administration (“OSHA”) under the Occupational Safety and Health Act (“OSH Act”). Although OSHA does not specifically regulate Ebola or other pandemics, employers may trigger workplace safety violations under OSHA’s General Duty Clause if they do not take proper steps to protect their employees.

Employers run the risk of receiving citations under the General Duty Clause if they expose employees to a hazard that the employer could reasonably have reduced and that the employer recognized would cause or likely would cause serious physical harm to employees. Employers in industries with a high risk of disease contamination (e.g., healthcare employers) should therefore evaluate potential hazards and determine whether they can take steps to reduce the risk of exposure to employees.

Employers should also keep in mind that an employee who reasonably refuses to report to work because of a dangerous work condition—including contracting a pandemic virus—may be protected from retaliation.

OSHA’s guidance about Ebola and pandemic influenza provides useful information for employers who want to prepare for and respond to contagious disease risks in their workplaces.

3. Employees may be entitled to leave under the Family and Medical Leave Act.

Federal and state (where applicable) family and medical leave laws (“FMLA”) complicate the web of responsibilities an employer has to navigate when it comes to dealing with ill employees. For employers covered by these laws (generally employers with 50 or more employees under federal law), an eligible employee who has contracted the Ebola virus or another pandemic virus may qualify for leave based on a serious health condition. Similarly, an eligible employee may qualify for leave if an eligible family member contracts a virus that qualifies as a serious health condition.

If an emergency situation prompts the need for FMLA leave, administering the leave in a lawful manner gets more complicated than under normal circumstances. For example, it may not be practical to solicit and review medical certification forms. In these situations, employers must have sufficient information (including the employee’s statements) that the underlying condition qualifies as a serious health condition. Designating leave as FMLA without sufficient information establishing a serious health condition can result in a retaliation claim. In emergency situations, employers may also need to exercise forbearance on the return of medical certification forms, particularly if an employee needs to assist a family member who is ill. For additional FMLA guidance, please visit the United States Department of Labor website.

Steps Employers Should Take to Minimize Workplace Safety and Health Issues

As with any other workplace safety and health issues, the recent Ebola-related news has raised many questions about what employers should do when facing similar situations. Although each employer is unique and each industry must confront different obstacles and risks, employers should, at a minimum, follow the steps outlined below.

Have a plan. Consult with internal safety experts and review the guidance provided by government agencies regarding specific safety issues. Create a plan (preferably with the assistance of legal counsel) that addresses issues specific to your workplace and your industry.
Communicate your plan to employees. Your company’s protocols for dealing with safety issues should not be a secret to any of your employees. Publicize the plan internally and ensure that employees have ready access to the plan.
Train your employees. Train your employees about your company’s safety protocols on a yearly basis. If you are concerned about a particular risk that is not usually common to your workplace or if you update your plan, provide additional training as needed to address these issues.
Supervise implementation of the plan. Having a plan in place and training your employees to follow certain procedures is meaningless if no one supervises the process. Designate individuals to review employee actions to ensure that the plan’s protocols are followed and to identify potential shortcomings of/improvements to the plan. Whenever necessary, update your plan to ensure that it addresses all major safety risks and train employees on the changes made to the plan.

Employers that consult government and other advocacy organization websites to adopt ideas, disseminate information and prepare practices and procedures for addressing workplace safety and health issues will be in a good position to protect against unwanted legal action.

ARTICLE BY

Rufino Gaytán

Godfrey & Kahn S.C.

Firings for Facebook Comments Unlawful, NLRB Rules

An employer violated the National Labor Relations Act by discharging two employees because of their participation in a Facebook discussion about their employer’s State income tax withholding mistakes, by threatening employees with discharge for their Facebook activity, by questioning employees about that activity, and by informing employees they were being discharged because of their Facebook activity, the NLRB has ruled. The Board also ruled the employer’s Internet/Blogging policy violated the NLRA. Triple Play Sports Bar and Grille, 361 NLRB No. 31 (2014).

Facebook Posts

Triple Play employees Jillian Sanzone and Victor Spinella discovered they owed more in State income taxes on their earnings at the sports bar than expected. Sanzone discussed this at work with other employees, and some employees complained to the employer about the tax problem. The employees did not belong to a union.

Sanzone, Spinella, and former employee Jamie LaFrance had Facebook accounts. On January 31, 2011, LaFrance posted the following “status update” to her Facebook page:

Maybe someone should do the owners of Triple Play a favor and buy it from them. They can’t even do the tax paperwork correctly!!! Now I OWE money…[expletive deleted]!!!!

The following comments were posted to LaFrance’s page in response:

KEN DESANTIS (a Facebook “friend” of LaFrance’s and a customer): “You owe them money…that’s [expletive deleted] up.”

DANIELLE MARIE PARENT (Triple Play employee): “I [expletive deleted] OWE MONEY TOO!”

LAFRANCE: “The state. Not Triple Play. I would never give that place a penny of my money. Ralph [DelBuono] [expletive deleted] up the paperwork…as per usual.”

DESANTIS: “yeah I really dont go to that place anymore.”

LAFRANCE: “It’s all Ralph’s fault. He didn’t do the paperwork right. I’m calling the labor board to look into it bc he still owes me about 2000 in paychecks.”

At this point, Spinella selected the “Like” option under LaFrance’s initial status update. The discussion continued:

LAFRANCE: “We shouldn’t have to pay it. It’s every employee there that its happening to.”

DESANTIS: “you better get that money…thats [expletive deleted] if that is the case im sure he did it to other people too.”

PARENT: “Let me know what the board say because I owe $323 and ive never owed.”

LAFRANCE: “I’m already getting my 2000 after writing to the labor board and them investigating but now I find out he [expletive deleted] up my taxes and I owe the state a bunch. Grrr.”

PARENT: “I mentioned it to him and he said that we should want to owe.”

LAFRANCE: “Hahahaha he’s such a shady little man. He prolly pocketed it all from all our paychecks. I’ve never owed a penny in my life till I worked for him. Thank goodness I got outta there.”

SANZONE: “I owe too. Such an [expletive deleted].”

PARENT: “yeah me neither, i told him we will be discussing it at the meeting.”

SARAH BAUMBACH (Triple Play employee): “I have never had to owe money at any jobs…i hope i wont have to at TP…probably will have to seeing as everyone else does!”

LAFRANCE: “Well discuss good bc I won’t be there to hear it. And let me know what his excuse is ;).”

JONATHAN FEELEY (a Facebook “friend” of LaFrance’s and customer): “And ther way to expensive.”

Sanzone and Spinella Discharged

When Ralph DelBuono, the employer’s co-owner, learned about the Facebook discussion, he discharged Sanzone, telling her it was because of her Facebook comment. Spinella was terminated the next day, after being interrogated about the Facebook discussion, the meaning of his “Like” selection, the identity of the others in the conversation, and other issues. The other co-owner told Spinella that, because Spinella “liked” the disparaging and derogatory comments, Spinella was disloyal and it was “apparent” that Spinella wanted to work elsewhere. He told Spinella, “[Y]ou will be hearing from our lawyers.” Thereafter, the company’s attorney contacted Sanzone by letter, suggesting a possible defamation action. The lawyer also contacted LaFrance who, in response, deleted the entire Facebook conversation and posted a retraction.

Sanzone and Spinella filed separate unfair labor practice charges against Triple Play, which the NLRB consolidated into one complaint.

The employer did not dispute the employees’ Facebook activity was concerted and they had a protected right to engage in a Facebook discussion about the employer’s tax withholding calculations. The employer, however, contended it had not violated the NLRA because the plaintiffs had adopted LaFrance’s allegedly defamatory and disparaging comments, which were unprotected. The employer also asserted the Facebook posts were unprotected because they were made in a “public” forum, accessible to employees and customers, and they had undermined the co-owner’s authority in the workplace and adversely affected its public image.

Comments Protected

The Board disagreed. It determined the employees did not lose the Act’s protection to engage in concerted activity because of their comments in the Facebook discussion. Under its holding in Atlantic Steel, 245 NLRB 814 (1979), the NLRB explained, it must balance employee rights with the employer’s interest in maintaining order at its workplace, but Atlantic Steel dealt with workplace confrontations with the employer, which was not the scenario here. The employer’s reliance on that decision was therefore misplaced. In this case, the Board pointed out, the disputed conduct involved a social media discussion among offsite, off-dutyemployees, and two non-employees in which no manager or supervisor participated and where there was no direct confrontation with management. Further, the Board said, Sanzone’s “use of a single expletive” to describe her manager “in the course of a protected discussion on a social media website” did not “sufficiently implicate” the employer’s “legitimate interest in maintaining discipline and order in the workplace.”

The Board also rejected the employer’s argument that Sanzone’s comment was unprotected because it was a workplace confrontation that could be seen by customers DeSantis and Feeley. The NLRB noted they joined the discussion as LaFrance’s Facebook friends, on their own initiative and in the context of a social relationship with LaFrance outside of the workplace, not because they were the employer’s customers, and“[t]his off-duty indiscretion away from the [employer’s] premises did not disrupt any customer’s visit to the [employer].”

Neither did the Board see this conduct as disloyal or defamatory. While the Board agreed an employer has a legitimate interest in preventing the disparagement of its products or services and in protecting its reputation from defamation, against which NLRA Section 7 rights are to be balanced, that interest was not pr
esent here so as to overcome the employees’ statutory protection. It rejected the employer’s contention that Sanzone’s comment and Spinella’s “like” were disloyal and unprotected. The purpose of the employees’ communications was to seek and provide mutual support to encourage the employer to address problems in the terms or conditions of employment, not to disparage its product or services or to undermine its reputation, the NLRB said. The discussion clearly showed a labor dispute existed and the employees’ participation was not directed to the general public (they were more comparable to conversations that can be overheard by a customer). Further, the Board said the comments were not “so disloyal . . . as to lose the Act’s protection” because they did not even mention the employer’s products.

The Board also rejected the contention that the employees’ comments were unprotected because they were defamatory. According to the agency, Triple Play had not met its burden to establish the comments were made with knowledge of their falsity or with reckless disregard for their truth or falsity. In addition, it said that Sanzone’s use of an expletive to describe a co-owner in connection with the asserted tax-withholding errors “cannot reasonably be read as a statement of fact; rather, Sanzone was merely (profanely) voicing a negative personal opinion of [the co-owner].”

“Like” Protected

The Board also decided that Spinella’s use of Facebook’s “like” option was protected. It expressed agreement only with the comment it immediately followed (LaFrance’s original post), the Board found, not with LaFrance’s other comments. Accordingly, said the Board, Spinella’s activity was protected by the Act, and the employer’s adverse action was unlawful. (See our blog post, Employee’s Facebook ‘Like’ is Part of Concerted Activity: NLRB.)

Internet/Blogging Policy Unlawful

The Board faulted the employer’s internet/blogging policy, as well. It found that, since employees would reasonably construe the employer’s “Internet/Blogging” policy to prohibit the type of protected Facebook post that led to the unlawful discharges, it was illegal.

The policy stated:

The Company supports the free exchange of information and supports camaraderie among its employees. However, when internet blogging, chat room discussions, email, text message, or other forms of communication extend to employees revealing confidential and proprietary information about the company, or engaging in inappropriate discussions about the company, management, and/or co-workers, the employee may be violating the law and is subject to disciplinary action, up to and including termination of employment. Please keep in mind that if you communicate regarding any aspect of the Company, you must include a disclaimer that the views you share are yours, and not necessarily the views of the Company. In the event state or federal law precludes this policy, then it is of no force or effect.

Employees could reasonably interpret the policy as proscribing discussions about terms and conditions deemed “inappropriate” by the employer, because “‘inappropriate’ [is] ‘sufficiently imprecise’ that employees would reasonably understand it to encompass ‘discussions and interactions protected by Section 7,’” the Board found.

Employer Cautions

This decision is wide-ranging. It underscores the need for employers to pause, reflect, and thoroughly investigate before taking action against employees for alleged misconduct where they have acted together in regard to their wages, hours or working conditions, even where their language might give offense to the employer despite the fact that members of the public can view their complaints. The decision also shows the NLRB affords significant leeway to employees, even permitting public invective against business owners — at least up to a point. Finally, employers should avoid policies and rules that contain broad, imprecise, or vague prohibitions that might be viewed as restricting unlawfully employees’ protected activity.

ARTICLE BY

Howard M. Bloom

Philip B. Rosen

Jackson Lewis P.C.

“Do You Want Liability With That?” The NLRB McDonald’s Decision that could undermine the Franchise Business Model

On July 29, 2014 the National Labor Relations Board (“NLRB”) General Counsel authorized NLRB Regional Directors to name McDonald’s Corp.as a joint employer in several complaints regarding worker rights at franchise-owned restaurants. Joint employer liability means that the non-employer (McDonald’s Corp.) can be held responsible for labor violations to the same extent as the worker’s “W-2” employer.

In the U.S., the overwhelming majority of the 14,000 McDonald’s restaurants are owned and operated by franchisees (as is the case with most other fast-food chains). The franchise model is predicated on the assumption that the franchisee is an independent contractor – not an employee of the franchisor. Generally, the franchisor owns a system for operating a business and agrees to license a bundle of intellectual property to the franchisee so long as on the franchisee adheres to prescribed operating standards and pays franchise fees. Franchisees have the freedom to make personnel decisions and control their operating costs.

Many third parties and pro-union advocates have long sought to hold franchisors responsible for the acts or omissions of franchisees – arguing that franchisors maintain strict control on day-to-day operations and regulate almost all aspects of a franchisee’s operations, from employee training to store design. Their argument is that the franchise model allows the corporations to control the parts of the business it cares about at its franchises, while escaping liability for labor and wage violations.

The NLRB has investigated 181 cases of unlawful labor practices at McDonald’s franchise restaurants since 2012. The NLRB has found sufficient merit in at least 43 cases. Heather Smedstad, senior vice president of human resources for McDonald’s USA, called the NLRB’s decision a “radical departure” and something that “should be a concern to businessmen and women across the country.” Indeed it is, but it is important to note that General Counsel’s decision is not the same as a binding NLRB ruling and that it will be a long time before this issue is resolved, as McDonald’s Corp. will no doubt appeal any rulings.

ARTICLE BY

Luke A. Wingfield

McBrayer, McGinnis, Leslie and Kirkland, PLLC

Wisconsin Federal Court Recognizes Same-Sex Marriage: How Does This Affect the Administration of an Employer’s Employee Benefits?

On Friday, June 6, 2014, Judge Crabb of the U.S. District Court for the Western District of Wisconsin issued a decision finding that Wisconsin’s constitutional amendment recognizing marriages only between men and women violates the Equal Protection Clause of the U.S. Constitution.

Unlike several other federal judges who have considered the issue, Judge Crabb did not make her ruling immediately effective. Instead the Court asked the plaintiffs’ lawyers in the case to help her fashion an injunction to implement her ruling. The plaintiffs have until June 16, 2014, to submit this proposal. The State asked for clarification on the June 6, 2014 ruling and requested that the court stay its decision until it made a final decision on the scope of the injunctive relief. On June 9, 2014, the court denied the State’s motion. In response, the State appealed Judge Crabb’s decision to the U.S. Court of Appeals for the Seventh Circuit in Chicago and requested an immediate stay of Judge Crabb’s order. The Seventh Circuit has solicited arguments from the parties to determine whether it has jurisdiction of the matter.

In response to Judge Crabb’s decision, many of the State’s counties have begun issuing marriage licenses to same-sex couples in the state. Others have declined to do so and have, instead, sought guidance from counsel or the Attorney General.

Addressing the Change

Judge Crabb’s decision, and issuance of Wisconsin same-sex marriage licenses, has injected some uncertainty into benefit plan administration in Wisconsin. Based upon the state of the prior law, it is likely that a Wisconsin employer will have more employees with domestic partners than employees with same-sex spouses through legal marriages formed elsewhere. Nevertheless, same-sex benefits are certainly an evolving issue for employers.

Family and Medical Leave

Registered and unregistered domestic partners were already covered under the Wisconsin Family and Medical Leave Act. Because an unregistered domestic partnership does not require a formal filing with a county clerk, it appears that the state law in this context is relatively unaffected.

On the other hand, the federal FMLA is substantially affected. The definition of spouse under the federal regulations requires that the marriage must be recognized by the state of residence. Most FMLA policies do not distinguish between same-sex and opposite-sex partners. Consequently, if Judge Crabb’s decision stands, requests for FMLA leave relating to same-sex spouses must be recognized under both federal and Wisconsin law if the leave is otherwise appropriate under the law.

Until the ramifications of the injunctive language are known, employers should pay particular attention to the language of their FMLA policies before making any determination about FMLA requests. Depending on how the courts ultimately rule, an employer’s FMLA policy may or may not require amendment. Regardless, if an employee asks about leave for a same-sex spouse, legal counsel should be consulted.

Benefits

The status of the law will remain uncertain until Judge Crabb makes a decision regarding whether to issue an injunction and the form such an order would take. If an injunction is issued and then stands following the anticipated appeal, employers who employ employees who have a same-sex spouse would no longer impute Wisconsin income tax for health coverage, and would otherwise recognize such spouse for all legal purposes. Because of the uncertainty in the current climate, employers should consider whether to continue imputing income for benefits provided to same-sex spouses until such time as transitional guidance is issued by the Wisconsin Department of Revenue on this issue.

Nothing has changed as it relates to unmarried domestic partners—these individuals are still subject to imputed income where the individual obtains coverage on behalf of his or her domestic partner.

Because employee benefits rules are largely governed by federal law, many same-sex marriage changes in employee benefits have been observed already since the U.S. Supreme Court’s Windsor decision of last year. If the Judge Crabb ruling stands, the most significant change for Wisconsin employers will likely pertain to Wisconsin tax treatment of family health coverage.

What should employers do in response?

Account for those same-sex couples who may have been married in a state that permitted same-sex marriage or who are newly married in Wisconsin following Judge Crabb’s decision;
Examine if modification of FMLA policy/forms is warranted based upon the changes; and
Examine if modification to benefit plan materials may be necessary.

Article By:

Charles P. Stevens

Kirk A. Pelikan

Of:

Michael Best & Friedrich LLP

Employer Used As Means to Commit Crime not a Victim under Restitution Act, Fourth Circuit Court Rules

The Mandatory Victims Restitution Act of 1996 (“MVRA”) provides that a victim of a federal crime may be entitled to an order of restitution for certain losses suffered as a direct result of the commission of the crime for which the defendant was convicted. A question that courts sometimes face is whether a company can be considered a “victim” under the MVRA if an employee uses that company as an instrument to defraud the federal government.

Looking at this issue, the U.S. Court of Appeals for the Fourth Circuit on April 4, 2014, declined to allow a company’s bankruptcy estate to receive restitution for a large debt caused by an owner/employee’s fraud because that company was used as an instrument for that fraud. In re Bankruptcy Estate of AGS, Inc., No. 12-cr-113 (4th Cir., April 4, 2014).

Dr. Allen G. Saoud was convicted after a June 2013 jury trial of five counts of health care fraud. Dr. Saoud, who is a dermatologist, in 2005 was excluded from participating in Medicare and Medicaid for 10 years. He then plotted to maintain ownership and control of his dermatology practice, AGS, Inc. in violation of the exclusion. He founded a new dermatology practice and transferred all of his patients to this new practice. After selling his new practice to Dr. Fred Scott for $1.8 million, Dr. Saoud then sold AGS, which had lost its value, for $1 million to nurse practitioner Georgia Daniel. Despite these sales, he continued to control and profit from both entities, partly by collecting Medicare and Medicaid reimbursement funds.

After Dr. Saoud was convicted, the estate of AGS, Inc., which had filed for bankruptcy, sought a $1 million restitution award to cover bankruptcy creditor claims that stemmed partly from the underlying fraud. The district court declined. The Estate of AGS, Inc. then filed a writ of mandamus with the Fourth Circuit.

The Fourth Circuit also refused to award restitution to the Estate. The Court held that Dr. Saoud used AGS, Inc. as an instrument in his scheme to illegally obtained Medicare and Medicaid funds, and as such, the Court declined to “also hold that AGS was one of the scheme’s victims.”

AGS, Inc. should be a source of concern to companies that have sustained losses as a result of employee fraud. If an employee, director, officer or owner uses a company to defraud the government and that company incurs tax or other debt liability as a result of that fraud, that company may not be able to receive restitution under the MVRA. Jackson Lewis attorneys are available to advise companies on the scope of the Mandatory Victims Restitution Act and their rights in collecting amounts lost to criminal acts.

Article By:

Ramsay C. McCullough

Of:

Jackson Lewis P.C.

Detecting FMLA (Family and Medical Leave Act) Abuse

Dealing with employees who abuse FMLA can be difficult. Letting abuse run rampant, however, can impact business productivity and put a damper on company morale (as present employees often have to pick up the slack of someone on leave). Employers who detect abuse must proceed with caution because it is very easy to run afoul of regulations.

Under the FMLA, it is unlawful for any employer to interfere with, restrain, or deny the exercise of any right provided by the Act. Further, employers cannot use the taking of FMLA leave as a negative factor in employment actions, such as hiring, promotions, or disciplinary actions. Violating these provisions can lead to employee lawsuits for interference or retaliation. Having said that, an employer is not helpless in thwarting employees’ ill-intentioned leaves.

If there is suspected abuse, it should be documented in detail. Who reported it? Is the source credible? Is there evidence (i.e., photographs)? Employers should refrain from overzealously playing detective or prompting other employees to snoop on a coworker – doing so may violate privacy laws. However, if there is a reasonable belief or honest suspicion that abuse is occurring, an employer may begin a confidential investigation, perhaps with the aid of private investigator. Surveillance of an employee should only be used in the most egregious situations and should always be conducted by a professional. Be sure to allow the employee the chance to refute the allegation and present his or her side of the story before taking any adverse action against him or her.

FMLA leave is a right for covered employees, but it does not act as a shield for misconduct nor does it prohibit termination of an employee who abuses the terms of an FMLA leave. You can terminate an employee on FMLA leave, but caution must be used. If you are an employer and detect abuse, it is highly recommended you contact an employment attorney about how to proceed so as to avoid costly lawsuits alleging interference or retaliation.

Article By:

Benjamin L. Riddle

Of:

McBrayer, McGinnis, Leslie and Kirkland, PLLC

Office Romances: 3-Part Series on How to Shield Your Company from Liability Part 3

According to a recent CareerBuilder survey, four in ten people admitted to dating a co-worker, and one-third eventually married that person. Whether a relationship between peers, relationships between supervisors/subordinates, flings, long-term relationships, or extramarital affairs, office romances can lead to unwelcome complaints and expensive lawsuits.

Part 1 of this three-part series addressed the potential risks that office romances pose to companies, and Part 2 covered the importance of adopting and enforcing a company policy addressing fraternization. This final installment offers recommended steps you should take now to defend potential claims of discrimination and harassment.

Tips for Employers

Employers should prepare and implement a clear policy regarding office relationships or update an existing one, and be sure to disseminate it and obtain employees’ acknowledgements. The policy should address to extent to which office relationships are permissible, and, if appropriate, require employees to promptly disclose the existence (or termination) of a romantic or sexual relationship to a designated member of Human Resources or management. When the employees involved are in a supervisor/subordinate relationship, disclosure is especially critical so that the employer may effectively address the impact of the relationship (e.g., evaluating if it is necessary to change job duties or reassign the employee(s)).

If harassment occurs despite an employer’s best efforts to prevent and stop it, you will have a strong defense if you can demonstrate that you have done the following:

Implement and enforce a sexual harassment and office romance policy that provides a clear reporting channel and prohibits retaliation for good faith complaints.
Respect employees’ reasonable expectations of privacy regarding their relationship in line with the company policies.
Train new and existing employees on the sexual harassment policy and document the training.
Train managers on what constitutes sexual harassment and how to handle complaints.
Train employees to report inappropriate behavior.
If a relationship develops between a manager and his/her subordinate, transfer one of them if possible to eliminate a direct reporting relationship.
Promptly and thoroughly investigate complaints.
Take appropriate corrective action to address prior incidents of sexual harassment.

Regardless of the type of policy your company adopts, be sure to customize it to the needs and actual practices of your business. Train employees and managers on expectations governing office romances. A well-drafted and uniformly enforced fraternization (or non-fraternization) policy will not prevent workplace relationships altogether, but it can protect you if you encounter office romances.

See Part 1 Here

See Part 2 Here

Article by:

Mona M. Stone

Of:

Greenberg Traurig, LLP

Supreme Court To Consider Employers’ Arguments Regarding Contraceptive Mandate

The United States Supreme Court will revisit the Affordable Care Act (“ACA”)requirement that most employers provide contraceptive coverage in employee health insurance plans. On November 26, 2013, the Court accepted two cases which center on the issue, each of which resulted in a different outcome. The ACA currently provides an exemption to certain non-profit religious organizations, but there is no such exemption for private employers.

The Supreme Court will now consider whether private companies should be able to refuse to provide employees with contraception coverage under their health plans on the basis of religion. Further, the Supreme Court may consider whether for-profit corporations may validly claim protection under freedom of religion.

In Sebelius v. Hobby Lobby Stores, Inc.^[1], the U.S. Court of Appeals for the 10th Circuit ruled that a requirement which forced Hobby Lobby to comply with the contraception coverage mandate violated the Religious Freedom Restoration Act, which protects religious freedom. Hobby Lobby is owned by David and Barbara Green, who have stated that they strive to run their company in accordance with their Christian beliefs. The Greens have no objection to preventive contraception, but only medication which may prevent human embryos from being implanted in the womb (i.e., “the morning-after pill”).

The 10th Circuit Appeals Court ruled in favor of Hobby Lobby based upon its decision in a previous case, Citizens United v. Federal Election Commission^[2]^, which held that corporations hold political speech rights akin to individuals. Taking this reasoning further, if a corporation can have political speech rights, then it should also have protection for its religious expression, according to the Court.

In Conestoga Wood Specialties v. Sebelius^[3], the U.S. Court of Appeals for the 3rd Circuit viewed the issue differently. The Court upheld the contraception coverage mandate based upon what it perceived as a “total absence of case law” to support any argument that corporations are guaranteed religious protection.

According to the ACA, contraceptive coverage provided by employers’ group health insurance plans is “lawful and essential” to women’s health; however, certain businesses assert that their religious liberty is more important. Ultimately, the United States Supreme Court will cast the deciding vote.

_{[1] Sebelius v. Hobby Lobby Stores, Inc., 723 F.3d 1114 (10th Cir. 2013).}

_{[2] Citizens United v. Federal Election Commission, 558 U.S. 310 (2010).}

_{[3] Conestoga Woods Specialties v. Sebelius, 724 F.3d 377 (3d Cir. 2013).}

Article by:

Brittany Blackburn Koch

Of:

McBrayer, McGinnis, Leslie and Kirkland, PLLC

The “Relocation Costs” Reimbursement Arrangement: A Section 409A Trap for the Unwary

When an employer requires an employee to move his or her primary residence to work, or continue working, for the employer, oftentimes the employer, as an inducement for the employee to accept the offer employment or continue employment, will agree to pay for some or all of the employee’s “relocation costs.” Employers must be aware of the critical tax implications that can flow from such an arrangement.

Agreements to reimburse the employee for the costs of relocating vary. For example, an employer and employee may agree that the employer will reimburse the employee for moving his or her personal belongings to the new location and perhaps one round-trip airfare for the employee and his or her family; or, the employer may agree to reimburse the employee for all associated relocation costs and related expenses up to a maximum amount. Regardless, if the reimbursement constitutes taxable income for the employee and is subject to Section 409A of the Internal Revenue Code (the “Code”), but the terms of the arrangement do not comply with the Code’s requirements , the employee may have to pay a whopping 20% excise tax on the reimbursement.

Not all moving or relocation expenses are treated alike for federal income and payroll tax purposes. Generally speaking, for moves within the United States an employee may deduct from his or her gross income the reasonable expenses associated with (1) moving his or her household goods and personal effects, and (2) travelling to his or her new home. However, these categories of expenses are deductible only if all of the following requirements are met: (1) the move is closely related to the start of employment, (2) the new job location is at least 50 miles farther from the prior home than the employee’s prior job location is from the former home, and (3) the employee works full time for at least 39 weeks during the first 12 months of employment at the new location.

If the expenses are of a type that may be deducted and meet the foregoing requirements, then an employer’s reimbursement of those expenses will also not be subject to withholding for income taxes, social security and Medicare taxes, provided that the reimbursement arrangement meets the following additional requirements: (1) the expenses have a business connection, i.e., the expenses were incurred in connection with performing services for that employer, (2) the employer requires that the employee adequately account for the expenses within a reasonable period of time, and (3) any excess reimbursements are returned to the employer within a reasonable period of time.

If the relocation cost reimbursement arrangement does not meet the foregoing requirements, or if the employer reimburses the employee for expenses that do not qualify as deductible moving expenses of the type outlined above, the amount of the reimbursement is subject to income taxes, social security and Medicare taxes. For example, employers may agree to pay for return trips to the former residence, pre-move house hunting expenses, temporary housing, storage costs for personal belongings (excluding those incurred in transit), or costs associated with entering into a new rental lease or canceling a prior lease. Reimbursement for any of these costs will be includable in income and subject to social security and Medicare taxes because they do not qualify as the type of expense that may be deductible, even though they may otherwise meet the requirements to be excluded from compensation. Since the reimbursements are taxable, careful consideration must be given in the event that the reimbursement constitutes non-qualified deferred compensation subject to Section 409A.

By way of background, subject to certain exceptions, and generally speaking, Section 409A requires that any compensation promised in one year that could by its terms be paid in a later tax year must be paid only upon certain permissible payment “events,” such as, for example, a fixed date or schedule, or upon termination of employment.

An agreement to reimburse an employee for relocation expenses may or may not cross tax years, but if under the terms of the agreement the reimbursement could be made in a later tax year, then it constitutes deferred compensation subject to Section 409A, and there are important documentary and operational requirements that must be met under Section 409A. If the agreement does not comply with these documentary and operational requirements, the reimbursement amount that the employee receives could be subject to the 20% excise tax.

First, the relocation reimbursement agreement should be written and the written document must provide (1) an objectively determinable non-discretionary definition of the expenses eligible for reimbursement, (2) the reimbursement will be for expenses incurred during an objectively and specifically prescribed period, and (3) that the amount of expenses eligible for reimbursement in one year will not affect the expenses eligible for reimbursement in any other year. (The reason for the rule outlined in number (3) is because the IRS does not want the employee to be able to, indirectly or directly, pick a more favorable tax year by, for example, holding on to the reimbursement request or delaying the incursion of the cost.)

Second, the reimbursement must be made on or before the last day of the employee’s tax year following the year in which the expense was incurred, and the right to the reimbursement cannot be exchanged for another benefit.

For the most part, an employer’s expense reimbursement policy will satisfy the rules regarding the timing of the reimbursement. Unfortunately, employers all too often either provide for a very vague definition of the “relocation costs” that may be reimbursed, or agree to a cap without taking into consideration that the expenses incurred in one year could impact the expenses eligible for reimbursement in the following year. Employers should draft their relocation agreements carefully to provide the desired benefit to the employee while staying within the confines of the limitations of Section 409A. Accordingly, we recommend that whenever an employer or employee agree to a relocation cost reimbursement arrangement, that counsel review the arrangements to ensure that it is either exempt from or otherwise in compliance with Section 409A.

Article by:

Jessica W. Catlow

Of:

Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

Tag: employer

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