Category: Labor & Employment

USCIS Announces Comment Period for E-Verify Program

Nataliya Binshteyn of Greenberg Traurig, LLP recently had an article regarding E-Verify published in The National Law Review:
GT Law
 

On September 11, U.S. Citizenship and Immigration Services (USCIS)announced a 60-day period for submitting comments about the E-Verify program. Comments are encouraged and will be accepted until November 13, 2012. Additional details about the Federal Register notice announcing the comment period as well as submission procedures are re-printed below.

Federal Register Volume 77, Number 176 (Tuesday, September 11, 2012)]

Pages 55858-55859

From the Federal Register Online via the Government Printing Office

FR Doc No: 2012-22256

Written comments and suggestions regarding items contained in this notice, and especially with regard to the estimated public burden and associated response time, should be directed to the Department of Homeland Security (DHS), USCIS, Office of Policy and Strategy, Laura Dawkins, Chief, Regulatory Coordination Division,

20 Massachusetts Avenue NW., Washington, DC 20529.

Comments may be submitted to DHS via email at uscisfrcomment@dhs.gov and must include OMB Control Number 1615-0092 in the subject box. Comments may also be submitted via the Federal eRulemaking Portal at http://www.regulations.gov under e-Docket ID number USCIS-2007-0023.

If submitting comment on one of the six E-Verify Memoranda of Understanding (MOU), please identify the MOU that concerns your business process, and, if possible, the article, section and paragraph number within the MOU that is associated with the comment.

All submissions received must include the agency name and Docket ID. Regardless of the method used for submitting comments or material, all submissions will be posted, without change, to the Federal eRulemaking Portal at http://www.regulations.gov, and will include any personal information you provide. Therefore, submitting this information makes it public. You may wish to consider limiting the amount of personal information that you provide in any voluntary submission you make to DHS. DHS may withhold information provided in comments from public viewing that it determines may impact the privacy of an individual or is offensive. For additional information, please read the Privacy Act notice that is available via the link in the footer of http://www.regulations.gov.

Written comments and suggestions from the public and affected agencies should address one or more of the following four points:

(1) Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;

(2) Evaluate the accuracy of the agencies estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;

(3) Enhance the quality, utility, and clarity of the information to be collected; and

(4) Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology, e.g., permitting electronic submission of responses.

©2012 Greenberg Traurig, LLP

Diversity Visa Lottery Registration Opens October 2, 2012

Varnum LLP

Each year the U.S. Department of State distributes 50,000 immigrant visas to applicants from qualifying countries in a random drawing pursuant to the Diversity Visa Lottery Program. The application period for the 2014 Diversity Visa Lottery is 12:00 p.m. EST Tuesday, October 2, 2012 through 12:00 p.m. EST Saturday, November 3, 2012.

Applicants must apply on-line at http://www.dvlottery.state.gov/. The Department of State will disqualify all entries by an applicant if more than one entry for that applicant is received. More information on qualifying countries, education and work experience requirements, and the application process is available at http://travel.state.gov/visa/immigrants/types/types_1318.html.

© 2012 Varnum LLP

Seventh Circuit Joins Ranks of Courts Holding that Internal Grievances about Employer Fiduciary Duty Breaches is Actionable Under ERISA Section 510

Seventh Circuit Joins Ranks of Courts Holding that Internal Grievances about Employer Fiduciary Duty Breaches is Actionable Under ERISA Section 510, an article by Mark E. Furlane of Drinker Biddle & Reath LLP recently appeared in The National Law Review:

 

In Victor George v. Junior Achievement of Central Indiana Inc.,decided September 24, 2012, the Seventh Circuit joined the Fifth and Ninth Circuits in holding that Section 510 of ERISA applies to unsolicited, informal grievances to employers.  The courts of appeals have disagreed about the scope of §510, and the Second, Third and Fourth Circuits have permitted Section 510 retaliation claims only where the person’s activities were made a part of formal proceedings or in response to an inquiry from employers (i.e., §510’s language does not protect employees who make “unsolicited complaints that are not made in the context of an inquiry or a formal proceeding.”).  Concluding that the language of Section 510 of ERISA was “ambiguous” and “a mess of unpunctuated conjunctions and prepositions,” the Seventh Circuit concluded that, “an employee’s grievance is within §510’s scope whether or not the employer solicited information.”  The court did, however, reiterate the high threshold to prevail on a Section 510 claim:  “It does ‘not mean that §510 covers trivial bellyaches—the statute requires the retaliation to be ‘because’ of a protected activity…. What’s more, the grievance must be a plausible one, though not necessarily one on which the employee is correct.”

Section 510 of ERISA prohibits retaliation “against any person because he has given information or has testified or is about to testify in any inquiry or proceeding relating to this [Act].”  Remedies for violation of that section are limited to “injunctive and other ―appropriate equitable relief,” which would not include back pay typically, but could include an injunction and reinstatement.  Attorney’s fees are also possible.  In the case, Victor George was a former vice president of Junior Achievement who sued his former employer alleging he was terminated after complaining that money withheld from his pay was not being deposited into his retirement and health savings accounts.  He complained to management, outside accountants, the board, the Department of Labor (although he did not file a complaint).  The District Court dismissed the case on summary judgment, holding George’s informal complaints to his employer did not constitute an “inquiry” under ERISA.  The appellate court reversed holding that George’s informal proceedings do trigger the statute’s protections.

©2012 Drinker Biddle & Reath LLP

Quality Stores Decision Could Lead to Significant Refunds of FICA Tax

The U.S. Court of Appeals for the Sixth Circuit recently held that certain dismissal payments were Supplemental Unemployment Compensation Benefits (SUB) exempt from FICA taxes—a clear split with the U.S. Court of Appeals for the Federal Circuit’s decision in line with an Internal Revenue Service (IRS) Revenue Ruling that significantly narrowed the criteria for determining whether certain separation payments qualify as SUB pay.  For employers that have made significant reductions in force payments in open years, the Quality Stores decision could lead to significant refunds of FICA tax.

In a long-awaited decision, the U.S. Court of Appeals for the Sixth Circuit held inUnited States v. Quality Stores, Inc., September 7, 2012, that certain dismissal payments were Supplemental Unemployment Compensation Benefits (SUB) exemptfrom FICA taxes.  This decision creates a clear split with the U.S. Court of Appeals for the Federal Circuit’s decision in CSX Corporation v. United States (518 F.3d 1328 (Fed. Cir. 2008)), which followed an Internal Revenue Service (IRS) Revenue Ruling that significantly narrowed the criteria for determining whether certain separation payments qualify as SUB pay.  For certain employers that have made significant reductions in force payments in open years, the Quality Stores decision could lead to significant refunds of FICA tax.

The Ruling

The Internal Revenue Code excludes any SUB payments to employees from the definition of “wages” for federal income tax purposes.  The statute essentially sets forth two requirements in order for severance or dismissal payments to constitute SUB pay.  The amounts must be paid to an employee:

  • Because of an employee’s involuntary separation from employment
  • Resulting directly from a reduction in force, the discontinuance of a plant or other similar conditions (IRC §3402(o)(2)(A).)

Based on the Sixth Circuit decision in Quality Stores, and the reasoning of the lower court decision in CSX (reversed by the Federal Circuit), it could be argued that these are the sole criteria to also exempt such payments from FICA and FUTA taxes.  However, the IRS in Rev. Rul. 90-72 (1990-2 C.B. 211) significantly narrowed the criteria for determining whether such payments will qualify as FICA/FUTA-exempt payments.  The IRS requires that separation payments not be made as a lump sum, that they be specifically designed to supplement state unemployment benefits and that the individual satisfies the requirements to receive state unemployment benefits.

The Sixth Circuit disagreed with the Federal Circuit, concluding:

“While the Supreme Court may ultimately provide us with the correct resolution of these difficult issues under the law as it currently stands, only Congress can clarify the statutes concerning the imposition of FICA tax on SUB payments.  Our role is to interpret the statutory law as it presently exists, and we have done that today.”

In a series of informal remarks on September 14, 2012, at the American Bar Association’s Section of Taxation Joint Fall CLE Meeting, a knowledgeable spokesperson from the IRS Office of Chief Counsel advised that, outside of the Sixth Circuit, the IRS maintains its previous position under Rev. Rul. 90-72 regarding the employment tax treatment of SUB pay.  The IRS is still deciding whether to seek a rehearing by the Sixth Circuit, or to request certiorari to the Supreme Court in response to the recent decision in Quality Stores.

Consider Filing a Protective Claim Now to Preserve Refund Opportunity

Although filing a complete refund claim can be burdensome from an administrative perspective, it is relatively easy for an employer to file a protective claim to preserve the statute of limitations on employment tax refund claims for open years and later file a supplementary claim with necessary employee consents and exact calculations.  The due date for the protective claim is three years from April 15 of the calendar following the year in which the severance payments were made.  For example, for FICA taxes paid in 2009, a protective claim should be filed by April 15, 2013.

To preserve the statute for FICA refund claims already disallowed by the IRS (many have simply been held in abeyance by IRS), made in prior years, employers need to review the dates for the IRS notices of disallowance carefully, in order to ensure they preserve the period to bring a suit for refund against the IRS.

Continue Withholding FICA Taxes

Until this controversy is resolved, employers are advised to continue withholding FICA taxes on separation payments made in connection with the present or future involuntary termination of employees, which do not meet the strict Rev. Rul 90-72 definition for exemption.

© 2012 McDermott Will & Emery

NLRB Mandates Wholesale Changes to Costco’s Social Media Policy

The National Law Review recently published an article by David M. Katz of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. regarding the NLRB and Costco:

 

There is no denying that the NLRB has recently devoted significant attention to employee’s use of social media.  Since August 2011, the Board’s Acting General Counsel, Lafe Solomon, issued three reports outlining his view of how the NLRA applies to employers’ social media policies and employees’ social media postings.  Click here and here for our commentary on those GC reports and for links to the reports themselves.  Until earlier this month, however, the Board itself had not weighed in on social media policies.

On September 7, the NLRB issued a Decision and Order (which you can access here) invalidating Costco Wholesale Corporation’s electronic posting rule, found in its employee handbook, that prohibited employees from making statements that “damage the Company, defame any individual or damage any person’s reputation.”  With little analysis, the Board found Costco’s policy overly broad, concluding that “the rule would reasonably tend to chill employees in the exercise of their [NLRA] Section 7 rights,” as employees would “reasonably construe the language to prohibit Section 7 activity.”  Section 7 of the NLRA provides to all employees—unionized and non-unionized—the right to engage in protected “concerted activities for the purpose of collective bargaining or other mutual aid or protection.”  Such protected concerted activity includes, for example, the right to protest an employer’s treatment of its employees or other working conditions.

The Costco decision adopts the legal reasoning set forth in the three GC reports, much of which is based upon traditional principles developed prior to the advent of social media as we know it.  And, similar to the three GC reports, the Board’s decision in Costco fails to articulate any social media-specific criteria to assist employers in crafting policies that do not inhibit employee rights under the NLRA,  although it does offer a couple of hints.

First, the Board distinguished prior cases addressing rules prohibiting employee “conduct that is malicious, abusive or unlawful,” including rules concerning employees’ “verbal abuse,” “profane language,” “harassment,” and “conduct which is injurious, offensive, threatening, intimidating, coercing, or interfering with” other employees. Criticizing Costco’s electronic posting rule, the Board stated that its social media policy “does not present accompanying language that would tend to restrict its application.”  If Costco had been more specific, then, by providing examples of prohibited conduct, its policy may have passed muster.  .  In doing so, employers should focus on the types of electronic postings that they truly seek to prohibit, such as defamatory, harassing or other egregious comments, or disclosure of employer trade secrets, proprietary information, or co-workers’ private information.

The second hint dropped by the Board in Costco is the suggestion that an employer’s inclusion of a savings clause or disclaimer may protect the employer from allegations that a social media policy inhibits employees’ protected concerted activities.  The Board concluded that Costco’s “broad” prohibition against making statements that “damage the Company” or “damage any person’s reputation” “clearly encompasses concerted communications,” but continued by noting that “there is nothing in the rule that even arguably suggests that protected communications are excluded from the broad parameters of the rule.”  This statement signals that the Board may have found Costco’s electronic posting rule acceptable had the rule included language specifically exempting protected concerted activities under the NLRA, which is in contrast to the GC’s position on such savings clauses.

As we noted in our previous postings on the subject, in light of the Board’s clear stance on social media policies (now confirmed in its Costco decision), and its application to both unionized and non-unionized employers, we recommend that all employers rigorously review their social media policies to ensure that they do not contain “broad” prohibitions that would not survive NLRB scrutiny.

©1994-2012 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

The NLRB at it Again: Blanket Rules Prohibiting Employees from Discussing Ongoing Investigations Violates NLRA Absent “Legitimate and Substantial Justification”

An article by Eric E. Hobbs of Michael Best & Friedrich LLP regarding The NLRB recently appeared in The National Law Review:

 

The National Labor Relations Board (NLRB or Board) on July 30, 2012, held that a blanket rule prohibiting employees from discussing ongoing internal investigations – for example, of employee misconduct, harassment, or criminal conduct – violates the employees’ rights under the National Labor Relations Act (NLRA) absent “legitimate and substantial justification”.

In Banner Health System, the employer’s human resources consultant, as a matter of course, had asked employees involved in internal investigations not to discuss the investigation’s details, the employees’ roles or what had been said during the consultant’s interviews while the investigation continued. In particular, she had asked employee James Navarro, whom she had interviewed as a part of an insubordination investigation, to maintain his silence. Navarro then filed an unfair labor practice charge against the employer, alleging that the consultant’s request had violated his rights under Section 7 of the NLRA, which protects, among other things, communications between employees regarding terms and conditions of employment.

The NLRB found merit to the charge and issued a complaint, which went to hearing before one of the NLRB’s administrative law judges. The judge found the employer’s conduct not to have violated Navarro’s Section 7 rights because the consultant’s request had been justified by the employer’s concern with protecting the integrity of its insubordination investigation.

The NLRB reversed its judge’s decision on that point. It held that, in order for an employer to justify a prohibition against employee communications regarding ongoing investigation, the employer must demonstrate the existence of a “substantial business justification” that outweighs the employees’ Section 7 rights. And a general concern with protecting the integrity of an investigation, according to the Board, was not substantial enough to meet the bar.

The Board gave examples of justifications that might qualify as sufficiently substantial to outweigh employees’ Section 7 rights: If a witness needed protection; if the employer reasonably believed that evidence might be destroyed or fabricated; or if maintenance of silence was necessary to prevent a “cover-up.” Notably, the Board did not say that those three circumstances were examples only, rather than an exclusive list of potentially adequate justifications. Our best educated guess is that they are examples only.

We do not have to guess, however, that the NLRB would find a blanket prohibition against communication by employees among themselves during the course of an ongoing employer investigation to be unlawful. In fact, a requirement of such silence in any case the employer cannot show substantial business justification for it will be found by the Board to violate the employer’s workers’ Section 7 rights.

The Board’s decision is not without support by its own precedent. In the late 1980s, the NLRB had held that it was unlawful under Section 7 of the Act for an employer to direct an employee who complained of sexual harassment not to talk to anyone other than her supervisors about the matter. The Board found that “anyone” could include the employee’s union representatives and that such a prohibition ran afoul of the NLRA.

The Banner Health System decision, however, greatly expands that principle. Employers now must be careful whenever directing employees not to communicate among themselves about, or to maintain as “confidential” all matters related to, an internal investigation. Protection of the integrity of the investigation is not going to be a sufficiently substantial reason for imposing such a prohibition, and the burden will be on the employer to establish that it had a “substantial business justification” for the prohibition that outweighed its employees’ rights under Section 7 of the NLRA.

In the event you believe it necessary to maintain the confidentiality of an internal investigation, we suggest that you take several steps:

  • First, make sure you are able to articulate a significant concern particular to the investigation that a failure by any witness to maintain confidentiality will result in serious, negative consequences. For instance, where employer, employee or third-party safety might be jeopardized, where a target of or participant in the investigation might become violent, where the target of or participant in the investigation might threaten or manipulate other witnesses, or where evidence might be destroyed or lost.
  • Second, be clear to limit your request for confidentiality. Limit it explicitly to confidentiality of the interview conducted, the facts known to the individual, his or her impressions and opinions, the existence of the investigation, and other of its elements. Make clear that the confidentiality is to be maintained only during the pendency of the investigation, but not afterwards. And, if possible, articulate that the confidentiality is to be maintained not just among employees but also among friends and family members.
  • Finally, do not threaten to discipline employees for breaches of confidentiality regarding the investigation at the time you communicate your confidentiality request, unless the investigation is one that clearly and “substantially” justifies such a threat.

© MICHAEL BEST & FRIEDRICH LLP

The Myth of the Ideal Worker: Does Doing All the Right Things Really Get Women Ahead?

The National Law Review recently published an article, The Myth of the Ideal Worker: Does Doing All the Right Things Really Get Women Ahead?, by Brande Stellings of Catalyst Inc.:

 

Women, what if much of the career advice you’ve been given for getting ahead in the workplace is simply wrong?  What if, despite doing “all the right things,” you still find yourself not earning as much or advancing at the same pace as your male colleagues?

Catalyst’s report, The Myth of the Ideal Worker, the latest in its series on high-potential employees, examined the career advancement strategies of women and men to find out what strategies each used and which strategies seemed to make a difference in terms of compensation and promotion. The findings may surprise you. Some of the conventional wisdom about women in the workplace has got it all wrong.

Knowing what will and will not work is vitally important, particularly in the legal profession where women’s advancement within law firms has flatlined. The National Association of Women Lawyers (“NAWL”) annual survey of women in AmLaw 200 law firms shows that women’s representation in the equity partner ranks is 15% – the same percentage since NAWL began the survey six years ago. These numbers are not dissimilar to women in US business generally. The annual Catalyst census of women’s representation of Fortune 500 Board directors and executive officers has also stalled out in the 14-16% range.

So, which career advancement strategies are most effective? Which ones have no impact?

We’ve all heard the maxim that women don’t ask – with its implicit assumption that if women do ask, they will receive. The Catalyst report found, however, that women were more likely than men to ask for career-building experiences and training, andjust as likely as men to negotiate for higher compensation or job placement during the hiring process for their current job.  Nevertheless, the men in the study (which follows the career paths of over 4000 MBA graduates from around the world) made more money and advanced farther and faster than their women counterparts. The $4600 pay gap that separated men from women in their first jobs out of the gate from business school? It grew to over $31,000 several years down the road – even when women were more likely than men to ask for more.

A lot of explanations are proffered about why these compensation and advancement gaps exist. The Catalyst reports have tested for a lot of those common assumptions and in the process busted some myths. Contrary to conventional wisdom, our high-potential pipeline study found these gaps are not due to lower aspirations, motherhood, part-time status, or industry. The problem isn’t with the women, it’s with organizational and social structures and the gender stereotypes that pervade them.

The Catalyst report found two tactics that made a measurable difference for women’s advancement in the study. The first is making one’s achievements visible. Women who were more proactive self-promoters were more likely to have risen faster and increased their salaries, and were more professionally satisfied.  In other words, it pays to toot your own horn.

Of course, we know that advice is not as simple to follow as it sounds. Self-promotion can be tricky, especially for women who run the risk of triggering the gender tripwire of stereotypes. A couple years ago at the NAWL General Counsel Institute, a law firm partner panelist told the audience about her experience writing up her accomplishments in her partner compensation memo. She was asked, “Don’t you think you should be more modest?”

Nevertheless, it’s important for women to find a style that works for them, and to make their achievements known to their bosses and their colleagues, to seek feedback, and to ask for credit and for promotions when due. It’s not enough to do good work. People have to see you and your accomplishments. Importantly, doing so will help attract a sponsor, which is critical to advancement.

The second tactic that predicted women’s advancement was gaining access to powerful others.  Identifying and networking with influential people within a firm, building a network of contacts with important people and working on high-profile assignments impacted women’s advancement in a way that other strategies – such as blurring work-life boundaries, getting training, and career planning – did not.

This tactic also made a difference for the men in our study. For the most part, however, the study found that similar approaches to career management yielded different outcomes for women and men. Even when women do “all the right things,” they still won’t advance as far or get paid as much as their male peers.  Maybe the issue isn’t that women don’t ask, but that men don’t have to.

To learn more about the latest research on career advancement strategies and hear from women leaders in the business and legal world about what strategies worked for them, join me at the NAWL General Counsel Institute on November 8, 2012 for a panel discussion, The Myth of the Ideal Worker: Does Doing the Right Thing Really Help  Women Get Ahead? For more information – Please Click Here.

© 2012 Catalyst Inc.

Retirement and Pensions Law Update

The National Law Review published an article about Retirement and Pensions Laws Changes written by David J. Leiter and Abby Matousek of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.:

 

PBGC Offers Guidance on MAP-21 Rate Changes

On August 29th, the Pension Benefit Guaranty Council (PBGC)released guidance on how the recently enacted MAP-21 legislation, which gives defined benefit plan sponsors flexibility in near-term plan contributions, will affect PBGC premiums. The guidance clarifies that calculation of variable-rate premiums will be unaffected regardless of whether plan sponsors avail themselves of interest rate stabilization provisions. The guidance also says that MAP-21 increases the flat and variable premium rates and caps variable rate premium. This guidance supersedes any “inconsistent guidance” in the PBGC’s 2012 premium instructions—which will be reflected in the 2013 instructions.

PBGC Requests OMB Extend Info Collection on QDRO Booklet Revisions

On August 23rd, the PBGC issued a notice requesting an extension of an information collection request for a booklet on qualified domestic relations orders (QDROs). The booklet contains information on benefit options that the PBGC offers on QDROs, modeled orders and child support. The booklet also clarifies rules on when payments to an alternate payee may begin. PBGC is planning several revisions to the booklet, including changing the description of agency procedures for informal review of a draft domestic relations order.

Industry Speaks Out on Brokerage Window Pros and Cons

Amidst concerns over DOL’s brokerage window Field Assistance Bulletins, plan fiduciaries are speaking out on the pros and cons of brokerage windows. In an August 16th interview SIFMA managing director Lisa Bleier said brokerage windows allow plan fiduciaries to give participants maximum flexibility in choosing investment options and are often the only way for employers to attain the fullest possible participation in its 401(k) plan. However, the downside to brokerage windows is that employees sometimes make investment choices fiduciaries would avoid. While a relatively small percentage of defined contribution plans have brokerage windows and the decision to offer them is generally based on participant demand.

Brokerage Window-Only Plans Will Likely be Heavily Influenced by Election Results

In an interview, Bradford Campbell, a benefits attorney and former DOL assistant secretary, said DOL officials will address concerns associated with brokerage windows if President Obama wins a second term; however, the issue will likely go away if Mitt Romney wins in November.

Witnesses Urge ERISA Advisory Council to Not Require Affirmative Beneficiary Designations

At an August 29th ERISA Advisory Council hearing, participants urged DOL to avoid one-size-fits-all regulation that would burden administrators with an affirmative duty to contact participants who undergo significant life events regarding changes to beneficiary designations. Practitioners present at the hearing told DOL that a rule requiring a plan administrator to actively reach out is unnecessary as most plans already encourage employees to update beneficiary choice and burdensome to plan administrators. Witnesses agreed on the importance of up-to-date beneficiary designations and outlined the standards already in place to ensure these designations are updated as necessary.

ERISA Advisory Council Hears from Industry on Lifetime Income and Income Replacement

At the August 30th meeting of the ERISA Advisory Council, flexibility of 401(k) plan distributions was underscored as a valuable tool to meet plan participants’ unique needs. Jason Scott, managing director of Financial Engines Retiree Research Center, told the Council that the common defined benefit model is not necessarily the right way to approach the issue of lifetime income, saying the “real power of the 401(k) plan is its flexibility.” Participants at the meeting agreed that plan sponsors tend to look for lifetime income solutions that are “fully vetted and approved and very easy,” which are not always the best for retirees. Some suggestions to the Council in the area of lifetime income included: encouraging plan sponsors to offer in-plan lifetime income assistance; providing clear guidance that “prudent retirement help includes consideration of the broader picture” (including Social Security); and considering solutions that lower the plan sponsor’s fiduciary risk.

Insurance Experts Should be the Judges of Annuity Providers

Witnesses told the ERISA Advisory Council on August 30th that the DOL should allow plan sponsors to defer to state insurance regulators’ determinations of an annuity provider’s long-term financial viability and ability to satisfy fiduciary duty. Cynthia Mallett, Vice President of Corporate Benefit Funding at MetLife told the Council that the requirement to assess annuity providers’ financial viability leaves the “entire retirement community at a loss” as it should not be expected that plan sponsors have stronger reviews than state insurance regulators. Participants said that the fiduciary responsibility involved in selecting an annuity provider “is one, if not the biggest, issue for plan sponsors” offering lifetime income options.

American Benefits Council Speaks Out Against 401(k) Credit Insurance Legislation

At an August 28th meeting of the ERISA Advisory Council, Diann Howland, Vice President of Legislative Affairs at the American Benefits Council, spoke in opposition to the Retirement Savings Security Act of 2011 (H.R. 3656), introduced by Representative Pete Sessions (R-TX). The legislation would promote an insurance product that repays some 401(k) plan loans in the event a participant defaults due to death or disability and would require plan sponsors to automatically enroll plan participants. The American Benefits Council is concerned that the automatic enrollment aspect in terms of costs of the product and the fact that the legislation waives the ERISA fiduciary responsibility. Howland cited concern that the bill continues to garner cosponsors—current cosponsors include Representatives Bruce Braley (D-IA), Ruben Hinjosa (D-TX), Tom Latham (R-IA), Charles Rangel (D-NY) and Pat Tiberi (R-OH).

IRS Examining Regulatory Progress on Lifetime Income Guidance

On August 28th, the IRS held a phone forum to discuss a package of guidance and proposed rules on lifetime income options. The guidance, issued in February, is intended to encourage the use of lifetime income options such as fixed and longevity annuities. The package includes:

  • REG-110980-10,  addressing partial annuity distribution options under defined benefit pension plans;
  • REG-115809-11, on qualified longevity annuity contracts (QLACs);
  • Rev. Rul. 2012-3, on how qualified joint and survivor annuity and the qualified pre-retirement survivor annuity rules apply when an annuity is purchased under a profit-sharing plan; and
  • Rev. Rul. 2012-4, on rolling over amounts from a defined contribution plan to a defined benefit plan to obtain an additional annuity.

IRS Cancels hearing on Anti-Cutback Exemption

The IRS has announced that a hearing scheduled for August 24th has been cancelled. The hearing would have considered proposed regulations that would provide a limited exemption to anti-cutback rules for pension plans, allowing single-employer plan sponsors that are in a bankruptcy proceeding to amend its pension plan to eliminate a lump-sum distribution option if it met certain conditions.

American’s Nearing Retirement Face Challenges

Americans approaching retirement age are faced with new challenges as a result of the financial crisis. The almost-retired “suffered disproportionally” according to a recent New York Timesarticle, experiencing falling home process in addition to lower incomes. The article cites a report from Sentier Research which found that household income for Americans age 55 to 64 fell by almost 10 percent in today’s dollars from three years ago.

Workers Show Confidence in Ability to Retire Despite Inadequate Savings

A recent study, Baby Boomers and Generation Xers: Are They on Track to Reach Their Retirement Goals?, conducted by the Insured Retirement Institute found that, although the majority of Baby Boomers and Gen Xers are confident they will have enough money to retire comfortably, many have not calculated what their needs will be and have not saved appropriately. While the report found that “there are large groups of people who just do not have realistic expectations,” the results show that those taking important steps—such as consulting financial advisors, calculating savings or buying annuities—are the most confident in their ability to retire.

©1994-2012 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

OFCCP Audits Focus on Veteran Hiring

Tina A. Syring-Petrocchi of Barnes & Thornburg LLP recently had an article regarding OFCCP Audits published in The National Law Review:

Although the new veterans hiring rules have been delayed, the Office of Federal Contract Compliance Programs (OFCCP) will focus its audits in aggressively interpreting the current regulations to support the affirmative action policies. The OFCCP has proposed new rules for veterans that would require contractors to track those who apply for jobs and write reports explaining decisions not to hire protected veterans. However, these proposed regulations have been delayed for at least nine months.

Despite the regulatory delay, the OFCCP will use the audits as a jump-start to the new hiring rules. It is anticipated that the OFCCP will scrutinize federal contractors’ good-faith efforts at hiring or attempting to hire veterans.  Employers should be prepared to review and evaluate hiring efforts, including how many military veteran applicants were referred by an agency, how many were interviewed and how many were hired.  Federal contractors also should begin tracking the number and quality of veteran applicants referred by recruitment sources and, if ineffective, cease using those sources. Failure to take these affirmative steps may give an appearance that the employer is just “going through the motions,” which will result in technical violations for being deficient in either outreach programs or recordkeeping.

While it is wise for employers to begin the tracking process and reviewing recruitment sources, federal contractors should avoid asking applicants if they are veterans. This particular question could result in further scrutiny by the OFCCP if the employer fails to hire the applicant as it would give the appearance of discrimination. Under the current regulations, employers are not required to make such an inquiry.

In addition to external recruitment efforts, employers should be prepared to demonstrate “known veteran” employees have been considered for promotions and retraining opportunities. The OFCCP’s position is that employers should look internally at known veteran employees (even if none apply for a position) to determine if that employee is qualified and interested for the position. Many companies and their advocates have argued that this runs contrary to equal employment opportunity since it results in preferential treatment of veterans as well as imposes a significant burden on employers.  Nonetheless, employers should be prepared for this inquiry during an OFCCP audit.

© 2012 BARNES & THORNBURG LLP

Smartphones – 24/7 Access: When are employees off the clock?

The National Law Review recently published an article by Cynthia L. Effinger of McBrayer, McGinnis, Leslie and Kirkland, PLLC regarding Smartphones and Employees:

With instant access to all things via smartphones and the internet, it has become increasingly easy for employees and employers to stay connected to work all the time. Smartphone access and being constantly connected is part of our professional make-up, and necessary to keep pace with the speed of the information highway. Right? Connectivity is firmly woven into everyday business practices but at what price?

If your company issues smartphones or similar devices to all or some of its employees so they can stay in touch, checking emails or responding to phone calls after-hours or on the weekends; your company could be at risk for ‘off-the-clock’ lawsuits.  The Fair Labor Standards Act (“FLSA”) requires employers to compensate non-exempt employees overtime pay for any time worked beyond a 40-hour workweek. Exempt employees (so long as they are classified correctly), are the exception. Under FLSA failure to pay an employee wages and overtime due will result in serious fines, and is a growing area of class action law suits.

Being smart about smartphones usage by employees is crucial. It is essential to have a clear electronic-use policy that outlines specific guidelines explaining work hours and use of any such device (laptops, tablets and phones). As an employer you are financially responsible for work hours that are requested and voluntary. Which means if a non-exempt employee is using a smartphone (company issued or personal) outside of work hours, for work purposes – even when not required or requested – the company is responsible for overtime pay to that employee for the hours worked. So, an electronic use policy needs to be very specific about what is permitted and what is prohibited.

Of course it is not enough to have a policy in place, it must be enforced. To enforce such a policy that applies to work performed after-hours and off-premises, the employer must institute a strong system of reporting and monitoring the activity. This could include a specific time-recording tool, as well as an essential versus non-essential activity list, which could temper an employee’s overtime.

There is a “de minimus” rule, which has been adopted in several federal court proceedings that classifies minimal time spent checking or replying to emails or texts as not compensable.  However, if the employee tracks and presents the aggregate of these de minimus actions, the time often becomes comprehensive enough for an overtime claim.

Having the correct system and policy in place to control smartphone usage is no longer an afterthought; it is an essential element of employment and a critical policy. Smartphones have changed the way we work, and as in many areas of business, technology surpasses our ability to keep up with the changes it creates. If you don’t have an electronic-use policy in place, we recommend you make it priority number one for the HR Department. Have it reviewed by an attorney, educate your staff and enforce its rights and restrictions.

© 2012 by McBrayer, McGinnis, Leslie & Kirkland, PLLC