Tag: Labor Law

A Quick Reminder Regarding Complaints in the Workplace

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Last year we reported on a landmark EEOC decision where the Agency concluded that discrimination against transgender individuals is actionable under Title VII. In that case, the EEOC held that Title VII prohibits an employer from taking adverse action based on the fact an employee/applicant fails to “adhere” to gender-based expectations or norms. It remains to be seen whether courts will agree with the EEOC’s position, but the decision appears to suggest that the argument may be viable in some jurisdictions.

There’s another angle to this issue, though: Can an employer be held liable for Title VII retaliation stemming from a complaint alleging transgender harassment? The biggest hurdle a Plaintiff will face in this context is whether the complaint amounts to “protected activity” under Title VII. Generally speaking, an employee can establish that she engaged in “protected activity” for purposes of a Title VII retaliation claim by demonstrating a “reasonable belief” that a violation of the statute occurred. This is true regardless of whether the underlying conduct amounts to actionable discrimination and/or harassment. A clever Plaintiffs’ attorney could conceivably point to the EEOC’s decision and argue that his or her client held a “reasonable belief” that a complaint regarding transgender-based harassment was protected activity under Title VII (and the adverse employment action was somehow linked to that complaint).

Bottom line: Even a “routine” complaint of unfair treatment can form the basis of a retaliation claim down the line. That being said, employers must be certain to thoroughly investigate all workplace complaints, regardless of how petty they may seem.

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To Track or Not to Track Re: Digital Advertising

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Digital advertising based on tracking users’ interests and related privacy concerns have been the subject of many recent news articles.  What does this mean for businesses?  Evolving industry practices and new legislation relating to online privacy and user tracking likely require changes to online privacy practices and policies.

Online privacy and user tracking are in the news almost daily.  Consider these highlights from the past few weeks about online tracking of California minors, big data brokers, California legislation addressing “do not track,” new mobile and online interest-based advertising technology, and a warning to all website operators from the Better Business Bureau:

New Privacy Rights for California Minors

On September 23, 2013, Governor Brown signed into law new Sections 22580 through 22582 of the California Business and Professions Code titled “Privacy Rights for California Minors in the Digital World.”  The new law, which goes into effect January 1, 2015, requires an operator of a website (including online services and applications, such as a social media site) or mobile application that is “directed to minors” to allow minors (defined as anyone younger than 18 years old residing in California) who are registered users the opportunity to un-post or remove (or request removal of) their posted online content.  The operator also must provide minors with notice and “clear instructions” about how to remove their posted content.  The operator is not, however, required to remove posted content in certain specific circumstances, such as when the content was posted by a third party.

This new law also prohibits website and mobile app operators from advertising to California minors certain products and services that minors cannot legally purchase, such as alcoholic beverages, firearms, ammunition, spray paint, tobacco products, fireworks, tanning services, lottery tickets, tattoos, drug paraphernalia, electronic cigarettes, “obscene matter” and lethal weapons.  Operators also are prohibited from using, disclosing or compiling certain personal information about the minor for the purpose of marketing these products or services.

Senator Rockefeller Expands Investigation of Data Brokers

On September 25, 2013, Governor Rockefeller (W.VA) announced that he sent letters to 12 operators of popular family-, health- and personal-finance-related consumer websites requesting details about whether and what information collected from consumers is shared with data brokers.  In his letter to the operator of self.com, for example, Rockefeller noted that “[w]hile some consumers may not object to having their information categorized and used for marketing purposes, before they share personal information it is important that they know it may be used for purposes beyond those for which they originally provided it.”

California Adds Do-Not-Track Disclosure Requirements Effective January 1, 2014

On September 27, 2013, California Governor Brown signed into law amendments to the California Online Privacy Protection Act (CalOPPA), a 2004 law requiring all commercial websites and online service providers collecting personally identifiable information about California residents to “conspicuously” post a “privacy policy.”  The amendments to CalOPPA, which take effect on January 1, 2014, add two new disclosure requirements for privacy policies required by CalOPPA:

  • The privacy policy must explain how the website “responds to ‘Do Not Track’ signals from web browsers or other mechanisms that provide California residents the ability to exercise choice” about collection of their personally identifiable information (Cal Bus and Prof Code §22575(b)(5)).
  • The privacy policy must disclose whether third parties use or may use the website to track (i.e., collect personally identifiable information about) individual California residents “over time and across third-party websites” (Cal Bus and Prof Code §22575(b)(6)).

The “Bill Analysis” history indicates that CalOPPA amendments are not intended to “prohibit third-party or any other form of online tracking” but rather to “implement a uniform protocol for informing Internet users about tracking . . . and any options they may have to exercise choice . . .” (6/17/13 – Senate Judiciary).

A website operator may meet the “do not track” disclosure requirement by including a link in the privacy policy to “an online location containing a description, including the effects, of any program or protocol the operator follows that offers the consumer that choice” (Cal Bus and Prof Code §22575(b)(7)).

The reference in §22575(b)(7) to “an online location” suggests that businesses already complying with the “enhanced notice link” requirements of the Self-Regulatory Program for Online Behavioral Advertising of the Digital Advertising Alliance (DAA) will comply with amended CalOPPA.  Among other requirements, the DAA’s self-regulatory program requires website owners/operators (called “First Parties”) to provide “clear, meaningful and prominent” disclosure about data collection and use for advertising purposes, and to offer consumers a way to opt out of tracking, such as through the DAA’s consumer choice page.  As noted in the Bill Analyses, while the DAA’s consumer choice mechanism enables consumers to opt out of receiving advertising based on online tracking data, it only works for companies that participate in the DAA’s program and “does not allow consumers not to be tracked.”

User Credentials Subject to California Breach Laws Effective January 1, 2014

Governor Brown also signed into law amendments to California’s breach notification laws on September 27, 2013.  As amended, the definition of “personal information” that triggers breach notification requirements includes consumers’ online credentials: “user name or email address, in combination with a password or security question and answer that would permit access to an online account.”

Mobile Advertising: Mobile Telephone as Tracking Device

In the October 6, 2013, edition of the New York Times, an article titled “Selling Secrets of Phone Users to Advertisers” describes sophisticated profiling techniques for mobile phone users that feed on data collected through partnerships with other various online service providers.  These companies are developing alternatives for cookies, which do not work on mobile devices and, as the new California law illustrates, are increasingly irrelevant as an online tracking technique because users can block or delete them.

New Tracking Technology from Microsoft and Google

On October 9, 2013, AdAge reported that Microsoft is developing a new kind of tracking technology to replace cookies.  The new technology would function as a “device identifier,” allowing user tracking across devices that use Microsoft Windows, Xbox, Internet Explorer, Bing and other Microsoft services.  Similarly, USA Today reported that Google is developing its own digital tracking mechanism known as “AdID.”  While both of these new trackers will be used to collect and aggregate date for advertising and marketing purposes, they purportedly will offer users more control over how and what online activity is tracked and who has access to their personal data.

Better Business Bureau Issues Compliance Warning to Website Operators

On October 14, 2013, the Better Business Bureau issued a Compliance Warning noting that a “significant minority of website operators” are omitting the “enhanced notice link” (as required by the DAA’s Self-Regulatory Program for Online Behavioral Advertising) when ad networks and other third parties collect data for interest-based advertising purposes but cannot provide their own notice on the website on which the data collection occurs.  The Better Business Bureau operates the Online Interest-Based Advertising Accountability Program, through which it monitors businesses’ advertising practices and enforces the DAA’s self-regulatory program, even for companies that are not participating in it.

All of this news has created consumer confusion.  While consumers are increasingly aware of being tracked, they don’t know what exactly it means or which websites are doing it—and they are not happy about it.  A study from data privacy company TRUSTe found that 80 percent of consumers are aware of being tracked and 52 percent don’t like it.

What to Do?

A check-up for the privacy policy (or “privacy statement,” which is the increasingly popular industry term) posted on your company’s website is a good way to start evaluating your company’s digital advertising and privacy practices.  The online privacy statement is the primary means by which website operators (also known as “publishers”) communicate their privacy practices to users.

These Four steps can help you successfully evaluate your company’s privacy statement:

First, find out if your company’s marketing strategy includes advertising based on consumer information collected through cookies or other tracking technology.  Even if this type of advertising is not part of current plans, your company’s website still may have third-party tracking activities occurring on it, and these activities must be disclosed in the privacy statement as of January 1, 2014.

Second, review the privacy statement displayed on your company’s website(s) and/or mobile application(s) and make sure it accurately, clearly and completely discloses the information collected from users, how it is collected (e.g., by your company or by third parties), how your company uses the information, and whether and how the information is disclosed to third parties.  If you use information that you collected from consumers for targeted advertising, make sure the privacy statement says so.  A federal judge in the Northern District of California recently reviewed a company’s online privacy policy to evaluate whether users reading the privacy policy would understand that they were agreeing to allow user profiles and targeted advertising based on the contents of their e-mails.  The court found that the lack of specificity in the company’s privacy policy about e-mail interception meant that users could not and did not consent to the practices described in the online privacy policy.

Third, find out when and how the privacy statement is or was presented to users who provide personal information through the company website(s) and/or mobile application(s).  Is the privacy statement presented as a persistent link in the footer of each webpage?  Are users required to agree to the privacy statement?  If not, consider implementing a mechanism that requires users to do so before providing their personal information.

Finally, if your privacy statement needs to be updated, make sure you notify all consumers in advance and ensure that the changes you propose are reasonable.  Unreasonable and overbroad changes made after the fact can cause reputational harm.  Instagram learned this at the end of 2012 when it tried to change its terms of service so that users’ photos could be used “in connection with paid or sponsored content or promotions, without any compensation to [the user].”  After a hail of consumer complaints, Instagram withdrew the revised terms and publicized new, more reasonable ones.

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A Tip For Dealing with Automatic Gratuities in 2014

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A new Internal Revenue Service (“IRS“) rule, set to take effect in January 1, 2014, may eliminate a common practice in the restaurant industry. Often, an automatic gratuity, normally 18%, is added to the bill of large parties. Automatic gratuities were adopted by restaurant employers as a means for ensuring that servers do not get stiffed on expensive bills. Servers heavily rely on tips to supplement a salary that is often times lower than the federal minimum wage.

Traditionally, automatically-added gratuities have been classified as employee tips. As such, it is up to the employees to report the money as income. Starting in January, automatic gratuities will be categorized as “service charges” – making them regular wages and subject to payroll tax withholdings. Employers will have to track and report any automatic tips and will be required to include the “service charge” payments in employees’ W-2 wages. Further, employers will no longer be able to count these tips as a credit to reduce their minimum wage obligation. It is a lose-lose situation because servers will not see their automatic gratuity money until payday; making it more difficult to survive on a small salary.

Many major chains, like Olive Garden and Red Lobster, have eliminated automatic gratuities in response to the approaching deadline. For restaurants that opt to keep the automatic gratuity system, payroll accounting will become much more complicated. Tips from automatic gratuities will have to be factored into hourly pay rates, which means hourly rates could vary based on how many large parties are served in any given hour.

It would be wise for smaller restaurants to follow the chain restaurants’ lead by eliminating automatic gratuities altogether. Doing so will not only to lessen compliance requirements and tax burdens, but will also keep employees happy by ensuring that the tips they earn can immediately be pocketed.

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Apocalypse Averted Again: Preliminary Thoughts on Welcoming Workers Back From the Government Shutdown

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As discussed a few weeks ago, the government shutdown had a broad impact on a number of workers in the public and private sectors. Now that the federal government has reopened, employers welcoming back furloughed employees should stand ready to answer worker questions and assuage employee concerns. Below we offer some preliminary thoughts for private employers managing this delicate process.

  • Back Pay and Unemployment. Employers should be prepared to answer employee questions about their eligibility for back pay and unemployment benefits for their time out of work. If employers provide back pay and employees have already received unemployment benefits, employers should notify employees that they may be required to pay back any unemployment benefits received.  Generally, employees can either collect unemployment from the respective state unemployment agencies for the time missed or they can accept the backpay if offered by the employer, but they cannot double collect.  At least three state unemployment agencies (PA, VA, MD) have explicitly stated that they will expect reimbursement if employers provide back pay.
  • Guard Against Liability. Efforts by employers to return workplaces to pre-shut down normalcy, including by providing back pay and other benefits to workers for the furloughed time, should be implemented in an even-handed, non-discriminatory manner to guard against liability. For example, if employers decide to bring employees back from a furlough on a rolling basis, they must be sure to have neutral business-justified criteria for who is brought back to the workplace and when they are brought back to the workplace.
  • Manage the Message. Hundreds of thousands of workers have been temporarily out of work for up to three weeks because of the government shutdown. Employers should emphasize that these temporary furloughs were the outgrowth of the Congressional stalemate. Accordingly the message to employees should be clear: extraordinary circumstances and not poor job performance, forced employers’ hands and required them to temporarily furlough employees.
  • Ease Their Pain. Employers need to be sensitive to the plight of their returning workers, many of whom have been suffering severe economic hardship during this time period. Economic esprit-de corps measures like jeans days or pizza lunches represent cost-effective ways to remind returning employees that they are highly-valued and welcomed back into the corporate fold.

When in doubt about prospective measures in the wake of the government shutdown, employers should contact employment counsel.

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IRS Guidance on Employment and Income Tax Refunds on Same-Sex Spouse Benefits

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Employers extending benefit coverage to employees’ same-sex spouses and partners should review their payroll procedures to ensure that such coverages are properly taxed for federal income and FICA tax purposes.  Employers also should review the options in Notice 2013-61 and consider filing claims for refunds or adjustments of FICA overpayments.

Employers that provided health and other welfare plan benefits to employees’ same-sex spouses prior to the Supreme Court of the United States’ June 2013 ruling in U.S. v. Windsor may be interested in filing claims for refunds or adjustments of overpayments in federal employment taxes on such benefits.  To reduce some of the administrative complexity of filing such claims, the U.S. Department of the Treasury and the Internal Revenue Service (IRS) recently issued Notice 2013-61, which outlines several optional procedures that employers can use for overpayments in 2013 and prior years.

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In Windsor, the Supreme Court ruled Section 3 of the Defense of Marriage Act (DOMA) unconstitutional.  Section 3 of DOMA had provided that, for purposes of all federal laws, the word “marriage” means “only a legal union between one man and one woman as husband and wife,” and the word “spouse” refers “only to a person of the opposite-sex who is a husband or wife.”

Federal Taxation of Same-Sex Spouse Benefits

The Windsor ruling thus extends favorable federal tax treatment of spousal benefit coverage to same-sex spouses.  The IRS issued guidance in July clarifying that this tax treatment would extend to all same-sex couples legally married in any jurisdiction with laws authorizing same-sex marriage, regardless of whether the couple resides in a state where same-sex marriage is recognized.  This IRS approach recognizing same-sex marriages based on the “state of celebration” took effect September 16, 2013.

Prior to the ruling, an employer that provided coverage such as medical, dental or vision to an employee’s same-sex spouse was required to impute the fair market value of the coverage as income to the employee that was subject to federal income tax (unless the same-sex spouse qualified as the employee’s “dependent” as defined by the Internal Revenue Code).  The employer was required to withhold federal payroll taxes from the imputed amount, including federal income and the employee’s Social Security and Medicare (collectively FICA) taxes.  In addition, employers paid their own share of FICA taxes on the imputed amount, as well as unemployment (FUTA).

As a result of the ruling, an employee enrolling a same-sex spouse for benefit coverage under an employer-sponsored health plan no longer has imputed income for federal income tax purposes; may pay for the spouse’s coverage using pre-tax contributions under cafeteria plans; and may take tax-free reimbursements from flexible spending accounts (FSAs), health reimbursement accounts (HRAs) and health savings accounts (HSAs) to pay for the same-sex spouse’s qualifying medical expenses.  This same favorable federal tax treatment does not extend to employer-provided benefits for an unmarried same-sex partner, unless the same-sex partner qualifies as the employee’s dependent.

Overpayments of Employment Taxes in 2013

Employers that overpaid both federal income and FICA tax in 2013 as a result of income imputed to employees for benefit coverage for a same-sex spouse may use the following optional administrative procedures for the year:

  • Employers may use the fourth quarter 2013 Form 941 (Employer’s Quarterly Federal Tax Return) to correct overpayments of employment taxes for the first three quarters of 2013.  This option is available only if employees have been repaid or reimbursed for over-collection of FICA and federal income taxes by December 31, 2013.

Alternatively, employers may follow regular IRS procedures to correct an overpayment in FICA taxes by filing a separate Form 941-X for each quarter in 2013.  Notice 2013-61 provides detailed instructions for each of the alternative options, including how to complete the Form 941, as well as Form 941-X, which requires “WINDSOR” in dark, bold letters across the top margin of page one.

Overpayments of FICA Taxes in Prior Years

Employers that overpaid FICA taxes in prior years as a result of imputed income for same-sex spousal benefit coverage may make a claim or adjustment for all four calendar quarters of a calendar year on one Form 941-X filed for the fourth quarter of such year if the period of limitations on such refunds has not expired and, in the case of adjustments, the period of limitations will not expire within 90 days of filing the adjusted return.  Alternatively, employers may use regular procedures to make such claims or adjustments.  The regular procedures require filing a Form 941-X for each calendar quarter for which a refund claim or adjustment is made.  Note that under the alternative procedure provided by Notice 2013-61 or under the regular procedure, filing of a Form 941-X requires either employee consents, or repayment or reimbursements, as well as amended Form W-2s to reflect the correct amount of taxable wages.

Employee Overpayments of Federal Income Taxes

Employers who provided benefits to employees’ same-sex spouses in 2013 may adjust the amount of reported federally taxable income on each employee’s Form W-2 (Wage and Tax Statement) to exclude any income imputed on the fair market value of the coverage and to permit the employee to pay for the coverage on a pre-tax basis.

Employees who overpaid federal income taxes in prior years as a result of same-sex spouse benefit coverage may claim a refund by filing an amended federal tax return for any open tax year.  Refunds are available for overpayments resulting from income imputed on the fair market value of the coverage and from premiums paid on an after-tax basis for the coverage.  An amended tax return generally may be filed from the later of three years from the date the return was filed or two years from the date the tax was paid.

Employers that file Form 941-X are required to file Form W-2c (Corrected Wage and Tax Statement) to show the correct—in this case reduced—wages.  Employers that do not file Form 941-X may want to begin preparing for employee requests for a Form W-2c for each open tax year in which benefit coverage was offered to employees’ same-sex spouses.

Next Steps

Employers extending benefit coverage to employees’ same-sex spouses and partners should carefully review their payroll processes and procedures to ensure that such coverages are now properly taxed for federal income and FICA tax purposes.  In addition, employers should review the options in Notice 2013-61, and consider filing claims for refunds or adjustments of overpayments of FICA taxes for any prior open tax years and issuing Form W-2c to allow employees to claim refunds of federal income tax.  Most importantly, by acting promptly, employers can correct the 2013 over-withholdings for both FICA and federal income tax and overpayment of the employer portion of FICA tax, without the necessity and burden of filing a Form 941-X.

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New Employee Wellness Program Rules for 2014

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Employers continue to look for ways to manage the cost of employee health care coverage as they navigate the turbulent waters of healthcare reform, and wellness programs continue to be a popular strategy.  However, adoption and expansion of these programs have been hampered somewhat by questions about their effectiveness, cost, and the risk of noncompliance with the uncoordinated web of laws and regulations governing these programs.  While evidence seems to be emerging that at least some wellness program designs can be an effective means for cost control and long-term savings due to improved health, recently issued final regulations under the Health Insurance Portability and Accountability Act (HIPAA) effective beginning in 2014 only add additional burdens to employers’ compliance efforts.

HIPAA amended ERISA to generally prohibit discrimination against individual participants and beneficiaries in eligibility, benefits or premiums based on “health status-related factors,” including physical and mental illnesses, claims experience, receipt of health care, medical history, genetic information, evidence of insurability, and disability.  However, under the wellness program exception to HIPAA group health plans may offer premium discounts, rebates, reduced co-payments and/or lower deductibles (generally referred to as ‘rewards’) to participants and beneficiaries who take part in “programs of health promotion and disease prevention.”

The final HIPAA nondiscrimination regulations, effective for plan years beginning after 2013, create two categories of programs under the wellness program exception: ‘participatory wellness programs’ and ‘health-contingent wellness programs.’

Participatory wellness programs either provide no reward  or do not condition a reward on the achievement of a health standard.  Examples of participatory wellness programs include:

  • Reimbursing all or part of the cost of a fitness center membership;
  • Reimbursing costs of participation or rewarding participation in a smoking cessation program regardless of whether the individual quits smoking; and
  • Rewarding participation in a no-cost health education seminar, a health risk assessment, or a diagnostic testing program, regardless of outcomes and without requirement for further actions.

A participatory wellness program must be available to all similarly situated individuals regardless of health status, but otherwise is not required to comply with the more strenuous requirements applicable to health-contingent wellness programs.

Health-contingent wellness programs require an individual to satisfy a standard related to a health factor to obtain a reward or require an individual to undertake more than a similarly situated individual based on a health factor in order to receive the same reward.  Health-contingent wellness programs are divided into two subcategories: ‘activity-only wellness programs’ and ‘outcome-based wellness programs.’

Activity-only wellness programs require an individual to perform or complete an activity related to a health factor in order to obtain a reward, but do not require the individual to attain or maintain a specific health outcome.  Examples of activity-only wellness programs include walking, diet, or exercise programs.  If an individual cannot participate in the activity due to a health factor, then a reasonable alternative (or waiver of the otherwise applicable standard) must be provided in order to qualify for the reward.

Outcome-based wellness programs require an individual either to attain a specific health standard or complete an activity or other requirement related to the health factor in order to obtain a reward.  These programs usually have two tiers: a measurement, test or screening, followed by a program that targets individuals who do not meet a pre-specified standard.  Examples of outcome-based wellness programs include:

  • Reward for non-tobacco use, or participate in a tobacco use cessation program; and
  • Reward for cholesterol, blood pressure or body mass index below a specified level, or take additional steps, such as complying with a prescribed plan of care or participating in a exercise program.

An individual who does not meet the specified health standard must be provided a reasonable alternative (or waiver of the otherwise applicable standard) in order to qualify for the reward.

Both activity-only wellness programs and outcome-based wellness programs must satisfy the following five additional requirements:

  • Individuals eligible for the program must be given the opportunity to qualify for the reward at least once per year.
  • The size of the reward(s) under all health-contingent wellness programs is limited to a maximum of 30% (50% for tobacco nonuse/cessation programs) of the total cost of elected coverage.
  • The program has a reasonable chance of improving the health of, or preventing disease in, participating individuals, is not overly burdensome, is not a subterfuge for discrimination based on a health factor, and is not highly suspect in the method chosen to promote health or prevent disease.
  • The full reward must be available to all similarly situated individuals and, as previously discussed, a reasonable alternative must be provided for obtaining a reward.   The plan is permitted to seek verification from the individual’s physician only that a health factor makes it unreasonably difficult or medically inadvisable for the individual to participate in an activity, and not whether the individual can satisfy a specified health standard.  Alternatives do not have to be determined in advance but must be provided upon request within a reasonable time.
  • Notice of the availability of a reasonable alternative must be provided in all plan materials that describe the terms of the health-contingent wellness program, and include contact information for obtaining the alternative and a statement that recommendations of an individual’s personal physician will be accommodated.

Add to these new rules the alphabet soup of other rules that impact wellness programs, including HIPAA privacy and security, GINA, ADA, ADEA, Title VII, FLSA, and COBRA, and it becomes clear that plan sponsors would be well-served to have even the most seemingly simple program reviewed by legal counsel for compliance.

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The False Claims Act During Times of War: Is There Any Time Limit For Bringing Suit

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A federal appellate court recently ruled that, at least for the moment, claims under the False Claims Act (“FCA”) are not subject to any statute of limitations. The United States Circuit Court for the Fourth Circuit, in U.S. ex rel. Carter v. Halliburton Co., 710 F.3d 171 (4th Cir. 2013), relied on an obscure federal statute, the Wartime Suspension of Limitations Act (“WSLA”), to hold that the FCA’s general six-year statute of limitations, 31 U.S.C. §3287, was tolled due to the ongoing conflict in Iraq. The Fourth Circuit’s decision is ground-breaking, as it is the first federal appellate court to weigh in on this issue and takes a broad view of the tolling question, effectively removing any limitations bar to FCA violations committed during times of war.

The WSLA, originally enacted in 1942 and amended as recently as 2008, generally suspends statutes of limitations in actions related to fraud against the United States until 5 years after the termination of a war. 18 U.S.C. §3287. In Carter, the qui tam whistleblower alleged that his employer, well-known government contractor Kellogg Brown Root Services, Inc. (“KBR”), was defrauding the government by inflating its employees’ work hours on a water purification contract as well as misrepresenting to the United States that it was actually purifying water for servicemen and servicewomen deployed in Iraq. The trial court dismissed Carter’s complaint on the grounds that, among other things, Carter’s case was not tolled by the WSLA because the government did not intervene in the action. Carter, 710 F.3d at 176. The Fourth Circuit reversed, holding that the armed conflict in Iraq suspended the statute of limitations in Carter’s case, regardless of whether the case was being prosecuted by Carter, as the FCA relator, or by the United States. According to the court, “whether the suit is brought by the United States or a relator is irrelevant . . . because the suspension of limitations in the WSLA depends on whether the country is at war and not who brings the case.” Id. at 180.

In addition to explicitly extending the scope of the WSLA to non-intervened cases, the Fourth Circuit made two other important WSLA-related holdings. First, the court ruled that the phrase “at war” in the WSLA is not limited to formally declared wars but, instead, applies to modern military engagements such as the United States’ involvement in Vietnam, Korea, Afghanistan and Iraq. Id. at 179. Although none of these conflicts were formally declared wars, they occupied much of the government’s attention and resources such that the purpose of the WSLA-allowing the government more time to act during the fog of war-would not be served if an unnecessarily formalistic approach were required.

Second, the Fourth Circuit-consistent with several district courts before it-ruled that the WSLA applies to both criminal and civil cases. Id. at 179-180. The question of WSLA’s application to civil matters arose out of the use of the word “offense” in the statute. The original version of the WSLA applied to “offenses involving the defrauding or attempts to defraud the United States . . . and now indictable under any existing statutes.” In 1944, however, the Act was amended, deleting the “now indictable” language. With that change, the court concluded, the “WSLA was then applicable to all actions involving fraud against the United States,” including civil actions. Id.

In light of the Fourth Circuit’s decision in Carter, the limitations period for FCA actions may be indefinitely extended. Indeed, in Carter, the court indicated that it is not clear that the war in Iraq is over for purposes of the WSLA. Tolling under the WSLA ends 5 years after the termination of hostilities “as proclaimed by a Presidential proclamation, with notice to Congress, or by a concurrent resolution of Congress.” Wartime Enforcement of Fraud Act, Pub. L. No. 110-417 §855, codified at 18 U.S.C. §3287. According to the Fourth Circuit, because “it is not clear” that President Obama has proclaimed the war in Iraq as over and provided notice of the same to Congress, as required by the WSLA, the limitations period may still be tolled.

Some commentators have argued that the FCA statute of repose, which sets the outside deadline for bringing claims at either “3 years after the date when facts material to the right of action are known or reasonably should have been known” by the government, “but in no event more than 10 years after the date on which the violation is committed, whichever occurs last.” This mandates that the statute of limitations for FCA cases cannot be tolled for more than 10 years. Although Carter did not reach that specific issue, it seems unlikely-based on the Fourth Circuit’s language and analysis-that it would endorse such a position. Indeed, the Fourth Circuit noted, in a footnote, that “tolling will indeed extend indefinitely” absent a formal Presidential proclamation with notice to Congress. Carter, 710 F.3d at n.5.

If the Fourth Circuit’s analysis is adopted by its sister circuits, there will be profound benefits for whistleblowers seeking to expose fraud against the Government. For instance, defendants may be discouraged from proffering hyper-technical, confused or convoluted statute of limitations defenses in order to avoid responsibility for their fraud. It would also open up the possibility of bringing qui tam claims under the FCA for conduct dating farther back in the past.

Department of Justice (DOJ) Intervenes in Qui Tam Action Against Lance Armstrong

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The Department of Justice announced in February that it would intervene in a False Claims Act suit filed against former Tour de France winner Lance Armstrong and others by former teammate Floyd Landis. Reports indicate that in 2010, Landis filed a lawsuit, captioned United States ex rel. Landis v. Tailwind Sports Corporation, et al., in the U.S. District Court for the District of Columbia. The lawsuit alleges that Armstrong and his teammates violated the terms of a $30 million sponsorship contract he and his cycling team had with the U.S. Postal Service (USPS) by taking drugs to enhance their performances.

USPS sponsored Armstrong’s Tailwind cycling team from 1996 through 2004. During that time, Armstrong and his team took more than $30 million in sponsorship fees. The USPS claims Armstrong violated a contractual promise by regularly employing banned substances and methods to enhance their performance, in violation of the USPS sponsorship agreements. Those sponsorship agreements gave USPS the right to place its logo prominently on the cycling team’s uniform, among other promotional opportunities. However, the agreement also required the cycling team to comply with all rules of cycling’s governing bodies. Those rules prohibited the use of performance enhancing substances and methods.

For years Armstrong and others denied that the team used performance enhancing drugs, but in October, 2012, the U.S. Anti-Doping Agency (USADA) issued a report concluding that Armstrong used banned performance enhancing substances, starting in at least 1998 and continuing throughout his career. The time Armstrong and teammates were alleged to have been “doping” overlaps significantly with the term of Armstrong’s USPS sponsorship.

After the USADA report, Armstrong admitted in an interview with Oprah Winfrey that he used banned substances and methods throughout his career, starting in the mid-1990s. He admitted having used banned substances during each of his seven Tour de France victories, including the six he won while sponsored by USPS.

The U.S. Government’s intervention complaint alleges that riders on the USPS-sponsored team “knowingly caused violations of the sponsorship agreements by regularly and systematically employing substances and methods to enhance their performance” and, as a result, “submitted to the United States false or fraudulent invoices for payment.” In addition, the complaint alleges that the Defendants “made false statements, both publicly and to the USPS, that were intended to hide the team’s misconduct so that those invoices would be paid.” All in all, according to the government, “[b]ecause the Defendants’ misconduct undermined the value of the sponsorship to the USPS, the United States suffered damage in that it did not receive the value of the services for which it bargained.” In support of its allegations, the government details the prohibited substances used by the Armstrong team, including erythropoietin, human growth hormone, anabolic steroids, and corticosteroids. It also details delivery methods used, including blood re-injections and “the oil,” a mixture of testosterone and olive oil. In addition, the government complaint contains a litany of Armstrong’s denials of banned substances use over a ten-year period.

While the Government notified the court that it was joining the lawsuit’s allegations as to Armstrong, the Tailwind cycling team, and the team’s manager, it advised the court that it was not intervening in the case as to several other defendants named in Landis’s complaint.

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Michigan Right to Work – What’s the Effect: A Data Point

barnes

How Michigan’s Right to Work law would ultimately impact union dues payer rolls has been a topic of some debate. Now we have a data point, but it may not tell the whole story.

Michigan’s Right to Work law became effective March 28, 2013. The law gives employees the right to choose to join and/or financially support a union. In other words, it allows employees to retain the representational benefits of their union representation without paying dues. If an employee elects not to pay dues, the employee’s union still must represent the employee with respect to grievances and arbitration. Unions refer to this as “freeloading.”

There has been much speculation about what impact the passage of Michigan’s law would have on the number of dues paying members. Today, an article in the Detroit News reported that, according to the Michigan Education Association, Michigan’s 150,000 member teachers union, only 1 percent of its members have elected to exercise their rights under the Right to Work law and stop paying dues.

Michigan

This, however, likely only tells part of the story because the law does not impact union security provisions in contracts that have not yet expired and some contracts were “rush-renewed” to ensure that they would not be impacted by Right to Work for several more years.

In addition, the Right to Work law did not impact union “check off” provisions which are often tied to a card that is signed by a union member and authorizes the employer to deduct dues from the member’s paycheck and send them to the union. Such cards can serve as an impediment to a member desiring to stop paying dues because they can be irrevocable for a period of time, even if the employee revokes his or her union membership. These agreements, which can be irrevocable for up to a year under federal law, are a hurdle that trip up many employees trying to end dues payments immediately. However, while certain restrictions on dues check off authorizations have been approved under federal law, it is unclear whether the Michigan Employment Relations Commission (MERC) will find such restrictions lawful or violative of Michigan’s Right to Work law.

The point is, MEA’s 1 percent report is only one data point; it will take a lot longer to tell the impact on the number of dues paying members in the MEA and other unions.

See all our previous Right to Work coverage here.

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Shutdown Closes National Labor Relations Board (NLRB) Operations

Barnes & Thornburg

As a result of the federal government shutdown, yesterday NLRB operations ground to a halt. Many practitioners and employers during the a.m. hours received contact from Board Agents and Board Lawyers indicating that pending investigations, petition processing and the like were on hold until after the shutdown ends.

The Board’s “Shutdown Plan” indicates that 1,600 of the Board’s 1,611 staff have been furloughed. All regional offices are closed and the only remaining staff are located in the Board’s main office in D.C. Even the Board’s website was shutdown and the resources posted online, including all Board cases, memos, and other guidance, became unavailable. Instead, visitors to the Board’s website were redirected to a landing page explaining “The National Labor Relations Board is currently closed due to a lapse in appropriated funds.”

government shutdown NLRB national labor relations board

The full effect of the shutdown on new and on-going NLRB cases is not completely clear.  The Federal Register Notice on the effect of the closure states that an extension of time to file any documents is granted sua sponte for all affected parties through the end of the shutdown.  However, the Board cannot grant extensions of time to the six-month statute of limitations in Section 10(b) of the National Labor Relations Act that applies to unfair labor practice charges.  The Federal Register Notice states that “the operation of Section 10(b) during an interruption in the Board’s normal operations is uncertain” and encourages effected parties to file their charges via fax, although they will presumably not be processed until after the shutdown concludes.  The Board’s website does provide that actions necessary “to prevent an imminent threat to the safety of human life or the protection of property may be undertaken” during the shutdown, although it is not clear what NLRB actions, if any, would fall into this category.

All ALJ hearings scheduled for this week have been postponed indefinitely, as well as all elections and election hearings scheduled through October 11. The Federal Register Notice provides that if the shutdown continues, additional hearings and elections will be postponed as well. Like the rest of the country affected by the shutdown, all practitioners and employers with business in front of the Board can do now is wait it out.

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