ALERT! COBRA Premiums Subsidized Under New Federal Law

President Obama recently signed into law the American Recovery and Reinvestment Act of 2009 (ARRA), which provides for a nine month subsidy of COBRA premiums for employees who are involuntarily terminated. For more, click here.

NEW! Newsletter available online!

The Williams Firm is pleased to provide its clients and friends with the Labor and Employment Law Reporter, an occasional newsletter highlighting important developments in the dynamic field of labor and employment law. 

The Summer 2009 issue appears below. If you would prefer to read the Summer 2009 issue offline, it is available in PDF format here.

To view archived issues of the Labor and Employment Law Reporter, click here.

Labor and Employment Law Reporter, Winter, 2009

In this Issue:

• Discrimination Found in Case of Associating Individual

• A Threat to Sue is Not a Valid Reason For Discharge

• COBRA Premiums Subsidized

• Limitation on Cost-Splitting in Arbitration Agreements

• U.S. Supreme Court Alters The Framework in Mixed Motive Age Discrimination Cases

• $16 Million Award Given in Age Discrimination Case

• USERRA Prevents Employer From Imposing Any Additional Requirements For Reemployment

• Okalahoma Gun Law Prevents Employers From Outlawing Guns on Their Property

• U.S. Supreme Court Rules That Those Who Speak Out About Discrimination Are Protected From Employer Retaliation

• Board of Education Avoids Unfavorable Outcome in Suit Over Employee Severance Plan

• Filing a 312 Petition for Arbitration Continues The Collective Bargaining
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Discrimination Found in Case of Associating Individual

The Sixth Circuit Court of Appeals has decided that an individual can sue for racial discrimination when the discrimination is based on that individual’s mere association with members of a protected group, so long as the individual has been the target of the discriminatory conduct. Barrett, et al v Whirlpool Corporation, 556 F3d 502 (CA6, 02/23/09).

Barrett involved three (3) women – Barrett, Melton, and Nickens – who regularly associated with African-American colleagues at work.  The women each encountered co-worker Travis making racist comments.  Attempts to involve their supervisor proved fruitless, as many were joining in on the jokes and comments.  When Barrett complained to Travis about his behavior, he responded that he owned a handgun.  When Nickens complained about Travis to another supervisor, Travis was subsequently fired.

Believing Nickens was responsible, Travis had two (2) friends still working at the plant tell Nickens that Travis was going to harm her after work. When Nickens complained to her supervisor, the supervisor assured her that it was unlikely that anything would come of it, but did nothing further. 

The three (3) eventually sued their employer when the company refused to address their concerns about attitudes in the workplace.  The three (3) women claimed that they were discriminated against for their association with African-Americans and their advocacy for their co-workers.  Each woman sued the company for both retaliation and a hostile work environment.

Barrett based her retaliation claim on having work directed away from her, but she never complained to management on that issue. Melton based her retaliation claim on being given a new position that was more physically difficult for her to do because of ongoing medical problems.  Nickens based her retaliation claim on the belief that a supervisor whom she had reported for racist remarks blocked her from getting a better position.  All three (3) retaliation claims were dismissed. 

The court established that in order to survive summary judgment on a hostile environment claim, Plaintiffs must demonstrate that they were subjected to extreme harassment that was targeted at them.  None of the comments witnessed by Barrett were directed at Barrett.  Melton heard many insults around her, but none of the derogatory terms were levied at her.  However, Nickens’ hostile environment claim was allowed to go to trial because she demonstrated an extreme action, the threats of harm, and those threats were directed at her for her perceived advocacy.

The court dismissed all three (3) Plaintiffs’ claims for retaliation.  None of the three (3) suffered any real change in employment, and no change that did not have some other possible reason.  When discussing Barrett, the court noted that retaliatory action does not include a refusal to be given supplies.

The important lesson from this case is that association with and advocacy for a protected class of people, such as women, African-Americans, or the disabled, to name a few, can be the basis for a hostile workplace claim.  Any Plaintiff in such a case must establish, however, that the comments were directed at him or her rather than merely heard by him or her at the workplace.

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Threat to Sue is Not a Valid Reason For Discharge

A threat to sue was not a valid reason to discharge an employee who was complaining about his work assignment.  The employee, Shelson, was newly  returned  from a worker’s compensation leave  of   absence  to  recover   from  hand  surgery.

The Defendant’s president directed the employee to return to work two (2) days before the doctor had cleared the employee to return.  After he returned, the president told him that he was not working fast enough.  In response, the employee threatened to sue. 

Following the threat, the Defendant discharged the employee.  The Michigan Court of Appeals ultimately decided the case based upon a number of deficiencies in the Defendant’s pleadings. The Defendant failed to follow several Michigan Court Rules when answering the Complaint.  The court also confirmed that a threat to sue is not an overriding justification to fire someone, when an employee has threatened to sue to enforce his rights under the Worker’s Disability Compensation Act. Shelson v. Schmidt Industries, Inc., Mich App; 2009 LEXIS 553 (unpublished, 03/10/09).

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Cobra Premiums Subsidized

With the signing of the American Recovery & Reinvestment Act of 2009, President Obama and Congress have created a system where COBRA premiums are subsidized for nine (9) months.  This subsidy is limited to employees whose employment was involuntarily terminated between September 1, 2008 and December 31, 2009.  Under this new plan, eligible employees will only need to pay thirty-five (35%) of the COBRA premium.  The Employer pays for the remainder with a reimbursement in the form of a proportional deduction in federal payroll tax payments.  Employers will receive a government reimburse-ment for any excess beyond the given tax liability.

Employers will need to amend their current COBRA election notices to include information about the premium subsidy and must include:

1. Forms necessary for establishing eligibility for premium subsidy;

2. Contact information of plan administrator and other personnel with information on the subsidy;

3. Description of the extended election opportunity;

4. Description of an assistance-eligible individual’s obligation to notify the plan when he or she becomes eligible;

5. Description of the qualified beneficiary’s right to COBRA subsidy and conditions; and

6. Description of option to enroll in different coverage under the health plan.

For individuals already eligible, a similar notice must be given within sixty (60) days of enactment.

In light of these changes, we recommend that employers do the following:

• Compile a list of all assistance-eligible individuals who will need to be notified, which generally includes all former employees whose employment was involuntarily terminated on or after September 1, 2008, and any eligible spouses and dependents who were enrolled in coverage prior to the termination;

• Revise payroll systems to identify eligible individuals in order to report the tax credit to the government and receive the subsidy;

• Check with the insurance carrier, if a plan is insured, to determine the appropriate procedures for enrolling assistance-eligible individuals who are not currently enrolled in COBRA continuation coverage;

• Review stop-loss contracts, if the plan is self-insured, to determine whether coverage applies to assistance-eligible individuals who are not currently enrolled in COBRA continuation coverage; and

• Modify applicable COBRA premium billings for March 2009 coverage to take into account the sixty-five (65%) subsidy.

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LIMITATION OF COST-SPLITTING IN ARBITRATION AGREEMENTS

The Sixth Circuit Court of Appeals has recently articulated a test to determine whether a cost-splitting provision in an arbitration agreement is enforceable.  The provisions are to be analyzed by whether:

The potential costs of arbitration are great enough to deter [potential litigants] and similarly situated individuals from seeking to vindicate their federal statutory rights in the arbitral forum.

Mazera v. Varsity Form Management Servs., LLC et al., 565 F3d 997 (CA 6, 05/19/09).

In Mazera, the court was evaluating a case where an employee, who spoke very little English, signed his contract of employment which contained an agreement to arbitrate with a cost-splitting provision.

The provision in that employment contract instructed the employee to contribute either five (5) days’ pay or $500, whichever amount was smaller.  The Employer in that case agreed in the contract to refund the employee’s payment should the employee succeeds at arbitration.  The contract also contained a provision that allowed the Employer to waive the deposit after an evaluation of the employee’s financial situation.

The court pointed out that if the employee were to pursue his case in court, many attorneys, working on contingency, would cover the fees unless the employee succeeded.  This would make litigation cheaper than arbitration for the employee, which runs counter to one (1) of the purposes of arbitration (that of arbitration being a cheaper alternative to litigation).  Also unfair to the employee was the short period of time (ten [10] days) within which to come up with the necessary funds.  The ultimate point is that employees cannot be deterred from exercising a statutory right by agreeing to split arbitration costs when those costs could mean the difference between the employee being able to afford a remedy and being financially unable to seek redress.

In this case, however, the matter was allowed to proceed to arbitration under the agreed to terms, solely because the Employer could waive the employee’s cost and was willing to do so.  Otherwise, this cost-splitting provision was not valid. 

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U.S. SUPREME COURT ALTERS THE FRAMEWORK IN MIXED MOTIVE AGE DISCRIMINATION CASES

The Supreme Court in a five (5) to four (4) vote has changed the test for evaluating mixed motive cases under the Age Discrimination in Employment Act (ADEA).  The court held that in cases where discrimination might only be part of the motive for the adverse employment action against the employee, the employee must demonstrate that the discrimination was a “but for” cause of the action.

The Plaintiff in Jack Gross v. FBL Financial Services, Inc. was fifty-four (54) years old when his Employer reassigned him to another position with fewer job responsibilities. 2009 U.S. LEXIS 4535 (06/18/09).  The Plaintiff was paid the same in both positions.  The Employer went on to create a new position in the company that had the Plaintiff’s old job responsibilities.  The Employer staffed that new position with a woman in her early forties (40s) and who was once an employee under Plaintiff’s supervision. 

The Eighth Circuit Court of Appeals applied the mixed motive framework adopted from Title VII cases.  In that test, if the evidence shows that discrimination was a motivating factor (even if not the primary one), then the Employer must show that it would have taken the action regardless of that discriminatory motive.  The Supreme Court examined both Title VII and the ADEA and decided that the evidentiary burdens were not intended to be equal between the statutes.  The court held that the ADEA does not support a mixed motive claim.  Instead, the Plaintiff in an ADEA case must show that but for his or her age the Employer would not have acted against him or her.

© 2006 The Williams Firm, P.C. This website is designed for general information only. The information presented at this site is not formal legal advice and does not create an attorney-client relationship.