Letter from the Editor

This is the first e-newsletter from the TBA Labor and Employment Section. A second one will be issued later this year.

I want to thank this issue's authors - Wes Sullenger (who can always be counted on to write), Lee Sparks, Drew Farmer, Alisha Wyatt, Graham Askew and myself.

If you have an article, an idea for an article, a suggestion, or even a constructive criticism, please e-mail (bbuchanan@kingballow.com) or call me (615-726-5484).

Thank you,

Bruce E. Buchanan

Federal Contractors and Subcontractors Must Use E-Verify Soon

by Bruce Buchanan

President Bush signed an Executive Order in June 2008, declaring contractors and subcontractors, who contract with the federal government, must participate in E-Verify, an electronic employment verification system. Although the President has authority to issue executive orders, any accompanying regulations must be promulgated through the federal register. Thus, the order is not immediately effective; rather, a comment period for the proposed regulations ended on August 11, 2008. It is reasonable to assume that the earliest effective date will be October 1, 2008 (the beginning of the new federal fiscal year), with a more realistic date of November 2008. The federal contractors and subcontractors will then have 30 days to sign an E-Verify Memorandum of Understanding (MOU) with the Department of Homeland Security (DHS) and begin its use.

All federal agencies that enter into contracts shall require, as a condition of each contract, contractors and subcontractors use E-Verify to establish the employment eligibility of "all persons hired during the contract term by the contractor to perform employment duties within the U.S. and all persons assigned by the contractor to perform work within the U.S. on the federal contract."

The second aspect, the use of E-Verify for the employment verification of current employees, is a major departure from the existing use of E-Verify. Under current E-Verify regulations, private employers, who are not federal contractors and subcontractors, are prohibited from using E-Verify to check on the employment eligibility of existing employees.

Other basic proposed requirements of E-Verify for federal contractors are:

1. May not submit an inquiry to E-Verify until after an employee is hired and an I-9 has been completed for the employee.

2. Must keep a photocopy of the permanent resident card or employment authorization document if the employee presents either of those documents to complete the I-9.

3. List B document to establish identity only if the List B document contains a photograph.

4. Must enter information from Sections 1 and 2 of the I-9 into E-Verify.

5. If the information entered matches the SSA and USCIS databases, the contractor is provided a confirmation number and must retain a record of the confirmation number on the I-9 or print the confirmation screen and attach it to the I-9.

6. If the SSA is unable to verify the information, the contractor will receive an "SSA tentative non-confirmation." If the USCIS is unable to verify proper work authorization, the contractor will receive a notice, "DHS verification is in progress." Afterwards, if the USCIS cannot verify the employee's work authorization, the contractor will receive a "DHS tentative non-confirmation."

7. If the non-confirmation did not result from a typographical error that the contractor can fix, the contractor must provide the employee with a written notice, "Notice of Employee of Tentative Non-Confirmation", generated by E-Verify.

8. The worker must indicate whether he intends to challenge the non-confirmation and both the employee and the contractor must sign the notice. The contractor should retain a copy of the Notice to Employee with the employee's I-9.

9. If the employee is challenging the non-confirmation, the contractor is required to provide a letter containing information about how to resolve the non-confirmation. The employee has eight working days to contact the SSA or DHS to try and resolve the discrepancy. The SSA or DHS has 10 working days to resolve the matter.

10. Must not take adverse action against an employee while the employee is challenging a tentative non-confirmation, unless the contractor obtains knowledge that the employee is not authorized to work.

11. If an employee does not challenge a tentative non-confirmation, the non-confirmation becomes final. If the employee is not challenging the non-confirmation, the contractor should terminate the employee's employment or report to DHS that it is not terminating the employees' employment after the non-confirmation.

12. Fines of $550 - $1,100 for each failure to notify the DHS that continued to employ the individual.

13. If the contractor continues to employ an individual after a final non-confirmation, it is subject to a rebuttable presumption that it has knowingly employed an unauthorized alien.

14. In the case of an SSA tentative non-confirmation, the employee should notify the contractor when he or she visits the SSA. The contractor must check the employee's information through E-Verify at least 24 hours after the employee informs the contractor he has visited the SSA, but no later than 10 working days after the contractor sent the referral to the SSA. If the employee does not contact the SSA, the contractor should resubmit the employee's information for verification no later than 10 working days after the contractor sent the referral to the SSA. The contractor will then receive an employment authorization confirmation, SSA final non-confirmation or a notice that DHS verification is in progress. A DHS tentative non-confirmation is handled similarly.

15. After a non-confirmation becomes final, the contractor must either terminate the individual's employment or notify DHS if it continues to employ an employee after receiving a final non-confirmation.

16. Must post notices provided by DHS regarding participation in E-Verify.

Bruce Buchanan is a senior associate in the Labor and Employment Section of King & Ballow in Nashville, Tennessee. He received his law degree from the Vanderbilt School of Law in 1982, and his undergraduate degree in 1979 from Florida State University, where he graduated magna cum laude with a B.S. in government. Prior to joining King & Ballow, Mr. Buchanan served as senior trial specialist for the National Labor Relations Board for 20 years. Mr. Buchanan represents employers in many areas of labor, employment and immigration law as well as individuals in immigration law. He is admitted to practice in Tennessee, Florida and Arkansas, before the U.S. Court of Appeals for the Sixth and Eighth Circuits and before the U.S. District Courts for the Middle District of Tennessee and the Eastern and Western Districts of Arkansas.

The Fluctuating Workweek Method of Overtime Payment and Small Business

by Lee R. Sparks

In a tight economic environment, it is important for all businesses to tightly control expenses. This is especially true with small businesses that are typically more vulnerable to the vagaries of price fluctuations and competition. One of the biggest expenses in any business is the cost of labor. As such, labor costs often present a catch-22 to the small business owner: you cannot grow your business without employees, but you have to be able to afford employees before you can hire them.

This article seeks to introduce an alternative method for the payment of employees in certain situations, and to point out common pitfalls that can result from implementing this method. However, before making any changes in your compensation methods, you are strongly advised to seek the advice and guidance of employment law counsel.

Fixed Rate versus Fluctuating Workweek

Most employers are familiar with the fixed rate of compensating employees. This method involves an employee being paid a fixed rate per hour, with overtime compensation being paid at a one-and-a-half times that rate. Thus, if an employee is paid at a rate of $12.50 an hour, that employee would receive $500 for a 40-hour work week ($12.50/hr. x 40 hrs.). In a fixed rate compensation method, an employee that works 50 hours in a workweek would be entitled to an overtime premium of $187.50 (10 hrs. x $18.75/hr.) resulting in total compensation for the week of $687.50 ($500 straight time + $187.50 overtime pay).

However, there is an alternative method of payment authorized under the Fair Labor Standards Act. This method is called the “fluctuating workweek method.” Under the fluctuating workweek method of compensation, the employer and employee agree the employee will be paid a stipulated salary with the clear understanding that this salary constitutes straight-time compensation for all hours worked, regardless of number. The best practice is to have this agreement in writing, signed by the employee. The regular rate is determined by dividing the salary by the number of hours worked. Thus, if an employee works 40 hours in a workweek and the agreed salary is $500 per week, the employee’s hourly rate is $12.50/hr. However, if the employee works 50 hours in a week, the employee’s hourly rate is $10/hr. Because the salary constitutes straight time pay for all hours worked in a given workweek, the employee need only be paid an additional one-half the regular hourly rate for hours over 40 in a workweek, in this case $5/hr. ($10/hr. x .5). Therefore, an employee’s total compensation for a 50 hour workweek would be $550 ($500 salary + $50 overtime).

As you can see, this results in significant savings. Sticking with our example of the 50 hour workweek, the fixed rate employee is paid $687.50, while the fluctuating workweek employee is paid $550. This results in a savings of $137.50 to the employer using the fluctuating workweek method.

To further demonstrate these savings, let us examine an example where an employee works 60 hours in a workweek. The fixed rate employee, paid at a rate of $12.50/hr. straight time plus an overtime rate of $18.75/hr ($12.50 x 1.5), would receive compensation of $875 ($500 straight time + $375 overtime pay). By contrast, the employer utilizing the fluctuating workweek method would divide the agreed-upon salary by the total number of hours worked, (e.g., $500 salary/60 hours) resulting in an hourly rate of $8.33/hr. The overtime compensation rate is thus $4.17 ($8.33 x .5), resulting in the total overtime compensation for the workweek, $83.40 ($4.17 x 20 hrs.). Thus, the employee would be paid $583.40 ($500 plus $83.40 overtime). Again, the savings to the employer utilizing the fluctuating workweek method of compensation is obvious and significant: $291.60.

Implementing and utilizing this method of compensation is not without its pitfalls, however. Recall that the agreed salary is straight time compensation for all hours worked. This is subject to the requirement that the salary is sufficiently large enough to insure that the employee’s average earnings will not fall below the federally-mandated minimum wage. Returning to our example of a $500 weekly salary, if an employee works 80 hours in a given workweek, his average hourly rate would be $6.25/hr. ($500 salary/80 hours). Since the current federal minimum wage is $6.55 hour, this example drops the employee below the minimum wage and is therefore impermissible.

Another common pitfall is reducing an employee's salary when that employee works less than 40 hours in a workweek. Remember, the agreed salary is compensation for all hours worked in a workweek, regardless of number. Hence, if an employee works only 30 hours in a workweek, that employee’s salary is still $500. If an employer is utilizing the fluctuating workweek method, it cannot revert to a fixed rate method for those weeks employees work less than 40 hours.

Finally, the fluctuating workweek method can only be employed in cases where the number of hours an employee is required to work varies from week to week. If an employee’s hours are typically 40 hours week to week, this method cannot be used.

Conclusion
The fluctuating workweek method of compensation offers employers a more economical method of compensating employees, resulting in significant cost savings over a fixed rate of compensation, especially in situations where employees are regularly called upon to work different hours week to week and in excess of 40 hours per week. Once again, any employer thinking of implementing this method of wage payment is urged to seek the advice of counsel before doing so to ensure compliance with all applicable laws and regulations.

Lee R. Sparks is an attorney in Jackson, Tennessee, helping small business people more effectively run their businesses. He can be contacted at (731) 554-2880, or by email at lrsparks@mac.com.

GINA Becomes Law

by Graham W. Askew

In what is commonly referred to as the first major civil rights bill of the new century, the Genetic Information Nondiscrimination Act of 2008 (“GINA”) is a new federal law that protects Americans from being treated unfairly because of differences in their DNA that may affect their health. Proponents of GINA contend the law was needed to help ease concerns about discrimination that might keep some people from getting genetic tests that could benefit their health. GINA also enables people to take part in research studies without fear that their DNA information might be used against them in health insurance or the workplace.

Title I – Health Insurance
Title I of GINA is modeled after the Health Insurance Portability and Accountability Act of 1996 (“HIPPA”) and regulates group health plans and issuers of health insurance. It becomes effective on May 21, 2009, and prohibits group plans and health issuers from:

• Adjusting premium or contribution rates for the group on the basis of the genetic information of individuals in the group;

• Requiring or requesting an individual or family member undergo a genetic test;

• Requesting, requiring or purchasing genetic information for underwriting purposes or prior to enrollment in the plan; and

• Using or disclosing protected health information that is genetic information for underwriting purposes.

Importantly, GINA does not prevent an issuer of health insurance from increasing the premium charged to a group health plan based on the manifestation of a disease or disorder of an individual. Nor does GINA prevent a group health plan or issuer from obtaining and using the results of a genetic test in deciding whether to pay a claim.

Title II - Employers
Title II of GINA is modeled after Title VII of the Civil Rights Act of 1964 and regulates employers, employment agencies and labor organizations. It becomes effective on November 21, 2009, and prohibits the aforementioned entities from:

• Discriminating on the basis of genetic information, without regard to how the information is derived by the entity in question, in hiring, termination, compensation and other personnel actions such as promotions, classifications and assignments;

• Requiring genetic testing or purchasing or collecting genetic information under most circumstances;

• Disclosing genetic information under most circumstances; and

• Maintaining any genetic information received by the employer with confidentiality and disclosing it only to the employee.

Impact of the New Law
Practitioners in the area of employment law are advised to become well acquainted with GINA and its provisions. Penalties for violating GINA can be significant depending on the particular infraction. Additionally, clients will undoubtedly be interested in conforming current and future policies to the prohibitions set forth in GINA and as defined in the anticipated regulations.

The impact of GINA will correspond to the gradual increase in the understanding and use of genetic information. Unlike the Civil Rights Act of 1964, which was premised on a well- developed record demonstrating the inadequacy of the existing law with regard to actual sexual harassment, opponents to GINA contend there is no evidence that employers or insurers are currently discriminating against individuals based on genetic information. However, in the years since GINA’s inception roughly 13 years ago and its enactment, use of genetic information has grown exponentially, revolutionizing nearly all areas of biomedical research and promising an eventual transformation of health care. Genetic tests now encompass more than 1,500 conditions with most of the growth in the area of common diseases suffered by the general population. With many of these tests becoming available in the clinic and some even being offered directly to consumers, it is likely the preemptive approach adopted by the federal government in the passage of GINA will become essential.

Graham W. Askew is an associate with Butler, Snow, O’Mara, Stevens & Cannada, PLLC. Mr. Askew is a member of the firm’s Labor & Employment Practice Group, where he concentrates in the areas of employment litigation, traditional labor law, and business immigration. He received his J.D. at Wake Forest University School of Law. Contact him via e-mail at graham.askew@butlersnow.com.

Supreme Court Rules Kentucky Retirement Plan Does Not Discriminate Based on Age

by D. Wes Sullenger

Kentucky’s retirement plan for “hazardous position” workers does not discriminate against older workers on the basis of age even though the plan adds unworked years of service to the benefits provided certain younger employees because this arrangement was based on legitimate factors other than age.

Kentucky’s plan provided retirement benefits for law enforcement officers, firefighters, paramedics, and other “hazardous position” employees. Most of these employees became eligible for retirement after 20 years of service or after five years of service and attaining the age of 55. These retirees received benefits calculated as years of service multiplied by 2.5% multiplied by final pre-retirement pay.

The plan also, however, had special provisions for employees who became disabled but were not yet eligible for retirement. A disabled employee could retire immediately if he or she had either worked for five years or became disabled in the line of duty. The plan adds the number of years of service (“imputed years”) necessary to make the employee eligible for retirement. Thus, if an employee with 17 years of service became disabled at age 48, the plan adds three years of service and calculates retirement benefits as if the employee had 20 years of service. Similarly, if an employee with 17 years of service became disabled at age 54, the plan adds one year of service and calculates benefits based on 18 years of service.

A law enforcement employee challenged the system of imputed years as discriminatory. He worked in a sheriff’s department past the age of 55, at which he became eligible for retirement, until he became disabled at age 61. When he retired, his benefits were based on the standard years of service times 2.5% times final pay. He claimed he was discriminated against based on his age in not receiving any imputed years of service as younger workers would have received upon developing a disability.

In Kentucky Retirement Systems v. EEOC (June 19, 2008), the Supreme Court, however, rejected his claim. The Court determined the provision of imputed years of service to some younger workers was based on pension status rather than on age. Rather than discriminating, Kentucky promised all hazardous position workers the imputed service benefit on equal terms. Regardless of the age at which they started work, they were promised sufficient years of service to earn retirement benefits if they were to become disabled during the course of their work. Moreover, this does not provide a retirement advantage to employees who become disabled as the plan only provides disabled employees with the minimum number of years of service to earn retirement benefits; it does not provide years of service beyond the minimum retirement age to enhance benefits as the employee challenging the plan sought.

In order to prove a claim of intentional discrimination because of age in violation of the Age Discrimination in Employment Act (ADEA), the plaintiff must show the employer took action to disadvantage him because of his age. The statute states its remedy is available to stop employers from taking adverse actions on the basis of stereotypical negative assumptions about age. Kentucky’s plan, though, did not assume all disabled workers would be older but instead assumed no disabled workers would have worked to the point of being both disabled and pension eligible. This assumption, which was not based on age-related stereotypes, applied equally to all workers.

The Court, therefore, determined Kentucky’s plan did not discriminate based on age. Lacking proof of a benefit to younger workers that was not available to older workers, the Court rejected the discrimination claim and let Kentucky’s retirement plan continue in effect.

D. Wes Sullenger is an attorney with the Sullenger Law Office in Paducah, Kentucky. His practice focuses on Fair Labor Standards Act collective actions and representing individuals in discrimination and other employment law matters. Wes is licensed in Tennessee and Kentucky.

by Alisha I. Wyatt

Can an employer ban employees from bringing a gun to work, even if the weapon is kept in their locked vehicle? With the downturn in the economy, this may be an important to ask due to the threat of employee violence in reaction to layoffs. To answer this question, one must look at two recent developments: the enactment of the “take-your-guns-to-work” law in Florida and the Supreme Court’s ruling on the Second Amendment.

The State of Florida enacted a new law, effective, July 1, 2008, prohibiting all public and private employers from discriminating against any employee, customer, or invitee for exercising the right to keep and bear arms. In essence, the law prohibits business owners from banning guns kept locked in motor vehicles parked on their private property as long as the employee possesses a valid concealed-weapon permit. Other states passing so-called “take-your-guns-to-work” laws are Alaska, Kansas, Kentucky, Minnesota, Mississippi, Nebraska, and Oklahoma, although Oklahoma’s law has been enjoined by a federal judge.

The United States Supreme Court decided, in late June, the Second Amendment protects an individual’s right to possess a firearm. In so doing, the Court found D.C. handgun laws, which generally prohibited individuals from carrying a handgun without a license, only allowed licenses to be valid for one-year increments and required individuals to keep their guns unloaded, disassembled or bound by a trigger lock, were unconstitutional. The Court found the text and history of the Second Amendment demonstrates the original intent of the founders was to preserve an individual’s right to keep and bear arms. Furthermore, the Court confirmed this interpretation by finding it analogous to several state constitutions, ratified before or immediately after the Second Amendment, including Pennsylvania's constitution, which states “the people have the right to bear and keep arms for the defense of themselves, and the state.” However, the Court held the Second Amendment is not unlimited and did not limit a state’s right to regulate gun use but simply held a state cannot wholly prohibit gun ownership without violating the Constitution.

Under Florida’s new law, employers may not prohibit an employee from keeping a legally possessed gun in his car. An employee who feels his right to take his gun to work has been violated may bring suit to enforce his right. However, the law does not apply to the following workplaces: schools, correctional facilities, nuclear-power plants, properties involved in national security, and businesses, whose primary activity involves manufacture of combustible materials.

The National Rifle Association, who backed the Florida bill, has embarked on a state-by-state campaign to influence legislatures to enact these so-called “take-your-gun-to-work” laws. They believe it is a question of whether employees can protect themselves on their drive to and from work. Critics of the law feel the law will give disgruntled employees immediate access to deadly weapons and increase workplace violence. Their fears are supported by studies that show jobsites where guns are permitted are more likely to suffer workplace homicides than those where guns are prohibited. Just recently, a Kentucky employee who under their state law had the right to store a gun in his vehicle, retrieved a gun from his vehicle and killed five co-workers and then himself.

A federal district has upheld Florida’s new law as relates to employees but ruled it unconstitutional in relation to customers of businesses. Eventually, the Supreme Court will likely be forced to decide whether an employer’s rights as a property owner are greater than an employee’s right to bear arms while on private property.

Supreme Court Expands Remedies for Alleged Victims of Retaliation in the Workplace

by Drew Farmer

Soon after the end of the Civil War, Congress enacted a law, Section 1981, to give former slaves “the same right . . . to make and enforce contracts . . . as is enjoyed by white citizens.” In CBOCS West, Inc. v. Humphries (May 27, 2008), the Supreme Court ruled this law’s language prohibits private employers from retaliating against employees of any race who complain about alleged racial discrimination in the workplace. The Court’s decision confirmed Title VII is not the only federal source of a remedy for alleged victims of this specific type of workplace retaliation. While limited in scope and not particularly surprising, the decision is important in effect.

The Case at Bar
An assistant manager in a well-known restaurant chain complained to other managers that one of his black co-workers had been terminated on the basis of race. The corporate owner of the restaurant chain later terminated the assistant manager. He filed a charge of discrimination with the Equal Employment Opportunity Commission (EEOC) alleging the company’s action violated the anti-retaliation section of Title VII. In his subsequent federal lawsuit, he claimed the same action also violated Section 1981. Section 1981 has nothing to do with modern-day workplace retaliation. The Court, over the objection of two Justices, ruled Section 1981 does apply to and prohibit workplace retaliation against employees complaining of racial discrimination.

Court’s Analysis
The Court principally relied on two of its prior decisions interpreting two different but similar laws. In 1969, the Court had interpreted another post-Civil War law, Section 1982, which gave former slaves “the same right . . . to inherit, purchase, lease, sell, hold, and convey real and personal property as is enjoyed by white citizens.” The Court ruled this law permitted a white man to sue a homeowners’ corporation in which he was a member for expelling him and refusing to approve his attempted assignment of a membership share to his black tenant. The second case, which was decided in 2005, ruled a male school teacher who complained about alleged gender discrimination against female student athletes was protected by a federal spending law that prohibits “discrimination on the basis of sex.”

The Court relied on these cases in support of its conclusion that the absence of specific anti-retaliation language in an anti-discrimination law, such as Section 1981, does not mean a court cannot interpret the anti-discrimination law to prohibit retaliation to the same extent it prohibits discrimination.

The Court relied on additional grounds besides the prior cases. A House Report that accompanied the Civil Rights Act of 1991 explicitly stated the pro-plaintiff amendments to Section 1981 were intended by Congress to “restore” the right to sue for retaliation under Section 1981, which right Congress believed had pre-existed but had been erroneously removed by a 1989 Supreme Court case. The Court in 2008 found it significant that the Congress responsible for the 1991 amendments believed Section 1981 had covered workplace retaliation since the 19th century, despite the absence of any anti-retaliation language in Section 1981. Furthermore, the Court was influenced in notable part by the “broad consensus” among lower courts that Section 1981 prohibits workplace retaliation for complaints of race discrimination.

For these reasons, the Court rejected all of the company’s arguments and confirmed Section 1981 prohibits employers from retaliating against an employee who engages in protected activity in opposition to alleged race discrimination.

So what?
Employers may legitimately ponder why Section 1981 matters if Title VII already prohibits workplace retaliation related to complaints of race discrimination. The two laws, however, do not overlap in every respect. The differences provide a potentially potent weapon for plaintiff’s lawyers and potentially costly traps for employers and their counsel.

For instance, under Title VII, employees alleging retaliation are required to file charges with the EEOC within as few as 180 and as many as 300 days after the alleged retaliation or they lose the right to file a lawsuit on the same basis. However, employees alleging retaliation for complaints of race discrimination under Section 1981 are not required to pursue any remedies with the EEOC, and they may have up to four years after the alleged retaliation to file suit. Employees alleging retaliation under Title VII, even if successful, may not recover compensatory or punitive damages exceeding the statutory caps on such damages. On the other hand, a successful Section 1981 plaintiff is not limited by any statutory cap on compensatory or punitive damages. Thus, an employer’s potential exposure is greater under Section 1981, in the amount of damages that may be awarded against it and in the statute of limitations.

Nor may employers assume the Court’s decision will be limited to those employees who claim retaliation as a result of complaints about alleged race discrimination. Other decisions of the Court suggest, and some lower courts have ruled, Section 1981’s primary focus on race discrimination does not prevent it from also applying to discrimination based on color or national origin or alienage. Therefore, employees who complain about color, national origin, or alienage discrimination will probably are protected from retaliation based on such complaints under the more plaintiff-friendly Section 1981.