2008 LABOR & EMPLOYMENT LAW UPDATE

The Labor and Employment Group is busy planning our Annual Labor & Employment Law Update. This years seminar will be held on September 25, 2008, at Old Overton Club (we will have better chairs!). Save the date, and tell your favorite MC&G lawyer about any special topics you’d like to see addressed.

THE AGING WORKFORCE – THINGS ARE CHANGING

Recent research shows that older Americans are working longer than they did just ten years ago – but not necessarily for the companies that were their primary career choice. The May 15 Wall Street Journal reports that several different research organizations including the Employee Benefits Research Institute, the Bureau of Labor Statistics, and the Boston College Center for Retirement Research have collectively painted the following picture of retirement trends:

• The average age for retirement has increased from 60 to 62 in the last ten years.
• The percentage of people between ages 60 and 64 with full-time jobs increased 5% over the past decade.
• For men between 58 and 62 who are still in full-time jobs, only 40% work for the same company that employed them at age 50. Twenty years ago, 70% of this group were with the same company. Several reasons are given for these trends, including:
• Baby boomers have not saved and planned for retirement as well as their parents.
• The decline in traditional defined benefit pension plans and lower earnings on 401(k) investments leaves employees with less retirement income.
• Today’s jobs require less physical stamina, allowing older workers to stay on the job longer.
• Age discrimination laws have eliminated mandatory retirement programs.

Some companies are developing programs that attract older workers. For example:

• CVS Caremark has about 1,200 employees who work part-time in northern states during the summer, but who migrate to the chain’s Florida drug stores for winter work.
• Borders bookstores finds part-time older workers appealing because its customer base largely consists of people 45 and older.
• Blue Cross Blue Shield Association of Chicago offers older professional employees financial planning assistance and more time off to persuade them to defer retirement.

ASSOCIATION DISCRIMINATION – BASKETBALL COACH “TOO EXPENSIVE TO FIRE”

Iona College in New York fired a white assistant basketball coach who was married to a black woman. The coach sued, claiming that he was fired because of his association with a person of another race. Other Federal courts, including the Appeals Court covering Alabama, Georgia, and Florida, have previously held that this “association discrimination” is illegal. What makes this case interesting is Iona’s defense – which pointed to the fact that the head basketball coach was also white and also married to a black woman but was not fired. The Federal Appeals Court in New York dismissed this evidence, saying that the college may have taken action against the assistant but not the head coach “because the head coach was too expensive to fire.”

NONCOMPETE AGREEMENTS – STATE AND NATIONAL DIFFERENCES MATTER

Consider this scenario from a recent court decision: A genetic research company located in Iceland hired researchers from the U.S., Scotland, Slovenia, and Iceland. All signed noncompete agreements enforceable under Icelandic law. A group of these researchers then decided to leave and open a competing company in Philadelphia. Is their Icelandic agreement valid in the USA?

The answer in this case was “yes,” but the answer would probably have been different if the employees had decided to open their new shop in Atlanta, San Francisco, Chicago, or Dallas. Why? Because unlike Pennsylvania, the courts in Georgia, California, Illinois and Texas are hostile towards noncompete agreements and will enforce them only in very limited circumstances.

In today’s information world, where many businesses operate primarily through electronic communications, physical location is often a matter of choice in that the business could operate effectively from any location. Since U.S. states and even different countries take markedly different views towards noncompete agreements, this is becoming a factor in where a new business will locate. Courts in Great Britain or Germany look at noncompete agreements with disfavor, whereas French courts treat them as routine contractual matters to be enforced as a normal business practice. Within the USA, most states (but not all) will enforce a noncompete agreement that is limited in both time (2 years or less) and geography (the territory in which the employee worked), but each state has its own rules about such issues as whether to flatly refuse to enforce an overly broad noncompete agreement, or to rewrite the agreement to make it more reasonable and enforce it only as modified.

Companies that operate from multiple locations or which sell/distribute products nationwide face drafting issues when trying to craft noncompete agreements that may be subject to litigation in different states. Of course, the agreement itself can specify which state law will be applied, but courts sometimes ignore this contractual provision. For companies concerned about employees “jumping ship” and opening a competing business in another state that favors free and open competition, the best advice is to draft the agreement as narrowly as possible to protect true core interests (such as customers with whom the employee had actual contacts) with the hope that even courts in a hostile state will enforce a narrow agreement.

WELLNESS PROGRAMS – CONTROVERSY BREWING

Wellness programs are becoming more popular as corporate America looks for ways to trim rising healthcare costs. The types of programs offered vary widely, and more aggressive programs can result in litigation.

Consider Scott Rodriquez, who worked for Scotts Miracle-Gro in Massachusetts. Miracle-Gro implemented a no tobacco use policy in 2005 as part of its wellness program. In November 2006, Rodriquez took a urine drug test. When the test results showed traces of nicotine, Rodriquez was fired. He sued Miracle-Gro for invasion of privacy and for violating the Employee Retirement Income Security Act (ERISA), which prohibits employer sponsored health care plans from discriminating against covered employees on the basis of their health. The lawsuit alleges that Miracle-Gro is trying to weed out smokers because they are more likely to have health issues, and therefore use healthcare benefits. The trial court in Massachusetts recently ruled that Rodriquez had a viable claim.

Other wellness programs face similar potential challenges by giving discounts on health insurance premiums to employees who meet certain targets for blood pressure, cholesterol, and body mass index or by imposing penalties such as higher premiums or deductibles for those who do not reach target levels.

Some companies offer cash bonuses or merchandise prizes to employees who participate in wellness programs. In some cases, the bonuses and prizes are tied to achievement of specified health targets. These types of incentives are considered to be lawful.

Employees generally perceive voluntary wellness programs in a positive light and as a valuable employee benefit. But companies that use healthcare benefits to penalize or reward employees risk challenges to their programs.