Thursday, January 31st, 2008

Severance Agreements and Waivers of FMLA Rights

The April 2007 and September 2007 Tip Sheets reported on how recent court rulings have made it harder to structure binding severance pay agreements by making it difficult for employees to waive certain types of claims. The September article highlighted a recent decision by the Federal Appeals Court in Richmond saying that employees can never waive FMLA rights without having the waiver document (severance agreement) approved in advance by the Department of Labor or by a Federal court. The Appeals Court’s decision has been criticized by many employer groups, including the U.S. Chamber of Commerce, the Equal Employment Advisory Counsel, and the Society for Human Resource Management, all of which have filed “friend of the court” briefs with the U.S. Supreme Court asking that the decision be reversed. Indeed, The Department of Labor was critical of the Appeals Court’s decision as well.

This past month, the U.S. Supreme Court officially asked the U.S. Solicitor General, the designated spokesperson for the federal government on matters pending before the Supreme Court, for a written opinion on whether the government supports or opposes the Appeals Court’s position. This action by the Supreme Court is a strong indicator that the Court seriously questions the soundness of the Appeals Court’s ruling. If so, that is good news for employers. A reversal of the lower court’s decision would make severance pay agreements more binding and enforceable.

Instant Messages Sink Employee’s Claim for Sexual Harassment

Normally, the discovery process in employment lawsuits involves the plaintiff/employee’s lawyer searching for emails, text messages, or other documents that confirm the employee’s claim. In an unusual twist, one employee/plaintiff saved instant messages she exchanged with her boss, but the documents were used to sink the employee’s claim of sexual harassment.

Amy Kraus worked for Cingular, now known as AT&T, Inc. She filed a suit against Cingular for sexual harassment, alleging that her boss made sexually charged comments, a sexually explicit telephone call, and told her that he would help her find a permanent job in exchange for sexual favors. To help prove her allegations, Kraus brought forward a series of instant messages between Kraus and her supervisor.

The messages began when the supervisor told Kraus that he had a sexual dream about her. In response, Kraus asked the supervisor for details about the dream and told the supervisor that she had sexual thoughts about him as well.

The Federal judge reviewing the case read the text messages and concluded that Kraus and her boss had each made flirtatious statements to the other. Kraus contended that her statements were intended to be nothing more than “compliments” to her boss and that she had no “actual liking” for him. The judge read all the messages and held that “a reasonable person viewing the totality of the situation, could not find that the IM conversation between the supervisor and Kraus constituted anything other than intersexual flirtation which the Supreme Court has stated should not be mistaken with discriminatory conditions of employment.” Based on the instant messages, the judge held that the supervisor’s conduct was not unwelcome, but rather that this case was an example of sexual banter between two consenting adults that was not sufficient to create a hostile work environment.

Wellness Programs – Can Employees Earn Discounts on Health Insurance Costs?

Many companies sponsor employee wellness programs that encourage employees to develop healthier lifestyles. A typical wellness program can include nicotine cessation classes, exercise programs, and diet counseling. The goal of wellness programs is to promote good health by lowering weight, cholesterol, and blood pressure.

Some companies go so far as to offer financial incentives, in the form of lower deductibles and co-pays on health insurance, for those employees who participate in wellness programs and meet defined criteria for body-mass index, cholesterol counts, blood pressure readings and non-nicotine use.

The U.S. Department of Labor issued a release dated December 7, 2007, warning companies that these financial incentives violate its rules requiring that group health insurance coverage “must not differentiate among individuals in eligibility, benefits, or premiums based on any health factor of an individual.”

The DOL release threatened “enforcement action” against companies that sponsor wellness programs which include this type of financial incentive.

Commentators questioned whether any type of financial incentive or reward offered by a wellness program, such as a cash award for meeting certain defined wellness criteria, can be offered without running afoul of the Department of Labor’s rules. Obviously, a cash award could be used by an employee to pay employee portions of premiums, deductibles or co-pays. For now, however, the general thinking is that cash awards remain OK.

Goldsmith v. Bagby Elevator Co.

The U.S. Court of Appeals for the Eleventh Circuit, which controls Alabama, Georgia, and Florida, released a decision in Goldsmith v. Bagby Elevator Co., Inc. on January 17. The case was about a former employee who sued his employer on claims of race discrimination, hostile work environment, and retaliation. The company was ultimately found liable for over $700,000, including punitive damages. The Court of Appeals raised three points of note to companies and employers:

  1. While an effective anti-discrimination or anti-harassment policy is an effective defense against an employee’s claims, a well written policy that is not adhered to is meaningless. The employer in this case had specific and well written policies, but management rarely, if ever, followed or enforced them. Not only could the employer not avail itself of the defense usually granted to employers with effective anti-discrimination and anti-harassment policies, the fact that they had a policy but did not follow it actually contributed to the punitive damage award, since it showed that the employer knew that the conduct at issue was prohibited by law but failed to act;
  2. While you can usually require employees to sign dispute resolution agreements as a condition of their continued employment, you cannot require them to sign an agreement that impacts claims or charges that are currently pending. Any “enforcement” against them for not signing an agreement that would impact a current claim or charge would be considered retaliation; and
  3. Racial slurs or statements made wholly outside the work environment by a supervisor or member of management are admissible as suggestive of the racial tone of the workplace under that person. In other words, what matters is what your key people say and the language they use, not where they say it.