May 2002 edition

Supreme Court Invalidates FMLA Regulation

Under the Family and Medical Leave Act (FMLA), qualified employees are entitled to a total of 12 workweeks annually of unpaid FMLA leave following certain events: a disabling health problem; a family member’s serious illness; or the arrival of a new son or daughter.  29 U.S.C. Section 2612(a)(1).  When the FMLA was enacted, Congress directed the Department of Labor to issue regulations necessary to carry out the Act.  The regulations include provisions requiring employers to give employees written notice that an absence will be considered FMLA leave, and detailed information concerning the employees’ rights and responsibilities under the Act.  29 C.F.R. Sections 825.208(a) and 825.301(c).  A separate regulation penalizes employers who breach these notice requirements.  This regulation, 29 C.F.R. Section 825.700(a), provides:
If an employee takes paid or unpaid leave and the employer does not designate the leave as FMLA leave, the leave taken does not count against an employee’s FMLA entitlement.
On March 19 of this year, in a 5-4 decision, the U.S. Supreme Court ruled that this regulation is contrary to the FMLA and invalid.  Ragsdale v. Wolverine World Wide Inc., 122 S. Ct. 1155 (2002).
Tracy Ragsdale, the Plaintiff in this case, was diagnosed with Hodgkins disease while an employee of Wolverine World Wide, Inc.  Her prescribed treatment involved surgery and months of radiation therapy.  She was eligible for seven months of unpaid sick leave under Wolverine’s leave plan.  Wolverine granted her requests for a leave of absence, and Ragsdale missed 30 consecutive weeks of work.  Wolverine held open her position and maintained her health benefits throughout this entire 30 week period.  However, it did not notify Ragsdale that 12 weeks of the absence would count as FMLA leave.
When Ragsdale sought an additional extension of her leave of absence, Wolverine advised her that she had exhausted her seven months under the company plan.  The company terminated her when she did not return to work.  She sued, relying on Section 825.700(a), and claiming that because Wolverine had failed to designate her leave as FMLA-qualifying, the 30 weeks of leave did not count against her FMLA entitlement, and that therefore she was entitled to another 12 weeks of leave.
The U.S. District Court for the Eastern District of Arkansas granted Wolverine summary judgment on Ragsdale’s claim, finding the regulation to be invalid because it required Wolverine to grant Ragsdale more than 12 weeks of FMLA leave in one year.  The Eighth Circuit Court of Appeals agreed.  The U.S. Supreme Court affirmed the decision of the Eighth Circuit Court of Appeals.  It noted that Section 825.700(a) punishes employers who fail to provide timely notice of the FMLA designation by denying them any credit for leave granted, regardless of whether an employee suffers any prejudice as a result of the lack of notice.  Calling the regulation a “categorical penalty” that is incompatible with the “FMLA’s comprehensive remedial mechanism,” the Court struck it down as an invalid exercise of DOL’s discretion to promulgate regulations. 
This decision is a clear victory for employers.  Now, if an employer fails to designate leave as FMLA leave, in most cases, and absent any showing of prejudice to the employee, it may still count the leave taken against the 12-week FMLA entitlement.  However, employers should continue to provide employees written notice of their rights and obligations under the FMLA and notice that an absence is FMLA qualifying.  Although the Court struck down the provision in Section 825.700(a) that categorically penalizes employers for failing to designate an absence as FMLA leave, it did not invalidate the notice requirements set forth in the regulations.  In fact, the Court expressly noted its decision did not address the validity of these notice provisions.
Further, the Court based its decision that the regulation is invalid, at least in part, on its finding that the regulation relieves employees of the burden of proving any real impairment of their rights or any resulting prejudice.  Thus, the decision does not necessarily eliminate an employee's right to pursue a legitimate claim that a failure to designate leave as FMLA qualifying somehow constituted an interference with, or denial or restraint of an employee’s FMLA rights.
Finally, it is sound practice to apprise employees of their rights and obligations as employees, even absent a statutory or regulatory provision imposing a penalty on employers who fail to do so.

Arbitration Agreements Not Binding On EEOC

On January 15, in EEOC v. Waffle House, Inc., the U.S. Supreme Court served up a decision in which it held that an agreement to arbitrate employment disputes between an employer and an employee does not bar the Equal Employment Opportunity Commission (“EEOC”) from bringing suit on its own and seeking victim-specific relief such as backpay, reinstatement and compensatory damages.  The Court reasoned that the statutory scheme covering EEOC’s enforcement powers does not support a finding that a private arbitration agreement materially changes the EEOC’s function or the remedies available to it.
In the underlying civil action, Eric Baker agreed in his employment application with Waffle House that any dispute or claim concerning his job would be settled by binding arbitration.  Two weeks after he started work, Baker suffered a seizure at work and Waffle House terminated his employment.  Baker did not initiate arbitration proceedings, but rather filed a discrimination charge with the EEOC alleging that his termination was a violation of the Americans with Disabilities Act (“ADA”).  Subsequently, the EEOC filed an enforcement action against Waffle House in federal court in which Baker was not a party.

In its decision, the Supreme Court reiterated that arbitration is a matter of consent, not coercion.  When the EEOC is not a party to the arbitration agreement, then it has not agreed to arbitrate its claims against the employer and will not be bound thereby.  Waffle House makes clear that an arbitration clause enforceable against a former employee will not preclude EEOC from bringing an action on that person’s behalf.  The Court did not consider the issue of whether a settlement, release or arbitration award for an employee would ultimately affect the validity of an EEOC’s claim (or the type of relief the EEOC may seek).  The Justices did, however, specifically state that courts can and should preclude double recovery by an individual.

OSHA’s New Recordkeeping Rules

Earlier this year, a new federal workplace injury and illness recordkeeping regime took effect.  The Occupational Safety and Health Administration (OSHA) has promised that the new requirements will be easier for employers to understand, offer more accurate workplace statistics and will go farther in protecting employee privacy.  OSHA has begun a broad outreach effort geared to employers, including a new page on its agency website devoted to the changes: www.osha-slc.gov/recordkeeping/index/html.
Federal law now requires covered employers to comply with revised regulation 29 C.F.R. Section 1904 and to use OSHA’s new Form 300 (Log of Work-Related Injuries and Illnesses), Form 300A (Summary of Work-Related Injuries and Illnesses), and Form 301 (Injury and Illness Incident Report).  Many covered employers, however, are just now encountering the nuances imposed by OSHA’s new recordkeeping rules.

For example, many employers are reporting uncertainty on the ramifications of the new rules on workers’ compensation reports.  OSHA is assuring covered employers that recording an injury or illness neither affects a person’s entitlement to workers’ compensation nor necessarily proves a violation of some OSHA safety rule.  The provisions of Maine’s Workers Compensation Act of 1992 have no direct impact on whether a case needs to be recorded on an OSHA Form 300 Log.  It is conceivable that some injuries are compensable but not OSHA recordable, while others may be OSHA recordable but not compensable under the Maine Act.

Additionally, the fact that an employee makes a report of injury does not establish the existence of the injury for recordkeeping purposes.  In determining whether an injury is recordable, an employer must first decide whether an injury, as defined by the OSHA regulation, has occurred.  Employers who are uncertain about whether an injury has occurred may refer the employee to a physician or other medical professional for evaluation and may consider that person’s opinion in determining whether an injury exists.   If the person diagnoses a significant injury or illness within the meaning of 29 C.F.R. Section 1904.7(b)(7) and the employer determines that it is work-related, then the injury must be recorded.

Under the old rule, all workplace illnesses had to be recorded, regardless of severity.  Now, recordability requirements are more subtle.  The new regime requires that injuries and illnesses be recorded according to the same criteria, meaning that some minor illnesses no longer need be recorded.  Employers are obligated to record work-related injuries or illnesses only if they result in one of the following: death; days away from work; restricted work or transfer to another position; medical treatment beyond first aid; loss of consciousness, or diagnosis of a significant injury/illness by a physician or some other licensed medical professional.  Despite this liberality, the new rules impose a stricter standard with respect to needlestick and sharps injuries.  Unlike the old standard, employers must now record all such incidents to the extent that the injury involves potential contamination by other person’s blood or a potentially infectious material.  Specific criteria are also provided in the new regulation for deciding when a mental illness is to be considered work-related.

Lastly, the new regulations expand employee privacy protections.  Employers are required to protect employee identities by withholding an individual’s name from a Form 300 for certain types of sensitive injuries and illnesses (e.g., HIV infections, mental illnesses, sexual assaults).  A complete list of all injuries and illnesses considered “privacy concern” cases is provided at 29 C.F.R. Section 1904.29(b)(7).  Moreover, employers are now required to remove employee names before providing injury and illness data to third parties who do not have access rights under the regulation.   However, all covered employers must keep a separate, confidential list of the case numbers and employee names for all privacy concern cases, in the event that OSHA requests disclosure.

Who Is A Supervisor?  The Supreme Court Speaks

To an employer faced with unionization efforts, the classification of an employee as a supervisor is a critical distinction.  Over the years, numerous disputes have been heard by the National Labor Relations Board itself, by the circuit courts of appeal, and by the United States Supreme Court.  In a recent decision, the Supreme Court overturned a longstanding NLRB interpretation that had previously resulted in denial of supervisory status to many who are now entitled to such standing.  National Labor Relations Board v. Kentucky River Community Care, Inc., 532 U.S. 706 (2001). 

The National Labor Relations Act sets forth a three-part test for determining supervisory status.  Employees are supervisors if (1) they hold the authority to engage in any one of 12 listed supervisory functions*, (2) the employee’s exercise of such authority is “not of a merely routine or clerical nature, but requires the use of independent judgment,” and (3) the employee’s authority is held “in the interest of the employer.”  The NLRB, however, has historically taken the position that the exercise of judgment by employees who are permitted by their employer to exercise a significant degree of discretion is not “independent judgment” if it is a particular kind of judgment, namely, ordinary professional or technical judgment in directing less skilled employees to deliver services.  Thus, even though an employee might appear to be responsibly directing employees and exercising independent judgment in doing so, the NLRB took the position that if the judgment consisted of “ordinary professional or technical judgment” in directing less skilled employees, such actions were not sufficient to qualify those employees as supervisors.
In a strongly worded decision, the majority of the Supreme Court described the exclusion as “startling” and held that the Board’s interpretation could not be enforced.  The Court noted that the Board’s interpretation based supervisory status on a factor that was cited nowhere in the statutes or in their legislative history.  The case centered on a challenge to the status of six registered nurses in a facility providing care for individuals suffering from mental retardation and mental illness.  Prior to this decision, nurses whose only indicia of supervisory status was the authority to direct less skilled nurses in delivering medical services would be eligible for union membership based on the NLRB’s interpretation.  Now, that exercise of “ordinary professional or technical judgment” in directing less skilled nurses is sufficient to qualify those nurses as supervisors.
The decision will have significant impact on the healthcare industry, where unionization efforts continue to flourish.  The decision will not only impact those efforts, but may result in a wave of unit clarification actions whereby employers seek to have excluded from their current union membership those nurses who would be now classified as supervisors under the Supreme Court’s decision.

*The 12 functions include the authority to hire, transfer, suspend, layoff, recall, promote, discharge, assign, award, or discipline of employees, or responsibly to direct them, or to adjust their grievances or effectively to recommend such action.

Legislative Update: Severance Pay A Hot Topic

The second session of the 120th Maine Legislature recently adjourned in Augusta, but not without tackling issues in the employment law setting.  Front and center for legislators this session was the question of severance pay.  Two separate, and competing, bills seeking to make significant changes to Maine’s severance pay statute, found at Title 26 M.R.S.A. Section 625-B, were hotly debated on both the House and Senate floors.

A bold proposal to change Maine’s severance pay laws, L.D. 2054, An Act Regarding the Payment of Severance Pay, was killed completely by legislators.  Brought forward by Rep. John Tuttle (D-Sanford), this legislation proposed to alter in several ways the severance pay requirements currently in force against Maine employers.  Among other things, the amended version of the bill provided that a business’s bankruptcy no longer excuses an employer from its obligation to provide severance pay.  The bill also clarified that the amount of severance pay due to an employee must be based on the total number of years the employee worked at the establishment, including those before the current employer assumed ownership.  Finally, the bill sought to award interest (calculated from the date severance pay should have been made), attorney’s fees and costs to any employee who obtains a judgment against an employer for unpaid severance pay.  In its amended form, the bill passed the Democrat-controlled House by a vote of 88-55.  In the Senate, where Democrats barely outnumber Republicans, the measure failed by the smallest of margins, 18-17. 

The second bill considered by lawmakers, L.D. 2001, An Act to Amend the Law Regarding Severance Pay, was presented by Rep. David E. Bowles (R-Sanford).  In its original form, it provided that, upon a determination by the Department of Labor that a “substantial cessation of operations” in a business having more than 100 employees has occurred, any employee that was laid off within one year of the Department’s determination is automatically eligible for severance pay benefits.  After a hearing before the Legislature’s Joint Standing Committee on Labor, however, the bill was stripped of all of its substantive provisions.  What was left was merely a directive to the Department of Labor to adopt major substantive rules by January 15, 2003 implementing the current, much narrower severance pay law, which mandates that benefits be paid only to those individuals who are employed at a business at the time it relocates or closes down completely.  In its amended form, passage in the House and Senate was swift and relatively non-controversial, as was Governor King’s signing of it into law.

Thus, in the end, Maine’s severance pay statutes were left virtually unchanged in the second session.  Whether the rules to be adopted by the Department of Labor in the coming year will change the landscape remains to be seen.  For now, though, the Maine’s severance pay laws remain intact.