By, Ben DeGweck, Esq., Vice President and Associate General Counsel, Education Corporation of America and Carole Miller, Esq. Patrick Mulligan, Esq. Bressler, Amery & Ross, P.C.
As private sector schools continue to face heightened legal and regulatory scrutiny in 2015, management and campus leadership must be aware of the potential liabilities inherent in the employer/employee relationship. In the New Year we expect to see significant changes to employment laws and regulations, and unprepared employers could face legal actions, employee conflicts, or hefty fines. To avoid such pitfalls, schools must monitor their policies and practices to ensure compliance with recent developments. The following are just some of the areas where we see changes continuing to occur in 2015.
- The U.S. Equal Employment Opportunity Commission’s (EEOC) assault on severance agreements
In the EEOC’s recent Strategic Enforcement Plan, the agency announced that one of its priorities is to “target policies and practices that discourage or prohibit individuals from exercising their rights under employment discrimination statutes.” Evidence of this strategic shift can be found in two high profile lawsuits the EEOC filed against employers in 2014 alleging that their standard form severance agreements interfered with employees’ rights to file discrimination claims and participate in EEOC investigations. While the EEOC has faced initial setbacks in these cases (including the outright dismissal of one suit), the agency will likely continue to pursue employers utilizing severance agreements it contends are discriminatory. For employers perhaps the most troubling aspect of this attack is that the EEOC is challenging routine provisions widely used in separation agreements.
The EEOC filed its first suit on the subject in February 2014, alleging that CVS Pharmacy’s severance agreements violated Title VII of the Civil Rights Act of 1964. EEOC v. CVS Pharmacy, Inc. (N.D. Ill. February 7, 2014). Among other attacks on CVS’s standard agreement, the EEOC argued that the “covenant not to sue” illegally deterred former employees from filing charges of discrimination with the agency. This covenant stated that the employee in exchange for agreeing to the severance payments “agrees not to initiate or file, or cause to be initiated or file, any action, lawsuit, complaint or proceeding.”
In October 2014, the Court dismissed the lawsuit after finding that the EEOC failed to engage in the conciliation (settlement) procedures prior to filing suit as required by Title VII. Because it dismissed the case for a somewhat technical deficiency, the Court did not rule on the major substantive issues of the EEOC’s complaint. However, Judge John Darrah did provide employers with some helpful notes, expressing skepticism about the merits of the EEOC’s underlying allegations. Judge Darrah indicated that standard carve-out provisions used in severance agreements could adequately protect employees’ rights to participate in discrimination suits. On December 5, 2014, the EEOC appealed the dismissal to the Seventh Circuit Court of Appeals.
In a second case addressing the issue, the EEOC sued CollegeAmerica, challenging multiple provisions in the school’s separation agreements.
EEOC v. CollegeAmerica Denver, Inc. (D. Colo. Apr. 30, 2014). The EEOC took an even more aggressive stance than in the CVS suit, as the agency challenged separation provisions commonly used by employers, including a release against future claims, a cooperation provision, and a non-disparagement provision. On December 2, 2014, the Court dismissed the majority of the EEOC’s claims, determining that (as in the CVS case) the agency had failed to make proper conciliation efforts prior to filing the lawsuit. Although the Court allowed the case to continue to determine whether the school retaliated against the former employee, the decision will not provide any further guidance with regard to the EEOC’s controversial stance on severance agreements.
Because neither court reached the merits of the EEOC’s arguments, the issue remains largely unresolved. The agency has given every indication that it intends to pursue its enforcement agenda, and employers should monitor the ongoing litigation and review their current practices to ensure that their severance agreements comply with the evolving requirements.
- Background checks and hiring decisions
Since issuing guidance on the subject in April 2012, the EEOC has attempted to take strong steps to discourage employers from excluding individuals who have been convicted of crimes from hiring consideration. In June 2013, the EEOC filed separate class-action lawsuits against BMW and Dollar General Stores, alleging that these employers engaged in racial discrimination in violation of Title VII by using “bright line” criminal background checks to disqualify applicants from employment.
These cases could have a significant impact on the use of criminal background checks during the hiring process, a practice currently used by many employers (including the EEOC, as discussed below).
However, the EEOC has struggled in previous lawsuits related to employers’ use of background checks in hiring. In EEOC v. PeopleMark, Inc. (W.D. Mich. 2008), the EEOC filed a lawsuit against the temporary staffing company, alleging that its use of criminal background checks had a disparate impact on African-Americans. After two years of investigation and over a year of litigation, the EEOC agreed to dismiss the case, acknowledging that it could neither prove that PeopleMark had a blanket “no-hire” policy, nor could it identify candidates who were discriminated against. The Court awarded PeopleMark $750,000 towards its expenses defending the case.
The EEOC has also attempted to limit employers’ use of credit reports in making hiring decisions. In EEOC v. Kaplan Higher Education Corporation (N.D. Ohio 2010), the EEOC sued Kaplan, alleging that its practice of using credit histories in making hiring decisions had a disparate impact on African-American applicants. However, the EEOC’s expert witness lacked sufficient information to identify the race of the job applicants. He attempted to use other allegedly “scientific” methods to determine the race of applicants, such as reviewing photographs on record with state motor vehicle departments.
After evaluating the analysis, the Court excluded the expert’s report and testimony as scientifically unsound. Shortly thereafter, the Court dismissed the case in Kaplan’s favor. In its decision, the Court noted that the EEOC itself runs background checks on many of its job applicants. In April 2014, the Sixth Circuit Court of Appeals affirmed the District Court decision on all grounds. The Circuit Court admonished the EEOC for suing Kaplan “for using the same type of background check that the EEOC itself uses.”
The EEOC faced a similar setback in EEOC v. Freeman (D. Md. Aug. 9, 2013). In the case, the Court dismissed the EEOC’s allegations that an employer’s use of criminal and credit background checks violated Title VII. Freeman, a service provider for corporate events, utilized a nuanced background check program. Importantly, the company did not employ a blanket disqualification criteria based on the results of background checks. The Court dismissed the EEOC’s claims after finding that Freeman’s practices did not violate Title VII, stating, “Careful and appropriate use of criminal history information is an important, and in many cases essential, part of the employment process of employers throughout the United States…. [I]t is not the mere use of any criminal history or credit information generally that is a matter of concern under Title VII, but rather what specific information is used and how it is used.” The EEOC has appealed the decision to the Fourth Circuit Court of Appeals.
As the EEOC appears committed to litigating cases related to the use of background checks, employers should review their current practices and continue to monitor the outcome of the above cases.
- Genetic Information Nondiscrimination Act (GINA)
Enacted in 2008, GINA makes it illegal for employers to discriminate against employees or job applicants due to their genetic information, which includes family medical history. The law restricts employers from requesting, requiring or purchasing such information.
GINA remains a relatively new law, and many employers do not consider whether their standard practices currently request prohibited information.
In January 2014, the EEOC settled the first class action lawsuit brought under GINA, EEOC v. Founders Pavilion, Inc. (W.D.N.Y. 2014). In the case, the EEOC alleged that a nursing and rehabilitation center conducted post-offer, pre-employment medical exams of applicants, and annual exams if the person was hired. Additionally, the EEOC alleged that the company requested family medical history in violation of GINA. Early in the litigation, Founders agreed to settle all claims, entering an agreement to pay class members $110,400.
Similarly, in November 2014, the EEOC settled the first GINA case it filed in California, in which it alleged that three agricultural companies requested restricted genetic information from job applicants. EEOC v. All Star Seed, et al. (C.D. Ca. 2014). The three companies signed a consent decree agreeing to settle the claims for $187,500 and to refrain from requiring pre-offer medical exams.
Employers must also ensure that they do not acquire prohibited information when responding to requests for accommodations under the Americans with Disabilities Act (ADA) or Family and Medical Leave Act (FMLA). Inadvertent requests for such information can be avoided by revising medical information request forms and training staff on GINA’s restrictions.
- Company wellness programs
Although company wellness programs have become increasingly popular as a means to reduce spending on healthcare costs and promote a healthy workplace, recent actions taken by the EEOC show that the programs could carry significant legal risk. In 2014, the EEOC filed three lawsuits alleging that employers’ wellness programs violated the ADA and GINA. In the most recent lawsuit, the EEOC alleged that medical testing related to Honeywell International’s wellness program was not voluntary, due to “large” and “substantial” financial penalties to employees who did not participate. EEOC v. Honeywell International, Inc. (D. Minn. Oct. 27, 2014). Based on this reasoning the EEOC alleged that the program’s disability-related inquiries and medical examinations violate the ADA, as employers cannot require employees to provide such information involuntarily. The EEOC also alleged that the program sought family health history in violation of GINA because it penalized employees whose spouses did not participate in the health screenings. According to the EEOC’s allegations, employees who did not participate in the wellness program could pay up to $2,500 in surcharges and lose $1,500 in contributions to their health savings accounts.
The EEOC’s recent lawsuits appear to be at odds with other federal statutes and guidelines promoting the use of wellness programs, such as the Affordable Care Act (ACA), which permits employers to encourage such programs through financial incentives. The ongoing lawsuits will likely address whether wellness programs that comply with the ACA can still be found to violate the ADA. Furthering the confusion, the EEOC has provided almost no guidance regarding wellness programs. As these cases are litigated in the ongoing year, employers should reevaluate their wellness programs and consider whether any incentives provided for employee participation would withstand EEOC scrutiny.
- Compliance with DOMA after United States v. Windsor
In United States v. Windsor (2013), the United States Supreme Court ruled that Section 3 of the Defense of Marriage Act (DOMA) was unconstitutional because it violated the Fifth Amendment’s guarantee of equal protection.
The decision has impacted a broad range of employee benefit plans. Both the IRS and the Department of Labor (DOL) have issued guidance providing that all legal same-sex marriages will be recognized for IRS and DOL purposes where marriage is a factor.
As a result of the decision, employers must ensure that their benefit plans comply with the continuing regulations being published concerning the rights of same-sex spouses, especially plans subject to extensive federal regulation.
- NLRB approves “Quickie” union election rules
On December 12, 2014, the National Labor Relations Board (NLRB) finalized a long-anticipated rule that speeds up the union election process and requires increased disclosure from employers to union organizers. The rule, referred to by some as the “quickie” or “ambush” election rule, provides that pre-election hearings will generally be held eight days after a hearing notice is served. Additionally, the rule eliminates a previously required 25-day period between the time an election is ordered and the actual election. Many in the business community have complained that these changes reduce the ability of employers to explain the advantages and drawbacks of unionization to employees. Additionally, employers will be required to disclose employees’ phone numbers and email addresses to union organizers.
The Board approved the rule by a 3 – 2 vote, with the Democratic-appointed members voting in favor and the Republic an appointed members voting against. In conjunction with a recent NLRB decision allowing employees to use their work email accounts for union organizing activity, the rule stands as one of the Obama administration’s most significant moves to help strengthen the power of unions. With the rule set to become effective in April 2015, employers should take quick action to familiarize themselves with the new union-organizing process.
- Employer provided email policies are under attack
On December 11, 2014, the NLRB continued its recent aggressive anti-employer trend by issuing its highly anticipated ruling in Purple Communication, Inc.
The ruling holds that employees can use their employers’ email systems for non-business related matters, including discussing their terms and conditions of employment and self-organizing efforts during non-working time.
This ruling is significant because it overturns the NLRB’s previous holding in Registered Guard, 351 NLRB 110 (2007) that employers could impose a policy that limited the use of the company’s email system to “business purposes only.” As a result of this reverse in course, it would be prudent in the New Year for schools to revisit their email policies to see if they comply with the ruling in Purple Communications, Inc.
- Reducing exposure to penalties from Obamacare
The Affordable Care Act’s employer mandate subjects employers to tax penalties if they do not provide health insurance to employees who work more than 30 hours per week. In February 2014, the Obama administration published final regulations providing guidance to colleges and universities regarding how to calculate the hours of adjunct instructors and student workers.
For adjunct faculty, the regulations require colleges to use a “reasonable” method of crediting hours of service for each hour spent in the classroom. However, the regulations create a “safe harbor” expressly allowing colleges to credit an adjunct faculty member with 2.25 hours of service per week for each hour of teaching or classroom time. In other words, “[i]n addition to crediting an hour of service for each hour teaching in the classroom, this method would credit an additional 1 1⁄4 hours for activities such as class preparation and grading.” Separately, adjunct faculty should be credited with an hour of service for each additional hour spent outside of the classroom on duties they are “required to perform,” including “required office hours or required attendance at faculty meetings.”
The regulations also provided guidance on the classification of student workers. The regulations do not provide a general exception for student employees. However, the regulations provides an exemption for hours spent by students participating in a federal work study program or a similar state or local program, stating “[t]he federal work study program, as a federally subsidized financial aid program, is distinct from traditional employment in that its primary purpose is to advance education.”
Private sector schools should expect the legal and regulatory environment to continue to rapidly evolve in 2015. Faced with this uncertain and sometimes challenging atmosphere school owners and campus leadership should stay informed about ongoing developments in the employer/employee relationship in order to navigate it safely in the New Year.
Mr. Ben DeGweck, Esq. is Vice President and Associate General Counsel for Education Corporation of America, the parent corporation of Virginia College, Culinard, Golf Academy of America, Ecotech Institute, and New England College of Business. ECA operates a total of 35 residential and online campuses across the United States. He has over a decade of legal experience in the fields of civil litigation, compliance and regulatory affairs, corporate transactions, employment and real estate law. He received his B.S. in Accounting and J.D. from the University of Alabama and holds a M.B.A. from the New England College of Business. He may be contacted at firstname.lastname@example.org or by phone at 1-205-358-1452.
Contact Information: Ben DeGweck, Esq. // Vice President and Associate General Counsel // Education Corporation of America // Phone: 205-358-1452 // email@example.com
Ms. Carole Miller, Esq. is co-chair of the Bressler, Amery & Ross’s Labor and Employment practice group and serves as a member of the firm’s Executive Committee. She has over a decade and a half of experience representing employers with regards to the full spectrum of employment claims. She has litigated claims pending in more than thirty states and regularly appears before arbitration panels. She also has extensive experience representing private sector educational institutions in all aspects of the employer-employee relationship. In addition to litigating and arbitrating claims, Ms. Miller conducts management and employee training relating to employment issues in the workplace, drafts policies and handbooks, and regularly counsels employers with respect to various employment issues. She may be contacted at firstname.lastname@example.org or by phone at 1-205-820-8236.
Contact Information: Ms. Carole Miller, Esq. // Co-chair // Bressler, Amery & Ross’s Labor and Employment // Phone: 205-820-8236 // email@example.com