Legal Advice. Daniel Margolis. Published May 2010

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1 Performance Management Published May 2010 Legal Advice Daniel Margolis Employment law is a cornerstone for anyone working in talent management. HR professionals must contend with a morass of legal concerns in the course of managing a workforce; it just comes with the territory. And with the change in U.S. presidential administrations and other changes in federal government overall that occurred in 2009, employment law is growing ever more complex. According to Fritz Smith, partner at law firm Seyfarth Shaw LLP, right now we have more new legislation and more pending legislation than we ve ever had, at least in the 20 years that I ve been practicing as a labor and employment lawyer. To some extent, the growing complexity of employment law is good news for talent managers. Faced with a shifting landscape of legal requirements in this space, organizations are loath to make changes in their HR departments. It s a highly regulated environment, which means anyone who is in charge of making sure regulations are complied with has some job security, said John Polson, partner at Fisher & Phillips LLP. So the upside is companies need HR people more now than they ever have. The downside is overregulated anything whether it s employment law or anything else eventually has some negative consequences. These include the increased cost of doing business. At a time when companies are not eager to spend money on revising policies and training, they ve had to do that, Polson said. And this likely has been with less manpower and resources. Corporations are probably leaner than they ve ever been, and they have more work to do trying to develop and administer policies that comply with the new laws and regulations, Smith said.

2 What Changed The number of recent changes to employment law is large. Asked what changes to employment law in the past year come to mind, legal experts focused on the most significant with respect to the purview of talent managers in general. Family and Medical Leave Act (FMLA): In January 2009, a number of changes to the FMLA went into effect. That s an area that HR managers are dealing with on a day today basis with employees who are requesting time off for various reasons, said Rob Cottington, labor and employment attorney at law firm Cohen & Grigsby. Those changes required HR managers to relearn what they ve been doing since 1993 when the Family and Medical Leave Act was first passed, because these regulations were really the first changes in that whole period of time. Signed into law by President Bush as part of the National Defense Authorization Act, the new FMLA regulations change the parameters by which individuals qualify to take medical leave, attaching new certification forms to the process. According to Polson, the regulations are a good example of the positive objective of legislation being subsumed by the process put in place to make companies comply with it. It obviously has some good outcomes in terms of people getting time off from work when they need it, he said. On the other hand, even lawyers struggle to absorb all of the regulation and case law that exist now applying to the FMLA. It s so complicated it s almost like trying to interpret the tax code. And that, in the end, probably frustrated the ultimate purpose of the law. Lilly Ledbetter Fair Pay Act of 2009: Signed into law by President Obama in January 2009, this changed the statute of limitations for claims of discrimination with respect to compensation. The statute of limitations was previously set at 180 days after the date pay was agreed upon. Now an employee or actually a former employee as well can go back to a discriminatory performance review that may have occurred five, 10 years ago and, as a result of that, their compensation was lower than it would have otherwise been, Cottington said. Every paycheck after that, as long as they can say that the effect of that has lasted throughout that period of time up till now, they can go back and challenge. This means HR professionals may need to maintain employment records indefinitely. To guard against risk, HR professionals should look at their compensation systems and determine if there is anything about them that could be viewed as discriminatory, leaving them open to claims. Cottington said, The more subjective those analyses are, the more open they are to challenge in saying, Well, you know, it s because of my gender or my race or my age that I was paid what I was paid.

3 Consolidated Omnibus Budget Reconciliation Act (COBRA) extensions: COBRA gives workers and their families who lose their health insurance the right to choose to continue group health benefits provided by their group health plan for limited periods of time under certain circumstances such as voluntary or involuntary job loss, reduction in hours worked, transition between jobs, death, divorce and other life events. If they meet that definition, individuals are responsible for 35 percent of their COBRA premiums, and the remaining 65 percent is picked up by employers and reimbursed from a payroll tax credit. Extensions to these provisions introduced as part of the American Recovery and Reinvestment Act in February 2009 were set to expire at the end of On Dec. 21, 2009, President Obama extended those further to May 31, 2010, and further extensions seem likely. If the economy doesn t turn around, I wouldn t be surprised if there were further extensions of this COBRA subsidy, said Sheldon Blumling, partner at Fisher & Phillips LLP. The impact of these changes and others has been significant. And where employment law hasn t changed, enforcement of existing laws has increased. Smith said the U.S. is entering an era of aggressive federal government enforcement of old and new labor employment laws and regulations, with increasing funding for the Equal Employment Opportunity Commission, the Department of Labor, the Occupational Safety and Health Administration, the National Labor Relations Board and others. All of those agencies are hiring more investigators, attorneys and administrative support, Smith said. There s also been transference of activity in employment law from states to the federal level. The states have gotten quieter because of the economy, including places like California, where you tend to see a lot of changes happening every year. It s extremely quiet, Polson said. You now have a federal system that is becoming more dominant, following an era where states had decided to start regulating employment law more significantly because they felt the federal government wasn t doing enough. We re now in this odd period where the tide is shifting. On the Horizon As much as employment law has changed in the past year, more change is planned for 2010 and beyond. Congress is considering the Employee Free Choice Act, a bill that would amend the National Labor Relations Act to establish a system to enable employees to form, join or assist labor organizations. This would make it easier for labor organizers to form unions within a given workforce, allowing that if they get signed authorization cards from more than 50 percent of the employees they seek to represent, they can obtain certification as the collective bargaining representative for those workers without having to go through a secret ballot election, Cottington

4 explained. He said the act also would impact initial contract negotiations between a union and its employer. That statute was a high priority for the labor movement, and the Obama administration has come out in favor of that, and there s a fair amount of support for it among the Democrats in Congress. It got put on the back burner as a result of other things going on, particularly health care and changes to the health care system, he said. I think once the health care issue is dealt with, that is going to be put back on the front burner for Other potentially significant acts that have been introduced in both the House and Senate are the Paycheck Fairness Act, which seeks to limit an employer s ability to defend equal pay claims, and the Employment Non Discrimination Act, which seeks to prohibit employment discrimination on the basis of sexual orientation and identity. To contend with current and future changes in employment law, Smith s advice to HR professionals is simple: Get educated. One of the best ways to do this is through collaboration. I can t overemphasize the need for people to partner up with other HR professionals, in house lawyers and industry organizations, and really get a good grasp on how things have changed, he said. Further, talent managers should try to influence the debate on the proposed legislation that s been introduced and the numerous other bills that are going to be introduced down the road. Polson prescribed the following steps: Do a complete review of all written policies. Conduct internal audits of key compliance areas. Review employment practices and liability insurance policies to ensure coverage and the ability to use a lawyer of choice. Return to investing in training. Revisit hiring practices to ensure bad hires aren t made in the event of a shrinking labor market during economic recovery. Polson said social networking websites such as Facebook are potential growth areas that may affect employment law going forward. We re seeing social networking Web sites change the workplace, and we re just starting to see litigation coming from that, he said.

5 Sexual harassment litigation had lessened during previous decades because of concentrated efforts of training and increased awareness of this issue. Social networking is now turning that progress back 20 years. Employees are making each other friends on their Facebook pages so they can now see each other s lives in graphic detail, and they feel comfortable putting things on their Facebook they would never bring to the workplace, Polson said. This includes conversation about explicit sexual activities and preferences, illnesses and other information that triggers civil rights issues. Worst case scenario: Their supervisors actually become their friends on Facebook, he said. Now supervisors are involved in all these inappropriate communications and learning all sorts of things they shouldn t know. I think you re going to see a big wave of lawsuits next year involving harassment and discrimination where Facebook content is exhibit A. Where employment law hasn t changed, enforcement of existing laws has increased. Smith said the U.S. is entering an era of aggressive federal government enforcement of old and new labor employment laws and regulations, with increasing funding for the Equal Employment Opportunity Commission, the Department of Labor, the Occupational Safety and Health Administration, the National Labor Relations Board and others. "All of those agencies are hiring more investigators, attorneys and administrative support," Smith said. There's also been transference of activity in employment law from states to the federal level. "The states have gotten quieter because of the economy, including places like California, where you tend to see a lot of changes happening every year. It's extremely quiet," Polson said. "You now have a federal system that is becoming more dominant, following an era where states had decided to start regulating employment law more significantly because they felt the federal government wasn't doing enough. We're now in this odd period where the tide is shifting." Daniel Margolis is a managing editor for Talent Management magazine.