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HR Matters
Employment application language reduces time to file lawsuits.
May 31, 2005
LABOR & EMPLOYMENT NEWS
Language of Employment Applications Can Reduce Time to File Lawsuits. A Michigan employee sued her employer, DaimlerChrysler, for sex and race discrimination one year after she was allegedly discriminated against. The employee had signed an employment application with DaimlerChrysler that said, "I agree that any claim or lawsuit relating to my service with Chrysler Corporation or any of its subsidiaries must be filed no more than six months after the date of the employment action that is subject of the claim of the lawsuit. I waive any statute of limitations to the contrary." The clause was written in the same size font as other printed portions of the text and was preceded by the statement: "READ CAREFULLY BEFORE SIGNING." The Sixth Circuit Court of Appeals dismissed the employee's lawsuit because it was not filed within the six-month period mandated by the employment application. The Court further held that "there is nothing inherently unreasonable about a six month limitations period contained in an employment agreement." (Thurman v. DaimlerChrysler, Inc.) Please give us a call if you would like to discuss the implications of this case for your company.
$11.2 Million Arbitration Award Upheld Against a Former Executive. A federal judge in Virginia confirmed an $11.2 million arbitration award against a former CACI vice president for breaching his employment contract's non-competition and non-solicitation provisions. According to the court, the employee breached the contract by: (1) soliciting CACI employees for jobs with his new employer Delphinus Engineering Inc., (2) facilitating their applications and hiring, (3) transmitting confidential company information to Delphinus, (4) assisting Delphinus in acquiring contract work previously performed by CACI, and (5) conspiring with several other CACI employees to harm its business. The court held that the employee not only breached his employment contract, but breached his duty of loyalty, tortiously interfered with the company's employment relationships with others, and violated the Virginia Business Conspiracy Act. Ultimately, the employee was required to pay more than $10 million in damages and $678,000 in attorneys' fees and costs. The court also imposed a permanent injunction requiring the employee to comply with the non-solicitation provision for one year and the non-competition provision for two years from the date of the decision. (CACI Dynamic Sys., Inc. v. Spicer)
Computer Company Must Pay $24 Million to Settle Overtime Claim. A technology company has agreed to pay $24 million to settle allegations that it misclassified 30,000 technical support workers and failed to pay them overtime in violation of federal and state laws. The workers claimed that they were misclassified as administrative and management employees and required to work up to 60 hours-a-week with no overtime. Although the company disputed the workers' claims, under the settlement agreement, class members will split $17.2 million for lost wages and damages, with an additional $180,000 going to the 17 named plaintiffs. (Giannetto v. Computer Scis. Corp.) Please contact us if you would like to discuss the classifications of your employees for wage/hour purposes.
WORKPLACE HEALTH & SAFETY NEWS
"Casual" Worker Entitled to Workers' Compensation Benefits. An employee for an Ohio produce wholesaler told her employer that unless her friend worked at the plant that day, she would have no way to get home and would be unable to complete her shift. The employer acquiesced and permitted the friend to work that day as a temporary worker, paying the friend $30 for five-and-one-half hours of work. The friend injured herself while working a carrot slicing machine and filed for workers' compensation benefits. The employer argued that the friend was not entitled to workers' compensation benefits because she was a "casual worker" and not an "employee." The court, however, found that the friend was an employee at the time of injury, because: the employer told her she "was hired," the employer asked her to report to the secretary who told her to complete the hiring paperwork after her shift, and the friend received safety equipment. (Raymond v. Shaker Produce, Inc.)
Internet Search Constitutes a Good Faith Job Search. An Ohio produce clerk sustained a work-related injury, which precluded him from returning to work. Eventually, the employee filed a motion for "non-working wage loss" compensation. The employer argued that the motion was inadequate, because the employee did not make a good faith job search since he relied primarily on the Internet and home computer searches for job contacts. Although most of the employee's contacts were not in-person, the evidence showed the employee made extensive efforts to follow-up with contacts, both positive and negative, and his efforts exceeded 40 hours per week. (State ex. rel. Giant Eagle, Inc. v. Indus. Comm.)
EMPLOYEE BENEFITS & EXECUTIVE COMPENSATION NEWS
Extension of Use-It-Or-Lose-It Deadline for Cafeteria Plans. Health flexible spending arrangements (FSAs) and dependent care assistance programs (DCAPs) have always been required to provide that any balances not used for expenses incurred during the plan year must be forfeited under the use-it-or-lose-it rule. The IRS recently announced that it will now allow employers to modify cafeteria plans to reimburse expenses incurred during a "grace period" of up to 21/2 months after the close of a plan year. A participant in a plan that has adopted the grace period may submit eligible expenses incurred during the grace period for reimbursement as if the expense had been incurred in the preceding plan year. A cafeteria plan still may not permit unused contributions to be cashed-out or converted to any other taxable or non-taxable benefit. For example, unused amounts in a health FSA may not be used to pay or reimburse dependent care expenses incurred during the grace period.
Employers wishing to adopt a grace period must amend the plan before the end of the plan year to which the grace period relates and should communicate to participants how the grace period works. Employers may also need to adjust the run-out period, during which qualified expenses incurred during the plan year or grace period may be submitted for payment, so as to provide sufficient time to submit claims after the expiration of the grace period.
Bankruptcy Reform Act Affects Benefits. Last month we reported on a case in which the U.S. Supreme Court decided that IRAs could qualify for federal bankruptcy exemptions. Shortly after that decision was announced, Congress enacted the Bankruptcy Abuse Prevention & Consumer Protection Act of 2005 that further expands the bankruptcy protections available for retirement funds. In addition to qualified retirement plans (like 401(k) plans), the new law specifically applies the expanded bankruptcy exemption to IRAs, governmental retirement plans, 457 plans and 403(b) arrangements. However, there is a $1 million cap on IRA funds that can be protected. These exemptions are available regardless of whether the debtor relies on federal or state law bankruptcy exemptions.
Other provisions of the new bankruptcy law relate to repayment of plan loans by participants in bankruptcy. First, the automatic stay, which normally prevents the collection of debts during bankruptcy, will not apply to the repayment of a plan loan. Second, plan loans will not be discharged in bankruptcy. Finally, amounts required to repay a plan loan will not be considered "disposable income" when the bankruptcy court considers a Chapter 13 reorganization plan.
When the employer files for bankruptcy, the new law provides that employee wages withheld (on either a pre-tax or post-tax basis) as contributions to an ERISA employee benefit plan, governmental plan, deferred compensation plan, tax-deferred annuities or health insurance plans are protected from the claims of the employer's creditors.
HR MATTERS from GH&R
Volume IX, Issue 97 - May 2005
This Newsletter is a periodic publication of Graydon Head & Ritchey LLP and should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general information purposes only, and you are urged to consult your own advisor concerning your situation and any specific legal question you may have.