On February 10, 2014 the Department of the Treasury issued final regulations under the Patient Protection and Affordable Care Act (ACA) that delay enforcement of the shared responsibility penalties for mid-size employers until 2016. Mid-size employers are employers with 50-99 full-time employees in the preceding calendar year. Full-time employees consist of employees who work 30 or more hours per week. Previously, in 2013, the Treasury Department delayed enforcement of the penalties for all employers from January 1, 2014 until January 1, 2015.

In addition, the new regulations allow some flexibility to large employers, defined as those with more than 100 full-time employees. Large employers will only have to offer minimum affordable coverage to 70% of its full-time employees in 2015, and then to 95% of full-time employees in 2016.

The Obama Administration describes the delayed enforcement as “transition relief” for employers from the requirements of the ACA, originally passed in 2010. Republican Congressional leaders are criticizing the delay, arguing in part that the Obama Administration is engaging in selective enforcement of the ACA by requiring individuals to pay penalties beginning this year, while delaying penalties against employers in a mid-term election year.

On February 5, 2014, the National Labor Relations Board announced proposed amendments to its regulations, which would make it easier for unions to organize employees. The proposed amendments would permit unions to hold workplace elections more quickly after filing an election petition. The majority of elections now take place 45 to 60 days after the union obtains necessary signatures to file a petition. It is estimated that the proposed amendments would shorten the time period by days or even weeks.

In addition to shortening the time period between the filing of a petition and an election, the proposed regulations would require employers to provide employees’ phone numbers and email addresses to the union before the vote. By requiring this personal information to be supplied by an employer, the regulations will make it easier for unions to contact and organize employees, and may also reverse the significant decline in union membership that has occurred in recent years.

Mark Pearce, the NLRB’s Chairman, announced that he would allow 60 days for public comment on the proposed amendments. Jay Timmons, President and CEO of the National Association of Manufacturers, has referred to the proposed election procedures as the “ambush election” rule. On the other hand, Richard Trumka, President of the AFL-CIO, called the proposed rules “an important step in the right direction.” He then noted that the current NLRB election process is riddled with delays and provides too many opportunities for employers to manufacture and drag-out the process through costly and unnecessary litigation that denies employees a vote.

We encourage you to write to the NLRB and to work with any of your associates to comment on the proposed amendments.

In Muzaffar v. Aurora Health Care Southern Lakes, Inc., 2013 WL 6199233 (E.D. Wis. Nov. 27, 2013), the federal district court for the Eastern District of Wisconsin held that the Emergency Medical Treatment and Active Labor Act (“EMTALA”) anti-retaliation provision applied to protect a private, non-employed physician with staff privileges at a hospital from retaliation by the hospital for reporting patient transfers that he believed violated EMTALA.

Congress enacted EMTALA in 1986 to remedy a perceived problem of “patient dumping” by hospitals, where patients unable to pay for emergency medical treatment would be denied such treatment or transferred before their conditions had stabilized. The enforcement mechanisms of EMTALA are two-fold: first, patients can maintain a private right of action against hospitals for damages sustained as a result of the hospital’s actions; second, the statute provides that hospital employees can report violations of EMTALA without fear of retaliation or adverse employment actions taken by the hospital. This second mechanism encourages and provides protection for employee whistleblowers. EMTALA, however, does not define the phrase “hospital employee” as used in the whistleblower provisions.

Over the hospital’s objections that the physician maintains his own private practice office, does not have an employment contract with the hospital, and does not receive compensation or employee benefits, the court ruled that the physician should be deemed an “employee” for purposes of EMTALA. Unlike cases that have held that physicians with staff privileges are not employees for purposes of other federal statutes, such as Title VII of the Civil Rights Act of 1964, the district court reasoned that the whistleblower protection provisions of EMTALA are merely enforcement mechanisms for the statute’s primary purpose of preventing patient dumping. The court reasoned that physicians with staff privileges are in an advantageous position to observe the denial of emergency treatment to patients. According to the court, not considering them “employees” under EMTALA would frustrate the purpose of the statute.

The takeaway for hospitals is that physicians with privileges, and without an employment contract, may be deemed employees for purposes of reporting a hospital’s possible violations of EMTALA. Care should be taken in dealing with medical staff privilege issues where a non-employed staff physician has reported an EMTALA violation.

On this blog, we have previously written about employee handbooks and arbitration clauses in the employment setting. However, the Missouri Court of Appeals recently weighed in on what happens when you combine the two by inserting an arbitration clause in an employee handbook. The results were not good for the employer.

There are two schools of thought on employee handbooks. The kitchen sink approach is to throw in everything that could be useful and defer the decision on actually enforcing particular provisions until the need arises. Arbitration clauses often fall in that category. The other – and better – view is to treat the handbook as a guiding document that sets rules not only for the employees but the employer as well.

From an employer’s perspective, the preference for arbitration is understandable. Employment cases are often very emotional and frequently involve issues nobody likes to be associated with, like race or gender discrimination, regardless of the merits of the claim. Arbitration provides a confidential and expedient forum for resolving those sensitive issues. As the Missouri Court of Appeals made clear, however, to get those benefits, the employer must be willing to commit to a contractual agreement instead of dictating policies and reserving the right to change its mind.

In Johnson v. Vatterott Educational Centers, 410 S.W.3d 735 (Mo. App. 2013), the Western District Court of Appeals held essentially that the employer can’t have its cake and eat it too. The Court pointed out that although the arbitration clause referred to itself as a contract, the rest of the handbook took great lengths to disavow any contractual status between the employer and the employee:

“[W]hile the Arbitration Agreement itself states that it is a binding and enforceable contract which will survive the termination of Johnson’s employment, it is book-ended by sections of the Employee Handbook which state in equally clear and explicit terms that nothing in the Handbook is contractual, and that everything in the Handbook is subject to change by Vatterott at any time, in its sole discretion.” 410 S.W.3d at 740.

Just like the vast majority of employee handbooks, Vatterott’s stated that it was “not a contract of employment” and that “no employment relationship other than ‘at will’ has been expressed or implied.” 410 S.W.3d at 738, quoting McIntosh v. Tenet Health Systems, 48 S.W.3d 85, 89 (Mo.App. 2001). Like most employee handbooks, Vatterott’s also stated that it could be amended from time to time in Vatterott’s discretion.

Arbitration clauses in contracts are enforceable. Under Missouri law, however, “employee handbooks generally are not considered contracts because they normally lack the traditional prerequisites of a contract.” 410 S.W.3d at 738. That does not mean that arbitration clauses in employee handbooks are per se unenforceable. Where the employer and employee “unambiguously agree that binding arbitration will constitute the employee’s exclusive remedy for employment-related disputes,” the arbitration clause may be enforceable. The Court held that Vatterott’s handbook was ambiguous because, in addition to the non-mutual arbitration clause, it contained provisions disavowing a contractual relationship and even cautioned that the it would “serve as a guide but is not the final word in all cases.”

The Court’s ruling underscores the difference between viewing employee handbooks as workplace rules, rather than a catch-all document that comes in handy only after a dispute arises. Arbitration clauses may be useful for employers, but not in a handbook, if your handbook is more of a guidebook than a rulebook.

With 2013 at its close, let’s take a peek at two cases currently pending in the United States Supreme Court that will have implications for employers in 2014.

Sandifer v. U.S. Steel Corp.

On February 19, 2013, the United States Supreme Court granted certiorari to review a decision by the 7^th Circuit Court of Appeals holding that time spent donning and doffing protective gear, as well as time spent traveling from the locker room to work stations, constituted “changing clothes” under the Fair Labor Standards Act (FLSA) §203(o), thus excluding the activities from being considered work time under the Collective Bargaining Agreement (CBA) between U.S. Steel and the United Steelworkers union. The briefing is complete and the Supreme Court held oral argument on November 4, 2013, so a decision should be forthcoming soon.

The question presented for the Supreme Court in Sandifer is what constitutes “changing clothes” under §203(o) of the FLSA. According to the Petitioners, who consist of approximately 800 current and former employees of U.S. Steel, the time spent donning and doffing safety gear and traveling to work stations takes several hours a week. Under the applicable CBA, this time is not compensated.

Under §203(o) of the FLSA, a CBA can exclude time spent changing clothes at the beginning and end of the day, which would otherwise be compensable time under the FLSA. The steelworkers claim, however, that the term “changing clothes” only encompasses changing from street clothes into work clothes – and does not include adding the safety gear they have to put over their street clothes – including fire retardant jackets, pants, and steel toed boots.

The decision has implications for employers because it will clarify what activities and items are covered under the “changing clothes” language in §203(o) of the FLSA, thus providing guidance to employers and labor unions for CBA negotiations.

NLRB v. Noel Canning Division of Noel Corp.

On June 24, 2013, the Supreme Court granted certiorari to review the decision by the D.C. Circuit Court we previously reported on back in March 2013 that held that President Obama’s recess appointments to the NLRB in 2012 were invalid. The briefing is complete, and the case is set for oral argument on January 13, 2014. And, interestingly, the Court has granted a request by Senate republicans to participate in oral argument.

The questions presented for the Court are: (1) Whether the President’s recess-appointment power is limited to recesses occurring between enumerated sessions, or whether the recess-appointment power can be exercised during a recess when the Senate is in session; (2) Whether the recess-appointment power can be exercised to fill vacancies existing at the time of the recess, or whether it is limited to vacancies that first occur during the recess; and (3) whether the President’s recess-appointment power can be exercised when the Senate is convening every three days in pro forma sessions.

The case has implications for employers because, in the event the Supreme Court determines that the recess appointments were an invalid exercise of the President’s recess-appointment power, decisions made by the NLRB during 2012 will be void.

On December 16, 2013, the United States Supreme Court held that an employer sponsored disability plan with a provision requiring a plan participant to file suit within three (3) years after filing a written proof of loss under the plan is enforceable under the Employee Retirement Income Security Act (ERISA). The decision by the Court in Heimeshoff v. Hartford Life & Accident Ins. Co., No. 12-729, resolved a deep split among the federal Courts of Appeals regarding the enforceability of such limitation provisions.

As factual background, Hartford Life & Accident Insurance Company (“Hartford”) acted as the Administrator for Walmart’s Group Long Term Disability Plan (“Plan”). Plaintiff Julie Heimeshoff (“Heimeshoff”) was a 20 year employee of Walmart, who stopped working on June 8, 2005, and submitted a claim for long-term disability benefits on August 22, 2005 based on a diagnosis of lupus and fibromyalgia. Hartford requested additional information concerning her claim, and notified her in November of 2005 that without the additional information, it could not determine whether she was disabled. In December of 2005, not having received the additional information, Hartford denied her claim for failure to provide satisfactory proof of loss. Hartford informed Heimeshoff that she had 180 days to appeal the decision, but later informed her it would reopen her claim if her physician provided the requested information.

In July 2006, a physician evaluated Heimeshoff and opined that she was disabled. In October 2006, Heimeshoff provided the evaluation and submitted additional medical evidence to Hartford. Hartford had the information reviewed by another physician, who opined that Heimeshoff could perform the duties of a sedentary occupation. In November, 2006, Hartford denied Heimeshoff’s claim for disability benefits. After receiving an extension of time to file an appeal with Hartford, on September 26, 2007, Heimeshoff submitted her appeal along with additional testing evaluations. After two additional physicians retained by Hartford reviewed the claim, Hartford issued its final decision on November 26, 2007.

The Plan contained the following limitations provision:

•  Legal action cannot be taken against the Hartford…[more than] 3 years after the time written proof of loss is required to be furnished according to the terms of the policy.

Heimeshoff filed her lawsuit on November 18, 2010, within 3 years of the final decision, but after 3 years following the time proof of loss was required under the Plan.

The unanimous Court held that: “Absent a controlling statute to the contrary, a participant and a plan may agree by contract to a particular limitations period, even one that starts to run before the cause of action accrues, as long as the period is reasonable.” In its decision, the Supreme Court reasoned that courts have upheld enforcement of contractual provisions providing for limitations periods shorter than what otherwise would be a state law statute of limitations period. The Court further emphasized the importance of the terms of the plan as governing in ERISA claims benefit cases. The Court reasoned that absent a controlling statute, or an unreasonable period of time, the provision must be enforced. As ERISA does not provide for a specific statute of limitations for benefit denial cases, there is no controlling statute. Finally, the Court found that Heimeshoff had almost a year following the final decision denying her claim for disability benefits before the limitations period ran, which the Court concluded was ample time to file suit.

The takeaway for employer sponsored benefit plans – if your benefit plan does not contain a time limitation for filing suit, consider a plan amendment to include a reasonable limit. Otherwise, claimants can use state law statutes of limitation, which in some states, such as Missouri and Illinois, are substantially longer, and delay filing suit. Under this Supreme Court precedent, a 3 year limitation period running from time proof of loss is provided will be considered reasonable.

Class and collective action lawsuits, particularly in the area of wage and hour claims under the Fair Labor Standards Act (“FLSA”) and state law, continue to be on the rise and are difficult and costly for employers to defend. A newly decided case reminds us that employers should consider the use of mandatory arbitration agreements that waive class action lawsuits for employment disputes.

On December 3, 2013, the federal Fifth Circuit Court of Appeals dealt a major blow to the NLRB when the Court overturned the NLRB’s prior decision that mandatory arbitration agreements containing class action waivers are unenforceable. In D.R. Horton, Incorporated v. National labor Relations Board, No. 12-60031, the Court overturned a January 2012 decision by the NLRB that a mandatory arbitration agreement containing a class action waiver violated Section 7 and Section 8(a)(1) of the National Labor Relations Act (“NLRA”). The NLRB had found that the arbitration agreement infringed on employees’ rights under Section 7 by limiting their ability to “initiate or induce group action…” By finding a violation of Section 7, the NLRB then concluded that by requiring employees to agree not to act in concert in administrative and judicial proceedings, the company committed an unfair labor practice under Section 8(a)(1).

In overturning the decision of the NLRB, the Court found that the NLRB failed to take into consideration the Federal Arbitration Act (“FAA”), which it opined is an equally important federal statute. The Court further held that because neither the NLRA statute itself nor legislative history contain “a congressional command to override the FAA”, that the mandatory arbitration agreement is enforceable.

The Eighth Circuit and other federal circuits have previously upheld mandatory arbitration agreements containing class action waivers. See Owen v. Bristol Care Inc., 702 F.3d 1050 (8^th Cir. 2013); Sutherland v. Ernst & Young LLP, 726 F.3d 290 (2d Cir. 2013). However, the NLRB has consistently taken the position that they are unenforceable, and this federal court appeals decision is the first to specifically overrule the NLRB’s position.

Recent Illinois appellate court decision puts in doubt enforceability of many existing employment restrictive covenants

Many businesses use restrictive covenants, such as non-solicitation and non-competition restrictions, in employment and other agreements to protect the competitive advantage that they derive from their investment in the development of customer relationships and confidential information. However, a recent Illinois appellate court decision raises serious doubt about the enforceability of many existing employment restrictive covenants. This case necessitates prompt action by employers that have restrictive covenants in agreements with their executives, managers, sales persons or employees in order to secure the protection and value they thought they had through these agreements.

Recent Illinois Appellate Court Decision

A decision this year by an Illinois Appellate Court in Fifield v. Premier Dealer Services held that less than two years of continued employment is not sufficient consideration to support restrictive covenants, even where the restrictive covenants were agreed to before employment began. Specifically, the court found that an employment agreement that contained restrictive covenants was unenforceable for lack of adequate consideration, even though the employee negotiated the agreement, the agreement was entered into before the employee began employment, the agreement was given in exchange for continued employment for an indefinite period of time, and the employee voluntarily resigned his employment. This decision was an abrupt departure from how restrictive covenants had generally been viewed in Illinois where conditioning employment on entering into an agreement containing restrictive covenants was thought to be sufficient consideration to support the enforcement of those restrictive covenants.

Impact of the Decision on Businesses

Unless and until this decision is overturned – the Illinois Supreme Court recently decided not to hear the case – it would be wise for business owners to revisit their existing agreements with employees that contain restrictive covenants. This review should include both agreements that have been recently entered into with employees and “form” agreements that will be used in the future. The focus of the review should be on whether the restrictions were/are supported by adequate consideration. To the extent that the restrictions were/are not supported by adequate consideration, business owners need to evaluate the value they perceive from their restrictive covenants and, as appropriate, take steps to enter into new agreements to replace existing agreement and revise any “form” agreements.

Going Forward

For those businesses that have employment agreements where the restrictive covenants are not supported by adequate consideration, the end of the year is a good time to revisit and revise those agreements as salary increases, discretionary bonuses and promotions may provide the needed consideration. It is also important to make sure going forward that agreements with employees that contain restrictive covenants will be enforceable. This can be done either by providing adequate consideration to the employee and/or possibly redrafting your agreement to apply the law of a jurisdiction where continued employment constitutes adequate consideration. In either case it is important that business owners do not take a one-size-fits-all approach when imposing restrictive covenants on employees, but cause the restrictive covenants to be drafted to protect the employer’s actual needs and tailored to the business and the interests to be protected.

Restrictive covenants still remain a viable and valuable tool to protect a business’s assets and future income stream. But business owners should make sure that their existing restrictive covenants are drafted in a manner likely to withstand a challenge. Restrictive covenants should be tailored to the specific employees, supported by adequate consideration and impose restrictions no greater than what is legitimately necessary to protect their business.