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Good News For Employers Regarding Class And Collective Actions From The Supreme Court

May 2, 2013 -

Two recent cases from the U. S. Supreme Court are good news for employers defending against class and collective actions under State and Federal wage and hour laws. In Genesis HealthCare Corp. v. Symczyk the Court ruled that when the claim of an individual who sued under the was extinguished, the claims of others who might be “similarly situated,” but who had not yet joined the case, died with the original filer’s claim. The Court also let stand the lower court’s holding that a claimant who is offered full relief but rejects or ignores that offer is subject to having their case dismissed. In Comcast v. Behrend, a consumer class action case, the Court reaffirmed what it had held in Dukes v. WalMart: that difference among the plaintiffs and their claims may justify denial of class action status. It also held that courts must examine requests for class status very carefully, and not just give plaintiffs a green light. Given the popularity of both class and collective actions in wage and hour claims, these decisions definitely improve the outlook for employers defending against such claims.

 Symczyk was filed as a collective action under §216(b) of the FLSA. In collective actions, other plaintiffs who are “similarly situated” to the individual filing the lawsuit must “opt in,” or file written consents to join the action. (In contrast, in class actions under Rule 23 like Behrend, everyone who has a similar claim is automatically included unless they take steps to “opt out.”)

Symczyk, a registered nurse, alleged that she and others who worked for Genesis had been denied pay because Genesis automatically deducted 30 minutes from their paid time for a daily lunch break but they often worked through lunch, missed their break, and thus were denied pay for hours worked. Early in the litigation, Genesis offered Symczyk a sum of money that represented full relief – the maximum amount she could win if she prevailed on all her claims – plus reasonable attorneys’ fees, under Rule 68 of the Federal Rules of Civil Procedure. Symczyk ignored the offer, and sought to proceed with the litigation: the district court determined that because Genesis had offered her full relief, even though she did not take it, her case was moot and should be dismissed.

Symczyk appealed, saying that even if her claim was dead, the claims of others who were “similarly situated,” having also been denied pay when they worked through meal breaks, should be allowed to proceed. The Court of Appeals for the Third Circuit agreed, and reinstated the case. Genesis asked for Supreme Court review. Its petition was granted, and the Supreme Court reversed the Third Circuit, holding that the claims of other potential plaintiffs who had not yet joined the lawsuit when it was dismissed due to Symczyk’s rejection of the Rule 68 offer did not survive the dismissal.

Perhaps the most controversial aspect of Symczyk lies in something the Court didn’t say: it let stand, without examining, the lower court’s decision condoning dismissal of the plaintiff’s case after she was offered, and refused (by ignoring the offer) full judgment satisfying her claims. An offer of judgment under Fed. R. Civ. P. 68 is an important tool in a defendant’s arsenal to short-circuit a lawsuit and avoid expensive litigation – a problem that is particularly acute in FLSA cases where the law requires the defendant to pay attorneys’ fees. If, as in Symczyk, an employer offers to pay the full amount of back wages, plus reasonable attorneys’ fees, a plaintiff who refuses that offer and continues litigation could possibly forfeit a collective action, also preventing the plaintiffs’ lawyers from collecting fees for services incurred after the date the offer is made. This is an important disincentive to lawyers eager to bring FLSA lawsuits.

Comcast was a Rule 23 “opt out” class action case. A group of customers sued the cable provider, claiming that they had been harmed because the company had created and abused a monopoly position in the market, denying them choices (and potentially lower prices) for cable service. The Supreme Court held that the case should not have been certified as a class action because individual questions regarding how different customers had been harmed predominated over class-wide questions. The Court reiterated that it had meant what it said in Dukes v. WalMart: that lower courts should probe beyond the pleadings, and conduct a rigorous analysis of the claims, before allowing a case to proceed as a class action.

Comcast matters to employers because shortly after publishing that opinion, the Supreme Court, citing Comcast, reversed and remanded to the 7th Circuit a case called Ross v. PBS Citizens, NA. Ross was a hybrid FLSA collective action/Illinois law class action where a group of former employees sued, alleging that they had been denied pay for hours worked. The Court of Appeals had affirmed a District Court decision that allowed these cases to proceed as class/collective actions: the Supreme Court said that was error, that the case should not have been so certified, and sent it back.

In both Symczyk and Comcast, the Supreme Court is making it more difficult to achieve class action status. This is important for employers because class action status makes wage and hour lawsuits more expensive and difficult to settle. The Court’s tacit approval of Rule 68 offers of judgment to moot a case may also make plaintiffs’ lawyers think twice about turning down an early (and fair) settlement.

Questions? Want more information? Call Larry Stine or Betsy Dorminey at (404) 365-0900 or at jls@wimlaw.com or ekd@wimlaw.com.

Obamacare - Issues and Solutions

April 11, 2013 -

Before January 1, 2014, employers with 50 or more “full-time equivalent” employees will have to decide whether to begin, or continue, to offer health insurance to their employees or whether to pay the penalties that will be imposed under the Patient Protection and Affordable Care Act, more commonly known as Obamacare. It may be helpful to sum up the dilemma some employers will face when making the decision and to suggest some potential solutions.

Starting January 1, 2014, employers with 50 or more “full-time equivalent” employees may be subject to non-deductible taxes unless they offer “minimum essential coverage” to at least 95% of their “full-time” employees. Full-time employees include those who work an average of 30 or more hours a week. “Minimum essential coverage” will generally include a group health insurance plan. Employers who do not offer such coverage will have to pay a $2,000 non-deductible tax for nearly every full-time employee (the first 30 employees are excluded) if any employee receives subsidized health insurance coverage from a state exchange.

Even if employers offer such coverage to at least 95% of their full-time employees, employers could be subject to non-deductible taxes if the coverage is not “affordable” for a particular employee or if the coverage does not provide “minimum value.” “Affordable” means that an employee does not have to pay more than 9.5% of the employee’s household income for single coverage under the employer’s plan. “Minimum value” means that the plan pays at least 60% of the plan’s total allowed costs as determined by the federal government. Employers who offer such coverage that is affordable and that provides minimum value will not face any penalty. However, employers who offer coverage that is not affordable or that does not provide minimum value will have to pay a penalty if any employee obtains subsidized coverage from a state exchange. The penalty will be $3,000 (increasing each calendar year after 2014 based on inflation in insurance premiums) annually for each full-time employee receiving subsidized coverage from a state exchange up to a maximum of $2,000 for each full time employee over 30 employees.

After 2014, employers with 50 or more “full-time equivalent” employees will have to offer the same coverage to the employees’ dependents as well in order to avoid or minimize the non-deductible taxes.

Potential Solutions

One possible solution is to offer a health insurance option that satisfies “minimum essential coverage” requirements and to offer other health care options so that employees can find an affordable coverage option or can purchase a greater level of coverage if they want. Doing so will allow employers to avoid penalties so long as at least one coverage option constitutes “minimum essential coverage,” which is “affordable” and provides “minimum value,” even if their employees do not sign up.

Even if employers offer affordable coverage, however, many employees may continue to decline company-offered insurance, either because they have coverage through Medicaid or a family member, or because they elect to pay the penalty for not having health insurance. The individual penalty for 2014 will be as low as $95, which is much less than most employees will be required to pay for coverage through company-sponsored plans. However, the individual penalties for being uninsured increase to at least $325 in 2015 and $695 in 2016 (and could be more depending on the individual’s income) and these higher penalties may cause more employees to accept employer-offered coverage in later years.

A second option for employers is to terminate their healthcare plans altogether and pay the penalty. When Obamacare was initially passed, there were some large corporations who evaluated the costs of paying the penalties versus continuing to provide health coverage to their employees and their studies indicated substantial savings from terminating their health plans and paying the penalties.

An example of why dropping coverage might be a viable option for some companies is the story of one employer who reports that it spends about $140,000 a year on insurance premiums to cover 25 managerial positions, but that under Obamacare he will be required to offer insurance to all of his 100 full-time employees starting in January. Doing so could increase his premiums to over $500,000 a year, exceeding his current profit. This employer believes that if he drops insurance entirely, he would pay a penalty of about $144,000 a year, about the same as his current cost (although the penalty is not tax deductible whereas the insurance premiums are). Obviously dropping coverage will not be good for employee relations. In order to counter this, an employer who chooses to drop all insurance coverage could make the decision more palatable to employees by explaining to employees that they may get better and cheaper coverage through the exchange than what the employer can offer and by paying employees more cash to help offset the cost for them to purchase insurance on their own.

A third option being considered by some employers is reducing the number of full-time employees, and converting more workers to part-time, since there will not be a tax assessed for failing to provide coverage to part-time employees. As discussed above, Obamacare defines a “full-time” employee as one who works or is paid for thirty or more hours per week on average, as determined on a monthly basis. Many employers have publicly announced plans to do this, in whole or in part, including a number of companies such as Darden, CKE Restaurants, Pillar Hotels and Resorts, and AAA Parking.

Since the requirement to provide coverage and the penalties for not doing so only apply to employers with 50 or more full-time equivalent employees, some companies have discussed whether it would be possible to set up several corporate entities all having fewer than 50 employees. The answer is no, this strategy will not work, since Obamacare’s mandate applies to affiliated companies.

Other employers may consider simply sub-contracting more work, thus avoiding the penalty provisions. However, in many instances, the contractor will also be subject to the Obamacare provisions, thus raising the contractor’s costs which the contractor will likely try to pass on to the employer. On the other hand, if the contractor has less than fifty employees, then this strategy could work.

Some employers also are paying close attention to a lawsuit filed by the State of Oklahoma that challenges the federal government’s authority to impose employer penalties. The lawsuit is based in part on the fact that most states, including Oklahoma, have decided not to establish state-run exchanges. Oklahoma asserts that, according to the law, the employer penalties apply only if the employee obtains subsidized coverage from a state-run exchange. In other words, if the federal government establishes or runs the exchange in a state, the employer penalties will not apply. Oklahoma claims that, contrary to the plain language of the statute, the IRS has issued rules saying that it will treat a federal-run exchange the same as a state-run exchange. This interpretation means that, if an employee obtains coverage in a federal-run exchange, the IRS may go after the employer for employer penalties. Oklahoma’s lawsuit challenges the IRS rule, and other lawsuits from employers may follow in 2014 when the penalties go into effect. If the courts rule that the IRS exceeded its authority, then employers who operate only in states that have federal-run exchanges will not be subject to the employer penalties.

According to the National Conference of State Legislatures, seventeen states and the District of Columbia received conditional approval from HHS for their exchanges. Mississippi's insurance commissioner applied for a state exchange, but did not receive HHS approval. Seven states are planning to pursue a state/federal partnership where the states run the consumer assistance and/or plan management function of the exchange. Every other state will default to the federally-facilitated exchange.

Whatever strategy employers choose to use, the time is near and it is critical that employers immediately review the requirements and study their options. In doing so it is worth noting that the average annual premiums for employer-sponsored health insurance in 2012 were $5,615 for single coverage and $15,745 for family coverage, according to the Kaiser Family Foundation.

Questions? Need more information? Call Jim Wimberly or Jim Hughes at (404) 365-0900 or e-mail them at jww@wimlaw.com, or jlh@wimlaw.com.

Self-Insured Health Plans After Obamacare

March 14, 2013 -

There is an issue that very few people are discussing, but will have major ramifications for employers who sponsor, and employees who participate in, self-insured health plans. This issue is raised by the preamble to the proposed regulations dealing with the employer penalty and apparently will be decided in the final regulations on the individual penalty. The issue is whether employers will be subject to the $2,000 per employee penalty on nearly all of their employees even though they sponsor self-insured health plans for their employees.

Most people are aware that an individual will not be subject to the individual penalty if the individual has “minimum essential coverage.” Minimum essential coverage includes health coverage provided through grandfathered health plans (GFHPs), qualified health plans (i.e., coverage through State Exchanges), health insurance policies, eligible employer-sponsored plans, and certain governmental plans (such as Medicare or Medicaid).

Although the individual penalty depends, in part, on whether the individual has minimum essential coverage, the employer penalty depends, in part, on whether the employer offers to its employees and their dependents minimum essential coverage under an eligible employer-sponsored plan.

What is an “eligible employer-sponsored plan”? Obamacare defines the phrase “eligible employer-sponsored plan” to consist of certain governmental plans, any other plan or coverage offered in the small or large group market within a State, and GFHPs offered in a group market. Obamacare also defines the phrase “group market” to mean the health insurance market under which individuals obtain health insurance coverage (directly or through any arrangement) on behalf of themselves (and their dependents) through a group health plan maintained by an employer.

Given these statutory definitions, concern is growing that the phrase “group market” will be limited to insurance products. If the phrase “group market” is limited to insurance products, then employers who sponsor self-insured plans will not be providing minimum essential coverage under an eligible employer-sponsored plan.

The preamble to the proposed regulations on the employer penalty states:

Future regulations [about the individual penalty] are expected to provide further guidance on the definition of [minimum essential coverage] and eligible employer-sponsored plans. These regulations [about the individual penalty] are expected to provide that an employer-sponsored plan will not fail to be [minimum essential coverage] solely because it is a plan to reimburse employees for medical care for which reimbursement is not provided under a policy of accident and health insurance (a self-insured plan).

What does this mean for employers? It means that a self-insured plan may be minimum essential coverage for purposes of the individual penalty, but it does not address the issue of whether employers who offer self-insured health plans will be subject to the $2,000 per employee penalty.

Of course, at this time we do not know how future regulations will define “eligible employer-sponsored plan” or “group market.” If the regulators follow the literal language of the statute, employers who sponsor self-insured plans are exposed. Of course, we are hopeful that under pressure from employers, that these phrases will be interpreted to include self-insured products offered by insurance companies, self-insured health plans administered by insurance companies, or self-insured plans with stop loss insurance.  The problem is that the government punts on this issue in the proposed employer penalty regulations.

Employers could consider commenting on the proposed employer penalty regulations by the March 18 deadline in an effort to ensure that they will not be subject to the $2,000 per employee penalty for nearly all employees even though they offer self-insured health plans to their employees.

 Questions? Need more information? Call Jim Wimberly, Jim Hughes, or Ray Perez at (404) 365-0900 or e-mail them at jww@wimlaw.com, jlh@wimlaw.com; rp@wimlaw.com

Healthcare Plans Developing and Unraveling - One Attorney's Opinion

March 7, 2013 -

Both employers and labor unions are starting to see the effects of Obamacare kicking in, and adjusting their plans accordingly. Many stark realities are now becoming apparent that may not have been anticipated.

First, Obamacare really did not really address healthcare costs, which continue to increase. As a matter of fact, there are new estimates from the Internal Revenue Service indicating that even a “cheap” family plan will cost $20,000 a year by 2016 to cover two adults and three children. At least for 2014, employers will not be required to provide dependent coverage as part of “minimum essential coverage” to avoid penalties under the new law.  However, the requirement of providing dependent coverage will kick in during 2015, at least under current regulations.

Labor unions, once a stanch supporter of Obamacare, now have serious doubts about it. A recent article in a union publication is entitled “Union Health Plans Will Suffer Under Obamacare.” The reason labor unions are becoming particularly concerned about Obamacare is that union healthcare plans (often called “multi-employer plans”) generally require all employees to participate, and employers to contribute for all employees. While this structure is supposed to drive down the per-employee healthcare cost, it has no similar savings to the employer and yet, employees would not have regular (and cheaper) access to the state exchanges, because the employer under the union-run plans may be providing “minimum essential coverage.”

As a result, with the union-run healthcare plan approach in Obamacare, employers are disadvantaged because they are paying for all employees and the employees themselves are disadvantaged because they do not have regular access to the state exchanges and the various available tax credits. Further, employers will be disadvantaged because they will not have access to the insurance market available through the exchanges, or the ability to simply stop offering coverage and provide their employees with money to assist in buying coverage on the state exchanges.

Even when an employer elects to be penalized by opting out of healthcare coverage, discontinuing coverage may be cheaper for the employer than any type of union-run plan. Without a union plan, employees can purchase their own coverage at the state exchanges at reduced rates, and with tax subsidies. Furthermore, an employer may provide an employee the money necessary to purchase the coverage on the state exchanges, and even throw in an extra amount for the workers’ increased taxes. In the process, employers can still save about half of their healthcare costs.

Labor organizations are also concerned about the fact that, with government healthcare plans available, one of the main reasons to unionize has gone away. Much like years ago when the various employment laws took away many of the reasons to unionize, the availability of government-run healthcare means that the promise of a union contract contributes nothing towards healthcare, and indeed, may really be a detriment to employees.

Further, unionized employers now have every incentive to get out of their union-run healthcare plans, and possibly out of the union itself. The employees may have the same incentive, since they see opportunities available in healthcare in the state exchanges that are less costly and more beneficial than those under the union-run plans.

Large employers (with 50 or more full-time employees) who intend to continue their own healthcare plans after 2013 are now realizing they need to pay a lot of attention to whether they are maintaining “minimum essential coverage under an eligible employer-sponsored plan” and thus avoiding the penalties. If minimum essential coverage under an eligible employer-sponsored plan is not maintained for 95% of the employer’s entire workforce, the employer may be liable for non-deductible penalties of $2,000 per employee for nearly all of its workforce in the U.S. This requirement to maintain “minimum essential coverage under an eligible employer-sponsored plan” is particularly important as many employers are experimenting with other variations of the healthcare plans, including individual healthcare accounts and the like, that may or may not provide the type of coverage that will avoid the penalties. Further, employers may need to review whether their plans have maintained grandfathered status. Unfortunately, many employers have relied on their insurance company, insurance brokers, and third party administrators to do all the technical things necessary to maintain grandfathered status, and often the necessary steps have not been taken. It is a fairly open question as to whether plans can be retroactively amended to take the necessary steps to maintain grandfathered status.

Another often overlooked fact is that even when employers maintain “minimum essential coverage under an eligible employer-sponsored plan,” they nevertheless may be liable for a penalty in circumstances where the premiums the employees must contribute exceed 9.5% of their household income or where the employers’ plans do not provide minimum value (which is determined by the federal government). For each employee who goes to the state exchanges in such circumstances, the employer may have to pay an additional $3,000 per year in penalties. At least in 2014, the speculation is that not many employees will go to the exchanges, because the penalty (which is unlikely to be collected) is only $95.00 (or 1% of income, if greater) per adult for each employee that has not signed up for coverage for the entire year. The penalties go up for 2015 to $325 (or 2% of income, if greater) per adult, which may cause more employees to participate in the employers’ healthcare plans and/or go to state exchanges for coverage. Also, the automatic enrollment provisions will likely kick in sometime in during 2014 for employers with 200 or more full-time employees, which may cause more employees to get coverage under the employers’ own plans.

 Questions? Need more information? Call Jim Wimberly, Jim Hughes, or Ray Perez at (404) 365-0900 or e-mail them at jww@wimlaw.com, jlh@wimlaw.com; rp@wimlaw.com

Supreme Court Restricts Retaliation Claims

SUPREME COURT RESTRICTS RETALIATION CLAIMS - June 29, 2013

 In University of Texas Southwestern Medical Center v. Nassar, Case No. 12-484, the U.S. Supreme Court clarified the causation standard for retaliation cases that are brought under Title VII if the Civil Rights Act of 1964. Specifically, the Supreme Court held that Title VII retaliation claims must be proved according to the principles of "but-for" causation, and not by the "mixed motive" causation principles that apply to Title VII discrimination claims.

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Supreme Court Green-Lights Mandatory Arbitration Clauses, Forestalling Class Actions: Could Be Good News For Employers

July 7, 2013 -

Will a mandatory agreement to submit disputes to one-on-one arbitration, bypassing class actions, hold up in court? The Supreme Court just said “yes” in a case involving credit cards – and this could be very significant news for employers who want to ensure that disputes with employees are handled confidentially, one at a time, rather than through protracted (and expensive) class actions in court.

 In American Express v. Italian Colors Restaurant, the restaurant wanted to accept American Express credit cards for payment. To do that, it had to enter into an agreement with the company that contained two important conditions. First, any dispute would have to be settled in one-on-one arbitration: no class actions allowed. Second, if it wanted to take American Express credit cards, it also had to agree to take the company’s debit cards. Retailers must pay high fees for both privileges, and the fees for debit card purchases are particularly high.

 The restaurant and a number of other merchants decided to sue American Express, claiming that the debit card requirement was an illegal “tying” arrangement that violated the antitrust laws. But since all of the merchants had signed the one-on-one arbitration agreement as a condition of accepting the cards, American Express said they couldn’t file a lawsuit, let alone a class action. The trial court agreed with American Express and dismissed the case, but the Court of Appeals agreed with the merchants and reversed, in part because enforcing the one-on-one arbitration requirement would make it prohibitively expensive to litigate the antitrust claims. American Express asked the Supreme Court for review.

 The Supreme Court came down squarely in favor of enforcing the arbitration agreement between American Express and the merchants. Justice Scalia, writing for the majority, found that abiding by the agreement between the parties was more important than any other consideration (such as enforcing the antitrust laws). Italian Colors had signed an agreement with American Express that precluded class actions, and was bound by its terms.

 The American Express decision is consistent with the Court’s other recent class action decisions, Dukes v. Wal-Mart and Comcast, which focused on the necessity to look at injuries and damages on an individual level rather than engaging experts to argue collectively. Class actions are where the big money is in litigation, although less for the class members, who often receive coupons entitling them to discounts from wrongdoing retailers, than for the lawyers, who routinely collect 7-or 8-figure fees. The expense of defending a class action, and the risk of financial ruin if you lose, often all but force a company to settle, even if they believe they would win in the end.

 So, what does this mean for employers? Potentially, a lot. All three of these Supreme Court decisions make it more difficult for litigants to bring class action claims in the future. What the American Express decision adds to the mix is that an agreement to arbitrate disputes one-on-one, rather than through a class action, will be honored. Employee-rights organizations will protest, but employers could require the same sort of agreements as a condition of employment, thereby protecting themselves from exposure to class action suits for back wages, discrimination, or other alleged violations. If you don’t think that will be important, just ask any employer who’s been on the receiving end of a class action.

Questions? Need more information? Contact Larry Stine at (404)365-0900 or jls@wimlaw.com;

or Elizabeth Dorminey at bdorminy@bellsouth.net.

Obama Administration Postpones Employer Penalties and Certain Other Requirements Until After 2014 Elections

July 12, 2013 -

On July 2, 2013, in a Treasury Department blog post, the Obama administration announced that it will postpone the effective date of several requirements imposed on employers. The administration will publish details of the relief being granted in the near future.

The blog post indicates that large employers (those with 50 or more employees) will not be subject to the employer shared responsibility payments until 2015. In other words, for 2014 only, large employers who do not offer health coverage to at least 95% of their employees will not have to pay a penalty of as much as $2,000 per employee per year for all employees (less 30) if just one employee obtains tax subsidized coverage in a State Exchange. Also, for 2014 only, employers, who offer health coverage that is not affordable or that does not provides minimum value, will not have to pay a penalty of as much as $3,000 per year for each employee that obtains tax subsidized coverage in a State Exchange.

The blog post also mentions that, for 2014 only, employers will not have to comply with certain information reporting requirements. All employers will not be required to file information returns that include details about the employees who have employer-provided health coverage, the type of coverage, and the premiums paid. Large employers will not have to submit information returns that disclose information about their health coverage and their full-time employees and that are necessary for determining the employer and individual penalties.

This transitional relief does not yet extend to employees. Employees may have access to tax subsidized coverage in the State Exchanges and may be subject to the individual penalties if they do not have minimum essential coverage. On July 9, White House Press Secretary Jay Carney said that the individual mandate would take effect as planned, although Republican leaders are calling for the same one-year delay for individuals as has been granted for employers.

What does this transitional relief mean for large employers? Large employers who offer health care coverage to their employees still must prepare for implementation of all other Obamacare requirements that become effective in 2014, such as reducing the waiting period for coverage to no more than 90 days. Otherwise, such employers will be subject to other penalties imposed by federal law and to lawsuits by employees based on violations of their rights under Obamacare and other federal laws. Large employers who do not offer health care coverage to their employees may have another year to decide whether to offer coverage.

There have been many comments as to the reasons for the delay. The Administration stated that the decision is one of accommodating business, but many questions remain as to whether the government is ready to implement the new law. Regulations have not been issued in many areas, including regulations covering information that was to be provided to each employee starting October 1, 2013, as to options of participating in the state exchanges, and regulations necessary for reporting data to the government. Further, reports indicate that the new computer systems necessary to implement the law have not yet been installed. Indeed, the Government Accountability Office has reported that various steps are still necessary for building the state exchanges.

Employers need to follow carefully subsequent developments and hopefully guidance that will come out concerning notices that were to be issued to employees beginning October 1.

Questions? Need more information? Contact Jim Hughes at (404)365-0900 or jlh@wimlaw.com or James W. Wimberly, Jr. at (404)365-5609 or jww@wimlaw.com.

A Teachable Moment: What Employers Can Learn From Paula Deen’s Experience.

August 15, 2013 -

The national attention devoted to Paula Deen provides an excellent opportunity for employers to review their policies and procedures concerning harassment and inappropriate conduct in the workplace with all employees, but most particularly, supervisors and members of management. Supervisors and managers are the first line of an employer’s defense in the prevention of claims for harassment or discrimination.

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How Supreme Court Gay Marriage Ruling Affects Employers

August 16, 2013 -

In a ruling issued by the U.S. Supreme Court on June 26, 2013, the Court declared unconstitutional Section 3 of the federal Defense of Marriage Act (DOMA), which defines marriage as a legal union between a man and a woman for purposes of more than 1,000 federal laws. The majority indicated that by denying federal recognition to a marriage recognized as legitimate under state law, the federal law violated the Constitution's guarantees of equal protection and due process. U.S. v. Windsor, _____ U.S. _______ (June 26, 2013). A companion case, Hollingsworth v. Perry, addressed whether the 14th Amendment's equal protection clause prohibited the State of California from defining marriage as the union of a man and a woman. The Court did not reach the merits of this particular issue, but instead denied review on technical grounds leaving standing a lower court ruling that struck down California's Proposition 8, which banned gay marriage.

Technically, the Supreme Court rulings do not address whether there is a federal constitutional right for same-sex marriage under the laws of the various states, thus suggesting there will be further rounds of litigation addressing that particular issue. The ruling does not address a separate DOMA provision that states need not recognize same-sex marriages performed by other states. Justice Scalia, however, writing for the dissent, indicated that the majority has provided a "blueprint" for extending gay marriage nationwide.

In the meantime, the rulings of the Court will play out in the states in two ways. First, numerous legal challenges will be made in those states prohibiting same-sex marriages, and at the same time efforts will be made in the states to overturn legislatively the banning of same-sex marriages. Currently, at least eight states recognize full or limited civil unions or domestic partnerships, plus the District of Columbia. Over 30 states have laws or constitutional amendments prohibiting same-sex marriages.

The immediate effect of the ruling is that employers in those states that recognize same-sex marriages will have to review their employee-benefit packages to make sure they do not discriminate against gay marriages. Even in states that ban gay marriages, more and more employers will likely move to recognizing same-sex relationships in their benefit programs to be consistent with the trend in the U.S. both legally, but also in public opinion.

The Supreme Court ruling appears to immediately affect federal benefits and federally-regulated benefits, including 401(k) plans and pensions. Gay marriages will lead to the same privileges as beneficiaries enjoy like other married couples. In healthcare, changes will be required to provide equal tax treatment of health insurance premiums, as a gay spouse will have the same right as a heterosexual spouse to pre-tax premium deductions. The ruling will also affect various other federal laws including immigration, bankruptcy and student aid. On the other hand, same-sex married couples could also see the likelihood of federal income tax increases, although there may be savings in the federal estate tax.

The issue drawing everyone's immediate attention is what to do about gay spouses who are married in states allowing such marriages, but who currently live in states that do not recognize same-sex marriages. Under past practices, many federal benefits such as Social Security turn on the validity of a marriage under the law of the state where the couple resides. The IRS will have to address these issues. Employers will have to address similar issues.


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