Issues In Employment Law – September 2001

Posted on September 1, 2001

Severance packages should provide for single-event, lump sum payment rather than periodic payments over a period of time.

According to a recent opinion of the U.S. Court of Appeals for the 7th Circuit, which covers Illinois, Indiana, and Wisconsin, if a severance plan requires any administration at all, then it will be governed by the Federal Employee Retirement Income Security Act. The reason that this matters is that actions by employees for violations of ERISA, carry with them the very real possibility of Attorney Fee awards, which can be quite expensive, and which are not usually available otherwise. In Bowles v. Quantum Chemical Company, 2001 WL 1084627 (7th Cir. 2001), a retiring employee sued his employer for payment of benefits under the employee severance plan with was in place for all employees in the event of a take-over or merger. The company failed to pay Mr. Bowles according to the plan, which called for regular payment of bonuses, and annual incentive pay for a number of years after such severance. The fact that the employer was required to monitor and calculate the amount of bonus and incentive pay to be paid from time to time after Mr. Bowles’ separation, the package was deemed to be a “plan” as that term is defined by ERISA, which then subjected the employer to an award of attorneys fees, in addition the amount of his claims. The Court reasoned that if the package had involved merely the mechanical application of a formula, and a payout, it would not have been an ERISA plan, thus eliminating the possibility of an attorney’s fee award.

Employers should institute zero tolerance policies regarding discriminatory comments or remarks in its workplace.

In Rivera v. Frito Lay Snack, 2001 WL 1013163 (1st Cir. 2001), the Court of Appeals for the First Circuit, which covers Maine, Massachusetts, New Hampshire, Rhode Island, and Puerto Rico, allowed an Age and National Origin discrimination to proceed, even though evidence of the employer’s age and national origin animus was well outside the usual time period in which such evidence is considered. Usually, a claimant must bring his claim to the EEOC within 180 days (or 300 days if the state or locality has a recognized referral agency, as was the case here) of the discriminatory act, and that evidence of actions which occurred beyond the 300 day period is outside the scope of the Court’s determination. However, as was the case in Rivera, when the claim alleges a continuing pattern of discrimination, the Court requires only that one such act giving rise to the claim have occurred within the 300 day period, and that related comments or acts will be considered. This leaves the employer open to possible liability for comments made many months or even years before, as in the case here, where six different episodes age or national origin comments occurring over a two year period were held to be often enough to constitute a continuous pattern of illegal animus. Thus, the spectre of a discrimination case can hover for quite some time.

Employers who wish to enforce no solicitation policies cannot enforce such a policy only as regards union activities, but must instead enforce it in every circumstance.

In a recent 4th Circuit Court of Appeals opinion, which determines Federal law in Virginia, West Virginia, Maryland, North Carolina, and South Carolina, an employer was admonished for unlawful interference with union activities. In Weis Markets, Inc. v. National Labor Relations Board, 2001 WL 1041448, (4th Cir. 2001) managers of Weis Markets had made anti-union comments, threats, and gestures, including the firing of one of the organizers. They had sought to declare the picketers as trespassers, and have them removed, and to further prohibit hand-billing and soliciting. They also offered raises to those who would vote against unionizing, and threatened to close a particular location, if the employees there decided to unionize. The National Labor Relations Board had made findings that each of these activities constituted unlawful interference with protected union organizing activity. On appeal to the Court of Appeals agreed with the NLRB on almost every point. The Court of Appeals decided, however, that as the parking lot, and the surrounding areas were under the exclusive control of the Market, its managers had a right, under property law, to prevent trespassers. This case is a powerful reminder that employers need to be extremely circumspect with dealing with union organization activity in the workplace.

The Supreme Court has let stand a broad application of the definition of “gross misconduct” which would alleviate an employer’s duty to provide COBRA continuation coverage.

The United States Supreme Court has denied certiorari in a case from the Fourth Circuit Court of Appeals, which decides Federal law for Virginia, Maryland, West Virginia, North Carolina, and South Carolina. By denying certiorari, the Supreme Court has let stand a definition of “gross misconduct” under ERISA, which included “flagrant, repeated insubordination,” even though the Seventh Circuit, which covers Illinois, Indiana, and Wisconsin, has previously held that failure to perform job duties was NOT gross misconduct. In Bryant v. Food Lion, Inc., 26 Employee Benefits Cas. 1009, 2001 WL 434566, (4th Cir. 2001), several managers were terminated for misconduct, and were not offered or notified of their rights under the COBRA amendments to ERISA. The employer defended the failure to provide such coverage by claiming that the managers had been terminated for “gross misconduct.” The reason such a distinction is important is that employers are required to provide continuation health insurance coverage for employee who leave the employment for any reason except for Gross Misconduct. Thus, for employers within the Fourth Circuit, the standard of defining “gross misconduct” has been loosened to include behaviors which are not normally associated with “serious malfeasance.”