Neil Alexander

Littler Mendelson
Shareholder and co-
Chair,
Littler Contingent
Workforce
Practice Group
Phoenix, AZ
602.474.3612
Suellen Oswald
Littler Mendelson
Shareholder and co-
Chair,
Littler Contingent
Workforce
Practice Group
Cleveland, OH
216.623.6099
George Reardon
Littler Mendelson
Special Counsel
Houston, TX
713.951.9400
Corinn Jackson
Littler Mendelson
Knowledge
Management Counsel
Los Angeles, CA
310.772.7268
Jon Osborne
Staffing Industry
Analysts
VP of Research
Mountain View, CA
650.390.6182
Bryan Pea
Staffing Industry
Analysts
VP of Contingent
Workforce Strategies &
Research
Mountain View, CA
650.390.6188
For More Information Contact:
Neil Alexander
Littler Mendelson
Shareholder and co-Chair,
Littler Contingent Workforce
Practice Group
Phoenix, AZ
602.474.3612
Suellen Oswald
Littler Mendelson
Shareholder and co-Chair,
Littler Contingent Workforce
Practice Group
Cleveland, OH
216.623.6099
George Reardon
Littler Mendelson
Special Counsel
Houston, TX
713.951.9400
Corinn Jackson
Littler Mendelson
Knowledge Management
Counsel
Los Angeles, CA
310.772.7268
Jon Osborne
Staffing Industry Analysts
VP of Research
Mountain View, CA
650-390-6182
Bryan Pea
Staffing Industry Analysts
VP of Contingent Workforce
Strategies & Research
Mountain View, CA
650.390.6188
For Information Contact:
This Months Items:
Summary
The Obama administration announced a delay in the employer pay-or-play mandate and accompanying insurer reporting requirements by one
year. The U.S. Supreme Court ruled as unconstitutional the section of the Defense of Marriage Act that required federal laws to ignore same-sex
marriages legally entered into under applicable state laws; the ruling will affect the design and implementation of employer benefit plans. A
plaintiff filed a putative collective action against a law firm and its staffing company as joint employers, alleging the defendants willfully violated
the Fair Labor Standards Act when they failed to pay overtime to a lawyer hired to perform document review. A regional director for the National
Labor Relations Board decided temps provided by a staffing agency for a short-term project were employees of the staffing firm and constituted a
unit appropriate for collective bargaining. A Maryland federal district court dismissed the Equal Employment Opportunity Commissions Title VII
suit against a company over alleged discriminatory background checks.
Date and Year
1. Affordable Care Acts employer mandate delayed one year
2. US Supreme Court overturns Defense of Marriage Act
3. Suit alleges law firm and staffing agency failed to pay overtime to temps
4. National Labor Relations Board orders temp staffing agency election
5. Court tosses Title VII disparate impact suit over alleged discriminatory background checks
August 2013
This monthly update is provided solely for informational purposes, and should not be considered legal advice. It is always recommended to seek qualified legal counsel before taking action.
1. Affordable Care Acts employer mandate delayed one year
Jurisdiction:
Federal
Description:
On July 2, 2013, the Obama administration announced a one-year delay in the employer pay-or-play mandate and accompanying insurer
reporting requirements under the Affordable Care Act. According to the Treasury Department notice, this delay is intended to provide the agency
additional time to simplify the reporting requirements and provide time to adapt health coverage and reporting systems while employers are
moving toward making health coverage affordable and accessible for their employees. The announcement came as many employers had been
preparing for the 2014 requirement that those with 50 or more full-time employees and full-time equivalent employees either offer health
coverage that meets certain standards to full-time employees or pay a penalty. According to the statement from Mark Mazur, Assistant Secretary
for Tax Policy at the Treasury Department, During this 2014 transition period, we strongly encourage employers to maintain or expand health
coverage. The administration has not announced that the transition relief will impact other provisions of the ACA, including access by
employees to premium tax credits for use in the future health insurance exchanges.
On July 9, 2013, the IRS issued additional guidance on this grace period, available here.
Item Type:
Regulatory Development
For Contingent Workforce Buyers
Implications:
The delay in implementation of a key component of the healthcare reform law, calls into
question whether certain other provisions of the law scheduled to begin in 2014, namely
the new healthcare exchanges, will meet the deadline. The announcement provides
regulators with additional time to try to simplify the burdens on employers created by the
mandate.
Suggested Actions:
Some staffing contracts now in force may still be in force when the mandate and
associated penalties begin in 2015. Buyers should review agreements to determine
whether, and how, they address interim increases in governmental-imposed costs. If the
contracts are not clear, buyers should discuss with suppliers who will bear these costs.
The delay will afford buyers additional time to carefully prepare staffing contracts entered
into between now and 2015 in order to address governmentally imposed costs with
suppliers.
For Staffing Firms
Implications:
See Implications for Contingent Workforce Buyers
Suggested Actions:
See Suggested Actions for Contingent Workforce
Buyers
This monthly update is provided solely for informational purposes, and should not be considered legal advice. It is always recommended to seek qualified legal counsel before taking action.
2. US Supreme Court overturns Defense of Marriage Act
Jurisdiction:
Federal
Description:
The U.S. Supreme Court ruled as unconstitutional the section of the Defense of Marriage Act that required federal laws to ignore same-sex
marriages that are legally entered into under an applicable state law. Currently 13 states (California, Connecticut, Delaware, Iowa, Maine,
Maryland, Massachusetts, Minnesota, New Hampshire, New York, Rhode Island, Vermont and Washington) and the District of Columbia provide
full marriage equality to same-sex relationships. The Windsor v. United States (No. 12-307 Jun. 26, 2013) decision will significantly affect private
employer benefit plans.
The Windsor decision took effect on July 22, 2013. An employee with a valid same-sex marriage will be treated as having a spouse for any
benefit plan that refers to spouses without limitation. This means employers can provide spousal coverage under medical plans without
imputing income to those employees. It also means that same-sex spouses will receive the benefit of spousal status for purposes of 401(k) and
other retirement plans. Same-sex spouses will now be eligible for the same favorable tax treatment under the Internal Revenue Code (the Code)
as opposite-sex spouses. However, it is unclear how the value of coverage provided to same-sex spouses will be taxed under the different state
income tax laws. While a state that recognizes the marriage will treat the coverage of a same-sex spouse the same as coverage of an opposite-
sex spouse, many employees are subject to state income tax for income sourced from a state in which they do not reside (if they commute to a
non-recognizing state, or perform services in multiple states). Accordingly, employers may still be required to calculate the value of employer-
provided coverage for a same-sex spouse.
For more information, please see Littlers Insight, Same Sex Marriages and Benefit Plans After Windsor
Item Type:
Case Law
For Contingent Workforce Buyers
Implications:
The IRS is expected to issue guidance on the definition of spouse for purposes of the Code.
Once the IRS determines how relationships will be treated under the Code, Employee Retirement Income
Security Act (ERISA) plans will have to treat couples in such relationships as married for the purposes of the
spousal benefits prescribed under ERISA (such as survivor benefits under tax-qualified retirement plans and
401(k) plans, and domestic relations orders). But employers will still be able to define spouse differently
(narrowly or more broadly) for purposes of non-mandated spousal benefits under ERISA plans.
Suggested Actions:
Employers should consult with counsel to determine whether they need to adjust their payroll systems to
eliminate the additional imputed income for the value of coverage of same-sex spouses under federal tax law. It
has not yet been determined how (or if) the employers should adjust future 2013 withholding to take into
account the imputed income recognized during the first half of 2013.
Employers also should consult with counsel familiar with state laws to determine whether any employees with
same-sex spouses recognized in their state of residence have income subject to tax reporting in states that do
not recognize the marriage, and adjust their payroll systems accordingly.
For Staffing Firms
Implications:
See Implications for
Contingent Workforce Buyers
Suggested Actions:
See Suggested Actions for
Contingent Workforce Buyers
This monthly update is provided solely for informational purposes, and should not be considered legal advice. It is always recommended to seek qualified legal counsel before taking action.
3. Suit alleges law firm and staffing agency failed to pay overtime to temps
Jurisdiction:
New York
Description:
In Lola v. Skadden, Arps, Meagher, Slate & Flom LLP (No. 13-05008 S.D.N.Y. Jul. 18, 2013), the plaintiff filed a putative collective action against
a law firm and its staffing company as joint employers, alleging the defendants willfully violated the Fair Labor Standards Act (FLSA) when they
failed to pay overtime pay to a temporary contract attorney hired to perform document review work. According to the complaint, David Lola was
hired through staffing firm Tower Legal Staffing in April 2012 to work for law firm Skadden Arps on a document review project as a temp. Lola
worked on the project for approximately 15 months and allegedly routinely worked more than 40 hours per week without getting paid overtime.
The suit alleges it is a fairly common industry practice to hire contract lawyers for document review and accordingly, the legal industry insists
that because these individuals have law degrees, they are performing high level work that is exempt under the FLSA. The suit further alleged
that to the contrary, due to the routine nature of Lolas job duties that did not require any legal analysis or practice of law, he should have been
paid overtime pursuant to the FLSA.
Item Type:
Lawsuit Filed
For Contingent Workforce Buyers
Implications:
See Implications for Staffing Firms.
Suggested Actions:
See Suggested Actions for Staffing Firms.
For Staffing Firms
Implications:
The plaintiffs attorney in this case has represented contract attorneys in two prior suits
alleging FLSA overtime violations against law firms, one of which settled in 2010. The
other suit is currently ongoing. If Lola or other similar cases incur significant settlements or
judgments for the plaintiffs, staffing firms and law firm buyers can anticipate an increase in
such cases.
Suggested Actions:
While attorneys are typically considered exempt from the FLSA because of their
professional degrees and the highly skilled nature of their work, cases like Lola emphasize
that it may be important to review the actual job duties performed by a worker or temp
before classifying him or her as exempt from the FLSA.
This monthly update is provided solely for informational purposes, and should not be considered legal advice. It is always recommended to seek qualified legal counsel before taking action.
4. National Labor Relations Board orders temp staffing agency election
Jurisdiction:
Maryland
Description:
In Bergman Bros. Staffing Inc. (NLRB Regl Dir. No. 5-RC-105509, Jun. 20, 2013), a regional director for the National Labor Relations Board in
Baltimore decided temps provided by a staffing agency for a short-term project were employees of the staffing firm and constituted a unit
appropriate for collective bargaining. North Carolina-based Bergman provides employees to perform asbestos abatement services on projects
with durations ranging from a few hours to several weeks. According to the regional director, once Bergman places a temp with a client, the
client signs a two-page temporary employment agreement that lists the responsibilities of Bergman and its client. Bergman agrees to provide
employees to the client for a minimum of four hours and their hourly rates are in effect for up to four months. Bergman provides all of the
employees' compensation, including the employer portion of payroll taxes. Under the agreement, the client is responsible for the direction and
supervision of employees, for recording the time worked by each employee, and for verifying the accuracy of the hours shown on their
timecards. Bergman and the client typically sign another agreement including details about the project and the hourly rates for workers once a
specific job is started. After the job has been completed, the client releases the employees, who return to Bergman for assignment to other
projects. If Bergman does not immediately place the employees they are laid off until another placement is available.
The regional director said the test for determining whether individuals are temporary employees for union organizing is whether they have an
undetermined tenure: If the tenure of the disputed individual is undefined and they are otherwise eligible, they are permitted to vote [in union
elections]. On the other hand, where employees are employed for one job only, or for a set duration, or have no substantial expectancy of
continued employment and are not notified of this fact, and there have been no recalls, such employees are excluded as temporaries. The
regional director thus found that the temps are permanent Bergman employees with the right to organize and participate in union elections,
because only their work with clients is temporary and they always return to Bergman at the end of their projects. Moreover, the fact that the
employees are only laid off at the end of a project and not terminated suggests that Bergman expects to have a continuing relationship with the
employees beyond any one clients immediate project.
Item Type:
Labor Decision
For Contingent Workforce Buyers
Implications:
See Implications for Staffing Firms.
Suggested Actions:
See Suggested Actions for Staffing
Firms.
For Staffing Firms
Implications:
Notably, the regional director said Bergman's employees would have been denied an opportunity to
organize if he had concluded prior case law required a petition to name both Bergman and its clients
as joint employers. Under its current system, Bergman receives little advance notice of when clients
will need employees and those projects are of relatively short duration: Even assuming a labor
organization could file a petition simultaneously with the employer securing the project from its client, it
is unlikely that the board would be able to conduct an election before the project was complete, let
alone engage in any meaningful bargaining.
Suggested Actions:
While the Baltimore regional directors position is not binding elsewhere, it could be followed by other
regional directors throughout the country when presented by similar facts. The current board is no
stranger to staking out bolder and more far-reaching positions and staffing firms should monitor
representation cases to see if a trend develops. We will continue to monitor developments and report
them through the Legs and Regs Advisor.
This monthly update is provided solely for informational purposes, and should not be considered legal advice. It is always recommended to seek qualified legal counsel before taking action.
5. Court tosses Title VII disparate impact suit over alleged discriminatory background checks
Jurisdiction:
Maryland
Description:
In EEOC v. Freeman (Case No. 09-cv-02573, D. Md., Aug. 9, 2013), a Maryland federal district court dismissed the Equal Employment
Opportunity Commissions (EEOC) Title VII suit against Freeman over alleged discriminatory background checks based largely on flaws in the
EEOCs expert report. The company ordered different types of background checks for different positions. For some positions, the company
ordered only a criminal check and verification of the applicants Social Security number. For other positions, such as general managers and
department heads, the company added education and credential checks. The company conducted post-offer background checks and cited a
variety of reasons for conducting the checks, presenting the court with evidence that the company had experienced serious problems facing
many employers, including theft, embezzlement, drug use and workplace violence.
The company designed its background check program with five goals in mind: (1) avoid exposure to negligent hiring/retention lawsuits; (2)
increase the security of the companys assets and employees; (3) reduce liability from inconsistent hiring or screening practices; (4) proactively
reduce the risk of employee-related loss; and (5) mitigate the likelihood of an adverse incident occurring on company property that could
jeopardize customer or employee confidence. In October 2009, the EEOC filed suit against the company, alleging that it engaged in an ongoing
pattern and practice of discriminating against African Americans, Hispanics and male applicants by examining their criminal reports and against
African Americans by examining their credit histories for employment purposes. The district court granted summary judgment for the company
based on its findings that the EEOCs expert testimony (1) was unreliable and would not support a finding of disparate impact, and (2) failed to
attribute any supposed disparate impact to a specific employment practice. While the opinion acknowledges the legitimate business reasons for
conducting criminal background checks and highlights significant challenges the EEOC faces when prosecuting such suits, the court did not
reach the question of whether the company could affirmatively demonstrate business necessity.
For more information, please see Littlers ASAP, Federal Court Dismisses EEOC Title VII Disparate Impact Suit Over Alleged Discriminatory
Background Checks Without Trial.
Item Type:
Case Law
For Contingent Workforce Buyers
Implications:
The Freeman courts opinion will not prevent the EEOC from continuing to challenge employer use of
background checks and the court explicitly recognizes that some specific uses of criminal and credit
background checks may be discriminatory and violate the provisions of Title VII. The EEOC is expected
to appeal the decision. The agency has already appealed another credit check case in Ohio after the
court similarly ruled the EEOC failed to show any disparate impact.
Suggested Actions:
Employers with concerns regarding potential disparate impact risks should consult counsel to conduct a
privileged audit of their screening policies that evaluates, among other things, whether the policy,
incorporates variation for different roles within the company, and requires confidential handling and
destruction of sensitive information.
Employers also should stay abreast of state and federal laws in addition to Title VII that impact the use
of criminal and credit records in employment, such as the Fair Credit Reporting Act.
For Staffing Firms
Implications:
See Implications for Contingent
Workforce Buyers.
Suggested Actions:
See Suggested Actions for
Contingent Workforce Buyers.