Employment Policies and At-Will Employment

While progressive discipline and adherence to company policy can help an employer defend a challenge to an adverse employment action, employers need to keep in mind that, in the absence of agreement otherwise, in most jurisdictions employees are "at-will."  "At-will" employment means that employees can be terminated at any time for any reason (other than unlawful), or no reason at all, with or without notice.  Likewise, at-will employees can terminate their employment in the same manner.  In a non-union setting, employers should avoid policies that commit them to steps in imposing discipline for performance, conduct or absenteeism or responding to employee complaints.  Even with a disclaimer advising that policies are not contractual and are subject to change, employees can assert claims based on reliance, contract, or differential or discriminatory application.  It is much better for employers to retain discretion.

In addition, employers should avoid policies that are confusing and difficult to implement, or that will not be applied in practice.  Employers should reconsider policies where exceptions swallow the rule.

For more on employment policies that can do more harm than good, see my comments on SHRM's website at: www.foxrothschild.com/Newsstand/News.aspx

EEOC Issues Technical Guidance on ADEA Waivers

On July 15, the Equal Employment Opportunity Commission (EEOC) issued technical assistance on waivers of discrimination claims, including age discrimination claims, in a Q&A  format(www.eeoc.gov/policy/docs/qanda_severance-agreements.html).

The guidance, directed at employees faced with waiving claims, explains the following criteria for a release to be enforceable:

- The release must be in exchange for consideration over and above that which an employee is already entitled.

- The release must be knowing and voluntary, which means:

  • it was written in a manner that was clear and specific enough for the employee to understand based on his education and business experience;
  • it was not induced by fraud, duress, undue influence, or other improper conduct by the employer;
  • the employee had enough time to read and think about the advantages and disadvantages of the agreement before signing it;
  • the employee consulted with an attorney or was encouraged or discouraged by the employer from doing so;
  • the employee had any input in negotiating the terms of the agreement; and
  • the employer offered the employee consideration (e.g., severance pay, additional benefits) that exceeded what the employee already was entitled to by law or contract and the employee accepted the offered consideration.

In order to ensure that a release is knowing and voluntary, the release should name the claims to be released, including discrimination claims. 

Also, as explained in the new guidance, even if an employee signs a release, s/he can still bring a claim, either challenging the waiver itself or with the EEOC or other agency (which would not be covered by an employee release).  However, arguably a severance agreement can require an employee to return any severance payment attributable to a claim the employee pursues (under a "tender back" provision), or any recovery on the employee's behalf.  A release cannot require an employee to waive his/her right to bring an EEOC charge or cooperate in an EEOC investigation.  A release also cannot waive prospective claims.

The new guidance also explains the additional requirements that must be met for an effective release of an age claim under the Age Discrimination in Employment Act.  Specifically:

  • A waiver must be written in a manner that can be clearly understood. 
  • A waiver must specifically refer to rights or claims arising under the ADEA. 
  • A waiver must advise the employee in writing to consult an attorney before accepting the agreement.
  • A waiver must provide the employee with at least 21 days to consider the offer. 
  • A waiver must give an employee seven days to revoke his or her signature.   
  • A waiver must not include rights and claims that may arise after the date on which the waiver is executed. 
  • A waiver must be supported by consideration in addition to that to which the employee already is entitled.

In the context of an exit incentive, which is a termination of two or more employees, a release of an age claim also must give the employee 45 (instead of 21) days to consider and identify the decisional unit, eligibilty factors, time limits, job titles and ages of all individuals who are eligible for the program, and the job titles and ages of all individuals in the same job classifications or organizational units who are not eligible for the program.

At the July 15 commission meeting at which the guidance was issued, EEOC Acting Chairman Stuart Ishimaru commented that more older workers are staying on the job as a result of current economic conditions; more workers are age 40 and older; and, EEOC age charges are rising (private sector age discrimination charges in fiscal 2008 increased by 29% compared with the prior year and comprised neary 25% of all EEOC charges).  While the burden on employees to prove age discrimination may be high under current judicial interpretation of the ADEA, employers still must avoid age-related stereotypes and "ageist" comments in the workplace. 



The Employee Handbook: Sword and Shield

While no law requires an employer to have a handbook, employers should implement and distribute certain policies in order to defend themselves from potential claims from employees. The employee handbook is an appropriate, centralized and convenient medium for doing so. In addition, the handbook can be an important resource to employees who have questions about company policies, work rules, and benefits. Equally important, the employer can use its handbook to put forward a positive corporate image to its employees, which can be effective in highlighting favorable benefits, keeping employee morale high, and avoiding union organization.

While there is no "one size fits all" employee handbook, employers should consider the following policies when implementing an employee handbook:

- Disclaimer:  All employee handbooks should include a prominent disclaimer at the beginning of the handbook advising employees that the handbook is not a contract, that employees are employed at-will, and that the employer can terminate their employment or change benefits at any time for any reason. The employer should require employees to sign an acknowledgment that they received the handbook and reviewed and understand its contents, including the at-will disclaimer. 

- Privacy issues:   Employers now have the capability to monitor computers, e-mail, and telephones; videotape; conduct drug and genetic testing; and eavesdrop. Many states recognize that employees have a common law protection from invasion of privacy by their employer and recognize tort claims for violation of that right, including claims for defamation, false imprisonment, false arrest, and intentional infliction of emotional distress. Accordingly, employers should include policies in the employee handbook that diffuse expectations of privacy, where reasonable to do so.

For example, the handbook should include a policy that advises employees that any containers or packages (regardless of ownership) that they carry in or out of the company’s premises are subject to inspection, as well as desks, lockers, cabinets ( as well as voice mail, e-mail, and computer data) and other similar items on company property. The employer can provide that a refusal to consent to such a search is grounds for discipline of the employee.

In addition, employers must have a policy advising employees that the e-mail system is owned by the employer and that employees have no reasonable expectation of privacy in their e-mail communications and internet searches. The policy should advise employees that the employer can retrieve even deleted messages. The policy should prohibit employees from accessing each other’s e-mails, as well as illegal and improper uses of e-mail and the internet, such as pornography, obscenity, harassment, and gambling. The employer also should prohibit employees from subscribing to information without employer permission; violating copyrights; or, issuing defamatory statements. Employers should issue passwords to employees and prohibit them from sharing those passwords, while maintaining the employer’s right to know all passwords and access an employee’s e-mail at any time. 

Employers must remember that even with such notice, employer monitoring of personal communications, and attorney-client privileged communications, is still restricted. 

Telecommuting:  For employers, telecommuting offers the benefits of decreased office space requirements and more flexibility in hiring. The employee gains flexibility in terms of work hours and commuting. However, there are several potential pitfalls presented by allowing employees to telecommute, including lack of direct supervision, costs involved with establishing an appropriate home work environment, and attendant liability and implementation issues. To address these issues, a telecommuting policy should include a statement that telecommuting is at the employer’s discretion; a length of service and satisfactory performance requirement; a trial period; restrictions on child and other dependent care; safety and confidentiality protections; and, requirements for face-to-face and telephone or other regular interaction.  In order to comply with the record-keeping requirements of federal and possibly state wage and hour laws, the employer must require non-exempt employees to keep and submit a record of all hours worked. In addition, the employee must be required to notify the employer immediately of any injuries sustained in the home office.

- Non-harassment:   In response to a hostile work environment harassment claim, in the absence of a tangible employment action, the employer may raise an affirmative defense based on a showing that it exercised reasonable care to promptly prevent and correct any sexually harassing behavior, and that the employee unreasonably failed to avail himself of any preventative or corrective opportunities offered by the employer. A non-harassment policy, which the employer has distributed to employees and in which the employer has trained employees, is a critical part of such a defense.  A non-harassment policy should include a clear statement that the employer will not tolerate any harassment on the basis of any protected trait or activity. The policy should define harassment and specify that its terms apply to work-related settings such as business trips and business-related trips, as well as in the office. The policy should cover all employees, managers, and outside clients or vendors doing business with the company. While the employer may be limited in what action it can take against non-employees for harassing its employees, the employer can limit, change, or end the relationship with the client or vendor who is the source of the harassment.  The non-harassment policy should advise employees how to report harassment that they experience or witness; how the employer will investigate the alleged conduct and communicate the results; how an employee can appeal the conclusion; and, what sanctions may be imposed (including termination). The non-harassment policy should explicitly prohibit retaliation against an employee for making a complaint.

- Reasonable accommodation:  Under federal and some state anti-discrimination laws, employers may have an obligation to “reasonably accommodate” an employee’s disability or religious belief. Generally, reasonable accommodations are those adjustments or modifications which specifically assist the employee in performing the duties of a particular job. However, an employer is not required to make reasonable accommodations where the accommodation(s) would cause the employer undue hardship, such as where the accommodation is too expensive or disruptive or would be ineffective.  A reasonable accommodation policy should institute a procedure for evaluating requests and, where appropriate, for providing the appropriate accommodation to the employee. The policy should require the employee to report his or her disability or religious belief to the employer and make a request for an accommodation where the condition at issue is not readily apparent. The employer must balance the request for the accommodation against the hardship it may impose, based on the employer’s size, type and financial strength. Employers should document requests for accommodations, discussions pertaining thereto, and decisions regarding implementing or denying the request.

References Employee references can be the basis for defamation and retaliation claims against former employers for releasing potentially damaging information regarding an employee.  Accordingly, employers must control who responds to reference requests and what information is released. An employee reference policy must designate an individual to respond to requests and prohibit other employees from doing so. The policy should limit the information that will be released, such as to job title and terms of employment, unless the former employee has signed his or her consent to the release of any additional information. 

- Cell phone use:    In order to limit liability, employers should include polices in their handbooks governing cell phone use for business purposes by driving employees. Employers also should be cognizant of state laws that place restrictions on cell phone use while driving.

- Leaves of absence: Employers who are covered  by the Family and Medical Leave Act ("FMLA") must have a FMLA policy in their employee handbooks.  In addition to addressing employee rights and responsibilties under the FMLA, the policy should address interaction with any applicable state leave law rights, other employer leaves, and paid time off.

- State laws: Employment laws differ from state to state.  Mutli-state employers must supplement core policies with applicable state law requirements.

- Other:  In general, an employee handbook should contain certain basic policies addressing, for example, compensation, leaves, equal employment opportunity, substance abuse, and benefits. The handbook also can describe a company’s structure, goals, and philosophy.  

Drafting and implementing the handbook are only the first steps.  Employers must train supervisors in how to apply the policies, as deviation from policies and practices can be evidence of improper motive, such as discrimination, as well as create feelings of unfair treatment among employees.

While every employee handbook must be tailored to the business at issue, depending on its goals, culture, location, and practices, all handbooks can have the common results of meeting legal obligations and bringing structure to the workplace.

Effect of Furloughs on Employee Benefits

In order to avoid layoffs and reduce costs, many employers are imposing unpaid leaves of absence, or furloughs, on active employees.  How do these leaves affect employee benefits?

Section 401(k) and Profit Sharing Plans
 It may be more difficult for furloughed workers to meet the 1,000 hour service threshold, permissible under the tax code and often defined by employers.  Some employees may have to wait an additional eligibility period, such as until their next anniversary.   The same issue could arise with respect to eligibility requirements for profit-sharing plans, and vesting in pension plans.
Unpaid leaves also could affect employer matches and profit sharing contributions.  How matches have to be paid is defined by the plan documents.
If an employee has borrowed from his/her 401(k), which may be a more frequent occurrence in today's economy, 401(k) plan loan repayments could also be affected, as such loans are usually repaid through salary reductions.   If a leave is unpaid, the employee will have to write a check or s/he could go into default.
Employers can address some of these problems by amending plan documents to credit employees for service during furloughs.
Health Insurance
Some employees also may lose health insurance if their hours dip below the threshold to participate in an employer's plan.
In order to address this issue, employers could again treat furloughed employees as active for insurance purposes.  Employers also could modify their plan documents and contracts with insurers to cover employees who work fewer hours.
COBRA Subsidy
Employees who lose insurance due to a reduction in hours or furlough are generally eligible to continued coverage under COBRA, but may not be eligible for the new COBRA subsidy of their premium payments.  Under the new COBRA subsidy, if an employee is forced to quit due to a reduction in hours or furlough, the separation could be an involuntary termination qualifying the employee for the COBRA premium subsidy.
Other Fringe Benefits
Employee contributions to flexible spending accounts also may be affected, for example if an employee needs less daycare because s/he is on an unpaid leave of absence.  Whether an employee can change his/her election depends on whether that employee qualifies as having a change in status under Section 125.  A reduction in hours alone may not be enough.
Employer Benefits
Employer policies, such as those in an employee handbook, should address how eligibility for or accrual of employer-provided benefits, such as paid time off or tuition assistance, are affected by voluntary and involuntary unpaid leaves, and employees on unpaid statutory leaves, such as under the Family and Medical Leave Act, or other applicable state leave laws, should be treated as favorably.



Age Must Be Main Factor Leading to Adverse Employment Action

Adverse employment actions, such as reductions in force, are often challenged by older workers.  A recent decision of the United States Supreme Court may make it easier for employers to defend themselves against such claims.

In Gross v. FBL Financial Services, Gross, an employee of FBL, sued for age discrimination after FBL demoted him and transferred some of his responsibilities to a younger worker.  The Supreme Court held that employees asserting federal age discrimination claims under the Age Discrimination in Employment Act ("ADEA") must prove that age is the main factor behind an adverse employment action.  The issue in the FBL case was whether employees must present direct evidence of age discrimination in order to shift the burden of proof to the defendant under a "mixed-motive" analysis (where a decision is allegedly based on both permissible and impermissible factors).  The Court concluded that under the ADEA, unlike Title VII, the employee must show that "but for" the employee's age, the employer would not have implemented the adverse action - not just that age played a part in the decision. 

A legislative response to this employer-friendly decision is a definite possibility.