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Week In Review

March 07, 2016

California Employers Face New Anti-discrimination Policy Requirement
California has amended its Fair Employment and Housing Act (FEHA) regulations to require employers to have a policy to combat discrimination, harassment and retaliation in the workplace by April 1, 2016. The regulation follows a 2012 law that required employers to ensure a workplace free of sexual harassment by implementing a sexual harassment policy and to distribute to all employees. The amended regulations will take effect April 1, 2016. The FEHA prohibits harassment and discrimination in employment based on race, color, religion, sex, gender, gender identity, gender expression, sexual orientation, marital status, national origin, ancestry, mental and physical disability, medical condition, age, pregnancy, denial of medical and family care leave, or pregnancy disability leave.

Wisconsin Supreme Court: Employees Must be Paid for Time Donning and Doffing Work Clothes
Under Wisconsin law, employees at a canning facility must be paid for time spent donning and doffing company-required clothing and gear at the beginning and end of the workday, because this was integral to their principal activities. The average of 5.7 minutes it took them to change was not de minimis.

As a food-processing business subject to federal standards of cleanliness and quality, the company enforced work rules requiring employees to wear company-provided clothing while in the plant. The company leased the clothes from a vendor that picked up worn clothes, laundered them, and dropped off clean clothes. Unable to persuade the company to compensate employees for this time, employees brought a class action claiming the company violated Wisconsin law. The Court held emphasized that a principal activity of the employees was sanitary food production, and the company’s requirement that employees wear clean whites, hair nets, and other equipment designed to keep foreign objects out of the food was an integral part of the production of sanitary food.

The court rejected the company’s argument that the stipulated 5.7 minutes of donning and doffing per day was non-compensable because it was de minimis. The Court held that the time spent putting on and taking off the required clothing and equipment was not a “trifle.” In this case, 5.7 minutes per day added up to approximately 24 hours per year, and at an hourly rate of $22, this could potentially amount to over $500 per year for each employee—a figure that was certainly significant to an employee and to the company.

Alabama Bans Local Government Minimum Wages
The Alabama Legislature quickly passed and Governor Robert Bentley signed the “Alabama Uniform Minimum Wage Act” on February 25, effectively halting Birmingham and other local governmental entities from enacting their own minimum wage and benefit requirements. The legislation prohibits a county, municipality, or any other political subdivision from enacting or administering any ordinance, policy, rule or other mandate requiring an employer to provide any employee, class of employees, or independent contractor with any employment benefit, including, but not limited to, paid or unpaid leave, vacation, wage, or work schedule, that is not required by state or federal law, and provides that such local entities shall not require an employer to compensate an employee, class of employees, or independent contractor for any vacation or other or other form of leave for which the state or federal law does not require the employee, class of employees, or independent contractor to be compensated. Any ordinance, policy, rule or other local mandate inconsistent with this provision would be considered void.

Just days before, the Council of the City of Birmingham adopted Ordinance No. 16-28 to establish a minimum wage of $10.10 per hour that employers would have been required to pay employees working within the geographical boundaries of the City. The Ordinance also sought to impose annual increases based on the rate of inflation beginning in 2017. Employers would have been required to pay the $10.10 minimum wage rate as soon as February 24.

EEOC Files First Sexual Orientation Discrimination Lawsuits
The Equal Employment Opportunity Commission (EEOC) announced the filing of its first two Title VII sex discrimination cases based on sexual orientation.

In the first case, the EEOC asserted that a medical center subjected a gay male employee to harassment because of his sexual orientation. The employee was a telemarketer. His manager repeatedly referred to him using various anti-gay epithets and made other highly offensive comments about his sexuality and sex life, including regularly calling him a “fag.” The employee complained to the center director, but the director purportedly said that the manager was “just doing his job,” and refused to take any action to stop the harassment.

In the second case, the EEOC asserted that a lesbian forklift operator was harassed by her supervisor because of her sexual orientation. According the complaint, the employee’s supervisor made comments about the employee’s sexual orientation and appearance on a weekly basis, such as “I want you to like men again” and “You don’t have any breasts.” The employee complained to the general manager and called the employee hotline about the harassment.

As the federal law enforcement agency charged with interpreting and enforcing Title VII, the EEOC has concluded that harassment and other discrimination because of sexual orientation is prohibited sex discrimination. Addressing emerging and developing issues—especially coverage of lesbian, gay, bisexual, and transgender individuals under Title VII’s sex discrimination provisions—is one of six national priorities identified by EEOC’s Strategic Enforcement Plan (SEP).

ERISA Preempts Vermont’s Health Insurance Reporting Law
The United States Supreme Court has held that a Vermont statute that requires health insurers and other entities to report payments related to health care claims so that the information can be included in an all-inclusive health care database was preempted by The Employee Retirement Income Security Act (ERISA). The Court held that the duties imposed by the state law were inconsistent with ERISA’s central aim: “to provide a single uniform national scheme for the administration of ERISA plans without interference from laws of the several States even when those laws, to a large extent, impose parallel requirements.”

The challenged Vermont law requires health insurers (including self-insured plans and third-party administrators), health care providers, government agencies, and other entities to report payments relating to health care claims and other information relating to health care services, including data on enrollment and claims data on members and policyholders, to a state agency so that the information can be compiled in the Vermont Health Care Uniform Reporting and Evaluation System. This database was intended to reflect “all health care utilization, costs, and resources,” both within the state and as to services provided elsewhere to Vermont residents. (The statute’s implementing regulation requires the submission of “medical claims data, pharmacy claims data, member eligibility data, provider data, and other information.”) The database is meant to serve as a resource “for insurers, employers, providers, purchasers of health care, and State agencies to continuously review health care utilization, expenditures, and performance” in the state. Vermont is one of almost 20 states that currently have, or are in the process of implementing, such an “all-payer claims” database.

Liberty Mutual has a self-funded, ERISA-covered health benefit plan that covers some 80,000 individuals in 50 states. The plan covers only 137 Vermont residents, and so falls below the 200-person cutoff for mandated reporting. However, Blue Cross Blue Shield of Massachusetts (BCBS), the plan’s third-party administrator, is a mandated reporter under the disclosure statute, since it serves several thousand residents, including Liberty Mutual plan’s members in Vermont. As such, BCBS was ordered to transmit its files on eligibility, medical claims, and pharmacy claims for the plan’s Vermont members. Fearing that the disclosure of such confidential information might violate its fiduciary duties, Liberty Mutual instructed BCBS not to comply. It then filed suit seeking a declaration that ERISA preempts application of the Vermont statute and its corresponding regulation to its ERISA-covered plan, and bars the state from pursuing data about the plan or its members.

Vermont’s reporting regime, as applied to ERISA plans, was preempted, the High Court held, as it falls within the category of state laws that interfere with the uniformity of plan administration and thus, has an “impermissible ‘connection with’” ERISA-covered plans. ERISA has “extensive” reporting, disclosure, and recordkeeping requirements in place, the majority noted (including, most importantly, annual reporting requirements to the Secretary of Labor). Consequently, “reporting, disclosure, and recordkeeping are central to, and an essential part of, the uniform system of plan administration contemplated by ERISA.”

Liberty Mutual also suggested that the new reporting obligations for employer-sponsored health plans imposed by the Affordable Care Act (ACA) further support a finding of preemption here. However, the ACA specified that it shall not “be construed to preempt any State law that does not prevent the application of the provisions” of the Act. Does this “anti-preemption provision” prevent any new ACA-created reporting obligations from preempting such state reporting regimes, notwithstanding their incorporation into ERISA? This was a question for another day, as the holding here rested on a finding that ERISA’s preexisting reporting and recordkeeping provisions retain their preemptive force regardless of whether the ACA-imposed obligations also preempt state law.

SESCO recommends that clients review all applicable policy and practices to ensure compliance. For assistance, contact us at 423-764-4127 or by email at