Monthly Archives: April 2013

April 29, 2013

OFCCP Settles Alleged Systemic Discrimination Against…Males

By Chris Chrisbens

Occasionally, the question arises whether the Equal Employment Opportunity Commission (EEOC) and the Office of Federal Contract Compliance Programs (OFCCP) will pursue alleged discrimination against white males.  The OFCCP answered that question last Thursday announcing an audit settlement with federal contractor Goodwill Industries of Southern California alleging systemic discrimination against men.  OFCCP’s press release
states that “Goodwill’s hiring process favored female applicants for
entry-level positions as attendants at local donation centers, in part because
of perceptions that women have better customer service skills.” 

While denying discrimination, Goodwill agreed to pay $130,970 in back wages to 200 unsuccessful male applicants and to make 18 job offers to qualified men previously rejected. 

"Sex discrimination in the workplace can take many forms, and we are committed to fighting all of them," said OFCCP Director Patricia A. Shiu. "That means getting away from outdated notions about
what constitutes 'men's work' and what constitutes 'women's work.'”

For federal contractors it is especially important that they pay attention to statistically significant hiring disparities against both women and men, and are prepared to defend their hiring criteria as job-related and consistent with business necessity. In this case, Goodwill’s alleged belief that men were not as well-suited for customer service as women clearly did not pass muster. 

April 25, 2013

BUZZ KILL: Employee Legally Fired For Off-Duty Marijuana Use

By Emily Hobbs-Wright & Brad Williams

The Colorado Court of Appeals issued a precedent-setting decision today upholding an employee’s firing for off-duty marijuana use.  Citing federal law, the court held that using pot during non-working hours is not “lawful activity” under the state’s lawful off-duty activity statute.  The decision provides the first direct guidance on terminating workers for off-duty marijuana use since Amendment 64 legalized the drug’s use and possession last November.

The case involved a quadriplegic employee licensed to use pot under the state’s medical marijuana amendment.  The company terminated his employment after he tested positive for drugs in violation of company policy.  The terminated worker claimed that he used the drug within the limits of his license, had never smoked on his employer’s premises, and had never been under the drug’s influence at work. 

In the lawsuit, the terminated worker claimed that the company’s actions violated Colorado’s lawful off-duty activity statute, which prohibits termination for any “lawful activity” conducted off an employer’s premises during nonworking hours.  Before today, Colorado courts had never squarely addressed whether the statute prohibits termination for off-duty marijuana use, when it is permitted under Colorado law. 

Invoking a dictionary definition of the term “lawful,” the Court of Appeals held that “for an activity to be ‘lawful’ in Colorado, it must be permitted by, and not contrary to, both state and federal law.”  Because marijuana use remains illegal under federal law, termination for off-duty pot-smoking does not violate the statute.  The court also noted that its interpretation maintained the “balance between employer and employee rights” reflected elsewhere in Colorado law.

The decision is hugely important for Colorado employers.  Amendment 64, like the medical marijuana amendment before it, did not require employers to “permit or accommodate” pot use, and expressly permitted policies restricting such use.  But before today, courts had never previously decided whether state or federal law defines “lawful activity” under the statute.

The decision may not be the final word.  Further appeal to the Colorado Supreme Court is possible, and other legal theories based on disability and similar laws remain untested.  But for now, the decision provides the best guidance yet on terminating marijuana users, suggesting that courts will protect employers’ rights to enforce drug policies notwithstanding Colorado’s legalization of marijuana.  It further reinforces the importance of employers defining illegal drugs as those prohibited under both state and federal law in drug policies.

This article is designed to provide general information on pertinent legal topics. The statements made are provided for educational purposes only. They do not constitute legal advice and are not intended to create an attorney-client relationship between you and Holland & Hart LLP. If you have specific questions as to the application of the law to your activities, you should seek the advice of your legal counsel.

April 25, 2013

Tips for Complying with Utah’s Internet Employment Privacy Act

By Elizabeth Dunning

Effective May 14, 2013, Utah employers may not request employees or applicants to disclose information related to their personal Internet accounts.  The Internet Employment Privacy Act(IEPA), recently signed into law by Utah Governor Gary R. Herbert, prohibits employers from asking an employee or applicant to reveal a username or password that allows access to the individual’s personal Internet account.  In addition, employers may not penalize or discriminate against an employee or applicant for failing to disclose a username or password.  A similar restriction applies to higher educational institutions through passage of the Internet Postsecondary Institution Privacy Act. 

With enactment of the IEPA, Utah becomes the fifth state to pass legislation that limits an employer’s access to social media accounts, joining California, Illinois, Maryland and Michigan.  New Mexico passed a similar law shortly after Utah and New Jersey’s law passed the legislature and is awaiting the governor’s signature.  A bill introduced in February in the U.S. House of Representatives called the Social Networking Online Protection Act (H.R. 537) is stuck in committee. 

Public Online Accounts Are Fair Game under the IEPA 

The IEPA does not restrict or prohibit employers from viewing or using online information about employees and applicants that the employer can obtain without the employee’s username or password.  Any online information that is available to the public may be accessed and viewed by employers without violating the IEPA.  Consequently, individuals who set privacy settings on their online accounts to allow “public” access effectively opt themselves out of any protections offered by this new law. 

Utah Restriction Applies to Accounts Used Exclusively for Personal Communication 

In prohibiting employers from requiring disclosure of online usernames and passwords, the IEPA draws a distinction between personal Internet accounts and those used for business related communications.  The law only restricts employer access to personal online accounts that are used by an employee or applicant exclusively for personal communications unrelated to any business purpose of the employer.  It does not, however, restrict access to accounts created, maintained, used or accessed by an employee or applicant for business related communications or for a business purpose of the employer.  

In practice, the line between personal and business related accounts may be blurred as many employees use their personal online presence to network and communicate for business reasons.  Consider the sales person who uses his or her LinkedIn account to communicate with potential buyers within a particular industry, or the CPA who posts tax reminders on his or her Facebook page.  Are those accounts accessible under the IEPA since they are not used “exclusively” for personal communications?  A plain reading of the law suggests that may be the case, thereby watering down the potential protections offered by the IEPA to applicants and employees.   

Steps for Complying with the IEPA 

Utah employers should review their HR forms, policies and practices to ensure that they do not ask applicants and/or employees to provide a username or password to their personal Internet accounts.   Train supervisors and managers not to ask for this information as well.  In fact, take the opportunity to remind supervisors and managers not to “friend” subordinates on personal online platforms, such as Facebook.  In addition, reinforce that employees and applicants may not be penalized or treated adversely for failing to provide a username or password for personal online accounts.   

Remember, too, that even though the IEPA does not prohibit accessing an employee’s or applicant’s public social media accounts, viewing such information creates other risks.  Employers may view information regarding the individual’s religion, race, national origin, disability, age, or other protected group status that could give rise to a discrimination claim.  Furthermore, online information is unreliable and ever-changing, meaning that employers should not rely on what they see online when making employment decisions.  To stay out of trouble, consult with legal counsel before viewing or using social media in the employment context.

For more information about permissible actions and potential damages under the Utah Internet Employment Privacy Act, please see our Client Alert.

April 23, 2013

NLRB Says Investigation Confidentiality Policy is Unlawful


Following its decision in Banner Health (despite the uncertainty caused by the Noel Canning decision), the National Labor Relations Board (NLRB) recently released an Advice Memorandum stating that  Verso Paper Corporation’s written policy calling for employees to maintain confidentiality in all workplace investigations violates Section 7 “concerted activity” rights under the National Labor Relations Act (NLRA).   Verso’s policy is unlawful, says the NLRB, “because it does not take into account the Employer’s burden to show in each particular situation that the Employer has a business justification for confidentiality that outweighs employees’ Section 7 rights.” 

Banner Health:  Blanket Confidentiality Violates NLRA Section 7

As reported in July 2012, the NLRB in Banner Health held that at the outset of each investigation employers must carefully balance whether a confidentiality requirement truly is warranted under the specific circumstances, or whether it would unfairly impinge employees Section 7 rights to discuss their working conditions.  Only where a need for confidentiality outweighs Section 7 rights can confidentiality be required. 

Unfortunately, the NLRB’s analysis in Banner Health at least implied that the only relevant factors weighing in favor of confidentiality are whether witnesses need protection, evidence is in danger of being destroyed, testimony is in danger of being fabricated, or there is a need to prevent a cover up.  The NLRB provided no guidance as to whether or not any additional factors, or what other factors, might be important in justifying a confidentiality instruction.  In particular, the NLRB in Banner Health did not discuss overarching factors which generally warrant confidentiality in most workplace investigations, including encouraging witness and complainant participation. 

Verso Paper’s Unlawful Confidentiality Policy

Verso Paper’s policy articulated the broadly-accepted bases for investigation confidentiality:

Verso has a compelling interest in protecting the integrity of its investigations. In every investigation, Verso has a strong desire to protect witnesses from harassment, intimidation and retaliation, to keep evidence from being destroyed, to ensure that testimony is not fabricated, and to prevent a cover-up. To assist Verso in achieving these objectives, we must maintain the investigation and our role in it in strict confidence. If we do not maintain such confidentiality, we may be subject to disciplinary action up to and including immediate termination.

The NLRB’s Advice Memo suggests that Verso’s blanket policy is unlawful because “specific facts” revealing a “legitimate and substantial” reason are necessary to justify confidentiality in each case: 

An employer may prohibit employees’ discussions during an investigation only if it demonstrates that it has a legitimate and substantial business justification that outweighs the Section 7 right.  In Banner Health, the Board held that an employer must show more than a generalized concern with protecting the integrity of its investigations. Rather, an employer must “determine whether in any give[n] investigation witnesses need[ed] protection, evidence [was] in danger of being destroyed, testimony [was] in danger of being fabricated, and there [was] a need to prevent a cover up.” 

*  *  * 

The Employer may not avoid this burden by asserting its need to protect the integrity of every investigation, but rather must establish this need in the context of a particular investigation that presents specific facts giving rise to a legitimate and substantial business justification for interference with the employees’ Section 7 right.  (Emphasis added.) 

It has also been reported that at least one EEOC office has taken the position that this type of blanket confidentiality policy violates Title VII’s right to oppose discrimination.  This appears to be contrary to the EEOC’s prior Guidance which provides:  “An employer should make clear to employees that it will protect the confidentiality of harassment allegations to the extent possible.”  Naturally, an employer cannot hope to maintain confidentiality if employees are not requested, or have no obligation, to do likewise. 

Significantly, the Advice Memo acknowledges that “the first two sentences of [Verso Paper’s] rule lawfully sets forth the Employee’s interest in protecting the integrity of its investigations.”  (Emphasis added.)  Given that the first two sentences of Verso Paper’s policy refers to its interests (not employees’), presumably the Advice Memo means the Employer’s interest, not the Employees’. 

The Advice Memo also suggests language to replace the offending language in the last two sentences of Verso Paper’s policy:

Verso may decide in some circumstances that in order to achieve these objectives, we must maintain the investigation and our role in it in strict confidence. If Verso reasonably imposes such a requirement and we do not maintain such confidentiality, we may be subject to disciplinary action up to and including immediate termination.  

This language provides little protection.  An employer’s general policy of investigation confidentiality also supports an employer’s complaint procedures by encouraging timely, legitimate complaints and fosters its ability to fulfill the duty to promptly investigate and address EEO and other legal issues.  It may come as a shock to complainants and other employees that confidentiality is no longer required in all investigations.  And, the mere possibility of confidentiality may be little consolation to complainants and other employees genuinely concerned about confidentiality and reluctant to participate.  But, that appears to be the protection the NLRB now sees fit to afford employees.   

Employers’ Difficult Position

Even though the Advice Memo acknowledges an employer’s “compelling” interests and “strong desire to protect witnesses,” this rule still puts employers in the difficult position of having to develop “specific facts” warranting a “substantial” need for confidentiality before the investigation begins and before it can require employee confidentiality.  At the outset of an investigation, however, it is not often clear in what direction a workplace investigation will lead; what might happen during (or after) an investigation to trigger confidentiality concerns or retaliation; or on what particular grounds confidentiality might truly be necessary in retrospect.  That is at least in part exactly why a blanket approach to investigation confidentiality is important, necessary and has been the preferred practice. 

What Now? 

While NLRB’s Advice Memo is not binding, and Banner Health could be invalidated depending on the outcome of the Noel Canning case, it strongly suggests that the NLRB intends to pursue this position, similar to its position regarding social media and Section 7 rights.  Thus, you may want to think about taking a number of steps to make a confidentiality instruction more likely to pass NLRB muster, including:

  • limit confidentiality instructions to EEO / legal issues or when investigation integrity is a particular concern;
  • specifically consider and document why confidentiality is necessary to a particular investigation;
  • ask complainants and witnesses to share and document concerns regarding confidentiality, intimidation, retaliation or other concerns that could warrant confidentiality;
  • revise written policies to reflect the NLRB “approved” language;
  • tailor confidentiality requirements to the specific subject matter of the investigation, and matters discussed in interviews and statements only during the investigation;
  • limit the confidentiality instruction to interviewed employees who have personal knowledge of events or other directly relevant information;
  • clarify that you cannot guarantee confidentiality;
  • clarify that the confidentiality restriction is not intended generally to prevent employees from addressing concerns with one another or with the employer; and
  • explain that the purpose of the confidentiality restriction is to:
    • preserve the integrity of the investigation process;
    • encourage employees to speak up when they have a problem and give them confidence that they may speak the truth;
    • uphold your anti-retaliation policy; and
    • allow you to conduct thorough and objective investigations which, in turn, allow you to effectively address employee complaints and concerns and resolve workplace conflict. 

Chris Chrisbens is the lead attorney for Holland & Hart’s Affirmative Action Planning and Office of Federal Contract Compliance Programs (OFCCP) service. He can be reached at or 303-295-8193.

Disclaimer: This article is designed to provide general information on pertinent legal topics. The statements made are provided for educational purposes only. They do not constitute legal advice and are not intended to create an attorney-client relationship between you and Holland & Hart LLP. If you have specific questions as to the application of the law to your activities, you should seek the advice of your legal counsel.

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April 18, 2013

How a Colorado Bill Could Provide Up to 24 Weeks of FMLA Leave

By Brian Mumaugh

Could Colorado employees be entitled to take up to 24 weeks of job-protected leave every 12 months?  Yes, in some circumstances, if the bill recently passed by the Colorado House of Representatives and progressing through the Senate is signed into law.  Although greatly downsized from its original form, House Bill 1222 expands the group of family members for whom Colorado employees are entitled to take leave from work under the federal Family and Medical Leave Act (FMLA) to include care for civil union partners and domestic partners.  In certain circumstances, this expansion could result in an employee being entitled to 24 weeks of FMLA leave in a given year.  Let’s look at what the bill provides.

Leave to Care for Civil Union and Domestic Partners 

Colorado employees currently must look to the federal FMLA for job-protected leave benefits.  Federal FMLA provides an eligible employee up to 12 weeks of leave during a 12-month period to care for a spouse, child or parent who has a serious health condition.  The federal FMLA, however, does not permit leave for an employee to care for his or her civil union partner or domestic partner.  If signed into law, House bill 1222, called the Family Care Act, would allow an eligible employee to take leave to care for the employee’s partner in a civil union or the employee’s domestic partner (if the employer recognizes the person as the employee’s domestic partner or the domestic partnership is registered with the municipality or the state, as applicable).  The employer would be permitted to require the employee to provide reasonable documentation or a written statement of the family relationship, in accordance with the FMLA.  The employer also would be allowed to require the same medical certification as may be required under the FMLA. 

“Double Dipping” of FMLA Leave 

The bill states that FMLA leave taken by an employee under this new law would run concurrently with leave taken under the FMLA and that the new law would not increase the total amount of leave to which an employee is entitled during a 12-month period.  This seems to suggest that “double dipping” would not be permitted.  However, federal regulations provide that the FMLA does not supersede any state law that provides greater leave rights than those provided by the FMLA.  Further, the regulations state that if state law provides for a certain amount of leave, which may include leave to care for a seriously-ill “spouse equivalent,” and leave was used for that purpose, the employee is still entitled to his or her full FMLA leave entitlement, as the leave used under state law was provided for a purpose not covered by the FMLA.  29 C.F.R. § 825.701(a)(3).  On the other hand, if FMLA leave is used first for a purpose that is permitted under both state and federal law and state leave has thereby been exhausted, the employer would not be required to provide any additional leave to care for the “spouse equivalent” during that 12-month period. 

What does this mean?  It means that the order of state vs. federal leave matters.  If leave to care for a seriously-ill civil union partner under state law is requested first, the employee potentially may “double dip” if he or she subsequently requests leave provided under the federal law.  This could lead to a total of 24 weeks of leave in a single 12-month period.  However, if leave that qualifies under the federal FMLA occurs first and the employee takes the full 12 weeks of leave at that time, no leave is available should the employee need to care for his or her civil union partner or domestic partner under state law.   

Next Legislative Steps 

Having passed the Colorado House, the Family Care Act moved to the Colorado Senate where it has passed unamended on second reading.  The Senate needs to pass the bill on third reading to be sent to Governor John Hickenlooper to be signed into law or vetoed.  Rest assured that we will continue to monitor this bill and will pass along updates as warranted.

April 12, 2013

Immigration Law Webinar: New I-9 Forms Effective on May 7th

Last month, U.S. Citizenship and Immigration Services announced that employers should begin to use the revised version of the I-9 employment eligibility verification form. The new I-9 will be mandatory for all employers beginning on May 7th.

Join us for a complimentary 30-minute webinar to learn what changes have been made and what you need to know about using the new I-9 form. 

Wednesday, April 24, 2013
Noon – 12:30 p.m. MST
Webinar login information will be included in your RSVP confirmation.

Roger Tsai, Of Counsel, Holland & Hart llp

Click here to RSVP now.

Please respond by Tuesday, April 23, 2013. 

Questions? Contact Tracy Taylor at

April 8, 2013

How Will the Colorado Civil Unions Law Impact Your Employee Benefit Plans?

by Rebecca Hudson

On March 21, 2013, Governor John Hickenlooper signed Senate Bill 11 in an historic ceremony at the History Colorado Center near the state Capitol. The law, which will take effect May 1, means that Colorado will join eight other states that permit civil unions or have similar laws that recognize civil unions. Nine other states and the District of Columbia allow same-sex marriage.

Under the new Colorado Civil Union Act (Colorado Rev. Stat. 14-15-101 et seq.), Colorado will recognize civil unions entered into by same-sex and opposite-sex couples, granting rights afforded to traditionally married couples, such as enhanced inheritance and parental rights, workers compensation survivor benefits, anti-discrimination protection, state family leave benefits and unemployment benefits. People in civil unions also will have the ability to make medical decisions for their partners.

A civil union, however, is not a marriage, which means a civil union does not provide federal protections or responsibilities to couples who enter into one. For example, under the Federal Defense of Marriage Act ("DOMA") federal programs define marriage as "between one man and one woman." DOMA will not recognize the Colorado Civil Union Act, and will only consider a spouse to be a person of the opposite sex who is a husband or wife. Accordingly, employment benefits offered by Colorado employers that remain governed by federal law will not recognize a civil union between members of the same sex. This post briefly touches on some of the benefits that Colorado employers must consider under state and federal law.

Group Health Insurance Benefits

Colorado health plans "issued, delivered, or renewed or after January 1, 2014" will be required to treat a partner in a civil union and a marriage the same. This means that if a Colorado employer offers health insurance to the spouse of an employee, the employer must also offer health insurance for the partner in a civil union. A plan is governed by Colorado law if the insured health plan or insurance contract was issued in Colorado. If a group health plan is self-insured, it will not be governed by state law and will instead by governed by federal law, primarily the Employee Retiree Income Security Act of 1974 ("ERISA"). Under ERISA, an employer is not required to extend coverage to a civil union partner.

In addition, Colorado employers are not required to offer civil union partners continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") because COBRA is governed by federal law. After January 1, 2014, however, civil union partners will be able to receive continuation coverage under the Colorado State Continuation/Conversion provisions.

Because federal law does not currently recognize civil unions, an employee who elects group health coverage for a civil union partner must pay for those benefits on an after-tax basis. To the extent the employee's employer subsidizes premiums paid for coverage for a same-sex partner, the employee will have imputed income equal to the value of that subsidy. The imputed income is subject to federal income tax.

Retirement Benefits

Under a Colorado public retirement system, civil union partners will now be entitled to any survivor benefits provided to spouses under public sector pension plans. For example, a civil union employee may now designate his or her partner as a beneficiary under the employee's state public employees' retirement system. Similarly, the civil union partner of a firefighter or a police officer will be eligible for survivor benefits under a local government firefighter and police pension plan.

Next Steps

Below are several action items Colorado employers should consider to comply with the Colorado Civil Union Act:

  • Determine if state law applies to any employee benefit plan.
  • Amend any plan governed by Colorado law that provides for spousal coverage to include civil union partners. Update enrollment and beneficiary forms.
  • If a group health plan must cover civil union partners, contact the plan's insurer(s) to incorporate and approve the Colorado State Continuation/Conversion provisions to all plan participants.
  • Confirm proper tax treatment of benefits provided to civil union partners under the federal tax code.
  • Review public pension benefits and ensure that the benefits are payable to both married and civil union partners who qualify.

For additional questions about the Colorado Civil Union Act and its impact on employee benefits, contact a member of Holland & Hart's Benefits Law Group.

April 3, 2013

OFCCP Wins Again: Health Care Providers May Be “Subcontractors” with Affirmative Action Obligations

By  Chris Chrisbens 

In the latest decision in the ongoing battle between the Office of Federal Contract Compliance Programs (OFCCP) and health care providers, a U.S. district court ruled that certain health care providers may be “subcontractors” covered by federal affirmative action laws and regulations.  UPMC Braddock v. Harris.  In that case, UPMC Health Plan, a health maintenance organization (HMO), contracted with the U.S. Office of Personnel Management (OPM) to provide insurance coverage and HMO services to federal employees participating in the Federal Employees Health Benefits Program (FEHBP).  The HMO Health Plan then contracted with UPMC Braddock and two other hospitals to provide HMO medical services to covered federal employees.

Two Key Findings

Key to the court’s decision were two findings:  (1) the provision of medical services by the hospitals is a “nonpersonal service” within the definition of “subcontract” found in the affirmative action regulations; and (2) the HMO Health Plan’s contract with the federal government (OPM) obligated it to provide medical services, as opposed to only insurance coverage, which it provided through the hospitals.  Accordingly, the hospitals in the case qualified as “subcontractors” under both prongs of the definition:

Subcontract means any agreement or arrangement between a contractor and any person… :

(1) For the purchase, sale or use of personal property or nonpersonal services which, in whole or in part, is necessary to the performance of any one or more contracts; or

(2) Under which any portion of the contractor's obligation under any one or more contracts is performed, undertaken or assumed.

Although the Braddock case may be appealed, as it currently stands health care providers and insurers may have affirmative action obligations arising out of:

  • Any direct contracts with the federal government of $50,000 or more, such as contracts with the Veterans Administration, Health and Human Services (including Centers for Medicare and Medicaid Services), Department of Justice, and under the FEHBP;
  • Subcontracts of $50,000 or more as defined above, including those under FEHBP; or
  • Direct contracts and subcontracts under Medicare Parts C (Medicare Advantage) or D (prescription drug plans).  OFCCP concedes that Medicare reimbursements under Parts A and B are financial assistance rather than government contracts and thus are not subject to affirmative action obligations. 

Currently, healthcare providers who are network providers in TRICARE—a U.S. Department of Defense healthcare program for military personnel and their families – are not “subcontractors” pursuant to a 2012 amendment to the TRICARE program.  That could also change. 

As stated in OFCCP’s Directive 301, OFCCP takes a case-by-case approach to determining health care provider and insurer coverage.  However, OFCCP’s Directive 293 (although rescinded by Directive 301), still provides some useful insight into the OFCCP’s analysis.  The bottom line is OFCCP remains very interested in health care providers and insurers who therefore, must carefully analyze and understand their federal government contacts with the foregoing in mind.


Court Rejects Hospitals’ Arguments to Avoid Subcontractor Status

In Braddock, the UPMC hospitals made four arguments to counter their alleged status as “subcontractors” subject to affirmative action obligations.    First, they argued that the contract between OPM and the HMO Health Plan specifically excluded medical providers from the contract’s definition of “subcontractor,” and therefore, they were not “subcontractors” under the regulations.  To the contrary, the court found that because the parties had “no authority to define the contours of the equal opportunity laws governing federal procurement by devising their own meaning for the word ‘subcontractor,’ the definition of that word in the OPM/Health Plan contract has no effect on whether the hospitals lawfully may be regarded as government subcontractors and subject to the attendant legal obligations.”

The hospitals next argued that because the medical services they provided to federal employees are very personal in nature, rather than “nonpersonal services,” the first prong of the “subcontractor” definition was not met.  Because affirmative action regulations do not define the term “nonpersonal services,” the court turned to the definition found in the Federal Acquisition Regulations (which also apply to federal contractors and subcontractors), and which contain a “materially identical definition of ‘subcontract.’”  That regulation provides that a non-personal services contract focuses on the fact that the employees performing the contract are not subject to the “supervision and control usually prevailing in relationships between the Government and its employees."  It also explains that "[a] personal services contract is characterized by the employer-employee relationship it creates between the Government and the contractor's personnel.”  Under this generally-applicable standard, the court found that the hospitals’ services were non-personal because the employees performing them were not controlled by the government. 

The hospitals also argued that they were not “subcontractors” under either prong of the definition because:  (1) the medical services performed were not “necessary to the performance” of the HMO Health Plan’s contract with OPM; and (2) they had not “performed, undertaken or assumed” any of the HMO Health Plan’s obligations under the OPM contract.  These arguments turned on whether the OPM contract obligated the HMO Health Plan to provide only insurance coverage, medical services or both.  It was also based on the administrative ruling in OFCCP v. Bridgeport Hospital.  There it was held that because Blue Cross/Blue Shield (not an HMO) was obligated under its contract with OPM to provide only insurance coverage, the health care providers to which it provided reimbursement for services rendered to federal employees were not “subcontractors” because they provided nothing necessary to the performance of the OPM contract and likewise undertook no obligation of the Blue Cross OPM contract.  In contrast, in Braddock, the HMO Health Plan’s contract with OPM required it to put an HMO into operation, and otherwise provide specified medical services, which it accomplished via the hospitals.  Thus, unlike Blue Cross in the Bridgeport case, it was both an insurer and a medical services provider.  Thus, the UPMC hospitals both performed a service necessary to the OPM contract and undertook at least one of its obligations.

Finally, the hospitals made a contractual argument that because affirmative action obligations had not been incorporated into the hospitals’ contracts with the HMO Health Plan, they were not binding on the hospitals.  The court rejected that argument finding that such obligations were nonetheless incorporated into the contracts by operation of law because they express “a significant or deeply ingrained strand of public procurement policy.” 

Unless the UPMC hospitals are successful in an appeal, it appears likely that OFCCP will pursue compliance audits of health care providers as outlined above.

April 1, 2013

Eight Questions to Ask After Filing an H-1B

By Roger Tsai

On April 1, 2013, U.S. Citizenship and Immigration Services (USCIS) began accepting petitions for H-1B visas subject to the cap for next year’s allotment of visas for foreign national professionals.  Only 65,000 H-1B visas are issued for the coming year which begins on October 1, 2013, with an additional 20,000 visas available for foreign nationals who graduated from a U.S. college or university with a master’s degree or higher.  Employers seeking to obtain work authorization for key foreign national employees in specialty positions such as engineering, computer science, accounting, medicine, teaching and other high tech or professional fields need to file their petitions on or shortly after April 1 as the cap on H-1B visas is expected to be reached quickly. 

8 Questions that Help Minimize H-1B Liabilities  

If you filed an H-1B petition, here are eight questions you need to ask to reduce your potential liability: 

1.      Are you properly maintaining a Public Disclosure File? 

When filing an H-1B petition, the sponsoring employer must attest that it will comply with the terms and conditions of the labor condition application (LCA).  Employers must keep a public disclosure file related to each H-1B worker to demonstrate compliance with the LCA terms.  The public disclosure file should be kept for at least one year beyond the LCA expiration date and must include:

  • A copy of the LCA with employer’s signature
  • Documentation of the wage to be paid to the H-1B employee
  • Explanation of wage system
  • Prevailing wage source
  • 10 business day posting
  • Summary of benefits offered to the H-1B employee
  • Evidence of recruitment and additional non-displacement attestations (for employers who are deemed willful violators) 


2.      Have you filed an H-1B amendment when a change of employment occurs?

Under applicable regulations, an H-1B amendment must be filed if there has been a material change in the employment terms from that listed on the original H-1B petition.  Material changes may include a significant change in the job duties, a reduction in hours or compensation, or a change in work location. 

3.      Are you ensuring maintenance of immigration status for H-1B transfer workers?

Under the portability provisions of the American Competitiveness in the 21st Century Act, an H-1B worker employed by another company may transfer to a new employer.  The new employer, however, must file an H-1B visa transfer petition with USCIS before the worker begins work for the new employer. The H-1B extension will also require HR to re-verify the employees work authorization in Section 3 of the I-9 before the current H-1B expires. 

4.      Are more than 15% of your workers in H-1B status?

An employer with more than 50 full-time employees of which 15% or more are H-1B employees may be considered to be an H-1B dependent employer.  An H-1B dependent employer has additional attestation obligations related to its recruitment efforts and the displacement of U.S. workers.  For example, each time the employer files an LCA to support an H-1B petition, the employer is required to indicate its H-1B dependency status.  Large employers with more than half of all workers in H or L immigration status are subject to an additional $2,000 filing fee. 

5.      Do you have independent high tech contractors who are really your employees?

Misclassifying workers as independent contractors rather than employees opens the door to a whole host of potential liabilities related to pay practices, tax withholding, etc.  It also raises potential issues related to immigration requirements, including whether you are effectively the employer of the contractor. If you effectively control the work, you are the employer and may have an obligation to file the H-1B petition.  

6.      Have any salary cuts reduced H-1B workers below prevailing wage?

Employers must pay H-1B workers the higher of (1) the actual wage level paid by the employer to all other individuals with similar experience and qualifications for that employment; or (2) the prevailing wage for the occupation in the area of employment.   Employers who decrease pay levels for H-1B workers need to re-evaluate the new pay rate to ensure that they still meet the required salary.

7.      When you terminate an H-1B worker, do you notify the USCIS and DOL and offer to pay for return travel?

Employers who terminate the employment of an H-1B worker prior to the end of the H-1B status immediately end the lawful immigration status for the H-1B worker.  The employer should notify USCIS and DOL of the termination as failure to do so may result in the accrual of back-wages to the H-1B employee.  The employer also must offer to pay the H-1B worker the reasonable costs of return transportation to the foreign worker’s country.

8.      Have you informed your H-1B workers when (and when not) to travel?

H-1B workers need to take appropriate steps when they travel abroad, including obtaining a valid H visa stamp and maintaining an unexpired passport.  H-1B workers generally should avoid travel outside the U.S. during a pending change of status or extension of status because Customs and Border Protection may issue a visa stamp which may not incorporate the extension. Recent international student graduates whose OPT status expires before October 1, 2013 and are in the U.S. under the cap gap regulation may not travel. Married H-1B workers need to extend the H-4 status of their spouse through consular stamping or filing an I-539 with USCIS. 

Additional Information on Hiring Foreign Workers

Hiring foreign nationals for short term employment in the U.S. involves a complex set of immigration laws and regulations.  USCIS provides numerous resources for employers, including a guide called “How Do I Hire a Foreign National for Short-Term Employment in the United States?”  Please do not hesitate to contact Roger Tsai or another member of Holland & Hart’s Labor and Employment practice group if you have specific questions or need help with filing H-1B petitions.