Monthly Archives: April 2016

April 26, 2016

Public Employee Demoted For Perceived Political Activity Can Bring First Amendment Challenge

Vilos_JBy Joanna Vilos

In a 6-to-2 decision, the Supreme Court ruled that when a public employer demotes an employee in order to prevent the employee from exercising his free-speech rights, the employee may challenge that action as a violation of the First Amendment and §1983, even if the employer was mistaken about the employee’s behavior. The Court found that the government’s motive is what matters and that the constitutional violation of discouraging employees from engaging in protected political activity and speech is the same regardless of whether or not the employer was mistaken about the employee’s political involvement. Heffernan v. City of Paterson, 578 U.S. ___ (2016).

Supervisor Assumed Employee Supported Opposing Candidate

Jeffrey Heffernan was a police officer in Paterson, N.J., a twenty-year veteran of the force. After being promoted to detective in 2005, he was assigned to the office of the chief of police. In April 2006, the city was in the middle of a mayoral election where the incumbent had the support of Heffernan’s supervisors, but the challenger was a former Paterson police chief and friend of Heffernan. Heffernan could not even vote in the election as he did not live in the city but his mother did.

One afternoon, while off duty, Heffernan went, at his mother’s request, to the challenger’s campaign office to get a new yard sign for his mother’s yard. Other members of the police force saw him with the sign. The following day, Heffernan’s supervisors demoted him to patrol officer and assigned him to a walking patrol post. They demoted him as punishment for what they thought was his “overt involvement” in the challenger’s campaign, even though that belief was mistaken. Heffernan was not involved in the campaign but merely picked up the sign to help his bedridden mother.

Heffernan sued, alleging his demotion violated the First Amendment. He asserted that his supervisors demoted him because they thought he engaged in constitutionally protected speech, even though they were mistaken about his actions. The district court and Third Circuit Court of Appeals rejected his claim, holding that a free-speech retaliation claim under §1983 lies only when the government retaliated against an employee who actually exercised his First Amendment rights, not on the mistaken perception that he exercised protected rights.

High Court Rules In Favor Of First Amendment Protection 

Generally, the First Amendment prohibits government officials from dismissing or demoting an employee because that employee engaged in constitutionally protected political activity or speech. Heffernan argued that the government’s motive in taking an adverse employment action is the key to a public employee’s retaliation claim. He alleged that as long as a government employer believed that the employee was engaged in protected activity and took adverse action because of that belief, the employer violated the First Amendment.

The Supreme Court agreed. Writing for the majority, Justice Breyer stated that “the government’s reason for demoting Heffernan is what counts here.” The Court ruled that when a government employer demotes an employee because it wants to prevent the employee from engaging in political activity protected by the First Amendment, the employee is entitled to challenge that unlawful action under the First Amendment and §1983, even if the employer is acting upon a factual mistake regarding the employee’s behavior. The Court stated that the employer’s mistake does not diminish the risk of harm to the demoted employee or to others who fear similar adverse consequences of engaging in protected activity.

The Court left the door open, however, for government employers to adopt a neutral policy that prohibits police officers from overt involvement in any political campaign. Whether a specific neutral policy meets constitutional muster is a question the Court left for another day.

It’s the Employer’s Ill Motive that Matters, Not the Employee’s Exercise of Rights

The Court’s ruling today means that a public employer can be held liable for violating an employee’s constitutional rights even where the employee admits he wasn’t exercising those rights. The public employer’s desire or motive to keep the employee from engaging in protected political activity is enough to give the employee a viable claim for damages under §1983 regardless of whether the employee engaged in any activity protected by the Constitution.

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April 19, 2016

Employee Reveals Medical Condition At Disciplinary Meeting – Now What?

Collis_SBy Steve Collis

You’re all set to fire an underperforming employee. You sit down for the disciplinary meeting and just as you start discussing her performance problems, she reveals she has back and neck pain due to work-related stress. What do you do? Here are practical steps you can take to handle this all-to-often workplace scenario.

Setting the Stage

Let’s look at the facts from a Tenth Circuit Court of Appeals case that dealt with this situation. Susan Bennett had worked as a Fiber Optic Tech for Paetec Communications, Inc. (Paetec) for twelve years. She was responsible for locating, repairing, testing and maintaining fiber optic cable in a service area covering parts of Oklahoma and Arkansas.

After Paetec was acquired by another company, Windstream Communications, Inc. (Windstream), Todd Moore became Bennett’s supervisor. Moore instituted a new policy requiring all technicians to check in at an assigned office each morning at 8 a.m. to allow for cross-training and to pick up company vehicles stored on the secured company premises.

Bennett was assigned to report to the Tulsa office each morning which required her to commute a total of almost four hours each day. She often arrived at the Tulsa office more than two hours late, or left several hours early to commute home. On a number of occasions, she failed to report to the office at all. Her time and attendance issues resulted in her being unable to complete a cross-training program that other technicians received.

A month or so after instituting the check-in policy, Moore and the company’s human resources specialist provided Bennett with a “final coaching” session which was the first step in the company’s progressive discipline policy. That same day, Bennett called to report that she was experiencing chest and shoulder pain due to work-related stress and had a doctor’s appointment the next day. The company directed Bennett to complete a workers’ compensation claim. She did and after she failed to return from her leave of absence, the company deemed her to have abandoned her job. She sued her employer, alleging her termination was due to gender and age discrimination. Bennett v. Windstream Comm., Inc., 792 F.3d 1261 (10th Cir. 2015).

Practical Steps To Avoid Liability

Disciplinary meetings do not always go as planned. As in Windstream’s case, employees sometimes disclose new information that raises a legal concern. When faced with an employee’s previously unknown medical condition, a new complaint about workplace harassment, or some other new issue, you should consider the following practical steps to help reduce the risk of liability for your organization.

Step #1 – Weigh Severity of Misconduct Versus Risk of Potential Liability

If an employee has engaged in severe misconduct, such as workplace violence, it may still be in your organization’s best interests to go forward with imposing the planned discipline or termination. As long as you are treating this person the same as any other employee who has engaged in this sort of severe misconduct, the risk of liability for a discrimination or failure to accommodate claim is likely low. In such cases, ensure that you have confirmed the facts supporting your discipline/termination decision and that they are properly documented before taking action against the employee.

For less severe infractions, such as attendance issues or failing to meet performance goals, however, moving forward with the planned discipline may be risky in light of the new issue(s) raised by the employee. You likely need more information about the person’s medical condition or newly asserted complaint before you can make an informed decision about your next steps.

In addition, you need to know whether the employee’s supervisor or anyone else in a decision-making capability had prior knowledge of the employee’s asserted medical condition or complaint. In these circumstances, your best practice is to inform the employee of his or her performance problems or misconduct at the meeting and explain the consequences of such conduct, but postpone imposing the discipline until you have had an opportunity to confirm the facts related to new information. If appropriate, you can place the employee on a paid administrative leave while you investigate the new issue.

Step #2: Have Written Policies and Follow Them

Good employment policies will provide you with a road map for how to handle most employee concerns. For example, if the employee asserts that she has been sexually harassed by her supervisor, follow your harassment policy and initiate an internal workplace investigation to determine whether harassment is indeed occurring at your facility. If so, take appropriate steps to remedy it. In the case of a newly revealed medical condition, determine whether it may qualify as a serious health condition under the Family and Medical Leave Act (FMLA) and then follow your FMLA policy, providing necessary notices and forms. As in Bennett’s case, if the employee alleges that the medical condition is work-related, handle it as a workers’ compensation claim and follow your workers’ comp procedures.

Step #3 – Provide Leave and Benefits to Which The Employee is Entitled

Once the employee has informed you of a medical condition, disability or other concern, your best bet is to provide them with the leave, reasonable accommodation or other benefits to which the employee is entitled. As frustrating as it may be that the employee waited until a disciplinary meeting to inform you of his or her condition, you now have knowledge of that information and you can’t put the genie back in the bottle. Sure, you can try to defend any potential claims by proving that you didn’t have knowledge of the condition when the actual discipline decision was made, but that sort of defense is fact specific and will be difficult to get resolved early in the case. If you want to avoid potential liability, it is best to offer any leave and benefits for which the employee is eligible.

Step #4 – Be Patient

It’s tough to back off on your planned discipline and “be nice” to a poor performing employee while he or she is out on leave or is getting medical treatment. It’s especially difficult in cases where you suspect that the employee may be manipulating the laws in order to avoid getting fired or being placed on a performance improvement plan. But be patient.

Let the workers’ compensation claim or FMLA leave run its course. At that point, the employee either comes back to work and is expected to perform up to your standards, or is unable to return to work. If the employee’s condition does not allow for a return to work, consider whether the employee’s condition is a disability covered by the Americans with Disabilities Act (ADA). If so, engage in an interactive process to determine if a reasonable accommodation would permit the individual to perform the essential functions of his or her job. A reasonable accommodation may include providing additional time off to complete medical treatments or recover, but you are not required to provide an indefinite period of leave. If you are patient and provide all required benefits until they are exhausted, you often are presented with clear, low-risk options for resolving the employment situation.

Step #5 – With Proper Documentation, Proceed With Discipline/Termination

An employee who engages in misconduct or performs poorly does not become “untouchable” simply by asserting a medical condition or harassment complaint. You may still hold them to your performance and conduct standards. First, be sure you have communicated your standards to the employee through an employee handbook, training and/or performance reviews. Second, ensure that the employee’s infractions or poor performance issues are properly documented in an objective, fact-based manner. And third, be certain to treat this employee the same as any other employee who has engaged in similar misconduct or poor performance. If you’ve met these criteria, you will minimize the risk that the discipline or termination you impose will result in liability.


Taking action to discipline or fire an employee is rarely risk-free. Taking such action after an employee reveals a medical condition, disability or other concern raises the stakes even higher. But you can minimize the risk of a lawsuit if you stay calm, follow your policies, and provide any rights and benefits to which the employee is entitled. Take each new development step-by-step and you will reduce the chance that you will need to defend your decisions in court.

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April 13, 2016

H-1B Visa Submissions Lower than Expected

Tsai_RBy Roger Tsai

The U.S. Citizenship and Immigration Services (USCIS) received over 236,000 H-1B visa applications for fiscal year (FY) 2017 in the first week of April. That number far exceeds the statutory cap of 65,000 H-1B visas under the general category and the 20,000 visas under the master’s degree cap. But, it is only 3,000 more petitions than were filed last year, and substantially less than many attorneys and employers were expecting. That is good news for H-1B petitioners, who face better odds at roughly 36% selection rates, but is a sign that the tech economy may be plateauing or new increased fees for employers submitting high volumes of applications are taking effect.

Lottery System Used to Select Petitions

U.S. businesses use the H-1B program to employ foreign workers in occupations that require highly specialized knowledge in fields such as science, engineering, and computer programming. On April 9, 2016, USCIS used its computer-generated random selection process, or lottery, to select a sufficient number of H-1B petitions to meet the total 85,000 cap. The agency first conducted the selection process for the advanced degree exemption. All unselected advanced degree petitions then became part of the lottery selection process for the 65,000 general category limit.

USCIS earlier announced that it will begin premium processing for selected H-1B cap cases no later than May 16, 2016. No start date has been announced for regular processing cases, although historically regular processing receipt notices have been issued in May. All unselected petitions will be rejected and returned with their filing fees. 

Not Selected? Consider Alternative Visa Options

If you need to hire foreign professionals but your H-1B visa petition was not selected, you may want to explore other popular alternatives. Consider the following alternative employment visas and options:

  1. Lateral Hire of H-1B Workers. The statutory H-1B visa cap applies only to new H-1B petitions, meaning that employers may be able to hire foreign workers who currently hold H-1B visas through another employer. Current H-1B employees generally may extend their visa status for up to six years and in some cases, even longer. In addition, foreign nationals who previously held H-1B status but are not currently employed in the U.S. are exempt from the annual H-1B cap and may be returned to that status for the rest of their six-year H-1B visa period.
  2. F-1 STEM OPT Extensions. Science, tech, engineering, and math (STEM) graduates may apply for an extension to their one year Optional Practical Training (OPT). The extension period soon will be increased from 17 to 24 months. The 17-month extension period under the current STEM OPT rules will apply to applications filed through May 9, 2016, but I-765 Applications for Employment Authorization filed after May 10, 2016 may seek the longer 24-month extension available under the new rule. F-1 employers must participate in E-Verify in order for the STEM graduate to be eligible for this extension.
  3. TN Visa. The TN visa is a three-year nonimmigrant visa for Canadian and Mexican citizens and authorizes the individual to work and live temporarily in the U.S. Almost all TN positions require a Bachelor’s degree except for a Scientific Technician or Management Consultant position, but unlike the H-1B, there is no numerical limitation to the number of TN visas issued. TN nonimmigrant workers must show that they will be working in one of sixty TN approved occupations, such as nurses, attorneys, engineers, management consultants, and scientific technicians. 
  4. E-3 Australian Specialty Occupation Visa. An E-3 visa allows Australian citizens to enter the U.S. for a two-year period to work in a specialty occupation, which is defined as any position which normally requires a Bachelor’s degree in a specific major or concentration (i.e. engineer, nurse, scientist, software developers, and accountants). Solely managerial or sales roles do not qualify as specialty occupations. E-3 visas are limited to 10,000 per year.
  5. L-1B Specialized Knowledge Worker Visa. Workers who currently are outside the U.S. working for a foreign parent or subsidiary company related to a U.S. company and who have done so for at least one out of the last three years may qualify for the L-1B intercompany transfer for specialized knowledge workers. The individual must hold specialized knowledge which is distinguished from knowledge held by others in the company and industry.
  6. F-1 Student Status. Non-U.S. citizens may choose to return to school and change their status to F-1. Depending on his or her degree program, the international student’s office may allow the individual to work off-campus part time under Curricular Practical Training. Students should contact their university’s international student’s office for additional information.

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April 11, 2016

New Fiduciary Rule Applies Stricter Standard to Most Retirement Account Advisers

By Rebecca Hudson, Bret Busacker, and Molly Hobbs

In its long-awaited final fiduciary rule, the Department of Labor (DOL) establishes stricter fiduciary standards for investment advisers and consultants providing services to ERISA plans and IRAs. Intended to offer additional protection to ERISA plan participants and IRA owners, the final rule issued on April 7th broadens the application of the ERISA fiduciary standard to many investment professionals, consultants, and advisers who previously had no obligation to adhere to ERISA’s fiduciary standards or to the related prohibited transaction rules.

Final Fiduciary Rule Replaces Five-Part Test

Since 1975, ERISA and its implementing regulations have defined “fiduciary” and “investment advice” narrowly. Under ERISA Section 3(21)(A), a “fiduciary” is someone who has the authority and/or responsibility to provide investment advice under a retirement savings plan and is compensated for doing so. Investment advisers and consultants who are a fiduciary with respect to an ERISA plan or IRA engage in a prohibited transaction if they receive “conflicted compensation” (e.g., commissions, trailing commissions, sales loads, 12b-1 fees, and revenue-sharing payments) from third parties with respect to the investments they recommend to these ERISA plans and IRAs. 

In 1975, the DOL created a five-part test to identify an ERISA fiduciary. An adviser or consultant who does not acknowledge his or her fiduciary status with respect to a plan will nonetheless be a fiduciary with respect to the plan if the adviser enters into an agreement to regularly provide individualized investment advice that will serve as the primary basis upon which the advice recipient will make investment decisions (the “five-part test”). 

Believing that the retirement landscape has changed significantly since 1975, including the prevalence of participant-directed 401(k) plans and the extensive use of individual retirement accounts (IRAs), in 2010, the DOL proposed to broaden the definition of investment advice. The DOL subsequently withdrew the 2010 proposed rule in response to significant push back from various stakeholders. In 2015, a new proposed rule was published that eliminated the five-part test and extended fiduciary status to those advisers who provide advice that is individualized or specifically directed to the advice recipient. In response to the wide range of comments it received on the 2015 proposed rule, the DOL made significant changes to the final fiduciary rule, but kept much of the expansive nature of the 2015 proposed rule.

General Structure of the Final Fiduciary Rule

In today’s marketplace, many investment professionals, consultants and advisers have no obligation to adhere to ERISA’s higher fiduciary standards or to the prohibited transaction rules because they do not satisfy each prong of the five-part test. The DOL expects that broader application of the fiduciary standard under the final fiduciary rule will more closely align the advisers’ interests with those of their customers, while reducing conflicts of interest, disloyalty, and imprudence.

Under the final rule, an investment adviser or consultant that makes a “recommendation” to a plan or IRA for a fee or other compensation that is customized for or specifically directed at the plan or IRA may be a fiduciary. For purposes of the final fiduciary rule, a “recommendation” includes providing advice with respect to:

  • buying, holding, selling, exchanging, or rolling over securities or other investment property, or
  • management of securities or other investment property, investment policies or strategies, portfolio composition, selection of other persons to provide investment advice or services, selection of investment account arrangements, and recommendations with respect to rollovers, distributions, or transfers from a plan or IRA.

Accordingly, an investment adviser or consultant who makes an investment recommendation (as defined above) and receives conflicted compensation in connection with the advice provided to the plan or IRA will engage in a prohibited transaction unless one of the enumerated carve-outs from the rule applies or the adviser/consultant complies with the “Best Interest Contract Exemption” requirement.

What You Need to Know

Plans, their affected financial advisers, and other service providers have until April 10, 2017 to prepare for any change from non-fiduciary to fiduciary status. Notably, there are also two exceptions to the effective date, which will provide more time for certain service providers to adapt to the new standards. In particular, the Best Interest Contract Exemption and rules regulating advice with respect to the advisers proprietary funds will have a transition period during which fewer conditions apply, from April 2017 to January 1, 2018, at which time the rule will be fully implemented.

ERISA plans should begin now to review their relationship with their current investment adviser/consultant. Some things plans should consider include:

  • Determine if an adviser or consultant is currently a fiduciary under the new fiduciary rule.
  • Determine if one of the rule carve-outs applies to the services provided by adviser or consultant.
  • Discuss the Best Interest Contract Exemption with any adviser that is a fiduciary and determine the best way to document and comply with that exemption.

In conducting this review, plans should interpret the general fiduciary rule broadly and interpret any of the enumerated carve-outs narrowly. Fiduciaries should expect that advisers will provide written documentation of their role and their satisfaction of any carve-out. Plans should require advisers to indemnify the plan from any prohibited transaction that arises as a result of its failure to comply with any carve-out or exemption.

For more information about this rule, its carve-outs and the Best Interest Contract Exemption, please read our full summary.

April 6, 2016

Fired HR Manager Has FLSA Anti-Retaliation Claim

By Jason RitchieRitchie_J

When a manager voices work-related concerns to company executives, does that constitute a complaint triggering anti-retaliation protection, or is it simply part of his or her job? The Ninth Circuit Court of Appeals recently answered that question in the FLSA context and their decision may surprise you.

FLSA Anti-Retaliation “Fair Notice” Requirement

The Fair Labor Standards Act (FLSA) prohibits employers from retaliating against an employee who has “filed any complaint,”  instituted any proceeding, or testified in any proceeding alleging a violation of the FLSA. To determine whether an employee has “filed any complaint” under this anti-retaliation provision, the U.S. Supreme Court has established a “fair notice” test, stating that a complaint must be “sufficiently clear and detailed for a reasonable employer to understand it, in light of both content and context, as an assertion of rights protected by the statute and a call for their protection.” In other words, the employer must have fair notice that an employee is making a complaint that could subject the employer to a later claim for retaliation.

Different Standards For Managers and Non-Managers

Most managers are also employees, as defined by the FLSA. That means that managers can be protected by the FLSA anti-retaliation provision. But, in most companies, managers are expected to voice work-related concerns and recommend changes in policies and procedures to their superiors as part of their duties. In fact, managers who are responsible for ensuring that their company comply with applicable laws necessarily need to report potential compliance issues to upper-level executives. Consequently, managers are in a different position when reporting possible FLSA violations to their boss than a front-line employee would be, making it difficult to determine whether a manager’s compliance concerns amount to a “complaint” within the scope of the FLSA anti-retaliation provision.

Numerous other federal appellate courts deciding this issue have formulated a rule that looks at whether the manager stepped outside his or her role of representing the company when making a complaint. In order for the manager to have engaged in protected activity, he or she must have either filed (or threatened to file) an action adverse to the employer, actively assisted other employees in asserting FLSA rights, or otherwise engaged in activities that reasonably could be perceived as directed towards the assertion of rights protected by the FLSA.

The Ninth Circuit (whose decisions apply to many Western states, including Montana,California, Idaho, Nevada, Oregon, and Washington) flatly rejected that rule. Declining to adopt such a bright-line test, the Court ruled that the determination instead rests on a case-by-case analysis, looking to the content and context of the complaint to see whether the employer had fair notice. The fact that a complaining employee is a manager is only one consideration to be included when weighing the content and context of the complaint.

HR Manager Escalated Pay Concerns Prior To Her Termination

In the case before the Ninth Circuit, Alla Rosenfield was hired by GlobalTranz Enterprises as its Manager of Human Resources. Over the next year, the company promoted Rosenfield to Director of Human Resources and later added Director of Corporate Training to her title. Throughout that year, Rosenfield reported to her superiors that the company was not complying with the FLSA.

Specifically, Rosenfield verbally complained to management at least eight times that the company was not in compliance with the FLSA. She raised the subject of FLSA violations in at least 27 weekly and monthly reports to her superiors. On some occasions, she provided copies of the statute and provided specific examples where she believed the company had misclassified a large number of employees. She also requested changes in the payment of wages for those employees.

Rosenfield’s boss disapproved of her complaints. He considered himself the sole person responsible for FLSA compliance and as such, he made it clear to Rosenfield that he did not want or expect her to determine whether the company was in compliance. Five days after Rosenfield documented the company’s non-compliance and complaint to her boss again, he fired her. She sued, alleging that GlobalTranz and its executives had violated the FLSA’s anti-retaliation provision. After the district court granted summary judgment to the employer on the FLSA retaliation claim, she appealed to the Ninth Circuit.

The Ninth Circuit overturned the summary judgment in favor of the company, sending the case back to the lower court to continue proceedings. The Court focused on the fact that because FLSA compliance was not part of Rosenfield’s responsibility, her complaints about FLSA non-compliance and her advocacy for the rights of employees to be paid in accordance with the FLSA could not reasonably have been understood by the company to be merely a part of her regular duties. The Court ruled that a jury could reasonably find that Rosenfield had indeed filed a complaint that triggered FLSA anti-retaliation protection. Rosenfield v. GlobalTranz Enters., Inc., No. 13-15292 (9th Cir. Dec. 14, 2015).

Dissent Would Have Required Manager to Step Outside Role

The three judges on the Ninth Circuit panel did not all agree on the outcome of this case. One judge dissented, disagreeing that the Supreme Court’s “fair notice” test should outweigh the manager test articulated by the other appellate courts. Judge Dee Benson would have required that Rosenfield show that she stepped outside of her role as a manager in doing something adverse to her employer in order to establish that she “filed any complaint” within the meaning of the FLSA anti-retaliation provision.

Treat Internal Complaints With Care

This decision is troubling as it makes it very difficult for employers to know when a supervisor or manager is engaging in protected conduct that may trigger retaliation protection in the future. Take seriously any internal reports by managers related to pay issues and potential FLSA violations. If you intend to take any type of adverse action against a manager, review first whether he or she has any reported FLSA concerns so you may evaluate the risk that your action will be deemed retaliatory.

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