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Labor and Employment Insights
Fall/Winter 2002
Articles:
September 11: The Aftermath
ATTACKS MOVE RELIGIOUS, ETHNIC ISSUES TO FOREFRONT
The terrorist attacks of September 11 are expected to have long-lasting effects on many workplaces. Labor & Employment Insights will periodically feature articles on the anticipated impact of the attacks. This article was written by Teresa Rider Bult and S. Craig Moore of Constangy’s Nashville Office, and Robert C. Lemert of Constangy’s Atlanta Office.
National origin and religious discrimination have assumed new significance in the aftermath of the terrorist attacks of September 11. Although the issues are not new, the magnitude is. A study released by the Council on American-Islamic Relations (CAIR) shortly before the attacks, found that anti-Muslim incidents between March 2000 and March 2001 had increased over the preceding year by fifteen percent. Almost half of the 366 discriminatory incidents reported during this time period were allegedly connected with the workplace.
Now, after September 11, these types of incidents are sure to increase as employees express their patriotism and fury simultaneously. It’s hard to ignore calls for "Jihad" against the United States or that the "22 most wanted" are almost all from the Middle East. Even African and Latino Americans, both traditionally victims of profiling, say in polls that they approve of profiling Middle Eastern people in the wake of the attacks.
It also doesn’t help that many of the alleged hijackers and their co-conspirators apparently lived peacefully in the United States for years and presumably benefitted from their neighbors’ religious and ethnic tolerance. Nor does the sight of demonstrators in Middle Eastern countries who cheered the attacks and burned American flags.
To their credit, the media and many political leaders, including President Bush, have cautioned Americans to beware of discriminating against the vast majority of Middle Eastern people and Muslims who are peaceful and law-abiding. However, the brutal nature of the attacks, coupled with the natural human tendency to stereotype, may render some such discrimination unavoidable.
As a result, companies are now concerned about how to prevent anger and intolerance from spilling over into their work environments. Employers have already had some uncertainty with regard to their obligations in employing individuals with different cultural backgrounds. Now that task may seem more daunting than ever before.
To understand ethnic or national origin discrimination, one must first understand its roots. National origin (and religious) discrimination are prohibited under Title VII as well as under several state and local laws. The EEOC defines national origin discrimination as the denial of equal employment opportunity because of an individual's, or his or her ancestor's, place of origin; or because an individual has physical, cultural, or linguistic characteristic of a national origin group.
National origin discrimination can take several forms. Of course, there is "traditional" national origin discrimination in the form of English fluency requirements, "English-only" rules, prohibitions of foreign accents, and height and weight requirements that are not justified by a legitimate business necessity. Employers may also be liable for national origin discrimination after an adverse employment decision (such as a termination) if there is proof that the decision was a result of bias against the individual’s ancestry. Middle Eastern plaintiffs often present evidence of derogatory ethnic slurs like "damn Arab," "desert people," "camel jockey," or "towel head" to show such bias.
Plaintiffs can also bring claims for national origin harassment. National origin harassment, like its more familiar sexual and racial varieties, arises when an intimidating, hostile, or offensive work environment is created through the use of ethnic slurs or other conduct relating to an individual’s national origin.
While courts have held an isolated instance of extremely serious harassment may give rise to a claim, they have consistently stated an employer is not liable if an employee has been subjected to only random or isolated comments or conduct. In determining "how much is too much" the employer must consider both the victimized employee’s perception of the conduct as well as the objective perceptions of a "reasonable person."
As with sexual harassment, whether the work environment is "hostile" or "abusive" is determined by looking at all the circumstances — the frequency of the discriminatory conduct; its severity; whether it is physically threatening or humiliating, or only an offensive utterance; and whether it unreasonably interferes with an employee’s work performance.
It is difficult, if not impossible, to prevent all ethnic-based bias and harassment in the workplace. However, such claims can be minimized and liability avoided by taking a few simple precautions:
• Implement and communicate a No-Harassment Policy that includes harassment because of national origin. Investigate, resolve, and document any harassment claims as soon as they are brought to your attention.
• Educate employees about the unique cultural traits of the different national origin groups in the workplace. Emphasize that the extremists who planned and carried out the attacks are not representative of people of the Middle East or of Muslims.
• Encourage employees to express their patriotism in a positive manner rather than by advocating intolerance of Middle Easterners or Muslims. ("God bless America," yes; "death to Afghans," no.) Make it clear to all supervisors and employees that any kind of religious or national origin discrimination will not be tolerated in the workplace.
• Instruct management to refrain from making national origin-based remarks or allowing employees to make them. Even comments that are intended to be humorous must be prohibited.
• If your company has a number of Muslim or Middle Eastern employees, consider holding employee meetings to specifically address the implications of the terrorist attacks and their effect on the workplace. These will also provide a good opportunity to remind employees of your company’s policy against any type of discrimination or harassment based on national origin or religion.
• Managers and supervisors should be careful in discussing the derivation of employees’ or applicants’ surnames, or even their first names. Although some view this as polite conversation or a desire to learn about a particular culture, this type of discussion can subsequently be used to bolster a national origin claim.
• Do not forget that even individuals who are not authorized to work in the United States can claim national origin bias under certain circumstances.
Teresa Bult and Craig Moore practice in the areas of employment litigation prevention and defense, with a concentration in national origin issues. Bob Lemert practices in the areas of labor law and plant closings, and in cultural issues in the workplace.
From The Editor’s Desk: WE WILL PREVAIL
The vicious and cowardly terrorist attacks of September 11 were carried out without respect to race, creed, or color. They were carried out without regard to religion, to gender, or to politics. Americans of all races and nationalities, and many visitors from other countries, lost their lives.
What we often forget is that this was also an incident of workplace violence par excellence. One firm lost almost 100 percent of its workforce, including the brother of its CEO. The firefighters and police officers who bravely tried to rescue the people trapped in the World Trade Center, only to become victims themselves, were doing their jobs when they died. No doubt the majority of passengers on the hijacked jets were travelling on business. Even Bob Stevens of The Sun, who died from anthrax, probably became infected on the job.
Despite the horror, it is heartening to see the unity shown by Americans, and our neighbors worldwide, in response to these despicable acts. Especially moving was NAACP Chairman Kweisi Mfume’s statement that we are all "Americans" now, with no hyphens.
Meanwhile, employers will have a number of issues to address as a result of the attacks. It is necessary to become familiar with the employment and reemployment rights of military and military reserve personnel. Constangy’s Executive Labor Summary contained a brief summary of the law in this area, and you should have received our most recent Client Bulletin, which addresses it in more detail. If you missed either publication, you can find them at www.constangy.com. We also expect to see employers increasingly develop preventive response plans for terrorist attacks and biological sabotage if and when they occur.
Thanks in large part to President Bush’s admonition to Americans to avoid discrimination and harassment against people who are, or who look like they are, Muslim or of Middle Eastern descent, it appears that incidents against such individuals may be on the decline after an initial spike immediately after the attacks. Page One contains an excellent article on national origin discrimination by Teresa Bult, Craig Moore, and Bob Lemert.
Other anticipated issues relate to the emotional fallout from the attacks, including fear of working in tall buildings or of business travel. HR professionals—particularly in the New York and Washington areas—will face the challenge of dealing with the emotional trauma, physical injury, and bereavement of their employees.
There is much work to be done, but there is no question that we will prevail.
Robin E. Shea, Editor
Winston-Salem Office
THE LIVING WAGE: A Back Door for Unions?
—Kerri Riesdorff, Kansas City Office
When you come home and have forgotten your house key, you normally try the front door to see whether, by chance, you left it unlocked. If you didn’t, then you try the other doors. If all else fails, and you haven’t hidden a spare key in your mailbox or under a planter, you might try getting in through a window.
For years unions, with their declining membership in recent decades, have been like the bumbling homeowner struggling to get into a locked house. However, a new strategy has them not only getting in through the back door, but also side doors and several unlocked windows as well.
The strategy is the so-called "living wage" movement. Living wage ordinances render non-union companies less competitive (and thus, by comparison, union companies more so). Moreover, companies with unions and collective bargaining agreements are normally exempt from living wage ordinances.
A Primer
What is the living-wage movement, you ask? It is a grass-roots movement created by the Association of Community Organizations for Reform Now ("ACORN"). The movement, with substantial support from local and international labor unions, seeks to raise minimum wages in selected areas significantly beyond the current federal minimum wage of $5.15 an hour. To date, they have been successful. The ordinances currently enacted have an average wage of $9.66 per hour.
For the most part, living-wage ordinances apply only to employers who contract with, or receive monetary benefits from, a city or county. However, the "living wage" craze has already expanded beyond municipal contractors. Santa Monica, California, recently enacted a living wage ordinance that applied to all employers—including private employers—in the downtown and beach areas. One affected hotel expects to incur an additional $800,000 a year in labor costs.
An employer who fails to comply with a living-wage ordinance faces stiff penalties. The penalties range from significant monetary penalties to disqualification from future contracting opportunities. In fact, more than eighty percent of the ordinances include some form of monetary penalty, including back pay, interest, liquidated damages, withholding of contractual payments, and immediate termination of contract. Some ordinances even impose fixed civil or criminal fines.
The Unions’ Angle
One may wonder what any of this has to do with unions. Here’s the answer: Santa Monica employers are exempted from the living wage ordinance if . . . they have union contracts! This "back-door" for labor unions is a real bane for Santa Monica’s hotel and restaurant industries, which have thus far been successful in repelling union organizing efforts.
Living-wage ordinances benefit unions in two additional ways. First, the ordinances raise labor costs for non-union employers, rendering them less competitive and union employers thus relatively more competitive. Second, many ordinances call for the creation of an "oversight committee" to review the effectiveness of the ordinance as well as make comments and recommendations. Labor unions generally have at least one seat on these committees. Their participation institutionalizes union access, interaction, and influence.
Thus, it’s not surprising that ACORN and the AFL-CIO are supporting seventy-five campaigns in thirty-seven states. Their tactics resemble those employed by unions against corporate employers, except that the targets in living wage campaigns are generally city councils or other local planning bodies. Organizers include members of local welfare advocacy groups, labor representatives, faculty and college students, and community religious leaders who are provided with union-supplied training materials, persuasive statistics, organizational support, and access to media outlets. Campaigns have employed aggressive legal tactics, public demonstrations, and protests, such as John Sweeney’s leading a parade in support of a living-wage initiative at Harvard University.
Will a "Living Wage" Benefit Employees?
As is so often the case, a measure touted as an attempt to "help" low-wage employees is likely to have precisely the opposite effect. Employers faced with unsustainable labor costs are likely to do one of three things: reduce hours, eliminate positions, or move out of town. Further, the ordinances have the effect of "flattening" wages: if a company has to pay $10 an hour for an unskilled laborer, it probably won’t be able to afford to pay much more than that for an experienced and skilled craftsperson. As a result, the incentive for employees to improve their skills through education and training disappears.
Living-wage proponents have been criticized for advocating higher wages than necessary. ACORN insists living-wage rates be based upon the guidelines of the Department of Health and Human Services for a household of four. The guidelines assume only one wage earner per household, with only one job. No government benefits or income from a second job are taken into account. Yet statistics demonstrate that fewer than one in three low-wage earners are heads of households and that fewer than one in ten are sole breadwinners. More than half of the low-wage employees are unmarried and childless—in other words, often just starting out on the first rung of the economic ladder.
Current Status
As we went to press, there were sixty-two living-wage ordinances in twenty-four states, and campaigns are under way in twelve additional states that currently have no living-wage ordinances. California, not surprisingly, has the most living wage ordinances, with thirteen. Union-heavy Michigan is second, with eight, and Wisconsin ranks third, with six. Nonetheless, the movement is nationwide. And new ordinances are being adopted at a rate of approximately one every month.
We expect the Santa Monica victory to encourage the living-wage movement to increasingly pursue private employers and universities. ACORN is also said to be advocating an inflated minimum wage for employees of federal contractors. And don’t be surprised if living-wage advocates appear at your next corporate shareholder meeting, demanding that you "voluntarily" adopt living-wage policies.
Kerri Reisdorff practices in the areas of labor law, and employment litigation prevention and defense.
IS THIS REALLY ESSENTIAL? Job Rotations and ADA Compliance
—Virginia A. Piekarski, Winston-Salem Office
In these days of leaner operations, as well as heightened sensitivities to ergonomic issues, many employers are instituting job rotation systems in which employees are expected to perform a variety of tasks throughout the work day rather than the same task, and only that task, day in and day out. The most frequently cited reasons for implementing a job rotation system are flexibility (better ability to respond to changes in demand for a particular product or service, as well as better response to emergency situations) and ergonomics.
But what if an employee claims that he or she is unable to perform one or more of the components of a given rotation because of a disability? Does an employer have a duty under the Americans with Disabilities Act ("ADA") to make a reasonable accommodation by eliminating that component(s)? Or can an employer stick to its guns and insist that the employee perform each and every job in the rotation?
The answer is: it depends. In a case involving Saturn, the auto manufacturer, the United States Court of Appeals for the Sixth Circuit (Kentucky, Michigan, Ohio, Tennessee) has recently provided some guidance on this issue that may be helpful to employers with job rotation systems.
As a general rule, it is entirely permissible under the ADA for an employer to require as an essential function the ability to rotate through a variety of specific duties, so long as the rotation requirement serves a legitimate business purpose. The need for flexibility and an interest in protecting the health of employees have been routinely recognized by courts as legitimate business reasons for job rotations. In fact, most courts are reluctant to second-guess an employer’s decision that employees rotate through various tasks if any legitimate reason is proferred by the employer for doing so.
Assuming that each component of a rotation job is an "essential" function, then the employer should not have to eliminate the component because, under the ADA, as we all know, the elimination of an essential function is not a reasonable accommodation. "Job restructuring" as a reasonable accommodation pertains only to the restructuring of non-essential duties (or marginal functions) of a job. Employers are not required to assign existing employees or hire new employees to perform essential duties of a disabled employee. Moreover, employers are not required to eliminate essential functions.
But what if there is a question as to whether the component in a job rotation is not an "essential" function? Could that make a difference? Yes.
Like most ADA issues, the determination of whether a function is truly "essential" is intensely fact-specific. Courts will weigh a number of factors, including the following: (1) the employer’s judgment as to which functions are essential; (2) the employer’s written job descriptions (job postings, training plans and the like are also frequently reviewed); (3) the amount of time spent on the job performing the function; (4) the consequences of not requiring an employee to perform the function; (5) the terms of a collective bargaining agreement; (6) the work experience of past incumbents in the job; and (7) the current work experience of incumbents in similar jobs.
Enter the Saturn case. An employee at a Saturn facility suffered from various hand, arm and neck impairments that restricted his mobility. After he was removed from his work team, moved through a series of temporary jobs, and finally placed on involuntary medical leave for several months, he sued Saturn under the ADA. He contended that the company unlawfully refused to place him on a work team whose job rotation included any task that he was unable to perform with his medical restrictions.
The central issue in the lawsuit was the extent to which Saturn’s job rotation system was integral to the day-to-day operations of the company (and thus the extent to which the job rotation was an essential function of the jobs of Saturn employees). Company witnesses characterized job rotation as the "building block" of the Saturn Corporation.
However, the plaintiff brought this into serious question. Numerous Saturn employees testified that team members frequently did not fully rotate, but instead swapped tasks with other team members – sometimes out of physical inability to perform certain tasks, but sometimes just because they didn’t like the tasks. Even worse for the company, many employee witnesses were unable to identify a single team on which every member was fully rotational. Worst of all, the evidence established that supervisors knew this and had never taken action against employees for electing not to rotate.
The evidence also showed that many of Saturn’s job descriptions, as well as the collective bargaining agreement, were completely silent about job rotation. Based on the evidence, the court concluded that full task rotation was simply not an essential job function within the meaning of the ADA.
Once this conclusion was reached, the remaining pieces of the puzzle easily fell into place. The evidence showed that plaintiff was frequently able to perform all but one or two team tasks; therefore, reassigning or removing these few tasks was not an undue hardship for the company. Despite the fact that Saturn eventually was able to place the plaintiff in a position where he could perform all ten team tasks without any accommodation, and thereby bring him back from his extended leave without having suffered much in the way of lost wages, the plaintiff still walked away with $90,000 in compensatory damages.
Saturn’s unfortunate experience has a lot to teach us about making reasonable accommodations in job rotations. First, the ability to fully participate in a job rotation system must actually be an essential function of the job before an employer can use it as justification for not granting an accommodation. Second, in determining whether a job function is "essential," upper management and Human Resources must consult with the people who actually do the work—the employees and the line supervisors. Supervisors and employees will often know of informal exceptions and accommodations that take place every day and that will severely undercut an employer’s contention that a given job function is "essential."
Finally, if you think that a job rotation system is one of the ingredients that makes your organization a "different kind of company," then make sure that your employees and supervisors are practicing what you preach and that the "sermon" is in all job descriptions, postings, training plans, and collective bargaining agreements.
Gini Piekarski practices in the areas of litigation prevention and defense, and affirmative action.
Pros and Cons on Job Rotations
PRO . . .
England v. Enbi Indiana, Inc., 102 F. Supp.2d 1002 (D. Ind. 2000): Ability to rotate through all four presses found necessary to provide flexibility to respond to changing product demand and to reduce high rate of repetitive motion injuries.
Anderson v. Coors Brewing Co., 181 F.3d 1171 (10th Cir. 1999): Multiple job classification was "essential function" where rotation was required to respond to surges in demand.
Malabarba v. Chicago Tribune Co., 149 F.3d 690 (7th Cir. 1998): Flexibility was justified to allow newspaper to strictly adhere to its production and distribution schedules.
Laurin v. Providence Hosp., 150 F.3d 52 (1st Cir. 1998): Shift rotation was "essential function" for nurses in twenty-four hour hospital facility.
Lowry v. Eastman Kodak Co., 2001 U.S. App. LEXIS 13751 (2nd Cir. 2001): Cross-training found necessary for vacation scheduling and for prompt and proper response to boiler emergencies. (Court took special note of fact that need for rotation was stressed in the department’s training plan.)
Kees v. Wallenstein, 161 F.3d 1196 (9th Cir. 1998): Plaintiff corrections officers were not "qualified" under ADA of inability to rotate through all ten job functions.
and one CON . . .
Chen v. Galen Hospital Illinois, 2000 U.S. Dist. LEXIS 608 (N.D. Ill. 2000): Court refused to dismiss ADA lawsuit filed by radiology technician where lengthy performance evaluation did not indicate that transporting and positioning patients and pushing a portable x-ray machine were "essential functions" of job rotation.
Gini Piekarski
Changes in Retirement Laws
Will Let Us Keep More for Our Golden Years
EGTRRA, EGTRRA—Read All About It!
—Ira S. Friedrich, Atlanta Office
"EGTRRA," short for the Economic Growth and Tax Relief Reconciliation Act of 2001, offers employees the opportunity to set aside more money for their retirements. The ability to contribute more money to retirement plans will help restore account balances devastated by the stock market decline. In that respect EGTRRA is a cut above other recently enacted retirement plan simplification laws.
Effective with the start of the 2002 Plan Year, EGTRRA will make the following welcome changes in federal retirement laws:
401(k) Plans
o The annual contribution limit increases from its current $10,500 to $11,000 in 2002. The limit then increases $1,000 a year through 2006, for a Year 2006 maximum of $15,000.
o Older employees can save even more. Employees who are at least fifty years old can contribute an additional $1,000 in 2002. This increases $1,000 a year through 2006, for a maximum additional $5,000 a year. This catch-up contribution is not subject to any of the non-discrimination rules or limits, which means that in 2006 an older employee can set aside $20,000 tax-free for retirement.
o The Hardship Distribution rules will be relaxed. Right now, employees who receive hardship distributions are not allowed to resume contributions until they wait twelve months. EGTRRA cuts that waiting period to six months.
In addition to giving employees more opportunity to save on their own, EGTRRA increases the amount of money that can be put into an employee’s account every year.
o The compensation used to compute benefits has increased from $170,000 to $200,000. This means that $30,000 of compensation that was ignored in computing benefits will now be added back into the benefit formula.
o The maximum amount that can be put into a defined contribution plan has increased dramatically. Pre-EGTRRA, the limitation was the lesser of twenty-five percent of pay or $30,000. Post-EGTRRA, the limitation is the lesser of one hundred percent of pay or $40,000.
o The limitation on the amount that an employer can deduct has increased from fifteen percent of pay to twenty-five percent of pay. This will eliminate the cut-back on employee benefits caused by deductibility problems. Employers can increase benefits to a possible twenty-five percent of pay and know the additional expense will be fully deductible. Salary deferral contributions are now excluded in computing the amount that is deductible.
Defined Benefit Plans
o The compensation used to compute benefits has increased from $170,000 to $200,000. This means that $30,000 of compensation that was ignored in computing benefits will now be added back into the benefit formula.
o The maximum amount that can be paid out of a defined benefit plan has been increased by $20,000 a year. The new limitation is $160,000, rather than $140,000.
o The actuarial assumptions that have been used to lower the maximum payouts for early commencement have been revised. These changes drastically increase the amount of money available to an executive taking early retirement.
Employers have some big decisions to make as a result of these new rules. Will they allow employees who have reached age fifty to make catch-up contributions? Will they change benefit formulas based on the increased compensation contribution and deduction limitations? Will they revise their executive compensation programs, now that executives will be eligible for greater retirement benefits? Constangy recommends that all employers review their retirement benefits programs as a result of this great new law.
Ira Friedrich is head of Constangy’s employee benefits practice group. Please call Ira or Carl Cannon in the Atlanta Office, or Dana Thrasher in the Birmingham Office, if you wish to discuss the impact of EGTRRA on your retirement plans.
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