Supreme Court: State Need Only Rational Basis for Refusing to Subsidize Union Political Speech Through Payroll Deductions.

Yesterday, the United States Supreme Court reversed the Ninth Circuit and upheld an Idaho state law which precluded payroll deductions by state and local governments to support political speech and political activities by unions. (Payroll deductions for regular union wages were permitted). The unions sued, arguing that the prohibition violated their First Amendment rights. The Supreme Court noted that the state law did not prohibit the unions from engaging in political activities or speech; it merely refused to promote those activities through payroll deductions. Therefore, only a rational basis analysis applied; not strict scrutiny. Idaho's interest in avoiding the reality or appearance of government favoritism or entanglement with partisan politics was sufficiently rationale to support the legislative ban. Ysursa v. Pocatello Education Ass’n, No. 07-869.

As described by the Court, “[u]nder Idaho law, a public employee may elect to have a portion of his wages deducted by his employer and remitted to his union to pay union dues. He may not, however, choose to have an amount deducted and remitted to the union's political action committee, because Idaho law prohibits payroll deductions for political activities. In particular, “ Idaho's Right to Work Act declares that the ‘right to work shall not be infringed or restricted in any way based on membership in, affiliation with, or financial support of a labor organization or on refusal to join, affiliate with, or financially or otherwise support a labor organization.’ . . . “The First Amendment prohibits government from "abridging the freedom of speech"; it does not confer an affirmative right to use government payroll mechanisms for the purpose of obtaining funds for expression. Idaho's law does not restrict political speech, but rather declines to promote that speech by allowing public employee checkoffs for political activities. Such a decision is reasonable in light of the State's interest in avoiding the appearance that carrying out the public's business is tainted by partisan political activity. That interest extends to government at the local as well as state level, and nothing in the First Amendment prevents a State from determining that its political subdivisions may not provide payroll deductions for political activities.”

“Restrictions on speech based on its content are ‘presumptively invalid’ and subject to strict scrutiny . . . The First Amendment, however, protects the right to be free from government abridgment of speech. While in some contexts the government must accommodate expression, it is not required to assist others in funding the expression of particular ideas, including political ones. ‘[A] legislature's decision not to subsidize the exercise of a fundamental right does not infringe the right, and thus is not subject to strict scrutiny.’. . . Given that the State has not infringed the unions' First Amendment rights, the State need only demonstrate a rational basis to justify the ban on political payroll deductions. The prohibition is not ‘aim[ed] at the suppression of dangerous ideas,’ but is instead justified by the State's interest in avoiding the reality or appearance of government favoritism or entanglement with partisan politics. We have previously recognized such a purpose in upholding limitations on public employee political activities.”

“The question remains whether the ban is valid at the local level. The unions abandoned their challenge to the restriction at the state level, but contend that strict scrutiny is still warranted when the ban is applied to local government employers. In that context, the unions argue, the State is no longer declining to facilitate speech through its own payroll system, but is obstructing speech in the local governments' payroll systems. We find that distinction unpersuasive, and hold that the same deferential review applies whether the prohibition on payroll deductions for political speech is directed at state or local governmental entities. ‘Political subdivisions of States--counties, cities, or whatever--never were and never have been considered as sovereign entities.’ They are instead ‘subordinate governmental instrumentalities created by the State to assist in the carrying out of state governmental functions.’ State political subdivisions are ‘merely ... department[s] of the State, and the State may withhold, grant or withdraw powers and privileges as it sees fit. Here, the Idaho Legislature has elected to withhold from all public employers the power to provide payroll deductions for political activities.”

“The State's legislative action is of course subject to First Amendment and other constitutional scrutiny whether that action is applicable at the state level, the local level, both, or some subpart of either. But we are aware of no case suggesting that a different analysis applies under the First Amendment depending on the level of government affected, and the unions have cited none. The ban on political payroll deductions furthers Idaho's interest in separating the operation of government from partisan politics. That interest extends to all public employers at whatever level of government.”

Insomniacs can read the full opinion at http://www.supremecourtus.gov/opinions/08pdf/07-869.pdf.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with an attorney.

Stark County Court of Appeals Dismisses Whistleblower Retaliation Claim as Untimely

Earlier this month, the Stark County Court of Appeals dismissed as untimely a claim for wrongful constructive discharge based on an employee’s written allegations of theft against his supervisor to the Board President and city law director. Miller v. Rodman Pub. Library Bd. of Trustees, 2009-Ohio-573. In that case, the plaintiff maintenance supervisor wrote the President of a public library and the city law director about his suspicions that his supervisor – the Library’s Director of Operations – was stealing chairs from the library. When no action was taken for several months, the plaintiff supervisor resigned his position, citing his prior allegations. Just a few weeks later, the Operations Director was arrested, pled guilty, paid restitution and was incarcerated for a period of time. Five months after he resigned, the plaintiff supervisor filed suit against the library, claiming that he was constructively discharged in violation of Ohio’s Whistleblower statute and public policy. The trial court dismissed his claims for being filed more than 180 days after his alleged constructive discharge and the Court of Appeals affirmed.

The court found that Ohio Revised Code § 4113.52(D) required any civil action under the Whistleblower statute to be filed within 180 days. The Court of Appeals refused to consider the supervisor’s argument that the 180 should not begin to run until the Director had been arrested because the supervisor failed to file any response to the Library’s motion to dismiss at the trial court level. The Court also refused to recognize a public policy claim because the sole source of public policy identified to support that claim was the whistleblower statute (which required a claim to be filed within 180 days).

Insomniacs can read the full opinion at

Government to Subsidize 65% of Medical Continuation Coverage for Involuntarily Terminated Employees

The recently enacted American Recovery and Reinvestment Act of 2009 (the “Act”) contains a provision where the federal government will partially subsidize the continuation of medical insurance coverage for involuntarily terminated employees for up to nine months if they are eligible for continued medical coverage under COBRA or similar state law. (Ohio has a mini-COBRA statute that applies to employers which are not otherwise covered by COBRA at Ohio Revised Code 3923.38). The continued medical coverage is available to any employee who participates in an employer-sponsored health plan and who is involuntarily terminated after September 1, 2008 but before December 31, 2009 – even if the employee did not initially elect to continue medical coverage after his or her termination.

The government is partially subsidizing the insurance coverage by requiring employers to pay for 65% of the monthly premium and then recoup that amount from the quarterly payroll and FICA taxes the employer would otherwise be required to pay. Of course, the employee has to elect to continue medical coverage under the new Act and pay his or her 35% share of the monthly premium before the employer can reimburse itself through payroll tax withholdings. If the employee already paid the 102% share of the premium (for months after February 17, 2009), the employer can either reimburse the employee for the 65% or credit the overpayment towards premium payments for the next two months. (The subsidy cannot be used for months prior to February 17, 2009). Employers will also need to file a report with the IRS concerning the involuntary termination of an employee covered by the new Act, the amount of the payroll taxes used to reimburse the employer for the 65% of medical insurance continuation and the Tax Identification Numbers of all covered employees. The IRS will issue regulations and other guidance concerning the form and content of such reports.

The employee may elect to continue the same insurance coverage which the employee utilized during active employment, or if the employer permits it, the employee may elect a less expensive medical plan if such plan is also offered to the employer’s active employees and such plan offers more than merely dental, vision, flexible spending or an on-site clinic at the employer’s facility.

The subsidy will not constitute taxable income to the employee, unless the employee’s adjusted gross income exceeds $125,000 (for single filers) or $250,000 (for joint filers). These high income employees may elect to waive the subsidy in order to avoid having the amount of their taxes increased by the full amount of the subsidized premium (or a significant fraction of that amount).

As mentioned, the government subsidy is available for up to nine months, but may terminate earlier when the employee becomes eligible (i) for COBRA coverage eighteen months earlier (i.e., the nine month subsidy does not extend COBRA’s regular 18-month eligibility period); (ii) under another employer’s medical plan, social security income or Medicare; (iii) for coverage under a flexible spending arrangement or (iv) for coverage for treatment that is furnished in an on-site medical facility maintained by an employer which consists primarily of first-aid services, prevention and wellness or similar care. Employees are required to notify employers if they obtain other medical coverage or risk a 110% penalty.

Employees who did not earlier elect continued medical coverage have 60 days to elect subsidized coverage once they receive the employer’s revised notice of eligibility. The revised notice of eligibility must be sent to any employees terminated between September 1, 2008 and December 31, 2009 and must notify recipients of:
• The availability of subsidized premiums for continued coverage;
• The option to enroll in different coverage (if the employer permits this option);
• The forms necessary for establishing eligibility for subsidized premiums;
• The name, address and telephone number necessary to contact the plan administrator and any other person maintaining relevant information in connection with the subsidized premiums;
• The extended election period (for employees who failed to timely elect COBRA coverage prior to February 17, 2009); and
• The employee’s obligation to notify the plan if the employee becomes eligible for other medical coverage or social security income and the penalty for failing to comply with this obligation;

The Department of Labor is required to publicize acceptable model notices by mid-March 2009 and employers are required to send by mid-April 2009 the revised notice to all employees involuntarily terminated since September 1, 2008.

Insomniacs can read these provisions of the Act in full at http://www.dol.gov/ebsa/pdf/COBRAPremiumReductionProvision.pdf. The Department of Labor expects to publish the new model COBRA notice on its website at http://www.dol.gov/ebsa/cobra.html.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with an attorney.

Supreme Court Dismisses Appeal on Whether Wrongful Discharge Claim Is Valid Based on Safety Concerns Shared with Insurance Auditor

Today, the Supreme Court dismissed on procedural grounds an appeal of a case which has captured the attention of employment attorneys throughout the state. On February 6, 2008, the Ohio Supreme Court heard oral argument about whether public policy wrongful discharge claims should be recognized when the employee did not “blow the whistle” to either a government agency or management about safety concerns, but rather, complained to a private sector insurance auditor about his paranoia of being set up to be fired in a document of fire alarm inspections. The Court held today that there was no final appealable order from the trial court because that court had entered summary judgment in favor of the employer on several claims and then the plaintiff appealed only after voluntarily dismissing his remaining claims. Without a final appealable order, the plaintiff had no jurisdiction to appeal to the Ohio Court of Appeals and the employer could not appeal to the Supreme Court.

As reported in the July 9, 2007 FYI, the Montgomery County Court of Appeals reversed summary judgment in favor of the defendant employer on the wrongful discharge claim after the plaintiff was fired for insubordination after expressing concern about the employer’s fire alarm system with an insurance agent who had been present to inspect the employer’s premises and provide an insurance quote. Dohme v. Eurand Am., Inc., 2007-Ohio-865 (3/2/07). Notably, the plaintiff had not been fired several years earlier when he reported to the fire department that one of the fire alarms had malfunctioned during a fire. Instead, he was transferred to another position which made him responsible for the fire alarm system. A few days prior to his termination for insubordination, the employer had specifically prohibited all employees from speaking with the insurance agent who was scheduled to inspect the premises. Although the plaintiff had not been specifically authorized in writing to meet with the insurance agent, he says that he had been asked to fill in for an absent employee. He then provided a report to the agent about overdue fire alarm inspections and noted that “suspiciously” one of the overdue inspections had not been included on the report. Plaintiff testified that he did not want to be blamed for the omission.

The employer argued that no public policy was jeopardized or implicated by the plaintiff’s termination as required by Ohio law. “Moreover, Plaintiff's statements did not indicate a concern for work place safety. The plain language of his comments only indicates his own suspicion that the missing inspection report is an attempt by Defendant to set him up for a deficient job performance.” However, the Court of Appeals rejected this argument: “[T]he employee's intent is largely irrelevant in an analysis of the clarity element of a wrongful discharge claim. What is relevant is whether [plaintiff] did in fact report information to the inspector that encompassed a public policy favoring workplace safety. If [plaintiff] did so, then the trial court erred in granting summary judgment.” Under state and federal law, “[t]here is a clear public policy favoring workplace fire safety. Therefore, retaliation against employees who raise concerns relating to workplace fire safety contravenes a clear public policy. . . . An employee who reports fire safety concerns to the employer's insurance inspector, regardless of the employee's intent in doing so, is protected from being fired solely for the sharing of the safety information.”

The Court of Appeals also rejected the employer’s argument that the plaintiff had failed to report his concerns to a government agency and chose, instead, an insurance agent. The Court determined that this argument “ignores the fact that an insurer's requirements may function to avoid fire safety defects. When such requirements are imposed, or higher premiums are the alternative, an employer . . . is motivated to cure safety defects. The market thus plays a role different from that of government, which may issue citations, but perhaps more immediate and compelling. And, making the insurer aware of defects through its representative furthers the public interest in effective fire safety measures.”

The Court of Appeals also rejected the argument that an “employee must make some formal announcement that his statements are being made for the purpose of protecting the public policy favoring workplace safety. Employers are presumed to be sophisticated enough to comply with the workplace safety laws. When an employer directs employees to not speak to an insurance representative inspecting a premises, an implication arises that the employer wishes to cover up defects, including those that create a danger to employees. Supporting the employer's conduct endorses its efforts to conceal potential dangers. As the Jermer court recognized, the Supreme Court views employee complaints as critical to the enforcement of the State's public policy. We would be minimizing the importance of these complaints and the State's public policy were we to concentrate on the employee's intent in raising the safety concern rather than on whether the employee's complaints related to the public policy and whether the employer fired the employee for raising the concern.”

During the February 2008 oral argument, the Supreme Court was told that there was no authority supporting the appellate court’s holding that whistleblowing claims can exist even when the whistleblower did not share his or her concerns with a government agency or with management. Some of the justices’ questions indicated that they were skeptical of drawing a bright line for whistleblowing claims which would limit them to government agents or management. Rather, a suggestion was made that public policy might be better served if whistleblower claims were recognized when the concerns were shared with anyone with power to remedy an unsafe situation. The employer’s attorney suggested that such a rule could lead to whistleblower claims being brought when employees merely reported their concerns to co-workers or to their spouses. Questions then focused on whether the insurance auditor could have improved an allegedly unsafe condition such that public policy would be served by recognizing a whistleblower claim when the concerns are shared with an insurance company. Apparently, the trial court record had not been sufficiently developed on that point.

Months after oral arguments, the Supreme Court extended jurisdiction over an additional issue: whether the clarity element had been satisfied in the public policy claim.

As readers of this blog know, the Sixth Circuit last week dismissed whistleblowing and wrongful discharge claims when the employee failed to report his concerns to the appropriate government agency after making internal reports. See:

Sixth Circuit: State and Federal Whistleblower Statutes Do Not Protect Internal Reporting by Employee Until He Investigates and Reports to Government

Today, the Sixth Circuit affirmed the dismissal of whistleblowing and public policy claims by the terminated officer of a financial institution who had provided information about misconduct to his supervisors that lead to his former boss being fired. Hill v. Mr. Money Finance Co., No. 07-3907. The Court found that the plaintiff’s activities were not protected by state or federal whistleblowing statutes or public policy because, among other things, he was fired before he reported the misconduct to government authorities.

According to the Court’s opinion, the plaintiff was hired as a Senior Vice President and was permitted by the company president to work three days each week in the office (since he lived approximately 90 miles away). At some point, he provided about 54 pages of evidence to a member of the Board of Directors about misconduct by the company’s president, including questionable credit card charges (for, among other things, flowers and lingerie), and two questionable loans. This information was forwarded to the CEO and ultimately to outside counsel, which arranged for the president to resign. None of this was reported to any federal or regulatory authorities. That same Board member was eventually hired as the new president and he terminated some of the “perks” of the plaintiff’s position, including his ability to work from home or receive a car allowance. When the plaintiff sought an increase in compensation to reflect the changes, the new president instead arranged for him to interview with other companies that would consider his compensation needs.

The plaintiff then attended a seminar where he learned about Suspicious Activity Reports (SARs) filed with the federal law enforcement and the Treasury Department concerning improper loans. He informed the new president that he believed that the former president’s misconduct was required to be documented in a SAR, but the new president failed to take any action on this information or learn about the SAR process. A few weeks later, the new president decided to eliminate the plaintiff’s SVP job as part of a reorganization. However, before the plaintiff was so informed of the reorganization, he sent a letter to the Board and the bank’s compliance officer about his concern that the bank was required to file a SAR concerning the former president’s misconduct. In particular, he believed it was illegal not to submit a SAR under the circumstances. The bank’s outside counsel refused to disclose whether a SAR had been filed, but responded “that [the plaintiff’s] approach to the situation created ‘disturbing problems’; that Mr. Money has no problem with filing an SAR because it has no reason to protect the resigned [former president]; and that if [the plaintiff] wanted to file an SAR, he should ‘go ahead.’” Apparently unaware that the plaintiff had already raised the issue with the current president, the attorney also expressed displeasure “at [the plaintiff] choosing to ignore ‘the chain of command,’ and suggested that [the plaintiff] ‘manufactured this issue for reasons that have nothing to do with’ filing a SAR.” Nonetheless, the attorney advised the compliance officer to “seek clarification from the Financial Crimes Enforcement Network (“FinCEN”), a division of the Treasury Department, whether an SAR needed to be filed.” The compliance officer sought clarification about one of the two improper loans and was told that it was not criminal misconduct which required a SAR.

Eleven days after informing the Board that he felt a SAR was necessary, the plaintiff was fired in the reorganization based on the needs of the business and his requested compensation. He then provided a letter he had mailed the day before detailing how he felt retaliated against for reporting the prior president’s misconduct when his working conditions had been changed by the current president. Two months later, the plaintiff filed suit and then filed a SAR.

The Court affirmed the dismissal of the plaintiff’s claim that his termination violated Ohio’s Whistleblower statute at Ohio Revised Code § 4113.52. The Court concluded that an employee is only protected “from retaliation ‘as long as he made a ‘reasonable and good faith effort to determine the accuracy’ of each informational element.’” The Court did not believe that the plaintiff satisfied this requirement of the Ohio statute despite evidence that he:

1) “gathered the concerns of multiple employees”; (2) assembled these concerns “into a written report,” which he presented to [the Board member]; (3) sought “additional information” on a credit card account when another employee brought her concerns to him, which entailed “obtaining online account information”; (4) reviewed “approximately 54 pages of MasterCard statements, which revealed the specifics of [the former president’s] activity”; (5) “pulled files to review loans” made to [an] (individual with the Ohio address, whose loan documents were delivered to New Jersey) and [a] singer; (6) “read the statutes relating to embezzlement and bank fraud.”

While the plaintiff “demonstrate[d] that he transmitted the concerns of multiple employees to [the Board member]. However, . . . serving as a “mere conduit” of information does not by itself amount to a reasonable and good faith effort” under the Ohio Whistleblower statute. “[I]t is clear that only those employees in the chain of command – only those “conduits” – who satisfy the requirement to make a reasonable and good faith effort to determine the accuracy of information they received and passed on are protected under the statute.”

The Court also rejected the plaintiff’s argument that he had submitted a written report to the Board member when he assembled the 54 pages of evidence of the misconduct, including his handwritten notes on some of the pages. Rather, the evidence “likewise fails to show that [the plaintiff] sought any information beyond that contained in the statements printed by another employee. He states that he did not know nor seek to ascertain whether the bank conducted an audit on the credit card or exactly how much money [the former president] paid back, if any.” The Court was also troubled by the amount of effort which the plaintiff put into determining whether the misconduct was criminal – or even felonious. “Merely stating in a sworn affidavit that he ‘believed that these serious crimes were felonies’ may conceivably satisfy the requirement that the employee reasonably believed a felony occurred, but it does not satisfy the requirement to make a reasonable and good faith effort to determine the accuracy of that belief. Even if it is not inconceivable that a jury would find reasonable and good faith effort with regard to the first informational component (occurrence of misconduct), it is far less conceivable with regard to the second informational component (criminality of misconduct), and wholly inconceivable with regard to the third informational component (felonious nature of misconduct). Therefore, we affirm the district court’s decision as to [the plaintiff’s] claim under the Ohio Whistleblower Statute, on the grounds that [the plaintiff] did not proffer sufficient evidence to create a genuine issue of material fact as to his reasonable and good faith effort to determine the accuracy of the information he reported.”

The Court also affirmed the dismissal of the federal whistleblowing claims because the plaintiff failed to “establish that his conduct qualifies for whistleblower protection under Federal Whistleblower Statutes [at 31 U.S.C. §5328 and 12 U.S.C. §1831j] , because [he] did not file protected information with the federal agencies specified in the statutes until after Defendants terminated his employment, and his ‘internal whistle-blowing’ to . . . the Board members does not satisfy statutory requirements.” As explained by the district court, “The language of sections 1831j and 5328(a) is clear and unambiguous. If the plaintiff did not report the relevant information, himself or through a conduit, to a federal banking agency, the Attorney General, the Secretary of the Treasury, or any federal supervisory agency, before being discharged or otherwise discriminated against . . . then the plaintiff is not protected by these whistle-blower protection laws.” More pointedly, “[a]lthough [the plaintiff] “had threatened to file an SAR on more than one occasion, and even announced his intent to do so, [he] did not actually file an SAR until after Defendants fired him.” Statutory language is clear that retaliation must follow the provision of information to a specified federal authority.”

The Court likewise affirmed the dismissal of the public policy claim. As explained by the district court: Because the plaintiff “did not report criminal activity within the corporations to anyone outside of the companies with any authority or oversight over the Defendants’ industries until after he was terminated,” [the plaintiff’s] actions “do not fulfill the goals of these statutes or of the public policy behind these statutes.” According to the Court, “[t]he obvious implication of [Ohio decisions] is that an employee who fails to strictly comply with the requirements of [the shistleblower statute] cannot base a [public policy] claim solely upon the public policy embodied in that statute.”

“[T]here is no genuine material issue as to whether [the plaintiff] reported anything outside the company – and as we agreed above, he did not. [The plaintiff’s] conduct did not fulfill the goals of the identified public policies, not solely because [he] did not comply with statutory requirements, but also because [he] failed to report, as required by the clear public policies he identified. Holding that a public policy in favor of reporting crimes requires that a possible crime actually be reported is not at odds with lower court decisions [he] cites in support of his claim.”

For some reason, the Court found distinguishable other public policy claims which protected internal whistleblowers simply because they involved different public policies. Rather “all of [those] cases deal with the policy favoring workplace safety. “

The Court likewise faulted the plaintiff for failing to identify any other specific public policy which prohibited retaliation against employees engaged in his behavior. The Plaintiff “does not match the “source” to the clear policy: we are left guessing as to which of these numerous statutes manifests a clear public policy against the “dismissal of bank employees in retaliation for reporting unlawful conduct by the officers of financial institutions,” let alone what specific statutory language expresses said policy clearly. Even if such a policy were clearly manifest, this claim fails for the same reasons as above – there was no “reporting” of violations to external authorities. Since [the plaintiff] did not establish the clarity element of the tort, whether he has established the jeopardy element is moot.”

Even if the Court did not think much of the plaintiff’s retaliation claims, it dismissed the Defendants’ request for sanctions for pursuing a frivolous claim.

Insomniacs can read the full option at http://www.ca6.uscourts.gov/opinions.pdf/09a0099n-06.pdf.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Sixth Circuit: Union’s Waiver of 30-Year Retired Employee’s Benefits Without Notice or Consent Protected Assets of Bankrupt Employer.

Today, the Sixth Circuit issued a decision in which it held that the statutory and severance claims of a 30-year retired employee of bankrupt LTV Steel had been waived by the employee’s former union even though he received no notice of the waiver, never consented to it, and had been explicitly excluded from receiving compensation under the waiver agreement. McMillan v. LTV Steel, Inc., No. 07-4370. Although federal law is pretty clear that unions no longer represent retired employees in negotiations, the employee was deemed to have waived that compelling legal argument when he failed to raise it in support of his claims before the bankruptcy or district courts. The Sixth Circuit also refused to disturb the district court’s conclusion that the employee’s actual claim for pension and 401(k) benefits was with the Pension Benefit Guaranty Corporation (PBGC) since it had assumed control of the employer’s retirement benefits when it filed for bankruptcy.

According to the court’s opinion, the plaintiff retiree worked for 30 years in a UWSA unit for LTV Steel. The UWSA and LTV had negotiated both a defined contribution plan (i.e., a 401(k) plan to which both the employee and employer contributed) and a defined benefit plan (i.e., pension). In 1999, the UWSA and LTV reorganized the retirement benefits to eliminate future pension contributions (and limit future payouts to a $10,000 lump sum), and to transfer employer contributions from the 401(k) plan to the pension plan. About a year later, LTV filed for bankruptcy protection, issued a WARN notice a few months later and eventually permanently closed the retiree’s plant. The plaintiff retiree worked at reduced pay at other LTV plants, but remained out of work beginning in August 2001. Under a USWA negotiated agreement, he had the option to transfer (without seniority) to another plant, to remain on layoff status, to accept retirement or to take severance. The plaintiff elected to retire in December 2001 and take his $10,000 pension lump sum. While the opinion is ambiguous on this point, this amount was apparently never paid.

In the meantime, LTV eventually sold all of its assets in December 2001, but the sale proceeds were only sufficient to pay secured creditors and not to pay administrative claims or unsecured creditors, such as the plaintiff and other retirees. Accordingly, PBGC assumed LTV’s pension obligations. The UWSA then renegotiated the CBA with LTV and eliminated, among other things, the previously promised severance pay. Nonetheless, six months later, the USWA filed an administrative claim with the bankruptcy court for LTV’s failure to pay severance pay, WARN Act liability, retiree benefits, etc. The UWSA settled its claim with LTV in December 2003 for $15M, but the settlement expressly did not benefit retirees such as the plaintiff who worked at his original plant or were laid off prior to November 2001. In the 2003 settlement, UWSA waived any and all other claims it could make arising out of any bargaining agreement. The plaintiff received no notice of the USWA administrative claim and did not receive notice of, or consent to, the 2003 settlement.

Nonetheless, the plaintiff filed his own administrative claim against LTV in 2002 for over $300,000 (for unpaid wages, pension benefits and 401(k) payment) and it was denied by the bankruptcy court. The plaintiff eventually reached an unsecured settlement with Copperweld -- one of LTV’s subsidiaries -- for the full amount, but retained his right to pursue his claim against LTV. In 2004, he filed another administrative claim for over $40,000 for his unpaid 401(k) contributions, severance pay and other benefits.

The bankruptcy court found that the 401(k) contributions were transferred to the pension fund in 1999 and were now being administered by PBGC and not LTV. The Sixth Circuit agreed that the plaintiff should be limited to asserting a claim against the PBGC. In addition, the bankruptcy court found that collateral estoppel from the Copperweld settlement estopped the plaintiff from pursuing the same amount from LTV, despite his reservation of rights to pursue claims against LTV. The Sixth Circuit found that the plaintiff’s claims were not entitled to administrative priority status because the liability arose before LTV filed for bankruptcy and did not relate to retiree healthcare benefits.

Finally, his claim for severance benefits and WARN Act payments were deemed waived by the USWA in 2003 even though he received no proceeds from that $15M settlement, received no notice of the claim or settlement, and never consented to the settlement. Indeed, the law is clear that unions cannot negotiate on behalf of retirees because they are no longer union members. However, even though the bankruptcy court erroneously concluded that the USWA was acting as his agent, the plaintiff never raised the issue of agency to the bankruptcy or district courts, but rather, focused on his lack of notice and consent to the settlement. Therefore, the Sixth Circuit determined that he could not belatedly raise the agency argument even if the lower courts had erred. Moreover, if the UWSA had been his agent, it had authority to waive his WARN Act and severance pay claims on his behalf – even without notice or consent. Therefore, those claims were also dismissed.

Insomniacs can read the full court decision at http://www.ca6.uscourts.gov/opinions.pdf/09a0040p-06.pdf.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

USCIS Again Delays Mandatory E-Verify Implementation For Federal Contractors Until May 21, 2009

As summarized here on December 9, 2008 and January 12, 2009, the federal government published its final regulation in November which will require many federal contractors and subcontractors to begin using the e-verify program to confirm the employment eligibility of many existing and newly-hired employees as federal service and construction contracts and solicitations are issued or amended. However, although the initial implementation date was scheduled to be January 15, 2009 and was pushed back to February 20, 2009, it has once against been postponed until May 21, 2009. In other words, federal agencies have been directed to postpone the insertion of a new clause into procurement contracts and solicitations requiring contractors and subcontractors to enroll and utilize the e-verify program. This regulation implements Executive Order 12989 which was amended in June 2008.

The USCIC website now provides, among other things, that “This new rule requires federal contractors to agree, through language inserted into their federal contracts, to use E-Verify to confirm the employment eligibility of all persons hired during a contract term, and to confirm the employment eligibility of federal contractors’ current employees who perform contract services for the federal government within the United States. Federal contracts awarded and solicitations issued after May 21, 2009 will include a clause committing government contractors to use E-Verify. The same clause will also be required in subcontracts over $3,000 for services or construction. Contracts exempt from this rule include those that are for less than $100,000 and those that are for commercially available off-the-shelf items. Companies awarded a contract with the federal government will be required to enroll in E-Verify within 30 days of the contract award date. They will also need to begin using the E-Verify system to confirm that all of their new hires and their employees directly working on federal contracts are authorized to legally work in the United States.”

Additional details about the e-verify requirements and exemptions are included in the December 9 posting [Many Federal Contractors and Subcontractors Required to Use E-verify Program After January 15, 2009].

Contractors remain free to utilize the e-verify system and USCIS points out that more than 100,000 employers have registered for the program. In response to the Chamber’s protests about e-verify, USCIS contends that e-verify is not mandatory because employers are not mandated to become federal contractors.

Insomniacs can read the UCSIS announcement at http://www.uscis.gov/portal/site/uscis/menuitem.eb1d4c2a3e5b9ac89243c6a7543f6d1a/?vgnextoid=534bbd181e09d110VgnVCM1000004718190aRCRD&vgnextchannel=534bbd181e09d110VgnVCM1000004718190aRCRD.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

New I-9 Form Delayed Until April 3, 2009

No one would ever accuse the federal government of being efficient. As reported here on January 26, 2009, USCIS announced in December 2008 that a new I-9 form would become mandatory for all employers on February 2, 2009. However, this new I-9 form was not placed on the USCIS website until the end of January 2009 – days after the Obama inauguration and only days before the mandatory deadline. Then, on Friday, January 30, 2009 -- only a week later and only one business day before the new form became mandatory -- the Obama administration has announced that EMPLOYERS MUST NOT USE THE NEW FORM UNTIL April 3, 2009. Indeed, the new administration has re-opened the review and public comment period until March 3, 2009.

Insomniacs can read the full USCIS press release at http://www.uscis.gov/portal/site/uscis/menuitem.5af9bb95919f35e66f614176543f6d1a/?vgnextoid=52b16d962492f110VgnVCM1000004718190aRCRD&vgnextchannel=68439c7755cb9010VgnVCM10000045f3d6a1RCRD.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.