IRS Increases Mileage Rates to $.585/mile Effective July 1, 2008

On Monday, the Internal Revenue Service “announced an increase in the optional standard mileage rates for the final six months of 2008. Taxpayers may use the optional standard rates to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes. The rate will increase to 58.5 cents a mile for all business miles driven from July 1, 2008, through Dec. 31, 2008. This is an increase of eight (8) cents from the 50.5 cent rate in effect for the first six months of 2008, as set forth in Rev. Proc. 2007-70. . . . The new six-month rate for computing deductible medical or moving expenses will also increase by eight (8) cents to 27 cents a mile, up from 19 cents for the first six months of 2008. The rate for providing services for charitable organizations is set by statute, not the IRS, and remains at 14 cents a mile. . . . The new rates are contained in Announcement 2008-63 on the optional standard mileage rates. Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

Insomniacs can read the full IRS press release at http://www.irs.gov/newsroom/article/0,,id=184163,00.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. 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.

Supreme Court: Employer Bears Burden of Proving Disparate Impact of Facially Neutral Factors Was Based on a Reasonable Factor Other Than Age

On June 19, 2008, the Supreme Court held that the employer bears the both the burden of production and the burden of persuasion in raising as an affirmative defense to an ADEA disparate impact claim that its decision was based on a reasonable factor other than age (RFOA). Meacham v. Knolls Atomic Power Lab., No. 06-1505. In Meacham, the employer conducted a reduction in force (after more than 100 employees accepted voluntary buyouts) in which 30 of the 31 involuntarily reduced positions were held by an employee over the age of 40. Managers had been instructed to evaluate their staffs by four factors: years of service, "performance," "flexibility," and "critical skills." Twenty-eight of the involuntarily reduced employees sued, raising both disparate-treatment (i.e., intent) and disparate-impact (i.e., result) claims under the ADEA and state law, alleging that the defendant employer "designed and implemented its workforce reduction process to eliminate older employees and that, regardless of intent, the process had a discriminatory impact on ADEA-protected employees." In the ensuring class action, the plaintiffs’ expert opined “that results so skewed according to age could rarely occur by chance;4 and that the scores for "flexibility" and "criticality," over which managers had the most discretionary judgment, had the firmest statistical ties to the outcomes.”

In construing the ADEA statute, the Court recognized that the RFOA defense was listed along another affirmative defense for bona fide occupational qualification. The employer has always held the burden of proof and persuasion for the BFOQ defense. Similarly, under the FLSA and EPA, the employer has born the burden of proof and persuasion on the “reasonable factor other than sex” affirmative defense. While it might seem reasonable to assume a different interpretation of the burden in a disparate treatment case – since age is a factor in the prima facie case – and the RFOA defense seems superfluous, in the disparate treatment case (where age discrimination exists in fact when the unlawful treatment is not based on age), the RFOA defense is particularly applicable:

“[I]n the typical disparate-impact case, the employer's practice is "without respect to age" and its adverse impact (though "because of age") is "attributable to a nonage factor"; so action based on a "factor other than age" is the very premise for disparate-impact liability in the first place, not a negation of it or a defense to it. The RFOA defense in a disparate-impact case, then, is not focused on the asserted fact that a non-age factor was at work; we assume it was. The focus of the defense is that the factor relied upon was a "reasonable" one for the employer to be using. Reasonableness is a justification categorically distinct from the factual condition "because of age" and not necessarily correlated with it in any particular way: a reasonable factor may lean more heavily on older workers, as against younger ones, and an unreasonable factor might do just the opposite.”

“Here is what is so strange: as the Government says, "[i]f disparate-impact plaintiffs have already established that a challenged practice is a pretext for intentional age discrimination, it makes little sense then to ask whether the discriminatory practice is based on reasonable factors other than age." Brief for United States as Amicus Curiae 26 (emphasis in original). Conversely, proving the reasonableness defense would eliminate much of the point a plaintiff would have had for showing alternatives in the first place: why make the effort to show alternative practices with a less discriminatory effect (and besides, how would that prove pretext?), when everyone knows that the choice of a practice relying on a "reasonable" non-age factor is good enough to avoid liability?14 At the very least, developing the reasonableness defense would be substantially redundant with the direct contest over the force of the business justification, especially when both enquiries deal with the same, narrowly specified practice. It is not very fair to take the remark about Wards Cove in City of Jackson as requiring such a wasteful and confusing structure of proof.”

Regardless of the strangeness of the result, the Court reiterated that the plaintiff still bears the burden of producing enough evidence to show that age discrimination has resulted from a specific employment practice which is responsible for statistical disparities against older workers. In the final analysis, the Court acknowledges that “there is no denying that putting employers to the work of persuading factfinders that their choices are reasonable makes it harder and costlier to defend than if employers merely bore the burden of production; nor do we doubt that this will sometimes affect the way employers do business with their employees.” Moreover, “as the outcome for the employer in City of Jackson shows, "it is not surprising that certain employment criteria that are routinely used may be reasonable despite their adverse impact on older workers as a group."

Insomniacs can read the full decision at http://www.supremecourtus.gov/opinions/07pdf/06-1505.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.

Supreme Court Upholds Less Deferential Standard of ERISA Review Against TPA Insurance Company.

On June 19, 2008, the Supreme Court affirmed the Sixth Circuit Court of Appeals in Metropolitan Life Ins. Co. v. Glenn, No.. 06-923. In that case, Sears purchased long-term disability insurance from MetLife and appointed MetLife as the Third Party Administrator of the LTD claims of Sears’ employees. Sears’ LTD Plan also gave MetLife discretionary authority to determine employees’ eligibility for benefits. When the plaintiff applied for LTD, MetLife initially granted her application for 24 months of benefits. However, after encouraging her to apply for SSI benefits (which she obtained), it then determined that she was ineligible for extended benefits in that one of the medial reports submitted indicated that she was capable of performing sedentary work.

The Supreme Court had previously noted in Firestone Tire & Rubber Co. v. Bruch, 489 U. S. 101, the proper judicial standard of review for ERISA benefit claims under §1132(a)(1)(B). First, courts should be "guided by principles of trust law," analogizing a plan administrator to a trustee and considering a benefit determination a fiduciary act. Next, the principles of trust law require that de novo review be utilized unless the terms of a benefits plan provide otherwise. Finally, if the terms of the benefit plan grant the administrator or fiduciary discretionary to determine the participant’s eligibility for benefits, the court should utilize a deferential standard of review as appropriate. However, if the administrator or fiduciary with such discretion "is operating under a conflict of interest, that conflict must be weighed as a 'facto[r] in determining whether there is an abuse of discretion.’”

In Glenn, the Court determined that this analysis from Firestone applied equally to an insurance company acting as both the insurer and the TPA and not just an employer who acts as both the fiduciary evaluating the claims and the employer which funds the benefits. That "[e]very dollar provided in benefits is a dollar spent by ... the employer; and every dollar saved ... is a dollar in [the employer's] pocket" is equally applicable to this situation. Nonetheless, the Court reiterated that the TPA was still entitled to a deferential standard of review pursuant to the terms of the LTD plan, but that – in light of the conflict of interest inherent in an insurance company deciding for itself whether to award benefits out of its own accounts -- the reviewing court was permitted to consider a number of factors, including ”(1) the conflict of interest; (2) MetLife's failure to reconcile its own conclusion that Glenn could work in other jobs with the Social Security Administration's conclusion that she could not; (3) MetLife's focus upon one treating physician report suggesting that Glenn could work in other jobs at the expense of other, more detailed treating physician reports indicating that she could not; (4) MetLife's failure to provide all of the treating physician reports to its own hired experts; and (5) MetLife's failure to take account of evidence indicating that stress aggravated Glenn's condition.”

Insomniacs can read the full decision at http://www.supremecourtus.gov/opinions/07pdf/06-923.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.

Ohio Appeals Court: Employee’s Speculation Does Not Convert a Lateral Transfer Into a Constructive Discharge.

Late last month, Montgomery County Court of Appeals affirmed the dismissal of wrongful, constructive discharge claim against an employer which arose out of the plaintiff’s transfer to a similar job at a location 15 miles from his former job. Lookabaugh v. Spears, 2008-Ohio-1610. The court also dismissed defamation claims against the employer’s customer whose complaints about the plaintiff motivated his transfer because the customer had a qualified privilege to complain. Although the plaintiff speculated that the new job would not be reliable and prevented him from regularly checking on his ill wife during lunch, the court noted that a "[p]art of an employee's obligation to be reasonable is an obligation not to assume the worst, and not to jump to conclusions." Farris v. Port Clinton Sch. Dist., 2006-Ohio-1864, ¶64. Moreover, a lateral ‘transfer without a change in benefits, salary, title, or work hours is usually not an adverse employment action. Policastro v. Northwest Airlines, Inc.,” 297 F.3d 535, 539 (6th Cir 2002).

The plaintiff accepted the job in part in order to obtain health insurance because his wife had been ill. Although the job regularly required him to travel, he could often check on his wife during his lunch break. After a customer (who had long-standing conflicts with the plaintiff) complained and threatened to move his business if the plaintiff continued to work there, the employer transferred the plaintiff to the same job 15 miles away. The plaintiff rejected the transfer. After filing suit, the plaintiff claimed that the transfer was an adverse job action which forced him to resign because (1) there had not been a job previously available at the new location (i.e., it was a “ghost job” which had been created for him as a pretext), (2) the offered job was not comparable, and (3) his was no longer the decision-maker regarding his employment.

As noted by the court, an adverse employment action generally “occurs when it results in a material change in wage or salary, a less distinguished title, a material loss in benefits, significantly diminished material responsibilities, or other indices that might be unique to the particular situation. Hollins v. Atlantic Co., 188 F.3d 652, 662 (6th Cir. 1999). A significant increase in the employee's commute may be a factor in whether a transfer is an adverse employment action. Keeton, 429 F.3d at 264-65 . . . . In determining whether the transfer is an adverse employment action, courts generally employ an objective test. See Mauzy, 75 Ohio St.3d at 588-89; Policastro, 297 F.3d at 539, citing Kocsis v. Multi-Care Mgmt., Inc., 97 F.3d 876, 886 (6th Cir. 1996). An employee's subjective belief that one position is more desirable is irrelevant to whether the transfer is an adverse employment action. E.g., Policastro, 297 F.3d at 539; Tessmer v. Nationwide Life Ins. Co.,” Franklin App. No. 98AP-1278 (9/30/99).
The court rejected the plaintiff’s argument that the transferred job was not comparable. Although the plaintiff complained about the employee turnover rate at the new location, the seasonal downturns in working hours, and the new manager’s temper, the plaintiff “assumed that he would be fired from” the new location. The plaintiff “cannot base a constructive discharge claim based on an unsubstantiated assumption that his worst fears would come true. ‘Part of an employee's obligation to be reasonable is an obligation not to assume the worst, and not to jump to conclusions.’" Farris v. Port Clinton Sch. Dist., 2006-Ohio-1864, ¶64.

The fact that the plaintiff” would no longer be able to visit his wife during lunchtime does not render the position at [the new location] incomparable to the [former] position. Although [the plaintiff] benefitted from living close to the [former] facility by being able to check on his wife at lunchtime, that benefit was a subjective reason for [the plaintiff] preferring the [former] position. However, being able to go home at lunchtime was not a benefit of employment offered by Landmark to its employees. [The plaintiff] was not promised that he could go home at lunchtime, and he indicated that he did not go home every day because he was not always in the area during lunchtime. His position with Landmark . . . . . required him to travel to customers' properties throughout the day. Although [the plaintiff] would have preferred to work at the facility within a mile of his home, the addition of a ten to fifteen mile commute did not constitute a material change in the terms of his employment.”

Because there was no evidence that the plaintiff had been constructively discharged, he also could not prevail on his claim that his "discharge" had violated public policy.

Insomniacs can read the full decision at http://www.sconet.state.oh.us/rod/docs/pdf/2/2008/2008-ohio-1610.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.

Ohio Appeals Court: Controller’s Objection to Corporate Misfeasance and Breach of Fiduciary Duty Cannot Support Wrongful Discharge Claim.

Late last month, the Holmes County Court of Appeals reversed a jury verdict in favor of a discharged controller on the grounds that the trial court should have entered summary judgment in favor of the defendant employer on the claim of wrongful discharge in violation of public policy. Schwenke v. Wayne-Dalton Corp., 2008-Ohio-1412 (3/27/08). In that case, the plaintiff controller alleged that he had been terminated for complaining about corporate officer misfeasance and misappropriation. However, the court determined that the plaintiff had failed to identify a specific source of public policy which was violated by the alleged corporate misfeasance and misappropriation. The defendants had claimed that the plaintiff had been fired because of “his inability to work with his direct supervisor and with senior management, his negative and arrogant attitude and "the on-going degenerative nature of [his] work performance.” Accordingly, the judgment of $72,000 and $148,000 in attorneys fee was reversed.

The plaintiff had alleged that the CFO and president of the privately-held corporation had engaged in misappropriation and malfeasance in engaging in the following actions for over three years:
* The “corporate office would `issue' credits for expenses incurred in Europe (France was facility location). The driver of the amount of the credit would be based on the financial deficit reflected on Europe's financials that the executives were looking to conceal. Credits would be issued against the Mt. Hope manufacturing facility and possibly other facilities;”
* The American “facilities would as a matter of business sell products to [the company]. As such the US had an ongoing receivable for which Europe would have to issue payments to the US. These `credits' would be used to offset legitimate receivables. The credit would reduce [corporate] expenses, and the offset to A/R would allow for no exchange of cash for this specific issue, [r]esulting in overstated [corporate] Europe profits; [r]esulting in fictitious [corporate] cash flow; [r]esulting a stronger appearing [corporate] Europe balance sheet; [f]avorable credit terms from vendors for the [corporate] entity; and [r]esulting in overstated costs in the USA and if the Credit was treated as a return, an understatement of revenues (same P & L effect but in different areas of the income state).”
* “[C]orporate accounting personnel, under the direction of the executives, would write-up manual journal entries to decrease costs in Europe and increase costs in the US. On occasion there would be no credits issued, just a transfer of costs on paper that would inflate US costs while masking costs and losses in Europe.”
* The defendant corporate officers “misused company assets for personal gain. Specifically, [one] defendant . . . received massive personal loans (to fund personal assets such as homes) from [the corporation] at interest rates significantly below the Fair Market Value (i.e. 2.5%) while earning large interest rates on their deferred compensation (i.e. 13%-17%). This occurred over a 3 1/2 year period between January 2001 and July 2004. The inappropriate moving of costs across [corporate] facilities allowed for inaccurate bonus accruals, rewards, and deferred compensation accruals for [the individual corporate officer defendants]. Numerous employee (management, supervisory and non-supervisory) bonus awards (and sometimes departments) were subjectively lowered, with no basis, to decrease lower ranking employees' annual bonus payouts allowing for inflated executive . . . . bonus and deferred compensation awards;”
* The corporate individual defendants “were engaged in inappropriate accounting procedures and misappropriation of corporate assets. Specifically, defendants implemented the `3-B Plan', which allowed major shareholder . . . . to receive undisclosed commissions in the amount of millions of dollars by selling products in Europe below costs (i.e. `dumping').”

The plaintiff controller denied that his claims were governed by Ohio’s Whistleblower statute, and thus, he had not been required to prove that he had put his concerns in writing to his supervisors or complained to a government agency. Rather, he claimed that his protests were protected as a matter of public policy and that his retaliatory discharge violated public policy.

In order to prevail on such a claim, a plaintiff must demonstrate: "1. That clear public policy existed and was manifested in a state or federal constitution, statute or administrative regulation, or in the common law (the clarity element); 2. That dismissing employees under circumstances like those involved in the plaintiff's dismissal would jeopardize the public policy (the jeopardy element); 3. The plaintiff's dismissal was motivated by conduct related to the public policy (the causation element); and 4. The employer lacked overriding legitimate business justification for the dismissal (the overriding justification element)."

The court determined that, notwithstanding the detailed allegations, the plaintiff controller could not prevail because he had failed to satisfy the clarity element by identifying a public policy existed. “Nor did [the controller] cite or present the trial court with any legal authority in support of his argument that his termination violated public policy. [The controller] merely alleged that he questioned [the individual corporate officer defendants] about alleged inappropriate accounting practices and misappropriations of corporate assets and was fired and that his firing violated public policy. [The controller], . . . merely alleged that his firing violated public policy. In short, . . . [the controller] never offered any legal authority suggesting that [appellant's] conduct and alleged reaction from or by his employer forms a basis for a "public policy' exception to Ohio's at will relationship."

While the concurring judge was willing to consider that fiduciary duties may have been violated, the judge was unwilling to believe that breach of fiduciary duty constitutes a source of public policy sufficient to override the employment at will doctrine.

Insomniacs can read the full decision at http://www.sconet.state.oh.us/rod/docs/pdf/5/2008/2008-ohio-1412.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.