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May 2008 Newsletter In this issue:
STATE IMMIGRATION REFORM According to a National Conference of State Legislatures report released on April 24, 2008, during the first quarter of 2008, state lawmakers have filed 179 immigration bills addressing employment in 31 states. As of March 31st, more than 1,100 immigration-related bills have been introduced in 44 states. Twenty-six states have enacted 44 laws and adopted 38 resolutions or memorials related to immigration. The following is an update of state laws that have been passed recently to deal with the ongoing issue of illegal immigration and its impact on employers and U.S. workers. States that prohibit employers from knowingly hiring illegal immigrants: Oklahoma: Oklahoma makes it a discriminatory practice for any employer to discharge an employee who is either a U.S. citizen or permanent resident alien while retaining an employee who the employer knows, or reasonably should have known, is an unauthorized alien and who is working in a job category that requires equal skill, effort, and responsibility, and which is performed under similar working conditions as the job category held by the discharged employee. Tennessee: Tennessee law prohibits employers from knowingly employing, recruiting, or referring for hire an illegal immigrant. However, an employer will not be found to have violated the law if, within 14 days after commencement of employment, the employer follows the employment eligibility verification requirements under the Immigration Reform and Control Act of 1986 (IRCA) or uses the federal electronic verification service provided by the Department of Homeland Security (E-verify, formerly Basic Pilot Program). For the first violation, an employer’s business license will be suspended until the employer can show that it is no longer employing illegal immigrants. For second and subsequent violations that occur within 3 years from the first violation, an employer’s business license will be suspended for 1 year. Other states that prohibit employers from knowingly hiring illegal immigrants include Arizona, where violations results in suspension and/or revocation of business licenses, Colorado, Pennsylvania, West Virginia, where violations subject employers to suspension and/or revocation of business licenses, fines, and jail time, and New Jersey. States that prohibit state agencies from contracting with contractors or subcontractors who employ illegal immigrants: Arkansas: Arkansas requires all bidders for state contracts to certify that they do not employ or contract with any illegal immigrants. The certification is required on contract bids for professional services, technical, and general services, or any construction contract of $25,000 or more to certify that the contractor does not employ or contract with illegal immigrants. A contractor found to have violated the certification requirement must remedy the violation within 60 days; otherwise, the state agency must terminate the contract for breach of contract, and the contractor is liable for actual damages. In the event the contractor uses a subcontractor at the time of certification, the subcontractor must also certify within 30 days that he/she does not employ or contract with illegal immigrants. If the contractor learns that a subcontractor is in violation of the certification requirement, the contractor may terminate the contract with the subcontractor, which will not be deemed a breach of the contract by the contractor and subcontractor. Missouri: If a Missouri state agency determines upon reasonable evidence that a contractor or its subcontractors employed illegal immigrants to perform under a state contract, the state agency must order the contractor to discharge the illegal immigrants. If upon reasonable evidence the state agency determines that a contractor or subcontractor has knowingly violated IRCA in employing illegal aliens, the agency may withhold up to 20% of the total amount of the contract or subcontract. Tennessee: Tennessee prohibits state agencies from contracting to acquire goods or services from any person who knowingly utilizes the services of illegal immigrants. No person may enter into such contracts with Tennessee state agencies without first attesting in writing that he/she will not knowingly utilize the services of illegal immigrants, or knowingly utilize the services of any subcontractor who will utilize the services of illegal immigrants, in the performance of the contract. Any person found to have knowingly utilized the services of illegal immigrants to a state agency is prohibited from contracting or submitting a bid for any contract to a state agency for a period of 1 year from the date of discovery of the usage of illegal immigrant services. Other states that prohibit state agencies from contracting with contractors or subcontractors that employ illegal immigrants include Arizona, Colorado, Pennsylvania, New Jersey, and West Virginia. States that require employers to use a work status verification system: Oklahoma: Oklahoma public employers must register with and utilize a work status verification system (e.g., E-Verify or any equivalent federal or independent verification program). Additionally, public employers are prohibited from entering into a contract for the physical performance of services within the state unless the contractor or subcontractor registers and participates in a work status verification system to verify information of all new employees. Oklahoma also requires independent contractors to provide to the contracting entity with documentation to verify the independent contractor’s employment authorization. If an independent contractor fails to provide such documentation, the contracting entity is required to withhold state income tax at the top marginal income tax rate. Contracting entities that fail to comply with the withholding requirements will be liable for the taxes required to have been withheld unless they are exempt from federal withholding of the contractor pursuant to a properly filed IRS Form 8233 or its equivalent. Other states that require employers to use a work status verification system include Arizona, Georgia, Minnesota, and North Carolina. Should you have any questions or want additional information regarding the state laws referenced above, please contact Donna Galchus, Missy Duke or Jimmy C. Cline in our Little Rock office. DHS PUBLISHED ITS SUPPLEMENTAL PROPOSED RULE ON NO-MATCH LETTER On March 21, 2008, the Department of Homeland Security (DHS) published its supplemental proposed rule to its August, 2007 “no-match” rule to better outline steps an employer may take in response to receiving a letter from the Social Security Administration (SSA) indicating that an employee’s name does not match the social security number on file. The supplemental rule was in response to a California federal court’s injunction preventing DHS from implementing the rule that DHS appealed. DHS also promised to issue revised regulations to address the court’s concerns. The supplemental rule does not alter any of the steps or time frames, called “safe-harbor” procedures provided in the August, 2007 rule, that employers can take in response to receiving a no-match letter. Rather, the supplemental rule provides the following additional guidance to the August rule: · Defines “prompt” notification that employers must provide to workers listed in a no-match letter as being immediately upon receipt of the no-match letter or within 5 business days of the employer completing the internal review; · The rule does not apply to workers hired before November 6, 1986; and · The rule does not require employers to make or retain any new documentation or records should employers choose to follow the “safe-harbor” steps laid out in the rule. The supplemental proposed rule is subject to a 30-day public notice and comment period, and comments were due by April 25, 2008. RECENT AMENDMENTS TO THE FAMILY MEDICAL LEAVE ACT ARE IN EFFECT The new amendments to the Family Medical Leave Act (FMLA) were signed into law by President Bush on January 28, 2008. Included in these amendments is the first ever expansion to the FMLA since it was enacted fifteen years ago. The language expanding the FMLA is contained in Section 585 of a broader Defense Department authorization measure. These amendments expand the FMLA in three important ways that will affect employers’ current policies. First, the bill adds two categories of covered conditions permitting an eligible employee to take FMLA leave: (1) an eligible employee may now take FMLA leave due to a “qualifying exigency” related to active military duty; and (2) an eligible employee may now take FMLA leave to care for a family member with a “serious illness or injury” incurred in the line of duty. The Department of Labor is currently in the process of defining a “qualifying exigency” that will be covered by the new amendments. Many believe these exigencies will include overseas assignments, recalls to active duty, and troop mobilizations. The exigency leave will be subject to the normal twelve (12) workweek limitation on FMLA leave in a twelve (12) month period. Second, the bill allows an eligible employee to take up to twenty-six (26) weeks of FMLA leave on one occasion to care for an injured service member. This twenty-six week leave is combined with any other FMLA leave the employee takes and the combined total of leave cannot exceed twenty-six weeks. Third, the bill adds “next of kin” to the family members allowed to take FMLA leave to care for an injured service member. “Next of kin” is defined as the nearest blood relative of the service member. EEOC ELIMINATES CASE DISMISSAL GROUNDS In February 2008, the Equal Employment Opportunity Commission (EEOC) removed three grounds for dismissal of employment discrimination claims that existed under the federal regulations. A claim can no longer be dismissed for the following reasons: 1) failure of the charging party to participate; 2) inability to locate the charging party; or 3) the charging party’s refusal to accept an offer of full relief for harm alleged in the charge. According to the EEOC, the dismissal options existed for case management purposes only. As a case management tool, these grounds for removal became outdated with the passage of the Priority Charge Handling Procedures (PCHP) in 1995. After the passage of PCHP, the EEOC could issue final determinations when further investigation was not likely to lead to evidence establishing a violation of the employment discrimination statutes. Therefore, the EEOC’s case management goals were achieved without the additional dismissal grounds. Confusion existed in the courts because of differing interpretations of the dismissal regulation. Prior to the deletion, courts disagreed as to whether dismissal for one of the deleted grounds constituted exhaustion, which would entitle the charging party to de novo review by the federal court. This deletion clarifies that the charging party is entitled to de novo review in federal court. The impact of this EEOC regulation change is that dismissal now can only occur when the EEOC makes the following determinations: 1) no reasonable cause exists to support the claim; 2) the charge is not timely filed; or 3) failure to state a claim upon which relief can be granted. WELLNESS PROGRAMS FOR EMPLOYERS The 1996 Health Insurance Portability and Accountability Act (HIPAA) legislation amended ERISA, the Internal Revenue Code and the Public Health Service Act to add nondiscrimination rules that prohibit health plans from basing the entitlement to benefits on the health factor of an individual. The legislation directed the Department of Labor (DOL), the Internal Revenue Service, and the Department of Health and Human Services to draft nondiscrimination regulations and to include an exception for wellness programs, which would allow these plans to offer incentives on health factors. These three agencies implemented general rules that a group health plan may not establish any rule for eligibility of any individual to enroll for benefits that discriminates based on any health factor that relates to the individual or individual’s dependent. The exception to this general rule provides that a group health plan may establish a premium or contribution differential based on whether an individual has complied with the requirements of a wellness program. The DOL has considered and answered numerous questions concerning HIPAA nondiscrimination provisions and how those interact with wellness programs. If none of the conditions for obtaining a reward under a wellness program are based on an individual satisfying a standard related to a health factor, or if no reward is offered, the program complies with the nondiscrimination requirements, assuming participation in the program is made available to all similarly situated individuals (i.e. Non-HIPAA Wellness Programs). The DOL explains that examples of nondiscriminatory conduct would be: · A program that reimburses all or part of the cost for memberships in a fitness center. · A diagnostic testing program that provides a reward for participation rather than outcomes. · A program that encourages preventive care by waiving the copayment or deductible requirement for the costs of, for example, prenatal care or well-baby visits. · A program that reimburses employees for the costs of smoking cessation programs without regard to whether the employee quits smoking. · A program that provides a reward to employees for attending a monthly health education seminar. In contrast, wellness programs that condition a reward on an individual satisfying a standard related to a health factor (i.e. HIPAA Wellness Programs) must meet five requirements in order to comply with the nondiscrimination rules: 1. The total reward for all the plan’s wellness programs that require satisfaction of a standard related to a health factor is limited – generally, it must not exceed 20 percent of the cost of employee-only coverage under the plan. If dependents (such as spouses and/or dependent children) participate in the wellness program, the reward must not exceed 20 percent of the cost of the coverage in which an employee and any dependents are enrolled. 2. The program must be reasonably designed to promote health and prevent disease. 3. The program must give individuals eligible to participate the opportunity to qualify for the reward at least once per year. 4. The reward must be available to all similarly situated individuals. The program must allow a reasonable alternative standard (or waiver of initial standard) for obtaining the reward to any individual for whom it is unreasonably difficult due to a medical condition, or medically inadvisable, to satisfy the initial standard. 5. The plan must disclose in all materials describing the terms of the program the availability of a reasonable alternative standard (or the possibility of a waiver of the initial standard). As to the limit on rewards, a reward can be in the form of a discount or rebate of a premium or contribution, a waiver of all or part of a cost-sharing mechanism (such as deductibles, copayments or coinsurance), the absence of a surcharge, or the value of the benefit that would otherwise not be provided under the plan. Under HIPAA, the reward for the wellness program (coupled with rewards for other wellness programs with respect to the plan that require satisfaction of a standard related to a health factor) must not exceed 20% of the cost of the employee-only coverage under the plan. The cost of the employee-only coverage is determined based on the total amount of employer and employee contributions for the benefits package under which the employee is receiving. The 20%-reward limit in the final regulations allows plans and issuers to maintain flexibility in their ability to design wellness programs, while avoiding rewards or penalties so large as to deny coverage or create too heavy a financial penalty on individuals who do not satisfy an initial wellness program standard that is related to a health factor. These wellness program rules are generally effective for the plan year starting on or after July 1, 2007. Compliance with ADA In addition to complying with HIPAA and ERISA regulations, wellness programs are subject to the ADA. The ADA prohibits an employer from conducting medical examinations on inquiries about an employee’s health status. An exception to that prohibition provides that an employer may conduct voluntary medical examinations and activities, including voluntary medical histories, which are part of an employee health program available to employees at that work site. Moreover, the Equal Employment Opportunity Commission (EEOC) has explained that an employer may conduct voluntary medical examinations and inquiries as part of an employee health program, such as medical screening for high blood pressure, weight control, and cancer detection, providing that: 1. Participation in the program is voluntary; 2. Information obtained is maintained in accordance with the confidentiality requirements of the ADA; and 3. This information is not used to discriminate against an employee. While the ADA does not set a per se percentage limitation, the ADA emphasizes that the medical examination must be voluntary. The final HIPAA regulations indicate the any reward over 20 percent would not be voluntary and, thus, would be too great of an incentive for any employee participating in a wellness plan. Considering implementing a wellness program? If you have any questions regarding wellness programs, or any other healthcare or benefits-related issues, please contact Amber Bagley in the Little Rock office. ARKANSAS SUPREME COURT RULES THAT A CREDITOR’S FILING OF A LIS PENDENS TRUMPS A MATERIALMAN’S LIEN A lis pendens is a statutorily required notice, filed with an Arkansas Circuit Clerk, to warn all persons that the title to property indicated in the lis pendens is in litigation and that those persons are in danger of being bound by an adverse judgment. The Arkansas Supreme Court recently held that a materials supplier was barred from a future claim in real property because its materialman’s lien was filed after another creditor, a mortgagor, filed a lis pendens in conjunction with its foreclosure action. See 2008 WL 1747108 (Ark. Apr. 17, 2008). In that case, the bank filed a complaint of foreclosure and a lis pendens after an individual defaulted on his construction loan. The bank did not list the materials supplier as a party to the foreclosure action. Twenty-one days later, materials supplier filed a materialman’s lien on the same property. In the foreclosure action, the court entered a decree in favor of the bank, and the bank later purchased the property and sold it to another party. A year later, the materials supplier filed its own foreclosure action against the property, naming the bank as a defendant. The trial court ruled in favor of the bank and dismissed the materials supplier’s lien foreclosure action. On appeal, the Arkansas Supreme Court examined both the lis pendens and materialman’s lien statutes. Specifically, for purposes of priority over other creditors, Ark. Code Ann. § 18-44-110(a)(1) provides that a materialman’s lien is considered to relate back to the date on which the particular material was furnished. Additionally, Ark. Code Ann. § 18-44-117(a)(1) provides that a materialman has 120 days after material is last supplied to file a lien. Therefore, because the materials supplier filed its lien prior to 120 days after the last date it supplied material, the primary issue for the court was whether the supplier’s acquired interest in the property related back to the time it supplied material and therefore was prior to the bank’s lis pendens filing. In analyzing this issue, the court focused on the date the materials supplier perfected its materialman’s lien and the date the lis pendens was filed. The court noted that it had repeatedly held that a person who acquires an interest in property subject to a pending lawsuit, or subsequent to a lawsuit, in which a lis pendens notice has been filed, is treated as though he or she was a party to the lawsuit and is bound by the result of the suit. According to the court, although the materials supplier acquired an interest in the property by perfecting its lien within 120 from the last date of supplying material, the supplier’s interest was nonetheless acquired after the bank’s lis pendens was filed. Consequently, the materials supplier was bound by the results of the bank’s foreclosure action and was barred from bringing its own foreclosure action. Otherwise, according to the court, it would be “utterly impracticable” and burdensome for a foreclosing creditor to have the duty of discovering materialmen with unrecorded liens on the property. This decision is potentially devastating to lien claimants. In effect, the decision requires lien claimants to repeatedly check the filings in the Circuit Clerk’s office in the applicable county, or conduct a title search, as often as every 21 to 25 days, up to and including the date that the claimant actually files its lien, to ensure that a prior lis pendens has not been filed. The decision imposes an equally, if not substantially more difficult, “utterly impracticable” and burdensome process, not just on one foreclosing creditor like the bank, but potentially on multiple foreclosing creditors, i.e. lien claimants, on the affected construction project. NEWS AROUND THE FIRM Chambers & Partners has once again named Cross, Gunter, Witherspoon & Galchus as one of the top labor and employment law firms. Six members of the firm were named as top leaders in their fields. These attorneys are Bruce Cross, Russell Gunter, Carolyn Witherspoon, Donna Galchus, Ben Shipley and Susan Kendall. Russell Gunter gave a federal and state legislative update to the North Central Arkansas Human Resources Association in Harrison, Arkansas on April 2, 2008. He also presented a legal update to ARSHRM State Conference on April 24, 2008. Carolyn Witherspoon spoke at the ABA Section on labor and Employment Law meeting in Tucson, Arizona March 27th – 29th. Her topic was “Developing Confidentiality Issues Affecting Attorney’s Ethical obligation in our Increasingly Hi-Tech Landscape.” She also spoke at the Arkansas Association of Women Lawyers in Fayetteville on April 3, 2008. Her topic was, “Putting Together the FMLA Puzzle." Ben Shipley, Susan Kendall and Jimmy Cline spoke at a Lorman Seminar on Employment Law from A to Z in Arkansas in Springdale on April 29, 2008. Russell Gunter and Rick Roderick conducted training for Arkansas Tech University's Professional Development Institute on "Legal Issues in the Workplace." On April 29, Mr. Gunter spoke about high tech privacy issues and Mr. Roderick discussed discipline, termination and documentation. Allen Dobson is the President of American Subcontractors Association of Central Arkansas. On April 17, ASA held its 4th Annual General Contractors’ Appreciation Crawfish Boil. This year’s event was the largest General Contractors Appreciation function ever, with over 340 attendees. Donna Galchus, Missy Duke, Jimmy Cline and Elizabeth Cummings spoke at a Lorman seminar in Little Rock on Employee Handbooks on April 30, 2008. Scotty Shively and Amber Bagley presented a seminar on Stark II Phase III at the Spring Conference of the Medical Group Managers Association of Arkansas on April 25, 2008. Bruce Cross and Jess Sweere spoke at the 2008 Primerus Defense Institute Convocation in San Diego, California on April 25, 2008, on the topic of wage and hour issues. Amber Bagley delivered a speech on COBRA issues for the Mental Health Council on March 12, 2008. Jimmy Cline and Jess Sweere presented a program entitled "Employment Law: The Basics" for the Arkansas Small Business Development Center on March 26, 2008.
Amber Bagley and Jess Sweere presented a seminar discussing document retention on February 28, 2008. Ms. Bagley discussed medical document retention and Mr. Sweere spoke on document retention based on employment statutes.
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