Monthly Archives

Failure To Notify Employee Of Cobra Rights May Subject Employer To Liability

As you probably know, the Consolidated Omnibus Budget Reconciliation Act, commonly known as COBRA, allows employees to elect to continue health coverage under an employer-sponsored health plan for a certain period of time following the termination of employment or other qualifying event. Once an employee elects continuation coverage, the employee is responsible for paying the premiums required to keep the coverage in effect. Generally, the insurer provides the required notice explaining continuation coverage rights to the employee after a qualifying event. The employee then has 60 days to elect coverage.

In a new federal court case out of Michigan, however, the employer was found liable to an employee for damages suffered due to a failure to provide the proper COBRA notification, even though the employer had contracted with a third-party administrator to provide the notification. In Linden v. Harding Tube Corp., the court explained that ERISA imposes a responsibility upon a plan sponsor to provide appropriate notification regarding COBRA coverage rights. A plan sponsor is defined as the employer in the case of an employee benefit plan established or maintained by a single employer. The court went on to explain that there could be no dispute that the regulations with respect to COBRA notification had been violated because neither the employer nor the company with whom it had contracted to provide COBRA notifications had notified the insurance carrier that there should be continuation coverage or paid the premium necessary to activate the coverage. As the plan sponsor, the employer is initially liable for those violations. The court left it up to the jury to decide whether the employer could recover from the third-party with whom it had contracted for the damages it had to pay its ex-employee.

The lesson to be taken from this case is that if there is a failure to communicate COBRA continuation rights to an employee following a qualifying event, the employer will ultimately be responsible for that failure if the employer is also the plan sponsor. If you contract with a third-party to provide COBRA notification rights, you should make sure that copies of the appropriate notices following a qualifying event are sent to you so that you can ensure the notifications have been made in a timely fashion. If they are not, you could be held responsible for any medical costs incurred by your ex-employee during any time that he was uninsured because of your failure to provide the appropriate notification.

Identity Theft in the Workplace: Protecting Your Employees-And Yourself

As you have probably heard, identity theft across the nation is growing at an alarming rate, particularly in the workplace. With this upsurge, victims are increasingly looking to recover damages from the companies from which their information was stolen.

What Is Identity Theft?
Identity theft occurs when someone uses the personal information (usually a social security number, name, date of birth, or credit card number) of another fraudulently and without permission. The thief typically uses this information to obtain money, goods, or services, but identity theft is also used to obtain identification cards and other government-issued documents.

Identity Theft – A Growing Problem
According to FBI statistics, identity theft is our nation’s fastest growing crime. In 2004, the Federal Trade Commission, which operates a nationwide identity theft hotline, announced that for the fourth straight year identity theft topped the list of consumer complaints. In 2004 alone, the FTC reported that there were almost 44,000 victims of identity theft in California. With 122 victims per 100,000 people, California ranked third in the nation behind only Nevada and Arizona.

The Legislative Response
Legislative response to the rise in identity theft has occurred on the national and state levels. In 1998, Congress passed a law making it a federal crime to use another’s identity to carry out an activity that violates federal law or that is a felony under state law. Similarly, California law now makes it a felony to use the personal identifying information of another for any unlawful purpose without the authorization of that person. A California statute also requires businesses and government agencies to notify consumers if hackers gain entry to computers that contain unencrypted personal information such as credit cards, social security numbers, and driver’s license numbers. That same statute allows any person injured by a violation of the law to file a civil suit against the company or agency.

Expansion Of Identity Theft Into The Workplace
Initially, stealing mail and wallets was the primary form of identity theft, but recently criminals have expanded to hacking into computers and copying company databases to obtain private information. Two examples illustrate the expansion of identity theft into the workplace. First, in San Diego, a dishonest employee obtained access to a storage room where past payroll information was filed. The employee obtained Social Security numbers from 100 current and former employees and used them to obtain credit in their names. Second, a Nigerian crime ring was employed temporarily at a very large corporation. One of the Nigerian employees downloaded an employee list containing social security numbers, then used the numbers to obtain credit and make fraudulent purchases. The employees did not know about the concerted thievery until they shared stories with their co-workers and learned that many of them had been victimized.

Identity Theft & The Employer – New Grounds For Recovery
Employees and their lawyers are considering potential grounds for recovery of when their personal information is misappropriated from work. Case law is relatively undeveloped, but two theories have materialized as potential grounds for recovery. The first theory is based on invasion of privacy. A short time ago, 204 employees of a Minnesota trucking company filed a class action lawsuit against their employer after their social security numbers were faxed to 16 terminal managers. They claimed that this was an invasion of privacy because the company released personal, confidential information without their permission. The Minnesota Court of Appeals agreed, and overturned a trial court order dismissing the claim. The trucking company sought review of the ruling, and the Minnesota Supreme Court overruled the Court of Appeals, finding that the employer’s dissemination of social security numbers to terminal managers did not constitute publication under the definition of invasion of privacy. Although the anti-employer decision was overturned, the case demonstrates a legitimate possibility that an employer’s failure to guard against disclosure of employees’ confidential information could lead to invasion of privacy lawsuits. The second theory is based on negligence principles. Recently, a Michigan appellate court upheld a $275,000 jury verdict awarded to several 911 operators who were victims of identity theft. The plaintiffs filed a negligence action against their union after discovering that the person behind their identity theft was the daughter of the union treasurer. The union treasurer took private company records out of the office, and her daughter somehow obtained the information and misused it. In upholding the verdict, the court found that the union owed a duty of care to its members, and that identity theft was a foreseeable consequence of a breach of that duty. Although limiting its holding to the facts, the decision signals a wakeup call to employers—take proper steps to ensure confidentiality of your employee’s private information, or be liable for the consequences.

How To Protect Yourself – A Self Survey
For tips on how to avoid or limit liability in the event that identity theft strikes the workplace, check the Identity Theft Resource Center website, accessible at www.idtheftcenter.org.

DLSE Proposes New Regulation Clarifying Meal Period Requirements

Existing law requires that an employee who works more than five hours a day must be provided with a meal period of not less than 30 minutes, except that if the total work period per day is no more than six hours, the meal period may be waived by mutual consent. An employee who works for more than 10 hours a day must be provided with a second meal period of not less than 30 minutes, except that if the total hours worked are no more than 12 hours, the second meal period may be waived by mutual consent, but only if the first meal period was not waived. To give you an idea of how costly violating this law can be, a jury in Oakland recently awarded $172 million to thousands of employees who claimed that Wal-Mart denied them these required meal periods.

The Division of Labor Standards Enforcement (DLSE) has proposed a new regulation clarifying an employer’s obligation to provide meal periods to its employees. The proposed regulation defines the term provide as “to supply or make available a meal period to the employee and give the employee the opportunity to take the meal period.” The proposed regulation clarifies that an employer is deemed to have provided a meal period to an employee if the employer: (1) has informed the employee, either orally or in writing, of his or her right to take a meal period; (2) gives the employee the opportunity to take the meal period; and (3) maintains accurate time records. Notwithstanding these three criteria, an employer may still establish by a preponderance of the evidence that a meal period was in fact actually supplied or made available to the employee and the employee was in fact actually given the opportunity to take the meal period. The proposed regulation also clarifies when the required meal period(s) must begin. For employees who work more than five hours but no more than six hours per day, the meal period must be provided during the sixth hour of work, but may be provided earlier. For example, if an employee works from 8 a.m. to 2 p.m., the 30 minute meal period must be provided between 1:01 p.m. and 2:00 p.m., but may be provided earlier. Moreover, the employer and employee can mutually waive the employer’s obligation to provide a meal period.

For employees who work more than six hours but no more than 10 hours per day, the meal period must be provided before the completion of the sixth hour of work. The employer cannot waive its obligation to provide the meal period. However, an employee may initiate a request for approval from the employer to: (A) not take the meal period for that day; or (B) take only a portion of the meal period for that day. The employer has the discretion to approve or deny the request. The employer’s approval or denial of such request is not a violation of the employer’s duty to provide a meal period.

For employees who work more than 10 hours but no more than 12 hours per day, the employer must provide a second 30 minute meal period. The second meal period may be provided any time between 10 hours and 1 minute and 12 hours. If the total hours worked are no more than 12 hours, the employer’s obligation to provide a second meal period may be waived by mutual consent of the employer and the employee, but only if the first meal period was not waived.

The DLSE’s proposed regulation has already undergone two rounds of rather substantial revisions. The DLSE is currently considering comments to the most recent version of the proposed regulation, and may revise the proposed regulation yet again. As soon as the regulation is finalized and adopted, we will update you in a future edition of this newsletter.

2006 Legislative Update

2005 was a slow year for new employment-related legislation, and much of the new legislation is limited to certain types of employers or employees. Here is a synopsis of the more notable legislative activity.

Computer Professional Exemption Clarified
Existing law provides that employees in the computer software field may qualify for overtime exemption if certain conditions are met. One of those conditions is that the employee’s hourly rate of pay is not less than $41. A new law now clarifies that this condition is met if the employee’s hourly rate is not less than $41 or the annualized full-time salary equivalent of that rate, provided that in each workweek the employee receives not less than $41 per hour worked. Note that, under both the old and the new laws, an employee in the computer software field is not exempt from overtime requirements unless all of the following additional conditions are met:

1. The employee is primarily engaged in work that is intellectual or creative and that requires the exercise of discretion and independent judgment. 2. The employee is primarily engaged in duties that consist of one or more of the following: A. The application of systems analysis techniques and procedures, including consulting with users to determine hardware, software, or system functional specifications. B. The design, development, documentation, analysis, creation, testing, or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications. C. The documentation, testing, creation, or modification of computer programs related to the design of software or hardware for computer operating systems. 3. The employee is highly skilled and is proficient in the theoretical and practical application of highly specialized information to computer systems analysis, programming, and software engineering.

Deadline For Filing Fair Employment And Housing Act Claims Extended For Minors The Fair Employment and Housing Act (“FEHA”) prohibits discrimination, harassment and retaliation. Under current law, an employee who believes that her employer violated FEHA must file a complaint with the Department of Fair Employment and Housing within one year from the date upon which the allegedly unlawful conduct occurred. Effective January 1, 2006, this period is extended for up to one year after the employee reaches age 18.

Final Wages May Now Be Paid By Direct Deposit
Existing law has long allowed an employer to pay wages by direct deposit, so long as the employee has voluntarily authorized direct deposit. Final wages, however, could not be paid by direct deposit. Effective January 1, 2006, Labor Code section 213 has been amended to provide that final wages may be paid by direct deposit, so long as the employer complies with all other requirements regarding the payment of final wages.

Wage Statements
When an employer pays an employee’s wages, the employer must furnish the employee with an accurate itemized statement showing, among other things, the name of the employee and his or her social security number. By January 1, 2008, existing law requires the employer to include no more than the last four digits of the employee’s social security number or an existing employee identification number other than a social security number. This law has been clarified to provide that, by January 1, 2008, the employer must include on the itemized statement the last four digits of the employee’s social security number or an employee identification number other than a social security number. In other words, if you were intending to comply with the new requirement by including the last three digits of your employees’ social security numbers on their statements, you now need to include the last four digits.

Unruh Civil Rights Act Expanded
The Unruh Civil Rights Act generally prohibits business establishments from discriminating on the basis of sex, race, color, religion, ancestry, national origin, disability or medical condition. The Act has now been expanded to explicitly prohibit business establishments from discriminating on the basis of marital status or sexual orientation.

Service Of Labor Commissioner Complaints, Notices And Decisions
The Labor Commissioner is authorized to investigate employee complaints and provide for a hearing in any action to recover wages, penalties and other demands for compensation. A new law provides that, in such proceedings, the complaint, notices, and decision may be served by leaving a copy of the document at the home or office of the person being served and thereafter mailing a copy of the document to the person at the place where a copy was left. This new law was enacted to address the problem of employers who tried to avoid personal service of labor commissioner documents by refusing to sign for the documents.

Public Works Payroll Records
Existing law provides for the payment of prevailing wages on certain public works, and requires each contractor and subcontractor performing work on a public work to keep payroll records regarding his or her employees. Senate Bill 759 amends this requirement by specifying that the payroll records may consist of printouts of payroll data that are maintained as computer records, if the printouts contain the same data and are verified in the same manner as required for other payroll records.

DLSE Proposes New Regulation Clarifying Meal Period Requirements
By Kim Johnston
Existing law requires that an employee who works more than five hours a day must be provided with a meal period of not less than 30 minutes, except that if the total work period per day is no more than six hours, the meal period may be waived by mutual consent. An employee who works for more than 10 hours a day must be provided with a second meal period of not less than 30 minutes, except that if the total hours worked are no more than 12 hours, the second meal period may be waived by mutual consent, but only if the first meal period was not waived. To give you an idea of how costly violating this law can be, a jury in Oakland recently awarded $172 million to thousands of employees who claimed that Wal-Mart denied them these required meal periods.

The Division of Labor Standards Enforcement (DLSE) has proposed a new regulation clarifying an employer’s obligation to provide meal periods to its employees. The proposed regulation defines the term provide as “to supply or make available a meal period to the employee and give the employee the opportunity to take the meal period.” The proposed regulation clarifies that an employer is deemed to have provided a meal period to an employee if the employer: (1) has informed the employee, either orally or in writing, of his or her right to take a meal period; (2) gives the employee the opportunity to take the meal period; and (3) maintains accurate time records. Notwithstanding these three criteria, an employer may still establish by a preponderance of the evidence that a meal period was in fact actually supplied or made available to the employee and the employee was in fact actually given the opportunity to take the meal period.

The proposed regulation also clarifies when the required meal period(s) must begin. For employees who work more than five hours but no more than six hours per day, the meal period must be provided during the sixth hour of work, but may be provided earlier. For example, if an employee works from 8 a.m. to 2 p.m., the 30 minute meal period must be provided between 1:01 p.m. and 2:00 p.m., but may be provided earlier. Moreover, the employer and employee can mutually waive the employer’s obligation to provide a meal period.

For employees who work more than six hours but no more than 10 hours per day, the meal period must be provided before the completion of the sixth hour of work. The employer cannot waive its obligation to provide the meal period. However, an employee may initiate a request for approval from the employer to: (A) not take the meal period for that day; or (B) take only a portion of the meal period for that day. The employer has the discretion to approve or deny the request. The employer’s approval or denial of such request is not a violation of the employer’s duty to provide a meal period.

For employees who work more than 10 hours but no more than 12 hours per day, the employer must provide a second 30 minute meal period. The second meal period may be provided anytime between 10 hours and 1 minute and 12 hours. If the total hours worked are no more than 12 hours, the employer’s obligation to provide a second meal period may be waived by mutual consent of the employer and the employee, but only if the first meal period was not waived.

The DLSE’s proposed regulation has already undergone two rounds of rather substantial revisions. The DLSE is currently considering comments to the most recent version of the proposed regulation, and may revise the proposed regulation yet again. As soon as the regulation is finalized and adopted, we will update you on its requirements in a future edition of this newsletter.