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A Simplified Norm to Represent an Expanding Power: the Right to Listen in on Employees’ Phone Calls and the Standardization of French Privacy Law

Since 2001, the French Court of Cassation has made a continuous effort to refine and, in some circumstances, narrow the scope of the right to privacy in the workplace with a view to reaching a fair and balanced approach. The January 6, 2015 declaration of the French Data Protection Authority (CNIL) further highlights this trend towards the standardization of information collection at work, and serves to clarify and expand the right of employers to listen in on employees’ phone calls at work.

Background

In the landmark 2001 “Nikon Case,” the Court of Cassation ruled that “an employee has the right to the respect of his private life – including the right to the secrecy of correspondence – on the work premises and during working hours.” This announcement was qualified, however, and the court further refined that unless marked by the employee as “private,” the documents and files created by an employee on a company-computer for work purposes are presumed to be professional, which means that the company can access those documents and files without the employee’s presence. This can lead to an employer using such emails against an employee in the case of employment termination. Nonetheless, employers have an obligation under privacy and labor laws to inform employees about the collection and use of their personal data.

Building off of this decision, in October 2014, the French Social Supreme Court held that evidence gathered against an employee from data that had not previously been declared to and registered with CNIL was de facto illegal.

The French Labor Code and the French Data Protection Act both stipulate rules for the use of monitoring software by employers in the event that an employer wishes to establish such mechanisms. In particular, the employer must submit information to and engage in consultation with the works council, provide information to employees impacted by the software and make a formal declaration of the proposed monitoring activities to CNIL.

CNIL Declaration: Movement Toward a Simplified Norm

Continuing this trend, the declaration issued by the CNIL on January 6, 2015, further demonstrates not only how important the CNIL is, but also how the area of data protection is evolving and become more standardized in France.

This recent declaration established that employers wishing to record their employee’s telephone communications must first declare such information by filling out a simplified declaration form in lieu of a normal declaration form. After effectuating this simplified declaration, an employer will have the ability to listen to and record employee conversations for the purpose of employee training, evaluation and betterment of the quality of service.

While this declaration serves to grant employers permission to monitor employees, it also imposes upon them a number of restrictions: (i) the employee must be notified and informed of his or her right to refuse such recordings and (ii) the employee may only keep recordings for a period of six months. The information gathered from such recordings, however, may be kept for a reasonable period of time.

The issuance [...]

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Supreme Court to Review Same-Sex Marriage Cases

The Supreme Court of the United States announced on January 16, 2015, that it would review four cases challenging the constitutionality of state laws banning same-sex marriage in Kentucky, Michigan, Ohio and Tennessee.  The U.S. Court of Appeals for the Sixth Circuit ruled in November 2014 that the same-sex marriage bans in these states were constitutional, thereby creating a split of opinion among the federal circuit courts.

As of January 30, 2015, same-sex marriage is legal in 36 states and the District of Columbia.  In addition, Michigan is expected to soon begin recognizing 323 marriages that were performed there in March 2014 (during the one-day period after a district court found the state’s ban on same-sex marriage unconstitutional and before an appellate court issued a stay of the district court ruling).

A ruling by the Supreme Court is expected in June 2015.  If the Supreme Court rules that state laws banning same-sex marriage are unconstitutional, the ruling will create precedent that will lead to the legalization of same-sex marriage in all 50 states.  Same-sex couples would then be able to marry in any state and would be entitled to all of the rights, benefits and obligations that are extended to opposite-sex spouses under both federal and state laws.

Federal Law

In 2013, the Supreme Court ruled in U.S. v. Windsor that Section 3 of the Defense of Marriage Act (DOMA) is unconstitutional (for more information, see McDermott’s On the Subject “Supreme Court Rules on DOMA and California’s Proposition 8”).  Section 3 of DOMA had provided that, for purposes of all federal laws, the word “marriage” means “only a legal union between one man and one woman as husband and wife,” and the word “spouse” refers “only to a person of the opposite-sex who is a husband or wife.”  Subsequent Internal Revenue Service (IRS) and U.S. Department of Labor guidance clarified that, as a result of Windsor, favorable federal tax treatment of spousal benefit coverage would extend to all same-sex couples legally married in any jurisdiction with laws authorizing same-sex marriage, regardless of whether the couple currently resides in a state where same-sex marriage is recognized (see McDermott’s On the SubjectIRS Guidance Clarifies Retroactive Retirement Plan Impact of Supreme Court’s Windsor Ruling” for more information).  The most recent IRS guidance clarifies that, effective as of June 26, 2013, retirement plans must be administered in a manner that reflects the Windsorruling.

Next Steps for Employers

All employers should continue to monitor developments in this case and in state same-sex marriage laws.  The Supreme Court’s ruling could have significant consequences for employers in states where same-sex marriage has not been legalized or that have not otherwise extended spousal benefit coverage to same-sex spouses.  An employer that currently extends benefit coverage to unmarried same-sex partners would need to consider whether to continue offering such benefits if all employees can marry and thereby receive spousal coverage under the employer’s benefit plans.




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Join McDermott Partners at a Webinar on TOP IRS and DOL Audit Issues for Retirement Plans

Tuesday, February 10, 2015
12:30 – 1:30 pm EST

Please join McDermott Will & Emery for a complimentary webinar discussing key issues retirement plan sponsors should take into account when establishing and maintaining internal controls based on the compliance requirements Internal Revenue Service (IRS) and U.S. Department of Labor (DOL) agents review when they conduct retirement plan audits.

Specific topics will include the following:

  • The most significant issues IRS agents focus on during audits, including definitions of compensation, employee eligibility requirements and properly updated plan documents
  • The most significant issues DOL agents focus on during audits, including target date funds and revenue sharing fees, and avoidance of late payroll deposits and missed employee communications
  • Steps employers can take in order to improve their internal controls for compliance with IRS and DOL requirements

McDermott Speakers
Nancy S. Gerrie, Partner, McDermott Will & Emery
Jeffrey M. Holdvogt, Partner, McDermott Will & Emery

To register, please click here.

 




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Changes to IRS Form for Qualified Adoption Expenses

The Internal Revenue Service (IRS) has released the 2014 version of Form 8839 (Qualified Adoption Expenses), as well as updated instructions.  Taxpayers use Form 8839 to claim the adoption credit, an exclusion for employer-provided adoption benefits, or both.  Changes to the 2014 form and instructions include the following:

  • The maximum adoption credit and exclusion amounts have been adjusted to reflect their 2014 values ($13,190 per eligible child).
  • The instructions regarding adoption of children with special needs have been revised.
  • The adoption credit carry-forward worksheet in the instructions for line 16, which identifies unused credits that taxpayers may carry forward to 2015, has been modified to reflect that there are now three years (2012–2014) for which a taxpayer might have carry-forward amounts.



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Reevaluating Paid Time Off and New Challenges

Cost containment evaluation and strategies relating to overall management of human capital costs remain a continual struggle for many organizations.  Labor costs, far and away, continue to be the largest cost for many organizations.  Consequently, this has resulted in an organizational focus on ways to create efficiencies within their existing benefits programs.  Interestingly, it appears that paid time off (PTO) is one area where organizations have an opportunity to create efficiencies, as well as mitigate long-term financial risk and compliance risk.

Historically, many organizations provided their employees with separate holidays, vacation days, personal days, and sick time.  Over time, however, many of these organizations have redesigned these programs to incorporate a “total” combined time off (CTO) approach where all of these different categories of personal time are included in one overall pool of days.  A CTO approach simplifies administration of these arrangements and, in general, when compared to the traditional separate days approach, results in organizations overall providing fewer days of total time off.  Changing to a CTO methodology did provide many of these organizations with initial cost savings, but other potential opportunities may exist as well as new challenges that have arisen.

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California Imposes Mandatory Sick Leave Law

On September 10, 2014, California’s Healthy Workplaces, Healthy Families Act of 2014 (California’s sick leave law) became law.  The new law requires most employers to allow employees to accrue up to three days of paid sick leave per year based on an accrual of at least one hour of paid sick leave for every 30 hours worked.  California’s sick leave law does provide for various accrual caps, in deference to employers that already have a paid time off (PTO) policy meeting certain standards, as well as various other exceptions.  Employees may use the paid sick leave to care for themselves or other family members.  Notably, the new law imposes notice, posting and record-retention obligations with which employers must now comply.

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UK Employment Alert: Holiday Pay – UK Government Introduces Two-Year Limit on Claims for Back Pay

The UK Government has introduced legislation to help employers deal with the fallout of recent decisions indicating that pay for statutory holiday should include, and should always have included, overtime and other job-related allowances, as we reported on previously here and here.

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The Immigration Accountability Executive Actions: Ramifications for Business

President Obama’s plan for executive action on immigration includes items of interest to businesses, professionals, investors and other highly skilled workers. The plan aims to grow the U.S. economy and create jobs for U.S. workers, while allowing U.S. businesses to more readily hire and retain foreign employees.

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Seventh Circuit: Plaintiffs Lacked Standing to Challenge Tax Exemption for Ministerial Rental Allowances

An appellate court recently issued a favorable ruling for religious employers in a closely watched case relating to the ability of religious employers to provide tax-fee housing allowances to ministers. The court overturned a district court decision declaring unconstitutional Internal Revenue Code Section 107(2), which excludes from gross income a rental allowance paid to a “minister of the gospel” as part of his or her compensation, because the plaintiffs-appellees lacked standing to challenge the provision’s constitutionality. Religious institutions offering such allowances should continue to monitor developments in this area and consider alternative compensation strategies.

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