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EMPLOYEE BENEFITS BLOG
Insights on Employee Benefits and Executive Compensation
EMPLOYEE BENEFITS BLOG
Insights on Employee Benefits and Executive Compensation
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The French Supreme Court Decides that Employees with Jobs at Risk Take Precedence

by | Jul 7, 2011 |

by Jilali Maazouz and Sébastien Le Coeur

Under French law, an employee can only be dismissed on economic grounds when all efforts have been well documented to redeploy him or her in an alternative position within a company.

On 7 April 2004, the French Supreme Court concluded that an employee facing economic dismissal has priority over an external candidate to fill a position available in the company. 

On 23 March 2011, the French Supreme Court went even further and ruled that an internal vacancy within a company in France should be offered as a priority to the in-house employee who is at risk of redundancy.

This recent Supreme Court ruling extends the obligations of French entities or international entities operating in France contemplating redundancies.  As a result, should an employer decide to offer a position to an employee who is not at risk of redundancy, he or she will be liable to pay damages to the employees who are eventually made redundant.

In the internal recruitment/redeployment process, the employee within the company facing economic dismissal has priority over an employee within the company whose economic dismissal is not contemplated and over an outside candidate.  If priority is not given to him/her, the company’s redeployment obligation is not fulfilled and the dismissal is held unfair.  That is why we recommend not having external or internal recruitment ads of the shortlisted positions.

Clients contemplating employees redundancies in France should consider the following steps to fulfil its redeployment obligation:

  1. Collect information on the employees whose dismissals are contemplated (current and past positions, skills, current compensation, languages spoken, CV’s, recent training, annual reviews, etc).
  2. List all the positions available in the company worldwide during the period of when the redundancies in France are planned (e.g. 3 to 6 months).
  3. Shortlist all the available positions that match the employee’s current professional qualifications or are compatible with the employee’s skills. Even positions which require employees to have a short period of training or roles viewed as less of a position than the employee’s current status need to be listed.  Avoid shortlisting employees for roles that: a) require knowledge of a foreign language not mastered or b) require relocation in countries where immigration laws would prevent the employee from working. Also be sure not to externally or internally advertise the shortlisted positions.
  4. If one or several available shortlisted positions are located outside of France, the French entity must ask the employee in writing whether or not he/she would accept a position abroad.  The letter must make a list of all the company’s geographic locations and require the employee to indicate any restrictions regarding redeployment, particularly in relation to the offices proposed and compensation given.  Within six days of receiving this letter, the employee must provide a response. If the employee fails to reply within the allocated time than the employer can justify termination on the grounds of refusal to be redeployed abroad. The available positions shortlisted can then be reviewed and the freeze on [...]

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Companies Should Brace Themselves: It’s Going To Be Easier and Faster to Unionize America

by | Jul 6, 2011 | , ,

by Stephen D. Erf, Heather Egan Sussman and Sabrina E. Dunlap

Recently, the National Labor Relations Board (NLRB) proposed new rules purportedly intended “to reduce unnecessary litigation” and streamline pre- and post-election procedures. The bottom line is that these new rules, if adopted, will make it easier to unionize American workforces.  One way the new rules “streamline” the unionization process is by requiring the exchange of timely information, including employee contact data and required forms. The proposed rules also aim to defer potential litigation until after an election has been held, so that proceedings related to litigation do not slow down the election process, which will limit the opportunity for the employer to present its views regarding the issues. Given these proposed rules, American businesses may likely step-up union avoidance efforts.

The U.S. Department of Labor (DOL) simultaneously has released a new proposed rule that appears designed to discourage such union avoidance efforts. Under this proposed rule, an existing exemption from certain disclosure requirements for “advice” would be significantly narrowed such that employers would be required to disclose arrangements with consultants that draft communications on behalf of an employer designed to “directly or indirectly persuade workers concerning their rights to organize or bargain collectively,” even when the consultants do not contact employees directly. Under the proposed rule, the DOL said employers should disclose information about “union avoidance” seminars and trainings offered to employers by lawyers or labor consultants, because theses seminars “involve reportable persuader activity.” The DOL is warning employers against classifying such seminars as “advice” to avoid disclosure under the exception. 

The combined NLRB and DOL efforts appear to be a governmental one-two punch aimed at American business – they make it easier for unions to organize workplaces on the one hand, and discourage union avoidance efforts on the other. Fortunately, however, we suspect corporate America will not be so easily discouraged, because it could be far more costly for companies to skip the union avoidance training, now that the NLRB has helped grease the skids toward organizing American workplaces. On balance therefore, we expect companies still will elect to move forward with the training, and just be mindful of their disclosure obligations, assuming these proposed rules go into effect.



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Employee Benefits Blog Recognized as a Top 10 Compensation and Benefits Blog by HR Daily Advisor

by | Jun 14, 2011 | , , ,

McDermott’s Employee Benefits Blog was recently recognized as one of the Top 10 Compensation and Benefits Blogs by HR Daily Advisor.  Thank you to those who follow our blog on a regular basis.  We appreciate your support and please contact our editors if you have suggestions on trending topics you’d like to hear more about.

To read the HR Daily Advisor article, click here.



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Illinois Civil Unions Complicated by Federal DOMA and Potential DOMA Repeal

by | May 31, 2011 | ,

by Todd A. Solomon and Brett R. Johnson

The Illinois Religious Freedom Protection and Civil Union Act, which legalizes civil unions for same-sex and opposite-sex partners, takes effect on June 1, 2011.  The law entitles civil union partners to all of the legal rights and obligations that opposite-sex spouses have under Illinois state law by requiring that a party to a civil union be included in any use of the terms “spouse,” “family,” “immediate family,” “dependent,” “next of kin” or other terms that denote a spousal relationship throughout Illinois law.  Illinois will recognize as a civil union any same-sex marriage, civil union or substantially similar legal relationship entered into in other states.

The application of the Illinois law is complicated by the intersection of federal and state law.  The federal Defense of Marriage Act (DOMA) continues to define a “spouse” as a husband or wife of the opposite sex.  A civil union in Illinois will not, therefore, be a “marriage” under DOMA.  As a result of DOMA, parties to an Illinois civil union will not be entitled to federal law benefits applicable to opposite-sex spouses (e.g., qualified joint and survivor annuity (QJSA) and qualified pre-retirement survivor annuity (QPSA) benefits under tax qualified retirement plans, COBRA coverage, etc.).  Note, however, that on March 16, 2011, both the U.S. House and Senate introduced legislation to repeal DOMA (The Respect for Marriage Act of 2011), and to tie federal law marital status to an individual’s marital status in the State where the individual entered into the marriage.  The Respect for Marriage Act bills currently rest with the Judiciary Committees of the House and Senate, and the next step for each (e.g., Committee vote, hearings, Senate and/or House floor vote) is unclear.

Because the new Illinois civil union law may impact areas such as employee benefit plans, employer leave policies (including the Illinois Family Military Leave Act) and any other employer-provided benefits covering spouses, employers should ensure such programs are in compliance with the June 1, 2011 law change.  More information on the employee benefit plan implications of the legalization of civil unions in Illinois can be found here, while the impact on Religious Organizations benefits is discussed here.



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California Adopts Federal Tax Treatment of Health Coverage for Adult Children

by | May 23, 2011 | ,

by Susan M. Nash, Amy M. Gordon, Todd A. Solomon, Raymond M. Fernando and Adrienne Walker Porter

On April 7, 2011, Governor Jerry Brown signed into law California Assembly Bill 36 (AB 36).  AB 36 conforms certain California income and employment tax laws to certain changes to the United States Internal Revenue Code (the Code) and Internal Revenue Service (IRS) guidance relating to the favorable tax treatment of health benefits coverage for adult children under age 27.  The favorable state tax treatment afforded under AB 36 applies retroactively as of March 30, 2010, which also conforms to the effective date of the parallel provisions under the Code.  For a more detailed summary of AB 36, see our related On the Subject, "Health Care Reform: California Adopts Favorable Federal Tax Treatment of Health Coverage for Adult Children Under Age 27."

Background
The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the Act), generally requires group health plans that provide dependent coverage for children to continue to make such coverage available for adult children until age 26, beginning as of the first plan year commencing on or after September 23, 2010.  Effective as of March 30, 2010, the Act also afforded certain favorable tax treatment under the Code with respect to such coverage.  See our related On the Subject, "Health Care Reform: IRS Guidance on Health Coverage for Children Under Age 27."

Discrepancies Between State and Federal Tax Laws
Some states’ tax laws do not automatically conform to corresponding changes in federal tax laws.  Thus, although the Act made various changes to the Code relating to the tax treatment of health coverage and reimbursements for children under age 27, some states’ tax laws did not automatically conform to those changes.  California recently adopted AB 36 to conform to such changes under the Code.

Next Steps for Employers and Plan Administrators
Employers and plan administrators should take action now in the following ways:

  • Employers and plan administrators subject to California state tax should take steps to ensure that their reporting and payroll systems comply with the changes made under AB 36.
  • Employers and plan administrators should consider circulating employee communications regarding the impact of AB 36.
  • Employers and plan administrators should continue to monitor California and other state laws for further tax reform related to health coverage for adult children under age 27. 


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Repeal of Expanded Tax Information Reporting Requirements Under PPACA and Small Business Jobs Act of 2010

by | Apr 28, 2011 |

by Ira B. Mirsky and Robin L Greenhouse

On April 14, 2011, President Obama signed legislation that repeals the expanded Form 1099 reporting requirements under the Patient Protection and Affordable Care Act (PPACA) and the Small Business Jobs Act of 2010.

The new legislation eliminates the requirement to expand tax information reporting, beginning in 2012, for payments in excess of $600.00 either (i) for the purchase of goods or merchandise; or (ii) made to a corporation, on Forms 1099-MISC.  The legislation also eliminates the requirement that recipients of rental income from real estate, but who are not otherwise considered engaged in the trade or business of renting property, be required to issue Forms 1099-MISC reporting payments of $600.00 or more that are made in the course of earning the rental income (for payments to a service provider, such as a painter, plumber, or accountant).  Before the enactment of PPACA, payments under each of these circumstances, or to these categories of recipients, would generally have been exempt from the tax information reporting rules under Section 6041(a) of the Code and the Regulations thereunder.

For more information please contact your regular McDermott attorney.



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Recent NLRB Activity Zeroes In On Social Media Policies

by | Apr 20, 2011 | , ,

by Stephen D. Erf, Heather Egan Sussman, Christopher Scheithauer and Sabrina E. Dunlap

The law is not new – it’s just being applied to our newest forms of communication:  Twitter, Facebook and others.  Even the legal framework is relatively straightforward: Section 7 of the National Labor Relations Act (NLRA) protects “concerted activities,” which include circumstances where employees seek to “initiate or induce” group action for “mutual aid or protection.” In today’s workplace, activities such as blogging, or posting messages on social networking websites, can be considered concerted activity, and unless the activity falls within one of the exceptions to the NLRA’s protections (e.g., confidentiality breaches, extreme disloyalty, etc.), the law limits an employer’s control over what employees may write and post. 

In one recent case, the National Labor Relations Board (Board) accused American Medical Response of Connecticut Inc. (AMR) of violating Section 7 when it terminated an employee for allegedly criticizing her boss on Facebook. In its complaint against AMR, the union argued that the company had been interfering with, restraining and coercing employees in exercising their protected rights under Section 7 of the NLRA. The parties reached a settlement on the eve of trial, which required AMR to clarify and narrow its policy.

Even more recently, the Board’s Manhattan office has announced plans to file a complaint against Thompson Reuters over its Twitter policy. In 2010, an employee reportedly tweeted in response to a management inquiry, “One way to make this the best place to work is to deal honestly with [union] members.” The Board claims the company then improperly disciplined her pursuant to the Twitter policy by chastising her for making the statement. 

While we will have to wait for the complaint to see exactly what the Board takes issue with (and the company denies the allegations), this case involves a union, so it is easier for an employer to see the potential for NLRA landmines in that workplace.  But what many employers do not realize is that Section 7 applies equally to nonunionized workforces. 

In the wake of these NLRB complaints, what does this mean for all U.S. employers?  If you have not already done so, you should be reviewing your social media policy:

  • You CAN prohibit employee’s use of social media during work time.
  • You CANNOT include a blanket prohibition on critical comments.
  • You CAN prohibit disparaging comments about company products or services.
  • You CANNOT ominously threaten sanctions or termination for activities that could arguably be protected.
  • You CAN take a tone that focuses more on using good judgment and common sense.     

In addition, an overly broad or vague policy alone may violate the NLRA, so you should consider taking steps now to narrow and clarify your policy to avoid becoming the next Board target.



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Final EEOC Regulations for the ADA Amendments Act, Published on March 25, 2011

by | Apr 5, 2011 | ,

by Heather Egan Sussman and Stephen Erf

The Equal Employment Opportunity Commission (EEOC) recently released the final regulations intended to simplify implementation of the Americans with Disabilities Act Amendments Act (ADAAA). In the ADAAA, which went into effect on January 1, 2009, Congress directed the EEOC to revise its Americans with Disabilities Act (ADA) regulations to conform them to changes made by the ADAAA. Though the ADAAA and these final regulations do not change the definition of a covered “disability” under the ADA—a physical or mental impairment that substantially limits one or more major life activities—the ADAAA and the final regulations made significant changes to how those terms are to be interpreted. In particular, the regulations set forth a list of principles to guide the determination of whether a person has a disability, and provide that the definition should be construed as broadly as possible under the law. The most significant changes to the ADA are as follows:

  • The principles outlined in the final regulations provide that an impairment is a disability if it “substantially limits” the ability of an individual to perform a major life activity as compared to most people in the general population.
  • “Mitigating measures” such as medication and assistive devices must not be considered when determining whether someone has a covered disability – so, if an employee’s condition would qualify without medication or assistive devices, then person should be considered to have a covered disability (interestingly, this does not include the ordinary use of contact lenses or eyeglasses).
  • Physical and mental impairments that are episodic (such as epilepsy) or in remission (like cancer) are disabilities if they could be “substantially limiting” when active.
  • The final regulations explain that the term “major life activities” includes “major bodily functions,” such as the immune system, normal cell growth, and brain and endocrine functions.

The final regulations state that the question of whether an individual meets the definition of disability should not demand “extensive analysis,” and that the focus in cases brought under the ADA should be whether covered entities have complied with their non-discrimination and reasonable accommodation obligations and whether discrimination has occurred, not whether the individual meets the definition of a covered disability. The intended effect of these changes is to make it easier for an individual seeking protection under the ADA to establish that he or she has a disability within the meaning of the ADA, though whether that is true in practice, and how the EEOC chooses to enforce the changes, remains to be seen.



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Civil Unions Legalized in Illinois; Implications for Employee Benefit Plans

by | Feb 16, 2011 | , ,

by Joseph S. Adams, Todd A. Solomon and Brian J. Tiemann

Employers should take action now to prepare for requests for benefit coverage from employees planning to enter into a civil union once a new law legalizing civil unions for same-sex or opposite-sex partners takes effect in Illinois on June 1, 2011. The most common requests for benefits for a civil union partner are likely to be coverage under the employer’s medical, dental and vision plans, and survivor annuity coverage under defined benefit pension plans.

Medical, Dental and Vision Benefits. Employers with medical, dental or vision plans insured with contracts issued in Illinois will be required to extend coverage to an employee’s civil union partner if the plan provides coverage for other employees’ spouses. Employers that are required to or that voluntarily choose to extend such coverage to an employee’s civil union partner will need to ensure that the employee is properly taxed on these benefits. Because civil unions are not recognized under federal law, employers must impute income to the employee for federal income tax purposes, unless the partner qualifies as a “dependent” of the employee pursuant to Section 152 of the Internal Revenue Code. However, because civil union partners in Illinois are entitled to all of the rights and benefits as spouses, the value of employer-provided medical, dental and vision coverage is not taxable for Illinois state income tax purposes.

Retirement Benefits. The Illinois civil union law will not require non-government employers with qualified retirement plans to extend spousal benefits to civil union partners since these plans are regulated solely by federal law. However, employers may want to consider amending their plans if they want to provide full parity in benefits for civil union partners. Employers with defined contribution plans may want to identify civil union partners as default beneficiaries in the event an employee fails to designate a beneficiary or if the beneficiary predeceases the employee. Another option with respect to defined contribution plans is to permit an employee to obtain an optional hardship withdrawal for IRS-recognized expenses related to a civil union partner. Employers with defined benefit pension plans may want to permit an employee’s benefit to be paid over the joint life of the employee and his or her civil union partner and/or to allow a civil union partner to receive a death benefit if the employee dies before retirement.

More information on the employee benefit plan implications of the legalization of civil unions in Illinois can be found here.



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Requirements for Certain Nonimmigrant Visa Petitions to Be Modified

by | Dec 17, 2010 |

by Joan-Elisse Carpentier, David J. Levine and Raymond Paretzky

On December 22, 2010, U.S. Citizenship & Immigration Services will require all companies and individuals petitioning for certain nonimmigrant status to use a new Nonimmigrant Visa Petition (Form I-129), which requires all petitioners for an H-1B, H-1B1 Chile/Singapore, L-1 or O-1A visa to answer questions regarding release of controlled technology or technical data to the beneficiary of the petition. All such petitioners are required to certify the petitioner has reviewed the Export Administration Regulations and the International Traffic in Arms Regulations, and has determined that either a license is not required to release such technology or data to the foreign beneficiary or that the petitioner will prevent access of such technology or data to the foreign person until any such license or authorization is obtained.



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