HR Compliance and Regulatory Update

The HR Compliance Update is provided by KPA partner, Ford & Harrison LLC, a labor and employment law firms with a national practice in all aspects of labor and employment law, providing HR advice to HotlinkHR™ clients. http://www.fordharrison.com/

Protective Equipment Not Included in FLSA Exemption for Changing Clothes

David P. Maram

Recently, the U.S. Department of Labor (DOL) issued an Administrator's Interpretation (AI) reversing DOL positions published during the Bush Administration and stating that employees must be compensated for time spent donning and doffing certain kinds of "protective equipment" even if under the terms of the relevant collective bargaining agreement (CBA), or the CBA's custom and practice, such time is to be unpaid. See Administrator's Interpretation No. 2010-2, available on the DOL web site at: http://www.dol.gov/whd/opinion/adminIntrprtn/FLSA/2010/FLSAAI2010_2.htm. The AI also reverses other DOL interpretations and states that while time spent changing "clothes" (as opposed to "protective equipment") can still be treated as unpaid time pursuant to the terms of a CBA or custom and practice, "subsequent activities, including walking and waiting, are compensable."

FLSA § 203(o)

Under the Fair Labor Standards Act (FLSA,) time spent "changing clothes or washing at the beginning or end of each workday" can be treated as unpaid if the time is excluded from compensable time pursuant to "the express terms or by custom or practice" of a CBA. 29 U.S.C. § 203(o) (emphasis added).

DOL Determines "Clothes" Does Not Include Protective Equipment

In a 1997 Opinion Letter, the DOL concluded that time spent putting on, taking off and cleaning the protective equipment utilized in the meat packing industry was compensable and that the protective equipment did not constitute "clothes" under § 203(o). Subsequently, the DOL changed positions and issued opinion letters in 2002 and 2007 including such protective equipment in the definition of "clothes." Federal courts never fully accepted the Bush Administration's position, with the Ninth Circuit Court of Appeals and district courts in the Seventh and Fourth Circuits handing down decisions since 2002 applying a definition of "clothes" at odds with the Bush Administration's position.

The DOL's recent AI reverses the Bush Administration's position and states that the term "clothes" as used in § 203(o) does not include "protective equipment worn by employees that is required by law, by the employer, or due to the nature of the job." Examples of such "protective equipment" that is no longer considered clothing include "mesh aprons, plastic belly guards, mesh sleeves or plastic arm guards, wrist wraps, mesh gloves, rubber gloves, polar sleeves, rubber boots, shin guards and weight belts."

Changing Clothes is a Principal Activity that Begins the Continuous Workday

The recent AI also determined that "changing clothes" is a "principal activity" that begins the continuous workday even if the time is non-compensable under the terms of a CBA. As a result, while donning and doffing "clothes" (as opposed to "protective equipment") can still be treated as unpaid time pursuant to a CBA's terms or custom and practice, subsequent activities, including walking and waiting, are compensable. The DOL's current position on this issue also reverses its prior position that if such donning and doffing is excludable time under a CBA, it cannot be a principal activity that begins the continuous workday. As with the Bush Administration's "protective equipment" position discussed above, federal courts never fully adopted its "principal activity" position, with district courts in the Third, Fifth, Sixth, Seventh and Eleventh Circuits rejecting the Bush Administration's interpretation.

Bottom Line for Employers:

It is the DOL's current position that unionized employees cannot bargain away their right to be paid for time spent putting on and taking off certain "protective equipment." Thus, if a CBA provides that time spent donning and doffing such equipment is not compensable, that provision is now invalid in the eyes of the DOL. Also, it is now the DOL's position that while donning and doffing "clothes" (as opposed to "protective equipment") can still be treated as unpaid time pursuant to a CBA, these activities now begin the continuous workday. As a result, the DOL takes the position that a unionized workforce must be paid for time spent doing subsequent activities, like walking to the factory floor or waiting in line at the time clock, as long as such periods of time are not so insubstantial and insignificant as to be considered de minimis.

Form 5500 Schedule SSA Update

Jeffrey Ashendorf

Section 6057 of the Internal Revenue Code requires reporting of plan participants who separate from service with a right to a deferred vested benefit. The form for filing these reports has been the Schedule SSA (Form 5500), Annual Registration Statement for Deferred Vested Participants. When the new EFAST-2 electronic filing system for Forms 5500 went into effect — for 2009 returns — the Schedule SSA was eliminated. The information previously contained on Schedule SSA (i.e., names, Social Security Numbers, etc.) was not suitable to be disclosed online with the newly-filed Forms 5500. In its place, a new Form 8955-SSA is required to be filed with the IRS in order to comply with Code Section 6057.

The IRS has recently announced that, due to delays in finalizing and issuing the new Form 8955-SSA, plan administrators will not be required to file the Form 8955-SSA for the 2009 plan year — or later years — until further guidance is issued. That guidance will establish a special due date (expected to be some time in 2011) for the 2009 Forms 8955-SSA. In addition, once the guidance is issued and the Forms 8955-SSA are available for filing, plan administrators should have a reasonable time to complete and file the Form by the special due date. However, the IRS cautions that the filing waiver and special due date for Form 8955-SSA has no effect on the time for filing the Forms 5500 (or Forms 5500-SF) and other Schedules for the 2009 plan year through EFAST2. Calendar-year plans (without extension) are required to file on or before August 2, 2010 (the regular due date — July 31 — falls on Saturday.)

Form 5500 Filing Due for Calendar Year Plans

Tiffany Downs, Isabella Lee

The Form 5500, Annual Return/Report of Employee Benefit Plan, including all required schedules and attachments, is used to report information concerning employee benefit plans. Generally, any administrator or sponsor of an employee benefit plan subject to ERISA must file information about each benefit plan every year. Typically, Form 5500 reports must be filed by the last day of the 7th calendar month after the end of the plan year. For calendar year plans, this means the Form 5500 is due by August 2, 2010 (as July 31 is a Saturday), unless a Form 5558 is submitted and received by the IRS on or before the Form 5500 report's normal due date.

Form 5558 provides for up to a two and one-half-month extension of the deadline. Alternatively, an automatic extension of time may be available based upon the due date of the employer's federal income tax return if: (1) the plan year and the employer's tax year are the same; (2) the employer has been granted an extension of time to file its federal income tax return to a date later than the normal due date for filing the Form 5500; and (3) a copy of the application for extension of time to file the federal income tax return is maintained with the filer's records. An extension granted by using the automatic extension procedure cannot be extended further by filing a Form 5558, nor can it be extended beyond a total of nine and one-half months beyond the close of the plan year.

The DOL requires that all Form 5500 reports, and any required schedules and attachments, be completed and filed electronically. Thus, plan administrators must register for signing credentials and electronically sign all Form 5500 reports. Additionally, annual reports must be made available by plan administrators to plan participants and beneficiaries.

IRS penalties for late filing are $25 per day up to a maximum of $15,000. DOL penalties can run up to $1,100 per day (no maximum). For willful violations, individuals face up to a $100,000 fine and/or imprisonment up to 10 years.

For welfare benefit plans, Form 5500 reports must be filed for both fully-insured and self-insured plans. Welfare benefit plans include health plans, dental plans, vision plans, disability plans, life insurance plans, accidental death and dismemberment plans, and certain employee assistance programs that have more than 100 participants at the beginning of a plan year.

Is Having a Close Relationship Enough to Pursue Title VII Retaliation Claim?

Jolina Abrena

Although the federal appeals courts were in agreement that a close relationship with someone who has engaged in protected activity under Title VII is not sufficient to permit a person who has not engaged in such activity to pursue a retaliation claim, that issue may now be less than clear. On June 29, 2010, the U.S. Supreme Court granted review of the Sixth Circuit's decision in Thompson v. North American Stainless, LP, in which the Sixth Circuit held that a third party cannot pursue a retaliation claim under Title VII where he has not personally engaged in a protected activity.

Title VII is the federal law that, among other things, prohibits employers from discriminating against employees and job applicants based on their membership in protected classes (race, color, religion, sex, or national origin). Title VII also prohibits employers from taking adverse actions against employees for engaging in a protected activity, such as filing a discrimination complaint.

In this case, Thompson worked for North American Stainless (NAS) and, while he was employed, met and married another employee, Miriam Regalado. While Thompson and Regalado were engaged, she filed a charge against NAS with the Equal Employment Opportunity Commission (EEOC), claiming her supervisors discriminated against her based on her gender. About a month after the EEOC notified NAS of Regalado's charge, the company discharged Thompson. Thompson sued NAS claiming he was discharged because his fiancé filed a discrimination charge against NAS. The trial court ruled in favor of NAS and the Sixth Circuit upheld this decision, finding that Thompson was not a proper claimant because he did not allege that he himself had engaged in protected activity under Title VII. In reaching this decision, the Sixth Circuit noted that the Third, Fifth and Eighth Circuits have unanimously rejected such third-party retaliation claims.

By agreeing to review Thompson, the U.S. Supreme Court will consider whether Title VII prohibits an employer from retaliating against a third party who has a close associate that files a discrimination claim, and if yes, whether the third party may pursue an independent retaliation claim. The Supreme Court is anticipated to hear oral argument during its next term, which begins October 2010. Thus, its final decision may not be issued for more than a year.

What Does This Mean for Employers?

Depending on the Supreme Court's decision, employers may have to defend against more Title VII retaliation claims. Prudent employers will continue to ensure that their legitimate reasons for terminating employees, as well as other adverse actions, are sufficiently and properly documented.

If you have any questions regarding the HR Compliance Updates please contact Jim Hendricks at Ford & Harrison LLC , 55 East Monroe Street, Suite 2900,Chicago, IL 60603

jhendricks@fordharrison.com
P: 312-960-6118
F: 312-332-6130