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/

Legal Alert: Supreme Court Upholds City's Review of Employees' Text Messages

In a unanimous decision, the U.S. Supreme Court has held that the City of Ontario did not violate its employees' Fourth Amendment right to be free from unreasonable searches by reviewing the employees' text messages sent on pagers provided by the City. See City of Ontario v. Jeff Quon (June 17, 2010). The Court did not rule on whether the employees had a privacy interest in the text messages, but instead assumed that they did and ruled on the issue of whether the City's search violated the Fourth Amendment. Although the decision involves a government employer, which is subject to the Fourth Amendment's restrictions, private employers may also find the decision instructive because the Court noted that the City's search also would have been reasonable in the private workplace. Thus, employers considering searching their employees' electronic communications should be aware of the factors the Court considered in finding the City's search reasonable.

Background

In this case, the City issued Quon and other members of its SWAT team pagers that were capable of sending text messages. Each pager was limited to a certain number of characters per month and the City was charged an overage fee for usage in excess of the character limit. The City had a Computer Usage, Internet and E-Mail policy, which, among other things, specified that the City "reserves the right to monitor and log all network activity including e-mail and Internet use, with or without notice. Users should have no expectation of privacy or confidentiality when using these resources." Quon acknowledged that he had read and understood the policy. Although the Computer Usage policy did not specifically mention the text messages sent on pagers, Quon and other employees were informed that the text messages would be treated like e-mails, meaning that they would fall under the City's policy as public information and would be eligible for auditing.

Quon exceed his character limits for several months. At first the City permitted him to simply pay for the overage, but eventually it decided to review the text messages to determine if the character limit was set too low or if employees were using the pagers for personal reasons during work time. Upon review, the City discovered that many of Quon's text messages were not work related and some were sexually explicit. The situation was investigated by internal affairs, which reviewed only the messages Quon sent during work hours. The internal affairs report determined that Quon sent or received 456 messages during August 2002, of which only 57 were work related. Quon was disciplined and subsequently sued the City and the police department, claiming the review of his text messages violated the Fourth Amendment.

The Supreme Court granted certiorari and overturned the Ninth Circuit's determination that the City violated the Fourth Amendment by reviewing Quon's text messages.

Court did not Determine Employees' Expectation of Privacy

The Court did not determine whether the employees had a reasonable expectation of privacy in the text messages, noting that it must "proceed with care when considering the whole concept of privacy expectations in communications made on electronic equipment owned by a government employer." Recognizing that a broad holding addressing employees' expectations of privacy in employer-provided technological equipment might have implications for future cases that it could not predict, the Court stated that it preferred to dispose of the case on narrower grounds.

Presumptions

Accordingly, the Court made several presumptions before reaching a decision: (1) Quon had a reasonable expectation of privacy in text messages sent on the pagers provided to him by the City; (2) the City's review of the text messages constituted a search within the meaning of the Fourth Amendment; (3) the principles applicable to a government employer's search of an employee's physical office apply with at least the same force when the employer intrudes on the employee's privacy in the electronic sphere.

City's Search was Reasonable

The Court held that even if Quon had a reasonable expectation of privacy in the text messages, the City did not violate the Fourth Amendment by reviewing transcripts of the text messages. Applying the standard set forth by earlier Supreme Court cases, the Court held when a search is conducted for a noninvestigatory work-related purpose or to investigate work-related misconduct, a government employer's warrantless search is reasonable if it is "justified at its inception" and if the measures adopted are "reasonably related to the objectives of the search and not excessively intrusive in light of the circumstances giving rise to the search." The Court held that the City's review of the text messages satisfied this standard.

The Court held that the search was justified at its inception because there were "reasonable grounds for suspecting that the search [was] necessary for a noninvestigatory work-related purpose." The search was ordered to determine whether the character limit on the City's pager contract was sufficient to meet the City's needs. The Court held that the City had a legitimate interest in determining that its employees were not being forced to pay out of their own pockets for work-related expenses and that the City was not paying for extensive personal communications. Further, the Court held that reviewing the transcripts was reasonable because it was an efficient and expedient way to determine whether Quon's overages were the result of work-related messaging or personal use.

The Court also held that the review was not excessively intrusive – the City only reviewed two months out of several in which Quon exceeded his monthly allotment in order to obtain a large enough sample to decide whether the character limits were efficacious.

Further, assuming that Quon had a reasonable expectation of privacy in the contents of his messages, the extent of such an expectation is relevant to assessing whether the search was too extensive. The Court held that it was not reasonable for Quon to conclude that his messages were in all circumstances immune from scrutiny. Given that the City issued the pagers to Quon and other SWAT Team members in order to help them more quickly respond to crises – and given that Quon had received no assurances of privacy – Quon could have anticipated that it might be necessary for the City to audit pager messages to assess the SWAT Team's performance in particular emergency situations.

For these same reasons – that the employer had a legitimate reason for the search and that the search was not excessively intrusive in light of that justification – the Court also concluded that the search would be "regarded as reasonable and normal in the private-employer context."

Employers' Bottom Line:

The Court's decision emphasizes the importance of having clear and well-communicated electronic usage policies, which may reduce any expectation of privacy an employee may have in communications on employer-provided electronic equipment. Additionally, under the Court's decision in Quon, an employer's search of an employee's electronic communications should be deemed reasonable where the employer can justify the search based on work-related needs and where the search is not excessively intrusive.

For more information 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

Legal Alert: Anticipated Health Care Reform Grandfathered Plan Regulations Released

Penny Wofford

On June 14, 2010, the Departments of Health and Human Services, Labor and Treasury, officially released much-anticipated grandfathered plan regulations under the Patient Protection and Affordable Care Act (the "Act").

The Act mandates benefit structures for most group health plans beginning as early as the first plan year on or after September 23, 2010. However, health plan coverage existing as of March 23, 2010, called "grandfathered health plan" coverage, is exempt from some provisions of the Act for as long as the plan maintains its grandfathered plan status.

That sounds simple enough except the Act did not address how a plan could lose its grandfathered plan status or at what point changes in a plan become significant enough to destroy grandfathered status. The regulations issued last week, in the form of an interim final rule, address some of those questions.

Changes in Benefits, Cost-Sharing and Contributions

The regulations specify that any changes in benefits, cost-sharing or contributions listed below will cause a plan (or benefit option) to lose its grandfathered plan status:

• Elimination of benefits to diagnose or treat a particular condition or the elimination of benefits for any necessary element to diagnose or treat a condition;
• Increase in percentage cost-sharing borne by employees by any amount;
• Increase in fixed-amount cost sharing borne by employees, other than co payments, by greater than the rate of medical inflation plus 15 percentage points (called a "maximum percentage increase");
• Increase in employees' fixed-amount co-payments by the greater of the "maximum percentage increase" or five dollars increased by medical inflation;
• Decrease in employer contributions toward the cost of any tier of coverage (i.e., single, family, etc.) by more than five percentage points;
• Imposition of new or modified annual limits.

Other Events

In addition, these other events can cause a plan to lose its grandfathered plan status:

• For fully insured plans, if an employer or employee organization enters into a new policy, certificate or contract of insurance after March 23, 2010, the new policy, certification or contract of insurance is not a grandfathered health plan.
• If the primary purpose of a merger, acquisition or business restructuring is to cover new individuals under a grandfathered health plan, the plan loses its grandfathered plan status.
• If employees are transferred into a health plan (transferee plan) from another plan existing as of March 23, 2010 (transferor plan), and (i) the transferor plan, if it were amended to be equivalent to the transferee plan, would lose grandfathered plan status as a result of such amendment, and (ii) there is no bona fide employment reason for the transfer, the transferee plan loses grandfathered plan status.

For example: A plan sponsor offers two health plan coverage options, Option A and Option B. The plan sponsor eliminates Option A because of its high cost. All employees participating in Option A are transferred to the remaining coverage, Option B. If the plan sponsor had amended Option A to match Option B, the amendment would have caused Option A to lose grandfathered plan status. Therefore, Option B loses grandfathered plan status as a result of the transfer.

Required Plan Statement

To maintain grandfathered plan status, a plan administrator must include a statement in any materials distributed to plan participants and beneficiaries describing benefits, that the plan is believed to be a grandfathered health plan within the meaning of section 1251 of the Act and must provide contact information for questions and complaints. The regulations provide a model statement.

If you wish to receive a copy of the model statement, contact Penny C. Wofford, pwofford@fordharrison.com.

Documentation Requirement

A plan must also maintain records documenting the terms of the plan that were in effect on March 23, 2010, and any other documents necessary to verify, explain or clarify its grandfathered plan status. Such documents could include policies, certificates of insurance, summary plan descriptions (SPDs), premium rate sheets or other documentation of employer and employee contributions to the plan.

Transitional Rules

The interim final rules provide some transitional relief for changes made to a plan before the regulations were issued. If changes were made to a plan after March 23, 2010, but before issuance of the regulations, pursuant to (1) a legally binding contract entered before March 23, 2010; (2) a filing made before March 23, 2010, with a State insurance department; or written amendments that were adopted before March 23, 2010, such changes are not taken into account in considering whether coverage remains grandfathered.

In addition, for purposes of enforcement, the agencies will take into account good-faith efforts to comply with a reasonable interpretation of the Act and may disregard changes to a plan that only "modestly exceed" those permissible in the interim final rules.

Finally, the regulations allow a grace period for employers to revoke or modify any changes that were adopted prior to the issuance of the interim final rule that would otherwise cause a plan to lose its grandfathered plan status. An employer is permitted to revoke or modify the change effective the first plan year beginning on or after September 23, 2010, to bring the plan's terms within the limits for retaining grandfathered plan status.

More Guidance May Come

The agencies invited comments as to whether the list of changes addressed in the interim final rules should be expanded. For example, the agencies asked for comments as to whether other changes in plan structure, such as a change from fully insured to self- insured status, changes in network providers, changes to prescription drug formulary, etc., should cause a loss in grandfathered plan status. The agencies further stated that they may, as appropriate, issue additional administrative guidance to clarify or interpret the interim final regulations.

Employers' Bottom Line:

Before adopting changes to an existing health plan, employers should consider whether proposed changes could cause a loss of grandfathered plan status and then carefully weigh the benefit of any considered changes with any potential burden of subjecting the plan to non-grandfathered plan compliance obligations under the Act.

DOL "Clarifies" that FMLA Definition of Son or Daughter Includes Children of Same-Sex Domestic Partners

Karen Montas-Coleman

The U.S. Department of Labor (DOL) recently issued an Administrative Interpretation (AI) clarifying its opinion that employees are entitled to take Family and Medical Leave Act (FMLA) leave for birth, bonding or to care for the child of a domestic partner or same-sex domestic partner, as well as other children for whom an employee has responsibility for day-to-day care or financial responsibility, even though the employee has no biological or legal relationship with the child. According to the DOL, the AI was issued in response to numerous inquiries from employers regarding when an employee with no legal relationship to a child is considered to be standing "in loco parentis" under the FMLA and, accordingly, entitled to leave. (The AI does not address an employee's entitlement to take military-related leave under the FMLA, which is governed by different definitions.)

Although the DOL states that it is clarifying the definition of when an employee is considered to stand "in loco parentis," this is the first time the agency has specifically stated that otherwise covered employees are entitled to take FMLA leave to care for the children of same-sex domestic partners.

Background

The FMLA allows an eligible employee to take up to 12 weeks of leave for the birth or placement of a child, to care for a newborn or newly placed child, or to care for a child with a serious health condition. The FMLA defines a "son or daughter" as a "biological, adopted or foster child, a stepchild, a legal ward, or a child of a person standing in loco parentis."

The AI explains that Congress intended the definition of "son or daughter" to reflect the reality that many children in the Unites States today do not live in traditional "nuclear" families with their biological father and mother. Congress further stated that the definition was intended to be construed to ensure that an employee who has day-to-day responsibility for caring for a child is entitled to leave even if the employee does not have a biological or legal relationship to the child. Accordingly, Congress included the term "in loco parentis," which is defined as "in the place of the parent" within the definition of "son or daughter." The key in determining whether someone is "in loco parentis" is the intention of the person to assume the status of parent toward a child.

Interpretation

The DOL stated that whether an employee stands "in loco parentis" to a child is a fact issue dependent on multiple factors including:

• the age of the child;
• the degree to which the child is dependent on the person claiming to be standing "in loco parentis";
• the amount of support, if any, provided; and
• the extent to which duties commonly associated with parenthood are exercised.

Further, the FMLA regulations define "in loco parentis" as including those with day-to- day responsibilities to care for and financially support a child. The AI interprets this regulation to require either day-to-day responsibilities for care or responsibility for financial support, but states that an employee is not required to show both factors to be considered standing "in loco parentis" for a child.

Thus, the AI states that employees with no legal or biological relationship to a child may nonetheless stand "in loco parentis" to a child and be entitled FMLA leave. Examples of persons who might fit the definition of "in loco parentis" include:

• an employee raising a child with the biological parent;
• same sex partners raising a child where the employee has no legal or biological relationship with the child;
• an employee who requests leave to bond with the adopted child of a same sex- partner; and
• a grandparent or other relative who has taken on the responsibility to raise a child but has not legally adopted the child.

It should be noted that the fact that a child has biological parents does not prevent a finding that the child is the "son or daughter" of an employee who lacks a legal relationship with the child because "neither the statute nor the regulations restrict the number of parents a child may have under the FMLA." However, an employee who cares for a child while the child's parents are on vacation would not be considered to be "in loco parentis" to the child. According to the Administrator, an employer who is not sure whether the employee is entitled to leave as standing "in loco parentis" should be satisfied with a simple statement asserting that the requisite family relationship exists.

Employers' Bottom Line

Whether an employee's relationship to a child is covered under the FMLA must be analyzed on a case by case basis. The fact that an employee provides either day-to-day care or financial support may be sufficient to establish an "in loco parentis" relationship where the employee intends to assume the responsibilities of a parent. Therefore, it is important to be aware of the broad interpretation the DOL gives this term and carefully analyze every request under the FMLA for leave to care for a child.

If you have any questions about the Administrative Interpretation or other FMLA issues, please contact the author of this Alert, Karen Montas-Coleman, kcoleman@fordharrison.com or 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

Tennessee Governor Signs Law Permitting English-Only Policies

Delaine Smith

On June 23, Tennessee Governor Phil Bredesen signed into law a bill permitting English-only policies in the workplace. Well, sort of. The law adds a new section to the Tennessee Human Rights Act that declares:

It is not a discriminatory practice for an employer to institute a policy in the employer's workplace that requires all employees speak only in English at certain times when the employer has a legitimate business necessity for such a policy, including but not limited to the safe and efficient operation of the employer's business.

The specific language of this new provision was debated and revised in an effort to balance the concerns of employer and employee rights groups.

To whom can it apply?

Although an earlier version of the bill applied to both employees and applicants (requiring applicants to "agree" to speak English-only if hired), the final version allows an English-only policy to extend only to employees. However, as noted below, although the law ostensibly permits application of English-only policies to "all employees," employers should carefully consider whether such a broad application would be justified under the circumstances of their workplace.

Limiting Language: "At Certain Times" . . . "Legitimate Business Necessity" . . . "Safe and Efficient"

The statute limits application of the English-only rule to "at certain times when the employer has a legitimate business necessity for such a policy." There was much debate about this provision. The final version replaced the words "while engaged in work" with the broader language "at certain times" followed by the limiting business necessity language. An earlier version of the bill specifically articulated the business necessity provision to mean (1) communications with customers, co-workers, or supervisors who speak English, and (2) in emergencies or other situations in which workers must speak a common language to promote and ensure safety. Such language mirrored an EEOC guidance, which also permits English-only rules for "cooperative work assignments in which a common language is needed to promote efficiency." However, the final Tennessee law deleted that enumeration, and instead, the law as passed requires a legitimate business necessity but does not otherwise define that term other than to say that it includes but is not limited to, "safe and efficient operation of the employer's business."

Notice and consequences

In order to invoke an English-only policy, an employer must give employees notice of the policy and the consequences of violating it. The law does not specify whether notice in English only is sufficient.

New Law?

Significantly, this law has no effect on the federal laws and regulations on English-only rules, including the EEOC position that permits English-only rules only "if needed to promote the safe or efficient operation of the employer's business." A spokesperson for the Governor stated that the Governor signed the law because it does not change Tennessee law with respect to English-only provisions, and it contains an additional unrelated section protecting volunteer rescue squad workers from termination if they are absent from or late to work because they responded to an emergency. See T.C.A. § 4-21401(d).

Bottom Line for Employers

Employers should be cautious if considering an English-only policy. Such a policy should be narrowly tailored to reflect truly legitimate business necessity that can be clearly demonstrated if challenged. Under both Tennessee state and federal law, employers should not prohibit employees from speaking other than English on rest or meal breaks or other non-working times. Further, before adopting such a policy, employers should weigh the business necessity for the policy against the potential negative impact on employee morale and any diversity initiatives of the company.

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