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APRIL 2003 I. LEGISLATIVE/REGULATORY
UPDATE California Legislation Several bills are currently pending in the California legislature that, if passed, may impact California employers and employees.
U.S. Representative Judy Biggert (R-Illinois) has introduced the Family Time Flexibility Act (HR 1119). The bill would amend the Fair Labor Standards Act to allow private sector employers to offer the choice between compensated time off (“comp time”) and overtime pay. Under the bill, employees would be permitted to voluntarily choose to receive paid time off rather than cash overtime wages. Such agreements would need to be in writing and could not be a condition of employment. Further, the employee must have the ability to withdraw from the agreement. Comp time would accrue at the rate of one and a half times the employee’s regular rate of pay when more than 40 hours are worked in a workweek. No employee would be permitted to bank more than 160 hours of comp time, and the paid time must be taken within one year from the time the extra hours were worked. For the measure to assist most California employers, however, state law would need to be revised.
HIPAA privacy rules that relate to the protection of medical records went into effect for “covered entities” on April 14, 2003. “Small health plans” (those with annual receipts of $5 million or less) must comply by April 14, 2004. A “covered entity” is typically a health care provider, health insurance plan or third-party administrator, or health care clearinghouse that collects and maintains health care records. Covered entities may include employers whose health plans are self-insured and administer health benefits for employees internally. They also include employers that run on-site health clinics for employees. Information subject to HIPAA is referred to as “protected health information” (PHI), which includes individually identifiable health information, transmitted or maintained in any form or medium. This individually identifiable information includes a lengthy list of health and personal information that either identifies or can be used to identify an individual and related medical data. A “covered health plan” includes a group health plan, defined as an employee welfare benefit plan under ERISA. Covered health plans include both insured and self-insured plans, hospital and medical benefits plans, dental plans, vision plans, health flexible spending accounts, and employee assistance plans. An exception exists for self-administered plans with less than 50 participants. However, small plans that are administered by a third-party, such as a third-party administrator, are covered by HIPAA. Under HIPAA, a covered entity generally may not use or disclose PHI, except for treatment, payment, or health care operations in compliance with HIPAA requirements:
In addition, HIPAA grants certain rights to individuals, such as the rights to access, amend, and receive an accounting of disclosures of their PHI. HIPAA also imposes certain administrative responsibilities on covered entities. While most employers are not “covered entities,” many are plan sponsors subject to the obligations of a plan sponsor and/or plan administrator under HIPAA or ERISA. Plan sponsors likely have an obligation to ensure that their plans are in compliance with HIPAA. This creates a dual role for employers. First, the employer will need to ensure that any covered plans comply with the applicable HIPAA requirements. Employers should verify that third-party administrators and insurance carriers comply with HIPAA requirements. Second, the employer that wants or needs access to its plan’s PHI will need to comply with the plan sponsor requirements. A health flexible spending account is considered a covered plan and, when self-funded, must comply with HIPAA privacy requirements. If it is separate from other health benefits and qualifies as a “small health plan,” compliance with the rules may be delayed until April 14, 2004. HIPAA includes special exemptions for medical information relating to workers’ compensation cases, allowing disclosure of only such information as is authorized by and necessary to comply with relevant law. The rules will have limited impact on compliance with family leave, pregnancy leave, sick leave, and disability laws because in such situations the medical information comes voluntarily from the employee or, with the employee’s authorization, from the treating physician.
The U.S. Department of Labor published a proposal to modernize its regulations defining overtime exemptions for white collar employees under the federal Fair Labor Standards Act. The proposal would replace current regulations and make significant changes in federal wage and hour law. The proposed regulations increase the minimum salary for white collar exempt employees to $425 per week – a substantial increase from the current minimum of $155 per week for administrative and executive employees and $170 per week for professional employees. The regulations would also permit employers to suspend exempt employees in one day increments without pay for disciplinary reasons. Finally, the proposed regulations would replace the current duties test for the three white collar classifications: Executive Duties: The proposed test would have three requirements: (1) managing the enterprise; (2) directing the work of two or more employees; and (3) having the authority to hire or fire, or make recommendations about hiring or firing that are given great weight. Administrative Duties: The proposed regulations require that the exempt employee must hold a position of responsibility and strike the discretion and independent judgment test. Professional Duties: The proposed regulations supplement the current advanced learning requirement to include professionals who gain equivalent knowledge and skills through a combination of job experience, military training, and attendance at a technical school or community college. For the proposal to assist most California employers, however, state law would also need to be revised. II. JUDICIAL UPDATE Employee Gives Insufficient Notice for Family Leave In Stevens v. California Department of Corrections, a California court of appeal ruled that an employee’s request for vacation during a holiday period to visit ailing parents is insufficient notice for leave protected by the California Family Rights Act (“CFRA”). Keeley Stevens (“the Employee”), a sergeant employed by the California Department of Corrections (“the Employer”), requested a one week vacation to spend Christmas with his parents in Michigan. In the request, the Employee noted his parents’ deteriorating health and his concern that their deaths may be near. When the Employer denied the Employee’s request because there were no open vacation slots, the Employee sued, alleging the Employer violated the CFRA by denying his request for family leave. The court opined that the Employee requested time to spend the Christmas holiday with his parents who might pass away in the near future, not time to provide care for their serious health conditions. To provide notice sufficient to qualify for CFRA leave, the Employee needed to state that his parents had serious health conditions and state his intention to care for them. Moreover, the court emphasized that an employer is not required to be clairvoyant. The Stevens case reminds covered employers of several steps to take in regard to family and medical leave: (1) CFRA and FMLA posters should be posted in the workplace; (2) information about an employee’s obligation to provide notice of the need for family and medical leave should be set forth in the employee handbook; (3) employees should provide enough information in a leave of absence request so the employer can determine whether it is covered by CFRA or FMLA. While employees do not need to ask specifically for family and medical leave or mention CFRA or FMLA by name, they must at least provide verbal notice to make the employer aware the employee needs leave for a CFRA or FMLA qualifying event. An employer may then request a doctor’s certification confirming that the family member has a serious health condition; and (4) further inquiry may not be necessary if an employee requests vacation or PTO. If, however, an employer denies a request for time off and the employee later reveals that the request may be for a family leave qualifying purpose, the employer may inquire further into the reasons for the absence.
In Gradilla v. Ruskin Manufacturing, the Ninth Circuit Court of Appeals dismissed a lawsuit filed by Arnulfo Gradilla (“the Employee”) who claimed that he was entitled to protected leave under the California Family Rights Act (“CFRA”). The Employee worked for Ruskin Manufacturing (“the Employer”) as a sheet metal assembler. The Employee was informed by his wife that her father died in a car accident in Mexico. She asked that he accompany her to the funeral. When the Employee asked permission to miss work, he was told he did not qualify for bereavement leave. When the Employee told his supervisor he needed to accompany his wife because of her heart condition, his request was granted, although there was no mention that the leave would be protected by the CFRA. While in Mexico, the Employee’s wife experienced heart problems. Also while the Employee was away, the Employer scheduled a mandatory overtime workday. Because of the mandatory overtime, the Employee missed three days of work. When the Employee returned to work, he was told to go home. Three days later, the Employer terminated the Employee’s employment for violating the three-day no-call/no-show policy. The Employee claimed his termination was unlawful because he had a right to family and medical leave under the CFRA. The Ninth Circuit disagreed and found that the Employee failed to prove that he left work “to care for” his spouse, as is required by the CFRA. According to the court, “the scope of the CFRA does not include a requirement that an employer must accommodate an employee whose spouse decides, in spite of her serious health condition, to travel away from her home for reasons unrelated to her medical treatment.” Moreover, the court held “caring for” has been interpreted to involve some level of participation in ongoing medical or psychological treatment of a condition, either inpatient or at home, not traveling to a funeral in Mexico.
In Yanowitz v. L’Oreal USA, Inc., a California court of appeal addressed an unlawful retaliation claim set forth by Elysa Yanowitz (“the Employee”), a regional sales manager of L’Oreal (“the Employer”). A male executive allegedly ordered the Employee to fire a female employee in her region because the executive found the employee insufficiently attractive. The Employee did not conduct the termination of employment. The executive and the Employee’s immediate supervisor then subjected the Employee to heightened scrutiny and increasingly hostile evaluations. Within four months, the Employee went out on stress leave and her position was eventually filled. The court of appeal determined that a male
executive’s order to fire a female employee because she fails to
meet the executive’s standards for sexual attractiveness is an act
of sex discrimination, as no similar standards were applied to men. Further,
the court opined, the Employee’s refusal to carry out that order
was a protected activity. Consequently, the Employer was not permitted
to retaliate against the Employee for that refusal.
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