By Douglas B. Mishkin, Partner and Co-Chair, Employment Law Practice Group
Welcome to the inaugural edition of the Employment Law Insight, a service of the Employment Law practice group at Patton Boggs LLP.
Employers are best served by integrated legal services that address their core needs: employment (discrimination and harassment, compensation and noncompetition); benefits; immigration; and health and safety. Our Employment Law practice group provides such services to our clients throughout the United States and internationally.
Why “Employment Law Insight”? Employers have available to them, and indeed are besieged by, a wealth of legal information about the workplace on a daily basis. Our purpose is to select from that wealth of information those nuggets we think are most worthy of your attention and then to offer insight – a different way of looking at an issue, of conducting your workplace, of addressing your thorniest problems.
Our group comprises litigators and counselors and policy professionals. Collectively we bring an array of perspectives to the challenges that employers face as employers. Staying out of court, litigating aggressively when necessary to protect your interests, monitoring legislative and agency developments and occasionally examining the possibilities for changing the law all have their time and place. An employer should expect its law firm to determine and provide the right approach for the right situation. Our Employment Law practice group does just that.
We hope you will find our Employment Law Insight a helpful addition to your professional reading. You will find author contact information for each article provided. We welcome your questions, comments and other feedback, and look forward to “speaking” with you from time to time.
EEOC Issues Guidance on the ADA and Cancer, Diabetes, Epilepsy and Intellectual Disabilities
Jennifer L. Keefe, Partner; Caroline Davidson-Hood, Associate
On May 15, the Equal Employment Opportunity Commission (EEOC) issued new guidance on the applicability of the Americans with Disabilities Act (ADA) to job applicants and employees with cancer, diabetes, epilepsy and intellectual disabilities. A complete overview of the new guidance is provided on the EEOC website, in a section on disability discrimination is available here.
As EEOC Chair Jacqueline Berrien explained, “While there is a considerable amount of general information available about the ADA, the EEOC often is asked about how the ADA applies to these conditions.” The guidance anticipates and responds to some of those questions, providing examples of reasonable accommodations employers may be expected to make for employees with one of the conditions.
The guidance defines each of the four conditions and identifies them as protected disabilities under the ADA as amended by the American with Disabilities Amendments Act of 2008 (ADAAA). Just as the ADA’s definition of “disability” includes a “record” of impairment that rises to the level of a disability, cancer that is in remission or diabetes that is controlled by medication or diet are considered disabilities.
According to the EEOC, an “intellectual disability” exists if one’s IQ is below 70-75; one is limited in “adaptive skill areas” such as communication, self-care, home living, social skills, health and safety, self-direction, functional academics such as reading, writing or math; and the disability originated before the age of 18.
Obtaining and Disclosing Medical Information
The ADA has long prohibited employers from asking a job applicant about his or her disability before an offer is made unless the disability is obvious or voluntarily disclosed. Inquiries are permitted after an offer is made, so long as all similarly-situated applicants are treated the same. Once the employer obtains medical information, it may follow-up with questions such as whether the condition will interfere with the employee’s ability to do the job.
The guidance explains, for example, that if a candidate for a chef position discloses his epilepsy in his post-offer medical evaluation, the employer may ask whether he can safely work with hot and sharp objects. If the epilepsy is controlled by medication and the candidate has safely worked as a chef for several years, the employer may not withdraw the offer. An employer may request documentation from the candidate’s doctor verifying the condition. Except in specified circumstances, an employer must not disclose any information about the employee’s condition.
Under the ADA as amended, an employer must provide a reasonable accommodation if an employee requests one or the need for the accommodation is evident, so long as the request does not impose an undue burden. For each of the four conditions discussed, the EEOC suggests a number of reasonable accommodations.
For a person with an intellectual disability, reasonable accommodations might include reading written instruction aloud, expanding trainings and using demonstrations, placing pictures or color-coding instead of words on labels. If an employee is limited from performing functions that are marginal to a job, like closing out the register at a concession stand at the end of an evening, that person may be assigned alternative tasks, such as cleaning.
Reasonable accommodations for diabetes include providing a private place to administer injections and breaks to eat, drink, take medication or check blood sugar levels as needed. For cancer, reasonable accommodations include leave for doctor’s appointments, rest or medication breaks, a modified schedule, permission to work from home, or change in office temperature. The guidance encourages flex-time schedules or shift changes to permit employees to attend weekday radiation treatments or doctor’s appointments during regular business hours.
For epileptics, common reasonable accommodations include permission to bring a service animal to work, providing a driver for meetings and other work-related events, or permitting work from home.
Employers must be careful not to act on the basis of myth, fears or stereotypes in addressing workplace safety concerns. Refusing to hire--or terminating--an individual with a disability for safety reasons must be justified by a “direct threat” of substantial harm that cannot be eliminated or reduced by reasonable accommodation. The harm must be serious and likely to occur, not speculative.
For example, an epileptic welder who fails to take medication and experiences sudden and unpredictable seizures is a direct threat. An employer may not demote a cancer survivor because of fears that job stress may cause a relapse. Similarly, an employer should not assume that a person with intellectual disabilities may not work in a kitchen with sharp knives and hot ovens unless it has specific information indicating that the employee cannot understand and follow safety procedures. Finally, to prevent harassment in the workplace, the EEOC suggests that employers maintain and enforce a written policy and conduct periodic training.
In light of recent EEOC lawsuits under the Genetic Information Non-Discrimination Act, the new guidance suggests that the EEOC is paying heightened attention to the intersection of health matters and discrimination in the workplace, particularly when such discrimination may be related to one of the four conditions specified.
Employers with current or prospective employees with any of the conditions specified should review the new guidance to ensure compliance. Complex questions or issues may be discussed with any member of the Patton Boggs Employment Law practice group.
Continued Vigilance Required for Nonqualified Deferred Compensation Arrangements
Stacey Grundman, Benefits Attorney
The newness of the IRC Section 409A regulations governing deferred compensation is long-gone, but the complexities of this regulatory scheme remain burdensome and all should be vigilant to ensure compliance as penalties can be severe.
If you have been avoiding addressing potential Section 409A problems or think some have been overlooked, there are voluntary corrections programs available to bring deferred compensation plans into compliance.
As a refresher, Section 409A and its implementing regulations impose sweeping restrictions on a broad range of deferred compensation arrangements. The penalties for noncompliance are steep – immediate inclusion in income for all vested benefits and a 20 percent excise tax on all such amounts.
All compensation that is earned, or to which there is a legally binding right, in one taxable year, but that is payable and includable in income, pursuant to the terms or a plan or arrangement, in a subsequent tax year is considered deferred compensation subject to Section 409A. Thus, deferred compensation is defined broadly – raising Section 409A issues in a variety of plans and arrangements including:
SERPs, excess benefit plans, and other nonqualified retirement plans;
Separation and severance plans;
Salary continuation arrangements;
Performance/incentive pay arrangements;
Stock option plans;
Guaranteed payments under partnership and LLC agreements;
Warrants or other rights to acquire interests in partnerships and LLCs;
Sick pay plans; and
Split dollar life insurance arrangements (providing benefits other than death benefits).
Code Section 409A limits the distribution of benefits to specified events or times and prohibits the delay or acceleration of the benefit payment schedule unless certain conditions are met. Specifically, distributions may only occur upon a separation from service (provided that a “specified employee” of a public company may not receive distributions until at least six months after separation); a fixed time, or pursuant to a fixed schedule, specified under the plan; death; disability; change in control; or an unforeseeable emergency.
In order to comply with Section 409A, a deferral election must be made by the end of the year preceding the calendar year in which services are to be provided. Generally, a change in the time and form of a distribution is permitted only if (a) the election to delay is made at least 12 months before a scheduled payment and (b) the postponement of the distribution is at least an additional five years. The regulations proscribe criteria for accelerating benefit distributions as well.
Correcting Operational and Documentary Defects
The Internal Revenue Service (IRS) has issued guidance to address situations where a deferred compensation arrangement does not comply with Section 409A (a “document failure”), or the deferred compensation agreement is not administered in a manner that complies with Section 409A (an “operational failure”).
IRS Notice 2008-113 provides procedures for correcting inadvertent failures to operate a plan or agreement in compliance with Section 409A and the Section 409A Rules. These procedures can be followed to correct mistaken accelerations, mistaken deferrals, and options with exercise prices mistakenly set below its fair market value of the date of grant. Utilization of these procedures trigger significant reporting requirements.
IRS Notice 2010-6 provides procedures for correcting provisions in plans and agreements that inadvertently fail to comply with Section 409A and Section 409A Rules. It clarifies that certain ambiguous plan terms will not be treated as Section 409A violations as long as the plan is not under examination by the IRS. The Notice also provides specific correction procedures for certain types of inadvertent document failures. Most require plan amendments and some require partial income inclusion if non-compliant provisions will be triggered within one year of the correction. These procedures are not available to stock right plans or plans linked to other nonqualified or qualified plans. Plan sponsors that make corrections under this Notice are subject to special reporting requirements.
IRS Notice 2010-80 modifies the guidance given by Notice 2008-113 and Notice 2010-6 by clarifying certain provisions of each notice, expanding the relief provided by each notice and reducing reporting requirements, and providing certain additional methods of correction.
Proposed Section 409A regulations on income inclusion provide additional correction options for certain operational failures – but only for deferred compensation that is not yet vested. In addition, there may be general income principles that serve as basis for corrections.
Notably, each approach provides opportunities for voluntary corrections in only limited situations. Plan sponsors are advised to take action regarding Section 409A compliance with respect to both existing plans that should be reviewed for compliance and in drafting new plans.
Employment Law Update: Immigration Reform on the Hill
Kristin D. Wells, Of Counsel
This month, all American employers should keep a watchful eye on the debate on comprehensive immigration reform. The expansive bill that has taken center stage on the floor of the U.S. Senate, will impact recruiting and hiring practices, benefits packages and HR management processes for most U.S. companies. The bill not only seeks to legalize 11 million undocumented U.S. residents, but also, for example, requires electronic verification of the legal status of all new hires and will determine whether legalized immigrants can receive health care insurance and other benefits. In addition, the bill will create thousands of visas under new and expanded programs for agricultural workers, lower-skilled guest workers and high-skilled workers, and it makes important changes to many existing visa categories, such as additional recruitment requirements for all employers seeking to hire a foreign national under the popular H-1B visa program.
After a thorough review and amendment process in the Senate Judiciary Committee, Senate Majority Leader Harry Reid brought S. 744, the “Border Security, Economic Opportunity and Immigration Reform Act of 2013” to the Senate floor for three weeks of debate in early June. He promises to hold a final vote on the bill prior to the July 4th recess. In the deliberative style of the Senate, debate will cover a wide range of issues, but votes will only be held on a limited number of amendments.
At present, the bipartisan Group of 7 in the House continues to work on drafting a comprehensive bill. As the Senate completes its work, pressure is building on the House to move legislation and the Republican caucus is beginning to respond. Under the leadership of Judiciary Committee Chairman Bob Goodlatte (R-VA), Republican members have introduced topic-specific bills on core areas of reform–such as the E-Verify employment verification system, agricultural workers, and high-skilled workers. Two of these bills were marked up this week, and the third is scheduled for a markup next week. A substantial border security bill passed the Homeland Security Committee last month.
Speaker John Boehner and others in the House leadership have promised their members that they will not take up the Senate bill in the House, and that they will only pass a bill in the House that enjoys the support of the majority of the Republican caucus. Exactly what bills will be passed on the floor and how this process will be managed remains to be seen. There is still a possibility that these bills could be merged and conferenced with a Senate bill, if bills pass in both chambers. Should a comprehensive immigration reform bill pass Congress and be signed into law, it will have a strong impact on how hiring and benefits are handled by all American employers in the foreseeable future. Policy advisors to the Employment Law practice group at Patton Boggs continue to monitor the progress of this important legislation and provide periodic updates to clients and other interested entities.
U.S. Customs and Border Protection Revises I-94 Processes
Shaoul Aslan, Partner
Sam Mudrick, Associate
Foreign nationals entering the United States through an air or sea port will most likely not be issued an I-94 Arrival-Departure Record, the small card normally stapled into the passports of foreign nationals. The U.S. Customs and Border Protection agency (CBP) announced that, effective May 31, I-94 cards would no longer be issued at air and sea ports of entry.
Instead, passports will be stamped with the date of arrival and the date that an individual’s approved status in the United States will expire. I-94s will now only be available electronically by visiting the CBP website, available here, and entering personal data and entry information on the foreign national. Foreign nationals will be then able to print a copy of the electronic I-94. The following information on the individual must be entered to obtain the I-94:
Family and First names
Date of Birth
Passport Country of Issuance
Date of Entry
Class of Admission
A printed copy of the electronic I-94 will still be required for various reasons, such as completing the employee’s Form I-9, or applying for a change to immigration status, so a copy of an individual’s I-94 should be printed and retained upon entering the United States.
Further, a printed copy of the I-94 ensures that the date of status expiration matches the date stamped in the passport. Inconsistent dates should immediately be brought to the attention of an individual’s immigration attorney to determine whether it is necessary to contact CBP to correct the error. Failure to do so could result in overstays and future immigration problems.