Adverse Action – Two Step Process (cont.)

SHRM 2012
• Michael P Aitken
– Discussed the climate in DC right now – with the current
approval rating of Congress being only 11% - what that can
mean for the Presidential Election as well as those in
Congress looking to get re-elected.
– Key Issues that of focus include:
• Mandatory employment verification process
• Efforts to overhaul the recognition of unions in the
collective bargaining process
• Proposals to amend current affirmative action
requirement for employers in regard to veterans,
people with disabilities and others.
Current Stats on Congress
• Fact – Incumbents win re election when
unemployment is down
– Senate has 33 open seats – 10 because members
are retiring
– The House has 41 open seats – 13 because
members are retiring
Obama Administration – focus on
Work Flexibility
• New website that shares Research and
Employer Best Practices
• The DOL is launching a employer/employee
survey on FMLA Issues – no date was
DOL Proposed Regulations - FMLA
• Military Leave
– Clarifies to include recent veterans
– Defines serious injury/illness to include preexisting conditions aggravated in the line of duty.
– Expands the amount of leave for rest and recover
from up to 5 days to 15 days
• Intermittent Leave
– Intermittent leave is traced like all other forms of
leave (sick, vacation, personal) provided it is not
greater than one hour
The Supreme Court Speaks… Are You
• Key areas of employment law they are
– Discrimination
– Class and Collective Actions
– Retaliation
• Disparate Impact v. Disparate Treatment
– Disparate Impact – attack on Practice/Policy “no
intent” but did impact a group of employees
– Disparate Treatment – How an individual/group
was treated based on their membership in a
group, “there is intent”
Class Certification
• Wal-Mart v Dukes (June 20, 2011)
– Issue – whether a federal court may hear a
nationwide class-action on behalf of hundreds of
thousands of female Wal-Mart employees,
charging the company with engaging in a pattern
and practice of pay and promotional
discrimination (against women)
How to avoid being a class action
• Watch for early indicators of exposure
• Closely scrutinize individual charges and
resolve early when possible
• Be proactive with policies, procedures and
training (this means more than just lip service)
• Look at your own stats
• Be careful when providing
• Facts
– Retaliation claims are on the rise
– In 2010 retaliation surpassed race discrimination
as the most common type of charge filed with the
– In 2011, retaliation continued to surpass race
discrimination as the most common type of EEOC
charge filed
– 37% of the 99,947 federal workplace
discrimination charges filed alleged retaliation
Why the increase
• Relatively easy to establish
– Protected activity
– Adverse action
– Causal link between the two
• Juries are predisposed to find retaliation
• Recent U.S. Supreme Court cases
U.S. Supreme Court
2011-2012 Term
• Ministerial exception – Hosanna-Tabor
Evangelical Lutheran Church and School v
• Health Care Reform – Dept. of Health and
Human Services v. Florida; NFIB v. Sebelius;
and Florida v HHS
• FLSA exemption – Christopher v. SmithKline
Beecham Corp.
• Immigration – Arizona v. United States
The Enforcers: A U.S. Department of
Labor Update
• Miss Classification Initiative – Employee vs.
Independent Contractors
• Child Labor Laws
– Agriculture
– Care providers – example – currently minors can
operate a patient/resident lift – they want this
• Companionship Services
– FLSA – over time exemption
• P3 – Plan/Prevent/Protect
– OSHA enforcement
The Enforcers: A U.S. Department of
Labor Update - Continue
– Proposing new rules for Military Leave
• Extend to regular armed forces – but only if they are
deployed to a foreign country
• Rest and recuperation from 5 days to 15 days
• Extended caregiver leave to Veterans with serious
injury or illness
Enforcement Initiatives
• More Directed Investigations – 35% of investigations
are started with no complaining employee
• Employee vs. Independent Contractor
– Targeted Industries
Home Health Care
Child Care
Poultry/Meat Procession
Professional and Personnel Services
Enforcement Initiatives
• The DOL is working with the
– State Regulators
– Worker Advocates and Community Organizations
– Union
ERISA Update: Keeping Your Benefit
Plans (and You!) Out of Trouble
• Question – Because Health Care Reform Act is
being legally challenged, do group health
plans have to comply with requirement now in
– Answer – Only the individual mandate has been
ruled unconstitutional so far –
The U.S. Supreme Court heard oral arguments
March 26-28, 2012 – Decision expected in June
What to Do?
• Make sure group health plans are in
compliance with all applicable provisions that
became effective for plan years beginning
after Sept. 23, 2010.
• Start implementation planning for provisions
becoming effective in 2013, if planning needs
to start before late June 2012.
Do You Need To Fess UP?
• Failure of group health plan to comply with
any requirement of the Health Care Reform
Act results in excise tax on employer
– $100/day/affected individual
• Define Contribution Plans
– 401-k time lines:
• Disclosure from service providers – due 7/1/12
• General disclosure by plan fiduciary 8/30/2012
• Quarterly disclosure - no later than 45 days after end
of calendar quarter – due 11/14/2012
Summary of Benefits
• After 9/22/2012
– Must use a standard glossary of terms
– Can not exceed 8 pages
– Must be included with enrollment materials
– Must be provided 30 days before the plan year
The Safe Harbor rule of 2002 is still in effect
Health Care Reform – 2 Years Later
• Timeline for top priority 2012-2013 activities:
– $2500 health FSA contribution cap
– Higher Medicare payroll tax on wages exceeding $200,000
individual; $250,000 couple
– Form W-2 – track Health Care for reporting in 2013
– No cost sharing for Women’s preventive services for nongrandfathered plans
– Employers notify employees about exchanges
– Medical device manufacturers fees start
– Change in Medicare retiree drug subsidy tax treatment
takes effect
– Exchanges initial open enrollment period to being in the
Focus 2012-2013
• Summary of Benefits and Coverage (SBC)
– Must use the government-supplied SBC template
– Must use uniform glossary
• Which Plans?
– SBCs are required for all insured and self-funded
group health plans (grandfathered or not), including
stand-alone health reimbursement arrangements and
certain health flexible spending arrangements
– SBCs are not required for “excepted benefits” or
health savings accounts
– Many ex-pat plans largely exempt from providing
Focus 2012-2013 Continue
• Employers can provide stand-alone SBCs or
combine them with other plan materials, such
as summary plan descriptions (SPDs), as long
as the SBC is displayed at the start
• SBCs only for benefit package in which
participant is enrolled, eliminating
unnecessary multiple versions.
– Can be paper or electronic
Focus 2012-2013 Continue
• W-2 reporting
– Employers must report value of employersponsored health coverage on employee W-2
• Information reporting only; won’t affect tax treatment
of coverage
• Private sector employers
• Federal, state and local governments
• Exemptions: Churches/religious organizations selffunded plans. Employers issuing fewer than 250 W-2s
and Indian tribal governments
W-2 Continued
• What must be included:
Group health plans
Mini-med plans
Medicare supplemental
Employer flex credits
On-site medical clinics
Wellness Programs
Non integrated dental and vision
Employee salary reduction amounts to FSA
HAS contributions
HRA contributions
Employer contributions to multi employer plans
Government provided military coverage
Accident, disability, AD&D
Workers’ compensation
Other hospital/fixed indemnity
Additional Women’s Preventive
• Non-grandfathered plans must cover 100% in-network
women’s preventive services meeting criteria issued in
2011 guidelines, including:
– All FDA-approved contraceptive methods, sterilization
procedures, counseling
– Lactation support, counseling
– HPV and HIV testing
– Domestic violence screening, counseling
– Counseling on sexually transmitted infections
– Screening for gestational diabetes
Projected cost increases range from 0% - 0.5% (2013) but may
range from 0.5% - 1.5% longer term.
Shifting rules for religious-affiliated employers
More on the horizon in 2014
• Shared responsibility
– What is employer shared responsibility?
– Which employers are subject to shared
– How will an employer’s size be determined.
• No waiting periods longer than 90 days
• Exchanges
• Individual coverage mandate
Employment Background Screening;
Navigating Turbulent Waters to Stay in
Compliance and Out of Litigation
• Fair Credit Reporting Act (FCRA)
• State law Considerations
– Credit Checks
– Criminal History Information
• EEOC Focus & Related Litigation
• Recommendations for Employers
Fair Credit Reporting Act (FCRA)
• Mandates responsibilities of third-parties who
collect information about applicants or
employees (Consumer Reporting Agencies)
• Mandates requirements for users of this
information (End-User)
• Mandates requirements for the entities that
furnish information to the Consumer
Reporting Agencies (Furnisher’s)
What is a Consumer Report
• Any written, oral or other communication of any
information made by a CRA concerning a consumer’s
Credit worthiness, credit standing, credit capacity
General reputation
Personal characteristics, or
Mode of living
• Which is used or expected to be used or collected for one of the
“permissible purposes” (e.g., employment purposes)
Examples: criminal history, employment
references, education verification, driving
End-User Responsibility Under the
1. Permissible Purpose
– Employment
– At the Written Direction
2. Disclosure & Authorization
– Separate from application
– Specific state requirements
3. Adverse Action
– Two-step process for employment
4. Certification To CRA
– Generally in the agreement with CRA
Permissible Purpose
• Before running a background check, a person
must have a “permissible purpose” under the
– Employment is most common
– At the written direction of the consumer
– Insurance
– Issuance of credit
– Response to court order
Disclosure & Authorization
• Employers utilizing consumer reports for
employment purposes must:
– Disclose in a separate document that a consumer
report may be obtained
– Obtain written authorization from the individual
prior to ordering the report
• FTC opinion is that both disclosure and authorization
can be in one document
• Recent litigation challenging applicant tracking systems
• Recent litigation on challenging electronic signatures
Adverse Action – Two Step Process
• Adverse action is: Any action taken that is
adverse to the interest of the consumer
• Before adverse action is taken employers must
provide consumer with:
– A copy of the consumer report
– A summary of the consumer’s rights under the
– Any state law rights
Waiting Period
• Between pre-adverse action notice and
adverse action notice an employer must WAIT
– FTC’s opinion is that 5 business days is reasonable
– Purpose is to allow a consumer to dispute the
accuracy of completeness of the report BEFORE
have adverse action taken
– Many employers fail this part by contacting the
applicant by phone before giving pre-adverse
action notices
Adverse Action – Two Step Process
• Adverse Action
– Notice of the adverse action
– Name, address, and toll-free number of the CRA
that furnished the consumer report
– Statement that the agency did not make the
decision to take the adverse action and is unable
to provide the specific reasons why the action was
Adverse Action – Two Step Process
• After the adverse action is taken, the
employer must provide the consumer with:
– Notice of the consumer’s right to obtain a free
copy of the consumer report from the agency
within 60 days
– Notice of the consumer’s right to dispute the
accuracy or completeness of any information in
the report furnished by the agency.
Certification Requirements
• Employers utilizing consumer reports for
employment purposes must:
– Certify to the CRA that:
• The employer will distribute the required written
disclosure and obtain the required written
• The information will not be used in violation of any
laws or regulations; and
• The employer will comply with the adverse action
FCRA Penalties
• Negligent Noncompliance
– Actual damages (back pay sometimes compensatory)
– Attorney’s fees
• Willful Noncompliance
– Actual OR Statutory
• $100-1000 per person
– Attorney’s fees
– Punitive damage
Ban the Box
• Campaign to removing check boxes on
applications asking the applicant about arrest
or convictions
– Currently full restrictions in – HI, MA, Philadelphia,
– Partial restrictions to specific inquires, CA, CT, HI,
Take away – Consider the timing of the questions in
your hiring process
EEOC’s E-Race Initiative
• E- Race (Eradicating Racism and Colorism in
– The EEOC is in the process of identifying “issues,
criteria and barriers” that contribute to race and
color discrimination in the workplace
– Part of these efforts involve reviewing pre-hire
processes and other selection and testing criteria.
Who does it apply to:
Independent contractors
Background screening companies
Temporary staffing companies
– What is the EEOC asking for:
Employment applications
Hiring criteria
Background screening policies and procedures
Other testing procedures and criteria
Employer Best Practices
• Review Employment Applications
• Review Background Screening
• Review and narrow the positions for which
you are running credit checks
• Consider timing of background checks

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