The Employer's Legal Resource - December 2010

Every year, we host a comprehensive one-day Employment Law Workshop in the spring. This year, we are considering changing that format to offer shorter seminars throughout the year. These would be workshops focused on a single topic and could range from 1 to 4 hours in length. We want to know what you think.

• If you prefer the all day spring workshop format, click here and hit send.

• If you prefer shorter, single-topic seminars throughout the year, click here and hit send.

Generally, as we pointed out last month, employers may not make deductions from the pay of exempt employees without risking the loss of the overtime exemption. There are, however, a limited number of exceptions to the rule.

An employer is not required to pay the full salary of an exempt employee in the initial and terminal weeks of employment. In addition, deductions from pay may be taken when an exempt employee has performed no work in a work week.

Deductions may be made when an exempt employee is absent from work for one or more full days for personal reasons other than sickness or disability. For example, if an employee is absent from work for two full days to handle personal affairs, the employee's salaried status will not be affected if deductions are made from the salary for two full-day absences. But, if an exempt employee is absent for one and a half days for personal reasons, the employer can only deduct for the full day absence. If an employer has a personal time off policy, the employer may deduct full or partial days from the leave bank when an employee is absent for personal reasons. If the employee has exhausted his or her personal days off, however, only full days can be docked from the employee's salary.

Deductions from pay may also be made for absences of one or more full days due to sickness or disability, including on the job injuries, if the deduction is made in accordance with a bona fide plan, policy or practice of providing compensation for loss of salary occasioned by such sickness or disability. For example, when an employer has a sick leave plan, but the employee has used all available sick days, or has not worked for the employer long enough to qualify for sick leave, the employer can deduct full days of work missed. You may not deduct for partial day absences from pay, but you may deduct partial days from a sick leave bank. There is no requirement that the employer must pay any portion of the employee's salary for full-day absences for which the employee receives compensation under the sick leave policy, plan or practice.

An employer can deduct from the pay of exempt employees for unpaid disciplinary suspensions of one or more full days, if imposed in good faith, for infractions of workplace conduct rules. The suspension, however, must be imposed pursuant to a written policy applicable to all employees. An employer can also deduct from the pay of exempt employees for penalties, imposed in good faith, for infractions of safety rules of major significance.

An employer is not required to pay the full salary of an exempt employee for weeks in which the employee takes unpaid leave under the Family and Medical Leave Act, and may deduct from an employee's salary for partial day absences if such absences constitute intermittent or reduced leave under the FMLA.

Next month we will look at the remedies and penalties available for improper deductions.

By Rebecca M. Fowler rfowler@dsda.com

The Fair Credit Reporting Act, 15 U.S.C. 1681 et seq., provides that credit reporting agencies may provide "consumer reports" and "investigative consumer reports" to employers for "employment purposes." A few definitions are required. "Consumer reports" contain information "bearing on a consumer's credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living." Investigative consumer reports do not contain credit information, but include "information on a consumer's character, general reputation, personal characteristics, or mode of living," including information "obtained through personal interviews with neighbors, friends, or associates of the consumer." "Employment purposes" includes "evaluating a consumer for employment, promotion, reassignment or retention as employee." In other words, although consumer reports are perhaps most commonly used to screen job applicants, they are a tool employers can use throughout the course of an individual's employment.

On October 20, 2010, the U.S. Equal Employment Opportunity Commission held a public meeting to debate whether the use of these reports may have an adverse impact on African-Americans and Latinos. The EEOC heard testimony from multiple witnesses questioning whether credit reports accurately predict job performance or employee trustworthiness. In addition, the recent decline in the economy has given rise to concerns that people most in need of employment because of credit or financial struggles are the people most likely to be adversely affected by employer consideration of consumer reports. The Federal Trade Commission has increased its enforcement efforts, and has recently imposed fines of up to $1,000 per violation. Given the recent interest of the EEOC and the FTC, employers must strictly follow the rules of the Federal Trade Commission when using consumer reports.

First, employers must certify to the credit reporting agency used that they will comply with all applicable provisions of the Fair Credit Reporting Act.

Second, employers must disclose in writing to an individual that the employer may obtain a consumer report or an investigative consumer report about that individual. The individual must authorize the employer in writing to obtain these types of reports. Employers should utilize forms that authorize disclosure of consumer information throughout the course of employment, not just at the time of application. These forms must be clear and conspicuous and should be reviewed by legal counsel for compliance.

Third, employers who intend to take adverse action based in whole or in part upon consumer reports must, before taking any adverse action, provide the individual with a "pre-adverse notice" letter containing both a copy of the consumer report consulted and a copy of a document entitled "A Summary of Your Rights Under the Fair Credit Reporting Act." Credit reporting agencies must make this Summary document available to employers. The Summary is currently available at https://www.ftc.gov/bcp/menus/consumer/credit/rights.shtm. (Click on the "Fair Credit Reporting Act" link under "Summaries of Rights" in the top right corner.) Employers are advised to wait at least five business days after providing this "pre-adverse notice" before taking any adverse action based in whole or in part on information in a consumer report to give the individual adequate time to contact the credit reporting agency and correct any inaccuracies appearing in the report.

Finally, when taking "adverse action" based in whole or in part on information contained in a consumer report, the employer must provide written notice of the adverse action stating: (1) that the adverse action was based, in whole or in part, on the consumer report, (2) the name, address, and telephone number of the credit reporting agency that supplied the report, (3) that the agency that provided the report did not make or cause the adverse action and cannot provide the reasons for the decision, and (4) that the individual affected may request a free copy of the consumer report within 60 days and may dispute with the agency the accuracy and completeness of the report. "Adverse action" includes "a denial of employment or any other decision for employment purposes that adversely affects any current or prospective employee."

Employers must remember that refusal to hire and termination are not the only adverse actions. Decreased compensation, unfavorable changes in work schedules, decreased job duties, even damage to an employee's reputation may also trigger these notice obligations.

By Courtney Bru, cbru@dsda.com

The Department of Labor recently issued a Frequently Asked Questions (FAQ) article clarifying some of the provisions of the Genetic Information Nondiscrimination Act (GINA). GINA generally prohibits health plans and health insurance issuers from discriminating based on genetic information. GINA also addresses discrimination in employment based on genetic information. The new FAQ addresses the requirements regarding the prohibition of discrimination based on genetic information for group health plans.

The new FAQ clarifies the following GINA issues:

1. GINA is Broader than HIPAA. While HIPAA prohibits group health plans and health insurance issuers (Plans and Issuers) from imposing preexisting condition exclusions based solely on genetic information and prohibits discrimination in regard to individual eligibility, benefits, or premiums based on any health factor (including genetic information). GINA provides additional protection.
   
2. GINA restricts when Plans or Issuers may request, require, or collect genetic information.
   
3. Plans and Issuers may not base premiums on genetic information.
   
4. Genetic information includes genetic tests, genetic counseling, or genetic education. A genetic test is an analysis of human DNA, RNA, chromosomes, proteins, or metabolites if the analysis detects genotypes, mutations, or chromosomal changes. Analysis of proteins or metabolites directly related to a manifested disease, disorder, or pathological condition are not genetic tests. A manifested disease is generally a condition for which an individual could be reasonably diagnosed by a proper health care professional. A manifested disease is not a diagnosis based principally on genetic information. The FAQ provides the following examples of genetic tests: tests for BRCA1, BRCA2, or a colorectal cancer gene variant. The FAQ clarifies that HIV tests, complete blood counts, cholesterol tests, liver function tests, and alcohol/drug tests are not genetic tests.
   
5. Plans and Issuers generally may not request or require an individual to undergo genetic tests. However, GINA does not prohibit a health care professional who is providing health care services from requesting a genetic test. Additionally, a Plan or Issuer may request the results of such a genetic test to determine payment of a claim for benefits as long as the Plan or Issuer only requests the minimum amount of information necessary to determine payment. The FAQ provides the following example. If a Plan normally only covers mammograms for women under age 40 if a high risk of breast cancer exists, the Plan may require that the individual provide genetic test results or family history as evidence of a high risk of breast cancer, as long as the Plan only requests the minimum amount necessary to determine that a high risk justifies the mammogram.
   
6. Plans and Issuers may not collect genetic information prior to or in connection with enrollment or for underwriting purposes. Plans and Issuers may not offer rewards in return for the provision of genetic information. An exception exists for incidental collection of genetic information as long as the information is not used for underwriting purposes. This exception for incidental receipt only applies if the Plan or Issuer could not have reasonably anticipated the receipt of genetic information in response to a request or the request explicitly stated that genetic information should not be provided.
   
7. The definition of underwriting is very broad under GINA. It includes rules for determination of eligibility for benefits, computation of a premium, contribution amount, discount, rebate, payments in kind, or other premium differential mechanism, the application of preexisting condition exclusion, and other activities related to the creation, renewal or replacement of a health insurance or health benefits contract.
   
8. Unlike HIPAA, there is no exception under GINA for very small health plans with less than two participants who are current employees.
   
9. Effective Dates. The statutory provisions of GINA are effective for plan years beginning on or after May 21, 2009. The Regulations implementing GINA are applicable for plan years beginning on or after December 7, 2009. Accordingly, for calendar year plans, the statute and regulations apply as of January 1, 2010.

By Hilary L. Velandia, hvelandia@dsda.com

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