39 Employees Canned For Smoking, Lying, Lying About Smoking

A Whirlpool plant in Indiana has suspended 39 employees who were apparently caught smoking after they claimed on their insurance forms that they were eligible for a $500 credit the company gives to nonsmokers.

My first question was: how in the hell did they get caught? I mean, if there is one group of people who has figured out how to expertly conceal their bad habits, it's smokers. You don't see nailbiters spraying themselves with acrylic in the car on the way home or blaming the nail shreds on the ground on their buddies who were over the night before. Smokers know how to hide it, right?

The workers were suspended after they continued to smoke in designated locations outside the Evansville plant despite enrolling for health insurance in October as non-smokers, avoiding the penalty.*

Okay. Well, I've got nothing to say to that. Consider the $500 a "moron tax" or something.

So now what? With the trend of offering credits for nonsmokers growing so fast, the termination creates a serious question about the plan's future. According to the Tribune's article, these benefits have always been based on the honor system. If Whirlpool found 39 workers, and is threatening more terminations in the future, how viable is the model for everyone else?

Honestly, if smokers have been hiding their habits from their parents and teachers and girlfriends and kids for years and years, what's an employer? If you were offered $500 to say you didn't smoke, and you'd been saying you didn't smoke since you were 14 or something, why wouldn't you sign the dang form?

Besides, you know, losing your job and all.

*[from the Chicago Tribune]

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San Francisco "Pay or Play" DOA - ERISA Chews Up Another Pay or Play Law

Those of you who have been with us since the beginning (or have done some serious digging) know that one of our first posts at CE was on the unfortunate demise of the Suffolk County Fair Share Act, back in July. We said then that the Retail Industry Leaders of America was on a rampage trying to stop state "pay or play" healthcare laws by convincing federal judges they were per se preempted by ERISA - before Suffolk was a Maryland pay or play law that RILA put the brakes on.

How apropos, then, as we reflect on the year, that another business association has given us opportunity to revisit our earliest days. The Golden Gate Restaurant Association just got summary judgment in a lawsuit against the city of San Francisco in which it argued (what else) that the city's pay or play law, which was to go into effect next week, was preempted by ERISA.

From the Sacramento Business Journal:

Under the San Francisco plan, employers with 20 to 99 employees would have to spend $1.17 an hour per employee on health benefits or pay that amount to the city. Businesses with 100 employees or more would have to spend $1.76 an hour for each employee.

Judge Wright ruled that the mandate interferes with ERISA provisions that specifies employer autonomy over whether and how to provide employee coverage. The decision stems from a lawsuit filed by the Golden State Restaurant Association, which argued the mandatory contributions place a costly burden on business owners.

Man, when ERISA makes the MSM, you know something's going on. Though city attorney Michael Herrera is taking the appeal to the 9th Circuit, it's clear that the state is fighting this battle, since the SF plan is pretty much a petri dish for the statewide plan sitting the Cali Legislature.

As far as Herrera's chances go, his argument is not totally off base. From the city's press release:

“Although state and local laws that dictate employer choices about ERISA plans are preempted, legal requirements that employers may readily satisfy without altering or adopting ERISA plans are not because they do not interfere with uniform benefit plan administration,” Herrera argued. “San Francisco’s Ordinance clearly falls in this latter category, because it allows employers to comply with the health care spending requirement without adopting an ERISA plan or altering an existing ERISA plan. If an employer wishes to avoid the burdens of setting up a plan, or wishes to maintain plan uniformity across jurisdictions, it can simply make payments to the City, and those payments will make their employees eligible for substantial health benefits—benefits that would cost a great deal more in the private market.”

Going against Herrera, of course, is the fact that this argument has completely failed twice before. In his favor is 1.) logic (to a certain extent) and 2.) the fact that the 9th Circuit is crazy, and they seem to like poking the Supreme Court in the face with cases like this.

In the meantime, though, that ERISA keeps getting fatter and fatter on preempted laws. At the risk of biased commentary, may I suggest she at least start chewing up and spitting out, rather than swallowing them whole?

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Eye Witness Report on LaRue Oral Arguments

Just got this email from Marc DeBofsky (ERISA case law wizard and CE's Benefits Litigation professor) and thought I'd pass it along:

From a friend of mine –
Just got back from the oral argument in LaRue [v. DeWolff, Boberg & Associates]
Court asked lots of questions whether the claim should be brought under A(1)(b) versus (a).

Section 502(a)3 was barely discussed and I would doubt that the court will reach that issue at all.

Prediction -- a win under [502](a)2. Votes - 5-4 or 6-3. Kennedy asked no questions.

Anybody else see the show? Any predictions, eye-witness or otherwise, feel free to leave in the comments.

For all the discrimination lawyers out there, LaRue is the ERISA case asking whether individual plaintiffs should be allowed to recover money they would have gained if the 401(k) plan administrators had followed their investment instructions properly. LaRue lost pretty big when his retirement wasn't invested according to his specs.

If you're thinking anything like "well, of course they can, why would congress pass a law to protect people where plaintiffs can't recover under common law theories..." let me just stop you right there. You are entering a world of pain. Just stop. Don't look up the annotated statute or try and find a treatise or anything. Ignorance is bliss, I promise you.

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Veteran's Reemployment Rights - USERRA

[ed. note: While our goal at Current Employment is always to present this information in as lighthearted a way as possible, sometimes the situation is too important to run the risk of watering it down in humor, such is the case today.]

Since yesterday was Veteran's Day, we're devoting the day to veterans employment issues. Like always, we're not taking sides here, but this is one of the most delicate, complicated issues in modern employment law, so we felt the need to discuss it. This post is a general overview of the Uniformed Services Employees Reemployment Rights Act, or USERRA.

USERRA is meant to protect an honorably discharged serviceman's ability to return to his or her previous job after being deployed or on active duty. There are requirements for both the employer and the employee, and complaints are handled through an administrative agency.

Even with the law in place, the state of veterans returning from wars, both present and past, is not nearly where it needs to be. We'll address some of those issues in subsequent posts today.

Details on USERRA, and a place to go for help, after the jump.


Among USERRA's safeguards:

- Protection from discrimination on Title VII grounds.
- Reinstatement to the position the servicemember would have been in had they not been called to duty. That means if the soldier would have been promoted in the regular course of his employment, he must be reinstated at the higher position (called the escalator principle). If the employee must take a test to be promoted, the test can be administered by proctors stationed where the employee is on active duty, or reasonable accommodations must be made upon return to work, either to train the employee or provide alternative employment opportunities.
- Reasonable accommodation for employees returning with injuries or disabilities. If an employee is convalescing from war injuries, they have up to two years to request reinstatement to their position at work.

USERRA requires the employee to notify the employer of his or her active duty requirement when reasonable, and to give as much time as possible to the employer to prepare. Upon return, the employee must apply for reemployment based on the following schedule:

- If the active service was less than 31 days, the employee must apply on the next working day, excluding time travelling home and an eight hour rest period.
- If the active service is under 181 days, the employee has 14 days from the date they are released from service to apply for reemployment.
- If over 181 days, the servicemember has 90 days from release from service.

With regard to benefits, active servicemembers are eligible for all health and welfare benefits at their jobs back home for 2 years, though they may be required to pay up to 102% of the premiums. Pension benefits are always protected.

If a servicemember has a claim or complaint against their employer, they can take it to the Veterans' Employment and Training Service (VETS). From the Department of Labor USERRA site:

If resolution is unsuccessful following an investigation, the service member may have his or her claim referred to the Department of Justice for consideration of representation in the appropriate District Court, at no cost to the claimant... If violations under USERRA are shown to be willful, the court may award liquidated damages. Individuals who pursue their own claims in court or before the MSPB may be awarded reasonable attorney and expert witness fees if they prevail.

It seems like a pretty comprehensive statute, but, as with many helpful pieces of legislation, reality is standing in the way. The claims that are filed don't seem to be getting resolved effectively, and the result is an terrible amount of veterans unemployed, untrained and homeless.

If you or someone you know is struggling through the maze of benefits or reemployment laws for vets, the John Marshall Law School has established a new clinic that may be able to help. Here's the website. If you need more information, feel free to contact us and we can put you in touch with someone who can help.

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Teacher Pensions Teaching Wall Street a Lesson

Before I started law school, I was an aide at an elementary school. It was a humbling experience. The math and reading was ok, but everything I thought I knew about personal relationships was turned on its ear. My point is, anyone who knows a teacher (hello, Mrs. Galvan!) knows that they teach social responsibility and ethics as much as reading and math (and law).

We were not surprised, then, to find out that the California and New York teacher retirement funds filed amici briefs in Stoneridge Investment Partners v. Scientific-Atlanta Inc., a derivative securities fraud case heard last week by the Supreme Court.

From Education Week:

The California and New York state teacher-retirement funds, as well as some other large state pension funds, filed or joined friend-of-the-court briefs on the side of shareholders. The shareholders are seeking to hold two big companies that were the business partners of Charter Communications Inc. liable for allegedly helping the St. Louis-based cable-TV company in a fraudulent scheme that helped inflate its cash flow in 2000.

The teacher-retirement funds note that they have become some of the most active institutional investors in trying to improve the integrity of publicly traded companies in the wake of Enron and other recent high-profile corporate-fraud cases.

If anyone is going to teach corporate defrauders a lesson, we'd pick the teacher's unions. Not because of the love we have for our teachers, but because they're generally the best-funded, best-invested funds in the public sector.

Click the jump for CE's color commentary.

Another story: in Mississippi, where I spent first grade, every teacher in the school had a paddle. My teacher's paddle was named Charlie Brown. The principle's was named Buster and had holes cut in it for speed and angry eyes painted on the end. The pensions are swinging with Bowser.

The lesson here is more dunce-cap-in-the-corner than get-up-try-again, and it's one the CEOs had better learn. Corporate waste is easy when the shareholders are disjointed and hard to unify. But when three pension funds with billions of dollars invested can hold a 20-minute conference call and decide to dump your inefficient company stock, it becomes a much bigger deal. So, corporations, heads up. The teachers are pissed. And the water reclamation employees and the trash collectors. Regular people rely on you being responsible so they can retire.

In the immortal words of Tyler Durden:

"Look, the people you are after are the people you depend on. We cook your meals, we connect your calls, we guard you while you sleep. Do NOT f*** with us."

Though we hope our honored educators wouldn't use such foul language.

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Fee Disclosure Legislation = Increased Fees

[ed. note: Chad DeGroot is our employee benefits editor. Please be nice to him, because none of the rest of us understand or want to write about this crap.]


On October 4th, Representative George Miller (D-California) introduced a bill in the House seeking to increase transparency with respect to participant-directed defined contribution plan fees charged to participants. The bill essentially requires plans to disclose to each participant every fee charged to their accounts. Failure to properly inform participants would result in a $100 fee per participant, per day of noncompliance for the plan. Not only will this effort not result in a reduction or limitation on the fees participants incur, but it may result in an increase in those fees that were previously seen as unreasonable, or force those plans with relatively high fees to maintain that level.

Because of the increased administrative costs associated with an increase in disclosure, plans will be able to justify current or increased fees. One such administrative cost is going to be borne by HR departments trying to justify the fees to aggravated, uninformed participant-investors.

You think fee litigation has been on the rise as of late? Watch out.

If participants are going to see a reconciliation of the fees charged their accounts, and can understand such disclosure, there is inevitably going to be an increase in the already-saturated field of fee litigation. Much of this new litigation is going to be frivolous, and accomplish nothing but the clogging of overburdened courts and, of course, greater fees. The increase in potential liability and litigation is just going to act as another point on which a plan can justify not only leaving fees at their current levels, but may, in fact, require an increase.

Furthermore, not only will this legislation have no affect on the current fees, unless it provides grounds for an increase, but that which must be included in the disclosure is going to be complicated and convoluted to a point where the average participant will not even read it, or if they do decide to attempt the impossible, not understand it. A similar loophole has been exploited by companies in issuing proxy statements.

Many fees may currently be at inappropriate levels, but increasing the required amount of disclosure to participants is not the answer.

More After the Jump...

GM - UAW Reach Tentative Deal

We're gathering information right now - but here's what we know:
1. Most importantly for both sides, the auto workers are going back to making cars this morning (thanking God, probably, that they aren't going to be living on 200 bones a week for the next 6 months.)
2. GM has an official statement that the agreement is finalized, and...wait for it... it looks like there's a VEBA! We knew it! Not on the table our ass.

No more healthcare costs for GM (minus that hefty up-front contribution). Interesting. Does this mark a Womakian shift in Detroit? Everyone seems to think the other Big 2 are going to jump in ASAP. Plus, what does assuming 50 billion in healthcare responsibilities mean for the Union? Does this create solidarity or itnernal strife?

We'll keep updating this post throughout the day, as we learn more. In the meantime, discuss in the comments.

UPDATE [10:32 a.m.]: We got emailed that some people wanted an explanation of a VEBA. We scoured the web for one that wasn't written for IRS auditors (i.e.: BORING), and found this fascinatingly well-composed description on the Hopkins k-12 School District Website. We did the math, and CE started learning about VEBAS in 20th Grade. Apparently that puts us at, like, 7th-grade in Minnesota. Kudos to you, libertarians!

UPDATE [9:15 p.m]: Details are trickling out finally - looks like not only did GM catch up to the Minnesota primary education system, they're also getting the 2-tier salary structure they asked for - down to the dollar. From now on, temp and non-manufacturing workers will start at $18/hour, down $10 from the previous contract.

A lot of people seem to think the UAW is calling this a "victory" way too soon, citing a bunch of unanswered questions (like where the 38 bil will come from to fund the VEBA), and that the union is using the short strike to make this a win, when they did all the conceding. If the NY Times is correct, CE agrees:

In return [for taking over 50 billion in healthcare costs] the union won
guarantees that medical benefits for hourly workers and retirees and their
families will remain in place for the next two years. G.M. will also invest
money in its American plants, and will maintain its current union work force of
73,000.

Won? The union "won" that? So the UAW takes over the next 80 years' worth of healthcare costs in return for a promise by GM to keep making cars. If we didn't know it was the UAW, we'd be worried this was adhesion. No such luck - the CE prognosis: the union caved. Hard. Discuss in the comments.

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Huh? Wha?

Seriously, you turn your back for two months...

We know we promised you a full report on the UAW negotiations on the 24th...of July. In our defense, CE had to work out a few administrative details (see here) that took a little longer than expected. All of the sudden it was the 62nd day of the UAW negotiations, and we were sitting around talking about the Second Amendment or some other arcane, unused law like nothing was going on. Honestly, it's not like they're actually negotiating at the moment, so maybe we just saw this coming and didn't want to waste space on the boring parts. All the same, we're a little embarrassed.

Not as embarrassed as, say, Rick Wagoner's gonna be if this strike thing keeps up. Honestly, did anybody realize the UAW still knew how to strike? Of course, each side is blaming the other for the stoppage, but that's not the interesting part of this story.

According to the New York Times, GM is in a much better position to handle a strike now than it has been in the past, but that's really bad news for the company. Confused? We were. For the Times' analysis, and some more stellar CE commentary, keep reading.

First, how great is Rick Wagoner's name? That guy was born to run a car company.

Anyway, according to production guru James P. Womack, this strike is some kind of watershed moment, marking a change for better or worse in Detroit. He says that though GM has backed away from "defining moments" in the past, someone this time finally said enough's enough. Ok, first: backing away from "defining moments" just shows that GM is still the leader of the American Auto Industry. Plus, as the Times article points out, the car company hasn't done anything yet, and it has a, um, "spotty" track record of standing up to strikes. From the article:

In the past, its response, by and large, was to cave in to U.A.W. demands. That happened during the last big walkout, at two parts plants in Flint, Mich., in 1998. That seven-week standoff occurred when Rick Wagoner, the current chief executive of G.M., was president of its North American operations.

(What does this guy have a 10-year itch or something?)

G.M. never recovered the 31 percent market share it held before the strike, and was forced to offer rebate deals to get customers back into showrooms.

“G.M. has made deal after deal that didn’t deal with fundamental problems,” Mr. Womack said. “This time they have to hold the line on a contract.”

"Hold the line"? Yeah, we may not hold our breath. G.M. has about 2 months of reserves to hit the market - not exactly going to get the dealership guys their Christmas hams. Oh, also: the Times article fails to mention that Womack is the chairman (and founder, apparently) of the Lean Institute, which advocates Toyota Production System application to American industries. While there's nothing wrong with that, we're thinking he may have a little bias in defining those "defining moments".

Regardless, it's the other issue here that has the CE staff buzzing like a Halo 3 Mountain Dew Big Gulp: The link between GM's financial difficulties and its negotiating ability. Again, from the Times piece:

G.M. is better positioned to handle a strike now than in earlier contract talks, though not for reasons that have to do with strength. With its operations shrinking in the United States, the majority of its sales and profits are now coming from abroad.

It is selling more vehicles built in Canada, Mexico, and Europe, the source of new models for its Saturn division. And it is rapidly expanding production overseas, especially in China, which is fast becoming one of the world’s major car markets.

The company’s problems at home, which resulted in losses of more than $12 billion in the last two years, have forced it to close all or parts of a dozen factories, cut tens of thousands of jobs and offer deals to workers to quit or retire. A smaller G.M. means there are far fewer workers involved in this strike, so a halt in production inflicts less pain on the company.

The U.A.W. membership at G.M. has shrunk by more than 80 percent since the 1970 strike, when 400,000 workers were off the job for 67 days.

So, GM falls flat on its face financially, which ends up benefitting its bargaining ability and the bouyancy of its bottom line.* When you view this in the light of GM's major goal in this negotiation, the VEBA it hopes will rescue it from the pensions** of the UAW workers, a cycle emerges that is worth some discussion. Since we make it a point not to take sides, the rest of this topic belongs to you - in the comments.

Talks Continue in G.M. Strike
*Intentional alliteration

One last thing - This VEBA has not gotten much attention (alas, ERISA issues never do), so we're promising you a whole post on G.M.'s VEBA proposal and its potential effect on the situation in Detroit...once we track down our Benefits guy. They're so antisocial in the ERISA department...

**UPDATE: Did we say "pensions"? We meant "health and welfare benefits". Thanks to the tipsters for pointing out our mistake - and we reserve the analysis of the value of our education for another discussion.

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