Employment Law Update in Maryland

A. Mileage Rate Increase Effective July 1, 2008
1) IRS has announced an optional increase of 8 cents, from 50.5 cents per mile to 58.5 cents per mile.

2) Mileage reimbursement is in lieu of separate deductions for lease payments (or depreciation if the car is purchased), maintenance, repairs, tires, gas, oil, insurance and license and registration fees.

3) Increase is discretionary to the employer, but is undoubtedly a result of the skyrocketing gas prices.

B. Department of Labor Tool Rolled Out

1) In May, the DOL announced a variety of new "elaws Advisor" tools designed to help employers understand and comply with the major employment laws to which they are or may be subject.

2) There are more than 25 free, Web-based tools, including the following:

a) FirstStep Employment Law Overview Advisor - sets forth a host of yes or no or multiple choice questions designed to pinpoint which federal laws apply to the given user, based on size of business, location and type of industry.

b) FirstStep Recordkeeping, Reporting and Notices Advisor - summarizes the recordkeeping requirements for each law.

c) FirstStep Poster Advisor - makes available via download the various DOL posters, including information on where the poster must be displayed, its size and any language requirements that apply to each poster.

d) Various other Advisors, covering minimum wage and overtime, child labor, veterans' workplace rights, health and retirement benefits and workplace safety and health laws.

e) Great resource for new and existing businesses.

f) See www.dol.gov/elaws/firststep

C. Misclassifications of Employees as Independent Contractors

1) The IRS is continuing its assault on misclassification by employers of various employees as independent contractors.

2) Analysis of this issue is heavily fact-dependent and the essence of the inquiry is whether the person for whom the services are performed has the right to control and direct the individual performing the services - both as to the result to be accomplished as well as the means by which the result is accomplished.

3) Obviously, proper classification of the workforce is key to reducing this risk, and the greater the level of control regarding what will be done and how it will be done, the greater the likelihood that such worker will be deemed an employee.

4) Further guidance, including the twenty factors the IRS considers most probative to the analysis, may be found in Rev. Rul. 87-41.

D. Family and Medical Leave Act ("FMLA") Amendments
1) As part of the National Defense Authorization Act (the "Act"), signed into law on January 28, 2008, FMLA was amended, marking the first changes since its creation in 1993.

2) FMLA applies to private employers having 50 or more employees and who engage in, or produce goods or services for, interstate commerce.

3) Generally, the Act provides that an employee may now be entitled to up to 26 weeks of unpaid leave to care for an injured family member (including a spouse, parent, son, daughter or "next of kin"), provided that such injured individual is a "covered servicemember."

4) Requirements and Definitions:

a) "Next of kin" is defined as the nearest blood relative of that individual.

b) "Covered servicemember" must have a serious injury or illness that (a) was incurred in the line of duty while on active duty, and (b) may render the servicemember medically unfit to perform the duties of the servicemember's office, grade, rank, or rating.

c) Servicemember must be a member of the Armed Forces, including the National Guard or Reserves.

d) Servicemember must either be undergoing medical treatment, recuperation or therapy, be in outpatient status, or otherwise be on the temporary disability retired list.

e) No requirement that servicemember has been engaged with enemy combatants, so the Act applies to servicemember's wherever they may be serving, including the U.S.

5) Employees may not leave to care for "next of kin" under any circumstances other than those described above.

6) All other forms of FMLA leave remain limited to 12 weeks, and an employee may not take more than a combined total of 26 weeks during a 12 month period.

7) The Act also provides that employees shall be eligible to use their 12 weeks of FMLA leave when a family member (spouse, son, daughter or parent of the employee) is deployed, or has been notified of an impending call to be deployed, in support of a contingency operation, provided that a "qualifying exigency" exists.

a) As yet, there is no definition for a "qualifying exigency," and the DOL claims to be working quickly to draft regulations to define the term, with the DOL taking the position that this provision will not take effect until such regulations are promulgated.

b) According to various secondary authorities, a "qualifying exigency" may include child or elder care (even without a serious health condition) or helping such family member prepare for duty.

8) Fact sheet, an employer's guide and the amended statutes may be found at http://www.dol.gov/esa/whd/fmla/.

E. Social Security "No-Match" Letters
1) August 15, 2007, the Department of Homeland Security published new regulations creating stiff employer sanctions, including civil and even criminal penalties, for any failure to comply with their receipt of "no-match" notices from either the Social Security Administration or the DHS.

2) Generally, the rules set forth an employer's obligations upon receipt of a no-match letter from the SSA (including prompt notification to such employee, within five days of the completion of any internal review by the employer, which review must take place within 30 days of receipt of such notice) and their obligations upon receipt of notice from the DHS that an immigration statute or employment-authorization document presented by an employee during the I-9 process is erroneous.

3) The details of these regulations will be covered later in this seminar.

F. New Employment Eligibility Verification Form (I-9)

1) Effective December 26, 2007, the U.S. Citizenship and Immigration Service issues a new Form I-9 that employers must use to verify employment eligibility of all new hires or re-verifications.

2) Employers who fail to use the new form will be subject to penalties.

3) The form can be found at http://www.uscis.gov/files/form/i-9.pdf.

4) See also the I-9 Handbook published by the U.S. Citizenship and Immigration Services at www.uscis.gov/files/nativedocuments/m-274.pdf.

G. Genetic Information Nondiscrimination Act ("GINA")

1) Effective May 21, 2008, GINA was signed into law.

2) NIH has summarized GINA as protecting Americans from being treated unfairly because of differences in their DNA that may affect their health, and the new law prevents discrimination from health insurers and employers.

3) GINA prohibits employers from discriminating against employees on the basis of "genetic information."

a) "Genetic information" means information about (i) an employee's genetic tests, (ii) the genetic tests of family members, and (iii) the manifestation of a disease or disorder in such family members.

b) Employers are prohibited from acquiring genetic information, subject to certain exceptions, including (i) inadvertent requests of such employee about such employee or his or her family members, (ii) indirectly, as part of a wellness program or (iii) as part of an FMLA medical certification.

c) There is a lot of uncertainty about the impact of GINA, and it provisions do not go into effect until May 2009 (with respect to health insurers) and November 2009 (for employers, including private employers with 15 or more employees).

d) More information may be found at http://www.govtrack.us/congress/billtext.xpd?bill-h110-493 and http://www.genome.gov/10002328.

H. "Disparate Impact" Claims under the Age Discrimination Employment Act ("ADEA")

1) The ADEA applies to all private employers with 20 or more employees and who engage in, or produce goods or services for, interstate commerce.

2) On June 19, 2008, in the case of Meacham v. Knolls Atomic Power Lab., 554 U.S. ___ (2008), the Supreme Court determined that an employer facing a "disparate impact" claim (whereby a larger portion of a group of laid off employees is over 40 years old) must both produce evidence that the bases for determining who should be laid off were based on reasonable factors other than age AND persuade a court of their merit.

3) In Meacham, the employer, in performing a reduction in force, scored their employees based on "performance," "flexibility" and "critical skills." These scores, along with points for years of service, were used to determine who was laid off.

a) 30 of the 31 employees laid off were 40 years of age or older.

b) The Court held than an employer must bear both the burden of production and the burden of persuasion for the "reasonable factors other than age" ("RFOA") affirmative defense as specified under Section 623(f)(1) of the ADEA. In other words, merely identifying such other factors was insufficient.

I. Employee Communications with Personal Attorneys Via Company Email May Not Be Privileged
1) Based on a case out of New York State, Scott v. Beth Israel Medical Center, 17 Misc. 3d 934 (Sup. Ct. N.Y. County Oct. 17, 2007), communications between an employee and his personal attorney were deemed not protected by the attorney-client privilege due to employer's written email policy, which provided that the company's email system should be used only for business purposes.

2) The holding rested on the notion that the emails in question could not have been deemed "in confidence," because reasonable care was not taken to maintain their confidentiality inasmuch as they were transmitted on the employer's email system and subject to employer's email policy.

3) No case appears to exist under Maryland law on this point, but employers should be made aware that this is but one more reason to have an email policy in place. Such a policy should state both that the employer's email system is "for business purposes only," and that emails sent or received using the employer's system are subject to monitoring and review by the employer. Further, such policy should be acknowledged by each employee directly (via an executed receipt) or indirectly (via posting on a company intranet or the like and informing employees on where such policy may be located).

4) Conversely, employees who are entertaining lawsuits against their employers should be cautioned to use personal email instead of work email to communicate with their attorneys.

J. Risk of Liability to Employers from Employees Use of Employer-Provided Mobile Phones or Mobile Communication Devices

1) The use of mobile phones/communications devices has become ubiquitous, with employees regularly using them while driving to conduct either business or personal communications.

2) As we all know, this "multitasking" can be hazardous on the road.

3) An employer in Georgia recently paid a $5.2M settlement to an accident victim who alleged that the defendant's employee slammed into her vehicle while talking on an employer-provided mobile phone.

4) Given that the case was settled, the conduct of the employee at the time in question was never resolved, but these sorts of cases raise the specter of potentially huge liability for employers who provide these devices to their employees.

5) As such, it is prudent for all employers to implement strong written policies that prohibit employees from using mobile phones and other devices for business purposes behind the wheel of a motor vehicle. Such policies would ideally include written educational material about the safe use of such devices and should limit the exposure to such liabilities in the event of catastrophic third-party injury.

A. Flexible Leave Act
1) House Bill 40/Senate Bill 344 requires that qualifying Maryland employers (i.e. those with 15 or more employees and who provide leave with pay) must allow employees to take any paid leave (vacation, sick leave or compensatory time) whenever a child, spouse or parent is ill.

2) This controversial Act was signed into law on May 22, 2008 and is effective on October 1, 2008. The controversy over the Act stems from: (i) the failure of the Act to define a qualifying "illness" or the age of a "child;" or (ii) provide for verification regarding same, and the potential abuses that could ensue therefrom.

3) To the extent that an employee has multiple forms of paid leave available, such employee has the right to elect the type and amount of leave with pay to be used.

4) Under the Act, an employer need not allow an employee to use unearned paid leave, and the terms of any collective bargaining agreement or employment policy must be complied with, where applicable.

5) However, the Act does include an anti-retaliation provision that prohibits an employer from discharging, demoting, suspending, disciplining or otherwise discriminating, or threatening to do same, against an employee who exercises rights granted under the Act or files a complaint, testifies against or otherwise assists an action against the employer for violation of the Act.

6) Hence, the Act constitutes another potential ground that employers need to be mindful of as they seek to avoid retaliation claims.

7) For more information, see http://mlis.state.md.us/2008rs/bills/hb/hb0040e.pdf.

B. Accrued Leave on Termination of Employment

1) Emergency Bill SB 797, signed into law on April 24, 2008, reverses the Maryland Department of Labor, Licensing and Regulation's (DLLR) prior policy regarding the payout of accrued but unused leave when an employee is terminated.

2) Under the new law, an employer may refrain from paying any such accrued but unused leave to a terminated employee if:

a) The employer has a written policy that limits the payout of accrued leave to employees;

b) The employer has notified the employees of this policy; and

c) The employee is not entitled to such accrued leave at termination under the terms of the written policy.

3) Previously (in the fall of 2007), the DLLR announced a change to its long-standing position that forfeiture of accrued but unused vacation benefits was acceptable where a clear written policy to that effect existed. The announcement held that such accrued vacation must be paid out upon termination of an employee regardless of the terms of any written policy.

4) As the law now stands, any employer that may have changed its accrued vacation payout upon termination provision to comply with the DLLR's revised position may now adopt a provision allowing a forfeiture of such accrued vacation pay.

C. Maryland Personal Information Protection Act ("PIPA")

1) Effective January 1, 2008, and pursuant to the terms of House Bill 90, PIPA was enacted, providing certain protections to employees and customers regarding use of their "personal information."

2) PIPA applies to all business that collect and maintain customer "personal information," regardless of size.

3) PIPA requires businesses to take steps to protect such "personal information" of employees and customers and imposes significant obligations on any business that has "personal information" of Maryland residents.

4) "Personal information" means an individual's first name or first initial and last name in combination with any one or more of the following data elements, when the name or the data elements are not encrypted, redacted or otherwise protected by another method that renders the information unreadable or unusable: (a) a social security number; (b) a driver's license number; (c) a financial account number, including a credit card number or debit card number, that in combination with any required security code, access code or password, would permit access to an individual's financial account; or (d) an individual taxpayer identification number.

5) In summary, PIPA sets forth a framework for: (a) the protection of customer records containing personal information; (b) the destruction of customer records containing personal information in such a way as to make the information unreadable or undecipherable through any means; (c) a requirement for businesses who own or license personal information of a Maryland resident to implement and maintain certain security procedures and practice under certain circumstances; (d) the conduct of any investigation and the substance and timing of any notification of persons upon determination of a breach of security of any personal information; (e) a records retention policy; and (f) a requirement to notify certain consumer reporting agencies and/or the Office of the Attorney General of a breach of security under certain circumstances.

6) Violations of PIPA constitute an unfair and deceptive trade practice, subject to enforcement and penalty provisions.

7) Waivers of PIPA are void as against public policy and unenforceable.

8) The text of the enrolled bill (SB 194), may be found at http://mlis.state.md.us/2007RS/bills/sb/sb0194e.pdf.

A. Retaliation - What Is It? - Retaliation occurs when an employer takes action against an employee - such as firing, demoting or denying a raise or a promotion - for doing something the employee had a right to do or a right not to do. For example:
1) Making a complaint, e.g., of discrimination

2) Missing work for a legally required reason, e.g., jury duty or FMLA leave

3) Exercising a legal right, such as filing a workers' compensation claim

4) Reporting a perceived wrongdoing (whistleblowing)

5) Refusing to perform an illegal act (e.g., perjury, submitting false information to the government or participating in a kickback scheme).

B. Prima Facie Case

1) To establish a prima facie case for retaliation, a plaintiff must make the following showing:
a) That there was a statutorily protected opposition to, or participation in, a given action, that employer was aware of;

b) That an adverse employment action occurred; and

c) That there was a causal link between the protected activity and the adverse employment action.

d) See Chappell v. Southern Maryland Hosp., Inc., 320 Md. 483 (1990).

2) Once a prima facie case is established, the burden of production shifts back to the employer to establish non-retaliatory reasons for the adverse employment action.

3) To the extent employer meets its burden, the burden of production shifts back to the employee to prove that employer's proffered explanations are pretextual.

4) The burden of persuasion for the cause of action always remains with the employee. See Killian v. Kinzer, 123 Md. App. 60 (1998).

C. Hypotheticals

1) Scenario 1 - Jack worried that a dangerous chemical was being misused in the plant and he reported it to OSHA. His boss Cathy was not happy. "Jacks' wrong," she said. "There's nothing unsafe about the process. And I'm not happy that Jack didn't come to me with his concern. I guess he's not the team player I thought he was. He's not going to get that promotion after all."

2) Scenario 2 - Back in the accounting department, Jane took medical leave during the company's busiest annual time to care for her ailing mother. Her boss wasn't happy, and a month later, Jane didn't get the raise that the others in her department did.

3) Retaliation? - Scenario 1 seems pretty clear cut. With scenario 2, on the other hand, there may have been perfectly valid grounds for the salary adjustments. However, while there is no direct evidence of retaliation, there is an appearance of such due to the proximity in time of the two events. The company may very well see lawsuits from one or both of these scenarios.

D. Direct and Indirect Claims - The claim of retaliation may be the primary complaint, or such claim can be secondary to another claim. For example, the employee sues for discrimination and then claims retaliation for the filing of the initial claims. Interestingly, the secondary claims is often upheld even though the primary claim may fail. Juries are sympathetic to these types of retaliation claims and they are on the rise.

E. Perceived Retaliation - Moreover, perceived retaliation, say when the alleged instances of the underlying primary wrong and the retaliation are proximate in time, can be difficult to defend to defend if the rationale for taken the action charged with being retaliatory is not well-documented.

F. Grounds for Claim - Laws that can ground a retaliation claim include the ADEA, the ADA, Title VII, the Fair Labor Standards Act, the FMLA and OSHA, among others. Even when there are no specific laws, employers must be wary of appearing to treat employees unfairly.

G. Revisions to Maryland's Article 49B

1) Article 49B is the state anti-discrimination law, which bans discrimination in employment, housing and public accommodations. The law has been revised, effective October 1, 2007, to allow employees to bring their actions directly to the Maryland Circuit Courts instead of the prior requirement to bring their action before an administrative law judge at an administrative hearing before the Maryland Commission on Human Relations.

2) Article 49B applies to all employers having 15 or more employees.

3) Notably, employees resident in Prince George's, Howard and Montgomery Counties had this right, but now it is uniform throughout the State.

4) Additionally, the range of damages has also been raised much higher. Section 11B sets forth caps for compensatory and punitive damages based on the size of the employer, as follows:

a) 15 to 100 employees - Cap of $50,000

b) 101 to 199 employees - Cap of $100,000

c) 200 to 500 employees - Cap of $200,000

d) 501 or more employees - Cap of $300,000

e) N.B. - The cap is in addition to any back pay or benefits the employee would have earned during the period between the date of termination and the resolution of the suit.

f) N.B. - A successful plaintiff is also entitled to his or her attorneys' fees, which may be larger than the underlying damage award.

g) N.B. - Plaintiffs have the discretion to try the matter before a jury.

5) By increasing the damages available such that they are roughly on par with available federal damages, Article 49B removes the motivation that previously existed for a plaintiff with a claim of discrimination that is viable under both federal and state law (i.e. one based on race, sex, color, national origin, religion) to pursue his or her federal remedy.

6) Pursuant to revised Article 49B, plaintiffs who seek to pursue claims for which federal law affords no remedy (e.g., discrimination based on sexual orientation, marital status or genetic characteristics) may move directly in the Maryland state courts.

7) This change should significantly alter the risk analysis of prudent employers, due to the enhanced possible liabilities and the typically less willing state courts to throw out a case on a motion to dismiss or for summary judgment. To address these enhanced risks, concerned employers should strongly consider building in mandatory arbitration procedures for any and all employment-related disputes.

H. Danger Zones for Retaliation - You may not retaliate for the following:
1) Civic Duties - voting, jury duty

2) Safe Workplace - reporting unsafe workplace situations

3) Illegal Actions - whistleblowing

4) Legal Activities Outside of Work

5) Garnishment

6) Medical Leave (FMLA)

7) Disability Accommodation (ADA)

8) Workers' Compensation

9) Harassment - complaints about harassment

10) Union Activity - under the National Labor Relations Act (or even non-unionized "concerted" activity)

11) Compensation - complaints about wage and hour issues

12) Benefits - complaints relating to pensions or other employee benefits under ERISA

13) Veterans' Rights - under FMLA

14) Family Status (Maryland)

15) Marital Status (Maryland)

16) Sexual Orientation (Maryland)

17) Catchall - even when the underlying actions are not specifically protected by law, employees should not be retaliated against, as the court of jury may imply the covenant of good faith and fair dealing.

I. Preventing Retaliation - Consider the following in counseling employers so as to avoid inviting an expensive retaliation lawsuit:

1) Know the employee's rights and honor them. Be aware of and follow the policies and procedures associated with those rights.

2) Treat employee requests with respect, and take complaints seriously.

3) Stay in control when employees ask for something, even though it is aggravating.

4) Be alert for situation that may give the appearance of retaliation.

5) Avoid joking or other behavior that could be construed as indicating a plan to retaliate.

6) FINAL THOUGHTS - Managers need to stop, look and listen before any serious employee actions:

a) Stop the action to consider the consequences;

b) Look at the situation from the standpoint of an outsider; and

c) Listen to the employee.

7) Reiterating an earlier comment, employers should give serious consideration to a mandatory arbitration provision encompassing all employees with regard to any and all employment-related disputes.