Monthly Archives: January 2016
Thursday, January 28, 2016

Money Money MoneyIt’s like a simple set of facts on a law school exam with an answer that defies logic. And, yet, Supreme Court precedent has brought us to this illogical conclusion. Facts: Participant agrees to reimburse the plan money it has spent on his medical care. Participant sets aside money to reimburse the plan, but then spends all of the money himself before reimbursing the plan. Question: If the money cannot be traced, can the plan recover the amount it is owed from the participant’s other assets? Answer: Last week, the Supreme Court ruled in Montanile v. Bd. of Trustees of the Nat’l Elevator Indus. Health Benefit Plan that a health plan cannot enforce an equitable lien against a participant’s general assets when the participant has already spent the fund to which the lien attached.

Robert Montanile, a participant in an ERISA-health plan, was seriously injured by a drunk driver in an automobile accident and the plan paid more than $120,000 for his medical care. The plan contained a provision that required reimbursement from a participant who recovered money from a third party for medical expenses. Montanile also signed a reimbursement agreement reaffirming this obligation.

Subsequently, Montanile filed a claim against the drunk driver and received a $500,000 settlement. After settling his attorney’s fees and repayments, the participant had enough funds remaining to repay the amount due to the plan. The funds were held in trust, and the plan sought reimbursement. After negotiations between the parties broke down, Montanile’s attorney distributed the funds from the trust to Montanile.

The plan sued Montanile under ERISA seeking repayment of the amount it had expended on his medical care. Montanile claimed that while he still had some of the settlement proceeds, he had spent most of the funds and could not identify a specific fund separate from his general assets against which an equitable lien could be enforced. The district court ruled in favor of the plan and held that the plan could recover from the participant’s general assets despite the dissipation of the specifically identified fund. The Eleventh Circuit affirmed, reasoning that a plan can enforce an equitable lien once it attaches and dissipation of a specific fund to which it attached cannot destroy the underlying reimbursement obligation.

However, the Supreme Court held that an ERISA fiduciary cannot enforce an equitable lien on a participant’s general assets if the participant has spent the settlement funds on nontraceable items. In the Court’s view, enforcement of such a lien would not constitute “appropriate equitable relief” under ERISA. Citing its prior cases, the Court stated that “equitable relief” is limited to the types of relief which were typically available in equity, and, under those principles, the plan must identify a specific fund in the participant’s possession to enforce a lien.

Is this really the answer? We previously posted that the Supreme Court’s decision in this case could provide more insight into best practices for drafting subrogation provisions in medical plans. But, it didn’t provide such insights. Even a subrogation provision supplemented by a separate reimbursement agreement proved insufficient to avoid this unfavorable outcome. Is the answer really a race, encouraging one party to run to the courthouse and the other to spend as much money as possible as quickly as possible? There may be other novel theories of recovery, but, for now, at least one consideration for plans will be whether to closely monitor participant litigation against third parties in order to be ready to litigate quickly.

Wednesday, January 27, 2016

Stock DropIn a rebuke to the Ninth Circuit, the Supreme Court granted the Amgen defendants’ petition for certiorari, reversed the Ninth Circuit’s judgment and remanded the case for further proceedings consistent with its opinion in the district court. The unanimous per curiam opinion was issued without further briefing and oral argument, an unusual step in civil cases. The substance of the opinion and its handling by summary disposition sends a clear message: the Court meant what it said in Dudenhoeffer when it stressed the role of motions to dismiss in “divid[ing] the plausible sheep from the meritless goats” and crafted new liability requirements that plaintiffs must plausibly allege are met in order to state a claim. Admittedly, we steal liberally from Judge Kozinski’s dissent in Amgen in characterizing the opinion this way. But the Court’s summary handling of the Ninth Circuit’s judgment leaves no doubt that motions to dismiss must be given serious consideration and that boilerplate allegations will not suffice.

A Short Review of Amgen’s Long History

The continuing Amgen litigation began in 2007 when former employees filed a class action against Amgen defendants alleging that the fiduciaries violated the duty of prudence under ERISA. The complaint alleged that the fiduciaries knew or should have known, on the basis of inside information, that the company’s stock price was inflated. The district court dismissed the original complaint for lack of standing and other non-merits grounds. After the Ninth Circuit reversed and remanded, the district court dismissed again, this time for failure to state a claim. Nothing if not consistent, the Ninth Circuit again reversed the district court’s dismissal. The Amgen defendants petitioned for certiorari and asked the Supreme Court to hold the case pending the Dudenhoeffer decision. Following its opinion in Dudenhoeffer, the Supreme Court granted certiorari, vacated the Ninth Circuit decision, and remanded the decision back to the Ninth Circuit for further consideration in light of Dudenhoeffer. The Ninth Circuit reissued its prior opinion with minor changes, and Amgen filed another petition for certiorari.

Supreme Court – Take Two

Today’s opinion once again reversed the Ninth Circuit’s determination that the complaint states a sufficient claim for breach of the duty of prudence. The Court repeated the Dudenhoeffer standard for assessing claims based on the fiduciaries’ possession of inside information: “[A] plaintiff must plausibly allege an alternative action that the defendant could have taken that would have been consistent with the securities laws and that a prudent fiduciary in the same circumstances would not have viewed as more likely to harm the fund than to help it.” The Ninth Circuit had defended its decision by reasoning that it is “quite plausible” that removing the Amgen Common Stock Fund from available investment options would not cause undue harm. The Supreme Court’s response to this assertion was pointed. The Ninth Circuit’s conclusion regarding alternative actions might be true but “[h]aving examined the complaint, the Court has not found sufficient facts and allegations to state a claim for breach of the duty of prudence.” Neither conclusory allegations nor court guesswork provide what Dudenhoeffer requires. The Court left to the district court to determine in the first instance whether the stockholders may amend their complaint to adequately plead a claim. As we said in analyzing Dudenhoeffer in 2014, good luck with that.

They Really, Really Mean It

Together, Dudenhoeffer and Amgen serve notice that a complaint must do much more than allege a drop in stock price. The complaint must plead special circumstances showing that the market did not provide a reliable indication of price; where, as in Amgen, the complaint relies on the plan fiduciaries’ failure to act on nonpublic information, it must identify the action which the fiduciaries should have taken which would not have violated federal securities law prohibitions on insider trading as well as facts showing that a prudent fiduciary would not have viewed the action as more likely to harm the stock fund than to help it. These high standards are not satisfied by the complaints routinely filed upon a substantial drop a company’s stock price.

Tuesday, January 26, 2016

ThinkstockPhotos-496854082This last post in our three-part series on managing FMLA fraud is about how negative commentary – including emails with smiley face emoticons – can subvert an effort to show that a termination decision was based on an honest belief that the employee was misusing FMLA leave. (The first two posts in our series are available here and here.)

The case of Apatoff v. Munich Re Am. Servs., No. 11-7570, 2014 U.S. Dist. LEXIS 106665 (D.N.J. Aug. 1, 2014), involved an employee who took extended FMLA leave for asthma. Over the holidays, video surveillance showed the employee shopping on more than one occasion and carrying boxes as she moved into a new home. Based on this evidence, she was terminated for abusing FMLA leave.

During the ensuing litigation, the employee provided evidence that her physician had instructed her to engage in exercise and stay active, and had told her to remain on leave to determine whether airborne material in the workplace triggered her asthma. In its summary judgment motion, the employer argued that, even though it may have been mistaken, the employee’s FMLA retaliation claim should fail because the employer honestly believed the employee was misusing her leave.

The court rejected this argument, noting that the employer had failed to obtain information about the parameters of the employee’s medical restrictions before terminating her. Added to this fact was evidence that the employer’s management staff had sent email messages to each other that included comments like, “Nice. Where do we go from here,” in connection with information about the surveillance results, and had used smiley face emoticons when discussing the employee’s termination. This email commentary combined with the lack of follow-up during the investigation suggested that the termination was retaliation for the inconvenience caused by the employee’s FMLA absence.

Unfortunately, negative and snarky remarks like those involved in Apatoff are all too common in the workplace. Even leave administrators and supervisors who generally recognize the value of the leave rights and protections provided by the FMLA may find themselves inadvertently creating “Exhibit A” for a trial by expressing frustrations with employees’ use of FMLA and perceptions of FMLA fraud orally or in writing.

Lesson to learn: Avoid negative and emotional commentary in both general communications concerning the FMLA and communications about investigations into potential FMLA fraud. Employers should stick to the facts and conduct a proper investigation to avoid undermining efforts at managing the FMLA in the workplace.


Monday, January 25, 2016

On January 20, 2016, the federal Department of Labor (“DOL”) issued guidelines to employers on the subject of “joint employment.” Most of the buzz regarding the DOL’s publications centers around the new “Administrator’s Interpretation” of joint employment under the Fair Labor Standards Act (“FLSA”) and the resulting implications for joint liability under federal wage-and-hour laws.

However, the DOL didn’t stop with the FLSA. Instead, the DOL also issued a new “Fact Sheet”, Fact Sheet #28N, addressing joint employment principles under the Family and Medical Leave Act (“FMLA”).

Joint employment exists when an employee is employed by two or more employers, such that both employers have responsibilities under the FMLA. Fact Sheet #28N does not provide a detailed discussion of when joint employment will be found to exist for FMLA purposes, noting instead that the analysis is the same under the FMLA as under the FLSA. Importantly, however, Fact Sheet #28N provides a “staffing company” example, thereby reminding employers that joint employment will often be found to exist when a staffing company places employees at client sites.

In a joint employment situation under the FMLA, it is necessary to identify which employer is the “primary” employer and which employer is the “secondary” employer. Fact Sheet #28N discusses the factors that will be considered in this analysis, including:

  • who has authority to hire and fire, and to place or assign work the employee;
  • who decides how, when and the amount that the employee is paid; and
  • who provides the employee’s leave or other employment benefits.

Importantly, both the primary and secondary employer must count the jointly-employed employee in determining employer coverage and employee eligibility under the FMLA. In addition, both employers have obligations to avoid FMLA interference and discrimination, and to comply with certain record-keeping requirements.

Otherwise, however, the responsibilities of the employers are different. The primary employer is responsible for giving required notices, providing FMLA leave, maintaining group health insurance benefits, and restoring the employee to his or her job following leave.

While the secondary employer generally does not have those responsibilities, the secondary employer is responsible for job restoration in certain circumstances, such as “when the secondary employer is a client of a placement agency and continues to use the services of the agency and the agency places the employee with that client employer.”

Fact Sheet #28N includes a comparison chart to help employers identify their FMLA responsibilities in a joint employment situation.

A final important point, albeit one that is not discussed in Fact Sheet #28N: It is not uncommon for companies to directly hire individuals who were previously assigned to them through a staffing agency. Assuming a joint employment relationship existed during the staffing agency assignment, the company which is now the individual’s direct employer may be obligated to count the individual’s period of service (months and hours) through the staffing agency when determining the individual’s FMLA eligibility.

Friday, January 22, 2016

Earlier this month, the U.S. District Court for the Northern District of California recognized the retroactive application of United States v. Windsor.

In Schuett v. FedEx Corporation, plaintiff and her long-time same-sex partner, Lesly Taboada-Hall were married in a civil ceremony on June 19, 2013. Taboada-Hall, a fully-vested participant in the FedEx Pension Plan, passed away the following day from cancer. As of the date of Taboada-Hall’s death, marriage licenses for same-sex couples were not available in California due to enforcement of Proposition 8, a voter-enacted ban on same-sex marriage. Six days later, the U.S. Supreme Court issued its landmark Windsor decision declaring Section 3 of the Defense of Marriage Act (DOMA) unconstitutional.

Here’s where this gets interesting. On August 6, 2013, plaintiff filed a Petition to Establish the Fact, Date, and Place of Marriage, as permitted by California Health & Safety Code Section 103450. The Sonoma County Superior Court issued a delayed certificate of marriage that showed the marriage occurred June 19, 2013 — yes, June 19, 2013, a week before the Windsor decision. So, according to the Superior Court, the plaintiff actually became Taboada-Hall’s spouse on June 19, 2013, a day before Taboada-Hall’s death, rather than June 26, 2013, a week after her death.

Plaintiff then sought a qualified pre-retirement survivor annuity under the FedEx Pension Plan as a surviving spouse. Defendant denied the claim, asserting that at the time of Taboada-Hall’s death the plan had defined “spouse” in accordance with DOMA as a person of the opposite sex who has entered into a legal union between one man and one woman as husband and wife. In denying the plaintiff’s claim on appeal, the FedEx Retirement Appeals Committee stated that for purposes of the plan, Taboada-Hall was unmarried at the time of her death and had no surviving spouse.

Plaintiff filed suit arguing that since California recognized her as being married on June 19, 2013, the date prior to Taboada-Hall’s death, she should be considered a surviving spouse for purposes of applying ERISA’s mandatory benefit provisions. ERISA requires defined benefit plans, such as the FedEx Pension Plan, to provide a qualified preretirement survivor annuity to all married participants who are vested and die prior to their annuity starting date, unless the participant has waived the benefit and the spouse has consented to such waiver. Citing Department of Labor guidance following Windsor, the court noted that ERISA’s mandatory benefits provisions clearly apply to all spouses, including same-sex spouses. Here, the plaintiff argued the plan’s terms conflict with federal law (meaning, Windsor, applied retroactively), and as a result, the plan’s terms should be overruled. In denying FedEx’s motion for judgment on the pleadings, the court found that plaintiff had adequately alleged that defendant had violated ERISA by acting contrary to applicable federal law and failing to provide a benefit mandated under ERISA. The court appeared to rely heavily on the Superior Court’s issuance of the delayed marriage certificate and the fact that plaintiff and Taboada-Hall had been registered domestic partners in California and had done everything possible to legally marry while Taboada-Hall was still alive. In reaching its conclusion, that Windsor could apply retroactively to the FedEx Pension Plan, the court pointed to the fact that Windsor itself applied retroactively to invalidate DOMA back to its 1995 enactment.

It is worth taking note of this case because of the California Superior Court’s issuance of a retroactive same-sex marriage certificate dated a week before Windsor and the District Court’s acceptance of the marriage certificate as valid. If the court’s retroactive application of Windsor stands, it is a potential game changer.

Thursday, January 21, 2016

IRS AheadSigned into law in December 2014 and effective January 1, 2016, the Small Business Efficiency Act (“SBEA”) provides welcome federal statutory recognition of Professional Employer Organizations (“PEOs”). PEOs, who act as “co-employers”, are becoming popular for many small to mid-size businesses struggling to maintain compliance with an ever-increasing volume of regulations impacting human resources and benefits compliance.

In the past, many states individually recognized PEOs through licensing or registration statutes, and there were only a handful of pieces of federal guidance concerning how PEOs should be treated under federal law. The SBEA changes the federal legal landscape by instituting a voluntary certification process for PEOs. By completing this voluntary certification process, a PEO has clear statutory authority to collect and remit taxes on behalf of their clients. Businesses can breathe a sigh of relief as certified PEOs will also assume sole liability for the collection and remission of federal taxes.

In order to become certified, the SBEA requires PEOs to meet a number of financial standards, including bonding and independent financial audit requirements. The IRS has been working to determine the exact procedures and information system changes necessary to implement the new law, and the window for submitting comments on this process just closed earlier this month. At this point, it seems aggressive, but the IRS claims that it will begin accepting applications for certification on July 1, 2016 (only a year after it was directed under the terms of the statute).

The parameters of this certification process is particularly important as PEOs are seeing ever-increasing interest these days as many businesses require assistance with the Affordable Care Act (“ACA”) requirements. Small and midsize employers are also looking to access large-group benefits as PEOs can leverage their size to negotiate more favorable rates with insurers.

One question for businesses that remains to be fully addressed is whether a PEO (certified or not) can take over sole liability for ACA’s “play-or-pay” employer mandate under Section 4980H? Since its enactment in 2010, the ACA has cast uncertainty on its impact with third-party staffing arrangements. Additionally, the final rule and preamble implementing the employer mandate uses the term “professional employer organization” in a manner that may not be reflective of the IRS-stamp of approval PEOs we now have in 2016.

The final rule attempted to address this issue by indicating that, when the PEO client organization (i.e., the employer engaging the PEO) is the “common law employer” but wants to have the offer of coverage made by the PEO treated as the offering having been made by the PEO client organization, then the PEO client organization must pay a higher fee for those employees who enroll in the health coverage (as compared to those employees who do not so enroll).

Under the “common law employer” standard, whether a common law employment relationship exists is a facts and circumstance analysis which requires consideration of “the right to control and direct the individual who performs the services.” Language found in the SBEA specifically tip-toes around this issue, stating “nothing in this section shall be construed to affect the determination of who is an employee or employer.” Nonetheless, it is generally understood that under most arrangements PEOs treat employees as the PEO client organization’s common law employees. In cases where a PEO is not the common law employer of the employee (either in place of or in addition to the PEO client organization), however, the PEO has another path to offer coverage on behalf of a client and satisfy the client’s employer mandate obligation so long as the client pays the PEO an extra fee for individuals who enroll in the PEO’s health plan.

Additional guidance from the IRS in relation to these certified PEOs and how, if at all, they will impact the employer mandate would certainly be welcome and may help clear up some of these issues, but until that time companies should remain diligent and be aware of the potential legal risks.

Wednesday, January 20, 2016

The U.S. Equal Employment Opportunity Commission (“EEOC”) has steadfastly maintained that any wellness program that is not voluntary violates the Americans With Disabilities Act (“ADA”). In 2014, the Chicago District Office of the EEOC filed lawsuits against Orion Energy Systems, Honeywell International, Inc. and Flambeau, Inc. alleging that their respective wellness programs were not voluntary since employees who refused to complete a health risk assessment and/or biometric screening were financially penalized. In a case of first impression in the Seventh Circuit, the U.S. District Court for the Western District of Wisconsin granted summary judgment on December 31, 2015, in favor of the defendant in EEOC v. Flambeau.

Factual Background

Flambeau implemented a wellness program for 2011 in which employees who completed both a health risk assessment and biometric testing received a $600 credit. The health risk assessment included questions about the employee’s medical history, diet, mental and social health and job satisfaction. The biometric testing was similar to a routine physical exam involving (among other things) height and weight measurements, a blood pressure test and a blood draw. For 2012 and 2013, Flambeau eliminated the $600 credit and instead made completion of the health risk assessment and biometric testing a condition to enrolling in its health plan.

ADA Safe Harbor

Section 12112(d)(4)(A) of the ADA prohibits employers from requiring medical examinations and inquiries that are not job-related or consistent with business necessity. However, Section 12201(c)(2) of the ADA also provides that nothing in Title I of the ADA shall be construed to prohibit or restrict a covered person from establishing or administering the terms of a bona fide benefit plan that are based on underwriting risks, classifying risks or administering such risks that are based on or not inconsistent with state law (the “Bona Fide Plan Safe Harbor”). Flambeau argued that its wellness program fell within this safe harbor. This was the same defense successfully raised by the defendant in Seff v. Broward County.

The EEOC argued that the Bona Fide Plan Safe Harbor is inapplicable and that the only exception to the ADA prohibition on required medical examinations for wellness programs is the exception under Section 12112(d)(4)(B), which permits medical examinations which are part of a voluntary employee health program (“Voluntary Program Exception”). The EEOC reasoned that application of the Bona Fide Plan Safe Harbor to Flambeau’s wellness program requirement would render the Voluntary Program Exception irrelevant.

Court Analysis

In disagreeing with the EEOC’s rationale the Court described the Bona Fide Plan Safe Harbor as providing an exception for medical examinations that are tied to employers’ insurance plans which is in contrast to the Voluntary Program Exception which permits medical examinations that are part of an employee health program regardless of whether the employer sponsors any sort of employee benefit plan. Accordingly, a stand-alone wellness program cannot avail itself to the Bona Fide Plan Safe Harbor but it may qualify for the Voluntary Program Exception. The Court acknowledged that in some instances there may be overlap but held that just because a wellness program might fall within the scope of the Voluntary Program Exception does not mean that it cannot also be protected under the Bona Fide Plan Safe Harbor.

In considering whether Flambeau’s wellness program satisfied the conditions of the Bona Fide Plan Safe Harbor, the Court held that wellness program was clearly a term of the employer’s benefit plan. The Court stated that first and foremost, the EEOC’s entire claim is premised on its allegation that employees were required to complete the wellness program before they could enroll in the plan. Further, the Court noted that Flambeau had distributed handouts to its employees informing them of the wellness program requirement and scheduled the health risk assessments and biometric testing to coincide with the health plan’s open enrollment period. The Court held that the fact that neither the summary plan description nor the collective bargaining agreement identifies the wellness program requirement was not dispositive of whether the wellness program was a term of the benefit plan since such documents do not establish the terms of the actual benefit plan. The Court did note, however, that the plan’s summary plan description explained that participants would be required to enroll in the manner and form prescribed by defendant which put employees on notice that there might be additional enrollment requirements not spelled out in the summary plan description.

In determining that the wellness program requirement was intended to assist Flambeau with underwriting, classifying or administering risks associated with an insurance plan, the Court relied on the undisputed evidence establishing that defendant’s consultants used the information gathered through the wellness program to identify common health risks and medical conditions among enrollees and project Flambeau’s cost of providing insurance in order to make recommendations regarding participant premiums contribution amounts and the purchase of stop loss coverage.

The final issue addressed by the Court was the EEOC’s contention that Flambeau’s implementation of the wellness program was actually a subterfuge to evade the purposes of the ADA, which is expressly prohibited under the safe harbor. Citing Section 12101(b)(1) of the ADA, the Court noted that the purpose of the ADA is not to prohibit employers from asking for medical and disability-related information; but rather, its purposes is to provide a clear and comprehensive national mandate for the elimination of discrimination against individuals with disabilities. The Court explained that a benefit plan term does not operate as a subterfuge unless it involves a disability-based distinction that is used to discriminate against disabled individuals in a non-fringe benefit aspect of employment. The Court determined that Flambeau’s wellness program did not involve any such distinction or relate to discrimination in any way since all employees that wanted coverage had to complete the wellness program before enrolling in the group health plan. Further there was no evidence that Flambeau used the information from the wellness program to make any disability-related distinctions with respect to employees’ benefits.


The Court held that the protections set forth in the ADA share harbor enable employers to design insurance benefit plans that require otherwise prohibited medical examinations as a condition of enrollment without violating Section 12112(d)(4)(A) of the ADA. The impact of Flambeau on the pending wellness cases and the EEOC’s proposed rule on wellness programs remains to be seen but employers should be encouraged by the outcome of this case. It is uncertain whether the EEOC will appeal the Court’s decision, but further confirmation of the availability of the protections of ADA’s Bona Fide Plan Safe Harbor to wellness programs would be welcome news to employers since it would provide another means of structuring their wellness programs to comply with the ADA.

Tuesday, January 19, 2016

ThinkstockPhotos-112707613Continuing our three-part series on managing FMLA fraud (see our initial post here), this post addresses the importance of conducting a reasonable investigation, prior to taking adverse action, to develop a supportable “honest belief” of FMLA fraud.

The case of Hosler v. Fulkroad, No. 13-cv-1153, 2015 U.S. Dist. LEXIS 80801 (M.D. Penn. June 23, 2015), provides an excellent example of this principle. The employee requested leave for surgery and recovery, and submitted a doctor’s note in support of the request. The employer purportedly doubted the need for leave and terminated the employee while she was out.

Not only did the jury find in favor of the employee on her FMLA interference claim, but the court awarded liquidated damages, finding no credible evidence that the employer had a reasonable, good faith basis for its interference with the employee’s FMLA rights.

The court pointed out that the employer could not provide any factual basis for his personal opinion that the doctor’s note was fraudulent. Indeed, despite supposedly believing that the note did not come from the doctor’s office and that someone had forged the doctor’s signature, the employer failed to make any kind of reasonable inquiry with either the employee or her doctor concerning the validity of the note. Thus, the court imposed “significant consequences” for the employer’s “arbitrary, erroneous, subjective, and uninformed” action.

The importance of asking questions was also demonstrated in Dandridge v. N. Am. Fuel Sys. Remfg., No. 13-cv-573, 2015 WL 1197541 (W.D. Mich. Mar. 16, 2015). Video surveillance of an employee who called in an intermittent FMLA absence for migraines showed him entering and leaving a commercial property he owned during the time he was supposed to be at work. Relying on the video and the fact that the employee had, on four prior occasions, taken leave at the same time as another employee with whom he co-owned the property, the employer had the employee come in to the workplace and, without giving him a chance to explain, told him to resign or be fired for abusing FMLA leave.

In rejecting the employer’s motion for summary judgment on the employee’s FMLA retaliation claim, the court noted the employee had an explanation for the situation: he had received notice that the property had been burglarized and the police were involved, so he went to the property despite continuing to suffer from his migraine. The court faulted the employer for failing to investigate further before concluding that the employee was not incapacitated and unable to work, stating that while an investigation does not have to be “optimal,” this investigation failed because it was limited and singularly focused on the video recording.

The bottom line: While the legal standard for demonstrating an “honest belief” of FMLA fraud to defeat an FMLA claim varies by jurisdiction, it is always a good idea to avoid acting rashly or based on assumptions. To greatly increase chances of prevailing, employers should ensure that they conduct a reasonable investigation that includes gathering information from the employee and/or the employee’s provider as appropriate, before taking adverse action.

Monday, January 11, 2016

ThinkstockPhotos-466150788This post is the first in a three-part series of posts on managing FMLA fraud with tips from recent cases. In Alexander v. Bd. of Educ. of City Sch. Dist., No. 14 Civ. 8553, 2015 WL 2330126 (S.D.N.Y. May 14, 2015), for example, the court provided guidance on how FMLA policies can help support a termination decision when an employee misuses FMLA leave.

The employee in Alexander told her employer she needed intermittent FMLA leave to take her child to physical therapy appointments. Her request was approved after a doctor’s note confirmed the need for leave. Subsequently, the child refused to attend the appointments. Rather than update her employer about the situation, however, the employee attended classes while on leave during the scheduled appointment times. Trouble arose for the employee when she submitted a tuition reimbursement request for the course, and her employment was terminated for abuse of FMLA leave after she admitted these facts during the employer’s investigation.

Summary judgment for the employer on the employee’s FMLA retaliation claim – the obvious result – was granted. In doing so, the court rejected the employee’s argument that the motivation for her termination could not have been her abuse of FMLA leave, because she was “never advised that she had to apprise her employer of the need to terminate her FMLA intermittent leave” when she no longer planned to attend the physical therapy appointments. The court noted that, to the contrary, information on the employer’s website pertaining to its FMLA policy expressly stated that if it became apparent that an employee could resume work earlier than originally anticipated, the employee must notify the employer as soon as possible.

Takeaway: It’s always helpful with employment disputes, including those involving FMLA retaliation claims, to be able to point to specific policy language that the employee violated. In this case, the express requirement for the employee to notify the employer of a change in her need for leave won the day.

While not at issue in this case, other helpful policy language could include a statement that the submission of false information in support of a request for FMLA leave, or the abuse or misuse of approved FMLA leave, may result in discipline, up to and including immediate termination.

Friday, January 8, 2016

On January 4, 2016, the Internal Revenue Service published its annual update of user fees Rev. Proc. 2016-8 for various letter ruling and determination letter requests. The 2016 update now includes user fees and guidance for Voluntary Correction Program (VCP) submissions under the Employee Plans Compliance Resolution System. In many cases the user fee for VCP submissions is reduced under Revenue Procedure 2016-8. The revised fee schedule for employee plan user fees (including VCP submissions) is effective February 1, 2016.

Below are the current user fees for regular VCP submissions for qualified plans and 403(b) plans as set forth in Section 12.02 of Revenue Procedure 2013-12.*

Participants Revenue Procedure 2013-12 Fee
20 or fewer participants $750
21 to 50 participants $1,000
51 to 100 participants $2,500
101 to 500 participants $5,000
501 to 1,000 participants $8,000
1,001 to 5,000 participants $15,000
5,001 to 10,000 participants $20,000
Over 10,000 participants $25,000

* User fees for VCP filings relating to certain minimum distribution or plan loan failures were revised in Revenue Procedure 2015-27.

Below are the user fees, effective February 1, 2016, for regular VCP submissions for qualified plans and 403(b) plans as set forth in Section 6.08 of Revenue Procedure 2016-8.

Participants Revenue Procedure 2016-8 Fee
20 or fewer participants $500
21 to 50 participants $750
51 to 100 participants $1,500
101 to 1,000 participants $5,000
1,001 to 10,000 participants $10,000
Over 10,000 participants $15,000

Note: Revenue Procedure 2016-8 also includes additional user fee changes for other types of VCP filings, letter rulings, determination letter requests and exempt organization user fees.

The Service is in the process of revising Form 8951, Compliance Fee for Application for Voluntary Correction Program (VCP) (rev. September 2015). Until the revised form is published, the guidance states that the existing form should be used, however the appropriate user fee should be submitted based on the applicable revenue procedure.