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Space Shuttle and Employment Perks: Symbols of the Past Say Final Farewell

April 18, 2012 – 5:44 pm | By Dan Macy | No comments yet

[caption id="attachment_3527" align="alignleft" width="300" caption="photo: Dan Macy"][/caption] When we think of the term “bygone era,” one thing that commonly comes to mind is the space program. And perhaps another is employment perks. Not that either is gone, by any means. But times seem to be changing for both during an era of economic contraction, so perhaps it is no coincidence that the two topics share this special link. That association seemed more palpable if you were in Washington, D.C. on April 17. That is the day that the space shuttle program, the product of better economic times to be sure, symbolically came to a close with the transfer of the Shuttle Discovery — in a spectacular flyover — into retirement outside the nation’s capital. It is also the day after a congressional hearing focused on an apparently grandiose waste of taxpayer money by a federal agency — the General Services Administration (GSA), ironically enough the agency that oversees all of the federal government’s real estate, employee travel and other nationwide policies — on what Congress is calling a “bash in Las Vegas.” That earthbound spectacle has already revealed lavish employee perks and travel accommodations that call to mind the champagne times of the Reagan era, when the space shuttle program was in its heyday. But while the space shuttle ended its run with a smooth landing near the capital, the GSA, still flying high, is hitting some serious chop over its spending on fringes — including a luxurious loft suite with a hot tub in it, high over Las Vegas — that seemed more apt for the age of Airport ’77 than for the post-Lehman Brothers era. The GSA got in trouble over a conference for 300 employees that cost taxpayers $823,000. The conference took place in late 2010, well into the biggest financial crisis since the Great Depression. A scathing report by the GSA Inspector General (IG) Brian D. Miller called the expenses “excessive, wasteful and in some cases impermissible.” Travel and Entertainment Benefits Will federal business travel go the way of the space program, which became too costly for the country to bear and now exists as a mere shadow of its former self?  It’s probably in for some pressure, thanks to the GSA spending as though it was the good old days in which people were fond of saying, “What happens in Vegas stays in Vegas.” Was it that long ago that President Obama uttered the famous remark that stirred up a protest by the mayor of “Sin City”? The president said to banks, “You can’t get corporate jets, you can’t go take a trip to Las Vegas or go down to the Super Bowl on the taxpayer’s dime.” That was 2009, right after large banks that took public funds during the onset of the financial meltdown sent their employees to luxury hotels and resorts for company-sponsored conferences. The word “luxury” became taboo, and soon even private-sector companies found themselves actually spending more money, in some cases, to send their employees to less-glamorous sounding cities, just to avoid bad publicity. But the feds went and took a trip to Las Vegas on the taxpayer’s dime. One member of Congress even called for an end to the GSA. Well, maybe it’s time for an update in the agency’s thinking, anyway. And that seems like just what will happen, as is evident in the April 2 response to the IG’s report by the embattled chief of the GSA, who resigned later that day. The reform would apply to government employees, but federal travel policy can be a bellwether for the private sector. Federal agencies have to follow federal travel guidelines, and the IRS uses the federal travel rates — travel per diems, for example — as the basis for tax treatment of business travel fringe benefits in the private sector, too. Other Fringe Benefits Caught Up in the Going-nowhere World of Washington The GSA’s old school ways aren’t the only stale thinking in Washington. Back up in the sky, the Shuttle Discovery — perched atop a modified Boeing 747 — moved on from the clouds over the GSA’s headquarters in Foggy Bottom and glided past the Capitol dome, once seen by President Abraham Lincoln as a symbol of unity but now seen as a symbol of partisan bickering. All the inaction seems to be happening on one side of the dome, in the House of Representatives, as Congress displays to all in the land that it knows more than anyone about dysfunction. Buried deep in a piece of stalled legislation is a tax break for commuters who want to save money and do something good for the environment on the side, perhaps — a qualified transportation fringe benefit (QTFB). Going nowhere in the House currently is the transportation funding package known as “MAP-21,” or Moving Ahead for Progress in the 21^st Century, the Senate version of which contains the QTFB provision. The political parties cannot seem to agree how to move ahead, even as they let tax policy from the last century encourage driving to work over taking mass transit. Sen. Charles Schumer (D-N.Y.) tried to update the thinking of government by introducing a QTFB provision to the massive transportation bill. Schumer’s amendment would provide equitable tax breaks for driving to work or taking the train or bus there. But for now, even though employees’ use of public transportation to get to work is on the rise, the tax break for driving and parking the car is nearly twice as generous as that for taking the train or the bus to work. It All Circles Back to the GSA This is despite Obama’s initiative to get federal employees to cut back on their carbon footprint. In a sad twist of irony, the GSA — the agency that the president appointed to spearhead that very clean energy program — got into more trouble over a video clip that appeared to poke fun at the president and his eco-friendly initiative, which is designed to make federal employees travel less and do other greener things, like ride the bus or train to work. The video, which was provided to the congressional oversight committee investigating the Las Vegas conference, was presented for an award at that very conference. Observed CNN about the video: “One line of the song says ‘POTUS wants a press event, a project he can show,’ while a worker holds up a portrait of Obama. POTUS stands for “president of the United States.” Talk about twisted. If this represents the end of an era, let’s hope the next era involves more common sense.

Arizona Surgery Practice to Pay $100,000 in HIPAA Settlement

April 18, 2012 – 5:10 pm | By David Slaughter | 2 comments

A heart surgery group practice agreed to pay $100,000 to settle federal allegations that it chronically neglected standard HIPAA requirements such as risk assessment, training and business associate contracts, the U.S. Department of Health and Human Services (HHS) announced April 17. This settlement, coming hard on the heels of HHS’ $1.5 million agreement with BlueCross BlueShield of Tennessee, suggests that HHS officials’ recent tough talk is for real. And of potential significance for plan sponsors, it may signal that smaller covered entities are no longer under the radar. HHS’ enforcement action against Phoenix Cardiac Surgery, P.C. (PCS), was triggered by a complaint that PCS was posting patient appointments on a publicly accessible Internet-based calendar. When it investigated, HHS’ Office for Civil Rights (OCR) found that the five-physician group had implemented few policies or procedures to comply with HIPAA’s privacy and security rules, and had only limited safeguards on electronic protected health information (e-PHI), the agency alleged. “This case is significant because it highlights a multi-year, continuing failure on the part of this provider to comply with the requirements of the privacy and security rules,” OCR Director Leon Rodriguez said in a statement. “The HIPAA privacy and security rules have been in place for many years, and OCR expects full compliance no matter the size of a covered entity.” Like previous HIPAA “resolution agreements,” the PCS settlement imposes a detailed corrective action plan. In this case, PCS must prepare and submit policies and procedures for OCR approval and then, 60 days later, submit an “implementation report” that includes a risk analysis, a risk management plan and signed attestations that all employees have undergone the required training and certified compliance. HIPAA privacy and security enforcement are detailed in the Employer’s Guide to HIPAA and Employer’s Guide to HIPAA Privacy Requirements.

A Peculiar Line of Commerce: Supreme Court Weighs FLSA Status of Rx Sales Reps

April 18, 2012 – 12:50 pm | By Khristine Scholtz | No comments yet

The pharmaceutical industry made its case to the U.S. Supreme Court April 16 that pharmaceutical sales representatives (PSRs) are “outside salesmen” under the Fair Labor Standards Act and thus are exempt from the FLSA’s overtime requirements. A lot is at stake in the Court’s upcoming decision, since requiring overtime pay for PSRs could impose billions of dollars of potential liability on the industry. The case is Christopher v. SmithKline Beecham Corp. (No. 11-204). FLSA’s Definition of ‘Sale’ The bulk of the oral arguments revolved around the meaning of a “sale” under the FLSA and reflected how difficult this question is, as the Court struggled with this definition. Under section 3(k) of the FLSA, a “sale” includes “any sale, exchange, contract to sell, consignment for sale, shipment for sale or other disposition.” Regulations from the U.S. Department of Labor add that sales “include the transfer of title to tangible property, and in certain cases, of tangible and valuable evidences of intangible property.” Does Marketing a Product Qualify as a Sale? Thomas Goldstein, representing former SmithKline PSRs, argued that PSRs cannot be “outside salesmen” because they don’t actually make a sale. Rather, they market the drug or product to doctors, who then prescribe and sell the drug. Paul Clement, representing SmithKline, said the PSRs were “outside salesmen” under the FLSA because they are hired as salespeople and are given sales training. During the oral argument, he stressed that requiring overtime pay for PSRs could impose billions of dollars of potential liability on the pharmaceutical industry. To counter Goldstein, Clement argued that for PSRs, making a sale is the most important part of their job. The PSRs are seeking a commitment from a doctor to prescribe. And, he added, their salary is based on the number of prescriptions written. Justice Scalia called PSR work a “peculiar line of commerce,” because the representatives are selling a product (drugs) that they themselves are legally prohibited from selling. In other words, it is only doctors who can sell the drugs, since only doctors can write prescriptions for them. While acknowledging that the restriction places PSRs in an odd place when “selling,” Goldstein pointed out that the FLSA draws these strange lines frequently. For example, he said, movie theater employees are exempt but playhouse employees are not. Justice Kagan found DOL’s regulation (that a “sale” includes the transfer of title to property) confusing and possibly inconsistent with FLSA section 3(k). As she noted, in consignments (which section 3(k) includes in the definition of “sale”), there isn’t an actual transfer of title. Justice Scalia quickly agreed, pointing out that consignment sales don’t even have an agreement to transfer title. Rather, he said, consignments are like “a future contingent.” Keep an Eye Out for Final Decision The difficulty of the questions presented clouded most of the Justices’ stances on the topic (though Justice Scalia, predictably, did say that in his eyes, PSRs looked like salesmen). In any regard, employers that frequently interact with government agencies and/or rely on agency interpretations should keep an eye on this case. The Court’s decision is expected in late June 2012.

Wendy’s In Hot Water After Turning Away Cook With Disabilities

April 18, 2012 – 11:43 am | By Rita Zeidner | No comments yet

The U.S. Equal Employment Opportunity Commission is suing a Killeen, Texas branch of the fast food franchise Wendy’s for turning down a job applicant because he is hearing-impaired. The EEOC charges in its suit that the restaurant’s general manager refused to hire Michael Harrison, Jr. for a cooker position, despite his qualifications and experience, upon learning that Harrison is hearing-impaired. Harrison said that after successfully  interviewing with the Wendy’s shift manager, he attempted to complete the  interview process by interviewing with Wendy’s general manager via Texas Relay, a telephonic system utilized by people with hearing impairments. Harrison’s told the EEOC that during the call he was told by the general manager that “there is really no place for someone we cannot communicate with.” The Americans with Disabilities Act (ADA) prohibits disability discrimination and requires employers to make reasonable accommodations to employees’ and applicants’ disabilities as long as this does not pose an undue hardship. “In these tough economic times, opportunities for employment are at a premium,” said Robert A. Canino, regional attorney for the EEOC’s Dallas District Office. “Here, Mr. Harrison had the work experience necessary to do the job and was prepared to contribute his solid work ethic and skills again to the food retail business, but was denied the chance to do so on irrelevant and unlawful grounds.” The EEOC seeks injunctive relief, including the formulation of policies to prevent and correct disability discrimination. The suit also seeks lost wages and compensatory damages for Harrison and punitive damages against CTW L.L.C, the franchise owner. The EEOC filed suit after first attempting to reach a pre-litigation settlement through its conciliation process. “The ADA requires companies to treat disabled persons the same as all other applicants for a job," said Joel Clark, trial attorney for the EEOC. “This company automatically refused to consider Mr. Harrison for employment solely because of his hearing impairment. Wendy’s should not have relied on its own negative, generalized assumptions about his ability to communicate.”

Brinker Decision Pushes Meal, Rest Breaks Top of Conversation

April 18, 2012 – 11:02 am | By Liza Casabona | No comments yet

Last week, the California Supreme Court issued an opinion in a closely watched case dealing with meal and rest breaks for employees. Brinker Restaurant Corp. v. Superior Court clarified meal and rest break practices for employers in California; however, the case is generating interest in other parts of the country as well because of the prevalence of lawsuits around these issues. Brinker operates Chili’s, Romano’s Macaroni Grill and Maggiano’s Little Italy restaurants across the United States. In Brinker, the California court took up two issues: (1) if it is enough for employers to provide an employee with a break or if they are required to ensure that the break is taken; and (2) when during the workday are breaks taken and how long those breaks must be. In a unanimous decision, widely interpreted as favorable to employers (although there have been some claims that it also benefits employees), the court said:

• employers must provide nonexempt workers with a break but they don’t have to ensure that the break is taken;
• nonexempt workers are entitled to one 10-minute rest break for shifts between 3.5 and 6 hours in length, two 10-minute breaks during shifts between 6 and 10 hours long, and three breaks for shifts between 10 and 14 hours long;
• meals breaks should occur before the fifth hour of work; and
• rest breaks should be allowed in the middle of each four-hour work period but they don’t have to be provided  before a meal break.

In practice the decision about providing a break, but not enforcing the break, means that California employers are off the hook for making sure employees aren’t working during meal breaks. That question was considered the most contentious element before the California Supreme Court. In response to the opinion, Rex Heinke, a partner with Akin, Gump, Strauss Hauer & Field and Brinker’s lead attorney said, "the Court's definitive resolution of these critical issues offers clear and much-needed guidance not only to Brinker and their team members, but to hundreds of thousands of employers and employees statewide.” The court’s opinion clarified  some of the outstanding legal questions presented in the Brinker case, but remanded the case back to the lower court to address other issues such as whether or not the meal break claims can continue be part of the broader class action. The litigation was sparked initially by a class action suit filed by Brinker employees who alleged that they were pressured to work through their breaks. The lower court authorized a class action about the frequency and duration of rest breaks, which the California Supreme Court upheld in its decision last week. For more information, the U.S. Department of Labor has state-by-state information about meal and rest break provisions on its website.