2007

Annual Employment Law Update October 23, 24 and 25, 2007 Denver Tech Center Downtown Denver Westminster David R. Hammond Sybil R. Kisken Elizabeth J. McNamee Amy K. Hunt Brett C. Painter Jeff R. Pretty Janet A. Savage

1550 Seventeenth Street, Suite 500 Denver, Colorado 80202 Tel: 303 892 9400 Fax: 303 893 1379 www.dgslaw.com

Section II Dealing with Difficult Employee Separations

DEALING WITH DIFFICULT EMPLOYEE SEPARATIONS! by Sybil R. Kisken, Esq. When an employee's employment needs to end or is ending or ultimately does end-either voluntarily or involuntarily-there frequently are legal and practical issues that an employer needs to consider and address in order to minimize both the employer's liability and the impact of the employee's separation on the continued operations of the employer. This outline sets forth the: various types of employee separations and the primary legal authority that relates to employee separations, and then summarizes some recent cases which illustrate the challenges that can arise in an employee separation situation.

I.

Types of Employee Separations A.

I use the term "separation" in this outline because it seems to be the most appropriate word to encompass all of the ways pursuant to which an employee's employment may end. Just as every employee is hired, every employee ultimately separates from their employer-voluntarily or involuntarily, happily or unhappily.

B.

There are numerous ways in which an employee's employment with an employer can end, some of which in tum raise various issues and challenges: 1.

Voluntary resignation or "I quit": An employee decides to resign, for whatever reason, and gives the employer notice of his or her resignation.

2.

Job abandonment or constructive resignation: An employee simply stops coming to work and so at some point, the employer considers the employee to no longer be an employee.

3.

Death: Needs no explanation.

4.

Voluntary retirement: Perhaps best described as a subset of voluntary resignation, an employee decides to retire, usually associated with an older employee and usually characterized by an employee's decision to work no longer or to change jobs or professions.

5.

Mandatory retirement: An employee is compelled tb resign by virtue of a mandatory retirement policy or requirement. Mandatory retirement is prohibited by the Age Discrimination in Employment Act with limited exceptions for certain executives age 65 and older; certain governmental policymakers; judges; air traffic controllers; federal law enforcement officers; firefighters and law enforcement officers if certain requirements are met by the government employer.

'This topic evolved from a suggestion by Ann Welsch-thank you very much for your suggestion, Ann! DAVIS GRAHAM

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Practice pointer: Before implementing a mandatory retirement policy, it is recommended that an employer seek legal advice because the risk involved is significant. See EEOC v. Sidley Austin LLP, N.D. Ill. No. 05-C-0208 (Consent decree signed 10/4/07): EEOC reached $27.5 million settlement in lawsuit on behalf of 32 fonner attorneys which challenged mandatory retirement policy which created sliding scale of mandatory retirements of partners between the ages of 60 and 65. Consent decree prohibits Sidley Austin from using age as a basis to tenninate or change partnership status, and prevents the law finn from maintaining any infonnal or fonnal age-based retirement policies. The settlement followed a court decision in which the Seventh Circuit held that an individual who is a partner-employer under state law may still be classified as an employee under federal antidiscrimination law, and the analysis will tum on the individual's governing authority.

6.

Employment contract expires or otherwise is terminated: An employee with an employment contract may have his or her employment ended by the natural expiration of the contract or by a tennination process spelled out in the contract.

7.

Layoff (often due to reduction-in-force, job abolishment, company restructuring, etc.): An employee's services are no longer needed because their position is abolished or the job site is abolished or the employer can no longer afford to pay them; a layoff frequently may be viewed as a no-fault separation, although the criteria for detennining which employees to layoff may include perfonnance-related criteria. A reduction-in-force typically involves the layoff of many employees.

8.

Termination for performance reasons and/or inappropriate conduct: An employee is tenninated or discharged or fired for poor perfonnance, violation of company rules, inappropriate conduct, etc.

9.

Separation due to medical reasons: An employee cannot do their job because of medical reasons or medical-related issues. One of the most challenging employee situations involves separating an employee who has medical issues which prevent the employee from doing their job. The challenge derives in part from the fact that employers typically do not have medical expertise and therefore must rely on others to help assess the employee's ability to do their job. In addition, there are numerous laws and legal processes that often intersect in such a situation: worker's compensation, short-tenn disability, long-tenn disability, Family & Medical Leave Act leave, the Americans with Disabilities Act, and finally, the employer's own policies and procedures (which hopefully are consistent with all of the above). An employer has to make sure that the

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requirements of all applicable legal authority are complied with when dealing with an employee with medical issues. 10.

Constructive discharge: Typically this term is used to describe the situation when an employee claims to have been forced to resign because of intolerable working conditions.

11.

Involuntary resignation: This term can include the above concept of constructive discharge, and can also refer to the situation where an employee says "I quit" when they know or think they are about to be fired.

12.

Negotiated resignation or separation: An employee and an employer mutually negotiate the terms of an employee's separation, usually to their mutual benefit.

Practice pointer: Review your employment policies and employment contracts to determine if you have defined and addressed in a consistent and appropriate fashion various forms of employee separations. For example, do you have a written "job abandonment'" policy? Do you require that an employee give a certain amount of notice before they resign, and if an employee doesn't-what is the consequence (e.g., eligibility for re-hire)? C.

The approach an employer takes to handling any of these employee separations or endings is important. The approach an employer takes to an involuntary separation is critically important:

"As a former plaintiff's counsel, I know that the way in which an employee perceives his or her final disciplinary action or termination meeting is the most significant factor in determining whether a lawsuit will be filed. ,,2 A study of 996 terminated employees in Ohio found that those given no explanation were ten times more likely to sue their former employer than those given an explanation. 3 Practice pointer: Carefully plan an approach with as much dignity as possible for the employee. D.

The language an employer uses when characterizing and approaching an employee separation can potentially impact how the separation is viewed, by the employee and by others. For example, consider the use of the term "termination": When an employee's employment is ended because the employee can no longer perform the essential functions of his or her job due to medical reasons beyond the employee's control,

2"Disciplining and Firing Employees" by T. Robinson at www.artic1ecity.com/artic1es/legalJarticle 498.shtmi. 3See

http://researchnews.osu.edu/archive/tiredup.htm.

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does it make sense for an employer to refer to that employment separation as a "termination" if the same employer uses the same term to refer to a situation when an employee's employment is ended due to poor performance and/or inappropriate behavior in the workplace (e.g., workplace violence)? As a practical matter from the employer's perspective, it may not matter much, if at all what language is used to characterize an employee separation, but from an employee's perspective-it can make a difference. The City and County of Denver, for example, refers to a medical-related separation as a "disqualification" or a "no-fault separation." It is not only about language there; an employee who is disqualified is eligible for re-hire, whereas an employee who is terminated is not eligible for re-hire for a period of five years. Another example, with more subtle distinction, is an employer's characterization of a separation or firing due to poor performance versus an employer's characterization of a separation or firing due to inappropriate behavior in the workplace (e.g., stealing, workplace violence). And even subtler still, what about a situation where the reason for the firing involves both poor performance and inappropriate behavior: an employee who is rude and nasty to co-workers.

Practice pointer: It is recommended that employers review the terminology that they are using to characterize different types of employee separations to determine if the language itself properly characterizes each type of separation. The language itself may affect how an employee views their separation, and potentially may influence whether the employee decides to challenge the separation. E.

Documentation is another critical aspect of minimizing liability with respect to an employee separation. The mantra, "document, document, document," is firmly held by most employment lawyers, human resource professionals and managers. However, the new mantra, particularly in light of amendments to the Federal Rules of Civil Procedure which took effect on December 1, 2006, is "review your policies with respect to documentation, including electronic documentation, ensure documentation is maintained appropriately, and frequently remind others of their obligation to do so."

See Alai v. Union Pac. R.R. Co., 129 P.3d 999 (Colo. 2006): Conductor tripped over rubber mat and filed injury report; the employer did not properly suspend its 92-day document retention policy. The Colorado Supreme Court found that the trial court properly instructed the jury that it could draw an adverse inference against Union Pacific as a result of the destroyed documents, and ultimately the conductor was awarded $6 million. II.

Legal authority governing employee separations and terminations

There are numerous statutes, both state and federal, that an employer must be aware of when dealing with employee separations, both voluntary and involuntary. Following is a non-

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exhaustive list of the legal authority that is frequently implicated in employee separation . . 4 sItuatIOns: A.

Age Discrimination in Employment Act of 1967 ("ADEA"), as amended, including the Older Workers Benefit Protection Act of 1990 ("OWBPA"), 29 U.S.C. §§ 621-634 (federal law which prohibits age discrimination in employment, and which also addresses, inter alia, mandatory retirement policies and requirements for obtaining a valid waiver of rights under the ADEA for employees age 40 or older) Information about the ADEA and OWBPA can be found at: http://www.eeoc. gov/types/age.html

B.

Colorado Wage Claim A'ct, C.R.S. §§ 8A-lOl-8-4-l23 (state law which regulates payment of employee wages, including when an employee's employment ends) Information about the CWCA can be found at: http://www.coworkforce.com/LAB/ Effective May 31, 2007, the Colorado Legislature amended § 8-4-110(1) to make the award of attorney fees in a CWCA action discretionary rather than mandatory. C.R.S. § 8A-llO(1) ("If, in any action, the employee fails to recover a greater sum than the amount tendered by the employer, the court may award the employer reasonable costs and attorney fees incurred in such action when, in any pleading or other court filing, the employee claims wages or compensation that exceed the greater of seven thousand five hundred dollars in wages or compensation or the jurisdictional limit for the small claims court ...."). This amendment applies to "legal actions to recover wages or compensation commenced on or after the effective date of this act." House Bill 07-1247 § 4 (Chapter 381, Labor and Industry). Please note that employees can file CWCA complaints on-line.

C.

COBRA-Consolidated Omnibus Budget Reconciliation Act of 1985, 29 U.S.C. §§ 1161 et seq. (federal law requiring certain employers and their health, disability and life insurance providers to make coverage available to eligible employees and their dependents for a period of time after separation)

4Aside from the reference to COBRA, it is beyond the scope of this outline to address laws related to employee health and retirement benefit plans (including the Employee Retirement Income Security Act of 1974 ("ERISA"» and tax consequences of separation agreements (including Section 409A of the Internal Revenue Code of 1986). Davis Graham & Stubbs LLP has lawyers who specialize in these and other related areas of law. See also http://employeebenejitslaw.dgslaw.com (DGS's first blog created by attorney Vicki Johnson).

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Several federal agencies have responsibilities with respect to COBRA; frequently answered questions about COBRA can be found at: http://www.dol.gov/ebsaiFAQs/fag compliance cobra.html D.

Colorado Catastrophic Health Insurance Coverage Act, C.R.S. §§ 10-16214-10-16-217 (Colorado's state version of COBRA, which is similar in many ways, but which covers broader range of employers) Information about health insurance, including the Colorado Catastrophic Health Insurance Coverage Act, can be found at: http://www.dora.state.co.us/insurance/consumer/healthrnain.htm See attached comparison of COBRA versus state law published by the Colorado Department of Regulatory Agencies

E.

Colorado Employment Security Act, C.R.S. §§ 8-70-101-8-82-104 (state law providing for unemployment compensation for eligible employees) Information about Colorado unemployment compensation can be found at: http://www.coworkforce.com/UIB/ Note, effective August 3, 2007, the Industrial Claims Appeals Office must receive an appeal within twenty (20) calendar days after the date the hearing officer decision is mailed; the postmark date is no longer considered in determining the timeliness of an appeal.

F.

WARN Act-Federal Worker Adjustment and Retraining Notification Act, 29 U.S.C. §§ 2102-2109 (federal law requiring employers to provide advance notice of plant closing or mass layoffs to affected employees as well as local and state government officials) The WARN Act is administered by the U.S. Department of Labor's Employment and Training Administration, and information can be found at: http://www.dol.gov/compliance/topics/plant-closings-Iayoffs.htm The state dislocated worker contact in Colorado is: Terry Bohannon State Rapid Response Coordinator Colorado Department of Labor and Employment 633 1i h Street, Suite #700 Denver, CO 80202-3660 303-318-8840 Fax: 303-318-8930 Email: [email protected]

Website: http://www.coworkforce.com/EMP/Layoffassistance.asp

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III.

Legal Claims That Can Arise From Employee Separations and Terminations

An employee whose employment ends, whether voluntarily or involuntarily, can pursue a variety of legal statutory and common law claims, depending on various facts, including the circumstances of the employee separation, the type of employee (e.g., private or public sector), the type of employer, etc. The following is not an exhaustive list of the types of claims an employee may bring as a result of the end of their employment relationship, because the creativity of the unhappy former employee and his or her lawyer is the only limitation on the type of claim an employee may assert, but following are some commonly-pursued claims: A.

B.

C.

Federal discrimination claJims, including: 1.

Age discrimination claims under the Age Discrimination in Employment Act of 1967 ("ADEA")

2.

Disability claims under the Americans with Disabilities Act ("ADA")

3.

Equal pay claims under the Equal Pay Act of 1963

4.

Gender, religion, race, color, and national origin claims under Title VII of the Civil Rights Act of 1964 ("Title VII")

5.

Pregnancy discrimination claims under the Pregnancy Discrimination Act (part of Title VII)

6.

Retaliation claims brought under the above-referenced statutes

Federal claims under other federal statutes, including: 1.

Fair Labor Standards Act ("FLSA") claims

2.

Family and Medical Leave Act ("FMLA") claims

3.

Uniformed Services Employment and Reemployment Rights Act of 1994 ("USERRA") claims

4.

Retaliation claims brought under the above-referenced statutes

State discrimination claims under the Colorado Anti-Discrimination Act ("CADA"), which prohibits discrimination or retaliation on the basis of: disability, race, creed, color, gender, age, national origin or ancestry, sexual

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orientation, marital status, pregnancy, child birth, adoption and lawful off-duty activity. D.

E.

F.

State claims under other statutes, including: 1.

Colorado Employment Security Act

2.

Colorado Uniform Jury Selection and Service Act

3.

Colorado Wage Claim Act

4.

Colorado Workers' Compensation Act

State law claims based on common law, including: 1.

Breach of contract claims and related contract-type claims (including promissory estoppel claims and breach of implied contract claims stemming from personnel policies and handbooks)

2.

Defamation and privacy claims

3.

Fraud and misrepresentation claims

4.

Intentional and/or negligent infliction of emotional distress claims

5.

Outrageous conduct claims

6.

Tortious interference with contract and/or prospective business advantage claims

7.

Wrongful discharge in violation of public policy claims

Claims brought by governmental employees, including: 1.

42 U.S.C. § 1983 claims (e.g., governmental employees often claim violations of their rights to procedural and substantive due process, property, liberty, free speech, equal protection)

2.

Claims based on specific statutes relating to particulargovernmental employees, (e.g., Colorado Teacher Employment, Compensation and Dismissal Act)

3.

Claims by state and federal employees under their respective whistleblower acts

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IV.

Recent Cases Illustrating Chall~:nges of Employee Separations A.

Reductions-in-force

1.

Blair v. Henry Filters Inc., 2007 U.S. App. LEXIS 24091 (6 th Cir. 10/15/07): A salesman who claimed he was removed from a profitable account because he was "too old" because the buyers were younger and interested in activities like mountain biking, and who was ultimately fired at age 57 after his supervisor allegedly said he wanted "a younger sales force," may proceed with age discrimination claim. The Sixth Circuit found significant the company's "lack of an objective plan for the reduction-in-force," noting instead that "the shedding of employees appears to have been chaotic, occurring in fits and starts." Cotter v. The Boeing Co., 2007 U.S. Dist. LEXIS 45995 (B.D. Pa. 6/26/07): A 52-year-old employee may proceed with age discrimination claim stemming from reduction-in-force where the RIF criteria were "highly subjective" and the employee's evaluations were inconsistent. The court noted that "there is a stark inconsistency between Ms. McKee's yearly performance evaluations and the scores on her [RIF-related] evaluation, both of which were completed by the same person." Practice pointer: Have an objective plan for a reduction-in-force.

2.

Mendelsohn v. Sprint/United Mgmt. Co., 466 F.3d 1223 (loth Cir. 2006): The Tenth Circuit held that the "same supervisor" rule does not apply to reductions-in-force. The Court stated: [The] "same supervisor" rule in the context of an alleged discriminatory company-wide RIF would, in many circumstances, make it significantly difficult, if not impossible, for a plaintiff to prove a case of discrimination based on circumstantial evidence. Conceivably, a plaintiff might be the only employee selected for a RIF supervised by a particular supervisor. Meanwhile, scores of other employees within the protected group also select~~d for the RIF might work for different supervisors. In such cases, the constraints of Aramburu would preclude a plaintiff from introducing testimony from those other employees. Applying Aramburu to cases of discrimination based on an alleged companywide discriminatory RIF would create an unwarranted disparity between those cases where the plaintiff is fortunate enough to have other RIF'd employees in the protected class working for her supervisor: and those cases where the plaintiff is not so fortunate. We do not think such disparity should exist.

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Note: The Supreme Court has accepted review ofthis case and a decision will be issued before next year's seminar. 3.

Timmerman v. Us. Bank, 483 F.3d 1006 (10 th Cir. 2007): An employee's effort to rely on statistical evidence pertaining to a company reorganization that occurred two years prior to her disciplinary discharge must fail. The Tenth Circuit stated: [T]here is a logical disconnect between the situation of the incumbent female branch managers and Ms. Timmerman's firing. Had Ms. Timmerman brought a charge of discrimination arising out of her demotion during the reorganization, then statistical evidence that a large percentage of female branch managers over the age of forty were not rehired during the same time period would surely have been probative of pretext. On the other hand, the same statistical evidence is not probative in this lawsuit where the alleged discriminatory animus in the decision to terminate--an entirely different adverse employment action--occurred two years after the protected employees within the statistical data set were not rehired and under completely different circumstances. The Court stated, "[t]he fact that a plaintiff is required to demonstrate pretext does not grant a jury license to second-guess all prior hiring, firing and disciplinary decisions no matter how attenuated they might be from the challenged action."

But see Reid v. Google Inc., 2007 Cal. App. LEXIS 1663 (Cal. Ct. App. 10/4/07): Former manager fired at age 54 who alleged that a company executive told him he was not a "cultural fit" may pursue an age discrimination claim. The court reversed summary judgment for Google in part because of evidence that older employees were statistically more likely to receive poorer performance reviews and lower bonuses.

Practice pointer: Consider doing statistical analysis before engaging in a reduction-in-force. 4.

Syverson v. Int'l Bus. Machs. Corp., 2007 U.S. Dist. LEXIS 75056 (N.D. Cal. 10/3/07): OWBPA does not create any independent cause of action for declaratory or injunctive relief based on invalid waiver. The court stated that the "OWBPA only sets out the terms of an effective waiver and does not create an independent cause of action." Plaintiffs were laid off and had signed waiver in return for severance package; in their lawsuit, they claimed waiver ineffective and that IBM had violated ADEA by terminating them. See also Whitehead v. Okla. Gas & Electric Co., 187 F.3d 1184 (lOth Cir. 1999): The Tenth Circuit held there exists no affirmative right to relief

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under OWBPA when the plaintiffs had also filed an Employee Retirement Income Security Act claim but no ADEA claim. (This case is cited in Syverson.) .

Practice pointer: Make sure your waiver and release agreements comply with the requirements of the OWBPA. B.

Retaliation

1.

Spengler v. Worthington Cylinders, 2007 U.S. Dist. LEXIS 70256 (S.D. Ohio 9/24/07): A 53-year-old seasonal employee who was fired after complaining about ageist comments by his supervisor can pursue a retaliation claim; court noted that Spengler was fired for alleged deficiency in interpersonal skills but no one offered an opportunity for him to work on such skills before firing him and supervisor's "demeanor" toward Spengler changed and he would not make eye contact with Spengler after he complained about the comment.

2.

Moore v. Epperson Underwriting Co., 2007 U.S. Dist. LEXIS 59796 (D. Minn. 8/15/07): A military reservist who took time off of his civilian job to receive treatment for service-related medical conditions was fired and sued under USERRA. The court rejected the USERRA discrimination claim because Moore was not performing a "military duty" when attending the doctor's appointments. However, the court denied summary judgment on the employee's USERRA retaliation claim based on the employee's claim that he was fired for telling a manager that he believed the company was violating USERRA by deducting time fi-om his accrued leave balances to cover his medical absences.

Practice pointer: When an employee raises a discrimination claim, step back and make sure it is addressed appropriately even if it means delaying· the ultimate separation. 3.

Proctor v. United Parcel Servo Inc., 2007 U.S. App. LEXIS 22306 (loth Cir. 9/18/07): Employee's time to file ADA retaliation charge did not begin to run when he was advised he was medically unfit to return to work because such advisement did not mean that the company definitely intended to fire him. The Tenth Circuit distinguished two U.S. Supreme Court cases, Delaware State College v. Ricks, 449 U.S. 250 (l980), and Ledbetter v. Goodyear Tire & Rubber Co., 27 S. Ct. 2162 (2007): [U]nlike the plaintiffs in Ledbetter and Ricks, Mr. Proctor claims that UPS acted with unlawful intent during the charging period (i.e., within the 300 days prior to the filing of the administrative complaint upon which his lawsuit is based). He does not argue that his termination was a delayed effect of alleged acts of discrimination occurring outside the charging period.

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In addition, unlike the Court in Ricks, we cannot conclude that UPS notified Mr. Proctor of his eventual termination prior to the charging period. . .. Even if we assume that Mr. Proctor's termination in January 2004 was an inevitable consequence of earlier employment decisions, the record does not support the conclusion that UPS notified Mr. Proctor of this inevitability. However, the Tenth Circuit ultimately affirmed summary judgment on the ADA retaliation claim, because Proctor did not establish a causal link between his protected activities and his termination, and he did not establish that UPS's explanation that it fired him was a pretext for discrimination because a neutral doctor determined he was unfit. Nor did Proctor's claim for state law retaliatory discharge based on his filing of a worker's compensation claim prevail.

Practice pointer: Keep careful track of the timing of events leading up to a termination. In Proctor, the employee's union representative allegedly asked his supervisor about the status of the worker's compensation settlement negotiations. The supervisor allegedly said, "We're going to pay him a work comp settlement and as far as I'm concerned he can go eat sh*t and die."

Second practice pointer: Be patient with what sometimes can be a lengthy process. C.

Documentation and evidence to support separation decision 1.

Denham v. Sunoco, 2007 U.S. App. LEXIS 3991 (loth Cir. 2007) (unpublished decision): Employee's ERISA claim rejected where private investigator hired by employer videotaped employee while on disability leave, showing employee unloading 50-pound sacks. The Tenth Circuit found that the employee failed to show pretext because the employer had a good faith basis for its decision to terminate him. Practice pointer: Consider what evidence and documentation there is to support the termination decision.

D.

Dishonesty as a separate misdeed 1.

DAVIS GRAHAM

Piercy v. Maketa, 480 F.3d 1192 (10 th Cir. 2007): The Tenth Circuit effectively affirmed a female deputy sheriffs termination based on her "departure from the truth" with respect to her wearing a tongue-stud in violation ofthe dress code. However, the Tenth Circuit reversed the trial court on a claim relating to a male-only policy for transfer opportunities to a particular jail.

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Practice pointer: Ensure that job applications, personnel policies, etc. consider dishonesty as a separate offense for which discipline, including termination, may be imposed. E.

No re-hire or re-application clause 1.

Jencks v. Modern Woodmen, 497 F.3d 1261 (loth Cir. 2007): A fonner employee ofMWA-who had previously pursued, won and settled a Title VII case against M\VA-pursued a second claim based on MWA's refusal to enter into a sales agent contract with her. MWA sent Jencks a fonn letter soliciting her to apply for a sales agent position. She applied, and ultimately received a rejection letter citing her insufficient sales numbers during her previous employment and the terms of the Settlement Agreement from the first lawsuit. In the Settlement Agreement, she had waived any entitlement to re-employment or reinstatement. Jencks claimed retaliation because the Settlement Agreement did not preclude her affiliation with MVIA as an independent contractor. The Tenth Circuit affirmed the trial court's grant of summary judgment because Jencks could not establish that MWA's dual reasons for not hiring her as an independent contractor were pretextual. Notably, the court stated that Jencks may have been entitled to a trial ifMWA had only relied on her past poor performance as its rationale.

Practice pointer: Make sure a no re-hire clause in a settlement agreement is broad enough to encompass all potential situations, including independent contractor and consulting positions.

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COBRA versus COLORADO CONTINUATION/CONVERSION

The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a federal law that gives certain employees and their dependents the right to temporarily continue group health coverage in particular instances.

Colorado continuation and conversion were created by the Colorado Legislature to "fill the gaps" left by COBRA.

1. COBRA applies to employers with the equivalent of 20 or more employees on more than 50% of the typical business days in the previous calendar year.

1. Colorado Continuation/Conversion applies to employees of fillY employer group policy where COBRA doesn't apply.

2. The COBRA continuation period ranges from a minimum of 18 months to a maximum of 36 months, depending on the qualifying event. It may be shortened if the employee enrolls in another employer plan of benefits, the employee becomes entitled to Medicare, or the employer ceases to sponsor a group health plan. If the employee elects notto enroll in a new employer plan, then the COBRA coverage may continue until the normal expiration of coverage.

2. Colorado Continuation may continue for a maximum period of 18 months or until the covered participant becomes eligible for other group coverage. If new group coverage excludes a condition covered under the continued plan, coverage under the prior employer's plan may be continued for the 18 months or until the new plan covers the condition, whichever comes first.

3. COBRA applies to all employers except church or religious affiliated employers. Self-funded plans are subject to COBRA. COBRA does not apply to health plans sponsored by the federal government, such as FEHBP, or certain church-related groups.

3. Colorado Continuation/Conversion applies to fully insured plans and HMOs only. Colorado law does not apply to self-funded plans, federal plans or other plans not under the jurisdiction of Colorado laws.

4. Benefits match those of non-terminated employees, including dental, vision, and prescription benefits provided under separate contracts.

4. Benefits match those of non-terminated employees, including dental, vision, and prescription benefits provided under separate contracts.

5. Employers are not required to offer COBRA continuation coverage to employees terminated for "gross misconduct."

5. When termination was due to "gross misconduct," and employee and dependents are not eligible for COBRA, Colorado Continuation may be available and must be offered if all other requirements are met.

6. Dependents losing "dependent child status" under the plan's rules, such as failure to maintain full-time status as a student or reaching the age constraints, are eligible for COBRA continuation coverage provided the plan is timely notified of the loss of dependent status.

6. Dependents losing "dependent child status" under the plan's rules, such as failure to maintain full-time status as a student, or reaching the age constraints, are not eligible for Colorado Continuation, but may be eligible for conversion coverage.

7. COBRA is available regardless of how long the employee had 7. Continuation coverage is available if an employee has been continuously covered under the employer's plan for six consecutive been covered by the employer group plan. Employees typically months. If covered for less than six months but more than three need to be covered by the employer group health plan on the months, conversion is available. In the case of death or divorce, the day before the qualifying event. employee or dependent is authorized continuation and, if necessary, conversion after 18 months of continuation coverage. 8. NOTIFICATION. The employer must notify the plan administrator of the participant's qualifying event within 30 days. The plan administrator must then notify the participant of COBRA continuation rights within 14 days. If the employer and the plan administrator are one and the same, the employer has a total of 44 days to notify the participant. Premiums charged may be 100% of the total premium due the carrier plus an administrative charge not to exceed 2%. (COBRA participants receiving the 11month disability extension under COBRA regulations may be charged up to 150% of the premium.)

8. NOTIFICATION. Within 10 days of termination, employer must send written notice to employee of right to continue. The notice must inform the employee of the amount the employee must pay monthly to the employer to retain coverage; how, where, and when payment is to be made; and the fact that loss of coverage will result if timely payment is not made to the employer.

9. ELECTION PERIOD. Employee/participant has 60 days from the date of the notice or the loss of coverage (whichever is later) to elect COBRA coverage, and 45 days from the date of COBRA election to pay the premium owed.

9. ELECTION PERIOD. Employee shall notify the employer, in writing, of their intent to continue coverage and submit premium payment to the employer within 30 days of termination. If the employer fails to notify the employee of the right to continue, the employee has the option of retaining coverage by making proper payment to the employer within 60 days of the date of termination.

10. Conversion may be available at the conclusion of COBRA continuation coverage, except for a self-funded benefit plan. In Colorado, conversion would be to the standard or basic health benefit plan or a plan issued through CoverColorado.

10. Conversion is available at the conclusion of continuation, or upon termination of a small group policy, without evidence of insurability, to a standard or basic health benefit plan or a plan issued through CoverColorado.

Authority: Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1986, and Health Insurance Portability and Accountability Act of 1996 (HIPAA)

Authority: Section 10-16-108, Colorado Revised Statutes and Health Insurance Portability and Accountability Act of 1996 (HIPAA)

For more information on COBRA, contact the regional office of the US Department of Labor, Kansas City, MO at (866) 444-3272.

For more information on Colorado continuation or conversion coverage, contact the Colorado Division of Insurance at (303) 894-7490 or (800) 930-3745 (in-state calls only).

Dealing with Difficult Employee Separations

Sybtl R. Kisken, Of Counsel Davis Grahem & Stubbs LIP 155017'" Stroet, Suite 500 Denwr, CO 80202

3031892-7497 [email protected]

Types of Employee Separations

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• • • • • • • • • • •

"Iquit" Death Job abandonmenVconstruction resignation Retirement-voluntary or mandatory Layoff/reduction~n-force

Termination for performance reasons Disqualification/separation for medical reasons Constructive discharge Involuntary resignation Contract expires or is terminated Negotiated resignation/separation

Law governing separations

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• ADEA & OWBPA .CWCA • COBRA • CCHICA (state COBRA) • Colorado Employment Security Act • WARN Act

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Claims that an unhappy former employee might pursue:

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• • • •

Discrimination & retaliation claims FLSAclaims FMLA claims USERRA claims

• •

CWCAdaims Breach of contract. promissory estoppel

• • • • •

Defamation IntentionaVnegligent infliction 01 emotional distress Outrageous conduct Wrongful discharge in violation 01 public policy Special claims for govemment employees including Section 1983 claims

So what do you do to minimize your risk of getting sued?

Or at least be prepared in the event that you do get sued? Here's my top 10 list:

1. Review your policies Review (and if necessary, revise) your personnel policies from the perspective of employee separations.

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For example. do you have a disclaimer? Do you have a job abandonment policy? Do you confirm at-will status of employees?

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2.

Fine tune the language of employee separations

• "I'm sorry, but we must disqualify you-this is a no-fault separation" VERSUS • "You're fired - get out!"

3.

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Consider document retention, including ESI

• EIS = Electronic stored information • Document, document, document! • Keep documentation, keep documentation! • Remind others to keep, remind others to keep! • Don't make $6 million mistake • Denham case: Video doesn't lie

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Make sure you know your responsibilities under CWCA

• When separation due to employer's "volition," wages due and payable immediately

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• Effective May 31, 2007, award of attorney fees is discretionary rather than mandatory • My prediction: More claims

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5. Unemployment compo • If you want credit with respect to unemployment claims for severance payment made to employee, be sure to indicate that severance payment is for the purpose of assisting with transition to other employment • Severance payment = reduces utc • Separation bonus delays utc

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6. RIF - Severance and release • If severance payment is offered in exchange for release, make sure that: - Release is in compliance with OWBPA - Severance is not guaranteed in a policy, or policy makes reference to release - Severance is paid only upon receipt of release

7. Plan RIF carefully

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• Blair case: "Lack of an objective plan" "shedding of employees appears to have been chaotic, occurring in fits and starts"

• Cotter case: "Stark inconsistency" between annual evaluations and RIF evaluation

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7. Plan RIF carefully cont' • Mendelsohn case: "Same supervisor" rule does not apply in RIF situations so overall plan must be justifiable - Note: The United States Supreme Court has granted review of this case so stay tuned ....

7. Plan RIF carefully cont' • Consider statistical analysis of potential RIF - Timmerman case - Google case: As employees age, they

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were statistically more likely to receive poorer performance reviews and lower bonuses

8.

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To avoid a retaliation claim, be prepared for a discrimination claim

• Spengler case: After complaining about ageist comment, Spengler was firedsurvived summary judgment because no one offered opportunity for him to work on interpersonal skills before firing him and supervisor's demeanor toward Spengler changed after complaint and supervisor wouldn't make eye contact

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8. Retaliation claims cant' • Epperson case: After duty in Iraq, Moore obtained civilian job but took time off for treatment of service·· related medical issues; ultimately was fired. • USERRA discrimination claim rejected because was not performing "military duty" when attending appointments • But USERRA retaliation claim can proceed based on Moore's claim that he was fired for telling manager he though company was violating USERRA by deducting time from his leave balances to cover medical absences

9. Make sure they are gone for good.

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• Jencks case: Employee sued, won and ultimately settled Title VII claim • Solicited for contract position with fom, letter • Not hired because of no-hire provision in settlement agreement • Retaliation claim tossed out • Make sure no-hire provision is BROAD

10. Be patient (and only vent to your lawyer). • Sometimes the process can be lengthy, but it is worth it to do it right if it minimizes your risk.

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