Retirement Claims – Pension Benefits from Multiple Employers No Longer Sacred

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Until recently, retirees entitled to pension benefits under retirement plans from multiple employers could rest assured that their benefits could not be cut by plan trustees unless plan assets were exhausted, mainly because ERISA (the federal Employee Retirement Income Security Act) made it illegal for trustees to do so. But in December 2014, all that changed. The provisions of a year-end bill called the Multiemployer Pension Reform Act of 2014, which was slipped into the $1.1 trillion Omnibus Spending Bill, allow trustees of at-risk plans to suspend benefits if they can show this would prolong the life of the plan.

Now there is a precedent for allowing retiree benefits to be cut. One question that remains to be answered is whether this will lead to a slippery slope of other solutions in the future. Let’s back up to how this happened.

Multiemployer pension plans typically cover a specific industry such as construction, trucking, mining and food retailing. They are collectively bargained, jointly funded by groups of employers, and administered by a board of trustees. According to the Department of Labor, there are 1,427 multiemployer defined benefit plans covering 10.5 million participants with $431 billion in assets. All of these plansare partially insured by the federal PBGC (the Pension Benefit Guaranty Corporation), which steps in if the plan’s assets are exhausted, although it guarantees benefits at a much lower level than the plans themselves provide.

The purported reason for the controversial Multiemployer Pension Reform Act of 2014 is that many multiemployer pension plans are in serious financial trouble, and they threaten to bring the PBGC down with them. An estimated 1.5 million persons were covered by plans in danger of failing over the next two decades, including the Teamsters’ Central States fund and the United Mine Workers of America fund. The plans in total are subject to an $8.3 billion deficit that is projected to hit nearly $49.6 billion by 2023. This puts at risk the PBGC, which is currently running a deficit in its multiemployer program of over$42.2 billion.

As a result of these troubling conditions, a coalition of multiemployer pension plan sponsors and some major unions developed and promoted a package of proposed reforms known as Solutions, Not Bailouts, and in essence this package became the Multiemployer Pension Reform Act of 2014.

The Act creates a new plan status known as critical and declining status for plans likely to become insolvent in the next 15 to 20 years. The trustees of plans meeting the requirements of this status can apply to the U.S. Treasury Department to suspend benefits for retirees and reduce accrued benefits for active workers. The trustees must demonstrate that they have taken all reasonable measures to forestall insolvency and that the proposed benefit suspension will ensure solvency. If these requirements are met, then the trustees mayreduce benefits, even for current retirees, to 110 percent of what the PBGC guarantee would offer. In addition to determining the size of the benefit reduction, plan trustees make the decision on how to allocate the cuts. For example, they can cut retirees’ benefits more than those of active workers. But benefits for disabled plan participants and retirees older than 80 are protected and reductions of benefits for people between age 75 and 80 have to be phased in.

The trustees, however, cannot cut benefits entirely by themselves. First, U.S. Department of Treasury officials have 225 days to approve a plan’s application for benefit reductions, which must show how cuts would affect all plan participants. In addition, plan participants must vote on proposed changes unless the plan poses a high degree of risk to the PBGC, defined as a claim of $1 billion or more. This would seem like a significant degree of protection. Buta majority of all workers and retirees in a plan – not just a majority of the ones who vote – is required to block cuts. And some argue the right of approval is an illusory protection for retirees.

Because the new provisions puts at risk retiree benefits which had previously been protected, many retiree groups and some unions are in staunch opposition to the new provision. They argue that other alternatives were not seriously considered and that retiree’s perspectives were given enough weight. Finally, they say, any new law that allows potential cuts in benefits should be phased in over time rather than taking effect immediately, so people can adequately plan for the future.

But the reforms had bipartisan support on Capitol Hill, as well as from many employer and labor trustees who were in search of permission to fix their endangered plans. Proponents argued that if a plan failed, the benefits would be cut anyway, so it made sense to give the trustees of at-risk plans a tool to stabilize their plan before it failed. Many also argued that this was a necessary step to shore up the PBGC.

If you are a retiree who expects his/her benefits from a multiemployer pension plan, contact Kilgore & Kilgore today. Our employment benefits attorneys are ready to evaluate your situation. Call us today at (214) 969-9099 or email de*@ki********.com to set up a free review of the facts of your case with a Dallas employment benefits lawyer.

Employee Rights at Work – Political Discussions in the Workplace

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Most employees believe they have a First Amendment right to free speech, and that allows them to discuss political issues whenever they want without restriction, including at work. But while employees do have some protected rights vis-a-vis their employers to discuss some political subjects, these rights are very restricted. First, it is important to remember that the First Amendment applies only to government restrictions on free speech. If you are not a public service employee, then your employer is not the government. So, unless another law gives you the protected right to speak about politics at work, your boss can prohibit you from doing so, or regulate how, when and where you do so. Your employer can fire you at will if you don’t comply with these company rules.

An employee’s right to discuss outside politics in the workplace is defined by the National Labor Relations Act (NLRA). This Act gives employees a narrow window of political subjects that can be discussed in the workplace, but such discussions must be related to workplace issues. Section 7 of the NLRA provides employees the right to engage in “concerted activities” for “mutual aid or protection” regarding specifically identified employment-related concerns. For example, promoting a candidate specifically because of his/her support for unions, increased minimum wage, safety in the workplace, immigration reform, etc. These discussions would fall within a worker’s rights under Section 7. But employees are still employees, and they are expected to first and foremost perform their jobs. So any political discussions or campaigning is restricted to non-working hours in non-working areas.

Section 7 does not protect purely political activity. If you want to wear t-shirts or buttons that support a candidate, or campaign for that candidate in any way, then whatever you wear or say must be specifically linked to the employment-related issue. And, if your employer has neutral policies governing the time, manner and place of the protected speech that is permitted under Section 7, then you have to abide by those rules, as well. Keep in mind that these protections under the NLRA apply to most private businesses, not just to unionized employers. But these rights apply only to non-supervisory employees, not to supervisors or managers.

In addition, federal regulations cut both ways regarding politics in the workplace. Some laws, regulations and rules may themselves restrict employee rights. For example, if an employee’s discussions involve race, national origin, sex, religion, age, sexual orientation or military status — especially when the subject is emotional and the conversation heated — they risk subjecting the employer to claims of discrimination, harassment and retaliation.

While few and far between,there are some states that outlaw some forms of discrimination against employees for engaging in some forms of political activities.

Under Section 276.001 of the Texas Elections Code, an employer cannot retaliate against an employee because the employee voted for a particular candidate or refused to reveal who the employee voted for. In fact, it is a third degree felony to do so. Retaliation includes harming, threatening to harm, or reducing an employee’s wages or another employee benefit. In addition, in Texas an employer cannot prevent or retaliate against an employee for voting, and must allow employees to vote during working hours unless the polls are open on an election day for at least two consecutive hours outside of the employee’s work time.

New York has an “off-duty conduct” statute which prohibits employer discrimination based on an employee’s “political” activities. Such activities include running for public office, campaigning for candidates or participating in political fundraising activities.

One other thing to keep in mind is that if you belong to a union, your contract may prohibit discrimination or retaliation by your employer against union workers based on their political activity, especially for activities outside of working hours and not on the business premises.

All in all, while it’s a given that many employees are going to discuss politics in one way or another at work, especially in the run-up to a heated election, it is also true that employers are recognized as having the right to reasonably regulate how, where and when these discussions take place, and regarding what subjects. Failure to understand this could cost you your job. And if it does there may be nothing you or the best employment lawyers can do about it.

Servicemember Rights: Providing a Tougher Shield for Soldiers – Regulation of Payday Loans is Slowly Expanding in Texas

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There is a long-running debate in Texas about whether government should regulate payday, auto-title and other similar short-term, high-interest loans. Thus far, the Texas state government has failed to impose any non-superficial regulation. Therefore until recently, Texas was considered one of the most lenient states for lenders offering these types of loan products. However, local government regulation of payday loans has begun to fill the void left by the state, and slowly but surely, some meaningful regulation and enforcement is creeping across Texas and impacting the payday loan industry.

In Texas, payday and auto-title lending is a $4 billion-a-year industry comprised of around 3,500 businesses. The state has imposed no limits on the size of a loan or the fees involved, and as a result, it has been reported that Texans get bigger loans and pay higher fees, on average, than consumers elsewhere.

A payday loan is a short-term loan that is typically due on the borrower’s next payday. The borrower is required to agree to a payment method within the lender’s control, such as writing a check for the full balance in advance, so the lender has an option of depositing the check when the loan comes due. Loan fees can be as high as $30 per $100 borrowed, and those fees result in annual percentage rates (APR) of almost 400 percent on many payday loans. Auto-title loans are similar, but are given in exchange for car titles as collateral.

Some payday lenders give borrowers the option to roll over their loans if they cannot afford to make the payment when it’s due. In fact, many lenders encourage this. Most often, the borrower pays yet another fee to delay paying back the loan. And if the loan is rolled over several times, the borrower could end up paying hundreds of dollars in fees and still owe the original amount borrowed. For example, the average auto-title borrower nationally renews a loan eight times and pays $2,142 in interest for $941 of credit, according to a 2013 Center for Responsible Lending report.

Critics of payday and auto-title loans say the lenders pinpoint desperate people and purposefully attempt to trap them in a cycle of debt in order to collect more and more fees. Here is a quote from a New York Times article dated September 27, 2014, “We have seen firsthand how lenders use loopholes in the rule to prey on members of the military,” Richard Cordray, director of Consumer Financial Protection Bureau, said in a statement. “They lurk right outside of military bases, offering loans that fall just beyond the parameters of the current rule.” (1)

Supporters of the industry say lenders offer needed capital to persons who have few options. In any event, it has been reported by the Center for Public Policy Priorities (2) that Texans spent $1.2 billion in payday and auto-title fees in 2012, and 35,000 cars in the state were repossessed by auto title lenders.

Thus far, the majority of the legislators in Austin appear to have sided with the payday loan industry. Advocacy groups and some legislators have argued for legislation, including annual percentage rate caps, but to no avail. Lawmakers did pass measures in 2011 requiring payday and auto-title lenders to be licensed by the state and to post a schedule of fees in a visible place, but more significant measures failed to pass in 2013. Payday lenders are still not subject at the state level to any of the types of regulatory oversight, licensing and consumer protections governing other Texas lenders.

But while payday loan regulation was languishing and then shot down in the statehouse, municipal governments including Houston, Dallas, San Antonio, Austin and El Paso were passing their own ordinances. And as of now, about 20 cities in Texas have adopted payday loan restrictions to protect borrowers.

Most of the municipal ordinances follow a model that doesn’t set a cap on interest rates, but rather limits the loans to 20 percent of a borrower’s gross monthly income. Auto title loans cannot exceed three percent of a consumer’s gross annual income or 70 percent of the vehicle’s retail value. In addition, under most ordinances, at least 25 percent of the principal must be paid upon a rollover. The ordinances of Houston and other Texas cities also place a limit on the number of installments and rollovers.

Payday loan companies sued several of these cities in an attempt to invalidate the local ordinances, but they lost an important case against the City of Dallas in a state appellate court. This has emboldened cities to begin enforcing their own payday loan regulations.

However, payday loan companies in Texas have always been very adept at determining exactly where the regulatory line is drawn and creating loan products that stay just within the rules. An example of this is how they have managed to work around federal restrictions on payday loans to military personnel. For example, the Military Lending Act of 2006 set a 36 percent interest rate cap on a range of high cost loan products. But the protection applied to a narrow sliver of loans, covering only loans for up to $2,000 that lasted for 91 days or fewer. It also covered auto title loans with terms no longer than 181 days. Some lenders simply altered their products to evade the restrictions. Some offered loans for just over $2,001, or for periods that were just over 181 days. (1)

It remains to be seen if these lenders will continue to do the same with the municipal regulations put in place by cities in Texas, or will directly challenge or even flout these laws. If they do offer products that are in violation of city ordinances, they may open themselves up to civil lawsuits by borrowers as well as suits brought by municipal government authorities.

Payday lenders have already been targeted by federal authorities, including the recently created Consumer Financial Protection Bureau, and we will discuss that in the second installment of this post.

(1) New York Times Business Section, September 27, 2014, by Jessica Silver-Greenberg NY Times – Tougher Shield for Soldiers Against Predatory Lenders
(2) Center for Public Policy Priorities, from a Report by the Office of Consumer Credit Commissioner, July 2013; Payday-Auto Fact Sheets

Employee Rights at Work: A Case of Misclassified Identity

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The Ninth Circuit Says FedEx Drivers are Employees not Contractors

Many companies have built profitable businesses by making independent contractors, rather than employees, the backbone of their business model—and FedEx Ground Package System, Inc. (FedEx Ground) is one of the most prominent companies to have done so. But last month, Fed Ex Ground was dealt a severe blow when the Ninth Circuit Court of Appeals ruled in Alexander v. FedEx Ground Package System, Inc. that Fed Ex Ground had misclassified its delivery employees as independent contractors.

Independent contractors—including freelancers, consultants, temps, etc.—are persons who contract to perform work for a business and have the right to do so according to their own means and methods. This means that the business engaging the independent contractor can control only the results of the work, not the manner in which the work is performed.

The use of independent contractors has become common in many industries as it provides businesses with significant flexibility and cost savings. Independent contracting has become popular among some, who prefer freedom and opportunity as an independent contractor rather than being an employee. But there are others, who would prefer to be employees because of the accompanying employee benefits that independent contractors do not receive as part of their compensation.

So what does an employer like FedEx Ground gain if a worker is classified as an independent contractor rather than an employee? Quite frankly, a lot.

For example, if a worked is deemed to be an employee, then an employer like FedEx Ground is required to:

  • Make Social Security and Medicare contributions,
  • Pay unemployment and workers’ compensation premiums,
  • Provide health insurance and other benefits available only to employees, and
  • Pay overtime, minimum wage and employee expenses according to company
    policy and relevant laws.

In addition, employees are entitled to the protection of many state and federal laws which do not apply to independent contractors. Consequently, employers must not only ensure that the individual performing services has been properly classified, employers must also ensure that they have complied with those laws governing wages, benefits and overtime. Non-compliance with these laws exposes the employer to potential lawsuits, fines and civil and criminal penalties.

On the flipside, independent contractors are not entitled to company health benefits, overtime pay, unemployment insurance, etc., and do not receive the protection of many laws aimed at protecting employees. This may be a fair trade if they are allowed the freedom, flexibility and opportunities that go along with being an independent contractor. But what happens if these independent contractors are subject to the restrictions placed upon employees while receiving none of the benefits of being an employee? For obvious reasons, this can be a lose-lose proposition.

For years, FedEx Ground delivery drivers have contended that they were unlawfully misclassified as independent contractors. They have brought a series of lawsuits in different jurisdictions attempting to force FedEx Ground to not only classify them as employees, but also, have sought damages for back pay and lost benefits. These lawsuits met with mixed success. The drivers have enjoyed a few victories, suffered some losses and reached several settlements. Dozens of similar worker misclassification cases are still pending.

The Alexander v. FedEx Ground Package System, Inc. case represents the biggest victory yet for FedEx Ground drivers.

This area of the law is subjective and uncertain. The criteria used to determine whether a worker should be classified as an independent contractor or an employee differs widely between jurisdictions. This would partly explain why the FedEx Ground drivers have been successful only in some jurisdictions.

The consistent inquiry by most courts and administrative bodies is whether the hiring party has the right to control the manner and means by which a worker accomplishes work. In applying this criteria, however, the court can take dozens of factors into account.

The three-judge panel of the Ninth Circuit, in reaching its conclusion that the drivers in California were employees and not independent contractors, looked at all the controls that FedEx Ground had in place regarding the manner and means by which its drivers performed their jobs. The Ninth Circuit noted that the drivers were required to purchase uniforms and equipment from FedEx; that there were truck outfitting requirements, schedules and service area routes; and restrictions on how and when helpers could be hired and used. In totality, the court concluded that FedEx Ground had sufficient controls in place that supported a finding that the drivers were employees and not independent contractors.

The FedEx Ground drivers’ successful challenge to the misclassification should be encouraging to persons who feel they have been similarly misclassified. The Alexander decision will probably be the impetus to more class action challenges.

FedEx Ground now faces substantial liability for lost wages and benefits that will be claimed by those employees who were found to have been misclassified. It has also put the company in the position of either having to continue to defend numerous lawsuits, relinquish a great deal of control over its drivers and/or change its business model.

Many companies using independent contractors are being forced by lawsuits to make similar decisions. Federal and state authorities are launching their own crackdown on misclassification of employees as independent contractors. That will be the subject of our next post on this subject.

If you are an independent contractor who feels misclassified by an employer, contact Kilgore & Kilgore today. Our employment law attorneys are ready to evaluate your situation to determine if you have a valid case. Call us today at (214) 969-9099 or email de*@ki********.com to set up a free review of the facts of your case with a Dallas employment lawyer.

Employee Rights: Will Employment Rules on Social Media Policies Survive the NLRB’s Costco Precedent? Employee Rights Lawyers May be the Only Ones to Sort This Out

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As reported in our previous posts in August(read them by clicking here NLRB Clean Slate Part 1 and NLRB Clean Slate Part 2 about the National Labor Relations Board (NLRB) v. Noel Canning, that U.S. Supreme Court decision, commonly referred to as Noel Canning, which they handed down in June of this year, invalidated the NLRB decisions made between January 4, 2012 and August 5, 2013. In doing so, the Supreme Court also nullified the precedents set by those decisions. The Noel Canning decision has put employees and businesses in a legal limbo. Both employers and employees are now faced with the question: Whether to follow the pre-Noel Canning state of the law or assume that the recently invalidated decisions will eventually be reissued. The advice of an employment attorney like those at Kilgore & Kilgore should be sought before attempting to navigate the treacherous waters of employee and employer rights.

One of the most important rulings made by the NLRB during that period of invalid decisions was in the case of Costco Wholesale Corporation. Like many businesses, Costco had addressed the social media boom by adopting a policy which dictated how their employees could use social media such as Facebook with respect to the workplace and their jobs. Costco’s employee handbook broadly prohibited employees from posting statements online that could “damage the Company, defame any individual or damage any person’s reputation.”

Ironically, Costco never enforced this policy against any employee. Nevertheless, the NLRB reviewed the policy and ruled that it violated Section 7 of the National Labor Relations Act (NLRA). In particular, the NLRB determined that Costco’s policy was overly broad and would have a chilling effect on employees’ rights under Section 7 to engage in protected concerted activities because an employee might reasonably believe that this policy restricted his or her ability to post statements regarding the terms and conditions of employment. For more detail on the concerted activities rule, click here to see our July 25th blog post Your Rights as an Employee—The Concerted Activity Rule.

The NLRB issued this ruling even though Costco had never disciplined an employee for violating this policy. In doing so, the NLRB set a precedent not only for what type of social media policy violates the NLRA, but also, the ease with which such a policy could be challenged at any time, regardless of whether the employer has taken any disciplinary action to enforce the policy.

Since the Costco decision was invalidated by Noel Canning— what happens now?

One answer to this question might be found in the NLRB’s General Counsel’s pre-Costco published opinions, which expressed the view that Section 7 of the NLRA applies to an employer’s social media policies. One caveat here, the General Counsel’s memoranda are only considered guidance, not precedent, but are often just as instructive. Further support for this answer comes from the fact that the NLRB was following this guidance in its Costco decision. Another answer may lie in the political makeup of the reconstituted NLRB, which suggests that the current Board will follow the policies of the recent past. Therefore, employers have good reason to cautiously assume that the Costco precedent will soon reappear.

It would be wise for employers to draft social media policies that are as specific as possible, and state clearly that its policy is not intended to prohibit protected activities under Section 7 of the NLRA. On the flipside, if employees feel they are being unlawfully intimidated by their company’s social media policy, they could well have a valid claim which the NLRB would support. In either event, sound and experienced legal advice would be of great assistance. Kilgore & Kilgore has employment law attorneys who specialize in this particular area and are ready to review and revise such company policies in order to reduce the potential risk of exposure during this uncertain period.