To give employers more time to update their payroll systems, the IRS has made the reporting optional for tax year 2011.  For smaller businesses, which file fewer than 250 W-2 forms, the reporting requirement is also optional for tax year 2012. 

The 2011 Form W-2 is available on the IRS website and includes the codes that employers can use to report the cost of group health insurance coverage.  The IRS emphasizes that reporting is for informational purposes only, and employer health benefits are not taxable. 

For more information on the Affordable Care Act tax provisions, click here.

The Fairfax County Circuit Court has found that an action against third party background check company that allegedly failed to find an “extensive” criminal record may proceed under a claim of negligent performance under a contract.  Under Virginia law, a third party background check company may be liable for negligent performance under a contract where its negligence caused physical harm or death to a third party.

On February 22, 2011, Mark Lawlor was found guilty of capital murder and rape and was later sentenced to death in connection with the death of Genevieve Orange, who lived in the Prestwick Apartments, in Falls Church, Virginia.  At the time of the murder, Lawlor was allegedly an employee of Berkshire Property Advisors LLC which managed the apartments.  Lawlor’s employment gave him access to the building at all hours.  Prosecutors in the criminal case claimed Lawlor used a passkey to enter Orange’s locked apartment as she dozed on her couch.

Liberty Screening Services, Ltd. allegedly did the background check on Lawlor before he was hired as a leasing agent for Prestwick Apartments.  Liberty purportedly said Lawlor had no criminal record.  Lawlor, however, “had an extensive criminal record including, but not limited to, felony convictions for the abduction/kidnapping [sic] of a woman, as well as the burglary and unlawful entry of her home, for which he served six years in prison.” 

Ms. Orange’s mother brought a wrongful death action as administrator of her daughter’s estate.  Ms. Orange sued Liberty and the apartment complex’s owner and the management company.  Plaintiff brought three causes of action, including wrongful death by negligence against both Berkshire and Liberty.

Liberty demurred to Count II, arguing that Plaintiff did not, and cannot, allege a common law duty that Liberty owed Ms. Orange which “arose separate and apart” from Liberty’s contractual relationship with the Berkshire Defendants and give rise to a cause of action.  Plaintiff contends that she set forth a basis for negligence liability, namely that Liberty undertook a duty to perform Lawlor’s criminal background check, and that, having undertaken that contractual duty, Liberty had a corresponding duty to use reasonable care in carrying out the investigation.

The Court dismissed Orange’s claim for negligent hiring without prejudice, allowing Orange to amend her complaint to allege Liberty’s negligent performance of the pre-employment screening contract.  The Court granted leave to amend after deciding whether an injured third party might have a cause of action sounding in tort against a party who negligently performed a contractual duty.  Finding that the circumstances alleged could give rise to a negligence claim under Virginia law, the Court sustained the Demurrer without prejudice.

The Court found that under Virginia case law, as well as that from other jurisdictions, Plaintiff can allege a cause of action for negligence against Liberty based on its assumption of duty, even though it was only contractually bound to Berkshire.  Virginia courts have previously recognized an independent duty sounding in tort where a party’s negligent performance under a contract caused physical harm or death to a third party.  See Boland v. Rivanna Partners, et. al. 69 Va. Cir. 308 (Charlottesville 2005) (finding that an independent contractor entering into an agreement with a shopping plaza operator to plow snow and ice retained an independent duty to use reasonable care because the act of clearing the parking lot was not just for the benefit of the owner but also for the benefit of the plaintiff/customer and others like her); Gonella v. Lumbermans Mutual Casualty Co., et. al., 64 Va. Cir. 229 (Fairfax 2004) (recognizing an independent duty to perform a contractual duty even where the parties are in privity of contract).

A copy of the court’s opinion letter can be found here.

In the case, the U.S. alleged that a former employee who became an independent contractor conspired with then-current employees to steal data.  From 1996 to 2004, Nosal worked as an executive for Korn/Ferry International, an executive search firm.  Nosal signed a Separation and General Release Agreement and an Independent Contractor Agreement.  Pursuant to these contracts, Nosal served as an independent contractor for Korn/Ferry, and agreed not to compete with it for one year. 

Shortly after leaving his employment, Nosal engaged three Korn/Ferry employees to help him start a competing business.  The indictment alleges that these employees obtained trade secrets and other propriety information by using their employee user accounts to access the Korn/Ferry computer system.  Specifically, the employees transferred to Nosal source lists, names and contact information from the company’s confidential and proprietary database of executives and companies.

The government filed an twenty-one count indictment against Nosal and an accomplice that included eight counts alleging violations of CFAA, §1030(a)(4).  The CFAA counts were dismissed by the District Court and the government appealed. 

§1030 (a)(4) subjects to punishment anyone who:

Knowingly and with intent to defraud, accesses a protected customer without authorization, or exceeds authorized access, and by means of such conduct furthers the intended fraud and obtains anything of value, unless the object of the fraud and the thing obtained consists only of the use of the computer and the value of such use is not more than $5,000 in any 1-year period.

Under the statute, the phrase “exceeds authorized access” means “to access a computer without authorization and to use such access to obtain or alter information in the computer that the accesser is not entitled so to obtain or alter.”  Id. §1030(e)(6).  

The government contended on appeal that precedent and statutory interpretation shows that an employee “exceeds authorized access” under the statute when he or she obtains information from the computer and uses it for a purpose that violates the employer’s restrictions on the use of the information.  The Ninth Circuit agreed.  The definition of “exceeds authorized access” hinged on the use of the word “so” in §1030.  “So” in this context, the court stated means “in that manner to obtain or alter.”  And, because an accessor who is not entitled to access information in a certain manner, whether someone has exceeded authorized access must be defined by those access limitations set by the employer.

LVRC Holdings LLC v. Brekka, 581 F.3d 1127 (9^th Cir. 2009) was relied upon by Nosal to have CFAA causes of action dismissed in the District Court.  Brekka held that a person accesses a computer without authorization “when the person has not received permission to use the computer for any purpose.”  Here, the Ninth Circuit clarified Brekka, finding that under the CFAA an employee accesses a computer in excess of his or her authorization when that access violates the employer’s access restrictions, which may include restrictions on the employee’s use of computer or of the information contained in that computer.  An individual who is authorized to use a computer for certain purposes but goes beyond those limitations by the CFAA is some who has “exceed[ed] authorized access.” 

The Court remanded and instructed to reverse the dismissal of the CFAA counts. 

The employer’s computer access policy in this case actually carried more importance for the CFAA causes of action than did the non-compete and independent contractor agreements.  This case is a reminder that any and each employee policy may become important and be scrutinized at any given time.  Computer use policies should be updated to be specific and contain restrictions to protect the employer’s business.

The SSA’s new letter states that the employer is not required to respond to the SSA.  However, the letter advises employers that the SSA may share the information that it receives with the Department of Justice or Internal Revenue Service.  The No-match letter further warns employers that receipt of a No-match letter is not a basis, in and of itself, to take adverse employment action against an employee. 

Receipt of a No-match letter puts employers on notice of possible discrepancies that must be investigated.  Employers should develop standard policies and procedures to address SSA No-match letters and implement such policies and procedures in a consistent, non-discriminatory manner. 

Links to the Department of Justice’s instructions to employers who receive No-match letters are here and here.  

Additional articles on the SSA’s resumption of sending No-match letters can be found here, here and here.

The law would permit termination or discipline of an employee “who is impaired on the property or premises of the place of employment, or during the hours of employment.”  The text of the bill as introduced can be found here.

The law also provides that “it is unlawful for an employer to discriminate against a person in hiring, termination, or any term or condition of employment or otherwise penalize a person, if the discrimination is based upon . . . .  (2) The person’s positive drug test for marijuana, provided the person is a qualified patient and the medical use of marijuana, as defined in Section 11362.7, does not occur on the property or premises of the place of employment or during the hours of employment.”  How will this apply to government contractors that regularly test employees for drug use?  What about employees who are required to maintain federal security clearances and lose their job when they fail a drug test and cannot maintain their clearance?  

It will also be interesting to see whether employers can get any traction defending against claims under this law by arguing that the use of marijuana is a federal crime.

Personnel Records

• Personnel records include documents relating to an applicant’s or employee’s hiring, firing, transfer, assignment, demotion, promotion, layoff, rates of pay, other terms of compensation, evaluation, and request for reasonable accommodation.
• Personnel records should generally be retained for at least four (4) years after an individual’s application or an employee’s termination.
• Federal laws that require retention of personnel records include Title VII of the Civil Rights Act of 1964, Civil Rights Act of 1866, Americans with Disabilities Act (ADA), Age Discrimination in Employment Act (ADEA), Rehabilitation Act of 1973, and Vietnam Era Veterans’ Readjustment Assistance Act of 1974 (VEVRA). 

Payroll Records

• Payroll records contain an employee’s name, address, rate of pay, the basis on which wages are paid (ex. hourly, salary, commission, piecemeal), wages paid during each pay period broken out by straight time and overtime premium, dates of payment and pay period covered.
• Federal laws that require retention of payroll records include Fair Labor Standards Act (FLSA), Family Medical Leave Act (FMLA), and ADEA.  Generally, federal laws provide that payroll records should be retained for at least three (3) years. 
• The Virginia Unemployment Compensation recordkeeping requirements require employers to retain wage records, including tips, scheduled hours, and unemployment insurance records for at least four (4) years. 16 VAC 5-32-10.

Time Cards and Records

• Records that contain the time each workday began and ended, total hours works in each day and each week, amount of and reason for each deduction from or addition to wages, and daily output of an employee not paid on an time basis
• Time cards should be retained for at least two (2) years.  Three (3) years would be safer because of the potential longer statute of limitations period under the FLSA for “willful” violations.
• Federal laws that require retention of time cards and records include FLSA and FMLA.

FMLA Records

• Records that should be retained for FMLA purposes include medical certifications and related medical information, dates or hours of leave taken, copies of all notices given or received from employee, documents describing employee benefits or employer policies and practices regarding paid and unpaid leave, payments of employees benefits, and records of any dispute between employer and employee.  
• Medical records must be maintained in separate file and treated as confidential documents.
• FMLA records should be maintained for at least three years from the date leave ended.

Immigration Records

• Immigration records that should be retained include an employee’s Employment Eligibility Verification Form I-9.
• Immigration records should be retained for at least three (3) years from the date of completion or one (1) year from termination of employment, whichever is later.
• It is recommended that I-9 forms are kept separate from other personnel documents to ensure no discrimination and easily gathered if audited.  

Minor Employee Records

• Employers must retain a minor’s certificate of age, occupation of minor, signature of issuing officer, date and place of issuance, and name and address of minor’s parents.
• Minor employee records should be retained for at least three (3) years from date of termination of employment under FLSA.
• For employees under the age of 16, Va. Code § 40.1-81.1 requires employers to keep time records, including the time designated as a free-from-duty meal period, for at least three (3) years from the date last worked by the minor.   

Affirmative Action Employers — NOTE:  If your company is subject to affirmative action requirements, we recommend consulting with legal counsel on your compliance obligations.

• Affirmative action employers include government contractors or subcontractor with more than 50 employees or a single contract in the amount of $50,000 or more  
• Applications for employment should be retained from at least two (2) years after the date the position is filled, if the employer has more than 150 employees, or one (1) year if the employer has less than 150 employees or federal contract less than $150,000.  
• Written affirmative action plans including supporting documents should be retained for at least two (2) years.
• Personnel or employment records, including the employee’s gender, race, and ethnicity, should be retained for at least two (2) years from the date of personnel action. 
• All documents concerning internal complaints and termination, including all supporting documents, for individuals with disabilities, disabled veterans, and veterans of the Vietnam era should be retained for at least one (1) year from the termination of employment.  

Employee Benefit Records

• Employee benefit records that should be retained include benefit plan documents, benefit plan disclosures, benefit plan reports, all documents that were used in compiling required plan reports, copies of COBRA notices or notices of COBRA not offered due to gross misconduct, and all COBRA-related correspondence. 
• Employee benefits records should be maintained for six (6) years after filing, but every employee must maintain records sufficient to determine the benefits due to employee or benefits that may become due to an employee. 
• Federal laws requiring retention of employee benefits records include Employee Retirement Income Security Act (ERISA) and Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA)

OSHA/VOSH Records

• Occupational Safety and Health Act (OSHA) Forms 300, 300-A, and 301 must be retained for at least five (5) years from the end of the year to which records relate.
• OSHA also requires employee medical records and exposure records of employees exposed to toxic substances or harmful physical agents must be retained for at least duration of employment plus 30 years.    
• Virginia Occupational Safety and Health (VOSH) Office has adopted OSHA recordkeeping requirements

Document Retention Policies 

• Businesses should maintain a recordkeeping or “document retention” policy to ensure compliance with statutory and regulatory requirements and aid in litigation.
• Document retention policies should be revised regularly to ensure that the policy does not become obsolete or result in an unintentional violation of the law.
• Document retention policy should be closely followed to avoid inferences of improper document destruction.
• Document retention policy should include:
  • An authority designated to manage the recordkeeping policy
  • The specific documents to be retained and the appropriate time to retain each category of documents
  • The proper place and storage medium for each category of documents
  • The proper method and time of destruction of documents   
  • Prohibit mangers from keeping records not set out in the policy or maintain “unofficial” or dummy files
  • A statement that in the event of litigation, all documents relevant to the litigation should be maintained and not destroyed 

Broccoli v. Echostar Communications Corp., 229 F.R.D. 506 (D. Md. 2005).

• Broccoli alleged that his former employer, Echostar, sexually harassed and retaliated against him in violation of Title VII. 
• During litigation, the court found that Echostar failed to preserve documents, correspondence, and emails relevant to Broccoli’s employment and his termination.  As a result, the employer was limited in introducing evidence at trial regarding its legitimate reasons for Broccoli’s termination and the jury was given an adverse inference instruction.
• Nevertheless, the jury returned a verdict in favor of Echostar and concluded that Broccoli was not sexually harassed or retaliated against.  However, Broccoli was awarded approximately $21,000 in attorneys’ fees due to Echostar’s failure to maintain employment-related documents as required by the recordkeeping provisions of Title VII.

The ICPA was recently signed into law by Illinois Governor Pat Quinn and will become effective January 1, 2011.  In a press release from the State of Illinois, Governor Quinn stated “A job seeker’s ability to earn a decent living should not depend on how well they are weathering the greatest economic recession since the 1930s.  This law will stop employers from denying a job or promotion based on information that is not an indicator of a person’s character or ability to do a job well.”

The ICPA applies to all Illinois employers, excluding only banks and financial institutions, insurance companies, state law enforcement units, state and local government agencies and debt collection agencies.  Under the law, covered employers are prohibited from inquiring about an applicant or employee’s credit history or obtaining a copy of their credit report.  Employers may, however, still inquire about an employee or applicant’s credit history for a position in which a credit history is a “bona fide occupational qualification.”  These limited circumstances include positions that involve: (1) bonding or security required under state or federal law; (2) unsupervised access to $2,500 in cash or equitable assets; (3) signatory power over business assets of more than $100; (4) management and control of the business; or (5) access to personal, financial or confidential information, trade secrets, or state or natural security information. 

The ICPA also prohibits retaliation or discrimination against any person who files a complaint, participates in an investigation or proceeding, or opposes a violation of the ICPA.  An employer may not require an applicant or employee to waive any right under the ICPA and any agreement to waive ICPA protections is invalid and unenforceable.  Any employer that violates the ICPA will be subject to civil liability for damages, including attorneys’ fees and costs, as well as injunctive relief.

For the full text of the ICPA, click here.

The CORI reform was recently signed into law by Governor Deval Patrick and the so-called “ban-the-box” provision, which bars employers from requiring applicants to check a box on job applications if they have a criminal history, will go into effect November 4, 2010.  The legislation contains a narrow exception that permits employers to inquire about an individual’s criminal history on a job application if: (1) the applicant is applying for a position for which any federal or state law creates a mandatory or presumptive disqualification based on a conviction of certain criminal offenses; or (2) the employer is subject to an obligation under any federal or state regulation not to employ persons in one or more positions who have been convicted of certain criminal offenses.

Massachusetts law only restricts employers from requesting criminal history information on the “initial written application form.”  Accordingly, employers may ask an applicant about his or her criminal history during the interview process.  Employers that fail to comply with the new law will be liable for compensatory and punitive damages, interest, and attorneys’ fees. 

Effective February 6, 2012, the Massachusetts CORI reform also provides that felony conviction records (with limited exceptions) will be sealed, and therefore unavailable to employers in a background investigation, 10 years after disposition.  Misdemeanor convictions will be sealed five years after disposition. 

Hawaii became the first state to enact a “ban-the-box” provision in 1998, prohibiting public and private employers from inquiring about an applicant’s criminal history until after a conditional offer of employment has been made.  Minnesota, New Mexico, and Connecticut have since enacted comparable legislation applicable to public employers.

For the full text of Massachusetts’ “ban-the-box” legislation, codified as M.G.L. c. 151B §4(9), click here.

EEO-1 reports are required to be filed annually by businesses with (a) 100 or more employees, or (b) federal government contracts of $50,000 or more and 50 or more employees. 

The EEOC and Office of Federal Contract Compliance Program (OFCCP) use EEO-1 reports to investigate and remedy the under-representation of protected classes in various job classifications.  Accordingly, EEO-1 reports request information regarding the ethnicity, race, and gender of reporting businesses’ employees.  Penalties for failing to file an EEO-1 report include fines and a ban on future government contracts.

For additional information regarding EEO-1 reports, the EEOC’s website can be accessed here.

Contributed by Laura Chaimowitz

A job applicant with documented credit problems and a lawsuit against a former employer is claiming retaliation and race and gender discrimination after being denied a job interview. To avoid similar suits, organizations should be mindful of what information they solicit from applicants, and HR must clearly communicate evaluation criteria and processes to hiring staff.

The article can be found here:  Careful What You Ask For.

The new law provides a 15-month premium subsidy to individuals who were involuntarily terminated between September 1, 2008, and May 31, 2010.  Individuals who were terminated between March 2, 2010, and May 31, 2010, following a reduction of hours that occurred between September 1, 2008, and May 31, 2010, also qualify for the subsidy.  In addition, the Act provides transition relief for individuals who lost their jobs between March 31, 2010, and April 15, 2010.  Other provisions under the Act include an extension on the deadline to file for Federal Emergency Unemployment Compensation until June 2, 2010, an extension on Medicare physician payment rates until May 31, 2010, and compensation for federal employees who were furloughed during March 1st and 2nd.

Additional information on this law here, here and here (DOL site).  The text of the law can be found here. 

Contributed by Claudia L. Guzman

The original Code section (Va. Code Ann. § 44-93.3) required a Virginia service member to apply for reinstatement within 14 days of release from duty or hospitalization following release.  The 14 day time period still applies to absences that are less than 180 days.   For absences that exceed 180 days, a service member now has 90 days to apply for reinstatement to a former position.  Upon release, an employer shall restore a service member to the same position held at the time of order to active duty, or a comparable one if that position has been eliminated.  The reemployment rights do not apply when the cumulative length of absences (for reason of uniformed service) exceeds five years.  The amended law, signed on April 8, 2010, becomes effective on July 1, 2010.

The new Code section is here.

Contributed by Ellen D. Kennedy