NY Employment Law

Another Perspective on Health "Insurance" and The Workplace

We launched this blog with a two-part essay about health insurance, health care, and the workplace (June 16, 2006 and June 17, 2006).  Recently, Robert E. Moffit, Ph.D., of the Heritage Foundation, published a comment urging the adoption of a policy that would sever the connection between health insurance and jobs.  I don't normally expect to be on the same page with the Heritage Foundation, but maybe that is just an indication that realigning the health care payment structure will require the realignment of traditional interest groups.

Adverse Impact and Employment Test Validation

    TAKE AWAY: Employers operating in New York, Connecticut, and Vermont who utilize employment tests should be prepared to prove through legally competent evidence that: (1) the test makers first conducted a suitable job analysis, (2) they used reasonable competencein constructing the test, (3) the content of the test is related to the content of the job, (4) the contenet of the test is also representative of the job, and (5) the employer used a scoring system that usefully selects from among the applicants those who can better perform the job.

    Last week, the Second Circuit reconsidered its precedents governing proof of adverse impact in age discrimination cases, as discussed elsewhere on this site .  Now, the Second Circuit (albeit a different panel) has reexamined its precedents regarding an employer's burden of proof to successfully defend the legal validity of an employment test.  Judge Wesley's opinion for a unanimous panel in Gulino v. Board of Education ultimately focuses upon what evidence an employer must produce in order to demonstrate that a particular employment test (or other employment practice alleged to have an adverse impact) "is job related for the position in question and consistent with business necessity," and thereby rebut a plaintiff's prima facie case.

    The Gulino opinion notes that the terms "job related" and "business necessity," now enshrined in  Title VII , have been "used interchangeably by the courts," although they appear to have semantic differences.  The court finesses this problem by using alternate language from the Albemarle decision as the operative standard: "discriminatory tests are impermissible unless shown, by professionallt acceptable methods, to be predictive of or significantly correlated with important elements of work behavior which comprise or are relevant to the job or jobs for which candidates are being evaluated."

    The Gulino plaintiffs challenge the use of two tests by the New York City Board of Education to determine whether candidates for teaching positions are qualified. (interestingly, the court penned a lengthy opinion, including 27 footnotes, without so much as a nod to the "well qualified" terminology introduced by the No Child Left Behind Act.)  Both tests passed muster with the District Court; the decision was not appealed as to one of the tests.  The Court of Appeals finds that the validity of the other test must be measured by a more rigorous test than the one used by the District Court, and so remands.

    Besides harmonizing and distinguishing a large body of Second Circuit precedent with its decision in Gulino, the court's opinion also contains a useful discussion of the difference between tests that seek to measure mastery of job content and tests that seek to measure whether an individual possesses certain job constructs (mental processes or traits).  Validation of tests measuring constructs is much more difficult than validation of tests measuring knowledge or mechanical ability.  The test being scrutinized here was one measuring constructs, and the court found that the formula laid out in Guardians Ass'n v. Civil Service Commission, 630 F.2d 79 (2d Cir. 1980) - and spelled out above -  was still appropriate for determining the validity of such tests.

Workforce Reduction and Age Discrimination

The impact of the Supreme Court's decision in Smith v. City of Jackson (2005) is trickling back down through the court system.  This week, the U.S. Court of Appeals for the Second Circuit  issued a post-remand decision in Meacham et al. v. Knolls Atomic Power Laboratory.  The Meacham action involved an ADEA claim on behalf of some 30 employees, all over the age of 40, who had lost employment during a reduction in force at the Laboratory.  A jury verdict was rendered in favor of the plaintiffs.  Defendant moved for judgment as a matter of law.  The U.S. Magistrate Judge presiding over the matter denied the motion.  The Second Circuit affirmed the denial of the defendant's motion, leaving the plaintiffs' verdict intact.  Defendant's petition for certiorari was granted, and the matter remanded for reconsideration in light of the decision in City of Jackson.

The Second Circuit now reverses the decision below and grants defendant's motion for judgment as a matter of law.  As before, the Court finds that plaintiffs carried their burden of establishing a prima facie case that the reduction in force violated the ADEA by adversely impacting older workers.  The identification by the plaintiffs of the subjective nature of certain elements of the selection process was specific enough to meet their burden.  Similarly, the Court adhered to its earlier view that the defendant had met its burden of articulating a "legitimate business justification" for the process used to select employees for termination.

Applying pre-City of Jackson standards, the Second Circuit had found that plaintiffs were entitled to prevail because they had met their burden of proving that the proffered justification failed the test of business necessity, i.e. that plaintiffs demonstrated at least one alternative process that would have had less adverse impact on the protected class.  The City of Jackson decision, however, redefined plaintiffs' ultimate burden of prove, such that plaintiffs were now required to prove that defendant's selection process was "unreasonable."  This greater burden was not met by the plaintiffs, holds the Second Circuit.

In Meacham, the Second Circuit recognized that the Supreme Court's analysis in City of Jackson requires that adverse impact claims alleging age discrimination must now be analyzed differently than such claims alleging discrimination on the basis of any of the other protected classifications.

Too Late for Unemployment Benefits

An employee whose employment is terminated for unsatisfactory performance, and who meets other eligibility criteria, will be awarded unemployment insurance benefits.  And, the experience rating of the former employer will be charged accordingly.  However, an employee whose employment is terminated for misconduct will be disqualified from receiving benefits.  And, the former employers experience rating will be unaffected.

From this distinction, we see that doing a bad job may or may not disqualify an applicant.  How bad does performance have to be in order to amount to misconduct?  This question can be particularly vexing when the undesirable conduct is tardiness.  Most employees, and some decision makers within government agencies, consider tardiness to be a minor infraction.  Some employers feed this perception by tolerating tardiness, or being inconsistent in their enforcement of attendance expectations.

Nevertheless, under certain circumstances, chronic tardiness does amount to misconduct, and will disqualify the offender from receiving unemployment benefits after termination of employment.  The necessary circumstances are summarised in the August 10, 2006 decision in Matter of Van Beek v. Commissioner .  To successfully contest a claim for unemployment insurance, an employer should be prepared to present convincing evidence that: (1) the employee had received warnings (written warnings are easier to prove), (2) the employee knew specifically that continued tardiness could result in loss of his job (not just another warning), (3) the employee was, in fact, late on the final day, and (4) the employer's decision to terminate employment was based on that last incident of tardiness (not some other reason).

Case law does not specifically require that an employer prove consistent enforcement of the attendance rule.  However, if an applicant can point to more lenient treatment of other employees, the applicant can argue that he did not truly believe that tardiness was treated as a dischargeable offense by the employer, and may argue that the employer's true motivation in his case was something else, something that would not disqualify the applicant.  This is another illustration of the importance of training supervisors to consistently apply the standards of conduct in your workplace.  "No good deed goes unpunished."

Recording Telephone Calls

The Treo smartphone has as one of its features a voice-recording capability.  And, that feature is linked to the phone function so that the Treonaut can directly record a call conducted with the Treo.  Now, here in New York State, one party to a phone conversation may lawfully record that conversation without the consent, or knowledge, of the other party or parties to the conversation.  Other states, however, prohibit the recording of telephone conversations without the consent of all parties to the conversation.  Which rule applies when the parties to a conversation are in states with different requirements?

The California Supreme Court recently held in Kearney v. Salomon Smith Barney that if one party to the conversation is in California, then the California rule requiring consent of all parties governs.  That case involved a call placed between California and Georgia.  Georgia, like New York State, requires the consent of only one party.  The people on the Georgia end knew that, and relied on that in deciding to record the conversation from their end.  Not good enough, said the California Supreme Court.  It concluded that California has a sufficiently strong interest in protecting the privacy of Californians that the correct choice of law to control such conversations was California law.

The next question: what law applies if a party in Georgia calls a California resident's cell phone, having a California area code, but the California resident is in New York State (or other state with a one-party rule) when they take the call?

Health Insurance Isn't, Really

Isn't really insurance, that is.  At least, not if your definition of "insurance" incorporates a significant amount of risk-sharing.  As a practical matter (i.e., mortgage financing), every homeowner in my city pays a sum of money each year for fire insurance coverage on their home.  Very, very few of these homeowners will ever experience, and submit a claim for, an insured fire loss.  Over the 15-year or 30-year life of their mortgage, they will have paid thousands of dollars of premiums, and received no payment back from the fire insurance company.  But, over that same 15-year or 30-year period, a few homeowners will experience substantial fire loss, and they may receive tens of thousands, or hundreds of thousands, of dollars from a fire insurance company to which they have paid merely thousands, or even just hundreds, of dollars of premium.  That is insured risk-spreading, as Ben Franklin envisioned it back in old Philadelphia.

The premise here is that health "insurance", as sold today, is simply not based on this principle of spreading risk and the cost of loss.  Many, many people in my city are covered by some sort of private-market health insurance policy.  Very, very few of those people will not experience, and therefore submit a claim for, a health care expense this year.  And again next year.  And the year after.  It is not too much of a stretch to say that the health inurance companies are just holding our money until it needs to be sent to the physician, hospital, clinic, or pharmacy.

I have heard that there was a time when health insurance was more like fire insurance.  That is, it was designed to collect modest amounts of money from many who would not claim any of it back, in order to pay relatively large sums to, or on behalf of, a few who experienced catastrophic health events .  If so, those days are long gone.  Particularly as federal and state governments have passed laws requiring that health "insurance" policies pay for procedures or treatments that the legislatures concludes all citizens should have access to - that is, the legislatures have increased the proportion of assured claims for benefits, and thereby further decreased the risk spreading aspect of health "insurance."

Yes, I know.  Some of us will have heart attacks, and some will have cancers, and some experience prolonged debilitating dementia, while some of us will live out the term of our bodily mortgage acquiring nothing more than stronger lenses and gradually accumulating prescriptions.  This does reflect a measure of risk spreading.  A vestigial measure.

Return, for a moment, to the phenomenon of legislatures regulating health insurance policies by requiring that certain treatments be covered.  Most likely, some legislators have mailed the folks back in the district, touting their support for the constituents' "right" to have a certain treatment or procedure paid for by the insurance company.  What is this, but a piecemeal approach to "universal health coverage"?  A piecemeal approach that has been "rational" to politicians, but would be deemed "rational" by few economists or accountants.  Or, health care providers. 

Health Insurance - Fringe Benefit or Civil Right?

Rarely does a day pass, now, without the appearance of some news report or commentary regarding who is, or isn't, covered by health insurance, or who is paying what for health insurance coverage.  These pieces tend to fall into four categories: (1) the "how will we as a nation afford this" policy analyses, (2) the "labor v. management" stories, (3) the "whose fault is it?" attempts to find the bad guys who are doing this to us, and (4) the "individual hardship" human interest profiles.  Often, these approaches are interwoven in a single presentation.

When I began practicing labor law, shortly after the earth's crust had cooled, it was still common to refer to the compensation paid for work as being composed of two elements: "wages" or "salary", and "fringe benefits."  Among the bundle of "fringe benefits" was group health insurance coverage.  No longer is health insurance on the fringe.  It has become THE central form of compensation to be  managed by employers, and sought by workers.

This is noteworthy, not least because in 75 to 80 years of government mandating minimum compensation for most workers, there has not been a statutory requirement that employers generally pay any particular amount of compensation in the form of paid medical bills.  The closest our system has come are the federal and state "prevailing rate" laws that require employers performing public works to contribute to union-sponsored health insurance plans.  Even the recent Massachusetts statute does not require work compensation to be paid in the form of health benefits, but uses the tax incentive approach to . . . well, let's use a future post to examine what Massachusetts is trying to accomplish.  In short, our law has not made health care, or health insurance coverage, a right accompanying employment.

About thirteen (13) years ago, a nascent federal plan to provide Americans with "universal health care" was scorned into oblivion.  Now, the Citizens Health Care Working Group has prepared recommendations for universal health coverage to go to Congress this Fall.  We are poised, therefore, to again debate whether health care (as differentiated from health insurance) will be recognized as a right accompanying participation in our society.