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MAY 2018



Inside This Issue


1.    PBGC Issues Guidance to Assist Multiemployer Pension Plans to See Alternate Payment Rules for

       Employer Withdrawal Liability


2.    Asset Purchasers Beware of Withdrawal Liability Under ERISA


3.    9th Circuit Court of Appeals Rules that a Fresno County School District Violated the Equal Pay Act


4.    Under FMLA an Employer Can Deny Leave Based on Tardiness Grounds on Account of Sleep Apnea


5.    Insomnia Alone Does Not Establish Violation of Americans with Disabilities Act (ADA)


6.    US DOL Clarifies when Interns and Students are Employees Under FLSA



PBGC Issues Guidance to Assist Multiemployer Pension Plans to See Alternate Payment Rules for Employer Withdrawal Liability


The Pension Benefit Guaranty Corporation (“PBGC”) issued guidance to assist multiemployer pension plans that request PBGC review of alternative plan rules for satisfying employer withdrawal liability. The guidance explains PBGC’s review process, the information needed, and factors PBGC considers in reviewing plan proposals.


Under pension law, an employer that withdraws from an underfunded multiemployer plan is responsible for a share of the plan’s unfunded benefit obligations and generally pays withdrawal liability over a period of years. Employer withdrawal liability payments help to compensate plans for the loss of future contributions from the withdrawn employer. Alternative withdrawal liability payment rules differ from the standard statutory payment terms.


Although there are two key aspects of withdrawal liability that are particularly important to distinguish—the method for determining  withdrawing employer’s allocable share of the plan’s unfunded vested benefits (“UVBs”), and the payment of an employer withdrawal liability amounts to the plan—the guidance provided under this policy statement applies to the latter.  Specifically, this guidance relates to a plan’s proposed adoption of alternative payment amounts and terms and conditions to satisfy withdrawal liability as provided under section 4224.


The proposals can be highly complex, involving analysis of plans’ future cash flows and underfunding under various scenarios. They often involve highly troubled plans and require great care to ensure that the plan participants are not harmed and that the Multiemployer Insurance Program is not put at greater risk.


For proposals to adopt alternative terms and conditions to satisfy withdrawal liability that are intended to extend plan solvency by encouraging the continued commitment of contributing employers to the plan, PBGC finds it helpful to see support for an assertion that:  (i) The alternative would retain employers in the plan long-term and secure income that would be otherwise unavailable to the plan, and (ii) absent the alternative, employers would withdraw from the plan or significantly reduce contributions in ways that would undermine plan solvency.  PBGC will work with trustees to assess what kind of support a plan would be able to most efficiently provide and what would be most useful for PBGC’s understanding of the proposal.


It is the pension plan that must make a proposal to adopt alternative terms and conditions to satisfy withdrawal liability.  Then, if an employer believes it should have an alternate payment plan, it is the employer’s obligation to convince the pension plan trustees to make a proposal to PBGC.



Asset Purchasers Beware of Withdrawal Liability Under ERISA


In a 7th Circuit Court of Appeals decision in Indiana Pension Fund v. ManWeb, the union pension fund sought withdrawal liability from defendants/purchasers of assets from a third party which had previously withdrawn from the plaintiff’s pension fund.  The court noted that the purchaser was not aware of the third party’s contingent withdrawal liability at the time of the asset purchase.  It is the totality of the circumstances which determines the purchaser’s liability.  Here the defendant’s  use of third-party’s intangible assets, including its name, goodwill, trademarks, supplier and customer data, trade secrets, telephone number and websites, and its retention of third-party’s principals to promote defendant to third-party’s existing and potential customers sufficiently established requisite continuity of business operations to support imposition of successor liability on defendant.  The fact that defendant did not offer industrial refrigeration construction services prior to said asset purchase that had been offered by third party, that 13 of third-party’s employees who joined defendant after asset purchase represented only small fraction of defendant’s employees, and that less than 2 percent of defendant’s projects and revenues came from third-party’s customers after asset purchase, did not require different result.



9th Circuit Court of Appeals Rules that a Fresno County School District Violated the Equal Pay Act

The school district had a policy that a new hire teacher would be paid an added 5% to her previous pay. The Appellate Court reasoned that prior salary alone, or in combination with other factors, cannot justify a wage differential.  Allowing pay differences based on previous salaries only perpetuates wage gaps between men and women that are based on discrimination in the job market.  This ruling contrasts in part with a 7th Circuit ruling in Illinois which found that it is not a violation of the Equal Pay Act to consider an employee’s wage history so long as sex is not a factor in determining salaries. 


Based upon the unique facts situation in the 9th Circuit case, wage history can be used to determine a salary if that wage history shows that the salary was commensurate with the employee’s skills, education etc.  But employers should use wage history sparingly, if at all.



Under FMLA an Employer Can Deny Leave Based on Tardiness Grounds on Account of Sleep Apnea


In another 7th Circuit case of Guzman v. Brown, the plaintiff applied for FMLA leave, which was denied by the employer, since plaintiff failed to show that defendant had either actual or constructive notice of the sleep apnea condition. 


Plaintiff also made an Americans with Disability claim.  Here too, the plaintiff loses because she failed to show that the decision maker was aware of the sleep apnea at the time of the termination.  Most importantly, the fact that plaintiff’s sleep apnea was the cause of her tardiness, does not require a different result, since the violation of the workplace rule, even caused by her disability, is no defense to imposition of discipline because of a violation of a rule. 


That plaintiff made an accommodation request after the decision to terminate was made, did not excuse plaintiff’s past tardiness which was the basis of the termination.



Insomnia Alone Does Not Establish Violation of Americans with Disabilities Act (ADA)

​In January of 2018 the 7th Circuit Court of Appeals decided that under the Americans with Disabilities Act, insomnia condition alone does not establish a violation.  In Rodrigo v. Carle Foundation Hospital etc., plaintiff alleged that defendant terminated him from its medical residency program, after plaintiff had failed “Step 3” test for third time, and after defendant had rejected plaintiff’s request to be re-instated to residency program. While plaintiff claimed that his insomnia condition was cause of his failed tests, plaintiff failed to establish that he was a “qualified individual” under ADA, where: (1) years prior to plaintiff being admitted into residency program defendant adopted policy requiring residents to pass Step 3 test before being offered employment contract for third year of residency program; (2) defendant had also adopted policy requiring termination from residency program whenever resident had more than two failures of Step 3 test; and (3) no resident who had failed Step 3 test more than two times had been allowed to continue in residency program while instant policies had been in force.


The requirement that resident pass Step 3 test was essential function of plaintiff’s job at defendant’s hospital, and plaintiff’s failure to establish that he was a qualified individual under ADA also precluded him from establishing retaliation claim based on defendant’s failure to grant him requested reinstatement to residency program.



US DOL Clarifies when Interns and Students are Employees Under FLSA


According to the United States Department of Labor (“US DOL”), Courts have used the “primary beneficiary test” to determine whether an intern or student is, in fact, an employee under the Fair Labor Standards Act (“FLSA”). In short, this test allows courts to examine the “economic reality” of the intern-employer relationship to determine which party is the “primary beneficiary” of the relationship. Courts have identified the following seven factors as part of the test:


1. The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation,

    express or implied, suggests that the intern is an employee—and vice versa.

2. The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including

    the clinical and other hands-on training provided by educational institutions.


3. The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.


4. The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.

5. The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.

6. The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational

    benefits to the intern.


7. The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion

    of the internship.


Courts have described the “primary beneficiary test” as a flexible test, and no single factor is determinative. Accordingly, whether an intern or student is an employee under the FLSA necessarily depends on the unique circumstances of each case.


If determined the person is an employee, the person is entitled to overtime pay and minimum wage under FLSA.

 

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