Pay Equity … What Does a Company Need to Know and How Do I Conduct an Audit
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Pay Equity … What Does a Company Need to Know and How Do I Conduct an Audit

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Employment Law Updates & Affirmative Action News Lake Associates, Inc. Debbie Rich, PHR, Sr. Consultant December 2002 State Specific Information New York Governor Pataki signed the SONDA (Sexual Orientation and Non-Discrimination Act) on December 17, 2002. It takes effect in 30 days adding sexual orientation as a protected category in New York State. We recommend you update your handbooks, postings and applications accordingly. The New York State Human Rights Law was recently amended and became effective on November 16. The law continues to prohibit employers from requiring an employee to forgo a religious observance as a condition of employment and now specifically requires employers to accommodate other religious beliefs, such as dress, hair style, beards and prayer requirements, unless doing so is an undue hardship. Employment Law, Interesting Cases & Other Compliance News HIPAA (Health Insurance Portability and Accountability Act of 1996) Title I governs portability of health benefits, special enrollment, and non-discrimination rules. Title II governs Administrative Simplification. There have been new compliance issues within Title II, Subtitle F of HIPAA. The Administrative Simplification provisions are intended to make the health care information system more cost effective and efficient by requiring standardized electronic transmissions of certain claims related information. The Department of Health and Human Services has, ...

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Employment Law Updates & Affirmative Action News
Lake Associates, Inc.
Debbie Rich, PHR, Sr. Consultant
December 2002

State Specific Information

New York Governor Pataki signed the SONDA (Sexual Orientation and Non-Discrimination Act) on
December 17, 2002. It takes effect in 30 days adding sexual orientation as a protected category in
New York State. We recommend you update your handbooks, postings and applications accordingly.

The New York State Human Rights Law was recently amended and became effective on November
16. The law continues to prohibit employers from requiring an employee to forgo a religious
observance as a condition of employment and now specifically requires employers to accommodate
other religious beliefs, such as dress, hair style, beards and prayer requirements, unless doing so is an
undue hardship.

Employment Law, Interesting Cases & Other Compliance News

HIPAA (Health Insurance Portability and Accountability Act of 1996) Title I governs portability
of health benefits, special enrollment, and non-discrimination rules. Title II governs Administrative
Simplification. There have been new compliance issues within Title II, Subtitle F of HIPAA. The
Administrative Simplification provisions are intended to make the health care information system
more cost effective and efficient by requiring standardized electronic transmissions of certain claims
related information.

The Department of Health and Human Services has, so far, issued final regulations in two key areas
governed by HIPAA: Privacy and Electronic Transactions. The following table outlines HIPAA
compliance deadlines. Numerous other related regulations will be issued or finalized in the coming
months and years. Lake Associates provides training in HIPAA compliance.

Compliance Date Event

October 15, 2002 Electronic Transactions extension filing deadline

October 16, 2002 Electronic Transactions original deadline

April 14, 2003 Privacy deadline

October 15, 2003 Electronic Transactions (small health plans and extension filers’
deadline)
April 14, 2004 Privacy (small health plans deadline)

April 14, 2004 Extended business associate contract deadline


IRS mileage rate goes down to 36 cents as of January 1, 2003. See our 2003 Guidebook which will
be published in January for other 2003 limits.

EEOC updates guidance on National Origin bias as of December 2, 2002 in the form of a new
compliance manual section, on the prohibition against national origin discrimination under Title VII
of the Civil Rights Act of 1964. The guidance, along with a new web page and Q&A fact sheet, is
© 2002 Lake Associates, Inc. Page 1 part of the EEOC’s proactive efforts to prevent workplace discrimination through education. See
www.eeoc.gov for further information.

President Bush on June 12, 2002 signed into law the Public Health Security and Bioterrorism
Preparedness and Response Act, P.L. 107-188. The new law extends protection under the
Uniformed Services Employment and Reemployment Rights Act (USERRA) to non-military
civilian workers who get temporarily appointed as “interim disaster-response personnel” during
medical emergencies declared by the US government.

U.S. Patriot Act and its implications for employers, effective October 24, 2002 Those employers
deemed as financial institutions by the Act (for example and to name just a few: banks, credit card
systems, registered securities brokers, insurance companies, travel agencies, car dealers) must
establish anti-money-laundering programs. Secondly, this Act amends the Foreign Intelligence
Surveillance Act of 1978, it is not confined to financial businesses – this allows the FBI to apply for
an order from a judge requiring production of any and all records from any business for an
investigation to protect against international terrorism. These may include confidential medical
records, education records, or any others. Lastly, the federal government may tap phones and Internet
use or seize voice mail and e-mail, with only cursory judicial authorization and the subject of the
action may not have to be notified.

Sarbanes-Oxley Act of 2002 was signed into law earlier this year to attempt to root out the types of
fraud exemplified by the Enron and Adelphia scandals. While this impacts corporate audits and other
financial disclosures, it also changes the rules governing qualified retirement plan and executive
compensation in 4 areas. First, starting January 26, 2003, plan administrators of 401(k) and other
individual account qualified plans will need to notify plan participants in writing at least 30 days
before the start of a “blackout period.” [“Blackout period” generally speaking is any 3-day period
during which participants’ rights to change plan investments or effect distributions are temporarily
suspended.]

Second, directors and executive officers of publicly-traded companies and whose qualified individual
account plans hold company stock are prohibited from trading employer securities outside of a
qualified individual account plan during a blackout period. [This blackout period is regulated under
the insider trading restriction rules which generally means a 3-day period during which at least 50%
of the participants under all of a company’s plans are restricted from train in employer stock.]

Third, from the standpoint of executive compensation, S-O prohibits publicly-traded corporations
from loaning money to directors and executive officers after July 30, 2002.

Lastly, the final change wrought by S-O is an increase in the assessable penalties under ERISA.
Specifically, effective July 30, 2002, the maximum criminal penalty jumped from $5000 to $100,000,
the maximum prison term was extended and the maximum criminal penalty for corporations
increased to $500,000.

Supreme Court’s 2001-2002 Term Featured 6 Significant and Important Employment Cases

1. Chevron USA v. Echazabal, 122 S. Ct. 2045 (2002) The Court unanimously upheld the
EEOC’s regulation that provides a defense to an ADA claim if an employer refuses to put
someone into a job that would pose a “direct threat” to the person’s health or safety. The ruling
overturned a decision by the US Court of Appeals for the Ninth Circuit holding that Chevron
violated the ADA by denying a position to an individual with a disability who would have faced
personal harm if put into the job.

2. US Airways v. Barnett, 122 S. Ct. 1615 (2002) The Court ruled 5 – 4 that a request for an
accommodation under the ADA that violates a bona fide seniority system is “unreasonable”
© 2002 Lake Associates, Inc. Page 2
?unless the individual can show “special circumstances” that call for an exception. The decision
clearly was an attempt by the five Justices in the majority to find an acceptable middle ground. In
an unusual split, two of the four dissenting justices argued that the decision went too far, while
the other two dissenters contend that it did not go far enough.

3. Toyota Motor Manufacturing v. Williams, 122 S. Ct. 618 (2002) An unanimous decision held
that anyone claiming ADA protection because they cannot perform certain “manual tasks” must
show that those tasks are central to most people’s daily lives in order to be considered a major life
activity under the law. Just being unable to perform certain job tasks is not sufficient to establish
the ADA’s protection. A decision by the Sixth Circuit that was overruled created a large
loophole that would have provided ADA coverage to anyone unable to perform a few manual
tasks of a particular job.

4. Ragsdale v. Wolverine World Wide, Inc. 122 S. Ct. 1155 (2002): First FMLA Decision
Strikes Down Overly Broad DOL Regulation Since the Department of Labor (DOL) first
adopted FMLA implementing regulations in 1995, employers have contended that the agency’s
pronouncements for exceeded the statute’s reach. In the first FMLA case to reach the Supreme
Court, five of the nine Justices agreed. The Court struck down DOL’s rule providing that the
clock does not start to run on an employee’s entitlement to FMLA leave unless and until the
employer provides individual notice, thus extending the FMLA eligibility period for that person
well beyond the statutory limit. According to the majority of the Court, the agency’s rule was a
“regulatory sleight of hand” that “worked an end run around important limitations of the statute’s
remedial scheme.” The Court concluded that “the regulation is contrary to the Act and beyond
the Secretary of Labor’s authority:

5. National Railroad Passenger Corporation (a/k/a Amtrak) v. Morgan, 122 S. Ct. 2061
(2002): “Continuing Violation” Theory Does Not Apply to Discrete Acts of Discrimination,
but Does Apply to Hostile Work Environment Claims The court ruled unanimously that an
individual alleging discrimination based on an alleged discrete act of discrimination by an
employer must comply with Title VII’s regular administrative charge filing deadlines. The Court
also ruled 5 – 4 in the same case, however, that the so-called “continuing violation” theory
permits a plaintiff to bring a valid hostile work environment action based on acts of harassment
that occurred well outside of Title VII’s filing deadlines, as long as at least on contributing
incident fell within the normal filing deadline. The ruling overturned a decision by the
notoriously pro-plaintiff US Court of Appeals for the Ninth Circuit that in effect had allowed a
former employee to challenge discrete employment actions that were several years old.

6. Hoffman Plastic Compounds, Inc. v. National Labor Relations Board, 122 S. Ct. 1275
(2002): No Backpay Awards to Undocumented Workers Stating that “awarding backpay in a
case like this not only trivializes the immigration laws, it also condones and encourages future
violations,” the Court ruled 5 – 4 that the federal Immigration Reform and Control Act (IRCA)
prevents an award of backpay to an undocumented worker. While the case arose under the
National Labor Relations Act (NLRA), the Court’s broad decision also should apply to cases
presenting the same issue under federal employment discrimination statues.


Affirmative Action News

The 2000 U.S. Census special EEO file will be released during the third quarter of 2003 (this is the
file with pertinent statistics for the AAP Availability section).
• With the issuance of this special file, other reports will have to come into compliance, specifically
the EEO-1 Report. The Joint Reporting Committee is stating at this time that the EEO-1 form will
not reflect the new race categories until September 2004.
© 2002 Lake Associates, Inc. Page 3 • OFCCP will unlikely require the use of the revised race categories in AAPs until late 2004 or
early 2005.

Consider your definition of an applicant. This is still an ongoing issue with the OFCCP. A
legitimate definition is no longer anyone who is “interviewed” by the company. May we suggest
reviewing this process to ensure there are definite steps and definitions with your application process?
There has been much published on this topic recently, one of the conservative applicant definition
includes 3 parts – the job seeker must express an interest in being employed by a specific employer,
the job seeker must express this interest in conformance with the procedure defined by the employer
for receiving such expressions of interest, and the employer must actually act upon the job seeker’s
qualifications.

Current OFCCP regulations do not require contractors to “certify” compliance in writing – no need to
send the vendor certifications out anymore. OFCCP’s regulations now require that other specified
actions be taken by contractors and subcontractors, both prior to and upon the award of a government
contract, to verify (not certify) their compliance with EEO/AA obligations. This can be done in the
bid at the outset of contract negations that they are in compliance with the Executive Order AAP
requirements and EEO-1 filing requirements. Also, federal contractors much include equal
opportunity clause in all subcontractors and purchase orders.

Sample purchase order language: The equal employment opportunity and affirmative action
requirements set forth in 41 C.F.R. Part 60-1.4(a) (women and minorities), 41 C.F.R. Part 60-
250.5 (a) (covered veterans and 41 C.F.R. Part 60-741.5(a) (individuals with disabilities) are
hereby incorporated by reference into this contract [or subcontract].

So, what about the regulations in Section 503 and VEVRAA which state that “the contractor should
send written notification of company policy to all subcontractors, vendors and suppliers, requesting
appropriate action on their part?” Importantly, such dissemination is not mandatory. Instead, OFCCP
makes and overall assessments of the contractor’s outreach efforts.

The OFCCP has issued a directive outlining the standards the Agency will use for evaluating requests
for “separate facility” exemptions under E.O. 11246 and VEVRAA. This would be pertinent when
one or more facilities of a company insist that they are not involved in any government contract work.
The Agency states this will be granted “only in rare and compelling circumstances.”

Once again, the Vietnam Era Veterans’ Readjustment Assistance Act of 1974 (VEVRAA) will be
amended – this will be the third time in the last four years. President Bush signed this into public law
on November 8, 2002 and it will be effective December 1, 2003. The Job for Veterans Act (JVA)
revises the categories of veterans who are protected by federal affirmative action requirements; add a
VETS-100 reporting requirement to report the number of all current employees by job category and
hiring location; raise the threshold of VEVRAA contract coverage from $25,000 to $100,000; keep
responsibility for several veterans programs in the Labor Department’s Veterans’ Employment and
Training Service; and create a new special “President’s National Hire Veterans Committee.”
Highlights – the JVA deletes one category of currently protected veterans, adds a new category,
and expands a third. Specifically, the revised VEVRAA’s definition of “covered veteran” to
delete the term “veterans of the Vietnam era,” adds a new category of veterans who receive an
“Armed Forces Services Medal,” and expands the category of “recently separated veterans” to
include anyone discharged within the last three years.


This article is intended to provide useful information on the topics covered and shouldn’t be construed as legal
advice or legal opinion. For more information, please contact Diane at dl@lakebiz.com or Debbie at
drich@lakebiz.com or connect to our website www.lakebiz.com.
© 2002 Lake Associates, Inc. Page 4