February 24, 2014

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Prepared by Ted Gentry
February 2014

Employee Handbooks and Manuals Part II:  Highlighting the “No-Contract” Disclaimer

Wyche at Work continues its 2014 series on employee handbooks by emphasizing what should literally be on the first page:  a conspicuous disclaimer that demonstrably expresses that the handbook is not a “contract of employment”.  While such a requirement (now statutorily proscribed) may seem unnecessary or overkill, this recommendation is the result of two decades of legal jurisprudence in which South Carolina courts found that employee handbooks and manuals inadvertently created an implied contract of employment. Often going out of their way to find that handbooks were contracts or that disclaimers were not sufficiently conspicuous, South Carolina courts opened the door to numerous claims that an otherwise uneventful termination “breached” an employment contract because it was inconsistent with handbook policy. As one court surmised in finding an implied contract out of a handbook:  “It is patently unjust to allow an employer to couch a handbook, bulletin, or similar material in mandatory terms and then allow him to ignore these very policies as a ‘gratuitous, nonbinding statement of general policy’ whenever it works to his disadvantage.”

This precedent, while logical in application, effectively created a significant exception to South Carolina’s “at-will” employment doctrine.  These “handbook cases”, as they became known, caused legal headaches for employers who wanted to publish handbooks without being held legally liable for the particular contents of their handbook, or at least have the ability to respond flexibly to workplace incidents without the threat of a post-termination lawsuit. Handbooks with “mandatory” language were routinely cited by lawyers and courts alike as having created implied employment contracts. Wyche at Work litigated several of these “handbook cases” with a representative case decided by the South Carolina Court of Appeals in favor of the employer.

The South Carolina legislature tackled this issue in 2004. Passing South Carolina Code § 41-1-110, the General Assembly created a “safe harbor” that all employers should take advantage of when they issue handbooks:

It is the public policy of this State that a handbook, personnel manual, policy, procedure, or other document issued by an employer or its agent after June 30, 2004, shall not create an express or implied contract of employment if it is conspicuously disclaimed. For purposes of this section, a disclaimer in a handbook or personnel manual must be in underlined capital letters on the first page of the document and signed by the employee. For all other documents referenced in this section, the disclaimer must be in underlined capital letters on the first page of the document. Whether or not a disclaimer is conspicuous is a question of law.

This language – even if counterintuitive in application – should be followed strictly. A handbook disclaimer should clearly state that the handbook is not a contract of employment and should be:

  • Underlined;
  • Capitalized;
  • Contained on the first page of the document; and
  • Signed by the employee.

Other employment policies, procedures, or documents should contain a disclaimer in underlined capital letters on the first page of the document.

This statute has stemmed the number of “handbook cases” in South Carolina considerably. South Carolina employers should follow it precisely and make sure that they publish handbooks that include a proper disclaimer.

Fourth Circuit Recognizes Extension of ADA to Temporary Impairments

The Fourth Circuit Court of Appeals, which covers South Carolina, was the first federal appellate court to apply the expanded definition of “disability” pursuant to the 2008 amendments to the Americans With Disabilities Act (“ADA”) that a sufficiently severe temporary impairment may constitute a disability.

In Summers v. Altarum Inst., Corp., the appellate court held that the plaintiff’s injuries, preventing him from walking for a period of seven months to a year after an accident, constituted a disability as defined by the ADA. Originally, the ADA did not apply to “temporary” impairments.  However, in determining whether a physical or mental impairment “substantially limits one or more major life activities,” the amended regulations provide that “effects of an impairment lasting or expected to last fewer than six months can be substantially limiting” for purposes of providing an actual disability. In making this determination, the EEOC considers the duration of the impairment as well as the severity.  The regulations provide this example: “[I]f an individual has a back impairment that results in a 20-pound lifting restriction that lasts for several months, he is substantially limited in the major life activity of lifting, and therefore covered under the first prong of the definition of disability.”

In Summers, the plaintiff proposed a plan to work from home, but the employer did not respond to his request or discuss possible accommodations to permit the plaintiff to return to work; instead, the employer terminated him to hire a replacement.  Because the court found that the plaintiff suffered under a disability as defined by the ADA, the court ruled that the employer’s response was unacceptable. The court cautioned employers that an employee’s request for an accommodation, even if unreasonable, typically triggers an employer’s duty to engage in a “good faith interactive process” in an effort to ascertain a reasonable accommodation that would allow the employee to perform the essential functions of the job.

When faced with requests for accommodation for a temporary disability, employers should engage the employee in a dialogue to discuss potential accommodations, including what medical leave and short-term disability options are available to the employee and, for substantial impairments spanning several months, what accommodations can be made to permit the employee to continue working while she recovers. In the meantime, Wyche at Work will continue to monitor how courts are responding to ADA and other employment-related claims and update here accordingly.

The EEOC Settles Its First Genetic Information Discrimination Suit

The EEOC settled its first ever case involving a relatively new law, the Genetic Information Non-Discrimination Act (“GINA”).  Made effective in 2009, GINA deals exclusively with genetic information, a technical term fully defined in the statute to include genetic tests that detect an employee’s genotypes, mutations or chromosomal changes, an employee’s family’s genetic tests, an employee’s family medical history, and an employee’s requests for or receipt of genetic tests.

GINA, which applies to employers with fifteen or more employees, both prohibits and requires certain employer behavior. Employers are prohibited from, among other things:
1. using genetic information to make employment decisions,
2. discriminating against applicants or employees based on genetic information, and
3. requesting, requiring, or purchasing genetic information from applicants or employees.
On the other hand, employers are required to keep any genetic information they unwittingly or lawfully acquire confidential and place limits on the disclosure of any such information. Employers violating GINA are subject to typical remedies including mandatory hiring/promotion, front pay, back pay, compensatory damages, and punitive damages.

A recent case settled by the EEOC shows just how easy it is for an employer to run afoul of GINA. Founders, a nursing home/rehabilitation center, required its nurse applicants and employees to undergo physical examinations before and during employment. As part of these examinations, Founders asked its nurse applicants and employees for information relating to family medical history. The EEOC alleged that asking for family medical history violated GINA’s prohibition on requesting or requiring genetic information from applicants or employees.

Shortly after the EEOC filed its complaint against Founders, Founders admitted to violating GINA and entered into a settlement agreement with the EEOC, under which Founders had to pay in excess of $100,000 to affected applicants/employees. This suit and settlement reaffirmed the notion that employers should be careful to comport with GINA and the EEOC’s GINA regulations. Best compliance practices include:

  • requesting medical information only for lawful purposes (like documentation for reasonable accommodation and/or medical leave),
  • instructing health care providers who perform workplace tests to not include genetic information with medical information,
  • scrubbing unnecessary and potential problematic inquiries (i.e., family medical history) from applications and other HR forms; and
  • establishing a policy clearly prohibiting the discussion of genetic information in the workplace and outlining the procedure for maintaining the confidentiality of any genetic information that may be learned in the workplace.

GINA is one more statute that can trap the unwary employer. Wyche at Work will continue to monitor developments in this developing area of exposure.

Executive Order Establishes Minimum Wage for Employees of Federal Contractors

As promised in his State of the Union address on January 28, President Obama has signed an Executive Order raising the minimum wage for employees of federal contractors from $7.25 per hour to $10.10 per hour. The new minimum wage takes effect on January 15, 2015 and may be increased annually based on the Consumer Price Index. The Executive Order authorizes the Secretary of Labor to issue regulations implementing the order by October 1, 2014. Meanwhile, “new contracts, contract-like instruments, and solicitations” must include a clause specifying the minimum wage to be paid to workers. Contractors and any subcontractors are required to incorporate the clause in their lower-tier contracts.

Minimum wage increases also took effect in January 2014 in many states and municipalities across the country.  According to data from the Department of Labor, 21 states and the District of Columbia now have established minimum wages that are higher than the Federal minimum wage of $7.25 per hour.  Other states have set minimum wages that are the same as or less than the Federal minimum wage.  The higher minimum wage, whether established by state or federal law, typically prevails. South Carolina is one of five states with no minimum wage requirement and thus is subject to the minimum wage and other requirements of the Fair Labor Standards Act.

The FLSA covers most private employers, regardless of the number of employees. While the FLSA does not cover independent contractors, volunteers, interns, or trainees, South Carolina employers should make sure that these “nonemployees” are classified correctly.

If you have any questions about these or other workplace law topics, please contact Ted Gentry.

This update is provided by Wyche for educational and informational purposes only and is not intended and should not be construed as legal advice.