Wyche at Work: January 2014 Employment Update

Prepared by Wyche attorneys, Andy Coburn and Ted Gentry
January 2014

Employee Handbooks and Manuals:  A New Series by Wyche At Work

Due mostly to the intrusive efforts of the National Labor Relations Board, legal issues surrounding employee handbooks, manuals, and policies have received significant attention in the last 12 months. Wyche at Work has noted troublesome developments, suggestions, or cautions in several recent updates. Because the legal attention given to employee handbooks and guides had consistently receded following a sea-change in South Carolina law in 2004, the recent uptick in handbook concerns make 2014 an appropriate time to develop and publish a series on Handbook Law in South Carolina. We hope that you find this series practical and helpful.

Should employers publish an employee handbook?

Employee handbooks cover a wide range of topics by definition. They are encyclopedias outlining employer’s expectations for its employees, dictionaries defining employee’s workplace rights and obligations, and guides mapping the whole of the employment relationship. We start our series on this expansive topic with a rather specific philosophic question:  should an employer maintain an employee handbook at all? Before the change in South Carolina jurisprudence referenced above, this was a very open question: a good case (from a legal perspective anyway) could be made that employee handbooks could and should be avoided. But most companies did choose to publish, maintain, and update their handbooks because employee handbooks offer a number of practical and legal benefits:

  • Well written handbooks can serve to effectively and efficiently communicate a number of policies, including working hours and vacation days, wages and fringe benefits, personal conduct and social media policies. In this way handbooks serve as a practical one-stop shop for what employees may, must, and cannot do while with a particular employer.
  • Following the lawful hiring, promotion, harassment, discipline, and termination policies contained in an employee handbook can often times form the basis of meritorious defenses to claims of discrimination, wrongful termination and/or hostile work environment.
  • Handbooks and policies not only help employees understand what is expected of them, but they can provide a hedge against arbitrary behavior and help foster consistency and an appearance of fairness, thus boosting morale and potential productivity.

Despite these significant benefits, handbooks and policies can raise concerns and come with a potential (and real) cost:

  • As Wyche at Work has previously highlighted and demonstrates below, broad handbook policies can expose employers to scrutiny by the National Labor Relations Board or other governmental regulators.
  • Poorly written handbooks can lead to employee confusion over what is right, wrong and expected of them.
  • Drafting, reviewing, updating and disseminating handbooks can be an arduous and lengthy process requiring legal review.
  • Overly specific handbook policies can decrease flexibility for employers and tie them to ineffective or inefficient procedures for dealing with employee misconduct or grievances.
  • In some circumstances, employee handbooks can serve as the basis of a claim that an otherwise at-will employee had a contract of employment.

As set forth earlier, even though there are potential pitfalls, most companies believe that the benefits of a well crafted handbook generally outweigh the costs of doing so. The time it takes to draft, aggregate, review and update employee policies is offset by the time you gain by not having to continually explain discrete polices to individual employees. The effort it takes to set up and follow uniform legal employment practices is offset by the effort saved from having to defend claims of discrimination, arbitrariness, or unlawful employment practices.

Stay tuned to Wyche at Work as we dive deeper into employee handbooks, offer specific guidance on how to avoid common drafting pitfalls, and reveal best practices for creating or revising your own employee handbook.

NLRB Targets Employer’s No Gossip Policy

Wyche at Work has already highlighted the NLRB’s increasing influence and regulation of potential or perceived violations of the National Labor Relations Act in the non-unionized workplace. More specifically, the NLRB has targeted employer policies that actually or potentially infringe on employees’ rights under the National Labor Relations Act to discuss the terms and conditions of their employment with one another.

The NLRB continued this trend in a recent administrative decision, Henderson v. Laurus Technical Institute. In Henderson, Laurus Technical Institute promulgated a no gossip policy. Under this policy employees faced discipline for, among other things:

  • talking about a coworker’s professional life without that coworker’s supervisor being present;
  • making negative, untrue, disparaging comments or criticisms about a coworker; or
  • creating, sharing or repeating information that might injure a coworker’s professional reputation or credibility.

Henderson, an employee at Laurus, began discussing several topics with her coworkers during working hours. Among these were (i) her concerns regarding Laurus’ recent unannounced firings and internal grievance handling procedure, (ii) favoritism by Laurus’ management and staff, and (iii) other employers that might be hiring. Laurus determined that Henderson’s behavior constituted a violation of the no gossip policy and decided to terminate her.

The NLRB held that the no gossip policy was overly broad and violated employees’ NLRA Section 7 rights. In doing so, the NLRB found that the no gossip policy could be read to “prohibit virtually all communications about anyone, including the company or its managers”.

This recent decision highlights the importance of crafting (and applying) workplace policies carefully (and why Wyche at Work is emphasizing handbook review in 2014). Do not hesitate to contact Wyche should you have any questions about drafting or reviewing your workplace policies.

NLRB Drops Battle over Notice-Posting Requirement

At least for now, the NLRB’s attempts to require most private sector employers to post a notice informing employees of their rights to unionize (reported in earlier editions of Wyche at Work) are over. The NLRB announced that it would not appeal the two court rulings – one of which was filed in the South Carolina – finding that the posting requirement was unlawful.

Health Care Reform – 2014 Highlights for Employers

When a benefits-related question comes up, Wyche at Work consults with Andy Coburn. Andy notes that key health care coverage changes under the Affordable Care Act take effect in 2014. While Wyche at Work has previously addressed ACA health care changes, some areas of interest for the upcoming year include the following:

  • Employers with more than 50 full-time equivalent employees must take action to ensure that they are prepared to comply with the employer “pay-or-play” mandate in 2015.
  • The maximum small business tax health insurance credit has increased from 35% to 50% of employer costs.
  • Health insurers in the small group market (employers with 2 to 50 employees) are limited in the factors that they can take into account in setting premiums for non-“grandfathered” plans. For example, they may not take into account certain traditionally used factors such as gender and are limited in the extent to which they may take into account age.
  • The permissible premium discount for employees who participate in qualified wellness programs has increased from 20% to 30%.
  • Pre-existing condition exclusions, waiting periods of more than 90 days and annual dollar limits on benefits now are generally prohibited.
  • Cost-sharing requirements and annual deductibles are now restricted by law.
  • Small businesses may obtain health insurance through the health care exchanges.

If you have questions about these changes, please contact Andy Coburn.

SC Court addresses Independent Contractor/Employee Classification for Workers’ Compensation

As a general rule, most companies appreciate that employees are entitled to workers’ compensation while independent contractors do not benefit from the protection of workers’ compensation. The South Carolina Supreme Court handed down a case last month that highlighted the tension in the workers’ compensation arena when the courts and the Workers’ Compensation Commission try to distinguish between an employee and an independent contractor classification and found that a worker hired through a staffing agency was entitled to workers’ compensation benefits.

In Shatto v. McLeod Regional Medical Center, the plaintiff was employed at a hospital through a staffing agency. During her employment, she was injured while assisting with a patient. She brought a workers’ compensation claim against the hospital, which denied that an employment relationship existed because she was actually employed by and through a staffing agency.

The South Carolina Supreme Court determined that the primary criteria for determining whether an individual was an employee or an independent contractor in the workers’ compensation context was the right to control the performance of the claimant’s work. The court then enumerated the standards to establish the right of control:  (1) direct evidence of the right or exercise of control (i.e., right to direct how the services are to be performed); (2) furnishing of equipment; (3) method of payment; and (4) right to fire. In Shatto, the Court found that only the method of payment favored the independent contractor status.  Because most of the other indicia of the relationship between the claimant and the hospital appeared or were consistent with employment, the nurse was entitled to workers’ compensation benefits.

Shatto reaffirms the notion that an employer cannot avoid workers’ compensation liability simply by classifying a worker as an independent contractor or retaining a worker through a staffing agency. Moreover, an employer, like the hospital in this case, that exercises control over a worker in a way that looks and feels like an employment relationship (and in some instances even described as a “temporary” employee), will have a significant challenge preventing such a worker from being classified as an employee  in the workers’ compensation arena. What makes this classification even more challenging is that other governmental agencies and regulators apply different standards to distinguish the independent contractor/employee relationship. If you are concerned about whether your workers are correctly classified, please do not hesitate to contact Wyche for assistance in this area.

South Carolina to Share Services for Unemployment Benefits

Unemployment insurance benefits will soon be administered by a third-party consultant hired to implement a single unemployment insurance benefits system for unemployed residents in South Carolina, North Carolina and Georgia. The Southeast Consortium Unemployment Insurance Benefits Initiative, which includes agencies in these three states, has signed a $60 million contract with Capgemini Government Solutions LLC to design, develop and implement the multi-state benefits system. The new system will replace the states’ current individual unemployment benefits systems. In a Capgemini press release, the executive director of the S.C. Department of Employment and Workforce, Cheryl M. Stanton, stated that the initiative will modernize the state’s aging unemployment benefits systems, allow for greater unemployment insurance and IT flexibility, and (eventually) save money. It is not believed that this development will change the immediate day-to-day interactions your company may have with the South Carolina Department of Employment and Workforce, but Wyche at Work will keep you apprised of future developments in this area.

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.


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