Business Leaders Serve Jail Time For Employment Tax Crimes

November 5, 2019

Business owners and leaders of companies caught cheating on employment tax obligations increasingly face prison sentences for allowing their companies to fail to withhold, account for, report and pay over to the Internal Revenue Service (IRS) federal income tax, as well as the employees’ share of social security and Medicare taxes (collectively known as FICA taxes) and the employer’s share of FICA taxes in accordance with the Internal Revenue Code (Code). The lengthening list of business leaders nailed for their company’s employment tax violations sends a clear warning to other business owners and operators to ensure their businesses don’t get caught shirking on their own employment tax obligations.

Whether for aggressively misclassifying common law employees as contractors, underreporting wages, or other deliberate or other means, willful violations with employer income and FICA tax requirements historically has been common. Sadly, many employers continue to engaged in these activities in blissful ignorance of the Justice Department’s high priority employment tax fraud investigation and prosecution that already has produced an impressive and growing number of federal grand jury criminal tax fraud indictments, convictions and sentences across the country.  With this priority enforcement continuing, business owners and leaders should act to reduce their own personal susceptibility to potential tax fraud and other liability by carefully assessing and documenting their efforts to verify the adequacy of their own company’s worker classification and income and employment tax withholding and payment practices.

October Indictments Of Staffing Firm Owner Operators

The October successes of the Tax Division alone demonstrate the dangers owneres and executives face if their company cheats on employment tax obligations.  These sucesses included securing separate federal grand jury criminal indictments against staffing business operators in New York and North Carolina.  On October 24, for instance, the Justice Department announced that a New York grand jury had issued criminal tax indictments against the owner/operator of a Long Island City, New York temporary employment staffing businesses including PTP Staffing Associates Inc. (PTP), and PPS Associates Inc. (PPS).  The indictments charge that as the alleged sole owner of PTP and PPS, Heppenheimer was required to collect, account for, and pay to the IRS federal employment taxes withheld from the wages of PTP and PPS employees, but from 2013 through 2017, failed to report more than $270,000 in employment taxes to the IRS.  If convicted, Heppenheimer faces a statutory maximum sentence of five years imprisonment for each count charged, plus substantial monetary penalties, supervised release, and restitution.  Owner of New York City Temporary Staffing Firms Indicted for Employment Tax Fraud

Mere days later, the Justice Department also announced that a North Carolina federal grand jury had indicted Rebecca Adams and her daughter Elizabeth Wood with conspiring to defraud the United States government by withholding taxes from employees’ paychecks and failing to pay those taxes over to the Internal Revenue Service (IRS).  See e.g., Owners of Greensboro Temporary Staffing Firms Indicted for Employment Tax Fraud.  The indictment alleges Adams and Wood created Forms W-2 for the staffing business employees but failed to file these forms with the government as required. Instead of paying the taxes withheld from employees, the indictment alleges that Adams and Wood used the funds to pay for personal expenses, such as a personal maid, personal landscaping services, and pet spa services. The staffing business allegedly changed names twice, even though it did not otherwise change its actual business operations. Adams was also charged with tax evasion based on her allegedly evading payment of more than $400,000 in previously assessed employment taxes and penalties to the IRS. If convicted, both defendants face significant punishment.  If convicted on these charges both Adam and Woods can expect their punishment will include prison time.  Adams and Wood each face a statutory maximum sentence of five years in prison for each charge of conspiracy, employment tax fraud, and tax evasion, plus probation and monetary penalties.

October Employment Tax Convictions Of Business Owner/Operators

Along with securing these new criminal tax indictments, the Justice Department also was successful in obtaining new criminal tax convictions against business owners in West Virginia and Florida for employment tax violations.

On October 21, two West Virginian business owners plead guilty today to conspiring to defraud the United States regarding their employment taxes and individual income taxes in a Federal District Court in West Virginia.   According to court documents, Russell and Karen Rucker, a married couple, operated Rucker, Billups and Fowler Inc. (RBF), an insurance agency located in Huntington, West Virginia. Russell Rucker was the president of RBF and since approximately late 2013, Karen Rucker served as a financial officer. Between September 2015 and September 2018, the Ruckers withheld approximately $143,226 in payroll taxes from the wages of RBF’s employees, which they did not pay over to the IRS. Instead, the Justice Department charged the Ruckers diverted portions of the withheld funds for their own personal benefit. For instance, from 2014 through 2016 the Ruckers continued to pay themselves over $500,000 in salary.  The Justice Department also charges that in response to IRS collection efforts in an attempt to conceal funds from the IRS, the Ruckers deposited money into the bank account of another individual, attempted to evade IRS levies by using a series of bank accounts that they did not disclose to the IRS, and by paying their mortgage and many other bills in cash.  The Justice Department also claims the Ruckers also attempted to evade payment of $114,911 of Russell Rucker’s 2001, 2002, and 2005 individual income taxes by disguising paychecks issued to Russell Rucker as non-taxable “note proceeds and failed to file their individual income tax returns and RBF’s corporate returns for 2014 through 2017. The Justice Department valued the intended tax loss caused to the IRS by their conduct is more than $250,000.  Currently awaiting sentencing scheduled on January 27, 2020, the Ruckers each face a statutory maximum sentence of five years in prison as well as monetary penalties, a period of supervised release, and restitution.  See West Virginian Business Owners Plead Guilty to Failing to Pay Employment Taxes and Individual Income Taxes.

Less than a week later, the Justice Department achieved another prosecutorial success when Miami, Florida business owner Ricardo Betancourt plead guilty on October 29 to causing the multiple parcel delivery businesses he owned and operated in South Florida to fail to pay over employment taxes.  According to the Justice Department, Betancourt’s multiple South Florida parcel delivery businesses earned gross revenues of more than $100 million and employed hundreds of employees.  Betancourt as the owner and operator of these businesses was responsible for ensuring the businesses collected and paid over to the IRS the employment taxes withheld from employees’ paychecks.  The Justice Department charged that Betancourt withheld payroll taxes from his employees, but deliberately failed to pay over those withholdings and other associated taxes to the IRS.  The Justice Department claimed that in 2013 and 2014, Betancourt did not pay over approximately 97 percent of the federal employment taxes he withheld from his employees. In 2015 and 2016, Betancourt did not pay over any of the federal employment taxes he withheld from his employees. For the quarter ending December 2016, Betancourt admitted that he failed to truthfully account for and pay over payroll taxes of approximately $727,478.  In his sentencing currently scheduled for February 12, 2020, Betancourt faces a statutory maximum sentence of five years in prison as well as a period of supervised release, restitution, and monetary penalties.  See Miami Business Owner Pleads Guilty to Employment Tax Fraud.

October Criminal Sentencing Of Business Owners For Employment Tax Violations

The prison sentences imposed in October also show business owners criminally convicted on employment tax related tax evasion and tax fraud charges should expect to serve time in prison.  Take the sentencing of Gail Cooper, who was sentenced for the employment tax crimes she committed as owner of a commercial and residential glass installation company, Greenville Architectural Glass (GAG). According to the Justice Department, as the owner of GAG responsible for GAG’s finances, Cooper was legally responsible for ensuring that GAG properly withheld and paid over to the IRS federal income, Social Security and Medicare taxes on the wages GAG paid to its employees during the years 2013 through 2015. Cooper was also required to file quarterly employment tax returns with the IRS. Although Cooper caused GAG to withhold taxes from employees’ wages, the Justice Department shared she neither filed the required quarterly returns for the first quarter of 2013 through the second quarter of 2015, nor paid the withheld amounts over to the IRS. Cooper also failed to pay over to the IRS unemployment taxes. In all, Cooper caused more than $280,000 in payroll taxes not to be paid.  Furthermore, the Justice Department also charged Cooper filed false individual income tax returns for 2008, 2009, and 2010, on which she understated GAG’s gross receipts and overstated its expenses. Cooper caused GAG’s bookkeeper to manipulate and delete entries in the company’s accounting records. Specifically, she directed the bookkeeper to delete invoices from the software after GAG received payment from a client to make it appear as if GAG had not received the payment. Cooper also paid personal expenses with business funds, including utility bills for her residence and rental properties, and caused these to be classified as business expenses. After filing fraudulent returns for 2008-2010, Cooper did not file any individual income tax returns for the next several years. In total, the Justice Department charged Cooper’s conduct caused a tax loss of $587,516 to the United States.  As punishment for these criminal convictions, U.S. District Judge Thomas M. Rose on October 29th ordered Cooper to serve 14  months in prison, two years of supervised release and pay restitution to the IRS in the amount of $659,262.39. Ohio Glass Company Owner Sentenced to Prison For Not Paying Employment Taxes.

That same day, Justice Department Tax Division prosecutors also obtained a 24 month prison sentence against a Tulsa, Oklahoma computer software development company owner for his criminal conviction on failing to account for and pay over employment taxes withheld from his employees’ wages.  According to documents and information provided to the Court, as the owner and operator of Tulsa-based Zealcon Corporation, Earnest J. Grayson Jr. was responsible for withholding, and paying over to the IRS payroll taxes on the wages paid to Zealcon employees. For the period January 2014 through June of 2016, Justice Department prosecutors showed  Grayson caused a tax loss of approximately $1 million by intentionally not paying to the IRS income and social security taxes withheld from Zealcon employees’ wages and the employer portion of social security taxes due from Zealcon on those wages.  As punishment for these crimes, Grayson was sentenced to serve a 24 month prison sentence, ordered to pay restitution to the IRS in the amount of $904,091, and to serve three years of supervised release.  Owner of Tulsa Software Company Sentenced to Prison for Employment Tax Fraud.

Successful Criminal Prosecutions Show Success of  Justice Department  & IRS Prioritization of Employment Tax Enforcement

These October criminal prosecutions are not aberrations, but instead are the result of the successes the Justice Department Tax Division is experiencing from the high prioritization it has given civil and criminal employment tax enforcement since 2018.  Beginning in May, 2018, the Justice Department Tax Division made civil and criminal employment tax enforcement a top priority.  The Justice Department views employer violations of these requirements as a widespread and substantial problem.  Employment taxes on employee wages represent nearly 70% of all revenue collected by the IRS and, as of June 30, 2016, more than $59.4 billion of tax reported on Employer’s Quarterly Federal Tax Returns (Forms 941) remained unpaid. When last measured prior to the Justice Department’s kickoff of its current enforcement initiative in 2018, the Justice Department said, employment tax violations represented more than $91 billion of the gross Tax Gap and, after collection efforts, $79 billion of the net Tax Gap in the U.S. See Employment Tax Enforcement.  The Justice Department also considers the nonpayment of employment taxes serious misconduct by employers. Its Employment Tax Enforcement page states, “When employers willfully fail to collect, account for and deposit with the IRS employment tax due, they are stealing from their employees and ultimately, the United States Treasury. In addition, employers who willfully fail to comply with their obligations and unlawfully line their own pockets with amounts withheld are gaining an unfair advantage over their honest competitors.”  Of course, in addition to these criminal prosecutions, the IRS and Justice Department also are pursuing civil tax enforcement.

Under this enforcement initiative, the Justice Department partners with the IRS in targeting for criminal and civil enforcement employers that violate their legal responsibility to collect and pay over to the IRS federal income tax, as well as the employees’ share of social security and Medicare taxes (collectively known as FICA taxes) withheld from employee’s wages as well as to pay the employer’s share of FICA taxes using a combination of civil and criminal tools.  It pursues money judgments, permanent injunctions, and criminal convictions that often carry substantial prison sentences, restitution and financial penalties against businesses and their owners and operators who fail to comply with their employment tax obligations and to collect outstanding amounts assessed against entities and responsible persons. It also pursues criminal investigations and prosecutions against those individuals and entities who willfully fail to comply with their employment tax responsibilities, as well as those who aid and assist them in failing to meet those responsibilities.

In the face of this ongoing enforcement effort, businesses and those with ownership or management authority over the collection and payment of employment taxes should use care to ensure the business properly classifies workers as employees versus contractors or in some other status, that wages are properly tracked and income tax and employment taxes properly are calculated, withheld and paid over to the IRS.  Proper worker classification is a critical starting point of these compliance efforts. When another person performs work for a business, the business first must classify correct whether that person is its employee versus an independent contractor or the employee or contractor of another business. Businesses and business leaders responsible for income and employment tax withholding, reporting and payment should be particularly careful when participating in arrangements that the IRS might consider employment tax fraud schemes such as:

  • “Pyramiding” of employment taxes, which the IRS views as a fraudulent practice where a business withholds taxes from its employees but intentionally fails to remit them to the IRS. Businesses involved in pyramiding frequently file for bankruptcy to discharge the liabilities accrued and then start a new business under a different name and begin a new scheme.
  • Abusive employee leasing arrangements where the business contracts with outside businesses to handle all administrative, personnel, and payroll concerns for employees where the leasing entity fails to properly report wages and withhold and payover income or employment taxes to the IRS.  The IRS and other agencies often pursue tax collection and other enforcement actions against businesses that have used leasing or other staffing businesses when the leasing or staffing company fails to properly report, withhold or pay over income and employment taxes to the IRS.
  • Paying workers in whole or partially, in cash without properly accounting for, withholding and paying income or employment taxes due on a worker’s wages where the facts and circumstances indicated the worker qualified as a common law employee of the business; or
  • Filing false payroll tax returns understating the amount of wages on which taxes are owed, or failing to file employment tax returns to evade employment or other taxes.

 

When evaluating the adequacy of employment tax compliance, business owners and operators are encouraged to resist the urge to assume that they can rely upon the contractual or labels of workers as contractors or employed by a staffing, leasing or other service provider to avoid characterization and resulting liability for employment and income tax obligations as the employer of workers. Under the Code the defensibility of these characterizations of workers generally is determined based on whether the facts and circumstances reflect that the business in operation possessed the requisite control to qualify as a common law employer with little or no deference to how the parties have labeled the arrangement. Leaders must critically evaluate these and other potentially suspect arrangements to realistically assess the likelihood that the IRS and Justice Department will agree with the company’s treatment; seek contractual, audit and other operational safeguards to require compliance and to capture and retain records and other evidence that the business might need to defend itself against a future audit or enforcement action associated with these suspect arrangements.

For More Information

We hope this update is helpful. For more information about worker classification and employment tax compliance and enforcement or other labor and employment developments, please contact the author Cynthia Marcotte Stamer via e-mail or via telephone at (214) 452 -8297.

Solutions Law Press, Inc. invites you receive future updates and join discussions about these and other human resources, health and other employee benefit and patient empowerment concerns by participating and contributing to the discussions in our Solutions Law Press HR & Benefits Update Compliance Update Group and registering for updates on our Solutions Law Press Website.

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About the Author

For more information about the IRS and Justice Department employment tax enforcement activities, contact the author of this article. Recognized by her peers as a Martindale-Hubble “AV-Preeminent” (Top 1%) and “Top Rated Lawyer” with special recognition LexisNexis® Martindale-Hubbell® as “LEGAL LEADER™ Texas Top Rated Lawyer” in Health Care Law and Labor and Employment Law; as among the “Best Lawyers In Dallas” for her work in the fields of “Labor & Employment,” “Tax: ERISA & Employee Benefits,” “Health Care” and “Business and Commercial Law” by D Magazine, Cynthia Marcotte Stamer is a practicing attorney board certified in labor and employment law by the Texas Board of Legal Specialization and management consultant, author, public policy advocate and lecturer widely known for 30+ years of management focused employment, employee benefit and insurance, workforce and other management work, public policy leadership and advocacy, coaching, teachings, and publications including extensive work with businesses on tax and other worker classification compliance, risk anagement and defense.

Businesses involved in these arrangements generally should use care to critically evaluate these and other potentially suspect arrangements to verify their likely defensibility in the event of a challenge based on a realistic assessment of the actual facts and circumstances; seek contractual, audit and other operational safeguards to require compliance and to capture and retain records and other evidence that the business might need to defend itself against a future audit or enforcement action associated with these suspect arrangements.

For More Information

We hope this update is helpful. For more information about worker classification and employment tax compliance and enforcement or other labor and employment developments, please contact the author Cynthia Marcotte Stamer via e-mail or via telephone at (214) 452 -8297.

Solutions Law Press, Inc. invites you receive future updates and join discussions about these and other human resources, health and other employee benefit and patient empowerment concerns by participating and contributing to the discussions in our Solutions Law Press HR & Benefits Update Compliance Update Group and registering for updates on our Solutions Law Press Website.

.

About the Author

For more information about the IRS and Justice Department employment tax enforcement activities, contact the author of this article. Recognized by her peers as a Martindale-Hubble “AV-Preeminent” (Top 1%) and “Top Rated Lawyer” with special recognition LexisNexis® Martindale-Hubbell® as “LEGAL LEADER™ Texas Top Rated Lawyer” in Health Care Law and Labor and Employment Law; as among the “Best Lawyers In Dallas” for her work in the fields of “Labor & Employment,” “Tax: ERISA & Employee Benefits,” “Health Care” and “Business and Commercial Law” by D Magazine, Cynthia Marcotte Stamer is a practicing attorney board certified in labor and employment law by the Texas Board of Legal Specialization and management consultant, author, public policy advocate and lecturer widely known for 30+ years of management focused employment, employee benefit and insurance, workforce and other management work, public policy leadership and advocacy, coaching, teachings, and publications including extensive work with businesses on tax and other worker classification compliance, risk anagement and defense.

Author of numerous highly regarding publications on worker classification and other employment, payroll, and employee benefit tax compliance publications, Ms. Stamer’s clients include employers and other workforce management organizations; employer, union, association, government and other insured and self-insured health and other employee benefit plan sponsors, benefit plans, fiduciaries, administrators, and other plan vendors;   domestic and international public and private health care, education and other community service and care organizations; managed care organizations; insurers, third-party administrative services organizations and other payer organizations;  and other private and government organizations and their management leaders.  As part of this work, she has worked extensively on employee benefit communication and other employee benefit plan legislative and regulatory policy, design, compliance and enforcement including testifying to the EBSA Advisory Council on Employee Welfare and Pension Benefit Plans in  on the effectiveness of employee benefit plan disclosures during 2017 hearings on on reducing the burdens and increasing the effectiveness of ERISA mandated disclosures.

Throughout her 30 plus year career, Ms. Stamer has continuously worked with these and other management clients to design, implement, document, administer and defend hiring, performance management, compensation, promotion, demotion, discipline, reduction in force and other workforce, employee benefit, insurance and risk management, health and safety, and other programs, products and solutions, and practices; establish and administer compliance and risk management policies; manage labor-management relations, comply with requirements, investigate and respond to government, accreditation and quality organizations, regulatory and contractual audits, private litigation and other federal and state reviews, investigations and enforcement actions; evaluate and influence legislative and regulatory reforms and other regulatory and public policy advocacy; prepare and present training and discipline;  handle workforce and related change management associated with mergers, acquisitions, reductions in force, re-engineering, and other change management; and a host of other workforce related concerns. Ms. Stamer’s experience in these matters includes supporting these organizations and their leaders on both a real-time, “on demand” basis with crisis preparedness, intervention and response as well as consulting and representing clients on ongoing compliance and risk management; plan and program design; vendor and employee credentialing, selection, contracting, performance management and other dealings; strategic planning; policy, program, product and services development and innovation; mergers, acquisitions, bankruptcy and other crisis and change management; management, and other opportunities and challenges arising in the course of workforce and other operations management to improve performance while managing workforce, compensation and benefits and other legal and operational liability and performance.

A Fellow in the American College of Employee Benefit Counsel and Past Chair of both the ABA Managed Care & Insurance Interest Group and it’s RPTE Employee Benefits and Other  Compensation Group, Ms. Stamer also has leading edge experience in health benefit, health care, health, financial and other plan, program and process design, administration, documentation, contracting, risk management, compliance and related process and systems development, policy and operations; training; legislative and regulatory affairs, and other legal and operational concerns.

A former lead consultant to the Government of Bolivia on its Pension Privatization Project with extensive domestic and international public policy concerns in pensions, healthcare, workforce, immigration, tax, education and other areas, Ms. Stamer has been extensively involved in U.S. federal, state and local health care and other legislative and regulatory reform impacting these concerns throughout her career. Her public policy and regulatory affairs experience encompasses advising and representing domestic and multinational private sector health, insurance, employee benefit, employer, staffing and other outsourced service providers, and other clients in dealings with Congress, state legislatures, and federal, state and local regulators and government entities, as well as providing advice and input to U.S. and foreign government leaders on these and other policy concerns.

Author of leading works on a multitude of labor and employment, compensation and benefits, internal controls and compliance, and risk management matters and a Fellow in the American College of Employee Benefit Counsel, the American Bar Foundation and the Texas Bar Foundation, Ms. Stamer also shares her thought leadership, experience and advocacy on these and other related concerns by her service in the leadership of the Solutions Law Press, Inc. Coalition for Responsible Health Policy, its PROJECT COPE: Coalition on Patient Empowerment, and a broad range of other professional and civic organizations including North Texas Healthcare Compliance Association, a founding Board Member and past President of the Alliance for Healthcare Excellence, past Board Member and Board Compliance Committee Chair for the National Kidney Foundation of North Texas; former Board President of the early childhood development intervention agency, The Richardson Development Center for Children (now Warren Center For Children); current Vice Chair of the ABA Tort & Insurance Practice Section Employee Benefits Committee, current Vice Chair of Policy for the Life Sciences Committee of the ABA International Section, Past Chair of the ABA Health Law Section Managed Care & Insurance Section, a current Defined Contribution Plan Committee Co-Chair, former Group Chair and Co-Chair of the ABA RPTE Section Employee Benefits Group, past Representative and chair of various committees of ABA Joint Committee on Employee Benefits; an ABA Health Law Coordinating Council representative, former Coordinator and a Vice-Chair of the Gulf Coast TEGE Council TE Division, past Chair of the Dallas Bar Association Employee Benefits & Executive Compensation Committee, a former member of the Board of Directors of the Southwest Benefits Association and others.

For more information about Ms. Stamer or herexperience and involvements, see here or contact Ms. Stamer via telephone at (214) 452-8297 or via e-mail here.

About Solutions Law Press, Inc.™

Solutions Law Press, Inc.™ provides human resources and employee benefit and other business risk management, legal compliance, management effectiveness and other coaching, tools and other resources, training and education on leadership, governance, human resources, employee benefits, data security and privacy, insurance, health care and other key compliance, risk management, internal controls and operational concerns. If you find this of interest, you also be interested reviewing some of our other Solutions Law Press, Inc.™ resources here.

If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information including your preferred e-mail by creating your profile here.  We also invite you to join the discussion of these and other human resources, health and other employee benefit and patient empowerment concerns by participating and contributing to the discussions in our Health Plan Compliance Group or COPE: Coalition On Patient Empowerment Groupon LinkedIn or Project COPE: Coalition on Patient Empowerment Facebook Page.

NOTICE: These statements and materials are for general informational and purposes only. They do not establish an attorney-client relationship, are not legal advice or an offer or commitment to provide legal advice, and do not serve as a substitute for legal advice. Readers are urged to engage competent legal counsel for consultation and representation in light of the specific facts and circumstances presented in their unique circumstance at any particular time. No comment or statement in this publication is to be construed as legal advice or an admission and its content is not tailored to any particular situation and does not necessarily address all relevant issues. Because the law is rapidly evolving and rapidly evolving rules makes it highly likely that subsequent developments could impact the currency and completeness of this discussion.otherwise notify any participant of any such change, limitation, or other condition that might affect the suitability of reliance upon these materials or information otherwise conveyed in connection with this program. Readers may not rely upon, are solely responsible for, and assume the risk and all liabilities resulting from their use of this publication.

Circular 230 Compliance. The following disclaimer is included to ensure that we comply with U.S. Treasury Department Regulations. Any statements contained herein are not intended or written by the writer to be used, and nothing contained herein can be used by you or any other person, for the purpose of (1) avoiding penalties that may be imposed under federal tax law, or (2) promoting, marketing or recommending to another party any tax-related transaction or matter addressed herein.

©2019 Cynthia Marcotte Stamer. Non-exclusive right to republish granted to Solutions Law Press, Inc.™ For information about republication or the topic of this article, please contact the author directly. All other rights reserved.


Proposed NLRB Employee Definition To Exclude College Study Workers

October 23, 2019

Monday, December 16, 2019 is the new comment deadline for providing feedback to the National Labor Relations Board (NLRB) ion a proposed rule that would exempt undergraduate and graduate students performing services for financial compensation in connection with their studies from the NLRB’s definition of “employee” for purposes of the National Labor Relations Act (NLRA) and other collective bargaining and union organizing and representation laws under the NLRB’s jurisdiction. The extended comment deadline was announced here October 17, 2019.

The original notice of proposed rulemaking published here on September 23, 2019 would exempt ” every student performing teaching, research and any services for compensation, at a private college or university in connection with his or her studies from treatment as an “employee” for purposes of Section 2(3) of the NLRA.

The NLRB says this proposed rulemaking “is intended to bring stability to an area of federal labor law in which the NLRB, through adjudication, has reversed its approach three times since 2000.  The NLRB has stated this proposed standard on the exclusion of students from the NLRA definition of employee is consistent with the purposes and policies of the NLRA, which contemplates jurisdiction over economic relationships, not those that are primarily educational in nature.

The proposed regulation is one of several regulatory projects that the now Trump-appointee dominated NLRB has undertaken in the past year in its effort to undue a host of pro-labor changes to NLRB policy changes initiated and enforced during the Obama Administration when President Obama appointees dominated the NLRB and its policies.  Another example of these regulatory efforts include the NLRB’s current efforts to reverse a change in interpretation and enforcement of the “joint employer” rules of the NLRA and Fair Labor Standards Act that substantially expanded the imputation of liability for collective bargaining and other labor-management and wage and hour law violations by treating companies as joint employers that received the benefit of work performed even when the recipient company did not control the details of the work or the nominal employer.  Employers generally will want to carefully monitor and provide appropriate input on these and other developments.

For More Information

We hope this update is helpful. For more information about this or other labor and employment developments, please contact the author Cynthia Marcotte Stamer via e-mail or via telephone at (214) 452 -8297.

Solutions Law Press, Inc. invites you receive future updates and join discussions about these and other human resources, health and other employee benefit and patient empowerment concerns by participating and contributing to the discussions in our Solutions Law Press HR & Benefits Update Compliance Update Group and registering for updates on our Solutions Law Press Website.

About the Author

Recognized by her peers as a Martindale-Hubble “AV-Preeminent” (Top 1%) and “Top Rated Lawyer” with special recognition LexisNexis® Martindale-Hubbell® as “LEGAL LEADER™ Texas Top Rated Lawyer” in Health Care Law and Labor and Employment Law; as among the “Best Lawyers In Dallas” for her work in the fields of “Labor & Employment,” “Tax: ERISA & Employee Benefits,” “Health Care” and “Business and Commercial Law” by D Magazine, Cynthia Marcotte Stamer is a practicing attorney board certified in labor and employment law by the Texas Board of Legal Specialization and management consultant, author, public policy advocate and lecturer widely known for 30+ years of management focused employment, employee benefit and insurance, workforce and other management work, public policy leadership and advocacy, coaching, teachings, and publications.

Highly valued for her rare ability to find pragmatic client-centric solutions by combining her detailed legal and operational knowledge and experience with her talent for creative problem-solving, Ms. Stamer’s clients include employers and other workforce management organizations; employer, union, association, government and other insured and self-insured health and other employee benefit plan sponsors, benefit plans, fiduciaries, administrators, and other plan vendors;   domestic and international public and private health care, education and other community service and care organizations; managed care organizations; insurers, third-party administrative services organizations and other payer organizations;  and other private and government organizations and their management leaders.  As part of this work, she has worked extensively on employee benefit communication and other employee benefit plan legislative and regulatory policy, design, compliance and enforcement including testifying to the EBSA Advisory Council on Employee Welfare and Pension Benefit Plans in  on the effectiveness of employee benefit plan disclosures during 2017 hearings on on reducing the burdens and increasing the effectiveness of ERISA mandated disclosures.

Throughout her 30 plus year career, Ms. Stamer has continuously worked with these and other management clients to design, implement, document, administer and defend hiring, performance management, compensation, promotion, demotion, discipline, reduction in force and other workforce, employee benefit, insurance and risk management, health and safety, and other programs, products and solutions, and practices; establish and administer compliance and risk management policies; manage labor-management relations, comply with requirements, investigate and respond to government, accreditation and quality organizations, regulatory and contractual audits, private litigation and other federal and state reviews, investigations and enforcement actions; evaluate and influence legislative and regulatory reforms and other regulatory and public policy advocacy; prepare and present training and discipline;  handle workforce and related change management associated with mergers, acquisitions, reductions in force, re-engineering, and other change management; and a host of other workforce related concerns. Ms. Stamer’s experience in these matters includes supporting these organizations and their leaders on both a real-time, “on demand” basis with crisis preparedness, intervention and response as well as consulting and representing clients on ongoing compliance and risk management; plan and program design; vendor and employee credentialing, selection, contracting, performance management and other dealings; strategic planning; policy, program, product and services development and innovation; mergers, acquisitions, bankruptcy and other crisis and change management; management, and other opportunities and challenges arising in the course of workforce and other operations management to improve performance while managing workforce, compensation and benefits and other legal and operational liability and performance.

A Fellow in the American College of Employee Benefit Counsel and Past Chair of both the ABA Managed Care & Insurance Interest Group and it’s RPTE Employee Benefits and Other  Compensation Group, Ms. Stamer also has leading edge experience in health benefit, health care, health, financial and other plan, program and process design, administration, documentation, contracting, risk management, compliance and related process and systems development, policy and operations; training; legislative and regulatory affairs, and other legal and operational concerns.

A former lead consultant to the Government of Bolivia on its Pension Privatization Project with extensive domestic and international public policy concerns in pensions, healthcare, workforce, immigration, tax, education and other areas, Ms. Stamer has been extensively involved in U.S. federal, state and local health care and other legislative and regulatory reform impacting these concerns throughout her career. Her public policy and regulatory affairs experience encompasses advising and representing domestic and multinational private sector health, insurance, employee benefit, employer, staffing and other outsourced service providers, and other clients in dealings with Congress, state legislatures, and federal, state and local regulators and government entities, as well as providing advice and input to U.S. and foreign government leaders on these and other policy concerns.

Author of leading works on a multitude of labor and employment, compensation and benefits, internal controls and compliance, and risk management matters and a Fellow in the American College of Employee Benefit Counsel, the American Bar Foundation and the Texas Bar Foundation, Ms. Stamer also shares her thought leadership, experience and advocacy on these and other related concerns by her service in the leadership of the Solutions Law Press, Inc. Coalition for Responsible Health Policy, its PROJECT COPE: Coalition on Patient Empowerment, and a broad range of other professional and civic organizations including North Texas Healthcare Compliance Association, a founding Board Member and past President of the Alliance for Healthcare Excellence, past Board Member and Board Compliance Committee Chair for the National Kidney Foundation of North Texas; former Board President of the early childhood development intervention agency, The Richardson Development Center for Children (now Warren Center For Children); current Vice Chair of the ABA Tort & Insurance Practice Section Employee Benefits Committee, current Vice Chair of Policy for the Life Sciences Committee of the ABA International Section, Past Chair of the ABA Health Law Section Managed Care & Insurance Section, a current Defined Contribution Plan Committee Co-Chair, former Group Chair and Co-Chair of the ABA RPTE Section Employee Benefits Group, past Representative and chair of various committees of ABA Joint Committee on Employee Benefits; an ABA Health Law Coordinating Council representative, former Coordinator and a Vice-Chair of the Gulf Coast TEGE Council TE Division, past Chair of the Dallas Bar Association Employee Benefits & Executive Compensation Committee, a former member of the Board of Directors of the Southwest Benefits Association and others.

For more information about Ms. Stamer or her health industry and other experience and involvements, see here or contact Ms. Stamer via telephone at (214) 452-8297 or via e-mail here.

About Solutions Law Press, Inc.™

Solutions Law Press, Inc.™ provides human resources and employee benefit and other business risk management, legal compliance, management effectiveness and other coaching, tools and other resources, training and education on leadership, governance, human resources, employee benefits, data security and privacy, insurance, health care and other key compliance, risk management, internal controls and operational concerns. If you find this of interest, you also be interested reviewing some of our other Solutions Law Press, Inc.™ resources here.

If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information including your preferred e-mail by creating your profile here.  We also invite you to join the discussion of these and other human resources, health and other employee benefit and patient empowerment concerns by participating and contributing to the discussions in our Health Plan Compliance Group or COPE: Coalition On Patient Empowerment Groupon LinkedIn or Project COPE: Coalition on Patient Empowerment Facebook Page.

NOTICE: These statements and materials are for general informational and purposes only. They do not establish an attorney-client relationship, are not legal advice or an offer or commitment to provide legal advice, and do not serve as a substitute for legal advice. Readers are urged to engage competent legal counsel for consultation and representation in light of the specific facts and circumstances presented in their unique circumstance at any particular time. No comment or statement in this publication is to be construed as legal advice or an admission and its content is not tailored to any particular situation and does not necessarily address all relevant issues. Because the law is rapidly evolving and rapidly evolving rules makes it highly likely that subsequent developments could impact the currency and completeness of this discussion.otherwise notify any participant of any such change, limitation, or other condition that might affect the suitability of reliance upon these materials or information otherwise conveyed in connection with this program. Readers may not rely upon, are solely responsible for, and assume the risk and all liabilities resulting from their use of this publication.

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$1.25M NLRB Backpay Order Highlights Risks of Mismanaging Union Risks In Health Care & Others M&A Deals

September 23, 2012

California nursing home buyer must pay estimated $1.25 million in backpay and interest, recognize union & hire 50 employees of seller following purchase

Last week’s National Labor Relations Board (NLRB) order requiring the buyer of a California nursing home to pay approximately $1.25 million in backpay and interest, rehire 50 employees and recognize the seller’s union reminders buyers of union-organized businesses of some of the significant risks of mishandling union-related obligations in merger and acquisition, bankruptcy and other corporate transactions under the National Labor Relations Act (NLRA) and other federal labor laws.  

Buyer’s Obligations To Honor Seller’s Collective Bargaining Obligations

Under the NLRA, new owners of a union facility that are “successors” of the seller generally must recognize and bargain with the existing union if “the bargaining unit remains unchanged and a majority of employees hired by the new employer were represented by a recently certified bargaining agent.”  See NLRB v. Burns Sec. Servs., 406 U.S. 272, 281 (1972).   

In assembling its workforce, a successor employer also generally “may not refuse to hire the predecessor’s employees solely because they were represented by a union or to avoid having to recognize a union.” U.S. Marine Corp., 293 NLRB 669, 670 (1989), enfd., 944 F.2d 1305 (7th Cir. 1991).   

Nasaky, Inc. NLRB Order

Last week’s  NLRB Order requires Nasaky, Inc., the buyer of the Yuba Skilled Nursing Center in Yuba City, California, to recognize and honor collective bargaining obligations that the seller Nazareth Enterprises owed the before the sale and rehire and pay backpay and interest to make whole 50 of the seller’s former employees who the NLRB determined Nasaky, Inc. wrongfully refused to hire when it took over the facility from the prior owner, Nazareth Enterprises. 

Before Nasaky, Inc. bought the nursing home, many of the employees at the nursing home were represented by the Service Employees International Union, United Healthcare Workers West (Union).    After Nasaky, Inc. agreed to buy the facility but before it took control of its operations, Nasaky, Inc. advertised in the media for new workers to staff the facility and told existing employees at the facility that they must reapply to have a chance of keeping their jobs under the new ownership.  

When Nasaky, Inc. took operating control of the Facility, facility operations continued as before with the same patients receiving the same services.  The main difference was the workforce.  The new staff included 90 employees in erstwhile bargaining unit positions, of which forty were former employees of the predecessor employer and fifty were newcomers.  Nasaky, Inc. then took the position that the change in the workforce excused it from responsibility for recognizing or bargaining with the Union or honoring the collective bargaining agreement between the Union and seller Nazareth Enterprises.

When the union demanded that Nasaky, Inc. recognize the Union and honor the Union’s collective bargaining agreement with Nazareth Enterprises, Nasaky, Inc. refused.  Instead, Nasaky, Inc. notified the union that it would not allow the Union on its premises, would not honor the Union’s collective bargaining agreement with the seller, and did not accept any of the predecessor’s terms and conditions of employment.  The Union then filed charges with the NLRB, charging that Nazareth Enterprises had breached its obligations as a successor under the NLRA.  

After NLRB Regional Director Joseph F. Frankl agreed and issued a complaint, California Administrative Law Judge Gerald Etchingham found all the allegations true based on a two-day hearing.  He rejected all of Nasaky’s explanations for why it declined to hire most of those who had worked for the previous employer.  See ALJ Decision.  Since Nasaky, Inc did not file exceptions, the NLRB ordered Nasaky, Inc. immediately to recognize and bargain with the Union, hire the former employees and make them whole.  The amount of backpay and interest is expected to approximate $1.25 million.  

Managing Labor Exposures In Business Transactions

The NLRB’s order against Nasaky, Inc. highlights some of the business and operational risks that buyers and sellers can face if labor-management relations are misperceived or mismanaged in connection with business transactions.  Because the existence of collective bargaining agreements or other labor obligations can substantially affect the operational flexibility of a buyer, buyers need to investigate and carefully evaluate the potential existence and nature of their obligations as part of their due diligence strategy before the transaction.  A well-considered understanding of whether the structure of the transaction is likely to result in the buyer being considered a successor for purposes of union organizing and collective bargaining obligations also is very important so that the buyer and seller can properly appreciate and deal with any resulting responsibilities.

Beyond the potential duty to recognize a seller’s collective bargaining obligations, buyers and sellers also should consider the potential consequences of the proposed transaction on severance, pension, health, layoff and recall and other rights and obligations that may arise.  At minimum, the existence of these responsibilities and their attendant costs are likely to impact the course of the negotiations.

When a worksite is union organized, for instance, additional obligations may arise in the handling of reductions in force or other transactions as a result of the union presence.  For example, in addition to otherwise applicable responsibilities applicable to non-union affected transaction, the Worker Adjustment Retraining Act (WARN) and other plant closing laws and/or collective bargaining agreements may impose special notification or other requirements before a reduction in force or other transaction related activities. 

Similarly, the existence of collective bargaining agreements also may trigger obligations for one or both parties to engage in collective bargaining over contemplated changes in terms and conditions of employment, to provide severance, to accellerate or fund severance, benefits or other obligations, to provide continued health or other coverage, to honor seniority, recall or other rights or deal with a host of other special contractual obligations.

Where the collective bargaining arrangements of the seller currently or in the past have included obligations to contribute to a multiemployer, collectively bargained pension or welfare plan, the buyer and seller also need to consider both the potential for withdrawal liability or other obligations and any opportunities to minimize these exposures in structuring the allocation of the arrangement. In this case, both parties need to recognize that differences exist between the federals for determining when successor liability results under the withdrawal liability rules than typically apply other labor and employment law purposes.  While buyers and sellers often presume that the stock versus assess sale distinction that typically applies for many other legal purposes will apply, this can be an expensive mistake in the case of determining a buyer’s obligation to honor the seller’s collective bargaining obligations post deal.  Likewise, buyers can be exposed to multiemployer successor liability from asset transactions, although it may be possible to mitigate or avoid such liabilities by incorporating appropriate representations in the sale documents or through other steps.  Since these multiemployer withdrawal and contribution liabilities generally attach on a controlled group basis, both parties need to properly appreciate and address these concerns early in the transaction to mitigate their risks and properly value the transaction.

In light of these and other potential labor-related risks that may affect corporate and other business transactions, parties contemplating or participating in these transactions are urged to engage and consult with competent legal counsel with specific experience in such labor management relations and multiemployer benefit plan matters early in the process.

About The Author

Management attorney and consultant Cynthia Marcotte Stamer helps businesses, governments and associations solve problems, develop and implement strategies to manage people, processes, and regulatory exposures to achieve their business and operational objectives and manage legal, operational and other risks. Board certified in labor and employment law by the Texas Board of Legal Specialization, with more than 25 years human resource and employee benefits experience, Ms. Stamer helps businesses manage their people-related risks and the performance of their internal and external workforce though appropriate labor and employment, human resources, employee benefit, worker’s compensation, insurance, outsourcing and risk management strategies domestically and internationally. Recognized in the International Who’s Who of Professionals and bearing the Martindale Hubble AV-Rating, Ms. Stamer’s experience includes significant experience  advising and representing buyers, sellers, their commonly controlled and affiliated entities, lenders, bankruptcy trustees and committees and others regarding labor-management relations, employment, compensation, employee benefits and other human resources related exposures, strategies and negotiations.  She also has served as counsel to multiemployer and single employer pension, profit-sharing and other retirement, health and welfare, severance and other plans and their fiduciaries and sponsors in relation to these and other transactions.

Ms. Stamer also is a highly regarded author and speaker, who regularly conducts management and other training on a wide range of labor and employment, employee benefit, human resources, internal controls and other related risk management matters.  Her writings frequently are published by the American Bar Association (ABA), Aspen Publishers, Bureau of National Affairs, the American Health Lawyers Association, SHRM, World At Work, Government Institutes, Inc., Atlantic Information Services, Employee Benefit News, and many others. For a listing of some of these publications and programs, see here. Her insights on human resources risk management matters also have been quoted in The Wall Street Journal, various publications of The Bureau of National Affairs and Aspen Publishing, the Dallas Morning News, Spencer Publications, Health Leaders, Business Insurance, the Dallas and Houston Business Journals and a host of other publications. Chair of the ABA RPTE Employee Benefit and Other Compensation Committee, a council member of the ABA Joint Committee on Employee Benefits, and the Legislative Chair of the Dallas Human Resources Management Association Government Affairs Committee, she also serves in leadership positions in many human resources, corporate compliance, and other professional and civic organizations. For more details about Ms. Stamer’s experience and other credentials, contact Ms. Stamer, information about workshops and other training, selected publications and other human resources related information, see here or contact Ms. Stamer via telephone at 469.767.8872 or via e-mail to cstamer@solutionslawyer.net.

About Solutions Law Press

Solutions Law Press™ provides business risk management, legal compliance, management effectiveness and other resources, training and education on human resources, employee benefits, data security and privacy, insurance, health care and other key compliance, risk management, internal controls and operational concerns. If you find this of interest, you also be interested reviewing some of our other Solutions Law Press resources at www.solutionslawpress.com including:

If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information – including your preferred e-mail – by creating or updating your profile at here or e-mailing this information here.   

©2012 Cynthia Marcotte Stamer.  Non-exclusive right to republish granted to Solutions Law Press.  All other rights reserved.

 


Labor Risks Rising For Employers Despite NLRB Loss Of Arizona Secret Ballot Challenge

September 6, 2012

Businesses concerned about Obama Administration-backed efforts to promote its pro-labor agenda must stay diligent despite the set back suffered by the National Labor Relations Board (NLRB) in its attempt to a Federal Judge to challenge state laws that purport to require secret balloting in union elections in NLRB v. State of Arizona.

Federal District Judge Frederick J. Martone handed the NLRB a temporary setback in its campaign to prevent states from enacting legislation that would interfere with NLRB efforts to  strengthen labor organizing powers by restricting secret ballot protections when he rejected the NLRB claims that an Arizona Constitutional Amendment mandating secret balloting in union elections was an unconstitutional infringement on the NLRB’s powers in his September 5, 2012 decision in NLRB v. State of Arizona,  the Court left the door open for a potentially successful challenge to the Arizona secret ballot amendment in the future depending on how Arizona applies the law.  Furthermore, considered in the context of the Obama Administration’s broader pro-union regulatory and enforcement agenda, the NLRB’s challenge to the Arizona and other state secret ballot laws reminds businesses  that their operation face a minefield of mounting labor-management relations risks icluding many that create traps for management sometimes even in the case of non-union workplaces.  In light of these expanding exposures, business leaders should update their policies and practices to mitigate the rising risks while keeping a close eye on the Obama Administration’s ongoing effort to expand the power of organized labor by challenging secret ballot mandates in Arizona and other states and the plethora of other pro-union regulatory and enforcement  efforts.

NLRB Attacks On Workers’ Secret Balloting Rights

Undermining worker’s secret ballot rights is a key initiative that organized labor with the support of the Obama Administration has promoted to help union organization efforts.

Secret balloting of workers in union organizing elections is designed to promote the ability of worker’s to vote their wishes free from the fear of retaliation by unions or management.  It has been a key element of the NLRA since its enactment.

The current method for workers to form a union in a particular workplace generally is a two-step process that begins with the submission by organizers to the NLRB of a petition or authorization card signed by at least 30% of the employees requesting recognition of the union. Under existing law, once the NLRB verifies that the organizers have met the petition or authorization card requirement, it generally orders a secret ballot election unless more than 50% of the workers have signed authorization cards and either:

  • The employer notifies the NLRB that it is waiving the secret ballot and voluntarily recognizing the union; or
  • The NLRB orders the employer to recognize a union based on the NLRB’s determination that the employer has engaged in unfair labor practices that make a fair election unlikely.

Since the Obama Administration came to power, however, labor with the support of the NLRB and the Obama Administration have included efforts to eliminate or get around secret balloting as part of their broader campaign to strengthen and promote unions and their power.  These efforts are reflected in the sharp increase in orders by the NLRB with new Obama appointees that employers recognize unions without balloting,  the Obama Administration and Congressional Democrats are pushing to enact the Employee Free Choice Act, which would make union recognition mandatory without any balloting when the NLRB verifies that over 50% of the employees signed authorization cards, and challenges to state laws that would impede these efforts like that brought against the State of Arizona.  While Congressional Democrats and the Administration have thus far failed to get the legislation passed, they continue to voice their support for and intention to pursue its enactment after the elections in November.

NLRB’s Challenge To Arizona Constitution’s Secret Ballot Provision

In NLRB v. State of Arizona, Judge Frederick J. Martone on September 5, 2012 handed the NLRB a temporary setback in its campaign to prevent states from enacting legislation that would interfere with its efforts to avoid or cut secret ballot protection when it granted the State of Arizona’s motion to dismiss the case but left the door open for future action.

As Federal legislation and enforcement actions that would limit workers’ rights to vote in a secret ballot rights have continued, Arizona and various other states have enacted laws to protect secret ballot rights in their states.

In January 2011, the NLRB advised Arizona and three other states that recently adopted “secret-ballot amendments” conflicted with longstanding federal labor law by restricting the methods by which employees can choose a union. When no agreement could be reached, the NLRB filed suit to have the Arizona amendment declared unconstitutional.

The Arizona lawsuit challenged a 2010 constitutional amendment to the Arizona Constitution that states”[t]he right to vote by secret ballot for employee representation is fundamental and shall be guaranteed where local, state or federal law permits or requires elections, designations or authorizations for employee representation.”  Arizona Constitution, Article 2 § 37.  In its lawsuit, the NLRB asked the Federal Court to declare Article 2 § 37 unconstitutional and preempted to the extent that it applies to private employers, private employees, and labor organizations subject to the NLRA on the grounds that the state secret ballot rule “creates a state forum to protect employee representation rights, a task which Congress assigned exclusively to the NLRB.

Among its other efforts to defend the statute, Arizona argued there was no preemption because the state’s “guarantee” of a secret ballot election would only apply if the voluntary recognition option is not selected.

In reaching its ruling, the Federal Court hung its hat on this argument.  “It is possible that state litigation invoking (the amendment) may impermissibly clash with the NLRB’s jurisdiction to resolve disputes over employee recognition, conduct secret ballot elections, and address unfair labor practices,” Judge Martone wrote.  However, because the amendment has not yet been applied, Judge Martone wrote that he could not assume that it would conflict with the NLRA.

Arizona Decision A Temporary Victory In Battle In Labor-Management Relations War

While the court rejected the NLRB challenge of the Arizona secret ballot requirement this week, the NLRB’s announced disagreement with the decision coupled with the limited scope of the ruling makes clear that businesses watch for another NLRB challenge based on the implementation of the law as well as other new regulatory and enforcement traps for employers. 

The court battle over Arizona’s secret ballot amendment is just one of the many areas where the NLRB under the Obama Administration is pursuing a pro-union agenda.  In addition to challenging state laws that might operate to restrict union organizing or other activities, the NLRB also has adopted and is promoting the adoption of other pro-labor rules as well as stepping up enforcement on behalf of labor. See e.g., NLRB Moves To Promote Non-Union Employee Use of Collective Action Rights By Launching Webpage; NLRB Report Shows Rise In Unfair Labor Practice Complaints  Formal Proceedings Comments Feed; NLRB Settlement Shows Care Necessary When Using Social Networking & Other Policies Restricting Employee Communications.  As part of these efforts, for instance, the NLRB increasingly is challenging the authority of employers to enforce mandatory arbitration provisions in employee handbooks or employment agreements, to regulate social media, and to engage in a broad range of other common employer practices while at the same time, it is using its regulatory powers to promote employer posting and other requirements designed to educate workers about their organizational rights.  As many of these new rules apply both to unionized workplaces and ununionized workplace, these and other evolving rules often leave all employers to significant and often underappreciated labor law risks in a broad range of circumstances.  This risk tends to take on particular significance for unorganized workforces  due to a low awareness or appreciation of these changes or their implications on unorganized workforces by their management team.  Mistakes are increasingly costly in the current enforcement environment.

Costly Consequences For Employers

The statistics show the cost of management mishandling of labor relations in today’s environment is expensive and growing.  This pro-labor regulatory and enforcement agenda as resulted in a significant rise in NLRB unfair labor practice charges in recent years.  According to NLRB statistics, the number of unfair labor practice charges brought by the NLRB steadily rose from 2009 to 2011.  The number of charges filed by was 1,342 in 2011, 1,242 in 2010, 1,166 in 2009 and 1,108 in 2008.  Moreover, NLRB statistics also document that backpay and other remedies also have risen sharply during this period.  For instance, in 2008, the NLRB ordered a total of $68,800,000 in backpay, fees, dues and fines in 9,400 cases.  In contrast, in 2009, the NLRB ordered $77,700,000 in backpay, fees, dues and fines against employers even though the number of cases dropped to 8,700,000 cases.  This trend continued in 2010, where out of 8,300 cases, the NLRB ordered employers to pay $86,100,000 in backpay, fees, dues and fines.  See NLRB Statistics. See also NLRB Case Decisions.

In light of this increased activism, employers should exercise care when using mandatory arbitration, compensation gag rule, or other similar provisions; dealing with requests for employee representation by union and non-union employees in organizing, contracting and even disciplinary actions; establishing and administering social networking, communication and other policies; and a wide range of other situations. In addition, employers concerned about these or other labor activities should consult competent counsel for advice about appropriate options and risks for dealing with these activities. 

If you have any questions or need help reviewing and updating your organization’s employment and/or employee practices in response to the NLRA or other applicable laws, or if we may be of assistance with regard to any other workforce management, employee benefits or compensation matters, please do not hesitate to contact the author of this update, Cynthia Marcotte Stamer.

About The Author

Management attorney and consultant Cynthia Marcotte Stamer helps businesses, governments and associations solve problems, develop and implement strategies to manage people, processes, and regulatory exposures to achieve their business and operational objectives and manage legal, operational and other risks.

Board certified in labor and employment law by the Texas Board of Legal Specialization, with more than 20 years human resource, labor and employment and employee benefits experience, Ms. Stamer helps businesses manage their people-related risks and the performance of their internal and external workforce though appropriate human resources, employee benefit, worker’s compensation, insurance, labor management, outsourcing and risk management strategies domestically and internationally.

Recognized in the International Who’s Who of Professionals and bearing the Martindale Hubble AV-Rating, Ms. Stamer also is a highly regarded author and speaker, who regularly conducts management and other training on a wide range of labor and employment, employee benefit, human resources, internal controls and other related risk management matters.  Her writings frequently are published by the American Bar Association (ABA), Aspen Publishers, Bureau of National Affairs, the American Health Lawyers Association, SHRM, World At Work, Government Institutes, Inc., Atlantic Information Services, Employee Benefit News, and many others. For a listing of some of these publications and programs, see here. Her insights on human resources risk management matters also have been quoted in The Wall Street Journal, various publications of The Bureau of National Affairs and Aspen Publishing, the Dallas Morning News, Spencer Publications, Health Leaders, Business Insurance, the Dallas and Houston Business Journals and a host of other publications. Chair of the ABA RPTE Employee Benefit and Other Compensation Committee, a council member of the ABA Joint Committee on Employee Benefits, and the Legislative Chair of the Dallas Human Resources Management Association Government Affairs Committee, she also serves in leadership positions in many human resources, corporate compliance, and other professional and civic organizations. For more details about Ms. Stamer’s experience and other credentials, contact Ms. Stamer, information about workshops and other training, selected publications and other human resources related information, see here or contact Ms. Stamer via telephone at 469.767.8872 or via e-mail to  cstamer@solutionslawyer.net

If you find this of interest, you also be interested reviewing some of Ms. Stamer’s other recent updates, including:

If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information – including your preferred e-mail – by creating or updating your profile at here or e-mailing this information here.   

©2012 Cynthia Marcotte Stamer.  Non-exclusive right to republish granted to Solutions Law Press, Inc. All other rights reserved.


Employers Face New Labor-Management Exposures Under Activist National Labor Relations Board

November 8, 2011

The just-released National Labor Relations Board (Board) 2011 Fiscal Year-end report highlights the advisability for employers to tighten their labor-management relations compliance and defenses in response to the growing regulatory and enforcement activism of the Board on behalf of labor under the Obama Administration.  

President Obama made no secret of his strong support and intention to pursue an aggressive pro-union legislative and enforcement agenda and to take other actions to support unions.  While Administration efforts to enact the Employee Free Choice Act or other pro-union legislation have met with limited success in Congress, federal enforcement law data shows the Obama Administration is achieving significant success in promoting its pro-union agenda through regulation and enforcement.

The 2011 Fiscal Year-end numbers show the number of cases handled by the Board rose 17% in 2011.  During the 2011 Fiscal Year that began October 1, 2010, the Board:

  • Handled 272 unfair labor practice cases and 96 representation cases;
  • Issued 368 decisions in contested cases; and
  • Pursued two pro-labor rule making initiatives.

In cases like its highly publicized challenge to the planned move by Boeing of jobs to another state, the Board regularly has lent its support to labor efforts to oppose or challenge management authority.  In the course of handling these cases, the Board also reached out to strengthen the power and protections of labor by addressing issues such as the access rights of pro-union employees to employer property, the rights of undocumented immigrant workers to back pay remedies, the protection of new collective bargaining relationships from challenge and other issues favorable to union organization and rights.

Along side its high disposition of cases, the Board also has released and sought public comment on two new rules favorable to labor:

  • A new final rule that will require that employers post a notice of employee rights under the National Labor Relations Act (“Posting Rule”) scheduled to take effect on January 31, 2012; and
  • Proposed rules that would change pre- and post-election representation case procedures, which the Board has not finalized at this time.

The progress of the Board in using its regulatory and enforcement powers to promote a pro-labor agenda is helping union organizing and bargaining efforts.  In light of this new activism, employers should review their existing policies to ensure that they comply with evolving federal rules regarding the rights of labor and to otherwise act to defend against potential labor related risks keeping in mind emerging decisions that extend certain historical labor rights to unionized employees, employees engaged in protected organizing activities and, under recent decisions, in some instances even employees in non-union environments requesting representation in disciplinary or other circumstances not historically understood by employers to fall within the provision of the National Labor Relations Act.

For Help or More Information

If you need help reviewing, updating, administering or defending your labor and employment, fringe benefit or other employee benefit, compensation or other workforce and human resources practices, please contact the author of this update, Cynthia Marcotte Stamer.

Ms. Stamer is recognized, internationally, nationally and locally for her more than 24 years of work, advocacy, education and publications on labor and employment, employee benefit, human resources and related workforce, insurance and financial services, and health care matters. 

A board certified labor and employment attorney widely known for her extensive and creative knowledge and experienced with these and other employment, employee benefit and compensation matters, Ms. Stamer continuously advises and assists employers, employee benefit plans, their sponsoring employers, fiduciaries, insurers, administrators, service providers, insurers and others to monitor and respond to evolving legal and operational requirements impacting workforce, benefit and compensation matters.  She regularly advises employers and others about union-management organizing, collective bargaining, discipline, and other related issues, as well as a broad range of other human resources concerns.

Recently selected for induction as a Fellow in the American College of Employee Benefit Council and for extensive work and accomplishments in the employee benefits and human resources area, immediate past Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Group and current Co-Chair of its Welfare Benefit Committee, Vice-Chair of the ABA TIPS Employee Benefits Committee, a council member of the ABA Joint Committee on Employee Benefits, and past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, she also helps employers and others negotiate employee benefit and other compensation related commitments with unions and others.   She also helps these and other clients to design, administer, document and defend medical and other welfare benefit, qualified and non-qualified deferred compensation and retirement, severance and other employee benefit, compensation, and human resources, management and other programs and practices tailored to the client’s human resources, employee benefits or other management goals.  A primary drafter of the Bolivian Social Security pension privatization law, Ms. Stamer also works extensively with management, service provider and other clients to monitor legislative and regulatory developments and to deal with Congressional and state legislators, regulators, and enforcement officials concerning regulatory, investigatory or enforcement concerns. 

Recognized in Who’s Who In American Professionals and both an American Bar Association (ABA) and a State Bar of Texas Fellow, Ms. Stamer serves on the  Editorial Advisory Board of Employee Benefits News, the editor and publisher of Solutions Law Press HR & Benefits Update and other Solutions Law Press Publications, and active in a multitude of other employee benefits, human resources and other professional and civic organizations.   She also is a widely published author and highly regarded speaker on these matters. Her insights on these and other matters appear in the Bureau of National Affairs, Spencer Publications, the Wall Street Journal, the Dallas Business Journal, the Houston Business Journal, Modern and many other national and local publications.   You can learn more about Ms. Stamer and her experience, review some of her other training, speaking, publications and other resources, and register to receive future updates about developments on these and other concerns from Ms. Stamer here.

Other Resources

If you found this update of interest, you also may be interested in reviewing some of the other updates and publications authored by Ms. Stamer available including:

About Solutions Law Press

Solutions Law Press™ provides business risk management, legal compliance, management effectiveness and other resources, training and education on human resources, employee benefits, compensation, data security and privacy, health care, insurance, and other key compliance, risk management, internal controls and other key operational concerns. If you find this of interest, you also be interested reviewing some of our other Solutions Law Press resources available at www.solutionslawpress.com

THE FOLLOWING DISCLAIMER IS INCLUDED TO COMPLY WITH AND IN RESPONSE TO U.S. TREASURY DEPARTMENT CIRCULAR 230 REGULATIONS.  ANY STATEMENTS CONTAINED HEREIN ARE NOT INTENDED OR WRITTEN BY THE WRITER TO BE USED, AND NOTHING CONTAINED HEREIN CAN BE USED BY YOU OR ANY OTHER PERSON, FOR THE PURPOSE OF (1) AVOIDING PENALTIES THAT MAY BE IMPOSED UNDER FEDERAL TAX LAW, OR (2) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY TAX-RELATED TRANSACTION OR MATTER ADDRESSED HEREIN.

©2011 Cynthia Marcotte Stamer, P.C.  Non-exclusive license to republish granted to Solutions Law Press.  All other rights reserved.

 


NLRB To Review, Invites Briefs In Cases Involving Voluntary Recognition Agreements & Successor Employers

August 31, 2010

A newly constituted National Labor Relations Board in a narrow 3-to-2 vote has granted review and is inviting interested parties to file briefs in two sets of cases that question when a labor union’s support among employees can be challenged.

In one set of cases, the newly-constituted Board will reconsider the Board’s 2007 ruling that an employer that agrees to voluntarily recognize a union based on signed authorization cards must post a notice advising the employees that they have a right within 45 days of the notice to file a petition for an election to decertify the union or in support of a rival union, if they so desire.

In the second set of cases, Board is set to reconsider the Board’s rulings that a successor employer duty to recognize and bargain with a union recognized by its predecessor can be challenged by the employer, employees, or a rival union.

Get more details here.

The decisions made by the Board could have significant impacts on the responsibilities of employers to recognize and deal with unions.  Employers and others concerned with labor-management relations should monitor, and if appropriate, consider sharing their perspective through a timely submitted brief in these matters.

For Assistance or More Information

If your organization needs assistance reviewing or responding to the request for comments or otherwise dealing with labor or other human resources compliance concerns, please contact the author of this update, Board Certified Labor & Employment attorney Cynthia Marcotte Stamer at (469) 767-8872 or via e-mail here.

Board Certified in Labor and Employment Law by the Texas Board of Legal Specialization, Ms. Stamer has more than 23 years experience advising employers and others about union organizing and certification, collective bargaining and other labor and employment, employee benefits, compensation and other workforce compliance, risk management and defense matters.  She continuously advises employers about these and other related regulatory compliance, workforce management, operational, public policy, enforcement, litigation and risk management and other concerns. Ms. Stamer also publishes, conducts client and other training, speaks and consults extensively on these and other concerns and practices. She regularly speaks and conducts training for the ABA, American Health Lawyers Association, Institute of Internal Auditors, and many other organizations.  Her insights on these and related topics have appeared in Atlantic Information Service, Bureau of National Affairs, World At Work, The Wall Street Journal, Business Insurance, Managed Healthcare, Health Leaders, various ABA publications and a many other national and local publications.  To contact Ms. Stamer or for additional information about Ms. Stamer, her experience, involvements, programs or Publishers of her many highly regarded writings on labor, human resources and other workforce management matters include the Bureau of National Affairs, Aspen Publishers, ABA, AHLA, Aspen Publishers, Schneider Publications, Spencer Publications, World At Work, SHRM, HCCA, State Bar of Texas, Business Insurance, James Publishing and many others.  You can review other highlights of Ms. Stamer’s experience here

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Comments Invited On Burdensomeness of Requirements To Obtain DOL Determination That Benefit Plan Qualifies as As Collectively Bargained Plan

December 30, 2009

By Cynthia Marcotte Stamer

The Employee Benefit Security Administration (EBSA) is inviting public comment on the compliance burdens to comply with its administrative procedure (‘‘procedural rules’’) for obtaining a determination by the EBSA if a particular employee benefit plan is established or maintained under or pursuant to one or more collective bargaining agreements for purposes of section 3(40) of the Employee Retirement Income Security Act (ERISA).

Codified beginning at 29 CFR 2570.15, these procedural rules concern specific criteria set forth in 29 CFR 2510.3–40 which, if met, constitute a finding by EBSA that a plan is collectively bargained. Plans that meet the requirements of the criteria rules are not subject to state law and qualify for delayed compliance, exemption or other special treatment under various requirements of ERISA, the Internal Revenue Code or other applicable requirements.  Among other things, overzealous characterization and marketing of self-insured health plans covering employees of multiple employers as collectively bargained and therefore exempt from state insurance regulation has resulted in numerous high profile enforcement actions for insurance fraud or other violations around the country over the past decade. 

The procedural rules require applicants to submit certifications and other documentation.  EBSA is inviting comments on the appropriateness of the assessment currently published in connection its publication of the procedural rules of the compliance burden estimates these procedural rules

EBSA particularly is interested in comments that:

  • Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
  • Evaluate the accuracy of the agency’s estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
  • Enhance the quality, utility, and clarity of the information to be collected; and
  • Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology, e.g., by permitting electronic submissions of responses.

If you have questions about or need assistance evaluating, commenting on or responding to this invitation or other employee benefit, employment, compensation, employee benefit, workplace health and safety, corporate ethics and compliance practices, concerns or claims, please contact the author of this article, Curran Tomko Tarski LLP Labor & Employment Practice Group Chair Cynthia Marcotte Stamer.  Board Certified in Labor & Employment Law by the Texas Board of Legal Specialization, Chair of the American Bar Association RPTE Employee Benefits & Other Compensation Group, and a Council Member on the ABA Joint Committee on Employee Benefits, Ms. Stamer is experienced advising and assisting employers, employee benefit plan and their fiduciaries, insurers, financial advisory services, administrators and custodians, debtors, trustees and creditors in bankruptcy and others about plan, process, and product design, administration, documentation, risk management and defense under ERISA, COBRA, HIPAA, labor and employment, tax, state banking and insurance, and other laws.  She also advises, assists, trains, audits and defends employers and others regarding the federal and state Sentencing Guideline and other compliance, equal employment opportunity, privacy,  leave, compensation, workplace safety, wage and hour, workforce reengineering, and other labor and employment and defends related audits, investigations and litigation, charges, audits, claims and investigations by the IRS, Department of Labor and other federal and state regulators. Ms. Stamer has advised and represented employers on these and other labor and employment, compensation, employee benefit and other personnel and staffing matters for more than 20 years. Ms. Stamer also speaks and writes extensively on these and other related matters. For additional information about Ms. Stamer and her experience, see here or to access other publications by Ms. Stamer see here or contact Ms. Stamer directly.   For additional information about the experience and services of Ms. Stamer and other members of the Curran Tomko Tarksi LLP team, see here.

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