Monthly Archives: June 2012

Supreme Court Upholds Healthcare Reform

In a fairly major surprise, a slim and somewhat unusual majority of the Supreme Court today upheld the individual mandate of President Obama’s Affordable Care Act. You can find more information in my article, Health Care Law Upheld by Supreme Court.

Supreme Court: Pharmaceutical Reps Not Entitled to Overtime

In a 5-4 split, the Supreme Court decided yesterday that pharmaceutical detailers qualify as outside salespeople and are therefore not entitled to overtime pay. This case was closely watched in the pharmaceutical industry, which estimated that a change in industry practice to require overtime to these employees would cost billions of dollars.

The job of a detailer is to visit doctors in a particular sales territory and explain the uses, benefits, and risks of a particular set of the company’s prescription drugs. In the heavily regulated field of pharmaceuticals, the detailer’s goal is to obtain a “nonbinding commitment” from the doctor to prescribe the company’s drugs when appropriate. A portion of the detailer’s pay is incentive-based, determined by sales of the featured drugs in the detailer’s territory.

In this case, everyone agreed that the detailers routinely worked more than 40 hours a week and did not receive overtime pay. Their employer, GlaxoSmithKline, classified them as “outside salespeople,” a job category that is exempt from the overtime requirements. The issue before the court is whether what they do can really be called selling.

For the majority, Justice Alito found that it could. He determined that the regulations interpreting the outside salesperson exemption were intended to be broad enough to cover various industry practices, including the use of detailers. Although there is no sales contract (other than that oxymoronic “nonbinding commitment”), no money changes hands, and no orders are placed, the detailers were doing all that’s legally allowed in this heavily regulated field to sell the company’s products. Ultimately, doctors must be free to prescribe the medications appropriate to a patient’s condition, and patients may ultimately decide not to follow that advice, or to purchase a generic equivalent. The company can’t control this part of the transaction, but it can promote its products to those who write the prescriptions.

For the dissent, Justice Breyer pointed out that, unlike representatives who sell drugs to doctors for their own use (such as vaccines and medications to be administered in the doctor’s office), the detailers do not make any sales. Rather, their work looks more like promotional work, a category which the regulations treat as separate when the person performing it does not also make sales. The only sale is made at the pharmacy counter, not in the doctor’s office.

Interestingly, all of the Justices agreed that the Department of Labor’s recent efforts to interpret the outside salesperson exception more strictly (to entitle more employees to overtime) had failed. In opinion letters and in amicus briefs, the DOL stated that detailers didn’t qualify as outside salespeople because they did not transfer title to the property in question. (This is the most recent interpretation; the DOL had previously said that the employee would have to be involved in a “consummated transaction” in order to have made a sale.) Both the majority opinion and the dissent disregarded this recent reinterpretation and focused on the language of the statute and regulations, finding that the DOL’s opinion had been too much of a moving target to warrant deference to the agency.

No More 99ers: Federal Extensions of Unemployment Benefits Shortened

When unemployment rates are high, Congress has generally responded by passing legislation to supplement state unemployment insurance benefits. In keeping with this tradition, Congress passed the Emergency Unemployment Compensation (EUC) program in 2008 to provide additional weeks of eligibility to workers who had lost their jobs in the recession. Over time, the benefits available from state governments, plus four “tiers” of EUC, plus benefits available through the Extended Benefits program (a joint federal-state extension) added up to a potential total of 99 weeks of benefits. Some of the extra money available from Congress was dependent on the unemployment rate, so workers in some states weren’t eligible for the full 99 weeks. But many were, and some of the long-term unemployed took to calling themselves “the 99ers,” even before the Occupy movement made 99 the magic number dividing the haves and the have-nots.

Well, that number is changing. When Congress reauthorized the unemployment extension programs in February, it phased in a couple of changes intended to restrict benefits eligibility. First, it set higher unemployment rate thresholds a state must meet before qualifying for the benefits extension. And second, it decreased the total months of benefits available. Starting at the beginning of this month, those changes are taking effect.

Once unemployed workers have used up their state benefits (which last 26 weeks in most states, although a handful of states have cut back on this number too), the tiers of the EUC program become available as follows:

  • Tier 1: 20 weeks of benefits until September 2012; 14 weeks thereafter
  • Tier 2: 14 weeks of benefits, but only if the state unemployment rate is at least 6% (this trigger is new, beginning in June 2012)
  • Tier 3: 13 weeks of benefits until September 2012; nine weeks thereafter. This Tier is available only if state unemployment is at least 7% (this trigger has increased from the former requirement).
  • Tier 4: Six weeks of benefits until September 2012; ten weeks thereafter. The trigger for this Tier has been increased to 9%.

The extended benefits program offers an additional 13 to 20 weeks of benefits, based on the state unemployment rate. However, most states no longer qualify. The National Employment Law Project estimates that no states will qualify for extended benefits by September of 2012. The upshot is that by September of 2012, the maximum possible benefits available will drop by six weeks, to 93. Because no states are projected to continue qualifying for extended benefits, however, the true maximum will be 73 weeks — and that’s only in states whose unemployment rates remain quite high. Already, some states have stopped qualifying for Tier 4 benefits based on the trigger rate.

And that’s before we reach what has come to be known as the “financial cliff” at the end of the year. That’s when all federal extensions to unemployment are set to expire, along with the Bush-era tax cuts, and those automatic spending cuts Congress enacted to force itself to reach a budget agreement are set to take effect. If Congress doesn’t act on the unemployment piece, benefits will revert to the 26 weeks or less available from state governments. Ouch.

EEOC Guidance on Using Criminal Records

About a month ago, the Equal Employment Opportunity Commission (EEOC) issued enforcement guidance on the use of arrest and conviction records in employment decisions. The EEOC has long warned employers that blanket policies of excluding anyone with an arrest or conviction could lead to discrimination claims, given the much higher arrest and conviction rates of African American and Latino men. This guidance clarifies the rules for employers, giving examples of the kinds of policies and decisions that might violate Title VII and providing a framework for employers who take criminal records into account in hiring, retention, or promotions.

The guidance points out that consideration of criminal records could lead to disparate treatment or disparate impact claims. In a disparate treatment case, the employee would have to show that the employer treated people in different protected classes (for example, those of different races) differently in considering criminal records. If an employer ran a criminal background check only on non-White applicants, excused minor offenses by White applicants while excluding Latino applicants for the same types of records, or assumed that an African American with a youthful drug offense posed a safety risk while a White applicant with a similar offense did not, that employer is treating applicants differently based on their race or national origin.

The trickier situation involves disparate impact claims, in which the employer’s apparently neutral policy has a disproportionately negative effect on people in a particular protected class. Because arrest and conviction rates vary so much by race and national origin, a blanket policy of excluding all applicants with a criminal record could easily result in a disparate impact against African American and Latino men. This is the reasoning behind the ongoing “ban the box” campaign, to get rid of the check box on employment applications asking whether applicants have ever been arrested or convicted of a crime. A company that routinely disqualifies any applicant with a criminal record from further consideration for any job could well be courting a discrimination claim.

Of course, this doesn’t mean employers don’t have good reason to screen out applicants with a record of particular offenses for particular jobs. No one wants a convicted sex offender working in a classroom or someone who just finished serving a felony sentence for identity theft handling confidential customer information. The EEOC provides a three factor test, which employers can use to ensure that any criminal record exclusion accurately distinguishes between those who pose an unacceptable risk and those who do not. The employer must assess:

  • the nature and gravity of the criminal offense or conduct
  • how much time hass passed since the offense or sentence, and
  • the nature of the job (including where it is performed, how much supervision and interaction with others the employee will have, and so on).

Even if this test indicates that the applicant may pose a risk, the employer should allow the applicant an opportunity to provide mitigating information demonstrating that he or she shouldn’t be excluded based on the offense. For example, the applicant might show that the criminal record is simply inaccurate. Or, the applicant might provide facts about what really happened, previous work history, rehabilitation efforts, and so on, in an effort to demonstrate that the record shouldn’t disqualify the applicant from the position.