Hello,

Here is the latest issue of “This & That” Tuesday. I hope you find it to be informative and useful.

 

 

Hal Leonard to Pay $150,000 to Settle Sexual Harassment Charge

 

Hal Leonard Publishing Company, a music print publishing company founded in Winona, Minn., has agreed to pay $150,000 to a class of female employees to settle a sexual harassment charge brought against the company by a former employee.

An investigation by the EEOC revealed that women were subjected to unwelcome grabbing and squeezing as well as sex-based comments and actions at Hal Leonard’s facility.  The harassment was perpetrated by co-workers and, despite multiple complaints to Hal Leonard management, the misconduct did not cease. Following an investigation of the discrimination charge, the EEOC determined that there was reasonable cause to believe the company violated Title VII of the Civil Rights Act of 1964.

An employer who has a sexual harassment policy on paper but fails to enforce it is placing itself at great risk. Employers need to take sexual harassment allegations seriously. The EEOC was pleased that Hal Leonard worked cooperatively with them to resolve this charge without having to go through protracted litigation.”

In addition to paying a total of $150,000 to a class of victims, Hal Leonard will (1) provide an apology to the former employee who filed the original discrimination charge; (2) conduct annual anti-discrimination training for three years which the EEOC may observe; (3) provide the EEOC with documentation of an accountability provision in performance evaluations of managers, supervisors and lead employees; and (4) provide the EEOC with documentation of all sexual harassment complaints for three years.

 

Unintended Errors in Benefits Communications May Result in Liability under ERISA

 

Employee benefits issues have become increasingly complex. It is, therefore, not surprising that, from time to time, those charged with administering ERISA plans may make mistakes in communicating with participants about benefits. However, as a recent decision illustrates, those mistakes may prove costly to employers sponsoring and administering ERISA plans. In Winkelspecht, an email from an employer’s Administrator of Payroll and Benefits, erroneously advising a participant that the company would continue to pay his life insurance premiums post-retirement, provided the basis to find the employer and the life insurance plan liable for the benefit under ERISA.

The Background

Mr. Winkelspecht (referred to as “Wink” in the decision) retired after 35 years with his employer. Prior to retirement, he contacted his employer to inquire about continuing his life insurance benefits post-retirement. The life insurance, in the amount of $103,000.00, was insured through a policy with a third-party insurer, with premiums paid by the employer. The company’s regular Administrator of Payroll and Benefits was on maternity leave at the time, so Wink’s question was fielded by a temporary employee. The temporary employee responded, by phone and then by email, that the life insurance benefit would be continued and paid for by the employer. The contrary was true. The summary plan description (SPD) advised participants that they had 31 days after their employment ceased to convert into “portable coverage” and pay the first premium. When Wink died, his daughter learned from the life insurance company that the coverage had terminated at the time of Wink’s retirement. Wink’s wife (as beneficiary) sued the employer, the plan, and the life insurance company for the benefits.

The Decision, in part

The court granted the plaintiff’s motion for summary judgment on her claim, finding evidence of: (1) a knowing misrepresentation; (2) made in writing; (3) reasonable reliance on that representation; and (4) damages. The court surveyed the law in the Seventh Circuit and declined to require an “intent to deceive” as an essential element of the claim; a knowing misrepresentation sufficed, the court concluded. The court also rejected the employer’s argument that the plaintiff’s claim sought an improper modification of the plan. The SPD may have advised employees that their coverage would terminate if not converted, but it was silent on who would be responsible for paying the premiums for the coverage. By assuring Wink that his employer would pay the premiums, the temporary administrator was not construing the plan; rather, “she was assuring him of [the employer’s] intent.”

The court also found the employer liable for breach of fiduciary duty. The court agreed that the temporary administrator was not an ERISA fiduciary. Nevertheless, it concluded that her misrepresentation triggered fiduciary liability for the employer (in its capacity as plan administrator) because, inter alia, the employer held the temp out to participants as its representative for benefits purposes, and did not adequately train her on issues surrounding the life insurance plan.

Take Note

Plan administrators must train and monitor those charged with communicating with participants about benefits to ensure that they are conveying complete and accurate information. In parallel, they should carefully review their plan documents and written communications to ensure their clarity. Although neither of these steps is likely to avoid participant litigation entirely, both may strengthen an employer/plan administrator’s defenses if litigation surfaces.

Family Video to Pay $70,000 to Settle Disability Discrimination Suit

 

The EEOC today filed a consent decree resolving a disability discrimination lawsuit brought against Family Video Movie Club, Inc., known as Family Video, a Glenview, Ill.-based retailer of movies and games. Family Video is the largest privately-owned movie and game retailer in the United States and operates more than 735 Family Video stores in 19 states with more than 7,000 employees.

According to EEOC’s lawsuit, brought under the Americans With Disabilities Act (ADA), Family Video subjected Jeffrey Spoonley, a sales associate with major depression and social anxiety disorder, to harassment because of his disability, and terminated him after he complained of the harassment. The EEOC filed this suit after first attempting to reach a pre-litigation settlement through its conciliation process. EEOC and Family Video entered into a three-year consent decree resolving the lawsuit.

As part of the consent decree, Family Video has agreed to pay Spoonley $70,000 in monetary relief. The consent decree also enjoins Family Video from engaging in further disability discrimination or retaliation, and requires Family Video to hire an equal employment opportunity (EEO) coordinator to implement discrimination policies and procedures, provide training, monitor and investigate discrimination complaints.

Employers cannot harass, discriminate or fire employees with disabilities based on perceptions or prejudice. The EEOC will continue to vigorously enforce federal law by prosecuting companies which discriminate by firing workers because of their disabilities or retaliate against employees who complain about such discrimination.