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Cypen & Cypen
JUNE 21, 2007

Stephen H. Cypen, Esq., Editor

Never Forget - September 11, 2001


American Association of Retired Persons appealed a judgment of the United States District Court for the Eastern District of Pennsylvania (see C&C Newsletter for April 14, 2005, Item 1 and C&C Newsletter for October 20, 2005, Item 4). The District Court had vacated, on the basis of a significant change in law, a previous grant of summary judgment in favor of AARP, and instead granted summary judgment in favor of Equal Employment Opportunity Commission. At issue was a regulation that would exempt from the Age Discrimination in Employment Act (as amended by the Older Workers Benefit Protection Act) employer coordination of retirement benefits with, inter alia, Medicare benefits. AARP challenged the regulation as contrary to terms of ADEA, and sought to reinstate the District Court’s permanent injunction against implementation of the regulation. The United States Court of Appeals for the Third Circuit affirmed the District Court’s order granting summary judgment in favor of EEOC, but on grounds other than those relied upon by the District Court. The proposed regulation is within EEOC’s exemption authority under Section 9 of ADEA. That section clearly and unambiguously grants to EEOC authority to provide, at least, narrow exemptions from the prohibitions of ADEA. By definition, the power to grant exemptions provides an agency with authority to permit certain actions at variance with express provisions of the statute in question. By stating that “any or all provisions” may be subject to exemptions, Congress made plain its intent to allow limited practices not otherwise permitted under the statute, so long as they are “reasonable” and “necessary and proper in the public interest.” American Association of Retired Persons v. Equal Employment Opportunity Commission, Case No. 05-4594 (U.S. 3rd Cir., June 4, 2007).


Participants and beneficiaries in a pension plan for employees of Guidant Corporation brought a class action against the company. The plan’s portfolio included stock in Guidant held by an Employee Stock Ownership Plan, and the suit claimed the pension plan’s fiduciaries acted imprudently in failing to dispose of that stock. The district court dismissed the complaint because the named plaintiffs had no “standing” to bring the action since they had retired from Guidant and cashed out their pension benefits before filing of the amended complaint, and so ceased to be participants in the pension plan. Lawyers for the class, could, to keep the class action alive, have substituted as named plaintiffs members of the class who remained participants in the plan -- current employees. But being unwilling to abandon the claims of class members in the situation of named plaintiffs, they decided instead to appeal the district court’s ruling. The appellate court reversed. Obviously, named plaintiffs have standing to sue in the sense of being entitled to ask for an exercise of the judicial power of the United States as that term in Article III of the Constitution has been interpreted, because if they win they will obtain a tangible benefit. But there is also a nonconstitutional doctrine of standing to sue, one aspect of which is the requirement that plaintiff be within the “zone of interests” of the statute or other source of rights under which he is suing. The Employee Retirement Income Security Act defines “participant” to include former employees who have cashed out their plan benefits, as named plaintiffs here, if they may become eligible to receive a benefit of any type from the plan. So, the question comes down to whether, if plaintiffs win their case by obtaining a money judgment against Guidant, the receipt of that money will constitute receipt of a plan benefit. It will. Harzewski v. Guidant Corporation, Case No. 06-3752 (U.S. 7th Cir., June 5, 2007).


California Public Employees’ Retirement System has announced it is taking over a debt-ridden high rise project. According to the Sacramento Bee, CalPERS will evaluate and develop a different high-rise project, which is likely to include a hotel and some condominiums, but not the 400 units the developer had planned for his 53-story building. As the nation’s largest public pension fund with assets of almost $250 Billion, CalPERS added an aura of legitimacy to the developer’s vision, when it agreed to invest $100 Million in the project. Deutsche Bank agreed to lend another $350 Million and the city also kicked in an $11 Million subsidy. Shortly after the developer broke ground last summer, the project was $80 Million over budget and condo sales slowed to a trickle as the housing market went soft. The site is now little more than a hole in the ground the size of a city block. CalPERS declined to disclose what it is paying to take over the project. Once the project is completed, we hope the trustees will not be assigned to “toilet duty.”


Despite the prolonged national agony over the war in Iraq, there was reason to smile in 2006. This year’s survey by of the top ten bizarre employment law situations presents another potpourri of workplace wackiness:

10. Workplace hustler. A court has certified an arbitrator's decision that Hustler magazine publisher Larry Flynt must pay $1.1 Million to a former secretary who alleged that having to comply with Flynt's trysts with prostitutes in his private office created a hostile work environment.

9. Discharge-of-the-year award. Two employees of an ice skating rink were fired for making a midnight fast-food run with two Zambonis.

8. Family-leave hoax. A newly-hired salesman did no work for months, after telling bosses his 3-year-old son had cancer. He was revealed to be a liar when his employer tried to send flowers to the family after being told the boy had died.

7. No claim over jealous wife. A federal appeals court of has ruled that an employee who admittedly engaged in physical, suggestive contact with the owner of the company for which she worked has no sex discrimination claim against him or the company, nor a tort against his wife, who insisted she be fired.

6. An explosive arbitration award. A federal trial court has ruled that an arbitration panel did not err in ordering reinstatement of a warehouse employee, with a history of violent behavior and felony indictments, to his job, which involved handling highly explosive chemicals.

5. Dubious “team building.” A jury has awarded $1.7 Million to a female sales employee on her claim for sexual harassment against her former employer, in which she alleged she was spanked on three occasions in what the company called a "camaraderie-building exercise."

4. Sex, drugs and religion. A federal appeals court has rejected sexual and religious harassment, retaliation and other claims by an employee who alleged that her female co-worker propositioned her for sex, spiked her drink with methamphetamine and, after a religious conversion, tried to proselytize her.

3. Profitable panic attack. A jury has awarded $6.5 Million to a health care case worker who claimed she was denied a promotion because a panic disorder prevented her from greeting clients.

2. Shoot self in foot, then sue. A Drug Enforcement Administration agent who accidentally shot himself in the foot while demonstrating gun safety to school children is suing the agency, claiming that a video of the incident has made him the laughing stock of the Internet. (Note: not to make light of the situation, but that video is absolutely priceless -- particularly the look on the agent’s face, after just having told the students that he was the only one in the room professional enough to handle a gun!)

1. Peeping and poison ivy. A federal appeals court has ruled that a supervisor who spied through a peephole into a women's restroom for years and placed a substance apparently containing poison ivy on the toilet seat did not create hostile environment liability for the employer. An employee may only rely on evidence relating to harassment of which she was aware during the time she was allegedly subjected to a hostile work environment.

Okay, Everybody, get back to work.


A City of Hollywood police sergeant was driving to the police station in a marked “take-home” vehicle owned by the City. The take-home policy provided that the vehicle could be driven to and from work. On the morning of the accident, the sergeant was driving to the police station from home on the route that he had been taking on a daily basis for several years. His shift was to begin at 7:00 a.m., and he was going in one hour early that morning to study for the lieutenant’s exam, which was to take place several months later. As he was driving, he struck and seriously injured a minor, as she attempted to cross the roadway in an effort to reach her school bus. The vehicle take-home policy was part of the Collective Bargaining Agreement between the Broward County PBA and the City, which provided that the purpose of the vehicle take-home policy was to provide the appearance of additional police presence. The sergeant’s supervisor testified that take-home vehicles are part of the City’s employment package and are only permitted to be used portal to portal or for off-duty details. If a police officer is going to or from home in a police vehicle and witnesses a crime being committed, he must stop and take action. The officer must also be dressed in uniform and armed when operating a police vehicle. In an action brought against the City by the minor’s mother, the trial court entered final summary judgment in favor of the City, concluding that at the time of the accident in question the sergeant was not in the course and scope of his employment with the City, and therefore the City was not liable as a matter of law. Receding from its own prior opinion just four months earlier, the 4th District Court of Appeal affirmed. At the time of the accident, the sergeant was not in process of carrying out a “primary responsibility” of his job as a police officer. He was not engaged in the “prevention or detection of crime or the enforcement of the penal, criminal, traffic or highway laws of the State.” Rather, the sergeant was off-duty and made the personal decision to go to the police station an hour before his shift started to study for an upcoming lieutenant’s exam. He was not furthering any interest of his employer or performing any duties of his employment. He was simply in transit to the police station an hour before he was required to report for work for the personal reason of studying for the lieutenant’s exam. Garcia v. City of Hollywood, 32 Fla. L. Weekly D1442 (Fla. 4th DCA, June 6, 2007), withdrawing original opinion at 32 Fla. L. Weekly D507 (Fla. 4th DCA, February 21, 2007).


The National Labor Relations Act permits states to regulate their labor relationships with public employees. Many states authorize public-sector unions to negotiate agency-shop agreements that entitle a union to levy fees on employees who are not union members, but whom the union represents in collective bargaining. However, the First Amendment prohibits public-sector unions from using objecting nonmembers’ fees for ideological purposes not germane to the union’s collective-bargaining duties, and such unions must therefore observe various procedural requirements to ensure that an objecting nonmember can keep his fees from being used for such purposes. Washington State allows public-sector unions to charge nonmembers an agency fee equivalent to membership dues and to have the employer collect that fee through payroll deductions. An initiative approved by state voters requires a union to obtain nonmembers’ affirmative authorization before using their fees for election-related purposes. A public-sector union sent notice to all nonmembers twice a year, detailing their right to object to the use of fees for nonchargeable expenditures; the union held any disputed fees in escrow pending completion of the objection process. Nonmembers filed suit against the union, alleging that the union had failed to obtain affirmative authorization (as required by the initiative) before spending nonmembers’ agency fees for electoral purposes. The Washington State Supreme Court ultimately held that although a nonmember’s failure to object after receiving notice did not satisfy the initiative’s affirmative-authorization requirement, that requirement violated the First Amendment. On review by the United States Supreme Court, the court reversed, holding that it does not violate the First Amendment for a state to require its public-sector unions to receive affirmative authorization from a nonmember before spending that nonmember’s agency fees for election-related purposes. It is immaterial that the initiative restricts a union’s use of funds only after they are within the union’s possession. Fees are in the union’s possession only because the State of Washington and its union-contracting government agencies have compelled their employees to pay those fees. The campaign-finance cases deal instead with governmental restrictions on how a regulated entity may spend money that has come into its possession without such coercion. Davenport v. Washington Education Association, Case Nos. 05-189 and 05-1657 (U.S., June 14, 2007).


The Northwest Florida (Fort Walton Beach) Daily News reports that Fort Walton Beach’s finance director said officials have not contributed what they say they have to the General Employees Pension Plan. He said that, particularly from 1997 to 2001, the City would budget 6% to 8% of its general fund money to the pension plan, and then fund just 2.5% to 5%. The difference was directed to “other budget needs.” The city manager retorted that 6% to 8% was merely what the City projected as reasonable, and that the amount required to be contributed to the plan had always been met. Ironically, the finance director says that the current pension contribution is too much. Employees generally contribute 5% of their annual compensation to the fund. Stay tuned for updates.


We have previously written about the “magic age” to take Social Security benefits (see C&C Newsletter for June 29, 2006, Item 5). Now, with people working well past retirement age and earning more money, financial advisors are suggesting Social Security benefits be delayed because bigger payouts will be earned. More than 70% of Americans opt to take their Social Security checks as soon as possible, according to But, by delaying when you start receiving your benefits, you may receive more money and ensure you have a better retirement in the long run. People can choose to take their Social Security benefits as early as age 62 and as late as age 70. By taking benefits early, people lock in their monthly benefits at a much lower payout rate than they might otherwise garner. The Social Security Administration claims there is no difference at what age people claim their benefits, but some financial advisors believe delayed gratification does pay off. For retirees born in 1943 or later, benefits increase by 8% for each year you delay receiving your benefit. In addition to the 8% increase in benefits, your actual payment will also be indexed for inflation. In other words, if inflation is running at 3%, your actual benefit will increase by an impressive 11% for each year you delay taking the benefit. The American Society of Actuaries reports that a 65-year-old male has a 50% chance of surviving until age 85. The average 65-year-old woman has a 50% chance of surviving until age 88. And as a couple, there is a 50% chance that one spouse will survive to age 92. Improvements in medical science will only prolong life and push these numbers higher. To that end, more people are also choosing to work well into their later years in life. So why take sooner what will pay you more later? Especially if you can afford to be patient. Meanwhile, the Social Security Administration provides a break-even age calculator, which is located at


Claiming that the Gillette Company had provided him with miscalculations of pension benefits estimates prior to his retirement, Livick sued the company and alleged that its negligence amounted to a breach of fiduciary duty to him. He asked the court to remedy the alleged breach under Section 502(a)(3) of the Employee Retirement Income Security Act, by using its equitable power to issue an injunction ordering the company to pay him the benefits that the Human Resources Department initially represented. Although not specifically raised in his complaint, Livick also suggested that, in the alternative, the court should equitably estop the company from paying benefits in a manner inconsistent with its previous representations. ERISA Section 502(a)(3) does allow equitable remedies for breaches of fiduciary duty, to recover under such theory, but the defendant must have been acting as a fiduciary of the plan or engaged in the conduct about which plaintiff complains. Here, the Federal District Court granted summary judgment in favor of the company. Provision of pension estimates is a purely ministerial non-fiduciary duty. The mere exercise of physical control or the performance of mechanical administrative tasks generally is insufficient to confer fiduciary status. Fiduciary liability arises in specific increments correlated to the vesting or performance of particular fiduciary functions in service of a plan, not in broad, general terms. Purely ministerial duties, like calculation of a benefit estimate, require no exercise of discretion. And, because the misrepresentations were not plan interpretations on which Livick could have reasonably relied, he would not have an estoppel claim. Livick v. The Gillette Company, Case No. 05-11094 (D. Mass., June 12, 2007). Compare, Thurman v. Pfizer, Inc. (see C&C Newsletter for May 17, 2007, Item 11) and Christiansen v. The Qwest Pension Plan (see C&C Newsletter for September 21, 2006, Item 4).


The following is from Money magazine. The warning signs were clear when I took my hand-held to bed in order to check e-mail after Letterman, before Matt Lauer and often in between. I would be thumbing away when a traffic light turned green and a voice prodded me from the backseat: “Mom, go!” I got to the point where I could not wait more than a second or two before the thing buzzed to see who was writing. Here is my five-step plan:

  • Admit the problem.
  • Repeat this mantra: There are no e-mail emergencies.
  • Tally up the cost of interruptions.
  • Fight tech with tech. Turn off new mail notification. Use auto-reply. Unsubscribe to useless e-mails.
  • Hide the gadget in a drawer.

Your editor once went cold-turkey for a few days, and suffered withdrawal symptoms. Oops -- got to run. Something on my hip is vibrating.


A snippet from indicates that a small town council in Louisiana has adopted an “anti-sag” law. It is now unlawful for anyone to be in a public place in dress not becoming to his or her sex, or any indecent exposure of his or her person or undergarments. Violators could find themselves fined up to $500 or even get a six-month jail term for those droopy pants. No word yet from the local plumbers’ union.


Editors of the American Heritage® dictionaries have compiled a list of 100 words they recommend all high school graduates -- and their parents -- should know. The words are not meant to be exhaustive, but are a benchmark against which graduates and their parents can measure themselves. If one is able to use these words correctly, one is likely to have a superior command of the language. We can understand why most appear on the list, but find the following to be somewhat “abstruse” (which, itself, is not on the list):


Can u reed this?


“If you tell the truth, you don’t have to remember anything.” Mark Twain

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Items in this Newsletter may be excerpts or summaries of original or secondary source material, and may have been reorganized for clarity and brevity. This Newsletter is general in nature and is not intended to provide specific legal or other advice.

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