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Cypen & Cypen
NEWSLETTER
for
NOVEMBER 16, 2006

Stephen H. Cypen, Esq., Editor

Never Forget - September 11, 2001

1. OPTIMISM AMONG CFOs DOWN:

According to CFO, optimism among chief financial officers is at its lowest point since the last recession. Just 20% are more optimistic about direction of the U.S. economy, down from last quarter, when 24% had a positive outlook. The gloomy picture stems from continued worries about consumer demand, rising cost of labor and high fuel prices. One-third even suggest that we will be in a recession within a year. Based on this less-than-rosy view, some are planning to scale back capital spending and hiring forecasts. Overseas, the mood is not as bleak. In Europe, 43% are more optimistic about their economy, and in Asia, optimism jumped to 64%.

2. COUNTY FIRE RESCUE PERSONNEL NOT ABSOLUTELY IMMUNE FROM CIVIL RIGHTS LIABILITY:

Brown, as personal representative of her late husband’s estate, sued employees of the Broward County Fire Rescue Squad for civil rights violation in connection with her husband’s death. She alleged that those employees had violently physically handled and mistreated her husband, resulting in his death from positional asphyxiation due to hog-tie restraint. The employees moved to dismiss on the ground of absolute immunity, or in the alternative, qualified immunity. The trial court granted the motion, finding that the fire rescue squad employees were entitled to absolute immunity on the basis of Section 768.28(9)(a), Florida Statutes, as interpreted by the Florida Supreme Court. On appeal, the district court reversed. The lower court erred in relying on a prior Supreme Court of Florida case, which is factually inapplicable. That case involved a state agency, the Department of Corrections. This suit involves members of the Broward Fire Rescue Squad, who are county officers or employees. The United States Supreme Court has said that the county and its employees are not immune from an action under Section 1983 of the Civil Rights Act of 1871 to the same extent as the state government. Also, although the employees asked the appellate court to decide whether the dismissal was still correct on the basis of qualified immunity, the upper court declined to decide that issue on a motion to dismiss. Brown v. Jenne, 31 Fla. L. Weekly D2655 (Fla. 4th DCA, October 25, 2006).

3. NO INTEREST ON “DELAYED” DC PAYMENT:

Adams, a former employee of IBM Corporation and a participant in its Personal Pension Plan, brought an ERISA action involving his defined contribution retirement benefits under the Plan. When Adams retired in May of 2003, he was entitled to a retirement benefit, which was calculated by reference to a Personal Pension Account. Every month, a participant’s Personal Pension Account accumulated “pay credits” at a rate of 5% of the employee’s salary and “interest credits” at a rate of one percentage point higher than the rate of return on one year treasury securities. When a participant retired, he could withdraw the account balance as a lump sum, convert it into an immediate life annuity or defer receipt of a lump sum or a life annuity until a later date. If a participant elected to defer receipt of a lump sum or a life annuity, he continued to accumulate interest credits until his Personal Pension Account balance was withdrawn or converted into a life annuity. The Plan did not pay interest on lump sum distributions beyond a participant’s normal retirement age of 65. Adams did not formally elect one of the Plan’s optional forms of payment within a month following departure, as required. At time of Adams’s separation, he was already 67 years old. His suit demanded interest payments from date of retirement (May 2003) through September 2005, when he ultimately accepted a lump sum retirement. The United States district judge ruled in favor of IBM. The administrator’s decision was not wrong. Adams’s interpretation overlooked the requirement that a participant “elect to defer” before he can take advantage of a deferment. Adams admitted that he made no such decision. Thus, Adams is not entitled to obtain interest payments for the period following the date on which he was required to elect his benefits. Even if Adams had made his decision in a timely fashion, the Plan required that he begin to receive payments no later than the first month after his date of departure. Adams v. IBM Corp., Case No. 1:05-CV-3308-TWT (N.D. Ga., October 10, 2006).

4. CONGRESSIONAL FIELD HEARING ON PUBLIC EMPLOYEE RETIREMENT SECURITY:

NCPERS’ Monitor reports that a subcommittee of the House Education and the Workforce Committee of the U.S. House of Representatives on August 30 held a field hearing in Springfield, Illinois to examine retirement security of state and local government employees. The hearing was widely considered a partisan attempt to embarrass the Democratic governor and candidates for stated and federal office in that state. The House Education and the Workforce Committee does not have jurisdiction over public pension plans! The hearing featured testimony by the National Association of State Retirement Administrators’ Keith Brainard and others, defending the public sector pension plans. While many witnesses agreed that there were difficulties in certain of the state’s pension plans, concern was voiced that generalizations painted a substantially more dismal picture of pensions in the state of Illinois than actually exists. According to the executive director of the Illinois Municipal Retirement Fund, eight of the 13 major public pension funds in Illinois are adequately funded. Incredibly, the executive director was not allowed to testify before the committee, but did issue a press statement. NCPERS, along with NASRA and over 20 national organizations, sought representation before the subcommittee and drafted a public statement for the record that put the lie to many of the statements made by witnesses and subcommittee members. Among the points addressed in the statement for the record were the nature of public pension promises, the inherent guarantees that public employees receive and the significant differences between private and public sector pension plans.

5. HOW DO AGE DISCRIMINATION LAWS AFFECT OLDER WORKERS?:

A recent Issue in Brief from the Center for Retirement Research at Boston College asks, and attempts to answer, that very question. While the intention of the Age Discrimination in Employment Act is to prevent age discrimination in the workplace, in practice it may have only limited benefits and significant costs. Although laws as they currently exist provide a boon for older men who remain on their jobs and are more difficult to fire, they harm those seeking new employment. What can be done to combat this problem? It would be difficult to go back to the world prior to ADEA, with hard age limits in advertisement and mandatory retirement strictly enforced. Even removing the federal law and placing responsibility for enforcement at the state level would be unlikely to change how firms respond to age laws at this point. One possibility to combat age discrimination at the hiring level would be to perform professional or governmental audits on hiring or to bring forth highly publicized class action lawsuits combating hiring discrimination. Publicity surrounding such acts might make firms less likely to feel that they could discriminate in hiring decisions with impunity. See the next item for a brief history of the ADEA.

6. A BRIEF HISTORY OF THE ADEA:

The above piece from Center for Retirement Research at Boston College has a nice little history of the ADEA, which we summarize here. Explicit age discrimination in the workplace was relatively common until recent decades. For example, in the first half of the 20th Century, job advertisements often specified the age of perspective applicants, and firms frequently set formal age limits for hiring or promotion. In addition, less than 30 years ago, mandatory retirement was a fact for most professions. Concern over the economic and social cost of broad-based age discrimination gradually led to legislative action. By 1960, several states had adopted age discrimination laws. In 1965, a U.S. Department of Labor report assessing need for federal legislation concluded that age limits upon new hires hurt the rights and opportunities of older workers. The report argued that age discrimination was based on stereotypes unsupported by fact, that arbitrary removal of older workers was generally unfounded and that performance of older workers was at least as good as that of younger workers. In addition to the negative impact on older workers, the report concluded that age discrimination hurt the economy by keeping productive workers from producing. Similar arguments are still heard today. In wake of the Labor Department report, the federal government enacted the Age Discrimination in Employment Act in 1967. ADEA prohibited age-based discrimination against most people aged 40-65 in firms with 20 or more workers. (Firms are exempt if they can prove a bona-fide occupational qualification that is directly related to age or if the position is a high-salary policy-making position.) It passed with little controversy; only four House members and seven Senators voted against it. In 1978, Congress extended the protected age group to 40-70 and eliminated mandatory retirement for most federal employees. In 1979, the Labor Department gave administrative responsibility for enforcing ADEA to the U.S. Equal Employment Opportunity Commission, which increased resources for enforcement. ADEA was also strengthened in the 1978 amendment by a provision allowing those bringing lawsuits based on age the right to a jury trial. Juries are more likely than judges to find for the plaintiff than for the defense in these cases. Finally, in 1986, Congress amended ADEA to eliminate the upper limit on the protected age range, effectively ending mandatory retirement for all. (Exceptions to this elimination included BFOQs and cases where existence of job tenure would impose an undue hardship on the employer, such as for professors. Mandatory retirement was phased out for tenured positions by 1993.)

7. FAILURE TO FIND LIGHT DUTY ASSIGNMENT FOR POLICE OFFICER NOT PREGNANCY DISCRIMINATION:

Tysinger, a patrol officer and 8-year member of the City of Zanesville Police Department, brought suit against her employer alleging that she was subject to pregnancy discrimination, a form of se.x discrimination, in violation of federal and Ohio law. The district court found that Tysinger had failed to make out a prima facie case. On appeal, summary judgment was affirmed. Tysinger had alleged that the department engaged in se.x discrimination when it denied her accommodation of her pregnancy, despite having suitable positions available, and despite having granted accommodations to other similarly situated non-pregnant workers in the past. Tysinger had failed to produce evidence demonstrating that she had been subjected to disparate treatment because of her pregnancy. In addition, Tysinger had failed to rebut the department’s legitimate nondiscriminatory reason for its actions by showing it to be pretextual. (Interestingly, neither party raised propriety of the police department as a defendant: the department is not a judicial entity subject to suit; it is a subdivision of a municipal corporation, which is subject to suit. The city, Tysinger’s actual employer, should have been the named defendant.) Tysinger v. Police Department of the City of Zanesville, Case No. 05-3785 (U.S. 6th Cir., September 25, 2006).

8. FIREFIGHTERS MUST BE PAID FLSA OVERTIME EVEN IF EXTRA HOURS WORKED BY SUBSTITUTES:

Current and former firefighters sued the city to recover overtime pay they claimed was due under the Fair Labor Standards Act. The trial court granted summary judgment to the city, concluding that FLSA’s plain language prevents payment of overtime wages to those who have not actually worked. On appeal, the judgment was reversed. The firefighters were often scheduled to work more hours than FLSA permits an employee to work without receiving overtime pay, and on some of those occasions they would ask other employees to work shifts on their behalf. This kind of arrangement is common among firefighters and is permissible under FLSA, so long as it is voluntary and done with the employer’s permission. When a substitution occurs, the employer pays the scheduled employee and not the substitute; the amount the substitute receives is fixed by private agreement between the two employees. The city paid the firefighters straight time for their substituted shifts and also credited them for purposes of seniority and leave time, but refused to pay them overtime to which FLSA plainly would have entitled them had they worked the shifts themselves. The firefighters contended that a federal regulation entitled them to the same amount of overtime pay when substitutes worked their shifts for them. FLSA does not reveal a congressional intent to deny an employee overtime wages when another worker voluntarily substitutes for him with the employer’s permission. The Department of Labor’s regulation, 29 C.F.R. Sec. 553.31(a), crediting the nonworking employee with overtime is not inconsistent with FLSA. In addition, that regulation does not create an unreasonable burden on employers. All the city has to do is pay the scheduled employee as if he had worked the scheduled shift; it need not keep additional records. And the city need not monitor all shift exchanges, because any voluntary substitutions that take place will not cause the employer’s actual overtime expenditure to vary from the expectations that it developed when it first scheduled the employees. Senger v. City of Aberdeen, South Dakota, Case No. 05-3803 (U.S. 8th Cir., September 29, 2006).

9. SENATORS ASK FOR PENSION AGENCY PROBE:

Finance Committee Chairman Chuck Grassley (R-Iowa) and the Panel’s top-ranking Democrat, Max Baucus (D-Mont.), said they want the Government Accountability Office to report back by early next year with preliminary information on the Pension Benefit Guaranty Corporation, which insures traditional, defined benefit pension plans. Bankrupt steel and airline companies that have transferred pension responsibilities to PBGC have been a major factor in growing demands placed on the agency and its swollen debt. At the end of 2005, the agency recorded a deficit of almost $23 Billion. In their letter to GAO, the Senators said that 80% of all claims against PBGC have come since 2000. In 2000, the agency paid benefits of $900 Million to 240,000 people. Five years later, PBGC was paying $3.7 Billion in benefits to 698,000 people. The Senators are particularly concerned about how PBGC is handling the challenge and whether legislative changes are needed in PBGC’s structure, appropriations or law. PBGC’s operations are financed by insurance premiums paid by companies that sponsor traditional pension plans. It also earns money from investments and receives funds from pension plans it takes over. The agency is not funded through tax revenues. The fear, however, has been that a taxpayer-funded bailout could happen at some point if the private pension system was not appropriately overhauled.

10. FOOD FOR THOUGHT:

Although not apropos of anything, we came across the following words of the late Norman Vincent Peale, which surely provide food for thought:

  • You can make yourself sick with your thoughts, and you can make yourself well with them.
  • You are the sovereign judge of any thought that goes through your mind. You can't stop the birds from flying over your head, but you can keep them from building a nest in your hair.
  • A problem is a concentrated opportunity. The only people that I have ever known to have no problems are in the cemetery. Succeed by breaking problems apart and finding the values.
  • Action creates motivation. Action is the best medicine I know.

Now, that should assuage your hunger pangs.

11. “I SWEAR I DIDN’T KNOW THE STUFF WAS LACED!”:

Now here is a case of what appears to be an overdevoted wife. According to plansponsor.com, a 22-year veteran of the New York Police Department, who had been assigned to the Joint Terrorism Task Force, was suspended without pay after a random drug test found marij.uana in his system. As it turns out, his wife had taken to substituting marij.uana for oregano in her meatball recipe because she wanted to keep him out of harm’s way by forcing him into retirement. An assistant trials commissioner found the detective not guilty, ruling the positive drug test was a result of “involuntary ingestion.” He’s lucky she didn’t finish up with Alice B. Toklas brownies.

12. QUOTE OF THE WEEK:

“People never lie so much as after a hunt, during a war, or before an election.” Otto von Bismarck


Copyright, 1996-2006, all rights reserved.

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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