Employment Law Watch : Employment & Labor Lawyer & Attorney : Reed Smith Law Firm

Tucked away in Act 44 of 2009, landmark legislation intended to relieve the significant financial strain on municipalities throughout Pennsylvania, in particular Philadelphia and Pittsburgh, the General Assembly imposed a set of best-practices standards on every municipal pension plan in the Commonwealth. Act 44 contains sweeping changes for the use of professionals by municipal pension systems by imposing substantial selection procedures and disclosure requirements.  Chapter 7-A of Act 44 mandates an open competitive selection process for any and all professional services contracts when the municipal pension system is a party. Basically, any entity receiving money from a municipal pension fund, such as actuaries, fund custodians, fund managers, plan advisors and other professional consultants, going forward, may be retained only after being selected through a competitive process. Furthermore, under Act 44, the “most qualified” bidder must be selected. Finally, Act 44 contains conflict-of-interest standards, restrictions on political contributions, and annual disclosure requirements.

This article explains the mandates of the new Act and provides a checklist of tasks necessary for compliance by a municipality.

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This post was written by Sara A. Begley and Miriam S. Edelstein.

The Pennsylvania Human Relations Commission (“PHRC”) has proposed “Policy Guidance” stating that it intends to treat an employer's rejection of an African-American or Hispanic applicant because of his or her criminal record as presumptive evidence that the employer is discriminating against the applicant in violation of the Pennsylvania Human Relations Act (“PHRA”).

The proposed Policy Guidance potentially presents significant new hurdles for Pennsylvania employers as they attempt to strike the correct balance between instituting security-minded and non-discriminatory hiring practices. This is particularly critical in fields that are highly regulated by federal, state and administrative bodies. Employers in regulated industries are already bound by a myriad of statutory, regulatory and court authority that includes prohibitions against employing individuals convicted of specific offenses in certain occupations. 

The PHRC is seeking public comments regarding the proposed Policy Guidance by January 26, 2010, so that it can consider them before deciding whether to adopt the final Policy Guidance on February 22, 2010. A copy of the proposed Policy Guidance can be found on the PHRC’s website,  and includes instructions for submitting comments. Please read on for further information regarding the potential issues the proposed Policy Guidance raises for Pennsylvania employers, and suggestions of points to include if you choose to submit comments to the PHRC.

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Introduction

On October 9, 2009, Gov. Rendell signed into law Act 51 of 2009 (“Act 51”), which removed the 100 percent Killed-in-Service benefit from Act 600 and created a similar but not identical benefit under the Emergency and Law Enforcement Personnel Death Benefits Act (“Death Benefits Act”), 53 P.S. § 891 et seq. While the Death Benefits Act creates a 100 percent survivor benefit for firefighters, ambulance service or rescue squad members, and police officers who die in the line of duty, only borough and township police officers, under Act 600, previously had a Killed-in-Service benefit guaranteed by state pension law. This article is limited to the interplay between Act 600 and Act 51. While a cursory reading of the new law suggests a limited change to the existing benefit, Act 51 significantly impacts the current benefit available to surviving spouses and creates challenges for municipal employers in eliminating the now-illegal benefit from an Act 600 Pension Plan. This brief analysis reviews the Act 600 survivor benefits available prior to the passage of Act 51, the new benefit created by Act 51, and identifies the issues that must be addressed in order to transition safely to the new Act 51 benefit.

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This post was written by Scott E. Blissman and Joel S. Barras.

The Supreme Court has recently declined to review the Commonwealth Court’s 2008 holding that a municipality properly included officers that had entered into a deferred retirement plan in the municipality’s calculation for state pension aid. In a time when municipal pension funds have been devastated by market conditions, this ruling will increase the amount of state aid many municipalities will receive to help satisfy increasing minimum municipal obligations.

Background

City of Erie v. Department of the Auditor General involved the City’s establishment of a Partial Lump Sum Distribution Option (“PLSDO”). The PLSDO allowed City employees who had reached certain age and length-of-service requirements to select a “pension look-back date” that preceded their actual termination date by 12, 24 or 36 months. For purposes of pension calculations, the pension look-back date would be used as the effective date for the employee’s retirement benefits. The employee would continue to work for the City, but would no longer accrue seniority or service credit; however, the employee was required to continue contributing to his or her pension plans between the pension look-back date and the date of employment termination. Following the employee’s separation of employment, he or she would receive his or her normal retirement benefits determined as of the pension look-back date, as well as a lump sum cash distribution equal to the participant’s monthly retirement benefit, multiplied by the number of months elected in the PLSDO. In most respects, the PLSDO is analogous to Deferred Retirement Option Plans or In-Service Retirement Option Plans.

During an audit by the Department of the Auditor General (“AG”), the AG determined that the City included PLSDO participants in the City’s preparation of its PF-385 form used to receive state pension aid. The AG believed that PLSDO participants should not be included as employees eligible for Act 205 monies, because they were, in effect, retired. Conversely, the City believed that the PLSDO participants should be counted in the calculations, because they were still actively working between their elected pension look-back date and their actual termination date. The AG’s audit recommended that the City reimburse the commonwealth for the excess state aid received in error. The City challenged the recommendations in the audit report concerning the excess state aid through the AG’s administrative process, and the AG’s hearing officer sustained the audit report findings. The City appealed that decision to the Commonwealth Court.

The Commonwealth Court’s Decision

The Commonwealth Court appropriately focused its analysis on the applicable statutory language that authorizes state pension aid; i.e., Section 402 of the Municipal Pension Plan Funding Standard and Recovery Act (commonly referred to as “Act 205”). Act 205 established a General Municipal Pension System State Aid Program that provides funds that municipalities may use to supplement their pension plans. The court noted that the amount of money a municipality may receive is based on “each active employee who was employed on a full-time basis for a minimum of six consecutive months prior to December 31 preceding the date of certification and who was participating in a pension plan maintained by that municipality…” (emphasis added).

The court then concluded that the PLSDO’s pension look-back date is merely used for pension calculation purposes, and not as the date that the employee stopped working. Rather, an employee who participated in the PLSDO continued to work on a full-time basis and contribute to the pension plan beyond the look-back date. Finally, the court noted that the definition of “active employee” indicates that the PLSDO participants are engaged in an activity; i.e., their continued employment. There were no limitations or restrictions placed on their jobs once the employees elected the PLSDO. Therefore, the court held that the City was not required to refund the state aid received for participants of the PLSDO.

Practical Effects for Pennsylvania Public Employers

• Employers should include active employees who are participating in deferred retirement option plans on their roster of employees for purposes of calculating state pension aid.
• Employers should expect unions to emphasize this decision in pushing to obtain such deferred retirement option plans, or to obtain enhancements of the benefits available under these plans.
• While there are many similarities between the PLSDO and a traditional DROP or IROP, the courts may rely upon a few differences in distinguishing this case from one involving a traditional DROP or IROP. Specifically, the court noted in City of Erie that the employees continued to contribute toward their pensions, which does not occur in traditional DROP or IROP settings.

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This post was written by Scott E. Blissman and Joel S. Barras.

The Supreme Court has declined to review the Commonwealth Court’s 2008 holding that a Borough was statutorily required to promote the top-scoring candidate on its eligibility list. Accordingly, the Court found that the Borough erred when it promoted a lower-scoring candidate, who was in the top three on the eligibility list, to fill a position for the Captain of its Fire Department.

Background

Borough of Wilkinsburg v. Colella involved a civil service firefighter who had served as the Borough’s Fire Department Chief Engineer for almost eight years. When the Captain position became vacant, the Borough held an examination to establish the eligibility list for the position pursuant to its civil service rules and regulations. Each candidate who took the exam received a score based on his or her performance on the written and oral portions of the examination. The candidates were then ranked by final score and placed on the eligibility list for promotion. Colella received the highest score. However, the Borough promoted another employee, who was serving as the acting Captain, even though that employee received a lower score on the exam, but was still in the top three. The Borough did so on the basis that it could select any of the top three candidates on the list for promotion.

The Chief Engineer filed a statutory appeal of the decision to the Court of Common Pleas, which sustained the Engineer’s objections and directed the Borough to promote him to the position of Captain. The Court of Common Pleas reasoned that the Borough Code required promotions to be based solely on the outcome of the examination. Thus, the Borough did not have any discretion to choose from the three highest scorers on the eligibility list when filling the vacant Captain’s position by promotion, as opposed to when it hired a new firefighter. The Borough then appealed to the Commonwealth Court.

The Commonwealth Court’s Decision

The Commonwealth Court affirmed the ruling of the lower court. The court drew a clear distinction between original appointments and subsequent promotions. Under the Borough Code, the ability to select from a list of the highest-scoring applicants applied only to original positions. Such discretion did not apply to promotions. Specifically, the language allowing for discretion in the selection process for original appointments did not appear in the provision relating to promotions. The Borough’s interpretation of the Borough Code ignored this distinction and would have rendered the provision pertaining to promotions meaningless. Earlier cases to the contrary were distinguishable, because they were decided before the Pennsylvania General Assembly amended the Borough Code to limit the ability to select from a list of the highest-scoring applicants to original positions. Since virtually identical language appears in the First Class Township Code and the Third Class City Code, promotions in those communities must also comply with this ruling. With the Supreme Court declining to review this decision, this decision is now established law.

Practical Effects for Pennsylvania Public Employers

• All Boroughs, First Class Townships, and Third Class Cities should amend their civil service rules to provide that promotions must be awarded to the highest-ranking individual on the civil service list.
• The only way to avoid promoting the highest ranked individual is to decline to fill the position. Promotions are discretionary; a municipality is not required to fill a position simply because there is an opening. See Trosky v. Civil Service Commission, City of Pittsburgh, 539 Pa. 356, 652 A.2d 813 (1995).
• Note that veteran’s preference does not apply when promoting current civil service employees.
• Joseph C. Rudolf and Ryan J. Cassidy are currently preparing a Fifth Edition of their publication, Model Hiring Manual for Pennsylvania Municipalities, which is distributed by the Pennsylvania Department of Community and Economic Development. We will be sending out an Alert when this publication is finished. If you would like a copy of the Fourth Edition, please respond to this e-mail.

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This post was written by Scott E. Blissman and Joel S. Barras.

In a recent decision by the Pennsylvania Labor Relations Board (“Board”), the Board found that a public employer committed an unfair labor practice by prohibiting its unionized employees from smoking in outdoor work spaces. This case represents the Board’s attempt to balance its longstanding case law requiring employers to negotiate prohibitions on employee smoking with the recently passed Pennsylvania Clean Indoor Air Act. Specifically, the Board concluded that the Clean Indoor Air Act permits public employers to unilaterally ban smoking by employees in all indoor work areas without first negotiating with the employees’ union, but the statute does not apply to outdoor spaces. The case may proceed on appeal to the Commonwealth Court, and we will update you if and when the case progresses.

Background

In Association of Pennsylvania State College and University Facilities v. Pennsylvania State System of Higher Education, prior to September 2008, faculty and coaches were allowed to smoke indoors and outdoors, subject to previously negotiated local restrictions at the various state college and university campuses. In September 2008, the State System of Higher Education (“SSHE”) informed the faculty’s union that the Pennsylvania Clean Indoor Air Act prohibited smoking in the workplace, and as such, any past practice or provision in the operative collective bargaining agreement that permitted such activity was null and void. As the new law did not provide an exception for existing labor agreements, the SSHE did not negotiate or discuss this new prohibition prior to its implementation.

In response, the union filed a charge of unfair labor practices with the Board, alleging that the state unilaterally changed a term of employment that is a mandatory subject of bargaining. Initially, the Board Hearing Examiner dismissed the charges, citing the overriding authority of the Clean Indoor Air Act. The union filed Exceptions to the Board, which reversed the Examiner’s Proposed Decision and found the SSHE violated Act 195 by failing to bargain with the union regarding the outdoor smoking ban.

The Pennsylvania Labor Relations Board’s Decision

In its decision, the Board first noted that the General Assembly can pass legislation that requires public employers to unilaterally change a mandatory subject of bargaining, regardless of its bargaining obligations to its employees’ unions. As such, to the extent that the Clean Indoor Air Act applies to public employers’ facilities and their employees, the Act would supersede existing provisions in any labor agreement. In reviewing that law, the Board agreed with the Hearing Examiner that public employers were statutorily required to prohibit smoking in their indoor facilities by members of the public and public employees. However, after analyzing the Act’s provisions, including its name – the Clean Indoor Air Act – and the General Assembly’s public deliberations, the Board held that it did not apply to outdoor areas. Accordingly, the Board concluded that its established case law that required bargaining over smoking prohibitions still applied to those spaces. Therefore, the SSHE committed an unfair labor practice by unilaterally banning smoking by unionized employees in outdoor work spaces.

Practical Effects for Pennsylvania Public Employers

Public employers are permitted, and in fact required, to prohibit smoking by their employees in all of their indoor facilities and vehicles. However, with regard to their public parks and other outdoor spaces, current contract provisions and established past practices control. Before a public employer can modify its outdoor smoking policy for unionized employees or institute a new policy, it must first gain the assent of the union representing any impacted employee.

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This post was written by Joel S. Barras, Scott E. Blissman, and Daniel J. Moore.

The Third Circuit Court of Appeals has ruled that the Philadelphia Police Department did not violate Title VII of the 1964 Civil Rights Act when it denied an officer’s request to wear a headscarf, a head covering traditionally worn by Muslim women, while in uniform and on duty. According to the court’s ruling, the Department successfully demonstrated that allowing the officer to wear a headscarf on duty would impose an undue hardship on the Department.

Background

The dispute began in 2003 when the officer requested permission from her commanding officer to wear a headscarf while on duty. The officer’s request was denied pursuant to the Department’s strictly-enforced internal uniform policy. The officer subsequently filed a complaint of religious discrimination with the Equal Employment Opportunity Commission (“EEOC”) and the Pennsylvania Human Relations Commission (“PHRC”). While these administrative agencies investigated her complaints, the officer continued to report to work wearing a headscarf, eventually resulting in a temporary 13-day suspension, without pay, for insubordination.

In 2005, the officer brought suit against the city of Philadelphia in federal district court, alleging religious discrimination. The district court granted summary judgment in favor of the city, holding that the officer could not be reasonably accommodated without imposing an undue burden on the city.

The Third Circuit’s Decision

The Third Circuit affirmed the district court’s ruling. The court explained that an employer is not required to accommodate a religious belief if it can show that the requested accommodation would cause an undue burden on the employer and its business. In this context, an accommodation constitutes an “undue hardship” if it would impose more than a de minimis cost on the employer. Here, the city presented testimony that strict enforcement of the Department’s uniform policy was
“critically important to promote the image of a disciplined, identifiable and impartial police force by maintaining the Philadelphia Police Department uniform as a symbol of neutral government authority, free from expressions of personal religion, bent or bias.” Such uniformity encouraged officers to subordinate their personal preferences in favor of the overall policing mission, and conveyed a sense of authority and competency both inside the Department and to the general public. Accordingly, the court found that the city had shown that wearing a religious headscarf would impose an undue burden on the Department, and that the district court’s grant of summary judgment was proper.

Practical Effects for Pennsylvania Public Employers

The Third Circuit’s decision is consistent with a number of federal courts holding that police departments are not required to accommodate an officer’s request to wear religious garb while on duty. For example, a court in another jurisdiction has held that a police department was not required to accommodate an officer’s request to wear a gold cross pin on his uniform in contravention with the department’s no-pins policy. It is important that police departments have a detailed, written uniform and appearance policy. Such policies can and should address tattoos and piercings that would be visible on an officer while in his or her uniform. Additionally, it is important that police departments apply any such policy consistently, without exceptions. A court would likely rule differently had the department provided medical exemptions for a particular aspect of the uniform policy or grooming standards (e.g., a “no-beard” policy), while refusing religious exemptions. As a practical matter, this uniform and appearance policy should be included with your job application materials to avoid situations where a newly appointed officer claims that he or she was unaware of work rules on appearance. If your police department does not have such a policy, contact one of the attorneys at Reed Smith to obtain a model policy.

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This post was written by Scott E. Blissman and Joel S. Barras.

In light of the economic downturn, public employers have been forced to consider and, in some cases, to implement layoffs as part of a greater labor cost reduction strategy to address lost tax and other revenues. While it is always a difficult decision to furlough employees, the federal government has stepped in to provide some relief to these individuals. The recently passed federal Stimulus Plan amended benefits provided under COBRA and the health care coverage continuation provisions of the Public Health Services Act. Any employer with 20 or more employees and thereby subject to the requirements of COBRA or the PHSA with an employee who has or will have been involuntarily terminated during the period from September 1, 2008 through December 31, 2009 must take action.

The most significant changes to these benefits for former employees are as follows:

• For a period of up to nine months beginning on or after March 1, 2009, any qualified beneficiary whose employment is involuntarily terminated between September 1, 2008 and December 31, 2009 is required to pay only 35 percent of the applicable premium amount, rather than up to 100 percent of the premium.
• Employers are reimbursed for the 65 percent of the premium they pay through an offsetting payroll tax credit.
• The 65 percent premium subsidy is tax free for taxpayers with a modified gross income of up to $125,000 ($250,000 in the case of a joint return).
• Employers must provide each qualified former employee with written notice regarding the availability of subsidized COBRA and PHSA premiums, the availability of an extended election period, and the individual's rights and obligations to receive subsidized COBRA or PHSA continuation coverage.
• An additional COBRA election period allows individuals who did not elect COBRA continuation coverage as of Feb. 17, 2009, but who would otherwise be considered a qualified former employee on that date, to elect COBRA subsidized coverage. This individual will be able to elect subsidized coverage going forward, but not retroactively. Again, employers must provide a notice to these former employees regarding the extended COBRA election period and subsidy.

With regard to informing former employees of their rights to these expanded benefits, the U.S. Department of Labor released model notices to assist employers in complying with the new requirements. A brief description and a link to each model notice can be found below.

General Notice (Full version) – The General Notice is the COBRA election notice updated to include information about subsidized COBRA premiums required by the Stimulus Plan. This Notice can be used for all qualified beneficiaries who experience a qualifying event at any time from September 1, 2008 through December 31, 2009.

General Notice (Abbreviated version) – The abbreviated notice is an abbreviated version of the General Notice that does not include the COBRA coverage election information. It may be sent in lieu of the full version to individuals who experienced a qualifying event on or after September 1, 2008, have already elected COBRA coverage, and still have coverage.

Alternative Notice – Insurance carriers that provide group health insurance coverage in accordance with state law must send the Alternative Notice to persons eligible for continuation coverage under state law.

Notice in Connection with Extended Election Periods ("Extended Election Notice") – This Notice must be sent to any assistance-eligible individual who (i) had a qualifying event at any time from September 1, 2008 through February 16, 2009, and (ii) either did not elect COBRA continuation coverage, or who elected it but subsequently discontinued COBRA. This notice must be provided by April 18, 2009.

Employers should immediately begin work internally and with their outside COBRA administrators to update and distribute the required notices.

For a .PDF copy of this alert, please click here. 

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