The case involved Saint Clair Adams, a Northern California computer salesman, who applied for a position with the national electronics retailer Circuit City in October 1995. When he was hired, Adams signed an arbitration agreement in which he agreed to submit any employment-related claims he might have in the future to arbitration.

Two years later, Adams sued Circuit City in state court, claiming that he had resigned after being repeatedly harassed by coworkers and a store manager because he is gay. Circuit City filed suit in federal court to stop the state court proceeding and enforce the arbitration agreement under the Federal Arbitration Act (FAA). The FAA makes commercial arbitration agreements enforceable in federal court, except for employment contracts for "seaman, railroad employees or any other class of workers engaged in foreign or interstate commerce." Disagreeing with all other federal appeals to address the issue, the Ninth Circuit held that this exception applied to all employment contracts and refused to enforce the arbitration agreement. Reversing the appeals court, the Supreme Court upheld the employer’s right to arbitration, ruling that the FAA exempted only the employment contracts of transportation workers, such as railway employees and seaman.

Perhaps the most important question raised by the Circuit City decision may be its effect on increasing employment arbitration. Employment arbitration has grown rapidly in the past decade, and surveys have shown as many as one in twelve U.S. workers is covered by an arbitration clause. The Supreme Court decision will inspire employers across the nation to seriously consider using arbitration agreements. Arbitration, however, can mean both good and bad news for employers.

Companies that are sued can see a real cost benefit in arbitration. Taking employment disputes to arbitration can be quicker and more efficient, less costly, user-friendly for both employee and employer and more fair. Companies that use arbitration can avoid the expense of a long jury trial as well as discovery orders that seek information from the company files. Arbitration also does away with the possibility of a huge damages verdict.

If you would like more information on the topic presented in this article, please contact an attorney in the Labor and Employment Practice Group.

By John T. Vogel, Esq.

Despite significant costs, employers often provide early retirees with health insurance coverage until the retirees are eligible for Medicare. But as a result of several recent federal court decisions, employers might face age discrimination claims after generously providing these benefits.

The facts reflect that Erie County provided Medicare eligible retirees with SecurityBlue, a Medicare HMO, but retirees under 65 had their choice of either traditional indemnity insurance or SelectBlue, a point-of-service program. Despite this difference in coverage based on age, the Third Circuit held the County would have a defense if it met the "equal benefit/equal cost" rule. Under this rule, a benefit plan is ADEA compliant if it provides either equal benefits to employees (including retirees) or the employer incurs equal costs for providing different benefits.

Upon remand, the Federal District Court for Western Pennsylvania held that the County’s benefit arrangement violated the "equal benefit/equal cost" rule. See 2001 U.S. Dist. LEXIS 5299 (W.D. Pa. April 16, 2001). The County conceded that it could not meet the "equal cost" portion of the test because SecurityBlue cost the County less than did the other health plans. In determining whether traditional indemnity insurance, SecurityBlue and SelectBlue provided "equal benefits," the District Court looked at how much each insurance plan cost the retiree (as opposed to the employer).

The Court found that under SecurityBlue the Federal Government pays Highmark a fee to handle a retiree’s medical claims but that SecurityBlue requires covered retirees to continue paying their Medicare Part B premiums. According to the Court, this essentially meant that older retirees were paying their Medicare premiums to Highmark. More important, these Medicare premiums were greater than the contributions retirees who chose SelectBlue or traditional indemnity paid. As SecurityBlue participants "paid" a greater proportion of their insurance premiums than did the younger retirees selecting other coverages, the County’s plan (for this and other reasons) failed the "equal benefit" portion of the test.

Interestingly, the District Court was unwilling to conclude that HMO’s such as SecurityBlue by their very nature were inferior to the traditional indemnity plans. The Court believed that retirees reasonably might prefer the lower co-payments and added features of a Medicare HMO instead of the greater choice of service providers traditional indemnity insurance provided.

As a result of Erie County, employers who provide retiree health benefits, particularly as an inducement for early retirement, should review their present arrangements to determine if any potential problems exist. While rumors abound that Congressional legislation to reverse Erie County may be in the future, employers nonetheless should be prepared.

On April 16, 2001, the U.S. Supreme Court agreed to decide whether workers with repetitive stress injuries can qualify as disabled employees under the Americans with Disabilities Act (ADA).

This is the second time in as many years that the Supreme Court has reviewed the reach of the ADA, the 1990 law that requires employers to make reasonable accommodations for qualified workers who are limited by mental or physical impairments.

Two years ago the Supreme Court ruled that the law did not cover employment applicants who were rejected because of impairments that could be corrected or treated with medication.

Now the court will decide whether the law protects a worker who is unable to do a particular job because of tendinitis or back trouble that was caused by that job. The outcome in the two cases, to be heard this fall, could affect the estimated one million U.S. workers who suffer from repetitive motion injuries.

If the worker with the repetitive stress injury is judged to have a disability, the ADA will require employers to make reasonable accommodation, such as assigning the worker to a job that does not strain the injured wrist, shoulders or back. However, if the injury does not qualify for disability, the employer will not be obligated to find other work for the employee.

In their appeals to the high court, employers are likely to argue that the ADA should not cover workers who have repetitive stress injuries because these injuries prevent them from performing only a narrow category of tasks associated with their specific jobs. As such, these impairments would not substantially limit the employees’ ability to work.

The Supreme Court will not likely decide this issue until next year. In the meantime, employers should consider reports of repetitive stress injuries on a case-by-case basis and should consult legal counsel about requests for accommodations.

If you would like more information on the topic presented in this article, please contact an attorney in the Labor and Employment Practice Group.

In an effort to reduce violent and abusive conduct, the Pennsylvania legislature and courts have placed increased responsibilities on employers whose employees interact with children and the elderly. As a result, employers are finding it increasingly more important to conduct thorough background checks on their employees.

In response to significant growth of the American elderly population, the Pennsylvania legislature increased the burden placed upon employers engaged in providing care to adults over the age of sixty to thoroughly investigate the criminal backgrounds of all potential employees. Organizations, both public and private, that provide services to the elderly, must perform background checks of their employees or face potentially severe civil and criminal penalties.

The Older Adults Protective Services Act was enacted by the Pennsylvania legislature to protect the elderly from abuse, neglect, exploitation and abandonment. To further this end, recent amendments to the Act have broadened their scope and increased the obligations placed upon administrators and owners of facilities who provide care for the elderly. Now, any organization providing services to care-dependent adults over the age of sixty must complete thorough criminal investigations of all employees. Administrative individuals responsible for hiring must investigate the criminal history of all potential new hires, sometimes requiring exhaustive state and federal inquiries. The failure to do so could subject the administrator and the facility owner to stiff civil sanctions as well as potential criminal penalties, including imprisonment of up to one year.

If a potential new hire will have or may potentially have contact with any individual who receives care, services or treatment from the organization, that employee must be investigated. If the potential employee has been a resident of Pennsylvania for at least two years, the facility is required to review a criminal history report generated from the State Police or its central repository. If the applicant has not been a Pennsylvania resident for at least two years, the facility must review a federal criminal history record generated by the Federal Bureau of Investigation. While most facilities are aware of these requirements, they may be unaware of what to do with the results.

Agencies and organizations that fall within the Act are prohibited from hiring any applicant or retaining any employee if the background check indicates that the individual has been convicted (not merely arrested or charged) of certain crimes. While it comes as no surprise that homicide, rape, and arson fall within the list of prohibited offenses, other, less serious convictions are also included. For instance, convictions for shoplifting or failing to return a library book could also prohibit the applicant from employment. Similarly, unlawfully providing another with access to a computer system or forgery are also prohibitive. Because the Act does not limit the age of the conviction, convictions like those referenced above, even if twenty or thirty years old, may still prevent the applicant’s employment.

The legislature has not been alone in placing this increased burden on employers. Pennsylvania courts have also recognized a duty on the part of employers to exercise reasonable care in determining an employee’s propensity for violence.

As the law continues to focus on the rights of victims of violence to recover against anyone arguably responsible for the harm inflicted upon them, an awareness of each employee’s history is increasingly more important. In order to protect employers and managerial personnel from potentially large civil verdicts and serious criminal liability, managers and human resources professionals must be cognizant not only of the obligations to investigate, but also of what to do with the results of these investigations.