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Chapter 21: The Employee s Safety Nets: Unemployment and Workers Compensation, Social Security, and Retirement Plans

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Chapter 21: The Employee s Safety Nets: Unemployment and Workers Compensation, Social Security, and Retirement Plans

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    1. © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 21 - 1 Chapter 21: The Employee’s Safety Nets: Unemployment and Workers’ Compensation, Social Security, and Retirement Plans Employment & Labor Law 7th Edition Cihon & Castagnera

    2. © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 21 - 2 Introduction Worker protection from unemployment, on-the-job injury, work-related disability and old age Federal Employment Liability Act (FELA): A federal law designed to protect and compensate railroad workers injured on the job (passed in 1908) The Railway Labor Act (passed in 1926) The Employee Retirement Income Security Act (ERISA) was passed in 1974 in response to numerous instances of pension fund mismanagement and abuse

    3. © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 21 - 3 Unemployment Compensation Unemployment Compensation: Benefits paid to employees out of work through no fault of their own and who are available for suitable work if and when it becomes available Fault will disqualify workers from unemployment compensation Willful Misconduct: The high level of fault that disqualifies an out-of work worker from unemployment benefits Poor performance Voluntary quitting

    4. © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 21 - 4 Litigating Unemployment Claims Unemployment compensation litigation usually starts with a terminated worker’s application for benefits The claim is usually evaluated by an unemployment office/agency in the area where the worker resides Appeals are possible whether the decision is favorable or unfavorable Appeals go to a referee, then state court, then Supreme Court (if necessary) Employment compensation claims can: Impact the organization’s bottom line (claims increase employer taxes) Create a record which is helpful to the claimant when later pursuing a discrimination or other type of wrongful discharge claim against the corporation Be included in a severance/release agreement between the company and an employee departing under less than amicable circumstances

    5. © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 21 - 5 Label Systems Corp. v. Aghamohammadi Facts: The defendants, Samad Aghamohammadi and Pamela Markham, both of whom were employed by Label Systems, were a married couple. Upon arriving at work one day, the defendants were terminated, accused of willful and felonious misconduct. Plaintiff filed a three-count complaint against the defendants, alleging conversion (theft), breach of duties of loyalty, and appropriation of trade secrets. Unemployment benefits were awarded to both employees, a decision the company appealed. The defendants counterclaimed against Label Systems, and filed a third-party complaint against the employer alleging vexatious litigation. After 3 hearings, both appeals were withdrawn by the plaintiffs. Issue: Whether the defendants had engaged in willful and felonious conduct, therefore making them ineligible for unemployment benefits Decision: The court found that the defendants did not engage in willful and felonious conduct.

    6. © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 21 - 6 Workers’ Compensation Workers’ compensation has been instituted in virtually every state as a statutory tradeoff Workers’ Compensation: Benefits awarded to an employee when injuries are work related Employer gets immunity from suits by employees Employee gains: Easy access to benefits Relatively simple adjudication of disputed claims Possibility of an additional recovery in a related third-party tort action

    7. © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 21 - 7 Ethical Dilemma Verona Meyer was employed by Sonrise at Burger King. She was working her shift at the restaurant, lost her footing, and struck her lower abdomen on the “Whopper board.” She was approximately 35 weeks pregnant at the time. Verona went to the hospital and delivered a girl baby, Patricia. Verona and Gary Meyer claimed that blunt trauma to Verona’s abdomen from the Whopper board resulted in the baby being born several hours later with severe injuries. In April 1998, the Meyers, on behalf of themselves and their daughter, Patricia, filed suit against Sonrise for negligence, alleging that both Verona and Patricia were injured in the course of Verona’s employment because of unsafe working conditions. The Meyers claimed damages for Patricia’s injuries, which allegedly included permanent mental and physical disabilities, and for their own subsequent losses due to destruction of the parent/child relationship.

    8. © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 21 - 8 Federal Preemption of Workers’ Compensation Claims Government acts (like FELA) typically supersede state workers’ compensation laws ERISA specifically exempts state workers’ compensation laws from its preemptive powers

    9. © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 21 - 9 Social Security The Social Security Systems’ benefits fall into three major categories: Retirement Insurance Benefits The original and main purpose of social security is to provide partial replacement of earnings when a worker retires Was never intended to totally replace what that worker was earning prior to retirement Medicare A form of health insurance that covers a portion of the costs of hospitalization and the medical expenses of insured workers and their spouses age sixty-five and older, as well as younger disabled workers in some circumstances Disability A severe physical or mental impairment prevents that person from working for a year or more or is expected to result in the victim’s death

    10. © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 21 - 10 Wall v. Astrue Facts: In 1995, Joan Wall suffered injury when a Cadillac struck the rear end of the vehicle she was driving. She was injured again in an August 1999 fall in a flooded restroom at work. She did not engage in any substantial work thereafter. Joan filed an application for supplemental social security benefits based on the disability. The ALJ concluded Wall was not disabled under the meaning of the Social Security Act. Issue: Whether the ALJ’s decision that Wall, while unable to perform her previous occupation, could still find suitable work was correct Decision: The appellate court panel ruled that the ALJ had done his duty in developing a full record of Wall’s alleged disability and therefore affirmed the ALJ’s decision.

    11. © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 21 - 11 Employee Retirement Income Security Act The Employee Retirement Income Security Act (ERISA) sets standards for pension plans including fiduciary conduct, information disclosure, plan taxation, and remedies for employees Imposes standards of conduct and responsibility upon pension fund fiduciaries Requires that pension plan administrators disclose relevant financial information to employees and the government Sets certain minimum standards that pension plans must meet to qualify for preferential tax treatment Provides legal remedies to employees and their beneficiaries in the event of violations

    12. © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 21 - 12 Eligibility for ERISA’s Provisions ERISA applies to two types of employee benefit plans established by employers: Welfare plans usually provide participating employees and their beneficiaries with medical coverage, disability benefits, death benefits, vacation pay, and/or unemployment benefits Pension plans are defined as including any plan intended to provide retirement income to employees and resulting in deferral of income for such employees ERISA does not apply to: Employee benefit plans that established by federal, state, or local government employers Plans covering employees of tax-exempt churches Plans maintained solely for the purpose of complying with state workers’ compensation, unemployment compensation, or disability insurance laws plans maintained outside the United States primarily for the benefit of nonresident aliens

    13. © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 21 - 13 Wirth v. Aetna U.S. Healthcare Facts: Wirth was injured in a motor vehicle accident caused by a third party tort feasor. He subsequently recovered a settlement from the third party tort feasor. Aetna U.S. Healthcare asserted a subrogation lien to recover monies from that settlement. Wirth filed a class action suit in state court alleging, inter alia, unjust enrichment and violation of Pennsylvania’s Motor Vehicle Financial Responsibility Law (MVFRL.) The district court dismissed Wirth’s claims, and Wirth challenged the decision. Issue: Whether ERISA preempts state law claims against the defendant Decision: The court held that Wirth’s claims against Aetna were completely preempted by ERISA and there was no error in the district court’s conclusion that it had jurisdiction over this matter.

    14. © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 21 - 14 Fiduciary Responsibility Fiduciary: Any person exercising discretionary authority over benefit plan administration, management, or disposition of plan assets; or who renders investment advice regarding the plan Fiduciary Responsibility ERISA imposes standards of conduct and responsibility on fiduciaries of benefit plans established or maintained by employers and unions engaged in or affecting interstate commerce All such plans must be in writing and must designate at least one named fiduciary who has the authority to manage and control the plan’s operation and management All assets of the benefit plan must be held in trust for the benefit of participating employees and their beneficiaries

    15. © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 21 - 15 The Working Law The 2008 Amendments to ERISA -Respond to Financial Crisis In December 23, 2008, President George W. Bush signed the Worker, Retiree, and Employer Recovery Act of 2008 (WRERA) The WRERA amends the Pension Protection Act of 2006 (PPA), the Internal Revenue Code, the Employee Retirement Income Security Act of 1974 (ERISA), and the Age Discrimination in Employment Act of 1967 (ADEA) The WRERA suspends the Required Minimum Distribution rules for 2009 for 401(k), 403(b), governmental 457(f) and other defined contribution plans and individual retirement accounts This suspension is a direct reaction by Congress to the “meltdown” in the financial markets and its devastating effect on retirement accounts The act allows participants who have reached the age when they are required to begin withdrawing funds from their retirement accounts, to postpone selling their investments at current depressed values

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