Managing Rules And Risks: Are You Ready For The New Regs?

1. Managing Rules And Risks: Are You Ready For The New Regs? Wednesday, September 15, 2004

2. Welcome Moderator, Mike Orren Publisher, Texas Lawyer

3. Balancing Employment Risks and Managing Risk-Shifting Strategies Vicki Birenbaum Doug Haloftis Brian Pudenz

4. EEOC Charge StatisticsFY 1992 Through FY 2003 The number for total charges reflects the number of individual charge filings. Because individuals often file charges claiming multiple types of discrimination, the number of total charges for any given fiscal year will be less than the total of the eight types of discrimination listed. The data are compiled by the Office of Research, Information, and Planning from EEOC's Charge Data System - quarterly reconciled Data Summary Reports, and the national data base. * EEOC began enforcing the Americans with Disabilities Act on July 26, 1992.

5. Nationwide Plaintiff Recovery Probability for Employment Practice Liability Overall (1996-2002) Source: Employment Practice Liability: Jury Award Trends and Statistics (2003), Jury Verdict Research

6. Nationwide Plaintiff Recovery Probability for Sex Discrimination

7. Nationwide Plaintiff Recovery Probability for Race Discrimination

8. Nationwide Plaintiff Recovery Probability for Age Discrimination

9. Nationwide Plaintiff Recovery Probability for Disability Discrimination

10. Nationwide Statistical Trends in Discrimination Awards The compensatory award median, probability range, award range and award mean for all plaintiff verdicts collected for the years 1996 through 2002 involving discrimination are analyzed in the table below.

11. Distribution of Discrimination Awards, Overall (1996-2002) The following table provides the distribution of compensation awards and percentage of the total number of awards within specific dollar ranges for overall discrimination awards. This category included a combination of age, disability, national origin, pregnancy, race, religion, sex and sexual orientation discrimination. Award Range Percentage To - $ 4,999 4 5,000 - 9,999 3 10,000 - 24,999 7 25,000 - 49,999 10 50,000 - 74,999 8 75,000 - 99,999 7 100,000 - 249,999 20 250,000 - 499,999 17 500,000 - 749,999 8 750,000 - 999,999 4 1,000,000 - 1,999,999 7 2,000,000 - 4,999,999 4 5,000,000 + 2

12. 350,000 326,250 300,000 250,000 228,012 200,000 158,000 150,000 139,900 138,596 100,000 50,000 46,248 0 Filing Discrimination Filing Sexual Whistleblower Filing Workers' Retaliation, Other Retaliation, Overall Claim Harassment Claim Claim Compensation Nationwide Median Awards for Retaliation Cases (1996-2002) Dollars

13. Award Range for Retaliation Cases Percentage To - $ 4,999 4 5,000 - 9,999 5 10,000 - 24,999 8 25,000 - 49,999 11 50,000 - 74,999 8 75,000 - 99,999 6 100,000 - 249,999 18 250,000 - 499,999 19 500,000 - 749,999 8 750,000 - 999,999 4 1,000,000 - 1,999,999 5 2,000,000 - 4,999,999 2 5,000,000 + 1

14. Median Award by Defendant Type For Discrimination, Federal District Court Cases (1997-2003) Defendant Type Source: Employment Practice Liability: Jury Award Trends and Statistics, 2004 Edition.

15. Analysis by Defendant Type The following pie chart reveals the industry breakdown of defendant types based on plaintiff and defendant verdicts rendered from 1996 through 2002.

16. Nationwide Employment Practice Liability Settlements (1996-2002) The settlement median, probability range, total range and mean for all settlements collected for the years 1996 through 2002 are analyzed in the table below.

17. Nationwide Settlement Trends (1996-2002) The following table provides the distribution of settlements and the percentage of the total number within specific dollar ranges for the years 1996 through 2002. Distribution of Settlements

18. 160,000 149,425 140,000 127,000 120,000 115,000 103,025 100,000 80,000 71,500 60,000 40,000 20,000 17,250 0 Title VII Awards ADEA Awards ADA Awards W/C Retaliation TCHRA Awards FMLA Awards Awards Texas Median Awards for Employment Cases (2002-Present) Dollars Source: Information collected from Westlaw Data Base.

19. EPL Considerations Nexus Between Retention $’s and Claims Trends Employer size Relationship to Median Verdicts/Settlements Impact Early claim evaluation Claim management paradigm

20. EPL Considerations (Cont’d) • Duty to Defend Policies • Pro’s • Timing of financial contribution • Less worry about allocation • Con’s • Limitations on lawyer selection • Constraints of litigation guidelines • Panel Counsel Evaluation

21. EPL Considerations (Cont’d) • Settlement • Usually require insured’s consent • “Hammer” clause • Tension between Economic and Reputational Concerns • Common denominator: competent counsel

22. EPL Considerations (Cont’d) • Coverage Issues • Defense costs included within policy limits • Same policy forms unclear • Notice of claim • Exclusions • “Bodily injury” only excluded • “Bodily injury and personal injury” exclusion • Exception to injury exclusion: emotional distress, mental anguish, and humiliation • Assault and battery

23. EPL Considerations (Cont’d) • Breach of Contract • Within “wrongful act” definition • Written contract exclusions • Express contract exclusions • Oral Contract exclusions • FLSA Exclusions

24. EPL Considerations (Cont’d) • Recap • Purchase considerations: • Packages • Inter-corporate coordination • Paradigm • Exposure • Retention • Price • Counsel relationships • Scope of coverage

25. The Fair Labor Standards Act:Old Law, Brand New RegulationsBill Belt Carrie Hoffman Ron Gaswirth

26. Collective Actions

27. Settlements and Judgments • Shoney’s – $18 MM • Radio Shack – $27 MM • Eckerd – $ 8 MM • Rite-Aid – $25 MM • Albertsons – $37 MM • Taco Bell – $13 MM • Farmers Insurance – $90 MM * • Pacific Bell – $28 MM • Wells Fargo – $4.6 MM

28. Collective Actions • Section 16 B • Court can order mailed notice • No Rule 23 • Opt-in only • lower number of plaintiffs • No res judicata • 2-year statute of limitations • 3-year willful

29. Certification – 5th Circuit • Similarly Situated • Lenient standard to be certified: similarly situated in job and pay provisionally after close of discovery • Stringent standard applied at de-certification stage • Issues • Names and Addresses Produced • Court Ordered Notice

30. De-certification • Opt-in Plaintiffs not similarly situated

31. What To Do? • Audit • Exempt jobs • Off-clock work • Rules • Wait time • Travel time • Break time • Make sure overtime is calculated correctly

32. New Wage and Hour Regulations

33. Brand New Regulations • DOL issued final regulations on April 20, 2004 • Became effective on August 23, 2004 • Not all of the proposed regulations remain, especially the elimination of the “discretion and independent judgment” duty requirement • The increased salary requirements remain in the final regulations, but were increased further • The final rule includes many significant changes that take into account 75,280 comments from the public

34. New “Fair Pay” Regulations • So-called “white collar” overtime exemptions • Eliminates the short and long tests and replaces them with one “standard test” per exemption • Increases the minimum salary paid to a white collar exempt employee (executive, administrative, professional) • From $155/week ($8,060/year) – Former long test • To $455/week ($23,660/year) – New standard test

35. New “Fair Pay” Regulations • Overtime exemptions do not apply to certain classifications of employees, regardless of salary: • “Blue collar” workers who perform work involving repetitive operations with their hands, physical skill and energy • Police officers, fire fighters, paramedics, emergency medical technicians and similar safety and first responder employees • Licensed practical nurses and other similar health care employees

36. New “Fair Pay” Regulations • Highly Compensated Employees Highly compensated employees performing office or non-manual work and paid total annual compensation of $100,000 or more (which must include at least $455 per week paid on a salary or fee basis) are exempt from the FLSA if they customarily and regularly perform at least one of the duties or responsibilities of an exempt executive, administrative or professional employee identified in the standard tests for exemption.

37. Executive Exemption • NEW: The employee must be compensated on a salary basis at a rate not less than $455 per week; • The employee’s primary duty must be managing the enterprise, or managing a customarily recognized department or subdivision of the enterprise; • The employee must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent; and • NEW: The employee must have the authority to hire or fire other employees, or the employee’s suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees must be given particular weight.

38. Administrative Exemption • NEW: The employee must be compensated on a salary or fee basis at a rate not less than $455 per week; • The employee’s primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and • The employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.

39. Professional Exemption - Learned • NEW: The employee must be compensated on a salary or fee basis at a rate not less than $455 per week; • The employee’s primary duty must be the performance of work requiring advanced knowledge, defined as work which is predominately intellectual in character and which includes work requiring the consistent exercise of discretion and independent judgment; • The advanced knowledge must be in a field of science or learning; and • The advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction.

40. Professional Exemption - Creative • NEW: The employee must be compensated on a salary or fee basis at a rate not less than $455 per week; • The employee’s primary duty must be the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic endeavor.

41. Computer Employee To qualify for the computer employee exemption, the following tests must be met: • The employee must be compensated either on a salary or fee basis at a rate not less than $455 per week or, if compensated on an hourly basis, at a rate not less than $27.63 per hour; • The employee must be employed as a computer systems analyst, computer programmer, software engineer or other similarly skilled worker in the computer field performing the duties described below;

42. Computer Employee (Cont’d) To qualify for the computer employee exemption, the following tests must be met: • The employee’s primary duty must consist of: • The application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software or system functional specifications; • The design, development, documentation, analysis, creation, testing or modification of computer systems or program, including prototypes, based on and related to user or system design specifications; • The design, documentation, testing, creation or modification of computer programs related to machine operating systems; or • A combination of the aforementioned duties, the performance of which requires the same level of skills.

43. Outside Sales • The employee’s primary duty must be making sales (as defined in the FLSA), or obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer; and • The employee must be customarily and regularly engaged away from the employer’s place or places of business. • Salary requirements do not apply.

44. Maximizing Lawsuit and Class Action Avoidance:  Creating The Right Work Environment and The Data To Prove ItKenneth Broodo

45. Maximizing Lawsuit and Class Action Avoidance LAWFUL, adj.Compatible with the will of a judge having jurisdiction.LAWYER, n.One skilled in circumvention of the law.LITIGANT, n. A person about to give up his skin for the hope of retaining his bones.LITIGATION, n. A machine which you go into as a pig and come out of as a sausage. -Ambrose Bierce, The Devil’s Dictionary

46. Maximizing Lawsuit And Class Action Avoidance: Creating The Right Work Environment • Work Environment/Correction • HR Organization and Purpose • Anti-Discrimination Practices • Statistical Analysis/Measurement • Data Collection and Coding • Monitoring and Feedback • Decision-Making Processes/Prevention • Notice and Opportunity • Standards and Consistency

47. Work Environment • HR Organization and Purpose • Anti-Discrimination Practices “Sometimes a cigar- is just a cigar.” -Sigmund Freud

48. HR Organization 1. Functional Integration 2. Role of Operations 3. Ombudsman

49. B.Anti-Discrimination & Diversity Measures 1. Posted Non-Discrimination Notice 2. Publication of Revised EEO Policy Statement * Review of Value-Based Policy Issues 3. Diversity Training 4. Written Communications 5. Diversity Incentives

50. C. Discrimination Complaints and Non-Retaliation 1. Program Review 2. Written Complaint and Investigation Procedures 3. Non-Retaliation Policy