Employer-Provided Cell Phones Not Taxable Income to Employees

When an employer provides an employee with a cell phone for “noncompensatory” business reasons, the provision of the phone will not be taxable income to the employee, according to the Internal Revenue Service. This is the case even where the employee uses the phone for personal reasons as well as business reasons, and the employee will not need to substantiate that all or a portion of the cell phone use is for business purposes. In addition, certain reimbursements received for the business use of an employee’s personal cell phone will not be taxable to the employee to the extent the employer requires the employee to maintain and use the employee’s personal cell phone for business purposes.

In order for the provision of a cell phone or the reimbursement of cell phone expenses to be considered for reasons related to the employer’s business, there must be substantial reasons relating to the employer’s business for providing the cell phone. An example would be where the employer needs to contact the employee at all times for work-related emergencies, or where the employer requires that the employee be available at times when the employee is away from the office and/or at times outside of the employee’s normal work day. A cell phone provided to promote morale or to provide additional compensation will not meet these requirements and will be subject to normal rules regarding taxation of fringe benefits.

Seattle Requires Employers to Provide Paid Sick Days

The Seattle City Council has voted to require employers with five or more workers to provide paid sick days. Companies with 5 to 49 workers would have to offer full-time workers at least five paid sick days annually, while companies with 50 or more employees would have to provide at least nine paid sick days.

Supporters said it was especially important for public health that food-service and health-care workers have paid sick days, but business opponents said the legislation was an expensive mandate. Mayor Mike McGinn is expected to approve the legislation. The law wouldn't take effect for until September 2012, and new businesses would not have to comply until they've been operating for two years. Seattle is the third major city to enact a paid sick leave law; Washington, D.C., and San Francisco have similar laws.

EEOC Files Suit Against Bass Pro for Failing to Hire Blacks and Hispanics

Bass Pro Outdoor World, LLC (Bass Pro), a retailer of sporting goods, apparel, and other miscellaneous products, engaged in a pattern or practice of failing to hire African-American and Hispanic applicants for positions in its retail stores nationwide, and then retaliated against employees who opposed the discriminatory practices, according to the EEOC.

The EEOC’s suit, filed in U.S. District Court for the Southern District of Texas, Houston Division (Civil Action No. 4:11-CV-3425), alleges that Bass Pro has been discriminating in its hiring since at least November 2005. The EEOC claims that qualified African-Americans and Hispanics were routinely denied retail positions such as cashier, sales associate, team leader, supervisor, manager and other positions at many Bass Pro stores nationwide. The lawsuit also alleges that managers at Bass Pro stores made overtly racially derogatory remarks acknowledging the discriminatory practices.

The lawsuit further claims that Bass Pro retaliated by punishing employees who opposed the company’s unlawful practices, in some instances firing them or forcing them to resign. The EEOC also accuses Bass Pro of unlawfully destroying or failing to keep records and documents related to employment applications and internal discrimination complaints.

The EEOC's lawsuit seeks (1) a permanent injunction prohibiting Bass Pro from engaging in race discrimination, national origin discrimination, retaliation, and improper record destruction; (2) back pay on behalf of victims of hiring discrimination and/or retaliation; (3) compensatory and punitive damages; (4) the implementation of fair recruitment and hiring procedures, and (5) the reinstatement or rightful-place hiring of mistreated job applicants and former employees.

Indiana Law Restricts Employers from Requiring Employees and Applicants to Disclose Gun Possession and/or Use

Indiana has passed a new “Disclosure of Firearm or Ammunition Information as a Condition of Employment” law. Under the law, no "public or private employer doing business in Indiana" may "require an applicant… or an employee to disclose information about whether the applicant or employee owns, possesses, uses, or transports a firearm or ammunition, unless the disclosure concerns the possession, use, or transportation of a firearm or ammunition that is used in fulfilling the duties of the employment of the individual." Ind. Code § 34-28-8-6(1).

Employers are also prohibited from conditioning employment "or any rights, benefits, privileges, or opportunities offered by the employment" on an employee's or applicant's agreement to forgo lawfully owning, possessing, storing, transporting, or using a firearm or ammunition. Ind. Code § 34-28-8-6(2).

The law, which became effective July 1, 2011, covers all public and private employers "doing business" in Indiana.

New Jersey White Collar Overtime Regulations Now Follow Federal Regulations

The New Jersey Department of Labor and Workforce Development (NJDOL) has adopted the federal regulations regarding white collar overtime exemptions (and has repealed existing state regulations). New Jersey now joins the majority of states that track certain federal overtime exemption requirements. The new regulations are effective immediately.

As an example, New Jersey and federal wage and hour laws have exempted from overtime eligibility individuals employed in a bona fide administrative, executive, professional or outside sales capacity. This is called the “white collar” exemption. To qualify for this exemption, the employer must show that employees satisfy both a “duties” test and a “salary basis” test. The “duties” test looks at what an employee does. The “salary basis” test looks at the employee’s salary and requires that certain white collar employees be paid above a specific level of compensation.

While the U.S. Department of Labor simplified the federal regulations governing the white collar overtime exemptions in 2004, New Jersey did not follow – until now. Under the federal regulations, as simplified, an employee whose “primary duty” consists of the performance of exempt tasks, such as management tasks or non-manual work related to management or general business operations, may be classified properly as exempt. The law in New Jersey, however, had also required an employee dedicate at least 80 percent of his or her workweek to the performance of exempt tasks.

The different requirements were confusing, because employers may have properly classified employees as exempt under federal law while violating New Jersey law. The new regulations in New Jersey remove the 80-percent restriction on exempt work.

Occupational Safety and Health Review Commission Establishes Test to Determine Whether Attorney-Client Privilege Applies to Company Audits

The Occupational Safety and Health Review Commission has established a three-part test to determine whether third-party safety and health audits are protected from disclosure by the attorney-client privilege. Secretary of Labor v. Delek Refining, Ltd., OSHRC No. 09-0844 (July 11, 2011).

Delek hired a third party to conduct an audit of its process safety management program. This audit was meant to assist legal counsel in its compliance efforts. After the Occupational Safety and Health Administration (OSHA) investigated an explosion and fire at a Delek facility, litigation followed. During discovery, the Secretary of Labor requested a copy of the audit report, but Delek claimed the report was protected by attorney-client privilege. The Administrative Law Judge (ALJ) denied Delek’s motion to quash on the basis of privilege, and the company sought review of the denial with the Commission.  

The Commission set forth a three-part test to determine whether the privilege applies to third-party reports:

1. The company must have provided information to the third party (rather than the third party providing its own information).  
2. The company must have sought legal advice. 
3. In order to provide the legal advice, the attorney needed the services of the third party to translate technical or complex information.

The Commission did not rule on whether the report at issue met this test, it instead remanded that question to the ALJ to review the facts of the case in light of the three part test.

This case sets forth important factors for employers to consider when contracting with a third party to perform safety and health audits.

EEOC Sues Goodyear for Disability Discrimination

The EEOC has filed a lawsuit against the Goodyear Tire & Rubber Company, alleging that the company violated the Americans with Disability Act (ADA) by firing a qualified employee at its facility in Fayetteville, N.C., because of her bleeding disorder. Equal Employment Opportunity Commission v. The Goodyear Tire & Rubber Company, Civil Action No. 5:11-cv-00468 (E.D.N.C. 2011).

According to the EEOC, Alisha D. Adams applied for the position of tire builder at Goodyear’s Fayetteville facility in October 2007 and was extended a conditional offer of employment, subject to a post-offer medical examination. During this examination, Adams disclosed that she had menorrhagia, a bleeding disorder associated with her menstrual cycle. As a result of this disclosure, Goodyear required Adams to obtain medical clearances from two physicians, which she did, she was medically cleared to work. She began to work for Goodyear in January 2008.

In February 2008, Adams disclosed to her supervisor that she had been diagnosed with menorrhagia. Thereafter, according to the complaint, Adams was terminated by Goodyear because of its unfounded belief that Adams was substantially limited in the major life activity of working. The EEOC alleges in its lawsuit that Goodyear’s conduct violates the ADA. The suit seeks back pay, compensatory damages and punitive damages for Adams, as well as injunctive and other non-monetary relief.