Severance Pay Considerations

Severance pay is one of those tricky items that can come back to bite an employer if care is not taken. In New York, for example, there is no statutory right to severance pay. However, if an employer either has a written policy or a regularized and well-known past practice of furnishing severance pay, then the employer is typically obligated to make the payment and apply the severance policy uniformly. If the employer maintains an unwritten, known past practice of providing severance, that’s generally just as binding as if a written policy existed. In short, by having a severance policy, written or unwritten, an employer may create an ERISA-protected benefit, any deviation from which could be unlawful.

New York employers may, however, retain discretion to vary the amount of severance in each individual case, and even award no severance pay at all, provided that such discretion is contained in the written severance policy or is part of the known, past practice. I am no fan of unwritten, past practices when it comes to employment policies as they are usually open to interpretation. This is true particularly in instances where the employer’s stated “understanding” of the policy differs markedly from that which may be provided by former and current employees. IMHO, an employment policy is as good as the paper upon which it is written.

In reviewing severance policies, employers may wish to consider whether to: (a) put the policy in writing if the policy is based purely on past practice; (b) retain discretion to vary the amount of severance or eliminate it altogether on a case by case basis; and (c) require the employee to execute an appropriately drafted Release as a condition for the severance payment. The matter of a Release is something which I find that most employers have ignored, often to their detriment.

The Revised I-9 Form

As I advised previously, as of December 26, 2007, employers are required to use the revised I-9 Form for all employees hired on or after that date. Employers are not required to re-verify existing employees for whom they have a properly completed I-9 Form. Essentially, the revisions concern changes to the list of identity documents which are acceptable proof of an employee's eligibility to work in the United States.

The I-9 Form is a very important document which must be completed and retained by all domestic employers for each employee hired in the United States. The I-9 Form requires the employer to verify the employment eligibility and identity documents provided by the employee and to record the document information on the Form. Employers who fail to use the newly amended Form I-9 may be subject to applicable civil penalties.

The revised form can be downloaded here.

New Requirements For OSHA Certification On New York Public Work

Last December, I posted on the newly enacted Labor Law Section 220-h, which becomes effective on July 18, 2008. As it is my practice to issue multiple posts as the effective date of pertinent legislation approaches, here's another reminder.

Labor Law Section 220-h applies to public works projects of $250,000 or more, and requires that all laborers, workers and mechanics working on any such project be certified as having completed an OSHA-approved construction safety and health course which is at least 10 hours long. It further mandates that the advertised bids and contracts for every public work project of at least $250,000 contain a provision setting forth this requirement.

The OSHA certification must be in place prior to the individual performing any work on the project. So, if a member of the workforce is scheduled to take the course but has yet to receive the OSHA certification, he or she cannot work at the public jobsite.

Rules and regulations concerning the new law will be promulgated by the New York State Department of Labor. I'll fill you in when they are published.

Go To The Head Of The Class

An interesting decision was handed down recently by the United States District Court for the Eastern District of New York with respect to class action lawsuits involving wage claims under both Federal and State law.

In Guzman v. VLM, Inc., (E.D.N.Y., Case No. 07-CV-1126, Decided: March 2, 2008), the Plaintiffs (immigrant workers) were employed at a bakery located in Brooklyn, New York. They sued the employer for unpaid overtime under both the Fair Labor Standards Act (the “FLSA”) and New York Labor Law. Plaintiffs moved for class certification and Defendants cross-moved to dismiss. In granting class certification, the court exercised supplemental jurisdiction to permit certification under State law instead of under the FLSA. As a basic premise, supplemental jurisdiction permits a Federal court, in its discretion, to determine State law claims which are so related to the Federal claims that they form part of the same case or controversy.

By exercising supplemental jurisdiction, the Guzman court could determine the FLSA and New York Labor Law claims, thereby avoiding certain restrictions imposed by the FLSA. The main such restriction being the requirement that participants affirmatively “opt-in” to the class action. In contrast, the New York class action statute (CPLR § 903) provides that all persons are covered by a certified class action unless they specifically "opt out." Interestingly, Rule 23(c) of the Federal Rules of Civil Procedure (which was superseded in this instance by the class action provisions of the FLSA) is similar to the New York statute in that it does not require an “opt-in” for class participation.

The court found this “opt-out/opt-in” distinction to be important given that many members of the proposed class, primarily immigrant and/or undocumented workers, might be reluctant to “opt-in” because they feared retaliation. Further, the court determined that the use of supplemental jurisdiction was appropriate in the interests of judicial economy, convenience, and fairness since the State law and FLSA claims arose out of a common nucleus of operative facts. To this end, the court found that "the factual overlap between the federal claims and the state claims is virtually total," and stated that “there is no reason that FLSA’s collective action procedure is incompatible with maintaining a state law class action over the same conduct.”

In Guzman, the court took an exceedingly practical approach. Plainly, it would have been a waste of judicial resources to limit the case to the named Plaintiffs while a parallel case (seeking class action status) would likely have been commenced against Defendants in State court alleging virtually identical claims. Indeed, quite a legal morass could result if inconsistent determinations issued from the Federal and State courts based upon common factual circumstances.

While it remains to be seen as to whether Plaintiffs will prevail on the substance of their claims, the Guzman court implemented a logical and perfectly appropriate procedural methodology to achieve a pragmatic and legally defensible result.