Month: January 2005

KaiserNetwork.org points out here that the topic of benefits made it into the inaugural address (online here) only briefly:

In America’s ideal of freedom, citizens find the dignity and security of economic independence, instead of laboring on the edge of subsistence. This is the broader definition of liberty that motivated the Homestead Act, the Social Security Act, and the G.I. Bill of Rights. And now we will extend this vision by reforming great institutions to serve the needs of our time. To give every American a stake in the promise and future of our country, we will bring the highest standards to our schools, and build an ownership society. We will widen the ownership of homes and businesses, retirement savings and health insurance – preparing our people for the challenges of life in a free society. By making every citizen an agent of his or her own destiny, we will give our fellow Americans greater freedom from want and fear, and make our society more prosperous and just and equal.

Nevin Adams, Executive Editor for Plan Sponsor.com and Plan Sponsor magazine, has a “2005 To-Do List” for the industry here. Dittos for this item on the list:

Rethink/rebuild the three-legged stool. Once upon a time, this nation had a philosophy for helping ensure retirement security predicated on the notion of government programs (like Social Security) working in tandem with private savings and employer-sponsored programs as a three-legged stool of support. We?re at least talking about Social Security these days (well, some are), but accounting/financing rules and burdensome regulations continue to whittle away at the promise of defined benefit plans. Meanwhile, what used to be additional support?the defined contribution plan?is increasingly the only employer-sponsored option. Worse, in many cases, it appears to have supplanted the personal savings leg of the stool. Maybe we don?t need three legs on that stool; maybe we need four, but it is time we quit carving the legs individually and realized we actually will have to sit on this stool one day soon.

Rick Meigs, founder of the 401khelpcenter.com, has written a commentary discussing trends that he sees coming in the 401(k) arena for 2005. Two of the trends he notes are a continued focus by regulatory agencies (i.e. SEC and DOL) “on revenue sharing and the issue of fees being ‘hidden’ from the plan sponsor” as well as the “rise of the independent fee-only pension consultant.”

Michael Fox has a good post on the recent EEOC charges filed against a major law firm for age discrimination. He has links to the EEOC’s press release here as well as a link to a prior case decided in 2002–EEOC v. Sidley Austin Brown & Wood, 315 F.3d 696 (7th Cir. 2002). He writes:

The basic legal question is simple — when does a partner (and probably equity shareholder, in firms that are professional corporations) have so little say in the running of the firm, that they are for purposes of the discrimination laws just another employee.

In an earlier decision, partially enforcing an EEOC subpoena which preceded the filing of last week’s complaint, Judge Posner lays out the arguments and issues in EEOC v. Sidley Austin Brown & Wood, 315 F.3d 696 (7th Cir. 2002). Although clearly only deciding a preliminary issue, it is hard to read the opinion without coming to the conclusion that Sidley Austin may have an uphill battle on the initial legal question. Of course overcoming the hurdle of the partnership is only the first step. . .

Regarding this issue of whether “partners” are “employees” for ADEA purposes, the EEOC press release has this to say:

EEOC’s Regional Attorney in Chicago, John C. Hendrickson, said that in resisting the EEOC investigation and in forcing the EEOC to obtain judicial enforcement of its subpoena, “Sidley’s unwavering position has been that the matters involving how the law firm dealt with those it referred to as ‘partners’ and whether it engaged in discrimination were simply way beyond the reach of the ADEA and EEOC.” However, according to Hendrickson, the EEOC administrative investigation revealed that, “except for a very few controlling partners at the very top, Sidley’s lawyers appeared to be ordinary employees not unlike their colleagues at parallel levels in the business community and, therefore, covered by the ADEA.”

Hendrickson said, “Whatever titles Sidley had decided to give these lawyers–partner, counsel, or otherwise–our investigation indicated that they had no voice or control in governance of the firm and that they could be and were fired just like any other employees without notice and without the vote or consent of their fellow attorneys. A small self-perpetuating group of managers at the top ran everything, and that was it–end of story.”

Interestingly enough, the opinion written by Judge Posner for the case decided in 2002, relies on an ERISA case in reaching the conclusion that the “partners” in question could possibly indeed be “employees” for purposes of the ADEA. He states:

The problem of line drawing presented by this case is not unique to employment. It arises whenever legal consequences turn on classification as partner versus employee, whether in tax and tort cases or in discrimination cases. . .

The same problem of the tyranny of labels arose when the Supreme Court had to draw the line in ERISA between an “employee,” defined unhelpfully as in the ADEA as “any individual employed by an employer,” 29 U.S.C. § 1002(6), and an independent contractor. The Court could have said that an employee is anyone who is called an employee. Instead it said:

In determining whether a hired party is an employee under the general common law of agency, we consider the hiring party’s right to control the manner and means by which the project is accomplished. Among the other factors relevant to this inquiry are the skill required; the source of the instrumentalities and tools; the location of the work; the duration of the relationship between the parties; whether the hiring party has the right to assign additional projects to the hired party; the extent of the hired party’s discretion over when and how long to work; the method of payment; the hired party’s role in hiring and paying assistants; whether the work is part of the regular business of the hiring party; whether the hiring party is in business; the provision of employee benefits; and the tax treatment of the hired party. Since the commonlaw test contains no shorthand formula or magic phrase that can be applied to find the answer, . . . all of the incidents of the relationship must be assessed and weighed with no one factor being decisive.

Nationwide Mutual Ins. Co. v. Darden, 503 U.S. 318, 323-25 (1992) (citations and internal quotation marks omitted). In a subsequent case, we said the most important factor in deciding whether a worker was an employee or an independent contractor was the employer’s right to control the worker’s work.

The EEOC case could have a great impact on law firms and the legal profession, in general, as the demographics of firms change with more and more of the baby boom generation of lawyers coming of age.

The Wall Street Journal is reporting here that the Defense of Marriage Act (“DOMA”) has been upheld by a federal district court in Florida. U.S. District Judge James S. Moody today upheld the federal law, dismissing a lawsuit by two women seeking to have their Massachusetts marriage recognized in Florida. An Associated Press article (via the New York Times) is here.

Read more about DOMA, how it interacts with ERISA, and how it impacts the benefits arena in previous posts which you can access here.

Also, an article here by USAToday.com reports that the Louisiana Supreme Court unanimously reinstated a marriage amendment to the state constitution that was overwhelmingly approved by voters in September. At issue was a provision of the amendment that stated: “A legal status identical or substantially similar to that of marriage for unmarried individuals shall not be recognized.” Eleven other states adopted similar amendments in the fall elections. The Louisiana Supreme Court reversed a state district judge’s ruling in October which had struck down the amendment on the grounds that it violated a provision of the state constitution requiring that an amendment cover only one subject. You can access the opinion here.

Update: Thanks to a reader who emailed me a bankruptcy case, In re Kandu, decided in August of 2004 in which the court also upheld DOMA. No link to the actual case, but you can read about it here.

Further Update: Thanks to a reader for sending me a link to the Kandu case here. Links to other documents in the case are here.

BusinessWeek Online last week launched two new blogs: The Tech Beat which will cover “innovations, trends, and dustups in the world of tech” and the Deal Flow which will discuss developments in the “world of venture capital and startups.”

(Source: Micro Persuasion and Real Lawyers Have Blogs.)

Interesting article here authored by Maria O’Brien Hylton: “The Changing World of Employee Benefits.” Opening excerpt:

When I graduated from law school in 1985, there were no courses offered in employee benefits law. Nor, as near as I can recall, was ERISA ever discussed in any of the labor and employment classes I took. There was no mention in the introductory labor law course or in other classes about employment discrimination, union organizing, and employment arbitration. Now, in contrast, many law schools include a course on employee benefits and ERISA, and students hoping to work in the labor and employment area frequently find that ERISA work is plentiful, and traditional NLRA work is not. This, of course, reflects larger changes in the market for legal services. . .

At the end of her article, the author makes a recommendation that willing employers and employees be allowed to bargain for “compensation arrangements that are now impermissible because of minimum wage and overtime laws” so that “employees who wanted to could ‘purchase’ health insurance with a specified number of hours of uncompensated overtime or with a lower hourly wage.” She suggests that such “arrangements would be attractive to dual earner households; in effect one might work for wages and the other for benefits.”

Of course, it goes without saying that the outlook of the single earner household (and of many today who must pay more and more of their income to cover the skyrocketing costs of health insurance) is rather bleak–presenting a choice of either having enough to live on or or having adequate medical care.

For those of you who may share my fascination with space exploration, the international Cassini-Huygens space mission to Titan, Saturn’s largest moon, is sending back pictures. Don’t miss this great one here from SaturnToday.com. There are more pictures here.