Supporters of such laws say they are necessary because an increasing number of employers are doing credit checks even though there is no proof that bad credit is a marker of risky employees.  They say the practice unfairly injures the huge pool of people whose credit was damaged by layoffs, medical bills or other factors beyond their control. They also say it disproportionately screens out minorities.  “Bernie Madoff had a pretty good credit score,” said Matthew Lesser, a Connecticut state representative.

The limited research on the topic seems to support the new laws.  Even a spokesman for one of the credit reporting companies acknowledges that there is no research to show any statistical correlation between what’s in somebody’s credit report and their job performance or their likelihood to commit fraud.

Advice to employers:  only use credit report history when there is some correlation between that information and the position in question, such as those that regularly handle money.  And only use the credit report as one factor among several in evaluating candidates.

This recent article in the New York Times should remind us that employers can get themselves into trouble by offering “unpaid internships” that are not really internships.  Agencies in several different states have investigated the use of internships and have, in some cases, fined employers who are actually using the interns to provide unpaid labor.  As one official at the federal Department of Labor suggested:  “If you’re a for-profit employer or you want to pursue an internship with a for-profit employer, there aren’t going to be many circumstances where you can have an internship and not be paid and still be in compliance with the law.”

 In order for the “intern” to qualify as an unpaid “trainee” and not an “employee” (who must be paid), six criteria must be met:

 1. The training received, even though it includes actual operation of the facilities of the employer, is similar to what would be given in a vocational school or academic educational instruction;

 2. The training is for the benefit of the trainees;

 3. The trainees do not displace regular employees, but work under their close observation;

 4. The employer that provides the training derives no immediate advantage from the activities of the trainees, and on occasion the employer’s operations may actually be impeded;

 5. The trainees are not necessarily entitled to a job at the conclusion of the training period; and

 6. The employer and the trainees understand that the trainees are not entitled to wages for the time spent in training.

Most employers find that the fourth factor is the most difficult to meet because an intern’s activities will generally provide some benefit to the company.  Only if all of the factors listed above are met is the worker a “trainee” do the minimum wage and overtime provisions of the Fair Labor Standards Act not apply.  By contrast, the mere fact that an employer labels a worker as a trainee and the worker’s activities as training does not make the worker an intern or  trainee for purposes of the FLSA unless the six factors are met.

 I recommend that any employer that uses interns use a written agreement setting out these six factors, and designate a manager to ensure that each factor is being met.

And does anyone think that Ross is really an intern on the Tonight Show?

Employers of a “qualified employee” are excused from paying the employer’s portion of Social Security taxes on that employee’s wages in 2010. A qualifying employee is one who (a) is hired after February 3, 2010 and before January 1, 2011; (b) does not replace another employee; (c)  is not related to the employer;  and (d) certifies under penalty of perjury that he or she has not been employed for more than 40 hours during the 60-day period ending on the date that employment begins with the new employer.

This incentive can save the employer up to $6,621.60 for each qualified employee hired (6.2% of the maximum Social Security withholding for 2010), with increased savings for hiring qualified veterans, whose maximum Social Security withholding amount is higher. Employers also can receive a tax credit on their 2011 return for each new employee hired and retained for 52 weeks under certain criteria; that credit is the lesser of $1,000 or 6.2% of the wages paid to the employee for those 52 weeks.

The text of the new bill may be found here.

This morning there are a couple of interesting privacy stories that serve as good reminders of best practices in this area.  The first arises in connection with a union arbitration over discipline meted out to an employee of a municipal liquor store in Paynesville, Minnesota.  As you know, these types of arbitrations usually depend largely on the terms of a particular collective bargaining agreement and the specific past practices of the employer.  What makes this matter interesting, however, is that the employee’s bad conduct came to light because the employer was surreptitiously making audio recordings of everything that happened in the store.

As I discussed here,  employers are generally free to use video surveillance techniques (except in places like locker rooms where employees have a “reasonable expectation of privacy”).  It is far riskier, however, for employers to use audio surveillance, especially if the employees are not made aware of it.  Besides potentially violating federal and state laws governing wiretapping, such a practice might also constitute an invasion of privacy.

The arbitration decision in the Paynesville case mentioned above confirms this analysis.  As the arbitrator wrote: “To meet a fairness or just cause standard, employees would need to be told that they would be subject to both audio and visual surveillance and that the information gathered would be used to review their performance, and potentially used as a basis for discipline.”  While non-union employers probably don’t need to include the language about surveillance being used to review performance, the best practice is for employers who chose to use audio surveillance for legitimate business reasons to advise their employees that they are doing so; otherwise, the employee may claim that she had a reasonable expectation that her private conversations would remain private.

The second development involves credit checks on prospective employees.  As this article in yesterday’s Star Tribune discusses, a number of states are considering legislation that would limit employer’s ability to do credit checks on job applicants based on fears that it unfairly harms people in debt because of past financial problems.

As I have written about before, employers should not have blanket policies regarding background checks for applicants. Credit problems and criminal convictions should not be automatic exclusions; rather, they should be evaluated based on the job, the amount of time since the problem, and other factors.  As one Wisconsin legislator quoted in the Star Tribune rightly put it: “If someone is trying to get a job as a turck driver or a trainer in a gym, what does his credit history have to do with his ability to do that job?”

According to a new survey by health insurance company HealthPartners, health care costs are the biggest obstacle to business expansion for Minnesota businesses.

Almost two-thirds of companies said health costs jumped 10 percent or more in the past two years, with a quarter reporting costs increasing by more than 20 percent

Many employers blame employee lifestyles for the cost increases.  Seventy-one percent said their workers had poor health habits — not exercising enough, not eating enough fruits and vegetables, or smoking.

According to the survey, employers are resorting to a variety of tactics to lighten their health costs. About 60 percent are increasing employees’ share of costs through higher premiums, co-pays or deductibles.

Only laid-off workers who cannot get coverage under another group health plan, like a spouse’s plan or Medicare, are eligible for the subsidy. The premium assistance is available for individuals whose income is under $145,000 and for families filing jointly with incomes under $290,000. The subsidy phases out for those earning more than $125,000 (or $250,000 for families).

According to a December study of large employers by the benefits consultant Hewitt Associates, average monthly enrollment rates have increased by 20 percentage points since the subsidy was enacted in March 2009. In the six months before enactment, an average of 19 percent of eligible workers enrolled in Cobra each month. During the nine months after the subsidy became law, that figure increased to 39 percent of eligible employees.

Plans subject to the Federal COBRA provisions must provide a General Notice to all qualified beneficiaries, not just covered employees, who experienced a qualifying event at any time from September 1, 2008 through February 28, 2010, regardless of the type of qualifying event, and who have not yet been provided an election notice. Individuals who experience any qualifying event after December 19, 2009 must get the updated General Notice within the normal time frames for providing a COBRA election notice. The updated model General Notice includes information on the premium reduction as well as information required in a COBRA election notice.

Plan administrators must also provide notice to certain individuals who have already been provided a COBRA election notice that did not include information regarding the extension. The DOL has developed a model Premium Assistance Extension Notice. This model notice includes information about the changes made to the premium reduction provisions of ARRA by the 2010 DOD Act. Listed below are the affected individuals and the associated timing requirements.

• Individuals who were “assistance eligible individuals” as of October 31, 2009 (unless they are in a transition period – see below) and individuals who experienced a termination of employment on or after October 31, 2009 and lost health coverage (unless they were already provided a timely, updated General Notice) must be provided notice of the changes made to the premium reduction provisions of ARRA by the 2010 DOD Act by February 17, 2010;

• Individuals who are in a “transition period” must be provided notice of the changes made to the premium reduction provisions of ARRA by the 2010 DOD Act within 60 days of the first day of the transition period. (The transition period begins immediately after the end of the nine months of premium reduction in effect under ARRA before the amendments made by the 2010 DOD Act, as long as the premium reduction provisions of the 2010 DOD Act would apply due to the extension from nine to 15 months).

The Supreme Court seems likely to accept a case involving background checks on employees who do contract work for the government, a legal hodgepodge which one judge has analogized to a turducken (a turkey stuffed with a duck and a chicken). 

The case was brought by a group of scientists and engineers at the Jet Propulsion Laboratory, a research facility operated by CalTech under a contract with NASA.  In 2004, the government expanded the scope of background checks required for many government jobs, including those held by contract employees like those at the lab.  The plaintiffs claim that the government’s investigations are overly intrusive and violate their privacy rights.  The Ninth Circuit Court of Appeals agreed with the plaintiffs, and the government has asked the Supreme Court to hear the matter.

The plaintiffs particularly object to requests for information being solicited from schools, landlords, employers and other third parties, especially “adverse” information about alcohol and drug use; finances; and mental or emotional stability.  One form also gives informants space to provide “derogatory” information about the subject.

Two interesting stories on privacy issues this morning.

First, Acorn is having even more problems because a republican activist did a little dumpster diving behind its offices in San Diego and came out with a bunch of documents containing social security and driver’s license numbers of its members and job applicants.    Ouch!

Second, Sen. Patrick Leahy is sponsoring a bill called the Personal Data Privacy and Security Act of 2009 that would require entities that keep personal data (like employers) to establish effective programs for ensuring that such information is kept confidential.    You should definitely get ahead of this curve.

Two rather obvious suggestions:  first, have a written plan in place to maintain the confidentiality of all documents and electronic data that contain personal information like social security numbers, and train your employees to follow the plan.  Second, when you throw documents in the trash, shred those that contain confidential or private information.  You never know who might be diving into those dumpsters behind your office!

The Department of Labor announced Friday that it has hired an additional 250 wage and hour investigators to respond more quickly to complaints and undertake more targeted enforcement of wage and hour laws.

In the past three months, the Labor Department has brought two enforcement cases that resulted in the recovery of nearly $2 million in back wages for 500 workers.

The Wage and Hour division administers the Fair Labor Act, which sets standards for minimum wages, overtime pay, recordkeeping, and child labor. The act applies to companies with at least $500,000 in annual business.

Of greatest concern to most employers is the complicated area of deciding which employees are exempt from receiving overtime pay and which are non-exempt.  The DOL’s website includes a tool to help employers make proper classifications.