The document discusses challenges and trends for HR professionals in 2011, including increased OFCCP enforcement of affirmative action rules, new reporting requirements for federal contractors, emerging issues under the ADA and GINA, high levels of EEOC charges and litigation, and state legislative priorities such as employment law reform, workers' compensation changes, and unemployment insurance solutions. The presentation provides an overview of legal issues and an outlook for HR practices in the coming year.

1. New Challenges
for HR in 2011
presented by Stinson Morrison Hecker LLP
St. Louis, Missouri | January 27, 2011
© 2011, Stinson Morrison Hecker LLP
www.stinson.com

2. WELCOME
Objectives
• Recent Changes
• Emerging Issues and Trends
• Practical Impact and Action Needed
• Outlook for 2011
© 2011, Stinson Morrison Hecker LLP
www.stinson.com

3. PRESENTER PROFILE
Laura Kipnis
Partner, St. Louis office
314.719.3022
lkipnis@stinson.com
© 2011, Stinson Morrison Hecker LLP
www.stinson.com

4. AFFIRMATIVE ACTION
• OFCCP Initiatives and Enforcement Priorities
• Compensation Guidelines Rescinded
• OFCCP Discontinues I-9 Inspections
© 2011, Stinson Morrison Hecker LLP
www.stinson.com

5. FEDERAL CONTRACTORS
• New Executive Compensation and Subcontractor
Reporting Rules
– Applies to contracts in excess of $25,000 issued after July 8, 2010
– Contractor must obtain information from first-tier subcontractors
(phased-in reporting)
– Executive compensation reporting of five most highly
compensated executives if:
• More than 80% annual gross revenues from government contracts
and that revenue is greater than $25 million; AND
• the public does not have access to information through SEC filings.
• Don’t Forget New Poster
© 2011, Stinson Morrison Hecker LLP
www.stinson.com

6. AMERICANS WITH DISABILITIES ACT
• EEOC Approves Final Draft of ADAAA Regulations
– Final regulations expected in March 2011
• EEOC Scrutinizes Leave of Absence Policies
– Carefully review leave of absence policies
– Allow for flexibility, case-by-case determinations
– Additional leave as a reasonable accommodation?
• Obesity Discrimination and the ADA
– Not directly addressed by ADAAA proposed regulations
– Expect more “actual” and “regarded as” cases
• Duty to Accommodate Not Limited Just to Problems
Once at Work
– Colwell v. Rite Aid Corporation
© 2011, Stinson Morrison Hecker LLP
www.stinson.com

7. GENETIC INFORMATION NON-
DISCLOSURE ACT
• Final Rule Issued
– Effective January 10, 2011
– Employers must notify health care providers not to
provide genetic information, including family medical
histories
– Safe harbor provision if receive information contrary to
notice
– Verify all forms, policies to ensure compliance but
employers do not need to purge files that already
contain information
© 2011, Stinson Morrison Hecker LLP
www.stinson.com

8. EEOC
• Highest Level of Changes in History
2010 – 99,922 2007 – 82,792
2009 – 93,277 2006 – 75,768
2008 – 95,402
• Highest Monetary Recovery
$319.3 million through private sector
administrative enforcement
• Increased Scrutiny of Credit Checks In Employment
Decisions
© 2011, Stinson Morrison Hecker LLP
www.stinson.com

9. LITIGATION TRENDS
• Litigation Trends
– Upward trend expected to continue for third year
– Wage and hour, discrimination and whistleblower/retaliation claims on
the rise
– Arbitration more prevalent in non-union employment disputes
• Legal Duty to Preserve Documents and Electronic
Information
– Employment cases routinely have earlier notice, prior to lawsuit
– Plaintiff’s attorneys becoming more sophisticated
– Put protocols in place; train key personnel
© 2011, Stinson Morrison Hecker LLP
www.stinson.com

10. U.S. SUPREME COURT - DECIDED
• 3rd Party Retaliation Claim Under Title VII
– Thompson v. North American Stainless
– Closely associated third party is protected
• Arbitration
– Stolt-Nielsen S.A. v. Animal Feeds International Corp.
– Class action claim not subject to arbitration unless arbitration clause
specifically includes class claims
© 2011, Stinson Morrison Hecker LLP
www.stinson.com

11. U.S. SUPREME COURT – PENDING
• Cat’s Paw Theory
– Staub v. Proctor Hospital
– Liability for discrimination by non-decisionmaker who influenced
decision?
• Arbitration
– AT&T Mobility v. Concepcion
– Does FAA prohibit states from mandating that class arbitration be
available as part of every arbitration agreement?
• Retaliation under FLSA
– Kasten v. Sant-Gobain Performance Plastics Corp.
– Oral complaint sufficient to support claim for retaliatory discharge?
• Class Action
– Dukes v. Wal-Mart Stores, Inc.
© 2011, Stinson Morrison Hecker LLP
www.stinson.com

12. INCREASED FOCUS ON MISCLASSIFICATION OF
EMPLOYEES AS INDEPENDENT CONTRACTORS
• IRS and U.S. Dept. of Labor Joint Initiative
• Missouri Dept. of Labor and Industrial Relations Audit
Changes
• What is at Stake:
– Income tax withholding
– Social Security
– Unemployment taxes
– Minimum wage and overtime pay
– Workers’ compensation coverage and premiums
– Qualified status of ERISA plans
– Number of employees for purposes of coverage under COBRA, FMLA, etc.
• Pro-active Steps
– Self-audit
– IRS 20 factor analysis of 1099s
© 2011, Stinson Morrison Hecker LLP
www.stinson.com

13. DEPARTMENT OF LABOR
• Attorney Referral Assistance for FMLA & FLSA Claims
• “Reasonable Break Time” for Nursing Mothers
– Applies to non-exempt employees
– Place other than bathroom must be provided
– Breaks need not be paid
– Exempts small employers if it would impose undue hardship
– Does not preempt state law
• DOL Administrative Interpretations Instead of Opinion
Letters
• New Initiative Regarding Exempt Employees
– Expect April 2011 release date
© 2011, Stinson Morrison Hecker LLP
www.stinson.com

14. MISSOURI SUPREME COURT
• Fleshner v. Pepose Vision Institute –
– First Missouri Supreme Court recognition of public policy exception to
employment at-will
– Whistleblower activities need not be the “exclusive causation” for
termination
• Keveney vs. Missouri Military Academy – wrongful
discharge based on public policy also applies to contract
employees
• Margiotta v. Christian Hospital Northeast – clarified narrow
scope of public policy wrongful discharge claim
© 2011, Stinson Morrison Hecker LLP
www.stinson.com

15. PRESENTER PROFILE
Mike Gibbons
Of Counsel, St. Louis office
314.259.4598
mgibbons@stinson.com
© 2011, Stinson Morrison Hecker LLP
www.stinson.com

16. MISSOURI BUSINESS LEGISLATIVE AGENDA
Employment Law Reform
Missouri employers want to:
1) Eliminate the ability of plaintiffs to sue supervisors and
employees in their individual capacity;
2) Confirm that the federal standard of proof in discrimination
cases is followed in Missouri so that discrimination must
be a motivating factor in the dismissal;
3) Ensure the law protects legitimate whistle blowers who
alert authorities to illegal activity performed by their
employer or who refuse to engage in illegal activity at the
request of their employer; and
4) Impose damage caps on claims to mirror the caps
imposed on similar claims in federal cases. (HB 205)
Source: Fix The 6 To Promote Missouri Jobs
© 2011, Stinson Morrison Hecker LLP
www.stinson.com

17. MISSOURI BUSINESS LEGISLATIVE AGENDA
Workers’ Compensation
Missouri employers want to:
1) Ensure that the claims of employees that contract
occupational diseases continue to be covered under Workers’
Compensation. Recently, some courts have decided that
most of these claims are not covered under the Workers’
Compensation system; (HB162, SB8) and
2) Protect fellow employees from liability when acting in the
regular course of their employment and accidentally injuring a
co-worker. A recent court decision has allowed a claimant
that received a Workers’ Compensation settlement to sue his
fellow employee for damages. (HB91, HB160, HB221, SB8)
Source: Fix The 6 To Promote Missouri Jobs
© 2011, Stinson Morrison Hecker LLP
www.stinson.com

18. MISSOURI BUSINESS LEGISLATIVE AGENDA
Tort Reform
Missouri employers want to eliminate the
concept of joint and several liability. Current
law allows judgments to be collected from
any party that is at least 51% at fault, rather
than a party’s liability for payment of a
judgment being directly related to the
percentage of fault.
Source: Fix The 6 To Promote Missouri Jobs
© 2011, Stinson Morrison Hecker LLP
www.stinson.com

19. MISSOURI BUSINESS LEGISLATIVE AGENDA
Unemployment Insurance
Missouri employers collectively have borrowed more than $722 million
from the federal government to pay unemployment claims. The ability
to issue bonds to repay these loans to the federal government already
exists in the law, but the term of the bonds must be lengthened.
Missouri employers will pay off the bonds through a surtax established
in current state law.
The State of Missouri will not be obligated to repay the bonds, nor will
the bonds hurt the state’s ability to incur other bonded indebtedness. If
this effort is not successful, EVERY Missouri employer can expect a tax
increase of about $21 per employee as they will lose Federal
Unemployment Tax credits. That amount doubles the following year
and triples the next year. (HB135, HB170)
Source: Fix The 6 To Promote Missouri Jobs
© 2011, Stinson Morrison Hecker LLP
www.stinson.com

20. MISSOURI BUSINESS LEGISLATIVE AGENDA
Franchise Tax Limit
Missouri employers want to place a limit on the
amount of Missouri Franchise Tax that any
Missouri corporation must pay. Missouri is one
of a few states that imposes both a corporation
income tax and a franchise tax levied on assets,
regardless of profitability. This first step will
protect Missouri companies that want to expand
or bring additional assets into Missouri.
(HB76, HB77, SB18, SB19)
Source: Fix The 6 To Promote Missouri Jobs
© 2011, Stinson Morrison Hecker LLP
www.stinson.com

21. MISSOURI BUSINESS LEGISLATIVE AGENDA
Minimum Wage
Missouri employers want to ensure the minimum
wage in Missouri does not exceed the federal
minimum wage. Missouri’s minimum wage law
allows an automatic inflation adjustment that
could result in a higher minimum wage in Missouri
than the federal minimum wage.
It is believed that as the minimum wage
increases, the ability of employers to continue to
employ workers is damaged, particularly affecting
entry level workers. (HB61, SB110)
Source: Fix The 6 To Promote Missouri Jobs
© 2011, Stinson Morrison Hecker LLP
www.stinson.com

22. PRESENTER PROFILE
Ted Mitchell
Associate, Kansas City office
816.691.2462
tmitchell@stinson.com
© 2011, Stinson Morrison Hecker LLP
www.stinson.com

23. EMPLOYEE BENEFITS
• Health Care Reform Updates
• Flex Spending: Over-the-Counter
Medicines and Drugs Implementation
• 401(k) Fee Disclosure Regulations
• IRS’s New Audit Program
• Top 5 Plan Mistakes
© 2011, Stinson Morrison Hecker LLP
www.stinson.com

24. HEALTH CARE REFORM-
NONDISCRIMINATION
• The Patient Protection and
Affordable Care Act (PPACA)
prohibits fully-insured plans that
are not grandfathered from
discriminating in favor of highly
compensated individuals (HCIs)
in benefits or eligibility.
© 2011, Stinson Morrison Hecker LLP
www.stinson.com

25. HEALTH CARE REFORM-
NONDISCRIMINATION
• Failing to comply with the nondiscrimination rules
can lead to excise taxes, civil money penalties,
or a civil action.
• However, the IRS, Treasury Department, and the
Departments of Labor and Health and Human
services recently stated that compliance with the
nondiscrimination provisions is not required until
there is further guidance published on the issue.
© 2011, Stinson Morrison Hecker LLP
www.stinson.com

26. HEALTH CARE REFORM: IMPLEMENTATION
• The U.S. Department of Labor, Employee
Benefits Security Administration has issued a
series of “FAQs About Affordable Care Act
Implementation.” Parts I-V can be found via
http://www.dol.gov/ebsa/healthreform/
© 2011, Stinson Morrison Hecker LLP
www.stinson.com

27. HEALTH CARE REFORM
IMPLEMENTATION: FAQs
• The most recent DOL/EBSA “FAQ About
Affordable Care Act Implementation” (Part V,
issued December 22, 2010) gives information
about automatic enrollment in health plans
(among other things).
• Employers with more than 200 employees are
not required to automatically enroll new full-time
employees in the health benefits plans until
further regulations are issued.
© 2011, Stinson Morrison Hecker LLP
www.stinson.com

28. FORM W-2: REPORTING HEALTH
CARE COSTS OF COVERAGE
• IRS Notice 2010-69 provided interim relief
for reporting the cost of coverage under an
employer-sponsored group health plan on
Form W-2; reporting this cost on Form W-2
is not required for 2011.
© 2011, Stinson Morrison Hecker LLP
www.stinson.com

29. FSA OVER-THE-COUNTER
MEDICINES AND DRUGS
• After December 31, 2010, health FSAs and
HRAs are no longer able to reimburse for over-
the-counter medicines and drugs unless
purchased with a prescription.
• Does not apply to insulin, medical equipment,
medical supplies, or diagnostic devices.
• If over-the-counter medicines or drugs are
purchased, the participant must substantiate
with a prescription!
– Acceptable substantiation: the actual
prescription, a copy of the prescription, or
substantiation from an independent third
party (for example, a pharmacy receipt with a
prescription number on it).
© 2011, Stinson Morrison Hecker LLP
www.stinson.com

30. FSA OVER-THE-COUNTER MEDICINES
AND DRUGS: USE OF DEBIT CARDS
• Health FSA and HRA debit card systems have not historically
been able to substantiate compliance with the new over-the-
counter purchase rules.
• The IRS in Notice 2011-5 allows that health care debit cards may
continue to be used to purchase OTC prescribed medicines or
drugs if:
– a prescription for the OTC medicine or drug is presented to a pharmacist;
– the over-the-counter medicine or drug is dispensed by the pharmacist in
accordance with applicable law and regulations pertaining to the practice of
pharmacy
– A prescription number is assigned, (the health debit card system does not work
unless an Rx number is assigned);
– the pharmacy retains records for the transaction;
– the pharmacy records are accessible by the employer's plan or its agent
(requirement applies for all health debit card transactions); and
– all the requirements of the guidance are met.
© 2011, Stinson Morrison Hecker LLP
www.stinson.com

31. 401(K) FEE DISCLOSURE
REGULATIONS
• Purpose is to improve the transparency of
fees and expenses to participants and
beneficiaries.
• Give participants more easy-to-understand
information about choosing investments.
• Applies to plan years beginning on or after
November 1, 2011.
© 2011, Stinson Morrison Hecker LLP
www.stinson.com

32. 401(K) FEE DISCLOSURE
REGULATIONS: REQUIREMENTS
• Plan-related information must be given at start of
participation and annually.
• Plan fees and expenses information given initially and
quarterly.
• Use standard methodologies to calculate and disclose
information.
• Must present in an easily understood format.
• Must include glossary of terms and have an accessible
website.
Those responsible for administering the employer’s 401(k)
plan should know about the new rules. We recommend that
the employer check with the administrators to assure there
will be compliance.
© 2011, Stinson Morrison Hecker LLP
www.stinson.com

33. IRS’S NEW AUDIT PROGRAM
• “Employment Tax National Research Program”
– Began February 2010.
– Allow IRS to gauge whether businesses are properly
complying with employment tax law and reporting
requirements.
– 2,000 employers chosen at random during each of 2010,
2011, and 2012.
– “Comprehensive Examinations”—must have all
employment tax returns and records available for auditors.
© 2011, Stinson Morrison Hecker LLP
www.stinson.com

34. PREVENTING THE TOP FIVE
PLAN MISTAKES
(Or, what your benefits attorneys want you to know)
1) Always sign and date documents, then
keep copies of all signed documents
2) Plan Definition of “Compensation”
3) Employee Eligibility
4) Plan Loan Administration
5) Timing of Plan Contributions
© 2011, Stinson Morrison Hecker LLP
www.stinson.com

35. PRESENTER PROFILE
Brad Sandler
Partner, St. Louis office
314.719.3006
bsandler@stinson.com
© 2011, Stinson Morrison Hecker LLP
www.stinson.com

36. E-VERIFY
• GAO Report 12/17/2010
– Fiscal year 2009 – immediate confirmation 97.4% of 8.4
million
– Fiscal year 2006 – immediate confirmation 92.0%
• Vulnerable to Identify Theft/Fraud
– DHS Estimated 32,800 workers were erroneously
terminated in 2009 due to E-Verify
• Arizona – First state to make E-Verify mandatory
for all workers
– Approximately 50% new hires were not put into E-Verify
© 2011, Stinson Morrison Hecker LLP
www.stinson.com

37. I-9 COMPLIANCE
• Year ending 9/30/2010 ICE conducted
audits, 2740 employers - more than
double previous year; fines increased from
$1.0 million to $7.0 million
– Chipotle
– Abercrombie & Fitch
– Dunkin Donuts
– Missouri – Hua Huang – Manager, China
Buffet/Mongolian Grill in Poplar Bluff –
provided housing, transportation, false ID,
fraudulent marriage scheme
© 2011, Stinson Morrison Hecker LLP
www.stinson.com

38. I-9 ELECTRONIC STORAGE
• Final Ruling – Electronic Storage
– Retrieval system with indexing
– Retention of audit trail for I-9 forms
– Government access
– Access record creation
– Provide printed copy of electronic I-9 if
requested by employee
© 2011, Stinson Morrison Hecker LLP
www.stinson.com

39. NEW FORM I-129
H-1B, L-1A, L-1B, O-1: New Form I-129
requirements:
1. Certify under penalty of perjury reviewed Export
Administration Regulations (EAR) and International Traffic
in Arms Regulations (ITAR) and determine either:
a) License is not required
b) A license is required from Department of Commerce or U.S.
Department of State to release technology or technical data
to beneficiary (employee and employer) will prevent access
until and unless employer gets the required license or
authorization.
2. Indicate whether employee will work at off-site location,
paid higher prevailing wage or actual wage at all
locations, including off-site.
© 2011, Stinson Morrison Hecker LLP
www.stinson.com

40. H-1B CAP-EXEMPTION
• New AAO Decision at USCIS-California
Service Center impact “cap-exempt” H-1B
petitions – definition of “Affiliation”.
– Had to be “owned” or “controlled” by an
institution of higher education; no longer
sufficient to be affiliated based on contractual
affiliation between institution of higher
education and other organization claiming
affiliation.
© 2011, Stinson Morrison Hecker LLP
www.stinson.com

41. SSN – NO MATCH LETTERS
• New SSN No Match Guidance – can’t use
basis of letter alone as a basis to
suspend, terminate, take adverse action;
how long to resolve discrepancy?
• FAQ’s – not defined
• E-Verify – tentative confirmation for up to
120 days
• DO NOT IGNORE, TAKE STEPS TO
RESOLVE
© 2011, Stinson Morrison Hecker LLP
www.stinson.com

42. FAMILY AND MEDICAL LEAVE ACT
• Loco Parentis Definition Clarified
– Labor Secretary Solis: the DOL’s actions “send
a clear message to workers and employees
alike: All families including LGBT families are
protected by the FMLA.”
– Make sure to understand relationship with the
“son or daughter”
• Still No Revised Certification Forms
For Qualifying Exigency or Covered
Servicemember Leave
© 2011, Stinson Morrison Hecker LLP
www.stinson.com

43. OSHA 2010: THE YEAR OF THE
INSPECTION
• 41,000 inspections conducted
– 15 year high
– 5% increase over FY 2009
• 94,000 Citations issued
– Largest number in two decades
– 7% increase over FY 2009
• Greater Penalties
– Average Fine for Serious Violations increased
6% over FY 2009
© 2011, Stinson Morrison Hecker LLP
www.stinson.com

44. UNION MEMBERSHIP
• 2010 – Membership in Private & Public Sector
Declines
– 11.9% in 2010: lowest rate in 70+ years
– 6.9% of private sector workers are unionized
– 36.2% of public sector workers are unionized
• 1650 NLRB Elections Nov. 1, 2009-October 31, 2010
– Unions won 68%
© 2011, Stinson Morrison Hecker LLP
www.stinson.com

45. NLRB INITIATIVES
• Employee Free Choice Act Likely Dead So Expect, Via
NLRB Decisions & Rulemaking:
– Faster elections
– “Electronic” elections
– Increased scrutiny over conduct during election campaigns
– Increased penalties for unfair labor practices
• Proposed poster of rights under the National Labor
Relations Act
• Pending case involving “concerted activity” and social
media
© 2011, Stinson Morrison Hecker LLP
www.stinson.com

46. RETALIATION / WHISTLEBLOWING
• OSHA Issues New Whistleblowing Regulations
– Three interim rules published August 31, 2010
– Covers employees in railroad/public transit, commercial motor carrier,
and consumer product industries
• Whistleblower Protections for Financial Services
Employees
– Dodd-Frank Wall Street Reform and Consumer Protection Act signed
on July 21, 2010
– SEIU targeting bank employees
© 2011, Stinson Morrison Hecker LLP
www.stinson.com