LABOR & EMPLOYMENT NEWSLETTER - Round-Up: Tax Cuts, Genetic Testing, and Expanding Retaliation

Below are some of the employment law headlines that we hope to monitor closely for you in the coming months.

2008 Tax Cuts for Texas Employers

On March 10, 2008, Texas Governor Rick Perry announced a one-year suspension of the state’s Unemployment Insurance (UI) replenishment tax. An estimated 370,000 Texas businesses will be eligible for the tax cut of $90 million, thanks to the state’s strong economy and low unemployment. The Texas Workforce Commission (TWC) approved the suspension of the tax after reviewing employment figures and economic forecasts for the state and determined there were sufficient reserves to meet unemployment obligations for 2008.

The UI replenishment tax is based on state-wide benefits and taxed wages and applies to all Texas employers to cover unemployment claims not charged to a specific employer. According to the TWC, the UI replenishment tax varies inversely, from year to year, to statewide economic conditions.

In 2007, Texas created more jobs than any other state in the nation, resulting in record low unemployment. Thanks to the momentum of a healthy economy, Texas is able to give a tax break to businesses that contribute to the state’s overall economic prosperity.

In addition to the one-year suspension of the 0.12 percent replenishment tax, TWC will continue to distribute the surplus tax credit announced in October 2007 to those qualifying employers who file quarterly unemployment tax reports and owe UI taxes. Those employers will receive the surplus tax credit after their first quarter 2008 tax returns are filed and taxes are paid. In addition, qualifying employers must have had a payroll in 2007 and must have paid all taxes due.

The 2008 UI tax rates also reflect the elimination of the obligation assessment, previously a component of the UI tax. The 80th Texas Legislature passed a measure allowing TWC to pay off bonds issued in 2003 to bolster the Trust Fund. By paying off the bonds early, Texas employers will save an additional estimated $270 million in taxes in 2008.

Discrimination Based on Genetic Testing

On April 24, 2008, the United States Senate passed the Genetic Information Nondiscrimination Act (GINA) by a vote of 95 to 0. The Act is designed to protect individuals against discrimination based on their genetic information when it comes to health insurance and employment. These protections are intended to encourage individuals to take advantage of genetic testing as part of their medical care.

GINA would forbid insurers from denying health insurance coverage or setting rates based solely on an individual’s genetic predispositions to a disease. The Act would likewise forbid employers from using individuals’ genetic information in hiring, firing, and other workplace decisions. GINA deals with discrimination based on genetic risk for health problems, but allows insurers to consider disease itself in decisions on enrollment and rates.

GINA will have far-reaching effects as the number of genetic tests grows. The National Human Genome Research Institute estimates that every person probably carries “half a dozen or more genetic mutations” that raise the risk of disease. Forty-one states have laws covering genetic discrimination in insurance and thirty-one states have laws covering employment discrimination based on genetic factors.

The long-awaited federal protections, which have been debated in Congress for thirteen years, are expected to be approved by the House of Representatives next week. President George W. Bush is expected to sign GINA into law.

Retaliation at the U.S. Supreme Court, Again

In October 2008, the United States Supreme Court is expected to hear oral arguments in Crawford v. Metropolitan Government of Nashville and Davidson County, Tennessee, 211 Fed. Appx. 373 (6th Cir. 2006). Crawford is the third retaliation case considered by the Supreme Court this term. The case involves the specific issue of whether Title VII protects an employee from retaliation for cooperating with an employer’s internal investigation of unlawful employment practices. Title VII protects an employee from retaliation because the employee has “opposed” an unlawful employment practice (the opposition clause) or “filed a charge, testified, assisted, or participated in any manner in an investigation, proceeding, or hearing” under Title VII (the participation clause).

Ms. Crawford, a thirty-year employee, claimed she was discharged because she cooperated in her employer’s investigation of sexual harassment complaints against another employee. Prior to the investigation, no EEOC charge had been filed by any of the complaining employees. As part of the internal sexual harassment investigation by the employer, Ms. Crawford was interviewed in July 2002 and revealed her own allegations of sexual harassment by the same employee under investigation. Ultimately, the employer concluded its investigation and found that the employee engaged in inappropriate and unprofessional behavior, though not sexual harassment. The investigators recommended training and education for employees. By January 2003, Ms. Crawford was terminated due allegations of embezzlement and drug use, charges which she claimed were unfounded.

The Sixth Circuit of Appeals held that Ms. Crawford was not protected by either the “opposition” clause or the “participation” clause. Ms. Crawford’s mere cooperation in an internal investigation did not rise to the level of overt activities, such as initiating a complaint and taking further action, necessary under the opposition clause. Similarly, she was not protected by the participation clause because the investigation was internal and was prompted by an informal internal statement by another employee. Generally, courts have held that the participation clause does not apply to internal, in-house investigations conducted apart from a formal EEOC charge. At a minimum, an employee must have filed an EEOC charge or otherwise instigated proceedings under Title VII to be covered by the participation clause. The Sixth Circuit Court observed that limiting the participation clause prevents the burden of Title VII from falling on an employer who proactively chooses to launch an internal investigation. If the participation clause is expanded, employers would be discouraged from taking a proactive approach, according to the Court’s reasoning. The U.S. Supreme Court will decide whether either retaliation clause should be expanded, and will, hopefully, provide definitive guidance on this issue in the coming months.