Be careful how you implement policies: Lessons from Treasury’s mistake

Editor’s note: This story has been updated to reflect the people who continued to receive the $1,000 discretionary payment to their 401(k) accounts after the renegotiation in 2018.

 

Be mindful about how your policies affect your workforce. What can start out as a cost-saving measure on the surface could turn into a class action lawsuit for age discrimination. Just look at the Treasury Department’s Office of Comptroller of the Currency: they recently learned that lesson the hard way, a way that cost them $837,000.

At the heart of this case is a policy that happened to negatively affect OCC employees who earned more...

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Be mindful about how your policies affect your workforce. What can start out as a cost-saving measure on the surface could turn into a class action lawsuit for age discrimination. Just look at the Treasury Department’s Office of Comptroller of the Currency: they recently learned that lesson the hard way, a way that cost them $837,000.

At the heart of this case is a policy that happened to negatively affect OCC employees who earned more than $200,000 a year. The problem is, about 97% of the employees in that group are 40-years-old or older.

Alexis Tsotakos, a senior associate attorney at Gilbert Employment Law was on the team that represented the class of affected employees. She recounted the series of events that led to her client’s case, class action approval and the large payout from Treasury.

At issue is a policy the OCC put in place shifting away from a long standing practice of making $1,000 discretionary payments to all employees’ 401(k) plans. Back in 2017, OCC decided to try to move more towards a merit-based compensation instead of across-the-board payments.

That was quickly shot down because it was a violation of the collective bargaining agreement, and OCC put the idea in their back pocket. Later, in 2018, when it was time to renegotiate, they implemented a change.

The $1,000 payment stayed for all bargaining unit employees and non-bargaining unit employees who made less than $200,000 a year. The employees not receiving the $1,000 benefit were mostly those aged 40 or older, according to Tsotakos.

“And so my client, due to the nature of her position, started scratching her head when she saw that they were going to stop this $1,000 contribution, and thought, ‘Given who they’re excluding, it seems to me like this is going to disproportionately affect older workers,’” Tsotakos said. “So she started talking to people and raising the alarm that this may not be fair here, they may be unfairly keeping these employees from this dollar contribution. And so she spoke with a number of people who kind of waved her off.”

Tsotakos said there was an analysis that found the policy did, in fact, disproportionately affect older workers, but they decided to move forward anyway. So her client filed a complaint, hired lawyers and that’s when it took off.

Ultimately, Treasury settled after the class action case was certified, leading to the payments going out now. Not everyone who missed out on the $1,000 payment is getting settlement money, however.

The Age Discrimination in Employment Act specifically protects people who are age 40 or older from discrimination. It does not protect workers under 40-years-old, which means that the approximately 3% of workers affected by OCC’s policy change under 40 will not get paid.

The lesson all employers may want to take away is that policies that can negatively affect employees can have unintended consequences.

Tsotakos said that it does not matter if the employer intended to discriminate or not. If a policy disproportionately affects a protected group, that is all that matters in these cases.

“It often happens that policies have an impact that people were not aware of, or not thinking about when they implement a policy,” she said. “And that’s why when you have situations like this, and you have an employee who immediately identifies, ‘Hey, this is going to be a problem,’ agencies would do well to listen to those folks, instead of letting this sort of go on for as long as it did.”

She mentioned that her firm offers training for employers so that they can avoid costly mistakes in the worlds of equal employment opportunity laws and reasonable accommodations.

“I tend to focus my personal practice in reasonable accommodation laws,” Tsotakos said. “This is a little bit of a departure from what I normally do. But it really does run the gamut. And it is a really good opportunity to make sure that you are keeping up with the law, because this is an area that changes rapidly. And it’s one of the great things about practicing in this area. But it also means that you have to remain informed, because if you don’t, you can make mistakes like this”

In paying out the settlement, the Treasury Department is cutting checks to the tune of $600 per class member to two classes of over 400 each. The dispersal will take a couple of forms depending on the recipient. Tsotakos said that those still employed at the agency will receive their settlement as a contribution directly into their 401(k).

“Just administratively, it’s a little bit easier. And it also has the benefit of potential beneficial tax ramifications,” Tsotakos said.

Those no longer employed at Treasury will receive payment once they are all tracked down and their information is gathered, she said.

At the end of the day, Tsotakos said that Treasury made the right call settling.

“I think they did the right thing in the sense that they acknowledged that this had the potential to be a serious PR situation for them,” she said. “And they resolved it with us relatively quickly, without having to engage in many years of litigation. Because that’s often the case when you have a class action: You have to engage in discovery, retain experts, things like that. And they came to the table relatively early on in the process, which I think speaks well to them.”

Nearly Useless Factoid

By Daisy Thornton

Iceland produces the highest percentage of writers per capita in the world. One in 10 people in Iceland get published in their lifetime. There’s even a popular saying, “ad ganga med bok I maganum,” which literally translates to everyone “has a book in their stomach.”

Source: Daily Beast

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