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HR and Tax Newsletter - November 2005

Reminder: Cafeteria Plans Can Be Amended to Provide for Grace Period After End of Year

The IRS has issued a notice that permits employers sponsoring cafeteria plans to amend the plan document to provide for a grace period after the end of the year in which unused benefits and contributions to a flexible spending account can be used. The grace period cannot extend beyond March 15 of the year following the year in which the contributions were made or for which benefits were accrued. Under prior IRS authority, participants in flexible spending accounts had to use up the accrued benefits or contributions or forfeit them. IRS Notice 2005-42

The Eleventh Circuit Says Creation of Alternative to Union Grievance Process Was Unlawful

Georgia Power Co.'s unilateral implementation of a system for employees to file complaints outside of the usual grievance process was unlawful. (Georgia Power Co. v. NLRB10/14/05). In reaching its decision the court held that Georgia Power took unilateral action on a subject--the grievance process--that was a mandatory subject of bargaining.

Before 2001, Georgia Power had one companywide program to address equal employment opportunity concerns, and another program to deal with corporate ethics and fairness issues. Georgia Power notified the union on May 30, 2001, that they were creating a new workplace ethics initiative to replace both existing programs. Employees received a memorandum two days later explaining that the new program would cover the entire workforce and would include provisions for an independent ombudsman and peer review of certain employee concerns.

Under the new procedures, workplace ethics officials would notify labor relations managers of all cases or concerns raised involving union-represented employees. If a case involved a complaint filed by an employee on an issue covered under the collective bargaining agreement, it would be handled according to the contract's grievance provisions. In cases involving discharge or demotion, management officials would determine on a case-by-case basis whether employees could choose to use the workplace ethics procedures. Cases certified for arbitration under the contract's grievance procedure were not handled through the workplace ethics program.

The union objected to the new program during Georgia Power's presentation, arguing that the union was the sole representative of covered employees, that the collective bargaining agreement already had a grievance procedure, and that the company unlawfully dealt directly with employees.

After implementing the workplace ethics program, Georgia Power did not advise the union when it received a workplace ethics grievance or allow the union to represent unit employees who brought complaints through the workplace ethics procedure.

An NLRB Administrative Law Judge concluded that while the workplace ethics program itself was lawful, the way it was implemented was illegal because it resulted in changes to the grievance process--a mandatory subject of bargaining. The NLRB upheld the Administrative Law Judge's decision.

The court reasoned that the establishment of grievance procedures was a mandatory subject for bargaining under the NLRA and that the company's implementation of the workplace ethics program affected grievance procedures, that it was designed without union input and that union-represented employees could ignore the union grievance process by filing a complaint through the new system instead.