While waiting for the pending issuance of the proposed Fair Labor Standards Act (FLSA) white-collar regulations, employers can begin taking some steps now to prepare.
Many believe the proposed regulations will be issued in March, although the proposed regs haven’t been sent yet to the Office of Management and Budget.
It is rumored that California’s quantitative duties test may be applied to the FLSA executive exemption, which would require employees to spend at least 50 percent of their time in exempt work in order to be classified as exempt. An adviser stated they would be surprised if thequantitative duties test was limited to the executive exemption and feel it might be applied as well to the administrative and professional exemptions.
Employers may begin doing an analysis now on their exempt population and how this change would affect them.
For many companies, some classes of employees are nonexempt in California, but exempt in the rest of the country. That may change with the new rule as well, if California’s quantitative duties test is applied across the nation.
Five Key Steps
Various legal counsel recommends five key steps employers should take now in anticipation of the revised overtime regulations:
Employers should begin now by talking to the managers or supervisors responsible for these exempt employees to determine the actual job duties for the employees as opposed to the stated job duties, because it’s the facts that matter most.
Employers need to know their workforce and be proactive. They should identify those exempt positions whose classification barely meets the FLSA minimum qualifications for a white-collar exemption under either the duties or compensation components. If either the duty or salary component is affected by regulatory changes, employers will know these identified positions will be targeted first.
The more lead time that a business has to grapple with these issues, the more satisfactory the process and the outcome will be for everyone.
The Department of Labor has just published a series of FAQs regarding premium reimbursement arrangements. Specifically, the FAQs address the following arrangements:
Situation #1: An arrangement in which an employer offers an employee cash to reimburse the purchase of an individual market policy.
When an employer provides cash reimbursement to the employee to purchase an individual medical policy, the DOL takes the position that the employer’s payment arrangement is part of a plan, fund, or other arrangement established or maintained for the purpose of providing medical care to employees, regardless of whether the employer treats the money as pre or post tax to the employee. Therefore, the arrangement is considered a group health plan that is subject to the market reform provisions of the Affordable Care Act applicable to group health plans and because it does not comply (and cannot comply) with such provisions, it may be subject to penalties.
Situation #2: An arrangement in which an employer offers employees with high cost claims a choice between enrollment in its group health plan or cash.
The DOL takes the position that offering a choice between enrolling in the group health plan or cash only to employees with a high claims risk would be discriminatory based on one or more health factors. The DOL states that such arrangements will violate such nondiscrimination provisions regardless of whether (1) the cash payment is treated by the employer as pre-tax or post-tax to the employee, (2) the employer is involved in the selection or purchase of any individual medical policy, or (3) the employee obtains any individual health insurance. The DOL also notes that such an arrangement, depending on facts and circumstances, could result in discrimination under an employer’s cafeteria plan.
Situation #3: An arrangement where an employer cancels its group policy, sets up a reimbursement plan (like an HRA) that works with health insurance brokers or agents to help employees select individual insurance policies, and allows eligible employees to access the premium tax credits for Marketplace coverage.
The DOL takes the position that such an arrangement is a considered a group health plan and, therefore, employees participating in such arrangement are ineligible for premium tax credits (or cost-sharing reductions) for Marketplace coverage. The DOL also takes the position that such arrangements are subject to the market reform provisions of the ACA and cannot be integrated with individual market policies to satisfy the market reforms. Thus, such arrangements can trigger penalties.
Key Takeaway
There has been quite a bit of banter regarding whether any of the foregoing arrangements could be an effective way for employers to avoid complying with the market reforms and other provisions of the Affordable Care Act applicable to group health plans. These FAQs are a strong indication that the DOL will be forceful in its interpretation and enforcement of these provisions.
In short, it depends.
Recently, several clients have received their annual premium rebate checks from their group health insurance company and are looking for guidance on the proper use of these funds. Under the Patient Protection and Affordable Care Act (“PPACA”), it requires health insurance companies now operate on specific medical loss ratios (80% for employers with less than 100 employees and 85% for employers with more than 100 lives). If an insurance company does not meet the stated medical loss ratios (MLRs), it is required to rebate part of the premium received back to groups.
Below is a summarized analysis used to determine if an employer can keep the premium rebate in whole or in part:
Plan Assets: The first step is to determine who owns the rebate. In accordance with the DOL’s guidance (Technical Release 2011-04), the portion of the rebate that is attributable to employee contributions is considered a plan asset. Therefore, if employees contributed to the cost of the group medical insurance plan, they are entitled a percentage of the rebate equal to the cost paid by the employees (i.e.- if employees paid 25% of the premiums, they would be entitled to 25% of the rebate). If the employer paid the entire cost of the premium, then no part of the rebate would be attributable to employee contributions permitting the employer to retain the full rebate.
For further guidance on premium rebates or any of the PPACA or ACA requirements for employers, please contact our office.
The Department of Labor announced on June 20th a proposed rule that would allow an employee to take FMLA leave to care for their same-sex spouse, regardless of whether the employee lives in a state that recognizes their marital status. As expected, the DOL has adopted a “state of celebration” rule, in which a spousal status for purposes of FMLA is determined not on the state in which the employee currently resides (as currently stated in the FMLA regulations), but based on the law of the state where the employee was married. For example, if the employee was married in New York, but now resides with his same-sex spouse in Indiana, the employee will enjoy FMLA rights to care for his spouse as if he had resided in New York.
DOL’s Interpretation of FMLA after U.S. v. Windsor
The FMLA allows employees to take leave from work to care for a family member with a serious health condition. Before U.S. v. Windsor abolished certain portions of the Defense of Marriage Act (DOMA), same-sex couples were not allowed to take FMLA leave to care for a same-sex spouse, since DOMA did not recognize the relationship. After the Windsor decision but before the recent announcement, employees were eligible to take FMLA leave to care for a same-sex spouse only if they have resided in a state in which same-sex marriage is legal.
According to the DOL’s notification, the proposed new FMLA regulation includes the following highlights:
The proposed rule would mean that eligible employees, regardless of where they live, would be able to:
The DOL announced the proposed changes on Friday in a press release, stating, ”The basic promise of the FMLA is that no one should have to choose between succeeding at work and being a loving family caregiver … Under the proposed revisions, the FMLA will be applied to all families equally, enabling individuals in same-sex marriages to fully exercise their rights and fulfill their responsibilities to their families.”
The Notice is Not Unexpected
It was only a matter of time before this regulatory announcement became reality. In fact, the DOL foreshadowed the move when it issued Technical Release 2013-04 in September 2013, at which time the agency took the position that — at least with respect to employee benefit plans — the terms “spouse” and “marriage” in Title I of ERISA and its implementing regulations “should be read to include same-sex couples legally married in any state or foreign jurisdiction that recognizes such marriages, regardless of where they currently live.”
Next Steps
As with other proposed regulatory changes, the public will be given the chance to provide comment directly to the DOL on the proposed change before the agency issues a final rule on the issue. After the final rule is adopted, employers should review and amend their FMLA policy and procedures, as well as all FMLA-related forms and notices.
As a business owner, it is important to understand how the Affordable Care Act may affect your business. However, with so many misconceptions about about Health Care Reform works, this can be difficult.
A common myth is that business owners will be fined if they do not provide notification to their employees about the new Health Insurance Marketplace.
If your company is covered by the Fair Labor Standards Act (FLSA), you must provide a written notice to your employees about the Health Insurance Marketplace (aka Exchange) by October 1, 2013, however the Department of Labor has announced is no fine or penalty currently under the law for failing to provide this notice.
For more information on the Exchange notice, please contact our office or review a previous post on this topic.
The health insurance Marketplace created by the Affordable Care Act (ACA) will open on October 1st. Most small employers (those with 50 or fewer full-time employees) are not required to offer health insurance coverage under ACA. Businesses with more than 50 full time employees have gotten a one year reprieve from the “pay or play” penalties. But all companies, regardless of size, are required to notify their employees about the Obamacare Marketplaces by October 1st.
The state and federal insurance exchanges are websites on which individuals and small businesses can shop for health plans. Though the deadline is less than a month away, many small businesses may not realize they have to notify employees of the existence of the Marketplace (aka Exchange). Many small business owners are unaware of this requirement or are under the misconception that it does not apply to them because they are too small to be governed by the health care reform law’s mandate. It is not clear how the requirement will be enforced yet, but penalties for businesses that do not comply could reach $100 per worker per day.
Some employers assume that because they are a small business who does not offer health insurance currently that the requirement does not apply to them. The Exchange notification requirement applies to any business regulated under the Fair Labor Standards Act (FLSA), which covers all companies with at least one employee and $500,000 in annual revenue.
The U.S. Department of Labor has posted information about the notification requirement on its website and has provided model notices (in both English & Spanish) to be used by both employers who offer insurance and those who do not offer insurance.
The one to three page model notices can be downloaded, filled out, and printed, either for distribution in the workplace or for mailing to employees’ homes. Employees who are hired after October 1st must be provided the notice within 14 days of their date of hire with the company. Employees must be provided the notice, regardless of their enrollment status in the group’s medical plan. The safest route is to distribute the notice via U.S. mail or follow the instructions for distributing it electronically. Currently there is no requirement that states the employer must obtain signatures from employees confirming their receipt of the notice.
Please contact our office for more information on how to ensure you business is compliant with ACA requirements in 2014.
The DOL’s Employee Benefits Security Administration (EBSA) has made available Spanish language versions of model notices to employees of health coverage options. The Affordable Care Act (ACA) requires employers to provide employees with a notice of their health insurance coverage options available through the future health insurance exchanges no later than October 1, 2013. The English version of these model notices were released in May 2013.
Please contact our office for copies of the model notice(s) in English and/or Spanish.
On June 26, 2013, the US Supreme Court declared the Defense of Marriage Act (DOMA) as unconstitutional. DOMA had previously established the federal definition of marriage as a legal union only between one man and one woman. The extinction of DOMA already has HR departments thinking how this will impact the future of the Family and Medical Leave Act (FMLA) as well as other benefits.
How FMLA is Impacted
As we know, the FMLA allows otherwise eligible employees to take leave to care for a family member with a serious health condition. “Family member” includes the employee’s spouse, which, under the FMLA regulations, is defined as:
a husband or wife as defined or recognized under State law for purposes of marriage in the State where the employee resides, including common law marriage in States where it is recognized. 29 C.F.R. 825.102
Initially, this seems to suggest that the DOL would look to state law to define “spouse”…but not so fast. According to a 1998 Department of Labor opinion letter, the DOL acknowledged that the FMLA was bound by DOMA’s definition that “spouse” could only be a person of the opposite sex who is a husband or wife. Thus, the DOL has taken the position that only DOMA’s definitions could be recognized for FMLA leave purposes. As a result, FMLA leave has not been made available to same-sex spouses.
That changes yesterday, at least in part.
What’s Clear about FMLA After the Ruling
In striking down a significant part of DOMA, the Supreme Court cleared the way for each state to decide its own definition of “spouse”. Thus, if an employee is married to a same-sex partner and lives in a state that recognizes same-sex marriage, the employee will be entitled to take FMLA leave to care for his/her spouse who is suffering from a serious health condition, for military caregiver leave, or to take leave for a qualifying exigency when a same-sex spouse is called to active duty in a foreign country while in the military.
What’s Unclear about FMLA After the Ruling
But what about employees who live in a state that does not recognize same-sex marriage? Are they entitled to FMLA leave to care for their spouses?
As an initial matter, the regulations look to the employee’s “place of domicile” (aka state of primary residence) to determine whether a person is a spouse for purposes of FMLA. Therefore, even if the employee formerly lived or was married in a state that recognized the same-sex marriage, he/she is unlikely to be considered a spouse in the “new” state for purposes of FMLA if the state does not recognize the marriage. This is no small issue, since 30+ states currently do not recognize same-sex marriage and some don’t go all the way (e.g. Illinois, which recognizes same-sex unions, not marriages).
Surely, some might argue that the U.S. Constitution requires other states to recognize the marriage; however, this issue is far from settled. Clearly employers need some help from the DOL. It is speculated that the DOL may draft regulations on how employers can administer FMLA in situations where the employee’s spouse is not recognized under state law. This would give life to concepts such as a “State of Celebration” rule, in which a spousal status is determined based on the law of the State where the employee was married and not where they reside. However, without more guidance, it is still too early to tell how the DOL will handle this.
Other Key Benefits Affected by the DOMA Decision
FMLA is not the only federal law impacted by the fall of DOMA. If federal regulations follow through, some of the notable federal laws and benefits impacted may include:
A provision of Health Care Reform requires employers to provide a notice to all employees regarding the availability of health coverage options through the state-based exchanges. The Department of Labor delayed the original requirement that the notice be distributed by March 1, 2013, as it was determined that there was not enough information regarding exchange availability.
The DOL recently issued temporary guidance along with a model notice. The DOL has issued the model notice early so employers can begin informing their employees now about the upcoming coverage options through the marketplace.
Two model notices were released by the DOL. One is for employers who currently offer medical coverage and the other is for those who do not offer medical coverage.
Employers are required to issue the exchange coverage notice no later than October 1, 2013. This will coincide with the beginning of the open enrollment period for the marketplace.
The notice must be provided to all employees, regardless of their enrollment on the group health plan. It must be provided to both full time and part time employees as well. Employers are not required to provide a separate notice to dependents. Employers will need to provide the notice to each new employee (regardless of their status) who are hired on or after October 1, 2013 within 14 days of their hire.
An exchange coverage notice must include –
The DOL also modified its model COBRA election notice to include information about the availability of exchange coverage options and eliminate certain obsolete language in the earlier model.
Please contact our office for a copy of the model notice(s).
You may be already aware of the continuing escalation of all forms of whistleblower and retaliation claims, including the 20+ Anti-Retaliation laws enforced by special investigators from OSHA’s Whistleblower group.
On one of OSHA’s recent news releases, they state that the Labor Department filed a federal lawsuit against Duane Thomas Marine Construction and its owner Duane Thomas for terminating an employee who reported workplace violence, which is a violation of Section 11© of the OSH Act. OSHA asserts the employer fired an employee for complaining about unsafe work conditions. It may seem a bit unusual to hear that the alleged unsafe conditions involved fear of workplace violence, but who can blame an employee in today’s current environment. However, as it turns out the hazard the employee complained about was the owner!
The employee alleged that, on numerous occasions between 2009 and 2011, Mr. Thomas committed workplace violence and created hostile working conditions. He allegedly behaved abusively, make inappropriate sexual comments and advanced, yelled, screamed, and made physically threatening gestures, in addition to withholding the employee’s paycheck.
The employee, who worked directly for Mr. Thomas, reported to him that he was creating hostile conditions. On Feb 25, 2011, the employee filed a timely whistleblower compliant with OSHA alleging discrimination by Thomas for having reported the conditions to him.
On March 28, Thomas received notification of the complaint filing. Five days later, Thomas had computer passwords changed to deny the employee remote access to files and then terminated the employee. OSHA’s subsequent investigation found merit to the employee’s compliant.
OSHA is seeking back wages, interest, and compensatory and punitive damages, as well as front pay in lieu of reinstatement for the employee. Additionally, OSHA seeks to have the employee’s personnel records expunged with respect to the matters at issue in this case and bar the employer against future violations of the OSH Act. Wow…. but the usual warning: we may not know all of the facts.
The employer may have behaved badly and gave the employee the ability to make out a viable claim. Or, the employee may have exaggerated, or even made up the whole thing. But while most employee lawsuits are notorious for not being completely accurate, there must be at least some pretty bad facts for OSHA to take the action it did.
This atmosphere may or may not have presented a valid safety hazard, but guess what? Under the law, the violation is the act of terminating the employee for complaining about a safety concern. And the catch is…the concern does not have to be valid! Please note there is a different standard if the employee refuses to work because of an unfounded and unreasonable concern.
For all we know, the employee could have annoyed his boss with unfounded complaints until the boss fired him in a moment of anger…but that too is a potential violation.
The take away advice from this scenario is to eliminate two phrases from your vocabulary: “Boys will be boys” and “You had to be there”. The main problem is that lawyers and Uncle Sam will ultimately be there if one’s conduct is foolish enough.
Be sure to train your supervisors to behave professionally regardless of the setting and remind them of the many behaviors, including some of the offbeat ones, that are protected as Whistleblowing.