"Pay or Play"
Congress recognized the importance of keeping employers incented to provide health care coverage. This incentive is provided through a penalty that is imposed on certain employers who do not provide health care coverage to their employees. Effective January 1, 2014, employers with at least 50 employees who do not offer their employees and dependents with certain specified minimum levels of health coverage and have at least one employee receiving premium assistance from the federal government will have to pay a monthly tax of $166.67 (i.e., one-twelfth of $2,000) per full-time employee (but ignoring the first 30 full-time employees).
A different penalty is imposed if the employer offers coverage but the coverage does not satisfy specified minimum levels. Generally, the specified minimums require: (i) the employee’s cost for the coverage to be less than or equal to 9.5% of the employee’s household income, and (ii) the actuarial value of the benefits covered under the plan to equal or exceed 60% of the cost of the covered services. Employers who offer coverage that does not satisfy these specified minimums must pay a monthly tax of $250 (i.e., one twelfth of $3,000) for each full-time employee who receives federal premium assistance for coverage (with a cap on such penalty equal to $166.67 times the number of the employer’s full-time employees but ignoring the first 30 full-time employees).
The play or pay penalties are indexed for inflation. For purposes of these rules, a full-time employee is an employee who works at least 30 hours per week. Beginning in 2014, penalties are also imposed on certain individuals who do not procure health insurance.
Monday, April 5, 2010
Friday, April 2, 2010
Lactating Mothers' Relief in PPACA
I posted much about the Patient Protection and Affordable Care Act because it focuses so much on regulating the insurance industry and to a lesser extent regulates employers. There's an important protection in it though for women who breastfeed. Section 4207 amends the Fair Labor Standards Act to require employers to give women reasonable breaks and a location that is not a bathroom to express breast milk. Here's the text.
SEC. 4207. REASONABLE BREAK TIME FOR NURSING MOTHERS.
Section 7 of the Fair Labor Standards Act of 1938 (29 U.S.C. 207) is amended by adding at the end the following:
`(r)(1) An employer shall provide--
`(A) a reasonable break time for an employee to express breast milk for her nursing child for 1 year after the child's birth each time such employee has need to express the milk; and
`(B) a place, other than a bathroom, that is shielded from view and free from intrusion from coworkers and the public, which may be used by an employee to express breast milk.
`(2) An employer shall not be required to compensate an employee receiving reasonable break time under paragraph (1) for any work time spent for such purpose.
`(3) An employer that employs less than 50 employees shall not be subject to the requirements of this subsection, if such requirements would impose an undue hardship by causing the employer significant difficulty or expense when considered in relation to the size, financial resources, nature, or structure of the employer's business.
`(4) Nothing in this subsection shall preempt a State law that provides greater protections to employees than the protections provided for under this subsection.'.
While promoting expressing milk may not be problem free as a policy matter, many women rely on the ability to do so to feed their children, and this is a very important step forward that will support more women of who want to breastfeed their children.
SEC. 4207. REASONABLE BREAK TIME FOR NURSING MOTHERS.
Section 7 of the Fair Labor Standards Act of 1938 (29 U.S.C. 207) is amended by adding at the end the following:
`(r)(1) An employer shall provide--
`(A) a reasonable break time for an employee to express breast milk for her nursing child for 1 year after the child's birth each time such employee has need to express the milk; and
`(B) a place, other than a bathroom, that is shielded from view and free from intrusion from coworkers and the public, which may be used by an employee to express breast milk.
`(2) An employer shall not be required to compensate an employee receiving reasonable break time under paragraph (1) for any work time spent for such purpose.
`(3) An employer that employs less than 50 employees shall not be subject to the requirements of this subsection, if such requirements would impose an undue hardship by causing the employer significant difficulty or expense when considered in relation to the size, financial resources, nature, or structure of the employer's business.
`(4) Nothing in this subsection shall preempt a State law that provides greater protections to employees than the protections provided for under this subsection.'.
While promoting expressing milk may not be problem free as a policy matter, many women rely on the ability to do so to feed their children, and this is a very important step forward that will support more women of who want to breastfeed their children.
Wednesday, March 31, 2010
NASA blasts off into employment law case
The United States Supreme Court recently granted cert a public employee privacy case which will consider whether NASA, a federal agency, violated the informational privacy rights of employees, who worked in non-sensitive contract jobs, by asking certain invasive questions during background investigations.
The Government is asking the Court to overturn the 9th Circuit decision which directed a district court to issue a preliminary injunction on behalf of contract workers at NASA's Jet Propulsion Laboratory (JPL) operated by the California Institute of Technology under a contract with the federal government. The Government maintains that the privacy expectations of the employees are minimal because they have are in the government employment context, these are standard background forms that the government is using, and the Privacy Act of 1974 protects this information from disclosure to the public.
The case was originally brought in 2007 by twenty-eight scientists and engineers employed as contractors at JPL on behalf of a potential class of 9,000 employees that NASA classifies as low-risk employees. Questions included in the background check ask about “any treatment or counseling” for illegal drug use, and forms issued to references seek “adverse information” about the workers' employment, residence, and activities regarding violations of the law, financial integrity, abuse of alcohol or drugs, mental or emotional stability, general behavior, and “other matters.”
This will be an interesting case for a number of reasons. First, it does not squarely fit into either the public employee drug testing cases (Von Raab & Skinner), nor does it focuses on a public employee's privacy rights in their physical belongings (Ortega). Rather, it focuses on an area of public employment constitutional law that has received less attention: the informational privacy rights of these employees. The Court has "hinted" at a constitutional right to informational privacy in two cases in the 1970s and then "never said another word about it." Judge Kozinski is his dissent from denial of rehearing en banc (citing Whalen v. Roe, 429 U.S. 589 (1977), and Nixon v. Administrator of Gen. Servs., 433 U.S. 425 (1977)).
Normally, because of the fact that the government is acting in its employer capacity, it would have more latitude to infringe on its employee's rights under the Fourth Amendment. This means that a balancing test is most appropriate. Such a test would balance the need of the employee for informational privacy against the needs of the government employer. In this case, it would appear that employees are seeking to protect confidential and potentially embarrassing personal information against the government's need to obtain information to protect and secure its federal facilities.
NASA v. Nelson, No. 09-530
The Government is asking the Court to overturn the 9th Circuit decision which directed a district court to issue a preliminary injunction on behalf of contract workers at NASA's Jet Propulsion Laboratory (JPL) operated by the California Institute of Technology under a contract with the federal government. The Government maintains that the privacy expectations of the employees are minimal because they have are in the government employment context, these are standard background forms that the government is using, and the Privacy Act of 1974 protects this information from disclosure to the public.
The case was originally brought in 2007 by twenty-eight scientists and engineers employed as contractors at JPL on behalf of a potential class of 9,000 employees that NASA classifies as low-risk employees. Questions included in the background check ask about “any treatment or counseling” for illegal drug use, and forms issued to references seek “adverse information” about the workers' employment, residence, and activities regarding violations of the law, financial integrity, abuse of alcohol or drugs, mental or emotional stability, general behavior, and “other matters.”
This will be an interesting case for a number of reasons. First, it does not squarely fit into either the public employee drug testing cases (Von Raab & Skinner), nor does it focuses on a public employee's privacy rights in their physical belongings (Ortega). Rather, it focuses on an area of public employment constitutional law that has received less attention: the informational privacy rights of these employees. The Court has "hinted" at a constitutional right to informational privacy in two cases in the 1970s and then "never said another word about it." Judge Kozinski is his dissent from denial of rehearing en banc (citing Whalen v. Roe, 429 U.S. 589 (1977), and Nixon v. Administrator of Gen. Servs., 433 U.S. 425 (1977)).
Normally, because of the fact that the government is acting in its employer capacity, it would have more latitude to infringe on its employee's rights under the Fourth Amendment. This means that a balancing test is most appropriate. Such a test would balance the need of the employee for informational privacy against the needs of the government employer. In this case, it would appear that employees are seeking to protect confidential and potentially embarrassing personal information against the government's need to obtain information to protect and secure its federal facilities.
NASA v. Nelson, No. 09-530
Tuesday, March 23, 2010
Supreme Court considers oral complaints under FLSA
The U.S. Supreme Court has agreed to consider whether the anti-retaliation
provision of the Fair Labor Standards Act, which prohibits discrimination
against an employee who "filed a complaint," covers an employee who orally
complained to supervisors that the location of time clocks prevented employees
from being paid for time spent donning and doffing required protective gear.
Plaintiff, who was fired by Saint-Gobain Performance Plastics Corp. for
violating time-clock procedures, is asking the justices to overturn the Seventh
Circuit's June 2009 decision that he did not engage in protected activity under
the FLSA because he did not complain in writing. The statute's use of the
language "filed" shows that Congress intended employees to submit written wage
and hour complaints to be shielded from retaliation, the court said.
The Seventh Circuit denied Plaintiff's request for rehearing
en banc. The three dissenting judges asserted that the interpretation that the
FLSA's anti-retaliation provision does not cover oral complaints is "unique
among the circuits" and conflicts with the Labor Department's position.
Kasten v. Saint-Gobain Performance Plastics Corp., U.S., No. 09-834, cert.
granted 3/22/10
provision of the Fair Labor Standards Act, which prohibits discrimination
against an employee who "filed a complaint," covers an employee who orally
complained to supervisors that the location of time clocks prevented employees
from being paid for time spent donning and doffing required protective gear.
Plaintiff, who was fired by Saint-Gobain Performance Plastics Corp. for
violating time-clock procedures, is asking the justices to overturn the Seventh
Circuit's June 2009 decision that he did not engage in protected activity under
the FLSA because he did not complain in writing. The statute's use of the
language "filed" shows that Congress intended employees to submit written wage
and hour complaints to be shielded from retaliation, the court said.
The Seventh Circuit denied Plaintiff's request for rehearing
en banc. The three dissenting judges asserted that the interpretation that the
FLSA's anti-retaliation provision does not cover oral complaints is "unique
among the circuits" and conflicts with the Labor Department's position.
Kasten v. Saint-Gobain Performance Plastics Corp., U.S., No. 09-834, cert.
granted 3/22/10
Friday, March 19, 2010
Form 5500 Reporting for 403(b) Plans Clarified
As § 403(b) plan administrators and plan auditors prepare to file the 2009 Form 5500 - which, for most plans, will be the initial annual report - the Department of Labor issued new guidance to clarify when certain annuity contracts and custodial accounts can be excluded.
Change in Reporting Obligation for § 403(b) Plans
IRC § 403(b) provides a tax-sheltered annuity program for public school employees, employees of certain tax exempt organizations, and certain ministers. Historically, these arrangements were treated as a collection of individual contracts or accounts controlled by the employee without the involvement of the plan administrator. However, this changed for tax years beginning in 2009, when § 403(b) plans - other than those qualifying as "governmental plans" or non-electing "church plans" - became subject to ERISA's general reporting requirements. As a result, plan administrators became obligated to report financial information regarding pre-2009 individual contracts and custodial accounts over which, in many cases, they had little knowledge. The new reporting also obligated § 403(b) plans with 100 or more participants to file audited financial statements, and obligated all § 403(b) plans to report the plan's aggregate financial information.
2009 FAB Relief
Recognizing the difficulties administrators would face in complying with the new reporting requirements the Department of Labor issued Field Assistance Bulletin 2009-02. For purposes of satisfying the reporting requirements, this FAB allows administrators to exclude annuity contracts and custodial accounts as part of the plan or as plan assets if:
The contract or account was issued to a current or former employee before 2009,
The employer ceased to have any obligation to make, and ceased making contributions to the contract or account before 2009: The rights and benefits under the contract or account are all legally enforceable by the individual owner against the insurer or custodian without involvement by the employer, and the individual owner is fully vested in the contract or account.
2010 Further Relief
In response to questions it received regarding the scope of this relief, the Department issued Field Assistance Bulletin 2010-01. Among the main clarifications are:
Involvement by the Employer - Discretion or Approval not Permitted. The new FAB makes clear that, although the relief under FAB 2009-02 would be available where the employer performs the limited function of making information available to the § 403(b) provider (e.g., reports employment status), the relief would not be available if the employer must consent to, or make discretionary decisions regarding enforcement of, the employee's rights under the contract. Prohibited approval would include, for example, where the employer must certify that the employee is eligible for distribution under the IRC, or must approve a hardship distribution or loan. Q&A-1.
Making Contributions - Loan Repayments Count. If an employer forwards employee loan repayments to the provider, the contract or account would not be eligible for the relief. Where the employee forwards the loan repayments directly to the provider, however, the contract or account would be eligible for the relief if the other requirements are satisfied. Q&A-2.
Large & Small Plans - Relief Applies to Both. The relief applies to large and small plans - both for determining what accounts are plan assets for purposes of the audit and for determining the plan assets to be reported on the financial statement. Moreover, it applies in determining the number of plan participants and whether the plan is a "large plan" subject to the audit requirements. Q&A-5.
Qualified Opinions - Department Will Not Reject Filing. The Department will not reject a Form 5500 filing where the plan's independent accountant issues a "qualified," "adverse" or "disclaimed" opinion if the opinion states that the sole reason for the designation is because pre-2009 contracts were not covered by the audit or included in the financial statements. Q&A-6.
Election to Exclude - Auditor's Role. While the administrator is responsible for determining whether the requirements for relief are met, the FAB makes clear that if the independent accountant discovers contracts were incorrectly excluded from the financial statements, the accountant is expected to alert the plan administrator. If the parties cannot agree, the independent accountant is expected to note the issue in the audit report. Q&A-7.
Post 2009 - Relief Applies. The relief under FAB 2009-02 applies to 2009 and later reporting years. Q&A-11.
Pre-2009 Contributions - Includes 2009 Contributions Attributable to 2008. Contributions attributable to 2008, but not deposited until 2009, would not make the account or contract ineligible for the relief. Q&A-13.
The FAB also addresses the regulatory "safe harbor" by which § 403(b) arrangements funded solely through salary reduction contributions are not considered employee pension plans - and, therefore, not subject to the reporting requirement. The safe harbor is set out in Labor Regulation § 2510.3-02(f). It requires (a) employee participation to be voluntary, (b) all rights under the contract to be enforceable only by the employee, (c) the employer to have only limited involvement, and (d) the employer to receive no compensation other than for expenses in handling salary reduction contributions. The FAB clarifies that the employer cannot, consistent with the safe harbor, appoint a third-party administrator to make discretionary decisions, and cannot itself retain discretionary authority to exchange or move funds from the § 403(b) provider. It can, however, select contracts where the provider is responsible for discretionary decisions. The arrangement generally must offer a choice of more than one § 403(b) contractor and more than one investment product.
Change in Reporting Obligation for § 403(b) Plans
IRC § 403(b) provides a tax-sheltered annuity program for public school employees, employees of certain tax exempt organizations, and certain ministers. Historically, these arrangements were treated as a collection of individual contracts or accounts controlled by the employee without the involvement of the plan administrator. However, this changed for tax years beginning in 2009, when § 403(b) plans - other than those qualifying as "governmental plans" or non-electing "church plans" - became subject to ERISA's general reporting requirements. As a result, plan administrators became obligated to report financial information regarding pre-2009 individual contracts and custodial accounts over which, in many cases, they had little knowledge. The new reporting also obligated § 403(b) plans with 100 or more participants to file audited financial statements, and obligated all § 403(b) plans to report the plan's aggregate financial information.
2009 FAB Relief
Recognizing the difficulties administrators would face in complying with the new reporting requirements the Department of Labor issued Field Assistance Bulletin 2009-02. For purposes of satisfying the reporting requirements, this FAB allows administrators to exclude annuity contracts and custodial accounts as part of the plan or as plan assets if:
The contract or account was issued to a current or former employee before 2009,
The employer ceased to have any obligation to make, and ceased making contributions to the contract or account before 2009: The rights and benefits under the contract or account are all legally enforceable by the individual owner against the insurer or custodian without involvement by the employer, and the individual owner is fully vested in the contract or account.
2010 Further Relief
In response to questions it received regarding the scope of this relief, the Department issued Field Assistance Bulletin 2010-01. Among the main clarifications are:
Involvement by the Employer - Discretion or Approval not Permitted. The new FAB makes clear that, although the relief under FAB 2009-02 would be available where the employer performs the limited function of making information available to the § 403(b) provider (e.g., reports employment status), the relief would not be available if the employer must consent to, or make discretionary decisions regarding enforcement of, the employee's rights under the contract. Prohibited approval would include, for example, where the employer must certify that the employee is eligible for distribution under the IRC, or must approve a hardship distribution or loan. Q&A-1.
Making Contributions - Loan Repayments Count. If an employer forwards employee loan repayments to the provider, the contract or account would not be eligible for the relief. Where the employee forwards the loan repayments directly to the provider, however, the contract or account would be eligible for the relief if the other requirements are satisfied. Q&A-2.
Large & Small Plans - Relief Applies to Both. The relief applies to large and small plans - both for determining what accounts are plan assets for purposes of the audit and for determining the plan assets to be reported on the financial statement. Moreover, it applies in determining the number of plan participants and whether the plan is a "large plan" subject to the audit requirements. Q&A-5.
Qualified Opinions - Department Will Not Reject Filing. The Department will not reject a Form 5500 filing where the plan's independent accountant issues a "qualified," "adverse" or "disclaimed" opinion if the opinion states that the sole reason for the designation is because pre-2009 contracts were not covered by the audit or included in the financial statements. Q&A-6.
Election to Exclude - Auditor's Role. While the administrator is responsible for determining whether the requirements for relief are met, the FAB makes clear that if the independent accountant discovers contracts were incorrectly excluded from the financial statements, the accountant is expected to alert the plan administrator. If the parties cannot agree, the independent accountant is expected to note the issue in the audit report. Q&A-7.
Post 2009 - Relief Applies. The relief under FAB 2009-02 applies to 2009 and later reporting years. Q&A-11.
Pre-2009 Contributions - Includes 2009 Contributions Attributable to 2008. Contributions attributable to 2008, but not deposited until 2009, would not make the account or contract ineligible for the relief. Q&A-13.
The FAB also addresses the regulatory "safe harbor" by which § 403(b) arrangements funded solely through salary reduction contributions are not considered employee pension plans - and, therefore, not subject to the reporting requirement. The safe harbor is set out in Labor Regulation § 2510.3-02(f). It requires (a) employee participation to be voluntary, (b) all rights under the contract to be enforceable only by the employee, (c) the employer to have only limited involvement, and (d) the employer to receive no compensation other than for expenses in handling salary reduction contributions. The FAB clarifies that the employer cannot, consistent with the safe harbor, appoint a third-party administrator to make discretionary decisions, and cannot itself retain discretionary authority to exchange or move funds from the § 403(b) provider. It can, however, select contracts where the provider is responsible for discretionary decisions. The arrangement generally must offer a choice of more than one § 403(b) contractor and more than one investment product.
Thursday, March 18, 2010
Facebooking while working carries risks for employers
Last October, the Federal Trade Commission (FTC) issued guidelines stating that bloggers who offer endorsements must disclose any payments they have received from the subjects of their reviews or face penalties of up to $11,000 per violation.
The agency, charged with protecting consumer interests, had not updated its policy on endorsements in nearly three decades, well before the Internet became a force in shaping consumer tastes. Now, new rules attempt to make more transparent corporate payments to bloggers, research firms, and celebrities that help promote a product.
As the importance of social networking and blogging continues to grow in today’s increasingly Internet-dominated business world, the FTC has revised its Guides Concerning the Use of Endorsements and Testimonials in Advertising, published in the Federal Register at 16 C.F.R. Part 255.
These new guidelines address the application of Section 5 of the Federal Trade Commission Act, which prohibits unfair or deceptive acts or practices and unfair competition in or affecting commerce. If your company provides services or sells products and your employees are blogging about them or talking about them on their Facebook accounts, the presumption may be that they are doing so with the company’s support and for the company’s benefit. This could lead to liability for your company for false statements made by your employees under the Federal Trade Commission.
This is another reason to review your employee handbooks and review policy on social networking, especially if your company permits employees to Facebook during regular business hours.
The agency, charged with protecting consumer interests, had not updated its policy on endorsements in nearly three decades, well before the Internet became a force in shaping consumer tastes. Now, new rules attempt to make more transparent corporate payments to bloggers, research firms, and celebrities that help promote a product.
As the importance of social networking and blogging continues to grow in today’s increasingly Internet-dominated business world, the FTC has revised its Guides Concerning the Use of Endorsements and Testimonials in Advertising, published in the Federal Register at 16 C.F.R. Part 255.
These new guidelines address the application of Section 5 of the Federal Trade Commission Act, which prohibits unfair or deceptive acts or practices and unfair competition in or affecting commerce. If your company provides services or sells products and your employees are blogging about them or talking about them on their Facebook accounts, the presumption may be that they are doing so with the company’s support and for the company’s benefit. This could lead to liability for your company for false statements made by your employees under the Federal Trade Commission.
This is another reason to review your employee handbooks and review policy on social networking, especially if your company permits employees to Facebook during regular business hours.
Wednesday, March 17, 2010
Sixth Circuit errs on the side of Free Speech for public employees
In a surprise for free speech advocates, city police department employees fired after filing a report critical of the department may proceed with a lawsuit asserting their terminations violated the First Amendment and the Kentucky Whistleblower Act, the U.S. Court of Appeals for the Sixth Circuit rules in an unpublished opinion.
Writing for the 2-1 majority, Judge Clay says under precedent from the
Kentucky Supreme Court, the city of Jeffersontown was the former "employer" of
Melvin Kindle for purposes of the whistleblower law. Clay writes that the
district court had also erred in granting summary judgment as a matter of law
to the city on the First Amendment claim because Kindle's misconduct report was
on a "matter of public concern." Clay vacated and remandsed the case to the
district court for further proceedings.
Judge Guy dissents, writing that he would have certified the state law
question to the Kentucky Supreme Court, and that Kindle's report was on purely
internal personnel issues and not of public concern. There is nothing stunning or innovative about the majority or dissent opinions, but it is increasingly rare for public employees to exercise free speech related to their jobs, or even off their jobs, so this case comes as a pleasant surprise.
Kindle v. Jeffersontown, 6th Cir., No. 09-5119, unpublished opinion 3/15/10
Writing for the 2-1 majority, Judge Clay says under precedent from the
Kentucky Supreme Court, the city of Jeffersontown was the former "employer" of
Melvin Kindle for purposes of the whistleblower law. Clay writes that the
district court had also erred in granting summary judgment as a matter of law
to the city on the First Amendment claim because Kindle's misconduct report was
on a "matter of public concern." Clay vacated and remandsed the case to the
district court for further proceedings.
Judge Guy dissents, writing that he would have certified the state law
question to the Kentucky Supreme Court, and that Kindle's report was on purely
internal personnel issues and not of public concern. There is nothing stunning or innovative about the majority or dissent opinions, but it is increasingly rare for public employees to exercise free speech related to their jobs, or even off their jobs, so this case comes as a pleasant surprise.
Kindle v. Jeffersontown, 6th Cir., No. 09-5119, unpublished opinion 3/15/10
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