Ripped from the Headlines: Key HR News 0 New Year, New Changes in the Workplace: Technology/Social...

Ripped from the Headlines: Key HR News 1 New Year, New Changes in the Workplace: Technology/Social Media and Key EEOC Initiatives

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Counsel of PR Firms, HR Roundtable

QUARTERLY LEGAL UPDATE

July 19, 2012

Alan Hahn

PartnerBenefits & [email protected]

© 2012 Davis & Gilbert LLP

Jessica Golden Cortes

PartnerLabor & [email protected]

Ripped from the Headlines: Key HR News 2

HEALTH CARE REFORM UPHELD

»Supreme Court Upholds Individual Mandate

- Any applicable individual who does not have minimum essential health coverage will be penalized

- Federal authority to impose tax penalties on individuals who do not acquire health coverage

- Penalty is a “tax” for Constitutional purposes

• Penalty is imposed by IRS like other taxes

• Failure to purchase insurance is not unlawful


2012 CHANGES

»Reporting of Employee Health Coverage

- Employers must include the cost of employer-sponsored health coverage on each employee’s IRS Form W-2

»Summary of Benefits and Coverage (SBC)

- Insured and self-insured health plans must issue a summary of benefits to applicants and enrollees that describes plan’s coverage

• Effective as of the first day of the first open enrollment after September 23, 2012


2013 CHANGES

»Employee contributions to flexible spending accounts are limited to $2,500 annually

»Available deduction associated with Medicare Part D subsidy is eliminated

»Effective March 1, 2013, employers must notify employees at time of hiring of availability of exchanges

»FICA taxes: 0.9% increase in employee’s portion of Medicare tax for those earning more than $200,000 (single filers) and $250,000 (joint filers)


PLAN YEARS BEGINNING ON OR AFTER JANUARY 1, 2014

»Health Care Reform

- Employer mandate

- No waiting periods in excess of 90 days allowed

- Plans must cover costs of participation in clinical trials

- Wellness programs

• Increases maximum incentive amount from 20% to 30% of cost of coverage


2014 CHANGES

»Employer Mandate

- Large employers must provide minimum essential coverage or be taxed

- A large employer is any employer with an average of 50 or more full-time employees in the prior calendar year

• IRS to issue guidance on determination of “full-time employee” based on number of hours worked, including guidance on variable hour employees (e.g., potentially using a “look back” method)


2014 CHANGES

»Employer Mandate

- “No-coverage penalty” is for employers who do not offer minimum essential coverage for full-time employees in any month in which any full-time employee receives subsidized coverage through an exchange

• Penalty = Number of full-time employees (over 30) for month X $166.67

• Example: Business with 75 employees not offering coverage must pay tax equal to 45 X $166.67 = $7,500.15


2014 CHANGES

»Employer Mandate

- “Subsidized-coverage penalty” is for employers who offer minimum essential coverage for full-time employees in any month in which any full-time employee is receiving subsidized coverage through an exchange

• Penalty = Number of employees receiving a subsidy for month X $250 (capped at $2,000 X full-time employees minus 30 for month)


2014 CHANGES

»Health Benefit Exchanges

- Each state will receive funding to establish and maintain an exchange

- Beginning in 2014, individuals and small employers will be able to purchase health insurance through the exchange

• Small employer = 100 or fewer employees (except in states that have the ability to limit small employers to those with 50 or fewer employees)


2014 CHANGES

»Employer Reporting Obligations

- Total number and names of full-time employees and dependents receiving health coverage

- Employer’s share of benefit cost

- Length of waiting period under the plan

- Lowest cost option available under the plan

- Whether employer offers minimum essential coverage, months when coverage was available and dates each individual was covered


NEXT STEPS – PPACA

»Ensure Summary of Benefits and Coverage is in place for open enrollment

»Ensure systems are in place to comply with required reporting obligations

»Communicate with finance

»Communicate with employees

»Amend plan documents

»Await additional guidance (e.g., full time employee)

»Consider impact on employment/separation agreements (e.g., changes to nondiscrimination rules)

Challenging the Defense of Marriage Act (DOMA)

»Federal courts recently held DOMA unconstitutional

- 1st Circuit in Boston

- Northern District of California

»DOJ expediting ruling on constitutionality of DOMA

- Asking Supreme Court to hear both challenges

• Bypasses request for appeal to 9th Circuit court of lower court decision


Implications for Employers

»Review plan policies regarding definition of spouse

»Review tax treatment and gross-up policies for same-sex spouses and dependents

»Review beneficiary designations


Failing to Monitor Retirement Plan Fees: A $35M Mistake

»ABB, Inc. breached its fiduciary duty by not properly monitoring or negotiating its recordkeeping fees

- Failed to evaluate revenue-sharing payments

- Failed to follow investment policy statements and prudently select and monitor investments

- Additional fiduciary breach where ABB was aware that the recordkeeper “subsidized” costs from other services

- Did not offer lowest-priced funds - Tussey v. ABB, Inc.


New Retirement Plan Fee Disclosure Requirements

»Service provider fee disclosure (July 1, 2012)

- Provided to plan by service providers

- Must ensure that fee disclosure is compliant

- Must benchmark fees

»Participant fee disclosure (annual and quarterly)

»All eligible employees (even non-participants) must receive:

- “Plan-related information”

- “Investment-related information”


Retirement Plan Fees: How Legal Counsel Can Help

»Attend and advise on fiduciary meetings

»Draft/review minutes

»Review plan documents, including investment policy statements

»Review fee disclosure statements

»Provide guidance on disclosure requirements to participants


NEW YORK



NEW YORK LABOR LAW §193

»No deductions unless expressly authorized

- In accordance with the law

• “expressly authorized in writing by the employee and are for the benefit of the employee … limited to payments for insurance premiums, pension or health and welfare benefits, contributions to charitable organizations, payments for United States bonds, payments for dues or assessments to a labor organization, and similar payments for the benefit of the employee.”

NEW YORK LABOR LAW §193

»What does “similar payments for the benefit of the employee” mean? DOL interpretation:

- Must be like the others listed: investment for employee’s benefit (e.g., insurance, pension) or “supportive,” meaning used by someone else (e.g., charitable contributions, union dues)

- Cannot deduct for loans, advances, overpayments, parking, etc.

- Cannot be separate charge against wages – can sue but cannot discipline


NEW YORK LIKELY TO BROADEN PERMISSIBLE DEDUCTIONS UNDER LABOR LAW §193

»Pending amendment would allow deductions for

- Parking, transit passes, gym memberships, cafeteria purchases, day care

- Overpayments due to clerical errors

- Repayment of wage advances

»DOL to develop regulations for repayments

»Employees may revoke most authorizations at any time

»Governor expected to sign soon


NEW YORK TO REPEAL WTPA?

»Deemed a “. . . a costly, duplicative bureaucratic morass,” Senator Cathy Young stated that the WTPA’s “mandated notices impose unnecessarily burdensome administrative costs on all private sector employers . . . ”

»Repeal would dispense with annual notice requirements


NEW YORK TO REPEAL WTPA?

»Passed in the Senate in March 2012 but died in the Assembly in June 2012

»Employers will have to continue to comply for now, unless a special assembly is called later this year to rule on the legislation


NEW JERSEY



EXPANSION OF NEW JERSEY LAW AGAINST DISCRIMINATION

»New Jersey employees have a claim under the NJLAD if they are treated a certain way because they are “perceived as” belonging to a specific protected class, even if in reality, they do not

EXPANSION OF New Jersey Law Against Discrimination

- For example, even though not Jewish, a plaintiff had a viable NJLAD claim where he alleged that supervisors directed anti-Semitic comments at him on a daily basis for a 16-month period

- In analyzing hostile work environment “perceived as” claim, the court looks to whether conduct was “severe or pervasive” from the perspective of a reasonable member of the protected group, not group of which the plaintiff was actually a member

- Cowher v. Carson & Roberts (N. J. App. Div. 2012)


CALIFORNIA


MEAL AND REST BREAKS

»CA Labor Code § 512(a):

- An employer may not employ an employee for a work period of more than five hours per day without providing the employee with a meal period of not less than 30 minutes

• Exception: if the total work period per day of the employee is no more than six hours, the meal period may be waived by mutual consent of both the employer and employee


MEAL AND REST BREAKS

»CA Labor Code § 512(a) (cont.):

- An employer may not employ an employee for a work period of more than 10 hours per day without providing the employee with a second meal period of not less than 30 minutes

• Exception: if the total hours worked is no more than 12 hours, the second meal period may be waived by mutual consent of the employer and the employee only if the first meal period was not waived


BRINKER RESTAURANT CORP. v. HOHNBAUM (CALIFORNIA SUPREME COURT APRIL 2012)

»Do employers have an affirmative duty to ensure that employees actually take their meal period?

»Plaintiffs sought class action status for a claim of compensation for unused meal breaks

»Court held: an employer must relieve the employee of all duty for the designated period and relinquish any employer control over the employee and how he or she spends the time, but need not ensure that the employee does no work


BRINKER RESTAURANT CORP. v. HOHNBAUM (CALIFORNIA SUPREME COURT APRIL 2012)

»If work does continue, the employer is liable for straight pay only if it “knew or reasonably should have known that the worker was working through the authorized meal period”


FEDERAL


SOCIAL MEDIA LEGISLATION PENDING NATIONWIDE

»Pending legislation aimed to protect the privacy of employees/applicants would prohibit employers from forcing prospective/current employees to provide access to their own private account as a condition of employment, and from discriminating or retaliating against them for refusing to do so

»Pending federal legislation

- Social Networking Online Protection Act (SNOPA) (introduced April 2012)

- Password Protection Act of 2012 (introduced May 2012)


SOCIAL MEDIA LEGISLATION PENDING NATIONWIDE

»Similar state laws pending in California, New York, Illinois, Texas and Washington

»New Jersey proposed legislation would also prohibit employers from even asking if an employee/applicant has social media accounts and impose fines and penalties for violations

»Law already passed in Maryland


TITLE VII PROTECTION FOR TRANSGENDER EMPLOYEES

»EEOC has ruled that discrimination against transgender people is a violation of Title VII’s protection against sex discrimination, which protects against discrimination based on both biological sex and gender

»Transgender applicants and employees can now file EEOC charges against employers for sex discrimination

- Macy v. Holder (EEOC Apr. 2012)


Ripped from the Headlines: Key HR News 35 New Year, New Changes in the Workplace: Technology/Social Media and Key EEOC Initiatives

3535 HR/NY Annual Legal Update – March 13, 201235

QUESTIONS?

© 2012 Davis & Gilbert LLP

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