ACA Employer Mandate Penalty Letters Coming Before Year-End!

Contributed by Kelly Haab-Tallitsch, December 7, 2017

With only 30-days to respond, employers should be watching their mail for Affordable Care Act (ACA) employer mandate penalty letters (IRS Letter 226J), coming before the end of 2017.

Recent updates to the “Questions and Answers on Employer Shared Responsibility Provisions (ESRPs) Under the Affordable Care Act” on the Internal Revenue Service (IRS) website indicate the agency is gearing up to begin enforcement of the ESRP provisions of the ACA, commonly known as the employer mandate. According to Q&As 55-58, “Making an Employer Shared Responsibility Payment,” the IRS will start sending penalty notices in “late 2017” to employers whom the IRS believes may owe penalties for not complying with the ACA employer mandate in 2015. Penalties will be proposed and assessed via Letter 226J.

The determination of whether an employer is liable for a penalty and any proposed amount is based on the information reported to the IRS on Forms 1094-C and 1095-C and information on which full-time employees received a premium tax credit. The 2015 information reporting process was not without problems and it is possible employers who complied with the employer mandate may receive IRS 226J letters due to reporting errors or other issues.

Employers have the opportunity to respond to a Letter 226J within 30 days, prior to official assessment of liability and demand for payment.

I received a Letter 226J…Now What?

  1. Review the letter and enclosed information carefully. Letter 226J will include information showing your proposed penalty by month and a listing of employees that received a premium tax credit.
  2. Compare with your records. Review the Forms 1094-C and 1095-C you filed for 2015, and other relevant records.
  3. Complete and return the Form 14764 included with your Letter 226J within 30 days. Include any supporting documentation.
    • If you agree with the IRS’s penalty determination:
      • Complete Form 14764 indicating your agreement.
      • Include payment for the penalty (or pay electronically). If you do not pay the entire penalty amount, the IRS will issue a Notice and Demand for payment.
    • If you disagree with the IRS’s penalty determination:
      • Complete Form 14764 indicating your disagreement.
      • Include a signed statement explaining why you disagree with part or all of the proposed penalty.
      • Include any documentation supporting your statement (i.e. date of employment termination records, proof of offer coverage or premium amounts).
      • Make changes, if any, to the Employee PTC Listing enclosed with your Letter 226J and submit with Form 14764.
  4. The IRS will acknowledge your response with a Letter 227 describing any further actions you may need to take.
  5. If, after receipt of Letter 227, you still disagree with the proposed or revised penalty, you may request a pre-assessment conference with the IRS Office of Appeals within 30 days. Instructions on requesting a pre-assessment conference will be included in the Letter 227. Upon receipt of your request, the IRS will contact you to arrange the time and place of the conference. According to IRS Publication 5 “Your Appeal Rights and How To Prepare a Protest If You Don’t Agree,” conferences with Appeals Office personnel are held in an informal manner by correspondence, by telephone or in-person.

Bottom Line

Failure to timely respond to a Letter 226J can result in steep penalties for employers – even those who complied with their responsibilities under the ACA. Be sure to closely watch your mail this holiday season.

Impact of Recreational Marijuana on Your Business

Contributed by Noah A. Frank, December 5, 2017

While marijuana use remains unlawful under federal law, 30 states and Washington D.C. have legalized some form of medical use.  Eight states and Washington D.C. have legalized recreational marijuana for adults.  More cities, states, and counties have taken steps towards legalizing adult recreational use and increased tax revenues, or to decriminalize possession of small amounts (this might be seen as a tacit legalization without the tax benefits).

Illinois may be next to legalize adult recreational use, with a majority of those polled in the state supporting legalization, and $350M to $750M in annual tax revenue on the line to help plug a $6B+ deficit.  What is clear is that marijuana use may become more prevalent, and the impact on business felt more frequently.

Here is what you need to know now:

  1. Medical cannabis users may still be protected! While use of cannabis is still unlawful under federal law, the steps required to become a registered medical user in most states imply that the user has an underlying medical condition that would be considered a disability, protected under the Americans with Disabilities Act, or similar state or local law.  Therefore, consideration must be given to these equal employment opportunity laws.
  2. Impairment at work is never tolerated. Businesses must be proactive in implementing employment policies regarding substance and alcohol use and impairment in the workplace.  Consistent, nondiscriminatory enforcement of these policies will help protect businesses from equal employment opportunity/disability claims.
  3. Treat cannabis like: heroin, prescription medication, or alcohol – depending on your view and consistent with state law.
    1. Heroin: Remember, cannabis is unlawful under federal law, and employers may implement drug-free policies.
    2. Prescription medication: In states where medical cannabis is lawful, and subject to the above, remember that use of cannabis by someone other than the registered user is the same as abusing someone else’s prescription. This use is not protected by any law.
    3. Alcohol: Where recreational use is in play, subject to the above, many states protect lawful conduct during non-working hours (e.g., using cannabis after work); however, use and/or impairment at work need not be tolerated.

Prepare Now for Recreational Marijuana:

Given current trends, recreational use seems likely to be a question of “when.”  Proactive steps today will put the company in a position to make reasoned decisions, rather than reactionary moves opening the company to claims of discrimination.  This includes:

    • Reviewing the company’s philosophy towards marijuana, prescription medications, and alcohol in the workplace. Ensuring that supervisors have appropriate training on these issues.
    • Updating handbooks and manuals to reflect drug testing, workplace search, disability, and other related policies.
    • Determining safety-sensitive positions, and updating written job descriptions accordingly.
    • Engaging experienced employment counsel to audit policies and practices to ensure compliance and to address policy violations, investigations, and disability accommodation and related matters as they arise.

 

Déjà Vu All Over Again? DOL Appeals Overtime Rule

Contributed by JT Charron, December 1, 2017

At this time last year, employers across the country were preparing for implementation of the DOL Final Overtime Rule, which would have more than doubled the minimum salary level for exempt employees. At the eleventh hour, employers were granted a reprieve when the Federal District Court for the Eastern District of Texas temporarily halted implementation, which was subsequently made permanent in August of this year.

In the interim, a presidential election occurred. And with the change in administration came uncertainty about what—if any—action the DOL would take regarding the now-defunct overtime regulations. We began to get answers following Alexander Acosta’s appointment as Secretary of Labor. Since his confirmation hearing in March Acosta has repeatedly stated that—while the jump to $47,476 was excessive—the salary level test should be increased to somewhere between $30,000 and $35,000.

In July, the DOL followed up on Acosta’s comments by issuing a request for information (RFI) regarding the overtime exemptions. The RFI sought responses to eleven sets of questions pertaining to the overtime exemptions, including questions regarding whether annual indexing of the salary test would be appropriate and the impact on the wages of exempt employees caused by the anticipation of the 2016 Final Rule. The comment period ended on September 25, 2017, with the DOL receiving over 200,000 comments.

On October 30, 2017, the DOL filed its appeal of the Texas court’s decision to permanently block the overtime rule. That appeal has been stayed while the DOL develops new overtime regulations. To be sure, the DOL is appealing this decision for one reason—to preserve its authority to revise the salary level test. In both its earlier decisions, the District Court repeatedly emphasized that the duties—not salary level—test should control the determination of exempt positions.

In its August 31 decision the Court attempted to clarify, in a footnote, that it was “not making any assessments regarding the general lawfulness of the salary-level test or the Departments authority to implement such a test.” However, the broad language used elsewhere in the opinion, is difficult to square with this narrow holding. In fact, in its appeal of the preliminary injunction—which was later dismissed as moot—the DOL asked the Fifth Circuit Court of Appeals to “address only the threshold legal question of the Department’s statutory authority to set a salary level, without addressing the specific salary level set by the 2016 final rule.” We expect the DOL to take a similar stance in the instant appeal.

What’s Next

There is nothing employers need to do at this point. The DOL is currently reviewing the comments it received in response to its RFI, after which it will publish a notice of proposed rulemaking. Following that notice there will be a comment period prior to the issuance of any new regulations. Although it could be months—or years—before we see any new regulations, we fully expect that the current salary level will be increased, the only question is by how much. Stayed tuned – we will keep an eye on any action by the DOL and will keep you updated!

EEOC Actively Enforces Equal Pay Violations

Contributed by Jonathon Hoag, November 28, 2017

The EEOC’s Strategic Enforcement Plan (SEP) for Fiscal Years 2017-2021 identified “Equal Pay” as a priority area that demands focused attention. The EEOC’s recent press releases show it is actively fulfilling this strategic mission.

gender equality

Gender equality scale

In the third scenario, the EEOC obtained a judgment against a pizza restaurant for violating the Equal Pay Act. Two high school friends-one male and one female-applied to be “pizza artists” and both were hired. However, the female applicant received $0.25 less an hour in starting pay. When she realized this discrepancy, she contacted the restaurant to complain. In response, the restaurant withdrew the offers of employment to both individuals. The EEOC’s attorney referenced the vast amount of recent news related to sexual harassment and stated unequal pay is simply another form of sex discrimination in the workplace. Further, the EEOC stressed that it will continue to thoroughly investigate and enforce equal pay requirements.

Bottom Line

The overwhelming media coverage of sexual harassment and unequal treatment in the workplace reinforces that employers must make equal treatment a top priority. Periodic review of policies and practices, with attention to pay policies, remains critical to limit employer exposure to lawsuits alleging unequal pay or treatment.

Oh No, Not You (Again): Serious Enforcement of Harassment Policies Is Absolutely Necessary

Contributed by Steven Jados, November 22, 2017

During the past several weeks, it seems that every day has featured new allegations of sexual harassment involving celebrities, politicians, and others in positions of power.

These allegations invite a question to employers: Do you want to be in the news for all the wrong reasons? No? Good, because this moment in time should impress upon all businesses the importance of vigilant enforcement of anti-harassment policies.

HandbookThe first step in enforcement is ensuring that anti-harassment policies are properly communicated to all employees—from entry-level to C-Suite.  All employees should be told, in no uncertain terms, on day one of their employment and regularly thereafter, that they have the right not to be sexually harassed at work. The company’s management—all the way to the top of the organization—must also be put on notice that employees have the right not to be sexually harassed at work, and that credible allegations of harassment will carry real consequences for those who engage in such unacceptable behavior.

Employees must also be trained on how to make internal complaints of harassment within the company.  On that point, employees should know that they can contact human resources, or any appropriate member of management with whom the employee is comfortable with, to disclose improper conduct without fear of retaliation.

Training must also extend to human resources and all members of management, so that they know to recognize harassment complaints for what they are—and so the company’s investigation and enforcement procedures can promptly be put into action. Management must take all complaints or possible situations of harassment seriously, and investigate them to their reasonable conclusion.  There can be no off-the-record complaints; companies cannot look the other way because an accused manager was “just kidding” or, even worse, because an individual “gets to do whatever he or she wants.”  In the end, appropriate disciplinary action and re-training must follow when the company’s investigation determines that harassment occurred.

While proper investigation procedures can shield companies from liability in certain circumstances, failures in implementation, training, investigation, and enforcement of anti-harassment policies are more likely to result in legal liability, negative publicity and adverse financial implications.

Attention employers: Do you have questions on how to implement or communicate anti-harassment policies? Are you uncertain how you should respond to employee complaints? Do you need help in training your employees and management on company anti-harassment policies and procedures? Or, like many employers, are you simply hesitant to investigate harassment allegations against high-level managers?

Ultimately, if you are asking these questions, the best approach is to seek the advice of experienced employment counsel so that potential areas of liability can be contained and minimized, or better yet, eliminated as soon as possible.

UPDATED 11/22/2017: Deadline to Electronically Submit OSHA Data

Contributed by Matthew Horn, November 21, 2017

BREAKING NEWS: In follow up to our blog from yesterday, OSHA issued a press release this morning extending the deadline to electronically report from 12/1 to 12/15. All other information in the blog remains unchanged.
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On June 27, 2017, OSHA issued a press release announcing that it would be delaying the compliance date for its Rule requiring most employers to electronically submit their injury and illness data to OSHA. The press release pushed back the compliance date four months, from July 1, 2017 to December 1, 2017, so OSHA could review the Rule closely.

Dec1Just over two weeks later, OSHA issued another press release announcing that it would be launching its website allowing employers to submit their injury and illness data on August 1, 2017. On August 1, 2017, OSHA made good on that promise and launched its website, which is linked here. To date, despite OSHA’s promise to review the Rule closely, it has taken no action to roll back or delay the electronic reporting requirements, so the December 1st deadline remains.

Under the Rule, virtually all employers with twenty or more employees are required to submit their completed Form 300A for 2016 by December 1, 2017. In 2018, employers with twenty or more employees must submit their completed Form 300A for 2017 by July 1, 2018, and those employers with more than 250 employees must submit their Form 300 and 301s by that deadline, as well.

While we were hoping OSHA would roll back or delay the Rule, it appears that is not going to happen. Accordingly, all applicable employers would be well-served submitting their data online no later than December 1st.