Author Archives: smithamundsen

Association Health Plans Expanded Under DOL Final Rule

Contributed by Kelly Haab-Tallitsch, July 10, 2018

12837750 - stethoscope wrapped around health insurance policies, soft focusOn June 21, 2018, the US Department of Labor (DOL) published a final rule making it easier for a group or association of small employers to band together to buy health insurance.  The rule allows employers that previously could only purchase small group health coverage to join together to purchase insurance in the less-regulated large group market.

The rule broadens the definition of an “association” that can act as a single “employer” to sponsor an Association Health Plan (AHP) under the Employee Retirement Income Security Act of 1974 (ERISA). Employers that pass a “commonality of interest” test based on geography or industry can form an association for the sole purpose of offering an AHP to their employees.

Under the new rule employers can show a commonality of interest if they are:

  • In the same trade, industry or profession throughout the United States; or
  • In the same principal place of business within the same state or a common metropolitan area, even if the metro area extends across state lines.

Potential Benefits

In most states employers with less than 50 employees must purchase health coverage in the small group market, which is subject to greater regulation (a few states set the cut off at 100 employees). Under the new rule, an association of employers with a total of 50 (or 100) or more employees among them will have access to the large group market. Why does this matter? Large group plans are exempt from some of the regulatory requirements imposed on small group health plans by states and the Affordable Care Act (ACA), including the requirement to provide coverage for 10 essential health benefits.  This will allow an AHP to offer a “skinnier” (and cheaper) plan than those available in the small group market.

AHPs may also help employers leverage the bargaining power of a larger group and reduce administrative costs through economies of scale. The regulations also enable AHPs to self-insure, subject to state oversight, an option not previously available to most small employers. Sole proprietors may also participate in an AHP.

Considerations

AHPs are still subject to nondiscrimination regulations. Coverage of an individual cannot be restricted based on any health factor or denied based on a preexisting condition.

Because AHPs are not subject to the same rules as small group health plans, employers must read the fine print and understand the details of the coverage they are purchasing.  AHPs are closely regulated by state and federal regulations and compliance will continue to be complex. AHPs are a type of a multiple employer welfare arrangement (MEWA), which are generally required to file a Form M-1 and a Form 5500 annually unless otherwise exempt.

Implementation Timeline

The new rule will be phased in beginning in September 2018, at which time fully-insured AHPs may begin to operate under the rule. Existing self-insured AHPs may begin to operate under the new rule on January 1, 2019 and new self-insured AHPs can begin on April 1, 2019.

 

#MeToo Prompts Stiffer Sexual Harassment Laws

Contributed by Suzanne S. Newcomb, July 6, 2018

In January we reported on a change in federal tax law aimed at discouraging confidentiality in sexual harassment and abuse settlements. Since then Tennessee, Washington, New York, and New York City have enacted sexual harassment prevention measures including discouraging confidential settlements.

#MeToo

#MeToo on sketchbook 

In Tennessee and Washington it is now unlawful to condition employment on an agreement not to disclose workplace sexual harassment although confidential settlements are still permitted in both states. The Washington state law further clarifies that non-disclosure policies and agreements do not prevent discovery or witness testimony in administrative or civil judicial actions and tasks the state’s Human Rights Commission with developing model policies and best practices to prevent sexual harassment.

New York recently passed an aggressive state-wide anti-harassment law which mandates annual training, prohibits mandatory arbitration of sex harassment claims, and severely limits an employer’s ability to keep the underlying facts of such claims confidential as follows:

  • Effective Immediately Employers must protect non-employees in their workplace from sexual harassment and are liable to non-employees (i.e. contractors, subcontractors, vendors, consultants or others providing services) if the employer’s agents knew or should have known of the harassment and “failed to take immediate and appropriate corrective action.”
  • Effective 7/11/2018
    • It becomes unlawful to require employees to arbitrate sexual harassment claims (this provision will likely be challenged as violating the Federal Arbitration Act).
    • It becomes unlawful to require confidentiality as to the facts and circumstances underlying a claim of sexual harassment unless confidentiality is the complainant’s preference. If the complainant indicates he or she prefers confidentiality, the employer must wait 21 days while the complainant considers the proposed confidentiality provision and, if the complainant chooses to accept the provision, the complainant must be allowed seven days to revoke the agreement. Note, unlike the ADEA, the NY State law does not appear to allow the complainant to waive any part of the 21 day consideration period.
  • By 10/9/2018 employers in the state must (1) adopt a written sexual harassment policy and (2) provide “interactive” sexual harassment training to all employees annually. Both the policy and the training must meet the strict standards set forth in the statute.

New York City enacted its own ordinance which extends the time period for filing sexual harassment complaints to 3 years; expands the prohibition of sexual harassment to all employment and independent contractor relationships (unless the contractor is itself an employer) regardless of number of employees; effective 9/6/2018 will require employers to display a new mandatory poster and provide an information sheet to all employees upon hire; and effective 4/1/2019 will require employers to provide annual “interactive” sexual harassment training which meets the minimum standards outlined in the ordinance to all employees (including managers, supervisors and interns).

Employers with operations in New York must act now to ensure compliance. Others should remain alert as many other jurisdictions are considering similar measures.

 

When Is Travel Time Compensable For Employees With No Regular Workday?

Contributed by Brian Wacker, June 29, 2018

Employees’ work schedules seem to be as fluid than ever. More and more, employers are bending to the employment market’s demand by allowing employees to work remotely from home and/or to reasonably set their own hours to accommodate personal obligations such as caring for children or loved ones. If done thoughtfully and effectively, these accommodations can lead to happier and more productive employees.

65707188 - 3d illustration of car location tracking with laptop and satelliteBut it is not without potential pitfalls. A common concern for employers with employees who keep odd or fluid work schedules is whether they are required to compensate these employees for travel time away from home.

The answer, unfortunately, is not always clear. As employers know, the Fair Labor Standards Act (FLSA) requires employers to pay employees for their “work.” Over time and through the passage of subsequent legislation, Congress has clarified that employers are not required to pay their employees for time spent commuting from home to work. That is not compensable worktime, regardless of if the employee works at a fixed location or at different work sites.

But what about when an employee without a regular work schedule has to travel away from home for work?  Must he or she be paid for time traveling to and from the destination?

The answer is a qualified “maybe.”  The Code of Federal Regulations (CFR), 29 C.F.R. §785.39, provides that travel away from home is compensable worktime if and when it cuts across the employee’s workday. In such a case, the employee is just substituting travel for other compensable work activities, even weekends or dates the employee does not typically work. So if an employee has a regular work schedule – say, 9:00 a.m. to 5 p.m. – their time spent traveling during those times is compensable. Easy enough.

So what happens when an employee has no easily discernable, regular “workday?”  How do employers determine what travel time is compensable – and what is not?

How to determine whether an employee has a “regular workday”

The Department of Labor (DOL) recently attempted to clarify employer obligations and offer them more certainty in potential wage and hour disputes arising in these situations.  FLSA 2018-18.

Employers should be cautious in making any unilateral determination that an employee does not have a “regular workday,” even if the employee’s hours are not rigidly set. If challenged, the Wage and Hour Division (WHD) or a court will review employee time records with an eye to establish work patterns that such a “regular workday” existed that requires the employee to be compensated for travel time. So fair warning: just because an employee has a non-traditional schedule or work setup does not mean she does not have a “regular workday.”

Any determination that an employee does not have a “regular workday” should be the result of a situation-specific (hopefully, time-record-supported) analysis. Otherwise, it may not pass muster if challenged by employees seeking additional compensation.

The DOL provided several permissible methods to an employer to conduct this analysis:

  • Review the employee’s time records during the most recent month of employment. If they reveal typical work hours, the employer can consider those as normal hours going forward absent a material change in circumstances.
  • If there are not typical work hours revealed upon review of the employee’s time records, the employer can choose to average the start and end times of the workday.
  • If neither of the above methods reveal a typical workday, the employer can negotiate an agreement with the employee as to what the reasonable amount of time spent traveling falls within a regular workday and what time is otherwise compensable.

Each of these methods, if used reasonably, will shield the employer from an adverse finding by the WHD that the CFR was violated for not compensating employees’ travel only during work hours. Employers looking to reduce potential risk would be well advised to take heed of these recommended methods.

The Final Chapter: The Supreme Court Overrules Abood in Janus v. AFSCME and Changes the Face of Public Sector Labor Relations

Contributed by Carlos S. Arévalo and Julie Proscia, June 27, 2018

16306823 - 3d illustration of scales of justice and gavel on orange background

3d illustration of scales of justice and gavel on orange background

On June 27, 2018, the United States Supreme Court issued a groundbreaking decision in Janus v. AFSCME eliminating the public sector fair share requirement and thus changing the face of public sector labor. The Janus case, originating in the 7th Circuit, involved an appeal over the dismissal of a complaint that sought to invalidate agency fees and to reverse the Supreme Court’s 1977 decision in Abood v. Detroit Board of Education.

Over 40 years ago, the Abood Court established that public sector non union members could be charged or allocated agency fees or a “fair share”, by the representative union, for collective bargaining, contract administration, and grievance adjustment purposes. In today’s ruling, the Court reversed Abood and declared that “public-sector unions may no longer extract agency fees from nonconsenting employees.”  Regarding Illinois’ Public Labor Relations Act provisions allowing automatic fair share deductions, Justice Samuel Alito wrote:

This procedure violates the First Amendment and cannot continue. Neither an agency fee nor any other payment to the union may be deducted from a nonmenber’s wages, nor may any other attempt be made to collect such a payment, unless the employee affirmatively consents to pay.

Janus will undoubtedly have short and long term impacts for public sector employers and unions. Of immediate concern, and given the Court’s ruling that fair share deductions cannot continue, public sector employers need to promptly determine if there are any non-union employees who have been subject to “fair share” fees and cease collecting the fees pursuant to existing contracts now that fair share fees have been found unconstitutional. This decision also substantially impacts the bargaining of open and soon-to-expire contracts and the types of provisions that will be negotiated, including proposals that will pursue to have deduction authorizations be “irrevocable” as well as provisions that will deny representation of nonmembers in grievance proceedings unless unions are properly compensated. Janus has opened the door for a dual grievance administration system and essentially dual representation.

Given the broad and significant ramifications of this momentous decision, we invite and encourage all public sectors managers, administrators and department heads to participate in our webinar on July 9th, which will focus on Janus and its impact on public sector employers. We will discuss the following topics:

  • What changes public sector employers need to make immediately for fair share employees
  • The potential impact of Janus on exclusive representation
  • The potential for a bifurcated grievance and disciplinary system
  • How to handle open contract
  • How Janus impacts closed contracts

Register for our complimentary webinar – Calling All Public Sector Employers: SCOTUS Reverses Janus – What You Need to Know

 

Amazon, Berkshire Hathaway and JP Morgan Name CEO in New Venture that Could Change Healthcare for Employers

Contributed by Suzannah Wilson Overholt, June 20, 2018

As promised earlier this year, we have an update regarding the new health care company being formed by Amazon, Berkshire Hathaway and JPMorgan Chase, which still lacks an official name.  In February, Warren Buffett announced that a CEO would be named within a year.  The group later announced that a search was underway, and then, in early June, announced that a new CEO had been identified and would be named in two weeks.

12837750 - stethoscope wrapped around health insurance policies, soft focusTrue to their promise, on June 20, 2018, the triumvirate of Warren Buffett (Berkshire Hathaway), Jeff Bezos (Amazon) and Jamie Dimon (JPMorgan Chase) announced that Dr. Atul Gawande will serve as CEO of the new company starting July 9.  Dr. Gawande currently practices general and endocrine surgery at Brigham and Women’s Hospital and is a professor at Harvard’s School of Public Health and Medical School. He is also the founding executive director of Ariadne Labs, which, according to the Ariadne Labs website, is a joint center between Brigham and Women’s Hospital and Harvard’s School of Public Health.  Its mission is to “create scalable health care solutions that deliver better care at the most critical moments in people’s lives, everywhere.” The web site indicates that Dr. Gawande is also chairman of Lifebox, “a nonprofit reducing surgical deaths globally.” CNBC reported that Dr. Gawande will not be giving up his positions at Harvard or Brigham and Women’s Hospital and is transitioning to the position of chairman of Ariadne Labs.

When initially announced in January, the primary purpose of the new company was portrayed as an effort to reduce health care costs for employers. The appointment of Dr. Gawande adds a bit more insight into how that goal may be achieved. According to Bloomberg, the selection of Dr. Gawande has led analysts to conclude that the new company will take an expansive look at how to approach fixing health care.  In a letter to his shareholders, Dimon indicated that the new company’s agenda will include aligning incentives among doctors, insurers and patients; reducing fraud and waste; giving employees more access to telemedicine and better wellness programs; and figuring out why so much money is spent on end-of-life care. Some have been critical of his statements, indicating that they are focused on the wrong issues.

The new company will be headquartered in Boston, most likely because that is where Dr. Gawande is located. Bloomberg reported that additional details such as the size, budget and authority of the new company are still not available. However, it will be “an independent entity that is free from profit-making incentives and constraints.”  We will continue to monitor this and provide updates.

2018 Has Shown A Significant Increase in ICE Form I-9 Audits – Is Your Company Ready?

Contributed by Sara Zorich, June 18, 2018

U.S. Citizenship and Immigration Services

“U.S. Citizenship and  Immigration Services” text with American flag in background 

We have seen a major increase in 2018 of Form I-9 audits from the Immigration and Customs Enforcement (ICE). First we saw 122 companies audited in California in February 2018. Next, we saw a number of companies in the Chicagoland area and throughout the Midwest receive Form I-9 audits in March 2018. Then, just weeks ago ICE made a number of arrests in the Chicagoland area.

This increase in activity is not showing any signs of slowing. In fact, we anticipate I-9 audits to increase and are aware of ICE hiring additional agents in the Chicago area to assist in the increase of Form I-9 audits.

What should a company do in light of ICE’s increased audits?

First, you need to ensure that your employees responsible for the Form I-9 process understand the Form I-9 requirements. The Form I-9 has changed a number of times over the last couple of years and we are finding that those changes are not necessarily understood by employers. Make sure you are using the most recent form.

Second, you should audit your Form I-9’s, either on your own, or have an attorney assist you to help identify and correct technical Form I-9 errors. A self-audit before ICE arrives can assist in reducing your liability during an ICE audit.

Third, you need to have a plan if ICE audits your Form I-9’s. Your plan needs to include what to do the day ICE arrives along with what to expect from the audit process and potential ramifications on your business.

Employer Stock in Qualified Plans: Recent Developments Largely Good News for Fiduciaries

Contributed by William Scogland, June 13, 2018

Many employer sponsored defined contribution (DC) plans qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended (the “Code”) maintain employer stock funds. Many such stock funds long antedate the Employee Retirement Income Security Act of 1974, as amended (ERISA).

In the wake of the Great Recession, plaintiffs’ counsel successfully prosecuted numerous ERISA fiduciary stock drop cases. The allegation was that fiduciaries breached their duties under ERISA by maintaining employer stock in a plan when they should have sold it.

16306823 - 3d illustration of scales of justice and gavel on orange background

scales of justice and gavel on orange background

Four years after a unanimous Supreme Court ruling (Fifth Third Bancorp. v. Dudenhoeffer) provided guidance on stock-drop lawsuit pleading standards, plaintiffs are having increasing difficulty in avoiding dismissal of such suits. Under Dudenhoeffer, plaintiffs cannot avoid a motion to dismiss by pleading merely that the stock went down and that the fiduciaries should have caused the plan to sell it before the decline. The plaintiffs must plead “special circumstances” to convince lower courts to let a lawsuit proceed. While the meaning of “special circumstances” is not totally clear, it appears that they must be extreme. In the Arch Coal case, the  court stated that “Plaintiffs’ allegations of Arch Coal’s ‘serious deteriorating condition’ and ‘overwhelming debt’ are evidence of the company’s slide into bankruptcy but do not establish a special circumstance under Dudenhoeffer.”

Plaintiffs must also convince the courts that an alternative action by a prudent fiduciary to keeping company stock in a DC plan wouldn’t do more harm than good.

For example, the “more harm than good” standard was cited by the district court in dismissing a suit against IBM. “The complaint is bereft of context-specific details to show how a prudent fiduciary would not have viewed the proposed alternatives as more likely to do more harm than good.” The standard has also been cited by, at least, one other district court.

Also, in the good news column is the Fifth Circuit’s decision in Tatum v. RJR, a reverse stock drop case. Here the plaintiffs alleged that the RJR fiduciaries breached their duties by eliminating the Nabisco stock fund when its stock price later increased. The Fourth Circuit held that those plan fiduciaries were not liable for any losses related to their procedural imprudence because a “hypothetical prudent fiduciary” would have made the same decision, even though they failed to engage in the process ERISA requires.

It is unlikely that ERISA fiduciary cases regarding stock funds have ended, and the ERISA fiduciary process is still important. Although the fiduciaries finally won, it was after an extended period of time and the expenditure of huge amounts of the employers’, fiduciaries’ and/or insurers’ money.

ERISA plaintiffs’ lawyers will probably keep filing such cases. In the past, ERISA plaintiffs’ counsel has succeeded in morphing their approaches, and they can be expected to do so in this context as well.