Category Archives: Employee Benefits

REMINDER – Chicago Minimum Wage Ordinance Requires Notices and Wage Increases Starting July 1st!

Contributed by Michael Wong and Sara Zorich

This Wednesday, July 1, 2015, Chicago’s Minimum Wage Ordinance (Chicago Municipal Code §1-24) goes into effect, increasing the minimum wage to $10.00 per hour for non-tipped employees and $5.45 for tipped employees.

IMPORTANT NOTICE REQUIREMENTS: All employers that maintain a business facility within the geographic boundaries of  Chicago AND/OR are subject to one or more of the license requirements in Title 4 of the Municipal Code of Chicago are covered by Chicago’s Minimum Wage Ordinance and MUST do the following starting July 1st:

  1. Post Chicago’s Minimum Wage Poster by July 1st! (Click here for a Copy of the Poster)
  2. Include a copy of Chicago’s Minimum Wage Poster with the first paycheck issued after July 1st to each employee that is subject to the Ordinance (i.e. works at least 2 hours in Chicago, or at some point may work at least 2 hours in Chicago)!
  3. Include a copy of Chicago’s Minimum Wage Poster with the first paycheck of any employee hired after July 1st!

From our prior Chicago Minimum Wage Ordinance Post, here are points that you need to know about the Chicago Minimum Wage Ordinance:

  1. Covered Employers: Any individual, partnership, association, corporation, limited liability company, business trust, or any person or group of persons that has at least one employee and (1) maintains a business facility within the geographic boundaries of Chicago AND/OR (2) is subject to one or more of the license requirements in Title 4 of the Municipal Code of Chicago.
  2. Covered Employees: Any employee who works for at least 2 hours in any two-week period within Chicago’s geographic boundaries, including driving through Chicago during work (e.g., that delivery driver that takes Route 94 from Evanston to Gary and gets stuck in rush hour traffic is covered!).
  3. Hours subject to Chicago’s Minimum Wage: Chicago’s Minimum Wage only has to be paid for hours worked by the employee when he or she is physically present within the geographic boundaries of Chicago. This includes time spent driving during working hours, but does not include time commuting between home and work.
  4. Non-Tipped Employees’ Hourly Rate: Chicago’s Minimum Wage for non-tipped employees starting July 1, 2015 will be $10.00/hour, and increase as follows: July 1, 2016 to $10.50/hour; July 1, 2017 to $11.00/hour; July 1, 2018 to $12.00/hour; July 1, 2019 to $13.00/hour; and each July 1st thereafter, Chicago’s Minimum Wage will increase by an amount announced by the Commissioner of Business Affairs and Consumer Protection (and, of course, if the CCMW is less than the Illinois or Federal minimum wage, then the highest wage rate applies).
  5. Tipped Employees’ Hourly Rate: Chicago’s Minimum Wage for tipped employees starting July 1, 2015 will be the greater of the Federal or Illinois minimum wage for tipped employees plus $0.50/hour, and increase as follows: July 1, 2016 by an additional $0.50 ($1.00 total); and each July 1st thereafter, Chicago’s Minimum Wage will increase by an amount announced by the Commissioner.
  6. Penalties & Damages: A fine of $500.00 to $1,000.00 per day for each offense that is not corrected. Potential license suspension or revocations and an order to pay restitution to underpaid employees. Additionally, employees can pursue a private cause of action to recover THREE times the underpayment, attorney fees and costs.
  7. Union/CBA Issues: There is no grandfathering for current “in-force” collective bargaining agreements! This means that, depending on the provisions of a current CBA, there could be an automatic increase in all employees’ wages (i.e., if only the lowest paid employee’s rates are defined and each other level is based a percentage higher), or the union could even demand to re-open bargaining mid-contract.  We anticipate that there will be substantial controversies over this.

Employees That Are Erratic and Disruptive, While Suffering From A Mental Illness, Can Still Be Terminated Under The ADA

Contributed by Julie Proscia

Erratic behavior, caused by an underlying medical condition, does not necessarily mean a free pass under the Americans with Disabilities Act (ADA). In March, the Eighth Circuit Court of Appeals, in Walz v. Ameriprise Financial, Inc., upheld the termination of a bipolar employee, finding that the termination did not violate the ADA. Identifying and accommodating employees with overt physical disabilities is substantially easier than accommodating behavior that is disruptive and/or erratic and caused by mental illness. Because of the difficulty in addressing these types of issues, employers are often unsure of what to do–and thus do nothing. This ruling is good news for employers that struggle with disciplining and ultimately terminating individuals that are disruptive in the workplace and who cannot perform the essential functions of their position with or without a reasonable accommodation.

In Walz v. Ameriprise Financial, Inc., the plaintiff worked for Ameriprise as a process analyst. The position required not only good communication skills but also the ability to work well in a team. Starting in 2012, the plaintiff began to interrupt meetings, disturb coworkers, and disrespect her supervisor. After Walz’s supervisor had repeated discussions with her about her behavior, including offers of assistance and time off, she was eventually issued a disciplinary warning. Walz then applied for FMLA leave which was granted by a third party vendor that administers the leave requests for Ameriprise. Neither the third party vendor nor Walz ever informed Ameriprise of the reason for the FMLA leave. Upon her return to work, Walz provided a doctor’s note stating that her medications had been stabilized and was released for duty. The plaintiff was then given, reviewed, and signed a document that explained Ameriprise’s policy against disability discrimination and the procedure for requesting a reasonable accommodation. Within months of her return to work, Walz again began to engage in disruptive and erratic behavior to both her colleagues and supervisor, and was ultimately terminated. Throughout this time, Walz never requested a reasonable accommodation or reported the nature of her illness.

Walz subsequently sued Ameriprise alleging that it violated the ADA and should have known that she had a disability and forced her to take additional time off, despite the fact that she never disclosed the illness nor requested an accommodation. On appeal, the Eighth Circuit rejected her arguments and upheld the district court’s ruling. In doing so, the court found that Walz was not a qualified individual under the ADA because she could not perform the essential functions of her position with or without accommodation. Moreover, it held that the employer does not have a duty to “guess” an employee’s disability when the employee does not inform it of the illness or injury.

Bottom Line: Employers can discipline and terminate employees for erratic, rude and disruptive behavior even if the cause is ultimately related to an underlying medical condition. In a note of caution, employers still need to engage in the interactive process and investigate reasonable accommodations if the employee has disclosed a medication condition causing the behavior.

Newsflash: Chicago Minimum Wage Increasing to $13.00/hour

Contributed by Noah A. Frank

On December 2, 2014, the Chicago City Council approved The Chicago Minimum Wage Ordinance (Chicago Municipal Code §1-24), increasing the minimum wage to $13.00 per hour.  Here are nine points you need to know now:

  1. Covered employees are those who work for at least two hours in any two-week period within Chicago’s geographic boundaries, including driving through the city (e.g., that delivery driver that takes Route 94 from Evanston to Gary and gets stuck in rush hour traffic is covered!).  Time commuting between home and work does not count.Wage
  2. Employers with at least one covered employee are subject to the Ordinance (excluding various City entities, local, state, and federal government, and employees during certain stages of employment and in certain subsidized programs).
  3. The City of Chicago Minimum Wage (“CCMW”) only needs to be paid for work while the employee is physically present within the geographic boundaries of Chicago (you may need to determine how long your driver was stuck in traffic).
  4. CCMW for non-tipped employees will increase: on July 1, 2015 to $10.00/hour, on July 1, 2016 to $10.50/hour, on July 1, 2017 to $11.00/hour, on July 1, 2018 to $12.00/hour, and on July 1, 2019 to $13.00/hour.  Each July 1 thereafter, the CCMW will increase by an amount announced by the Commissioner of Business Affairs and Consumer Protection (and, of course, if the CCMW is less than the Illinois or Federal minimum wage, then the highest wage rate applies).
  5. For tipped employees, the CCMW will increase: on July 1, 2015 to the greater of the Federal or Illinois minimum wage for tipped employees plus $0.50/hour, and on July 1, 2016 by an additional $0.50 ($1.00 total).  Each July 1 thereafter, the CCMW will increase by an amount announced by the Commissioner.
  6. There is no grandfathering for current “in-force” collective bargaining agreements!  Unlike other municipalities’ similar recent laws, there is no exemption or safe harbor for currently in-force CBAs.  This means that, depending on the provisions of a current CBA, there could be an automatic increase in all employees’ wages (i.e., if only the lowest paid employee’s rates are defined and each other level is based a percentage higher), or the union could even demand to re-open bargaining mid-contract.  We anticipate that there will be substantial controversies over this.
  7. Notice: Employers with a physical location within Chicago must post a notice; notice must also be provided with the first paycheck subject to the Ordinance.
  8. Penalties include daily fines of $500 to $1000.
  9. Damages:  Through a private cause of action, covered employees may recover three-times the underpayment, attorney fees, and costs.

The bottom line: Employers with employees working in or traveling through Chicago should start planning for wage increases now, and review CBAs as well.

Readers are encouraged to reach out to experienced LE counsel for advice and direction.

Critical 2014 Illinois Prevailing Wage Change Impacting All Non-Union Contractors & Employees

Contributed by Jeffrey A. Risch

Effective January 1, 2014, the Illinois Prevailing Wage Act will define “general prevailing rate of hourly wages” to mean hourly cash wages plus ANNUALIZED fringe benefits.  Thanks to PA 98-482, the law will now read:  The terms “general prevailing rate of hourly wages”, “general prevailing rate of wages” or “prevailing rate of wages” when used in this Act mean the hourly cash wages plus annualized fringe benefits for training and apprenticeship programs approved by the U.S. Department of Labor, Bureau of Apprenticeship and Training, health and welfare, insurance, vacations and pensions paid generally, in the locality in which the work is being performed, to employees engaged in work of a similar character on public works.

Many non-union contractors have established bona fide defined contribution plans that provide for 100% immediate vesting of the prevailing wage fringe benefit; usually in the form of retirement savings.  The advantages for the worker are endless.  For example, the money is solely and exclusively in the control of the worker to do with it however they deem appropriate. In exchange for such a rich and rewarding benefit, some plans specifically limit the contribution to only those hours actually worked on “public works projects” (aka prevailing wage projects).

Big Labor went to the Illinois Legislature and successfully lobbied for the addition of the term “annualized”.  Therefore, effective for all worked performed on January 1, 2014 and thereafter, the Illinois Department of Labor will audit fringe benefit contributions made under a defined contribution plan and will calculate all contributions over all hours worked in a given period.

What does this mean???

The Illinois Prevailing Wage Act allows for certain fringe benefits (Health and Welfare, Pension/Annuity, US DOL Training, and Vacation in some localities) to be considered in determining the prevailing rate and be taken into account as part of the component by being an offset to the total in determining compliance with the prevailing rate. Contractors may choose to pay the entire prevailing wage determination in cash or they may choose to pay some in cash and some in allowable fringe benefits.  If a contractor does not pay any allowable fringe benefit or just a portion of it, then according to the Illinois Department of Labor the total prevailing wage hourly determination must now be made up in the base hourly wage rate in order to comply with Prevailing Wage Act (which will raise the hourly wage and therefore skew any overtime rates).

Also, to establish the proper hourly calculation for allowable fringe benefits, contractors will be expected to divide the total amount they contribute to a bona fide fringe benefit plan by the total of all hours worked.  According to the Illinois Department of Labor, a contractor cannot simply take the hours worked and contributions made on public works/prevailing wage jobs to make the hourly calculation.  An example used by the Illinois Department of Labor includes: If a contractor contributes $520 per month for single insurance coverage and the employee works 2080 hours (40 x 52 weeks) then the effective annual contribution rate is determined by dividing $6240 ($520 x 12) by 2080 which equals $3.00 per hour. If the health and welfare portion of the prevailing wage is $5.05 per hour, the contractor can take a credit of $3.00 per hour and must pay $2.05 ($5.05-$3.00) additional on the hourly base wage.  The same formula will be applied to Pension, Annuity, 401k plans, Training, and Vacation in some localities that are funded by the contractor.

Obviously, this is a critical change in the interpretation and administration of prevailing wage law in Illinois.  Contractors need to immediately review their accounting practices for Illinois prevailing wage purposes.

New York City Passes Paid Sick Leave Law

Contributed by Samantha Esmond

On April 5, 2013, we blogged about the resurgence of proposed paid sick leave legislation, which had been considered by the New York City Council since 2009. The New York City Council initially approved the legislation on May 8, 2013 and, as promised, Mayor Bloomberg vetoed the legislation on June 6, 2013.

Despite Mayor Bloomberg’s veto, the New York City Council garnered enough votes to override his veto and enact the “Earned Sick Time Act.” Several other cities, including Seattle, Portland, Philadelphia, San Francisco, and Washington D.C. have passed similar laws. However, New York City is the most populous city yet to require employers to provide paid sick leave. It has been estimated that this new law will affect nearly one million New Yorkers.

Specifically, the Act requires employers who employ twenty (20) or more employees and all employers of one or more domestic workers to provide paid sick time to their employees beginning on April 1, 2014. The Act is expanded to cover employers who employ fifteen (15) or more employees beginning on October 1, 2015.  Employers who do not employ the requisite number of employees will be required to provide employees with up to 40 hours of unpaid sick leave once the law takes effect on April 1, 2014.

Under the Act, employers shall provide a minimum of one (1) hour of sick time for every thirty (30) hours worked, with a maximum of no more than forty (40) hours of paid sick leave per calendar year, as defined by the employer. To be eligible for paid sick time, employees must work within New York City limits and must have been employed for more than eighty (80) hours in a calendar year. The Act further provides that eligible employees shall be entitled to use sick time for themselves or to care for an eligible family member who is in need of:  (1) a medical diagnosis; (2) care or treatment of a mental or physical illness, injury, or health condition; or (3) preventative medical care.

Although, New York City employers must provide paid sick leave, they may require reasonable notice of the need to use such sick leave, not to exceed seven (7) days advance notice, and request documentation for absences of more than three (3) consecutive workdays. The Act further requires employers to provide employees with written notice of the Act’s requirements, upon commencement of the employment relationship and requires employers to maintain records documenting their compliance. The full text of this new Act is available here.

IMPACT:  New York City employers should be cognizant of the new requirements of the Earned Sick Time Act, including the notice and recordkeeping provisions, and update all employee handbooks and sick leave policies to ensure compliance.

The Supreme Court Strikes Down DOMA – What Does It Mean For Employers?

Contributed by Rebecca Dobbs Bush

On June 26, 2013, the U.S. Supreme Court, in United States v. Windsor, issued a landmark decision striking down the federal Defense of Marriage Act (DOMA) as unconstitutional. Now the federal government must acknowledge marriages between same-sex couples. What does this mean for employers? Well, it depends on what states you operate in….

If you live in a state like Illinois that DOES NOT recognize same-sex marriage:

The short answer is, no one knows. While Illinois does allow same-sex couples to enter into a civil union, being in a civil union is essentially the same as being unmarried for purposes of federal law. The decision of the Supreme Court now arguably makes civil unions even more unequal to marriage.

While civil unions are not affected by the decision, it is unclear whether employers will be required or permitted to recognize same-sex spouses of employees living in states that do not recognize same-sex marriages for purposes of federal employment laws such as ERISA, COBRA, FMLA, etc. In other words, what are an employer’s obligations if they operate in Illinois and have an employee who entered into a same-sex marriage in Massachusetts?

The decision references the fact that over 1,000 federal laws contain provisions specifically applicable to spouses that may be affected and should be coordinated. Until we receive additional guidance from the relevant agencies, employers in states such as Illinois are in a state of uncertainty. For example, the IRS generally defers to state of residence and not state of celebration for purposes of determining tax filing status and whether employer provided benefits should be considered imputed income. However, some federal laws, such as ERISA, do not specifically reference which state law should be given deference. In light of the stated views of the Obama administration, many are anticipating an Executive Order directing federal agencies to defer to the state of celebration for purposes of determining whether couples are married. In the meantime, employers operating in states that do not recognize same-sex marriage will need to wait for further clarification.

If you operate in a state that DOES recognize same-sex marriage:

Currently 13 states and the District of Columbia recognize same-sex marriage, including: Massachusetts, Connecticut, Iowa, California, Vermont, New Hampshire, Washington D.C., New York, Rhode Island, Delaware, Minnesota, Maine, Maryland, and Washington State.

For employers operating in states where same-sex marriage is recognized:

  • Same-sex and opposite-sex spouses will need to be treated the same for purposes of benefits extended to spouses.
  • Employees will not have to pay federal taxes for imputed income tied to an employer’s contribution to the same-sex spouse’s welfare benefit coverage. And, these same employees should be permitted to make their contributions towards these spousal benefits on a pre-tax basis under a Section 125 plan.
  • COBRA continuation will need to be offered to same-sex spouses.
  • Same-sex spouses will need to be treated the same as an opposite-sex spouse for purposes of an employer’s pension or 401(k) plan.
  • Employees will be able to access FMLA leave to care for an ill same-sex spouse the same as they would for an opposite-sex spouse.

Regardless of the state you operate in:

Every employer should review their existing benefit plan documents to verify how “spouse” is defined and to determine whether amendments need to be made to existing documents to accurately reflect the employer’s intent and actual administration of the plan.

Will Your Employees be More Interested in Health Insurance Subsidies than Your Group Health Plan?

Contributed by Rebecca Dobbs Bush

While most of us have had just about enough when it comes to discussing Health Care Reform, the discussions aren’t even close to being over.  The most anticipated provisions, the individual and employer mandates, are scheduled to take effect January 1, 2014. 

Many employers are focused on more of an internal analysis – evaluating whether they need to implement a group health plan or change the structure of their current benefit offerings to manage their exposure to penalties under the employer mandate provisions.  At the same time, it is critical to understand the options for individuals to receive subsidies and the availability of individual plans for purchase on state/federal insurance exchanges.  Along with the mandate provisions, insurance exchanges and individual subsidies also become available as of January 1, 2014.  As an employer, have you determined how many in your workforce might be eligible for subsidies in the event you didn’t offer insurance or in the event your group health plan offering is not “affordable” and of “minimum value?”  Not only should you be looking at this to be able to evaluate compensation and benefits offerings to employees, whether an individual is eligible for a subsidy can determine whether you have any penalty exposure for that particular individual.

Citizens and legal residents with household incomes between 100% and 400% of the federal poverty level (who purchase coverage through a health insurance exchange and do not have access to an “affordable” health plan of “minimum value” through their employer) are eligible to receive a monthly advance tax credit to reduce the cost of their coverage.  The amount a person can receive is based on the premium for the second lowest cost plan available on the exchange (i.e., a silver plan) and varies based on their income. 

For example, a household of 4 earning approximately $46,100 is at 200% of the federal poverty level.  This family would not have to pay more than 6.3% of their income ($2,904.30) if they decide to purchase coverage on the exchange at a benchmark level of silver or lower.  For the sake of example, if you assume the annual cost of family coverage in a silver plan is around $10,000, this family would receive monthly tax credits in advance totaling approximately $7,000 annually.  The amount they receive in subsidies is tied to the cost of the silver plan.  However, they are free to access the same amount of subsidy and use it to purchase the cheaper bronze plan. 

For those between 100% to 250% of the federal poverty level, they would also be eligible for subsidies to assist with out-of-pocket costs at the point of service, such as deductibles, copayments and coinsurance.  In the above example, if the family purchased a silver plan (which will have an actuarial value of 70%), they would receive additional subsidies to essentially improve the actuarial value of their coverage to 87%.

But remember, access to all of these subsidies for the family in the example above disappears where an employer offers “affordable coverage” at a “minimum value.”  Based on IRS clarification, an employer’s coverage is “affordable” and of “minimum value” if the cost of covering the employee only is no more than 9.5% of that employee’s income and the actuarial value of the plan is at least 60%.  The test for affordability is not based on the cost of family coverage in an employer’s health plan.

It is estimated that approximately 68% of the population is at or below 400% of the federal poverty level.  Have you evaluated how many employees in your workforce might be eligible to receive a subsidy and how your anticipated benefit offerings compare?  The Kaiser Family Foundation has published a subsidy calculator to use in examining the impact of the subsidy at different income levels, ages, family sizes, and regional costs.  It can be found here:  http://healthreform.kff.org/subsidycalculator.aspx