Register Now! When Terminations Go Wrong

With the rise of workplace violence, the termination process has become more complex. Having the skills and knowledge to prevent or minimize problems during a termination benefits all areas of an organization.

Join Heather Bailey of SmithAmundsen and special guest, Debbie Pickus of Team Fireball Inc., on Thursday, February 7 at 12:00 PM CT for the latest installment of our Labor & Employment Quarterly Series. Heather and Debbie will discuss ways to properly conduct a threat assessment to reduce the risk of workplace violence and employment lawsuits. Specific topics covered include:

  • Tips and tricks for effectively terminating the problem employee while avoiding litigation (or, at least, diminishing risks)
  • How to properly prepare documentation from start to finish when it’s time to terminate
  • Personal Safety Awareness: how to heighten your mental, physical and environmental awareness to reduce risk tolerance
  • How to recognize a threat before it becomes an issue
  • Hands-on learning of basic personal safety skills

Who should attend? HR professionals, business owners, and anyone who regularly handles employment termination meetings with employees.

The Affordable Care Act after Texas v. United States

Contributed by Kelly Haab-Tallitsch, December 19, 2018

On Friday, December 14th, a U.S. District Court judge in the Northern District of Texas issued a ruling in Texas, et al., v. United States of America declaring the entire Affordable Care Act (ACA) unconstitutional, based on the requirement that individuals must buy health insurance or face a tax penalty. Previously, the U.S. Supreme Court upheld the ACA individual mandate as constitutional under Congress’s authority to tax Americans. But the Texas judge held that because the tax bill passed by Congress in December 2017 reduced the individual mandate penalty to zero, it is no longer a tax and no longer under Congress’ taxing power.

The broad ruling has left many employers unsure about their responsibilities under the ACA. Here are the key takeaways:

1.            The ACA remains in effect, for now.

The judge’s ruling in Texas v. U.S. is not an injunction requiring the government to stop enforcing the ACA. Rather, the ruling reaches a legal conclusion that the individual mandate is unconstitutional and the mandate is integral to the entire ACA. The controversial decision is likely to be appealed and the law remains in place pending the outcome of an appeal. Noting that the decision is not the final word on the ACA, the Department of Health and Human Services issued a statement that it “will continue administering and enforcing all aspects of the ACA as it had before the court issued its decision.”

2.            Applicable Large Employers (ALEs) must continue to comply with the ACA’s employer shared responsibility provisions.

The employer shared responsibility provisions of the ACA remain in place. ALEs (i.e. employers with 50 or more full-time equivalent employees (FTEs)) must continue to comply with such provisions, including the information reporting requirements due in early 2019. ALEs must also continue to offer qualifying coverage to 95% or more of their full-time employees (and dependents) or face penalties.

3.            The future of the ACA is unknown.

The decision in Texas v. U.S. will almost certainly be appealed to the Fifth Circuit Court of Appeals and potentially to the Supreme Court. The sweeping nature of the ruling invalidating the entire law is likely to be scrutinized in the higher courts. Opponents of the Texas judge’s decision are likely to argue that the individual mandate is severable from the remainder of the ACA and even if found to be unconstitutional, the remainder of the law should stand.

What’s the bottom line?

Nothing has changed for employers. As noted above, the Texas judge’s decision is likely to be appealed and the case may be winding its way through the courts for months. Employers should continue their compliance activities and stay tuned for further developments.

Conducting an HR Audit for 2019

Contributed by Jeffrey Risch, December 17, 2018

When was the last time you conducted an HR audit for your organization?

We’re all busy and get distracted easily. Often times HR considers a thorough review of the Employee Handbook is enough to ensure all is well from a legal compliance perspective as to personnel policies and practices. Not quite. A closer examination of an employer’s forms, contracts, procedures, practices and actual day-to-day management is essential. In other words, a deeper dive into an organization’s HR-universe is necessary these days. In a world of increased workplace regulation and litigation risks, a more thorough review and audit is required.

For a sample of a comprehensive checklist of the subjects, topics, and issues that a common HR audit entails, please take a moment and familiarize yourself with our HR Audit Checklist here.

Why Exit Interviews are Important in the Compliance Landscape

Contributed by Suzannah Wilson Overholt, December 14, 2018

Exit interviews have been a mainstay of the HR world for years.  They are most often viewed as a means of obtaining insights into employee satisfaction reExit Interviewlated issues, such as compensation, benefits and work environment.  However, such interviews are a valuable component of a compliance program designed to prevent, detect and stop potential or existing fraudulent or otherwise illegal conduct.  This is especially true in the health care industry.

Why health care?  The media has regular accounts of various types of health care providers being investigated or sued under the False Claims Act (FCA) or other statutes governing the behavior of providers who receive money as part of the federal health care programs, e.g. Medicare and Medicaid.  The number of FCA actions being brought each year has increased dramatically, with most of them being brought by current or former employees of the entity being sued.  The rise of these so-called qui tam actions is what should give any entity with federal contracts reason to double down on identifying fraud, waste and abuse.  If the provider does not identify it, an employee may and that employee will not hesitate to blow the whistle to the government.

This is where exit interviews come in.  The goal is not to identify whistleblowers or take action against them.  Rather the goal is to develop the trust of employees so they will share their knowledge and work with the provider to correct the conduct rather than make an external report or file a qui tam action.

When it is feasible to do so, conduct exit interviews in-person and well in advance of the employee’s last day rather than as part of the usual exit process of completing paperwork and turning in company property. Those conducting the interviews must be properly trained to obtain useful information and should not be the exiting employee’s supervisor.

If a face-to-face interview is not possible, have a questionnaire ready to go that can be sent to the individual. Employees who have already left the organization may be more forthcoming. Do not exclude involuntarily terminated employees. They may share more because they feel they have nothing to lose.

The interview should primarily be the responsibility of HR, with limited involvement by compliance. The interviewers should ask whether the exiting employee observed any violations of laws, regulations, the Code of Conduct, or policies. The compliance office should be told about any reported violations. Any management, regulatory, or legal issue raised should be addressed before the employee leaves employment, if possible. Doing so may prevent the employee from reporting the issues externally.

Finally, keep a record of the process – any and all communications with the employee regarding an exit interview or follow-up questionnaire, what the employee said during the interview, and steps taken in response to what was said.  In addition, follow up with the employee to report what action was taken in response to the allegations.

Note: The following articles are great additional resources for this topic and I encourage you to review.

Are Independent Contractor Transportation Workers Exempt from the Federal Arbitration Act?

Contributed by Brian Wacker, December 10, 2018

The Supreme Court recently heard arguments on an issue which will have lasting implications on the arbitrability of claims between employers and certain independent contractors. Where the Court lands will have significant impact on employers moving forward, not only with regard to the form of contracts employers offer, but also with regard to how they classify workers in the transportation field.

Currently, the Federal Arbitration Act (the “FAA”) authorizes transportation employers to include mandatory arbitration provisions in employment contracts, which can require employees to arbitrate workplace disputes in lieu of going to court, and limit them to bringing those claims individually. This is obviously a strong tool for employers seeking to minimize the uncertainty and costs of litigation.

SupremeCourtBuilding

Supreme Court Building

However, as employers with workers engaged in transportation should know, an exception is made in Section 1 of the FAA, exempting “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” 9 U.S.C. §1. This has become known as the “transportation” exemption. Historically, Congress included this exemption, in part, because transportation workers were subject to separate federal dispute resolutions statutes already in effect.

In New Prime, Inc. v. Oliveira, Sup. Ct. Case. No. 17-340, the Court considered the “transportation” exemption in the FAA – specifically two issues: (1) whether disputes over its applicability should be resolved by an arbitrator or a judge and (2) whether the exemption applies to independent contractors as well as employees.

The scope of the “transportation” exemption has been wrangled over for years, culminating in the 2001 landmark decision in Circuit City Stores, Inc. v. Adams, where the Court plainly read the exemption, holding that it did not apply to any workers outside of the delineated transportation industries. In other words, non-transportation workers could no longer try to seek the benefit of the exemption.

Despite this precedent, workers have continued to try to expand its application with New Prime being just the latest example – this time to independent contractors working in the transportation field. Following submissions and several amicus briefs in support of both sides, the issue and positions of the parties were clear. When defining the exemption’s scope, it uses the term “contracts of employment.” New Prime, the Petitioner, has asked the Court to interpret this term narrowly, arguing it should mean only those contracts that establish a common-law employment relationship. Oliveira, the Respondent, argued the term should refer to all agreements to perform work, regardless of form, which would necessarily include independent contract agreements.

The Court heard oral argument on October 3, 2018. Because the case was submitted prior to new Associate Justice Kavanaugh’s confirmation, the case was only heard by eight justices. So if the justices split along ideological lines 4-4, Oliveira will prevail and the First Circuit’s ruling that the independent-contractor agreement at issue was a “contract of employment” for purposes of the exemption.

The Court is not expected to rule until early 2019. This blog will update as soon as the Court’s opinion is issued.

Proposed Regulations Issued on Hardship Distributions

Contributed by William Scogland, November 30, 2018

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hand stacking coins

The IRS has issued proposed regulations on hardship distributions under section 401(k) and 403(b) plans (“Proposed Regulations”), addressing issues raised by the Bipartisan Budget Act of 2018 (“Budget Act”) and the 2018 Tax Cuts and Jobs Act (“Tax Act”). Plan sponsors need to consider administrative and plan amendment changes promptly.

There are two requirements for a permissible hardship distribution:

  • The withdrawal must be made due to an immediate and heavy financial need; and
  • The amount of the withdrawal must be limited to the amount necessary to satisfy that financial need.

Elimination of Six-Month Contribution Suspension

Under current regulations, participants who take a hardship distribution are prohibited from making contributions to the plan and other employer-sponsored plans for six months. The Proposed Regulations eliminate the six-month contribution suspension requirement.

Plan Loans Not Required Before a Hardship Distribution

Previously, a requested hardship distribution could be approved only if the participant has taken all plan loans otherwise available. The Proposed Regulations would remove this requirement. Unlike the elimination of the six-month suspension period, however, the elimination of this requirement is not mandatory.

New Circumstances for Hardship Distributions

Under current regulations, an employee is considered to have an immediate and heavy financial need in one of six categories of hardship events. The Proposed Regulations liberalize these rules:

  • A participant could take a hardship distribution for expenses to repair damage to his principal residence if the damage qualified for a casualty loss deduction under Code Section 165. The Proposed Regulations would restore the casualty loss hardship distribution even though the casualty loss deduction has generally been repealed.
  • Hardship distributions for qualifying medical, educational, and funeral expenses include those expenses incurred by a participant’s “primary beneficiary.”
  • Under a new category of permitted hardship distribution events, participants may take a hardship distribution due to expenses and losses (including loss of income) incurred after federally-declared disasters (as long as the participant’s home or principal place of business at the time of the disaster was located in an area designated for federal assistance).

Expansion of Sources

The Proposed Regulations expand the sources available for hardship distributions. Proposed Regulations confirm that safe harbor 401(k) employer contributions (and earnings thereon) and a number of other plan “buckets” are available sources for hardship distribution. Plan sponsors would not be required to expand the available sources for hardship distributions.

Plan Administrators May Rely Solely on New Participant Representation

A participant need only represent (in writing or by electronic means) that they have insufficient cash or liquid assets to satisfy the financial need. A plan administrator could rely on the representation in the absence of actual knowledge to the contrary.

Effective Date

The Proposed Regulations generally apply to hardship distributions made in plan years starting after December 31, 2018, but some special rules apply. There may be additional changes in final regulations.

Illinois Supreme Court to Decide Biometric Privacy Case

Contributed by Carlos Arévalo, November 27, 2018

Data breach 2In October of 2017, we first reported on the filing of a class action suit by a group of Chicago-area employees where plaintiffs alleged that their employer’s use of worker fingerprints for time-tracking purposes violates the Illinois Biometric Information Privacy Act (BIPA).  Specifically, the employees claimed that their employer failed to properly inform them in writing of the specific purpose for which their fingerprints were being collected and the length of time their fingerprints would be stored. Plaintiffs also claimed the employer failed to obtain written consent before obtaining fingerprints.

Then, this past June, we reported on a federal court’s decision finding that despite no concrete damage, an employee (and her putative class) might have a triable cause of action for violating her privacy and right to control her biometric data. The allegations in this case also included a failure to inform the specific purpose of collection and failing to obtain written authorization for the collection of biometric data.

On November 20, 2018, the Illinois Supreme Court heard oral arguments in a Rosenbach v. Six Flags Entertainment Corp., a case specifically addressing BIPA. While Rosenbach is not an employment case (it concerns a patron’s access to Six Flags), it nevertheless involves the issue of whether collection of biometric data alone triggers statutory damages even if the plaintiff has not claimed actual harm. The lower appellate court in Rosenbach found that alleging only technical violations of the notice and consent provisions of the statute is not tantamount to alleging an adverse effect or harm. Thus, how the Illinois Supreme Court rules in the next few months is bound to have a significant impact on Illinois employers and potentially elsewhere in the country.

In the meantime, to avoid and/or minimize any BIPA issues or potential liability, we continue to recommend that employers take the following steps:

    1. Establish a written policy that addresses the purpose(s) of biometric data use, how it will be collected, and how it will be stored.
    2. Be prepared to address any requests for reasonable accommodations based on disability, religious, or other reasons.
    3. If biometric data might leave a closed system, ensure that proper safeguards are in place, including contractual liability shifting.
    4. Ensure that employees whose biometric data is used acknowledge the policy, and authorize its use and collection.
    5. Train supervisors on the company’s policies and practices to ensure consistency.
    6. Have biometric data systems audited to ensure that data is not open to the public or a systems breach.
    7. Finally, consult with competent employment counsel to ensure that policies and practices comply with relevant law.