Save the Date! Complimentary Webcast April 29: NEW Illinois Law Prohibiting Use of Criminal Convictions: An Employer’s Guide

Effective March 23, 2021, new Illinois law generally prohibits the use of criminal convictions in employment decisions and creates additional new hurdles for employers who decide to rely on any conviction for employment purposes-unless otherwise authorized by law. Join Jeff Risch and Allison Sues on Thursday, April 29 @ noon CT for a timely discussion surrounding the new law. During this webcast attendees will learn:

  • How to navigate new hiring mandates
  • What to include in the mandated written notices to a denied applicant or terminated employee because of a conviction record
  • How to reconcile the new IL law with existing local, state and federal mandates (i.e. FFCRA, Ban the Box, etc…)
  • How to analyze whether a specific conviction history has a substantial relationship to a certain job position or poses a unreasonable risk to property or safety
  • What does “unless otherwise authorized by law” really mean for employers

US DOL Publishes Model Notices for American Rescue Plan COBRA Subsidy

Contributed By Rebecca Dobbs Bush, April 8, 2021

close up of the hands of a businessman in a suit signing or writing a document

The American Rescue Plan Act (ARPA), signed by President Joe Biden on March 11, 2021, included a COBRA Subsidy covering 100% of COBRA premiums for “Assistance Eligible Individuals” during the period of April 1, 2021 through September 30, 2021.  The 100% premium subsidy will be reimbursed to employers through their quarterly payroll tax returns. 

Pursuant to ARPA, employers are required to notify certain individuals about potential eligibility and details of the subsidy by May 31, 2021. Individuals then have 60-days to elect.  And although Notice 2021-01 described extensions of various plan deadlines for potentially up to 1-year or 60-days after the expiration of the “Outbreak Period,” the US Department of Labor (DOL) now makes clear in its FAQ on COBRA premium assistance under the American Rescue Plan Act of 2021, that this extension of timeframes for employee benefit plans does not apply to notice periods related to the COBRA premium assistance.  Also noted within the published FAQ, a penalty of $100 per qualified beneficiary, not to exceed more than $200 per family, may be assessed on employers for each day they are in violation of the COBRA rules.

Model Notices Available:

The above model notices cannot be used without modification that customizes each with specific information about the relevant individual and the employer’s group health plan. As potential fines for noncompliance can be steep, employers should carefully set procedures for timely distribution of all requisite notices. 

Can I Ask My Employees If They Have Been Vaccinated?

Male doctor hand wears medical glove holding syringe and vial bottle with COVID-19 vaccine

Contributed by Heather A. Bailey, April 6, 2021

The short answer is: Be careful what you wish for!  During this COVID-19 pandemic, vaccinations have been at the front of everyone’s mind. Now, with the mass rollout of vaccinations across the country, employers’ main questions have been: i) Can we mandate vaccinations for our workforce or, alternatively, ii) can we ask employees whether they have been vaccinated or not (and to show proof of vaccination)? Our Labor & Employment blog has been at the forefront for the first question and provides more information on COVID-19 vaccination developments and what legal risks come into play for employers when mandating the vaccine in the workplace.

Whether you’ve chosen to mandate COVID-19 vaccinations or not, you still may be interested in asking your employees to show proof of their vaccination status.  This simple question comes with its own set of risks. The U.S. Equal Employment Opportunity Commission (EEOC) has given additional guidance in this area in Section K.3 of “What You Should Know About COVID-19 and the ADA, the Rehabilitation Act, and Other EEO Laws.”   

The good news is that generally asking your employees for proof of their vaccination status is not considered a medical exam for reasons that include the fact that there are many reasons that are not disability-related that may explain why an employee may or may not have gotten a vaccination.  For example, they may not have one yet because they have been unable to secure an appointment, or they simply do not believe in the vaccination because they think COVID is a hoax.  This is different from someone not getting vaccinated due to a disability or religious belief.  Moreover, this general practice is not a HIPAA violation and HIPAA does not apply in this context.  The rub and risk come if you ask follow-up questions that may elicit whether the employee may have a disability.  Simply following-up with “why do you not have the vaccination yet?” could be treading into that risky territory that touches on whether an employee’s disability is the reason why the employee has not been vaccinated. 

If you find yourself in that territory,  you will have to evaluate the employee’s response within the framework of the Americans with Disabilities Act (ADA) (or Title VII, if the employee’s response implicates religious beliefs) requirement to justify proof of vaccination being “job-related and consistent with business necessity.”  This is the same analysis an employer must undertake when mandating vaccinations, and it can be a tedious and high standard to meet. View the Labor and Employment Blog for more information on the ADA and employers’ efforts to require mandatory vaccinations and health screenings for employees.

The same is true of follow-up questions that may elicit genetic information (e.g., I cannot get the vaccination due to my family’s history of being immuno-compromised).  (See Sections K.8 and K.9 of the EEOC guidance described above).  Once again, simply asking for vaccination proof does not run afoul of the Genetic Information Nondiscrimination Act (GINA) so long as you stop there in your inquiries.

Practice Tips:

  • Again, be careful what you wish for.  It’s one thing to ask the employee whether they were vaccinated and to show proof, and it’s another to ask why they were not vaccinated. Once you start eliciting disability, religious or genetic information with follow-up questions, you are placing your company at risk of knowing more information than you may have bargained for.
  • You need to ask yourself, first, why do I want to know information regarding why my employees have been vaccinated or not?  What are you going to do with this information?  Having a need and plan for this information will help ensure you have a business justification for why this information is necessary. If you don’t have a plan or a need, you may determine that knowing this information is not really necessary after all.
  • When asking employees to show proof of vaccination, it is good to remind them that you do not want them to include any other medical information that may be listed on their vaccination-related documents.
  • If you determine this is the route you want to take, always work with competent labor & employment counsel to help guide you through the process so you do not step on any landmines (even if it’s just a simple follow-up question). 

Construction Contractors Beware: Think Twice Before Paying Prevailing Wage Assessments!

Construction hat and gavel.

Contributed by Jeff Risch, April 2, 2021, www.illinoisprevailingwage.com

Big Labor continues to use local, state and federal prevailing wage laws to target contractors they have a “beef” with.  Since most prevailing wage audits are triggered by a complaint (including 3rd party complaints), trade unions and certain union-friendly organizations can easily turn in a contractor with the general assertion that the contractor is not complying with applicable prevailing wage law. While contractors and merit shop trade associations could do likewise, they typically don’t for obvious business reasons.  Having concentrated my practice on assisting contractors with prevailing wage disputes throughout the U.S., this trend not only continues but is ramping up in recent months.  While contractors who intentionally cheat the system and ignore their legal obligations should get what they rightly deserve, many contractors are facing audit assessments that are simply  off or incorrect.  Paying a disputed assessment in the hope of not upsetting the government agency or believing that cooperation will bring you favor is arguably one of the worst things a contractor can do these days; failing to properly document your disputes with any assessment that you believe has been issued in error could be the 2nd worst thing.

In short, I am now seeing more and more audit findings that are just flat out wrong, in whole or in relevant part.  Additionally, it is often the case that even if the ultimate assessment is correct, the discrepancy is based on a clerical mistake, an unintentional accounting or reporting error or a case of disputed worker classification.  However, many general contractors and public bodies, especially local units of government, are being told that they must reject the bid of a contractor who has any past or pending prevailing wage complaint against it, even when the contractor is the low bidder. By rejecting bids or terminating contracts with non-debarred contractors who are simply fighting the good fight with prevailing wage issues, these general contractors and public bodies are depriving contractors of fair due process, stifling competitive bidding and ignoring their obligations to the taxpayer.

In these times, contractors need to be extra cautious and careful in any and all communications with any government agency investigating prevailing wage compliance. To be clear, every complaint must be taken seriously by the contractor to ensure that the record ultimately reflects that the contractor is not only complying with its legal obligations, but also free to bid and perform public construction projects without interference. 

With the above in mind, there are 5 basic rules for anyone performing public construction work to follow with an eye on growing prevailing wage enforcement:

  1. Know your legal obligations under any and every local, state or federal prevailing wage ordinance/law that applies to your business (note: what’s permissible under Federal Davis-Bacon may be unlawful under local/state prevailing wage law);
  2. Ensure your business is complying with all applicable prevailing wage obligations for every worker, every day, every week, every job — not simply paying the correct rates but also keeping and maintaining detailed and accurate time and payroll records;
  3. Never allow a prevailing wage audit or investigation  to be closed or remain in limbo without some document that confirms your full compliance with your legal obligations (you will have to do this yourself);
  4. Never sign any settlement agreement concerning prevailing wage issues without first reviewing it with competent legal counsel to help ensure that no admission of liability or guilt is made and to expressly state that you are free and clear to bid and perform future public construction work; and
  5. Educate your local units of government on who you are and highlight your good name and business reputation — get to know the public officials, get involved and form relationships.

NEW ILLINOIS LAW PROHIBITS USE OF CRIMINAL CONVICTIONS: Guide for Employers and Sample Forms

Contributed by Jeff A. Risch and Allison P. Sues, March 24, 2021

employment law books and a gavel on desk in the library. concept of legal education.

As we previously blogged about, the Illinois legislature passed Senate Bill 1480, which, in relevant part, provides that unless otherwise authorized by law, an employer may only consider an individual’s criminal conviction history if there is a substantial relationship between the criminal history and the position sought or held, or if the employer can show that the individual’s employment raises an unreasonable risk to property or to the safety or welfare of specific individuals or the general public. Governor Pritzker has now signed the bill into law – which went into effect immediately. SmithAmundsen LLC’s Labor & Employment Group has been intimately involved in the tracking of this legislation and continues to voice concerns on behalf of employers. With that in mind, our firm has created an EMPLOYER’S GUIDE to help employers not only navigate the new mandates, but also includes sample forms  that may prove useful to employers at this critical time.

While this law would not restrict employers from running criminal background checks on applicants or employees, it clearly creates many unique challenges. Undoubtedly, Illinois’ new law is the most restrictive and cumbersome in the country.

Will Employers Have to Give 1% of their Total Gross Profits to the State of Illinois? Gov. Pritzker Signs into Law Unprecedented Changes to IL Equal Pay and Corporate Laws

Contributed by Jeff Risch, March 23, 2021

Private employers in Illinois now have more landmines to navigate as the state’s legislature pushed through SB1480 during its most recent “lame duck” session.  Gov. Pritzker just signed the legislation into law today!  While there are many substantive provisions and amendments to various laws contained in SB1480 (including new restrictions on the use of criminal convictions as we blogged about previously), the law also amends the Illinois Business Corporation Act (IBCA) and the Illinois Equal Pay Act (IEPA); resulting in unprecedented compulsory reporting of race, gender and ethnicity statistics and related pay data.  These changes are part of a new national trend (see our previous blog on CA’s new law), while the Biden Administration begins to review similar pay data reporting mandates.

Amendments to the IBCA

Under the IBCA, private corporations who are required to file an Employer Information Report EEO-1 with the Equal Employment Opportunity Commission (EEOC) will have to submit substantially similar data they report under Section D of the EEO-1 report — in a format to be approved by the IL Secretary of State (SOS) — as part of their annual corporate filing with the SOS.  For any corporation that must submit EEO-1 related data to the state, the SOS will then publish the corporation’s data on gender, race and ethnicity on the SOS’s  official website.  This new mandate is set to be in place for any and all annual corporate filings with the State of Illinois beginning on and after January 1, 2023. Employers who fail to comply with the new IBCA mandates will not be authorized to conduct business in Illinois and/or will have their status as a corporation involuntarily dissolved. 

Amendments to the IEPA

The changes to the IEPA are much more complex and employers who are not intimately familiar with Illinois’ unique Equal Pay Act law are playing with fire.  Private employers with 100+ employees within the State of Illinois must certify their equal pay compliance (including, demonstrating how they actually comply) and provide pay data information to the IDOL.  Employers who fail to comply with the IEPA certification mandates or provide false information to the IDOL will result in a non-discretionary fine of 1% of their annual gross profits

As a reminder, the IEPA generally applies to all employers with employees working in the state.  The state law is also materially different than the federal law in many aspects, including, but not limited to: the fact that any pay disparity is reviewed on a county level (not facility); encompasses African American status in addition to gender; limits the defenses available to employers trying to justify pay disparities; broadens what “equal” means by utilizing a “substantially similar” standard; and prohibits inquiry into salary/wage history. 

The amendments under SB1480 applies to any PRIVATE employer with more than 100 employees in the state. These employers will have to obtain an Equal Pay Registration Certificate from the IDOL within 3 years from the effective date of the new law (today, March 23, 2021) and must recertify every 2 years thereafter.  These businesses will be required to apply for an equal pay registration certificate by paying a $150 filing fee and submitting an equal pay compliance statement to the IDOL.  In addition to submitting their most recently filed EEO-1 report for each county in which the business has a facility or employees, they will also need to compile a list of all employees during the past calendar year (separated by gender and the race and ethnicity categories), and report the total wages paid to each employee during the past calendar year. The IDOL will then issue an equal pay registration certificate to these employers, who must also submit a statement signed by a corporate officer, legal counsel, or authorized agent of the business that confirms the following: 

  • that the business is in compliance with the Title VII of the Civil Rights Act of 1964, the Equal Pay Act of 1963, the Illinois Human Rights Act, the Equal Wage Act, and the Equal Pay Act of 2003;
  • that the average compensation for its female and minority employees is not consistently below the average compensation for its male and non-minority employees within each of the major job categories in the Employer Information Report EEO-1; 
  • that the business does not restrict employees of one sex to certain job classifications and makes retention and promotion decisions without regard to sex;
  • that wage and benefit disparities are corrected when identified to ensure compliance with applicable anti-discrimination laws; and
  • that the business identifies how often wages and benefits are evaluated to ensure such compliance.

The equal pay compliance statement must also indicate whether the business, in setting compensation and benefits, utilizes:

  • a market pricing approach;
  • state prevailing wage or union contract requirements;
  • a performance pay system;
  • an internal analysis; or
  • an alternative approach to determine what level of wages and benefits to pay its employees. If the business uses an alternative approach, the business must provide a description of its approach.

The issuance of a registration certificate will not serve as a defense against any IEPA violation found by the IDOL, nor a basis for mitigation of damages.  The certification can also be suspended or revoked by the IDOL at any time.

While the pay data submitted to the IDOL will be considered private for the IDOL’s eyes-only, the IDOL’s decision to issue, not issue, revoke, or suspend an equal pay registration certificate will be public information.

There are also new anti-retaliation provisions in the amendments that make it financially painful for any employer found to have taken adverse action against an employee for engaging in protected activities under the IEPA.  But, that’s not all… the legal burden is now placed on the employer to prove, by clear and convincing evidence, that it would have taken the same unfavorable personnel action in the absence of any protected conduct.  

What Employers Must Do Moving Forward:

  • Review and, if necessary, modify equal pay policies that demonstrate a commitment to IEPA compliance.
  • Audit equal pay compliance annually. This includes creating strong/reliable compensation systems that are in line with the law (base wage, benefits, commission programs and bonus opportunities).
  • Update job descriptions annually.  Focus not only on job titles, but the actual duties, responsibilities and qualifications of the position.
  • Evaluate performance reviews.  ***These continue to be the “kiss of death” for many employers since very few evaluators are willing to be honest and direct.
  • Consider partnering with credible 3rd parties to help design and implement compensation systems in order to comply with all applicable anti-discrimination laws.

Construction Picket Lines: What Union Workers Must Know

Contributed by Michael Hughes, March 16, 2021

11058927 – protesters crowd landscape background illustration

As the 2021 construction season gets underway, and with an increasing number of construction projects being completed with a mix of union and non-union subcontractors, many workers have legitimate questions about their rights and responsibilities on such mixed-staffed projects. These questions especially can arise when a “dual-gate” system has been established (creating a “neutral” gate for union contractors and a separate, “reserved” gate for non-union contractors), or when a union is involved in different types of activities at the jobsite, such as picketing, bannering (erecting stationary signage or using the inflatable rat), or hand-billing (handing out flyers to the public). 

This update does not address how project owners and general contractors can lawfully establish such dual-gate systems, but rather addresses common questions raised by subcontractors and their employees after such system has been established.  Mostly, though, this update aims to dispel common myths and untruths perpetuated by union representatives that simply are contrary to established law under the National Labor Relations Act (NLRA). 

The following Q&A should allow you to answer those questions and, more importantly, educate workers (especially including union-represented workers) about their rights and responsibilities when there is a labor dispute at a mixed construction project.

Q:  The unions have said they don’t have to “honor” a dual-gate system and that any picketing on the project means that the entire job is being picketed. Is that true?

A:  This is not true.  Under the NLRA, it is UNLAWFUL for a union to fail to properly honor a valid dual-gate system (for example, by picketing the gate designated for union contractors). If the union sets up its pickets at the “neutral” union gate, an Unfair Labor Charge can be filed and the NLRB will seek a federal court injunction to prevent the union from picketing the wrong gate.

Q:  Isn’t it lawful for employees of union subcontractors to refuse to work while a picket is located at the project—even if there is a neutral gate for the union members to enter?

A.  NO. It is NOT a lawful work stoppage for a union tradesperson to refuse to enter through a neutral gate.  Such actions are NOT protected under the NLRA. Union workers can be disciplined/fired for refusing to enter and work through a neutral gate.

Q:  What if a union Business Agent instructs or encourages union workers to refuse to enter through, or work “behind,” a lawful, neutral gate?

A:  It is UNLAWFUL for a union or its Business Agent to instruct or encourage any employee to refuse to enter a neutral gate, or to leave a jobsite and refuse to work when there is a neutral gate established for those employees.

QCan the union take away employees’ pensions or blackball them if they enter a neutral gate?

ANO! This is a common tactic used by unions and Business Agents to threaten their own members with loss of pension or other sanctions if they enter through a neutral gate and work.  Such statements are completely and entirely false and unlawfulA union cannot punish—and cannot threaten to punish—any employee who enters a neutral gate and works.

Q: If the union is “bannering” or hand-billing, isn’t that the same as picketing?

A: NO. If the union is bannering (using stationary signage or the inflatable rat) or handing out flyers to the public, without normal picketing, the NLRB currently says that is NOT a picket line. It is not a lawful work stoppage to refuse to work during bannering/leafletting and, just like the above, it is illegal for a union to threaten or take action against employees who work in those circumstances.

SmithAmundsen’s Labor & Employment Group serves as labor counsel to multiple construction industry associations and has particular experience in helping owners, developers, GC’s and contractors  maintain labor harmony.  Knowing the law and separating fact from fiction goes a long way in ensuring construction projects get done on time and on budget.

7th Circuit Allows USERRA Class Action to Proceed

Contributed by Carlos Arévalo and guest author Molly Arranz, March 11, 2021

Clock that says “paid time off”

Commercial air pilot and Air Force reservist Eric White filed a class action against United Airlines under the United Services Employee and Reemployment Right Act (USERRA) claiming United violated USERRA by not providing paid military leave to the same extent as other paid leave. The district court dismissed White’s lawsuit, but last month the 7th Circuit ruled that paid leave falls within the definition of “rights and benefits” employees are entitled to pursuant to USERRA. The case has been sent back to district court.

Generally, USERRA provides that any person who is absent from work as a result of military service is deemed to be on a leave of absence and is “entitled to such other rights and benefits” provided to other employees under contract, policies and practices.  In the lawsuit, White argued that the phrase “rights and benefits” is to be applied broadly and should include “paid leave.”  Of significance, White also alleged that United not only deprived him of paid leave but also prevented him and others in his putative class, from fully participating in United’s profit sharing plan. United maintained that USERRA does not mandate paid leave.

In its decision, the 7th Circuit found that rights and benefits “captures all ‘terms, conditions, or privileges’ with no express limitation” and an employer’s policy of paying employees during a leave of absence is a term, condition or privilege of employment.  Insofar as Congress chose not to include an exception to this rule, it should be applied broadly.  The court also rejected United’s arguments that “Congress did not realize that it was opening the door to this kind of paid leave…and that [the Court’s] reading would effect a costly sea-change for public and private employers.”  The court focused on the specific language of the statute and noted that “USERRA mandates only equality of treatment; and does not specify how generous or how parsimonious an employer’s paid leave policies must be.”  

A number of district courts are dealing with similar cases and this 7th Circuit decision, a matter of first impression at the federal appellate level, will be leading the way. Employers should be reviewing policies as well as collective bargaining agreements and practices to ensure they have a handle on paid leave rights and benefits. You can and should evaluate any common policy or practice that is not on all fours with the legal requisites, as a common question of fact or law as to the employees could form the cornerstone of what could become a new wave of class action litigation. Employers should also be mindful of parallel state statutes that, in some instances, supplement and complement USERRA “rights and benefits.”

The American Rescue Plan Act of 2021: What’s in it for Employers?

*Save the Date! Complimentary webcast on March 23rd at noon CST: American Rescue Plan: What Employers Must Know Now

Contributed by Rebecca Bush and Kelly Haab-Tallitsch, March 11, 2021

Almost one year after the enactment of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), and with the second extension of pandemic unemployment assistance about to expire for millions of workers on March 14, 2021, the American Rescue Plan Act of 2021 (the “Act”) was signed into law by President Biden on Thursday afternoon, March 11, 2021. 

The estimated cost of the Act is $1.9 Trillion, with $1,400 Recovery Rebate checks for each qualifying individual, the extension of supplemental unemployment benefits through September 6, 2021, as well as billions in new or additional relief for various industries, such as education, transportation and infrastructure, aviation/airlines, health care, shuttered venues, restaurants, and state and local governments.

Several provisions of the Act are potentially available for employers of various sizes across all industries. Some key non-industry specific provisions are set forth below.

Premium Assistance for Cobra Continuation Coverage for Individuals and Their Families

Remember the COBRA Subsidy implemented years ago where individuals had 85% of their premiums covered? The Act invokes similar assistance for individuals. However, this time the amount covered for individuals is set at 100%. It generally applies to premiums due related to coverage periods from April 1, 2021 through September 30, 2021. Employers will be required to notify employees about the availability of the premium assistance and the expiration date. The Secretary of Labor is required to produce model notices, with the initial model notice of availability to be provided within 30 days of the Act’s enactment. The 100% premium subsidy will be reimbursed to employers through their quarterly payroll tax returns.

Extension of Employee Retention Credit

The Employee Retention Credit was recently extended and amended as part of the Consolidated Appropriations Act of 2021 (enacted during the last week of December 2020). The Act further extends the availability of the credit for wages paid through December 31, 2021.  As a reminder, we explained the prior expansion to the Employee Retention Credit previously.

Extension of Tax Credits ONLY for Paid Leave under the FFCRA

In the last round of stimulus legislation, the tax credit for paid leave under the Families First Coronavirus and Response Act (“FFCRA”) was extended through March 30, 2021.  However, the extension was not mandatory and maximum leave allowances were not reset, meaning an individual that had already exhausted available amounts in 2020 was not entitled to further time off regardless of whether an employer continued to make the leave available on a voluntary basis. We previously explained the extension in a recent blog post.

Employers that are contemplating, or already, providing paid time off for employees to obtain the vaccine, now potentially have assistance funding that leave. The American Rescue Plan extends the availability of the tax credits for paid sick or family leave through September 30, 2021, and the maximum amount of tax credits that an employer can claim for each employee will reset on April 1, 2021.  This reset allows an employee who exhausts the maximum leave through March 31, 2021 to be able to utilize additional FFCRA leave on April 1, 2021 through September 30, 2021, provided the employer continues to voluntarily allow the use of FFRCA leave. In addition, two new permitted reasons for paid sick leave are added where: (1) an “…employee is seeking or awaiting the results of a diagnostic test, for, or a medical diagnosis of, COVID 19 and such employee has been exposed to COVID-19 or the employee’s employer has requested such test or diagnosis;” and (2) “the employee is obtaining immunization related to COVID-19 or recovery from any injury, disability, illness, or condition related to such immunization…”  

Optional Expansion of Limits under Dependent Care Flexible Spending Account Plans

Employers that offer dependent care flexible spending account plans may increase the maximum deferrals under the plan to slightly more than double the normal deferral limit. This is for the 2021 plan year only. This translates to a maximum deferral for a married couple in the amount of $10,500 and $5,250 for an individual.

For further information, register to attend SmithAmundsen’s complimentary webcast on March 23rd at noon CST: American Rescue Plan: What Employers Must Know Now

COVID-19 Extension of Group Welfare Plan Benefit Deadlines Clarified Bringing Potential Relief for Employers

Contributed by Rebecca Dobbs Bush, March 9, 2021

hand holding megaphone – benefits

In a previous blog article, we alerted readers to the extension of deadlines related to COBRA, Special Enrollment, Plan Disclosures and more. The prior Joint Notice from the DOL and IRS provided suspension of all deadlines until 60 days after the expiration of the National Emergency, referred to as the “Outbreak Period.”

The issue requiring clarification arose due to the unanticipated length of the Outbreak Period.  Much like all of us, the IRS and DOL did not foresee an Outbreak Period continuing well over a year later.  As the one-year anniversary of the Outbreak Period approached, a conflict began to arise with ERISA section 518 and Code section 7508A(b). Those provisions generally provide that the Secretaries of Labor and the Treasury may prescribe extensions of only up to one-year when it relates to a Presidentially declared disaster. Accordingly, some plans were contemplating a complete disregard of further extensions based on the one-year limitation on the emergency rule-making process.  Anticipating this potential action by plan sponsors, the DOL (also on behalf of the IRS) issued Disaster Relief Notice 2021-01.

However, with Notice 2021-01, the intended “clarification” of the discrepancy has led to a much more administratively complicated process.  Now, plan sponsors and participants must apply the extension on an individual basis for each separate deadline versus the previously declared extension of all deadlines.  Notice 2021-01 confirms that individual deadlines are revised to the earlier of: (1) one year from the date of the original deadline, or (2) the end of the Outbreak Period (previously defined and which has yet to occur).

Several specific examples were provided in Notice 2021-01 to help illustrate the revised administration of plan deadlines:

  • If a qualified beneficiary would have been required to make a COBRA election by March 1, 2020, the Joint Notice delays that requirement until February 28, 2021 – which is the earlier of 1 year from March 1, 2020 or the end of the Outbreak Period (which remains ongoing).
  • If a qualified beneficiary would have been required to make a COBRA election by March 1, 2021, the election deadline is now delayed until the earlier of 1 year from that date (i.e., March 1, 2022) or the end of the Outbreak Period.
  • If a plan would have been required to furnish a notice or disclosure by March 1, 2020, the relief under the Notice would end with respect to that specific notice or disclosure on February 28, 2021.

Note that none of the examples provided allow for a deadline extension of more than 1 year.  For this reason, Notice 2021-01 provides much needed relief for employers that were trying to manage never-ending extensions for COBRA elections, payments, etc. And as additional relief for employers, the DOL specifically indicates that prior notices furnished without relying on the relief set forth in Notice 2021-01, do not need to be reissued.   

Within Notice 2021-01, the DOL also reminds plan sponsors that “The guiding principle for administering employee benefit plans is to act reasonably, prudently, and in the interest of the workers and their families who rely on their health, retirement, and other employee benefit plans for their physical and economic well-being.”  In keeping with this guiding principle, the DOL encourages plan sponsors to consider affirmatively sending notices to those participants that are now facing the end of the relief period advising them of such.  In other words, if you now have COBRA participants or others that will be suddenly subject to election or payment deadlines, it is best practice to provide them with some type of notice or communication to that effect.