The U.S. Supreme Court announced on Monday, March 2, that it will again review the constitutionality of the Affordable Care Act’s (ACA) individual mandate, and whether, if the mandate is unconstitutional, it can be separated from the rest of the ACA.

In January’s blog, we reported that in Texas v. U.S., the individual mandate of ACA, the requirement for all individuals to be covered by health insurance, was found by the Fifth Circuit Court of Appeals to be unconstitutional. Originally, the district court found that since the individual mandate was essential to ACA, the entire Act was unconstitutional.  On December 18, 2019, the court of appeals affirmed that the individual mandate was unconstitutional, but it did not uphold the decision to strike down the entire ACA.  The court remanded that aspect of the case back to the federal district court to determine whether the mandate can be severed from the rest of ACA.

On January 3, certain Democratic states’ attorneys general and the U.S. House of Representatives, defending ACA, filed petitions requesting that the Supreme Court weigh in on the constitutionality of the mandate, as well as the viability of the remainder of ACA.

The Republican states’ attorneys general, along with the Trump administration, filed a petition with the Supreme Court requesting that the Court not hear the case.  The petition also requested that if the Court does hear the case, that it affirm the district court’s decision overturning the entire ACA.

While the timing of when the Court will hear the case is not completely clear, it is likely to be in the next term, beginning in October. Earlier in the current term, the Court declined to hear the case on an expedited basis. Therefore, any decision in the case is unlikely to come until after the Presidential election this fall.

As we previously stated, employers should continue to comply with ACA, including the requirement for large employers (over 50 full-time employees) to provide affordable insurance to its full-time employees and report such coverage to the IRS (Form 1095-C). All other ACA provisions, such as guaranteed issue, no annual or lifetime limits, age 26 coverage for adult children, etc., remain in effect.

Stay tuned!

This week, the National Labor Relations Board (“NLRB”) published its long-awaited rule regarding joint-employer status under the National Labor Relations Act.

The final rule provides:

  • to be a joint employer, a business must possess and exercise substantial direct and immediate control over one or more essential terms and conditions of employment (“terms and conditions”) of another employer’s employees.
  • a business who exercises direct control over another employer’s workers will not be considered a joint employer if such control is only “limited and routine.”
  • indirect and contractually reserved control over essential terms and conditions and control over mandatory subjects of bargaining should only be considered to the extent they supplement and reinforce evidence of the business’s exercise of direct and immediate control.
  • definitions of key terms. Under the finale rule, terms and conditions are defined as “hiring, firing, discipline, supervise, direction, wages, benefits, and hours of work.”  Substantial means that such control is not exercised on a “sporadic, isolated, or de minimis basis.”  Substantial direct and immediate control means direct and immediate control that has a regular or continuous consequential effect on an essential term or condition of employment of another employer’s employees.
  • what does and does not constitute “direct and immediate” control of terms and conditions.

The final rule reverses the Obama-era standard set forth in the Browning-Ferris decision, which dramatically expanded joint-employer status.  The new rule is more employer-friendly and returns to a standard more consistent with the NLRB’s interpretation of joint-employer status prior to Browning-Ferris.

The final rule will take effect on April 27, 2020.  We expect that there may be lawsuits challenging this rule and will update you with further developments.

The California Supreme Court (“Court”) recently ruled that Apple, Inc. is required to pay its workers for time spent waiting for and undergoing security screenings before leaving the workplace.  The Court found that the company’s policy requiring employees to clock out before undergoing two daily bag checks added up to approximately 90 minutes of unpaid work per week and was illegal.

Apple employees are required to go through a security bag check every time they leave the store to detect and prohibit theft.  The search can range from five to 45 minutes, depending on the availability of security guards and number of employees trying to leave.  If the bag contains personal technology, the device must be verified as belonging to the employee.  California law requires employers to pay their employees for all “hours worked.”  The Court determined that time spent waiting for and undergoing those required searches of personal bags is compensable by state law.

The ruling will have economical and practical impacts on California employers.  In order to mitigate the effects, employers will need to make any bag checks as expeditious and efficient as possible or consider removing them altogether.  Employers could also offer off-site storage for personal items to eliminate bringing bags into work or set a size limit on items brought to work.  Similar to airport and sports events security checks, employers could require employees to use clear bags for easier searches.

Stay tuned!

On January 31, 2020, the United States Citizenship and Immigration Services (USCIS) published a new version of the Form I-9, Employment Eligibility Verification. Employers may begin using this version of the form immediately and are required to begin using it by April 30, 2020.

The Form I-9 is used by employers to verify the identity of employees (both citizens and non-citizens) and confirm that the employee is authorized to work in the United States.  USCIS has made the following minor changes to the form and its instructions:

  • Added Eswatini (formerly the Kingdom of Swaziland) and North Macedonia (formerly Macedonia) to the Country of Issuance field in Section 1 and the foreign passport issuing authority field in Section 2 because those countries recently changed names (these changes are only visible when completing the fillable Form I-9 on a computer);
  • Clarified who can act as an authorized representative on behalf of an employer;
  • Updated the USCIS website addresses;
  • Provided acceptable document clarifications;
  • Updated the process for requesting the paper Form I-9; and
  • Updated the DHS Privacy Notice.

Although the new form must be used beginning in April, it is marked “(Rev. 10/21/2019).”  Employers can download the new form here.

The novel coronavirus first appeared in Wuhan, China in December 2019. Since then, approximately 430 individuals have died as a result of the virus and over 20,700 people have been infected.  Eleven individuals in the United States (as of the date of this writing) have been diagnosed with the virus, including a Massachusetts resident and student who recently traveled back from Wuhan, China.

The World Health Organization (WHO) and the Trump administration declared a public health emergency over the outbreak. The United States also stated that it would temporarily bar entry to the United States of foreign nationals who have recently traveled to China, and U.S. citizens returning from China’s Hubei province will be subject to a mandatory 14-day quarantine. The State Department has issued a Level 4 travel advisory stating, “Do not travel to China due to the novel coronavirus first identified in Wuhan, China.”

Should employers be worried? How should employers respond? The federal Occupational Safety and Health Administration (OSHA) has stated that, “most American workers are not at significant risk of infection.” Therefore, employers should not “worry” or overreact, but should be well informed, take steps to minimize risks, and be prepared to respond based on the circumstances.

The Basics About the Coronavirus

According to the Centers for Disease Control (CDC), symptoms of the virus may appear in as few as two days or up to 14 days after exposure. Symptoms include fever, cough, and shortness of breath. The virus can be spread from person-to-person, similar to how the flu spreads, such as through sneezing and coughing. The CDC has stated that it currently is not clear if people can get the virus by touching a surface or object that has the virus on it and then touching their own mouth, nose, or possibly their eyes.

What Employers Can Do to Minimize Risks

Promote Good Workplace Hygiene. There is currently no vaccine to prevent coronavirus. Therefore, the CDC recommends taking everyday preventive actions to help prevent the spread of respiratory viruses such as:

  • Wash hands often with soap and water.
  • Use an alcohol-based hand sanitizer with at least 60% alcohol.
  • Avoid close contact with people who are sick.
  • Stay home when sick.
  • Cover a cough or a sneeze with a tissue.
  • Clean and disinfect frequently touched objects and surfaces.

Employers should provide hand-sanitizers in the workplace and should advise employees on best hygiene practices and prevention measures.

International Travel. OSHA’s general duty clause requires employers to furnish to each worker “employment and a place of employment, which are free from recognized hazards that are causing or are likely to cause death or serious physical harm.” Given the State Department’s Level 4 warning, employer should not require (or permit) employees to travel to China for business until further notice. Employers should also carefully evaluate employee business travel to any country that has been affected by the virus and consider other options, such as conducting meetings by video conference.

Personal Travel. While an employer can control work-related travel, an employer’s legal ability to restrict an employee’s personal travel is much less clear. However, an employer should consider requiring an employee returning from travel to China or other affected areas to stay out of work, or to work from home, during the incubation period.

Conclusion

This issue, like prior issues related to SARS and the Swine flu, requires employers to balance their legal obligation to provide a safe workplace with their obligation to avoid violating privacy and discrimination laws. The best way for employers to walk this tightrope is to be well-informed about the facts, as published by official government agencies like the CDC and OSHA, and not act on assumptions or misinformation. Employers should continue to closely monitor this situation as it evolves. 

This information is for educational purposes only to provide general information and a general understanding of the law. It does not constitute legal advice and does not establish any attorney-client relationship.

On January 12, 2020, the United States Department of Labor (“DOL”) announced a final rule revising its regulations interpreting joint-employer status for purposes of the Fair Labor Standards Act (“FLSA”).  The final rule will take effect on March 16, 2020.

Background

Under FLSA, employers are required to pay employees at least the federal minimum wage for all hours worked and overtime for all hours worked over 40 in a workweek.  Employers are defined under the FLSA as “any person acting directly or indirectly in the interest of an employer in relation to an employee.”  Thus, an employee may have one or more joint employers.

New Rule

The DOL’s final rule continues to recognize two scenarios under which the agency identifies joint employer status. In the first scenario, employers are considered joint employers where an employee performs work for one employer that simultaneously benefits the other employer.  In the second scenario, employers are considered joint employers where one employer employs the employee for one set of hours in a workweek and the other employer employs the same individual for a separate set of hours in the same workweek.

With respect to the first scenario, the final rule adopts a four-factor balancing test for determining joint employer status. The DOL will consider whether the potential joint employer:

  • hires or fires the employee;
  • supervises and controls the employee’s work schedule or conditions of employment to a substantial degree;
  • determines the employee’s rate and method of payment; and
  • maintains the employee’s employment records.

The final rule also provides clarity on the four-factor analysis.  It provides:

  • no single factor is dispositive, and each factor is to be weighed based on the circumstances of the case;
  • mere maintenance of an employee’s employment records alone will not establish joint-employer status; and
  • additional factors may be relevant to the analysis but only when they show whether the potential joint employer is exercising significant control over the terms and conditions of the employee’s work or is otherwise acting directly or indirectly in the interest of the employer in relation to the employee.

The final rule also identities several factors that are not relevant to the determination of joint employer status.  The factors are:

  • operating as a franchisor or entering into a brand and supply agreement, or using a similar business model;
  • the potential joint employer’s contractual agreements with the employer requiring the employer to comply with its legal obligations or to meet certain standards to protect the health or safety of its employees or the public;
  • the potential joint employer’s contractual agreements with the employer requiring quality control standards to ensure the consistent quantity of the work product, brand, or business reputation; and
  • the potential joint employer’s practice of providing the employer with a sample employee handbook, or other forms, allowing the employer to operate a business on its premises (including “a store within a store” arrangements), offering an association health plan or association retirement plan to the employer or participating in such a plan with the employer, jointly participating in an apprenticeship program with the employer, or any other similar business practice.

The final rule also provides several examples of how the DOL’s joint employer guidance should be applied in various circumstances.

Takeaways

Employers should view the new rule as a positive development as the new standard is clearer and narrowly defines joint employer status.  Employers should note, however, that the final rule applies only to the FLSA and does not apply to the Occupational Safety and Health Act, the National Labor Relations Act, Title VII of the Civil Rights Act, or state wage and hour laws.

On December 20, 2019, President Trump signed into law, as part of the 2020 Appropriations Bill, the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019. This is the first major legislation affecting retirement plans since the Pension Protection Act of 2006.

The Act contains provisions to encourage the growth of 401(k) plans. Perhaps the most significant change is the increased ability of unrelated employers to join a multiple employer plan, referred to as a “Pooled Employer Plan”. Previously, an employer was not permitted to participate in a multiple employer plan unless the employer had a “commonality of interest” (e.g., the same industry or geographic area) with the other employers. The Act eliminates the commonality of interest requirement. The Act requires the appointment of a “Pooled Plan Provider” to be the administrator and fiduciary under ERISA, and requires registration of the Pooled Plan Provider with the Internal Revenue Service and the Department of Labor.  A Pooled Employer Plan facilitates economies of scale that can result in lower administrative costs thereby making it easier for employers to offer retirement plans for their employees. The Pooled Employer Plan provisions are effective for plan years beginning in 2021.

A partial list of other changes includes:

  • Increase in Automatic Enrollment Limit. Under current law, 401(k) plans are permitted to enroll participants automatically, with a limit of 10%. The limit is increased to 15% for plan years beginning in 2020.
  • Small Employer (under 100 employees) Tax Credit for Starting a Plan. The credit, limited to 50% of qualified costs, is increased. The credit is available for 3 taxable years beginning with 2020 plan years.
  • Increase in Required Beginning Date. The new law increases the age of the required beginning date for IRAs and qualified plans from 70½ to 72. This is effective for distributions required to be made after December 31, 2019 for employees and IRA owners who attain age 70½ after December 31, 2019.
  • Long Term Part-Time Employees Permitted to Participate in 401(k) Plans. A 401(k) plan must permit an employee to make elective deferrals if the employee has worked at least 500 hours per year for at least 3 consecutive years and is age 21 by the end of the 3-year period. This rule does not require participation in matching or employer contributions unless the employee otherwise satisfies the conditions for such participation. This provision applies to plan years beginning in 2021 with respect to service beginning in that year.
  • Lifetime Income Disclosure. ERISA is amended to require a defined contribution plan benefit statement to include an estimate of the monthly lifetime retirement income at least once in a 12-month period. This new rule will not apply until 12 months after regulations and a model notice are issued.
  • 5500 Penalties. Penalties are increased for failing to file a Form 5500 from $25 per day to $250 per day, not to exceed $150,000. This increase applies to 5500s required to be filed after December 31, 2019.
  • Plan Amendments are not required until the end of the 2022 plan year.

The law includes changes that not only affect employer-sponsored retirement plans, but also impact individual retirement estate planning, due to changes regarding the commencement and distribution of post death distributions. These changes generally eliminate “stretch” payments to beneficiaries, other than “eligible designated beneficiaries,” such as a spouse.

This information is for educational purposes only to provide general information and a general understanding of the law. It does not constitute legal advice and does not establish any attorney-client relationship.

On December 18, 2019, a federal appeals court ruled that the Affordable Care Act’s (ACA) individual mandate is unconstitutional, since the mandate tax penalty had been reduced to zero. The individual mandate, the requirement that everyone have health insurance coverage, was previously challenged as unconstitutional. In 2012, the Supreme Court ruled that the individual mandate was valid as a tax, noting that it would not be valid under the Commerce Clause power.

The 2017 Tax Cut and Jobs Act repealed the individual mandate penalty on individuals without insurance, effective in 2019. Although the penalty was nullified, the individual mandate remained in the statute. Texas and other states filed suit challenging the constitutionality of the mandate claiming that since it no longer raised revenue for the government, it could not be upheld as a tax.

In December 2018, a federal district court agreed with Texas, finding that the individual mandate penalty was unconstitutional since it no longer functioned as a tax. In addition, the court stated that since the individual mandate was essential to the Affordable Care Act, the entire Act was unconstitutional.

On December 18, 2019, the Fifth Circuit appeals court held that the Texas district court was partially correct, in that the individual mandate, without a penalty, was unconstitutional. However, the appeals court did not uphold the portion of the decision to strike down the entire ACA.  The court remanded that aspect of the case back to the federal district court to determine whether the mandate can be severed from the rest of the ACA. The appeals court also instructed the federal district court to analyze the individual mandate’s interplay with other ACA provisions.

On January 3, certain Democratic states’ attorneys general and the U.S. House of Representatives, defending the ACA, filed petitions requesting that the Supreme Court immediately weigh in on the constitutionality of the mandate, as well as the viability of remainder of the ACA.

Employers should continue to comply with ACA, including the requirement for large employers (over 50 full-time employees) to provide affordable insurance to its full-time employees and report such coverage to the IRS (Form 1095-C). Note that all other ACA provisions, such as guaranteed issue, no annual or lifetime limits, age 26 coverage for adult children, etc., remain in effect.

Stay tuned!

Connecticut law now requires nearly every employer to provide sexual harassment prevention training for all employees, including supervisors and non-supervisory employees. For more information on the new law, click here.

In response to numerous client requests, Carmody will be offering separate two-hour seminars: one geared toward supervisors and the other geared toward non-supervisory employees. Our training complies with Connecticut’s training requirements, and we will provide written confirmation to your attendees upon completion of the session. Our schedule for seminars is set forth below.

The supervisor program will be presented from our Waterbury office, but individuals may also participate by video conference in our New Haven and Stamford offices. Registration starts at 8:15 a.m. and the program begins at 8:30 a.m. The fee is $75 per person and includes a continental breakfast.

Now offering webinars! For those unable to attend in-person, we will now offer the scheduled programs by webinar at the same time. The fee is $50 per person and begins at 8:30 a.m.. The non-supervisory program will be presented by webinar only.

Seminar Schedule: 

Supervisor Harassment Prevention Training
March 13, 2020, June 12, 2020, September 11, 2020, and November 13, 2020

Employee Harassment Prevention Training
January 17, 2020, May 8, 2020, August 14, 2020, and October 9, 2020

On-Site Training: Carmody also provides customized on-site training for supervisors and/or employees. In many cases, this can be done on a fixed-fee basis, making it a cost-effective option for employers that need to train groups of employees and/or supervisors. Please contact Romania Jawahir or a member of our Labor & Employment group if you are interested.

Click here to register!