Obamacare Delayed Again: Medium-Sized Employers Not Required To Provide Health Coverage Until 2016

[February 14, 2014]  Employers with 50 to 99 full-time workers now have an additional year to “play or pay” under the Patient Protection and Affordable Care Act (“ACA”), i.e., to offer health insurance to full-time workers or pay a fee.  Newly issued final rules require these mid-size employers to offer coverage by 2016, instead of 2015.  To be eligible, an employer must certify to the U.S. Treasury Department that it has not laid off employees in order to fall below the 100-employee threshold.  Although not required to provide coverage in 2015, mid-sized employers must still comply with reporting requirements in 2015.

Employers with 100 or more full-time equivalent employees are still required to provide coverage no later than January 1, 2015, or the start of their plan year in 2015 (for non-calendar year plans).  However, to avoid paying a penalty, such larger employers must offer coverage only to 70% of their full-time workers in 2015.  Beginning in 2016, employers must offer coverage to at least 95% of full-time workers.

In order to prepare for 2015, larger employers may use a look-back period during 2014 to determine whether an employee is a full-time employee under the ACA, i.e., works 30 hours or more per week.  (While there are bills pending in Congress that would change the ACA’s definition of full-time employee from the current 30-hour per week rule to a 40-hour rule, the bills have little Democratic support.)  Although it may be tempting to wait and see what further delays or changes may come, larger employers should begin now to prepare for 2015.

Senator Warren Introduces Bill Banning Credit Checks Of Job Applicants

[January 8, 2014]  At this time of year when visions of credit card bills dance in our heads, Senator Elizabeth Warren (D-Mass.) has introduced a bill that would ban employers from checking the credit of applicants during the hiring process.  The Equal Employment for All Act would prohibit employers from using credit reports for employment purposes, unless for a national security position or otherwise required by law.

In her floor speech supporting the bill, Senator Warren explained that a bad credit rating is often the result of a personal crisis, and she pointed to research demonstrating that a person’s credit rating has little to no correlation to his or her ability to succeed at work or likelihood to commit fraud.  Other supporters of the bill have argued that credit checks are discriminatory, pointing out that African Americans and Hispanics have considerably lower credit scores than non-Hispanic Whites.

Is this a solution without a problem?  A 2012 survey by the Society for Human Resource Management found that less than half of employers (47 %) conduct employment credit checks.  Only 13% of employers conduct credit checks on all job candidates.  The remaining 34% of employers conduct credit checks only on those candidates applying for sensitive positions, including positions with financial responsibilities, senior executive positions, and positions with access to highly confidential employee information.  For employers who conduct credit checks, most do so only after making a contingent job offer.

If you are in the minority of employers conducting credit checks, we recommend that you stay tuned to this bill, which appears to coincide with the Obama Administration’s renewed focus on income inequality.  We also recommend that you take this opportunity to review your credit-check policy and other background-check practices.

Massachusetts Employers Not Required To Offer Section 125 Plans

[November 25, 2013]  The Massachusetts Health Connector has announced that it will no longer enforce several of Massachusetts’ health reform requirements, including the law requiring employers to provide a Section 125 Cafeteria Plan or pay a surcharge.

According to the Connector, the Section 125 requirement is incompatible with recent guidance from the Department of Labor (“DOL”) about the Affordable Care Act.  Governor Deval Patrick will pursue legislation to repeal the state’s Section 125 requirement, the Employer Health Insurance Responsibility Disclosure (Employer HIRD) form, the Free Rider Surcharge, and the recently created Section 125 Notification Requirement.  In the interim, the Connector will not enforce these requirements.

Pursuant to the DOL’s guidance, Massachusetts employers may no longer offer Section 125 plans that allow non-benefits eligible employees to purchase their own non-group health insurance using pre-tax income.  Employers may, however, leave such plans in place until the expiration of the employees’ health plans in 2014.  Employers should discuss with benefits counsel any necessary amendments to their Section 125 plan documents.

This change does not affect Section 125 plans for benefits-eligible employees:  employers may continue to offer such plans and may continue to allow employees to pay their group health insurance premiums on a pre-tax basis.

Reminder: Obamacare Exchange Notices Due To Employees October 1

[September 16, 2013]  Employers must provide Obamacare “exchange notices” to current employees by October 1, 2013, and to new employees at the time of hire.  (For 2014, this means within 14 days of the start date.)  The DOL has made available on its website two versions of model notices:  one for employers who offer health coverage and one for employers who do not.

Although the employer mandate of the Affordable Care Act (“ACA”) has been postponed until 2015, the requirement to notify employees of health care coverage available on insurance exchanges by October 1, 2013, remains in effect.  The requirement applies to all employers who are covered by the Fair Labor Standards Act.

The exchanges are scheduled to begin accepting applications on October 1, 2013, for coverage that will begin on January 1, 2014.  However, recent polls have found that many Americans, including those who are currently uninsured and, thus, will face a penalty under the ACA as of January 1, 2014, do not understand the law’s requirements.

Thus, the Obama Administration has increased its efforts to promote the law, including enlisting former President Bill Clinton for a recent speech detailing the intricacies of the ACA.  The White House has also recruited athletes and entertainers to help spread the word about the upcoming enrollment period.

The required notice to employees must be provided in writing and in a manner calculated to be understood by the average employee.  It may be provided electronically if the DOL’s electronic disclosure safe harbor requirements are met.

Employers must provide a notice to every employee regardless of plan enrollment status or part-time or full-time status.  Employers need not provide a separate notice to the employees’ dependents.

Heads Up!

[August 28, 2013]  It seems that a new season of Head-of-School turn-over is upon independent schools: after several quiet years (post-Great Recession), more Heads of School are retiring.  In turn, this is leading to a rippling of job changes throughout independent schools across the country.

All of this activity – Heads retiring, Heads leaving schools, Heads starting at new schools – serves as a reminder of the importance for schools (and their Boards) to handle these transitions effectively (i.e., “dot the i’s and cross the t’s”).  With this in mind, we offer the following thoughts to help guide schools through the transition process, from departure through the search and to hiring a replacement.

  • The departure of a long-standing Head of School affects each school community in unique ways.  It is, therefore, important that independent schools take stock of the departing Head’s achievements and conduct a self-reflective and thorough assessment of the school’s needs as it embarks on the search for a new Head of School.
  • The school should establish a timeline for its search process.  For example, consider whether it makes sense for a new Head to overlap with the departing Head:  will that ease or complicate the transition?
  • Next, the school’s Board should convene a search committee, which should engage a professional search firm to assist the school in identifying suitable candidates.  Carefully negotiate the search firm’s contract to fully protect the school’s interests.  A critical part of the search process will be working with the search firm to create the best possible profile of the school.  What are the school’s short, medium and long range goals for enrollment, fundraising, and capital projects? What about the school’s culture is unique? An accurate profile of the school will help to ensure that candidates for the school’s most important job actually understand the school’s strengths and challenges, and where the potential Head can envision making a positive impact.
  • The interviewing of potential candidates provides an important opportunity to assess personality, interpersonal skills and fit.  Therefore, Board members should be well prepared (perhaps formally trained) to ask the right questions, avoid inappropriate questions, and assess candidates’ responses.
  • Once a candidate is selected, we recommend executing a short (one or two page) “term sheet” prior to drafting a contract.  Once both sides agree on key terms and numbers, the remaining contract terms will usually fall more easily into place.
  • We recommend conducting a “safe harbor” analysis (under Internal Revenue Service (IRS) regulations) to ensure that the school offers what the IRS would consider to be reasonable compensation.  By reviewing compensation arrangements for the initial contract, the school will avoid the potential of having to decrease compensation upon contract renewal, if the original package was too “rich” as compared to the compensation paid by similar organizations.
  • Finally, some independent schools provide a modest financial package to a departing Head of School, sometimes as a thank you or a bridge to retirement, or perhaps to help smooth the transition to the next Head of School.  However, unless specifically required by the departing Head’s contract, such additional payment is typically discretionary.  Regardless, we recommend offering any such parting compensation only in exchange for a release of potential claims.

It may have been many years since your school made the transition from one Head to the next.  Given the apparently high number of transitions that seem to be underway, this could be a busy 12-24 months for schools looking for their next Head of School, while the best candidates will likely have many options.  Therefore, schools are well-advised to do some careful planning, and engage experienced professionals who can offer thoughtful guidance, to navigate this transition as smoothly as possible.

Rhode Island Joins “Ban the Box” Trend: Prohibits Criminal History Inquiries On Employment Applications

[August 7, 2013]  Effective January 1, 2014, Rhode Island will join Massachusetts and other state and local governments in restricting pre-employment inquiries about job applicants’ criminal histories.  In all, ten states (California, Colorado, Connecticut, Hawaii, Illinois, Maryland, Massachusetts, Minnesota, New Mexico, and Rhode Island) and 52 municipalities (including New York, New York, Austin, Texas, and Detroit, Michigan) have passed similar laws and ordinances.

Rhode Island employers will be prohibited from asking in employment applications whether an applicant has ever been arrested, charged with, or convicted of any crime.  Employers also will be prohibited from orally asking job applicants for this information prior to the first interview.

The law applies to public and private Rhode Island employers with four or more workers, with certain exceptions.  For example, pre-interview criminal history questions are permissible for law enforcement agencies.  Other employers may make such inquiries where federal or state law prevents them from hiring persons convicted of a specified crime or where a bond is a job requirement and a prior offense would disqualify an applicant from obtaining such a bond.

Even when employers comply with these “ban the box” laws and request criminal history information only after an initial interview, use of such information poses risks.  The EEOC recently revealed its focus on this issue by filing lawsuits against two large employers, alleging that their use of criminal background checks disproportionately affected African-Americans.  The EEOC issued guidance on the use of criminal checks in 2012, and employers would be wise to review the guidance in light of the EEOC’s recent activity.

We recommend that employers review the EEOC’s 2012 guidance, determine whether the municipalities and states in which they operate have “ban the box” laws, review and revise their job applications and policies for compliance with the laws, and train hiring and recruiting managers on the change.

Out of Sight, Not Out of Mind: Wage Age Protection Extends to Salesperson Living and Operating Outside Massachusetts

[July 16, 2013]  In light of a recent Massachusetts Appeals Court decision, Massachusetts employers should be mindful of potential liability under the Wage Act for unpaid wages, including sales commissions, to employees who reside outside the Commonwealth and who perform their day-to-day sales activities by traveling and telecommuting from other states.  Failing to recognize that Wage Act protection could extend to these remote employees could prove costly for employers and their officers (who may be individually liable):  the Appeals Court affirmed a judgment for a Florida-based sales director against the CEO of a Massachusetts-based company for more than $300,000.00, plus attorneys’ fees.

In the decision, Dow v. Casale, the Appeals Court applied the choice-of-law doctrine and determined that Massachusetts had the most significant relationship to the parties and their employment relationship, irrespective of where the plaintiff lived and was physically located from day to day.  As a result, the court concluded it was appropriate and reasonable to apply Massachusetts law to plaintiff’s claims and to afford him the remedies provided under the Wage Act.

As a result of the Dow ruling, Massachusetts employers should recognize that the scope of the Wage Act extends beyond the physical boundaries of the Commonwealth.  In today’s telecommuting world where so many employees work from locations other than a company’s Massachusetts headquarters or local offices, it is easy for employers to forget the potential costly ramifications of failing to timely pay these employees wages they are owed.  In light of the Wage Act’s mandatory treble damages and attorneys’ fees provisions, an employer’s “out of sight, out of mind” attitude could prove costly.

Employers should therefore audit their practices concerning out-of-state employees and, if possible, take steps to reduce the employees’ relationships with Massachusetts (e.g., by generating paperwork for out-of-state customers from the remote employee’s location and by instructing the employee to use his or her local contact information on his or her business cards).  Employers may wish to consult employment counsel concerning compliance with the Massachusetts Wage Act for any out-of-state employees.

“Play or Pay” Postponed: Employer Penalties For Violating Obamacare Put Off Until 2015

[July 3, 2013]  The Obama administration has delayed for one year the provision in the Affordable Care Act (“Obamacare”) that requires companies with 50 or more employees to pay a penalty if they fail to provide affordable health insurance to most of their full-time employees.  Employers now have until January 1, 2015, to comply with the so-called “play or pay” provision.

Citing the complexity of corresponding reporting requirements, a representative of the Department of Treasury explained in a statement on July 2, 2013, that the delay is designed to meet two goals:  1) allow the Department of Treasury to consider ways to simplify the new reporting requirements, and 2) provide time “to adapt healthcare coverage and reporting systems while employers are moving toward making health coverage affordable and accessible for their employees.”

The deadlines for other provisions of Obamacare, including the individual mandate and the requirement for states to establish health insurance exchanges, remain as scheduled.  Individuals must obtain coverage by January 1, 2014, or pay a tax.  Enrollment in the health exchanges is still scheduled to begin on October 1, 2013.  Employers must provide exchange notices to current employees by that date, as we earlier described here.

While this reprieve is much-needed good news for employers wrestling with Obamacare, employers would be wise to continue planning for the now-delayed requirement.  In fact, the Obama administration “strongly encourages” employers to voluntarily comply with the reporting requirements in 2014 in order to facilitate a smoother transition in 2015.

Obamacare Exchange Notices Due October 1 Per IRS Guidance

[May 22, 2013]  Employers must provide Obamacare “exchange notices” to current employees by October 1, 2013, and to new employees “at the time of hiring.”  (For 2014, this means within 14 days of the start date.)

Specifically, the IRS has finally provided temporary guidance to employers about their obligation, pursuant to the Affordable Care Act (“ACA”), to notify employees of health care coverage available on insurance exchanges.  The requirement applies to all employers who are covered by the Fair Labor Standards Act.

The DOL has made available two versions of model notices: one for employers who offer health coverage, and one for employers who do not.

The notice must be provided in writing and in a manner calculated to be understood by the average employee.  It may be provided electronically if the DOL’s electronic disclosure safe harbor requirements are met.
Employers must provide a notice to every employee regardless of plan enrollment status or part-time or full-time status.

Employers need not provide a separate notice to the employees’ dependents.

Employers Must Act Now To Comply With The California Wage Theft Prevention Act, Which Took Effect On January 1, 2012

California Governor Jerry Brown recently signed into law the California Wage Theft Prevention Act (the “Act”), which imposes significant new obligations and potential penalties on employers.  Most significantly, the Act requires that California employers provide each new hire with a detailed written disclosure containing specific wage-and-hour information.  Read more.