In the past week, Immigration and Customs Enforcement (ICE) has significantly increased the number of Notices of Inspection issued to employers nationwide, leading to a dramatic spike in I-9 audits. Unlike the enforcement initiative rolled out by federal authorities in February of this year, the latest sweep is no longer concentrated in Southern California but appears to be nationwide in scope.
There appears to be somewhat of a pattern with regard to which employers are targeted by this effort. ICE seems to be focusing on businesses operating in states, counties, and cities that have designated “sanctuary” status, and has also ramped up efforts to follow up with employers who have been subject to an I-9 audit in the past.
Regardless of whether you fall into either of these two categories, you are at increased risk of a visit from federal immigration authorities. What should you do today to prepare for a possible knock on the door from federal officials tomorrow?
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In “Alice in Wonderland,” the Queen of Hearts once proclaimed, “Why, sometimes I’ve believed as many as six impossible things before breakfast.” This appears to be the rallying cry of many plaintiffs across the country when they file administrative charges and lawsuits. They continue to name individual supervisors and human resources directors as individual defendants despite case law that generally holds individuals cannot be found liable under some of the most common federal employment discrimination laws: Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act (ADA), and the Age Discrimination in Employment Act (ADEA).
Unfortunately, the clear language in case law supporting the dismissal of individuals has not prevented plaintiffs from bringing claims under these statutes. A federal court judge in Oregon recently outlined this costly and questionable practice in his dismissal opinion in a case involving Starbucks, stating:
[Plaintiff’s] attorneys regularly file suit in state court for violations of these [discrimination] statutes against individual employees, knowing that they likely will be defended and indemnified by the employer, for the ostensible purpose of educating and deterring them from unlawful behavior. This court fails to see any need to file a lawsuit to deter such unlawful behavior. Even if employees are not sued individually, their employer surely will take appropriate action to deter any future behavior. [Plaintiff’s] attorneys also admitted that as a matter of course they sue employees prior to engaging in discovery and obtaining any evidence as to how complicit the employees may have been in the alleged discrimination or retaliation. Instead, they appear to presume that any employee who questions the plaintiff’s work performance should be sued.
Being named in a lawsuit puts individuals in a terrible position of having to personally defend themselves. Even if they are able to eventually get dismissed from the complaint, they do not come out unscathed—they often get stuck paying defense costs and are usually subjected to the invasive discovery process.
This shotgun approach to employment litigation establishes that plaintiff take the Cheshire Cat’s words to heart, in pursuit of money: “If you don’t know where you are going, any road can take you there.”
Federal And State Laws That Permit Individual Liability
The frightening aspect of this trend is that those roads do sometimes lead plaintiffs to a place where they can recover from supervisors, managers, and HR directors. At the state level, New Jersey, New York, Massachusetts, Connecticut, Ohio, Oregon, Pennsylvania, and Washington are among the states that allow plaintiffs to bring claims against individuals under the theory that they “aided and abetted” discrimination or harassment. And California allows plaintiffs to bring claims against individuals for harassment. Likewise, many states allow plaintiffs to bring claims against individuals who “retaliate” against them for engaging in protected activity. These types of laws will continue to sweep across the country as the states that have enacted them are generally at the forefront of employee rights.
At the federal level, individuals are regularly found personally liable for violations of the Fair Labor Standards Act (FLSA), the Family Medical Leave Act (FMLA), Section 1981 of the Civil Rights Act, the Uniformed Services Employment and Reemployment Rights Act (USERRA), the Employee Retirement Income Security Act (ERISA), and the Immigration Reform and Control Act (IRCA).
For instance, a 2017 case out of the Eastern District of Pennsylvania recently held that an HR director may be individually liable for FMLA and wage violations. In Edelman v. Source Healthcare Analytics, LLC, the court determined that there is individual liability under the statute because it defines an “employer” to include “any person who acts, directly or indirectly, in the interest of an employer to any of the employees of such employer.” The court next found the HR director acted in the interest of the employer when she terminated plaintiff.
The court reasoned that the HR director is subject to personal liability under the FMLA because she exerted control over plaintiff’s specific leave and because she terminated her. Using this same reasoning, it appears that the court would have likely reached this same conclusion if it was a manager, or perhaps even a general counsel, who advised the plaintiff of her FMLA rights and subsequently terminated the plaintiff’s employment.
An even more recent case out of the Eastern District of Pennsylvania denied a defendant’s request to have a race discrimination claim against the individual supervisor dismissed. In a 2018 case against a trucking company, the plaintiff made four different attempts to sue a former supervisor. The fourth time was the charm, as the court recently concluded that the plaintiff pled the bare minimum for his race discrimination claim to survive against the supervisor under § 1981.
Interestingly, the only allegation relating to possible race-based discrimination was plaintiff’s allegation that the supervisor ordered him “to go home early” and “leave work until his next scheduled shift.” The supervisor allegedly made this demand upon learning about plaintiff’s report to another employee of disparate treatment between Caucasian and African-American employees.
This case should serve as a cautionary tale to all HR directors, managers, and supervisors as there were no other allegations of race-based discrimination against the individual supervisor. In fact, there were no allegations that the supervisor had any involvement in the decision to terminate the plaintiff. Further, there were no allegations that the supervisor played a role in the union’s investigation and hearing. The court simply concluded the supervisor’s decision to send the plaintiff home was enough to survive a motion to dismiss.
Takeaways
Managers, HR directors, and supervisors should heed the Queen of Hearts’ recommendations when considering what steps to take to protect themselves and their company: “It takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!”
To better protect yourself and the company, you should ensure your employee handbook accurately reflects the ever-changing laws related to protected classes and all forms of harassment. Second, you should schedule annual harassment and discrimination trainings with managers and non-managers. These trainings will act as a defense in the event of a discrimination or harassment lawsuit. Also, the trainings will put employees on notice that they may be personally liable for violations of both state and federal employment statutes.
Finally, there must be an emphasis, from the top down, to take responsibility for the company’s workplace culture. Remaining complacent exposes both companies and individuals to a disgruntled employee exclaiming “off with their heads!”
Article Courtesy of Fisher & Phillips
On June 19, 2018, the Trump administration took the first step in a three-part effort to expand affordable health plan options for consumers when the U.S. Department of Labor (DOL) finalized a proposed rule designed to make it easier for a group of employers to form and offer association health plans (AHP). A final rule relaxing rules around short-term, limited duration insurance and a proposed rule addressing health reimbursement arrangements are expected in the upcoming months. In cementing proposed changes to its January 2018 proposed rule, “Definition of ‘Employer’ Under Section 3(5) of ERISA — Association Health Plans,” the administration seeks to broaden health options for individuals who are self-employed or employed by smaller businesses. The final rule will be applicable in three phases starting on September 1, 2018.
Under the rule, it will be substantially easier for a group of employers tied by a “commonality of interest” to form a bona fide association capable of offering a single multi-employer benefit plan under the Employee Retirement Income Security Act of 1974 (ERISA). The rule outlines two primary bases for establishing this “commonality of interest”: (1) having a principal place of business in the same region (e.g., a state or metropolitan area), or (2) operating in the same industry, trade, line of business or profession. An association also may establish additional membership criteria enabling entities with a sufficient “commonality of interest” to participate in the AHP, such as being minority-owned or sharing a common moral or religious conviction, so long as the criteria are not a subterfuge for discrimination based on a health factor. Further, the final rule clarifies how the association must be governed and controlled by its employer-members in order to be considered a bona fide association capable of offering a single-employer health benefit plan.
Meeting the criteria for a bona fide group or association of employers in the final rule allows the AHP to be treated as a single-employer ERISA plan. Thus, assuming the association is comprised of employer-members with more than 50 total full-time employees, it will be considered a large group and exempt from key Affordable Care Act (ACA) market reforms, such as the essential health benefits requirements and modified community rating rules, that would otherwise apply to a health plan offered by any of its individual employer-members with less than 50 full-time employees. This is important because the ACA applies certain requirements only to small group (and individual) health insurance products and not to large group plans.
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The IRS released its first piece of guidance on the newly added credit for paid family and medical leave in the form of FAQs. The FAQs provide helpful information as employers work to either implement conforming paid leave policies or ensure that their current policies are sufficient. However, the IRS acknowledged that additional guidance is needed.
Background
As part of the Tax Cuts and Jobs Act enacted and signed into law in late 2017, Congress added section 45S to the Internal Revenue Code. This section allows employers to claim a general business credit for providing paid family and medical leave to certain employees. In order to be eligible for the credit, the employer must have a written policy that allows no less than two weeks of paid family and medical leave annually. This amount is prorated for part-time employees. The written policy also must provide for payment of not less than 50 percent of the amount normally paid. Although section 45S references the Family and Medical Leave Act of 1993 (FMLA), the leave does not have to be provided under the FMLA provisions. Instead, it can simply be allowed under the employer’s policy. If, however, the employer is not covered by the FMLA, the employer’s written policy must include a non-retaliation clause.
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The Family and Medical Leave Act (FMLA) forms expire June 30—not on their original expiration date of May 31—but experts believe they aren’t likely to change when they’re replaced with new forms.
Employers who customize their own forms aren’t too concerned with the imminent replacement of the current forms, but employment law attorneys disagree on how much the DOL forms might be tweaked.
The FMLA forms are used to certify that an employee is eligible to take FMLA leave and to notify him or her of leave rights under the law. The forms expire under the Paperwork Reduction Act of 1995, which requires the Department of Labor (DOL) to submit its forms at least every three years to the Office of Management and Budget (OMB) for approval, so the OMB can ensure processes aren’t too bureaucratic.
The DOL is renewing the current FMLA forms on a month-to-month basis until it replaces them with new forms. But the new forms may be virtually identical to the current ones with just a different expiration date.
In 2015, the DOL made a few minor tweaks to the FMLA forms so they would conform with the Genetic Information Nondiscrimination Act.
There have not been substantive changes to FMLA or its regulations in the past three years that would require changing any of the information provided or sought on the current forms, noted Tina Bengs, an attorney with Ogletree Deakins. So it is likely that the new forms, once issued, will be approved for the maximum three-year period.
Customization of Forms
Some employers customize the DOL-recommended forms for their own use, observed Steven Bernstein, an attorney with Fisher Phillips. For example, some employers are covered by state and federal FMLAs and adjust the federal forms to reflect state law requirements. Others make minor changes, such as referring to workers as “associates” rather than “employees.”
On occasion, employers incorporate reference to their accrued leave policies, while others adopt robust language disclaiming liability under the FMLA, he said.
He cautioned, however, that an employer can be held liable for using a form that harms the employee by misleading him or her about FMLA rights, and recommended that any changes be reviewed by an outside expert to ensure that added language does not inadvertently conflict with the FMLA.
Monica Velazquez, an attorney with Clark Hill, prefers customized forms so that employers aren’t handing workers documents with the DOL logo. The logo makes the forms look more official than they are, she said, and emphasizes that their use is optional.
It is recommended if you are going to create customized FMLA forms to copy and paste the information from the DOL form into the employer’s own form. If the employer plans to use its own language, use plain English and bullet points, she said. Keep things as direct as possible.
For example, instead of an open-ended question about the employee’s treatment schedule, a customized FMLA form might ask the doctor to choose a frequency of treatment—every week, month or year—and circle the response. This would reduce the challenge of reading doctors’ often illegible handwriting. Less space for handwritten information also would reduce the chances of doctors’ filling certification forms with confusing medical lingo.
Many employers put the information about health conditions at the top of the medical certification forms, as it’s the first piece of information the employer wants—what ails the employee or family member—so the employer has a better sense of whether the employee is covered by the FMLA.
FMLA Forms
The current DOL forms are:
The Affordable Care Act (ACA) created PCORI to help patients, clinicians, payers and the public make informed health decisions by advancing comparative effectiveness research. PCORI’s research is to be funded, in part, by fees paid by either health insurers or sponsors of self-insured health plans. These fees are widely known as PCORI fees. Health insurers and self-insured plan sponsors are required to report and pay PCORI fees annually using IRS Form 720 (Quarterly Federal Excise Tax Return). The report and fees are due on July 31st with respect to the plan year that ended during the preceding calendar year. For instance, for calendar year plans, the fee that is due July 31, 2018 applies to the plan year that ended December 31, 2017.
Reporting PCORI fees on Form 720
Form 720 and completion instructions are posted on the IRS’ website. Insurers and self-insured plan sponsors must report the average number of lives covered under the plan. For fully insured plans, the carrier is responsible for reporting and paying the fee on the employers behalf. For a self-insured plan, the plan sponsor (employer) enters information for “self-insured health plans.” The number of covered lives is then multiplied by the applicable rate based on the plan year end date. Form 720 that is due July 31, 2018, will reflect payment for plan years ending in 2017. The applicable rate depends on the plan year end date:
The applicable rate may increase for inflation in future years. However, the program ends in 2019 and PCORI fees will not apply for plan years ending after September 30, 2019. Insurers or self-insured plan sponsors that file Form 720 only for the purpose of reporting PCORI fees do not need to file Form 720 for the first, third or fourth quarter of the year. Insurers or self-insured plan sponsors that file Form 720 to report quarterly excise tax liability (for example, to report the foreign insurance tax) should enter a PCORI fee amount only on the second quarter filing. See below for more information about affected plans and methods for calculating the number of participants and amount of the required PCORI fee.
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The IRS has created a webpage on understanding Letter 227, which certain applicable large employers (ALEs) may receive in connection with the assessment of employer shared responsibility penalties (aka Pay or Play penalties). As background, the IRS uses Letter 226J to notify an ALE of a proposed penalty assessment. ALEs have 30 days to respond, using Form 14764 to indicate their agreement or disagreement with the proposed penalty amount. Letter 227 acknowledges the ALE’s response to Letter 226J and explains the outcome of the IRS’s review and the next steps to fully resolve the penalty assessment. There are five different versions of the letter (samples are provided of each version on the IRS website):
Only Letters 227-L and 227-M call for a response, which must be provided by the date stated in the letter. The IRS stresses that the Letter 227 is not a bill. Notice CP 220J is used to collect the employer shared responsibility penalty payment.
Late last week, the IRS released Rev. Proc. 2018-34 which, among other items, set the affordability threshold for employers in 2019. In order to avoid a potential section 4980H(b) penalty (aka Pay or Play penalty), an employer must make sure one of its plans provides minimum value and is offered at an affordable price. An actuary will determine whether the minimum value threshold has been satisfied and this is generally not an issue for employers. However, an employer is in control as to whether the plan it is offering meets the affordability threshold.
A plan is considered affordable under the ACA if the employee’s contribution level for self-only coverage does not exceed 9.5 percent of the employee’s household income. This 9.5 percent threshold is indexed for years after 2014. In 2018 the affordability threshold decreased from 9.69 percent to 9.56 percent. However, similar to every other year, the affordability threshold is scheduled to increase in 2019. In 2019 the affordability threshold will be 9.86 percent. The significant increase compared to 2018 provides an employer who is toeing the line of the affordability threshold an opportunity to increase the price of its health insurance while continuing to provide affordable coverage.
An employer wishing to use one of the affordability safe harbors will use the 2019 affordability threshold of 9.86 percent when determining if the safe harbor has been satisfied. The first affordability safe harbor an employer may utilize is referred to as the form w-2 safe harbor. Under the form w-2 safe harbor, an employer’s offer will be deemed affordable if the employee’s required contribution for the employer’s lowest cost self-only coverage that provides minimum value does not exceed 9.86 percent of that employee’s form w-2 wages (box 1 of the form w-2) from the employer for the calendar year.
The second affordability safe harbor is the rate of pay safe harbor. The rate of pay safe harbor can be broken into two tests, one test for hourly employees and another test for salaried employees. For hourly employee, an employer’s offer will be deemed affordable if the employee’s required contribution for the month for the employer’s lowest cost self-only coverage that provides minimum value does not exceed 9.86 percent of the product of the employee’s hourly rate of pay and 130 hours. For salaried employees, an employer’s offer will be deemed affordable if the employee’s required contribution for the month for the employer’s lowest cost self-only coverage that provides minimum value does not exceed 9.86 percent of the employee’s monthly salary.
The final affordability safe harbor is the federal poverty line safe harbor. Under the federal poverty line safe harbor, an employer’s offer will be deemed affordable if the employee’s required contribution for the employer’s lowest cost self-only coverage that provides minimum value does not exceed 9.86 percent of the monthly Federal Poverty Line (FPL) for a single individual. The annual federal poverty line amount to use for the United States mainland in 2019 is $12,140. Therefore, an employee’s monthly cost for self-only coverage cannot exceed $99.75 in order to satisfy the federal poverty line safe harbor.
When planning for the 2019 plan year, every employer should check to make sure at least one of its plans that provides minimum value meets one of the affordability safe harbors discussed above for each of its full-time employees. Should you have any questions on determining the affordability of a plan or any other questions related to the Forms 1094-C and 1095-C, please don’t hesitate to contact us.
In the last Regulatory Agenda, OSHA indicated that it was undergoing rulemaking to revise the Improve Tracking of Workplace Injuries and Illnesses regulation promulgated under the Obama administration. Specifically, OSHA noted it was considering deleting the requirement for employers with 250 or more employees at an establishment to electronically submit its 300 Log, 301 Forms along with the 300A Form. What was not clear at the time was what OSHA was going to require for submission in July since the agency has not yet issued a Notice of Proposed Rulemaking revising the standard.
Recently, OSHA made clear that it will not collect or require employers with 250 or more employees per establishment to submit the 300 Log or the 301 Forms. OSHA will require all employers covered by the regulation to only submit the 2017 300A Form by July 1, 2018. Beginning in 2019 and every year thereafter, the 300A Forms must be submitted by March 2.
Covered establishments with 250 or more employees are only required to provide their 2017 Form 300A summary data. OSHA is not accepting Form 300 and 301 information at this time. OSHA announced that it will issue a notice of proposed rulemaking (NPRM) to reconsider, revise, or remove provisions of the “Improve Tracking of Workplace Injuries and Illnesses” final rule, including the collection of the Forms 300/301 data. The Agency is currently drafting that NPRM and will seek comment on those provisions.
Also, last week we blogged about OSHA’s reversal in position regarding the electronic filing of 300A Forms by employers in state plans that have not adopted the Improve Tracking of Workplace Injuries and Illnesses requirements. OSHA is now requiring those employers to submit their 300A Forms using the Injury Tracking Application on OSHA’s website by July 1, 2018. However, an agency official recently clarified that since OSHA does not have jurisdiction in those states with state plans, it is prohibited from enforcing the regulation and can not issue citations to employers for failing to electronically submit the 2017 300A, and since those certain state plans have yet to adopt the regulation they are equally prohibited from enforcing the requirement and can not issue citations to employers. So while OSHA is requiring employers in state plans that have not yet adopted the regulation to submit their 2017 300A it has acknowledged that it has no enforcement authority for those employers who fail to do so.
Article courtesy of Jackson Lewis