Supreme Court upholds Obamacare again … but why?

Once again the Supreme Court has ruled in favor of the Affordable Care Act (ACA) — and upheld a component that’s become an essential part of the law. So now HR pros can start worrying about the upcoming Obamacare compliance challenges without any major distractions.

The Supreme Court case, King v. Burwell, is an appeal of a July ruling from the 4th Circuit Court of Appeals, which upheld the law’s subsidies.

Had the subsidies been struck down by the High Court, millions of Americans could’ve lost the tax subsidies that allowed them purchase affordable coverage under the health reform law.

In fact,  USA TODAY reported that more than 5 million Americans would be affected if the subsidies are struck down.

How affected? Those subsidies have reduced monthly insurance premiums by 76% (the average monthly premium dropped from $346 to just $82) for those who qualify, according to federal officials.

How we got here

The entire case essentially hinged on one phrase in the health reform law, which says that subsidies — in the form of tax credits — would be offered in health insurance exchanges “established by the state.”

But more than 30 states passed on setting up their own exchanges, so the feds stepped in to do so.

Four Virginia residents — the original plaintiffs in the case — claim that the subsidies are illegal in the states where only federal exchanges have been established.

‘Inartful drafting’

With its ruling, the Supreme Court essentially said that the subsidies should be available to all eligible Americans regardless of whether they live in states that have set up their own health insurance exchanges.

In the ruling, Chief Justice John G. Roberts, Jr. did acknowledge that the specific language in the Affordable Care Act was confusing and problematic. As Roberts put it, the law:

“contains more than a few examples of inartful drafting … Congress wrote key parts of the act behind closed doors, rather than through the traditional legislative process.”

Despite the language, Roberts said the intent of law was clear and that:

“Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them. If at all possible we must interpret the Act in a way that is consistent with the former, and avoids the latter.”

Maintains status quo

So where does this leave employers. According to Buck Consultants global practice leader Tami Simon:

“The ruling will not have a significant impact on employers and the human resources department. It maintains the status quo for time being.”

And for employers, the status quo is finding ways to comply with the many complex Obamacare regs, such as:

  • The reporting requirement (2016), and
  • The Cadillac Tax (2018).

‘You can’t fire me, I’m on FMLA’: Was mistake-prone worker correct?

As you know, taking FMLA leave can’t completely shield an employee from termination, especially when the person’s performance warrants him or her being fired. But the FMLA very much complicates the matter. So what do you need to be able to safely let under-performing FMLA-takers go? 

Answer: Documented evidence that the employee isn’t meeting performance standards.

A recent lawsuit in which the employer’s decision to terminate an employee on intermittent FMLA leave was upheld by a federal appeals court provides a good example of when it’s permissible — and what it takes — to safely let these kinds of workers go.

Multiple stints of FMLA

Elizabeth Burciaga sued her employer, Ravago Americas LLC for FMLA retaliation after she was terminated following several FMLA-related absences.

Burciaga was a customer service representative, who was responsible for contacting sales representatives and customers, receiving and processing orders, scheduling shipments, and resolving customer issues.

She’d been at Ravago for five years, and was considered one of Ravago’s more experienced customer service representatives.

Earlier on in her employment with Ravago, Burciaga had taken FMLA leave on two separate occasions for the birth of her children.

Then, about year after her last leave, she requested intermittent FMLA leave to help care for her son. Her request was granted, and she took several days off on a somewhat sporadic basis to care for her son.

Ravago never expressed any concerns about Burciaga taking leave.

Mistakes crept in

During the time she was approved for intermittent leave, Burciaga began making mistakes.

Examples:

  • Burciaga entered an order for 15,000 pounds of material when the customer ordered 22,500 pounds of material
  • She submitted and shipped material under the wrong customer number
  • She shipped the wrong material to a customer, and
  • She shipped the wrong material to a customer again.

A logistics coordinator was able to catch and correct some of these mistakes before customers or the company was affected. But, after being approached by Burciaga’s manager, the logistic coordinator informed him that Burciaga “habitually made shipping errors.”

Her manager then took the matter to upper management, explaining that someone with Burciaga’s experience shouldn’t be making those kinds of mistakes.

Burciaga was terminated. She was told the company couldn’t tolerate continued shipping errors because they could hurt the company’s reputation.

She then sued for FMLA retaliation.

Retaliation a form of discrimination

The court in this case said FMLA retaliation essentially amounts to discrimination — in which an employer takes an adverse action against an employee for exercising a right.

So the employer had to prove it had a nondiscriminatory reason for firing Burciaga.

After reviewing the company’s documentation, which clearly outlined the mistakes she’d made, the court sided with Ravago and dismissed Burciaga’s lawsuit.

When she balked, the court said Burciaga failed to create a “causal connection” between her FMLA leave and her firing.

Three things the employer had in its favor:

  • It had already allowed Burciaga take FMLA leave in the past with no problems
  • Not once was her FMLA leave brought up in the discussions around her work performance or termination, and
  • It had undisputed evidence that Burciaga was making mistakes that could damage the company’s reputation.

All three factors weighed heavily in the court’s ruling that no connection existed between her FMLA leave and her termination.

DOL issues new OT rules: What you need to know, what they’ll cost

The wait is finally over. The DOL just released its proposed revisions to the FLSA overtime exemption rules. Now you can start prepping for the fallout, which will be dramatic. 

For months, the DOL’s been teasing us with promises that the proposed rule changes would be revealed soon. Labor Secretary Thomas Perez even joked the agency was “working overtime” to get the revisions on the table.

Well, all the speculation came to a screeching halt on Monday, when a President Obama-bylined column was published by The Huffington Post, providing a sneak peek at the rules. Hours later, the official Notice of Proposed Rulemaking was available on the DOL’s website.

We’ve gathered the pertinent facts from the 295-page long notice here for you.

Here’s what you need to know:

  • The new pay threshold is much higher than anticipated. As you know, the current minimum salary a worker has to be paid to be exempt from overtime is $455 per week or $23,660 per year. Well, under the proposed rules, it would jump to $970 a week or $50,440 per year. That’s significantly higher than the $42,000 mark those on Capitol Hill had been teasing. The DOL calculated that $50,440 would equal the 40% percentile of weekly earnings for full-time salaried workers.
  • The highly compensated employee threshold will also climb. The total annual compensation requirement needed to exempt highly compensated employees would climb to $122,148 from 100,000 — or the 90th percentile of salaried workers’ weekly earnings.
  • The salary thresholds will automatically increase. For the first time ever the salary thresholds will be tied to an automatic-escalator. The DOL is proposing using one of two different methodologies to do this — either keeping the levels chained to the 40th and 90th percentiles of earnings, or adjusting the amounts based on changes in inflation by tying them to the Consumer Price Index.
  • No changes to the duties tests have been proposed. The DOL hasn’t suggested changing the executive, administrative, professional, computer or outside sales duties tests (see them here) as of yet. However, the agency is seeking comments on whether they should be changed and whether they’re working to screen out employees who are not bona fide white collar exempt employees. Early indicators were that the DOL would look to adopt a California-style rule in which employees would be required to spend more than 50% of their time performing exempt duties to be classified as exempt.
  • Bonuses aren’t part of the salary calculation. As of now, the DOL says discretionary bonuses won’t count toward a person’s salary — but that could change depending on the comments the agency receives. Currently, such bonuses are only included in calculating total compensation under the highly compensated employee test. That’s not set to change. But the DOL said some stakeholders are asking for broader inclusion of bonuses in salary calculations.
  • The rules will — most likely — take effect in 2016. We don’t have a definitive timeline for implementation of the rule changes, but it’s a safe bet they won’t kick in until at least 2016. The proposed rules haven’t been published in the Federal Register yet. But once they are, an official public comment period will be set. The DOL will then review the comments and make changes to the proposed rules if it’s deemed necessary. At that point, the rules will be re-released in their final form, and an effective date will be announced.

How many people will be affected?

Based on the Obama Administration’s calculations, only about 8% of workers currently earn less than the existing $23,660 salary threshold. And as the numbers above indicate, cranking the threshold up to $50,440 would put about 40% of workers under the line. According to the DOL, that would extend overtime eligibility to about 4.6 million workers, assuming employers did nothing in reaction to the rule changes.

The White House has also provided a chart of just how many workers in each state would be affected by the rule changes — again, assuming employers stood pat.

How much will it cost?

Now for the cost to employers: The DOL is estimating that the average annualized direct employer costs will total between $239.6 million and $255.3 million per year, depending on the salary threshold auto-escalation method.

In addition to direct costs, the DOL says the rules would transfer between $1.18 billion and $1.27 billion out of employers’ coffers into employees’ paychecks annually — again assuming employers do nothing to adjust to the rules.

As we reported previously, Oxford Economics, a global analytics, forecasting and advisory firm, is predicting that transfer of funds won’t take place. Its researchers believe businesses are likely to make “significant adjustments in the structure of their workplaces to compensate for the billions of dollars of added wages the new regulations would impose.”

Oxford Economics predicts employers will “adjust compensation schemes to ensure they do not absorb additional labor costs.”

To do this, the firm estimates employers would:

  • lower hourly rates of pay
  • cut employee bonuses and benefits so they can increase base salaries above the new threshold, and
  • reduce some workers’ hours to fewer than 40 per week in order to avoid paying overtime.

All of these actions would leave total pay largely unchanged.

But taking these actions would result in exorbitant administrative costs — far outweighing the DOL’s estimates, according to Oxford Economics.

In its report, commissioned by the National Retail Federation, Oxford Economics estimated that raising the salary threshold to $51,000 would cost businesses $874 million in administrative expenditures alone.

Company’s shady-looking ‘RIF’ leads to $145K payout

Firing a disabled employee while he’s out on medical leave is usually a recipe for disaster. But it can be done in limited circumstances. However, the potentially discriminatory nature of this firing was a little too obvious for the EEOC to overlook. 

Meet Doug Johnson. He drove a van and took nursing home patients to medical appointments for his employer Paloma Blanca Health Care Associates, a health and rehabilitation center in Albuquerque, NM.

Almost three years into his tenure, Johnson suffered a heart attack and was diagnosed with a number of other cardiovascular conditions.

He then requested a reasonable accommodation under the ADA in the form of a request for FMLA leave.

Paloma Blanca approved him for 12 weeks of FMLA leave.

So far so good, right?

Fired as part of an ‘RIF’

Five weeks into his medical leave things took a sharp turn.

Johnson was terminated.

Firing a person while on medical leave is enough to perk up the EEOC’s antenna. But Paloma Blanca didn’t stop there.

It notified Johnson that it had eliminated his position and was laying him off due to a “reduction in force.”

Granted, a legitimate RIF is actually one of the ways employers can terminate individuals on medical leave — assuming it could be proven those workers would’ve been let go regardless of their medical condition or leave of absence.

But problem for Paloma Blanca was this looked like anything but a legitimate RIF, at least according to the info contained in the EEOC’s press release on the matter.

No other Paloma Blanca employees were subjected to an RIF at that time, the EEOC said, and there were no department- or facility-wide reductions in force around that time either.

So the EEOC sued Paloma Blanca under the ADA for disability discrimination and for failing to provide reasonable accommodations to a disabled individual.

Perhaps seeing how bad this looked, Paloma Blanca decided to settle the lawsuit by providing Johnson $145,000 in monetary relief.

As part of the settlement, Paloma also agreed to:

  • expunge from Johnson’s personnel file any references to the allegations of discrimination, his participation in the lawsuit or his disabilities
  • review and distribute to employees its policies regarding disability discrimination and retaliation
  • provide its employees with training regarding disability discrimination and procedures for handling requests for reasonable accommodations, and
  • post a notice emphasizing the company’s equal employment opportunity policy and reaffirming its commitment to providing reasonable accommodations for employees and applicants with disabilities.

Don’t let temporary ADA accommodations turn into never-ending perks

When employers grant accommodation requests, those accommodations should always be made on a temporary basis. Unfortunately, many firms unknowingly turn these temporary accommodations into permanent ones.

Act early to prevent confusion

Ms. Galindo stressed the importance of making sure employers act early to prevent any confusion about the nature of the accommodation.

Here’s why that’s so important: Say an employee’s accommodation has been in place for a long period of time. The company decides the arrangement is no longer working out and tells the worker.

The worker then sues under the ADA, and the court sides with the employee. Its reason: The accommodation has been in place for this long without it impacting the company, so there’s no reason why it should all of sudden be an undue hardship.

In any communication about the reasonable accommodation during the interactive process and/or hardship analysis, it should be clearly stated that the accommodation is being made on a temporary basis.

From there, employers should revisit the accommodation regularly to see if the circumstances are still the same or if changes have taken place that could alter the accommodation.

How regularly? A 30-day increment usually works well, so HR pros should shoot for check-ins every 30 days, 60 days, 90 days, etc.

Another area that should be reviewed regularly: Job descriptions. Many job descriptions are poorly written, so “essential job functions” are difficult to pin down, says Galindo.

For example, if a job requires a high stress tolerance that should be listed in the description because it would impact the accommodation process.

Galindo also offered what she called “The Reasonable Test,” which is a very simple test to determine whether or not an accommodation is reasonable. If the accommodation will have a negative impact on the company as a whole, chances are it’s not a reasonable accommodation.

And chances are, the smaller the company, the easier it’ll be to prove the accommodation negatively impacts the entire workforce.

Of course, this test should never be used to make actual employment-based decisions. When the ADA is in play, the interactive process is always the way to go.

6 forms accommodations take

Galindo’s presentation also touched on the six major types of accommodation types employees generally request under the ADA, which include:

  1. Physical (a different chair, a special keyboard, etc.)
  2. Functional (being temporarily relieved of certain job functions, providing “sheltered” work environments for staffers with anxiety issues, ADHD, etc.)
  3. Environmental (Moving the employee to a different work environment, limiting his or her exposure to hot or cold)
  4. Work Hours (modified or reduced hours, alternate shift assignments, etc.)
  5. Time Off (intermittent absences, continuous leave), and
  6. Other (work aides, coaching, respite from attendance or discipline or attendance, service dogs).

Do your people have to be paid for ‘snow days’?

With a good portion of the country digging out from recent staggering snowfalls, it seems like a good time to review what rights and responsibilities employers have to employees who miss work because of inclement weather.

Rebecca Goldberg, writing on the Connecticut Labor and Employment Law blog, offers a pretty comprehensive look at snow day absences. Here’s a rundown of what she had to say:

Exempt employees

Since they’re paid on a salary basis, except in rare circumstances, a reduction in hours doesn’t change exempts’ pay.

If a business is closed for less than a week, the law requires that exempt workers be paid their full salaries. But the feds also say it’s permissible to require the employee to use vacation days or other PTO to cover their absence — but if the employee has no PTO time available, his or her salary can’t be reduced.

Caveat: State laws may vary on these issues, so it’ll pay to check with your company attorney.

So, OK. You can make exempts use up vacation time for snow days. But Goldberg cautions that “if an exempt employee performs any work during the day (whether onsite or from home), the employee must be paid for the whole day.”

Partial-day deductions from a paid time off bank are allowed, even for exempt employees.  So, if an exempt employee chooses to come in late due to road conditions, a portion of a day may be deducted from the employee’s paid time off bank — again, if the employee has PTO available. Partial-day deductions in pay aren’t allowed.

Non-exempt employees

As you well know, non-exempts are paid only for hours worked, so generally speaking, if the snowdrifts prevent them from getting to the workplace, they don’t get paid. Again, though, Goldberg offers a word of caution: “Some passive time, such as on-call time, is considered ‘hours worked,’ so it is possible some non-exempt employees will need to be compensated, even if they do not perform any actual work.”

Some state laws require some form of payment for non-exempt employees who report to work and are then sent home early.

In addition, employers should count these hours as “hours of service” for purposes of the Affordable Care Act.

Tips for employers

Here’s Goldberg’s general advice on handling employee pay issues that come with absences caused by the weather:

Many employers choose to pay all employees for the full day, without deducting from a paid time off bank, for administrative simplicity, employee morale, or other reasons.  (Of course, a collective bargaining agreement may limit these choices.)

Whether or not to close the worksite can be a difficult decision and may be influenced by road conditions, the length of employees’ commutes, the nature of the job, whether schools are closed, production requirements, whether telework is possible, employee morale, and the amount of pay at issue.

Unless the employee’s job is of a critical nature (think hospital employees), employers should avoid subjecting an employee to discipline or termination for failing to report to work if the employee feels the road conditions are unsafe.

Employers should communicate to employees beforehand how the employees will be notified of a worksite closure.  Small employers typically will call each employee at home or send an email, while larger employers may announce a closure through a radio station or company website.

Whatever you choose, make sure employees know whether they are expected to report to work.

Fixed leave policy costs company $1.35M

A recent Equal Employment Opportunity Commission (EEOC) lawsuit highlights the dangers of fixed leave policies. 

Princeton HealthCare System, which operates several medical facilities, will pay $1.35M to settle a disability discrimination lawsuit stemming from a fixed leave policy and leave tracking system it had in place.

According to the EEOC, Princeton’s leave tracking system only took into account the requirements of the Family Medical Leave Act (FMLA) when it came to handling employees’ medical leaves.

This resulted in two actions, which spurred the EEOC’s suit:

  • terminating employees who weren’t yet eligible for FMLA after a few absences, and
  • automatically terminating employees once they’d been out on FMLA leave for more than 12 weeks.

According to the EEOC, such actions robbed employees of rights they may have been entitled to under the Americans with Disabilities Act (ADA).

It says hard-line fixed leave policies slam the door on the chance for employees to receive reasonable accommodations under the ADA that may allow them to return to performing the essential functions of their jobs — and reasonable accommodations can include medical leave given in addition to FMLA leave.

The EEOC sued Princeton, claiming it failed to at least seek out reasonable accommodations for employees who were absent for medical-related reasons.

As part of the settlement agreement, Princeton has also agreed to:

  • no longer require employees returning from disability leave to present a fitness-for-duty certification stating they are able to return to work without any restrictions (because that too slams the door on the possibility of some employees receiving reasonable accommodations that may allow them to return to their jobs)
  • not subject employees to progressive discipline for ADA-related absences, and
  • provide ADA training to its workforce.

The $1.35M will be distributed to those unlawfully terminated under Princeton’s former fixed leave policy.

The EEOC also said in the future Princeton must engage in the interactive process with ADA-covered employees, including employees with a disability related to pregnancy, when deciding how much medical-related leave is needed.

Always enter the interactive process

While it appears the EEOC is taking a hard-line stand against fixed leave policies here, what it’s really trying to do is make employers aware of their responsibilities to enter the interactive process whenever a medical condition interferes with an employee’s ability to perform his or her job.

When such conditions are in play, even if an employee has already been granted a full 12 weeks of FMLA leave, employers must enter the interactive process to see if a reasonable accommodation exists that would allow affected employees to return to work.

Companies can have policies that impose caps on how long workers can be on leave. But they must be flexible enough to allow room for reasonable accommodations — including more leave — that help employees return to work.

How much medical leave is too much? In a recent landmark decision by the U.S. Court of Appeals for the Tenth Circuit, it was ruled anything beyond six months is generally not reasonable.

PayrollEase Holiday Hours

Independence Day
Friday, July 4th: PAYROLL EASE and BANKS will be CLOSED

Paychecks dated Thursday, July 3rd:
You must submit your payroll on Tuesday, July 1st by 12pm/Noon

Paychecks dated Monday, July 7th:
You must submit your payroll on Wednesday, July 2nd by 12pm/Noon

Thank you and have a great holiday!