Recordkeeping: What you must keep – and for how long

The trouble with recordkeeping at a lot of companies: You don’t know how complete your records are until you get involved in litigation or an audit. But by then, it’s often too late to fill in any critical gaps.  

That’s why it’s essential to know — before you find yourself in some kind of legal dispute — what documents you need to hold onto and what you can trash without putting your company at risk.

To be on the safe side, many employment law attorneys recommend you keep everything for at least five to seven years after an employee has left.

That’s sound advice — if you’ve got the storage and personnel to keep track of all those docs for that long. But it may be overkill, and often isn’t necessary to comply with many employment law record retention requirements.

Here’s a rundown of document retention rules under laws such as the FMLA, COBRA, FLSA, ERISA, HIPAA, ADEA and Equal Pay Act, courtesy of the employment law experts at the law firm Lindquist & Vennum:

Employee leave

The FMLA requires employees to hold on to a slew of employee leave-related paperwork for at least three years, including:

  • Identifying data regarding the employee on leave, which includes name address, occupation, pay rate, terms of compensation, days worked, hours worked per day, and additions or deductions in pay
  • Dates and hours of FMLA leave
  • Copies of employer notices to employee(s)
  • Documents describing employee benefit and premium payment info
  • Docs describing any disputes over FMLA benefits, and
  • Copies of the company’s FMLA policy.

Benefits plans

A slew of laws (ERISA, COBRA, ADEA, HIPAA) layout what benefits plan-related documents companies must hang onto, and the length of time docs must be saved varies by the enforcing law. Here’s a summary of the essentials:

  • Employee benefit plan governing documents — keep indefinitely
  • Summary plan descriptions and notices — keep indefinitely
  • Records backing up the information reported on Form 5500, such as vesting and distribution info, coverage and nondiscrimination testing data, benefit claims info, enrollment materials, election and deferral data, and account balance and performance data — keep for six years after the Form 5500 filing date
  • Evidence of fiduciary actions — keep indefinitely
  • HIPAA privacy record documents — keep six years from the date it was created or the date it was last in effect, whichever is later, and
  • COBRA notices — no required retention period, but it’s recommended these documents be kept for at least six years from the date they were given.


Most compensation-related documents, with the exception of Certificates of Age (keep those until termination), do not need to be kept longer than three years, including:

  • Records containing employees’ names, addresses, dates of birth, occupations, pay rates and weekly compensation — keep for three years
  • Collective bargaining agreements and changes/amendments to those agreements — keep for three years
  • Individual contracts — keep for three years
  • Written agreements under the FLSA — keep for three years
  • Sales and purchase records — keep for three years, and
  • Basic employment and earnings records, like wage rate tables used to calculate wages; salary, wages and overtime pay info; work schedules; and additions to or deductions from wages — keep for two years.


There are a number of hiring and recruitment-related materials employers must hold on to, including:

  • Hiring documents, like job applications, resumes, job inquiries and records of hiring refusals — keep for one year from date of action
  • Job movement docs, such as promotion, demotion, transfer, layoff and training selection info — keep for one year from date of action
  • Test materials, including test papers and employee test results — keep for one year from date of action
  • Physical examination results — keep for one year from completion, and
  • I-9 forms — keep for three years after the date of hire or one year after the date of termination, whichever is later.

Litigation changes the equation

Once you’re on notice that any matter may become the subject of litigation or an audit, you must keep all documents related to that matter until the case has come to a conclusion — no exceptions.

In addition, you must anticipate litigation when you receive a notice that a lawsuit is being filed, notice of a DOL or EEOC charge, an attorney demand letter, or an internal complaint.

What you must keep in those instances includes:

  • the personnel file of the complainant
  • all documents related to his or her application, hiring, promotions, transfers, disciplinary actions, evaluations, training, pay and medical records
  • job postings
  • job descriptions
  • complaint records of other employees
  • investigation notes and documents
  • supervisor notes and records, and
  • anything related to an alleged harasser or wrongdoer.

Bottom line: The best way to successfully fend off litigation or an audit is to be able to produce strong, comprehensive documentation.

What’s annoying employers most about the ACA now?

Recently, employers were asked which part of the ACA they most want to see changed. And in what’s likely to be a surprise to many, the No. 1 answer wasn’t the employer mandate. 

Although 70% of the 644 employers surveyed said they’d like to see the employer mandate repealed, it still wasn’t the highest vote-getter.

What was? Repealing the excise or “Cadillac” tax. All told, 86% of employers said eliminating the tax on high-cost health plans was atop their “Wish List” of the things they’d like to see done to the ACA.

The survey was conducted by the consulting firm Mercer.

So the top five changes employers would like to see to the ACA looked like this (employers could place multiple votes):

  1. Eliminate the excise or “Cadillac” tax — 86%.
  2. Repeal the employer mandate — 70%.
  3. Change the definition of a full-time equivalent employee to one who works 40 hours per week — 66%.
  4. Repeal and replace the ACA entirely — 54%.
  5. Repeal the individual mandate –51%.

Just missing the top five was: Allowing the use of stand-alone HRAs to purchase individual coverage — 51% (it received fewer “strongly favor” votes than did repeal the individual mandate).

The biggest impact?

When asked about the impact of the ACA on their organizations, employers said it:

  • created a significant administrative burden — 84% (with 51% saying the burden was “very significant”)
  • resulted in making unwanted plan design changes to avoid the excise tax — 29%, and
  • generated higher costs — 20%.

Has enrollment changed?

Employers were also asked if their health plan enrollment had changed as a result of the employer mandate, and the results closely mirror reports from the Congressional Budget Office (CBO):

  • “No” — 74%
  • “Yes,” an increase — 22%, and
  • “Yes,” a decrease — 4%.

The CBO has reported there’s been virtually no change in the number of employees enrolling in company-sponsored health coverage as a result of the ACA.

In a surprise move, Supreme Court offers compromise on contraceptive issue

Just when HR pros were all but certain the Supreme Court was going to issue a split decision in the case centering on the Affordable Care Act’s contraceptive coverage mandate, the High Court surprised everybody by doing something it hasn’t done in well over half a century.  

At issue in the Supreme Court case was a religious objection to ACA’s contraceptive coverage mandate.

As HR pros know, the healthcare reform’s birth control mandate requires companies to cover insured employees for the use of all contraceptives without any cost-sharing.

This isn’t the first time religious groups have objected to the contraceptive coverage mandate, but it seemed as if the Obama administration eased their concerns when it carved out a religious exemption to the mandate. Under the exemption, religious groups would simply have to fill out a form, submit it to their insurer and then they wouldn’t have to provide the coverage that went against their beliefs — the feds would do it for them.

Problem solved, right? Many religious organizations seemed satisfied with the exemption, and it has worked well since it took effect a few years ago. But some more conservative groups felt the exemption doesn’t actually go far enough.

Their reasoning: By signing the exemption form, they were directly enabling someone to provide the contraceptive coverage, which essentially makes them complicit in something that goes against their religious beliefs.

And that’s what was at the heart of  Zubik v. Burwell.

Writing on, Dahlia Lithwick summed up the complicated case like this:

“While churches, synagogues, and mosques were exempted from the Affordable Care Act’s employer-provided contraception requirement, religious nonprofits that object to affording their workers birth control were granted the aforementioned accommodation. So these employers are no longer on the hook and the insurance companies provide the contraception directly themselves—from separate funds and using separate communications. In these seven consolidated cases, the nonprofit objectors have claimed that the very act of filling out the form requesting the accommodation, or notifying the government, itself triggers something they deem to be a sin.”

A supplemental solution

While many media outlets were reporting the Supreme Court was likely to come to a 4-4 deadlock, the Court decided to take an outside-the-box approach to the issue. Rather than coming to a decision based on the facts of the case, the Court offered its own compromise to the parties involved and asked if they’d agree to that compromise.

How rare was such a move? Well, the last time the Court did something like this was back in 1953, during the landmark case Brown v. The Board of Education of Topeka.

Here was the Court’s latest compromise proposal: Objecting religious organizations can get a contraception-free insurance plan and the organization’s insurance company would provide the required contraceptive coverage via a supplemental plan. Result: Employees get all of the coverage they are entitled to under Obamacare, and the objecting religious organizations aren’t complicit in providing coverage that violates their religious beliefs.

Both the government and the conservative non-profit organizations said they’d accept the High Court’s compromise.

‘Cadillac’ tax delayed: What it means for HR pros

Employers got an early Christmas present when President Obama signed a budget bill that delayed the implementation of the Affordable Care Act’s tax on high-value or “Cadillac” health plans. 

How long is the delay? The 40% excise tax on high-value health plans (individual plans with premiums that exceed $10,200 and family plans with premiums exceeding $27,500) is now slated to kick in Jan. 1, 2020. It was originally scheduled to kick in two years earlier — Jan. 1, 2018.

Did the bill change the tax? Yes. The tax will now be deductible. So any amounts employers/plan sponsors end up paying toward the tax will be tax-deductible expenses. Also, the budget bill, which will fund the government through fiscal year 2016, calls for the U.S. comptroller general and the National Association of Insurance Commissioners to study whether the ACA uses “suitable” age and gender benchmarks to determine the “Cadillac” tax thresholds. So more changes could be on the way.

Did the bill alter the ACA in any other ways? Yes. It did so in two ways:

  • It suspends the tax on medical devices for two years. The ACA requires medical device manufacturers to pay a 2.3% excise tax on all medical devices they sell. It took effect in 2013. The budget bill suspends the tax for two years, so it’ll kick back in on Jan. 1, 2018.
  • It imposes a moratorium for one year on the collection of the ACA’s annual health insurance provider fee, which took effect in 2014. The fee will kick back in Jan. 1, 2017.

Did the bill push the “Cadillac” tax closer to death? Yes. For a while now, the Obama administration has been adamant that it would oppose or veto any legislation that would delay, weaken or kill the “Cadillac” tax. So what changed? Legislation to repeal the tax has been getting overwhelming support from both sides of the aisle in Congress. That, combined with pressure to get a budget deal passed by year-end — a deal Republicans insisted include some alteration of the tax — forced President Obama’s hand to delay the tax. The delay now gives opponents of the tax more time to either alter the tax or get it repealed altogether. Its fate will now will likely be left up to the next president and Congress.

2 benefits never to put on the chopping block

With healthcare costs continuing to skyrocket — along with fears of triggering the “Cadillac” tax in 2018 — employers are looking into what kinds of benefits they can cut. 

But there are two benefits that should remain a last resort for cuts: dental and vision benefits.

Three reasons for this:

  • When structured correctly (as stand-alone options) key ACA regulations don’t apply to these benefits. In other words, the coverage won’t count toward your Cadillac tax thresholds. Remember, the 40% excise tax will kick in for any health plans for which premiums exceed $10,200 for individuals and $27,500 for family coverage. If you create dental and vision plans separately from health plans, you can avoid having their premiums count toward those thresholds.
  • Routine eye and dental exams can be instrumental in diagnosing underlying health issues before they spiral into long-term problems. Examples: Vision checkups can help employees detect diabetes or hypertension earlier (and more cheaply) than they would through a primary care physician. The same is true of dental check-ups, which can often help uncover early warning signs of heart disease.
  • When employees have vision and dental coverage, emergency room visits for such problems can be significantly reduced, saving health plans a ton on ER visits.

What workers want

Another reason dental and vision should become (or remain) a core part of your benefits package: Employees’ interest in these offerings is increasing.

Case in point: A 2014 SHRM study found that 83% of the workers who were offered vision coverage enrolled in the plan, compared to the 78% who did so the prior year.

A separate study by MetLife also found that 76% of employees would be interested in voluntary dental coverage if it was offered by their employer.

Overtime crisis nearing: 6 steps to avoid pitfalls

It would be hard for any regulatory change to be as impactful as the passage of the Affordable Care Act. But the DOL’s impending changes to the overtime exemption rules may be exactly that. 

As if that wasn’t stressful enough, you’ll have far less time to prepare for the fallout of the overtime rule changes than Obamacare gave you.

The new rules won’t be phased in over the course of a decade like the ACA’s mandates. All signs point to the overtime rules taking effect before the end of 2016.

They’ll affect 2016 budget, staff plans

That means the time to start prepping is now, since the overtime rules will affect your budget and staffing plans for the 2016 calendar year.

And even without the final rules in hand yet (the comment period for the proposed rules just ended), there are steps employers would be wise to take now to brace for them — no matter what form the rules ultimately take:

1. Audit employees’ work hours

As you know, the DOL’s poised to raise the minimum salary threshold to be exempt from overtime to $50,440. So the first step is calculating how many hours your employees who earn less than that are actually working.

Reason: You don’t want to assume they work 40 hours per week only to be blindsided by the fact that they actually work 50 hours per week after the rule changes have reclassified those employees as non-exempt.

Next, you’ll want to weigh the cost of giving raises to those under, but near, the threshold — and who are most likely to work more than 40 hours per week — to avoid overtime obligations.

Note: The DOL may allow you to count nondiscretionary bonuses, and possibly commissions, toward 10% of workers’ salary levels. That may help to drag a few of your fence-sitters over the threshold without you having to give them a raise. But we won’t know until the final rules are issued.

2. Assess the effect on benefits offerings

One question you’ll want to ask yourself: Will being reclassified as non-exempt make some employees no long eligible for certain benefits that they once had?

If so, do you want to change your benefits plans to enable those workers to keep their benefits — or might you want to eliminate those benefits to make up for any costs resulting from having to now pay those workers overtime?

3. Expand time-tracking

No matter how you slice it, companies’ non-exempt employee populations are about to swell.

That will require expanding systems to track more workers’ hours to ensure proper overtime pay.

It couldn’t hurt to visit with your tech department now to start discussing ways to implement or expand time-tracking systems.

4. Revisiting remote work arrangements

It’s time to ask yourself what the rule changes could mean for remote work — checking work email, taking phone calls after hours, etc.

You can dissuade or even prohibit non-exempt employees from doing these things after hours all you want. But here’s the bottom line: Some are still going to do it — and when they do, you need a way to track that work time and compensate them for it.

Again, get together with your IT folks to determine the best ways to track employees’ after-hours/at-home work.

It’s worth noting that the DOL, in its Spring 2015 Regulatory Agenda, said it’s seeking information on “… [T]he use of technology, including portable electronic devices, by employees away from the workplace and outside of scheduled work hours …”

As a result, expect some rulemaking on this subject as well — like perhaps a definition of what qualifies as “de minimis” work.

Currently, the FLSA does say that “de minimis” work (typically five minutes or less) done beyond the 40-hour workweek by non-exempt employees is not compensable.

However, the common practice of workers reading and responding to emails off the clock on their smartphones has complicated the issue of “de minimis” work.

5. Create a communication plan

If you’re not going to raise some workers’ salaries — and they’re about to be reclassified as non-exempt — you need a plan in place for how you’ll break this likely upsetting news to them.

Some issues you’ll need to tackle:

  • Punching a clock. More workers are going to have to do it, and it may seem like a demotion. How will you explain why it’s now necessary?
  • Loss of flexibility. For your current salaried workers, being turned into hourly employees means taking time off to go to the doctor or attend a child’s event could result in less pay. Again, how will you break this news to them? And will you let them make up the time?

6. Prepare for changes to the duties test

It appears the DOL may eliminate the “concurrent duties” rule and require employees to spend more than 50% of their time exclusively on exempt duties for them to maintain an exempt classification.

Assume those changes will be adopted and you could avoid unpleasant surprises down the road.

Handling the tricky questions in FMLA intermittent leave

It’s a given: Intermittent FMLA leave is a giant thorn in the side of HR people everywhere. But not all intermittent leave requests are equal. Here’s a look at some of the most common scenarios, and how to handle them.

The FMLA allows employers some flexibility in granting different kinds of intermittent leave. Employees are entitled to take it for serious health conditions, either their own or those of immediate family members.

The law also allows use of intermittent leave for child care after the birth or placement of an adopted child, but only if the employer agrees to it. It’s the company’s call.

It’s not always simple, however.

If the mother develops complications from childbirth, or the infant is born premature and suffers from health problems, the “serious health condition” qualifier would likely kick in. As always, it pays to know the medical details before making a decision.

Eligibility’s not automatic

Companies can successfully dispute bogus employee claims to FMLA eligibility.

Consider this real-life example:

A female employee in Maine said she suffered from a chronic condition that made it difficult to make it to work on time.

After she racked up a number of late arrivals – and refused an offer to work on another shift – she was fired.

She sued, saying her tardiness should have been considered intermittent leave. Her medical condition caused her latenesses, she claimed, so each instance should have counted as a block of FMLA leave.

Problem was, she’d never been out of work for medical treatment, or on account of a flare-up of her condition.

The only time it affected her was when it was time to go to work.

Sorry, the court said. Intermittent leave is granted when an employee needs to miss work for a specific period of time, such as a doctor’s appointment or when a condition suddenly becomes incapacitating.

 That wasn’t the case here, the judge said – and giving the employee FMLA protection would simply have given the woman a blanket excuse to break company rules.

Cite: Brown v. Eastern Maine Medical Center.

Designating leave retroactively

In order to maximize workers’ using up their allotted FMLA leave, employers can sometimes classify an absence retroactively.

Example: An employee’s out on two weeks of vacation, but she spends the second week in a hospital recovering from pneumonia.

Her employer doesn’t learn of the hospital stay until she returns to work. But she tells her supervisor about it, who then informs HR. Within two days, HR contacts the woman and says, “That week you were in the hospital should be covered by the FMLA. Here’s the paperwork.”

The key here is that the company acted quickly – within two days of being notified of the qualifying leave.

The tactic’s perfectly legal, and it could make a difference in the impact FMLA leave time could have on the firm’s overall operation.

It’s also an excellent example of the key role managers play in helping companies deal with the negative effects of FMLA.

Using employees’ PTO

First, a no-no: Employers should never tell workers they can’t take FMLA leave until they’ve used up all their vacation, sick and other paid time off (PTO).

Instead, you can require employees to use their accrued PTO concurrently with their intermittent leave time. Employers can also count workers’ comp or short-term disability leave as part of their FMLA time – but in that case, employees can’t be asked to use their accrued PTO.

The transfer option

Companies can temporarily transfer an employee on intermittent leave, to minimize the effect of that person’s absence on the overall operation.

The temporary position doesn’t need to be equivalent to the original job – but the pay and benefits must remain the same.

And, of course, the employee must be given his old job – or its equivalent – when the intermittent leave period’s over.

A few restrictions: The move can’t be made if the transfer “adversely affects” the individual. Example: The new position would lengthen or increase the cost of the employee’s commute.

Such transfers need to be handled in such a way as to avoid looking like the employer is trying to discourage the employee from taking intermittent leave – or worse yet, is being punished for having done so.

Cooperation, please

Although FMLA is certainly an employee-friendly statute, employers do have some rights when it comes to scheduling intermittent leave. For instance, employees are required to consult with their employers about setting up medical treatments on a schedule that minimizes impact on operations.

Of course, the arrangement has to be approved by the healthcare provider. But if an employee fails to consult with HR before scheduling treatment, the law allows employers to require the worker to go back to the provider and discuss alternate arrangements.

Sometimes, it’s as simple as taking an employee aside and saying, “I know you’ve got to go to physical therapy. But these 10 o’clock appointments are really affecting work flow. Could you see about scheduling them for after work hours?”

The firing question

Yes, companies can fire an employee who’s on intermittent FMLA leave. Despite the fears of many employers, FMLA doesn’t confer some kind of special dispensation for workers who exercise their leave rights.

Obviously, workers can’t be fired for taking leave. But employers can lay off, discipline and terminate those employees who violate company policies or perform poorly.

When an employee on FMLA leave is terminated, the DOL decrees that the burden’s on the employer to prove the worker would have been disciplined or terminated regardless of the leave request or usage.

Reductions in force

When an employer has a valid reason for reducing its workforce, the company can lay off an employee on FMLA leave – as long as the firm can prove the person would have been let go regardless of the leave.

So companies should be prepared not only to prove the business necessity of the move, but to show an objective plan for choosing which employees would be laid off.

Misconduct or poor performance

Employees on FMLA leave – of any type – are just as responsible for following performance and behavior rules as those not on leave.

But companies that fire an employee out on FMLA will be under increased pressure to prove that the decision was based on factors other than the worker’s absence.

And courts might well pose employers a key question: Why didn’t you fire this person before he/she took leave?

That answer’s not always difficult. Many times, employers don’t realize how badly an employee was doing until they see the mess he or she has left behind.

The good news: A number of courts have upheld employers’ rights to fire employees on FMLA leave – even when the employee’s problems were first discovered when the employee went off the job.

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).

EEOC finally issues wellness rules: 8 things employers will want to know

It took a while, but employers finally have some sold guidance on how to design their wellness program incentives so they don’t violate the ADA.

The EEOC has been promising for a while now to issue rules to clear up the confusion it’s created around what kinds of wellness incentives are legal — and when non-participation penalties become so steep as to render a program “involuntary” and, thus, illegal under the ADA.

Well, the EEOC has finally kept its promise, and its new proposed rules outline, in its words, “how Title I of the Americans with Disabilities Act (ADA) applies to employee wellness programs that are part of group health plans …” The regs will be published in the Federal Register on Monday.

But the EEOC did offer a sneak peek of the proposed rules on its website.
How we got in this mess

But before we get to them, here’s what got us to this point.

This past summer, the EEOC decided it was going to go after employer wellness programs it felt punished employees too harshly for not participating in wellness initiatives.

Example: In the first of three lawsuits the agency filed, it claimed Orion Energy Systems’ wellness program non-participation penalty for failing to complete a health risk assessment was so steep it rendered the program “involuntary.”

The ADA says a program can’t submit employees to medical inquiries that aren’t job-related and consistent with business necessity, unless those inquiries are part of a “voluntary” wellness program.

Orion charged employees who didn’t complete a health risk assessment their entire health plan premium, plus a $50 dollar non-participation penalty.

In the third lawsuit the EEOC filed, the one that’s gained the most prominence, it went after Honeywell International for slapping employees who didn’t submit to health screenings with a penalty worth roughly $4,000 in some cases. The EEOC felt this rendered Honeywell’s wellness program illegally “involuntary.”
Why this is such a mess

Employers have been complaining that by filing these lawsuits, the EEOC has overstepped its bounds.

Their argument: The EEOC hasn’t released any specific guidance as to what kinds of penalties would be so steep as to render a wellness program involuntary.

Some members of the GOP have even blasted the agency’s actions.

In some cases, employers and members of the GOP have said the EEOC’s actions fly in the face of the wellness regulations enacted by the Affordable Care Act, which state employers can offer wellness incentives/penalties as long as they don’t exceed 30% of the value of an individual’s insurance premiums (50% if the incentives are tied to smoking cessation).

In response to these allegations, the EEOC promised to issue regulations clearing the air on what kinds of wellness program incentives are legal once and for all.

What the proposed rules say

Employers that feared the new rules would be a tangled mess of confusing rules and exemptions (what federal law isn’t?) will likely be pleasantly surprised.

The rules appear to be pretty straightforward.

Here’s a rundown of the key points:

The proposed rule clarifies that the ADA allows employers to offer incentives up to 30% of the cost of employee-only coverage to employees who participate in a wellness program and/or for achieving health outcomes.
The rule also allows employers to impose penalties on employees who do not participate or achieve certain health outcomes. The maximum allowable penalty an employer can impose on employees is 30% of the total cost of employee-only coverage.
The total cost of coverage is the amount the employer and employee pay, not just the employee’s share of the cost. Example: If a group health plan’s total annual premium for employee-only coverage (including both employer and employee contributions towards coverage) is $5,000, the maximum allowable incentive an employer could offer to an employee in connection with a wellness program that includes disability-related questions (such as questions on a health risk assessment) and/or medical examinations is $1,500 (30% of $5,000).
Asking employees to complete a health risk assessment or have a biometric screening for the purpose of alerting them to health risks (such as having high cholesterol or elevated blood pressure) is acceptable under an employee health program (a.k.a., a wellness program).
Collecting and using aggregate information from employee assessments to design and offer programs aimed at specific conditions prevalent in the workplace (such as diabetes or hypertension) is also acceptable under a wellness program.
Asking employees to provide medical information (like that obtained through a health risk assessment) without providing any feedback about risk factors or without using aggregate information to design programs or treat any specific conditions would not be acceptable under a wellness program.
For a wellness program to be voluntary, it must not: A) require employees to participate, B) deny access to health coverage or generally limit coverage under its health plans for non-participation; and C) take any other adverse action or retaliate against, interfere with, coerce, intimidate, or threaten employees (such as by threatening to discipline an employee who does not participate or who fails to achieve certain health outcomes).
If a health program is considered a wellness program that is part of a group health plan, an employer must provide a notice clearly explaining what medical information will be obtained, how it will be used, who will receive it, and the restrictions on disclosure.

What’s next?

The public has until June 19, 2015 to comment on the proposed rules.

The EEOC will then evaluate all of the comments it receives and make revisions to the rules if deemed necessary. The agency will then vote on a final rule. After it’s approved, the final rule will be sent to the Office of Management and Budget and will be coordinated with other federal agencies before it is published in the Federal Register.

So it’ll likely be several months before the final rules are enacted.

It’s also unclear what effect, if any, the proposed rules will have on the wellness program lawsuits the agency’s filed against employers.

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).